The EIA releases two monthly petroleum data sets for US oil production. The Monthly Energy Review which gives the US production and consumption of all forms of energy, oil, natural gas, coal and electricity. The other, the Petroleum Supply Monthly deals only with petroleum but gives every possible statistic, production, refining, export and import from every state and district.
Concerning total US crude oil production the two should agree but they don’t. From December 2011 back they have the exact same production numbers but the near months differ greatly. I have found that the latter, the Petroleum Supply Monthly is the most accurate. The Monthly Energy Review usually changes their numbers to match the Petroleum Supply Monthly but both revise their numbers as more accurate numbers come in. They both are published the last week of the month but the M.E.R is always a month ahead with their data.
Here are their the numbers in KB/d and the difference between the two.
Notice that the former had US production up by 333 kb/d in December while the latter had US production down by 77 kb/d in December. But both will be revised to match what each state or pad reports later on.
There is no uniform reporting strategy among different states. They all appear to do it differently and on a different time frame. For instance the PSM, which is the only one of the two that reports state by state production number, reports the exact same numbers for North Dakota that we get from North Dakota. But they get their Texas data from the Texas Rail Road Commission. And the Texas RRC is very delinquent with their reporting. They just report the numbers as they come in from the field and every month they change as more numbers come in, sometimes taking many months until all the numbers are in. So the EIA just guesses at Texas production numbers.
Texas and North Dakota daily C+C production in KB/D. The last data point is December 2013.
Notice the last nine months are extremely linear. In fact each month, April through December, Texas monthly crude production increased by exactly 50,000 barrels per day.
Here below is their production, along with North Dakota, plotted on as change per month. The December drop in North Dakota production is exactly what was reported by the State.
Notice the last nine months of Texas production increase. The EIA is guessing that Texas oil production will have increased by exactly 50,000 barrels per day every month from April through December 2013. The up and down spikes in 2008 and 2011 was just a reporting anomaly. Barrels not counted in one one month were counted the next month instead, causing a down spike one month and a corresponding up spike the next. But what this does tell us is that the EIA reports exactly what the Texas RRC reports, when they finally get around to reporting.
This also means that we don’t really get any good data for Eagle Ford and the Permian because the data we get from the EIA’s Drilling Productivity Report will reflect this same wild ass guess.
Basically this means we will not know when the US C+C peaks until several months after the fact. But we should get some hint when the EIA starts to lower their guessing numbers as to Texas Production.
I understand that perhaps half of Texas production is conventional oil, not shale oil but nevertheless this chart tells us that when US shale oil peaks, the US peaks… again.
Here is the US C+C production using data from the EIA’s Petroleum Supply Monthly in kb/d. The last data point is December 2013.
Here you can see clearly that the US Shale or LTO production, beginning about two and one half years ago, has increased US production by 2.5 million barrels per day. This year will tell the story of whether that will continue or not. My bet is we will definitely see a slow down but just how big a slow down I can only guess.
News Jacking
In a way, the world’s major oil companies all suffer from some version of the same problem: They’re spending more money to produce less oil. The world’s cheap, easy-to-find reserves are basically gone; the low-hanging fruit was picked decades ago. Not only is the new stuff harder to find, but the older stuff is running out faster and faster.
EXCLUSIVE-North Dakota Jan oil output flat as winter chills drilling-data
Growth in the larger Eagle Ford shale in south Texas also ground to a halt at around 1.1 million bpd, according to the LCI data, which was made available to Reuters.
Parts of North Dakota had the third coldest December on record, so frigid, according to local papers, that diesel fuel froze in truck tanks. In January, it was the wind that forestalled the drilling and hydraulic fracturing operations that are necessary to keep output growing.
Still, it is likely to be a temporary lull in the otherwise upward trajectory of the Bakken region, whose bounty turned North Dakota into the country’s No. 2 oil-producing state. Regulators expect the backlog of wells waiting on completion, numbering 635 in December, to be up and running by May.
“In spite of the weather declines experienced in January, oil production from shale oil wells increased 30 percent from January 2013 after increasing almost 60 percent the year before,” said George Lippman, president of LCI.
Two things I take away from this. First the EIA will have to adjust their guess for Texas production for December because Eagle Ford also took a hit that month. Second if shale oil production increased by 60% in 2012 and 30% in 2013, we can clearly see a trend.
And how did I miss this one that came out about a week ago?
Expert: World could face oil shortage
Global demand for oil is about 90 million barrels a day. Factoring in production declines as well as new demand from emerging nations, in 10 years the world will need another 55 million barrels a day of oil, he said.
“I see a lot of forecasts for the future, but nobody is saying where the oil is going to come from,” Powers said.
US crude oil production growth declined in December 2013. See the graph comparing rigs in operation (in the oil sector, left scale) and the annual change in 12-month cumulative crude oil production (defined as the total production over the past 12 months less the total production over the previous 12 months, right scale).
The observed peak in crude oil production growth took place in September 2013, when the 12-month growth was 368 million barrels. By December 2013, this had declined to 346 million barrels. The declining rate is approximatley 7 million barrels per month. At this rate, it would take 49 months or about four years before the US oil production reaches the next peak.
In term of daily production, US crude oil production was 7864 thousand barrels per day in December, which was 785 thousand barrels per day higher than in December 2012. By comparison, the December 2012 production was 1051 thousand barrels per day higher than in December 2011.
You have to wonder if the ongoing overall decline in Bakken output persists for another month or two will drillers be able to ‘catch up’ with current decline rates.
Daily output oil per well is shrinking not just number of new wells …
https://www.dmr.nd.gov/oilgas/stats/historicalbakkenoilstats.pdf
That’s just because their were less new wells (and also over time, there will be more and more old wells even with constant addition of equal wells).
The main point is that Enno’s cum curves show wells are averaging the same (actually slightly better) productivity/well from 2008 to 2013.
You do realize new roads may have as much to do with improved per well output as geologic technique?
Interesting. How?
Trucks can carry more per day. More roads get them where they were going to load from an onsite tank faster, which means they can get to more onsite tanks per day, which means a well that had to stop because of a full onsite tank need no longer be stopped.
Go to the previous posted article, page 2 of the comments, there is a link entitled “long line of trucks”. The visual tells the story.
Thanks.
The guy in the article says 30% increase from Jan 2013 for Jan 2014. That would be a 14K bpd gain over Dec.
Consider the discrepancies between the weekly crude oil production data and the monthly data. Look at the graph below, showing the 52-week change in 52-week average weekly oil production.
The weekly data imply the US crude oil production in 2013 was 1.24 million barrels per day higher than in 2012. The monnly imply the growth from 2012 to 2013 was only 346 million barrels or 0.95 million barrels per day.
Ron:
Kudos on the plot of Texas numbers (must be models, should be so labeled) as well as the story on estimated JAN ND production.
For the other stuff (majors problems, an old oil exec saying we are running out), that’s been covered.
(must be models, should be so labeled)
I have no idea what you are talking about. The charts were all made with real data published by the EIA.
I mean that EIA is reporting modeled numbers and they should so label them. Nothing against you, against them. Ya done good.
Oh, you mean estimates! No, the EIA does not label them as estimates. Sometimes in their PDF tables they will put an “E” beside the total US data, or sometimes even an “RE” meaning a revised estimate. But they never label their Excel data as estimates.
However I thought I explained all that in the text. They must estimate the Texas data for the latest months because the Texas RRC simply takes months to report the actual production numbers.
I know what you said in your post. You just didn’t understand my comment. Now you do. 😉
Keep up the good work and don’t take any guff from the hoi polloi. 😉
http://theworldenergydilemma.com/about-the-author
An old exec saying we are running out. Head Petroleum Engineer for ARAMCO for 2 years, probably knows what he is talking about as it pertains to KSA. You don’t hear someone that previously worked for ARAMCO offer up much of anything.
Ron, you remember that old Yamani article I sent you where he said in (1980) that the world better get their act together in the next 30 years or it will be to late. Now Powers says KSA can produce for 30 more years.
Great stuff as always Ron. Thanks for your diligence.
Thanks Ed. No I don’t remember that Yamani article. Please send me the link if you still have it, or post it here. I think KSA can produce for 30 more years, just not very much. Did he say how much they could produce in 30 years?
Occasionally you do hear a Saudi official slip up and tell the truth.
U.S. Reliance on Oil From Saudi Arabia Is Growing Again
On page 2 of this New York Times article we get this:
“This is strictly, totally business,” said Sadad Al Husseini, a former executive at Saudi Aramco, the state oil company. “Saudi production is flat out. Where you send it is a matter of where you make the best profit.”
Bad news about the book… based on the Amazon preview and this review, it seems more like a memoir than a reasoned analysis. The reviewer recommends “Peeking at Peak Oil” as a superior study of the same issues.
http://www.amazon.com/review/R1C21EHA5HZ3RD/
US oil rises on Bakken supply rumours
http://www.upstreamonline.com/live/article1353885.ece
Crude oil loadings at a dozen major North Dakota rail terminals fell by more than 200,000 barrels on average in the past two days, data from industry intelligence provider Genscape showed on Friday according to Reuters.
Posted that a few hours ago on the previous post. Fleshing this out:
Boom.
http://www.reuters.com/article/2014/02/28/oil-bakken-rail-idUSL1N0LX1N720140228
“The Genscape data, made available to Reuters, showed that only 220,000 barrels were loaded at the terminals on Wednesday, the day after the DOT order, an exceptionally low rate.
On Thursday, seven of the 12 terminals monitored by Genscape loaded a total of 470,000 barrels; five terminals did not load at all, although two of those had been operating on Wednesday, according to the data.”
There is handwaving about a new DOT regulation that will “have government get in the way”, but it smells a lot like manufactured excuse.
btw the math . . . 200K barrels lost each day for 2 days is 400K barrels. / 28 (days in Feb) = 14285 bpd off of whatever number would would have seen in the month’s report we’ll see in April.
hmm or maybe not. We have presumed the measure is taken at the wellhead. There may be enough storage on site to keep the well operating even if there are few days of obstruction downstream, as it were.
The producers are paid upon/after delivery to their customers (refineries). Less oil transported means deferred cash flows for the companies.
Very good. True. But we won’t see that in the monthly output very soon.
Perhaps eventually, tho.
Rune: what happened with your 600-700 M bpd prediction? Why off and what learned?
My phrasing in http://www.theoildrum.com/node/9506 (back in Sep 2012) was:
“Now and based upon present observed trends for principally well productivity and crude oil futures (WTI), it is challenging to find support for the idea that total production of shale oil from the Bakken formation will move much above present levels of 0.6 – 0.7 Mb/d on an annual basis.”
(And I was referring to the Bakken formation in North Dakota, that is I did not include Montana)
For all of 2013 production from Bakken (ND) was an average of 794 kb/d.
1. So why were you wrong, low? It’s not just to hold you accountable, but what can you learn? Was it peaker bias? Poor model? Price crash? What assumption was off that drove it low?
2. You reiterated the prediction as late as JAN2013 (post was rerun). And the first calander year, your prediction was broken. Heck, I wonder if a 12 month period centered on JAN2013 would already break your prediction. Even with zero growth (unlikely), we will finish 2014 at about 900 k per month. Breaking your prediction even more.
3. Take a look at the image here (cum curves by year): http://peakoilbarrel.com/reverse-engineering-north-dakota-bakken-data/comment-page-2/#comment-9747
I mean 900 M/day. Lysdexic
A note on the Chart that Nony referenced above.
The 2007 cumulative curve is a combination of 2007 and some earlier wells (those that produced more than 1000 b/d as of Jan 2007) so that curve should probably be ignored. I found this out in an email conversation with Enno who has been a huge help (and very patient with my endless questions) after I had posted the chart.
I still think you ought to write an article on why/how you were wrong. Would be the straightforward thing to do. Was a lot of press on the dreaded Red Queen article, so fair thing to do would be to square that up.
In december the Bakken producing well count increased by 40. That means at least 40 new wells came on line. Nevertheless production per well decreased from 134 barrels per well per day to 126 barrels per well per day. That is a decrease on 6 percent in one month even when counting new well production. In December they could not run fast enough to stay in the same place.
That is the Red Queen in action!
I actually completely agree with you. It’s sort of like coal mining. If you shut down the extraction, production drops. And yeah, you definitely saw it in cold December 2013. Big time.
Still…we sure beat that 650 +/- k bpd of Rune’s post. The Red Queen is an evil bitch, but we kicked her ass in 2013. USA! (Eurocoms hate our pioneer spirit.)
650 +/- 50. Lysdexic. 🙁
Hi Nony,
Another thing in Rune’s model was that he used WTI for his oil price, which intuitively it seems that would be your choice as well (based on our conversations).
My thinking is that the marginal Bakken barrel goes to the East coast where refinery gate prices track Brent prices more closely than WTI, the WTI price would be correct if all of the Bakken oil was being sold to Midwest refineries, but in that case the $12/barrel transport cost in Rune’s model would be too high (because it is much less than that cost, perhaps $4/ barrel to transport to refineries in the Midwest.)
Based on WTI futures prices and $12/barrel transport costs, it looked as if Bakken oil would not remain profitable for very long back in Sept 2012. In addition well productivity was dropping slightly relative to 2011 wells, but this has changed in 2013.
For all of these reasons Rune’s scenario was a little on the pessimistic side, but personally I have learned a huge amount from Mr. Likvern and appreciate his work and his willingness to patiently share his knowledge with others.
Note that a big piece of his pessimism was a result of using WTI futures to predict 2013 and 2014 oil prices. Maybe Rune can comment on how good an estimate of future WTI prices the Sept 2012 futures price deck proved to be.
OK, thanks man
My thinking is that the marginal Bakken barrel goes to the East coast where refinery gate prices track Brent prices more closely than WTI,
Nope, the price the Bakken producer gets is actually about $20 a barrel below the WTI price.
Director’s Cut
Nov Sweet Crude Price = $71.42/barrel
Dec Sweet Crude Price = $73.47/barrel
Jan Sweet Crude Price = $74.20/barrel
Today Sweet Crude Price = $81.35/barrel
Are those the wellhead prices? Transport netted out?
I have no idea but I assume they are wellhead prices.
That is my impression as well, the listed NDIC prices are ND wellhead prices. What a company may do is to establish a trading company, selling the oil at the wellhead then paying the transport from the wellhead to the refinery and then pocketing the profit or……. loss.
Looking at todays price ($81/bbl, due to lower shipments??) a company could sell it for say $101/bbl, thus making $20/bbl and paying the transport of say $12/bbl, thus netting a profit of $8/bbl (that is post tax!)….which is a lot!
Exxon started as a transport company!
There are several things to keep in mind here.
Bakken oil (in general) has an API gravity of 36 – 44, which means it is very light (more like condensate) and thus have lower volumetric energy content than Brent oil (something like 5 – 8 % lower). What is being sold is energy and the ability to refine the “crude” into commercial products.
There is a limit to much LTO (Light Tight Oil) a refinery can allow into its feed.
The $12/bbl transport cost was from EIA that (at the time of writing) listed transport costs from Bakken to the refineries in the range of $12 – $15/bbl. (In other words I deliberately choose to go with the lower end to avoid being labeled as pessimistic).
As far as transport goes, pipelines is the most cost efficient way to move large volume oil over long distances, like oil from Bakken, for some reasons pipelines matching Bakken production growth have not happened.
Why? What is it the oil companies know that makes them not willing to commit to long term shipping rights (in pipelines) that would have increased their net back (and thus profits per barrel)?
The oil price has been in (steep) backwardation for some time (for what that is worth), and it is easy to use whatever future oil price for any scenario analyzed, however using futures gives everyone the same reference platform (this is about transparency).
I believe that the oil price in the short to medium term will move lower, simply because a growing number of consumers can not afford expensive oil.
I have several Bakken scenarios also some that are more optimistic.
Bakken oil is almost identical to LLS or WTI (closest to LLS). There is an overall glut of light sweet crude in the US because the refineries were changed over for heavy sour (remember 10 years ago when everyone thought any new sources would be crappy? HA! HA!) and because of export restrictions.
If you have some information that the oil is low quality
You have to compare apples to apples. Brent is priced in London, WTI at Cushing. If you price them both at a refinery, they are very comparable, with maybe a slight bias to the WTI.
Bakken is good quality oil with a very high yield of gasoline. At the door, it’s competitive with LLS or WTI. No crapping on my baby. Go Bakken, go!
http://g.foolcdn.com/editorial/images/6886/crude-quality_large.jpg
If you have information that the crude is considered low quality or trades at a deficit at the refiner door, let me know. I have things like EOG and CLR investor presentations that say the opposite. Maybe you don’t trust that (although companies could get in trouble for lying in such). But do you have any info of your own to say it’s not good oil?
Nony,
Perhaps you can explain to all readers why Bakken oil at the wellhead is fetching about $20/bbl below WTI and close to $30/bbl below Brent?
I think we covered this.
The comparison for kerosene and diesel Ron did and I think the yardstick was LLS (though that may have been the Eagleford), but the original heads up on the matter was from a presentation that compared to Nigerian oil, and it was woefully light in those two fractions vs Nigeria.
The point would be phrasing. “Good quality” doesn’t mean anything. If customers want diesel from a refinery, the refinery has a preference for conventional oil. The operative reality would be a matter of definition. “Good quality” should not be used. Diesel rich vs not diesel rich is more meaningful to a refinery, if that’s what their customers want. Diesel is selling at a substantial premium to gasoline.
1. “What is being sold is energy and the ability to refine the “crude” into commercial products.”
Correction: latter part of sentence is correct, earlier part is not.
2. WTI similar to Bakken: look at this comparison:
http://www.hydrocarbonprocessing.com/images/798/89779/Bryden-Tab-01.jpg
API: 42 versus 40
sulfur: 0.2 versus 0.33
3. North Dakota Petroleum Council:
“Question: What is the API gravity of Bakken crude oil? Explain its relative quality.
Answer: Bakken crude oil gravity ranges from 36 to 44 degrees API. The quality of this oil is excellent, almost identical to WTI. The benchmark crude oil is West Texas Intermediate, which is 40 degrees API sweet crude. It is the benchmark because it requires the least amount of processing in a modern refinery to make the most valuable products, unleaded gasoline and diesel fuel.”
http://www.ndoil.org/?id=78&offset=5&advancedmode=1&category=Bakken%20Basics
4. CLR official investor presentation:
http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NTM0OTQzfENoaWxkSUQ9MjIyOTAxfFR5cGU9MQ==&t=1
See pages 22-24 discussing refiner’s view of the oil. And while I can understand you being skeptical of a company presentation, this thing went through corporate legal and is not making projections about future growth or the like…they are talking time now. See in particular the footnotes at the bottom of pages 23 and 24.
5. EIA discussion of Bakken/WTI differentials. Note that they only discuss transport as a reason for difference, not quality.
http://www.eia.gov/todayinenergy/detail.cfm?id=10431
6. Another discussion of WTI (Cushing) versus Bakken (Clearbrook) differential:
http://marketrealist.com/2013/11/bakken-discount-wti-widest-point-since-early-2012-affecting-energy-names-earnings/
(Note that none of the discussion is about Bakken being worse than WTI. Transport is the rationale used for differentials.)
7. 10 dollar difference of WTI and Brent. WTI has traditionally been slightly better priced than Brent because it is lighter/sweeter and easier to process. The reason for the current difference is US shut in light crude and that Brent is priced in London, WTI in Cushing. Land the WTI in London or the Brent in Cushing and the price difference will evaporate.
http://www.caseyresearch.com/cdd/tricky-calculus-oil-price-differentials
7. “20 dollar difference of WTI and Bakken”: We don’t know what that NDIC price means. Is it net transport, net taxes? You’re jumping to conclusions.
Hi Rune,
This is a little off topic.
I was wondering about point forward vs. full cycle costs for Bakken oil. I believe you tend to use the point forward method (which seems to be what the oil companies also use in their investor presentations.)
Art Berman often points out that in the long term it is full cycle costs that are important if the oil production is going to be profitable. Have you ever attempted to estimate (at least roughly) the full cycle costs vs the point forward costs? For the average Bakken oil company would this add say $5/ barrel to overall costs ( obviously this would vary from company to company).
I sometimes forget that my scenarios may be overly optimistic because I am ignoring land costs and other general overhead when doing my NPV calculations. You often do a very detailed analysis of the financials (digging into annual reports and such) so your insights would be enlightening. Thanks.
Dennis
Dennis,
What I have presented are point forward estimates. I also have full life cycle costs for some companies, but these are not for publication.
Full life cycle costs brings the break even price higher and there are differences among companies.
Hi Rune,
How much higher would the breakeven price be using full cycle costs? 5, 10, 15 dollars? I am just trying to get a rough idea.
Can you give me an idea of the top 5 or 10 oil companies operating in the North Dakota bakken and what % of the total bakken oil those 5 or 10 companies produce as a group? (For example the top 5 companies produce x% of ND Bakken oil.)
Or maybe someone else knows of a website that tracks this stuff I have had little luck finding information.
I have seen assay information that suggests that the distillate yield is 10% lower….
I don’t have the links handy though….
Hi Rune,
Nony is in agreement with you that futures are the best way to estimate future prices, perhaps the EIA is too optimistic, but their reference scenario in 2013 had prices decreasing out to 2015 (which agrees with you) and then rising thereafter, which I believe that both you and Nony think is incorrect (I am more confident of Nony’s views because we have discussed this). The AEO 2013 low price scenario, which assumes real oil prices fall to about $75 (2013$) by 2015 and then remain at about that level out to 2040. I think the reference oil price case is more realistic.
It is also interesting that the low price case seems right to people with different views, you think it is correct because limited oil supply will cause a recession, I believe that Nony thinks that supply will be plentiful and keep prices low. I think supply will be limited and will drive up price, but not so fast that it crashes the economy. This knife edge scenario is probably not very realistic. Prices need to rise if we are to get to the other side, low prices will be bad in the long run IMO.
Dennis, Rune,
The price of oil is the most difficult thing to predict. That is because it all depends on the state of the economy. And the state of the economy depends, to no small extent, on the price of oil.
If the oil supply starts to drop off then one would think the price would skyrocket. Doubtful. If the price of oil starts to skyrocket then the economy goes in the tank, prices drops even as production collapses even further.
That is exactly what happened in 2008 so no one can claim that it cannot happen again. But if it happens again production is very unlikely to bounce back this time. The marginal barrel is now above $100. That was not the case in 2009.
So where will the price of oil be in a few years? I have no idea just as I have no idea as to what the state of the economy will be in a few years. But I am definitely not optimistic.
Ron,
By using the futures price one allows for a reference for anyone to check out. I have observed that the futures may be a poor indicator, but one has to use what is available.
I expect oil prices to soften over time and as you point out small changes in the supply/demand balance may have huge effects on the price.
That several big oil companies now are reducing CAPEX and exploration supports your view that it becomes harder for supply to bounce back post a (new) steep decline in the price.
Plus, I guess “price” is very relative, and does not say everything. The real important measure is “affordability”. Since I have been learning about oil and the economy I realized that while the price of oil could go down, it could at the same time become more unaffordable as well. Which feels somewhat counter intuative..
My intuition is that the economy is already pretty bad and we don’t have indicators of a looming recession, but more indicators of coming out of one. So I don’t think the markets are pricing in a general further economic decline, but rather increased supply (not just US LTO, but Iran, Iraq, Libya). Of course, the futures may be wrong, just like a point spread for a football game. But it’s sort of the best guess we have. And it could be wrong low or high. These things happen…
Must be Bakken production has a significant impact on oil prices. Less Bakken oil, higher price of oil. Demand outstrips supply.
In the final analysis, Bakken Oil will command higher prices and control the price.
It’s at the end of the 11/10/12 Patzek post:
http://patzek-lifeitself.blogspot.com/2012_11_04_archive.html
“I see a lot of forecasts for the future, but nobody is saying where the oil is going to come from,” Powers said.
This is pasted from the My San Antonio link Ron posted up thread.
I have posted a lot of links recently and pointed out that the authors of these links are dancing around and not mentioning the two dirty words ” peak oil ” even though it is perfectly obvious that the data they present point without question to those two dirty words.
This is because their editors are prim and proper old schoolmarm types and don’t allow dirty words in their publications because they will not be a party to offending the tender young ears of the children who run the companies that pay the bills via advertisements for every thing from beer to Lear Jets.
Any journalist working for a mainstream publication that even thinks about mentioning the dirty words ”peak oil” is probably put on notice in no uncertain terms that if he does so in public he will not only be looking for a new job but also that he will be blackballed by all the major media and that any writing he does in the future will be on his own time.
I am sure there must be a few exceptions to this unwritten rule but I haven’t been able to find them.
My guess is that ” My SanAntonio ” is a small outfit and doesn’t collect much in the line of ad revenue and can there fore fly under the big business black ball radar.
And even so the author of this article avoids the dirty words.
But someday within the next few years just about everybody with a byline in the entire country will be wringing their hands about how they were mislead by all those crooked oil guys or else telling us that they are breaking the story of the century.
Peak oil was in the media just plenty in the past. See this chart. There’s no black helicopters.
http://2.bp.blogspot.com/-hC819n9EoFM/UfkIFielYMI/AAAAAAAAAlw/wgwD7GDqfqQ/s1600/screenshot_12.jpg
Just look back to all the folderol with Matt Simmons on CNBC predicting $500/bbl oil and the like.
I do not disagree with Nony’s black helicopters comment.
I was following peak oil religiously when Simmons was still with us but that was some years back.
If I have one thing to contribute to this debate in general it is my rolling stone background because I have never claimed to be any more than a well informed layman with a few dozen relevant science courses on my transcripts when it comes to peak oil.
One rolling stone experience was finishing somewhat over half of a RN program which I was unable to complete because I wound up being the caretakers 24/7 for my bedridden Mom. So I went back and started again and be damned if I didn’t have to drop out again and now I am pretty close to 24/7 tied down looking after my almost ninety Daddy.
Nobody in my family on his side ever seems to die from anything except accidents, bullets, and dementia. There is no heart disease, to diabetes, no cancer, etc, to be detected in his family tree as far back as a hundred years or so.Hence I have read a dozen books about dementias, all of recent copyright and written by medical professionals because I am no doubt going to be dealing with my Dad until he dies and he is now showing all the early signs of Alzheimer’s.
The odds are depressingly high I will go that way myself.
Now my point in revealing this personal history is that anybody who knows sxxt (doo doo) from apple butter about dementias and who followed Matt Simmons will tell you that the odds are astronomically high that he was suffering near the end from some sort of dementia. It came on pretty fast so it wasn’t Alzheimer’s. It was probably related to stroke or a cancer or something of that nature.
Now as far as his predicting five hundred dollar oil I don’t see any reason why the price could not go that high for a very short period of time in the case of a panic.
The spot price of natural gas has peaked regionally in similar fashion on numerous occasions because of nothing more than the inability of the gas companies inability to get in to market in extreme cold snaps.
But I always interpreted such remarks as artistic license for the most parts. Simmons was a banker above all else and there can be no doubt that he understood that the economy cannot support five hundred dollar oil.
I may not have made in clear that my very recent comments here on publishers self censoring due to the issue of losing advertising revenue are intended to apply to the last few months.
The failure to sell ads to businesses vested in ” business as usual” is quite enough to break a publication or at the least get the editors fired.No helicopters needed. Beyond that the ownership and management of most major media these days is so intermixed with that of the ”business as usual ” dominant economic interests that there is hardly any risk at all of an editor who would seriously challenge business as usual ever getting hired.
Even NPR finds it necessary in my opinion to avoid addressing hot topic issues such as peak oil directly for fear of causing or contributing to an economic down turn brought about by disillusioning or panicking the public.
So they can talk about global warming -because there is no immediate risk of anything being done about it that will hurt Wall Street.
But peak oil would panic their listeners as well as the public in general and be a fist in the gut of the liberal coalition as well because bad economic news is always bad for the faction in control in Washington and right now the liberals have two out of three of the government and a chance of putting another justice or two on the Supreme Court as well if they can hold on long enough.
Peak oil news would be equally unwelcome if the repugicans and conservatives were in control of course and probably even worse.
This is one of the times when both political wings stand to gain or at least hold their ground by ignoring developing bad news.
The republicans cannot capitalize on the opportunity be cause they are the ones most heavily vested in business as usual and not in position to use peak oil as a club to bash the democrats.Doing so would be tantamount to and admission that the whale lovers and tree huggers and the global warming faction have been right all along.
hehe that’s nice, Peak “Peak Oil Talk” was in 2005 as well 🙂
Hello and FWIIW
Is that an “annual basis”? 😉 How many wells are waiting for fracking? How was the weather this year?
You want to put some serious money behind 2014 having annualized production less than 700 M bpd (your prediction)? I’m totally serious. I will take the bet.
I really expected better from you. Opinion is dropping. DC may be a doomer to my cornie, but he’s a truthseeker, which is what matters in the end.
Nony,
I think Rune’s work has been excellent and I have learned a huge amount from him.
Rune’s prediction was based on the productivity of the average well going forward being similar to the 2011 average well that he dug out of the NDIC data (he was the first one to do this, that I was aware of), he also very graciously shared that data with me which enabled me to get started on some of my modeling, which is simply an extension of the work that Rune started.
I think Rune also was using something like 1500 wells added per year for his projections because his financial analysis led him to believe that ramping up wells at a higher rate would not be profitable (I am guessing here, I do not think he ever wrote that). Anyway wells were added at a higher rate than 1500 wells per year and that is the sole reason his estimate was a little low, if you look at recent projections that take account of actual well additions his model is right on the money. Note that his 1800 well per year forecast comes out slightly below the actual production because 2013 wells were about 5 % more productive than 2011 wells See chart (taken from Rune likvern’s website Fractional Flow http://fractionalflow.com/2013/12/23/in-bakken-nd-it-is-now-mostly-about-mckenzie-county/#more-738 and also posted here at Peak Oil Barrel
You are a good guy, DC.
Nony,
I just wanted to give you and others a feel for the history. Another quick point on Rune’s scenarios. He was not predicting what would happen. It was a scenario where he said, lets assume wells in the future look like the average 2011 well and lets also assume that 1500 new wells are added each year in 2013 and 2014, what would the output be in that case, what would it look like if 1800 wells were added in 2013 and 2014? If he had included a scenario with 2000 wells added each year, that may have been a better guess for 2014 and maybe 1900 for 2013 and 2014 would prove correct, but scenarios created in Feb 2014 are much easier to get right for 2013 and 2014, than a scenario created in Sept 2012.
It got huge press. If he had been right, would we hear this “just a scenario”? I think he owes it to do a followup and eat some crow. Would be manly and honest.
Now Gail…but let’s not go there. 😉
DC,
When I presented my results back in Sep -12 it was based upon available hard data and it was chosen to go for how cumulative 12 month productivity had developed from the wells analyzed (this is a very reliable indicator). I did not use the average for all 2011, but the average for wells started as from June 2011 which was far better than the wells during the first half of 2011. I did not say anything about how well productivity would develop as the data showed that after a decline, the productivity at the time had improved somewhat.
There are several things to observe for developments of a trend like Bakken, number of added wells, the companies financial positions (that is how much more debt are they able to assume), developments of the oil price (which have been higher than what the futures suggested back in 2012), how the global supply/demand balance develops and also how financials develops.
How demand for LTO develops (there is a limit to how much LTO that the refineries can absorb), bottle necks in the value chain (like transport) that may affect the price of LTO. As Bakken is landlocked buyers would love a situation where they could get Bakken oil very cheap.
Where would the oil price be if all countries had to run a balanced budget?
Just a few.
EOG has lower D/E than they did before. See their stunning conference call. And if you say that is from E going up…well hello! Market is making a judgment.
I’m really trying not to tear into you, but I think you are making excuses. Those wells are profitable is why they are being drilled.
Hi Nony and every body else too,
Please remember that not all of us know all of the abbreviations and acronyms. There will be high school and college students as well as Joe Sixpack’s reading these comments in ever increasing numbers and attention spans are short under the best of circumstances.
”EOG has lower D/E than they did before. See their stunning conference call”.
I read this blog daily and several other sites covering energy but I haven’t the foggiest idea who EOG is and only a vague idea what D/E might be since it is given without context.
A couple of unfamiliar acronyms is all too often enough to cause people to just click on another site.Everybody can take this to be bank as solid gold fact based on real professional expertise.I have a copy of my (expired ) ”Collegiate Professional” teacher’s license issued by the Commonwealth of Virginia around here someplace.
I misspent seven years trying to explain reality to high school kids.
Mac, I couldn’t agree more. It really gets me when people throw those acronyms around and expect every reader to know what they stand for. For instance I just read this over on PeakOil.com:
“The FAO FPI has been under 210 for the last couple of years.”
People who write crap like that deserved to be stoned. 😉
Old man: OK. 🙂
EOG= Exxon Oil and Gas. They are the company that started the Eagle Ford shale exploitation and are the leader there. They are also big in the Bakken and have good acreage.
They have a reputation for being a good operator technically. They were spun off in 1999, couple years before Enron went bankrupt. Were a bastard stepchild in that company since they were real, had assets. They were skilfull at predicting and responding to the natural gas glut (shifted their acreage from US gas to US oil).
http://www.eogresources.com/home/index.html
D/E is debt to equity ratio. Both debt and equity are used to finance companies. Debt is optimal for tax purposes and for keeping managers noses to the grindstone. But too much of it can lead to cash crunches and bankruptcies and also makes a company unable to invest in growth. Finance theory shows that for different companies, there is an optimal blend that they should have. I actually think EOG should be running more debt, but they have lowered their debt to equity ratio and have an A bond rating (too “good” in my opinion, but the opposite of the doomer meme that Rune referred to, without analysis, or that Gail likes to spout off with.) Actually the ability to finance with some debt implies a less risky business (remember these guys are “mining coal” not running wildcats or gosh knows developing a biotech drug).
http://www.readyratios.com/reference/debt/debt_to_equity_ratio.html
Nony,
A slight typo on your behalf.
EOG Resources Inc. (formerly Enron Oil and Gas)
Not as you stated Exxon Oil & Gas, you had me confused for awhile. I know you went onto talk about Enron, rather than Exxon.
http://en.wikipedia.org/wiki/EOG_Resources
Thanks for fix.
Sorry about the formatting (no edit function)
Totals from NDIC daily reports
Hi Rune,
I assume most of these producing wells completed were in the Bakken/Three Forks? Or likely 95% or more of them were. Also I would assume that most of the plugged and abandoned wells (80% or more) were non-Bakken/Three Forks wells. Would that guess be fairly close.
DC,
I have not checked out all these wells by formation, but you may be close.
I checked one of the dry wells (in Feb) which was in Bakken/Three Forks.
Here is some info on the 6 dry holes:
http://themilliondollarway.blogspot.com/2014/02/eighteen-18-new-permits-williston-basin.html
I think the 4 dry holes are in the LodgePole formation and were drilled back in 2011, but status given now. (Not an assertion, just trying to figure it out.) See also here:
http://themilliondollarway.blogspot.com/2010/11/background-regarding-whiting-lodgepole.html
I think the Lodgepole is a layer just above the Bakken (based on google image). Not sure about the other two holes (are they in the Bakken or off in the Tyler or something)?
It’s actually news when there is a dry hole. Opposite of normal drilling. Supposedly all of 2012 had no dry holes.
http://themilliondollarway.blogspot.com/2013/06/the-geologic-column-in-north-dakota.html (scroll down)
A lot can be gleaned from the Bakken Blog Click on “ND drilling permits issued
week ending February 28 »” and get all permits, wells completed along with their barrels of oil per day and barrels of water per day. They even give the dry holes finished this week.
Dry hole
Renville ~ #16216 – Ballantyne Oil, LLC, Diepolder 11-1NENE 36-160N-84W TD: 5186
Stark ~ #19272 – Oil For America Exploration, LLC, Wolf 29-1SWSE 29-139N-95W TD: 9613
Stark ~ #19785 – Oil For America Exploration, LLC, Froelich 27-2NWSW 27-138N-97W TD: 9800
Stark ~ #20061 – Oil For America Exploration, LLC, Dohrmann 13-1SESW 13-140N-94W TD:9615
Stark ~ #20195 – Oil For America Exploration, LLC, Dohrmann 14-1NENE 14-140N-94W TD: 9680
Golden Valley ~ #21734 – Chesapeake Operating, Inc., Olson 12-139-104 A 1H SWSW 12-139N-104W TD: 18,844
Good info, man.
Yeah, looks like those holes are the same ones that were written about in 2011 and just now finally got officially called dry. (the numbers match)
The 4 Oil for America ones, that is. Don’t know about the other 2.
But how hilarious, that we are doing forensics on the less than 1% of total drilling population that was dry. 😉
Oh don’t underestimate that importance. It delineates boundaries in three dimensions.
Agreed. They are exploration holes and much more learning from them than a development hole.
My point is more that the bulk of the holes being drilled right now are very, very de-risked.
Is the number of dry wells an anomaly?
When I went through the detailed data I found that around 1 % of the wells were dry or very poor performers.
No, I think those dry holes were drilled some time ago. Their permit numbers were 5 to 6 thousand below those of the producing wells that were completed this week. They just finally got around to listing them. One of the 14 producing wells completed this week did produce 5 barrels per day however.
My model estimates it will take the net addition of around 115 new producing wells in Jan -14 to sustain the Dec -13 level of 863 kb/d from Bakken(ND).
For Jan -14 NDIC daily reports shows that 94 wells were completed (all ND).
Wells subject to weather related temporarily shut ins is expected to become higher.
Hi Rune,
Enno Peters has dug some data out of the NDIC monthly reports from 2008 to 2013, it shows that 2013 wells (for the first 11 months) were running about 5 % higher cumulative output than the 2011 wells, if that trend continues into 2014 (as in it does not decrease but remains 5 % higher than 2011 avg well), then possibly 110 wells would be enough to remain level. If you are interested in Mr. Peters data, let me know by e-mail.
I read Enno Peters post which I found to be excellent.
My model suggested that first 12 months production for more recent wells may have improved some, this by looking at differences relative to the 2011 reference well. The thing we have to watch for is how the cumulative develops.
In general I found that wells that had very good first 12 months total flows (above the reference well) also had steeper declines from year 1 to year 2 thus the cumulatives for these better wells versus the reference well converged with time.
What my model does not identify is wells being temporarily shut in for some reason (primarily weather) and there is no way to tell what wells are being shut in and where in there productive life (where on their depletion curve) they are.
During winter this makes new wells look poorer (than they really are), while during summer (as these wells are brought back to flow) new wells appears as better (than they really are).
Rune,
This is just a guess on my part, but I would think that it is the relatively low producing wells that would be temporarily shut in for the winter. I think that new wells that are brought online during the winter are unlikely to be shut down due to weather. The wells that produce the most will be plowed out first.
Note that when you look at all of North Dakota the percentage of idle wells stays pretty steady at around 9 to 10% (in 2013), back in 2011 it was around 12% so the % of idle wells has been decreasing perhaps because there is a higher percentage of newer wells that may require less maintenance/workovers.
DC,
I will give you some numbers to ponder,
From Nov-13 to Dec-13 the total number of idle wells increased with 168 (all ND).
The number of idle wells in the 4 counties with the biggest production (Dunn, McKenzie, Mountrail and Williams which mostly is Bakken/TF) increased by 133 (from Nov-13 to Dec-13).
Hi Rune,
This is mostly an increase in wells waiting to be fracked due to bad weather.
From the Feb Directors cut:
“We estimate that at the end of Dec there were about 635 wells waiting on completion services, an increase of 125.”
Most of the fracking services are occurring in those 4 counties you mention, the increase of 133 idle wells is mostly explained by the 125 wells mentioned in the quote above by Helms. Note the total number of idle wells in Dec was 1183 and 635 of these were waiting on fracking services. Also note that these 1183 idle wells are capable of producing and thus have been “completed”, but they remain idle because the production will be very low if they are not fracked. This is why the “wells completed” numbers that Helms mentions are not that important in determining production, many wells that are completed are not ready to produce, until they are fracked.
See https://www.dmr.nd.gov/oilgas/directorscut/directorscut-2011-10-12.pdf
Where Helms says:
“The idle well count dropped significantly again to 733 wells, but normal is 450, indicating a continuing backlog of almost 300 wells waiting on fracturing services.”
Also https://www.dmr.nd.gov/oilgas/mpr/2011_08.pdf
See page 2 of report above (state summary) to find the idle wells in Aug 2011 are indeed 733 wells. (The wells waiting on fracking is actually 733-450=283 wells.)
“My model suggested that first 12 months production for more recent wells may have improved some, this by looking at differences relative to the 2011 reference well. The thing we have to watch for is how the cumulative develops.”
FWIW: This could be attributed that the drillers have located a sweet spot that has better recovery than the areas they were drilling in 2011. If this is true than the peak date may be pushed out especially if even better areas are found.
What is the new sweet spot?
A moment of art, from death, aka trucks.
http://www.youtube.com/watch?v=M7FIvfx5J10
70 million views
Watcher: love that commercial, the music and all.
Just watched this one…scary too.
https://www.youtube.com/watch?v=1zXwOoeGzys
Peakoilbarrel seems more analytical than Peakoil. Also, I don’t see people commenting at both places. Are they rivals?
No of course not. I assume you are talking about PeakOil.com. I often comment on PeakOil.com. We are totally two different kinds of sites. PeakOil.com is a reposting site. That is they post stuff that has already been posted elsewhere. In fact this very blog was posted there today.
There may be more optimists that can be found at Peakoil.com.
A little Ukraine factoid. Way too much talk of the Russians losing leverage because it’s not winter and they can’t freeze them with a nat gas cutoff.
Saw this on ZH and fact checked it. Turns out 44% of Ukraine electric comes from nat gas, and they consume more than they produce. The remainder arrives from the Russian grid.
These people are screwed and probably don’t even realize it. Russia can do as they please, especially since Russia’s 6 million bpd export to Europe would be the source of NATO fuel.
Russia has a lot of power there, including from the Black Sea Fleet also. I have a feeling that West Ukraine will get cut off and this will be a shame. Much bigger country than Georgia and hard to say that they invaded Russia first.
Imagine if Russia started destabilizing Canada by causing civil unrest. What would the US do? You can bet your bottom dollar the US would be rolling in troops and tanks into Canada. The Ukraine is in Russia’s sphere of influence. To expect them to sit by and watch the US create the next Libya on their door step is beyond insane.
The EU wants the Ukraine to steal the Ukraine’s wealth, as happened to all of the other eastern European states that joined the EU. The US via NGOs (Non Gov’t Organizations) was financing the protests in the Ukraine to allow the EU to pillage it. The US involvement is likely because they want payback over Syria and to set up NATO bases in the Ukraine.
Tech Guy,
I couldn’t agree more with you. Dr. Paul Craig Roberts who was the former Assistant to Secretary of Treasury during the Regan Administration, was interviewed on King World News about the Russia/Ukraine situation.
It is very interesting as he discusses how the U.S. tried to destabilize Ukraine by funding riots and etc by financing the moderates. However, after the Coup, the hardcore nationalists from Western Ukraine stepped in with guns and forced the moderates to step aside.
Now it is a complete disaster because Washington and the EU did not get the desired outcome. Instead they have a historic pro-Nazi regime that actually supported Hitler during WW2 against Stalin who are trying to remove the Russian language as the official language in Ukraine. They also want any Russians stripped of their citizenship.
What a real mess. I highly recommend the interview below:
http://kingworldnews.com/kingworldnews/Broadcast/Entries/2014/3/1_Dr._Paul_Craig_Roberts.html
steve
I am not up on my internal history of the Soviets as well as I should be to stick my two cents in here but anti Stalin is not exactly the same thing as pro Nazi.
You take your allies where you are able to find them when you are dealing with a Stalin that has just recently starved millions of your fellow country men as Stalin did during the thirties and collectivization of the Ukraine.
AS Winston Churchill remarked at one point, if the devil were to come out against Hitler, then he would at least mention the devil favorably in Parliament .
I have never myself been able to decide whether Hitler, Stalin, or Mao was the worst man of recent times . Hitler started WWII of course but Stalin put him to shame in terms of terrorizing and murdering his own people even allowing for the Holocaust.
Ditto Mao with his Great Leap foolishness.
Of course there have been others just as depraved such as Idi Amin (spelling ?) but he was not able to fulfill his potential due to having control of a small country to small to give him free rein to exercise his talents.
The difference being that Ukraine strayed from Russia´s field of influence. Eastern Europe came in to play for others to try and exert their influence after Russia stumbled. Russia is once again establishing themselves and a clash is occuring where two (or more) significant players are trying to influence the same region.
It´s a dangerous game that all sides are playing but both sides have ideologies that dictate they play the game no matter the stakes.
Numbers, numbers, numbers. So many numbers. And how good are they? To paraphrase Colin Campbell, “It’s not an issue of whether my numbers are wrong. We know they are wrong. The question is how wrong.”
I love that Ron, Rune, Jean and others do their best with what they have to give us the best possible picture they can of what is to come. And if they are off by even five or even ten years (though I would bet real money they are not) that doesn’t change the importance of their message. We are headed for times unlike anything we or any previous civilization has seen, and very few people are taking it seriously. On the other hand, what difference would it make if they did?
Watching the numbers, looking at the graphs, reading the commentary — it all passes the time. And I will be more than a little interested to see whose predictions come closest to the mark. But that somewhat academic interest will be superseded by miles by my concern for my son and his future. He won’t care whose prediction was most accurate. He will have much weightier matters on his mind. And I will not blame him or others of his generation if they look back and curse my generation and my father’s generation for being so reckless and irresponsible.
Another way to characterize the situation is that we know we are depleting the remaining volume of economically recoverable hydrocarbons, the question is, what’s the depletion rate?
As I pointed out in the prior thread, by definition the remaining volume of post-2005 Top 33* CNE (Cumulative Net Exports) declined from 2005 to 2012. Again, the question is, what’s the depletion rate?
My estimate, based on the 2005 to 2012 rate of decline in the Top 33 ECI ratio (ratio of production to consumption) is that we may have already burned through about one-fifth of post-2005 Top 33 CNE in only seven years.
*Top 33 net oil exporters in 2005
Calhoun,
You’ve just provided us a concise, very well written description of reality. These are my own feelings, exactly. Good job man.
Doug
When your predictions are off, you should try to figure out why. Also, you should really watch out for your biases affecting your guesses/analyses. e.g. a peaker running a model that turns out a low/early peak.
It’s not just Rune. Look at Picollo/Gail in 2008 predicting 150-225,000 bpd peak and everyone in the comments section at TOD cheering that analysis on. Looks pretty flipping flawed now doesn’t it!
http://archive.is/Pc1uj
Rune’s post got a lot of real media attention. He owes it write up a crow version. I’m sure he would be shouting from the rooftops if he had been right. He was defensive about Filloon or others criticisms. But he still has not done the right thing when it turned out he was wrong. Being wrong does not annoy me as much as not being a truth seeker.
Nony,
You made your point fer pete sakes. Give it a rest dear sir.
The Titanic is sinking and people are bickering that it took a few more minutes longer for it to sink?
steve
OK. Will do.
Yeah, I second that motion. One can run anything in the ground.
Predictions? We are at peak oil right now. Or put it another way, we are well past peak oil for every importing nation. We importing nations are using less oil because there is less oil to use. Imports of all OECD nations combined has dropped by almost 7 million barrels per day since 2006.
End of story, peak oil has arrived. But apparently a few people just haven’t gotten the message.
12 Month Trailing Average of Combined OECD Imports
OECD Imports are dropping by one million barrels per day per year.
Predictions are right, predictions are wrong. It seems, though, the NET energy from oil extraction peaked a while ago. Yet there’s no data to prove that.
Ken Barrows Wrote:
“Predictions are right, predictions are wrong. It seems, though, the NET energy from oil extraction peaked a while ago. Yet there’s no data to prove that.”
Well there is data to support this. The price went way up. Pre-2005 the price of Oil was reasonable. Since 2005 the prices has been $80 or higher (except for a very brief dip of 2008\2009).
I think the Kopits presentation that compares capital expenditures to output also shows that net energy is long since in the rear view mirror.
Hey, if this is happening at or near the peak in world oil production, just imagine what it will be like when we start on the down slope.
Global riot epidemic due to demise of cheap fossil fuels
“If anyone had hoped that the Arab Spring and Occupy protests a few years back were one-off episodes that would soon give way to more stability, they have another thing coming. The hope was that ongoing economic recovery would return to pre-crash levels of growth, alleviating the grievances fueling the fires of civil unrest, stoked by years of recession.
But this hasn’t happened. And it won’t.”
It won’t happen because we are at peak oil, or so close that any increase in production will be marginal. We are at the end of growth. And the end of growth is the beginning of collapse.
Economists forecast the end of growth
“Future growth in real GDP per capita will be slower than in any extended period since the late 19th century.”…
“Our global economy, reckless in its use of all resources and natural systems, shows many of the indicators of potential failure that brought down so many civilisations before ours.”
A few days ago I said something to the effect of “absolutely nothing will happen at peak oil”. I take it all back. It looks like something is happening at peak oil after all.
Hi Ron,
The Guardian is number three on my list of bookmarked news sites and the only reason it isn’t number one is that I haven’t bothered to rearrange the icons.
I agree that ”something is happening” at peak oil and have long believed that we are in the early stages of collapse but that most people will not realize this because collapse will for the most part proceed piecemeal in the poorer parts of the world it it’s early stages at least. But it’s effects are perfectly clear to be seen even in this country if you happen to live in a depressed area where people have to drive a lot just to get to work. I live in such an area.
If the current total production plateau holds for few more years or if it doesn’t it is still (from a disinterested point of view ) obvious that the consequences of peak oil are already making themselves felt in very painful ways in countries that are energy poor.
Now as I see it in retrospect I think we have been focusing actual peak production too much and not enough on production per capita when it comes to getting the message across to the public.
Production per capita is the more important metric at least in the near term economic picture and peak oil per capita is in clearly in the rear view mirror.
Any honest fool with some background in agriculture acknowledges that oil prices and to a lesser extent natural gas prices determine food prices to a substantial extent and that the diversion of food crops or land and other capital diverted to biofuel production ( moonshine mostly here in the US) contributes heavily to rising food prices too.
Now this link you have put up is straight down the line the straight dope as I read it with maybe a couple of minor quibbles not worth mentioning.
But it is a blog published as a separate thing from the main part of the paper and not on the front page or in the business section of the paper or even in the main section of the environment.
Blogs are sort of letter to the editor thing.
The editors can run them without being accused of giving them the full-fledged stamp of approval of the paper itself.
Furthermore the Gaurdian is a non profit and as such not so much subject to pressure from advertisers as most papers.
THANK GOD (OR SKY DADDY for evolutionary pc types,lol) for the Gaurdian.
It is imo the best newspaper in the world right now and there is no doubt at all that it is the best one you may still read free on the net.
But even the Gaurdian does not yet dare to mention peak oil on the front page unless I have missed seeing it.
No other important paper that I know of is quite so close to acknowledging peak oil and I believe the Gaurdian will be the first major publication to put peak oil on the front page where it belongs.
Mac, the problem is we’re living a fantasy and what should matter is the world we leave for our children and the other wretched creatures trying to make a living here.
However, although I really hate to say it, Patrick (and Buddha) is right: the best thing we can do is accept Fate, tone down the stuff we do, and get on with life. Just because it pisses me off no one believes in global warming, Peak Oil or peak anything, that’s the way it is. And, ’twas ever thus.
I think the best way to improve response to both Climate Change and the fact of Peak Oil is to not discuss them at all with those who are resistant but to constantly discuss their effects. Transport poverty, rising energy cost, insurance cost rise, need for resilience in both energy supply and from unpredictable weather events. It’s crazy I know but I find that the conversation and resultant action on these issues is much easier to get going if we just pull back from raising their base causes. I am confident that soon enough we will be able to discuss base cause too, but right now it’s more productive to interest people in the direct economic and lifestyle benefits of improved transit, living and working with reduced car use, generating their own electricity and so on…
Things that you may not think will make any difference but when billions of people all make one small change it adds up to a big one. This is after all how we got into this oil addiction. And we have no choice. We may be condemned to a shark fin, or we may be able to flatten that out to a long tail, or somewhere in between, and the only way to find out is try.
To this end I am very keen on as gradual but continual price signal from crude as possible. This $100 plateau has been longer than I expected and is sure to break out north as soon as the Shale story gets more complicated (ie stops growing). A return to 2008 volatility is likely too but a lot more difficult to function in. All talk in the MSM then is about ‘shocks’, a way of avoiding discussing real supply/demand issues.
Patrick,
“Things that you may not think will make any difference but when billions of people all make one small change it adds up to a big one.” It’s exactly what my two daughters have been telling me for a very long time. Perhaps I’m hard wired for doom because it doesn’t seem like anyway near enough. That said, no peace of mind, or solutions, will come from a gloomy outlook either. So I concede, your view wins! I guess.
Doug
Gracious, Doug.
Canadian Urbanist Gordon Price likes to discuss change as being on a continuum between Utopian and Apocalyptic with Incremental in the middle. I guess the first is incredibly rare except in intention, the second all too common, but the last, Incremental, continual.
We can certainly find any number of ways that Catastrophic change is immanent but hasn’t the human experiment always really been in that state and only survived by seeking its reverse through the agency of Incremental acts.
However history is littered with the apocalyptic hastened by people promising the utopian. For me, now, the people offering the endless life at 20thC resource plunder are misguided Utopians. But then to many used to that world this is the very charge that is leveled at the Green movement. I detect it for example over on Euan Mearns’ site, where the UK energy predicament is being blamed on those urging transition from traditional sources and structures….
Also change is never synchronous. Different places will be forced to different states at different times. Very very interesting to watch!
Patrick Wrote:
“This $100 plateau has been longer than I expected and is sure to break out north as soon as the Shale story gets more complicated (ie stops growing).”
The price of oil probably not going to go too much higher. prices may go up $10 to $20 (except for Spikes from Geopolitical events) as the worlds economy can’t afford much higher prices. If they could then Oil majors would need to slash CapEx spending and the peak in shale could be delays as more money was able to fund expansion.
The 2008 spike happened because the world was in a housing bubble and banks were offering everyone easy loans. Instead of Oil prices resuming a trend higher, the global economy will shrink to the supply constraints. The next economic dip will get dicey for the west as unemployment is already too high. We are likely to see revolutions, civil war, as well as real war. The signs of this coming are very visible. We already have revolutions and civil war in the middle east. China/Japan cold war heading to a hot war, Trouble in the Ukraine, frequent riots in western nations with high unemployment.
Riots in the US may not be far off, now that California is out of water, and its farms will be cut off, we will almost certainly see some food inflation by the end of the year. Once food stamps can’t keep up, people will turn to violence.
“This is after all how we got into this oil addiction.”
Oil is the food for the modern economy. It not really an addiction because without it the economy will starve to death.
Oil prices cannot go much higher for a long period in inflation adjusted terms.
However, imagine this:
Russia invades Ukraine. tick
Western nations retaliate by selling Roubles and Russian stocks. tick
Russia retaliates by shutting gas and oil pipelines pipelines to Europe. No tick yet
Price spikes very rapidly (up $2 today so far )
Global recession within a couple of months.
All the important parties (i.e. not Ukraine) will pull back from the brink. Europe and the U.S don´t want to face the shock and Russia isn´t as resilient as it makes out. Ukraine will fracture and the various regions will have greater independence – all is well (barring Ukraine) until the next time.
These clashes are getting more frequent. Russia and the U.S came much closer to conflict than they have in a long time over Syria 6 months ago. Now we have Ukraine as a divisive issue – no suggestion of military action (not from the E.U and U.S anyway) but it´s a point of tension that won´t help in the long run.
As oil supplies tighten and prices inevitably rise (despite any offsetting economic decline), the cognitive dissonance experienced by the American population will be excruciating. After decades of real abundance and one decade of ersatz abundance (as touted by IEA, oil companies, govt, media), the reality that it is over will be too much to bear. Beyond the actual suffering that results from scarcity there will be the psychological damage from the realization that it is over. I can only expect the worst — but then, I’ve always been an optimist!
Calhoun,
I might add, the abundance we, and our parents generation, have taken for granted, in a very real sense, goes beyond anything witnessed in history, except perhaps by kings, queens, sultans, tsars, and the like. This is such an obviously unsustainable event that no one with any imagination could believe it will just could go on and on. Yet I meet people every day who honestly believe that it’s perfectly normal to own multiple luxury cars and yachts and be taking endless trips around the world. This phenomenon seems summed best by the phrase “sense of entitlement”. All this, naturally, financed by the riches of endless extremely cheap energy – and there’s the rub.
Good morning all.
Regarding the price of oil either by the barrel or by the gallon….
After we go over the cliff, I doubt most people will care if the price is rising or falling. Many people will have lost jobs, and for those still working, their wages will not keep pace with inflation.
If I cannot afford a car, but rather must ride a bike, or, a motor cycle or scooter, if I’m lucky, then the price of fuel at any price doesn’t matter much to me.
Even if fuel prices fall, they will still be higher, relative to all other prices.
On that note, I have four bikes in my household, as well as two bicycle cargo trailers. Next I’m looking to buy a scooter or motorbike.
Several bikes and several trailers in our household. Sold the scooters a while back, and the car a few years before that. And we rent out two rooms in our house to students. I think of this as the “new normal”, which seems like the “old normal”, which existed before my time. At least according to what I have read, and what older people have told me.
Pretty much only thing I use car for is to drive to get groceries, go to doctor/dentist, and occasional trips to a relative. Live in the city and lots of stuff is walkable. Even going to the gym, I bike rather than drive (transport becomes workout!) However, when working, I’m on the road with lots of flying and a rental car. Still, I stay at a hotel very close to the client site, so total drive is low. I don’t do it for $$ or environmental reasons, but for lower commute time.
I realize that everyone is different and if you have a wife pushing for a yard for the kids or exurb schools, etc….they are all choices. But my point is rather than just being planet-altruistic, try to find positive lifestyle reasons for “doing the right thing”. For example, low commute distance because it’s less time lost staring at the windshield and listening to Rush Limbaugh and sports talk. Biking or walking for errands because it’s tacit workout as well as just getting some outdoor time. If you’re a local foodie, than the joy of having absolutely fresh tomatoes rather than those rocks from Safeway. Etc. Etc.
The scooter or bike types with cargo carts behind them think they are preparing, but never seem to quite ask themselves how the groceries got onto the shelves to which they intend to bike when all others can’t drive.
I think that is sort of a bus versus car issue though. Think how much less gas it takes to go 10 miles as part of a busload as opposed to 10 miles as a single driver. Similarly, the semi truck with 30,000 pounds of groceries has way better economics per pound than me taking 50 pounds home in my 20 year old 2 seater sports car. 😉
Well of course, all generalizations are wrong …
It’s not so much “Preparing”, as just adapting and adjusting to various tends in modern day life, or, more accurately, what I THINK are the main trends in modern day life. I live in a place with a high walkability score, where riding a bicycle is very common. I couldn’t afford a car, even if I wanted one. Our main grocery store is very close, and is a local store that sells a lot of locally grown or produced food items.
I have no certainty of what the future holds, although I have many ideas (many of which are at odds with one another). Living locally, as much as possible, makes sense to me. It may turn out to be quite foolish, or just plain silly.
Unless things really go to hell in a hand basket the food will still get to the stores because fuel will be rationed to farmers and truckers hauling food with a priority right up there with the cops and rescue squad.
But the variety will fall of sharply and drumsticks will be the new ribeye and ribeye will be the new caviar.
I am not going so far as to say that industrial farming and delivery will collapse because I can’t see any SURE reasons why this should happen,at least not during the next couple decades.
But if the cards fall wrong —it could happen.
I am counting on Big Brother to prevent it though.By the time we are looking at collapse belly to belly and nose to nose Uncle Sam will literally know where each and every one of us sxxt last ( defecated in polite language) and the ration system will be ready on hard drives and backups at least.
I just hope the administration in charge when the time comes is competent in terms of actually administering a large undertaking.
This one will be the biggest ever and it is going to be one tough nut to manage. It will make Ocare look like a Sunday School picnic.
If there are any old commie administrators with top level experience still around from Soviet days they will be in big demand as consultants.;-)
“drumsticks will be the new ribeye and ribeye will be the new caviar.”
Which is why I’m eating a lot of steak now. Seriously.
Farmer Mac wrote:
“Unless things really go to hell in a hand basket the food will still get to the stores because fuel will be rationed to farmers and truckers hauling food with a priority right up there with the cops and rescue squad.”
Food stamps or EBTs are not keeping up. I think a lot of people will not have enough to eat anyway. Fewer workers means less tax revenue, and less money for wealthfare.
Another issue is that the majority of farmers in the US are at or near retirement age. As a farmer I think you realize the disaster would be if a bunch of city slickers attempted to work on farms.
Farmer Mac wrote:
“I just hope the administration in charge when the time comes is competent in terms of actually administering a large undertaking.”
I would consider that statement borderline “cornucopian” 🙂 Unfortunately things always get much worse before they get better.
For most of the reasons you listed is the reason why I am heading to a rural area and to become food self-reliant. I don’t want to end up getting fed soylent green if I remain where I am.
Based on thirty years of experience growing much of my food, and several years as a small commercial farmers–
There is no such thing as “food self-reliance.”
Just a short list of what one relies on to grow “one’s own” food:
tractor makers and repairers
fuel companies
seed companies
makers of chainsaws, implements, plastics, alloys
electrical infrastructures for such items as irrigation systems
tool makers
I’ve stopped fooling myself. I’ve stopped “preparing” for peak oil. Not only do we not know what to “prepare” for, there is no removing oneself from the system upon which one relies.
MikeB Wrote:
“I’ve stopped fooling myself. I’ve stopped “preparing” for peak oil. Not only do we not know what to “prepare” for, there is no removing oneself from the system upon which one relies.”
I think you didn’t understand what I meant by self-reliant, not “self-sufficient”. Will I be completely self-sufficient, no, but I can avoid being 100% reliant on the just-in-time (JIT) system . I am pretty sure depending on the existing system is a death sentence or a deep experience of abject poverty. I have no choice but to try.
For tractor repairs I can probably be close to self-reliant with a full machine shop to either repair or manufacture replacement parts. I’ve been slowly accumulating machine tools and learning how to use them for years.
For Fuel, I can stock up 15 to 20 years of consumption needed for farming equipment. I’ve also investigated options to become self-reliant with fuel via destructive distilling. I don’t need to operate a 1000 acre farm. My needs won’t require burning through hundreds of gallons per season.
Seeds can be recovered from crops, just as it was generations ago before seed companies became the dominate player. I’ve already become seed self-reliant with a garden and using heirloom seeds. I also intend to make heavy use of perennials.
For Electricity, I already have a plan with Solar, Woodgas and steam. I’ve been learning and practicing repair of power electronics for years. I am also relocating to a temperate region with more than ample rain fall to limit the need for irrigation.
The difference is that I don’t need to farm to run a business, I just need to farm to be self-reliant. I don’t need to operate a 1000 acre or even a 100 acre farm in order to earn money, nor would I want to. I suspect your situation is different than mine.
That said there are things I cannot do, such as survive a nuclear war and the problem with the nuclear spend fuel pools. I also lack medical skills need to treat serious illnesses and probably a dozen other skills need to be completely self-sufficient. Either I try, or I die. I rather try first, I can always die later 🙂
Just one question: What are you doing to protect yourself, your tractor fuel, and whatever else you may have of value, from others who see your cache of stuff as something they would like to have?
Remember we are talking about a time when law and order, as we know it today, will not exist.
Ron Wrote:
“Just one question: What are you doing to protect yourself, your tractor fuel, and whatever else you may have of value, from others who see your cache of stuff as something they would like to have?”
1. I am not telling anyone, nor is anything visible.
2. None of my buildings will be visible from the road.
3. I am relocating a rural region away from the majority of people, and choosing a property that has no next door neighbors. Drifters and scavengers are not going to walk down a mile dirt road looking for resources. They will stick to places that will offer the most resources that expend the fewest calories. I think within weeks the majority living in urban and suburban regions will die off. Most won’t live to even get out of the suburb limits, overweight, easy prey by maundering gangs, lack of preparation and survival skills.
4. There will be significant security measures implemented which I don’t really want to discuss.
5. Tractor and machine noise use would need to be avoided when the collapses unfolds a to avoid detection. I think after a few months, perhaps a full year, nature will take its course culling off those that turned to nomadic survival as all the remaining resources are quickly consumed (remember or JIT system!)
Obviously, I am not go to do anything that makes me a target.
I can’t guarantee it will work out, but if I don’t try then all is lost without a fight. Better to try my best than drown in self-defeatism. At the very least, it will keep me busy and prevent me from dwelling on things I cannot prevent. I suspect this is why you spend so much time pulling all this data together and running this blog: find something to be preoccupied and avoid becoming permanently depressed.
My biggest worry is not the lawlessness, its the spent fuel pools. There is no way and nowhere to go to avoid them. Once the collapse begins, who going to maintain them and prevent them from burning? I fear that if the majority of the spent fuel pools burn, its game over for all vertebrates. Would you disagree with this assessment? I do already have significant equipment to detect and monitor radioactive contamination, but all it will really do is tell me is that the game is over.
I’ve stopped “preparing” for peak oil.
People forget that you can’t simply bring back the technology of the past and that there were problems associated with that technology – such as Horse and buggy.
From Horse to Horse-Power (8-page PDF)
Hi Mike and Tim,
There is a world of truth in what you guys have to say and I would be the last person to contest it.
I will be as close to self sufficient as just about anybody except a real doomer if tshtgf while I am still able to work because I appreciate what you have said here. But there will be many a thing I will have to give up the biggest two being variety in my diet and the enormous amounts of time I will have to devote to growing food that I purchase these days and doing jobs by hand that I use power tools to do for now.
Just getting in enough firewood by hand to heat and cook would take a day every two weeks year in and year out and at my age I won’t be able to handle that sort of all day hard work much longer.
If you are located in the right place you don’t have to have irrigation at all and there are places where it is easily managed with a few hand tools. I own some bottom land that can be irrigated with nothing more than a pick and a shovel and a months work ditching by hand because it lies adjacent to a stream.
But this year I will dig the ditches with a backhoe which will take only a day.
I have actually worked a horse and a mule back when I was a kid and my grandparents still kept them mostly due to old times sake.(I can’t remember when we didn’t have cars and trucks and tractors.) Old folks being old folks and creatures of habit we still raised a couple of acres of corn by hand except for plowing with the tractors and we still plowed little gardens all over the place with the mule.
Momma worked long hard hours at home cooking from scratch and gardening (to a real farmer gardening is what you do to eat and farming is what you do to take to market to sell) and putting up literally thousands of cans of veggies and fruits and meats.
It is possible to grow enough to eat and eat well if you have good land and are willing to work at it long hours year in and year out without a whole lot in the line of purchased inputs.
But anybody who anticipates actually doing it should be damned sure they have plenty of prime land and that they get every thing done now that they possibly can to make it easier later on. Such things include well built storage barns, durable fencing, a well equipped workshop , a large store of fertilizer and other essential industrial inputs ranging from nails to rope to table salt.
It isn’t going to be easy at all. If it becomes necessary the only way I will be able to manage it in a few more years is to take in a couple of young folks and hope that they don’t feed me to the hogs someday when I get to be more trouble than help.
But the odds are pretty good that we won’t have to deal with this level of collapse in the US for a good long while yet and maybe not ever on a widespread basis.
We Yankees can be pretty mean if we have to be and we we are the best armed country in history by a very long shot.
So we probably can hog enough resources to last us long enough to transition to a coal fired and renewables powered economy with a little luck.
It won’t be pretty but compared to what is in store for most of the people in this world it won’t be bad at all.
It’s a sad truth but there have always been people without enough to eat even in the USA and there will no doubt be more and most of them will be going hungry thru no fault of their own beyond a lack of understanding of which jobs are secure and which ones aren’t.
And some people are just so ”sorry ” that they can’t be helped. I was offered food stamps for half price many times when I used to live in the city, and I have seen people t trading food for beer and cigarettes in supermarket parking lots in the last few weeks.
A man who gets Viagra from the Veterans hospital offered it to me for way less than half price a couple of months ago and to be honest the only reason I didn’t take it is that I don’t have a girlfriend and no hope of getting one that I would actually want.
When I suggested that he quit picking it up and telling the doc he didn’t need it ( his woman packed up and left) he looked at me as if I were as crazy as a mad hatter.
Depending on how fast things go to hell in the proverbial hand basket we won’t experience much actual starvation in the US in my opinion because we will have our very own police state that would have turned Hitler, Mao, or Stalin green with envy in many respects.
By the time things are bad enough that we will really need a martial government Uncle Sam will know every place we took a number two bathroom break for the last decade at least.
Every body who doesn’t get on the wrong side of the bureaucracy that issues ration tickets will probably get enough to eat but it will be a boring and bland diet.
But my own personal opinion is that although a hard crash is inevitable it may not actually arrive for a good long while yet and the odds again imo are probably at least even that I won’t live to see it take effect here in the US.
But collapse is already here piecemeal in a good many parts of the world.
If I were a young guy knowing what I know now I would be working towards a self sufficient lifestyle well to the north of the Mason Dixon line and at least four or five thousand feet up on a mountain range that gets a lot of rain due to the prevailing winds coming it wet and passing on over the top all rained out.
Farmer Mac Wrote:
“Every body who doesn’t get on the wrong side of the bureaucracy that issues ration tickets will probably get enough to eat but it will be a boring and bland diet.”
The problem with rationing, is that it fails within a few years. We can see it happening in Argentina and Venezuela. Farmers and ranchers don’t like working hard for peanuts to feed a bunch of freeloaders. Soon or later the store shelves go bare and riots become the daily routine. I very much doubt rationing will last very long in the USA. We’ve become a nation of Narcissists and lack the ability to pull together to plow through a major crisis. We even elected a narcissist for president.
“we won’t experience much actual starvation in the US in my opinion because we will have our very own police state that would have turned Hitler, Mao, or Stalin ”
In the case of Mao and Stalin, The people did starve even when the country was a police state. Stalin killed off about 60 million and Mao about 50 million. Hitler managed to avoid it until the end by invading other nations and taking their resources. For a modern day example of a police state, millions are starving in North Korea. The problem with Police states is that they are always controlled by megalomaniacs that try to implement grand plans that never work and end up killing millions. The US would last a lot longer without a police state and with far less suffering. But I will agree that appears the direction the US is heading.
The US is too dependent on the JIT (Just in time) system. We have no resiliency anymore and all it will take is one major event to break the system. The US has far too many dependents relying on too few people to support them. Even if an energy crisis was near the US would still face collapse because it deep in debt and there are more dependents than contributers. The US imports the resources it needs abroad using its fiat currency. When the dollar collapses it will be the end of the police state as the federal gov’t is 100% dependent on the value of the dollar to survive.
I hope your right that a collapse is in the distant future, but I am anything but a gambling man. I rather error on the side of self-reliance than gamble on a unstable JIT system. I also want to distance myself from the police state. FWIW: I think a collapse is still a few years away, but not so distant that I can postpone becoming self-reliant.
This also describes the changes I have made in the last few years, and more and more are making similar incremental changes like these too. We are doing it because it is the rational response personally. This will increase as oil price guides us away from old habits. This elasticity in use is slow to start but will accelerate. In my city inner suburbs that are more connected, walkable, and better served by transit are now being bid up in value while auto-dependent more distant suburbia is flatlining or dropping in its. People aren’t all stupid, they calculate the transport costs (in time and money) as well as dwelling cost when deciding where to live. Driving stats are flat to falling, transit, walking, and cycling are growing fast. And this is in a steadily growing economy. These small individual changes made out of self interest are and will have real impact on the ability of the economy to function in a world of more expensive liquid fuels and allow time and capital for investments in the necessary infrastructure for the post car urban world to be built.
A couple of years ago I wrote this about the urban future and it is gratifying to see it slowly unfolding in many (not all, of course) metros:
http://transportblog.co.nz/2012/05/30/futurissimo-the-new-city-street/
Being an urban Republican rocks. Get to enjoy all the fun aspects of the libdem BlueStater lifestyle without having to be an effete PC weeny.
I can also see how being a rural hippy could be fun. Nothing like going against the stream.
😀
I was in a city office yesterday where most of the staff ride bikes and store them in the reception when a client came in expressed surprise at the bikes saying: ‘you must be a bunch of Greenies.’ He was answered with: ‘no we’re not, we’re a bunch of fiscal conservatives’.
Nice response. Of course they’re actually both.
This website has the same defect as TOD: We neeeed a like-button!!! 🙂
like buttons are digital echo chambers.
Instead, you could just choose one poster to be stoned to death, like that short story.
Exactly….
Playing for greenies becomes a self-defeating goal…
From Jeremy Leggett’s excellent blog
Total tries to sell stake in Azeri gas field in face of cost. Quoting the Financial Times:
“Total is in talks to sell its stake in a huge gas field in Azerbaijan after it baulked at the enormous cost of the project, which would deliver Caspian gas directly to European markets for the first time.”
Costs are getting a lot of headlines these days. I think we are witnessing a sea change in investment where the focus is less on growing booked reserves to growing profits. It was always assumed that reserves could be produced and sold at a profit, but not any more. The ability of economies to pay for oil and gas is, as Kopits pointed out, a limiting factor on demand and higher prices are needed to pay for expensive production.
And more from Jeremy:
During 2013, however, key investors curbed their investments in coal and
oil, recognizing the risk that assets might end up stranded by climate policy.
As I describe in my new book, The Energy of Nations, HSBC’s lead oil and
gas analyst, Paul Spedding, told investors and media at the launch of Carbon
Tracker’s 2013 report in Bloomberg’s London headquarters that he would be
recommending that his bank’s clients stop wasting their money on capital
expenditure in the search for new reserves and give it back to investors as
dividends.
This is what businesses do when they are in decline — start returning earning to shareholders rather than plow them into unprofitable attempts to regain growth. The really ironic part of this is a few years ago publications like Forbes were speculating about the possible profit potential if peak oil occurred. Please see this article Bracing For Peak Oil Production By Decade’s End. It’s kind of hilarious. It starts out with Maxwell predicting peak oil by 2017, which, as we all know, will be devastating. By the way, Maxwell was saying this in 2010.
“A bind is clearly coming. We think that the peak in production will actually occur in the period 2015 to 2020. And if I had to pick a particular year, I might use 2017 or 2018. That would suggest that around 2015, we will hit a near-plateau of production around the world, and we will hold it for maybe four or five years. On the other side of that plateau, production will begin slowly moving down. By 2020, we should be headed in a downward direction for oil output in the world each year instead of an upward direction, as we are today.”
Maxwell doesn’t come out and openly say that disaster is looming, but I’m certain he’s fully aware of the implications of his statement. So what does the genius interviewer at Forbes ask:
Against that kind of challenging, even scary background, what investments are you recommending to “take advantage” of this?
Yeah Baby, peak oil is coming, let’s TAKE ADVANTAGE of it. Holy cripes. When I first saw this New Yorker Cartoon, I thought it was kind of funny. Now it’s just scary.
By the way, Jeremy has a new book I am keen to read. You can get it from Amazon here.
Calhoun, thanks for this excellent post. It is the most interesting one I have read in days. Sorry that it took so long to appear but it appears that posts with more than two links must be approved by an administrator.
Thanks, Ron. Just an added note: whereas Jeremy suggests that oil and coal assets will be stranded by climate legislation, I find that very hard to imagine. I expect there will be no such legislation and if such legislation came to pass, there would be no compliance.
I think businesses are rethinking their capital expenditures based on one thing only — expected return on investment. The past few years have seen bitter disappointments from Brazil to Kazakhstan, Iraq to Nigeria. And soon, I believe, Bakken will be added to the list. The oil company executives and their boards cannot possibly be unaware of these disappointments and must be wondering whether tis nobler in the pocket book to endure the slings and arrows of outrageous fortune or get their money out while the getting’s good. 2014 is shaping up to be an interesting year.
Calhoun,
Once again I must say, good job man; you are indeed a real asset to Ron’s Blog. But for the record, so there’s no mistake: NO I’m NOT in love.
Doug
Thank you. And thanks to Ron for giving us all a place to call home since TOD closed shop.
Climate Change challenged by California field biologist
Why Climate Deniers Have No Scientific Credibility – In One Pie Chart
A greater force and factor involves the Atlantic and Pacific multidecadal oscillations with regard to climate change, i.e. the earth itself has much more capacity to change the weather than any anthropogenic origins.
Anthropogenic causes are there, no denying that. The entire earth was once covered in ice and glaciers.
Can’t be a climate denier when the facts present evidence to the contrary.
Galileo was convicted of heresy, he recanted to save his hide from being fried, even though he was correct.
Sometimes, science doesn’t make everybody happy.
That’s the way it goes moving west.
Your 2nd paragraph seems to imply that humans caused the end of the last ice age. Huh? Or was that just haphazard juxtaposition?
And while there is certainly truth to your 1st paragraph, there’s one simple question I pose to climate skeptics (no sense bothering with deniers) who are at least able to contemplate basic science. Since at least Arrhenius, we have known that CO2 in the atmosphere traps heat and re-radiates it back to Earth. Since Keeling, we have a very clear picture of just how much CO2 we are adding to the atmosphere. Just where is all the extra heat going, and what is it doing to the climate system?
As for Galileo, it’s a slick but not apt comparison. Galileo had science on his side, vs. the church which had only belief. Deniers have exactly what on their side, vs. the science of climate change?
Yes, there is room for skepticism & debate in science – in fact, science relies upon it. But there must be evidence to debate, not merely belief. Just because 99% agree on something does not mean they are right. But when 99% of the evidence points to a conclusion, that is a different equation.
I have a question, that you may be able to answer: If the climate is warming, would the maximum annual temperature in a country tend to go up over a period of decades or a century?
On first guess, I would say “yes”. Is there any reason to say “no”?
The evidence in Canada is that the maximum annual temperature in the top 200+ cities for the past 65 years has been constant. It has not moved up since records began. Why is that?
Canabuck,
You didn’t hear? Canada is exempt from physical laws 🙂
I think the warming must only be happening in rural areas 🙂
Yes, the sentence was supposed to be the last in the first paragraph, it was a mistake for it to be where it is. Didn’t notice the mistake until after posting.
sorry.
In 1988, there was a day in August that reached a temp of 108 degrees in the shade in the northern clime where I am.
Those temps have yet to return since that time and the number of days that are plus 100 during the summer months are fewer in number. Increases in rainfall and a rising water table have kept summertime temps lower, imo.
One of the coldest winters on record is occurring this year, btw. It is likely to remain a record or close to the record.
Climate change, a definite yes. Global warming has a ways to go before it happens where I am.
This winter, I wish global warming were the case, it’s colder than Hades out there and has been for a good 110 days with no relief. Uff da.
aws,
Good chart, made a copy for my wallet. Won’t make any difference though. Fact is, I bet if it was relabeled, with the red sliver representing climate change believers, it would be pretty accurate description of current state of affairs. Still, it’s a good addition to Ron’s Blog.
There is a great deal of truth in what this guy has to say on a local level. We have certainly changed the face of the Earth on a local basis enough to disrupt nature more than climate change has disrupted nature -SO FAR IN THE SAME LOCALITY.But this is not the case in the larger sense when we consider the face of the earth.
I have often wondered myself if climate modelers have assigned too much significance to greenhouse gases and not enough to land use criteria such as rooftops pavement forest pasture and croplands and so forth.
This would not change the outcome of runaway warming in the end of course but it might result in the model ‘s not being quite as accurate over the short and medium term.
There are many small streams near my home that used to support cutthroat trout that are clean enough to do so still but the trout are gone because too much land adjacent to the streams has been cleared and too many small impoundments created mostly so homeowners can look at their own little miniature lake.
With so much sun on the water it gets too warm and the trout can’t make it any more.
But why he should deny the reality of climate change is some what of a mystery. Nobody is claiming that man made warming has already more severely impacted ecosystems than development on the level that he implies.
Any body who is keeping up should understand that the global warming fecal matter is only now beginning to hit the fan in small amounts.
Now I am not a qualified researcher but anybody who cares to investigate the history of agriculture for the last century will quickly come to the conclusion that farmers are planting earlier and harvesting later in most parts of the northern hemisphere.
And even a casual look at the way species are moving of their own accord to new territories indicates that not many are moving south and to lower elevations but quite a few are moving north and to higher elevations.
AWS:
Becareful about apply measures like that. 500 years ago, just about every scholar believed the sun rotated around the Earth. Even in modern times theories and assumptions turned out to be completely wrong. You can not prove a theory by the number of people or papers that support it.
Clifman Wrote:
“Your 2nd paragraph seems to imply that humans caused the end of the last ice age. ”
No, that the Earth was warming before the Human footprint had any chance of impacting climate change. if man never existed the Earth would have continued to warm, but perhaps at a much slower rate.
Clifman Wrote:
“Deniers have exactly what on their side, vs. the science of climate change?”
I fear the believe in climate change and that we can change it is just another form of religion. The only way humans will cut their CO2 emissions is from a global dieoff that culls billions and reduces the number of people consuming resources. Eventually this will happen.
I would much rather see the entire group focus there effort on getting nuclear power shutdown and cleaned up. While this is a very daunting task, the risk of a cascading lost of multiple power plants is by far a more more immediate threat. Just the loss of one spent fuel pool can render a 1000 mile radius inhabitable is a risk that we and the planet cannot afford. I find it very disturbing that the same group that is in favor of cutting CO2 emissions is also very in favor of expanding nuclear power which has the potential of destroying all vertebrates on the planet.
I have a sample of oil from the Three Forks. You can smell the fumes from the gases present in the oil when you open the top of the small bottle it’s in.
I am going to keep it just in case it is the very last 5 cc’s of oil existing on the planet. lol
The Russians are going to keep the Ukraine, every bit of it. If it takes a military invasion, that’s what they’ll do and have done. It’s a no brainer. Russia is going to retain their oil revenues at all costs. Not going to be any other way.
Why did they let go that part of their territory in the first place? They let it go only a few years after the Chernobyl disaster. I presume they will now only take back the eastern part: the part not containing the exclusion zone.
Verwimp:
“Why did they let go that part of their territory in the first place? ”
For the same reasons Ron Walter already identified. Oil profits. If you recall KSA (Kingdom of Saudi Arbia) and other ME nations opened up the taps causing the price of Oil to drop to record lows. the FSU (Former Soviet Union) had there Oil export revenues collapse. There is a famous (perhaps infamous) CIA article from 1987, released under the FOIA, that discussed that if the oil glut persisted that the Soviet union would collapse. I am sure an Ex-KGB man like Putin understands this.
Ronald Walter Wrote:
” Russia is going to retain their oil revenues at all costs. ”
Or until Oil is no longer fungible, or there is a global reset (ie US dollar collapse). Putin needs Petrodollars to stay in power. Its also possible that at some point the EU won’t be able to afford imports from Russia, making these “board” moves pointless. So far Putin has done an incredible job of winning the PR game. First Snowden, then the Chemical Weapons in Syria. I would not doubt that Putin has another plan to make the US look foolish again. I am not a fan of Putin, but he managed to stay on top of this game.
The big danger is the USA as its run but a bunch of clueless hotheads that believe they are a bunch of genius chess players, who can’t ever seem to ever win at checkers playing against kindergarten children.
The Petro States of America
By Mark Hertsgaard, Bloomberg Businessweek, February 27, 2014
Carnage on the Natural Gas Market
By Matthew Philips, Bloombeerg Businessweek, February 27, 2014
I have been watching the wild swings in natural gas prices the last two months with interest and am somewhat amazed how little attention has been paid to it in the media. I am guessing it is not until people get their utility bills and start howling that we’ll see a reaction. And since most electricity rates in the US are set by some kind of public utility commission, I’m not sure how responsive the kwh rates can be to quick changes in natural gas costs. But I note even with the uptick in natural gas prices, there has been no uptick in the number of rigs drilling for natural gas the past two months.
Electricity Price Index Soars to New Record at Start of 2014:
http://www.cnsnews.com/news/article/terence-p-jeffrey/electricity-price-index-soars-new-record-start-2014-us-electricity
CNS appears to be a right wing oriented website, but insofar as I can tell, the article is accurate.
Alberta Mother Fights Five Neighbouring Fracked Wells
Diana Daunheimer’s lawsuit follows years of policing industry in her own backyard.
By Andrew Nikiforuk, 28 Feb 2014, TheTyee.ca
Always good to remind ourselves that there are real people on the ground who are being poorly treated by the fracking industry.
Triple Divide
Triple Divide : trailer and info
Watch the whole documentary!
[vimeo 63571188 w=500 h=281] Triple Divide – Trailer from Public Herald on Vimeo.
The on the ground impacts of fracking the Marcellus can’t be ignored forever!
When the buffalo were decimated by hunting to provide fertilizer for farmers in the farming states of Ohio, Illinois, Iowa, Indiana, etc. those 60 million one ton animals were a direct resource until their numbers were reduced to hundreds and the Great Plains had been scoured for buffalo bones for the bone china industry and agriculture, the price of buffalo bones were at 8/ton to 22 per ton and then there were none. That is why an old buffalo skull has value, millions were ground to dust. Cart upon cart of buffalo bones hauled to market is documented photo history. Nothing lasts forever.
If an analogy exists close to what Peak Oil is, buffalo hunting with a Sharp’s .50 caliber would be the one I would use. You’ll get your shark fin graph for sure.
I am afraid were are decimating millions upon millions of animals and plants from hundreds of millions of years of earth’s existence and what it has done by geologic forces. Humanity is attempting to burn every animal and plant that ever existed prior to humanity’s existence.
I doubt that it will stop.
$104.25 early Asian trading.
What’s going on with oil prices? They are up, both Brent and WTI, almost $2 a barrel though they are jumping all over the place. Brent has been trading around $111 and WTI around $104.50 though they are both jumping up and down right now.
Energy and Oil Prices
Google news has nothing… so far anyway.
War worries.
Gold too. Looks like nerves are definitely frayed.
Germany burns 2.5 million bpd. Half of that comes from Russia. A cutoff is 1.25 mbpd off the market.
As compelling is the accumulation of the East Europe countries, who all depend on Russian oil. Czech Republic, Poland, Slovenia, all those places get huge % of oil from Russia. They are 10 million people here, 10 million people there. They add up to a lot of people. If any of them are allowing Nato forces transit (forces fueled substantially by Russian oil btw) then Russia closes the spigot to them and presto, oil price rise.
It’s not generic war fears. It’s growing awareness of how readily Russia can do specific impositions of power via its dominant position.
They need the money from sales? Yes, they do. But you last longer with transported food and no money, than you do with money but no transported food.
There will be no war.
Russia is now integrated into the western economy and not just as an energy supplier. It suits no one to go to war.
Wars happen when people [especially in power] want them.
You don’t ever have to go to war. All you need do is surrender when confronted.
It’s not rocket science.
Read what was done to France after they surrendered in WW II. Now the Germans understood how to conquer. Really effective job. No defeating an enemy and then paying for his upkeep. That’s just silly. They defeated the enemy and had the enemy pay for that war with calories. Not worthless paper. Calories.
Russia will have to decide if they will let the EU pay that West Ukraine GAZPROM arrears bill with printed Euros. The East Ukraine / Crimea / Odessa bill can be forgiven.
If you think Russia is playing hardball with Ukraine today, wait until the South Stream pipeline is built. The only reason Russia treats Ukraine “lightly” today (by forgiving debt) is because if they shut off gas to Ukraine they shut it off to the rest of Europe. Once the South Stream is in play, Russia can cut of Ukraine with impunity. Then you will really see hardball, Putin style.
But gas delivered via South Stream (if it does get built) won’t be cheap — the pipeline will be incredibly expensive to build and operate:
South Stream’s offshore section with the total length of 925 kilometers will run under the Black Sea through the exclusive economic zones of Russia, Bulgaria and Turkey. The maximum depth will be more than two kilometers and the design capacity will amount to 63 billion cubic meters.
The onshore section will cross Bulgaria, Serbia, Hungary and Slovenia. The gas pipeline will end at the Tarvisio gas metering station in Italy. Gas branches from the main pipeline route will be built to Croatia and to Republika Srpska (the state formation within Bosnia and Herzegovina).
In order to feed the required amount of gas into the South Stream gas pipeline, Russia’s gas transmission system will be expanded by means of constructing the additional 2,506.2 kilometers of line pipe and 10 compressor stations with the total capacity of 1,516 MW. This project has been named Southern Corridor and will be implemented in two phases before 2018.
Gazprom
I don’t know which is more mind numbing — the kilometers of new pipeline required, the depth of the pipeline, or the amount of energy consumed by the compression stations. That’s 1.5 GW of electricity used just to compress the NG for transmission?
If I were Russia I’d be thinking “Why the hell should I spend all this money on an alternative pipeline just to accommodate a country that is acting like a spoiled child?” I might also be thinking “If the South Stream gets built, it could carry gas from many other countries in the region, reducing my influence on Europe. I’m not going to let that happen,”
So it’s not surprising to read this concern being voiced by the EU:
The deals violate the package in three ways: Gazprom, the Russian state-owned gas company, cannot be both manage the pipelines and provide the gas, Gazprom cannot be the only one using the pipelines, and the tariff structure is unfair. A diplomatic source said that the member states in question have been aware of the Commission’s finding for some time.
European Voice
So no matter how you look at it, Russia holds, if not all the cards, a very, very strong hand. How it all unfolds is anyone’s guess. My personal guess is that Europe’s attempt to diversify away from Russia will NOT be sufficient to provide any real sense of autonomy and, in time, they will gravitate towards Russia’s sphere of influence and away from the United States.
Hello European Voice,
Nobody has appointed me the doorman but welcome to this forum on behalf of everybody here anyway.
My two cents worth on your comment:
Well, for what it’s worth there are still a lot of people in Europe who remember the Russians as the old USSR . That is not a pleasant memory at all.
The Germans in particular have good reasons to avoid depending on the Russians. There is little doubt in my mind that a huge part of the political consensus that has made the German drive for energy independence possible is that the country is acutely aware that in the event of another major war they wouldn’t even have enough fuel to fight a battle outside their own borders unless the American navy escorted the tankers to Germany.
American memories aren’t as long as Russian and European memories but I still know a few old geezers who would kill a German on sight and when the fecal matter hits the fan the next time we Yankees may not be in a position to guarantee oil shipments to anybody.
And there is always a next time. Next time is a question of when rather than if.Fortunately the next major war looks to be comfortably far off -even with the current crisis in the UKraine.
Russia is too strong for the rest of the world to confront her in her own back yard and while we might have succeeded in bullying a country as small as Iran into giving up on nuclear weapons for now, well, the Russians already have plenty of them as well as the means of delivery and beyond that the world cannot deal with a Russian reverse oil embargo.
Putin has all the trump cards.
I fear you are basically correct.
Note that Russian net oil exports have not increased since 2007 (relative to 2007). Recent Russian net oil exports (total petroleum liquids + other liquids, EIA):
2007: 7.2 mbpd
2008: 6.9
2009: 7.0
2010: 7.1
2011: 7.1
2012: 7.2
Based on the 2007 to 2012 rate of decline in their ECI Ratio* (from 3.66 in 2007 to 3.25 in 2012), I estimate that Russia shipped about 18% of their post-2007 Cumulative Net Exports in the five years from 2008 to 2012 inclusive.
*Ratio of production to consumption
What’s the ECI ratio in the U.S. based on the 2007 to 2012 rate of decline?
The US ECI ratio (ratio of production to consumption) has been increasing, but of course, we are still well below 1.0 (consumption exceeds production).
Note that while (temporarily) increasing production and falling consumption (relative to 2005) have substantially reduced the US demand for net oil imports, increasing production and falling consumption in a net oil importing country have no direct impact on the supply of Global Net Exports of oil.
“increasing production and falling consumption in a net oil importing country have no direct impact on the supply of Global Net Exports of oil”
Not disputing, just can you explain that more (doesn’t make sense to me).
Simply means that as long as the US is a net importer this has no effect on World total net exports. Total net exports will be the same regardless of what the US does because we are not one of those exporters. Our actions will not cause either an increase or decrease in world oil exports simply because we have nothing to do with world oil exports.
It makes perfect sense to me.
But if we import less into our country (both from lower consumption and from self-supply) doesn’t that mean global trade is reduced? What does the “net” mean?
This is not even an argument about peak oil, just trying to understand definitions.
It would not mean net exports would increase or decrease. It might mean there would be more oil for other countries to buy but that would only affect price, it would not affect total export volume whatsoever.
Total net exports is the total oil exported by exporting nations. Imports of importing nations go up and down and that causes price fluctuations. But basically all exporting nations export every barrel they possibly can.
Well then price will drop…and presumably some high cost exporters might stop marginal production.
Huh. Normalize to 2007 if that is your baseline year. Without nitpicking your data, Russian ECI declined from 1.00 to 0.82. Okay. Now normalize the U.S. data to show the increase from 1.00 to 1.??.
I await said ECI calculation.
I think that you are confused about oil and oil products. Your ECI should be net product based. Oil doesn’t have much utility without refinery throughput.
For production, I’m using total petroleum liquids + other liquids (EIA). For consumption, I’m using total liquids.
I’m ignoring refinery gains for a couple of reasons: (1) Refinery gains represent a net energy loss, in terms of energy input versus energy output and (2) It distorts the production numbers for countries with a lot of refinery capacity.
And as noted above, the Russian ECI ratio fell from 3.66 in 2007 to 3.25 in 2012.
The important thing is not so much the quantity, but the price. They benefit materially from a high price and are hurt by a low one. (I guess their costs can vary also, but I think simple price rises just go right to their bottom line.)
Note that if Russian oil consumption continued to increase at the 2007 to 2012 rate of increase (3.4%/year), and if production were to fall at 1%/year, in 2022 their net exports would be down to about 5.0 mbpd, versus 7.2 mbpd in 2012.
Any reason to think production will drop? It’s increased a fair amount lately and well…big country.
I suspect that it is when, not if, that Russia resumes its oil production decline. Their (so far) absolute production peak was back in the 1980’s.
In any case, a declining ECI ratio, even with rising production, was an early warning sign of net export problems ahead for the Six Country Case History*, from 1995 to 1999. Six Country production rose by 2% from 1995 to 1999, but their ECI ratio fell, and in only four years they shipped more than half of post-1995 Cumulative Net Exports (CNE). As noted above, I estimate that Russia shipped about 18% of post-2007 CNE in only five years. And of course, it’s not a question of whether the volume of remaining post-2007 Russian CNE has fallen, the question is, by how much?
*The six major net oil exporters that hit or approached zero net exports from 1980 to 2010, excluding China
I follow Russian production pretty close. They peaked, so far, in December and production is down about 90,000 barrels per day since that peak. That is of course their post Soviet Union peak. However their web site posts only daily production and I have to collect them every day and average them.
Russian Daily Energy Production
They have stated that they hope to keep production flat, or at 2013 levels, in 2014. I think 2014 will be a down year for Russian oil production. However that is just my opinion.
U.S. ECI* please.
*Ratio of production to consumption
Okay. I’ll do the calculation for you.
1.
U.S. numerator in 2007 = 5.5 mb/b
U.S. numerator in 2012 = 7.0 mb/d
2.
U.S. denominator in 2007 =20mb/d
U’S. denominator in 2012 = 18 mb/d
1.
5.5/20=27
2.
6.5/18=36
Normalized U.S ECI =36/27 or 1.33
So the U.S. is the largest consumer of oil and the third largest producer of and its ECI has risen by 33% from 2007 to 2012.
No. US ECI was .275 (5.5/20) in ’05, and in ’12 was .389 (7/18). As WT said, an increase, but still a faaar cry from export status, in spite of what the MSM has ballyhooed the past couple of years.
Yawn.
Normalized U.S ECI +33% from 2007-2012. Do ya wanna wager a gallon of moonshine that U.S ECI is +50% from 2007- 2015? Farmer mac could distill it today and arbitrage it for another two years and make a fortune. 🙂
As noted elsewhere, temporarily rising US production and a decline in consumption, relative to 2005, had no direct impact on the supply of Global Net Exports of oil (GNE, which I define as combined net exports from the top 33 net oil exporters in 2005).
Based on the 2005 to 2012 rate of decline in the Top 33 ECI ratio, I estimate that they have already shipped about one-fifth of post-2005 Cumulative Net Exports (CNE).
And of course, the supply of GNE available to importers other than China & India fell from 41 mbpd in 2005 to 35 mbpd in 2012.
Using total petroleum liquids for production and total liquids for consumption (see above note as to why), the US ECI ratio* in 2008 (a low point in production) was 0.39 and in 2012 the ECI ratio was 0.54. An ECI ratio of 1.0 marks the boundary between net exporter and net importer status.
*Ratio of production to consumption
Normalize your data. 2012 0.54 point is higher, not lower, than 2007 0.39 point. That means that the 2012 ECI is positive relative to 2007 ECI by 38%. Sheesh!
Why did come up with some stupid ECI acronym?Wouldn’t PCR be simpler. Production Consumption Ratio.
Marmico,
I gather you are asserting that the US ECI ratio has increased. Do ya think?
Following is my very first response to your inquiry, up the thread:
“The US ECI ratio (ratio of production to consumption) has been increasing, but of course, we are still well below 1.0 (consumption exceeds production).”
I named the ratio the Export Capacity Index (ECI) because it is a way to evaluate the future export capacity of net oil exporting countries. Following is are the 2002 to 2012 ECI for the (2005) Top 33 net oil exporting countries.
As I have now pointed out several times, production and consumption fluctuations in net oil importing countries like the US have no direct impact on the global supply of net oil exports.
The industrialists and the bankers are usually years ahead of the regulators and in the case of exporting American crude they are figuring out ways to giterdone despite the ban on doing so.
http://online.wsj.com/news/articles/SB10001424052702303874504579376962979450296?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702303874504579376962979450296.html
Ron,
All emotions aside, the Russian Federation is an energy superpower. They have gas and oil plus a lot of undeveloped potential; they also have reliable customers throughout Asia and Europe. So, notwithstanding the possibility (or is it probability) of drastic revisions to economic order arising from Peak Oil, insurrection, whatever, in many respects Russia is in the driver’s seat – an enviable position. I don’t like the idea that Putin is Stalin reincarnated or that Russian boots are stomping on the Ukraine but we’re not going to war. That’s just the way it is.
Doug,
The situation in Ukraine & Russia is more complex than the silly media is putting out. Again… I HIGHLY RECOMMEND THE INTERVIEW BELOW:
http://kingworldnews.com/kingworldnews/Broadcast/Entries/2014/3/1_Dr._Paul_Craig_Roberts.html
steve
Steve, I remain totally indebted to you for bringing the interview by Dr. Paul Craig Roberts to my (our) attention. This should be required listening prior to comments re the Ukraine, etc. This information doesn’t really surprise me but it certainly humbles me. Thanks again.
Doug
The Russian people are used to extreme hardship . They have suffered this under the czars, during WWII ,under Stalin thru Brezhnev and then in the absolute collapse . If they have to go thru it again they will . But what about the West? If Putin decides to hell with the currency rates and stock markets and shuts of the gas and oil to West Europe,what happens ? The only item the Russian people need for survival is some types of food which they might have to import (they have heat ,water,shelter and public transport) for which they have enough resources and contacts . The world is sick of American hegemony and many countries will assist . If Putin goes this route it would mean the end of Western Europe . He can easily propaganda this as an “existential” crisis for Mother Russia and the people will back him . The US is with the back to the wall since the EU realises that they are screwed and are washing their hands off the matter, leaving Washington holding the bag and the policy makers in DC have no idea what to do .They know they cannot use force, so now they have to save face ,providing Putin allows so .Interesting times indeed.
Let’s fire up the LNG exports. We have an essload of gas. It will help the Europeans be less Finlandized and hurt Putin’s major source of hard currency (even just by lowering price).
Dropping oil price would help too, but is harder (need to drill ANWAR, VACAPEs, etc.) and the left won’t allow that.
Germany has no LNG terminal. It all comes from Russia or Norway, who is in decline.
It is past time for German policy to be formed only after consultation with the Russians, who btw provide Germany about half of their 2.5 million bpd consumption.
https://en.wikipedia.org/wiki/Finlandization
See also appeasement and balkanization. 🙁
We would of course, in effect, just be exporting Canadian gas, since we are still a net importer of gas (from Canada).
I’m always fascinated by people’s beliefs that a net importer of energy can impact global markets by re-exporting imported energy.
A few years ago, a Bloomberg column talked about the prospect for Brazil, a net oil importer, with a recent track record of increasing net oil imports, “Taking market share away from OPEC.”
You’re adding supply to the market. It will either make quantity go up and price go down. If the entity adding production is a net importer is irrelevant. Could be a net importer adding supply, a net exporter, or a new entity.
The exact same dynamics apply for vertically integrated companies in commodity markets. Consider P&G who buys tissue paper on the open market, but who also produces some of their own. Believe me, if they go from 50% internal supply to 75% internal supply, Georgia Pacific will feel the impact (negatively).
As I said, I’m always fascinated by people’s beliefs that a net importer of energy can impact global markets by re-exporting imported energy.
Currently WTI is $10 below Brent. So obviously there is some shut in production. The impact of it hitting the global market will be small, but real. Also, the markets think about the possibility of more (or not more) in the future. So, they’ll notice…
Right now the spread is $6.52 but you miss the point. US refineries are not getting enough WTI so they still must import a lot at Brent prices. That sets their price of exports, not the cheaper WTI.
Anyway a net importer does not “hit” global markets with exports. And WTI is not “shut in”, the price differential primarily represents shipping costs.
If it’s not shut in, then allowing exports mean none will occur. But I bet you they would occur.
International trade assumes that different parties do different things, that everyone does not have to do everything. So if US refineries are optimized for heavy crude, but US production is primarily light crude, then sending the light crude to the world market and importing is more efficient for us and for other countries.
The only people who are hurt are other producers of light crude (since competition increases) or US consumers of light crude. This is why the refineries that do use light crude love the fact that it is shut in.
And it’s not a light switch, Ron. Just because they’re importing some crude doesn’t mean that they don’t like the amount that is shut in.
We’re also talking about a country with significant geography to it. Perhaps sending Alaskan oil to Asia, while importing more on the other side of the country makes sense. Or perhaps exporting frim the Gulf Coast (to world markets) makes sense while importing on the East Coast. Given the lower price of ocean shipping to CBR.
Incidentally, Canada’s dry (processed) natgas production has been declining since 2006 (at least through 2012). Given virtually flat dry (processed) US natgas production since late 2011, it’s entirely possible that combined US + Canadian dry natgas production was down, or at best flat, from 2012 to 2013.
Canada’s ECI ratio for natgas fell from 1.97 in 2006 to 1.65 in 2012. At this rate of decline, they would hit zero net natgas exports around the year 2029. It also implies that they may have shipped about half of post-2006 CNE of natgas by the end of this year.
Dry processed natural gas production for Canada in 2012 was 5 TCF, and for the US, 25 TCF.
Using Citi Research’s estimate for a 24%/year decline rate from existing wells, we need about 6 TCF of new production every year in order to offset declines.
Or according to Citi, we need to replace more than current Canadian natgas production every year, in order to maintain 25 TCF per year.
link
And B.C. wants to export LNG!
B.C. expects to export LNG for 50 years from new gas fields in the North East. A $37 Billion investment in infrastructure is happening right now.
Yup Canada is working on being THE rouge carbon state of the century; bitumen, coal, gas. If it’s got an H and a C in it; they’ll sell it to ya.
Of course otherwise they’re all aboot sustainability.
Nony,
The left has little power. For the most part those vast reserves off the East Coast and in ANWAR are only in the imagination of radio talk show hosts. Ask Rockman, I am pretty sure if those areas were opened up, there would be very little oil industry interest at present oil prices.
OK, than no harm in letting us try. Right?
Rockman is not always 100% right. He talked about Obama accelerating the leases for offshore, but his info is dated. After the 2010 BP spill, the brakes went on pretty hard. VACAPES was cancelled, etc.
And Rush is an idiot. I’m…not. 😉
Hi Nony,
Well I guess on the east coast if you could get all Altlantic states to agree its a good idea, that would be fine. On ANWAR, I guess the Fed government could sell it back to Alaska, and let Alaska decide. On east coast, the spills don’t stop at arbitrary lines so getting all states on board makes sense.
CNBC is reporting that Russia has issued an ultimatum to Ukrainian forces in Crimea to surrender by 10:00 P.M. Eastern Time today, or face an armed attack.
Sad.
I already get the impression that we are going to let the Russians do what they want (certainly Putin has made this calculation). That said, US moved CVN-77 into the Med on 26FEB (and scrambled it across the ocean to do so). The “normal med carrier” was in Persian Gulf. We don’t have as many as we used to. What do you want to bet that ship is in the East Med (they won’t go into the Black Sea).
Washington has to think through it’s options. I guess some settlement to let Russia have Crimea but preserve rest of Ukraine, might be workable for us. I think Putin will negotiate like a Russian though. He may want east (or all) of Ukraine or the ability to destabilize it further in the future, to restrict alliances with it.
The whole thing is really sad, but realistically if we could stop it at just giving them the Crimea, that might be best we can do (I am worried that we end up worse than that).
Jeff,
I used to believe MEET THE PRESS and MSM were the places to get good quality information and news. However, after a few years of research, it became apparent that these media channels are completely irrelevant in finding the truth.
Putin & Russia have no alternative but to use force if these RIGHT WING NATIONALISTS who have taken over western Ukraine do not step down. The U.S. tried another COUP in Ukraine and have now made a complete mess of the situation.
At some point in time… I look forward to collapse of the Federal Govt as it no longer serves as a positive force in both domestic and foreign policy.
steve
This is not yet confirmed. Single anonymous source. It would not fit with the Russian method so far, of silent invasion and ‘persuading’ Ukrainian units to switch sides one by one. I do not see Russia firing the first shot , at least not until it has covered a lot more ground.
CNBC is now reporting the conflicting stories.
“CNBC is now reporting the conflicting stories.”
It would not be surprising that the source was a trader or a CNBC employee looking to make a quick buck by stirring up the markets.
CNBC employees are prohibited from investing in the stock or commodities markets. They would be fired if they did. And, they would go to jail if they pumped or dumped on a stock in which they had an interest in and the SEC found out about it.
Ron Wrote:
“CNBC employees are prohibited from investing in the stock or commodities markets. They would be fired if they did. And, they would go to jail if they pumped or dumped on a stock in which they had an interest in and the SEC found out about it.”
There are always ways around this by using a third party to benefit and then sharing the wealth. Reuters got burned a year or two ago by releasing news early to selected hedge funds so its proven to occur. The only reason why this came to light is because of a whistle blower as the SEC is grossly incompetent.
Unfortunately the SEC is too busy viewing porn and managing there own market portfolios as SEC employees are not banned from trading. The majority of SEC investigations are political as we see loads of people get away with insider trading and never get much as a slap on the wrist.
FWIW: I was half joking that a CNBC employee made fake news to influence the markets. I have no inside knowledge to back up the claim.
To tell you the truth… I can no longer stomach our MSM. I am currently listening to Steve Liesman (CNBC) commentary on this Ukraine-Russia situation. Steve Liesman has to be one of the worst commentators on CNBC by far.
I find it ironically hilarious how our MSM can paint the Russians as being the threat here, when certain political factions in the U.S. Govt have caused more harm in the world then all other governments combined.
MARK MY WORDS… CNBC will go off the air soon after the U.S. Dollar gets devalued and the word, “GOLD” becomes a household term once again.
steve
Optimal Russian outcome, partition the country with Russia getting the East ***and*** South, including the port of Odessa. The south speaks Russian, too. There is also apparently a religious issue unfolding of factions of one Orthodox variant vs another, and that would also define the east and south to be Russia’s.
This results in the western segment landlocked and in arrears for GAZPROM payments, likely to be paid by the EU given there is probably an EU regulation stating that all citizens must have heat. The western segment has no industry, but I think it does have farmland. Huge burden thrown onto the EU. The reason those citizens wanted to join the EU was for the benefits payments and the ability to travel to Italy to work.
In general, though, Russia can raise gas prices and come out way ahead on the whole deal, assuming they want to keep accepting Euros or dollars for oil and gas.
BNSF weekly carload report has 10,326 carloads for week 8 2014. Week 8 2013 was at 9335 carloads. One railroad oil tanker contains 598 barrels.
http://www.bnsf.com/about-bnsf/financial-information/weekly-carload-reports/pdf/20140222.pdf
In addition to a bicycle, be sure to purchase a shovel, rake, and hoe.
It is useful to understand that Crimea had always been a part of Russia for hundreds of years. In 1954 Khrushchev “gave” Crimea to Ukraine as mostly a symbolic gesture reflecting his affection for the region. But it never really was a part of Ukraine and since Russian maintains part of its Navy there, it’s no wonder they are holding on to it.
The U.S. will bluster and in the end look foolish and ineffectual.
Here’s a link from a blog associated with the WSJ and while it dances around the issue it does actually use the peak oil dirty words as a link to sell a Richard Hienberg book. Most of us here know him as a well known peak oil advocate and popular writer.
The author tells it pretty much as we see it here in terms of constrained supplies, declining opportunities for the big companies to find big new fields, rising costs, and so forth.
He specifically denies that he sees peak oil headed our way in the near future,but his words belie his denial since Market Watch is a business oriented forum and businessmen looking at the sort of data he presents usually conclude that an industry facing such problems is on it’s way out.
The most interesting thing about the article is not the contents since we here in this forum are already familiar with the content but rather the response of the almost four hundred readers who posted comments.
Almost to a man they are in absolute denial about perfectly obvious truths such as the poor quality of new reserves and the failure of the oil companies to find any major new conventional fields and the inability of the world to pay ever higher oil prices.
To put it bluntly if this messenger were to speak in front of his readers they would tar and feather him and ride him out of town on a rail.
The people of this country that read the WSJ absolutely refuse to consider what any body has to say if it its to tell them that maybe all is not well with their world.
http://www.marketwatch.com/story/the-well-is-running-dry-for-big-oil-2014-03-03
Here’s the best analysis of the state of the oil industry I have seen in a good long while.;-)
http://www.theonion.com/articles/report-good-thing-world-has-unlimited-quantity-of,35422/
boring…..
I am sorry you don’t appreciate the Onion. Most people find it amusing and beyond that given the nature of our culture these days it is highly fashionable to play the cynic.
Hence millions of people think it means they are smart and sophisticated if they sneer at any knowledge or data that comes from any source they happen to disagree with for any reason. Sometimes the reason is partisan political loyalty and sometimes it is just the desire to shoot any messenger bearing bad news.
Given this consideration the fact that the onion is making fun of the oil cornucopians is a great stroke of fortune for anybody who happens to read it and laugh–because once you have laughed at a person or an idea or organization or institution then you are prepared to listen to bad things about them.
And in the case of peak oil the bad things happen to be true and critically important to the listener in terms of his future.
A Trip Through La-La Land on CBNC this morning . . .
This morning, Eugene Rumer, with the Carnegie Endowment for International Peace, and a former US intelligence officer, stated that given Russia’s reliance on energy exports, if the US liberalizes its energy exports, it would be bound to have a negative impact on Russia.
This was followed by other talking heads making the same point, in regard to both oil and natgas. One guy said that if the law were changed, we could start shipping crude oil to Europe tomorrow.
As I said up the thread, I’m always fascinated by people’s beliefs that a net energy importer turning around and re-exporting energy is supposed to have some kind of material impact on the global export market.
The most recent four week running average data from the EIA show that we processed 15.2 mbpd of crude oil in US refineries, and we had to net import 7.2 mbpd of crude oil, with 8.0 mbpd coming from domestic production and stocks. And of course, we remain a net natgas importer (from Canada).
Jeff, Actually I think Nony has the answer to the Ukraine-Russia “problem”: Flood the world with our locked in oil and gas, Europe tells Russia to get stuffed and everyone in the West lives happily ever after. Might as well fill China’s tanks at the same time and get some extra brownie points from there. Really, you guys on Ron’s Blog are all just a bunch of worry warts.
I suppose we could boost our crude oil imports from Russia by two mbpd, so that we could then export two mbpd of crude oil to Western Europe.
Of course, the bizarre thing is that the talking heads were seriously talking about “Flooding the world with our locked in oil and gas.”
In the alternative reality of Crude Oil La-La Land on CNBC, the US, was, according to a CNBC anchor last year, already a net crude oil exporter.
I have those programs on in the office out of necessity. And for sanity reasons have the mute on. As you well know and have gone on record saying, those folks are just plain evil.
Evil? Well yes, in effect they are evil because they are disseminating lies that will eventually have some extremely undesirable effects on our country and the rest of the world as well. These effects may run all the way up to WWIII.
But the odds are that Rumerr and those saying these things are merely overeducated fools.
Remember the story of the horseshoe nail?
For the benefit of anybody who has not heard it:
For want of a nail a horseshoe was lost and for want of a shoe the horse went lame and for want of the horse the messenger did not deliver a message with the effect being that a critical battle was lost, which in turn lead to the loss of the war and the king losing his kingdom and maybe his head as well although I have not heard it told beyond the loss of the kingdom.
(I have added the loss of his head because no sad story or bad news should ever be exploited to less than the fullest possible extent. I don’t know who said this first but I believe Bill Clinton said it at least twenty years or so ago which is the first time I remember hearing it.;-) )
The moral of the story of course is that the lack of a nail cost a kingdom .
Such foolishness as this guy Rumer is spouting could conceivably be taken seriously in the wrong office of the wrong congressman on the wrong committee and while the odds against this happening are hopefully high, shit happens. If this happens the result might be that we escalate the current crisis needlessly.World War One resulted from the mismanagement of what should have been a minor crisis.
One thing is for damned sure .
Putin is an old hand in the intelligence business and it is absolutely certain that he will recognize any suggestion that we can hurt him by exporting oil or natural gas as the the moonshine it is and laugh at us.
There is an old French saying that goes something to the effect about something foolish :
Only a fool or an intellectual would believe THAT.
Unfortunately the people of the world seem to mostly one or the other.
And for what it is worth there is huge overlap between the two groups which is why I have never been able to call myself a liberal.
I will stick to the term conservative although it does not mean the same thing the the world as it does to me. I use it in the sense that an engineer uses it meaning to bring all the data available to the table and then rationally decide on a course of action that hopefully will not result in a disaster.
The so called conservatives that dominate American politics these days are anything but conservative in the original sense of the word but they are at least a little less gullible and naive than the average overeducated intellectual.They are incidentally also a lot less honest.
The liberal intellectuals I meet (mostly online ) tend to be honest and sincere if ill-informed about human nature. The average so called conservative intellectual understands human nature quite well but routinely lies his butt off for personal and partisan purposes.
But back to the people like Rumerr . (Damned spellchecker will not allow me to spell his name correctly!) He is not a spokesman for evil in the sense of somebody employed by a propaganda machine such as the Nazi Goebbels or his underlings.
He is most likely just an overeducated and ill-informed liberal fool because that’s the only kind employed at such places as the Carnegie Endowment.But there is a possibility that he knows better and is simply trampling the truth in the mud for some perceived partisan purpose.
There are no doubt conservative fools saying the same thing today at conservative think tanks.Likewise they may be sincere but ill informed or they may be lying for the sake of a perceived partisan advantage.
Mac, picky but: “For want of a nail a horseshoe was lost…” refers to the death of Richard III at the Battle of Bosworth Field. The story which describes the unhorsing of Richard during battle puts the origin after the battle (22 Aug. 1485). Therefore, no, not invented by Bill Clinton. While on this subject: “Ask not what your country can do for you but what you can do for your country” the inaugural speech by JFK is quoted (or appropriated) from Decimus Junius Juvenal (a.d. c60-140), a Roman poet/diplomat. Although Juvenal is said to be the first to use this phrase others disagree saying it is a direct quote from a Greek general (forget his name) given on the eve of battle with Persians. Good old Decimus also said: “Generally, common sense is rare in the (higher) rank” Rarus enim ferme sensus communis in illa Fortuna.). Thought you might like that.
Doug
John Bussey, with the WSJ, joins the CNBC bandwagon:
WSJ: U.S. Does Have Weapon vs. Putin: Energy
Is it true that the U.S. has few real options to pressure Vladimir Putin to get out of Ukraine?
How about a straight business statement from Washington like this:
“We are delighted to announce that the U.S. is accelerating its plans to export natural gas and will soon reverse our virtual ban on oil exports. We have such abundant, new supplies of gas and oil in America that we look forward to becoming a major supplier to world markets. And the first customers we aim to serve are our good friends in Europe.”
End excerpt.
Copy of my comment, following the article:
I’m always fascinated by people’s beliefs that a net energy importer turning around and re-exporting energy is supposed to have some kind of material impact on the global export market.
The most recent four week running average data from the EIA show that we processed 15.2 mbpd (million barrels per day) of crude oil in US refineries, and we had to net import 7.2 mbpd of crude oil, with 8.0 mbpd coming from domestic production and stocks.
In terms of total petroleum liquids + other liquids (EIA), combined net exports from the Top 33 net oil exports in 2005 which I define as Global Net Exports of oil (GNE) have been below the 2005 rate for seven straight years (through 2012). Furthermore, the developing countries, led by China, have been consuming an increasing share of a post-2005 declining volume of GNE. The supply of GNE available to importers other than China and India fell from 41 mbpd in 2005 to 35 mbpd in 2012.
And yet large sectors of the mainstream media are telling us that a net crude oil importer turning around and, in effect, re-exporting crude oil will have a material impact on the global supply of net oil exports. Perhaps we could boost crude oil imports from Russia by two mbpd, so that we could then export two mbpd of crude oil to Western Europe?
In any case, given high, and rising, decline rates from existing US oil wells, we are going to have a great deal of difficulty in just maintaining current oil production levels for 10 years.
On the natural gas side, we remain a net importer of natural gas from Canada, whose natural gas production has been in decline in for several years.
While US natural gas production has been increasing, as a result of (temporarily rising) production from tight/shale plays, we are facing enormous decline rates from existing production. Citi Research estimates that the annual decline rate from existing US natural gas production is about 24%/year. This would be the percentage decline from 2013 to 2014, if no new wells were completed in 2014. This decline rate would require the US to replace 100% of current natural gas production in about four years, just to maintain current production for four years.
It’s typical of the Age of Denial that we are living in (in regard to energy supplies) that so many members of the media are talking about the US–a net importer of both crude oil and natural gas–exporting oil and gas as a way to influence global energy markets.
And how many b/d of product was net exported in the most recent four week running average data from the EIA?
And the answer is: 1.9 mb/d. Square the circle with all data. The U.S. oil and product CIR ( Consumption Import Ratio) has doubled since 2005. You are fond of acronyms and ratios, no. 🙂 The U.S. is both a rising PCR (Production Consumption Ratio) and CIR country, to the volumetric tune of ~5.5 mb/d.
How much do you think that the U.S. will increase refinery capacity in the next five years? Capacity additions will impact the CIR. Some greenfield development but mostly bolt on capacity additions in brownfields.
As I have now pointed out several times, production and consumption fluctuations in net oil importing countries like the US have no direct impact on the global supply of net oil exports.
Imports=exports. It’s an accounting identity.
Assume country A net importer produces 1 unit and consumes 2 units and country B net exporter produces 2 units and consumes 1 unit both at time T1.
Assume country A net importer produces 1.1 units and consumes 1.9 units and country B net exporter produces 2 units and consumes 1 unit both at time T2.
At T2 country A net imports 1.9 units and country B net exports 0.9 units with 0.1 units being stored. The global supply of net oil exports has declined because a net oil importer increased production.
“The global supply of net oil exports has declined because a net oil importer increased production.”
Then it would also follow that a decline in demand in a net oil importing country would cause the supply of net oil exports to also decline, unless the demand for net oil imports was increasing elsewhere, e.g., in developing countries.
Then it would follow that the critical metric is Available Net Exports of oil, or Global Net Exports less Chindia’s Net Imports. The reality facing the US, and most other developed net oil importing countries (at least through 2012), is that we were gradually being shut out of the global market for exported oil, via price rationing.
You seem to be laboring under the assumption that lowered imports will not hurt exporters. Your (implicit, false) rationale seems to be that exporters will still dump their product on the market somewhere. Well, maybe…but:
1. The price will drop. So their $$ value of exports will drop. Remember that is what they care about, not how much volume they send out.
2. The higher cost production (marginal barrels) will leave the market with lowering price. So those exports will drop. This is elementary supply and demand.
3. You really are making a mistake thinking lowered imports don’t affect net exporters. Really, if you follow your rational EVEN IF WE become a net exporter, you could still claim that it doesn’t hurt exporters (they could still dump product).
***
Instead of getting all tied up in TLAs and ratios, consider the classical microeconomics. Look at how commodities like steel, aluminum, etc. work. when demand is lessened.
(4.) Countries won’t greenlight the same sort of projects in a lower price environment. So there is an effect over time…
You might check out the normalized liquids consumption versus annual Brent crude oil price chart down the thread, especially in light of the following chart showing the ratio of Global Net Exports of oil (GNE*) to Chindia’s Net Imports (CNI).
As noted above, the reality facing the US, and most other developed net oil importing countries (at least through 2012), is that we were gradually being shut out of the global market for exported oil, via price rationing.
*Top 33 net exporters in 2005, total petroleum liquids + other liquids
Incidentally, I agree that if we ignore the following, things look better:
(1) Monthly Brent crude oil prices have been above $100 for 35 of the past 36 months, versus 6 months in 2008;
(2) Global Net Exports of oil have been below the 2005 rate for seven (probably eight) straight years, as annual Brent crude oil prices rose from $55 in 2005 to $112 in 2012 (with one year over year decline, in 2009).
(3) The supply of Global Net Exports of oil available to importers other than China & India fell from 41 mbpd in 2005 to 35 mbpd in 2012, as annual Brent crude oil prices rose from $55 in 2005 to $112 in 2012 (with one year over year decline, in 2009).
As I said below, we live in the Age of Denial regarding energy supplies.
You might respond to my points. You keep throwing out three letter acronyms as if they make some magic effect. You haven’t even though through the microeconomics of supply and demand. Hence your comment that lowered consumer demand and increased competitor supply has no impact on existing suppliers!!
You keep making qualitative objections and counterfactual arguments to a quantitative presentation, but you do serve as an excellent example of most people’s knowledge of what I call “Net Export Math,” to-wit, somewhere between ignorance and denial.
You keep making non-specific quantitative arguments and throwing charts and three letter acronyms around without directly addressing points.
Look: your basic view is that lowered US consumption (and increased internal production) can’t affect exporting countries until we magically cross the line and become a net exporter ourselves. that’s just daft. Where are the barrels of oil going that would have come to us? If they are dumped on the market (since you seem to assume oil producers just produce willy nilly) then price is lower (than it would have been). Also, if you are going to assume that oil producers just dump no matter what…well they can do that even when we become a net exporter.
You really haven’t thought things through, man.
I agree that declining US oil consumption (relative to 2005) and (temporarily) rising production, as a result of frantic drilling efforts in high decline rate tight/shale plays, are both reactions to the post-2005 decline in Global Net Exports of oil, which strongly contributed to annual Brent oil prices increasing from $55 in 2005 to $112 in 2012.
And falling US oil consumption and temporarily rising production (along with stagnant demand in other areas due to high oil prices) probably had a marginal effect on oil prices (contributing to keeping Brent on an “Undulating” $100 plateau since 2011), but as noted several times, fluctuations in production and consumption in net oil exporting countries have no direct impact on the global supply of net oil exports.
Note that a doubling in annual Brent crude oil prices from 2005 to 2012 corresponded to a seven year decline in Global Net Exports of oil (relative to 2005).
The bottom line remains that the developing countries, led by China, have consumed an increasing share of a post-2005 declining volume of Global Net Exports of oil (GNE), as the volume of GNE available to importers other than China & India fell from 41 mbpd in 2005 to 35 mbpd in 2012. Fluctuations in production and consumption in net oil importing countries do not alter this mathematical fact.
The $64 trillion question is to what extent this trend continues for another 10 year or so, but in my opinion, it is very likely that consumers in developed net oil importing countries like the US will continue to be gradually shut out of the global market for exported oil.
Hi Nony,
Last time I checked there were not any important world cartels in the steel or aluminum industry.
In the oil industry, OPEC responds to a drop in oil price by cutting back on oil supplied to World markets. The argument that OPEC is producing flat out (which is difficult to verify) mostly means (if it is correct)that OPEC would not have the power to reduce world oil prices (because they would be unable to increase supply).
I think that Mr. Brown assumes that OPEC will not let oil prices drop very far before they cut supplies.
For this reason economic arguments based on perfectly competitive markets do not apply very well.
To they extent there is a functioning cartel, yes you are right. But the peakers were the ones saying there is not a cartel. [I don’t know…am very curious.] I agree that arguments based off of free competition do not apply if there is not free competition. however, it’s very useful to understand how free competition works before looking at how revenue maximizing price by a monopolist or cartel work. (Really, it is.)
And also I thought Mr. Brown was saying they would dump their oil, not withhold it. If they withhold it, definitely net exports go down significantly.
I actually WANT to talk about more sophisticated nuances, but when people show obvious lack of understanding of even the simpler case, how can we do so?
Global Net Exports of oil (GNE*) increased at 5.4%/year from 2002 to 2005, as annual Brent crude oil prices approximately doubled from $25 in 2002 to $55 in 2005.
GNE fell at 0.5%/year from 2005 to 2012, as annual Brent crude oil prices doubled again, from $55 in 2005 to $112 in 2012.
ANE (GNE less CNI) increased at 4.7%/year from 2002 to 2005.
ANE fell at 8.5%/year from 2005 to 2012.
As noted up the thread, when one chooses to ignore the factual net export supply data, things do look better.
*Top 33 net exporters in 2005, total petroleum liquids + other liquids
you seem to like to make a lot of magic acronyms CNI, ANE, blabla. I prefer OPP. 😉
In terms of history: production can increase with decreasing price (if supply increases enough). lower production may also occur while prices increase (if supply capacity drops enough). To really think it through, you need to look at demand and supply curves (both).
Also, your whole point where you try to imply that mathematically lowered US imports and increased internal production has no effect on other producers (right up until the magic time when we become a net exporter) makes no sense.
And liquids consumption for China, India, (2005) Top 33 net oil exporters and the US, relative to 2002, versus annual Brent oil prices.
Ooops, I screwed that basic arithmetic up. Exports=imports, so at T2, country A net oil imports 0.9 units and country B net oil exports o.9 units with either 0.1 units in storage or 1.9 units of production and no storage.
I suppose my problem is that the U.S. is a net product exporter but a net oil importer. How do you normalize global oil and product flows?
Hi Marmico,
You asked,
“How do you normalize global oil and product flows?”
You find net exports for petroleum products and crude. So for the US, which is a net importer, you would subtract the net exports of petroleum products from the net imports of crude. See table below from BP Statistical review 2013 (workbook can be downloaded at link below.) Note that for old people like me, you may need to zoom in your browser to 200% to read the table below.
http://www.bp.com/content/dam/bp/excel/Energy-Economics/statistical_review_of_world_energy_2013_workbook.xlsx
Hi Marmico,
I am not sure if you are aware of this, but Europe has plenty of refining capacity, they may import some diesel and export some gasoline because their auto and truck fleet is more diesel intensive than north America, most of the US product exports are to Mexico and Canada. The important metric is total petroleum net exports (crude and products), and I believe that this is what Mr. Brown is tracking (the consumption numbers track the products, and the production numbers track the crude(and NGL).
Bottom line, net exports of petroleum products, is not very relevant to Europe, what they need is crude for their refineries. If North America would like to cut back on the crude inputs to its refineries (which in the US is 7 MMb/d more than the US produces), then Europe would be happy to take that crude off our hands. In fact Canada and Mexico do not have export restrictions.
According to BP Statistical Review 2013 in 2012 the US was a net importer of 7.9 MMb/d (crude plus petroleum products) and 3.3 MMb/d came from Canada (2.8MMb/d) and Mexico(0.5MMb/d).
Also of interest is that the US was a net exporter to Europe in 2012, but only 46 kb/d out of 10,314 kb/d of total net imports. Clearly the US was flooding the European market in 2012 🙂
Without those nasty export restrictions, the US could cut back on crude inputs to refineries by 8 MMb/d, and export all the oil we produce to Europe, we would still need to import 7 MMb/d so that rich people can drive and maybe we can produce some food, etc., but this could definitely work 😉
Those guys at CNBC, Bloomberg, Wall Street Journal are really on to something.
Try a search on “petroleum export restrictions.”
http://www.reuters.com/article/2014/03/04/us-ceraweek-chevron-ceo-idUSBREA231VJ20140304
I don’t even pretend to know if Chevron should have won or lost this long running pollution case but it appears that the company has finally won it in an American court. There is a chance the verdict will be reversed on appeal but the odds are against it.
There’s one surefire way to get tough with Putin
By Steve LeVine, Quartz, March 3, 2014
Part of me thinks this sounds really foolish and imprudent.
I don’t think we should have a strategic reserve. In an extreme wartime WW2 situation, we could still supply necessary oil for our war machines and for the economy from domestic production. Personal driving around would be severely affected but we would get by. Also given our navy and control of the oceans and diversity of suppliers it’s unlikely that imports would ever be cut off entirely. In terms of keeping it for economic effects, what’s the point? We never use it and even if we did how long would the effect last.
I’m not sure that selling off the reserve would have that much affect. However if done in conjunction with a national address approving Keystone and accelerating offshore (and the like), prices would move. This is because the market builds in future expectations of supply (tight or loose) into current prices.
This sounds really foolish and imprudent. : )
Score one for you, man. 🙂
I am thankful you have a sense of humour. : )
By EU regulation, every EU country is required to have a 90 day storage of oil at average consumption rates.
It is to be used only when explicit scarcity conditions exist.
”I don’t think we should have a strategic reserve. In an extreme wartime WW2 situation, we could still supply necessary oil for our war machines and for the economy from domestic production. Personal driving around would be severely affected but we would get by. Also given our navy and control of the oceans and diversity of suppliers it’s unlikely that imports would ever be cut off entirely. In terms of keeping it for economic effects, what’s the point? We never use it and even if we did how long would the effect last.”
I am maybe drinking not enough coffee or maybe too much but I have a hard time sometimes understanding whether you are serious or sarcastic.
We sure as hell don’t want to get into a shooting war keeping the sea lanes open in the event of a major crisis until we have given the foggy bottom guys a shot at patching up whatever the problem might be.THAT is probably the single most important reason to maintain the reserve and it would enable us to maintain business as usual, or something approaching business as usual, for a good while.
Beyond that there has not really been a serious naval battle for a couple of decades at least and nobody knows how well a navy including ours is going to perform in the face of the new missiles that have not yet been tested in actual combat.
If we were to find it necessary to send our navy into close combat near the choke points on the oil lanes it might shrink mighty fast.
Beyond that there is probably not a tanker owner alive who will send his ship to sea during a hot war until after it is commandeered by his country’s navy . Given the range of modern aircraft there is virtually no chance a tanker could cross an ocean without being found and sunk unless escorted by fighter aircraft.
Back in WWII it took dozens of sorties on the average to score a hit on a fast moving ship with an air launched torpedo or bomb. Next time it will take only one fast fighter bomber and just one missile to sink an unescorted ship and that bomber will be able to stand off a hundred miles or more at launch.
If this isn’t bad enough there are some credible military aviators who think that even an obsolete old fighter armed only with surface to ground rockets could easily sink even a supertanker because even the biggest tanker is not armored at all.A rocket designed to destroy a tank or a concrete gun emplacement would likely open a twenty foot hole in a tanker at the water line and a tanker is a damned big target compared to a bunker or a tank.
Maybe the crew could deal with half a dozen holes, fires ,and other damages. Maybe not. I sure wouldn’t want to be on it to find out the hard way.
The next really big hot war means the end of international commerce in oil over the water for the duration of the fight.
This is one reason I personally think the Keystone should be built.It would be a different matter if not building it would actually accomplish anything but the tar sands oil will get to market anyway.
The US has the only power projection Navy on the planet. Even at a 350 ship Navy instead of 600, they are the class of the planet and can conduct fleet operations and influence land battles in a way, no one else can. And they sure as heck can control sea lanes. Choke points is a little trickier (mines, etc.) but they still are pretty aggressive about controlling places halfway around the planet from us (Straight of Hormuz, Straights of Malacca, etc. etc.)
There is no doubt in my mind that Columbia rules the oceans. And I’ve been hearing this guff about cruise missiles taking out carriers since the 70s and I don’t buy it. You have to have seen how a CVGB sets up air defense. And that’s not even mentioning our nuclear sub force…months underwater, steaming across oceans, sewers of Moscow, hunting Red October, doing spec ops, etc. etc.
I definitely don’t want to get into a shooting war.
Hi Nony,
What effect do you think a move to lower oil prices would have on oil production?
You have to ask yourself why price changed.
1. Was it because more supply came on the market and the demand curve (the buyers and potential buyers) stayed the same? In that case, price will drop while consumption increases. And total production = total consumption.
In this eventuality, some producers may exit the market (highest cost ones). Either immediately or over time, by not greenlighting high cost products.
Of course, to even drive this change, any new supply has to be sufficiently low cost to sell at the new price. This is why, for instance, that Bakken oil (which may be the world’s marginal oil now) can keep price down to 100 from 120. But it can’t keep price below 60. [Made up numbers, but directionally correct.]
2. Has price dropped because of demand dropping? Note (people seem to confuse this a lot), I’m not talking about the lower demand with higher price. IOW, sliding along the curve. But about THE CURVE ITSELF moving. For instance if vehicles start running on natural gas, if we go into a recession, if gas taxes are increased, if substitutes (e.g. coal or NGL or NG or electricity) drop in price, etc. etc. In this eventuality, price drops while consumption drops. And total consumption = total production.
***
Obviously if both of these are occurring at same time, then both impacts occur and it’s hard to say if total production increases or decreases. You’re moving both lines on me at the same time!
Also, note that both effects are negative for existing producers. It’s common sense. [If you’re already selling lemonade, you’re hurt when someone else opens a competing stand and you’re hurt when the weather turns cold and people don’t want it!] The impact on producers that stay in the market (e.g. SA) is just that much less on the bottom line. 100 (revenue) – 20 (cost) = 80 (profit) -> 80 (revenue) – 20 (cost) = 60 (profit). [volume stays the same, since none of their barrels are squeezed out of the market.] For the high cost producers (I donno Nigeria?), their lost profits are limited to basically whatever they make (they get squeezed out of the market, but they won’t produce at a lost). For some countries (I donno, Russia, US?) who have a portfolio of costs of production, both effects will occur.
This is all econ 101 and not controversial, right? Get James Hamilton back interested in the peak oil scene and he will say that I described the first chapter in the micro book properly. 😉
P.s. This is a free competition explanation, but much if it applies if you assume a cartel functioning. And it’s the peakers who think there is no OPEC cartel effect on price (that they are full out, no possible price crash.)
Nony,
My problem is that I appear to have a reading comprehension issue; or perhaps it’s just that I can’t tell when you’re being serious, or not. Scanning various recent comments for examples that bamboozle me isn’t helpful: practically all of them bewilder me. In other words, what the Hell are you talking about? So it’s back to the beginning, I MUST have a comprehension problem. Sorry.
Doug:
No offense, but this stuff is basic econ 101. If you’ve never really wrestled through those basics, it becomes hard to have a discussion of more nuance points (Hoteling’s rule, cartels, etc.) And then we end up having to repeat/explain the basics of garden variety microeconomics.
My advice is instead of going through this stuff in the context of a debate on oil, something with a littler more complexity and one you are already engaged with in “peak versus cornie” battles, is to just work through a basic micro book. Managerial Economics is a very accessible one (no calculus required). Can buy it on Amazon for less than the cost of dinner at a mid-scale restaurant.
Here is a quick snippet on the net (not from that book, but of the concept):
http://www.netmba.com/econ/micro/supply-demand/
P.s. Don’t let me get you down. I have aggressive tendancies on the net. Your post had a very cool tone to it. Kudos (on your kindness). However, bottom line is…yeah it is your comprehension. [I’m actually doing way more explication than I should have to.] But it’s OK, you’re still a nicer guy than me. 😐
Nony,
Actually my background is Eng. Physics followed by Geology/Geophysics so it’s not simple math that (usually) confuses me; it’s my poor comprehension of your explanations. And, frankly I’ve never thought of accounting as anything other than an incredibly boring pursuit. Let’s just call it draw and move on.
No! We’re so close, man!
I respect your manly Bessel functions an the like. That stuff is hard. I’m far from a mathematical physicist.
The point with some of this micro stuff is not to just plug and chug numbers into a formula, like a chemical engineer (sorry, have to slam engineers ;)) but to understand how factors work, which ones are part of other factors, etc.
For instance, you can understand how additional plates in a distillation column affect separation even if you don’t know the equation for it, how much, etc. You can also intuitively understand that there will be diminishing returns, just because of the end limit of 100% separation. IOW doubling the number of plates does not take you from 95% yield to 180% yield…it takes you to 97.5% (I think, don’t really know the equation either).
Econ is not boring and it’s not accounting. It’s effing beautiful. Most of the good people who go into it come from engineering or the sciences. Like this guy:
http://faculty.wcas.northwestern.edu/~rrb/ (hint, click the link to his CV and look where his bachelors is)
There is no basic econ 101 when money can be created effortlessly and loaned to people, interest charge and repayment (creating pain for the borrower) demanded.
Where is econ 101 in a world where money is created from thin air with no basis other than “maybe this will improve matters”.
A guy on ZH expanded on this.
His point was that no one demands you repay the air you breathe. There is no moral obligation associated with air repayment. So when money, an imaginary substance, is created from nothing then why is there any obligation with regard to it?
You are confusing micro (supply demand curve basics) with macro (fiscal policy). Not knowing the difference between micro and macro means you don’t know micro well enough.
Hi Nony,
My comment was in response to the second sentence of this comment:
“I’m not sure that selling off the reserve would have that much affect. However if done in conjunction with a national address approving Keystone and accelerating offshore (and the like), prices would move. This is because the market builds in future expectations of supply (tight or loose) into current prices.”
You suggested that we increase the expected supply of oil. Let us assume for simplicity the demand curve does not shift in response, but that the supply curve for oil shifts to the right. Under those assumptions price drops and the quantity of oil demanded increases while the quantity supplied will decrease at the lower price (compared to the quantity which producers would be willing to supply at current prices after a shift in the supply curve).
Now it becomes a little more complicated because you introduce the expected future supplies as determining current market prices (which is probably correct), but that doesn’t fit neatly into an introductory level microeconomic explanation where market prices are determined by actual quantities of supply and demand rather than future expected quantities.
So lets take a rational businessman in the oil industry that knows as much economics as you or me. Strategic reverves are released, keystone xl is approved and all restrictions on drilling for oil are removed. His expectation is that oil prices will decrease as a result of all this expected future supply.
Would he be more likely to undertake the investment necessary to make these “expected future supplies” of oil a reality if oil prices are lower?
1. Yes, definitely marginal projects will be reduced! The net effect is still beneficial for consumers (and harmful for producers) though. After all, you are adding future supply. Anyone forced out of the market would be marginal, higher cost production. [The only possible case where this doesn’t apply is (possibly, see below) producers who will have sold all their oil before the future supply enters the market.
2. I might have been wrong when I said current price would be reduced. This would definitely apply in a world where futures market was following Hoteling’s rule and simple depletion concerns (IOW, futures were higher than current prices). However, they are already backwarded. Thus the market is really planning on oil being cheaper in the future. So, I think expectation of future supply would definitely widen the amount of backwardation, but I don’t know if it would have any affect on current price. (I’m sure there is a simple answer, I just don’t know enough to know it).
Hi Nony,
I think my point was that it is by no means clear that the actions you suggest would have much of an effect on oil prices. The markets with their perfect knowledge of past, present, and future should know in advance what will happen in the future to prices, quantities supplied and demanded and how these will evolve in the future 🙂 Any announcement by the President would have already been priced into the market prices.
A drop in price might benefit consumers. Especially those rational consumers with perfect foresight.
For the irrational consumers, without such perfect foresight, they might buy a home that was poorly insulated, or buy a large SUV because the lower oil prices proved that all the talking heads on CNBC are right, oil supplies are indeed infinite!
Are lower prices always, beneficial to consumers? Only if the current prices are giving them proper signals about the likely direction of future prices.
We differ of course on what we think the likely future trajectory of oil prices will be. I think they are more likely to be at least as high as the EIA’s AEO Reference scenario (and possibly as high as their High Price scenario). You are inclined to trust that the futures market is roughly correct and think that the AEO low price scenario (which sees falling future oil prices) is correct. If your assessment is correct, then lower prices would benefit consumers, unequivocally.
I think real oil prices will rise in the future, at least by 2020, probably sooner. If they rise slowly, say by 1% annually (real prices), the economy may be able to adjust.
Whether such a rise would be enough for a transition away from oil and natural gas to occur is unknown.
It may take an 8% annual rise in real oil prices similar to the 6 year period from 2001 to 2007, in order to change consumer preferences. Maybe 4 to 5% annual increases would be enough to get some changes to occur without tipping the economy into a recession, it is pretty hard to guess.
Record Cold in a Warming World
By: Dr. Jeff Masters, Wunderblog, 2:58 PM GMT on March 04, 2014
and here’s the chart that was meant to go with the link… : )
Maybe one person out of a thousand will see a temperature map like the one you posted. So far as I can judge from personal experience there are only half a dozen people in my entire neighborhood who have seen something along these lines and the only reason there are six of us is that I showed it to the other five.
One really gets it. That’s me . One or two others are interested but it doesn’t sink in. The rest think the map is a commie conspiracy fabrication on the part of the scientists who are living high on the hog on their tax money .
I am very glad we have large two story masonry barn that I can use for emergency housing when the power goes off and the temperature hits 110 or 115 one of these days in a killer heat wave here.It won’t be a dry desert heat.The first floor is three quarters underground and the last wall can be bermed if necessary. It has never dropped to freezing in that first floor or basement and it has never gone above about seventy five.
There isn’t any real way to predict how likely something of this nature is but 100 plus days are not all that uncommon here in late July and August and I live in a local microclimate that consistently runs five to ten degrees higher on calm sunny winter day afternoons than the local NWS forecast.
And yes I really am in the mountains and less that half a mile from the Blue Ridge Parkway as the crow flies. Our home place is on a southern exposure at 14oo feet with the ridges surrounding the local community in a feature sometimes called ”the cup” by local old timers.
It’s easy to see why if you type in 24317 into the local forecast search box and look at the topographical map that displays on the right.
This cup is the reason old man Ralph Levering stopped here well over a century ago when he was exploring this part of the country looking for a place ideally suited to growing apples. We lobar folks have been growing them commercially ever since.
Mac, It’s pretty obvious that “the map is a commie conspiracy fabrication” but you really do have to give them credit for all the work involved making it. Common now, admit that at least.
Doug
Well at least we are not killing the polar bears. They are warmer in this map. Oh wait… 🙁
Jordan Considers Water Rationing After Dry Winter: Official
By Donna Abu-Nasr, Bloomberg, Mar 4, 2014 6:17 AM ET
Coffee to Soybeans Surge as Brazil Drought Damages Crops
By Marvin G. Perez, Megan Durisin and Liyan Chen, Bloomberg, Feb 18, 2014 10:13 PM ET
Haze Shrouds Malaysian Capital Amid Forest Fires and Drought
By Chong Pooi Koon and Manirajan Ramasamy, Bloomberg, Mar 4, 2014 4:53 AM ET
Argentine corn crop slammed by drought; harvest estimates wither
By Hugh Bronstein, Reuters, BUENOS AIRES Tue Jan 14, 2014 5:35pm GMT
[Australian] Drought takes its toll on the soil
By Edwina Farley, ABC Rural, Updated 1 hour 31 minutes ago
link for the last article… http://www.abc.net.au/news/2014-03-04/abares-opener/5295780
Ash Spill Shows How Watchdog Was Defanged
By TRIP GABRIELFEB, NY Times, 28, 2014
Captured regulator!
Unfarming: The Way to Win a Million Dollars
K.M., Big Picture Agriculture, March 4, 2014
The international energy data base from the EIA shows 25.3 TCF (trillion cubic feet) for US dry processed natural gas production in 2012.
But the EIA natural gas data base shows 24.1 TCF for 2012. In other words, 2012 was presumably revised downward by 1.2 TCF, or by 3.3 BCF/day (billion cubic feet per day).
The EIA is currently showing basically flat production from 2012 to 2013 (24.1 TCF in 2012 to 24.3 TCF in 2013). Assuming a probable downward revision for 2013 data, in my opinion, it’s entirely likely that we actually had a year over year decline in US natural gas production from 2012 to 2013.
Incidentally, the EIA shows that Canadian dry processed natural gas production was 5.1 TCF in 2012. Based on the Citi Research estimate of a 24%/year decline rate in existing US natural gas production, in order to maintain a 24 TCF per year production rate, the US would have to put on line the productive equivalent slightly more than all of Canada’s 2012 natural gas production, every single year, just to maintain 24 TCF per year.
Do you have a link to this Citi Research estimate?
I can send it to you, if you shoot me an email. It’s in the form of a Powerpoint presentation.
westexas AT aol Dot com
From Total CEO to Yergin: “peak capacity”
Oil industry costs are spiraling out of control, and it’s time to rein them in, Total CEO Christophe de Margerie insisted Tuesday. Yes, let’s rein in those pesky costs (who let them loose in the first place?)
“Excellence cannot be an excuse for doing anything at any price,” de Margerie told oil and gas industry executives gathered at the IHS CERAWeek energy summit in Houston. How about excellence lite?
We cannot continue to swallow this huge inflation. Ok, where is this rant headed?
The French oil executive suggested that soaring capital expenditures are partly being driven by greedy subcontractors. He stopped short of naming names, but blamed “Asian countries (that) think we are ready to pay forever.” Dude, come on! Name some names! Maybe some Asian names? So, somebody is to blame but we don’t know who but it has something to do with labor costs or something like that, is that it?
De Margerie’s comments came as other industry leaders highlighted the climbing costs of oil projects. Chevron CEO John Watson noted that those ventures are becoming far more complex, even as labor costs and offshore rig prices escalate. Get it? Labor costs and rig prices — that’s the root of the problem. Damn those workers for wanting to be paid! See: John Watson
You know what this is, don’t you? It’s oil industry executives trying to find a whipping boy to blame for their inability to make big profits. And it sounds like just about anybody is a candidate.
While Watson suggested companies could look to share engineering work across projects, de Margerie urged more restraint on potentially inefficient environmental and safety expenditures that may have jumped in the wake of the 2010 Deepwater Horizon disaster.
He suggested that safety and environmental concerns after the Gulf oil spill had been used to justify outsize expenses. Those darn environmental and safety expenditures! They are so freakin’ inefficient. And they are all because of a little oil spill and a few rig workers killed in the Gulf of Mexico a few years ago.
Cost-cutting doesn’t mean you are not doing your job properly, he stressed.
“A good company, which is extremely capital intensive, cannot just ignore that they are responsible for what they are producing,” de Margerie said. “There are ways of being safer, cleaner, without always adding additional costs.
“It’s now time to stop this, and we can do it without putting people in trouble” or at risk, he said. “It’s a lack of efficiency in most cases.” So, Dude, if there are ways of doing it why aren’t you doing it? What’s your point? That you are consciously inefficient?
De Margerie’s colorful conversation with IHS CERA Chairman Daniel Yergin briefly strayed from cost concerns into oil-field terminology Tuesday. He suggested the industry made a blunder in widely adopting “hydraulic fracturing” as the name of the pivotal well completion technology allowing companies to extract previously inaccessible oil and gas resources.
He derided “this stupid word we are using, which is ‘fracturing.’” Yergin said he preferred “enhanced stimulation.” Yeah, I prefer enhanced stimulation too. In fact, I prefer it a lot. But is this all you guys can do? Whine about your the ineffeciency of safety requirements and using the wrong words to fool the public about fracking? And how much are you getting paid?
He also cautioned against oil and gas industry pronouncements about abundant energy resources. When industry leaders “say there is plenty of oil and gas . . . you’re sending the message that we don’t care about the environment,” de Margerie said. “We do care. And the problem today is not the oil and gas resources ” it is access to those resources.”
Some resources are locked away in relatively unfriendly countries, de Margerie said. There is “no more peak oil” and “no more peak gas,” he said, but those geopolitical and access constraints do translate into “peak capacity.” Dude, you are pathetic. So it’s not peak oil, it’s peak capacity. And this cretin is the CEO of Total. But at least he cares about the environment and probably also human rights and saving unicorns as indicated by this report on the role of oil companies (including Total) in enhancing the environment in Nigeria.
Access is a huge issue. The majors can get oil out of hard to get to places, but when they have to deal with nationalization (Argentina) or oligarchs/Putin screwing them (Russia), it puts a crimp on the projects they can/should do. You still see some projects getting done…but not as many as would happen if things were more favorable geopolitically. Basically a higher hurdle rate is created.
I am reading Yergin’s book right now at bedtime. It’s excellent and you all should get over the reflexive cornie/peaker battles and distaste for Yergin and check the book out. In particular some of the observations about Putin and energy are spot on. Given the current situation in Ukraine, it’s really prescient, this book by Yergin.
I would really check the book out. Covers a huge amount of topics and is very well footnoted and the like. It’s not a fluffy book. Even if you don’t like Yergin, like TOD, you would be well served just in terms of reading a history of oil to read this book. And it is really not a cornie advocacy book. (not like the opposite version of Twilight in the Desert or the like). It’s basically a history of recent oil dynamics. Just like The Prize, you can imagine various outcomes in the 20 year off future and that is left open.
Yeah, and it’s not like anyone anticipated that peak oil would make us look for oil in less friendly places. And how come they’re not our friends anyway? I mean did we ever invaded a country on false pretext or anything like that evil Putin guy?
Oh, right. Forgot.
Calhoun,
“And how come they’re not our friends anyway?” I’ve wondered about that too. It just doesn’t see fair.
We invaded Iraq on a false pretext.
And then we wasted a bunch of American’s lives, $$$$$, and didn’t even get any oil out of it. Putin seems much smarter than the neoconservatives.
P.s. At least Iraq has a coastline and is next to Kuwait (US bases). Afghanistan really scares me in terms of the geography. How are we getting out of there?
I would really like to know what countries de Margerie is referring to as unfriendly. Total is operating in practically every oil producing country — who are the hold outs? Venezuela I guess. Anyone else? Unless, of course, he defines”unfriendly” as “they want to limit our profits and keep as much as they can for themselves.” By that definition, pretty much everyone in the world is unfriendly, including de Margerie.
Calhoun,
You just don’t get it do you? “They want to limit our profits and keep as much as they can for themselves.” No, of course there’s nothing unfriendly about THAT. However, actually limiting profits and keeping them for themselves is exceedingly unfriendly, it’s UN-American, treasonous in fact. Man, I just don’t know about you……….
The Labor Market Ate My Homework
Here’s a rather revolting article where in Chevron CEO John Watson blames labor costs for the high price of oil.
Labor and capital costs have more than doubled in the last 10 years, creating a “new reality” for energy producers and consumers, Chevron CEO John Watson said at the IHS Energy CERAWeek conference at the Hilton Americas in downtown Houston. OK, so it’s a combination of labor and capital costs that are causing high oil prices. Since labor and capital pretty much represent all the cost of doing anything, that’s hardly surprising.
“That new reality for our industry is that costs have caught up to revenues for many classes of projects,” Watson said. Again we hear the industry admitting they are having trouble finding profitable projects. This is the new theme for 2014.
He argued that rising labor costs have forced oil companies to look for ways to cut other expenses in order to boost the profitability of projects. Those costs are now built into oil prices. Hey, what happened to the capital part? Now it’s just labor?
“Essentially, for a company like mine and many others, $100 a barrel is becoming the new $20 in our business,” Watson said. Becoming? Dude, where have you been for like the last ten years.
Among the rising costs have been those for offshore development, which now reaches into waters that are deeper and more obscure than were possible a decade ago. And that wouldn’t be the result of peak oil, now, would it?
The result of higher labor costs will mean higher energy prices, Watson said. Again, it’s labor costs. Get it? You and I are paying too much for oil because of labor costs.
“If $100 is the new $20, consumers will pay more for oil,” he said. Boom, the punch line — consumers will pay more for oil because of labor costs. Are you starting to get the picture here?
And on a happy note,
Watson also touted a court ruling Tuesday related to claims of environmental damages in Ecuador.
The U.S. District Court for the Southern District of New York ruled that a $9.5 billion judgement against Chevron made by courts in Ecuador was given as a result of fraud.
“This ruling is a resounding victory for Chevron and our stockholders,” Watson said. “It confirms that the Ecuadorian judgement against Chevron is a fraud and the product of a criminal enterprise.”
“Having a judgement like this from a reputable court in the United States will certainly be helpful in preventing enforcement actions elsewhere,” Watson added. Happy, Happy, Joy, Joy. Our lawyers beat their lawyers. YEAH BABY! That’ll show them. … Ahem, now for the slide show.
Oh, by the way, did I mention how labor costs are driving up the cost of oil?
ps, I almost missed the irony of Williams calling Ecuador’s lawsuit a criminal enterprise — takes one to know one.
I agree that blaming labor cost or capital cost (!?) makes little sense. For one thing, cost of capital is unlikely to change unless the dynamics of the industry (non diversifiable risk profile, CAPM model) have massively changed. And labor? How much a portion of costs is that?
More likely culprits:
a. depletion winning (i.e. POD)
b. cartel becoming effective again
c. Iran/Iraq/Libya not having their act together. Arab Spring messing up production…