The Baker Hughes International Rig Count is out. I have decided to try something new with the charts. That is to compare the current year’s rig count with the previous two years count and to insert, within the charts, the percent change for this year as compared to last year. Also, this is the total rig count, Oil and Gas. Also the charts are not zero based. I do this in order to better emphasize the monthly change.
July usually sees a big jump in rig counts. This year there was a very tiny July increase, only a fraction of the increase we usually see for July.
*The Total International rig counts does not include the USA, Canada or the FSU. The Total International rig count was down 28 in July to 1118. Last July it was up3 to 1344.
The Middle East is the only place that rig counts are holding up. Rig counts for July are down 32 to 391 but they are still above their 2013 levels.
Latin American rigs fell 1 to 313 and are 23% below their 2014 level of 410.
Europe’s rig counts fell in July to 108. That is 45 rigs below last July’s count of 153.
Africa’s rig count dropped by 9 to 94. That is 43 rigs below last July’s count of 137.
The Asia Pacific rig count dropped by 3 to 212. That is 41 rigs below last July’s count of 253.
*The Total World rig count includes the USA and Canada but not the FSU. The Total World rig count increased by 31 to 2,167. That is 1,441 rigs below last July’s count of 3,608. The percentage decrease from last July is just under 40%.
The US rig count is leveling out. The US rig count was up 5 to 866 but that is still 1010 rigs or 53.84 percent below last July’s rig count of 1876 total rigs.
Canada’s total rig count increased by 54, from 129 to 183. However last July’s increase was 110 rigs, from 240 to 350. So this year’s July increase was less than half last July’s increase.
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Ron maybe this belongs in the previous post. However, I thought it might not be seen and so decided to place it here. Below is company reporting a 25% increase in Bakken production in Q2 over Q1. Did they do it by adding rigs??
CALGARY, Aug. 7, 2015 /CNW/ – Enerplus Corporation (“Enerplus”) (ERF) (ERF) announces the results from operations for the second quarter of 2015.
HIGHLIGHTS:
Through the second quarter of 2015, Enerplus delivered production growth, improved cost performance and maintained a strong financial position.
Production volumes grew by 7% quarter over quarter to 107,429 BOE per day. This growth was primarily driven by increased activity in North Dakota, where production averaged approximately 27,100 BOE per day, up over 25% from the first quarter of 2015. We also saw growth from our gas portfolio with our Canadian Deep Basin and Marcellus assets showing production increases over the first quarter of 2015. Our production mix was essentially unchanged from the previous quarter, with crude oil and natural gas liquids accounting for 43% of production.
What is it about July that typically brings on an increase in rig count?
I have no idea but for the last 16 years the average worldwide increase in July has been 109 rigs. The largest July increase was 179 in 2005 and the smallest July increase was 12 in 2001. But Canada always has a huge increase in June, July and August, far more than any other nation. However this week, the weekly data showed Canada dropping oil 12 rigs. That is very strange. Canada’s gas rigs were up by 5 this past week.
Well, in some places it’s just after the start of the rainy season. The dry season is used to build roads and locations. There’s also the budget bs. If you get the wells in the budget, you don’t get approval from everybody until the end of the year. Then it’s necessary to go through the site work, prepare the rig, move it, etc.
In my case I tried to run contrarian, have everything ready as far as the site was concerned by early January, move the rig in February. This allowed them to drill the first batch of wells in dry weather.
On December 9th, I published on my blog:
That was before the number of rigs started falling. Not so bad so far.
On February 5th, I also published:
On this one the jury is still out.
In my opinion the reduction of US shale oil and a global economic crisis will set the stage for an inevitable peak oil. It looks that this time it will be for real. Embrace for impact.
In my opinion the reduction of US shale oil and a global economic crisis will set the stage for an inevitable peak oil. It looks that this time it will be for real. Embrace for impact.
Agreed!
It’s time to seriously start the process of completely switching the economy over to renewables.
There is a obviously still a place for petroleum products but it is no longer economical for use in generating electricity or powering private automobiles.
http://goo.gl/MC06F2
Why Are Americans Switching to Renewable Energy? Because It’s Actually Cheaper Fossil fuels have become an economic liability—for both consumers and energy companies.
Here’s the way to go GRIN!
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“Embrace for impact.” Don’t you mean brace for impact? If not, who do I embrace, not you guys surely. 🙂
group hug for Doug!
Similar product, the Walkcar (check out the video):
http://time.com/3989603/japan-walkcar-transporter/
Of course, I suspect that the commute would be a little more challenging in snow and ice conditions.
The Baker Hughes North America weekly rig count is out. Oil rig count up by 6, gas rig count up by 4. Most places saw little or no change except the Permian which saw an increase of 6.
Canada oil rig count fell by 12. That is a surprise.
Baker Hughes defines its international rig counts as including all the published countries except USA and Canada. Its worldwide counts include USA and Canada. The July upswing you noted is due to seasonal activity in Canada. The International count (ex USA & Can) declined 28 rigs in July to 1118.
Baker Hughes doesn’t publish info on rigs in several countries, notably Russia, China, and Iran. Does anyone have reasonably current data on any of those.
Drilling activity in Russia is traditionally measured in meters drilled. This number has been rising over the past decade and was up about 10% in the first half of this year.
Hi alex, do you have a link to that source, or a name for it?
The number of drilling rigs is variable, depending on the season. The latest numbers I have are for 2012. Given that drilling activity continued to increase in 2013-15, I estimate that the number of active rigs is now seasonally fluctuating between 850-900 and 1000-1050 units
Permian is responsible for more than half of the increase in oil rig count since the low point in June 26th
Total US oil rig count +42
Permian + 22
Bakken and Eagle Ford are only slightly up
Small point. The colours on the line graphs on the first chart do not match the colours on the key. But good stuff.
Sorry Mike, I got really screwed up on that one. I don’t know what happened but I had a sudden emergency and had to drop everything. When I got back I completely lost track of where I was and just messed everything up. It was not even the right chart. It is all now okay I think.
Good stuff! I agree. Very valuable information, Ron. Thanks!
I have an accounting question.
Read an article today that indicated the large service companies, such as Schlumberger, Halliburton, etc. are allowing upstream shale companies to “buy now, pay later” regarding services. Appears it will work like a furniture store, where the well will be completed, but payment is not due for several months or maybe even over a year.
I assume the shale company still has to show that as an expense in the current quarter, and cannot show it when actually paid, either later this year, or in 2016?
I wonder if that is where a large amount of savings is being realized, but surely under GAAP, it must be expensed when the service is performed? OTOH, it seems I read that Q1 CAPEX is much higher than Q2 due, in part, to expenses incurred in Q3 and Q4 of 2014, but not billed and paid until Q1 2015.
Clarification of this would really be appreciated.
On another note, closed below $44 today on WTI. No end in sight. Really going to hurt again, but just have to deal with it, it is reality. There is a price where we will shut almost everything down and lay almost everyone off, but we have not gotten there yet, and depending on how far it falls, would wait a little bit before taking such drastic action. However, I do think $30s WTI is very possible and $20s WTI is not out of the question either. A price that makes any sense as not been with us since Thanksgiving, 2014. Soon it will be one year with prices below the true break even (as I define it) for all of US shale. The more stuff they make up, the lower the price goes.
The head honcho at Pioneer (PXD) really makes some bold statements. I already quoted one, that he expects Permian oil production to reach 5-6 million bopd. I guess in conference call he also said they are adding rigs, and would only remove rigs from the field if WTI stays below 40 for over 18 months.
The article contrasted him with, of all people, Harold Hamm. Hamm says they really need to become cash flow neutral, and could possibly achieve that with $60 oil and second half CAPEX, which will be about 1/3 of first half CAPEX. However, he also said would be $200-300 million cash flow negative in second half with $50 oil.
Of course, 1. oil is now below $44 and 2. is Harold Hamm speaking of WTI or CLR realized price, which is forecast by CLR to be $7-$10 below WTI.
shallow sand,
I think Pioneer was the first to start adding rigs in the Permian.
From a Reuters article a month ago:
As oil teeters at $50, a few shale producers still drilling more
Jul 10, 2015
http://www.reuters.com/article/2015/07/10/us-usa-drilling-idUSKCN0PJ17U20150710
A handful of optimistic U.S. shale drillers are sticking with plans to deploy more rigs in the coming months even as oil prices take a sharp dive well below many producers’ $60-a-barrel breakeven point.
On Wednesday, Pioneer Natural Resources Co. became the first big company to publicly confirm it was drilling more wells, saying it had already added two rigs in the Permian Basin of Texas this month and would keep on adding two a month as long as the oil price “remains constructive.”
Shallow sand,
Regarding your accounting question.
I think the delayed payments to services companies might have been shown in balance sheet as current liabilities.
For example, Whiting shows $430mn as “Accrued capital expenditures” as of December 31, 2014, and only $199 million as of March 31, 2015
Chesapeake shows $3,061 million as “Other current liabilities” as of December 31, 2014, and only $2,474 million as of March 31, 2015
Ill try to look into this more. Unfortunately I know just enough about corporate accounting to be very dangerous. For example, I mixed up free and discretionary cash flow the other day.
Clueless. If you are out there, could you help?
All costs that should be expensed while drilling a well are expensed on the income statement when incurred, regardless of when they will be paid (if ever, in the case of bankruptcy). The accounting entry is a debit to expense and a credit to current accounts payable [unless there is long-term financing for these expenses (probably rare). However, if there were financing in place for these expenses so they do not have to be paid for over 1 year, the credit would be to long term payables].
However, most of the costs are capital items when drilling a well. GAAP also requires a recording these costs when incurred, regardless when they are paid. The entry is a debit to an asset account [property, plant and equipment, or work in progress, etc. If the asset is depreciable (e.g., the pumping equipment) the debit will end in an oil & gas depreciable asset account. If it is amortized as production occurs, (generally, intangible drilling costs) the debit will go into an IDC account. The credit will go to current accounts payable. However, if the drilling companies are financing their services for more than a year, some, or all, could go into a long term payables account.
Obviously, if the company is immediately paying for any expense or capital item with cash on hand, the credit is, in effect, to the cash account.
Read an article today that indicated the large service companies, such as Schlumberger, Halliburton, etc. are allowing upstream shale companies to “buy now, pay later” regarding services. Appears it will work like a furniture store, where the well will be completed, but payment is not due for several months or maybe even over a year.
Well, well, well. As it were. Seems someone suspected this. Cost per well declines on a per quarter basis. They won’t find much interest in this from the truckers, (that’s another pun) though. They need the paycheck now.
And btw, furniture isn’t interest free.
Schlumberger may soon be like Sears or Kohls. > 50% of gross revenues are interest on the credit card inventory, not profit from selling stuff.
Hmmmmmmmmmmmmmm,
So they borrow the money from a lender, and then borrow it AGAIN from SLB or HAL.
Why? So they can report “efficiency”.
Oooh, and it occurs to me . . . this runs the numbers up higher. And higher. And higher. That’s the stuff of systemic disaster and what attracts the Fed’s attention.
“So they borrow the money from a lender, and then borrow it AGAIN from SLB or HAL.”
Watcher, the same thing is occurring at the margin for auto sales with subprime auto loans and lenders desperately hoping that they can “securitize” the average 5- and 7-year loans at a ~0.5% premium to unload the liability/”asset” on some unsuspecting sucker.
The financial media report 17M vehicle sales as a boom when the underlying facts suggest that this phenomenon is just another aspect of the Red Queen Race off the Seneca Cliff of the unsustainable auto-, oil-, debt-, and suburban housing-based economic model.
As a consequence, no doubt the Fed will be compelled by the Fed’s owners, the 10-12 Too-Big-to-Exist (TBTE) banks, to print trillions more in fiat digital debt-money credits for bank reserves to bail out banks’ loans to the shale sector, securitization of subprime auto loans, and the record non-financial corporate debt to GDP to buy back shares to reduce equity share float in order to goose earnings/share to keep the equity market propped up.
If only the masses knew what has been happening since 2012.
I have a technical target for WTI of $32-$39, which, if broken sets up a constant-US$ price of . . ., well, I don’t want to say or risk appearing like an idiot.
http://www.thehillsgroup.org/depletion2_022.htm
Suffice it to say that it conforms to the pattern of the mid-1980s and to the Hill’s Group projection at the link above, including price, wage, and nominal GDP deflation and the 10-year US Treasury yield at 1% or below.
Wasn’t GMAC financial arm of GM making more money than the car unit for a while? The moto of new economy with this NINJ-a loans is “Howmuchpermonth” can you pay but these shale guys can’t even operate in that economic model. They need “Pay Later or maybe Never” model 🙂
In reality, large upstream companies have always taken enormous advantage of their vendors. Some, like CHK, for instance, are notorious for 120-150 day payments to their suppliers and service providers. Those slow paying producers are easily, and quickly, identified and the bills for services rendered will always be more than for those that pay on 90 day terms, more of less the industry standard, to cover the cost of “financing.” I have always in 50 years paid on 30 day terms; when I use a big service provider like Halli they will offer me a significant discount for paying in 30 days, as do others. So I think there is no special reasons for this so called “news” other than trying to calm the masses. There is certainly no accounting privileges to be gained from taking advantage of vendors. To me it is just another example of sleazy business practices that fit right into the shale oil business model. Somebody needs to break this to Watcher easily; I know he will be disappointed.
Sorry to always be the one that offers up the reality check.
http://oilprice.com/Energy/Energy-General/The-Broken-Payment-Model-That-Costs-The-Oil-Industry-Millions.html
Mike
Again, I have always had some issues in understanding accounting rules.
I do notice in looking at CLR, WLL, PXD and OAS, all had a decent sized negative number in accounts payable and accrued liabilities in the statement of cash flows for Q2, 2015, compared to prior periods reported along side. 4 for 4 on that, which I think is interesting.
I do not understand accounting enough to determine if a company is able to “manage expenses”. I assume that in each instance, a report of lower per BOE OPEX is the actual result of lower expenses, and not the result of managing the payment of expenses.
For example, lets say I operate the Smith lease. I incur $30,000.00 of expenses for the quarter on net oil sales of 1,000.00 barrels. $30.00 per barrel OPEX.
But, lets say I do not pay $5000.00 of OPEX until the next quarter. That doesn’t allow me to state OPEX for the quarter is only $25.00 per barrel? I assume the expense is recorded at the time incurred, not paid.
Likewise, I don’t think there is any way I can claim a well cost $7 million instead of $8 million just because $1 million of the well cost was not paid until the next quarter?
I would note I think there is some monkeying around with well cost in one respect. I note that one company disclosed the cost to drill and complete and then separated out the cost of leasehold equipment. In that instance, the cost of equipment was about $800K, which sounds about right. I sometimes wonder what all each company includes when talking about well costs.
However, I think they would have to report well costs consistently. Don’t see how they could get away with saying well cost averaged $9 million in 2014, and then lower that to $8.2 million just by not including leasehold equipment costs.
Mike, I never knew anyone paid on 90 day terms, let alone 120 or 150? What the heck!!
We pay on 30 for everything, always have. Always will, at least till we are flat broke.
That is ridiculous.
We have some really small service guys who want paid on the spot, which is ok because if you do that, they tend to show up at your well before the ones that won’t bring a check to the location.
Mike, I never knew anyone paid on 90 day terms, let alone 120 or 150? What the heck!!
You guys should see what my buddy, who owns a high end flooring and carpeting company in Florida has to put up with. It seems the more luxurious some hotels are the longer they take to pay. 90 and 120 are quite common and then on top of that, how about having to wait almost a year to collect a half a million bucks, a good portion of which you have dished out in materials and monies you paid your subcontractors during the job. Even then only finally getting paid because you threaten to put a lien on the building. And I’m not talking about an isolated incident either.
I think this is just another sign of the breakdown of our country. Doesn’t anyone have any pride? If I don’t pay a bill timely, it bothers me.
So many on here saying everything is a house of cards, those who act the richest are actually most broke. Probably accurate. And probably going to take the rest down with them.
Shallow I am with you 5 X 5 on that; I could not in good conscious do that to anyone. Its partially why I have used the same service companies for 40 years or more. But this 90-120 stuff is an old habit in the oilfield. It started in the 1980’s.
The company that I mentioned above set the standard for shale oil operations beginning in 2008. It jacked bonus rates on mineral leases up 1000% across the country and set the bar so high for mineral lease terms, no oil operator will be able to reasonably lease minerals anymore, ever. It began this 120-150 days payment stuff…and of course chingled millions of royalty owners over post production marketing costs. You know how much debt they incurred in the process.
Mike
Doesn’t anyone have any pride?
That’s a rhetorical question, right?
As for the rest of your comment I think it is spot on!
SS
I believe I covered your questions on accounting timing above. As you know, the Oil and gas industry is unique. Almost all companies, even the the best of times, have current liabilities that exceed current assets. There is a reason for this.
Using averages, and presenting the ideal conditions – Almost all wells have several partners. One of the partners is appointed as operator. The operator might have a 30% interest in the well. So, a cost item is incurred on July 31, 2015. The operator receives a bill on August 15th. The operator has to accumulate all of the July bills and bill the other 70% partners. It takes until August 25th to do that and send out a bill. The partners receive the bill, including the July 31 expense around September 1st. They believe that they are entitled to 30 day term, so they send the Operator a check around September 30th. The operator deposits the check and does the accounting and now feels that he has the funds to pay the company that billed for the July 31st expenses. The operator states that they “cut” checks twice a month – on the 15th and 30th of every month. So they cut the check October 15th and mail it. The service vendor receives the check (for July 31st services) on October 18th. Again, this is best case in many instances.
We have a few et als. A bill paid in July by us goes on the July joint interest billing, which is mailed to the et als by August 10 and which is due August 25.
Some guess we carry et als for about 25-55 days. But we are small, et als are few. Whole different ballgame.
Any reason for increase in accrued liabilities in Q2 compared to prior quarters, that you might think of?
Thank you for previous response as well
“But, lets say I do not pay $5000.00 of OPEX until the next quarter. That doesn’t allow me to state OPEX for the quarter is only $25.00 per barrel? I assume the expense is recorded at the time incurred, not paid.”
You show this $5000 as OPEX in your profit and loss account (income statement). But it is deducted in cashflow statement for this quarter and hence is not included in calculation of cashflow from operating activities until the time your really pay. It should also be shown in the balance sheet as accounts payable.
It depends on the country and contract arrangement. In most jurisdictions it’s booked when the bill is received.
Let me give you an example from a location I audited: Company (operator) has a contract with large service outfit, which includes volumes discounts. The service outfit acidizes a well, they do a job ticket, operator representative signs it.
But the service company can’t bill for services until the end of the month, when they calculate the volume discount. Eventually they submit a bill with the volume discount and all the individual services.
Operator has to allocate the volume discount to reduce the bill for each operation. At this point the actual bill minus the discount is booked as expense for that particular well (or lease, or field, or platform, whatever is required by the operations/accounting system).
The best operation I saw had a computer program in every company rep and engineer portable, into which they input the job description and the estimated cost, on a daily basis, and this was carried into the daily report (it was used to report the daily cumulative well cost, daily ops OPEx, etc).
Mailing the check was a different matter. I’ve been in a couple of jobs where I had to sign the damn checks. We did it every two weeks simply because I had to set aside a morning to have accounting bring in the checks, the associated paperwork, and the people I could quiz if I had doubts.
My assistant, a very sharp young lady, would review the material the day before, she knew which items would look funny, and she had the individuals required to answer questions make sure they knew they may be getting a phone call from me.
Sometimes I refused to sign, which caused a stir, and requested additional reviews. It kept people on their toes. But OPEx or CAPEX was logged in by accounting, the amount in the checks we didn’t send pending further review were just accounts payable.
Hi Shallow, I had a look at the QEP statements as you mentioned them as one of the better shale producers.
I was surprised by the large amount of “Purchased Gas and Oil Sales.” $215M is a significant portion of revenues, effectively zeroed out on the expense side by “Purchased Oil and Gas Expense” ($217.2M). Do the other large shale producers look like this? I can’t help wondering what is the point. I understand maybe buying up production from smaller producers and clipping the ticket on the way through, but I don’t understand why you’d do it and not make any money.
QEP has good hedging gains, both this quarter and last, and maybe some of that comes from the marketing side, but it’s not reported that way. All the hedging gains are reported against the production business unit.
So, scratching my head there, and when I parse out what QEP actually produces, some 50,000 boe, maybe 60,000 with NGL, the production is similar to PWE (63,000 liquids) and PGH (66,000). QEP has more gas production, but not enough to justify the increased valuation, and they have done well on derivatives. But in the end, as you say look at the market cap – they’re at something like 3-4X the Canadians. I’m not seeing it.
DuaneX. I assume that QEP must have a midstream business, and that is what accounts for the numbers you describe. Again, just a guess on my part. I do not notice that with others, except there was a time CLR had those entries, as I recall. That was a few years ago I think.
I will readily admit that why some companies have a higher valuation than others is something that is not always easy to understand just from looking at the financials.
Ultimately, valuations now may be based quite a bit on the market’s view of which companies will survive, or rumors of which are the most likely buyout targets.
I do not have the time, nor the ability, to do in depth analysis of each company and I am always open to other views. My mission is to determine if US shale will render our conventional obsolete.
So far, I am not convinced US shale will render our conventional obsolete. However, the decision of most of these companies to continue to grow production and drill their best locations, at sub $40 oil in the field, has and will continue to hurt both them and all other producers financially.
Plains Marketing, LP crude bulletin for 8/7/15 shows almost all postings below $40. There are some postings in the $20s. So, a shale company with 60 % oil and 40% gas and NGLs is realizing BOE prices in the $20s. My view is almost no shale companies are able to remain solvent long term at those levels.
I can tell you that this price hurts us, we only do what we have to do keep things going, and there is a small percentage of wells that have went down with a down hole failure that we have left down, but we will have to eventually return them to production or plug them. Hate to plug, but that can happen in a long downturn due to state regulations.
So we have cut production. We have done our part.
We may see WTI slip into the 30s this week. For us, that will mean a roughly 70% drop from June, 2014.
To give some perspective, most bank oil loans are of short duration. The standard here is five year amortization. We were able to buy production and pay it out in that time, or shorter, in the 2000-2007 time frame. In 2008, lease prices went through the roof. They did crash in 2009, but by 2011 were back to 2008 levels. We thankfully bought very little after 2006, because prices just got too high.
There is little to no ability to pay principal on loans in our area from oil net income. I do not know what those who recently bought leases with borrowed funds are doing. Maybe on interest only?
Shale companies did not pay loan principal, they used all discretionary cash flow to drill more wells. They can only pay principal now through stock issuance, dilution of existing shareholders, unless they slow drilling more than they have. A goal of cash flow neutrality does not allow for payment of loan principal.
The shale industry is largely a microcosm of US society. Live paycheck to paycheck, and if you want something but don’t have the cash, just put it on the credit card and pay the minimum payments forever.
Thanks SS, that the shale producers continue to flog away is one of the other differences between the Canadians, which I am more familiar with looking at – production in CA is generally down, due to lower capex and selling of assets. It’s stated as such pretty clearly in CA reporting. Other differences – “adjusted EBITDA” vs FFO; no clearly stated opex; relative lack of transparency of production on a boepd basis. The whole QEP financial powerpoint never states BOEPD. Rather a big picture BCFe per year, with a pie chart 32% oil. This for me is harder to work into actual daily production numbers.
The QEP buying and selling has the whiff of a big round trip trade that inflates revenues but doesn’t add any value. Maybe I don’t understand the model, but they’re not making anything out of it.
Agree the comment about the microcosm of society. Listened to an interesting podcast yesterday about taxi medallions. They exceeded $1 Million to buy one in NYC at the top. Now Uber has crushed the pricing and banks are foreclosing on them. The business model was to buy one and hire out the cab for $100/day. The renter gets the cab for 24 hrs and keeps what he makes on top of the $100. Would you borrow a million bucks to enter a business that would at best produce $36K all things being perfect? Not me. But the medallions were going up in price so that was the real game. Until it wasn’t.
From the Rolling Stone article:
They were not victims of climate change but of religious zealotry. It is very unwise to go the entire day-light without drinking any water if Ramadan falls on July, whatever says any religion. Too many hours and too much heat so dehydration can become dangerous.
Another case of miss-attribution. But who cares. These days everything is the fault of climate change to the point that nobody pays any attention to other issues.
How do you know what killed them? Your attribution is a correlation and lacks causality. The most one can say is ‘insufficient data to draw a conclusion’. Ramadan has been in either July or August and/or July and August in 2011, 2012, and 2013. However only 2015 seems to have the death spike. A regressional analysis, off the top of my head, indicates temperatures likely played a significant role in the death spike. Possibly too did power cuts. It would also do you no harm to know a fatwa was passed by Mufti Mohammad Naeem, the head of the biggest madrasah in Karachi, allowing Muslims to forgo the Ramadan fast.
I submit that it is also you who have joined in the program of misattribution.
The article that I linked says clearly that the doctor at a hospital in Pakistan indicated that many died from dehydration. It also says that the majority of the victims were men above 50, specially day-laborers. Both are atypical of an elevated death toll due to a heat wave. In the 2003 heat wave most of the deaths were people with complications, elderly with other diseases mainly, not laborers, and they died of heat stroke and disease complications, very few from dehydration. Usually small children die of dehydration, not adults that can drink water.
In Spain we have frequent heat waves during the summer, and a lot of Muslims that work in the fields. This year to prevent labor problems some farm owners changed the working hours to avoid the warmest in the day, while others only hired Muslims if they could show they were not following Ramadan by drinking water.
http://www.heraldo.es/noticias/aragon/2015/07/05/a_grados_sin_comer_beber_ramadan_los_temporeros_aragon_376998_300.html
To what do you attribute the fact that not all Muslims in Pakistan are dead from dehydration?
Not all Muslims work outside, or obey the Ramadan rules.
Sometimes the boss has special considerations. Work from sunup until two, let them go home. What they do at home is their business. Some locations just reverse the day. Go to work night shift for Ramadan.
In our case the rigs have large fans. And I’ve seen places where a local cleric issued a fatwa saying the rule could be ignored because it was a life or death situation.
In other cases they have air conditioning. This option is not feasible in locations with power cuts.
Others just send everybody on vacation. this doesn’t solve the problem for a laborer who makes a living hauling junk on a cart he has to pull. They don’t have that luxury.
And not everybody is equally sensitive to heat, or sweats the same, or needs the same amount of water, or continues working under the sun when not feeling well, or has diabetes, or any other condition that affects the outcome. Yours is a strange question.
Here’s a link to a post I wrote about Karachi. I haven’t kept up with Pakistan, I worked on a couple of projects there, many years ago, and I had to study their energy system to be prepared to market natural gas if we made a discovery. So this blog post doesn’t include anything I remember from work, it’s all recent material I picked up in recent months
http://21stcenturysocialcritic.blogspot.com.es/2015/08/karachis-heat-wave-and-pakistans-energy.html
Climate change has not yet resulted in massive sustained heat waves in the subcontinent. To be frank the temperatures in summers are always high here and a lot of people die during summer of heat stroke. Anyone would if they had to pull a hand cart loaded with 100kg in 47C temp. Nothing unusual in this. Westerners usually get all scared when they visit this place during the summers, so we end up getting some sensational headlines in foreign newspapers.
The only thing where there has been visible impact are the rains. They are very erratic nowadays. Earlier the rains were regular and predictable, not so any more. It’s either a deluge or a draught. Gentle rain has kind of disappeared.
Ron,
On the link at the end of the article, you misspelled “Desdemona”.
BTW: Thanks for the link; I was previously unaware of this blog.
I had also been unaware of the Desdemona website. I read several of the articles there and those articles are obviously addressing major issues. But one nit-pick: The “Point of No Return” article states: “In Washington state’s Olympic National Park, the rainforest caught fire for the first time in living memory.” But in 1987 or 1988 (maybe 1986) I went camping in the Olympic National Park for two weeks — major backpacking/hiking trip. During that time, there was a forest fire burning that left haze in the sky and an acrid smell. The ranger dude told us there was a fire. Maybe the article means to say “the rainforest experienced a major fire for the first time…”. Or maybe the writer is very young, and so his living memory doesn’t go back as far as mine…?
Here’s a link you may wish to read:
http://www.nps.gov/olym/learn/management/fire-history.htm
I am gonna take a pass on visiting that site. Call it denial if you want. It is depressing enough just driving out of the capital city, where I spend most of my time, to my late father’s homestead an hour away. Yesterday was particularly so since, I was asked by an acquaintance if I could take them and a friend to collect some water, seeing as how the local municipal supply situation has become really bad lately.
I thought, “what the heck, how much skin is this gonna be off my back?” So, I left the house at about 7 am picked them out and followed their directions to a location where they could fill their containers. After about twenty minutes we passed the first public water pipe but that had a small pick-up truck with several 55 gallon drums being filled so we proceeded to another that had nobody there. They started filling the containers and my acquaintance filled twelve 17.5 liter (4.62 US gallon) plastic kegs plus three 6 gallon pails or about 70 US gallons total, not including several smaller bottles like 2 liter soda pop bottles and similar stuff. Maybe 75 gallons in all for a household of at least 5 including an infant?
The friend was a real talker and for more than an hour while the containers were being filled she babbled on abut all sorts of stuff, letting me in on the fact that only one of the fathers of her two little girls, one looked about three years old and the other could have been six or seven, was offering any financial support for the kid. The pipe we were drawing water from was the lowest point in the area so, it seems that our activities meant that some of the nearby houses were not getting any water in their pipes, resulting in a couple folks coming down to the pipe with small containers to collect water. One lady passed on her way to do her laundry in the river running close by, lamenting the fact that there was a pick up truck with “a whole heap of drums” being filled at the other pipe. The locals at one point asked where we were from as they discussed the state of the water supply in the region and how many towns and villages were having a really hard time with water. I thought to myself that we would not be welcome there if we returned, as my acquaintance seemed to have planned, speaking of “two trips”.
Regardless to say, when I dropped them off after 9:30 am, I let then know that I had stuff to do at home and could not help them out with any second trip. I don’t think they had even considered the fact that as “outsiders”, they had inconvenienced the folks in the vicinity of the source. At one point during the discussions with locals, it was pointed out that some people were using water to wash cars, while people wanted water for more important purposes. I opined that one day people would want water to drink and not be able to get that, much less wash their all important cars and pointed out that my vehicle has been washed less than four times in the three years I have owned it and is none the worse for it.
While driving through the countryside, one of the things I can’t help noticing is the amount of young people, in particular young mothers. At one point I thought to myself that these people are not wild animals, they are people with thoughts and feelings but, they sure seem to be breeding uncontrollably like wild animals or yeast if you will!
The other depressing thing is the “wild” fires. I cannot remember ever seeing as much scorched countryside as I have this year and last year. We have had two consecutive hot, dry summers and when you consider the practice of locals including farmers, to use fire as a means of getting rid of trash or clearing land, you have a recipe for disaster. I see acres of steep hillside land scorched and wonder if people are not making any connections between the fires and our water woes in that, fires in watershed areas are going to result in less water in the absence of rain coupled with deluges of unusable silt when it does rain. My theory is that people (idiots?) are starting small fires to burn some trash or clear areas of land for agriculture and strong winds and the presence of large amounts of “fuel” result in the fires quickly getting out of control. I believe that most, if not all these fires are started by man and just find it amazing that people seem to think they can control the extent of their fires, in light of the prevailing evidence that it is just about impossible!
Yeah, so between a general population that sees no harm in people having a few kids and people who don’t seem to see the environmental degradation caused by using a little fire to burn some trash or clear a little land here or there, I’d say we’re screwed enough! I have a hard enough time not letting this stuff overwhelm the little shreds of hope I feel every time I see a new array of PV panels, to go reading Desdemona Despair!
I find myself increasingly feeling like I am an alien, a different species from this bunch of people who go around living their lives and spouting inane drivel while the conditions on spaceship earth continue to deteriorate. Last night while driving along the streets of the city where I live I looked at the half moon as it rose from behind the mountains in the distance and thought to myself, “will we be missed when we are gone?”
Got to go attend the funeral of my late best friend’s 27 year old nephew. He died in a car accident on July 21st when his street racer ( Mitsubishi Evolution IX) got out of control at what must have been over 100 mph. His body was found outside the wreck with fatal head injuries. He was not wearing his seat belt.
Agente i lived in Cuba we had serious water shortages. We seldom had running water at home, so my dad bought me a cart and a large steel drum. When I arrived from school I had to make the trip down the hill to a low spot, wait in line, load the drum one third full and then crawl back up the hill. I was expected to make two trips everyday. If a friend wanted to help me haul the drum we could load more water and he would help me haul it.
As far as I know what you need is to be more proactive about population growth, and remember that Atlantic tropical cyclones will be less frequent as the climate warms. I don’t know for sure about Jamaica, but in Cuba the tropical storms and cyclones would bring badly needed water to Eastern Cuba. The trick is to have the storm miss the island but dump a lot of water.
Hey islandboy, have you ever considered adding passive solar stills to your product line. I’m guessing that in Jamaica a really simple still with a 1 square meter surface area can produce about 6 litres a day of pure drinking water even if you start with polluted water from the ocean.
A few years ago I built some modular hexagonal stills out of scraps I found in a dumpster added some pvc piping and glass and took the contraptions to a beach in Florida to test. They actually worked quite well!
There are a number of commercially available small solar stills and I’m sure you could find plans on line for free and this is something even unskilled people can make. Maybe you could start a community project building solar stills in Jamica!
http://www.appropedia.org/Solar_distillation
The first documented account of solar distillation use for desalination was by Giovani Batista Della Porta in 1958.[4]However, no solar distillation publication of any repute leaves out the Father of solar distillation, Carlos Wilson, the creator of the first modern sun-powered desalination plant, built in Las Salinas (The Salts), Chile in 1872.
[11]This desalination plant, “can be considered to be the first industrial installation for exploitation of solar energy[11].” The Las Salinas plant was envisioned to take advantage of the nearby saltpeter mining effluent to supply the miners and their families freshwater [4]. The facility was quite large for its time and now:
“The plant was constructed of wood and timber framework covered with one sheet of glass. It consisted of 64 bays having a total surface area of 4450 m2 and a total land surface area of 7896 m2. It produced 22.70 m3 of fresh water per day. The plant was in operation for about 40 years until the mines were exhausted[4].”
You have sun and ocean in Jamaica, right?
Cheers!
Fred
It might be worth your time to research these two questions for Jamaica:
1) Why is water managed so badly? Is there a governmental agency responsible for this? What are they doing, and why? Wikipedia is often a good starting point:
“The management of Jamaica’s freshwater resources is primarily the domain and responsibility of the National Water Commission (NWC). The duties of providing service and water infrastructure maintenance for rural communities across Jamaica are shared with the Parish Councils. Where possible efficiencies have been identified, the NWC has outsourced various operations to the private sector.
Water supplies are adequate to meet the demands of all sectors; however, the supplies are not located close to where most of the population lives.” https://en.wikipedia.org/wiki/Water_resources_management_in_Jamaica
Now, does this fit with your understanding? If not, you might want to edit the Wikipedia entry.
and
2) what’s happening with fertility, and why? What are the trends? Is it getting better? Why, or why not?
Here’s a source that suggests that fertility in Jamaica has fallen sharply, and is almost at the replacement level of about 2.1:
“Fertility rate; total (births per woman) in Jamaica was last measured at 2.26 in 2013, according to the World Bank. ”
http://www.tradingeconomics.com/jamaica/fertility-rate-total-births-per-woman-wb-data.html
You might feel better, or at least be glad to understand the situation better.
I think I’ll just try and elucidate on my thoughts with answers to these two questions. Since I have lived here all my life and got interested in politics as a teenager in the seventies, I think the real question is why are the public affairs in Jamaica so badly managed? The answer is complex and goes back to the granting of Universal Adult Suffrage as opposed to the situation where only the wealthy (usually white, descendants of of the colonizers and former slave owners) landowners could vote. While this gave a voice to every citizen it had the downside of encouraging aspiring representatives to espouse populist policies.
Under a populist (socialist) government of the seventies several companies were nationalized including most of the sugar factories, the municipal bus service, the electricity utility and the telephone company among others. The government had owned the national railroad since 1900. Virtually everything the government acquired was managed badly. In terms of the sugar industry, the pro union, anti capitalist posture of the government made the owners of many factories threaten to cease operations with the government’s response being to nationalize them to save the jobs.
The primary aim of government at the time was to improve access to services for the masses (the poor), a noble enough aim, except for the fact that was achieved mainly restricting price increases. As we all know. the decade of the seventies was a time of significant oil price increases and at the same time a hefty royalty on bauxite mining introduced by the new administration resulted in a slow and steady reduction in mining activity and revenues to the government. In a couple of cases the government itself eventually had to take controlling interests in mining operations and seek buyers for the product to prevent closures.
So all in all, a lot of what were formerly private sector operations became government jobs. In many instances the perception (if not the reality) has been that posts, from the board chairmanship to janitorial positions, were filled on the basis of party affiliation rather than qualifications. Unfortunately, in addition, when the government is the owner of the enterprise, priorities are not always the same as when the quality and reliability of competitively priced products and services determine whether the enterprise succeeds or fails. All the sugar factories have been sold back to private owners but most of them have ceased operations. The only part of the railroad still operating is operated by the bauxite mining interests to support their mining operations. I hope that answers the first question.
As for population growth, my casual observation is that, most of it is happening in areas that can least afford it and I sense the prevailing attitude to be a sort of “after the fact” resignation that shit happens. Of my close circle friends/acquaintances some have no children, while others have one or two or three and a couple have four. On the other hand, the unmarried woman we hired as a caregiver for my late father had four when we hired her and added a fifth, for a fifth father, during the time we employed her. I know of several unemployed women who have as much as three children. Is there any way to discourage unemployed people or poor people from taking the chances that might produce children?
The same populist policies that I alluded to earlier up, have sought to “ease the burden on the poor”. No sales tax on basic foods, free education and free health care all contribute to making it less expensive to raise kids. The problem is that, it is likely that if these things are removed, it is the kids that will suffer, not the adults responsible for their predicament. My observation is that it is the people who can least afford it that are contributing the most to population growth in Jamaica.
This observation is supported by the UNFPA page on Jamaica:
Teenage pregnancies
The adolescent fertility rate has declined over the past 5 years and now stands at 72/1000. This is still fairly high, and the fact that 18% of all births in Jamaica occur to teenagers is quite alarming. One major challenge is the fact that teen-mothers often drop out of the school system, and have little support from the ‘baby-fathers’ in bringing up their children. This has a double negative effect – on the young mother, who has her opportunities for development truncated; and on the child, who will not receive the benefits that a better-equipped mother could provide in terms of parenting.
In the area of adolescent sexual and reproductive health, there are also inconsistencies between policies and the legal framework which impede access to reproductive health services for young people. This has been linked to unwanted or unintended adolescent pregnancies among young people as well as STI and HIV infection.
Additionally, the absence of youth-friendly health services and the cultural barriers to effectively promoting comprehensive sexuality education further impedes young people’s access to reproductive health services.
and
Youth and Violence
Homicidal violence, 77% by the gun, is a leading social problem; it is male on male, youth on youth, poor on poor. Of the youth, aged 15–24, 26.2% males and 7.9% females are illiterate. Unattached youth, those who are not in school, unemployed and not participating in any training course, comprise roughly 30% of the total youth population. About a quarter of unattached youths had attained only a grade 9 level or less of education. Their future prospects for productive and satisfying lives is thus limited. This also makes female youth vulnerable to sexual exploitation and adolescent pregnancy and puts male youth in an extremely vulnerable position, which might lead to participation in criminal gangs.
The 2008 Reproductive Health Survey also indicates that approximately 20% of women ages 15-49 had experienced sexual violence. This figure reflects only reported cases, and it is estimated that the actual incidence is significantly higher.
The reports by Fred from his observations in Brazil, sound like things there could be pretty similar. Maybe these things are just facets of developing countries but, it is more likely that they are the result of poverty generally, since reports out of places like the US and the UK indicate that, the situation is similar among their poorer populations.
I think one of the biggest dilemmas we will face as a civilization is how to prevent a wholesale reversion to poverty and desperation in a world of declining oil production. As OFM frequently opines, it will not happen at the same pace in all places and the more I think about it, the more I think I had better sort out my UK passport (born to a British mother) so I can more easily get out of Dodge when TSHTF! Nobody wants to be stuck in the wrong place!
The experience in Cuba was similar after Castro installed the dictatorship, but it was much more pronounced. They nationalized everything, induced middle class and professional flight, and ruined the economy.
But in Cuba the population boom didn’t take place because so many of us fled, and because they implemented a system to encourage abortion. This went as far as advising young women to abort as soon as they visited a doctor for a pregnancy diagnostic.
Interestingly, even though Fidel was very homophobic and had beliefs closer to an Iranian cleric with regards to social issues, he encouraged free sex, hedonism, and later allowed male and female prostitution to become widespread. This was part of a plan to cause social breakdown and build “new socialist man” on the ruins.
Today Cuba has growing crime as the dictatorship faces a disenchanted, nihilist, anticommunist, and very poor youth able to prey on the tourists and Cubans who receive money from relatives abroad. But it’s not like in other countries simply because justice is extremely harsh.
Fernando, it might interest you to know, if you did not already, that the populist leader of the seventies was one Michael Manley who, seems to have had some sort of man crush on Fidel. He was a very charismatic leader who spouted a lot of anti-capitalist, anti-colonialist, anti-imperialist rhetoric and once made a speech in which he said something about walking hand in hand with Fidel to the mountaintop! He scared away many businesses and professional people and migration remains one of the factors affecting population growth here as well.
As I teenager I was quite impressed by him but, alas, I am older and wiser now! 😉
I remember Manley. In those days Fidel was a big name dropper. Used Manley, Allende, Arafat, Lumumba, Bouteflika, Ho Chi Minh, and his Soviet bosses’.
The sources you provide don’t blame the young women. They blame restricted access to contraception, exploitation and rape.
18% of children born to teenagers isn’t great, but it’s not as bad as it could be. It’s about 10% for the US.
Regarding mismanagement:
We’ve got patronage, and a lack of understanding of market economics. That doesn’t seem to quite be enough, though. Can you think of anything else?
It’s good enough. It doomed the Soviet Union and red China, Cuba, etc. Venezuela is getting a triple dose, lack of knowledge about market economics, corruption, and incredibly poor governance and management practices.
Hello Islandboy,
Your description of the woes brought on your little country via expanded government is a great nutshell explanation of one of my reasons for remaining a small government conservative.
I worked for government on several occasions, mostly as a teacher, and know lots of government employees. When you get right down to the nitty gritty the first and foremost consideration of a government employee and the bureaucracy of which he is a part is ALWAYS SELF INTEREST.
The VAST MAJORITY of teachers are not dedicated souls of the Mother Teresa sort. That’s education industry bullshit, just like cheap labor being essential to food production is farm industry bullshit. The VAST MAJORITY of teachers are just plugging away like anybody else doing no more than they have to in order to hold onto their positions from year to year. Ditto the vast majority of cops social workers highway department employees etc etc etc.
I have never yet met a cop who believes there are enough cops nor a teacher who believes there are enough teachers or a fireman who believes he is paid well enough or that his hours are short enough.
The nature of a lot of problems is such that they can be successfully managed only by government, some of these being national defense, pollution control, environmental protection, etc.
Unfortunately the immediate reaction of my liberal acquaintances to any discussion of almost any problem is that there should be a new program or an expansion of an existing program to take care of it.
Probably more than fifty percent of our drug troubles are due to so many goddamned lawyers cops judges probation workers jailers security men burglar alarm guys making a living out of drugs.
Does ANYBODY with a brain really think the criminal justice industry wants what is best for the country ? Only an idiot could possibly be so naive.
But the industry is part and parcel of big government and unfortunately most republicans are conservatives in name only rather than actual principles and too ignorant and scared to think such things thru so they support the criminal justice industry and the ever growing police state which has already robbed us of the last vestiges of any real privacy.
Fools who are afraid to the extent that they wear panties and want to be kept personally totally safe by government in the end are apt to become VICTIMS of the government they expected to save them. Such fools deserve neither freedom nor safety and in the end will have neither.
Any parent who is actually RAISING his or her kid has very little to worry about when it comes to drugs in and of themselves compared to the CONSEQUENCES of the war on drugs. The risks associated with smoking a little pot or even snorting some cocaine are TRIVIAL compared to the risks associated with the criminal justice system’s efforts to regulate personal behavior- which is by my principles the business of the individual so long as he is not harming anybody except maybe himself.
I could go on all day. Government jobs and income redistributions are necessary but should be kept to down to as low a level as practicable. Otherwise big government BECOMES the primary problem rather than the solution.
Big GOVERNMENT includes the Military Industrial Complex, the parasitic criminal justice industry, the mostly parasitic legal industry which exists to enable people to deal with the tens of thousands of obscure laws WRITTEN BY LAWYERS sitting as legislators, bailouts for too big to jail BANKSTERS, and …. well I could go on all day.
Farmers are supposedly the next thing to the traditional mythical cowboy , free men supporting themselves in a free society. BULLSHIT. At various times just about all of us are on government welfare of one sort or another. I know a dozen multimillionaires who got to be multimillionaires because they got sweetheart loans to buy farm land they never intended to farm beyond the minimal necessary extent to keep the loan in effect for the first four or five years. After that they quit and just sat back and watched their country property morph into subdivisions or three hundred acre single family estates over a few decades time. Not a single one has ever been required to pay a penalty of any sort. I strongly suspect they could have quit farming in TWO years no problem.
Get your UK paperwork in order and then work on getting any paperwork needed to get into Canada permanently and the USA as well. The British Isles are already overpopulated and very short of non renewable natural resources.
IF things turn out badly within your lifetime , if tshtf- and there is a distinct possibility it will within a couple of decades or so- you will find much greater opportunities in Canada or the USA.
Of course you know all this already.
But others who know less will be reading and thinking about these things as a result of this conversation.
Getting permanent resident status in Canada may be a piece of cake in your case.
Probably more than fifty percent of our drug troubles are due to so many goddamned lawyers cops judges probation workers jailers security men burglar alarm guys making a living out of drugs.
Almost certainly more than 90%.
So sad that the local military-industrial complex is promoted by republicans, and totally immune to being reined in.
Jamaica’s population trend, according to Mazama Science’s Population Databrowser:
http://mazamascience.com/PopulationDatabrowser/?country=JM&language=en
The thing about some of these plots that opens a few of my mental circuit breakers are the countries that experience significant drops in fertility for a noticeable period…and even countries that experience a notable drop in population for a period…then after that period is over, the population trend-line recovers and marches on upwards…almost as if the killing fields (or whatever the phenomenon happened to be in various countries) never happened. The birth dearth in Jamaica from ~ 1983-~1992 didn’t make a much of a dent in the longer-term trend.
Cambodia (Pol Pot/Killing Fields):
http://mazamascience.com/PopulationDatabrowser/?country=KH&language=en
Peoples Republic of China (‘Great Leap Forward’):
http://mazamascience.com/PopulationDatabrowser/?country=CN&language=en
North America (onwards and upwards, happy motoring!):
http://mazamascience.com/PopulationDatabrowser/?country=US%2CCA%2CMX&language=en
World…heading to 9.5+B by 2050…and still climbing after that..?
World…heading to 9.5+B by 2050…and still climbing after that..?
To me that’s kind of like asking if we can continue to increase the speed of a vehicle, which theoretically has a top speed of 120 mph, when it is currently traveling at 110 mph, but is only 100 ft. from a brick wall.
If the current population growth is sustained we will supposedly reach 9.7 billion around 2050. Personally I highly doubt that will happen. Even if we could keep that many people fed I can’t imagine wanting to live in a world with that many people. Given my current age I will probably not be alive in another 25 years so I guess I won’t find out myself… But our children deserve better than mere survival on a depleted planet so I sure hope we can find humane ways to stop and reverse population growth!
Fred,
It’s far easier to reduce the per capita “footprint” than it is to reduce population by 50%.
Use 50% less water? Easy…stop growing rice in the desert. Cut beef consumption by 33%…etc.
Cut personal fossil fuel consumption by 90%? Easy – drive an EV.
And so on…
Unless that EV is a pedal assist bicycle, or your EV is entirely powered by renewables, 90% cut is simply not physically possible given the weight of a battery vehicle and the requirements for acceleration and deceleration, and the need to travel at speeds to generate a lot of aerodynamic drag.
And transport (outside the US) is only about 25% of greenhouse emissions anyway. Food production generates more.
And efficiency gains are a matter of diminishing returns, whilst population growth is currently about linear, but could easily turn exponential again.
The wealthy on this planet waste vast amounts of resources, but the poor consume more overall, whilst wasting very few.
Unless that EV…is entirely powered by renewables
And, it certainly can be. EVs are rolling computers (as are all new cars), and programming them to charge when wind and solar are available is pretty straightforward.
I actually was thinking of oil consumption, but it really is true that EVs can cut your transportation FF consumption by 90% (and eventually 100%).
transport (outside the US) is only about 25% of greenhouse emissions anyway. Food production generates more.
I included food. The same logic applies: price GHG emissions properly, and they can be reduced very quickly for very little sacrifice. That’s far, far faster and easier than reducing population.
efficiency gains are a matter of diminishing returns
Not at all. Economies of scale, and improved manufacturing and tech can produce continuous reductions.
population growth is currently about linear, but could easily turn exponential again.
Not when fertility is well below replacement in the majority of the world, and plummeting in almost all of the rest.
the poor consume more overall, whilst wasting very few.
Poor farmers are very, very inefficient and wasteful of things like water. Again, rice in the desert. And think of all the kerosene being burnt for lighting and cooking: the indoor pollution, the very high costs…
Some of those variations, especially for small countries like Jamaica, are very likely just statistical errors.
Please note that we can easily see 1% growth per year for some time after after fertility rates have dropped below replacement level, due to the lags in a demographic transition.
Hi Nick,
The population momentum does not continue forever. In the chart below are the UN medium and low fertility scenarios until 2100.
Reality is likely to be between these two scenarios (hopefully closer to the low fertility case.)
I absolutely agree.
My point was aimed at those who see the temporary growth that happens during and after the demographic transition, and are confused about why it happens, thinking it means that population growth will continue forever.
“Interestingly, however, with non-market oil producers controlling a large portion of oil capacity around the world, the contraction of supply could disproportionately occur in the United States.”
“In other words, low oil prices are forcing production cut backs. More declines in output should be expected in the months ahead. Moody’s expects more defaults in the oil and gas industry this year, as debt piles up and lenders cut off access to credit for drillers. ”
* Unprecedented or Not * ?
http://oilprice.com/Energy/Oil-Prices/Could-WTI-Trade-At-A-Premium-To-Brent-By-Next-Year.html
This oil bidness seems to be in a downward spiral, a vortex, a whirpool. Whirling dervishes on tour 24/7.
I get up in the morning to go out and work like a dog. It never fails. You begin the day and then you decide what is most important, then work like hell to get it done to go and work like hell to get the next thing done. There is no end to the work, never will be. Flip flop, it never stops. A fool never learns. Bacon, eggs, and hasbrowns for breakfast. Eat, drink, and be merry for tomorrow may never come.
Even God said to hell with it, I’m taking a day off, dammit. lol
Jeff Rubin on all one needs to know to understand “Peak Oil”:
https://www.youtube.com/watch?v=KU14fItHGgc
Growth per capita is over, which means that we can’t afford to build out renewables AND sustain the fossil fuel infrastructure AND maintain real growth per capita: the end of growth.
$20-$30 oil, deflation, no real growth per capita, debt-deflationary depression, fiscal austerity, and the risk of systemic debt defaults, and systemic collapse.
Jeff Rubin has certainly forgotten more economics than I will ever know but growth per capita is over FOR SURE only if you accept his ( most likely unstated ) assumptions.
Assumptions tend to make ASSES of U and Me unless you are VERY careful with them.
One that might fail to hold involves efficiency and conservation and changes in life styles. It IS possible that energy efficiency can increase at say two percent a year while energy supplies decline at one percent- leaving room for growth for a while yet – maybe for decades- Maybe not world wide but certainly in major portions of the world.
HEY GUYS, HOW MANY of us in this forum REALLY give a shit about the troubles of the people in Sub Saharan Africa?
I do in the abstract but I do not mind admitting i have never donated a dime except thru taxes (foreign aid) to helping them.
Another is that the very Effing definition of growth may be strictly defined in theory but in day to day communications it means something plastic of flexible. We considered the world to be growing when growth was mostly limited to the richer western countries and the peasants of Asia were still just about all of them subsistence farming. MEANING —— WHO counts when we say growth per capita?
Some growth (at least) occurs when a person who has had NO electricity gets his first twenty watts and or his first half a kilowatt hour on a daily basis. We certainly are NOT so hard up that we could not if we so desired supply everybody in the world with THAT much electricity. Small scale renewable energy IS HIGHLY ECONOMIC – if the alternative is doing without.
Another consideration – and a truly major one – is that GROWTH in the gross sense is not necessarily doing ANY particular randomly selected person or community ANY GOOD. My GROSS waist line has certainly been growing for years because I am prosperous enough to overeat the wrong foods.I have in farm country humorous terms certainly done the right thing and built a substantial protective shed over the only tool I own that REALLY matters- well , any way it mattered back when I was younger, lol.
I submit that a person who forgoes owning an F250 four by four diesel tricked out all the way and uses it to fetch beer or go to church – uses it as a status symbol- would be substantially better off , all the way around , driving a vehicle that costs eighty percent less and spending the eighty percent on other things. There ARE other ways to display status.
Yet another consideration is that the population is variable and while we all EXPECT it to continue to grow for decades, the population might level off and start declining MUCH sooner than expected. Mother Nature has a way of throwing problems at us in a somewhat random fashion.NOBODY expected the birth rate to fall so fast back when I was a kid. Nobody much expected tight oil production in the USA to grow like kudzu either.
Even the poorest people in the world now have at least some access to modern communications in most cases – even if this communication is limited to one radio or tv set in the home village. People are able to travel as never before. WORD GETS AROUND when it comes to how the rest of the world is living. Television and soap operas seem to have brought about a revolution among young Brazilian women when it comes to having more than one or two kids.
Maybe Bill Gates or some other mega rich person will decide he is going to spend eternity in hell or that he will be forgotten unless he does something really spectacular – such as founding a major new university – OR making birth control free for any body who wants it.
Would the USA extradite Elon Musk if he were to start delivering free birth control pills with little parachutes by the billions from orbit? How many desperately poor men might show up at a clinic to get a vascetomy if somebody were to offer them a nice set of hand tools and five hundred pounds of non perishable staple foods?
Some body with both questionable intentions (Baptist warriors who believe in sex only within the bonds of matrimony ) and questionable moral values may decide to create a sexually transmitted disease that renders victims STERILE rather than killing them. The medical profession might not get so excited about curing it or stopping the spread of it compared to the response to AIDS.
Such diseases already exist. Tweaking one to make it far more easily transmitted might not be too big a deal.
Then there is the simply UNDENIABLE fact that resources and power are NOT equally distributed all over the populated portions of the planet. Growth PER CAPITA might be over.
Growth in quality of life measured in health, leisure time, intellectual accomplishment, etc, may well continue for quite some time yet in large parts of the world. When the shit hits the fan, we are going to wake up here in the USA and in some other well situated countries and change our ways.
In WWII we built the biggest military machine in history in the shortest time ever. If we cut out the production of tricked out pickup trucks in favor of plug in hybrid cars is that growth or lack thereof ?
It may not be growth in the gross sense but it makes sense and will improve every body’s quality of life. If we mandate that the construction industry retrofit older houses for energy efficiency rather than build new houses for a population that will be declining is that growth or not growth?
NOBODY has proven his case to the best of my knowledge when he claims a transition to a renewably based economy is impossible. Improbable perhaps , impossible not proven. Of course the transition is apt to occur in a world with a lot less people in it. A die off IS baked in. It will NOT be world wide unless the cards fall entirely in the devil’s favor.
I am a poor man when it comes to cash on hand and current income but I could afford a battery and solar power system that would keep the LED lights and my refrigerator on with no problem. My computer too. And such systems will cost half as much ten years from today as they do now.
If we change our ways so that each middle class person who buys one more new car than he really needs no longer buys that unnecessary car but rather spends the money on improving the energy efficiency of his home and or business – well then , we would be over half way there in terms of energy troubles at least here in the USA.
YOGI SEZ PREDICTING IS HARD. 😉
“I could afford a battery and solar power system that would keep the LED lights and my refrigerator on with no problem. My computer too. And such systems will cost half as much ten years from today as they do now.”
In that case my analysis shows you should save your money and wait to buy your solar power panel and battery. If you take the money you would use buying a solar panel kit, and put it in a safe, you will earn the equivalent of 6.9 % interest. However, a more precise analysis should be carried out taking into account any subsidies, tax credits or other goodies you can extract from tax payers.
In that case my analysis shows you should save your money and wait to buy your solar power panel and battery. If you take the money you would use buying a solar panel kit, and put it in a safe, you will earn the equivalent of 6.9 % interest.
I think you are missing OFM’s main point. The PV system he is talking about will most benefit those who have no access whatsoever to electricity today. That’s a couple billion people living in extreme poverty by first world standards. They do not have access to the banking system, don’t have money to put in a vault and make money from the interest. They need the electricity like yesterday.
You talk a good talk about being concerned about human rights and the poor but you keep trying to promote BAU and a system that only works for the elites. Granted you and I and most of the good folks reading this are a part of that elite as well. And as I’m typing these words I’m listening to some Brazilians outside my window discussing the economic crisis and local politics, It’s not quite as bad as Venezuela yet but things are very very interesting here as well.
Population, as you well know coupled, with real physical resource limits is the biggest problem we face. The non negotiable lifestyles of the western world are going to be negotiated and the the 1% that holds most of the wealth and resources will be held accountable.
I strongly suspect that you will see more and more people in the third world getting access to PV systems and going the distributed generation route. The people who are on the forefront of facilitating this transition are the ones who will probably be the members of the new elite.
And communism will have nothing whatsoever to do with any of it.
Cheers!
That system (solar panel plus battery) doesn’t really solve much, simply because poor people who live in remote places can’t afford it. This isn’t going to do much to solve a third world country’s major energy needs. It could be a niche solution to allow them to charge a few cell phones and put in a refrigerator to store some medicines in very remote locations.
If a third world country can get cheap financing from rich donor nations they should definitely buy these kits. But it won’t do anything for the millions living in urban areas.
That system (solar panel plus battery) doesn’t really solve much, simply because poor people who live in remote places can’t afford it. This isn’t going to do much to solve a third world country’s major energy needs.
I think you are wrong about that. No, I’m 100% certain you are wrong about that!
see my comment about 5 days ago:
http://peakoilbarrel.com/world-natural-gas-shock-model/comment-page-1/#comment-530007
And OFM made a similar comment in the same thread about Africa.
The people in the attached graphic will never connect to any grid they will only have PV. It’s the grid that is unsustainabe and will be uneconomic to implement. Just like in my linked comment, the Brazilians with cell phones will never have land lines but will continue to get better cellphones and service. Neither the phone companies nor the end users could ever afford to have land lines at this point in time. This what I keep talking about when I say the old paradigm doesn’t work and there is a new one already being implemented. You sir, seem to continue insisting that what was will always continue to be. Granted I could be wrong but I see things very differently from you.
Oh and here’s that graphic of PV on huts
If these people ever connect to the grid I will happily eat my hat and yours!
poor people who live in remote places can’t afford it
It’s cheaper and more widely available than oil. Hundreds of millions of Africans spend a lot of their income on kerosene for lighting and cooking, and solar is far cheaper.
The perfect is the enemy of the good.
I must agree with Fernando that small scale pv is not going to do a whole lot in the near future for the poor people in the big cities of the world.
But – BUT the growth of this and similar technologies is apt to be exponential and once the installed base gets to be big enough , things will hopefully change very fast.
Small scale pv can produce enough to recharge electric bicycles for instance. That application alone has the potential to be a real game changer in lots of cities.
I have a home built solar domestic hot water system that works fine and supplies all our hot water needs in summer and well over half even in our moderately cold winters.
I also have a solar cooker under construction – to be honest, sitting around half built for four or five years – that will if I ever finish it cook a large pot of stew in a couple of hours even on a chilly winter day.
In the end we have little choice but to pray to sky daddy or the other god(s) of our choice that the world population starts declining.
But there are a lot of things we can do to postpone the final day of reckoning , world wide,when it comes to energy and environmental degradation..
With luck there may not even be a final reckoning in a few currently rich and powerful countries- at least not for the next couple of centuries or longer.
Fernando,
In that case my analysis shows you should save your money and wait to buy your solar power panel and battery.
Really, you should put your brain in gear. That simple present-value analysis misses the value of the electricity produced…just as Fred said.
When one considers solar power such as he described, with batteries which allow him a full disconnect, solar power isn’t economic at all. This is why nobody with a connection to the grid and a lick of common sense buys the solar panels, plus several days’s worth of battery back up. I didnt penalize the solar panels plus batteries kit with the added handicap they carry (they are money losers).
Sigh. That’s not what he was talking about.
First, he was talking about renewable power being affordable, regardless of whether it was “competitive”.
2nd, you have to take into account pollution, security of supply, etc. Coal is very, very expensive when you include all of the external costs. Any accountant, and any economist (no matter how conservative) will tell you: proper accounting matters.
Yes, Nick. Nevertheless in many locations coal and natural gas are cheaper. And as it turns out, many African countries lack the conditions to install wind or solar. One good example is Congo (former Zaire). That country has much more hydropower potential.
Other than Kenya, where I saw a very diverse geography, most of those nations are up the creek without a paddle, growing populations, terrible and corrupt governments, tribal conflicts, huge urban areas teeming with disease and garbage…..
Fernando, fer crimminies sake we are not talking countries or large scale installations! We are talking really small, like 2 to 300 watts of PV, a cheap solar charger with a couple of 12 volt lead acid batteries powering some LED lights a cellphone charger and maybe a very small 12 volt cooler/ fridge , the kind we in the US can plug into the cigarette lighters of our cars. You keep saying solar is too expensive for these people but they are proving you wrong by actually putting these systems on their roofs and charging their cell phones with them! Coal and natural gas are not cheaper for these people!
You are going to have to do a hell of a lot of writing to convince me most African villagers can stick a solar panel on a hut to drive a refrigerator. That photo is either photoshopped, or some green NGO stuck them there for propaganda. In most villages one would have to be an incredible idiot to put something expensive like that on the outside. It means getting robbed or raided.
So, you feel the major problem with small solar in Africa is crime?
Do you feel that crime rates are much higher in general in Africa than in OECD countries?
in many locations coal and natural gas are cheaper.
Not if you include all the costs, like pollution and supply insecurity.
many African countries lack the conditions to install wind or solar.
Most of Africa has very good solar insolation.
Now, many African countries do indeed have lots of other problems, like war, poverty and terrible government. But…those problems apply to fossil fuels as well.
Look at Nigeria, which has a wealth of oil, but is incredibly badly managed, with fuel shortages and many, many other problems.
Dude, you are in lala land. I can’t even suggest you take a trip there, most of you guys don’t last 72 hours.
A classic example of an “arm-waving” argument.
It would help to add some specific ideas…
That Rubin video is from October 2012. He’s building his case on high oil prices . . .
An article about the notion of commercial cargo ships being powered, at least in part, by the wind (article has several links within):
http://www.iflscience.com/technology/researchers-are-looking-surprisingly-old-idea-next-generation-ships-wind-power
A link to cargo vessel energy efficiency measures which can be taken right now:
http://www.cepal.org/Transporte/noticias/bolfall/3/51833/FAL-324-WEB-ENG.pdf
Fernando,
Thank you very much for sharing that informative paper. I recommend it to all here. No warp drive or Nirvana required…but good engineering, corporate values, and public policies.
Fernando,
I’m glad to be able to say that’s great information.
Peak Oil is never going to threaten land or water shipping. Shipping will get much more efficient; it will outbid low-value personal transportation; wind and solar can be very useful; and it is sufficiently valuable that in the far distant future it can run on synthetic fuel.
I agree with Nick that we are not at any real risk of running out of fuel to take care of essential shipping- at least not in the easily foreseeable future.
But rising shipping costs can make big waves in the ways certain industries operate.
Local farmers in my area are growing potatoes again after being driven out of the market by more northern growers for the last half century. The cost of hauling them, a couple of bucks per bushel or more sometimes, has risen high enough that they can now be grown locally for local markets at a profit.
Yes. Viability is different from competitiveness, and in a free market system even small changes in relative costs can produce large differences in optimal allocations and locations.
I perused the internet auction. Many non operated working interests in ND Bakken wells for sale. Also plenty of working interests in horizontal wells in other locations. All the big names represented as operators.
Either the stuff on the auction are always the lesser economic wells, or there is a problem. I am still seeing OPEX per BOE higher than company averages, pretty much across the board.
There is a particular lot of HZ wells in OK that look particularly brutal. We are talking wells that in some instances probably should not have been completed. Most were producing mostly gas, with some gas prices under $2 per mcf.
I know most here don’t have the time to crunch numbers, but if you do, take look.
Probably the most interesting on the auction is something I haven’t seen before. Baker Hughes is selling net profits interests in a couple of deals.
I guess maybe funding by service companies is much more common than I realized. I do not think that is a good sign.
We do not like having et als. I can’t imagine asking our chemical company, supply store, etc., to finance us.
Schlumberger loaned $1 billion to PDVSA about a year ago, supposed to pay for their services. As far as I can tell one reason the Maduro dictatorship survives is the cash flow from Chinese, Rosneft, ChevronTexaco and Schlumberger loans.
Venezuelan farmers ordered to hand over produce to state
http://www.telegraph.co.uk/news/worldnews/southamerica/venezuela/11754156/Venezuelan-farmers-ordered-to-hand-over-produce-to-state.html
That is what you can expect when you are a food producer and there is widespread food shortage. Your produce will be taken from you with little if any compensation. But at least you will be left enough to feed yourself and your family, as it is in the interest of those in power than you continue producing food.
“as it is in the interest of those in power than you continue producing food.”
Close but not a ringer. It is in the interest of tptb that SOMEBODY keep producing food.
There are examples such as the Commies in the old USSR starving out the land owning farmers in Ukraine.
The Venezuelan commies have already succeeded in wrecking food production in a country that is well situated to be self sufficient and a net exporter.
How long it will take to restore food production once the current regime is gone is any body’s guess. The stock of running and repairable machinery may be in even worse shape than the oil industry. The people who know how to farm may be dead or too old and crippled up to resume working in too many cases for food production to be restored quickly.
If any body wants to quibble about the Maduro outfit being commies, fire away but being a plain spoken old hillbilly I lump birds of a feather that flock together as being of a species.
The state stores try to use a rationing system based on electronic fingerprint capture (purchaser provides fingerprint when buying food, is blocked from buying again for x days).
Corruption is rampant, store employees and national guardsmen allow the food to “leak out” in large quantities. The food is resold openly near the state store at much higher prices. But poor people or even the middle class can’t afford the prices and they are going hungry. There’s also a lot of violence in the food lines, and in recent days they have been hijacking food trucks.
I have to conclude oil production must be going down, but they lie about the production rates. They are buying blending crudes and this allows them to inflate the figures to some extent.
The regime is a real abomination, they were trying to copy the Castro dictatorship, it’s becoming almost as bad as what I saw in Cuba. They haven’t seen the worst, because the repression, torture and abuse are still a bit amateur. What Castro did to us was horrible, and I suspect Raul Castro is mentoring Maduro to get really tough on the people. I think a lot of them are about to die.
I would guess those are settlements in the form of production payments, for instance judgments derived from disputes over costs, or the quality of services rendered, with operators. In spite of the frac now, pay later horse pucky (THATS really going to help the long term sustainability of the shale business!) service companies are not in the habit of funding operations. They don’t. Schlumberger got in bed with a few operators on some stuff but they were documented WI, subject to JOAs, etc.
Mike, I’ve seen all sorts of arrangements. I think some weak operators with very poor financials prefer to finance themselves a little bit via delayed payments, knowing they will see a higher initial charge.
Many years ago I worked in an operation providing production services (we had one of those service contracts we see in South America), the state oil company lacked the cash to pay us, so we accepted special 10 year bonds they issued, dollar denominated and with a REALLY nice interest rate. We flipped those bonds to investors (used a Swiss bank to handle that business), received about 70-80 % of face value.
To make up for being nice we requested our contract be modified, for example we got a 10 year extension, and some tax rulings which allowed us to do quite well.
Exactly, Fernando. I have seen similar payment methods tied to production; bonds, back-in’s after payout, production payments, whatever. BH I am sure has some of those things and they would like to sell them. Maybe before Halli gets their grubby mitts on it.
The USA 2015 graph in the 2:nd last picture was the smoothest most perfect reveresed exponential one I’ve seen in a long time. _Very_ unusual with so smooth graphs of anything measured from reality. Felt I wanted to point it out.
Ron and all– I have one more question and then I will sit back and just listen to you all for a while (I think, unless I have another question! 😉 I know you are making a best guess/educated guess but– why do you think 2015 will probably be the final peak? Why couldn’t we ramp up fracking USA again like we did 2012 – 2015 and have another higher peak (total liquids, I mean)? What is it that makes you think next ramp up will not be as high? Thank you again for this invaluable blog!
Karen, oil companies need time to react. Let’s say oil prices start climbing and hit $60 by September…most companies would wait at least 30-60 days before they expose themselves. Let’s say they have permits and hardware all lined up…then they need to move the rig, drill well, complete well (it’s more than just fracturing jobs). So new wells can’t make up decline.
The only possibility would be to speed up fracturing of wells they seem to have drilled but are waiting to fracture. But I don’t think they can fracture them fast enough. Besides, the USA produces in other areas, and those wells don’t gave the high initial rates. I think the peak in 2015 already happened. And I suspect the world peak is coming around the corner.
Also remember the ongoing decline in many regions including former exporters and the prospects of decline in Russia and in Saudi Arabia as they switch from water flooding at their aging super-giant Ghawar, to CO2 flooding. an any of the experts here give an opinion as to whether or not CO2 injection is likely to result in increased production in the case of Ghawar?
You can peak pretty high and pretty late if you don’t care about economics — or rather you can’t care about economics, because your cities are starving and they HAVE to have oil, regardless of price/cost.
US Crude + Condensate (C+C) production rebounded from 5.0 MMBPD* in 2008 to 9.4 MMBPD in the first quarter of 2015 (EIA).
If we assume that the decline rate from existing US wells in 2008 was about 5%/year, we needed about 0.25 MMBPD of new production every year in order to maintain the 2008 level of production. At 9.4, even with no increase in the decline rate from existing wells, the volumetric decline from existing wells would increase to close to 0.5 MMBPD.
However, with such a high percentage of US production coming from high decline rate tight/shale plays, I suspect that the decline rate from existing wells has risen to somewhere between 10% and 20% per year, which implies that we need, in round numbers, somewhere between one and two MMBPD of new C+C production, every single year, just to maintain current production.
*What’s the prevailing opinion on preferred notation for million barrels per day? I used to used mbpd, but I whenever I use million for gas, I and virtually everyone, uses MMCFPD. So, I suppose it makes sense, to be consistent, to use MMBPD for oil.
However, with such a high percentage of US production coming from high decline rate tight/shale plays, I suspect that the decline rate from existing wells has risen to somewhere between 10% and 20% per year, which implies that we need, in round numbers, somewhere between one and two MMBPD of new C+C production, every single year, just to maintain current production.
Maybe a tad high. Shale decline rates would raise the average decline rate, but one presumes Alaska’s decline will start to flatten and assymptote to zero? This would lower the average?
“but one presumes Alaska’s decline will start to flatten and assymptote to zero?”
Don’t bet on that. Alaska has been declining at 5-6% for the past decade, there are over 1000 straws in Prudhoe Bay, there has to be enough oil to make the pipeline function, the gas cap has been sucked dry. I could go on and on but I think it’s wrong to assume an assymptote-to-zero. Of course oil price will be a HUGE factor and only God and Dennis are likely to make a guess there. Oh yeah, Prudhoe Bay started with a 600 foot “deep” reservoir, several years ago that had been reduced to 60 feet. All the satellite reservoirs count for nothing.
Also, because of probable overestimates of the EUR for tight/shale plays and because of insufficient consideration to wells plugged out early, and because of probably underestimated operating costs, I suspect that the contribution of the overall “tail” of low volume and low decline rate production from tight/shale plays is probably overestimated.
Amen, brother!
Hi Jeffrey,
The average well profiles from 2007 and later for the ND Bakken are based on all wells including those that have been shut in. Wells that have stopped producing are recorded as having zero output in months they do not produce.
The costs may be underestimated, but I have adjusted my estimates using suggestions by Fernando and shallow sands. If oil prices rise to $80/b or more there will be a lot of output from the LTO plays, if oil prices remain less than $80/b long term, then output from LTO plays will fall.
There are some that think oil prices will remain low for the long term, I think that only happens if there is an economic crisis which makes oil demand fall. This is a remote possibility, but do not think it can be reliably predicted.
Also, a reminder that the observed net rate of decline in Louisiana’s marketed natural gas production (a mix of conventional + shale gas) from 2012 to 2014 was 20%/year. This was the net decline, after new wells were added, i.e., the gross underlying rate of decline from existing wells in 2012 and 2013 was even higher than 20%/year.
I am estimating that the gross underlying rate of decline in US C+C production from a mix of conventional and tight/shale plays in the 10% to 20%/year range (probably closer to 20% IMO). This is the rate of decline from existing wells, with no new wells added.
Karen,
Your question meets very much the point of how to engineer a bubble. At the beginning there is no pay back of loans, so all the money goes into new production. There is no legacy rate at the beginning and there are the best locations to be drilled. Over time a bubble gets tired especially when the underlying business gets weak through low product prices. Finally a bubble gets in a mature state when the business comes into an equilibrum. This is not only the case for fracking, but also for the internet, PC sales and mobile phones. Fracking is now in a critical state as loans are coming due (Samson SSN has to make a critical payment on August 20) and legacy rates are reaching high levels. The most important point now is how real announced efficiency measures are. If managements can show profits at low oil and gas prices, fracking has probably reached a certain state of profitable equilibrum. If you ask shareholders, who have sold shares in panic over the last weeks, the point of equilibrum for fracking is quite disappointing. My personal measurement of how to assess the state of a bubble is the ratio of revenue gain over capex. In the case of fracking the ratio is now below 0,20 (20 cents of revenue gain over one dollar capex) and deflates very quickly.
Karen, first of all, I am a member of a very tiny minority who thinks 2015 will be the peak. Many, and in fact most people posting here, do not see 2015 as the peak at all. They are afraid of simply being wrong so they will not stick their neck out. Also few of them have been studying the production of every major oil producer in the world as I have and simply do not realize the state of world oil production.
However we may very see another ramping up of US production. That will make little difference however as the decline in the rest of the world has already begun. That decline will be greater than any ramping up of US production.
There are other reasons however. Triple digit oil is something the world can not afford for very long. High oil prices take their toll on the economy. A declining economy means fewer people can afford triple digit oil so the demand goes down and so does the price. At that point we start the whole cycle all over again. This is the second time prices have crashed and it could very well happen again… and will if prices increase again.
But with every cycle the cost of producing oil increases. That is the “marginal” price of oil increases. That is the price of producing the most expensive barrel of oil increases every year. However the marginal cost has decreased in the last several months because those higher marginal barrels are simply not being produced right now.
At any rate, as I explained a few days ago, peak oil is about world oil production, not just US production. And by 2016 far more nations with far more oil will be decreasing production than will be increasing production.
Well, the shale players are saying going through cycle like this has made producing oil much cheaper.
But not cheap enough. They are losing money. I bet that in 12 months half of the heavily exposed companies won’t even exist. Or if they do they will be a lot smaller. There’s got to be mergers, buyouts, fire sales, etc. it’s the way this usually works.
Karen, I am also of that minority that agrees with Ron on Peak Oil in 2015. We also share our concern for the environment and our worries for the population bomb. We just disagree on climate change, ha ha.
I come to that conclusion from different evidence to Ron’s which gives me a lot of confidence given the consilience of our approaches. I trust Ron on his analysis and to a certain extent also EIA, IEA, JODI, OPEC and Russia on their production data.
My analysis is from an economical point of view. The economy is both the one doing the extracting and the one using the oil to function and to extract. All the information that we need to know is reflected in the demand, supply, production, storage, price, cost and debt of oil.
Shale oil is the product of high oil prices coupled with huge cheap debt and lax environmental regulations. High prices were the result of increased demand due to the start of a new economic cycle in 2009 fuelled by China’s massive debt growth that could not be met by a limping supply after 2005’s previous peak oil.
But the world is close to debt saturation due to lack of collateral and since peak oil exports took place in 2005-2007, highly indebted countries with a big dependence on oil for their energetic needs (Greece, Cyprus, Spain, Portugal) were shun by the debt markets and went into recession in 2010.
At the economic weakness point of mid-cycle in 2012, the Eurozone and Japan also went into recession, showing not only economic weakness, but also reduced oil consumption.
As the economic cycle enters its last phase in 2013 the global economy starts to cool down and due to shale oil continuous growth, oil supply finally meets demand despite the rest of the producing world outside North America not growing much its supply.
Shale oil continues with the foot on the pedal and overshoots in 2014, crashing down the prices as the Saudis refuse to pay the bill.
Now we have the opposite conditions to 2009. Oil prices are half of what they were and little prospects of coming back up. Debt costs are rising fast as debt/equity ratios are soaring. And the global economy is close to end the economic cycle with a new global recession. A looming market crash will make sure of that.
Since production exceeds demand, the excess is being stored. Eventually we will get close to maximum storage capacity and storage costs will soar. At that point production will be abruptly reduced to match demand. Economy dictates that expensive oil is shut down preferentially.
In 2015 we will have:
-A reduction of shale oil in the US
-A reduction of bitumen oil in Canada
-A reduction by other producers. Venezuela, North Sea and Russia appear most likely.
The others will not be able to compensate even with the timely lift of Iran sanctions.
Then in 2015-16 we will have a global economic crisis that will crash demand and prices for a year or two.
After that we enter to the other side of Peak Oil, where the economy spends more time contracting than expanding a la Greece.
After that comes the day of reckoning for the overindebted world and the final judgement on central bank’s monetary craziness.
The world will become a lot poorer and will use a lot less fuel, so we will never overpass the 2015 Peak Oil.
Hope I didn’t scare you.
“Shale oil continues with the foot on the pedal and overshoots in 2014, crashing down the prices as the Saudis refuse to pay the bill.”
Ron’s intent is clear enough- that the Saudis are refusing to cut production to force up the price.
But they will actually make MORE money if they cut production. I stand by my previous arguments that their basic goal is not to wipe out American tight oil but rather to put a hurting on certain enemies or perceived enemies .
Tight oil will be back as shortly after the price of oil on the market goes high enough and stays high enough that the it can be produced at a profit.
Most of us seem to think that no industry can ever expand without borrowing money from banks but this is patently untrue.
There are plenty of institutions out there with money enough to produce SOME tight oil – money of their own- once they believe producing it is a safe and profitable undertaking. Once the first few hundred wells are drilled with this cash money as opposed to borrowed money then folks with plenty of collateral will shortly thereafter again be able to borrow money to produce tight oil.
Let us remember that the exploration is done, the roads are in, the pipelines are either in or already laid out and ready for permitting, a lot of housing is now in place , the regulatory and permitting apparatus is in place.
Oil is not apt to stay cheap so long the people who know how to run the drilling and tracking rigs all die or retire. All that is missing is the money and the money will be back with when the price goes high enough and stays there for six months or a year.
But they will actually make MORE money if they cut production.
Of course this is true. And Russia could actually make more money if they cut production. US producers could actually make more money if they cut production. In fact if all oil producers could just agree to cut production they would all make more money.
Question: Why would you expect Saudi Arabia to do something that you would expect no other oil producer or producers in the world to do?
Well, the obvious answer is that they’re a member of OPEC, whose sole reason for existence is to reduce oil production to raise prices; and they’ve done it before.
Now, we can see reasons for them to handle things differently. In particular, it looks like they expected supply to rise fast and long enough that there was no point in trying to restrict supply. But, that’s a slightly more complex discussion.
Hi Ron,
The only real reason is that they have done so before.
I don’t expect them to cut since they have not done so after so many months BUT if they were able to whip the rest of OPEC into line – so they don’t do all the cutting unilaterally – while everybody else in the cartel keeps on selling flat-out – there is a SMALL chance that they might cut.
The Saudis CAN cut if they please – their government is free to do as it pleases so long as it is willing to deal with the consequences.
The only other top flight producer in a position to cut enough to really matter is Russia. But the Russians have their nationalist backs up, and are likely determined to prove the BEAR can deal with low oil prices. Furthermore they are probably leery of putting the idea that they might cut off exports for any reason into their customers heads. . I sure as hell would not want to be dependent on Russian exports if I were a German.
Now as far as Russia cutting production goes I will hazard a guess that Putin has the muscle to put such a policy in place if he really wanted to. But I don’t think there is any likelihood of his doing so.
My impression is that the Russians are not all that hard up and that they possess the means and the skills necessary to keep their own economy functioning bootstrap style. Russia is a VERY rich country in terms of resources. Russians are also used to hard times.
So far as the USA is concerned I don’t believe it is politically possible to cut oil production in this country by any sort of direct political action.
The people would never stand for it and our national politicians would rather eat feces with a spoon in my estimation than to propose such a policy.
A policy intended to result in production cuts, such as tightening up the lending standards might help some. That sort of action would be politically palatable.
Maybe they’ll cut back after the summer heat subsides and they don’t need the gas to generate electricity?
A potentially good reason why they will not cut has just occurred to me. Of course it might also be a real stinker.
With oil in storage being so plentiful, and the American tight oil industry able to ramp back up very quickly , given that the men and machinery are readily available and all that, maybe they think they CAN’T force the price up quickly.
If you are in charge of men , it is almost always better not to issue an order that you know will not be obeyed.
In the case of the Saudis cutting production, it could be that they are thinking they cannot force the price up IN FAIRLY SHORT ORDER. The consequences of failing to achieve a quick success would be proof positive in the eyes of the world that they are no longer in possession of the levers of power.
An unsuccessful effort would REALLY cost them in terms of international status.
And of course if it succeeded then it would also really put the wind back into the sails of some of their enemies dependent on oil revenues.
They might even have quietly arrived at the conclusion that a return to high oil prices in the short term will wreck the world economy which is already in very poor shape – and that the consequences of a major world economic depression would be worse for them than spending some of their accumulated assets.
Most likely there are cliques inside the Saudi royal family, and inside the advisors they rely on, that are pushing contradictory paths or responses. It might be impossible for even the senior princes to know for sure what they will be doing six months or a year down the road, depending on what sort of deals they cut with each other.
Some individual or clique with little judgement and less experience might wind up making important decisions. Yogi sez predicting is hard.
Dunno. Looks to me like there’s 200 mmbo in excess storage. If the Saudis get OPEC to agree to a 1 mmbopd quota cut for ALL it may work out.
Perhaps the Saudis saw the globalization of fracking as a threat, given the sharp rise in the U.S., and think it worthwhile to spend a year or two trying to kill it
The damage done to past and future investment returns given the greater uncertainty, the lack of current investment in frack equipment that could have been flooding the world looking for something to do, once the cost is sunk, maybe means they win for a few more years after prices rise
Though as many have said, simply not cutting doesn’t mean they are doing anything really
Though the recent increases if real and sustained are different
Any theory has to take into account two facts:
– That the Saudis are actually increasing production, something that was quite unexpected. They have therefore the intent of losing more money.
– That the Saudis already went through an oil glut and cut production with disastrous consequences for them. It took them many years to recover.
I would say that the Saudis learned their lesson. A lesson that the US shale has not studied.
The Saudis being an entity, a single massive family controlled from the top, can learn and act accordingly.
The tight oil industry is composed of lots of individual companies each out to serve its own best interests. No individual company is in a position to look after the interests of the industry as a whole.
This is a classic “tragedy of the commons” scenario.
The tight oil industry has done exactly what traditional economists would have predicted and is suffering exactly the same consequences.
It expanded past the size at which it could profitably sell its product and now is shrinking. It will continue to shrink until the it can produce profitably at some level and some price.This basic broad brush scenario is of course complicated by easy money and other bigger producers able to ”sweat” the little guys – courtesy of old JD Rockefeller who ”sweated” one little guy after another building his empire.
I have been watching the Christmas tree industry for some time expecting it to grow past the point at which trees can be profitably sold except by large mostly mechanized growers in located in places where land is dirt cheap.
The local ”cut your own” market is already saturated with prices of trees on the stump falling quite a bit. When one guy starts making money in such a business there are ten others watching him and all ten may decide to get into the same business. If there is market enough for only two of them….. well eight will go under.
Hi Javier,
Do you have any opinion about the impact on air transportation industry right after the global peak oil and following recession? Also I am wonder how serious the imminent global economic crisis is after 2015-2016. Thanks.
Kim,
The air transportation industry operates on very narrow margins since an important part of it converted to Low Cost. Countries that are already past Peak Oil like Spain had seen the number of flights reduced and a new airport that was built right before the crisis never opened for lack of flights. A global crisis will reduce the demand for flights and holidays affecting an industry that is already fragile.
A global crisis will be dead serious. The world is a lot more indebted than in 2008 and the markets have been inflated by FED policies beyond proportion to the point that market valuations are above those of 1929 and 2008 and almost on par with 2000. We are already seen the effects of a market bubble blow in China that still has not affected the rest of the world, but if China’s economy enters in tail spin I don’t think the world would take it lightly. Europe is a mess and Japan is hurting from the failure of Abenomics. Unemployment is high and labor participation low in many OECD countries. The international banking system has been strengthen, but many banks continue to fail stress tests even with conditions milder than those that a global crisis would create.
We could say that a big part of the world has not recovered properly from the 2008 crisis, and that could be the norm from now on. Each crisis could start from a lower point than the previous one.
There’s an old saying: “How do you make a small fortune by investing in aviation? Start with a large fortune…”.
That said, airlines are making a lot of money right now: they’ve re-built their business model around $100 oil, and oil is now a lot cheaper. If oil goes back up to $100, they’ll be ok.
I don’t think their problem is going to be an increase in oil price, but a reduction in customers numbers. Affordability becomes a problem when the economy does poorly and a lot of people is out of jobs.
”With their healthy cash reserves the majors can hold out for higher prices, even if they’re years away. The same can’t be said for many of the smaller companies drilling in the U.S. shale patch. Shale producers had bought themselves time by cutting costs, locking in higher prices with oil derivatives, and raising billions from big banks and investors. Many cut drilling costs by as much as 30 percent, fired thousands of workers, and renegotiated contracts with oilfield service companies. “That postponed the day of reckoning,” says Carl Tricoli, co-founder of private equity firm Denham Capital Management.”
”Over the first half of 2015, U.S. shale producers were able to raise about $44 billion in debt and equity, according to UBS. As oil prices keep falling, investors are losing their appetite for risky shale debt. Bonds have become more expensive and are laden with more onerous terms, including liens against drillers’ oil and gas assets. More than $24 billion of the $235 billion in debt owed by 62 North American independent oil companies is trading at distressed levels, meaning their yields are more than 10 percentage points above U.S. Treasuries.”
http://www.bloomberg.com/news/articles/2015-08-06/oil-prices-shale-producers-face-reality
More than $24 billion of the $235 billion in debt owed by 62 North American independent oil companies is trading at distressed levels, meaning their yields are more than 10 percentage points above U.S. Treasuries.”
amortized into OPEX
Hi all,
Been following this site about a year now and find it very education and informative. Thanks for your thoughts.
Been long on oil since March 15, but never in my worst case scenarios saw oil going back here to this level around 43 WTI 48 Brent. To my questions. How accurate are BH rig count numbers? As we have seen the EIA numbers are very guessish and have some delay on it as I understand. Is BH rig numbers the same way?E.g. can the reporting of the rigs be trusted US and international and are they up to date? Whats you thoughts? My second question the oil price seams very US focused and a lot of price action comes in the US trading hours. What data are there from an international production perspective that can be trusted and accurate on a weekly basis such as EIA and API? OPEC is only monthly?
Thanks again and I really appreciate all the article and most of the commentary.
Amatoori,
BHI rig counts are reliable
I agree about the US focus. Why do US inventories and rig counts move the market. We never hear about Russian inventories, Canadian inventories, etc.
I have put forth the idea that US inventories rose after the price crash because US refiners did not mind storing as much cheap crude as they could. Without knowing world inventories, how do we know for sure there is a huge oversupply based on US inventories?
U.S. accounts for more than 20% of global oil consumption, more than 80% of the increase in global supply of C+C+NGLs from 2008 to 2014, and most of the increase in OECD oil and product inventories. U.S. inventories are well above the 5-year average, while European inventories are within this range.
All in all, the U.S. is the country that has the greatest impact on the world oil market
OECD End-of-Month Industry Stocks
So, usa and europe inventoriea stable last few months. Where are the 3 mm bbl day excess ending?
SS – FYI I was out of pocket for a couple of days, but answered some of your accounting questions above on your comments from yesterday.
This site is far and away more reliable than BH, but it requires subscription:
http://www.rigdata.com/counts_rankings.aspx
Nobody can categorically say what the actual rig count is without a helicopter and lots of fuel. There is a sense in the real oilfield that BH is going down in a few months and everyone with BH is going to the house. On a service related basis their services have become dismal. I am fond of BH and hate to see what has happened to them, but I don’t trust them anymore, period. I am not the only one. For the sake of the oilfield, I hope politicos shoot down this merger thing with Halli, in the interest of competitive pricing.
Mike
Mike, I compared BHI rig count data for the Bakken and Eagle Ford with the numbers from local sources, and they were very close. The only difference is that BHI has a stricter definition of active rigs, which does not includes rigs moving from one location to another.
Can you tell us how the numbers from Rigdata differ from BHI?
Thanks
Mike and Shallow
I have not direct knowledge of the BH rig count but….I have a friend who is a multi decade employee with BH in the wireline services.
He is very suspicious of the BH rig count because he knows what the drill bit salesman are reporting for sales.
And he is going to the house soon……
Thank you, John, for sharing that. I am also suspicious of the BH rig count and always have been. I think what was once a terrific company has just been taken off hospice care and is waiting to die. I am sorry for your friend and 200,000 other men and women going to the house because of the failed business model of shale oil. It was not much of a revolution was it? It was an uprising put down by ignorantly flooding the market with 4.5 million more barrels of oil per day. They charged up the hill, tripped over their own feet, and now can’t get back up again.
In Texas there are supposedly 125 rigs still running in the EF, according to BH. No way.
Alex, Rigdata got dumped in my office 3 months ago, along with other luxuries I can’t afford anymore. Historically the difference in the two reporting entities has been 5-8%. I could call in a chip somewhere and confirm that, but I don’t need to. A 6 rig swing from week to week is meaningless. It is not an indicator of any kind of trend that needs modeling or analyzing. Drilling rig “efficiency,” (as in time to drill shale wells) is NOT the reason that LTO production is not falling yet, IMO.
Mike
Mike,
I’m just trying to understand what is wrong with BH rig count data. Do you think they are intentionally overstating the number of active rigs in order to dump oil prices? Why would they do that?
BTW, I agree with you that a relatively small increase in rig count is not a sign of a rebound in LTO production
I don’t think there is anything wrong with BH data, Alex. I simply think there are perhaps some more reliable sources and I gave the person an example. I think it is difficult to track total rigs working, actually, and as you have suggested there are matters of definitions to consider, for instance, being mobilized, mobilized, cold stacked, idle that sort of thing. I am worried about BH going forward.
I drove the length of Karnes County 10 days ago, east to west, right down the middle of the EF interstate. 63 miles, thru EOG’s hood, Marathon’s, Pioneer’s, Murphy, BHP; three drilling rigs is all I saw. I was shocked. I drove past H&P’s new S. Texas yard; they could not get another drilling rig in there if they tried…they are now renting land nearby just to have places to stack them.
I agree with your demand assessment, below, completely. So does OPEC. Oil prices fell for one reason only.
Mike
I wish they reported Meters drilled per time period along with rigs actively deployed.
Hi Mike,
I don’t have the latest data from the RRC on wells completed in the Eagle Ford for the month of July.
In June about 192 wells were added to the “oil schedule” from June 1, 2015 to July 1, 2015.
If your guess that only a couple (say 10 ) rigs are running in the EF play, an your guess that the frack-log is only 300 wells waiting on completion, then by September the frack-log would be close to zero and we would see a steep drop in EF output.
What would your guess be as to the correct number of oil rigs turning in the EF play in August 2015? Would it be 50, 75 ? Clearly you are implying that the BH count is too high.
Link to EF info page below:
http://www.rrc.state.tx.us/oil-gas/major-oil-gas-formations/eagle-ford-shale/
I did not say there were only 10 rigs running in the Eagle Ford, Dennis. A lot of people currently believe fewer than 100. I did not say there were 300 wells waiting to be frac’ed, Dennis. (??!!). I don’t know what the frac back log is. I am pretty sure I know what the frac back log is for the biggest EF player in the trend and that would suggest to me there are not near as many wells awaiting frac’ing as what people want us to believe. Wells are getting frac’ed. They need the money, and they need to book reserves. THAT is the logical, rational explanation for flat production thru 2015 so far, NOT drilling rig “efficiency.”
Though I am inclined to believe what real people tell me, and what I see, than the current misinformation on the internet, that’s me. There is little reason to model my observations. Things will be a whole lot more obvious to everyone in another 90 days.
Mike
Alex, BH US onshore @7.31.15 was 835. Rigdata Radar US onshore was 804. Not atypical at all.
Mike
Thank you, Mike.
Very interesting. I don’t think BH is overtly cheating . Most probably, Rigdata has a stricter definition of active rigs. For example, they may exclude rigs drilling wastewater wells?
Geopolitcs and oil prices:
http://journal-neo.org/2015/08/08/us-s-saudi-oil-deal-from-win-win-to-mega-loose/
He knows nothing.
I just finished reading this link.
Does anybody know anything much about this Near East outfit and or the author? This is my first time encountering this site and this author.
He makes some point blank allegations that may or may not be true. I have suspected all along that some of them are true.
Some of his analysis is consistent with my own thinking. Some is not.
I don’t think Washington aka the Obumbler administration really gives a shit about the low price of oil compared to the overall state of the economy. The Fed’s actions when it comes to zero interest rate money etc WERE NOT put in place to save the tight oil industry but rather to stimulate the larger economy.
The last paragraph or two lead me to think this guy and this organization may be rather obvious about pushing an agenda of their own. I don’t necessarily agree with our doing away with the Fed in favor of national bank but I am not advocating such a course.
Obumbler…
He is probably a better prez than the idiot the repugnants ran against him but the Obumbler he is nevertheless. For instance – his Justice Department did not IIRC prosecute a single top floor banking executive although anybody with an iq over seventy knows hundreds of them should have been jailed.
His security apparatus apparently is so inept it didn’t even know his own secretary of state was conducting the nations diplomatic business on a a personal email server.
The Ocare rollout is probably going to go down in history as the BIGGEST clusterfuck in the history of computing and data management.
I could go on a while.
BUT I still maintain he is no worse than other recent presidents and probably has done a better job than whats his name would have.
And God help us if Palin had ever gotten into the White House.
I credit the President for many (not all) things he has done to date, given what he has to work with: 1) Congress, 2) Media, and most importantly, the American people. Stupid is as Stupid does.
I particularly am disappointed with two big things:
The continuing wiping of the ass of the national security state with the wadded-up Constitution…Those who sacrifice liberty for security deserve neither.
The lack of prosecution of the robber baron slime financiers and their collaborators (including captured/Ayn Rand free market ueber alles brain washed government ‘regulators’) who drove the economy into the ditch from 2006 (actually the groundwork was laid years earlier) through late 2009. Golden parachutes for the barons, the common folk holding the flaming bags of shit. Liberty AND JUSTICE for ALL. And the continuing inadequate fundamental structural regulation of the finance sector…what has happened in 2007-2009 has happened before and will unfortunately happen again…because of the Golden Rule (those with the gold make the rules).
I am now about one quarter the way through the book ‘After the Music Stopped’ by Alan S. Blinder…someone either on this blog or on Our Finite World recommended this book some time ago..I bought it and only recently started reading it…so far I find it educational concerning the various financial vehicles and enlightening on how and why the crash happened. I am only 1/4 through, so I can’t speak to my opinion about the rest of the book yet.
http://journal-neo.org/about/
Their address is in Moscow.
Regarding the Rolling Stone Article Ron linked at the end of his keypost…
Interestingly,
I recall the
Soylent Oceanographic Survey Report, 2015 to 2019
concluding that the oceans were dying.
Perhaps we have a decade or two or maybe three longer?
Oil Prices: The argument for a “V” shaped recovery
http://www.oilandgas360.com/oil-prices-the-argument-for-a-v-shaped-recovery/
http://www.oilandgas360.com/oil-prices-argument-for-a-v-shaped-recovery-part-two/
So this is their punch line? The argument for a “V” shaped recovery?
I would bet my money on OPEC. No recovery for the rest of the decade. After that we will see what is left of the US shale industry and other expensive producers.
OPEC doesnt have the legs to run at low prices for a decade. Nor do they have the organizations or economic drivers to increase production. I suppose you do realize Venezuela is in chaos, in part because the government is trying to play communist, in part due to corruption, and in part due to low oil prices? By the end of the year they should be down to close to 2 mmbopd.
The rest of the decade is less than half a decade now. It is not a problem of increasing production but of increasing demand. So far after over six months of half price demand has not increased its rate of growth that continues depressed. This is the major mystery of the current oil conundrum. ¿WHY HAS NOT OIL DEMAND SHOOT UP WITH HALF PRICES?
The answer to that question is also the answer to why oil prices are not going to go back up to 100 $/b anytime soon.
“So far after over six months of half price demand has not increased its rate of growth that continues depressed. This is the major mystery of the current oil conundrum. ¿WHY HAS NOT OIL DEMAND SHOOT UP WITH HALF PRICES?”
Really?
Year-on-year increase in global oil demand (mb/d)
Source: IEA Oil Market Report July 2015
AlexS,
You are looking at the tree, not at the forest. And it is a fake tree, since part of it is estimates and the other seasonal change. No doubt part of IEA attempt to disguise what is actually happening in the oil world. Now let’s look at the forest with IEA actual data, without estimates.
While supply is clearly accelerating, demand is not, and should be growing like crazy with half prices. The contrast is reflected in inventory growth.
Houston, we have a problem. The economy is not growing despite halving the price of crude oil.
You said that demand growth has not accelerated in 1H15, despite 2 times lower oil prices. That is wrong, as demand increased by 1.6mb/d vs. the same period of last year.
What seasonal changes are you talking about?
My chart is showing year-on-year growth, which means that quarterly numbers are compared with the same quarters of last years.
The fact is that the current glut in the oil market is due to exceptionally strong growth in supply, not weak demand.
Demand growth was weak in 2014, but this year it has returned to multi-year average levels
Pardon me if I fail to see your argument, AlexS
Are you trying to say that that bump in the last month of data (less reliable) actually demonstrates that demand is strongly responding to low oil prices?
Don’t be ridiculous. The data clearly shows that demand is barely responding to decreased prices if at all. We had more demand growth with oil above 100$.
By the way, this goes against Economy 101, that says that any essential resource whose price is substantially decreased in the absence of supply constraints should see its consumption substantially increased.
I am amazed that most people not only don’t see this, but even discuss it. I guess I shouldn’t as there are lots of examples of people failing to see the obvious.
Hi Javier,
Very basic mistake. In economics, demand increases (technically the quantity demanded increases) if we assume that all else remains equal (ceteris paribus). That assumption is never valid in practice for the macroeconomy.
The total oil consumed for the world is not correlated with the oil price to any degree if you look at the data, the level of oil consumption is mostly correlated with World GDP. AlexS is correct, the explanation for the fall in prices is that oil supply grew faster than oil demand.
When demand grows faster than supply so that the oil market is in better balance, then oil prices will rise.
Both the IMF and World Bank predict that GDP will grow between 2.6 and 2.8 % in 2015. They might be wrong, but I will take their analysis over yours in this case.
AlexS is also very sharp.
Hi Dennis,
You are missing the point.
AlexS and I were not discussing the cause of the fall in oil prices. On that we both agree. We were discussing the response of the demand to the low prices. AlexS questioned my assertion that halved prices have not significantly increased oil demand so far. I think that I have proved that I was right.
I agree that if/when the demand and supply balance the price will go up.
Regarding global GDP projections, I won’t get into that except to say that in 2007 the IMF projected a 4.8% global GDP growth for 2008. Those projections don’t have much intrinsic value.
“By the way, this goes against Economy 101, that says that any essential resource whose price is substantially decreased in the absence of supply constraints should see its consumption substantially increased.”
Sorry you need to move on to economics 102. Oil demand is inelastic in the short term. It takes time for oil demand to both soak up extra supply and react to under supply. People don’t suddenly plan 2 week vacations out West, or buy new 1000hp SUVs the moment oil prices collapse. They also don’t buy econoboxes and move next door to work the moment prices sky rocket.
People can and do react over the longer term. They move, buy new cars, join carpools, etc. Hence, the U.S. economy can handle much higher priced oil in 2015 than was possible in 2007. Given low prices long enough U.S. consumers could revert to 2007 oil price sensitivity levels; however, CAFE requirements are currently pushing towards lower oil price sensitivity.
Thanks Alex.
Depletion never sleeps.
Barring the world wide economy being in the nursing home from here on out , the price of oil will go up well before the end of the decade.
And we will find that if it stays down a whole lot longer most of the mineral rights and infrastructure in places like North Dakota will belong to the majors before prices go back up.
This is an extremely good and well researched article. I did not realize that yesterday when I posted about it. But now that I have read the article, both of them, this guy knows what he is talking about. Though it remains to be seen if prices will recover.
People have been giving that Brazilian ethanol cost for two decades, sometimes lower, and yet the world continues to not be flooded with Brazilian ethanol
It competed freely with gasoline at a hundred dollar oil for years and yet never really exceeded a trickle
There are import restrictions into the USA and Europe. They subsidize local biofuel producers who have become a very powerful lobby.
In other cases, the ethanol markets at insufficient price to justify the conversion to an ethanol mix. What I don’t get is why nations like Colombia don’t encourage ethanol. They have the land. Maybe it’s the FARC limiting access to the Llanos?
there have been different ones at different times, mostly to favor local US ethanol over imports. They have not, however, generally had any impact on importing ethanol to compete with gasoline, which was possible for a few years in the us
generally speaking the cost of ethanol in brazil is a lot higher than people assume, though it does have some advantages versus the US and other markets
This make any sense at these prices? Or do they just want oil lower to hurt Russia?
http://www.argusmedia.com/News/Article?id=1069130
Drawing down 80 million barrels over 7 years — that’s nothing.
Selling such small amounts of oil over such an extended period of time would have no significant effect on oil markets or on Russia or any other country.
This proposed SPR sale is a political trade off which may or may not pass. Somebody is calling in favors which will be paid for with money raised by selling a few million barrels of oil here and there for a few years. I don’t know the details but honestly I don’t have to make this judgement. Such deals are quite common in congressional politics. Backs get scratched.
Sometimes this is a good thing. Medical research is good.Every body is at risk of getting sick. Bridges to nowhere not so good. The benefits of such spending flow almost entirely to the contractors and maybe a few local people.
I think the oil would be sold from 2017-2019 in small increments, and congress hopes to receive $85+ per barrel.
March of 2014. ” To Suprise Russia with a release from the SPR” http://www.reuters.com/article/2014/03/12/us-usa-energy-reserves-idUSBREA2B12V20140312
Puerto Rico Debt Crisis:
http://www.nytimes.com/2015/08/09/business/dealbook/pain-of-puerto-ricos-debt-crisis-is-weighing-on-the-little-guy-too.html?hp&action=click&pgtype=Homepage&module=second-column-region®ion=top-news&WT.nav=top-news
Gail Tverberg had an article on islands economies a month ago.
What Greece, Cyprus, and Puerto Rico Have in Common
Greece is also afflicted with the island economy syndrome since it has over 200 inhabited islands.
She’s right on one thing: being dependent on expensive imported oil is bad for your economy. Better to transition away from expensive, risky, dirty oil, ASAP.
Im convinced now this whole thing is Geopolitical. Spare capacity is record low. World demand is at record highs. This thing is serious. Obama was on an HBO special recently talking about making it more expensive for Russia to do business. http://thesaker.is/the-new-russian-naval-doctrine-one-very-important-sentence/
Obama on raising the costs on Russia:
http://www.politico.com/blogs/media/2015/06/obama-criticizes-russian-staterun-media-209492.html
Ukraine is the pivot for controlling the world island in the eyes of those hellbent on global control.
Mackinder theories still run American and British foreign policy.
http://www.sott.net/article/276668-Geopolitics-of-Empire-Mackinders-Heartland-Theory-and-the-Containment-of-Russia
Do you really thing China’s demand is collapsing when their per capita consumption is only 2 bbls?
https://www.energyvoice.com/oilandgas/84607/china-oil-imports-rise-to-record-as-private-plants-boost-buying/
MMercury,
Actually import volumes in China are at record highs not only for crude oil, but also for coal, natural gas, iron ore…. Although many import prices came down by more than 50%, imports just declined 8% yoy. The Chinese economy is on the cusp of a strong boom with rising imports, higher house prices and increasing growth.
Oil demand from China has not reduced and therefore is setting new records every other month. The question is the same as with global temperatures, the rate of increase has come down a lot, so China’s oil demand is growing SLOWER. What will happen next is everybody’s guess.
Javier,
The numbers in your chart go just to May 2014. 2012 to 2014 has been a period of high oil prices and thus also low oil products consumption around the World. However oil prices have come down significantly over the last year and this triggered substantial oil consumption growth in China. According to the latest numbers from the IEA report China oil products consumption has surpassed 11 mill b/d in April coming down a little bit to 10,7 mill b/d in May 2015. This is 10% higher than in your chart and coincidences with a healthy economic growth in China.
Any evidence of this?
You cannot compare IEA numbers with this graph numbers. That’s an apples to oranges comparison.
Let’s see about that substantial growth in oil consumption in China with IEA numbers?
Hmm. I don’t see it. (continues in next post since I have one more figure)
Now, IEA numbers for 2015 may not be that accurate as they are based in forward estimates, so let’s look to electricity consumption, since both oil and electricity are inputs to the economy and they usually move in parallel:
Oops, electricity consumption in 2015 is going substantially down, not up. It doesn’t look like Chinese economy is substantially increasing its energy consumption. I guess I am right then, and China’s oil demand is growing weakly.
US demand hitting records too.
http://www.reuters.com/article/2015/07/10/usa-refining-kemp-idUSL8N0ZQ1SG20150710
MMercury,
On the surface the US economy might be resilient. However, the US high yield bond market is on the brink of collapsing due to many shale loans under water. High yield average shot up this month from a low of 5,79% in January 15 to currently 7,21%. Loan volumes in August are down 54,78 bn to just 7,7 bn. If this persists the US economy will be in one of the worst recessions ever very soon.
Clueless,
Thanks for your answers to Shallow. I am of the opinion that to understand the success of the LTO industry, one has to understand the basics of oil & gas accounting.
Looking at the financial statements of several of these companies, I am again surprised by the low DDA costs, compared with the net property and equipment assets. Based on actual wells costs, estimated EURs, and actual well production profiles, I have estimated DDA costs myself, and always came up much higher than the reported costs. If I am right, than these lower reported DDA costs are front-loading profits, which would give a major incentive to keep drilling, in order to keep relative DDA costs low.
I have thought about a few factors that would explain this difference. I have tried to look online for explanations of them, but could not really find them, so I hope you can shed some light on these:
1) Amorization over BOE reserves. Suppose that, as Mike and others have stated, a well produces relative more oil in the first 5 years, followed by more gas. Oil is still more profitable than gas, while gas take a relative large part of the reserves, due to the 6-1 translation (BTU-content). So, is amortization of all capitalized well costs done as a unit-of-production over oil and gas separately, or over the reserves in BOE? The latter, which I belief is the case, would clearly lead to a lower initial amortization.
2) Amortization over the well life. I was wondering over what time frame the amortization of capitalized drilling costs would occur. I assume it is over the life of the well, but without any established data on the viability of LTO wells, how are these well lives established? An optimistic operator (= the general LTO operator), may use a 50-year well life, in order to calculate the EUR over which the amortization occurs. Is this correct, or is this done more conservatively? Also, over such time frame, I belief it makes sense to apply a discount factor, to account for the time-value of money, and for uncertainties over such large time horizons. Is it correct that no such discount factor is applied?
3) Amortization regardless of extraction costs. As Shallow Sand has often explained, unit extraction costs are increasing over the life time of a well. Consider for example a well that is just breaking even on the well level in years 10-50, while still producing say half of the reserves during that time. Is it correct in this example that amortization in no way considers the increasing unit extraction cost, and that the total DDA costs in the first 10 years are the same as in the later 40 years?
4) Amortization by well or field. Is amortization of well development costs done by well, or over a larger area (say field or country)? If the latter, does it not again include mixing apples and oranges (oil and gas wells), where gas wells may have much larger reserves in BOE terms?
As an example, consider a case where I have 1 oil well (with reserves of 100 BOE), and 1 gas well (with reserves of 200 BOE). Suppose in year 1 I produce 1 barrel of oil for the oil well, and from the gas well I produce 1 BOE of gas. In this case I produce 2 BOE, vs the total reserves of 300 BOE, so only 2/300 of total development costs are amortized, even if say the oil well has cost me twice as much as the gas well?
With these issues, is there a difference between “full-cost” vs “successful efforts” accounting?
Enno Peters,
At the end it always boils down to the most important issue in any business: What is the management saying or planning and what really happens out there in the real world? RRC for instance has indicated that they especially care about shareholders. The reality is that the share price went down by two thirds in the last year. RRC is not the only company destroying other peoples money and lifes. How long can this go on until people wake up?
Heinrich Leopold,
I don’t know RRC. I just saw that all the last insider transactions were major sales of their stock at much higher prices; typically not a good sign. To be fair, in general, a one year stock price drop does not necessarily have to do something with underlying value.
I think an important distinction is that, if the above issues I raised are true, it would mean that in a big way presenting a false view of reality is a core part of this business, and condoned by the accounting profession and regulators. In my view that must have a big impact also on the integrity of those involved in the business: if you see cheating all around you, supported by the people who should oversee it, and people benefitting from it in a major way, then there are several human biases that cause this behavior to spread, as Charlie Munger has so well explained.
It would also mean that part of the P&L statements are better ignored, and replaced by an alternative, like Shallows use of the PV10 instead. But it does make one wonder if that is enough then, as a company where integrity is damaged typically generates less value than even a conservative estimate.
Enno. Good posts. Now factor in Rune’s point about inflated EUR.
How do those affect DD&A? How about PV10?
GAAP earnings re shale are very misleading. CLR has GAAP earnings in first half 2015, yet burned over one billion cash.
Enno,
Thank you for your reply. It is not only about RRC. I have mentioned the company as they explicitely pride themselves to take care about shareholders. It is about LINE, WLL, QEP, COP, GDP, EOX, EOG,even XOM……, who have lost huge amounts of money and presenting rosy statements as they want to get the money from the last naive man in the world. No matter which accounting standard or method, something does not add up here.
Enno -First, let me state that I retired last century and am now out of touch. Second, unfortunately, with accounting, there are usually several acceptable methods with many items. Whenever a company chooses one of those acceptable methods, it becomes their GAAP method of accounting for that item and cannot be changed without the blessing of the auditors and without showing what the prior several years would be using the “new” method instead of the “old method” as previously reported [unless “immaterial”].
With that being said, several statements. Regarding, the basics of oil and gas accounting. Unfortunately, people go to school and/or have years of on the job training in the industry to fully understand the basics. I know of no other industry that, in general, pays so much for accounting jobs. [Perhaps, Google, Apple, Facebook, etc.]
With respect to successful efforts vs. full cost, I believe that you can research articles on the internet that discuss the follow on accounting effects of choosing one or the other [in addition to explaining the fundamental immediate difference profit/loss impact]. You probably do not want to do that, but I do not know your passion for accounting.
In my opinion, despite having computers, the amortization of capitalized costs will generally not be on a per well basis. Most likely on a field or area of interest basis.
Way back when I was involved, there was always the 6/1 ratio of gas to oil on an energy basis. But, from an economic basis, it almost never has worked that way. [My opinion – that is primarily because you could not put gas into an auto or an airplane or a generator, etc.] With that being said, I believe that many would be using Total Proved Reserves from a field on a BOE equivalent basis [and remember that in addition to oil and gas, there is the possibility of many other liquids products]. So, if total proved reserves are 1,000 BOE and during the year 100 BOE are produced [of whatever nature] the amortization would be 10%. Certainly, I think that that would be a rough approximation.
I will try to point out some of the futility in analysis [in my opinion]. Suppose a company spends $1 million to obtain 1,000 BOE of proved, developed reserves in year one. And the next year spends $5 million to obtain 1,000 BOE of proved developed reserves. In that second year it produces 100 BOE of the reserves found in the first year. The amortization is likely to be $100,000 and the ending proved, developed reserves on the balance sheet will have $5,900, 000 capitalized at the end of year 2. Unless you are there doing the books, I do not know how you could ever figure any of that out. [This example isolates information from 2 sources of reserves. A large company may have hundreds of sources of reserves combined in their calculation.]
Disclaimer. I am so distanced from current accounting, that I am merely somewhat good for a historical perspective.
PS: It is interesting to see some of these companies who in the past [late 1990’s with gas, 2008 with oil at $30/40 at year end in 2008 (when the SEC used year end value, not a rolling 12 months), and again this year have written off Billions of $ of their oil and gas assets due to “valuation” and now say they can be profitable at $40 oil. Right, we can all be profitable if we write off a large portion of our costs in one huge swipe. So future amortizations are half of what they would have been.
Clueless,
Thanks for your explanations.
I have small questions.
If a company takes impairments/writedowns (these are normally non cash), how does that affect its assets and equity?
With costs does that include investments/CAPEX?
rune – Suppose you have a $400,000 personal residence on your personal balance sheet as an asset. It is what you paid cash for it 8 years ago in Las Vegas. A reputable real estate appraiser currently appraises the house at $250,000 because that is now what similar houses are selling for in your area. So, when you go to the bank for a line of credit, you bring along your personal balance sheet that now shows that you own a house worth $250,000. Your net worth (equity), your assets less liabilities, has just dropped by $150,000. You had a non-cash reduction to your asset, and a like amount to your net worth (equity).
Oil company is in the same boat. Only, they do not own a house, they own an oil and gas asset, which is shown on its balance sheet as an asset – investment in property, including all CAPEX associated with it. And instead of an appraiser, they use the SEC PV10 calculation which results in a lower current value than their capitalized costs. They reduce its amount on the asset side of the balance sheet down to the PV10 value and their equity on the other side of the balance sheet is reduced by a like amount.
Yes. Thank you.
I do wonder about two things regarding PV calculations for shale.
The first Rune brought up. What EUR is being plugged in?
Second, one I have brought up, what OPEX figure is being plugged in?
By now, seems the engineering firms should have some good histories, or a least getting better.
EUR of 800K v 400K and holding OPEX flat on a per unit basis are two things I wonder about. I assume reserve reports are public data for public companies. Also Lease Operating Statements?
Just remember that almost all shale companies will likely have PDP PV10 or Pv9 of half or less of what it was one year ago. Add on any EUR that may be inflated or OPEX that may be too low, makes things even worse.
Now, remember that 60% of PDP PV10 or PV9 is about the maximum a bank will loan on.So only 3 US public drillers active in the Bakken, being ExxonMobil, Abraxas and EOG, would be able to have Banks hold all of their debt. Yet COP just issued $2.5 billion of bonds at 1.9% interest.
I think there are financial issues in US oil and gas production that have never been seen.
Clueless, thanks for all your comments, much appreciated.
This link is essential reading for any body who wants real insights into modern international power politics.
English Site>World>WikiLeaks>SPIEGEL Interview with WikiLeaks Head Julian Assange
Many oxes getting gored.
Stone Energy has a share price of 5.19 with earnings of -9.94 per share.
Swift is 56 cents per share and is losing 24.10 USD per share. 44 .54 million shares, you do the math.
Swift had a price as high as 12 dollars per share.
Sandridge, same story. Comstock, another sad tale of woe. It doesn’t end, the goring goes until hell won’t have it.
Might as well throw in the towel.
What can go wrong?
110 oil causes too much economic stress.
The chickens came home to roost. What goes around comes around.
A black swan event occurring right freaking now.
You know what they say in the Russian Army, toughki shitski.
‘Frack now, pay later,’ top services companies say amid oil crash
http://www.reuters.com/article/2015/08/07/us-fracking-halliburton-schlumberger-nv-idUSKCN0QC0F220150807
Business is so tough for oilfield giants Schlumberger NV and Halliburton Co that they have come up with a new sales pitch for crude producers halting work in the worst downturn in years. It amounts to this: “frack now and pay later.”
The moves by the world’s No. 1 and No. 2 oil services companies show how they are scrambling to book sales of new technologies to customers short of cash after a 60 percent slide in crude to $45 a barrel.
In some cases, they are willing to take on the role of traditional lenders, like banks, which have grown reluctant to lend since the price drop that began last summer, or act like producers by taking what are essentially stakes in wells.
At Halliburton, some of the capital to finance the sales will come from $500 million in backing from asset manager BlackRock, part of a wave of alternative finance pouring into the energy industry that one Houston lawyer said on Thursday allows companies to “keep the engine running.”
When its second-quarter net profit tumbled by more than half a billion dollars to just $54 million, Halliburton’s Chief Executive Dave Lesar told analysts the company needed to find new revenue. The BlackRock money, he said, would allow Halliburton to “look at additional ways of doing business with our customers, different business models, push beyond where we have been today.”
Halliburton declined to provide additional details, including how many customers it has for its financing program, citing confidential dealings with clients. Schlumberger has said it has eight onshore refracking clients in North America.
Another variant, which Halliburton has considered and Schlumberger has pushed, is one in which the companies cover up-front costs for a producer and then get a piece of a well’s performance.
The services companies have made these special offers to producers in a bid to roll out the new business line of refracking, in which existing wells are worked over to lift output.
………………………………………
Schlumberger Chief Executive Paal Kibsgaard has acknowledged producers might be unwilling to give up output from a well they think will be lucrative, and instead choose a traditional services contract.
“It’s just a reflection of do they want to capture more of the value themselves or would they like to outsource all the risk and potentially much more of the upside to us?,” he said on the company’s July results call.
This is no doubt the item Shallow Sands was quoting above that set off the discussion about this being new or not new.
It would appear to be new, given it is the suppliers orchestrating the arrangement. Not too typical for a company to seek ways to not to get paid on time.
Blackrock’s $500M isn’t going to go very far. It is a baby bailout, but it’s too babyish and odds would seem low it’s what Blackrock thought that money would fund.
It also explains somewhat why some shale companies are reporting efficiency and others are not. Not all were using the suppliers Blackrock funds.
They are looking for a way to print oil to keep the shale industry from being wiped out, not from a shale industry perspective — from an each individual executive job perspective.
But systemically this is a direct affront to Russia and KSA. From their perspective, the US is looking to create ways to flow oil at a loss and doesn’t care who is hurt. Exporters have zero reason to tolerate this. Nor should Canada, whose currency has collapsed to just 76% of the USD.
The eventual decision is not to raise price. It’s to refuse to sell to certain customers at any price. Very much in keeping with the precedent set by US sanctions on whoever.
Sorry for posting the entire article, but it is worth reading, in my view.
U.S. shale drillers struggle amid slumping prices: Kemp
By John Kemp
http://www.reuters.com/article/2015/08/07/usa-shale-kemp-idUSL5N10I2YB20150807?feedType=RSS&feedName=everything&virtualBrandChannel=11563
Aug 7 (Reuters) – North America’s shale drillers are struggling with the renewed slump in oil prices, despite cutting costs, boosting output, and in some cases employing hedging to improve realised prices.
Stock prices for most of the main shale drillers have fallen faster than the price of U.S. light crude since the middle of April.
Spot WTI has fallen 20 percent since mid-April but the share price of Pioneer Natural Resources has dropped 30 percent and Continental Resources is down almost 40 percent over the same period.
Both companies increased production during the second quarter. Pioneer produced 197,000 barrels of oil equivalent per day (boepd) in April-June, up from 194,000 in January-March, while Continental reported output of 227,000 boepd, up from 207,000.
Pioneer’s production is mostly from the Permian Basin and Eagle Ford in Texas, while Continental’s operations focus on North Dakota’s Bakken and Oklahoma.
Both companies reported that drilling and completion costs had fallen by 20-25 percent compared with the end of 2014, they told analysts during conference calls held in the first week of August to discuss their earnings.
Both companies are drilling wells faster than ever before, in the best case in just 13 days, which means they can squeeze out extra efficiencies by drilling the same number of wells with fewer rigs, or more wells with the same number of rigs.
Both are speeding up drilling time and boosting output per well by focusing on the most prolific shale layers in the most productive areas.
Both expect to grow their production this year compared with 2014, by 10 percent in Pioneer’s case and 19-23 percent for Continental.
Yet neither company made money in the second quarter. Continental’s net income was basically zero while Pioneer posted a net loss of $218 million.
In some ways, the two companies have opposite philosophies and strategies: the fact both are struggling to cope with the renewed slump in prices illustrates the challenge all shale firms face and the lack of good options.
Pioneer points to its active hedging programme as a key source of competitive advantage that will enable it to weather the slump better than its rivals.
Pioneer has hedged 90 percent of its forecast 2015 oil production at an average price of $71 per barrel, and the company has already established three-way collars to protect around 75 percent of its forecast 2016 oil production.
By contrast, Continental lifted its 2015 hedges in October 2014, realising a profit at the time, but gambling on a rebound in oil prices which has not happened and leaving the company exposed to full extent of falling prices.
But the biggest difference lies in their attitude to prioritising production growth versus capital discipline in the face of lower oil prices.
GROWTH AND/OR DISICIPLINE?
Pioneer has repeatedly emphasised its determination to continue growing its output aggressively even if wellhead prices remain below $50 per barrel.
The company confirmed its plan to add two extra drilling rigs per month during the second half of 2015 and eight more in the first quarter of 2016.
Pioneer is targeting compound annual growth in oil production of more than 20 percent between 2016 and 2018 even if prices remain in line with the current futures curve.
Repeatedly quizzed by analysts about whether the company was targeting production or returns, the company insisted its wells were highly profitable even at current prices, so it wanted to drill as many of them as possible.
“Why don’t you pursue more of a return strategy than a growth strategy?” one analyst wondered. But the company disputed the distinction and insisted it was maximising returns by growing volume profitably.
Faster drilling, cost reductions and hedging will enable the company to meet its production targets despite lower prices.
“Do you see yourselves as part of the global market share war that we’re seeing in the industry and that you’re just going to outrun it and survive?” one analyst asked.
“That’s right,” replied Chief Executive Scott Sheffield.
Pioneer aims to use efficiency gains and smart hedging to survive the downturn even as others are forced to cut back.
“I personally think (Texas) shale oil will out survive LNG projects around the world, it’ll survive new exploration projects, and they’ll survive essentially all other shale plays in the U.S. in the Midland Basin,” Sheffield said.
“The world needs the Permian Basin. And so eventually supply-demand’s going to reset. And the longer it stays lower, oil prices are going to bounce back even quicker”.
Pioneer foresees prices returning to the mid-$50s or even low $60s by the second half of 2016.
The company left just a glimmer of room for doubt. “We always get asked what commodity price would slow you down,” Sheffield explained. “If oil prices go to $40 and stay at $40 for the next 18 months, we’ll most likely slow down. But as long as our hedge positions and the (futures) strip occurs, there’s no reason at this point in time to slow down.”
The company would only make small losses this year at $40 and would hope to offset them by further efficiency improvements and cost reductions.
Where Pioneer focuses on profitable growth and outlasting competitors, Continental has repeatedly emphasised its disciplined approach to investment.
“We do not believe the current price environment is sustainable,” Continental’s chief financial officer told analysts, “and we will remain patient awaiting better commodity prices before deploying additional capital .. Our efficiency and cost improvements are allowing us to do more with less capital.”
Chief Executive Harold Hamm warned bluntly: “I think the market rewarding people for jumping in, increasing production, rig count today in low commodity prices, I just don’t see that as something that ought to be happening.”
“Let the market rebalance. These reserves and these resource plays are not going anywhere and we all have a long future and that’s the kind of way we look at it here.”
Continental wants to use cost reductions and efficiency improvements to increase profits rather than grow output. It hopes to cut capital spending while maintain production roughly constant in 2016 at end-2015 levels.
The company told analysts it would be cash flow neutral in the second half of 2015 at WTI price of $60 while it would outspend cash flow by $150 million to $200 million at $50 per barrel.
The cash flow neutral price has come down sharply since the turn of the year and the company hopes to reduce it even more in the second half if necessary by squeezing costs even harder.
Continental could use any rise in prices or further cost savings to grow production in 2016, rather than leave it flat, but insists it is “committed to a disciplined approach”.
PRIORITISING PROFITS
The difference between Pioneer and Continental is one of emphasis as much as strategy, profitable growth versus cutting capital spending while maintaining output.
But the fact that both companies have seen their share prices pummelled over the last four months highlights the awkward position in which all shale producers are stuck. Recent price falls have eliminated the advantage they have wrought from cheaper costs and faster drilling.
Individually, it makes sense to concentrate on maintaining or increasing output while cutting costs, hoping other producers will reduce their output. But with all the shale firms pursuing variants of the same strategy and OPEC also increasing its production the strategy is collectively suicidal.
Yet there is no easy way to organise a collective output cut or even a slower rate of growth among the shale firms because of antitrust law. Some shale producers seem to be hoping for other producers to cut first, either voluntarily or because of the threat of bankruptcy.
The shale sector’s problem resembles the difficulties which airlines had until recently, growing capacity without making a profit. The airlines eventually learned to prioritise profits over capacity, but only after years of pain. The shale sector appears to be at the start of a similar learning curve.
Climate tipping points:
The ocean:
http://www.natureworldnews.com/articles/8232/20140724/scientists-identify-possible-tipping-point-of-global-warming.htm
Methane hydrate:
http://www.pnas.org/content/106/49/20596.full
http://arctic-news.blogspot.com/2013/11/breakthrough-documentary-exposes-severe-arctic-methane-threat.html
https://www.youtube.com/watch?v=iSsPHytEnJM
Albedo:
http://math.umn.edu/~mcgehee/Seminars/ClimateChange/presentations/2011-1Spring/arctic2011-3-no_movie.pdf
http://www.pnas.org/content/106/49/20590.full
For over two million years the earth has wandered between two extremes. On one hand there is snowball earth and on the other is an ice free hot world. We have reached neither, which has allowed life to continue without a naturally induced major extinction event, lately. Technology has changed the course of this temperature wandering toward the warm side. Since the cooling of the oceans has allowed methane to be stored in huge amounts, going toward the hot side is tempting either a long term extreme heating or a fast extreme heating.
On the other hand, using technologies to cool the earth may push the earth into a cold cycle. Since the earth already experiences large glaciations, technological methods of cooling the earth just might overshoot and produce snowball earth.
And then there are the civilization collapse scenarios, where much of the infrastructure and probably much of the forests are burned. This could cause a short term cooling followed by a long term warming or if slow enough just extend the long term warming with the chance of reaching tipping points toward a hot world. The modifier is the possibility of burning less fossil fuel than in the civilization continues scenario. But that is only a possibility. More than likely most collapse outcomes would produce as much atmospheric carbon as burning fossil fuels or more.
You can fret all you want. There are no tipping points. Earth climate has been able to homeostatically maintain its temperature within a very narrow range despite an increasingly stronger sun, huge volcanic traps, giant meteorite impacts and changes in tens of times the concentration of CO2.
What is left is a 150 million year cycle, and we are at the bottom of it, stuck in the middle of a very cold Ice Age, our civilization the product of an interglacial that sooner or later will end.
Now many westerners believe that due to their sins (CO2) they are all going to burn in hell (Earth’s hothouse >5° C). I would say we are getting a little bit of Judeo-Christian projection. I would recommend relaxing and enjoying the warmth before it is gone.
Just in case, those numbers in the graph are millions of years. That’s the entire Phanerozoic.
It’s important to factor in the gradual sequestration of carbon and oxygen in carbonate rocks. The atmosphere has less oxygen and co2 than it did in the past. The sheer amount of atmosphere turned into rock didn’t sink in my head until I realized Florida and the Bahamas were huge piles of carbonate.
Yes, it is important. CO2 concentrations have been going down along Earth’s history as the planet ages due to volcanic activity reduction and carbonate sequestration, to the point that we have reached very low levels during the Neogene and Quaternary.
What people don’t understand is that the oxygen in the atmosphere comes mainly from the CO2. Our atmosphere is poorer in oxygen and CO2 than during the Cretaceous. That’s why animals have been reducing their maximum size since then, and nothing like a Quetzacoatlus could fly today. Birds and mammals are becoming smaller as the geological periods pass. The Earth is also becoming less productive. Below 180 ppm of CO2 plants stop growing, and glacial levels are barely above that.
As the Earth continues becoming less active and produces less CO2, in the far future the planet might go back to only microbial life in a reducing atmosphere.
Finally, a couple of very long-term systems thinkers!
I make the case that your long-term CO2 level concerns bolster the case to moderate anthropomorphic CO2 emissions going forward.
As global atmospheric temperatures rise, evaporation increases, atmospheric water content increases, rainfall increases, and erosion increases, leading to increases amounts of carbon and oxygen incorporated into sediment and over a long time being sequestered in rocks, removing it from the atmosphere. Since the Earth’s interior heat is cooling, vulcanism is slowly decreasing, meaning less gasses will be returned to the atmosphere. Ergo, moderating anthropomorphic CO2 output aids humanity’s cause in both the shorter and longer terms.
Google Geologic Time Scale. Meanwhile, note humans have been on earth about 200,000 years; Civilization is about 6,000 years old; Industrialization started in the 1,800s. Modern calculators didn’t exist when I was in university. Geologically speaking, we’re just a flash in the pan so your “long term thinking” is irrelevant.
Nevertheless, the so called tipping points aren’t evident to me. I see a lot of bs flung around, but I don’t see much I consider solid.
Look at the BS about the Karachi heatwave. I saw some much unsupported material flung around I decided to write a blog post with the data, and a one paragraph analysis. That heat wave had nothing to do with global warming.
You do realize that water is the largest green house gas?
You can fret all you want. There are no tipping points.
No tipping points? Really?! Surely you jest!
https://goo.gl/fmyVnI
Really. The climate has proved to be a stable system for over 500 million years. Stable systems don’t have tipping points.
It is possible to make an ingenious but misleading argument that the climate has no tipping points, that it simply oscillates around a mean over a long enough period of time. I suppose this could be technically true if we define tipping points as being exclusively artifacts of civilization.
But as the term is usually understood it includes factors such as extended episodes of volcanism and the Milankovitch Cycle being described as tipping points bringing about changes in climate – volcanically caused changes being random and the Milankovitch Cycles being recurrent.
If the conversation is about time frames relevant to humans and our current civilization then there ARE tipping points for dead sure in the professional opinions of the large majority of atmospheric physicists.
CO2 and other greenhouse gases are fast approaching concentrations high enough to bring about climate change that might appear trivial in terms of a hundred million years but these changes will be MAJOR disruptive events in terms of humanity.
OFM:
I don’t believe a case has convincingly be made that small changes in forcings can provoke big changes. Last time I checked, GCMs were unable to do that.
Javier HOW can you say that the earth has passed from ice age to ice age with hot stages between – and with the change being abrupt in geological time in some cases – and still DENY the concept of tipping points?
At SOME particular time, the variable influences on climate changed and converged to a degree sufficient to INITIATE a flip.
This convergence of the variables to a degree sufficient to bring about a significant change is what EVERYBODY ELSE means by tipping point in discussions of climate.
I occasionally correspond with and talk with professors at various universities who spend their lives working in the various hard sciences. It is amazingly easy to get a reply from just about any of the lesser known ones if you send them an email or just call their office during their posted office hours set aside for working with students.
Cell phones are MARVELOUS inventions. I can talk for hours on end, to my heart’s desire, with anybody willing in the entire country for forty bucks a month.
Few if any of these professors of hard science depend on climate grant money. Virtually all of them would dismiss your arguments out of hand in a class discussion as being true in terms of the ultimate big picture on the geological time and planetary spatial scales but utterly ignorant or deliberately ingeniously misleading in terms of human historical temporal and spatial scales.
Very small changes in input variables can bring about substantial changes in equilibrium conditions of any complex system – and sometimes these changes can be rather abrupt.
Running just one percent in the red financially from one year to the next means bankruptcy in short order. Running one percent in the black means a lot of money in the bank in a decade or two.
A couple of degrees in terms of geological history is nothing to write home about.
In human terms it may well mean that a bread basket agricultural area that supports tens of millions or hundreds of millions of people might suffer a major crop failure once a decade rather than once a century.
A degree or two warmer ocean surface waters will likely mean two or three times as many REALLY bad hurricanes.
Three or four degrees will wipe out the local orchard industry where I live.
And while all the naysayers rant on and on about the supposed fact that there is little or no warming -I NEVER hear any of them wondering why there are so few COLD years on average in recent times.
Why don’t you tell us how long it has been since the last unusually cold year planet wide?
Generally speaking I would not even bother to respond to your bullshit but there may be a few kids out there reading this blog who might fall for it.
A little knowledge is a dangerous thing. Context and nuance are everything when it comes to truly understanding any complex system.
I will hang in and make sure nuance and context are not forgotten in this discussion.
Mac, do you REALLY believe Obama’s bs about his grandkids not being able to swim in Hawaii? Or do you think he’s full of it and inducing fear?
He is exaggerating for political effect,preaching to his choir, which is pretty much par for the course for any politician of any stripe.
I seldom pay much attention to political rhetoric unless it has to do with declaring a war or changing the long accepted rules of society in opposition to the wishes of the majority of the people. I believe adults should be able to behave as they please in private but I also believe people who do not believe in certain lifestyles should be forced to accommodate the practitioners thereof when running a small business .
There is after all a phenomenon called BACKLASH, political. A better solution, in my opinion, is for birds of a feather to flock together and move to communities where they control local government and local lifestyles. THAT is real diversity and does not risk the rise of the sort of politicians we all would rather avoid.
The Castro’s would not be in control of Cuba had the former business as usual types not been so callous and greedy as to look down on the ordinary people there as peasants to be used as servants and laborers and kept barefoot and hungry.
Push too hard and you often get results you never intended – maybe even a Repuglican landslide.
Nobody knows for sure who will next occupy the White House and control congress but there might be as many as four or five justices appointed to the Supreme Court by the next president.
There MIGHT be problems with swimming in Hawaii in forty years – the local waters might for instance be home to too many nasty stinging jellies at that future time.
It will not be too hot or too cold. The water is not apt to be polluted enough to be dangerous in Hawaii but I sure as hell would not bet on any local waters under the control of business as usual politicians being clean enough to go swimming.
The Obungler is prez because the democratic party was ONE , desperate to run ANYBODY BUT HILLARY, and TWO, because the electorate was so sick and tired of business as usual that the Obungler was able to convince the younger element he REALLY MEANT IT when he campaigned on hope and change. He IS a HIGHLY component campaigner.
It’s very unfortunate that he is such an inept administrator and just about as deep in the vest pocket of the big bankers as any republican.
He has at least engineered the first stage of a transition to a western European style health care system which is a good thing, long term.
The problem with it is that it does almost nothing to lower costs, it merely shifts them around.
Two major instances of backlash were involved. The first one is that the country had gotten to the point of being so pissed off at the business as usual health care system that the democrats were able to manage the political coup of government takeover. Served the medical profession right imo.
The second backlash was that this takeover was in large part responsible for the repuglicans mopping the floor with the dimorats last election cycle.
And my impression for now is that unless they run a child molester or the dimorats come up with somebody with some charisma and a fresh face they are going to win the White House by a SUBSTANTIAL margin.
As I have often said, this will be very bad in that it will result in few if any new environmental initiatives and the gutting of some already in place.
Javier, on this point I will have to put in my two cents worth. In the past 500 million years we have had periods where the ice was 3 to 4 kilometers thick over North America to periods when palm trees were growing on the Antarctic Continent. If that is your definition of stable then I would like to know what unstable would look like.
And there most definitely was many tipping points during that 500 million years, many, many of them.
But Ron, a couple of kilometers of ice in your back yard is normal, you’re just a short term thinker. Oh, I guess where you live it would be 60 feet of seawater. Anyway, just a normal weather fluctuations. You really must learn to put things in perspective — take the long view..
Over 500 million years Earth’s average temperature has oscillated within a 12° C band, i.e. 16 ± 6° C. Well within the optimal for Earth’s life.
Compared to the Moon at the same distance from the Sun, the Earth only presents 3.4% of temperature variability. This is despite all the huge pushes that Earth has received from orbital variations, Sun activity variations, volcanic activity, continental rearrangements and meteorites.
We are unable to explain why Earth’s climate is so stable despite such huge pushes. It is clear however that Earth’s climate is dominated by strong negative feedbacks that revert to the mean. Otherwise the Earth climate during the past 550 million years, that anything that could happen did happen, would at some point had made an excursion outside that band that would had wreck havoc on complex organisms.
Currently, the position of Antarctica in the South Pole, the emergence of the Panama isthmus and the geometry of the Arctic Ocean and its enclosure, together with the oceanic currents distributions have set the scene so the stable situation of Earth’s climate is a glacial situation. Interglacials are metastable situations when there’s enough 65° N summer insolation to reduce the amount of ice in the Arctic Ocean.
The climate is changing all the time and looking toward the past we can see abrupt changes and progressive changes. Those tipping points are imaginary. The magnitude of the change depends on the different forcings acting at a time. For example last glacial inception 115,000 years ago was a progressive cooling, while the Younger Dryas 12,900 years ago was an abrupt cooling. Did both have the same tipping point at a certain temperature?
Javier, your “logic” is all over the place and makes no sense. First you talk about a global change and then compare it to a local change as if it was global.
The actual average temperature range of the earth is more like 20 degrees Celsius. Local temperature ranges are much greater.
The reason that the temperature has not achieved lunar range is because we have an atmosphere and large oceans. The atmosphere controls 75% of the earth’s albedo. Much of that albedo control is due to water vapor.
” It is clear however that Earth’s climate is dominated by strong negative feedbacks that revert to the mean.”
No, earth’s climate is dominated by greenhouse gases such as water vapor and CO2. This warms the planet far above it’s black body radiation temperature.
There is no clarity of a strong negative feedback to warming since it can take over 100 million years to bring the average temperature back to it’s low point.
In fact if we take the Permian glaciations as the low point it took almost 300 million years to fall back to those temperatures after rising 18 degree C.
That’s way too high. 5° C below and about 6-8° C above. That’s the range.
“In fact, the difference between today’s average global temperature and the average global temperature during the last Ice Age is only about 5° C”
http://www.exploratorium.edu/climate/primer/
According to you then Earth should have +15° C anomaly registered. Could you please provide evidence.
Of course there is a reason, but I was not talking of the reason, but of the fact that the climate system provides an amazing stability. This is a tiny range the Earth maintains. The range between winter and summer at mid-latitudes is bigger that the Earth’s average temperature range over 550 million years. This is amazing in itself.
This is a popular theory, but far from proven. It negates the role of the Sun, diminish the role of the oceans, and ignores quite a lot of conflicting evidence. As far as I know, the null hypothesis that CO2 plays a secondary role has not been disproved.
Of course there is. Otherwise coming out of a glacial period would not stop the warming ever, as temperatures rise, CO2 rises, ice albedo reduces, H2O vapor increases, etc. Every single time it should provoke a run up all the way to the hothouse, yet every time it gets stopped.
Why should it bring the temperature back to some imaginary line? I already showed that the data indicates the existence of a 150 million year cycle. The temperatures go back to the long term average rather quickly in geological terms as seen in this figure.
See my 8:12 PM response.
It gets stopped by the atmosphere.
It gets stopped by something, that is for sure. Whatever that is it constitutes a negative feedback.
Javier, Fernando,
We used to say in the trades that the farther from home a man is, the greater the presumption he is a pro.
We also said that if you can’t always dazzle them with your brilliance , sometimes you can baffle them with baffle them with your bullshit.
Now I have not only ADMITTED that I am an adherent of the HUMPTY DUMPTY School of Linguistics – meaning that words mean what I mean them to mean when I say them-I brag about it . 🙂
You guys are entitled to play by the same rules if you so please. But if you want to play this way then you ought to make it clear you are using your own definition of the phrase “tipping point”.
You guys seem to think anybody who does not agree with you is ignorant of geology and biology. I assure you that anybody who earns a degree in agriculture from a respectable university knows the basics.
Please carry on. I am justifiably proud of my own modest fame as a bullshitter but every once in a while I enjoy listening to some WORLD CLASS talent.
Mac: As far as I’m concerned a tipping point means when a phenomenon has positive feedbacks and will gain strength as the initial forcing is reduced or discontinued.
The main forcings in this case are greenhouse gases and orbital variations, right?
We know orbital variations are driving the earth towards cooling, but this is a slow process.
We also have natural climate oscillations scientists can’t explain properly (but guys like Dr Mann tried to erase by fudging the analysis). The little Ice Age and the Medieval Warm period are examples.
Then we have the greenhouse gases. To make the greenhouse gas emissions cause very high atmospheric concentrations they have to assume we will burn huge fossil fuel resources, way beyond what I think is reasonable. If the resources are closer to what I think the peak concentration is 630 ppm. Dennis thinks it’s lower.
And then there’s the climate models. Thus far they continue to over predict warming, even if we see NOAA alter the climate record to exaggerate the warming trend (something which isn’t seen in the satellite data being acquired by NASA).
So there you are. I think most of you guys it need to study the subject with a cool head, forget about reading bs magazines, and remember everybody has an agenda.
Today, there are very few scientists and experts out there who arent sharpening a knife in what has become a huge political battle.
“and remember everybody has an agenda. “
Who has a bigger agenda than the fossil fuel lobby, companies like Koch Industries and Exxon-Mobil, in seeing this CO2 induced global warming thing put on the back burner? Methinks you just shot yourself in the foot with that there statement buddy!
Old Farmer Mac,
Regarding the definition of tipping point.
As English is not my first language there is bound to be misunderstandings and mistakes by my part.
I did look at the definition of tipping points. I found several meanings
1) the point at which a series of small changes or incidents becomes significant enough to cause a larger, more important change.
2) the time at which a change or an effect cannot be stopped.
3) a time during an activity or process when an important decision has to be made
4) a time during an activity or process when a situation changes completely
Which one should I use? Science is about precise definitions. I cannot accept all four simultaneously for a climate tipping point.
1) The first one talks of a disparity in cause and effect. A small cause causes a large effect. There are no good examples in climate science of this one, as it is believed that the response of the system is proportional to the forcings + feedbacks, and takes place in their direction.
It could be argued that the Milankovitch eccentricity (100,000 years) cycle is an example of this type of tipping point, because it has a very small effect on Earth’s insolation, about 0.3% or 0.45 W/m2, and yet it is the one that appears to govern glacial termination. But it is a bad example since this precisely constitutes one of the main obstacles in the Milankovitch theory and most scientists doubt that such a small change can produce such a big change. So instead of constituting an example of accepted tipping point, it constitutes the 100,000 year problem.
this is the type of tipping point I have been talking about. If there are no good examples in scientific literature that are accepted by most scientists, why should we believe tipping points of this class do exist?
2) The irreversibility type of tipping point. This one does not have scientific meaning. Stopped by what? Every climate change is reversible if the summation of forcings + feedbacks reverses, and indeed we find in the record that climate change is reversing directions all the time, so climate change is stopped all the time. Of course any climate change will not stop for as long as the forcings + feedbacks are pushing the system, and so the seasons are never stopped. If it refers to being stopped by man then every climate change is unstoppable as we are no more able to stop climate change as ants are able to stop the wind. If it refers only to stopping CO2 emissions by man, then there is no other tipping point in climate history (my point) and this one remains hypothetical as it has not been demonstrated that stopping CO2 emissions is going to stop global warming. In fact global warming has entered a hiatus without any reduction in CO2 emissions, and this strongly suggests that the opposite could also be true and reductions in emissions could have very little effect on global warming.
3) A tipping point for taking a decision. I can decide on taking a plane before the gates close so a little time before that there is a tipping point for my decision. This pertains to human decisions, not to science. Again no other tipping points in past climatology of this type (my point), and again no proof that this tipping point does exist in human CO2 emissions (see 2 above).
4) A tipping point that changes the situation. This is a more general type of tipping point and the one that I was discussing with MarbleZeppelin. If every big change that changes the situation has a tipping point by definition, then of course there is a tipping point for every big change. This is called circular reasoning. It is not scientifically productive and it empties the tipping point of meaning. I put the example of choosing a tipping point between winter and spring in Groundhog day and he took it rather badly.
So what should I do Old Farmer Mac? Which meaning of tipping point should I discuss. Which one is the one all the rest have agreed but failed to tell me?
Regarding me thinking that anybody that disagrees with me is an ignorant, nothing further from truth. I accept disagreement better than most people here. As a scientist I am more used to accept being wrong than most people here as I have to change my opinion and hypothesis every time evidence coming from experiments fails to support them, and every time any of my colleagues proves me wrong on something. Scientists argue about their findings and the evidence all the time and taking the opposite view and attacking your position to see how solid it is, is considered a favour by your colleagues that can prevent embarrassing mistakes when publicly presenting your findings. You are mistaking my defending my arguments with passion with me thinking the rest are ignorants. Obviously I do not take lightly being personally attacked because that is ethically unacceptable in science. We argue about evidence not about people.
I have other advantage over most people here. Climate change is not a personal belief to me as I try hard to not have personal beliefs in anything. I am not politically motivated. I am and have been all my life a conservationist. And I have already changed my mind regarding climate change once due to not enough evidence to dismiss the null hypothesis, that CO2 is a secondary driver of climate change. As Marcello Truzzi (an skeptic’s skeptic) said and Carl Sagan popularized, “Extraordinary claims require extraordinary proof.”
IPCC and some scientists have made extraordinary claims. The press and the politicians have embraced those claims and now most of the people believes them. However the extraordinary proof is missing. I have looked for it and I have not found it. Yes, we have changed the atmosphere, yes, that change should warm the planet, yes, there is warming. But we don’t know how much warming the CO2 has produced and we lack evidence that the changes we are seeing are significantly outside natural variability.
Instead of extraordinary proof what I see is ad hoc explanations for the periods when the evidence does not match the theory (aerosols for 1940-1976, heat hiding in the ocean for 2001-present), misleading propaganda (scientific consensus, settled science), personal attacks on dissenters (deniers, sold to big oil capital), and tons of alarmism not supported by evidence (extreme events, exaggerated threats). Not very reassuring and the trademark of an impaired theory trying to achieve dominant position by other means.
I am sorry if I give the impression that I look down on people that don’t share my views. That is not true. I am surrounded by people dear to me that believe in dangerous anthropogenic global warming. Everybody is entitled to his opinions and beliefs regardless of their scientific basis. A creationist is entitled to believe that God created mankind and life on Earth, but if he is trying to defend his beliefs within the realms of science against me, he is going to get bruised. To scientifically defend an opinion opposite to mine, you better do your homework or accept that my opinion has as rational basis as yours and the science is far from settled.
If anybody here has been attacked for scientifically defending his opinion on climate change, that has been me. I think I have given ample proof that I have looked seriously into the evidence, while most haven’t. That doesn’t mean that I am correct. There are a lot of people that know immensely more than I do about climate science and they hold the opposite opinion to mine. That doesn’t mean that they are correct. That is a problem that happens when there is insufficient evidence. Also if I were a scientist working on climate change I don’t see how I could publicly held a dissenting position as in these days that is a sure way of irreversibly damaging your career in a lot of countries.
I believe I am valuable to the blog for as long as Ron is keen on discussing climate change. Why would anybody want to be exposed only to the same opinion that one holds? You guys are learning more about climate change and climate phenomena (paleoclimatology, glaciars, sea levels, glaciations, extreme phenomena, etc) since I present scientific evidence about that to you and show you what is a myth and what has a real basis. I have no desire of converting anybody, as everybody is entitled to his beliefs. I’d like to demonstrate that the science is far from settled, that dangerous anthropogenic global warming is just a theory that has not disproved the null hypothesis and that it is as rational to believe in it as it is to believe in the opposite, so this issue should not be so divisive. In a couple more decades it is probable that nature will decide who is wrong and who is right.
Which one should I use? Science is about precise definitions. I cannot accept all four simultaneously for a climate tipping point.
Can we just cut through all this BS once and for all?!
There are not four different definitions for tipping points in this discussion! When talking about the dynamics of complex non linear systems such as climate, there is only one definition of tipping point that matters and that is the one used in Chaos mathematics:
https://www.dur.ac.uk/ihrr/tippingpoints/mathematicaltippingpoints/
Mathematical Basis of Tipping Points:
Finding the mathematical basis of ‘tipping points’ through bifurcation analysis will help us discover whether or not accurate mathematical representations of physical or socioecomic systems display tipping point behaviour. In mathematics, a bifurcation is a point at which small changes start to grow rapidly, through positive feedbacks. If the systems studied do behave like bifurcations then it may be possible to predict ‘tipping points’ we encounter in the world. In chaos theory, a well-known example of a system that bifurcates is a Lorenz attractor originally derived from a model of convection in the earth’s atmosphere. Studying how different kinds of systems bifurcate will help researchers determine whether or not a particular system could ‘tip’.
At least this is the definition I have been using! While on occasion I too have subscribed to OFMs rules of being a good bullshitter and having my words mean what I want them to mean. Not in this case! Let’s keep the definition simple, scientific, mathematical and precise!
Back atcha Javier,
I have read deeply into the history of climate and geology. I am not disputing any of the basic science you have outlined. The particular papers you mention are ok, but one or two papers, or a dozen, are not enough to indicate a consensus.
Likewise Ron, Fred, Islandboy, and just about everybody else taking exception to your arguments all know the basics.
You are pissing us off lecturing us as if we are ignorant of the basics. I no doubt am guilty (sometimes ) of actual intended or unintentional condension when discussing the realities of agriculture but not many people are really acquainted with the basics of agricultural science and technology. Professional biologists for instance who oppose the use of herbicides are often ignorant of the tradeoff between accelerated soil erosion and herbicide use.
THE ISSUE as WE see it is NOT what happens over millions of years but what might and PROBABLY WILL happen over the next few decades and centuries.
Perhaps I should try another way to explain MY position and understanding.
Fernando is an engineer. I know some engineers well. If I were to ask the engineer who designed the cooling system installed on my truck how it will perform in ten degree hotter or colder weather he can tell me both from theoretical calculations and from actual field experience.
He probably CANNOT tell me from actual field experience how it would perform at an ambient temperature of say -sixty five degrees C because it has not likely ever been TESTED at such a high temperature.
But he can run his calculations and give me an answer with a very high probability of it being a GOOD answer.
Climate physicists and other scientific types working on climate are doing approximately the same thing- telling us how they EXPECT the climate to behave as we pour more greenhouse gases into the atmosphere and clear more land for development and pour more concrete and lay more asphalt etc.
The biggest difference is that my truck engine cooling system is actually pretty simple in principle and the physical laws involved are very well understood. All the variables are known and accounted for.
Climate on the other hand is an enormously complicated field that is more like a partially assembled jigsaw puzzle. MANY MANY questions remain to be answered.
This does NOT however mean that we do not understand climate well enough for professionals in the field to make good general predictions. I am a professional farmer, university trained. I can tell you with ninety five to one hundred percent confidence what the results will be if you vary the inputs into an orchard – rainfall, temperature , soil acidity, available nutrients, application of various pesticides etc etc. BUT there are still many many unanswered questions involved in raising apples that may not be answered for ten more years – or a hundred more years.
The engineering equivalents of mechanical or civil engineers are climate physicists. When they tell us they are highly confident that forced warming is a reality good sense indicates we should listen.
No sensible engineer would ever build a dam or a bridge without KNOWING the local soil and stone will provide an adequate foundation. If he does NOT know this he will refuse the job.There IS such a thing as the precautionary principle.
I have been following the advance of medical and nutritional science since the sixties. It takes a LONG TIME to get everything right – climate is no different.
The models will get better as time progresses.
Ask your physician if he has a complete understanding of your digestive or nervous system and he will laugh at you. Ask him what the effects of taking in an extra fifty calories a day will be , everything else held equal, and he will tell you with great confidence you are going to get fat over time.
And there IS a clear warming trend.
I never see any of you skeptical types present any evidence of a COOLING trend that is significant in terms of current short term history.
Current and near term future history is what this debate is all about. To the rest of us.
We don’t really give a damn except in the abstract what the climate will be like ten thousand years into the future.
I am sure your future descendants will find it perfectly normal to read about the city of Chicago reputedly buried under the glacier – a few thousands or tens or hundreds of thousands of years from now. Or to go fishing among the crumbling piles of brick which will be all that is left of high rise water front business districts.
Fred
Here is not only a definition of climate tipping point but a discussion of the tipping elements in the earth system.
http://yosemite.epa.gov/ee/epa/eerm.nsf/vwAN/EE-0564-112.pdf/$file/EE-0564-112.pdf
“THE ISSUE as WE see it is NOT what happens over millions of years but what might and PROBABLY WILL happen over the next few decades and centuries.”
Exactly. And I agree with anyone who says any multi-variable system like climate, biology or ecology involves tipping points. How could it be otherwise?
Ok, Fred,
Accepting your definition a tipping point is when positive feedbacks overcome forcings.
There is no evidence that tipping points exist in climate as we do not know if positive feedbacks ever dominate the system. In fact we have not been able to adequately calculate the contribution from different feedbacks to the current situation, and thus we don’t know what the climate sensitivity is. Otherwise we would know its value. A climate sensitivity of less than 2.4 would demonstrate that there is no tipping point in the current situation.
Without knowing the value of feedbacks one cannot demonstrate the existence of tipping points as one cannot demonstrate that positive feedbacks have overcome forcings. Of course tipping points can be modelled and the models can be parameterized and tuned so to reproduce salient characteristics of climate change. That doesn’t make them any more real.
Of course further confusion can be introduced into the subject by arguing about what constitutes forcing and what feedback in any given case.
Old Farmer Mac,
I am sorry you get pissed off but I wonder how much of that is because I question your beliefs. My posts are full of scientific figures and citations and papers, so I can hardly be lecturing about basics if I am discussing what the literature supports or doesn’t.
We agree on the complexity of climate. As you having never seen any skeptical presenting evidence of a cooling trend in current short term history, that is obviously because there are no significant cooling trends in the last two hundred years. Just real but small cooling trends like 1950-1975. I do not dispute that we have been having 200 years of warming, but we also had similar periods of warming and cooling previously, or how do you think the world got into the Little Ice Age after the Medieval Warm Period.
I am interested in paleoclimate, but have no problem in debating near term future climate.
Have you read On the recovery from the Little Ice Age by S. Akasofu, 2010. Natural Science, 2, 1211-1224. doi: 10.4236/ns.2010.211149.? You might find interesting that some scientists believe that we are just living through the recovery from the Little Ice Age and that there’s no sufficient evidence for more extreme theories. That paper is a bibliographic review full of bibliography and figures. A very easy read.
Of note is the following figure that is absolutely real yet very much ignored and points to two important conclusions:
1. Current warming is part of a longer trend not related to anthropogenic CO2 increases.
2. We are failing to recognize a 60 year cycle in the warming that is absolutely evident in all the data and that is going to make a lot of climatologists look like fools.
Can you or any other believer dispute these two facts?
He doesn’t get it Ron. He does kill any hope of a rational discussion though on the information I brought forward..
Face it, you’d be as well off arguing with a Jehovah Witness.
An old friend would always welcome Jehovah’s witnesses into his house. After they were inside, he would then ask them to do dishes, take out trash and other general household duties. They would cut short their visit.
The climate has proved to be a stable system for over 500 million years.
Yes, that is true up to a point. it has oscillated back and forth in a stable pattern between a greenhouse earth and an icehouse earth for over 500 million years.
However to argue that there are no possible tipping points because a system has been stable for a while is disingenuous to say the least.
http://sitn.hms.harvard.edu/flash/2014/earth-climate-tipping-point/
Figure 1 – Latitude where permanent ice stopped forming as a function of sunlight reaching the surface (Es), or amount of CO2 in the atmosphere. At the present day, Es = 1.0. Graph reprinted from [].
The chart above demonstrates that, with the current solar energy contribution to Earth, there are three possible equilibrium points in the Earth’s climate. First, the Earth of today, with ice near the poles and none at lower latitudes. Second, an ice-covered snowball Earth. Third, an Earth with no permanent ice at any latitude. If we start at today’s climate and trace the chart, we see that once the permanent ice near the poles recedes past 65 degrees, Earth moves from our current condition to an ice-free condition very quickly (on a geologic time scale). Once Earth is ice-free, this becomes the new normal for the climate system, and only a significant reduction in incoming solar energy or the amount of carbon dioxide (or other greenhouse gases) in the atmosphere will bring the climate back to its present-day condition.
That is all theory. The snowball Earth is an unproven theory that a lot of scientists reject. When saying that the snowball Earth is “a possible equilibrium point in the Earth’s climate” it must be difficult to keep a straight face.
It was all theory until the first nuclear detonation on July 16, 1945. Then the world changed forever.
Up until now I was making a sincere attempt at engaging you in a rational civil conversation. However you seem to be intent on making that effort rather difficult.
Quite frankly being told by you that it must be difficult for me to keep a straight face when I say something, is deeply offensive and insulting to me.
I guess it must be even more difficult to keep a straight face when saying that the earth’s climate is stable and therefore there are no tipping points!
That sir, is pure unadulterated Yak Dung! And I suspect you actually know that…
Are you Daniel Katzenberger?
If not then I was not saying that to you but to him for writing that phrase. No need to apologize. It should have been clear to you that I was referring to the author.
If yes, then yes, I said that to you. Thinking that a hypothetical snowball Earth, that is possible that never took place, constitutes an equilibrium point within Earth’s climate is a joke. Building a serious model on tipping points based on extreme situations that may have never happened is laughable. But then I shouldn’t laugh on your work anyway. So if you are Daniel Katzenberger then I apologize.
The problem I see with comments trying to tie what can happen today to ver far past say 2.5 million years is the differences in geography.
Talking about geography, and paleogeofraphy, scientists focused on Paleo climate can fall in traps simply because they lack the information, or the time to study detailed regional geology. I had a wonderful opportunity to get access to data and information held by oil companies, and learn geology from world class experts when we were exploring for oil, and I know this information isn’t all available to scientists in academia. Some of them make gross mistakes but get through peer review simply because they can’t absorb the information, and the reviewers also lack it.
Just putting this here in response to Javier’s 7:19 pm posting since it would probably not fit down there.
That figure in Wikipedia appears to have an incorrect scale.
Regarding the warmest period 50 million years ago, the Early Eocene Climatic Optimum (EECO) the correct consensus average temperature is +12° C, not +14° C.
This is from Latitudinal Gradients in Greenhouse Seawater δ18O: Evidence from Eocene Sirenian Tooth Enamel. Clemetz and Sewall. Science 232, 455. 2011.
But there is a problem even with this value. δ18O isotopic values have to be corrected for a number of known issues, like volume of ice and precipitation, that alter the relationship between δ18O/δ16O.
What this article does is demonstrate that the tropical precipitations in such a warm world were a lot higher than previously estimated, and therefore the conclusion is quite clear. This is the last phrase of the article:
It is thus probable that the Early Eocene Climatic Optimum was closer to other temperature maxima on the paleo-record at about +10° C
Hansen disagrees with you.
As the authors of the paper state:
“Our results, thus,
suggest that the Eocene tropics were not only
wetter but may have been cooler than foraminiferal
d18O data have previously indicated.”
“May have been”, says it all.
Since the data was taken from mammalian species, that only leaves about 500 million years out of the graph. The authors only talked of the Eocene. To extend it further is grossly inappropriate.
Contrarian: Opposium totalis
Notable Characteristics: Defines the phrase “goes against the grain.” Never hesitates to inject a contrary viewpoint, whether at a department meeting or Grandma’s Thanksgiving dinner table. Habitual sender of email forwards promoting offbeat philosophies. If you say right, this head-butter goes left.
Songs & Calls: “You’ve got it backwards.” “Society is nothing but a deluded swarm of lemmings.” “I know I’m right.”
If you mean James Hansen, that’s one of the scientists I was thinking about when I wrote some of them make gross mistakes when dealing with paleogeography. Hansen lacks information, and very clearly never had the time to absorb what’s available. A lot of what he writes about Eocene geography and climate is wrong. He has the wrong timing for the Indian plate collision with Asia, and ignores the presence of intracontinental seas located in Central Asia as well as their connection to the Arctic Ocean. A lot of that data comes from the Soviets, and it takes dozens of experts working the puzzle to try to get it assembled. Hansen and others just fail to get it right.
No. Hansen disagrees with Clemetz and Sewall. I don’t do research on Early Eocene Climate Optimum. I just find Clemetz and Sewall better experts on the issue and more convincing.
Going further back to the distant past the error bars become bigger. It is as difficult to claim that there were extraordinarily warm periods as that they were not.
Climate change scare is one of those “popular delusions and the madness of crowds” issues.
If people are being led to be afraid of something, chances are that something is not real. If people are being prevented from being afraid of something, chances are that something is real.
Hey Javi, it seems that you are trying pretty hard to prevent people “from being afraid of something” (global warming). So, if it is the case that, “If people are being prevented from being afraid of something, chances are that something is real”, what’s the deal?
Same deal as when some people tried to convince us that Iraq did not have weapons of mass destruction. Didn’t make any good but at least they tried to tell the truth.
At least nobody will be able to tell that everybody believed in dangerous global warming.
Religion, fear, madness? What are you talking about, certainly not science.
You speak of 12 degrees positive average global temperature and say that is no real problem, nothing to fret about. Meanwhile all the sane scientists have determined humans will not exist if a six degree rise in global average temperature occurs.
Right now numerous species populations are falling, have been for many years. Species are going extinct at a high rate. Why now? Is it just a coincidence that the climate change has reversed and is quickly going in the other direction at the same time. One can believe in coincidences but there is much evidence to the contrary.
At the same time we are pumping huge amounts of aerosols into the atmosphere and yet this unintended geo-engineering is only muting the effect of global warming and not in all locales.
So even large negative forcings are being overcome by the positive ones. The direction is clear, the rate is very high. Normal climatic changes should not be very obvious within one lifetime.
One can ignore the changes in ice, one can say that vegetation changes may only have a long term slow effect on global climate, but the changes in the atmosphere are fast and immediate. The global surface response is slower due to less energy input and greater mass, but the atmosphere is the controlling factor.
Species are being driven to extinction at very high rates due to global human appropriation of net primary production (HANPP). In essence we are leaving neither room nor energy for them.
global human appropriation of net primary production (HANPP)
By focusing on CO2 we focus on the wrong problem and thus do not come closer to a solution.
Uhhh Javier, we know about the other problems for a long time and they are being both studied and addressed. The climate change problem is the new elephant on the block. We are allowed to have more than one problem at a time, at least most people are capable of understanding multiple problems.
MarbleZeppelin,
Except that anthropogenic global warming is a potential problem. The less than 1° C of warming since 1900 has some advantages and disadvantages, but so far nobody has proved that it has been a huge problem. Yet is gathering most of the media attention, most of the money, most of the scientific effort and most of the political efforts.
Can you name a big high level international conference on any other serious and proven environmental problem?
It is damaging our ability to confront actual present problems and that is bad in itself.
“If people are being led to be afraid of something, chances are that something is not real. If people are being prevented from being afraid of something, chances are that something is real.”
this makes absolutely no sense.
Javier,
This is an intriguing graph.
How was the baseline temperature determined?
What is the source for this graph? I would like to navigate to the source and poke around a bit to learn.
I would love to see graphs over a similar time scale for atmospheric carbon dioxide and oxygen content (percentage of total), along with the temperature plot.
Wishing for even more, I would love to examine a plot with the factors described above overlain with plots of the Milankovitch cycles, known impactor events, and known events of significant vulcanism.
I found it interesting that the major extinction events occurred when temperatures sharply declined after peaks. AT first I thought that might correlate to glaciations, yet the current temperature is significantly lower than the temperatures correlating to the extinction events, and we certainly are not in a glaciation phase now.
Do you (or anyone else) recommend a good book (or several) describing the Earth’s geophysical processes, history and evolution (including estimated for the future?). No recommendations for quackery tomes please…
Rational Analyst:
The data for that graph is from Jan Veizer, who made and published a δ18O isotope database with over 16,000 data points covering 526 million years. That data is available at his webpage where are the citations
Isotope Data – Jan Veizer
The graph was made by Bill Illis for a post at Watts Up With That?
Searching the PaleoClimate Record for Estimated Correlations: Temperature, CO2 and Sea Level
Similar graphs using the same database can be found through the scientific literature as it is the best data available for that period.
An explanation on the conversion of δ18O data into temperature can be found in Wikipedia:
δ18O
Carbon dioxide proxies are a lot less precise than temperature proxies and the data is sparse. There is a very good model, called Geocarb III that provides the reconstruction with increasing error bands. Experts seem to trust it, or they don’t have anything else to go along. You can find graphs in Bill Illis’ article.
Oxygen data is even worse than CO2. We know for certain that in the carboniferous oxygen levels were above 30%. That’s why there were such big insects. There is no general agreement about oxygen levels at the rest of the periods, although a more or less crude depiction is the graph at the end.
Don’t know of any, but Milankovitch cycles are at a scale of tens of thousands of years, not millions.
Major extinctions are thought to coincide with huge volcanic trap eruptions by some experts. Such large scale vulcanism would provoke a very big global volcanic winter while the sulfuric acid would drastically acidify the oceans providing an explanation for both abrupt cooling and mass extinction.
I have no recommendation for such a book, since I have read none, sorry. But I am sure there are excellent books on the subject.
I read somewhere the oxygen spike in the Carboniferous was caused by plants evolving to make woody material the bacteria couldn’t break down. The wood turned to coal, removing the carbon, and the oxygen wAs released in huge quantities. Eventually bugs evolved to learn to digest wood.
CO2 and oxygen appear to move in opposite directions in the paleo-record as theory predicts. The wood-microbe theory is attractive. I wonder how it could find evidential support,
”Major extinctions are thought to coincide with huge volcanic trap eruptions by some experts. Such large scale vulcanism would provoke a very big global volcanic winter while the sulfuric acid would drastically acidify the oceans providing an explanation for both abrupt cooling and mass extinction.”
So now, are you going to deny that large scale volcanism can be the initiator and origin of a TIPPING POINT?
Or that an acidified ocean might be the reason the ocean TIPS toward an extinction event?
OFM, please don’t rile the inmates.
Obviously those things happened. If they constitute a tipping point for you, then yes.
I see volcanic eruptions from huge traps over a long period as a major climate push causing a major climate change. I am unsure where the concept of tipping point can be applied there.
Rational Analyst,
The place to start is with the work of Robert A. Berner. Google:
Berner, Phanerozoic oxygen, CO2.
You do realize that ice ages, glaciations, snowball earth, iceless warm periods are all due to tipping points. Oh, I guess you don’t.
What is your definition of a tipping point? It clearly is not the same as mine.
If any big change requires a tipping point, then evidently there’s a tipping point in any big change. Is there a tipping point going from winter to spring? A day when you can say spring is from now on committed? Groundhog day perhaps?
Yes, you do seem confused on the meaning of many terms.
Your constant pretentious and patronizing writing manner assures I will not answer. You are acting like a smartass without the smart part.
Pardon me if you don’t like my writing style. May I remind you that I am regularly insulted and personally attacked or questioned whenever I respond to other people’s posts on climate change? You are one of those that insult me so I really don’t give a rat ass if you are all sensitive about my sarcasm. If you don’t ever respond to me again the better to me. Of course I reserve my right to respond to your posts on climate change if you continue to bring up the issue with arguments that don’t hold water. It is always good that people get exposure to different opinions and arguments so they can form an informed opinion.
Not sensitive, just know when it is a waste of my time.
An interesting tidbit on the Abraxas Q2 conference call, regarding how misleading IP rates can be, and the effect of choking wells:
“I think we’re still incline to say that choking the wells back does enhance the ultimate recovery, but what that doesn’t address is the rate of return and there is a camp out there that says open up wide open get the oil out as fast as you can to capture a higher rate of return and don’t worry about tomorrow. The companies that are generally doing that have got such a large inventory they don’t need to worry about tomorrow and they just continue to drill and blow their wells down because they’ve got so much to do it doesn’t matter but I think from an engineering perspective being conservative like we are is by far the best for long-term growth in a small cap company like us and I think we’re going to continue to do that. We studied very closely two companies Murphy and EOG in the Eagle Ford may have marked different philosophies on choke size, Murphy chokes their wells way back, EOG opens their wells wide open, consequently the IPs that you see are misleading because of that, but we’ve looked at production a year and two years down the road and Murphy’s production rates are considerably higher than EOG’s average production rate. So that in effect tells you that choking them back early does prolong the life of the well and perhaps increases the ultimate recovery as well.”
So much for declaring who has the best acreage.
Good commentary. But it’s missing a bit about tubing size. This is a subtle issue which requires careful modeling, but what I’ve found in my case is that one needs to size the tubing as small as possible, while considering issues such as artificial lift, well performance as it depletes, ability to run sucker rods and tools inside the tubing, and so on.
After I retired I was a consultant for a few years, one type of job I had wa simply to visit a company and their field operations, see how they did things, a d point out to management where they could improve. One area many companies seem to ignore is well, tubular and artificial lift design. They use empirical methods, copy what other operators use, get tips from service companies, but fail to look at the full well cycle.
What I found is that choking a well does improve recovery. We can also prepare a model and demonstrate why it happens. There are two types of wells I know of which don’t benefit: gas wells in a strong water drive reservoir, and viscous oil wells producing via chops, which involves perforating a small section and pumping the hell out of the well to force it to make a bunch of sand.
Similar to last year, my wife and I will be spending next weekend at Boone Pickens’ ranch. We will fly from Dallas to the ranch with others on his Gulfstream. He will be entertaining 40 or so guests, most of whom will have connections with the Amarillo High School classes of the late 40’s. Boone was obsessed with basketball. In 1947, with a one point lead, he lost the ball toKyle Rote Sr. in the last minute of a semi-final championship game. He is sharp for age 87. Older than me but probably in better shape except for vision. Should I question him about oil and gas? He is not big on conservation (at least for himself). http://www.dallasnews.com/lifestyles/arts/columnists/alan-peppard/20111009-a-peek-inside-t.-boone-pickens-panhandle-shangri-la.ece
As for his opinion of . . . excluding miracle discoveries, is global warfare likely over the relentless scarcity unfolding.
Last year there was very little oily discussion. Politics got more time. Someone mentioned fracking and Boone replied that he had been fracking for many years. There was fracking near his house. I asked what he thought the oil and gas industry would be like in 50 years. He answered “I don’t know”. Discussion ended.
Pickens jumped the gun in calling peak oil and predicting a shift to natural gas but apparently his thinking was sound. Only his timing was off .Ten or twenty years is a long time to us as individuals it is only an eye blink or maybe a yawn in terms of history.
I would love to know what he thinks about the future of the oil and gas industries and what he thinks about the potential for electrification of personal transportation if he is willing to discuss these topics with you.
There is little doubt in my mind that we can given time – and given enough cheap gas – gradually convert the trucking industry to running mostly on gas. Building big diesel engines to run on both diesel and gas is easy enough and not all that expensive except for adding the natural gas tanks on the trucks. ( There is plenty of room for them suspended on the bottom side of a trailer chassis and even inside the cargo box area if the truck is used to haul heavy materials such as stone, grain or steel. An enclosed truck with the cargo box full up is hauling light but but bulky cargo.)
I believe the gas refueling infrastructure is not all that big a problem given that gas lines do crisscross the country already and that refueling stations can be built in a lot of places without running new pipelines. IF the shift to gas fueled heavy trucks takes off, the truckers can refuel with gas if a station is on the route, Tesla supercharger fashion. More stations can be built as the number of dual fuel trucks increases.
After a decade or two a trucker with a dual fuel truck could probably travel pretty much all over the country on major highways without having to fuel up with diesel- assuming gas stays very cheap compared to diesel. Truckers that stay fairly close to home in major metro areas would be able to run on natural gas alone.Some truckers are already running on gas exclusively – ones who run routes that bring them home every night.
The real question is whether the gas will be there and cheap enough compared to diesel fuel.
Gas will not stay cheap if the industry succeeds in building a lot of export terminals.
Every body should listen to the linked TED talk and take it to heart.
I don’t know how much this guy knows about the technical end of agricultural production but he sure as hell has a rock solid grasp of the big picture.
Personally I do not doubt that TECHNICALLY we could double food production, if the necessary inputs remain available and affordable and can be provided to farmers who do not already have access to them.
As a practical matter, I do not believe the inputs are going to be available in sufficient quantities at affordable prices to enable the folks still farming using older methods to make the switch on a world wide basis.Beyond the actual availability of such inputs as fertilizers, diesel fuel, pesticides etc there is the issue of roads and distribution, storage facilities for increased production that might come about, training of the people on the land actually doing the work, political and religiously based obstructionism, climate troubles, and water shortages – to mention just the worst of the LESSER issues.
The BIG issue is that the best land is already being farmed and the remaining land not already under the plow is not EVER going to produce as well as currently farmed lands produce – the soil and the weather just aren’t as good.
The speaker is not in a position to just come right out and say what he thinks. The closest he can come is to say we have one opportunity to get it right and that we cannot fail.
But I am not constrained by the necessity to politely beat around the bush since I do not speak to large audiences in front of major organizations.
Sooner or later there will be a really bad year weather wise in some heavily populated large impoverished area of the world already very skating at the edge of famine level food production and people are going to starve by the tens of millions – unless they die fighting each other or at machine gun protected borders.
In the past stockpiles of grain have been adequate to ship serious quantities of food to places such as subSaharan Africa to help with RELATIVELY small scale famines.
The stockpiles, carry over from one year to the next, that used to be such a problem for American farmers no longer exist. If they did I am not at all sure that countries such as the USA – still relatively rich but headed for harder times- would be willing to foot the bill for charity on a grand enough scale.
DON’T get caught in Egypt.
And get thee hence to the non discretionary side of the economy even if you live in a rich country.
Localized farming can and will save a relatively few people in some places. It might save anybody reading this forum. My family at one time farmed as much to provide our own food and fuel and building materials as we did to sell for cash. This works- if you are willing to work at it.
A modern day subsistence farming operation could keep a dozen people alive and healthy on a few acres so long as one or two of the dozen has enough cash income to cover property taxes and the purchases of essential goods for such a small community or extended family.
I worked for him for 8 years. As long as he is not in the middle of some other topic, I would say go for it. He always liked to discuss things that he felt he had superior knowledge about. In my opinion, general questions are better, not specifics like “how low do you think the rig count will go?”
Does anybody know if Pickens has said publicly what will be done with his fortune or who will get it?
At least a few of the mega rich people in this country have made plans to leave most of their money to good causes. Some like Bill Gates are spending it heavily on good causes already.
Perhaps he will leave some of it to the quail??
http://www.boonepickens.com/a-suprising-environmentalist/
He has taken the Bill Gates pledge to give almost all of it away. And, I believe that he has given away more than one-half billion $’s so far. Probably $250 million to Oklahoma State University so far (his college).
I was wrong. He is probably over $750 million already, with over $500 million to his alma mater.
http://www.boonepickens.com/giving-back/
Pray to SKY DADDY and /or the God(s ) of your choice they don’t spend it all on a new football stadium and coaching staff. 😉
The $260 million upgrade will probably be sufficient. https://en.wikipedia.org/wiki/Boone_Pickens_Stadium
Sigh….I might have guessed.
I am VERY proud of myself that I do not know the name of a single athlete who plays for my alma mater. I do know the name of the football coach though. They built a dammed billboard where I cannot avoid seeing it a couple of miles away as the crow flies proclaiming the community to be “Frank Beamer country”. It is directly across the road from a stop sign.
We had some foot ball players in my dorm when I was an undergrad. All of them were as big , strong , and dumb as mules. None of the ones I met could have successfully finished the freshman year in agriculture which included Real Mc Coy chemistry and biology with labs plus real math but there were plenty of make believe courses available to them in some departments such as business administration. A good portion of the business of the university seems to be administering the football program.
They say he is a nice enough guy who has actually been known to speak to somebody on the street but I have never run into him myself so I can’t say for sure.At any rate I am not a celebrity so he is unlikely to try to strike up a conservation with me.
I would not go thirty seconds out of my way to meet any sports or Hollywood celebrity in the world unless in the course of conducting business.I MIGHT make an exception for my distant cousin WILD BILL From DAWSONVILLE given we are both gear heads.
I did meet some famous entertainment types once working as a driver on a movie set. They loved me because I was totally uninterested in kissing their asses or asking the same old same old stupid questions. I talked childhood experiences, day to day life, local cooking Richmond style etc with Clarence Clemmons for a couple of weeks. Great guy. Salt of the earth.
I got hired on along with a couple of buddies because the transportation guy knew us as giterdone types capable of minding our own business. So when we were offered tips the first time by the caste guys and girls we just politely explained we took the jobs simply to learn how movies are made between jobs of our own -a sort of hands on vacation for us -and not in the habit of accepting tips, nor in need of them.
When we displayed no signs of silly celebrity worship we were accepted as personal acquaintances within the first few hours. There were other famous people but I have forgotten their names now.
Making a movie is a lot like soldiering. Boring as hell mostly nothing interesting to do for hours and hours and then a short intense burst of work. Then more waiting around for hours and hours. The celebrities get as bored as anybody else. Only a few people such as directors are constantly busy.
I volunteered for a dozen jobs such as holding up one end of a giant white sheet used to prevent shadows when shooting. You had to hold it absolutely dead still and be ready to do exactly what the director wanted instantly.
Sounds like you had an interesting life.
I could never understand the hero worship given to professional athletes or to movie stars. Never been a fan myself.
The real heroes out there often go unsung or even noticed. They don’t get paid huge salaries, many don’t get paid at all. Yet people get caught up in a vicarious life of sports and films, feeding huge amounts of money into basically unnecessary and frivolous activities. Then they often complain if the government aids the poor of subsidizes needed programs.
Sounds like you made good use of the education you received at your alma mater.
I’d ask two questions:
First, if he were to leave $2M to a normal working person type relative (with very little existing investments or investing experience), how would he suggest the relative invest it, at this particular time?
2nd, what does he think of Teslas?
Last I heard Boone had a natural gas car at his Dallas home. However he has had macular degeneration and no longer drives. http://money.cnn.com/2015/05/08/investing/t-boone-pickens-tesla-elon-musk/
That natural gas car would have to be a Honda Civic since that’s the only NG car that was on the market AFAIK. If Boone travels around in a Honda Civic, he would think Teslas are too expensive.
I wonder if he thinks any of the following are too expensive; Porsche Panamera, Mercedes E63AMG, Mercedes S Class, BMW 7 Series, Audi A8, Aston Martin, Bentley. While not as downright luxurious as the cars on that list, the Tesla feels very refined because of it’s lack of vibration and noise and the highest performance option can out accelerate all of them.
Boone has had natural gas cars from the 90’s when he started Clean Energy. He has a regular auto customized. Costs a lot to do that, but for him, who cares. Taxi’s in Calgary were customized to use natural gas in the 1980’s.
I vaguely recall riding in a natural gas powered taxi in Santa Barbara, California circa 1975.
I am surprised that no one has linked this article. A couple of important points:
1. Oil or NG production is not linearly proportional to rig count. With improving technology, rig count can decrease and production can increase or stay flat.
2. With improving technology, the cost of producing shale oil continues to fall. Shale oil is not “high-cost” but “medium-cost”.
http://www.telegraph.co.uk/finance/oilprices/11768136/Saudi-Arabia-may-go-broke-before-the-US-oil-industry-buckles.html
“The problem for the Saudis is that US shale frackers are not high-cost. They are mostly mid-cost, and as I reported from the CERAWeek energy forum in Houston, experts at IHS think shale companies may be able to shave those costs by 45pc this year – and not only by switching tactically to high-yielding wells.
Advanced pad drilling techniques allow frackers to launch five or ten wells in different directions from the same site. Smart drill-bits with computer chips can seek out cracks in the rock. New dissolvable plugs promise to save $300,000 a well. “We’ve driven down drilling costs by 50pc, and we can see another 30pc ahead,” said John Hess, head of the Hess Corporation.
It was the same story from Scott Sheffield, head of Pioneer Natural Resources. “We have just drilled an 18,000 ft well in 16 days in the Permian Basin. Last year it took 30 days,” he said. “
It was linked to in the previous post, ” US Oil Production Finally Starting to Decline.”
Advanced pad drilling techniques allow frackers to launch five or ten wells in different directions from the same site.
I don’t understand why you need advanced techniques to drill in five or ten wells in different directions from the same pad. Why couldn’t you do the same thing with old techniques?
With improving technology, the cost of producing shale oil continues to fall.
Or is the cost of drilling and fracking falling because of all the out-of-work drillers and frackers?
In my opinion, advanced oil extraction technology is similar to medical technology — the more advanced it is, the more it costs.
Suyog,
We hear the stories about efficiencies and new drilling techniques every day. However why are the shale companies tanking on the stock market like hell? There is a serious mismatch between what these companies are saying and how the financial numbers are. Secondly, Saudi Arabia has 700 bn basically in cash and no debt and the shale industry is sitting on 700 bn of high yield debt costing 100 bn every year. I do not think that shale can sit out half a year at these prices. Saudi Arabia instead can sit tight at least five years. The main issue for Saudi Arabia is that they do not want to cut alone. It does not help when Saudi Arabia cuts 1 mill bbl/d. There is a cut of 3 mill bbl/d necessary to bring prices up again. So, also shale has to cut at least 1 mill bbl/d, which it does not want to do at the moment at the peril of investors and shareholders. Who cares about the dudes losing their retirement money?
Suyog,
Advanced pad drilling techniques allow frackers to launch five or ten wells in different directions from the same site.,
Speaking for the Bakken where the most information is available, all these wells in different directions, is a little misleading. They make it sound like a wagon wheel, but in the Bakken all the laterals run North South. When the oil companies were just drilling one well per lease, it was a simple matter of drilling straight down, turning the bit in a short radius bend and drilling horizontal in either the north or south direction. These well tested the formations and more importantly held the lease by production. They required new pipelines, roads, tanks etc.
Now they are trying to save money and produce from the the same pads that have already been established. These wells will be spudded right next door to original producer, but the lateral will run 600 to 1300 ft offset to its neighbor but parallel. To do this instead of drilling straight down they drill at an angel to create the desired offset. But as Fernando and Shallow have pointed out, the pump that will be required later on in the process has to be placed in the well at less than 10 deg, so a fare bit of engineering is required to optimize the well geometry.
As for drilling times. Shale can be drilled quickly with PDC bits, but when a company brags about a record drilled section of hole. They very rarely mention how long it took to recover the drill string. Cleaning the hole is most important, and many holes have been lost while pulling out of the hole (POOH) due to cutting collecting around the stabilizers and bit and causing the drill string to be stuck in the hole.
Drilling fast is the easy part, cleaning the hole is the important part. what you can get away with, differs on location and geology. This is a learned experience and comes in time. By now the data is in, and the drillers will now be going pedal to the metal knowing what the important parameters are.
Another development they may be referring to, is the directional drilling technique. Originally bent subs and mud motors were the normal procedure. But there was a better/more expensive process, called Rotary steerable. This gives much better hole cleaning and potentially faster drilling. I would assume the services companies have dropped their prices to the point where rotary steerable is now the preferred method.( Can anybody confirm this for me please.)
Thank you, Push. “Drill” is yet another self serving, misleading term used by the shale oil industry to keep the public, and lenders, believing the shale oil industry has everything still under control and making big profits. If you use the term “drill” literally, it might be possible to shove a BHA down, around and out 18,000 feet in 16 days in the Bakken but that does not include changing out DP strings, short trips, pumping sweep after sweep after sweep, setting surface casing, cementing, WOC, nippling up the stack, testing, setting an intermediate string, cementing, WOC, testing, and setting a third string thru the lateral with a liner hanger and, 9 times out of 10, tacking the liner with cement, WOC, testing, changing out the stack parameters for ever casing string, testing, etc., etc, etc. In the EF Pioneer may be using two casing strings, surface and long, but still…start to finish a minimum of 25 days on any shale well, if they don’t have any problems and everyone has problems, always. I watch ’em and count the days. That’s a fact. The shale oil industry, as a whole, are a bunch of stinking liars.
While I am on my early morning rant about the shale oil industry, drilling “efficiency,” or the make believe time it takes to “drill” a shale well, has very little to do with why LTO production is not falling the way people believe it should be falling. Service companies have been decimated with layoffs and spud to date of first production into the stock tanks a shale well is still taking 3-4 months; to date of first reported production, 5 months. Production has not declined the way people think because the fracklog stuff is a farce. The shale industry is frac’ing like crazy (all of it’s 2014 inventory is gone, I’ll betcha) and they are gutting those wells because they need the money, and they need to book the reserves. Higher IPs mean bigger EURs. That’s common sense and 50 years of experience. But it’s not internet links, or data, and that’s all people want round these parts. I should hang out with my kind more, uh?
Thanks, Push. I can always count on you for some reality.
Mike
Although it may have been mentioned above, don’t forget the production equipment. I wonder if this is being included in well costs. What does a 640 Lufkin cost? Along with 10,000′ of rods and down hole pump.
My understanding is many of the companies do not include this equipment in their drill and complete costs.
One thing we discussed before was the rapid change in produced fluid rates over the first year. This causes many issues that no company conference calls discuss. Seems like I quoted an article from Liberty Resources which mentioned this issue.
Good point about the Lufkin pump. Surely completion cost would be ruled off once production starts. The pump would not be installed until production drops off, sometime afterwards, and therefore most likely accounted for under a different classification. Capex but not drilling / completion!
A lot of this “new technology” they discuss is old hat. I think these guys simply never worked offshore or in areas where we used pad drilling (Alaska, Western Siberia, Timan Pechora, Venezuela, Canada, etc). What I see improving is the tools, and the coil units are much, much better. I remember back in the early 80s using a coil was terrifying because they parted so much. Costs are down for several reasons: they are squeezing the hell out of contractors (I told you so), the personnel is high graded and scared, so they work their tails off, and I bet they are getting much better prices for casing and other tangibles.
It is indeed “old hat.” But vast improvements have been made in that old technology, for sure. By the by, with regard to Hess’s statement, above: it takes less than 10 minutes to drill up a composite frac plug with CT and CT is generally always needed on a post frac lateral anyway to circulate sand out of the wellbore between stages. Frac plugs that dissolve are neato burrito but whooptie doo. Letting them disintegrate instead of drilling them is not a 300K savings per well. Nu uh.
Bear markets for oil price tend to last a lot longer than bull markets. Are we in for a long low price period?
I very much doubt the current bear market will last 11-28 years, that is unless we have deep, prolonged worldwide recession, which is certainly a possibility.
Any reasoning behind your conclusions that you would like to share?
Not that you asked me but, the first hundred years or so of that chart are the years just after the beginning of commercial exploitation and leading up to the US peak (for 45 and lower API gravity crude as Jeffery likes to point out). The next thirty five years lead up to the worldwide peak (for 45 and lower API gravity crude). If we are indeed past the worldwide peak for good (45 and lower API gravity crude), then past performance will not be a good indicator of future results.
IOW, this time it’s different.
From reading this blog it should be pretty obvious why oil prices won’t stay low for the next decade. It simply costs a lot more to extract oil today than it did 20, 30, 40, … years ago.
Thanks for your insights. So lower production combined with higher cost per energy obtained are price positive factors.
Since fracking is a price negative factor yet only works in a higher priced environment it seems to introduce a new system instability.
Add the new efficiencies and replacement technologies which are price negative factors to the increasing population of car users and oil users which is price positive and one has a mix that will cause a long term oscillation in the price with short term factors causing further price oscillations.
So unless new efficiencies and new technologies such as alternate transport and better insulation of buildings and building heating/cooling changes move forward fast enough, the price will not only oscillate but should have an upward trend. Of course increasing price will cause further reductions in use and modify the rise.
No one is building the replacement production for declining cheap, conventional sources. Global production has been basically kept flat since 2005 only by Canadian tar sands and US fracking. Neither makes any money at these prices, or near these prices. Tar sands projects are often well north of $100/bbl to breakeven on a new development. Unsurprisingly they’ve been getting shelved left and right for the past year.
The frackers are all losing money and a lot of it at these prices. They can’t maintain current production, let alone make net new.
Arctic projects are both really expensive and haven’t worked. In the best case scenario we wouldn’t see them for another decade.
Brazil turned out to be too expensive and technologically difficult. Giant bust with no plans to revive that anywhere near what people thought it would be.
The world is losing a lot of conventional production every year because it’s completely depleted. This means you will get a shortfall pretty quickly if prices are not high enough to make expensive projects work. And the leadtime on expensive projects is very long and the economics and sustainability of US fracking are dubious at best. So a few years of low prices = MUCH higher prices.
Immediate oil price has nothing to do with mid-long term prospects other than what new projects get funded. Oil has extremely inelastic demand and almost as inelastic supply. You change prices by several hundred percent by just being 10% on one side or the other of equilibrium.
I completely agree with your analysis.
Seven year bear market (2008 to 2015)?
The annual price of Brent was $97 in 2008, and it averaged $110 for 2011 to 2013 inclusive, remaining at $99 in 2014.
In any case, given a 24% increase in global gas production from 2005 to 2014 (BP) and a 26% increase in global NGL production versus only a 5% increase in global Crude + Condensate (C+C) production (EIA data for liquids), in my opinion it’s a virtual certainty that actual global crude oil production (45 and lower API gravity crude) was flat to down from 2005 to 2014, despite the trillions of dollars in global upstream capex for 2006 to 2014 inclusive.
Given the foregoing and given ongoing substantial declines in global upstream capex, it seems to me that we are likely to see a substantial decline in actual crude oil production (45 and lower API crude)–the stuff that actually corresponds to the oil price indexes.
Jeff, do you have any data or graph on global oil exports between 2005 and 2014? I would very much appreciate an update on peak oil exports.
I agree that if we were able to subtract condensates from the oil data we wouldn’t like the picture.
I’ve got the (2005) top 33 net exporters through 2013, although there have been some revisions since we compiled the data base, notably Saudi Arabia in 2005.
I’m waiting on the EIA consumption data for 2014, before I update through 2014.
Net exports = Total petroleum liquids + other liquids production less total liquids consumption, and as I have repeatedly noted, almost no one has any appreciation for the massive amount of depletion in remaining post-2005 CNE (Cumulative Net Exports).
In regard to the Six Country Case History (major net exporters that hit or approached zero net exports from 1980 to 2010, excluding China), we can use football terms, with four quarters of depletion. It took them 12 years to hit zero net exports, after a net export peak.
In the first quarter, they shipped 41% of post-1995 CNE.
(Combined production was still increasing)
In the second quarter, they shipped 34% of post-1995 CNE.
(75% depleted at half time, production only down by 6% from 1995)
In the third quarter, they shipped 21% of post-1995 CNE.
In the fourth quarter, they shipped the remaining 4% of post-1995 CNE.
In regard to global crude oil production, as I have periodically noted, it’s very likely that actual global crude oil production (45 and lower API gravity crude oil) peaked in 2005, while global natural gas production and associated liquids, condensate & NGL, have so far continued to increase.
I do follow your arguments since a few years ago and I have gone to TOD archives to read the original articles. I think that your work is very important and that the exports situation is not only responsible for much of the current economic problems but is likely to cause massive damage well before production decline is significantly diminished.
I look forward to seeing your 2014 update.
While we are on the subject of the international drilling market. Us Shale oil is not the only bubble market out there. Here is an article from July 1914. Amazing how boom goes to bust. This story is not getting much air play. Very unlikely anybody that was building a rig with 10% down and on spec, will have most likely walked away from their commitments by now. I suppose the shipyards are now the ones with the problem.
http://www.offshore-mag.com/articles/print/volume-74/issue-7/rig-report/offshore-rig-building-boom-continues.html
Offshore rig building boom continues
Jul 2014
Only 26 of the rigs under construction were not built on a speculative basis. Rather, they were ordered with a firm drilling contract already in hand. That leaves 135 rigs ordered without contracts that need to find work prior to delivery in order to avoid zero-rate idle time. So far, 25 of them have secured assignments. However, some of the other 110 rigs are actually being built with a specific target market or customer in mind, such as the jackups being built for Mexico’s Grupo R, Oro Negro, Perforadora Central, and Perforadora Mexico. All of the rigs are aimed at the Mexican market, namely state-owned operator PEMEX.
Will this be successful? http://www.thetimes.co.uk/tto/business/industries/naturalresources/article4522053.ece
Why not ask Boone?
Hard to tell. There’s no established production, their costs are high, and the natives can be hostile.
No chance. Massive NIMBY opposition. The UK is green and populated.
At one time I thought we could overcome native resistance by offering them free cooking lessons and paella pans so they could learn to est decent sea food. But now I realize they are very demanding natives. We need to add lots of hard liquor, beer, and dart boards to keep them distracted.
They will change from green to the deepest sort of Koch Brothers red the first time the heat goes off during a really cold winter.
That time will come. Depletion and international politics virtually guarantee it, the only realistic but imo unlikely reason it might not come being a successful transition to nukes and renewables.
My bet is that a gas supply crisis hits them like a fist in the solar plexus before they manage a switch to renewables and nukes.
The only thing that scares me as bad as a big new fleet of nukes is the lack of them considering the potential consequences of a lack of energy. Wars are fought on a regular basis over access to energy.
My recent post ”World Crude Oil Production and the Oil Price, August 2015” on Fractional Flow is not about rigs.
It is my take on why I expect oil prices to remain in the doldrums for some time.
Key words/phrases; world [C + C] supply/demand balance, dollar strength, stocks, credit, affordability
http://fractionalflow.com/2015/08/10/world-crude-oil-production-and-the-oil-price-august-2015/#more-1075
Nice post. Should we do a betting pool for the timing to one full month average WTI price above 80 $ per barrel? I’m guessing may 2017.
Fernando, thanks!
What is your best guess for global demand for (C+C) oil by May 2017?
And general access to credit?
HI Fernando,
I have a high opinion of your opinions when the subject is oil or commies. If I had money enough to bet , I would bet on the price of oil being back at eighty within two years myself.
Depletion never sleeps. Capex has been cut to the bone all across the industry except maybe in a couple of places such as Saudi Arabia. All that upstream pruning -from a layman’s pov at least – is going to have a noticeable effect on production within a couple of years.
Everything else held equal, a couple of million barrels a day in legacy production lost is probably enough to put the price back up towards a hundred bucks again. The primary question involved is whether the economy will get better or worse. If it holds about even, oil is going up.
Isn’t that SOP for mining type industries? They shut down or pull back as much as they can when the price is low and go gangbusters as the price climbs.
Historically speaking, it’s old hat.
Break even prices in four North Dakota counties in the Bakken are 24 dollars per barrel in Dunn, 26 dollars for McKenzie, Williams county is 34 dollars, Mountrail is 41 dollars.
There are 63 rigs working in those four counties.
https://www.dmr.nd.gov/oilgas/
Would very much like a link that defines break even and shows the calculation that arrives at those figures.
Me too!
How the number is derived has to have some veracity, some credibility. The bean counters must be doing their job.
http://www.drillingedge.com/north-dakota/dunn-county
Don’t shoot, I’m just the messenger.
Not shooting at you Ronald Walter.
Couldn’t find the financial information in your link, but looks like the average daily BO for a well in Dunn Co in April was 113.7.
So after severance tax, that would be $707,304 of income annually at $24 in the field.
Seems that $14,000
per month OPEX plus another $100K of down hole failure repairs plus another $1 per barrel G & A should be a pretty good estimate of what should be subtracted, pre interest. So subtract $301,000 we end up with $406,000 pre interest.
Say $3 million was borrowed to drill well at 5% interest, no
Principal paid back yet. So pre income tax net is at $256,000.
Those wells must really kick butt before they hit the Dunn Co average to break even at $24 in the field. Or is that $24 WTI, which would be $16 in the field.
Except that . . . .
maybe they don’t want to amortize the payback of that loan and expect to pay it all back in year 5 when it matures.
But they drilled holes 5 yrs ago so those are now due.
It is hard to say what those break even numbers are for, as there is not enough information there to make an independent assessment of them. It is a transparency thing.
FWIIW, the wells in McKenzie (using $26/b at the wellhead) comes out with an estimated EUR for LTO of 800 kb (undisounted) and $8M for the well.
CORRECTED SUNSPOT HISTORY SUGGESTS CLIMATE CHANGE NOT DUE TO NATURAL SOLAR TRENDS
http://www.sciencedaily.com/releases/2015/08/150807220750.htm
“The Sunspot Number is a crucial tool used to study the solar dynamo, space weather and climate change. It has now been recalibrated and shows a consistent history of solar activity over the past few centuries. The new record has no significant long-term upward trend in solar activity since 1700, as was previously indicated. This suggests that rising global temperatures since the industrial revolution cannot be attributed to increased solar activity.”
Leif Svalgaard has very convincingly demonstrated in my opinion that there is no modern grand maximum in the 20th century and that the Sun has not been increasing its activity during most of the warming. I agree that this rules out a role for the Sun in global warming.
A different question is if the Sun is going to play a role in the climate of the next decades. 65° N summer insolation has become real low in the last millennia, and most Sun experts believe that a grand minimum is in the making for the next decades. If it comes to happen I don’t believe it will produce catastrophic cooling (I am not a big fan of catastrophic theories), but I do believe it will be a cooling factor that neither models nor alarmists have considered.
and about those models….
“One of the favorite criticisms harped on by deniers is that global temperature isn’t rising as fast as computer models have predicted. So far, comparisons have shown that observed temperature is on the low end, even skirting the significantly low end, of model results. They generally use this to imply, or say outright, that not only are models “wrong wrong wrong” but the whole of climate science is “wrong wrong wrong.”
Of course it might be a valid criticism of the models, but not of global warming theory which most decidedly does not depend on complex computer models. The models are just our best way of forecasting what the future will bring; they aren’t necessary to understand, or confirm by many observations (not just temperature data), the physics behind man-made climate change.
But it’s still important to understand why models are diverging from observations, because models really are our best tool for knowing what to expect. A new paper by Cowtan et al. has identified one of the crucial reasons, namely, that models aren’t diverging from observations by nearly as much as has been believed so far.”
https://tamino.wordpress.com/2015/07/30/getting-model-data-comparison-right/
http://www-users.york.ac.uk/~kdc3/papers/robust2015/background.html
For those among us who deny Tipping Points in complex systems please understand what the phrase actually means then consider for example which follows.
“….Small changes can make a big difference for the earth system. Beyond certain thresholds, known as ‘tipping points’, ecosystems may collapse and change into distinctly different states.
A tipping point is defined, for the purposes of the Global Biodiversity Outlook, as a situation in which an ecosystem experiences a shift to a new state, with significant changes to biodiversity and the services to people it underpins, at a regional or global scale. Tipping points also have at least one of the following characteristics:
The change becomes self-perpetuating through so-called positive feedbacks, for example deforestation reduces regional rainfall, which increases fire-risk, which causes forest dieback and further drying.
There is a threshold beyond which an abrupt shift of ecological states occurs, although the threshold point can rarely be predicted with precision.
The changes are long-lasting and hard to reverse.
There is a significant time lag between the pressures driving the change and the appearance of impacts, creating great difficulties in ecological management.
The tipping points are a major concern for decision-makers because of their potentially large impacts on biodiversity, ecosystem services, climate change and human well-being. It can be extremely difficult for societies to adapt to rapid and potentially irreversible shifts in the functioning and character of an ecosystem on which they depend. While it is almost certain that tipping points will occur in the future, the dynamics in most cases cannot yet be predicted with enough precision and advance warning to allow for specific and targeted approaches to avoid them, or to mitigate their impacts. Responsible risk management may therefore require a precautionary approach to human activities known to drive biodiversity loss.”
http://biodiversity.europa.eu/topics/tipping-points
Tipping points?! What tipping points?!
Every theoretical concept is possible, but if tipping points are so obvious in climate change, surely it must not be so difficult to demonstrate their existence. And if it is not possible to demonstrate their existence then, why should we believe they do exist?
No worries Javier, you are entitled to believe whatever you want.
Javier, this story may or may not be true. I would like to think it is.
Supposedly for many years geologists recognized that the Yellowstone area displays unmistakable signs of past volcanism but were frustrated in finding the extinct volcano.
As the story goes they were IN the crater of the volcano for years and years while looking for it. The crater was or is vast beyond their ability to imagine it so they just flat out missed it looking for something many many times more obvious and smaller.
We know climatic tipping points exist because we know the climate changes periodically from one general state to another. Ya told us so yourself !!!
We also know it changes sometimes rather abruptly.SOMETHING triggered the changes. Could have been volcanism in some cases , asteroid impacts in other cases, changes in orbital pathways in other cases in COMBINATION with volcanism, maybe changes in plant cover in other cases, plate tectonics as you pointed out obviously play a role. ETC ETC
It took a LONG time for most of humanity to realize they live on a BALL since it is SO big.
Yer tipping points are as obvious as the Yellowstone Caldera if you are willing to look for them on the GRAND scale. After all you insist on talking about TIME on the grandest scale of all- deep geological time- and climate on the largest relevant scale – the planetary scale.
Ok, I do believe in meteor impacts that change climate. I do believe in volcanic traps that change the climate. I do believe in abrupt climate changes brought about for still unknown reasons like Dansgaar-Oeschger events.
If those are caused by tipping points to you then we still believe in the same things.
It is hard to not get caught in semantic discussions.
It is hard to not get caught in semantic discussions.
Which is why In went straight to Chaos Math for the definition of tipping points. Pure mathematics does not get caught up in semantics.
Eons ago during Geology 101 classes Great Extinctions were cited as important Turning Points. The Cretaceous-Tertiary extinction event is the most well-known because it wiped out the dinosaurs but a series of other mass extinction events has occurred throughout Earth’s history. Some were even more devastating than the K-T. The most severe occurred at the end of the Permian period when 96% of all species perished; this along with the K-T are two of Big Five mass extinctions, each of which wiped out at least half of all species. I’m certain you know this but others may not.
Hell, maybe a rock hits the planet and shakes it real hard, precipitating giant earthquakes, volcanoes, and global cooling followed by global warming. I need to put that into a disaster movie script starring Tom Hanks and Sigourney Weaver.
FOR ALL
In a recent post (link below) on Fractional Flow I posted some charts for 3 companies showing developments in their LTO totals by vintage.
http://fractionalflow.com/2015/08/03/are-the-light-tight-oil-lto-companies-trying-to-outsmart-mother-nature-with-their-financial-balance-sheets/
One of the companies Oasis Petroleum had a significant improvement in their LTO well productivity for the 2015 vintage wells. Refer to chart below which shows flow by vintage and by month.
Second month LTO flow improved on average by 60%.
5 month average totals for all wells increased from 38 kb to 62 kb. An increase in the LTO totals for the 2015 vintage above 60% relative the average (of all of Oasis’ wells) after 5 months of flow.
Would anyone venture to explain/make educated guesses on what the reasons for this significant improvement in LTO well productivity for the 2015 vintage may be?
A 60% improvement in productivity in 2015 would have absolutely nothing to do with rig “efficiency,” not in a 5 month time frame. Besides, rigs don’t drill better wells, they can only drill wells faster, or slower, straighter or more crooked. Not better frac techniques from 2014 to 2015, that’s not it, and I don’t think Oasis has that big an acreage position to improve its well production 60% simply by retreating to its sweetest of sweet spots.
This chart fits perfectly into my belief that these shale guys have been taking the corks out of everything they have and producing wells with no regard for reservoir management and longevity. They’re not choking wells back in 2015, they’re gutting them. They need the money. And if they hurry and do their decline curve analysis now, before the real steep decline kicks in, the EUR’s they send to their lenders will look a lot better and keep them on life support a few more months.
LTO production is fixin’ to nose dive.
Mike
Credible.
And contrary to the whole fracklog stuff.
The presence of Blackrock is annoying. It was THEY who managed the bailout money for AIG and other recipients 5ish yrs ago. If there was ever a Fed instrument, it’s them.
And now they are fronting $500M to Halliburton to fund delays by drillers in paying for services.
Very curious. They are a hammer and every problem looks to them like it needs financial engineering to solve it.
Mr. Likvern
I appreciate your compiling the data and extending your range of inquiry in an effort to understand the reasons behind the significant increase.
I would refer you to the three most recent posts by your old ‘cyber nemesis’ Mike Filloon, posted within the last few weeks on Seeking Alpha.
In an important, IMHO, data source, this past Friday’s conference call – with accompanying presentation – by EOG should be remembered in years to come for what it revealed.
Not only was the first so-called high density Frac performed in the Bakken by EOG (well named Riverview 202 32H?), this well had a first full month production of over 80,000 barrels.This amount is the highest all time one month well flow in North Dakota. The lateral is 4,300′ long. This well/frac design was introduced in the EF last year and is now implemented on 95% of EOG’s wells there.
In the Q&A, the CEO was emphatic that the precise Frac geometry obtained with this process will enable EOG to place future laterals within 650′ of each other with no inter well interference.
A professional in the field made a stunning (to me) acknowledgement in the comment section in Filloon’s most recent post (Saturday?). This individual commented on the 16 million pounds of #100 mesh sand EOG used in one well, followed up with 7 million pounds #40/70?, ? million lbs of bigger and a fourth size totaling something like 27 million pounds of sand for one well – one half being the tiny #100 mesh … This man said that companies are now essentially sand blasting the micro fissures with the small stuff and then following up with bigger proppant to maintain conductivity.
If this info is correct, it would explain EOG’s CEO confidence in controlling the frac’d size/geometry as well as explaining the vast, vast amounts of water an sand EOG has been using.
The ramifications of this stuff is enormous.
Coffee,
Interesting choice of word, “cyber nemesis”.
I look at the actual data (NDIC) and where these lead me.
Picking one well out of some 9,000 does not tell the full story. There are certainly some very good wells and surely more to come.
What is more interesting is the overall picture and the economics of it, that is financial profitability is the objective of LTO extraction.
The Riverview wells in Clarks Creek are good, like the Riverview 3-3130H with first production in March 2013 with a total of 505 kb per May-15, first 12 months of flow of above 350 kb.
That well was amongst the 0.5% of the top wells of 2013 vintage.
To me it is really simple, why not let several others do statistical analysis of normal distribution of well productivity for all the LTO wells in Bakken.
A statistical analysis results in a realistic picture of what was.
When will my “cyber nemesis” produce and present an analysis of normal distribution similar to the one below? That analysis comprises all Bakken LTO wells by vintage.
The chart shows that about 10% of the wells of 2014 vintage had a first 12 months total flow of 150 kb.
Mr Filloon seems like a nice guy. I don’t think either he or coffee care about whether anyone in the US oil and gas industry is making any money, how many industry jobs are lost, whether US conventional production is being permanently economically damaged by the shale fiasco or any other things that someone who owns interests in US oil production might care about.
For example, Mr Filloon would tell us the above mentioned EOG well will payout soon as 80,000 x $60 per barrel is $4,800,000 profit in the first month.
I questioned Mr Filloon about his payout calculation method and he agreed that things such as royalties, severance taxes, OPEX, G&A, income taxes, loan principal and interest all have to be paid, and that the low basis in the Bakken at the well head does exist, but that stuff is not the focus of what he writes about.
Last I knew, drilling, completing and producing oil and gas wells is done for economic reasons, and not as an academic exercise.
Again, nothing against anyone who likes to tout high IP, “new tech”, etc. I agree it is interesting.
However, I think ignoring the economics misses the big picture of how shale has caused one of the top three US oil busts since US became a net importer of oil (and could end up the worst bust soon), that same has also caused a natural gas bust of epic proportions, how billions of investor dollars are being wiped out, etc. The list goes on and on.
The production we own an interest in is experiencing its worst economic performance since 1998-1999. If the price stays in the low 40s and or goes lower through the rest of this year and a good part of 2016, it will be the worst.
As to a a Bakken well that made 80,000 barrels in one month, let me point out something. Assume that well cost $7 million or more. It is the top 30 day production out of over 9,000 wells in the Bakken.
Well, we hit one that made over 900 barrels in the first thirty days a couple years ago that cost $70K to drill and complete, including all equipment. A friend of ours hit several in the last two years that topped ours, including a group of 4 wells that produced over 40,000 barrels in the first 12 months. On a proportionate basis, looks like our 100+ year old depleted field’s top recent wells win. Never mind the one in the mid 1980s that IP over 1,000 and produced over 30,000 barrels in the first 12 months. Or the hundreds of wells over 100 years ago that IP over 500 barrels.
Of course now, there is not one rig running around here. That is because it is pretty much 1950s USA around here. People using and risking their own money, and of they have investors, caring about the relationship with them.
Look how many shale companies have screwed over the common stockholders by diluting shares, or bond holders by issuing new debt that is senior in priority to the old debt.
Also, I don’t think I heard us conventional folks chanting Saudi America, energy independece or other slogans. We were too busy minding our own business, thankful to be making excellent returns on our investments and providing deserving Americans with good paying jobs.
Well the shale boys with their complete disregard for economic responsibility sure ruined that. It would be different if they were truly making money. But they are not.
So I guess some can talk about impressive IP, I’ll stick with the economic fact that many US businesses have failed and many more will, and worse, many US citizens likely lost the best paying job of their lives.
Do these wackos even bother to sit down and count truck trips required for 27 million pounds of sand and then extend that to every well? Call it what, 60,000 pounds per trip. What is that 400+?
On a tablet, can’t do the numbers.
Ha-ha. These guys are petrified of the stock price errr personal net assets fall. They are pumping it.
Watcher, it might have happened once and if it did it cost every bit of 10 million, just the frac. That size frac would take 350 hours of constant pumping, never stopping, and require 500,000 barrels of fresh, potable water. It does not happen in drought stricken S. Texas I assure you.
Thank you, Shallow. That is well said.
My employees are my family and the stress of trying to keep them employed and their wives and children in their families cared for, is overwhelming at the moment. For the first time in a half century, I don’t know if I can survive too much longer. My story is no different than yours are the entire rest of the oil and gas industry; people are suffering… and they are scared. Entire world economies are changing as we speak because of this current situation we are in regarding crude oil prices and market imbalances. To deny the role that the US shale oil business has had in this mess is ignorant.
I resent the hell out of people who think this is a game, a way to pass the time by constantly touting the wonders of shale oil and shale gas in the face of so much adversity by so many. I can read the same shale oil bullshit on the internet; we all can. We’ve been hearing it for 8 years. It’s a miracle, its a revolution, it will make us energy independent.
Right.
The shale oil industry is an economic failure, the extent of which is going to be the stuff books are written about.
Mike
Hi Mike,
I am sorry I cannot offer any assurance the price of oil will go up in time to save your business.
But it seems safe enough to assume that your extended family possesses the same toughness and work ethic you do so the likelihood of any of you winding up on welfare or charity for more than a few weeks is very slight.
Your sort always finds a way to be self supporting. What doesn’t kill you leaves you leaner and meaner.
Was it you who once said your first boss told you all you could take off for lunch was one glove ? And that you grew up just like him?That was Toolpush I think but the work ethic is the same.
Thank you. I’ll be fine and so will my employees. I put the t in tough. I just don’t like this fantasy shale game people like to “play” around here. I come around here hoping to find out something about my future, everyone’s future, and big frac BS doesn’t sit well with me.
Have you ever noticed, Mac, that for all the hubbub about big wells, and new technology, not a single one of these shale oil CEO’s have had the balls to step up and say…here’s why we are in trouble and here is what we think we can do to get out of trouble? Not one of them. All they can do, thru their websites, is to defer and deflect.
Shallow is correct, millions of Americans invested their retirement plans in the deception the shale oil industry portrayed about it’s success. They lost their shirts. Good men and women are going home now out of work. Anybody still promoting this shale oil industry should be embarrassed.
Mike
OFM,
Just for the record, the one glove lunch break, is a Mike story, not mine.
Mike, again we’re conventional players. Even so we agree 100% with you. Talked to plenty playing shale, they are wide open, reservoir be damned. Just what we heard mind you. We hate shale as much as you do. Also agree…drop is coming, big time.
Hi, Richard. Me too; I have some LTO MI but I wouldn’t touch the stuff with Trump money. I’m like you guys, minimum 3:1 ROI or we don’t even saddle the horses.
Don’t wander off too far; sometimes I need bailing out around here.
Mike
Now, let us try a different perspective.
One of the great tools in the industry is to plot daily/monthly/annual versus cumulative.
In the chart below will anyone venture a guess for what the EUR may become for the average of all wells?
221,590.6 barrels?
If I say 591 even and win, what is the prize?
Let me show a different flow vs cumulative plot. In this one all the LTO wells in Bakken started since Jan -08 and that had at least 12 months of flow since start up are grouped according to their 12 first months totals and data per Apr-15 (this gives cumulatives for 6+ years for the oldest wells). Data is LTO only.
Note how the “poorer” wells decline slower than the good ones (total decline from peak to tail).
In the chart is also embedded information the portions and number of these wells in each group.
Great chart, thanks.
Rune,
Thanks for the charts and articles.
Oasis says they are now drilling “High Intensity Wells”. More sand, more frackstages, longer laterals, etc.
Hi Alex,
I have been through all the well data (as per May 15) for 15 of the big companies in Bakken. These data has been whipped for confessions with several devious techniques .
Of these 15 only Oasis had a significant jump in productivity starting with the 2015 vintage.
So I look for explanations.
Rune,
this chart from your article shows that Oasis’ wells performance was quite mediocre until this year and has even deteriorated between 2011 and 2014.
https://fractionalflow.files.wordpress.com/2015/08/fig-1-well-productivity-and-proftiability.png
Maybe Oasis is just catching up with the other Bakken players in 2015?
This internet stuff sure gets confusin.’ Six months ago they were drilling wells in the Bakken and not frac’ing them at all, three months ago they were frac’ing them with slick water and no sand, now they are spending more money than ever and frac’ing everything with “high intensity” frac’s up to 9 million pounds, even 27 million pounds, Holy Cow!! At 17 dollar net oil prices too.
This picture is from Oasis latest presentation. It contains a lot of stuff like this
Mr. Likvern
Just did a real quick check … in addition to the implementation of these newer frac’ing techniques, Oasis has pulled in dramatically to their highest value acreage, the Indian Hills area.
Although Oasis has over 300,000 leased acres, it is relatively far flung throughout the Bakken and not especially ‘high value’.
The three rigs that Oasis currently has running are practically within spitting distance of one another (as per the Gis map) in the highly productive Camp field.
Coffee and AlexS, thanks.
In Jan 15 Oasis started 3 good wells in Alkali Creek (Mountrail) and some of the wells in Baker (McKenzie) looks nice. Then there is one (started in Mar 15) in Sanish that is very good.
Their wells in Camp are decent.
From there we just have to see how the wells with these new techniques develop.
Ya, I was wondering too where the hold-back-for-higher-prices theory went.
Which is utterly consistent with damn near everything since 2008. Absolutely nothing is transparent now.
You don’t need to lie when things are good.
The EPA has a big black eye today and a heaping huge dollop of crow for their evening dining pleasure.
You do as we say and whatever we do is none of your business.
The collapse of the EPAs diktats is probably very near. One of those tipping points.
Yes, the dark and sinister forces of evil never rest. They will bring down all those of high moral character and good intentions. All purveyors of a non-toxic world will be crushed in the name of money and greed. Every mistake will be amplified and crucified. Whoa be to those who get in the way of the machine. Toxic pollution and mutated children will be the rewards you reap, and small amounts of money covered with the deadly slime of guilt and remorse.
Resistance is futile.
You ought to face it, them good ole boys are gonna have fun kicking the EPA while its down. And wait until OSHA gets on their backs for endangering the lives of the poor guys who breached the dam.
Come on Fernando, they have been kicking the EPA for a while now. I remember when you could see the air around here and some rivers ran black with pollution. Ah, the good old days when the birds turned away from the chemical factories and their settling ponds washed downriver every good flood.
The best one was when I was about a mile downwind of the big chemical factory driving down the road when a blast of vapor hit me and I simply could not operate my lungs. Yep, that was the 60’s and 70’s. Grey domes over every city and some would just bring tears to your eyes as you entered them.
I bet all the young people can’t wait to experience those toxic times. Cancer and autism isn’t enough to get them swinging into action. Twenty-five percent asthma in high school students is not enough. I guess air you can see, colored dead rivers, toxic land and waters, ash falling from the sky like snow in June; that will do it. They will get off those X-boxes and I-whatevers and actually do something. Or at least Twitter about it. Oh well, I’m probably dreaming again.
I don’t have any trouble at all remembering the air in Washington DC burning my eyes to the point that I flat out refused to go there without first calling friends there to check on the local weather.
Someday people will eventually accept the now indisputable truth that a VERY SUBSTANTIAL PORTION of all our health problems are associated with pollution of many various sorts. It’s not just ordinary smoke and particulates. It’s trace amounts of hormone mimics in our food and water. Chemicals leaching out of food packaging. Chemicals put into our food. Food that has been so processed that the food itself can be described as mildly toxic over time.
I have never seen a good layman’s level popular press article on the effects of fluoride in drinking water on the microbes constantly exposed to it as it is diluted headed downstream- setting up a perfect situation for evolution to create nasty fluoride resistant strains. Gotta happen given time.
We are ripping big holes in the insanely complex web of life that keeps things stable via negative feed back effects. One day we are going to wipe out a key predator that turns loose a bug that will wipe out a staple crop for a year, maybe five years while we figure out a way to restore production.Spraying is ok if the alternative is no production but lots of places the chemicals, the machinery and the skills needed to use them are not available.
Pray to the God(s) of your choice for Pearl Harbor Wakeup Events.
Once the pollination cycle is broken, they can weep all they want. Maybe they will try to produce little robotic “bees” and other “bugs” to try and take over the job.
It won’t be much fun living in a world full of flies.
EIA drilling productivity report out for September predictions.
US Shale oil production should drop a total of 373,000 from end of May to End of September (month averages) or at an Annual rate of 1.492 Million barrels. A 26.44% annual decline rate. Quite stunning.
Yes, a pretty steep drop is predicted. The top early this year was revised somewhat lower as well.
When all is said and done I want Fernando and Javier to know that I have respect for their intellectual abilities and that I agree with BOTH of them in certain respects in regard to the climate debate.
For one , they are in my opinion with ninety nine percent confidence right about the anthropogenically connected rise in CO2 concentrations NEVER getting ANYWHERE CLOSE to the figures used by the climate establishment. Score a BIG touchdown for them.
Additionally somewhere upthread Javier posts a comment to the effect that the monomaniacal focus on climate is keeping the establishment from paying very much attention to OTHER potentially or actually equally dangerous problems.
SCORE ANOTHER TOUCHDOWN for them. My reasoning in this respect is as follows. In terms of the ultimate big picture you can kill a man with a sword by chopping his head off. On the other hand you can also kill a man with a small sharp stick by poking him in the eye just right. He is dead either way.
IF we do not solve some of the OTHER potentially “fatal to life as we know it” problems we may not need to worry much about forced climate change. Energy wars for instance could bring on a flat-out WWIII.
Continiously expanding the amount of land under the plow and the heavy use of synthetic fertilizers could possibly result in reaching a tipping point that will result in ecological collapse before climate change brings on such a collapse.
If we do not succeed in dealing with some truly existential economic and political problems SOONER we may not have to worry about catastrophic climate change LATER.
SCORE ANOTHER touch down for them.
And they JUST MIGHT actually have a case about the lack of PROOF positive in respect to any easily identified climatic tipping points-strictly defined – meaning based on fast positive feedback-( although I am personally certain there IS good evidence for such tipping points -such as extensive volcanism at times.)
This does not disprove the existence of such tipping points but it does mean as Javier points out we do not have to attribute the change of seasons to tipping points as such. There is no technical argument to be made so far as I know that the seasons change due to clear and obvious positive feed back effects. The change of seasons is more gradual and predictable than changes we usually think of as being brought on by positive feedback.
I believe that gadflies are extremely useful factors in any serious discussion. Gadflies help us keep our feet on the ground and not go off tilting at potentially non existent windmills while ignoring real and immediate potentially existential problems.
Everybody should watch the TED talk ” The Other Inconvenient Truth” Ron linked up top.I posted a long comment on it upthread someplace.
It speaks highly of you, Old Farmer Mac, that you will take a step back to reflect on the many things on which we agree instead of on the few that we disagree.
I was the one that brought the TED talk “The other inconvenient truth” to the attention of Ron and the others in a comment at the last post. Jon Foley is the lead author of that Nature article on organic farming yields that we discussed. I was truly impressed by the TED talk, the quality of its data and the importance of its message.
I look forward to continue exchanging information and arguments with you on any subject, not only climate change. It doesn’t bother me the least that people hold opinions contrary to mine. That’s part of accepting diversity.
Tipping point. When the natural forcings produce an increasing feedback that changes a natural state or equilibrium point.
https://www.youtube.com/watch?v=kCxDOs5Taew
Dr. Hansen talks about tipping points, carbon tax and organized denial. He specifically states that delaying action on carbon reduction is a crime against humanity. Do we really need more proof that the Arctic is melting or the glaciers are disappearing?
I don’t know if our actions will be enough but I am sure I know where continued inaction will lead.
Proof that he is deranged and dangerous.
Not agreeing with him is the same as being a genocidal.
No, just proof that he sees the predicament and you don’t.
He is just not psychopathically aligned to BAU and is truly concerned with the world’s future. He also knows how to add and realizes what the numbers mean.
Yeah sure, the same Jim Hansen that says:
“The trains carrying coal to power plants are death trains. Coal-fired power plants are factories of death.”
I hope he sticks more to the evidence in his research, because the guy clearly has lost touch with the ground.
Javier, you and Fernando have made claims that are nothing less than completely delusional. You still have not explained your preposterous claim that the global energy imbalance is only 0.6 watts per square meter. You have zero basis for criticizing how grounded a real scientist is when you have a record of making wildly ungrounded claims yourself.
Bullshit
I have never made such a claim. I have no idea what the global energy imbalance is. If I needed to know it I would research it in the scientific literature.
Don’t you have anything better to do than make false claims about me?
hansen is so extreme I usually take several months to go through his papers. After they get published one has to dig deep to see the errors and inconsistencies. In my case I focus on his errors in paleogeography or outlandish claims he makes about prior ages’ sea level.
So post some examples. Would like to see where you think he goes wrong. I have access to a number of scientific journals so you can cite the sources directly and list your objections.
Mac, I’m glad to see you are so open minded. The key is to remember that we face both an energy crisis and climate change. I see the two problems together as a puzzle one has to so,ve. But solving it gets harder when we get thrown so much politically biased information.
If you check my Twitter you’ll see I’m trying to influence cornucopians who happen to be hard line republicans, and I think I may be having a subtle effect convincing them things aren’t exactly as they’ve been told.
If you have clear skies above this evening and night, the Perseids are showering meteors.
Doesn’t cost a dime to view the stars and Milky Way.
Also, if you have a pair of infinite focus binoculars, you can see many more stars other than Orion or Ursa Major.
Thanks for the reminder, cloudy here now but hoping for Wednesday and Thursday night clear skies.
Had the price of oil remained constant around the forty dollar range, the Williston Basin and Bakken might not have ever been developed as an oil play to the extent it has.
Today, it is adding and supplying an additional 365 million barrels per year. The glut that crashed the market, seems to be that way. Now, it is being relentlessly beat upon.
The beatings will continue until the morale improves.
Whose fault might that be?
China has begun the process of devaluing their currency. It dropped 1.9% in matter of a few minutes against the dollar. With the issues China is currently having a 30% devaluation is in order. Debt deflation is going to out weigh any food price inflation they maybe experiencing. The hangover from the party thats been going on since 2008 is setting in.
Interesting enough when the Fed does QE or cuts interest rate they export inflation to other countries. But when the BOJ or ECB or PBoC devalues their currency they export their deflation to other countries. This move wont necessarily be dollar positive and there for oil negative.
When PBoC devalues the yuan it applies to the Yen as well. China devaluing should push USD/JPY down. and if they do anywhere near a 30% devaluation over the next year. USD/JPY will unwind taking global equity markets with it. Which will be met with more Fed QE.
Nothing like a global currency war! Where all countries are trying to preserve BAU for as long as they can by devaluing their currency. We’re headed to a point where global trade just stops happening as currency will no longer get accepted as form of payment.
An analysis on the US trade figures shows the increasing danger of global recession.
Inside The June Trade Report——The Shrinkage Continues
This should be taken into account when modelling or predicting oil prices and production.
In my opinion due to the effects of oil peak, the global economy is shifting into a new different state. It looks like around 2007 we passed a tipping point.
There are no tipping points.
I have been told that any big change has its tipping point. I learn.
We had another tipping point when Saudi Arabia refused to reduce its oil production. We are likely to have another tipping point when all those oil price hedges expire and shale companies’ credits are due for review.
This problem appears to be easy to solve. We should just set an international conference, perhaps in Paris, so all major oil
pollutantsproducers can reach an agreement on a global oil production reduction to match demand. Of course an obstacle is that countries don’t trust each other and nobody wants to do the cutting alone, because then their economies will be at a disadvantage while the global reduction is not achieved.It is just too bad that our global leaders are occupied with a more pressing and damaging problem. The United Nations Oil Change Conference will have to wait for a more propitious moment.
In the meantime we are very likely to run into several more oil tipping points.
Sanitation in New York City pre-oil age was no picnic.
A few pictures to view:
http://www.19thcenturybottlediggers.com/sanitation101.htm
Oil helps a lot in keeping you clean.
It looks like the rig count maybe self correcting to the lower oil price from the little bounce that has been going for the last few weeks. north Dakota count down to 70 today. 73 on last Friday, and 75 just a few days before hand.
Lifting of Sanctions Will Lower Oil Prices and Boost Domestic Economy If Managed Well
August 10, 2015
http://www.worldbank.org/en/news/press-release/2015/08/10/iran-lifting-sanctions-will-lower-oil-prices-and-boost-domestic-economy-if-managed-well
Iran’s full return to the global market will eventually add about a million barrels of oil a day, lowering oil prices by US$10 per barrel next year, according to the World Bank….
Excerpts from the report:
“With the nuclear deal and lifting of sanctions, Iran could gradually step up oil exports. While it will take time to resume oil production because of under investment in the sector, most observers predict that in 8 to 12 months, Iran’s crude oil exports can reach pre-2012 levels. This means an extra 1 mb/d of crude oil hitting the oil market. Simulations with a multi-country, multisector computable general equilibrium (CGE) model show that, without any policy interventions by OPEC members and other oil producers, international oil prices will drop by 14 percent. Assuming that the futures oil price for delivery in December 2015 stands at $66 per barrel, this will reduce oil prices to an estimated $56.
While the resumption of Iran’s oil exports to pre-2012 levels will take time, the immediate reaction of the oil market could be to take into account Iran’s 30-40 million barrels of stockpiled crude oil and condensate stored in the Persian Gulf. Many observers believe that Iran could immediately export about 400,000 – 500,000 barrels per day from this stockpile – which would then last for about three months – and get ready in a few months to increase oil exports substantially. Thus, the short term impacts on oil prices will still be a decline but less than what is estimated when Iran’s exports get back to full throttle.
Since the nuclear framework agreement of April 2, 2015, there has been renewed interest from foreign multinationals seeking to invest in the oil and gas sector. Iranian officials estimate that the oil and gas sector needs $130 – 145 billion in new investment by 2020 to keep oil production capacity from falling, of which the large South Pars gas field alone requires $100 billion.”
OPEC Supply Reaches 3-Year High as Iran Pumps Most Since ’12
http://www.bloomberg.com/news/articles/2015-08-11/opec-output-reaches-3-year-high-as-iran-pumps-most-since-2012
OPEC pumped the most crude last month in more than three years as Iran restored output to the highest level since international sanctions were strengthened in 2012.
The Organization of Petroleum Exporting Countries, raised output by 100,700 barrels a day to 31.5 million last month, the group said in its monthly market report, citing external sources. This increase came even as Saudi Arabia, which often curbs output toward the end of peak summer demand, told OPEC it cut production by the most in almost a year.
Iran increased output by 32,300 barrels a day in July to 2.86 million a day, the highest since June 2012, according to data OPEC compiles from “secondary sources” such as media agencies and international institutions. Sanctions to deter the nation’s nuclear research took effect in July that year.
Iraq, OPEC’s second-largest producer, led gains in output last month, increasing production by 46,700 barrels a day to 4.1 million, the group’s data show.
The report also includes data directly submitted by OPEC’s 12 members. In these figures, Saudi Arabia said it reduced output in July by 202,700 barrels a day to 10.36 million. That’s the biggest reduction since August 2014. A group total was unavailable for these statistics because Libya didn’t provide a production estimate.
“Domestic consumption in Saudi Arabia already peaked in June,” Giovanni Staunovo, an analyst at UBS Group AG in Zurich, said by e-mail. The pullback “might also be related to challenges in keeping exports elevated in an environment where other OPEC countries also fight for market share.”
This guy was on Talk Radio: Making the case – we all go to hell if we don’t burn mountains of carbon.
http://www.wsj.com/articles/book-review-the-moral-case-for-fossil-fuels-by-alex-epstein-1417477909
How many Billions was spent on “The Grid” in Iraq?
In 2011 The amount the U.S. military spends annually on air conditioning in Iraq and Afghanistan: $20.2 billion, according to a former Pentagon official.
http://www.npr.org/2011/06/25/137414737/among-the-costs-of-war-20b-in-air-conditioning
That’s more than NASA’s budget
Centralized Power Generation is becoming unaffordable. Latest Coal Plants in US came in ~ $6 a watt. Then you have to somehow ship hunks of carbon from distant lands. In NW Florida most coal for electricity comes from Colombia. The Energy Future is Distributed.
Alex Epstein”As fossil fuels are used more climate related deaths fall…” He also says global warming is not a problem. “a modern coal plant is one of the cleanest sources of energy”. He is for DDT use.
The guy is a kook. Nice stories to tell children of big energy businessmen’s children at night.
You can listen to his interview: http://www.greentechmedia.com/articles/read/the-moral-case-for-fossil-fuels
$6 a watt for a coal plant and still have to buy the energy? Does that include strong pollution controls and carbon sequestration? Otherwise it could never compete with solar and wind power.
Special Report: How the rise of a mega solar panel farm shows us the future of energy
https://gigaom.com/2015/01/20/a-special-report-the-rise-of-a-mega-solar-panel-farm-why-its-important/
$6/watt includes reasonably strong conventional pollution controls (sulfur scrubbing, etc.), but not carbon sequestration.
No carbon sequestration puts the actual cost out of sight. No real competition to alternative power.
Never trust anything on climate published in the WSJ. It was purchased by Murdock in large part to provide a forum for crackpot right wing propaganda. There is at least $100 million spent each year pumping out anti-science propaganda. In many cases it is extremely effective. The resources on the other side are massively more limited. The net result is that the small number of people who actually understand the science have to waste their time here confronting the nonsense.
Put simply, no one denies that climate changes. Instead what is questionable, unproven and an acceptable matter for denial is the theory that it can be caused by man. Being a fiscal conservative and Republican I firmly believe the whole theory will completely unravel and taint all future scientific endeavors as the years go by. Further by the left wing scientists own calculations, the controls they want to institute to somehow stop the climate change they say they are observing would completely ruin our economy and necessary standards of living. Even crazier, the controls would have little to no positive effect on the climate.
What’s really sad is that a lot of voters in this country have been conned but are unfortunately unable see it because they never take their eyes off the liberal biased mainstream media which never stops to tell the other side of the climate change story in the same way talk radio and the conservative media outlets do. Just as an example, the news came out a month or two ago about how the global surface temperature data was “doctored” to portray 2014 as the hottest year ever, but no mainstream media outlet paid any attention to this bit of news. You had no choice but to read about it on Breitbart or WND, or watch The Blaze channel on TV. When all the mainstream media outlets are caught red-handed not telling the full story about heavily politicized science like climate change, they look incredibly shady, as if they have an ulterior motive involving the current White House administration on not getting the truth out to the American public.
Wow, Don. Proof of your statements followed immediately. They hound anyone trying to discuss the actual science and solutions and try to politicize it or use pseudo-science to muddy the waters. You are so right, they waste everybody’s time and wear down their patience.
Marble — So true! It is quite sad. This last guy did not even attempt to provide any fake evidence. At least with Javier and Fernando they try to cite some reputable study to support their misrepresentations. It then makes it easy to point out that the study doesn’t say anything like what they think it says.
EY (Ernst & Young, the International accounting firm) did a cost study over a year ago. I think that you can look at this, and input current costs down by 33% from what is shown. And perhaps assume that best area wells are being drilled so production is 10-15% better than average.
http://www.ey.com/Publication/vwLUAssets/EY-US-upstream-costs-prices-and-the-unconventional-treadmill/$FILE/EY-US-upstream-costs-prices-and-the-unconventional-treadmill.pdf
Excellent article Clueless.
“It should be noted that a negative outlook in free cash flow in the initial years of an unconventional oil and gas development project is not notably different from what is generally seen in most conventional oil and gas development projects. However, what differentiates unconventional developments is the fact that in these initial years, essentially all cash flows generated by the project will need to be immediately reinvested to fund the drilling that will in turn deliver the subsequent period’s production growth and cash flow — what can only be described as the unconventional “treadmill.” This high reinvestment requirement thus makes these unconventional developments highly vulnerable to declines in commodity prices. Such a drop would impact current-period revenues and cash flow, as well as subsequent-period production if reinvestment is reduced or delayed.”
How prescient..
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