May Non-OPEC Oil Production Declines Again

260 thoughts to “May Non-OPEC Oil Production Declines Again”

1. I picked a date, November 2017, one year before the peak in world oil production in November 2018. For all oil producing nations, I subtracted their production in May 2022 from that data, Nov. 2017. There were 23 who had gained production from Nov. 2017 to May 2022 and 65 who had lost production during that period.

   The below graph is the combined production of the 23 nations that increased production between November 2017 and May 2022. In January 2013 they were 49% of world oil production. Today they are 60% of world oil production.

   

   1. An entire thread about Non-OPEC and not one comment about fracking…

2. The below graph is the combined production of the 65 nations that declined production between November 2017 and May 2022. In January 2013 they were 51% of world oil production. Today they are 40% of world oil production.

   Notice that this group had already declined by over 1.9 million barrels per day from their previous peak in Nov. 2016 by the time the world peaked in Nov. 2018.

   These 65 nations were, in May 2022, down 7,091,000 barrels per day from their previous peak and down 5,170,000 barrels per day from the World peak month of Nov. 2018.

   The data in both charts is through May 2022.

   

   1. Hey guys, from July 2017 to May 2022, the combined production of the 65 countries in the loser’s category has declined a total of 6,857,000 barrels. Divide that by the 58 months from July 2017 to May 2022 you get an average decline rate of 118,000 barrels per month or an average decline rate of 1,418,696 barrels per year. This group will continue to decline. Perhaps not at this rate but very likely at about one million barrels per day per year.

      The gainers have almost petered out. They will not even come close to making up for what the losers have lost. People, nothing could possibly be more obvious than the fact that the peak in world oil production happened four years ago. Why has the mainstream media or the oil world not recognized this fact? Why do we even have doubters on this blog? This baffles me!

      1. Ron,

         There have been many times that peak oil has been declared and every time so far that peak has been breached. This is likely to be the case for the centered 12 month peak in August 2018 of roughly 83 million barrels per day, we will see in a couple of years if this peak holds, my expectation is that it will not, but perhaps the peak in 2028/2029 of about 85 to 86 Mb/d for the centered 12 month peak (likely in the July 2028 to July 2029 time frame) will be the final peak in World crude plus condensate output.

         1. Dennis, just look at the data. There has never been a time in the past where half the world’s oil production declined by over 1.4 million barrels per day per year for five years.

            But, I will give you the benefit of the doubt. If you can show me where such a decline has happened before, then I will kiss your ass on the courthouse square and give you 30 minutes to draw a crowd. 🤣

            I really don’t mean to be so sarcastic Dennis, but you just acting like this has happened many times in the past when I know damn well it has not bothers me just a tad.

            1. Ron,

               We will see how the future plays out. Peaks have occurred before. In 1979 five nations produced more than half the World’s Oil (Soviet Union, Saudi Arabia, United States, Iran and Iraq), it was actually 63.7% of the total. Five years later in 1984, those five nations produced 7.3 Mb/d less than they did in 1979 (an average annual decline of 1465 kb/d.) The world managed to muddle through. You want to be careful with “never”. I will forego the kiss.

               In that case there was a major war between Iran and Iraq, recently there has been a pandemic which reduced demand and messed up supply chains, this may pass.

               1. Dennis, the decline for these 65 nations, more than 50% of world oil production at the time, started about two and one-half years before the pandemic. And their combined production had declined by over three million barrels per day before the pandemic.

                  No, I use the word never with absolute confidence. This has never happened before.

               2. Ron,

                  You said:

                  “There has never been a time in the past where half the world’s oil production declined by over 1.4 million barrels per day per year for five years.”

                  In 1977 five nations (Saudi Arabia, US, Iran, Iraq, and Kuwait) produced 51% of World C plus C. In 1979 those 5 nations produced 27.23 Mb/d of World output and in 1984 they produced 18.08 Mb/d or 9.15 Mb/d less than 5 years earlier which is an average annual decline of 1.83 Mb/d. So there was a time indeed when half the World’s oil production fell by more than 1.4 Mb/d per year for 5 years.

      2. well thanks for cheering me up this sunday morning !

      3. Agree Ron! Dennis – A new high doesn’t materialize out of thin air at some future date, there needs to be steady incremental progress. You have yet to provide any meaningful data or chart that shows how such a future scenario occurs. On the other hand, we now have countless charts of just the opposite. The data doesn’t lie…as for natural gas peaking in 2030-35, somehow that doesn’t make sense. Peak oil means peak everything, that’s a big reason so many issues around the world currently. The strangest part of Dennis’ position is that he believes the EVs will have a significant impact yet world oil will reach a new production peak, those 2 issues seem they can’t coexist…

         1. Kengeo,

            Consider World C plus C output in the chart below. For nearly two years the trend in World C plus C output has been an annual increase of about 4.8 Mb/d. The bottom line is that World output has recovered strongly since June 2020. Output in the US, Canada, Brazil, Norway, Guyana, Suriname, and Argentina will increase output by more than output will fall elsewhere up to 2028, potentially Saudi Arabia, Iraq, and UAE may also increase output by more aggressive resource development.

            I expect the future annual growth rate will be around 800 kb/d for World C plus C output.

            

            1. Of course, World production has been recovering since June 2020. That was the bottom of the largest demand hit that has ever happened. However, the recovery is now petering out. May 2022 production was below October 2021 production seven months ago. It will recover somewhat through August and then begin, at first, a slow decline. I expect the decline will speed up in two or three years. August will be the post-pandemic peak.

               World oil production for 2023 will be below 2022 production.

            2. Dennis – Thanks for giving more detail. This is useful. Assuming 2021 global prod. was ~89.9 MBpD, then by 2028 the previous peak would be surpassed if net annual increase was 0.8 MBpD.
               It also sounds like you believe all of this increase in production will come from US LTO.
               Note in Ovi’s post above he has US annual increase of 0.24 MBpD, significantly less than the 0.8 needed.
               I’m not sure how your analysis treats Ron’s Loser65 group, but they lose more than 1 MBpD annually.
               It sounds like a truly optimistic stance is that Loser65 might be offset by potential gains from a couple major players (US-Canada-MiddleEast+Russia)…If you were making the argument that there is no net oil production growth for the next 5-6 years, while I wouldn’t agree, I don’t think I would push back too much, as it’s feasible (yet unlikely as we should continue to see net annual decreases in production, as Ron believes/points out). For your scenario, do you believe the Loser65 group stabilizes or at least it loses less annually in the future?
               I know you’ve made so many past estimates that have proven to incorrect, but I think it’s clouding your perception/judgment. I actually think your chart from 10 years ago is spot on, and remember that additional URR won’t have a significant change in the production curve from a timewise perspective…
               If prices stay this high I’m sure we will see (continue to) demand destruction, that’s another factor that doesn’t support annual increases in production…but at least we have a metric to test your hypothesis (World growth quarterly in oil production of approx. 0.2 MBpD). On the other hand, I believe the losing hypothesis is that annually loses of at least 1.0 MBpD will be seen (-0.25 MBpD). Either of these should be very easy to tell apart…

               1. Kengeo,

                  Nearly all of the decrease in output since 2017 has been from OPEC, some of this has been from the 10 OPEC nations subject to quotas since Jan 2019 and a large part has come from Venezuela and Iran. Basically a lot of the 65 losers decline was simply due to sanctions on Iran and Venezuela and OPEC cuts due to oversupply since Jan 2018. If we take OPEC and Russia out of the picture, the decline is not very large.

               2. Kengeo,

                  I don’t think the analysis from 2012 is accurate, it did not account for unconventional oil output which has proven to be much larger than I anticipated in 2012. Chart below has my current best guess for unconventional and conventional C plus C. Unconventional is extra heavy oil (API gravity less than 10 degrees from Canada and Venezuela) plus light tight oil.

                  

         2. Kengeo,

            Much of the increase in World output comes from US tight oil. For a high oil price scenario (where brent oil price remains above $90/b in 2022$) I get a scenario with a URR of about 90 Gb with an output peak at 12 Mb/d in 2030. In 2018 average annual tight oil output was about 5 Mb/d so this would be about a 7 Mb/d increase from 2018.

            Average annual output in kb/d for US tight oil for scenario starting with 2018

            4967
            6528
            7791
            7338
            7634
            8332
            9176
            10116
            10908
            11387
            11675
            11845
            11927
            11839
            11477
            10966
            10258
            9487

            

   2. Ron,

      Excellent charts. The 65 Losers should put the FEAR OF GOD into the public, but it won’t. When I continue to debate peak oil on Twitter Spaces, the rebuttal I get all the time is that Peak Oil is just an issue of Under-Investment. Furthermore, they suggest we should be tapping into every barrel of oil we can to continue this wonderful experiment I call…

      DESTROY THE NATURAL SYSTEMS of the planet to an even greater level to make even more impossible to support 8 billion souls.

      Homo Sapiens… Very Smart & Intelligent, but also quite Stupid and Unwise.

      GOD HATH A SENSE OF HUMOR…

      steve

      1. Steve, many of the same people think that Peak Oil is 10 years in the future and cheer the the discovery of the few fields that were in the category of yet to find. I wonder if they have thought about whether the world will be better off if they are right (which they are not) as the world population will then be 8.5 billion.

      2. A lot of group think going on with the narratives in the news and in politics. No one wants to address the “elephant in the room” which is we are running out of scarce natural resources. It would be wonderful if someone actually clearly described what the energy transition is transitioning to and how it will impact life in the future.

         In the mean time I have meet with several of my friends who run large PE firms that were mostly dedicated to Upstream Oil & Gas Investments. They related to me that they can only raise capital if it is for green transition or technology related to the green transition. Without capital, the charts above will look very different. Invested financial capital is a huge component of oil and gas reserve replacement and production. Just sayin.

   3. Ron

      A very interesting analysis and a rather startling result. However the very startling result makes one wonder from were did such a high annual decline rate come.

      To answer that question, it was necessary to replicate your analysis to better understand from where the high decline rate arose. Looking at the countries with the biggest drop from November 2017 and May 2021, two countries stood out, Russia and Iran.

      I don’t think that these two countries can be considered to be in decline. The EIA’s Russian production for May is just a fluke of a four month delay in reporting. It will go up since we already have preliminary results for August. Iran’s production has been slowly increasing back to its sanctions limiting level of 2,550 kb/d. While production is down from November 2017, it is not due to geology.

      As such, I think that these two countries need to be added back into the analysis to get a more realistic decline rate.

      I track three decline scenarios. The World W/O big ten scenario includes Russia and Iran and that chart is included in the World Oil Production section in the above post. I bookend that analysis with a “52 small countries in decline” scenario. Many of these countries may not be investing much in drilling to counteract decline. The other scenario is World W/O US and using the STEO forecast out to December 2023. Both of these bookends have been posted previously.

      These scenarios, along with “Ron 23 plus Russia and Iran” are shown in the charts below. The decline rate for “Ron’s 23 plus Russia and Iran” is 569 kb/d/yr. The production beyond the covid discontinuity was not included in the OLS analysis. The 52 countries decline rate is 527 kb/d/yr while World W/O US is 756 kb/d/yr. I think that 525 kb/d/yr to 756 kb/d/yr is a reasonable range for the “net decline” rate. Ron Plus Russia and Iran falls in that range.

      Note how the chart in the post, World W/O big 10, along with the 52 countries and World W/O US shown below have all recovered from the covid discontinuity.

      See charts below.

      

      1. I don’t understand how you can add Russian and Iran to Ron’s 23 gainers and start your chart at 27,000kbd and end up at 19,000, whereas Ron’s chart of the 23 gainers starts at 37 and ends at 47. How does taking into account more equal less?

      2. Ovi, I agree with Mike. How can you add two nations and wind up with much less? Anyway, I did add Russia and Iran to my chart and got a totally different result than you.

         No, Iran is not technically in decline, but politically they are. There are three things that affect a country’s production rate, geology, politics, and economics. All three affect every nation on earth. So, I just have to take the data as it is presented and use it. I cannot fudge it because I think if it weren’t for those damn sanctions’ things would be different. At any rate the total decline from May 2017 was 7,091,000 barrels per day. Removing Iran would only change that number by about one million barrels per day.

         But as to Russia, you are dead wrong. There is no doubt that Russia is in geological decline. Of course, the sanctions just make it a lot worse. But if you remember Russia, before the invasion, admitted they were in decline. The Minister said he hoped to get back to within 200 K barrels per day of their pre covid production. He hoped to plateau around that point. But every analysist who commented on that probability said, “no” Russia would decline because their brownfields in the Urals and Western Siberia, where over 60% of their production came from, was about to go into steep decline.

         I have added Russia and Iran to my chart of 23 gainers and got a totally different result than you did.

         

         1. Ovi subtracted Russia and Iran plus Ron’s 23 from the World total to find the decline rate for the rest of the World (World minus these 25 nations). The title on the chart does not reflect the data plotted.

            If we take Ron’s chart above and subtract rom World C plus C we get the chart that Ovi posted.

            1. Oh, I get it now. He meant “Ron’s 65 losers less Russia + Iran.

               Well, like I said, I will not fudge the data because of politics. I cannot predict politics. But as I also said, he is wrong about Russia. Russia is in a very serious geological decline. The sanctions will only make that decline much worse. Russia must be included in any chart of the world’s decliners because, in barrels per day, they will likely be the world’s largest decliner for the rest of this decade.

            2. Thanks Dennis

               That is exactly what I did and I did put the wrong title on the chart.

               Corrected chart added.

               

   4. 52 Small Countries

      Notice how the Covid discontinuity is just a small hiccup.

      

   5. World W/O US and the STEO projection out to December 2023.

      It will take until September 2022 for EIA data to appear and for the remaining countries to fully recover to the pre-covid trend line. This is the highest net decline rate I have seen, 756 kb/d/yr.

      

3. Another great post. Thank you Ovi. Would it be fair to say that, without the release from US SPR, the five-month surplus in world oil projected for this fall, would be non-existent?

   1. Paoil

      Thanks

      The supply balance chart is the difference between actual production and demand. The SPR release is extra supply into the market. So the surplus, considering the SPR release, would be an additional ~1.0 Mb/d over and above what is shown.

4. Hi Ovi , long time no see . Only popped in to say that you are terrific also Dennis ( although he is on the wrong track ) . As someone who discovered ” peak oil ” in 2003 and has been following it from about 20 years , I now realize the subject should be ” peak electricity ” . I have oft commented that the 3 legs of the stool called IC are ” oil , electricity and metals ” . I have posted links on ” The Olduvai theory ” by Richard Duncan . Well , UK and Europe will be the first to learn the lesson . I will not respond to any comments . I only popped in to appreciate your effort and more important grace and manners . Some should read “Letters to my son ” by Lord Chamberlain on how a discourse should be made . With respects and be well .

   1. Hole in head,

      Everyone will believe I am wrong until 2029 arrives when my scenarios will again be proven too pessimistic (as has happened many times in the past).

      1. Dennis, you forgot your smiley face after that comment. 😊 But to compensate I will add my laughing-out-loud face. 🤣

         1. Ron,

            We will see. In 2012 I expected the following for my best guess (between these low and high URR estimates). See

            https://oilpeakclimate.blogspot.com/2012/07/further-modeling-for-world-crude-plus.html

            In the chart below I updated the EIA data through 2021 using latest EIA estimates. The scenarios were created in 2012 when I only had World EIA data through 2011.

            

            1. Dennis, so you got it wrong in 2011. Well, don’t feel bad, that was before the shale revolution. But, in 2011, where were all the nations that were in deep decline like they are today. It looks like you were just guessing. Well, back then I was just guessing also. And I also got it wrong. I was, like you, just guessing. But today we have the data. The data does not lie. The decliners outnumber the gainers, both in the number of nations and in barrels per day.

               Arby’s says “We have the meat.” Well, I say “We have the data.” And the data does not lie.

               I really don’t understand you when you make the claim that this has happened before. Yes, we have just guessed before and got it wrong. But this many nations declining has never happened before. And they are declining by the millions of barrels per day over just a few years. This has never happened before!

               About the 65 declining nations. Russia will move out of the decliners in June, remain there through July and August, then back into the losers in September…and remain there forever.

               1. Ron,

                  Fewer nations were producing oil in the past based on EIA reporting. Some nations have seen output decline and others have seen output rise. When the World reached its recent centered 12 month average peak in August 2018, OPEC plus was not restricting output, in 2019 they cut back, followed by pandemic. Since June 2020 World C plus C output has increased at an average annual rate of over 4.4 Mb/d. You are being fooled by your choice of dates for looking at declining nations, I use the same data and see things very differently. Any scenario of the future is always a guess, my point was that my guesses in the past have tended to underestimate future output using data available at the time. Whether my current scenarios are too high or too low cannot be known until we have more data.

               2. Well, production level for my 65 losers was, in May, below their production level for February 2021, fifteen months ago. I would say they have recovered from the pandemic about all they will recover.

                  Hey, I made a bold statement. I said World oil production in 2023 would be below World oil production in 2022. Aren’t you going to dispute that? I know it will be close, but still, 2023 will be lower.

               3. Ron,

                  I expect you will be wrong, 2023 output will likely be more than 2022 (annual average output for World C plus C).

            2. Impressive Dennis!, from 10 years ago.
               Nobody has been closer to the mark, despite LTO, pandemic, all the other things going on in the world.

               1. Thanks Hickory,

                  Just a lucky guess really, at the time I badly underestimated how much unconventional oil would be produced, I had not developed any model for tight oil or extra heavy oil at that time, in a sense my overestimation of conventional oil was almost equal to my underestimation of unconventional oil. In any case my scenario was wrong in 2012 and my current best guess will also be wrong. Whether it is too low or too high, time will tell, much depends on future prices of oil, lithium, cobalt, and the state of the World economy, along with wars and other political conflict, nothing about the future is known and the number of possible futures is infinite. Any single scenario has exactly a zero probability of being correct.

               2. Indeed.
                  And I very much appreciate your level headed approach, which is a desperately needed counterbalance to the rest of us all.

      2. Nobody, I repeat NOBODY, that has ever invested in the oil and natural gas business, owned working interest in wells, paid lease operating expenses, or prepaid for the cost of drilling and completing of an actual well and then had to cover overages, NOBODY that ever worked out of a checkbook… and lost money, would EVER say something as asinine as this comment by Dennis Coyne.

         Or this by whathisname: “Recoverable resources – at economical cost – will be available far off into the future. Gar. Own. Teed.”

         Who “guarantees” anything they can’t see, miles below the surface, deep down in the dark?

         Because they read about it on the internet? Because EQT says its true?

         This is nothing more than narcissistic need to be different than others, to go against the flow, to draw attention to yourself by making bold, stupid statements with nothing at stake if you are wrong.

         What’s the common denominator of a proverbial, eternal optimist, who ALWAYS finds a way to refute legitimate, fact based concern for the future?

         They’ve got no real life experience in the subject matter. They’ve got nothing invested in it; they’ve not put their money where their mouths are. When they are wrong they sort of… slink off into the sunset.

         Nothing about the oil business lasts very long. NEVER are past results an assurance of future performance. That is particularly true of this latest fad…tight oil and tight gas. It’s entire future depends on how much money private enterprise (debt), or governments (more debt) are willing to throw at it.

         1. Mike,

            I may well be wrong. The future is difficult to predict. Nearly everyone who comments here seems sure that oil output has peaked, my expectation is different. Below is my current best guess scenario for World C plus C, peak is 2029 at about 88 Mb/d, the extraction rate on the tight axis is annual output divided by proved developed producing (PDP) reserves for conventional C plus C which excludes extra heavy oil production (API Gravity under 10 degrees) from Canadian oil sands and Orinoco belt in Venezuela. The scenario assumes Brent oil prices remain above $90/bo in 2022 US$ on average from 2023 to 2040. The URR is about 2900 Gb through 2150 with about 2700 Gb of conventional oil URR and 200 Gb of unconventional oil URR.

            I am concerned about the future, oil and natural gas output is likely to decline at some point in the near future and the World will need to find ways to use less fossil fuel. One option is to ride horses, but this is an expensive option, another is to walk or ride a bicycle which doesn’t work well in many cases, another is to transition to some other form of transport that uses less oil as a fuel source. Coal and natural gas are also likely to peak in output in the near future (coal may have already passed its peak in 2014) so alternatives to coal and natural gas will need to be ramped up in the near future.

            If something doesn’t change soon the World will be very short on energy, another option is to try to waste less energy and utilize it more efficiently.

            

         2. Mr. Roughneck,
            From your very first posts on this site, many years ago, you and I have been at loggerheads.
            I suspect that observers may have been exposed to data which – should they so choose to engage – has provided a basis for a wider ‘education’ as my view has been one of the few contrarian stances (vis a vis peak oil) on this site since its inception.
            However, your openly calling me a liar regarding the ridiculous topic of EOG using 153,000 barrels of water to frac a Riverview well (a fact easily corroborated by anyone spending 1 minute on FracFocus) was both ungentlemanly and – as is frequently the case in your statements – 100% wrong.
            Despite your making more exits from this site than James Brown starring in ‘Groundhog Day’, I generally appreciate your input while rarely giving much credence to your bombastic proclamations.
            To the point of my referenced comment regarding abundant recoverable resources from the Appalachian Basin … yes, absolutely.
            I spent some time reading G&R’s presentation that Doc Rich noted and a huge flaw leaped right up off the screen.
            G&R claims only ~16,000 Marcellus drilling locations exist, while ~12,000 have already been brought online.
            This is preposterous.
            One can believe/disbelieve as one so chooses, but thinking that both the AB is turning over and that the US natgas prices will converge with global pricing is pure fantasy.
            Gar. Own. Teed.

            1. Coffeeguyzz,

               Note that there will be a differential between the World natural gas price and prices in North America due to the cost for liquifying, transporting then conversion back to the gaseous state for natural gas which will probably be about $5/MCF.

               Note that since mid 2020 dry Natural gas output has been growing at an annual rate of about 4 BCF/d and natural gas exports have been growing at an annual rate of about 2.3 BCF/d. If the rate of natural gas exports accelerates and natural gas output does not do the same we could see US natural gas prices approach to within $5/MCF of the World natural gas price level. Europe may no longer rely on Russian gas as they have in the past. It will be interesting to see how it plays out, but shale gas might not be as plentiful as you suspect.

               From blog post at link below

               https://novilabs.com/blog/pennsylvania-update-through-march-2022/

               I get the following chart which suggests the average well profile for pennsylvannia shale gas has deteriorated since 2020.

               

               1. Dennis,
                  Those charts from Enno’s excellent site actually strongly buttress my reply to Doc Rich regarding having familiarity with the WHYs behind presented data as being crucial to analyzing (or, at least, better ability to understand) just what the heck is going on.
                  Well profile deteriorated since 2020?
                  Really?
                  Cum is better for ’21 which is better than ’20
                  Likewise for production rate for ’21’s first 12 months.
                  Noticing anything about the line thickness after first 12 months for ’21 cohort?
                  Could this be wells going offline as adjacent wells are frac’d?
                  (Note, Enno uses calendar month production, NOT actual days online).
                  Regarding 2022 wells .. interesting exercise for you if you are interested …
                  Check 2022 production for Bradford, Sullivan, Susquehannah and Wyoming counties (NEPA … Northeast Pennsylvania). 41 wells, over 600 million cfd production.
                  Now, do the same for Allegheny, Armstrong, Beaver, Butler, Elk, Greene, Lycoming, Tioga, Washington, and Westmorland counties (SWPA and Northern Tier). 45 wells and just over 300 million cubic feet per day.
                  What your 2 charts show, Dennis, in depicting 2022 Pennsylvania horizontal wells is WAY fewer wells drilled that – proportionally – diminished impact of high output/dry gas NEPA wells while enhancing the impact of the lower producing ‘wetter’ SWPA wells (which captured higher value NGLs) along with the Tier 2 type profiles of ‘off the fairway’ locations.
                  Your charts provide an excellent display of how accurate data can be susceptible to a wide array of interpretations/analysis that might not capture the essence of what is actually going on.
                  (The various companies and their individual conditions/positions also play a big role in all of this).

               2. Coffeguyzz,

                  The calendar month makes the most sense when looking at a well and its economics, so that’s a specious comment, Enno Peter’s data is excellent. The thickness of the line changes because each month in 2020 (Jan, Feb, …, Nov, Dec) new wells are completed, this has nothing to do with adjacent wells being fracked. Basically for wells completed in May 2021 or later we have fewer than 12 months of data (11 months for wells completed in May, 10 months for wells completed in April, etc).

                  The 2021 wells look perhaps marginally better than 2020, I am looking at the first 12 months that we have all wells producing which we only have data for 2020, for 2021we only have complete data for first 4 months (557 wells). When we compare the 565 wells completed in the first 4 months of 2020 with the 557 wells completed in the first 4 months of 2021 the cumulative production at 4 months in 2020 was 1534 MMcf vs 1599 MMcf for the 2021 wells or about a 4% increase. I do not have information on the increase in average lateral length for the first 4 months of 2021 compared to the first 4 months of 2020, if it was more than 4% then output per acre would have decreased. You like to tout the increase in lateral lengths achieved in Pennsylvannia, but I would note that the state is not getting any bigger in area, the longer the lateral, the fewer potential wells that can be completed profitably and also note that often output per acre decreases as the lateral length increases so overall URR could decrease as a result of increasing lateral length. I agree that the economics for longer lateral wells may be better up to a point, but there may be a premium leasing cost associated with putting together leases that allow very long laterals, so the returns to going longer may be minimal in many cases.

            2. Coffee, “loggerheads” is an understatement. I don’t remember calling you a liar over a 153,000 barrel frac; we, not you, were using three times that water a decade ago and now we’re using 3 times that water again. I’ve set them. Sadly, I’ve even paid for a few. Have you?

               I can’t stand guys like you, sorry. There are a number of you here on AOB. You THINK you are smarter standing on the sidelines that those playing the actual game. You won’t go in the game. Too scary, too risky. You have diminished my 65 years of hard manual labor in the oilfield, thousands of sleepless nights standing in the cold rain, putting good men into body bags then having to explain to their wives what happened, having my checking account down to three digits …to nothing more than a bunch of internet dribble, To stupid numbers and investor presentations. To fucking charts. You and people like you have forgone 150 years of history, of incredible hardships, loss, and heartache over a bunch of horseshit you read on the internet. I resent it, deeply. Always have. I consider you, and many people like you, and embarrassment to my industry and what it stands for.

               I think the AB IS turning over; 100%. It was drilled practically to death to earn 65 cents per MMBTU. Its well productivity IS falling; I can prove it with data but it would be like talking to a fence post. Moreover, the people IN it, like the companies you admire so much and hang around, like a groupie, they are selling America out with LNG exports. Or others that you so admire, like anybody in the tired old Bakken, they simply burn their gas, a BCF a day, waste it, like it was nothing. Who, in God’s name, could EVER feel pride, or accomplishment, over that?

               Nobody IN the oil business, or that respects it, appreciates it, and honors its incredible history, or the fickleness of Mother Nature, EVER “guarantees” anything. They are humbled by it all and the failures they have endured. Indeed I resent guys like you very much. Nothing personal; have a nice, laborless day.

               1. That is the best comment I have read here, ever. I’d have to revisit TOD to find something that honest genuine and heartfelt, if even there. And it followed the first zero-scaled graph to ever appear on POB. Glad I stopped by. Thanks.

               2. Thanks Mike,

                  I agree it looks like productivity may be decreasing in Pennsylvannia shale gas. In June 2022 ND captured 94% of 3061 MMcf/d of gas produced so about 177 million cubic feet of natural gas flared according to last month’s Directors Cut.

                  https://www.dmr.nd.gov/dmr/oilgas/directorscut

                  Texas does a much better job with only 0.65% of all natural gas flared which is amazing, this is down from 2.29% in June 2019. North Dakota (and all of the US oil industry) should follow the lead of Texas on this.

                  See

                  https://www.texansfornaturalgas.com/flaring_in_texas_falls_by_over_70_percent

                  Thanks Mike for pointing this out.

                  Found the following at Novilabs blog which suggests productivity normalized for lateral length has been fairly flat lately fro most tight oil basins. See first chart in the blog post.

                  https://novilabs.com/blog/can-unconventional-well-productivity-predict-peak-oil-production/

   2. Hole In Head:

      You are completely accurate. It should be peak electricity. This is the Achilles heel.

      It would surprise a lot of people to realize just how much of California’s electricity comes from coal-fired utility plants in Wyoming and Nevada—especially during the summer months.

      And this year, in Europe, there is going to be a lot of coal burned to generate electricity.

      1. According to the EIA, it doesn’t look like that much coal really, and soon to be none.

         “Although coal-fired power plants supplied about 9% of imports, coal’s total contribution to the state’s electricity supply from imports and in-state generation in 2020 was less than 3%. A state law enacted in 2006 requires California utilities to limit new long-term financial investments in baseload generation to power plants that meet California emissions performance standards, and essentially all imports of coal-fired generation are projected to end by 2026.”

         https://www.eia.gov/state/analysis.php?sid=CA

         1. China’s commitment to building 270 Gigawatts of new coal fueled power plants during the coming 5 years would seem to … offset … efforts by others in the ‘reducing emissions’ crusade.
            That is one huge (1,000 Megawatt) plant coming online Every. Single. Week for the next 5+ years.
            Much of the coal will come from the world’s largest open pit mines in Inner Mongolia and be shipped via the brand new $30 billion Haoji railway.
            Mebbe someone outta tell Greta.

            1. Australia + USA = 40% of worlds coal reserves

               See military investments that are consistent with this.

            2. COFFEEGUYZZ,

               Indeed… China will continue to push its High-Tech Metropolis Economy to a higher peak; thus the COLLAPSE will be even more breathtaking.

               China is now blowing through a staggering 4.5 billion tons of coal per year vs. 500 million tons in the USA. While China will likely increase its coal production & consumption for a bit, all bets are off when global oil production begins to decline, and with it, the very diesel that runs the World Coal Industry.

               The INSANITY I get all the time is that if we get into trouble with oil, we have 1,000 years of coal reserves. I gather these EINSTEINS believe that Coal will be mined, extracted, and transported with the ENERGY TOOTH FAIRY. 🙂

               steve

               1. SRSROCCO,

                  I enjoy your posts. But you seem to be rooting for collapse.

                  This Einstein thinks,

                  The USA will have enough fuel to build a coal – to – liquids infrastructure.

                  Adding Australia’s resources in exchange for military protection will be a JACKPOT

               2. PEAK AVOCADO.

                  No… I’m not rooting for Collapse, but I did stay awake in History class when I read about how ALL Ancient Civilizations Collapsed.

                  Thus, if we are looking at Homo Sapiens as a BATTING AVERAGE, they have struck out every time when we decided to Grow Exponentially.

                  So, it’s not a matter of ROOTING; rather, it’s a matter of LOGIC and DEDUCTIVE REASONING instead of HOPIUM.

                  I hope (LOL) you see the logic in my response.

                  steve

      2. Gerry Maddoux,

         Using BP Statistical Review of World Energy for World Electricity generation a peak is not evident.

         See chart below.

         

   3. Hole In Head,
      Glad to hear from you. I always enjoy your comments. It seems to me that the natural gas situation will bite us sooner than declining oil. From what I have read the giant Marcellus basin is starting to roll over. The Utica formation still has some growth but then what. Our conventional natural gas fields have been in deep decline for some time now. I think natural gas prices in the US will really rise in the next 1 year especially with our increasing LNG exports.

      1. Docrich,
         The observation that the Marcellus might be rolling over is questionable.
         While it is true that the current ~35 Billion cubic feet per day Appalachian Basin output may not increase, this is due – primarily – to maxing out the takeaway pipe limits.
         In fact, the recent EQT acquisition of Tug Hill (after purchasing Alta) will enable EQT to drill longer (thus, cheaper per lateral foot) wells which will improve the economics.
         Chesapeake’s purchase of Chief will have the same impact on its operations in NEPA.
         The Utica indeed holds future promise as the step outs continue accross the northern tier.
         XTO (although trying to exit the App Basin) just brought online a Utica well northeast of Pittsburgh.
         In 6 1/2 months production, this well – the Trilogy 5HU – has produced almost 7 1/2 Bcf … the energy equivalent of 1,250,000 barrels of earl.
         Long, long ways to go in extracting the available hydrocarbons … not even counting the 100+ Trillion cubic feet from the Upper Devonians.

         1. Coffeeguyzz,

            The World consumed 142.5 trillion cubic feet of natural gas in 2021. 100 trillion cubic feet is peanuts.

            Natural gas is also likely to peak in 2030 to 2035, coal may have also have peaked by that time (at this time peak coal was back in 2014.)

            1. Coffeeguyzz,

               The US consumed about 30 trillion cubic feet of natural gas in 2021 and exported 6.6 trillion cubic feet of natural gas and imported 2.8 TCF for a net export total of 3.8 TCF, so about 34 TCF of natural gas per year, so 100 TCF is enough supply for less than 3 years, if there is no increase in consumption or net exports.

         2. Coffeguyzz,
            According to Goerhring & Rozenswajg(Commodity investment firm), US natural gas prices will start raising to more like world prices in the next 6 months. If it wasn’t for the explosion at the Freeport LNG export facility in June, Henry Hub prices would already been higher. Our natural gas storage in the past 2 months would have been near zero as Freeport is 20% of US LNG exports which are now going in to storage instead of being exported. We shall see what happens in the next year.

            1. Doc,
               Yeah, I need to read more of G&R’s work as I keep reading pretty much of what you just described.
               When I started reading some of their stuff awhile back, I was unimpressed, frankly, and I believe (from memory) it was becsuse the G&R folks compile tons of data and make prognostications with seemingly minimal understanding/knowledge of the ‘WHYs’ behind the data.
               I try to use first order info, that is, actual production numbers, locations, wells, information from the companies (mindful of the ever present chest thumping tone).
               In the Appalachian Basin, the number of new wells is way down, productivity is up, decline rate is relatively low, and the efficiencies have become astonishing.
               That said, in basin pricing was still ~3$/$4 per mmbtu right up until a few months ago.
               Like all things hydrocarbon, Doc, future pathways for the AB will be determined as much by politics as anything else.
               Recoverable resources – at economical cost – will be available far off into the future.
               Gar. Own. Teed.

         3. Coffeguyzz,

            The average Marcellus well in Pennsylvannia produced about 4.2 BCF in its first 12 months of production, based on 515 wells completed in 2020. This is a more relevant metric than cherry picking one outstanding well.

            1. Dennis,
               You crack me up in so many ways … and that is not said with any type of derogatory tone.
               Do you remember the brief back and forth that you and I had regarding Marcellus’ EURs a few years ago? Something about a ‘report’ that claimed the ‘average’ Marcellus well EUR was expected to hit 4 Billion TOTAL over a few decades’ production?
               I had then referred to Cabot’s numerous wells that had ALREADY produced several Billion cubic feet.
               … and, you are absolutely correct in noting that the Trilogy 5 HU is an uncommonly spectacular well.
               Thing is, Dennis, there are about 30 or more wells in Pennsylvania and Ohio that have produced near or above 10 Billion cubic feet in their first year online.
               As acreage continues to consolidate along with operational efficiencies, high output per well is apt to increase.

               BTW, that 4.2 Bcf at $8/mmbtu throws off almost $34 million. First. Year.

               1. Coffeeguyzz,

                  Just pointing out that first 12 months EUR is about 4.2 BCF. I am not sure about capex and OPEX in the Marcellus. Lets say OPEX is $13/boe, that would be about 9.1 million for OPEX, perhaps with current inflation the CAPEX is about 14 million per well (a guess based on tight oil costs per well). In 2021 the average price for natural gas was $3.89/MCF so gross revenue would have been about 16.3 million and net revenue about $7 million, so another year would be needed for the well to pay out.

                  It is surprising that the completion rate has not picked up more than it has with the higher natural gas prices.

                  

               2. Dennis,
                  Capital expense (D&C) and LOE vary significantly depending upon different factors … lengths of laterals and amounts of liquids being two of the more prominent.
                  An illustrative 10,000 foot lateral well cost ~$8 million prior to the recent inflationary runup. (Said by many to be ~25% increase).
                  The operating costs are largely gathering (local pipe), processing (fractionating liquids and removing impurities), and transportation (long distance delivery). Costs of $1/ thousand cubic foot have been cited as a rough average.
                  Overall, the big AB companies claim an ‘all in’ cost of ~$2.50/$2.75 per mmbtu to drill, complete, and deliver one thousand cubic feet. This has undoubtedly increased somewhat this calendar year.
                  FWIW, the in basin pricing is typically 80 cents below Henry Hub.
                  Regarding your comment about ~100 AB completions per month … as the takeaway pipes are about 100% utilized, expect no more growth out of the Marcellus/Utica with the present constraints.
                  Those 100 completions – if representative of WV, OH, and PA output – are bringing to market ~35/36 Billion cfd of natgas … over 6 million barrels of oil equivalent energy … larger than the Permian’s oil output.

               3. Coffeeguyzz,

                  We need to look at all costs for CAPEX, not just D and C, land and other overhead should be included, I am pretty sure $8 million doesn’t cover it.

                  Also if we look at total boe for Appalachia as reported in DPR it was 6.18 Mboe/d in July 2022 vs 8.74 Mboe/d for Permian in July 2022 using 5.8 Mcf=1 boe. The Permian produces both natural gas (20 BCF/d=3.5 Mboe/d) and C plus C (5.24 Mb/d).

   4. HHH

      Glad to hear from you. I have been wondering to where you have vanished. I know that looking at these charts is almost as exciting as watching grass grow. The odd month some surprise does appear. Make sure you are back for the January issue since that is when the EIA issues it’s 2024 forecast.

5. FYI. Just thought I would post the chart of World C+C production less the World’s three largest producers, Russia, Saudi Arabia, and the USA. Right now, the World less those three is about four million barrels per day below their peak 12-month average. Obviously, the World less these three are in decline and I can see no reason this decline will not continue. It will be up to Saudi and the USA to make up this difference. Russia will only add to their burden.

   

   1. Ron

      Glad to see that you have included Russia in this chart.

      I think the issue with Russian production is: “What will the future decline rate be?”. Will it be in the order or 100 kb/d/yr or say greater than 500 kb/d/yr.

      The only pre-covid hint on Russian decline rate is from December 2018, 11,051 kb/d to April 2020, 10,935 kb/d, a drop 116 kb/d over 28 months (EIA). Not a big decline but definitely not showing any signs of growth. Then covid hit and they shut down a number of wells. How much well damage did this do?

      As for oil sanctions it is not clear what this will do to their ability to export production. The impact of access to technology on production is another issue.

      China, India plus a few others will buy all that that Russia can export via the Black Sea. According to the article below, Russia can export up to 6 Mb/d through the Black Sea. Internal use could be between 2.5 Mb/d to 3.0 Mb/d. OPEC says 3.5 Mb/d of all liquids. That leaves 2 Mb/d to 3 Mb/d to export to Europe, which Europe will readily take. I assume they get more $/b from Europe than China.

      Bottom line is we will have to wait for about a year to see what is really happening with Russian production.

      I have placed on OLS line through world W/O Big 3. Used data from January 2017 to January 2020 and the data from December 2021 to May 2022, the last seven data points. The decline rate is back in the ball park, 751 kb/d/yr.

      https://markets.businessinsider.com/news/commodities/russian-oil-exports-august-record-china-india-sanctions-ukraine-energy-2022-8

      “The August figure was down from the roughly 180 million barrels exported in May but is unusually high for the month, the IIF data showed. It is the most recent indication of the strength of Russia’s energy exports.”

      

      1. Ovi, the decline will be fast at first, then slow down. I expect 2023 production will average between 9 and 9.5 million barrels per day. Then the decline will be much slower, on the order of 200 K barrels per day per year.

         Russian domestic consumption has dropped dramatically. Nothing is happening in Russia so not much consumption. That gives them more oil to export.

         Ovi, from that chart it is blatantly obvious what is happening. The World less the big three peaked in November 2016 and has declined by over 5 million barrels per day since then. The Covid recovery is over. Russia will be down two million barrels daily from its pre-covid production level. The US is slowing down, and Saudi will have reached a post-covid peak in August or very nearly so.

         It’s over. It really doesn’t take a genius to figure that out.

         1. Ron

            It is unfortunate that the EIA data is four months late. I think we have to wait until the October EIA report is out to see if the post covid recovery is over.

            The August OPEC report shows that in July, OPEC added 500 kb/d over May. That is why I think we have to wait till we get October data and then see if decline sets in. I am looking forward to the January STEO to see what they have to say about 2024. The September OPEC report should also be interesting as SA, UAE and Kuwait push into new highs.

            I think we will see a lower third peak in late 2022 or sometime in 2023. The second lower peak was November 2019.

         2. Ron,

            All of the decline was due to OPEC less Saudi Arabia, this was due to OPEC cuts in 2019, pandemic, and sanctions on Iran and Venezuela starting in 2017, we will see what happens in the future. Iran and Venezuela (especially the latter) may not recover, but they will also not decline at the pace of 2017 to 2020 in the future.

      2. Ovi,

         Note that much of that decline was OPEC cutting output in 2019 as well as sanctions on Venezuela and Iran that started in 2017. If you looked at World minus OPEC minus Russia minus US and used same months that you used for OLS on that set of nations we get the following (months not used in OLS are not included on chart (Feb 2020 to Nov 2021). In this case we get a slight increase in output, all of the decline was due to OPEC.

         Chart below is for crude plus condensate output.

         

         1. Dennis

            Missed your response. I agree Non-OPEC + US + Russia shows a big decline rate after Nov 2018. I also think Non-OPEC W/O Russia could be in a slow decline. It all depends on where you start. Starting in Oct 2014 to Jan 2020. Adding in Nov 2020 to May 2022 to the least squares shows a low decline rate of 118 kb/d/yr.

            

         2. Decline in OPEC + US + Russia

            1005 kb/d/yr

            

            1. Ovi,

               For that OLS decline rate did you exclude April 2020 to October 2021? Also we have data for OPEC and Russia through August and if we start in Jan 2019 and end in Aug 2022 (leaving out the late 2018 increase by OPEC and Russia to increase their quotas in 2019 and the Pandemic months of May 2020 to Oct 2021) I get an annual decline rate of 470 kb/d. Much changes with different starting points of course. Quite a lot of OPEC decline is due to Venezuela which seems to have stabilized around 650 kb/d.

               If we look at OPEC plus Russia plus US for the same months you looked at for World less these nations (starting in Oct 2014 and ending in June 2022 and leaving out same months as your analysis (OPEC is crude only in this case) we get an average annual decline rate of 211 kb/d.

               The data can be sliced and diced in many ways, if we drop more of the pandemic crash and recovery (Feb 2020 to Sept 2021) we get an annual increase for OPEC plus Russia plus US (crude only data for OPEC) of 158 kb/d.

               1. Yes Dennis – We should cherry pick such data which indicate a sharp downward trajectory since 2018 and then focus on a thin slice of data pointing to a completely unsustainable upward trend…right? Whatever gets us to a new world production peak in say…7 years😲😲😲😲
                  who needs geological/other constraints anyway….

               2. Dennis

                  The answer to your first question is yes.

                  I don’t think that that you can start OPEC plus US plus Russia at October 2014. The analysis has to start after the peak. We really need to see if the increasing OPEC output from UAE, SA and Kuwait offsets the OPEC decliners. I still think a more over all decline rate is in the range of 550 kb/d/yr to 750 kb/d/yr.

               3. Dennis

                  A additional thought. Going forward, I think the more relevant data for assessing decline rate for OPEC + US + Russia will be post October 2021.

               4. Ovi,

                  I think it makes more sense to look at top 15 producers from 2010 to 2020, rather than OPEC, Russia and US and World minus top 15. Many in the OPEC 13 are not very significant oil producers with about 5 OPEC nations producing under 500 kbpd.

               5. Kengeo,

                  Oversupply, pandemic and sanctions are the better explanation for decline since 2018 rather than geological factors. The decline you expect may be delayed if oil prices remain high.

6. Russia

   

7. D. Coyne: “Using BP Statistical Review of World Energy for World Electricity generation a peak is not evident.”

   “Peak Electricity” was probably the wrong way to phrase it, though anything else would be clumsy. Affordable electricity is perhaps the better concept. Or relatively clean electricity.

   In point of fact, the price of electricity is going up rapidly. This is most obvious in the U.K. and Germany, but it’s spreading almost in lockstep with the determination to go green. California has used large amounts of electricity imported from the coal-burning Jim Bridger Utility plant, which was built ten-times too large to supply Wyoming’s needs in order to sell electricity-on-demand to the California grid. The previous commenter was right, California has sharply reduced that importation–for now–but time will tell. If the California grid shows signs of failing there will be a lot of electricity flowing from Wyoming to California–it’s a governor-to-governor phone-call option. The price of electricity in California is going up fairly dramatically. It’s a rich state and can subsidize its users. But it’s premature to say that they’ve stopped using coal-generated electricity, just as it was premature to declare the Diablo Canyon nuclear power plant a goner. As an emergency, it was kept on-line. More natural gas plants were added in the LA area this year too.

   What’s the right term? “Affordable electricity for the masses,” which sounds socialistic, has peaked for a lot of places–just take a survey in London sometime. The U.K. is making contingency plans to subsidize the cost of electricity. When the Navajo coal-fired plant in northern Arizona was decommissioned, environmentalists cheered. However, before the year was up, China had added the bituminous coal-burning capacity of 27 Navajo plants to generate electricity. And they didn’t stop there. All for affordable electricity.

   Peak electricity is not upon us–technically. Affordable electricity for the masses peaked out sometime during this last year. We are entering the age of governmentally-subsidized electricity. And to subsidize electricity at increasing levels in more and more places is going to be a tremendous economic drag.

   I didn’t plan on going into such a long diatribe about this. But like the true environmental burden of producing electric vehicles, this is the dark underbelly of the transition to a cleaner form of energy. Ironically, carbon capture on a grand scale is advancing at roughly the same speed as the wind and solar projects. We–the world community–is going to wind up (hopefully) with some sort of happy mix of energy sources to allow civilization to advance.

   1. Gerry , you understand the problem of electricity . ” peak electricity ” or ” peak affordable electricity ” . Does it matter ? ” A rose is a rose and it would still smell sweet even if called by another name ” Shakespeare . I am posting a link specially for you and anybody who is in UK and EU . ” Since when did banks produce energy ? ” Little Lizzie ” just f****d the British public twice over and they don’t even realize it . One of my friends opined about the Brits ” So ignorant and yet so happy ” . All who are from UK and the EU read this .
      https://consciousnessofsheep.co.uk/2022/09/09/since-when-did-banks-produce-energy/
      Groot Lizzie is dood aged 96 years .

   2. Gerry Maddoux,

      High prices for electricity may lead to a rapid expansion of non-fossil fuel energy which a current World price levels for fossil fuel is a far cheaper way to produce electricity. As this transition occurs we may see electricity prices drop eventually. Not clear how we measure “affordable electricity”.

      1. Dennis , enjoy it while it lasts . 50 % of steel , aluminium and zinc production in EU is shutdown . My friendly neighborhood baker shutdown ( a husband and wife operation ) because they cannot pay their new electricity bill . Unaffordable . I can go on and on but it is futile . Some here think North America is the world . Well it is Eurasia that is the name of the game . Read Mackinder and Brzezinski and you will understand what I am talking about i think I will sign out just to avoid an unnecessary bout . From tubelight to candlelight .

         

         1. Hole in head,

            Do you have a link to a better copy of that graphic? It is impossible to read, but looks to be far from the mark through 2022. Or a link to the original source or where you found it.

         2. Hole in head,

            I found this by Duncan

            https://web.archive.org/web/20060524051136/http://www.thesocialcontract.com/pdf/sixteen-two/xvi-2-93.pdf

            Updated chart from 2005 or 2006 below from paper above.

            Note that the chart has World energy production per capita in barrels of oil equivalent per capita, in 2021 the chart predicts about 6 boe per person when in fact energy output was about 12.9 boe per capita in 2021, slightly higher than 2008 when output was 12.4 boe per capita. The peak was 2018 at 13.01 boe per capita for World primary energy consumption using BP Statistical Review of World Energy 2022.

            Data can be downloaded in a spreadsheet at page linked below

            https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy/primary-energy.html

            

            1. Dennis , search ” the Olduvai Theory ” on Google ” Images ” . You will get a slew of updated and better graphics and images . Yours is the original image but it has been updated . By the way I learnt about ” the Olduvai ” from the website of Jay Hanson (RIP) . Rgds

      2. D Coyne: “Not clear how we measure ‘affordable electricity’.”

         Affordable electricity: that which can be purchased without requiring governmental subsidies.

         1. Gerry Maddoux,

            Measuring government subsidies Worldwide for electricity is not a small task. Can you point me to such a measure? Without it “affordable electricity” as you define it remains a philsophical concept without any real data behind it at the World level. Simpler to measure electricity produced, just as we measure C plus C output and do not look at the many ways the oil industry is supported by governments Worldwide (tax breaks, subsidies, public support of transportation infrastructure, etc).

            1. In response to D Coyne:

               Price of war: UK and EU throw $500 billion at energy subsidies

               1. Gerry Maddoux,

                  I assume that is for all types of energy. One would need to assess what percentage of subsidies goes to different types of fuel, some would be for transport, some for heating directly (gas boilers heating homes and water) and some would subsidize electricity, and of course the EU and UK are not the World.

                  High prices may lead to more efficient use of energy and replacement of high priced sources of energy (natural gas, oil, and coal) with less costly non-fossil fuel sources of energy. This will clearly take time, but it is a badly needed step which North America and Asia will need to follow.

               2. Ethiopia is about twice as populace as the UK, and is growing about 4 times faster.
                  The new hydroelectric dam dramatically improves electricity/capita and affordability of electricity.
                  And yes, government funding was certainly involved.
                  It always is with big hydro, and many other big infrastructure projects.

                  Large scale electricity requires large scale infrastructure investment.
                  For most countries the economic payback of electricity system and generation is huge.

8. Graph

   

   1. Data

      

      1. Lightsout, thanks for this chart. I think the top line reads Jan 22 through Aug 22, then % difference. But I know virtually no Russian. Can you, or anyone else, tell us what the legend on the left reads?

         1. I think it’s:
            Total oil and gas production
            Taxable (and something else)
            Oil
            Gas Condensate
            Exports (and something else)
            Oil
            Gas
            Products

            1. Thanks, George. But that makes things really confusing. That chart shows April as the highest oil production month. April was the month of total collapse according to all other sources.

               March …………….. 11,010
               April ………………… 9,693
               Monthly Decline -1,317

               Click on graph to enlarge.

               

               1. Ron,

                  I found a source with Russian C plus C output at 10042 kb/d in April, 968 kb/d less than March.

                  From Jan 2022 to July 2022 I have the following estimates for Russian C plus C in kb/d:

                  11,002
                  10,461
                  11,010
                  10,042
                  10,225
                  10,710
                  10,800

                  Chart below has Russian output of C plus C in kb/d fo monthly data and the Centered Twelve Month Average (CTMA). For CTMA the peak was about 11.3 Mb/d and the most recent CTMA (Feb 2022) is about 10.7 Mb/d.

                  

               2. Well, you didn’t give us your source. I don’t understand that dip in Feb. 22. I see no reason to disagree with your average, it is the same as mine. At any rate, there is not much to argue about. In the long run, it will make no difference whatsoever. It is what happens from here on out that matters.

                  

               3. Ron,

                  You are correct on Feb 2022 output.

                  from following

                  https://www.reuters.com/business/energy/russias-feb-oil-output-rises-trading-paralysed-by-sanctions-2022-03-02/

                  Russian C plus C output was 11.06 Mb/d in Feb 2021, I must have been using a source giving crude only data, I have corrected this in the spreadsheet, thank you.

                  For April output of C plus C I used the link below which has May’s output at 10.2 Mb/d (43.1 million tonnes), and 5% higher than April (41.05 million tonnes). April has one fewer days than May so output is 41.05 times 7.33 b/t divided by 30 days or 10.03 Mb/d.

                  https://oilprice.com/Energy/Energy-General/Russia-Oil-Output-Rose-5-In-May-Report.html

            2. Russia to cut oil, condensate output 2% m/m in Aug – Kommersant

               MOSCOW, Aug 30 (Reuters) – Russia is set to reduce oil and gas condensate production by 2% month on month in August, the Kommersant newspaper said on Tuesday, citing sources familiar with the data, as Gazprom GAZP.MM cuts output.

               Production in Russia is set to fall to 1.445 million tonnes per day (10.59 million barrels per day) after rising every month since May, the paper added.

               Russian oil production has proved resilient and has defied predictions of a steep decline following sweeping restrictions introduced by the West after Moscow sent its troops into Ukraine on Feb. 24.

               Russia has managed to boost sales of oil to Asia, notably to India and China.

               Oil and gas condensate fell by 11.5% in April from March to just above 10 million bpd and had been on a recovery path since then. In July, it rose to 10.76 million bpd.

               https://www.nasdaq.com/articles/russia-to-cut-oil-condensate-output-2-m-m-in-aug-kommersant

               The 10.59 Mb/d is very close to the three week average of 10.56 Mb/d posted earlier.

         2. Ron please see my earlier post up thread.

9. Finally some August oil production data out of Russia.

   OPEC+ crude oil output rises but quota shortfall hits record high: Platts survey

   Libya’s recovery, along with growth by core Gulf members, drove OPEC+ crude production in August to its highest since April 2020’s price war, according to the latest Platts survey by S&P Global Commodity insights.

   Even so, the group underachieved yet again in delivering its promised production increase for the month and remains far below its declared output ceiling, as sharp losses in Kazakhstan and Nigeria tempered August’s gains.

   OPEC’s 13 members pumped 29.56 million b/d in August, up 480,000 b/d from July, the survey found. Russia and eight other non-OPEC allies fell by 220,000 b/d in the month, producing a collective 13.28 million b/d.
   SNIP
   Growing shortfalls have led to swirling questions about how much more crude the group will be able to add in a tight physical market facing ratcheting sanctions on Russia over the war in Ukraine.

   Leaving aside Russia, which pumped 9.77 million b/d in August, the rest of the members have increased production by just 440,000 b/d since February, while quotas have risen by 2.96 million b/d, survey data shows.

   Only Saudi Arabia and the UAE have any significant upside potential, according to many analysts, with the majority of OPEC+ producers already at maximum volumes or are hamstrung by technical problems, a lack of investment, or internal unrest.

   Perhaps in recognition of their limits, OPEC+ ministers agreed at their latest meeting Sept. 5 to claw back quotas by 100,000 b/d for October.

   But first, they have committed to a 648,000 b/d hike for September—the same aggressive increase they were supposed to deliver in August.

   The problem is I don’t know whether that 9.77 million b/d represents crude only or C+C. But I am pretty sure it is crude only. Russian C+C averages 8% condensate. That would put Russian August C+C at 10,551,000 barrels per day in August. That is pretty close to what we had expected.

10. Lets consider the list of countries with big geopolitical or managerial constraints to their oil production and/or exportation of crude oil products currently,
    including Libya, Iran, Venezuela, Nigeria, and Russia. Who am I forgetting?
    This is serious production curtailment.

    And then consider that in this decade there is a pretty strong chance that the Chinese will move on Taiwan.
    Militarily… unless Taiwan simply surrenders in the interim.
    The chance for a big disruption in global trade and stability of supply chains and economic function as a result of this issue coming to a head is very significant in my estimation.
    And this will have a big affect energy production, exportation, and demand.
    Put it all in blender is the best I can see .
    I’m sure that US think tanks are thinking long and hard how to respond to China’s pending move in its front yard. As best I can tell, its a lose lose issue for the US, for globalization and world trade, and maybe even for China…despite winning the battle.

    Considering reading- Danger Zone: The Coming Conflict with China

    Food for thought. Clock is ticking on this.

    1. Hickory

       Crossing the Taiwan Str is a huge challenge, 80 miles. Satellites would spot the build up. There would be no element of surprise. I think it is all a lot of bluster on the part of Xi.

       Maybe I am just an optimist.

       1. I think you are spot on Ovi. I know Xi would love to do it, but he is a lot smarter, in that regard, than Putin. Or at least he is now, but perhaps not before the Ukraine invasion. He sees what is happening to Russia right now because of Putin’s stupid move and wants no part of that mess.

          1. The Chicoms haven’t laid a cubic metre of concrete for an attack on Taiwan. They have laid plenty of concrete for an attack on Vietnam. Have a look at the military base at 22° 24’ 40” N, 106° 42’ 23”. It’s 10 km from the border. So they can sneak armored units up at night and hide them from satellites.

             1. Uninformed.

             2. REMFs!!
                No airstrip or helipads
                No POL
                No ordinance storage facility at safe distance
                No field range

                Perhaps a brigade level admin facility for elements of either 74th or 75th Group Army/Southern Theater Command.

                https://www.voanews.com/amp/east-asia-pacific_china-said-be-installing-missile-base-near-border-vietnam/6202580.html

                https://ampe.vnexpress.net/news/news/vietnam-to-investigate-china-s-missile-base-near-its-border-4231752.html

                https://asiatimes.com/2022/06/vietnam-warily-weighs-a-china-base-in-cambodia/?amp_markup=1

                https://en.m.wikipedia.org/wiki/Southern_Theater_Command

                …. or maybe, since there’s no sign of a big fuck off parade square anywhere, it’s just an expansion of the farm school and model agriculture that’s across the street; or maybe it’s just a new factory & community housing.

                https://www.alamy.com/stock-photo-aerial-view-residential-houses-in-shanghai-taken-from-the-plane-in-86454446.html

                Dave should write a military analysis column for American Thunker.

          2. Putins stupid move? No one there is more stupid than the Europeans who are going under, right now. And Putin has no hurry in Ucraine. He‘s dragging that war to inflict as much pain as possible – not only to the military enemy, but to the whole rest of the continent. One winter will ruin the EU‘s economy, two or three will send them back into the middle ages. There‘s only one who faces a slim win win situation, whatever the outcome might be: the US. Though the tables can turn very soon, especially with China joining the game …

             1. WTFC, Is this just your desires or your imagination. Putin is losing the war; his army and his people are on the verge of revolt. The Russian economy is in shambles and getting worse. He has no way out. His days are numbered.

                And you think he made a smart move????

                1. Ron, do you really believe what you‘re writing? You know, I almost fully agree with you on peak oil, but concerning this war I have quite a different stance. I suggest let‘s agree that we disagree and let’s pick up this topic within four or five months, when we have a much better information base to discuss upon.

                2. WTFC, please, just watch the news. Just watch a few youtube videos on the Russian economy and how it is faring. You will soon realize that Putin is losing the war and the Russian economy has become a basket case. This is not my opinion. It is the opinion of every news organization in the world. But of course, you are entitled to your opinion, even if it differs from almost every other opinion in the world.

                   So, be happy.

                3. 1) What impact would removing Putin have on the global energy picture?

                   2) Does Putin have any checks and balances on firing Nukes?

                   If he sees hes going down he might start taking things down with him

                   Hypothetical:

                   Putin gets replaced; His replacement is NATO aligned; The middle east can now be conquered by NATO.

                4. Replying to Peak Avocado

                   1) What impact would removing Putin have on the global energy picture?

                   Peak Avocado, that is not my decision or the decision of anyone in the Western World. The Russian army and the Russian people will make that decision. I have no input therefore I will stay out of that decision.

                   2) Does Putin have any checks and balances on firing Nukes?

                   I have no idea.

                   If he sees he’s going down he might start taking things down with him?.

                   He just might. But I have no control over that and my opinion on that subject is not worth a bucket of warm spit. Therefore I shall express no opinion on that subject.

                5. https://www.dailymail.co.uk/news/article-11210709/Putin-feeling-dramatic-possibly-nuclear-general-issues-stark-warning.html

                   Putin prepared to do the unthinkable…according to US Generals.

             2. It’s hard not to see the Russian-Ukraine War as already a massive success for the US.

                1) It gives military dollars a place to flow after shutting down Afghanistan office.
                2) the russian military has underperformed throughout the invasion.
                3) a stalemate wears down Russia (massive enemy) and Ukraine (potential vassal state, cheap labor, cheap food).
                4) a stalemate has created “bad blood” between Ukraine and Russian for generations that can easily be used to divide and conquer the region.

                russia was being weakened by continual NATO moves across Eastern Europe, and Russia pushed one of the final buttons they had left – the military button. now where are they? spent. Reduced almost completely to a “place with a lot of oil”, but in every other instance no different than, say for example, Mexico.

                1. “Reduced almost completely to a “place with a lot of oil”, but in every other instance no different than, say for example, Mexico.”

                   Russia has 4000 nukes that can strike anywhere on planet Earth.

                   They are far more of a challenge than Mexico.

       2. Yes, big challenge or it would have happened long ago.
          But if you delve into some of the details of the current status of forces and technology, as well as the window of ‘oppurtunity’, I think you may find it a big mistake to downplay this.
          I think it is far more likely than was a Russian invasion of Ukraine.

          And regarding Ron’s comment- if the Chinese do make the move, you’d be wise to bet they will ‘do it right’.

          1. Naw, I can’t believe China would risk sanctions with an invasion of Taiwan. Sanctions would cause 50% unemployment in China. And with their collapsing real estate market, that would be the trigger that starts riots in the streets. China depends on exports more than any other nation in the world. And they have the highest dollar value of exports in the world. They export over three trillion dollars’ worth of products every year.

             RANK COUNTRY 2021 EXPORT SALES
             1. China ………………. $3,026,233,691,000
             2. United States …… $1,753,941,406,000
             3. Germany ………… $1,626,387,793,000
             4. Japan …………….. $757,460,945,000
             5. Netherlands ……. $691,826,642,000

             1. When they are ready to act, they will be better prepared to handle the disruption than will we.
                (it will be degrees of catastrophe)
                It will be a game of chicken, yet they will be ready to pull the trigger if need so.
                Like Putin, they will likely figure that they can sustain more pain than can those who oppose them.
                Much easier for them since the high level surveillance autocracy allows them to literally dictate the internal processes. They can easily reward those who are obedient, with food or energy for example.
                They will be ready to crash the system- US reserve currency status will be history.

                regardless of whether your off the cuff reaction sees this as plausible, the book is very good education on these matters.

             2. That Germany number is really impressive—

                1. Yes, Germany is impressive, and per capita, the Dutch are super impressive.
                   China……………..$2,161.60
                   US………………….$5,323.04
                   Germany………$19,538.54
                   Japan………………$6,021.15
                   Netherlands…..$39,668.96

                   The top export for NLD is refined petroleum products, while for Germany it is cars.
                   Click on the country name to view the OEC data, it’s quite interesting.

          2. A war over Taiwan would be tragic, and it is more likely that China will take it without mass bombing unless that is their last choice. They are certainly building the war machine to get the job done, and the US will be overwhelmed in that frontyard if it comes to that.
             But the writing is on the wall- China sees that land as crucial for their ability to control their neighborhood.
             Better plan for the eventuality, and that means taking steps to limit the downside for Taiwan and US right now.
             Back to the early point- if it comes to outright aggression then world trade will be severely disrupted, including energy trade.

    2. Nigeria appears to be having a Venezuela-type collapse of its oil industry.

       https://oilprice.com/Energy/Crude-Oil/Nigerias-Oil-Exports-Plunge-To-Record-Low.html

    3. Another great book on the subject is “Destined for War. Can America and China Escape Thucydides’ Trap?” by Graham Allison. That and “Danger Zone” will make you say, “Hmmmm.”

       China crossing the Taiwan Straits, if it comes to war, will almost certainly be within the context of a much larger conflict. One that involves the United States, because there’s too much at stake.

       History that you probably know: When Mao Zedong prevailed in China in the late forties, a defeated Chiang kai-Shek retreated to Taiwan, taking a lot of documents with him. Included in them was the Treaty of Peking, which as a result of the Second Opium War resulted in Great Britain forcing China to cede Eastern Siberia (Chinese Manchuria) to Russia. Think about that a moment. China as it was would be energy-rich (Sakhalin I & II). Mao Zedong made a vow to reclaim Taiwan, but never got around to it. Then the U.S. made an agreement involving One China, and that agreement is with Mainland China. Unless someone can direct me to another line of thought–I haven’t thought about this for a long time and could be rusty–the United States has no formal treaty with, or commitment to, the Island of Taiwan whatsoever. And yet that is where our loyalties seem to lie. The plum, of course, is in the Taiwan Semiconductor Manufacturing Company, which is said to be a very superior purveyor of chips.

       Fun Fact: Xi’s father was the propaganda minister for Mao Zedong, and Xi studied at his father’s knee. Xi really wants to fulfill his destiny, which involves reestablishing One China.

       Graham Allison thinks we’re falling into Thucydides’ Trap. There’s even a Thucydides’ Trap Project, at the Kennedy School at Harvard. They game it daily.

       1. Nah. Improvements in electronics have changed warfare. The world’s oceans are now like the Mediterranean in WW2. Ships are constantly subject to attack from land-based aircraft. You can sink a ship 2,000 km away for less than 5% of the cost of building the ship. It is so easy now to go asymmetric on the Chicoms. That is what the US Marine Corps is doing.

          1. The US Military doesn’t need to go asymmetric on the Chicoms.

             One Virginia Class submarine could turn Beijing into an ashtray. The US has like 60 – 80 of the monsters. And you can never be certain where they are

             Australia on the other hand would need to go asymmetric.

             But it wouldn’t work, because Australia doesn’t manufacture it’s own weapons. It needs other countries to import them from.

             1. Think a little harder on that Peak Avocado.
                The USA is not going to launch nuclear weapons at China over Taiwan,
                or over the loss of the two or three aircraft carriers stationed in the Chinese sphere,
                short of an episode of severe psychosis or temper tantrum.

                1. Thanks Hickory,

                   I’ll send an email to US Military.

                   ”
                   Dear US Military,

                   Hickory thinks you are wasting your time in Taiwan, Please stop wasting Tax Payer money.

                   I’m trying to think a little harder.

                   regards,
                   Peak Avocado”

                2. Get real. I know you can read.
                   The US military will not engage in a nuclear war over Taiwan.
                   Its pretty simple.

       2. Gerry, yes the biggest Taiwanese single corporate asset is the Taiwan Semiconductor Manufacturing Company and the intellectual capital that goes along with it and the other companies in the tech sector.

          But the strategic value for China is the solidification of control of the whole front yard, including the waters and sky of the East and South China sea, and even out to Guam.
          The Chinese air and sea cargo business, including oil transport, will be no longer such a great vulnerability.

          I am not justifying their goal, but I understand some of it. We would be fools to misread their patience in this matter as lack of determination.

          And Archibald, you may want to consider that idea in reverse. China now has the capability to take out both US aircraft carriers in the region from far off, and to smother communications/intelligence. They are approaching overwhelming advantage in that region. It is their only front.

          1. Taiwan will be assimilated by China. The question is not if, but when. China would love to grant the island a transition of one or two decades as they did with Hong Kong, but the militarization of Taiwan works against that goal and renders war almost inevitable. When will that happen? Between today and 2030, not later I suppose.

             1. I agree WestTexas.
                With that in mind we ought to be offering up a very big immigration program for skilled Taiwanese.
                And get realistic about how much economic clout and political capital we want to expend on the losing end of an eventuality.
                If we handle ourselves correctly, Guam might go umbombed and remain as an effective air and sea base.

                1. Guam is the most strategic island in the West Pacific.
                   It will remain a US possession.
                   I’ve lived there several times, and my brother currently lives there.

                2. Over the last few years, Hickory has been suffering a bout of Doomers disease. Which means around every corner a Doomer sees the end of civilization as we know it. History tells Doomers collapse is the inevitable out come of overshoot. Hickory, like to many posters on this site have a problem with the timing of the process. The attacks that Dennis suffers from his projections of oil output fall into this same Doomer camp.

                   Timing is everything.

                   Example- 3/5/22

                   “As long as Ukraine is willing to fight, this is a opportunity from heaven for the U.S. and NATO to set Russia back 75 years plus nukes. Russia doesn’t have the forces to hold Ukraine as long as the West supplies them with weapons. Russians only option is going to turn into bombing Ukraine back to the stone age. I think the most likely end will be the West rebuilds Ukraine and Russia finds overwhelming missiles along it’s western borders years from now.”

                   https://peakoilbarrel.com/december-us-oil-production-unexpectedly-drops/#comment-736179

                   Hickory- “I consider that the optimistic scenario, and see it as more likely that Russia will take most of Ukraine [all of the black sea coast including Odessa and the eastern 2/3rds of the country including the entire Dneiper basin which includes Kyiv], or all of it.”

                   https://peakoilbarrel.com/december-us-oil-production-unexpectedly-drops/#comment-736182

                   Why did Britain have an empire the sun near set on ? Because it was an island which was nearly impossible to invade. Ukraine is a land invasion. With the backing of world democracies, Taiwan isn’t going anywhere without the destruction of China as we know it.

                   Hi OFM

                3. Good to hear from you HB, kind of.

                   If you just want to consider happy, I suggest Nickelodeon channel, or some such thing. And yes-
                   I’ve been realistic (pessimistic) ever since I learned about human nature, and the course of world history
                   beginning as a child.

                   To reaffirm the original point in this thread- there are many examples around the world where smooth functioning of the fossil energy production and delivery system falls far short of geologic potential (Iran, Venezuela, Nigeria etc)
                   One of the big non-geologic threats is a rollback in the degree of globalization, for whatever reason. With the China-Taiwan conflict, I’m just pointing out one of the biggest threats to globalization (robust international trade and supply chain function) that I see on the horizon in this decade.

                   And yes, if I was a young person in Taiwan who had hopes for a life free of China autocratic control I would indeed be pessimistic.

             2. WESTEXASFANCLUB

                Why do you think that China would offer Taiwan a transition and more importantly why would Taiwan accept seeing how China broke their promise to HK?

                1. OVI, do you really think Taiwan has a choice? They might kick the can a couple of years, but the reunification is not negotiable for the mainland and Taiwan knows this. So, if you have the choice between an all out war (one that you are going to lose) and negotiations – how would you decide?

                2. Wes

                   Putin made the same mistake.

                3. Do not assume that the Chinese will making any mistakes when they choose to force the Taiwan issue.
                   And do not assume that their military tech and determination will be subpar, rather they will have advantages in these factors.
                   They will make the Russians look like amateurs.

                   China will offer Taiwan transition time if they acquiesce willingly. Not as much time as they gave HK, I suspect.

                   btw-
                   two WSJ journalists wrote a recent book, and are going to be live at the Commonwealth Club of SF Wednesday 5p PST- “Josh Chin and Liza Lin: China and the Era of Digital Surveillance”, for those with an interest in the state of the art where autocracy intersects with big data.
                   https://www.youtube.com/watch?v=2JfFz6jTfiY

             3. WIth the current economic crisis in China, I think it is going to be difficult. And with oil supply tightening and domestic coal supply tightening of the coming years, Chinese economy will suffer badly. A lot of young éducated Chinese are arriving on the labor market in China without finding jobs : they have other things to worry about than invading Taïwan.

                1. Xi will get his two million strong army ready to invade…but then at the last minute, just before the entire army is set to conquer Taiwan, the whole thing will get called off because of a single Covid case.

11. Tidbits.

    1) Satellite recon. There is entirely too much talk of geosynchronous satellites. They are 23,000 miles up. Value for signal collection. Often have radar. Imagery multi spectral, less so. Lower altitude satellites obviously have less distance to deal with for imagery resolution area/pixel. Multispectral, but clouds are clouds. The reason low altitude matters is the spacecraft move. They don’t hang overhead like the 23,000 mile orbits do. They traverse the sky in a location in about 15 minutes give or take. The planet rotates under the orbit so a given location can be imaged usually 2X per day, 12 hours apart. One of the 2 in the dark. Radar is not unheard of on these, but they tend to be small with small solar cell area (radar eats power).

    2) Used to be classified many moons ago, but satellites could measure localized sea altitude and find submarines cruising via water displacement. It got complicated. Maybe solved by now.

    3) Russian ships in the Caspian and Black Sea are shooting missiles at Ukraine targets. Remember the CPC? Long pipeline carrying 1.4 mbpd out of the Caspian area to Novorossiysk terminal in the northeast shore of the Black Sea (in Russia). Oil is a mix of Russia, Kazahkstan, Azeribaijan and yup, Iran. This can all be seen from orbit. Parking ships near the terminals in the Caspian or the Black Sea makes for a complicated decision for targeting. Risk the pipeline to hit a ship?

    4) It’s a good lesson. Nothing is going on over there both sides can’t see. Any story you hear about who surprised who, just ignore it. There are no surprises. First war in mankind’s history in which both sides have excellent satellite imagery, or radar images and signals collection. Forget drones, largely. They can be both jammed and spoofed, and that is bidirectional. Piloting data or imagery data. Electronic warfare equipment should be arriving for both sides. Drones are talked of mostly to sell drones.

12. Could someone explain the US SPR management strategy to me? I don’t understand how a price of around $80 WTI is going to be locked in for around 180 million barrels without paying a massive premium.

    1. I’m going to sound like a broken record but I will repeat that the most important thing to understanding the economy is money creation and destruction. I will give a new reference to a mainstream economist: Stephanie Kelton: https://stephaniekelton.com/

       According to her the U.S. government spends $4.5 trillion a year and collects $3.5 trillion in taxes. The U.S. government has an infinite line of credit and cannot go bankrupt. Kelton misses the importance of energy, but at least she is straight about the importance of money creation in the economy and how much nonsense is spouted about deficits (see her book).

       1. No, not what I meant.

          Executive branch says they are going to buy back barrels at or below $80. I don’t understand how they lock in that price without paying at least $15 per barrel premium, making the real cost a lot more.

          Hard to market time that amount of barrels over six months or more.

          1. Shallow sand,

             US net imports of crude oil were 3146 kb/d for the July 2021 to June 2022 period, for the 12 months from July 2007 to June 2008 US net imports of crude oil were 9911 kb/d. The SPR stocks of crude at the end of June 2022 were 493 million barrels and at the end of June 2008 the SPR was at 706 million barrels.

             The reason for the SPR is to protect against an oil embargo, and net imports of crude oil is the important measure. Relative to June 2008 the SPR is at 70% of the level in June 2022, but net imports of crude are at 32% in June 2022 compared to June 2008. Essentially the SPR is at about 2.2 times the level of coverage of net imports in June 2022 relative to June 2008.

             If we use imports of crude vs net imports (probably the better measure). At the end of June we still had adequate crude in the SPR, but it may need to be refilled before long.

             I agree tht it is not a smart move to be selling these strategic reserves. Though note that about 1.7 Mb/d of gasoline and diesel are exported (net exports) in recent years. In a crisis those exports could be stopped and would reduce the amount of crude that needed to be imported by about 1.2 Mb/d.

       2. Ok – I bite.
          Money creation is a function of liquidity preference and MMT gets that right. I agree that bond holders don’t finance deficits – it’s a gold standard-ish POV and has not been applicable for decades and decades. It also explains why so many concepts like crowding out and the quantity theory of money have no empirical support anymore.
          Rgds
          WP

13. “Pioneer Natural Resources CEO Scott Sheffield said last week that U.S. oil production growth would likely disappoint both this year and next.

    Sheffield has forecast that U.S. oil production will add 500,000 bpd this year but in 2023 the production gains may be lower than this, due to constraints, Reuters reported last week. The EIA forecasts production growth of 800,000 bpd for 2023. ”

    https://oilprice.com/Energy/Energy-General/Analysts-May-Have-Overhyped-Americas-Largest-Oil-Basin.html

    1. Stephen Hren,

       Perhaps Sheffield is trying to talk up oil prices. It is always a wise decision to under promise and over deliver, he might be doing that as well and also keeping shareholders happy by claiming restraint.

       A look at recent Pioneer Natural Resources Permian basin output from shaleprofile, in 2022 about 49 wells per month have been completed for first 6 months, this is roughly half the average completion rate for Pioneer in 2018 (about 100 wells per month completed in Permian Basin.

       Chart below from

       https://novilabs.com/blog/permian-update-through-may-2022/

       Just choose Pioneer from list of operators.

       

       1. Note that if we look at well quality for Pioneer, it has been decreasing since 2019, this may be what Sheffield is talking about, maybe he expects this for the Permian basin in general going forward. Chart below from novilabs blog (same link as previous comment) click on well quality then choose Pioneer for operator and select 2017 to 2021 for first production year to reproduce chart below (more information can be found by looking at chart at novilabs.

          Note that when we look at well quality for all operators, the productivity (not accounting for increasing lateral length, I don’t have access to that data) increased through 2021, but has fallen in 2022.

          

    2. The amount of rationalisation going on would normally indicate a Basin in late middle age and declining, so maybe it’s preemptive and they know what’s coming. COP bought out Shell operations, Pioneer bought DoublePoint and sold non-core assets to Continental, Diamondback bought QEP (after Energen in 2018), Devon bought WPX and might be going for ExxonMobil operations.

       1. Enno Peters said the following about the Permian in his post.

          Total Production

          Permian tight oil production rose to a new output record in May, at around 4.6 million b/d (after upcoming revisions, horizontal wells only). Not all this production is reported yet by the state agencies, thus the apparent drop in production in the above chart. Natural gas production rose as well, to over 18 Bcf/d. You can view this by toggling the ‘Product’ selection to gas.

          Perhaps future growth will be slower especially if supply of labor, steel pipe, and other equipment is short.

14. EU embargo to hit Russian oil output, IEA says

    Russian oil production is forecast to fall by 17 per cent by February compared with prewar production once an EU embargo on Moscow’s exports comes into full force, according to the International Energy Agency.

    Although the drop of 1.9mn barrels a day is smaller than the 3mn b/d losses the IEA predicted in March, the forecast points to the impact the EU ban on Russian crude and refined petroleum products could have even if significant volumes are rerouted to other markets.

    Russia, which is one of the world’s biggest oil producers, pumped almost 11mn b/d of crude and products in August, only marginally down on its output before it invaded Ukraine in February, the Paris-based IEA said. It expects that to fall to 10.2mn b/d in December and to 9.5mn b/d by February 2023.

    1. Ron

       I don’t buy it. China and India plus a few others will buy extra Russian oil and then turn around and sell it to Europe and make a bonus. Europe will happy then to say they don’t need Russian oil. The supply lines will get longer. Natural gas is a different story.

       Russia Energy Revenue Drops to 14-Month Low on Sanctions Fallout

       (Bloomberg) — Russia’s energy revenues shrank in August to the lowest in more than a year as Western sanctions over Ukraine prompted the Kremlin to sell discounted oil and squeeze gas flows to Europe.

       The refusal to buy Russian oil by some traditional customers in Europe means Moscow has been forced to sell oil at a steep discount in Asian markets, depriving it of the full benefit of higher prices. While August saw record-high spot gas prices in Europe, gas levies, which take up a smaller share in the budget, couldn’t fully offset lower oil revenues. State-run Gazprom PJSC has significantly cut gas exports to Europe this summer, blaming sanctions for capped flows.

       Russia’s oil and gas revenues, which account for more than a third of nation’s budget, fell to 671.9 billion rubles ($11.1 billion) last month, the lowest since June 2021, according to Finance Ministry’s data published Monday. That’s a drop of almost 13% from July. It’s also a 3.4% decline from a year ago, even though Urals crude prices rose almost 10%.

       https://www.bnnbloomberg.ca/russia-energy-revenue-drops-to-14-month-low-on-sanctions-fallout-1.1818137

       

       1. Ovi, It’s not that simple. The US and the EU are trying to keep oil flowing by placing a price cap on Russian oil. Russia will get about $30 less a barrel if they are willing to accept the price cap. Putin says he will not do that. And China and India are under pressure to either pay the cap price of not buy Russian oil. Everything is unstable right now. However, China will not willingly ignore Russian sanctions. If they do they may face sanctions themselves.

          But Russian production will drop anyway because of sanctions on parts and services. Just how fast that production will drop is uncertain. But I think it is a safe bet that Russia will be producing well under 10 million barrels per day in the first quarter of 2023.

          1. Ron
             Russian oil still flowing to Europe via waters off Greece

             China and India don’t feel any pressure and I think it is that simple

             TOKYO — The West has sanctioned Russia over its invasion of Ukraine, but Russian oil continues to flow to Europe via hidden maritime routes.

             https://asia.nikkei.com/Business/Energy/Russian-oil-still-flowing-to-Europe-via-waters-off-Greece

15. Dennis, I think you will need to revise all those optimistic charts of yours. 🤣

    Analysts May Have Overhyped America’s Largest Oil Basin

    Current forecasts of U.S. crude oil production growth may have to be significantly revised as the recent slide in active drilling rigs in the top shale basin, the Permian, suggests that output may disappoint due to supply chain constraints and cost inflation in the double digits.

    The rig count in the Permian Basin dropped by 2 to 340 last week, as the number of total active drilling rigs in the United States dropped by 1, according to new data from Baker Hughes published on Friday.

    The active oil rigs in the Permian now number 316 – the lowest in four months. This suggests that the most prolific U.S. shale basin, which continues to drive America’s oil production growth, is going through “a significant slowdown,” Bloomberg Opinion columnist Javier Blas argues.

    The slowdown in activity, as evidenced by the drop in active oil rigs from 331 in July to 316 now, points to the fact that forecasts of Permian output, and by extension, U.S. crude oil production growth, need to be recalibrated lower.

    As shale drillers prioritize returns to shareholders and paying down debts, they are not rushing to drill even at $90 or $100 oil. Even those planning an increase in drilling activity face supply chain delays and up to 20% higher costs.

    At the same time, the Energy Information Administration said in its latest Drilling Productivity Report this week that crude oil production in the Permian is set to hit a record high next month, adding 66,000 bpd from September to reach 5.413 million bpd in October.

    Yet not everyone is so optimistic: Pioneer Natural Resources CEO Scott Sheffield said last week that U.S. oil production growth would likely disappoint both this year and next.

    Sheffield has forecast that U.S. oil production will add 500,000 bpd this year but in 2023 the production gains may be lower than this, due to constraints, Reuters reported last week. The EIA forecasts production growth of 800,000 bpd for 2023. By Tsvetana Paraskova for Oilprice.com

    1. Ron,

       I will revise as I get more data. My recent conservative scenario for Permian Basin in chart below, it assumes the completion rate rises to 650 wells per month maximum by Jan 2026, the current completion rate is around 435 wells per month (August 2022 from DPR DUC data). That is a 215 well increase over 39 months, an average increase in completion rate of about 5.5 wells per month. Note that from Jan 2017 to June 2018 the average rate of increase in Permian basin completion rate was about 14.6 wells per month.

       The recent estimate by Enno Peters in May 2022 was 4600 kb/d for Permian basin, my scenario has output in May 2022 at 4348 kb/d, about 250 kb/d less than Enno’s estimate (he is usually very accurate.) Perhaps I will need to revise my scenario higher in the future.

       

       1. Dennis

          In the comments above you do not mention that the completion rate is down from a high of 444 in March and the drilled wells showed its first drop in August. Maybe you could post a chart that shows what happens with say 450 completions every month. I assume production will continue to grow but slowly roll over.

          Do you have a WTI price that will drive completions up to 650 per month?

          

          1. Ovi,

             In my scenario I use the oil price scenario where oil prices climb from $77/bo in Sept 2022 to $100/bo in July 2026 (2020$) and remain at that level until Dec 2030. Yes the completion rate has leveled off since April after more than doubling over 18 months from 210 to 429, an average rate of increase of 12 wells per month from Sept 2020 to March 2022.

             An alternative set of scenarios with maximum completion rates of 400, 500, and 600 new wells per month from Dec 2023 to Dec 2030. From March 2018 to April 2020 the average Permian Completion rate was about 481 wells per month and in 2014 the average completion rate was 600 wells per month. These are older scenarios from Feb 2022, the more recent (650 completion maximum) scenario breaks out Wolfcamp Delaware, Bonespring, Wolfcamp Midland, and Spraberrry well profiles from 2018 to 2050 and may be more accurate, the older scenarios use a single well profile for all Permian basin formations which varies by year and has decreasing EUR after 2021.

             My expectation is that supply constraints will eventually be resolved and high oil prices (over $90/bo in 2022 $ from June 2022 to Dec 2035 for Brent crude) will lead to a higher completion rate than 600 wells per month by March 2025. I am often wrong in my guesses about the future.

             

             1. Dennis

                Thanks for the charts. See comment after your chart below. The 400 chart below looks a bit different than this one.

                1. Ovi,

                   The two are the same, the scale on the left axis make them look different. Below I show the tight oil completions in wells per month for my best guess tight oil scenario. The peak in 2026 to 2029 is similar to a previous peak in 2015, also the rate of increase from 2020 to 2025 for my scenario is similar to the previousrate of increase in completion rate from 2010 to 2015.

                   

                2. Dennis, concerning that projected “US tight oil well completion rate”, can I borrow that crystal ball you got that projection from? I have some things I need to project myself. 😂

                3. Ron,

                   Just filling in the blanks. That is the scenario I use, the odds of it being correct are zero.

                   When I use that completion rate scenario with the well profiles based on data from novilabs (formerly shaleprofie), the US tight oil output would be as shown below. This is also certain to be wrong, but it is my best guess as to what might happen if oil prices remain above $90/bo in 2022 $ for 12 month centered average oil price from Jan 2023 to December 2035.

                   

       2. Dennis, please don’t take my post too seriously. It is just not that important. I do hope you are correct about the Permian. But it doesn’t really matter. The Permian is but a bit player in the grand scheme of things. I am concentrated on world production. World production peaked in 2018. I think you know that. But, it is just part of the big story. The big story is …. well, you know what that is. I have been thrashing that straw for over forty years, long before peak oil was in the picture.

          Take care,
          Ron

          1. Ron, you have delivered the same message since I have followed the Oil Drum (shale notwithstanding)
             And you are right, shale will not change the big picture now.

          2. Ron,

             Happy always to get your comments.

       3. Revision to Permian best guess scenario with completion rate falling to less than 650 per month after Jan 2029, slightly different from previous scenario after 2028 (previous scenario had completion rate remaining at 650 wells per month from Jan 2029 to December 2030.) The red crosses are EIA data for Permian basin tight oil output.

          

    2. Ron
       Also this.
       https://twitter.com/aeberman12/status/1570390781160214535?t=sEZReIs1whLmDIXGik7Fjg&s=19

16. Dennis –

    YoY U.S. prod. has increased by 0.46 MBpD. If you were to extend those sharp increases for the next 5 years, you’d have a net increase of 2.3 MBpD…using your chart above that would result in ~6.5 MBpD for 2027.5, but looking at the chart above you have 8.0, so you obviously think that production rate is going to increase significantly sometime soon. All current indications are actually to the contrary, right (rig counts, rumors, etc)?

    For the permian, I think the best case scenario is that we see a plateau for medium to longer term period (5-10 years). Obviously, if drill rigs drop below a certain amount, then the 14% annual decline rate of the wells kicks in and we will see net decline rather than plateau…

    Even if geology constraints didn’t exist, why the heck would we want to overproduce the Permian???? Permian is the best reserve we have…

    Just curious, how do your future scenarios play out with Permian maxing out at 5 MBpD?

    1. Kengeo,

       If the Permian remains on a plateau at 5 Mb/d then the World peak might be lower, though other nations might increase extraction rates to offset that. This is not what I want to happen, it is what I expect based on the workings of a capitalist economy where independent oil producers free from government intervention (with the exception of current regulations) attempt to maxmize profits. In general oil producers are trying to make money and at $90/bo for oil and $6/MCF for natural gas (current price is around $8/MCF) they can make a lot of money even with the current inflated costs.

       Scenario below assumes tight oil output reaches a maximum of 8 Mb/d and maintains a plateau, extraction rate is for conventional oil only. A lower peak for this scenario of about 83.8 Mb/d in 2030, but it is unlikely that tight oil output will be as low as this scenario projects and peak oil output is likely to be over 85 Mb/d around 2029 for World crude plus condensate output.

       

       1. For those who are upset that this projection doesn’t show a cliff-like decline,
          you can put the same data on a compressed and longer time scale chart (1900-2070) and get the appearance you are looking for.
          If that helps you…justify your thinking.

          1. Hickory,

             For the scenario above I plotted the natural log of World C plus C from 2040 to 2070 to find a decline rate of about 3% per year, from 2030 (peak year) to 2039 the decline rate gradually increases from zero to 3%.

             

17. Here’s my favorite 10 year old chart which has stood the test of time, credit to author:
    😐

    

    1. Kengeo,

       A problem with those scenarios is the assumption for World C plus C URR that was too low (2500 Gb for the low scenario and 2800 Gb for the “high” scenario). A more realistic URR assumption is 3000 Gb to 3500 Gb for World crude plus condensate, see Laherrere et al 2022.

       https://www.sciencedirect.com/science/article/pii/S2666049022000524

18. https://www.oilystuffblog.com/forumstuff/forum-stuff/whazzup-in-west-texas

    Great post!

19. That is a great post, future does not bode well for increase in US oil production…swimming in place for 5 years is about all we could hope for…then 10-15% annual decline, here’s what that looks like (and that looks optimistic to me…):
    Permian (MBpD):
    2026/27 – 5.0
    2030 – 3.0
    2032 – 2.0
    2035 – 1.5
    2037 – 1.0
    2042 – 0.5
    2050 – 0.1

    1. Peak Avocado and Kengeo,

       I agree Mike Shellman’s blog post was excellent. I agree the economics for Permian basin wells are currently very good. Perhaps Permian producers are waiting for either costs to decrease or oil prices to increase (or both), Mike would know better than me why things have slowed down, perhaps much of it is just supply chain issues so there is no reason to increase rig counts or frac crews if you can’t find workers or pipe or sand or water to complete your wells.

       An alternative low completion rate scenario (400 wells per month) for Permian. I doubt the completion rate will remain this low long term, 600 to 700 wells per month is a more likely maximum completion rate around 2026 or 2027.

       

       1. Dennis

          400 wells per month gives a nice yearly increase 2022 to 2023 and the drillers/completers don’t have to stretch their finances.

       2. Ovi,

          Note that the scenario with a 650 well per month completion rate does not reach that level of completions until 2026, note completion rate on right axis in chart below. Also note that the vertical scale is much different than the previous chart.

          I would also note that the wells completed in this scenario can easily be financed from cash flow while paying down debt and returning money to shareholders. The finances of tight oil operators is currently quite good, they would be wise to produce more oil while oil prices are high, at some point in the future (perhaps around 2035 to 2040) demand for oil may start to wane, oil prices will fall and the window of opportunity for making nice profits on tight oil production will close.

          That is the reason I expect the completion rate will rise in the tight oil basins (especially the Permian Basin).

          

       3. Ridiculous Chart Dennis

          1. LTO Survivor,

             We will see.

20. Sounds like the produced water management is a major issue…likely impact to higher costs to deal with it…

21. This url is like a poem that says a lot.
    I don’t have access beyond the paywall-

    https://www.wsj.com/articles/the-global-economy-has-become-a-battlefield-russia-china-financial-war-income-borrowing-sanctions-energy-taiwan-credit-natural-gas-11662986911

    1. We are entering the period of catabolic collapse. It begins with de-globalization and moves on from there.

       I am reading the book Blip by Christopher O. Glugston. It was recommended by George Kaplan a few months ago. It is sober reading and in line with my thinking from over 20 years ago. Fossil fuels are finite and there is no way to replace them.

       I wonder what the electric car enthusiasts are now thinking when charging in Europe is more expensive than driving a car with ICE and using gasoline. This is coming to a neighborhood near you soon enough.

       1. Seppo, my friend’s Hyundai Kona EV costs him less than $0.09 per mile (daytime rates) and just over $0.02 per mile (off-peak rates). My Audi A4 was $0.31 per mile at last fill-up. UK prices. So EV’s in Europe are more expensive than ICE?

          1. When we all switch to EVs next year, I wonder what the electric rates will be?

             1. GreenBub , here is the answer . These are copies of a bill from a company in Italy engaged in the processing of frozen foods .

                

       2. Thanks for the book recommendation. In my bucket.

          I’ll thread the middle here-
          if your area has a good electric system/supply, then driving around with EV is much less expensive than petrol, and this trend will escalate as oil depletes further. I reemphasize that qualification point- ‘if your region has done a good job with its long-term electricity planning and implementation’, for a time beyond cheap coal/gas.

          On the other hand, most of the world generally has been asleep at wheel at planning for a world of declining fossil fuels. a process that should have started in severe earnest in the 1970’s. And since the world has been generally limp on efforts to change course there likely will be a relative shortage of transport energy for much of the world. Which means higher cost per mile as the general state.

          note- my wife has an electric vehicle and I have a gas one. She pays less than 1/5th per mile than do I.

          1. Blip in a 20 min vid:
             – https://www.youtube.com/watch?v=cdXdaIsfio8

             

             1. Thanks for posting this link, John. I have been thrashing this straw for half a century. It is the very logical outcome of our human predicament. Yet those with their heads in the clouds, or perhaps heads up their ass would be a better metaphor, accuse me of spreading doomer porn. Oh well, as I tell my kids and grandchildren, I am 84 years old and will be safely dead when the shit hits the fan.

             2. John, This book is somewhat difficult to read owing to its style of writing, but I decided to read it as it has a lot of information. Thanks for the link.

       3. Seppo Sir , a question that has been pinching me . Zoltan Polszar ( CFO of a hedge fund ) with a good record of crisis forecasting ( rpt ONLY crisis forecasting ) said that it takes $ 200 billion of Russian energy to leverage that into a $ 2 trillion of manufacturing output for Germany . This means a leverage of 10:1 . He calls it Germany’s ” Minsky moment ” . So my question is. In finance leverage works both ways . Is it true for energy ?
          The Paretto Principle defines the 80/20 rule . In wholesale business 80% of the sales come from 20% of the customers ( I have practical experience on this ) . If a company loose this core than it will shutdown . Logic . Do you think this is correct ? As I post let me state some facts . Fertilizer production in EU is shut by 70 % . Steel , aluminum and zinc production shutdown by 50% . These are core industries required for downstream products . My line of work puts me in contact with SME’s in Belgium . Currently they are paying their X 3 times electricity bills and hoping that the govt will do something , but I give them maximum 6 months before they throw in the towel . Yes , deglobalization is in full swing and it is inflationary for prices but deflationary for the economic system . Are we going witness the deindustrialization of Germany ? Germany is the whale in EU , the rest are just minnows . As goes Germany , so goes EU . Respects .
          P.S : This question is a request for Seppo Sir, but all who have an understanding of the issue are welcome to chime in , We are ” Bozo’s on the same bus ” .

          1. Minor nitpick: Zoltan is global head of short-term interest trading at CSFB

             https://www.credit-suisse.com/about-us-news/en/articles/news-and-expertise/we-are-witnessing-the-birth-of-a-new-world-monetary-order-202203.html

             rgds
             WP

          2. Hole in Head
             I cannot comment on what Zoltan has said, for I do not have broad enough knowledge of the issue. But I will comment on something related to this. Early this week Wall Street Journal had an article on European companies relying on natural gas shutting down, specifically it mentioned the aluminum smelter in Slovakia.

             https://www.tellerreport.com/news/2022-08-17-the-largest-aluminum-plant-in-slovakia-will-stop-production-due-to-electricity-prices.H14ffDH5Cc.html

             There are also news that Germany is closing whole industries. Whether these are attention grabbing headlines, I do not know, but logic suggests that something like this is happening.

             If an aluminum smelter is forced to shut its doors owing to energy costs, the question arises, why is not energy one of the factors of production in macro-economic theory. The answer is that from a macro perspective it is still too cheap and can be ignored. However from micro-economic perspective it has grown sufficiently large to shut some factories down. As this creeps into other industries, a time will come that the economic theory that ignores energy can be ignored. It relaters to the fundamental flaw based on the “cost share theorem”.

             Now you are asking whether a company that would be viable at current energy prices will lose 80% of its customers because the energy costs of their customers are too high and thus will the said supplier stay in business. For a large company with large fixed costs, the shut down is likely in my view. Conversely, it the energy costs are too high for the producers of primary metals so they cannot sell their products owing to their high price that is required for them to remain profitable, then the downstream businesses will not have the materials to make their own products. This, of course, depends how long this situation lasts. I am expecting that it will last forever from now on with perhaps some short periods of relief from time to time. So the 80/20 rule both ways is just a good guess and I have nothing better to offer.

             I do chat with some people from Finland quite often and they are quite worried what is happening there. Needless to say the governments in EU are dysfunctional as they can no longer make independent decisions, and if they could, the politicians are a sorry lot, as we have seen both here in the USA and in Canada.

             I might have also mentioned the book The Technological Society by Jacques Ellul. It is a fantastic book to connect the dots of how we have arrived at the place we are at today. Namely we are in a predicament from which there is no escape. As I have said before, electric cars are an attempt to keep our present unsustainable life style alive, but doing so makes matters worse in the long run.

             1. Seppo Sir , thanks for your response . We are on the same page . What you read are not attention grabbing headlines . These are facts . Your view on the macro and micro level as to how energy is priced is illuminating . In the meanwhile two links for you to digest .
                https://www.reuters.com/markets/europe/germany-weighs-nationalizing-uniper-energy-crisis-worsens-bloomberg-news-2022-09-14/
                and now daylight robbery. Desperation .
                https://www.bloomberg.com/news/articles/2022-09-16/germany-takes-control-over-rosneft-s-three-german-oil-refineries

                1. Hole in Head

                   It is exactly the Uniper situation that is a topic of which people in Finland are now concerned, as the Finnish energy company Fortum is the major owner. The dysfunction of the government in Finland that is run by what is at best called a bunch of “teen age girls” shows up that they were completely unprepared to negotiate with the professional team that Germany sent. It looks like Finnish taxpayers will end up with the tab. But enough of this.

          3. It’s mostly green Nimby attitude – there is frackable gas here, and some conventional in the North Sea left.

             But we need some big Blackouts before we do anything about this – it’s all about climate and enviromental in the discussion. Importing the stuff is better, you don’t have to see the pumps and pipes.

             They are all talking about green energy, but not much happens. And still no plans for storage(besides a lot of talk about batteries), so we will need coal + gas even in a mild summer night.

             And no talk about energy – it’s all electricity production talk. And Corona.

             The frackable ressource has even the right size – just big enough to be forced to convert to something different the next 20 years, be it renewable or nuclear / thorium, or a mix of everything.

             1. This should be of interest to Europeans . Understand the electricity pricing mechanism and why you are paying the high price . Exposed by Yanis Varoufakis ( former Finance Minister of Greece) and the most hated person in the EU headquarters . Tip . The prices are determined in Netherlands for the whole EU . Surprised .
                https://www.youtube.com/watch?v=NicE0-N9ux0&ab_channel=DiEM25

    2. The article is long on prose and short on facts – here is a snippet:

       U.S. sanctions against Russia fit neatly into the income-and-borrowing framework. Banning imports of Russian oil sought to impair Russia’s income. Forbidding investors to purchase Russian bonds and freezing Russia’s central-bank reserves were intended to increase the cost of credit.
       But as Russia has demonstrated, in any war it’s possible to counterattack. Lower prices on Russian crude found buyers in India and other countries. When Russia cut off natural-gas sales to Europe, it sought to destroy European income. Many European companies can’t make a profit with such high costs.
       America’s energy industry isolated the nation from significant harm. But a war over Taiwan would wreak havoc on the global economy. Global trade with China is about $4.5 trillion; of which the U.S. is about $600 billion. No other country could easily replace China. The entrepreneurial infrastructure around Shenzhen is unique. In the event of war, the U.S. might try to freeze China’s foreign-exchange reserves. Or, seeing the Russia example, China could move first and disrupt U.S. credit markets.
       Over the same 200 years that produced huge increases in standards of living, there have been many disruptions to globalization. An expansion in global trade from the 1860s to World War I was followed by a retreat. After each interruption, the world gradually resumed its path of greater trade integration, and the same will likely happen this time for the simple reason that isolation impairs wealth.
       The key assumption behind the post-Cold War order has been that economic self-interest would discourage conflict. I certainly believed that. My contacts in China and Russia experienced an increase in living standards. The most obvious indicator of increased wealth was their foreign travel, which rose to levels their parents couldn’t imagine.
       The invasion of Ukraine taught me that this assumption was flawed. After Russia’s military setbacks, Beijing may be reconsidering its Taiwan policy. More likely, Beijing believes the U.S. should be reconsidering its own policy.
       So far, my mother-in-law’s enthusiasm for Mr. Putin outweighs her nostalgia for Starbucks. When offered a trip to Finland to see my wife and me, she declined, citing the need to stay and support the war.

22. Biden Officials Weigh Buying Oil at Around $80 to Refill Reserves

    https://www.bnnbloomberg.ca/biden-officials-weigh-buying-oil-at-around-80-to-refill-reserves-1.1818317

    So how long will oil price stay at $80?

23. For anyone thinking Russia is doing gangbusters with their incompetent SMO.

    https://m.youtube.com/watch?v=sL3EysuSniQ

    1. Thanks for the link Kleiber. This video blows away any arguments that Putin and Russia are doing just fine. No, hell no, Putin really stepped in it when he invaded Ukraine. But he cannot take it back, he has wrecked the country. He cannot just pull out and ask that the sanctions be removed. He will have to rebuild the country first.

       And this puts to bed the silly story that oil production will not be affected very much. No, I believe production will soon drop to below nine million barrels per day, likely by the middle of next year. And all progress in their Arctic fields will come to a halt until sanctions are completely lifted, likely in about ten years.

       This video tells the story of a report prepared by Russians for Putin.

       Hey people, watch this video before you start telling anyone just how smart Putin really is. Hell, that man is dumber than Donald Trump, and that is really goddamn dumb!

       1. “Hell, that man is dumber than Donald Trump, and that is really goddamn dumb!”

          Agree with you on most everything you say Ron.

          Putin miscalculated in Ukraine. He thought they would lie down like they did when he took Crimea.

          He also underestimated the role the internet would play in having the World rally against him.

          He made a calculated move that might ruin him.

          Putin rose thru the ranks of the KGB to get to power.

          Trump has never risen the ranks of anything.

          Trump’s dad gave him 200 million bucks and he tricked the world into thinking he was a great business mind despite all his businesses failing.

          If Trump had simply invested in an S&P Index fund he would have amassed billions. But instead he has almost lost his wealth several times and looking at jail time!!!!

          Putin, a horrible guy, has run a nation for decades….although at this point may have ruined it.

          He is definitely not dumber than Trump.

24. US shale bosses tell Europe: ‘There’s no bailout coming’

    The US shale industry has warned it cannot rescue Europe with increased oil and gas supplies this winter amid fears that a plunge in Russian exports will send crude prices soaring back above $100 a barrel.

    Even though oil markets have softened in recent weeks, the respite could end when an EU embargo on Russian sales comes into full effect later this year. US Treasury secretary Janet Yellen this week warned the embargo “could cause a spike in oil prices”.

    However, US shale executives sitting on vast oil and natural gas reserves that could be used to alleviate a European energy crunch say they will be unable to step up supplies quickly enough to prevent winter shortages.

    “It’s not like the US can pump a bunch more. Our production is what it is,” said Wil VanLoh, head of private equity group Quantum Energy Partners, one of the shale patch’s biggest investors.

    “There’s no bailout coming,” VanLoh added. “Not on the oil side, not on the gas side.”

    There is a lot more to this article. Just click on the link to read it.

    

25. It’s all downhill from here.

    Dennis and Ovi have been discussing OPEC + Russia + USA. Well, I don’t have the USA’s production through August, but I do have OPEC + Russia through August. Though it is OPEC crude only and Russia C+C, it makes little difference. The percent decline would not change if we had OPEC C+C through August.

    OPEC + Russia stood at 40,136 K bp/d in August 2022. That is 3,030 K bp/d below their peak in November 20188 and 2,766 K bp/d below their high 12-month average in August 2017. This month, September will very likely see OPEC + Russia decline. And decline more in October. And their average for 2023 will be at least one million barrels per day below this August 2022 peak. It’s all downhill from here.

    

    1. Ron

       Going forward, the only data that counts in assessing whether the previous decline rate of these 3 will continue is data after October 2021. Since the data in 2018 and 2019 was a self imposed cut back, it is not indicative of what the data will do after October 2021. My bet now is that it will plateau starting in Nov/Dec 2022.

       One issue to keep in mind is the drop in US demand relative to last year. The attached table from yesterday’s EIA report shows US demand is down 1,500 kb/d relative to last year and gasoline demand is down, 850 kb/d. So unless US demand starts to pick up, SA will not have to increase production and OPEC’s overall production capacity will not be stressed. Russia and US will just keep pumping as much as they can. Once the SPR dumping stops in mid October, improved clarity on supply vs demand should show up.

       Demand has to get to the point that it begins to stress OPEC’s production capacity. I think that could happen in late 2023.

       

       1. Ovi wrote: Since the data in 2018 and 2019 was a self imposed cut back, it is not indicative of what the data will do after October 2021.

          No, that is not exactly the case. Between July 2017 and December 2019, OPEC less the big 5 declined by 1,250,000 barrels per day. And they are down another one million barrels per day since then. That was not voluntary cuts, that was natural geological decline. And Russia’s decline was all after that. There is no doubt whatsoever that Russia’s decline will continue.

          The USA is just a bit player in this drama. Our consumption will have very little effect on world oil production. August will very likely be the world’s post-pandemic peak. September may be close, but I doubt it. However, there is no doubt that world production in December will be well below both August and September.

          I am a little shocked that you are so clavier about Russia’s future production capacity. The sanctions will have a dramatic effect on Russia even if they are able to sell every barrel they can produce. Sakhalin island has already completely shut down because of sanctions and American companies pulling out. They averaged 227,000 bp/d last year. If you would just watch this video it just might change your mind about the future of Russian oil production:
          RUSSIAN Report Forecasts ECONOMIC COLLAPSE
          It is a report prepared by Russians for Putin.

          

          1. Ron,

             Most of that decline was from Venezuela and it is not natural geological decline, it was due to failed state status. Venezuela declines by about 1.3 Mb/d From Jan 2017 to August 2022. Nigeria is also at near failed state status, it declined by about 400 kb/d from Jan 2017 to Aug 2022, combined that is 1700 kb/d of 2500 kb/d for the “Other 8”. For the “Other 6” decline is about 800 kb/d over 5.5 years, roughly an annual decline rate of 145 kb/d.

             1. Ron

                Who are your big 5. I can’t replicate your chart. I used SA, Kuwait, UAE and Iraq for the four. Which country is #5?

                Are you using OPEC data or EIA data?

                1. Iran is the fifth. I know sanctions have temporarily stifled their production, but historically they are one of the five largest producers in OPEC.

                2. Ron

                   EIA data?

                3. Sorry, Ovi. No, OPEC data. I will post a graph of the Big Five at the bottom.

                4. Ovi,

                   I used Saudi Arabia, Iran, Iraq, UAE, and Kuwait as big 5. Ron may be using MOMR data. My analysis was based on the MOMR data and is through August 2022. The “Other 6” is OPEC less the big 5 plus Venezuela plus Nigeria (a group of 7 nations). Those 6 better reflect OPEC nations declining because of Geology rather than political strife.

                5. Dennis, you cannot remove politics from the data just as you cannot remove economics and expect to get anything reasonable. There will always be political involvement in every nation on earth. Why remove Nigeria? Nigeria, Libya, Venezuela, Iran, and Russia are all players in this drama. Removing any one of their production, increase or decline, from the mix and you will wind up with something that does not reflect reality.

                   The world is the way it is Dennis. You cannot remove any nation’s contribution from the mix because of politics. There will never be a time when politics is not part of the effect on world oil production…never!

                6. Ron,

                   You said the decline was due to geology. I was simply pointing out that geology is only part of the story. I think looking the World as a whole makes more sense, also keep in mind that the drop in output due to sanctions or failed state status is a different animal.

                   There is a drop and then the rate of decrease changes after reaching some point.

                   In the case of Venezuela output has stabilized at about 650 to 700 kb/d, it probably won’t continue to decline at the rate of the 2017 to 2020 period, likewise Nigeria and Russia may exhibit a similar pattern.

26. The obvious danger is that Putin is an old man with 2,000 tactical nuclear weapons at his disposal. It’s unwise to think that he will meekly accept defeat.

    1. Putin knows that if he starts nuking anyone, Russia will be bombarded with nukes from other countries. It’s called “Mutually Assured Destruction”. Putin knows this but far more important is the fact that his generals know this as well. Putin cannot push the nuke button without the consent of those who will actually be pushing that button and their commanding officers. They all know that if they push that button or allow anyone else to push that button, they themselves, and their families, will all die.

    2. They have to find a way to let Putin declare “victory” ( let him save face ) and exit.

       Otherwise, Putin knows if he steps down or is removed he is not going to a retirement community.

       He will be jailed, tortured and killed.

27. Okay, good to know.

    But not all nuclear is created equally. If Putin’s general launched a few very small nuclear weapons targeting Ukraine only, would the world truly engage Russia in a MAD nuclear war? I somehow doubt it.

    “Putin is comfortable in the ‘stability-instability’ world, while the West is deterred by his nuclear bluster as if Nato’s billion-dollar deterrent is nothing but a paper tiger,” tweeted Dr Mariana Budjeryn, a nuclear expert with the Belfer Center for Science and International Affairs, at the Harvard Kennedy School.

    1. Yes, smaller battlefield nuclear use by Putin should not be a surprise to anyone if he feels that his personal position is desperate. I have no idea if his military will cooperate with that order.

28. Gasoline demand is down 11% from 2019 in the US. Peak demand may already be in the rear view mirror.

    https://wolfstreet.com/2022/09/14/gasoline-demand-destruction-accelerates-despite-plunge-in-gasoline-prices-consumption-drops-to-august-1997-level/

    1. That is interesting.
       The US GDP is now considerably higher than the pre-Covid level, yet the gasoline consumption is lower.

       That articles does a good job explaining the underlying dynamics, although I think it mostly pertains to the US rather than the world.

       1. Actually Hickory it will be much easier to electrify personal transport in developing countries as the modes of transport are much less complicated than cars. Here’s a look at how rickshaws in India are converting to electric:

          https://www.nytimes.com/2022/09/04/business/energy-environment/india-electric-vehicles-moped-rickshaw.html

    2. Basically the current situation is $90 oil is not high enough to increase production (note sustained rig count decrease in Permian), but IS high enough to drive electrification of transport. We saw oil over $100 earlier this year because of a major increase in demand from the pandemic ending and low interest rates/fiscal stimulation, and an oil shock from the Ukraine war. Those two scenarios may not occur in tandem again for some time.

       If oil production peaked in 2018, and it looks increasingly likely, than peak demand will be part of it. This is not hard to understand. A large percentage of oil consumption is frivolous and can be dropped (and likely has been) with the slightest pressure.

    3. Let’s not forget that frivolous spending is the grease of a modern economy. You might argue that it’s not essential but without growth and frivolous spending you can say goodbye to a lot of things taken for granted like ultra low interest rates. Look up the interest rates in medieval times. The first source I found is from Tyrol (Austria, 1287-1406) and the average level of risk-free loans is assumed to be around 10 percent, while trade loans carried significantly higher interest rates of 20 to 28 percent [1]. I think these levels of interest would induce eye bleeding in any modern suit. But that is what happens in a world without growth.

       [1] https://eurhisfirm.eu/wp-content/uploads/2020/09/nicolussi-koehler-the-price-of-money-working-paper.pdf

       1. “Let’s not forget that frivolous spending is the grease of a modern economy.”

          If we expand the idea up from ‘frivolous’ energy use to ‘non-essential’ energy use
          then we can realize that the world can get by with a lot less energy than we do currently.
          And yes, this means a much smaller economy, with many sectors being dramatically smaller than we have today.
          If we don’t downscale the massive consumption and growth pattern of the world in a planned and deliberate manner, then the chaos of energy (and water and food and soil) shortage
          will force the downsizing upon us, in the form of high prices and then scarcity and then rationing and then high barbed walls, in sequence.

          Anybody got a plan for downsizing the growth addiction pattern and consumption of their country?

          1. “Frivolous spending” was the engine of median and baroque time, too.

             Every free ressource got into representation and power demonstration – be it rich decorates castles ,
             churches or luxury goods.

             All world trade with wooden sailing ships and later the colonies was about luxury goods. The chinese silk road was about luxury goods. In these times it wasn’t possible to transport base articles like energy (wood) and basic food over distances.

             The king had his crown and palace – but even the most humble peasant tried to buy some colored fabric for a dress of his wife or a shiny belt buckle.

       2. At some point the economy of growth has to end and we have to come up with system that won’t kill everything. Not sure how that happens of course, Herman Daly and others are a good start, but someone cancelling their five mile drive to get a candy bar in their SUV won’t end the world at this point in time, and there’s still plenty of this type of activity we can nix.

       3. A large part of non-essential consumption is status or virtue signalling for you or on behalf of your children – e.g. to show you’d make a worthy mate or be a better ally than an enemy. To be honest as a signal the spending has to be non-essential and it must be visible, so the bigger and more obviously frivolous the better. Part is genetic and part is cultural. The culture may evolve faster than biology could, but nowhere near fast enough to make mach difference, and any change couldn’t be directed (if we were hubristic enough to try then my guess would be that the outcome would be the exact opposite of what was intended).

          1. Great observations George.

             A suppressed premise in most people’s solution seeking is the latent narcissistic one of the omnipotence of human agency. Moreover there appears to be a diminishment or denial of basic human nature (and broad gender nature) and an assumption of blank slate programmability. The hubris and lack of self awareness is fascinating. Add to this the likelihood that the thermodynamic collapse of Industrial Civilisation is a hard wired predicament, not a problem with a possible solution, and you get the phenomenon of attempted “innovation” solutions merely exacerbating the issues and accelerating the timeline of phase change and entropic relaxation.

             Ellulian “Technique” has an emergent logic of its own too, beyond human control now..

             Our future can only to be adapted to with MUCH less people and MUCH less complexity, whatever people’s good intentions might otherwise hope for.

             Again, wonderful comment George.

             1. Maybe try to break out of the doomer trope and explain why gasoline demand peaked in 2019 and is down 11% since then?

                1. The biggest demand sector is commuting and office occupancy is still below half of pre covid levels. Part is continued WFH, part is some can no longer afford the commute in private vehicles so vacancies remain unfilled and part is that the jobs have gone either because of a general recession or from changes in societal behaviour during the lock downs.

          2. Agree, and that is why it likely that the vast majority of downsizing of energy use and consumption of derived goods and miles traveled will be a forced change in state, rather than a voluntary downsizing based on belief, rationale or good intention (meaning a response to understanding the predicament of both population overshot and environment destruction).

             Involuntary downsizing will show up first as loss of purchasing power for scarce goods and services and will first affect the poorest nations and the poorest citizens of all countries.
             That has always been the case- barely getting by for that big segment of the world population.
             What will be new is the downgrading of the purchasing power and loss of chance for increasing prosperity from work and discipline that has been the big economic wave of humanity over the last several hundred years, especially among those people who have had access to abundant/affordable fossil solar energy, and some degree of freedom from economic repression.

             The downsizing will be very patchy, with some places and peoples approaching the condition slowly and others rapidly and already.

          3. George

             I once read somewhere that back in the 60s, it cost GM $300 more to make a Cadillac than a Chevy. Some smart guy, called Sloan I think, figured out what you point out above and so Chevys sold for $2,500 and the Caddy for $5,500.

29. North Dakota took another hit in July, down 27,266 barrels per day to 1,069,517 bp/d. The Drilling Productivity Report said the Bakken would be up instead by 22,829 bp/d.

    

30. SPR continues steep decline, more than 25% drawdown since February 2022 (~6 months)…

    Last time it was this low was Fall 1984…38 years ago…

    When will it stop?

    

    1. Until the midterms are over and there is no more need to buy votes.
       rgds
       WP

       1. It will be interesting what happens then.

          No more SPR (even perhaps refilling, Biden buying up all the 80$ oil as he announced), lower investing at current levels, OPEC reducing and Russia declining with spare part problems because of sanctions.

          And Europe burining more oil for energy instead of the expensive gas.

          Looks like a turn around for prices.

    2. A different way to look at SPR is to consider the ratio of SPR to barrels of net crude oil imports each month. This gives us the months of crude supply available from the SPR, if net imports of crude oil falls to zero.

       In 1984 the number was about 4 to 5 months as US net imports was low at that time (Alaska was producing near its peak).

       

       1. Thank you for that chart Dennis.
          Puts things in perspective.
          I wonder if the stored crude character is the proper match for the refineries, without needing import to achieve proper blend?

31. Here is the OPEC Big Five through August 2022. I think they are at their max, or very nearly so.

    

    1. Ron

       Below are the July and August commitments along with the difference of the Big 4. Venezuela has no commitments. There is a minimal increase for September and it is reversed for October.

       Looking at the table and your chart, the question is will OPEC and OPEC Big 4 be able to sustain their August production level for more than six months?

       

       1. No, of course not. They cannot hold that level very long. They are all straining to reach that level. Not just these four but the rest of OPEC will be down by the end of the year. Libya is now back to full production and will gradually decline from here.

          Saudia and Kuwait are now producing all they can from the Neutral Zone So there is not much left there though they hope to boost it a bit over the next five years.

          Discussions included boosting production from the current 170,000-175,000 b/d to 500,000 b/d, though 250,000-300,000 b/d is more likely in the next five years, a source with knowledge of the operations told S&P Global Commodity Insights.

          No, Ovi, it’s over. OPEC is now producing every barrel it possibly can and so is non-OPEC. Way too many nations are now in decline for production to go much higher. Remember while some nations will obviously increase production slightly, far more nations will be decreasing production due to natural decline.

32. Exclusive: Russia sees its oil output falling by up to 17% in 2022 -document

    Russian oil output may fall to as low as 433.8 mln t in 2022

    This would be the lowest since 2003

    Russian oil trade crippled by sanctions over Ukraine

    Oil, gas exports are also seen declining

    April 27 (Reuters) – Russia may see its oil production fall by as much as 17% in 2022, an economy ministry’s document seen by Reuters showed on Wednesday, as the country struggles with Western sanctions.

    I have reached my free article limit, and without paying, that was all I was allowed to read. However, the important point is that 433.8 million tons per year works out to be 8,712,000 barrels per day. That’s 2.5 million barrels per day below their pre-covid level. Note also that this was reported in an official Russian Ministry document.

    However, I don’t see Russia’s production hitting that level until early 2023.

33. Below is World C+C production less the OPEC big 5, Saudi, Iran, Iraq, Kuwait, and UAE. EIA data through May 2022 is thousand barrels per day.

    Notice the 12-month averaged has flattened out. That means the covid recovery is complete. I expect the 12-month average to move lower by December and much lower next year.

    I posted the OPEC Big 5 chart above. I believe they have reached their peak and will slowly decline from here on out. September production could increase a tiny bit, but nothing like the August increase. Then it’s all downhill from there for both the OPEC Big 5 and World less the Big 5.

    Just in case anyone is interested, peak oil happened four years ago.

    

    1. Ron

       The EIA is four months behind. From May to August, OPEC added 750 kb/d (MOMR). A few other countries will rebound from summer maintenance by then and the EIA production numbers in September will be slightly above your average. After that it will plateau. As I mentioned earlier, the only good data going forward to assess net decline will be from October 2021.

34. https://market-ticker.org/akcs-www?post=246962

    Simple facts on Debt.

    Not directly related to oil. But given the Shale debt very relevant I think.

    1. “Corporations basically never pay off debt; they always roll it over ”

       “When the best credits out there roll over the next time, which they all will within the next couple to ten years, they will pay that 6% where they were paying 2 or 3%!”

       If I were an investor, I would read that very closely.

       1. Global dollar shortage. And currently that shortage is way worse outside US than it is inside US.

          Only way more dollars get created to ease this shortage is lower interest rates. To entice people to borrow. And commercial banks to lend.

          Central banks are leading us right into global depression. Only tool the FED has to get more dollars out is currency swaps with other central banks. But those don’t work like most think they do.

          This is how they work. FED swaps “bank reserves “ dollar denominated for “bank reserves “ denominated in whatever currency. Now the foreign central bank let just say it’s the ECB. In order to get those dollars into the economy they have to find borrowers with collateral that want to borrow and have collateral. Otherwise those dollars never make it into the economy. Now think about that in the context of collateral shortage.

          These currencies swaps are all unwound eventually as they have expire dates. But point is just because they are made doesn’t mean they will be useful in stopping the global depression due to an acute dollar shortage.

          I stand by my $25 oil call. Hell it might go to $15🤣

          1. Karl believes the Fed has to raise interest rates or it will cause rioting in the streets.

             When people can’t afford to eat.

             The rioters will come after congress and the fed ( see Sri Lanka ).

             Those guys will save their own asses first. Thus interest rates to rise to halt inflation.

       2. Did you guys expect the symptoms of and responses to peak energy, peak financialization of natural assets, and peak population to look much different?

          I’m not saying that we are at peak in any of these things, but we are getting closer and starting to round the top. These are the early hints of whats coming, touching the most vulnerable places and sectors first.

          Some people think the Fed would not have had to put on the brakes if they had refrained from pushing on the accelerator each time we have had a major economic crises (2001 air bombings, 2009 Derivatives crash, 2020 pandemic). But if they had refrained from pushing on the accelerator they would have been replaced by popular demand from the voters who would elect a president who would promise the sun and earth (or coal and border walls, as was the case)-
          2019- “WASHINGTON—President Trump renewed his call for lower interest rates and his criticism of the Federal Reserve on Wednesday, by pressing for the central bank to cut short-term rates to “ZERO, or less,”

35. New posts are up

    https://peakoilbarrel.com/opec-update-september-18-2022/

    https://peakoilbarrel.com/open-thread-non-petroleum-september-18-2022/

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