Non-OPEC June Oil Production has Small Increase

267 thoughts to “Non-OPEC June Oil Production has Small Increase”

1. Thanks, Ovi.

2. Thanks Ovi , for all the info . Very well laid out and defined . My reaction . Nothing of interest . Canada is the only one that has still potential , all others are in decline . The forecast that production will increase by 1,888 kbpd is “sleight of hand ” as it will be mostly NGL . US still struggling to cross the previous peak . Tks once again .

   1. I think Norway is an interesting case to follow, as most here probably know they peaked at 3,1 MB/day in 2001, so that one will definately be hard to beat. But beeing curious I re-read George Kaplans post from two weeks ago (looking forward to part 2) and I also went back and checked some old stuff at crudeoilpeak for more info. There I among other things found what I remembered seeing a couple of years ago, namely a graph of Norways oil extraction rate and earnings at the time of “production”, made by Rune Likvern, and they seem to have sold the bulk at fairly low prices…(and invested it in USTs and stocks…)

      Anyway, there is also a graph in that linked post from Aleklett, from an ASPO 2010 presentation which supports Dennis claim that extraction can, and sometimes will, exceed forecasts, alas, that was the same year as Johan Sverdrup was discovered so the size of the discovery was probably unknown at that moment.

      The attched picture is from a 2015 update where Sverdrup was accounted for, but with all that in mind, are they creaming Sverdrup out as fast as they possibly can, considering current production level?

      http://crudeoilpeak.info/global-peak/norway-peak-oil

      But George´s post 2 will maybe answer that…

      

      1. Laplander , tks for bringing up the names of Rune and Aleklett . It has been a real long time since I heard about them . I admire their work and clarity . I also await Mr Kaplan post 2 .

         1. I´m also thinking about Jeffrey Brown, aka Westtexas, for an update on ELM, the Export Land Model, that would be really interesting now, a couple of years later. Mazamascience doesn´t seem to update their data for oil exports anymore, but it was a really good site for different countries and regions. Perhaps they (and Ron) were all just a bit ahead of their time…
            (where´s Leanan btw?)
            Addendum, but they all helped me to get to the acceptance phase, and start preparing…

            1. I remember asking about LTO around 10 years ago on The Oil Drum, and Jeffrey was adamant that the US would never exceed it’s 9,600 bpd level of about 1971.

               1. I kept an xls on the old computer, tracking Bakken output but when it crossed 1000 kBpd in 2015 or so I stopped updating it…So I bought one more second hand (pre-owned in the US) snowmobile to enjoy the fun while it lasted, but I knew it was short term…

               2. He should not be ashamed that he was wrong. The same assumptions about oil’s finiteness, and the peak and decline of individual fields, still hold true. C. Campbell continually warned us not to be over concerned about the timing (or the exact quantity) of peak but about “the long decline that follows.”

               3. @ Mike B, I sure hope it will be a “long decline”, otherwise things will get really interesting…

               4. I remember asking about LTO around 10 years ago on The Oil Drum, and Jeffrey was adamant that the US would never exceed it’s 9,600 bpd level of about 1971.

                  Nick, this is just bullshit. In 2011 the shale revolution was in its infancy. Hardly anyone foresaw its true potential. You are trying to do nothing but imply that Jeffrey Brown was nothing but a hack because he did not foresee the shale oil phenomenon. If not, then what is the purpose of your post.

                  Does the fact that Jeffrey did not foresee the quantity of shale oil to be produced mean that the Export Land Model is invalid? No? Then what the fuck is the point of your post if not just to belittle him?

                  The fact that Jeffrey did not foresee the shale revolution, does not follow that the Export Land Model is invalid. That is what is called a non-sequitur. One has nothing to do with the other. Only someone who wishes to belittle him would dare try to make such a nonsensual connection.

                  I apologize for the outburst but in my dotting old age, I have become far less tolerant of such non-sequitur nonsense.

               5. He should not be ashamed that he was wrong.

                  Well, being wrong should carry no shame – I haven’t seen anyone who really anticipated the potential of LTO. His real mistake was in being so adamant about it. That’s the continuing problem of Peak Oil – a lack of recognition of the difficulties of this kind of forecasting. PO enthusiasts have continually overstated the certainty of their data.

                  C. Campbell continually warned us not to be over concerned about the timing (or the exact quantity) of peak…”

                  The timing is the crucial question. That’s what makes Peak Oil important. If PO happens in 100 years, or even 50, it’s a non-issue.

                  …but about “the long decline that follows.”

                  That’s the other key mistake of PO. PO is NOT the End Of The World As We Know It. In fact, PO can’t come soon enough – the risks of FF-induced Climate Change are far higher than the risks of PO.

               6. It is obvious that oil, natural gas and coal will peak some day. Its impact on the society is a function of when it happens. If oil had peaked in 2005-2008 timeframe, the impact on the society would have been disastrous, comparable to WW2 (without the bombs). Now, not so much. We are in the early stages of transitioning to electric transportation, at least for the non-aviation sector. We are also in the early stages of transitioning to SWB (Solar Wind Battery) grid. By 2030, if 90%-95% of the VMT (Vehicle Miles Traveled) are in EVs and if 90%-95% of our grid is powered by SWB, peak oil is inconsequential.
                  The Peak Oilers and ELM proponents will eventually be right , but it will not matter by then.

               7. Gotta love a cornucopian who’s a self appointed expert in everyone’s mistakes.

      2. You realize sverdrup is medium or heavy oil and therefore useless.

         1. John , a simple question . Last total C+C is 77 mbpd (rounded off ) . How much of this output per you is ” real ” oil and how much ” just called out oil ” . If you can qualify with origin source e.g 7mbpd of shale according to you is ” just called out oil ” . Let us see your analysis . Perhaps you can also dissect the 77 mbpd figure into heavy , medium and light category .

      3. They are not “creaming” Sverdrup, its just a field in its own league. Extraction will be north of 80% of total resources in place when all is said and done.

         1. The marketed api for sverdrup is 28 and the analysis shows a lot of heavy products https://www.bp.com/content/dam/bp/business-sites/en/global/bp-global-energy-trading/documents/what-we-do/crudes/johan-sverdrup.xls

            1. John, i assume you are not talking to me right?

3. Assistance needed . Can someone tell me what is API of the oil that KSA , Kuwait , etc burn for electricity ?

   1. Generators are joint generation/desalination machines. Runs on diesel. Two big refineries in Kuwait. Refines 31 API oil and also newly 48 — no diesel in that.

      1. Thanks Watcher . Running on diesel . Let us see when they become Lebanon . 🙂
         P.S ; And to add fuel to the fire ” Water desalination ” . What could go wrong .

         1. And not by a small amount, 70% of KSA tap water is dessalinized water, but I think they are trying to move to more gas for power/water (not that it make a huge difference)

            1. Yvest , last I recall was that KSA was importing NG from Qatar or UAE to pressurize it’s own oilfields . However that is a minor issue , you put it correctly ” not that it makes a huge difference ” .

               1. HiH, that is not correct. Saudi is importing natural gas from Qatar but not for pressurization of their oil fields. All their pressurization is done with water injection. They are importing natural gas for electrical generation and water desalination. They burn all the gas they produce domestically to generate power and water but they simply do not have enough gas for that. So they burn a lot of crude oil in their boilers. They can buy gas for a lot less than they get for their oil. So they had much rather buy gas and sell oil.

                  Qatar and Saudi Arabia eye peace, a mega gas deal could follow

                  Qatar and Saudi Arabia have several good reasons to finally settle their political differences. Agreeing what could be the gas deal of the century is perhaps the best.

                  The kingdom burned almost 900,000 b/d of valuable liquid fuels for industrial use and power generation in 2017, according to the Riyadh-based energy think tank, King Abdullah Petroleum Studies and Research Center.

                  Replacing this oil with natural gas could generate more than $10 billion of additional export revenue at current market prices, or add to its existing cushion of spare crude capacity that was recently tested by the attacks on Abqaiq.

                  Buying gas from Qatar is one of the cheapest ways for the kingdom to remove oil entirely from power generation, but first must come peace after a near three-year total breakdown in diplomatic and economic relations.

                  A partial thaw came this week when King Salman bin Abdulaziz invited Qatar’s emir, Sheikh Tamim bin Hamad Al-Thani, to attend a gathering of the Gulf Cooperation Council leaders in Riyadh later this month. Although the emir declined the invitation – sending his prime minister instead – the direction of travel is undeniable.

                  “Gas supply has always been the Achilles heel to Saudi’s ambitious economic growth plans,” said Samer Mosis, senior analyst at S&P Global Platts Analytics.

                  “While the kingdom has equally ambitious plans to expand non-associated gas production, Saudi Aramco’s track record in this arena is spotty at best. A gas deal with Qatar would be the rational solution to this conundrum, but Saudi would be loath to build a dependence on Qatari gas.”

                  On paper, Saudi holds the world’s fourth-largest gas reserves and is the Middle East’s third-biggest producer after Iran and Qatar. But output of natural gas – most of its current output is associated with its oil – could have been much higher had Saudi fully developed its resources.

                  There is a lot more to this article but you will need to click on the link to read it.

               2. Tks , Ron for the differentiation and clarification .

   2. This a good point and nobody is able to answer it. Notice how sloppy the oil industry is with statistics about basic facts like oil grades.
      https://i.ibb.co/SwtY9rd/6-C7-EFE2-F-857-D-4784-9794-A05867-D23698.jpg
      These graphs show what happens assuming all the domestic consumption is useful light oil. We know that Saudi was around half Arab light grade in 1999 and it’s worse now. American imports are 15% light.
      The wedge between light oil production and domestic consumption has to be closing fast. Kuwait is entirely producing in the rumaliah area and Burgan is dead, Kuwait has hardly any real oil production. All the good stuff is Saudi and uae and uae is already diluting.
      Since oil peaked in 2018, and assuming half Saudi output is light, and all the domestic consumption is light oil, exports will die by 2025. UAE is a similar situation and peaked 2016.
      Kuwait is essentially irrelevant and doesn’t produce much light oil since it’s all the northern fields now.
      The car industry has already collapsed. Everyone’s gonna die really soon and nobody really cares. NGL will run out in a few months and utility prices will spike, there will be blackouts like already in China.

4. Baker Hughes US oil rig count +5 to 428

   

   1. One question, is the current rig count enough to keep the current production stable?

      1. I would doubt it but I really have no idea. One of the oilmen on the site could give a far better answer than I.

         1. If you look at the actual data in RRC all the real wells like Texas ten Y were drilled before 2015. Production is dominated by a handful of big leases drilled years ago anything new is a joke.
            In GOM it’s definitely dead there’s hardly any activity.
            Drilling is just morons screwing around at this point it’s obvious production is near peak. It’s only growing at all from minor expansions of a few existing leases.

   2. Ron

      IMO this guy is on fire.
      https://youtu.be/MSK04HPznmM

      1. Thanks for the link, he’s sharp.
         RU & KSA obviously have nothing to spare because any time they pretend to produce more, their storage falls.

         1. It’s actually that UAE is spiking with heavy oil, I posted this before. The inventory falling alone is not even the worst.
            Also pops,
            https://web.archive.org/web/20210714083822/https://peakoil.com/forums/the-world-outside-america-has-been-in-peak-oil-since-2005-t78054.html

      2. Yeah, I agree. Great video. This guy has obviously been following Saudi and Russia and obviously sees their problem. As to Saudi’s APO, why would they give money away? Why would they sell something that was more valuable to the purchaser than to themselves? Obviously, they would not. And he nailed Russia pretty well also. Thanks for the link.

         1. Matt Mushalik from down under has a very good site and info ,unfortunately is missed out . Read here about Saudi reserves etc after the Abqaiq attack
            https://crudeoilpeak.info/?s=Abqaiq

   3. Ron

      Attached is an addition to your chart. It’s petty obvious which comes first, WTI or Rigs.

      

5. Thanks for the post Ovi. Very interesting information!

   1. GreenBub, HIH, Survivalist

      Thanks for the compliments.

      Once we get US crude output data near the end of the year, like March next year, we will get an idea of how world demand will begin to stress OPEC and its partners.

      At the current time, US production appears to be stuck in the 11,300 kb/d range and unable to help in addressing increasing world demand, as it did in 2017 and 2018. In fact for the past year, the US has been a net importer of oil and it has increased over last year. The four week moving average for net imports last year for the week ending October 2 was 2,311 kb/d. For the week ending October 1 this year, net imports averaged 3,812 kb/d, an increase of 1,500 kb/d.

      If the US cannot reduce its net oil imports by increasing internal production, this will begin to stress OPEC plus and in particular SA with their ability to meet increasing world demand.

      While we may not currently be at peak oil, we may currently be in the situation where world monthly oil demand is increasing at a faster rate than world increasing monthly supply.

      1. Ovi,

         If oil prices keep increasing, which is likely if demand is growing faster than supply as you suggest (I agree with your assessment), then eventually the high oil prices might lead to increasing CAPEX levels for the oil industry. If that is correct, we will eventually see US output increase. I do not know what oil price level will cause this, my guess is $85 per barrel or higher.

         1. Dennis

            I agree that rising oil price will increase capex. However will it be sufficient to relieve the pressure on OPEC plus.

            1. On the short and medium term there will be no big increase in US oil.

               The capacity limitation, discussed here often, prevent this. Pre ordering steel pipe for 6 months, labor shortage, clogged logistic pipelines to china (that spare part for our rig is somewhere in the limbo …) will only allow very small increases at very high prices. Price increases of 50% + as reported by shallow will eat away CAPEX without gitting more holes – and needing even more CAPEX.

               In long term this will solve – most of these problems are the after – COVID – problems restarting the world economy again. I know the companies are working on it. Perhaps many more things will be produced domestic.

               1. Eulen. I’m just reporting price increases in our small field.

                  I don’t know the numbers in the Permian Basin, which is where the oil production growth will come from.

                  Have to think prices are up there also, and that labor is scarce?

            2. Ovi,

               Yes, the combination of demand destruction and increased supply will eventually balance the market at some higher oil price. Only oil produced can be consumed.

               Opec will produce as much as they can by May 2022, and oil prices will simply adjust to balance demand and supply.

               1. Dennis

                  Agreed. By next May OPEC, Russia and US capabilities will be much clearer.

6. Natgas item. China recently outlawed bitcoin mining. Those miners have headed to NoDak. Offering to capture flared natgas on site at fracked wells. Oil production companies interested. Bitcoin miners run generators on the natgas — also on site. NoDak winter cold reduces main CPU and graphics card CPU cooling reqmts. Free-ish power to create Bitcoins.

   Amusing, the world of Twitch streamers — gaming types. Raging about Bitcoin. Graphics cards have price driven up by Bitcoin miners.

7. Fuel shortage forces shutdown of main Lebanese power plants

   Beirut, Lebanon – The two main power plants in crisis-hit Lebanon have gone out of commission, effectively stopping all state electricity in the country.

   The shutdown on Saturday of the Deir Ammar and Zahrani plants, which have generated very limited electricity in recent months, took place due to a diesel fuel shortage, sources said.

8. The World Has Hit the ENERGY CLIFF…

   This has been my message for the past several years. I knew the world would hit the ENERGY CLIFF soon, but it seems as if we have done so already. Thus, the world now at the Top will experience more extreme volatility and chaos as high prices-shortages turn into low prices-surpluses. Thus, in time… recessions will turn into a depression that never seems to end.

   Rinse & Repeat.

   This is not just a European or China Energy Crunch. We are seeing record low Heating Oil Inventories in the United States: https://www.zerohedge.com/commodities/us-heating-oil-supplies-lowest-decades-ahead-winter

   And, as I posted at the end of the last Oil Post, which I would like to post here again, is that the U.S. Energy Industry produced 2.35 mbd of propane last week, but exported 1.25 mbd. Thus, the domestic market and inventories received 1.1 mbd. So, with FREE MARKET CAPITALISM AT WORK, Americans may face possible propane shortages and high prices this winter.

   The ENERGY CLIFF has arrived.

   steve

   

   1. Steve , I hope they are still manufacturing blankets in USA or even that is off shored to China ? . 🙂

      1. HOLE,

         That would be funny if it wasn’t the case… but it is. Also, the notion that there are all these BACKED-UP Container Ships off the coast of California, seems to ignore that a significant portion are empty with no place to go waiting for U.S. Exports that aren’t in demand overseas.

         With the energy crisis also now hitting Lebanon: https://www.bbc.com/news/world-middle-east-58856914, India: https://twitter.com/JavierBlas/status/1446768445593460740, the Balkans: https://twitter.com/JavierBlas/status/1446752064252661773

         The notion that ALL WILL BE FINE, regurgitated by the clueless, because we have PLENTY OF ENERGY RESERVES or MAGICAL GREEN ENERGY… no longer passes the smell test.

         This is the FALLING EROI causing havoc and problems throughout the world.

         steve

         1. “Fertilizer prices are climbing very, very, very fast as ammonia plants in Western and Easter Europe shut down or curtail production in response to record high natural gas prices.”
            https://mobile.twitter.com/JavierBlas/status/1446508052761432065

            North America also:https://pbs.twimg.com/media/FBNG7dBWYAw51XJ?format=jpg&name=large

            Food price increases coming next year.

      2. I think Australia and New Zealand are the biggest blanket exporters. They have lots of wool.

      3. Most heating in the US is with natural gas or electricity, in rural areas if heating oil or propane prices rise too much people use wood for heat.

         1. In my experience electricity is the primary backup to propane & fuel oil. Space heaters are very easy.

   2. Did you hope to gain credibility here by citing a far-right, conspiratorial libertarian blog Zero Hedge? Guess I can put you on ignore now.

      1. Mike B,

         Are you going to put me on IGNORE because I also quoted the BBC & a BLOOMBERG ENERGY ANALYST?

         And by the way, the Zerohedge article on Heating Oil Inventories came from information from Blloomberg.

         When people react this way…What the hell has the world come to…. LOL??

         steve

         1. You aren’t quoting the BBC and Bloomberg Energy, you are quoting a repackaging of their statement by a propaganda outlet of the Russian government.

            Effective propaganda is always a mixture of truth and lies. Otherwise it’s jut nutty like the constant stream of lies Trump emits. It’s preaching to the choir, and even the choir is starting to roll its eyes. So the fact that your propaganda contains scraps of truth is no defense.

            By republishing Zerohedge you are showing yourself to be an asset in Putin’s effort to destroy Western democracy and re-establish the Soviet Union. And you are instrumentalizing this forum.

            The question is whether you are a conscious asset or just a dupe.

            1. I read Zerohedge on regular base. Many informations about Money and FED are very good – and I get information about my own country not published or published very late and small here.

               One example. This information I haven’t read in our newspapers:
               https://www.zerohedge.com/energy/german-power-plant-halted-after-it-runs-out-coal

               I verified it over the next week – but it was always in side notices. There is no interest from our press to point everyones nose at the fact we are on the brink of a Texas style blackout this winter. And we’ll shut down 2 of our last nuclear sites this winter. Hopefully it’s a stormy and rainy winter – then wind power will work.

               To compensate it, I read some leftist news, too.

               PS: The broken windmill they’ve shown was bigger in the press here.

               1. EULENSPIEGEL,
                  I too read zero hedge on a regular basis along with a bunch of other websites including this one. I guess I am a dupe.

               2. News sources mostly show their biases by omission. It’s good to read a variety.

               3. Greenbub
                  That may be the comment of the month on this site.

               4. As the Russians say: trust, but verify. There is nothing wrong with Zero Hedge as a springboard on to other stories that may not have been picked up by the MSM.

                  And, frankly, does anyone get a gold star for regurgitating everything the BBC, CNN, FOX, DM, Grauniad, or WaPo put out? They all have their biases and blindspots.

               5. BBC, CNN, FOX, DM, Grauniad, or WaPo…have their biases and blindspots.

                  Good, god, no. The BBC (or CNN or WaPo) is not anything like Fox. Fox is a toxic mess of deliberate misinformation, and not comparable in any way to normal media. Please tell me you know that!!

               6. Thanks Nick, we can agree on that.

                  Question: Where does Kiebler live, Greenland perhaps. How can anyone living in the civilized world not be aware of what an outlier Fox news is? How can anyone not living in a cave for the last decade not be aware that Fox News has no news at all, nothing but fanciest propaganda? Fox is destroying American Democracy. There could be no Trump without Fox.

               7. Ron,

                  Sadly, this may be an example of “false equivalency”, which is a deliberate propaganda tactic of the far right: “We’re bad, but so are you!”…

                  Description:

                  The argument simultaneously condemns and excuses both sides in a dispute by claiming that both sides are (equally) guilty of inappropriate behavior or bad reasoning. While the argument appears to be treating both sides equally, it is generally used to condemn an opponent or to excuse ones own position.

                  Example:

                  “Nearly all members of the scientific community agree that climate change is real; but there are also those who believe that climate change is a hoax. So there are supporters and critics on both sides of the debate.”

                  “We condemn in the strongest possible terms this egregious display of hatred, bigotry, and violence – on many sides; on many sides.” – Donald Trump (Aug. 12, 2017, in response to violence at a white nationalist rally in Charlottesville held earlier that day.)

                  https://www2.palomar.edu/users/bthompson/FalseEquivalency.html

               8. I live in the UK, as I’ve mentioned numerous times.

                  And as someone who has grown up with the Beeb and The Guardian as a constant in the household, let me laugh at anyone thinking they are somehow beyond the same propaganda or convenient missing of certain stories shenanigans of the obviously ridiculous Murdoch shit.

                  The BBC News dept. is a shadow of its former self. Anyone who actually dealt with Brexit, day in and day out, will tell you that. And The Guardian has now gone the way of the Indy in being all about getting that rage bait from the clique they appeal to. It’s truly depressing.

                  And I’m sure the WaPo, run by one Mr. Bezos, is completely impartial on things relating to, say, shitty business practise.

                  Notice my point was that you SHOULD question all outlets, not that they are all equivalent. But if you say stuff like the BBC is somehow above all this, I’m just going to have to ignore anything else you say on that matter because you’re clearly out of the loop.

                  I would argue that if it wasn’t Fox, it would be some other outlet that rallied the tea party folks to vote in Trumpy or some other hothead. The 24/7 news business is, well, a business. And that means they need to make money, same as any other. That’s why journalism is basically dead and state owned bodies like the BBC are open to manipulation by gov’t interference. This is why there are no truly impartial and all encompassing news outlets, but then that doesn’t mean one can look at the Daily Mail or CNN and split the difference.

   3. Without free market you just get no propane. Or you get a coupon for 10 bottles of propane and can try to get it.
      Than you need enough black market currency to redeem your coupons. And in a cold winter this will be expensive, too.

      The state will not solve things – think at the most idiotic corona policies – that’s how the state solves things.

      You’ll still have to regulate some things – there is no working completely free market. You’ll have to take the best of both. One possible thing for example is to work with the strategic petroleum reserve – releasing barrels in a crisis like this approaching winter crisis, and rebuying them when things settle.

9. I ordered a pizza this morning from my favorite place where I live. It was about 11:30am on Saturday morning. And the guy answering the phone said they were out of regular pepperoni but still had old world pepperoni.

   The horror of it right 😂

   It’s little trivial things now. But if your paying attention even in the most affluent parts of the country things are changing.

   Majority of people haven’t even connected the first two dots together. Much less have a clue that ordinary life is going to change pretty drastically in the next few years.

   Right now here in the USA it’s football season be It college or professional. I’m soaking it in and enjoying it. Thinking by the end of this decade we might not even have football seasons anymore.

   One by one things that are normally done will disappear as we go over the energy cliff. Heck a lot of higher education or college’s won’t even be here a decade from now.

   Energy poor means you only do the things that are absolutely necessary. The poorer you become the smaller the list becomes of what is necessary.

   1. Don’t go apocalyptic – I thing it’s enough to scale down just a few things in the USA.

      Your per head energy usage is more than the double than here in Germany. And I think we can live good enough (going on vacation 2 times a year), and the Bundesliga still plays soccer (that’s our thing, all other sports are a side show).

      When I was in the USA 8 years ago I just wondered about all the waste. Cars used almost double the gas as here while driving very calm (didn’t wanted to get in contact with the police), comletely unisolated windows in a modern hotel – temperatures in this region are between -20 and +40 celsius, they must get poor paying the utility bill.

      You have lots of low hanging efficiency fruits – just earn them. We are here at the harder part now.

      1. As with all things, energy efficiency savings are subject to the law of diminishing returns.

         1. Eulen , ours’s is a ” The Landfill Economy ” . In this my waste is your income . Stop waste and crash the economy . Don’t believe ,look what the decimation of travel , tourism and hospitality industry (about 18% of the World’s GDP) has done to the economies of countries like Thailand , Turkey , Egypt, France, Italy etc . I know they are yet not breaking each other’s heads but the social fabric is unravelling . Easier said than done . No pain, no gain .

            1. Tourism isn’t waste. It provides valuable entertainment (and education) which people are willing to pay for.

               1. In the US, “tourism” consists of people towing gargantuan “mobile homes” behind monster trucks, behind which is usually a third vehicle, a car of sorts, which apparatuses they park in “natural” areas where they can plug in, turn on (the tv) and drop out waste products into septic fields, all the while roasting the planet with CO2 and befouling our views.
                  IT IS DESPICABLE.

               2. Mike–
                  I couldn’t of said it better.

               3. I thought Alim was into saving the planet from oil. Now he’s a global tourist industry advocate.

                  https://www.nature.com/articles/s41558-018-0141-x

                  Do the cornucopians have any coherent thoughts?

               4. Alim , your POV is no go .
                  Entertainment : Entertainment is important but not essential . Without entertainment societies have other problems like alcoholism etc . Example the FSU where their was no entertainment except WWII movies and Khrushchev on TV . However entertainment does not mean take a flight from NYC to Cancun , Delhi to Bangkok and Brussels to Malaga to get plastered and shoot your load . There are similar options closer than to spend all the FF .
                  Educative : This is a narrative spread by the tourism industry . How much are you going to learn or get educated by visiting Paris for a week ? The travel time from the time I leave my house , drive to the airport ,checkin ,checkout and drive to the hotel in Paris is 4 hrs .This does not include flight time . I could get more info on France, Paris and French culture by surfing the internet for 4 hours . Yeah , I won’t be able to take photos of myself touching Eiffel tower or of La Louvre so that it I can say “I was in Paris last week ” at the next cocktail party .
                  As Survivalist said “Do the cornucopians have any coherent thoughts?”

         2. Lightsout,

            That is true, but the fact remains that US per capita energy consumption is 2 times the average European level. In addition Worldwide there is a huge amount of energy wasted by internal combustion engines and producing steam used in turbines for electric power. Also a lot of heat is wasted in buildings that are poorly sealed, not well insulated and that don’t take advantage of available passive solar.

            World energy use would be far lower if energy was expensive because buildings would be improved and more efficient power production and transport would be utilized.

            1. As an engineer who designs sustainable buildings for a living I have to add there is a “yes, but” to this. Having just attended one of the annual award banquets for architects (my clients) in this industry last week, the topic is on my mind. Unfortunately, much of the energy used by a building through its total life is used during construction (embodied energy). This ratio tends to be worse for sustainable buildings.

               http://faculty.arch.tamu.edu/Jos%C3%A9%20L.%20Fern%C3%A1ndez-Sol%C3%ADs/Research/Peer%20Reviewed%20Papers%20-%20Presentations/Files/Manish_Solis%20Measurement%20Protocol%20Need%202.pdf

               I was impressed two years ago (the last time the event was held before COVID) when the key note speaker mentioned to the room something along the lines of “…if you use air conditioning in your house, you’re not really serious about sustainability…” There is indeed much which could be done to reduce energy use. Could we mandate max/min temperatures? 2% savings for every degree, more or less. We can also ban leisure air travel, theoretically. What will be politically possible?

               I’m all for aggressive building codes – but high up on the list should be (1) smaller buildings, (2) long lasting buildings. Also, adapting to being much less comfortable in existing buildings

               1. When I was in the USA I noticed they didn’t harvest even the low hanging fruit – things like double glass windows I have rarely seen. I don’t speak from sophisticates isolation and passive house standard.

               2. Eulenspiegel,

                  In cold areas of the US double paned windows are standard in construction since 1985 or so. Insulation standards have also improved over time, again moreso in northern parts of the US.

                  Older homes are not as well built for energy efficiency.

               3. BlondBeast,

                  The report you linked to simply says that better standards are needed, and that current data is very low quality:

                  Sartori and Hestnes [38] conclude, after reviewing 60 case studies from past literature, that for a conventional building, the embodied energy could account for 2-38 percent of the total life cycle energy, whereas, for a low energy building, this range could be 9-46 percent.

                  A range of 2 to 38%? Nine to 46%?? These are enormously wide ranges.

                  Thormark [57] asserts that embodied energy of a low energy house could be equal to 40-60 percent of total life cycle energy

                  Well, sure. If you dramatically reduce operational energy, than the percent of lifecycle energy accounted for by embedded energy will rise dramatically. That’s simple math.

                  Efficiency is very, very useful. It can help us get through the temporary bottleneck we’re facing, as we transition away from fossil fuels. But in the end, it’s not the most important thing. The most important thing is to stop burning fossil fuels as an energy source.

               4. @ D Coyne
                  I was near St. Luis. Hot summers with clima on, cold winter storms direct from the North. And single glas windows – I don’t get it.

                  And in the northern part I would recommend triple glas windows. They are common standard for new buildings here.

                  @Nick

                  With the transition efficiency is even more important – you can build from both sides then to make transition a lot faster. Using less energy leads directly less new power sources, less deep storages and less new infrastructure needed.

               5. Four years ago I visited an office of our company in Ann Arbor MI. We stayed there for a week.

                  It was a bizarre place in many ways. For example, employees were packed into cubicles to “save space”, but two thirds of the cubicles were empty. Their product was dying so there were no plans to add employees.

                  The office was so cold that the ladies had formed a knitting group and taught each other how to make fingerless gloves to keep their hands warm enough to use a mouse.

                  After a day in the freezing meeting room (we couldn’t open the windows to warm up) we got them to complain to the janitor. The next day someone showed up with a stepladder, removed a ceiling panel in the foyer and fiddled around with a wrench for about 20 minutes.

                  As a result, the office next to the meeting room got several degrees warmer. However, it was a corner office reserved for senior management. There was no management on site senior enough to enjoy this privilege, so it remained empty. The janitor never came back.

                  The hotel was similar. The room temperature was set to 65 F when I checked in, and the air conditioner was extremely loud. I switched it off and opened the window when I was in the room.

                  I am pretty sure there is some potential for optimization of energy use in America. I grew up in East Tennessee in a house without air conditioning. It was sometimes unpleasantly hot upstairs, but I survived into adulthood.

               6. My grandfather made some enormous contributions to S. California architecture (see https://www.rmsdocumentary.com/). Coming back to France after spending the summer in Los Angeles, I was horrified at current trends in building in Los Angeles. My grandfather was famous for bringing the outdoors in, that is to say that he made use of the temperate S. California climate to integrate exterior living spaces and views into his house designs. The current trend is to bring the indoors out. Because real estate prices are based on indoor area, buildings fill up the entire lot they are located in leaving no room for plants. Don’t these people know that one of the 9 clinically proved reasons for depression is lack of contact with nature? The market is a complete failure when it comes to satisfying the needs of the city. The new houses I see going up are all built for people with lots of money while there is a tremendous homeless population with very little money.

                  Michael Reynolds has shown that it is possible to build passively heated houses in many climates out of dirt, tires, glass, bottles, and other stuff that frequently ends up in landfills (key search word: earthship). Other people have shown that you can build fire resistant passively heated multistory dwellings from hay. Living green roofs do a good job of insulating from heat and increase biodiversity.

                  Though not an expert, I have heard that current building codes stifle innovation and creativity. My grandfather used to build things to code before the building was inspected. As soon as the inspector was gone he would tear things down and rebuild them solving architectural problems, but not to code.

               7. @Nick G – no major objection. I pulled the article quickly – we’d generally use a “around 25%” if quoted on it. My firm does a lot with net zero, and now carbon neutral, in construction.

                  Efficiency runs us into Jevon’s paradox, too. Don’t get me wrong, I’m all for energy efficiency for those of us who can afford it. I’m renovating a small cabin to be net zero myself, for some resiliency for my family. And I push it whenever I can.

                  But no matter how sustainable you make concrete, there is nothing as sustainable as less concrete.

               8. Efficiency runs us into Jevon’s paradox, too.

                  Maybe a little. I confess that I worry a little less about lighting levels with LEDs. But after you reduce energy input to 10%, a 20% increase in output from that base will only take you to 12% – I can’t imagine people increase their square footage much because of reduced energy operating costs.

                  That does point out the importance of careful regulation combined with carbon taxes, to deal with the overall universe of energy consumption and not just a few outliers.

                  But no matter how sustainable you make concrete, there is nothing as sustainable as less concrete.

                  Yeah, conventional cement is bad. Have you seen anyone using any of the alternatives that have been developed recently? My sense is that builders are very resistant to changing their time-tested methods…

               9. @NickG – I have seen some of this “carbon sequestering concrete” technology which is quite cool. So far it is limited to a few metro regions, and typically for mega projects ($100M construction cost and up).

                  But as with many sustainable building methods the argument has been that luxury builders and high-end projects subsidize the roll-out and economies of scale. To some extent this has been true. There are encouraging developments in many areas moving toward the Passive House system (U.S. east coast affordable housing moving in this way). Many other municipalities have decarbonization plans and electrification plans in place. I’m in the “skeptical, yet supporter” category.

                  For instance, once mega project we are working on (600ksf+) is trying to go all electric with emergency backup. We recently informed them they need 40ksf of space dedicated to battery storage to meet their goal. There are some encouraging funding sources out there now in the ESG space as REIT’s are pressured to improve the energy profile of their building stock. Had a chiller replacement this week accept an option to switch to a heat pump style system at significant improvement. The reason given was they are pursuing investment from European sources which require these commitments. Let’s hope it all can hang together long enough for us to give it our best shot.

                  (All this being said, I acknowledge individuals should pursue the lower tech and reuse type approaches. Big fan of earth ships and permaculture as noted by other comments. But I think this kind of stuff being available broadly will not be in time due to building codes, big ag, etc.)

               10. trying to go all electric with emergency backup. We recently informed them they need 40ksf of space dedicated to battery storage to meet their goal.

                   Hmm. Why do they need storage? If they weren’t focusing on sustainability, would they have onsite generation? Are they simply trying to downsize their diesel backups and reduce diesel consumption?

               11. @Nick G – Having emergency backup is part of the certification they are pursuing, and needed for tenants (lab spaces). Ordinarily they would have a natural gas generator – which is quite sensible. In this case “no gas connection” is part of the rating system, and quite silly imho. Natural gas (or deisel) has many important uses. There is some chance we may get an exception on this one. Good questions!

               12. Natural gas (or deisel) has many important uses.

                   What are you thinking of?

               13. What are you thinking of?

                   Nick, there are many, many important uses for natural gas and diesel. That should be obvious to anyone. Are you truly unaware of this fact?

               14. Ron,

                   I believe we’re talking about an office building complex, not an industrial complex. Clearly they’ve decided not to use natural gas for HVAC. So, what’s left?

                   Actually, I can see a case for liquid/gas fuels for long-term power backup (not necessarily from fossil fuels, of course, as I’ve discussed often). Batteries are more suited for very short term backup. But BlondBeast seems to be talking about other things.

               15. @Nick G – The value of natural gas or diesel for emergency power for labs (or more commonly hospitals) has to do with disaster planning and redundancy. For instance – hospitals commonly require an electrical hookup to two separate electrical feeds, and also water feeds – just in case, since people may die if one goes down. These locations are also often designated as emergency shelters for local disasters. A fair amount of planning based on local infrastructure goes into deciding on the reliability of the gas system in a crisis, vs the capacity to store diesel – and for how long. These issues for hospitals at least in the U.S. are codified by building standards (N+1 redundancy for mission critical facilities)

                   The value of NG or diesel in other areas (be it power generation or HGV) I’ll leave to others, as I have generalist knowledge and opinions but not expert knowledge. C.V. note my company of which I’m a parnter has designed 300+ net zero, LEED certified or passive commercial buildings in the 20M-100M range in the last 15 years. I will credit I am staggered at how little the people in my industry understand primary energy issues. I feel like I’m on an island, despite consulting to large municipalities about a decarb future.

               16. BlondBeast,

                   Yes, I’m very familiar with healthcare backup power – I thought you were talking about something else. I agree: I suspect that the NG hookup requirement was aimed at routine operations like HVAC.

                   As I said above, liquid or gas fuel seems to fit the operating profile of a backup system. I’d say your project deserves a waiver.

                   Eventually we’ll use synthetic fuel of some sort.

               17. BlondBeast,

                   Here’s a thought for your gas connection waiver: a very large battery is almost certainly higher carbon than a gas generator because of the very large embedded energy of the battery!

                   Batteries are very low carbon in applications where they get daily use. In applications where they get one or two brief uses per year they are neither cost-effective nor low carbon.

         3. Lightsout —
            We are nowhere close to where we could be in energy efficiency.

            1. “You have lots of low hanging efficiency fruits – just earn them. We are here at the harder part now”.

               To which I directed my comment.

      2. It’s virtually impossible for everyone to not die in 3 years.
         The op isn’t even that focused, NGL inventory is a third below last year.

         https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W_EPL0XP_SAE_NUS_MBBL&f=W

         America has 2m bpd light oil consumption. If ngl inventory is falling 50m per year that’s 100k per day. The deficit started around March so it’s 200-300k now. That’s a 15% deficit. Ngl isn’t oil obviously but because natural gas is eroi useless it is coming out of oil.

         Everyone will die in 2024 so the collapse of the car industry- half the economy- means 30% annual decline from here. We already see 15% this year.

10. Hello, just greeting everyone! Ultimately, I did post close to nothing but keep on reading the barrel regularly. I’m sure there are many others who do so. The work and comments here are very appreciated, a big thank you to all the contributors.

11. Interesting article. You should probably break it down by API gravity to see spiking, but otherwise it is a interesting trend.

12. I think the biggest thing that will be in the way of higher priced oil is still going to be the dollar. And it’s not what goes on at FED that determines the strength or weakness of the dollar. It’s global dollar funding that determines the strength or weakness of the dollar.

    Currently China is managing their currency peg to the strong side. But dollar denominated debt is blowing up and getting defaulted on. China imports a little over $2 trillion of stuff from rest of world if you use 2019 numbers. That means about $2 trillion US dollar get exported from China to rest of the world.

    If China imports less it means less dollars exported to rest of the world. Which means US dollar funding comes under pressure. If you look at currency markets it already happening. A strong dollar wrecks everything.

    I know I’ve been talking about a much stronger dollar taking oil price down for awhile. There will some lag in time frame. But it’s coming.

    1. HHH

       On November 2, 2020. the DXY was 94.13. On Oct 11, 2021, the DXY is 94.31. Essentially no change. On November 2, 2020,WTI settled at 36.81. On October 11, 2021 WTI settled at 80.52, more than doubling. This seems to imply that the price of oil has little effect on the DXY. See DXY and WTI charts below.

       Also it says that the world needs double the amount of $US to trade oil. Daily trade at $80/b and trading 80,000 kb/d needs $US 6.4 B/d.

       At this point it seems to me that supply/demand for oil plays a bigger role than the DXY in deterring the price of oil.

       Your thoughts would be appreciated.

       

       1. It’s really about dollars available to bid price. DXY matters and so do a lot of other dollar indexes. But they aren’t what really matters

          It’s dollar funding, the Eurodollar market the shadow money that you can’t see. The dollar loans that you can’t see in a index that actually matter.

          Eurodollar system was working smoothly before 2008-2009 crisis. Eurodollars are the dollar denominated credit or debt that allows world trade to happen. The Eurodollar market froze in 2008 crisis. And what I’m says is that going to happen again.

          The stuff Evergrande is defaulting on are Eurodollars. It’s a symptom of a dollar credit shortage or a Eurodollar shortage.

          This just the beginning. Strong dollar will take down a few other things first before oil has it’s oh shit moment.

          I’m not saying oil can’t go higher. Right now I’m long inflation. Higher oil prices are included in that. What I am saying is this inflation will lead to a blowup in dollar funding. Which will crush the inflation. And prices.

          This price inflation is temporary regardless of the lack of supply.

          The Fed doesn’t back dollar denominated loans made outside of the US. China can vouch for that.

          There just aren’t enough dollars circulating to service all theses loans made outside US. Inflation is like pouring gas on this fire. Because it takes more dollars something that there is a shortage of to buy the same amount of stuff.

    2. Settled WTI price today, $80.52

       Above should have read

       On November 2, 2020,WTI settled at 36.81. On October 11, 2021 WTI settled at 80.52, more than doubling.

       

    3. Everyone’s dying really fast, phantom peaked, New Mexico is about to.

    4. And the funny thing is: The higher the energy market prices are (the current coal, gas and oil price spikes), the more $ they need to export. So the oil price depends on the $ price, and the $ price on the oil price since China is the biggest importer.

       1. That’s irrelevant they can borrow.
          The real problem is the API of oil is declining and everyone is getting fake stuff.
          https://i.ibb.co/v3gNRhR/9-C302-FE5-544-E-47-BF-8125-E92-DCA8743-B7.jpg

          1. First, the “trend line” do not fit the data. Second, LTO has increased US supply of light crudes and thus demand for heavy needs to be met by imports. If there has been any “API-scarce grades” then these would probably be found in the medium or upper medium range.

             1. Umm. Everything besides light oil is utterly useless.

                1. John Thompson, you are a complete idiot. Every weight of oil is useful, including very heavy oil to make asphalt. Or just heavy crude for bunker fuel. There are no useless weights of oil.

                   But every post of yours is just so fucking stupid.

                   We had such a blooming idiot here before. His name was Mark. We banned him because of his continuous very stupid posts. Then he came back as Bob. Banned again because of his continuous posting of very ignorant posts.

                   Now he is back calling himself John Thompson. Mark, Bob, John, your ignorance gives you away. Damn, you just cannot hide stupid.

                2. Mr. Patterson
                   This individual posted for years on the Peakoildotcom site initially as Shortonoil, then Mustang19.
                   To say it was nonstop, nonsensical gibberish would be an understatement.
                   Most peculiarly, he actually seemed to have a small, fanatically devoted band of followers.

    5. China may import for $2 tr a year but it exports for $26 tr a year (2019). That would make it a net importer of $600 bn (in paper dollars) a year.

       1. China runs a fiscal 10% deficit and now since import prices are so much higher. They will be running huge twin deficits. Think Argentina but a much larger and much more important country

          Their 2 trillion in Reserves mostly US treasuries won’t last long trying to defend currency peg.

          China will be epicenter of next crisis.

          1. That’s pretty much nonsense.

             For one thing, the “twin deficits” idea is comparing apples to oranges. The may seem related, but they really aren’t.

             Also you are claiming they will run a current account deficit, when I read your comment correctly, but you have no data. You are just randomly claiming some future event. If it happens, it would be wildly out of sync with the trend of the last thirty years or so.

             1. Alimbiquated , when nations, countries or empires tip over ,they tip over . 30 years , 70 years , 300 years of history take a back seat . Ask the Brits or the Soviets . As was remarked on the fall of the Soviet Union ” Nothing happened for 70 years and then 70 years happened in 7 days . “

                1. Hole in Head —
                   Kind of like the Patagonian flu that’s going around. No symptoms at all, then suddenly Bam! you fall over dead.

                   So If you aren’t showing any symptoms, you probably have it.

             2. Back in 2018 when oil price was $75 ish China’s current account turned negative for a quarter. They got a reprieve from it as oil price fell. They import a massive amount of oil. Still do. But now it is not just oil it’s coal and NG that are also issues.

                As long as China’s dollar reserves are growing they can continue expanding credit within their own borders in their own currency.

                China’s banking system is about $48 trillion. And it’s reserves are only about $2 trillion. They don’t have enough US dollars not even remotely close. It would be different story if China’s currency was accepted as payment outside their own borders.

                And as the pile of dollars they do have disappears. The current account turns negative they lose ability to defend peg. Which will compound the inflation problems they are having. They must defend peg at all cost to hold back inflation.

                Also China regulates the price on electricity. So while imports can cost 5 times what they did two years ago for coal the full cost isn’t past on to the consumers. Cost are only allowed to rise something like 10-20% So when it comes to coal imports 5 times the amount of dollars are leaving for the same amount
                of coal as it was 2 years ago. And cost aren’t being recouped by the end users.

                It wouldn’t surprise me one bit if China and India have a war over coal imports if supply can’t be ramped up to meet demand btw. Try factoring that into price of oil.

                There is a thing known as China’s credit impulse. If your not familiar with it google it. This credit impulse is there as long as China has growing reserves of US dollars.

          2. HHH,

             They will simply not defend the peg to the US dollar.

             1. They are heavily defending it right now Dennis. They have too because of inflation.

                They don’t defend it their problems get worse by multiples. They will abandon the peg if inflation continues as it has been. When they just don’t have dollars to defend it. And some very bad things happen to markets and prices when that happens. Higher oil goes the higher the odds of what I’m saying happens.

                Everyone would cheer for lower prices if they grasp the gravity of what higher priced oil means.

             2. Dennis, the alternative for China on breaking the peg are devaluation , inflation , bank defaults etc etc . Chaos and mayhem that is unimaginable . If they break the peg the Yuan will go the way of Zimbabwean dollar . Pray they hold the dam .

                1. Hole in head,

                   The currency should float, just like Euro, dollar, pound, swiss franc, yen, won, etc.

                   An artificial peg tends to cause more problems than it solves. It simply distorts markets.

                   China’s economy is the second largest in the World and on its way to becoming the largest economy in the World, the fact that they try to manage exchange rates is just silly.

                   If they want to claim to be a major economic power they should stop acting like a third world nation.

                2. I think that based on PPP, China already has the largest economy.

                3. Dennis , the currencies that are free floating still manage their exchange rate vis a vis the USD . Remember the Plaza Accord with Japan in the 70’s-80’s because the Japanese were managing the Yen to their benefit . In a fiat currency based system USD is the top honcho . China just followed the Japanese mercantilist policy to get rich but more aggressively . It is now impossible to unwind without causing massive upheaval worldwide . China is 17.8% of the world’s manufacturing output . Asking China to float the Yuan will be like asking the USA to abandon the ” petro dollar ” status . Easier said than done .
                   I agree with HHH s that they are going to impose capital controls to prevent capital flight . The real estate bubble in China is $ 5 trillion . It has burst and is unravelling . In the 2008-09 crisis the real estate bubble in the USA the value crashed by 50% .

                4. Nick G , yes on PPP basis , but all is debt . The problem of the debt being tied to the USD currency peg has been well explained by HHH .

13. The Export Land Model

    The Export land model is not a theory, it is nothing but pure common sense. Jeffrey Brown coined the phrase about fifteen years or so ago. It is explained here: What the Export Land Model Means for Energy Prices

    But basically, it means that any exporting country will, quite naturally, increase its domestic consumption. And, all exporting countries will eventually start to decline in oil production. When that happens, the combined increase in domestic consumption and decline in domestic production, will both add to the decline in oil exports.

    That means that peak oil will have a double-barrel effect on the world’s economies. Importing countries will be in dire straights. Keeping world order under such circumstances will be difficult to say the least.

    

    1. The ELM model is moderately useful. It’s interesting to look at countries like KSA, for instance, and how they’re managing their net exports. It’s also interesting to look at the remarkably stupid behavior of major oil exporters, who repeatedly subsidize domestic consumption: that includes the US, KSA, Venezuela, etc. Unfortunately, it’s not just exporters who do this stupid thing, as we see in countries from India to Lebanon.

       But it makes a basic assumption that the only thing that matters are exports. That’s clearly not true, as we’ve seen from the impact of the US reducing it’s imports. A reduction in imports is just as important as an increase in exports. Similarly, an increase in imports is just as important as a decrease in exports. In other words, oil is fungible, and where it’s produced and where it’s consumed is not so important. Texas oil exports are as important as those of Kuwait.

       The result: the most important thing is the net world balance of production and consumption, not net exports.

       1. But it makes a basic assumption that the only thing that matters are exports.

          No, ELM makes no such assumption. By what strange logic did you arrive at that conclusion?

          A reduction in imports is just as important as an increase in exports.

          Errrr, Nick, I think there is something you really fail to understand about Middle East oil exporters. They do not import oil or oil products. They export oil and oil products and almost nothing else. You seem to think that the USA is an example of the world’s major oil exporters. Nothing could be further from the truth. For the past several decades the USA has been a net oil importer. Currently, as our consumption has increased, it’s pretty much of a wash.

          Texas oil exports are as important as those of Kuwait.

          Oh my God, are you serious? First of all, First of all, US oil companies export oil, Texas does not. The US is not important at all when it comes to net exports. As the chart below shows, the USA, on average 2021, is a net oil importer by a piddling 63,000 barrels per day. It’s basically a wash.

          The result: the most important thing is the net world balance of production and consumption, not net exports.

          Good gravy, what the hell does that mean? The world must consume no more than it produces? Wow! How did you arrive at that conclusion? Nick, some countries produce almost nothing but oil and some countries produce no oil whatsoever. That, Nick, is the problem. In a world of declining oil production, the producers only will have it all and the consumers only will have almost nothing.

          Bottom line, as the production from the world’s major oil exporters begins to decline, their consumption will not decline. They will consume a greater and greater proportion of their own production. That will make their exports decline at a greater rate than their production declines. And that is all that it says. Countries like Japan, South Korea, Germany, France, etc., etc. will suffer far greater than the world’s major oil producers. And if a person cannot understand such basic logic then they have a very serious problem.

          

          1. Ron,

             If most nations continue to freely trade goods and services, then oil will become expensive as nations that nedd oil imports try to outbid each other, also it makes subsidies in oil producing nations more expensive in the sense that if you give away oil to domestic consumers at $10/bo when you can sell the oil for $120/bo on World markets, then the NOC is losing $110/bo for every barrel used domestically rather than exported. It is possible in this situation that nations will reduce the level of subsidy at home, prices for fuel will increase and consumption will decrease within producing nations.

             In addition high oil prices will speed the transition to non-oil alternatives such as CNG and batteries.

             1. Of course Dennis. That is already happening. From January 2018:

                Saudi Arabia Subsidies

                Saudi Arabia recently scaled back some fossil fuel consumption subsidies that artificially lowered the price of fuel for its citizens, increasing its country’s gasoline prices by 50 percent. Saudi Arabia’s government also started a policy to reduce fossil fuel subsidies in 2015 when the kingdom raised the price of 95 Octane gasoline from 0.60 to 0.90 riyal. Currently, the government is considering the details of a plan to phase out subsidies for gasoline and jet fuel. This could result in a hike of about 80% for octane-91 grade gasoline to about 1.35 riyals per liter (0.36 cents)

                And of course, this reduction of subsidies, in every exporting country, will continue until there are no subsidies at all. That will just be the natural progression of events as the world’s oil supply continues to decline. Production countries already see the handwriting on the wall. And in just a few years there will be no subsidies at all and consumption will continue at a steady rate. And as production continues to decline, exports will decline even faster.

                1. Ron,

                   You assume consumption continues at a steady state, that is a poor assumption. As oil supply become short and oil prices increase, consumption of oil will decrease as people and businesses switch to either BEV or CNG for transport (and in some cases to electrified rail). We are likely to reach a point where consumption decreases more quickly than supply and oil prices start to fall. My guess is that this (decreasing oil prices) occurs between 2030 and 2040, best guess is 2035. Obviously as oil prices start to fall, no further development of expensive resources (tight oil, oil sands, artic oil, and deepwater offshore) will occur and World supply of oil will fall to balance the market.

                2. Dennis, I make no assumptions whatsoever. All I am doing is giving the basics of the Export Land Model. It is nothing more than just plain common sense that as an exporting nation’s oil production starts to decline, their exports will decline faster than domestic consumption.

                   Of course, as world production starts to decline prices will go up and consumption will go down. I never doubted that for a minute because that is something else that is no more than just common sense.

                   But world exports and imports will decline faster than production declines. The exporters will be the “haves” and the importers will be the “have nots”. Surely, Dennis, that is just not too hard to understand.

                   Dennis, you are the one making irrational assumptions. You assume that renewables will replace oil fast enough to cause a drop in demand, thereby causing the price to drop even in a world of declining production. But to your credit you do not see that happening for another decade or so. But the Export Land Model will kick in long before then.

                   Our difference Dennis is on the timing of Peak Oil. I see happened 2018-2019. You see it a decade later. A decade will give renewables time to kick in… well almost. But if we are already post-peak, shortages will be felt long before renewables can take over.

                3. Ron,

                   Yes we disagree on timing and on whether the export land model makes good assumptions. If the export land model proves correct, oil prices will be very high and those high prices just lead to a quicker transition to EVs and CNG (compressed natural gas) for transport as well as a general move to more fuel efficient vehicles.

                   If you think high oil prices cannot affect World consumption of oil in a hurry see 1979 to 1983 when World oil consumption fell by 10.6%, in the 4 years leading up to 1979 oil consumption had grown by 17% so this was a swing of almost 28% from the previous trend. In today’s case we have a new and better technology to replace ICE vehicles which did not exist in 1979, so we might see a greater swing in oil consumption than was witnessed in 1979 to 1983.

                   It will be interesting to see how it plays out, a lot of auto manufacturers are jumping on the EV bandwagon.

                   Let’s say ELM is correct as you assume and that 2018 is the final peak in oil output as you also assume, what oil price do you expect in the medium term, say 2025, if the pandemic has wound down? You seem very pessimistic about future supply and any possible substitution for oil use from EVs or natural gas, so I would think this implies very high oil prices, perhaps $120/bo or more (in 2020 US$) for Brent crude in 2025?

                4. Ron,

                   It is nothing more than just plain common sense that as an exporting nation’s oil production starts to decline, their exports will decline faster than domestic consumption.

                   That’s not realistic. It may be common sense, but so is a flat earth.

                   It really makes a hidden assumption that production from other countries is still rising, so that oil prices stay low. If all major exporters are reducing their exports, and importers like the US don’t compensate with more production then oil prices will rise dramatically and all consumers (including those in exporting countries) will have to reduce their consumption in order to match production with consumption.

                   Really, the ELM model assumes that consumers in exporting countries will be shielded by price controls and subsidies, but as we have discussed relative to KSA, this cannot last forever. Price pressures will break those price controls and domestic consumers will have to take their share of the cuts in consumption.

                   And, as Dennis notes, those cuts in consumption don’t have to be painful. Smart consumers will shift to alternatives. Some alternatives, like EVs or solar power (think KSA!), will be cheaper and better…

                5. If the export land model proves correct,….

                   Dennis, you don’t seem to understand. The Export Land Model is a statement of fact, not something that just might happen. It is a hard-cold fact that oil production in exporting countries will peak and start to decline. Now those countries could sacrifice their own population and cut domestic consumption instead of exports. Fat chance of that happening. But if it does, then I am just wrong.

                   If you think high oil prices cannot affect World consumption of oil

                   Dennis, when did I ever make such an assumption??? I challenge you to dig up a post of mine making such a claim. I am not a blooming idiot Dennis. I have always asserted high prices, of any product, affect consumption. This does not negate the Export Land Model. In fact, I stated just a couple of days ago that a nation could make just as much money by exporting half as much oil because the decline of world oil production would at least double the price of oil. That country could keep domestic consumption steady, decrease exports by 50%, and still get as much revenue from their oil as before.

                   It will be interesting to see how it plays out, a lot of auto manufacturers are jumping on the EV bandwagon.

                   Consumers must jump on the EV bandwagon for the EV revolution to work.

                   I would think this implies very high oil prices, perhaps $120/bo or more (in 2020 US$) for Brent crude in 2025?

                   I think you are a little low. I would guess closer to $150/bo by 2025 in 2020 dollars.

                6. Nick wrote: It really makes a hidden assumption that production from other countries is still rising, so that oil prices stay low.

                   No, nick, makes absolutely no such assumption. In fact is oil prices go high, it makes the Export Land Model far more likely. If prices double then a country can export half as much and still have the same export revenue.

                   Really, the ELM model assumes that consumers in exporting countries will be shielded by price controls and subsidies,…

                   Again, it makes no such assumption. Of course, domestic prices will increase. Prices will increase all over the world. But every national leader, even in a dictatorship, ignores the welfare of its citizens at its own peril. The Arap Spring revolution proved that point in spades. Every nation will appease its own citizens while still trying to get the best price for its exports. But the national leaders must try desperately to appease their own citizens, else there will be a revolution and they will be out at best and hung at worst.

                   Smart consumers will shift to alternatives. Some alternatives, like EVs or solar power (think KSA!), will be cheaper and better…

                   Someday, yes someday. But not nearly fast enough to counter the decline in world oil production.

                7. Ron,

                   Every nation will appease its own citizens

                   In other words, ELM assumes that exporters will have price controls and subsidies that shield their consumers from oil market price pressures.

                   Right?

                8. Right?

                   Wrong. You are obviously forgetting that in most exporting nations, especially those in the Middle East and Africa, the oil is owned by the country.

                   They will not shield their citizens from high prices. They will have higher prices, just not as high as those in Japan or Germany. Everything will be a calculated trade-off, Nick. Nothing will be cut and dried.

                   That’s the way it already is Nick. Saudi Arabia is cutting the subsidies to its citizens. Every year they get cut just a little more. And that is the same for almost every other exporting nation.

                   You seem to think everything will be either black or white. Either huge subsidies or no subsidies at all. No, it is always somewhere in between.

                9. These were the net exporters at the end of 2019, based on BP data.

                   

                10. Ron,

                    The export land model, which you defend as being correct from a common sense point of view, assumes consumption in exporting nations will not be affected when World output peaks and starts to decline.

                    The assumption is very likely to be wrong.

                    The assumption implies that consumption will not be affected by prices or that exporting nations will continue to subsidize domestic oil consumption. Both of these are also bad assumptions.

                    A lot of bad assumptions are wrapped up in that common sense model.

                    It was also a common sense theory that believed light objects would fall more slowly than heavier objects.

                    It is fairly common for common sense notions to be proved incorrect by careful analysis.

                11. Dennis- I believe that the domestic consumption in exporting nations will be generally restricted by higher global prices and lower internal subsidies, but nonetheless the shortfall in exports will still grow as depletion unfolds.

                    Some countries like Saudi Arabia or Nigeria or Iran or Russia may have trouble with civil unrest if the domestic supply of affordable energy is restricted too much.

                    To be an energy importer is a very vulnerable state of being going forward.

                12. The export land model, which you defend as being correct from a common sense point of view, assumes consumption in exporting nations will not be affected when World output peaks and starts to decline.

                    Dennis, forgive me but you are telling me what the ELM model assumes when it actually assumes no such thing. Why, Dennis, why do you declare what it, or I, assume when no such assumption is made, or even hinted at. High oil prices will affect all nations equally. It is just that exporting nations will be in better shape to deal with those high prices than nations who must import every barren of oil they consume.

                    The assumption implies that consumption will not be affected by prices or that exporting nations will continue to subsidize domestic oil consumption. Both of these are also bad assumptions.

                    Damn! Dennis, please show me the post where I made that assumption or implied that the ELM implies any such assumption. I did not and ELM makes no such assumption. Dennis, I have no idea what you are trying to do with all these silly assumptions which no one is making.

                    If country A is producing 4 million barrels per day and is exporting 2 million barrels per day, while country B is producing nothing but importing 2 million barrels per day, then everyone is happy. But then country A’s production drops to 3 million barrels per day, and world production drops by a similar amount.

                    Now, are you trying to say that both countries are in the same boat because high oil prices affect both countries equally?

                    Okay, I am assuming that country A has the advantage. You’re damn right I am making that assumption. And you think that is an irrational assumption? And country B will start to hurt sooner and a lot worse than country A. That will be the case no matter how high oil prices are. But you just go right on and assume that because high oil prices affect both countries equally that they are both in the same boat, that both face the same peril. That the country with oil is no better off than the country with no oil. Because, you say, high oil prices affect both equally. Really Dennis, really?

             2. Dennis , govt’s know the solutions but the politicians ?? now that is another matter . How can you win an election if you tell the electorate to downsize ? Same with royalty . How do you keep your head attached to your shoulder by cutting subsidies ? It will be the last resort always and by that time the table has tipped over . Too late .
                P.S : I am forwarding this post to MBS . Maybe he will give you call ? 🙂

                1. Dennis , changed my mind . We need you here . 🙂 .

          2. Ron , any explanation for the Jan 21 figure of -814 and Apr 21 figure of -843 . I seem to be missing things . Tks in advance .

             1. No, no explanation that I can come up with. That is just normal fluctuation. Rember, this is oil companies doing all this. Some months they just decide to import more oil for whatever reason. However, if you examine the PDF file you will see something interesting.

                Petroleum Overview you will notice that the US, in 2005, 2006, and 2007, imported over 12,000,000 barrels per day. then imports started to decline and we actually exported an average of 636,000 barrels per day in 2020. That was because of shale oil.

                I think, however, that we are destined to become a net importer again.

          3. ELM makes no such assumption.

             Uhmmm…”export” is right there in the name. The whole idea is that production and consumption in exporting countries are much more important than those in importing countries.

             Middle East oil exporters. They do not import oil or oil products.

             1st, ELM doesn’t apply only to the ME. It includes all exporters. 2nd, of course they import oil and oil products. Mexico imports a great deal of oil products, so much so that they have very little in net exports. Canada has large imports in the eastern provinces. Other exporters (Iran, KSA, etc) have large imports of products because they haven’t built refining capacity.

             You seem to think that the USA is an example of the world’s major oil exporters. Nothing could be further from the truth.

             Before WWII the US was by far the big kahuna of oil exporters. It was the US embargo of Japan that started the Pacific WWII. And the US is a good example of a country that very, very carelessly allowed itself to slip from an exporter to an importer with subsidies and price controls (just like all those contemporary exporters we like to criticize).

             US oil companies export oil, Texas does not.

             Of course Texas exports oil: Texans don’t consume all of their production: they send a big portion to California, Colorado,heck all over.

             Good gravy, what the hell does that mean?

             It means that production and consumption levels inside importers is just as important as production and consumption inside exporters. The US is the big example of that: rising production reduced imports and freed up oil for other importers.

             Countries like Japan, South Korea, Germany, France, etc., etc. will suffer far greater than the world’s major oil producers.

             As you discussed with Dennis, price pressures hit consumers one way or another: subsidies have to be paid by someone. When prices rise governments run out of money, and then price pressures break through and hit consumers. Exporters will reduce subsidies and their internal consumers will suffer the same price pressures as consumers in other countries.

             Actually, major exporters will also suffer: they desperately need the exports. Just look at Venezuela for a good example of that. KSA is having a b***h of a time kicking the oil export habit.

             1. 1st, ELM doesn’t apply only to the ME. It includes all exporters. 2nd, of course they import oil and oil products. Mexico imports a great deal of oil products, so much so that they have very little in net exports.

                Mexico is not among the world’s largest exporters, far from it. So why are you including them in your argument?

                Other exporters (Iran, KSA, etc) have large imports of products because they haven’t built refining capacity.

                Oh dear God, how can you be so fucking wrong?

                Iran’s refineries are operated by the National Iranian Oil Refining and Distribution Company (NIORDC). NIORDC operates 15 refineries with a combined crude distillation capacity of 2.04 million barrels per day, according to Facts Global Energy. NIORDC has capacity to produce 1.86 million bpd and has at least nine refineries.

                But what about Saudi Arabia? Nick, I worked in Saudi Arabia from 1980 to 1985. Though I did not work in a refinery, my house was 200 feet from the refinery gate at Ras Tanura. Saudi has since built some of the most advanced refineries in the world. They are a net exporter of petroleum refinery products.

                Nick, you had to just pull this shit right out of your ass without even a single google search. You just assumed that these Middle East oil exporters didn’t have a clue as to what a refinery was. Nothing could be further from the truth. Saudi Arabia is a world leader in refinery technology. This article is from way back in 2014:

                Saudi Arabia moves downstream

                Over the course of the next 15-20 years, Saudi Arabia’s domestic consumption of refined petroleum products and petrochemicals is expected to rise significantly and meet the country’s increased production levels. Until then, Saudi Arabia looks set to become a key regional exporter of refined products, plastics and polymers.

                Nick, please do a little research before you post such utter bullshit again.

                1. Ron,

                   I suspect that you’re right – I’m behind the times on oil products. I have the strongest memory of big crises in Iran because they couldn’t get gasoline, and yes, I remember those articles about KSA gearing up their refinery output – that’s what led me down the garden path.

                   Anyway…I don’t know how we got on to that…not really important to ELM.

                   So, where were we?

                2. “from 1980 to 1985”, back when a long distance call to S.A. for 30 minutes cost $100.

       2. > It’s also interesting to look at the remarkably stupid behavior of major oil exporters, who repeatedly subsidize domestic consumption: that includes the US, KSA, Venezuela, etc.

          Every successful drug dealer follows the rule “Don’t get high on your own supply”.

       3. This is what KSA should be doing, instead of building useless skyscrapers with their oil money.

          https://www.youtube.com/watch?v=T39QHprz-x8

          But they won’t.

          1. ALIMBIQUATED,
             That was just a great video and I thank you for sharing it. Mankind has deforested so much of the land which ends up causing drought and desertification. We can turn things around but are we smart enough to do the right thing.

             1. Yeah, I really like this video too. I think this thinking applies to a lot of other places, including large areas of the American West.

                1. Thanks Alim, great vid. It linked to this site, Regenerative Resources, which is also promising…

                   https://regenerativeresources.co

    2. For all the countries that import oil products, the only thing that matters is how oil is available to on markets- that is ‘how much is exported’.
       Global production means squat to the vast majority of countries that are all importers.
       I’m surprised more emphasis is paid to the trend in net global oil exports.
       I think we would find that it has been in brisk decline for many years.
       Anybody have good data on that?

       1. Hickory that’s the exact thing I gave in my graph. It’s from jodi.
          https://i.ibb.co/SwtY9rd/6-C7-EFE2-F-857-D-4784-9794-A05867-D23698.jpg

       2. Hickory,

          Much of total World oil exports used to be consumed by US, Europe, and China, (about 68% to 78% range over the 1993 to 2006 time frame), due to the increase in US output from 2006 to 2020, US net imports of oil have dropped to almost zero and the share of US, European, and Chinese net oil imports has dropped to about 39% of World exports of oil in 2019 and to 34% in 2020. Data from BP (oil trade tab) at link below

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

          

          1. Seaborne volume of crude oil has been flat over the past 10 years.
             If this is accurate, then my assumption is wrong, thus far.
             The US LTO production, the drop in Venez and Libyan production for reasons of chaos/mismanagement, and the Iranian sanctions for reasons of nuclear weapons proliferation (by an aggressive theocracy),
             are the biggest factors in this past decade.

             “Transport volume of crude oil in seaborne trade 2010-2020”
             chart- https://www.statista.com/statistics/264013/transport-volume-of-crude-oil-in-seaborne-trade/

    3. Mr. Patterson
       While I am unfamiliar with much of Mr. Brown’s concepts, the status of hydrocarbon countries transitioning from abundance to balance to deficit has continuously played out with natgas in places as far flung as Algeria, Pakistan, India, Indonedia, Malaysia, the Philippines and – conditionally – Egypt.
       A case could be made that the UK has morphed from a hydrocarbon rich-to- deficit country in recent years with major consequences.
       Even the Netherlands’ massive buildout of greenhouse-sourced agriculture is one such manifestation of availability/scarcity.

       The economic, political and social ramifications seem to be very profound yet somewhat subtle … and this extends outwards to competing, producing countries.
       Highly enlightening topic worthy of much self directed education.

       1. A highly enlightening topic for sure.

          If forced countries change policies, but not if there is a decade(+) cushion.

       2. I still hear, even after this past month, people in the UK talk about our North Sea gas and oil and why the gov’t is letting the producers gouge us with high bills. There is no massive understanding that the UK has peaked and been declining for years, and that we import vast amounts of FFs now.

          1. Kleiber
             ” … that the UK has peaked …”.
             Actually, the few stages that Cuadrilla had frac’d in the Bowland showed very encouraging results … all the more so as the project was in the very early stages of development.
             Depending upon many factors – primary being, perhaps, the severity of this upcoming winter’s energy travails – there may arise in your country a level headed, drama free examination of the pros and cons of producing the century’s worth of natty beneath your (collective) feet in the Weald and Bowland basins.

             The recent era of ‘feels before reals’ may be drawing to a close amidst dark, cold, non viable houses, factories, and commercial operations.

             1. ‘feels before reals’

                Are you suggesting that making prevention of climate change a high priority is just a “feel-good” policy?

                Do you disagree that climate change is a very serious risk?

                1. Nick G
                   I just reviewed – once again – Yuri Bezmenov’s comments upon interacting with people who have been exposed to the life long ideological subversion process successfully launched long ago by the USSR against western countries/societies.
                   As such, I refuse to engage in these discussions as ‘our world views of Reality’ are not merely incongruent, they are impossible to reconcile regardless of the amount/veracity/observable data that continues to present right before our eyes.

                   With some dismay – coupled with sparks of optimism – I continue to observe the reactions of the wider public as dramatic experiences continue to unfold.
                   That the mental machinations of orthodox ‘narrative spinners’ is accelerating gives me great hope. (The reference to Kurt Cobb’s piece in the last thread – he blaming natgas for the current energy woes after decades long kneecapping of same – would be hysterically funny but for the fact that he is still taken seriously).

                   Nick, it is simply not possible to productively exchange our differring perspectives with one qualification …
                   You, yourself, graciously expounded a few weeks back on the nobleness, the beneficent consequences (my desctiption) of ‘seeing through the Other guy’s eyes’.
                   I would suggest that you, yourself, may find that impossible to embrace if you pre-qualify – and dismiss – Other views that you deem repugnant. (See your above comments).

                   These discussions range far from the Peak Oil topics at hand, and I do not particularly enjoy delving into these matters … all the while well recognizing the crucial nature of this stuff.

                2. “Are you suggesting that making prevention of climate change a high priority is just a “feel-good” policy?”

                   “Our company/country/you name it has just announced that we will be carbon neutral by 2050”- I have heard this 100s of times recently and it means jack shit.

                   Not really feel-good as much as feel-COLD. Going to be an interesting winter.

                3. CoffeeGuyzz,

                   I’m sorry to hear that you don’t subscribe to the idea that climate change is a real problem. And that you seem to think that it’s part of a Russian propaganda campaign.

                   I have to admit – I feel that climate change as a big problem is pretty much settled science, kind’ve similar to the theory of evolution & natural selection, and a round earth.

                   And, no, I don’t believe that civilization will end or that we will all be freezing in the dark without fossil fuels.

                   OTOH, I am happy to discuss these things in a civilized manner if you’d like.

                4. Nick G.

                   I note some states have passed laws which end FF use for electricity generation by a date in the future.

                   For example, Illinois passed such a law.

                   However, the law doesn’t require the end of FF production in the state, doesn’t end the use of FF for transport and doesn’t end the use of FF for heating (gas).

                   I also note much of the Illinois law had to do with a direct subsidy to utilities to not retire a couple nuclear power plants. This subsidy appears to have been needed because Illinois sources over half of its electricity from nuclear. Also, thousands of jobs would have been lost if the nuclear plants were retired.

                   I assume these steps are good, but are these States moving to slowly. Or are they just doing what is feasible given current technology, supply chains, etc?

                   Illinois is the number 4 coal producing state in the USA. I assume loss of jobs/stranded assets/possible litigation was a reason why ending coal production wasn’t addressed in the legislation?

                5. Nick-
                   “And, no, I don’t believe that civilization will end or that we will all be freezing in the dark without fossil fuels.”

                   I think you are being extremely optimistic with that prognosis.
                   When it comes to heating and cooling, and cargo transport, and transport of goods and people in general, as well as food production and industrial output-
                   All of these things are at severe risk [emphasis on severe/catastrophic] of energy shortfall, as fossil fuels become scarce and more expensive.

                   I thought that was clear to everyone.
                   In fact, I think some degree of that poorer prognosis is a certainty.
                   Not everywhere quickly, and not all at once.
                   But progressively.

                   Keep in mind that economic strain in one region can lead to severe recession/depression elsewhere, and to shortfall in global trade of all sorts of materials ‘essential’ to our modern 8 billion way of life- from copper to semiconductors, fertilizer to chemical feedstock, medicines to machinery.
                   A small example- if your washing machine broke there could be a time when the wait list for a used/refurbished machine is 36 months, even if you had money for it. We in the wealthier half of the world have become used to extreme excess of wealth and convenience in much of this world. And the other half are working as hard as they can to get on the raft.

                   There are some partial replacement energy choices to adopt, and some places have/will make steps to rapidly implement those replacements. But for most places the steps taken thus far is like dipping your toe in the water.
                   The massive effort it will take to replace fossil fuel energy as it depletes will be far too weak and slow to prevent the global experience of energy poverty. And the measures it takes to voluntarily limit energy consumption have been generally feeble. The worlds population has been running blind, preferring to pretend that the party goes on forever. High prices due to energy shortfall will be the mechanism forcing decline in consumption.

                   Its a matter of degree. And I certainly agree with your prior statements- policy choices matter. In a huge, but partial, way.

                6. Nick G
                   So as not to derail this thread, I will (with some reluctance/misgivings) continue this topic on the non petroleum side.
                   It may be tonight or tomorrow before I am able to post, but I will use your last comment as an excellent starting point as to how language/phraseology/concepts play such outsized roles in shaping our ‘World View’ narratives which – in this current hyper-information age – quickly transition from the individual to the group to the societal to the global stage in toto with blinding speed.

                   Fascinating stuff, but not particularly appropriate for those unwilling and/or unable to broach topics that – superficially, at least – challenge strongly held core beliefs concerning their connection to their world-at-large.

                7. SS,

                   I think you’re asking 2 questions: is the Illinois law agressive/fast enough, and should it shut down supply instead of consumption?

                   I think it’s not quite fast enough: if it were up to me I’d add a zero-net-revenue carbon tax which applied to all fuels, wherever they were burned, that was returned via a per capita dividend to all IL citizens. OTOH, I suspect it was as much as was politically feasible. Heck, it’s much more than most states are doing.

                   On supply vs consumption: personally I’d leave production alone (although I’d prefer that obvious production subsidies be eliminated – with emphasis on the word “obvious”). For one thing, not all fossil “fuels” are burned. AFAIK, asphalt and petrochemical feedstock don’t have to create GHG emissions. For another, it’s a big painful fight with producers that’s completely unnecessary: production of FF doesn’t create pollution, only the actual burning of FF creates pollution.

                   At some point we may have to deal with other countries which refuse to acknowledge that air pollution crosses political boundaries. That may require messing around with cross-border taxes, or even embargoes. But that’s really, really messy and not an immediate priority. Heck, as countries like the EU and the US develop cheap and effective replacements for FF the problem will mostly solve itself.

                8. Hickory,

                   Are you arguing that the elimination of FF will cause massive problems because it’s difficult to do quickly, or are you arguing that FF simply cannot be replaced 100%?

                9. I don’t know what is theoretically possible [that discussion is appropriate for the other thread].
                   But I think it is a certainty that the human attempts to adjust will continue to be slow, short-sighted, and will fall short.

                10. Hickory,

                    A couple of thoughts. First, I agree that there will be some pain and chaos in a transition. At minimum there will be more countries like Venezuela, whose dependency on oil exports has destroyed it’s economy. The likely scenario includes a lot of mismanagement which will cause unnecessary pain: there exist plenty of good technical and policy approaches which would help make a transition smooth. It’s painful, for instance, to watch the clumsy ways that many countries manage the lifting of fuel price controls, leading to riots, etc.

                    2nd, what are the implications for public policy? To me, it leads directly to the idea that we should accelerate a transition away from fossil fuels as the highest of priorities. The sooner we build wind and solar, upgrade the grid, build EVs, electrify and build out rail, etc., etc. the more prosperous and and free of disruptions we will be. I think you agree…

    4. There is a major flaw in the export land model, if the country gets rich by exporting oil and then stops exporting oil it will no longer be rich. When the country can’t export as much oil, they can’t buy as many cars, jets and construction machines. This lowers their oil consumption, thereby increasing their exports.

       1. Andre, you haven’t a clue as to what the hell you are talking about. No one said a damn thing about a country stopping exports. If world exports drop by half, then the price of oil will far more than double. Countries can still export only half as much oil and still increase their export income.

       2. Andre , you are wrong . If they stop importing new stuff the growth in consumption will stop . However all the cars , boats jets etc which have already been purchased and are in use will continue to guzzle oil . So it does not lower their consumption , only stops the growth . The problem is that even a statist consumption in a declining production environment is fatal .

       3. If I remember correctly regarding ELM one key point Jeffery J. Brown effortlessly made was “the rate of decline in exports exceeds the rate of decline” or something in that manner.
          So a thought experiment: a hypothetical country extracts 4 Mbpd , uses 2 by themselves and exports 2.
          Unfortunately extraction then drops to 3 Mbpd, consumption stays the same at 2 Mbpd but exports are then down to 1 Mbpd. So a 25% reduction in extraction rate leads to a 50% reduction in exports. Took a couple of years to get the picture, but I don´t think you can argue about the math.
          He also showcased a couple of countries, don´t remember which, to give actual, real world examples.

          And even if the hypothetical country reduces internal consumption by 10% exports are still down 40%, if my calculations are correct. Different use/export ratios gives different numbers, but seems to get worse the closer to the end of export capability you get, but the story in general stays the same…

          1. Yea, Laplander, this ain’t rocket science. It is just down in the dirt, ordinary, common sense. Fourth-grade math. Yet some people still want to argue with it. Amazing!

             1. Hi Laplander, Ron , my memory of ELM was that it took 10-12 years to arrive at zero exports from the peak production . West Texas had three countries as models . Indonesia was definitely one of them since I remember Indonesia relinquished its membership of OPEC around the time he made the report. I am posting a link which is from Euan Mearns blog ” Energy Matters ” . This is the last post discussing ELM . The post is from 2017 but very relevant today also . Suggestion , can anyone do some research and do a post on the current status of ELM . This is the Achilles heel . Special Request to West Texas if you are reading this post , please update the current situation .
                P.S ; World peaked in 2018 . So zero exports by 2028 ??? . Not by my estimate because shale declines too fast . My guess is 2025 . A few have also indicated the same . I reserve the right to be wrong .
                Edit : I think the second was UK but could be wrong .
                https://euanmearns.com/peak-oil-exports/

                1. ELM does depend on nothing being able to midi gate the numbers. Say Saudi Arabia finds a way to use more NG for electricity instead of oil there by freeing up oil for exports.

                   Think people who actually didn’t read from beginning to ending don’t understand ELM. Jeffery Brown never said each countries numbers were set in stone. And timeline were set in stone.

                   He said after peak production occurs if nothing changes or nothing is done and domestic demand growth stays same. Then exports go to zero in about 10-12 year.

                   And he is right.

                2. HHH , “Say Saudi Arabia finds a way to use more NG for electricity instead of oil there by freeing up oil for exports. ”
                   Usually I am in agreement with you but ” Say ” ??? They could have done this but did not obviously for them lifting cost of oil was cheaper than importing NG (at least till recent ) . Unfortunately it was BAU even with the West Texas warning . Heck it has been BAU since Hubbert warned about peak oil in the 50’s . Time to pay the piper .

                3. Regarding the 10-12 years thing, I think it really depends on the decline/depletion rate of extraction at those conditions. So if your wells decline faster, i.e. shale wells or top suction horizontals in an old field, things might happen faster than expected. Just my guess though.
                   Edit, a related measurable thing that´s also been mentioned before here and in other places are “Peak net exports”, to keep an eye on that would be my suggestion.

          2. HIH,

             I wasn’t saying Saudi’s could find more NG. But if they could it would change the outcome of ELM model. Anything that could change the variables. Wave a magic wand and put nuclear power stations in Saudi Arabia or force poverty on more people. Would also change outcome of ELM model.

             All I was saying is some who haven’t taken time to fully read Jeffery Brown’s work might think he talks in absolutes.

             Some countries have ability to change the variables to some degree that could extend exports a little long than the 10-12 years after peak production.

          3. Land Export Model

             https://en.wikipedia.org/wiki/Export_Land_Model

             See also this in regard Saudi Arabia

             https://oilprice.com/Energy/Energy-General/The-Real-Facts-Behind-Saudi-Arabias-Wild-Oil-Claims.html

             1. I have a copy of the article on ELM from the archives of 2010 from TOD . Comments are interesting as always . Enjoy .
                http://theoildrum.com/node/7007

14. EIA shows US consumption north of 21 mbpd. This is 2019 territory and surpassing.

    Work from home means people leave cities, where they could walk to the grocery store. The virus drove them out. They aren’t gonna return.

15. Absolutely the best video on Saudi Arabia I have ever watched. And it is brand new, Sep 23, 2021. 21 minutes long. And they even talk about peak oil, though that is not the main subject. They know their oil production will dwindle to nothing and they are trying desperately to develop other industries and exports.

    Saudi Arabia’s Oil Problem

    1. I proposed on a project in SA that was part of an enormous higher education campus connected with their plans to divest from oil. I’ve been waiting three years and it’s still on the shelf. Not holding my breath!

       1. Yeah, KSA is professional about managing their oil, but they seem very bad at all other forms of energy. My understanding is that they have good gas resources, for instance, but don’t develop it because they insist on keeping it’s domestic price too low for viability because they want to subsidize domestic industry.

          And solar power! They’re “the KSA of solar power”, it would be incredibly cheap, and they desperately need it to displace oil generation. They’ve been announcing massive projects for a decade or more. And yet…crickets…

          1. It would most likely come down to a matter of pride (of being the world leader of fossil fuels). Solar on rooftops makes sense. Could be cleaned for sand by those who live there. And be productive during daytime, probably be able to charge an electric car even. Or keep the AC going long enough so it is possible to sleep with pretty minimal energy use during the night. Not much battery capacity needed.

    2. Another discussion of oil, energy, and the economy

       https://www.youtube.com/watch?v=csf4fdV-EOQ

16. Interesting article today in the WSJ “Investor Shift From Fossil Fuels Leaves Surging Market to Smaller Players ”
    https://www.wsj.com/articles/investor-shift-from-fossil-fuels-leaves-surging-market-to-smaller-players-11634117402?mod=hp_lead_pos7

    “Those left are moving to increase production, but they are relatively small players who won’t be able to make a significant impact on output. Investors are steering capital away from fossil fuels and toward companies that rank high in environmental, social and governance, or ESG, measures.

    “Oil-and-gas has seen the worst returns of any sector over the past five years; the returns are volatile and investors feel ESG pressures,” says Wil VanLoh, who runs Quantum Energy Partners, which manages $18 billion, making it one of the few remaining big energy private-equity funds. “There’s been a huge retreat in available capital.””

    Rgds
    WP

17. Stock up on ad blue .
    https://alwaysfreshnews.com/news/world/87407/diesel-owners-can-have-a-serious-problem-adblue-is-starting-to-miss-pravda-sk/

18. Another wake up call for those who will listen to Mr Shellman .
    https://www.oilystuffblog.com/single-post/drain-america-first?postId=f95b97e6-8b98-4b81-a903-3fe215b401c7

    1. He’s always got something hair-raising to say. Too bad his piece is followed by commenters like this one:

       This is outstanding information. Conventional oil peaked in 2005 and shale has been the only thing between us collapse of the global economy. You have to wonder if the rush to inject 8 billion people with a ‘vaccine’ is related to the fact that over all oil supply has peaked.

       Jesus H. R. Puffenchrist. What is it about “peak oil” that attracts such fruitcakes?

       1. Mike, Mr. Shellman does not control who posts on his blog. We have had such stupid comments right here on this blog. We try to delete and ban the worst offenders, however. I am sure Mr. Shellman is not pleased with that poster’s comment.

       2. Mike B , if Mr Shellman’s pointing out distasteful facts to the ignorant public is hair raising I say then bring it on . We need a lot of these hair raising facts sent out to all those who are asleep . As to the comment , it is not Mr Shellman’s to control . He is old enough to know how to handle it .

          1. Ron and Hole–I agree with both of you.

    2. Shellman,

       Not a lot new here. America(US) has been foreign oil dependent pretty much all mine and your life. The best I can understand from your article is that America should use other countries resources “first” and save America’s resources for later. In addition, you really don’t seem to have any other remedy. This to me, comes across as entitled and selfish. OTOH, I think you make a great case for transitioning to an electric transportation system and renewables a.s.a.p.

       The sooner oil goes to $200 a barrel. The better off humanity will be in the long term. The current price of a limited, important and damaging resource leads to waste.

       Bring it on !

    3. If I have learnt one thing from Mr Shellman, and indeed many on here; it’s that there are people writing articles for free that is better than that written by than those who expect to get paid for it.

19. The EIA issued its October STEO report today. The big change is the continued lowering of the US December 2022 output and the monthly rate of increase.

    The December 2022 production is lower again at 12,053 kb/d, down by 120 kb/d from the September report. However, and possibly more significant, the monthly increase from January to December has dropped from 68.1 kb/d/mth to 49.6 kb/d/mth. The reduction in the growth rate is due to an increase in the forecast January output and the decrease in December 2022. (Red graph)

    August and September 2021 output is forecast to be lower due to hurricane Ida.

    

    1. First, thank you for all the effort into looking at these things and keeping us updated!
       But at this rate, eyeballing and extrapolating the chart, would it not be like 2025 or so before the US is up to speed again?

       Alas, it heavily depends on spending on drilling and completion of shale wells I suppose, and the presence of viable ones of course, viewed as the layman that I am.

       1. Laplander

          At the end of 2022, US output will still be 913 kb/d lower than the peak in November 2019 of 12,966 kb/d.

          If the US could maintain a production growth rate of 49.6 kb/d/mth, it would take 18 months to get back to that level. That would be mid 2024. Appreciate that the increase is largely due to the DUCs being completed. The good ones will run out in 9 to 12 months. Will the drillers drill more wells to offset the loss of the DUCs?

          The effects of this $80 on drilling should begin to show up in December in output, rigs and frac spreads.

          1. Ovi, Laplander ,these guys are now forecasting by throwing darts at monkey boards . The oil basins in the US are what Mike S calls ” pin cushions” . The good parts are over and done with . All what is left to drill are second rate formations . Increasing rigs or frac spreads are good for investor presentations and swipe more money from the pockets of some who are still gullible . The peak of 12.9 mbpd will never be achieved . Wake me up if they even achieve 12 mbpd . Price can go higher but the costs are also increasing at the same pace . Oh and let us not talk about the labor availability issue which SS , LTO have been posting about .

20. Dennis, I would love to get your opinion on this article by Mike Shellman:

    Drain America First ?

    A snippet: Both sub basins in the Permian are being over drilled, pressure depletion is causing well productivity to decline ever so slightly and associated gas production to increase significantly. In the Delaware Basin rising GOR is only slightly more of a problem than rising water to oil ratios. Production in the Permian is still growing, slightly, but its taking more wells, longer laterals, more sand, more groundwater, more seismicity in areas of produced water disposal and more…borrowed money.

    It’s a short read, one minute at most. Everyone should read it. I loved it and thought it was spot on.

    1. Drill baby drill, Ron it’s just what America has done for the last 100 years. Pressure depletion is also nothing new. The Permian is a bridge to the future for maybe 10 or 15 years. America needs to act now to start transitioning.

    2. Drain America First ?

       Certainly all oil exporting countries are doing the same mistake. Saudi Arabia, for example, would be better off cutting their production in half. This would double the price of oil while leaving their revenue constant and extending their production twice as far into the future.

       1. Just a note of interest. The term “Drain America First” was a phrase coined by M. King Hubbert in the 1950s. He was bitching about it, not promoting it.

          But you are correct Frugal. Any nation would be smart to cut its exports and save the oil for the future. But they all want the money right now. So they export every barrel they can…”Right Now!”

          1. ” Any nation would be smart to cut its exports and save the oil for the future. But they all want the money right now. ”

             In the USA we don’t have much in the way of national energy policy or regulation.
             Thus LTO oil was developed in a huge rush, all at once as fast as individual companies could get in the game.
             While i am not advocating full scale central planning economy or price supports to the oil industry,
             I do think some degree of organized planning would have been better for the management of this nations resources that are critical and limited such as oil, good soil, and water.
             Better than the free-for-all system that has no guiding force other than quick profit on one hand and bankruptcy on the other.
             But alas, money buys politicians.

             1. I do think some degree of organized planning would have been better for the management of this nations resources that are critical and limited such as oil, good soil, and water.

                Artificially reducing a country’s oil production doesn’t require much regulation. Just put a hard cap on production and let market forces do the rest. This would lead to higher prices and less drilling and fracking. In other words, higher revenue and lower expenses, aka, highly profitable oil companies.

          2. That is super cool, that Hubbert coined the phrase. What a guy.

          3. Any nation would be smart to cut its exports and save the oil for the future. But they all want the money right now. So they export every barrel they can…”Right Now!”

             Ron, what you wrote on 10/12/2021 is also true:

             “Countries can still export only half as much oil and still increase their export income.”

             One problem that ‘we’ all know: this would destroy the worldeconomy, and even faster and worse than during the last big spike of oilprices.

             1. In a similar line with Frugals post, if/when it becomes obvious that there is a limit to availible exports, would it not be clever for all of OPEC and other exporters to be less bothered about “market share” and more about raising prices as much as possible without killing the customer/host? But a delicate balance.

                Also, as an example of Ron´s point, as mentioned upthread Norway peaked in 2001, when oilprice was an average 23$ (inflated adjusted comparable to 35$ today) but their earnings still went up afterwards due to rising prises. Luck or smarts unknown, but they would have earned even more if they had reduced extraction rate and delayed peak a bit, so maybe not smarts…

                https://inflationdata.com/articles/inflation-adjusted-prices/historical-crude-oil-prices-table/
                http://crudeoilpeak.info/global-peak/norway-peak-oil

                Edit, As you can see, this is quite old, would be really interesting to see an update. Note, the black line is gross earnings, not oil price.
                Edit 2, upon reflection, besides all other factors, would the 2006-8 increase in price not in part be connected to a reduction in availible exports?

                

       2. Would there eventually be an issue with US refining if the light tight oil was kept in the ground? When it is eventually produced would there be the capacity to handle so much light oil (as a proportion of the total) especially if by then there wasn’t sufficient heavy oil available as imports for blending. It would be a problem if refineries had to be built or modified extensively to handle light oil feed especially if there was only a few years of rapidly dwindling production left by then. Possibly with the lower flow rates there is enough capacity in newer refeineries, while those handling the heavy oil would be shut down by then, but I don’t know the actual figures.

          1. I assume all you’d have to do is blend the light oil with heavy oil imported from Canada, although I’m not sure if this is how refineries do it? And completing the Keystone XL pipeline would substantially increase the amount of heavy oil available to US refineries. Is it really this easy?

             1. No, you cannot just mix very light oil with very heavy oil and get medium-weight oil. It just doesn’t work that way.

                1. Yes this makes sense. A mixture of short and long hydrocarbon chains is not the same as all medium length hydrocarbon chains. The output from the oil refinery would be different ratios of gasoline, diesel, and kerosene.

             2. Frugal

                There are two different issues here. One is making a crude out of Canadian bitumen. The other is transporting the bitumen from Fort McMurtry to Hardisy Alberta.

                To get the bitumen to Hardisy via pipeline, they mix it with a diluent such as pentane, butane and possibly propane to reduce its viscosity so that it can be pipelined to Hardisy.

                Once there, they remove the diluent and mix it with lighter crudes and synthetic crude to produce what is known as Western Canada Select. This is what is shipped to the US. See attached article

                https://www.oilsandsmagazine.com/technical/western-canadian-select-wcs

                1. Great article Ovi!

    3. Ron,

       I have read it. I have declining productivity and rising GOR built into my analysis based on information from LTO Survivor and others.

       I have shown repeatedly what I expect based on data from shaleprofile.com, past output data and completion rates and expert analysis by the USGS, which has pretty much nailed output for the North Dakota Bakken/Three Forks (ERR= 8Gb).

       Any tight oil that has not been developed by 2033, is likely to remain in the ground because World demand for oil will be falling faster than supply by 2034.

       We can save that oil for future generations, but it will never be profitable to produce and will remain in the ground forever.

       I think capitalism works fairly well when properly regulated for both positive and negative externalities and when private businesses are allowed to sell their goods and services to whomever they choose.

       Some conservatives seem to disagree with this and believe that government should decide which set of consumers should be able to buy certain products.

       1. Any tight oil that has not been developed by 2033, is likely to remain in the ground because World demand for oil will be falling faster than supply by 2034.

          Rolling in the floor laughing my ass off.

          Dennis, I would just love it if you were correct here. But I am sad to say that your assumption here is horribly wrong. World oil supply will start to decline long before 2033-2034. Demand will not be met by falling supply by 2025. And renewables will, by then, still be well below making up the difference, sadly.

          I dearly hope I am mistaken because I fear for my children and grandchildren. But hopeum distorts reality for most folks. I sure wish it would do it for me also. But alas…..

          1. By 2033, global light transport will not need much petrol, compared to now.
             Its all going electric.
             Other uses of oil will remain in high demand.
             It will be interesting to see how the refining sector will adapt to the changing mix of product the market seeks.

          2. Ron,

             The model has supply starting to fall in 2028, but it falls gradually at first and high oil prices will destroy enough demand to balance the market. By 2033 enough EVs will be on the road that oil demand will be falling faster than the decrease in supply and oil prices will start to fall in order to balance the market,

             1. Dennis, looking at your graph below you still seem to be basing everything on the reported/claimed URR. Those estimated are not worth a bucket of warm spit. Your graphs are just plain wrong because your URR estimates are way too high.

                1. Ron,

                   The chart has a URR of 3000 Gb, in 2018 Laherrere estimated World URR for C plus C of 2800 to 3000 Gb, note also that when I include lower extraction rates after 2033 due to World demand falling at a faster rate than the fall of World supply (starting in 2029) and leads to lower oil prices, the URR falls to 2900 Gb or less.

                   Also note that Jean Laherrere’s estimates have continued to increase over time from about 2000 Gb in 1998 to almost 3000 Gb in 2018, in general his estimates have been conservative and have needed to be revised higher over time (this is also true of my estimates).

             2. Dennis,

                It’s worth mentioning that your assumptions about EV growth are pretty conservative. Have you checked them lately against the latest growth numbers?

                1. Nick G,

                   All of my estimates tend to be conservative, I assume the rate of growth of EVs will slow down as output ramps up, difficult to predict future growth rates.

                2. Yeah, I understand.

                   Still, it can be interesting to chart the actual growth rate experience against the projected rates.

                   If you happen to have the time…

       2. Dennis,

          “Any tight oil that has not been developed by 2033, is likely to remain in the ground because World demand for oil will be falling faster than supply by 2034.”

          Dennis correct me if im wrong here but didnt you originally predict this thing to happen at 2023, then moved it to 2025, then to 2030 and now 2033/2034.

          Or perhaps i am thinking about your prediction when debt was going to be paid back and mixing it together?

          Im not trying to poke you, even though my own opinion on both matters differs a lot from yours, im just interested if you have been moving your predictions out in time and if so the reasons why.

          1. Baggen,

             I expect peak oil around 2028 (this has moved forward a bit due to the pandemic (less oil produced from 2020 to 2022 than predicted befor pandemic was apparent). The idea of oil prices falling in 2033 depends on transition to electric transport and how quickly that occurs (my mid-case model has demand falling below supply in 2033, this guess could obviously be wrong).

             My models get adjusted based on changing circumstance. and based on new information. For example in 2018 Jean Laherrere produced a World URR estimate for C plus C of about 2800 to 3000 Gb, not that my current best guess oil shock model has World C plus C URR of about 2950 Gb, perhaps that is too high, but I think it more likely it will be too low especially if the transition to electric transport is slower than my best guess.

             From June 2019,

             https://peakoilbarrel.com/oil-shock-model-scenarios-2/

             below is best guess model

             I said this about the chart:

             My best guess for future World oil output in the absence of a major economic crisis in response to peak oil has extraction rates gradually rising from 2025 to 2045, remaining flat until 2050 and then decreasing at a gradually increasing rate. The extra heavy oil scenario that I believe is most likely is 210 Gb with a tight oil scenario of about 85 Gb (these correspond with the XH3 and lto1 scenarios presented earlier.) Conventional oil with the extraction rate scenario I believe most likely has a URR of 2700 Gb, with the World C C scenario having a URR of 2985 Gb through 2200. Scenario presented in chart below.

             My first public prediction was in July 2012 and had World C plus C peaking in 2018 at about 80 Mb/d (annual average output).

             See

             https://oilpeakclimate.blogspot.com/2012/07/an-early-scenario-for-world-crude-oil.html

             The model gets adjusted as new data becomes available, in 2012 I did not expect US tight oil would reach 8 Mb/d in 2019.

             

21. Art Berman on the energy crisis and other things .
    https://www.youtube.com/watch?v=HB1eGDpEeQY&t=24s&ab_channel=Wealthion

    1. Thank, HIH. This is interesting, and from my know-nothing, lay perspective, very reasonable…
       …except…at minute 45, it seems to traffic in utter bullshit.

       The host projects a chart of “supplies” of oil, coal, and gas “reserves,” in the ground, and both he and Art pretend this means that “there is plenty of fossil supply out there,” or something to that effect. They say nothing about the quality or accessibility of any of that “reserve,” and it seems their judgment goes right out the window at that point.

       Now, I’m just a writer and teacher, but I used to study geology, and I’ve been paying attention to the issue of peak oil for over 15 years now, and I know that “peak” has nothing to do with the oil in the ground. Isn’t that called the “reserves fallacy”?

       As my favorite geology professor wrote over 20 years ago, “How long can oil supply grow?” The point is, how fast can you get all that “supply” our of the ground, and at what cost?

       They speak only tangentially of peak.

       And they say not a goddamn thing about CO2 emissions going forward.

       So I have mixed feelings about this video.

       1. Mike B , yes not as rounded as would be expected of Art whom I have been following for long . You are correct and has been several times mentioned on this blog ” what matters is flow rate (decline rate ) and not the depletion rate ” . Reserves are immaterial . If the crude in Ghawar does not get to the tank of Six pack Joe in Montana it’s value is that of the sands of Sahara .

          1. I will say, Art is pretty clear about the stupidity of “Drain American First” in regard to LTO, as is our friend M. Shellman. That part of the vid is good.

22. FED is going to move into tapering in next two months. Now just because it seems like a policy error doesn’t mean they won’t do it. And balance sheet will still be expanding just at a slower rate.

    I look for yields on long term debt to fall back towards zero after finding a peak as everyone piles back into treasury debt for safety and remember nobody really holds treasuries for yield anymore. They hold them for safety but they really hold them so they can use them as collateral to borrow more money in REPO market.

    We will have slowing growth and rampant inflation at same time come first or second quarter of next year if inflation trend continues or gets worse. Which it most likely will.

    The inflation comes first followed by the deflation or disinflation. Long end of yield curve will signal when they have lost faith in the inflation narrative and when yields do roll over and head lower you should pay attention because that is when the inflation narrative falls apart and we will likely get a cycle top in oil price within a few months as the inflation narrative changes into disinflation or outright deflation.

    As long as nothing major breaks anywhere between now and first or second quarter next year that is how I think it will play out.

    The dollar has been strengthening since Jan 2021 against most other currency. And that is likely a trend that will continue. Again that is a sign of not enough dollars or dollar credit. Dollar should be sinking with the inflation we have but it’s not. Because the inflation we are experiencing isn’t monetary inflation. It’s just supply side shocks.

    Which means the amount of dollars available to sustain current price really aren’t there. Which is exactly why the economy will slow and narrative will change from inflation to disinflation or even deflation.

    1. HHH , agree on all only like to refine it . There will be inflation in all things essential ( food , energy , healthcare, education etc ) and deflation in all things non essential .Deflation is baked into the cake . The chronology is simple to understand : Peak oil= no growth in oil supply = no economic growth = no demand= deflation = recession = prolonged recession (depression) . Buckle up .

23. Shortages of natural gas in Europe and Asia are boosting demand for oil, deepening what was already a sizable supply deficit, says the IEA

    https://www.bloomberg.com/news/articles/2021-10-14/global-gas-crisis-is-spilling-over-into-oil-markets-iea-says

24. Another thing I should point out is what happens with the US spending bill really matters to oil price more than most people would think.

    If only $1.5 trillion deal gets passed. It will sink oil price in months after the deal is done and I’ll explain why.

    If only $1.5 trillion gets passed instead of the $3.5 or actually closer to $5 trillion if everything they wanted got passed. It would mean US treasury wouldn’t have to issue as many bills, notes, and bonds as they would if the higher amount gets passed.

    Which means there would be less collateral to use at REPO market to borrow money to push asset prices higher. There are some large banks that are leveraged long oil futures by borrowing money via REPO market to fund these deals. Not all REPO is the overnight lending that most people associate with REPO lending btw.

    Less collateral mean less borrowing. Leads to lower prices. When you buy something like a oil futures contract it’s a bet on capital gains via higher oil price. There is no revenue to service the debt used to buy the contract.

    That is why you see prices collapse when there is a shortage of dollars or dollar credit available to bid prices.

    1. You seem to be confusing fiscal policy and monetary policy.

       Another point: America is not the world. Fiscal expansion in the US is not as important on a global scale as you seem to think.

       1. You seem to not understand how things get funded. Where the money comes from to push prices higher? Where does the money come from to do business? The collateral underpinning the entire global monetary system is US treasuries. US fiscal policy in large part determines how much collateral there is in system. Less collateral means less US dollars overseas to transact with. It means more US dollar denominated debt defaults outside US.

          Only thing that matters on a global scale is can you get US dollar denominated credit. Cross border settlements globally are still done in about 80% US dollars. China’s yuan is used in less than 1% of all global transactions for comparison.

          The average US treasury bill, note, bond has been rehypothecated 6-8 times. Well that is the number that is admitted to. Reality is more like 12-15 but we can stick to official numbers. So the average treasury is the collateral backing 6-8 different loans. These loans are made in REPO market. It’s where dollar funding happens.

          Example:

          Bank in Singapore has a client who needs 1 million US dollars to do a overseas transaction. Bank in Singapore says ok to client. But since the bank in Singapore might not have the dollars on hand or
          even if they do have them they might not want to use them. The bank in Singapore might also not have the collateral needed but that is ok. They can borrow the collateral for a small fee from a US bank that does. Then borrow the $1 million that their client need to do their transaction.

          Oil price has been push by those who borrow money in the way I just laid out above. Heck if your a big bank or hedge fund knowing the energy backdrop. Which is underinvestment in future supply and supply side disruptions why wouldn’t you borrow big and go long oil futures?

          And since they aren’t technically funding oil companies they get to appease the environmental crowd.

          We’ve seen this before though. In the run up to 2008-2009. It ends in disaster.

          1. HHH , correct 100% . Rehypothecation of collateral ( in conjugation with the Euro Dollar system) is the Achilles heel of the debt based system . It amplifies the risk 5-6 times over . When the basic collateral gets damaged ( vanquished ) the effect on the full system is 6 fold . The problem is no one knows who the entities holding the paper which leads to a loss of trust/confidence in the trade and a gridlock in the credit markets as happened in 2008 .

25. 130Km truck traffic jam carrying coal from Mongolia to China .
    https://www.nu.nl/159759/video/trucks-dagenlang-in-file-van-130-kilometer-bij-china.html

    1. Sorry guys , this post is from 2017 . However nothing has changed in China-Mongolia . Burning diesel so that you can have coal at the power plant . 🙂 . An anecdote . When the World cup was held in South Africa ESKOM the South African energy provider could not get coal to the power plants because the roads were broken . Reason . No asphalt . Mandela had to intervene to get the roads fixed . Oil is the master resource . Don’t mess with oil (Putin) . 🙂 🙂

       1. Yeah, getting asphalt to build roads with is often a problem in countries without the refining ability to produce it.

          But just you wait. Their problems will be over when they start producing that renewable energy asphalt. 😂

          1. Renewable energy asphalt . ROFL

          2. There are actually test roads paved by bio asphalt. It performs good. But, as always, one of the main issues with bio-energy/fibre/chemicals is scale. It works well on a small scale but it is not possible to replace all applications that use fossil resources.

             1. Oh, I have no doubt that after the oil age is over we will make all kinds of products, now made with oil, from corn, soybeans, all kinds of plants, and even trees. We will need millions of more acres of farmland to do that.

                But not to worry. We still have millions of acres of forest we have not yet cleared. We can just clear-cut it all and plant what we need. And if crunch comes to crunch, we can just convert some of the land now used to produce food to energy and products production. Of course, that would lead to famine in a lot of the undeveloped world. But those people are nothing but a problem anyway. So problem solved. 😥

             2. The oil used for chemistry represents a few liters in an oil barrel. Thus, there is no need to worry about this. As soon, there will be molten chlorides fast reactor using the stockpile of depleted uranium and high temperature electrolysers such as those being industrialized in south France with Genvia corporation (99% energetic efficiency, cocorico), there will be also no problem for the generation of hydrogen. Unless some people find a way to use hydrogen from the natural emissions of hydrogen.

                1. Also asphalt recycling is very common. In America about 80% is recycled.

          3. A smart country/state/city would be going all out on road maintenance now. [Infrastructure]
             This will be the last decade where it is relatively affordable.
             The past decade would have been much better.

             I understand the roads in Afghanistan have been improved.

             1. Uhmm…when asphalt prices go up, road builders shift to concrete. Concrete is more expensive up front but has much lower maintenance costs: lifecycle costs are comparable.

                1. I think the Autobahns in Germany in the 30´s and 40´s were originally made, in part at least, in concrete?
                   Anyway, there´s recently been a lot of controversy and legal issues about calcium mining in Sweden for cement manufacturing, and the CO2 attached to it, so that may be an issue. That being said, concrete is still useful for foundations for hydro dams (in suitable locations), wind mill foundations etc., in my opinion.

                2. Laplander,

                   See my conversation above with Blondbeast about low-carbon (aka carbon-sequestering) cement.

                3. Per kilogram of paving material- the energy embodied in the roadway production of asphalt vs concrete is roughly 3:1, however concrete is applied in a thicker layer and also uses steel for reinforcement.

                   Regardless of the details- It doesn’t change the fact that all roadway construction and maintenance is high in energy requirement and will become a much more expensive task over time roughly tracking peak oil.
                   We are at peak road this decade.
                   Entropy is guaranteed, and roadway decay will parallel depletion in fossil fuel.
                   I suggest allwheel drive vehicle with high clearance.
                   Driving slower will gradually become the norm.

                   The ramifications of energy depletion will affect all in ways that most haven’t begun to digest.

                   https://pavementinteractive.org/energy-and-road-construction-whats-the-mileage-of-roadway/

                4. Hickory,

                   all roadway construction and maintenance is high in energy requirement and will become a much more expensive task over time roughly tracking peak oil.

                   Even if the cost of diesel doubles, I’d estimate that it would still be a relatively small percentage of the cost of construction & maintenance – IOW, if it’s 5% now, doubling would only take it to 10%, or a 5% increase. Have you looked at the cost composition of such projects (labor, overhead, materials, fuel, etc)?

    2. What a joke!!! 😀

26. Oil rigs up 12, but not up so much in the major shale oil basins. I haven’t been following this closely. Would guess vertical rigs for oil would be trending up with $80+ WTI.

    1. SS , hello . Rigs up but production flat or down . This is peak oil . The can has been kicked down the road but now we have run out of road . Take care . I need you oilmen so that I can have strawberries 24/7/365 . 🙂 🙂

       1. HOLE,

          Something not really considered closely is the near 3,000 DUCs that were completed and drawn down in the past 1 year. While some have mentioned this, if we multiply the 2,909 DUC reduction at approximately $4 million a pop that is $11.6 billion in saved CAPEX spending.

          Now, if we assume the newly drilled and completed wells at about 60% and the DUCs at 40%, then TWO BIG FACTORS are now facing Shale Oil Management straight in the face.

          1) How to increase drilling enough to offset that 40% decline of DUCs, which will become a problem in the next 6-12 months…

          2) How to access enough materials and labor to drill and complete more wells when costs of materials and labor are in short supply and the on top of that, the extra CAPEX funding to drill more new wells to offset the 40%. DUC decline

          So, it seems to me, the U.S. Shale Oil Industry may continue to slowly increase production in 2022, but in 2023, it all starts to fall apart, economically and logistically.

          steve

          1. Steve ,Interesting calculation and in my view extremely difficult to achieve . Maybe they can come up with some bigger lies , they are geniuses at that . 🙂

          2. Steve,

             Exactly, they need to borrow more money to achieve this.

             Current capex spend is a false reality.

             They are also not replacing reserves at a 100% ratio, as reserves booked on paper dont match actual production profiles by a landslide as Rune showed years ago, so whats the big deal?

             Even more capex is actually needed to replace reserves in reality over time.

             Time is running out on them, they wont be able to hide this forever.

    2. SS , talking of strawberries . Today purchased 500 gm of blueberries from Aldi ( Belgium ) for Euro 3.49 . Country of Origin : Peru . Hats off to all the oilmen . Thank you for the blueberries (Music ) — Abba song 🙂

27. Drill, baby, Drill!

    

    1. Luckily for you, there are people who are thinking to the future. That’s not the case in France, unfortunately. https://www.energy.gov/ne/articles/southern-company-and-terrapower-prep-testing-molten-salt-reactor

28. Twelve oil rigs added this week. Is this the result of $80 oil. See attached Table with State and Basin breakdown.

    The first week in the Table is the week ending Aug 20, just before hurricane Ida hit. Note that Louisiana had 18 rigs in operation then. They are still 5 short of the original 18. Over the past two weeks, California has added 3 rigs.

    Looking at the basins, Permian (Texas) added 3 and NM dropped 2 for a net gain of 1. The EF added 2. The big gainer is “Other”, with 6.

    

29. OPEC spare capacity.
    https://bisoninterests.com/content/f/opec-spare-capacity-is-insufficient-amid-global-energy-crisis

30. OPEC post later today or tomorrow.

31. New posts up

    https://peakoilbarrel.com/opec-update-october-2021/

    https://peakoilbarrel.com/open-thread-non-petroleum-october-16-2021/

Comments are closed.