All OPEC data reflected in the charts below are from the April edition of the OPEC Monthly Oil Market Report. https://momr.opec.org/pdf-download/ The data in in thousand barrels per day and all data is through March 2020.
Though OPEC 13 was up 821,000 barrels per day in March it was still the fourth lowest month in 9 years.
Iran, Libya, and Venezuela are exempt from the agreed on cuts. These three were down a combined 206,000 barrels per day. Those subject to cuts, were up a combined 1,026,000 barrels per day.
Untitled Spreadsheet
What you see here is OPEC members positioning themselves for the agreed upon cuts. This has happened twice before,in recent history, in 2016 and again in 2018. Everyone was producing flat out, and, no doubt, some even emptying their storage tanks. Nevertheless one can see the obvious decline since 2016.
Here are the agreed upon cuts. Though I am sure not everyone agreed. Nevertheless this is the cuts, from their March production numbers that they should be making, beginning in May 2020.
Note: I cannot locate, on the web, the exact date the cuts are to start or from what point. That they start on May 1st and from their March production level is just an assumption on my part. If anyone has better information please inform me and I will make the necessary correction.
I really doubt that Algeria will cut 200,000 barrels per day.
Angola is supposed to cut 300,000 barrels per day. That would put them at about their January 2005 production level.
Congo is almost a non participant in this drama.
Ditto for Equatorial Guinea.
Ditto for Gabon as well.
Iran, exempt from cuts, was down 52,000 barrels per day.
Iraq, down 20,000 barrels per day in March, has obviously been producing flat out since forever. They have always ignored quotas. But now they are supposed to produce OPEC’s second largest cut, 1,1,00,000 barrels per day. If they ignore cuts this time this will really piss Saudi Arabia off. This is about to get interesting.
Kuwait increased production by 170,000 barrels per day in March, preparing them for a 600,000 bpd cut. That would put them at 2,240,000 bpd, near their 2009 lows.
Libya was down another 54,000 barrels per day in March. Their export posts are still being blockaded.
Nigeria was up 65,000 barrels per day in preparation for a 400,000 bpd cut.
Saudi Arabia increased production by 388,000 barrels per day in preparation for a 2,500,000 bpd cut. That would put them at 7,558,000 bpd. The last time they produced at such a low level was 2002.
The UAE increased production by 386,000 barrels per day in preparation for a 700,000 bpd cut. That would put them at 2,751 bpd. They are capable of doing that I believe.
Venezuela’s political problems have increased causing their oil production to drop further. They were down by 100,000 bpd.
The OPEC World oil supply chart shows OPEC crude only but World supply is total liquids. Non-OPEC total liquids plus OPEC NGLs were down by 200,000 bpd in March.
Russian C+C production was 11,248,000 barrels per day in March. If they cut production by 2,500,000 bpd that would put them at 8,748,000 bpd. I doubt that will happen.
Notice: I speculate on cuts in the above post. Of course I am talking about voluntary cuts. Involuntary cuts are another matter altogether. That is cuts they had to make because their storage tanks were full and then had no option except to cut production. Such cuts could, if things get bad enough, be even greater than the voluntary cuts they have agreed on.
Ron, I think all the cuts they agreed on are basically involuntary ones. Once storage is full, they have to cut production, there isn‘t any place in the world all that oil could go to. So IMO all those fancy ageements are simply the attempt to „sell“ the inevitable.
Well there is a tremendous difference between involuntary cuts and voluntary cuts. If they could cut production below demand, they could keep prices high. But if all cuts are because the market is flooded with oil, then prices fall through the floor.
So, we shall see which market prevails.
Both markets? It looks like they are trying to give it some order.
If they can achieve stable prices, they obviously win something. Also, if they are able to distribute the losses. Because certainly – besides the lesser quantities of oil – prices won‘t go up very high. So it‘s all about managing the inevitable.
I expect that by 2021 oil prices may start to recover, though it depends on how well the World does in reopening economies in the face of covid19, hopefully testing can be ramped up, treatments are developed, and eventually a vaccine by Sept 2021, it will take another year before vaccine production is ramped up and the vaccine has been widely administered. At that point, perhaps Sept 2022, the economy will be able to recover.
All is highly uncertain, obviously.
If things get really nasty, we, the people from the developed world, will have the responsibility to keep the people in the third world from starving – we can‘t save some hundred thousand people in our countries and kill by those means millions elsewhere. That‘s ethically unsustainable and in my eyes the single mayor problem we‘re going to face in the months and years to come.
If we assume this responsibility, this might be the beginning of a better world. Otherwise everybody will be trying to save his own behind and things will turn really ugly, not only in the poor countries.
In other words, I can‘t see any return to BAS. It‘s simply not possible if we take in account human and ethic factors.
Westtexasfanclub,
I agree.
Oil’s Collapse Is Taking an Entire Service Industry Down With It
No one is feeling the pain of an oil collapse more than the shale producers. Except, perhaps, their suppliers.
Since the start of 2019, the oilfield services sector has lost almost 50,000 jobs, or about 13% of its workforce. Meanwhile, the falloff in fracking — the technology used to shake loose oil from shale — is forecast to face its worst year ever with at least half of all work expected to be ended by July 1, according to Citigroup Inc. The domino effect for workers across a wide spectrum of companies can be devastating, said Skip Locken, Pioneer’s vice president of drilling operations.
I don’t understand – why is anyone completing any wells at all right now?
Nick G,
There might be a few monster wells that might be viable at these prices, but not many in the US. I would expect completion rate will fall close to zero, not sure it will get all the way to zero, but certainly to 10% of Jan 2020 completion rates are likely to be reached, perhaps lower.
Leases have time limits on production or they are forfeited. My recall is some of them cost money up front. Drill and produce, or forfeit.
At https://shaleprofile.com there is a great tool that can be used for future supply projections for tight oil.
The projection below only includes Eagle Ford, Bakken, Permian, and Niobrara.
Tool is at https://shaleprofile.com/us-tight-oil-gas-projection/
Chart below assumes 5 month lag between changes in rig count and changes in output,
monthly rig change is -100 (or -10%) up to Dec 2021, then 40 (or 4%) from Jan 2022 to Aug 2025, then -39 (-3.9%) from Sept 2025 to Dec 2029. No changes in well productivity are assumed.
tight oil output reaches 5 Mb/d in Dec 2029, this allows US exports of tight oil to stop even without any refinery upgrades, it also allows the US to produce tight oil for a longer period, potentially maintaining tight oil output at 5 Mb/d out to 2040.
The unlabeled brown/gold area represents Niobrara output in the chart below.
The biggest casualty of Covid19 will, ironically, be the doomer theory of peak oil, something I personally subscribed to for 15 years or so but am now willing to write it’s obituary. As Dennis’ chart above shows, US shale oil, along with many other production basins, is likely to have tremendous spare capacity over the next decade to keep energy prices affordable. Covid targeted some of the most egregious offenders of global energy waste with precision: airplanes, cruise ships, business conferences, etc.
https://oilprice.com/Energy/Crude-Oil/Coronavirus-Has-Wiped-Out-A-Decade-Of-Oil-Demand-Growth.html
Peak oil production and consumption almost certainly peaked in 2018 (80% or higher probably imho). Covid is promoting a de-globablized, more nationalized world that will inhibit a return to the oil consumption levels of the late twenty teens. This is happening simultaneously with profound advancements in renewable energy production and storage, along with political pressure to combat climate disruption that will resurface after Covid is contained in the next 12-18 months. While the global economy pauses, the intense research into solar electricity and battery storage continues unabated.
Experimental concentrated solar cell efficiency is approaching 50%: https://www.nrel.gov/news/press/2020/nrel-six-junction-solar-cell-sets-two-world-records-for-efficiency.html
Battery research is just on the cusp of a major cycle of reduced costs. The price of a PV panel today from when I installed a system on my home in 2007 is down 95-98%. This same thing is about to happen with batteries over the next 8-12 years.
Flow batteries: https://cleantechnica.com/2020/04/13/how-low-can-energy-storage-go-lots-lots-lower/
My guess is oil prices will struggle to stay over $50/barrel for a month or more ever again.
I’m retired now. That’s my old group at NREL. Its really a great accomplishment but they had to publish early because they were shut down. The device is being limited by internal resistance between the individual cells. Something that is anticipated in kind of work and will eventually be solved. This limits the current density and hence the concentration that the device can effectively operate at. Since the cell’s efficiency increases as the concentration ratio increases it will easily exceed 50% efficiency once these issues are resolved. Because of the expense associated with the growth of the device it needs to be deployed in high intensity concentrator systems where the cells represent a relatively small fraction of the over-all system cost.
Thanks SW I appreciate your insight!
Yes not a silver bullet but more posted as an example of the fact that even after these tremendous efficiency gains over the last decade there is still ongoing breakthroughs.
Stephen Hren says:
“The biggest casualty of Covid19 will, ironically, be the doomer theory of peak oil”
That’s bogus because some of us have written about peak oil and oil depletion for 15 years on the blogs w/o ever referencing the term “d00mer”. All we were doing was tracking the empirical data and making educated guesses on the trajectory, and golly-jeez weren’t we SPOT ON all along!
Regardless, this is an event that seems like it will have a similar impact to the 1973 oil shock, in that it flattens the curve of oil consumption, possibly for the next five to ten years. So on the original trajectory we would have had peak oil in 2005, that shifted it to 2025 or so. Now it’s been shifted out again, possibly to 2035 due to a lower consumption curve (something like what you were talking about in your previous post right?).
That will buy the world a lot more time to transition to a renewable energy economy before the disastrous effects of a supply peak.
Just a few more massive crises and we’ll never reach peak oil. When you consider that anyone 25 and under has lived their entire conscious lives living from one world-ending catastrophe after another its any wonder the suicide/drug OD/mass shooting rates aren’t even higher. But – peak oil is only partially impoverishing them, so that’s in the plus column.
Sorry, we always will reach peak oil some day – this is basic science. If there are only catastrophes from now on, alien invastion and zombie apocalypse and everybody is building his Mad Max vehicle, 2018 was peak oil.
This is the easy crystal ball scenario – the more difficult is in a restarted economy when 2018 will be propable surpassed, but for how long and how much. That’s the more complicated one.
Eulenspiegel,
I think twocats may have been talking about peak supply (high oil prices at peak, where I will arbitrarily define “high oil price” as more than $80/b in 2020 US$) rather than peak demand where oil prices are lower than the “high oil price” defined above.
Of course there will be some peak in oil output at some point in time (I usually think in terms of centered 12 month average World C C for peak oil).
For your complicated scenario I expect about 2027-2029 for peak oil, and I expect oil prices to be high during and shortly after the peak (with high oil prices lasting until 2035 to 2037).
This scenario assumes a covid19 vaccine becomes available by August 2021 and that proper fiscal and monetary policy measures are taken by most national governments which will minimize the length of the depression that may result from the pandemic.
Eulenspiegel,
my points are as follows:
1) peak oil is a dynamic that has been in play since at least 2002, driving decisions, changing the nature of the economy, and creating austerity in one form or another.
2) the GFC was a civilizational “step-down” ala Kunstler’s Slow Emergency which on some levels we will never recover from. The pandemic will be the same.
2) the hope of suspending peak oil and thereby creating an energy transition through a series of massive crises like the GFC and the current pandemic is a little absurd:
a) i think part of the austerity dynamic may have facilitated the pandemic – the reduction in budgets for public health, etc.
b) the economic loss will drive millions if not billions into poverty – an energy transition would conceivably take some amount of economic input and planning – and its very difficult to plan in the aftermath of a crises.
c) the sentiment of “disaster suspends peak oil” views the “transition” as one that happens without people. 10s of millions of people lost their stored wealth in the GFC. 10s of millions if not billions of people are spending down their savings now to avoid bankruptcy, starvation, what have you. if the only thing stopping peak oil collapse is collapse then its a distinction without a difference. Like committing suicide on death row.
Now if you believe that an energy transition could both steadily reduce FF and bring billions of people into a modest standard of living (developed world reducing energy consumption, and developing world increasing) then I guess one could look at it that these sacrifices are the birth pangs of that new world. If its just BAU – then the transition will arrive just in time for a final collapse / step-down.
Twocats,
Do you feel that renewables just cannot provide the same level of energy consumption as fossil fuel?
to nick G – I definitely believe it is worth a shot to go for full renewables and use as little FF as we need to keep large grids afloat. I’d rather have electricity 14 hours a day than 0 hours a day. I can conceive of a very fulfilled life using a small fraction of the energy I personally use today. I think a lot of people feel the same way I do. few of those people have actual power.
Stephen Hren,
Doubtful the peak will be moved beyond 2030, though potentially there could be a plateau from 2027 to 2035, transition will be difficult, and perhaps impossible, but in my view the odds are low that it will not be possible and also low odds that a transition will be easily achieved. It will take hard work and sacrifice, but it can be achieved.
Dennis, stretch the plateau from 2018-2035, label it a very, very optimistic scenario and I agree with you. But I really doubt 2018 will be SUBSTANCIALLY surpassed at any moment in the future. Almost two decades of a plateau would not be the worst thing for a transition though (well, including the coming deep dip in that plateau) …
westtexasfanclub,
I agree that is an optimistic scenario, note I expect a severe dip from 2020 to 2021 with recovery by 2025 to 2018 output levels, so the plateau would be at about 83 Mb/d from 2026 to 2035, which is admittedly optimistic, more realistic would be a plateau from 2026 to 2030 with gradual decline to perhaps 78 Mb/d by 2035 followed by steeper decline as EVs and plugin hybrids gain market share for land transport, in addition high oil prices may lead to better efficiency for sea and air transport and perhaps more localized supply chains which would reduce demand for sea and air transport, improving teleconferencing may reduce business travel and reduce the level of air transport.
All speculation on my part and all impossible to foresee.
Very well explained . Thanks ,twocats .
Thanks for all the thoughtful input, everyone. I agree that the energy transition will likely be brutal and hope I wasn’t painting too pretty of a picture of it. I see the future as a choice between a dramatically lower per capita energy consumption future powered by renewables, or total earth death if powered by fossil fuels. However, I also still think we need some fossil fuels to make it to the renewable transition, as the capabilities, especially in terms of storage, are not there yet. If fossil fuels, especially the most useful one – oil, peak too early and were burned in an unproductive manner (excessive travel, wanton consumption, etc), which appeared to be the case prior to the current Covid crisis, then it seemed likely we would not have the resources to make the transition.
On the other hand, if they peaked too late and we had too much supply, especially of oil, then climate disruption would reach a level that was no longer tolerable for much of life. Covid has targeted some of the most egregious forms of oil consumption, prolonging the peak by flattening the consumption curve and making this energy available to move towards a renewable energy future. This is happening simultaneously with major advances in battery tech, the last piece of the puzzle for making intermittent renewable energy sources viable to many of civilization’s needs.
So far as economic equality is concerned, we know that the current top-down fossil fuel energy system does not create equitable wealth. A renewable energy civilization with distributed energy rather than concentrated energy will have a far greater chance of equitable wealth distribution. But of course there’s a really good chance we’ll figure out a way to fuck that up too…
HIH – thanks. to stephen – very well put and I apologize for inferring your comments were made flippantly. I did take some liberty with them.
Lots of these solar cell efficiencies are achieved by adding complexity to an already complex process. Achieving a record efficiency is more of a technical achievement than a practical achievement.
On Baez’s blog someone was nominating Keith Barnham for a $1,000,000 sustainability prize, as he was the one that first suggested using multiple quantum wells as a highly efficient solar cell. The longstanding problem is how to create multiple quantum wells at scale.
I was working with III-V materials for my thesis work and even back then there were bizarre ideas for improving efficiency. At the same time that Barnham was advocating MQWs for solar cells circa 1990, we were thinking about how to use the vicinal surface lattice staircase to more naturally generate one at scale — either “vertical” superlattices or quantum wires.
https://forum.azimuthproject.org/discussion/comment/21862/#Comment_21862
Interesting to speculate on this stuff but I veered off in a different direction
PV increase will continue to happen incrementally. Storage is what’s about to plummet in price, and that’s the missing piece of the puzzle.
I always shake my head when ideas come up that will increase efficiency by 2 or 3 times that cost 10 times as much. Lots of great ideas but they do not come near for watts for the buck. The USA seems to be lost in the idea of huge, expensive technical improvements rather than churning out lots of cheap panels, there’s a reason so many goods carry ‘Made in China’.
NAOM
The biggest casualty of Covid19 will, ironically, be the doomer theory of peak oil,
Poppycock! Renewables have been hit just as hard, if not harder, than fossil fuels by this virus. When and if we recover from this nightmare we will be back to the exact same problem, dwindling fossil fuel and a race by renewables to fill the gap while we still have liquid fossil fuel.
It is obvious that OPEC peaked in 2016, (with the exception of Iran and Venezuela). Non-OPEC has been propped up for almost a decade by shale oil.
World peak production was October and November of 2018. That was over a year before the virus killed demand. If we are very lucky and demand does come back, production will never reach that point again. Well, that’s my opinion anyway.
Hi Ron, I don’t think demand will come back quickly either, or ever perhaps – that’s exactly what’s going to give us a buffer of spare capacity in oil production that will allow a transition to occur. And yes many renewable energy jobs are going out the window right now as well. Since energy demand is collapsing it makes sense that all energy jobs are being hit. The question is what jobs will grow once the recovery in energy demand happens from its lows in a year or three. I’m betting renewable energy jobs will be much better positioned to start growing again once energy demand starts growing. But I never expect you to agree with me on that one.
I’m betting renewable energy jobs will be much better positioned to start growing again once energy demand starts growing.
You are talking jobs while I am talking energy. True, renewables can replace fossil fuel… when the sun is shining… or the wind is blowing. But there will always be a demand for liquid fuel for most of ground transportation and all of air and sea transportation… and in the cold winter dark nights.
But right now we just have to survive this nightmare.
Hi Ron,
Always is along time. 🙂 Air transportation might “always” require liquid fuel, sea transportation and ground transportation could move to other types of energy. I will define always as for the next 150 years.
I tend to agree that peak oil supply (where oil prices become high due to demand for C+C becoming higher than supply at some “low” oil price level and thereby driving oil prices higher) is likely to occur. The current downturn in oil output is mainly a combination of oil output growing faster than demand (in 2017 and 2018) and then the pandemic crushing demand for oil.
At some point the pandemic will end and eventually the economy will recover, my guess is by 2023 or 2024 we are likely to be close to 2019 in real World GDP per capita. The peak will be delayed from 2025 to 2027, oil prices will be high (over $100/bo in 2020 US$) from 2027 to 2040 and by that time transition to electric transport and perhaps autonomous driving will have reduced demand for crude for land transport to the point that oil prices start to fall. Perhaps air transport alone will be enough to keep oil resources from becoming stranded assets, but I doubt it. A lot of the more expensive oil will never be produced (oil sands, tight oil, deep water off shore and Arctic oil resources).
Well, Even though I spent my career working on solutions, I must say that I share Ron’s pessimism. I believe that what we are living through right now is just a dry run for what is eventually in store for us. Viruses are natures immune system for us. She has been tinkering for awhile now. Consider Mother Nature like a soccer mom driver her unruly kids on a long trip. They are raising hell in the back seat. She keeps saying over and over. “Don’t make me stop this car” Well, I think she stopped the car. The thing is, despite the death and dislocation, this is a relatively mild example as the morons on FOX News delight in telling us. But don’t worry Sean, Mother Nature has an endless supply waiting in the wings and the you really really don’t want to know what she’s got cooking up next. No, the planet is going to be just fine. We are the ones who aren’t going to make it. And we are catching a tiny glimpse of how it is going to end. The next time around it won’t be a cough.
I know I’m the odd man out optimist here, but… I am observing some changes in the past week where I live in Texas… Traffic is back and consistent. My sense is that gasoline demand has already started to ramp back up and will ultimately surprise to the upside. Humanity here is bubbling over and can’t be contained much longer.
On human pathogens… they are always defeated, otherwise we would all be dead and no one would be posting here. Small pox, Polio, Spanish flu, mumps, etc… all of them felt like the end of the world when they were in an outbreak, but we conquered or contained them and moved on. This situation will be the same. With trillions of dollars of enterprise value at work finding solutions currently (Gilead, Abbott, J&J, etc…) multiple pathways will be created for solutions quicker than anyone expects… the big carrot is dangling and humanity is greedy. This is why the pathogens eventually lose and humanity wins….Humanity is not linear, it creates new pathways and timelines for solutions, especially when inspired by greed.
Then we move on, forget and get lazy again.
This virus was highly transmissible but not particularly lethal. Still, look what it did to the world economy in a matter of months. There will come a virus that is just as transmissible but is five perhaps ten times as lethal. Then, it will be all over. Instead of the idiots on Fox News clamoring for us to get back to work, while they broadcast from home or “secure locations” within a matter of weeks there will be no one keeping the lights on. No one stocking the grocery stores. No one keeping the water flowing. The financial systems will collapse and it will be a matter of weeks not months before even the richest among us are reduced to savages.
gung.
In our rural area I haven’t noticed a difference in traffic except on the interstate, where semi truck traffic is heavy and auto traffic is light.
Thus gasoline is $1.27-1.55 per gallon but diesel is over $2.50 per gallon.
Our area has been very fortunate with only about 10 cases in a 40 mile radius. One death in a nearby county, a 90+ year old. All but one case has recovered and is not under quarantine.
I suspect we will get hit hard by this as the urban areas recover. Just like news travels slowly to here, so will COVID -19.
Or maybe we will largely be spared. I really have no idea.
Do you think if we have a v shaped recovery the shale knuckleheads will immediately return the rigs? Or do they finally have the fear of God injected into their brains?
shallow sand,
I would think the speed of the tight oil recovery will depend on the price of oil, at least in part. If the April 2020 Short term energy outlook price projections for WTI are correct, (oil price goes to $20/b in April and gradually recovers to about $43.50/bo in June 2021) then I expect tight oil output will fall by at least 3 Mb/d by Dec 2020 and not start to recover until 2022/2023, if we banned oil exports from the US, tight oil output might only return to 5 Mb/d. The US government is not that smart so we will continue export a precious resource for peanuts. See scenarios (there are two) down thread.
Dennis,
You’re concerned that private enterprise is not conserving our oil resources. In effect, you’re saying that’s oil is more valuable than it’s market price. In other words, there is an external cost to oil production, which is not reflected in market prices.
There is a simple, effective tool for fixing this problem: excise taxes. They internalize this cost, keep value at home, and reduce production (if high enough).
Nick,
There are not many people that support higher taxes, so although you are correct in principle, it is difficult to institute such policy in practice. I like fee and dividend for carbon taxes, but it has never caught on.
Nothing to do with nature according to Nobel prize winner.
http://thejewishvoice.com/2020/04/2008-nobel-prize-for-medicine-winning-dr-luc-montagnier-says-covid-19-was-manipulated-for-hiv-research/
In fact he says nature will make the virus less virulent.
Multiple scientists have debunked that theory.
https://www.sciencenews.org/article/coronavirus-covid-19-not-human-made-lab-genetic-analysis-nature
“That finding debunks a widely disputed analysis, posted at bioRxiv.org before peer review, that claimed to find bits of HIV in the coronavirus, Hodcroft says. Other scientists quickly pointed out flaws in the study and the authors retracted the report, but not before it fueled the notion that the virus was engineered.
Some stretches of the virus’s genetic material are similar to HIV, but that’s something that stems from those viruses sharing a common ancestor during evolution, Hodcroft says. ‘Essentially their claim was the same as me taking a copy of the Odyssey and saying, “Oh, this has the word the in it,” and then opening another book, seeing the word the in it and saying, “Oh my gosh, it’s the same word, there must be parts of the Odyssey in this other book,” she says. ‘It was a really misleading claim and really bad science.’”
Regarding the economic condition in 1-2 years, I see only one discrete reason that economic growth (and consumption) will remain hampered. This virus will have slightly accelerated deaths among those over 60 yrs old, but on the overall growth curve of humanity, the covid-19 pandemic will not be noticeable. The march on towards 9.7 B by 2050 remains unaffected.
Energy consumption will be back to ‘full steam ahead’.
The big economic hurdle I see to growth resumption is debt. Not my field of expertise, but at some point the global financial system will need to go through some form of reckoning, assuming the human universe is not completely absurd [I know it has a huge component of absurdity]. This reckoning could be extremely painful. Ask those who have lived through episodes of severe deflation, austerity, hyperinflation, or devaluation, and poverty.
How long will it take to return to the same purchasing power of citizens, as they had prior?
How long will it take city, and state budgets to get back?
How long will it take for corporations to take on new projects (risk)?
Hickory,
With proper monetary and fiscal policy decisions by national governments, the crisis can be managed. The Great Depression was such a disaster due to poor government policy informed by classical economics.
The solution is in a short book (284 pages),
https://www.amazon.com/gp/product/B07JCJXDG4/ref=dbs_a_def_rwt_hsch_vapi_tkin_p1_i0
no doubt this can be found at your local library, though at 99 cents, it is not expensive.
I am glad that you are optimistic about it all be handled well. I certainly hope that pans out.
An awful lot of budgets are severely broke, from the family and small business level, to the cities, states and corporate level. And none of these entities have a money printing, Fed backstopping capability.
Hickory,
Yes, that is why I referred to national governments who usually have the ability to control money supply and issue debt (Europe is a bit complicated as individual nations do not control money supply). The state and local governments must be supported by the Federal government and individual citizens through government stimulus for the economy and other aid.
It is a societal choice, severe depression or economic recovery. The correct choice is obvious from my perspective, people just need to get over their fear of government debt. In a severe economic crisis it is the answer.
A textbook explanation can be found in
https://www.amazon.com/Macroeconomics-William-Nordhaus-Paul-Samuelson-dp-B0086HWNS6/dp/B0086HWNS6/ref=mt_paperback?_encoding=UTF8&me=&qid=
Most any textbook by Paul Samuelson will do, most University libraries will have several copies.
Hickory,
I do not think it will be handled well, only that with good leadership it could be. In the US that is far from the case, so I am the opposite of optimistic.
I wholeheartedly agree with you on that Dennis.
It seems to me that very few entities manage their financial cards well, whether in or out of crises.
The government appears to be diverting a large amount of financial aid to large businesses, the inspector general should oversee that – oh, wait!
NAOM
What strikes me as the big financial risk is not really debt, but the effect of high debt on purchasing power. And not just debt, but the loss of income or revenue, the loss of credit worthiness, the draw-down of reserves, the decreased willingness to to take financial risk, and the sustained unemployment in many sectors.
I’m referring to families on up to corporations, and all the levels of government who don’t have direct access to magic fed money.
There will be sustained loss of purchasing power that will take a very long time to recover.
So Dennis,
You are against the free market? I always had a hunch you were a Keynesian.
Iron Mike,
Not against the free market, just not a fan of Great Depressions. The free market sometimes needs help, I tend to take the view if it’s broke then we should fix and when it isn’t we leave it alone.
Free markets may self regulate in the long run, but why wait and suffer?
Dennis,
There is always going to be some draw backs. Why should inept companies survive financial crisises and be bailed out? What that ultimately does is it encourages bad behaviour.
Even with regards to covid-19 situation which isn’t technically a financial crisis, good companies should have put away money for rainy days. Smart individuals have savings for rainy days! But that rarely if ever happens with corporations, because these big companies don’t give a shit since they know the government will bail them out. A lot of airlines companies prior to the covid-19 situation where doing share buy backs and overinflating their share prices while turning millions/billions in profit year after year.
Why should tax-payers bail them out? Did tax payers get a cent all those years when they where turning a profit? These companies should be allowed to fail so they learn from their ridiculously greedy policies. Keynesian economics hadn’t accounted for greed on steroids.
Iron Mike,
Keynesian economics is not synonymous with government bailouts of large industries.
Note that often these bailouts are simply low interest loans that are repaid in full, the reduced economic disruption means lower unemployment rates.
Note that this is far from a “rainy day” event, it is a 100 year level event, that nobody was prepared for.
So in your view a depression is a better plan, Herbert Hoover felt much the same. 🙂
It’s also possible to give no aid to any corporations, Keynes did not specify. The government could just send checks to people so they have income and perhaps do some infrastructure investment and fund state and local governments to some degree.
In the US with a Republican president and Republican control of the Senate, government bailouts of big business are likely, but I would agree it is far from the best approach.
Note also that few US citizens would make it through this crisis without government assistance, perhaps it is different in Australia. Most people do not have enough savings to get them through this crisis on their own.
Dennis,
I don’t want to drag on the dialogue but:
Keynesian economics is not synonymous with government bailouts of large industries.
Maybe, but that is how it is being used in the real world.
In my worthless opinion, people don’t have enough savings to get them through such periods because of poor economic education and in some areas of the world, over inflated asset prices and the consequent debt overload. Where i live in Australia, property prices are ridiculously inflated. Why? Because government, and central bank policies don’t allow assets to deflate as they would in a free market.
These Keynesian policies has huge ramifications for people in my generation. And just cause bigger problems further down the line. Your thinking is, make today easier for a harder tomorrow.
Austrian school and or Chicago school of economics makes much more sense. Financial crisises are seen as natural cycles and the antidote to poor business practices. With the death of some businesses comes the life of new ones, and the same mistakes would not be repeated. And the debt slate starts clean.
In your thinking debt just gets piled on more and more and more…billion, trillion, quadrillion, let the future generations pay them off kind of thinking. It is lazy and undignified in my opinion.
Iron Mike,
I would take Paul Samuelson and Walras over Friedman and von Mises any day of the week.
Just because policy makers make bad choices does not mean the theory is incorrect.
As I said, businesses can be allowed to fail, it is perfectly consistent with the neoclassical synthesis of neoclassical and Keynsian theories.
When the economy is doing well, leave it be, when it is not use fiscal and monetary policy to stimulate the economy.
When done properly, the debt is paid back during good times so that when bad times come money can be borrowed.
The lack of savings is simply a matter of income inequality, that could be solved by progressive taxation.
Again good leaders would help, we have few of those in the US.
Dennis,
Government debt to gdp ratio (U.S). There has been periods of reduction but look at the trend.
https://www.macrotrends.net/1381/debt-to-gdp-ratio-historical-chart
Surely there has been more good periods of economic growth than recessions to stabilize debt growth, but such a thing hasn’t happened at all. And this doesn’t include the 2 trillion dollar fiscal stimulus in 2020, which is a negative period of economic growth.
Lets be honest, it is just going to keep going up 🙂
Iron Mike,
US Government debt to GDP at about 110% of GDP, it should be lower I agree, the time to accomplish reduced debt is during times of prosperity.
Debt is much less of a problem than many believe. In 1947 US government debt was 87% of GDP and in 1945 debt was about 112% of US GDP. Government debt was reduced up to 1970, debt levels were also reduced during the Clinton administration, though not as much, but it was only 8 years from 1993 to 2001.
As to what the future will bring, I will be honest, I do not know, I can only speculate, just like you.
The simple reason to never allow a recession without intervention is that the country always exits it poorer than it could have been with intervention. It really doesn’t matter how many problems are kicked down the road, a wealthier country will invariably have an easier time dealing with them. Allowing a recession/depression to fix economic problems is the economic equivalent of bleeding a patient in medicine.
Mike —
Classical economics predicts that unemployment should always be low. High unemployment means labor supply is outstripping demand, and that should lead to a fall in labor costs, reducing unemployment. It is the “pure” market theory.
Classical economics has been observed to be false. In some cases, unemployment gets very high and stays that way.
Keynes suggested that the problem is “sticky prices”. That means that workers with jobs refuse to take wage cuts even in times on high unemployment. His remedy was to print more money, causing inflation, in times of high unemployment, which results in inflation. Inflation reduces real wages without reducing nominal wages, thus sneakily solving the sticky price problem.
Once real wages decline, the market should automatically reduce unemployment, just a classical economics predicts. Keynsianism is deeply rooted in market economics.
That is Keynesianism in a nutshell. It doesn’t really matter how the money is spent, but unemployment money is a good bet, because it is politically palatable. Keynes himself joked about digging ditches and filling them back up to improve the economy.
Republican ideologues prefer handouts to rich people, but this is less effective at moving the real economy, and result in things like the Trump tax cut resulting in the Trump stock market bubble and share buyback. In fact the economy probably would have been about the same without the tax cut.
Are there any alternative ideas around?
Milton Friedman used his “law of rational expectations” as a “Monetarist” counterargument. It basically says that workers aren’t as easy to fool as Keynes thought, so inflation won’t unstick labor costs. Italy’s scala mobile, where unions negotiated wages automatically linked to inflation, are the classic example of rational expectations.
Monetarism sounded good in the inflation-wracked 70s, but its emphasis on tracking money supply foundered on the definition of money. Remember the Thatcher government arguing about the relative significance of M0, M1, M2 etc? Also the velocity of money, which measures how often a given dollar is spent per year, further muddies the waters.
In the end Monetarism tightens the rules of Keynesianism, but doesn’t upend it. Nobody has had a better idea yet, whatever the guy trying to sell you gold online claims, so we’re stuck with Keynes.
Also, I realize this is a bit off topic, but the question recently arose on the difference between fiscal and monetary stimulus. In the current situation, is it better to lower interest rates or engage in deficit spending?
The current problem facing the world economy is not reduced money supply. The problem is the velocity of money. The money is there but not being spent because of COVID-19.
In this situation, fiscal measures like handouts to needy people, who have no choice but to spend the money immediately, are much more likely to succeed than low interest rates. Low interest rates fail to address the underlying problem of low velocity.
Bailing out companies makes more sense than cutting interest rates, but the government should focus on cases where the bailouts will result in increased spending by the company.
Alimbiquated,
Always easier to reduce interest rates, as they approach zero (or become negative), this becomes a less effective policy (much of the World has already reached that point) and then fiscal policy is the better option, particularly money put in the hands of lower income people who will immediately spend it. Fiscal stimulus aimed at the rich could simply be saved rather than spent and is an ineffective approach. That is why tax cuts for the wealthy is dumb policy.
Dennis, Mike,
Share buybacks are companies paying off debt, because shares are debt the company owes to shareholders. Companies pay interest in the form of dividends.
In the current zero interest climate buybacks make sense to companies. Tax cuts that make them possible don’t help the economy, they just transfer taxpayer funds to private companies. As Dennis says, the money is just saved (by reducing debt), and that is dumb policy.
Buybacks raise the price of the stock without increasing the value of the company by reducing the number of shares. The total value of the company is the number of shares times the price per share.
I suspect that the Trump stock market bubble was driven by people seeing the prices going up because of buybacks, assuming it meant the value of companies was increasing, and pouring even more money into the market on that belief.
This suggests that Wall street is run by sheep that can’t do basic math, but there may also be other issues including tax issues involved. It’s just speculation on my part.
Dennis,
Just because policy makers make bad choices does not mean the theory is incorrect.
When has an economic theory being sufficiently tested to see its viability? It is tough to make that statement in the economic field since it isn’t a science, in my opinion.
You know more than me on this issue. But the Fed monetary policy and government fiscal policy are all Keynesian theory. Correct me if i am wrong please. The long-term downtrend of inflation and its disappearing act is because of asset bubbles, that is where the inflation is in my opinion. I could be wrong but that is what it seems.
When done properly, the debt is paid back during good times so that when bad times come money can be borrowed.
When has this happen in modern times, or historically? Which government/president actually reduced debt during the good times? I see the opposite when one looks at public debt/gdp ratio. Again i could be wrong and correct me if i am.
Hi Alim,
Thanks for your input, good info. None of this is my field of expertise but Milton Friedman and the Chicago school of economics such as Thomas Sowell seem to make more sense to me.
I think the lack of inflation in current times is hiding in asset and equity prices (such as share buybacks which you mentioned) which isn’t counted towards inflation statistics.
100% the velocity of money is the issue now. But what about government debt from fiscal stimulus? Who is accountable for that? MMT doesn’t see any issue with the government having infinite debt. I don’t think their economic theories match with what is actually occurring in the real world. They seem to be just going along with the experiment to see what happens.
Iron Mike,
Asset bubbles have little to do with inflation rates which measure a basket of consumer goods and how the price of that basket changes over time.
The velocity of money has slowed considerably as the limits of monetary policy are reached. In 1981 in the US money velocity was 3.5, in 2019Q4 it had fallen to 1.29 for the US.
Pushing more money into the system will simply reduce the velocity of money.
I agree social science does not allow controlled experiments, so no theory can be “correct” in the way a physical theory could be easily tested in a lab.
In addition if one devised a “correct theory of economics”, one would need to keep it a secret. As soon as such a theory was known, the behavior of society would change and invalidate the underlying assumptions of the model.
Makes social science a tricky business.
Dennis,
Asset bubbles have little to do with inflation rates which measure a basket of consumer goods and how the price of that basket changes over time.
Think about it this way. When the price of a house exceeds “market value” then wages decrease relative to property prices. So if a family is spending more of their income paying off a mortgage than consumer goods, then surely that will drive down inflation. Which is what is happening now. That’s what i see. People are overloaded with debt and don’t have spare capacity to spend on consumer goods. Hence the inflation figures are anemic due to the basket of goods used to measure the statistic not taking into account assets such as property prices for e.g. What i am trying to say is that inflation in property prices (not measured) is overtaken the inflation of consumer goods (measured).
Pushing more money into the system will simply reduce the velocity of money.
Can you elaborate on what you mean please. By pushing more money into the system do you mean by fiscal policy ? Or monetary policy as in reducing rates to make credit more accessible to consumers?
And shouldn’t those policies increase the velocity of money i.e. inflation ?
Iron Mike,
I am talking about monetary policy which controls the supply of money. When the Central bank attempts to increase economic activity by increasing the supply of money, in some cases the money simply circulates more slowly (velocity of money).
Fiscal policy is government spending and/or the level of taxation. So increased government spending (on hospitals, roads, military, housing, or research) or a reduced level of taxes would both be expansionary fiscal policy with the reverse (less government spending or increased tax levels) being contractionary.
https://en.wikipedia.org/wiki/Fiscal_policy
Inflation is not the velocity of money.
Velocity of money is total money in circulation divided by total monetary transactions (in layman’s terms, how many times the average dollar changes hands in a year). Inflation is the average price level for a fixed basket of goods (representative of the average consumer) and how this price level changes over time (pretty much nothing to do with velocity of money).
Note that housing costs are included in CPI, about one third of the CPI is based on housing costs. US house prices increased at about 3.5% per year from Jan 2018 to Jan 2020.
https://fred.stlouisfed.org/series/CSUSHPISA
For velocity of money in US and definition under chart see
https://fred.stlouisfed.org/series/MZMV
discussion of CPI and housing costs at link below
https://seekingalpha.com/article/4173463-cpi-and-housing-prices
Long term (1987 to 2020) housing prices have increased by 3.62%, while the consumer price index has increased at 2.44% per year, keep in mind that for many in the US their home (if they own it) is their retirement savings, and while 1.2% (roughly) is not a great return on investment, it allows a bit of extra income in retirement, the housing cost included in the CPI is based on rent payments and does not always reflect current market conditions as rents tend to increase more when a new renter signs a lease.
Dennis,
Thank you so much for the info. I’ve noticed in the U.S house prices (depending on area of course) are much more affordable than in Australia. Sydney and Melbourne are some of the most expensive properties in the world.
Regarding your statement:
Inflation is not the velocity of money.
Inflation is the average price level for a fixed basket of goods (representative of the average consumer) and how this price level changes over time (pretty much nothing to do with velocity of money).
I have to go ahead and disagree with that. Again i could be wrong but looking at this article:
https://www.stlouisfed.org/on-the-economy/2014/september/what-does-money-velocity-tell-us-about-low-inflation-in-the-us
MV = PQ
Inflation (price of goods P) is directly correlated with the velocity of money. V~P.
You are correct in your view since monetary supply M increases velocity V has the tendency to decrease as they are inversely correlated based on that equation.
There are many websites that argue the strong relationship between velocity of money and inflation.
Iron Mike,
Generally in that very simplified MV=PQ equation, assuming any of the variables is fixed proves to be a flawed assumption.
When I started studying economics in the late 70s, it was often assumed that the velocity of money was relatively constant, if we we further assumed that Q was relatively constant, then clearly P would be proportional to M.
Problem is that neither assumption is borne out by the data, Q (total real expenditures in the economy or real GDP) is constantly increasing and over time since 1980 the velocity of money has been decreasing. Let’s assume for a moment that the velocity of money was fixed (despite reality), then if real GDP grew at say 1.5% per year on average, then we would want money supply to also grow at 1.5% per year if we want the price level to remain stable. Typically the inflation target is about 2% per year, which would imply money supply growth of 3.5% per year for an economy growing at 1.5% per year on average and that hits the 2% target for annual rate of inflation.
It only works if velocity of money is fixed.
https://fred.stlouisfed.org/series/MZMV
https://fred.stlouisfed.org/series/M1V
https://fred.stlouisfed.org/series/M2V
According to the wikipedia article on money suppy
https://en.wikipedia.org/wiki/Money_supply
MZM velocity is supposed to be a good predictor of inflation so is often followed by inflation hawks.
Actually I was trying to convey exactly the ideas presented in the piece you linked, obviously I am not stating things clearly.
I was trying to say the velocity of money is not constant, it has been decreasing over time and that breaks the link between money supply and prices, that is basically what the pieve you linked is saying, I agree with it in full.
Dennis,
Yes i understand what you are saying. The article also states:
If for some reason the money velocity declines rapidly during an expansionary monetary policy period, it can offset the increase in money supply and even lead to deflation instead of inflation.
The velocity of money can be calculated as the ratio of nominal gross domestic product (GDP) to the money supply (V=PQ/M), which can be used to gauge the economy’s strength or people’s willingness to spend money.
Again i know these equations are simplified, but wouldn’t the increase in money supply M decrease the velocity of money V ? (I believe you stated this 2 replies ago)
Following along they stated a few reasons as to why the velocity of money is slow:
And why then would people suddenly decide to hoard money instead of spend it? A possible answer lies in the combination of two issues:
* A glooming economy after the financial crisis
* The dramatic decrease in interest rates that has forced investors to readjust their portfolios toward liquid money and away from interest-bearing assets such as government bonds
Do you agree with this reason? And in your opinion how would you increase the velocity of money, what policies would you use? (Forgetting covid-19, but prior to that event velocity of money was declining sharply eitherway).
The velocity of money will simply depend on Money supply and nominal GDP. V=GDP/M, so if we want higher V we could reduce the supply of money or increase GDP (or both).
I agree either of those reasons could be part of the explanation, but note that only the second reason would have still applied in the US until the pandemic hit.
In my mind the logical explanation is that monetary policy just is not effective when interest rates approach zero. The extra (or excess) money supply, just sits in the accounts of the wealthy and is not spent.
When the money does not circulate (I spend money to buy a car, jobs are created, which leads to spending by the auto workers, etc (this is called the multiplier effect) when we have most of economic growth going to the wealthy who save much more of their income than they spend, there will be a tendency for velocity of money to fall, part of the explanation is income inequality. Address income inequality through a more progressive income tax code which eliminates all tax loopholes for the wealthy and the velocity of money is likely to increase.
Dennis,
I agree with with income inequality as a possible cause of reduction in the velocity of money.
Wouldn’t a government fiscal policy to for example raise the amount of money given in welfare cheques for the unemployed help increase the velocity? Even policies such as helicopter money?
It seems in both our countries, raising taxes for the rich almost never happens.
Iron Mike,
Yes anything which puts more money in the hands of low income citizens will tend to increase the velocity of money as nearly every dollar is spent rather than saved. Likewise tax cuts for low and middle income citizens will have a similar effect. Handouts for the wealthy (whether tax cuts, loans, or outright grants to big business or financial companies) are far less stimulative, though they help a bit if they reduce the number of people who lose their jobs.
Income inequality is a big problem, but wealthy Senators and representatives do not see it as such, many are what I call free market fundamentalists, I have a more balanced view. Free markets are great when they work, but there are many instances where government intervention is necessary.
“Try that with your coal mine…”
A line worth remembering.
NAOM
Write an obituary for the airlines:
How the first phase of peak oil brought Virgin Australia into minus
after 2008
http://crudeoilpeak.info/how-the-first-phase-of-peak-oil-brought-virgin-australia-into-minus-after-2008
U.S. Corn Ethanol Production Fell 45% along with Gasoline Product Supplied
U.S. Corn Ethanol Plant production for April 10th fell to 570,000 b/d versus 1,035,000 b/d on March 13th. Thus, corn ethanol production declined by 45% since March 13th, while gasoline product supplied fell 47%.
Farmers and Ethanol producers must be taking a beating from a near 50% decline in production.
Total U.S. Petroleum Product supplied fell to 13.8 mbd on April 10th versus 21.4 mbd on March 13th. I am sticking with my forecast that total petroleum products will likely fall to the 12 mbd level.
Steve
Steve,
This is not surprising as the ethanol is blended with most gasoline at 10% so if gasoline output falls by 45%, we would expect ethanol output to also fall by 45%, ethanol does not store very well so they only produce what is necessary to blend with gasoline. I doubt products supplied will fall much further, perhaps to 13 Mb/d, but 12 Mb/d seems too low. Pretty much everything in the US is shut down, doubt it will get much worse in terms of liquid fuel demand.
Dennis,
Yes, ethanol falling in parallel with gasoline product supplies is a NO-BRAINER. However, while everything is shut down, a percentage of the gasoline product supplied is heading to INVENTORIES and not in gas tanks of cars, trucks, and SUVs.
Easily, 70-75% of auto-traffic in the U.S. has disappeared. Thus, the gasoline product supplied isn’t taking into account all the LOCKDOWN of American Driving.
Over the next 3-4 weeks, it’s highly likely that total products supplied will reach 12 mbd or less. But, this isn’t really the IMPORTANT ISSUE even though you and I can have fun playing TIT for TAT.
I am more concerned about the LONG-TERM demand destruction that takes place towards the end of 2020 and onwards.
As I stated in my article: FIRST STAGE OF OIL DEMAND DESTRUCTION: U.S. Supply Of Petroleum Products Down 7 Million Barrels Per day
https://srsroccoreport.com/first-stage-of-oil-demand-destruction-u-s-supply-of-petroleum-products-down-7-million-barrels-per-day/
There will be 3 STAGES of Demand Destruction.
STAGE 1) Initial Collapse to 12-13 mbd total products by early May
STAGE 2) Rebound of U.S. oil demand as Americans go back to feed their Restaurant, Bar, Starbucks and Shopping addiction.
STAGE 3) U.S. Oil demand Declines again in 2H 2020 as the Lousy Economic Fundamentals really start to kick in along with the 2-Wave of COVID-19
steve
Srocco,
While not impossible, I tend to think your Stage 3 estimates, as you call them, are way too dire and a highly unlikely scenario outcome. Specifically, that the US economy will never return to pre Corona levels is an extreme and unlikely future. Good for drama and discussion, but not really something I would plan on financially.
Who knows what life will be like in five years, but of course it’s going to be different, it always is, with or without COVID…. but populations will be larger and economic activity will eventually be greater than pre-COVID. Not a strait line, but greater. Heck, we may have a little population surge in ~9 months with everyone cooped up in their homes! We could call them COVID Boomers… kidding, kidding…
For thousands of years, humanity has grown and expanded, crashing through challenges that dwarf today’s COVID. We are the virus of the globe. Changing to a new norm creates amazing opportunities. An abrupt negative change or challenge such as pandemics, natural disasters or global wars can eventually evolve into a positive stage and reenergize and redirect old pathways into new and fresh directions. And…our world today can adapt and redirect much quicker than in the past…. and in the future, it will be quicker than today. The velocity of change is staggering today vs just one generation ago.
^ Specifically, that the US economy will never return to pre Corona levels is an extreme and unlikely future. Good for drama and discussion, but not really something I would plan on financially.^
Disagree . First the economy will never return to pre Corona levels ,you can take that to the bank . Second the system does not work at 50-60-70% capacity and that is what our current economic setup is ,a big system composed of smaller subsystems . An analogy would be the human body which is a complete system composed of smaller subsystems ,the digestive system,the nervous system,the circulatory system etc . All must work in synchronisation for the body to function .It is not possible that a system say ,the renal system or the pulmonary system is not working and you will be able to report to work . You may be alive with the failure of a subsystem but definitely you are ^functionally^ dead . The virus has knocked out a lot of subsystems in our way of living or you may say lifestyle . The financial system is just an example ,as it is kept alive with an overdose of money printing ,just like you can keep a ^functionally^ dead alive with doses of antibiotics. This time what has happened is a Synchronised System Failure with too many subsytems going kaput and there will be no recovery from this .Get ready for what JHK termed ^ The Long Emergency ^ . The golden rule for the way our current system is structured has an Achilles heel that is ^ The end of growth is the beginning of collapse ^ . Understand the fine line ^the end ^ even ^ zero growth ^ will lead to collapse leave alone negative growth where, we are today .
HiH,
I respectfully disagree. The human body is merely a series of static subsystems that cannot adapt or change, other than through long-term evolution. Our financial system and economy comprises many overlapping subsystems that are too numerous to inventory here. These systems, most importantly, are dynamic and can adapt, redirect, restructure and redesign on the fly as headwinds are encountered. The human body simply dies at failure as it cannot adapt. In other words… our financial systems can change the rules in response to a crisis and move on…. If we get a knockout blow to a portion of our financial system, we simply recreate it and a new norm is formed. I’m not saying it’s glamorous or perfect… some are hurt along the way as the whole is preserved. A small example of this adapt and change was the simultaneous 1980’s meltdown of the S&L Crisis, oil industry and real estate…. The rescue plan took a while to gain momentum, but was ultimately successful and GDP growth grinded through. I really don’t think there was a down GDP year during this crisis other than the slight dip in the 1991 recession. And that period sucked! I remember walking in on my dad sitting in the dark in our living room listening to the 1812 Overture trying to clear his head (he was a great engineer). Our financial system survived and thrived because we could change the structure and rules… the result is that nominal GDP has grown ~300% since then. Why is the COVID 19 situation any different from the S&L era crisis cluster other than COVID is the fear of the day… which always feels like it’s the worst because it’s active and in our face. End game Doom prognosticating is easy to dish but hard to support. Never has it come to pass other than temporary pauses.
Never underestimate the resiliency of humans. We are relentless ants of greed. In this current natural disaster style crisis, we are changing the rules and will continue to do so until effective medical solutions are available, then humanity will roll back into its old habits of ravenous consumption over time as our memories fade from fear into greed and new GDP heights will be achieved. It always has and always will… until the big asteroid comes.
^The human body simply dies at failure as it cannot adapt.^
Incorrect . It is the combination of both adaption and resilience ability of the human body that evolved over hundred-thousands of years ,that bought homo sapiens (human beings) to be where we are ,or else we would still be somewhere lower in the evolutionary cycle . Of course the human body or any animal will eventually die . Death is the great equalizer .
The experience of the past handling of the economic crisis are invalid today . The world was not 7 billion people ,$329 trillion in debt , climate change breathing down the neck ,the main source of energy which is oil in depletion and decline ,terrible EROEI for all FF ,a pandemic ,a locust epidemic ,etc etc all converging at the same time . A perfect storm . The difference between 0 Celsius and 1 Celsius is not 1. The difference is at 0 you have ice,a solid and at 1 you have water ,a liquid . This is phase change . The virus is the catalyst that has triggered the phase change,if not the virus it could be something else . When you burn petrol in the car ,you get smoke , you cannot capture the smoke and turn it back into petrol . In phase change most of what we have learnt or experienced is invalid . So now the FED is doing what it did in 2008 ,throw money left ,right and centre ,in 2008 it was $ 875 billion , now it is already $ 2.6 Trillion and counting . Result , nulla ,nada ,zero . Trying to solve a health crisis by monetary and fiscal methods is not going to work . They have taken the kitchen sink,the bathtub and thrown everything,even buying junk bonds . Understand there is no such thing as a ^ zero growth^ economy , I have already pointed out that ^zero growth ^ is leading to a collapse . After this what ? The world has changed . Just one example , if ^social distancing ^ is the new normal ,then instead of 5 in a row ,there will be 2 in a row in airplanes, sit down restaurants are over ,sports events,carnivals,music festivals are over .Can airlines,restaurants,movie theaters etc survive operating at 50% capacity ?No . They are not coming back . We are now in uncharted territory , but one thing I can assure you ,it is all downhill from here ,the speed at what this will occur will be learnt shortly . Don’t depend on a vaccine in the short term ,we are still waiting for one, for SARS,HIV and many other diseases . The virus is in the driver’s seat and we are just bozo’s on the same bus . Be well .
Disclaimer :- I am not a pessimist , just a ^disappointed^ optimist . They are also called realist . 😉
I suspect there will always be a random movement week to week due to production moving in and out of storage. For example, residual oil supply jumped 11 fold this week and other oils supply increased too. So it will be very difficult to pin the absolute low of the products supplied on a weekly basis. It can be 11, 12 or 13.
It will be perhaps far more instructive to look at a 4 week moving average as it will cut off the noise and give a much better picture closer to the true value. It was above 21.5 million BPD pre corona. Let us see where the trough forms. It can be at 13 or 12 or somewhere in between. But the fact of the matter is that 8-9 million BPD of demand has vanished. And when it recovers, we are not going to get the whole 8-9 MBPD back. Not this year, not next year.. maybe never.
How much storage is available for the ethanol corn feedstock , wonders I?
And will less corn for ethanol be planted this year?
Last year it was over 40% of all corn acreage, almost as much prime farmland as Illinois and Iowa have combined.
Hickory,
You bring up an excellent question in regards to how much corn will be planted this year for ethanol production. The typical planting time for corn is late April, early May. So, I imagine farmers are watching the corn market very closely to see how much they are going to plant.
Sure, it’s 3-4 months before harvest, but who knows how much gasoline demand will have declined by August-September.
Lastly, another SECONDARY IMPACT on the huge decline in ethanol production is the loss of distiller grains as a by-product that is fed to cattle, pigs, and chickens. So, with 45-50% of ethanol production OFFLINE, that is one hell of a lot less FEEDSTOCK for the U.S. cattle, pig, and chicken industry.
Americans still have no clue just bad the supply chain disruptions have taken place and will continue to THUNDER through the economy over the next 1-2 months.
steve
If their is demand for corn livestock feed, but not ethanol production, there is plenty of production capacity from all the land that has been recently planted to corn for ethanol.
On the bright side, the United States is officially energy independence for the first time in our lifetime.
Only Trump can fix it !
Russia’s Oil Revenues Tank Despite Historic OPEC Deal
Due to the monthly recalculation of Russia’s oil export duty based on the average price of its key export grade, Urals, for the previous month, Russia’s oil export duty in May is about to be 87 percent lower than in April, Bloomberg reported on Thursday.
According to Bloomberg estimates on data from the Russian finance ministry, Moscow would be getting less than US$1 out of each barrel of Urals it exports.
This may be of some interest…
With Western Canadian Select now trading at $4.47 a barrel, it’s cheaper than buying a 12-pack of Coke at Walmart for $5.08.
Crazy Times indeed.
steve
It’s now $10. I suspect it has something to do with expiry of May and start of June series. Is my guess correct? WTI too has jumped from 20 to 25. (Source: oilprice)
WCS at close on Friday April 17.
Big move. Up 53.6% from yesterday’s close of 7.24. Nice gain for those who risked buying yesterday. What changed?
I am not 100% sure but I am reasonably confident that it’s the changeover from May to June contracts. Oil price is right now in super contango. I read somewhere that the november contracts are trading in the 40’s. So if u have storage space, buy spot at 18, sell futures for end of the year and pocket the profit.
Someone can correct if I am wrong.
Uups … at least it’s just a gallon of Coke – a barrel would be a serious health risk ?
Asian futures WTI sub $19.
I would guess there are very few oil wells in the United States that can flow at a profit at that price. None of them in shale. A handful in Texas. A handful of California. Nothing in the Gulf of Mexico. Nothing in Alaska. Maybe a few wells onshore Louisiana and in Oklahoma.
Less than 2 million bpd? Minimum consumption for food transport and military operations and law enforcement and lawn mowing? 10 mbpd?
We’re headed towards the nationalization exit and the off ramp doesn’t have to be steep. The industry is not going to be allowed a backstop via fiscal bailout. The companies will have to borrow money from the Fed and I don’t think they want to do that because they’ve already borrowed money from other unelected folks.
I would guess government would seize the assets as the companies fold and the workers become civil servants. And if consumption increases, guess what? The price won’t go up. It’s an election year.
Western Canadian Select this morning…$2.74… Basically free. One wonders, of course, how much longer major operations like Suncor, Syncrude, Conoco Phillips et al can continue like this.
Funny how it is almost completely unreported by Canadian news outlets, as far as I can tell. I guess they don’t want to rehash the Liberal government’s historic screw up on TMX, and the subsequent fantastic level of economic devastation wrought to Western Canada, to become another lightning rod of public discontent.
All along I mostly blamed the US shale fiasco for Western Canada’s (read: Alberta’s) economic collapse over the past decade. Turns out, however, that we provided plenty o’ rope to hang ourselves with, shale or no shale. As always, the mind boggles and my jaw continues to grind along the ground.
Starting to see week over week improvement in global flights per day. Not a trend but possibly building one…
April 9th: 68,623
April 16th: 75,216
Mostly freight. The flightradar apps are filled with Fedex and UPS jets.
Agreed, but I will take it. More flights, more jet fuel demand. Total flights had been on a persistent downtrend since late Feb, but now appear to be flattening out and perhaps beginning a recovery.
I was eyeballing various chemistry & emissions over China, on earth nullschool and others. Domestic burn appears to be picking back up.
Mike Shellman has never liked the fact that the export ban on crude was lifted in Sept 2015. From a national security standpoint he is correct and there are many instances where “free trade” is not allowed for national security, we don’t sell our military hardware to our enemies as a general rule.
So I have changed my free trade viewpoint on crude oil and note that from 1975 to 2015 this was the policy of the US, no crude exports.
From 2014 to 2019 US crude exports rose from 350 kb/d to 2980 kb/d, most of this increase in exports was tight oil exports which cannot be utilized in US refineries. One solution is to refit refineries to process the lighter crude, but this is expensive and refiners have been unwilling to do so for the most part.
An alternative is to reduce tight oil output to about 5 Mb/d for the long term and reimpose the crude export ban.
The scenario below uses prices from the EIA’s April STEO and AEO 2020 reference oil price scenario along with the models I developed using data from shaleprofile.com to develop well profiles and for past completion rate data.
I have left my Bakken, Eagle Ford, Niobrara, and other US tight oil models as they were and simply adjusted Permian basin completion rates to achieve roughly 5 Mb/d of US tight oil output after recovery from the current downturn, tight oil output can be maintained at 5 Mb/d until at least Aug 2051 under the assumptions of my model (which ends in Aug 2051, no new wells are completed beyond that date in the models).
This is not necessarily what I expect will occur, it is a “what if” exercise to see how long 5 Mb/d output for tight oil could be maintained if no new US refinery capacity for tight oil was developed from now until August 2051. The aim would be to conserve US tight oil resources and utilize them in the United States.
Dennis
I agree. If the long term thinkers in the US believed in Peak Oil, the best thing to have done would have been to limit US production and import what was necessary. Also work with Canada which has massive reserves of heavy crude/bitumen. This keeps the Texas refiners supplied with heavy crude. The syncrude, (Syncrude Sweet Blend) produced from bitumen is biased toward making diesel and gasoline. Also it is has a higher quality than WTI (Sweet) and has no bottoms. This would make North America close to self sufficient.
Chins’s big push to EVs is driven by the knowledge that they had to import over 10 Mb/d of oil up to January 2020. They know this is their achilles heal. They have been going around the world buying up oil assets. They bought companies in Canada. They learned too late that it cannot be exported back to China,
On a related note to try to make North America self sufficient see below.
“BILLINGS, Mont. — A U.S. judge canceled a key permit Wednesday for the Keystone XL oil pipeline that’s expected to stretch from Canada to Nebraska, another setback for the disputed project that got underway less than two weeks ago following years of delays.
Judge Brian Morris said the U.S. Army Corps of Engineers failed to adequately consider effects on endangered species such as pallid sturgeon, a massive, dinosaur-like fish that lives in rivers the pipeline would cross.
https://www.usnews.com/news/business/articles/2020-04-15/judge-cancels-permit-for-keystone-xl-oil-pipeline
Ovi,
Maybe the raw bitumen could just be shipped by rail to the US? Then build a facility near existing pipelines (maybe in Oklahoma) to create the syncrude and ship to Gulf coast refineries. I have not really looked at the problem, but it seems the Keystone XL was poorly conceived, as a better project would have gotten around the various obstacles and be moving oil.
Dennis
In January 2020, Canada exported 400,000 bbls/d by rail. On any given day we export a around 3.8 M/d to the US. So rail accounts for around 10% of Canada exports. Cost is one issue. Roughly $15/b by rail vs $5/pipeline. The other issue is that the rail companies want a long term commitment because they have to buy rail cars, locomotives and train crews and build transfer points.
The companies have made a commitment to add rail shipments and spread the costs over all shipments.
Keystone XL was conceived more than 10 yrs ago as an expansion of the Keystone pipeline that was commissioned in 2010. Keystone went through without difficulty. For Keystone XL, they picked s shorter route through more environmentally sensitive areas. In retrospect, they should have chosen to parallel the same route.
Part of the plan was to have a spur line from the Bakken connect to it. Because of the delays some other company built the Dakota Access pipeline. It ran into protests while being built but few court challenges.
Alberta is building a refinery to convert bitumen to syncrude sweet. It is about 3 years late and the cost has doubled to $9.6 B for a refinery with a capacity to make 50,000 b/d of diesel. You can see why the preferred route is to ship the bitumen to Texas refineries designed to crack it.
HEY OVI, DENNIS
WESTERN CANADIAN SELECT IS TRADING FOR $0.28 TONIGHT. HOW DOES THAT FACTOR INTO YOUR PONTIFICATING ECONOMIC DISCUSSIONS REGARDING RAIL TRANSPORTATION, AND POSSIBLE FUTURE SUPPLY???? YES THE ALL CAPS MEANS THAT I AM SHOUTING RIGHT NOW WITH EVERY FIBER OF MY BEING
Michael,
A long term discussion on future tight oil and oil sands output for US and Canada.
The low price suggests Canadian oil that has no pipeline access, should not be produced at present. I doubt the economic down turn will last forever, but I pontificate. 🙂
Also US refinery demand for Canadian crude has fallen from 3800 kb/d (in Jan 2020) to 3200 kb/d for the most recent reported week ending April 10.
For WCS June 2020 Futures, the recent price was -$14/b.
https://www.cmegroup.com/trading/energy/crude-oil/western-canadian-select-wcs-crude-oil-futures.html
Another source has the price of WCS at $11.12 as I write this.
https://www.bnnbloomberg.ca/oil#/WCS_Crude
WTI is at $12.46/bo (WCS may be a June Contract and WTI is a May contract, so not an apples to apples comparison until the May contract expires). The WTI JUne contract is currently trading at $22.52, so about a $11.40/b spread in the two contacts, this may account for the transport cost to get the WCS to the Gulf coast refineries where the bulk of US refinery capacity resides that can handle the heavier Alberta oil.
Baker Hughes Texas rig count. Down 40 for the week, 13%. At the rate of 40 rigs per week, the count will be close to zero in 6 weeks. Down 140 over 5 weeks.
Shocking! I mean what are 262 rigs still doing?
Drilling future DUCs.
Yes. There are a lot of shale companies which are hedged for a few months. So they can continue drilling unprofitable wells just to keep the CEO bonus high.
Othe people would pocket the hedge money and lower production, waiting for better times to ramp up production again.
The bonuses should be paid with stock options only so that the interests of CEO is aligned with shareholders, I would not buy any shares of a tight oil company where this was not the case (I own none). Investors who don’t pay attention may see their stock values evaporate, maybe next time they will pay attention.
Ovi,
Nice chart. If we look at horizontal oil rigs in the 4 major tight oil basins (Permian, Williston, Eagle Ford, and DJ-Niobrara) over the past 5 weeks, the rig count has dropped by 171 horizontal oil rigs, If we fit a trendline to the past 6 weeks of data and extend the trendline forward by 75 days, the horizontal oil rig count hits zero in 11 weeks for these 4 basins. I imagine the line will flatten out before reaching zero, maybe the count will fall to about 90 in 8 weeks and remain around that level for 6 months or so. Most recent horizontal oil rig (HOR) count for the 4 basins combined is 362. Five weeks ago the HOR count was 533.
Ovi,
If I focus on Texas and consider only Eagle Ford and Permian horizontal oil rigs, the count has gone from 462 to 312, note the difference in count is because Permian includes New Mexico. For Texas only (excluding New Mexico) the count decreased for HOR from 349 to 230 or about 24 rigs per week. So if that trend continued we would see zero rigs in 10 weeks. Much of the drop in Texas rigs over the past 4 weeks (count was 340 four weeks ago for EF and Permian combined HOR count in Texas) was conventional vertical rigs and some of the rigs were outside Permian or Eagle Ford plays. The 4 week drop is steeper at 27.5 rigs per week, suggesting only 8 weeks to zero rigs.
Major article at peak oil.com on Russian production.
The Golden Age of Russian Oil Nears an End
– In the next 10-20 years, Russian oil will become more expensive as extraction from less accessible basins becomes necessary to maintain current export levels.
– Internal inefficiencies within Russia’s oil sector, as well as the remote locations of remaining reserves and potential shifts in future oil demand, add up to a murky future for the country’s energy-reliant economy.
– Moscow may adjust its budget to ensure plummeting oil prices don’t cut into its government spending, but proper economic diversification away from energy remains a complex and unlikely process.
Russia’s easily accessible oil reserves have long been the cornerstone of its economy. But these conventional fields are depleting, leading to the need to invest and expand into more untapped sources. This transformation will not be easy or cheap, as various factors have led to a poorly optimized oil sector that’s ill-equipped to soften the blow of rising costs. The key to maintaining a strong energy market, and securing the capital needed to develop new and expensive fields, will instead rest on whether Moscow can secure its foothold in China’s increasingly oil-hungry market. In any case, Russia may have little choice but to accept that its glory days of oil dominance and high profit margins are nearing an end.
Russia’s days of cheap and easy-to-access oil are numbered.
Russia has its own central bank and a very large SWF. Renders most of the article meaningless.
They consume only 3.2 mbpd. Produce at least that. Pay the crews in rubles, have their refineries buy it in rubles.
The world is never going back to what it was. There doesn’t have to be a rubles to dollars conversion.
It might be helpful if someone could explain the disconnect between May 2020 and June 2020 WTI futures, which on percentage terms surely set a record today.
Many, many crude oil postings are in single digits today and will be until Monday.
I wonder if HHH was stopped out or had rolled contracts forward.
I obviously don’t understand everything so some help would be appreciated.
I assume Brent and WCS were up because the quote for both today was the June contract.
Yeah it was confusing for me too. Never seen anything like it. But it looks like the market is in super contango. Spot is around 18 bucks, June is at 25 and November is changing hands in the 40’s. So anyone who has access to storage can buy the physical stuff for cheap now, sell the futures, store it for 6 months or so and sell it for a fat profit.
T Shyam
You don’t need storage if you own oil underground. You sell a futures contract 6 to 9 months out. At some point you hire drillers so that you can meet your delivery commitment.
.
Yep. I understand. I was just explaining the super contango that is existing in the current market.
Vanguard and T Rowe Price and probably just about all fund families have energy sector ETFs.
As oil has fallen, their price has increased. Because of the rising tide.
shallow sand,
I have never traded oil futures, but would think it might be the 10 Mb/d OPEC+ cut expected to start on May 1 is expected to raise the price of oil in May (which would effect the contract that expires on June 1). For the current front month contract (expiring on May 1) many are expecting Saudi and Russia may produce all they can until the new agreement comes into effect, so for the current month we expect oil prices to be low. That’s my take, and yes this is a very unusual circumstance, it is not often we see demand fall by 30 Mb/d over a 2 month period, so markets may not behave in the way we normally expect.
Attached is a chart showing the settled prices for WTI on Friday April 17. The May contract will expire either on Monday 20th or Tuesday the 21st. Typically it is the 20th but it can vary.
What will be interesting to watch is where the June contract will open. Depending on volume it could drop down to around $20. It’s not easy to figure out and I don’t have the depth of knowledge to explain it, even though I have followed the futures contracts numbers for quite a while.
What the steep Contango (Front month lower than the next) is saying loudly these days is, “Keep the darned stuff in the Ground!!”.
Ovi
It is also saying that a recovery in demand is expected and that oil prices will rise. A smart producer would cut back output as much as possible and defer completion of DUCs until oil prices rise.
So yes keep it in the ground and wait for better prices.
Please remind me, what is a DUC – other than a stunted waterfowl?
NAOM
NAOM,
A DUC is a well that has been drilled but not completed–the drilling is done but the well isn’t equipped to produce oil or gas.
Many thanks, keep taking the port.
Synapsid,
Mostly correct,
A tight oil well is drilled and then it gets fracked, the DUCs have been drilled (drilling rig count affects this closely) but the fracing process has not been finished (there are undoubtedly other steps in the process which are also done as part of the completion process). The frac spread count affects the completion (or so called first flow) of wells fairly closely. Unfortunately I do not have access to the detailed frac spread data (only total counts for the US for both oil and gas frac spreads), the baker hughes rig count data gives quite a bit of detail in the pivot table data (ability to break out tight oil basins, oil rigs, horizontal rigs, etc). It would be nice if we had something similar for frac spreads, but the detailed information is proprietary.
Africa learning lessons from the west
https://www.dailymail.co.uk/news/article-8232649/Virus-triggers-unrest-Africa-Riots-break-Johannesburg-food-shortages.html
and pigs might fly
Heads up. There are many YouTube videos of planes flying empty. Quite a lot of them. They have to do this to keep their slots at the various airports, particularly in Europe. If Delta does not fly its scheduled flights into Gatwick then Delta loses access to Gatwick.
Reporter booked some flights and interviewed some of the people on them. There were typically less than 10 passengers per flight. In all cases, they were flying for some family situation. One guy’s mother had died and he was going to the funeral. One lady was going to help a sibling with chemo. Another lady was going to her sister’s wedding.
Nobody was going to a business meeting. Nobody was going to the beach.
So the oil gets burned with nobody aboard.
Watcher,
Yes some oil gets burned, but there are in fact many fewer flights. Some airlines may choose to forgo keeping their slots, a business decision.
This whole deal would have been a hell of lot easier to deal with if air travel had been severely restricted from early on. Its a take home lesson.
I’m going to give two points to trump (2/100).
One was appointing someone besides himself to lead the white house task force (he should have followed the guidelines and instructions he was then given).
Secondly he did take advice and limit air travel from China fairly quickly. Problem is it was a leaky half measure, and not applied much more broadly and quickly to limit the influx of virus load. Big mistake.
and the scum shit World Health Organization recommendations were..
Quote;
WHO continues to advise against the application of travel or trade restrictions to countries experiencing COVID-19 outbreaks.
https://www.who.int/news-room/articles-detail/updated-who-recommendations-for-international-traffic-in-relation-to-covid-19-outbreak
and when Trump banned flights from Europe, many European leaders condemned the move.
Fact is the WHO should be an organization that gives the best advice to all countries and not advice based on the economic wishes of the Chinese dictatorship.
Your being conned and distracted from the administration’s failures
Failure is rewarded everywhere. How does the WHO spend 200 million on travel and heads don’t roll? Wonder what % of Total Budget?
https://nypost.com/2019/05/20/world-health-organization-blew-almost-192-million-on-travel-report/
Hmm, maybe they could use a little oversight from America. Oh Trump forgot to to confirm a US representative for three years?
This childish scapegoating has got to stop. Trump is a complete failure, and has the blood of tens of thousands of Americans on his hands.
Quit being a white knight rescuing Trump the damsel in distress, he’s a loser and he and the rest of the country need to learn to accept it.
The Post is a Murdoch rag. Don’t believe anything in it until you check it with two other sources.
Trump’s proposed budget cut WHO funding by 50%, long before the current fight about Covid 19 procedures. This administration tries to cripple government agencies everywhere – that’s just what it does.
Wayne, I too have disappointed in some of the WHO positions and performance on this. Same criticism goes for the CDC (here in the USA).
But we surely need organizations like these, and they need operate with greater than a shoestring budget, if we expect good results.
Hickory,
The problem with such organisations is that there is little to no oversight in how they operate. Prior to covid-19 WHO has been accused of corruption multiple times. But little to nothing was done to rectify their inner workings. They need to be held accountable. And not allowing Taiwan to join even as an observer is beyond unacceptable.
We here in Australia were lucky not to take WHO advise. Our health officials declared covid-19 a pandemic prior to WHO. And implemented travel bans (against WHO advise) and compulsory 14 day quarantines for anyone entering the country. I will not give our PM any credit, because he wanted to keep the economy running, and after advising people to avoid gatherings of 500 people or more, he was caught going to a football match lol. At the same time he at least listened to health officials and state governments to go into complete lockdown quickly.
Agree, the organizations need oversight, especially when run by males.
Who will oversee the overseers?
Maybe…Inspectors General?
“If, three years ago, President Trump had removed two inspectors general from their posts within a week of each other for overtly self-interested reasons—as he has done over the past few days—it would have been a big scandal. Presidents don’t just fire inspectors general for doing their jobs, after all. And presidents who agree to have an oversight board composed of inspectors general don’t typically sack one of them to prevent him from leading the board’s monitoring of trillions of dollars of congressionally appropriated money.
Yet last week, the president announced the firing of Intelligence Community Inspector General Michael Atkinson for overtly retaliatory reasons. Atkinson had been the inspector general who notified Congress, as he was legally bound to do, of a whistleblower complaint that raised a matter of “urgent concern”—the event triggered the Ukraine scandal and the president’s resulting impeachment.”
https://www.lawfareblog.com/why-trumps-inspector-general-purge-not-national-scandal
Trumps China travel restrictions were a measure that bought a little time at best. The time should have been used to prepare to build a testing infrastructure and trace tacting. It wasn’t.
Opening up the economy without convincing 90 percent of the people it’s safe isn’t going to save the airlines and restaurants. Large gatherings are out until a vaccine. The protesters can’t force an early successful opening of the economy without testing and tracing. Trump doesn’t care about how many Americans die, only his reelection. More than 100,000 American’s will die needlessly from Trump’s inept handling of Covid 19.
Biden 2020 for a return to common sense
Keep in mind that much of the debate about reopening the economy is all about fixing blame for the economy, before the election.
Trump/Republicans would like to take credit for reducing covid deaths, while fixing blame for the economic hit from the shutdown on Democrats. He/they don’t care about reopening the economy as much as they want people to blame Democrats for the economic fallout of the lockdown. So…Trump will keep saying he wants things to reopen, and hoping Democratic leaders keep things shut down, so he gets the best of all worlds: a low death rate and the blame for negatives going to the other party…
The protesters can’t force an early successful opening of the economy without testing and tracing.
HB,
Anyhow not easy, because a lot of asymptomatic covid-19 infected people also have viral shedding at least a few days.
“The research evidence on the wearing of masks by the lay public is interpreted differently by different official bodies. The US Centers for Disease Control and Prevention, for example, also changed its guidance on 6th April (https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/prevention.html) and now says the following:
“Cover your mouth and nose with a cloth face cover when around others
You could spread COVID-19 to others even if you do not feel sick.
Everyone should wear a cloth face cover when they have to go out in public, for example to the grocery store or to pick up other necessities.
Cloth face coverings should not be placed on young children under age 2, anyone who has trouble breathing, or is unconscious, incapacitated or otherwise unable to remove the mask without assistance.
The cloth face cover is meant to protect other people in case you are infected.
Do NOT use a facemask meant for a healthcare worker.
Continue to keep about 6 feet between yourself and others. The cloth face cover is not a substitute for social distancing.”
“Indeed, the WHO itself, in a different set of guidance (on pandemic influenza), acknowledges that there may be situations where the balance of probabilities falls in favour of masks. I quote from their guidance, https://www.who.int/influenza/publications/public_health_measures/publication/en/:
“Face masks worn by asymptomatic people are conditionally recommended in severe epidemics or pandemics, to reduce transmission in the community”
https://www.sciencemediacentre.org/expert-reaction-to-new-who-advice-on-use-of-facemasks-in-the-context-of-covid-19/
Biden 2020 for a return to common sense… LOL.
Thanks for the laugh.
Steve, I ani’t laughing! Only a Trumpite would laugh at that statement.
Is that you?
Biden 2020 for a return to common sense.
Ron,
Let me clarify my position. Trump is a PIECE OF GARBAGE.
However, the notion by Americans that their “ASSHOLE” Politician is better than the other “ASSHOLE” provides a nice WARM FUZZY, but it’s not true.
Yeah… TRUMP is a PIECE OF CRAP, no debate there. But, for those who think Biden is going to make the situation in the country any better…. YOU’RE BETTER OFF rubbing your lucky RABBIT FOOT, than putting any hope in BIDEN, who in my opinion… is just another ASSHOLE.
Steve
At some point we must draw a line across the ground of our home & our being, drive a spear into the land, & say to the bulldozers, earthmovers, government & corporations, “thus far & no farther.”
— Edward Abbey
Steve, I have never heard such an ill-informed comment from an otherwise intelligent man in all my life.
To even imply that Biden, or any of the other candidates that ran for the Democratic nomination, is just as bad as Trump, is an insult to the intelligence of any thinking human being.
No, no, fuck NO Steve, Trump is an embarrassment to America. Other leaders of the world, as well as their general populations, are laughing their ass off at America for electing such a narcissistic moron for our president.
But I do understand where you, and a few others on this list, are coming from. You have an ideology, a far right, less government is better, ideology. And you are very embarrassed that your party elected such a moron for a president. So you scream to the top of your lungs: “I know our man is an asshole but everyone else is an asshole as well.”
Sorry Steve, but that is a poor argument made by someone who cannot make a better argument.
Steve,
I disgree. I don’t know Biden, but he would be far better than Trump in my opinion, a very low bar unfortunately.
Pepsi, or Pepsi Lite?
I’m not into Pepsi.
But Biden will probably be a slower death.
+1
Ron,
I am not going to debate you on this issue. I see how you reply to those when you STRENUOUSLY object.
If it makes people sleep better at night that they got their MAN…. BIDEN at the helm, so be it.
Steve
Steve, my objection, my astonishment is, how in God’s name could anyone possibly put any other candidate or world leader in the same basket at Trump?*
*Other than Mussolini of course. Was Trump born after the death of Mussolini? Could this possibly be a case of reincarnation?
My take Ron,
Politics are complicated and there is more information to understand than anyone person can absorb. Most Americans are ill informed about the world around them, history and how government works. On top of that, it’s human nature self interest comes first and decisions leaders have to make aren’t always good vs. bad. But, bad or really bad choices.
Today we have one party that is working solely for the wealthy. Exploiting religion, racism, gun rights and fear. They make it confusing, lie and point the finger at the other party. It’s to their advantage to spread the idea both parties are evil. The ill informed get their excuse to though up their hands and fall into self preservation of self interest(religion, racism, gun rights and fear).
For me, anyone who says both parties or leaders are the same. Are displaying their ignorance on the subject with glee.
United we stand, divided we will find the end around the corner. No human on earth can have our current level of standard of living on their own. Ignorance is a cancer to civilization.
HB,
Let me tell you what a cancer to civilization is. People who exhibit the following traits:
*Self-righteous
*Egotistical
*Sit on their high horse and belittle others
*Rude
*Divisive
*Suffer from an extreme form of Dunning-Kruger effect.
*No self awareness whatsoever
Trump has all these traits, but guess what, so do you.
Trump has all these traits, but guess what, so do you.
But of course Mike. That was HB’s point all along, and mine as well. You suddenly realize that your man, the man you elected for president, is a narcissistic idiot. And your defense is the typical schoolyard comeback: “Well, you’re a nuddin.” You accuse everyone else of the same problem your hero has.
Really! I would have thought you could have done better.
Ron,
Wtf are you talking about.
“Your man”. “Elected”.
Mate i don’t even live in the U.S. I already replied to your post in the oil shock forum. Go read before you repeat your nonsense.
http://peakoilbarrel.com/the-oil-shock-model-and-compartmental-models/#comment-700864
You both remind me of George Bush after 9/11, and Sarah Palin criticising republicans against the Trump campaign which she called RAT.
“You’re either with us, or against us”.
It would be funny if it wasn’t so tragic.
Mike, I do not keep a log of who lives where. You keep commenting like you know a lot about American politics so I just assume you have an interest.
And you are, on this point, dead wrong. No, hell no, it is not: “You’re either with us, or against us”. That is a goddamn cheap shot and you know it. I supported both Bush and his dad as well as Reagan. Though I did not vote for them.
What you fail to realize is what an abomination Trump it. I support America and I find Trump an embarrassment as well as a tragedy for our country. I could have supported John Kasich for the Republican nomination in 2016. Though he was a Republican he would have made a president we could all have been proud of.
But… but… and a very big but… if you cannot understand why Trump is an abomination, why he is such an embarrassment for all thinking Americans, then there is something broken inside your reasoning system.
Biden 2020 for a return to common… uh… um… look Mack you know the thing where you get the thing that goes with the other thing.
a question i never thought I’d have to ask going into a presidential election: what’s more dangerous – narcissism or dementia?
Cats, if you have evidence that Biden suffers from dementia then please post it. If not, then please stop posting right wing bullshit conspiracy theories.
Good judgement is paramount.
Biden beats Trump by a mile every day of the year on that.
Oh, and he also cares about people besides himself.
Oh, and he knows what it is like to be a common man.
We could make a very long list.
With Biden you get an entirely new administration. And a VP who could step in before four years are up.
Biden is serving as a placeholder. Focus on replacing Trump and his administration. Biden will bring in a far more capable group of people.
“Biden is serving as a placeholder”
Maybe, or maybe he’ll be an FDR and even win a war
Texas Oil at $2 a Barrel Raises Specter of Negative Prices
Buyers bidding for crude in Texas, the birthplace of the shale revolution, are offering as little as $2 a barrel for some oil streams, a precipitous markdown from a month ago. The slumping value of physical barrels is raising the possibility that Texas producers may soon have to pay customers to take crude off their hands.
… and still several 100 rigs and fracking pumps running.
Even when hedged, I would take the money and do nothing, at least not drilling new holes and pumping only these that are damaged without pumping.
Probably have leases that expire. No choice.
Time to negotiate the contract, setting a drilling hiatus of a few months during these prices.
It’s the best for both – I don’t think it’s the best for mineral owners to sell their share of the oil for 1$, too. When it’s gone it’s gone.
And when you are hedged, you don’t need to continue drilling like mad, you can just sell the options or futures for money to survive this.
Large Bay Area refinery to shutter temporarily due to low demand
https://www.sfgate.com/news/bayarea/article/Marathon-Refinery-To-Suspend-Production-Due-To-15210831.php
Seems to be starting—
US Frac spread count was down to 147 as of Friday.
It was 185 the previous week and about 350 eight weeks ago, so 203/8=25.4 frac spreads per week. If this continues we reach zero in less than 6 weeks, around May 29, 2020. This suggests a completion rate of zero for tight oil wells starting in June 2020.
Schlumberger are forecasting a low of 50 guess we have to wait and see.
Lights out,
We may be there in two weeks, and in three weeks we can see if they are correct, assuming the linear rate of decrease at about 25 per week continues.
WESTERN CANADIAN SELECT NOW NEGATIVE 33 CENTS PER BARREL YES I AM SHOUTING IN ALL CAPS
Mr Sutherland,
Good article (Dec 2018) but a bit dated on Alberta transport costs for Oil, about $15 to 20 per barrel by rail to the Gulf coast and with pipeline capacity maxed out. About 1.8 Mb/d of Alberta’s heavy crude goes to Midwest refineries in the US (all they can handle) with the rest (about 2 Mb/d) going to US gulf coast, pipelines are cheaper for moving crude but capacity is limited so some goes by rail.
https://www.oilsandsmagazine.com/market-insights/crude-oil-pricing-differentials-why-alberta-crude-sells-at-deep-discount-to-wti
Currently the lack of oil demand is the problem.
https://www.zerohedge.com/commodities/singapore-oil-trading-giant-files-bankruptcy-after-hiding-800-million-losses-secretly
Are there more behind the curtain ?
Would not surprise me if more such swindles are exposed now. WTI below 15 and Brent diff ~100%. 10+ years with easy credit and rewarding high risk taking (and socialising the loss) has contributed.
What about airlines, don’t they hedge their oil consumption? Do they hedge their oil opposite to some oil producers so they have to pay their counterpart now? How does that work out for them when the oil price has collapsed and they don’t make a profit?
I see now that it is WTI May contract that is sub $15. June WTI-Bent diff is not so extreme. My bad.
You know, that PPP gizmo reduces the cost of producing oil by quite a lot. Have to go back and look at the income statement from some of the smaller companies, but I’ll just pull a number out of the air and suggest that labor is 50 maybe 60% of their total cost, and that includes labor from their suppliers on the presumption that the suppliers have also sent in an application to the PPP.
The point thing if the cost of producing oil has gotten down to very small numbers, there’s really no particular reason why oil can’t be very low priced.
Question. In a typical lease with the mineral owner expecting to collect royalties and those royalties are 18% of revenue or whatever, and revenues have cratered — can the owner of the oil underground shut down production? He signs the lease and agrees to allow production to take place, but does he have any power to stop production at these prices. Obviously if the lease expires he can just refuse to sign another, but while the lease is in effect, can he stop production. Is there a price clause that allows him to stop production?
WTI is at $12.50 right now down 6 bucks today. Futures are holding up much better though. June is at 22.50, July is at 27.50 and Jan 2021 futures barely down just 60 cents at 33.60.
There must be many regions where prices go negative now. Let’s see how low WTI can get before companies stop producing in big style.
At 12$ everyone in the USA should be negative now only for producing – wellhead prices are much lower than WTI. I read somewhere 2x$ / barrel for most shale regions for producing ( no development costs considered ).
This volatility is mainly due to expiry of May contract. June is still trading above 22. So we will see the price back to above 20 bucks tomorrow when this series expires and June starts to trade as the front month.
T Shyam,
As storage tanks reach their limits we may see prices go negative until the OPEC+ cuts hit on May 1 and/or rig and frac spread counts fall off a cliff and we see horizontal oil rig counts and frac spread counts approach zero, in addition we may see a lot of stripper wells (wells producing less than 15 bo/d) get shut in at these oil price levels, I think they may need $30-35/bo to be viable, but Shallow sand or Mike Shellman would know more (depends of course on water oil ratio and a multitude of other factors such as well depth, royalty burdens, taxes, and all sorts of stuff I don’t know about).
Unbelievable what is happening. Brent isn’t hit as bad. At some point storage capacity will be reached and to stabilise prices, production needs to cease.
Alot of leveraged companies will go bankrupt and that again will stabilise prices in my opinion. Once in a life time opportunity. You’d think in the long term this is a great investment.
Brent doesn’t have a PPP reducing costs towards $0.
U.S. Oil Prices Have Never Been This Upside Down Before
U.S. crude oil prices plunged to Monday as demand dives and storage capacity dwindles amid the coronavirus pandemic.
West Texas Intermediate futures for May delivery, which expire Tuesday, plunged 39% to $11.25 per barrel, a 21 year-low. Brent crude oil prices fell 6.4% to $26.29 per barrel.
Meanwhile, the more actively traded June U.S. crude futures tumbled 11% to $22.07 per barrel, and July U.S. crude futures were down 5% to $28 per barrel.
Attached is a chart comparing Friday’s close and Monday’s 9:30 futures contract. The May contract closes tomorrow, April 21. You can see how the June contract is moving down toward Friday’s settled price. While the today’s headlines report the new low oil price, the market is really focussed on June.
$7.78 now. Wow! Just wow!! Futures are holding steady though. Infact they are higher by a few cents now than when the spot was at 12.50.
I am not surprised at all. What OPEC hard cut did put a floor on Brent price. US & Canada will have to go through bankruptcies, shut in’s to put a floor on WTI in the next 1-2 months to stabilize the price.
But the executives at Shale companies still are in some kind delusion that Texas RRC will impose broad cuts in Texas or that Saudis & Opec will cut even more etc…. The level of delusion among oil executives is absolutely amazing.
The PPP is taking costs down. No reason price can’t follow them.
The gov’t is covering the cost of labor.
No PPP for Brent. Companies too big.
EIA’s latest tight oil estimates by play at link below.
https://www.eia.gov/energyexplained/oil-and-petroleum-products/data/US-tight-oil-production.xlsx
Revisions lower for Jan and Feb 2020 tight oil output of about 100 kb/d each month. A “revised estimate” is shown in chart below which assumes the revisions from the March to April estimate, occur again next month for the most recent 14 months. The actual EIA official tight oil estimate published most recently is shown for comparison. Obviously the “revised estimate” is simply a guess based on the assumption stated above, future revisions are unknown until they occur.
The revised estimate for March 2020 is 7983 kb/d, the official estimate is 8096 kb/d a decrease of 78kb/d from the November 2019 peak at 8174 kb/d. The average rate of monthly decrease in US tight oil output from November 2019 to March 2020 is about 20 kb/d each month.
For the “revised estimate” US tight oil output falls by 235 kb/d from Nov 2019 to Mar 2020 or an average monthly decrease of about 59 kb/d.
My expectation is that US tight oil output will drop much more steeply over the April 2020 to March 2021 period, possibly dropping by 2500 to 3000 kb/d over that period, if oil prices remain under $40/bo for WTI.
A tight oil scenario for April 2020 to Dec 2020 added to revised estimate in chart above, completion rate for tight oil wells is assumed to fall from 1100 completions in Nov 2019 to 140 completions in Sept 2020 and the completion rate remains at that level through Dec 2020. Tight oil output falls by about 2500 kb/d for this scenario over the Dec 2019 to Dec 2020 period. Output is 5660 kb/d for Dec 2020.
It can happen even faster.
WTI is now at 7.80 – when well head price gets negative for many producers, some will stop the pump or choke it – or be forced to do it by the banks. You’ll pay for the oil, pay for the water disposal, pay for the workers and pay for wear down of tools and trucks.
And how is it with the mineral owner – has he to pay his share of the oil, too?
Perhaps some tanks are already full, or a part of the system. Not everything will fill at the same speed. I read some big refinery in Texas stopped, so there can be some chain reaction of tanks filling and pipeline rerouting, leading to local complete oversupply.
There are some future expiry and roll over games, but they happen every month and never ever in this magnitude.
Below 5. Meltdown.
Can the future get negative?
Spot prices can.
I think it is paper contracts that are being dumped by traders who have May contracts that expire tomorrow at 2:30 . Apparently the ratio of paper barrels to real barrels is close to 1000 to 1
I think it can.
2.43 now. It’s time to officially rename the crude from WTI to WTF.
Eulenspiegel,
The model is based on April 2020 STEO oil price forecast, which had oil prices going to $20/b at minimum, at lower oil prices (perhaps negative), I agree output might decrease even faster and low output tight oil wells might get shut in, and perhaps all tight oil wells that would not be damaged by doing so might be choked back or temporarily shut down at oil prices under $20/bo.
A scenario with no tight oil completions from April 2020 to Dec 2020 has output falling by about 3200 kb/d from Dec 2019 to Dec 2020 and by 3500 kb/d by March 2021 (no tight oil completions for 12 months) over a 15 month period. This does not account for the possibility of tight oil output being shut in, that might add another 1000+/-500 kb/d so perhaps 4500+/-500 kb/d decline in tight oil output over 15 months is about as steep a decline as I would expect, add perhaps another 1000 kb/d from stripper wells and we might see a 5500 kb/d decrease in US C+C output bringing us to about 7200 kb/d by March 2021. That is the most I would expect for a decline, probably 8000 kb/d would be a bit more reasonable.
It can but it wouldn’t. June delivery is rock solid despite the meltdown in near month ($4.5 btw). It might go down tomorrow to low 20s or even high teens but it’s not gonna go negative. The way the long dated WTI futures trade and the way brent is holding up is evidence for that.
This meltdown is obviously squaring of paper barrel positions that went long a few days to weeks back thinking they got the bottom. Since they have to take physical delivery if they hold till tomorrow, they are scurrying for the exit.
Oh its $3.25 now ??
Just one.
Stunning. Watching it live is something I can tell my grandkids.
unbelievable
Which website is this?
https://www.dailyfx.com/crude-oil
Thank you
https://www.bloomberg.com/quote/CL1:COM
At the moment WTI is -$13.98. This is totally crazy. You need to pay somebody $14 to take your barrel of oil!!
Oops now it’s suddenly -$37.20/barrel!!
Yeah make that -$37. Now traders who are holding long June paper barrels would be crapping their pants. ??
OilPrice.com keeps serving 504 Gateway Timeouts.
From – https://www.dailyfx.com/crude-oil 13:42 CST
https://en.wikipedia.org/wiki/There_Will_Be_Blood – The Sequel
Sure seems like somebody is teaching somebody else a lesson
Their software can’t handle negative prices I presume. $ Minus 25.00/b now according to Bloomberg.
https://www.cmegroup.com/apps/cmegroup/widgets/productLibs/esignal-charts.html?code=CL&title=MAY_2020_Crude_Oil_&type=p&venue=1&monthYear=K0&year=2020&exchangeCode=XNYM
Ok I’m willing to take a barrel of oil if someone gives me $23!
Where’s HHH and his charts now?
didn’t you hear? he called the bottom when it hit $17 last month. he’s long now.
@Dennis, have you ever developped a scenario with negative prices? 😉
My guess is that -$55 is below even Exxon’s full cycle Permian production costs?, even excluding tax and royalties. Will royalty holders have to chip in too?. Waiting for some shale Co to claim that they are profitable above -$100.
Verwimp,
No, I imagine output would be close to zero, perhaps negative. 🙂
Generally I would have assumed a negative oil price was not possible.
Looks like yet again my assumptions proved incorrect.
“Looks like yet again my assumptions proved incorrect.”
I know the feeling! 🙂
Verwimp,
I have learned that every assumption about future events is invariably wrong, but I imagine I am not alone in the assumption that a price for oil of less than zero would be rare (until a few days ago I would have put the probability at zero). Oh well, wrong again. 🙂
I know everyday just seems the same these days but what happened to April 18. Went negative I suppose.
No trading on weekends, April 18 was a Saturday.
At 14:28 ET the oil price was -40$. Can anyone explain this? Were oil producers ready ready to pay 40$ per barrel just to get rid of their product? Just one moment? It doesn’t make sense.
I understood it’s contracts nearing their end, so whoever holds it at the end, has to accept the fysical delivery of the product. But all above ground storage capacity in the usa is full. So, yeah, problem if you get a delivery…
understood it’s contracts nearing their end, so whoever holds it at the end, has to accept the fysical delivery of the product.
No, that is not the case. Any contract, long or short, can simply be settled in cash. In fact, the vast number of contracts are settled in cash. Actual physical delivery is very seldom ever made or taken.
However, your spelling may have made your statement at least partially correct. Yes, they must make “fysical” delivery, (dollars), but not “physical” delivery, meaning the actual product. 😉
Thanks Ron! I wasn’t playing word games however. I’m not a native speaker, just trying to do my best.
On topic: you mean the storage issue isn’t the real issue?
No, the storage issue is very real. It is real for producers and it is real for hedgers who wish to buy the physical product at fire-sale prices and sell it at the futures price. They must buy the physical product, store it, then sell it at the futures price at or near the expiration of the futures.
But for paper traders, they are not concerned with storage. Who do you think sells the puts that producers buy in order to guarantee them a fair price. If they bought a put that guarantees them the right to sell their barrels at $25 a barrel and oil is trading at $2 a barrel at expiration, they will take the cash price for the put, from the put selle, ($23), then sell their oil on the open market for $2 a barrel, giving them a $25 price for their oil.
The bottom line, producers and traders of the physical product are concerned with storage. Paper barrel traders are not in the least concerned with storage. Except, of course, in the case where the storage problem affects the actual price of oil. They monitor the storage problem but are never burdened with the problem themselves.
Hi all,
how does a negativ oil price effect the hedge positions of the E&P companies? I think they have swaps and collars getting due every month. And who is going to pay for that. Does anyone have an idea?
Best
Toby
a hedge is only as good as the counterparty. We are about to see how good a lot of people look naked.
Watcher has to be loving this.
Proof that the entire system is BS.
Shrug. Bernanke told everyone and no one could possibly listen, because it would disrupt their mindset of a lifetime.
Nothing I tell people here will affect how many die from oil scarcity. Except maybe one thing.
That land you’re getting your oil from, SS . . . plant some crops on it. Preferably peanuts.
I thought I would never see -$37 a barrel oil in my lifetime. 100 million barrels of oil with virtually nowhere to go.
steve
It’s not 100 million barrels, it’s the marginal cost of producing one(or a few) additional unit of a product today. BTW, the strategic national reserve has over 100 million barrels of empty volume capacity today. Just another reason why politics matter.
Dump the Trump
No worries finding a place for the 100 million barrels??? LOL… Another good laugh. Here’s IHSMarkits take on today’s oil price action:
Courtesy of IHSMarkit’s energy vice president Roger Diwan
How did you end up with negative oil prices today? This happens when a physical futures contract find no buyers close to or at expiry.
Let me explain what that means:
A physical contract such as the NYMEX WTI has a delivery point at Cushing, OK, & date, in this occurrence May. So people who hold the contract at the end of the trading window have to take physical delivery of the oil they bought on the futures market. This is very rare.
It means that in the last few days of the futures trading cycle, (which is tomorrow for this one) speculative or paper futures positions start rolling over to the next contract. This is normally a pretty undramatic affair.
What is happening today is trades or speculators who had bought the contract are finding themselves unable to resell it, and have no storage booked to get delivered the crude in Cushing, OK, where the delivery is specified in the contract.
This means that all the storage in Cushing is booked, and there is no price they can pay to store it, or they are totally inexperienced in this game and are caught holding a contract they did not understand the full physical aspect of as the time clock expires.
The contract roll and liquidity crunch that made the extreme sell-off today possible but it DOESN’T necessarily represent futures market conditions: NYMEX June settled today at $21.13.
The June contract is not out of the woods either: today’s action indicate that physical oil markets at Cushing are not in good shape and that storage is getting very full.
————————
Dump the Trump??? LOL… Trump’s a piece of garbage.
However, if folks believe BIDEN is going to MAKE EVERYTHING ALL BETTER after the U.S. and World just suffered a MAJOR HEART-ATTACK, think again.
I would rather spend my time planting a garden than worry about which flavor of ASSHOLE is going to be in the Whitehouse.
Presidents and Politicians won’t be able to solve the MASSIVE PROBLEMS coming.
But, HELL… it’s a free world. If people want to put their LIVES in politicians’ hands in providing food and etc, so be it.
steve
” if folks believe BIDEN is going to MAKE EVERYTHING ALL BETTER after the U.S. and World just suffered a MAJOR HEART-ATTACK, think again.”
Please don’t make false claims. No where did I make anything close to your comment and I don’t know anyone who supports Biden who believes such ignorance.
“No worries finding a place for the 100 million barrels???”
Again, another false claim. I made nothing close to your statement. I simple said it not 100 million barrels. A better way to explain todays pricing is musical chairs. Where the music is going to stop tomorrow and someone is going to get left standing without a place to store their oil. It’s not going to be a worlds day of production without space. Everyone else is going to find a chair and the game will get played again.
“The Strategic Petroleum Reserve (SPR) is a supply of petroleum held by the United States Department of Energy (DOE) for emergency fuel. It is the largest emergency supply in the world, and its underground tanks in Louisiana and Texas have capacity for 797 million barrels”
“As of March 6, 2020, the inventory was 635.0 million barrels”
https://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve_(United_States)
If the Trump Administration was proactive instead of being reactive, they could have been buying oil at record low prices for the benefit of Americans last month and supporting the oil production industry from todays record market collapse. The Administration should have been also proactive in January and February regrading the pandemic. Scaling up testing and tracing. Last, most oil is not traded on the spot market. It is traded by long term contracts.
You can put your head in your garden soil. But you will never become educated on a world of subjects and problems walling your self off. It’s also doesn’t seem to stop your hair from being on fire.
Buying for the Strategic Reserve was proposed over a month ago.
https://www.cnbc.com/2020/03/13/trump-asks-energy-department-to-purchase-oil-for-the-strategic-petroleum-reserve.html
thank you for posting that tweet thread from Diwan – it was what I was sending friends asking how oil could go negative. whoops!
Guess the gaz prizes have been negative in periods which means the producers payed to get rid off it. Same now happens with shale oil when all pipelines, tanks are filled up. Perhaps Exxon have enough storing capacity same with other majours and they will sell it when markets have improved, if not I guess Q1 will be red.
Here’s your chance to make a fortune:
1. Lease a VLCC supertanker, something that can hold a million barrels.
2. Buy a million barrel WTI contract for -$40/barrel.
3. Take delivery of the oil and the $40 million.
4. Pump the oil into the VLCC.
5. Anchor the VLCC outside a tropical island for 6 months or so. Hope no hurricanes or oil thieves come around.
6. Sell the oil for $40 million or whatever the spot price is in six months.
7. Pay off the VLCC, pipeline, and other costs. This shouldn’t be more than a few million.
8. Live the live of a multi-millionaire !!!
I looked at all the different places on the net I buy parts for my tractors and other stuff. Can’t find anybody who has a cheap VLCC for sale!
Sarc light ON.
How long before they start pumping it into the ocean?
Nah…they’ll go full on Catch-22: pump it up one hole, and then pump it back down another.
And if the two are connected, downhole, – whoopee – infinite oil! 🙂
As I wrote :
Florian says:
03/31/2020 AT 4:36 AM
HHH, I think you were too early. I will buy as soon as WTI dips below 15.
So here we have it – WTI is hitting the bottom. Now I can buy. Just a bit of patience required.
I broke even with stop loss at $19.87 re enter long at -$54.22 it was a 400% move in one day. Never seen anything like it in any market ever. I thought about going long at -$1.00 went and ate lunch came back and it was -$54.28 lol.
Did we anticipate this oil shock?
I guess if the oil was purchased on a contract and someone has to take it away, without any more storage locations available I guess they will need to pay someone to deal with the problem.
Psssst, you notice just how fast the media leapt to declare negative pricing derives from running out of storage?
No law of nature says either that happened or that matters. Besides which people were telling me recently NYMEX doesn’t decide the price of oil. But here we are.
Buy farmland. Get crops planted, just so you know how. Not much more time.
Oil has to flow or you all die. You likely will soon anyway, but oil has to flow or that happens now. If it can’t flow at a profit, then the industry will be nationalized in some fashion. Hell, the PPP largely moves towards that anyway. Especially with a FY2020 fiscal deficit about 35-40% of GDP.
The only real question is will the companies AND the landowners be nationalized or just the companies. Probably both. Just to avoid loose ends. Any court that might hear the ensuing lawsuit can just be defunded so it can’t.
If you have to have it, and you DO have to have it, then you will get it.
Yes, I don’t think US is out of storage or is even near a record high yet. I assume that is coming in the weeks ahead.
Is there any reason WTI can’t go negative $1,000 or more? Almost all producers are on a monthly average. Almost all have already sold oil in April. Say oil is negative $1,000 or more and June rolls the same.
So say at the end of the month the producer owes the crude purchaser for that oil sold prior to today’s fiasco. Say that is $1,000 a barrel. Plus owes the royalty share, and can’t collect from the royalty owners very easily, if at all.
Say CLR is unhedged and had to pay the crude purchasers for several million barrels at $1,000 per barrel.
So what happens there??
In the field here guys were driving around shutting down everything. A lot of F you, don’t care if we sell another barrel to you turds for a long time.
If it’s needed, and it IS needed, no one is going to be allowed to refuse to provide it. Not a hell of a lot different than having someone try to blockade oil imports. The US would never allow that, nor will it allow domestic blockade.
Those guys shutting things down . . . they’ll become civil servants if that’s what is required.
As for fulfilling contract obligations at -$1000/b, that means CLR would have to pay the purchaser as CLR provides the oil. So just default on the contract. Get sued. Time will pass and maybe it becomes $0/barrel.
At $0 small companies can provide the oil per contract and get paid $0, and the govt funds labor so there is no loss.
CLR too big for that, so they default and let the lawyers eat calendar in the subsequent lawsuit.
Which btw does not mean it all is better later. No reason it has to be.
Look, this is all gobbledygook about a substance created from nothing. Only one thing matters right now and that is will there be a cure. A cure that is a CURE. With efficacy numbers like antibiotics had vs bacterial disease in 1945 pre resistance. No BS 45% response crap.
You invent that or nothing is going back to normal.
shallow sand,
Seems doubtful WTI would got to -$1000/b, this weird pricing was simply a squeeze where people waited too long to sell their futures contract and were left holding the bag, most of the market had moved on tho the June contract and the May contract was very thinly traded.
Not clear which monthly price is used, do you sell oil for a price that is determined in the future? That seems strange and given the volatility it seems a new arrangement should be made, maybe sell at yesterday’s closing price for the front month futures contract or the most recent spot price reported by the EIA.
In any case, until some better system is devised, I agree most producers will be unwilling to take the risk of “selling” their oil at a potentially negative price.
Just to be clear, when you sell your oil at the “monthly average price”, that is a price that will not be known until the end of the month? Or is it sold at the previous month’s average price?
Seems a very strange system, basically you have no idea what price you will be getting for your oil, I guess it is no different for a corn farmer or a cattle rancher, but it would make planning a problem and seems kind of a gamble.
Tough business to be in.
June contract now dropping
Attached is a chart that compares the settled prices for the WTI futures contracts for Friday and Monday. Note how Monday’s June contract price of $20.43 is converging to the settled price on Friday of $18.27. On Friday, the June contract settled at $25.03. Today it was down by $4.60 to $20.43. This is what you call the Big Squeeze on those holding the May contract which expires tomorrow at 2:30.
A bit of reminder that the upheaval from disease is not only common throughout history, obfuscation of it and erasure of it from history is just as common.
The Founding Fathers are often thought of as the cream of the intellectual crop of the 13 colonies. Truth is, their intellectual reputation was not the primary selection criteria for sending them to Philadelphia. Rather, it was the fact that all were immune to smallpox, via inoculation or having survived it.
We’re going to need a cure for this virus, or we will never again see normal.
Watcher,
Either through a vaccine or herd immunity the effects of the virus can be significantly reduced. The Spanish flu H1N1 got eradicated through herd immunity, but depending on the region you live I believe, it is still included in the seasonal influenza vaccine. Not 100% sure of the reason, but probably due to antibodies not lasting for more than a few months (flu season). And or the mutated structure of the H1N1 from its original form season to season.
I don’t think we have enough data to determine how long antibodies or immunity lasts after contracting covid-19, yet.
Friend of mine of many years knows a great deal about Immunology as a professor of such at a Canadian university. I got a briefing. Antibodies do not reproduce. And they are not immortal.
There are Memory cells in the immune system and it is they that produce antibodies. As the antibodies age and die and disappear, the Memory cells produce new ones to replenish the supply. So the phrasing is frequently about how long the antibodies last to confer immunity, but this is not how it works. It is the generations of Memory cells that accumulate total and lose memory of the past antigen against which antibodies are generated. It is in those cells that duration of antigen response is determined.
And the last uncomfortable point is that the presence or absence of antibodies need not define degree of immunity. A recent study out of China found recovered patients to have very low levels of antibodies and in some none at all. Many other segments of the immune system are involved.
We need a cure. Not a 50% effective vaccine.
There is no cure for small pox, but the disease is just about dead.
The way to fight an epidemic is by testing and quarantining those who test positive. That is why countries where testing started early have a less severe problem.
That said, a cure would be nice. But the chances of finding one in the near future are slim. Viruses are hard to kill, because they aren’t really alive.
Watcher,
Thanks for the information regarding memory cells. Very interesting. So the memory cells producing say the measles antibody could be longer than the memory cells producing say the influenza antibody? Would that be right?
And the last uncomfortable point is that the presence or absence of antibodies need not define degree of immunity. A recent study out of China found recovered patients to have very low levels of antibodies and in some none at all. Many other segments of the immune system are involved.
You’re talking in regards to covid-19 I am assuming. So you’re saying there is a possibility of reinfection? Assuming the studies are correct.
US Crude Oil Collapses to Negative -$37 Per Barrel – Why and What Does it Mean?
Crude oil hit an unprecedented benchmark this past session. Through US trade, the ‘front month’ (also referred to as ‘active nearby’) US-standard grade crude futures contract posted its first negative print on record…and then went on to collapse for a settlement price of -$37.63 per barrel. Yes, that is negative 37 dollars per barrel. All things considered, this is an incredible development for one of the most important markets for the global markets and economy.
Watch Brent futures. A similar event like what took place in WTI yesterday is likely to happen.
W/O physical delivery? sounds implausible to me: https://www.reuters.com/article/us-global-oil-price-explainer/why-brent-oil-wont-follow-u-s-wti-futures-below-zero-idUSKCN2232AE
Thanks Jeff,
So for Brent settlement is not based on physical barrels, it is cash based, price can go down, but it is highly unlikely to become negative.
Perhaps HHH knows this and just means the Brent futures price will drop close to zero,
I doubt it will close below $15/b0, but I also doubted that WTI would ever close at negative 37 dollars per barrel.
Below is a crude pricing bulletin from plains all american for April 20, 2020 from
https://www.plainsallamerican.com/getattachment/94c5f688-a275-4537-97f9-c034c917c168/2020-075-April-20-2020.pdf?lang=en-us&ext=.pdf
I would not have believed this without seeing it.
After what occurred yesterday, and given the coming collapse of basis to WTI on 5/1/20 in the lower 48, it has become too risky for the time being to produce crude oil, period.
For some time, it has been common for producers to be paid on a monthly average of WTI, less a discount based on factors such as crude quality, geography, etc.
What we have determined, is that if the price is negative for a month, the producer pays the crude “purchaser”. Not just the producers NRI, but 100% of the oil hauled, with the producer required to try to collect $$ from the royalty owners, etc.
It is possible to go away from a monthly average. However, pricing oil on the day sold is now very risky too, given the collapse can occur quickly, and tanks priced and hauled at 7 am can be positive then, but go negative by the close, very negative in fact, as we have just witnessed.
In my view, every producer has no choice but to shut down at this time. Smaller producers have been doing that all over the US since March, and yesterday that happened frantically in some areas as posted prices for 4/20/20 ranged from the low negative $40s to the high negative $50s per barrel.
The talking heads on financial news didn’t focus on this story much. I assume the powers that be forbade them.
How much oil is produced and then sold to a refiner owned by the same company that produced the oil? That company would have no such risk.
Shallow sand,
On the money owed to the producer from the royalty owners, I imagine you could just put the money owed on your books and bill the royalty owner with no expectation of payment. In future months when things return to normal, you just deduct the money they owe you from the money you owe to them. It seems unlikely that the average price for the month will be negative. Is this based on spot price or futures price for WTI? Month to date the April average WTI spot price is $23.77/b0, what is your discount to WTI?
Dennis.
Many operators do not do the royalty accounting. In our part of the world that is performed by the crude purchaser, who cuts checks to to royalty owners.
I don’t want to state anything specific to us, but you can look at Plains All-American website now, and then look again on May 1. I am hearing you will see basis to WTI drop $5-20 per BO.
So WTI could average $15, but many well head prices could be negative.
Nobody can make money sub $20 anyway. Add that to the risk of a negative price that could easily go over $100, it is too risky to produce.
Better to lose a little every month shut in than a lot.
This is going to end up being bad for the states. We plan on hanging onto our wells, but there are many who will file Chapter 7. Chapter 7 means the wells become orphans.
North Dakota is having an emergency meeting called by the governor, which among other matters, will be to define selling oil at negative prices as waste. As land locked as the Bakken is, prices could be negative for a couple months or more. That would mean all wells shut in. I suspect other measures are going to be taken to try to avoid orphan wells in the state.
shallow sand,
plains crude oil bulletin, price is -$41.74/bo for WTI
https://www.plainsallamerican.com/getattachment/94c5f688-a275-4537-97f9-c034c917c168/2020-075-April-20-2020.pdf?lang=en-us&ext=.pdf
So these prices would be the WTI basis you refer to, which change daily? Or do you take the average of all these prices for the month?
Reread you comments more carefully, things are a bit clearer.
I would think selling based on daily price would be best, just avoid the couple of days before the current futures contract expires and you are unlikely to see the severe drop in prices.
Also one could sell at an agreed price at the time the crude is loaded on the truck, if it is possible to arrange that.
Dennis. Everything is being shut in today in our field and throughout our Basin.
All of it. Leases that have been in continuous production since prior to WWI. Leases we have continuously produced for over 40 years.
There is no strategy because once oil went negative there is nothing that can be done to plan around it. Demand is too low and unknown.
Many operators here by and large are like family farms. Multi generational, we all talk. We have talked this morning. We all agree, shut down.
You are being clouded by the media, who are acting like this is a novelty. It isn’t. It costs quite a bit to produce oil, can’t sell it for single digits through some strategy to avoid negative days and have it work out.
I know you are balanced and reasoned, but there isn’t a way out of this until the pandemic subsides or supply falls to near the level of demand.
shallow sand,
Oh I entirely agree shutting down is quite sensible, and none of my business. 🙂
I was thinking about how I would strategize going forward once oil prices rose to levels that were profitable if I were a producer.
I understand fully that nobody makes money at under $20/b in the US, you have given me enough information that makes this obvious, even to me.
I am just trying to learn how this works and the daily pricing just seems to make sense once oil prices get back to reasonable levels (maybe WTI at $45/bo?) in case there is some weird episode in the future where prices go negative (before yesterday I would have claimed this was impossible, or at least highly unlikely such as one in a million odds or less). This might not be possible, but you mentioned something about daily pricing, which seems safer now that we know negative oil prices (for WTI) are indeed a possibility. I could not believe that posted price from Plains All American, it did not occur to me that the posted prices are based on the settlement price from the previous day for the front month futures contract. Seems crazy, but it is the world we live in I guess.
Wait a minute. Has the front month contract for WTI had a settlement price of -$37/b in the past? I think that is new.
My understanding was that you had already shut down your production some time in the last few weeks, but I understand the negative prices would affect you if you sold any oil in April, I forget when you mentioned you were shutting things down.
Oh and I am sorry things have worked out this way for you and all oil producers in your area, hopefully oil prices will rise to a level that allows production to resume in your basin. (I think you have said in the past that $45-$55/bo works, though costs may have increased since that estimate was made by you and I may be remembering it wrong).
Dennis. We had shut in about 30%. It is going to 100% by Friday. There are some things that have to be done to accomplish complete shut in, but doesn’t take long.
The way pricing works with Plains as far as we know is as follows. Plains posts a price every day in the areas it buys oil and for the various grades of oil, based upon the NYMEX close. Anywhere from $3-20 below the NYMEX close based on the market area.
Those discounts to NYMEX WTI are increasing another $5-15 May 1. We are at the lower end of that, but we are still losing $6. So if NYMEX WTI averages $20 for a month, we are paid $10.
My point is the we learned that the price can go very negative and that we have to pay 100%, even though our NRI is 80-87.5%.
Dennis.
We used to sell based on the daily price. Keep in mind when we started selling oil in the 1970s, oil sold in the teens. It hit a high of $38 and a low of $8 between 1980-1986. From 1986-1999, the range was $8-25, with the price mostly $15-20. A 50 cent move was a big one.
However, as volatility increased after the invasion of Iraq, we went to a monthly average to try to smooth the volatility.
shallow sand.
I watched a video from Primary vision about futures prices for the June and July contracts, the experts there expect negative price again for June and July near expiration, so if you start producing again, daily pricing may be safer and just don’t sell any oil near the futures contract expiration so you don’t get caught with negative prices.
They are also predicting frack spreads go to 40 to 50, but from my perspective I would expect the frack spread count to go to zero with wellhead prices in the single digits, it would be crazy to be completing any wells at all until storage levels fall and demand and supply for crude become more balanced.
Despite the claims of some that demand and supply don’t matter. In fact, they do.
Dennis.
Sat in on a video conference for small conventional producers across the Midwest, but primarily located in the Mid-Continent region.
Not everyone has shut in everything completely but I got the sense that there will be little conventional oil produced in the month of May.
One of our crude oil purchasers, which is a regional company (but been in business for decades) doesn’t envision hauling any crude oil at all in the month of May.
I do not think it is unreasonable for you to assume lower 48 conventional oil production will be off by 50-75% in the month of May, maybe even more.
I just don’t know how any company that isn’t hedged could justify selling oil for under $10, and risk negative pricing.
There are some companies that are dragging frac tanks to tank battery sites and planning on filling those up so they can keep running but not market oil. I can’t see how they will be able to do that, too many regulatory hurdles.
The Oklahoma Corporation Commission entered a 90 day Emergency Order which purports to allow companies to completely shut in with no risk of leasehold issues. We don’t see how that stands up, given it interferes with contracts. However, we do think that would be good evidence to use regarding a force majeure defense. We think negative oil prices also would be good evidence.
Don’t think the NYMEX WTI price of $16.50 is helpful. For us that is $12.50 in April and $6.00 starting May 1.
Funny to see 29 rigs still active in the Bakken. ConocoPhillips says they will keep seven active rigs in the US shale fields, but will just be building DUCs, not drilling any wells.
I just hope the State regulatory agencies use some common sense. Many of the younger people in these agencies have little experience and are just biding their time until an EPA job opens. So we are worried there will be trouble.
Also, not to get too political but the AOC types aren’t helping Biden as they celebrate the oil industry’s pain. I don’t think too many people are enjoying life with the world using about 70 million BOPD of liquids per day. Imagine if in less than ten years that number went to zero, as she and her ilk naively desire.
SS,
I think very, very few people are celebrating the pain in the oil & gas industry. Even those who’d very much like to see the industry replaced by other energy sources.
The AOC thing is a good example of how the conservative media inflame their audience. AOC tweeted an insensitive comment, realized it was bad and deleted it, and then multiple conservative websites made a lot of noise about it. So…one politician made an insensitive comment which was only out there briefly, and the conservative websites kept it alive and amplified it, in order to tell their audience how bad and mean and terrible every one of those democrats are.
Do those media go out of their way to inflame their audience? Is it just the nature of news to report man bites dog? Are they just saying what they think their audience wants to hear in order to sell advertising?
Shallow sand,
As I imagine you are aware, OCS is on the fringe of the Democratic party. There are many nutcases on the right as well. Just think about the moron in chief, the man has never made an intelligent comment in his life.
People say stupid stuff, anyone expecting anything different will be disappointed. I think the Olklahoma law allows such regulation when production is deemed wasteful. Basically the state rules are law and supercede contacts. For a example a contract murder is also a contract, but as it violates law it is not enforceble by law.
NickG and Dennis.
I know AOC is far left. I know there are others like her and I am also very aware there are many far right nuts.
I don’t make apologies for either side. They are destroying our country.
The fact that the nut cases on both sides of the aisle can’t come together during a time of crisis is a sure sign we are in big trouble.
This is the biggest test in my lifetime for our country and world and the politicians who are still fomenting the hate and divisiveness are failing us big time.
We have a President advocating ingesting disinfectant. We have a US representative celebrating the demise of an industry that we are decades from being able to do without, unless one is willing to accept mass starvation and death.
Just because Trump says ridiculous stuff daily doesn’t excuse the AOC rhetoric and vice versa.
The way I see it millions of people’s means of making a living are being destroyed. Not just in the oil industry. My doctor friend’s practice is in jeopardy while he treats people with COVID 19.
Rather than yelling at people as being stupid, as they beg to resume their jobs, maybe have some understanding and thank your lucky stars that you aren’t in their shoes.
The doctors and scientists are the ones to listen to. But, we also have to realize they are under incredible pressure and they can’t predict exactly how this will play out.
I know I sure as heck can’t predict the final result of this tragedy.
When I put on another hat, I work closely with those who are dependent on illicit drugs. I have a group that I work with on almost a daily basis who are trying to become sober for life.
Going into this, our group was doing awesome. I had 100% compliance for many months in a row, the best I have done since we started the program in 2011. The strides they have made in their lives make a huge impact on me.
This week we hit exactly 1/2 who have relapsed. It is awful. Jobs lost led directly to this. We are trying to do the best we can via email, telephone and Zoom. It is gut wrenching. The dependency professionals I am working with say they think as many could die from overdoses related to this crisis as actually die from the virus.
Anytime someone suggests terminating an industry they have to remember the upheaval that the job losses cause. Does that mean there should be no change? Of course not.
But the AOC types are not only unrealistic, but very tone deaf. They are directly why people who live around me and mostly should be voting D, vote R. The AOC types would like us rural people to go back to living like we did in the 19rh century, not realizing if that happens they in the city will starve to death.
The food and fuel is taken for granted by so many. I hope after this nightmare they can still take them for granted, but maybe think a little more before they speak about radically transforming the industries without a good plan.
But I am very worried. The food and fuel industries are being disrupted like they never have in my lifetime.
As to the food, just look at what is happening in the meat packing industry.
As to the fuel, even debt free businesses that have survived every other price collapse are in jeopardy.
I have never felt such consistent pressure for such and extended time and I am afraid it is just beginning. And am luckier than most.
I am sorry to hear this. Can you please tell me whether these wells can be restarted say after 6 months? What would be the cost? Will the recovery per day reach the pre shutdown levels?
Thank you.
We think we will be ok if shut in 2-3 months. It’s not winter, which helps. No frozen pipes.
6 months or more, will be hard to say.
Thank you. So if the wells can be restarted in say 2 months, the recovery wont be affected?
Hope not. We shall see.
We have some low volume leases that have to be shut in when it is below 10 degrees F. They come back, and the winter of 2013-14 some were shut in almost 3 months.
Some leases we have were abandoned by other operators in the 1998 crash. They had been on the state’s orphan fund list, and we took them over. They have been good wells.
shallow sand,
Thank you for walking us through all this and I apologize for the inane questions.
Good luck, stay safe.
Update on posted oil prices from yesterday.
https://www.plainsallamerican.com/customer-center/crude-oil-bulletins
Price varies by location and grade, most of the sweet medium weight grades were $3/bo to $13/bo at 7 am yesterday.
Dennis.
These will continue as is through April 30. The reason is that there were contracts entered into between Plains and its refinery customers months or even years ago with regard to these basis spreads.
The contracts can be terminated and renegotiated by either party with 30 days written notice.
Written notice was given (I am told anyway – haven’t seen the notices) by the refiners in late March when things went haywire.
Let’s see how things look on May 1. I suspect many prices will fall significantly to NYMEX WTI.
shallow sands,
Are the Plains-all american prices pretty standard nationwide? I did not understand the spreads would change on May 1, you had mentioned it before, but my head was spinning from negative oil prices so I missed it.
Hope you get everything buttoned up by end of day.
Thanks and good luck.
Hi SS,
Out of wells that are shut in by bankrupt operators, about what percentage can be put back into production later, from the orphan stage, in your opinion?
I understand that you can probably come up with a fairly good estimate for your own neck of the woods, where you live and work, but that otherwise your answer will be only a rough guess most likely.
THANKS!
OFM.
In our field the wells all can be put back into production. We have done that ourselves.
One of our best wells was shut in from 1998 to 2012, when it was given to us. We spent a little money upgrading the equipment and it paid out in 9 months at $90 oil.
SS,
first I hope you and yours are well!
I sympathize but get ready, for it is going to get worse…
…we had a chance to discuss these things (price, etc) a while ago, years I believe.
Anyway, hang in there and let’s hope for the best.
Be well,
Petro
Hi Petro ,glad to see you back . In 2016 you had made a post . I am reposting it for the commentators . You were so correct .Stick around and take care . See below.
Summerized as
his Summerized as
his answer is in 2 parts:
-Macro-view, or overall “picture” and,
-Micro-view, or why crude or specific densities of it sell for -$?).
Macro-view:
1, going to get worse, much worse. please do not “quote” me on that
2, every/any other forum/site/media/book/paper/publication/presentation etc.,
etc., etc., they confuse and make you “foggy”.
3,Don’t seek solutions.There aren’t any
4,forget about supply/demand, market fundamentals.
5, Normal economic and fundamentals do NOT work anymore.
6, Everybody in the world is producing full capacity as prices go to $0.
7, Oil above $60-$70/brl kills the economy; Oil below $50-$60/brl kills your business.
8, Demand/supply and market fundamentals worked before, when we had plenty of sub $10/brl oil
up until 10-15 years ago but not anymore
9, Because we are left with “Bakken and 10-mile-under-sea-Horizon” type of oil. That
works only with high yield (aka: junk bonds) paper financing
10, That is why you see shale/tar and other production going exponential ONLY after 2008-2010 (hint: TARP1,
TARP2, QE1…QE99…) even though fracking is a 50-60 year old technology
11, Was never use and/or improved before because it did not make economic and financial sense
12, QE99…ZIRP… was used to finance Chesapeake, Occidental and a lot of others
13, Peak Oil will not come as the consequence of physical constraints (i.e no more oil in the ground.).
14, Peak Oil shall follow financial collapse (already in progress) in very short order.
15, (we) will never see $100-$150/brl oil under NORMAL market conditions because the problem is a
demand/affordability/debt collapse problem – NOT a oversupply/glut problem.
16, Over supply production is consequence of the “last man standing” to take out the higher cost oil
by producing at full capacity so the price per barrel goes >$0
Therefor prices will go lower
17, The prices will then spike as the result of financial-economic-political collapse, and/or war,
and/or natural-climate calamity, and/or all of the above.
18, we are now entering a deflationary wormhole (death spiral )remotely similar is Roman Empire
during 4-5 century AD.
and as Petro stated
…presented in short of detail and extremely simplistically
Still wtg on micro view I guess
Corrections anyone ?
Forbin
REPLY
Petro says:
01/17/2016 AT 2:26 PM
Thank you for enumerating my sentences and inserting spaces between them!
Very synthetic and concise of you…
Be well,
Petro
answer is in 2 parts:
-Macro-view, or overall “picture” and,
-Micro-view, or why crude or specific densities of it sell for -$?).
Macro-view:
1, going to get worse, much worse. please do not “quote” me on that
2, every/any other forum/site/media/book/paper/publication/presentation etc.,
etc., etc., they confuse and make you “foggy”.
3,Don’t seek solutions.There aren’t any
4,forget about supply/demand, market fundamentals.
5, Normal economic and fundamentals do NOT work anymore.
6, Everybody in the world is producing full capacity as prices go to $0.
7, Oil above $60-$70/brl kills the economy; Oil below $50-$60/brl kills your business.
8, Demand/supply and market fundamentals worked before, when we had plenty of sub $10/brl oil
up until 10-15 years ago but not anymore
9, Because we are left with “Bakken and 10-mile-under-sea-Horizon” type of oil. That
works only with high yield (aka: junk bonds) paper financing
10, That is why you see shale/tar and other production going exponential ONLY after 2008-2010 (hint: TARP1,
TARP2, QE1…QE99…) even though fracking is a 50-60 year old technology
11, Was never use and/or improved before because it did not make economic and financial sense
12, QE99…ZIRP… was used to finance Chesapeake, Occidental and a lot of others
13, Peak Oil will not come as the consequence of physical constraints (i.e no more oil in the ground.).
14, Peak Oil shall follow financial collapse (already in progress) in very short order.
15, (we) will never see $100-$150/brl oil under NORMAL market conditions because the problem is a
demand/affordability/debt collapse problem – NOT a oversupply/glut problem.
16, Over supply production is consequence of the “last man standing” to take out the higher cost oil
by producing at full capacity so the price per barrel goes >$0
Therefor prices will go lower
17, The prices will then spike as the result of financial-economic-political collapse, and/or war,
and/or natural-climate calamity, and/or all of the above.
18, we are now entering a deflationary wormhole (death spiral )remotely similar is Roman Empire
during 4-5 century AD.
and as Petro stated
…presented in short of detail and extremely simplistically
Still wtg on micro view I guess
Corrections anyone ?
Forbin
REPLY
Petro says:
01/17/2016 AT 2:26 PM
Thank you for enumerating my sentences and inserting spaces between them!
Very synthetic and concise of you…
Be well,
Petro
The UK went into full lockdown on the 21 March, many museums and theatres closed the week before that.
Every restaurant, pub, library, museum, etc has been closed for over 3 weeks. yet yesterday we had 4,676 known new cases. The actual figure is far higher as many are dying without being tested.
How are these people getting the virus if there is nowhere to go?
From data coming from care homes, it looks like asymptomatic young carers are infecting old sick people, who then become very ill.
A carer who visits old people in their homes my visit 15 to 20 people in a day. In order to protect their clients they should throw away their masks, gloves and aprons after every client visit.
There would never be enough PPE in the world to do that in every country.
So the most vulnerable will die anyway, and we destroy the global economy for no benefit.
Fact is the virus is everywhere and a vaccine in quantity is over a year away.
Best admit there is nothing we can do til then and face the fact that we all die at some point.
Are you saying all 4676 of those cases were elderly visited by a home nurse?
The issue is not to undo the government lockdown, at any level of government. Governments can declare everything’s wide open and people are still not going to get on airplanes or a crowded bus. No one is going to risk killing their parents, and no one is going to stay away from their parents the rest of their lives.
We’re going to have to have a cure.
My dad (93 years old) visited me on my birthday last weekend; he lives with my sister, who drove him. We went to a parking lot near my house in Toronto. He sat in the car, and I sat in a chair 6 feet away. We talked for an hour, and then my sister drove him home. He hadn’t been in the city proper for almost ten years (no ground floor bathroom at my house) and was fascinated by the new streetcars.
I have also been to a dedicated Covid testing center. It had the air of a science fiction movie on a student budget. The lobby had a guard at the door, taped off pathways to demarcate physical distancing, and 3 people in full PPE whose job was to direct me and to clean everything I came in contact with.
It is possible to not kill our parents.
This is all about priorities. Trump and his minions, and in fact all conservatives, are solely concerned with maintaining the existing social hierarchy: the class structure. If they win, we get air travel, giant SUV’s, and Disneyland. If the side in favour of testing and caution win, maybe we get fewer deaths. Maybe in the winter I see my dad in a building designed to allow interaction without danger.
Your dad’s life, or a vacation in Cabo? Make no mistake: this is a test.
Oops…sorry Dennis. I’ll try to keep this kind of comment on the other side.
Lloyd,
No problem, great comment.
That is fine if you see your parents once in a blue moon.
If like many many people including myself, help with things every week, you cannot take a test every week.
The carer company we contact sent around 2 people who had no masks or gloves.
There are 400 thousand nurses and doctors in the UK and another half a million professional carers. There are 6 million non professional carers in the UK. How often do you think we can test them?
A hundred thousand tests a day would take 70 days to get round them just once. In that 70 days god knows how many could get infected.
I sympathize.
A big chunk of the burden in my family has fallen to my sister, who is a social worker (and hence still at work). Extreme caution in all her interactions at work, and in cleanup after.
I know it is difficult, and I know that efforts at this point are the inadequate chasing the almost-ok. The aim should be that every week things get better: more tests, more PPE, and more people following the guidelines. And more research, with the hope that this will result in more knowledge, and with that knowledge, better guidance and best practices.
I am reminded of AIDs in the eighties: when I first read about it, there was speculation that it could be passed through kissing (and the answer is that no, it can’t be). We are at that point in our knowledge of Covid. People will get sick, and some will die. Mistakes will be made. The answer is not to give up, but to try for small victories.
It’s not that simple. It’s about maintaining an economy so everyone can eat. I am a food producer there is a global food crisis coming down the pipeline big time.
Your Dad’s life or enough food for the planet. (we could have do both but are to stupid).
Are you unable to produce food?
Last time I think I heard of farmers dumping food was in the Great Depression.
https://www.wired.com/story/why-farmers-dumping-milk-people-hungry/
So the most vulnerable will die anyway, and we destroy the global economy for no benefit.
This is the face of American economic thinking. The president is wants people to die so stock prices will go back up, and his acolytes agree.
One of the policies the Nazis instituted was killing handicapped people, on the theory it was good for the economy. The Republicans aren’t quite there yet, but are inching towards it.
Alimbiquated
Do you think any of this has easy answers? If so what are they.
The World Health Organization told every government not to stop flights. That is when we lost the chance to stop this virus in it’s tracks. When Trump stopped flights from Europe he was attacked. It looks to me, some people are so deranged with partizan hate that they cannot see the truth when it stares them in the face.
Now the WHO allowed the virus to infect every country the choices are stark.
The richest people will want full lockdown. It keeps them safe in their mansions with swimming pools and fully stocked larder.
They do not care how many people go hungry or end up with no job or home.
Those who want to end the lock down know that if they do not go back to work in a few weeks, they will be destitute.
Perhaps the democrats should think about that
There are no easy answers, but social distancing and testing is crucial. “Total lockdown” is a vague term. And spare me the bullshit about Republicans caring about poor people.
Trump stopping flights from Europe was dumb. Legalizing mercury poisoning is evil. Organizing crazy people to have armed demonstrations and banning immigration is creeping fascism.
Testing is important because everyone that tests positive needs to be in quarantine. That is the only way to stop an epidemic. The way you test millions of people is by treating the situation like an emergency instead of a way of sticking to your political enemies. You manufacture millions of tests and get tens or hundreds of thousands of people to administer them.
What has Trump done?
He has said “Testing is a local thing”, trying to avoid responsibility.
He has lied repeatedly about the extent of testing.
He falsely claims that current testing is sufficient.
He has stupidly pushed a snake oil cure, claiming he knows better even though he clearly doesn’t know the difference between a virus and a bacterium.
He has attacked the few institutions we have to deal with the issue, such as CDC and WHO, because they are convenient scapegoats.
He is preventing people from signing up for Obamacare, just because he hates Obama
The guys is causing tens of thousands of American deaths. He needs to be tried for treason and shot. There is no excuse for his behavior.
WHO is not a scapegoat, it is a disgusting lapdog for the Chinese government. It said banning international travel would be wrong. They allowed the virus to travel all over the world.
They are the ones that should be put on trial.
The countries least effected banned international travelers from China the earliest.
The WHO allowed this to happen.
One thing is for sure if Trump headed the WHO you would be calling for it to be abolished
Hmmm. So, your argument is that people who criticize Trump’s handling of Covid 19 are biased against him?
Well, you might want to show that you’re not biased. Energy is central to this blog, so that would be a good place to start. I think it’s fair to say that there is a consensus on this blog that the Trump administration’s energy policy is really terrible. Are you ready to agree?
One thing is for sure if Trump headed the WHO you would be calling for it to be abolished
No, because I can differentiate between institutions and people, instead of anthropomorphizing everything and dividing them into teams of “good guys” and “bad guys” before I start attempting to understand the world.
If Trump was head of WHO, I would be calling for him to resign, because he is obviously unfit for the job. In the same way, I think the Senate Republicans failed to do their duty by refusing to remove him from office after his impeachment. That does not mean I want to abolish the Senate or the presidency.
WHO is not a scapegoat, it is a disgusting lapdog for the Chinese government.
Yeah, that’s a great argument. All it really says is that in your world view, China and the WHO are on the bad guy team. Maybe the current administration should have done its duty and put an American representative in place instead of just attacking the institution.
Wayne- you could have done it that way (no attempt to slow it down), but you’d have to be ready beforehand with mass graves, martial law to protect the hospitals, and replacement appointees to quickly fill the shoes of all the government officials, univ professors, corporate leaders and such, since there would be something like 4-500,000K deaths in UK in this scenario, all within a month or so.
In the USA, 2-2,500,000 deaths. [#getitdonequick]
You want to make the decision? Will they call you wicked, or a hero?
Guys
Maybe pause a bit and review the data. Sweden has implemented hardly any measures and the numbers (despite being somewhat worse than others in Europe) are far from the horror scenarious described above.
daniel,
Perhaps Swedish citizens have heard of the internet and question whether their government officials know what they are doing, people can still choose to self isolate as much as possible. Also Sweden is not densely populated which is an advantage.
Compare Sweden’s cases and deaths to Norway and Finland.
Sweden population is about 10 million.
Norway and Finland each around 5-6 million.
Sweden likely has a lot more cases than reported based on the high death toll.
Sweden’s economic and health demographic should result in a low percentage of deaths per cases compared to most other countries.
SS I posted my goto site with data in Per 1 Million Population below.
The UK was going to go the Sweden route. What stopped them was a night-before report of permanent lung damage in the young. They were all ready to quarantine only the elderly and send everyone else to work. But permanent lung damage in the young stopped them.
As for the worship of herd immunity going on, way too soon. There are rather too many disquieting reports of recovered patients having no detectable antibodies within just a few days of release. So antibodies are not the definitive measure of immunity (hear that vaccine people? Vaccines are tested by measuring antibody titre post vaccination. Not valid for this virus)
Gotta have a cure. Not a vaccine. A 85-90% reliable cure, like antibiotics were for bacterial infection. Not a 45% response rate vaccine.
Daniel and others,
Sweden has implemented a lot of measures but most of them are guidelines on voluntary basis. Most people follow the recommendations. Lots of people work from home, roads are empty, most high schools and universities have switched to distance education etc.
The low population density is not the reason why this has not escalated. Stockholm has a population of about 2 million and it is almost as packed as any other western city. The latest estimate is that 500 000-600 000 have had the corona virus in Stockholm and “heard immunity” (60%) will be reached by late May or early June. Total number of covid deaths in Sweden is 1765 and most of these are in Stockholm, still the death rate is low. The rest of the country is behind on the curve and will probably follow a less steep curve due to all precaution. The economic consequences will be much more severe than the humanitarian.
This is good info, but don’t bet on herd immunity.
Sweden has nearly ten times the deaths of its neighbors.
https://www.businessinsider.com/how-sweden-and-norway-handled-coronavirus-differently-2020-4
Hickory
If the World Health Organization had done it’s job and said, all international travel should be banned for a month or there will be a world calamity. Then this would be over now.
Now we have a virus where half the people show no symptoms. So it will spread when people go to shops, when people care for other people.
There is no stopping this now. Slowing the death rate just makes people happy but the final number of deaths will be the same. The only difference will be how many ordinary people lose their jobs and how many firms are destroyed
Wayne,
Probably better for nations to be prepared rather than trying to shift blame. Each nation could have chosen to not allow any international flights to land in their nation, or allowed travel of any kind to their nation. It might have helped, we can only speculate as that ship has sailed.
Wayne,
The blame should be assigned squarely at the door of ECB, Bank of England and imbecile political class for 12 years of austerity that reduced Hospital infrastructure in many parts of Europe to the level of 3rd world countries.
A naturally occurring virus mutation knows no national boundaries. To blame WHO or China is as fatuous as blaming Texas for the Spanish Flu pandemic 1918-22.
Ves
If the WHO demanded the ban on international travel for a month in February the virus would have been stopped.
It is no fatuous to know that tracking a tracing of the tiny number returning home would have been relatively easy.
No amount of hospitals can stop the deaths. 80% of people on ventilators die, 80% receiving all possible care die.
stopping the virus could have been done, China did it by stopping people traveling. The fucking WHO let it fly all over the world into every single city
The initial outbreak was in October, 2019 in Wuhan. The virus could have easily been here in November and December. There have been reported deaths in California from COVID-19 on February 6th and 17th, which means that the infections **started** in early January. So stopping flights in February would have been closing the barn door after the horses have fled.
According to reports, our intelligence people were warning the US Government in the November and December time frame that this virus was coming our way.
The WHO has no way to stop you or I from flying. They can make recommendations but it is up to the various governments to enact those recommendations.
In the US, you apply for a Passport through the State Department not the WHO.
I suggest you do your homework.
“If the World Health Organization had done it’s job and said, all international travel should be banned for a month or there will be a world calamity. Then this would be over now.“
Wayne,
Banning travel by air and by ship, right ? And that should have started on which date exactly ?
“Slowing the death rate just makes people happy but the final number of deaths will be the same.”
Obligation to wear face masks in public spaces will diminish the final number of deaths. Look what happens in Austria (covid19info.live). Few people test positive, but a lot more people get infected, however stay asymptomatic or with almost no symptoms. A simple face mask don’t obstruct all the virus particles, but prevents that most of the virus particles reach the lungs. Apart from this, this measure buys time for until a vaccin is available.
The window to have made the decision to fight it, or just let it go on a wild run, was in late Jan or early Feb. China was seen to be building a very large hospital in just a few days at the end of Jan. You would have a week or two, with the data at hand, to have made the decision to attempt to slow it down or not. Most countries waited a month to make a full decision, and even then took intermediate measures without deep conviction.
Muddle.
This kind of decision has to be made before you have good data. The best indication at the time was a mortality of close to 3%. Gradually we are finding the mortality will be much lower. You didn’t have that info when the choices had to made. Thats how it works it the midst of a volatile situation (pandemic, war, or love).
You need to pull a shift as an orderly in a hospital.
At the risk of sounding cavalier, I am now thinking that either I am crazy or the world is crazy for ignoring what appears to be a cheap, simple, safe, readily available(?) treatment for COVID-19 (and other similar infections).
I have posted about this on the non-petroleum thread but, for the benefit of those who don’t venture over there let me try and be brief. There is a Chinese/American doctor by the name of Richard Cheng who got stuck in China after going to visit his parents for the Chinese New Year holidays. He got involved with associates and assisted in the setting up of three clinical trials, testing the efficacy of high dose vitamin C. Preliminary results were positive and Cheng has been trying to spread the word. He has been posting videos on Youtube but several of them have been removed for “”Violating Youtube community guidelines”. As a result he has copied them to uncensored alternative video hosting site at the following link https://www.brighteon.com/channels/rzcheng .
This guy is going out on a limb and risking his professional reputation to promote high dose vitamin C (along with other compounds) as a treatment for critically ill COVID-19 patients, increased oral in take for mild cases and increased oral intake as a preventative measure. What’s in it for him? While he might become world famous, he sure as hell can’t get a patent on vitamin C or his protocol, as far as I am aware. He is not alone. Several other doctors that practice integrative medicine or nutritional medicine are also making the case for interventions that feature high doses of vitamin C and vitamin D among other things.
How could this be? Why would it work? How would it work? one might ask. The rational is that in the process of fighting the infection, the body rapidly uses up vitamin C, leaving it in a state similar to people suffering from scurvy. As far as I am aware, the levels of vitamin C in the blood plasma of critically ill COVID-19 patients is not being measured. Why would they bother if the medical establishment at large does not think this is an issue? However there is an area where this has been studied. Dr. Paul Marik of the Eastern Virginia Medical School developed a treatment for sepsis in 2017 that involved high dose vitamin C, Hydrocortisone and Thiamin. He found it remarkably successful and so did his nurses, see: ICU nurses discuss vitamin C therapy for sepsis. One of Marik’s observations is that these patients all had vitamin C levels that were critically low and prompted him to write the following paper:
Doctor—your septic patients have scurvy!
I encourage everyone to read the linked Marik paper and would like to suggest that “other critical illnesses” in the quote above, includes COVID-19. I do not know for certain why an effort is being made to prevent the spread of the idea that vitamin C can help prevent critical illness when infected with COVID-19. Does anyone have any ideas why anyone would not want this to be true and if it were true why they would not want it to become widely known? 😉
There’s a folklore saying tha to the effect that it’s a hundred times easier to fool people than it is to get them to admit they were wrong later. Some of the old women around here put it this way:
” He would rather eat shit with a splinter than admit he’s wrong about……. “
So, I just found an article that makes me feel like I’m in some really good company as far as my stance on vitamin C is concerned. No less than Amory Lovins!
Don’t Just Avoid the Virus — Defeat It by Strengthening Your Immunity
Exactly why nutritional and immune enhancing therapies are not being applied by the majority remains a mystery to me. My brother is a travel ER nurse and yesterday started showing covid like symptoms. By this afternoon my Paramedic brother had flown out loaded with supplies to get additional treatment underway. Here are my notes of my personal protocols as I have developed them at this point.
Nutritional therapies for Covid-19
1 A. take 1/4 teaspoon Vit C every 4 hours or smaller dose up to every ½ hour is best. If bowel tolerance is exceeded reduce the dose or increase the rate.
B. Liposomal Vit C from 1 to 6 grams per hour. That is 6 pills per hour.
2 A. Diffuse – Nanoparticle Silver Zinc and Copper like 4 times a day,
B. at least ½ hour apart diffuse with 3 cc of saline .5% Hydrogen peroxide and 3 drops of 2% iodine.
3 once per day- Chelated Zinc tablets- up to x8 Quercitin or purple defence x2 Vit E x2 , Vit Bs x2 Jigsaw magnesium 4 tablets lugols iodine tablet x1 to x2 selenium x1 to x2
Meso copper 1 to 2 tbls Meso silver 1 to 2 tbls Meso zinc 1 to 2 tbls
4 Take charcoal and binders with plenty of water on empty stomach to mop up bile toxins in the intestines before they re-enter the blood stream in the colon.
5 Dr Zelenzky says 200 mg Hydroxychloroquine for 5 days 400 mg if case is severe.
220 mg Zinc sulfate and Azithromiacin in advanced situations for secondary bacterial infections.
6 No Ibuprophen or Tylenol etc. Fever up to 106 is fine and these higher temps help the immune system function better so help your body stay warm.
7 Dr Mercola and Dr Brownstein are big fans of ozone therapy for many diseases including covid-19 . You can ozone treat your blood , intramuscular injection , rectal insufflation, drink ozone rich water.
We all consistently eat a highly carnivorous diet of grassfed beef and lamb and organic pasture raised pork goose turkey chicken and eggs along with some veggies and fruits and cut back hard on processed grains sugar oils and other frankenfoods.
So we are about as prepared as we can expect to be and ready to face the dragon.
I’m a farmer so why should I feel so confident? See I have quite a number of animals whose healthcare I am responsible for and calling the vet in most cases costs more than the animal is worth. And I have such good success by simply seeing to that their nutritional needs are being met that no vet has been on the farm for many years. Last time was the State vet who came to check out my poultry to see whether the latest avian flu was killing my birds like the ones 5 miles east of here. So I loose some at times which gives me an opportunity to reflect on what went wrong and what I might try to not have that happen in the future. It also helps me come to terms with my own eventual death.
On the other hand; conventional healthcare is refusing to take care of covid patients until they are clearly loosing the battle. And as a wise man once said “An ounce of prevention is worth a pound of cure.” Anything you can do to support your immune system to get on top of the situation as the virus is replicating exponentially will also pay off exponentially.
farmlad,
Are you family of Donald Trump ?
I promised myself I would stop commenting on the oil side but your comment is so hopelessly lost I’ll do it one more time. Trump is obviously as lost on health and nutrition as you are on discernment. He only cares about money power and raising controversy and little to nothing about the well being of the american people. Waiting to give hydroxychloroquine to patients once they are experiencing shortness of breath is far to late and totally missing the point.
‘So the most vulnerable will die anyway, and we destroy the global economy for no benefit.’
Yes. this was the original plan for Boris’ cull.
But there are flaws in this thinking. (Discounting the ethics for now.)
1/ The virus is severely impacting a small percentage of younger healthy people. Boris included.
2/ The global economy was already at risk of crashing before this virus. The containment measures taken against the virus may actually help cushion the social dislocation that will occur when the economy disintegrates.
‘Fact is the virus is everywhere and a vaccine in quantity is over a year away.’
Yes for the vaccine, but no the virus isn’t everywhere.
I live on Jeju island. There has been no community transmission of the virus here.
The island relies on tourism. The air route from Seoul to Jeju is the busiest in the world.
For the last few months travel has been substantially down. There has never been a lockdown.
A dozen travelers infected with the virus have been tested and quarantined in the last 3 months.
But starting this weekend extra planes have been added and they are fully booked.
Given that community transmission of the virus on mainland Korea is now tending to zero, it is quite likely that this influx will not cause any problem.
Some countries are doing better than others in weathering this storm, and I believe that will continue to be the case as the global economy dips.
Korea has done a very good job with testing and tracing, far ahead of what has been done in some nations in Europe and the United States.
Dennis,
I have heard that Korea was hit hard by a previous recent virus (H1N1, SARS or one of those) and that is at least partially why they were more prepared than most of the world.
Quiet one,
Yes many asian nations were hit hard by SARS and were better prepared for a pandemic as I understand it.
My point was simply that the West could learn something from these nations about proper preparation, though it was implied rather than stated clearly.
https://www.worldometers.info/coronavirus/ a site with per 1 Million population columns.
US testing leads the world in total. Fewer per 1M than Germany, MORE per 1M pop than S Korea. More than Netherlands. More than UK. Testing doesn’t look very important to deaths. US deaths per 1M is 136. Spain and Italy test more and have more deaths. France tests less and has more deaths (all per 1M).
Deaths per 1M pop vary wildly, with no apparent difference in response type or magnitude in countries. Though Sweden vs Norway and Denmark has a much higher death count, and rate. 11%. dood above explains why Sweden is not much worse.
tests per capita- USA is way down the list, lower than Russia
deaths per capita- Sweden 175, Norway 34, Finland 25
Sweden has a much worse death rate than adjacent countries
[per capita=cases per mill]
One country with by far the worst case chart in the world=USA
https://www.ft.com/coronavirus-latest
And Switzerland who implemented some of the strictest measurens in Europe have a death rate of 171. The correlation between shut down measures and deaths is not quite that straight forward. For instance Norway has very relaxed measures compared to austria, however the numbers are comparable.
For clarity death rates for heart deaseses, malaria, flu, etc. Should be quoted when shouting the covid19 numbers. Don’t get me wrong, this is bad. But how much suffering are we creating by destroying the economy?
Heart disease was the #1 cause of death in the US with a rate of 1988 deaths per million in 2017. If we assume the heart disease deaths are relatively uniform throughout the year this would be an average of 5.44 deaths per million each day, for New York State with a population of 19.6 million, if we assume their rate matches the US average it would be 107 deaths per day from heart disease on average. For the roughly 50 days so far for the outbreak in New York state the average daily death rate has been about 394 deaths per day with recent rates at about 700 deaths per day, roughly 7 times the previous leading cause of death.
https://www.cdc.gov/nchs/fastats/heart-disease.htm
Note also the deaths from covid19 have occurred over a 2 month period (first US death on Feb 29), for the US it is 137 per million and still increasing at about 2000 deaths per day. The equivalent rate for heart disease over a two month period would be 166 per million, so for the US as a whole mortality rate might not reach the level of heart disease.
Hi Dennis, what are the chances you could do a model on US virus deaths and project forward ? I’m thinking 200k by election day.
HuntingtonBeach,
My knowledge is pretty slim in this area. I could do a projection using a very simplistic Hubbert model, but more sophisticated models can be found at link below.
https://covid19.healthdata.org/united-states-of-america
That projection is 66,000 with a 95% confidence interval of 45k to 124k.
No doubt there are other models.
A simple logistical model points to total deaths of approximately 58k, typically for Oil URR this Hubbert Linearization method tends to underestimate, in this case a logistic may be appropriate and might give a fairly good estimate. I imagine their are more sophisticated models and social distancing may make the logistic a poor model.
Data from
https://www.worldometers.info/coronavirus/country/us/
Thank you for the link Dennis. I’m going to stick with my 200k by election day.
Huntington Beach,
My expectation, if we do not try to reopen the economy too quickly, is 80 000 +/-10k.
That is a big if, if people decide they should not listen to the experts in science and listen to economists and some business leaders instead, then your 200k estimate may prove correct.
My guesses about the future are usually incorrect, perhaps yours will be more accurate.
Dennis,
We are at over 48,000 today in less than 2 months plus adding over 2k per day and increasing. Still over 190 days until the election. I hope your right, but I think it’s wishful thinking.
Stay Safe, I’m afraid my guess is to low unless there is a therapeutic.
Huntington beach,
I tend to go with experts especially when I lack an epidemiology background. The logistic does support the lower number, but I am no expert.
Comparing death rate is also difficult as countries don’t necessary report the same way. Belgium where I live report deaths tested positive and death likely from COVID-19 in Care Homes (but not tested). More than 50% of deaths are from not tested in Care homes.
Another way to look at it is through the excess mortality rate. Data are not yet available but it is likely that last week in Belgium, excess mortality was 100% or more (data available in next 24h), meaning more than twice the expected number of deaths compared to usual, or 50% deaths all causes from COVID-19 (or related).
This could come from COVID-19 or consequences, such as cancer patients or other pathologies not treated because low priority compared to COVID-19.
Excess mortality rate in New York was apparently ~300% during last weeks.
https://www.nytimes.com/interactive/2020/04/21/world/coronavirus-missing-deaths.html
‘US testing leads the world in total. Fewer per 1M than Germany, MORE per 1M pop than S Korea.’
For an understanding of the number of tests required I suggest you watch this video
https://www.youtube.com/watch?v=wbdOJsXxGGU
The important statistic is that the rate of positive tests in South Korea is less than 3%, whereas in the US it is 25%. When you only have ten cases then a 97% rate of negatives gives you a very good confidence that you are not missing some.
‘I have heard that Korea was hit hard by a previous recent virus’
Yes. The South Korean government was completely inept in 2015 during a similar pandemic caused by the MERS virus. Their behavior then was similar to the European and American governments now.
The president at the time was inept. The failures at the top ultimately led to an impeachment.
See – https://www.scmp.com/news/asia/east-asia/article/1821113/park-geun-hye-under-fire-over-handling-mers-crisis
jeju-islander,
Thank you for the correction, I mistakenly guessed it was SARS that had hit Korea (maybe that was only in China) rather than MERS (outbreak in 2015).
Nice to have a local who knows what’s what.
Tracking the True Toll of the Coronavirus (some very compelling total mortality charts):
https://www.nytimes.com/interactive/2020/04/21/world/coronavirus-missing-deaths.html?smid=tw-nytimes&smtyp=cur
thanks anonymous, a good piece on covid 19 mortality estimates by tracking excess deaths above the typical average for this time of year.
Bottom line, most countries focus on hospital deaths, the real number is likely 30% higher at least.
Saudi Arabia’s decision to trigger an oil price war has backfired badly
This week, the dire situation reached the point where the cost of storing American oil was higher than the price of oil itself. That’s when prices turned deeply negative. (On Tuesday, West Texas Intermediate rebounded to US$6 a barrel – a price that would still destroy the shale industry within months.)
MBS seems to have lost more than he has gained. Yes, the U.S. shale industry – the business that had the audacity to challenge Saudi Arabia’s dominance of the market – is in deep trouble. U.S. oil-company bankruptcies have started and will continue.
But the Saudi economy is also taking punishing blows. The prospect of oil going back to US$70, even US$50, this year appears slim, as big economies make only tentative steps to dismantle their quarantines.
Negative Oil Prices: How it Happened and Resulting Implications
http://blog.gorozen.com/blog/negative-oil-prices-how-it-happened-and-resulting-implications
Canadian oil sands economics are looking pretty bleak:
https://www.oilsandsmagazine.com/news/2020/4/21/cash-flows-turn-negative-at-fort-hills-on-rising-operating-costs-and-falling-bitumen-prices
Off topic – but this thread has gone everywhere –
Looks like American Political Activist Michael Moore is getting a little closer to Truth:
What if wind farms, solar panels and other green energy projects are not enough to save the planet and humanity simply cannot sustain life as we know it?
“Planet of the Humans,” executive produced by Oscar-winning filmmaker Michael Moore and written and directed by Jeff Gibbs, asks hard questions about what it sees as the failure of well-meaning efforts to halt climate change.
“It seems like we have been losing the battle,” Moore told Reuters. “We are in deep, deep trouble.”
“Planet of the Humans,” which will be released on YouTube youtu.be/Zk11vI-7czE on Tuesday free of charge to the public, argues that the mainstream environmental movement has sold out to corporate interests and that solar and wind energy components and electric cars rely too heavily on deforestation and electricity generated from coal and natural gas to produce them.
“What we have been calling green, renewable energy and industrial civilization are one and the same thing – desperate measures not to save the planet but to save our way of life,” Gibbs says in the film.
A better approach, Gibbs suggests, would be people having fewer children. “Infinite growth on a finite planet is suicide,” he says.
….
“The fact that within days animals are coming back and the skies are blue tells us that we don’t have to build a million square miles of solar panels or buy a zillion electric cars. If we just slow down and stop we can make a tremendous difference instantly,” said Gibbs.
“I think this is a good chance, this 50th (Earth Day)anniversary, to think through who we are, what we’ve become as an environmental movement, and where we should be going next,” he said.
https://www.reuters.com/article/us-earth-day-documentary/michael-moores-planet-of-the-humans-asks-what-if-green-energy-cannot-save-the-planet-idUSKCN2231U8
Perhaps the Population Bomb is finally going to be addressed.
Disclosure – 57 Y.O. male – no children – BY CHOICE. Adult working and taxpaying – Renter in an Urban Zone.
Tim,
You’re proof that the population bomb is being addressed. You, and all of the rest of the people who have chosen to have 2 or fewer children. The US, and most of the world is below the replacement rate for fertility. We’re not yet at ZPG because of the overhang caused by the Demographic Transition, but the world is choosing to not have infinite growth.
I saw Planet of the Humans last night.
Reality, not for our techno utopians
I thought reality was supposed to be for everyone.
That is a illusion
(sarc)
The green technophile sheeple will resist all information outside their religion of wind-solar-batteries. Great film, but it just opens a can of worms in a system that can’t even deal with false dichotomy.
Hickory, and others
Why Austria has the best results of all W-European countries ?
Because starting end of March face masks are obligatory in f.e. supermarkets.
How could China control the local epidemic within 2-3 months ?
Because everyone is wearing face masks almost everywhere.
Why Sweden does it so bad ?
Because until recently no measures at all were taken.
Follow the data, the numbers, also on covid19info.live
I was wondering: can governments be sued because of negligence, carelessness, failure to act ?
“I was wondering: can governments be sued because of negligence, carelessness, failure to act ?”
No, but imagine if you could. You’d get a big payment, and then pay huge taxes to fund the payouts. The only winner would be the lawyers.
Hickory,
A Dutch government agency (RIVM) states that simple face masks probably don’t have additional value.
In Austria there is an obligation to use them in f.e. supermarkets since end of March. From the beginning of April the new cases started to go down considerably. Not only is the number of daily registered cases in Holland now about a factor ten higher, also the number of deaths is a factor of ten higher. If Dutch government knows this, but does nothing, then the Dutch State can be accused of manslaughter.
A lot of people wouldn’t have lost their loved ones, if face masks would have been mandatory. A lot of people will not lose family members and friends in the future if wearing face masks will become mandatory from now on.
The same situation in most States of the U.S.
The US Centers for Disease Control and Prevention, for example, changed its guidance on 6th April (https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/prevention.html) and now says the following:
“Cover your mouth and nose with a cloth face cover when around others
You could spread COVID-19 to others even if you do not feel sick.
Everyone should wear a cloth face cover when they have to go out in public, for example to the grocery store or to pick up other necessities.
Cloth face coverings should not be placed on young children under age 2, anyone who has trouble breathing, or is unconscious, incapacitated or otherwise unable to remove the mask without assistance.
The cloth face cover is meant to protect other people in case you are infected.
Do NOT use a facemask meant for a healthcare worker.
Continue to keep about 6 feet between yourself and others. The cloth face cover is not a substitute for social distancing.”
And the WHO says:
“Face masks worn by asymptomatic people are conditionally recommended in severe epidemics or pandemics, to reduce transmission in the community”
And every country should wonder why China brought their epidemic under control within a few months
Yes, the pseudo green sheeple don’t like to know they have been hoodwinked and are following billionaire pied pipers.
Here’s one thing that the right winger people, including most economists, apparently, don’t understand.
MOST of the work we do these days is simply NOT essential, other than that it provides an income for the people doing it.
An income obviously IS essential, unless a person is wealthy.
But no matter WHAT it costs to provide NON ESSENTIAL workers with an income for the duration, that cost will be trivial, compared to the cost of allowing the virus to run wild, which will inevitably result in snowballing problems WAY beyond overloaded hospitals and a couple of million dead people dead from the virus. Another few million will die because they can’t get the medical care they need due to lack of hospital space and lack of enough health care professionals.
Such problems can range from local crime waves to the essential industries such as the electrical grid shutting down not by mandate but because there’s nobody left capable of running them , all the way up to WWIII if the cards fall wrong.
There’s a pretty good chance we could have avoided WWI except for a four or five idiots armed only with pistols. The tensions were already there, but cooler heads might well have prevailed had what’s his name not been assassinated.
On the other hand, if somebody with a pistol had assassinated Hitler before he started WWII, we may have avoided that war as well.
I’m not saying we can avoid wars altogether, but with luck and good leadership and cool heads running the show, we can avoid them more often than not, maybe for a generation or two at a time, or even longer.
I have no way of knowing for sure, but it’s my personal opinion that we would be at much greater risk of a very bad long term out come opening up the economy again too soon, as opposed to staying mostly shut down for a while yet.
For what it’s worth, I’ve read a LOT of history, and my professional background includes some training in infectious diseases, the control thereof, and the management of an essential industry…. food production and distribution.
We’re fairly well off at the actual farm level, because we’re few and far between and well isolated in mostly rural communities, and we work alone or in small teams and not even then necessarily in close personal proximity…… with the exception of the people who hand harvest fruits and vegetables. They’re at high risk.
And we’re probably ok in terms of getting the input materials we have to have, from fertilizer to fuel to insecticides to shipping containers, seed and feed, etc. But there may well be some serious problems if the virus gets loose on the grand scale disrupting the middle men industries such as meat packing or retailing.
I couldn’t agree more ; An income is essential. That’s where the federal Government needs to step in and issue a $1000 check every month to every american citizen for the duration of this pandemic instead of bailing out poorly run big businesses. And who cares if the rich get this, uncle Sam can get it all back at the end of the year if he wants to.
This would allow everyone to at least eat and stay warm since paying rent is no longer required. Otherwise we can only expect massive and explosive uprisings riots and looting within a month or two.
farmlad,
I agree, except similar income restrictions to the initial checks sent out should be applied, no need for high income individuals (above say 300k annual income) to get these checks, they should have savings they can tap.
If everyone below a certain income level was given a basic income for the duration of the emergency then companies would be propped up since those people would be, out of need, spending that money in – guess what – companies.
Maybe not pay out to those who are getting their normal income and help companies that have had income cut off completely but can demonstrate a reliable business.. No bail outs to those companies that have or should have cash in hand.
Business was changing before the pandemic and these times should be used to precipitate that change and move to new models. Malls were dying due to online sales, this will speed that and they should be allowed to go, turn off their financial ventilators. Cinema complexes are anchors in many malls, they will be hit, badly, by a move to Netflix. People will discover that big screen TVs plus Netflix provide a better environment than smelly cinemas with over expensive refreshments, inconsiderate patrons and films on their schedule rather than yours. Another anchor falls, so does the mall.
BAU needs to end and the people need to be propped up while the new business model takes root. Change is overdue. No point in prolonging old jobs, new ones will arise.
NAOM
Don’t take this to the bank, but I’ve read that cinemas depend almost entirely on refreshment revenues to stay in business, because the companies that own the movies have methods of collecting the entire ticket price for almost every ticket sold to a popular new movie.
I quit going to movies many years ago, except once in a long while when somebody especially recommends a particular one to me, because nearly all of them are junk, and nearly all the people who write reviews seem to be paid for prostitutes.
1st para
Exactly what I have read, why I expect a collapse as people find home viewing more amenable.
NAOM
We have many programs in place to help those that are less fortunate. And that is fine. But that creates an incentive to either move into those brackets and there is always the uncertainty that you will not meet all the requirements.
What I am advocating is a Universal Basic Income for every american of $1000 per month to get us through this crisis period. A UBI supports stay at home parents, caregivers, self employed gig workers, and everybody else. Most importantly it does not disincentivise working for the rest of your income like many other welfare programs that only allow income from black markets.
Anything other than Universal creates unnecessary complexities that guarantee high levels of unintended consequences. The government is always able to tax the rich if they want too.
That could work. I would prefer it not apply to the rich. Pretty easy to tell from tax returns who is wealthy and who is not. Everyone else can get the check, or just give it to everyone. It will make little difference to the wealthy either way.
Farmlad:
“What I am advocating is a Universal Basic Income for every american of $1000 per month to get us through this crisis period. A UBI supports stay at home parents, caregivers, self employed gig workers, and everybody else”
1. Good like trying to remove it. Once People start collecting they will be very reluctant to give it up, especially if UBI provides more income than they got while working. It would be as bad as giving them all crack cocaine & heroin.
2. UBI will create shortages & cause price inflation as companies struggle to find workers willing to do jobs.
3. US is dead broke. The Federal Debt already tops $24T and probably will increase by another $3T this year alone (without UBI). The only think now propping up the US gov’t is the value of the dollar and that like to erode fast from all of the additional spending and QE (Fed Reserve is printing about $1T USD per week).
TechGuy Tell me this. Would you would stop working if you were getting a $1000 per month no matter if you worked or not? I didn’t think so and neither would I or most other Americans. You need to think for yourself instead of listening to the parasitic class of Americans.
The small percentage of people that stop working where UBI has been tested included Moms with small children and folks who further their education instead of getting a job and prostitutes. I hope you and everyone reading this takes a moment to ponder the liberty that a UBI can give where almost all other welfare programs have failed.
Not saying that we need to do away with the other welfare programs but I think their would be plenty of people that would be happy to exchange many of their current welfare programs for a simple and guaranteed UBI of $1000 per month. This way they would be free to go looking for paid work.
In contrast we now have workers who have been laid off and like their unemployment plus $600 and don’t want to go back to work. How crazy is that?
Also most of our welfare programs require that people are not getting a decent income including from minimum wage jobs. With a UBI people are not forced to choose between a low paying job or welfare.
You don’t ever need to take it away. Just get back whatever percentage that the government wants in the form of a VAT on Luxury goods and inflation is dialed up or down with ease.
This would put some pressure on corporations to improve working conditions because people could actually afford to quit their job and go looking for a better one without risking loosing everything they have. This is a win win for the people and a win for employers that offer lower pay but very meaningful jobs such as small organic farms.
“TechGuy Tell me this. Would you would stop working if you were getting a $1000 per month no matter if you worked or not?”
The current UBI Bill is $2K/mo ($24K per year) which is close or more than a lot of people make. Already People are getting angry at there bosses that reopen because they are losing there unemployment benefits and losing money:
“Biz Owner Shocked At Angry Response When She Tells Staff Their Paychecks Will Resume”
https://www.zerohedge.com/personal-finance/they-demand-unemployment-biz-owner-shocked-angry-response-when-she-tells-staff
As someone that has worked hard for a long time, I would likely see much, much higher taxes to pay for UBI. Currently I pay about 60% of every dollar earned to taxes (I keep about 40%) This my limit if my tax rate goes up higher than its no long worth my time to put in the hours I do, and I will simply cut back, which would include me spending. I am an sure I am not alone.
“Just get back whatever percentage that the government wants in the form of a VAT on Luxury goods”
Except just aboutwhen *everything* is considered luxury goods: Fuel, electricity, vehicles, & basically all durable goods.
“This would put some pressure on corporations to improve working conditions”
Nope, it just adds few to reduces costs: more outsourcing & more automation to reduce labor costs. The US & China had low employment rates comparied to the EU. Higher taxes destroy jobs not create them.
notanoilman wrote:
“If everyone below a certain income level was given a basic income for the duration of the emergency then companies would be propped up since those people would be, out of need, spending that money in – guess what – companies.”
its not going to work as you expect:
1. Once people get UBI, it will be impossible to end it. People will go nuts if you try to take it way.
2. with UBI, few workers will show up to work, so companies will struggle to find workers, resulting in shortages and soaring prices.
Venezuela tried UBI, and it ended up collapsing their economy.
That said, Its likely the US will be heading for an economic collapse. Too much debt, The Demographics cliff, and now complete disruption of global supply chains.
notanoilman wrote:
“No bail outs to those companies that have or should have cash in hand.”
No business has “cash in hand” The US tax code is set up to force companies to spend every dollar of revenue, and to borrow as much as possible. Companies are hit with huge taxes on savings and get tax breaks on debt owed. The only businesses that aren’t deep in debt a very small business that banks refuse to loan money to.
All of the big companies are loaded up with Debt to fund stock buybacks.
“No point in prolonging old jobs, new ones will arise.”
I very much doubt it:
1. Companies were in cost-cutting mode before the Pandemic.
2. Companies were either automating & self-serving kiosk to reduce labor costs (largely driven by souring healthcare premiums, $15 min. Wages, and underfunded pensions).
3. The retail jobs that you refer to, employ most of the US workforce (ie service economy working in retail type jobs). As some who works with a lot of business I saw companies either outsource or automated entire departments. I’ve seen entire HR, IT, Legal, Accounting, Sales department go from hundreds of workers down to just a handful of workers. These were all good paying jobs that no longer exist.
I think we will see a return of pre-20th century economics, where a very small portion of the population has a decent lifestyle will the large majority live in extreme poverty & are destitute. Homelessness was already soaring in the US before the crisis, and I expect it will absolute explode once the courts re-open for evictions. About 80% of the US population lives paycheck to paycheck with little to no savings. They just cannot weather unemployment.
“its not going to work as you expect:
1. Once people get UBI, it will be impossible to end it. People will go nuts if you try to take it way.
2. with UBI, few workers will show up to work, so companies will struggle to find workers, resulting in shortages and soaring prices.”
You are simply reciting republican mantra
“No business has “cash in hand””
All you didn’t want to know
https://www.google.com/search?num=30&gl=us&hl=en&pws=0&source=hp&ei=iEijXqecNdqVr7wPkNWBsAE&q=company+cash+reserves&oq=company+cash+reserves&gs_lcp=CgZwc3ktYWIQAzICCAAyAggAMgYIABAWEB4yBggAEBYQHjIGCAAQFhAeMgYIABAWEB4yBggAEBYQHjIGCAAQFhAeMgYIABAWEB4yBggAEBYQHlDKCliJM2DnO2gAcAB4AIABzgKIAZ4qkgEGMi0xNy40mAEAoAEBqgEHZ3dzLXdpeg&sclient=psy-ab&ved=0ahUKEwingKqM8IHpAhXayosBHZBqABYQ4dUDCAg&uact=5
““No point in prolonging old jobs, new ones will arise.”
I very much doubt it:”
Ok, tell me how many worked for Uber 12 years ago?
NAOM
Most of those companies listed are foreign cash holdingss, & its for the very top tech companies that are holding cash overseas to avoid paying taxes. The majority of US major business are deep in debt and likely will be downgraded to Junk status this year:
19 S&P 500 Companies Bear 33% Of U.S. Debt:
https://www.investors.com/etfs-and-funds/sectors/s-p-500-companies-carry-third-us-debt/
https://www.investopedia.com/why-debt-laden-stocks-leading-s-and-p-500-risk-major-reversal-4772080
“Goldman Sachs calculates that net leverage for the median S&P 500 company hit an all-time record in the second quarter”
https://www.macrotrends.net/stocks/charts/SPGI/s-p-global/debt-equity-ratio
Debt to Equity is above 8.5 times. meaning most companies are basically bankrupt.
“Ok, tell me how many worked for Uber 12 years ago?”
Uber has never made any money and continues to lose money every month:
“Uber stock hits a new all-time low as shares continue to slide following $5 billion Q2 ”
https://www.cnbc.com/2019/08/14/uber-stock-hits-a-new-all-time-low.html
Uber is just a Dot-Bomb 2.0 Company, and probably will fail this year, or by next year.
also Most Uber drivers are now quitting after about 6 months, since its not really profitable anymore:
https://uberdriverthings.com/uber-drivers-quitting-2019/
“Many drivers feel as though they are mere slave labor. UBER doesn’t care about them, as far as they can see. And they have plenty of reason to think so if you look at the many situations that have come up over the last few years. UBER rarely backs up its drivers, and in fact, has often taken away from drivers’ earnings. So, it’s not a surprise to see that many Uber drivers are quitting.”
Recall that during the first Dot-bomb bubble, Millions all lose their temporary Dot-Com jobs when the Dot-Com bubble popped. We are going to see a lot of Dot-Com 2.0 closures this year for sure.
While its possible to replace lost jobs, with new jobs & work at Google, Apple, etc, the new jobs all require advanced technical skills that the large majority do not posse, and unlikely to ever posses. It can take a decade or more to develop advance technical skills that are in demand, and Its very very unlikely the majority of people would be willing to put that much effort. If didn’t apply for technical careers when they were in college in the late teens\early twenties, Its not as if a 35+ liberal arts\retail worker is going to go back to school to get a engineering degree.
So where do you propose that a Middle age worker that gets replaced via automation or outsourcing is going to find a job? Do you think a 40 year old salesman is going to get a engineering job working for Apple or Google? How about the a supermarket cashier that lost their job to a self-checkout machine? Are they going to become a super-star coders\design the next ASIC low power CPU? I think not!
FWIW: I worked with many large businesses at the corporate level that offer consumer goods, healthcare, insurance, industrial, manufacturing, etc. They were all in cost cutting mode for the past 8 to 10 years. They are currently focusing on downsizing white collar (those that pay decently) with automation & outsourcing. I suspect this they will pick up the pace considerably as the pandemic\lock down is crushing revenue.
I would not be surprised that the US unemployment rate tops 40% later this year. In the past 5 weeks, 26 Million out of 164M workers were let go (nearly 16%). I suspect there is about to be an explosion of layoffs in May as revenue continues to fall.
I just saw a blurb that Exxon has a big petrochemical plant in China and I think it said opens today. Wholly owned. And now, can’t find the article anymore.
…ouch:
https://twitter.com/Jkylebass/status/1253013582184407041?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1253013582184407041&ref_url=https%3A%2F%2Fwww.zerohedge.com%2Fcommodities%2Fkyle-bass-saudis-are-sending-us-50-million-barrel-oil-bomb
….ouch s’more:
https://twitter.com/tedcruz/status/1252746773304676353?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1252746773304676353&ref_url=https%3A%2F%2Fwww.zerohedge.com%2Fcommodities%2Fkyle-bass-saudis-are-sending-us-50-million-barrel-oil-bomb
Prepare spiritually and morally fellas, for things seem dark..
be well,
petro
Full article:
https://www.zerohedge.com/commodities/kyle-bass-saudis-are-sending-us-50-million-barrel-oil-bomb
Interest rate (the cost of money) is in Negative territory.
Oil price (the cost of energy) is in Negative territory .
That is like telling the patient that his temperature and blood pressure are in negative territory . The situation is now ripe for an unprecedented system collapse . Grab your seats.
Not really anything new. Gas prices have been negative at the wellhead for most of the oil era. It’s nothing new.
North Dakota flared 19% of its gas production last year because it was worth less than nothing.
https://www.eia.gov/todayinenergy/detail.php?id=43435
HiH,
in mmt there’s no such thing as “the price of money” – you are longing for the good old days…
When a complex , interconnected , thermodynamically open system reaches limits and runs out of “buffers” – there’s no such thing as “cost of energy” and “supply-demand” bs either!
I commented for years on this blog about those things, so i’m not going there…
..but you are correct regarding us being in the “kaboom” phase.
Unlike you though, I think that we shouldn’t worry about “grabbing the seats” , for after this, there will be no “post-cedented” thing to worry about….
Be well,
petro
P.S.: thanks for digging up my old comments…I’d forgotten that i knew this stuff years ago…
…(no arrogance intended…. ha, ha).
From the tweets above:
Hi Ted,
It’s actually 24 VLCC supertankers carrying a combined total of 50.4 million barrels, which spread out over 48 days of exports amounts to 1.05 million barrels per day in departures.
Everything you see between Madagascar and Brazil is due to arrive in May.
Cheers /TT
For perspective the most recent 4 weeks had Saudi crude oil imports at about 6% of total US crude imports (about 350 kb/d), this would increase that to 1000 kb/d, about 18% of the 5500 kb/d average crude imports from all nations of the past 4 weeks (WE April 17, 2020).
About 150-years of oil-price history in one chart illustrates crude’s spectacular plunge below $0 a barrel
That jaunt into negative territory had never happened before…
I’ll just leave this here.
https://theintercept.com/2020/04/22/trump-coronavirus-governors/
Gilead had some bad rumors.
We shall see——
Will low oil prices cause high oil prices?
How Oil Prices Could Go To $100
While the situation is totally unprecedented it’s impossible to say what will happen next for oil markets, some experts think that oil is poised for a major comeback. Even though oil prices are lower than they have ever been, “one energy fund thinks $100 a barrel is achievable,” reported the Midland Reporter-Telegram earlier this week.
That’s the myopic thinking of mises/hayek/austrian/supply-demand/gold-standard crowd.
They are 100 years late…we are way, way, way past that.
…and did I mentioned myopic?
Oil will NEVER get to $100/brl (supported by a stable economy, aka true value $100) again!
I commented regarding this on this site at length years ago, so i’m not going there… and I hate myself for “nailing it”, BUT right before our system’s (inevitable) collapse, we will have violent price swings – ergo, you might have your/the $100/brl …or $10000000000…/brl price
It will mean nothing anyway, for by that time (which may be now), there will be no market (and civilization) to sustain it…
Enjoy the old wine and cigar while you can…
Be well,
Petro
Petro, you were correct in 2016 and you are correct today . The hassle is that 7 billion people on the planet will shove their head in the sand than face the elephant in the room . The only problem is that when you shove your hand in the sand ,you expose your backside . 😉 . Borrowing your phrase ,be well .
Worth consolidating a few things.
CARES act was Phase III of stimulus this year. In total it added to 2.0T 12B 170B for a total of 2.18T.
CBO pre virus expected 1.1T deficit this year. So sum is 3.2T.
Today the House passed another 480B and that takes us to 3.7T for the year (so far).
Goldman Sachs in late March offered up an expected -24% reduction in GDP for Q2. That leaves 17T for the US GDP and that was just Q2. Q3/4 will be more contraction without a cure.
I say GS is either clueless or offered that pre stimulus. Deutsche Bank says 13% loss Q2. Let’s go with that and take another 5% off Q3/4. 21T X 0.82 –> 17.5ishT GDP end of 2020.
Let’s be clear here. A total deficit of 3.7T / 17.5T is 21% of GDP. The debt will be about 25T and thus 143% of GDP.
These are unprecedented numbers. BTW I believe the $1200 checks added to $1T. If you want to do that monthly that’s $12T. 68% of GDP. The rich are included in the GDP. That 17.5T is all you get to draw from. Asking for quite a lot of GDP growth to fund that, and understand this . . . that’s even if the Fed prints and hands it out. GDP is GDP.
China already reported a -7% quarter for Q1, but they are out of lockdown now. They were 14T last year, they will catch up quite soon.
To stop that will require a cure. I’d guess an outright cure could replace the 4T lost in a couple of months. Massive boom in everything, including oil. But cure means cure. 85-90% cure rate, not 45% odds of getting antibodies produced. Try to BS something less than CURE and it can get much worse.
This stuff above is why things have got to get going again. It doesn’t take many 13% negative quarters to destroy everything. Everything includes school teacher pay, cops, every govt clerk in every state you can think of.
“Asking for quite a lot of GDP growth to fund that, and understand this . . . that’s even if the Fed prints and hands it out. GDP is GDP.” ~ watcher
In mmt and, where we are at the present, there’s no such thing as “gdp growth to fund deficits/debts”.
You are thinking in supply/demand mises/hayek/austrian terms…
You (like 99.9%) are 100-120 years late.
The numbers are being typed to keep the system alive – NOT to be paid back or “funded by gdp growth”.
We can blaim anybody as to why we are here, but without doing it, we would have to eat (literally) eachother to survive.
I know… is a hard concept to grasp, and requires a lot of knowledge…
… but it is what it is!
Enjoy life as you (and I) remember it, for the future shall be very different.
be well,
petro
Oh son of a gun. Everything I just typed up there didn’t include QE. The mind boggles.
Watch Wrote:
” BTW I believe the $1200 checks added to $1T. If you want to do that monthly that’s $12T. 68% ”
I am sure its much less than $1T for the $1200 checks: 164M Workers * 1200 = $196B * 12 month = $2.3T. They are only giving out $1200 to workers that paid taxes, and the $1200 is means tested. I personally won’t see a dime of the $1200.
That said, The US & the rest of the industrial world is going to fall into a global economic depression. Simply too much debt, and now hitting the Demographics cliff. I would imagine any boomer over ~62 that loses there job is going to file for Social Security this year. There is no point delaying SS if they are unemployed.
I suspect the fed is just going to run the printing presses 24/7 this year just to avoid a full collapse.
On top of the list you provided, You missed State & local gov’t that all need bailouts. Mitch McConnell told states to file for bankruptcy:
“McConnell suggests states declare bankruptcy during pandemic”
https://www.mcclatchydc.com/news/coronavirus/article242235101.html
While there are some legal roadblock preventing states from declaring bankruptcy, its possible with some changes. The other option might be that the Fed just buys trillions of Muni-debt or the Fed lets states make direct loans, perhaps with negative rates such that it pays states to borrow with the Fed.
https://mobile.reuters.com/article/amp/idUSKCN2260PX?__twitter_impression=true
The comment inside looks legit — you don’t get to cancel a contract just because it’s not profitable anymore. You made the choice not to hedge.
I don’t remember the divorce settlement details. Gotta hope his ex divested.
This is why it is so risky to produce oil currently and everything not hedged is being shut in.
Don’t believe it when EIA prints US production at 12.1 BOPD or something close next Wednesday.
As for making fun of HH for not hedging, I understand as he has way too many barrels not to.
However, hedging has gotten incredibly expensive and is not easy. Until you have tried hedging oil yourself, you have no clue.
To hedge with SWAPS or collars you have to post a lot of cash margin. To hedge with puts you have to pay the entire put premium up front.
15+ years ago we bought puts for less than $1 per BO at a price not much lower than the current cash price. There wasn’t basis risk back then anywhere like there is now.
Recently (1/20) puts cost $4-6 per BO for one year, and there is also tremendous basis risk as all will find out 5/1/20.
Anyone not hedged needs to shut in for the month of May. But it won’t happen.
Too many cannot face reality.
Hi Shallow,
Do you think California Resource Corporation should or will shut-in. Their not competing with WTI. They have 30% of their oil production hedged for the second quarter of 2020. They get paid by Brent pricing. There are no crude pipeline connecting the Midwest to the California refineries. There is a pipeline connecting LA to Phoenix for product. Also a product line that runs from El Paso to Phoenix. They should put some light on this in their 1st quarter earning conference call May 4. I’ve been meaning to go over to the Huntington Beach Cliffs to see if there are a more than normal number of oil tanker sitting in the Long Beach Harbor waiting to get unloaded. Also to check if the regular jack pumps in HB are operating.
I’ve been meaning to go over to the Huntington Beach Cliffs
Surfed there quite a bit in the 60’s.
Was pretty ragged then. My sister lives in Newport– next visit I’ll take a look.
We used to climb the oil derricks for fun.
A land far, far away, in a time long long ago.
Frac spread dropped to 85 for week ending 4/24/2020 from 147 last week.
See 12:50 time mark and watch foe about 2 min from video linked below (it is good in my opinion).
https://twitter.com/PrimaryVision?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor
couple of screenshots below for those that don’t like videos.
A second screen shot from video in previous comment. Past 6 weeks the frac spread count dropped from 298 to 85 and in the past 2 weeks dropped from 185 to 85.
The $500 question is how strongly this is going to affect near term production and what is the time lag?
Time lag is quite short, I imagine we will see a sharp drop in the completion rate by May. Tight oil output drops very quickly when the tight oil completion rat drops below 150, which we will see by May or perhaps June. The completion rate is the number of new wells that start producing each month, sometimes called “first flow” wells.
A new Non-Petroleum thread has been posted
http://peakoilbarrel.com/open-thread-non-petroleum-april-24-2020/
A new Non-Opec oil Production thread has been posted.
http://peakoilbarrel.com/non-opec-oil-production-punches-new-high/