The OPEC Monthly Oil Market Report has just came out with OPEC production data for September 2014. All production numbers are in thousand barrels per day with the last data point September 2014.
The August production numbers were revised down 275,000 bpd from 30,347 kbd to 30,054 kbd. Current OPEC 12 production stands at 30,474 kbd, up 402 from the revised numbers.
Saudi Arabia’s August production numbers were revised down 202 kbd. With that revision they are down another 50 kbd in Septemer to 9,605 kbd.
By far the largest change in OPEC production came from Libya, up 251 kbd to 787 kbd.
The other big gainer was Iraq, up 135 kbd to 3,164 kbd.
The four OPEC nations that have increased production over twice as much as total OPEC appears to have topped out at around 18.5 million barrels per day.
The other eight “mostly losers” were up 317,000 barrels per day, mostly on the strength of Libya’s recovery.
Saudi “secondary sources” numbers and their “direct communication” came in a lot closer than they did last month.
Is OPEC falling apart? An interesting quote from: Oil & Energy Insider:
Typically, OPEC acts in concert when oil prices slide too quickly, acting collectively to cut back production in order to prop up prices. However, amid the most recent price decline, Saudi Arabia and Kuwait have unilaterally cut prices in order to maintain market share, a decision that caught some market analysts by surprise. The price cut was intended to underprice oil from the United Arab Emirates, a fellow cartel member.
The OPEC basket price dropped to $88.27 a barrel yesterday, the lowest in years.
We’re Sitting on 10 Billion Barrels of Oil! OK, Two
It’s all about shale drillers telling the truth to the SEC but lying in reports they present to the public in an attempt to persuade investors to buy their stock. Here is an example:
Lee Tillman, chief executive officer of Marathon Oil Corp., told investors last month that the company was sitting on the equivalent of 4.3 billion barrels in its U.S. shale acreage.
That number was 5.5 times higher than the one Marathon reported to federal regulators.
So it is legal to lie to investors and potential investors. And here’s how they justify it.
Experienced investors know the difference between the two numbers, Scott Sheffield, chairman and CEO of Irving, Texas-based Pioneer, said in an interview.
If experienced investors know you are lying, then why lie?
“Shareholders understand,” Sheffield said. “We’re owned 95 percent by institutions. Now the American public is going into the mutual funds, so they’re trusting what those institutions are doing in their homework.”
That still begs the question, why lie? Are you doing it for the other 5 percent? The truth is that these funds advertise the fact that they are investing in shale oil companies. And we see headlines like New Fund Capitalizes on Shale Oil Revolution. And what does Michael Underhill, who runs the fund, have to say?
Underhill’s message: the surge in oil and gas production that has fostered predictions of U.S. energy independence by 2030 is bigger than you think; indeed, some sources are now forecasting achievement of energy independence as early as 2018-’19.
The funds are telling the same damn lie! Or more correctly, the funds are repeating the same lie told by the drillers, and passing that lie on to investors and potential investors.
The SEC requires drillers to provide an annual accounting of how much oil and gas their properties will produce, a measurement called proved reserves, and company executives must certify that the reports are accurate.
No such rules apply to appraisals that drillers pitch to the public, sometimes called resource potential. In public presentations, unregulated estimates included wells that would lose money, prospects that have never been drilled, acreage that won’t be tapped for decades and projects whose likelihood of success is less than 10 percent, according to data compiled by Bloomberg. The result is a case for U.S. energy self-sufficiency that’s based more on hope than fact.
The Rising Marginal Cost Of Oil Production Highlighted By Kashagan Expense Escalation
So while investors and commodities traders are focused on West Texas, North Dakota and South Texas (Permian, Bakken and Eagle Ford), perhaps they should be focusing on the bulk of oil production, coming from the rest of the world, and the associated high costs, delays and political risks. Geopolitical factors and offshore development challenges may ultimately be the dominant factors in the oil price (and thus, oil producer equity prices). The marginal cost of production for oil just rose another 7%. Perhaps it is time to buy some smaller onshore US oil producer stocks.
Fracking Firms Get Tested by Oil’s Price Drop (Behind pay wall but available via google.)
Weakening oil prices could put a crimp in the U.S. energy boom. At $90 a barrel and below, many hydraulic-fracturing projects start to become uneconomic, according to a recent report by Goldman Sachs Group Inc. While fracking costs run the gamut, producers often break even around $80 to $85.
Rail head prices are well below $80 a barrel in the Bakken.
The OPEC Charts page has been updated.
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Yo Ron, maybe a sticky sort of permapost would be good as regards methodology of the various sources.
Meaning, why are there revisions? These countries monitor their own output and issue a report. Are they issuing estimates or data in those reports, and when do the estimates completely stop being estimates?
I’m good with upward revisions as delayed reports arrive, but downward revisions . . . . hmmm.
The numbers released by the countries themselves are political and highly unreliable. The “secondary sources” data is far more accurate though they do get it wrong occasionally. So they correct them the next month.
I don’t question the “secondary source” data or revisions. Reporting agencies like Platts and others would have little reason to lie about their data. In fact they have a very high incentive to get it right. If they were ever caught fudging the data it would ruin their reputation forever and no one would subscribe to their services again.
But if only the secondary sources are regarded as reliable (by you and I suppose a number of analysts), how can it be that the official figures released by the countries don`t turn into an embarrassment for them if “noone” believes in them anyway? What is their purpose then? Are they just for the “unsuspecting public” and mainstream media?
Okay, the “direct communication” numbers from Iran and Venezuela are very unreliable. Check them out, they are always way off from the “secondary sources” numbers. Chavez wanted to show that the strike, and him firing all the strikers did not affect production. And Iran wanted to show that the sanctions had no effect.
Iran’s figures were originally about 1 million barrels per day too high. Nowadays they are only about a quarter of a million barrels per day too high. Venezuela’s figures have always been about half a million barrels per day too high. And this is not by “me and a number of analysts” as you put it but by everyone including the EIA and the OPEC MOMR. The MOMR only recently started publishing those “direct communication” numbers because Venezuela would throw a hissy fit at every OPEC meeting because the MOMR was not reporting what they said they were producing.
The numbers from the other ten OPEC nations are fairly reliable.
But really now, Venezuela and Iran don’t seem to be the least bit embarrassed because the production they report don’t match the numbers that the rest of the world says they produce.
Ok, I see, thanks for the clarification!
“Iran’s figures were originally about 1 million barrels per day too high. Nowadays they are only about a quarter of a million barrels per day too high. ”
How was the gap closed? Upper lowered or lower upped?
Upper lowered.
I have a slight problem with this.
The wiki on sanctions quotes huge export reductions and that chart of outright production only dropped 750K bpd over the relevant period. BP on mazamascience says consumption is 2 mbpd and somewhat flat.
There is some talk of above ground storage to protect the wells from being irreparably damaged by shut-in (??? there’s that concept again) but the differentials are over 1 mbpd. There is no way in hell they have 365 million barrel above ground tanks to fill each year.
Do you have any data on what Iranian secondary sources would be, because everything I am seeing says they are exporting far more than quoted and it’s not being measured.
Hello all,
In recent days I have put up a couple of posts.
Some tags escaped therefore another try (hopefully Ron will delete the first attempt).
They are not about crude oil, but a status on natural gas from Norway (Norway has been and presently is Europe’s second biggest supplier of natural gas after Russia) with my forecasts towards 2025.
Status of Norwegian Natural Gas and a Forecast towards 2025
A post about the world’s development in total energy consumption since 1800 and how growth in solar and wind measures up against fossil fuels since 1990.
The Powers of Fossil Fuels
Rune
Saw a Ransqawk blurb last night that Statoil announced a big gas find.
Could this be what Ransquawk referred to?
Small gas discovery northeast of 7220/8-1 Johan Castberg in the Barents Sea – 7220/2-1
” Preliminary estimations of the size of the discovery are between 1 and 2 billion standard cubic meters (Sm3) of recoverable gas.”
1 billion Sm3 approximates 35.3 Bcf
Hard to make the economics work for such a small discovery in the Barents Sea.
It was last night. I’ll try to track it down. Very recent.
No additional info. That does look like it.
“Walk with those seeking the truth, run from those who think they’ve found it.”
Perfect!
That quote is by Deepak Chopra.
“…Chopra is a leader and pioneer in the field of mind-body medicine; he transforms the way the world views physical, mental, emotional, spiritual, and social wellness. Known as a prolific author of eighty books books with twenty-two New York Times best sellers in both fiction and non-fiction, his works have been published in more than forty-three languages.”
Don’t give me ANY credit for knowing anything about this; was impressed by the Rune’s quote just now looked it up.
Thanks for looking up the source.
I found the quote somewhere (and attributed it unknown at the time I put up the post it appeared in) and thought it appropriate.
Deepak is the ultimate Boomer Charlatan.
But if you want to be enlightened, for 3 grand he can make it happen.
That is correct, Chopra is a a pseudo scientific quack. knowing what I know about him I highly doubt he is the true author of that quote. Chopra is not above plagiarism! It seems he just reworded the following quote and appropriated it as his own…
Trust those who seek the truth, but doubt those who say they’ve found it.” – André Gide.
André Paul Guillaume Gide (French: 22 November 1869 – 19 February 1951) was a French author and winner of the Nobel Prize in Literature in 1947 “for his comprehensive and artistically significant writings, in which human problems and conditions have been presented with a fearless love of truth and keen psychological insight”. Source Wikipedia
Having said that I much prefer Albert Einstein’s take on truth and knowledge:
“Whoever undertakes to set himself up as a judge of Truth and Knowledge is shipwrecked by the laughter of the gods.”
A few critiques of “The Powers of Fossil Fuels”. I hope you’re not offended.
While I do agree that we will be using fossil fuels for some time into the future, some of the other points of the post require further examination.
A “Millenium” is 1,000 years. I’m not sure if that was the word you wanted to use.
Energy from fossil fuels is only a tiny fraction of the amount of solar energy used by humans.
Also, studies have shown that only 7% of the square footage of cities in the US, could potentially provide 100% of the country’s electricity, using existing solar PV technology.
And while solar PV is more expensive than some types of fossil fuels, it is certainly cheaper than oil fired electricity at current prices.
Finally, fossil fuel infrastructure has had a huge “head start” over commercial PV production. There must be strong arguments for replacing an existing infrastructure. If fossil fuel resource depletion theories are correct, production will eventually decline, resulting in higher prices. So there could be a strong economic argument in the future. There are also environmental concerns.
John B
Why should I take offense from your comment?
It should be centuries and not millennium. This has been edited in my post.
(Strange no one else caught it, I have had several read the post, emailed me and no one caught it, well that is until you did).
So Thanks!
True about fossil fuels being a fraction, but I hope I made it clear it was about human exogenous energy consumption.
With regard to improved solar coverage, this is also a question about resource allocation.
How FF prices will respond on the downslope is much up to debate. Through several years I have been in the camp that price is about affordability. Demand is what you can pay for. Presently the world struggles with too much debt. Growth in debt allowed to grow FF (and renewables) demand and also for some time negate higher prices.
In most of the major supply disruptions over the years, e.g. the Arab oil embargo, the Iranian revolution, the Libyan civil war, oil prices spiked. Higher prices are required to quash demand, so that supply and demand are in equilibrium. This is basic economics. Even the anticipation of lower production, would cause higher prices through speculation.
Even at the retail level, if there is some supply disruption (hurricane, etc.), there is an economic incentive to raise prices. The dealers who do not raise prices, will quickly run out of product.
When solar cost relative to ff’s is discussed, it is essential to factor in the global climate change component. If that is done, ff’s are obviously far too expensive for us to use, and solar is far less expensive not only in penalty to the future but to right now, and here.
I also suggest that another factor is important- the high probability of a political about-face in the event of a climate-related catastrophe too big to ignore. Such as, for example, a heat-driven city-destroying fire in the US south-west.
All such things considered, it seems highly likely to me that there will be a sudden huge demand for solar in the near future.
I am no expert on solar, but from the little I have understood solar requires energy in its manufacturing process.
So where should the energy come from to allow for this rapid expansion in solar?
If the answer is from FFs, I would say “Houston, we have a bigger problem!”
Exactly Rune. Wimbi is way too optimistic. By the time the demand for solar is clear, it will be many decades too late to supply it.
I am an expert on solar power and a huge fan, but even I think we have waited too long to make the huge investments, both in energy and material, required to replace fossil fuels with solar or any other renewable supply.
I’ve lived off-grid for almost all of my adult life (I’m 66) and know how easy it can be with solar and small hydro, but household power is a minor part of any energy transition for our civilization.
Transportation is the biggest problem. I still have several fossil fueled powered vehicles and, while I could buy an EV, not many in my community could afford it. Also, where I live, all freight is moved by truck after it is offloaded from container ships. There is not a single railroad in the state that could be electrified. Almost every traveler comes and leaves by jet. Have you guessed where I live yet?
Without fossil fuel powered transportation Hawaii would rapidly revert to a lightly populated backwater. But while Hawaii is a worst-case example, most big cities are not very well set up either. When I’m on the mainland I look at all the traffic around me on the freeway and have to shake my head. I see no way it all gets replaced with renewable energy in time to keep even a semblance of BAU going. Never gonna happen.
Pretty much, which is why warfare and victory are the order of the day.
BTW, here’s some delightful Chinese data.
Chinese electric car sales from 2010 to Sept 2014 amount to 70,000 vehicles, in total, including hybrids.
Total car sales
2010 18 million cars
2011 18.5 million cars
2012 19 million cars
2013 20.1 million cars (all time world record for any country)
2014 to date almost 17 million cars.
That’s a sum of 92.6 million cars in 4.75 yrs.
Electric clocks in at . . . let’s see . . . 0.1% of that haha amid the all time greatest hyping ever seen.
Now those benign Chinese btw, are quoted as having 100 cars for every 1000 people. Yet another metric that they MUST address, because the US equivalent is 800 cars for every 1000 people.
So we can expect the Chinese to ramp up a factor of 8 on car derived oil consumption and JUST AS FAST AS THEY CAN to achieve bare parity with the US.
If that’s 80% of their oil consumption (don’t know if it is, but one does hear such things), then their 8 mbpd present such consumption will be going to 64 mbpd AS FAST AS THEY CAN.
Now where were they going to get that again? You listening Tokyo?
correction, that source isn’t clear, might not include hybrids, which doesn’t matter, if it burns gas it burns gas.
You forgot to mention 200,000,000 electric bicycles, brand new subway systems in 20-30 cities and most of the world’s high speed rail. I don’t think China is on America’s trajectory.
Then why did they set the all time record on car buys in 2013, and are on track to beat it this year.
There is no escaping the numbers. They are exploding oil consumption. All the other stuff is wishful thinking.
>Then why did they set the all time record on car buys in 2013
Because things change faster than they used to, and there are a lot of Chinese.
Look at Africa — they went from almost phoneless to 800m mobile phones in about 10 years. All that proves is that they had a deficit before and change is easy nowadays.
The answer is that they’re not.
Chinese oil consumption has stopped growing so dramatically.
How can that be? Partly because Chinese cars aren’t driven nearly as far as American cars, partly because they get much better MPG.
Actually, Hawaii has one of the highest per capita penetrations of solar power in the country.
http://cleantechnica.com/2014/09/03/top-10-solar-energy-states-per-capita-us/
Also, the electric utility is planning for 67% renewable energy in 15 years. Although I suspect their projections are on the conservative side.
http://www.hawaiianelectric.com/heco/_hidden_Hidden/CorpComm/Hawaiian-Electric-Companies-submit-plans-for-Energy-Future-of-Hawaii
Hawaii is also one of the top states for electric car sales.
http://www.treehugger.com/cars/top-10-electric-car-states-are.html
They have an electric rail system under construction as well.
https://www.flickr.com/photos/honolulurail
BAU, never gonna happen. Right, and lucky we are about that.
We can pay for solar by the simplest and most obvious way- we get our ff’s , materials, skills, etc etc needed for solar by doing solar with them INSTEAD OF the idiotic things we are doing with those same ff’s, etc, today.
People, I ask you again, just look around and use your eyes. I now give a few ghastly examples of things we are doing today that, not done at all, could EASILY give us the wherewithall for solar, for good and all.
In domestic life. Too big houses, too little insulation, way way too much mindless driving around for nothing but a pack of peaches. Big deserts called lawns, and big ff’ guzzlers mowing same.
And in commerce. Gawd! Just look at it. Almost all the stuff in any department store is totally lacking of any need. Twenty different kinds of the same damn car part that could just as well be all identical. Fuzzy kids toys from China, which last maybe 15 minutes after christmas and then go to that huge stack of totally unused fuzzy kids toys from China already in the cellar.
Any private car fancier than a Civic.
You can fill in the million other examples well known by all, especially all those folk who spend their life writing adverts for crap which nobody would otherwise never even think of buying.
I easily paid the cost and ff’s to get my house entirely on PV by not buying that pickup, and not taking that jaunt around the country that my good neighbor did. And now, he is shoveling ff into his pickup and I am shoveling kw-hrs into my Leaf.
To say that we can’t afford going to solar is same as saying, what I have actually heard people say–
“Sure, we could save the world from global warming, but we can’t afford to.” !!
Humanity. Too bad. Had some promise, but died of idiocy before getting there.
Reports of the death of Humanity have been greatly exaggerated.
You can always trade your Leaf in for a newer model.
http://www.businessinsider.com/tesla-model-d-features-elon-musk-acceleration-car-speed-2014-10
Indeed you are correct Joe. I’m an engineer, and solar expert myself. When oil goes bye-bye, so will our entire society. The total energy stored in fossil fuel is unimaginable, compared to anything else on Earth. Wind and solar are great, but they are not enough to power our needs, at present. Period. Watch how fast we revert to cavemen after a sustained power outage. I encourage everyone to follow your lead and get a backup solar power system and some food, water and weapons.
Actually, the amount of Solar energy received by the Earth is thousands of times greater than fossil fuels, and nuclear fuel combined.
And no offense, but all the engineers I know, can come up with multiple solutions to virtually any problem, almost instantaneously. It’s in their blood.
Multiple solutions would be nuke Shanghai.
Or nuke the entire Chinese east coast.
Or more gently embargo oil imports to China by force and celebrate compassion.
Yeah, great idea dude, nuke China. Are you still on your meds?
It can come from solar. Solar has a high EROEI.
It doesn’t yet, which is normal. Humans bred horses. Horses built coal mines. Coal (and horses) built oil wells. Now oil builds wind & solar.
The old always builds the new.
Humans bred horses. Horses built coal mines. Coal (and horses) built oil wells. Now oil builds wind & solar.
Thanks for that. I’ve been following peak oil discussions for awhile, but only recently stumbled on some hardcore doomer sites. No matter what I suggested about the future, a few people shot it down. Nothing could convince them that any humans could survive without oil.
Precisely 732,254,389 humans will survive without oil.
What a sunny perspective you find here, yes?
I don’t expect life to continue as usual, and I think resources are overextended already, so I think the human population will decline.
However, the hardcore doomers don’t see a scenario where any humans will survive. They believe that once the oil is gone, humans will become extinct. They can’t envision any energy source working well enough to keep ANY humans alive.
I’m a hardcore doomer, but not quite to the “near-term human extinction” point. Even so, I am certain that lots of people will survive without oil; it’s just that most of those future survivors are already living without oil.
So, if you’re not prepared to live without oil, or money, and all the goodies they both provide, you’ve got a lot of work to do. I know I still do, but less and less every day.
I’m already to the point where I can hope that, to paraphrase Bush, “this sucker does go down”. Here’s to imminent collapse. The sooner it happens the better the chance that we leave a habitable world to those few grandchildren who live through it.
Humans won’t be gone until we’re replaced with something better.
I am a hardcore doomer and I have always maintain that there is no way humans will go extinct. Humans occupy every niche on earth that it is possible for humans to live.
After the collapse there will be undershoot that will last for a few decades then the population will move back up to the sustainable level, somewhere under one billion people.
An extinction scenario is pretty easy post oil derived decline.
So food stops transporting, spare parts do too, and China offers slave labor to Bali in return for sailing ship transport of rice to Shanghai.
Down we go to my 732 million number above. Lifestyle declines. No rubber tires without oil so even bikes get rare. Enclave mobility declines and inbreeding gets more common. Immune systems weaken, disease becomes more frequent and common and enclaves start getting knocked off by epidemics and natural disasters.
They don’t rebuild because there is no migration. Worse, perhaps worst of all, the salt deposits inland are no longer easy to mine without machinery, because they already were. Then the enclaves get limited to shorelines and natural disasters start to pick them off.
Extinction post Peak is a pretty easy scenario — even without the fallout from China’s east coast that would end Texas oil production (similar latitude).
My feeling is that extinction discounts the fact that homo sapiens have survived much worse conditions than a life without oil.
I believe if homo sapiens completely disappear, it will likely be because conditions on earth have changed to such an extent that very little of any kind of life survives. And if that is the case, then oil wouldn’t make much difference.
I guess I was just surprised how little the extreme doomers wanted to think about any other possible scenarios. It was like talking to people waiting for the second coming of Jesus. They had made up their minds and thinking about anything else was a waste of time to them.
“My feeling is that extinction discounts the fact that homo sapiens have survived much worse conditions than a life without oil.”
But all the other easy stuff had not yet been used then. Particularly salt. Look into why inland cities are where they are. It’s usually salt.
It’s been used. Now you go mine halite with gas powered engines shipped in from the factory.
It’s all Occam’s Razor. The path of least probability resistance is extinction.
If homo sapiens could survive pre-oil or pre-coal, I don’t see why they couldn’t survive post-oil and coal. Why would it matter that the easy stuff is gone if they aren’t using it anyway?
I think it is possible that homo sapiens along with a lot of other species become extinct. However, I can’t see that loss of oil would be the reason. As I said, the species has survived much worse.
Again, I think there are other possible scenarios rather than extinction because of loss of oil.
Actually, if you take the global warming scenario to its fullest extent, it might take loss of fossil fuels to give homo sapiens any chance of survival. Better to stop adding CO2 to the atmosphere than to maintain the lifestyle that fossil fuel affords.
I don’t think it is a given that homo sapiens will become extinct BECAUSE of loss of oil.
“My feeling is that extinction discounts the fact that homo sapiens have survived much worse conditions than a life without oil.”
“Homo sapiens (modern humans) is the only surviving species in the genus, all others having become extinct. ” Source Wikipedia
While Homo sapiens is indeed a very clever ape, there is nothing about them that guarantees they will not suffer the same fate as all the other members of the genus, Homo, before them…
“Why would it matter that the easy stuff is gone if they aren’t using it anyway?”
I don’t think you’ve thought through what near zero transport means, and the easy salt being gone.
It’s not the 1880s again. They had salt. They had coal. They had oil.
When you can’t get spare parts, you don’t have anything you think you can have over a period of 40 years. No parts. No medicine. It will all break. The bearings in the car alternators spinning in splashing water will die. You don’t even have to spin them. Materials age even if not used. A tree limb will blow into solar panels, and there will be no replacements.
It’s all about oil and it’s not about anything else.
Extinction is patient. And it’s cruel. It happens slowly, and inexorably everyone will see it happening and coming. The last few generations will KNOW they are going extinct.
It’s not the 1880s again. They had salt. They had coal. They had oil.
There is a big difference between living pre-1880s and extinction.
That’s what I mean by people jumping from the end of BAU to extinction.
A lot has to happen to Earth before homo sapiens as a species completely dies out. The species survived much worse than loss of fossil fuels. If homo sapiens as a species is headed for extinction, then Earth itself is likely to become uninhabitable for many species. If that is the case, loss of oil is the least of anyone’s worries.
I just can’t see going from “civilization is collapsing” to “homo sapiens” is extinct.
Do I think homo sapiens could become extinct? Sure, given the history of Earth, just about any species could be wiped out. But because the oil runs out? No.
In defense of Doomers, I don’t think they believe the loss of oil in and of itself would become an extinction level event. But rather from the resulting economic collapse, and “resource wars”.
So rather than solving rather simple engineering problems, it’s easier to revert back to “R” complex activities, such as fighting. They could be right.
But why would war result in extinction unless it is an all out nuclear war leaving lots of radiation that kills off most of the planet? If that is the case, let’s talk about radiation rather than how people will be inconvenienced by loss of oil.
In other words, we are back to the “On the Beach” doomsday scenario rather than the “peak oil” doomsday scenario.
It’s all Occam’s Razor. The path of least probability resistance is extinction.
Watcher, you usually post really logical post but that one makes no sense whatsoever. Occam’s Razor states that among competing hypotheses, the one with the fewest assumptions should be selected. You are assuming that something would kill off every person in every one of the hundreds of thousands of niches in the world. Such a scenario requires thousands of assumptions.
The Eskimos in Siberia, Alaska, Canada, and Scandinavia would have to be killed or die off. Every one of the thousands of tribes. Every aboriginal of the wilds of of New Guinea, the Amazon, Australia, Borneo and every wild jungle in the world would have to be killed off. And there are hundreds of thousands of other niches in the world where there would likely be survivors.
To simply assume that there would be no survivors anywhere is exactly the opposite of Occams Razor. Such a scenario just requires too many assumptions, way, way too many assumptions.
This is one reason I am skeptical that loss of oil will kill off an entire species. Maybe massive changes to the atmosphere could do it, but not loss of fossil fuels. Man doesn’t need them to keep the species going.
“This suggests the early human population was tiny (so the opportunities for new matrilines to evolve in the first place were limited) and reinforces the idea that Homo sapiens may have come close to extinction (eliminating some matrilines that did previously exist). Indeed, there may, at one point, have been as few as 2,000 people left to carry humanity forward.”
http://www.economist.com/node/11088535
It happens that around here, there are lots of appalachian junk kickers, who pride themselves in their skills in living on junk. Which of course, is wealth beyond measure to most of previous humanity.
I myself have long been of that mindset, so I have no patience with the hordes of people who can’t tell a box wrench from a box- and don’t want to learn.
So, re extinction- certainly not, not even close. It’s not just here in these hills that people know how to cope- it’s here and there all over the planet.
Of, course, there are a few little bothers with that way of life, like, short. No problem, lots left. Easy to replace. Done all the time.
Actually, I’m having fun right now setting up a seminar on simple thermal machines, things anybody can make that take heat and do work.
Start with the simplest of all. A chimney.
Another, real simple- Thermocompressor, aka Bush engine. Big, weak, but works. Fun to do with tin cans.
I’m pretty sure the Amazon Indians who have never contacted the outside world will survive too. Not to mention the Papua highlanders, the Eskimos, and the hundreds of millions (or billions?) without modern energy except maybe kerosene lanterns.
wrt your mentions of salt below (to which reply is not possible) there’s a doc I watched a few years back titled, I believe, ‘Salt’. (Not the one about Lake Eyre) It shows the harvesting of salt from the high Atacama to the coast of Portugal to a moveable railroad in operation somewhere in the ‘Stans, I believe. It seems to have disappeared from the interwebs since I viewed it. Given salt’s critical role, I keep wanting to refer people to it. Anybody got any clues?
There’s certainly been enough salt accumulated over the centuries that if you knew you were heading into tough times, your community could stockpile some, or you could find ways of salvaging what is already out there from other sources.
On the list of survival needs, I don’t think salt will pose the biggest problem.
And again, for those of us who don’t expect extinction based on the loss of oil, we do expect the amount of people living on earth to go down. We expect that at some point the population will size itself to properly fit a post-oil lifestyle. The resources still available should be able to sustain a population appropriate for those resources.
Peak oil won’t reduce population.
Educating women, now…
Peak oil won’t reduce population.
Educating women, now…
I get what you are saying, but my point about peak oil and population reduction is that if there is a transition period where total available energy goes down, then likely some parts of the world will find it harder to feed the people they already have. I think it is reasonable to expect to see declining populations in some places, or perhaps all places.
I’ve been charting a middle path between technology will fix all and support an unlimited population, and oil will be gone and homo sapiens will become extinct.
Well, we don’t have a net energy problem: we have a liquid fuels problem and a climate change problem.
For better or worse, we have a large: surplus of both liquid fuel and food production. The US uses five times as much fuel capita as Europe, for passenger transportation. The world now produces twice as many calories as are needed. Three times as many people in the world die from obesity, then from starvation.
We have quite a bit of leeway with which to handle the transition away from oil.
I am pleased to read some optimistic views. I’d much rather read those than the “there is no hope” ones. If there is no hope, then I don’t really need to know that, do I? How would knowing that make a difference in that case?
It was Francis Bacon who said “People desire to believe what they desire to be true”.
Boomer desires to read what he desires to be true.
True, but you see the same thing with global warming assessments. If scientists said, “There’s no hope. The planet will be warming to catastrophic levels and there is nothing anyone can do about it,” then people wouldn’t even try. They wouldn’t worry about carbon at all, figuring it no longer makes a difference.
So I like to read plausibly good news. If someone says, “Never worry about anything,” I will be skeptical. But if someone says, “Yes, we have problems, but we can solve them,” I’ll listen.
I think Boomer is just pleased to hear good news.
It’s perfectly clear that Boomer is willing to be realistic – based on some comments about climate change.
No, solar is meh; perhaps to shave a percent here or there, or to warm a home, but never when the sun does not shine, except with redundant stations and batteries and transmission and more capital spending than one can shake the stick at that they instead burn in a rocket stove, having not patience for the sun yet to rise. Do without? Consider two tea-sellers, one who burns a concentrated fuel store, and another that relies on the sun. Sun not up? Sale to vendor one. In too much a hurry to wait for the sun to boil the water? Again, sale to vendor one. Try to plaster the planet with an immensity of solar plants coupled with losses from batteries and losses from transmission lines? Well, maybe vendor two might get a sale, but this turns the subject to the high complexity and high capital costs of such an infrastructure, and considerations of how to maintain said infrastructure over time, assuming that it even can be built. (And how exactly vendor one would not still be making sales, and how vendor two could match that price.) The lessons from the “too cheap to meter” nuclear system may be most instructive, as humans have an amazing track record of excessive optimism in technological innovation. Evgeny Morozov in “The Net Delusion” has many examples, for the historically inclined: did you know that the speed of communication offered by the telegraph caused world peace to break out? Ditto for any solar noise.
Solar can handle about 25% of power requirements. No one is really suggesting more than 50%, certainly. Wind, hydro, nuclear, etc would provide the rest.
Wind is slightly stronger at night – there’s a nice synergy.
Solar can easily produce 100% of the world’s energy needs.
Sure. But, that wouldn’t be the low cost option.
The optimal thing is a mix of solar, wind, hydro, nuclear, biomass, etc., etc.
The Chinese solar panel companies invested heavily in solar farms when the prices crashed.
Looking at the growth in total FFs versus renewables consumption since 1990 we should now ask ourselves if we truly are prepared to wean ourselves completely of FFs and transition into a life within an energy budget made up from only renewables (refer also figure 1).
IMHO, the real issue is the mindset of growth itself. We, whoever ‘WE’ really includes, will at some point collectively face the reality that continued growth of any sort is simply no longer possible. ‘WE’ must wean ourselves off of this profoundly destructive paradigm. Not that I think ‘WE’ will…
I guess we can place the blame on Francis Bacon, though it’s hard to say which came first. The so called industrial enlightenment or the harnessing of fossil fuels. In my mind you probably couldn’t have one without the other.
The paper linked below is typical of the disconnect that seems pervasive amongst most economic historians, there is apparently no connecting of the dots between the enormous consequences of humans suddenly having gotten access to the extremely energy dense sources of energy embeded in coal and oil. Neo Classical Economists continue to miss the elephant in the middle of the room because the don’t have a grasp of basic physics, let alone biophysics. They also probably don’t really understand the consequences of the exponential function either. Yet ‘WE’ somehow continue to accept their ideas about the necessity and possibility of continued economic growth. Which is why ‘WE’ continue to think that we can’t wean ourselves off of fossil fuels and live within the energy budget allowed by renewable energy sources alone.
http://www.econ.upf.edu/docs/seminars/mokyr.pdf
“…for the purposes of explaining the Industrial Revolution we need only to
examine a slice of it, which I have termed the Industrial Enlightenment—a
belief in the possibility and desirability of economic progress and growth
through knowledge.14 The idea of improvement involved much more than
economic growth or technological change; it included moral and social
improvement, alleviating the suffering of the poor and the unfortunate, and
more generally such matters as justice and freedom. Yet the idea that production
could be made more efficient through more useful knowledge
gradually gained acceptance. Scotland, again, showed the way, but the idea
diffused throughout Britain and the Western world.15
It surely is true that not all Enlightenment philosophers believed that
material progress was either desirable or inevitable, or were persuaded that
the rise of a commercial and industrial society was a desirable end. And
yet the cultural beliefs that began to dominate the elites of the eighteenthcentury
West created the attitudes, the institutions, and the mechanisms by
which new useful knowledge was created, diffused, and put to good use.
Above all was the increasingly pervasive belief in the Baconian notion that
we can attain material progress (that is, economic growth) through controlling
nature, and that we can only harness nature by understanding her in
order, as he himself put it, to bring about “the relief of man’s estate.” Francis
Bacon, indeed, is a pivotal figure in understanding the Industrial
Enlightenment and its impact. “Lord Bacon,” as he was referred to by his
eighteenth-century admirers, was cited approvingly by many of the leading
lights of the Enlightenment, including Diderot, Lavoisier, Davy, and the
astronomer John Herschel.”
‘WE’ need to somehow leave the ‘Growth’ Paradigm behind and understand that continued economic growth based on fossil fuels is going to have to end sooner or later whether we want it to or not.
Fred,
I believe it is all about our mindsets and our perceptions/ideas about success which we acquire from social/cultural signals (propaganda).
Somewhere in here lies a huge challenge; to redefine our perceptions/ideas about successes (call it reprogramming).
Does bigger, faster, enhanced, more over consumption etc really, really improve our lives?
Is keeping up with the Jones (by going deep into debt) what one really wants?
Some (as in very few) have decided to lower their consumption level (and experienced an improvement in their quality of life).
The majority is likely stuck in some (planted) ideas about success, normality and scared of the alternative(s) as that represents something new/unknown for them.
Rune, I very much agree!
Yep, me too. But around here there are plenty of people who do go for what Rune said, and are in fact getting together to do something about it. In three days they will have a big meeting to brainstorm on this subject.
My entry is to suggest a wiki on a vision of our town from the future, giving everybody a chance to paint their own version. My version is truly lovely–to me. What a surprise!
Us folks here are just ordinary people, nobody special. That means that exactly the same process is going on all over the country -right?
Yep! I just had a nice conversation with a young lady friend of mine who out of the blue asked me what I thought of the idea of ‘Tiny Houses’ she said she was looking into building one for herself.
http://tinyhouseblog.com/
I told her I’d be glad to help her add solar PV to her project whenever she was ready.
Fred and wimbi,
What you both are describing is both interesting and encouraging.
A while back, I discussed the state of affairs with a long time colleague and friend and it appears we have made parallel observations about how things might evolve;
1) The world of human brains will seamlessly move from “There is NO problem” to ”It’s too late, we’re f***ed”.
2) Bloggers, analysts, doomers will quickly shift from attempting to persuade decision makers that we are living in overshoot to writing about “How to live in Overshoot”.
As an additional note awhile back I listened to an in depth/portrait interview with a female on the radio (I got rid of TV ten ears ago) and when asked where she lived (she traveled all over the globe) she answered; “I live inside my head.”
The paper linked below is typical of the disconnect that seems pervasive amongst most economic historians, there is apparently no connecting of the dots between the enormous consequences of humans suddenly having gotten access to the extremely energy dense sources of energy embeded in coal and oil.
I doubt coal is running out, even if oil is. There is also nuclear. The oil crisis is about running out of liquid fuel, not energy. That is why there is strong reason to believe there may be a technical fix.
Batteries may save the day, allowing business more or less as usual. They are inherently clunkier than liquid fuel, but not completely unusable, and they are getting better all the time.
New technology is allowing us to harvest unconcentrated energy, especially solar and wind. I also see a huge potential for geothermal.
All modern societies are extremely wasteful, and technology and pricing can help.
A lot of things could go wrong, but I don’t think it’s a foregone conclusion that they will.
That said, I firmly agree that the sudden amazing boom in the backwater of Eurasia’s far northwest coast was triggered by the discovery of cheap resources in the New World.
Batteries may save the day, allowing business more or less as usual.
There is nothing that can replace liquid fuel. Batteries will never fly an airplane, or drive heavy trucks, or power tractors and farm equipment in the field.
Plastics, rubber tires, fertilizer, asphalt, pesticides and a thousand other petochemical products cannot be made from or produced by batteries. There is simply no replacement for liquid fuel. BAU cannot survive the demise of liquid fuel.
Maybe it’s me feeling grumpy just getting off a cramped transatlantic flight, but I think the world can do with a little less flying 🙂 Anyway it is hardly the end of the world.
Coal can replace gas wherever it is used in the chemical industry, according to BASF anyway. Fertilizer doesn’t actually require gas, just hydrogen. The key thing is splitting the nitrogen triple bonds. Plastics can b made from a variety of raw materials, and a 90% reduction in use is feasible if you count recycling.
I think you are confusing the end of what you are used to with the end of civilization.
There has been a bit of development on electric airplanes.
http://www.technologyreview.com/news/516576/once-a-joke-battery-powered-airplanes-are-nearing-reality/
http://www.dailymail.co.uk/sciencetech/article-2613186/Forget-electric-cars-Airbus-unveils-plans-fly-battery-powered-PLANES-20-years.html
Long haul electric trucks are also a possibility.
http://insideevs.com/scania-testing-electric-big-rig/
Batteries will never fly an airplane, or drive heavy trucks, or power tractors and farm equipment in the field.
Batteries can do all of that, just not for very long ranges. But long range remote uses, like flying, water shipping and seasonal agriculture don’t account for a very large percentage of liquid fuel. Biofuel and synthetic fuel can handle that.
Have you looked at synthetic fuel? It works right now, it’s just a little more expensive.
Plastics, rubber tires, fertilizer, asphalt, pesticides and a thousand other petochemical products cannot be made from or produced by batteries.
You don’t need oil for those. You don’t even need fossil fuels. You just need hydrocarbons: hydrogen and carbon. H2 can come from water and electricity. Carbon can come from biomass, or from seawater.
This isn’t new tech: it’s all here now. Just ask any chemical engineer, like Robert Rapier.
Have you asked any chemical engineers??
When people list what you can’t do without oil or other fossil fuels, my thinking is that technology will continue to look for substitutes. While some people think humanity will just give up and die off completely, I think the people who survive will cope, one way or another. Do I think life will go on as it is today? No. But coming out at the end of this might result in a better, if different, life down the road. Much of what I spend my money on could disappear completely and I wouldn’t miss it.
I think most of us here know that peak oil is coming, or is here already. So we need to deal with it. Saying nothing else will work isn’t really dealing with it.
Sure.
The thing is, substitutes exist *right now*.
Really. Some of them are just taking time scaling up (hybrids, EVs, etc), some of them are a little more expensive (e.g., synthetic fuels) so they can’t compete yet. But they’re all here.
You don’t need oil for those. You don’t even need fossil fuels. You just need hydrocarbons: hydrogen and carbon. H2 can come from water and electricity. Carbon can come from biomass, or from seawater.
We have been over this a thousand times, mostly on TOD. Yes you can get carbon from biomass, hydrogen from water and even make hydrocarbons from air and water. The problem is it takes many times as much energy to manufacture the hydrocarbons than you get back when you burn them.
When fossil fuels are gone they are gone for good. We will not make them from water and air.
Of course synthetic fuels are just a “carrier”. We all understand that, here at least.
But surplus windpower is cheap. And we’ll only need to replace maybe 10% of current liquid fuel consumption with synthetic fuel.
Heck, ethanol can power a US fleet of 240M passenger vehicles, if they’re extended range EVs (like the Volt) which use only 10% as much fuel.
Satellite data shows U.S. methane ‘hot spot’ bigger than expected
American Geophysical Union Newsroom, 9 October 2014, Joint Release
The return of Rossi and the E-Cat
http://www.networkworld.com/article/2824558/infrastructure-management/could-ultra-cheap-clean-energy-be-just-around-the-corner-the-return-of-rossi-and-the-e-cat.html#comments
Rossi’s followers are thinking the recent drop in oil prices has something to do with this new test report on the ECAT. That’s clearly not what’s happening but someday in the next few years it might.
NASA put out an interesting article on LENR last year:
http://climate.nasa.gov/news/864/
I was very interested in reading the misinformation shale companies shill out to investors. On a local note Quicksilver bought out a defunct and shut down pulp mill site at Campbell River, B.C. The first thing they did was erect a huge sign proclaiming it would be a site for a new LNG export terminal. This is spite of the fact that Campbell River is an extra day steaming from Asia, plus it is located another 100 miles west of Juan de Fuca Strait or 200 miles east of the western entrance of the Inside Passage. In addition, while there is currently a nat gas co-gen site operating next door, a new gas pipeline would still have to be built to provide for the LNG facility.
For years I have heard locals say an LNG plant was coming to CR. For years I have said, “nah, this is just to bilk investors and pump up stock”. Furthermore, the site is so polluted I don’t know what liabilities are involved for eventual use? An operating pulp mill of 60 years spills a lot of bad stuff on the ground. presently they are harvesting scrap steel with a small crew.
paulo
“I was very interested in reading the misinformation shale companies shill out to investors.”
Totally agree: In fact, I think Jeff deserves a major metal for bringing the article to our attention (and aws for adding the included figure in subsequent comments).
I just ordered one of these. I might also get a kill-o-watt meter.
BC Hydro offers a rebate reduction. Our monthly bill fluctuates between $49 to $85. I am not sure just why at this point although rates have gone up as well. It might be correlated to how much welding I am doing or how much wood shop time I am pulling down. We are also running two freezers right now, outside, so with the cooler weather that should go down as well even though they are Energy Star rated. The freezers store most of the food we grow and right now they are bursting.
Product:
Rainforest EMU-2™ energy monitoring unit
The EMU-2™ continuously monitors your electricity usage and displays this information, in both dollar cost and kilowatts, on an LCD screen. Information displayed includes the total electricity use for the billing period and the real-time electricity use.
Just bought one in junk shop for $6, unused. Works reasonably well, a sensor strapped to the mains supply cable, a wireless display unit. Carry out round the house and watch power change
As you switch appliances on and off. We have baseline consumption of 0.1KW, sensors, timers, TVs on standby, etc. We consume 6 or 7KW a day total. Electric shower is the biggest load, about 4KW.
I mean 6 or 7 KWh of course.
Measure the transients?
I looked at this gadget on Amazon, and the description said that it only works when one is using one particular brand of smart power meter (provided by the utility). Is that true? Reading these comments I see that no one has mentioned that. Can any provide clarification? If this unit does require a special power meter, are there other whole-house devices to measure electricity usage which do not require a smart power meter?
I have an egauge that monitors electricity use and solar production.
http://www.egauge.net
It works great, gives you a daily graph and tons of historical information.
Not cheap; I got mine free as part of a research project.
BC Hydro has to verify my new meter is configured for this use. Right now it is a new smart meter, but because we live in the boonies they still send a meter reader around. I don’t know if that will affect its ability. I don’t think my meter is set up to ‘talk’ yet. I’ll have to see.
paulo
Ron, thanks for charts. Libya up 600,000 bpd accounts for most of OPEC 12 rise. Surprised that Iraq is totally unaffected by recent unrest. Also surprised that Saudi, Kuwait and UAE have not yet cut production. I guess we are perhaps in mode of pain for high cost producers for several months to see high cost areas shut down before OPEC turns screw – I was going to say for the next ratchet up but i don’t think global economy can tolerate that.
ISIS in Baghdad suburbs. It’s like Basra is a different country.
Should have known bombing would fail.
Classic perpetual Napoleonesque timelessness — an army travels on its stomach. These ISIS guys are getting fed by the civilian populace, who support them. That’s a populace, btw, who are seeing reports of anti women this and anti children that propaganda and laughing at it.
Of rather a lot more interest is who so quickly had anti close air support tactics ready to implement.
These guys are professionals. They aren’t ragtag. Someone has trained them, and someone funded that training. They knew right away the bombing was coming and how to avoid it.
People in the areas ISIS has conquered are enlisting with them. They probably don’t have much of a choice.
https://www.youtube.com/watch?v=ajh2HxBngg0
The reporter in the above piece mentions ISIS’ “version” of Islam. Apparently she has never read the Quran, because ISIS is exactly what the Quran teaches.
Actually the Koran, like the Bible, is a pretty patchy document that doesn’t teach much of anything and doesn’t even make much sense without heavy redaction. It’s hard to exaggerate how low the quality of the original Koran text is. In fact some experts believe that about 20% of the text isn’t even Arabic.
Like the Old Testament, the Koran was originally recorded with no vowels, word separation or punctuation in an otherwise unrecorded Semitic language (or languages). The vowels were added as “diacritic” dots to both texts on the command of Persian caliphs in the Middle Ages.
But unlike the OT, where it is usually assumed that the consonants cover the actual pronunciation at the time, the script used by the Koran only had about half as many consonants as Arabic actually has. So for example in the original texts, the same character could mean b, th, n and j. In modern Arabic these are distinguished by dots (diacritics).
That makes reading the original texts very difficult, especially since Semitic languages are so similar to one another. It may explain the odd pronunciation of some proper nouns like Ibrihim for Abraham and Isu for Jesus.
But German Islamologists generally believe that a lot (20%?) of the Koran is Syrian Christian texts written in Aramaic. These Christians were followers of the “Doubting” Thomas who is slandered in the NT (John 20). Arabic, Hebrew and Aramaic are closely related languages that express most word meaning in the consonants and most grammar in the vowels.
Thomas Christians believe (there are still a few left) that Judas was switched with Jesus by a miracle, so Jesus was never crucified, and that there is no Trinity but one unitarian god. Like the Ethiopian Orthodox Christians, they also believe in the Book of Enoch, with its guardian angels etc, which are barely mentioned by other Christians. The Koran says this too. By this reading Islam is a Christian heresy, like Mormonism.
Getting back to the original point, I don’t believe there is any “true” Islam any more than there is any “true” Christianity, even if everyone claims there is.
A couple of Witnesses appeared on my doorstep the other day who claimed that not only Jehovah’s Witnesses but billions of others will have everlasting life on earth and thus fulfill God’s original plan for humanity when he put Adam and Eve in the Garden of Eden.
Heaven might be a better route to go though considering the way we’ve been fucking up our good old blue planet. And my wife insists half of those who die in combat travel straight to Valhalla upon death so perhaps there’s a better option there: but do Norwegians know about anything (sorry Rune) ?
Whole lot sounds like variations on the same Fairytale to me.
But if my great grandfather and my grandfather and my father an me (probably not) and my kids and my grandchildren, etc. all get to have everlasting life of earth, won’t it start to get pretty clouded here?
And my wife insists half of those who die in combat travel straight to Valhalla upon death…
You have to be joking. The way you have talked about your wife she seems to be a highly intelligent, highly educated person. She does not believe that crap. I refuse to believe that she believes it.
But I am left wondering, what happens to the other half, and why do they not get to go to Valhalla?
Of course I’m joking Ron, give me (us) a brake here. No one in my, or my wife’s, family has had ANY religious convictions in five generations — not a single one. This reminds me of the time you thought I was serious about getting methane from Titan.
But the context in which you wrote it gave no indication that you were joking. If I had said something similar about my extended family, (but not my wife), it would have been the truth.
When I worked at Marshall Space Flight Center I knew PhDs who were fundamentalists and believed the earth is no older than 6,000 years.
When it comes to religion there is no accounting for what some otherwise highly intelligent people believe.
“….PhDs who were fundamentalists and believed the earth is no older than 6,000 years…” I’ve heard stories like that but find them very hard to believe.
I didn`t know this was a religious forum, lol, but there are those also (like me) who believe the World is much older, but mankind only about 6000 years old. Well slightly less since the first 6000 years are supposed to be the years when mankind fully demonstrates we are not able to govern ourselves (we are doing a great job!), and the final “Sabbath Millennium” beginning after 6000 years of Creation, thus making a perfect “7 day cycle” (one day is like a thousand years for God remember) with God`s number being 7 of course :))
Oh yeah, she just told me that the other half go to the goddess Freyja’s field Fólkvangr. And, she said to remind you that, like Christianity, this is a myth: “for Christ’s sake”. Some sarcasm included in there as well perhaps.
Ron,
Those who die in battle go to Valhalla because they will be needed at the last battle–Ragnarok. (slashed “o” to be supplied by the reader.)
Think of it as a mustering center.
I think I have this correct, anyway.
The old Norse Mythology is just a variation of similar mythologies from around the globe. Valhall was a place for dead warriors allegedly, one half ended there the other half of warriors in Folkvang with Freia, but most dead people ended up in “Helheim” or “Helvete” (Hell) which originally was a place where the dead rested until judgement day. Thus Helheim/Hell is a place like e.g the Greek “Hades”, not a place of eternal torture for the damned. This kind of “hellish thinking” which has been incorporated into most of modern Christianity stems largely from Medieval times and the Catholic Church with thinkers like Dante and other minions.
You might want to check out the following:
Ragnarok in Norse Mythology
http://www.viking-mythology.com/ragnarok.php
If KSA cuts production to elevate price, it means Saudi Aramco has no concern about shale, because low price could wipe out the industry.
If KSA maintains output to encourage price decline, shale will be destroyed.
I don’t see any sunny segment in those two scenarios.
Oh and btw, I did see a comment elsewhere that went like this:
Why is the price of oil crashing? When is the election?
Purely speculation but the US & EU seem to be waging financial war with Russia. On one hand the BRICS are working on their own version of an international bank for settlements as a way to manage trade without green backs (and undermine the dollar hegemony). Perhaps the US has encouraged SA to maintain exports at a level sufficient to lower Brent to a point that undermines the Russian economy? This has happened before.
In any case the current oil price is bound to shake out the more marginal players in the LTO world. But lower oil prices also jack up economic activity which in turn drives up oil demand. I’ll be curious to see where oil prices end up this winter.
Except this is the new normal where LTO is a signif % of that economic activity.
The world economy definitely seems to have the flu these days does it not?
Ron and the other good folks who maintain that demand destruction can and will drive down oil prices are certainly winning that particular debate in spectacular fashion at this time.
But if all the figures we have seen concerning the depletion of legacy oil fields are correct to within the ballpark then it seems very unlikely that tight oil and the recovery of production in places such as Iraq things (hopefully )settle down politically can grow fast enough to offset declining production elsewhere for very long- maybe for another couple of years or a little longer.
Then we will find out if declining production can push up prices faster than demand destruction can push prices down.
My opinion is that we will be paying well over a hundred and twenty bucks a barrel in constant current day money in the medium to long term.
A hundred fifty bucks in a decade would not surprise me.This would probably bring about an economic contraction of debatable but very serious proportions of course but we can also adapt to higher oil prices so long as those prices rise slowly and steadily.
There are plenty of ways to spend a little more upfront to save a whole lot on oil over the long term.
A sudden sharp spike that lasts more than a few weeks would most likely gut the business as usual economy and a slow steady rise may eventually kill it by the death of a thousand cuts. But if the rise is slow and steady I think the economy will live until something else kills it even though it will contract considerably on the basis of higher oil prices.
There really is no disputing the magnitude of the dollar run up. That is responsible for what looks like well over 50% of the oil price decline.
Election day approaches. Cheap gas is a boon to the party in power.
QE is ending. Germany seems to hate that more than the US economy (or so it appears until loss of trucking and drilling and railcar activity hits in Q4 GDP for polar vortex rev 2.0.
ISIS and the Kurds are selling way under market price oil.
The one thing we generally know is not happening is there have been no new Ghawars discovered in the past 3 weeks, there has been no spectacular oil production technology advance in the last 3 weeks . . . there really has been nothing on the supply side to drive it.
I can’t escape the conclusion that the dollar going up is basically a zero sum game in terms of oil prices. We Yankees can buy oil cheaper of course but everybody else who buys oil with dollars must ultimately pay for the purchased oil by means of converting their own currency into dollars and when that happens- they get fewer dollars per pound or yen or euro whatever their currency may be.
I realize this process may not correlate perfectly with the total amount people everywhere pay for oil but it ought to work out fairly close.
So the dollar rising doesn’t necessarily hurt oil exporting countries much either depending on what they spend their oil dollars ON.
If for instance the Saudis get fewer dollars because oil prices are going down because of a rising dollar then when they spend the dollars on goods imported from any country losing the dollar race they get more goods.The increased purchasing power of their oil dollars should approximately offset the loss in dollars due to currency fluctuations.
This is not to say that the real price of oil is not falling and that oil exporters and producers are not losing purchasing power as a consequence.
Producers here in the US are certainly getting less dollars per barrel and are compelled to spend most of their revenues here inside this country. I doubt the folks up in ND are buying much in the line of Japanese built oil drilling equipment or heavy trucks for instance.
That would all have merit if oil were priced in some fictitious 3rd party currency like tuks. Then all the currencies have to convert at their rate to the tuk and buy oil as you describe.
But oil is priced in dollars. If a dollar rises for non oil purchase/selling reasons (non oil supply and demand reasons), then oil’s price is affected by factors that are not oil related.
That’s just the way it is. Scotland seeking independence crashed the UK pound (versus everything) and oil’s price fell denominated in the stronger dollar. This would have happened even if Scotland had no oil.
So tell me how the Japanese for instance buy oil cheaper because of a stronger dollar. They buy with dollars but they ultimately get dollars by converting yen into dollars. When the dollar goes up in relation to yen they get less dollars per yen.
Your explanation is like a dog chasing it’s tail. It never closes the circle..
Now if the price of oil is declining not because of a strong dollar but simply because the world economy has the flu and supply is thus outrunning demand at current prices… well then the price will fall in any currency that has a more or less stable relationship to the yankee dollar.
I believe this is the true explanation of falling oil prices.
Well, it IS a dog chasing its tail.
The BOJ has printed yen in totals that made Bernanke look like a hawk. But the yen was mired at 102 despite it. For months and months. They were TRYING to trash the yen and it wouldn’t fall. The NY Fed functions as a conduit for some other CBs that want to intervene in the FX market and that is probably why it would not fall. There was indirect intervention.
This is relevant to your point. Japan paid $100 X 102 yen per USD for a barrel. They didn’t change consumption by 20% (the among of price decline), and global supply hasn’t risen by 20% in the past 4 weeks. That would be 18 mbpd globally.
But Japan now will pay more yen for a barrel. No supply change at all and most certainly no 20% change in either Japan’s or the world’s consumption.
Mario Draghi won’t print. That SHOULD be Euro bullish, but he’s been lying so long that people doubt the Euro can survive. The BOE is similarly pretending and people are staying away from the GBP by the thousands.
And so, relative to those two majors, the dollar rises. A lot of things redenominate.
Amount of price decline . . . tablet.
How will US foreign policy affect oil production in the Persian Gulf?
Washington
Wields the Oil Weapon
Wrong question. It’s how will Gulf oil production affect US foreign policy.
The wonderfully named Dan Dicker tells it as it is – US shale oil production to be cut and companies to get in heaps of trouble at these oil prices:
http://www.cnbc.com/id/102078540?trknav=homestack:topnews:2
The index which tracks most of the US shale oil producers is in free fall (and since it is now down 20% plus in a technical bear market):
http://finance.yahoo.com/q/bc?s=^EPX&t=2y&l=on&z=l&q=l&c=
Couple of more months of this and any number of shale oil operations are going to go tits up. No wonder the Saudis aren’t bothered about the supporting the oil price by cutting production – maybe they got so fed up with all the US shale oil propaganda they decided to see how that bubble would cope with $80 oil 😉
The narratives are so many I have lost count.
Maybe EOG and CLR will have a press conference and announce that out of pure patriotism, they have decided to leave the oil in the ground for the grandchildren.
They can play the Star Spangled Banner when they distribute pink slips. For you non Americans out there, Pink Slips are the little pieces of paper that ask you to report to Human Resources for exit interviews and a briefing on your separation benefits.
Watcher,
I am waiting for the share price of LNG to collapse. Lots of good bets out there
Steve
Another CNBC piece via Yahoo Finance. Is the MSM on a roll or sup’m?
Here’s why shale oil stocks are tanking
It’s a little bit more subtle than CNBC says, but they are worthless so one would expect that.
HYG is a/the high yield bond ETF. If you sashay over to finance.google.com you’ll see it is yielding 5.9%. I looked up EOG and CLR the other day and their latest issuance rated just under Moody’s investment grade threshold, aka junk, but pretty good quality junk.
If EOG and CLR could not get their paper out of junk territory, then the other frackers are worse off ratings wise. Andddddd, if HYG is at 5.9%, then that’s what the frackers are paying to get cash. Now, HYG has been falling with equities so that has goosed that 5.9% number up to where it is, but that’s the number and if they sell paper to the public Monday, that’s what they have to pay.
Contrast that with 10 yr US T paper at 2.3%, or German 10 yr paper at < 1%.
They DO have serious interest to pay.
With oil’s price in the eighties, the US gov’s tax revenues from profits on oil sales will be cut in half or more.
The US gov stands to lose tax dollars in a big way, me thinks.
It’s designed to weaken the US gov’s bottom line and further indebtedness.
I don’t quite understand who is in that conspiracy. The gubmint wants to lose tax revs?
I have consistently argued here that real oil prices can and will increase beyond the hundred twenty plus or minus price that is often mentioned as the max the world economy can support without dieing from oil price disease but I always try to remember to say that I am talking about the medium to long term rather than the short term.By medium term I mean at least four or five years from now to start.
The overall energy efficiency of the economy can be increased a lot faster than some of us expect and it IS INCREASING faster in my personal opinion than most folks realize.There is a huge sum of money being invested annually now on a world wide basis in energy efficiency.
Let’s not forget that a machine operator or a doctor who commutes in a car ten years from now that gets twice the mileage of his current vehicle is still just as productive as ever.The doctor will be able to afford a plug in hybrid and the machine operator will be able to downsize.
You see plenty of new Mustangs and Camaros and Dodge Chargers out there but the vast majority of them are v6 rather than v8 powered these days and get better mileage than my first car- a Chevy with a one barrel straight six and stick shift that took most of a minute to get up to sixty.
Here is a link to an article about energy efficiency.
http://www.scientificamerican.com/article/first-fuel-should-be-elimination-of-wasted-energy/
In the past we have depended on gigantic centralized systems to provide us with energy and water and these systems are so big and expensive that we have had to run them continuously to make them work.
A city bus system works only if you run the buses quite a lot when there are few riders but it still works at least after a fashion.But in a prosperous society it is cheaper to drive an EXISTING car than it is take a bus in as many cases as not if parking is not a big problem.I used to live in a city with a fairly decent bus system and only rode on rare occasions because tickets actually cost me more than gasoline and the short trips TO PLACES SERVICED BY BUSES AT TIMES I WANTED TO GO hardly mattered in terms of my overall cost of owning a car.
MY POINT is that we can afford cars that cost a hell of a lot of money and yet we use them less than an hour a day on average.
I think that if business as usual survives long enough that we will find we can afford to own some pretty nifty energy saving technologies that are not yet on the radar in most cases.
For instance there is no reason why a small engine cannot be totally enclosed and supplied with a top quality exhaust system and run on natural gas.With a tight water jacket and excellent sound proofing it could be installed inside a house just as safely as any fuel burning furnace and make no more noise.ALMOST ALL THE HEAT GENERATED but normally lost could be used to heat the living spaces and the mechanical energy – rotating power- used to power a heat pump or other household loads.
I am not proposing that such a system would provide all the power needed but if properly sized it could run for hours every day during cold weather and if the excess heat of combustion were captured in domestic hot water it could be used an hour or two a couple of times a week in hot weather as well.
This would take combined heat and power to pretty close to one hundred percent efficiency at the onsite basis.
Unless they have gone broke there are a couple of companies out there manufacturing such systems but hardly anybody has yet heard of them and only a few have actually been installed.
Electronic controls will allow such systems to be totally automated and the engines and generators can easily be built to last tens of thousands of hours with very little maintenance because they will be slow running at constant speed burning clean gas and low stressed. They can be cheap in basic design because light weight, wide power band ,variable speed operation and other attributes usually needed will not be necessary. Fuel economy will not matter much either because any heat not converted to mechanical energy will be captured and used anyway.
In the uk these micro chp units are not practical at the domestic level. They produce too little electricity to justify the extra cost, for the amount of heat a averagely insulated average sized house needs in our climate. We always get better return by more insulation.
For now almost anybody anywhere needing heat or cooling energy will get a bigger bang for the dollar by adding more insulation and better windows and doors than by any other means.
The point is not to supply the bulk of the electrical load of any given house but to get the maximum amount of utility out of the fuel burned.
If you have a small chp unit that gets forty percent efficiency mechanically then almost all the remaining sixty percent can be used to heat the house during cold weather and the unit sized accordingly.It should be sized so as to run mostly at peak load times during the winter months so far as that goes thus lowering the peak that has to be supplied thru the grid. Close to sixty percent of the heat in the fuel winds up heating the house directly.
If you feed the forty percent mechanical yield into a heat pump and get two for one on that investment you get a very close to a hundred forty percent yield of heat for your fuel investment. And a heat pump can do better than two for one a lot of the time.
Will this ever be economical in dollars and cents? I personally believe it will be in places with a lot of cold weather and piped gas.In places with a mild climate the system might not ever run enough to pay for itself.
We need to remember that the gas pipes and ductwork are already existing in retrofitted houses and that new houses must still have this stuff. And the combined engine generator can be incorporated into the necessary venting system and necessary furnace if gas heat is to be used.
IF you use grid juice it seems that total efficiency of delivered energy maxes out at around fifty percent. The rest is lost at the generating plant and in the transmission thru the grid. So-if you feed grid juice into a heat pump delivering two for one you get about one hundred percent total efficiency max.
The small chp unit can do much better than that if coupled to a heat pump.
Such a system can also serve as an emergency generator capable of keeping a few lights and a refrigerator etc running during a power outage as well as a means of reducing peak loads back at the generating plant and on the transmission lines.
Chinese and Indian car purchases overwhelm any efficiency consumption moderation.
Maybe probably but not absolutely for sure.
China has an authoritarian government and may mandate electric cars or plug in hybrids or even just outlaw the sale of more private automobiles although the odds of this last happening are close to zero.
We just don’t know what may come to pass. I expect however that Chinese and Indian drivers are going to have just as hard a time paying for gasoline as most Americans a few years down the road.
And the fact that they may consume a lot of oil in Chindia does not change the fact that most Americans can and probably will be buying much more fuel efficient vehicles in years to come.If the price of gasoline doubles it will still cost the same to put fuel in a car that goes twice as far on a gallon.
The owner of the most popular garage in my immediate neighborhood is now driving a Prius………. the first one in the immediate neighborhood ……….and quite a few of his customers are asking to take a look at it and a ride in it. This one guy alone is probably going to wind up convincing a lot of tight fisted Scots Irish hillbillies to buy one based on the gas mileage and reliability of the Prius.
I just hauled home six ten foot sticks of electrical conduit in my Escort sticking out the back window. I could have driven the farm truck.
My retired uncle the quite well to do retired paving contractor used to swear three or four years ago he would never drive anything except his F250 diesel four by four which is all tricked out with every option he could get.
Retirement and the recent depression led him to change his mind.
Now I see him out and about quite often in his wife’s Camry. He says it is to save wear and tear on the truck but he will never live long enough to wear out that truck. He’s doing it to save some money on fuel but he will never admit it in so many words.
The numbers I posted above had within the relevant article a mention that the govt was pushing electric vehicles and the article said that sales were horrific and a tiny fraction of what was hoped.
0.1%. That’s reality and it’s not going to change any time soon (and therefore ever). They have to ramp 8X to just reach US car total levels. They will consume all the oil and leave nothing for others and others . . . will act.
Why do you assume the Chinese and Indians are going to be able to hog all the oil and leave none for anybody else?I personally doubt that either country will be able to project military power very far within the next couple of decades – probably not out of their own immediate neighborhoods.
If you believe in peak oil and peak resources you are suffering from a very serious case of cognitive dissonance if you also believe the Indians and Chinese are going to get to eight cars per ten people.
They will never get to even a third of that ratio and in the meantime we yankees are going to be headed back to half or less as many cars per capita as we have now unless there are miracle breakthroughs in electric cars.
We are not yet using many electric bicycles or bikes of any description but we will be in ten years.
If the Chinese want to waste money on car fuel, let them.
Those of us who buy EVs will be happier, healthier and wealthier.
Let’s assume that’s true.
So what? That’s no reason for anybody else to waste their money buying oil, or cars that run on it.
As to the satellite methane bright spot: I believe this portion of the San Juan basin was still being developed for coal seam gas during the referenced 2003-2009 time frame. I wonder if air drilling of these wells especially if not running a continuous flare could have given off the high methane signature. If so you would imagine that the hot spot would now become more background.
England achieved the goal of 200 million tons of coal mined/produced in a year during the eighteen nineties. Now, the total tonnage world wide is 7822 million tons. Times the next 50 years and there might be even more problems, not fewer.
http://www.worldcoal.org/resources/coal-statistics/
A cut back of 20 percent would do a great deal of good. Ramp up the factories to produce solar grids and burn coal to run the power plant to power the factories that produce the solar panels by the millions. Oil prices would stand to gain ground.
There shouldn’t be wars for oil, there should be a war on oil like there is a war on coal. The world could stand to use a less, not more. Wars on oil and coal would benefit mankind more than you know, really, it would.
Not having coal as an energy source and a resource to be used to produce electricity is analogous to eating your seed corn. It is a foolish endeavor, you’re whistling in the dark, you’ve taken leave of your senses, you’re flying over the cuckoo’s nest, you’ll be taking a trip to the funny farm, you’ll make Daffy Duck look completely sane.
Build another million wind towers and Daffy Duck will get wiped out, which would be a loss too great to bear. Wind towers are too in your face and they need to be wiped out first, not birds. Wind power is not for the birds, that’s for sure, but it is for the birds.
Beam up time.
Hi Ronald ,
I would love to meet your tobacconist. I think maybe he has some exotic product I haven’t seen since my long haired sixties days.
As the old saying goes, two heads are better than one, even if one is a cabbage head.
I try not to try too hard, but sometimes I reach the cabbage head stage.
Most OPEC nations are hurting, especially Iran.
Oil-Price Slump Strains Budgets of Some OPEC Members Behind a pay wall.
Oil-Producing Countries Face Steep Deficits If Price War Continues.
I would not call it a price war at all. It is a slump in oil prices caused by low demand brought about by a world in recession.
The continuing slump in global oil prices is punching holes in the budgets of oil-producing countries, including some OPEC members such as Iraq and Libya that are struggling with severe political and security problems.
Many members of the Organization of the Petroleum Exporting Countries need oil prices to average way above the current Brent crude oil price of $90 a barrel to balance their books. They have ratcheted up annual spending since the Arab Spring in 2011—and rely heavily on oil-export receipts for income.
But most Gulf monarchies with relatively small populations, such as OPEC’s biggest producer, Saudi Arabia, can cope with lower oil prices for some time, making it less urgent for them to cut output to boost prices.
Countries faced with mounting deficits will now “hardly be able to fund their share of [exploration and production] investment” said Ali Aissaoui, a consultant at Arab Petroleum Investments Corp., a bank owned by Arab oil producers.
However here is where low oil prices will really make a big difference:
Nor will tapping international debt markets be easy. Major ratings firms don’t even assign credit ratings to Iraq and Libya. They rate the debt of fellow OPEC members Angola and Nigeria as speculative, making funding very expensive. The cost of servicing Nigerian debt has doubled in four years, according to its Debt Management Office.
Low oil prices are hitting the credit market. This is where low oil prices will have a big, though delayed, effect on world oil production.
And of course oil and gas account for about 75 percent of Russia’s exports and almost half of its total revenue. No idea what their oil breakeven is but would bet they’ve gotten used $100/bbl.
Odds are pretty good shale oil production is a very significant part of US GDP.
Even economically it is very possible and maybe even probable that the US gets hurt more by low oil prices than Russia.
Totally different situation. The US government has no particular concern on shale making money; if anything, they certainly prefer low gas prices because the rest of the economy needs them. On net, tax revenue is going to be better if shale operators are getting killed than if they are raking it in.
Budget break-even applies to states that fund most if not all of their budget via oil exports. Russia is in a jam here – the same one they got in in 2008-9 – because of where they get their money and what they assume the price of oil to be in their budgeting.
And of course the US government can just issue debt for nothing if oil somehow hurt tax revenues that much on net; we run at a absolute large, but pretty manageable deficit as it is. Russia can’t do this, since there is little international market for their debt.
This is a weakness specific to petrostates.
“On net, tax revenue is going to be better if shale operators are getting killed than if they are raking it in. ”
That’s the flaw in the layout. The operators are not going to “get killed”, aka lose money. They are going to shut the doors. The truckers and railcars won’t function anymore. The proppant shippers won’t ship.
It’s not operating at a loss. It’s not loss of tax revenue because you don’t get to tax the frackers’ profit. It’s loss of revs from truckers not having income anymore. It’s unemployment. It’s outright loss of GDP and maybe a deep loss.
You do have a point that govt or CB could just print whatever money is needed to do whatever, but that’s true of the Russian CB too, not just the Fed.
We’ve gone through this. Russia’s populace isn’t going to starve because oil price fell. They will pump the oil needed to grow and ship food to themselves. They won’t buy big screen TVs.
If American oil output dies from low price and China is demanding all that is available and has it secured already in prepaid long term contracts, then America COULD start to see scarce food at the grocery store shelves. We can watch ourselves starve on big screen TVs.
This is not a clear case of Russia getting hurt more than America. That’s propaganda.
China hasn’t secured oil on long-term contracts.
They’ve secured the right to pay for oil at market prices. That’s very different. It means that the high bidder still wins. So, not much has changed.
They’re just ensuring access.
“; we run at a absolute large, but pretty manageable deficit as it is.”
you’re full of crap
As the shale boom is entirely financed by equity and debt, the big impact of a low oil price on the US is actually the bond market. There is a clear correlation between oil price and the bond market (HYLD, HYG, JNK,..), which is on the brink of collapse. As shale finance represents probably just 500 bn it has a domino effect on the huge junk bond market. It is the first time as far as I know that the dollar is up and the junk bond market collapses. The US is treated know as a commodity producer, with all the dire consequences. So it is in the same boat as Russia. The big beneficiary is actually China where the stockmarket has already risen quite substantially. So in terms of bond markets, the US is treated more like Russia and China becomes more like the US (big oil importer benefits from a low oil price). Depending on how low the price of oil will fall, this can be much bigger than the subprime mortgage crisis.
The US is still an oil importer. Lower oil prices help the US.
And you gotta read this article. It’s in “The Economist”, no more respectable publication exist.
Unsustainable energy. The price of oil has been tumbling. The cost of finding it has not.
THIS has been a nerve-racking summer for oil companies. Since June the price of a barrel of Brent crude oil—the global benchmark—has slumped from $115 to $92, a decline of 20% and the lowest for more than two years. That drop is partly thanks to economic weakness. Growth is slowing, particularly in China and the euro zone, reducing oil consumption with it. The International Energy Agency (IEA), US Energy Information Administration and OPEC have all recently lowered their forecasts for global oil demand.
But there is also a growing glut of supply. America’s output of shale oil has risen by around 4m barrels a day since 2008, cutting American imports from OPEC almost by half. The club of oil exporters itself is in disarray. On October 1st Saudi Arabia, the cartel’s dominant producer, unilaterally and unexpectedly cut its official prices to shore up its global market share. The kingdom had already trimmed them earlier in the northern summer, as had Kuwait and Iraq. Most Middle Eastern OPEC members are now engaged in a price war in Asia.
All this is dire news for companies in the exploration and production (or “upstream”) part of the industry, many of whose strategies have been built around far higher oil prices. After plunging below $35 during the 2008-09 recession, the price of Brent had recovered to $128 a barrel by spring 2012. The oil firms responded by pouring cash into all sorts of projects, from American shale to deepwater fields in the tropics. Analysts at EY, a consulting firm, estimate that the world’s energy companies are currently bankrolling 163 upstream “megaprojects”—those costing more than $1 billion apiece—worth a combined $1.1 trillion dollars. The majority, EY found, are over budget and behind schedule. Most big projects have been planned around the assumption that oil would stay above $100—a notion that in recent years has become an article of faith in the industry.
Falling prices are not the industry’s only headache. Locked out of many of the lowest-cost fields by “resource nationalism” in the countries that own the reserves, the oil firms have been pushed into more technically difficult prospects. So capital spending has soared—even as production has slowed for many publicly listed oil majors. Douglas-Westwood, another consulting firm, calculates that the productivity of upstream capital spending has fallen by a factor of five since 2000, and that it continues to decline by almost 5% a year
This extended quote from the economist is the sort of information I have used when coming to my own conclusion that oil prices are going to go up considerably over the long term. There is no doubt more oil available right now day in day out than end users are able and willing to buy at current prices so prices are falling.
Now whether the price has fallen far enough yet to put some producers in the red …..My guess is that if it hasn’t it will if it falls just a few bucks more.
BUT we don’t know precisely what any tight oil producers cost is to the best of my knowledge, and some times it is more profitable to run at a loss than it is to simply shut down a business.
A restaurant for instance may be averaging a loss of let us say two thousand bucks a month with all hired help and management. ( No labor supplied by owners)Simply closing the restaurant may leave the owner liable for a four thousand dollar a month rent bill.
His best option would be to stay open at a loss. Some oil companies may find themselves in this position very soon, running at a loss overall but showing a better cash position by maintaining production.
Any company whose assets consist mostly of mostly tight oil is going to be ” running in the hole” or pretty close to it if prices fall any farther if the stories we read about the costs of tight oil production are accurate.
So as I see things , not being an economist but having taken some basic courses in the field, the highest cost producers may soon be shutting down because shutting down will be their best option if prices fall any farther.
This will put a floor under the price of oil that might not be real solid in the short term because the remaining producers are going to include some that can run at a loss for a good while perhaps given that they are large companies with lots of assets or government owned. Such companies may be willing to run at a loss for a while in order to maintain market share and keep their management and personnel etc all together in anticipation of better times.
But the deeper we dig into such a problem the more variables come into play until we soon get to a point that we simply cannot say why a certain thing is or is not happening or to what extent for what reason.
High oil prices no doubt have a lot to do with economic weakness in oil importing countries. But there are more things wrong than just high prices. If oil prices stay at ninety bucks a while and we don’t see things improving then we will have to put some of the blame on other problems such as maybe shortages of clean water for drinking and irrigation, good timber on the stump, poor quality copper ores, excessive government spending on football stadiums, take your choice. I could go on all day.
If prices drop to eighty bucks and stay there a while there should most definitely be an economic upturn if oil prices are as important as we think they are.But maybe there are so many OTHER things wrong the economy cannot support even eighty dollar oil over the longer term.
So – we are going to find out a few things for sure. We will soon know if tight oil can be produced at ninety bucks if the price stays that low.We will know not too long after than about the estimated costs of some oil fields under development. The development of those that have estimated costs in excess of ninety bucks will be put on the back burner at least in some cases.Some other owners may already be in so deep they have to stay in and hope prices will be up again by the time they are ready to sell some new oil.
With prices in the eighty to ninety or even ninety five to a hundred buck range depletion of existing fields as a percentage of total production is going to take on more and more importance because there is going to be less and less new production coming on line to offset legacy field depletion.
I believe the stage may be set to find out which is going to be more important in determining oil prices- demand destruction or falling production.
My bet is that in ten years prices will be up substantially in constant money from recent levels around a hundred bucks and that production will be down substantially from current levels.
With a little luck I might still be driving and prosperous enough to buy a new car in ten years. No need of leaving that money to a bunch of ingrate relatives that never come visit! If I am able I might just buy myself a 2025 model plug in hybrid with all the bells and whistles that gets the equivalent of a hundred mpg or more or even a pure electric.
But truckers are still going to be buying diesel a hundred gallons per day or more per truck and farmers likewise per big tractor and combine in their busy seasons.There will be a sale for oil at a hundred fifty bucks if production falls off far enough to allow the price to rise that much.
And if I am right about adaption this price will not break the economic camel’s back a decade from now.
I will not argue however that peak resources of all kinds combined plus ecological destruction will not result in economic collapse. I believe a widespread collapse is baked in but that it will be spotty and that some countries will pull thru the next few decades more or less whole barring getting nuked or fried by global warming.
I sure wouldn’t invest in real estate in the American southwest or in Florida water front expecting to hold indefinitely.But winters on the high plains might not be so bad in a couple of decades!
This economic collapse may be well started even today or the economy may recover for a while which is what I expect before heading downhill again. This boom and bust may repeat a three or four times yet before things head to hell in a hand basket for sure.
I think most of us reading this forum have a fair to good shot at living to see the end of perpetual economic growth.
There has to be some feedback loop in demand too if Shale activity contracts measurably: if there’s a big slow down in those trucks and trains in Nodak and Texas, then I’m guessing that’ll make a not insignificant hit to diesel demand in the US further putting downward pressure on price…? Or is it just not meaningful in the scheme of things? Anyone have any kind of informed guess as to the scale of this consumption by Shale industry?
“Or is it just not meaningful in the scheme of things?” No facts but I would think not meaningful. There’s a highway near where I live, half the time, (western Canada) and it’s dominated by heavy-truck traffic: lumber/logs, pipe/modular homes (going to Alberta tar sands), groceries, etc. It’s a relatively small highway, perhaps 1000 trucks per day — maybe 30-40 percent of all vehicles. A gazillion pickup trucks around here with maybe 30-40% being diesel. Major logging activity: all diesel powered.
Did a computation of truck fuel consumption for a brand new well. Posted it. Search won’t find it, I suspect.
Bottom line, fuel burn per well was insignificant compared to flow.
To some extent the LTO shale producers have hedged in the futures market. The smart/lucky ones may be able to weather this.
There was a Bloomberg piece a few weeks ago about a well known trader who was buying up oil futures at ~$100ish. No doubt some of those selling were LTO producers.
If Brent goes below $75 it’s time to go long, big time.
ISIL within 8 miles of Baghdad, as Iraqi governmnet pleads for US ground forces:
http://www.telegraph.co.uk/news/worldnews/islamic-state/11156264/Iraq-asks-for-US-ground-troops-as-Isil-threaten-Baghdad.html
This would be a greater humiliation for the administration than having Obamacare shut down. Quote from the article :
“The problem,” noted one US pilot, “is that once you get American boots on the ground… one of those guys gets captured and beheaded on national TV.”
Iraq required that US forces leave Iraq by the end of 2011:
http://en.wikipedia.org/wiki/U.S.–Iraq_Status_of_Forces_Agreement
As they say, be careful what you ask for.
Low oil prices are one thing, but current coal prices are killing much of coal mining industry. And coal gives our civilisation almost as much energy, as oil. Recently China cut coal output plan for this year by 190 mt – that’s equivalent of about 2 mb/d of oil. Something big is happening right now. I think that next couple quarters will be critical.
Some total estimated costs per mile for a range of vehicles, some new, some used:
I came up with some BMW I3 numbers by extrapolating the Leaf numbers. The following numbers are the estimated total costs over 75,000 miles, over a five year period. The vehicles are ranked from lowest cost per mile to highest cost per mile.
http://www.edmunds.com/tco.html
2014 Nissan Leaf: $27,000 ($0.36 per mile)
$30,000 price
5 year fuel cost: $2,700
New Honda Fit (EX): $32,000 ($0.43 per mile)
$20,000 price
5 year fuel cost: $8,100
2011 Honda CRV: $39,000 ($0.52 per mile)
$18,000 price
5 year fuel cost: $10,800
BMW I3 (Based on extrapolating Leaf numbers: $41,000 ($0.55 per mile)
$45,000 price
5 year fuel cost: $2,700 (not counting gas for gas assist version)
New Mazda 6: $48,000 ($0.64 per mile)
$25,000 price
5 year fuel cost: $8,600
2010 BMW X5: $62,000 ($0.83 per mile)
$25,000 price
5 year fuel cost: $16,000
2011 Mercedes GLK: $64,000 ($0.85 per mile)
$28,000 price
5 year fuel cost: $16,000
Never have been pleased with Edmund’s layout.
The Mercedes vs Leaf is $2800/yr in fuel. At 15,000 miles per year that’s about 18 cents a mile.
But the numeric difference in “cost to own” is 49 cents/mile. Fuel is just barely 1/3 the difference.
The real difference is the Mercedes is an expensive luxury car selected by an owner who has earned luxury. The bulk of that pennies per mile difference is depreciation of the expensive luxury car vs the lower money niche car. The cost to own difference is about success. Not about batteries.
I resemble that remark. We have two elderly (2004 and 2005) BMW’s, both with over 100,000 miles, and maintenance costs are becoming a real issue. I’m contemplating getting at least one Leaf. Anyone had any experience with one?
There is a essay on evtv.me about new cars being unmaintainable. I have a vw TDI wagon that the computer in the door gone zombie and the car won’t lock and alarm goes off .. 4 shops and the dealer are clueless. The complexity of new cars is frightening.. Classic BMWs may be worth keeping if someone understands them..
I paid eighteen hundred bucks for my 99 Escort some years ago and I will still be driving it five years from now. It ain’t a luxury car by any standard of the last sixty years but it has power steering power brakes and heat and air conditioning and will not likely require more than a couple of thousand bucks in repairs over the fifteen years I expect to own it and drive it at least a hundred thousand miles. It gets over thirty mpg average.
New cars are luxuries for people who can afford them or want them as status symbols.But without new car buyers I would not be able to buy older cars proven to last dirt cheap.
I too had the habit of buying used cars and driving them a long time & fixing them myself. Had very good service from the chain of somewhat used toyota corollas I had over last 20 yrs.
Like click and clack, I think it’s nuts to buy a new car.
But I did last year buy a new Leaf. Couldn’t find any other around here.
This thing is so much better than any other car I have ever had that I think there will be a stampede toward electrics once the public becomes aware of them.
and since I fuel it with PV-solar, it costs very little to use. Wife uses it just the same as she did all the others, and brags incessantly to her friends about how superior it all is. None of them ever even heard of an all-electric car, and when they see those big signs on the side -RUNS ON THE SUN- they simply don’t understand the whole scene.
But- they will. Then-boom.
I strongly agree even though I have no personal experience with electric cars. The only reason in my judgement that they are not selling faster than they can be built is lack of familiarity with them on the part of the driving public.
Once there is an electric in the neighbor hood and people see it on the road every day day after day the ice will be broken. It will help enormously when battery prices come down some of course and when there are actually a few used ones around on dealer lots.
People aren’t going to rush out to buy an electric car the way they did cell phones. There is too big a worry factor about long term reliability and resale price and it is going to take some time for this worry factor to go away.Twenty or thirty grand is a lot of money even to a one per center.
But once the first young professional woman buys one and keeps it in a given office …. the word is going to get out fast. No tuneups no brake jobs no oil changes no mufflers and dirt cheap by the mile to drive……………Not to mention that all important social awareness and status statement.
Nothing else will say smart sophisticated modern culturally aware like an electric car.
We have had a Leaf for 3+ years and a Volt for 2+ years. We love both. Electric cars are nice and quiet (as quiet as a high-end luxury car). Near zero maintenance. We take the Leaf in every 6 months for a check because the warranty requires it, but the only thing that has actually been maintained is to replace the cabin air filter. I looked under the hood once when I bought it, and have never opened the hood again. (I have done just about everything on a gasoline car myself except rebuild a transmission.) The Leaf has good acceleration, handles big hills just fine (and we have driven the Volt up the mountains in Colorado). Both cars have a good cold A/C that handles summer in Texas quite well. The Leaf has an excellent sound system.
I honestly do not know any difference between a pricey luxury car and a Leaf, other than snob appeal.
I drive an older Lexus. Minimal maintenance. You don,’t need a Leaf. You need to pick something other than BMW.
We are driving a 2010 red Prius and a year old black four cylinder Honda Accord. Couldn’t be happier. The Honda was at the suggestion of my favorite mechanic. Hope to keep both 10 years or more.
You only need a Leaf if you want to save money and reduce fuel consumption…
Jeff, I have a Citroen Berlingo 1.6HDI year 2011 . I work as a courier so drive 600 km PER DAY . My kilometer stands at 420000 Km today(yes 420000) . Never paid a cent extra then for regular services required by the manufacturer i.e oil changes,filters etc (circa Euro 1200 per year) . Average : Drove from Belgium to Frankfurt and return . Total 1000 Km usage 53 litres . Total cost Euro 70 . Unbelievable . By the way seating capacity is 6 and not 5 .
Would, could, a Texan drive a Citroen? : )
Only in Austin.
The point is that the Leaf is the cheapest car on the road. Cheaper than a Nissan Versa, cheaper than a Honda Fit, etc.
Ron, way up higher when replies ran out and this tablet got clumsy searching even higher . . . ?Occam’s razor . . . applause, people often get it wrong re probability vs assumption total (though usually they are the same), but regardless, on this tablet, briefly, I offer the contrary — given loss of transport more assumptions reqd for survival than for the extinction path of least resistance.
But we’re not going to lose transport. That’s the whole point of the Leaf discussion: passenger transport is more than 50% of transport. Most freight can go to rail. There’s enough oil for the rest for another 100 years, and after that biofuels and synthetic fuel will handle the remaining 10%.
If the idea of never having to buy gasoline to propel your automobile takes hold, car owners embrace electricity to power cars with electric drives, gasoline will become less expensive, the market would nose-dive. Millions of electric cars and millions less gasoline engine cars will have a mind-numbing effect on humanity. There would be no shortage of gasoline ever again. The yellow plastic covering the pump handle would disappear altogether. Gasoline shortages are here, you know.
Better build some more power plants generating electricity. Solar arrays won’t work like you think they should, you’ll fry birds, literally, and wind power will be a complete nuisance for all species including the ebola virus. You want to know what will happen? Good ol’ King Coal will ride to the rescue. Coal will power the electric cars and bikes. More hydro and nuclear will too, but you are going to need oil to achieve hydro and nuclear. King Coal can cover that base too. Coal is your go to fuel, easy to use, abundant, the best heat you can buy to heat your home. Beats them all for efficiency and ease of use. Occam’s Razor’s penultimate example of how to get things done. Coal will be your salvation, oil would be sorely missed, but coal will be missed even more. Sorry for the campaign for coal, but you would miss it dearly if it went away and never came back.
Those vehicles equipped with rice plant transplanters will forever be used to plant rice instead of by hand. Saves a lot of work. The work now is to replace the operator with robotic controls and intelligent controls to monitor what is taking place.
Fossil Fuels are required for humanity to exist as it does now and that dependence is not going to go away. Mongolia produces 98 percent of its electricity from power plants fueled by coal. Take that away and the Mongolian hordes will come knocking on your door.
It is a nice dream to have renewables to power the planet, but not in your lifetime is it going to happen. It’ll be a nightmare in the end.
Although, doing away with stops at a gas station to buy more gasoline at 3.50 for a gallon does have great appeal and can’t be ignored. The convenience of not having to do that one thing and still be able to transport yourself with a set of wheels fueled by electricity is what should have happened in the very beginning. Studebaker built electric cars first. Studebaker should have won the race from the getgo. Electric drives are a gas. The electric starter should have never been invented. Broken arms would have forced the owner to use electric drives powered by electricity sourced from a battery instead of cranking a gasoline engine until it backfires and breaks your arm.
Had Edison not invented the electric light bulb, we’d all be burning kerosene to light the lamps to see at night and the whales would not have had any hope of survival. Then oil was in its infancy and something had to be done to find a way to use it all, so Henry Ford used gasoline in an engine mounted onto a frame with wheels on it and the rest is history.
Any choices made, the choice would be a Maybach with a V-12 engine with a cost of about 385,000 usd and change or some number in that range. Might as well go whole hog. Anybody got an extra 385 grand to give away? I’ll take good care of the Maybach. Of course, it would only be driven on Sundays.
I would also buy a new electric car to drive from Monday to Saturday. Since the only real car company on the entire planet is Nissan, it would be a Leaf, even if the Altima has engine hoods that fly off the car when you’re driving it. Electric vehicles are a game changer. Still are going to need oil to move snow so the electric vehicle doesn’t get stuck and you just sit there with no power to move. It can’t be a world without oil, but it can be a world where a lot less of it is used and won’t involve a great deal of hurt.
The health insurance industry has a tiger by the tail with ebola.
That was my point. A lot of aboriginals, especially in the deep jungle, do not use liquid fuel at all. And extinction is not the path of least resistance. You have no idea how much resistance people will put up to stay alive and to keep their kin and fellow tribesmen alive.
I agree with Ron. UNLESS we get hit by a big asteroid or nuke our selfs into extinction we are going to survive as a species with a 99.99 percent probability for a very long time in human terms although we might not make it very long in terms of geological,astronomical, biological time. But a million years or so is in the cards for us barring that asteroid.We are now so spread out in so many places that conventional war, famine,and disease will never get us all, unless the atmosphere goes anoxic. That could conceivably happen but by then we would have suffocated anyway. The odds of THAT are happening are slim indeed at any rate.
Eighty or ninety percent of us maybe more may well perish if the cards fall wrong when peak resources combined with climate change hit us hard but even ten million people are enough to repopulate the planet in a hurry given that they will possess all sorts of legacy knowledge and technologies. I will lay a bet that there are at least fifty million large stainless steel butcher knives in American kitchens that will last right thru a house fire or nuclear war or a thousand years in the dirt and be just as good as new.
People will learn how to recreate craft level manufacturing in a hurry and what a craftsman makes generally lasts indefinitely.I have wooden furniture made by a relative that is worth a small fortune already close to a hundred years old that will last at least a few hundred years barring fire or leaky roofs.In has never been in a cardboard box or a warehouse. Furniture can go from maker to end user on a push cart if necessary.This particular furniture was originally delivered with a horse drawn wagon. The same horse dragged the logs out of the woods. I never knew the man who made it but I knew one of his sons well before HE died some years ago.
Modern roads well graded and with plenty of stone under the asphalt will soon be impassable to motor vehicles after (IF) a hard crash hits but they will be there almost forever if used and maintained by local people .There will be a billion tons of steel laying around ready to be repurposed although most of it will rust away within a century or so.Copper wire by the thousands of tons will be easy to find for a thousand years. Remember the Iceman’s axe was made of copper.
Peak oil may well mean the end of life as we know it today in richer countries with remaining substantial natural resources but only if the peak is sharp and the backside of the curve is steep.Otherwise we will conserve our way thru the bottleneck in fortunate countries such as the US and Canada and just build some coal to liquid plants and a lot of mass transit and get away from centralized businesses and go local again.
Life in the US won’t be business as usual as we recognize it today but it will still be life as we know it minus easy personal transportation and lots of frivolous and useless consumer junk. The power will stay on , the water will stay on, there will be food in the supermarket.Order will be maintained , if necessary by troops who will shoot first and ask a few questions later if they are not too busy shooting some more.
There is absolutely no reason we can’t build out an enormous wind and solar power farm system if we choose to do so well before the oil and coal necessary to build it are too scarce to allow it to happen.We have spent more than required on wars for oil and the military industrial octopus in the past.
Steel that has been going into automobiles and skyscrapers can be diverted into wind turbine towers and factories that are churning out gears and bearings and axles for heavy trucks and bulldozers can switch to manufacturing wind turbine components.The concrete going into high rises and shopping centers can go into turbine towers.
Skilled mechanics will work for whatever Uncle Sam tells them they will get paid on the transition or they will find themselves collecting the wages of a private fourth class doing the same work for even less and with tougher bosses.
Factories that stamp out car fenders and hoods can manufacture mounting systems for solar panels.Insulation factories will run around the clock around the calendar.
WHEN the economic shit associated with peak oil and peak resources hits the fan it is going to hit WELL BEFORE either coal or oil are exhausted.
Modern well established governments may be the most tenacious life forms that have ever evolved in some respects and they WILL use their powers – once it is obvious that they must do so – to redirect such resources as are available to solving the peak oil problem.
Barring very bad luck there will be time to solve it using time of war economic policies such as rationing and redirecting industries into producing the needed machinery and infrastructure.
The thing that scares me far worse is runaway climate change. By the time the situation is absolutely indisputable in terms of convincing laymen and congress critters it may well be too late to do anything about it.
The effects of peak oil will be felt pretty damned quick via a big price spike that will go away with a depression but that will return with a vengeance if and when the economy recovers and it will not be possible to deny this problem exists much longer.
But the co2 already in the atmosphere may be enough to ruin the climate twenty or thirty or forty years from now. Putting more in every year is sure to fry the planet in human terms.Convincing the public and congress critters of this fact is probably going to be impossible.
Monkey brains aren’t geared to deal with time frames that long.
Eighty or ninety percent of us maybe more may well perish if the cards fall wrong when peak resources combined with climate change hit us hard but even ten million people are enough to repopulate the planet in a hurry given that they will possess all sorts of legacy knowledge and technologies.
That’s why I got frustrated on that other site with the extreme doomer conversations. A few them refused to even allow any discussions about scenarios other than collapse and then rapid extinction. They had their minds so made up and so closed to other possibilities that it was heresy for anyone to even contemplate survival.
People just don’t think these things thru.
What do you lose with transport? Ya, food. That sends the hordes of the smartest, fittest, most rugged individuals streaming out from cities. Gang members well armed.
Let’s move forward a few years from that event. Tetanus vaccine is used up. So are antibiotics.
Population continues its descent. Give it another decade. No more money. No more shipments of cash. Communications start to die as cannibalization of equipment reaches its end.
Calorie generation via farming eats hours. Of all the mechanisms for descent, this one becomes dominant. The ivory tower types aren’t going to get fed because they didn’t contribute to calorie generation. With money gone, the only exchange medium is farming hours. So that’s the end of intellectual pursuits.
We’re now 50 yrs from the first trucks that didn’t bring food to cities. We’re down to 1 billion globally. Of the 6 billion that died, 2 billion died from rivers being choked with bodies and the sheer number of flies in the air making it unbreathable within 30 miles of cities and that was all in years 1-3.
The remaining 1 billion gravitated to seashores, for the salt needed to preserve food. The concept of repopulating the planet requires oil to fuel population gain, and it’s gone, so that’s not in the cards and never will be. Seashores get tsunamis and hurricanes. Enclaves will start to get picked off.
But seashores also provide transport of food up and down the coast to save areas that get hit by a famine — provided there is any to spare elsewhere. A fairly big problem will be the possible loss of all livestock in the initial years of outward pouring from cities. If there are no pigs left in the world, there never will be any to haul down the coast to the needy. So sailing ships with holds filled with potatos and walnuts will be the norm. Maybe carribou can be transplanted southward. Seems unlikely.
Time passes. Inbreeding within enclaves. Marine life recovers from the initial years of desperate overfishing and becomes a food source, but very light on carbs. Lack of iodized salt brings back thyroid disease. Diabetes takes 15 years off life expectancy. No sheep, no insulin.
Farming calorie hour imperatives gut education. Intellectualism declines further. As does medical training.
Relentless loss and descent are clearly underway. Time passes. Disease wipes out an enclave here, then there. There will be no pressure or incentive to ever try to repopulate it. Shrinkage continues. In the final analysis, it becomes clear there is just nothing to fuel the reduction of hours spent farming so that other things can be pursued.
Give it a few centuries. That should be all the time the pain lasts.
Oh I forgot to mention the elimination of women’s rights. As muscle reasserts itself as being overwhelmingly valuable to society with loss of intellectual input, the contribution of women becomes limited strictly to babies.
Watcher, it is not that you are not thinking things through, it is you are just ignoring all the people that live in primitive and wild places.
First, I don’t believe that all the people who live in countryside will become extinct. After the die-off of perhaps 90 percent of the population there will be a lot of empty spaces for people to eek out a living from the land. But there will still be thousands of places in the tropical jungles of Asia and South America as well as thousands of other places in the high Arctic. You completely ignore these places. I guess that is because they don’t fit into your paradigm of total extinction.
I’m okay with primitives who never depended on oil. I understand that.
But we’re talking about extinction here. Those people can never grow. They will remain what they are, until a plague hits them, or a tsunami.
It’s growth and only growth that avoids extinction. Otherwise, all your eggs are in one basket.
But we’re talking about extinction here. Those people can never grow. They will remain what they are, until a plague hits them, or a tsunami.
Homo sapiens expanded from just such humble beginnings.
You really seem to be locked into the extinction model. But you have no way of knowing the future. We are all speculating, but you seemed damned determined to insist that extinction is the only possible outcome.
Yeah, Boomer is right. They will have an empty world in which to expand into. And no competition for territory. They would grow like wildfire.
But there is no reason current homo sapiens will be wiped out completely when previous ones have survived droughts, floods, volcanoes, disease, war, famine, an Ice Age, and so on.
Unless the atmosphere changes so much that most current species are wiped out, I see no reason why homo sapiens can’t survive what previous homo sapiens survived.
They grew. That’s how they survived those events. They spread out. They found what they needed to spread out.
If you hold a population at one level and occupy one spot, eventually you’ll get picked off.
They grew. That’s how they survived those events. They spread out. They found what they needed to spread out.
If you hold a population at one level and occupy one spot, eventually you’ll get picked off.
You have looked at the historical population models, haven’t you? Human population growth is a relatively recent phenomenon. And some of us think that if enough people disappear, there will be sufficient resources to keep the rest of them alive.
The growth or die model seems to be what a lot of economists follow, but some of us think there are more sustainable models.
If you hold a population at one level and occupy one spot, eventually you’ll get picked off.
Errrrr… with no one and nothing to hold them, why would they hold their population level, and why on earth would they just occupy one spot when they have the whole world to expand into?
Guys, think about it. If farmland got huge in some area, it was because there was salt nearby and natural irrigation. It’s not a whole world. It’s places with that combination. The salt has been getting harvested for hundreds of thousands of years. So those places are fewer.
If people get wiped out in a locale, how can others expand into that area? How do they get there? How do they know the place is empty and they should even try to get there? Natural irrigation fails sometimes and presto, famine. Famines would be one of those locale destroying events. You can’t ship food so you’re limited to what a self irrigated field can do, or if you’re on a coast you may beg for help.
Those primitive tribes with no contact? They’ll be inundated in the initial year or two. They have no great advantage. The influx of people with firearms will be overwhelming.
See how it requires so many assumptions for survival vs the obvious result of the stages of descent? You have to believe natural irrigation works. Right this moment California is farming only via aquifer, and that’s pumped with pumps that will break and have no spare parts. You have to believe new easy salt will be found. You have to believe isolated tribes won’t be overrun by desperate people. You have to believe that initial surge won’t wipe out all livestock along with wild animals. That’s the end of easy protein so you have to assume something benign in that arena.
Sorry. Oil scarcity will kill everyone eventually.
err hundreds or thousands
Watcher, Boomer has it right, you are just have your mind set on extinction and refuse to ever listen to arguments to the contrary.
None of the reasons you list have any relation to why species actually go extinct. You refuse to acknowledge that there are literally millions of separate niches where humans can survive. The odds that everyone in those millions of niches would go extinct are millions to one.
Salt? What the hell has salt got to do with anything. Only a tiny portion of the earth’s land is salt saturated.
Isolated Tribes expand by simply increasing their numbers and moving into the territory that borders their own. If no one is there then they meet no resistance. Only if the area is populated do they meet resistance. How do they get there? They walk!
And you can’t have it both ways. You can’t have people with guns walking thousands of miles into the deep jungle, or even harder, walking thousands of miles into the high arctic, just to kill people. That is just silly. People with guns are survivors. And they will not go to all that trouble just to kill indigenous people.
No population of animals has ever gone extinct due to overpopulation. Species go extinct due to under population. Species go extinct because they are isolated and so underpopulated that they cannot find one another to mate.
I find it really strange that some people are so locked in on the myth that the human population is doomed to extinction that they ignore the very things that causes a population to go extinct.
Humans occupy every habitable niche on earth. Literally millions of them. The idea that they all will go extinct, every one of the millions of habitable niches will either be killed off or die-off is one of the strangest ideas I have every came across.
I don’t believe any biologists would ever buy that extinction scenario. Biologists know why populations go extinct and overpopulation is not one of the causes. And populations go extinct because they have only one niche, not millions.
The disturbing pattern of health care workers, wearing protective gear, coming down with Ebola continues, whether it be in Africa, in Spain or now in the US:
http://www.dallasnews.com/news/local-news/20141012-health-care-worker-at-presbyterian-hospital-in-dallas-tests-positive-for-ebola.ece
You really have a way of starting Sunday morning with cheerful information Jeff. Maybe you should apply for the Grim Reaper’s job when it comes up for renewal?
Doug,
That’s what this board is all about. Happy news. Day after day after day.
Heh!
Lol.
Too funny!
I’m gonna put odds at 50/50 confirmation tests fail to confirm.
An update to the original article:
I have had some personal experience with such suits and while they are reasonably efficient protection they are a long way from fool proof.
Patients pick up infections even in operating theaters that have been twice scrubbed and disinfected meticulously while the doctors and nurses operating on them wear sterile gowns and gloves and masks and the air itself comes in thru hepa filters.
The virus in this case may be so infectious that even the tiniest microscopic speck of saliva expelled by a sneeze might be enough to infect another person if it lands on a spot they touch or if they inhale it.
When we hear that a disease cannot be spread by air what is meant is that SO FAR it has not been proven to spread thru the air.
No nurse or doctor I know of personally would allow a person with aids to sneeze on or near them if they had an open wound such as a bloody scratch or minor cut.They say airborne transmission is impossible if you ask them publicly but their behavior indicates otherwise and if you know them well they will tell you privately they are not confident that airborne transmission is impossible by any means.
99.99% filters won’t protect against 100 million viruses.
People who live in total isolation from the rest of humanity will not be affected by those viruses. But far more important, there are almost always people who are immune. There are people who are immune to the aids virus. And it would not surprise me at all if it was found that there are people who are immune to the ebola virus.
aren’t the infected survivors immune?
“People who live in total isolation from the rest of humanity will not be affected…” Perhaps, if they stay totally isolated.
Speaking from my base of almost total ignorance, my understanding is that isolated peoples are often especially susceptible to infectious diseases: native Indians to smallpox/TB for example. Those who survive living in the most wretched conditions may have better odds?
“But far more important, there are almost always people who are immune.” That seems spot on. Some people seem to “catch” almost nothing going around — or they are relatively unaffected.
The relationship between susceptibility to a disease and exposure is that a population that has never been exposed to a given disease will catch it right and left if once exposed to it.
The ” isolation ” means simply that there has been no previous exposure rather than that the victims live far apart in sparsely settled territory.
So while the local people here in America were first exposed to smallpox etc these diseases went thru the population like fire thru dry grass even if the people lived quite a ways apart. One visit by an infected person could wipe out a whole village.
It is true that there are sometimes individuals that are immune to a new disease but this is not universally true.
There were many tens of millions and maybe as many as four or five hundred million American chestnut trees for instance when the blight arrived here and so far as we know not a single tree out of all those millions was immune .
The only trees that have survived have never been exposed to the disease.They are all located out west and so far the disease has not been transported by accident across the intervening thousand plus miles without suitable host trees.
They got there by the usual way- carried by men. In this case they are a very highly treasured ” invasive species”.
( Chesnut trees will be making a comeback over the next few decades as tree breeders have managed to cross breed the chestnut with an Asian species and thereby confer immunity.I hear that the blight proofed trees are virtually indistinguishable from the pure strain except by genetic testing. )
Love the story about the chestnuts. I wonder when it will start happening.
I don’t think anyone has managed to evolve a natural resistance to Ebola, it’s only been present in human for between 40-50 years and there have until this year been limited outbreaks of it.
Any and every community is going to be susceptible to Ebola – if health care workers are coming down when the virus is in a controlled state (i.e. there are only a handful of cases and all the attention to detail necessary is given) then how are we going to cope if a large number of cases start to appear. All you need is for the virus to enter the population of a country on the same continental land mass as you and containment is going to be tricky. The virus could gain momentum in a country without such a strong medical service and slowly but surely you would find the spread crossing the border.
Survivors as ezrydermike proposed aren’t immune, if they were immune we wouldn’t be identifying them as survivors. Survivors are resistant. People who are immune most likely wouldn’t show symptoms and would be carriers.
“People who are immune most likely wouldn’t show symptoms and would be carriers.”
Yes, and you can line up behind Jeff for the most depressing news prize.
My daughter, a biology professor, calls me “Debbie Downer” (from Saturday Night Live). However, after reading about outbreaks among health care workers in multiple countries, both developing and developed, she bought a supply of freeze dried food.
In any case, here’s an article to contemplate, in regard to the 21 day incubation period:
Human asymptomatic Ebola infection and strong inflammatory response
http://www.ncbi.nlm.nih.gov/pubmed/10881895
I don’t think anyone has managed to evolve a natural resistance to Ebola, it’s only been present in human for between 40-50 years and there have until this year been limited outbreaks of it.
I believe the way these things work is that some people may already have some sort of factor in their bodies making them resistant to something like Ebola. It’s not that the body developed this specifically for protection from Ebola. It could have been a random mutation. And then if much of the other population is wiped out, but these random carriers pass along these protective genes, future generations may carry a protection.
They have found a few people who were exposed to, but didn’t develop HIV. Something about them genetically protected them even though they were not given medical intervention in advance to protect them.
Yes, some people do have a natural resistance but it’s unlikely (although not impossible) that any one group would show resistance, equally no group is likely to show any greater weakness to the virus.
I shouldn’t have said “carriers.” They aren’t carriers of the disease. They are carriers of the mutation that protects against the disease.
HIV is a different kettle of fish altogether. It’s been with us for tens of millions of years. In fact there are some theories that placental mammals evolved because they were infected with immune deficiency retroviruses that allowed the placenta to attach itself directly to the mother without an immune reaction.
I don’t think anyone has managed to evolve a natural resistance to Ebola, it’s only been present in human for between 40-50 years and there have until this year been limited outbreaks of it.
Natural resistance is not something that must evolve. It is just a natural immunity. There were people immune to the aids virus very early in the epidemic.
However over a long period of time resistance does get built in to certain ethnic groups – mainly because those who don’t have resistance die.
That’s why European viruses were much more devastating to native communities than on the Europeans. The Europeans certainly suffered and many would have died but the native communities died in droves.
Hi Ron, sorry to sound as if you didn’t know this. In my original response I was trying to demonstrate that isolated communities wouldn’t suffer any worse from Ebola (from a biological point of view) than those living in cities.
The discussion went sideways as it often does.
so the nurse received an transfusion from the dr who survived.
I am sure I am getting things wrong here semantically, but the dr who survived exposure has some type of immune response that can be shared by a transfusion of the antibodies
http://www.reuters.com/article/2014/10/14/us-health-ebola-usa-idUSKCN0I31Q620141014
50/50 just came up tails.
CDC confirms the test result. Ebola.
I Checked on the CDC site to see what the recommendation for Personal Protective Equipment (PPE) recommendation is. The current recommendation is a gown, a mask or respirator, goggles or face shield, and gloves. Further PPE is only recommended if there are significant body fluids around. The full details can be found here http://www.cdc.gov/vhf/ebola/hcp/index.html in the protecting health care workers section
The pictures I’ve seen of people in full protective outfits have usually been CDC workers. The pictures of most of the Doctors and Nurses in Africa that I’ve seen are following the CDC guidelines.
The scary thing is people’s attitudes to the virus. The BBC interviewed the general public at the Austin World Fair about Ebola – probably not everyone was as blase but quite a few people informed the interviewer that they weren’t worried as they were washing their hands as they’d been told to.
I understand there is a need to keep things in proportion, there was no reason for people at the World Fair to fear contagion, however informing people that washing their hands will protect them is…I’m honestly unable to think of an appropriate adjective to describe what a bad idea it is.
The news is not all bad. http://www.medicalnewstoday.com/articles/283625.php TB was the number one cause of death in the US at the beginning of the 20th Century. Syphilis was common.. There was no treatment for pneumococcal pneumonia, (the old man’s friend).
When the annual Ebola death toll in the United States approaches one-twentieth the death toll in the United States from HIV (or influenza, or auto-related deaths, or suicides, etc.) , I will join you in your elevated concern.
For Whatever its worth: No, I do not have HIV, nor do I know anyone who does. I am straight, as if that matters in the conversation…but I am an analyst, who looks askance at people who hop on every potential bandwagon as evidence that the World as we know it is about to crash down and burn. Humanity faces clear predicaments in the not-too-distant future (starting as early as ten years from now, but maybe not becoming manifest in a dire way for somewhat later)…it seems pointless to me to pull the fire alarm for every little thing that comes across the Internets and media that rattles your cage a bit.
https://en.wikipedia.org/wiki/List_of_preventable_causes_of_death
http://drugwarfacts.org/cms/?q=node/30
Please keep some sense of perspective and proportion…else you will continue to give rationale LTG thinkers a bad name.
Look, Dave … I can see you’re really upset about this … I honestly think you ought to sit down calmly … take a stress pill and think things over…
Out!
Discussion doesn’t hurt – admittedly I and probably others do have a pre-disposition to find this and similar subjects of particular interest but that doesn’t mean there isn’t merit in discussing them.
I said about a month back that I thought it would be brought under control, now I’m not sure which way to lean.
There have been predictions for awhile now that eventually the world will be hit with an epidemic that we can’t control. So far Ebola doesn’t sound like the one.
For me personally I am probably most concerned about antibiotic-resistant strep and staph infections. I’ve known people who have ended up in the hospital because skin injuries have gotten out of control, and of course, periodically we hear about people who have lost limbs or have died because nothing they have been given controls their infections.
I would be worrying about MRSA.
Ebola (actually the genus of 5 species of the virus, of which the Zaire strain is what we are dealing with) is more of a societal and social problem.
Sorry, typing before I realised who you were replying to. I’d agree that considering any extreme preventative measures is jumping the gun.
I stick by my previous comment though that I’m not 100% sure that we have the means to prevent this spreading.
Basic probability theory applies to understanding the possibility of a new fatal contagious disease emerging.
Since it seems to be the case that there is a consensus that such a disease emerging is a possibility, it is eventually inevitable that it will happen.
But this is not so bad as it sounds. If the odds of it happening are one percent per decade for instance then the odds are ninety nine percent it will not happen during that decade. The odds of it not happening the following decade are again ninety nine percent.If it does not come to pass during the second decade the odds are again ninety nine to one in our favor it won’t happen in the third decade.
So while the threat is real.. there are certainly better things to worry about.
Ebola on the other hand is already with us and now the question is whether we can contain it.I am not worried about it getting badly out of control in a place like the US but in most of Africa and many other places in the world the resources needed to contain it may well prove inadequate to the task…………….
I would not bet that it won’t kill a million people or maybe even ten million before it burns itself out……… temporarily.
Getting rid of it permanently is probably going to be impossible because there is probably at least one organism out there that is serving as a reservoir/host without ill effects. There may be more than one.
Got in a hurry in above comment. I meant to say that once the disease is widely dispersed it may infect other animal species above and beyond the ones that are the reservoir in tropical Africa as of now. Fortunately in this respect we don’t have any wild primates running around in this country to serve as reservoirs but there are plenty of monkeys in South America for instance and baboons are found in many places as well.
It might turn out that the virus can survive in species such as domestic pigs which have metabolisms rather similar to our own.
One of the reasons malaria is so bad in Africa is that the vector mosquitoes transfer the disease from animals to people (by biting both) instead of just between people as the important vectors in Asia do.
I’d mostly agree, it will be developing nations that take the brunt of things. I wonder though if developed nations won’t take a toll. If health workers are unable to prevent infection in the few number of cases we’ve seen then I wonder how capable they’d be if larger numbers of cases presented.
I think the key to developed nations preventing an outbreak will be containment. I wonder how feasible that is in our interconnected world, the first suspected case has shown up in South America (Brazil). I can’t imagine how bad Ebola could be if it got root in a megacity like Sao Paulo.
Containment won’t be good for business, they’re already predicting a cost of $32 billion cost to Africa’s economy so far. Airline and travel agency stocks in the U.S have already taken a hit from fears of Ebola.
And remember that the Presbyterian Hospital ER is currently shut down, presumably because so many workers are in self quarantine, waiting out the 21 day period (but note article up the thread that I posted).
Epidemology and disease control control are pretty well understood. You don’t need to be able to treat the disease to beat it. You need a vaccine and cooperation on the ground.
Vaccines are already being tested. Here’s one example:
http://www.theverge.com/2014/10/11/6962039/ebola-vaccine-is-now-being-tested-in-west-africa
WHO: Ebola is most severe acute health emergency in modern times
http://www.telegraph.co.uk/news/worldnews/ebola/11158504/WHO-says-Ebola-is-most-severe-acute-health-emergency-in-modern-times.html
Shit: Debbie Downer is back.
http://www.hulu.com/watch/19280
Apparently this video can only be watched from within the US (I’m north of the border).
Naw, I’m getting the same message and I am way south of the Canadian Border. Huly is a web streaming company like Netflix. I could get them for $7.99 a month but I already have Netflix and HBO, I don’t need another premium line.
Odd, I have no problem. It’s just an SNL “Debbie Downer” clip.
Comes in fine from Cleveland. LOL
Jeff, since you seem to be the point-man on this stuff, have you been following Marburg virus disease (MVD)? Apparently Marburg is the name for the human disease caused by any of the two marburgviruses Marburg virus (MARV) and Ravn virus (RAVV). MVD is a viral hemorrhagic fever (VHF), and the clinical symptoms are indistinguishable from ebola virus disease (EVD). Prognosis is generally poor (average case-fatality rate of all MVD outbreaks to date = 59%). If a patient survives, recovery may be prompt and complete, or protracted with sequelae, such as orchitis, hepatitis, uveitis, parotitis, desquamation or alopecia. Importantly, MARV is known to be able to persist in some survivors and to either reactivate and cause a secondary bout of MVD or to be transmitted via sperm, causing secondary cases of infection and disease.
The only reason I’m aware of this is because we have close friends in Uganda (who we visit from time-to-time) and Marburg has been identified there very recently. If it’s not already on your “doom list’ possibly you’re missing out big time — potentially.
PS: I just copied above data from internet; I don’t have any real knowledge or experience with any medical related matters.
I’m no expert. I’ve just been following the story closely since I read the following OpED a month ago:
What We’re Afraid to Say About Ebola
http://www.nytimes.com/2014/09/12/opinion/what-were-afraid-to-say-about-ebola.html?emc=edit_tnt_20140911&nlid=745484&tntemail0=y&_r=1 By
MICHAEL T. OSTERHOLM
SEPT. 11, 2014 Michael T. Osterholm is the director of the Center for Infectious Disease Research and Policy at the University of Minnesota.
Excerpt:
The second possibility is one that virologists are loath to discuss openly but are definitely considering in private: that an Ebola virus could mutate to become transmissible through the air. You can now get Ebola only through direct contact with bodily fluids. But viruses like Ebola are notoriously sloppy in replicating, meaning the virus entering one person may be genetically different from the virus entering the next. The current Ebola virus’s hyper-evolution is unprecedented; there has been more human-to-human transmission in the past four months than most likely occurred in the last 500 to 1,000 years. Each new infection represents trillions of throws of the genetic dice.
If certain mutations occurred, it would mean that just breathing would put one at risk of contracting Ebola. Infections could spread quickly to every part of the globe, as the H1N1 influenza virus did in 2009, after its birth in Mexico. Why are public officials afraid to discuss this? They don’t want to be accused of screaming “Fire!” in a crowded theater — as I’m sure some will accuse me of doing. But the risk is real, and until we consider it, the world will not be prepared to do what is necessary to end the epidemic.
In 2012, a team of Canadian researchers proved that Ebola Zaire, the same virus that is causing the West Africa outbreak, could be transmitted by the respiratory route from pigs to monkeys, both of whose lungs are very similar to those of humans. Richard Preston’s 1994 best seller “The Hot Zone” chronicled a 1989 outbreak of a different strain, Ebola Reston virus, among monkeys at a quarantine station near Washington. The virus was transmitted through breathing, and the outbreak ended only when all the monkeys were euthanized. We must consider that such transmissions could happen between humans, if the virus mutates.
Maybe it will mutate to be transmissible by internet.
UN Ebola chief raises ‘nightmare’ prospect that virus could mutate and become airborne if it is not quickly brought under control
http://www.dailymail.co.uk/news/article-2778022/UN-Ebola-chief-raises-nightmare-prospect-virus-mutate-airborne.html
The longer the Ebola epidemic continues infecting people unabated the higher the chances it will mutate and become airborne, the UN’s Ebola response chief has warned.
Anthony Banbury, the Secretary General’s Special Representative, has said there is a ‘nightmare’ prospect the deadly disease will become airborne if it continues infecting new hosts.
There are statistics in the old English rectory records from 1348-49 when plague arrived in a village. Similar effect.
There would be weeks of 8 deaths, then 9, then 10, then 12, and then all of a sudden, 50, and 80 and 100.
The more who were infected, the more chance bubonic didn’t kill before it reached the lungs. Then the coughing started and everyone around the cough got it, and they got the coughing kind.
Ya I know Y pestis is doubted now yadda yadda. The numbers are what they are and that’s the proposed mechanism. The more who are infected, the higher the odds something bad has a chance to happen.
Let’s put it in perspective.
0.1% of Liberian population have the disease in the last 6 months
Many will recover.
The population grows by 2.3% per year. It has doubled since 1995.
Ever had pneumonia? Your condition continually worsens until you are so weak all you can do is rest to regain your strength however, you don’t and the illness continues. You can’t do a thing. Your only hope is a visit to a doctor’s office and receive some medical attention. It is your only hope, you just might die of pneumonia when all you had to do was visit the doctor. Hard to figure out what is wrong until someone lends a helping hand before it is too late.
Are we there yet?
Fumento on extreme AIDS estimates, late 1980’s. Heterosexual transmission turned out to be less than some expected. I was active in hospital and public health groups at that time and was informally collating HIV stats for one of the groups. Hysteria was rampant. http://fumento.com/aids/shrinking.html
I got a small problem with ebola Zaire. It’s a long damn way away. Over 2000 miles from Sierra Leone to the Ebola river in Congo (Zaire).
Last I heard the working hypothesis is spontaneous identical mutation took place two different places.
Please.
http://www.reuters.com/article/2014/10/13/us-oil-saudi-policy-idUSKCN0I201Y20141013
(Reuters) – Saudi Arabia is quietly telling oil market participants that Riyadh is comfortable with markedly lower oil prices for an extended period, a sharp shift in policy that may be aimed at slowing the expansion of rival producers including those in the U.S. shale patch.
I think Saudi Arabia is tired of being the only OPEC member to cut production when prices drop. But they also have a second motive for not cutting production as the article points out. They are well aware of the marginal cost of oil and know lower prices will spell bankruptcy for a lot of marginal producers, especially those shale producers.
The OPEC Basket Price fell almost two dollars over the weekend to $86.43.
The Saudi family has definitely had plenty of time to learn to play hardball and they have sent plenty of young men to get their MBA in our most elite business schools.
So I would not be surprised if they were to play the old ” let them sweat” game that Rockefeller was famous for in the early days when he used cut rate prices to drive out and then buy up his competitions assets. They played it well enough to help break the old USSR.
They may well be able to play it well enough to break the tight oil industry now. But in the end the depletion of conventional fields including their own virtually guarantees that they won’t be able to dump oil on the market very much longer to dampen prices.Maybe another year or two? Maybe four or five at the most?
http://online.wsj.com/articles/opec-members-rift-deepens-amid-falling-oil-prices-1413136848
If the shale folks start cutting back, look for NoDak’s congress critters to start talking about government measures.
http://rt.com/usa/194620-california-aquifers-fracking-contamination/
‘at least nine of the 11 hydraulic fracturing, or fracking, wastewater injection sites that were shut down in July upon suspicion of contamination were in fact riddled with toxic fluids used to unleash energy reserves deep underground.’
I take things from rt.com with a grain of salt (as I guess I should from all news sources), I checked up on the story and this particular round of information hasn’t been run by any other major news outlets. The original story about wastewater injection being shutdown in July received more coverage.
BBC WORLD NEWS (This morning)
Oil prices have fallen again amid renewed worries about low global growth with Brent crude near four-year lows.
Brent crude dropped to $87.74 a barrel, its lowest since December 2010, before recovering some ground to $88.12.
US light crude oil was down $1.40 at $84.42, close to a two-year low.
The prospect of weak economic growth cutting demand for oil has hit prices. In addition, key Opec producer Saudi Arabia has signalled it could cope with lower prices.
Saudi Arabia’s Oil Price ‘Manipulation’ Could Sink The Russian Economy
http://finance.yahoo.com/news/saudi-arabias-oil-price-policy-101314302.html
The vice-president of Russia’s state-owned oil behemoth Rosneft has accused Saudi Arabia of manipulating the oil price for political reasons. Mikhail Leontyev was quoted in Russian media as saying:
Prices can be manipulative. First of all, Saudi Arabia has begun making big discounts on oil. This is political manipulation, and Saudi Arabia is being manipulated, which could end badly.
The problem is that Russia’s latest budget requires oil prices to average at least $100 a barrel in order to cover the government’s spending promises. The government already needs to borrow around $7 billion from foreign investors next year and as much as 1.1 trillion rubles ($27.2 billion) from domestic investors. Given the country’s sanctions-imposed isolation from international bond markets, any additional borrowing would be a big concern for policymakers in Moscow.
Not that I believe ANYTHING on Yahoo News but this stuff must have been copied form somewhere — possibly somewhere reliable?
Watcher,
Please don’t chop my head off: I’m just passing this stuff along. And remember that I suggested Russia might have become too comfortable with $100/bbl.
Russia has an oil wealth fund of over 500 bn, virtually no public debt. In my view Russia is very well prepared for low oil prices. This time it is the shale industry and the US junk bond market which is on the brink.
There are rather a lot of non shale industries issuing high yield (junk) bonds. HYG is down about 6% from July. The S&P is down about 5%. This is not Apocalyptic divergence.
And as for Russia, that looks like 30 billion dollars (not that they borrow dollars, they borrow rubles and FX conversion doesn’t have to matter when you have your own central bank) on $2T of GDP (again measured inappropriately in dollars) or 1.5% of GDP. The US is ballyhooing economic buoyancy and will borrow $500 billion in FY 2015 on $17.3T or 2.8%.
Who is it that’s in trouble again?
You are confusing current account issues with government borrowing. Current account deficits are a serious problem, government debt not so much.
haha what?
Actually you seem to be confusing three separate things: fiscal policy, monetary policy, and net national savings.
Maybe, but according to Wikipedia, Russian National Wealth Fund (Russia’s sovereign wealth fund) had $87.32 billion in assets as of June 2014. Where did the “over 500 bn” figure come from?
SWFs have always looked profoundly weird to me. I suppose they are intended to morph into pseudo central banks and issue their own SDRs (create money), but I have never quite understood why or how they can exist for a country that ever runs a fiscal deficit.
Of course, the real reason they exist is likely just Goldman et al persuading countries and US states they need to have such things, and they need to be entrusted to skilled money management whose fees will be quite reasonable.
I read a similar figure on rt.com a few days back and so decided to check it out – trading economics has their foreign currency reserves worth about $470 billion.
Not the same as an oil fund but it could be where the number is coming from.
“over 500 bn” figure is actually foreign exchange reserves of the Central Bank of Russia, currently standing at $455bn.
http://i.imgur.com/0jw6kpV.png
This figure includes 1,157 tonnes of gold. Russian central bank bought 45 tonnes of gold in September, 122 tonnes since the beginning of the year.
http://i.imgur.com/bPRVKMZ.png
Oh cripes…. why would those silly Russians buy that stupid Barbarous Relic… GOLD???
JEEESH…Steve
Ya reckon they might just have some insider info on the supply situation — considering that they are one of the world’s major suppliers and that they have some of the worlds best and most experienced spooks actually running their government right this minute?
My guess is that what the Russians haven’t learned about the the business of the world simply by vacuuming the world press is hardly worth knowing anyway but I am reasonably sure that if they think they have missed something they put hacker to work finding it for them.
I do not believe in gold as a means of backing a currency even though the idea is very attractive because I think market forces are going to keep on driving the price of it up on average over the long haul.
So you just can’t tell the world you will sell gold for so many dollars or euros per ounce or kilo. The world will bring your dollars to the bank and buy all you have and then……….. well you haven’t got any any more and ……… and …………. and…….. and
..What the hell are you going to do the next time somebody shows up with a suitcase full of hundreds and wants to cash them in for the promised gold backing???
But the possession of large quantities of gold does impress people and make it much easier to get a currency accepted in trade.
And if the price does go up…you can sell it at a profit.
I think the price will go up and down rather wildly and unpredictably in the short and medium term but that in the long run the price is going to go steadily higher.
But overall, Bakken oil is now going to be priced at $64/barrel. I would guess EOG and CLR will hype this as indicative of how strong their businesses are because they will buy up leases from the destroyed companies at “cut rate prices” and then pretend they have lower costs than Procter and Gamble making toothpaste.
More amusing by far will be the postponement of flaring regulations and attempts to standardize Bakken oil.
Tidbit: Russia signs deals with China to help weather sanctions REUTERS/Yekaterina Shtukina/RIA
“….Under the new agreements, cooperation will deepen between state oil producer Rosneft and China National Petroleum Corporation, including in liquefied natural gas (LNG) projects and possibly LNG supplies to China…”
Sorry, screwed up:
https://au.news.yahoo.com/world/a/25250006/russia-signs-deals-with-china-to-help-weather-sanctions/
China total vehicle sales just out for Sept.
1.98 million units, (cars plus commercial vehicles/trucks) for the month, up 2.5% from last year and ZH as usual ballyhoos a slowing.
1.98 million units is a 23.76 million/year additional oil consuming vehicles.
Oh! Wait. Given 70,000 EVs bought there over 5 years, that would be a 14,000 annual rate, so let’s reduce that 23.76 million ALL THE WAY DOWN to just a mere 23.746 million additional oil consuming vehicles.
Gotta be precise and all that.
Oh, and at say 20 miles/day commute round trip, much less than US norms, and calling it an average of 25 miles/gallon, that will be
20/25 gallons X 23.746 million / 42 gallons per barrel = 452K bpd additional consumption from just these additional vehicles.
Should get to 12 mbpd easy, up from 10.5.
I probably should go see how many airplanes and ships they added, but hell, let’s just call it 12 mbpd and look for 13 in 2015-2016.
Might be good to look up lawn mower sales too. haha
Stats:
Average US commute: 24 miles round trip. http://nhts.ornl.gov/2009/pub/stt.pdf
Average US VMT: 12k
Average US MPG: 22
Chinese CAFE: 6.9L/100km
Yeah, and no Chinese cars are scrapped of course…
Well, that fails.
American sales absolutely have old cars drop off the back end, so growth there would be limited to population 1%/yr.
But China is nouveau riche. These are new buyers, almost entirely. These folks might have a 3 year old car, which will be resold to some lesser nouveau riche.
Sorry, it’s all new consumption.
Well, my cynicism might be showing thru but if their cars aren’t any better than their other stuff with Chinese brand names they will be junking a hell of a lot of cars very soon.Sarcasm light on.
Even if their cars don’t last any better than our tight oil wells they are going to need a lot more oil soon given the rate at which they are selling them.
I’d sign onto that, macguy, except GM is the biggest seller in China, and Toyota weighs in, as does Ford.
Face it. They are exploding and they aren’t going to stop unless they are forced to — and it looks like oil price ain’t gonna do it.
Copy of a reply I made to a Saudi based consultant on the Econbrowser website:
Some interesting data about China’s latest oil import data follow, which are particularly interesting in the context of the longer term data (discussed below).
China’s September crude oil imports rise 7% on year to 6.74 mil b/d, exports fall to nil
http://www.platts.com/latest-news/oil/singapore/chinas-september-crude-oil-imports-rise-7-on-27719307
Following is an essay I wrote on net oil exports, which I define as total petroleum liquids + other liquids proudction less liquids consumption (EIA data). Note that Saudi net oil exports rose from 7.1 mbpd (million barrels per day) in 2002 to 9.1 mbpd in 2005, as annual Brent crude oil prices rose from $25 in 2002 to $55 in 2005.
Saudi net oil exports have so far been below the 2005 rate of 9.1 mbpd for eight straight years, falling to 8.7 mbpd in 2013, as annual Brent crude oil prices rose from $55 in 2005 to the $110 range for 2011 to 2013 inclusive.
So Far, Global Net Exports of Oil Peaked in 2005
Because of the way that we define net exports, we have to deal in terms of total petroleum liquids (plus other liquids for the EIA data set).
Some definitions:
Global Net Exports (GNE) = Combined net exports from (2005) Top 33 net oil exporters, total petroleum liquids + other liquids (EIA), which accounted for about 99% of total global net exports of oil in 2005
Available Net Exports (ANE) = GNE less Chindia’s Net Imports (CNI)
CNE = Cumulative Net Exports (for a given time period)
ECI (Export Capacity Index) Ratio = Ratio of production to consumption
GNE/CNI Ratio is analogous to the ECI Ratio
Six Country Case History. The Six Country Case History consists of the major net oil exporters (net exports of 100,000 bpd or more) that hit or approached zero net exports from 1980 to 2010, excluding China. China, like the US, became a net importer prior to a production peak, because of a rapid rate of increase in consumption. Combined production from the Six Countries virtually stopped increasing in 1995, showing only a 2% increase from 1995 to 1999.
The following chart shows the normalized values for production, ECI Ratio, net exports and remaining post-1995 CNE (Cumulative Net Exports) by year (1995 values = 100%).
http://i1095.photobucket.com/albums/i475/westexas/Slide2_zps6c3a6280.jpg
Note that even as production increased slightly from 1995 to 1999 (by 2%), net exports fell, because of rising consumption, as illustrated by the decline in the ECI Ratio. And note that even as production increased from 1995 to 1999, remaining post-1995 CNE fell by 54%.
Estimated Six Country post-1995 CNE were about 9.0 Gb (billion barrels) based on the 1995 to 2002 rate of decline in their ECI ratio. Actual post-1995 CNE were 7.3 Gb.
The key point is that a declining ECI Ratio corresponded to a rapid rate of depletion in remaining CNE, and even as Six Country production rose from 1995 to 1999, the rate of depletion in remaining post-1995 CNE accelerated, from 15%/year in 1996 to 26%/year in 1999.
Global Net Exports of oil (GNE). GNE, the combined net exports from the top 33 net exporters in 2005, fell from about 46 mbpd (million barrels per day) in 2005 to about 44 mbpd in 2012. Preliminary 2013 data show that GNE in 2013 fell to 43 mbpd. Combined production from the top 33 net exporters in 2005 rose slightly from 2005 to 2013, but because consumption increased faster than production, net exports fell, as evidenced by the decline in the ECI Ratio.
The following chart shows the normalized values for production, ECI Ratio, net exports and estimated remaining post-2005CNE (Cumulative Net Exports) by year (2005 values = 100%).
http://i1095.photobucket.com/albums/i475/westexas/Slide14_zpsbd9a272e.jpg
Based on the 2005 to 2012 rate of decline in the Top 33 ECI Ratio, I estimate that remaining post-2005 Global CNE fell by about 21% by the end of 2012. As noted above, this methodology was too optimistic for the Six Country Case History, in regard to estimating post-1995 CNE.
Available Net Exports of oil (ANE). ANE are defined as Global Net Exports of oil (GNE) less the Chindia regions (China + India’s) net imports (CNI). ANE fell from 41 mbpd in 2005 to 35 mbpd in 2012. Based on the preliminary 2013 data, ANE fell to 34 mbpd in 2013.
The GNE/CNI Ratio is analogous to the ECI Ratio. The following chart shows 2002 to 2012 GNE/CNI data, with the extrapolation based on the 2005 to 2012 rate of decline in the ratio.
http://i1095.photobucket.com/albums/i475/westexas/Slide20_zps26112103.jpg
At a GNE/CNI Ratio of 1.0, China and India alone would theoretically consume 100% of Global Net Exports of oil, leaving no net oil exports available to about 155 net importing countries. Of course, the global economy can’t survive if only two countries are consuming anywhere close to 100% of Global Net Exports of oil, but that has been direction we have been headed in since 2002, up to and including 2013.
I’ve called what happens from 2012 to 2022, and in following years, to the GNE/CNI Ratio the “$64 Trillion Question.” The conundrum is that we continued to slide, at least through 2013, toward a point in time–a GNE/CNI Ratio of 1.0–that we cannot arrive at.
“China’s September crude oil imports rise 7% on year to 6.74 mil b/d, exports fall to nil
http://www.platts.com/latest-news/oil/singapore/chinas-september-crude-oil-imports-rise-7-on-27719307”
Last I saw they have domestic production of just under 5 mbpd. This says they may just reach a total burn of almost 12 mbpd this year, which would be up double digit %, because they are so moderate and leaping to embrace alternatives.
You are a little high. China’s production in the second of quarter of 2014 was 4,191,000 barrels per day, just a tad lower than the fourth quarter of 2010.
It’s that BP thing again, all liquids sometimes and other times not. I was eyeballing the graph. Looked about 4.5.
The BP definition of oil production is crude oil and natural gas liquids. The BP defintion of oil consumption includes all liquids. But the BP definition of oil production EXLUDES coal to liquids, gas to liquids, biofuels etc
In any case, I think China produces very little natural gas liquids.
Well, anyhow, leaping a lot farther than we are.
http://www.forbes.com/sites/jackperkowski/2014/06/17/china-leads-in-renewable-investment-again/
Ron, The following seems important (to me anyway)
http://www.reuters.com/article/2014/10/13/us-oil-saudi-policy-idUSKCN0I201Y20141013
LONDON/NEW YORK (Reuters) – Saudi Arabia is quietly telling the oil market it would be comfortable with much lower oil prices for an extended period, a sharp shift in policy that may be aimed at slowing the expansion of rival producers including those in the U.S. shale patch.
Some OPEC members including Venezuela are clamoring for production cuts to push oil prices back up above $100 a barrel.
But Saudi officials have given a different message in meetings with investors and analysts: the kingdom, OPEC’s largest producer, will accept oil prices below $90 per barrel, and perhaps down to $80, for as long as a year or two, according to people who have been briefed on the recent conversations.
The Saudis appear to be betting lower prices – which could strain the finances of some members of the Organization of the Petroleum Exporting Countries – will be necessary to pave the way for higher revenue in the medium term, by curbing new investment and further increases in supply from places like the U.S. shale patch or ultra-deepwater, according to the sources, who declined to be identified due to the private nature of the discussions.
Saudi seems to be trying to drive out the high marginal producers. But this will take time, six months at least. Projects already started means capex already spent, so they will be completed even though some of them will lose money. The Bakken has enough wells already completed that it will take over two months before they are fracked.
There is a time delay here. It will be sometime next year before we see the effect of marginal producers dropping out.
Saudi is also doing this because Iran and Russia (who backs Syria and Iran) have extremely high budget break-even points. As Saudi wants Iran to drop the nukes, they will want conditions to be intolerable for Iran and its backers, so they negotiate.
If the Saudis won’t cut and the existing Bakken production can’t cut…yeah, bad times to be a shale operator.
How all of a sudden does KSA control all of this? Oil is down about 20%. Did KSA boost production 20%? No. Did anyone, in total, boost production 20%? No.
Did the planet suddenly drop consumption 20%? No.
Well, at risk of instant decapitation, there were those rumors about Saudi Arabia selling oil at big price discounts: perhaps (if true) that would trigger some “events”.
I think ISIS is offering a better deal. Hell, when they take Baghdad, maybe they’ll price everything out of Basra at $40.
Where are the CLR hypers?
I am not too impressed with economists in general but nevertheless I learned a few things back in the dark ages in econ 211,221,231.
One of those things is that when you are a little fellow you are compelled to follow the pricing lead of the big fellows who dominate the market.
If company X has most of the market sewn up for a given commodity, and that company has some pricing power, you sell for just a hair less than they do, or maybe a hair more.
You don’t discount your product ten or twenty or more percent even if the necessary profit margin is still there.
If you do, one big buyer will swoop in and take your entire output and you will lose all your regular customers which is not a good thing at all when the big buyer turns on you and quits buying wanting an even bigger discount.
OF course with sanctions in effect Iran etc will have to discount to some extent.But I doubt they are discounting down to as low as forty bucks but who knows?
Now I can easily imagine a bunch of ayatollahs dumping oil on the grand scale (assuming they had it to dump) if they were to become convinced it would wreck relationships between oil producing countries and the Great Satan and lead to war.
Watcher,
Its the Ancient Aliens..
Steve
Given the nature of oil price and supply a rather small over supply of only a couple of percent might be enough to bring about a twenty percent drop in prices. The prices of farm products are often similarly sensitive to minor variations in supply.
Once produced oil has to be sold to SOMEBODY unless the owner can afford to put it in storage which in and of itself must be a very expensive operation.
The simplest explanation for low current prices in my estimation is that the world economy is has slowed down and end users just aren’t buying as much oil as they were a year or two ago.
Either the price has to come down in order to get sales back up again when consumers are not able to afford to spend any more on oil– OR—
Production must fall in order to dry up the excess supply which is driving down the price.
A ten percent surplus supply of apples or strawberries at any given time can drive the wholesale price right down into the dirt since both apples and strawberries are perishable.ONCE PRODUCED ,you must either sell them for whatever you can get or feed them to the pigs or put them on the compost heap.
Oil producers can at least dial back production if they are not so short of cash that they too have to sell for whatever they can get.
Getting the price back up to a hundred bucks a barrel may require a production cut of anywhere from a few hundred thousand barrels a day up to a million or two. I have no idea personally just how much production would have to be curtailed to get the price back to a hundred bucks.
If the last couple of million barrels coming to market cost ninety bucks a barrel to produce some marginal producers are going to start dropping out.
Now here is something else that I can’t estimate or even guess.
If a few Bakken and Eagle Ford producers fold and quit drilling ….. How long will it be AFTER prices go up again before the number of new wells drilled every month can recover to current levels?????
IF this takes a year or two then by then the decline of legacy oil fields will in and of itself take a million or maybe two million barrels or more off the market.
As I said, if oil price drops are enough to force some players out of Texas and North Dakota, I hope they discourage some projects from even starting in Colorado. The oil crash of 1982 in Colorado took its toll in a very big way. If this latest oil boom will be short-lived, it may not be worth doing beyond what is already in the state now.
That’s why I have been watching the peak oil numbers for the Bakken so closely. If it is coming there within a couple of years, perhaps some damage can be headed off in Colorado before it starts.
The Saudis are the only OPEC producer with any flexibility. Besides their size, that gives them tremendous ability to influence marginal price. No one else at OPEC is gonna cut, they can’t.
Because oil is so inelastic, those last couple million bpd are the most important. If you have excess oil, price falls rapidly; the utility of storing crude is limited by logistics and consumption doesn’t respond that quickly to “CHEAP!”
If Saudi senses economic weakness and financing a driven US oversupply, they can totally refuse to correct it. No one else will.
I agree. The Saudis are no longer in the driver’s seat.
I believe Anon has made a very good point about the Saudis wanting to put pressure on Iran which I for one had overlooked.
Well, we can’t have it both ways.
Either the sanctions are uber effective and Iran can’t sell any oil — in which case why should they care what the price is?
Or the sanctions are zero effective and a price cut means Iran sells oil for whatever currency can get thru SWIFT and **maybe** is hurt by a dollar denominated decline.
Here’s a What If.
What if the Saudis have been unable to match or exceed their 2005 net export rate of 9.1 mbpd (total petroleum liquids + other liquids, EIA), and they have been watching increasing US tight/shale production with concern. In 2013, their net exports were 8.7 mbpd, versus 9.1 mbpd in 2005.
What if they have been waiting for a decline in global demand, as an opportunity to punish the tight/shale producers price wise by simply maintaining production and net exports, in the face of declining demand? And of course, they have emerged from the high demand summer season.
The following seems important (to me anyway-sarc). Comforting that nuclear powered Micky
M O U S E has been rescued.. what would the planet do without ME Oil? what’s next?
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11156949/Walt-Disney-backs-1bn-refinancing-of-Paris-theme-park.html
History is being made in Western North Dakota…we all have read about boom towns in the distant past, but now we have front-row seats to a modern boom-town in-progress:
I will try to find this movie at the theater…if it isn’t playing locally, I will see it from NetFlix, etc:
http://www.villagevoice.com/2014-10-08/film/the-overnighters/
There are a variety of text articles worthy of reading:
http://www.alternet.org/environment/what-my-time-americas-new-oil-boomtown-taught-me-about-our-climate-madness?paging=off¤t_page=1#bookmark
I spent 9 1/2 years in Minot, ND. I feel sorry for the NoDaks come twenty years from now…I wonder if the locals will be able to pay the utilities, insurance, and upkeep for that $70M community center in Williston after the boom has petered out?
NoDak recently did what Alaska did. They now have their own sovereign wealth fund. They’ll try to make money on money.
Good for them. They sure took their time, but finally perhaps are wising up. NoDaks are very trusting folks…perhaps too trusting.
Now they need to heed ROCKMAN’s advice (given over and over and over again on TOD) to emulate the strict oil extraction environmental regulations enforced by those liberal stalwarts Texas and Louisiana!
If the good people of North Dakota were really wise, they would cream off as much moolah as they can, while they can, and pay for their residents, businesses, and industries to implement robust energy efficiency measures and to build out as many wind turbines and enhanced grid technology as possible. They should also mandate that every oil well must either collect its methane and re-inject it into reservoirs, and/or collect it and pipe it to the NoDak’s to heat their homes, businesses, and factories. Oftentimes, private enterprise is not going to do the right things for society, and government has to step in and enforce measures that provide the greatest good for all, including over the longer term. Market forces look a few quarters ahead, and usually could give a rat’s rear-end about the greater good. Admittedly, government can and does have issues of its own, but I’ll generally favor those foibles over the ‘unhindered market jungle’ approach.
What govt is going to do is step in and cut taxes to keep those companies from closing their doors when all they get now is $64 for Bakken product.
Oh, and about that greater good — that’s leaving it in the ground for the grandchildren, yes? Zero royalties. Zero everything.
Now I don’t know a lot about this but I really don’t believe these drillers in the Bakken are paying any federal taxes on oil they produce. There are no federal royalties on oil production except oil produced on federal lands or federal offshore territories. They pay taxes on profits and if they are not making any profits they don’t pay any taxes.
And I really don’t believe the government is going to give them money if they go bankrupt.
I’d guess CLR and EOG will buy up the small fry.
Then the government will give them money to keep those trucks and trains rolling. Ooooh, hell, will be hugely patriotic.
“Foreign interests are taking steps to cause these companies difficulties. We are obligated to protect these Americans from the maneuvers by those foreigners.”
Oh and my “govt” in the original comment was NoDak, not Federal. Rebutting the concept of the NoDak SWF and what it would be spent on.
I wonder if the locals will be able to pay the utilities, insurance, and upkeep for that $70M community center in Williston after the boom has petered out?
They can make arrowheads of of old circuit boards to trade with the other tribe in the next river valley.
Maybe trade for a few women?
I started following the peal oil discussions to see what might happen in Colorado. The state doesn’t need more boom-and-busts. I wonder if low oil prices will slow down fracking in Colorado (which hasn’t been embraced by many communities anyway).
My main concern is that companies will move in, run operations for a bit, and then go bankrupt, leaving the state with a mess to clean up and no on-going revenue stream from the mess.
The state has agriculture, tourism, housing developments, etc., which, if anything, are put at a disadvantage with fracking, so I am wondering at the long-term planning in balancing out various competing economic entities.
The fracking play in Colorado is nowhere near as large as the others. Anyone talking like it will be big, reliable revenue from heaven should be ignored.
Unfortunately it has been a big issue in Colorado, with out-of-state money coming in to support pro-fracking candidates.
Colorado has had a long history of natural resource boom and busts and worked hard to expand to other industries. It’s reasonable for suburban communities to balk at having drilling next to their homes, parks, and schools.
If fracking production peaks in the Bakken relatively soon, that’s reason enough for Colorado to be cautious about what they give away for fracking.
Ron made a point above about sunk costs.
There are several hundred drilled holes in NoDak awaiting fracking.
I am gonna say that’s a tiny % of the total price tag. Water has to arrive, proppant has to arrive and the pump has a day or two of rental and has to arrive. Then the truck costs for oil and salt water arrive, but so does oil revenue.
However, he can be right if there are prepaid reservations of proppant and water. Then it’s a completely sunk cost and up comes 1000 bpd at a lousy $60/barrel.
But if not and the proppant is paid net 30 days after delivery, then . . . those drilled holes are not gonna be fracked.
If only a percentage of the cost are sunk, say 50 percent, then it is highly likely that the project will be completed even if it is a money loser. It’s simple math. If the total well costs are 10 million and 5 million has already been spent and the well will, with the very low oil price produce 7 million in revenue, then the well will be completed. Better to complete the well and lose 3 million than abandon it and lose 5 million.
I would expect that all the wells already drilled and are awaiting fracking, will be completed. In fact it is likely that, in the very good sweet spots, everything will continue as usual. Only the marginal areas where wells have not came in with alot of oil, will be cancelled.
There are a lot of wells that have been completed over the years, but there’s not nearly the amount of new activity that has been predicted. Court battles have slowed down the process since many communities have been fighting where new wells will go in.
That’s why I am wondering if the big rush might be slowed for economic reasons, aside from court battles or environmental reasons.
Let’s take a generic well that IPs 1000 bpd and falls 66% in year 1. End of year will be 333 bpd so the average for year 1 is delightfully 666 bpd.
At $60/barrel first year revs are 14.6 million. They don’t get all that. Truck hauling costs come off, royalties come off, maintenance ops and disposal water reservation at the well comes off.
If it’s a $10 million well, that’s $10 million sunk. Royalties in the Bakken are between 10 and 18% of production (it says here: http://www.thebakken.net/2011/12/23/how-much-royalties-for-oil-rig-in-north-dakota/). So 15% of the 14.6 million bux is 2.19 million.
The trucks won’t eat the remaining $2.4 million (though it will eat some, maybe 200K for salt water and oil haulage and maintenance?) and that will be profit, so a 1000 bpd IP well works at $60/b if it only crashes 66% in year 1, and they do have more years to come, though that 666 bpd is going to fall.
So . . . English . . . marginal wells won’t be drilled. What does marginal mean? What IP works for say, 2 year payback?
I think it’s about 900 bpd IP. Someone can do the algebra if they care but asking these guys to wait 2 years for payback with price uncertainty and regulation uncertainty gets dicey and so much so that expected 700 bpd IPs may get declared “marginal” and not drilled at $60.
Note this doesn’t include the plug and abandon expense at the back end.
Note btw that since the decline isn’t linear the delightful 666 bpd avg is pretty high.
$60 really is a stress mountain.
Speaking of all of which, Wes guy if you’re still here and bored, any idea of what % of wells do < 800 bpd IP?
I look at the daily activity reports, but I don’t keep track of the 24-hour IPs reported in them. Not many Bakken wells in the sweet spot come in with a 24-hour IP of 800 bbl/d or less, though. 24-hour IPs in the neighborhood of 1,000-3,000 bbl/d are more the norm there.
You may find a better answer to your question by going through Bruce Oskol’s chronicle of new wells he updates every day on his blog or the bakkenblog.org weekly reporting roundups that Ron has previously posted a link to.
Thanks Wes.
This is at least a look at what $60 / barrel will mean.
Of course even an IP of 1500 bpd that crashes to 300 end of year 1 and most of the months south of 500 has the same issue — and we are presuming they can predict what a well will look like in that regard.
Just went thru one of your links. Pointed at this:
http://www.bakkenblog.com/bakken/Permits/Entries/2014/1/17_Week_3__January_13-17.html
January this year
The count was, on that page, whatever that page means,
21 wells below 800 bopd, 33 above 800 bopd.
btw that link, that month, picked at random. Didn’t scan them all for heaviest concentration < 800. It was actually just picked randomly and the only one picked.
Gotta count the interest on the debt of the fracking operator (not just on the well in question, mind). Most have a great deal of junk bond finance.
Now *that* number will get paid because if you don’t, you’re going to bankruptcy court. Most of these probably have cross-default provisions. But drilling wells that will otherwise lose money to just service the overall debt (cash flow or die), that ain’t ending well.
Well, $10 million X 0.059 (HYG yields 5.9%) is indeed $590K/yr interest expense for that well.
Not insignificant. It requires additional 54 bpd avg over two years to pay the 590K X 2.
So good call. The IP threshold for discard or the project gets higher.
Based on the decline rates I’ve seen posted, it looks like total production is about 3-4 times the first year production. If they really pay off their investment in the first year, I can’t imagine them not drilling.
I wonder if the locals will be able to pay the utilities, insurance, and upkeep for that $70M community center in Williston after the boom has petered out?
That question is being asked all over America. The initial subsidies to create suburban infrastructure created a bloated and unaffordable mess.
Have you seen a good, quantitative analysis of the costs of city vs suburban living? I’d be very curious.
That’s the question. What happens after the fracking slows down? I like the temporary workforce housing solutions. They build them, they use them, they leave and the units can be hauled off or resold and repurposed. http://www.ariesresidencesuites.com/ This is a much better solution that rapid building of permanent structures that will not be able to be supported in a few decades down the road.
via The Guardian…
Mark Carney: most fossil fuel reserves can’t be burned
Bank of England governor lends his support to ‘carbon bubble’ theory that coal, gas and oil assets are at risk, reports BusinessGreen
Carney should go back to pretending he won’t buy gilts. I thought this was going to be a surprising statement about shale oil.
Pentagon: global warming will change how US military trains and goes to war
Climate change to become immediate factor for all strategic, operational and planning decisions
We can meet 2C climate target – and here’s how, say energy experts
Sir Bob Watson and a team of climate experts lay out a step-by-step action plan on how to meet global warming limit, but say success depends on ‘immediate, urgent, action’
Stephen Leahy, theguardian.com, Friday 10 October 2014 11.42 BST
IF I had some money to put into the stock market I would be carefully watching the price of the stock of any companies engaging mostly in energy efficiency retrofits for existing buildings.
There is going to be huge spike in the prices of such stocks sooner or later. It won’t last of course because such stocks always eventually top out but they would be a superb place to have some money for a few years when retrofitting becomes ” the next big thing”.
2C climate target?! What a bunch of finely refined yak dung! There is no such target from a scientific standpoint. That’s purely political… These steps include increased energy efficiency in all sectors
Last week I was diving on one of my local coral reefs and witnessed massive bleaching. The water felt unusually warm for the beginning of October. We’re only at 0.8C warming and there has been salt water flooding in the streets at high tide around here.
2C climate target?! Yeah! Good luck with that. Maybe the tooth fairy will stop by and grant some wishes. Bah! /rant
2C was a political target, not a science based target. It got etched in stone at one of the COPs as being a “not dangerous” level of warming. The science moved forward, became more robust, and what was considered ‘not dangerous’ is now a pretty scary level of warming.
… and still we do nothing.
Saudis prepared for $80 oil in bid to retain market share: sources
More evidence that the Saudis are taking advantage of the dropping oil prices to try to wipe out high cost producers, such as US LTO, tar sands, Kashagan, Brazil presalt, etc. A lot of oil producing countries are going to get hurt badly by lower prices including Russia, Venezuela and of course the Saudis themselves.
Or maybe the Saudis don’t need to deliberately lower their production because this will happen by itself anyways. It will will be interesting to see what happens to North Dakota and Texas production if a sustained medium term price of $80/barrel comes to pass. And are Americans going to flock to gas guzzlers?
First of all KSA hasn’t done ANYTHING. There was no announcement of increased production BEFORE THE PRICE FALL. All these stories making the rounds are what KSA is allegedly saying AFTER THE PRICE FALL.
They didn’t make it happen. At the very most the OPEC folks looking for money are asking them to cut production (while they, themselves, do not) and put more money in their pockets.
Somehow these stories have become some suggestion that KSA caused things to happen for some reason. They didn’t do anything at all yet, and may not do anything at all, and if they do nothing at all and hold production, that will be declared to be manipulation. It’s rather bizarre.
The dollar is up in Singapore against the Pound and Euro and Yen. Again.
They didn’t make it happen.
Of course I know this.
The point is that they’re not prepared to stop the price fall by cutting production. Instead they’re letting the price fall to and hoping that high-cost producers will get wiped out, which will in turn lead to higher future prices.
I suspect your assessment is correct. Perhaps the question now is how long will it take for this process to play out because there’s a lot of momentum in the system. As Ron mentioned earlier, funded projects will mostly proceed as planned, and a lot of them exist. For example, about 5000 large trucks loaded with supplies are currently moving along one in British Columbia highway to and from the tar sands project(s) in Alberta every day — that’s momentum! And, in my experience, individual companies (and even sovereign states) will fight like crazy to book reserves since therein lies credibility: even if many of these “reserve” determinations would be deemed nonsense by a Petroleum Engineer.
“But the first causalities of lower oil prices may well be unconventional basins where production costs are much higher than average. In the US, the weighted average marginal cost of crude production at the shale-dominated onshore plays is about $73/b currently but some projects are vulnerable with WTI crude below $90/b, according to recent analysis by Baird.”
http://seekingalpha.com/news/2028465-bloomberg-bakken-producers-poised-to-curb-exploratory-spending
But the first causalities of lower oil prices may well be unconventional basins where production costs are much higher than average.
Some of us hope that is exactly what happens. Killing a project because of economics is an easier debate than killing it for other reasons.
I also wonder about the Keystone pipeline. Canadian producers have other options anyway, and I have wondered who might pay for an unwanted pipeline across Nebraska when pricing looks iffy.
So here’s a thought…does dropping the hammer on more marginal new projects induce or accelerate the overall peak?
If Bakken crude is at $79 and falling, it would ordinarily not make sense to make said glut worse. But the Bakken is not an ordinary project. It is extremely fragmented between companies, driven by “drill or kill” covenants in mineral leases and similar covenants in the financing. It also declines rapidly on existing wells, which means you need new ones. Also not how oil fields normally work; mass infill drilling is *not* BAU. It is usually a sign of bad management or desperation.
However, projects that are not yet started.and would ordinarily be required to offset the formidable decline of all the stuff drilled in 2014 may be money losers on their face. So they won’t start, or won’t fund. So that replacement does not happen. Some operators go bust entirely and won’t be back in their earlier shape.
Bakken production historically takes hits when conditions are just too bad to drill at a normal clip in winter, and it takes some time to recover from that. This dynamic is similar, although probably with a longer tail given physical damage to capacity (projects not existing, rather than just moving slow). In the meantime, the current wells go poof.
So if you have a long financial winter following the huge drilling binge this year, can you actually resume an upward trend when prices would justify it?
“can you actually resume an upward trend when prices would justify it?”
If companies close doors, the people are let go. In this environment, no one else in NoDak will hire them.
They will leave and look for work, and find some sort of lesser paid work.
Getting them back after a price increase will not be easy or cheap. Relocation requires desperation.
The bust will decline production much steeper than a price rise can reverse and increase it.
“Also not how oil fields normally work; mass infill drilling is *not* BAU. It is usually a sign of bad management or desperation.”
No, this is not bad management or desperation, it’s a business decision. Reservoir management involves maximizing recovery/profits, ideally. Some players are really good at this: the Norwegians for example. But in our “Western system” shareholder dividends, and other factors, are essential variables in the equation. When shareholders are clamoring for bugger dividends you do what you must. You and I may think saving the planet should be the primary criteria but, unfortunately, that’s not how it works.
Most of your other points are best addressed by Ron and others whose oil knowledge vastly exceeds mine. But, if you want to talk about pulsars…………
My oilfield knowledge is far from vast but I do know a bit about infill drilling. Infill drilling does work and it does recover a lot of oil a lot faster. And it does recover some oil that would not otherwise be recovered.
What it does do is change the recovery profile of the field. It will keep production high until the water hits those horizontal laterals at the top of the reservoir. Then you will have a sharp shark-fin falloff in production.
That being said, infill drilling in shale fields is a totally different matter. It really should not be called infill drilling at all. Down-spacing is the proper name for it. It was found that there were large spaces between the laterals that was almost totally un-penetrated by the frack blasts. So all they are really doing is drilling in between the previously drilled wells and recovering oil that could not be reached by by those previously drilled wells.
Production per well, in many cases, will drop off by 20% or so, depending on how close they get to the previously drilled wells. But at any rate they are getting oil that would not otherwise be recovered at all.
It needs to be remembered that a shale oil field, or LTO field, is a totally different animal than a conventional reservoir. A conventional well is drilled in reservoir rock where oil migrates, or is swept by water injection toward the well bore. In a shale field there is no migration at all. It is source rock, not reservoir rock. And it has so little permeability that the oil was never able to escape, it just sits there not ever going anywhere. You literally have to blow the rock apart in order to get the oil out. So oil not blown apart by the frack pressure would never migrate to the well bore.
Probably the best technical analysis of unconventional field development I’ve seen on your site, Mr. Patterson. My compliments to you on your continuing to learn some of the more seemingly innocuous aspects of this industry … which are not at all trivial in an operational/profitable sense.
I would take exception to your description of “blowing the rocks apart”, however, as the fissures – either natural or man-made – are merely spaces where 20/40 mesh proppant – measuring 1/32 to 1/64 of an inch – is lodged to allow the oil/gas to flow.
The continuing evolution in more and more efficient completion and stimulation is being assisted by the likes of GE investing an additional $10 billion in the coming years with a focus on developing waterless fraccing (liquified of emulsified CO2, Nitrogen, nat gas, or some combination of same). Newer versions of resin coated sand enables the proppant to be more ‘buoyant’ in these fluids.
The ongoing quest for EOR in the shale plays is also a priority for GE and many others.
Except for oversize trucks used as cars Detroit doesn’t build any real gas guzzlers any more except for handful of real hot rods and even the hot rods get pretty good mileage these days.Out of the next dozen Camaros and Mustangs you see ten or eleven of them will have v6 rather than v8 engines.
One of the fastest cars on the road the new model Corvette which comes ONLY with a monster V8 gets better mileage that some econocars of times past.
The high performance exceptions to this general rule cost so much that hardly any of them are sold ..You can read dozens of articles about high performance versions of the Corvette or Camaro for instance and yet never see one in a show room or on the street.That sort of car sells by the dozen rather than the thousand.
ISIS continues to advance in Iraq:
http://www.cbsnews.com/news/isis-captures-iraq-army-camp-as-bombs-hit-baghdad/
“But Iraqi troops, overstretched and overwhelmed by ISIS’ summer blitz that seized large swaths of territory in western and northern Iraq”
It’s 10,000 – 15,000 guys. That army is getting “overstretched and overwhelmed” by 10,000 guys?
An interesting viewpoint on ISIS taking over Baghdad
https://www.youtube.com/watch?v=p4-nVmiqFRM
Just hear on Local talk radio blab that Turkey is now Bombing the Kurds, Not IS. OK, that makes sense, but Turkey was also denying that the US and KSA could stage from Turkish soil. Someone has nothing on Bagdad Bob. Seems like it’s not nice to bomb the ones you were just giving weapons to.
I’m reminded of the fall of Saigon, after the US gave up and finally pulled out of Vietnam:
http://www.npr.org/templates/story/story.php?storyId=4625940
Lesson in that. The South Vietnamese Army was trained and equipped and they folded like a cheap lawnchair.
The Iraqi Army is doing the same.
Maybe you can’t train people to defend themselves. Maybe it never works.
BTW is it true the infected Dallas nurse is Vietnamese? Someone mentioned a name and it looked Asian.
Yes.
http://www.nytimes.com/2014/10/14/business/energy-environment/oil-prices-fall-as-opec-members-fight-for-market-share.html?_r=0
“This is not your garden variety autumn price decline,” said Tom Kloza, chief oil analyst at GasBuddy.com, which reports fuel prices from filling stations across the country. “Clearly there is a rift in OPEC, and that means we are more likely to see a price war over the next six months. Crude oil is teetering on the brink of collapse.”
4.2% hit today, WTI closed at $81.84.
Brent dropped 4.3% and closed at $85.04.
Bunch of chicken being played right now on who will have to cut production first.
Maybe it will be CLR.
Wellhead pricing for Bakken oil has dropped below $70/bbl, into the mid-$60s/bbl. These are levels not seen since 2010.
http://www.fhr.com/%28X%281%29S%282srefj55ix45cx55ihmf1wmv%29%29/refining/bulletins.aspx
http://paalp.com/fw/main/default.asp?DocID=1363
Also is anyone paying attention to the stocks of the companies operating in the Bakken? Oasis Petroleum, the largest company that operates only in the Bakken and nowhere else, is going to be in a death spiral if oil prices don’t rebound. In addition American Eagle Energy, Crescent Point Energy, Emerald Oil, Enerplus, Halcon Resources, Kodiak Oil & Gas, Northern Oil & Gas, QEP Resources, SM Energy, Triangle Petroleum, WPX Energy are all at or very near to 52 week lows.
You know what?
If there was ever a chart telling the tale, look at that Flint Hills Resource chart. Look at how only two of eight Eagle Ford categories are proper oil under API 50, and note how suddenly 50 has become the threshold and not 45.
Guys, the EIA’s Drilling Productivity Report came out around noon today. I wanted to have a post on it but there is just nothing there to post. Its the same old story as last month.
Only thing of note is they lowered their estimate of Bakken production an average of just over 15,000 barrels per day for every month in 2014. Which just goes to prove that they just guess at the production. They will eventually report what the state of North Dakota reports but it will take them almost a year to get it right. They have December of 2013 and all earlier months correct. But beginning in January they just guess and pay no attention to what North Dakota reports.
Beginning with January, the Eagle Ford data was revised down by an average of 6,574 barrels per day and for the same period the Permian was revised up by an average of 5,400 barrels per day.
The thing is, substitutes exist *right now*.
Really. Some of them are just taking time scaling up (hybrids, EVs, etc), some of them are a little more expensive (e.g., synthetic fuels) so they can’t compete yet. But they’re all here.
So much the better. I’ve known we need to phase out oil since the Carter days. I’ve long wondered if we’d have a smooth transition or a rough one. Until the global warming thing, I figured it would be about economics. We’d either start the switch early before suffering the economic costs of a sudden need to switch, or we would wait until the last minute and then have to pay extra to make the changeovers. I figured the economics alone would be the issue.
Then with global warming, I realized that we have a more urgent need to make the switch. However, it would appear that the only motivating force for some people continues to be financial. But, then again, worldwide recession is doing its part to get people to cut back on oil. Couple that with the increased costs of getting what is left out of the ground and perhaps there will be a tipping point in a somewhat timely fashion.
I think income inequality is a concern, but it probably is very good in terms of consumption. If just a few rich people have money, they don’t consume nearly as much as a thriving middle class.
We really need to leave most oil in the ground. Of course, coal is more critical.
Fossil fuel interests are good at blocking change. Among experts I think there’s a clear consensus. In the US “lay” population, including the wealthy, denial is still strong. That’s helped by massive disinformation, of course.
The “fracking will save us” media coverage has been very misleading.
Even without doing research, if the business writers had stopped to think about it, they would realize fracking (for oil) and tar sands are an indication that the oil industry is dying (slowly or rapidly depending on your perspective). No company would bother with either option if they could find new sources of easy oil.
I do expect some serious ramifications when the Bakken hits peak oil and nothing can be done about it. Once the fracking miracle proves not to be sustainable, I would think some post-oil planning begins on a much larger scale.
Anybody who can buy a hybrid or EV will be fine. People who have to wait for used cars will suffer for a while.
Carpooling would expand quite a bit – can’t you see carpooling apps on people’s phones?
I was thinking more along the lines of the business and economic reaction. If you have been basing your expectations and projections on oil and you do that because you have been superficially looking at increasing production in the US, you may find it harder to maintain your viewpoint if production starts to drop again.
I think there is money to be made in phasing out oil use as much as possible, but as long as those with a vested interest in making money from an oil economy have the ability to influence laws, the changeover and possible economic recovery is delayed.
Change *is* happening. EVs are growing strongly.
If the current price decline is intended to kill competition, it’s targets include EVs. I don’t think that will succeed, hut it won’t help.
ZH is on the great smash:
quoting Goldman:
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/10/shale%20cost%20curve%20red.jpg
ZH is pretty hard core libertarian, which categorizes them as their own type of wacko, but they close the article with an ominous tidbit in terms of politics often puts blame on people who could not have stopped something:
“very soon there will be a very vocal, very insolvent and very domestic shale community demanding answers from the Obama administration, as once again the “costs” meant to punish Russia end up crippling the only truly viable industry under the current presidency.
As a reminder, the last time Obama threatened Russia with “costs”, he sent Europe into a triple-dip recession.
It would truly be the crowning achievement of Obama’s career if, amazingly, he manages to bankrupt the US shale “miracle” next. “
The joke among those who know the president doesn’t control everything is that whenever something bad happens anywhere in the world or even on the smallest personal level, it’s Obama’s fault.
I guess that replaces the, “God is punishing gays, so he killed thousands of people with that natural disaster,” line of thinking. Obama has replaced God in his control and influence in the world.
That’s what frustrates me about politics. When you are always looking for someone to blame, you are likely overlooking the real cause of the problem and therefore not doing anything to solve it.
Whenever the next president is, it won’t change the reality that the oil is running out. If you’ve pumped most of it out, it is hard to claim environmentalists won’t let you pump even more of it.
And of course, if you accuse the president of lowering oil prices, you have to go to the consumer and explain why gas prices have to be higher or the oil companies can’t make any money.
There is a good and somewhat classic explanation of deflation attributed to a young Ben Bernanke and what it means. It goes like this:
“You think lower prices are good for people. But that’s not what works. If prices are going to be lower tomorrow than today, people won’t buy today. They’ll wait, and if they know tomorrow prices will fall further the day after tomorrow, then they’ll wait again. Economic activity is destroyed.
But sir, if prices are rising then store owners will not put goods on shelves this morning because they know they can get more for the goods tomorrow, and tomorrow they will withhold the goods again until the next day.
Well, yes, but you can order store owners to put things on shelves. It’s harder to order consumers to buy.”
The free market in action.
Oh marvelous.
Dallas nurse’s boyfriend works in Fort Worth. Checked into a hospital with ebola symptoms. This is from twitter, unvetted.
I have family in Fort Worth and have been following the story since the first case was reported in Dallas.
Here’s the headline about the Fort Woth case tonite —
http://www.westernjournalism.com/breaking-conflicting-reports-say-infected-nurses-texas-boyfriend-may-ebola/
It seems criminal, the fact that so much of the news about the Ebola outbreak in Dallas is focused on the hospital’s and the caregiver’s breach of protocol since the beginning. The questions they are not asking seem to point to the larger picture – is there no federal policy, no federal strategy, no proper federal emergency management to face the crisis? We have hardly heard a peep from the President, much less from anybody else except a few figureheads at the CDC.
This is truly a shame, and to me it points to a major failure of leadership. I voted for Obama, seeing no better candidates anyway, and, certainly after having seen the many intractable messes that the previous administration got us into as a nation, it seemed clear that the depublican party was mess. Still is. But the remocrats are no better either, and it seems evident that neither has a plan to deal with anything of the likes of peak oil, climate change, or Ebola. It is shameful.
I voted for Obama, knowing all along he was more conservative than most people thought.
I don’t think his reactions to problems are out of keeping with who he is and what he has to work with. He has always sought compromise, and listened to whatever experts there are. Sometimes those experts spout the commonly accepted approach, rather than suggesting something more dramatic.
I think Ebola has been dealt with the way the US health care community tends to deal with health issues. I remember that for years the common advice for HIV was too conservative. Public health officials don’t want to cause panic, particularly when they don’t know all the facts.
And of course, we all know that there are environmental health risks that are fought for years if preventing them takes money out of someone’s pocket.
A surgeon general would be helpful
Heh
http://mediamatters.org/blog/2014/10/14/after-smearing-surgeon-general-nominee-fox-wond/201147
exactly
The latest Canadian natural gas storage numbers have come out. I read recently that storage in eastern Canada is at acceptable levels… which would mean they must be well below in western Canada. Not sure if that is really the case though, anybody know?
If completions slow in the Eagle Ford and Bakken… we’ll see a decline in the production of associated gas.
Probably the powerful effect is NGL price will fall too, and that will end the Marcellus.
Is the market overall well supplied with gas without the Marcellus and Bakken?
I don’t keep up with the statistics but my first guess is that with tight oil production going down- if it does go down- natural gas prices may actually go up since there is so much gas coming out of tight oil wells. Of course a lot of it is flared but still a lot of it is sold ..
Another guess is that demand for gas will not fall off as fast as the demand for oil in a sick economy. People can easily drive less and switch to the smaller car in two car families and that sort of thing but maybe they can’t as easily and quickly cut back on heat and electricity as they can gasoline……
IIrc a year or two back we were reading that a big part of the gas production industry was dependent on the associated liquids that could be sold for oil rather than the gas itself.
So maybe if the price of these liquids falls along with the price of oil then gas production will be curtailed too….Less gas wells will be drilled if the price of the condensates coming up with the gas drops along with oil prices.
Personally I expect oil prices to go back up again pretty soon unless the economy gets noticeably worse.Rust and depletion ( courtesy of Matt Simmons) never sleep and inflation only naps courtesy of OFM.
My own opinion is that declining production combined with growing population on average over time will push prices up faster than demand destruction can push them down on average.Lots of people disagree with this opinion of course.
I say this even though I expect people to be driving new cars that get fifty mpg in another decade or so even here in the states where as everybody knows we have a god given right to cheap gasoline.
The latest report from the Carbon Tracker Initiative…
Carbon Supply Cost Curves: Evaluating Financial Risk to Coal Capital Expenditures
Harold Hamm of Continental was on Cramer in person tonight. He confirmed that the Bakken is the real deal folks and that there’s no need to worry about the lowering oil prices. Continental will do just fine chugging away like it has been in the Bakken and SCOOP but maybe some production lowering will have to happen, in case the price dont go back to the better level. But I still see no reason not to believe Hamm knows just what to do to maximize profits for shareholders even in the current market that has an abundance of oil.
Rewatching the video of the Hamm interview now, http://video.cnbc.com/gallery/?video=3000319887
Why did you believe this blog is focused on what’s best for CLR shareholders?
Why did you belief Cramer is focused on what’s best for CLR shareholders..
Seriously, if you are a CLR shareholder, why belief anybody Mike, and why don’t you calculate for yourselves, based on the public NDIC data, what the breakeven price is for Continental.
Abundance of expensive oil. Fixed that for you.
I personally don’t depend to know what price CLR needs to break even but it IS probably lower that that of most other tight oil operators.
I listened to the video with my usual skeptical ear and while I would not buy CLR stock based on what Hamm said I must say he made some good points. The biggest one is that he mentioned the decline of conventional old fields such as the North Sea. Another is that OPEC even if they could probably would not boost production very long.
He did sort of gloss over the fact that they have only cut prices rather than actually increase output of course.
But cutting price is probably perfectly effective a way as raising production of maintaining market share and putting the heat on marginal producers and driving some of them out at least temporarily.
Nobody should expect the Saudis or anybody else to raise production in a falling price scenario unless it is a small company making money at the new lower price. Not these days.
The time when the Saudis could put a big hurt on the old USSR by flooding the market with cheap oil are long gone.They don’t have it except maybe in the ground and by all indications they don’t have the capacity to produce very much more in the short term.
Nobody seems to know for sure just how much spare capacity they have but some very sharp people such as our own host Ron think they have very little indeed. I think they probably have a little but not much- not enough to drive down the price on world markets.
Overall I rate Hamm as being more or less honest in terms of describing the state of the industry. In terms of the prospects for his own company….. buyer beware as usual.
I think he is right in predicting that oil will be back to ninety bucks pretty soon.
Thanks for your comments Mac.
I find it incredibly difficult to listen to Cramer, who fails to provide any coherent in-depth analysis. I prefer to listen to investors who actually have a great track record. But, with great effort, I did watch the video.
Obviously Hamm is a smart enough guy, he wouldn’t be where he is, if he wasn’t. But as long as his and other tight oil production companies are not cash flow free (which they still clearly are not), they depend on external funding, and that explains the abundance of marketing.
I also belief that as long as economic conditions in the world are sound, the oil price probably still will move higher in the long run, as it isn’t becoming cheaper to extract oil. However, Hamms, and my oil price predictions are as good as anybody else’s (ie pretty worthless). He can make a lot of money right now in the oil futures if he strongly believes in >=90$ oil prices in the coming 1-2 years. He can buy his own stock now if he thinks its undervalued. Instead he chooses to join Cramer. Note the difference with somebody like Warren Buffett, who instead warns investors he might start buying back stock, and then actually does.
The single biggest mistake investors are making is
attribute substitution
Instead of answering the, computationally complex, question “Is this stock substantially undervalued?”, they answer questions like “Do I like this company?”, “Looking at the trend, will the stock price go up?”, etc.
Financial ruin for many, and Cramer is playing that game happily along.
I don’t think Continental needs a lower break-even price than most other operators. I know for a fact that Continental wells in North Dakota return less oil than the average operator.
Companies like Continental are highly depend on short-term oil prices, due to the strong decline of their wells in unconventional reservoirs, despite some price hedging. After 2 years, the monthly output of the average ND well has reduced by 80%. Also, Hamm would be lying if he would say that Continental can just wait a couple of years until conditions improve (which is also something he is not exactly saying, but hinting enough in that direction). Many costs keep being incurred, and necessary external funding would dry up soon enough.
I don’t like the false information these companies are spreading, which has been a big motivation for me to reveal better of what is going on. They have been overly optimistic in their resource estimations, in their well EUR’s, and in their accounting (esp depreciation of assets). Continental has been a big part of that as well. In the past this kind of misinformation was difficult to correct. Luckily now much more information is publicly, and freely, available, and this does become possible.
LOL if anything shows the shear desperation of Continental ….
Cramer has been flogging Continental to anyone dumb enough to watch his show, and the stock has tanked — lost 30% in a few days, he says. So “if the oil price bottoms out” it will be time to buy more stock, he says. No, Jim, if oil price go up it will be time to buy stock in oil companies.
Every sentence that comes from his mouth contains a logical fallacy or is meaningless.
His lickspittle attitude to the Hamm is cringeworthy too. When did America become a feudal society?
Someone (Mark Twain?) once said a gold mine is a hole in the ground with a liar standing next to it. But compared to Cramer, Hamm seems fairly honest. The media cheerleaders are worse than the liars who are in it for the money. What’s the point? I really don’t get it.
Bonus points for delusional remarks that seem so normal nowadays: “Energy renaissance”(mispronounced), “There will always be turmoil in the Mideast”, “the most exciting part (0.01% of total jobs) of the job growth in the US”, …if we didn’t have all that turmoil going on over there…we’d see higher prices”…
Cramer has a long history of asymmetric risk. You might make a little money on his wins, but his losses will wipe you out. Theres an obvious reason for that in market theory – if its being broadcast worldwide, it’s not an information advantage.
As far as CLR – no, of course a $30+ fall in crude is not good for business for someone who sells crude.
If I had any money left over after following implied or explicit blog post recommendations to buy specific stocks (remember Petrobank?), I would have bought CLR stock, right before the recent decline in their stock price.
From the decks of the presentations (pdf) at the recent Canadian Solar Industry Conference in Calgary, Alberta.
I’d recommend looking at the presentation by the Alberta Electric System Operator (starts at page 33). Lots of info on bitumen production’s impact on Alberta’s grid planning.
NoDak likely reports tomorrow so Ron will have another Ronpost out, and this array of comments will be lost to eyeballs — but nonetheless, a thought:
If shale oil is truly a significant part of GDP, maybe with derivatives perhaps a majority of growth, then when production crashes, so will GDP growth.
What happens then? Consumption drops. And the price drops more.
This can get ugly.
If shale oil is truly a significant part of GDP
Let’s say there is 3m bpd of shale. That would be about 1bn barrels a year, which sells at about $100, so we have $100 bn total income.
The US GDP is expected to be about $16,800 bn in 2014
http://www.tradingeconomics.com/united-states/gdp
So shale oil is about 1/168 of the GDP, or 0.6%.
The big impact of a shale bust is contagion on the high yield bond market, which affects housing, car sales, consumer loans…. As oil prices drop now fiercly, this can be much bigger than the subprime mortgage crisis.
Apart from the 0.6%, you also need to consider all the supporting businesses and activities which generate additional GDP.
But I think that shale’s impact on GDP is much larger that that, due to the psychological factors involved. Shale is a “growth enabler”… it allows us to say “see, we can continue growing the economy forever, there’s no need to panic, the stock market will grow forever too”. When that illusion crashes, the true impact of shale on the economy will become apparent.
you also need to consider all the supporting businesses
I disagree, those supporting industries are costs to the drillers, so their income is reduced by the outlays to finance those activities. GDP is a measure of income from the money point of view. So the 0.6% already includes activities that are costs. The final income of the drillers is lower, and the income of the other players is factored in. That’s what double entry bookkeeping is all about.
Put another way, the 0.6% estimates the revenue of the drillers, not their income (profit).
0.6% is a healthy chunk of growth. It’s not a matter of how much GDP is affected, it’s a matter of how much GDP growth is affected — largely because population is always growing.
As for costs to drillers, well, it’s income to trucking companies. And rail companies. And proppant companies. And HYG lenders.
So I applaud the first level estimate of 0.6%. It’s probably not final.
No, obviously not final. 😉 Also note that only the part that is growth is what was added this year compared to last year.
As for costs to drillers, well, it’s income to trucking companies. And rail companies. And proppant companies. And HYG lenders.
Exactly. So you subtract it from the take of the drillers (because it’s cost) and it shows up in the profit of those other companies.
Note the calculations assumes that the LTO business is a “normal” one, meaning is isn’t just the Ponzi scheme to burn investor money and get a few managers rich. If you look at the books of those drillers, their only actual income in the increased value of their mineral holdings. Their operations are losing money hand over fist.
My understanding is that they have negative cash flow, not that they’re “losing money”. Accounting for profit is on an accrual basis, meaning that it takes into account future revenues. LTO declines quickly, but you still get roughly 70% of your revenue in the second, 3rd, etc years, while almost all of your costs are in year one.
So, if you can survive the cashflow burn, you have a very profitable well.
You can have profits if you are burning cash to build something you can profit from later. but these guys are burning cash to drill wells that immediately deplete.
The profit they are making is from mark-to-market evaluation of their holdings — that is, an estimation of what the value of the mineral rights they hold would be, if they were to sell it off immediately. The hype surrounding the LTO is what is keeping these evaluations high, and encouraging Wall street to lend them money to cover their operating costs. That is where the Ponzi scheme accusations are coming from.
They don’t deplete that fast. AFAIK, the numbers you commonly see are the percentage declines from the first day, to 12 months later. The decline rate from the overall first year production, to 2nd year production, is rather smaller. Plus, the decline rate slows down in the 2nd, 3rd etc years.
So, first year production only appears to account for about 30% of the overall well’s production. If 90% of all of the costs are in the first year, and if 1st year revenue is sufficient to even come close to covering them, then the well is going to be very profitable.
On average, a new well is only going to produce for 6 months of the current fiscal year, assuming drilling is spaced out over the year fairly evenly.
So, the company spends 90% of the cost, but only gets 6 months of revenue. Of course it’s going to show a cash flow loss in the first year.
Not quite.
700 bpd avg first 180 days would pay it all back in just 6 months if the price were $100/b. But ya, no question, 6 mos flow will not pay for the $10 million at $60.
As for 90% of costs being in year 1, no. HYG at 5.9% and 10 million is 590K in interest every year. The trucks are maybe 3%. Royalties are 15% of production. We can account for those as costs or diminished revenue, but if costs, they add up every year and will overwhelm that 90% peg. Then there is the back end 100K to plug and abandon.
I’ll guess 75% of costs in year 1. Shrug.
hmmm. 700 bpd x 180 x 60 = 7.56M. So, that pays off 76% of the debt in the first 6 months. If the 2nd 6 months is only 350bpd (wild guess), then that’s another 3.78M, which pays off the rest and leaves a positive cash flow. All in the first calendar year (but not fiscal year – that will show negative cash flow).
If 70% of revenues are in 2nd and later years, then .7 x .15 = 10.5% of overall gross revenue paid out in 2nd and later years.
5.8%, typo. It does matter. That’s 10,000 bux.
The disturbing pattern of health care workers testing positive for Ebola continues (second health care worker tests positive in Dallas).
I guess we will know we are in really deep doo-doo when officials start doing press conferences in hazmat gear.
Does flooding the victim with UV light do any good to suppress the virus spread?
I don’t know, but some troubling claims by the nurses’ union:
http://houston.cbslocal.com/2014/10/15/nurses-union-ebola-patient-left-in-open-area-of-er-for-hours/
And the second health care worker, who tested positive on Tuesday, flew on Frontier Airlines on Monday.
I thought test results take 48 hrs.
CDC is now demanding that all passengers on that flight report for testing. This will go over well.
So if you just treated an ebola patient, what you do is hop on a jet to Cleveland and then fly back to DFW and maybe pop a fever the next day, and the day after, get your death sentence.
Some more “Debbie Downer” reading material below, which doesn’t offer much comfort for those airline passengers.
But patients in early stages seem to be far less communicable than in late stages.
WaPo reporting passenger temp was 99.5F degs before boarding the plane Monday.
I don’t think so.
University of Minnesota Center for Infectious Disease Research and Policy:
COMMENTARY: Health workers need optimal respiratory protection for Ebola (9/17/14)
http://www.cidrap.umn.edu/news-perspective/2014/09/commentary-health-workers-need-optimal-respiratory-protection-ebola
This is directly relevant to CBS article linked above. Excerpt follows. This is in regard to Duncan’s second visit to the ER:
The CDC generally can’t be sued, the hospital can be. I suspect the nurse union will phrase their releases to build their case consequent to advice of counsel.
After Duncan was admitted, on his second visit, and finally placed in isolation, medical staff did not wear protective gear until Ebola test came back positive:
http://thescoopblog.dallasnews.com/2014/10/presbyterian-workers-wore-no-protective-gear-for-two-days-while-treating-ebola-patient.html/
Some are better prepared:
Mexico has the healthiest population in the entire world.
Since Ebola has captured the noise machines for now, why not take a look at larger issues in the public health arena?
http://www.washingtonpost.com/blogs/wonkblog/post/why-texas-has-the-highest-percentage-of-uninsured-people-in-the-us/2011/08/02/gIQA1wIdHJ_blog.html
‘…You can expect Texas Gov. Rick Perry, for example, to bring up how his state has generated 37 percent of the country’s new jobs since 2009.
Here’s one statistic, though, you won’t hear him touting: Texas has the highest percentage of uninsured people in the country. Twenty-six percent of Texas residents lack health insurance, compared with a national average that hovers around 17 percent. That works out to about 6.3 million uninsured Texans, a population nearly equal in size to the entire state of Massachusetts.’
https://en.wikipedia.org/wiki/Health_insurance_coverage_in_the_United_States
In my opinion, some minimum level of health care is a human right, and public health is a public good.
We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.
E pluribus unum
United we stand, divided we fall.
We must all hang together, or assuredly we shall all hang separately.
…or…we can all go all Ayn Rand.