Hi Gang, I had expected the Texas RRC data today but it didn’t happen. I expect it Monday or Tuesday at the latest. I am continuing the experiment Dennis started a week or so ago. We have two open threads, one oil and gas only, the other any other related subject such as climate change of economic collapse.
This one is Oil and Gas only.
Mr.Patterson
I appreciate your ‘giving this a shot’ with dual threads. It may prompt more in depth as well as wider range vis a vis the hydrocarbon world.
Hope the Sunshine State is proving to be agreeable to one and all.
Ron,
I second the hope that the two-thread approach will be retained.
How The Oil Bust Has Wounded Linn Energy
Linn’s bonds have plunged to distressed levels and are now trading in the 30s, with yields of 40% or more, according to FINRA data.
I’ll tell you what, they’re definitely not the only ones hurting. I sold a lot of oil this week and got garbage money for it. A mere fraction of what I was getting a year ago. I only sold it because all my tanks were full. I can only store around five thousand barrels. I haven’t built up my storage capacity over the years because putting oil in tanks doesn’t get money wired into my bank account. I’d rather keep the oil moving than store it.
I cannot in any way understand why anybody would go out and drill new holes in the ground to get more oil for this kind of garbage money. It’s common sense. That is why I’m expecting production to drop off. The idiot bankers might keep financing the bigger operators only because they’re already in too deep and cutting them off will cause a total loss. But that doesn’t apply to a whole lot of marginal players. KKR just just took a total loss on a 7.2 billion investment on Samson. And the Japanese outfit, wasn’t it sumitomo, invested a billion and sold it for a dollar. This is a really bad joke folks and outfits like the Saudis are trying to teach people a lesson about investing in expensive energy schemes. They don’t like it and it’s their rice bowl.
And this is pissing me off too.
As I told Mike, if you stop by the Dairy Queen I’m working at, I’ll give you a free dip cone.
I’d like to take that dip cone and stick into some Wall Street assholes eye. Anything they touch turns to dung. Washington too. I’m about ready to start ripping people’s heads off and shitting down their necks. The old Italian mafia wishes they were as good as this Wall Street crowd. They’re crooks man.
That means the bottom might be in when I get this mad.
HR,
I can empathize with you… but I have to tell you, your comment gave me one hell of a laugh. Not laughing at you. .. but rather I feel the same as you about the criminals on Wall Street.
I cannot in any way understand why anybody would go out and drill new holes in the ground to get more oil for this kind of garbage money.
Garbage money appears to be better for some operators than no money. I assume a lot of them are praying for oil prices to go up before they go broke.
Frugal,
The US energy industry currently produces oil and gas for a cost of around 1000 bn USD and sells it for 500 bn USD. This huge gap of 500 bn USD per year has to be financed by (naive) bond – and equity – holders and bank credits. The US has a strong financial sector, yet the question remains how long it is possible to subsidize global energy prices just based on the belief that oil prices will go up soon.
Heinrich Leopold
You numbers are exaggerated
A brief calculation shows that combined revenues for total oil & gas produced in the US in 2015 should not exceed $270bn.
I don’t know what are the costs, but they are certainly much lower than 1 trillion dollars.
Total estimates (except NGL price) are from EIA’s STEO
http://static2.businessinsider.com/image/55fc46cabd86ef20008bb691-1200-900/oil-rigs-9-18-15.png
Hard to believe that US oil rig count went up by 8 times between 2009 and 2014.
The SA article is a good read. I guess all of the improvements are originating from the O&G research labs in D.C. since there is zero, zip, nada discussion of the cost of these improvements?.
oops, this should have gone down thread. that’s what I get for typing on an iPad in bed and in the dark!?
https://app.box.com/s/u3icgvx6wbcddnijynhx257dshzm1dyr
https://app.box.com/s/6aju2cctaq9wxck2y6xwxdfbqidq95op
https://app.box.com/s/s0wyvm4xh7kvd4fxcwyxx3mfevtf8yub
https://app.box.com/s/8rqnbk0mqgctg7vlt04su71711vumjs9
The YoY rate of production appears to be peaking at the fastest rate since the early 1950s, and the 5- and 9-year rates are at the fastest rates since 1927 and 1930.
But even with the boom/bubble in shale production, oil production is down 45% per capita since 1970 (at the level of the late 1940s), rendering the shale boom hardly a blip on the long-term, log-linear US oil depletion regime per capita.
Third quarter for us will be a loss, first quarterly loss since 1999. Managed to eke out in the black in Q4 2008 and Q1 2009.
At these levels it is a struggle to keep out of the red. We did at least get small projects that had to be done finished and got ad valorem taxes and well fees behind us. So hopefully can shoe string it the rest of the year.
Still have 3 leases shut in. Really, just all but one well on 2 of them. Third we just shut down and really won’t care much if have to eventually plug, just one well.
I continue to wonder how this will play out with the highly indebted companies. I know they are all on interest only, can’t see how many could be paying principal at $40 oil or less and $2.50 gas or less.
Hopefully, if prices do turn the banks and investors will require some principal retirement before another round of drilling begins.
Charts, charts and more charts. He ends with this question: “is there a chance that the industry will reach the next milestone – of 2 million barrels of oil per well – by 2020?”
http://seekingalpha.com/article/3519636-u-s-shale-oil-wells-will-get-bigger
It’s a Halliburton info-commercial. They sell hydraulic fracturing services.
Some articles about Shale oil companies and bankruptcy. 16 shale oil companies died since the beginning of this year.
The next critical date seems to be October, 1st
Oil Companies Near Bankruptcy
US shale industry braced for bankruptcies
Some U.S. oil companies need to die
This link does a great job pointing out the bad side of exploiting Alaskan fossil fuels.
http://www.theecologist.org/News/news_analysis/2985412/arctic_charade_obamas_alaskan_tour_and_the_climate_change_puzzle.html
It also does a great job of making the Obumbler look worse than he really is- which is really not bad at all, depending on the issue. Taken all around he will go down as a decent to good prez.
The thing that hard core leftists and hard core greens tend to forget is that BAU paradoxically MUST survive and thrive if there is to be any hope of REAL progress on the environmental front.
Homework is to compose a short essay explaining why this is so.
The best one imo I will quote with credit in my book- if I ever finish it.
The link points to an article which gave me additional insights on how people fail to solve problems. The author doesn’t understand that shutting down exploration offshore Alaska won’t do much to global warming, but it has the potential to cause enormous economic harm to Alaska.
Let’s say, for the sake of argument, that Shell eventually proves a 10 billion barrel group of fields. That’s equivalent to four months’ worth of world wide production at today’s rate. It would be produced over about 50 years, which means it will have a negligible impact on the global warming issue.
That bunch doesn’t seem to get they have two viable options they can plug at this time: kill half to three fourths of humanity in a hurry, or start advocating nuclear power. Or they can keep on dreaming about cheap batteries, cheap solar panels, cheap wind turbines, and cheap high voltage super grids.
Old Farmer Mac said:
From Nick G’s comments I believe he would agree that this is the case, that BAU must survive in order to implement the future green Shangri-La
But isn’t Gail Tverberg’s argument that BAU cannot survive the shift to expensive oil, which would then preclude the future green Shangri-La?
So isn’t another important question can BAU survive expensive oil?
Capitalistism and the modernist paradigm, of which capitalism is a subset, are both built upon a linear theory of history. According to this theory, history follows a continuous upward line which goes on forever. And since both capitalism and modernism are materialist doctrines, economic growth also follows this continuous upward line which goes on forever.
Are not capitalism and modernism antithetical to those theories which hold that there are limits to growth?
Are not capitalism and modernism antithetical to those theories which hold that there are limits to growth?
I am always a little bemused when people refer to any hard fact as a theory. I would have phrased your last sentence a little differently.
“Are not capitalism and modernism antithetical to the obvious fact that there are limits to growth?”
And the obvious answer would be: Yes, of course.
It depends on what’s growing. My analysis shows capitalism is better for freedom, in spite of its flaws. It’s much more effective encouraging innovation, efficiency, and economic growth. Economic growth is feasible even if consumption of raw materials and energy isn’t growing, if they are used more efficiently. Such efficiency is achieved much better via capitalism. A comparison of the Soviet and USA oil industries proves it.
But even if capitalism were equal to its deadly enemies socialism and communism, it wins hands down because it is less likely to end in a terrible dictatorship like we see in North Korea and Cuba.
Fernando,
You are fighting a sectarian battle and are missing the bigger picture. As Robert H. Nelson put it in Economics as Religion:
If the wars of religion four hundred years earlier had been fought among Catholics and diverse Protestant denominations within Christianity, the great wars of religion of the twentieth century were now fought among socialist, Marxist, fascist, American progressive, capitalist, and other branches of an overarching religion of progress.
The larger argument is that it might be lights out for the entire religion of progress, including all its factions.
”You are fighting a sectarian battle and are missing the bigger picture.”
Perhaps so , maybe no. I have a hard time sometimes knowing what Fernando thinks.
But it IS obvious that growth can continue FOR SOME TIME even in the event that energy supplies are declining- so long as efficiency of energy use outruns depletion of energy supplies.
The modern western world economy has been growing faster than energy consumption in recent times and it is obvious enough that we could all drive cars that average twice the fuel economy as todays auto fleet with nothing lost.
I cannot prove it but I think Fernando is right that capitalist societies are less likely to morph into dictatorships than socialist or communist societies- but this may have more to do with changing times than the issue of capitalism versus socialism.
Education and trade tend to make people and countries more peaceable on the whole, and just about all societies these days are better educated generation after generation- excepting the ones embroiled in civil wars maybe.
Nobody who has any appreciation of history would argue that growth is not a built in assumption in all recent historical contexts.
The great advantage of the linearly upwards theory of history becomes clear when one compares it with other concepts of history, such as the cyclical theory of history which deals, for instance, with the rise and fall of civilizations and empires. Even more gloomy is the ancient notion of a Golden Age at the beginning, from which everything else is derived, implying the rather unpleasant certainty of continuous decline.
The only competitors in the field which enjoy any broad base of popularity are the messianic theories of history: Judeo-Christian millenarianism, Positivism, Marxism, Neoliberalism, to name some of the more prominent ones. In these theories history will come to an end after both man and nature are transformed and an earthly paradise established. “History is seen as a moral drama whose last act is salvation,” is how John Gray puts it. But there has always been a disagreement about what the earthly paradise should look like.
As Gray goes on to explain:
For Marx and Lenin, it would be a classless egalitarian anarchy, for Fukuyama and the neo-liberals a universal free market….
Through their deep influence on Marx, Positivist ideas inspired the disastrous Soviet experiment in central economic planning. When the Soviet system collapsed, they re-emerged in the cult of the free market. It came to be believed that only American-style ‘democratic capitalism’ is truly modern, and that it is destined to spread everywhere. As it does, a universal civilisation will come into being, and history will come to an end.
Gray adds that “This may seem a fantastical creed, and so it is.”
“What is more fantastic,” says Gray, “is that it is still widely believed.”
While I like Gray, and find much of his analysis compelling, one must always temper it with the causality of his origin coming out of the Right in the UK.
Straw Dogs was excellent, but drifted into postmodern relativism.
May I recommend The Reactionary Mind: Conservatism from Edmund Burke to Sarah Palin by Cory Robin?
He analyses Gray quite throughly.
cytocrome C,
OK, I’ve got the book on order. I’ll see what Robin has to say.
My belief is that we’re moving into an era when the old left-right, liberal-conservative, Republican-Democrat dualisms are no longer valid.
I think we’re going to see a rebirth of nominalism as the old vocabulary crumbles under the new realities.
The book is excellent.
Things are getting blurry on the old order, I agree.
But when the little difference between left/right argument comes up, I usually see a hard right turn.
You might find this article by Immanuel Wallerstein interesting, as he analyzes how the left in Latin America is fracturing under the new realities:
“The Latin American Left Moves Rightward”
http://iwallerstein.com/the-latin-american-left-moves-rightward/
Probably no better example of the schism opening up within the left can be found than in the conflict over whether to allow oil drilling in the Yasuni National Park in Ecuador or not:
“Ecuador’s continued conflict over oil drilling, indigenous rights and biodiversity”
http://www.redd-monitor.org/2014/06/03/ecuadors-continued-conflict-over-oil-drilling-indigenous-rights-and-biodiversity/
Many commentators, not just Wallerstein, believe this schism within the left poses a much more serious threat to the survival of Latin America’s progressive governments than anything the right is doing.
I’m with Ron this time, perpetual growth is going to hit the brick wall of physical limits sooner or later, and sooner, every passing day.
BUT- The only hope we have, and it is not a bright hope, of achieving a truly green economy depends on business as usual holding on until the necessary technology can be perfected and scaled up-IF it can be perfected and scaled up.
A very hard crash that will wipe nearly all of us out is otherwise absolutely baked in but it will not necessarily come about all over the world silmantaneously. Some small parts of the industrial economy might survive for a very long time in some places- with luck.
The USA can survive quite a long time on the DREGS of our one time gift of non renewable resources- if we put our minds to it.Putting our minds to it is a political matter rather than a technology matter.
There is essentially a zero hope of going green across the board in the short to medium term no matter what.
BUT – and this butt is as wide as that of a four hundred pound secretary- if we get the necessary Pearl Harbor Wake Up Bricks upside our collective head soon enough and often enough, we might just conceivably manage to hold on- sort of, after a fashion- in a country such as the USA or Canada and squeak thru by means of going on a war time economic footing and working like hell on efficiency, conservation, and renewables. There are reasons to believe that the population of most countries with educated citizens will start to fall within the next fifty years or so.
With a welfare state to fall back on ( hopefully at least ) and birth control getting to be cheaper every year, populations might fall a lot faster than expected.
I do not know a SOUL, except some older pious Christians, who expects his children to help out in his old age -although I have encountered some on the internet. The welfare state has won, the intergenerational FAMILY old age support model is smashed beyond repair in richer western countries.It will not be resurrected within the next fifty years and the tale will be told within that fifty years in any case.
My generation has basically given up any hope of help from our own children,painting with the broad brush. We expect to be shuttled off into nursing homes or assisted living schemes at best.Our kids expect even worse from our grandkids.
( Things are somewhat different in my subculture of course. I am looking after my Dad at the expense of having no personal life of my own for however long it takes and a few of the youngsters are serious about the teachings of the church.)
If we were to close our borders to all except individuals with skills or knowledge really in short supply, we could and almost for sure would have a falling population within the easily foreseeable future here in the USA.
I know this is a hard and mean position, and that my own fore bearers stole this land from the people who had it before my kind arrived.
But farmers are used to dealing with REALITY instead of wishes and wants and what ifs. I have to cull livestock. The weak go to slaughter immediately. When the apples are too many on the trees, we get to work and pull the little ones off and toss them on the ground- because that is the only way the ones left on the tree can grow and the only way the tree can be kept healthy. Leaving them on there results in lots of unmarketable miserable scummy little apples at best and a badly broken up tree in all too many cases. Sometimes the harm to the tree is such that you have to euthanize the tree itself. We come along during the winter when work is slow and saw it up into firewood and dig out the stump and plant another tree. I have been looking at a badly overloaded tree that did not get thinned and seen it collapse before my very eyes, split in half. If I had been under it it might well have killed me.
There is such a thing as CARRYING CAPACITY and we are already well in excess of the long term carrying capacity of the North American continent using current technology and living our current life styles.
BUT we might manage to maintain a fat farm sort of bau long enough to get our population down ( without coercion ) and adapt , without excessive coercion, to a new low energy lifestyle before the shit hits the fan so thick and fast it buries us.
IF we are lucky as hell.
I am not holding my breath but neither am I just giving up. Somebody will get my little farm which will support them in a dignified fashion if they take care of it and are willing to work but they may be growing citrus rather than apples and peaches a hundred years from now.
But if we enter a new paradigm which calls for reduced production, reduced consumption, and a reduced material standard of living, will that still be capitalism?
Or will it be something else?
Can it still be capitalism, whose alpha and omega is the maximizaiton of aggregate utility?
Population and natural gas consumption growing in the US http://www.eia.gov/dnav/ng/hist/n9140us2A.htm
BUT- The only hope we have, and it is not a bright hope, of achieving a truly green economy depends on business as usual holding on until the necessary technology can be perfected and scaled up-IF it can be perfected and scaled up.
Unfortunately, the political divide seems to suggest that fossil fuel folks can’t admit that a transition needs to happen. We’ve got folks on the right who freak out at any discussions of energy efficiency, renewable energy, or energy conservation. For them, the only likelihood that they will see the light will be when they can’t afford their current lifestyles, and even then, their solutions might be to kill people rather than seek out new technologies.
Mr. Patterson: Your non-oil remark spawned a larger number of non-oil comments people crave to discuss even this forum is not the place. They are so eager to get rid of the boring oil issue so they are happy to get to the old habits.
Hi Glenn,
Gail’s arguments are not very convincing. World GDP per capita has grown while energy prices have been high, the higher prices have slowed growth somewhat, but capitalism does not always result in continuous growth at a constant rate. You are correct that oil prices and debt are factors in economic growth, along with labor productivity, and labor force participation rates, and resource availability. Gail’s story is incomplete at best.
Energy will be used more efficiently and other forms of energy will be used as fossil fuel energy prices rise.
Tverberg has a brand and a message and a following just like a preacher.
She cherry picks her facts to suit herself and she sticks to her canned message as closely as any backwoods Baptist sticks to the KJB.
I do not pretend to know what she actually thinks but I would not be surprised to find out she practices differently than she preaches. I recently read about a guy who is a well known publicly as an anti gun nut shooting an intruder in his home. Such is life. The Borgia family enjoyed the Papacy for damned sure.
You can bet your last can of beans that she will never mention any factor that detracts from her case if she can easily avoid doing so. That is evidence enough (sufficient ) that she is a SALES PERSON rather than an educator. I on the other hand try to tell both sides of any story I comment on- or at least acknowledge the other side when somebody brings it up.
Well it’s pretty obvious that, since all the big boys are aggressively competing to control the world’s resources of expensive oil, that they disagree with Gail.
And furthermore, just as in the 16th and 17th centuries when the center gave way and the transition from medievalism to modernism took place, we live in an age full of people who know that they, and they alone, have the truth, and these truth-bearers all disagree.
But, to put it in the famous words of Cromwell: “By the bowels of Christ, bethink ye that ye may be mistaken?”
Now I’ll conceed one point to you, and that is that Gail is enamored of crisis theory. And I would argue that just as likely an outcome as collapse is secular stagnation. We very well could muddle through.
But continued economic growth into the future? Any theory which predicts this is, in my opinion, highly suspect. And it matters little whether the future growth is “continuous growth at a constant rate” or future growth takes a more jagged trajectory.
Hi Glenn,
As population peaks and declines we could see a steady state of Total real GDP if population falls at a rate that allows GDP per capita to rise slowly.
For example a 1% annual rise in GDP per capita would require a 0.99% fall in population for steady state GDP if we start with a GDP per capita of $16,000 per person (2005$) in 2075 and a population of 9 billion (assumed peak population). Scenario is only an illustration as we don’t know when population will peak, at what level or what GDP per capita will be when it does.
Dennis, there was a similar deceleration of real GDP per capita during the 1780s-90s, 1830s-40s, 1890s, 1930s-50s, and Japan since 1990. Although eCONomists no longer study economic history (“history is dead”, or so we are told) or cycles/”rhythms” (they don’t exist, or so they believe), it’s referred to as the Kondratiev or Long Wave winter or Trough or debt-deflationary regime or Schumpeterian depression.
Growth of real GDP per capita is no longer sufficient to service the existing debt AND provide for the necessary additional debt to provide the incremental debt-induced growth of real GDP per capita.
If one adjusts global oil production for debt-money and population growth, the value of oil per capita and in debt-money terms has fallen significantly, which ensures a decline in future production, price, and demand with the further secular deceleration of real GDP per capita.
LTG and EOG per capita coincided with Peak Oil per capita in 2005-08. Growth is over and another global deflationary recession and bear market are likely, only we don’t know it because we don’t actually understand Peak Oil, economic history, the nature of debt-money, and the structural factors associated with deflation, including excessive debt, asset bubbles, extreme inequality, low labor share, decelerating productivity, and disproportionate net flows to the financial sector precluding real growth per capita for the rest of the economy. The crash in commodities, ZIRP, and the incipient deflation occurring around the world are unambiguous indications of another recession for the emerging debt-deflationary regime of the Long Wave.
Government spending is part of the GDP equation, and since 2009’s breakthrough of the arbitrary printing reluctance threshold — essentially government can spend what it wants, run a deficit, and have its central bank fund it.
Hard to make a case now for GDP measuring anything logical.
Green = Move To Iceland
Free electricity, free heat, maybe even free women.
a startup called Silicor is building a facility to purify silicon for solar cells in Iceland to take advantage of the low cost of electricity and heat from the geothermal resources there. The value of the silicon relative to the bulk is high, so being remote is less of an issue. This will remove the fossil fuel contribution to solar cell fabrication and the energy input is nearly free, which should improve the EROI.
The direct energy input may be cheap, but geothermal does have operating operating costs. And it requires investment.
What’s the cost of electricity in Iceland, and what’s the realistic geothermal resource below $0.15 per kWh delivered at the plant gate? Did you research it?
70% percent of Iceland’s electricity is generated from hydroelectric power with 29% from geothermal. It’s a very windy country but there are no wind turbines. Electricity consumption per capita is 7 times higher in Iceland than the rest of Europe, mainly because of aluminum smelters. Iceland imports most of its food.
Old Farmer Mac,
You made a call for information on the resource curse — or what Canadians call the staples trap — the other day.
You might find this article of interest:
CELAC is a paper organization. It’s an empty shell. This Chinese propaganda seems to be aimed at people who don’t really exist.
A different take on Chinese mercantile imperialism
http://www.theguardian.com/global-development/poverty-matters/2013/may/30/latin-america-risky-chinese-dragon
Sometimes Fernando is the man with the REAL MESSAGE.
ONLY an idiot could possibly believe the Chinese are going to behave any better than any other large powerful country in modern times. The ease of communication and the global economy will tend to reduce the worst abuses somewhat, or at least drive them out of sight.
Incidentally the Gaurdian is a left oriented environmentally correct paper and one I read almost every day.
This is a last man standing game by a bunch of global elites fighting over the dregs of resources that are left.
China is merely the last of the large industrial dinosaurs.
That appears to be the sad truth of the matter:
“Argentinians protest against Chinese oil exploration”
A campaign to stop a Chinese company from extracting oil from a national park in northeast Argentina has engaged environmental activists, indigenous people, local politicians and forest rangers….
The oil is being extracted in the middle of the Calilegua National Park, created in 1979 in the state of Jujuy. The park covers 76,000 hectares of tropical mountain forest, which is of the utmost environmental importance, according to a 2011 assessment made by the state government.
The 5,700 hectares of the Caimancito oil field lie within this protected area, as does the oil production infrastructure: 24 kilometres of oil pipelines and eight kilometres of gas pipelines. Of the 34 wells that have produced oil in the past, 10 remain active.
“Everyone was sure that the few active wells would be closed, but now the idea is to reactivate the field and expand it,” explained Franco Aguilar, attorney of the National Aborigine Pastoral Team (ENDEPA), a Catholic organisation that defends the rights of indigenous communities.
http://dialogochino.net/argentinians-protest-against-chinese-oil-exploration/
Oil is $77/barrel in Argentina. Lots of fields are more economical there than elsewhere.
I’m argentinian… Oil is $77/barrel but in the offcial dollar. The problema is that no one can buy the 9,3 pesos per dollar you have to pay 15 pesos per dollar in the street. So if you have a refinery it’s cheaper the argentinian $77 (77 x 9.3 = 716 pesos) than the imported 50$ (50 x 15 = 750 pesos plus tax).
With China we have many social and political problemas. Our governments and the neoliberal partys wants the chinese inverts (nuclear, hydro, etc.) but if we accept many workers will be chineses (the discussion is big but in just a month there will be a new president so we have to wait)…
C be succinctly correct. 🙂
I’ve worked in China, had lengthy meetings with them, was spied upon and had my briefcase contents copied by Chinese agents, saw closeup how they operate in Venezuela, and I assure you they are an order of magnitude worse than any other nation I’ve seen playing the imperialism game. Chinese enterprises have zero ethics, no controls, are very willing to use corrupt methods, and violate the law where they operate.
Yes, I had an office in Harbin (China) for about seven years and can’t recall a single meeting where I wasn’t asked for a bribe of some kind. Perhaps things have changed a bit since Xi Jinping began his campaign against corruption, waste and extravagance about three years ago. Oops, guess that was an off oil/gas comment.
The GNE/CNI Ratio, Slip-sliding away toward a point that we cannot arrive at . . .
Following is a link to, and an excerpt from, an article I wrote which introduced what I call the Export Capacity Index Ratio (ECI, the ratio of production to consumption in oil exporting countries).
I also discussed the GNE/CNI Ratio, the ratio of Global Net Exports of oil to Chindia’s Net Imports, which is analogous to the ECI Ratio.
In both cases, one can extrapolate the rates of decline in the ratios to estimate when the respective ratios would theoretically approach 1.0, which would theoretically mean zero net exports for the ECI Ratio and zero GNE available to importers other than China & India for the GNE/CNI Ratio.
Commentary: The export capacity index (February, 2013)
http://www.resilience.org/stories/2013-02-18/commentary-the-export-capacity-index
Based on extrapolating EIA data through 2012, the GNE/CNI Ratio would approach 1.0 around the year 2030.
Based on extrapolating EIA data through 2013, the GNE/CNI Ratio would approach 1.0 around the year 2033.
I don’t have complete data yet for 2014, but based on some preliminary EIA + BP data, it appears that the declining GNE/CNI ratio trend continued in 2014, and I suspect that an extrapolation of the complete EIA data, when released, will show the GNE/CNI Ratio approaching 1.0 between 2030 and 2033.
In other words, I suspect that we will have four years of data showing a pronounced decline in the GNE/CNI Ratio, through 2014, that when extrapolated, suggests that the GNE/CNI Ratio would theoretically approach 1.0 some time between 2030 and 2033. Note that there are ongoing revisions to prior years’ data, as the data bases are updated with new annual data.
In any case, as noted above, we have quite the conundrum–since the data suggest we are continuing to slide toward a theoretical point in time which would cripple the global economy.
Following are the four variables which are used to define the GNE/CNI Ratio (technically, I’m using the absolute value of the GNE/CNI Ratio):
GNE/CNI = (A-B)/(C-D)
Where:
A = (2005) Top 33 Net Exporters’ Production (Increasing from 2005 to 2013)
B = (2005) Top 33 Net Exporters’ Consumption (Increasing from 2005 to 2013)
C = Chindia’s Production (Increasing from 2005 to 2013)
D = Chindia’s Consumption (Increasing from 2005 to 2013)
Production = Total petroleum liquids + other liquids
Consumption = Total liquids
Note that all four variables showed increasing values from 2005 to 2013. Following are changes in these variables which would tend to cause the GNE/CNI Ratio to continue to decline:
Declining (2005) Top 33 Net Exporters’ Production (a when, not if, event)
Increasing (2005) Top 33 Net Exporters’ Consumption
Declining Chindia Production (a when, not if, event)
Increasing Chindia Consumption
Here’s the problem.
Given an ongoing, and inevitable, decline in GNE (Global Net Exports of oil), unless China & India cut their net oil imports at the same rate as, or at a rate faster than, the rate of decline in GNE, the rate of decline in the volume of GNE available to importers other than China & India will exceed the rate of decline in GNE, and the rate of decline in the volume of GNE available to importers other than China & India will accelerate with time.
For example, the observed 2005 to 2013 rate of decline in the volume of GNE available to importers other than China & India (2.3%/year) was almost three times the observed rate of decline in GNE (0.8%/year).
The GNE/CNI Ratio Data through 2012.
At a GNE/CNI Ratio of 1.0, theoretically there would be zero Global Net Exports of oil available to about 155 net oil importing countries.
Hi Jeff,
Reading from your chart, the rate of decrease of GNE/CNI from 2002 to 2009 was about 9.5% per year, from 2009 to 2012 the rate of decrease was 5%/ per year. So the rate of decrease is getting smaller over time. You assumed about an 8.6% rate of decrease in GNE/CNI in your chart. Based on the decreasing rate of decrease in GNE/CNI shown by the 2002-2012 data that seems an unreasonable extrapolation. As I have said before you overstate the case in your chart with an unreasonable extrapolation.
Let’s say the rate of decrease continues at 5% (I think that is still too high), in that case the GNE/CNI ratio would reach 1 in 2048 rather than 2030, that is still not very realistic, but is more realistic than what is shown in your chart.
I created an alternative scenario where the rate of decrease of the GNE/CNI ratio gradually decreases by 5% each year (10%, 9.5%, etc), shown in chart below.
And as noted above, from 2005 to 2013, all four variables showed increases, most crucially production for the Top 33 exporters, and as also noted above, it’s very likely that an extrapolation of the 2005 t0 2011, 2012, 2013 and 2014 data will show the GNE/CNI Ratio approaching 1.0 between 2030 and 2033. Again, these extrapolations were based on increasing production for the Top 33 (and for Chindia), relative to 2005.
After production started falling, relative to the 1995 value, the rate of decline in the Six Country Case History ECI Ratio (analogous to GNE/CNI) accelerated. As production increased from 1995 to 1999, their ECI Ratio fell at 2.3%/year. As production started falling, their ECI Ratio fell at 4.5%/year from 1995 to 2007. Basically, as they moved from rising production to falling production, the rate of decline in their ECI Ratio just about doubled, relative to 1995.
From 1995 to 1995, the Six Country Case History was characterized by rising production, rising consumption, a falling ECI Ratio and falling net exports. In other words, in terms of rising production and rising consumption, the (2005) Top 33 Exporters and Chindia (relative to 2005) were very similar to the Six Country Case History, but as noted above, once the Six Country production started declining, the ECI Ratio decline accelerated.
However, a crucially important point is that even as Six Country production increased from 1995 to 1999, the rate of depletion in their post-1995 CNE (Cumulative Net Exports) was enormous. In only four years, as production increased, they shipped 54% of post-1995 CNE.
Following is a graph for the Six Country Case History from 1995 to 2002. Note the inflection point in the ECI Ratio and net exports in 1999, as production started declining.
And here is a similar normalized chart for the (2005) Top 33 Exporters, through 2012 (values for 2013 were similar).
Again, from 1995 to 1999 and from 2005 to 2013, the Six Countries and the (2005) Top 33 Exporters respectively were characterized by rising production, rising consumption, a falling ECI Ratio and falling net exports, relative to 1995 and 2005 respectively.
What happens when production declines, which is a “When” event, not an “If” event.
Given an ongoing, and inevitable, decline in production from the Top 33, unless they cut their liquids consumption at the same rate as, or at a rate faster than, the rate of decline in production, it’s a mathematical certainty that the rate of decline net exports will exceed the rate of decline in production and that the rate of decline in net exports will accelerate with time.
I understand and fully agree with your Export Land Model.
However, I still fail to see why GNE/CNI is a significant or useful measure.
Ratios are problematic. When someone talks about P/E, as far as I’m concerned, that just shows they are a poor mathematician: P/E is highly nonlinear, with a horrible singularity in the useful range. One should talk about E/P, expressed as a percentage; that makes it easy to compare stocks and bonds.
We certainly can’t expect GNE/CNI to decline linearly. The hand-extrapolated curve shown above is made up. I will assert: GNE/CNI is never going to approach 1. I can easily draw a curve that extrapolates the above data and reaches an asymptote at about 3, which corresponds roughly China+India’s share of global population. That seems plausible to me: as oil gets short, the price will get bid up; everybody will get some of it, nobody will get all of it (assuming we avoid a big war). China and India will have a seat at the table, along with everyone else; we’ll all be hungry.
With Chinese oil production peaking this year their imports are unlikely to drop.
http://thediplomat.com/2015/07/china-peak-oil-2015-is-the-year/
As discussed above, although it’s a controversial topic on Fantasy Island, most people think that production declines are a “When” event, not an “If” event.
Following are some mathematical musings.
Here are the EIA data, million barrels per day, for the (2005) Top 33 Net Exporters and for China & India for 2013. There have been some revisions since I compiled the data base, but they weren’t material.
Top 33:
Production – Consumption = Global Net Exports (GNE)
63 – 20 = 43
Chindia:
Production – Consumption = Chindia’s Net Imports (CNI)
5 – 14 = -9 (net imports, or CNI)
GNE less CNI = Available Net Exports (ANE)
43 – 9 = 34
Let’s do some simple arithmetic.
Assume changes of 10 MMBPD in Top 33 production and in Chindia consumption.
First, assume Top 33 production declines by 10 MMBPD over an undefined time period, but at some point within the next 20 years. Unless Top 33 consumption falls by the same volumetric amount, 10 MMBPD, GNE will decline, but in any case let’s assume no change in consumption.
Second, assume that Chindia’s consumption increases by 10 MMBPD over an undefined time period, but at some point within the next 20 years. Unless their production increases by the same volumetric amount, 10 MMBPD, their net imports (CNI) will increase, but in any case, let’s assume no change in production.
Let’s combine the two.
Top 33 production falls by 10 MMBPD, but no change in consumption, so GNE falls to 33.
Chindia’s consumption increases by 10 MMBPD, but no change in production, so CNI increases to 19 MMBPD.
Combining these two scenarios–falling Top 33 production (and no increase in consumption) and increasing Chindia consumption (with no decline in production)–would mean that ANE would fall from 34 MMBPD in 2013 to 14 MMBPD, at some point within the next 20 years.
At some point in the next 20 years:
GNE less CNI = ANE
33 – 19 = 14
Note that the GNE/CNI Ratio, based on foregoing, would be 1.7, versus 9.5 in 2005.
At the 2005 to 2013 rate of decline in the GNE/CNI Ratio, the ratio would be below 2.0 in about 10 years.
One of the primary inferences is that China’s industrial growth boom is over (no longer growing in real terms per capita), and India will not be able to industrialize (or by extension become a post-industrial, service-based economy).
Because post-industrial, services-based, high-entropy economies are also high-debt, financialized economies, the world has reached Peak Oil along with peak population, peak debt, peak big gov’t, peak productivity, and LTG.
Growth per capita is over. What is left is conservation and efficiency, restrictions to births and immigration, a steady-state, ecologically sustainable economic system, and redistribution of resources and income. There is no historical model for such a system for the peak-Oil Age epoch and capitalism (or socialism or communism).
Therefore, we are challenged to envision and work to devise and implement a r-evolutionary post-Oil Age transition to a new techno-scientific, -economic, -humanist, -progressive paradigm that will likely require the death of the Boomer generation to achieve.
As noted above, GDP as a measure of growth probably lost its validity in 2009 when government spending funded by central banks became a norm rather than an exception. You can essentially print GDP now, since govt spending is part of the GDP equation and govt spending can be funded whimsically.
10/6/2015
China’s offshore CNOOC started to peak in 2010
http://crudeoilpeak.info/chinas-offshore-cnooc-started-to-peak-in-2010
I always try to explain the gap between Asian oil production and consumption in a graph the reader is invited to complete for the next 20 years
23/6/2015
Asia’s oil consumption at record high while production peaked in 2010
http://crudeoilpeak.info/asias-oil-consumption-at-record-high-while-production-peaked-in-2010
Here’s a link to a Stratfor webpage with gas pipeline maps. It’s good to have as a reference. But it doesn’t have full coverage (it’s missing some lines).
https://www.stratfor.com/interactive/interactive-veins-influence?utm_source=Twitter&utm_medium=Official&utm_campaign=Link
A new study, similar to the Limits to Growth, study has been published:
Natural Resources in a Planetary Perspective
The focus is on minerals and soil, with a section on fossil fuels. Lots of projections relative to collapse. At the present time, the authors see global collapse about 2060. They say somewhere that global warming should not be a principal focus, because resource constraints are going to be more stringent than any government actions. Lots of Hubbert curves. Much modeling of complex systems.
Go to the link, scroll down to the second publication, and download it. It is free.
http://www.geochemicalperspectives.org/online
Don Stewart
Thanks Don,
I could posts links to perhaps dozens of other papers mostly from the biological sciences perspectives that also tell us we are not doing too well and either we make drastic changes in the ways we have been doing things or there will be the piper to pay…
Yet the vast majority of people are still hung up on BAU, political solutions, ISMs, religions, etc… etc… all of that, in my view has almost become completely irrelevant.
We are already in completely uncharted waters and we need to rethink basically everything we have taken for granted for a long long time.
There are days when I experience moments of hope and optimism but reality has been pretty grim.
Time to de-cloak for a minute:
Problems versus Predicaments
The vast majority of posters on POB seem to view the future as a series of problems with solutions. I would argue that we face predicaments that have no solutions (to echo John Michael Greer). As long as people believe that the future can be made tolerable via doing “something” then they will be ultimately blindsided and crash and burn.
Let’s be realistic, EVs and all the other gimmicks are not going to allow BAU to continue in the long term. Further, many of us are older than dirt. Although I have gardens, PV system and lots of other “preps”, the reality is that I am almost 77 and can’t come close to doing physically what I use to do. And, family members believe in BAU forever – and they have a lot of physical problems themselves so I’m the best of a bad lot although I’m the oldest.
Sorry, but there will be a collapse and that’s the way it is.
Todd
PS to whomever Wharf Rat replied to up thread – If you’re in Mendo maybe the three of us can get together. He and I get together in a town north of Ukiah. If you are interested post a reply to this and I’ll put up an email addy for me.
Most of this thread should be on non-oil. Meanwhile, TX released July today, the have done this on the weekend before.
Doesn’t look like TX fell much, if any. Are you out there Dr. Dean?
Dean has posted his charts to me. I will have a post tomorrow on the Texas RRC data.
Thanks Ron.
http://www.bnsf.com/about-bnsf/financial-information/weekly-carload-reports/
Week 36 of BNSF carload reports.
There is a difference of approximately 1600 fewer carloads of petroleum from week 36 of 2014.
Either production is slowing, peaked, or the oil is going through a pipeline. It’s going to be tough to increase production at $30.00 per barrel.
Coal carloads increased by about 6000. Coal replacing former fuel oil and propane markets?
Three tons of coal in the coal bin just before winter is a good feeling, nothing to worry about, very low risk of any failure, goes in the firebox and some kindling, you’re not going to have to freeze. Wood is the same, a few cords of wood and you won’t be out in the cold.
Grain elevators now use coal to dry grains where it once was propane-fired grain dryers 35 years ago.
Those old propane grain dryers are now junk and obsolete, coal seems to be replacing yesterday’s fuel of choice, propane. Price dictates what fuel will be used, crushes demand.
At 48,000 carloads in week 36 at the BNSF railyards, coal has work to do, can’t be bothered with what it shouldn’t be doing, it’s busy.
Same for oil, it can do work and that’s that.
While reading some of the off- topic comments above, I was reminded of Tolstoi’s words:
“I know that most men, including those at ease with problems of the greatest complexity, can seldom accept even the simplest and most obvious truth if it be such as would oblige them to admit the falsity of conclusions which they delighted in explaining to colleagues, which they have proudly taught to others, and which they have woven, thread by thread, into the fabric of their lives.”
I have personally always found that there is as much wisdom inside the covers of great works of literature as there is between the covers of physics and biology text books, which is why I have made lifelong habit of studying both classic literature and science.
Science delineates the limits of what is possible and thus what we CAN do.
Great literature tells us what we are LIKELY to do within those limits.
Okay, since this is an open thread, I’ll throw a really wild curve ball out there… I myself am multi cultural and a polyglot so my brain is wired quite differently than that of the vast majority of humans… I also happen to be working on a project that is involved with story telling. I invite you to watch this TED talk to the end and ponder what it means to be able to make do with a “SHIT KNIFE”…
https://www.ted.com/talks/wade_davis_on_endangered_cultures
Enjoy! BIG GRIN!
An open question to some of the oil guys on here. Clearly higher prices are going to return and likely as swiftly as they fell once post peak data can no longer be explained away by weather events maintainance etc.
Does any one want to speculate as to what measures will be introduced once desperation sets in. We have already seen that the environmental risks from fraccing have largely been accepted as have the devastating effects of oil sand mining.
Will we once again see attempts at nuclear fraccing it was tried in the past by both the USSR and US. If it could free up just another 1 or 2 percent from excisting fields the temptation could be hard to resist.
Seems to me that at some point we’ll decide the economic costs (if not the environmental costs) are too great to try to squeeze at an extra little bit of oil.
While some of the fossil fuel folks may want to prevent alternative energy sources so that we are dependent on every little bit of fossil fuels till the end, there are other people (and rich ones at that) who have a vested interest in encouraging other energy technologies.
I’m not sure when the tipping point will be in favor of phasing out fossil fuels, but I expect it to happen eventually.
Clearly higher prices are going to return and likely as swiftly as they fell …
Not. Gonna. Happen.
Does any one want to speculate as to what measures will be introduced once desperation sets in.
Do you mean like, rationing, price controls, restricted rights, etc., basically, a command wartime economy?
No, I can’t speculate.
Will we once again see attempts at nuclear fraccing it was tried in the past by both the USSR and US. If it could free up just another 1 or 2 percent from excisting fields the temptation could be hard to resist.
Nope.
Again: Not. Gonna. Happen.