Comments on oil and natural gas production in this thread.
218 thoughts to “Open Thread Petroleum, December 24, 2018”
WTI $42.58
WTI Midland $34.34
Flint Hills posting ND Light Sweet $16.75.
Seems the break even is pretty low, as EIA has predicted about a million bpd increase out of shale in 2019? It doesn’t matter whether you provide storage or increase the number of refineries, shale production is relatively dead at these prices. The prices just need to stay ridiculously low for awhile to stop the EIA and IEA from producing more imaginary oil, and face reality. Yeah, that would affect my wells, but I would hope for a better price, later.
Less than $17 a barrel? Bakken is done for awhile. And there is NOBODY in the Permian breaking even at $34. Remember what happened in 2015? Yeah, production dropped by over a million barrels. These prices are as bad as 2015, and we have a bigger drop potential. Those pipeline builders gotta be really worried. But, they should be anyway. How are you going to keep the pipeline flowing if you can’t take what’s in there out, because there is nowhere to put it? How many mentally challenged people are working in the Permian?
The amazing part is, this time there is no glut, at all. Inventories will drop, but just let it happen. We have to forever eradicate the Permian and shale production will save the world song. It’s a thousand times more irritating than listening to Bing Crosby’s white Christmas on January1st. There ain’t no fritzing Santa Clause, EIA!
Seems like a lot of year end liquidation of oil futures perhaps. That’s the only explanation I’ve got for how oil is this low. Probably will bounce back to the low 50’s WTI by late January. It will be interesting to see December through February US production data to see what effect this price dive has done.
Hi GuyM,
“Those pipeline builders gotta be really worried. But, they should be anyway.”
What do you think the issues are that the pipeline companies are worried about
right now? I would appreciate your thoughts on this.
Two thoughts, immediately. The price is such now, that if it stays anywhere close to that for awhile, completions won’t be as expected, and there won’t be enough oil to fill them. The second is, that if the E&Ps had the right price, and did produce, there is probably not enough shipping until late 2020 or 2021 to handle 2.5 million bpd extra. No place to store it, and refineries can’t use high API. Unless, I am missing something. Pipelines can’t make much money because a pipeline is filled, it has to be flowing.
Its gonna go to zero. Just kidding.
Doubt these prices will be sustained.
Maybe not zero, but could be a lot more. It’s reacting to the stock market, now. Dow down 15% and still going. This is no simple correction, as that stops at around 10%, usually. Been a long, long time since the last bear market, and is past due. Everything dives, until they come to grips that commodities are a different animal. That may take months, or longer depending on how bad it gets. Who knows, each bear market has a different generation, and it’s always new to them.
Especially this one, as it has been so long. New ball game.
I think it was EN who posted how rate hikes can cause this on a historical basis. Based on that chart, we could be in a significant bear market. Bubbles are going to pop. Not sure what the derivative markets are looking like, but they can’t be healthy. The derivative markets are many times bigger than the regular stock markets. Think Lehman Brothers, and margin call. Lehman didn’t fail over bad home loans, they failed over the derivatives of home loans. This time, it won’t be housing, but something will give. They made a big effort to control the banks after the last fiasco in 2008, but made NO effort in regulating derivatives. Brilliant. Some of the weaker oil companies may be in trouble. JMO.
Right on…the move from 18,000 to 27,000 in the Dow was just hot air as we are seeing now. Investors realize there isn’t a fed put and are freaking out, how far will it sink before Powell and company call off the dogs and say no more rate hikes and stop quantitative tightening..cause it’s on “autopilot” according to them. All I want is 4% on an 18 month CD, fat chance now.
The autopilot is also the monthly selling of Bonds held by the Fed, which also acts as interest rate increases.
hahahahahahaahahaha
The inventory nazis will be out soon with a surprise discovery that there was more in storage than they ever suspected.
Don’t you worry none. In the finest traditions of capitalism and free markets, various govts will be taking action soon. To do something.
Yeah, they are convening as we speak. Never fear. Trust in your government, not your 401k.?
In other words, if you have to sell those paper barrels for margin calls, and there is too few to buy, because they are selling, also; then price goes down, because there are too many paper barrels, and not enough buyers. Probably, the original paper sellers lose their butt, and have to sell something to cover their margins. Everyone now is paying homage to the margin god. Because, there was never any real money to cause the stock market to soar like an eagle.
Which reverses itself later, because when it is time to sell new paper barrels, less are sold, enabling the price to go up (if anyone has any money left). Everyone else is busy ducking Guido, because the value of what they had left in their portfolio was not enough to cover margin. Er, I think?
Anyway, that’s Guy’s course negative 101, on the current status of oil prices.
We come full circle back to the Jan. 2009 Lows! Lowest was Jan 16 at $36.
Folks, I think we hit a recession!
Recession usually lags 9 months after the market crash, but, yeah. We are basically there.
Recession is based on GDP not the stock market or price of oil.
Of course. But traditionally, crashes take from cash/growth after a period of time. Nine months to a year, and growth in GDP precedes bull markets by the same. It’s not a fritzing law, but it’s logical, and normal. Has been since I started following it in the 60’s. Last crash was different, in that the GDP growth declined before the crash, due to housing. But, if the crash persists, my bet would be a lack of cash, eventually, to support growth. There are huge losses, we don’t see that are happening now in the derivative market, besides the stock markets. There was something like 384 trillion just in interest rate bets in derivatives,that half are losing right now.
This is no traditional crash. FED can stop hiking interest rates and market might pause an consolidate before going lower but lower they go. Until FED stops allowing it’s balance sheet to shrink, down is the direction for markets. Back when QE was full blown stuff like gov. shutdown and trade wars were the very thing that made markets go higher because it meant more QE for longer.
There is nothing organic about the recovery of markets since 2008-2009. All assets and markets are mispriced. Price discovery wasn’t allowed to happen after 2008-2009. Truth is true price discovery won’t be allowed to happen this time either.
Fed is manufacturing a market crash so they can do the next round of QE. Fact is QE works but you can’t end it and you sure as hell can’t reverse it. QE creates the illusion that everything is fine. There is a credibility issue if you can’t ever end QE though. That’s where the Fed finds itself now.
Your right. Each crash is different. This one is just a slow meltdown. And, since I have been following it, there has never been anything organic about market growth, it’s always BS. There was nothing organic about the first big market crash in the early part of last century, it was purely speculative. The tulip crash, before established markets was speculative.
Growth in GDP and markets are two separate animals. Although, as the previous crash proves, GDP decline can affect the market, as well as market crashes affecting GDP.
The stock market, and now especially derivatives, are nothing other than a gigantic Las Vegas casino. Elves in the market strive to maintain that there is a relation, but in the end, it doesn’t pan out.
Well the Dow has had its largest monthly loss ever recorded this December unless market recovers some of that between now and the end of the year. Slow meltdown maybe not. It’s currently at about -4,200 which tops the largest monthly drop during 2008-2009 by about 1,000 points.
Just further to drop than the previous ones. Half would be about 10k more points. But, there is nothing magical about half, it could stop well before that.
The analysis of the drop is still being speculated. The ones that make sense, so far, is that there was a lot of market fear (tariffs, ad nauseum). Sell offs happened, snow balling into covering margin calls. If so, that is a normal scenario, but I think the Fed raising interest rates, and continuing to unravel QE is also a major, if not the major reason. There are a bunch of other reasons that don’t make a lot of sense. One blaming oil price. I think that is yet to come, but not this time.
Unwinding of FED’s balance sheet is also on autopilot. They don’t have to have a Fed meeting to vote on it like a rate hike. Much easier to deflect the blame elsewhere for the resulting market decline.
-4,200 which tops the largest monthly drop during 2008-2009 by about 1,000 points.
Hey, it it’s the precentage drop that counts. What was the largest monthly percentage drop in the 2008-2009 crash? I would wager it was far greater than the percentage drop this December.
This article is about the huge 1,175 one day drop last February, but the point still holds.
The Dow’s 4.6% loss on Monday was the worst since August 2011. But it didn’t even crack the top-20 of all-time losses. It was just the 25th worst loss since 1960.
The Dow’s biggest one-day percentage loss was the 22.6% Black Monday crash on Oct. 19, 1987. In point terms, that was “only” 508 points. In second place, the Dow crashed 12.8% on Oct. 28, 1929.
Looks like the biggest percentage drop for a month was Feb 2009, at around 21%. Eclipsing this month. But, it had also been going down for a long time. What was this month, around 16%? But, it’s just started,
HHH
Not the proper measure.
You have to look at percentage drop.
GuyM,
I get 4 instances of bigger drops than Feb 2009 which was about 12.4% (I take the difference divided by the average of the two months). Oct 1987 (26%), Aug 1998(16%), Oct 2008(15%), and Sept 2002(13%). So far Dec 2018 has been about (16%) and if it remains flat through Dec 31, it would be the third biggest percentage monthly drop in the DJIA since Nov 1986 (I only have data from 1985 to present).
Sometimes a stock market crash leads to recession and sometimes not. In 1988, 1999 and 2003 there was no US recession even though there were significant monthly downturns in the DJIA.
The Stock market is not a good predictor of recessions.
Look at total market Cap loss in dollar figures. I disagree with percentage drop being the only thing that matters.
HHH,
Let’s imagine you had Warren Buffet’s wealth (approximately $84 billion) and lost one million dollars in your portfolio, now imagine your portfolio was worth 1 million and you lost 1 million. (100% in second case and 0.001% in the first case)
If the Dow is at 20,000 and loses 1000 points, it is not as significant as the Dow at 2000 and losing 1000.
You can disagree of course and claim only the numerator matters. I think one has to look at the whole picture (numerator and denominator).
Oh and I did not say it was the only thing that matters, read what I wrote. By “proper measure”, I mean it is more appropriate because it is a more complete measure which considers both the size of both the numerator and denominator.
HHH,
The Fed is letting 50 B per month run off the books, Currently the Fed Balance sheet is about 3200 B above the 2017Q4 level, so if the current rate continues, in 5 years and 4 months we are back to 2017 levels (880 billion). The Fed’s balance sheet has been decreasing since 2015, but faster increases started in 2018 with balance sheet falling from 4444 B on Jan 1. 2018 to 4084 on Dec 17, 2018, about 31 B per month. If that rate continues we get back to 870 B in 8.6 years. So some time in 2026.
Some big banks guess that the Fed will keep 3.5 trillion on it’s balance sheet, the fed would reach that level in about 19 months.
Relative to the 2007Q4 level considering increased GDP an equivalent FED balance sheet would be 1250 B, that level could be reached in 2025 if the Fed continues to let Treasuries and MBS mature and fall off the balance sheet at the rate of 31 B per month (average rate in 2018). Several news pieces claim the rate is 50 B per month in balance sheet reductions, that rate drops 1.2 trillion every 2 years.
Yeah and…. market will follow Fed’s balance sheet. Those pension funds who bought $64B in stocks that made the market bounce are going to lose their collective shirts on that deal as the Fed’s balance sheet shrinks.
Personally i don’t believe there is enough excess liquidity floating around to push oil back to $90-$100 even in the event of a shortage. Maybe i get proven wrong about that. But i don’t see $100 oil again without a massive amount of QE and other monetary tricks.
That run up in oil price 2008. Was due to highly leveraged investment banks being long CL running up the price. That’s not going to happen again.
Let’s also not forget that the FED isn’t the only CB out there thats pulling liquidity out of the market. ECB is following right behind the FED. When the ECB starts to tighten monetary policy all those NIRP refugees that left EUROPE in search of yield in US market will start pulling their money back home.
I can only wonder how much of those NIRP refugees from EUROPE ended up in shale oil chasing yield. I think ECB tightening of monetary policy will have a greater impact on US markets than the FED’s tightening did. By a wide margin.
HHH,
Lots of excess reserves in the system, as interest rates go up, private investors will buy the Government bonds and financial markets will become normalized. At least for the US the money supply is fine and inflation rate is near the target (2.2%), monetary policy seems appropriate.
My guess is the European Central Bank has this figured out as well.
Q3-2018 was 3.4% GDP growth. Very good for an advanced economy.
The Stock market is not a good predictor of recessions.
A recession is overdue. The problem is the new economy might not resist a recession with the huge monetary mass created out of thin air that hides at financial instruments.
Leading indicators are dropping like a lead zeppelin. Past GDP growth is irrelevant. GDP will go negative in one or two quarters unless they lie.
I am of the opinion that the GFC of 2008 was just the appetizer for this one. The Central Banks of the World have all but guaranteed a monetary crisis when the paper wealth finally causes the mother of all real asset inflation trying to escape from zero valuation.
Carlos Diaz,
Not really possible to predict a recession in advance. The pessimists always believe a recession is one or two quarters away (unless we are already in one), eventually they will be right, one just has to wait a few years.
If we look at the recessions in the US since 1981 and assume another recession begins in 2019, then the average business cycle has been about 9.5 years. Most of the recessions have not been very severe (GFC was worst since Great Depression, but the other 3 were not very severe.
Impossible to predict either when the next recession begins or its severity. I think the next severe recession will be about 3 to 5 years after the peak in World Oil output in 2025. Not at all unlikely we may see a mild recession between 2018 and 2030, possibly as the peak approaches in 2023.
Not really possible to predict a recession in advance.
Every strong downturn in ECRI weakly leading index growth corresponds to serious economic trouble. 2010 and 2012 were not US recessions, but they almost made the EU and the Euro implode.
So this is not a constantly moving forward recession prediction that finally becomes correct. Economic indicators show this is no picnic, and the probability of recession is actually quite high.
And actually I would have predicted that Quantitative Easing cannot be undone without triggering a recession.
Carlos,
The WLI is not doing very well since 2009, eventually it might be right again, perhaps by 2030 🙂
Dunno why you say that. WLI is working fine, giving early warning of serious economic weakness. The economy has been intervened since 2009 by Central Banks that try desperately to prevent a new global recession pumping up financial assets every time the economy slows down. The result is a very long business cycle. But eventually CBs will fail as the drug becomes less and less effective. And there are a lot of troubles coming home to roost. Protectionist measures affecting global trade, Brexit…
Carlos,
The WLI has dipped below zero 5 times since the GFC and no recession so far (eventually there will be a recession and it might even coincide with the dip in the WLI as it is bound to be right eventually). CBs are supposed to intervene to try to stabilize the economy, that’s their job, so nothing new there. The QE that everyone has complained about is being gradually unwound and monetary policy is being normalized, and now people complain that is a bad thing, on the contrary, it is a good thing that interest rates are moving back to more normal levels so that capital is allocated efficiently.
You seem to have a lot of this stuff backwards, things are moving in the right direction in financial markets.
There are some clowns (rhymes with dump) that don’t get this.
The WLI has dipped below zero 5 times since the GFC and no recession so far
Oh gosh! so US-centric. The global economy is interconnected. Perhaps that bit escapes you. The 2010-2012 drops in WLI are the response to the European Sovereign Crisis that took place at that time. have you heard about that? “Subsequent follow-up recessions in 2010‑2013 were confined to Belize, El Salvador, Paraguay, Jamaica, Japan, Taiwan, New Zealand and 24 out of 50 European countries.”
That makes it 31 out of 72 countries with quarterly GDP data, and a very good chunk of the global economy.
So ECRI WLI did work at those times by indicating global economic weakness.
The financial markets are intervened. The Fed is undoing QE on its own, while Japan and the EU are not. The US monetary tightening is partially compensated by creating a monetary flow towards higher interest rate US from the rest of the world.
At the same time the US interest rate curve has inverted, gold is going up and market volatility is going up.
The fireworks are just beginning. I think it is you who has a lot of things backwards. You can expect oil prices to show also an increased volatility, but don’t expect them to recover much when so many people think a recession is in the cards.
Carlos,
If you are going to claim WLI predicts US recessions, then I look at the US. If you are now claiming it predicts World Recessions, I believe it does poorly there as well.
I stand by the statement that recessions cannot be reliably predicted in advance, you can choose to believe otherwise.
Your keyed into peak oil output, still. It doesn’t need to be at peak, before shortages to demand appear. The more severe the shortage, the more it will affect the economy. I really think that will happen far before peak oil. But, I have not received my soothsayer license yet.
Big questions I have for 2019 are:
1. Where’s the fritzing over supply they keep talking about? If there was an over supply it would show up as inventory increases, somewhere. We know it’s not in the US, and OECD supplies don’t indicate an inventory increase that’s over the norm at this time of year, so where are these “experts” coming up with an over supply?
2. Even with an economic slowdown, we will be getting some type of growth, simply due to population expansion.
3. Growth of supply is primarily defined as coming from opec, or non-opec. OPEC plans to cut production by 1.5 million or more barrels a day, which doesn’t count any drops in Iran or Venezuela. That’s cut, not grow.
4. Non opec growth is limited to what the US comes up with on high API stuff. It’s not even going to do that now, in all likelihood.
Given all that, would not you predict a significant shortage in 2019? Who knows exactly how much it will be, but probably bigger than a bread box.
Of course, EIA and IEA can tell us bed time stories, but it’s not going to prevent Freddy or Jason from becoming reality.
The IEA says there will be a slight under supply in 2019.
At the moment oil stocks are building and that is why OPEC have agreed to cut production.
I keep hearing that, and no one provides any detail to that “build up”. Energy News constantly provides data as to most of the world stocks, and it’s not in that. It’s not in the US and OECD inventories. So, tell me, exactly where is this inventory build?
If China’s consumption is slowing down and it’s inventory is rising this much.
Merry Christmas from S Padre Island at 75 Degrees F.
Very white this morning in Bend Oregon.
So markets look down 14ish% YTD. Still 4 days to worsen that or better that.
You know, there is no law of the universe that says markets can’t be down more than 10% this year, and next year, and the next, and the next for 10 years or so. Never done that before? So what? Never printed 25% of GDP before. Never API 40.6 WTI before. After 10 yrs, scarce oil, scarce life.
You have that right. The world is full of surprises.
And, I do not see QE, again. Different folks in the Fed. So, banks will lose big time on easy money, and getting more is not going to be easy like last time. Over the past two years, I have been getting endless calls and letters wanting to loan me money. Bet that slows down.
And, because bear markets have a tendency to stick around for a few years, oil supply may put a blanket on improvement. So it could be possible for continued decline, rather than a rebound. Or, one real big final decline. No end to the possibilities.
One, I really see as a possibility, is another export ban. Think about it. Gasoline prices go up due to a shortage. We could be in a recession with stagflation. The public, and the illiterate congress would not be able to comprehend API. We are just exporting oil, when gas prices are high. In a way, they would be right. Think how that would affect 2.5 million bpd pipeline expansions, and extra shipping improvements.
Or, we could elect another flawed icon for President-Elon. Who would promise a Tesla for every family, or a free trip to Mars.
Ok, this is fun, but pointless.
Wrong govts.
Think in terms of the big SWFs. It is they that seek action.
As for quoting indices vs their histories, this sounds like a good thing. Just be sure that you quote an index that has the same companies in it as it did historically. The Dow with Apple will be difficult data to find for 1960. But you can find GE in it for then.
Ever notice they don’t add a company that is failing? And never remove one that is doing well? Similarly we should only quote WTI 39.6 API price. Difficult data to find.
SWFs? Meaning.
Sovereign Wealth Fund
Sovereign Wealth Funds . These are major players in the stock market .SWF of Saudi alone is 750 Billion . Many other oil exporters like Qatar,Kuwait,UAE ,Norway etc with plus 100 billion each in play .
Thanks.
Nothing magical about 39.6 vs 40.5 API. In fact withe the older refineries circa 1965, 40.5 would be fine. Refineries have been retooled for heavier crude, if necessary they could be retooled again, but it’s more efficient to ship the oil to refineries designed to handle lighter oil.
Quick turnaround of the market from this point has no historical precedence. Although, if it does not go down much more, 3 to 5 months is possible.
It will probably have a sharp rebound before the next wave of declines.
Nobody can predict what the market will do in the future. That is fairly obvious.
Have you heard of technical analysis. How do you think people make money from the markets.
That would be the 2/20 slime
Dow is up 3+% today. Ehhmmm Dennis….
Iron Mike,
If you think you know what’s going to happen, place your bets.
All I am saying is that it is unlikely someone can guess correctly on a regular basis. Basically on any day one could claim it will go up or down the following day, it’s essentially a coin flip on whether you will be correct.
Note a “big move up” says very little, you have to be specific. The market will go up by more than 3% or down by more than 3% would be a better statement that can be judged to be correct or incorrect.
I can say with 100% certainty that I do not know which way markets will move on any given day.
After 1987 crash it took about 21 months for market to reach the previous high, so yes stock market can get overheated (as it was this year) can correct and then gradually resumes growth. Note for the real economy growth rate of GDP was 4.2 in 1988 and 3.7 % in 1989, the real economy was affected very little by the crash in 1987 (the biggest monthly drop in percentage terms of the DJIA at 26% in October 1987).
The stock market bust led to a bubble burst of property, which led to the S&L downfall. I didn’t come up with that, it’s in the article.
I mean, think about it. By this time, there may be trillions gone, is that not going to show up somewhere, eventually? If there was no borrowed money, and all were cash investments, it may be contained just to the market. But, that’s never the case. The market did not go up from 16 to 26, because the GDP provided the money, it was borrowed, somewhere. Or, leveraged, if that makes more sense.
GuyM,
Money can move from bonds to stocks, from real property sold to stocks and from other stock markets (Europe, Asia, South America, etc). Some may also be borrowed on Margin and of course that can lead to big drops as margin calls lead to further selling. It might show up eventually, sometimes it does and sometimes it doesn’t. Consider the case where most people buy and hold, market increases from 16 to 26, simply based on market action on the margins, then falls back to 16, those that bought at 16 would be back to no gain and might feel a bit poorer, but if they weren’t paying attention, they’d figure the market didn’t do very well for the past couple of years, which happens from time to time. That’s how I look at it, the market was over valued, now it may be under valued, not a big deal in the grand scheme.
No, not for us, but maybe for the guy who was a millionaire, yesterday, but is ducking Guido, now; it’s a pretty big thing. The only reason I mention it, is that it obviously is having some effect on oil prices, temporarily.
GuyM,
Seems the oil price fall is due to other factors from my perspective, though there may be a bit of spurious correlation.
The other factors are misreading supply and demand, but the effect of the stock market is definitely spurious.
DC,
You know, I can’t help thinking that the US and Canada, working in a fair and sensible partnership, could be as close to self-sufficient as anywhere in the world.
Synapsid,
Perhaps for the short term with better pipeline access from Canada, not sure if oil sands could be ramped up enough to cover the eventual decline of US tight oil, the US imports about 2 Mb/d on a net import basis (Sept 2018) crude and products, about 3 Mb/d of this is from Canada, so you are correct at present, and potentially this could work until 2025 to 2030.
DC,
I was referring to resources, including us humans, and ability to develop and make use of them responsibly not just to petroleum. A key first part would be to stop wasting human potential, water, and soil. A parallel endeavour would be to stop using the atmosphere as a dumping ground. Canada and the US have the capacities, social and technical, to do this but nothing like the will.
I don’t expect to see anything of the kind actually come about.
Synapsid,
Totally missed what you were getting at, I agree, but the problem is global and will require global cooperation, unfortunately even less likely, though perhaps rising fossil fuel prices may lead to a move in the appropriate direction, HVDC interconnects between US and Canada would help, I think quite a bit of hydropower is already exported to the US from Canada, perhaps as solar ramps up in the US southwest, excess power can be exported to Canada with an interconnect in BC/Washington. HVDC transmission between North and South America would also make sense as solar takes off, as does an Africa Europe connection.
Nice summation of the incompetence of Venezuela’s Oil Minister Quevedo. He is set to be OPEC’s minister next year. The misery continues, with 10% of the population having fled in the last three years and who knows how many dead from lack of basic services. Oil revenue down 75% in six years and falling.
And capex is just begun to be cut. Another month at the current price, and it will go down more. Flat production could be just a dream. EIA projections can’t hide from this kind of news, and it will become more prevalent.
Of course, their inane drilling productivity report will look better with less rigs.
When the ill planned pipelines come online, they will struggle for completions again with a dearth of crews. Really, really bad timing for a price decrease.
GuyM,
If Permian Basin horizontal oil well completion rates go below 300, output will decline, scenario below shows one possibility if oil prices remain flat through Dec 2019. In this scenario the Permian horizontal oil well completion rate falls from 415 wells per month in Oct 2018 to 230 wells per month in August 2019. Peak delayed to 2035, peak output about 6000 kb/d.
Oh, based on last week, I would say flat. If the market goes up 200 points today, it is far from recovering. Trend is down. Depends on how the next month looks. However, after a good start, the market is already down again. And, now it’s up again, slightly. Seen this before. Confucious say, never attempt to catch a falling knife. Hang on to your hats.
At least oil is up slightly. And commodities are where the smart money should go.
With the above scenario for Permian and a revision to my Eagle Ford Scenario (secondary peak in 2022 at about 1400 kb/d), a new US LTO scenario (with Bakken, Niobrara, and rest of US LTO unchanged from my previous scenario) has a plateau from 2025 to 2035 at about 7300 kb/d with output increasing from 6500 kb/d at the end of 2018 to 7400 kb/d in 2033, only an average increase of 60 kb/d each year, much less than the 1000 kb/d increases often bandied about.
There will be a plateau in there, but I have serious doubts it will last that long. Tier ones and twos won’t last that long.
different plays peak at different times. Notice the peak is much lower than my previous scenario (9.2 Mb/d) due to lower Permian completion rate. In any case, just showing how the revised Permian scenario affects the US model, could be we get a higher sharper peak, though due to pipeline and port constraints the lower completion rate for a longer plateau would be more sensible.
Lack of industry coordination makes this unlikely.
Looks like a good model.
GuyM,
No guess on short term direction of stock market, long term my guess is up.
Market timing is a game for those who like to be parted from their money. 🙂
Buy and hold (Vanguard Total Stock Market Index) is my strategy.
Buy and hold is the only really good strategy, especially in funds. If it goes way down, it will always come back up again. Historically. Nothing is absolute.
agree
Well, any guess where the poo is going next? I’ve been completely blind sided by this drop. Inventories are actually relatively low in the US….
Are we going up or down?
The fundamentals supporting a good price are there, and improving every day. It’s the investors and stock market that’s gone haywire. They can’t eventually pull their head of their posterior, because they lost their posterior in the market.
Sean,
Nobody knows, my guess is up to $70/b by Sept 2019, I am consistently wrong about oil prices so do not consider this investment advice, consult an oracle for that. 🙂
Where is Karnak, when you need him?
Are we going up or down?
Gold hit a low August 16 and has been growing since. The ratio gold/silver is also going up. There is growing fear in the markets. This has just started. I’ve been waiting for this to happen since 2014 when oil price collapsed. These things take their time.
It looks like we are going to hit a Kondratieff winter with massive debt repudiation, and a monetary crisis. But the real problem is Peak Oil. No recovery is possible in a declining energy environment. The most likely outcome is industrial civilization collapse as angry mobs leave governments powerless to react. There are symptoms everywhere. Extremism and populism on the rise everywhere. World leaders focusing on the wrong problem (CO2 production) when we are reaching Peak Oil and should be developing nuclear energy like there’s no tomorrow. It is not going to be pretty.
So to keep everyone happy, here are some averages for the all wells EFS, Bakken and Permian. Decided to exclude Niobrara, oil numbers are much lower.
2015 Q3 36 months of production: 162,635 BO most recent monthly rate 58.6 BOPD
2016 Q3 24 months of production: 169,078 BO most recent monthly rate 103.5 BOPD
2017 Q3 12 months of production: 136,850 BO most recent monthly rate 213.1 BOPD
For 2015 162,635 x .80 x $45 = $5,854,860
7% severance $409,840
$5 per BO LOE $650,540
$2 per BO G & A $260,216
Net = $4,534,264
I lowered the costs some to make the economics more favorable from the standpoint of those who love the sub $2 gasoline. Might be ok to look at 10K and 10Q if anyone would like to plug in different cost estimates.
The 2016 wells described above are at $4,713,894 per well after 24 months.
The 2017 wells described above are at $3,815,378 per well after 12 months.
Of course, I was just trying to make a point that wells drilled in 2015 that had seen 3 years of weak (and one year of average) oil prices were going to be total losers that would not payout within any reasonable time horizon, if at all.
To continue, there is no mention in these numbers of how much land costs. I seem to recall many Permian players paying $15-60K per acre. So a two mile DSU would cost $19.2 million to $76.8 million. I just ignored land costs completely.
Further, each of these companies has interest expense. One can go to the 10K’s and 10Q’s to see how much that is costing each per BOE. I just ignored interest expense too.
These wells are a lousy investment at $50 WTI. Only gets worse as the oil price sinks.
I think this all started because maybe GuyM was actually giving some credence to EOG guidance. I don’t blame GuyM, or anyone else, for believing what the companies say.
I do argue until we see some well payout data (hard data, not power point variety) from these companies, we should assume the wells generally do not payout within 36 months, or even 60 months.
I do agree, wells have residual value after 36 and 60 months. I also agree that much higher oil prices make this business a money maker. Finally, I agree the wells have improved every year, although it is looking like 2016 might have been the high water mark, with later wells not moving the needle much higher.
Time for me to exit for awhile. I was just trying to remind people of the numbers. I think most of the investing public has figured it out, based on where these companies are trading since oil dumped again.
Thanks shallow sand.
Have a restful holiday season–well restful as can be anyway.
Thanks shallow sand,
For the average 2016 Permian well we can use the Arps hyperbolic to approximate where
q(t)=Q/(1+Db)^(1/b) and Q=26764, D=0.2842, and b=1, which simplifies to
q(t)=Q/(1+D) in this case where b=1 and q(t) is monthly output in barrels per month and I use mid month for t, that is t=0.5, 1.5, 2.5, … with t being months from first flow
For month t=0.5, q(t) should be multiplied by 0.35 to better approximate actual well output. This is justified because on average the first month is usually less than 30 days of output, probably an average of around 15 days (and the hyperbolic is not a perfect fit over the first few months).
breakeven wellhead price is $62.86/b with royalties and taxes combined at 32% and real well cost at 9.5 million dollars and operating costs at $2.3/b plus fixed monthly cost of $15,000 per month (fund for future downhole maintenance), well pays out at 60 months and annual discount rate is 10.95% (nominal rate), the real discount rate is 8.45% if the annual inflation rate averages 2.5%/year. cumulative output is 212 kb at 36 months, 257 kb at 60 months, and 370 kb at end of well life at 211 months and 12.28 b/d output. Spreadsheet with calculations below (where actual data from shale profile is used for first 18 months of well life with Arps hyperbolic assumed for future months from month 18.5 to month 122.5, after that exponential decline is assumed at 9.12% per year (0.7935% per month). Spreadsheet at link below for breakeven calculation for average Permian basin well with first flow in 2016.
I agree $45/b or anything less than $62.86/b for the Permian basin is a money losing proposition,
If we want to assume a 0% ROI, we can get down to $53.64/b for a breakeven price at the wellhead, but why complete wells and take that risk when you will not make any money? Perhaps all these companies believe they will drill above average wells. 🙂
Thank you Dennis, this is very helpful. Your numbers confirm why US shale production will be heading down shortly if oil prices remain at these levels. What’s of interest to me is that as shale gets a bigger pie of the market oil production becomes increasingly more elastic. In the old days it took the industry 5 years to bring a project online and they would produce it at completion regardless of price, in that world OPEC was the only stabilizer force in town. This has changed now with the arrival of shale, many people think OPEC will have to extend or deepen the cuts in April, I disagree, since by April it will become apparent that US shale wont be growing as the expected 1m+ rate in 2019, aka shale will be the force doing the re-balancing in 2H-2019 and not OPEC. Going forward we will increasingly see this 6 months interplay between OPEC and shale, a combination of market forces and political forces operating in tandem to put a $45/$50 floor under oil prices. As an oil investor, I like this built-in downside protection, yes it comes at the price of an upper price cap, but most of the Canadian companies I focus on make a great return at $50+ WTI, hence any price above that is just windfall profit.
Joseph,
One thing to consider is the relentless increase in World demand for oil at about 800 kb/d higher average consumption each year on average from 1982 to 2017 (World C+C EIA data). US tight oil has provided about 2/3 of the increase in World C+C output since 2010, at some point OPEC and Russia will no longer be able to offset declining output in many parts of the World as well as fill the gap left by more slowly growing US tight oil output, at that point oil prices(12 month average price for Brent) start to rise above $75/b, probably around 2022 to 2023 as US tight oil output reaches a plateau and OPEC, Canada, and Brazil will need to both offset declines in the rest of the World as well as increase World C+C output by 800 kb/d. My suspicion is that this can no longer be accomplished beyond 2025, even with oil prices rising above $120/b and World C+C output starts to decline at 1 to 2% per year with oil prices continuing to rise to over $150/b, until supply and demand come into balance as we transition to EVs, plugin hybrids, and more efficient ICEVs, as well as drive less, car pool, use public transport, bike, walk, move closer to job and shopping, etc. High prices can have a powerful effect (consider 1979 to 1986) on the efficiency with which a product is used.
Good analysis, and thanks, again. No amount of increased productivity could make them profitable at $45, especially not $37, or $16. The clock is ticking. Yeah, EOG has gone from over $120 to $87. Hopefully, they will act conservatively, and hold off drilling ours until price picks up.
“World leaders focusing on the wrong problem (CO2 production) when we are reaching Peak Oil ”
Carlos, imagine what would happen if climate change wouldn’t exist. Now at least something (EV’s, wind, solar) is done to mitigate the consequences of PO, though it is not five minutes before twelve, but past twelve o’clock already for this. On the other hand, various managements of car brands, f.e. Volvo, are aware of PO.
Both problems, climate change and PO, have to be tackled in more or less the same way. After having read the recent posts about the outcomes of climate change now and, most probably inevitable 2-3 degrees increase in the future (feedback processes !!), I don’t know what is worse, climate change or PO. Definitely both are very troublesome.
Han, the only workable solution to deliver the energy we need 24/7/12 is nuclear. Some prudent countries with long-term vision are going that way. Most of the West is not, or even dismantling what nuclear they have got.
When our energy fails we will convert any tree we can get into CO2. During the Greek crisis they cut down the trees in the parks to keep warm in winter.
“Most of the West is not, or even dismantling what nuclear they have got.”
IIRC Germany changed opinion after the earthquake/tsunami nuclear plant disastre in Japan and this is strange because the chance of that happening in Germany is almost zero. They must have become afraid of accidents in general. Nuclear waste management has its own issues
Carlos.
I wouldn’t vote for nuclear energy.
Even if it was much less expensive.
I don’t trust humans to be impeccable, much less trustworthy.
The nuclear power options assumes both of those traits.
False assumption, as much as we’d like to pretend its not so.
Hickory,
The way to face fears is through statistics. Plenty of nuclear plants are over 50 years old and have delivered huge amounts of energy without a serious incident. Casualties in the nuclear industry are extremely rare. By contrast casualties among crews maintaining and repairing wind turbines and installing and repairing rooftop PV panels are frequent. Would you rather be a guy in charge of greasing wind turbines or work in a nuclear plant? Perhaps those lives lost are a fair price to have an ideologically correct energy that only works when the wind blows or the sun shines.
Fear is a choice.
You can call it fear. I’ll call it wisdom.
The two big meltdowns of commercial reactors were both because of decisions made by humans,
in the design and/or operation,
that were faulty.
I’d prefer it be deployed in your backyard, not mine.
I’d vote that way.
A lot more of that wisdom and we would still be living in caves.
Every year 1,250,000 people die in road traffic accidents. Are you proposing to ban vehicles or to make them safer?
“Would you rather be a guy in charge of greasing wind turbines or work in a nuclear plant?”
Carlos, is greasing again after some time still necessary ? I know from bikes that since many years ago the crankshaft doesn’t have to be regreased.
The older nuclear plants are risky, the new ones have close to zero risk for meltdown. Of course, don’t build them in earthquake sensitive areas.
Still always will exist the nuclear waste management issue. If you have a thousand nuclear plants in the world, you get quite a lot of waste. I wrote thousand, how many do you think would be needed ?
“I don’t trust humans to be impeccable, much less trustworthy.
The nuclear power options assumes both of those traits.”
Hickory, evil humans will develop nuclear bombs anyway. Illegal transportations of radioactive elements are taking place for many years already. The risk would increase, that’s what can be stated.
Oh dear, you won’t be comparing a bicycle to a wind turbine, will you?
Planned maintenance is usually once a year, to that you must add repairs.
This is a dangerous high altitude work with a significant number of wounded and casualties.
“Most wind farms are in remote areas, and workers are faced with making repairs while up to 330 feet in the air once at the site. Also unlike natural gas-fired or coal-fired plants, operators can expect to repeat this process multiple times because of the comparatively small capacity of wind turbines.
…
Many different parts of the wind turbine need to be lubrication with a range of lubricants greases to gearbox fluids to hydraulic oils.
…
The gearbox is not the only part of the turbine that requires lubrication, however. The generator bearings and blade bearings also require lubrication, and there are lubrication points on the blades. Wind tower blades have bearings that will essentially feather the blade so operators can optimize the blade angle to match wind speed. The main shaft bearing and yaw and pitch drives also require lubrication.” https://www.power-eng.com/articles/print/volume-117/issue-5/features/wind-turbine-lubrication-and-maintenance-protecting-investments-.html
But as long as it is just workers who do the dying, we can ignore the issue and keep opposing nuclear energy that doesn’t kill anybody. 50 years of nuclear energy in my country and not a single casualty, wind energy has already killed more than ten in the last decade. It is difficult to get good statistics as it is not fashionable to criticize renewables.
A picture of two windfarm engineers moments before they died in a wind turbine accident.
They should be made martyrs of the anti-nuclear movement.
I think you meant martyrs of the anti-wind movement Carlos. Go for it.
Seems to be your passion.
No, no. It is you who rejects nuclear against all evidence. My passion is having plenty of cheap energy, because it is a strict necessity for our industrial civilization that keeps us alive.
Carlos, if your primary interest is inexpensive energy you will like this source of information- Lazard Levelized Cost of Energy (version 12, Nov 2018). Look at the chart on page 2 for comparison of Unsubsidized analysis.
This is straight up data from a respected source. You may be surprised what you learn.
Nuclear energy is not one of the inexpensive options. Not even close.
“Oh dear, you won’t be comparing a bicycle to a wind turbine, will you?“
No, but if the moving parts are closed watertight… The reason will be that metal particles mix with the grease, like f.e. in CE from cars. Much bigger forces than in bicycle crankshafts. Thank you for the info regarding maintenance of wind turbines !
Han Neumann Wrote:
“The older nuclear plants are risky, the new ones have close to zero risk for meltdown. Of course, don’t build them in earthquake sensitive areas.”
It’s irrelevant since investors won’t back new plants. Recall that one new plant under construction has cost overruns about $20 billion USD. Realistically every square mile of the earth is subject to earthquakes, just some regions.
Nuclear also won’t solve all of world’s mounting problems which dwarf future energy issues: Debt, Demographics, Non energy resource depletion. If tomorrow a quantum leap in energy tech was developed that provide everyone with cheap & clean energy its still not going to solve the other major issue.
Venezuela
population 2015 31.155 million
2016 31.568 million
2017 31.977 million
2018 32.38 million
Net migration per year (a lot of folks move into Ven for the healthcare) about -12,000/yr. X3 =-36K and that’s about 1/1000 pop.
There has been no countrywide census taken in Venezuela in decades. Those numbers you quote are obviously estimates. Estimates based on past growth numbers. Obviously Venezuela’s population is now in decline. Those numbers you quote are not worth a bucket of warm spit.
Yes PDVSA hasn’t even released financial documents for the past two years, and doesn’t have a sound number on how many employees it has (somewhere between 80-100K it says). And that is the most organized organization in Venezuela. The thing about immigrants is they are headed to countries that aren’t in free fall (mostly Brazil and Columbia) so counting them is not that difficult. The collapse of Venezuela is not “fake news” like you are pretending, Watcher. It’s good to question the main trope, but there’s also a time to bag it when the evidence is overwhelming.
Dennis what’s your opinion on this ? The link posted in the webpage is in Spanish and i couldn’t translate it.
Iron Mike,
I didn’t try to translate and my Spanish is not good, looking at the charts it seems the focus is on net energy which is problematic in my view, it is a nice idea in principle, but in practice where the boundries are drawn vary from author to author. Easier to simply consider oil output by mass (rather than volume) as this approximates total energy fairly well, as to “net energy”, much of the extra energy input into the production, refining, and distribution of petroleum and petroleum products is provided by sources of energy that are not oil (coal, natural gas, nuclear, and renewable energy used to produce electricity).
If one is going to use a net energy analysis it must be done on a society wide basis for all forms of energy to be of any use, pulling just oil out of the many forms of energy society uses makes little sense and is a waste of effort in my view. The charts up to “Oil Raw Energy” look fairly reasonable. I usually leave NGL out of my analyses and focus on C+C in barrels.
Thanks Dennis. Makes sense.
On another note, I think I read a while back in, i think it possible could have been the Hirsch report. The estimated URR of the earth is around 8 Tb. Have you read any documents regarding the estimated URR of the earth, regardless of technical or economic recovery.
Iron Mike,
There are many different estimates, usually URR is equivalent to ERR, as oil that is not profitable to produce will not be produced. My guess is that if we ignore NGL and natural gas, that for crude plus condensate the URR will be 3 to 4 trillion barrels, my best guess is about 3.5 trillion barrels, if the energy transition is fairly slow, a rapid transition (similar to what Tony Seba foresees), then it might be 3 trillion barrels and perhaps even 2.5 trillion barrels (about 1400 Gb will have been produced from 1870 to the end of 2018), so this leaves 1100 to 2600 Gb left to produce (if my estimates are correct).
If you are talking about original oil in place(OOIP), basically about 35% of OOIP gets produced on average in conventional reservoirs, for tight oil it is about 3 to 5%, I am not sure about oil sands. My mean estimate has about 500 Gb produced from tight oil and oil sands and 3000 Gb from “conventional reservoirs” (not oil sands in Canada or Venezuela and not light tight oil), so for that piece OOIP would be 8500 Gb, for tight oil OOIP would be 2500 Gb, and for oil sands if we assume a recovery factor of 15%, and URR of 400 Gb, then the OOIP would be about 2700 Gb. So total Earth OOIP would be about 14 trillion barrels, for this to be the URR, the oil price would need to rise to about one billion dollars per barrel 🙂
One big unknown in these estimates are the price that people can afford for the energy. Will it be enough to extract it.
The cost of extraction will continue to go up over time, likely. What percent of remaining recoverable C+C will people spend capital on to go get?
And that depends on many variables, like- the general level of prosperity, energy alternatives, extraction technology advances, and perhaps even global warming [via carbon disincentives].
For example, in a country that couldn’t create debt for free like the USA, the tight oil and gas would still be underground. Speaking of that, I thought ‘there was no free lunch’ ?
Hickory,
Agree, many variables all of which interact in complex ways make predictions difficult. My guess is that the price of Brent oil is unlikely to rise above $250/b in 2017$, after 2035 oil prices are likely to fall as EVs, wind and solar make oil nearly obsolete. Depending on the speed that the transition to alternatives occurs, World C+C URR is either 2500 Gb (fast transition) or 4000 Gb (slow transition), I will revise my best guess to the mid-point of 3250 Gb (from my earlier guess of 3500 Gb) and note that this does not include NGL or biofuels so cannot be compared with BP Statistics (includes NGL) or IEA estimates (which includes all liquid fuels, NGL+biofuels).
US has stopped QE and has started to unwind the 4.5T Fed balance sheet that has accumulated by Jan 2015, lately at 34B per month (past 11 months). So money supply is tightening and interest rates should rise.
It is strange terminology.
There is a very big difference between
Ultimately Recovered Resource and
Ultimately Recoverable Resource
The chaos of human affairs may prevent a large percentage of ‘recoverable’ resource from getting out of the ground.
Such as in Venezuela perhaps.
Hickory,
Good point, my URR estimates are oil that is extracted in the scenario so “recovered” is a better term than recoverable, I think generally the idea is if it can be recovered profitably then it is “recoverable” and that if it is recoverable by that definition, then it will be recovered.
There is a lot of resource in Canadian oil sands and Orinoco Belt that will never be profitable to extract and thus would not be considered as URR in my opinion.
Hi Dennis,
It is difficult to rule out some kind of price control if supply of oil gets to scarce in the not too distant future. Limited supply for private consumption or some kind of intervention to keep a lid of too high prices. It does not make sense in the way capitalism is supposed to work in theory, but may very well be the way governments intervene in markets. This latest oil price fall has nothing to do with fundamentals in the oil markets in my opinion. It smells manipulation of some sort, but it is difficult to prove anything at all.
When it comes to the FED, can they not reverse policy when they want? I think they can. It means QE again and lowered interest rates to stimulate the economy once again. I just think it will be as a response to a real crisis a bit further down the road.
All countries would have to participate in price controls, a big dream. Otherwise, the highest bidder walks away with the next barrel produced.
That said, it would be preferable to have a ceiling and a floor as price controls, now. The floor would enable all oil that can be produced now, the ability to do so. At this price, opec can’t even sustain forever. We would still be screwed, anyway. But, why speed the ship up to hit the iceberg?
But, no, we have to live on fairy tales by EIA, IEA, and OPEC.
Kolbeinh,
Yes the Fed can always reverse policy, the current policy of winding down the big Fed balance sheet will give them room to use that policy of QE again in the future if there is a severe financial crisis.
On price controls, that doesn’t work very well in practice and simply results in long lines waiting for a product that is in short supply, markets work much better in my view. No they are not perfect, just the best system discovered so far, especially when properly regulated to account for externalities(pollution) and public goods(transportation system).
“, after 2035 oil prices are likely to fall as EVs, wind and solar make oil nearly obsolete. ”
Dennis, I think after 2035 still a lot of oil will be used in the transportation sector. A lot of oil after 2035 is recoverable and will be recovered.
A question: the wind+solar installed in 2018, how many (imaginary) cities with, let’s say, one million habitants (90% of them with low income) it can provide with electricity, included that needed for EV’s ?
Han,
Wind and solar output has been growing quite rapidly, as coal, oil and natural gas deplete the marginal (most expensive to produce) unit of fossil fuel energy will become more expensive than wind and solar (per watt of electricity produced) and the exponential growth of wind wind solar may continue (for the past 13 years the rate of growth has been about 19% per year for wind and solar electricity production), this suggests a doubling of output every 4 years.
EVs will be cheaper than ICEVs (total cost of operation) as oil depletes and oil prices rise, some oil may continue to be produced, but tight oil, oil sands, deep water, and Arctic oil will all be too costly to produce as demand for oil drops as EVs take over the market, perhaps this does not happen by 2035, but definitely by 2040 demand for oil at $100/b or more will be less than supply and oil prices will eventually fall to under $60/b (in 2017$), not much oil will be profitable to produce at those prices and prices may continue to fall due to over supply which will make a lot of conventional oil production unprofitable. Oil will be produced, just much less of it (maybe 5 to 10 Mb/d for World output and it will gradually fall as ICEVs become as common for transportation as horses are today.
“Oil will be produced, just much less of it (maybe 5 to 10 Mb/d for World output and it will gradually fall as ICEVs become as common for transportation as horses are today.“
Dennis, that amount of oil will be necessary for only the avation industry in 2030.
“and the exponential growth of wind solar may continue (for the past 13 years the rate of growth has been about 19% per year for wind and solar electricity production), this suggests a doubling of output every 4 years.”
After a few more doublings I expect it to become very difficult to double again in 4 years, as the most favourable locations, especially for wind turbines, are occupied. Not impossible, but there will be more issues than there are now already
Han,
That is wind and solar, they won’t grow at equal rates and solar costs have been dropping at 21% annually from 2010 to 2017 in the US. As prices increase there will be slower or no growth in the airline industry, they will also increase efficiency.
I translated the article, quite an interesting one. As more and more inputs are needed to produce and refine liquid fuels the fossil fuel system will be even more self supporting and give less net value than it does now. So instead of 40 percent additional energy needed to produce a gallon of gasoline or diesel, it will rise past 60 percent.
No problem though because by 2040 we won’t need very much oil production. Mostly for chemicals and that will be descending. Also for some niche areas.
Thanks GF. Though i disagree with your final paragraph, I acknowledge i don’t know the future and you may be right.
Just running the current trends forward. Take those and $2.00 and get yourself a coffee. The future is all possibilities and potentials. It’s our will and capabilities guided by the harsh realities of nature. Nature is quickly changing so who really knows?
If what Dennis proposed about natural gas is true, we might see a mad dash for renewable energy in the mid 20’s. Could happen. Energy is there, but will we still have coffee?
Gone Fishing,
I do agree with your second paragraph.
I was looking at US natural Gas only, for the World there might be quite a bit, not as much estimation of the natural gas resource has been done.
Steve Mohr has don a bit of work on coal, oil, and natural gas, and Laherrere has done a bunch of work on natural gas as well. My hope is that it will be more expensive than renewables as it depletes and will mostly be used as a backup to wind, solar, hydro, geothermal, and nuclear after 2030 or so, hopefully “wind gas”, batteries, biofuels, and vehicle to grid, along with demand side electricity pricing and thermal storage of excess wind and solar power will quickly replace the backup role that might be played by natural gas during the transition and most of the natural gas will be left in the ground.
Economics is the key, if it’s more expensive than alternatives (even before considering externalities, including global warming) much of the natural gas that is technically recoverable will never become economically recoverable.
Note that all of these same arguments can also be applied to coal (except I doubt that will be chosen as backup as coal power is one of the least competitive electricity producers, though that may only be true in the US where natural gas prices are quite a bit lower than the World price level.)
I am concerned with the huge amount of work and money to replace the heating systems of many homes and businesses. Gas has become a mainstay of heating, as well as industrial processes, as it replaced oil heating.
People should start double insulating their homes now and planning for high prices or a shift to heat pumps and solar if possible.
I wonder when the warnings will go out, or if as usual there will be none and people will get trapped with expensive/useless systems.
Gone fishing,
Best case scenario is a gradual rise in the price of natural gas and people begin to look at alternative sources of heating. More insulation and better envelope seal is almost always a smart first step, though an energy audit by a trained professional is probably the best first step for the average homeowner.
Air source heat pumps are a good choice in many places in the US, for colder areas (near Canadian border and some high elevations) a ground source heat pump might be a better choice, though payback might not be quick unless natural gas or electricity rates are high.
I agree it will be expensive, but eventually heating systems get replaced, the insulating and sealing of homes is also expensive, but payback can be pretty quick.
Low interest loans from the government might be one way to push such a policy forward and might provide some economic stimulus when the next GFC arrives in 2030, though starting sooner would be better.
“I am concerned with the huge amount of work and money to replace the heating systems of many homes and businesses. Gas has become a mainstay of heating, as well as industrial processes, as it replaced oil heating.“
There you have it GF. I gave Holland as one example in the non-petroleum thread. Gas used there for heating and cooking. By the way, I don’t live there anymore, but in Curaçao most of the time, where I have solar panels. Almost everyone on this island uses gas in bottles for cooking.
Han,
Cost of gas will go up as the cost of wind and solar fall and old heating systems and stoves will get replaced as they break and are replaced over time.
The process is gradual, it happens over 10 to 20 years or so, sometimes more quickly as the price differential becomes large.
“As prices increase there will be slower or no growth in the airline industry, they will also increase efficiency.“
Dennis,
Yes, indeed. ‘Degrowth’ with falling prices if/when the world enters an economic depression. But for now, full speed ahead, Boeing seeing no bumps or turbulence on the horizon:
A few questions from a totally non expert :
looking at the Permian on gg maps is really “impressive”, for instance around : https://www.google.com.br/maps/@31.7193926,-102.300091,10635m/data=!3m1!1e3
But I thought horizontal drilling was around 1 to 3km (3 to 10,000 feet), whereas the wells seems to be spaced more like 500 meters sometimes even less.
Is it because these are old wells ? Because some reach to different layers/depth ?
By the way, how many horizontal drills there is per vertical one ?
They have been drilling vertical conventional wells in the Permian for close to a hundred years. Most of that was for shallower wells in different formations. The single dots are vertical. The longer lines are horizontal. A lot of those single dots are not producing anymore, some are. Conventional production has dropped to under a million barrels a day, now. If prices picked up, you would see an increase. The EUR and time to pull it out are slower, now. I think I remember reading that there were over 30 different formations in the Permian. Non technical answer.
Good god. You zoom out and see that the whole area is a pincushion.
You zoom in and drop the little google guy in the road, and you see that it’s a shit hole.
Interesting stuff.
Pretty apt description. You see why I have serious doubts about some of the estimates of growth. That is, if you can find a road to drop down to.
I agree with Dennis that the correlation between Dow and oil prices is spurious, but it’s there. Dow continues its decline, and so does oil. I think you can count panic as having some correlation?
GuyM,
After I said there was no correlation I looked at the market and saw what you meant, could be the fear and greed matching up in both markets, they are not always in sync historically.
Platts US #rigcount for Dec 27 = 1,147, down 28 from last week). US permits = 599 (-1,131)
It can’t continue like this with a low oil price party for (very) much longer. The question is when and how fast/high oil prices will rise. I have a feeling it will rebound substantially already in January and have some sort of peak level in 6 months time. After that all bets are off and we either start a real recession or another doze of desperate crazy volatility in prices.
kolbeinh,
I expect a gradual rise in oil prices to $75/b by August or Sept, this might gradually bring on more tight oil output, but pipeline and port constraints will keep supply from increasing too much, if prices start to move above $75 or $80/b (if supply is inadequate) then OPEC+ will increase output to fill the gap, if they cannot meet demand at $80/b prices will continue to rise. It’s not clear to me that oil prices are likely to rise above $80/b. I think the market may balance at $70 to $80, with my best guess about $75/b through the end of 2019. The port constraints on the Gulf coast may not be alleviated until 2020 or 2021, so a Permian glut is not very likely unless they find a way to export the oil.
Yes, oil prices can be predicted maybe (are we talking WTI or Brent?). But I am following the NOK/USD closely and it was not far from 5,90-6.00 NOK/USD in 2011-2014, but now it is 8,70 NOK/USD. And our country is not even emerging markets and our currency was supposed to react up when oil price is up. Not happening anymore. Just another reminder of the strong dollar effect elsewhere. To be followed closely in Asia minus China maybe if interested. China make up their own rules. (I don’t even get why Euro is so strong at around 0%+ interest rate…bound to break??. Not following FED rate hikes upwards because of what?). Norwegian (state) bank wants to increase interest rates two notches next year; seems healthy. I still think FED in the US is the most forward looking of the central banks in the western world after all.
kolbeinh,
Brent price in my comment above, I consider Brent as the World oil price, so at $110/b it was 660 NOK/b in 2013, and now at $60/b it’s around 522 NOK/b, I don’t follow these exchange rates so that is very instructive and perhaps explains why investment in oil production in Norway may continue.
Maybe I can find this answer, but perhaps someone here already knows.
I think most of us here are pessimistic about the future of the planet and global economy.
When I go looking for predictions from economists, most are short term, assuring us that a recession isn’t on the immediate horizon.
What economists have created a complex forecasting tool that includes a variety of variables: scarcity of resources, cost of energy, declining number of transformative inventions, etc,?
Hi!
A short answer to something that deserves a long answer. I think there is much quality of life even if energy consumption is reduced very much per capita. So very much hope indeed. And (only my creative thinking ofc) is that the biggest energy challenges are not even in our generation. And I also think the economists are very much opportunists, and also governments are built on much of this it seems, and they will definitely keep pushing until the (etc. peak oil) wall is there. No wisdom to be gained really. The only wisdom is that you can not have 4 years of this “shit” in the oil business without it setting “shit” marks on the future ;-). The speed of energy transition ought to be debated a lot, but is not. I have a hunch it will be a hotter theme in the future.
I am fine with reduced energy consumption. In fact, I support slow growth, no growth, or even degrowth economics.
Mainstream economists don’t seem to acknowledge that there are constraints on growth. They foresee cycles, but no real discussions of potentially permanent downturns.
I think we are entering into some significant global challenges, but mostly what I am reading now is whether we’ll have a recession in 2019 or 2020. Yes, we have scientists warning about the impacts of global warming, but we don’t have mainstream economists speculating about a future with radically less consumption.
As people here note, what we hear is mostly about business as usual for decades to come.
I don’t think the last scentence will be true, it is too comforting.
I don’t think it is true, either. But mainstream economists don’t seem to bring up disruptions.
One of the articles featured in the second link. Degrowth versus a Green Bew Deal.
The author is right to suggest that converting the world to green technology has more appeal than trying to stop fossil fuel consumption by shrinking economies.
“Through this approach, economies can continue to grow but economic growth becomes absolutely decoupled from fossil fuel consumption and the resulting generation of CO2 emissions. … By contrast, the degrowth approach relies primarily on contractions of economic activity—measured by GDP—as the means to cut fossil fuel consumption and CO2 emissions. But as Pollin points out and the degrowth model by leading proponent Peter Victor confirms, in this approach, considered on its own, CO2 emissions will only fall to the extent that GDP itself declines.”
CIA World Factbook, certainly a source that would have an agenda, lists Venezuela’s pop at
31.3 million for July 2017. The numbers above say end of 2017 and 31.9 million. Some dood above said 10% of pop had sashayed out over 3 yrs. That would be 3.2 million. CIA doesn’t see that.
Let’s scope other places:
CIA distasteful? You can go with Al Jazeera who declares 3 million left. Don’t say how many arrived. Did provide a picture of a handful of well fed guys. They do declare the 3 million is 1 in 12 of the pop. Which would make the pop 36 million.
The Guardian announced “nearly 2 million” have left since 2015. So less than 2 million is what, 6%? They are quoting some UN guy, who apparently has better sources than the CIA. Or Al Jazeera.
There is a report out that 2018’s homicide rate went down. Turned loose some murderers, if they agreed to out migrate. Shrewd.
I haven’t found ANY source for pop that quotes sub 30M. Of course, maybe they make babies as fast as people leave. Because, of course, they can’t eat.
Colombia has some data on the number of Venezuelans emigrating.
It is estimated that 0.8 to 1.5 million Venezuelans live outside Venezuela. The later number is probably more correct, as 762,000 live in Colombia alone, and 381,000 went through Colombia to other countries in 2018.
Neighboring countries are clearly affected by a tremendous increase in the number of Venezuelans crossing the borders legally or illegally. The most worrisome data is that polls consistently show 10% of Venezuelans declaring they are in the process of applying for migration permits, visas, and passports in a country where the administration is almost at a standstill.
Your mocking of the problems Venezuelans are going through is distasteful. I wish you don’t have to go through something similar to learn a little bit of empathy.
I mock your bias.
The day of the recent earthquake people were streaming out of buildings in the various videos. None looked like they were starving. Further, I recently heard that the whole populace had shaved their heads and body hair because lice had taken over. Didn’t see any bald guys in those videos, either. Didn’t see any bald guys among the well dressed and well fed folks in the videos of people walking to the border.
Why would you trust what you read in the media? Especially NYC based media. NYC banks are enraged at Venezuela’s refusal to borrow money from them. Their debt to GDP ratio is far below the US ratio. Banks make money from charging interest on loans, which they can’t collect if there is no borrowing from them.
The US banks sanction their use of SWIFT and dollars in general. So they pay Russian (and Chinese) loans in oil. This isn’t too terribly novel. North Korea has paid for its imports from China via coal.
The media was London and France not NYC linked by Carlos, above we have Aljazeera.
As to estimates of population and migration, often there are a variety of estimates.
People can flee violence and lack of opportunity and employment without necessarily starving.
Dennis-
You are basing your analysis on Western Media.
They are obviously missing something.
Maduro was to be gone years ago.
He is still there.
The Russians and Chinese have a different view–
I have numerous comrades who were there recently– but don’t have a clue what is happening now.
You have any comrades in country?
Hightrekker,
A friend is from Venezuela and still has family there, I actually don’t do any analysis of Venezuela, but agree much of what I hear is from NYT, WP, News Hour, and NPR.
Do you consider Aljezeera, Western Media?
I mock your bias.
I guess you need to watch better.
Debt to GDP is just an index and people cannot live from it.
We know the day to day situation in many places in Venezuela. Stores are half empty, and the government has made it illegal to take pictures of empty shelves. When people get sick they cannot get the medicines they need because they are not being imported. I guess they are not being traded for oil. And oil production is in free fall, so Venezuela’s economic capacity is decreasing fast. A very high inflation rate makes people’s savings disappear. We know they took three zeroes from note bills recently, so nobody is making that up. And it was just declared the most dangerous country in the world by Gallup with 40% of the people declaring having been robbed in 2017. With 23,000 violent deaths it has a rate of 81.4 violent deaths per 100,000 people. In Caracas the rate goes up to 112 violent deaths per 100,000 people, the second most dangerous city in the World. Apparently security forces are responsible for about one fifth of the deaths, and less than 25% of Venezuelans feel safe from their police.
So, I guess you don’t know what you are talking about.
As for what WE know, the answer is pretty much nothing. Measuring things in SWIFT dollars rather than land or oil or gold or population growth permits an enormous number of words to be written that say nothing. Quoting inflation (btw that data came from the opposition, not from the govt) is similarly meaningless. It’s measured in dollars, created from thin air by a central bank.
As for Gallup, who funded their measurement, and how was it taken? How can they have a sophisticated sample guaranteed not to derive from opposition bias?
We have been told they starve. The videos do not show starvation. Frankly the discussion ends there.
Russia and China are pouring money in. It’s not in the form of food and medicine.
Yeah, the discussion ends here. You’re a dickhead. Go live there if you like it so much and then you tell us first hand.
Apparently Watcher put his life savings in the Petromoneda and that isn’t working out too well for him. Not a good investment move, dood.
Russia is not really a big nation population wise (1.9% of World population).
India and China are clearly very large with 17.2% and 18% of World population respectively (about 35% combined.)
So a quote from India would be more important than Russia.
“zoom in and drop the little google guy in the road, and you see that it’s a shit hole.” Perhaps, but “Sometimes Worthless” ?
“American energy companies have spent billions of dollars in the past decade exploring for natural gas. But in parts of Texas and New Mexico, there is now so much of it that it is sometimes worthless. Some companies have even had to pay buyers to take it away.” https://www.wsj.com/articles/in-booming-oilfield-natural-gas-can-be-free-11545906601
Interesting stuff indeed.
S Hole or just Sometimes Worthless? …. Non technical question.
Not really a shit hole, just, sparse and desolate. Gas is going to be a problem until 2020, when pipelines are completed. And oil prices are not doing that much greater than gas prices, considering the cost to produce. I already am guessing a 25% drop in completions for Dec, and worse in Jan on, until oil prices recover, somewhat. A drop in production in the Permian, is not impossible, and other shale fields will, no doubt, drop.
Guym,
There might be a bit of momentum which will take a few months to unwind.
I expect the following for monthly US tight oil increases in kb/d from Oct 2018 to Sept 2019:
130
115
100
85
70
60
50
40
30
20
10
0
710 kb/d, 12 month total Oct 2018 to Sept 2019.
This assumes Brent oil price remains under $70/b until June 2019.
Er, what’s your confidence level of that projection with current prices. Assuming WTI stays under $50 for a couple of months? And they will until EIA stops their BS projections.
And what do Brent oil prices have to do with US shale?
Guym,
There is a typical WTI Brent spread of about $10/b, so just subtract 10 from my Brent estimate, so fill in WTI under $60/b with the usual spreads for various US prices (there are many different prices all over the US and of course the spreads are not fixed, but I am not going to give 100 different prices).
I doubt WTI remains under $50/b beyond Feb 2019, it will be back to $60/b or higher by Memorial day at the latest.
If WTI remains under $50/b until June 2019, output would be lower than the prediction above, perhaps 300 kb/d higher than Oct 2018 levels by Sept 2019, it will go up by 490 kb/d over first 7 months and then decrease by 250 kb/d over the last 5 months for a total 12 month increase of 240 kb/d. Just a guess and we don’t know future oil prices or how these companies will react. Generally they produce more than the economics suggests that they should (in the case of 2015-2016).
Well I zoomed in and headed north, interested to see how close the frac pads came to civilization. I-20 seemed to be a dividing line, with the industrial stuff and drilling having free reign below and above the freeway the houses and neighborhoods start. I moved along up one of the streets and it was all small houses in disrepair, boarded windows here and there, burnt out little yards divided by chain link fences. Saw a dormitory facility for the oilfield workers that looked like a FEMA trailer park. Nice trucks outside but you live in a little box with a window unit, surrounded by a hurricane fence with barbed wire, when you’re not working. I sure as hell wouldn’t want to live in either place. So yeah, a shit hole.
It’s not a family location, except for the Midland/Odessa area, and not much drilling around there. So, if you had a family, they would stay there, and you mostly in a desolate area. Even though you may get 200k a year, living conditions suck. Hard to attract new employees.
And, the Delaware Basin is far, far away. Nothing around for miles and miles. Probably, what you looked at around I20 is mainstream, where most of the drilling in the Delaware is, would be the edge of the world.
My Dad was a tool pusher for years, so I lived in the Odessa area during the 50’s. It was not as nice then, as it is now. I loved to go to the main office with him, because it had air conditioning.
So, when all the talking heads project all the huge growth numbers, I just chuckle. Everyone had it tougher in the 50’s, but not many of the younger generation are going to put their families, or even themselves through what we went through.
We spent most of my early life without benefit of air conditioning, television, and listening mostly to Amos and Andy, or the Shadow on radio together in the living room. In some places out there, you are not far removed from that. Imagine no internet, Gasp! Or, having to use dial up, Horrors! Or, a single A/C unit in the window that won’t reach to the bedroom, Sweat! Now, try to tell your children that’s ok.
Weekly Petroleum Report from EIA is out with crude and petroleum stocks falling by 2.045 million barrels from the previous week.
If we only consider crude oil, gasoline, distillate, jet fuel, and residual fuel oil stocks (ignoring propane/propylene, other oils, and unfinished oil products) the stock levels increased by 2.715 million barrels from the previous week.
In the chart below I show the weekly stocks of crude, gasoline, distillate fuel, jet fuel and residual fuel from 2008 to 2018, do you see the huge surge in stocks since Oct 2018?
Neither do I.
In fact since the week ending Oct 5, 2018 to the week ending Dec 21, 2018 the stock level for the crude plus products category I created in the chart (ignoring propane, unfinished oils, and other oils) has decreased by 3.8 million barrels.
The likely explanation is the huge increase in US C+C output from 11,475 kb/d in Sept 2018 to recent 4 week output average of 11,650 kb/d, an increase of 175 kb/d over 3 months or an average increase of about 58 kb/d each month for the past 3 months.
Note that the trend for World increases in C+C demand from 1982 to 2018 has been about 67 kb/d each month (800 kb/d per year), so the recent increase in US crude output for the past 3 months is not enough to meet World demand increases.
Note that the weekly output estimates are not very good and the stock level estimates are also not great, the increases in US tight oil output have been smaller each month since May 2018 and if that trend continues from Nov 2018 to Oct 2019, the next 12 months (Nov 2018 to Oct 2019) will only see US tight oil output increase by 710 kb/d. That is a likely scenario (and perhaps optimistic) if Brent oil prices remain under $70/b until July 2019.
The past four weeks, total stocks (including SPR) have decreased about 27 million, according to the weeklies, if you don’t look at just some stocks. At a slow time of year. That supply glut imagined by the talking heads is having some affect on inventories? Good thing OPEC cut, and shale production is stagnating. We should be looking good by June?
“We are entering an unprecedented period of uncertainty in oil markets”
-Fatih Birol
Common language translation is: “we are screwed”. But, things can always look up. Next year we get the General from Venezuela as OPEC.Head.
Seems to be true—
GuyM,
Higher prices may lead to more well completions if supplies are short and also may lead to OPEC increasing output if oil prices go above $80/b for Brent. From your perspective higher prices might be a good thing, it certainly would be good for the planet.
I would certainly like higher oil prices, I just don’t want things to get out of hand, which they are now. If we can get ludicrous prices to the low side, the same can happen the other way. Yeah, it will eventually balance out, but at what cost? I think prices should be between $80 and $100. Anything else would either hurt the economy or discourage production somewhere.
GuyM,
I am in rough agreement on your price range, I would say $70 to $90 makes sense for Brent from now to the end of 2019, probably your range (80 to 100) makes sense longer term, say 2020 to 2022, I think prices will rise to the 100 to 140 range as the peak approaches from 2023 to 2025 and I doubt the World economy will do well at sustained prices above $150/b, though at nominal price that might be ok in 2025, in 2017$ (I think in terms of real prices), the economy slows at $150/b or more in my view.
Well, your talking Brent, I’m talking WTI. You agree that the Permian is not breaking even at $63, so why is $70 Brent a good price to encourage production. I really don’t see where Brent pricing is relevant to North America pricing, which is were most of any increase will come from.
GuyM,
The Permian does break even at $63/b at the well head ($68/b WTI.)
The Oil Market is a World Market and Brent is now the defacto World price.
I gave a price range of 70 to 90 for Brent, for WTI that would be $60 to $80, implied is that there is volatility so I think $70+/-$10 for WTI and that is enough for profits in the Permian where wellhead prices would be $65/b (with a 10% ROI when well head price is $63/b). Perhaps prices will be higher, I have historically guessed too high on oil prices so your $90/b+/-10 for WTI is probably too high, and my $70/b guess might be low, maybe $70 to $90 for WTI would make sense, best guess of $80/b, seems most of the oil companies were doing fairly well when WTI was around $70/b (May to Oct 2018), so they would be fine at WTI from $70-$90, and note that from Nov 2017 to Nov 2018 the monthly WTI spot price was $57/b to $71/b and US tight oil output increased strongly over that period at that price level. Pipeline and port constraints will make it impossible to repeat that performance over the next 12 months even at those price levels, so I expect slower growth 700 kb/d rather than the 1400 kb/d increase over the previous 12 months for tight oil output increase.
Dennis,
I don’t usually comment on these threads but having downloaded your average Permian well model and reviewed the economics I am puzzled by the fact you ignore NGLs. From analysing the production data from several of the large Permian players I think it’s reasonable to assume they get 0.3 barrels of NGL for every barrel of oil. You can also assume that they achieve 50% of WTI prices for NGL (perhaps higher?).
This significantly lowers the break even WTI price for the Permian players, to ~$55 per barrel, and is more consistent with their numbers. I think it’s reasonable to ignore the gas.
Apologies if I’ve misunderstood your spreadsheet and this has already been taken into account.
Fraz
Fraz,
Thanks for pointing this out, I had assumed much of the natural gas was being flared, but Permian output of natural gas is 8 BCF/d, so it is not all being flared.
If we assume Permian Basin natural gas is just as wet as the Texas average then 11 BCF/d of natural gas results in roughly 1 Mb/d (million barrels per day) of NGL (based on 2017 data), at the rate that C+C and natural gas was produced in Nov 2018 in the Permian basin this would mean about 0.4 b/d of NGL for each barrel of C+C produced.
I will need to rework my analysis to take account of this.
I appreciate the criticism, you have understood just fine, I think.
I may comment on this further in the Dec 31, 2018 Petroleum thread. So look for comments there.
Chart for all US petroleum stocks for past 52 weeks below in kb/d, also note for week ending 12/21/2018 the level was 1877 million barrels and the 5 year average level (a common benchmark) is 1913 million barrels. We are currently about 37 million barrels below the 5 year average stock level.
Yeah, and consider that not only is OPEC cutting back, SA is reducing exports to US to about a third. Exports out of the US are holding up. There is nothing I can imagine, except a deep drop in US inventories to June. I don’t expect much in the way of price deviation for, at least, a couple of months. I haven’t followed any other analysts, besides Phil Flynn, who have a clue to what is going on.
I often have a quick look at World inventory levels, they still look low. There was an increase in jet fuel inventories into Sept/Oct. Looking at the US weeklies, jet fuel stocks in the USA are back down again.
So far, it looks like Gasoline inventories put in a low on week ending November 23rd at 224.5 million barrels. This low is higher than the glut year lows. https://pbs.twimg.com/media/DvmrsM_WoAATPZo.jpg
Ok, looked at a history of Canada, and it looks like in one week towards the end of the year, it approximates zero, then jumps up big in January. So, current drop is not indicative, yet.
Somewhat undeserving of even this much hype of production from Vaca Muerta shale. 70K boepd by 2025. Yawn.
OTOH it is RDS after all and the quote is 27 billion barrels of reserves.
Well. What do you expect out of a formation called dead cow?
Twitter headline: “BREAKING: A third of all gas stations in the U.S. are now under $2 per gallon” How will electric cars ever compete? (I have nothing against EVs, just don’t see them replacing ICEs anytime soon)
How long will they stay that low? It’s not a good price for the industry.
Low prices are temporarily good for consumers, but if they discourage investment and drilling, then the end of the oil age might still be in sight.
What do some real-ish numbers say?
I go to gasbuddy to find where there’s cheap gas, blob of dark green leads me to Buffalo Missouri. https://www.gasbuddy.com/GasPriceMap
US fleet avg: 25 mpg
fuel at $1.74 Buffalo Missouri
$1.74/g / 25mpg = $0.0696/mile gasoline cost for 25mpg vehicle.
Tesla model 3 at 237 Wh/mile, == 1 mile/.237 kWh = 4.219 mile/kWh
electricity in Buffalo MS at $0.1098/kWh https://utilitieslocal.com/states/missouri/buffalo/
$0.1098/kWh / 4.219 mile/kWh = $0.0260/mile electricity cost for Tesla Model 3
$0.0696/mile gas / $0.0260/mile EV = 2.67
cheap gasoline is 2.67 x more expensive than electricity in Buffalo MO.
How about Californi’, the least you oughta be?
fuel in LA at $3.373/gallon.
but it’s Caleefourrneeuh, so maybe you’d drive a Prius (50 mpg)
$3.373/g / 50 mpg = $.0675/mile
Hmmm, do you pay the $0.21659/kWh (tier 2) to LADWP?
$0.21659/kWh / 4.219 mile/kWh = $0.0513/mile for your Tesla model 3
Yikes! That’s almost enough to get you to move to San Diego where So Cal Edison offers a time-
of-use EV rate of $0.13/kWh from 9pm – 12pm
16,336 kWh/yr / 1575 $/yr = 10.37 kWh/$, or $0.096/kWh
$0.096/kWh / 4.219 mile/kWh = $0.0228 / mile in the model 3
$0.0675/mile gasoline / $0.0228/mile Tesla model 3 = 2.96
not so cheap gasoline is 2.96 x more expensive than your own electricity in Los Angeles.
Or LADWP electricity is still cheaper than gas for a Prius, though not by much.
Sunnnv, I think you left out a key component in your comparison, the price of a comparable mid-size compact ICE car compared to a Tesla Model 3. Here are some ICE models in the Model 3 category:
Kia® Forte
Mazda® Mazda3
Kia Soul
Ford® Focus
Nissan Versa
Chevrolet Cruze
Honda® Civic
Toyota® Corolla
Hyundai Elantra
Nissan Sentra
The prices for the aforementioned cars range from $17K to $20K, as compared to $40K-$50K for Model 3. At this price point, and not even accounting for the massive depreciation of the resale of value of an EV compared to an ICE, it would take you decades to make up the difference with the cost of the fuel. A Tesla is a tax payer subsided toy car for the rich, for the rest of us an ICE car would do very well, thank you.
Best choice is to buy a diesel car and then have it modified so it can also run on vegetable oil. Not the most environmental friendly choice, but after Peak Oil and once the electrical infrastructure has collapsed together with the industrial civilization you can still make oil from olives or sunflower seeds and have a running car.
But where would you drive too and how would you fend off Mad Max/Zombie attacks.
I’ll use it to deliver mail. Once civilization collapses a mailman is the only figure that can keep society holding together in the good path.
Oh no! Not our mail lady! She’d wind up wearing skulls, and running over people. I’ve watched her get that evil smile as she takes aim at my garbage cans.
Civilization collapse in the US is over imagined in films, etc. It may be more military oriented, but total collapse is unlikely. As a veteran, that’s where I would gravitate towards. There may only be about 2 million active and national guard, now, but there is more that ten times that of past members, not counting members of supporting organizations. Or, well over 10% of the adult population (it was almost mandatory for awhile). Those numbers don’t even touch on the number of police, or similar organizations and past members. I think we would gravitate towards cohesion, and not collapse. And, because all of us fought, or stood for the Constitution, it would survive. That’s a large number of people, who have already qualified with some kind of firearm.
There is an old flag for the US revolution I particularly like. It was a snake about to strike that said: “Don’t tread on me.”
But, we are not alone. I not sure about some countries, but I couldn’t imagine a civilization breakdown in China, Russia, or Israel, for similar reasoning, but completely different histories.
“Civilization collapse in the US is over imagined in films, etc. It may be more military oriented, but total collapse is unlikely.”
The way the US is growing more belligerent every year & now locked into a three way cold war with Russia & China, Odds favor another global war.
That said, the US military is dependent on the US dollar, if the dollar hyper-inflates it has no money to pay its solders or maintain its equipment. US Federal debt is about to top $22T with dozens of Trillions promised in entitlements promised to retiring boomers. Many States are edging to insolvence over promised worker pensions & medical benefits. Sometime between 2021 & 2024 Interest due on debt & entitlements exceeds all federal revenue.
“Best choice is to buy a diesel car and then have it modified so it can also run on vegetable oil.” Sure, with acres of land, lots of mules, and a 30+ year-old rig with fuel heaters, super filters, mechanical fuel injection, etc. Burning food for fuel will not make one popular. Modern engines need consistent fuel resulting from continuous processes. Wasting 8 out of every 10 Liters of fuel out a radiator in an ICE car won’t be acceptable. On top of that Photosynthesis is less than 1% efficient. When the millions-of-year-old hydrocarbons flows drop, it’s going to get ugly.
Yeah, I bought my Versa slightly used (3k miles) for $9k. Take a while for gasoline to be an issue, and I don’t have to plan around chargers.
After people buy up the 1000 Model 3’s being produced daily by Tesla, many of them become used Model 3’s in a few years. Those will sell for much less, but still have a long life ahead of them. And still no oil changes, radiator coolant changes, transmission fluid, belts and the other costs that go along with an ICE vehicle. It all adds up. Beyond the costs, however, EV’s are superior vehicles to own. I was sold of the absolute fun of driving them well before the economic issues were considered.
Joseph: re “comparable” to a Tesla model 3….
Uh, go to your local Tesla store/gallery, and take a test drive in a model 3. https://www.tesla.com/findus
None of the vehicles on that list are “comparable”.
Comparable to that list for EVs might be a Nissan Leaf or maybe a Chevy Bolt.
The comparable car to the Model 3 is a Mercedes C class, fully loaded which is about 75k.
I own both a “loaded” Honda Civic and a Telsa Model 3 long range battery, AWD with enhanced autopilot (about 58k), the “performance” version is about 70k and is similar to the high end Mercedes C class.
There is no comparison between the Civic and the Model 3 except the size of the car.
@sunnnv My point is that when gas is cheap, people buy guzzlers like pick-ups and SUVs. It is one of the laws of the universe. The other problem is that even at $6 gas, I don’t see the replacement of the US passenger fleet (121 million cars) in any short order.
US oil consumption was up over 1% last year. China up 4%. India on track with YTD numbers for 6.5%.
Chinese vehicle sales this year are down 1% Y-Y at about 24.5 million, annualized. As has been pointed out, vehicles bought in China are new oil consumption because they are relatively nouveau riche. An old car doesn’t roll off the back end for them. It’s new consumption. And no, don’t declare these are electric. The electric wackos don’t break out hybrids from electric. The hybrids are gasoline cars carrying a battery around and most “electric” are hybrids.
I’ll save you time. All run on gas or diesel. All.
India will spike oil consumption this year. Like China, an old car doesn’t roll off the back end. These are all new oil consumption.
Forget with the alternative stuff. Buy guns. Scarcity isn’t gonna make anyone more gentle.
Watcher- “And no, don’t declare these are electric. The electric wackos don’t break out hybrids from electric. The hybrids are gasoline cars carrying a battery around and most “electric” are hybrids.”
You are talking bullshit here.
Sure a hybrid is a petrol car with a battery (and electric motors). But that doesn’t take away from the fact that a majority of your miles with such a vehicle can be electric.
Case in point. There is a plug-in hybrid van in my driveway that has 69% of its miles traveled electric, and 31% gas (almost all used on long trips to the mountains, which were purely optional).
The electric miles are costing about 1/4 of the gas ones. the vehicle is USA made, and can fit a sheet of ply flat inside (or lots of guns if that is your preference).
Your storyline on this is old.
There is no such thing as optional.
You choose to consume that oil, or the Chinese do. If the US populace is ever asked to forgo consumption so that the Chinese can grow theirs per capita, that consumption is not going to be forgone.
Buy guns.
But do bear in mind the averaged sources of mains electricity generation in the U.S.: (2017)
Which makes most EVs about 2/3rds ff powered and 1/8th renewable powered, excluding hydro.
I posted a short note here a couple of years ago which estimated that a car-only gas station with 20 pumps would need a 40MW supply for EV equivalency. Trucks would require far more.
As for cost, make sure that taxes are the same per work-energy unit supplied. Electricity is often cheaper than gas in this respect at the pump/charger.
Last, but not least, your old, beat up EV that has had 15 years + providing trusty service on the farm and local area should be as cheap to run as its oily and worthless diesel predecessor that keeps going year in, year out, albeit inefficiently.
It’s this last that I think that EVs will find hard to achieve.
As noted by Hickory, each state varies in fuel mix for electricity, and with an EV one can often (depending on living in single family dwelling vs. apartment/condo/…) put up PV panels and make your own juice fairly low carbon.
Where I live I get 124 mpg CO2 equivalent off grid power.
In Buffalo, New York, it would be 247 mpg CO2 equivalent (?lots of hydro?).
In Buffalo, Missouri, it would only get 51 mpg CO2 equivalent.
The grid is getting cleaner as time goes on. See Islandboy’s electric power monthly article for the latest.
2 MW per charging station seems way excessive.
EVs are way more efficient than Internal Combustion Engine vehicles.
Tesla superchargers currently share 120 kW between each pair of stations. The soon-to-be-released Porsche Taycan with 800 volt battery will max out at 350 kW. https://www.greencarreports.com/news/1120518_evgo-launches-first-public-350-kw-fast-charger
The issue is how fast batteries can absorb power, particularly as they near full charge. When I plug the model 3 into a supercharger and it’s down under 100 miles range left, it will start sucking power at over 100 kW (400 something miles of range per hour) if I’m at a pair by myself. But it soon starts to taper off. Still 30 minutes or so is enough to get me down the road to the next bio-break pitstop on a long trip. (around town, I just plug in when I come home, no time wasted going to gas stations).
Another owner’s charging curve: https://teslamotorsclub.com/tmc/threads/supercharger-speed-116kw.107619
As far as longevity, Jay Leno has a 1909 Baker electric.
Claims “100% maintenance free” at 3:26
starts showing the Baker at 2:55 https://www.youtube.com/watch?v=OhnjMdzGusc
At 5:40, story of a woman who drove one to the Beverly Hills Hotel to get her hair done every week, “from 1935 to almost 2001”.
Yes, modern EVs will need a battery change every 10-20 years (depending on what kind of range loss one finds acceptable), and modern electronics may fail occasionally, but the diesel will need a starter battery from time to time, oil and filters, brakes, tires, etc.
Lot of meat in this one if your able to separate the fact from fiction. First, the Dallas Fed usually has the trend, but are usually somewhat behind. Second, a $50 price is a fiction. It needs to be higher, and the Permian discount makes their price lower than WTI. Third, for Dennis?, there is no basis for the Dow and the Oil price to be in lockstep, but here is confirmation of the reasoning, or rather lack of reason. A lot of smaller companies, and even larger follow what Papa does with Centennial. Diamondback and Parsley are huge in the Permian, and the article failed to mention some others that have already cut capex, like ConocoPhillips.
If there are layoffs, again, then kiss the year end increase expected goodbye. I do expect a very significant increase in prices sometime this year. However, contrary to popular belief, shale operators can not change that quickly. There will be a significant delay.
On another note, I read an article in local paper that stated the number of abandoned mobile type homes in the Permian area is becoming problematic.
And my initial queries on Permian completions have it dropping by over a third in Dec., but that’s not firm.
WTI $42.58
WTI Midland $34.34
Flint Hills posting ND Light Sweet $16.75.
Seems the break even is pretty low, as EIA has predicted about a million bpd increase out of shale in 2019? It doesn’t matter whether you provide storage or increase the number of refineries, shale production is relatively dead at these prices. The prices just need to stay ridiculously low for awhile to stop the EIA and IEA from producing more imaginary oil, and face reality. Yeah, that would affect my wells, but I would hope for a better price, later.
Less than $17 a barrel? Bakken is done for awhile. And there is NOBODY in the Permian breaking even at $34. Remember what happened in 2015? Yeah, production dropped by over a million barrels. These prices are as bad as 2015, and we have a bigger drop potential. Those pipeline builders gotta be really worried. But, they should be anyway. How are you going to keep the pipeline flowing if you can’t take what’s in there out, because there is nowhere to put it? How many mentally challenged people are working in the Permian?
The amazing part is, this time there is no glut, at all. Inventories will drop, but just let it happen. We have to forever eradicate the Permian and shale production will save the world song. It’s a thousand times more irritating than listening to Bing Crosby’s white Christmas on January1st. There ain’t no fritzing Santa Clause, EIA!
Seems like a lot of year end liquidation of oil futures perhaps. That’s the only explanation I’ve got for how oil is this low. Probably will bounce back to the low 50’s WTI by late January. It will be interesting to see December through February US production data to see what effect this price dive has done.
Hi GuyM,
“Those pipeline builders gotta be really worried. But, they should be anyway.”
What do you think the issues are that the pipeline companies are worried about
right now? I would appreciate your thoughts on this.
Two thoughts, immediately. The price is such now, that if it stays anywhere close to that for awhile, completions won’t be as expected, and there won’t be enough oil to fill them. The second is, that if the E&Ps had the right price, and did produce, there is probably not enough shipping until late 2020 or 2021 to handle 2.5 million bpd extra. No place to store it, and refineries can’t use high API. Unless, I am missing something. Pipelines can’t make much money because a pipeline is filled, it has to be flowing.
Its gonna go to zero. Just kidding.
Doubt these prices will be sustained.
Maybe not zero, but could be a lot more. It’s reacting to the stock market, now. Dow down 15% and still going. This is no simple correction, as that stops at around 10%, usually. Been a long, long time since the last bear market, and is past due. Everything dives, until they come to grips that commodities are a different animal. That may take months, or longer depending on how bad it gets. Who knows, each bear market has a different generation, and it’s always new to them.
Especially this one, as it has been so long. New ball game.
I think it was EN who posted how rate hikes can cause this on a historical basis. Based on that chart, we could be in a significant bear market. Bubbles are going to pop. Not sure what the derivative markets are looking like, but they can’t be healthy. The derivative markets are many times bigger than the regular stock markets. Think Lehman Brothers, and margin call. Lehman didn’t fail over bad home loans, they failed over the derivatives of home loans. This time, it won’t be housing, but something will give. They made a big effort to control the banks after the last fiasco in 2008, but made NO effort in regulating derivatives. Brilliant. Some of the weaker oil companies may be in trouble. JMO.
Right on…the move from 18,000 to 27,000 in the Dow was just hot air as we are seeing now. Investors realize there isn’t a fed put and are freaking out, how far will it sink before Powell and company call off the dogs and say no more rate hikes and stop quantitative tightening..cause it’s on “autopilot” according to them. All I want is 4% on an 18 month CD, fat chance now.
The autopilot is also the monthly selling of Bonds held by the Fed, which also acts as interest rate increases.
hahahahahahaahahaha
The inventory nazis will be out soon with a surprise discovery that there was more in storage than they ever suspected.
Don’t you worry none. In the finest traditions of capitalism and free markets, various govts will be taking action soon. To do something.
Yeah, they are convening as we speak. Never fear. Trust in your government, not your 401k.?
A Minsky moment, day, week, month or year(s). Aka margin call on highly leveraged margin is probably the cause. Hence, duck it’s hitting the fan.
https://seekingalpha.com/amp/article/4229895-something-happening
In other words, if you have to sell those paper barrels for margin calls, and there is too few to buy, because they are selling, also; then price goes down, because there are too many paper barrels, and not enough buyers. Probably, the original paper sellers lose their butt, and have to sell something to cover their margins. Everyone now is paying homage to the margin god. Because, there was never any real money to cause the stock market to soar like an eagle.
Which reverses itself later, because when it is time to sell new paper barrels, less are sold, enabling the price to go up (if anyone has any money left). Everyone else is busy ducking Guido, because the value of what they had left in their portfolio was not enough to cover margin. Er, I think?
Anyway, that’s Guy’s course negative 101, on the current status of oil prices.
We come full circle back to the Jan. 2009 Lows! Lowest was Jan 16 at $36.
Folks, I think we hit a recession!
Recession usually lags 9 months after the market crash, but, yeah. We are basically there.
Recession is based on GDP not the stock market or price of oil.
https://www.bea.gov/data/gdp/gross-domestic-product
Q3-2018 was 3.4% GDP growth. Very good for an advanced economy.
Of course. But traditionally, crashes take from cash/growth after a period of time. Nine months to a year, and growth in GDP precedes bull markets by the same. It’s not a fritzing law, but it’s logical, and normal. Has been since I started following it in the 60’s. Last crash was different, in that the GDP growth declined before the crash, due to housing. But, if the crash persists, my bet would be a lack of cash, eventually, to support growth. There are huge losses, we don’t see that are happening now in the derivative market, besides the stock markets. There was something like 384 trillion just in interest rate bets in derivatives,that half are losing right now.
This is no traditional crash. FED can stop hiking interest rates and market might pause an consolidate before going lower but lower they go. Until FED stops allowing it’s balance sheet to shrink, down is the direction for markets. Back when QE was full blown stuff like gov. shutdown and trade wars were the very thing that made markets go higher because it meant more QE for longer.
There is nothing organic about the recovery of markets since 2008-2009. All assets and markets are mispriced. Price discovery wasn’t allowed to happen after 2008-2009. Truth is true price discovery won’t be allowed to happen this time either.
Fed is manufacturing a market crash so they can do the next round of QE. Fact is QE works but you can’t end it and you sure as hell can’t reverse it. QE creates the illusion that everything is fine. There is a credibility issue if you can’t ever end QE though. That’s where the Fed finds itself now.
Your right. Each crash is different. This one is just a slow meltdown. And, since I have been following it, there has never been anything organic about market growth, it’s always BS. There was nothing organic about the first big market crash in the early part of last century, it was purely speculative. The tulip crash, before established markets was speculative.
Growth in GDP and markets are two separate animals. Although, as the previous crash proves, GDP decline can affect the market, as well as market crashes affecting GDP.
The stock market, and now especially derivatives, are nothing other than a gigantic Las Vegas casino. Elves in the market strive to maintain that there is a relation, but in the end, it doesn’t pan out.
Well the Dow has had its largest monthly loss ever recorded this December unless market recovers some of that between now and the end of the year. Slow meltdown maybe not. It’s currently at about -4,200 which tops the largest monthly drop during 2008-2009 by about 1,000 points.
Just further to drop than the previous ones. Half would be about 10k more points. But, there is nothing magical about half, it could stop well before that.
The analysis of the drop is still being speculated. The ones that make sense, so far, is that there was a lot of market fear (tariffs, ad nauseum). Sell offs happened, snow balling into covering margin calls. If so, that is a normal scenario, but I think the Fed raising interest rates, and continuing to unravel QE is also a major, if not the major reason. There are a bunch of other reasons that don’t make a lot of sense. One blaming oil price. I think that is yet to come, but not this time.
Unwinding of FED’s balance sheet is also on autopilot. They don’t have to have a Fed meeting to vote on it like a rate hike. Much easier to deflect the blame elsewhere for the resulting market decline.
-4,200 which tops the largest monthly drop during 2008-2009 by about 1,000 points.
Hey, it it’s the precentage drop that counts. What was the largest monthly percentage drop in the 2008-2009 crash? I would wager it was far greater than the percentage drop this December.
This article is about the huge 1,175 one day drop last February, but the point still holds.
Dow Jones Suffers Worst Point Drop Ever, But Percentage Loss Is Not Historic
The Dow’s 4.6% loss on Monday was the worst since August 2011. But it didn’t even crack the top-20 of all-time losses. It was just the 25th worst loss since 1960.
The Dow’s biggest one-day percentage loss was the 22.6% Black Monday crash on Oct. 19, 1987. In point terms, that was “only” 508 points. In second place, the Dow crashed 12.8% on Oct. 28, 1929.
Looks like the biggest percentage drop for a month was Feb 2009, at around 21%. Eclipsing this month. But, it had also been going down for a long time. What was this month, around 16%? But, it’s just started,
HHH
Not the proper measure.
You have to look at percentage drop.
GuyM,
I get 4 instances of bigger drops than Feb 2009 which was about 12.4% (I take the difference divided by the average of the two months). Oct 1987 (26%), Aug 1998(16%), Oct 2008(15%), and Sept 2002(13%). So far Dec 2018 has been about (16%) and if it remains flat through Dec 31, it would be the third biggest percentage monthly drop in the DJIA since Nov 1986 (I only have data from 1985 to present).
Sometimes a stock market crash leads to recession and sometimes not. In 1988, 1999 and 2003 there was no US recession even though there were significant monthly downturns in the DJIA.
The Stock market is not a good predictor of recessions.
Look at total market Cap loss in dollar figures. I disagree with percentage drop being the only thing that matters.
HHH,
Let’s imagine you had Warren Buffet’s wealth (approximately $84 billion) and lost one million dollars in your portfolio, now imagine your portfolio was worth 1 million and you lost 1 million. (100% in second case and 0.001% in the first case)
If the Dow is at 20,000 and loses 1000 points, it is not as significant as the Dow at 2000 and losing 1000.
You can disagree of course and claim only the numerator matters. I think one has to look at the whole picture (numerator and denominator).
Oh and I did not say it was the only thing that matters, read what I wrote. By “proper measure”, I mean it is more appropriate because it is a more complete measure which considers both the size of both the numerator and denominator.
HHH,
The Fed is letting 50 B per month run off the books, Currently the Fed Balance sheet is about 3200 B above the 2017Q4 level, so if the current rate continues, in 5 years and 4 months we are back to 2017 levels (880 billion). The Fed’s balance sheet has been decreasing since 2015, but faster increases started in 2018 with balance sheet falling from 4444 B on Jan 1. 2018 to 4084 on Dec 17, 2018, about 31 B per month. If that rate continues we get back to 870 B in 8.6 years. So some time in 2026.
https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
https://www.cnbc.com/2018/12/19/fed-chief-powell-says-he-doesnt-see-the-fed-changing-its-strategy-for-shrinking-the-balance-sheet.html
https://www.msn.com/en-us/finance/realestate/fears-of-looming-recession-cast-light-on-fed-balance-sheet/ar-BBR7vir
Some big banks guess that the Fed will keep 3.5 trillion on it’s balance sheet, the fed would reach that level in about 19 months.
Relative to the 2007Q4 level considering increased GDP an equivalent FED balance sheet would be 1250 B, that level could be reached in 2025 if the Fed continues to let Treasuries and MBS mature and fall off the balance sheet at the rate of 31 B per month (average rate in 2018). Several news pieces claim the rate is 50 B per month in balance sheet reductions, that rate drops 1.2 trillion every 2 years.
Yeah and…. market will follow Fed’s balance sheet. Those pension funds who bought $64B in stocks that made the market bounce are going to lose their collective shirts on that deal as the Fed’s balance sheet shrinks.
Personally i don’t believe there is enough excess liquidity floating around to push oil back to $90-$100 even in the event of a shortage. Maybe i get proven wrong about that. But i don’t see $100 oil again without a massive amount of QE and other monetary tricks.
That run up in oil price 2008. Was due to highly leveraged investment banks being long CL running up the price. That’s not going to happen again.
Let’s also not forget that the FED isn’t the only CB out there thats pulling liquidity out of the market. ECB is following right behind the FED. When the ECB starts to tighten monetary policy all those NIRP refugees that left EUROPE in search of yield in US market will start pulling their money back home.
I can only wonder how much of those NIRP refugees from EUROPE ended up in shale oil chasing yield. I think ECB tightening of monetary policy will have a greater impact on US markets than the FED’s tightening did. By a wide margin.
HHH,
Lots of excess reserves in the system, as interest rates go up, private investors will buy the Government bonds and financial markets will become normalized. At least for the US the money supply is fine and inflation rate is near the target (2.2%), monetary policy seems appropriate.
My guess is the European Central Bank has this figured out as well.
A recession is overdue. The problem is the new economy might not resist a recession with the huge monetary mass created out of thin air that hides at financial instruments.
Leading indicators are dropping like a lead zeppelin. Past GDP growth is irrelevant. GDP will go negative in one or two quarters unless they lie.
I am of the opinion that the GFC of 2008 was just the appetizer for this one. The Central Banks of the World have all but guaranteed a monetary crisis when the paper wealth finally causes the mother of all real asset inflation trying to escape from zero valuation.
Carlos Diaz,
Not really possible to predict a recession in advance. The pessimists always believe a recession is one or two quarters away (unless we are already in one), eventually they will be right, one just has to wait a few years.
If we look at the recessions in the US since 1981 and assume another recession begins in 2019, then the average business cycle has been about 9.5 years. Most of the recessions have not been very severe (GFC was worst since Great Depression, but the other 3 were not very severe.
Impossible to predict either when the next recession begins or its severity. I think the next severe recession will be about 3 to 5 years after the peak in World Oil output in 2025. Not at all unlikely we may see a mild recession between 2018 and 2030, possibly as the peak approaches in 2023.
No, but leading indicators are the closest thing.
https://www.advisorperspectives.com/images/content_image/data/c0/c086e9ad738dd9f289f3837b475d8b38.png
Every strong downturn in ECRI weakly leading index growth corresponds to serious economic trouble. 2010 and 2012 were not US recessions, but they almost made the EU and the Euro implode.
So this is not a constantly moving forward recession prediction that finally becomes correct. Economic indicators show this is no picnic, and the probability of recession is actually quite high.
And actually I would have predicted that Quantitative Easing cannot be undone without triggering a recession.
Carlos,
The WLI is not doing very well since 2009, eventually it might be right again, perhaps by 2030 🙂
Dunno why you say that. WLI is working fine, giving early warning of serious economic weakness. The economy has been intervened since 2009 by Central Banks that try desperately to prevent a new global recession pumping up financial assets every time the economy slows down. The result is a very long business cycle. But eventually CBs will fail as the drug becomes less and less effective. And there are a lot of troubles coming home to roost. Protectionist measures affecting global trade, Brexit…
Carlos,
The WLI has dipped below zero 5 times since the GFC and no recession so far (eventually there will be a recession and it might even coincide with the dip in the WLI as it is bound to be right eventually). CBs are supposed to intervene to try to stabilize the economy, that’s their job, so nothing new there. The QE that everyone has complained about is being gradually unwound and monetary policy is being normalized, and now people complain that is a bad thing, on the contrary, it is a good thing that interest rates are moving back to more normal levels so that capital is allocated efficiently.
You seem to have a lot of this stuff backwards, things are moving in the right direction in financial markets.
There are some clowns (rhymes with dump) that don’t get this.
Oh gosh! so US-centric. The global economy is interconnected. Perhaps that bit escapes you. The 2010-2012 drops in WLI are the response to the European Sovereign Crisis that took place at that time. have you heard about that?
“Subsequent follow-up recessions in 2010‑2013 were confined to Belize, El Salvador, Paraguay, Jamaica, Japan, Taiwan, New Zealand and 24 out of 50 European countries.”
That makes it 31 out of 72 countries with quarterly GDP data, and a very good chunk of the global economy.
So ECRI WLI did work at those times by indicating global economic weakness.
The financial markets are intervened. The Fed is undoing QE on its own, while Japan and the EU are not. The US monetary tightening is partially compensated by creating a monetary flow towards higher interest rate US from the rest of the world.
At the same time the US interest rate curve has inverted, gold is going up and market volatility is going up.
The fireworks are just beginning. I think it is you who has a lot of things backwards. You can expect oil prices to show also an increased volatility, but don’t expect them to recover much when so many people think a recession is in the cards.
Carlos,
If you are going to claim WLI predicts US recessions, then I look at the US. If you are now claiming it predicts World Recessions, I believe it does poorly there as well.
I stand by the statement that recessions cannot be reliably predicted in advance, you can choose to believe otherwise.
Your keyed into peak oil output, still. It doesn’t need to be at peak, before shortages to demand appear. The more severe the shortage, the more it will affect the economy. I really think that will happen far before peak oil. But, I have not received my soothsayer license yet.
Big questions I have for 2019 are:
1. Where’s the fritzing over supply they keep talking about? If there was an over supply it would show up as inventory increases, somewhere. We know it’s not in the US, and OECD supplies don’t indicate an inventory increase that’s over the norm at this time of year, so where are these “experts” coming up with an over supply?
2. Even with an economic slowdown, we will be getting some type of growth, simply due to population expansion.
3. Growth of supply is primarily defined as coming from opec, or non-opec. OPEC plans to cut production by 1.5 million or more barrels a day, which doesn’t count any drops in Iran or Venezuela. That’s cut, not grow.
4. Non opec growth is limited to what the US comes up with on high API stuff. It’s not even going to do that now, in all likelihood.
Given all that, would not you predict a significant shortage in 2019? Who knows exactly how much it will be, but probably bigger than a bread box.
Of course, EIA and IEA can tell us bed time stories, but it’s not going to prevent Freddy or Jason from becoming reality.
The IEA says there will be a slight under supply in 2019.
https://www.iea.org/oilmarketreport/omrpublic/
At the moment oil stocks are building and that is why OPEC have agreed to cut production.
I keep hearing that, and no one provides any detail to that “build up”. Energy News constantly provides data as to most of the world stocks, and it’s not in that. It’s not in the US and OECD inventories. So, tell me, exactly where is this inventory build?
If China’s consumption is slowing down and it’s inventory is rising this much.
https://oilprice.com/Energy/Energy-General/Chinas-Oil-Inventories-Rise-4167-In-One-Month.html
That would be enough to force prices lower.
Merry Christmas from S Padre Island at 75 Degrees F.
Very white this morning in Bend Oregon.
So markets look down 14ish% YTD. Still 4 days to worsen that or better that.
You know, there is no law of the universe that says markets can’t be down more than 10% this year, and next year, and the next, and the next for 10 years or so. Never done that before? So what? Never printed 25% of GDP before. Never API 40.6 WTI before. After 10 yrs, scarce oil, scarce life.
You have that right. The world is full of surprises.
And, I do not see QE, again. Different folks in the Fed. So, banks will lose big time on easy money, and getting more is not going to be easy like last time. Over the past two years, I have been getting endless calls and letters wanting to loan me money. Bet that slows down.
And, because bear markets have a tendency to stick around for a few years, oil supply may put a blanket on improvement. So it could be possible for continued decline, rather than a rebound. Or, one real big final decline. No end to the possibilities.
One, I really see as a possibility, is another export ban. Think about it. Gasoline prices go up due to a shortage. We could be in a recession with stagflation. The public, and the illiterate congress would not be able to comprehend API. We are just exporting oil, when gas prices are high. In a way, they would be right. Think how that would affect 2.5 million bpd pipeline expansions, and extra shipping improvements.
Or, we could elect another flawed icon for President-Elon. Who would promise a Tesla for every family, or a free trip to Mars.
Ok, this is fun, but pointless.
Wrong govts.
Think in terms of the big SWFs. It is they that seek action.
As for quoting indices vs their histories, this sounds like a good thing. Just be sure that you quote an index that has the same companies in it as it did historically. The Dow with Apple will be difficult data to find for 1960. But you can find GE in it for then.
Ever notice they don’t add a company that is failing? And never remove one that is doing well? Similarly we should only quote WTI 39.6 API price. Difficult data to find.
SWFs? Meaning.
Sovereign Wealth Fund
Sovereign Wealth Funds . These are major players in the stock market .SWF of Saudi alone is 750 Billion . Many other oil exporters like Qatar,Kuwait,UAE ,Norway etc with plus 100 billion each in play .
Thanks.
Nothing magical about 39.6 vs 40.5 API. In fact withe the older refineries circa 1965, 40.5 would be fine. Refineries have been retooled for heavier crude, if necessary they could be retooled again, but it’s more efficient to ship the oil to refineries designed to handle lighter oil.
https://www.cnbc.com/2018/12/24/whats-a-bear-market-and-how-long-do-they-usually-last-.html
Quick turnaround of the market from this point has no historical precedence. Although, if it does not go down much more, 3 to 5 months is possible.
It will probably have a sharp rebound before the next wave of declines.
Nobody can predict what the market will do in the future. That is fairly obvious.
Have you heard of technical analysis. How do you think people make money from the markets.
That would be the 2/20 slime
Dow is up 3+% today. Ehhmmm Dennis….
Iron Mike,
If you think you know what’s going to happen, place your bets.
All I am saying is that it is unlikely someone can guess correctly on a regular basis. Basically on any day one could claim it will go up or down the following day, it’s essentially a coin flip on whether you will be correct.
Note a “big move up” says very little, you have to be specific. The market will go up by more than 3% or down by more than 3% would be a better statement that can be judged to be correct or incorrect.
I can say with 100% certainty that I do not know which way markets will move on any given day.
After 1987 crash it took about 21 months for market to reach the previous high, so yes stock market can get overheated (as it was this year) can correct and then gradually resumes growth. Note for the real economy growth rate of GDP was 4.2 in 1988 and 3.7 % in 1989, the real economy was affected very little by the crash in 1987 (the biggest monthly drop in percentage terms of the DJIA at 26% in October 1987).
Yeah, there was a real delayed reaction on that one, the S&Ls tubed the end of 1989, and we wound up with negative GDP by 1990.
http://rooseveltinstitute.org/unlearned-lesson-1987-crash/
The stock market bust led to a bubble burst of property, which led to the S&L downfall. I didn’t come up with that, it’s in the article.
I mean, think about it. By this time, there may be trillions gone, is that not going to show up somewhere, eventually? If there was no borrowed money, and all were cash investments, it may be contained just to the market. But, that’s never the case. The market did not go up from 16 to 26, because the GDP provided the money, it was borrowed, somewhere. Or, leveraged, if that makes more sense.
GuyM,
Money can move from bonds to stocks, from real property sold to stocks and from other stock markets (Europe, Asia, South America, etc). Some may also be borrowed on Margin and of course that can lead to big drops as margin calls lead to further selling. It might show up eventually, sometimes it does and sometimes it doesn’t. Consider the case where most people buy and hold, market increases from 16 to 26, simply based on market action on the margins, then falls back to 16, those that bought at 16 would be back to no gain and might feel a bit poorer, but if they weren’t paying attention, they’d figure the market didn’t do very well for the past couple of years, which happens from time to time. That’s how I look at it, the market was over valued, now it may be under valued, not a big deal in the grand scheme.
No, not for us, but maybe for the guy who was a millionaire, yesterday, but is ducking Guido, now; it’s a pretty big thing. The only reason I mention it, is that it obviously is having some effect on oil prices, temporarily.
GuyM,
Seems the oil price fall is due to other factors from my perspective, though there may be a bit of spurious correlation.
The other factors are misreading supply and demand, but the effect of the stock market is definitely spurious.
DC,
You know, I can’t help thinking that the US and Canada, working in a fair and sensible partnership, could be as close to self-sufficient as anywhere in the world.
Synapsid,
Perhaps for the short term with better pipeline access from Canada, not sure if oil sands could be ramped up enough to cover the eventual decline of US tight oil, the US imports about 2 Mb/d on a net import basis (Sept 2018) crude and products, about 3 Mb/d of this is from Canada, so you are correct at present, and potentially this could work until 2025 to 2030.
DC,
I was referring to resources, including us humans, and ability to develop and make use of them responsibly not just to petroleum. A key first part would be to stop wasting human potential, water, and soil. A parallel endeavour would be to stop using the atmosphere as a dumping ground. Canada and the US have the capacities, social and technical, to do this but nothing like the will.
I don’t expect to see anything of the kind actually come about.
Synapsid,
Totally missed what you were getting at, I agree, but the problem is global and will require global cooperation, unfortunately even less likely, though perhaps rising fossil fuel prices may lead to a move in the appropriate direction, HVDC interconnects between US and Canada would help, I think quite a bit of hydropower is already exported to the US from Canada, perhaps as solar ramps up in the US southwest, excess power can be exported to Canada with an interconnect in BC/Washington. HVDC transmission between North and South America would also make sense as solar takes off, as does an Africa Europe connection.
Nice summation of the incompetence of Venezuela’s Oil Minister Quevedo. He is set to be OPEC’s minister next year. The misery continues, with 10% of the population having fled in the last three years and who knows how many dead from lack of basic services. Oil revenue down 75% in six years and falling.
https://www.reuters.com/article/us-venezuela-pdvsa-military-specialrepor/special-report-oil-output-goes-awol-in-venezuela-as-soldiers-run-pdvsa-idUSKCN1OP0RZ
https://www.oilandgasinvestor.com/us-shale-producers-hit-brakes-2019-spending-1726676
And capex is just begun to be cut. Another month at the current price, and it will go down more. Flat production could be just a dream. EIA projections can’t hide from this kind of news, and it will become more prevalent.
Of course, their inane drilling productivity report will look better with less rigs.
When the ill planned pipelines come online, they will struggle for completions again with a dearth of crews. Really, really bad timing for a price decrease.
GuyM,
If Permian Basin horizontal oil well completion rates go below 300, output will decline, scenario below shows one possibility if oil prices remain flat through Dec 2019. In this scenario the Permian horizontal oil well completion rate falls from 415 wells per month in Oct 2018 to 230 wells per month in August 2019. Peak delayed to 2035, peak output about 6000 kb/d.
Oh, based on last week, I would say flat. If the market goes up 200 points today, it is far from recovering. Trend is down. Depends on how the next month looks. However, after a good start, the market is already down again. And, now it’s up again, slightly. Seen this before. Confucious say, never attempt to catch a falling knife. Hang on to your hats.
At least oil is up slightly. And commodities are where the smart money should go.
With the above scenario for Permian and a revision to my Eagle Ford Scenario (secondary peak in 2022 at about 1400 kb/d), a new US LTO scenario (with Bakken, Niobrara, and rest of US LTO unchanged from my previous scenario) has a plateau from 2025 to 2035 at about 7300 kb/d with output increasing from 6500 kb/d at the end of 2018 to 7400 kb/d in 2033, only an average increase of 60 kb/d each year, much less than the 1000 kb/d increases often bandied about.
There will be a plateau in there, but I have serious doubts it will last that long. Tier ones and twos won’t last that long.
different plays peak at different times. Notice the peak is much lower than my previous scenario (9.2 Mb/d) due to lower Permian completion rate. In any case, just showing how the revised Permian scenario affects the US model, could be we get a higher sharper peak, though due to pipeline and port constraints the lower completion rate for a longer plateau would be more sensible.
Lack of industry coordination makes this unlikely.
Looks like a good model.
GuyM,
No guess on short term direction of stock market, long term my guess is up.
Market timing is a game for those who like to be parted from their money. 🙂
Buy and hold (Vanguard Total Stock Market Index) is my strategy.
Buy and hold is the only really good strategy, especially in funds. If it goes way down, it will always come back up again. Historically. Nothing is absolute.
agree
Well, any guess where the poo is going next? I’ve been completely blind sided by this drop. Inventories are actually relatively low in the US….
Are we going up or down?
The fundamentals supporting a good price are there, and improving every day. It’s the investors and stock market that’s gone haywire. They can’t eventually pull their head of their posterior, because they lost their posterior in the market.
Sean,
Nobody knows, my guess is up to $70/b by Sept 2019, I am consistently wrong about oil prices so do not consider this investment advice, consult an oracle for that. 🙂
Where is Karnak, when you need him?
Gold hit a low August 16 and has been growing since. The ratio gold/silver is also going up. There is growing fear in the markets. This has just started. I’ve been waiting for this to happen since 2014 when oil price collapsed. These things take their time.
It looks like we are going to hit a Kondratieff winter with massive debt repudiation, and a monetary crisis. But the real problem is Peak Oil. No recovery is possible in a declining energy environment. The most likely outcome is industrial civilization collapse as angry mobs leave governments powerless to react. There are symptoms everywhere. Extremism and populism on the rise everywhere. World leaders focusing on the wrong problem (CO2 production) when we are reaching Peak Oil and should be developing nuclear energy like there’s no tomorrow. It is not going to be pretty.
So to keep everyone happy, here are some averages for the all wells EFS, Bakken and Permian. Decided to exclude Niobrara, oil numbers are much lower.
2015 Q3 36 months of production: 162,635 BO most recent monthly rate 58.6 BOPD
2016 Q3 24 months of production: 169,078 BO most recent monthly rate 103.5 BOPD
2017 Q3 12 months of production: 136,850 BO most recent monthly rate 213.1 BOPD
For 2015 162,635 x .80 x $45 = $5,854,860
7% severance $409,840
$5 per BO LOE $650,540
$2 per BO G & A $260,216
Net = $4,534,264
I lowered the costs some to make the economics more favorable from the standpoint of those who love the sub $2 gasoline. Might be ok to look at 10K and 10Q if anyone would like to plug in different cost estimates.
The 2016 wells described above are at $4,713,894 per well after 24 months.
The 2017 wells described above are at $3,815,378 per well after 12 months.
Of course, I was just trying to make a point that wells drilled in 2015 that had seen 3 years of weak (and one year of average) oil prices were going to be total losers that would not payout within any reasonable time horizon, if at all.
To continue, there is no mention in these numbers of how much land costs. I seem to recall many Permian players paying $15-60K per acre. So a two mile DSU would cost $19.2 million to $76.8 million. I just ignored land costs completely.
Further, each of these companies has interest expense. One can go to the 10K’s and 10Q’s to see how much that is costing each per BOE. I just ignored interest expense too.
These wells are a lousy investment at $50 WTI. Only gets worse as the oil price sinks.
I think this all started because maybe GuyM was actually giving some credence to EOG guidance. I don’t blame GuyM, or anyone else, for believing what the companies say.
I do argue until we see some well payout data (hard data, not power point variety) from these companies, we should assume the wells generally do not payout within 36 months, or even 60 months.
I do agree, wells have residual value after 36 and 60 months. I also agree that much higher oil prices make this business a money maker. Finally, I agree the wells have improved every year, although it is looking like 2016 might have been the high water mark, with later wells not moving the needle much higher.
Time for me to exit for awhile. I was just trying to remind people of the numbers. I think most of the investing public has figured it out, based on where these companies are trading since oil dumped again.
Thanks shallow sand.
Have a restful holiday season–well restful as can be anyway.
Thanks shallow sand,
For the average 2016 Permian well we can use the Arps hyperbolic to approximate where
q(t)=Q/(1+Db)^(1/b) and Q=26764, D=0.2842, and b=1, which simplifies to
q(t)=Q/(1+D) in this case where b=1 and q(t) is monthly output in barrels per month and I use mid month for t, that is t=0.5, 1.5, 2.5, … with t being months from first flow
For month t=0.5, q(t) should be multiplied by 0.35 to better approximate actual well output. This is justified because on average the first month is usually less than 30 days of output, probably an average of around 15 days (and the hyperbolic is not a perfect fit over the first few months).
breakeven wellhead price is $62.86/b with royalties and taxes combined at 32% and real well cost at 9.5 million dollars and operating costs at $2.3/b plus fixed monthly cost of $15,000 per month (fund for future downhole maintenance), well pays out at 60 months and annual discount rate is 10.95% (nominal rate), the real discount rate is 8.45% if the annual inflation rate averages 2.5%/year. cumulative output is 212 kb at 36 months, 257 kb at 60 months, and 370 kb at end of well life at 211 months and 12.28 b/d output. Spreadsheet with calculations below (where actual data from shale profile is used for first 18 months of well life with Arps hyperbolic assumed for future months from month 18.5 to month 122.5, after that exponential decline is assumed at 9.12% per year (0.7935% per month). Spreadsheet at link below for breakeven calculation for average Permian basin well with first flow in 2016.
https://drive.google.com/file/d/1dfTb18PKbYeEvYhBnZPeVOqMdVp_NSpz/view?usp=sharing
I agree $45/b or anything less than $62.86/b for the Permian basin is a money losing proposition,
If we want to assume a 0% ROI, we can get down to $53.64/b for a breakeven price at the wellhead, but why complete wells and take that risk when you will not make any money? Perhaps all these companies believe they will drill above average wells. 🙂
Thank you Dennis, this is very helpful. Your numbers confirm why US shale production will be heading down shortly if oil prices remain at these levels. What’s of interest to me is that as shale gets a bigger pie of the market oil production becomes increasingly more elastic. In the old days it took the industry 5 years to bring a project online and they would produce it at completion regardless of price, in that world OPEC was the only stabilizer force in town. This has changed now with the arrival of shale, many people think OPEC will have to extend or deepen the cuts in April, I disagree, since by April it will become apparent that US shale wont be growing as the expected 1m+ rate in 2019, aka shale will be the force doing the re-balancing in 2H-2019 and not OPEC. Going forward we will increasingly see this 6 months interplay between OPEC and shale, a combination of market forces and political forces operating in tandem to put a $45/$50 floor under oil prices. As an oil investor, I like this built-in downside protection, yes it comes at the price of an upper price cap, but most of the Canadian companies I focus on make a great return at $50+ WTI, hence any price above that is just windfall profit.
Joseph,
One thing to consider is the relentless increase in World demand for oil at about 800 kb/d higher average consumption each year on average from 1982 to 2017 (World C+C EIA data). US tight oil has provided about 2/3 of the increase in World C+C output since 2010, at some point OPEC and Russia will no longer be able to offset declining output in many parts of the World as well as fill the gap left by more slowly growing US tight oil output, at that point oil prices(12 month average price for Brent) start to rise above $75/b, probably around 2022 to 2023 as US tight oil output reaches a plateau and OPEC, Canada, and Brazil will need to both offset declines in the rest of the World as well as increase World C+C output by 800 kb/d. My suspicion is that this can no longer be accomplished beyond 2025, even with oil prices rising above $120/b and World C+C output starts to decline at 1 to 2% per year with oil prices continuing to rise to over $150/b, until supply and demand come into balance as we transition to EVs, plugin hybrids, and more efficient ICEVs, as well as drive less, car pool, use public transport, bike, walk, move closer to job and shopping, etc. High prices can have a powerful effect (consider 1979 to 1986) on the efficiency with which a product is used.
Good analysis, and thanks, again. No amount of increased productivity could make them profitable at $45, especially not $37, or $16. The clock is ticking. Yeah, EOG has gone from over $120 to $87. Hopefully, they will act conservatively, and hold off drilling ours until price picks up.
“World leaders focusing on the wrong problem (CO2 production) when we are reaching Peak Oil ”
Carlos, imagine what would happen if climate change wouldn’t exist. Now at least something (EV’s, wind, solar) is done to mitigate the consequences of PO, though it is not five minutes before twelve, but past twelve o’clock already for this. On the other hand, various managements of car brands, f.e. Volvo, are aware of PO.
Both problems, climate change and PO, have to be tackled in more or less the same way. After having read the recent posts about the outcomes of climate change now and, most probably inevitable 2-3 degrees increase in the future (feedback processes !!), I don’t know what is worse, climate change or PO. Definitely both are very troublesome.
Han, the only workable solution to deliver the energy we need 24/7/12 is nuclear. Some prudent countries with long-term vision are going that way. Most of the West is not, or even dismantling what nuclear they have got.
When our energy fails we will convert any tree we can get into CO2. During the Greek crisis they cut down the trees in the parks to keep warm in winter.
“Most of the West is not, or even dismantling what nuclear they have got.”
IIRC Germany changed opinion after the earthquake/tsunami nuclear plant disastre in Japan and this is strange because the chance of that happening in Germany is almost zero. They must have become afraid of accidents in general. Nuclear waste management has its own issues
Carlos.
I wouldn’t vote for nuclear energy.
Even if it was much less expensive.
I don’t trust humans to be impeccable, much less trustworthy.
The nuclear power options assumes both of those traits.
False assumption, as much as we’d like to pretend its not so.
Hickory,
The way to face fears is through statistics. Plenty of nuclear plants are over 50 years old and have delivered huge amounts of energy without a serious incident. Casualties in the nuclear industry are extremely rare. By contrast casualties among crews maintaining and repairing wind turbines and installing and repairing rooftop PV panels are frequent. Would you rather be a guy in charge of greasing wind turbines or work in a nuclear plant? Perhaps those lives lost are a fair price to have an ideologically correct energy that only works when the wind blows or the sun shines.
Fear is a choice.
You can call it fear. I’ll call it wisdom.
The two big meltdowns of commercial reactors were both because of decisions made by humans,
in the design and/or operation,
that were faulty.
I’d prefer it be deployed in your backyard, not mine.
I’d vote that way.
A lot more of that wisdom and we would still be living in caves.
Every year 1,250,000 people die in road traffic accidents. Are you proposing to ban vehicles or to make them safer?
https://en.wikipedia.org/wiki/List_of_countries_by_traffic-related_death_rate
“Would you rather be a guy in charge of greasing wind turbines or work in a nuclear plant?”
Carlos, is greasing again after some time still necessary ? I know from bikes that since many years ago the crankshaft doesn’t have to be regreased.
The older nuclear plants are risky, the new ones have close to zero risk for meltdown. Of course, don’t build them in earthquake sensitive areas.
Still always will exist the nuclear waste management issue. If you have a thousand nuclear plants in the world, you get quite a lot of waste. I wrote thousand, how many do you think would be needed ?
“I don’t trust humans to be impeccable, much less trustworthy.
The nuclear power options assumes both of those traits.”
Hickory, evil humans will develop nuclear bombs anyway. Illegal transportations of radioactive elements are taking place for many years already. The risk would increase, that’s what can be stated.
Oh dear, you won’t be comparing a bicycle to a wind turbine, will you?
Planned maintenance is usually once a year, to that you must add repairs.
This is a dangerous high altitude work with a significant number of wounded and casualties.
https://aemstatic-ww1.azureedge.net/content/dam/pe/print-articles/2014/01/f5-photo1-1401pe.jpg
“Most wind farms are in remote areas, and workers are faced with making repairs while up to 330 feet in the air once at the site. Also unlike natural gas-fired or coal-fired plants, operators can expect to repeat this process multiple times because of the comparatively small capacity of wind turbines.
…
Many different parts of the wind turbine need to be lubrication with a range of lubricants greases to gearbox fluids to hydraulic oils.
…
The gearbox is not the only part of the turbine that requires lubrication, however. The generator bearings and blade bearings also require lubrication, and there are lubrication points on the blades. Wind tower blades have bearings that will essentially feather the blade so operators can optimize the blade angle to match wind speed. The main shaft bearing and yaw and pitch drives also require lubrication.”
https://www.power-eng.com/articles/print/volume-117/issue-5/features/wind-turbine-lubrication-and-maintenance-protecting-investments-.html
But as long as it is just workers who do the dying, we can ignore the issue and keep opposing nuclear energy that doesn’t kill anybody. 50 years of nuclear energy in my country and not a single casualty, wind energy has already killed more than ten in the last decade. It is difficult to get good statistics as it is not fashionable to criticize renewables.
A picture of two windfarm engineers moments before they died in a wind turbine accident.
https://external-preview.redd.it/nQCXq3NNf5sZibDCI3Q0CF-QKz6EPnteGY_6TO6RRQg.jpg?auto=webp&s=1c8cfd8ce55bc5aaff8b2510f91e0b24d36fbd2e
One of them jumped and was found on the ground the other was found dead by firefighters after the fire died out.
https://www.reddit.com/r/pics/comments/1q0sca/last_week_two_engineers_died_when_the_windmill/
They should be made martyrs of the anti-nuclear movement.
I think you meant martyrs of the anti-wind movement Carlos. Go for it.
Seems to be your passion.
No, no. It is you who rejects nuclear against all evidence. My passion is having plenty of cheap energy, because it is a strict necessity for our industrial civilization that keeps us alive.
Carlos, if your primary interest is inexpensive energy you will like this source of information- Lazard Levelized Cost of Energy (version 12, Nov 2018). Look at the chart on page 2 for comparison of Unsubsidized analysis.
This is straight up data from a respected source. You may be surprised what you learn.
https://www.lazard.com/media/450784/lazards-levelized-cost-of-energy-version-120-vfinal.pdf
Nuclear energy is not one of the inexpensive options. Not even close.
“Oh dear, you won’t be comparing a bicycle to a wind turbine, will you?“
No, but if the moving parts are closed watertight… The reason will be that metal particles mix with the grease, like f.e. in CE from cars. Much bigger forces than in bicycle crankshafts. Thank you for the info regarding maintenance of wind turbines !
Han Neumann Wrote:
“The older nuclear plants are risky, the new ones have close to zero risk for meltdown. Of course, don’t build them in earthquake sensitive areas.”
It’s irrelevant since investors won’t back new plants. Recall that one new plant under construction has cost overruns about $20 billion USD. Realistically every square mile of the earth is subject to earthquakes, just some regions.
Nuclear also won’t solve all of world’s mounting problems which dwarf future energy issues: Debt, Demographics, Non energy resource depletion. If tomorrow a quantum leap in energy tech was developed that provide everyone with cheap & clean energy its still not going to solve the other major issue.
Venezuela
population 2015 31.155 million
2016 31.568 million
2017 31.977 million
2018 32.38 million
Net migration per year (a lot of folks move into Ven for the healthcare) about -12,000/yr. X3 =-36K and that’s about 1/1000 pop.
There has been no countrywide census taken in Venezuela in decades. Those numbers you quote are obviously estimates. Estimates based on past growth numbers. Obviously Venezuela’s population is now in decline. Those numbers you quote are not worth a bucket of warm spit.
Yes PDVSA hasn’t even released financial documents for the past two years, and doesn’t have a sound number on how many employees it has (somewhere between 80-100K it says). And that is the most organized organization in Venezuela. The thing about immigrants is they are headed to countries that aren’t in free fall (mostly Brazil and Columbia) so counting them is not that difficult. The collapse of Venezuela is not “fake news” like you are pretending, Watcher. It’s good to question the main trope, but there’s also a time to bag it when the evidence is overwhelming.
https://un-denial.com/2018/12/19/by-antonio-turiel-the-sunset-of-oil-2018-edition/
Dennis what’s your opinion on this ? The link posted in the webpage is in Spanish and i couldn’t translate it.
Iron Mike,
I didn’t try to translate and my Spanish is not good, looking at the charts it seems the focus is on net energy which is problematic in my view, it is a nice idea in principle, but in practice where the boundries are drawn vary from author to author. Easier to simply consider oil output by mass (rather than volume) as this approximates total energy fairly well, as to “net energy”, much of the extra energy input into the production, refining, and distribution of petroleum and petroleum products is provided by sources of energy that are not oil (coal, natural gas, nuclear, and renewable energy used to produce electricity).
If one is going to use a net energy analysis it must be done on a society wide basis for all forms of energy to be of any use, pulling just oil out of the many forms of energy society uses makes little sense and is a waste of effort in my view. The charts up to “Oil Raw Energy” look fairly reasonable. I usually leave NGL out of my analyses and focus on C+C in barrels.
Thanks Dennis. Makes sense.
On another note, I think I read a while back in, i think it possible could have been the Hirsch report. The estimated URR of the earth is around 8 Tb. Have you read any documents regarding the estimated URR of the earth, regardless of technical or economic recovery.
Iron Mike,
There are many different estimates, usually URR is equivalent to ERR, as oil that is not profitable to produce will not be produced. My guess is that if we ignore NGL and natural gas, that for crude plus condensate the URR will be 3 to 4 trillion barrels, my best guess is about 3.5 trillion barrels, if the energy transition is fairly slow, a rapid transition (similar to what Tony Seba foresees), then it might be 3 trillion barrels and perhaps even 2.5 trillion barrels (about 1400 Gb will have been produced from 1870 to the end of 2018), so this leaves 1100 to 2600 Gb left to produce (if my estimates are correct).
If you are talking about original oil in place(OOIP), basically about 35% of OOIP gets produced on average in conventional reservoirs, for tight oil it is about 3 to 5%, I am not sure about oil sands. My mean estimate has about 500 Gb produced from tight oil and oil sands and 3000 Gb from “conventional reservoirs” (not oil sands in Canada or Venezuela and not light tight oil), so for that piece OOIP would be 8500 Gb, for tight oil OOIP would be 2500 Gb, and for oil sands if we assume a recovery factor of 15%, and URR of 400 Gb, then the OOIP would be about 2700 Gb. So total Earth OOIP would be about 14 trillion barrels, for this to be the URR, the oil price would need to rise to about one billion dollars per barrel 🙂
Some good sources are
https://www.resilience.org/stories/2010-07-20/projection-world-fossil-fuel-production-supply-and-demand-interactions-paper-exce/
https://www.researchgate.net/publication/267870440_Projection_of_world_fossil_fuels_by_country
https://royalsocietypublishing.org/doi/full/10.1098/rsta.2013.0179
Thanks Dennis, interesting stuff.
One big unknown in these estimates are the price that people can afford for the energy. Will it be enough to extract it.
The cost of extraction will continue to go up over time, likely. What percent of remaining recoverable C+C will people spend capital on to go get?
And that depends on many variables, like- the general level of prosperity, energy alternatives, extraction technology advances, and perhaps even global warming [via carbon disincentives].
For example, in a country that couldn’t create debt for free like the USA, the tight oil and gas would still be underground. Speaking of that, I thought ‘there was no free lunch’ ?
Hickory,
Agree, many variables all of which interact in complex ways make predictions difficult. My guess is that the price of Brent oil is unlikely to rise above $250/b in 2017$, after 2035 oil prices are likely to fall as EVs, wind and solar make oil nearly obsolete. Depending on the speed that the transition to alternatives occurs, World C+C URR is either 2500 Gb (fast transition) or 4000 Gb (slow transition), I will revise my best guess to the mid-point of 3250 Gb (from my earlier guess of 3500 Gb) and note that this does not include NGL or biofuels so cannot be compared with BP Statistics (includes NGL) or IEA estimates (which includes all liquid fuels, NGL+biofuels).
US has stopped QE and has started to unwind the 4.5T Fed balance sheet that has accumulated by Jan 2015, lately at 34B per month (past 11 months). So money supply is tightening and interest rates should rise.
It is strange terminology.
There is a very big difference between
Ultimately Recovered Resource and
Ultimately Recoverable Resource
The chaos of human affairs may prevent a large percentage of ‘recoverable’ resource from getting out of the ground.
Such as in Venezuela perhaps.
Hickory,
Good point, my URR estimates are oil that is extracted in the scenario so “recovered” is a better term than recoverable, I think generally the idea is if it can be recovered profitably then it is “recoverable” and that if it is recoverable by that definition, then it will be recovered.
There is a lot of resource in Canadian oil sands and Orinoco Belt that will never be profitable to extract and thus would not be considered as URR in my opinion.
Hi Dennis,
It is difficult to rule out some kind of price control if supply of oil gets to scarce in the not too distant future. Limited supply for private consumption or some kind of intervention to keep a lid of too high prices. It does not make sense in the way capitalism is supposed to work in theory, but may very well be the way governments intervene in markets. This latest oil price fall has nothing to do with fundamentals in the oil markets in my opinion. It smells manipulation of some sort, but it is difficult to prove anything at all.
When it comes to the FED, can they not reverse policy when they want? I think they can. It means QE again and lowered interest rates to stimulate the economy once again. I just think it will be as a response to a real crisis a bit further down the road.
All countries would have to participate in price controls, a big dream. Otherwise, the highest bidder walks away with the next barrel produced.
That said, it would be preferable to have a ceiling and a floor as price controls, now. The floor would enable all oil that can be produced now, the ability to do so. At this price, opec can’t even sustain forever. We would still be screwed, anyway. But, why speed the ship up to hit the iceberg?
But, no, we have to live on fairy tales by EIA, IEA, and OPEC.
Kolbeinh,
Yes the Fed can always reverse policy, the current policy of winding down the big Fed balance sheet will give them room to use that policy of QE again in the future if there is a severe financial crisis.
On price controls, that doesn’t work very well in practice and simply results in long lines waiting for a product that is in short supply, markets work much better in my view. No they are not perfect, just the best system discovered so far, especially when properly regulated to account for externalities(pollution) and public goods(transportation system).
“, after 2035 oil prices are likely to fall as EVs, wind and solar make oil nearly obsolete. ”
Dennis, I think after 2035 still a lot of oil will be used in the transportation sector. A lot of oil after 2035 is recoverable and will be recovered.
A question: the wind+solar installed in 2018, how many (imaginary) cities with, let’s say, one million habitants (90% of them with low income) it can provide with electricity, included that needed for EV’s ?
Han,
Wind and solar output has been growing quite rapidly, as coal, oil and natural gas deplete the marginal (most expensive to produce) unit of fossil fuel energy will become more expensive than wind and solar (per watt of electricity produced) and the exponential growth of wind wind solar may continue (for the past 13 years the rate of growth has been about 19% per year for wind and solar electricity production), this suggests a doubling of output every 4 years.
EVs will be cheaper than ICEVs (total cost of operation) as oil depletes and oil prices rise, some oil may continue to be produced, but tight oil, oil sands, deep water, and Arctic oil will all be too costly to produce as demand for oil drops as EVs take over the market, perhaps this does not happen by 2035, but definitely by 2040 demand for oil at $100/b or more will be less than supply and oil prices will eventually fall to under $60/b (in 2017$), not much oil will be profitable to produce at those prices and prices may continue to fall due to over supply which will make a lot of conventional oil production unprofitable. Oil will be produced, just much less of it (maybe 5 to 10 Mb/d for World output and it will gradually fall as ICEVs become as common for transportation as horses are today.
“Oil will be produced, just much less of it (maybe 5 to 10 Mb/d for World output and it will gradually fall as ICEVs become as common for transportation as horses are today.“
Dennis, that amount of oil will be necessary for only the avation industry in 2030.
https://news.thomasnet.com/imt/2012/10/02/world-aviation-industry-tries-to-overcome-green-fuel-hurdles
“and the exponential growth of wind solar may continue (for the past 13 years the rate of growth has been about 19% per year for wind and solar electricity production), this suggests a doubling of output every 4 years.”
After a few more doublings I expect it to become very difficult to double again in 4 years, as the most favourable locations, especially for wind turbines, are occupied. Not impossible, but there will be more issues than there are now already
Han,
That is wind and solar, they won’t grow at equal rates and solar costs have been dropping at 21% annually from 2010 to 2017 in the US. As prices increase there will be slower or no growth in the airline industry, they will also increase efficiency.
I translated the article, quite an interesting one. As more and more inputs are needed to produce and refine liquid fuels the fossil fuel system will be even more self supporting and give less net value than it does now. So instead of 40 percent additional energy needed to produce a gallon of gasoline or diesel, it will rise past 60 percent.
No problem though because by 2040 we won’t need very much oil production. Mostly for chemicals and that will be descending. Also for some niche areas.
Thanks GF. Though i disagree with your final paragraph, I acknowledge i don’t know the future and you may be right.
Just running the current trends forward. Take those and $2.00 and get yourself a coffee. The future is all possibilities and potentials. It’s our will and capabilities guided by the harsh realities of nature. Nature is quickly changing so who really knows?
If what Dennis proposed about natural gas is true, we might see a mad dash for renewable energy in the mid 20’s. Could happen. Energy is there, but will we still have coffee?
Gone Fishing,
I do agree with your second paragraph.
I was looking at US natural Gas only, for the World there might be quite a bit, not as much estimation of the natural gas resource has been done.
Steve Mohr has don a bit of work on coal, oil, and natural gas, and Laherrere has done a bunch of work on natural gas as well. My hope is that it will be more expensive than renewables as it depletes and will mostly be used as a backup to wind, solar, hydro, geothermal, and nuclear after 2030 or so, hopefully “wind gas”, batteries, biofuels, and vehicle to grid, along with demand side electricity pricing and thermal storage of excess wind and solar power will quickly replace the backup role that might be played by natural gas during the transition and most of the natural gas will be left in the ground.
Economics is the key, if it’s more expensive than alternatives (even before considering externalities, including global warming) much of the natural gas that is technically recoverable will never become economically recoverable.
Note that all of these same arguments can also be applied to coal (except I doubt that will be chosen as backup as coal power is one of the least competitive electricity producers, though that may only be true in the US where natural gas prices are quite a bit lower than the World price level.)
I am concerned with the huge amount of work and money to replace the heating systems of many homes and businesses. Gas has become a mainstay of heating, as well as industrial processes, as it replaced oil heating.
People should start double insulating their homes now and planning for high prices or a shift to heat pumps and solar if possible.
I wonder when the warnings will go out, or if as usual there will be none and people will get trapped with expensive/useless systems.
Gone fishing,
Best case scenario is a gradual rise in the price of natural gas and people begin to look at alternative sources of heating. More insulation and better envelope seal is almost always a smart first step, though an energy audit by a trained professional is probably the best first step for the average homeowner.
Air source heat pumps are a good choice in many places in the US, for colder areas (near Canadian border and some high elevations) a ground source heat pump might be a better choice, though payback might not be quick unless natural gas or electricity rates are high.
I agree it will be expensive, but eventually heating systems get replaced, the insulating and sealing of homes is also expensive, but payback can be pretty quick.
Low interest loans from the government might be one way to push such a policy forward and might provide some economic stimulus when the next GFC arrives in 2030, though starting sooner would be better.
“I am concerned with the huge amount of work and money to replace the heating systems of many homes and businesses. Gas has become a mainstay of heating, as well as industrial processes, as it replaced oil heating.“
There you have it GF. I gave Holland as one example in the non-petroleum thread. Gas used there for heating and cooking. By the way, I don’t live there anymore, but in Curaçao most of the time, where I have solar panels. Almost everyone on this island uses gas in bottles for cooking.
Han,
Cost of gas will go up as the cost of wind and solar fall and old heating systems and stoves will get replaced as they break and are replaced over time.
The process is gradual, it happens over 10 to 20 years or so, sometimes more quickly as the price differential becomes large.
“As prices increase there will be slower or no growth in the airline industry, they will also increase efficiency.“
Dennis,
Yes, indeed. ‘Degrowth’ with falling prices if/when the world enters an economic depression. But for now, full speed ahead, Boeing seeing no bumps or turbulence on the horizon:
https://www.usatoday.com/story/travel/flights/todayinthesky/2018/09/11/china-need-7-690-new-airplanes-2037-boeing-predicts/1267497002/
https://www.youtube.com/watch?v=VQlbiQj_49o
Why you should love hydrocarbons. Another video from the charismatic Aussie lol
A few questions from a totally non expert :
looking at the Permian on gg maps is really “impressive”, for instance around :
https://www.google.com.br/maps/@31.7193926,-102.300091,10635m/data=!3m1!1e3
But I thought horizontal drilling was around 1 to 3km (3 to 10,000 feet), whereas the wells seems to be spaced more like 500 meters sometimes even less.
Is it because these are old wells ? Because some reach to different layers/depth ?
By the way, how many horizontal drills there is per vertical one ?
They have been drilling vertical conventional wells in the Permian for close to a hundred years. Most of that was for shallower wells in different formations. The single dots are vertical. The longer lines are horizontal. A lot of those single dots are not producing anymore, some are. Conventional production has dropped to under a million barrels a day, now. If prices picked up, you would see an increase. The EUR and time to pull it out are slower, now. I think I remember reading that there were over 30 different formations in the Permian. Non technical answer.
Good god. You zoom out and see that the whole area is a pincushion.
You zoom in and drop the little google guy in the road, and you see that it’s a shit hole.
Interesting stuff.
Pretty apt description. You see why I have serious doubts about some of the estimates of growth. That is, if you can find a road to drop down to.
I agree with Dennis that the correlation between Dow and oil prices is spurious, but it’s there. Dow continues its decline, and so does oil. I think you can count panic as having some correlation?
GuyM,
After I said there was no correlation I looked at the market and saw what you meant, could be the fear and greed matching up in both markets, they are not always in sync historically.
Platts US #rigcount for Dec 27 = 1,147, down 28 from last week). US permits = 599 (-1,131)
It can’t continue like this with a low oil price party for (very) much longer. The question is when and how fast/high oil prices will rise. I have a feeling it will rebound substantially already in January and have some sort of peak level in 6 months time. After that all bets are off and we either start a real recession or another doze of desperate crazy volatility in prices.
kolbeinh,
I expect a gradual rise in oil prices to $75/b by August or Sept, this might gradually bring on more tight oil output, but pipeline and port constraints will keep supply from increasing too much, if prices start to move above $75 or $80/b (if supply is inadequate) then OPEC+ will increase output to fill the gap, if they cannot meet demand at $80/b prices will continue to rise. It’s not clear to me that oil prices are likely to rise above $80/b. I think the market may balance at $70 to $80, with my best guess about $75/b through the end of 2019. The port constraints on the Gulf coast may not be alleviated until 2020 or 2021, so a Permian glut is not very likely unless they find a way to export the oil.
Yes, oil prices can be predicted maybe (are we talking WTI or Brent?). But I am following the NOK/USD closely and it was not far from 5,90-6.00 NOK/USD in 2011-2014, but now it is 8,70 NOK/USD. And our country is not even emerging markets and our currency was supposed to react up when oil price is up. Not happening anymore. Just another reminder of the strong dollar effect elsewhere. To be followed closely in Asia minus China maybe if interested. China make up their own rules. (I don’t even get why Euro is so strong at around 0%+ interest rate…bound to break??. Not following FED rate hikes upwards because of what?). Norwegian (state) bank wants to increase interest rates two notches next year; seems healthy. I still think FED in the US is the most forward looking of the central banks in the western world after all.
kolbeinh,
Brent price in my comment above, I consider Brent as the World oil price, so at $110/b it was 660 NOK/b in 2013, and now at $60/b it’s around 522 NOK/b, I don’t follow these exchange rates so that is very instructive and perhaps explains why investment in oil production in Norway may continue.
Maybe I can find this answer, but perhaps someone here already knows.
I think most of us here are pessimistic about the future of the planet and global economy.
When I go looking for predictions from economists, most are short term, assuring us that a recession isn’t on the immediate horizon.
What economists have created a complex forecasting tool that includes a variety of variables: scarcity of resources, cost of energy, declining number of transformative inventions, etc,?
Hi!
A short answer to something that deserves a long answer. I think there is much quality of life even if energy consumption is reduced very much per capita. So very much hope indeed. And (only my creative thinking ofc) is that the biggest energy challenges are not even in our generation. And I also think the economists are very much opportunists, and also governments are built on much of this it seems, and they will definitely keep pushing until the (etc. peak oil) wall is there. No wisdom to be gained really. The only wisdom is that you can not have 4 years of this “shit” in the oil business without it setting “shit” marks on the future ;-). The speed of energy transition ought to be debated a lot, but is not. I have a hunch it will be a hotter theme in the future.
I am fine with reduced energy consumption. In fact, I support slow growth, no growth, or even degrowth economics.
Mainstream economists don’t seem to acknowledge that there are constraints on growth. They foresee cycles, but no real discussions of potentially permanent downturns.
I think we are entering into some significant global challenges, but mostly what I am reading now is whether we’ll have a recession in 2019 or 2020. Yes, we have scientists warning about the impacts of global warming, but we don’t have mainstream economists speculating about a future with radically less consumption.
As people here note, what we hear is mostly about business as usual for decades to come.
I don’t think the last scentence will be true, it is too comforting.
I don’t think it is true, either. But mainstream economists don’t seem to bring up disruptions.
https://www.localfutures.org/growth-degrowth-brief-history/
Boomer II,
Book below by one of my economics professors, which looks interesting, but I have not read
https://www.worldcat.org/title/economics-the-environment-and-our-common-wealth/oclc/826022948/viewport
Also some research from Political Economy Research Institute
https://www.peri.umass.edu/component/jak2filter/?Itemid=115&ordering=xf4&category_id=4,5,6,7,9,14,15,16,17,21&searchword=clean%20energy&limitstart=0
One of the articles featured in the second link. Degrowth versus a Green Bew Deal.
The author is right to suggest that converting the world to green technology has more appeal than trying to stop fossil fuel consumption by shrinking economies.
“Through this approach, economies can continue to grow but economic growth becomes absolutely decoupled from fossil fuel consumption and the resulting generation of CO2 emissions. … By contrast, the degrowth approach relies primarily on contractions of economic activity—measured by GDP—as the means to cut fossil fuel consumption and CO2 emissions. But as Pollin points out and the degrowth model by leading proponent Peter Victor confirms, in this approach, considered on its own, CO2 emissions will only fall to the extent that GDP itself declines.”
https://www.peri.umass.edu/publication/item/1101-degrowth-vs-a-green-new-deal
CIA World Factbook, certainly a source that would have an agenda, lists Venezuela’s pop at
31.3 million for July 2017. The numbers above say end of 2017 and 31.9 million. Some dood above said 10% of pop had sashayed out over 3 yrs. That would be 3.2 million. CIA doesn’t see that.
Let’s scope other places:
CIA distasteful? You can go with Al Jazeera who declares 3 million left. Don’t say how many arrived. Did provide a picture of a handful of well fed guys. They do declare the 3 million is 1 in 12 of the pop. Which would make the pop 36 million.
The Guardian announced “nearly 2 million” have left since 2015. So less than 2 million is what, 6%? They are quoting some UN guy, who apparently has better sources than the CIA. Or Al Jazeera.
There is a report out that 2018’s homicide rate went down. Turned loose some murderers, if they agreed to out migrate. Shrewd.
I haven’t found ANY source for pop that quotes sub 30M. Of course, maybe they make babies as fast as people leave. Because, of course, they can’t eat.
Colombia has some data on the number of Venezuelans emigrating.
It is estimated that 0.8 to 1.5 million Venezuelans live outside Venezuela. The later number is probably more correct, as 762,000 live in Colombia alone, and 381,000 went through Colombia to other countries in 2018.
Neighboring countries are clearly affected by a tremendous increase in the number of Venezuelans crossing the borders legally or illegally. The most worrisome data is that polls consistently show 10% of Venezuelans declaring they are in the process of applying for migration permits, visas, and passports in a country where the administration is almost at a standstill.
https://www.bbc.com/mundo/noticias/2014/10/141023_venezuela_emigrar_dp
https://www.france24.com/es/20180525-infografia-migracion-venezolanos-colombia-cifras
Your mocking of the problems Venezuelans are going through is distasteful. I wish you don’t have to go through something similar to learn a little bit of empathy.
I mock your bias.
The day of the recent earthquake people were streaming out of buildings in the various videos. None looked like they were starving. Further, I recently heard that the whole populace had shaved their heads and body hair because lice had taken over. Didn’t see any bald guys in those videos, either. Didn’t see any bald guys among the well dressed and well fed folks in the videos of people walking to the border.
Why would you trust what you read in the media? Especially NYC based media. NYC banks are enraged at Venezuela’s refusal to borrow money from them. Their debt to GDP ratio is far below the US ratio. Banks make money from charging interest on loans, which they can’t collect if there is no borrowing from them.
The US banks sanction their use of SWIFT and dollars in general. So they pay Russian (and Chinese) loans in oil. This isn’t too terribly novel. North Korea has paid for its imports from China via coal.
https://www.aljazeera.com/news/2018/12/untreated-diseases-health-conditions-plague-venezuelan-migrants-181206180318922.html
The media was London and France not NYC linked by Carlos, above we have Aljazeera.
As to estimates of population and migration, often there are a variety of estimates.
People can flee violence and lack of opportunity and employment without necessarily starving.
Dennis-
You are basing your analysis on Western Media.
They are obviously missing something.
Maduro was to be gone years ago.
He is still there.
The Russians and Chinese have a different view–
I have numerous comrades who were there recently– but don’t have a clue what is happening now.
You have any comrades in country?
Hightrekker,
A friend is from Venezuela and still has family there, I actually don’t do any analysis of Venezuela, but agree much of what I hear is from NYT, WP, News Hour, and NPR.
Do you consider Aljezeera, Western Media?
I guess you need to watch better.
Debt to GDP is just an index and people cannot live from it.
We know the day to day situation in many places in Venezuela. Stores are half empty, and the government has made it illegal to take pictures of empty shelves. When people get sick they cannot get the medicines they need because they are not being imported. I guess they are not being traded for oil. And oil production is in free fall, so Venezuela’s economic capacity is decreasing fast. A very high inflation rate makes people’s savings disappear. We know they took three zeroes from note bills recently, so nobody is making that up. And it was just declared the most dangerous country in the world by Gallup with 40% of the people declaring having been robbed in 2017. With 23,000 violent deaths it has a rate of 81.4 violent deaths per 100,000 people. In Caracas the rate goes up to 112 violent deaths per 100,000 people, the second most dangerous city in the World. Apparently security forces are responsible for about one fifth of the deaths, and less than 25% of Venezuelans feel safe from their police.
So, I guess you don’t know what you are talking about.
https://elpais.com/internacional/2018/06/07/colombia/1528350157_004846.html
https://www.vanguardia.com/mundo/video-453930-venezuela-el-pais-mas-peligroso-de-america-latina-con-23047-muertes-violentas-en-
https://gazettereview.com/2018/06/gallup-poll-venezuela-dangerous-country-live/
https://www.independent.co.uk/news/world/americas/most-dangerous-country-venezuela-safe-south-america-gallup-a8388736.html
You’re gonna need to quote articles from Russia, Indian and Chinese media. That’s the majority of the world’s population.
Lemme have a look.
RT: https://www.rt.com/business/447438-venezuela-russia-gold-exploration/ That’s somewhat interesting. No real interest in gold myself, but big reserves there
As for what WE know, the answer is pretty much nothing. Measuring things in SWIFT dollars rather than land or oil or gold or population growth permits an enormous number of words to be written that say nothing. Quoting inflation (btw that data came from the opposition, not from the govt) is similarly meaningless. It’s measured in dollars, created from thin air by a central bank.
As for Gallup, who funded their measurement, and how was it taken? How can they have a sophisticated sample guaranteed not to derive from opposition bias?
We have been told they starve. The videos do not show starvation. Frankly the discussion ends there.
Russia and China are pouring money in. It’s not in the form of food and medicine.
Yeah, the discussion ends here. You’re a dickhead. Go live there if you like it so much and then you tell us first hand.
Apparently Watcher put his life savings in the Petromoneda and that isn’t working out too well for him. Not a good investment move, dood.
Russia is not really a big nation population wise (1.9% of World population).
India and China are clearly very large with 17.2% and 18% of World population respectively (about 35% combined.)
So a quote from India would be more important than Russia.
“zoom in and drop the little google guy in the road, and you see that it’s a shit hole.” Perhaps, but “Sometimes Worthless” ?
“American energy companies have spent billions of dollars in the past decade exploring for natural gas. But in parts of Texas and New Mexico, there is now so much of it that it is sometimes worthless. Some companies have even had to pay buyers to take it away.”
https://www.wsj.com/articles/in-booming-oilfield-natural-gas-can-be-free-11545906601
Interesting stuff indeed.
S Hole or just Sometimes Worthless? …. Non technical question.
Not really a shit hole, just, sparse and desolate. Gas is going to be a problem until 2020, when pipelines are completed. And oil prices are not doing that much greater than gas prices, considering the cost to produce. I already am guessing a 25% drop in completions for Dec, and worse in Jan on, until oil prices recover, somewhat. A drop in production in the Permian, is not impossible, and other shale fields will, no doubt, drop.
Guym,
There might be a bit of momentum which will take a few months to unwind.
I expect the following for monthly US tight oil increases in kb/d from Oct 2018 to Sept 2019:
130
115
100
85
70
60
50
40
30
20
10
0
710 kb/d, 12 month total Oct 2018 to Sept 2019.
This assumes Brent oil price remains under $70/b until June 2019.
Er, what’s your confidence level of that projection with current prices. Assuming WTI stays under $50 for a couple of months? And they will until EIA stops their BS projections.
And what do Brent oil prices have to do with US shale?
Guym,
There is a typical WTI Brent spread of about $10/b, so just subtract 10 from my Brent estimate, so fill in WTI under $60/b with the usual spreads for various US prices (there are many different prices all over the US and of course the spreads are not fixed, but I am not going to give 100 different prices).
I doubt WTI remains under $50/b beyond Feb 2019, it will be back to $60/b or higher by Memorial day at the latest.
If WTI remains under $50/b until June 2019, output would be lower than the prediction above, perhaps 300 kb/d higher than Oct 2018 levels by Sept 2019, it will go up by 490 kb/d over first 7 months and then decrease by 250 kb/d over the last 5 months for a total 12 month increase of 240 kb/d. Just a guess and we don’t know future oil prices or how these companies will react. Generally they produce more than the economics suggests that they should (in the case of 2015-2016).
Well I zoomed in and headed north, interested to see how close the frac pads came to civilization. I-20 seemed to be a dividing line, with the industrial stuff and drilling having free reign below and above the freeway the houses and neighborhoods start. I moved along up one of the streets and it was all small houses in disrepair, boarded windows here and there, burnt out little yards divided by chain link fences. Saw a dormitory facility for the oilfield workers that looked like a FEMA trailer park. Nice trucks outside but you live in a little box with a window unit, surrounded by a hurricane fence with barbed wire, when you’re not working. I sure as hell wouldn’t want to live in either place. So yeah, a shit hole.
It’s not a family location, except for the Midland/Odessa area, and not much drilling around there. So, if you had a family, they would stay there, and you mostly in a desolate area. Even though you may get 200k a year, living conditions suck. Hard to attract new employees.
And, the Delaware Basin is far, far away. Nothing around for miles and miles. Probably, what you looked at around I20 is mainstream, where most of the drilling in the Delaware is, would be the edge of the world.
My Dad was a tool pusher for years, so I lived in the Odessa area during the 50’s. It was not as nice then, as it is now. I loved to go to the main office with him, because it had air conditioning.
So, when all the talking heads project all the huge growth numbers, I just chuckle. Everyone had it tougher in the 50’s, but not many of the younger generation are going to put their families, or even themselves through what we went through.
We spent most of my early life without benefit of air conditioning, television, and listening mostly to Amos and Andy, or the Shadow on radio together in the living room. In some places out there, you are not far removed from that. Imagine no internet, Gasp! Or, having to use dial up, Horrors! Or, a single A/C unit in the window that won’t reach to the bedroom, Sweat! Now, try to tell your children that’s ok.
Weekly Petroleum Report from EIA is out with crude and petroleum stocks falling by 2.045 million barrels from the previous week.
https://www.eia.gov/petroleum/supply/weekly/
If we only consider crude oil, gasoline, distillate, jet fuel, and residual fuel oil stocks (ignoring propane/propylene, other oils, and unfinished oil products) the stock levels increased by 2.715 million barrels from the previous week.
In the chart below I show the weekly stocks of crude, gasoline, distillate fuel, jet fuel and residual fuel from 2008 to 2018, do you see the huge surge in stocks since Oct 2018?
Neither do I.
In fact since the week ending Oct 5, 2018 to the week ending Dec 21, 2018 the stock level for the crude plus products category I created in the chart (ignoring propane, unfinished oils, and other oils) has decreased by 3.8 million barrels.
The likely explanation is the huge increase in US C+C output from 11,475 kb/d in Sept 2018 to recent 4 week output average of 11,650 kb/d, an increase of 175 kb/d over 3 months or an average increase of about 58 kb/d each month for the past 3 months.
Note that the trend for World increases in C+C demand from 1982 to 2018 has been about 67 kb/d each month (800 kb/d per year), so the recent increase in US crude output for the past 3 months is not enough to meet World demand increases.
Note that the weekly output estimates are not very good and the stock level estimates are also not great, the increases in US tight oil output have been smaller each month since May 2018 and if that trend continues from Nov 2018 to Oct 2019, the next 12 months (Nov 2018 to Oct 2019) will only see US tight oil output increase by 710 kb/d. That is a likely scenario (and perhaps optimistic) if Brent oil prices remain under $70/b until July 2019.
The past four weeks, total stocks (including SPR) have decreased about 27 million, according to the weeklies, if you don’t look at just some stocks. At a slow time of year. That supply glut imagined by the talking heads is having some affect on inventories? Good thing OPEC cut, and shale production is stagnating. We should be looking good by June?
“We are entering an unprecedented period of uncertainty in oil markets”
-Fatih Birol
Common language translation is: “we are screwed”. But, things can always look up. Next year we get the General from Venezuela as OPEC.Head.
Seems to be true—
GuyM,
Higher prices may lead to more well completions if supplies are short and also may lead to OPEC increasing output if oil prices go above $80/b for Brent. From your perspective higher prices might be a good thing, it certainly would be good for the planet.
I would certainly like higher oil prices, I just don’t want things to get out of hand, which they are now. If we can get ludicrous prices to the low side, the same can happen the other way. Yeah, it will eventually balance out, but at what cost? I think prices should be between $80 and $100. Anything else would either hurt the economy or discourage production somewhere.
GuyM,
I am in rough agreement on your price range, I would say $70 to $90 makes sense for Brent from now to the end of 2019, probably your range (80 to 100) makes sense longer term, say 2020 to 2022, I think prices will rise to the 100 to 140 range as the peak approaches from 2023 to 2025 and I doubt the World economy will do well at sustained prices above $150/b, though at nominal price that might be ok in 2025, in 2017$ (I think in terms of real prices), the economy slows at $150/b or more in my view.
Well, your talking Brent, I’m talking WTI. You agree that the Permian is not breaking even at $63, so why is $70 Brent a good price to encourage production. I really don’t see where Brent pricing is relevant to North America pricing, which is were most of any increase will come from.
GuyM,
The Permian does break even at $63/b at the well head ($68/b WTI.)
The Oil Market is a World Market and Brent is now the defacto World price.
I gave a price range of 70 to 90 for Brent, for WTI that would be $60 to $80, implied is that there is volatility so I think $70+/-$10 for WTI and that is enough for profits in the Permian where wellhead prices would be $65/b (with a 10% ROI when well head price is $63/b). Perhaps prices will be higher, I have historically guessed too high on oil prices so your $90/b+/-10 for WTI is probably too high, and my $70/b guess might be low, maybe $70 to $90 for WTI would make sense, best guess of $80/b, seems most of the oil companies were doing fairly well when WTI was around $70/b (May to Oct 2018), so they would be fine at WTI from $70-$90, and note that from Nov 2017 to Nov 2018 the monthly WTI spot price was $57/b to $71/b and US tight oil output increased strongly over that period at that price level. Pipeline and port constraints will make it impossible to repeat that performance over the next 12 months even at those price levels, so I expect slower growth 700 kb/d rather than the 1400 kb/d increase over the previous 12 months for tight oil output increase.
Dennis,
I don’t usually comment on these threads but having downloaded your average Permian well model and reviewed the economics I am puzzled by the fact you ignore NGLs. From analysing the production data from several of the large Permian players I think it’s reasonable to assume they get 0.3 barrels of NGL for every barrel of oil. You can also assume that they achieve 50% of WTI prices for NGL (perhaps higher?).
This significantly lowers the break even WTI price for the Permian players, to ~$55 per barrel, and is more consistent with their numbers. I think it’s reasonable to ignore the gas.
Apologies if I’ve misunderstood your spreadsheet and this has already been taken into account.
Fraz
Fraz,
Thanks for pointing this out, I had assumed much of the natural gas was being flared, but Permian output of natural gas is 8 BCF/d, so it is not all being flared.
If we assume Permian Basin natural gas is just as wet as the Texas average then 11 BCF/d of natural gas results in roughly 1 Mb/d (million barrels per day) of NGL (based on 2017 data), at the rate that C+C and natural gas was produced in Nov 2018 in the Permian basin this would mean about 0.4 b/d of NGL for each barrel of C+C produced.
I will need to rework my analysis to take account of this.
I appreciate the criticism, you have understood just fine, I think.
I may comment on this further in the Dec 31, 2018 Petroleum thread. So look for comments there.
Chart for all US petroleum stocks for past 52 weeks below in kb/d, also note for week ending 12/21/2018 the level was 1877 million barrels and the 5 year average level (a common benchmark) is 1913 million barrels. We are currently about 37 million barrels below the 5 year average stock level.
Yeah, and consider that not only is OPEC cutting back, SA is reducing exports to US to about a third. Exports out of the US are holding up. There is nothing I can imagine, except a deep drop in US inventories to June. I don’t expect much in the way of price deviation for, at least, a couple of months. I haven’t followed any other analysts, besides Phil Flynn, who have a clue to what is going on.
Phil seems to have a grip on the global pulse. Thanks!
http://www.321energy.com/reports/flynn/current.html
I often have a quick look at World inventory levels, they still look low. There was an increase in jet fuel inventories into Sept/Oct. Looking at the US weeklies, jet fuel stocks in the USA are back down again.
US inventories week/week changes (million barrels)
Crude Oil: flat
7 Products: +1.28
Propane & NGPLs: -2.81
SPR: flat
So far, it looks like Gasoline inventories put in a low on week ending November 23rd at 224.5 million barrels. This low is higher than the glut year lows.
https://pbs.twimg.com/media/DvmrsM_WoAATPZo.jpg
Some international products inventories week/week changes (million barrels)
Total Distillates: +3.86
Light Distillates: +6.59
Middle Distillates: -1.03
Heavy Distillates: -1.7
https://pbs.twimg.com/media/DvmtMEcWsAA2dw7.jpg
https://pbs.twimg.com/media/DvmtsurXgAAQR6E.jpg
Holy Moly! Not much change in US, but Canada dropped 43 to wind up with a grand total of 15 oil rigs operating!
IEA predicts a non-OPEC growth of 2.4 in liquids, which must be all in NGLs as there wont be any oil growth, anywhere.
And not from here, either.
https://www.cnbc.com/amp/2018/12/28/oil-price-meltdown-puts-offshore-drillers-back-to-square-one.html
Ok, looked at a history of Canada, and it looks like in one week towards the end of the year, it approximates zero, then jumps up big in January. So, current drop is not indicative, yet.
GuyM,
They seem to have a Holiday shut down in Canada.
https://www.oilandgas360.com/shell-argentina-invests-to-increase-shale-output-after-selling-downstream-assets/
Somewhat undeserving of even this much hype of production from Vaca Muerta shale. 70K boepd by 2025. Yawn.
OTOH it is RDS after all and the quote is 27 billion barrels of reserves.
Well. What do you expect out of a formation called dead cow?
Twitter headline: “BREAKING: A third of all gas stations in the U.S. are now under $2 per gallon” How will electric cars ever compete? (I have nothing against EVs, just don’t see them replacing ICEs anytime soon)
How long will they stay that low? It’s not a good price for the industry.
Low prices are temporarily good for consumers, but if they discourage investment and drilling, then the end of the oil age might still be in sight.
What do some real-ish numbers say?
I go to gasbuddy to find where there’s cheap gas, blob of dark green leads me to Buffalo Missouri.
https://www.gasbuddy.com/GasPriceMap
US fleet avg: 25 mpg
fuel at $1.74 Buffalo Missouri
$1.74/g / 25mpg = $0.0696/mile gasoline cost for 25mpg vehicle.
Tesla model 3 at 237 Wh/mile, == 1 mile/.237 kWh = 4.219 mile/kWh
electricity in Buffalo MS at $0.1098/kWh
https://utilitieslocal.com/states/missouri/buffalo/
$0.1098/kWh / 4.219 mile/kWh = $0.0260/mile electricity cost for Tesla Model 3
$0.0696/mile gas / $0.0260/mile EV = 2.67
cheap gasoline is 2.67 x more expensive than electricity in Buffalo MO.
How about Californi’, the least you oughta be?
fuel in LA at $3.373/gallon.
but it’s Caleefourrneeuh, so maybe you’d drive a Prius (50 mpg)
$3.373/g / 50 mpg = $.0675/mile
Hmmm, do you pay the $0.21659/kWh (tier 2) to LADWP?
$0.21659/kWh / 4.219 mile/kWh = $0.0513/mile for your Tesla model 3
Yikes! That’s almost enough to get you to move to San Diego where So Cal Edison offers a time-
of-use EV rate of $0.13/kWh from 9pm – 12pm
or do you put up a 10kWp PV system on your roof at $3.15/Wp
https://solar-to-the-people.com/solar-panel-cost/ca-california-cost-of-solar-panels/
20 year flat rate depreciation is $1575/year (quick and dirty assumptions),
PVwatts says you get 16,336 kWh/yr out of that system in Lost Angels.
https://pvwatts.nrel.gov/
16,336 kWh/yr / 1575 $/yr = 10.37 kWh/$, or $0.096/kWh
$0.096/kWh / 4.219 mile/kWh = $0.0228 / mile in the model 3
$0.0675/mile gasoline / $0.0228/mile Tesla model 3 = 2.96
not so cheap gasoline is 2.96 x more expensive than your own electricity in Los Angeles.
Or LADWP electricity is still cheaper than gas for a Prius, though not by much.
Of course the Tesla model 3 is more fun to drive than a Prius IMHO (13 year Prius driver, 3 months with my model 3), or most other ICE cars for that matter (I used to have a Saab 9-3). And no oil changes, tuneups, etc. for EVs.
https://cleantechnica.com/2018/12/28/wsj-auto-columnist-next-vehicle-to-be-electric-gasmobiles-could-soon-be-like-flip-phones/
Sunnnv, I think you left out a key component in your comparison, the price of a comparable mid-size compact ICE car compared to a Tesla Model 3. Here are some ICE models in the Model 3 category:
Kia® Forte
Mazda® Mazda3
Kia Soul
Ford® Focus
Nissan Versa
Chevrolet Cruze
Honda® Civic
Toyota® Corolla
Hyundai Elantra
Nissan Sentra
The prices for the aforementioned cars range from $17K to $20K, as compared to $40K-$50K for Model 3. At this price point, and not even accounting for the massive depreciation of the resale of value of an EV compared to an ICE, it would take you decades to make up the difference with the cost of the fuel. A Tesla is a tax payer subsided toy car for the rich, for the rest of us an ICE car would do very well, thank you.
Best choice is to buy a diesel car and then have it modified so it can also run on vegetable oil. Not the most environmental friendly choice, but after Peak Oil and once the electrical infrastructure has collapsed together with the industrial civilization you can still make oil from olives or sunflower seeds and have a running car.
But where would you drive too and how would you fend off Mad Max/Zombie attacks.
I’ll use it to deliver mail. Once civilization collapses a mailman is the only figure that can keep society holding together in the good path.
Oh no! Not our mail lady! She’d wind up wearing skulls, and running over people. I’ve watched her get that evil smile as she takes aim at my garbage cans.
Civilization collapse in the US is over imagined in films, etc. It may be more military oriented, but total collapse is unlikely. As a veteran, that’s where I would gravitate towards. There may only be about 2 million active and national guard, now, but there is more that ten times that of past members, not counting members of supporting organizations. Or, well over 10% of the adult population (it was almost mandatory for awhile). Those numbers don’t even touch on the number of police, or similar organizations and past members. I think we would gravitate towards cohesion, and not collapse. And, because all of us fought, or stood for the Constitution, it would survive. That’s a large number of people, who have already qualified with some kind of firearm.
There is an old flag for the US revolution I particularly like. It was a snake about to strike that said: “Don’t tread on me.”
But, we are not alone. I not sure about some countries, but I couldn’t imagine a civilization breakdown in China, Russia, or Israel, for similar reasoning, but completely different histories.
“Civilization collapse in the US is over imagined in films, etc. It may be more military oriented, but total collapse is unlikely.”
The way the US is growing more belligerent every year & now locked into a three way cold war with Russia & China, Odds favor another global war.
That said, the US military is dependent on the US dollar, if the dollar hyper-inflates it has no money to pay its solders or maintain its equipment. US Federal debt is about to top $22T with dozens of Trillions promised in entitlements promised to retiring boomers. Many States are edging to insolvence over promised worker pensions & medical benefits. Sometime between 2021 & 2024 Interest due on debt & entitlements exceeds all federal revenue.
“Best choice is to buy a diesel car and then have it modified so it can also run on vegetable oil.” Sure, with acres of land, lots of mules, and a 30+ year-old rig with fuel heaters, super filters, mechanical fuel injection, etc. Burning food for fuel will not make one popular. Modern engines need consistent fuel resulting from continuous processes. Wasting 8 out of every 10 Liters of fuel out a radiator in an ICE car won’t be acceptable. On top of that Photosynthesis is less than 1% efficient. When the millions-of-year-old hydrocarbons flows drop, it’s going to get ugly.
Yeah, I bought my Versa slightly used (3k miles) for $9k. Take a while for gasoline to be an issue, and I don’t have to plan around chargers.
After people buy up the 1000 Model 3’s being produced daily by Tesla, many of them become used Model 3’s in a few years. Those will sell for much less, but still have a long life ahead of them. And still no oil changes, radiator coolant changes, transmission fluid, belts and the other costs that go along with an ICE vehicle. It all adds up. Beyond the costs, however, EV’s are superior vehicles to own. I was sold of the absolute fun of driving them well before the economic issues were considered.
Joseph: re “comparable” to a Tesla model 3….
Uh, go to your local Tesla store/gallery, and take a test drive in a model 3.
https://www.tesla.com/findus
None of the vehicles on that list are “comparable”.
Comparable to that list for EVs might be a Nissan Leaf or maybe a Chevy Bolt.
A couple of (old, before dual motor and performance) links to “comparable” to Tesla model 3
https://insideevs.com/tesla-model-3-compared-dozens-competitive-vehicles/
https://cleantechnica.com/2017/08/06/tesla-model-3-vs-22-competitors-straight-specs/
Joseph,
The comparable car to the Model 3 is a Mercedes C class, fully loaded which is about 75k.
I own both a “loaded” Honda Civic and a Telsa Model 3 long range battery, AWD with enhanced autopilot (about 58k), the “performance” version is about 70k and is similar to the high end Mercedes C class.
There is no comparison between the Civic and the Model 3 except the size of the car.
@sunnnv My point is that when gas is cheap, people buy guzzlers like pick-ups and SUVs. It is one of the laws of the universe. The other problem is that even at $6 gas, I don’t see the replacement of the US passenger fleet (121 million cars) in any short order.
US oil consumption was up over 1% last year. China up 4%. India on track with YTD numbers for 6.5%.
Chinese vehicle sales this year are down 1% Y-Y at about 24.5 million, annualized. As has been pointed out, vehicles bought in China are new oil consumption because they are relatively nouveau riche. An old car doesn’t roll off the back end for them. It’s new consumption. And no, don’t declare these are electric. The electric wackos don’t break out hybrids from electric. The hybrids are gasoline cars carrying a battery around and most “electric” are hybrids.
https://www.drivespark.com/four-wheelers/2018/top-selling-cars-in-india-june-sales-report/articlecontent-pf90671-026003.html
I’ll save you time. All run on gas or diesel. All.
India will spike oil consumption this year. Like China, an old car doesn’t roll off the back end. These are all new oil consumption.
Forget with the alternative stuff. Buy guns. Scarcity isn’t gonna make anyone more gentle.
Watcher- “And no, don’t declare these are electric. The electric wackos don’t break out hybrids from electric. The hybrids are gasoline cars carrying a battery around and most “electric” are hybrids.”
You are talking bullshit here.
Sure a hybrid is a petrol car with a battery (and electric motors). But that doesn’t take away from the fact that a majority of your miles with such a vehicle can be electric.
Case in point. There is a plug-in hybrid van in my driveway that has 69% of its miles traveled electric, and 31% gas (almost all used on long trips to the mountains, which were purely optional).
The electric miles are costing about 1/4 of the gas ones. the vehicle is USA made, and can fit a sheet of ply flat inside (or lots of guns if that is your preference).
Your storyline on this is old.
There is no such thing as optional.
You choose to consume that oil, or the Chinese do. If the US populace is ever asked to forgo consumption so that the Chinese can grow theirs per capita, that consumption is not going to be forgone.
Buy guns.
But do bear in mind the averaged sources of mains electricity generation in the U.S.: (2017)
Natural gas 32%
Nuclear 20%
Coal 30%
Hydro 7%
Wind 6%
The rest insignificant.
Which makes most EVs about 2/3rds ff powered and 1/8th renewable powered, excluding hydro.
I posted a short note here a couple of years ago which estimated that a car-only gas station with 20 pumps would need a 40MW supply for EV equivalency. Trucks would require far more.
As for cost, make sure that taxes are the same per work-energy unit supplied. Electricity is often cheaper than gas in this respect at the pump/charger.
Last, but not least, your old, beat up EV that has had 15 years + providing trusty service on the farm and local area should be as cheap to run as its oily and worthless diesel predecessor that keeps going year in, year out, albeit inefficiently.
It’s this last that I think that EVs will find hard to achieve.
Source of electricity varies widely by state. For example my state (the biggest one), in 2017 got 44% from wind solar hydro. Idaho got 77% from wind hydro solar. Iowa got 37% from wind.
Here is a graphical display of all that for each state.
https://www.nytimes.com/interactive/2018/12/24/climate/how-electricity-generation-changed-in-your-state.html?smtyp=cur&smid=tw-nytimes
Paywall.
As noted by Hickory, each state varies in fuel mix for electricity, and with an EV one can often (depending on living in single family dwelling vs. apartment/condo/…) put up PV panels and make your own juice fairly low carbon.
Union of Concerned Scientists calculator based on fuel mix and EV specs for what one’s equivalent mileage is:
https://www.ucsusa.org/clean-vehicles/electric-vehicles/ev-emissions-tool
Where I live I get 124 mpg CO2 equivalent off grid power.
In Buffalo, New York, it would be 247 mpg CO2 equivalent (?lots of hydro?).
In Buffalo, Missouri, it would only get 51 mpg CO2 equivalent.
The grid is getting cleaner as time goes on. See Islandboy’s electric power monthly article for the latest.
2 MW per charging station seems way excessive.
EVs are way more efficient than Internal Combustion Engine vehicles.
Tesla superchargers currently share 120 kW between each pair of stations. The soon-to-be-released Porsche Taycan with 800 volt battery will max out at 350 kW.
https://www.greencarreports.com/news/1120518_evgo-launches-first-public-350-kw-fast-charger
The issue is how fast batteries can absorb power, particularly as they near full charge. When I plug the model 3 into a supercharger and it’s down under 100 miles range left, it will start sucking power at over 100 kW (400 something miles of range per hour) if I’m at a pair by myself. But it soon starts to taper off. Still 30 minutes or so is enough to get me down the road to the next bio-break pitstop on a long trip. (around town, I just plug in when I come home, no time wasted going to gas stations).
Another owner’s charging curve:
https://teslamotorsclub.com/tmc/threads/supercharger-speed-116kw.107619
As far as longevity, Jay Leno has a 1909 Baker electric.
Claims “100% maintenance free” at 3:26
starts showing the Baker at 2:55
https://www.youtube.com/watch?v=OhnjMdzGusc
At 5:40, story of a woman who drove one to the Beverly Hills Hotel to get her hair done every week, “from 1935 to almost 2001”.
A Baker with nickel-iron cells intact might still work ok, just some switches and resistors.
http://www.twinkletoesengineering.info/wells_auto_museum/baker_electric_technology.htm#Schematic%20of%20early%20Baker%20Electric
Yes, modern EVs will need a battery change every 10-20 years (depending on what kind of range loss one finds acceptable), and modern electronics may fail occasionally, but the diesel will need a starter battery from time to time, oil and filters, brakes, tires, etc.
Here Jay compares the 1909 Baker and a 2010 Ford electric from Europe.
https://www.youtube.com/watch?v=CRwEXaHTwsY
https://oilprice.com/Energy/Energy-General/Low-Oil-Prices-Could-Cripple-Texas-Job-Growth.html
Lot of meat in this one if your able to separate the fact from fiction. First, the Dallas Fed usually has the trend, but are usually somewhat behind. Second, a $50 price is a fiction. It needs to be higher, and the Permian discount makes their price lower than WTI. Third, for Dennis?, there is no basis for the Dow and the Oil price to be in lockstep, but here is confirmation of the reasoning, or rather lack of reason. A lot of smaller companies, and even larger follow what Papa does with Centennial. Diamondback and Parsley are huge in the Permian, and the article failed to mention some others that have already cut capex, like ConocoPhillips.
If there are layoffs, again, then kiss the year end increase expected goodbye. I do expect a very significant increase in prices sometime this year. However, contrary to popular belief, shale operators can not change that quickly. There will be a significant delay.
On another note, I read an article in local paper that stated the number of abandoned mobile type homes in the Permian area is becoming problematic.
And my initial queries on Permian completions have it dropping by over a third in Dec., but that’s not firm.
New Open Thread Petroleum Thread is up.
http://peakoilbarrel.com/open-thread-petroleum-december-31-2018/
and Islandboy’s Electric Power Monthly
http://peakoilbarrel.com/eias-electric-power-monthly-december-2018-edition-with-data-for-october/
Happy New Year everyone.
Thank you for participating in the discussion.