Peak Oil from the Demand Side: A Prophetic New Model

Ron Patterson Uncategorized

Peak Oil from the Demand Side: A Prophetic New Model

This is a Guest post by Avery Morrow
Avery Morrow’s Internet Fancy

The most attention-grabbing attempts to predict oil futures have come from geologists and environmental activists, who tend to look solely at production. An overlooked doctoral thesis by Christophe McGlade, Uncertainties in the outlook for oil and gas, in contrast, focuses on how both supply and demand might be constrained in the coming decades. Peak oil researchers should take note of McGlade’s thesis because he predicted, in November 2013, that oil prices would sink, and that they will stay low throughout the second half of this decade. I found this paper on Google Scholar and have no connection with the author, but I appreciate his careful consideration of peak oil arguments, and his ability to distance himself from the more narrow-minded aspects of both economic and geological thinking. Here’s a representative quote from the middle of the thesis, p. 216:

The focus of much of the discussion of peak oil is on the maximum rates of conventional oil production. Apart from issues over how this term is defined, results suggest that focussing on an exclusive or narrow definition of oil belies the true complexity of oil production and can lead to somewhat misleading conclusions. The more narrow the definition of oil that is considered (e.g. by excluding certain categories of oil such as light tight oil or Arctic oil), the more likely it is that this will reach a peak and subsequent decline, but the less relevant such an event would be.

Advocates for peak oil often try to fit oil production to a curve based solely on an idealized image of production. Indeed, when nothing unusual happens on the downslope, oil production looks like a Hubbert curve, especially on micro levels. But at the macro levels, unusual things do happen: for example, the shale boom. McGlade argues that pessimists have failed to acknowledge that now that conventional oil has reached its peak, we should not expect a smooth ride down, but rather we should expect the unexpected, such as discoveries of new methods of production or adjustments in demand. Oil production is an artificial, not a geological, process, and nothing about the way oil is produced at the macro level demands that it must look like a bell curve. Of course it is impossible to actually know what factors will really affect demand at a global scale, but the IEA considers two central scenarios which McGlade aims to apply to the future of oil (p. 174). One is the “low-carbon scenario” (LCS), in which the world’s governments take immediate and unprecedented action to keep anthropogenic warming below 2°C. The other is the “new policies scenario” (NPS), where new policies are adopted, but are insufficient for capping the temperature rise. This is assumed by the IEA to be what current green energy policy is actually pointing towards. McGlade does not even bother to model the IEA’s “current policies scenario” (aka “business as usual”), where very little is done to stop carbon emissions. It is hard to know whether the NPS has actually been implemented by IEA member states, but we will see that the NPS is disastrous enough.

Figure 10.12: Production of oil in the United Kingdom in NPS (top) and LCS (bottom)

BritainBritain 2

Here is a sample modeling of NPS and LCS, showing future production in Britain. Notice how much environmental policy can do to limit oil production. LCS looks a bit like a bumpy version of a Hubbert curve, while NPS, the “greenwashed business as usual” scenario, envisions the exploitation of currently unused “fallow” fields in order to feed higher demand. If we are concerned only with supply, we might glance at these graphs and assume naively that this shows a healthy supply meeting demand for both LCS and NPS. In fact this is not the case. The graph for NPS actually displays an insufficient supply for world needs. This is not the result of underestimation, either.

Global oil production in NPS grouped by field type and region

Prod 1

Global oil production in NPS grouped by discovery date and water depth

Prod 2

Here is world production for NPS. McGlade allows for very generous production increases, technological discoveries, and a long lifespan for conventional oil, which combine to produce Paul Krugman’s glorious fantasy: several decades’ worth of crude oil, biofuels, and NGL, and a gentle plateau over the years 2020-2035 with no one year that can be labeled a peak. This is the result of several upwards adjustments in McGlade’s model, including a built-in assumption that exploitation of an oil field is not a simple Hubbert curve but can be given a boost through “advanced oil recovery” (p. 232). The initial result of McGlade’s model, in both the NPS and LCS scenarios defined above, is a prediction that oil prices will actually sink in the second half of the 2010s (p. 247). I think this is quite notable as an accurate prediction made more than a year in advance; no other model seems to have accounted for the effects of shale and tar sands on supply so successfully. However, the price numbers that begin in the 2020s are not so pleasant, and would certainly upset the likes of Krugman.

First, prices in both NPS and LCS reach a slight peak in 2012 at around $100/bbl and $90/bbl respectively before they soften throughout the remainder of the 2010s. The price in NPS drops to a minimum of $57/bbl in 2019 while a minimum of $47/bbl is achieved in LCS in the same year. This reduction in prices may well lead to a cut in production by members of OPEC, but these results suggest that there is plenty of new capacity available on a global basis to meet demand at prices well below current levels. It is important to bear in mind that this reduction occurs without light tight oil playing any major role.

Second, this period of low prices is followed by a steady, and under NPS rapid, rise in oil prices after 2020. In NPS prices more than double (rising to $160/bbl) between 2020 − 2030 and global production rises by 6 mbbl/d. After 2030, there are insufficient new projects available, even from Canadian bitumen, and so demand destruction becomes the predominant mechanism used to allow supply and demand to match, resulting in a spike in prices reaching a maximum of just under $500/bbl in the final year. Even so total production remains on a plateau. This demonstrates that while there may not be a peak in oil production prior to 2035, it does not follow that there will be sufficient capacity available to prevent a major rise in oil prices. A more restrained yet steady rise is also seen in LCS, which averages just over $100/bbl in the 2030s.

Evolution of oil price between 2010 − 2035 as modelled by BUEGO under the NPS and LCS demand scenarios

Cost 1

Comparison of real oil price projections in the reference and low-carbon scenario to other agencies’projections

Cost 2

McGlade’s NPS scenario ends with the oil price literally off the charts by 2035, as can be seen in figure 10.10 above. But he predicts that this will be avoidable if the atmospheric CO₂ concentration remains on track to be below 425 ppm through 2100, with all the emissions cuts that entails. For the record: it was at 350 ppm in 1990, and is at about 400 ppm today; so the rate of increase needs to slow significantly. In other words, the next decade of global policy, 2015-2025, will determine the difference between a comfortable energy transition in 2025-2035 and a “business as usual” that transforms rapidly into a doomsday scenario. If the news carries items about previously abandoned plays in Britain coming back online, this should be taken as a sign of desperation — it will be far better news if we have no such news. If we hit 2025 without making severe changes to our lifestyles, even the most generous scenario will allow us no more wiggle room to avoid catastrophic collapse.

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585 thoughts to “Peak Oil from the Demand Side: A Prophetic New Model”

  1. Awesome! This study should be bookmarked for ages. I have been following the discussions on peak oil for roughly 7 years now (from just before the $147 peak) and my thinking has evolved over the years as new evidences come online. This study seems the closest to reality atleast to me.

    1. I think this study is on the optimistic side with its central estimate of 5100 Gb for remaining ultimately recoverable resources (RURR). If we add cumulative C+C output to 2010 (1100 Gb) to the RURR for a World URR we get 6200 Gb. This estimate includes C+C+NGL and about 1200 Gb of Kerogen oil is included in the estimate, if we deduct that we get 5000 Gb of C+C+NGL. About 1300 Gb of this total is natural bitumen and extra heavy oil from Canada and Venezuela), Jean Laherrere estimates about 500 Gb from these sources. If we deduct another 800 Gb from the URR (assuming Laherrere’s extra heavy estimate) we would have 4200 Gb, in addition if we assume 500 Gb for the URR of NGL we would have C+C less extra heavy oil(including oil sands in Canada) of 3700 Gb. This estimate is about 1200 Gb higher than the 2500 Gb estimate I use, based on discovery data from Jean Laherrere as well as Hubbert Linearization.

      A conversation between Steve Mohr and Christophe McBride would be interesting as each of their doctoral theses covers similar ground.

      Note that Steve Mohr’s central estimate for C+C was about 2400 Gb for World C+C less extra heavy in 2010 and about 800 Gb for oil sands from Canada and Venezuela.

      Steve Mohr’s thesis also models both supply and demand, but reaches different conclusions than McBride.

      Steve Mohr’s Thesis can be found at the link below:

      http://ogma.newcastle.edu.au:8080/vital/access/manager/Repository/uon:6530

      1. On rereading the Mohr thesis, I realize that he includes NGL in his oil estimates. I typically use about 300 to 400 Gb for an NGL URR estimate, if that is correct for Mohr’s estimate his conventional (excluding bitumen and extra heavy oil) C+C estimate would be between 2000 and 2100 Gb, slightly lower than recent estimates by Jean Laherrere.

        So for McBride’s “conventional oil” Mohr has 2400 Gb for his central estimate and 2900 Gb for the high case, where McBride’s low case is 3200 Gb for conventional oil and 3800 Gb for the central estimate. Table below is Table 7.1 from p 155 of McBride’s thesis, and gives remaining resources (RURR), 1200 Gb of cumulative output to 2010 needs to be added to find the URR for conventional oil.

        The high conventional oil case in Mohr’s thesis is 2900 Gb, if we deduct 300 to 400 Gb for NGL, the C+C estimate would be 2500 to 2600 Gb.

        1. Hi all,

          I said above,

          If we deduct another 800 Gb from the URR (assuming Laherrere’s extra heavy estimate) we would have 4200 Gb, in addition if we assume 500 Gb for the URR of NGL we would have C+C less extra heavy oil(including oil sands in Canada) of 3700 Gb. This estimate is about 1200 Gb higher than the 2500 Gb estimate I use

          This is not quite right, another 500 Gb of extra heavy oil and bitumen needs to be subtracted from the 3700 Gb figure to get McBride’s central estimate of C+C less XH (as Laherrere defines it) or McBride’s “conventional oil” less NGL would be 3200 Gb if we assume the URR of NGL is 500 Gb. So the McBride central estimate is about 700 Gb larger, than my estimate of 2500 Gb and 1000 Gb larger than recent estimates by Jean Laherrere.

          An alternative comparison is to look at “conventional oil” which is C+C+NGL with the exclusion of natural bitumen, extra heavy oil (Orinoco belt), and kerogen oil (Green River). Mcbride’s central estimate is 3800 Gb (1200 Gb cumulative output through 2010), Laherrere’s is 2500 Gb (300 Gb of NGL), and my estimate is 2900 Gb (400 Gb of NGL).

  3. I got heartburn already, he declares that NGL and light tight oil are “conventional” oil.
    (page 29 +/-).

    Particularly since he later says shale gas is “UN-conventional”.
    page 32.

    1. I got heartburn already, he declares that NGL and light tight oil are “conventional” oil.
      (page 29 +/-).

      And how exactly would that make any difference to his final conclusion?!

      If we hit 2025 without making severe changes to our lifestyles, even the most generous scenario will allow us no more wiggle room to avoid catastrophic collapse.

      Seems to me you miss his main point by quibbling about the differences in the varieties of oak trees in a forest that is already burning to the ground.

      I’m writing this post from south eastern Brazil and have been witnessing some of the consequences of climate change first hand. You may or may not agree that burning fossil fuel is one of its main underlying causes. I on the other hand am convinced that the science supporting that position is solid!

      Cheers!

      1. Fred,

        Agreed. And… from my location, climate change is surely making big changes. I am sitting in a local Crab Shack here in New Orleans, and I can tell you, the crabs aren’t like they used to be. Climate change has made them smaller.

        So, not only do we have to deal with huge VOLATILE swings in temperature and increased weather anomalies due to climate change, Sea Food isn’t worth eating anymore.

        steve

          1. Climate is not temperature. I too am rather skeptical of the modeling of this complex non-linear system. But it is a complex non-linear system and we are putting more energy into it. Take a snow globe. Those little water filled objects with a scene in it that has particles of fake snow in it and give it a shake. It swirls around creating a little snow storm. Shake it a lot harder and you create a blizzard. That is what is happening. We are shaking the globe harder by putting more energy into the system than is reflected out of it. Steadily. Now what the local consequences of this are on any given day, week or month is anybodies guess. The arctic ice melts. The jet stream goes nuts and cold air is dragged crazily south etc. Previously stable weather patterns are disrupted. Predictions become less reliable. But there is no denying that there is more over-all energy in the system. Temperature is just an unfortunate short hand measure of energy. Unfortunate because some idiot will always chime in that winter disproves the underlying mechanism.

            1. SW,

              Joey is a troll, possibly a trollbot.

              Please don’t feed the troll.

          2. Joey fails to understand the resulting 4-6 times warming of the Arctic compared to the rest of the planet distorts the normal functioning of the Jet Stream. Thus, Arctic cold air heads further south than normal and warmer air moves north.

            This creates a POSITIVE FEED-BACK LOOP which will continue this anomaly for quite some time. The POOR SLOBS who believe we are entering into a new mini ice age because the southern latitudes are experiencing much colder temperatures, fail to realize the Arctic is suffering from much higher temperatures.

            You can’t have a new ice age if the Arctic is warming more compared to the southern latitudes…. silly people.

            Unfortunately, that NITWIT George Noory on Coast-to-Coast Am doesn’t believe in Peak Oil or Climate Change…. even though he believes in space aliens. Either Noory is just plum ignorant or was bought off by the company that took over Art Bell’s old show and LOBOTMIZED it to death.

            That show is complete garbage today.

            steve

            1. Google “Danish Meteorological Institute” – Arctic

              They have a 58 year record of Arctic Temps (air). They plot each individual year against a 1958-2002 average graph. I do not see much difference, if any, between 58 years ago and 2014. In fact, the entire summer last year never got above average.

              However, I think that there may be an increase in Arctic ocean temps during that time.

            2. It is very hard for arctic air temperatures to rise much above zero Celsius as long as there is sea ice. The extra heat energy mostly goes into melting the ice. Average Winter temperatures have risen sharply, but are of course well below zero. Once all the sea ice has melted, you will see sharply higher summer temperatures as well. A couple of years ago, it looked likely to happen before the end of the decade, but two cool summers have allowed some increase in summer ice volume, and full melt may not be until 2025 or 2030

            3. It’s called ambient heat. Can’t measure it with a thermometer,but it is all too real just the same . put a pot of water and ice on the stove,stick in a thermometer and turn on the heat. The water’s temp won’t rise until all the ice is melted. What melted the ice? Ambient heat energy. We’ve been turning up the heat for awhile now steadily increased in fact each and every year without a break. What conclusion can we draw from that fact,as it pertains to the fate of the genus homo and the rest of the animals requiring a habitat in which to live?

            5. If the arctic is warming, how come there was 50% more ice this year at the minimum point in September than in 2012?

            6. The Arctic is losing ice.

              http://www.theguardian.com/environment/climate-consensus-97-per-cent/2014/oct/20/2014-arctic-sea-ice-extent-6th-lowest-in-millennia

              When discussing the Arctic sea ice death spiral, contrarians also invariably change the subject to the modest increase in Antarctic sea ice extent. That increase is happening despite the warming of the Antarctic region, with a variety of contributing factors (changes in the ozone layer, winds, and ocean salinity due to precipitation and collapsing Antarctic land ice, for example). However, the Arctic has lost 10 times more ice than the Antarctic has gained.

            7. How many people fully comprehend the headline “2014 Arctic sea ice extent – 6th lowest in millennia”? Even had to give it a bit of thought and decided to look up the data. Imagine my surprise when I found out that the ice cover was 50% greater than in 2012. Is there any hint of this in the article. NO! Is this a reporter who is just blindly quoting the official site and is too lazy to do some independent research or is it the MSM in general that is concerned with straying from the official line.

              Personally I am a fence sitter and keep looking at the data. I agree that two years of data is not enough to prove anything. The first clue of a change of direction will require the ice level to move above the median line.

              The reasoning that I have read was that open water absorbs more heat/energy and this is leading to warmer artic water. I presume the reverse should also be true. More ice cover will reduce energy absorption. The question I have is will it result in increasing ice at the summer minimum.

              Maybe we will have a clue in 2020.

              Al Gore said that the Arctic would be ice free by 2014. Maybe the science needs some tweaking.

            10. The surface area increase belies the fact that the ice grows thinner. Sorry. Wish you were right.

            12. Here is the chart. Yes there is a downtrend. However 2013 and 2014 are above trend. As I said, we need at least five more years of data to see if the trend continues down or changes to either, flat, or up.

          3. Meanwhile here in the mountains of southwest Virginia I spent a good part of the day outside working in just a long sleeved shirt. If there had been no breeze I would have worn sleeves.

            I still have a couple of neighbors who butcher their own hogs. They are still waiting for weather cold enough to safely butcher since their meat houses are not refrigerated and it takes a few days for salt to work it’s preservative magic.

          4. Wow. Just wow. Someone on here really thinks this in evidence against climate change? Beyond belief. Ever heard of Jennifer Francis?

            1. It has been unusually cold in parts of Ventura County. Some crops lost. Helicopters kept us awake at night protecting crops near Santa Rosa Valley. My wife threw a small snow ball at me which she had gathered from frost on our car. She is still worried about a couple of our outdoor plants. Should be warmer later this week

            2. clifman,

              We are in serious trouble and folks are regurgitating either INCORRECT or WORN-OUT DATA. Methane is blowing out of the Arctic in an exponential fashion.

              Regardless… I would imagine within a decade, most NITWITs who think the earth is cooling will have to eat crow.

              steve

            3. It’s kind of quaint to find somebody who’s enough of a “true believer” to still believe in the whole global warming fairy tale. Here in Kentucky I have a real hard time finding anybody who’ll admit to buying the rotten bill of goods the climate “scientists” and “experts” are trying to sell us. Probably because one needs to be a communist to fall hook, line, and sinker for their propaganda, and there just aren’t many communists in Kentucky, thank God — lol.

              Anyway, since you brought it up, I would really appreciate if one of you “true believers” would be so kind as to explain the following:
              Antarctic ice coverage at all-time highs.
              Arctic ice coverage INCREASING for the last 3 years.
              Temperatures of the deep oceans staying stable.
              17 years and counting of no global temperature increase.
              Drastic changes made in recent years to the weather recording stations, resulting in the artificial creation of higher temperatures within the structures themselves.
              The fact that temperatures and weather being recorded today has 1000x greater accuracy than 100, 200, 500 years ago.

              The plain and simple fact is, global warming is driven entirely by a left-ring redistributive economic agenda, not genuine science.

              Very truly yours,
              Steven Nisson
              Paducah, KY

            5. You anti-global warming people seem to troll the Internet, looking for mentions of global warming and then posting comments. You don’t participate in the group’s overall discussion. You are propaganda machines, only posting everywhere on one topic.

              And the whole communist thing is pretty silly. That’s appealing to a 1950s fear.

            7. I’m anti global warming. I prefer temperature in today’s range to 1 degree warmer. I’m also against inaccurate terminology and push personnel to use their units, label axes, and remember some people are color blind.

        2. Steve, the crabs might also be smaller because of population overshoot and demand exceeding the ability of the crabs to reproduce, thereby crabbers being required to “harvest” smaller crabs at higher prices.

          Delectable cracked Dungeness crab on the Left Coast this holiday season was selling retail at ~$45-50/lb. The price in the shell was $5-$10/lb, which translates to $15-$30/lb to crack it oneself. I suspect that’s too high for the bottom 90%+ of households, even for a once-a-year holiday treat.

          As to seafood not being worth eating, I have to agree, albeit regrettably so.

        3. “Agreed. And… from my location, climate change is surely making big changes. I am sitting in a local Crab Shack here in New Orleans, and I can tell you, the crabs aren’t like they used to be. Climate change has made them smaller.”

          Law of unconsidered consequences strikes again:
          Much more likely trend caused by evolution and human harvesting methods. Harvested crabs are regulated by size. Small crabs are thrown back and only the largest crabs are harvested. This trend alters the genetic profile that favors smaller crabs over large crabs. The large crabs are being genetically manipulated into extinction and favoring crabs that are genetically evolved to be smaller. There are numerous studies that humans hunting practices are altering evolution on wild game and fish.

          Humans always tend to look for answers that best suites their knowledge or beliefs, not on broad observation, research and critical thinking. From my observations, its appears that human have broadly blamed climate change/global warming for the cause of everything from droughts to hair loss.

          “Sea Food isn’t worth eating anymore.”

          Yes, but not because of the size of crabs, but because of all the pollution. Humans have treated the worlds oceans as giant toilet. Seafood, especially predators and bottom feeders have the highest concentrations of toxins. The oceans are so polluted that eating seafood more than once per month, increases your odds for disease and lower IQ. FWIW: I stopped consumption of all seafood back in 2007 because of rising mercury levels. I don’t not trust the gov’t recommendations since they are likely manipulated by lobbyists to protect the fishing industry.

      2. Climate Change is being felt here in Albania as well. Our forests are severely burning every summer. Boldog új évet magyar!

      3. Fred, “If we hit 2025 without making severe changes to our lifestyles, even the most generous scenario will allow us no more wiggle room to avoid catastrophic collapse.”

        Ten years. OK, counting relatives, I know say 100 people reasonably well. These mainly include folk living in Western NA, Europe (especially Norway, Italy and the UK), Africa (mainly Uganda) plus China (all regions) and northern Vietnam. The economic status of these people runs the full spectrum: dirt poor to wealthy, and educations range from about none to Full Professors. Not one of these people (or families) has lifestyle-change plans beyond generally improving their lot: No electric cars, no rooftop turbines, no moves to greener climes. Everyone I know wants: 1) kids in a good school, 2) to take the odd trip, 3) money in the bank to cover a downturn. Business as per usual you might say. My question: who exactly is leading this severe-lifestyle-change charge? Am I totally blind?

        1. Doug, no one is leading any kind of severe-lifestyle-change charge. And no one ever will. People will change when they are forced by events to change and not one day before.

          Arguments never produce changes in the population as a whole. Only events force people to modify their life style.

          People never hear arguments of coming disasters and act, they always wait until the disaster actually happens then react.

          1. People were leaving the city of Güssing Austria in the early 1990’s because there were no jobs. The city’s leaders decided to stimulate the local economy by switching to renewable energy sources for heating and electricity generation. Güssing succeded both in transforming its energy sources and stimulating the local economy in 2001. In the 1990’s fossil fuels were cheap and there was no carbon tax. The first thing Güssing did was to reduce energy consumption by 50%.

            By the end of the 21’st century everyone will be using renewable energy sources. Güssing is ahead of the game. Anticipating future trends has its rewards.

            1. Ovi The surface area increase belies the fact that the ice grows thinner. Sorry. Wish you were right.

          2. I would modify that to say, “most people”. As usual,however, point well taken. And even if they react to disasters, they often react in stupid ways. Response to Hurricane Sandy. Build bigger and better along the coast. Let taxpayers take it in the toocus next time too. We had a major flood here in Colorado last year. Response in my home town was to build even more houses along the local creek which caused major damage last year. Talked to a guy whose house took major damage. I asked him if he was going to get flood insurance. He said, “of course not, I don’t live in a flood plain.” Okie dokie. After all, it’s a thousand year flood.

          3. Ron is dead center in the bullseye as usual when he comments on human nature.

            The only hope we have for the people of the world in general taking the problems of climate, environment, and resource depletion seriously is that Mother Nature will smack us upside our collective head with a WHOLE SERIES of Pearl Harbor magnitude wake up bricks.

            It is going to take a lot of them and they will have to come pretty fast and on a pretty regular basis and be well distributed in order to provoke a large enough and long lasting enough response to save our self absorbed present tense only asses from collapse.

            The odds of Mother cooperating to this extent world wide are just about ZERO. What will happen is that she is will wallop us with a few broadsides that restore the population of humans into balance with whatever is left of the environment in terms of the big picture all over the globe. Saudi Arabia will have one person per many many square miles. Egypt will have about as many MAX as can be fed with locally grown food.IF New York remains a super city the residents are going to have to export something other than banking and advertising and high fashion to pay for their imported food and raw materials.

            But some countries are very favorably situated in terms of geography, military power, population and resources. The people of such a country MIGHT realize that desperate troubles require desperate measures and that their survival depend on getting with the desperate measures.

            The United States and Canada are countries that imo have a shot at making it thru the bottleneck more or less whole.Times will undoubtedly be very tough but maybe not so tough that very many people in North America die of starvation disease exposure or civil disorder.

            But our only hope is that we suffer that series of wakeup bricks upside our collective head – soon enough, fast enough and often enough to force us to act but not so many and so hard that we are UNABLE to act.

            The odds don’t look too favorable but in my estimation they are a long ways from hopeless.We will unless I am badly fooled be closing our southern border within a decade or less and not too many people are going to migrate in thru Canada- to the contrary a lot of us will be moving north if Canada will have us.Hardly anybody is going to arrive by water either here or in Canada- the oceans are too wide for refugee boats.

            With a flat out effort made on the conservation and efficiency fronts -meaning drastic lifestyle changes – and the population leveling off and declining we MIGHT make it ok for another century or two. Nobody is going to invade North America for the foreseeable future unless they release an incurable disease that kills yankees fast and efficiently leaves their own people untouched.

            And somebody does that- well we will probably nuke EVERYBODY unaffected to be sure we get the right ones.

            Yogi sez predictin’ is hard. ‘Specially the future.

            SOMETHING will get us sooner or later. But later may with a good shot of luck can mean a LOT later in human terms.

            1. With a flat out effort made on the conservation and efficiency fronts -meaning drastic lifestyle changes – and the population leveling off and declining we MIGHT make it ok for another century or two.

              That’s why I keep pointing out that although some conservatives many not consider themselves conservationists, if they support policies that decimate everyone but the top 1%, then they are doing their bit to slow down consumption.

              If people are too broke to buy much gas, to live in big houses, to buy stuff, and to fly on airplanes, they aren’t going to be using as much per capita fossil fuels.

              And I think the way the wealth is concentrated in the world right now, a good chunk of the world’s population could die off and not affect the lifestyles of the wealthy. In fact, it might be better for the wealthy because there would be less competition for the remaining resources. I think that’s the economic reality of the world right now. Much of the world’s population isn’t really essential for farming, manufacturing, or resource generation. Machines have increased efficiency so much that the number of people whose labor is needed to support the wealthy is much smaller than it used to be.

            2. Boomer,

              As far as pessimism goes, ask yourself: 10 years ago 2004 with oil prices at $20, what would you have predicted to happen to the aviation industry if prices went up by five times, to $100?

        2. Many unemployed immigrants to industrialised EU are returning to their more rural country of origin. This will lower fossil fuels use. 100,000 albanians have returned from Greece in these 5 years since the economic (peak oil and financial) crisis began

          1. Rita,

            Rita, “Many unemployed immigrants to industrialized EU are returning to their more rural country of origin………….”

            I wasn’t aware of that but Italy receives many “illegal” immigrants from Africa (and used to have Albanians coming in). In the past these people could normally find work but the Italian economy is so bad now many of them simply move on to France etc. It’s pretty hard to believe many Africans would return to their home countries voluntarily.

            1. Hi Doug,

              You are most likely correct.

              It seems Wimbi has made some changes, I have made modest changes, but not nearly enough, just hybrid vehicles, a passive solar house in my case and will probably get an EV for my next car. Higher fossil fuel prices will be needed for there to be any significant changes, very possibly too little too late.

              A crisis will be the only thing that might get the ball rolling in the right direction.

            2. Goddam it, I changed all right, went all PV, and everything GOT BETTER. What sacrifice? I spent some free cash I happened to have, got a lot of PV, and now coast along all cosy and happy while my neighbors worry about the next power outage, which is mighty sure to happen soon as it always does this neck of the dead end road.

              My wife tools around in her Leaf, with all her ladies’ clubs who are SLOWLY getting the idea that it actually is a real car, and really does car-like things, and by some sort of incomprehensible miracle, runs on the sun! Costs NOTHING above the initial not-all -that-high investment.

              I am feeling sorta guilty about making all those dreaded life style changes and getting nothing but cushy deals out of all of it. Have I sold my soul to Mephistopheles?

              To boot, had fun with all those wires and gadgets.

              Or, who knows, maybe I’m on to something?

            3. Wimbi – would like to ask you some DIY solar questions. E-mail adkdan@hotmail.com if you’re willing to entertain them. Thanks. Or we could do it on here if Ron’s OK with such for helping spread such info.

            4. Africans probably not, but East and South Europeans have more choices to return. Albanians are returning form Italy as well. Even more italians are living in Albania now.

        3. A couple of thoughts.

          1st, I live in a walkable neighborhood, commute to work in an electric train, improved the windows (with lami glass) so that no heat is needed down to about 2C. Life is far better: I can relax in the train, walk to fun things, and the house is far more comfy.

          2nd, that doesn’t matter. Individual voluntary efforts won’t do it, and we shouldn’t expect them to. This is something that needs to be done on a society-wide basis, with planning, standards, regulations, and carbon taxes. Societal plans are far more efficient, far fairer, and far more workable.

          You don’t expect basketball players to follow imaginary, voluntary rules, right? They follow the rules as promulgated by the league, and enforced by the refs.

          That’s the way society works.

      4. As Fernando says, NGL as crude is just wrong, it’s plastics and propane, not the source of gasoline and diesel.

        The composition of light tight oil is crude-oil like, but the economics and production “reservoir” dynamics are totally different. It’s stuff stuck in the source rock, so it kept cooking, so is much lighter than conventional crude, and contains a lot of NGLs, witness the severe fireballs when the trains crash. Because it deplete so rapidly, and is so costly, it’s a less reliable source to continue BAU.

        What really concerns me is that he waffles on peak oil, saying essentially “he said, she said, oh well, I guess there’s disagreement”. If one takes LTO out of the conventional picture, then it’s obvious there’s a bumpy plateau since 2005.
        See the 2nd picture at:
        http://euanmearns.com/broken-energy-markets-and-the-downside-of-hubberts-peak/

        Now of course the cornucopians will say “arbitrary/unfair”, “infinite fungibility”, …,
        but the point is that if conventional oil has peaked, so will unconventional.
        So, if we accept reality (that conventional oil has plateaued), we’re not going to be misled that the smoke from the burning forest is just alarmism, indeed things are possibly worse than they look, so we had better get sustainable asap. (and oh, btw, the sustainable cures for peak oil are the same cures for AGW).

        He says (bottom of 216) “The more narrow the definition of oil that is considered (e.g. by excluding certain categories of oil such as light tight oil or Arctic oil), the more likely it is that this will reach a peak and subsequent decline, but the less relevant such an event would be.”
        But never justifies why it’s “less relevant”. I’m smelling “I don’t want to psychologically accept peak anything, so … oh look, shiny!”.

        In fact, refineries are built and tuned to different crude oils, and the economics go haywire if fed something different than their optimum. So, for example, condensate is being exported (as “crude oil”) rather than used so much in the US, and has low prices due to low demand in the US.

        The “… by 2025 … to avoid catastrophic collapse” is Avery Morrow’s conclusion, not Christophe McGlade’s.

        McGlade’s model says prices peaked in 2012, but they actually ran for two more years at high levels before crashing rather more abruptly than his model. If his model doesn’t show reality, what good is it?
        He claims OPEC may curtail production (they aren’t), and they have “plenty of additional spare capacity” (pg 247). If they did/do, why didn’t the Saudis jump into the market with more than just 1 million bpd back in 2010 when prices leapt back to $100? Ummm – maybe that’s all the “spare capacity” they had???
        Maybe if they can kill 1 million bpd of LTO/tar sands, that’s all it takes to get oil back to $100.

        1. If one takes LTO out of the conventional picture, then it’s obvious there’s a bumpy plateau since 2005.
          See the 2nd picture at:
          http://euanmearns.com/broken-energy-markets-and-the-downside-of-hubberts-peak/

          Now of course the cornucopians will say “arbitrary/unfair”, “infinite fungibility”, …,

          Or they could say that oil peaked 10 years ago, and no one noticed. No gas lines, no shortages, no die off, no resource wars.

          The Doomer books and tapes were wrong.

          1. George Duuuuh-byuh’s little misadventure in Iraq wasn’t a resource war?

            Nobody noticed that prices started climbing in 2003, culminating in $147/bbl in 2008, nor that little financial difficulty exacerbated by those high oil prices?

            Now I grant you that very few outside of the peak oil community (and perhaps not so many even in it) noticed that E&P (exploration and production) capex quadrupled over the last decade, while all liquids only increased 12%. Care to explain that any other way than nearing/at the peak of conventional oil?

            Ya, the fast crash doomers have proven themselves wrong.
            But happy days forever don’t seem to be really and truly here.

            1. Ya, the fast crash doomers have proven themselves wrong.

              Now just tell me sunnnv, just how can a prediction about the future be proven wrong years before it is supposed to happen?

          2. Actually, many noticed the effects via higher prices at the pump. It’s just that they did not know that it was caused by peak oil.

          3. John B., this is the way I see it: oil ranges from extra heavy (around 7 degrees API) to very light oil (say 45 degrees API). Condensate is a gas at the reservoir and turns liquid at the surface. NGL is butane, propane, and ethane. Natural gas is methane. The industry has found and exploited most of the easy to get oil, a lot of condensate. NGL isn’t oil.
            As we exploit these resources we “move up the degree of difficulty”. So today a lot of the new oil and condensate is either very heavy, in very deep water, or in really crappy rocks.

            As we move up the degree of difficulty we need a higher price to justify the higher costs we face. There comes a time when the higher prices allow other sources to compete.

            And as far as I can see, when it comes to oil we are at the end of the party. There isn’t much beyond a certain water depth, the “shales” aren’t everywhere (they aren’t real shales), and extra heavy oil requires a huge amount of steel and steam to extract and process. Thomas Gold is a charlatan. And that leaves us standing out on a plank. After the oil gets really expensive we can use coal to oil. And after coal gets too expensive then what? Natural gas to liquids? That has a limit. Everything you can think of I have looked at for years. And so the end will come. It’s unavoidable.

            1. If you were right, then production wouldn’t be increasing. And the price would be going up instead of down.

              Reality is quite a different thing than the “End of Suburbia” nonsense doomer books and tapes that have been published so profusely.

            2. I’m right. Production increased because prices went up sixfold in 15 years (check oil prices from mid 1999 to mid 2014).

              I don’t read end of suburbia doomer books. I’ve been in the oil business for almost four decades. and if you allow me I can pass on some knowledge before I get too old. It’s your choice.

            5. Because electric vehicles aren’t really cheaper. They have to be mandated and heavily subsidized. This issue seems to be somewhat ignored by advocates. If they were competitive they would take over the market. The only thing which uses a battery and is very competitive is the golf cart. A hybrid makes sense. Beyond that you get into make believe green economic mucus. It just doesn’t hold its shape when you try to grab it.

            6. The reason you think fossil fuel vehicles are cheaper is that many of the costs of fossil fuel have not been factored into their prices. Pollution costs, for example.

            7. You mean CO2.?.? Thats correct. Now we need to discuss your carbon tax proposal, and the parallel commitment to end all subsidies given to renewables?

            8. You mean CO2.?.? Thats correct. Now we need to discuss your carbon tax proposal, and the parallel commitment to end all subsidies given to renewables?

              I was thinking more about water pollution, air pollution, health costs, land destruction, and so on. Fossil fuels aren’t especially clean.

              I haven’t brought a carbon tax proposal. You must have me confused with someone else.

            9. Fernando,

              I agree – it would be great to have stiff carbon taxes, and eliminate all subsidies.

              EVs would replace ICEs very, very quickly. Coal would be eliminated pretty darn quickly too.

            10. Because electric vehicles aren’t really cheaper.

              That’s just flat out not true.

              Have you looked at Edmunds.com’s 5 year total cost of ownership? The Nissan Leaf is the cheapest thing around, even without the tax credit/subsidy. With the credit, it’s insanely cheap. At least, in the US – I don’t know about Spain, which probably taxes the heck out of new cars, like most of Europe.

              If they were competitive they would take over the market.

              The Tesla is taking over the market. Other EVs, like hybrids and low end EVs like the Leaf, take much longer because they’re only somewhat better than the competition overall, and people take a while to get used to new things.

              The Tesla shows the truth of the principle that a new thing has to be dramatically better than the old thing to displace the old thing (at least quickly).

            11. Right. Musk is very clever. He wants to push the industry toward the EV, and he put out one that nobody could possibly say was anything but a great car. So what if it cost a lot. People who buy those huge muscle things don’t count cost anyhow.

              The leaf on the other hand gives the impression ” just like any other car, except can’t hear the engine”.

              So it takes a while for it to soak into people’s head that this thing is not just like any other car–it’s almost free to run it down the road. When that does finally get in, I think these things will really take off.

              And the guy who cares for his own car will stop being puzzled that he has near nothing to do- and he will quit worrying that he can’t hear whether the engine is right because he can’t hear any engine.

            12. Nissan might not see the Leaf as the absolute success story you do. They are increasing the range, presumably to increase the popularity. The price is expected to rise from $29,000 to $33,000. “Cheapest thing around” is getting a lot more expensive. Five years of data may not be sufficient to judge. The batteries are noted to deplete in range over time. As we can see from the increase in price, batteries are very expensive.

              http://www.thestreet.com/story/12554189/1/nissan-to-extend-electric-car-leadership-with-135-mile-leaf.html

            13. I would expect increases in range, and price to be a logical progression. No big news there.

            14. Anonymous,

              That article about the Leaf appears to be speculation and is kind’ve out of date – can you find anything else on the topic?

            15. Let’s put it this way: electric vehicles aren’t really cheaper FOR SOCIETY. They thrive due to mandates and subsidies. They are social parasites. The rational answer FOR SOCIETY is very high road taxes and mass transit. But since most of you enviromental types are Americans used to a cushy lifestyle you can’t look very far outside the fence. Remember, I’m not worried about a solution for you guys. I’m worried about billions of chinese, indians, Pakistanis, people like that.

            16. Yair . . . Here again Fernando Leanme I have to disagree with your conclusions.

              I see EVs being adopted by third world countries in the form of electric bicycles, tuk tuks and the likes, this despite the fact that gasoline and diesel is used far more efficiently than it is in socalled “developed” countries . . . witness a family on a 125cc scooter or 35 people (including those on the roof) in what we would call a 15 pax 2.7 litre turbo diesel bus.
              I just post my views to demonstrate my alternate way of thinking and really appreciate your comments and insight into oil related matters

              Cheers.

            18. Why keep repeating the same incorrect ideas? Have you looked at Edmunds.com? It includes all costs over 5 years, like depreciation, insurance, maintenance, repairs and fuel costs.

              EXCLUDING TAX CREDITS OR SUBSIDIES, the Nissan Leaf is cheapest.

              The Prius C is next cheapest.

              ————————

              As for mass transit, Europeans use only 18% as much fuel per capita as Americans, but they still only use mass transit for 11% of travel miles. I like trains – I use them every day. But their not the answer to everything, even in Europe or Cairo. Especially not Cairo…

              I agree that very high fuel taxes are the answer. That won’t move people to mass transit, though. It’ll move them to EVs.

            19. Take a look at official chinese government statements on ev’s. Why would they go to the trouble if ev’s were just parasites, huh?

              The chinese business guys I know are real smart.

            21. Better and cheaper? Nonesense. EVs have been subsidized for five years now in Washington State, um, apparently to the tune of a $7500 federal tax credit and a $500 rebate on some wall thingy and an exemption from the sales/use tax and motor vehicles sales/use tax and remain, well, a “niche like the Corvette” and otherwise a rounding error of the total fleet numbers. Some question the need for such discounts, given that the rich are well able to pony out such cash. And then there’s the little road maintenance problem, in addition to the Bertha boondongle, on top of the piss poor public transportation. A nixed fancy vehicle tax being a major cause of metro funding issues, along with the trying to spread metro out over unservable sprawl. Somehow replace all those ICE with EV in a glorious orgy of well-oiled consumption and you’d still have folks stuck in traffic on unmaintained roads and crammed into crush-load busses. That’s neither better nor cheaper.

              I spent $29 on transportation last year, and car sat twice. Got no tax breaks like the carists do for the trouble. What would $29 get me in your car world?

              Back on the insane infrastructure side of things, as Charles Marohn of Strong Towns points out, Ferguson has $300,000 in bog-standard roads, no shade trees, and a sidewalk two cannot walk abreast on. What, do we give the police EV so they can feel all green before shooting the consequent jaywalkers? Or, we could build more than mostly survivable communities, ones that do not virtually mandate the purchase of hilariously expensive vehicles? Yeah, right! There have been signs of sanity, though, with some areas actually *gasp* reallowing kids to walk or bicycle to school, instead of wasting limited school funds on vehicles to drag tham hither and yon. More money for teachers, exercise, and no money wasted on cars. Now that’s better and cheaper.

            22. There have been signs of sanity, though, with some areas actually *gasp* reallowing kids to walk or bicycle to school, instead of wasting limited school funds on vehicles to drag tham hither and yon. More money for teachers, exercise, and no money wasted on cars. Now that’s better and cheaper.

              I think having people walk and ride bikes is a better option than any sort of vehicle use. It’s healthier and requires less road maintenance.

              The EV subsidy doesn’t bother me because the number of EV vehicles on the road is still small, so it isn’t like the subsidies are costing the taxpayers a lot of money. Now, if we could get rid of all subsidies, including tax benefits to home owners, that would probably be a good thing. The entire tax structure could be reworked, but no one knows how to tackle it.

  4. I guess I am just a pessimistic old farmer but my bet is on old men and old mules getting ” older faster” once they have hit middle age.

    As a theoretical matter these charts and arguments are great. As a purely practical matter the contest is not always to the strong nor the race to the swift but that is the way to bet.A very, very few old men and mules remain hale and hearty and as productive as ever well into old age but that is not the way to bet.

    Now as to the demand side argument I am a long term optimist but a short term pessimist. I do argue in favor of pure electric and plugin hybrid vehicles as being superb technology that can go a LONG way to freeing us from oil addiction. I occasionally point out that the French are on track to have an oil free rail system pretty soon.Ditto some other technologies and adaptations.

    But while I believe that plug in hybrids and pure electric cars, etc, are going to sell like ice water in hell a LOT sooner than most people expect or would even believe I do not believe they are going to sell fast enough soon enough to allow us to get the oil habit under control before the oil habit takes a huge and potentially fatal bite out of the economy’s backside.

    The key point that I agree with is that we should not be TOO SURE we know what is going to happen.My excellent personal doc has been right to my knowledge about ninety percent of the time when he tells somebody they have a few weeks or months to live. But maybe one time in ten the patient rallies and lives a good long while.

    My bet is that the price scenario he predicts is in the ball park except that the low price scenario he predicts for the rest of this calendar decade is just too good to be true from the Joe Sixpack pov.

    But things could work out that way if the economy remains in the doldrums and the market ( with a swift hard kick in the butt from politicians to help keep the market on the job!!) delivers more efficient autos, trucks, planes, construction machinery soon enough and fast enough.

    Folks up in Connecticut who make plenty of money are going to replace old oil furnaces with nice new heat pumps when the furnace croaks even if oil is relatively cheap and economic managers in countries that import oil are going to continue to do as much as they can do to keep consumption down to help with balance of trade issues.

    But I just don’t see production being so good that prices can stay well below a hundred bucks very long with so much of the world economy just now getting to the point it can really make good use of lots more oil than ever before.

    I strongly suspect that all those millions of new cars in China are not being driven very many miles per year per car yet due to cars being sold faster than the streets and highways can be upgraded and or built to accommodate the traffic. But if oil stays cheap they WILL BE driven because cheap oil is probably the one biggest thing that will help them continue to build and pave new streets and roads at their usual smoking hot pace. This applies to India and just about any other country as well which has not yet built out a truly extensive modern street and highway network.

    I am not a pinko commie by any means but neither am I blinded by the thinking of deflationists. REAL CAPITAL exists in the form of people with skills and three dimensional natural resources.MONEY is just a way of keeping track and deciding who gets what.

    MONEY as such is not going to stop the continued development of the world economy so long as the actual resources needed are available in sufficient quantity. Ways will be found to renege on old debts even as loans are made.

    Oil seems to be the KEY limiting resource these days.And while I am not trying to horn in on our court jester’s turf the cheaper it gets the more expensive it gets.

    Anybody who appreciates a little zen in his English will get it immediately.

    1. OFM,

      Whole-heartedly agree with every word you wrote.

      This young buck when from fast-approaching-collapse-doomer (2005-2011) to a cautious it-won’t-be-easy-but-we-may-make-it optimist.

      I could easily foresee a scenario where the shale peak creates another 2008 type event. Prices rocket to $200, severe recession, financial panic. In that period, if it comes, and my bet is it will (but I’ve been wrong about countless things in my life) we could face a complete collapse scenario. We don’t have to, but depending on policy decisions and timing it could fall apart.

      We were hours away from collapse in 2008. With the political brinksmanship present today, it is possible a TARP type package would be delayed until it was too late. Even if the U.S. holds their system together there is the very real and much more likely scenario of Europe’s financial and monetary system coming apart during the next crisis. As growth collapses deficits would soar, and PIIGS countries would find themselves with no hope of bringing debt/GDP in line with what Germany wants. As they bicker with meetings and summits banks would collapse.

      In 2008 countries bailed out their own banks, but this put Ireland and Spain on the precipice of monetary collapse and sparked the EU sovereign debt crisis. Banks in Europe can only be saved by pooled funds next time around, which means Germany would have to be willing to create and basically fund a new mechanism for saving banks in other countries. if events most swiftly like in 2008 this could be the epicenter of a genuine global collapse scenario.

      However, if we make it past that critical period with humpty dumpty cracked, but not broken, we’ll be well into a world where PV, wind, and electric cars are powering a healthy base of societies activities. Self driving cars and services like Uber/Lyft will create the possibility of a new model of transport where you don’t even need to own a vehicle. If we only needed 1 vehicle for every 6 people in the U.S. it would save a lot of resources.

      My guess is people will be forced into this new mode of transport because the current system will become unaffordable for many. It seems technology will progress, but we will become much poorer, which is simply a continuation of what has unfolded over the last 30 years.

      Meat will eventually be grown in petri dishes as that tech gets cheaper and our current means (feeding crops to cattle) gets ever costlier due to demand growth and climate change.

      In my “optimistic” view, the technologies on our doorstep, technologies that already exist, and need only economies of scale, will allow us to successfully make oil a smaller and smaller part of our lives to the point where by 2035 a spike in prices, although impactful, would not create the economic meltdowns it currently does.

      At the same time, I believe the U.S., Europe, and Japan’s people will be, on the average, much poorer. Millennials struggle more than Gen X, and Gen X struggles more than Baby Boomers. Gen Z will have it worse than Millennials. College debt and ever lower wages for jobs requiring a college degree will sap the middle class dream from many in the next decades. Many will make it through by not having kids as well as a transition toward a more multi-generational home structure in the U.S. The U.S. is unique in that children, parents, and grandparents rarely live under one roof. This will change, and likely quite rapidly in the recession that follows the next oil price spike.

      Anyone have any thoughts on this? I enjoy any opportunity to adapt my thinking, and become more aware of my own blind spots.

      1. My view is similar. I think most people will become poorer, forcing them to consume less, which reduces the need for fossil fuels. And as the price of those goes up, consumption goes down even more.

        I don’t foresee everyone being wiped out, so I think some people will continue to do better than others. And the harder it gets for most people, the more resources there are left for those few who can afford them and have access to them.

        For the planet’s health, global depression is probably a good thing. For the people affected, probably not so much (though I think a simpler life with less consumption is not, in itself, a bad thing). However, I’d say individual people or cultures matter little when it comes to the future of Earth. If some people survive well enough, humans can continue. If no humans survive (which I think would mean most Earth would have become uninhabitable to most life), then Earth continues on, perhaps reinventing itself anew again, a process that continues until the Sun no longer supports it.

        1. On a geologic timeline I see humans simply as a catalyst for releasing the stored entropy of fossil fuels. A sort of “entropy finds a way” kind of view.

          The Carbon Cycle as described in textbooks focuses on primarily seasonal and yearly cycles, and, before human influence, is correct in positing that carbon sequestration is mostly a one way street.

          In a similar vein, before the existence of photosynthesis an intelligent observer would presume low entropy EM waves hitting the Earth were a one way street. Who could possibly conceive that a complex process would come about that utilizes that entropy to do work (photosynthesis) instead of being naturally “wasted” as it experiences heat death.

          At some juncture there will be a 4th Law of Thermodynamics that states “Any low entropy system that cannot attain equilibrium by current processes will, if sustained long enough, utilize free energy (low entropy) to develop processes that bring the system into equilibrium”. Those new processes are, by definition, complexity.

          The most accessible form of this is the formation of a star. Heat death alone cannot bring the system to equilibrium. The reaction rate (which itself is simply “entropy finding a way”) is so slow that disequilibrium builds – entropy is bottlenecked, like water behind a dam.

          Fusion reactions break the bottleneck. Entropy can now flow higher, but only after a highly complex series of processes develop. We need look to the stars for evidence that highly complex, self-sustaining processes are a natural consequence of entropy build. What we call life will one day be thought of as no different than the complex processes unfolding in a star, a hurricane, or any other complex system that results from entropy build and disequilibrium.

          Entropy built up in this planet’s crust, and to me it was all but inevitable that some process would come along to release that entropy. An intelligent observer could no more predict humans would be that mechanism than one could predict photosynthesis before it came about.

          Science can predict the half life of a block of uranium, but cannot predict what specific molecule will undergo decay or when. Similarly, we can surely predict that a constant building of low entropy in disequilibrium will develop a process (complexity) to bring about equilibrium, but we cannot predict how or when.

          Hopefully that all makes sense. I feel as though this broader view of life, energy, and complexity will not take root until we have evidence of life else where. I think that will spark a healthy debate that invariable leads to a single conclusion – life isn’t a unique process separate from the “natural” complexity we behold every day; it is simply a different category of entropic process no less or more important than the complex entropic process of stars, storms, or ocean currents.

          Even when I was a doomer I was quite content. Do we weep for the dinosaurs struck by an asteroid? No, because that event pathed the path for us. Would a creature living 65 million years from now weep for us? No, we were but a step in the continuous march of cosmic time.

          1. There is already such a Fourth Law of Thermodynamics formulated by the late Nicholas Georgescu-Roegen

          2. Brian,

            I thought I had a handle on entropy before reading your comment; now I’m not so sure. Actually, when I hear the word “entropy” my first thought involves old steam engines puffing down the tracks; next comes change in entropy as in thermodynamically reversible process followed by statistical stuff per Boltzmann. Finally the mind shifts to phase transitions, information theory, Second Law and lastly arrives at quantum mechanics as in wave function collapse.

            But, when you say: “low entropy EM waves hitting the Earth” I have no idea what that means. Wave energy is determined by amplitude isn’t it? The only time I’ve heard of entropy relative to EM radiation is in terms of wave function collapse. “Entropy is bottlenecked, like water behind a dam” Really? “Fusion reactions break the bottleneck.”

            I’ve always thought fusion corresponded to an increase in entropy (as melting ice cube) where order is decreasing in a closed system. “Entropy built up in this planet’s crust.” I think you mean entropy DECREASED in the planet’s crust, at least if you’re referring to the accumulation of fossil fuels. I won’t go on but when you ask: “Hopefully that all makes sense?” No, it doesn’t, not to me anyway.

            Solar fusion is not entropy in the sense of things breaking apart and never being put back together, but spreading of (total) disorder in space. We get sunlight on Earth because of entropy as the sun’s fusion spreads energy into the solar neighborhood. At least that’s the way I see it.

            2. Doug,

              It was truly a messy comment I made. More of a cathartic act where I just rolled with the thought stream to see where it led. Internet trolls the world over would be proud!

              I internally debated whether to post it, or just delete it since it was a very (euphemism alert) “creative” rambling. I apologize.

              That being said, I will defend my non-sense cause this is the internet after all.

              I was using the concept of entropy interchangeably with equilibrium. EM waves are on a fundamental level a low entropy form of energy; any system with a net influx of EM energy is a system that is accumulating (relatively) low entropy energy. Photosynthesis guides its journey to higher entropy, and captures a percentage in chemical bonds.

              To me it’s all about fundamentals. If an EM wave can be use to do work, whether in a solar panel, photosynthesis, or making water evaporate, then it is by definition a low entropy form of energy.

              I was sloppy in my wording when saying “entropy build” as what I was trying to convey was a building concentration of low entropy. Interchanging that sloppy term with “disequilibrium” was an attempt to marry the two seemingly separate concepts. In modern thermodynamics rising entropy is equivalent to approaching equilibrium, a low entropy system is = to being far from equilibrium.

              “Entropy is defined as a thermodynamic property which serves as a measure of how close a system is to equilibrium, as well as a measure of the disorder in the system.”

              In relation to fusion reactions we are in complete agreement; I just didn’t explain it very eloquently. I was referring to the moments before a star is born. Fusion is the new process that allows the low entropy gas cloud to more quickly reach equilibrium i.e. higher entropy.

              A brown dwarf, although it is far from equilibrium, never gets far enough from equilibrium for the activation energy required to overcome the Coulomb force to happen spontaneously at its gravitational center.

              I, um, hope that makes more sense. You are far more knowledgeable on this subject than I.

            3. No problem Brian, ramble on to heart’s content. And, sorry if I came across as a prima donna. This isn’t a physics blog so I really should keep my trap shut sometimes. Blame my wife who, as a mathematical physicist, is extremely exacting and a bit brutal when I cross the line with my unwarranted generalizations — which I’m ALWAYS making.

            4. Oh, Brian, one word of warning, talk about Brown Dwarfs all you want but don’t get onto pulsars; I’ve been following pulsar physics for over 40 years and can go on forever about them. 😉

            5. You must be old. Do you remember when popular mechanics had articles about atomic powered cars? I used to lap that stuff up, and wanted to study at MIT to design miniature atomic engines for lawnmower sand things like that.

            1. shuffling, that’s a way to visualize it. When you get down to it we living things absorb high energy photons and give up low energy photons. We are entropy reduction machinery.

          4. A bit of perspective: the process of fossil fuel accumulation is astonishingly inefficient. The total fossil fuel burned by humanity in the last two years (accumulated over many millions of years) probably is equal to about a month of Earth’s solar insolation.

            The whole idea that we have a one-time surplus of energy is unrealistic: the current solar flow is 10,000x as large as human FF energy dissipation.

            1. The whole idea that we have a one-time surplus of energy is unrealistic:

              Nick, I know you are solar power’s most enthusiastic cheerleader. But I do believe you are overselling it just a bit. The conversion to solar power, such as it will be, will be very expensive and rife with problems. And it is will not be even close to the panacea you expect it to be.

            2. The point is that there’s an enormous surplus of affordable energy available to us.

              Does that mean there’s no work involved in using it? No. Every energy source has required a lot of human ingenuity to access, from water power, to Dutch & Spanish windmills, to Dutch peat, to charcoal, to coal, to oil, etc.

              Expensive?

              No. PV is already cheaper than the grid in many places, and it’s cost continues to plunge. It’s far cheaper than oil/diesel generated power (which may be as much as 10% of current oil consumption).

              Solar power doesn’t fall equally everywhere, but it’s far more generally distributed than fossil fuels.

              Panacea?

              I wouldn’t suggest we try to use solar power for everything. That would be far sub-optimal, though doable if necessary. A diverse supply of energy sources is clearly cheaper, more reliable, more accessible, etc. Wind & hydropower (which are indirectly powered by solar power) have a very nice synergy with PV/CSP. Nuclear will work, if needed.

              Does that address your concerns? It’s short, because instead of covering various possibilities, I think I should stop and ask – what would you think might be the main showstopper?

            4. Nope.

              Now, the fact that sunshine only shines in the day means that the optimal mix of solar is probably not more than roughly 1/3 of kWhs – more than that probably means increasing storage or increasing consumption during the day, which might be a bit inconvenient.

              But, as I mentioned above, a diverse supply mix is definitely best.

            5. Seems to me winter time sunset in Beijing is one hell of a show stopper. Cold, short daylight, lots of chinese huddled and cursing the communist party leadership in the dark because they forgot to order batteries when they bought the solar panels.

            6. oops. That should be “The total fossil fuel burned by humanity in the last two hundred years (accumulated over many millions of years) probably is equal to about a month of Earth’s solar insolation.”

            7. I think some of the metrics are 1 year of solar insolation is more energy than all fossil fuel resources combined. Or 1 hour of solar insolation is equivalent to 1 year of human energy consumption.

              Some more practical metrics are from an NREL study that estimated 7% of a city’s surface are could provide 100% of it’s power if covered with PV. Or 1/3 of the Mojave Desert could power the entire US. Or an area the size of Spain could power the whole world.

              So obviously, the potential resource is there.

            9. Yes. I suggest you pickup a panel just to check it out. They work fine on cloudy days, even if it’s raining. Of course they don’t work at night, but there’s plenty of batteries around to fix that. Cheap lead/acid batteries work fine for PV.

              BTW, didn’t you write an excellent article about oil companies colluding to quash renewable energy, and electric cars?

            10. No it doesn’t really work. We have solar plants and the local papers carry lots of information about what goes on. Low sunlight, panels break, they have to use water to wash them because we get Sahara dust. Many of them were expecting huge subsidies, went broke when the government realized the whole thing was a scam. In real life, here, they have a lousy reputation. Same in Germany. Wind power does much better here, we read less complaints. What solar did was hurt renewables overall, because the money spent subsidizing it could be used to pay for the gas turbines and small hydro w need to offset wind intermittency. Solar is bogus once we get away from the equator and have longish winter nights.

      2. My guess is that literal factory grown meat is a LONG way off at best but your general views match up more or less with mine. I think there is a very good chance countries such as the US can pull thru peak oil more or less whole but no doubt there will be some severe economic consequences and average living standards are going to fall.

        This will not because technology cannot EVENTUALLY make up for oil and most other resource shortages but rather because technology imo cannot move so fast from gleam in the eye to verified experiment to small demonstration to high priced early adapter niches to general economic dominance.

        Don’t get caught in Egypt!!!

        ( I always use Egypt as an example of a country with a huge fast growing population that imo will not be able to pay for imported food and energy.)

      3. U.S., Europe, and Japan’s people will be, on the average, much poorer. Millennials struggle more than Gen X, and Gen X struggles more than Baby Boomers.

        Median wages haven’t grown in the last 30 years, but they haven’t fallen. Household incomes have risen, due to women working more. Per capita GDP, and average incomes have risen significantly.

        So, why have median wages stagnated? Because income gains over the last 30 years have to gone to the top 20% of earners, with much of them to the top 1%.

        It’s not a problem of Peak Oil – it’s that the rich are getting richer, and the rest of us aren’t.

        1. In some cases it’s caused by technology. In others it could be illegal immigration. Putting a few extra million low skill individuals in the labor pool doesn’t help the lower skill labor to get leverage and higher wages. And now I will wait with my helmet on.

          1. No, I agree, it’s a complex thing that’s influenced by a lot of factors. For instance, information technology makes it easier to have a “winner takes all” economy.

            A very big factor is unionization – a lot of people have been brainwashed into thinking they’re “too good” for unions, and they’re much poorer for it.

          2. No helmet required.

            Importing more people, especially low-skill people, does not help the situation in the U.S. going forward. No racial or ethno-sociaological profiling here, just the cold hard reality of finite resources with increasing extraction/production costs, divided by more and more ‘consumers’.

            Automation certainly has a lot to do with reduced opportunities for decent employment as well.

            As does Outsourcing.

            As does consumer/societal satiation.

            I think that these four factors (Automation, Outsourcing, continuing immigration/too high of a population, and Satiation) probably account for the shortfall in good employment opportunities in the U.S.

            1. But what evidence is there for finite resources creating a problem? Inflation is low, and commodity prices are falling (not just oil).

              Demand for many manufactured goods has plateaued, but we certainly need a lot of new infrastructure, including things related to energy. There’s enormous unmet demand for services, including childcare, healthcare, eldercare, education, entertainment, etc.

              A large part of the problem is too much income going to the wealthy, who have a lower “propensity to consume”. They put their money into paper investments, and the economy stagnates.

          3. I am one hundred percent with Fernando in this respect. My own people were greeted with ” No irish need apply” signs and worse when they came over and I have understanding and sympathy for refugees economic , political , or religious.

            But facts are very stubborn things and the demand for ordinary low skill or semiskilled labor is far short of the supply and every new immigrant adds to the problem.

            If I am short of help sometimes I have paid twenty five dollars an hour if the need is critical- for help such as harvesting in front of an incoming hurricane.

            But when there are five or six applicants for a farm labor position then I can get a good man for eight bucks. If there are a dozen applicants I can if I choose get the youngest and toughest of the lot and work him like a machine.

            If there are twenty applicants some of them will gladly work for less than minimum wage and often do.

            I used to know tons of liberals very well and used to spend most of my time around them.A very few of them paid casual laborers maybe a dollar more than the local going rate. The rest put their own wallets well above their rants about living wages.I have yet to meet one personally who pays a so called ” living wage”.

            When I was doing handy work it the university district in Richmond Va and asked how much I was owed for some small job I usually found the best answer was to just say whatever you think is fair.This had a good bit to do with getting paid in cash and not having a half a dozen different kinds of licenses and permits of course.

            Not once was I ever paid anything close to local union scale or the going rate for a contractor to have done the same work.For example for replacing a faucet and a couple of light switches and rehanging a sticky door a real liberal loud mouth professor known for bitching about local companies not being willing to pay fair wages gave me forty bucks for four hours which did not include my road time. I will say that his wife looked distressed and slipped me another twenty on my way out.

            The reason I happened to know all these people well was that my sweet pea at the time was a grad student getting her masters in ed and we lived in the immediate neighborhood and our social life revolved mostly around the university.

            A plumber with a number in the phone book at that time would have charged forty bucks just to swap out the faucet.

            1. The rest put their own wallets well above their rants about living wages.

              They weren’t ranting about people not volunteering to pay more, they were ranting about the need for a general rule to pay more.

              Basketball players don’t volunteer to play differently. Hockey players don’t volunteer to wear face masks, but they may push hard for a general rule that everyone follows so no one’s at a disadvantage.

              There’s no hypocrisy in wanting to change the rules, yet not volunteering to do it unilaterally.

            2. Basketball and hockey players work? You mean on the side? Poor choice Nick, those guys and their professions get paid for entertaining others – one of the many “catagories” of work that will experience huge reductions, if not elimination, in my opinion. Bullshit jobs – referenced below by Tagio (love that) – are most definitely the result of excess in the system.

            3. ”There’s no hypocrisy in wanting to change the rules, yet not volunteering to do it unilaterally.”

              In this case I see the issue differently. It is as much a moral issue as an economic one in my eyes and if you are not willing to walk the walk you should not talk the talk- especially when you can afford it.

            4. I wonder if your real objection isn’t to them being excessively judgemental & moralistic…

      4. Anyone have any thoughts on this? I enjoy any opportunity to adapt my thinking,

        and become more aware of my own blind spots.

        It may be a little late to add a comment to this post but someone may still read it, so hear goes:

        Meat will eventually be grown in petri dishes as that tech gets cheaper and our current means (feeding crops to cattle) gets ever costlier due to demand growth and climate change.

        My thought is that even though we have the knowledge and that such technology could become somewhat cheaper, for that technology to be used for the mass production of food to support billions of humans, it will depend on a continuation of a very complex society and civilization.(see: Collapse of Complex Societies by Joseph Tainter, as to why that may be a rather unlikely scenario) Such technology probably won’t be able to out compete other more energy efficient and simpler ways of producing protien such as raising insects.

        At the same time, I believe the U.S., Europe, and Japan’s people will be, on the average, much poorer. Millennials struggle more than Gen X, and Gen X struggles more than Baby Boomers. Gen Z will have it worse than Millennials. College debt and ever lower wages for jobs requiring a college degree will sap the middle class dream from many in the next decades

        I agree in part with this view but think that the entire paradigm it describes is likely to just become obsolete because it is so out of touch with physical reality in a resource constrained and depleted world. I think the days of a consumerist society based on planned obsolescence of gadgets coupled with a BAU economic growth model have actually been making us poorer and poorer all along in ways most of us do not even comprehend. This model has allowed a few to enslave the masses by controlling the way we think and see the world. Propaganda through the media tells us we need ‘STUFF’ to be happy… as a consequence many of us have lost our connections to the things that really matter.

        I have just returned from a trip to a place where people are perhaps poorer in stuff but also richer in other ways. They are more connected to each other and nature. They seem to have time to chat with friends and maybe make some art and music, and sing and dance with each other. The stuff they do have is more about needs than wants. I sincerely hope that this is a model that more and more people will seek as our future unfolds.

        Happy New Year to All!
        Fred

  5. The demand destruction already happens at $100 – $110 a barrel. That’s what the world is learning now. Announcing tapering of Quantitative Easing may also have contributed. The impact of lower oil prices on the financial system is also something to watch. One analyst has coined the term “sub-prime oil”

    SATYAJIT DAS, FINANCIAL ANALYST: One way of to think about this is if sub-prime mortgages was the trigger in 2008, sub-prime oil might be the trigger in 2014 and ‘15.
    http://www.abc.net.au/7.30/content/2014/s4155928.htm

    In regards to CO2 oil production is already too high right now. From my website:

    16/5/2013
    Half of oil burnable in 2000-2050 to keep us within 2 degrees warming has been used up as we hit 400 ppm
    http://crudeoilpeak.info/half-of-oil-burnable-in-2000-2050-to-keep-us-within-2-degrees-warming-has-been-used-up-as-we-hit-400-ppm

    1. @ Matt

      re: “The demand destruction already happens at $100 – $110 a barrel. That’s what the world is learning now. ”

      I agree that this is the case with a society that has yet to adapt. However, I believe that if or when we are forced to live differently by circumstances, over time we could live with $500 oil….$1,000 oil. Certainly, many aspects of our economy would no longer exist, but do people really need to fly to wherever to an ‘all inclusive’, or for a winter holiday in a hot climate? Are people happier in ticky tack sub-divisions? These wasteful industries could be replaced with others over time.

      FF used judiciously can help mankind live more comfortably than without, and certainly help build up alternatives, but this consumption of everything at any cost as being normal has got to end.

      Hopefully, birth control will prevail over war or famine because one way or another we aren’t going to make it at 7 or 9 billion people wanting ever more.

      regards

      1. Paulo, a lot of people could live with $500 oil….$1,000 oil, but more people could not. “Adapting” to that price would mean a dramatic change in our economy. The airline industry is not the only industry that would collapse, the trucking industry would collapse along with it, and with it our food delivery system. Of course food would still be delivered, just not as much and at much higher price.

        Everything would be higher, much higher. People could not afford to just abandon their homes in the distant burgs and move closer to their work or shopping. There is no place for them to go. They would be forced to stay put.

        Many small remote places still use diesel generators for power. Virtually all small islands do, remote villages in Alaska and other places do, and thousands of other places that are not serviced by a grid depend on diesel for power. This would be catastrophic for them.

        Basically that kind of oil price would totally collapse the economies of many countries and a severe hardship for those that do not collapse. You would see a depression far, far worse than anything the World has ever seen in modern times.

        One other thing would come from $500 to $1000 oil, it would dramatically reduce our population due to starvation.

        1. I know you are right with your comments. However, I am pondering what would be a happy medium, so to speak? What price forces us to change yet does not plunge the world into what you describe?

          It just seems that right now it is all or bust. We either keep goosing the GDP with perpetual growth and consumption via cheap energy and/or increased debt, or millions starve. Of course the sea is rising and……

          regards

        2. I agree with your scenario, Ron, but would add a bit of emphasis in a couple of areas.

          The most thorough analysis of PO that I’m aware of is the one done by a team of German military analysts four years ago. Despite its thoroughness (around 100 pages) and its stark conclusions, this study has been almost entirely overlooked, especially by MSM.

          The Bundeswehr team stressed the importance of trust/confidence, especially when it comes to financial institutions, currencies and government. They warn of a ‘tipping point’ in terms of production, prices, economic growth and public confidence. They point out the degree to which financial markets are especially attuned to new developments and have the power to accentuate/aggravate new trends. They also warn of chain reactions and contagion leading to the “collapse of monetary systems and international supply chains” and culminating in famine.

          The central point of the Bundeswehr analysts was probably this:
          “… the energy supply of the economic cycle must be secured and sufficient to facilitate economic growth. A shrinking economy over an indeterminate period presents a highly unstable situation, which would lead to system collapse. The security risks of such a development can hardly be assessed” (p. 65).

          More details here:
          http://www.resilience.org/stories/2011-06-13/review-bundeswehr-report-peak-oil-section-22-tipping-point-nov-2010

          1. RICK – I remember reading that study. What I didn’t expect was that it is possible to have economic growth split away from economic stagnation/contraction. It’s like having two sets of books.

            However this too has a limited life span and baring some significant bubble mania opportunity arising, which I just don’t see anywhere, it looks pretty certain that the jig is just about up.

            Cheers!
            Jef

          2. ” the energy supply of the economic cycle must be secured and sufficient to facilitate economic growth. ”

            It’s difficult not to feel a twinge of dispair when in the middle of what you hope to be a sophisticated analysis pivots on the fantasy of infinite growth.

            1. “the fantasy of infinite growth”

              Unless I’ve misunderstood your comment, I think you’ve misunderstood the Bundeswehr’s observation on economic growth.
              I’m paraphrasing here but their logic is as follows:
              – cheap/affordable energy is essential for economic growth;
              – PO will cause cheap/affordable oil to become less available;
              – this will stall economic growth;
              – this stalling will probably rattle financial sectors first, since they are so attuned to new developments;
              – ripple effects will extend to banks/lenders, currencies, and faith in governments;
              – economies function within a fairly narrow band of stability, and unsupportable energy costs and stalling economic growth will be very destabilizing.

              I found their analysis to be refreshingly candid and certainly not crude or unsophisticated. They also did their homework, with dozens of references to PO analysts like Simmons, Hirsch, Heinberg, etc… I think Jeff Brown and UKERC are in there as well.

              This is a study which warrants far more attention than it has received.

            2. Hi Rick,
              ” cheap/affordable energy is essential for economic growth;”

              The only steady growth that we have is debt growth. The whole economy is one ponzi scheme. It is all illusion of wealth. Remove the credit in US /Canada and you will have the living standard of southeast Asia. Europe already started the process of feeling effects of no more available resource collateral to secure credit in their monetary system. Just within 5 years Greece is reduced to 3rd World country. The others will follow very shortly.
              What Bundeswahr is really afraid (by publishing this document) is that is has to go to war in order to secure reaming resources and not well being of ordinary citizens in Germany. If they are really interested in well being of citizens they would start collaboration with other countries instead of more wars (economic/trade/military).

            3. I am not an oil analyst so I apoligize if my comments about the McGlade model here are simplistic or misguided. I have not read his paper, so I am shooting in the dark. Reading this review, however, it appears to me that the McGlade model seems designed more to establish the condtions under which we may continue at a production plateau of 80 – 90 million barrels/day than anything else, and under these conditions ends up with a price of circa $500/barrel around 2035.

              This is fantasy land. The economy cannot and will not support use of 90 million barrels at $500 a barrel. Saying that somehow the economy will change to make this possible is basically equivalent to “and then a miracle occurs.” As Steve Ludlum harps on time and again, almost all oil use is nonremunerative – it does not generate positive organic economic returns. In other words, we just waste it in order to provide ourselves with a cozy and comfortable lifestyle, erect cities and live in places no one would otherwise dream of living such as the desert, engage in military adventures seeking world domination etc., but burning the stuff and sending the combustion products into the atmosphere does not generate higher economic returns with which to pay increased prices or, indeed, any price at all. As long as we had copius and seemingly infinite amounts of cheap oil, we could extend credit/debt financing under an illusion that it would all someday be repaid out of further “growth.” This supported a “growing economy” – really just expansion based on extrapolation of extraction and consumption (waste) trends – and enabled the creation of millions of “bullshit jobs” (Graeber), themselves nonproductive of any real value. Now that we are nearing the end of cheap oil and reality of increased costs is pressing upon us, these jobs are dissappearing. The economy contracts, and can’t support higher prices, which further crashes demand, etc. While it will probably be possible to support some level of production at some higher price, it seems unlikely it will be anything like 80 million barrels. Most people are going to be cut out of this process as more and more “bullshit jobs” go the way of the Dodo.

            1. Thanks for your kind words, Steve.

              I feel honoured to have participated in the ASPO conferences in Denver and DC and was thoroughly impressed with the calibre of the discussions, both formal and informal.
              Now that I’m retired, I will make every effort to attend future ASPO conferences, which I’d like to see happen every two or three years. (As with so many events, annual is perhaps too often, especially given tight budgets.)
              But every two or three years would make the event much more special and I think many people would make the effort.
              PO concerns are as relevant as they ever were.

        3. When oil gets scarce or expensive, farmers will have to resort to producing their own energy like they did before the oil age. Before it was hay and oats for draft animals, but in the future it will be oil seed crops to produce their own oil for tractors, combines, trucks, home heating, barn heating, crop drying, etc… It will take about 1/2 of each farmers currently cropped fields to produce the necessary energy to run the farm – Leaving only 1/2 of current crop production for food.
          Mass starvation and death in many parts of the world will be the ugly result.

          1. I’m glad you raised the issue of on-farm energy, Jon.

            In both Canada and USA, government plans for liquid fuel emergencies/oil shocks are now to steer clear of rationing and simply allow “full price pass-through.”
            This approach has its merits, but when net on-farm income is bordering on negative for so many farmers, this ‘hands off’ approach will not work.

            During the summer of 2008 the effects were visible in our area of eastern Ontario: some fields were idled and most farmers scaled back. During a serious fuel emergency, farmers would need to produce more, not less (in order to compensate for declining long-distance food imports).

            You are correct about the potential for on-farm production of liquid fuels, methane, etc but only a fraction of farmers have the expertise, investment & equipment to actually do it effectively.
            Our emergency plans should have a means to ensure that affordable diesel fuel will be provided to farmers (who now represent under 2% of the population).

            1. I doubt if even one farmer in a thousand even here in the US is able to manufacture liquid fuel if you except the ones who own shares in the moonshine industry.

              The guys who are into grain and oil seed type stuff may have a shot if they are prosperous enough to buy a share in a processing and manufacturing plant. The rest of us don’ t have suitable feedstock – or not enough feedstock to economically manufacture liquid fuels. Nor do we have the capital to invest in the necessary equipment – never mind the necessary skills.

              We will have to buy our fuel for the foreseeable future.

              But I am not worried about the necessary supply getting to farmers except for spot shortages.

              My friends in the military ( mostly all retired now) assure me that Uncle Sam has contingency plans for such problems and that so long as anybody is getting diesel farmers will get what they need.

              I see no reason to believe otherwise although there might some serious time lag between the time shortages first develop and the time rationing is imposed.

            3. We have traditionally made enough to drink and give away to friends and sell a little but the price has been pretty steep in terms of lawyers and jail time and nobody in the immediate family is making any at present .I could still put my hands on some good stuff though if the occasion demanded. Lol

              At least a couple of cousins are resting up at government expense for making it in the past and for growing a little pot .

              Making liquor is a lot of work and to make it worth while as a business proposition you have to make it in quantities which damn near guarantee getting caught eventually.

              Making it legally involves spending a fortune getting the permits and building an approved facility. And then once built you would have to run it.

              Maybe the regulations involved will be loosened up considerably when the shit hits the fan but I would not count on this happening.My guess is that tptb will just see to it that farmers get what they have to have – diesel fuel.

              It is possible to run a diesel engine on ninety five percent ethanol /five percent diesel and it will run just fine but modifying an engine to run this way costs as much or more than a new engine.

              If we ever run tractors on ethanol again they will have to be new ones.A few million more or less antique gas jobs could conceivably be hauled out of sheds and reconditioned and modified to run on moonshine.

              This would run at least a couple of thousand just to properly modify the engine plus whatever else would have to be fixed. And the old gasoline tractors still around are generally way too small for the implements on hand these days anyway.

              I still have double bottom plows- that is all we ever had given that we have traditionally been orchardists and not field crop guys – but a real grain farmer these days plows not two furrows but six at least and maybe eight or even twelve – if he even plows at all.

              My biggest tractor wouldn’t much more than wiggle a full size sod planter in a nice level parking lot. Orchardists farm with two hundred horses or more just like the big boys but our machines get most of their horses from self contained engines rather than under the tractor hood.

            4. “so long as anybody is getting diesel farmers will get what they need.”

              Common sense says that of course this is what should occur, Mac. But I’ve been up and down the liquid fuel emergency (LFE)/oil shock plans (both past and reasonably current) of IEA, Australia, NZ, UK, USA and Canada.

              Everyone seems to have moved away from allocation and rationing schemes (which invariably have farmers in the top priority category) because they are unworkable. Australia did extensive work a decade ago (Alan Smart’s team’s documents were about 1,000 pgs in total). UK revised their entire emergency plan following the Sept. 2000 fuel crisis.

              But nothing has been done here in North America for decades. I met in Ottawa with Canada’s two lead officials three years ago and they were very clear: our late 1970s plan would never be used, no research had been done since and the entire issue was far from anyone’s mind.

              I also had a long conversation (2008?) with the DOE person who is responsible for fuel emergencies and she said the same thing: gov’t would do its best to stay out of the way and let the markets sort things out.

              On one level, expecting small farmers to pay emergency prices for diesel sounds like social suicide in terms of food supply a few months down the road (or perhaps even a few weeks).

              But think of the implications of supporting/prioritizing farmers:
              – what good is on-farm production if it can’t be moved along the supply chain? Processors and truckers need fuel as well. Supermarkets can’t function unless their staff can get to work, etc.
              – if farmers are to be subsidized, why not first responders, hospital staff, utilities personnel and civic employees, maybe even teachers and school buses?

              As the first Oil Shockwave analysts pointed out in 2005, a major oil supply shock would be a problem of the highest order, yet it’s something that we’ve given very little thought to. We think it can’t happen….

            5. Let me begin by saying that the people who are retired military who have talked about this sort of thing with me assured me that there are plans made public and OTHER plans that reside in only in outline form in their training manuals and in some detail in safes and computers classified top secret.

              I agree absolutely as things stand right now that farmers might not- probably would not- get what they would have to have and that the food distribution and processing industries might not get what they need.

              But after the time lag I mentioned – and after the PREZ declares a state of emergency and congress goes into special session etc – then the rules will change fast.

              My grandparents got the fuel and tires they had to have to keep their farms going in during WWII. They told me about giving a couple of gallons of gas to a neighbor once in a while so he would be able to get to to visit family too far away otherwise. They claimed they never got enough to sell any which I believe – a good bit of work was done with horses and mules which would ordinarily have been done with tractors and trucks.Next time around there won’t be any horses and mules- not a single one remains except pleasure horses among the local working farmers.A few hobby type guys have one or two horses or mules.

            6. Having a top-secret plan that involves the general public (and especially regarding something so vital to the public as fuel) makes little sense, in my opinion.
              Our society is hyper-sensitive to discrimination & unfairness. Unless such an all-encompassing plan can be imposed by martial law (it can’t), its implementation requires broad public acceptance (which itself requires understanding the logic behind the plan).

              As for a time lag, the UK experience shows that gov’t can’t afford a time lag. The most urgent task is to prevent panic buying, especially of fuel, food and toiletries. This can be a matter of hours. Most gas stations have fuel for 4 days or more. During the UK event, some stations were drained in 24- 36 hours. As in North America, local gov’t agencies no longer stock their own fuel, so even first responders had difficulty getting fuel.

              In supermarkets, people with cars and money cleared the shelves, leaving almost nothing for people with fewer resources.

              If something major should happen at Abqaiq or Ras Tanura (or even Cushing) we would be blind-sided. At a moment requiring exceptional social cohesion, I think we’d see existing divisions rupture in a hurry.

            7. @Rick Munroe sez:

              I also had a long conversation (2008?) with the DOE person who is responsible for fuel emergencies and she said the same thing: gov’t would do its best to stay out of the way and let the markets sort things out.

              That means complete reliance on the Federal Reserve and the geniuses on Wall Street to sort things out (run around with their hair on fire). Look to the immediate post-Katrina period in New Orleans for the model. Someone in DC will offer government checks in order to deflect responsibility, there will be a fuel black market run by vicious criminals; cops will shoot citizens on sight for no reason at all … fuel supplies will languish in depots a few miles from areas with desperate fuel needs.

              Evidence of the past 20 years or so indicates nobody in either public- or private sector management has a clue; they won’t instantly get one when SHTF.

            9. I cannot reply below due to the way this blog works so I must reply here above the spot my reply should be.

              What are you guys smoking?

              I am not talking about the government making sure everything works smoothly in the event of a sudden supply issue not severe enough for the federal government to declare a national emergency.

              I am talking about a wartime level cat five shit storm of trouble that is obviously not going away on it’s own. In time of war the government tells people what to do. They do it. All the way to leaving wives to be and packing a bag and going off to either kill or get killed for the duration of the war.

              Uncle Sam managed to effectively ration gasoline and diesel fuel during WWII starting from scratch in a matter of a few months.

              Anybody who thinks the federal government has grown so senile and impotent it can’t organize and enforce a fuel rationing system NOW just does not have a serious grasp of the nature of Leviathian’s powers once aroused.

              The bloody objections of the people to rationing will turn to MUCH BLOODIER INSISTENCE on rationing in a matter of days once they see the wealthy still flying and driving Beemers and Mercedes and shiny F250 pickups with nothing in the cargo box- while they are unable to pay a new ten or twelve dollar per gallon market driven price.

              Empty store shelves are among the best and MOST PRESSING JUSTIFICATIONS for imposing rationing and will be prominently mentioned in congressional speeches involving rationing- speeches that will be made from both sides of the aisle.

              Sorry to be so blunt folks but I have a very hard time dealing with naïveté on the part of supposedly well educated adults.

              When the shit is well and truly in the fan there will be rationing unless things go directly to mad max. It may take a few weeks or a few months for the Congress and the White House to realize that there is a genuine emergency that requires draconian measures be taken to deal with it..

              About the only remotely likely reason things might go directly to hell in a bucket that I can think of is a nuclear WWIII or maybe a super duper unprecedented in modern times solar storm that wipes out the grid and all the computerized motor vehicles etc.

              The odds of a disaster along such lines occurring in any given year are slim but we don’t know for sure how slim.

              Now I DID NOT say that everything would work out well in such an emergency.

              ALL I said was that farmers would get the fuel that they must have in this particular thread.

              In other spots I have maintained that we are not NECESSARILY doomed to having lots of people die of exposure or starvation etc in this country in the event of collapse except as the result of mismanagement.

              If anybody had bothered to ASK I would have said that I expect PLENTY of mismanagement. Hopefully however most of it will be corrected soon enough that not many people starve or die of exposure.

              I expect a a lot of people will die as the result of opportunistic scumbags robbing and raping and pillaging if things turn very nasty very fast.I have often repeated my advice ”Don’t get caught in Egypt.” That by extension means don’t get caught in Detroit or LA or DC as well.

              This all seems surreal to me given that I am one of the most libertarian conservatives around and about as far from a tea party type conservative as it is possible to be. I have stated here and elsewhere that Edward Snowden is a national hero.

              I had long hair and luckily a student exemption during Vietnam days.

              A gang ho flag waving guy I AIN’T.

              But here where almost everybody is insisting that the government ought to do this that and the other to solve problems I am just about the only one maintaining that the government IS CAPABLE of solving the particular problem of rationing fuel in a real emergency.

            10. Anybody who thinks the federal government has grown so senile and impotent it can’t organize and enforce a fuel rationing system NOW just does not have a serious grasp of the nature of Leviathian’s powers once aroused.

              The airport security measures implemented after 9/11 are a good example of how the government can still control our behavior if it says it’s a matter of national security.

            11. Is this even possible? It is still my understanding that farms operate on a net energy loss so how is it possible to for a farmer to produce there own fuel? If it takes a calorie to produce a calorie you get no where fast!

            12. It is a generally accepted argument that farmers run at a net energy loss and while this is probably true the arguments based on physics aren’t the ones that are applicable to answering the question of farmers producing enough to supply their own fuel needs.

              Humans can’t eat coal or natural gas or petroleum. It hardly matters as a practical issue if we put more btu’s into a corn field than we get back out of it so long as the ones we get are IN THE FORM we need to eat them- and so long as coal, oil and gas are plentiful and cheap.

              But what I have said so far is not an answer to the question as to whether farmers can produce their own fuel – or at least the feedstock needed which can be processed into fuel.

              The answer to this question is yes without a doubt- if you are talking about a typical American grain producer. It takes only a rather minor portion of the alcohol that can be manufactured from corn to operate the machinery used to raise corn.

              And while anti ethanol folks ( I am one of the anti’s ) generally fail to mention it there is a substantial quantity of left over mash referred to by various terms such as distillers grain which is a high value livestock feed.

              A farmer who produces fruits and vegetables cannot imo hope to produce enough to supply his own fuel needs and have anything left to sell.

              Now as to the embedded energy content of delivered inputs such as chemical fertilizers and large complex machines such as tractors- it is very hard to say for sure as it depends on the particular farmer and how much of this sort of stuff he uses in relation to his production.

              But on average – farmers import more calories or btus than they export in the opinion of most and maybe all economists that have looked into this – so far as I know.

              I believe we are net importers of energy as a whole across the entire industry but I am not a numbers cruncher.

              But we import very cheap fossil fuel calories and export very high value food and fiber calories and in the real world as opposed to the text book world this works ok.

              It will continue to work ok so long as fossil fuel calories are very plentiful and very cheap.

        4. Ron, rich folk won’t be able to live on $500 oil. The gardener will want $300 to mow the lawn, poodle haircuts will be $400, each bodyguard will charge $6000 per day, a bottle of aspirin will cost $35 and so on. Energy costs will drive everything through the roof. And those bodyguards are going to have a hard time stopping several dozen cannibals looking for well fed humans.

          1. Ron, rich folk won’t be able to live on $500 oil. The gardener will want $300 to mow the lawn, poodle haircuts will be $400, each bodyguard will charge $6000 per day, a bottle of aspirin will cost $35 and so on.

            Not necessarily. The rich people can provide room and board rather than pay. If the rich own land, they can become feudal lords and keep some families on their property.

            We haven’t had inflation in recent years even though oil prices crept up. If the masses don’t have any money, they aren’t going to drive up prices. They aren’t going to buy. They may starve, but they won’t be buying anything.

            2. Have you considered all the people in the world who don’t have much you haven’t eaten the rich? Great income and resource disparities already exist in the world but the poor and hungry haven’t overthrown the rich and powerful.

              Tribes maintain leaders. Countries maintain leaders. It’s in people’s nature that if someone running the show and providing for the people within that tribe, they aren’t likely to kill that leader.

            3. Yes, but they live in stand still societies or have been going up. I think it’s different when things go down. Easter island is an example. I’m not counting on putting several dozen of you to work for me in a medieval system. I think you would kill me and eat me before you let me do it.

            4. I don’t think that if you are surviving because the wealthy have given you food and a place to stay and the rest of the world is starving, you’d kill the person supporting you.

              What example do you have to suggest that people will kill the wealthy when they haven’t been doing it so far?

              How often have armies in the course of history turned on their leaders? Not that often.

              So I would expect that the wealthy will find it easy enough to get by with help with servants grateful for whatever handouts they are given.

            5. Before you’re eaten, you’ll probably loose your head.

              Had not Columbus been savvy enough to dupe, bamboozle the Caribs, who had captured every single crew member on those ships, they would have been the evening dining experience for the Caribs. Columbus convinced the Caribs to spare him and his crews if the moon were to disappear from the night sky in three days. Columbus being a navigator by the stars knew that there would be a lunar eclipse, when it did happen, the leaders of the natives considered Columbus a god and spared the lives of all those sea hags.

              The French Revolution was not kind to French Royalty and the aristocratic cats. Very nasty results.

              Heads rolled by the thousands. Of course, French sociologists studied the effects on a severed human head and compiled the data. Can’t waste a single opportunity to have a scientific approach. If it can be studied, it will be studied, nature abhors a vacuum.

              The guillotine needed lubrication every so often.

              Those Jacobins had a way of doing things and if it needed to be mandated via some legal persuasion, then that’s what was done. Robespierre running the show was probably not a good decision. The French got carried away and went nutso.

              The Reign of Terror:

              http://oldsite.english.ucsb.edu/faculty/ayliu/research/around-1800/FR/times-9-10-1792.html

            6. The pasty face doughboy that owns North Korea hasn’t been eaten by his body guards. 😉

              The risk is real but pretty soon the guards would come to understand that killing the boss is not in their best interests since the boss in the who makes sure the guards themselves get food and fuel.

              If the shit hits the fan really hard a lot of people are going to die in spite of the best efforts of martial law authorities. Some of them will die BECAUSE of martial law.

  6. OFM,

    “My bet is that the price scenario he predicts is in the ball park except that the low price scenario he predicts for the rest of this calendar decade is just too good to be true from the Joe Sixpack pov.”

    I believe he is saying that price will stay low, because “we” won’t be demanding very much, as his graphs on production do not rise very much above what they are today for the next 20 years. This must mean poor Joe Sixpack won’t be able to take advantage of all this cheap oil, because he has no money to buy it with. As you say China is going to be demanding more, along with India and a few others, so unless the west is in a total downward spiral and demanding less and less, his scenario seems a little strange.

  7. Interesting post for this site. The successful guess at oil price trends doesn’t imply his particular model is accurate. Many of us have models and predictions (I have one I used to estimate peak CO2 atmospheric content at around 630 ppm).

    From a technical point of view, NGL (natural gas liquids) shouldn’t be treated as oil. They are used in plastics manufacture, or compete with natural gas in many countries.

    The way I see it, the drive to cut emissions and the need to be prudent and efficient as we consume fossil fuels dovetail. I tend to think the global warming issue is hyped and sometimes here in Europe governments are irrational (Spain is an excellent example of really lousy investments in solar power). But if it fits the need to save on fossil fuel use then it helps us.

    Thus we can ignore the UN and IPCC hysteria but can work to be more efficient and work feverishly to develop practical renewable technologies, rather than the kludges we see today. And if the co2 content of the atmosphere does get to be a problem we ought to consider geoengineerng. This means research in that field is a critical item for the future.

    I shall now wait for answers with my helmet on. I’m used to getting a lot of abuse when I mention geoengineering.

    1. ”I shall now wait for answers with my helmet on.”

      It is good to have a sense of humor. 😉

      You may be better educated in the basic sciences than I am and have better insights into what sorts of renewable energy technologies may eventually be more practical than sun and wind.

      What do you have in mind?

      Personally I am inclined to argue that the roll out SO FAR of the wind and solar industries have been badly mismanaged it terms of getting a good bang for the dollar or euro or whatever has been invested in many many cases.

      But this sort of thing is to be expected in the case of SOME INEVITABLE bad decisions on the part of entrepreneurs even WITHOUT governments getting involved in pushing a technology.

      Now the nature of the political beast is such that DRIVING it is sort of like HERDING animals. You can MORE or LESS generally get them to go where you want if circumstances are favorable but you always spend a lot of time and energy heading them off from going in undesired directions and keeping them from reversing course or just deciding they like it fine where they are.

      AS MUCH AS HAS BEEN SPENT UNWISELY OR WASTED on wind and solar infrastructure that generates a poor or maybe even sometimes NO return the forced investment has no doubt resulted in the renewables industries being at least a decade or more ahead of where they would have been otherwise.

      And pretty soon wind and solar farms and individual small scale solar installations ARE going to be economic on a dollars and cents basis without need of subsidies.( I have my doubts about micro wind ever amounting to much .Towers are always going to be expensive and without a tower there just aren’t that many places a wind turbine works worth a hoot.)

      One highly relevant fact that is usually overlooked in discussing renewables is the fact that every kilowatt hour produced by wind and solar power saves at least three quarters or maybe more of the coal or natural gas needed to generate a kilowatt hour.

      Coal and gas are sold in world wide markets and anything that depresses demand in any given market has the effect of depressing prices for these two fuels in EVERY market. With wind and solar power now generating over four percent of our electricity in the US we are saving at least three percent of the oil and gas we would otherwise be burning in power plants.

      I have not been able to find any figures that I consider worth mentioning on how much this depresses the price of coal and gas but it obviously saves an ENORMOUS amount of money just in avoided purchases.

      We will be enjoying that savings year after year for the life of these installations.

      AND once built- NEITHER wind nor solar farms on land will ever TRULY wear out. Towers and turbines and generators and panels can and will be replaced at a minor fraction of the cost of a new from scratch solar or wind farm. The planning and engineering and transmission and road rights of ways and surveying and land acquisition etc are all one time costs that will never have to be paid again.
      A tower that might fail after thirty years with a current day three megawatt unit up top might be good for another thirty years with a somewhat lighter two megawatt unit up top. If not the foundations will still probably be good and the steel can be recycled and the concrete can be crushed and put on the local roads as gravel.

      For that matter my bet is that the safety mafia will get a good swift butt kicking right out of town and that old towers will be kept in service until sensors indicate failure is NEAR term before they are taken out of service. That might be fifty or a hundred years instead of thirty years.

      Old panels will just mostly fade away until they are either recycled or moved to locations where they are still useful – such as on a farm where they can be used to drive an irrigation pump or a feed mill. OR to a third world slum where they can run some basic machinery when the sun is shining – machinery such as pumps for water towers for instance.Or where they can be used to supplement grid juice in running refrigeration equipment at supermarkets and food storage and distribution warehouses.

      We tend these days to think nothing has any value more than thirty years or so down the road because that is about the limit imposed on realistic debt that must be repaid.

      But as Alan from Big Easy used to point out railroad tunnels dug with black powder in the ninetieth century are still just as useful today as they were then.

      Ditto my old farm house which my Daddy built on a ”cash as available” basis with no financing at all.

      1. Old farmer, I don’t have any answers…other than we do need to do more research. Most people have a kinda funny vision of the world, but the simplest way to put it: whatever we develop has better work for 1.5 billion Indians and 1.3 billion Chinese.

  8. In his conclusions he discusses the limitations of the study, and highlights the following drawback in his study:

    (i) the absence of interaction between the economy and energy system i.e. there is no feedback between
    high fossil fuel prices and GDP growth.

    Without wanting to be rude, thats kind of an important feedback to neglect.

  9. I think measuring the true state of the global economy would help a lot in seeing it’s relationship with current oil prices and production. Unfortunately that seems a lot more difficult than understanding geology (which is hard enough). So which is it; the stock market is booming and we are all getting richer fast, or I have had 1% raises for the last five or six years while health insurance contributions have gone up more than that, and now we have no contract for next year.

    I am not making these comments about my economic situation (one I am very appreciative of) to suggest that they tell us anything important, but rather to suggest that the true state of the GLOBAL economy is hard to see (if you can’t tell the true state of the economy as it effects me, how much do I know about china or India?), and in my opinion it will play the big part in future oil prices and production.

    Predictions just for fun. Next six months global oil (C & C) Production will drift lower slowly (on flat us production) while prices settle between $40 and $50. Twelve months from now production will be falling 2 to 3 mbpd while prices start to climb. At some point in the next 18 months prices will be back over $100. but will not stat that high very long. Production flat, then falling.

    1. Contradiction? “… production will be falling 2 to 3 mbpd while prices start to climb.” This makes sense because a shortage is created. ”
      But then:
      “… prices will be back over $100. but will not stay that high very long. Production flat, then falling.” Here again production is falling but prices will also fall. That can only be if there is a economic downturn, worldwide. This is unstable since oil producers can not sustain low oil prices for long and production is even cut more to a point where demand exceeds production. The price will rise.

      1. Hi nNgass,

        I agree. The long term oil price trend will be up, but I doubt the $500 to$1000 price of oil (if these are real oil prices in 2014$). Note that if we assume real oil prices of $55/b in 2015, that an average real oil price increase of 5%/year for 20 years would result in $146/b (in 2015$) by 2035, an average real oil price increase of 10%/year would result in $370/b in 2015$ in 2035, reality may fall between these two trajectories and price increases will not follow a smooth upward exponential trend, they will bounce above and below the trend line due to changing economic conditions.

  10. When you have 1400 coal-fired power plants located in different locations on the planet, it is unintentional geoengineering. Extracting five billion tons of coal out of the ground each year is geoengineering. When you are plowing up land for crops by the millions of acres, you are conducting an experiment in geoengineering. When you have detonated hydrogen bombs in the middle of the Pacific, you have conducted an experiment in geoengineering. When you are clear cutting entire swaths of forest in the Amazon, geoengineering is the result, maybe not what is desired, but it is geoengineering nonetheless. When you are drilling thousands of holes in the ground to extract oil, it’s got to be geoengineering. If you haven’t seen recent video of China and what is happening there, you haven’t seen the super modern roadways they now have. Incredible what man has done to make the world a better place and yet not. More geoengineering is what is going to happen, a plan for the future will include geoengineering and the cost won’t be much more than it is now.

    One of my relatives farmed for many years, if you didn’t have the implement in the ground, the words chosen were words you didn’t want to hear. You were there to geoengineer the land to make sure the crop was going to grow. Otherwise, you would never hear the end of it. Work was what was happening and that was that.

    You can stop when the work is over for the day or it’s time to retire because you’re too old to work. ‘Too old to work, too broke to quit when you get to the end of the line’ and you can hear Stonewall Jackson sing the words in his Union Song.

    One day while talking about coal and power plants and the smoke coming from the 300 foot tall smokestacks, he mentioned how farmers liked the particulate matter belching from those stacks and raining down on the farmland far and wide from those stacks. “It’s free fertilizer,” he said. Users of electricity also fertilize farmland when they switch on the light to find some leftovers in the fridge. I won’t mention acid rain, it doesn’t count.

    Call it a New Policy Scenario that has been happening for a hundred plus years now.

    Always a silver lining behind the darkest of clouds.

    Coal is black, oil is close to black, black gold as they say, but it does look dark green/brown in the jar. The sample was a thick dark green/brown color that I saw way back when in 1963 when I first saw a sample of crude from the well on another relative’s farmland.

    Call it blackwashing, whitewashing it all doesn’t cut it.

  11. This is all fine, but at this point from a global perspective, environmental policies have had very little impact on oil consumption, particularly when its tied to economic growth, which as we know it is directly tied to more oil consumption. China of the last two decades went from basically being a limited oil consumer to the second biggest and yet its GDP per capita and thus oil consumption per capita remains far behind the US. If it were to reach that level per capita GDP, its oil use would be similar, those are the measures of economic vitality we use.

    Frankly this piece is much more theoretical than most peak oil predictions. Its not that environmental policy couldn’t curb oil use and quite dramatically, but for it to be done on the scale necessary requires a rethinking of value and economics, and this has not been done to any extent, by anyone, particularly environmentalists.

    As far as oil at $300, well that becomes a society we don’t recognize, so its basically nonsense to say, but most importantly it ignores the experience of the last ten years and oil’s rise and what’s that meant for the US and global economy. From helping bringing about the ’08 recession and then at a hundred dollars a barrel the incapability of the economy to regain its previous status quo footing, and now in the last year and half the slow down of the majority of the global economy that has stagnated new oil demand.

    Anyway, we’re already in the transition, the latest great attempt to keep the status quo resulted in a massive debt splurge to offer a limited supplied for limited time, subsidizing business as usual. How much did the oil actually cost per barrel? If you want to see a transition in the next decade, we’d be much better off in the US with gasoline at $10 gallon, that wouldn’t be just a necessary environmental policy, it would be an economic one too.

    1. “Anyway, we’re already in the transition…” Absolutely. Everything we are doing (or not doing) represents The Transition. From the looks of it, there is no master plan for the human race. It’s rape and pillage from the beginning, through the middle and onward towards the end. I mean really, 7+billion people and no plan, WTF???

      Reading this article made me wonder about the other resources. While this is an oil related site, what about the other resources we are mining to make all the things we consume and then throw away. How much of those are left? And do they require “digging deeper” as the extraction continues? Where’s the model with different scenarios of, say, disposing of all the things we use and then throw away? Will we reach peak trash?

      A local group I belong to that trys to keep abreast of development issues in what’s left of the rural part of our county, just found out that some enterprising fellows have found a loop hole in two adjoining groundwater districts whereby they will be able to pump unlimited amounts of water because the aquifer they are tapping is not included in either jurisdiction. I’m talking the Edwards and Trinity in central Texas. The Edwards is highly regulated and sits atop the Trinity (in this location). However the EAA (Edwards Aquifer Authority) has no oversite to the Trinity below it. And the HTGCD (Hays Trinity GCD) does not include that particular part of the county. Another resource that is becoming more “valuable” as the demand for it increases. While rain collection policies struggle to get any meaningful backing because, because, because… well, hell, there is no BIG money in rain collection, and that’s all the insight you need into that.

      Seriously, if there is no master plan, what are we all suppose to be in support of? It’s not business as usual. From what I can gather, it’s business as always.

  12. Right, prophetic.

    A model that considers that prices can stay below breakeven prices for half of the producers for half a decade while production costs keep rising, and prophetises that production remains unaffected, is by no means a safe bet.

    Cheers

    1. But production costs for 50 % of the oil being produced arent $50 per barrel. Or are they? Maybe the investment and operating costs are $50 per barrel for that “marginal half”. But operating costs aren’t the same as capital expenses.

      1. I doubt OPEX or LOE or however you state it is $50+ for half of existing global production. But I am sure there are some barrels out of the 93 million bopd where the production cost is over $50. For many reasons, those barrels will not come off so quickly, but I am sure that effort is starting.

        The two questions that are difficult to answer:

        1. How many bbl of current world wide production has OPEX above $50 WTI

        2. How many bbl of future production cannot “pay out” at $50 WTI.

        I guess that 3-4 million bbl per day of the 93 million is in the red at $50 WTI.

        I guess that over half of in process or proposed projects cannot “pay out” if oil were to stay at $50 WTI over the project’s life.

        I further guess that in the US less than 10% of in process or proposed projects would “pay out” if oil were to stay at $50 WTI over the project’s life, especially if no new pipelines are built for Rocky Mountain/ND crude transport.

        Just guesses on my part, so feel free to slam them.

        1. OPEX above 50 bucks? Gotta be offshore wells that are way down in output, but still staffed with guys who get helicoptered in and out every few weeks with the full safety staff and the occasional hurricane evacuation costs.

          Hard to see how stripper wells with all infrastructure in place would be $50.

          1. Watcher.

            Should have been more clear in explaining my guess.

            WTI of $50 means $40 or less due to transportation issues, crude quality, etc. in many places.

            Further, I am making this guess on a lease by lease or division order basis, not field wide/company wide/state or country basis.

            Further I am probably not using the correct terms as many times LOE or OPEX does not include maintenance capital. For example, repairs to pumping units, down hole equipment, etc. I’ll revise my guess to the “total cost” which I will define as everything spent to operate the lease, including maintenance capital, labor, properly allocated G & A. But excluding all expenses to boost production, such as new wells, work over of existing wells, etc.

            I suspect there are secondary and tertiary projects that go underwater at $50 WTI if all costs associated with maintaining the project are included.

            Also suspect some older off shore falls into this category. Look at the stock price of Energy XXI. Also understand there is North Sea production that is very stressed at $50 WTI, or about $54 Brent.

            Again, I am just guessing, but I think you would be surprised. Labor, in particular, has caused much of the increase in lower 48 due to competition with horizontal shale.

            1. Shallow sand makes sense. I’ve evaluated properties which produced 94 to 95 % water cut. They had very high operating costs on a per well or a per oil barrel, but they produced over 1 million barrels of fluid. That’s 40 to 50 thousand barrels per day, with field operating costs (including pump replacements and other work overs) exceeding $50 per barrel.
              Some North Sea properties are at break even at $80 per barrel. They are kept producing to avoid the abandonment costs. And so it goes.

            2. Would you care to hazard a guess as to how long a deep water well can be kept in production at a loss to avoid plugging it ?

              If such a well loses let us say one hundred thousand a year and it costs one million to plug it ( these numbers are right out of thin air) then if the company owning it can borrow money at less than ten percent or so it would be probably be cheaper to borrow to pay to close the well than to produce it.

              But maybe the price of oil doubles and the well goes from a loser to a winner…….

            3. That well is attached to a line which carries the fluids to the sea surface. There are electric and hydraulic lines coming down from the surface, it’s what they call the control bundle. Some wells have methanol injection lines. The wells are connected to some sort of facility. This in turn is either anchored, or tied to the floor with tension members. It gets complicated. So what we do is hang on to delay abandonment as much as possible. I can’t give you a unique answer, because some countries will even give us a tax reduction to keep us in business. And so it goes.

      2. Full cycle costs are probably the right way to look at the oil price needed to keep oil companies cash positive without having to cut down on future production. We are already seeing a reduction in drilling permits in the US and Euan Mearns says that the situation in Aberdeen is indicative of future cuts in production. We also know of the dire economical situation in Venezuela. This model is already cracking after only a few months of low prices. Hard to see it would be able to hold for a few years.

        1. Future projects will probably be approved by large companies using a $80 per barrel hurdle rate, the exception will possibly be fast decline tight reservoir projects. But the large outfits don’t usually shift away from a long term view.

          It may even be likely that Arctic Oil projects are run on $100 per barrel. But the companies will have to get pickier to avoid incurring debt beyond their accepted range (30 % limit on debt to equity sounds reasonable)

    2. “A model that considers that prices can stay below breakeven prices for half of the producers for half a decade while production costs keep rising, and prophetises that production remains unaffected, is by no means a safe bet.”

      You, sir, don’t understand quantitative ease.

      1. “You, sir, don’t understand quantitative ease.”

        I believe I do to a certain extent. I have to confess that I do not see how quantitative easing is going to help Venezuela or help the US oil companies whose debt is going through the roof remain solvent.

        1. Quantitative easing won’t help Venezuela. Their credit rating is junk, the economy is in recession, with 60 % inflation, decreasing oil production, non payment of over $30 billion owed to suppliers, a serious crime wave, and a very corrupt and repressive government. They have food, medicine and spare parts shortages, a fleeing middle class, and all sorts of infrastructure problems. It’s a basket case.

        2. Talking some more about venezuela: the Peruvian government confiscated the venezuelan fishing vessel “Simon Bolivar” after the venezuelan government failed to pay for docking costs at El Callao. Some Venezuelans traveling in Europe report their Visa cards are no longer operative, even though they had secured hard currency via the official government exchange, and some are left stranded when airlines suspended flights after the government failed to transfer hard currency to pay for tickets sold in Venezuela.

  13. @McGlade sez:

    “Since the idea was first introduced into widespread attention by Hubbert (1956), there has been a fervent debate over the prospects for future oil production.”

    It’s a debate between credit industry shills on one hand, those who are fed up with credit industry lies on the other = this is not a real debate at all.

    Like 99% of all material produced regarding energy, this document is almost entirely about the extraction-side of the petroleum enterprise. McGlade assumes ongoing difficulties in the extraction business otherwise there would be no purpose to the paper.

    At the same time, there is no mention of the consumption-side which is where all of our difficulties lie. McGlade presumes the consumption side of the enterprise will sort itself out by way of markets … that is indeed what is underway. The ongoing oil price crash has little- or nothing to do with extraction; the costs of which are not being priced, rather the absence of return on the consumption side.

    Petroleum = bottom up business. At the end of the day every drop of oil/refined product has to be bought by a customer who must borrow somehow to pay for his purchase. He borrows, his boss borrows, his government borrows, his nation borrows other countries’ money (borrow by way of foreign exchange). Our economies are nothing more than interconnected daisy-chains of hundreds of trillions in loans.

    Borrowing is a necessity because consumption does not offer organic returns. Artificial returns must be borrowed from finance Ponzis; hence the need for shills. The US no longer manufactures goods like washing machines or table radios any more: its Wall Street financiers manufacture the bulk of the world’s credit; this is needed to substitute for absent monetary returns for just about everything else.

    Driving a car does not pay for the car (times- 1 billion cars), nor does it pay for the fuel, the roads, the massive governments including costly military endeavors, nor does driving pay for the ordinary costs of finance (risk premia and interest carry) which have ballooned exponentially. Other than for the smallest handful of customers — transit, construction, farming, delivery, emergency/first responder — customer use of fossil fuels and other capital is non-remunerative waste, for pleasure-fun, convenience, status, etc. The fashionable wasting processes — including fuel extraction industries — are collateral for more and more loans.

    The simplest of models is all that is required to see where this ends up: subtract the costs of petroleum extraction from the small use that provides an actual return. This difference is the price that the economy can actually afford to pay absent credit. With extraction costs rising — which cannot be denied by anyone — and with actual returns being very small, the output of the model looks to be a negative number. What that implies is the price of fuel will fall all the way to zero with nothing to be done in the way of ‘administrative adjustments’ to alter this outcome.

    The more meaningful implication is that the credit system is broken and that increased demand-over-supply does not cause prices to rise but for the ability of consumers to meet the price to fall … whatever that price may be. We can look forward to $8/barrel crude … with 25¢ gas and nobody having any money to buy it.

    This is what is taking place in Venezuela right now … along with variations on the theme occurring wherever anyone may make the effort to look. It is likely that the current oil price crash is caused by easy money policy in Japan/Abenomics … on top of all the other bits of monetary stimulus in other currency regions. It isn’t the end of the policy that is causing the crash but the policy itself: diverting purchasing power from customers toward big business cronies and back toward Ponzi lenders. More easing => more purchasing power diversion => less credit => lower fuel price => more bankruptcies => more credit distress => more easing in a vicious cycle.

    http://www.economic-undertow.com/2014/07/25/the-great-question-mark/

    1. Steve — Nice post. What you’re saying makes a lot of sense to me, and correlates with what the views I have formed from all my reading and information gathering. Also, thanks for that link to the economic undertow article, a very good one. Here is one of my favorite quotes from that article:

      The entire ‘waste fuel- borrow against the process’ enterprise is bankrupt. Even at 90+ million barrels of petroleum-like substances per day, we humans cannot burn enough to pay for tomorrow’s extraction of petroleum; that is, we are unable to borrow sufficient amounts to enable us to extract more. The fuel burning process is insufficient as collateral. What passes for ‘good collateral’ is inflated finance industry assets; claims against fuel that we cannot destroy enough of, fast enough.

      Another valid point made in that article: Regarding Google searches for Peak Oil, the article states that “The triumph of public relations and advertising over discernible reality” has convinced the masses at large that Peak Oil is not an issue, therefore interest in Peak Oil has flat-lined. I think that only a very small percent of the global human population has the ability and the wherewithal to cut through all the propaganda, to logically evaluate relevant facts and get a handle on the real issues surrounding Peak Oil. Those that are able to do so have pretty much already done it — they have “become aware” and are no longer doing Google searches for peak oil because they’ve already found (and bookmarked) their information sources, for the most part — like this website. Probably there are still new Peak Oil truth-seekers and converts trickling in, but for the most part, I think our global population has already been split into two distinct camps — those that GET IT, and those that will NEVER GET IT.

    2. Well said, Steve.

      I would add in support of your Ponzi credit theme that the US is now experiencing the condition in which total annual net flows to the financial sector equal or exceed annual GDP output, which means that the sum of labor product, profits, and gov’t receipts is pledged to the financial sector in perpetuity.

      This hyper-financialization of the US economy, imposed by the TBTF/TBTE banks and facilitated by the Fed, requires that the condition persists or GDP stalls and the necessary flows to the financial system risk contraction and the unprecedented leverage in the system going into reverse as in 2008-09.

      Further, note that the sum as a share of GDP of gov’t spending, household and business debt service, private health care and education spending, and energy consumption is now an equivalent of 56% of GDP. The US economy cannot grow without growth of gov’t spending for war, Obamacare subsidies, and food stamps, household and business indebtedness, illness, unaffordable treatments, and lingering death of elders, and college students taking on debt they can’t afford to repay. However, the growth of these sectors is a net drag on the remaining 44% of GDP.

      Therefore, the cost of gov’t, debt service, health care, higher education, and the oil-, auto-, debt-, and suburban housing-based economic model no longer permits further growth of real GDP/final per capita.

      Thus, the system is, in effect, consuming itself, i.e., cannibalization, and most of us are on the menu.

    3. I agree that debt is financing whatever economic activity there is in the world. And I’d rather not see that because I’d like to see consumption go down for environmental reasons.

      I don’t, however, think the world will stop once people realize the debt will never be repaid. Creditors are the rich and they can survive a very big reduction in their paper assets.

      1. Boomer – You do not understand deflation and how massively destructive it can be.

        1. Ben Bernanke: The evils of deflation is that a consumer sees lowering price and holds off spending until tomorrow. Activity is crushed by always waiting for tomorrow.

          Rebuttal: But if price is rising, the asset owner can hold it off the shelf awaiting higher price, also crushing activity by always waiting for tomorrow.

          Ben Bernanke: Yes, but it’s easier to impose legal requirements on the shop keeper to force him to put goods on the shelf than it is to force consumers to buy.

        2. But if a government decides to drop credit to zero and there is no inflation, seems like you’ve got a system where you can no longer prevent deflation if it is going to happen.

          Putting funds into the hands of the wealthy doesn’t stimulate the economy. If you want people to buy, then you are going to have to distribute these funds to more people, like a guaranteed minimum wage or Depression-era make-work programs.

          1. I meant a guaranteed minimum income. Give everyone enough money to survive, whether they work or not.

      2. Actually, the rich are borrowers, that is how they become rich.

        Credit expands so firms can have access to ‘more’, the firms’ equity shares are the personal wealth of the owners: this wealth is gained with credit. Third parties; customers/taxpayers/ the non-rich elsewhere in the world are all on the hook for repayment. This sleight of hand is really ‘theft’ but is called by economic philosophers ‘capitalism’.

        Public believes that the rich are those that have, rather they are those who have access … access to (borrowed) funds and to suckers who are able to repay.

        1. The poor do borrow in the form of credit cards, mortgages, and auto payments. They are encouraged to do so to buy what the rich are selling.

          Third parties; customers/taxpayers/ the non-rich elsewhere in the world are all on the hook for repayment.

          They aren’t on the hook if they keep pushing the repayment off into the future. Governments can’t collect from the poor if the poor have no funds to bring down that debt.

          If the poor have no assets and are already starving and living without energy, etc., there isn’t anything anyone can collect from them. So there’s nothing more for the rich to extract from them. Whatever wealth is tied up in debt collection would have to disappear unless the wealthy want to loan to each other and repay to each other.

          1. Borrowing is indeed how the non-wealthy repay, they certainly cannot earn enough.

            Due to the systemic repayment obligations the debt owed by each Millennial is about $1 million. Their parents paid their $250k debt by buying a house with a large mortgage. Now their kids have repay their parents mortgage by taking out larger loans for themselves (if they can).

            Their earning potential is constrained so they cannot borrow enough; borrowing is out of reach so their earnings are cut, instead. Here is another vicious cycle: because they cannot borrow they cannot earn either: instead of working as managers they work as bartenders: instead of earning union scale they load bins @ shipping terminals for minimum wage. The funds not earned … are shifted to the lenders so as to retire the tycoons’ debts.

            That’s what folks miss, the poor are separated from their chances to be non-poor; that is how they are forced to repay, how they are stripped of wealth. Of course this is self-defeating for the wealthy but carpe diem, right

            1. I get where you are coming from, but I don’t think more borrowing is going to launch these Millennials into better careers. They have been told to borrow to go to college because that would give them better careers. Many of them now just have debts.

              I think what is helping create new millionaires in Silicon Valley is not the ability to borrow but the ability to get rich people to fund your company. Now that is very stacked in favor of certain groups of people (e.g., white or Asian techie males who have attended the right universities), but that is different than saying they can borrow. They definitely have access to money, but they don’t need access to credit because investors give them what they need.

    4. Steve,
      Thanks for the great post. Well it comes to very simple from the start: We are not given money but credit (debt). And you can’t save credit as compare to money. So it is very easy to reduce and divert “less credit” in order as you say “to distribute purchasing power from customers toward big business and ponzi lenders.

  14. I (and a few others) have demonstrated that the 5- and 10-year change rates of US real GDP/final sales per capita do not grow with the constant US$ price of oil above $40 and oil consumption to final sales above ~3-3.5%. (Note that US real final sales per capita since 2007-08 have grown at a rate of ~0%, 0.5% since Peak Oil in 2005, and less than 1% since 2000, which compares with the long-term rate of 2.1%.)

    Oil below $80-$100 is insufficient to sustain profitable extraction of tight, deep, and tar oil.

    Global oil production per capita peaked in 2005 and is down since, with crude down more. The world is where the US was in the mid- to late 1970s in terms of production per capita, coincident with the onset of deindustrialization and financialization. However, US total public and private debt to wages and GDP in the 1970s and early 1980s was a fraction of what now exists in most of the industrialized countries today. Therefore, the rest of the world does not have the option of financializing their economies with $50-$100 oil.

    Despite the boom in US shale production (fastest 5-year rate since 1927, 1937, and 1944), i.e., a compounding doubling time of 5 years, US oil production per capita is down 45% since 1970 and 30% since the secondary peak in 1985. The boom in shale production against the US depletion regime’s decline curve since 1970 and 1985 is virtually undetectable, i.e., barely a blip. I expect the world to follow a similar trajectory as has the US hereafter into mid-century, including the end of global industrialization and growth of trade, i.e., “globalization” or the Anglo-American imperial trade regime.

    Consequently, owing to constraints from debt to wages and GDP, demographic drag effects, food and energy import costs, and energy/GDP, China-Asia’s growth of 5- and 10-year real GDP/final sales per capita will hereafter decelerate from 6-7% to 2-3% and eventually ~0% by the 2020s.

    Finally, the financialization of the commodities sector, including oil, i.e., commodities having become an “asset class” vs. business inputs, along with futures market leverage encouraged by central bank QEternity at ZIRP, has grossly distorted supply-demand and price signals to producers, speculators, and intermediate consumers. The crash in oil since the summer is similar to what happened in late 2008 with the unwinding of leveraged long futures positions, which is a story that has yet to be told.

    The takeaway is that the US cannot afford to extract costlier, lower-quality tight, deep, and tar oil AND grow real GDP/final sales per capita over 5-10 years. The world is now PAST Peak Oil and in a permanent depletion regime per capita AND at peak industrialization, trade, and growth of real GDP/final sales per capita.

    So, US demand destruction resulting from Peak Oil and demographic drag effects has been underway for many years, only it has been masked by QEternity, ZIRP, the effects of hyper-financialization, food stamps, disability payments, falling labor force participation rate, unprecedented fiscal deficits/GDP, and the unsustainable debt-financed boom/bubble in the tight and tar oil and energy-related transport sectors.

    1. “The world is now PAST Peak Oil” — Depends on how you define “Peak Oil”, doesn’t it? If you define it as “all fossil fuel liquids production”, then I think we aren’t quite there yet since we still have a lot of fracked holes still pumping and a certain amount of new holes ready to come online due to investment already made. But I personally anticipate that we’ll see the above-stated definition of Peak Oil this year as crashing oil prices put the brakes on new shale/unconventional production efforts and as existing short lifespan wells enter into their rapid decline phase. I think we can all agree that American Shale has been the only increase in global oil production since 2005/2008 period. Putting a stop to new development and rapid decline of existing wells — that leads us directly down the backside slope of Peak Oil. And I’m guessing that happens THIS year.

      1. BC and NW Resi

        Good points. This is Peak, right now as far as I am concerned. What NW indicates is when Peak is actually admitted by others as in “Houston, we have a problem”. I hazard a guess that unfolding problems (2015)will be explained by other factors for many many years.

      2. Per capita global Peak Oil happened in 2005-08.

        In terms of net energy and quality of liquid fuels per capita, the decline is larger still since 2005.

        Moreover, in systemic exergetic terms, the net energy per capita “capacity to produce” at an affordable price and necessary quality and supply to permit real GDP/final sales per capita constant is declining at an accelerating rate since 2008.

        QEternity, ZIRP, hyper-financialization, and unprecedented financial bubbles only distorts the supply-demand and price structure in real, currency-adjusted terms, resulting in misallocation of credit, scarce resources, capital, and even larger rentier claims to labor, profits, and gov’t receipts hereafter.

        But the misallocation is a characteristic function of the extractive rentier system, which exacerbates inequality and reduces money velocity and growth hereafter.

  15. Don’t see much value in the study.

    1. Too much focus on price. Recent FT article I someone mentioned here, the reply to which was “thank you for the explanation of QE. I now understand that. But now I no longer understand what money is.”

    2. Before the silliness about global warming, the talk is consumption constraint on production. Sort of a duh. Can’t produce it if there is nowhere to put it.

    3. Global warming is completely unimportant in this discussion. No government is going to starve its people to avoid 2 degs of temp. It’s just a bizarre presumption. Drill or die.

    4. The guy implies geology is some sort of quaint notion in analyzing oil flow rate. And then says he rejects it and economics. Then he sallies forth with saying one should not presume new tech won’t get more oil if there is consumption — which, btw, is the core principle of economics, demand will be met.

    5. Somebody hands out PhDs for this? How did this get past his advisor? The dissertation is reqd to advance the relevant body of work in the field, and the oral defense would explain that happens . . . how?

    1. Oooh, and the German 5 yr instrument just went negative in yield — because, you see, low oil price is economically stimulative.

  16. Thanks for mentioning this independent study, however the fact that McGlade correctly “predicted” the current slump of the oil price does not necessarily mean that he has a more thorough understanding of the system.
    In fact, the modelled price slump did was – unlike his assumptions – not the result of of removed OPEC quotas, a strong production recovery in Lybia or a sudden boost of technological progress of this mature technology. Instead, the price slump is almost completely due to the US shale boom, which is a result of political decisions in the USA (lifting environmental constraints) as well as the frenetic gold rush of crisis-ridden investors in the fossil energy sector – which are still ignoring that so far a huge part of these investments is far from ever breaking even – and which may turn out as a huge investment bubble ,which may burst at any time.
    (See for example:
    https://translate.google.com/translate?sl=de&tl=en&js=y&prev=_t&hl=de&ie=UTF-8&u=http%3A%2F%2Fwww.zeit.de%2Fwirtschaft%2F2014-12%2Foelpreis-usa-russland-wall-street%2Fkomplettansicht&edit-text= )

    If McGlade had considered the real-life “bubble economy” in his set of formulas this would have changed the picture completely.

    Furthermore, creating a model that “predicts” an oil price of 500 $/bbl AND at the same time does not expect a considerable demand destruction (due to the consumers’ limited purchase power and/or cheaper alternatives) – or even a serious economical crisis – might be an interesting theoretical scenario but is highly improbable. Whereas the demand destruction resulting from an escalating oil price means nothing else than a decreasing oil production – the decline after peak oil.

    Of course, McGlade is right to state that “even in the absence of a peak and subsequent decline in global oil production, oil prices can increase significantly.”
    In the peak oil community this possible scenario has been coined “peak oil light”.

  17. Oooh.

    From ZH

    “New Orders number tumbled by 8.7, the biggest crash since the 13.1 crash now blamed on the Polar Vortex (can’t blame the weather this time), it was the unadjusted New Orders number that was the stunner: at 53.5 this was the lowest number since before even the polar vortex: in fact it was the lowest since July 2013!”

    That’s from the ISM released moments ago.

    So again we see that low oil prices are economically stimulative.

    What crap this is.

  18. Well, I would predict a market crash. But correlation does not mean causation. Cheap oil isn’t going to stimulate the economy much and it isn’t going to cause the market to crash. An historic over-valuation will cause the market to crash. Then the rain makers can blame it on whatever snake oil they want to peddle.

    1. What does over valuation mean when the P/E multiples compared to historic norms now have the denominator defined by share buybacks?

      1. It is the first derivative. Look at any historical chart of the S&P. There is a long term growth rate and there are these recent anomalous periods of rapid growth followed by crashes that were caused by external market distortions. The dot com bubble and crash. The housing bubble and crash and now Q.E. These were all attempts by an excessively financialized system to pump itself up and exceed historic gains. That always ends in tears for the average investor. These cycles have the effect of making insiders unimaginably wealthy.

        1. Well, maybe. Or not. Bernanke explicitly said there was no problem in housing in the mid 2000s.

          Seems more rational to me to suggest economics is pseudo science and means nothing, and the things done to try to keep the wheels turning are being done because those wheels are in mud, made thicker by the physics of degrading EROEI.

          When you recognize oil is everything and view all things through an oil prism, a helluva lot of complexity gets less complex.

  19. “The price in NPS drops to a minimum of $57/bbl in 2019 while a minimum of $47/bbl is achieved in LCS in the same year. This reduction in prices may well lead to a cut in production by members of OPEC, but these results suggest that there is plenty of new capacity available on a global basis to meet demand at prices well below current levels.”
    1. Where are the new capacities that are so plentiful to produce cheap oil?
    2. New discoveries are in difficult places that need a high oil price.
    3. Which companies can produce 97 Mb/d oil in 2019 for these prices?
    4. Isn’t a cut in production by OPEC leading to higher prices. Apparently not teh author suggests. Hence, it is expected that a new “Saudi Arabia” is discovered. This is hard to swallow since we could not have overlooked such huge volumes.
    Things do not add up in this thesis. Maybe the “overlooked doctoral thesis by Christophe McGlade” should remain overlooked.

  21. I just saw the first graph where he shows “undevolped” and “undiscovered” oil for UK and stopped reading further . If your hypothesis is faulty then the result is faulty . His forecasting the price is a pure fluke . Price at $ 500 ?? This guy lives in la la land .

  22. Attention: A lot of people are having trouble bringing up the McGlade thesis. The problem, I think, is with their server. The post was picked up by Seeking Alpha, PeakOil.com and I linked to by Google News. They are likely getting far hits than the server can handle. It is likely a small server serving a small institution and just cannothandle the traffic. “discovery.ucl.ac.uk ??

    1. Ron

      the “ucl.ac.uk” server is for University College London, ac.uk is our academic institution suffix . UCL are far from a small institution, believe me (incidentally they’re only about 20 minutes walk away from me)! Although I suspect that you’re right that their PhD thesis servers probably aren’t used to taking the hammering that seeking alpha can generate.

  23. Some info requested on the dismantling and plugging on offshore oil platforms . If the price remains at this level then definitely the North Sea is down the tube . In such a case what are the responsibilities of the oil platform owner regarding dismantling,plugging and final shutdown . What are the costs involved ? What if the owner declares bankruptcy before shutdown ? Is there monitoring of the plugged wells afterwards on a regular basis to check for leakages ? Who does the monitoring ?

    1. The owner, or the previous owner, has the obligation to abandon. The abandonment process can take many years. The costs are high, but they depend on the details. A cost as high as $500 million is possible. Some may cost more. I don’t know about the monitoring requirements in the North Sea at this time, but well plugging regulations are very good. I wouldn’t worry about it.

  24. The economy is globalised now, but with peak oil it will fragment and relocalise. Each economy will have its own price of oil and will have its own factors affecting the price. So, using one model to forecast one price is futile. It will get a little chaotic.

    1. It will get, whatever the most fierce competitor makes it to be. If that requires weaponry, then it is not only inevitable but also moral to use it. It would be immoral for a power with the ability to secure its people advantage not to seek it. Advantage seeking is the very essence of humanity.

      1. You are saying that taking what you need, from another country, with the barrel of a gun is the moral thing to do? Sacking another country, leaving their people to starve so you can feed your own, is the moral thing to do?

        Morality, of course, is a human invention, there is no morality in nature. A pack of hyenas, catching and eating a baby antelope, while its grieving mother looks on, has nothing to do with morality, it is just nature, the way of the wild.

        However humans are supposed to be different, we are supposed to have a moral concept. But if what you say is the moral thing to do, then we need to remove the word from the dictionary because there is no such thing as morality. We would simply be behaving as wild animals behave.

        1. Generally, true.

          So get out yer dictionary and purge it.

          The activity will still proceed, and the winners write the history books declaring who wore the white hat.

          1. No you purge it. It’s your concept, might makes right, not mine. The word stays in my dictionary thank you.

            And you are dead wrong. That activity will not proceed and will not until we reach total collapse, then there will be no government, no law, only chaos and anarchy.

            But now we still try, though we often fail, to keep some morality in national behavior. Nothing is perfect of course, there are always flaws in any system. But for international trade to continue, we must have some kind of law and order between nations.

            When we don’t, and there will come a time when we wont, that will be what we now refer to as “total collapse”.

            1. Ya the collapse word always has seemed to me to lack a good definition.

              As for “and there will come a time when we won’t”, he who acts first acts best. Firstest with the mostest. Why wait for the inevitable if front running generates advantage.

              Besides which no one’s moral sensibilities need be bruised. Just manufacture it all. A Democrat administration did this in the Gulf of Tonkin.

            2. Besides all this, take a step back. Let’s make this case to the electorate:

              “My fellow Americans. I know things have not been going well. Our cities are starving. Chinese GDP reported at 7% recently but we don’t really believe that to be true. Maybe 4%, certainly not 7%.

              Some of my opponents have suggested we can interdict oil and take it from the Chinese so that we have more. This would be immoral. Better we starve and behave morally than achieve greatness at the cost of another.

              That is all I have to say. I urge you to go out tomorrow and vote for me. You’ll die with a clear conscience.”

              Opponent: Vote for me tomorrow and you need not die at all. They have no more right to that oil than you do. There is only so much to go around and we have already made profound sacrifices. My opponent suggests you die. I suggest you live. Vote for me.

              I ain’t gonna need Gallup to predict that winner.

            3. Pretty simplistic conjecture.

              May I reference you to ROCKMAN’s concept of MADOR?

              I will also point you to the numerous pretty logical and plausible scenarios posted by OFM on this site.

              LEVIATHAN will pull out all the stops to manage the situation in a manner to best disguise the reductions in energy availability. Not Mad Max, not V for Vendetta…but sleight of hand, misdirection, extend and pretend, bread and circuses.

              The Kabuki theater of two supposedly diametrically opposed political parties engaged in rhetorical battle will continue to be modulated as required…some manufactured outrage here, some Kumbaya and reconciliation there.

              Again, your snippets of future scenarios are rather native.

              I will bet it all that the situation has been managed at some level for quite some time.

              But, if Mad Max/’The Road’/Dr. Strangelove fantasies are your thing, well by all means enjoy yerself!

            4. Ya, the US will cut back so that Chinese housewives will have more. I can see that conspiracy unfolding from way over here.

              And it will be sold so that Texans and conservative Oklahomans all say yup, that’s the way to go. Degrade my kids’ future to improve life for those Chicoms over there.

            5. Chicoms?

              How quaint.

              You missed/didn’t get my attempted point: the presentation of the realities will never be as straightforward as your cartoon sketch of the future suggests.

              TPTB will not draw swords and sink each other oil tankers or anything like that…the downside from overt kinematic and non-kinematic warfare would dissipate remaining resources a lot faster than adopting the strategy of deftly managing the expectations of the major populations through skillful media/political/economic manipulations and adjustments…if you didn’t get my reference earlier, MADOR = ‘Mutual Assured Distribution of Resources’.

              No government official is ever going to come out and tell Texans that their kids can’t eat as many hamburgers so that ‘Chicom’ housewives can have more stuff. The management of the general perceptions of reality and expectations of the masses will be subtle and incremental and designed to achieve the most with the resources available…and that means avoiding wasteful and ultimately counter-productive warfare.

            6. I assume some of you have seen articles about the US military trying to ween itself off of fossil fuels as much as possible.

              Unfortunately, they sometimes run up against Congressmen telling them they must buy and use more oil and to forget about all that renewable stuff.

            7. I would prefer to put this comment down below but there is no space for it given the way the blog works.

              ”LEVIATHAN will pull out all the stops to manage the situation in a manner to best disguise the reductions in energy availability. Not Mad Max, not V for Vendetta…but sleight of hand, misdirection, extend and pretend, bread and circuses.”

              This is an excellent and accurate summary of my views AS FAR AS IT GOES.

              But ” it ” will go much farther barring extraordinarily good luck.

              The most hopeful scenario I can reasonably see any hope for is Rockman’s MADOR.

              My estimate is that there will be a lot of hot and furious fighting once the people in power in various countries are forced to face up to near term collapse and fighting appears to be one of or the best of a list of bad options.

              Mutually Assured Destruction may prevent the major nuclear powers from attacking each other directly on either sides home turf.

              But I doubt if the US would nuke any other country for sinking an oil tanker headed our way- or that China or Russia or India or France or the couple of other current nuclear powers would nuke us for sinking a tanker headed their way.

        2. All is fair in love and war.

          “Stop quoting your laws, we have swords,” said General Pompey.

        3. Hi Ron ,

          I always envied you your ” Darwinian” handle at TOD. I would have been Darwinian or something very close if you had not been there first.

      2. Hmmm …

        The mighty have been trying and failing to gain by battle since the ’30 Years War’. The mighty accomplish nothing other than lose more than they would have lost by other means.

        What is becoming undone are core theses of modernity: Leverage-as-wealth, money-making-money, End Justifies the Means (and living beyond it).

        In 2014, leverage creates poverty, money speculations unravel before they can mature, means have been depleted to the point where only the most modest of ends can be gained. Modernity is application of industrial, replicative expedients: this worked because externalities/consequences could be pushed onto future generations: now the consequences of both past and the present expedients are at our doorsteps.

        War is an expedient, modern war offers the illusion of mechanical leverage, there really is no leverage at all. At the same time: without ‘growth’ (in unsecured credit = GDP growth) there is no recovery after the devastation of battle. This is indeed something new, not being part of the human story-line since the Middle Ages, certainly not on a global scale. Governments may attempt the battle but they cannot win it = government failure and perpetual ruin.

        Part of the narrative/pathology of our times is the reflexive desire on the part of ‘authority’ to strike out against others and nature itself with greater violence: to conquer, rule, dominate. USA-USSR-ISIS: they have in common is failure. What works is collaboration and creativity, not barbarism.

        1. If you kill well enough, there’s no one to collaborate with. Many fewer moments of bother.

          1. Collaboration increases oil consumption. Think about it. Killing decreases it.

          2. That’s the problem, nobody can ‘kill well enough’ it’s theoretical, only.

            Nobody wins, even after the illusory ‘total victories’ of WWII, the end was not really the end, there really was no victory. The killing began with the 20th century; it has continued to the present. All that remains are aggregate costs …

            Advantages fail or are useless: besides the ‘Great Wars’; Vietnam is the good example for the US as is Afghanistan for the Soviets: these countries did not fail because they weren’t violent enough.

            Also, if the aim is to annihilate capital, either collaboration or contest will ‘work’. Right now our (modern) fashion is to compete, for each of us to outdo every other in waste. There is little in the way of collaboration that can be used as a control. Truly collaborative regimes tend not to be industrial (which are hierarchic).

            1. There is on doubt we CAN kill well enough NOW.

              Ever heard of neutron bombs and genetically engineered contagious diseases?

              I know the bombs are real and think there is plenty of reason to believe the diseases are either ready for release or could be readied for release in just a few short years.

              For that matter we could wipe out a country such as Afghanistan just by spraying ultra low volume (highly concentrated ) weed killer from existing bombers in a few months.No food equals no people pretty quick.

            2. None of these three mechanisms is nearly as easy/straightforward as you suggest.\

              And…Nation-States will not be in the business of conducting such acts.

              Non-state actors (terrorist organizations) can execute small-scale turbulence, but that is all.

              Bottom line: I throw my hat into Steve from Virginia’s camp. Large-scale violence and Death does not fit into the World Business Model.

              ‘Large Scale’ = >>> Iraq, or Vietnam, or Rwanda, etc.

            3. I do not believe there IS a world wide business model as such. There is business world wide of course with plenty of it conducted between points on opposite sides of the globe.

              Why anybody should actually believe there WILL BE NO MORE hot war is beyond me.

              So long as there are countries that in the judge ment of their leaders are able to win and such countries get into bad enough jams there will be more wars.

              In some cases there need be no actual fighting except for the playground bully just shoving around his victim a bit in the process of stealing his lunch.

              The countries in the immediate vicinity of China are not going to be able to resist an expanding China anymore than say Cuba could repel the forces we put into Sand Country to kick Saddam Hussein’s butt back home.

              Even industrial powerhouse Japan hasn’t a snowballs chance in the hottest part of Hell of defending herself from China these days except for being our kid brother in effect.

              And the Chinese schools are emphasizing the Rape of Nanking from what I read.

              I don’t know if we will defend Japan in the event of extreme trouble or not. Doing so could result in a nuclear war with the US on the receiving as well as sending end.

              Now if under some extremely unlikely but not inconceivable circumstances the US might decide to invade Venezuela I AM sure that nobody could stop us EXCEPT by going nuclear first.

              When circumstances are desperate enough any country will go to war. I am a pretty soft hearted and peaceful old fart in actuality and haven’t started a physical fuss in forty years or more.

              But I am not a physical coward and if I had starving grandchildren and no other way of feeding them I would take up armed robbery without a second thought except to plan well.

              The president of the US or the commandant of Cuba will do the same thing if necessary to feed the American people. He did it to ensure our access to Sand Country oil less that twenty years ago.

              Hillary will go to war if she gets to be prez and she has no other workable option.

              A general world wide economic collapse IS in my estimation baked in barring substantial extraordinary good luck.

              But it will almost for sure be piecemeal and some countries will probably pull thru. The likeliest ones are the ones able to wage war competently. They will not hesitate to do so.

            4. I never said there would be no more hot war.

              What I am saying is that such kinematic conflict will continue to be small potatoes, executed ‘in house’ (where the great powers don’t have a dog in the fight) or executed either ‘by proxie’ by the Great Powers and/or by special operations ‘under the radar’.

              What I am saying is that I am contesting the idea that the Great powers are going to duke it out in some kind of final destiny/WWIII showdown for last man standing.

              Oh, and I do most certainly believe their is Global economic coordination, both what is visible and what is more obscure…not a ‘model’ in the sense of some deterministic HAL-9000 model where info is plugged in and things are spit out, but some sort of at least loose Global coordination…certainly not the ‘Illuminati’, not even the 12-Industry consortium described in the movie ‘Rollerball’ (the original, not the dreadful remake), but something believable along the lines of unstated interlocking Directorates, armies of lobbyists, lots of back-room deals.

              Large-scale death and destruction is not good for global business. So the violence is modulated as best as can be done.

            5. Neutron bombs work quite well to wipe out any significant concentration of people. Just one can pretty well fumigate a major city. It would not be practical to use them in open countryside to get rid of farmers, too expensive.

              I expect you have not any experience with modern broad spectrum herbicides. It takes an amazingly small amount of this stuff to destroy or so nearly destroy a crop that one plane load would eliminate thousands of acres of wheat or millet or rice and they don’t cost very much in relation to the damage done.We can be talking in terms of ounces per acre – no need to use larger units such as pounds or kilos.

              Now as far the GE diseases- they are not easy or we would have seen them used already.But I personally do not doubt that nation states can afford to develop them and that it could be done in no more than a few years. The biological arts and sciences have been progressing at a smoking hot pace for the last couple of decades…. this will not be a start from scratch job if it is attempted.

              I think personally that anybody who believes that rich people SCATTERED all over the world can work together to stop new wars have a point well worth considering and that such people in total MIGHT have enough influence to stop a war from getting started at any given time for some particular reason.

              When we get right down to the nitty gritty and a high and mighty plutocrat in let us say New York who owns property in China and one in China who owns property in San Francisco have a powerful incentive to maintain the peace- no doubt about that.

              But there are always going to be other high and mighties out there who can rock the boat for reasons of their own to the point of upsetting it.Apple may be sourcing most of the product line (all of it ?) in Asia but when the shit hits the fan Apple stock holders are mostly as individuals holding only very small parts of the total shares outstanding and are going to worry more about the perceived status and perceived safety of this country than they are one small slice of their portfolio pie.

              There will always be plutocrats who MAKE their money out of crises. They have very powerful constituencies as well such as congress critters and unionized employees making big bucks building aircraft carriers and bombers.

              So yes the business model can serve as a damper mechanism to lower the risk of war. To expect it to RELIABLY PREVENT war is just plain and simple wishful thinking in my estimation.

              Look folks. We either believe in overshoot and collapse or we do not. I do- with the caveat that it will be piece meal in time and place to a substantial extent- and that some places are not NECESSARILY going to collapse like an old masonry building into a pile of rubble during an earth quake in the near to medium term.

              An astute reader of my comments will notice that I do not say much about the long term except that SOONER OR LATER SOMETHING IS GOING TO GET US ALL.

              When this piecemeal collapse arrives – and it will (- and it MIGHT snowball and get us ALL- I have never denied this possibility which so many consider a certainty) then with their short term survival at stake the people in charge of a given country are going to pay very very little attention to the wishes and desires of local rich folks if it appears that by mobilizing such armed forces as they possess and invading a neighbor they will prolong the survival of their own country.

              Let us just for a moment look at this from the point of view of a disinterested alien observer- a little green man research biologist with big eyes and ears in orbit in a stealthy flying saucer.It will not take him her it long to figure out nations and national boundaries etc- that much he would have understood long before his actual arrival from cracking our languages listening to tv and radio.

              He sees a country well armed sitting next to one that is not- the first one with plenty of armaments but a shortage of food. The second one with a shortage of armament but lots of good farmland and water.

              He will expect the ant colony of humans that call themselves Germans to invade the ant colony of humans that call themselves Poles.And in general his expectations come to pass.This is hard core reality the way it is going to play out. Collapse is hard core future reality.

              I think the USA and a few other countries have a good shot at short to medium term survival because they are very very powerful or tightly allied to other very powerful countries; because they are very favorably situated geographically in terms of defense in conventional war but capable of projecting power across oceans; because they still have substantial sky daddy bestowed gifts of as yet unexploited farmland water minerals etc; because they are LARGE enough and populous to maintain modern industrial economies within their own borders; and because when the shit is once well and truly in the fan the bricks of reality -Pearl Harbor wake up events– can wake up even the sleepiest of Leviathans such as happened when the Japanese bombed Pearl Harbor. We went from being isolationists to mucho macho yankees in twenty four hours although it did take two or three days for the machinery to grind out an actual declaration of war.

              The rich guys as a group were powerless to stop it. Utterly and absolutely powerless. Be realistic. A lot of them saw their own property threatened by the Japanese and the Germans while another others were drooling over the possibilities involved in supplying the materials we would be needing to fight- materials from socks and rifles to battleships.

        1. ISIS might win – even in a democracy. Attraction for many (majority?) men: You can have 5 wives. Rape does not exist unless you have a witness. No women can compete for your job – if you want to work. The most aggressive fighters are the hero’s/leaders. [Lord of the Flies] Your wife (wives) must obey you without question. You get a dowry.

          Attraction for many (majority?) women: You do not have to work outside the home. You can win the Miss America contest (everyone is in a full Burka – eyes win). Your husband must provide for you. [Is there one significant women’s organization in America that has condemned Muslim treatment of women?]

          Attraction for both: No one will rob/steal from you – limbs cut off. No one will criticize your religion – head cut off. No one will criticize the leading politicians – religious leaders. No lawyers – Sharia Law; religious leaders decide.

        2. Checked his credentials. No degree from West Point, Colorado Springs, or Annapolis. He has no qualifications in the subject.

        3. Conflict-related deaths during the twentieth century were higher in absolute and relative terms compared to the previous four decades.

          1. That statement makes no sense at all. You are comparing a century with four decades? Which four decades?

            You probably meant the previous four centuries. In that case, of course this is true in absolute numbers, but not in relative numbers. That is the per capita deaths due to violence in the previous four centuries was much higher.

        4. In terms of fatalities annually as a percentage of the total population the late twentieth and early twenty first centuries are the most peaceable time in ( well) documented history..

  25. haha

    From oilprice.com via ZH

    “In one example recently reported by Bloomberg, a private club in Williston, North Dakota has been shuttered because it failed to pay rent. “The Bakken Club,” which offered exclusive services including fine dining, airport shuttling, and corporate events, was a place where “like-minded individuals can further their business relationships.” Memberships ranged from $5000 to $25,000. Unfortunately for The Bakken Club, such lavish living becomes harder to maintain when oil prices crash.”

    1. According to an assessment from the Federal Reserve Bank of Dallas, an estimated 250,000 jobs across eight U.S. states could be lost in 2015 if oil prices don’t rise. More than 50 percent of those job losses would occur in Texas, which leads the nation in oil production.

  26. This article states (this is a partial snip):

    “There is an 80 percent likelihood that the number of people on the planet, currently 7.2 billion, will increase to between 9.6 billion and 12.3 billion by 2100, the researchers said. They also saw an 80 percent probability that Africa’s population will rise to between 3.5 billion and 5.1 billion by 2100 from about 1 billion today.

    The study, led by U.N. demographer Patrick Gerland and University of Washington statistician and sociologist Adrian Raftery and published in the journal Science, foresees only a 30 percent chance that earth’s population will stop rising this century.

    “Previous forecasts did indeed forecast a leveling off of the world population around 2050, and in some cases a decline,” Raftery said.”

    http://www.reuters.com/article/2014/09/18/us-science-population-idUSKBN0HD2AA20140918

    I think there is an 80% chance that their population prediction numbers are too high.

    1. With population it’s difficult to say as population can continue to expand well after a peak in industrial resources. I believe the Limits to Growth modeled this?

      Still, I think these authors get the fundamental story wrong which is so common these days (amazing, isn’t it, we live in the so called age of information and nobody seems to know anything).

      Absent subsidized oil and subsidized agriculture and subsidized aid, there is no further increase in the world population. Simple common sense (the mortality rate of everyone is 100%) and a review of the world situation confirms this.

      At some point, the unfit and unlucky and elderly will be culled off. Sounds cruel but how can it be any other way? Unless you are going to make an argument based on unrealistic fantasy…which is that medical advances will somehow keep us all going forever, in perpetuity, no matter how old or sick we are.

      Darwinian and Malthusian arguments made long ago still have relevance! We pretend that they do not, but they do. We moderns fool ourselves.

      1. ”We moderns fool ourselves.”

        We most certainly do. The world is most certainly a Darwinian place. Always has been and always will be. Competition for resources will take care of the population problem for us just as surely as the Black Death.

        It may be technically possible for the African population to explode to four or five billion people because it may be that enough easily accessible minerals including fossil fuels remain for this to happen.

        Personally I am extremely doubtful in this respect but solar power may be working miracles in terms of cost and productivity within a decade or two and it does not NECESSARILY take all that much fossil fuel to produce basic foodstuffs on a per capita basis.

        There is probably at least a couple of orders of magnitude of difference between the embedded energy content of a ton of grain delivered by water or rail from farm to city in the developing world in reusable hundred pound bags as there is in that same ton of grain delivered in plastic microwaveable throw away pasta bags in America.

        If people continue to dig in the dirt all day and screw all night without birth control they can make a lot of babies with very little in the line of per capita resources.

        My own guess however is that just about everybody in the world is going to get a big enough dose of enlightenment to give up on the baby front.

        While the resources to support that four or five billion coming into existence do not exist the resources to prevent it happening do. IF any body who works for the Feds needs help composing gobbledegook documents that can keep lawyers busy for years interpreting a single sentence I offer this one as an example of my abilities. 😉

        In plain words the supply water, soil, fertilizers, pesticides, etc will likely prove to be inadequate but little radios and tv sets that run on sunlight WILL BE both available and affordable.Even a four inch black and white tv screen is big enough for people who live in slums and remote villages to watch soap operas about young women with jobs but no babies.

        So far as I know there is no real reason why birth control drugs should cost more than a trifle.

        People who live in cities are not apt to cling to old cultural values involving children looking after elderly parents for more than one generation. THAT concept goes out with the trash as soon as the kids scatter out of the immediate neighborhood.

      1. So far, Ebola is an absolute bit player on the stage…it doesn’t even register on the population radar.

        For an analogous example, take a look at Cambodia’s total population graph at the Population econobrowser at Mazama Science:

        http://mazamascience.com/PopulationDatabrowser/?country=KH&language=en

        Note the dramatic negative population annual change percentage numbers in the 1970s…the ‘Killing Fields’.

        Now mentally draw a line from the Y-axis intercept of the plot line to the end of the plot line on the right side of the graph: It is almost as if the ‘Killing Fields’ population decline never happened!

        Now look at the China population graph: The Chairman Mao famines did not matter.

        Now look at Nigeria:

        http://mazamascience.com/PopulationDatabrowser/?country=NG&language=en

        Short-term population declines do not matter much…birth rates in excess of the replacement rate matter over the longer term (increasing life spans certain;y after a lot…but they would not matter much if replacement rate fertility was achieved earlier in the game).

        Note Japan:

        http://mazamascience.com/PopulationDatabrowser/?country=JP&language=en

        The disillusioning thing is, that even countries that, by hook or crook, are experiencing population level-off or even decrease, are chastised for ‘not doing their part to sustain global economic growth’:

        From the WaPo:

        http://www.washingtonpost.com/blogs/worldviews/wp/2013/10/22/japans-sexual-apathy-is-endangering-the-global-economy/?tid=pm_pop

        Then this:

        http://blogs.worldbank.org/africacan/can-rapid-population-growth-be-good-for-economic-development

        I read an other article a few years back stridently advocating how good it will be for the U.S. economy to reach 400 million Consumers per year by 2050, and even advocating that 500M would be all the better. More consumption = more business, don’t we see? Unfortunately I can’t find that article right now…

        What people don’t get is that population growth can’t go on indefinitely… even if people think that the only way to go about things is to continue to execute BAU.

        I am hopeful for the future of places like Japan and Russia, places which have (hopefully) a longer term decreasing population.

        I despair for the future of places such as Pakistan and Nigeria and Egypt…their futures are bleak.

  27. I’m seeing $52.40. The Euro is down to 1.2. The yen at down to 120.36 from 119 few days ago. And sterling is 1.53 down nearly 2% on the day, tra la tra la. Stretttttch that yardstick.

    I hear tell talk of Euro parity by end of 2015. Imagine that, Mario. And Samaras.

    2. Looking at a lot of people going broke … and not knowing why.

      The flip side is dollar preference, which has not really taken hold yet (along with energy deflation). The two dynamics together = pie and ice cream!

  28. One of the bigger wastes of energy today is the losses from poorly insulated buildings! Even the new commercial buildings being built today have relatively poor insulation. The poor insulation is based upon the assumption of eternal low priced natural gas to heat said buildings for their entire life.
    When natural gas prices start their inevitable steady rise some time in the first half of this century, the costs to try to continue heating those buildings is going to be catastrophic to the economy. And by then, the cost of properly super-insulating those buildings will have risen to unafordable levels as most of the better insulation materials are based on petroleum.
    The public (inc government and business) will not do anything until things get real bad, and by then it will be too late to do anything really meaningful to deal with the problem.
    The next 32 years are going to be very eventful, but at 75 I just may not quite get to see the full effect .

    1. I believe that using natural gas to generate electricity amounts to generational warfare. There are too many alternatives for electricity and not enough for heat.

  29. These types of projections always seam to overlook the growth of alternatives. At current growth rates, there will be 5,000 GW of solar power, and 1.2 billion electric motor cars on the road in 2025. I just don’t see how the oil price is ever going to be $500, or even $160/barrel. It would be so much cheaper to just buy an electric vehicle.

    1. “I just don’t see how the oil price is ever going to be $500, or even $160/barrel.”

      Oh, that’s easy to see. Just try to calculate how much oil (and other non-renewable inputs) will be needed to get and maintain those 5,000 GW of solar and 1.2 billion electric cars and the corresponding infrastructure.

      1. I think you just plug them into a wall charger, the electricity comes from some sort of gizmo. Like a solar panel, or a windmill hooked up to a generator. The key is to have a back up bike and a mother in law with a gas fired furnace.

        1. Oil is needed for mining, manufacturing, and even shipping of components for renewable energy as well as for consumer goods. Even petrochemicals need to be considered.

      2. Yes, please do the calculations. You’ll find that manufacturing PV and turbines uses little oil, and that both have good E-ROI.

        So, the cost of oil for renewable is small.

    2. You are neglecting the industrial use of oil, which will not be affected by intermittent solar power, nor by electric cars. If everyone in the whole world were able to buy a Tesla this year, then yes, that would be a significant dent in our oil consumption and would lower the price towards the LCS scenario. But that’s not what the future is actually going to be like.

      I see a lot of jabs at this model in the comments from the peak oil side which I think are a little terse for addressing a 300 page thesis, but this one from the cornucopian side is simply lazy.

      1. Industrial uses of oil is a much smaller percentage of oil consumption than transportation.

        And while there aren’t enough electric cars to go around now, there may be in 10 years if current growth rates continue.

        I for one think it’s the alts that are driving down oil prices now – not the Bakken. When you have 2 million barrels/day in biofuel, 17 million CNG vehicles, and 10 million electric and hybrid electric vehicles now, those alts have already put a big dent in oil consumption. And the number of alts are growing rapidly. In the case of battery electrics, growing exponentially. Math that doomers would rather avoid, it seems.

        We’ve heard the $500/barrel oil predictions before. Didn’t happen.

        https://www.youtube.com/watch?v=bGHpWOSsDZk

        2. This applies to industrialized countries. In much of the world (which involves developing countries), oil is used for mining, manufacturing, and shipping.

      2. Avery,

        Have you actually looked at the industrial use of oil?? Have you looked at the numbers, to see how it compares to passenger transportation?

        Have you ever talked to commercial managers who have to deal with increases in their input costs, like oil? They don’t sit still for it. An instructive example is aviation, which saw a 5x increase in fuel prices, and responded by cutting fuel consumption, cutting other costs, and preserving their profit margins. Granted, aviation never has great profit margins, but they did ok during this recent period.

      3. Hi Avery

        If I dispute that the weather forecast for the afternoon which is calling for CONTINUED rain is wrong simply by looking out the window and noticing and saying that the clouds are breaking up and the sun is shining thru already – and SAYING SO- does that make me lazy?

        It would do a lot of guys who are dead sure that technocopians are all wrong to read a few history books – at least a dozen or so involving the evolution of technology since ancient times.

        Such books are a lot more interesting than football games – and a lot more relevant.

        Most of us in the doomer gloomer camp ( and I am basically a doomer at heart) tend to forget that so long as bau lasts technical innovation will proceed as fast or faster than population growth.

        I personally expect Old Man Business As Usual will be able to hobble along more or less upright for another decade or two although this might be wishful thinking on my part.(Two more decades is all I can personably reasonably hope for and that is hoping for a LOT.)

        How about this for the NEXT BIG THING- solar energy technology and business practice evolve to the point that solar power is unquestionably cheaper than buying fuel and that the only reasonable thing to do is to shut down coal and gas production to the extent that solar can be built out? This is not to say we won’t have to maintain existing and maybe some new conventional generating capacity to cover nights and bad sun days – but simply that solar is just too plained damned cheap not to go wild building it out ?

        I long ago found myself in a similar position as a working farmer. My old Daddy managed to get along ok with just a pickup truck. So did I – for a long time. But it became obvious to me as gasoline kept getting to be more expensive that my best option was to buy a compact car- which I did many years ago.

        I drive the truck when I have to and the car otherwise based on the car running on less than half as much gasoline per mile.

        Wind and solar consume for all practical purposes- once built- hardly ANY fuel at all – compared to their energy out put. The little that is required is for transporting maintenance people and parts etc.

        If I were living in say New Mexico and could get a home pv system installed for the same price as Germans do today- due to efficient German workers and streamlined German building codes and permitting processes and scaled up capacity – and gasoline were five bucks- Well then I could justify owning a pretty powerful system to keep a battery electric vehicle charged up with no subsidy needed to make the dollars and cents work out.

        TODAY.

        In ten or fifteen years I expect the arithmetic will work in Virginia with pv costs going down and oil costs going up.

    3. There are about 1 billion cars on the road now. 1.5 billion in ten years would mean 150 million cars produced each year for ten years … what about the current crop of cars?

      What about the new ICE cars? Certainly, they would not cease production (particularly when ICE trucks, luxury sedans, high-performance ‘sports’ cars and SUVs subsidize electrics, internally). Right now about 65 million cars are manufactured per year. Many — not all — are replacements for older vehicles. Most of these are ‘sold on’ and become used cars or are shipped overseas.

      Right now is likely ‘peak car’ as very small percentage of them pay for themselves by way of their use. That means drivers must borrow some how to own and operate their cars … so do manufacturers to produce them.

      Right now the total number of electric (not hybrid) is very small, fewer than a million over-the-road vehicles (leaving out utility carts and fork-lift trucks). High end models are too expensive for anyone other than well-to-do. This is not a prescription for large numbers.

      I think a lot of folks have a big problem with scale: the scope of the fuel – auto industries and their life-cycle costs.

      1. Battery electrics are doubling every year. So the 600,000 last year is going to become 1.2 million this year, etc.

        I think the big problem for the ICE is that they’re going to have a hard time meeting future government emissions, and mileage requirements. More models in the respective fleets will have to be hybrid, or BEV, or Hydrogen Fuel Cell, to meet the new requirements.

        1. The amount of oil needed to manufacture large numbers of EVs, etc., will be much higher that what material resources (not just oil) will allow.

          1. Except for the battery itself it will take substantially LESS resources to manufacture a battery electric car. Transmissions and engines have HUNDREDS of intricately machined parts which cost a fortune to make.

            And the steel and aluminum in an ice powered car are going as easily recycled into an electric as into another ice car.

            When gasoline goes up again there are going to be tens of millions of older ice cars headed into the scrap yards for recycling. They are already so expensive to repair that older larger ones seldom get fixed after an accident or when they need a serious engine or transmission repair.It is not much more expensive to just buy a newer second hand car that is running rather than wait on a repair that might or might not hold up and the newer car will probably get better mileage as well as being safer.

            Right now for instance I am trying to sell my old Escort since I lucked into a nicer Camry. IT has a new sticker newish tires new brakes etc and runs just fine. I would not hesitate to take a thousand mile trip in it tomorrow. Asking only a thousand bucks. No transmission shop around here will rebuild an older larger cars transmission for that these days. Buy my car- get two fifty for the dead car – get better mileage- and no wait for the repair job.

            I believe battery prices are going to come down dramatically unless electrics start selling so well the manufacturerers don’t HAVE to cut prices to sell all they can build in the near future.

            We may be looking at another major oil shock in as little as two or three years. Yogi sez predictin’ is hard.

            If gasoline is in very short supply and five or six bucks a gallon a nicely maintained low mileage three year old Leaf may sell for more than it cost NEW.

            1. The average sales price for a Leaf ($30k, all in) is lower than the average sales price for all new light vehicles ($31k). That’s BEFORE the tax credit. With federal and state credits, it’s insanely cheap…

              Per Edmunds.com

            3. And, of course, the operating costs are so much lower that the Leaf is the cheapest car on the road, overall.

            4. My year old Honda Accord was around $22,000. My favorite mechanic recommended it. Nice size, high ratings, great milage, wife says it is beautiful. Of course a Civic would have been cheaper. I also have a five year old Prius. It is a little more demanding for routine service

            1. I thought you meant_sales _ would double in a year. You meant total EV fleet will double in a year? Seems optimistic. 2014 sales were 260,000. 2015: 600,000?

    4. There is a problem with this, because oil price have already dropped below level needed to counter natural decline rate. So peak oil and peak civilization is already behind us. So this renewables won’t be scaled up, because there won’t be money for it.

      1. So? Oil prices will rebound and we will produce more oil. I don’t think we will reach the point you describe for oh….say 15 to 20 years. Around that time the blob will hit the fan.

    1. Yeeppee. Now figure out how to light up 300 million urban dwellers living in African cities. Solar panels are a big joke for such a market.

        1. Yes. We see a lot of nicely packaged dope in websites like that. But Jasper charges more than twice the retail rate for energy, and it’s an intermittent source. From an economic and technical standpoint it’s a disaster for Eskom, the state owned utility. But we all know how it is, these renewables can cause disasters and one has to dig to find the truth. Google “Jasper Solar” and Google serves up dozens of pages loaded with bs. To find the truth one has to get really hard nosed.

          Here in Spain they paid through the nose to learn the lesson the South Africans are learning.

          1. How much does Jasper charge, and what’s the going rate in S. Africa? If you still have the source/link, that’d be nice to look at.

            1. The Jasper contract rate is 1.5 rand per kWh, the public rate is around 0.73 rand, increasing 8 % in 2015. Jasper sells everything it can make, when it can’t make it something else has to fire up. South Africa has no gas turbines ready to serve as spinning reserve for solar, so they keep burning coal to keep their plants going. In real life they have lousy service, brown outs, power surges and poor people lose their fridges. I bet you didn’t think about this issue. The most important piece of kit for a poor person moving up into lower middle class is a refrigerator. My grandparents did extremely well with a country store with a fridge they leveraged into college education for their children. But that fridge was connected to their own mini hydro plant, built by my uncle.

            2. Hi Fernando ,

              While I may appear to disagree with you a lot of the time I see this disagreement as being mostly due to you commenting on things as they are and will be for the next few years while I am mostly commenting about the way things will be or could be decades down the road.

              Given that you are an engineer – if you were free to build out both solar and coal generating capacity in a country that has to pay for imported coal- How high would coal have to go to make the solar build out an attractive option?Double ? Triple? Even higher? I know this question is outside your area of expertise and expect only a general answer nothing specific.

              It seems to me that with solar power getting cheaper and coal over the long term getting more expensive the savings on coal purchases alone will EVENTUALLY be enough to justify building solar capacity.

              My personal guess is that the four percent of our electricity we get here in the US from wind and solar power is saving us at least three percent of the coal and natural gas we would OTHERWISE be using as fuel at power plants. Does this seem be a reasonable guesstimate ? Does it allow enough for spinning reserve?

              Finding an answer to it has been a tough job. I have inquired in many places including asking directly at some utilities and at environmental and business organizations that promote wind and solar power. Nobody so far has been willing to answer this question. Maybe nobody knows but I find that very very hard to believe.

              I agree that along with a couple of lights and maybe a fan that a refrigerator is the key piece of technology that is most valuable of all in terms of raising people’s living standards.

              I have never done so myself but I read about people who have converted food freezers into ersatz refrigerators and run them on pv panels reliably by simply putting in jugs of water. The water freezes faster than food in containers that insulate the food to some extent and by keeping an eye on it they claim to get by ok for up to a week or longer no problems at all.

              I believe a refrigerator could easily be built that incorporates a LOT of insulation as well as a LARGE reservoir for ice at a reasonable cost and that such a refrigerator would serve well in a sunny climate running on pv juice.

              If cooking fuel is available most of the food in it could be saved for another day or two at least simply by cooking it in the event of a long stretch of low sun days.

              My wild ass guess is that it such a refrigerator would not cost more than fifty percent more to manufacture than an ordinary one.We are talking more insulation and a larger cabinet and an internal water tank. The motor compressor evaporator etc would be about the same as usual.No new tech at all.

            3. A quick search tells me that a Rand is worth about 8.5 US cents. So, the public rate is really 6 cents per kWh?

              The Jasper cost appears to be about 12 cents per kWh, which is pretty affordable.

              If S. Africa really has retail rates of 6 cents, their coal plants must be dirtier than the Chinese. The solar power will help people breathe…

              As for reliability: US coal plants aren’t very reliable – much less than gas or nuclear. S. Africa has very reliable and strong sunshine, so I suspect that Jasper is making the SA grid much more reliable…

            4. Or they subsidize electric power. Many countries do it, as costs go up they keep rates down. Im not a South African laborer living in Soweto, you would need to check to see what they think about x rate being “affordable”. I sense a huge disconnect between American and European greens and solar power advocates, and reality outside their milieus. It’s almost like Marie Anoinette’s famous “let them eat cake” attitude.

            5. Hi Fernando,

              By developing alternatives in North America and Europe (and East Asia), costs can be driven down.

              At some point in the future the costs of fossil fuels will increase and when the alternative forms of energy become competitive they will be used.

              Governments can subsidize electricity if they choose, or they could simply transfer money to the poor through redistributive taxation and let the market work out the rest (which would be more efficient in my view).

            6. Nope, I checked and S. Africa doesn’t subsidize electricity.

              Yes, 12 cents per kWh is very affordable- ask any of the countries that industrialized with costs that high it higher.

              And, of course, fossil fuel industries’ primary goal in life is to survive/profit/make a living, and not to help the poor.

      2. Yair . . . Fernando Leanme. I don’t agree.

        What is a joke is the way that the present system supplies those markets with electricity . . . have you ever seen the street wiring spaghetti?

        If there was ever a need for a couple of solar panels on a post it is for slum folks. They can improve their lives with a miniscule amount of electricity and make use of and repair appliances and equipment that is routinely scrapped in developed countries.

        Cheers.

        1. Definitely. When you don’t already have a centralized energy generation and transmission system, putting in localized solar is much more efficient and cheaper than trying to wire up an entire country.

          It is even cheaper in rural America. 15 years ago an energy co-op in Colorado was supplying ranchers with solar because it was cheaper even then than running electric wiring out in isolated areas.

        2. Scrub puller, the way I see it, most of you are american and never hung around a third world slum. On the other hand, I have. To be honest, it was for two reasons: one, I lived in third world countries and had domestic staff, and I worried about their living conditions, so I visited them in their shanties and took action to get the set up improved. Two because sometimes my company did “social works” and I was either a senior engineer or later the technical manager, so I met with local leaders and visited their towns (we didn’t allow them to connect to our power systems but did provide natural gas and other assistance so they could fix their own problems).

          Conclusion: most people living in the USA have a really weird perception about what life is like out there. And you are not trained to visit those places and come out alive, so don’t try it.

          1. Yair . . . Fernando Leanme.

            We come from different backgrounds and I am not American and I have lived and worked in conditions that are probably way beyond your understanding.

            In the true “third world” there is no such thing as folks “not being allowed” to hook into a mining or any other companies power system . . . how many hours have you put in investigating parasitic load?

            Cheers.

            2. Sorry dude, we didn’t allow anybody to connect. I worked in the oil industry, our systems are high voltage, and we have extremely tight security around our facilities. It’s so tight I can’t discuss what we do. I don’t want to start a bragging debate over who can out do the other. But the reality is that most Americans who write here just lack that experience.

        3. Try running a fridge with a solar panel hung on a post, buying it with a Soweto bus driver salary. Come back and let me know how it went, and what kind of booby traps you set for thieves.

          1. Where are you coming up with this stuff? People are talking about solar providing lights and phone charging to those who have no electricity. They aren’t talking about refrigerators.

            1. You’re talking about people eating others, and trying to give refrigerators to people who don’t even have lights.

              Your thoughts are drifting far from the conversations some of the rest of us are having.

            2. Exactly. You seem to think all our little African brothers live with an LED and a cell phone. That’s not the way it works. You guts have a really surreal idea of life elsewhere. Look up something like Mombasa, Libreville, Soweto, Addis Ababa. You know, large urban areas. Now figure out how to keep them happy.

            3. You seem to think all our little African brothers live with an LED and a cell phone.

              Yes, quite a few of them do.

            4. The 600 million African urban dwellers projected for 2050 won’t like your ideas for their future lifestyles. You do need to study this subject a bit more. And visit a safe city, say go to Libreville and meet people. Talk to them and see what they think. There are nice beaches but watch out for parasites and worms.

            5. Fernando I understand where you are ” coming from” in the American vernacular english.

              The people living by millions all jammed together by the skin of their teeth in the places you mention are never going to be ” kept happy” is the short answer to your argument.

              They are going to eat a little and riot and murder and rob and rape a lot for so long as they survive- which in my professional judgement as a university trained farmer will not be very much longer if the peak resources doomers are right- I am one of them and believe they are right.

              It may seem incredibly callous of me but the one thing I am the least worried about is that these people will ever wage war on my country.They are too poor to wage war in a fashion that will cause us any real trouble except for the loss of our civil liberties. These liberties are unspeakably precious to me but they are not necessary to my survival or the survival of my country.

              Now I do not remember you saying precisely where you live but if you do live in Spain or nearby then you may have a hell of a lot of trouble pretty soon with migrants.

              We have a serious problem with immigrants here in the US but the Atlantic and Pacific are a hell of a lot wider than the Mediterranean and when the time comes we will not have any problem closing our one vulnerable border to the south.

              Our good hearted and well intentioned souls on the political left have already shot off all their toes pushing socialized medicine and blocking the Keystone pipeline and so forth and the result of that was a right wing take over of the American political establishment .

              When the time comes that refugees are a TRULY major issue the right wingers are just about dead sure to be more than powerful enough politically to simply fortify and close the border as they see fit.

              I tried to explain this to my democrat buddies but none of them wanted to hear it.

              Nevertheless I maintain the USA will move more and more as time passes to the left politically. The democrats paid an enormous price for Ocare and blocking the keystone etc but they WILL BE the LONG TERM winners when it comes to such issues.

            6. Old farmer, I suspect these African nation’s will burn coal. I realize usa and european policies try to block coal fired generation plants, but they will sort it out as best they can. I also expect a heavier influx of africans trying to invade europe. Eventually something is going to break.

            9. They ought to sell ok to local folks who DO have the resources to buy one but live out past the ends of the grid lines.

              There are wealthy people every where – even in the middle of slums you will find some although they tend to get out as fast as they can and return as commuters to take care of their business.

              There are plenty of guys who make their living in the dope trade for instance who live in places where there is no grid.

              Their solar fridge and pv panels on their roof would be fairly safe from a thief. Such folks are surrounded by hangers on who keep a good eye on things for them.

              I think the economy in most poor parts of Africa is more apt to skip the grid stage in the same way the economy there mostly skipped the land line phone stage and went directly to cells. Now that so many people have cell phones there- and because cell phones will keep getting cheaper- it will be harder and harder to ever get enough customers to pay for a land line system.

            10. I think the economy in most poor parts of Africa is more apt to skip the grid stage in the same way the economy there mostly skipped the land line phone stage and went directly to cells. Now that so many people have cell phones there- and because cell phones will keep getting cheaper- it will be harder and harder to ever get enough customers to pay for a land line system.

              Yes, in more developed parts of the world, they are tied to out-of-date infrastructure. If you don’t have it in the first place, you can jump to what works best for you.

              I remember reading how India planned to skip over the Industrial Revolution. Having not participated in it in the first place, they focused on training people for the computer age and considered where they started from, have done very well.

              And I have read about entrepreneurs who see Third World countries a much better place to sell alternative technology because they need is there more than First World countries.

      3. hmmm, per the article, 28.5 million satisfied customers, sales growing at 150% per year,
        somewhere between 3 and 4 years to pass 300 million.

        have a look at the “certified” products
        https://www.lightingglobal.org/products/?view=grid

        A few watts of PV is all you need to have a decent light.
        Another couple of watts and you charge your cell phone.

        the “bottom of the pyramid” (BOP – not BOP, blow out preventer) consists of 1.5 Billion people with no access to electricity. They spend 30 Billion $ per year on kerosene for lighting (at the equivalent of $80/kWh for you Europeans complaining about high electricity rates), equivalent solar LED lights can be had for 2.7 Billion $.
        http://global-off-grid-lighting-association.org/wp-content/uploads/2013/09/A-T-Kearney-GOGLA.pdf

        25 Billion liters/year of lamp kerosene is 430 kbd.
        at $4.50/US gallon, that comes to about 30 Billion USD.

        Now maybe something you might know about.
        McGlade makes a big deal about “fallow” oil fields – discoveries that were never developed. What are your thoughts on these?
        Are there a bunch of them?
        Were they abandoned solely for economics, or were there other reasons (sour oil, difficult drilling conditions, etc.) that might make someone walk away forever?

          1. awesome – 134 lumens/W at 19 Watts, only down to 125 at 32 watts – on one die!

            That’s like an order of magnitude more efficient than plain incandescents, now past any fluorescent, and duking it out with the sodium lamps.
            http://en.wikipedia.org/wiki/Luminous_efficacy

            I have Cree CR-LE troffers in my new garage/workshop.
            Instant on – even at sub-freezing temps, way bright for these not so young eye. Will likely never have to replace them in my lifetime.

            2. CR-LE-50L-40K-S

              5000 lumens at 50 watts (“only” 100 lumens/watt – same as the best fluorescents).
              4000K colour temp
              Step dimming, i.e. two separate circuits per fixture. Don’t always need it so bright. 4 fixtures per 20’x30′ bay in the shop. No problems in 2 years so far.

          2. If one runs these devices at considerably less than their maximum wattage, would it follow that their already long (advertised) lifespans would scale even longer proportionally to the reduction in wattage?

            Different, but related, question: Has any research been done in the vein of extending the lifespan of solar PV cells/arrays?

            It is my dim ‘understanding’ that the tried and true ‘original quality’ polycrystalline silicon PV cells (think ARCO-manufactured PV cells, circa 1970s) can last 25+ years, meaning that their output is still ~75% or better than the original output when manufactured.

            What are the aging mechanisms for PV cells? Can more robust (or better/different) designs result in longer-lasting PV cells? How about a goal of PV cells which can provide 80% of rated output after 100 years (barring accident scenarios such as tornadoes, earthquake/building collapse/etc.)?

  31. Oil will go to $500 but it will be because our currency will follow the path of every fiat currency for 5,000 years. My fear is that peak oil and a loss of confidence in fiat may hit at the same time. This downturn in oil prices as well as a dirty banking system have destroyed a large percentage of upstream risk taking. And to all you greens it’s getting ready to get cold (real cold) for the next 20 years or so. Peak oil will be like hyperinflation in that not one in a hundred will see it coming and by the time they do it will be to late to reverse. The consensus about markets is getting ready to be blown to pieces so hang on and get ready.

    1. Believe it or not, the US budget deficit has actually dipped below $500 billion/yr and is still declining. With over 200 trillion in total assets, that’s not that much inflation. Despite all the “Hyperinflation Doomer” books and tapes out there, it didn’t happen.

      1. If you dig in you’ll find the measurements are bogus, but don’t bother. Deficit is due to grow this year and resume the march to oblivion.

        1. Every measurement is bogus. So we have no idea what is happening and we can just make up fairy tales. 😉

    2. If oil price (to customer) increases 10x (due to inflation or any other cause) then the cost to drillers will also increase 10x. There is no real change from current conditions w/ fuel unaffordable to customers and them being unable to borrow (or unwilling). Both the driller and the customer are stuck with the same dollar (or other monetary unit).

      What matters is purchasing power which is a one-to-one (unitary) relationship to what is being purchased (capital). The ‘money’ can change but not purchasing power. Money is simply a claim against purchasing power, one of many different kinds of claims.

      Of course, when capital is exhausted = no more purchasing power!

      1. Steve, it’s not a linear function. We do make real good money at $500 a barrel. For a while. But I suppose I would have to dust myself off and go back to work, because the pay scale would allow me to be like one of those Russian oligarchs and let me buy a small second level football club. I have an idea for a three five two lineup I want to try with professionals.

  32. I kind of stopped reading when I saw the large percentage projected for biofuels in the United Kingdom in the first figure. Given what I have read on biofuels, to explain that would be a thesis on it own.

    Or is this based on importing wood pellets from North Carolina? And that is considered UK production?

    1. The graph is not very friendly to the color blind, but no biofuels were considered in the UK chart. You are looking at “fallow” oilfields being put back into production, using a very similar color.

      1. In that case I don’t even know what “fallow” means. I have the meaning of fallow documented in The Oil Conundrum and I can’t see how it would apply in this case.

          1. Fallow is the time interval between discovery and production of a field. But in that case it would have to be associated with a particular type of hydrocarbon within that field. So he is using it in a generic sense, which to me is odd in that the careful book-keeping is lost.

            1. Interesting. I never heard the term. After hydrocarbons are discovered we can either delineate the field or put it on production using the discovery well. My experience is more related to internal company and regulatory processes, and the submissions for development approval to state authorities. That term must be used by financial types?

            2. I have never in 60 years heard fallow used in the oil business; farmland is left fallow when it is not planted; why would any field discovery, on or offshore, be left “fallow” with the product prices we have seen the past years?

              I like all these new words people are making up about the oil business; my favorite is de-risked.

            3. If someone makes a discovery, it does not always immediately get put into production. For example, if the land does not belong to you and you have to negotiate for rights. Or for example, all the oil that resides off the coast near Santa Barbara that became off-limits after the massive spill in 1969. Or oil that is known to exist in National Parks or Wildlife Reserves?

              The period of time from that discovery to first extraction has to be called by some term. What else do you want to call it? Perhaps “dormant”?

              https://www.gov.uk/oil-and-gas-fallow-blocks-and-discoveries#what-is-the-fallow-process

            4. We call them undeveloped. If they are not developable because the government stops us we call them stranded. That must be a british term we don’t use anywhere else.

            5. I like the term “fallow”…it should go in the new dictionary of oilfield terms.

              Nobody anywhere in the world, however, drills a well anywhere unless it the rights to do so before hand, be it on private land, offshore in Federal waters, or concessionary rights in a foreign country. There might certainly be regulatory issues that prolong a new discovery being brought on line, yes sir. Fallow works for me. Cropland not planted.

              I like the time between testing and actually bringing the well on line; it is a time of eternal hope that, by the way, mostly never works out like you think. Thunder Horse comes to mind. Anticipation is often better than realization, I say.

              Mike

            7. CIK-1, Chevron, 1002 Area, ANWR.

              ‘Fallow’ field, or dry hole providing one data point indicating the area isn’t as exciting as once thought?

              Even if the hoped-for resource was present, it would amount to a warm bucket of piss thrown into the gale.

  33. I can’t believe you people, lots and lots of chatter about this and that catastrophe and what not and nobody says anything- almost- about the real news of the day

    SOLAR IS CHEAP AND GETTING CHEAPER AND WILL KEEP DOING IT.

    “if you can do it, you can do it better” Egon Orowan.

    1. Solar is an easy one to shoot down. They used to say that solar was only .1% of total power production. Now they say it’s only 1% of total power production. In a few years, they’ll be saying it’s only 2% of total power production. It will be interesting to see what they’ll be saying in 10 years.

      1. We know what they will be saying.

        “Of course solar is cheaper, who ever said anything else.”

        1. I guess the issue is, will cheap solar stop the oil / credit problem from f*ckin us up first? I’ve got the feeling we should have been transitionin’ a lot earlier..

          1. Too bad. The clock only runs one way.

            BUT. The guy down the road knows nothing and cares less about anything but “how much does it cost”. So, when he can buy a kW-hr from solar at lower cost than from coal- he will. Not a bit of thinking required.

            That day is mighty close, and I am toying with the idea of doing the selling myself, at least on this little road.

            He is already primed. Goes by my house and sees the lights on during the power outages. What Gives!

      2. Consider the energy and material resource requirements for a growing middle class in ten years.

        1. Right. And those energy and resource requirements could be spent on carbon emitters, and chasing more carbon like madmen, as we are doing now, witness these pages, OR, on things that get us what we NEED from solar and such like.
          It’s a matter of CHOICE, not necessity.

          Do we choose to keep up the suicidal idiocy, or do we choose to get where we would like to be. Your choice.

            1. Hi Ron,

              In the process of following their nature, people make choices.

              The choices people make do make a difference. I am pretty sure that people in advertising and marketing departments spend a lot of time and effort trying to influence the choices that people make. People’s “nature” are an important influence, but their are many other factors that influence personal choices besides human nature.

              You may not make choices, but I do.

            2. Dennis, I think you miss the point, or perhaps I was not clear enough. Individuals make choices, masses of people do not. You make a choice to use less fuel, put solar panels on your house, put in a garden and all that stuff.

              But the world will not change because of your choices, the masses still follow their nature. They overfish the ocean, they over plow the land, they continue to draw down their water tables. They continue to destroy the earth. The continue to cut down the rain forest. They continue to follow their nature.

              The idea that people will, in mass, choose to save the earth is just silly. I do hope you realize that. If not then you are sorely mistaken.

            4. Hi Ron,

              Human nature is complex. Individual choices added up can make a difference. When faced with a crisis, humans often band together and make social changes based on a common cause.

              I agree that without some crisis there will be little change, but a “Pearl Harbor” type of event often will result in change. Once peak oil (and other fossil fuels) is apparent to most people such a crisis will have arrived. Then things may change in ways that Old Farmer Mac has described elsewhere. The modern nation state is quite powerful and can effect a lot of social change.

            5. Right now, the news and on Facebook you see a variety of stuff that is “important” to someone. We may be focusing on peak oil, while someone else cares about animal rights.

              At least once the US entered WWII, there was no question what the nation’s priority was. If there is a situation where our national survival is dependent on unified action, and the leaders of the country can convey this, I think we’ll all pull together.

              Unfortunately right now, everyone is focusing on their own self-interest and this often works against bigger goals. Yet, people do crave doing something meaningful. People will even die for the right cause.

            6. When faced with a crisis, humans often band together and make social changes based on a common cause.

              Dennis, I have never disputed the fact that people act together after the shit has already hit the fan. After it is already too late.

              Preparations for peak oil need to be started twenty years before the fact to have any mitigating effects. And it is already way too late to do anything about global warming and climate change.

              The human population is already in deep overshoot. We needed to halt the population increase at about 3 billion. We did not. It is already way too late to stop the drawdown of the world’s water tables. Way too late to stop overfishing the oceans. And the oceans are a plastic garbage dump that is killing off the ocean’s birds and turtles and a lot of other species.

              You guys, you, Boomer, Nick and many others act like there is still time to fix everything. That all we need to do is implement the fix du jour and everything will be hunky dory. Bullshit!

            7. You guys, you, Boomer, Nick and many others act like there is still time to fix everything. That all we need to do is implement the fix du jour and everything will be hunky dory. Bullshit!

              No, that’s not what I have been saying at all. I think the world can’t support the lifestyle common in the US. So as resources become more scarce and income inequality increases, significant numbers of people will become even poorer and won’t make it.

              At some point the population will likely stop falling because those who are left will have enough resources and skills to survive.

              Where I disagree with some of you is in the degree and form of contraction. I don’t think homo sapiens will disappear, and I don’t think there will be riots where the masses kill the rich.

              I think that when humans downsize to fit the available resources, their lives will be different, but not the end of homo sapiens.

              In other words, I don’t consider human civilization as it is now the standard of what must be or will be.

            8. Hi Ron,

              What part of the word crisis escape’s your understanding? I agree there are problems and that those will get worse until a crisis is reached. Then humans will change their behavior in response to alleviate the great suffering that occurs. Nobody is saying that everything will be wonderful (except maybe Nick gives that impression), they are saying that there are changes that can be made and that sooner would be better, but if done later it will be better than nothing.

              So you can focus on the negative, I will continue to focus on what should be done to improve the mess that humans have created.

            9. Yes, I agree.

              Of what value is it to me to expect the world will collapse in 10-15 years? I might as well do what I can to attempt to prevent or slow that down. If I fail at it, I haven’t added to the problems. If I succeed at helping the world make changes, so much the better.

              It’s like saying, “Don’t try to make the world a better place because we are all doomed.”

              Why should I buy into that?

            10. Preparations for peak oil need to be started twenty years before the fact to have any mitigating effects.

              First, who says? I mean, besides Hirsch, who’s model of the future was so unrealistic it didn’t even include EVs – his bright idea for replacing oil was going entirely to CTL!

              2nd, we did start 20 years ago. Remember Partnership for New Generation Vehicles under Clinton? That’s the program that got hybrids started (except in Japan, because US car makers were too stuborn…).

              And it is already way too late to do anything about global warming and climate change.

              Well, I agree that our trajectory doesn’t look good. But, eliminating CO2 emissions, and then pulling them back out of the atmosphere is very doable, and not as expensive as you’d think.

              Do we see that happening right now? No. But again, what slaveowner in Georgia in 1855 thought all slaves would be free in 10 years??? They couldn’t have imagined it.

  34. Excellent thesis, I have read most of it previously. One notable consequence can be seen in the NPS graph for the UK. Bio-fuels become a significant portion of energy production and then fade fairly quickly. I can see bio-fuels as a desperation method and can also see that they are not an efficient or sustainable way to produce energy on a large scale.

    I really don’t see how the price of oil could skyrocket as the one graph shows. Economic limitations would force demand destruction long before it reaches ultra-high levels.

    The idea that keeping CO2 levels below 425 ppm will have a significant effect on global warming and the resultant climate changes is not true. The current level of CO2 is enough to promote natural feedbacks (albedo changes, natural methane and CO2 inputs, loss of forest cover) that will warm the planet on their own. In fact just the loss of ice cover in the Arctic and Arctic Ocean will cause warming greater than the increase in CO2. That loss is guaranteed at current levels of CO2.
    Other feedbacks, such as the increase of H2O vapor in the atmosphere will also add significantly to the greenhouse effect, especially as the ocean warms.

    1. Most modelling suggests that 425 ppm will get the job done and keep atmospheric temperature increases at 2 C or less. Lower would be better, but CO2 levels will decrease over centuries and a decrease in World population would allow forest regrowth. The earth system feedbacks resulting in 6C of warming for a doubling of CO2 would operate over a millennium and there is relatively little ice on the planet relative to a glacial maximum so that ice albedo feedback would be considerably lower today in comparison to an ice age cycle.

    1. As it turned out, the guy was right, but it’s a bit sooner than 2015. Right now we are trying to produce some of the hardest oil one can imagine. Stuff in super deep rocks in very deep water, Kara Sea oil, those lousy tight rocks they like to call “shales”, and Kashagan. It’s getting mighty tricky.

  36. There aren’t going to be any significant changes in the status quo of coal-burning, the size of livestock herds, or the amount of automobile emissions domestically or internationally. “The American way of life is non-negotiable”. In the USA domestic policy is completely incapable of any changes, even after such a profound event as the late-summer economic crisis of 2008. McGlade got it right about current gas prices, and is now being exalted as a brilliant visionary? All of this rhetoric about driving Tesla’s, and mass-transitioning to alternative energy sources is just Pollyanna-thinking. There may be new and creative ways to get oil out of the ground, but this is counterbalanced by an American government that is wholly-controlled by lobbyists and special interests. Maybe this arrangement is superior to a legitimate democracy, as most Americans lack the curiosity or intellect about what an efficacious role of government would be.

    2. Sorry, bullshit! I have seen the american way of life turn on a dime right before my eyes. About two days after we got slapped on the battleships at Pearl. Half a year later after the battle of Midway, the Japanese were screwed for good, and Yamamoto for one, knew it right then.

      Too many people around here have never seen a real emergency, and think that just coasting along mindlessly is what people do and always will do. NOT TRUE.

      They should talk to the Russians at Leningrad, or the Brits from the Blitz. Or for that matter, the Germans in Hamburg. What they did when they had to do it.

        1. San Francisco is already turning. The city can’t spread its suburbs any wider, there is no room for more roads. So it growth is returning to the city centers.

      2. No, that is not bullshit. Rheinhartt got it exactly right. Americans did not turn on a dime in 1941 because of arguments of impending war.

        My argument has always been that people do not hear arguments of impending disaster and act. They wait until disaster strikes and then react! The events in December of 1941 is a perfect example of that behavior. There were, from the mid 1930s to 1941, strong arguments made to congress and to the American public concerning the intentions of Hitler and his allies. But the American people would have none of it. The US remained isolationists with the attitude: “It does not concern us, it is their problem, not ours.”

        Then disaster struck, the bombing of Pearl Harbor. And we reacted by declaring war on Japan and Germany.

        Too many people around here have never seen a real emergency, and think that just coasting along mindlessly is what people do and always will do. NOT TRUE.

        Sorry, bullshit! We are giving lip service to global warming but doing nothing to stop it. Rheinhartt is correct again, the American government that is wholly-controlled by lobbyists and special interests. We will do nothing.

        Rheinhartt again, concerning peak oil: All of this rhetoric about driving Tesla’s, and mass-transitioning to alternative energy sources is just Pollyanna-thinking.

        And he is exactly right again, Tesla’s are but a token effort like PVs and wind turbines. Nothing is really being done to prepare for the disaster that will befall us when oil production starts to decline in earnest.

        Yes, people will turn on a dime but only after the disaster strikes and not one minute before.

        1. “Nothing is really being done to prepare for the disaster that will befall us when oil production starts to decline in earnest.”

          The core truth.

          A reason for it being so is that disaster doesn’t have to befall “us”, because “us” isn’t everybody. People perceive that. Someone else can have the disaster while “we” don’t.

          1. I hardly ever really agree with Watcher but in this case he has a point. ”Someone else can have the disaster while “we” don’t.”

            I associate by choice and necessity with a lot of hard core conservatives some of them very well educated. They do not hesitate to point out in private that there is plenty of oil in Venezuela and that nobody is able to stop us from going down there and just taking it if it comes to that- at least not for the easily fore seeable future.

            The local people might even get behind us doing so if we managed the job well. I doubt many Venezuelans would kidnap all the students in a girls school or bomb a free clinic set up by yankees to look after their kids or object too much if there were milk in the stores again.And jobs in the oil fields paying regularly in yankee dollars capable of buying all the things currently unavailable there except to the local elite and not even them in a lot of cases.Imperialists we are but we are just about the soft hearted wimp champions of all time when it comes to imperialists.

            The rest of the world can sanction us as the rest of the world pleases. Except for the mineral resources we import we really do not need the rest of the world except as it represents the physical environment in which we live.

            Please – I am not seriously proposing that we invade Venezuela. Only pointing out that in the last extremity we might.

            1. Increasingly the wealthy aren’t loyal to any particular country. Would it actually serve their purposes to create a war to go take resources to benefit the US?

              Yes, the military industry lobby likes war, but for everyone else who is wealthy, it seems they can cut deals more easily than getting a country to go to war. And if they want some protection for their own self-interests, seems like they can hire their own protection or mercenaries.

              In other words, if you are one of the world’s wealthy, why bother trying to engineer scenarios involving Congress, the President, and the US military if you can get what you want in other ways?

            2. “Increasingly the wealthy aren’t loyal to any particular country. ” I’m not so sure about that. Switzerland has always received a lot of loyal support by every sort of wealthy: Good, bad and ugly.

            3. Switzerland has always received a lot of loyal support by every sort of wealthy: Good, bad and ugly.

              But not all the people who benefit from Switzerland become citizens there.

              However, it kind of proves my point. Switzerland isn’t invading other countries, and yet the wealthy like what it has to offer them.

            4. I would be very hesitant to describe these people “well educated: when they don’t understand what is the real issue with oil. What they would do with high break even oil from Venezuela oil sands? You have more then enough of that high cost stuff next door. You can get it now with huge discount since Total, Shell, Statoil are running away from that stuff like a plague. But I dont hear that there are any takers.
              Venecuela story is not about “getting the oil” it is about “denying the oil” to the others (Chinese).

            5. Conversations such as this one make little sense unless a time frame is specified. You are dead on that nobody much excepting maybe China really cares about Venezuelan oil at the moment.

              ”These people” are as well educated as anybody and include medical doctors, engineers ,lawyers as well as professional military people. I have a sister for instance who is both a retired professor of nursing at a large university and a retired army officer.Beyond that I have always made it a point to live in both worlds culturally and know a good many died in the wool liberals very well indeed and used to think of myself as a liberal believe it or not. I was at one time a card carrying member of the NEA and the ACLU and paid dues to the OPERATING ENGINEERS . Had a peace sign on a chair around my neck and hair down to my shoulders too as well as a corn cob in my pocket stuffed with something that would make you have to think a while to remember your name. Kept an apartment in the chi chi university district known as the FAN in Richmond Va and hung around VCU for years as a ” special grad student” meaning I signed up for anything interesting just about every semester.

              It is true that I retired back to the farm in the hills and that I spent a good part of most years here during my working life .

              I maintain contact with most of the people I used to know well in my former life.I also spend a lot of time on email with a few of the top people who posted at the old TOD site including a couple of professors. Thank sky daddy for email and cell phones and cheap gasoline.!

              You fail to understand that high cost low profit oil today is probably going to be as precious tomorrow as liquid gold. Nobody was much interested in North Dakota until the price shot up to a point it got interesting. I failed to point out that I was thinking long term – my fault of course.

              Canada is an old friend and while she is probably going to always be an old friend she may not want to sell us as much oil as cheap as we would like a few decades down the road.

              Bullying the Venezuelans will be easier and safer and less uncomfortable for us as a society.

              You do have an excellent point about the game being to keep the Chinese out of this hemisphere for the moment. Unfortunately we seem to have misplaced the common sense necessary to looking after our own long term best interests or we would not have shipped our critical industries to China in the first place.

            6. Mac,

              It does not matter if Canada is friend or not. What matter is this:
              1) The resources that could potentially be extracted have to be profitable
              2) General population have to have a means to pay for it.
              As of now these resources in oil sands are not even remotely profitable. Layoffs in Calgary (Canadian version of Houston) are in full swing as I type this. The projects that were on drawing board are scrapped. Budgets are cut. There is nothing more to do. And how long do you think they can run existing operations with the loss? And that is not small loss that we are talking about. And how do you know when the price will be back? You don’t know. The CEO of Suncor also doesn’t know either. Who is going to pay for the loss in the meantime? They have to make some tough decisions.
              If we assume that the price goes up to a profitable level at some point in future, then there is a problem if we can even afford this type oil. It could be like caviar – it is available on the market but general population are not consuming it in great quantities.

            7. People who drive future cars that go twice as far on a gallon will be able to pay twice as much for it without much trouble assuming they have income.

              Now as far as people being able to pay- at some point in the future I expect a lot of people are going to be destitute. But until things go all the way to hell in a bucket there will be PLENTY of people who CAN pay ENOUGH for SOME oil to keep the tar sands profitable.

              I am a poor man myself in terms of cash income or cash in the bank but there are many ways I can change things around to continue to buy the five or six gallons of gasoline I use in a typical week even if the price doubles. Now if it goes past say six bucks I will figure out a way to cut back some.

              I will not be cutting back much at all no matter how high diesel goes. The cost of diesel on my place is trivial in relation to the income it helps generate. Field crop guys will be looking for ways to save on diesel because they use a lot more per dollar of revenue.

          2. I must disagree with both Watcher and Mac here. “Us” is the human race. To believe that the USA will survive the collapse while other nations do not is just silly. I am really shocked that you guys actually believe that.

            It is not just peak oil that will cause the collapse it is peak everything. Everything is already collapsing because of the dramatic overshoot of the human population. The fish in the sea are disappearing, deserts are expanding, the rain forest is disappearing, all mega fauna except Homo sapiens are going extinct. Topsoil is being blown away and washed away, only about half remain. Rivers are going dry, lakes and inland seas are drying up and water tables are dropping by meters per year.

            But that only involves them and not us! Give me a
            break!

            1. I don’t necessarily believe that in the entire US business will remain as usual. But just as there is extreme poverty and extreme wealth in the world right now, I think some groups of people will do much better than others when peak oil and climate change hit. And as some groups of people don’t survive, that leaves more for those who do.

              Unless the entire planet becomes uninhabitable for most life, I think there will be enough homo sapiens remaining and surviving to keep the species going.

            2. Hi Ron .

              Give me a break as well. 😉

              I am about as pessimistic as you are when it comes to environmental degradation and resource depletion except that I think collapse is going to put a stop to these problems BEFORE all the good stuff is gone.

              Collapse barring flat out modern apocalyptic war is going to be PIECEMEAL . I have said this many times and have never ever run up on any good reason to believe otherwise except just plain old bad luck on the planetary scale.

              A great many countries are going to be known only in old books and survive only in the memories of the people in them who survive collapse when it arrives. If the climate goes totally haywire there may not be ANY people at all in such places as Saudi Arabia or even the lowlands of the Mississippi delta. JUST plain too hot or too hot and too humid too much of the year.

              I maintain that the Horsemen are going to be taking most of us away. But most of is is not the same thing as all of us and I am reasonably confident there will still be a substantial number of people living in most places people live today. In some places the population will be reduced ninety nine percent in some places it will be reduced fifty or seventy five or one hundred percent. Life will be pretty spartan compared to today for most people excepting maybe some Indian and Chinese subsistence farmers who may not notice a hell of a lot of difference at all.

              But I do expect there to be a government in control of most of the territory in most places after a while and a good many places will still be known by the same names and may even have about the same borders as they do today.

              Now do I expect the USA , AUSTRALIA , CANADA and other similarly situated countries to pull thru without experiencing some VERY TOUGH times. I have often pointed out that I expect such measures as draconian rationing and martial law are to be expected for extended periods and in many parts of the country. I have predicted the end of air travel, the outlawing of big personal trucks, draconian gasoline taxes and rationing and a centrally planned and administered war footing economy for as long as necessary.

              Now I have not predicted that the USA or any other country will survive and thrive on an industrial economic base FOREVER but it is also true that I have not predicted HOW LONG the USA might survive in recognizable form with most of the people in this country still living a fairly decent life compared to life prior to the Industrial Revolution or life in poor countries today.

              What I envision as being MOST likely falls along these lines:

              Personal cars mostly out and the ones remaining very small very fuel efficient and little used compared to today for long commutes etc.

              Millions of trades people on make work jobs doing useful work such as renovating older houses and schools etc for energy efficiency.

              Lots of people likewise employed on make work building street car lines and driving buses etc.

              Life in the suburbs being reorganized around community self sufficiency to the extent possible such as local businesses in local houses and buses and vans taking people where they have to go on a regular basis maybe once a week. If somebody commutes he will be commuting in a very very small hybrid or pure electric with the odds being pretty high it is charged mostly with wind and pv juice.

              Factories turning out one washing machine with parts and service guaranteed for fifty years versus a dozen that will have to be scrapped in ten or fifteen years for lack of parts.

              Beer brewed LOCALLY. Hauling train and truckloads of beer hundreds and even thousands of miles is insanity and will be outlawed. Bread baked locally. No wrapper needed except the bag that was used to wrap yesterdays loaf and last weeks loaf and that will be used again to wrap next weeks loaf.

              Furniture built to last. I have a house full of stuff that will last just about FOREVER barring fire that was made from local trees harvested and milled by and make into nice rustic furniture by a long dead relative and is worth a substantial amount of money now being close to real antique age. This furniture has never been advertised or boxed or inside a store. It will never leave this house so long as I live here.

              People working as servants again for room and board and a very modest salary.

              People doubling up to an extraordinary degree.

              People cooking at home again.

              Factories churning out ”the right stuff ” running twenty four seven the right stuff being insulation replacement windows heat pumps pv panels wind turbines led light bulbs heavy duty rechargeable batteries wood splitters gardening equipment chainsaws.

              Contractors knocking down old buildings no longer used in cities to recycle the materials and the ground uncovered being converted to community gardens. Lay foresters going thru the woods selecting trees to be selectively removed for firewood and better trees left for timber. As many people as needed to sort everything on a conveyer belt that is dumped off the garbage trucks for recyclable metal paper plastic glass wood fiber.

              CLOSED BORDERS except for maybe a very few very useful people such as medical doctors and certain engineers. The country will not be WILLING to pay for our current welfare population’s support never mind the expansion of the same- without putting everybody to work at SOMETHING.

              People learning to live with fans and long johns again. People used to salmon and ribeye eating chicken and people used to eating chicken eating beans.

              Damned FEW new houses or new roads or new anything else but lots of everything repaired and refurbished and made to last and to work efficiently. New cars mandated to get two hundred mpg equivalent. If it must be a go cart that will go only thirty five to make the cutoff a thirty five mph go cart it will be.

              People will have smaller families than ever because birth control will be subsidized and money to raise kids will be hard to come by. Plus in an austerity environment you want to inherit the old folks stuff not to sell it but to use it and leave it to the kids.

              A few farmers might believe in having six kids if they can find a wife dumb enough to go along but hardly anybody else.

              To make a long story short I fully believe that we are inevitably headed for a time when forced austerity will be the price of survival even here in the US.

              But we are not so short of any critical natural resource that we are going to starve or freeze in this country anytime soon except as the result of gross mismanagement.

              The grid will most likely stay up except maybe for the people at the far ends of rural lines with only one or two customers per mile. The water and sewer will stay on. There will be beans and potatoes at least in the local grocery store.

              Very few if any people in this country need die of starvation or exposure or communicable disease. We probably won’t be getting many organ transplants or so many eye operations but our average health status will probably actually IMPROVE given that we will be walking more and eating a lot less junk food.

              I expect toy such as pocket sized phones will still be available and people will still be listening to music coming out of such toys more than likely. The internet will be up along with the water and sewer and grid – most places at least.

              We will learn to live ok with intermittent discretionary electricity- there will be enough to keep the refrigerator on all the time but the washing machine may have to wait for the wind or the sun to cooperate. Engineers will have no trouble making sure it works this way.

            3. To make a long story short I fully believe that we are inevitably headed for a time when forced austerity will be the price of survival even here in the US.

              But we are not so short of any critical natural resource that we are going to starve or freeze in this country anytime soon except as the result of gross mismanagement.

              That’s what I expect, too. I see no reason to assume that people can’t survive using the same lifestyles that they used pre-oil. Not all places will be able to grow food, but unless the entire planet is wiped out, some places will. The United States is such a big country that there should continue to be places where people can survive via a greatly reduced lifestyle. And as more people don’t survive, what they leave behind can be reused by those who are still around.

              People survive in Africa on next to nothing. Why have they been able to do so, and yet we wouldn’t be able to?

            4. That’s what I expect, too. I see no reason to assume that people can’t survive using the same lifestyles that they used pre-oil.

              You’re right! There is no reason- if we live like indigenous peoples of 300 years ago, at the same population density, with the same life expectancy.

              All we’ve got to do is get down to about 1/60th of the current population and we’re there…*

              -Lloyd

              *WAG Canadian figures. Your mileage may vary. [no suitable emoticon…someone should get on this. Perhaps an image of Peter Sellers as Dr. Strangelove.]

            5. You’re right! There is no reason- if we live like indigenous peoples of 300 years ago, at the same population density, with the same life expectancy.

              Yes, if it comes to that. Which is the point. If peak oil causes a big die off, eventually there are enough resources for those who are left.

              Peak oil isn’t likely to hit everyone equally. Some will still have enough access to stuff to make it.

            6. Right On, Mac. What I would say. Um, except maybe not quite so many words.

              You must be a hellava fast typer.

            7. About typing:

              I came very late to computers and managed to get by without more than a little hunting and pecking until a few years ago.

              Then I decided given the amount of discretionary time available to me that I wanted to do some serious writing and that with a word processor I could manage it easier and faster and without paying a typist to redo hand written stuff.

              But being old and sometimes impatient not to mention fat and having stiff clubby arthritic fingers and painful elbows and shoulders I was just not able to master qwerty touch typing.

              Research on the net lead me to the Dvorak keyboard and free tutorials.

              Most people have never heard of it but it is a free utility built right into just about every MAC and PC out there that either has a conventional keyboard or a slot to plug in a conventional keyboard.

              Two clicks of the mouse switches my computer from qwerty to Dvorak and two clicks switches it back again. Free instant and trouble free.

              I taught my self to touch type using Dvorak in less than a month in an hour or so a day.

              Fat belly, fat clubby fingers, arthritis and all I can now do sixty to seventy words a minute with almost no errors. I can get close to a hundred with a few errors. The ones I make here are usually the result of hastiness and careless editing on the fly with no edit button.

              IF I were more conscientious I would type my comments in another program and check them more carefully before posting them.

              The world’s fastest Dvorak typists are over a hundred words per minute FASTER than the fastest qwerty typists in side by side competitions.

              I SELDOM EVER need to move the heels of my palms even a quarter of an inch from their usual resting places on the cushion at the bottom edge of my el cheapo MS ergo 4000 keyboard.

              No hands suspended in the air over the keyboard for me. I put it in my lap and type moving nothing except my fingers my eyeballs and my wrists- just a little side to side rotation with the wrists.

              Since I do not have enough sense of touch in my callused fingers to feel the little index marks on the f and j keys I put a little hump of glue on them to enlarge the marks so I can get my hands in the right spot to start typing without looking.

              Dvorak was brilliant man whose work and reputation were destroyed by ignoramus academics and businessmen and bureaucrats determined to avoid any inconvenient – to them – changes in the way things are done. There is a substantial possibility bribes were involved when the military was testing his keyboard as a possible way to train draftee typists. Nobody in the manufacturing or procurement channels wanted to switch which would have involved spending time and money in the short term to save MORE TIME and money in the long term.

              If I had the money I would set up fair competitions to prove how good his keyboard is but alas I am a poor man and setting up proper competitive trials would cost tens of thousands of dollars.

              Some people argue that you cannot easily switch from one lay out to the other but I do not believe that given that some self trained typists can and do switch.

              At any rate there is hardly any reason to switch BACK except that some programs require you to use a conventional keyboard and are thus not compatible with the Dvorak layout.

              I have no trouble switching from driving a car that has only drive and reverse on the shifter and to a truck with a clutch and two shift levers and thirteen forward and three reverse gears. The process requires no though at all..I just do it. So does every truck driver who operates a truck with that particular transmission.

              NOW AS FAR AS THE EVIDENCE THAT QWERTY IS AS GOOD OR BETTER IS CONCERNED- IN MY OPINION IT SIMPLY DOES NOT EXIST.

              I have spent a good bit of time looking for it. What does exist is highly questionable and the one major paper written by prominent economist or business professor somebody of that nature supposedly exposing Dvorak as a bumbler simply cannot be found- nowhere at all . Not AT ALL. But in is quoted as gospel by every idiot out there who is sure what he already knows is better than something he has not tried.

              There is ample opportunity here for somebody who wants to make a reputation in economic theory to become famous.But he will have to be able to set up fair trials side by side of beginning typists learning each system in similar circumstances with equally qualified teachers.

              Just finding an actual classroom teacher with charisma and pedagogical skills as well as a substantial Dvorak experience would be a tough job. Finding a qwerty expert teacher would be no problem at all.

              Then you would need two good sized groups of kids well matched who had no previous keyboard experience.

              I would be willing to bet my farm that the Dvorak kids blow the qwerty kids out of the water on both speed and accuracy per hour of instruction and practice time.

            8. Very few if any people in this country need die of starvation or exposure or communicable disease. We probably won’t be getting many organ transplants or so many eye operations but our average health status will probably actually IMPROVE given that we will be walking more and eating a lot less junk food.

              Sorry Mac but I think your scenario is extremely unlikely. I don’t think you have given a lot of thought to the extreme masses packed together is large cities. Or a lot of other places for that matter. When commerce breaks down and the lights go out… the food stores will be empty… people will riot… then they will die.

              There will be no beans and potatoes anywhere. People will kill for beans and potatoes.

            9. Sorry Mac but I think your scenario is extremely unlikely. I don’t think you have given a lot of thought to the extreme masses packed together is large cities. Or a lot of other places for that matter. When commerce breaks down and the lights go out… the food stores will be empty… people will riot… then they will die.

              There will be no beans and potatoes anywhere. People will kill for beans and potatoes.

              That is an expectation of a doomer, which encourages people to buy guns and hoard food. And the visions of novelists who portray the end of the world.

              However, there isn’t much historical indication that this will happen.

              There are people starving NOW in places next to the wealthy. If there are riots, they are very small and they end quickly.

              And there are starving countries NOW which aren’t overrunning rich countries.

              Those that have wealth have rarely been taken down by the starving masses. What civilizations in history have ended the way you are describing?

            10. However, there isn’t much historical indication that this will happen.

              History? Oh for God’s sake! You think we should check history for past global collapses? Or for past cases of ocean fisheries completely disappearing? Or for world water tables dropping to nothing? Or for the drying up of all fossil fuels that have fueled the industrial revolution and enabled the population to explode to over 7 billion people?

              But I have got to give you credit for being right, there is nothing in history that gives any hint of the events that will take place in the next 50 years or so.

              I don’t suppose you have ever read David Price’s Energy and Human Evolution?

            11. Or for past cases of ocean fisheries completely disappearing?

              Yes, people have destroyed animal life and vegetation in certain areas. But they didn’t stay in those areas and riot against each other. They tapped into other resources.

              So, yes, climate change is likely to destroy certain areas we now to turn to for food. So people will farm other areas. Those who don’t have access to those areas will likely not have enough food. But that is happening in the world right now and those people aren’t rioting against the rich.

              The point is that you expect to happen everywhere at the same time, so the masses will turn on those who have something left. I don’t expect everything to run out simultaneously everywhere. Those who live in protected areas have no reason to turn on each other. And they will likely be stronger than those who have nothing.

            12. An excerpt:

              A collapse of the earth’s human population cannot be more than a few years away. If there are survivors, they will not be able to carry on the cultural traditions of civilization, which require abundant, cheap energy. It is unlikely, however, that the species itself can long persist without the energy whose exploitation is so much a part of its modus vivendi.

              This is speculation. I see no reason why the disappearance of oil will end the species. Yes, I think a massive environmental problem could wipe out the species and many other forms of life. But the loss of oil, no.

              Homo sapiens have survived much worse.

            13. Yes, people have destroyed animal life and vegetation in certain areas.

              In certain areas? The whole goddamned ocean is a pretty big certain area. Africa is a pretty good certain area. Ditto for Asia, Europe, North America and South America. But so far the penguins of Antarctica are doing pretty good. 10,000 years ago humans and their animals represented less than one tenth of one percent of the land and air vertebrate biomass of the earth. Now they are 97 percent. Read my article here.

              I don’t think you have any idea of the magnitude of the problem. It doesn’t have to happen everywhere all at the same time. The point is it will happen everywhere eventually.

            14. The point is it will happen everywhere eventually.

              The entire Earth will be destroyed eventually. We know that.

              Where we differ is what is likely to happen in the next 50 to 100 years. I think life will change. In some places it will be much worse. In other places, maybe not so much. I think reduced consumption and a simpler life for those who can have it may be an improvement.

            16. I think where I differ from some of the rest of you is who I think will survive. I don’t see people turning on the wealthy. I see them turning on the poor, the elderly, etc.

              I think there will be victims as the world hits peak oil, but I don’t think the victims will be the wealthy. As I watch who has suffered and who is likely to suffer as the world economy gets worse, I don’t see it affecting the rich nearly as much as the poor.

              And as resources are redirected from saving the many to saving the few, I think the few will do okay. They can recreate feudal estates and support themselves and the families that live on the estates. The rest of the world be damned.

              Those families who support the wealthy aren’t likely to kill off the wealthy because they are already doing better than those who aren’t part of the enclave.

              People have been buying into the caste system in India for a very long time. People at the top get to live well. People at the bottom have to fend for themselves.

              While it might be cosmic justice to think that the world will collapse and the masses will kill and eat the wealthy, I don’t see much indication that this will happen. In fact, recorded human history suggests that the wealthy create narratives to prevent themselves from being treated like those lower than themselves.

            17. It’s not like one day we will go from oil to no oil. And it’s not like one day all the fields in the world will stop producing.

              There will still be oil, there will be still be food, even if there is less of it, and it is unequally distributed. So life will get tougher, but it is already getting tougher for many people.

              And as more people have a declining quality of life, the rich get richer, which they are already doing. The rich will find ways to protect their lifestyles, and will likely to continue to do so while others don’t have much. Those in areas which have more resources and better climate will likely continue to do better. It’s not one day the world goes to hell, people suddenly realize it, and then riot.

              As far as climate change is concerned, the scientists are already warning we are going to hell. So are there riots over that? No.

              A city floods now because of changing weather patterns. Another city suffers mass drought because of changing weather patterns. So are the people rioting in those cities? No.

              These changes are happening slowly enough that people are still adapting. And when it dawns on them that there are problems, politicians just divert their attention by blaming the problems on those who didn’t cause it. If the masses are going to turn on someone, it is likely they will go after those poorer than them than those richer than them because they have been told by the rich that the poor are the problem.

            18. Think about the US. You think people are turning against the rich and powerful as the masses get by with less? I haven’t seen much indication so far. Occupy Wall Street was the best attempt and didn’t get very far.

              So who is likely to be targeted as things get worse? The rich? Nah.

              How about black men?

              You guys who worry about people stealing food are expecting the middle class to one day wake up and storm grocery stores. I think it is playing out more like what you are seeing today. People may get angry, but they target minorities, the poor, and those who are a perceived threat rather than the rich.

            19. The smartest man I have ever talked to has a substantial hoard of food and water in his house and a big self contained pv system with enough batteries to ensure that his refrigerator and freezer will work indefinitely. He also has water storage capacity to enable him to get by fine with the ample rain that falls where he lives.He is not nearly so concerned with collapse as he is catching a communicable disease in the event of an epidemic since he has serious health issues and figures on staying in his house and avoiding public contact long enough for any epidemic to burn itself out locally- maybe six months or so.He just eats the older stuff and replaces it on a monthly basis and this costs him nothing except the use of the one room where he stores his non perishable food stash.

              I have a lot of food and firearms myself as well as a store of pesticides and fertilizers and diesel fuel etc. I have high hopes I will never need to fort up but the possibility has crossed my mind and I have discussed it with old acquaintances who might move here to fort up with me- acquaintances who have skills to complement mine.

              If the grid goes down we would could live a long time- probably a year by buying up and storing some stuff very quickly and putting a couple of cows in the back yard- not for milk but for safekeeping from thieves.IF things go mad max I expect they will calm down again within a year.My wild ass guess as to the probability of a mad max scenario here in my part of the US within my hoped for life time is no more than one percent annually.The odds in a place such as Detroit might be triple that – or near zero. Who knows?

              For what it is worth declassified Cold War documents indicate that the Pentagon estimated the odds of nuclear war at two percent annually in their internal planning documents.

        2. Hey, man, I didn’t say they turned BEFORE , I said quite clearly they turned after.

          My point was simple, and stands as stated. They DID turn. After, for sure, what I’m saying is that people can and do turn on a dime.

          Right, usually after, but, like then, sometimes not too late after to swim thru the wreckage and get ashore anyhow, late but not dead.

        3. Well, now, not quite nothing. For sure, nothing at the national government level, but, around here, we have done guv up on the gov long ago, and just decided to go do it. Prepare, that is. Like get off fossil fuels in little steps.

          today I had a meeting with the local reuse-recycle guy. He hates spending propane to heat his barn-like bldg. I showed him better ways, esp insulation and making a good wood stove. He went for it right now. Says he has lots of volunteers eager to help and learn.

          And there are lots of similar things in easy sight right in front of me. And I can’t believe we around here are in any way unique, why should we be? So, by extrapolation, the grass roots are growing all over the place.

          Yesterday there were a couple of hundred people here at an anti- injection well rally. I am targeting those people to drop nat gas and go for PV- heat pumps. They are of course vulnerable to this pitch, not wanting to be seen as hypocrites.

      3. If you think that the American people have the fortitude of the Russians during the Siege of Leningrad, you are just another American flag lapel-wearing idiot.

        2. The Russians are mighty tough people. They have to be,given their mighty tough history. I never said or thought that us softies are anywhere in the same league. I said look at the Russians–. Meaning there’s an example of surviving a REALLY tough situation, some people can do it.

          I remember standing at a bus stop in Red Square in January, it was 40 below and windy. I was gonna die real quick if that bus didn’t show, the pleasant Russian lady standing next to me was just as bland and calm and comfy as if she were sitting on a sunny beach. I was deeply impressed.

          Of course she had an advantage- she was dressed like a Russian.

        3. Enough of us will prove to be tough enough that there will be plenty of us left no matter what short of a flat out nuclear WWIII.

          I must agree that any REAL hardship would kill a few tens of millions of us off pretty quick and that a few million more would commit suicide.But there are plenty of people in my neighborhood with hands as hard and tough as shoe leather from doing hard physical labor.

          A good many of them have been in jail for offenses ranging from robbery to murder and the rest just haven’t ever been caught. Most parts of the country are more civilized of course -I live in the southern mountains and southern hillbilly culture is legendary for it’s violence.

          We no longer live up to our reputation for the most part.Things are peaceful here compared to Detroit or Maimi. You can go to numerous places in this country these days and get shot for your shoes or your watch or just because the perp feels like shooting somebody.

    1. Thanks Ron, this was an extremely interesting film. This may explain some of the violence and riots we are currently seeing in extremely overpopulated cities.

  38. The premise of the bell curve is that there is no unusual increase in credit levels and that consumers will buy at steadily increasing rates indefinitely. Otherwise, the period before peak production is reached may be extended, or production may decrease abruptly. In either case, the effects of peak oil remain.

  39. People who obviously know better should not be so dogmatic in their arguments. Maybe they are just in a hurry to score a point or typing in a conversational style but print on a page or a screen is almost entirely bereft of nuance.

    It is for instance now cheaper to own a small solar panel and battery and electric light than it is to burn kerosene and somehow or another somebody will figure out a way to make a buck getting panels, batteries, and electric lights to people burning kerosene for light.

    It is currently true that mining and transportation are heavily dependent on oil but if circumstances change slowly enough there is no reason at all that mining and heavy transportation cannot be managed electrically – and managed using mostly renewable electricity.

    A machine such as a giant bucket wheel excavator does not HAVE to run continuously to dig coal. Even if it did it would be possible to build a small coal fired generating plant right at the mine- a plant that could be loaded on a train and hauled away with the last load of coal and unloaded again at another mine. It is also possible to manufacture diesel fuel using coal as both the feedstock and the energy input.

    Nobody is ever going to run a farm tractor on an extension cord- but a machine that moves only a few feet a day could easily be run on a uber cord reaching the last few hundred feet. The freight trains that deliver the coal do not HAVE to run continuously. Coal and iron ore can be stockpiled. Ditto just about everything else.

    There were trucks running in Germany on tram wires and batteries before there were any trucks built with internal combustion engines.

    I am NOT argueing that we will solve our energy and resource problems across the board or that we can COUNT ON avoiding an overall economic collapse. The war as a whole may be either won or lost but it is a dead sure thing that many individual battles are going to be won.

    One such battle is in my opinion going to be the electric versus ice automobile- assuming the war does not progress TOO FAST to allow it to happen.We WILL be satisfied to drive very small short range pure electrics and we WILL find it very much to our advantage to buy cars such as the Leaf and the Volt as the tech scales up right along even as the price of oil goes up as well.My grandfathers would have been simply flabbergasted when they were kids to have been able to go twenty five miles round trip to town and back in a golf cart at twelve mph. It took ALL DAY in the farm wagon and the horses had to be allowed the next day off to rest up from such a tough day.

    Adaptation is going to be as much cultural as it is technological. We WILL be able to afford to insulate older buildings because the energy saved will be several times the energy invested in the renovation process. The costs of such a job is actually mostly labor. I work in the trades and know this to be a rock solid fact. And there are ways to insulate that don’t use all that much labor if you are willing to deal with the esthetics.

    I have helped a friend slap an inch of rigid foam with a foil face over his exposed cinderblock masonry walls and put vinyl siding on over that. With new windows and extra insulation in the attic and floors the total cash non labor cost of the whole job was less than he would have spent on oil for his furnace for the last ten years.

    Labor is something that WILL be cheap in the future. It won’t cost much more to hire a carpenter than it would have cost to support him on welfare ANYWAY.

    Now I personally do not believe that governments world wide are going to impose draconian cuts in fossil fuel use to preserve the environment – unless it comes to pass that renewables get cheap enough fast enough to allow it to happen without cutting too deep into living standards.

    But I do believe it is altogether possible that governments may well ban such toys as five hundred horsepower ice powered automobiles and slap a BIG tax on aviation fuel.Building codes CAN be continuously tightened up just as the fuel economy standards of cars can be elevated.

    Led lights can be mandated and when and if even better lights are invented they can be mandated too.

    I wish somebody would really and truly make an EFFORT to REALLY explain why industrial civilization cannot continue right on even as oil depletes – so long as it depletes SLOWLY enough for us to adapt.

    When the choice is between wasting oil and surviving by using it frugally governments will ENSURE it will be used frugally indeed- once the crisis is obvious to the people who are in control. There can be no doubt on this point. The only real question is whether governments will realize the gravity of the situation in time to impose the austerity measures needed to by the time necessary to enable adaptation.

    Anybody who cannot understand this sort of thing just can’t THINK very well. When Leviathan is threatened it’s gloves off and brass knuckles on. Who could possibly be dumb enough to think that a country that has close to ten million men in uniform to avenge Pearl Harbor is will be unable to muster the will power to impose economic measures necessary to ensure it survives peak oil?

    If these measures involve exporting a little democracy down Venezuela way then we will get back into that line of work in due course. The oil will flow as long as it exists and Fernando and Tool Push and their buddies can make it flow at a price we can pay – and we CAN pay a much higher price than we have so far ever paid. Given time to adapt of course.

    1. “I wish somebody would really and truly make an EFFORT to REALLY explain why industrial civilization cannot continue right on even as oil depletes – so long as it depletes SLOWLY enough for us to adapt.”

      1. To service the existing debt. The world is drowning in debt and need a constant source of growth to service it. Gov’ts and corp pensions have made huge promises to future retirees. Every retiree needs multiple workers to pay their retirement benefits. Without growth (expanding labor pool) its not possible to meet these obligations. Few people saved enough for retirement and most are counting on entitlements and pensions to carry them.

      2. Most Jobs depend on cheap and abundant energy. Much of the production is for consumerism. People buying new cars, new TVs, new computers, entertainment, etc. As the cost of energy rises, people will be able to afford less stuff and services. That means fewer jobs and higher permanent unemployment. As unemployment rises, tax revenue will fall. There isn’t much need to ore mining and energy extraction if the economy isn’t growing. Decline demand for resources creates a feedback loop as fewer goods, resources, and services are needed, the fewer the jobs are needed. You can already see this has the labor participate rates are plunging in the West and they will continue for the foreseeable future.

      3. Less resources means less consumption and less happy people. People drowning in debt, without the chance to dig out and improve their lifestyles will be miserable and become angry. This is the stuff that leads to riots, increased drug abuse and violence (see Europe as a prime example). As more as more people fall into this category they will look to leadership that promises them a way to prosperity. They will choose leaders that like Mussolini, Hitler, using nationalism and other traditional tactics to win elections. Once in power the only way the can obtain higher living standards is to take resources away from some one else. As Dick Cheney stated “The American way of life is non-negotiable” We will definitely see more charismatic leaders in the future that set civilization on the path to the next global war. So far the US had already begun with its invasion of the Middle East, and is now setting its eyes on Russia (which happens to be the largest oil exporter). I can see no way that the US’s actions against Russia will turn out well. The Middle East is now a complete disaster, directly caused by the US actions.

      4. Its unlikely that the oil depletion curve will remain shallow. CapEx spending for Oil is going to collapse next year and it will remain subdued for an extended period. Conventional Oil production had obtained a shallow decline by turning to in-fill\horizontal drilling that manages to recover the last remaining oil in already depleted fields by slimming the remaining oil off the water column. The world will probably need to replace at least 50% of existing conventional oil in the next decade as infill drilling winds down. The only remaining large untapped oil fields are in the offshore arctic regions, which is difficult and expensive. With the collapse in oil prices its unlikely that the arctic will be tapped in an significant way because no one is going to want to risk large amounts of capital into a oil with these large price swings. For Arctic drilling to occur prices need to go back up into the $120/bbl range (guesstimate) and they need to stay high for the long term (very unlikely due to the demand-destruction cycles)

      Another way to look at the economic problem is looking it as a space problem. Take a 1000 people and let them live in area of 10 square miles. The Population will rise until the space is complete occupied. Then every year take away 1 sq. mile of space. You have the same number of people competing for resources in an ever decreasing living space. Sooner or later they are going to get angry and miserable. Its much much easier to live in an environment of expanding resources. Its very difficult to survive in a environment of declining resources.

      Imagine if your paycheck (or retirement funds) shrank every year by 5% to 7% (which it probably will starting in a few years, if not already). Do you think you can maintain your lifestyle and happiness over the long term?

      1. Hi ya TECH ,

        Just to make it clear- I am not sure industrial civilization WILL continue at all nor tat it WILL continue to grow in the face of peak oil not to mention peak resources in general- I just believe it is not doomed to fail by peak oil alone and that it MIGHT survive peak resources in general as well for a good while and maybe even for a very long time.

        I grew up among people who simply could not imagine the world existing without SKY DADDY up there to create it and every little thing in it.

        My perspective is ahem er somewhat DIFFERENT .

        Maybe I am the worlds BIGGEST FOOL but I do NOT believe debt is an ESSENTIAL ingredient of an an industrial economy. NOR do I believe ETERNAL GROWTH IS NECESSARY to an industrial economy.

        Oil is a very useful substance to be sure but we had an industrial economy before we had oil – even though just about every peak oiler tends to forget that. Without oil we would STILL have an industrial economy TODAY. It would be far different from the one we do have of course and most likely much smaller and not so technically advanced due to the reduced size reducing investment in R and D over the last century and a half.

        Debt FACILITATES growth without a doubt. But so far as I can see there is no PROOF it is NECESSARY to growth. Lots of things HAVE gotten built in this world on a pay as you go basis and lots more things WILL get built. Lots of societies have existed in a stable form for extended periods of time with hardly any money of any sort in use never mind DEBT as such.

        Money is a MARKER for wealth but it is NOT wealth in any real physical sense.

        Now it is true that the world is drowning it debt. I have pointed this out myself here and elsewhere numerous times. But debts can be and are repudiated and never repaid. They are frequently inflated out of meaningful existence. DEBT can vanish in a flash when it suits the needs of people in power to make that happen. Now it is true that the owners of debt are frequently also the people in positions of power or else the OWNERS of the people in power via political machinations. So it does not happen very often but it DOES happen.

        People go to bankruptcy court owing millions and walk away debt free day after day. There is essentially nothing to prevent a country from doing the same thing on the grand scale. You just break the promise to repay whatever you owe whether it is money borrowed to build tanks and planes or money promised as social security benefits.I UNDERSTAND that this represents real trouble to people such as myself dependent on social security and medicare but this never the less would NOT be the end of the world. Now insofar as somebody who owns megabucks worth of debt it might or might not mean a change in his lifestyle. Most multimillionaires who go broke do not wind up pushing brooms and eating beans.

        It is not an efficient way to get things done but modern day countries do still rely on slaves in time of war – drafted citizens forced to fight for trivial wages in relation to the risks involved.

        I can see NO REASON whatsoever that a country with substantial land and resources and a well educated and highly skilled population SHOULD HAVE to ever borrow money. MY folks never borrowed a dime – they just worked and saved and bought things as they needed them from land to appliances to trucks and tractors. They retired with a substantial little farm with a very nice house on it. The latest model humans survived at least thirty or forty thousand years before social benefits and the welfare net existed in any form except the other band members helping out those in trouble on a ” cash on the barrel head ” basis. Nobody went out and borrowed money to buy meat at a market to feed a crippled up relative. They just shared whatever was available. It is true that the favor was returnable and that this could be considered debt of course.

        Debt enables FASTER growth – there can be no question of that. But people can be put to work in lieu of paying taxes and a road can get built. A town can collect enough to pay it’s current on going expenses from day to day. There IS NO PHYSICAL OR ECONOMIC LAW THAT DEMANDS THAT TOWN EMPLOYEES GET RETIREMENT BENEFITS..

        There is no law that says a town cannot buy a fire truck for CASH. OR renovate a school one wing at a time for CASH.

        Debt is interchangeable with ownership as well if there is no other way of raising enough capital to undertake a necessary or at least desirable large project. Right now I would be happy to run into somebody who would like to invest twenty five to fifty thousand dollars in a small farm project I have in mind as a part owner rather than a lender.

        In short the failure of the world to pay existing debts is not going to result in the end of the world although if you get caught on the wrong end of default it will FEEL like the end and may actually BE the end for you as an individual.

        It is true that most jobs these days do indeed depend on cheap and abundant energy but this situation is not set in stone forever due to any law of physics or economics.As a matter of fact I cannot say how much work is done that results in virtually nothing in the line of useful goods or services being created but it must be a very very large fraction of all work. If all the big fast food advertising signs in my town were to be torn down everybody would still be able to find his favorite serving of fast food poison and sales would hardly suffer at all.Those signs represent a wasted investment in terms of our actual lives. A lawyer is a useful man to know but at least half of what mine does for me I could do for myself if not for his professional colleagues all getting together to make sure there is as much confusion and expense as possible involved in every legal bit of business. Fxxkxng hair dressers in my state have gotten laws passed that MANDATE two years of full time training to cut and style hair. This is the same amount of time it takes to get a professional license to work as a registered nurse or x ray tech in a hospital.

        Now people must either eat or starve there is no question about that. But there is no natural law that says they must be fed or sheltered. We have a choice to make and we can support people on welfare or by paying them to do such work as society deems fit and worthwhile as public employees. The guy who has been making a hundred grand writing slick ads may not like it but he would not starve planting trees in a street median.

        You are dead on on number three but SO WHAT? Un happy people and war and crime and hardship have ever been part of the scheme of things and always will be. When the shit hits the fan then government will either institute measures to control the flying shit or else new people will take over government who WILL institute such measures. The world is a Darwinian place and we are Darwinian creatures as is amply and incontestably illustrated and documented by our entire history. This does not mean the end of industrial civilization.

        Your number four is worrisome to be sure in terms of my argument but I specifically proposed it in terms of oil depleting slowly enough to allow us to adapt.That adaptation IS POSSIBLE is absolutely a certainty in the medium term. IT is not guaranteed and might not be possible in the short term. It is probably impossible en the very short term. But in the medium term – we can if everything else fails manufacture enough liquid fuel from coal to hang in there. It might cost twice as much – so what in terms of our survival? Building cars that go twice as far on a gallon is a trivial problem from an engineering point of view. All that is necessary is to downsize them and reduce the top speed to forty . No new tech whatsoever would be needed.

        Over population is a problem that cures itself via die off to put it in the bluntest possible terms. Beyond that we have learned how to cheat our biological programs and enjoy as much sex as we can manage without having unwanted kids except by accident.. Over population is a temporary problem now. A huge one that might yet result in troubles leading to WWIII and our extinction it is true but nevertheless a problem that has been solved. It IS true that results are coming a lot slower than we would like but they are coming.

        My lifestyle and happiness have little indeed to do with whether industrial civilization survives and continues to grow even if the growth is very slow and there is a substantial period of contraction involved.

        Now maybe I am right. Maybe you are. No matter what happens neither of us will have been PROVEN wrong . The course of history depends a lot on chance circumstances and a horse that wins today may lose to the same competition tomorrow.

        2. Mac,

          Have you read “this time is different – eight centuries of financial Folly”?

        3. OFM wrote:
          “Debt FACILITATES growth without a doubt. But so far as I can see there is no PROOF it is NECESSARY to growth.”

          yes, debt is not necessary for growth, but we have a global economy drowning in debt. Peak Oil or not, those Obligations remain until they fail. Before civilization can improve itself, it has to stop digging itself deeper in debt. My comments are not about how it should be, or how could be, its how things exists today.

          “People go to bankruptcy court owing millions and walk away debt free day after day. There is essentially nothing to prevent a country from doing the same thing on the grand scale. ”

          Yes, that’s exactly what will happen. the problem is that a very large number of people are dependent on entitlements and pensions that would be wiped
          out. It will not just happen to individuals, but businesses and gov’ts. When a company goes bankrupt, the majority of its workers lose there jobs. The company suppliers also lay off workers since the failed company will no longer purchase their goods or services. The people that had invested there money in the failed business are also impacted. A lot of pension money is invested in many business that will not survive without cheap and abundant energy. These pensions plans will be wiped out. When it happens it will trigger a serious of events that disrupt the economy. The Failure of Lehman (one company) nearly triggered a global default back in 2008.

          I suspect that in order to avoid a fast hard default, Gov’ts will opt to print money and devalue the currency so that it doesn’t crash all at once (Fast crash). It will be like a slow boil, but once the tipping point is breached, collapses will occur very rapidly. When people’s purchasing power evaporates or their pension plans only pay penny’s on the dollar, they will be pissed off. Some will riot on the streets (first as protests that turn more violently as the problems progress). Voters will seek charismatic leaders for solutions.

          My guess is that you are collecting Social Security, have a pension plan, or have money saved. if your not yet retired I am sure you know many that are. What do you think would happen if that source of cashflow vanished in a wave of defaults? Would you or they be able to get by? Also presume that jobs will be unobtainable during this crisis. Virtually every business would institute a hiring freeze and most will also be laying off workers to boot. So what do you think will happen on a national or global scale we the debt bubble finally pops or gov’t use high inflation to avoid a hard default?

          “When the shit hits the fan then government will either institute measures to control the flying shit or else new people will take over government who WILL institute such measures”

          Yes, Generally the people that take over during a crisis (ie gov’t leadership), exacerbate problems. During the financial crisis of the 1920s & 1930’s we had a Mussolini, a Franco, a Tojo, a Stalin, a Mao, and a Hilter (I am sure I am missing a few others). All rose to power by make grand promises of a better life, a better system of gov’t, etc. In the end these “leaders” killed well over 100 million people combined. The next group will kill billions, and likely set humanity on a path to extinction.

          1. Every point you make is a good one.

            I am about as fully aware of recent history as it is possible for a layman to be- to know more would require me to have worked in a field where recent history is central to the work. But I have made a point of spending my evenings for fifty years reading serious books and at least once a month I have read on about the history of the twentieth century on average. No tv. No bars. Just my armchair and a book.

            ” During the financial crisis of the 1920s & 1930’s we had a Mussolini, a Franco, a Tojo, a Stalin, a Mao, and a Hilter (I am sure I am missing a few others). All rose to power by make grand promises of a better life, a better system of gov’t, etc. In the end these “leaders” killed well over 100 million people combined. The next group will kill billions, and likely set humanity on a path to extinction.”

            TRUE ENOUGH- but the crises of the time were as much or more resource based as financially based.

            You MUST have noticed the CONTINUED EXISTENCE of well populated countries named Spain, Italy, Japan, Russia, China, and Germany. Plus a few others I have missed as well. 😉

            I have never said things are going to be cushy. I only maintain that our survival is probable and that the continuation of industrial civilization is at least a serious possibility.

            Internal domestic trouble in Nazi Germany was not a problem – unless you happened to be a Jew or a Gypsy etc. Everybody had a job and everybody had SOMETHING to eat. Hitler is the proof of my contention. The people in control failed to maintain order and make sure people had work and food etc. They lost control. Hitler once it power maintained control by controlling these particular problems quiet successfully compared to his immediate predecessors.

            Now of course he lost his war but that was due to mismanagement and bad luck as much as anything. Any serious military historian will tell you that Germany could have won.

            If for instance he had built big fleet of submarines early on we probably would never have been able to relieve the pressure on the Brits in time to save them – and then he would have had to deal only with the Russians after that. With him in control of the seas with subs we would not have been able to reinforce the commies in time to save them either.

            If he hadn’t gotten in such a hurry he would have had jet fighters that would have mopped the sky clean of our prop planes of the era- they came too late to do him any good.

            Extinction is a very real possibility of course but in my own estimation the odds of our actual near term extinction are pretty low. A few people would probably survive even a flat out nuclear WWIII.

            In the long term something is sure to get us. Meteor super volcano expanding sun. Anoxic atmosphere. Something. No doubt about it.

            1. OFM Wrote:
              “You MUST have noticed the CONTINUED EXISTENCE of well populated countries named Spain, Italy, Japan, Russia, China, and Germany. Plus a few others I have missed as well”

              Yes, but none of the lunatics of the WW1/WW2 Era possed Nuclear weapons. Nor was there 440+ nuclear Power Plants with about a combined storage of 120kT to 200kT of spent fuel rods that need constant cooling to prevent doomsday.

              “If he hadn’t gotten in such a hurry he would have had jet fighters that would have mopped the sky clean of our prop planes of the era- they came too late to do him any good.”

              The US and Britain also had Jet Fighter programs, but they did not make into the war before Germany fell. The US & Britain had Working Jet prototypes before Germany:
              http://en.wikipedia.org/wiki/List_of_jet_aircraft_of_World_War_II

              “Internal domestic trouble in Nazi Germany was not a problem – unless you happened to be a Jew or a Gypsy etc. Everybody had a job and everybody had SOMETHING to eat. ”

              German had huge slave labor camps and took resources from the countries it invaded. For Germany to make good on its promises to the public it had to invade and take their resources. Same with Japan, and to a degree, Russia (Slave Labor, and later annexation of Eastern Europe)

              Its not reasonable to compare the WW2 era with today, since the world population was about 2.5 Billion and the majority of the population lived on rural farms and were self-reliant. In the West only about 2% of the population does farming, The rest live in urban\suburban regions.

              When the economy falls into depression, There will be very high-employment and few jobs. If almost impossible to prevent riots and rebellions during these periods. I very much doubt any existing gov’t of any industrialize world is capable of addressing it. Even Communist China uses heavy credit subsidies to keep the workers employed. Even the Chinese don’t want to deal with the aftermath of an economic depression.

    2. “I wish somebody would really and truly make an EFFORT to REALLY explain why industrial civilization cannot continue right on even as oil depletes – so long as it depletes SLOWLY enough for us to adapt.”

      If adapt means the government forbids someone from buying an F250, that’s adaption that isn’t going to happen. That dood will be voted right out of office.

      It doesn’t matter how slow the reduction in production is. People won’t endure reduction of lifestyle if they can alternatively reduce someone elses.

      So you’re right. Industrial civilization CAN continue as oil output declines, for those with the resolve and commitment to take action to secure that civilization for their kids and defeat the enemy — and yes, enemy is defined as anyone trying to take food out of their kids’ mouths.

  40. If I paid twenty cents for a gallon of gas in 1970 during a gas war, which I did, two dollars bought ten gallons of gasoline, and the price of gas in 2010 was at 4 US dollars, forty dollars for ten gallons, it is not due to a shortage of the petroleum product, it is due to price increases caused by monetary policy, not supply and demand influencing the market. Looks like an inflated price for gas to me, 0.20 usd versus 4.00 usd, you can see the difference, it is not difficult to notice what once was one price and is now twenty times of what it once was. That’s a lot.

    I saw the receipt issued from the hospital where my bride was born. The total cost for her to be born, including a three day stay for her mother to rest and recuperate, was 44.50 usd paid for by Blue Cross and Blue Shield.

    How much does it cost for a child to be born in a state-of-the-art hospital these days? If it is ten grand, the cost to be born is now 200 times more than the mid 1950’s. Unless you are born at home in America, you enter the world owing just about everybody you see some money. There is no hope in ever being financially on sound footing unless somebody is willing to forgive the debt.

    The economy is already hyper-inflated, it is a stealth hyper-inflation, nobody really notices they are being boiled to death in a huge boiling pot of worthless money that resembles the look of water and you look exactly like a frog. No way out except for to turn off the burner, which doesn’t appear to be happening.

    Every ounce of energy needed to keep any of us alive is taxed until the cows come home and the taxes become a stack of straw on the camel’s back. As soon as the weight becomes too great, the camel’s belly is touching the ground and its legs are horizontally spread in all four directions, what you call collapse. The stack of straw has a number on it and the last straw amounts to the total of all of them if it is one too many, too much debt and indebtedness, an appropriate analogy if there ever was one.

    All sound economics is gone, out the window, the roots of the demise are in modern monetary theory and the practice has led us into a swirling vortex of madness, a maelstrom of nonsense that nobody can figure out.

    Oil is not to blame for what has happened, it is along for the ride like a dog hanging his head out the window while you’re driving down the road.

    It ain’t the car, the economy, it’s the dumbass drivers.

    The foot feet is to the floor board and the engine is revving at 25,000 rpm. The engine overheats, the block is glowing red, the heat alone leads to engine failure, collapse. It can happen and is going to happen and the stupid drivers are to blame.

    Have a nice beer drinking day.

    2. “All sound economics is gone, out the window, the roots of the demise are in modern monetary theory and the practice has led us into a swirling vortex of madness, a maelstrom of nonsense that nobody can figure out.”

      Read that.

      Know it.

      Live it. He’s right.

  41. Another reason to suspect Shale has been a big source of GDP in the US since 2009.

    The Fed printed 4.5+ Trillion dollars in QE since 2009 via buying Treasuries and MBS. What is less well known is that the vast majority of that money was re-deposited at the Fed by Primary Dealers and their customer banks so that only a few hundred billion over that time period actually went into “the economy”. Instead, the redeposit went into an account called “excess reserves”. Meaning that the reserve total a bank must have on its books to support the lending it does to customers is a regulated level, and any “money” beyond that amount is an excess reserve. The Fed paid a small amount of interest on that money.

    We know Bakken wells cost about $8 million (on average since 2009) and since Jan 2009 it looks like 8,000 wells drilled. X $8 million = 6.4 billion dollars created by HY bond issuance, essentially not subject to Federal Reserve regulations on “reserves” ratio. The Eagle Ford, Permian, New Mex, Okla, etc . . . call it about triple that. Probably lower price wells. $15 billion? Seems reasonable. And so $21 billion or about 10% of that portion of QE that actually got into the economy.

    With QE suspended, and no more borrowing to drill in shale, there is little or no liquidity being injected.

    1. And yes, you can amplify that. The workers go out and buy cars with subprime loans, approved only because they have a job. That loan money is liquidity. So it can be more than 10%.

      1. But they’re all buying electric cars aren’t they? Actually, up here it’s F-350s and F-450s except the silly buggers who are going for F-550s.

      1. You, sir, are 100% correct and I hate my tablet’s piss poor visibility in bright light.

        This is also VERY BAD NEWS.

        This smells like fully 1/2 of the 4 yrs of QE printing that didn’t go into excess reserves account. If the Fed needs justification for intervention, here it is.

  42. Hi all,

    I adjusted the Oil Shock model to try to match the oil output in the charts, but it did not look realistic.
    The underlying URR of the model is 2500 Gb of C+C less extra heavy (XH) oil, 500 Gb of oil sands (XH oil), and another 400 Gboe of NGL for a total World URR of 3400 Gboe. Note that the USGS estimates C+C less XH at about 500 Gb higher than this model, but I think their reserve growth estimates are too optimistic.

    The model assumes other liquids (NGL and biofuels mostly) remains at the 2013 level of 8 Mboe/d from 2014 to 2050 (this is a simplifying assumption.) Extraction rate for C+C-XH increases enough to maintain a plateau in C+C output until 2035.

    This scenario is somewhat more pessimistic than the scenario presented in the post where liquids output increases by about 10 Mb/d from 2013 to 2032. I am not convinced that either scenario is realistic, I was interested in what would happen after 2035 if a plateau is maintained to about 2035 (which I believe is unlikely). From 2035 to 2050 output drops steeply if the extraction rate remains at 9.3%, if the extraction rate (aka depletion rate) should decrease due to a Worldwide Depression or War, then the decline rate will be even higher until the depletion rate stabilizes at some lower level (say 4%, this is difficult to predict).

    1. Extraction rate is from producing reserves and for comparison in the US the extraction rate from producing reserves (those oil reserves which have been developed and are producing oil) was about 12% in 2013. The level of producing reserves world wide is unknown, I have use Jean Laherrere’s estimate of 2P reserves and assumed about 56% of these reserves are producing or about 480 Gb of 850 Gb of 2P reserves in 2013. Note that I am excluding extra heavy oil reserves.

      1. Why are there reserves that are not producing?
        Is it because these reserves are uneconomic to produce?
        If so, should they really be counted as reserves?

        1. A reserve is an estimate of the amount of some resource located in a particular location that has the potential of being extracted given current technology. The North Sea for example, has commercially viable oil/gas reserves but that doesn’t mean that all of it is going to be exploited at the same time. Think: infrastructure, permitting, market conditions, capital allocation, production priorities, markets, etc.

          1. Hi Doug,

            Thanks, I agree with your definition, there are lots of oil reserves which have been assessed, but have not been developed. In the US about 12 Gb of proven reserves are not producing (about 33%). In addition to the proved reserves there are about another 12 Gb of probable reserves, so roughly 50% of proved plus probable (2P) reserves are non producing in the US.

            1. Dennis, often I think that the peak oil community, to which I am a citizen, wishes to undertake a complete do-over of an industry I have spent my entire life in. “Fallow fields,” for instance. Never heard of it.

              I have participated in many reserve studies done by reservoir engineers; “probable” reserves is a fun thing for big upstream companies and countries in the ME to make press releases about that is totally meaningless. Probable reserves, in a trend for instance, like the Bakken, must be 50% technically recoverable to have even a hint of meaning. Who decides that? Try borrowing money on probable reserves. Even reservoir engineers estimating probable reserves can’t keep a straight face about that stuff.

              Perhaps Doug can enlighten me, or Fernando, but in my world there are “proven reserves” that are estimated in a given moment of time, for a specific area, that could be recovered at current prices, and at current associated costs. Proven reserve estimates done last August are worthless today. Truthfully, for a lender, or for anyone speculating about the future of energy, “proven developed reserves” are all that matters; those are the reserves from a field, or specific area, that can be extracted thru existing wellbores, also at current prices, at current associated costs. Essentially, Frugal is correct, proven reserves that are not economic to produce at any given moment in time, do not exist.

              The term “reserve” is over used and confusing. There are proven, and proven developed reserves and really it is only proven developed that is relevant in acceptable accounting methods. I tend to believe the same for guessing about the future as well. What is the point is estimating 8 billion barrels of recoverable reserves from the Bakken, for example, when the range of oil price predictions runs from 13.00 dollars to 500.00 dollars a barrel? Reserve estimating is a is a fluid situation, pardon the pun.

              Mike

            2. By the way, I hate it when the shale oil industry drills a couple of wells on an acreage block of say 5,000 acres, and declares the entire block has then been “de-risked.” Are they then moving probable reserves in the block to proven reserves, or all the way up to proven developed reserves? That shale company will then fluff its feathers and declare because of 2 wells in a 5000 acre block it has 50 “drillable locations,” or 100 drillable locations on 5o acre densities. I guess that means something to some people, it doesn’t mean squat to me.

              M.

            3. Hi Mike, I am eminently unqualified to comment. But personally I find the term “proven reserves” ridiculous when applied to LTO and iffy many other times. But I’m old school, really old school. However, I clearly recall working with some Dudes on a reserve determination (remember I’m mainly a geophysicist so my input was primarily some kriging math) but then somehow I got saddled with the job of delivering said study (which we worked our asses off on) to a banker who took if from my hand and tossed it straight into the basket with the comment: “We have our own geologists, thanks.” Pissed me off but bankers have that effect on we mortals. Moral, one man’s reserves is another man’s fantasy. There are reserves for regulatory bodies, of course, that tend to follow pretty strict rules and “internal” studies and the junk that winds up in promo stuff but like I said, who am I to say.

            4. Mike, when we work offshore or in remote areas we definitely use proved plus probable reserves when we go to sanction. This is understood by consultants who work for the people arranging project financing for mega projects. The way we are supposed to book them is to use something like a P90 value for proved, and P50 for P+P. But I’ve been in charge of preparing the bookings for a large area, and I used a policy to book P25 to P40 for proved, and P50 for P+P. This was ok for say gas fields in large fat sands with excellent 3d coverage.

              In these cases with the tight oils I would only book proved on a well by well basis, using the production tests to estimate the well reserves. The reserves beyond the spacing unit would be probable up to say one spacing unit, and the rest would be possible. If we had wells spread out and a decent petrophysics trend I can go soft and approve a submission to call proved the offset spacing units, and call the rest probables if they were inside a well defined study area. But in horizontal well developments it’s customary to drill pilot holes, and get a sense for what’s going on before setting out the pad layouts. At least that’s the way I prefer it.

            5. Thank you, gentlemen, both. I appreciate your inputs. I understand the necessity of P50 P+P in concessionary work and sanctions, yes sir, Fernando. I know that probable reserves is important in those situations, just not in LTO stuff, I don’t think.

              Fernando, if accounting methodology for reserve definitions in shale could be utilized as you stated, or if the shale oil industry could have retained some of the “old school” principles we know, I wonder if it would be in the 9 line bind that it is in now.

              I am not sure, those folks with money could not wait to give it away to the shale oil industry. No joke, I recall 6 years ago getting cold calls from people wanting to loan me money….when I told them I was not in the shale business it was… OK, sorry to bother you, click.

              Mike

            6. Now THAT is interesting.

              That has commissioned sales written all over it, and probably from an investment bank. They were going to underwrite your HY issuance and take themselves a nice cut.

            7. Hi Mike,

              For the world with an estimated URR for C+C of 3000 Gb, the 30 Gb (at most) that will come from LTO is a drop in the bucket (1%).

              I don’t think I used the word “fallow” in my comment. Jean Laherrere believes proved plus probable (P50) is the best number to use when modelling World oil and I agree.

            8. Hi Mike,

              Nobody knows the future price of oil, especially me 🙂

              When estimating economically recoverable resources from the North Dakota Bakken/Three Forks or the Eagle Ford, I always use a very specific set of assumptions including oil price.

              Do you think that over the long term that oil prices are likely to be $13/b or $500/b for any significant period?

              I don’t. I would expect a long term trend between 5%/year and 10%/year increases in the real oil price from 2015 to 2035. Oil prices will fluctuate above and below the trend line as they always have and will be unpredictable within the window I have suggested.

              Does this seem reasonable? I would trust your guesses much better than my own. Thanks.

            9. Howdy Dennis, “fallow” is just a funny right now; it is not an issue. I understand how P+P @ 50% can and must be used in estimating world production and know that is important. The point I wished to make was the over use of the word “reserves” and the need to be very specific as to the definition of reserves. When you say “now,” I assume you mean at some weighed average of current Brent and WTI. I have seen “technically recoverable,” whenever that is used, what does that mean? Technically at what price?

              I know you know all this, Dennis. I don’t however feel that most people do and tend to snuggle up to whatever the shale industry says about “reserves.” Its a big word with very limited meaning.

              I have no earthly idea what oil prices are going to do in the short term. I see no reason whatsoever that your scenario is not just as good, or better, than anybody else’s. My 2015 budget meeting tomorrow will be attended by just me; at that meeting I will discuss with myself that my instincts tell me that by 2nd quarter 2016 I will be back on the road to full recovery and by then it would be nice to have a few more wells in place and on line. I don’t expect a big proxy vote against my decisions and I am quite sure I will agree with myself fully then adjourn the meeting.

              I absolutely don’t believe this stuff, do you?

              http://www.thehillsgroup.org/depletion2_022.htm

            11. Hi Mike,

              Thanks. No I don’t believe that either.

              Hopefully my guess of a 10% rise in oil prices is correct at least for 5 years or so (to get us to $90/b), eventually prices will go up, nobody knows when, but 12 to 18 months from now oil prices will be above $70/b.

              Note to all on the thesis URR for conventional oil is 2600 Gb and for bitumen, extra heavy and kerogen another 2500 Gb. About half of this 2500 Gb of unconventional oil is kerogen, so if we change this to zero (which I think is a better estimate) the unconventional is 1300 Gb (compared to 500 Gb in my model). I believe that McGlade includes NGL in conventional oil so my model may have a slightly higher conventional estimate (2900 Gb if NGL is included). That would mean if my extra heavy oil model was increased to 1000 Gb (from 500 Gb) it would match the model. Note that my model matches the CAPP estimate for oil sands output to 2030 and the increase from 500 Gb to 1000 Gb would mainly effect output from 2030 and later (which as Doug likes to point out is very speculative.)

              I may try to modify the Venezuela and Canadian models to 500 Gb each to see what they look like.

            12. Another comment on reserves is that many people confuse resources and reserves.
              Resources are the oil that is in the ground, reserves are resources that are profitable to produce at the oil price at the time the well was developed.

              I know hat Doug, Ron, Mike, Fernando, and most others know this.

              In the main stream media they often seem to use reserves and resources as synonyms, which is incorrect.

            13. Dennis, I know venezuela extremely well. What’s your definition of the heavy oil class you segregate? I got a feeling your venezuela figures are high.

            14. Hi Fernando,

              These are not 2P reserve estimates they are URR estimates, so would include TRR, this is for Orinoco Belt extra heavy ( less than 10 deg). I am using 250 Gb for Venezuela and 250 Gb for Canada (actually it is 500 Gb for the two, divided maybe 300 Gb for Canada and 200 Gb for Venezuela.

              What would your estimate be for the URR of the Orinoco belt, once western oil companies feel comfortable in Venezuela again?

            15. Dennis, reference the Orinoco, we need to discuss what’s a resource. The Orinoco original oil in place is 1.3 x 10^12 barrels. The trap is stratigraphic, very large, and quite heterogeneous. When we use the term resource we use (sometimes without thinking it through) a set of technical and economic conditions to estimate an ultimate recovery factor. If you want me to go absolutely bananas, and assume say $180 per barrel, a normal country environment, and the licenses to build nuclear power plants for the energy inputs, we could go for 20 %. But this assumes PDVSA is stopped sometime within the next 10 years from gutting the high grade area (Carabobo blocks in particular). PdVsa is using development practices which will eventually destroy the potential, gut the Creme de la Creme and reduce recovery enormously. This is a fairly technical concern I have, but I can explain it later.

            16. Hi Fernando,

              The USGS has estimated TRR for the Orinoco at 500 Gb, so 250 Gb looks pretty conservative. Without going into a lot of detail, but just using reasonable assumptions, such as Venezuela stops expropriating property from oil companies and that companies with experience in Alberta get involved in the Orinoco belt and real oil prices increase by 7% per year on average from now to 2035 ($193/b in 2035 from $50/b in 2015), what would your guess be for URR for the Orinoco belt? Assume you are guessing out to 2050 or even 2100.

            17. Dennis, what does the fractured-horizontal-well completed in a tight zone do after the first 10 years? Depending on the well spacing I can see a really long tail. A well drilled on say 1280 acre spacing should produce for 100 years if they know how to pump it and the price is high enough.

            18. Hi Fernando,

              Nobody really knows what happens after 6 years. My guess is that the well will follow the hyperbolic decline profile up to about a 10% annual decline and then follow an exponential at 10% per year. I assume when the well gets to 5 b/d it will no longer be profitable to produce, but even if we drop this assumption the average well has an EUR30 of about 366 kb and maybe 360 kb if it is abandoned at 5 b/d (around 27 years). EUR43 is about 377 kb with abandonment at 1 b/d.

            19. Thanks! Your 25 to 30 year life looks very reasonable. And whether it goes beyond 25 years doesn’t seem that important if we apply say 10 % discount rate.

            20. Hi Fernando,

              Your welcome. You had suggested 100 years (joking I know), I agree when we discount that output beyond 15 years doesn’t really affect the investment decision. And the well is at stripper status by year 20.

      2. Or stating it an other way, should we take part of tight oil and tar sands off the reserve list now that oil prices have dropped below extraction costs?

        1. It will take itself off the list when (if) no longer economically viable. Reserves by definition depend partly on price.

          1. I’m somewhat signed onto this concept in that, as I have pounded on the lectern, if the oil is there and you have to have it, you WILL go get it and print the money to pay for that.

            So no, price should not touch reserves totals in a non capitalism society.

        2. It depends on how you define “reserve”. A portion of the hydrocarbon molecules we find uneconomic to recover will become viable prospects when oil prices rise. And they will rise. I assume we don’t have a belief in cheap $50 oil forever?

            1. What we are seeing in Greece is very much related to energy depletion. it is just camouflaged so the general public does not get a clue. Yes there always side game but main narrative is energy depletion.
              What basically Greeks are saying is that they don’t want to play this “extend and pretend” game because they get very little in return. So basically you have SRYZIA taking over with different approach as a “bad cop” in this Greek tragedy. They are saying: “we want to be included in the upcoming QE decision and we want a pie of that cake as well”

              Germans are responding with type of rhetoric: “German way of life is non-negotiable”. They did not say that but used different line: Schauble, finance minister translated in simple English said this: “We will destroy your banking system if you don’t accept our demands of getting scraps from the table”
              So dilemma is if you give some QE to Greeks somebody has to get less. Basically it is fighting over energy scraps. Let’s see 22nd Jan and see how much Draghi is going to print.

            2. What we see in Greece is the wreck brought by an irresponsible government mentored by USA financial wizards. They will get out of the euro and become a Chinese colony, I suppose.

  43. It’s interesting that, based on the most recent four week running average data, the EIA is showing that US net total liquids were up year over year in late 2014, at 5.9 mbpd, versus late 2013, which were at 5.5 mbpd. Net crude oil imports were basically flat, 7.2 mbpd in late 2014, versus 7.3 mbpd in late 2013.

    http://www.eia.gov/dnav/pet/pet_sum_sndw_dcus_nus_4.htm

    Interesting chart showing total new vehicle sales globally through 2013:

    http://www.statista.com/statistics/262747/worldwide-automobile-production-since-2000/

    Apparently, the estimate for 2014 is for around 90 million new vehicles (1.7 million per week). Note new vehicle sales were already falling in 2008, versus 2007, while we are apparently seeing a year over year increase in 2014.

    1. Based on the four week running average data, US total liquids net imports were up from 4.8 mbpd in late October, 2014 to 5.9 mbpd in late 2014.

      1. That’s almost 20%. And, hardly seems possible without some extraordinary contributing factor. Any ideas on that?

        1. It’s partly an estimated increase in consumption. Total product supplied increased from 19.5 mbpd in late October to 20.2 mbpd in late December (2014).

          I wonder if the EIA might be overestimating actual US C+C production, especially the crude oil component of C+C.

    2. This is the big deal, Jeffrey, and every one of those bad boys bought in China is brand spanking new additional oil consumption and there is nothing the wacko EV crowd can do about it.

      I see Musk is getting divorced again. These wimmen seem to figure stuff out.

      1. I wonder how much those cars bought in China will be driven, and for how long?

        The Chinese Government-Industry capitalists aren’t much different than any other businesspeople: They want and need to declare victory with each quarterly and annual Report.

        Don’t think for one minute that the Chinese Robber-Barron-Commissars won’t melt those oil-burners doen ASAP and remake them into EVs, buses, and e-bicycles when the time calls for it.

        The ‘EV wackos’ in the U.S. may be the last road warriors driving after a fashion.

        People like Mac have it right…when the times call for it, the current safety regs will be quietly shelved, and the future vehicles will be mainly light, simple, and relatively slow EVs.

        Adjustments will be made to accommodate the realities of the changing energy situation.

        You seem obsessed with the People’s Republic of China. I got some news for you: there will be no grand U.S.-China warfare, sorry to disappoint you.

        Your comment about divorce is a non-sequitur.

        1. Driving or riding in a Model S for the 1st time is an experience you don’t Forget unless you fly F18’s. No one keeps a straight face.
          https://www.youtube.com/watch?v=Usay0lOAooI
          As you accelerate, the power output remains constant at around 320 KW, but as soon as you hit 210 kph (the rated top speed), the power output falls off a cliff and stabilizes at around 100 KW…. No P85D’s in town .. yet…

          1. Poor example. Thrust to weight ratio for F-18s with a nominal load is typically about 0.95.

            F-16s much higher. F-22 higher still 1.0+. Even the old F-4 was 0.86, and stripped could get to 0.9. That was back pre leading edge slats.

            The F-15 was the first aircraft higher than 1.0, also stripped. The F16 got there by being light, some of that was the cool side stick controller with pressure transducers to command control surfaces. You laid back a bit too so lighter seats.

            Anyway, undercut your imagery with error.

        2. Tesla’ business model relies on government mandates and subsidies. It’s similar to the USA ethanol industry. One can argue that industry doesn’t make a lot of sense, but it survives. The government can and will encourage irrational moves, sometimes they pan out because circumstances change, sometimes they don’t.

          Thus betting against Tesla is like betting that a government known to please special interests will stop doing so.

          While I’m at it, a well run government wouldn’t place a bet on a specific technical solution. For example, if I were King Fernando of California I would have put a gradually increasing tax on land located within urban areas. This would encourage denser cities within my kingdom. The money from this tax would be devoted to parks and mass transit for the commoner class. This may be considered un-American, but it would be a more rational solution than subsidizing electric vehicles built to accelerate at 3Gs, to be purchased by rich California nobles on the backs of my loyal tax paying and long suffering lower class subdits.

          1. While I’m at it, a well run government wouldn’t place a bet on a specific technical solution. For example, if I were King Fernando of California I would have put a gradually increasing tax on land located within urban areas. This would encourage denser cities within my kingdom. The money from this tax would be devoted to parks and mass transit for the commoner class. This may be considered un-American, but it would be a more rational solution than subsidizing electric vehicles built to accelerate at 3Gs, to be purchased by rich California nobles on the backs of my loyal tax paying and long suffering lower class subdits.

            I think most “greens” would agree with you. They probably would prefer a carbon tax to any subsidies to any energy-related industries.

    3. There are 1.2 billion vehicles on the road now, implying that most people in the world do not have vehicles. The article below from Green Car Reports states that we are headed for two billion vehicles by 2035 and 2.5 billion by 2050. They seem more concerned about the effects on global warming than the effects of attempting to produce that much liquid fuel. Apparently fossil fuel depletion has not entered the repertoire of some of the green community. One would think that the limits of fossil fuel would be heavily studied by any green organization as it would limit total CO2 output and rate.

      http://www.greencarreports.com/news/1093560_1-2-billion-vehicles-on-worlds-roads-now-2-billion-by-2035-report

      So I searched the Green Car site for peak oil articles and found one. That article was basically saying it was a debatable scenario but referenced a McClatchy article on the end of the oil era.
      http://www.mcclatchydc.com/2012/08/12/160930_is-the-era-of-oil-nearing-its.html?rh=1

      1. Allan, the greens got their heads in the clouds. They got Pachauri and Figueres saying we got to leave 2/3 of proved reserves in the ground to stay below their arbitrary 2 degree C rise. I don’t think either of those two earns 20 % of what they get paid, but the UN is full of incompetents.

        1. I am not at liberty to mention his name or handle here without permission which I do not have but I am in regular contact with one of the most effective environmental activists who ever lived and some regulars here might guess his name.

          He is the most rational and realistic person I have ever had contact with and sees thru bullshit and lead walls in a manner of speaking as easily as I see the sun on a clear day.

          In paraphrased words he says that environmental organizations exist mainly as mechanisms to raise funds to spend on maintaining staff and offices and public presence. Any money left over gets spent on something that is probably in need of doing but the methods chosen to spend that money will be chosen not on the basis of getting results but rather on the basis of getting the most and the most impressive publicity so as to raise more money.Any actual useful results are ALWAYS AND NECESSARILY secondary to the survival and prosperity of the organization itself.

          This explanation jibes PERFECTLY with my not insubstantial studies of biological systems. Beyond that I have met dozens of social workers , teachers, nurses , lawyers, and other various types who generally look you in the eye and tell you they do the work they do out of love for their fellow man which in ninety plus percent of all cases is an obvious lie.

          They do what they do primarily for the money and I am good enough at playing poker to read the truth in their body language except in the cases of competent cops and lawyers.

          In those cases I can tell they are faking most of the time but not exactly WHAT they are faking. The fact that they are not giving away much is all the indication you need that they may be hiding a lot.

          Nobody should be surprised that an organization such as ones promoting green cars stick strictly to their message. Staying on message is a FUNDAMENTAL RULE of successful politicking and fund raising.

          Now I will without permission drag our own articulate and unquestionably very bright and very well informed NICK into this by pointing out that he NEVER strays for even an instant from his message. This is excellent proof that he is has some professional background involving dealing with the public – or at least that like me he has spent some time learning about such things.

          ( I try to read a good book about something important at least every couple of weeks and have read a couple about the REAL rules of the political and pr games.I always try to pick ones written by respected academics.)

          There is no question in my mind that NICK realizes that his rosy projections are to put it mildly often overly optimistic. BUT there is just about a zero chance he will ever admit it – that would be violating the first rule of the advocacy game. I strongly suspect he is a professional with responsibilities that include pr.

          As for myself I am ready to argue either side of just about any question when I think somebody else is getting carried away by either his optimism or his pessimism.I am here not to convince anybody of anything but rather to enjoyably pass time stuck in the house with an invalid. I can’t spend all my time reading or cooking or on the phone. Beyond this I am working on a book and using this and a couple of other forums to refine my arguments and locate the weak spots in my thinking.

          1. The reason I’d rather hear the more optimistic predictions of alternative energy is that we seem to be facing two situations that will affect how we get and use energy: peak oil and climate change.

            Now, some of you assume we will be heading into a wall and there is nothing anyone can do.

            But I figure, if given the choice between trying energy conservation and alternative energy technology and doing nothing, I will take the former. It can’t be worse than doing nothing, especially if the assumption is that there’s nothing to save us anyway. In other words, given the choice between trying something and failing, and trying nothing and failing, I lean toward the former.

          2. Well, thanks for the compliments!

            As for “staying on message”, there are indeed somethings that I think are more important than others and I tend to stick them. On the other hand, I’ve been thinking about these things and dealing with them professionally and personally for decades, so my thinking about it is reasonably well settled. You are correct: you won’t see me debating with myself. I know what I think makes sense and I’m willing to present them and argue for them.

            As for optimism: yes, indeed, I disagree. Unfortunately that’s a long discussion. Let me say that I think peak oil is not our primary problem: I think climate change is.

            I think dealing with Peak Oil is pretty easy, because of the relatively short feedback and lag times. On the other hand climate change has very long feedback and lag times, and human beings are not good at dealing with that.

            At the moment, I would agree that humanity is not on an optimistic trajectory for dealing with climate change. I make a very clear distinction between what we technically could do, and what we are actually doing. We have the means (and they are affordable), but we are not using them very well.

            I feel a certain satisfaction from clarifying that for people. The fact is that these are solvable problems, on a technical level. The real problems are on a social level.

            I agree with Ron about that, but I disagree with him about the possibility of solving that. The fact is that humanity has made enormous changes in the past – for example eliminating slavery. Slaves in Georgia in 1855 could not have imagined that they would be free 10 years later.

            Does that help?

            1. “I think dealing with Peak Oil is pretty easy” You care if I put that on your tombstone?

            2. With that approach, I’m pretty sure I’ll outlive you.

              Convince me otherwise, with specific counter arguments. If you have time for sources/links, that’d be great.

            3. I think dealing with Peak Oil is pretty easy, because of the relatively short feedback and lag times. On the other hand climate change has very long feedback and lag times, and human beings are not good at dealing with that.

              While I believe the scientists about climate change, I don’t feel it is an effective motivator for most people. Even if we can make a strong case that we have more weather and natural disaster incidents RIGHT NOW because of global warming and therefore if we take drastic steps to curtail carbon NOW, we still won’t see ecosystem results immediately.

              However, whatever changes we make now in cutting back fossil fuel use will show rapid results in terms of energy costs, pollution, consumption patterns, etc. There are good reasons to look into energy conservation and alternative energy technology even if one totally ignores global warming issues.

              If you live in a smaller place, drive a more energy efficient vehicle (or get rid of your vehicle altogether and use public transportation, or walk, or ride), buy less stuff, and so on, you’ll likely have more money in your wallet or at least have fewer or lower bills to pay.

              There are many self-interest reasons to modify one’s activities that, in the process, are good for the planet as well.

            5. That’s what’s so weird!

              The alternatives to oil & FFs are better and cheaper.

              EVs are better and cheaper.

              Walkable neighborhoods are better (though not always cheaper).

              Trains are better and cheaperfor many things.

              Heat pumps are better and cheaper.

              Insulation and good windows are better and cheaper.

            6. Well Nick great deal of the stuff is just ego talking. If people dissolve ego you don’t even need to convince them about what is better. Last week I saw for the first time new (for me) Suburban. That thing is big like locomotive 🙂 What do you need that for? 🙂 That is easy part.

              The biggest problem that I see is how to untangle special interests that are going to lose with the change?
              I have visited Atlanta 20 years ago and I was shocked to see a sprawl of the city. At that time there was only one (or two, I can’t remember) metro lines operating within city. So if you don’t have a car you might as well be dead. 🙂

            7. Electric vehicles aren’t cheaper once we account for subsidies. Those subsidies come from taxes, they are a money transfer to the purchaser from society at large. If everybody goes to buy one the government will go bankrupt, and there won’t be enough electric energy to charge those batteries. A hybrid is the obvious solution if one wants to do what’s better for society. A plug in hybrid is also a good idea if your electricity has a high hydro and wind power contribution. A smaller vehicle is a better idea. And even better is to live in an apartment and use mass transit. But that’s a bit alien to many, I guess.

            8. A hybrid is the obvious solution if one wants to do what’s better for society. A plug in hybrid is also a good idea if your electricity has a high hydro and wind power contribution. A smaller vehicle is a better idea. And even better is to live in an apartment and use mass transit. But that’s a bit alien to many, I guess.

              I think most pro-EV people would agree with you. There are ways to reduce fossil fuel consumption without depending on EVs. I don’t have one. I don’t have easy access to electric outlets, so I just don’t drive much anymore. I walk.

              I think EVs are worth encouraging to promote continuing development of the technology. And the subsidies seem worth it to me for that reason. If they do end up being the dominant car, then the subsidies won’t be necessary. In other words, I see the subsidies as a drop in the transportation bucket and worth doing the same way we fund space projects. They may not contribute to us directly but might have some value down the road.

            9. Hi Fernando,

              In many parts of the US it isn’t really an option to use public transportation because it does not exist in many places.

              It would be good if there was more, but higher fuel prices will be needed before people demand it. Also population sensity is pretty low in many areas which does not work well for mass transit.

            10. I second all that.

              With a maybe odd sounding note .

              Since we cannot predict the future, any situation, no matter how hopeless it may seem at the moment, has, as a result of our irreducible uncertainty, a little justification for hope.

              And the farther the future, the more room for that
              hope, based as it is on a rock solid foundation of uncertainty.

          3. I used to use the term ‘invalid’ until I watched the movie ‘Gattica’.

            Since then I have used terms such as ‘infirm’ or ‘bed-ridden’.

            It was interesting how the altering of which syllable was emphasized in the movie emphasized the meaning of the word.

      2. Governments in time of extreme distress do pretty much anything that is physically possible if it suits them including for instance seizing a uber expensive resort near my home to use it as a hospital during WWII.

        When the shit is well and truly in the fan in terms of peak oil you can bet your last can of beans that unless you can demonstrate a real NEED for it you will not be buying a new f250.

        The people who don’t have the money for one and the gas it uses will make sure of it. They will outnumber the potential buyers by ten to one. As a matter of fact they already probably do but just haven’t coalesced into an effective pressure group yet.

        1. Your suppositions are so obviously logical that I find it amazing that some of the intelligent people on this board still maintain their mental model of a Worldwide fast collapse to the rock bottom within the next 10-15 years or so.

          Allow me to unpack this for those folks:

          Collapse will not be:

          1) Worldwide, that is, affecting all countries and regions equally at the same times.

          2) A sudden event going from then-current BAU to Olduvai Gorge or some such doomer vision within the span of 6 months, a year, three years, five years, etc.

          1. Barring an asteroid strike (>.3 NM diameter) or flood vulcanism on the scale of the Siberian/Deccan Traps events or a maximum spasm global thermonuclear war of course. Many biologists consider a global pandemic (even a manufactured one) on the scale of threatening humanity as we now it as rather implausible.

          2. Collapse will not be:

            Shuffling, glad your crystal ball tells you what collapse will not look like. Mind just don’t do that. Perhaps I should trade it in.

            But here is what my broken crystal ball tells me:

            1) The collapse will happen within the next 50 years, likely within the current half century.

            2) Of course it will not happen with the same force in every country in the world at the same time.

            3) The decline, that is the deep recession followed by a deep depression will be felt by every nation on earth.

            4) Eventually, perhaps over the course of 10 to 15 years, every country will experience chaos an anarchy from rioting mobs. Martial law will be declared by every country that has a standing army… and can afford to pay them. But a lot of countries will not have the resources to support a standing army.

            5) Deteriorating conditions in every country on earth makes predictions from this point on impossible.

            1. Ron,

              We agree on more than you think.

              Most of all, on the fact that neither of us have crystal balls!

              You run a good forum, you use a light touch on the tiller, and I appreciate your efforts.

            2. Most of all, on the fact that neither of us have crystal balls!

              Good lord, man, if we all had crystal balls, none of us would have children.

              -Lloyd
              {hmmm… that’s a little deeper than I intended.}

            4. 4) Eventually, perhaps over the course of 10 to 15 years, every country will experience chaos an anarchy from rioting mobs. Martial law will be declared by every country that has a standing army… and can afford to pay them. But a lot of countries will not have the resources to support a standing army.

              Human civilization has had major crises before. When has the entire world been hit by anarchy from rioting mobs?

              What current or historic rioting mobs are the model for what you foresee happening?

            5. The US is getting more polarized. So I can see tension increasing. As the “American Dream” disappears, people will get more frustrated.

              Those Tea Party Patriots, who envision themselves forming a militia to fight for their freedoms. Who do you think they will fight? The Kochs? Nah.

              More likely they see themselves fighting blacks, browns, and “liberals.”

              Who are these rioting mobs you expect? And who do you think they are planning to attack?

            6. Oh, and Muslims. The Patriots plan to defend the US from Muslim invasions, too.

            7. You can make fun of the 2A if you like. But I’ll bet the Syrians, and Iraqi’s wished they had a 2A when ISIS showed up, and starting lopping off heads.

            8. Two largest civilizational crises in known history were:

              1. Bronze Age collapse
              2. Roman Empire collapse

              There were riots, there were barbarian invasions, and afterwards there were dark ages for entire ecumene lasting for few centuries.

            9. If the world enters the equivalent of the Dark Ages, that is different than collapse. It is a constrained lifestyle, but it is a lifestyle.

              Tossing out much of modern conveniences and reverting to a simpler, more rural lifestyle may in fact be a necessary part of human history.

              Is it doom or is merely reverting to a more manageable human scale?

            10. For those who haven’t been reading the latest, the Dark Ages weren’t really all that dark.

              http://blogs.telegraph.co.uk/news/dominicselwood/100259552/why-the-so-called-dark-ages-were-just-as-civilised-as-the-savage-roman-empire/

              The Western Roman Empire had been disintegrating for centuries (just as the wheels had come off from under the Roman Republic before it). The Western Empire was old, tired, and coming apart at the seams. It was in a state of terminal decline. The emperors had long ago even done the unthinkable and abandoned Rome – choosing instead to rule from Trier, Milan, and especially Ravenna. As the map changed, they also realised they needed to shift power eastwards, which is why the Emperor Constantine eventually built his magnificent new Rome at Constantinople (Istanbul). There, where Europe meets Asia, the ever-philhellenic Romans continued to flourish as the Byzantine Empire for another thousand years.

              So, barbarian hordes may have picked over the carcass of the fading Eternal City in the 400s, but imperial Rome continued largely uninterrupted on the shores of the Bosphorus until AD 1453 (give or take the odd Crusader coup d’état).

              And this, talking about the legacies from the Medieval Period.

              http://www.independent.co.uk/voices/our-voices/battle-of-ideas/the-dark-ages-were-a-lot-brighter-than-we-give-them-credit-for-8215395.html

              And this:

              http://www.cracked.com/article_20615_5-ridiculous-myths-you-probably-believe-about-dark-ages.html

            11. I meant to put this in italics because I was quoting an article.

              The Western Roman Empire had been disintegrating for centuries (just as the wheels had come off from under the Roman Republic before it). The Western Empire was old, tired, and coming apart at the seams. It was in a state of terminal decline. The emperors had long ago even done the unthinkable and abandoned Rome – choosing instead to rule from Trier, Milan, and especially Ravenna. As the map changed, they also realised they needed to shift power eastwards, which is why the Emperor Constantine eventually built his magnificent new Rome at Constantinople (Istanbul). There, where Europe meets Asia, the ever-philhellenic Romans continued to flourish as the Byzantine Empire for another thousand years.

              So, barbarian hordes may have picked over the carcass of the fading Eternal City in the 400s, but imperial Rome continued largely uninterrupted on the shores of the Bosphorus until AD 1453 (give or take the odd Crusader coup d’état).

  44. Twenty years of consumption of oilcohol at ninety million barrels per day ends up to be 657,000,000,000 barrels or about 1/3 the amount of reserves deemed recoverable.

    Leaves one trillion in reserves remaining to be mined, harvested, pumped out of the earth and into a tank.

    At the current rate of consumption remaining constant, it leaves approximately 50 years of oil to burn if all goes like it is now providing more oil is gushing out of the ground at a rate of 200,000 barrels per day out of one well. Drill 500 of them and you’ll have your 100,000,000 barrels per day easy. Just drill those 500 wells, go home and let the good times roll. Life could go back to normal and the peak oil business would end.

    All of the fussing and fighting over oil would be over, pleasant days, peace, harmony, no discord, heaven on earth.

    Although it looks good on paper, good luck finding Nirvana. The lights shine in the Halls of Shangri la to prevent cursing the darkness.

    That’s it, Nirvana Policy Scenario. Better than what there is now.

    A hefty cutback on oil consumption just might get us there.

    Not much light shining on the north pole these days, it’s tilted away from the sun, no sunshine there for the time being. It could very well be the be the reason for some of the cold.

    The Baltic Dry Index is moving towards a low. Could it be part of the reason for the low price of oil?

    1. I have read that Russian oil production costs are very high.
      Why is this ? Is it the type of ground reserves Russia has?

      1. No, it’s mostly the remoteness of their new reserves. They are drilling the high Arctic, places where there no cities for hundreds of miles. Man camps must be built and everything hauled overland by long haul trucks over icy roads. And of course, much of their equipment must be imported also.

      2. Steviek, I spent a few years working in Russia, looking at fields, and preparing development plans for new fields. As you may imagine, a country that large with so many fields has a huge diversity of conditions. High costs can be attributed, as Ron explains, to remoteness (fields in Timan Pechora’s Nenetsky Okrug are a good example). But high water cut and advanced depletion are also causing high expenses. What the Russian oil industry needs is a small, high capacity electric submersible pump with a 10 year run life. That would be a game changer.

  46. I submit this, http://247wallst.com/energy-business/2014/12/30/top-5-producers-in-north-dakotas-bakken-oil-field/, for the feasting of those people needing to speculate about LTO in the Bakken. Don’t believe everything you read on the internet, but this seems pretty thorough to me, especially incremental lift costs per barrel, including interest expense.

    I note also the total indebtedness of the top 5 Bakken producers and the ridiculous notion that the FED will have to bail out the shale oil industry before oil prices begin to recover 2nd this is all over.

    1. sorry…begin to recover 2nd quarter of 2016, IMO. The shale industry is not functioning totally on borrowed money; there has been something north or south of 2.25 billion barrels of oil produced from the two biggest shale plays since inception and I estimate that equates to over 192 billion dollars of money, 134 billion of that was income to companies after royalty and taxes.

      If this author’s incremental lift cost per barrel research is correct, its pretty bleak up there in North Dakota right now, and I don’t mean the cold.

      Mike

      1. The things that catch my eye are:

        1) The analysis is all of Q3 2014, which ended 30 Sep. WTI price is way down from Q3.

        2) The quote towards the end of X billion dollars of debt not being too heavy for a given market cap doesn’t look too good (market cap = shares outstanding X share price) with share prices 25% down (for CLR) now vs 30 Sep. Besides which, when did market cap get to be the metric for debt excess? It’s supposed to be revenue.

        3) The guy’s calculation of costs were all quoted per barrel. Seems shaky method in an environment of sharp barrel output reduction via reduced drilling (60+% of output is from wells less than 18 mos old). Even if suppliers cut their price, an output fall increases the cost per barrel because the denominator shrinks.

        4) As for when the price recovers, maybe it’s recovering now from a few years of much higher than normal.

      2. I have a question: what are the applicable investment amortization rules for usa tax books at this time? These wells have very front loaded production rates and I haven’t kept up with usa tax details. What can they do to shelter income tax the first and second calendar years?

    2. The article starts out with a mention of Shell’s write down in their proven reserves of about 4 Gb. Here is a link to a 2004 article on the topic (note that Oman’s production as somewhat rebounded of late).

      What I always found interesting about the following article is the extent to which a senior officer with a publicly owned oil company (apparently) knowingly made false statements.

      OMAN’S OIL YIELD LONG IN DECLINE, SHELL DATA SHOW (April, 2004):
      http://www.nytimes.com/2004/04/08/business/oman-s-oil-yield-long-in-decline-shell-data-show.html

      The Royal Dutch/Shell Group’s oil production in Oman has been declining for years, belying the company’s optimistic reports and raising doubts about a vital question in the Middle East: whether new technology can extend the life of huge but mature oil fields.

      Internal company documents and technical papers show that the Yibal field, Oman’s largest, began to decline rapidly in 1997. Yet Sir Philip Watts, Shell’s former chairman, said in an upbeat public report in 2000 that ”major advances in drilling” were enabling the company ”to extract more from such mature fields.” The internal Shell documents suggest that the figure for proven oil reserves in Oman was mistakenly increased in 2000, resulting in a 40 percent overstatement.

      The company’s falling production and reduced reserves in Oman are part of a broader problem facing Shell, the British-Dutch oil giant that earlier this year lowered its estimate of worldwide reserves, a crucial financial indicator, by 20 percent, or 3.9 billion barrels.

      1. Jeff, that’s interesting. I spent some time in Oman teaching “locals” seismic survey basics but, of course, as a gringo I was a cloistered like a monk; as zero interaction with general public (never saw one woman in six weeks) but got the impression oil reserves are rapidly disappearing. I’m surprised there’s any left: Lots of gas of course. This all happened quite a few years ago so social situation likely completely different now.

    3. This is a great article. I worked on a similar project about ten years before shell got into their adventure. But we looked at using russian nuclear ice breakers. Eventually, after a few years of kicking things around we decided it was too risky.

      I think Shell management was encouraged by what they had done at Lunskoye offshore Sakhalin, but the guys they put on the Alaska project weren’t up to the task.

    1. It has such a buoyant, reassuring tone to it, doesn’t it?

      As was noted above, this “cost per barrel” stuff getting quoted (and btw we have a new low quote in the microphone queue, $29-$40 in this article) is being done by getting cost data and dividing it by oil output for the drilling levels going on 3 or more months ago. If you take that cost data and start dividing it by lower oil output flow from reduced drilling, presto, those costs per barrel increase via denominator shrinkage.

      Rampant bogosity in the finest traditions of post 2009 Wall Street. NoDak is learning well.

      1. Of course, if you drill less, you have lower costs, but the point still stands. Three months ago was a different lifetime re flow rates.

      2. Hey Zeus…quoting incremental lift costs per barrel of oil is as old as the oilfield itself; it is a measurement of lease operating expenses, or OPEX, in shale lingo, per barrel of existing production. It has nothing to do with “drilling levels, or lower output flow from reduced drilling.” As the well declines, lift costs can, and often do decline, incrementally, or they can increase incrementally, for instance with regards to G&A or inflation, etc. In analyzing production revenue streams, and all the associated ramifications thereof, incremental lift costs per barrel of oil calculations are a very useful tool to the industry and is most certainly not bogus distortion, as you imply.

        You didn’t go get a shot for that stuff like I asked you to, did you?

        1. Historical norms have problems during periods of unprecedented singularity. Oil price decline by 50% in 6 months.

          I’m gonna go look at how often that occurred absent war pre 2008 Apocalypse. Hang on.

          Okay, back. This guy here: http://www.fedprimerate.com/nymex-crude-oil-price-history-chart.htm Going back to 1983, aka, 30 years I see zero occasions. (1990 was a Kuwait war spike (Iraq invaded Aug 1990) and subsequent decline when war didn’t affect much in the way of overall Middle East output.)

          That’s zero, as in ZERO. Nothing like this has ever happened before. We got no war spiking oil. We got no aftermath pushing it down. It was 100+ for two or so years. Now it ain’t, and nothing happened to do friggin 50% in 6 months.

          One sees this all over finance. A pointing at how “this has always been so” and “historically the P/E ” of this or that is whatever, and then when the P/E gets even more absurd, you redefine E so it looks more benign. You see people trying to make sense of things, and then when they get to the point where it must mean something contrary to their own popular narrative, they decide their own analysis is wrong. This is particularly so when a decision is made that economic activity must be poor. This is ABSOLUTELY contrary to narrative and so, it — whatever “it” is — must be wrong.

          There Is No Precedent For Today. All of our experiences have no further value. No one has ever printed 4.1 Trillion dollars in 5 years before and that redefines everything.

          1. Oh btw I got me a flu shot a while ago. Haven’t had a cold for quite a while. Slight tidbit of advice. Fly first class. If you fly at the back, air flow is front to back and you breathe in every germ exhaled on the airplane.

            Famous Henry Kissinger quote: There is no reason to sit in the back of an airplane, unless you have diarrhea — or wish to meet those who do.

            1. I have always heard that in the admittedly extremely unlikely event of a crash that the tail is the safest place to be.

            2. If you click on the EIA data, they show $22.93 for January, 1986 and $11.59 for July, 1986. Having lived through the 1986 crash, and having been wiped out by it, I can testify that it definitely happened.

            3. http://www.macrotrends.net/1369/crude-oil-price-history-chart

              Nor there. This one goes back to the Israeli wars and you get some spiking there, but that 1986 thing isn’t there. I see lotsa articles about inflation adjustment and scarcity from preceeding Israeli war crises, but hard to imagine how it’s not really there on the graph. Gotta be inflation adjusting. The articles do refer to pricing against 1970s crises and “real price”.

              But I’m gonna stand corrected a bit, though it does look Israeli war related.

            4. Yes, it is definitely there. The $22.93 is January and the $11.59 is July. 

              1986
Jan     Feb     Mar     Apr     May     Jun     Jul
22.93	15.46	12.61	12.84	15.38	13.43	11.59

            5. I was named budget coordinator for a large region in a large multinational at that time. I was called in by a Vicepresident and asked to prepare revised budgets for all our regional subsidiaries. Each subsidiary president was asked to do the same, and sometime in early January we met in a conference room in Houston, and the fur flied. I had to force these guys to fess up their budgets could be cut in ways they never imagined. One of them threatened me openly, others did so quietly, but we cut. Our budget had assumed $28 per barrel for 1986, the new budget was made assuming $11 per barrel. Later in 1986 prices rose and we revised things up. But it was really scary.

            6. Check September 15 1985 to March 15 1986. I believe I was asked to look into the feasibility of buying up and storing oil sometime in early October because the market was dropping fast and they thought it was a short term panic attack, so we could get a few extra loads at bargain prices.

      3. Wait till February when WTI is $35. Break even in the core Bakken will then be reduced to $25 WTI or $10 at the well head. They are amazing cost cutters up there.

  49. Asian numbers are started. Euro down a ton. 55 pips and cracks under 1.20. Sterling follows suit down 38 pips. USDYen flat.

    And oil down about 34 pennies to $52.34.

    1. I would guess an effort to save the day may start in Greece. Euro weakness isn’t doing US shale any good.

      1. ZH’s weekend staff has seen it:

        Bidless Euro Crashes To Level Not Seen Since March 2006

    2. Some articles on the prospect of Greece leaving the Euro:

      http://www.marketwatch.com/story/greek-euro-exit-would-be-lehman-brothers-squared-economist-2015-01-03

      http://www.reuters.com/article/2015/01/03/us-eurozone-greece-germany-idUSKBN0KC0HZ20150103

      http://www.forbes.com/sites/timworstall/2015/01/04/germany-mistakenly-believes-the-euro-could-survive-greek-exit/

      http://www.businessinsider.com/the-euro-crisis-is-entering-a-new-highly-dangerous-phase-2015-1

      1. In 2011, the EU just threw sovereignty out the window and overtly interfered with Greek elections to keep the anti austerity, default-on-ECB/EU/IMF debt crowd out of power. No reason they won’t do it again.

        It’s obscene. It’s absolutely equivalent to having the US government tell a state that unless they elect some particular person Governor, the US govt will elevate federal taxes only in that state and cut them off from any US govt spending.

          1. Hell, why gulp.

            Step 1. The next downward revisions of breakeven will begin.

            Step 2. Some non overt measures will be “discussed” with government and/or Fed.

            Step 3. Some overt measures will be discussed, but will be called something else.

            All of this does depend on GDP being found “unexpectedly” to be particularly shale dependent. Given that, it’s a lock.

        2. From the Forbes.com article:

          And that’s what I think is the danger to the euro. Not that Grexit, Greece leaving it, would make the euro blow up. Rather, that Greece leaving, Grexit, would actually work for Greece and that means that other countries would follow that example. After all, standard economics, the way we’ve all thought about these problems for the last 80 years, does indeed state that devaluation is the solution here. Whatever the political desires of those arguing for greater European union, it is still the answer that will work.

          1. Oh make no mistake here. If Greece leaves the EU and the Euro and defaults on that debt, they can’t buy oil — at least not until the Russians start paying them for natgas transit.

            No one will lend to them to buy oil, but the various aid organizations probably will flow oil in. They are down to about 280K/d consumption. Probably can’t go lower without starvation of Athens and Thessaloniki.

            1. Yup. It’s always about oil & gas. and the Forbes line :” devaluation is the solution here.”
              yeah right. if that is just simple Zimbabwe with their devalued currency would be paradise 🙂

          2. It REALLY PISSES off the people who own it but debt can be made to disappear a lot of different ways. And if the debtors have more influence than the creditors with the justice system and the legislative system the debt stays gone.

            Nobody is apt to physically invade Greece if the Greeks simply renege on their debts. Whatever they have to export they can trade for whatever amount of oil they can import. It is impossible to pile debt on top of debt FOREVER in a finite world.

            An exit might well be the best option for the people of Greece.

            And even if it were possible the people extending the credit will eventually insist on the debtors at least being able to pay interest on a regular basis. Greece is apparently past this point in my estimation but I do not follow Greek news closely.

  50. Note of appreciation . This thread has at last gone to the basic point- what about ff’s and the ruin of the biosphere?

    I urge people doing what I am lucky enough to be in a position to do in this little town in fly-over country. I write op eds, do PV and make loud noises about it, and have set up ( loads of fun!) an Academy of No Carbon Widgets on my farm here. the idea is to actually make demos of all the good stuff, using some local young enthusiast to do the work that I direct. Oddly, those local enthusiasts just keep popping up out of nowhere. What they lack in engineering they make up for with energy and dedication.

    Then, when they think they really get it, they graduate and go start up their own business.

    We are working on pyrolyzers, gasifiers, biogas, woodstoves, hot air engines, compressed air storage, odd-ball high-wind-only low cost windmills, Ev’s, and of course PV, trying to make it as simple and electronics- free as we can get it.

    my thought on cars is simple- EV’s exist, people are working to improve them all over the place, and the power to charge them up can come from so many different ff- free sources that it’s unlikely they won’t run at least some every day, regardless of weather. That’s also why I like compressed air storage.

    I am putting all this on a web site, a bit slow, since my web expert is a student and isn’t here at the moment.

    of course I know this ignores big stuff like overshoot and all that. but it’s something, way better than weep and wail, harmless and fun.

    2. Thats awesome wimbi. Been my goal to have a little farm/homestead and run similar experiments. Got a link to any of your projects?

    1. The content of the article is certainly more nuanced than the title.

      As is often the case, the comments to the article are more interesting than the article itself.

    2. People who own all-electric cars where coal generates the power may think they are helping the environment. But a new study finds their vehicles actually make the air dirtier, worsening global warming.

      Oh fer crimminy’s sake! Really?! Only an absolute moron would think that! So some brilliant imbecile finally figured out that generating electricity by burning coal isn’t good for either public health or the environment?

      Well guess what, a civilization that is almost entirely based on the burning of fossil fuels is neither good for public health or the environment either and furthermore it isn’t sustainable in the long run because fossil fuels by definition are a finite resource.

      Hope ya all have a plan B, like maybe generating electricity from something other than coal… and while we are discussing that what’s more environmentally friendly, the entire infrastructure of fossil fuel extraction with its supply chains and waste sinks or a completely different paradigm for a less energy intensive civilization?

      Cheers!
      Fred

  52. Doug,

    A few days ago you had posted asking about H2S. Mike had responded to you and pointed out that I have experience in the Permian Basin with it, and that is true. However, I have been on vacation for the past 2 weeks and thus have not been on a computer (oh how it was nice) for some time, so I thought I’d respond to your question here.

    The new unconventional production in the Permian Basin is generally light sweet crude. Older production from conventional waterflooded fields tends to have H2S. The upper Permian especially has this issue, since there was a large amount of Gypsum (CaSO4.2H20) deposited in the Sabkha facies that was altered and released the Sulfur. Then the anaerobic bacteria that live in the water munch on the hydrocarbons and use the sulfur as their “oxygen.” So you get this:

    CaSO4 (gypsum dehydrates to anhydrite at depth) + H.C. –> CaCO3 + H2O + H2S

    There is actually so much sulfur that has been swept through the San Andres (upper Permian) there are sulfur mines near the Yates field at the southern extent of the Permian Basin. If you back calculate the amount of hydrocarbons that would have needed to move through the area and lost to the surface to deposit the sulfur in place, it is about 3 billion barrels of oil.

  53. Despite oil patch woes, railroads likely to keep rolling

    [Excerpt from article]
    [Rail] Carloads of crude oil spiked well over 4,000 percent between 2008 and last year — from 9,500 to 435,560 — as production boomed and the cost of a barrel of oil soared into the triple digits.

    Those prices have tumbled, to just above $50 per barrel Friday, and that has rattled some of the investors who have plowed money into companies like Union Pacific, Norfolk Southern and CSX.

    All three have seen their stock prices slip the past month….

    The Bakken region is one of the places where railroads are hauling most of the oil because pipeline capacity hasn’t kept up with production.

    Through the fall, North Dakota drillers remained on pace to set a sixth consecutive annual record for crude oil production.

    Justin Kringstad, director of the North Dakota Pipeline Authority, said the lower prices will prompt oil companies to look to reduce costs, but he’s not sure how much it will affect production in the region.

    “It’s still a little early to make any firm assessments,” Kringstad said.

    It helps that the cost of producing oil in the Bakken region is lower than in other places, so producers can still profit even when prices fall, said Don Seale, Norfolk Southern’s chief marketing officer.

    “Oil is being produced. The oil will have to move, and the assets have been invested in tank cars, loop tracks, infrastructure to support crude by rail,” Seale said during a recent investor conference call….

    The railroads — now delivering 59 percent of the roughly 1.2 million barrels of oil produced each day in North Dakota — expanded capacity quickly to handle the surge.

    Because the price of oil varies by market, railroads provide one of the best avenues for buyers and sellers to get crude to places where the price makes it economical.

    “Rail is definitely required to get all of the Bakken’s production out to market,” said Jonathan Garrett, a senior analyst at Wood Mackenzie, even if falling prices cut into margins for producers.
    [End of excerpt]

  54. Hard times could be ahead for North Dakota’s oil boom towns

    [Excerpt from article]
    The North Dakota oil boom isn’t going bust. Not yet. But with oil prices at a five-year low and dropping, the state is bracing for bad economic news that could ripple far beyond its borders.

    “I think we’re going to see a fairly significant correction,” said Ron Ness, president of the North Dakota Petroleum Council. “You’re going to see a tremendous number of pink slips over the next quarter and into the following quarter. And if we’re having this discussion in June, it will be that much more severe.”

    North Dakota oil companies can still turn a profit on oil at $52 a barrel, or less. But already, drilling operations have shuttered in the outlying counties, where the oil is harder to reach and the profit margins are narrower. In late 2014, there were 182 rigs in production. Now there are 163.

    Some oil companies have slashed their 2015 budgets in half. The state of North Dakota is in the process of revising a budget forecast that it had pinned on oil selling above $70 a barrel. The Organization of the Petroleum Exporting Countries (OPEC) has declined to cut its own production in the face of the oil flooding out of the Bakken, making it hard for market watchers to predict how prices will play out….

    And for now, the new year is still looking bright in places like Watford City.

    There’s a new $50 million high school under construction, with plans for another grade school to accommodate all the students who overflowed the classrooms and spilled out into half a dozen portable units on school grounds. The city, which ballooned from a farm town of 1,500 to a population of 12,000 and counting in the space of five years, is finalizing plans for a $101 million event center, complete with conference and performance spaces, two hockey rinks, a 135-foot water slide and an indoor lazy river.

    New businesses have opened all over town to cater to the crowds. The new South Park shopping plaza boasts two new hotels, a western wear outfitter, a tractor supply company, a tattoo parlor and a Japanese steakhouse. There are new housing developments springing up all over town. The local newspaper, the McKenzie County Farmer, predicted even more developments in 2015, including massive new highway projects, a new water treatment plant south of town and plans for more housing, more commercial development, maybe a new industrial park to go with the new highway bypass….

    At the McKenzie County Job Development Authority and Tourism Board, executive director Gene Veeder is fielding a lot of worried questions these days from workers wondering about their pay checks and businesses wondering whether it’s a good idea to go ahead with a new venture in the oil patch.

    “We’re in the sweet spot, here in McKenzie County,” said Veeder, who lives on a ranch his grandparents built a century ago. “We haven’t really reached a target where we’ll see a great slowing down. I think we’ll see a reduction in some rigs.”

    North Dakota has ridden out oil booms and busts before. In the ’50s. In the ’80s. Veeder sees no sign of this boom going bust yet.

    “We have a little bit of room to go before it really affects us,” he said. The city’s budget for the upcoming year tops $100 million and the state has squirreled away billions in oil revenue into funds it can tap for years to come to pay for future infrastructure, education and legacy projects. “Mainly what they’re telling us is to sit back and take a look at this thing. We were really fast-paced. We had a hard time keeping up. So we think it’s just normalizing.”
    [End of excerpt]

    1. “In late 2014, there were 182 rigs in production. Now there are 163.”

      I wonder where they get number from?
      https://www.dmr.nd.gov/oilgas/riglist.asp
      The govt site currently has 171
      Baker Hughes last week has 169, we will get an update on that in a few hours I believe.

      1. API-33075014660000, Start Date – 7/29/2014
        5 months of drilling. These rigs are probably not active.

    2. At least Mr. Ness is speaking somewhat truthfully. I live near a town of 1,500. Can’t imagine the turmoil Watford City has went through and will go through

    3. “Veeder sees no sign of this boom going bust yet.”

      Someone check that dood’s real estate holdings and if they are recently listed.

    1. Libya is a better target than either KSA or Iraq. Almost not even eyebrow raising. Anyone can bomb there and have it be blamed on someone else.

      1. Oooh, a twofer re: message sending.

        http://www.bbc.com/news/world-europe-30679182

        It did not take long. The game is very much in play. Greek voters are being bombarded with warnings about what is at stake when they go to the polls on 25 January.

        There is little that is coded in these messages. When a country has been bailed out to the tune of €240bn (£187bn; $286bn) there is no such thing as non-interference in Greece’s internal politics.

        haha Those bombs speak.

  56. Murderous oil crater today. WTI at $50, Brent at <$53. 5 &6% losses, respectively.

      1. Ya, and that 50% criteria in 6 months has now been obliterated. Headed for 60%.

        But relax. New breakeven analysis will be out any moment now showing shale is profitable at $20/b. That’s until all relevant real estate has been sold, or until the Fed decides this is important.

    2. I don’t know who this Berman guy is, but he certainly doesn’t know much about finance. Quote from the article: “Their debt was 120% of equity. That means that if they sold everything they own, they couldn’t pay off all their debt”. Nonsense: If they can sell everything they own at the values accounted for on the balance-sheet (granted, a big if), they obviously can repay their debt and still have their equity left over.

      1. CLR’s debt has been increasing. The % of equity stuff is shallow thinking by whomever, but his comment about levered free cash flow being negative can’t be good.

        Regardless, if your debt is increasing, you ain’t paying it off. In the Old Normal I’d care what interest they are paying. In the new normal of price evisceration, I’d care more about maturity than interest, because they have to retire that debt involuntarily per maturity, vs voluntarily because they were getting high price on high year 1 flow rates.

        If you don’t make your payments, you are in default and all your crap means nothing. You are frozen until the judge has time to see your case.

      2. That just don’t make any sense. Debt is what you owe. Equity is what you have. If the value of what you have is 20% less than what you owe, then if you sold everything you have you would still be short, you would still be in debt with no equity whatsoever.

        Well that is if “equity” means values accounted for on the balance-sheet. If it does then they owe 20% more than the value of their equity stated on their balance sheet.

        I just don’t see your reasoning Thomas.

        1. Debt and equity are both on the liability side of the balance-sheet. They add up to total assets by accounting definition. So the value of all your assets equals the sum of debt and equity, and as long as you have positive equity, you can in theory repay all your debt by selling all your assets (if debt is 120% of equity, it means that you are roughly 45 % equity financed and 55 % debt financed, which isn’t terribly high leverage). Always assuming that you can actually sell your assets at the values you accounted them for.

          1. Ron, when you say “equity”, seems what you really want to say is “assets” (“values accounted for on balance-sheet”).

            1. For extra credit, are convertible debentures liabilities or equity?

          2. Yeah, okay I first thought “equity”, that means shareholders equity. But then neither Thomas or Berman seems using it in that sense, (but perhaps you were.) They must be talking about assets. But no, it is not assets. It is shareholders equity. That is it is the value of all stock outstanding.

            DEFINITION OF ‘DEBT/EQUITY RATIO’

            A measure of a company’s financial leverage calculated by dividing its total liabilities by stockholders’ equity. It indicates what proportion of equity and debt the company is using to finance its assets.

            = Total Liabilities/Shareholders Equity

            OR:
            DEFINITION of ‘Debt/Equity Ratio’ A measure of a company’s financial leverage calculated by dividing its total liabilities by stockholders’ equity. It indicates what proportion of equity and debt the company is using to finance its assets.

            Or, they owe 20% more than all the shareholders equity, that is all the outstanding stock combined.

          3. At this time they won’t find a buyer, I don’t think. But I repeat a question I made above, what’s the USA tax accounting rule for depreciation of assets such as well and surface plant investment costs?

            1. All tangible drilling and completion expenses can be depreciated out over 7 years in the US, Fernando.

              Shareholder equity aside, the value of a production company is in the discounted value of its reserves, it’s assets, as Ron says. I don’t know anything about CLR, and don’t want to; if it owes 8 billion dollars it better have oceans of proven developed reserves, discounted at PV20, to be worth what it owes. At the end of 2013 it said it had a B of BOE, http://www.clr.com/operations/charts#chart182. That’s grown in the past year, then just got whacked a few months ago. Fernando, what say ye?

              Mike

    3. I almost bought some CLR based on his recommendations; I particularly like that they had 8000 more Bakken wells to drill. I took a couple of Advil and managed to not pull the trigger on that. I guess those 8000 locations are now, what, 6 1/2?

    4. Individual stocks/commodities are never good thing to buy. If people want to invest the only rational way is to buy low cost index funds, diversify among S&P and International markets according to market cap, divide between equities and bonds, and rebalance portfolio every 1-2 year (sell winners, buy losers) and no need to look at stock market ever again.

      1. Actually, Ves, this is the latest thing you’ve said that shows sophistication.

        The Bogle precedent on low cost index money is what it is, but my opinion is the sophistication stopped being relevant in 2008 when the world changed. Index funds can be down 20% over night in Asia just like anything else, and trigger circuit breakers before anyone can move. So while I once did as you say, and worshiped at the altar of low annual expense ratios, no longer. I trust nothing now.

        I would suggest the New Normal optimal choice vs Old Normal indexing is frontrunning the Central Banks. What must they do? Sometimes we know. Sometimes we don’t.

        Is there a shale index?

        1. Yo Jeff, from the comments under that article:

          CHINA (alone) will be consuming OVER 20 million barrels per day in fewer then four years.
          (Barrons)
          China, India, Japan combined will need every drop of exportable oil in five years.

          Gotta see if that Barron’s cite is googleable, cuz 20 mbpd is haha a lot.

        2. Yes, I hear you Watcher – that New Normal.
          I am just too far from the source to frontrun central banks.

          If my math in indexing turns out to be wrong I think I will open a pizza joint and sell it by slice 🙂 In the race to the bottom that is sure winner.

          1. There is a non chain pizza place in my town. Been in business 30 yrs on same recipe and overall formula, most of which is owning their building and a few zoning commissioners. They chose not to become a national chain. It means they didn’t grow, but they CANNOT lose money.

            There is a place for that in every portfolio.

      2. I bought high dividend paying individual stocks a few years ago, and they turned out well. I get the dividends and the stocks went up 30 to 40 %. But the key is to buy different companies in different sectors, it’s like making your own mutual fund.

  59. Boys (and Girls),

    There are only 2 kinds of economy humans have ever participated in….only 2

    1) Malthusian (up until around 1800)
    2) Industrial

    We did 1 for a long time (250,000-1milion years bp depending on how you define people)

    We did 2 until yesterday (0r about 2005)

    We will do 1 again shortly

    and all the breast beating and number flingin and oh so smart talk will mean exactly jack shit when the food goes away.

    The only question that needs to be asked is whether our genetics will make us go out like barbarians or like sheep?
    Think on it.

  60. Not one word about the massive debts nor that part of the debt is owed by the shale oil producers. Low oil prices can mainly be attributed to sluggish economic growth.

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