USA Oil Production

The Real Reason Why US Oil Production Has Peaked

Raymond James recently estimated that over the last three years the U.S. decline rate for oil has doubled from 1.6 to 3.2 million barrels per day. The drilled but uncompleted well inventory (“DUC”) is back to normal, so the number of wells being drilled and the number of wells being completed is now about the same. We need over 12,000 new horizontal oil wells completed each year to hold production flat and the number of completed wells will need to go up each year.

The U.S. Energy Information Administration (“EIA”) forecast at the beginning of this year was that the U.S. shale oil plays were just getting started and that production would increase by at least 2 million barrels of oil per day (“MMBOPD”) each year for several more years.

Now if you believe that U.S. shale production will increase by 2 million barrels per day each year for several more years, then I have a bridge that I think you might be interested in. But let’s just play “what if”, or what if it really did increase by 2 million barrels per day for the next five years.

According to the EIA’s Drilling Productivity Report, December 2018 shale production, all basins, was 8,232,750 barrels per day and the legacy decline, for all basins, averaged 6.14 percent per month or 505,737 barrels per day.

Legacy decline of over one million barrels per day would be a crippling requirement of shale producers. But not to worry, that is simply not going to happen. Now total US production did increase by two million barrels per day 2018. In fact, according to the EI.s Monthly Energy Review, US production increased by 2,064,000 barrels per day in 2018. But for the first 7 months of 2019, total US production has declined by 54,000 barrels per day.

USA production appears to have hit a snag. July production is now below November 2018 production.

In my opinion, legacy decline in shale production has reached a point where new production only replaces legacy decline. In fact, legacy decline may have reached a point where it is crippling shale oil production.

Those who have followed this blog for years know that Texas oil production is reported by the Texas Railroad Commission. But their data is very slow coming in, sometimes it is more than a year before all the data has come in. However, Dean Fantazzini, Energy economist, Deputy Head of MSU’s Chair of Econometrics and Mathematical Methods in Economics, has developed a program that uses the vintage data to make a pretty good estimate of the actual data. His past corrected data has been relatively accurate.

If Dr. Fantazzini’s data is correct then Texas peaked in December 2018 and has declined by 280,000 by June.

All the below charts were created from the EIA’s Drilling Productivity Report. The data is through September 2019 and the last few months is, of course, an estimate. Historically the estimate for those last few months has been overestimated.

Notice the last six months is pretty much a straight line. That is because most of it is just an estimate.

It looks like the Permian is pretty much the story as far as US shale is concerned.

The Permian is now just over 50% of total US shale production.

Permian Legacy Decline has been slowly rising and now sits at about 6%.

Eagle Ford has the highest legacy decline rate, now about 8.5% per month.

It looks like shale production, outside the Permian, has pretty much hit the wall. Pay no attention to those last four months. They are just the EIA’s wild ass guess.

In conclusion: Very high legacy decline, now over 6% per month, is shale’s Achilles heel. Of course, there are other problems as well. Bankruptcies are rampant, running out of sweet spots and the price of oil is just not high enough. It appears that the USA has peaked, or peaked until the price of oil rises at least $20 a month.

And check this one out:

Oil and Gas Bankruptcies Grow as Investors Lose Appetite for Shale

455 thoughts to “USA Oil Production”

  1. EIA monthlies to June
    https://www.eia.gov/petroleum/production/

    Dean’s charts self correct after a couple of months. Good estimates. Red Queen is already catching up. And, it will catch up faster the next six months from June, as most of the independents have severely cut back on capex.

    Your Wall Street journal link has a firewall. Never mind, I got through. Good post.

    1. where do you see that independents have severely cut back on CAPEX?

      Grateful for more information/links.
      Cheers

      1. I googled “Shale Capex Cuts” and got about a dozen hits of shale capex cuts. Just three of them are below.

        US Shale Operators Cut CAPEX, Up Production
        https://www.rigzone.com/news/us_shale_operators_cut_capex_up_production-01-mar-2019-158282-article/

        Montage Resources reduces drilling, cuts 2019 Capex
        https://www.kallanishenergy.com/2019/08/08/montage-resources-reduces-drilling-cuts-2019-capital-spending/

        US Shale Firms Cut CapEx, Up Production
        https://www.aogdigital.com/energy/item/8981-us-shale-firms-cut-capex-up-production

      2. https://csimarket.com/stocks/single_growth_rates.php?code=EOG&capx

        https://rbnenergy.com/surprise-surprise-part-3-eandps-paring-capex-despite-strong-2018-profits-2019-prices

        It’s widespead, simply google.

        Pioneer has not only reduced its capex, it’s reduced its workforce by 25%. Apache has given up on the Alpine High, their biggest capex. It’s 90 % gas, how stupid can you get? Yadda, yadda, Yadda. Just google the company for capex, and put 2nd quarter 2019. Voila!

        Your sure to get a positive statement from the company, but just concentrate on the capex going forward. For example, we’re losing money had over fist, translates to reduced operating expenses will provide an increased return for 2019. Get serious. None of these companies are going to say, we are screwed.

        EOG could make it, most of the rest are totally screwed.

        1. Even EOG will get pulled under the waves, probably sooner than later. All those wells, all of them, deplete at breakneck pace.

    1. Hi Matt,

      Can you or anyone explain this: “When adding the new data for 2015-2018 it was discovered that the 1980-2014 data had been changed – mainly increased by up to 1.24 mb/d in 2014”?

      1. As mentioned in the introductory graph 1 I did an analysis in 2015. Of course I kept the data in an Excel file which I did not touch since then. When I downloaded the EIA data up to 2018 I found these differences

  2. Reminds me of what Khalid Falih said about shale.

    “I have no doubt in my mind that U.S. shale will peak, plateau and then decline like every other basin in history,” Al-Falih told reporters at OPEC’s Vienna headquarters. “Until it does I think it’s prudent for those of us who have a lot at stake, and also for us who want to protect the global economy and provide visibility going forward, to keep adjusting to it.”

    Dr. Raymond Pierrehumbert will be proven right belatedly.

    https://slate.com/technology/2013/02/u-s-shale-oil-are-we-headed-to-a-new-era-of-oil-abundance.html

    1. Yeah, he was right. I could never imagine West Texas could ever support the lofty imaginations.

  3. The article does say US production still has an up side, but prices would have to be higher.

    If there is not enough supply then oil prices will obviously go higher as the did in 2003-2005 and in 2012-13.

    US drilling rig count is very low at the moment being only 742, at it’s highest recently the US could have 1,400 drilling rigs working.

    1,400 drilling rigs will certainly complete enough wells so new supply would exceed decline rates. When oil prices are over $100 as they were in 2012 and the number of drilling rigs are 1,400 then you can wake me up.

    1. Hugo,

      You want to focus on horizontal oil rigs. The count was as high as 1100, but many of those rigs were lower power rigs no longer economic to operate, a lot of the current rigs are higher power and far more efficient at drilling 3300 meter laterals commonly drilled today.

      1. A comment on oil rig chart from 9/1/2019 6:03 PM posted above. The horizontal oil rig count decreased by more than a factor of 5 from Dec 2014 to June 2016. There were only 24% of the Dec 2014 horizontal oil rigs still running in June 2016, tight oil output was 82% of the March 2015 maximum in Sept 2016 (there is about a three month lag between changes in rig count and changed in output due to time to drill and then frack the well.)

    2. Holy f*ck Hugo, you are a raving lunatic. The oil prices can’t go higher, otherwise there will be a repeat of 2008. Clearly you are incapable of learning from the past.

      1. Mike Sutherland,

        2008 financial crisis had very little to do with high oil prices as proven by recovery during 2011 to 2014 during a period of high oil prices.

      2. It is interesting how so many people want to keep believing the idea that the high oil and nat gas prices led to the financial crises of 2008-9.
        At first I was among them.
        But as the episode unfolded and the gross financial/regulatory mismanagement story gradually became public, that older narrative is no longer ringing the truth bell.
        But people do seem to cherish it.
        I have heard that the financial sector is now an even bigger portion of the economy than it was then. Atleast we have a guy with a hell of lot of bankruptcy experience as our leader now. I’m sure that you must be aware that it was Russian investors who bailed him out of his worst episode.

      3. Sutherland

        People like you who show mindless emotions just display their ignorance on all levels.

        The oil price was over $100 for nearly 4 years between 2011 – 2014. The global economy did very well during that time

        So do try and educate yourself

      4. Yes Mike, its ridiculous to suggest that the US housing crisis and collapse caused the Worlds Greatest Recession. Here are two serious studies that contract the reigning paradigm.

        https://www.nber.org/digest/aug15/w21261.html
        “The U.S. Foreclosure Crisis Was Not Just a Subprime Event
        The crisis began in the subprime mortgage sector, but twice as many prime borrowers as subprime borrowers lost their homes over the full sample period.

        Many studies of the housing market collapse of the last decade, and the associated sharp rise in defaults and foreclosures, focus on the role of the subprime mortgage sector. Yet subprime loans comprise a relatively small share of the U.S. housing market, usually about 15 percent and never more than 21 percent. Many studies also focus on the period leading up to 2008, even though most foreclosures occurred subsequently. ”

        https://www.brookings.edu/wp-content/uploads/2009/03/2009a_bpea_hamilton.pdf
        Causes Causes and Consequences of the Oil Shock of 2007–08
        “ABSTRACT This paper explores similarities and differences between the
        run-up of oil prices in 2007–08 and earlier oil price shocks, looking at what
        caused these price increases and what effects they had on the economy.
        Whereas previous oil price shocks were primarily caused by physical disruptions of supply, the price run-up of 2007–08 was caused by strong demand
        confronting stagnating world production. Although the causes were different, the consequences for the economy appear to have been similar to those
        observed in earlier episodes, with significant effects on consumption spending
        and purchases of domestic automobiles in particular. Absent those declines, it
        is unlikely that the period 2007Q4–2008Q3 would have been characterized as
        one of recession for the United States. This episode should thus be added to
        the list of U.S. recessions to which oil prices appear to have made a material
        contribution.”

        Yes Mike . . . 6 years of $100+ oil caused the Greatest Recession Ever. For each of those six years the US economy sent and lost $100 billion overseas in additional oil expenses.

        Further more, it is no coincidence that the so-called PIIGS, the Euro nations hit the hardest spend the most on oil
        https://www.businessinsider.com.au/the-oil-peak-has-been-reached-2010-10

        1. This is a complex question.

          Hamilton said oil was “a material contribution”. That’s not the same as being the primary cause.

          What’s the causal link between PO and recession/depression?

          James Hamilton showed one: that oil shocks caused fear, uncertainty and doubt among car buyers, who put off purchases, thus reducing overall capital investment, thus reducing aggregate demand, causing recession.

          “…, the technological costs associated with trying to reallocate specialized labor or capital could result in a temporary period of unemployment as laid-off workers wait for demand for their sector to resume. Bresnahan and Ramey (1993), Hamilton (2009b), and Ramey and Vine (2010) demonstrated the economic importance of shifts in motor vehicle demand in the recessions that followed several historical oil shocks.”

          page 26 http://econweb.ucsd.edu/~jhamilton/handbook_climate.pdf

          The problem: this is a short term effect. If oil prices stay high, drivers will switch to buying more fuel efficient vehicles and car sales will rise again. Again, this is what we saw from 2011 to 2014: oil prices stayed high, and yet car sales recovered to historically very high levels.

          1. Every recession since the World War II (save one) was preceded immediately before by an oil price spike. Every significant oil price spike was followed by a recession. Not spikes in other commodities, nor any other tracked market. That is cause, not correlation.

            1. Not spikes in other commodities, nor any other tracked market.

              Oh, my lord, no. Have you looked at the correlation of copper with the economy?

              What is Doctor Copper
              The term Doctor Copper is market lingo for the base metal that is reputed to have a Ph.D. in economics because of its ability to predict turning points in the global economy. Because of copper’s widespread applications in most sectors of the economy — from homes and factories to electronics and power generation and transmission — demand for copper is often viewed as a reliable leading indicator of economic health. This demand is reflected in the market price of copper. Generally, rising copper prices suggest strong copper demand and, hence, a growing global economy, while declining copper prices may indicate sluggish demand and an imminent economic slowdown.

              https://www.investopedia.com/terms/d/doctor-copper.asp

              On the other hand…

              If that doesn’t convince you, that means you feel very strongly that the world economy has been deeply harmed many times by it’s dependence on oil. That suggests that it might be a good idea to diversify from oil a bit, doesn’t it?

        2. Peter Starr,

          Generally we do not want cause preceding the effect unless we believe in time travel (works nicely in fiction, but not so much in physics). So your 6 years of $100/b or higher oil prices has very little to do with the cause of the GFC as there was only a single year of high prices that preceded the GFC (in 2008 the average WTI spot price was $99.67 and then the price fell to less than $80/b for 2009 and 2010 (annual average price), back in 2008 to 2010 the average annual Brent crude price was a bit lower than WTI. From 2011 to 2014 average annual Brent spot price was a bit higher than WTI and was 111,112,109, and 99 US dollars per barrel of oil in 2011 to 2014 respectively. During those years Global real GDP was growing at 2 to 3% annually. This fact calls into question assertions that oil prices over $98/b will cause a global recession. Of 5 years recently (since 2000) where this has been the case only 0ne of 5 coincided with a Global recession. Note also that Hamilton’s work focuses solely on the US, other studies have found that high oil prices have little effect on the World economy, though clearly a sudden supply shock as in 1973-1974 and 1979-1981 can have detrimental effects.

          It is not as clear that the World is quite as dependent on oil as was the case in 1973 to 1983 as oil is a much smaller part of the overall energy mix today in comparison to that earlier period.

        3. Peter Starr

          The 2010 article is a joke. Do you know where the graph came from?

          It was produced by one of the oil OilDrum contributors who told us that Saudi Arabia peaked in 2008. According to his in-depth knowledge of the country. Saudi Arabia would be producing on 6 million barrels per day by now.

          Look at the graph carefully, it has oil and condensate production falling from 82mmbd to 67 today.

          Do you actually know what it is today?

          Can you not tell when an article is written by someone who obviously knows nothing on the subject?

          1. The Saudi information/graph is not the one I referenced. Look at the chart; “PIIGS’s reliance on oil.” (I rarely post here, and am not able to paste a graph)

            1. Peter

              OK lets stick with what you posted.

              The graph has oil production peaking in 2008 and falling to 67 million barrels per day.

              Why on earth re post such rubbish?

              These countries do not suffer from peak oil but corruption

              https://www.greens-efa.eu/files/doc/docs/e46449daadbfebc325a0b408bbf5ab1d.pdf

              Portugal losses 18 billion Euros per year, the equivalent of 1,700 for each person.

              Corruption in Italy costs 237 billion equal giving 11 million Italians the average wage.

              Italy at the moment spends 26 billion on oil, that gives you some perspective on what their problems really are.

        4. IIRC it wasn’t the problem with sub-prime and outright fraudulent mortgages that was the problem, it was the bundling of them into CDOs and the fraudulent credit ratings given to those that undermined the entire credit market. No-one knew how good their collateral was! Those CDOs were deeply interwoven into complicated financial structures that took years to unravel, and in the meantime only the government backing prevented a complete shutdown of credit.
          The price of oil may (or may not) be an aggravating factor, but certainly not a cause by itself.

  4. Hello, i m from spain.

    Ron, you say that we are reaching the physical limits and then in the end you say that if it goes up $ 20 we can produce more, is it a contradiction?

    1. Yeah, there is sort of a contradiction there. Sorry about that. But we are seeing the physical limits hit in much of the world, regardless of the price. But if oil hits $80 to $100 a barrel, a lot more shale could be produced. But that will not change things in the long run. It could delay peak oil by a year or two.

      1. If the price of oil rose to $ 150, how much would US oil production go up? 13.14 or 16 million barrels per day? which is the limit geological?

        1. Who would pay for it? Who could pay for it?

          That’s the lesson from the first round of peak oil predictions (which crashed in 2010): If the price gets too high, people won’t buy the associated products.

          There must be some absolute limit on how high prices can go, but who knows what that is?

          Are we at the point where the producers say, “We can’t produce at a lower price,” and the consumers say, “We can’t buy at a higher price”?

          1. Michael

            That is not true. a hybrid car can do 200 miles per gallon

            If people bought hybrid cars they could easily afford $150 oil

            1. Hybrid cars are the cheapest option, if you include the very low cost of fuel (and some maintenance is lower, such as brake replacement).

              A used hybrid is very cheap. Used electrics, like the Chevy Volt, are also very cheap.

              What are you driving?

            2. I live on a farm and drive a 2003 Ranger.
              Luckily, work is only 8 miles away, and I’m home most of the time during summer.

            3. Ah, not really a car.

              It will be a while before there are cheap used hybrid or electric pickups available.

            4. Hugo,

              It seems that you underestimate the importance of crude oil in the world. High oilprices will affect many other things, including food prices. Not much of a problem for the wealthy, more so for the people with low income, that is the majority of world population.
              If only wealthy would be living on planet earth maybe we wouldn’t have this forum I think. One of the dangers of Peakoil lies in the consequences for the billions of people who are happy when they have enough to eat every day and can think or dream of buying a cheap car, now or in the future.

            5. Han

              I was really talking about US not being at peak now.

              Oil prices were over $100 for nearly 4 years and the world economy was doing fine.

              At that price oil is only 4% of income expenditure. Mortgages can be as high as 50% of income.
              House builders can make 400% profit on houses, if house prices fall a bit they will still be rich.

              Once oil production peaks and starts to fall, things will be difficult until enough electric cars are sold.
              The number of electric cars sold will need to be at least 50 million of the 100 million, in order to cope with peak oil.

              I thing the world will be behind the curve here for several years.

              I think between 2025 and 2030 things will be very difficult.
              However I still think environmental degradation and lack of water will be far worse in the years ahead.

              https://www.circleofblue.org/indiawater/?gclid=EAIaIQobChMIn4fa6PKv5AIVjbTtCh2DMgWHEAAYASAAEgJlSfD_BwE

              https://www.abc.net.au/news/2018-11-23/china-water-crisis-threatens-growth/10434116

            6. Hugo,

              I was referring to:

              “If people bought hybrid cars they could easily afford $150 oil“

              My answer related to the general effect of high oilprices in the world. The U.S. could afford oilprices higher than $100/b, but the U.S. depends also on how healthy the world economy is. I don’t see Trump’s plans becoming reality anytime soon.
              Not only fuel prices are going up with rising oilprices, that from many other products and food too. Big part of world population spends the majority of their income on food and transportation. The less money that remains for other things, the less mobile phones, etc will be sold. It’s that simple.

              “I think between 2025 and 2030 things will be very difficult.
              However I still think environmental degradation and lack of water will be far worse in the years ahead.”

              Probably, indeed. Peak oil consequences and climate change will even bite harder the next decade. Forests in many countries on fire now. Various positive feed back mechanisms on the way for runaway climate change.
              We cannot just start to transition to EV’s, thinking everything can go on the same way with growth, growth and more growth. The next economy has to be a shrinking economy for us to survive. Will the monetary system survive that ?

            7. “If people bought hybrid cars they could easily afford $150 oil”

              The loon has spoken.

          2. Michael B,

            Were you driving in 2011 to 2014, gasoline prices were quite high? Did you stop driving? In Europe petrol prices are 2 to 3 times the price in the US, people buy more efficient vehicles and perhaps drive less, but they still use their cars.

            1. I live in Europe and yes, gas prices are much higher than in the US. But our economies are adjusted to this… This is mainly taxes, so the money flows back in our economies. And these taxes were incremental over decades, not a sudden surge.

              The thing is, when you have strong prices change it also change the budget allocation. Usually, driving habits don’t change much because they are linked to you revenue (if you can’t go to work, you don’t get paid). So, you cut somewhere else… consumption of goods decrease.

              The rise of oil prices wasn’t the main cause of the recession of 2008. But it had an impact, maybe just the tip to make everything falling apart in this fragile financial house of cards.

              On the opposite, the price plunge of 2015 created a budget for goods consumption and there was a stimulation of goods consumption boosting economies.

              This is how I understand it, roughly. This is not exactly this, but from a consumer POV, this is what happens.

            2. Tita,

              I mostly agree that the speed of change in oil prices will be important and yes it can affect consumer spending when oil prices rise, eventually it can result (after a 1 to 3 year lag) in consumers switching to more efficient vehicles, using more public transport, car pooling, combining trips, walking, biking, etc. Only the purchase of a new car might see the 1 to 3 year lag, other factors could take effect immediately.

              In the case of the US and other oil producing nations, the higher oil prices also flow back into the economy, in fact lower oil prices hurts those oil producers so income is cut for those in the oil industry.

        2. It is not entirely a geological limit. The limits are legion. Workers, water, roads, and in the case of the Permian, trying to convince your family to stay in a really tough location. The major obstacle is going to keep independents alive before the majors take over everything. Upstream to downstream in the US is the major goal. Exporting at high prices would be a waste in the long term. And, it’s not only the majors, there is ConocoPhillips, Marathon, and a host of other downstreams that want a bigger piece of the pie.

          At this point MOST of the independents are toast. Can they stay alive long enough for prices to rise? Stay tuned, but, my bet for prices to rise any goes into 2020. Why, I don’t know, but that’s the direction. Inventories have to approximate zero, which I agree is a stupid guess. But, everything points that way.

        1. Do you know many people , or countries, who would not divert financial resources from other expenditures in order to keep their petrol consumption up.
          I don’t.
          Maybe if a barrel was over $100 people would scale back discretionary (frivolous) uses, but still, people tend to find the stuff extremely useful.
          In the 2030’s, when people will have more electric transport, it may be different.
          Thats how I see it, anyways.

            1. It is true Matt that USA demand went down with the economic crises of 2008-9, about 10-15 % for a few years.
              That decline was driven not by a sudden shock in oil price, or even high oil price, but by a loss of buying power for other reasons- a financial crises/mismanagement on a very large scale.

              I assert that if the economy had not had a sharp recession at that time, then the oil consumption would have kept slowly growing even at those higher prices present at that time.

              “High oil prices tend to suppress economic activities.”- I certainty agree with you, but the question is ‘how high can the prices go before they cause a reduction in consumption?’
              And that answer is surely not fixed, and varies by degree of economic strength in a country, and how much frivolous use in present.

              I consider the world economy to be at risk for economic depression, at any time, just because we are so far into gross overshoot, and depression is a natural symptom of ‘mild’ contraction. We like to walk along the very thin edge of a partially frozen lake, as if the whole surface is frozen solid deeply. By that I mean that most countries take very high degree of risk with their financial well being, living/growing far beyond their means. Just count up the debt to measure the degree.

              So, yes, we could move into a situation where higher oil prices couldn’t be afforded. But until we enter a big slowdown event, it seems the world economy could afford considerably higher fuel prices.

              You get so much valuable horsepower, even at a $100 bucks its an incredible deal…. unless of course you have an electric vehicle that can replace your particular use.

            2. Matt,

              You have cause and effect reversed, the high oil prices were a combination of a high level of economic activity leading to high demand for oil with supply not growing fast enough to meet that demand. The economic crash was due to an overheated housing market and poor banking regulation leading to a financial crisis. The oil price had very little to do with it.

              High oil prices from 2011 to 2014 were handled by the World economy with little problem, the prolonged crisis in Europe was due to poor monetary and fiscal policy in European nations where the lessons learned during the Great Depression were ignored.

        2. Can you imagine if we got an oil price shock. Say to $150. What would the ECB central bank of Europe be able to do about it. Raise short term interest rates?

          High priced oil can’t be allowed under any circumstance. At this point in the game high price oil is not just a country killer it will take whole continents with it.

          I think the ceiling of affordability is a lot lower than most believe. $70

          1. Doesn’t the affordable price in USD depend on the value of USD relative to other currencies?

            1. I’d say it does. And when you realize China’s credit creation over the past 10 year is more than the combine credit creation of the US, Europe,and Japan. Those 2 trillion in dollar reserves they own in the form of US treasuries won’t buy them a whole of time.

              30%-50% devalue of the yuan to the dollar is in the works and there is nothing they can really do about it.

              Think about Japan too. They can’t raise interest rate either no matter what the price of oil is. I’d say the US has little room to raise rates also.

              This all sets up a choice. If your the FED do you unleash QE4-5 or whatever it is and push oil price back to over $100 and watch everything implode? Or do you do nothing and watch everything implode?

            2. shallow sand,

              For other nations the obvious answer is yes. Exchange rates change all the time, this has been true since the Gold standard was abandoned in the 70s. But clearly for any given set of exchange rates a higher oil price in US dollars will raise everyone’s price of oil in Euros, pounds, etc unless the increased price of oil results in different exchange rates (a distinct possibility).

          2. HHH. Yes timing is a big part of the equation. Fast changes (shock to use your term) are difficult to adapt to, and cause chaos beyond their magnitude.
            Slower changes are more digestible to the economy, and peoples behavior.

          3. HHH,

            I think the World will have no problem with $70/bo, oil prices averaged about $110/b in 2017 $ from 2011 to 2014, the World could handle that oil price and perhaps even $140/bo in 2017$, my guess is that $150/bo for Brent crude in 2017$ or higher might cause problems.

            I think the World economic system is far more resilient than you believe with respect to the price of oil.

            1. Dennis, central banks have no room to combat inflation due to oil price. They can’t raise interest rates now and in 5 years from now interest rate will have to be much lower than they are today as the debt burden grows.

              Inflate your way out of debt is a false narrative. The only the thing that gets inflated is the total amount of debt. Doesn’t make it anymore payable just because you increase it. It’s a simple game of extend and pretend until it falls apart.

              There is no place on earth that it’s closer to falling apart than it is in China. You know the last crisis China had 35% of all loans were Non performing loans. It’s going to be way worse this go around. The total amount of credit issued just in the last 10 year has never been done anywhere at anytime. Nothing even close. In order to keep all the debt from imploding their going to have to print a whole lot more.

            2. HHH,

              World debt to GDP is not at unreasonable levels, much of the increase is due to better access to credit markets in emerging economies. The debt boogie man is just not very scary to those that understand economics. There can be too much debt and the high current debt levels should be paid down so we can address future crises. Higher taxes on the upper income earners would be a start as well as fewer tax shelters for the wealthy, that tax revenue can either be used for necessary infrastructure or simply used to reduce government debt (or at minimum to balance government budgets).

            3. Hi Dennis,
              I suppose I fit into that ” The debt boogie man is just not very scary to those that understand economics.” category of not understanding.

              There are two things about a high debt load that seem untenable to me in this current version of the world.
              One is- we don’t pay it down when times are good, in fact we tend to add to it. The short period of paydown during the Clinton presidency was a rare moment.
              Secondly, big debt load works if your prospects indicate that you can outgrow it, or atleast have longterm stable conditions to service it. Personally, the prospects for outgrowing the debt, when coupled with demographic and energy challenges we are up against, look low in probability to me.
              I admit, perhaps am looking at from a conservative, over the hill standpoint.
              Or maybe just realistic.

              Another aspect- we use debt to maximize our economic growth, at a personal and society level. We tend to stretch our borrowing to the severe limit.
              Is that max growth a good thing?
              Have we grown too far too fast, like an obese person just because food was available?
              I have great reservations about that behavior.

            4. Hickory,

              For all debt public and private debt to GDP has been growing pretty slowly at the World level.

              I am not claiming that debt is never a problem, but simply that at the World level it is not currently a problem.

              See

              https://www.bis.org/statistics/totcredit.htm?m=6%7C380%7C669

              chart below is based on data from BIS.

              To me the chart is not very scary.

              On borrowing, some borrow too much, others do not.

            5. I suppose it comes down to optimism.
              I don’t have enough of it, in regards to the worlds chances for smooth sailing.
              And smooth sailing conditions are the presumption it seems to me.
              I expect very choppy seas, and big debt is like having a crappy boat.

            6. Hickory,

              Hoover had much the same attitude. Have you read The General Theory of Employment, Interest, and Money?

              https://www.amazon.com/General-Theory-Employment-Interest-Money-ebook/dp/B07JCJXDG4/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=&sr=

              Hoover’s aversion to government debt was a big reason that the US economy did so poorly in 1929-1932, he did not have Keynes work to guide him (the book was published in 1936), European government’s response to the GFC ignored all that Keynes taught us and was prolonged by their aversion to government debt.

            7. So Dennis, lets consider it a fact that we do not ever pay down the accumulated debt, even in good times. That is our operating norm, and do not deviate from it to a significant extent. The chances of us moving towards a paydown stance are at less than zero.
              With that in mind, do you still think there are no consequences to the practice?
              It seems to me that we are creating a lot of winners with debt, and at some point there will have to come policy changes that will create a huge number of losers as a result. The trigger will be something that undercuts our prospects in a large way, like loss of reserve currency status. Regardless of the trigger, the debt load will add to problem in a huge way.

              Is this normal- “There is currently more than $16 trillion in negative yielding debt around the world as central banks try to ease monetary conditions to sustain the global economy.”?

            8. Hickory,

              I agree too much government debt is a problem when the economy is doing well and in those situations it makes sense for the government budget to be in balance. In some cases there are investments which can raise welfare that will only be undertaken by the government, in those cases running a temporary budget deficit to make the investment may make sense, especially in a low interest rate environment.

              It is not clear who buys these bonds with negative yields, seems a bad idea, better to just hold cash.

            9. “It is not clear who buys these bonds with negative yields, seems a bad idea, better to just hold cash.”

              Seems like a very broken system.
              I don’t see how a massive haircut to bondholders can be avoided. At some point, the system of retirement savings and municipal funding will be kneecapped. I believe it will turn out to be a much more severe case of financial mismanagement than the 2008-9 episode.
              Perhaps it is an early symptom of overshoot correction.

        3. Gail “the Actuary” Tverberg is detached from reality. She’s convinced that Peak Oil will cause us all to abandon modern civilization and go back to subsistence farming. She seems to think that manufacturing, and rail and water freight transportation, simply didn’t exist before oil.

          As for consumer reaction to higher oil prices: it’s not a question of whether people can afford oil, it’s a question of whether they think it’s competitive with alternatives.

          There are a number of uses for oil, and each is different. There are some for which there are obviously better and cheaper alternatives, but which still use oil in surprising quantities, including: electrical generation; space heating; industrial process heat; petrochemicals, etc.

          Most of the rest of the uses can be broken into many niches, each of which needs different solutions and which have different cost/benefits: taxis are very different from commuter cars; commuting is very different from recreation travel; local delivery is different from long haul trucking; ferries are very different from long-distance container vehicles.

          A few uses will be challenging, like aviation and long-distance water shipping – they account for a relatively small percentage of overall consumption. Others, like taxis, will be pretty easy.

          The history of oil is a long line of applications which have been replaced by better and cheaper alternatives: the first 30 years of oil was basically kerosene for illumination, which was replaced by electric light; Edison’s first electric generation plants were oil-fired, and 20% of US generation was oil-fired in 1979; space heating was big for a long time;, etc.

          2nd, there’s no reason that alternatives have to be liquid fuels: there was a notorious study several years ago (Robert Hirsch) which concluded that mitigating Peak Oil would be expensive and slow, which completely excluded from the analysis hybrids and EVs!

          3rd, Many cost benefit analyses are very incomplete: hybrids are a partial alternative, and are already the cheapest form of car. Pure EVs are cheaper than their ICE counterparts. But, that’s only the case over their lifetime: if you stop the analysis at 5 years, alternatives with greater capital cost are penalized. Similarly, the lower maintenance costs for EVs need to be included.

          4th, learning effects and economies of scale have to be included: the Chevy Volt had a small battery and a generator: that configuration is inherently inexpensive, but GM was still paying off the costs of development and ramping up production (and wasn’t really all that committed to alternatives…). Eventually, plugin vehicles will be an obviously better and cheaper alternative.

          Keep in mind that oil was dirt cheap for more than a century, and has only been moderately expensive for a few years at a time over the last 15 years. That’s not long enough for many industries and people to switch from short term elasticity to long-term elasticity mode.

          5th, and perhaps most importantly, we have to take into account external costs. Oil has appeared very cheap, when in fact it was never cheap. Climate Change is very expensive. Oil wars are very expensive (estimates range from many 100’s of billions to the trillions). Heck, Professor Hamilton attributes much of the Great Recession to Peak Oil. Well, the GR vaporized what, 6 trillion in capital? If Peak Oil is responsible for 50% of that, that’s a cost of $3 trillion, or about $10 for every barrel consumed in the last 10 years!

          If we fully load oil with all it’s costs, we’ll find that it’s not nearly as cheap or wonderful as we thought!

          1. “Gail “the Actuary” Tverberg is detached from reality. She’s convinced that Peak Oil will cause us all to abandon modern civilization and go back to subsistence farming.”

            I believe Dr. Jason Bradford has views of a perhaps similar nature.

            https://www.postcarbon.org/our-people/jason-bradford/

            PS ~ being an asshole is not a logical phallacy

            1. Yeah, Bradford is being unrealistic as well.

              And, yes, it’s possible for people to simply be an asshole for no particular reason, or just to sell papers, etc. But, more often people are insulting with a reason – to distract from the fact that their arguments are weak, and they must resort to insults instead.

            2. Have you considered the possibility that Tverberg and Bradford may be right?
              Just keep an open mind. I know as little about the future as the next guy. Mankind has never been in this situation before: 7,5 billion mouths to feed daily
              I see no reason to panic, but just keep an open mind for all possible outcomes

            3. Sure. I’ve been thinking about this stuff ever since the first Club of Rome report came out. I was much more pessimistic then, but I’ve been working with this stuff ever since, professionally and on my own time.

              I’ve concluded that Peak Oil would be a good thing, and forgotten in a generation or two. Climate change, on the other hand, is serious stuff. Which is why PO would be a good thing: oil is dirty, expensive and risky. We need to kick the oil (and FF) habit ASAP.

            4. We won’t be kicking that habit by mining yet more fossil fuels, among other, possibly, novel, environmental toxins, to build out, often by the same fossil fuel outfits no less, non-renewable renewable energy systems some seem to think they need like air and water. It’s too late.

              When do you retire? If you haven’t yet, maybe it’s very soon so you won’t have to bother with all this pseudorenewable crap, such as if you’re professionally shilling for it, and paid to do so on POB.

              We might have had the time and planet back when you were thinking of this stuff when the first Club of Rome report came out.

            5. If Bradford is wrong he gets to have a nice life in the country.
              If Nick is wrong he starves.
              Balance of consequences, risk management and all that.
              Nick seems like the “all the eggs in one basket” type, which, if you ask me, is a little odd for a dude who claims to have been contemplating the topic since 1972. Perhaps Nick is experiencing Peak Optimism?

            6. Farming is a tough life. Small farming as one’s sole source of support is a miserable life. I don’t envy anyone who tries it based on predictions of TEOTWAWKI.

              More importantly, the risk that farming in the US will collapse due lack of fossil fuel is basically zero. There are a lot of things to worry about – worrying about that would be an enormous waste of time when a lot of other problems need our attention, like…the project to transition away from fossil fuels ASAP.

              Not to mention that the idea that “Our Way of Life” will collapse, due to PO or a lack of FF, is a FF industry talking point.

              How to move farming away from FF is a long discussion, but here’s a bit of information about one approach:

              Corn takes about 3.5 gallons of diesel per acre, year round, to produce (a range of 2 to 5, with no-till at the low end). An acre of corn can produce the equivalent of about 320 gallons diesel (160 bushels per acre, 2.8 gallons of ethanol per bushel and .7 gallons of diesel per gallon of ethanol), so that’s roughly 1% of corn production needed to power tractors.

              Corn ethanol would make a lot more sense for tractors than for light passenger vehicles.

            7. You ever think about the World Nick, or just USA?

              I believe Bradford is addressing risks to global food production secondary to peak oil AND climate change. I guess that’s what YOU call a fossil fuel industry talking point?

              You got a one track mind dude. Blinders on. Your willing to ignore whatever it takes, as long as you can construct a a narrow problem definition that is solved by everybody buying a Tesla.

              Nate Hagens has it that everybody carpooling with their ICEs would do better for the environment than everybody buying a new EV. I guess he’s mistaken too, eh Nick?

            8. Well, you made a remark about personal strategies: “if Bradford is wrong…”. Both Bradford and I live in the US. So, I dealt with farming in the US.

              I’ve said many times that carpooling is a good idea. It’s an extremely fast, cheap and effective way to reduce oil consumption. But, it doesn’t get you all the way. For that you need EVs. And, in the transition you want to carpool with the vehicles that use the least oil: sedans, that are either hybrids or EVs, and eventually EVs as they become available.

              Bradford is dealing with risks to farming due to climate change? Well, I was reacting to his presentation being unrealistic about the impact of a transition away from oil, but I suppose it’s possible that he’s unrealistic about that, but has something useful to say about the impact of climate change. Could you explain that part? Please don’t just give a link: please give an explanation in your own words.

            9. I attended a conference once where she gave her canned peak oil presentation. She’s smart enough to avoid posting comments here, but not much smarter than that.

              Ask her a real question, and she’s like a deer caught in headlights.

              She has a product to sell, and there’s a market for it. She makes a living out of it, as far as I can see.

              She may or may not believe in her own presentations, lol.

            10. Ironically, that appears as at least one of your canned responses for Gail, as I seem to have read that before from you.

              If anyone cares to do an archive lookup, they may view the folly of your own commentary, such that I’ve periodically illustrated.

              BTW, have you yet figured out how to ship New Yorkers to– where was it?– Iowa? LOL

            11. Funny but true. You want to know what’s even sadier. You and I realize it’s his canned Travberg responce.

            12. Ostensibly, Ron Patterson and Gail Tverberg both had to ban you from their blogs at certain points and that you changed your nicks there and had to here to return, yes? ChiefEngineer? DentalFloss?

              So, if so, it sounds like you’re projecting a little, speaking of ‘sad’, yes? A little like OFM and his worm tongue (among other) bullshit, hm?

              We ‘meet’ all kinds online too.

          2. (1) Oil fired power plants were phased out after the 1st (US peak 1970 allowed OPEC to impose embargo) and 2nd oil crisis (peak oil in Iran 1975) not because of a planned, voluntary transition
            (2) Hirsch’s slow mitigation. The 2008 oil price shock was a warning. Where are we 10 years later? Are we on a path away from oil?
            (3) EV maintenance cost must include replacement batteries in the car and in your garage (to store power from solar panels – drive less in winter). The inverter for my solar panels lasted only 5 years
            (4) EV s recharged from grid are mainly coal power driven
            (5) The era of cheap, easy oil ended in the early 2000s (when the North Sea peaked), before the Iraq war

            16/3/2013
            Iraq war and its aftermath failed to stop the beginning of peak oil in 2005
            http://crudeoilpeak.info/iraq-war-and-its-aftermath-failed-to-stop-the-beginning-of-peak-oil-in-2005

            1. “EV s recharged from grid are mainly coal power driven”

              Not in the USA, where coal makes up less than 25% of electricity generating capacity, down from 40% in less than 10 years (primarily due to replacement with tight nat gas production).

              And some states, like the biggest in the country, get less than 5% electricity from coal, imported from neighboring states via the grid.

            2. Outside of the USA there’s this place called “the rest of the world”. Climate change deniers often also ignore it when attempting to gain a picture of reality and explain it to others. Anyway, from what I understand the largest market for EVs, by a long shot, is China. I’d suggest, that it’s reasonable to suggest, that most EVs in the world, you know- on the entire planet, are being powered by electricity from a coal powered grid. Now, you can pat your countrymen on the back at every opportunity if you like, hand out some ribbons perhaps, but it’s starting to look desperate. Not a lotta big wins for the technocornucopia crowd lately.

            3. Matt, here are my thoughts on each point:

              1) I agree. I’m not sure what point you have in mind when you say that it wasn’t a planned, voluntary transition. Prices went up, and utilities moved quickly to substitutes. That makes it a good example of “The history of oil is a long line of applications which have been replaced by better and cheaper alternatives”.

              2) “Are we on a path away from oil?”

              Yes. Plugin vehicles are growing quickly. Are we pursing that path as quickly as would be optimatl? No.

              On the other hand, another fundamental flaw in Hirsch’s analysis is the lack of discussion of short-term responses to Peak Oil. For instance, car-pooling is currently the largest alternative to single occupancy commuting – it’s bigger than mass transit. The average light vehicle occupancy is currently 1.2 people. That could be expanded literally overnight if we faced a serious short term problem with oil scarcity. That was true in 2005, and it’s dramatically true today, with everyone carrying a smart phone which can enable such things. A closely related alternative is car sharing, which could keep EVs at very high rates of utilization (as opposed to 5% utilization currently).

              3) EVs have very low rate of battery replacement – every indication is that they’ll generally last the life of the vehicle (That appears true for Tesla and GM, no quite so much for Nissan, which skimped on the battery temperature management).

              Rooftop PV is nice, but in now way is necessary to gain the benefits of EVs.

              5) $60 oil is a bit higher than historical levels, when corrected for inflation, but…not much. If you adjust it as a percentage of household income levels, it’s lower.

            4. What about, in the big picture global context (not cherry picking California), number 4 Nick?

              4) EV s recharged from grid are mainly coal power driven

              Btw, China seems to have some folks making good money on EVs. Something Musk’s vanity project seems a long way from doing. I wonder what’s up with that? Probably larger subsidies I’d imagine, although perhaps not on luxury brands.

              “Against the backdrop of those corrections came a trailblazing show last week by Shenzhen-based BYD Company, China’s dominant maker of EVs. BYD — which stands for “Build Your Dreams” — counts Warren Buffett among its investors and posted a 632% jump in profit for this year’s first quarter to 749.73 million yuan ($111.4 million). It sold nearly 118,000 vehicles in the quarter, up 5.2% over last year’s first quarter. In comparison, BYD’s U.S. counterpart and EV maker Tesla posted a loss of $668 million on revenues of $4.5 billion in the latest quarter. The 63,000 cars it sold last quarter represented a 31% fall from the previous quarter.”

              https://knowledge.wharton.upenn.edu/article/chinas-ev-market/

            5. Well, it’s a long and complex question. Here are a few thoughts:

              Pure ICE vehicles are about 25% efficient. EVs are roughly 3x as efficient. Coal produces about 2x as much GHG as oil, so an EV that was running 100% on coal would still be emitting fewer GHGs.

              China’s grid is mostly coal, but it’s not 100%. As time goes by, coal’s share will drop. That’s also true of the rest of the world. We do want to have a long term point of view.

              Most countries, like the ones that you and I live in where we have the most influence, have much lower shares of coal in their grid.

              EVs can charge when coal’s share is low and when wind and solar and nuclear are high. So, EVs are effectively running on less than the average share of coal on the grid.

              Because EVs can charge when wind and solar are strongest, they help create demand (and higher prices) for wind and solar. So, EVs help accelerate the transition away from coal.

              EVs can charge when wind & solar are high, and delay charging when they’re low. This reduces the impact of wind & solar intermittency, makes wind & solar more useful and accelerates their installation in a second and important way.

              Oil is polluting, expensive and risky. There is an enormous benefit to moving away from oil, even if the transition means burning some coal temporarily.

          3. In regard to Nicks 2nd point, I do not recall Hirsch excluding hybrids and EVs from his an analysis. What he did point out in the second paragraph of his Executive Summary, was the size of the US vehicle fleet and the challenge in transitioning that fleet to new energy sources in a relatively short time frame. Here is a link to the Hirsch report in which he discusses hybrids in Chapter VI, Section A, “Conservation” and EVs, “Fuel Switching to Electricity” in Chapter VI, Section F:

            PEAKING OF WORLD OIL PRODUCTION: IMPACTS, MITIGATION, & RISK MANAGEMENT

            Looking at the current state of affairs, I would posit that we are almost at the end of the first decade of mitigation, if you use the introduction of the first of the new wave of EVs in late 2010 as the starting point. However it is not the “crash program” that Hirsch wrote would be necessary. I would also posit that we are actually undergoing some of the mitigation scenario’s described in the Hirsch Report, despite the fact that the term “hydraulic fracturing” shows up only once in Chapter VI, Section B “Improved Oil Recovery”.

            Finally with regards to aviation, I am getting an increasing sense of an impending disruption in light aviation from the likes of the following article:

            Quantum Air Signs Up For 26 Bye Aerospace Electric Airplanes

            This small outfit, with no legacy (ICE) aircraft manufacturing base to hold it back, currently has a two seat electric aircraft with a promised flying time of over three hours undergoing certification with the FAA. They promise a 15x reduction in fueling costs, in addition to huge reductions in motor maintenance costs. Is this going to be the “Tesla” of light aircraft?

            1. One of the other things to think about is that Honda is developing a Flouride battery with roughly 8 to 10x the energy density of today’s Lithium Ion which would mean 30 hours of flight time for the Bye Aerospace Electric Airplanes.

            2. I’d be cautious about hijacking a petroleum thread for one’s non-petroleum non-renewable renewables and electric car and related agendas/fantasies.

              Previous civilizations didn’t collapse and/or decline because of fossil-fuel-burning, incidentally, as bad as burning them at scale appears. And so energy alternatives aren’t going to make much of a difference if the reasons why previous civilizations declined and/or collapsed are not addressed, and may in fact make matters worse, since, for examples, we are dealing with near 8 billion people now and depleting resources and environment– unlike much of fossil fuel-burning history.

              “…technophiles chime in with the latest in promising battery research. Most laboratory discoveries never make it to market, let alone gain market share. This is known.

              The mineral intensity of an electric car is far more than a regular car, meaning each electric car will require lots more mineral mining, shipping, processing and assembly. Yet, in 20-30 years, we will be entering a post-peak world where we will have shortages in food, water, energy, minerals, climate, peace and prosperity. Electric cars, like solar and wind energy will only hasten the arrival of mineral shortages and exacerbate ecological destruction.” ~ Robert Callahan

            3. The above note is not a “highjack”. It is a side note to add to the possibilities as we go forward. Electric airplanes don’t use JP-4 fuel which means less demand for crude oil processed into that fuel. Will it happen? Who **really** knows??? But it adds to the question of what might extend the peak to the point of irrelevance?

              With regard to electric vehicles, there is the question of how transportation will evolve. How will people get around and trade for food, goods, and services? After seeing a lot of pontifications fall flat on their asses, the sentence: “I have it on highest authority that if you sail far enough, you will fall off the ends of the world.” keeps repeating itself. Again, will it happen? What effects will it have on crude oil demand???

              The graphs I posted here were created by Exxon Mobil. Did they take into consideration a rapid transformation from ICE to EV based vehicles?

              As always, when we run short of something, we look for substitutes. And yes, what Robert Callahan says can come true, but how do we work with it to mitigate these effects? Are we on the Titanic or on a plane where Scully is the pilot or just merely observers? Will a pandemic reset the population growth curve?

              What’s **your** game plan going forward?

            4. *How Green Energy and EVs Will Drive Humanity Over a Cliff*
              By 2050, there will be at least 2bn cars on the world’s roads. If all of those cars were EVs, annual production of neodymium and dysprosium would need to increase by 70% and stay at that level until 2050. On the same basis, annual copper output would need to increase 100%, and cobalt output would need to increase by at least 250% to meet global demand.

              The increase in renewable energy infrastructure needed to provide power for EVs would also consume more metals and minerals. Wind turbines require a lot of steel, while solar panel installations consume several scarce minerals, such as high purity silicon, indium, tellurium and gallium. Extracting the minerals themselves is also a power-hungry process, adding to demand.

              https://www.petroleum-economist.com/articles/midstream-downstream/power-generation/2019/ev-revolution-could-stall-due-to-mineral-shortages

              Demand for copper, for example, could rise by 275 to 350% by 2050, according to academics at Yale University. The World Bank estimated in 2017 that action to limit the rise in global temperatures to 2C from pre-industrial levels could mean a seven-fold increase in demand for cobalt and an 11-fold increase in demand for lithium by 2050.

              https://www.ft.com/content/4863fff2-8bea-11e9-a1c1-51bf8f989972

              The current EU target is to ramp up production of Electric Vehicles 200 times by 2030. But, here’s the thing – this would lead to an increased demand for production inputs of cobalt, lithium and nickel and copper to build the electrical vehicles. However at 100 times the demand world cobalt resources would be exhausted in 8 months, lithium in 5 years, nickel in 4 months and copper in 5 months.

              https://www.resilience.org/stories/2019-06-20/propaganda-for-renewables-a-critique-of-a-report-by-oil-change-international/

              Electric cars use twice as much copper as internal combustion engines. So-called smart-home systems – such as Alphabet Inc’s Nest thermostat and Amazon.com Inc’s Alexa personal assistant – will consume about 1.5 million tonnes of copper by 2030, up from 38,000 tonnes today.

              https://www.reuters.com/article/us-usa-lithium-electric-tesla-exclusive/exclusive-tesla-expects-global-shortage-of-electric-vehicle-battery-minerals-sources-idUSKCN1S81QS

              Negative effects from the mining of metals like aluminum, cobalt and rare earths could impact a range of creatures from flamingoes to gorillas, plants, and even deep sea creatures.

              https://news.mongabay.com/2019/06/shift-to-renewable-energy-could-have-biodiversity-cost-researchers-caution/

              The Future of Electronics May Depend on Deep Sea Mining for Minerals

              https://www.allaboutcircuits.com/news/deep-sea-mining-metal-resources-advanced-technology-devel/

              If, as the IEA predicts, there are 125 million electric vehicles (EVs) on the road by 2030, it will require roughly 10 million tonnes of copper – a 50% increase over current annual global copper consumption (20 million tonnes).

              The additional wind turbines built by 2030 would require roughly two million tonnes of copper – about 10% of the world’s current production.

              That’s not even taking into account how much copper would be needed for a quadrupling of solar power, and all the enhancements to the electrical grid and charging infrastructure for electric vehicles that will be required.

              Given how much aluminum, metallurgical coal, copper, aluminum, zinc and rare earths are required for each wind turbine and each EV – and how much lithium and cobalt are needed for EV batteries – it begs the question: Will the transition to a low-carbon economy lead to “peak metals” (the point of maximum metal production)?

              The targets that governments are setting for themselves for electric vehicle and renewable energy adoption will require a massive increase in mining, and there’s some question as to whether the new mines required can even be built in time to meet the demand according to the timelines being set.

              https://www.mining.com/global-energy-transition-powers-surge-demand-metals/

              Rare earth metals are used in solar panels and wind turbines—as well as electric cars and consumer electronics. We don’t recycle them, and there’s not enough to meet growing demand.

              https://www.vice.com/en_us/article/a3mavb/we-dont-mine-enough-rare-earth-metals-to-replace-fossil-fuels-with-renewable-energy

              According to some estimates, humanity currently uses resources 50% faster than they can be regenerated, but several major resource shocks have gone underreported – and may change the way we live irrevocably. The top 3 supply shocks coming 1. Helium 2. Sand 3. Phosphorus.

              https://www.rt.com/news/463547-top-impending-supply-shocks/

              **Final List of 35 Minerals Deemed Critical to U.S. National Security**

              Take any of the minerals in the next list and Google it, followed by the word, ‘shortages’.

              https://www.usgs.gov/news/interior-releases-2018-s-final-list-35-minerals-deemed-critical-us-national-security-and

              This next graph shows how many times more we need of each critical mineral for all our green energy dreams to come true.

              https://hips.hearstapps.com/hmg-prod.s3.amazonaws.com/images/dd782292-5885-404a-ad3e-b27209279959.jpg?crop=1xw:1xh;center,top&resize=768:*

            5. What a gishgallop of nonsense.
              neodymium and dysprosium – not required for motors, Tesla and others use induction motors.
              high purity silicon, indium, tellurium and gallium – Solar panels do not require the last two, Silicon is plentiful, Indium has substitutes and is not a requirement for Solar.
              I am not accepting predictions of doom for renewables from anywhere called ‘petroleum
              cobalt – not required for batteries and, for that matter, neither is Lithium. Copper, guess what – ICE cars use it too.
              IEA predicts – IEA predictions are not known for being anywhere near accurate.
              Windmills and solar do not need rare earths, they mostly do not use any. As for steel and copper, fossil fuel power stations, nuclear etc also use these.
              Ugh, I am not going to spend the time tracking down each fallacy, it is just a load of bollocks.

              NAOM

            6. Yes, Hirsch does briefly consider both hybrids and EVs.

              But…he completely excludes EVs from his analysis. He says so explicitly:

              “Such a shift in public preferences is unpredictable, so electric vehicles cannot now be projected as a significant offset to future gasoline use….There are no known near-commercial means for electrifying heavy trucks or aircraft, so related conversions are not now foreseeable.”

              He also dismisses hydrogen for transportation – while I think H2 can’t compete with passenger EVs, they’re very viable for and likely to be used in heavy vehicles, and very likely would be viable if they were actually needed for light vehicles (which again, I think is unlikely).

              The bottom line for Hirsch is that only liquid fuels will do: “Production of large amounts of substitute liquid fuels will be required.”

              This is entirely unrealistic.

            7. The Hirsch Report was dated February 2005, almost six years before deliveries started for the battery electric Nissan Leaf and the hybrid Chevrolet Volt in December 2010. This was also seventeen months before the first prototype Tesla Roadster was revealed to the public on July 19, 2006, in Santa Monica, California. It was only twenty months after the company Tesla Motors had been incorporated to pursue the idea of electric cars.

              What would be entirely unrealistic is to expect that Robert Hirsch and his team could have anticipated that Tesla Motors would amount to anything or that EVs would have advanced as much as the have since the preparation of the report, which would have been almost complete in late 2004. Think about it! The report mentions hydraulic fracturing in passing ONCE! If they hadn’t figured out that fracking would heave resulted in an abundance of NG and a 5% addition to liquid fuel supplies, how could they have had any idea that 300 mile EVs would be available in 2019.

              Who knows? In another five years we could be discussing how the rise of electric light aviation caught everyone by surprise!

            8. Well, it’s good of you to forgive the Hirsch report for being flawed. But…the flaws are still fundamental.

              Electrification is the primary solution/substitute for oil, and the Hirsch report misses that completely. It concentrates on direct replacements for liquid fuel, like Coal to Liquid, something that just isn’t a good idea and thankfully is unlikely to take off.

              As a secondary matter, I think that was clear back in 2005. Heck, it was clear many years before that: Porsche invented the plugin hybrid back in 1904, and it would have reduced liquid fuel consumption by 90%, enough to allow ethanol to cover the remaining 10%. Evs have been around for more than a century (before ICEs), and they’ve always been viable, even if they didn’t seem competitive.

              A technical planning report isn’t supposed to report on current fashions, as the Hirsch report does (as we see in his reference to “public preferences” for ICEs). It’s supposed to think a little outside the box, not mirror the culture of the current transportation industry. That was entirely possible – other people were doing it at that time (I certainly was, and I didn’t invent these ideas). But, again, that’s a secondary matter. The primary problem is that the Hirsch report is unrealistic.

            9. I think I would cut Hirsch some slack with regard to not seeing the possibilities. Every automaker is onboard with electrifying their fleets over the next two decades. My poster child for all this in not the Tesla but Ford announcing the electrification of the F-150.

              To me, Hirsch’s report is a wake up to do something about impending shortages in crude oil supply. It’s implications go further than that with respect to the predictions from the Club of Rome.

              How do we address them? “The sooner we start the better.” And Hirsch goes on to say with a 20 year head start, we might be able to weather this storm with some difficulty. If Exxon Mobil is correct about peaking around 2040, and with our forays into renewables, EVs, battery development, etc. we are well into trying to address the issues he raises.

            10. My take away from The Hirsch Report is:
              1) Peak Oil is a liquid fuels problem. Currently that challenge is largely being met by LTO as opposed to some of the options envisaged by the report such as coal to liquids, Gas to liquids and biofuels. Fortunately for the world economy, LTO has scaled to meet the challenge remarkably well.
              2)The challenge posed by Peak Oil as a liquid fuels problem is that there are about a billion road transport vehicles worldwide, as well as agricultural, mining and industrial equipment that, rely on liquid fuels to function. This equipment represent trillions of dollars of capital investment that is expected to continue to function for between 10 to 30 years from their purchase date. As such, transitioning to a infrastructure that does not depend on liquid fuels will be an expensive proposition, that will take at least a couple of decades and will be difficult if there is not robust economic growth to support that transition. In the report and in public comments, Hirsch was very clear on that!

              IMO the report is spot on with respect to the above two points and while LTO has given us a respite, the opportunity to press ahead with the transition away from liquid fuels is not being embraced with the urgency it should. Who knows how long LTO can measure up to the task of mitigating global Peak Oil?

            11. PeterEV,

              I agree – the Hirsch report argues for starting ASAP, and that’s a good thing. I just hate to see people rely on it as an authoritative report: the report dismisses viable alternatives, and gives an excessively long timeframe for a transition.

            12. Islandboy,

              I think that framing PO as a liquid fuels problem can lead us in the wrong direction.

              As you note, oil is primarily used for transportation, so I’d say PO is a transportation problem. An emphasis on liquids points to LTO “drill, baby drill”, CTL, etc, while the solution is moving to electrification (and probably H2 for some heavy fleets).

              I agree, a transition away from oil does bring up problems with stranded assets. OTOH, Hirsch exaggerates this problem: assets turnover significantly faster than the superficial data given in the report, and replacement through attrition doesn’t cost anything over and above BAU.

              To the extent that stranded assets slow us down, this is an accounting problem: we have discovered that oil is far more expensive than we thought, and it’s mostly obsolete. This is now in the past: these are sunk costs, and they can’t be avoided. They must be “recognized” in an accounting sense, and the losses must be written off. This may make some losses for some comapanies and investors, and so they’re fighting this process.

              OTOH, if we recognize that the losses have already happened, we’ll set the stage for large investments in new productive energy assets, which will stimulate the economy.

              The real loser are FF companies and investors, not the larger economy.

          4. Whenever you are challanged…

            “Nick…

            Whenever you are challanged to show some numbers on how we can get to your utopian world, you link references to peoples beliefs in the main, with some made up numbers thrown in (theirs), that happen to coincide with your belief.

            You NEVER come up with the indepth numbers of how much energy will it really cost to get to the utopian future, simply because it shows that it is way beyond the budget of possible to get 7 billion of us there…

            Clearly in an energy constrained future when we are on the backslope of oil production, the commodities needed to build all these wind turbines and towers are going to push the cost UP greatly. Of course all the best sites get used first. These have a combination of great consistent wind resource, good roads for access and high voltage transmission lines. Having to add distance to existing roads and grid infrastructure is not included in the capital cost. Of course this number will grow as poorer and poorer sites have to be utilised. Again higher real costs than the off the cuff number given.

            Thank you Nick for proving my point precisely, you really don’t understand the numbers nor the problems.”

        4. Interesting. Seems that Gail has read the book “The next economy” from Paul Hawken.

          1. “Gail… is detached from reality…” ~ Nick G

            Gail has a substantial readership, which she interacts regularly with, at her blog. I also seem to recall reading her mentioning thereon that she has learned from her readership.

            In any case, this is in relatively-stark contrast to both ‘islandboy’ and ‘Nick G’, whoever they really are, look like, or claim to be, speaking of detachments to reality. (In fact, Nick is on record hereon for writing to the effect that he can’t tell us his real or full name or why.)

            Nick has a blog whose apparently last comment, dated 2015, deals with something to the effect of if we need crude oil to make plastic, as if we need yet more of the stuff, and more of the assorted crony-capitalist plutarchy industrial detritus that’s threatening the planet.

            Now, I don’t know about you, but if I had to place my confidence on a choice of only one of the three, it would easily be Gail.

            1. When prices go up, people use less. Didn’t fuel consumption drop and people moved to more efficient vehicles during the 70s oil crises? Happens every time.

              NAOM

            2. Paul,
              pls document your assertion by some facts and hard data.

        5. Matt,

          There is an economic model that posits that scarce resources can be allocated efficiently in a free market. There are fundamental problems with this model such as how equilibrium market prices are reached. See

          https://en.wikipedia.org/wiki/Léon_Walras#General_equilibrium_theory

          and

          https://www.amazon.com/Walrasian-Microeconomics-Introduction-Economic-Behavior/dp/020110461X/ref=sr_1_10?hvadid=78271538203209&hvbmt=be&hvdev=c&hvqmt=e&keywords=walrasian+economics&qid=1567605188&s=gateway&sr=8-10

          There is indeed wage disparity, though this is not a new problem.

          Chart below has GDP per capita in constant 2010 US$, this is essentially the World average real income per capita which has risen fairly steadily from 1965 to 2018, plotted on left axis.

          On right axis we have GDP per kilogram of oil equivalent (kgoe)of energy consumption for the World and energy consumption per capita in tonnes of oil equivalent per year (toe/a) for the World.

          Since 1965 energy use per capita has increased from 1.1 to 1.8 toe/a, while GDP per capita has increased from $4500 to $10,900 constant 2010 US$.

          Data for chart on energy from BP Statistical Review of World Energy
          https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html

          GDP per cap data
          https://fred.stlouisfed.org/series/NYGDPPCAPKDWLD
          population data
          https://fred.stlouisfed.org/series/SPPOPTOTLWLD

          1. As to $40/b oil needed for wage growth in US, if we use real GDP per capita as a proxy for real World income growth in constant 2010 US$ we see in the chart below there is very little correlation between income growth and oil prices. The correlation between Oil price and real GDP per capita is very low with R squared of 0.27 and if we were to argue for correlation (there is none) the data would reveal higher oil prices are correlated with higher real income, though it seems likely the causation runs from high income to high oil price.

          2. There is a strong correlation between energy consumption and real GDP as shown in chart below. R squared is 0.99 from 1965 to 2018.

  5. Ron – Great post on shale production. I really appreciate all the work you do to provide the rest of us with information that I consider very valuable to me. I hesitate to ask, but if you can manage a bit of extra time I would very much like to see national consumption information tied to the production figure graphs (historical to present). Especially for major producers like USA, China, Saudi Arabia, Russia, etc… I think being able to see these graphs and figures would make it a lot easier to visualize and project production vs available exports. I am wondering if available exports might cause a blowup before peak oil is here for sure?

    1. I would like to do that but my time is very limited these days. Though I am retired I have another project going that takes up most of my time. Also I don’t have any consumption data and don’t follow that subject very close.

  6. Let’s face it, gentlemen: peak oil is dead.

    I don’t mean there won’t be peak oil! Don’t confuse geologic, energy reality with what I’m talking about: peak oil as a well defined, understood, and sociological concept.

    What I mean is this: at no point will human beings alive, whether now, 10, 50, 100 years from now, ever admit there was something called peak oil, that it actually happened and could be studied. It will simply be forgotten and erased from memory. Statisticians will lie, energy companies will lie, politicians will lie. Nobody will ever tell the truth, because that’s not what we are as a species. As a species, we are optimistic primate hunters. We had to be this way – the pessimists simply die out. Optimists survive and reproduce. Optimists do have a blind spot: they can never admit there is anything wrong with nature or human society or anything – everything is perfect and utopian forever. And there’s a certain self fulfilling logic here: if you survive and reproduce, isn’t everything just fine for you?

    See what I mean. Let’s say global peak oil production actually does peak in 5 years, and then drops forever. Let’s say human population peaks in 10 years, then drops forever. What I’m saying is this: nobody will acknowledge this as such. Whoever is alive in 50 years, will simply use whatever is available to them, even if it’s very little, and they will believe everything is good and utopian and things are looking good! The future is bright! Because that’s what the politicians and corporations will tell them, and that’s what they themselves will believe. And it will be this way for the remainder of our species, whether this is centuries or millenia to come.

    Remember, the pessimists die out. Including peak oil pessimists. We are Romans, gentlemen, and the barbarians are going to outlive us, and set up their own system. We’ll just fade into history, that’s all.

    1. Statisticians will lie, energy companies will lie, politicians will lie. Nobody will ever tell the truth, because that’s not what we are as a species.

      No, that is not correct at all. Yes, these people very often lie, especially politicians. Statisticians seldom lie. But nobody lies all the time. Well, perhaps Trump does, but he is an anomaly.

      the pessimists simply die out.

      Throughout history there have always been optimists and pessimists. Why should pessimist suddenly start all dying out while optimists survive?

      Let’s say human population peaks in 10 years, then drops forever. What I’m saying is this: nobody will acknowledge this as such.

      No one?? Oh yeah, I forgot, the pessimists are all dead. Yeah right! You tell a great story Dolph. But your human psychology is simply all wrong.

      1. Nah, he’s close to correct.

        There will be lines at gas stations. There will be scarcity. It will all be attributed to transitory factors and assurances that it will be fixed soon.

        Then there will be wars and the deaths will accumulate and largely the deaths will be blamed on the wars and not on scarcity. There will be pretty good reason for this. It won’t be politicians trying to persuade the rightness of their policies. It won’t be oil company CEOs trying to keep their jobs.

        It will eventually simply be to retain hope. Transitory effects is a much easier story to sell than — scarcity is forever, the oil is gone and there is no reset, there is only societal decline to extinction. People will much prefer transitory issues to that.

        Lies are really easy when there’s a desperate desire to believe them.

        1. Bullshit, he is not anywhere close to being correct. What is going to kill off all the pessimist? The pessimist plague, a virus that affects only pessimists?

          Perhaps you and Dolph think there is some Darwinian survival advantage to being an optimist and some great survival disadvantage to being a pessimist. I would suspect the opposite is closer to the truth. The pessimist always thinks the noise in the bush is a lion where the optimist always assumes it is just the wind.

          So the pessimist had a distinct advantage during hunter-gatherer times. But what about today? The pessimist would always prepare for a bad winter or a long draught. The optimist would prepare for neither.

          In truth Watcher, I thought Dolph’s post was one of the dumbest things I had read in a long while. All pessimists suddenly dying out? Good gravy! But you thought it was pretty close to being true. Well, okay.

          Then there will be wars and the deaths will accumulate and largely the deaths will be blamed on the wars and not on scarcity.

          That is one of the most pessimistic things I have ever read. You had better watch out, you might catch that pessimist plague. 😉

          1. Well I didn’t really think of it as pessimism so much as skepticism or cynicism. When things fall apart, some hopeful platitudes will be accepted and doomster warnings ignored.

            Hell, the climate doomsters would do nothing but nod at what I just said.

            I like the darwinian metaphor. It does sort of fall away from mathematics, though.

            If you have $1 and invest it and lose 50% of it, and then get a 50% gain, you aren’t back to breakeven. You’re down still. A lot. So it’s best to concentrate on pessimism and fear loss and avoid it . . . much more than being optimistic and enthusiastically seeking gain. Losses are more powerful.

            1. Watcher, give me a break. Dolph wroth one of the dumbest posts ever posted on this blog. You found a way to agree with him simply because I disagreed with him.

              Your two posts, replying to me, had little to no relation to Dolph’s post. You just claimed “Nah, he’s close to correct” without addressing anything in his post.

            2. No, Ron, you just focused on the non important part. The important part from his post was:

              “What I mean is this: at no point will human beings alive, whether now, 10, 50, 100 years from now, ever admit there was something called peak oil, that it actually happened and could be studied. It will simply be forgotten and erased from memory. Statisticians will lie, energy companies will lie, politicians will lie. Nobody will ever tell the truth, because that’s not what we are as a species. ”

              He’s right. It will happen, no one will admit it. The people will prefer hope fed to them by someone hopeful.

              That was the start of the para. The topic sentence, as it were. Then there was some unimportant stuff and then there is his final sentence:

              “And there’s a certain self fulfilling logic here: if you survive and reproduce, isn’t everything just fine for you?”

              This is what we hear from folks who wave a hand at oil scarcity — specifically, “we got along just fine without oil before, we will again.” Those folks without oil survived and reproduced so people call that “we”. They think that’s “we”. The 6 of the 7 billion who die soon from scarcity . . . well, they won’t survive and reproduce. So we won’t hear from them. We’ll hear from the billion in Africa and Asia who manage to survive.

              Until disease hits each of their enclaves one by one and there are no drugs factories left and no way to ship anything they might manufacture.

            3. “What I mean is this: at no point will human beings alive, whether now, 10, 50, 100 years from now, ever admit there was something called peak oil, that it actually happened and could be studied. It will simply be forgotten and erased from memory. Statisticians will lie, energy companies will lie, politicians will lie. Nobody will ever tell the truth, because that’s not what we are as a species. ”

              Okay, if you cannot see the contradiction in that statement you have a very serious problem. If nobody remembers, then there is no reason for anyone to lie. If politicians, oil companies, and statisticians can’t remember then there is no reason for them to lie. If they are lying then they remember. Nothing could be more obvious than that.

              However, it is only conspiracy theorists that assume everyone is lying. What reason would every politician, every oil company, and every statistician have to lie? Why would everyone who remembers lie?

              The whole damn scenario proposed by Dolph is just really silly, silly beyond belief. And the very fact that he says all pessimist will die just proves that he hasn’t a fucking clue as to what he is talking about.

          2. Ron, your one mistake is this: you believe people are like you. That is your one mistake. It’s an easy one to make, we make it all the time, we all live in bubbles.

            What brings me here? I’ve been following this for 10 years and in that time all there has been is the peak oil non event. Time to be honest…this is a process, not an event. It’s such a long process, hardly anybody will notice it happening.

            1. You can ignore reality, but you cannot ignore the consequences of ignoring reality.

        2. “Lies are really easy when there’s a desperate desire to believe them.”
          Yeh, we see that each election day- This past prez one was a great example.

        3. You can make fuel from coal. And corn. Canadian oil sands have a lot more capacity. I don’t think we will be living Mad Max style on the highways of New Jersey and Wyoming. Apocalypse No.

      2. Bullshit dolph.
        It will be startling clear that oil has peaked (about 3-5 years after the fact).
        Startling.
        Enough said.

        1. Everybody has been saying this for 10 years now.
          Still waiting….still waiting…still waiting. Godot? Bueller?

            1. Michael, one thing these prognosticators like Dolph do not understand, the world does not behave en mass! People, all people, do not decide this or that. Some see it while others see it another way. So some Indian farmers commit suicide because their wells have all run dry. But some do not.

              You simply cannot say “people will do this or that because”. Some will and some will not. But ALL will definitely will not behave as the most desperate behave.

              To lump everyone into one category and say they will all behave in this or that manner is jus sheer stupidity. We are all different and we all respond differently to different situations.

              No, fuck no, all pessimist will not all behave in a similar manner.

              Damn man, it’s not all that hard to understand. To propose that ALL pessimist will behave in a similar manner is just stupidity beyond belief.

            2. It’s not just the wells running dry. It’s debt trying to keep the family alive while the crops fail.

          1. dolph- This little phenomena called fracking came along. Its a help temporary help.
            Sure, maybe another big surprise comes out of the bag of tricks (and innovation).
            Maybe Iran and Venezuela come back online at the right time.
            If not, we aren’t far off from peak.
            But to say ‘peak oil is dead’ is like saying ‘the aging process has been revoked”.

            1. If someone told me that peak oil will occur between 2008 and 2028 I’d say that’s pretty fucking good, especially given the opaque nature of the data and the complex variables.
              Dolph posits peak oil will never happen, but if it does nobody will notice, cuz Ron has an opinion on a narrower and more specific timeframe.
              Whether or not Ron is correct is irrelevant to the fact that dolph has an embarrassingly stupid argument.

      3. Actually, in one respect you’re absolutely right: in 100 years Peak Oil will be completely forgotten.

        Just as Peak Lead, Peak Mercury and Peak Horse are no longer top of mind.

  7. Some intriguing consumption stuff.

    Pop on over to the BP spreadsheet and find the regional consumption tab. For some regions there are countries broken out and for others, not. But on this tab you can get granularity on what kind of oil, what constituent part of crude, was consumed.

    Japan. The population decline is actually pretty recent — only since 2010. Their decline in consumption is popularly attributed to population reduction, and I have gotten this wrong, too, but consumption decline has been since 1995 with population gain for 15 of those years. In more detail, their consumption decline is not gasoline. They have increased gasoline burn since 1995. (The Prius is the 2nd most popular car in Japan and it first went on sale in 1997, so Prius didn’t kill gasoline burn, which has increased).

    It’s middle distillates and Fuel Oil that are way down. Stuff that fuels big commercial engines. That’s what has fallen. Fuel Oil is more than maritime bunker fuel. It powers big stuff. There was a sharp uptick of Fuel Oil consumption . . of 44% in 2012 because it was Fuel Oil that was called on to generate electricity when all the reactors were shut down during the quake panic. But the reactors returned and Fuel Oil resumed its decline.

    One last thing that could blow all those paras out of the water. Japan had until recently more refinery capacity than internal consumption. It’s a lot like Singapore. The crude comes in and product exports and this seems to somehow corrupt all measurements. The govt recently shut down many of the refineries. It wasn’t voluntary. Gov’t ordered. Now Japan has to import fuels, not just crude. Quite a lot. Which likely confuses the consumption measurements further.

  8. Ron.

    I see in EIA short term energy outlook that they are predicting US to average 12.3 in 2019 and 13.3 2020.

    Also predicting July, 2019 will be 11.7.

    So, first 7 months of 2019 would be average of a little over 11.9.

    Which means as of 8/1/19 EIA expects last 5 months US will average around 12.8?

    Wonder what info they have that we don’t?

    1. Ok I read this blog quite regularly but now I’m confused. US oil production has actually fallen since the start of the year?

      Dennis, can you respond to that? I thought I was just reading in the last post that the current completion rate in the Permian was enough to raise production for five more years or so. July is probably skewed because of the hurricane, but what gives?

      1. It’s definitely slowing. See my first post on June monthly production. When you add all the states with shale production, there is no growth from May to June. Yes, July should be down significantly due to the hurricane, but I expect no growth from shale.

        Dennis sees an increase, Ron sees it plunging. I see it flat for a few months, and slowly trending down. Pick your poison.

        1. GuyM,

          Yes the increase is pretty small for tight oil over the next 5 years only an average annual rate of increase of 344 kb/d for US tight oil from 2019 to 2024 for the flat completion rate scenario. This is a far cry from the 1620 kb/d increase in US tight oil output from Dec 2017 to Dec 2018, a factor of 4.7 times slower on average than the rapid rate of increase in 2018.

      2. Stephen Hren,

        No US C+C output in June 2019 was 12,082 kb/d and in Dec 2018 US C+C output was 12,038 kb/d, so output has risen, but not by much. Yes a flat completion rate could lead to a rise in tight oil output until 2025, though conventional output could fall to offset this. Conventional output has been falling of late as fewer new conventional wells have been completed for the past 6 months.

          1. US conventional output, where conventional is defined as C+C output that is not tight oil.

            1. Dennis, where did you find the conventional chart? Does it go back into 2015, when the conventional drilling in the Permian slowed way down?

            2. GuyM,

              The “conventional” C+C takes the EIA monthly data and substracts the tight oil data. Probably should have done L48 onshore minus tight oil.

            3. Better estimate for US L48 onshore conventional C+C output in kb/d.

            4. Yes, that coincides with the drop in conventional completions in the Permian from the price drop. Thanks!

              Probably affected stripper production, but shallow could probably contribute more accurately on that.

              Why do I get the impression we are putting the pieces together? I should know better. But, it looks like a movement of WTI towards $75 to $80, could see a significant improvement in production.

              Shallow Sands, please comment?

            5. Guy.

              If $75-80 WTI would hold for awhile (6 months +) drilling would resume in conventional fields lower 48 at higher levels in my opinion.

              Might be able to stem the decline, but I doubt there would be significant growth until WTI got back to 2012-14 (early) levels.

              Hard to believe we were paid $99.25 per barrel in June, 2014!

            6. Thank you shallow sand and GuyM.

              I think with the help of knowledgeable people like GuyM and Ron Patterson and experts like shallow sand, Mike S, Southlageo, and others we may be getting close to a decent estimate of the future considering the challenge of an infinite number of variables known and unknown.

              Maybe our probability of success has increased to 1/infinity divided by 2. 🙂

            7. Yeah, Dennis. The closest I can guess is by variable, which is legion. But, I can guess that, if a frog had wings, it wouldn’t bump its ass each time it jumped.

        1. Using Dean Fantazzini’s latest data we can estimate Texas output using the last 18 months of vintage data, this is compared with an estimate using only the most recent month of data and the EIA estimate for Texas C+C output. In my view using only a single month gives a poor estimate which is highly variable.

          1. Chart below shows a 3 month average, last month data vintage or month T1, as well as month T2 and month T3 vintage data. Note how different the T1, T2, and T3 estimates are, using many months of data (at least 6 months), gives a far more stable estimate.

            I tend to agree with GuyM, that the EIA monthly estimates are pretty good, probably better than anything else.

            1. Dennis you’re amazing! Thanks for all these, that helps clarify what’s happening here in US.

    2. shallow sand,

      for Jan to June 2019 the average is 11957 kb/d. If the trend in output from Jan to June continues through Dec 2019 the average 2019 output will be 12155 kb/d. So EIA STEO is about 150 kb/d too high, if the trend of the last 6 months continues.

  9. The current financial strain on shale producers is likely to intensify as many companies that took on debt after the 2016 oil slump face large debt maturities in the next four years. As of July, about $9 billion was set to mature throughout the remainder of 2019, but about $137 billion will be due between 2020 and 2022, according to S&P.
    Seems that there will be more bancurupt filings in the years to come.

      1. Thanks for the links. The Sanchez SEC Bankruptcy report on p 42 is very interesting
        https://sanchezenergycorporation.gcs-web.com/static-files/bbb3f9eb-95eb-4658-9e0d-f24e0ce1fd93

        It shows 2 paths:

        (1) Maximise Cash flow=> production is on a seasonal roller coaster, with a very modest growth, slightly exceeding the January 2019 level only in 2023. EBITDA less Capital is positive
        (2) Maximise Production Growth => increase production by a third but EBITDA less Capital is in the negative

        On p 43 there is also a sensitivity analysis for path 1 for oil prices between $50 and $80

  10. I think this is behind the optimism of the EIA and others – dont write dow the Permian on past Data:

    “EPIC Midstream Holdings LLC and Plains All American Pipeline LP both opened new lines from the Permian to Corpus Christi, Texas, in mid-August. The lines will eventually have a combined capacity of more than 1 million barrels per day (bpd), the companies have said.

    “The market is bid on filling these lines,” said Robert Yawger, an analyst at Mizuho in New York. “Things have changed drastically in just two or three weeks. And you’re going to have another big pipeline that’s going to continue to change the math.”

    https://pgjonline.com/news/2019/08-aug/new-pipelines-hurricane-drive-wti-inventories-down-prices-up

    So a double whammy:
    The pipeline cost overall dropped up to 3,x $ a barrel and also there is the needed capacity to raise production at all.
    All this improve economics for the Permian but only since mid August, so we cannot predict the results yet.
    Rigs are optimized for factory pad drilling on same location, so fewer rigs needed to drill more sites, older rigs get stacked, saves capex.

    Even the allmost perma Oil bull HFI Research, comes to the conclusions:

    “We have US oil production exiting 2019 at 12.95 mb/d.”

    https://seekingalpha.com/article/4289020-u-s-oil-production-stays-flat-first-half-2019

    So I think were not done yet…

      1. You can ignore reality, but you cannot ignore the consequences of ignoring reality.

      2. GuyM,

        Use RRC data to add up all completions and permits from 2015 to 2019 (use annual reports for 2015-2018 and year to date data for July 2019, its a pretty quick exercise).

        What is the total number of oil completions? What is the total number of oil and oil and gas permit?. Also look at cumulative totals over time and see that at some points completions are more than permits (indicating that permits are carried over from before Jan 2015). I get about 10,000 extra permits outstanding at the end of July 2019. even if new permits being issued is low at present, there are a lot of permits that have been issued to keep completions at least flat for quite a while.

        1. If you have the time, pull up completions for some of those months. Some of those are not counted as completions, because they are not. Drill down, and it shows it is not completed for some. Simply to adhere to RRC requirements. Yeah, there are probably over 8000 dead DUCs, that may start quacking if oil gets to $90 or so. When they drill, they always take core samples, which give some indication what they have. They are usually not going to spend an extra 70% in capex, if it will lose money.

          I don’t know a lot about drilling, but my Dad was a mud engineer. My early years, circa 1955 were in the Permian. Pretty tough without A/C. Lol, I used to play with core samples.

          1. My Dad was a tool pusher, truck driver and finally mud engineer also. I still remember those beautiful (lol) red and yellow company cars he had with Baroid. The oilfield is a small world.

          2. GuyM,

            I was not looking at EIA DUC data, I used Texas completions and permists from

            https://www.rrc.state.tx.us/oil-gas/research-and-statistics/well-information/monthly-drilling-completion-and-plugging-summaries/

            I used annual data from 2013 to 2018 for total Texas completions and permits as reported by the RRC and the July 2019 year to date numbers for 2019. Based on the numbers I estimate that there were at least 8777 permits carried over into 2013 that had been issued by Dec 2012, but the permitted wells had not yet been completed (or reported as being completed). At the end July 2019 at least 10,529 more permits had been issued than the number of wells that had been reported as completed.

            From Jan 2013 to July 2019 85,899 oil wells had their completion paperwork filed and 87,651 permits had been issued over that period.
            The cumulative total from Jan 2013 to Dec 2016 was 67,639 oil completions, but only 58,862 oil well permits had been issued over that period. I assume we need a permit to go with each completion, so I estimate at the end of 2012 there were 67639-58862=8777 oil permits that had not yet had their completion report filed with the RRC.

            For this reason I add the 8777 to 87651 to get 96428 total permits with 85,899 completions leaving 96428-87651=10,529 permits. As there were only 8588 oil wells completed in 2018, there may not be a need for so many excess oil permits.

            1. There are so many variables in permits, completions, rig counts, etc. My attention, now, is completely on the EIA monthlies, which as you point out, may be a tad high, due to smaller companies now in the shitter. Permits can be counted twice due to amendments, etc. ad naseum.

            2. GuyM,

              So permit numbers don’t tell us much. I agree with that. I also agree the EIA monthly data is useful.

  11. I find the reactions to Gail T here very interesting. She thinks we are the “crazy peak oilers”; and folks here think she is the “crazy peak oiler”. My view is simple. Whether it is Ron, or Dennis, or Gail, or someone else, the idea is to try to understand forces at play that will effect the future. Why? Just for the fun of it. I think her view is basically forces outside the oil fields will have as much effect on future oil production as forces (oil price and geology for example) inside. I agree with this. It is difficult to see exactly what makes the cake rise, but this is what will be needed if you wish to know the ending in advance. One question raised today was how and when folks will know if peak oil happened. Eventually, and probably, but first we will feel a slow, grinding slow down of the world economy. Will anyone be able to attribute that to root causes? Unclear. Have a nice day.

    1. Donn, the great thing is that everyone can contribute to the peak oil discussion. I never thought that the Permian would produce as much as it does now, but the Permian will peak perhaps due to lack of funding. I like making forecasts but forecasts should have clear assumptions. In this way, the assumptions can be questioned instead of attacking the author.

      1. “Gail… is detached from reality…” ~ Nick G

        “…the assumptions can be questioned instead of attacking the author.” ~ Tony Eriksen

        Yes… Nick plays a good game of ‘Interpersonal Relations 101’ when trying to win support for his ‘narrative’, which Gail ostensibly doesn’t conform to.

    2. The only thing we know for sure is we don’t “get to know the ending in advance”

    3. All this is confusing to some extent like 6 blind men trying to describe an elephant by each only touching one part of it.

      I bought into the Peak Oil peak of 2005. There was a peak in oil production and a graph by Exxon Mobil from 2016 (and earlier versions) show this peak quite well as the dark green area. Any one who is interested can see this graph online by searching on: Exxon view to 2040 and look for the 2016 report or click on this reference:
      https://cdn.exxonmobil.com/~/media/global/files/outlook-for-energy/2016/2016-outlook-for-energy.pdf

      Ken Deffeyes jokingly said: “It will occur Thanksgiving Day, 2005.”.

      Fast forward to 2018 (as I have not looked at the 2019 report). The same graph is there, updated, and with different footnotes and the one that is pertinent is:
      “Continued investment is needed to mitigate decline and meet growing demand.”
      The light and dark green areas have been merged into one dark green area. I think I also detect a peaking of supply maybe… just maybe just before 2040. I didn’t see that in the 2016 graph.

      On the next page, there is a graph that is titled: “Technology expands recoverable resource.” with the subtitle: “World – crude and condensate technically recoverable resources – trillion barrels.”
      There is a footnote that says: “Remaining oil resources can provide about 150 years of supply at current demand.”

      Dividing 1 trillion barrels by 150 years and then 365 days results in 18.26 million barrels of oil per day. So demand is just USA demand and not demand of the world for right now. This leads to a lot of questions.

      Where is this trillion barrel supply? I think Exxon maybe referring to the Green River Oil Shale and other such deposits. Wikipedia at https://en.wikipedia.org/wiki/Oil_shale supplies this statement: “A 2016 estimate of global deposits set the total world resources of oil shale equivalent of 6.05 trillion barrels (962 billion cubic metres) of oil in place.[2]” and that fits with the Exxon bar graph showing a total resource of 6 trillion barrels. It fits.

      The USGS I think calculated that there is over 3 trillion barrels of Oil Shale resource in western Colorado and Utah but that only about 1 trillion barrels was exploitable. This leads to the question what would it take to exploit this resource especially given that it has not been profitable to do so so far?

      According to a Shell manager, it takes about 2.5 to 3 barrels of water to process Oil Shale into a barrel of product that can be transported in a pipeline. His thinking was that there is not enough water in the Colorado River basin for this to happen. The water will need to come from east of the Continental Divide such as the Missouri River.

      If we want to become “Energy Independent”, what would it take? If we use 18 MBOE a day and we supply 13 MBOE a day from USA wells, we would need to mine 5 MBOE a day. This might need up to 15 M Barrels of Water (MBOW) a day. The Alaskan Pipeline, in its heyday, supplied just over 1.5 MBOE a day. So we would need roughly 15 Alaskan sized pipelines. Technically, we could do it but could we do it financially????

      I’m also wondering if Exxon, in their 18 MBOE a day average, is taking into consideration the inroads of EVs to where the world oil demand will drop to 18 MBOE a day or less? Honda is teaming up with CalPoly, NASA’s Jet Propulsion Laboratory, and a scientist from Purdue to try to create a Flouride based rechargeable battery. https://cleantechnica.com/2018/12/08/honda-nasa-caltech-claim-fluoride-battery-breakthrough/ The possibilities are cleaner, friendlier, and higher density rechargeable batteries. The article mentions 10x the energy density of Lithium Ion Batteries. So if a Tesla can go 325 miles using it’s current pack, a pack of Flouride batteries could propel it 3,250 miles (Key West to near Seattle). If that goal is obtained, a lot of ICE vehicles from cars, to buses, trucks, airplanes, etc. might be running on electricity and therefore the world’s need of crude oil could be greatly diminished.

      If there is a peak in oil production, I hope that we are at a point where we can say “so what” but a lot has to be done to get us there. What will be replaced? What will be displaced? I can see a lot of changes coming and I’m no seer.

      1. PeterEV, not much to worry about with peak oil since we have the technology to replace the transport energy if we want. There is plenty of energy available, it’s more a matter of will and investment than anything else. In the meantime, the American ICE can be made more efficient, although it might be a little late in the game for that move to make much difference.

        https://seekingalpha.com/article/4225153-evs-oil-ice-impact-2023-beyond

      2. Not directly related to PeterEV’s comment but I put my question here anyway…
        Is the US going to open up new areas on the West or East Coast and is there oil to be found there?

        1. Tom-
          “Is the US going to open up new areas on the West Coast and is there oil to be found there?”

          Don’t count on it. Exploratory drilling in past decades has not discovered some huge field to exploit, and the vast majority of people living west would rather shift towards electrification of transportation rather than risk the environmental destruction of an offshore oil industry.

          If there was a previously discovered “Ghawar” offshore, I suspect the debate would be most lively. And the money would talk loudest of all, if the past was any indication. Ask West Virginia.

      3. Peter-
        “I can see a lot of changes coming, and I’m no seer.”

        Love that line. I may quote you as I walk about.

        Excellent points you make.
        “If there is a peak in oil production, I hope that we are at a point where we can say “so what” but a lot has to be done to get us there.”
        Yes indeed!! And that is why many people see the push toward renewables and electrification as just about the most wise, and patriotic, thing we could work towards.

      4. Here is the 2019 version of the graph above from:
        https://corporate.exxonmobil.com/-/media/Global/Files/outlook-for-energy/2019-Outlook-for-Energy.pdf

        What is interesting is the footnotes. The first one says: ” The supply of existing oil production naturally declines at an **estimated 7 percent per year** without further investment. Significant investment is needed to offset this natural decline and meet the projected demand growth.” The 7 percent figure caught my eye.

        Also see the footnote about the switch over to Biofuels but Biofuels are such a very small amount.

        Here is the graph:

        1. The footnote that catches my eye is- Biofuels grows more than 70%.
          That is a horror show for the global environment.
          Things like species extinction.

          1. Agreed, but it’s so miniscule on the graph. In 2040, it would never be able to power much.

            1. True PeterEV,
              biofuels would never be able to power much (in relative terms),
              but the negative footprint upon the natural landscape is huge!

            2. Not to worry, Hickory, we have about 6 Earths to play around with…

              On one Earth, it’s assorted industrial agro plantations, such as for biofuels and oils; on another, it’s fossil fuels; on another, it’s non-renewable renewable energy buildout, complete with batteries and site-storage; on another, it’s industrial farming and forest-burning for it; on another, it’s cars, highways, sprawl, industrial parks and big-box stores, prime farmland pave-overs, tract housing; and so on…

              On Mars, it’s projected Elon Musk (and whoever he wants) clones, just in case you were wondering.

    4. Donn-
      ” One question raised today was how and when folks will know if peak oil happened”

      Indeed. Big question.
      Seems to me that if price of oil climbs significantly (say above 75$ for a sustained time), and after about three years the global production fails to grow in response- then peak will have been reached with a very high degree of certainty.
      It will likely take this kind of price production incentive to know.

      1. I have begun to believe that we will never “see” that sign. High oil price spikes from here will only be short periods. Unlike many others, I don’t think the global economy can afford higher and higher oil prices. This is precisely why peak oil will be hard to see. It will be hidden in economic melt down. Think about this for a moment. Is $50 oil a high or a low price? Name me anyone else selling any other liquid over the last 50 years that wouldn’t like to see that price increase. Ask your local dairy farmer. And yet everyone says it is low?

        1. I suppose it depends on timing.
          If a deep prolonged slowdown in world economy, and thus consumption, comes before a oil price rise, then the scenario you paint sounds on track.
          On the other hand, if the world economy and population keeps growing without significant retraction through the mid 2020’s, then I think peak oil will be felt and acknowledged.

        2. $60 oil is a bit higher than historical levels, when corrected for inflation, but…not much. It’s been quite a while since oil was at $5. If you adjust it as a percentage of household income levels, oil prices are lower than in the 1960’s.

          The national weighted average advertised price for conventional milk half gallons is $2.03 – that’s $85 per barrel. Oil is pretty cheap…
          https://www.ams.usda.gov/mnreports/dybretail.pdf

  12. I didn’t see a way to upload multiple graphs other than to string them out as separate postings. I didn’t want to do that without Ron’s permission.

  13. I once believed in a catastrophic peak oil scenario.

    Now I believe that we have a very real shot at dealing with peak fossil fuels without going back to animal power, lol.

    Whether we pull it off, in my estimation, depends on two key factors.

    One, can we maintain fossil fuel production at levels that will enable the economy to function reasonably well, even as we gradually invent and or scale up renewable energy production and learn to use energy more efficiently, getting by with much less per capita, as much as seventy five or even ninety percent less, while living well?

    We have enough to last for centuries if we cut back ninety percent.

    And two, will the climate go nuts and the economy fall apart before we can manage the transition?

    Right now, the best thing that could happen that realistically might happen almost any year is a nice hot little energy war that doesn’t kill more than a few thousand people per day over a year’s time. ( Sorry, SO sorry, about being callous, but liquor and tobacco kill that many every day too. )

    Long gas lines and rationing would result in people lining up in MUCH longer lines to buy electric cars, and voting in politicians that support renewable energy and energy conservation policies such as high mpg mandates for conventional cars, subsidies for industries producing energy efficient products, tighter building codes, etc.

    Plus maybe even tax breaks for single people and married people who DON’T have kids, or at least not more than one!

    I’m thinking the population crisis is going to solve itself a LOT faster than most demographers dare predict, at least in well developed countries, assuming business as usual lasts. I take every opportunity to talk to young women about their plans for having kids, and it’s simply amazing how many of them even here in the backwoods Bible Belt say one is ALL, frequently none, or maybe they will adopt one. More than two? Maybe one out of a couple of dozen say they plan on having more than two kids.

    Even the dumbest and most ignorant of them, these days, understand that more kids mean fewer new shoes and dresses for themselves, maybe no car for themselves, fewer meals out, getting old faster, being less attractive to a man or men in general at a younger age, etc, etc, etc.

    And believe it or not, even the ones who believe the KJB is the literal Word of God know PRECISELY how it comes to be that their belly is swelling, and how to prevent THAT from happening.

    Structural changes in the economy mean they can support themselves, as easily or EASIER than they can support kids with a man helping them. They know THIS too, although the phrase “structural changes in the economy ” would put a blank look on the face of the ones who don’t get some college.

    Smaller countries entirely dependent on imported oil would pass laws outlawing the importation of more ice cars and light trucks, etc.

    We MIGHT pull thru the coming resource depletion crisis if we get a big enough wake up call so that we get our collective ass in gear.

    The climate crisis may be insoluble, at the global level, given the changes for the worse that are already baked in, but the population crisis is basically the same one as the energy crisis.

    WE might be ok in terms of population as well, assuming the birth rate drops fast enough, world wide, and we manage the transition to a MORE sustainable economy soon enough.

    If we don’t, nearly all of the people who die hard will be the ones who live in catastrophically overpopulated countries that are already desperately short of natural resources.

    They will die in place, or at fences at national borders, with men behind the fences who WILL shoot as many as necessary for them to get the idea that they are NOT wanted.

    The world IS a Darwinian place. I’ve lived in both backwoods and well educated liberal society, and I can say for a FACT that the typical well educated liberal loves to love poor ignorant semicivilized people FROM A DISTANCE.

    They don’t compete with them for jobs, housing, or anything else, and they never find it necessary to interact with them at a personal level, unless they hire one to mow their lawn.

    They may have some poor black guy doing their labor work, and they may tip him a hundred bucks at Christmas, and buy him a ham or turkey as well.

    But they never have them in for lunch or dinner at the family table, as I do myself, when I hire them to help me out on the farm.

    When the shit is really well and truly in the fan, NOBODY in a country such as the USA is going to support politicians who support allowing in more than a very few new citizens. The ones who want to, for humanitarian reasons, will understand that doing so virtually guarantees hard core right wingers will win at the ballot box.

    Any and every still functional country is going to have WAY more than enough on its plate just dealing with its own economic basket case citizens.

    My personal opinion is that some people in some places have a decent shot at pulling thru the bottleneck, but that most people are going to die slow and hard sometime before the end of this century.

    The world IS a Darwinian place, and I don’t see any reason at all to believe that it won’t continue to be a Darwinian place.

    So long as we are ourselves reasonably secure and comfortable, we are usually willing to help out those less fortunate.

    Once we start tightening up our own belts……..

    1. Hey Mac,

      comment: “When the shit is really well and truly in the fan, NOBODY in a country such as the USA is going to support politicians who support allowing in more than a very few new citizens. The ones who want to, for humanitarian reasons, will understand that doing so virtually guarantees hard core right wingers will win at the ballot box.”

      Mac, when the shit hits the fan and hundreds of thousands…. eventually MILLIONS…of people start walking north a Wall won’t stop a thing, let alone immigration policy, or lack thereof beyond Congress gridlock and inaction. Will there be shoulder to shoulder guards on full auto ready to shoot down civilians? Mine fields blowing off kid’s legs? I’m a 64 year old Canadian sitting just fine on rural Vancouver Island, and I expect to see in my lifetime US climate/fear refugees heading north of 49. And before that happens, I would expect to see much upheaval and martial law as ‘authorities’ try and keep a lid on urban unrest. 10-20 years? A wee taste is Hong Kong right now.

      My wife and I were talking about this last week and we both agreed that we would welcome and do our best to feed anyone hungry at our door. I have many US relatives including wonderful nephews and nieces still doing okay. They all work in the auto or finance sector. They have nice homes and lots of debt; mortgage, auto, and student loans. They think Peak Oil and economic decline is crackers…..never happen. Never. I’m not sure they even know what it is?

      I’m a pretty optimistic guy but expect to see some kind of big war break out before any of this happens. There are too many plates spinning in the air and the Empire will not go quietly, imho. Too many factors festering out feedback and unintended consequences. Think about it; think about who/what is running the Country. There is no plan beyond election cycles and short term profits. Values and vision? Are those apps?

      Trade wars are easy to win, allies now gone within 2.5 years, incoherent foreign relations policies, and denial…denial….denial on top of rapid climate change does not bode well. Just my opinion, and regards to readership for their informing comments.

      1. Hi Paulo,

        “Will there be shoulder to shoulder guards on full auto ready to shoot down civilians? Mine fields blowing off kid’s legs? ”

        I wish I could bring myself to believe otherwise, but yes, I believe it will come to this,sometimes, and in some places, depending on how the cards fall.

        Various regulars here occasionally poke a little gentle fun at me for believing that some significant percentage of us MIGHT pull thru the coming bottleneck, more or less whole, saying I should be allowed my fantasy, because it comforts me, and doesn’t do any harm.

        But given their belief that when the shit hits the fan, most of us are going to die……. why the hell should anybody believe that collectively we won’t wage war on each other at the same level as we have waged war all thru history?

        Land mines, machine guns, fences…… these have been the traditional tools of war for the last century plus. I don’t see any reason to think we will fail to use them when it suits us to do so. When we have all the problems, and MORE problems than we can we can deal with, domestically, providing food, water, and shelter for our own non productive citizens who USED TO get a living working in convenience stores, cutting hair, serving drinks, selling cars, trying divorce cases?

        One of the scariest things about nazi Germany is that when all is said, and the arguments are all tallied up, the fact remains that most of the people who gladly took part in Hitler’s government were basically just ordinary people, who under other circumstances would never dreamed of starting an aggressive war, or raping and murdering people who looked or worshiped differently, or dressed differently…… or simply lived on land they wanted.

        It seems to me, and I have spent many a long evening reading history, that the vast majority of them just sort of went along to get along, keeping their heads down, going with the flow, because the nail or head that sticks out gets hammered. Most of them probably never gave any real thought at all to whether they were doing RIGHT……. or doing WRONG, at least not at the time. The ones that did probably mostly believed that the safest thing, and the only reasonable thing, for their OWN family was to go along and hope for the best.

        We should remember that famines and plagues seldom kill everybody, or even half of all the people in a given place.

        When things get bad enough in say Central America that a quarter or half the people in any particular place die for one reason or another , over the following year the pressure cooker can and will cool off. Lose half the people, you only need half as much food.

        Maybe we won’t have to shoot a lot of people at our southern border. Maybe you Canadians won’t have to shoot a lot of Yankees at your southern border.

        I hope we won’t.

        But imo it’s wishful thinking to BELIEVE we won’t, under some circumstances.

        If I’m entitled to my fantasy that maybe pockets of industrial civilization will survive, well then people that don’t want to think about just how violent we ARE, when provoked, are entitled to their assumption that countries won’t defend their borders using any level of force necessary.

        Here’s a thought that could be used as the core concept for a movie or novel. Suppose we Yankees see that the only way we can control the border is to either shoot people by the tens of thousands, or do something to get rid of them, some other way, that’s not AS morally reprehensible as murder on the grand scale?

        Suppose a black program exists to create a drug that can be distributed by B52’s that can be sprayed on crops all over Central America or India for that matter…. that can’t be washed off….. that causes irreversible sterility in any woman ( or man) who eats that crop?

        1. I have noticed that the many people who like to pain the picture of the breakdown of civilization, are a bit old (60+). Therefore, they can hope to die before SHTF, and since they believe in the not-too-pleasant future they can hope to die without significant regret too. So, the question is: do you experience Schadenfreude (joy derived from other’s misery)? You know, a younger person could read all those pontifications as “we experienced a fine life, you will not”, “we told you so, you did not listen” etc.

          Some breakdown will probably happen, no doubt about that. But why all those discussions whether there be machine guns and mines and what not….? It is a kind of revelling in misery, isn’t it?

          Finally, it is you, the older people, who had been granted the opportunity to choose the course of the world. And you could have changed the way.

          But in the end, the pride of being “right” overcomes everything else. The older people become, the less ready to admit a mistake.

    2. ‘I once believed in a catastrophic peak oil scenario.’ But did not appreciate the power of shale.

      ‘I once believed in communism.’ But did not appreciate the lure of counterrevolutionary thinking.

      See the analogy?

      Peak oil is like communism in the Soviet Union: the closer we are, the farther we are. That truth was captured by Stalin who said that the closer we are to achieving classless society, the more intensive and bitter the class conflict becomes. I have always thought that his words were just a cruel quip, but maybe Stalin captured some insight into reality too.
      In other words, welcome to dialectics.

      1. What exactly is the power of shale?

        If shale oil was easy to extract circa 1900, it would have been completely drawn down by now according to Jevons. The fact that it’s difficult and expensive is just a fat tail in the annals of the oil age

        1. Is this the real Paul as it does not carry the full nym or link?

        2. The power of shale is an ideology of Saudi America.

          Texan comrades on the Permian Front are in the fight against depletion to fulfill a 5-years EIA plan and make the power of shale true.

          Texas keeps the lights on!

      2. “Peak oil is like communism in the Soviet Union: the closer we are, the farther we are.”

        WTF? LOL

        1. Well, it can be a joke for you.

          Nevertheless, and always for the public consumption:
          1) both have been elusive
          2) the closer we are, the harder we have to strive

        2. The analogy is even more right as both the power of shale and counterrevolutionary conspiracies during Stalin’s reign share the same quality of worked-up illusions (one clue what such illusions share: it is intensity). And one day it will all suddenly disappear, like tears in the rain. No one will believe anymore. Eveyone will recognize that there was a shale fable, as there were false accusations of the Stalin’s time.
          But there will be a new illusion.

  14. Continuing to look at the Regional Consumption tab from the World Stat stuff.

    There is this category called Others. BP defines it as:

    ” ‘Others’ consists of refinery gas, liquefied petroleum gas (LPG), solvents, petroleum coke, lubricants, bitumen, wax, other refined products and refinery fuel and loss.”

    This is not trivial afterthought. This is over 20% of the total oil consumption for nearly all countries/regions. 24% for the whole world, and that deserves a !!!

    It’s 41% for India, also deserving a !!! I happen to know this derives from LPG, a hugely popular transportation fuel in India.

    China, 30%.
    US 22.6%

    India’s total oil consumption last year was 5.9%. Light distillates had 10% growth, gasoline 8.9%. Others, 6%. EVs and hybrids did nothing to gasoline burn there, which you would expect for such a narrow niche product for rich people in year-round warm cities. They didn’t drive much anyway. And of course rural driving is a big thing in India, per the recent item about political campaigns travelling place to place by road.

    China’s total oil consumption last year was +5.6%. Light distillates +7.3%. Kerosene/jet fuel + 14% (!!!) Others, 7.1%.
    And ditto.

    As noted above Japan’s consumption drop has been from lost economic activity, not population, and it burns more gasoline today than in 1995, so Prius didn’t do much there. Their big loss is in middle distillates, because they shut down a lot of factories. Repeat, population ROSE in Japan up to 2010. Only since then has it fallen and middle distillate consumption (and Others consumption) has been falling steadily since 1995, even when population was rising.

    First you lose your economy, then you lose your food.

    (Caveat about refinery exports from previous comment)

  15. Hello Hickory:

    No problem with quoting me. It’s usually the other way around.
    The truth is what it is and some days I have a hard time trying to find it!!

    OFM:
    >>Now I believe that we have a very real shot at dealing with peak fossil fuels without going back to animal power, lol.<<

    It scared me when the California Air Resources Board (CARB) abandoned the EV Mandate and shifted its focus to Hydrogen Fuel Cells (HFC). Anyone who scratched the surface could see there were a lot of technological problems that needed to be solved and were not likely to be solved, if ever. While there were a myriad of battery options that had a lot of potential. I think the auto industry wanted a few more years of profits from oil changes, fan belts, and spark plugs before giving up on the ICE cash cow. Now everyone seems to have gotten religious as in an electric F-150. Who would have thought??

    I used to worry and think of "bug out" sites and where we would need to go. I'm worried less and more concerned. The thought of "Oh ye of little faith" kept on crossing my mind. I suppose it depends on whether you are on the Titanic or on an Interstate highway going some where. You can die in either situation but being on the later where everyone of like mind is headed toward a destination is more reassuring. Not having enough faith keeps me from doing the normal things I should while too much faith is a danger unto itself.

    Daniel Yergin wrote that the peaking of oil resources will be an undulating plateau. he may have thought that an improving economy would send oil prices up until it killed the economy and then oil prices would fall again. But now it seems like EV buying will rise killing oil prices and then oil being cheap will cause people to buy ICEs instead of killing the economy and that maybe part of the undulating plateau.

    The great thing about EVs is that the engines "don't wear out". Their bearings do and they can be replaced as opposed to a worn out ICE cylinder block that has to be rebuilt. I've had one of the later rebuilds and the quality was not that good. EV engines should be a lot better.

    The electronics will be the key problem; especially if rare earths are needed. Hopefully, we will see this and begin recycling and not sending our rare earths back to China.

    I love the Bible passage that states "… and the meek share inherit the earth." Who are the meek? Are they not the ones who live within their means? If so, are they not the ones who save so they can invest later? We can see the effects of too much debt and individuals as well as countries have been brought down by too much debt.

    Just some thoughts. That and $2.31 will get me a "Tall" at Starbucks!!

    1. I see EVs and modern ICE vehicles as too complicated, even though they seem quite reliable for a few hundred K Km. My God, even modern tire valve stems have batts and transmitters linked to idiot displays because people are now too stupid to check their tire inflation. Valve stem price $200…$300 per? Extrapolate to battery and propulsion software, (proprietary software), that stops all future jobber replacement parts beyond belts and fluids.

      Anyway, I have a rebuilt 1981 Westfalia that looks and runs like a dream. It is worth more than I have invested in it, in fact…it is currently worth 7X what my showroom condition 2005 GMC work truck is worth, (The truck with 150,000 Km on it and maintained to new condition). The most complicated system on the Westie is a resistor pack “running” some intake temp sensors to adjust mixture mix on startup. My electronic tech buddy was looking to fix a friends jeep last week. The horn wouldn’t work. He thought it was….well, a horn. No it isn’t. It is a sending unit that transits to a brain box that sends a signal to a device that says, “Make horn noise now”. Computerised, of course. My Father- in-law had some kind of Buick that would flash the occasional warning light about a door. Price to swap out the module? $900. Excess complexity…needless complexity.

      I keep seeing a modern Mad Max in my head. Instead of an insanely laughing Mel Gibson hot wiring a fuel tanker we’ll see a meter toting nerd testing leads and wires and asking if anyone can read this damn code?

      1. Too true. Those days are decades backward in time and that is a huge amount of change considering the ever quickening pace of development.
        I remember reading my first book on cybernetics and another on electronic systems control in the early sixties. Our future view of PROGRESS was probably set back in the 1800’s and people are just following the lead set back in Victorian times.
        It looks like we may follow the previously set directions to it’s inevitable conclusions.
        I guess we are not a very creative or introspective species, to be so guided by such a singular view of the world and only now are starting to examine it, centuries later.

        Change through failure is a normal process.

      2. Paulo, your meter toting nerd is more likely going to be a nerd with a laptop, an OBD port dongle and a Controller Area Network Bus (CANBUS) sniffing setup, fuming about a strange (proprietary) implementation of the CANBUS protocol. My undestanding of the CANBUS arrangement is that all devices are attached to the Controller Area Network (CAN) and assigned a unique id. In the case of the friend’s jeep, pressing the horn button results in a packet being sent across the CAN addressed to the horn. All devices on the network receive the packet but only the horn responds to it and switches on. I assume a second packet would switch it off.

        The theory is that CANBUS should allow a single network/power cable to daisy chain to all the devices in the vehicle and control them, as opposed to having, for example, several wires to control three speed wipers with intermittent wiping as well. It remains to be seen how well CANBUS will stand the test of time but, it is likely to see increased adoption, especially with EVs.

      3. Hi Paulo,
        I share your concern about vehicles becoming too complex to fix with local skill/local machine, etc. I used to handle many repair tasks myself when younger, but things have become a complicated spaghetti mess under hood.
        And of course, this problem affects just about all kinds of vehicles built in past 3-4 decades. I’d guess well over 95% of the vehicles running around on the roads are ‘fragile’ due to complexity of the systems. EV maybe less so, since there are simply less systems at play.
        A guy in Germany has over 900,000 km on a Tesla. I’m guessing he had had to have the battery pack changed out, but didn’t see that info.

        Another issue along these lines is the energy supply line.
        With Petrol, there a very complicated system to get the juice from the source rock to the target tank. Such as a refinery.
        That looks very fragile to me.
        Reliance on that kind of complex system in a chaotic world is very risky.
        The supply line for electricity can be just as complex, but just like you point out the possibilities with the Westfalia, I point out that the electricity supply line can also be much simpler. If you have some equipment (dry solid material with no moving parts- PV panels, inverter, wiring/plug), your personal or local supply change for transport juice can be very short, and durable.

      4. There is similar phenomenon in Europe, especially in agriculture where farmers are starting to prefer buying old machines to new ones.
        So for example, the old Czechoslovak ‘Zetor’ tractors are rising in price.

        https://www.zetor.com

  16. Having just posted a comment further up, in which I cited “The Hirsch Report”, I have had an epiphany of sorts! Peak Oil is in fact history! It happened circa 2005-2007. The GFC was the first indicator and we are now more than ten years into mitigation, as described by The Hirsch Report. We have been lucky thus far but, how much longer will our luck hold.

    IMO it is a pity that Peak Oil has not been acknowledged, with the result that the current mitigation efforts are not getting the attention they deserve and lack the urgency required under the circumstances. If, for example, LTO were to be viewed as a Peak Oil mitigation scenario, the financing of LTO efforts would be seen for what it is, Peak Oil mitigation!

    Composing this post was interrupted by a phone call, during which it dawned on me that another aspect of a post peak world is playing itself out. Several Peak Oil prognosticators spoke about the rise of despots. What is Trump? What is Bolsonaro!

    1. I posted a graph showing that Exxon is predicting a peaking of world crude oil supply by around 2040, http://peakoilbarrel.com/usa-oil-production/#comment-686742 If Exxon is not taking EVs into consideration, then the ramping up of EVs might extend the peaking of supply to where demand is less than supply from 2040 forward. I did not see a footnote one way or the other.

      Hirsch’s warning about starting early is being heeded as the auto manufacturers are all electrifying their cars. Even Ford is electrifying their F-150!!. GM their Cadillac division, Volvo their entire fleet by 2035, Porche with their Taycan. Honda is developing Flouride batteries with 8 to 10x the energy density of current Lithium Ion batteries. Solar is cost effective with conventional power plants. Everything is being scaled up.

      It’s not like everything has to be electric by 2040 to counter the effects of Peak Oil. It needs enough so the demand for oil does not outstrip supply.

      This does not take into consideration the detrimental effects of continued burning of FF.

      1. Peter, I think you have missed the main point of my comment above. That point is that Peak Oil as defined in The Hirsch Report is history. Scanning through the report, I see no indication that Tar Sands or LTO are considered as anything other than Peak Oil mitigation factors. In retrospect there are some things that would have caught Hirsch and his team completely off guard.

        They completely misread the situation with NG, in forecasting a need for LNG imports in the US to meet US demand. The reality is that the US is now exporting LNG and looking to expand those exports into the short to medium term. They also failed to anticipate that EVs would have any potential to be part of a mitigation scenario. It goes without mention that they failed to anticipate the impact of hydraulic fracturing on both NG and LTO production.

        Having said all of that, the graph you posted from Exxon-Mobil basically proves my point. Conventional crude and condensate are definitely post peak and if you add deep water and oil sands, the picture does not look significantly better! Most of the increase since about 2010 can be attributed to Tight Oil and NGL, in other words fracking. I am now viewing fracking through the lens of Peak Oil mitigation so IMO Peak Oil is history and LTO etc. are just mitigation measures that have been remarkably successful thus far.

        It would be extremely interesting to hear the views of Robert Hirsch today if he still has his wits about him. He is now 84 years old and the last I can find about him on-line is from about 2009, the ASPO 2009 Conference:

        Robert Hirsch “Some Random Thoughts”

        More recently he did an interview about his 2010 book, “The Impending World Energy Mess” :

        https://www.youtube.com/watch?v=Am1DGjzxBrI&list=PLAB7BCDD9C0F00C03

        1. But the Exxon graphs I have posted say that the peak is 20 years away in the future.

          If Exxon says there is more oil than naught but ends up with less, they can be sued by share holders for overstating reserves. That’s a strong incentive for them to be conservative in their estimates.

          1. Nonsense, Exxon can be sued for overstating their reserves in official documents filed with the SEC. They cannot be sued for overstating their opinion of world reserves.

            1. My apology. I was not too careful in my wording.

              From my posting of the Exxon graphs, it still begs the question: “If Exxon **is conservative in their estimations of world reserves**, where are they seeing those reserves?”. What are they assuming? A trillion barrels of potential reserves is a lot of “oil” to hide.

              I have noticed that the inflection point has shifted and I think I’m seeing the curve “peaking” sooner than 2040. But I may be reading too much into their 2019 graph:

            2. From your chart above, conventional oil is already well post-peak. Add deepwater and we are still post-peak. Add oil sands and we are on a plateau nearing post-peak. Only tight oil is keeping C+C from peaking. When tight oil peaks the world peaks.

              Of course, NGLs, other liquids, and biofuels are there to allow the cornucopians to claim “no peak”. Peak oil will be when crude + condensate peaks.

            3. True. But the next page has a graph that says there are 1 trillion barrels of oil out there and that Exxon has the technical chops to extract it. I think they are referring to the Oil Shale of western Colorado and Utah for which they will need water (up to 3 barrels of water per barrel of “oil”) among other things such as extraction equipment and pipelines. All that is expensive.

              Their footnote says that this can go on for 150 years and meet demand which works out to 18.26 million barrels of oil a day. Therefore the demand is USA demand and is shown in the figure below.

              If world demand is higher than supply, gasoline prices would increase accordingly. Therefore the push by auto makers into EVs. Everybody can continue to make cars until can’t. We follow the supply curve down looking for substitutes for FF and using what remains of FF to create those substitutes. I think that’s the game plan.

            4. True.

              and the footnote says that a lot more investment would be needed but is not likely coming to either develop the Oil Shale in Colorado and the other sources world wide such as Venezuelan Bitumen.

              The remaining resource below is 5 trillion and can last 150 years at current [world] demand of 91 million barrels of oil per day with the proviso that the funding is there and they are indicating that the funding is not there by the curve going over.

              So the country that can husband their resources will be the ones who have resources to use.

            5. PeterEV,

              “So the country that can husband their resources will be the ones who have resources to use.”

              Canada will be a good example, not because of willingly husbanding resources but because of lack of pipeline capacity to export their crude. It’s the US that, one way or another, is forcing that husbanding on Canada.

            6. the country that can husband their resources will be the ones who have resources to use.

              Those resources are likely to be stranded, never to be used.

              I suspect that’s one reason KSA is less eager to reduce output than they used to be: they can see a future when demand will fall faster than their output, and their carefully husbanded reserves will become much less valuable.

              They have very low lifting costs, so they may be the last producer standing, but they wouldn’t make much money in that scenario.

            7. You think they are talking about the Green River Shale, which is not oil at all, it is kerogen. Not only does it require a lot of water, of which there is none in the area, but it also requires a lot of energy to cook the kerogen into oil and gas.

              Back in the 70s, there was a lot of talk and stock sold concerning the Green River Shale. It all died on the vine. There was no water and the process was just too expensive. It still is. Even if the price of oil went to $140 a barrel, the price it would take to make the process profitible, there is still no water in the area.

              I doubt the Green River Shale will ever produce a barrel of oil.

            8. Ron,

              I agree, the Green River kerogen is the oil of the future and always will be. 🙂

              This is an imaginary resource, URR will be 3 to 4 trillion barrels, likely it will be closer to 3 trillion, but if transition to alternative types of transport is slow, it might be 3.5 trillion barrels for World URR.

            9. The manager of one of the pilot programs said the water would have to come from east of the Continental Divide. He was estimating that it would take 2.5 to 3 barrels of water to make 1 barrel of “oil”. At 3 barrels of water, they would need approximately 10 Alaskan Pipelines to produce 5 million barrels of “oil” a day.

            10. Ron,

              It is possible that after tight oil peaks, that oil prices will rise and OPEC and Russia may increase output, in addition oil sands development might pick up pace with higher oil prices. The combination of these two might push the peak beyond the tight oil peak by a few years, but I doubt it would be delayed by more than three years and my best guess is one to two years, or perhaps only a plateau in output would be maintained, difficult to predict.

              For the most part, I agree that peak oil is more likely to coincide with the peak in tight oil than not.

  17. From the EIA monthly I see the US oil and condensate production was:
    April 12. 123 Mbpd
    May 12. 115 Mbpd ( – 8 000 bpd / 0,1%)
    June 12. 082 Mbpd ( – 33 000 bpd/ 0,3%).
    Will be very i teresting to see the production for July and August including new pipeline capacity. To me it seems like the DUCS that was good have now been used, Baker Hughes drill statistick document number of riggs still go down. In January EIA and Rystad believed US oil production would reach 13 Mbpd in 4th Quartile 2019, the truth is this might already be below 12 Mbpd . As they told the growth in US shale have be funded by borrowed money , now investors have far from get back what they where promissed, they are pissed off…

    1. Freddy,

      Keep in mind that some rigs are better than others, the older, less efficient and less powerful rigs are the ones being stacked. This leaves the better rigs still running which results in more lateral feet per day being drilled per rig. The same will be true of frack spreads, some of the equipment for fracking is also higher horsepower and better suited to todays completion requirements, the fracking crews that are left operating are using the best equipment and are the best and most experienced crew, the A team as it were. So we have better capital efficiency in this situation.

  18. A omeba is a pessimist if it stays in the jar till it consumes all and dies out. A optimist omeba crawls out of the jar and continues to thrive

  19. Example; Malthus, a study in population, 1800s: population grows till end primary, then coal, secondary, ww2 oil, thirdary, nitrogen fertilizer, 60?s, fourth, end Cold War 90s more land, fifth, dna splicing circa 2010, sixth, fusion, pyramid scaler atom of maxwell, insect use of said physics. Bad news ? War, hate, never ends

    1. How can production be falling, consumption increasing and stocks remain the same?

      1. Patience young padawan. 🙂

        First, stocks don’t remain the same. There is a time lag of several months between production in OPEC/MENA and stock change in US meaning that excess production in late 2018 impacted US stocks in the spring (see for example these two figures from Art: https://pbs.twimg.com/media/ECW_IhNXsAweltI.png https://pbs.twimg.com/media/ECkcTfzXkAE5uED.png).

        There is no good real time data, at least not publicly available, on global stocks but US stocks have declined so far this year (https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCESTUS1&f=W). It seems to me that we are starting to see the effect now on lower OPEC production (cut or whatever reasons) and LTO not growing as fast as forecasted.

        A quote from IEA’s last OMR (https://www.iea.org/newsroom/news/2019/august/economic-woes-hold-sway-over-geopolitics.html): “If the July level of OPEC crude oil production at 29.7 mb/d is maintained through 2019, the implied stock draw in 2H19 is 0.7 mb/d, helped also by a slower rate of non-OPEC production growth.” Note that this assumes LTO-growth in US causing the market to be oversupplied next year…

        The market sentiment is currently bearish on oil for whatever reason (US LTO growth, economic slowdown, etc.), you can see this on the yield curve that Art provides, the curve has become more flat (https://pbs.twimg.com/media/EDENJx2XUAIR5lC.png:large). I find the herd mentality of the oil market interesting and would not be surprised if the herd changes direction in a not too distant future. The big question mark I see is what will happen with the Iran-deal if/when stocks continue to decline.

        1. Gold has been out of favour for quite a while. Suddenly in June 2019, it started to rise from around 1250 to 1500 today. Why? Wish I knew.

          1. Lower world wide interest rates is one reason. Worries about a global recession is another.

        2. Who is it that has incentive to provide accurate information about storage? How does anyone benefit from that?

    1. EIA probably overestimating some may come from GOM and other tight oil plays such as Bakken and Niobrara.

      1. Dennis,

        EIA STEO forecasts US crude oil production of 12.95 mbd at Dec 2019 and splits it into
        Alaska 0.49
        GoM 2.12
        L48 10.34
        https://www.eia.gov/outlooks/steo/data/browser/#/?v=9&f=M&s=0&start=201501&end=202012&map=&linechart=~PAPRPAK~PAPRPGLF~PAPR48NGOM&id=&ctype=linechart&maptype=0

        My Dec 2019 guess is 0.45 mbd for Alaska, partly due to majors exiting Alaska
        https://ca.finance.yahoo.com/news/bp-exit-alaska-60-years-172226498.html

        My Dec 2019 guess is 1.95 mbd for GoM
        https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFP3FM2&f=M
        https://www.offshore-mag.com/production/article/14034424/gulf-of-mexico-oil-production-forecast-for-record-year

        My Dec 2019 guess is 10.10 mbd for L48, Permian being the main reason for the 0.4 mbd increase from June. The STEO data browser also forecasts a 0.4 mbd change from Jun 2019 to Dec 2019 for L48.
        https://www.eia.gov/outlooks/steo/data/browser/#/?v=9&f=M&s=0&start=201501&end=202012&map=&linechart=~~~PAPR48NGOM&id=&ctype=linechart&maptype=0
        The L48 Jun production of 9.7 mbd is derived from the latest EIA monthly production. (12.08 (total US)-1.91 (GoM) – 0.46 (Alaska) = 9.71 mbd)
        https://www.eia.gov/petroleum/production/

        My guess for US crude production in Dec 2019 is 12.5 mbd which is less than EIA STEO 12.95 mbd

    1. Tony

      The new wells take some time to have a lease id assigned and until this happens the output is reported in the pending lease file.
      Usually it takes 12 to 18 months for all the output to be reported in th PDQ. The estimate by Dean Fantazinni looks at how the data changes over time to guess output. The EIA samples large producers by asking them directly what their output is and then guesses the other 10% of output.

      When output from small producers changes in unexpected ways the EIA estimate will be poor.

    2. Because, RRC has a pending data file that is slowly transferred to production. I subscribed to the pending data file for a couple of years and compared to EIA monthlies. Use the EIA monthlies, they are fairly accurate.

  20. Another headwind for price of oil is not only is the Euro devaluing pushing the dollar up but the Chinese yuan is also now devaluing pushing the dollar up when before the peg broke it was stable. Soon it will be the Bank of England devaluing even more pushing the dollar up. I know i said this before but if the FED is unable to do anything to prevent further dollar strengthening. Dollar index is going to 112.00-116.00 range and it can keep going higher. Oil price will be in the 20’s soon enough. Unless they can get the dollar going the other direction.

    I know. We should sanction and tariff the shit out of countries that devalue their currency. And watch their currency devalue even more due to sanctions and tariffs. Sounds like a plan. 🙂

    1. HHH. Oil in $20s will result in big time distress on US upstream.

      So, what do you think the endgame would be?

      Isn’t there a gob (hundreds of billions$) of shale debt that needs rolled in 2020-2021?

      1. There will be bankruptcy but does that mean the oil won’t still flow? No it does not. It just changes hands. and it still flows. I got to believe FED steps in and goes large on QE at some point to just try to weaken the dollar. But it’s not guaranteed. Strong dollar actually stucks in foreign currency from those who are devaluing theirs. Into US assets. Stocks and bonds will remain bid. Because of this. Which might give FED and excuse not to do QE.

        China does have capital controls but it still leaks out. Europe on other hand doesn’t.

        I think the FED will cut interest rates to near zero shortly. But it won’t do much to slow down the dollar. FED is going to have to expand the balance sheet to slow down the dollar.

        1. HHH.

          See what happened to well completions and resulting production when oil cratered in late 2015-early 2016.

          WTI averaged $43 in 2016. You are implying less than half that.

          The oil will not flow regardless of BK at $20 in the shale basins. There would not be hardly any cash flow because LOE plus G & A plus transport is around $20 per BO (note BO, not BOE).

          I am not saying oil can’t go to $20. What I am saying is that there will not be sufficient cash to keep hardly any rigs and completion crews going in the shale basins.

          Try plugging $20 into EOG, PXD, etc 2018 P & L. Hugely negative.

          $20 WTI for one year shuts in A lot of wells, I’d say if WTI hit $20 on 1/1/20 and stayed there, by 12/31/20 US production would be down about 3 million BOPD, and would continue to drop like a rock.

          I look at a lot of conventional onshore production for sale. LOE for it is almost always over $20.

          1. shallow sand,

            You are correct, HHH is a trader and knows little about producing oil, the same is true of me, what I know I have learned from comments by experts like you. My guess is that very few new wells would be drilled in the US if oil prices were $40/b or less long term, but perhaps I am wrong.

            1. Dennis.

              I would think traders would study the financials of the underlying companies. But they didn’t seem to when oil prices dropped in half and shale management made many dubious claims of profitability at $30, $40 (XOM at $15).

              EOG claimed in early 2016 it would good at $30 WTI, despite the reserve report at the end of its 2015 10K clearly showing the opposite.

              Dennis Gartman is a trader who gets a lot of airtime. He famously said in 2016 that WTI would never trade again above $44 in his lifetime. It was just a few months before WTI crosses $44.

              BNP Paribas is now going on about how the price of oil will need to go to $10-20 to compete with renewables. If oil goes to $10-20, I suspect almost zero new wells will be drilled worldwide and most would be shut in after a year or two.

              When oil was $26 we were trying to figure out what the heck to do, we wouldn’t have kept producing at a loss for too many months.

              Oil could go to $20. OPEC would likely cut more. US rigs would be stacked. Bankers would be hard pressed to loan money.

              Who would provide the DIP financing to Whiting, QEP, OAS, etc with WTI at $20. The price is below the cost of operating the wells, and with no new wells, those companies’ production gets sliced in half in a matter of months.

              WTI goes to $20, what is the price of natural gas? I assume under $1?

              WTI goes to $20, what is the price of corn? I assume less than $3? Cornbelt farmers are getting $60-90 per acre government subsidy this year with corn at $3.60 and beans at $8.30.

              Traders sometimes lose sight of the price of inputs. Lose sight of the price of labor.

              I worked on a workover rig in the summer of 1991. I made $6 an hour. The man operating the rig made $8 and hour. Men at the oil refinery made $40-50K per year.

              Now, the man operating the workover rig makes over $20 and hour. The hand makes over $15 unless he is very green. Men at the oil refinery are all making over $100K.

              In the 1990s it cost us around $10 per barrel to produce. Now it’s over $30. It was $40 in 2014, and a dramatic crash only dropped LOE a few $$.

              Having sold oil for $8 around Christmas 1998, $140 in July, 2008, $28 February 2009, $99.25 June 2014 and $25 February, 2016, I am well aware traders can take the prices to extremes.

              But there are consequences to these extremes and $20 WTI would crater world supply, particularly would US supply, which contrary to the media claims, is very high cost.

              If it’s not high cost, explain XOM’s much lower margins on US production v international.

            2. Thank you shallow sand.

              Great stuff as always. At today’s current operating cost, I assume you would need a long term oil price of about $55/bo in constant 2019$ to continue operating your wells (the profit would be enough for the operation to be worth your effort). For a new well to be drilled would likely require about $75/b for perhaps a year (the appearance that oil prices had stabilized at that level, with a bit of room for risk, payout might be reduced to 3 years at that price level). These are guesses on my part and of course I wouldn’t want you to reveal too much about your company’s finances.

              The BNP Paribas research suggests $20/b for road transport, if enough oil is produced to satisfy demand, my guess is that by 2040 there will be less oil used for road transport and much of that demand for oil will be replaced by batteries, electrified rail and hydrogen fuel cells (whichever type of system is cheapest will take market share.

              There will still be demand from water and air transport which may allow higher cost oil for those uses, though perhaps most of World demand might be met by low cost OPEC and Russian output at perhaps $30/b, Probably we will see a peak in the long term price of oil (12 month average price) between 2025 and 2035 at around $120/bo, my best guess is 2030, after that oil price may gradually decline to $30/b by 2060.

        2. There is no way to rule out that the oil price could come considerable down (in nominal US$ terms) from present levels.

          HHH has some good and proven points (I am not saying I am agreeing with his prediction for the oil price of $20/bo in the near future).

          The US$ (DXY or trade weighted for those who prefer that) started to strengthen considerably as the Fed tapered and ended its QE3 in late 2014 and kept interest rates low. All this coincided with the flood of (primarily) “cheap” LTO that flooded the market (OPEC at this time also increased their flow) and this caused the collapse of the oil price in 2014.

          With the oil price at $20/bo most companies would have no choice but to produce to service their debts and cover other costs. This is called operating to cut the losses.

          Several oil companies went counter cyclical in 2015 and 2016 (due to access to cheap credit) as they outspent cash flow (by taking on more debt and equity sales) but total CAPEX was lowered, but still higher than cash flow. All in a (failed) bet for a higher oil price. Lowered CAPEX led temporarily to reduced LTO production.

          Most of the discussions here are VERY US centric.
          (The rest of the world is 95% of the global population and about 80% of world GDP.)

          In Norway and based on actual data from Norwegian Petroleum Directorate (NPD), Petoro (State’s Direct Financial Interest), several of the oil companies (including Equinor) the average OPEX is now at around $5/boe (NOTE, BOE) and stripping out the higher costs for NGLs and natural gas makes the average OPEX for oil somewhere below $5/bo.

          Then have a look at the OPEX for Russia, OPEC and other big producers.

          1. Rune everyone focuses on the US because this is where most of supply growth has been coming from over the last few years. Non-OPEC ex-US has been on a plateau since 2015. If you stall US growth you hand the market back to OPEC, which means higher prices.

          2. Rune.

            I agree my post is very US centric and my point of view is too.

            I do note how much better XOM has fared financially regarding upstream internationally than domestically (US).

            US financial media and companies can make all the claims they wish about US being a low cost producer, but the 10K and 10Q say otherwise.

            I don’t disagree oil could drop much lower than present prices. But I don’t see how production would be maintained with WTI at $20, assuming Brent and other grades are priced at the same level or close.

            US shale dropped several hundred thousand barrels with a 2016 average of $43. I am just making WAG, but suspect $20 for 1 year would stack 90% of US rigs, as we are seeing rigs stacked now at $55 WTI.

            1. Shallow sand,

              CAPEX would be cut way back if WTI remained at $20/bo long term. I doubt we will see monthly average spot price for WTI below $30/b until perhaps 2035. The last time the centered average 3 month nominal WTI oil price was below $30/b was June 2003. The lowest monthly spot price for WTI was $30.32 in February 2016, the average spot price in 2016 was $43/bo. The lowest 12 month average WTI spot oil price from 2004 to 2019 was $41/b0. I think a drop in the 12 month average price of oil to less than $40/bo is less than a 5% probability for the next 10 years. I also believe a 12 month average WTI spot price of over $130/bo in the next 10 years has less than a 10% probability. My guess is $75/bo+/-25 for the next 10 years, with about a 70% probability that the 12 month average WTI spot price will remain in this range.

            2. @Joseph
              True to that and the US growth in oil extraction has been impressive and we should be grateful for that.
              My response was directed towards low oil prices and required cash costs for some producers to sustain a considerably lower oil price.

              @Shallow
              LTO which stood for the major growth in US oil extraction was demonstrated to be costly several years ago, requiring like $60/bo – $80/bo at the WH to make some return.
              The low price since the collapse in the oil price in 2014 is now starting to take a toll on several shale companies, ref the recent growth in bankruptcies (Chapter 11, debt restructuring).
              A low oil price (like $30 – $40/bo, Brent spot) would not last for several reasons.

              A lasting low oil price stimulates (more) consumption, it could encourage cooperating producers to make further cutbacks to move the price floor up.

              The market operates somewhere between fear and greed and a lot of fear (negative sentiment) could send the oil price to very low levels.

              There is a lot of uncertainty about future economic growth, ref the US inverted yield curve, negative rates and a weaker global credit impulse which now signals slower (could be negative) (economic) growth.

              Lower economic activity means less goods moved around and less consumption of oil.

  21. Updated Permian model with EUR from 2017 to 2022 at 403 kbo and EUR decreasing after February 2023 falling to 320 kb by May 2033 for this scenario which has completion rate held constant at 510 wells completed each month from July 2019 to July 2028. URR is 36 Gb and total horizontal oil wells completed from Jan 2008 to April 2033 is 95977 for a scenario where oil prices rise to no more than $70/bo in 2017$ for Brent crude (WTI would be about $62/bo at maximum in 2017$). Peak output is 5766 kb/d from April 2028 to July 2028 for this scenario. That would be an average annual rate of increase in output of 231 kb/d from July 2019 to July 2028 for this scenario.

    1. Ron assumes that the legacy decline rate percent will remain constant at a constant completion rate, which is incorrect. The constant completion rate scenario leads to a fall in the monthly legacy decline rate from 7.7% in July 2019 for the trailing twelve month (TTM) average to 6% in July 2025.

      The chart below uses the scenario in the comment just above this and finds monthly legacy decline rate for that scenario.

      1. No, I have never assumed the legacy decline rate would remain constant. I kept it constant at 6.14% just as an example. In the past, it has usually increased when production was increasing and falling when production was falling. So when production was dramatically increasing, as in my example, I should have shown the legacy decline increasing. I was just being conservative by showing it constant.

        I never assumed that completions would remain constant. If production is to increase by 2 million barrels per day, as it did in 2018, then completions must increase. Either that or production per well must dramatically increase if there are no increase in completions.

        However, a decline from 7.7% per month to 6% per month is absolutely nothing to crow about. 🙂 Legacy decline of 6% per month is devastating.

        1. Ron,

          I agree tight oil output will not increase by 2 Mb/d per year as you seem to think the EIA is forecasting. The EIA’s AEO 2019 predicts that US tight oil output will increase from 6.5 Mb/d in 2018 to 9.4 Mb/d in 2025, so 2.9 Mb/d over 7 years or about a 414 kb/d annual increase in tight oil output over the next 7 years. If there is no increase in the completion rate output increases a bit less than AEO.

          1. Dennis, the EIA doesn’t speak with one voice when making predictions. They are all over the map. I have no idea who, at the EIA, made the following prediction but I have no doubt it was made:

            The U.S. Energy Information Administration (“EIA”) forecast at the beginning of this year was that the U.S. shale oil plays were just getting started and that production would increase by at least 2 million barrels of oil per day (“MMBOPD”) each year for several more years.

            That prediction was made just after US production had increased by 2 million barrels per day. So they just naturally assumed that this rate of increase would continue. And I have no doubt that. by now, they have changed their mind. And by next month they will have likely changed their mind again.

            Just a couple of years ago, the EIA was predicting very little growth in Non-OPEC production but tremendous growth from OPEC. Now that prediction has made a 180 turn. They are expecting the majority of growth from Non-OPEC.

            Actually the EIA prediction is not worth a bucket of warm spit. It is continually changing.

            On another subject, the EIA’s Petroleum Supply Monthly is still delayed. Have you any idea why? I mean do you have any wild ass guess?

            1. Ron,

              No idea, but you can get estimates from link below

              https://www.eia.gov/petroleum/production/

              I think the article you cited was poorly done. The EIA was not forecasting a 2 Mb/d annual increase in output in Jan 2019, the STEO from that month had 2018 US C+C output up by 1.58 Mb/d (from 2017 annual output) and for 2019 estimated a 1.14 Mb/d increase and for 2020 a 0.8 Mb/d increase (these are increases in annual average output for 2018, 2019, and 2020). This does add to 2 Mb/d over the next 2 years and perhaps that is what the author of that piece was saying (and not very clearly mind you.) Note that I agree that 2 Mb/d is probably too high, my guess would be a 1.5 Mb/d increase from 2018 to 2020 or an average annual increase of 750 kb/d in 2019 and 2020.

              Average output in 2018 was 10.93 Mb/d (according to the Jan 2019 STEO). If we assume a constant rate of increase in output we would have 11.68 Mb/d for average output in 2019 and 12.43 Mb/d in 2020.

              Average US C+C output for the first 6 months of 2019 is 11.96 Mb/d.

              Also the current estimate for 2018 output is 10.987 Mb/d, so a bit higher than the Jan 2019 estimate.

            2. If we assume a constant rate of increase….

              Yeah, but therein lies the rub. You assume a constant rate of increase, I do not. There is never a constant rate of increase. Sometimes the rate increases and sometimes it decreases. But the odds against a constant rate of increase is really low. And the odds of a higher rate of increase is even lower.

            3. Ron,

              I agree the rate is likely to change, you will notice that most of my output predictions do not assume a constant rate of increase, in almost every case as the peak approaches the rate of increase gradually decreases to zero.

              For the EIA’s short term energy outlook from August 6 they expect L48 excluding GOM to increase by 700 kb/d from Dec 2018 to Dec 2019 and by 620 kb/d from Dec 2019 to Dec 2020.
              So far L48 excl GOM has increased by only 82 kb/d for the first 6 months of 2019, it seems unlikely that output will increase by 540 kb/d over the last 6 months of the year, so the current STEO estimate is probably too high by at least 240 kb/d for 2019. If oil prices rise we may see output increase at a somewhat higher rate (perhaps 700 kb/d in 2019).

  22. BTW Norway, the darling of alternative transport.

    2018 oil consumption growth 5.1% Not broken out by distillate portion.

      1. The journalist has understood some things, but he has also got many things wrong.
        1. Myth? Which myth?
        2. Norway’s cold weather makes the country one of the least suitable for electric cars. Yes, the range gets smaller in cold weather, but that simply means that the car has to be charged up more often. EVs are mostly used in towns with small daily driving distances. And Norway is 98% powered by hydroelectric plants, so the electricity generation is clean and relatively cheap. Cold weather in winter days also create a high air pollution – again that is a reason to choose EV. Add that ICE are extremely expensive due to government fees.
        3. EVs practical inferiority to ICE. The first EVs had a shorter range, but apart from that EVs are superior in driving, maintenance, noise level, pollution, OPEX. The newest cars have quite a good range.
        4. …mind boggling that anyone in Norway would buy an ICE. My dear journalist, I think that’s a contradiction to your earlier points.
        5. The EVs are not really subsided but the governmental fees are removed. There is a difference. And compared to the extra tax on ICE, the removed fees are small.
        6. If Norway were to convert all cars to EVs… Well that’s never going to happen. The EV program will be gradually phased out.
        7. EVs do not reduce emissions. Ridiculous.
        8. ICE has a continued fuel efficiency. True, but very small improvement nowadays.
        9. Reducing CO2 by using the EV program has a too high financial cost. The financial costs of reducing CO2 will be high regardless. But that is not the reason of the program. The reason is to initiate interest in EVs and making people buy EVs until they are as cheap as ICE cars.
        10. In household with both EV and ICE 40% is driven by EV and 60% by ICE. Well, with two or persons in the household driving cars, it is almost 50/50 but ICE are needed for longer trips…
        11. The rich typically buys more EVs. Yes and those with a high IQ and those who live in cities often also often have a higher income. EVsare of course more frequent in cities. Those who have a certain IQ tend to choose cost-efficient solutions.
        12. Norway does not have a European energy mix.
        13. The German IFO study has already here in POB been debunked as shit…

        1. “The rich typically buys more EVs. Yes and those with a high IQ and those who live in cities often also often have a higher income.”

          Are you stating that people who buy EVs have a higher IQ? … What a condescending statement.

          1. I regret that comment. Is it fair to claim it is intelligent to make smart economical decisions?

      2. This article is strikingly unrealistic and pro FF.

        The various taxes and incentives make Norway the only country to have a car market that is not distorted with hidden FF subsidies.

        Here’s a striking ultra-conservative quote: ” Governments may create the conditions for wealth creation, but they don’t create wealth per se, wealth is created by private enterprise and is taxed and redistributed by governments for the public good. ”

        As if the identify of a worker’s employer dictates whether their work creates value!

    1. Even though Norway is “the darling of alternative transport”, EV sales are still a small part of their transportation mix. All-electric 7.8%, Plug-In hybrids, 3.6%, and Hybrids 4.0%. Without the impact of EVs, their consumption would likely have been higher.

        1. I think it’s important to put things into perspective. Knowing that EV sales have increased xx% makes it sound like Norway is full of EVs when it is actually a small percentage and that the increase FF consumption is due to maybe a vibrant economy.

          Since coming here and to other sites, my perspective has evolved due to the many opinions, charts, facts, positions, etc. If we all end up with public transportation and bicycles or horse drawn trolleys, we end up with public transportation or horse drawn trolleys. I’d like to see that coming instead of in a rear view mirror.

          However, the case for replacing ICE vehicles with EVs is getting stronger as batteries get better and the alternatives to refueling EVs get cheaper and better. But we’ll see. If something better comes along, we’ll hopefully adopt that something.

          1. The regional consumption tab on the BP Bible does not break out individual countries in Europe. It does for North America, and it does for Asia, at least for the major countries of those areas.

            Norway’s oil consumption last year grew at 5.1%. We do not know if that was gasoline. Or diesel / jet fuel. They are building that very long coastal highway that goes above ground and below ground/sea. They may be burning diesel in huge quantities to do the digging.

            Or it could be gasoline. It’s important to remember that hybrid cars are gasoline engine cars that haul a battery around with them, especially if they’re driving on that long highway. They get better mileage, but a goodly portion of that is not the battery. It’s the fact that those cars have very small engines put in them. There doesn’t seem to ever be an expectation that it’s going to haul a heavy trailer on which is piled a lot of cut branches from trees in the springtime. And so, small engine. Very small.

            1. Watcher.
              “And so, small engine. Very small.”
              I guess you are thinking of little mini hybrid cars.

              And sure that is one segment.
              But its not the whole story. I’ve got a PHEV that has the same size engine as its standard ICE version- 3.6L
              Its battery pack gives 32 miles range, and the petrol engine gives 488 mile range= 520 total.
              You can put a sheet of plywood flat inside.
              This past year I have 71% electric miles and 29% petrol miles.
              That ratio would shift strongly towards petrol if I was doing lots of long trips, and it probably wouldn’t be my vehicle of choice for that scenario.
              But it gives you an idea of what is possible, and in fact probable as this upcoming decade unfolds.
              Imported from Detroit.

            2. No not Misubishi.
              Chrysler Pacifica Van.
              And yes I do get 32 electric miles with it.
              Great vehicle.

        2. Joseph,
          I admit I have an EV, a Nissan Leaf. But more importantly, I hate news articles and comments which are clearly biased.

  23. Anybody see price of Brent falling below price of WTI sometime this year? The gap sure is closing.

    Brent had a rather large gap down open today or last night at futures market open where WTI didn’t. i’m assuming this was due to trade war and depreciating yuan. Added tariffs on Sunday.

    Looks like the trade war is weighing more on the price of Brent than it is on WTI.

    The dollar and gold are rallying at the same time and have been for awhile. That means things are really, really bad globally. Not a good sign for price of oil or other commodities for that matter.

    Nothing is more bullish for gold than a strong dollar. That might sound counterintuitive but they are both safe havens.

    Some people want to believe that the global economy is somehow healthy. Things are way,way,way worse than in 2008-2009. I mean damn what is the amount of debt with negative yields up to now days. 15-16 trillion or is 17 trillion. That isn’t normal or healthy. $70 oil is likely the limit this half dead economy can handle. And just because things seem ok in your part of the woods for the time being doesn’t mean they are.

    1. What I think is more significant is that WTI went into real backwardation about 3 weeks ago. That told me that demand for WTI had increased and the Refiners were saying I want oil NOW not next month, which is a very good sign for WTI.

      1. Somewhere above i think Watcher was saying Japan had taken some refining capacity offline. Wonder if these refiners that are demanding WTI NOW are trying to make up for some of this lost capacity. Those shutdown refiners would cause less demand for Brent i’m assuming. Though i might be assuming wrong.

  24. It looks like Nick Cunningham, the author of the article below, reads peakoilbarrel.com

    “The more important point is that the oil industry is slowing down more generally.

    Most oil forecasters expected explosive production growth to continue through this year and into 2020. But with June U.S. production at 12.082 mb/d, output is only about 80,000 bpd above levels seen at the end of 2018. In other words, growth has been pretty slow this year.

    Financial stress is really setting in, forcing drillers to cut back. The rig count fell by 12 in the last week of August, part of an ongoing slide since reaching a peak late last year. Bankruptcies are on the rise. As the Wall Street Journal notes, an estimated 26 U.S. oil and gas companies have declared bankruptcy this year, which is close to the full-year 2018 total. More are expected.

    Worse, there is a tsunami of debt that comes due in the years ahead. According to the WSJ, roughly $9 billion worth of debt was set to mature over the second half of 2019. But a whopping $137 billion in debt matures between 2020 and 2022, a massive total that stems from the huge debt issuance following the oil market meltdown a few years ago. A serious reckoning is just around the corner.”

    https://oilprice.com/Energy/Energy-General/Oil-Production-Growth-In-US-Grinds-To-A-Halt.html

    1. There is a cruel paradox with forecasting, especially with commodities. A forecasts itself can change things and invalidate the forecast. Combined with long lag times and capital intensive operations, it can cause great hardship for producers.

      So. Let’s say the forecasts are for shortages in your commodity, and higher prices. You and your fellow producers all run out and invest in new production capacity, and produce more. That causes too much production, and prices fall instead of rising. Everyone loses money.

      So, everyone is losing money, so the pundits forecast less production, and, once again, they forecast higher prices. So, everyone refinances or gets new investors, and rushes out and invests in new production.

      Rinse and repeat, until everyone is truly exhausted and out of money, at which time production actually does stagnate or fall and prices rise. At last, the forecast is validated!

      At which time producers can emerge from bankruptcy, or get bought out by someone, and after prices have been high enough long enough, the merry go round can resume…

      1. NickG.

        It is why, despite us owning a lot of oil wells and land, we all have other jobs and none of our kids has any intention of being a farmer or an oil producer.

        The commodity volatility is a joke. A farmer in the best corn growing counties will receive over $80 per acre in subsidies this year. So, a solo farmer who cash rents 1,000 acres (a relatively small operator in IL, IN or IA) will get $80K from the government. And he will still likely show a loss on his Schedule F for 2019.

        Commodities are a joke. Few think it is a good idea to base a career on them.

        I have routinely given the example of my friend trying to live on 20 BOPD he operates by himself. 2013 I figure he cleared close to half a million $. 2016 he likely didn’t make $40K.

        So why would a young person want to do that. His kids sure as hell aren’t. He won’t even let them help him and curses it daily around them, even though he secretly loves the oilfield.

        Damn shame what these traders do.

        1. “So why would a young person want to do that”

          “2013 I figure he cleared close to half a million $”

          I think you answered your own question. Everyone should so well.

          1. Huntington Beach.

            Commodities are a good speculative investment. Maybe a good career to work for a company with deep pockets.

            Not good for a small business person who is relying on the commodity price to pay his or her mortgage, feed the family, pay health insurance, etc.

            Keep in mind that 20 BOPD had to be either drilled or bought.

            2011-14 production here sold for over $100K per barrel. It is now selling for under $30K per barrel and there are few buyers.

            In Q1 2016, the solo 20 BOPD stripper operator generally worked for less than free.

            Imagine going to your job for three months and paying your employer $3,000 per month.

            Or how about the farmer who cash rents 1000 acres and pays $200,000 rent to his tenants, spends $400,000 to put out the crop, sells the crop for $500,000 and is still way short when he gets $80,000 farm subsidy?

            Likely that farmer borrowed a decent amount of the $600,000 in the spring.

            Sure, there is a chance at making big money if prices sky, but it’s very risky.

            Price tractors, combines and other farm equipment, even the used ones. It is impossible to go into farming in the US without being in a family that built up the business during the good times.

            All four of my great grandfathers farmed. One of my grandfathers did. The other started out as a farmer, he left it to work as an electrician. Two of six uncles farmed. There are 13 of us cousins. One farms, but he works as a carpenter most of the time. He and his father farm almost 2,000 acres, yet he works another job most of the year and his wife works full time, as does his mother. Both work primarily for health insurance, but also to get by during down commodity times.

            1. Shallow Sand knows more about the realities of farming than anybody else who has ever posted a comment here in this forum, myself excepted.

              It’s probably the most brutally competitive business in the entire USA.

              The only true bright spot is that while old oil fields play out, and are apt to be worth less than nothing, considering what it costs to close in and walk away, good land any where near a growing town or city in a well populated area is apt to be worth several times what you paid for it a generation back,even after allowing for inflation.

              Almost all of us, in my family, have given it up and sold out, as much as we hated to do so. But if you have to take a low paid job, you probably won’t be able to pay the property taxes on your place anymore and still pay the rest of your bills.

              Some of us are hanging on by running a few cows part time, just so we can pay property taxes……. and continue to live on the land we love. Or we log off a tract, to get enough money to make ends meet a few more years.

              I always got my own living off the farm, and just helped out, so Daddy could keep on doing what he loved. It would break his heart to see his land in the hands of anybody but family, and subdivided.

              A part time forty hour job in town is the rule, not the exception.

              I bought a place of my own, but I run it more like a dude ranch than a farm. It won’t ever clear a dime, most likely, but I expect the land to go up sharply, so long as OLD MAN BAU dodders on, and it’s HIGHLY leveraged, with a low interest loan. So long as the land goes up, so does my net worth. My annual return on the down payment I made on the place, starting the year I bought it, was over one hundred percent. Now it’s five hundred percent. Of course that’s not taxable,it will be a capital gain when I sell… IF I sell. I run it so it pays it’s own way, and that’s all I want out of it in terms of current income…… enough to balance the checkbook.

              I picked my place especially with price appreciation in mind, and don’t AT ALL mind working at it a couple of days a week. I LIKE the work, and would much rather do it than play golf or than sort of thing. This is a damned good thing, because if I wanted to run it on the basis of generating some current income, I would be damned lucky to make ten to twenty bucks an hour.

              There’s no way in hell I could make as much farming as I used to make operating heavy equipment, welding, working on old houses, teaching, or whatever.

              Anybody who wants out of the urban rat race when he retires would do WELL to read this comment over a few times, in case he thinks he might like country living and playing around out in the sunshine driving a tractor or driving nails.

              Look around, and you can get a house AND a farm, for not much more than the price of a house, all over the south, so long as you aren’t too close to a city.

            2. Comparing a job to a business is the root of the problem of this conversation and anyone who makes this mistake is most likely going to fail at business. Most business requires a capital investment at risk. Where a job is more or less the sale of one’s time to a business with little or no risk of capital. A lot like the difference between owning common stocks vs bonds. A lot of people don’t have the risk tolerance of being an entrepreneur. Fifty percent of new business fail in the first 5 years and 66% fail after 10 years. If it was easy, everyone would be a rich entrepreneur and labor would be a lot more expense because of lack of availability.

              Capitalism is full of losers. There are no free lunchs except for Republicans complaining about safety nets. Sorry, but I couldn’t help myself with that last line.

            3. I’d say a business can also be both a job and an investment.

              You own a small business and file a Schedule C and pay self employment tax. Or you own an entity and work for the entity you should get a W-2 form. Either way, social security and Medicare taxes are paid. So it has a job component.

              You fill out a financial statement for a bank and list the estimated FMV of the business on it, so it’s also an investment.

              My point is that if you decide to invest in farming or oil and gas, it is a good idea to have another source of income, even if you materially participate in the commodity business.

              I am just trying to give some real world examples for people who might not have any knowledge of these industries.

              For example, I think it is a good idea for people to know how much money farmers are losing with grain prices so low.

              HHH says he thinks oil will go to $20 WTI. He may be correct. My goal is to give an example of what happens to oil company P & L at $20 WTI.

        2. Shallow, it’s really hard to make a case for anything other than deflation when so many global interest rates have gone negative.

          Systemic deflation is going to define prices and there’s nothing anyone can do about it. To get this to change will require some sort of massive government intervention, because capitalism has already failed and the only thing keeping wheels turning is a 1 trillion dollar deficit (aka fiscal stimulus) that constitutes 5% of GDP. With that feeding in, will get about 2% growth.

          1. So, Watcher, how is the oil going to flow? Who is going to pay for it and how? At $20?

            1. I’ve made the point before. If you have to have it, and you do have to have it, then you will get it. Money has never been the only way for that to happen. I could list many ways. Here are a few:

              Gunpoint
              Nationalization
              Subsidy

              You talked above about what farmers get. Obviously the free market place doesn’t determine their business. Why should it determine the business of oil?

              Why are we even thinking in terms of free markets and capitalism in a world with negative interest rates? It’s not even worth discussion.

              You could wonder why governments don’t decree higher 10 yr interest rates. But then you look at the 23T national debt and there’s no further need to wonder about that.

            2. Oh, and btw, people. Those recession cheerleaders . . . the swath of destruction along the east coast is going to generate what, maybe another $250 Billion in deficit to fund rebuild? Who is going to vote against that? How do you get 2 consecutive quarters of negative GDP growth with 1.25T of influx?

  25. Russia reports an increase of 139,000 barrels per day in August. It is reported by several agencies that OPEC will be up around 80,000 bpd in August. This should put a lid on oil prices for a while.

      1. As an FYI, East Europe countries tend to have some pretty amazing growth and decline consumption numbers year to year.

        Hungary was +6.5% last year. Latvia -9%. The overall burn is so small that an extra truck rolling over and burning or having a truck driver call in sick can move their needle.

        1. Latvia and the rest of Baltics buy fuel in Russia and Belarus. Similarly Poland was buying a lot of petrochemicals from Belarus until Putin shut off any surplus oil for Lukashenko (oil sold for the internal Russian price, this is what made it profitable for Belarus – reexport for a market price).
          Germany and Switzerland buy from Netherlands, the fuel flows up the Rhine.

          So it is all interconnected. Individual countries data are not so reliable.

      1. Fuel oil is an explicit distillate fraction. In the post quake days of 2012 Japan, Fuel Oil was burned in huge quantities to make electricity. All reactors in the country were shut down that year in a panic. Electricity still arrived at houses because of Fuel Oil, the consumption of which that year was up 44% from the previous year. It would be a very credible reason for UAE imports. Their power sources list “petrochemical products and natural gas” as primary. Nuclear close behind.

        LPG is a popular transportation fuel in India. That’s probably where it went. LPG is included in the “Others” category of constituent oil product consumption. India’s consumption of this category is 41% of their total oil burn. For the world as a whole, 24%.

        1. UAE nuclear?

          Not yet.

          They are building, but do not believe will be allowed to finish. Too close to Iran.

        2. So why they write that 95% LPG went to China?

          ‘China was the main recipient of Iranian LPG in June, taking more than 95 percent of all LPG exports of Iran, according to Kpler.’

          As for the UAE, it is the main Iranian ‘offshore’ in the Gulf, a place where rich Iranians keep their money.

          Incidentally, UAE exports the same amount of oil as Iran: 2mbd

          Nevertheless, UAE consuming more than 1/3 of their production…. is a lot. Therefore, until 2030 the Gulf oil export may fall by more than half (taking into account depletion too).
          UAE and Hungary have similar number of people (Hunagry a bit more), yet UAE oil consumption is 6x of Hungary (1,2 mbd : 0,2 mbd). You ask yourself, what they are doing with that oil in Dubai?!

          And I have just realized that some of the tankers recently blasted near UAE were carrying fuel oil. It kind of makes the Iranian hand in those attacks less plausible – why would Iranians attack their own cargoes?

          Another interesting question is how such oil trading between two oil exporters should be considered – export or internal consumption?
          If UAE says it consumes 1 mbd oil, and then imports fuel oil, it actually masks real consumption numbers, and also from Iranian standpoint, sending fuel oil to UAE is not exactly the same as sending fuel oil to Japan.

          The UAE-Iran trade could be a way to circumvent sanctions, too: Iran would sell to UAE, which then could maybe export more. USA cannot sanction both UAE and Iran.

          The final observations is that in the case of scarcity oil exporter neighbours will probably have a delivery priority.

  26. Ohio just released 2nd quarter horizontal production results.
    ~6.7 Bcfd gas, ~63,000 bbld earl.

    When the now ancient (2012) USGS Utica assessment came out, the average well EUR over an expected 30 year lifetime was .6 Bcf … that’s point six billion cubic feet.
    Roughly 280 wells exceeded that number just this quarter alone (~12% of the total), with about 130 going over 1 billion cubic feet … 7 of which passed 3 bcf for the quarter.

    When the next Utica assessment is released, it will be electrifying.

    Speaking of electricity, ground has just been broken in Ohio for the largest natgas plant in the country – 1,875 Megawatts – the Guernsey Power Station.
    Using GE’s state of the art 7HA turbines, this plant will produce some of the most economical electricity anywhere.

    Cheap power prices is one reason the huge Australian steel maker, Bluescope Steel, is expanding in this region.
    Combining low electricity prices with low cost steel products, along with polyethylene and polypropylene feedstock, a manufacturing renaissance in this area is already underway.

    1. Well, this week should be a turning point. Draws for oil should be tremendous, which natural gas is tied to. Draws will continue. The SnapBack will be huge, eventually. This generation of traders are far more stupid, so who knows when.

      1. Sounds like you’re thinking of the famous quote from Keynes:

        “The market can stay irrational longer than you can stay solvent.”

    2. More senseless hype from Coffeeguyzz – the new GE “state of the art” turbines are known as total flops and are likely to be discontinued:

      GE is setting aside $480 million to repair its 9HA, 7HA and 9FB model turbines as it restructures its power business. The 126-year-old conglomerate has declined to say how many have been shut down, or when it would replace parts – if needed – in as many as 130 such turbines it has produced.

      https://www.reuters.com/article/us-ge-power-exclusive-idUSKBN1O60F4

      1. Absolutely fascinating to witness the ongoing mischaracterization of verifiable data that I occasionally post on this site.

        While I will in no way enter a discussion on future potentialities of GE in toto or in its power generation division specifically, the clear reference to the casting issues during the manufacturing of these massive pieces of equipment as noted in the above article have ALREADY been addressed as the multi billion dollar investment by the owners of the Guernsey plant should indicate to any thinking observer.

        As a side note, GE has been attempting to adress the blade degradation matter with onsite 3D printing replacements.
        The more permanent solution is the removal/replacement of the piece (modular construction playing a role) using the earlier casting process which has proven reliable over many decades.

        Again, the experienced owner/operators of this massive project – Caithness Energy and Apex Power – along with the army of engineers, bonding companies, financial backers, etc – might have a little more standing to validate a $1.6 billion dollar project than individuals opining about a manufacturing shortfall.

        1. Not up to speed on GE power division problems, but if they don’t somehow, some way, come up with a solution to the long-term care insurance policies they wrote, they won’t have the money to pay for anything — not even CEO salary.

        2. Gas turbines should last 30-40 years. This is the problem. They will be obsolete in 5-10. The amount of sunk costs will be tremendous, and GE is losing money hand over fist manufacturing them. See this quote:

          GE’s newer HA turbine can power up in under an hour, more quickly than the H to match fluctuating supplies of wind and solar power, GE said. The large market for the H turbine that GE anticipated “did not develop and has resulted in an orphan technology installation at IEEC,” the filing said.

          https://www.reuters.com/article/us-ge-power/general-electric-to-scrap-california-power-plant-20-years-early-idUSKCN1TM2MV

          The key line there is “power up in under an hour”. Batteries can respond to demand fluctuations in tenths of a second, in addition to being able to get essentially free electricity from the excess that renewables produce. It doesn’t matter how low natural gas prices go. No one is going to want a gas peaker that you still have to actually pay for the fuel.

          https://www.greentechmedia.com/articles/read/oakland-to-swap-jet-fueled-peaker-plant-for-urban-battery#gs.1el5rz

          1. Hi Stephen,
            In places that do not have enough renewables for 24/7/365 full energy deployment yet (everywhere), they need other forms of generation.
            This nat gas generation is a huge win compared to coal.
            It is going to be 2-3 decades before most places can even begin effectively wean themselves from fossil fuel generation.
            Or much much longer at the current pace of action.

            btw- I live near that oakland battery site. We in Calif are not anywhere close to being able to keep it topped off with renweables. Solar and wind in Calif now provide 24% of total annual demand (as of now), and that demand is just for electricity. That demand will increase as electrification of vehicles increases. We’ve got a very long way to go.
            Until then, nat gas.

          2. Mr. Hren

            As my main purpose in my original post was to highlight current Utica production, I do not wish to threadjack into an electricity focused sub thread.

            However …

            Should you or anyone else choose to do some research into these very specific items, you may uncover some … interesting … realities.

            Your first linked item validates the pitfalls of the original H model, yet still understates GE’s ongoing issues with blade degradation in the earlier iterations of the HA (since resolved, according to GE, by reverting to a previous casting process when the parts are manufactured).
            However, your highlighting of the ‘key line’ being “power up in under an hour” is FAR more significant than – apparently – you realize.

            Exactly how much is “under an hour”, Mr. Hren?
            Try 10 minutes, according GE’s specs.

            But, even 100% full ramp at the 10 minute mark does not convey what is going on here.
            At the touted 50 MW/minute ramp rate, in just 7 MINUTES, a typical 7HA turbine will produce MORE electricity than the current 100 turbine Hornsea offshore wind project using a generous 50% capacity factor on ~700 Mw nameplate.

            Think about what I just presented, Mr. Hren.

            A non descript, single gas turbine (bear in mind, this is NOT even including the down stream steam generator) can – in the veritable blink of an eye – dispatch more electricity than the partially built, largest offshore wind farm in the world.

            Reliably.
            On demand.

            Staffing for massive plants like the Guernsey (1,875 Mw) regulary run 30 full time employees.

            These plants can “turn on” during the morning and early evening peak demand hours and sell their product – electricity – when it is most in demand and commanding the highest revenues.

            Anyone seriously interested in this topic might do well to familiarize themselves with the Lazard LCOE Version 12, especially page #11, and be VERY well acquainted with the numbers used in their “Key Assumptions” tables on pages #17 and 18.
            It explains why there is explosive growth in global buildout of natgas power plants, despite the hilarious assertion otherwise in that first, referenced article from Reuters.

            1. >> I do not wish to threadjack into an electricity focused sub thread. <<

              Yes you do!

            2. Mr. Hren

              I do not know how familiar you may be in this arena of electricity generation (I consider myself to be a neophyte), but that near 4 year old SA article contains some pertinent information … specifically outlining the vulnerabilities of peaker plants.

              Seems to be a bunch of online articles recently boosting renewable generation by comparing them with the soon-to-be-archaic peakers.

              Should you choose to wade through the article linked below by Dennis, towards the end of the US analysis, these words … ” improved distribution and grid control in the U.S. is continuing to blur the distinction between baseload capacity and the rest”.

              Just so.

              This directly addresses your comment “… almost no one needs that much power”.

              The rapid transition from multi ‘train’ CCGPs from being solid baseload to just hitting those sweet spots, intraday, – formerly the province of small peakers – is yet another enormously attractive characteristic of Combined Cycle.

              … and, btw, you may not think it significant to go from dark to Hornsea output in 7 minutes … but a lot of other people sure do.

          3. Stephen

            Do you know how many of these battery storage units the United States would need to stop burning coal and gas?

            1. Hugo, no I don’t know about replacement. We were more discussing new builds. I don’t see any reason to build new natural gas or coal generation equipment, especially peakers. The odds of them being obsolete before their planned retirement are very high, and this needs to be taken into account.

              When you find yourself in a hole, the first thing to do is to stop digging.

            2. Stephen

              NO you don’t know.

              I am not surprised you don’t know.

              If you are arguing that no new gas or coal power should be built, then you do need to know what that would take.

              Germany has installed more wind and solar as a proportion of installed capacity than any other country in the world.

              https://www.energy-charts.de/power_inst.htm

              110GW, which is 40 GW more than it’s peak consumption!

              It is equivalent to the United States having 700,000Mw of installed wind and 600,000Mw of installed solar.

              But still over half of Germany’s electricity comes from Coal, Gas and Nuclear.

              https://www.energy-charts.de/energy.htm?source=all-sources&period=monthly&year=2018

              No point having batteries if you fill em up from coal.

              and electricity companies know how much electricity is needed, that is why you do not have to wait 7 minutes for the light to come on.

              https://www.bmreports.com/bmrs/?q=eds/main

      2. Interesting bit from that Reuters article (Dec 2018)

        Demand for large gas turbines is at a 23-year low, forcing GE and rivals to fight hard for fewer deals as utilities buy more wind and solar systems that have become cost competitive.

        This assertion does indeed seem strange given that consumption of natural gas has grown at an average annual rate of 2.4% from 2008 to 2018.

        Perhaps smaller gas turbines is where the growth is occurring.

        see also (from Nov 2018)

        https://www.turbomachinerymag.com/worldwide-gas-turbine-forecast-2/

        1. Many, perhaps most gas turbines have fairly low capacity factor in actual practice, so NG consumption could easily increase just by reducing coal plant utilization and increasing NG plant utilization.

          1. Nick
            As per that Lazard LCOE presentation – bottom of page #18 – a capacity factor of 80% is used.
            (Looking at Lazard’s cap cost and fuel cost, one may further understand the rush to build these plants).
            But it is the comparison on page #11 that tells the tale of CCGPs versus wind.

            When a plant that can – and does – produce 1,000 Megawatts for 12 hours a day – hitting the morning and evening ‘rush hours’ – and stands by burning minimal fuel the remaining 12 hours, it is operating at near 100% capacity for the 50% of the day that it is utilized.
            I believe we have discussed this in the past.

            Bottom line, these gas plants are extraordinarily efficient, flexible, and economical to operate … all the moreso with fuel costs in the $2.30/mmbtu range.

            1. Operating at 100%, for 50% of the time, is equal to 50% capacity factor.

              If NG is very cheap then a utility might increase that to 60 or 75%, while reducing capacity factors (utilization rate) for coal plants in one’s fleet of plants.

              It’s simple fuel switching, and it’s easy when your plants are well below 100% utilization.

        2. Dennis

          The Big Three – Siemens, Mitsubishi, and GE – are fighting for their very existence – power generation wise – in these tumultuous times.
          As that very detailed, informative article described, the short term outlook is not especilly sunny.
          The competition from related gas generators, specifically reciprocating engines, is pretty fierce as Wartsila et al are highly innovative entities.

          What that article skims through, however, is that the growth in Asia, possibly South America, is on the cusp vast change as now natgas is poised to be delivered to the most remote, the smallest of consumers via the innovative LNG processes and hardware.

          I believe Islandboy has mentioned this taking place in Jamaica.
          Likewise, Bangladesh, Brazil, Benin, New Caledonia (massive to miniscule) are lining up to have cheap electricity powered by natgas … delivered and stored in LNG form.

          Places with massive supply, such as the US, stand to benefit enormously from these very large Combined Cycle Generating Plants.

          1. Coffee.

            Based on what I am hearing so far in the CNN town hall, if there is a Dem sweep in 2020 you can forget you unconventional natural gas future.

            Ban fracking. Ban offshore.

            Will see what Biden says.

            1. “Ban fracking.”
              Thats just talk to far left base, and is much less likely an outcome as Trump getting Mexico to write a $50B check for a wall.

            2. Hickory.

              I watched most of this really long town hall.

              Trump may somehow win in 2020 after all.

              Living near an oil refinery, I noticed how Warren avoided answering what she would say if she spoke to refinery workers in Port Arthur, TX.

              Oil refinery rank and file make $125-200K plus benefits. I have seen the W-2’s. I have also seen the 7 figure retirement account statements for the ones retiring at age 55-60.

              Still waiting to hear what we do with all those refinery guys and gals. I guess we put them on roofs installing solar panels?

            3. Hickory is right. Warren is trying to gain support for primaries, and trying not to alienate activists.

              Don’t listen to Republican fear-mongering.

            4. I listened to what the candidates said last night. I don’t watch, listen to or read Fox News.

              I heard a lot of fluff and pie in the sky.

              Biden is number 1 in the polls and Warren is number 2. I focused on what both said and it wasn’t good. Not going to play well in the swing states. What I heard was many are going to be losing jobs, we will retrain them and pay them until they find another job. Bernie said pay them for five years, implying it might take that long to find another job.

              You think last night will help a D get elected in the general?

            5. Ron.

              I guess I am too isolated, living in a place where the food and fuel is produced.

              Like you, I see major problems on the horizon. I didn’t hear any specific solutions. Lots of fairies, pixie dust and unicorns. I did hear a lot of laborers are going to lose their jobs under these plans.

              Kind of like what Hillary said in 2016.

            6. Sadly, Democrats are addicted to honesty. They keep admitting that farming and manufacturing employment is only going to decrease, andthey keep proposing sensible solutions.

              Trump, on the other hand, is willing to promise that he’ll bring back non-existent jobs.

            7. shallow sand,

              I didn’t even know about that climate town hall, wow 7 hours is brutal. A lot of dumb stuff can be said in 7 hours.

              One thing I don’t quite understand, perhaps you can explain it to me.

              The combined problems of peak fossil fuels and climate change need some sort of policy action to mitigate the likely problems.

              I am from a rural area, the largest city in my state has a population of 67,000 people and the state as a whole is in the bottom 10 of US states for population. Though only in bottom third for population density.

              In your rural area do people generally not recognize that something needs to be done about these problems? Ignoring them is not much of a plan.

              I don’t see a lot of concrete proposals being offered by Republicans.

              Note that I don’t expect fracking will be banned or that oil or natural gas production will be shut down.

              I also think that we should try to move away from fossil fuels as it will take a long time to accomplish and waiting for the peak seems a bad plan and will result in a lot of economic disruption.

              Even eliminating all regulations on the oil and natural gas industry (a plan likely to be favored by many republicans) is not likely to increase oil and natural gas output by much.

              Do you have a plan on how we should proceed that would be acceptable to midwestern rural residents?

            8. shallow sand,

              Interesting. So Democrats admitting that people have lost jobs is the problem?

              This is a fact. Automation has reduced the number of people employed in manufacturing, also a fact.

              We could build fortress America and not trade goods or services with other nations, but this is just as likely to decrease the number of jobs as to increase them as the US both imports and exports goods and services.

              Not sure I see a solution to the problem.
              Have things improved measurably under the Trump administration where you live?

            9. Shallow-
              You have a stronger constitution than I- I have trouble swallowing the talk of politicians on both sides when they are in position of having to ‘promise’ things. I’ve been around the block enough times to know that the presidents role has limits, for example it was clear that Trump would get nowhere trying to save the coal industry despite the promises.
              So, I did not catch much of the discussion last night. But I read some about it, and I have to say Klobuchars stance on things issue like this comes across as genuine and thoughtful to me. Regardless of who gets elected, I expect the process of legislation to make any changes rather slow.
              Nobody is going to close refineries, until the market eventually does it.
              I do expect a push towards a gradually phased in carbon tax.
              I also think that democrats like the idea of gradually winning Texas. So, they will go slow on measures that would alienate the industry.
              My two cents.

            10. Hickory. Don’t disagree with you.

              Agree on Klobuchar somewhat. She won’t be reviewing hundreds of thousands of unconventional well permits however.

              These folks don’t seem to understand that oil AND gas come from the majority of the unconventional wells.

              I try really hard to stay balanced.

              Just trying to give the view of someone who lives where the food and fuel production occurs.

              City people cannot understand why rural have went so far R. Just trying to help explain why. There are lots of people here who can’t stand Trump. But it’s hard to vote in favor of losing your livelihood too.

            11. Shallow sand

              I didn’t watch the debate.
              Generally candidates make promises they know they won’t be able to keep.

              As I said before nobody will shut down fracking that will happen on its own as people decide losing money is a bad idea.

            12. “Sadly, Democrats are addicted to honesty,” is the absolute stupidest thing I’ve read on social media in months. It hardly surprises me it would come on Peak Oil Barrel and from Nick G. I would not want to put my full name behind that either, Nick. I did not think you could top the elitist, city boy comment about farmers living a “miserable life,” but you did. Congratulations. You may have a following here; personally I think you are nothing but a big wus.

            13. Seriously? Your comment is just insults. That’s not an argument.

              In the 2016 election Trump lied about 75% of the time, and Clinton lied about 25% of the time. That, sadly, helped Trump enormously, because people believed him. Well..people who watch Fox News believed him…

              https://www.politifact.com/truth-o-meter/lists/people/comparing-hillary-clinton-donald-trump-truth-o-met/

              And farming? Really? 150 years ago something like 50% of the country was in farming. Now it’s 1%. What happened? 150 years of grinding poverty for the smallest farms, which gradually but surely drove that 49% out of business.

            14. Mike. You know my politics.

              I was generally an Obama fan, until he referred to the percentage depletion deduction as a, “big oil tax break.” And then decided that our wells that can’t burn a flare need to be monitored for methane to the same extent as Harold Hamm’s monster flare stacks. I’m sure in both cases, he didn’t bother to take an hour and study the issue, he just let some anti-FF staffer from the East Coast make the decision and write the press release. Oh well, he had bigger fish to fry anyway.

              These candidates are attacking Obama from the left. With plans that are light on specifics.

              Except Bernie is specific. He’s going to pay every FF worker who loses his/her job 5 years pay at current salary plus benefits!

              Mike, you are making $ 1/2 million a year in salary, no? Maybe the Green New Deal will work out after all. Maybe a government buyout of stripper well leases at $150K per BO and 5 years salary for all the workers, which would include Mike. He is out there every day (although sometimes he is on some big iron tearing down an old tool house or something LOL! – I would call that more fun than work!)

            15. Seriously. Debating with you would be like talking to a tree stump; I’ve tried it. We are decades from a transition away from fossil fuels that might occur in such a way as to not cause economic and social chaos in our nation, and around the world. I don’t think you have the social skills to understand how “insulting” you are to hard working men and women in Middle America trying to feed, cloth and transport your privileged ass, nor how much harm and ill-will you seem willing to wish upon them for the sake of your climate fears; do you still check under the bed every night for the Koch Brothers? Good day to you.

            16. Give him a break Mike,
              Like a lot of guys who post things here, reality isn’t necessarily their strong suit.
              Kind of like the president, except he has a sharpy, big lawyers, and executive privilege.

            17. Mike,

              I mean no disrespect to hard working oil workers or farmers. I have absolutely no problem with either group.

              I think that when I say that oil has problems, you take that as disrespect. It’s really, really not.

              It’s just that we’ve gotten too reliant on oil.

              Wouldn’t it have been a good idea, when after WWII when the US started to import oil, that the US did something to prevent dependence on imports? We could have eliminated price caps on oil, eliminated TRRC caps on production (things that took 30 years to happen, way too late), increased fuel taxes to slow down growth in fuel consumption, encouraged EVs, etc, etc.

              Instead we’ve had a succession of oil wars, and spend trillions on the military as a direct result. And, we’ve lost a lot of brave working people who volunteered for the services, and we’ve got hundreds of thousands of wounded warriors who’ve lost limbs and have to live the rest of their lives with unrelenting PTSD (how many homeless are veterans?).

            18. Is someone suggesting the refineries should be shut down by the government?

              Every industry everywhere is subject to market forces. That is the way capitalism works.

            19. Shallow sand,

              Oil will become expensive and people will gradually use less, this likely occurs over the next 20 years or so and cutbacks at refineries are likely to be gradual.

              Did Obama shut down refineries? What is the Republican plan? Promise refinery workers they will keep their jobs forever?

              Republicans have no plan. They are all hat and no cattle.

  27. Wall Street Gears Up For Onslaught Of Oil & Gas Bankruptcies

    Oil and gas companies are facing an onslaught of bankruptcies as the “shale revolution” appears to be coming to an unceremonious end, at least on Wall Street, according to the Wall Street Journal.

    Companies like Sanchez Energy Corp., Halcon Resources Corp. and 26 other oil and gas producers have all filed for bankruptcy this year, already matching the 28 industry bankruptcies from all of 2018. The number is expected to rise as debt maturities for those looking to cash in on the shale revolution and make bets on higher oil prices years ago are now looming.

    5.7% of all energy companies with junk rated bonds are defaulting as of August, the highest level since 2017. The metric is “considered a key indicator of the industry’s financial stress.”

    The defaults are on the rise as companies struggle to service debt, bring in new money and refinance existing debt. The once-darling shale business model has been under significant scrutiny from Wall Street over the last 18 months, adding to the headwinds for many companies.

    Investor interest has faded after years of meager returns while, at the same time, companies struggle to meet their cost of capital with oil prices below $60/barrel.

    Private companies and smaller drillers have felt the most pain thus far. These companies “collectively generate a large portion of U.S. oil,” and their distress is indicative of wider distress throughout U.S. shale.
    Patrick Hughes, a partner at Haynes & Boone said: “They were able to hang in there for a while, but now their debt levels are just too high and they’re going to have to take their medicine.”
    Related: OPEC Abandons ‘’Whatever It Takes Strategy’’, Boosts Production

    Halcon filed for bankruptcy in August, just three years after it last filed for bankruptcy, due to a production slowdown in West Texas and higher than expected processing costs. The company’s chief restructuring officer (which we guess is probably becoming somewhat of a permanent position after filing bankruptcy twice in 3 years) said the bankruptcy was partly a result of lenders cutting the company’s credit line by $50 million earlier this year after it violated its debt covenants due to too much leverage.

  28. The three biggest producing shale regions in the US are the Permian, Eagle Ford and Bakken. EIA gives historical data https://www.eia.gov/petroleum/drilling/

    Bakken new production is struggling to be ahead of decline as shown below in the chart. Based on extrapolating the trend line, it appears that the Bakken should peak within the next six months.

    1. Eagle Ford continues to struggle to grow as new has fallen just under legacy decline.

      1. Permian continues its production strength as new is exceeding legacy decline by about 75kbd every month, using the trend line. That’s equivalent to 450kbd every six months.

        According to EIA data, actual Permian production increase has been 365kbd over the past six months.

        1. Been struggling to make heads or tails out of projections and EIA data. I can’t. What the EIA gets from companies on the monthlies is the only thing that makes sense. Their other info I mentally file in my trash can.

          1. GuyM, my charts above are based upon the same raw data as EIA monthly data, except for the last three months of July, August and September.

            1. Tony, not exactly. Most of the EIA data is recent months projections by drilling info. The monthlies are mostly responses of production directly from the companies.

        2. EIA 914 shows 85 KBD increase for Texas from December 2018 to June 2019 and a 50 KBD increase for North Dakota. It is very doubtful that there will be a 900 KBD increase from December 2018 to December 2019. ND shows zero growth so far from December 2018 to June 2019.

          1. Significantly curtailed Bakken output due to flaring limits of natgas.
            Helms has repeatedly stated this for months.
            New gas processing plants are starting come online shortly.

            1. I do not think so. The NG capture is only 76% vs. stated goal of 88%. The depressed NG prices makes it difficult to capture NG. For economic reason, Texas allows flaring even when pipeline is available.

            2. If nothing else, the concern over flaring limits is a very peak oil thing. Historically, the industry has rarely been concerned about waste. Now they’e thinking —
              “why are we wasting all this energy?”

            3. KV
              The Bakken operators, in somewhat similar fashion as their Permian counterparts, have little to no economic incentive to capture, process, and transport the associated gas that comes with targeted earl.
              However, in a bit of a contrast to Texas operations, the ND state regulators have been more stringent – albeit flexible – in holding the flaring percentage to already published limits.
              On the ground circumstances (construction delays, plant shutdowns, etc.) have prevented the by-now-expected 400/600 MM cfd gas capturing/processing to be taking place.
              These obstacles should be gone by this fall, enabling higher oil production to resume.
              The fact that 3 oil takeaway pipelines are in the early planning stages (cumulative capacities approaching 3/4 MM bbld) should indicate future production potential.
              These pipelines are expected to source Montana and Wyoming output, as well as North Dakota’s.

          2. Yes, it’s a real shell game on what US production is. But, I believe you are correct to choose the 914 as the correct shell, Krishnan. Two to three years ago, I did not believe it. But, research proved me incorrect. But, to gauge Permian, you have to consider both Texas, and NM.

            1. Not who the question was directed to, sorry if I am interrupting. However, based on Statements of Hamm, and Whiting financials, we are sure to see a temporary slowdown, at least. And, even NM decreased a little last monthly.

            2. I typed wrong. Sorry for that mistake.I should have said New Mexico increased by 50 KBD instead of North Dakota. But my very next sentence said ND growth was zero.

              ND should not grow if NG flaring rules are imposed. Sitton in Texas said he will allow flaring rather than force NG to be put in available pipeline if the costs were not judged economic.

      2. Tony, the June data is suspect as well. The last month’s data, September in this case, is just a wild ass guess that, historically, has been off by a country mile.

        A 5.5-year chart gives a much clearer picture than a 2.5-year chart.

  29. Seems like the massive negative sentiment in oil created since May and fueled further in August due to recession fears is changing. When OPEC+ makes a decision to tighten it can not result in anything other than a period of tight supply and higher prices. And the timing of this is not always as communicated. The political power struggles within oil makes the picture of what is happening obscure for most. But the guidelines are what is the marginal cost for more oil in the market and what is the demand for it. I tend to think the demand for oil is increasing at current prices. People accept an even higher price in affluent countries, but not so much developing countries. And then you have the inelastic nature of this market, that can make prices go to extremes. Now, I think we are in the very early phase of a oil bull market for some time.

    1. It is time for some new angles. The negative sentiment created by the Trump adm. has been reinforced by OPEC+. And now they seem to tighten, not as communicated. The intellectual work that has to be enhanced, is in what way we cope with dwindeling cheap energy resources. And the the way it is approached is by kicking the can further along the road. I and have to say the Trump adm. is responsible for this route. In the EU, not at least in Norway, the climate change agenda is state sponsored. I am not one to have a strong opionion about climate change, but the goal of modest energy consumption in a renewable path is very much an understandable aim. But the full throttle more production of oil & gas with even lower prices are sure to fail. And IMO the failure of that policy starts now.

        1. Yes, I think even the EIA has to give up reporting anything else the next few weeks if OPEC+ are serious. I suspect something is changing now. I guess OPEC has found out that pushing the price too low entracts too much speculative investments in this low interest rate environment. This year they have more tried strangling shale oil. And I guess that strategy is better. Anyhow; guess what? At least 6 months+ with bull market with a weaker response from shale than in 2018 could be the result. I am pretty sure this it is the case that this bear market would not last 1 more month (looking at the last OPEC statements; they want to keep their credibility when it all happens).

          1. I don’t think, the draws of gasoline on the East Coast are reflected yet.

            Everything is delayed in reporting. Just hide and wait.

            While everyone watches the US, it not the yen and the yang.

  30. https://www.reuters.com/article/us-centennial-rsrc-outlook/centennial-resource-ceo-sees-u-s-oil-output-growing-slower-than-forecast-idUSKCN1VP26M

    Sep 5, 2019
    Shale pioneer Mark Papa, chief executive officer at Centennial Resource Development Inc(CDEV.O), said Tuesday that he expects U.S. oil output will grow by 700,000 barrels per day in 2020, which is slower than government estimates.

    The U.S. shale business is feeling the effects of lower crude oil prices, capital constraints imposed by Wall Street investors demanding fiscal discipline and well spacing issues, Papa told investors at a Barclays energy conference in New York.

    “We’re seeing a lot of difficulty in growing U.S. oil production,” Papa said, noting that U.S. output has been hovering around 12.1 million bpd for months.

    He said the best locations in the major U.S. shale basins – the Permian Basin, Bakken and Eagle Ford Shale – are being depleted and the need to move drilling to second- and third-tier locations will have a “profound” effect in six months to three years.

    In separate remarks in Toronto, Dallas Federal Reserve Bank President Robert Kaplan noted that U.S. energy companies are being cautious about capital spending, with much of this year’s production growth coming from shale wells drilled previously that only needed to be hydraulically fractured.

    “If that cautiousness continues, we would expect net production growth is going to be meaningfully lower next year than it is this year,” Kaplan said.

    The U.S. government has estimated that the country’s crude oil production will average 13.3 million bpd in 2020, which would be a record level.

  31. Great article. I disagree with one of your affirmation though:

    “The drilled but uncompleted well inventory (“DUC”) is back to normal,”

    I don’t exactly know what a “normal” DUC count means. But according to eia’s DPR, the overall DUC inventory is just slightly below its all-time high (8’108 against 8’286 in February). From the major LTO basins data:

    – The Permian DUC count is at an all-time high, 50% of the overall count (4’000). The progress is strongly reduced compared to a year ago.
    – Eagle Ford DUC count is almost at its all-time high, and started to decrease after 2.5 years of slow increase.
    – The Bakken, Niorbara and Appalachia DUC count is at its lowest since 2014.

    Of course, eia’s DPR is inaccurate for data that have less than a year. My little comparisons are probably completely off from the reality. A year ago, DPR said there was 8’269 DUC in August 2018 and the number was revised down to 7’179.

    I anyway think that operators increased completion to maintain production levels, and they reduced the DUC count as the amount of freshly drilled wells is down. This is not visible in the DPR yet.

    There is still quite a large amount of DUC anyway. Pretty difficult to make an accurate guess on US oil production, IMHO.

  32. This perhaps should be in the non petrol thread, but in the last analysis, the only real reason to worry about the price of oil holding up is whether there is any real competition or substitute for oil. An economic slump is by definition always temporary, and depletion literally guarantees that oil must eventually get to be ever more expensive, unless we learn to live using only a very little of it.

    And if the world gets the series of WAKE UP bricks upside the head I mention so often, the competition could arrive a hell of a lot faster than anybody except Tony Seba fans expects it to.

    https://www.teslarati.com/tesla-model-3-production-line-gigafactory-3-china-pictures-video/

    1. How many fully electric cars will be sold this year?
      How many vehicles will be sold this year?
      What is the fuel consumption of Aviation and what is it increasing by?
      What is the fuel consumption of Marine transportation and what is it increasing by?

      How many fully electric vehicles need to be sold on an annual basis so that total oil consumption of transportation starts to go down?

    2. EV sales could be turning over. 2019 US EV/Plug in sales could actually come in LOWER than 2018. Tony Seba never saw that coming. Global sales may beat 2018 but depending on economy and trade fears – who knows. I feel EV exponentialists are the ones about to get the Wake Up Bricks.

      https://insideevs.com/news/368729/ev-sales-scorecard-august-2019/

      No this segment of thread doesn’t belong here – belongs in non-oil, other than the fact that low oil price is a probably an indicator of a weakening economy which is then reflected in things like EV sales.

      1. From the figures I would say total sales will be higher. But globally fully electric vehicle sales will need to be hitting 60 million for oil demand to level off.

        We are a long way from that. Perhaps 2035

      2. There was a blurb recently about some collapse in growth rate in China auto sales of the EV flavor. 120% y-y last year some month vs same month this yr . . 2% y-y.

        It was an article about where the Chinese smog was coming from and gasoline might not have been it, coal-fired electric plants were blowing in.

  33. Dan Steffens here. I’m the president of the Energy Prospectus Group based in Houston.
    https://energyprospectus.com/member-benefits/

    I wrote the article for OilPrice.com that got this discussion started.

    We have a lot of petroleum engineers and geologists in our Houston group. We have been discussing for over a year that EIA’s wild ass guesses that U.S. oil production would just keep going up by two million BOPD or more each year are insane. Upstream companies eventually run out of Tier One leasehold and at some point you can’t drill enough new wells to offset the ever increasing decline of the legacy wells. The math just doesn’t work. There is NO WAY that U.S. oil production can increase at the current active rig count. Completing a lot of DUC wells cannot bail us out this year.

    That said, I do think there is more upside for U.S. production, but not at $55/bbl WTI. The “Right Price” for oil (IMHO) is north of $65/bbl today and probably $75/bbl in 2020.
    Watch my podcast: https://www.youtube.com/watch?v=qtSpBhPqUTg&feature=youtu.be

    1. Dan,

      The EIA calls for about a 660 kb/d average annual increase in C+C output over the next 2 years, look at monthly STEO data from Dec 2018 to Dec 2020, the increase over 24 months is 1320 kb/d. Note sure where the 2 Mb/d annual increase estimate comes from unless you are including NGL (which I tend to ignore).

  34. Stock draw for Total Petroleum stocks of 4.9 million barrels for week ending Aug 30, 2019 (crude plus products).

    https://www.eia.gov/petroleum/supply/weekly/pdf/table1.pdf

    If we leave out propane/propylene (2.9 million increase) and other oils(1.8 million increase), the draw is 9.6 million barrels.
    Crude -4.8 million
    Gasoline -2.4 million
    Distillate -2.5 million
    Jet fuel +0.9 million
    Residual fuel -1.6 million
    Total of 5 categories above -10.4 million barrels

    I think GuyM called an 11 million barrel draw the other day, nearly spot on for liquid fuels.

    1. It should not be that big through the fourth quarter and first quarter of 2020, after that it makes sucking sounds. But that depends on what they can ship out. The last two weeks have averaged over 3 million barrels a day, and the pipelines to Corpus just started. And, production pretty stagnant. Quien sabe? Don’t look good, at first glance.

  35. EIA’ s “Short-Term Energy Outlook” (STEO) has been too high on oil production growth every month this year. EIA’s 941 report (actual production primarily from the states) shows that U.S. crude oil production averaged less per day in six months ending 6/30/2019 than December, 2018 oil production.

    There was a surge in production last December as a lot of DUC wells were completed, so they would be included in year-end reserves reports. November 2018 to June 2019, U.S. oil production increased by ONLY 80,000 BOPD.

    YOY the production will be up in 2019 just because we started from a much higher point.

    Unless the active rig count goes a lot higher, which won’t happen until oil prices go a lot higher, there is little chance that U.S. oil production will increase in 2020.

    IMO EIA’s forecasts (based on formulas) are too high.

    On 9-3-2019 Raymond James published a detailed report (“Energy Industry Brief”). They have significantly lowered their total liquids (crude oil + NGLs) production growth forecast for 2020.
    RJ: “U.S. petroleum liquids supply growth will struggle to grow more than 500,000 bpd annually! Given that consensus expectations for U.S. oil supply growth in 2020 are closer to 1.5 million bpd, our estimate of only 350,000 bpd of 2020 U.S. growth is WAY below consensus and VERY bullish for oil prices next year.”

    1. Suppose supply is insufficient and the price does not increase. I guarantee you there’ll be all sorts of people offering up, well, probably as many explanations as there will be people that allows them to retreat to the sanctuary of “let’s just forget it happened”.

      BTW, if the US desperately needs that oil and the price will not fund it then the price will be changed and market forces will have nothing to do with that change. In fact, maybe the price won’t change at all, but money will just be given to the producers by whomever — Treasury, DOE — in return for oil. Not a hell of a lot different than subsidizing farmers, who also produce something desperately needed.

    2. Dan,

      The STEO has average C+C output growing at about 1.35 Mb/d over the Dec 2018 to Dec 2020 period, and about 620 kb/d in 2020 (from Dec 2019 to Dec 2020). Not sure where Raymond James consensus estimates are coming from, but they are 2.4 times higher than the STEO monthly estimate for C+C output in the US.

      Generally the STEO has been a bit high, no forecast is perfect. Consider the STEO from Jan 2018 which predicted Dec 2018 US C+C output would rise by 680 kb/d from Dec 2017 to Dec 2018.

      In that case their estimate was far too low, with the actual increase in US C+C output from Dec 2017 to Dec 2018 at 2064 kb/d, about 3 times higher than the EIA had estimated in Jan 2018.

      In Jan 2019 the STEO expected June output would be 12.05 Mb/d, actual output was 12.082 Mb/d, slightly higher than the Jan 2019 estimate.

      Chart below compares Jan 2019 STEO with actual EIA monthly C+C output estimates (latest data).

  36. Hi Dennis, Are you sure the rigs being stacked now are older and less powerful? My impression is that the older and less capable rigs have been sitting in the weeds for quite a while now. Rigs being stacked now, September 2019 are generally good rigs that finished contracts and couldn’t get new work.
    The cyclical nature of the drilling business means that sometimes you have plenty of work even for your crappy assets, and at other times your top line rigs and crews will sit.

    1. DCLonghorn,

      I don’t work in the oil industry, but from what I have read there are a variety of different horizontal rigs operating. I am simply assuming if one is stacking rigs, one would choose to stack those rigs that are the least capable and keep the newest and most efficient rigs running. I could be wrong on this point, I am speculating on how I would run an oil company if I were the CEO or a petroleum engineer giving advice to a CEO.

      How would you make these choices?

      1. Dennis the point I was making is that the rigs still running are good rigs. The crap was laid down in 2015. What gets laid down today has more to do with customers, contacts, money and who knows the right people than which rig is newest and most efficient.

        According to Baker Hughes, in November 2014 there were 1371 HZ rigs 1917 total. A year ago there were 918 HZ and 1048 total, now there are 783 HZ and 898 total.

        There is not a driller that is choosing to lay down their rigs, they are fighting for every contract and sometimes the newest and highest specs win but sometimes it is good rig with a great crew, or experience drilling a certain area, or maybe somebody’s brother in law is able to get a deal.

        By the way, how do you define the newest and most efficient rig. Do you mean the rig drilling the one mile 4000 foot San Andres or the one drilling the deep two mile lateral.

        1. dclonghorn,

          There would be no way to specify the newest most efficient rig precisely. For any given well that is to be drilled a company that has 10 rigs available, but only 5 wells to drill will choose the 5 rigs and crews that are best suited to get the job done for the lowest cost. I imagine that is how a company would do it, if their aim is to make money. I tend to assume that is the aim, perhaps the oil industry works differently. 🙂

          So the choice I am talking about is which rigs are active and which are idled.

          Also note that the “who you know” method only makes money if the people you know are the best in the business, otherwise better to choose the best equipment you can get for the job at hand and the people that are best able to get the job done that you can find.

  37. My guess, it has peaked. Longer flat plateau, but pretty flat for awhile. What the independents did before January 2019, and what they will do in the future are apples and oranges. Dennis is beginning to get it, but it will probably, again, be between our estimates. Price is not going to budge much, until inventory approximates zero, next year. The traders are mostly computerized, with not too bright programmers. Everyone gets too caught up in projections, and ignores fundamentals. E.g, did June production for June surpass May per the monthlies. Hint, keep an eye on EIA monthly 914s. And, up to June, it was in large part due to the cheaper DUCs.
    Ten years, baby, that’s the lifespan put on shale by both EOG and Pioneer, That’s the max, and probably a lot less. The lifespan of independents are severely limited, unless they protect themselves by being bought up. And, if you do, you have been consumed by the Borg, who only want the oil, mostly, for their US downstream. Not to export. “Resistance is futile”. Exxon just received another $4 billion in sales from their North Sea to finance this, and more pending. Chevron acknowledges they jumped a little early on Anadarko, but still made 1 billion as compensation. Which still puts Oxy in the crosshairs, but at a little better price. Most will not be as lucky as Oxy, EOG, and Pioneer. And are the majors responsible for any part of the horrible oil prices? Guess.

    https://oilprice.com/Energy/Crude-Oil/The-Coming-MA-Wave-In-US-Shale.html
    And who will get the benefit of the best investment, the fish or the whale? And, personally I consider the Oxy purchase of Anadarko as insane.

    1. RE: Price -less than a year ago it $76. I think you will see the price rise if inventories start going down meaningfully.

    2. GuyM,

      I think much of the reason for the flat output lately is that there was a spurt of new conventional wells completed last year as oil prices rose to $75/bo. Conventional completions fell as oil prices fell (or at minimum the rate of increase fell to zero), this led to and increase in the rate of decline for conventional output compared to normal times, this decline rate will gradually subside back to normal levels and the increase in tight oil output will continue leading to a rise in US output.

      In short I disagree that the peak in C+C output has arrived, or if it has it will be a temporary peak.
      At $70/b we might see a peak in 2024, at $90/b by 2024 the peak will be 2025 for US output. World peak will be 2025 or possibly 2026 if oil prices over $100/b lead to greater investment by OPEC/Russia and various deep water plays.

      Much depends on the price of oil and that is difficult to predict.

      1. To me, I see a big shift in ownership in the Permian, and elsewhere. If it does not, then you are probably correct, eventually. Quien sabe?

        1. I mean, to me, I see no financial logic in the current price of oil from an accounting perspective. Yet, the market is not dealing in logic, now. You have a mass of independents who are floating belly up, because they have no profits, or cash flow to increase. On the other hand, you have pundits like Rystad, and the EIA have them plowing massive amounts of capex into production to increase production by 1 to 1.5 million a year. I’m afraid, I’m going with GAAP, here. Someone is crazy, and it probably is not the accountants.

          The era of financing capex by investment or lending has gone bye, bye. Nobody does, or should trust dead fish.

          Suppose the price of oil went up to $70 tomorrow. Would that make a difference? Not much. For the majors, sure. But they are mostly interested in downstream. For the few independets, who can still walk, yeah, a bunch. For the majority, they will only see the losses drop. They still will not have enough to drill.

          In the meantime the increase in US production is the yen and the yang of world increase in production. If it doesn’t happen, world inventories will report a drop, sometime. Usually posthumuiosly.

          1. GuyM,

            The EIA does not predict 1.5 Mb/d increases, that is a myth based on looking at annual averages.

            Try

            https://www.eia.gov/outlooks/steo/data/browser/#/?v=3&f=M&s=0&start=201501&end=202012&maptype=0&ctype=linechart&linechart=COPRPUS

            Below is the Short term energy outlook estimate for Dec 2018 to Dec 2020 for L48 excluding GOM. A 700 kb/d increase from Dec 2018 to Dec 2019 and a 620 kb/d increase from Dec 2019 to Dec 2020. Note that I think their forecast is too high, but the point is the claims that the EIA is predicting 1.5 or 2 Mb/d annual C+C output increases near term are incorrect.

            9.64
            9.45
            9.46
            9.5
            9.68
            9.73
            9.81
            9.92
            10.04
            10.21
            10.32
            10.36
            10.34
            10.33
            10.34
            10.39
            10.46
            10.54
            10.63
            10.72
            10.79
            10.87
            10.93
            10.96
            10.96

        2. GuyM,

          How much of the tight oil can majors refine, assuming all announced plans come to fruition? I cannot seem to find info on tight oil refining capacity that is very recent (most studies from 2015 and earlier,)

  38. My guess is that the seven US shale regions will peak at 9.5 mbd in 2022. The data is from the EIA DPR.
    https://www.eia.gov/petroleum/drilling/xls/dpr-data.xlsx

    The legacy decline rate has been over 500 kbd/month since Dec 2018. This means that production from new wells in a month has to be greater than 500 kbd to increase total US shale production. In Sep 2019, legacy decline was 564 kbd. In early 2020, legacy decline will surpass 600 kbd/month.

    Note that in Jan 2019, the EIA data showed that new production was only 395 kbd, much lower than the 513 kbd legacy decline rate. Feb 2019 new was also less than legacy. Anybody know why Jan & Feb new were below legacy? This Jan/Feb 2019 new production drop is reflected in the EIA monthlies as US crude oil production was 12.0 mbd in Dec 2018 and it fell to 11.7 mbd in Feb 2019.
    https://www.eia.gov/petroleum/production/

    1. Tony,

      Keep in mind that the DPR is based on a model that is not very good, their estimate for legacy decline and completions etc is also model based. In addition the output is for these “regions” and this includes conventional output as well as tight oil output.

      In any case, I ignore the DPR and focus on “tight oil production estimates by play” at page linked below. Those estimates are not perfect, but they are the best we have, older shale profile estimates (up to Oct 2018) are also pretty good, just take Enno’s latest estimates but focus on the data through Oct 2018, the only thing missing is vertical tight oil output and output from wells that started producing before Jan 2008, by using NDIC data most of this gap can be filled, leaving only vertical well tight oil missing (most of this would be from Permian basin and Bakken/Three Forks).

      https://www.eia.gov/petroleum/data.php

      My guess for peak tight oil is 9 Mb/d in 2025, so somewhat similar to yours, but this assumes higher oil prices ($90/b by 2026) and no GFC2 before 2025. Either assumption could be incorrect.

      I believe most tight oil plays except the Permian basin will peak in 2022, but Permian output will increase by more than the decrease in other basins until 2025 in my model.

      I am working on updating my Permian Basin model so this might change.

      Another factor to consider is that the completion rate increased over the 2017 to 2018 period which is why legacy decline increased. Note what happened in 2015 and 2016 to legacy decline in 2015 and 2016, it is possible that as completion rate flattens that the legacy decline rate will do so as well.

      1. Tony Eriksen,

        Model below assumes a Brent oil price that rises to no more than $70/b in 2017 US$ and the scenario reaches that price in Aug 2020 (Sept 2019 price in scenario is $58/bo for Brent in 2017 US$). The peak is 2024 for this scenario. Completions for US tight oil are constant in this scenario from July 2019 to June 2024.

        1. Using the model I find legacy decline for scenario above is as in chart below.

      2. Dennis,

        I also believe most tight oil plays except the Permian basin will peak in 2022, maybe earlier, perhaps Bakken.

        I agree with Ron that the Achilles heel is the relentless increase in legacy decline.

        Tony

        1. Tony

          Look at how legacy decline estimates change from older reports. Perhaps this will convince you that the legacy decline estimates are not very good. Only use DPR data 12 months old and older and you might be ok.

          1. Tony,

            I agree in principle, but if you assume the increase in legacy decline will continue on its recent trend you will get poor predictions. If the completion rate increases from the current level as of July 2019, then perhaps we will see an earlier peak, if completion rate remains about where it is peak is lower and later in 2024 and if the completion rate gradually falls the peak could be later than the constant completion rate scenario. Clearly future completion rates are not known, so the peak depends on the assumptions one makes. Perhaps you assume an increase in the completion rate, and if that occurs you may be correct.

            Also oil price will affect the number of completions.

            1. Wouldn’t it be great for mitigating climate change and at last starting seriously with the transportation energy transition if ‘ Peakoil’ comes rather sooner than later ?

              Better be confronted with the problems regarding this transition and world economy as soon as possible. Anyhow it will be very difficult to stay under the two degrees C average temperature increase.

            2. Han,

              If oil prices remain low the peak may come sooner, but it is doubtful that will be the case.

              Better to reduce demand with a fast transition to EVs, better public transport, cities designed for walking and biking, car pooling, combining trips, ride sharing, etc. Peak oil due to less demand and lower prices would be a good thing, peak oil due to supply constraints and very high oil prices might be an economic disaster associated with much suffering.

            3. Dennis,

              More than 10 years ago Nick wrote on the oildrum that (fast) transition to EV’s is necessary ASAP. Now still the same should be said, but that fast transition is not going to happen. Same for carpooling and ride sharing.
              There is an increasing demand for EV’s, but world population increases every year with 80 million. A lot still will buy (their first) ICE cars.
              Many big airports will be build soon or are under construction already. Those plans don’t take into consideration that Peakoil is
              near.
              MSM talks about energy transition for reason of climate change. Hardly ever for reason of fossil fuel depletion, and if that is mentioned, it is in one sentence and then the subject climate change resumes.
              Peakoil for most people is just a phenomenon too hard to understand, because it has to do with velocity of extraction.
              High oil prices we had already, followed by an economic recession, though some argue that was the reason for the recession, you too IIRC. Certainly oilprices above 100-120$ are a big problem for the many people with low income.
              When (not if in my view) there comes a next spike in oilprices the same will happen:. demand destruction, and Peakoil will then remain still under the
              surface.
              I don’t believe in your point of view that slowly rising oilprices will accelerate transition into EV’s, etc. Above all because I don’t think oilprices are going to rise slowly the next 5-10 years. But who knows, like all of us here I could be wrong.

            4. Han,

              Oil prices will rise, perhaps quickly or slowly, but as resources deplete either there will be a fast transition to EVs which will allow a slower rise in oil prices or there will be a slow transition which leads to higher oil prices. The higher the oil price the faster the transition ceteris paribus.

              I agree that we don’t know what oil prices will be or the speed that a transition to EVs might be accomplished.

              In the past I have tended to underestimate the pace of future technological change.

              I thought smart phones were a dumb idea 10 or 15 years ago, thought I would never buy one. I was incorrect.

        2. Tony,

          I agree that many tight oil plays (Bakken and Eagle Ford especially) will likely peak by 2022 (and perhaps earlier), the Permian may increase enough to offset other tight oil play so that the US as a whole peaks in 2024 in a constant completion scenario from 2019 to 2024 and Brent oil prices remaining at $70/b or less long term in 2017 US $. Different oil price assumptions or completion rate assumptions would give different results.

          1. An alternative scenario with higher oil price assumption (Brent oil prices rise to $90/b by 2027 in 2017 US $) and completion rate is constant until the end of 2020 and then rises gradually by 100 completions per month over a 50 month period (an increase of 2 per month). Peak output in 2025 at 9.74 Mb/d, tight oil from all basins except the Permian peak in 2021 at 4.18 Mb/d.

  39. What if 1.77 Mbpd liquid fuel was removed from the US supply chain?
    What be price of oil then?

    This 1.77 Mbpd oil equivalent is what the US biofuel production is,
    primarily corn ethanol. About 40% of corn acreage devoted production which directly compete with oil producers.
    And each gallon is subsidized by you at 45 cents/gallon.

  40. Regarding US shale production 2019, 2020 I believe EIA monthly 30.09 / 19.7 ,30.10 / 19.08., 30.11/19.9 and 30.12 / 19.10 will give good data for the future trend. As they say the decrease in June of 33k was related to pipeline capacity , well than if additional pipeline capacity open in beginning of August should EIA monthly for Oktober show significant increase in shale as I believe that is not affected by thyphones , storms in the GOM. Beside that there is a huge draw in inventories that soon is below 5 years average. Guess also some indication will be oil used in US + oil exsported- stock decline – import. If additional nr. of riggs continue to decline and oil price will continue WTI 50-60 range decline or flat shale production will be reasonable that hopefully also EIA would take serious if not to late. The future development in 2020-2025 will than lay in the hands of the majours, its owners/ board but in general many are sceptical if return is far from what they have budgetted or monet could be invested in other part of their Buisiness with much higher cash return in same period related to investmebt , risk.

  41. It looks like I could be right that there may be an Iran/UAE swap strategy in play in order to circumvent the sanctions:

    https://oilprice.com/Latest-Energy-News/World-News/OPEC-Not-Only-Produced-More-Oil-In-August-But-Shipped-More-Too.html

    ‘OPEC’s total August production was estimated at 29.61 million barrels per day, according to a Reuters survey, with Saudi Arabia, Nigeria, and Iraq all increasing their production. ‘

    So here is a riddle:
    UAE in August did not increase production, but did increase exports by 300kbd. On the other hand, UAE imported 200 kbd of fuel oil from Iran. Does 300kb oil equals 200 kb fuel oil?

    15,73 mbd Gulf exports – this is more or less what Europe, without Russia, consumes.

    Another point:
    I have skimmed over Iran pages of Simmons masterpiece, and he claims that half of Iranian oil (1,7mbd in 2003) comes from 4 giants: Agha Jari, Gachsaran, Marun, Ahwaz (p. 298). Two of those fields are to be now under 10% of UOR, two under 20% UOR. Should all four go offline, Iran actual oil production would represent ‘sanctioned’ level, more or less. Should just two go offline, it should fall by ~ 1 mbd.
    Another clue that sanctions may be here just to mask the Iranian decline?

    Why information about 1mbd Iranian exports to China suddenly disappeared from oilprice? To hide that the sanctions are fake? Shouldn’t such a piece of information boost the case for the trade war? Everybody but China kept away from the truth? Europeans obviously not on the train, with Macron inviting Iranians to G7 Biarritz.

    The plan may be to break China with the trade war, food shortages, credit collapse. Europe sided with China, Europe takes collateral damage.

    Oil scarcity will end European Union. Oil shortage in any EU country will put a strain on other members.

    Is Iran production now 1,7 [consumption] +1 [China exports]= 2,7 mbd ?

    It is actually an interesting idea, to use sanctions to remove oil from the market, for private sale, so to say. If I can think this, someone else can too….

    There have been some rumours about some “oil of unknown origin” coming to USA, oil which actually originates in Iran…. Another candidate, Venezuela, seems to be too disordered now. But both Iran and Venezuela produce coveted heavy oil. No one is troubling those Iranian ship-to-ship oil cargoes…. yet US navy has more ships than Iran has tankers….Is it really USA, not China, buying those 1mbd?

    If this is true, sanctions will never end…. But no Gulf war too;) It woul be good for the Iranian goverment too, who may easy control people with the help of enemy…. “Iran is under siege”. . Iran may entirely run out of exports by 2030 anyway. The narration will be “sanctions destroyed Iranian oil industry”.

    And yet if Gulf exports 10 mbd in 2030, we will be lucky

    1. Too much convolution and secrets held by more than one person don’t stay secret very long.

      Iran is targeted for sanctions primarily because they are Shiites and the Saudis want them smashed and hypes their threat. There doesn’t have to be any conspiracy beyond that.

    2. One of EU-
      When I read your posts, I feel like someone is trying to trick me.
      It actually seems like a sophisticated misinformation campaign.
      Is your dayjob some kind of fake news creator, political commentary, or fiction novel writing?
      You are very good at it!

      “It looks like I could be right”,
      “So here is a riddle”,
      “this is more or less “,
      “Another clue that …. may be here just to mask”,
      “If I can think this, someone else can too”,
      “There have been some rumours”,
      “If this is true”,
      “The narration will be”,
      “we will be lucky”

      1. If anytthing, peak oil is
        one big exercise in misinformation, isn’t it?

        Well, I have an investigative streak, and I am good at that 😉

        But my method is simple: timelines and coincidences.

        Isn’t it strange that without increasing production UAE exported 300 kb more in the SUMMER when they need additional power?

        It also struck me that Iran’s recent demand for a line of credit in advance [cash raising pretty similar to Aramco bonds] from Europe is a) nuclear blackmail a la North Korea; or, b) ‘poor me’ strategy; or, c) harbinger of a new mode of oil payment, which would be essentially buying a stake in future production…?

        If USA is a final destination of a part of Iranian oil, I suppose it would be a matter of accounts owners only knowledge. If oil was reexported, no Iranian would meet no American. So not many people would know. For USA, it would be a low cost opportunity to secure some Iranian oil without enraging Saudis. Isn’t the USA way often to do exactly that what they have forbidden someone else?

    1. Horizontal Oil rig count same as last week at 646. If we narrow down to Eagle Ford, Permian, Niobrara and Williston basins and look at horizontal oil rig count, we find that the count increased by 4 from 525 to 529 from week ending 8/30 to week ending 9/6. This is down from 580 one year ago, about 9% lower. Six months ago the horizontal oil rig count in these 4 tight oil plays was 579 rigs.

      Outside of these 4 tight oil basins there are 117 horizontal oil rigs operating onshore in the US as of week ending 9/6/2019, one year ago the total for the same area was 186 rigs, so a drop of about 37%. Note that the 4 tight oil plays of Permian, Williston, Eagle Ford, and Niobrara produced about 90% of US tight oil output in June 2019. So this 37% drop in rigs might explain the steep drop in conventional oil output over the past 9 months.

      Data from pivot table at page linked below

      https://rigcount.bhge.com/na-rig-count

  42. At end of August number of active riggs was 207 fewer than one year ago or 16,5% reduction. At the same time oil production in US was 11.0 Mbpd 30.08.2018 and 30.08.2019 it is 12.4 Mbpd. At the same time also oil price have declined, number of Companies goes bancorupt have never been higher and EIA believe the growth in shale will continue. If this was related to pipeline constraint that was improved in beginning of August it is strange not active rigs went up in August when pipeline capacity was added….

    1. Freddy,

      Focus on horizontal oil rigs in major shale plays, those in fact dis increase the first week of September. For Permian basin (where the pipeline constraints were a problem) horizontal oil rig count decreased from 434 for week ending Sept 7, 2018 to 394 for week ending Sept 6, 2019, a drop of about 9%.

      https://rigcount.bhge.com/na-rig-count

      See pivot table at link above.

      1. Dennis, I agree in your point that Horizontal drilled wells have much higher production. From the link I see that 12 months ago in Permian had 484 Riggs , now it is 57 less or 11,8 % . What is also a fact is last 12 month the WTI price drop about 20 usd… https://www.bloomberg.com/quote/CL1:COM .
        If DUC take 40% to drill and 60% to compleate of total cost they need lots of profit to drill new wells after the DUC’ that still can be profittable with WTI in 50 usd range only to fill the decline from producing wells in Permian. Based on bancorupt rate in US shale that already is in line with 12 month ended 2018 I doubt the Companies are generating enough free cash after all exspensives are payed incl. ballons of loan , interest, land lease to prevent US shale declining actualy there was a decline of 32k barrels a day from May to June. As I understand both EIA and Rystad strongly believe the oil majours will invest huge amounts in US shale to secure growth in 2019, 2020. I read Exoon have estimate profit in their shale asset.at 35 usd each barrel WTI when refinery, and new pipelines are compleated. That remain to see.
        As I understood from this page when a new well is set in production first 2 month flow will increase a bit than after 6 month in production decline might be 40%. In such situation if riggs in 12 month decline by 9-11% and most impact of mecanical, design , work processes is already optimized there there should already be decline last 12 month if it not have been for the DUCS..

        1. Freddy,

          When rigs were at their maximum, output was increasing strongly, use the pivot table to see horizontal oil rigs in Permian, the change from a year ago is 9%.

    1. Interesting news , guess all drilled uncompleated wells drilled in 2018 was reported in the ballance sheet in 2018 , but the earnibgs when they came online was including in 2019 that might exsplain why they had some profit in 2019. Else Exoon , Shell i.e dont need to tell nuch of the return of their investment their ballance sheet gives a good status on that…. Else it is good that some CEO within the Shale play seems to be honest, guess at the end the investors will reward that inspite it might not always be what they or the market want to hear…

      1. Currently, investors only respond to earnings, cash flow, and dividends. Not to hype.

  43. And Now the Really Big Coal Plants Begin to Close
    (sort of OT)
    https://www.scientificamerican.com/article/and-now-the-really-big-coal-plants-begin-to-close/
    When the Navajo Generating Station in Arizona shuts down later this year, it will be one of the largest carbon emitters to ever close in American history.

    The giant coal plant on Arizona’s high desert emitted almost 135 million metric tons of carbon dioxide between 2010 and 2017, according to an E&E News review of federal figures.

    Its average annual emissions over that period are roughly equivalent to what 3.3 million passenger cars would pump into the atmosphere in a single year.

    1. Same fluff as usual. No discussion of intermittency, inability of the renewable supply chain to rebuild itself, uneven spread of renewable resources, expense of battery and other storage methods, possible material limitations…

      This piece is no different than an oil cheerleader saying “Shale will give us abundant oil for decades to come.” No substance to either.

      1. Niko,

        The point is that EVs will be much cheaper to operate than ICEVs. Renewables will gradually take a larger and larger share of the electricity market because they will also be cheaper as fossil fuel depletes and becomes more expensive. Plenty of time for batteries, fuel cells, HVDC transmission, and vehicle to grid technology as well as demand pricing for electricity to gradually allow all fossil fuel to be replaced.

        All problems do not have to be solved in advance to proceed. Many do not like the nuclear option which is both very expensive and potentially very dangerous.

        Your nation could choose the nuclear option, if your fellow citizens would agree.

        The renewable route is far more sensible in my opinion, though perhaps small modular nuclear reactors, if proven safe and economic could play a backup role.

Comments are closed.