Russia is not as desperate for higher oil prices as is Saudi Arabia. There are a few reasons
for this. One of the key reasons is that the Russian currency is flexible, so it weakens when
oil prices fall. That cushions the blow during a downturn, allowing Russian oil companies to
pay expenses in weaker rubles while still taking in U.S. dollars for oil sales. Second, tax
payments for Russian oil companies are structured in such a way that their tax burden is
lighter with lower oil prices.
Saudi Arabia needs oil prices at roughly $84 per barrel for its
budget to breakeven.
... ... ...
Igor Sechin, the head of Russia's state-owned Rosneft, said that oil prices "should have
stabilized, because everyone was supposed to be scared" by the enormous OPEC+ production cuts.
"But nobody was scared," he said, according to Bloomberg. He blamed the Federal Reserve's rate
tightening for injecting volatility into the oil market, because traders have sold off
speculative positions in the face of higher interest rates.
...
Novak
offered the market some assurances that the OPEC+ coalition would step in to stabilize the
market if the situation deteriorates, suggesting that OPEC+ has the ability to call an
extraordinary meeting. He
told reporters on Thursday that the market still faces a lot of unknowns. "All these
uncertainties, which are now on the market: how China will behave, how India will behave...
trade wars and unpredictability on the part of the U.S. administration... those are defining
factors for price volatility," Novak said.
Nevertheless, Novak predicted the 1.2 mb/d cuts announced in Vienna would be sufficient.
Some analysts echo Novak's sentiment that, despite the current panic in the market, the cuts
should be sufficient. "We are looking at oil prices heading towards $70 to $80 quite a recovery
in 2019. That's really predicated on the thought that first of all, OPEC still is here. And I
think that the market is underestimating that they are going to cut supply by 1.2 mb/d,"
Dominic Schnider of UBS Wealth Management told CNBC
. "And demand looks healthy so we might find ourselves into 2019 in a situation where the
market is actually tight."
Jerri-Lynn here. This is
the latest installment in Justin Mikulka's excellent series on the fracking beat,
Finances
of Fracking: Shale Industry Drills More Debt Than Profit
. The industry lacks even the excuse of profit to justify
the environmental costs it inflicts – yet the mainstream media continue to swallow industry waffle. I've crossposted other
articles in the series, and I encourage interested readers to look at them – the entire series is well worth your time.
By Justin Mikulka, a freelance writer, audio and video producer living in Trumansburg, NY.
Originally published at
DeSmog
Blog
2018 was the year the oil
and gas industry promised that its darling, the shale fracking revolution, would stop focusing on endless production and
instead turn a profit for its investors. But as the year winds to a close, it's clear that hasn't happened.
Instead, the fracking
industry has helped set new
records
for
U.S. oil production while continuing to lose huge amounts of money -- and that was before the recent crash in oil prices.
But plenty of people in
the industry and media make it sound like a much different, and more profitable, story.
Broken Promises and Record Production
Going into this year, the
fracking industry needed to prove it was a good investment (and not just for its CEOs, who are garnering
massive
paychecks
).
In January,
The
Wall Street Journal touted the prospect
of frackers finally making "real money for the first time" this year. "Shale
drillers are heeding growing calls from investors who have chastened the companies for pumping ever more oil and gas even as
they incur losses doing so," oil and energy reporter Bradley Olson wrote.
Olson's story quoted an
energy asset manager making the (always) ill-fated prediction about the oil and gas industry that
this time will
be different.
Is this time going to be
different? I think yes, a little bit," said energy asset manager Will Riley. "Companies will look to increase growth a little,
but at a more moderate pace."
Despite this early
optimism,
Bloomberg noted in
February
that even the Permian Basin -- "America's hottest oilfield" -- faced "hidden pitfalls" that could "hamstring"
the industry.
They were right.
Those pitfalls turned out to be the ugly reality of the fracking industry's finances.
And this time was
not different.
On the edge of the Permian
in New Mexico,
The
Albuquerque Journal
reported the industry is "on pace this year to leap past last year's record oil production," according
to Ryan Flynn, executive director of the New Mexico Oil and Gas Association. And yet that oil has at times been discounted as
much as
$20
a barrel
compared to world oil prices because New Mexico doesn't have the infrastructure to move all of it.
Who would be foolish
enough to produce more oil than the existing infrastructure could handle in a year when the industry promised restraint and a
focus on profits? New Mexico, for one. And North Dakota. And Texas.
Texas is experiencing a
similar story. Oilprice.com cites a
Goldman
Sachs
prediction of discounts "around $19-$22 per [barrel]" for the fourth quarter of 2018 and through the first three
quarters of next year.
Oil producers in fracking
fields across the country seem to have resisted the urge to reign in production and instead produced record volumes of oil in
2018. In the process -- much like the
tar
sands industry in Canada
-- they have created a situation where the market devalues their oil. Unsurprisingly, this is not a
recipe for profits.
Shale Oil Industry 'More Profitable Than Ever'
--
Or
Is It?
However,
Reuters
recently
analyzed 32 fracking companies and declared that "U.S. shale firms are more profitable than ever after a strong third
quarter." How is this possible?
Reading a bit
further reveals what Reuters considers "profits."
"The group's cash flow
deficit has narrowed to $945 million as U.S.benchmark crude hit $70 a barrel and production soared," reported Reuters.
So, "more profitable than
ever" means that those 32 companies are running a deficit of nearly $1 billion. That does not meet the accepted
definition
of profit.
A
separate
analysis
released earlier this month by the Institute for Energy Economics and Financial Analysis and The Sightline
Institute also reviewed 32 companies in the fracking industry and reached the same conclusion: "The 32 mid-size
U.S.exploration companies included in this review reported nearly $1 billion in negative cash flows through September."
The numbers don't lie.
Despite the highest oil prices in years and record amounts of oil production, the fracking industry continued to spend more
than it made in 2018. And somehow, smaller industry losses can still be interpreted as being "more profitable than ever."
The Fracking Industry's Fuzzy Math
One practice the fracking
industry uses to obfuscate its long money-losing streak is to change the goal posts for what it means to be profitable.
The
Wall Street Journal recently highlighted
this practice, writing: "Claims of low 'break-even' prices for shale drilling
hardly square with frackers' bottom lines."
The industry likes to talk
about
low
"break-even"
numbers and how individual wells are profitable -- but somehow the companies themselves keep losing money.
This can lead to statements like this one from Chris Duncan, an energy analyst at Brandes Investment Partners:
"You always scratch
your head as to how they can have these well economics that can have double-digit returns on investment, but it never flows
through to the total company return."
Head-scratching, indeed.
The explanation is pretty
simple: Shale companies are not counting many of their operating expenses in the "break-even" calculations. Convenient for
them, but highly misleading about the economics of fracking because factoring in the costs of running one of these companies
often leads those so-called profits from the black and into the red.
The Wall Street Journal
explains the flaw in the fracking industry's questionable break-even claims: "break-evens generally exclude such key costs as
land, overhead and even at times transportation."
Other tricks, The Wall
Street Journal notes, include companies only claiming the break-even prices of their most profitable land (known in the
industry as "sweet spots") or using artificially low costs for drilling contractors and oil service companies.
While the mystery of
fracking industry finances appears to be solved, the mystery of why oil companies are allowed to make such misleading
claims remains.
Why does the fracking
industry continue to receive more investments from Wall Street despite breaking its "promises" this year?
Because that is how
Wall
Street makes money
. Whether fracking companies are profitable or not doesn't really matter to Wall Street executives who
are getting rich making the loans that the fracking industry struggles to repay.
An excellent example of
this is the risk that
rising
interest rates pose
to the fracking industry. Even shale companies that have made profits occasionally have done so while
also
amassing
large debts
. As interest rates rise, those companies will have to borrow at higher rates, which increases operating costs
and decreases the likelihood that shale companies losing cash will ever pay back that debt.
Continental Resources, one
of the largest fracking companies, is often touted as an excellent investment. Investor's Business Daily
recently
noted t
hat "[w]ithin the Oil& Gas-U.S.Exploration & Production industry, Continental is the fourth-ranked stock with a
strong 98 out of a highest-possible 99 [Investor's Business Daily] Composite Rating."
And yet when
Simply
Wall St.
analyzed the company's ability to pay back its over $6 billion in debt, the stockmarket news site concluded that
Continental isn't well positioned to repay that debt. However, it noted "[t]he sheer size of Continental Resources means it is
unlikely to default or announce bankruptcy anytime soon." For frackers, being at the top of the industry apparently means
being too big to fail.
As interest rates rise,
common sense might suggest that Wall Street would rein in its lending to shale companies. But when has common sense applied to
Wall Street?
The Chronicle notes the
epic money-losing streak for the industry and how fracking bankruptcies have already ended up "stiffing lenders and investors
on more than $70 billion in outstanding loans."
So, is the party over?
Not according to Katherine
Spector,
a
research scholar
at Columbia University's Center on Global Energy Policy. She explains how Wall Street will reconcile
investing in these fracking firms during a period of higher interest rates: "Banks are going to make more money [through
higher interest rates], so they're going to want to get more money out the door."
1. The
Sightline Institute methodology had 33 cos. Not 32. I would bet the Reuters reporter took out one company out from the
analysis. Bear in mind XOP has 72 or so companies so there is a lot of scope for cherry picking there too.
2. What
bank wants to run an oil company? The banks lent to a sector which conned them. I guess rates were too low for too long. Those
loans/bonds are only recoverable if oil prices are high. The oil men know they are long a massive call option, and you can't
take it off them. They can't get new money so they won't give back the old.
3.
Diamondback and maybe 8 others make money. Infrastructure in the right place and good geologies.
4. The
numbers are unfair to Andarko cos the cut off misses a bunch of cash coming back in q3
Remember Enron? We're clearly not smart enough to understand the genius of how this is profitable. I guess we should
just step aside and watch the smart guys spin straw into gold. I'm sure they will share the wealth with the land
owners right?
These oil men are not stupid. They like to get their DUCs in a row – wells drilled but uncompleted. If oil goes up
enough they can open the DUCs in less than 2 months. Its the weakly capitalized ones who will pump oil out of a
reservoir with low oil prices to service debt. Also by drilling they often validate a lease which would void if
they didnt drill. However by not pumping they dont have to pay any royalties – just rents.
Below $50 on WTI a lot of the sector doesn't generate enough cashflow to meet investment plans.
I think a lot of the funding is with junk bonds. So most of those bonds are sold to investors, including ETFs, mutual
funds, and pension funds. Many of the banks are just middlemen and will probably not be left holding too much of the bag if
they haven't kept them on their own books or written lots of stupid derivatives on them.
This
should be a much smaller sector than the housing sector so a sub-prime mortgage bond-like crash shouldn't have the impact
of 2008. But who knows, the main thing aI marvel about with the financial sector is their unerring ability to take
something that should be relatively safe, weaponize it, and threaten global financial stability with it.
I've watched in horror from a distance in regards to fracking, and then a few days ago, this planning area map for open
hydraulic fracking leases has me surrounded in a sea of red
We're on
a fractured rock aquifer in the foothills here that's separate from the one on the valley floor, and because it gets scant use
in Ag, and not many people live here (we're 2.5x as big as Paradise,Ca. in size, with 1/10th of the population and at a
similar altitude) nobody's hard rock wells had any issues with going dry during the lengthy drought and having to drill
hundreds if not a thousand feet deeper in search of H20, as was occurring to the farmers et al on the fruited plain.
I sure
don't like the idea of a fractured rock aquifer and fracking
One thing
going against us, is land is cheap here, it's nature acres, nice to look at. but no development potential, as the trees are
all in the way, and what sorry sap is going to cut down oaks a couple hundred old and level the hills to put in tiny boxes?
That
villain doesn't exist, luckily.
But if
you were to dangle large amounts of money at the owners of such low value acres, in oil leases?
And the
idea it was all a circle jerk by Wall*Street & Big Oil, to get the money!
.
Makes it even harder to swallow
Its not just the environmental damage. Banks lending to frackers will be precedent creditors. They'll keep loaning until
whatever value in the company that can be extracted in extremis has been used up. One can easily imagine the sort of
accounting Wall Street uses.
So when these companies finally go bust, faced with the diminishment of oil production, will US taxpayers be forced to bail
out the industry because of the economic/national security implications of the prospects of eviscerated US oil production
volumes? If so, Wall Street wins yet again.
A gigantic hidden cost is the liabilities associated with the resulting abandoned wells. This is why this fall there was a
Supreme Court challenge in Canada to a ruling on who gets paid first in such cases. In Canada the reclamation costs fall to
the remaining producers who share costs of the Orphan Well Association. In the US, it is completely off the books, and
therefore falls to the government to clean up abandoned plays when companies go bust.
So,
taxpayers could be on the hook both if there is a government bailout on bad loans, a al 2008/2009, AND will have to pay to
clean this up (it's expensive, by the way, there are thousands and thousands of these sites that need to be remediated). I
suspect the reason all this is happening is a strategic effort to use tax payer backstopped risk to punish Russia to daring
to exist.
This is similar to mines and old waste dumps. If the owners were limited partnerships or companies that went bankrupt
with no remaining solvent pieces, then there is no money in the kitty to clean them up. The remaining game in town then
is Superfund and state programs for inactive hazardous waste sites and orphan wells.
The
RCRA Subtitle C and D regulations in the 1980s and early 90s required landfill operators to set aside funds in
lock-boxes so that if they went bankrupt, the state could access those funds to close the landfills. The landfills
typically charge a fee per ton just to fund these financial assurance accounts and they need to keep them on file with
the states. Unfortunately, the resource extraction industry has generally been able to successfully fight against these
types of requirements as "job-killers".
One economic problem with fracked gas wells is they only produce large quantities of gas for a short time. It's usually 2 to 3
years. After that production tanks. I suspect a similar thing happens with fracked oil wells. I I've in NY close to the PA
boarder. For about 4 years, fracking was really booming. Now it has almost stopped. You see big lots filled with fracking
equipment gathering rust. It didn't take most people long to realize that only a few made money while the rest pay the bill
for all of the damage done. I'm glad in NY state they banned fracking. I own 50 acres and refused to buy into a leasing deal
before fracking was banned. My biggest concern was my well water becoming contaminated as well as losing control over how my
land is used. A big problem is that a company is allowed to drill under your land even if you don't have a lease agreement
with them. They have to pay you but they can also pollute your well. If that happens your property becomes of no value and
useless.
We'd become curious about folks moving to the NE tip of PA, as it looked like NJT might actually reopen rail service to all
those $80-$140K houses, right before Williams/ Transco's Constitution Pipeline finally caused hundreds of new fracked
wells? We'd guessed the only effect of the '16 election was who'd be prodding retirees into GasLand Poconos. Seems like a
great location for a remake of Green Acres meets Deliverance?
https://www.njherald.com/20180410/lackawanna-cutoff-project-may-finally-be-back-on-track
Looks like there's a mess of unwatchable YouTube videos. I wonder if refugees have any idea of what could happen up there?
Yes, when liquidity has a much smaller time constant then actual production, the rules of liquidity will decouple from the
production and actually dominate the process.
This is
well-known from physics, and why many economic theories are obviously and fundamentally wrong.
As long
as the economy is financialized with almost infinite velocity, nothing in the real world (including profits) will actually
drive the system. This is trivially obvious.
This kind of thing makes me chuckle. So the CEOs and other suits at the fracking companies are scamming their investors to
enrich themselves. Hard to feel bad about it (even though a fair number of the investors are probably "institutional") if it
wasn't for the needless environmental destruction that goes along with these two groups of elites ripping each other off.
Very broadly speaking, wouldn't this be a good real-world example of MMT? There is a natural resource we want to extract, we
have the manpower and machinery to do it, so we just do it? The money to fund it is limitless bound only by the constraints of
the resource itself. Wall street is just a rent-extracting intermediary
It's ironic that, having lived thru the 80's when the financial "geniuses" took over and it was all about ROI – Westinghouse
somehow came to the conclusion that you could make 6% on golf courses (they didn't even know, I don't think) instead of 2% on
industrials (that was probably correct) so they basically sold the store. Except for the nukes, sigh.
The
comments above, apes's for instance, point to the whole slosh of money. And there is some truth to that. But in this case, I'm
afraid much of the answer is that people in the oil bidness make oil wells because that's what they know how to do. ROI, Scmoi
O I.
Of all
the industries that are gone because they weren't allowed to "do what they know" because it was "cheaper to offshore" – read a
greater ROI to Wall Street – how come the worst is the only one that keeps its nose to the grindstone and does the actual work
it knows how to do?
No, what I meant was those other ones just "diversified" or whatever the word of the moment was, just did whatever made
the people at the top money.
But
oil/gas is different. They just "have to go get it". It's like termites and wood. I respect that, even if it's the wrong
thing to do. If I must refer to The Terminator again, "it's what they do. It's ALL they do".
PS:
there is oil/gas everywhere. I worked in the "bidness,"btw.
So frackers can take out billions of unpayable debt and discharge it in bankruptcy, but I get to carry a millstone of student
debt around my neck for the rest of my life? Great system we got here. Pretty flipping great.
You should have issued a junk bond on yourself instead of taking a student loan. You could then just default on the junk
bond (after having written some derivatives to short it to profit from your financial demise).
I have a different take on all this fracking.
I believe it was decided at the highest levels of our government to support it; including financially if necessary. The basis
for this support and secrecy would be national security. Easy enough to see how this could have transpired.
All that
said, if my theory is correct, the frackers will be bailed in some form or fashion. Probably the next QE will pick up the tab
or perhaps the DOD is funding it indirectly already.
Your take parallels Pym of Nantucket's. Ever since the end of WWII, the United States has been allowed to just 'print
money', first to pay for its contest with the former Soviet Union for global hegemony and then to 'pay for' its energy and
the products its industries could no longer profitably produce – at least as profitably as they could by off-shoring those
industries. This is all really just an extension of 'petrodollar warfare' – gigantic bluff the US can continue to go it
alone if necessary – having salted the central banks of 'developing countries' with all the 'reserve currencies' they
realistically need, at least if the depredations of the likes of George Soros are held in check.
In
summary, fracked oil is propping up not just Big Oil but the US military industrial complex and ultimately Wall Street and
its banks. As long as the US can control the world's access to energy (and possibly retard its transition to renewable
sources?), US politicians and bankers can continue to 'print money' (i.e. export debt) and sustain the whole rotten edifice
of US and Western 'political economy'.
As
usual Michael Hudson has it right:
"Finance is the new form of warfare – without the expense of a military overhead and an occupation against unwilling
hosts." It is a competition in credit creation to buy foreign resources, real estate, public and privatized
infrastructure, bonds and corporate stock ownership. Who needs an army when you can obtain the usual objective (monetary
wealth and asset appropriation) simply by financial means?
The time will come, as a result of this, that the US
will
have to go it alone. They are turning your money to
shit. Unless our corporate masters sell out the rest of the country to foreigners, like they already have much of our
nation's productive capital.We won't be alone, but like Greece, we will no longer be independent or free.
This kind of crap increasingly pervades our economy. Military. Finance. Healthcare. Like money with Gresham's Law, bad
investment drives out good. Every cost is also someone's profit opportunity, so costs are magnifying and spinning out of
control. More and more the welfare of society depends on 'borrowed' money.
It's like the modern day pyramids. Nicely dressed piles of rocks in the desert. Total waste and destruction of
resources. It also destroyed the social capital of Ancient Egypt, and turned them into slaves of Pharoah. It was the
people of Egypt who paid for the pyramids, with their labor and their liberties.
So
that's what else is going on. Your freedoms are going down those wells. And up the towers of finance. The Egyptians, at
least, got something to look at. They already had the barren wastelands.
At least these depressed oil prices from over fracking in the US will make Saudi Arabia poorer. Possibly poorer to the point
that widespread social unrest ensues there, leading to the dethroning of the House Of Saud, which, in turn, will cause the
dethroning of their chief covert friend and ally Israel.
Then in
order to stave off social unrest here in the US, we'll have to cut off ties with these two roguish troublemakers in the
region. Much needed balance of power will then be restored to the region with Iran and Syria restored to their former glory,
sparking peace and prosperity from Pakistan and Afghanistan to Egypt, Somalia and Yemen.
I don't
know if the pieces on the chessboard will ever realign this way, but it's rather amusing to speculate that this realignment
could possibly be triggered by the stupidity and shortsightedness of the US to over frack!
You got it backwards. KSA and Russia need lower oil prices to force US producers off the field and get their supply chains
back. Your thinking like a 1970's person. Think 2010's.
This is a non-climate change reason why developing electric vehicles in North America, Europe, and China would be good.
It would strip away much of the demand for oil which is a major funding source for Russia and KSA.
Jesus Herbert Walker Christ. Is anyone else getting sick of this stupid series? If you keep writing the same article every
year, and Wall Street keeps engaging in the same apparently irrational behavior, you might want to rethink your smug pose and
ask yourself whether there might be some additional digging to do to understand what the hell is going on.
The
contrast between this series and Hubert Horan's Uber work is striking. Horan not only points out the fact that Uber is
unprofitable, but also clearly shows who has an interest in extending the hype, and how and why the bandwagon keeps rolling.
This series is the complete opposite.
Fracking
"investors" aren't getting ripped off, and they're not stupid. You've just completely missed half the point of the Master
LImited Partnership structure. For the limited partners, the losses are a feature, not a bug. Until MLP shares are cashed in,
they generate tax losses for the LPs. Those losses are valuable generally, but 501c3s, especially love them because they allow
non-profits to offset Unrelated Business Income.
Go to
Guidestar or Nonprofit Explorer and pull down the 990T of any nonprofit with a few billion dollars worth of invested assets.
Line 5 (usually blank but filled in as a long attachment at the end) is almost invariably a who's who of the fracking
industry, with thousands of dollars in losses from each company. In any given year, LPs only liquidate positions in a small
number of the companies their holding each year, allowing them to avoid taxes with the annual losses, then cash in (at least
sometimes) when the value of the company is high.
The
industry's a scam, but just as much of the taxpayers as of the investors.
Do you make a habit of putting your foot in your mouth and chewing? Because you did it here, by copping a 'tude while being
100% wrong.
Passive tax exempt investors have no use for losses. Zero. Zip. Nada.
An
investor in a limited partnership is a passive investor. Income from a passive investment NEVER generates Unrelated
Business Income. If the idiocy you presented was correct, no endowment or public pension fund could ever show a net profit
from their investments in private equity and hedge funds without it being taxed as UBI. There would literally be no private
equity industry as we know it because most of its money comes from tax exempt investors, namely public pension funds,
endowments, foundations, private pension funds.
UBI
results from activity conducted by the not for profit. The classic example is an art museum's gift shop. See IRS
Publication 598 (emphasis ours):
Unrelated business income is the income from a trade or business
regularly
conducted by an exempt organization
and not substantially related to the performance by the organization
of its exempt purpose or function, except that the organization uses the profits derived from this activity.
Limited partners are required to be passive and have nada to do with the operation of the partnership. They typically make
double sure that their investment income won't be characterized as business income. As one tax expert confirmed by e-mail:
Endowments/exempts/pension funds can wind up having UBTI when they don't structure their investments through
corporations. They rarely fail to do this structuring. They wouldn't put themselves in the position of deliberately
incur UBTI and then go hunting for losses to offset it.
So it
is possible that you heard of a not-very-competent endowment that wound up seeking tax losses, but that would be highly
unusual, when you incorrectly said the opposite.
There
are other tells that you don't even remotely understand the how limited partnerships work, such as your comment "In any
given year, LPs only liquidate positions in a small number of the companies their holding each year, allowing them to avoid
taxes with the annual losses."
Limited partnerships are pass-through entities. LPs receive their pro-rata share of income and loss annually. They do not
need to sell to recognize gains or losses resulting from their participation in operations.
The
mainstream journalist who first wrote about the pervasiveness of losses in fracking after oil prices started trading in the
new normal of $70 a barrel and below, John Dizard of the Financial Times, explained why frackers would keep drilling at
losses as long as they could get their hands on funding, so this is entirely consistent with his forecast. And Dizard's
column is for wealthy individuals and he is conversant with tax issues, unlike you.
Hedge funds are keeping their cool in the most tumultuous end of the year for oil since the
2008 financial crisis, betting on better days ahead.
They boosted wagers on rising Brent prices for a third straight week amid expectations that
OPEC and allies will follow through on a deal to reduce output. The vote of confidence comes
against a backdrop of turmoil in financial markets that saw one measure of oil-price volatility
jump the most on record in November and head for its highest year-end level in a decade.
"There is a little more optimism and neutrality coming into markets and we're getting some
positive signs," said Ashley Petersen, an oil analyst at Stratas Advisors LLC in New York.
"It's not as if demand is tanking tomorrow and supply is going to triple. We're seeing a little
more rationale enter markets, a little more of a wait-and-see mode."
Although the global crude benchmark has declined about 15 percent since OPEC and its allies
came together and announced an agreement to reduce output on Dec. 7 -- extending its plunge
since early October to 40 percent -- producers have signaled dedication to the deal.
OPEC and its allies aim to publish a statement in January on the
implementation of the agreement to cut production, according to Russia's Energy Minister
Alexander Novak. He also said the market may see the impact of the cuts in January or February,
and if necessary, the group can convene before its scheduled meeting in April. At the
same time, a decline in Iranian imports to Japan adds another positive sign .
Hedge funds' net-long position -- the difference
between bets on higher Brent prices and wagers on a drop -- rose 6.7 percent to 162,249
contracts for the six days ended Dec. 24, ICE Futures Europe data show. Longs rose, while
shorts declined to the lowest level since late November. The report was for a period shorter
than a week because of the Christmas holiday.
Analysts
surveyed by Bloomberg forecast Brent to average $70 a barrel in 2019 as the market
tightens, OPEC's supply cuts take effect and unintended losses in Venezuela and Iran
increase.
So far, the apparent confidence from hedge funds and analysts hasn't yet translated into a
calmer market. After surging a record 86 percent in November, the Chicago Board Options
Exchange Oil Volatility Index ended Friday at 53.11. The last time it finished the year above
51 was 2008.
In the U.S., the Commodity Futures Trading Commission's commitments of traders report with a tally of
wagers on West Texas Intermediate and other assets won't be published during the government
shutdown, according to a Dec. 22 notice.
"... Of course, I was just trying to make a point that wells drilled in 2015 that had seen 3 years of weak (and one year of average) oil prices were going to be total losers that would not payout within any reasonable time horizon, if at all. ..."
"... To continue, there is no mention in these numbers of how much land costs. I seem to recall many Permian players paying $15-60K per acre. So a two mile DSU would cost $19.2 million to $76.8 million. I just ignored land costs completely. Further, each of these companies has interest expense. One can go to the 10K's and 10Q's to see how much that is costing each per BOE. I just ignored interest expense too. ..."
"... I do argue until we see some well payout data (hard data, not power point variety) from these companies, we should assume the wells generally do not payout within 36 months, or even 60 months. ..."
"... I was just trying to remind people of the numbers. I think most of the investing public has figured it out, based on where these companies are trading since oil dumped again. ..."
So to keep everyone happy, here are some averages for the all wells EFS, Bakken and Permian.
Decided to exclude Niobrara, oil numbers are much lower.
2015 Q3 36 months of production: 162,635 BO most recent monthly rate 58.6 BOPD
2016 Q3 24 months of production: 169,078 BO most recent monthly rate 103.5 BOPD
2017 Q3 12 months of production: 136,850 BO most recent monthly rate 213.1 BOPD
For 2015 162,635 x .80 x $45 = $5,854,860
7% severance $409,840
$5 per BO LOE $650,540
$2 per BO G & A $260,216
Net = $4,534,264
I lowered the costs some to make the economics more favorable from the standpoint of those
who love the sub $2 gasoline. Might be ok to look at 10K and 10Q if anyone would like to plug
in different cost estimates.
The 2016 wells described above are at $4,713,894 per well after 24 months.
The 2017 wells described above are at $3,815,378 per well after 12 months.
Of course, I was just trying to make a point that wells drilled in 2015 that had seen
3 years of weak (and one year of average) oil prices were going to be total losers that would
not payout within any reasonable time horizon, if at all.
To continue, there is no mention in these numbers of how much land costs. I seem to
recall many Permian players paying $15-60K per acre. So a two mile DSU would cost $19.2
million to $76.8 million. I just ignored land costs completely. Further, each of these
companies has interest expense. One can go to the 10K's and 10Q's to see how much that is
costing each per BOE. I just ignored interest expense too.
These wells are a lousy investment at $50 WTI. Only gets worse as the oil price sinks.
I think this all started because maybe GuyM was actually giving some credence to EOG
guidance. I don't blame GuyM, or anyone else, for believing what the companies say.
I do argue until we see some well payout data (hard data, not power point variety)
from these companies, we should assume the wells generally do not payout within 36 months, or
even 60 months.
I do agree, wells have residual value after 36 and 60 months. I also agree that much
higher oil prices make this business a money maker. Finally, I agree the wells have improved
every year, although it is looking like 2016 might have been the high water mark, with later
wells not moving the needle much higher.
Time for me to exit for awhile. I was just trying to remind people of the numbers. I
think most of the investing public has figured it out, based on where these companies are
trading since oil dumped again.
Good analysis, and thanks, again. No amount of increased productivity could make them
profitable at $45, especially not $37, or $16. The clock is ticking. Yeah, EOG has gone from
over $120 to $87.
Overall, oil prices will continue to "be difficult to predict," said Youngberg. "2019
will be volatile just as 2018 was."
Even so, he still offered some predictions for next year. He sees WTI prices averaging
$60 a barrel and global benchmark Brent averaging $66 in 2019. That would mark increases of
roughly 30% for WTI and 20% for Brent from Thursday's levels.
US stocks are decreasing at a slow time of year at about 2% a month. US will have minimal
growth in 2019, in all likelihood at current or even at $60 due the current low price. OPEC
plus is up to about a 1.5 million cut, so even at zero growth inventories will go away. So,
an equilibrium is assured damn, I ran out of fingers and toes,
I hope that is right.
Know it's not fair to ask with the recent price drop, but considering $46 a barrel price,
which shale play is going to contribute to a 600k barrel increase next year
By my logic, prices should be substantially higher, already. But, there is NO current
discussion which I believes touches on reality. Oil companies have to feel the same way.
Hence, my expectation of reduced capex through the first half. But, that's using logic over
future actions, which is a losing proposition. Oil prices will be volatile, and discussions
over supply/demand will be far from reality. That's a pretty good guess.
x Ignored says: 12/18/2018 at 10:56
pm So what are people going to say if the price goes low $40s, production increases and
companies post losses? And then the next year exactly the same thing happens. And the next.
Reply
Yes I don't believe chapter 11 bankruptcies stopped much production in 2016, will have to
wait and see if higher rates and a weaker junk bond market do anything
Look at the EIA field crude production page, which I assume for 2015, 2016 and 2017 is now
fairly accurate.
Production dropped more than 1.1 million BOPD from the 2015 peak.
The Permian frenzy appears to have been the primary driver of growth since, with US
production up 3 million BOPD from 9/15-9/18.
The price unfortunately needs to drop another $10 or so and stay there for awhile, as many
are hedged on a percentage of barrels in the Permian and I assume there is still quite a bit
of acreage that is not HBP.
I wound up owning FANG when it bought EGN. It is down $48 pretty quickly, and has been
considered one of the best independents in the Permian. I have heard claims they are
profitable in the $20s so I guess maybe we will find out.
The algos have been in charge of the oil market for awhile. Wouldn't surprise me if we
challenge 2016 low, if for no other reason than short to medium term oil prices near little
relation to the physical market.
When they're profitable in the 20s, they should have now tons of cash and dividends. At the
60$ WTI they should have made much more than 50% earning from total revenue, and should be
able to finance whole 2019 drilling program from cash they already earned.
Economic downturn . Perhaps the largest pricing risk, and one of the hardest to
predict, is the possibility of an economic
downturn . The global economy has already thrown up some red flags, with slowing growth in
China, contracting GDP in parts of Europe, currency crises in emerging markets and financial
volatility around the world. The tightening of interest rates looms large in many of these
problems. "Alarm bells are starting to ring. Demand growth has been a pillar of strength for
the oil market since prices fell and has exceeded 1 million b/d every year since 2012,"
WoodMac's Simon Flowers wrote. "We forecast 1.1 million b/d in 2019, but the trend is at risk."
The U.S.-China trade war could still drag down the global economy, but financial indicators are
already flashing warning signs.
Looks like a lot of bubbles bursting. Not likely to bounce back, so not much financing
available to float pure Permian players. Doesn't look good for any increase in production.
Oil prices will probably stay low with Dow for awhile. Until inventories get closer to zero.
Madness.
Interesting article from Goehring investment bank. They estimate that KSA remaining reserves
are around 50 billion bbls, instead of the 260 b claimed. They also (surprise) think that was
the reason the Aramco IPO was pulled. I also thought the Aramco IPO would never happen
because they would not be able to buy an acceptable reserve report.
Interesting, they are probably right.
I knew Aramco would pull out of the IPO. They are one of the most secretive companies. How
you going to float on the NYSE or London SE with no transparency, which is required by
law.
50 billion sounds about right in my worthless opinion. Interestingly enough that would be
more or less close to the Permian basin reserves.
I think peak oil will arrive without many people noticing until after it has occurred.
A few more thoughts about the referenced Goering report.
First, the basis or their report: "We have good data going up to 2008, however after that
point data becomes difficult to find."
Does anyone else have good data on Ghawar production through 2008. Actual Saudi production
data is hard to come by, and I would like to see a table of Ghawar production through 2008 if
it is out there.
Based on their 2008 data they have included a Hubbert Linearization which is the basis for
their claim.
Second, if their production data and linearization are correct, they have not been
adjusted for improved results from better technology. I believe the multi lateral super wells
Saleri described in his 2005 SPE paper have allowed KSA to recover several percent of
additional original oil in place, as well as to maintain high production rates longer.
Third is that it appears many of those super wells were drilled beginning in mid 2000's.
It would make sense that the change in Saudi attitudes regarding production restraint between
2014 and now could be due to those multilateral wells watering out.
Coffee. I hope if you have been investing in the Appalachian gas players that you have been
short.
The only investment class in oil and gas that may be worse over the past ten years would
be the service sector, particularly the drillers.
Interesting that, despite all the activity, the US onshore drillers are becoming penny
stocks. I have pointed out Nabors. The rest are all tanking bad it appears.
You made a big deal out of a very long lateral operated by Eclipse Resources. Eclipse
equity closed at 76 cents a share.
I am not so sure that ultra cheap oil and gas is such a great thing for the US, given we
are now the world's largest producer of both.
I never have, nor will I ever in the future, take any financial stake in these or any
other companies.
As I have stated numerous times over the years, my primary interest is in operations who
is doing what, how it is being done, who is doing it better – or claims to be.
My initial interest in this site way back when was to learn why some people seemed to
think this so called Shale Revolution was No Big Deal a retirement party, in the words of
Berman.
It was quickly apparent to me that a great deal of unawareness vis a vis industry
developments permeated this site's participants.
This, alongside several predisposing factors to NOT want the shale production to explode
upwards provided fertile grounds for the soon 12 to 16 million barrels per day US oil
production, along with 100+ Bcfd gas production to be a spectaculsrly unforseen reality.
What I prefer or not prefer is secondary to what I believe to be occurring, shallow.
If anyone cares to spend 3 minutes reading the April, 2017 USGS press release accompanying
the Haynesville/Bossier assessment, they will read the following from Walter Guidroz, Program
Coordinator of the USGS Energy Resources Program
"As the USGS revisits many of the oil and gas basins of the US, we continually find that
technological revolutions of the past few years have truly been a game changer in the amount
of resources that are now technically recoverable".
Addendum Eclipse is being shut down/folded into another entity.
The lead engineer behind their ultra long laterals is now working with the new outfit from
which this technology will continue to spread.
No offense meant coffee. I know some who post here like to tangle with you. I am not
interested in that, just straightforward discussion.
Shale has surprised the heck out of me, and has made me several times strongly consider
liquidating my entire investment in oil and gas, absent maybe keeping just a couple of KSA
like cheap (to quote PXD CEO) LOE wells to fool around with. Had I known in 2012-13 that this
was coming, would have sold all but those few "piddle around with wells." It has been
absolutely no fun when these price crashes occur, and is especially no fun knowing that this
shale miracle is less profitable than an operation producing less than one bopd per well from
very, very old and tired wells.
You have to admit that the way the shale is being developed is destroying the oil and gas
industries that are developing it.
Particularly hard hit are the service companies, many which are already bankrupt.
Even XOM, which I have owned for many, many years (prior to the merger, I owned both Exxon
and Mobil) has hit the skids, having fallen through the $70 per share barrier.
Range Resources is at $10.26, a level not seen since 2004. It traded as high as $90 before
the 2014 crash.
EQT was over $100. Today $18.55
Whiting was nearly $400 (accounting for a reverse split) and now is $21.98
CHK closed at $1.84. All time high was $64.
Nabors Industries, the largest onshore US driller closed at $2.09. Traded at split
adjusted $10 in 1978.
Halcon Resources Corp. was over $3,000 split adjusted at one time, went Ch 11 BK, now at
$1.65, looking not so good re: BK again.
We shall soon see who can access what in the way of capital to keep going assuming oil
prices stay below $50 WTI for a considerable time.
I guess I am always concerned about whether businesses make money. Seems to me that would
be of some importance to you, but it isn't, and I suppose there is no harm in that.
I have yet to work anywhere where making money was not the primary motivation.
If the money wasn't important, the shale executives would not make so much of it, I
suppose.
I have always had a hard time understanding why they kept drilling wells in Appalachia
when the gas was selling for 50 cents per mcf. Not important to you, but maybe to others.
Anyway, if we didn't have different views, places like this wouldn't be very
interesting.
Chinese refineries that used to purchase U.S. oil regularly said they had not resumed buying
due to uncertainty over the outlook for trade relations between Washington and Beijing, as well
as rising freight costs and poor profit-margins for refining in the region.
Costs for shipping U.S. crude to Asia on a supertanker are triple those for Middle eastern
oil, data on Refinitiv Eikon showed.
A senior official with a state oil refinery said his plant had stopped buying U.S. oil from
October and had not booked any cargoes for delivery in the first quarter.
"Because of the great policy uncertainty earlier on, plants have actually readjusted back to
using alternatives to U.S. oil ... they just widened our supply options," he said.
He added that his plant had shifted to replacements such as North Sea Forties crude,
Australian condensate and oil from Russia.
"Maybe teapots will take some cargoes, but the volume will be very limited," said a second
Chinese oil executive, referring to independent refiners. The sources declined to be named
because of company policy.
A sharp souring in Asian benchmark refining margins has also curbed overall demand for crude
in recent months, sources said.
Despite the impasse on U.S. crude purchases, China's crude imports could top a record 45
million tonnes (10.6 million barrels per day) in December from all regions, said Refinitiv
senior oil analyst Mark Tay.
Russia is set to remain the biggest supplier at 7 million tonnes in December, with Saudi
Arabia second at 5.7-6.7 million tonnes, he said.
19 hours ago This is an
economic/political tight rope for both countries. China is the largest auto market in the
world with numerous manufacturers located inside its borders. Apple sales will disappoint
inside China after Meng's arrest over Iran sanctions (Huawei is a world heavy weight in terms
of sales), and this has already begun inside China due to national pride. Canada has already
seen one trade agreement postponed over her detention. US firm on the main have already
issued orders to not have key employees travel to their Chinese plants unless absolutely
necessary for fear of retaliation. Brussels is actively working on a plan to bypass US
Iranian sanctions, which are deeply unpopular in Europe.
The key to this solution might be in automotive. Oil is possibly on the endangered bargaining
list. Russia is a key trading partner (for years) with China and, along with Saudi Arabia and
Iran (or even without Iran) will be able to supply their needs. Our agricultural sector,
particularly in soybeans, has been hit hard, forcing the US govt. into farm subsidies. Brazil
just recorded a record harvest in soybeans. The US could counter with lifting Meng from
arrest in return for an agricultural break, but those negotiations won't make the mainstream
news. Personally, I think her arrest was a very ill-thought move on the part of law
enforcement, as the benefits don't even begin to outweigh the massive retaliation to US firms
operating inside their borders. It is almost akin to arresting Tim Cook of Apple or Apple's
CFO. You don't kill a bug with a sledge hammer.
Iranian Foreign Minister Mohammad Javad Zarif on Saturday said US sanctions will have no
impact on the policies of the Islamic republic at home or abroad.
"It is obvious that we are facing pressure by the US sanctions. But will that lead to a
change in policy? I can assure you it won't," Zarif told the Doha Forum policy conference in
Qatar.
"If there is an art we have perfected in Iran and can teach to others for a price, it is
the art of evading sanctions," he added.
Sanctions typically fail to change regime behavior, and they are even more likely to fail if
there is no practical way for the targeted regime to get out from under sanctions short of
surrender. The more importance that a regime places on the policies that the outside government
wants to change, the greater the likelihood of failure will be. When the outside government's
goals threaten the regime's security or even its very survival, there is no question of making
a deal.
Because the Trump administration is pursuing regime change in all but name, there is no
chance that Iran will yield to U.S. pressure. The administration's demands are so ambitious and
excessive that no self-respecting state could agree to them without giving up its sovereignty
and independence. It should be clear by now that pressure and coercion inspire defiance and
intransigence. If the U.S. wants to see changes in Iranian international behavior, it would
need to provide assurances and incentives that make taking that risk worth their while. Since
this administration has made a point of reneging on commitments already made to Iran, there are
no assurances that it could make that the Iranian government could trust, and the
administration is allergic to offering any incentives to its negotiating partners for fear of
appearing "weak."
As big declines in legacy production are a characteristic of shale oil, then there will come a time when production from new
wells cannot keep up with the decline from the legacy wells. It can happen in 2019 or 2020.
My suspicion is that the economics are not that good and most wells are not profitable from November 2018 or so. So there is
something fishy that the shale oil industry ploughs on and continues to set new highs month after month.
Notable quotes:
"... We won't have much, or any growth in the first half of 2019, no matter what the hype is, unless prices spike. ..."
EF does not have pipeline problems, but it is not going to grow at $55 or less oil price. If
prices rise to $80, yes. But, the price will need to be consistent for a good long while.
GOM
has hit its high back in August according to SLa and George.
We won't have much, or any growth
in the first half of 2019, no matter what the hype is, unless prices spike.
Yeah, seems highly unlikely at best that Eagle Ford will ever regain its high. Even the EIA
forecast – notorious blue sky that it is – only gets it back to 1.5 million bpd.
And that on a theory of producers shifting from Permian due to logistical constraints in the
latter.
It's a mature area, only so many decent spots to drill.
"Note that an oil price scenario between the AEO 2018 low oil price case and reference oil
price case (average of the two scenarios) would mean that at current well cost, the Permian Basin
would never become profitable. This is what Mike Shellman has been saying all along."
Notable quotes:
"... We basically lost $20 a barrel in the blink of an eye. In our case, that is over $100K per month of income loss. This after 2015-17, where the price was less than half what it had been 2011-14. ..."
"... Imagine what would happen if the boss walked into the tech campus of a firm in Silicon Valley and said everyone was taking a $12,000 per month pay cut immediately. Would be a lot of knashing of teeth. ..."
"... Now imagine the pay cut was pretty much in conjunction with an erratic President, supported almost 100% by the industry, ironically, who erroneously thinks .30 a gallon lower gasoline prices will be a boon to the US economy. ..."
I think the frustration of a small business oil producer should be obvious.
My family and I have pretty much decided producing oil in the US is not a real business
anymore. How can one have a real business when there are so many fixed costs, that do not
change much, with the price of the product sold moving up and down like a yo-yo? Add to that
at least 50% of the voting public thinking what you are doing is evil. It is now much more
preferred that one grow harvest and sell cannabis so people can get high, rather than produce
oil for gasoline, diesel, plastics and the numerous other daily used consumer products.
You have done a lot of construction work, so I am sure you know the feeling when there is
a recession and work drops way off. At least you might get some sympathy in that situation.
Farmers get a government payment. Oil people get laughed at.
We basically lost $20 a barrel in the blink of an eye. In our case, that is over $100K per
month of income loss. This after 2015-17, where the price was less than half what it had been
2011-14.
Take the family out here that is living on 20 BOPD, doing all the work themselves. Selling
600 BO per month. That family just saw a $12,000 hit to the top line. The expenses didn't
change except for fuel, which has fallen some. Probably less than $1,000 per month savings
there.
Imagine what would happen if the boss walked into the tech campus of a firm in Silicon
Valley and said everyone was taking a $12,000 per month pay cut immediately. Would be a lot
of knashing of teeth.
Now imagine the pay cut was pretty much in conjunction with an erratic President,
supported almost 100% by the industry, ironically, who erroneously thinks .30 a gallon lower
gasoline prices will be a boon to the US economy. With the alternative being a party openly
hostile to the industry, who cannot differentiate between small business owners with small
footprints and corporate titans who make no money on the product, but make billions off the
corporate largess. We are all terrible polluters who need to get hit with a carbon tax and
made to jump through environmental testing hoops despite we are emitting less than the tiny
amounts of methane we were emitting 30 years ago.
Shallow. Thanks for explaining how it looks from where you stand.
As much as I hate to think this way, it raises the idea that the government should have a
price stability mechanism in place that shields producers from the volatility of the
dysfunctional market. Maybe gets updated every 6 months depending on market conditions or
something like that. I'm sure everyone would hate it.
Maybe the government should even have a longrange an energy policy. Like a ten yr plan. I
know crazy thinking.
Regarding my small oil business rant above. Small business is a tough place, not just in
the oil industry, but all over.
I think of the grocery store owners. Those guys had a pretty good thing going in small
towns 30 years ago. Now they are gone if there is a Walmart nearby.
Same with department stores. The mall in a mid sized town nearby is halfway a ghost town
now.
Capitalism can be brutal. But it doesn't seem that another way has proven to be a better
idea either. We tend to take freedom for granted in the USA. We are very lucky we have the
freedom we do have.
I don't know that price controls are a good idea. I don't know what the answer is to
market volatility. We benefitted from getting into oil when no one wanted to touch it, and
really did well from 2005–14. Since then, not so good, but maybe our time will come
once more.
Overall, shouldn't complain. Just trying to give a unique perspective. Also trying to
let everyone know that there are a lot of hardworking small business owners in upstream oil
and they aren't the terrible people some make them out to be.
Everything in the media these days is very urban centered and also very East Coast
dominant. So different perspectives from different regions is always good, I think.
!! Runners-up for Quote of the Year !!
from above:
"Shale oil is a by-product of easy monetary policies which are being withdrawn."
in a way kinda https://www.zerohedge.com/news/2018-12-11/real-implications-new-permian-estimates
"Now, I know FOR A FACT that American energy dominance is within our grasp"
and it keeps getting more better
"Reilly stressed, "Knowing where these resources are located and how much exists is crucial
to ensuring both our energy independence and energy dominance.""
Pretty Powerful results for just a by-product!
Was it JH Kunstler that pointed out that "energy dominance" is kinda kinky?
Shallow Sand
Neo Capitalism or Creditism might be better terms to describe our current monetary and
economic system. When central banks can issue Credit and lend it to their pets by the
billions and when those corporations go under they just issue more Credit to the
corporations that take their place. This is not Capitalism where companies and individuals
produce something valuable and return a profit that they can then reinvest as Capital.
This current economic system is destroying the sources of wealth and valuables. It
encourages burning down the house to stay warm. I used to dream of being a big farmer but
more and more I feel lucky when I see the stress and fear that so many of the bigger
farmers are dealing with.
I appreciate your great contribution to this site. I've learned so much from your
comments. They've increased my confidence that this shale business would not be here if it
were not for the biggest ponzi scheme to date. And that the peak of Oil production per
Capita that was reached in 1979 will never again be topped in my lifetime even with all
this fraud on its side.
Currently, legacy decline is just above 500,000 barrels per month. This means that if
production is to be increased by 100,000 barrels per month then new wells must produce
600,000 barrels per month of new oil.
If US new oil production is indeed increasing by 600,000 barrels/day per month, this is
a mind-blowing number -- 7.2 million barrels/day per year. Has new oil production ever
increased by this much anywhere else in the World?
Besides that, Saudi Arabia requires the organization to maintain a high level of oil
production due to pressure coming from
Washington to achieve a very low cost per barrel of oil. The US energy strategy targets
Iranian and Russian revenue from oil exports, but it also aims to give the US a speedy economic
boost. Trump often talks about the price of oil falling as his personal victory. The US
imports
about 10 million barrels of oil a day, which is why Trump wrongly believes that a decrease in
the cost per barrel could favor a boost to the US economy. The economic reality shows a strong
correlation
between the price of oil and the financial growth of a country, with low prices of crude oil
often synonymous of a slowing down in the economy.
It must be remembered that to keep oil prices high, OPEC countries are required to maintain
a high rate of production, doubling the damage to themselves. Firstly, they take less income
than expected and, secondly, they deplete their oil reserves to favor the strategy imposed by
Saudi Arabia on OPEC to please the White House. It is clearly a strategy that for a country
like Qatar (and perhaps Venezuela and Iran in the near future) makes little sense, given the
diplomatic and commercial rupture with Riyadh stemming from
tensions between the Gulf countries.
In contrast, the OPEC+ organization, which also includes other countries like the Russian
Federation, Mexico and Kazakhstan, seems to now to determine oil and its cost per barrel. At
the moment, OPEC and Russia have agreed to cut production by 1.2 million barrels per day,
contradicting Trump's desire for high oil output.
With this last choice Qatar sends a clear signal to the region and to traditional allies,
moving to the side of OPEC+ and bringing its interests closer in line with those of the Russian
Federation and its all-encompassing oil and gas strategy, two sectors in which Qatar and Russia
dominate market share.
In addition, Russia and Qatar's global strategy also brings together and includes partners
like Turkey (a future
energy hub connecting east and west as well as north and south) and Venezuela. In this
sense, the meeting between
Maduro and Erdogan seems to be a prelude to further reorganization of OPEC and its members.
It's crazy to think of all of the natural gas burned off by the world's oil producers. I
think of those oil platforms that have a huge burning flame on top. This is the kind of ****
that reminds us that the people who control the world care not for the people who live here.
Can't make a buck from it? ******* burn it.
Consider though that those oil producers are only in it for the money; it's not an
avocation with them. I imagine if there was a way to salvage the natural gas, it would be
done. Mo Muny would dictate it.
This could be the beggining of a level 5 popcorn event. It started a year or two ago and
when I saw it everybody laughed. Well look at it now. Saudi wants to defect. They have had
nothing but problems with the House of Sodomy for quite some time now.
If this leads to war in the Persian Gulf Edgar Cayce called it. The empire will burn that
place down before losing it. They may fail but something is going to go down.
Are the Sauds still full heartedly pushing the Zionist mission in Yemen?
As an Iranian-American I have been waiting for something big to happen with Iran. I am
really tired of waiting. I hope that Iran will grow some balls and fight the coalition. I
know that there are 80 million lives in danger, including my mom going back to Iran for a
short term. But this has been like a long torture and unending nightmare.
There is no multipolarity yet, but a bipolar hype of the world dominance run by US and its
vassals. An awakening will be harsh, when these realize their emperor goes naked.
Trump lost control of foreign policy, when he appointed Pompeo. US voters might elect Hillary with the same effect on foreign policy
as Pompeo.
Notable quotes:
"... It is to Trump's disgrace that he chose Pompeo and the abominable Bolton. At least Trump admits the ME invasions are really about Israel. ..."
"... Energy dominance, lebensraum for Israel and destroying the current Iran are all objectives that fit into one neat package. Those plans look to be coming apart at the moment so it remains to be seen how fanatical Trump is on Israel and MAGA. MAGA as US was at the collapse of the Soviet Union. ..."
"... As for pulling out of the Middle East Bibi must have had a good laugh. Remember when he said he wanted out of Syria. My money is on the US to be in Yemen before too long to protect them from the Saudis (humanitarian) and Iranian backed Houthis, while in reality it will be to secure the enormous oil fields in the North. ..."
"... The importance of oil is not to supply US markets its to deny it to enemies and control oil prices in order to feed international finance/IMF. ..."
Pompeo is a Deep State Israel-firster with a nasty neocon agenda. It is to Trump's disgrace that he chose Pompeo and the abominable
Bolton. At least Trump admits the ME invasions are really about Israel.
Pompeo is a Deep State Israel-firster with a nasty neocon agenda. It is to Trump's disgrace that he chose Pompeo and
the abominable Bolton. At least Trump admits the ME invasions are really about Israel.
Trump, Israel and the Sawdi's. US no longer needs middle east oil for strategic supply. Trump is doing away with the petro-dollar
as that scam has run its course and maintenance is higher than returns. Saudi and other middle east oil is required for global
energy dominance.
Energy dominance, lebensraum for Israel and destroying the current Iran are all objectives that fit into one neat package.
Those plans look to be coming apart at the moment so it remains to be seen how fanatical Trump is on Israel and MAGA. MAGA as
US was at the collapse of the Soviet Union.
As for pulling out of the Middle East Bibi must have had a good laugh. Remember when he said he wanted out of Syria. My money
is on the US to be in Yemen before too long to protect them from the Saudis (humanitarian) and Iranian backed Houthis, while in
reality it will be to secure the enormous oil fields in the North.
Perhaps this was what the Khashoggi trap was all about. The importance of oil is not to supply US markets its to deny it
to enemies and control oil prices in order to feed international finance/IMF.
"... Trump won't fire his son-in-law, so if Jared doesn't have the decency to resign on his own, he may well be responsible for Trump's downfall in addition to his own. Trump's silly daughter, Ivanka, needs to go to. ..."
"... Time for Bolton to send for the clairvoyant Theresa May who has managed to accuse Russia, and Mr. Putin personally, in the Skripals' poisoning n the absence of any evidence ..."
Comment section (David Wooten): "According to the crown prince himself, Trump's [Jewish]
son-in-law gave him a secret list of his enemies -- the ones like Al Aweed who were
tortured and shaken down for cash. Khashoggi might even have been on that list.
One or more of the tortured ones likely tipped off Erdogan, which is why Turkey only
needed to enter the consulate, retrieve the recorded audio device they planted, and walk out
with the evidence. Turkey also has evidence that puts MbS' personal doctor and other staff
arriving in Turkey at convenient times to do the job -- and probably more. Khashoggi was
anything but a nice person but Trump cannot say that or he'll likely be accused of
involvement in his murder.
Dissociation is made far more difficult by the fact that Jared is a long time friend of
Netanyahu who, like Jared, hasbefriended MbS .
Trump won't fire his son-in-law, so if Jared doesn't have the decency to resign on his
own, he may well be responsible for Trump's downfall in addition to his own. Trump's silly
daughter, Ivanka, needs to go to.
Were it not for the Khashoggi affair, fewer Republican seats would have been lost in the
election."
-- Time for Bolton to send for the clairvoyant Theresa May who has managed to accuse
Russia, and Mr. Putin personally, in the Skripals' poisoning n the absence of any
evidence .
These people -- Bolton, May, Gavin Williamson and likes -- are a cross of the ever-eager
whores and petty brainless thieves. To expose themselves as the willing participants in the
ZUSA-conducted farce requires a complete lack of integrity.
Of course, there is no way to indict the journalist's murderers since the principal
murderer is a personal friend of Netanyahu and Jared.
Jump, Justice, jump, as high as ordered by the "chosen."
By the way, why do we hear nothing about Seth Rich who was murdered in the most surveilled
city of the US?
@annamaria A 1st
grader can see that MbS was behind the murder of Kashoggi.
Trump won't fire his son-in-law, so if Jared doesn't have the decency to resign on his
own, he may well be responsible for Trump's downfall in addition to his own. Trump's silly
daughter, Ivanka, needs to go to.
I've been hoping for this since they moved to Washington with 'big daddy'.
@Anon " crappy
bedtime reading the woolyheadedness "
Hey, Anon[436], is this how your parents have been treating you? My condolences.
If you feel that you succeeded with your "see, a squirrel" tactics of taking attention
from the zionists' dirty and amoral attempts at coverup of the murder of the journalists
Khashoggi, which was accomplished on the orders of the clown prince (the dear friend of Bibi
& Jared), you are for a disappointment.
One more time for you, Anon[436]: the firm evidence of MbS involvement in the murder of
Khashoggi contrasts with no evidence of the alleged poisoning of Skripals by
Russian government.
The zionists have been showing an amazing tolerance towards the clown prince the murderer
because zionists need the clown prince for the implementation of Oded Yinon Plan for Eretz
Israel.
The stinky Skripals' affair involves harsh economic actions imposed on the RF in the
absence of any evidence , as compared to no sanctions in response to the actual murder
of Khashoggi, which involved MbS according to the availableevidence . Thanks
to the zionists friendship with the clown prince, the firm evidence of Khashoggi murder is of
no importance. What else could be expected from the "most moral" Bibi & Kushner and the
treasonous Bolton.
The stinky Skripals' affair involves harsh economic actions imposed on the RF in the
absence of any evidence, as compared to no sanctions in response to the actual murder of
Khashoggi, which involved MbS according to the available evidence. Thanks to the zionists
friendship with the clown prince, the firm evidence of Khashoggi murder is of no
importance. What else could be expected from the "most moral" Bibi & Kushner and the
treasonous Bolton.
"... Great article, thanks. Author says US LTO will be done by 2040, which makes sense. The speed and acceleration of sinking oil production is critical since we have not been strongly pursuing alternatives. If the production is down 50 percent by 2030 to 2035 it's going to be a tough go. If it falls faster then we are in severe trouble. ..."
"... The uncertainties he notes are shocking. That we have spent the last ten years pissing away our remaining "pennies" on a driving spree, instead of using it to build a renewable future, really makes me think that the backside of the peak is going to be awful. ..."
"... As a working petroleum geologist in the Delaware Basin and others, I will say USGS and EIA assessments are considered a joke. They do little to take into account the actual geology, or changes in the thermal maturity of the rock across a basin, it is more multiply an average well performance for a certain amount of acres drilled, times the total area of the basin, minus the number of drilled wells. ..."
"... I would not doubt oil production peaks in the mid-2020s as people drill up the best rock, and have to keep shifting to less productive horizons. ..."
"... So the oil cut is out: 1.2 mb. Together with russia and others. So LTO is saved, the frenzy can go on soon. ..."
Great article, thanks. Author says US LTO will be done by 2040, which makes sense. The
speed and acceleration of sinking oil production is critical since we have not been strongly
pursuing alternatives. If the production is down 50 percent by 2030 to 2035 it's going to be
a tough go. If it falls faster then we are in severe trouble.
Jean Laherrere knows a lot, but on LTO I think he may be wrong.
From the piece linked above: The best approach for forecasting future production is the extrapolation of past
production (called Hubbert linearization). For Eagle Ford the trend can be extrapolated
toward an ultimate quantity of 3 Gb.
The USGS estimates about a 12.5 Gb mean for the TRR of the Eagle Ford, when economics is
considered the URR might be reduced to 10Gb under a reasonable oil price scenario (AEO 2018
reference oil price scenario).
Recent USGS estimates for the Permian Delaware Basin have lead to a revision of my US
tight oil estimate to a mean of 74 Gb with peak probably in 2025 to 2030. Decline will be
relatively steep from 2030 to 2040, if the USGS estimates for the US tight oil resource prove
correct.
This is a terrific article. It takes all the confusions around oil and articulates them
beautifully. His review really makes me want to buy the book.
This is a delight to me because while I've always liked Laherrere's charts, I find his
English writing atrocious (not all his fault as a native speaker of French). This could
alienate lay readers, which is too bad because his message really needs to get out there.
The uncertainties he notes are shocking. That we have spent the last ten years pissing
away our remaining "pennies" on a driving spree, instead of using it to build a renewable
future, really makes me think that the backside of the peak is going to be awful.
Laherrere's knowledge is magisterial. Good on the editor who worked with him on this.
Indeed the amount of work that Jean is producing is truly quite amazing.
By the way what about Kjell Aleklett ?
According to his blog he didn't publish anything since 2017, the case ?
The "issue" with Jean is that he also is a climato skeptic (regarding CO2 effects) and this
has been detrimental to his ressource studies.
But one exercice in comparing the urgencies (taking the IPCC models just as they are), and
feeding them with the resource aspects of Laherrere, clearly shows that peak oil or even peak
fossile is the most urgent matter (knowing that anyway the mitigation measures, dimishing
fossile fuels burning, are usually the same, except stuff like CSS, that will most probably
never happen anyway).
Overall the terrible deficit of the "resource message" compared to the climate/CO2 one,
could be seen as a key reason for no measures being taken for the two aspects
Laherrere also suggests a 3 Gb URR for Eagle Ford where the USGS TRR mean estimate is
about 12.5 Gb and when economic assumptions are applied the ERR is probably about 10 Gb.
You are much more familiar with the Eagle Ford, at $80/b (2017$) does a 3 Gb URR estimate
seem correct?
Thanks. Does 10 Gb seem reasonable or is that too high? Average of USGS mean and
Laherrere's estimate would be about 6.5 Gb, again you know the area so your estimates would
probably be better than most.
It's pretty difficult to measure with strictly an $80 price. Some depends on gas price. There
are three windows in the EF. Oil, gas/condensate, and mostly gas. Gas has barely been
touched, and is the biggest window. Geologically older. It still will produce some oil and
condensate. If any, it will be mostly condensate. But it is still production as yet mostly
untouched. Gas/condensate has been drilled, and is responsible for the higher api coming out
of the EF, but in the past few years, less has been drilled due to the api. Oil window is
being drilled, but there is still plenty of tier two and three areas to go. Not so much tier
one. How do you measure that, and at what oil and gas price. I would say 12 is possible, but
it includes a lot of condensate and gas.
You could look at the USGS assessment of the Delaware in the same light. It may be there,
but is it cost productive? You may only get gas and/or condensate, depending on geological
age of the formation. Or, you may have to keep chasing after anything, as it moves quickly as
wells are drilled.
Thanks for the correction. Yes Gas prices would also be needed. The 10 Gb was C+C and yes
there is probably lots of condensate. I guess I would make it $4/ MCF for NG, you would
probably need condensate and NGL prices to do a full analysis, way too many moving parts for
me.
Got that right. Here's my cracker jacks geology assessment in the Permian. midland and
Delaware basins are slightly different, but the both have a wolfcamp as the lower level. It's
primarily a shale from my view of core samples. From the Bone Springs to the bottom wolfcamp,
there is no clear formation that acts as a container, Bone Springs looks like it is closer to
a sandstone, but closely formed from my view of the core samples. Not conducive to water
flooding due to lack of "walls". But, because of the lack of walls, the oil/condensate/gas
travels when wells are drilled. Indications are that EF has the same problems, but not as
fast? Very simplistic, and possibly wrong viewpoint.
And there is a fairly wide variety of prices depending on what comes out. I'm still trying
to figure out my pay Stubbs.
LARGEST CONTINUOUS OIL AND GAS RESOURCE POTENTIAL EVER
Today, the U.S. Department of the Interior announced the Wolfcamp Shale and overlying Bone
Spring Formation in the Delaware Basin portion of Texas and New Mexico's Permian Basin
province contain an estimated mean of 46.3 billion barrels of oil, 281 trillion cubic feet of
natural gas, and 20 billion barrels of natural gas liquids, according to an assessment by the
U.S. Geological Survey (USGS). This estimate is for continuous (unconventional) oil, and
consists of undiscovered, technically recoverable resources.
The Easter Bunny, Santa Clause, Tooth Fairy, but no Trolls? Conventional? They are out of
their Fxxng minds. Dept of the Interior is sharing the same hospital suite with the EIA. Both
digging for that phantom oil.
Somebody ought to tell the oil companies to quit using all this fracking stuff. All they
need to do is drill straight down. Sheesh!
I'm not a geologist, but your original projections peaking in 2025 appear reasonable to me.
Slow peak, not a huge peak like some. To add to that, JG Tulsa (below post), who is a working
geologist in the area, agrees with a mid 2020's peak. I'm not stupid enough to argue with
experts
You are clearly smarter than me. I do tend to listen when geologists and geophysicists try to educate me.
Here is a preliminary estimate for US LTO assuming USGS mean estimates are correct, the
Permian is up to date, but the older Bakken, EF, Niobrara, and US other LTO scenarios need to
be revised to reflect the AEO reference oil price scenario. Peak about 9 Mb/d in 2025, also
shown is an older estimate from June 2018 (before the recent Delaware Basin Wolfcamp and
Bonespring assessment from the USGS.)
This 46 billion barrels oil – along with 20 billion barrels NGLs and 281 Tcf gas
– is for the Delaware Basin Wolfcamp and Bone Spring only.
Combined with the earlier Midland Basin assessments of the Wolfcamp and Spraberry of 24
billion barrels combined, the total so far Technically Recoverable Resource is over 70
billion barrels oil.
Just as the Haynesville jumped from 39 Tcf to over 300 Tcf as the Haynesville/Bossier, the
Mancos from 1.6 to 66 Tcf, the Barnett from 26 to 52 Tcf, the Bakken/TF will jump next
assessment and both the Utica and Marcellus will skyrocket.
I know less about Marcellus, but Bakken/Three Forks was recently assessed in 2013, the new
assessment may be an increase, but I won't speculate in advance what it will be.
The 46 Gb mean undiscovered TRR for the Wolfcamp (Delaware Basin) and Bonespring is a
surprise to me, based on this the Permian tight oil TRR would be about 74 Gb, before this
assessment I had guessed 8 Gb for Delaware Wolfcamp based on output compared to Midland
Wolfcamp (it was about 30% of Midland so I took the 20 Gb Midland Wolfcamp times 0.3 and
rounded to 8 Gb). My previous mean estimate for Permian tight oil TRR was 38 Gb, so I was too
low by more than a factor of 2. My F5 (5% probability TRR might be higher) estimate was 54 Gb
before and the F95 estimate was 20 Gb, these are revised to F95=43 Gb and F5=113 Gb.
For the entire US I had a previous TRR estimate of 70 Gb for all of the US, this is
revised to 107 Gb for the mean US tight oil TRR.
An interesting development that might push the US peak in tight oil a little later and/or
a little higher. My F5 model had the Permian peak at about 7.5 Mb/d in 2027, a new model
might result in 2029 at 9.5 Mb/d, for the US as a whole, other tight oil plays might be
declining by 2029, so the overall US peak might be 2027 or 2028, based on current
information.
The formal report. The references are . . . a bit odd. There is a sense the whole thing is
dependent on technology results assessment from IHS.
Meaning, I don't see anything here that suggests USGS sent teams out to look at rock for
this whole area. They seem to have taken info from other IHS papers -- and the recent ones
from USGS were for what looks like much more limited geographic areas. Looks like IHS
encouraged extrapolation.
Btw someone at Bloomberg has declared this is a X2 on previous estimates. That would suggest
46 billion barrels of oil we're not just added to the US resource database. It would be more
like 23.
The Bloomberg guy didn't seem all that sharp, and so let's not take that as gospel.
Probably worth noting that it would not take much variance to move this resource into an
API 45+ or even 50+ configuration, and given the NAT gas and NGL estimates, that would seem a
pretty credible scenario. In which case it's not oil.
The Monterrey estimate was a study done for the EIA which was poorly done (it was not a USGS
estimate), the USGS estimates tend to be pretty good and have tended to be on the
conservative side, though we won't know for sure until all the oil is produced and the last
well is shut in. Every resource estimate involves extrapolation and/or modelling of future
well output by definition.
Some estimates are better than others, for example the USGS estimates are better than the
EIA estimates in most cases.
Previously I has guessed (incorrectly) that Permian mean TRR would be 38 Gb, this new
assessment would lead to a revision to about 74 Gb for mean TRR of the Permian Basin tight
oil resource.
In the scenario below I have a 253,000 well scenario (about 6 times more than my ND
Bakken/Three Forks mean scenario with 42,000 wells completed.) I assume new well EUR starts
to decrease in Jan 2023(about 3 years after my estimate of the future ND Bakken EUR decrease
start as Permian ramp up started about 3 years after Bakken). This assumption is easily
modified.
Peak is about 2028 with peak output at about 7000 kb/d (currently Permian tight oil output
is about 2750 kb/d based on EIA tight oil production estimates by play).
The scenario above does not consider economics. When we consider the discounted net revenue
over the life of the well and assume this must equal the real well cost in order for the well
to be completed using the assumptions below, then we find an economically recoverable
resource (ERR) scenario.
Economic assumptions (all costs in constant 2017$) are:
real oil prices in 2017$ follow the EIA AEO 2018 Reference Brent Oil Price scenario
royalties and taxes are 32% of wellhead revenue
transport cost is $4/b
OPEX is $2.3/b plus $15000 per month per well
real annual discount rate is 7% (nominal rate is 10% at 3% annual inflation rate)
real well cost=9.5 million 2017US$
Peak output is unchanged but wells completed are reduced to 173,000 and ERR=60 Gb.
The indications from drilling companies, so far, operating in the Delaware do not seem to
jive with the assessment of grandiosity. So, I am more than skeptical. The government can
create all the reserves they want, but if the oil companies can't get it out of the ground??
My understanding is that there is a core area in West Texas and NM. EOG is there. Extends a
few Counties in West Texas and NM starting around Loving County. Even there, it is high api.
Outside of that, it is highly sporadic. If you extrapolate what they are doing in tiny Loving
County to the rest of the Delaware, you can come up with these numbers. But, you can't. As I
read, there are over 800 Ducs outside of this area. You leave them as Ducs, because you
pretty much know what the completion will look like after drilling. Basically, the report is
hogwash. It's pretty easy to tell on the Texas side, as you can pull up completions by
county.
It may require higher oil prices and the associated gas is a problem, not enough
infrastructure to move it.
Also the USGS simply does a resource assessment, these are not reserves, no economic
assessment was done, the USGS leaves that to others.
I have often been skeptical of USGS Assessments (such as Bakken Assessment in 2013),
looking at proved reserves and cumulative production to data in the ND Bakken/Three Forks,
the 11 Gb mean TRR estimate from 2013 looks pretty good.
As a working petroleum geologist in the Delaware Basin and others, I will say USGS and EIA
assessments are considered a joke. They do little to take into account the actual geology, or
changes in the thermal maturity of the rock across a basin, it is more multiply an average
well performance for a certain amount of acres drilled, times the total area of the basin,
minus the number of drilled wells.
Everything is more complex than that. Right now operators
are drilling the best, most economic parts of the Delaware basin, at the going rate it will
not be too many years before they have to shift over to other benches of the Wolfcamp or Bone
Spring, which will be less productive. for deeper Wolfcamp benches you get more condensate,
less oil, much more gas, you might go from a 10,000′ lateral making 1-2 MMBO in the
Wolfcamp A, down to one making 300-500 MBO.
Still a decent well when you add in the gas, but
if you take that across a large area that will lead to a substantial decline in new well
performance. I would not doubt oil production peaks in the mid-2020s as people drill up the
best rock, and have to keep shifting to less productive horizons.
Can you give us your estimate of the TRR or ERR of the Delaware Wolfcamp and Bonespring.
There is a wide range in the USGS TRR estimate from 27 to 71 Gb with a mean of 46 Gb and a
median of 45 Gb. Would you say that 27 Gb is too high? It seems clear you think that 46 Gb is
far too optimistic. Note that the mean ERR would probably be around 38 Gb if the mean TRR
estimate was correct and prices follow the AEO 2018 reference price scenario. For the F95
USGS TRR estimate the ERR would be around 21 Gb.
Maybe you could also comment on other USGS assessments for Eagle Ford, Wolfcamp Midland
basin and Spraberry. Perhaps you could give us the "correct assessment".
I agree the EIA assessments are not good, economists do not know much about geophysics.
The people at the USGS are scientists, though they have limited information and thus use
statistical analysis to fill the data gaps.
Come on, Dennis. He may be a geologist, but my bet he is mortal, like you and I.
I really believe your first graph with 8 million as the high is the best I have seen. The
tail of that is probably not ever to be properly guessed, until it happens.
Dood, one of the most frequent points we deal with on this blog is the claim that technology
in horizontal fracking has multiplied output tremendously -- excluding from consideration
stage count/length.
The extra production "per well" seems to be from the well being longer in length and thus
consuming more water and proppant. Is this true, or is there some magical improvement in
proppant type or fracking pressure or whatever?
It's mostly the length of the lateral, although some is due to increased fracking stages
within the lateral (more holes in the pipe). Better drilling is another, although extra
lateral makes up most of it. The laterals, in general, are about twice as long.
Hanh? And this paragraph strikes this lay reader as utterly incoherent:
The U.S. sold overseas last week a net 211,000 barrels a day of crude and refined
products such as gasoline and diesel, compared to net imports of about 3 million barrels a
day on average so far in 2018, and an annual peak of more than 12 million barrels a day in
2005, according to the U.S. Energy Information Administration.
From EIA: "In 2017, the United States consumed about 19.96 million barrels per day." Let's
call it 20.
Also from EIA: US weekly field production ending 11/30: 11.7 million barrels.
20-11.7=8.3????
True? Fudging? Lying? What am I missing?
Then, you read further into the article:
While the net balance shows the U.S. is selling more petroleum than buying, American
refiners continue to buy millions of barrels each day of overseas crude and fuel. The U.S.
imports more than 7 million barrels a day of crude from all over the globe to help feed its
refineries, which consume more than 17 million barrels each day.
The US refines a lot of imported oil -- for export. There is refinery gain in this. This
means a barrel comes in. It is refined to various constituent parts like gasoline, diesel,
kerosene, etc. The VOLUME of these parts are liquids of less density and this means their
volume is greater. So a barrel of crude will yield a sum total of more than 1 barrel of
liquids of lower density. Since these products are exported, the barrel count is in favor of
exports vs the barrel count imported.
This is not a huge effect, but it's significant.
There's an EIA page for US sales volume consumed. If you add up all the products you get
well over 15 million bpd. US production is rather less than that. Imports must exceed
exports.
Thanks for trying to explain it to me. Maybe it's just too complicated for me to understand.
I still can't reconcile the headline, "US becomes a net oil exporter" with the EIA's
numbers: The US consumes 20 million barrels a day. The US produces 12 million barrels a day.
But, yes, they're net exporters. Whatever.
After 14 years, the niceties of peak oil still escape me.
I am not sure I follow you entirely, but for heavier crude oils there is waste to get to
diesel (a bit higher than 30 API). And for extra light oil there is a huge waste to get to
diesel, as much has to be segregated to petroleum gas and gasoline components due to length
of carbon chain.
The case for diesel shortage in 2020 due to shipping legislation is still very much
legit.
I was talking about imported crude (that would not be LTO and probably diesel rich) being
refined into a larger number of barrels of product vs the barrels of input crude. They
export. It's a bias towards export.
I think mostly the report derives from very noisy weekly data. The US is not a net
exporter.
Donald Trump could hardly have chosen a more treacherous economic moment to tear up the
"decaying and rotten deal" with Iran. The world crude market is already tightening very fast. He
estimates that sanctions will cut Iran's exports by up to 500,000 barrels this year. "It could
well be twice more cut in 2019
North America has run into an infrastructure crunch. There are not yet enough pipelines to
keep pace with shale oil output from the Permian Basin of west Texas, and it is much the same
story in the Alberta tar sands. The prospect of losing several hundred thousand barrels a day of
Iranian oil exports would not have mattered much a year ago. It certainly matters now.
Notable quotes:
"... The peak oil theme is very much forgotten in all the turmoil, but is very real still. ..."
"... How much more reserves to classify as probable (2p) is a movable target, it depends on the oil price. ..."
"... I agree that 2019 will show big declines in OECD inventory primarily because core OPEC wants it. (increasing KSA premiums to the US +3,5 dollars in Jan and lowering it to Asia). ..."
"... Or still more likely, a spike in oil prices in 2H 2019 and a recession soon thereafter. ..."
"... Who knows..the only thing certain is that oil is being pressured towards the final "spare capacity" (whatever that is) and that a recession will come anyway as a result of the low oil price environment the last 4 years. ..."
The peak oil theme is very much forgotten in all the turmoil, but is very real
still.
How much more reserves to classify as probable (2p) is a movable target, it depends on
the oil price.
And how rapid the extraction rates of reserves can extend to difficult to say; technology
and not at least the 3D maps of reservoirs coupled with improved seismic data, more precise
drilling and lower costs due to excess oil service capacity (at least for offshore) have
countered the inevitable declining quality of oil reservoirs and size of new ones coming
online for some time now.
I agree that 2019 will show big declines in OECD inventory primarily because core OPEC
wants it. (increasing KSA premiums to the US +3,5 dollars in Jan and lowering it to
Asia).
The next question is how high oil prices will go before there is some reaction from the
nations that have spare storage/capacity. I am thinking there is some relief in increased
pipeline capacity in Texas in 2H 2019 and also Johan Sverdrup in Norway (since I follow
things close to home) in the same time period to save the oil market in winter 2020.
Or still more likely, a spike in oil prices in 2H 2019 and a recession soon
thereafter.
Who knows..the only thing certain is that oil is being pressured towards the final "spare
capacity" (whatever that is) and that a recession will come anyway as a result of the low oil
price environment the last 4 years.
Offshore is hit hard, so are supply in places "too risky" for cheap financing the hidden
secret of the oil market (why so few news stories covering this?)
Saved from $40 oil, but I really doubt there will be much of a frenzy at $52 oil price.
Hopefully, that will give them enough cash flow for stationary. They need to write Christmas
letters to their shareholders telling them everything will be better next year.
We will also have to see how long it takes for the shale frackers modify their behavior in
the face of $50 oil. We haven't seen any signs so far, with a few rigs continued to be added
each week. At some point the frackers will wake up and determine that oil at $50 doesn't go as
far as oil at $75 and tap the brakes just a hair. We are also due for a seasonal pause in some
of the U.S. Northern areas, as winter takes a bite out of drilling activity.
In practical terms we will probably be well into the first quarter before we see any impact
from OPEC production cuts. However, once we do, it will be like June of 2017 all over again,
and the price of oil could strongly respond to the upside.
This article is from May 2018 but it read as if it was written yesterday.
Notable quotes:
"... He estimates that sanctions will cut Iran's exports by up to 500,000 barrels a day later this year. "It could well be much more in 2019," he said. ..."
"U.S. political pressure is clearly a dominant factor at this OPEC meeting, limiting the scope of Saudi actions to rebalance the
market," said Gary Ross, chief executive of Black Gold Investors and a veteran OPEC watcher.
channelnewsasia.com 10 May 2018
Donald Trump could hardly have chosen a more treacherous economic moment to tear up the "decaying and rotten deal" with Iran.
The world crude market is already tightening very fast. Joint production curbs by Opec and Russia have cleared the four-year glut
of oil. There is no longer an ample safety buffer against supply shocks. The geopolitical "premium" on prices has returned. Tensions
run high:
The Maduro regime in Venezuela is entering its last agonies, and the country's oil industry is imploding. North America has run
into an infrastructure crunch. There are not yet enough pipelines to keep pace with shale oil output from the Permian Basin of west
Texas, and it is much the same story in the Alberta tar sands. The prospect of losing several hundred thousand barrels a day of Iranian
oil exports would not have mattered much a year ago. It certainly matters now.
World leaders respond to President Trump's move to reimpose economic sanctions on Iran while pulling the United States out of
the international agreement aimed at stopping Tehran from obtaining a nuclear bomb.
Oil price shock is looming
It is the confluence of simmering political crises in so many places that has driven Brent crude to $US77 a barrel, up 60 per
cent since last June. "We believe an oil price shock is looming as early as 2019 as several elements combine to form a 'perfect storm',"
said Westbeck Capital. It predicts $US100 crude in short order, with $US150 coming into sight as the world faces a crunch all too
reminiscent of July 2008. The fund warns that the investment collapse since 2014 is about to deliver its sting. Declining fields
are not being replaced. Output from conventional projects has until now been rising but will fall precipitously by 1.5 million barrels
a day next year. By then global spare capacity will be down to a lethally thin 1 per cent. US shale cannot plug the gap. "The mantra
after 2014 of lower for longer has lulled oil analysts into a torpor," Westbeck said. Needless to say, a spike to $US150 would precipitate
a global recession.
The US might hope to weather such a traumatic episode now that it is the world's biggest oil producer but it would be fatal for oil-starved
Europe. Such a scenario would test the unreformed euro to destruction. Britain, France and Germany may earnestly wish to preserve
the Iran deal but they can do little against US financial hegemony and the ferocity of "secondary sanctions". The US measures cover
shipping, insurance, and the gamut of financial and logistical support for Iran's oil industry.
In the end, there are infinitely greater matters at stake than barrels of oil.
Any European or Asian company that falls foul of this will be shut out of the US capital markets and dollarised international payments
system. The EU has talked of
beefing up the 1996 Blocking Regulation used to shield European companies from extraterritorial US sanctions against Libya. But
this is just bluster. No European company with operations in the US would dare flout the US Treasury. "A choice for corporate Europe
between the US and Iran is unequivocally going to fall the way of the US," said Richard Robinson from Ashburton Global Energy Fund.
Rise in oil prices turns malign
He said Europe will have to slash its imports from Iran by 60 per cent because groups such as ENI or Total will refuse to ship
the oil, whatever the strategic policy of the EU purports to be. This dooms the nuclear deal (JCPOA) since Iran will not abide by
the terms if the EU cannot deliver on its rhetoric, let alone come through with the $US200 billion ($251 billion) of foreign investment
coveted by Tehran.
David Fyfe from oil traders Gunvor said we do not yet have enough details from Washington to judge how quickly companies will
have to act. He estimates that sanctions will cut Iran's exports by up to 500,000 barrels a day later this year. "It could well
be much more in 2019," he said.
Late last year it was still possible to view rising oil prices as benign, the result of a booming world economy. This year it
has turned malign. Global growth has rolled over. The broad IHS index of raw materials has been falling since February.
Europe's catch-up spurt fizzled out in the first quarter. Japan's GDP probably contracted. The higher oil price is itself part
of the cause.
$US500 billion extra 'tax'
Even at current levels, it acts as an extra $US500 billion "tax" this year for consumers in Asia, Europe and America. Not all
of the windfall enjoyed by the petro-powers is recycled quickly back into global spending.
One cause of the slowdown is the credit squeeze in China, which is ineluctably feeding through into the real economy with a delay.
Proxy indicators suggest that true growth has fallen below 5 per cent.
My own view is that monetary tightening by the US Federal Reserve - and declining stimulus from the European Central Bank - is
doing more damage than widely presumed.
Higher US interest rates are pushing up borrowing costs for much of the world. Three-month dollar Libor rates used to price $US9
trillion of global contracts have risen 76 basis points since January.
The Fed is shrinking its balance sheet, draining international dollar liquidity at a quickening pace. If the Fed is not careful,
it will tip the US economy into a stall.
Ominously, we are seeing the first signs of a US dollar rally, tantamount to a "short squeeze" on Turkey, Argentina and Indonesia,
among other emerging market debtors.
Toxic combination
The combination of a slowing economy and an oil supply shock is toxic, even if the "energy intensity" of world GDP is now half
the level of 30 years ago.
Opec and Russia can of course lift their output cap at any time, though that alone will not restore the full 1.8m barrels a day
of original curbs. Venezuela is now in unstoppable free-fall.
The Saudis have pledged to uphold the "stability of oil markets" and to help "mitigate the impact of any potential supply shortages".
Kuwait and Abu Dhabi could add a little. Yet cyclical forces may be moving even beyond their control.
In the end, there are infinitely greater matters at stake than barrels of oil. Trump is throwing US power behind Saudi Arabia
in the epic Sunni-Shia battle for dominance over the Middle East, and behind Israel in its separate battle with Iran.
What can go wrong?
Both conflicts are on a hair trigger. Israel attacked an Iranian air base in Syria last month and killed
seven revolutionary guards. This is a dangerous escalation from proxy conflict to direct hostilities. The JCPOA nuclear deal may
be all that restrains the Iranian side from lashing out.
Saudi Arabia's impetuous young leader Mohammad bin Salman is itching to settle the score of all scores with Iran, the Iranian
revolutionary guard are in turn itching to launch a one-year dash for nuclear weapons, and Trump is itching for regime change. What
can go wrong?
2019 might be the year when Western powers start paying the price for 2014-2017 oil price
crash. Three years of subpar capital investment will bite them in the back.
Russia Economic
Report said that OPEC was the single most important factor for oil price outlooks in the
short term.
"As non-OPEC oil supply growth is expected to be greater than that of global demand, the
outlook for oil prices depends heavily on supply from OPEC members," the report's authors
noted. The level of spare capacity among OPEC members is estimated to be low at present,
suggesting there are limited buffers in the event of a sudden shortfall in supply of oil,
raising the likelihood of oil price spikes in 2019."
The World Bank is not alone in seeing OPEC's spare capacity as an important factor for oil
prices going forward. Spare capacity provides a cushion against price shocks as evidenced most
recently by the June decision of the cartel and Russia to start pumping more again after 18
months of cutting to arrest a too fast increase in oil prices. They had the capacity to do it
and prices stopped rising, helped by downward revisions of economic forecasts.
Now, the oil market is plagued with concerns about oversupply, but this could change quite
quickly if there is any sign that OPEC is nearing the end of its spare production capacity. As
to the likelihood of such a sign emerging anytime soon, this remains to be seen.
The U.S. Energy Information Administration estimates OPEC's spare capacity at a little over 1
million bpd as of the fourth quarter of this year. That's down from 2.1 million bpd at the
end of 2017, but with Venezuela's production in free fall and with Iran pumping less because of
the U.S. sanctions, the total spare capacity of the group has declined substantially.
"... Everyone knows it's the US presence in the Middle East which creates terrorists, both as proxies of and in resistance to the US imperial presence (and often one and then the other). So reading Orwellian language, Pompeo is saying the US wants to maximize Islamic terrorism in order to provide a pretext for creeping totalitarianism at home and abroad. ..."
"... The real reason is to maintain the petrodollar system, but there seems to be a conspiracy of silence never to mention it among both supporters and opponents of Trump. ..."
"... everyone knows why the usa is in the middle east.. to support the war industry, which is heavily tied to the financial industry.. up is down and down is up.. that is why the usa is great friends with ksa and israel and a sworn enemy of iran... what they don't say is they are a sworn enemy of humanity and the thought that the world can continue with their ongoing madness... ..."
"... The importance of oil is not to supply US markets its to deny it to enemies and control oil prices in order to feed international finance/IMF ..."
Trump also floated the idea of removing U.S. troops from the Middle East, citing the lower price of oil as a reason to withdraw.
"Now, are we going to stay in that part of the world? One reason to is Israel ," Trump said. "Oil is becoming less and less
of a reason because we're producing more oil now than we've ever produced. So, you know, all of a sudden it gets to a point
where you don't have to stay there."
It is only Israel, it is no longer the oil, says Trump. But the nuclear armed Israel does not need U.S. troops for its protection.
And if it is no longer the oil, why is the U.S. defending the Saudis?
Trump's Secretary of State Mike Pompeo disagrees with his boss. In a Wall Street journal op-ed today he claims that
The U.S.-Saudi Partnership
Is Vital because it includes much more then oil:
[D]egrading U.S.-Saudi ties would be a grave mistake for the national security of the U.S. and its allies.
The kingdom is a powerful force for stability in the Middle East. Saudi Arabia is working to secure Iraq's fragile democracy
and keep Baghdad tethered to the West's interests, not Tehran's. Riyadh is helping manage the flood of refugees fleeing Syria's
civil war by working with host countries, cooperating closely with Egypt, and establishing stronger ties with Israel. Saudi
Arabia has also contributed millions of dollars to the U.S.-led effort to fight Islamic State and other terrorist organizations.
Saudi oil production and economic stability are keys to regional prosperity and global energy security.
Where and when please has Saudi Arabia "managed the flood of refugees fleeing Syria's civil war". Was that when it
emptied its jails of violent criminals and sent them to wage jihad against the Syrian people? That indeed 'managed' to push
millions to flee from their homes.
Saudi Arabia might be many things but "a powerful force for stability" it is not. Just ask 18 million Yemenis who, after years
of Saudi bombardment, are near to death for lack of
food .
Pompeo's work for the Saudi dictator continued today with a Senate briefing on Yemen. The Senators will soon vote on a resolution
to end the U.S. support for the war. In his prepared remarks Pompeo wrote:
The suffering in Yemen grieves me, but if the United States of America was not involved in Yemen, it would be a hell of a lot
worse.
What could be worse than a famine that threatens two third of the population?
If the U.S. and Britain would not support the Saudis and Emirates the war would end within a day or two. The Saudi and UAE
planes are maintained by U.S. and British specialists. The Saudis still
seek 102 more U.S. military personal to
take care of their planes. It would be easy for the U.S. to stop such recruiting of its veterans.
It is the U.S. that
holds up an already
watered down UN Security Council resolution that calls for a ceasefire in Yemen:
The reason for the delay continues to be a White House worry about angering Saudi Arabia, which strongly opposes the resolution,
multiple sources say. CNN reported earlier this month that the Saudi crown prince, Mohammed bin Salman, "threw a fit" when
presented with an early draft of the document, leading to a delay and further discussions among Western allies on the matter.
There is really nothing in Trump's list on which the Saudis consistently followed through. His alliance with MbS brought him
no gain and a lot of trouble.
Trump protected MbS from the consequences of murdering Jamal Khashoggi. He hoped to gain leverage with that. But that is not
how MbS sees it. He now knows that Trump will not confront him no matter what he does. If MbS "threws a fit" over a UN Security
Council resolution, the U.S. will drop it. When he launches his next 'adventure', the U.S. will again cover his back. Is this
the way a super power is supposed to handle a client state?
If Trump's instincts really tell him that U.S. troops should be removed from the Middle East and Afghanistan, something I doubt,
he should follow them. Support for the Saudi war on Yemen will not help to achieve that. Pandering to MbS is not MAGA.
Posted by b on November 28, 2018 at 03:12 PM |
Permalink
Comments Pompeo: "Saudi Arabia has also contributed millions of dollars to the U.S.-led effort to fight Islamic State and other
terrorist organizations."
Everyone knows it's the US presence in the Middle East which creates terrorists, both as proxies of and in resistance to
the US imperial presence (and often one and then the other). So reading Orwellian language, Pompeo is saying the US wants to maximize
Islamic terrorism in order to provide a pretext for creeping totalitarianism at home and abroad.
The real reason is to maintain the petrodollar system, but there seems to be a conspiracy of silence never to mention it among
both supporters and opponents of Trump.
There is really nothing in Trump's list on which the Saudis consistently followed through. His alliance with MbS brought him
no gain and a lot of trouble.
He did get to fondle the orb - although fuck knows what weirdness was really going on there.
thanks b... pompeo is a very bad liar... in fact - everything he says is about exactly the opposite, but bottom line is he is
a bad liar as he is thoroughly unconvincing..
everyone knows why the usa is in the middle east.. to support the war industry, which is heavily tied to the financial
industry.. up is down and down is up.. that is why the usa is great friends with ksa and israel and a sworn enemy of iran... what
they don't say is they are a sworn enemy of humanity and the thought that the world can continue with their ongoing madness...
oh, but don't forget to vote, LOLOL.... no wonder so many are strung out on drugs, and the pharma industry... opening up to
the msm is opening oneself up to the world george orwell described many years ago...
Take a wafer or two of silicon and just add water. The oil obsession has been eclipsed and within 20 years will be in absolute
disarray. The warmongers will invent new excuses.
A hypothetical: No extraordinary amounts of hydrocarbons exist under Southwest Asian ground; just an essential amount for domestic
consumption; in that case, would Zionistan exist where it's currently located and would either Saudi Arabia, Iraq and/or Iran
have any significance aside from being consumers of Outlaw US Empire goods? Would the Balfour Declaration and the Sykes/Picot
Secret Treaty have been made? If the Orinoco Oil Belt didn't exist, would Venezuela's government be continually targeted for Imperial
control? If there was no Brazilian offshore oil, would the Regime Change effort have been made there? Here the hypotheticals end
and a few basic yet important questions follow.
Previous to the 20th Century, why were Hawaii and Samoa wrested from their native residents and annexed to Empire? In what
way did the lowly family farmers spread across 19th Century United States further the growth of its Empire and contribute to the
above named annexations? What was the unspoken message sent to US elites contained within Frederic Jackson Turner's 1893 Frontier
Thesis ? Why is the dominant language of North America English, not French or Spanish?
None of these are rhetorical. All second paragraph questions I asked of my history students. And all have a bearing on b's
fundamental question.
b says, "And it its no longer the oil, why is the U.S. defending the Saudis?"
The US has a vital interest in protecting the narrative of 9/11. The Saudis supplied the patsies. Mossad and dual-citizen neocons
were the architects of the event. Hence, the US must avoid a nasty divorce from the Saudis. The Saudis are in a perfect blackmailing
position.
Of course, most Americans have no idea that the U.S. Shale Oil Industry is nothing more than a Ponzi Scheme because of the
mainstream media's inability to report FACT from FICTION. However, they don't deserve all of the blame as the shale energy
industry has done an excellent job hiding the financial distress from the public and investors by the use of highly technical
jargon and BS.
S.A. is a thinly disguised US military base, hence the "strategic importance" and the relevance of the new Viceroy's previous
experience as a Four Star General. It's doubtful that any of the skilled personnel in the SA Air Force are other than former US/Nato.
A few princes might fancy themselves to be daring fighter pilots. In case of a Anglo-Zio war with Iran SA would be the most forward
US aircraft carrier. The Empire is sustained by its presumed military might and prizes nothing more than its strategically situated
bases. Saud would like to capture Yemen's oil fields, but the primary purpose of the air war is probably training. That of course
is more despicably cynical than mere conquest and genocide.
Trump is the ultimate deceiver/liar. Great actor reading from a script. The heel in the Fake wrestling otherwise known as US politics.
It almost sounds as if he is calling for an end of anymore significant price drops now that he has got Powell on board to limit
interest rate hikes. After all if you are the worlds biggest producer you dont want prices too low. These markets are all manipulated.
I cant imagine how much insider trading is going on. If you look at the oil prices, they started dropping in October with Iran
sanctions looming (before it was announced irans shipments to its 8 biggest buyers would be exempt) and at the height of the Khashoggi
event where sanctions were threatened and Saudi was making threats of their own. In a real free market prices increase amidst
supply uncertainty.
Regardless of what he says he wants and gets now, he is already planning a reversal. Thats how the big boys win, they know
whats coming and when the con the smaller fish to swim one way they are lined up with a big mouth wide open. Controlled chaos
and confusion. For every winner there must be a loser and the losers assets/money are food for the Gods of Money and War
As for pulling out of the Middle East Bibi must have had a good laugh. My money is on the US to be in Yemen to protect them
from the Saudis (humanitarian) and Iranian backed Houthis while in reality we will be there to secure the enormous oil fields
in the North. Perhaps this was what the Khashoggi trap was all about. The importance of oil is not to supply US markets its to
deny it to enemies and control oil prices in order to feed international finance/IMF
@ Pft who wrote: "The importance of oil is not to supply US markets its to deny it to enemies and control oil prices in order
to feed international finance/IMF"
BINGO!!! Those that control finance control most/all of everything else.
Saudi Arabia literally owns close to 8% of the United States economy through various financial instruments. Their public investment
funds and dark pools own large chunks from various strategic firms resting at the apex of western power such as Blackstone. Trump
and Pompeo would be stupid to cut off their nose to spite their face... It's all about the petrodollar, uncle sam will ride and
die with saudi barbaria. If push comes to shove and the saudis decide to untether themselves from the Empire, their sand kingdom
will probably be partitioned.
The oil certainly still plays an important role, the u.s. cannot maintain the current frack oil output for long. For Tronald's
term in office it will suffice, but hardly longer. (The frack gas supplies are much more substantial.)
Personal interests certainly also play a role, and finally one should not make u.s. foreign policy more rational than it is.
Much is also done because of traditions and personal convictions. Often they got it completely wrong and the result was a complete
failure.
Let us watch what Trump does with this or if the resolution makes it to daylight:
Senate advances Yemen resolution in rebuke to Trump
The Senate issued a sharp rebuke Wednesday to President Trump, easily advancing a resolution that would end U.S. military support
for the Saudi-led campaign in Yemen's civil war despite a White House effort to quash the bill.
The administration launched an eleventh-hour lobbying frenzy to try to head off momentum for the resolution, dispatching
Defense Secretary James Mattis and Secretary of State Mike Pompeo to Capitol Hill in the morning and issuing a veto threat
less than an hour before the vote started.
But lawmakers advanced the resolution, 63-37, even as the administration vowed to stand by Saudi Arabia following outcry
over the killing of journalist Jamal Khashoggi.
"There's been a lot of rhetoric that's come from the White House and from the State Department on this issue," said Sen.
Bob Corker (R-Tenn.), chairman of the Foreign Relations Committee. "The rhetoric that I've heard and the broadcasts that we've
made around the world as to who we are have been way out of balance as it relates to American interests and American values."
[/] LINK
TheHill
But Mattis says there is no smoking gun to tie the Clown Thug-Prince to Kashoggi's killing.
TheHill
And Lyias @ 2 is a bingo. Always follow the fiat.
Soon, without any announcements, if they wish to maintain selling oil to China, KSA will follow Qatar. It will be priced in
Yuan...especially given the escalating U.S. trade war with China.
2019 holds interesting times. Order a truckload of popcorn.
Midwest For Truth , Nov 28, 2018 7:29:46 PM |
link
You would have to have your head buried in the sand to not see that the Saudi "Kings" are crypto-Zionistas. Carl Sagan once said,
"One of the saddest lessons of history is this: If we've been bamboozled long enough, we tend to reject any evidence of the bamboozle.
We're no longer interested in finding out the truth. The bamboozle has captured us. It's simply too painful to acknowledge, even
to ourselves, that we've been taken. Once you give a charlatan power over you, you almost never get it back." And Mark Twain also
wrote "It's easier to fool people than to convince them that they have been fooled."
Gee, not one taker amongst all these intelligent folk. From last to first: 1588's Protestant Wind allowed Elizabeth and her cronies
to literally keep their heads as Nature helped Drake defeat the Spanish Armada; otherwise, there would be no British Empire root
to the USA, thus no USA and no future Outlaw US Empire, the British Isles becoming a Hapsburg Imperial Property, and a completely
different historical lineage, perhaps sans World Wars and atomic weapons.
Turner's message was with the Frontier closed the "safety valve" of continental expansion defusing political tensions based
on economic inequalities had ceased to be of benefit and future policy would need to deal with that issue thus removing the Fear
Factor from the natives to immigrants, and from wide-open spaces to the inner cities. Whipsawing business cycles driving urban
labor's unrest, populist People's Party politics, and McKinley's 1901 assassination further drove his points home.
Nationwide, family farmers demanded Federal government help to create additional markets for their produce to generate price
inflation so they could remain solvent and keep their homesteads, which translated into the need to conduct international commerce
via the seas which required coaling stations--Hawaii and Samoa, amongst others--and a Blue Water Navy that eventually led to Alfred
T. Mahan's doctrine of Imperial Control of the Oceans still in use today.
As with Gengis Khan's death in 1227 that stopped the Mongol expansion to the English Channel that changed the course of European
history, and what was seen as the Protestant Wind being Divine Intervention, global history has several similar inflection points
turning the tide from one path to another. We don't know yet if the Outlaw US Empire's reliance on Saudi is such, but we can see
it turning from being a great positive to an equally potential great negative for the Empire--humanity as a whole, IMO, will benefit
greatly from an implosion and the relationship becoming a Great Negative helping to strip what remains of the Emperor's Clothing
from his torso so that nations and their citizens can deter the oncoming financialized economic suicide caused by massive debt
and climate chaos.
Vico's circle is about to intersect with Hegel's dialectic and generate a new temporal phase in human history. Although many
will find it hard to tell, the current direction points to a difficult change to a more positive course for humanity as a whole,
but it's also possible that disaster could strike with humanity's total or near extinction being the outcome--good arguments can
be made for either outcome, which ought to unsettle everyone: Yes, the times are that tenuous. But then, I'm merely a lonely historian
aware of a great many things, including the pitfall inherent in trying to predict future events.
"The suffering in Yemen grieves me, but if the United States of America was not involved in Yemen, it would be a hell of a lot
worse." And I'll bet Pompeo said that with a straight face, too. lmfao
And as for "...keep[ing] Baghdad tethered to the West's interests and not Tehran's," I'm guessing the "secretary" would have
us all agree "yeah, fk Iraqi sovereignty anyway. Besides, it's not like they share a border with Iran, or anything. Oh,
wait..."
p.s. Many thanks for all you have contributed to collective knowledge, b; I will be contacting you about making a contribution
by snail mail (I hate PayPal, too).
"... a powerful force for stability in the Middle East."
"Instability" more like it.
Paid for military coup in Egypt. Funding anti-Syrian terrorists. Ongoing tensions with Iran. Zip-all for the Palestinians.
WTF in Yemen. Wahhabi crazy sh_t (via Mosque building) across Asia. Head and hand chopping Friday specials the norm -- especially
of their South-Asian slave classes. Ok, so females can now drive cars -- woohoo. A family run business venture manipulating the
global oil trade and supporting US-petro-$ hegemony recently out of goat herding and each new generation 'initiated' in some Houston
secret society toe-touching shower and soap ceremonies before placement in the ruling hierarchy back home. But enough; they being
Semites makes it an offence to criticize in some 'free' democratic world domains.
Instead of the "rebuke to Trump" meme circulating around, I found
this statement to be more accurate:
"'Cutting off military aid to Saudi Arabia is the right choice for Yemen, the right choice for our national security, and the
right choice for upholding the Constitution,' Paul Kawika Martin, senior director for policy and political affairs at Peace Action,
declared in a statement. ' Three years ago, the notion of Congress voting to cut off military support for Saudi Arabia would
have been politically laughable .'" [My Emphasis]
In other words, advancing Peace with Obama as POTUS wasn't going to happen, so this vote ought to be seen as an attack on Obama's
legacy as it's his policy that's being reconsidered and hopefully discontinued.
Trump, Israel and the Sawdi's. US no longer needs middle east oil for strategic supply. Trump is doing away with the petro-dollar
as that scam has run its course and maintenance is higher than returns. Saudi and other middle east oil is required for global
energy dominance.
Energy dominance, lebensraum for Israel and destroying the current Iran are all objectives that fit into one neat package.
Those plans look to be coming apart at the moment so it remains to be seen how fanatical Trump is on Israel and MAGA. MAGA
as US was at the collapse of the Soviet Union.
As for pulling out of the Middle East Bibi must have had a good laugh. Remember when he said he wanted out of Syria. My money
is on the US to be in Yemen before too long to protect them from the Saudis (humanitarian) and Iranian backed Houthis, while in
reality it will be to secure the enormous oil fields in the North. Perhaps this was what the Khashoggi trap was all about.
The importance of oil is not to supply US markets its to deny it to enemies and control oil prices in order to feed international
finance/IMF .
@16 karlof1.. thanks for a broader historical perspective which you are able to bring to moa.. i enjoy reading your comments..
i don't have answers to ALL your questions earlier.. i have answers for some of them... you want to make it easy on us uneducated
folks and give us less questions, like b did in his post here, lol.... cheers james
The US Senate has advanced a measure to withdraw American support for a Saudi-led coalition fighting in Yemen.
In a blow to President Donald Trump, senators voted 63-37 to take forward a motion on ending US support.
Secretary of State Mike Pompeo and Defence Secretary Jim Mattis had urged Senators not to back the motion, saying it would
worsen the situation in Yemen.
...
The vote in the Senate means further debate on US support for Saudi Arabia is expected next week.
However, correspondents say that even if the Senate ultimately passes the bipartisan resolution it has little chance of
being approved by the outgoing House of Representatives.
That is quite a slap for the Trump administration. It will have little consequences in the short term (or for Yemen) but it sets
a new direction in foreign polices towards the Saudis.
Pompeo is a Deep State Israel-firster with a nasty neocon agenda. It is to Trump's disgrace that he chose Pompeo and the abominable
Bolton. At least Trump admits the ME invasions are really about Israel.
Take a look at some of the - informed - comments below the vid to which you linked. Then think again about an 'all electric
civilisation within a few years'. Yes, and Father Christmas will be providing everything that everyone in the world needs for
a NAmerican/European standard of living within the same time frame. Er - not.
'Renewables' are not going to save hitech industrial 'civilisation' from The Long Descent/Catabolic Collapse (qv). Apart from
any other consideration - and there are some other equally intractable ones - there is no - repeat NO - 'renewable' energy system
which doesn't rely crucially on energy subsidies from the fossil-hydrocarbon fuels, both to build it and to maintain it. They're
not stand-alone, self-bootstrapping technologies. Nor is there any realistic prospect that they ever will be. Fully renewable-power
hitech industrial civilisation is a non-deliverable mirage which is just drawing us ever further into the desert of irreversible
peak-energy/peak-everythig-else.
@16 karlof1. I also find your historical references very interesting. We do indeed seem to be at a very low point in the material
cycle, it will reverse in due course as is its want, hopefully we will live to see a positive change in humanity.
For example we know Tesla didn't succeed in splitting the planet in half, the way techno-psychotics fantasize. As for that
silly link, how typical of techno-wingnuts to respond to prosaic physical facts with fantasies. Anything to prop up faith in the
technocratic-fundamentalist religion. Meanwhile "electrical civilization" has always meant and will always mean fracking and coal,
until the whole fossil-fueled extreme energy nightmare is over.
Given the proven fact that the extreme energy civilization has done nothing but embark upon a campaign to completely destroy
humanity and the Earth (like in your Tesla fantasy), why would a non-psychopath want to prop it up anyway?
It is still the oil, even for the US. The Persian Gulf supplies 20% of world consumption, and Western Europe gets 40% of its oil
from OPEC countries, most of that from the Gulf. Even the US still imports 10% of its total consumption.
Peter AU 1 | Nov 28, 2018 9:44:50 PM | 20
b | Nov 29, 2018 2:33:04 AM | 23
USD as a world reserve currency could be one factor between the important ones. With non US support the saud land could crash
under neighbours pressure, that caos may be not welcomed.
Humble people around where I live have mentioned that time is speeding up its velocity; there seems to be a spiritual (evolutionary)/physical
interface effect or something...
Tolstoy, in the long theory-of-history exposition at the end of War and Peace, challenges 'the great man' of History idea,
spreading in his time, at the dawning of the so-called: European Romantic period of Beethoven, Goerte and Wagner, when
the unique person was glorified in the name of art, truth, whatever (eventually this bubble burst too, in the 20th C. and IMO
because of too much fervent worship in the Cult of the Temple of the Money God. Dostoyevki's great Crime and Punishment is all
about this issue.)
Tolstoy tries to describe a scientifically-determined historical process, dissing the 'great man of History' thesis. He was
thinking of Napoleon Bonaparte of course, the run-away upstart repulican, anathema to the established order. Tolstoy describes
it in the opening scene of the novel: a fascinating parlor-room conversation between a "liberal" woman of good-birth in the elite
circles of society and a military captain at the party.
...only tenuously relevant to karlofi1's great post touching upon the Theory of History as such; thanks.
Now as to the question: ¿Why is Trump supporting Saudi Arabia? Let me think about that...
JP Morgan has revising its outlook on Brent crude to US$73 per barrel on average, CNBC
reports . The bank's earlier forecast was for an average Brent crude price of US$83.50 a
barrel.
The head of the bank's Asia-Pacific oil and gas operations, Scott Darling, told CONB
analysts had factored in the increase in supply in North America that will occur in the second
half of 2019 and will eventually pressure prices even lower in 2020, to an average US$64 in
that year.
And so . . . Sovereign Wealth Funds and Shale. Are they funding those loans?
Answer -- not really. There was a hyped announcement of Singapore's SWF sending money to
Chesapeake. But that was in 2010.
Reporters who dare to look into this don't seem to find much. They retreat to the
sanctuary of narrative. Something like this "With renewables smashing oil's future, SWFs that
are mostly funded by oil and gas are reluctant to invest in anything related to oil or
gas."
Uh huh.
Worth noting that China has 4 SWFs that clearly were not funded by oil or gas -- but they
aren't really SWFs either. They are just money in accounts at the PBOC and of course that
entity can declare itself to have whatever amount it wishes (just like the Fed's Balance
Sheet). (Note surprisingly in this context that Hong Kong (listed as one of China's) has a
"SWF" of about 1/2 trillion dollars, which is absurd). But . . . China's money isn't oil or
gas derived and even they aren't pouring into profitable oil or gas so diversification may
not be the motivator in this. (Venezuela doesn't count, there will be no profit there)
BTW narrative embracers, y'all might want to examine why Tesla's stock didn't fall.
Answer, Saudi's SWF owns 5% of the company in total and they don't sell more or less any of
their holdings. This is a common trait of SWFs. They seldom sell anything. tra la tra la
Last but not least, and wow this is intriguing, there is CONSIDERABLE talk of the UK
creating a SWF funded by shale gas that hasn't flowed yet. Gotta be an agenda there.
Crude oil – The recent spike highs in crude oil exports must be coming from
inventory draws. As the sum of refinery processing plus net crude oil exports is higher than
crude oil production.
Chart https://pbs.twimg.com/media/Ds2Aqz9WsAANjjJ.jpg
Twitter – Donald J. Trump
So great that oil prices are falling (thank you President T). Add that, which is like a big
Tax Cut, to our other good Economic news. Inflation down (are you listening Fed)!
1:46 pm – 25 Nov 2018 https://twitter.com/realDonaldTrump
What exactly is going to change if the Fed suspends it's increases? Dollar liquidity is still
going to be an issue globally. Low oil price means less dollar liquidity particularly outside
USA. Market demands nothing less than full blown more QE and lower interest rates. There is
globally about 20 times the amount of dollar denominated debt as there is physical dollars to
service that debt. That is what happens when the FED drops interest rates from 5.25% to
0.25%. Everybody borrowed dollars. FED can't exit without putting us right back where we were
in 2009. They also can't continue. Why can't they continue? Answer is simple, the amount they
create to keep things going has to be an ever increasing amount at an ever lower interest
rate. Otherwise debt deflation happens. They hit a brick wall and can do nothing. So they
will try to deflate it a little at a time. By raising interest rates and unwinding QE a
little at a time. Then something major happens and it deflates a bunch all at once.
Oil continues collapsing. The 7% move today is probably magnified due to lack of liquidity
post-Thanksgiving, but nevertheless the move is huge. Oil is down 34% from recent highs.
Fundamentals and real economy do not change this quick, so expect to hear about more "hedge(ed)
funds" blowing up. After all this is a 3 sigma move .
What´s next for oil nobody knows, but 50 USD is a rather big level to watch. For
believers in Fibonacci, 50 is the 50% retracement from the 2016 lows.
Oil volatility, OIV index, is now in full explosion mode. This is pure panic and these
levels won´t be sustainable longer term, but the rise in oil volatility is simply
amazing.
As we outlined earlier, oil stress started spreading to credit several weeks ago. We have
been pointing out, no bounce in equities until we possibly see some stabilization in
credit . For the equity bulls, unfortunately credit continues imploding. European iTraxx
main continues the move violently higher.
Similar chart is to be found for the US CDX IG index.
Below chart shows the CDX IG index (white) versus oil (inverted, orange). The relationship
is rather clear. Add to this crowded positions and low liquidity and the moves continue feeding
of each other, causing enormous p/l pain and further risk reduction among funds.
European iTraxx main (inverted white) is now "aggressively" under performing the Eurostoxx
50 index (orange). The moves in credit are starting to feel rather "panicky", helping VIX and
other related volatilities higher.
Given the continuation in oil prices, we ask ourselves when will the market start to realize
Fed can´t be tightening as aggressively as (still) priced in. Maybe time for the Powell
put to revive?
"... You would not consider as viable the hypothesis that Trump is using the assassination, and evidence of MbS' ordering of it, as leverage to achieve various objectives that MbS wasn't on board with (a resolution of the Yemen situation? Oil pricing? toning down jihadi support in the MENA? Other?). ..."
What do people make of the fact that it seems Khashoggi apparently was recently married,
the picture of him with his supposed fiancée was clearly photoshopped (used the
same photo from his WaPo profile), and his family has indicated they knew nothing of this
new fiancée?
It also seems interesting how the US has a tape of MBS ordering his silencing when we
apparently knew little at the outset. Seems this turd is starting to stink a bit.
Automated SIGINT collection produces such volumes of material based on standing targets
that it often takes a while to sift through it. MBS's phone would be such a target. In
any event Trump doesn't want to hear it.
You would not consider as viable the hypothesis that Trump is using the assassination,
and evidence of MbS' ordering of it, as leverage to achieve various objectives that MbS
wasn't on board with (a resolution of the Yemen situation? Oil pricing? toning down
jihadi support in the MENA? Other?).
Oil and commodity markets were used as a finishing move on the Soviet system. The book,
"The Oil Card: Global Economic Warfare in the 21st Century" by James R. Norman details the
use of oil futures as a geopolitical tool. Pipelines change the calculus quite a bit.
That discovery chart shows the problem well, I hadn't seen it before. The big blip in deep
water discoveries in the 2000s from improved technologies and higher prices contributed
greatly to the subsequent glut and price collapse – and now what's left? There hasn't
been much of an uptick in exploration despite the price rally, offshore drillers continue to
go bust, leasing activity still fairly slow – the tranches get bigger as the last, less
attractive bits are released but lease ratio falls, Permian dominates all news stories. Why
would the recent decline curve turn around? And the biggest surprise might be that gas is
just as bad as oil, so the recent boost in supplies from condensate and NGL might also have
run its course.
I tracked FIDs for oil through 2017, I've been a bit less diligent this year so may have
missed some, but for greenfield conventional plus oil sands I have for the remainder of 2018
through 2025: 400, 1770, 1170, 800, 985, 70, 250, 400 kbpd added – about 6 mmbpd total,
nothing after 2025, plus another 1 mmbpd from ramp ups from this year. Only pretty small
projects could get done now before 2022, and there aren't many of those left. Anything else
would need to come from brownfield (in-fill), LTO or new discoveries (including existing
known resources that become reserves once a development decision is made).
High economic growth matched high growth in energy consumption and recessions saw fall in
energy consumption.
Since 90% of the energy consumed comes from burning the stored energy in coal, oil, gas
and wood. It is hardly surprising that during high economic growth CO2 emissions increase
also.
Those who not not wish to see this link, obviously think Peak Oil is not a problem. GDP
growth will continue even though oil becomes more scarce.
If oil production falls by just 1% per year, taking into account new vehicle production.
The world would have to produce 90 million electric cars each year in order to prevent oil
prices from destroying other users such as the aviation industry.
This year 1.5 million fully electric cars were made and according to several people here
peak oil is no more then 4 years away.
Since 90% of the energy consumed comes from burning the stored energy in coal, oil, gas
and wood. It is hardly surprising that during high economic growth CO2 emissions increase
also
I have a hunch that we are about to see some major changes to that paradigm.
I hope you are correct, but I have done some calculations on what is needed.
According to reports around $1.7 trillion was invested in energy supply in 2017. $790
billion on oil, gas and coal supply. $320 billion was spent on solar and wind.
During 2017 oil consumption increased by 1 million barrels per day. Gas consumption increased
by 3% and even coal consumption went up.
The world needs to spend about $2.5 trillion per year on wind, solar and batteries in
order to meet increased energy demand and reduce fossil fuel burning by about 1% per year.
This obviously depends on GDP growth being about average.
Since recent scientific observations have discovered that Greenland, the Arctic and
Antarctica melting much faster than anyone thought. The shift needs to be a minimum of 2.5%.
Thus a spending of around £4 trillion per year is needed.
I do not see any country spending a minimum of 12 times more on solar and wind in the next
3-5 years. It would take every country doing so.
Agreed Hugo. The world is only making token moves towards installation of the necessary wind
and solar.
This coming decade will see everyone scrambling to get the equipment built and installed.
Looks like centralized planning (China) is going to beat 'the market' on being the primary
supplier. Our 'free' market has tariffs on PV imported. Brilliant.
Does having a 5 (or 10 yr) plan make you communist?
Or just smart.
"The world needs to spend about $2.5 trillion per year on wind, solar and batteries in order
to meet increased energy demand and reduce fossil fuel burning by about 1% per year. This
obviously depends on GDP growth being about average."
1% per year? You have got to be kidding.
The global oil consumption for transport is about 39.5 million barrels of oil per day. Using
PV to drive EV transport would mean an investment of 2.2 trillion dollars in PV to provide
global road transport energy.
So what do we use next year's money for?
.
"The global oil consumption for transport is about 39.5 million barrels of oil per day"
39.5 million is only gasoline in the world. Add diesel and jet fuel and you get to about
75 million barrels a day for transportation or about 75% of oil produced.
Did you get the point? That Hugo overstated the cost of renewables to replace fossil fuels
by a huge amount and understated their effect by another huge amount.
We have a couple of people that consistently do that on this site.
You can do all what you want with paper oil including to crash market prices once again to
$40 level. You just can't refine paper oili and put the resulting gasoline in the car.
New York (CNN Business) The meltdown in the oil market has caught almost
everyone off guard. In the span of mere weeks, crude prices went from a four-year high to a
full-blown bear
market. The oil crash -- crude is down more than 30% from its recent peak -- was triggered
by a series of factors that combined to spook
traders who once saw $100 oil on the horizon. "The sheer scale of the move is triggering
unpleasant memories of 2014 and 2015," said Michael Tran, director of global energy strategy at
RBC Capital Markets, alluding to the last oil downturn. US oil prices plummeted another 7% on
Friday, breaking below $51 a barrel for the first time in 13 months. President Donald Trump
celebrated the oil crash. Read More "Oil prices getting lower, Great! Like a big Tax Cut for
America and the World. Enjoy!" Trump tweeted on Wednesday. "Thank you to Saudi Arabia, but
let's go lower!" But the oil slide can't be explained by a simple tweet.
... ... ...
American shale oil boom Although Trump praised Saudi Arabia, his tweet
omitted the central role played by America in the oil plunge. Lifted by the shale oil boom, the
United States recently overtook Russia and Saudi Arabia to become the world's largest oil
producer for
the first time since 1973. The International Energy Agency predicts US output will have
soared by more than 2 million barrels per day in 2018. It's expected to climb further next
year. No other country has ramped up production to that degree.
... ... ...
Demand Fear
Appetite for oil in the United States has been "very robust," but the IEA warned last week
of "relatively weak" demand in Europe and developed Asian countries. And the IEA flagged a
"slowdown" in demand in India, Brazil and Argentina caused by high prices, weak currencies and
deteriorating economic
activity .
Last month the International Monetary Fund downgraded its 2019 GDP estimates for both China
and the United States because of the trade war. Global GDP is expected to slow from 2.9% in
2018 to 2.5% next year. That's never good news for oil, which powers the economy.
... ... ...
Fast money
Commodities, much like stocks, are influenced by large bets made by hedge funds and other
traders. Analysts say the oil plunge was exacerbated by the unwinding of massive bullish bets
by financial players.
The managed money community's long positions in crude plunged in late October to the lowest
level since early 2016 when crude crashed to $26 a barrel, according to RBC.
The future of oil prices is in great flux. The huge boom in American and Canadian shale
output has added tremendously to the overall global supply of oil. The United States, as a
matter of fact, has become almost energy independent. At the same time, data from the
International Energy Agency shows that worldwide demand has flattened, to some extent because
of a drop in supply from emerging markets. These factors would seem to argue for oil prices to
range close to the current price of $58. However, crude was at $74 just a month ago, and the
circumstances that drove it up have not entirely disappeared.
Venezuela, which has the world's largest proven oil reserves, is in political and economic
turmoil. Iran's exports will be curtailed by sanctions. Tensions with Saudi Arabia have not
been so high in years after the murder of journalist Jamal Khashoggi. The Saudis already have
said they plan to cut production.
From what individuals pay for gasoline and heating oil to airline fuel prices to
petrochemical products, a spike in crude would be damaging. (Ironically, a very sharp drop in
oil prices is sometimes the sign of a falloff in global demand, and thus a signal of an overall
slowdown in worldwide GDP.)
TheRealNews
Published on 20 Nov 2018
CIA officials are signaling Saudi Crown Prince Mohammed bin Salman must be replaced. Is this all about the killing of Jamal
Khashoggi? Professor Asad AbuKhalil says there are other political reasons.
Fear not! I heard on the news on my way home that Trump has decided Saudi Arabia will not be
punished for the killing of Khahsoggi with termination of current arms contracts. The Donald
reasons that if that happens, the KSA will just buy its weapons elsewhere. And nobody in the
military-industrial complex wants that. I am very confident Justin Trudeau will interpret
that as a signal that Canada likewise should not cut off its nose to spite its face, and so
Canada will not 'punish' its good friend, either. Therefore, Saudi Arabia will experience no
punishment whatsoever for its admitted murder of an inconvenient American journalist. There
are limits to western indignation, after all. So the west will content itself with revoking
the KSA's invitation to the Spring Strawberry Social, and double down on its insistence that
Crimea is Ukraine and must be returned to Kiev's control, and the west will never accept its
'annexation'. Never, never, never. There are some issues on which the west has spine to
spare. So if you want a noisy western journalist removed, slip the Saudis a few bucks, and
they can probably make it happen with no recriminations.
The recognition of Crimea as part of Ukraine by Washington and its minions is totally
worthless. It is not based on law and justice, it is based on self-interest (as in the USA
had big plans to acquire Crimea and build a massive naval base there). The use of the word
annexation is propaganda drivel.
Ukraine annexed Crimea in 1991 and the ICJ has ruled that
local ethnic majorities have a right to self determination. If independence is good enough
for Kosovo, it is good enough for Crimea. No amount of special pleading by Washington and its
bootlicks about Kosovo being "special" has any merit.
I'm afraid you are wrong about the ICJ Kirill. The ICJ dodged the actual issue. They ruled
that making a declaration of independence is not against international law, not
whether anyone/whatever/blah blah blah actually has the right to independence. Possibly
because they did not want to cross Pandora's Rubicon Box
the adoption of the declaration of independence of the 17 February 2008 did not violate
general international law because international law contains no 'prohibition on declarations
of independence
####
Some call it 'unique', others call it a precedent , therefore 'not unique'. If the
West argues that the ICJ said it was ok, then it is also ok for Crimea to declare
independence. Or, if they claim that Crimea is not independent, that Kosovo cannot be either,
hence, as you point out the use of the word ' annexation ' and other creative
circumlocutions to avoid mentioning that secession was first and the clear comparison with
Kosovo which would not serve them well at all.
The International Court of Justice today held that
international law did not prohibit Kosovo's
declaration of independence, while sidestepping the
larger issue of Kosovo's statehood
####
But, this is not the first time the West has decided what international law is for itself
when back in 1991 the European Council ministers themselves appointed the Badinter Commission
to give it a legal figleaf for recognizing the administrative borders of Yugoslavia as
international. I've posted this link before, but once more with feeling:
Thanks for the clarification. But it is all a house of cards. Given that empires and
countries have continually fissioned into pieces through the whole of relevant history, the
notion of "territorial integrity" is bogus and a corollary of "might makes right". As long as
the country can suppress secessionists it has territorial integrity, when it becomes too weak
everything falls apart. There is no international law. And if ware to assume a common law
regime that is not maintained by legislatures, then secession is fully legal if the local
majority wants it hard enough.
We know it is nothing but the Law of the Jungle. It's just that the fancy dress shop
has expanded and has a lot more more costumes on offer to its clients.
when the west trots out its I-never-said that-exactly smokescreen, it is helpful to read
what various western countries wrote as legal opinions, and the arguments they used to
support their reasoning. Where Kosovo is concerned, a classic is the Polish opinion, written
by (or more likely for) its then-Foreign Minister, Radek Sikorski. He wrote, in part;
" a state is commonly defined as a community which consists of a territory and a
population subject to an organized political authority; that such a state is characterized by
sovereignty the existence of the state is a question of fact, the effects of recognition by
other states are purely declaratory. A declaration of independence is merely an act that
confirms these factual circumstances, and it may be difficult to assess such an act in purely
legal terms."
Legal opinions are usually replete with bafflegab to confuse the easily-bored and the
pressed-for-time readers. But Mr. Sikorski made what he must have believed was a very
convincing case that a sovereign state-within-a-state is characterized by an ethnic
population, a pre-existing degree of autonomy (so that the entity demonstrates the capability
to function autonomously), and its own functioning institutions such as banks and
infrastructure.
Which of those is not descriptive of Crimea? It was even called "The Autonomous Republic
of Crimea", for Christ's sake. Sikorski doubtless had an inkling that the Kosovo precedent
might come back to bite NATO, and so tried to duck a justification which might read like a
precedent, but it was unavoidable.
Looks like the recent oil price drop was engineered like in 2014 by the USA
adminsitration...
" Concerns that strict sanctioning of Iranian oil would result in a spike in global oil
prices prompted Trump to grant waivers to eight of Iran's largest purchasers of oil, creating a
situation where Iran's oil-based income will increase following the implementation of sanctions.
The bottom line is that the current round of U.S. sanctions targeting Iran will not achieve
anything. "
Notable quotes:
"... With Iran, the issue of nuclear non-proliferation was an additional justification for sanctions. Here, disarmament concerns eventually trumped regime change desires, to the extent that when the U.S. was confronted by the reality that sanctions would not achieve the change in behavior desired by Tehran, and the cost of war with Iran being prohibitively high, both politically and militarily, it capitulated. It agreed to lift the sanctions in exchange for Iran agreeing to enhanced monitoring of a nuclear program that was fundamentally unaltered by the resulting agreement, known as the Joint Comprehensive Program of Action, or JCPOA. ..."
"... When Trump withdrew from the JCPOA, he did so in an environment that was radically different than the one that was in play when President Barack Obama embraced that agreement in July 2015. Today, the U.S. stands alone in implementing sanctions, while Iran enjoys the support of the rest of the world (support that will continue so long as Iran complies with the provisions set forth in the JCPOA.) Moreover, Iran is working with its new-found partners in Europe, Russia, and China to develop work-arounds to the U.S. sanctions. ..."
"... The coalition of support that the U.S. has assembled to confront Iran, built around Israel and Saudi Arabia, is not as solid as had been hoped -- Israel is tied down in Gaza, while Saudi Arabia struggles in Yemen, and is reeling from the fallout surrounding the murder of Jamal Khashoggi ..."
The
imposition of new, more stringent sanctions targeting Iranian oil sales by the Trump
administration has once again raised the question: is this even a viable policy?
The Council on Foreign Relations
defines sanctions as "a lower-cost, lower-risk, middle course of action between diplomacy
and war." In short, sanctions do not represent policy per se, but rather the absence of policy,
little more than a stop-gap measure to be used while other options are considered and/or
developed.
Not surprising, sanctions have rarely -- if ever -- succeeded in obtaining their desired
results. The poster child for successful sanctions as a vehicle for change -- divestment in
South Africa during the 1980s in opposition to the Apartheid regime -- is in reality a red
herring. The South
Africa sanctions were in fact counterproductive , in so far as they prompted even harsher
policies from the South African government. The demise of Apartheid came about largely because
the Soviet Union collapsed, meaning the South African government was no longer needed in the
fight against communism.
Another myth that has arisen around sanctions is their utility in addressing
nonproliferation issues. Since 1994, the U.S. has promulgated non-proliferation sanctions under
the guise of executive orders signed by the president or statutes passed by Congress. But there
is no evidence that sanctions implemented under these authorities have meaningfully altered the
behaviors that they target. Better known are the various sanctions regimes authorized under UN
Security Council resolutions backed by the United States, specifically those targeting Iraq,
North Korea, and Iran.
The Iraq sanctions were, by intent, a stop-gap measure implemented four days after the Iraqi
invasion of Kuwait and intended to buy time until a military response could be authorized,
organized, and executed. The nature of the Iraq sanctions regime was fundamentally altered
after Operation Desert Storm, when the objective transitioned away from the liberation of
Kuwait, which was achieved by force of arms, to the elimination of weapons of mass destruction,
which was never the intent of the sanctions to begin with. The potential for sanctions to alter
Iraqi behavior was real -- Iraq had made the lifting of sanctions its top priority, and thanks
to aggressive UN weapons inspections, was effectively disarmed by 1995.
This potential, however, was never realized in large part to the unspoken yet very real
policy on part of the U.S. that sanctions would not be lifted on Iraq, regardless of its level
of disarmament, until which time its president, Saddam Hussein, was removed from power. Since
the sanctions were not designed, intended, or capable of achieving regime change, their very
existence became a policy trap -- as the sanctions crumbled due to a lack of support and
enforcement, the U.S. was compelled to either back away from its regime change policy, which
was politically impossible, or seek regime change through military engagement. In short,
American sanctions policy vis-à-vis Iraq was one of the major causal factors behind the
2003 decision to invade Iraq.
One of the flawed lessons that emerged from the Iraq sanctions experience was that sanctions
could contribute to regime change, in so far as they weakened the targeted nation to the point
that a military option became attractive. This is a fundamentally flawed conclusion, however,
predicated on the mistaken belief that Iraq's military weakness was the direct byproduct of
sanctions. Iraq's military weakness was because its military had been effectively destroyed
during the 1991 Gulf War. Sanctions contributed significantly to Iraq being unable to
reconstitute a meaningful military capability, but they were not the cause of the underlying
systemic problems that led to the rapid defeat of the Iraqi military in 2003.
The "success" of the Iraq sanctions regime helped guide U.S. policy regarding North Korea in
the 1990s and 2000s. Stringent sanctions, backed by Security Council resolutions, were
implemented to curtail North Korea's development of nuclear weapons and ballistic missile
delivery systems. Simple cause-effect analysis shows the impotence of this effort -- North
Korea's nuclear and ballistic missile capability continued unabated, culminating in
nuclear-tipped intercontinental ballistic missiles capable of reaching U.S. soil being tested
and deployed. The notion that sanctions could undermine the legitimacy of the North Korean
regime and facilitate its collapse was not matched by reality. If anything, support for the
regime grew as it demonstrated its willingness to stand up to the U.S. and proceed with its
nuclear weapons and ballistic missile programs.
The Trump administration labors under the fiction that it was the U.S. policy of "maximum
pressure" through sanctions that compelled North Korea to agree to denuclearization. The
reality, however, is that it is North Korea, backed by China and Russia, that has dictated the
timing of the diplomatic breakthrough with the U.S. ( the
so-called "Peace Olympics" ), and the pace of associated disarmament. Moreover, North
Korea's insistence that any denuclearization be conducted parallel to the lifting of economic
sanctions demonstrates that it is in full control of its policy, and that the promise of the
lifting of economic sanctions has not, to date, prompted any change in Pyongyang's stance.
While President Donald Trump maintains that the U.S. will not budge from its position that
sanctions will remain in place until North Korea disarms, the fact of the matter is that the
sanctions regime is already collapsing, with China opening its border, Russia selling gasoline
and oil, and South Korea engaged in discussions about potential unification.
The U.S. has lost control of the process, if indeed it was ever in control. It is doubtful
that the rest of the world will allow the progress made to date with North Korea to be undone,
leaving the U.S. increasingly isolated. Insisting on the maintenance of a sanctions regime that
has proven ineffective and counterproductive is not sustainable policy. As with Iraq, U.S.
sanctions have proven to be the problem, not the solution. Unlike Iraq, North Korea maintains a
robust military capability, fundamentally altering the stakes involved in any military solution
the U.S. might consider as an alternative -- in short, there is no military solution. One can
expect the U.S. to alter its position on sanctions before North Korea budges on
denuclearization.
Iran represents a far more complex, and dangerous, problem set. The United States has
maintained sanctions against Iran that date back to the 1979 Iranian Revolution that overthrew
the Shah, and the seizure of the U.S. embassy and resultant holding of its staff hostage for
444 days. The U.S. policy vis-à-vis Iran has been one where the demise of the ruling
theocracy has been a real, if unstated, objective, and every sanctions regime implemented since
that time has had that outcome in mind. This is the reverse of the Iraqi case, where regime
change was an afterthought to sanctions. With Iran, the issue of nuclear non-proliferation
was an additional justification for sanctions. Here, disarmament concerns eventually trumped
regime change desires, to the extent that when the U.S. was confronted by the reality that
sanctions would not achieve the change in behavior desired by Tehran, and the cost of war with
Iran being prohibitively high, both politically and militarily, it capitulated. It agreed to
lift the sanctions in exchange for Iran agreeing to enhanced monitoring of a nuclear program
that was fundamentally unaltered by the resulting agreement, known as the Joint Comprehensive
Program of Action, or JCPOA.
When Trump withdrew from the JCPOA, he did so in an environment that was radically
different than the one that was in play when President Barack Obama embraced that agreement in
July 2015. Today, the U.S. stands alone in implementing sanctions, while Iran enjoys the
support of the rest of the world (support that will continue so long as Iran complies with the
provisions set forth in the JCPOA.) Moreover, Iran is working with its new-found partners in
Europe, Russia, and China to develop work-arounds to the U.S. sanctions.
The coalition of support that the U.S. has assembled to confront Iran, built around
Israel and Saudi Arabia, is not as solid as had been hoped -- Israel is tied down in Gaza,
while Saudi Arabia struggles in Yemen, and is reeling from the fallout surrounding the murder
of Jamal Khashoggi .
Concerns that strict sanctioning of Iranian oil would result in a spike in global oil prices
prompted Trump to grant waivers to eight of Iran's largest purchasers of oil, creating a
situation where Iran's oil-based income will increase following the implementation of
sanctions. The bottom line is that the current round of U.S. sanctions targeting Iran will not
achieve anything.
For the meantime, Iran will avoid confrontation, operating on the hope that it will be able
to cobble an effective counter to U.S. sanctions. However, unlike Iraq, Iran has a very capable
military. Unlike Korea, however, this military is not equipped with a nuclear deterrent.
If history has taught us anything, it is that the U.S. tends to default to military
intervention when sanctions have failed to achieve the policy goal of regime change. Trump,
operating as he is under the influence of Secretary of State Mike Pompeo and National Security
Advisor John Bolton, is not immune to this trap. The question is whether Iran can defeat the
sanctions through workarounds before they become too crippling and the regime is forced to lash
out in its own defense. This is one race where the world would do well to bet on Iran, because
the consequences of failure are dire.
Scott Ritter is a former Marine Corps intelligence officer who served in the former
Soviet Union implementing arms control treaties, in the Persian Gulf during Operation Desert
Storm, and in Iraq overseeing the disarmament of WMD. He is the author of Dealbreaker:
Donald Trump and the Unmaking of the Iran Nuclear Deal (2018) by Clarity Press.
"... The Treasury declaration blamed MbS advisor Saud al-Qahtani as mastermind behind the Khashoggi murder, while the Saudis carefully avoided that. We now learn that the person in the U.S. National Security Council who put al-Qahtani on the list was fired : ..."
"... Fontenrose had played a key role in the administration's decision about which Saudis to sanction in response to Khashoggi's killing, these people said. ..."
"... I suspect that MbS tried, via Trump's son-in-law Kushner, to save al-Qahtani (and himself). Trump clearly wanted to do that, but Fontenrose blew the plan by pushing for al-Qahtani to be sanctioned. The CIA also sabotaged the planned exculpation of MbS by 'leaking' its judgment about MbS' personal responsibility to the press. ( WaPo published the CIA conclusion in Arabic , another point the Saudis will hate.) ..."
We were first to point out that the NYT's characterization of an old North Korean
missile site as "deception" was pure nonsense. Newsweek
, 38north.org , NKNews.org ,
The Nation and others now also condemned the neo-conned NYT propaganda.
The war let to the loss of Netanyahoo's majority in the Knesset. He is now trying to stall new
elections in which he could lose his job.
Trump's Middle East policy is in total disarray. Nothing is working as planned. Netanyahoo
will probebaly fall. Saudi Arabia will not make nice with Qatar. There will be no Arab NATO or
anti-Iran alliance. MbS is despised but will stay on the job. Yemen is starving. The U.S. is at
odds with Turkey over support for the Kurds. Trumps knows and
hates this :
The adviser who talks to Trump said: "If the president had his way, he would stay entirely
out of the Middle East and all of the problems."
The piece was the first to point out the difference between the Saudi investigation, which
put blame on Major General Ahmed al-Asiri, and the names on the U.S. sanction list published at
the same time. The Treasury declaration blamed MbS advisor Saud al-Qahtani as mastermind
behind the Khashoggi murder, while the Saudis carefully avoided that. We now learn that the
person in the U.S. National Security Council who put al-Qahtani on the list was fired :
On Friday evening, Kirsten Fontenrose, the National Security Council official in charge of
U.S. policy toward Saudi Arabia, resigned, administration officials said. The circumstances
of her departure weren't clear. But Fontenrose had previously been placed on administrative
leave, according to people familiar with the matter.
Fontenrose had played a key role in the administration's decision about which Saudis to
sanction in response to Khashoggi's killing, these people said.
I suspect that MbS tried, via Trump's son-in-law Kushner, to save al-Qahtani (and
himself). Trump clearly wanted to do that, but Fontenrose blew the plan by pushing for
al-Qahtani to be sanctioned. The CIA also sabotaged the planned exculpation of MbS by 'leaking'
its judgment about MbS' personal responsibility to the press. ( WaPo published the CIA
conclusion
in Arabic , another point the Saudis will hate.) Trump is furious that the CIA (again)
sabotaged his policy:
Asked about reports that the CIA had assessed involvement by Mohammed, the president said:
"They haven't assessed anything yet. It's too early."
The Express UK reports that Russia and Saudi Arabia's 'long-term relationship' will not
only survive, but grow, regardless of geopolitical turmoil and internal Saudi scandal as the
energy interests between both nations bind them together.
... ... ...
But IHS Market vice chairman Daniel Yergin said the decision was unlikely to jeopardise
the relationship between the two allies.
The Saudis have faced significant international criticism in the wake of the killing of
journalist Jamal Khashoggi at the Saudi consulate in Turkey.
Speaking to CNBC, Mr Yergin made it clear that Moscow and Riyadh would continue to be
closely aligned irrespective of external factors.
He explained: "I think it's intended to be a long-term relationship and it started off
about oil prices but you see it taking on other dimensions, for instance, Saudi investment in
Russian LNG (liquefied natural gas) and Russian investment in Saudi Arabia.
"I think this is a strategic relationship because it's useful to both countries."
Saudi Arabia and Russia are close, especially as a result of their pact in late 2016,
along with other OPEC and non-OPEC producers, to curb output by 1.8 million barrels per day
in order to prevent prices dropping too far – but oil markets have changed since then,
largely as a result.
The US criticised OPEC, which Saudi Arabia is the nominal leader of, after prices
rose.
Markets have fluctuated in recent weeks as a result of fears over a possible drop in
supply, as a result of US sanctions on Iran, and an oversupply, as a result of increased
production by Saudi Arabia, Russia and the US, which have seen prices fall by about 20
percent since early October.
Saudi Arabia has pumped 10.7 million barrels per day in October, while the figure for
Russia and the US was 11.4 million barrels in each case.
Mr Yergin said: "It's the big three, it's Saudi Arabia, Russia and the US, this is a
different configuration in the oil market than the traditional OPEC-non-OPEC one and so the
world is having to adjust."
BP Group Chief Executive Bob Dudley told CNBC: "The OPEC-plus agreement between OPEC and
non-OPEC producers including Russia and coalition is a lot stronger than people
speculate.
"I think Russia doesn't have the ability to turn on and off big fields which can happen in
the Middle East.
"But I fully expect there to be coordination to try to keep the oil price within a certain
fairway."
Markets rallied by two percent on Monday off the back of the
Saudi decision to cut production , which it justified by citing uncertain global oil
growth and associated oil demand next year.
It also suggested
waivers granted on US sanctions imposed on Iran which have been granted to several
countries including China and Japan was a reason not to fear a decline in supply.
Also talking to CNBC, Russia's Oil Minister Alexander Novak indicated a difference of
opinion between Russia and the Saudis, saying it was too soon to cut production, highlighting
a lot of volatility in the oil market.
He added: "If such a decision is necessary for the market and all the countries are in
agreement, I think that Russia will undoubtedly play a part in this.
"But it's early to talk about this now, we need to look at this question very
carefully."
The cost of producing a large lithium battery is high and it is "perishable product",
which will not last even 10 years. The average life expectancy of a new EV battery at about
five (Tesla) to eight years. Or about 1500 cycles (assuming daily partial recharge, which
prolongs the life of the battery) before reaching 80% of its capacity rating. https://www.quora.com/What-is-the-cycle-lifetime-of-lithium-ion-batteries
Battery performance and lifespan begins to suffer as soon as the temperature climbs above
86 degrees Fahrenheit. A temperature above 86 degrees F affects the battery pack performance
instantly and often permanently. https://phys.org/news/2013-04-life-lithium-ion-batteries-electric.html
It is also became almost inoperative at below freezing point temperatures. For example it
can't be charged.
So they need to be cooled at summer and heated at winter. Storing such a car on the street
is out of question. You need a garage.
And large auto battery typically starts deteriorating after three years of daily use or
800 daily cycles.
Regular gas, and , especially, diesel cars can last 20 years, and larger trucks can last
30 years.
"... Finally, unlike Yergin and other historians of the oil industry, Auzanneau frames his tale of petroleum as a life cycle, with germination followed by spring, summer, and autumn. There is a beginning and a flourishing, but there is also an end. This framing is extremely helpful, given the fact that the world is no longer in the spring or summer of the oil era. We take petroleum for granted, but it's time to start imagining a world, and daily life, without it. ..."
Similarly, the real story of oil is of fortunes lost, betrayal, war, espionage, and
intrigue. In the end, inevitably, the story of oil is a story of depletion. Petroleum is a
nonrenewable resource, a precious substance that took tens of millions of years to form and
that is gone in a comparative instant as we extract and burn it. For many decades, oil-hungry
explorers, using ever-improving technology', have been searching for ever-deteriorating
prospects as the low- hanging fin its of planet Earth's primordial oil bounty gradually
dwindle. Oil wells have been shut in, oil fields exhausted, and oil companies bankrupted by the
simple, inexorable reality of depletion.
It is impossible to understand the political and economic history of the past 150 years
without taking account of a central character in the drama -- oil, the magical
wealth-generating substance, a product of ancient sunlight and tens of millions of years of
slow geological processes, whose tragic fate is to be dug up and combusted once and for all.
leaving renewed poverty in its wake. With Oil, Power, and War, Matthieu Auzanneau has produced
what I believe is the new definitive work on oil and its historic significance, supplanting
even Daniel Yergin's renowned The Prize, for reasons I'll describe below.
The importance of oil's role in shaping the modern world cannot be overstated. Prior to the
advent of fossil fuels, firewood was humanity's main fuel. But forests could be cut to the last
tree (many were), and wood was bulky. Coal offered some economic advantages over wood. But it
was oil -- liquid and therefore easier to transport; more energy-dense; and simpler to store --
that turbocharged the modern industrial age following the development of the first commercial
wells around the year 1860.
John D. Rockefeller's cutthroat, monopolist business model shaped the early industry, which
was devoted mostly to the production of kerosene for lamp oil (gasoline was then considered a
waste product and often discarded into streams or rivers). But roughly forty years later, when
Henry Ford developed the automobile assembly line, demand for black gold was suddenly as
explosive as gasoline itself.
Speaking of explosions, the role of petroleum in the two World Wars and the armament
industry' in general deserves not just a footnote in history books but serious and detailed
treatment such as it receives in this worthy volume. Herein we learn how Imperial Japan and
Nazi Germany literally ran out of gas while the Allies rode to victory in planes, ships, and
tanks burning refined US crude. Berlin could be cut off from supplies in Baku or North Africa,
and Tokyo's tanker route from Borneo could be blockaded -- but no one could interrupt the
American war machine's access to Texas tea.
In the pages that follow, we learn about the origin of the decades-long US alliance with
Saudi Arabia, the development of OPEC, the triumph of the petrodollar, and the reasons for both
the Algerian independence movement and the Iranian Revolution of 1979. Auzanneau traces the
postwar growth of the global economy and the development of consumerism, globalization, and car
culture. He recounts how the population explosion and the Green Revolution in agriculture
reshaped demographics and politics globally -- and explains why both depended on petroleum. We
learn why Nixon cut the US dollar's tether to the gold standard just a year after US oil
production started to decline, and how the American economy began to rely increasingly on debt.
The story of oil takes ever more fascinating turns -- with the fall of the Soviet Union after
its oil production hit a snag; with soaring petroleum prices in 2008 coinciding with the onset
of the global financial crisis; and with wars in Iraq, Syria, and Yemen erupting as global
conventional oil output flatlined.
As I alluded to above, comparisons will inevitably be drawn between Oil, Power, and War and
Daniel Yergin's Pulitzer-winning "The Prize", published in 1990. It may be helpful therefore to
point out four of the most significant ways this work differs from Yergin's celebrated tour de
force.
The most obvious difference between the two books is simply one of time frame. The Prize's
narrative stops in the 1980s, while Oil, Power, and War also covers the following critical
decades, which encompass the dissolution of the Soviet Union, the first Gulf War, 9/11, the US
invasions of Afghanistan and Iraq, the global financial crisis of 2008. and major shifts within
the petroleum industry as it relies ever less on conventional crude and ever more on
unconventional resources such as bitumen (Canada's oil sands), tight oil (also called shale
oil), and deepwater oil.
Finally, unlike Yergin and other historians of the oil industry, Auzanneau frames his
tale of petroleum as a life cycle, with germination followed by spring, summer, and autumn.
There is a beginning and a flourishing, but there is also an end. This framing is extremely
helpful, given the fact that the world is no longer in the spring or summer of the oil era. We
take petroleum for granted, but it's time to start imagining a world, and daily life, without
it.
Taken together, these distinctions indeed make Oil, Power, and War the definitive work on
the history of oil -- no small achievement, but a judgment well earned.
Over the past decade, worrisome signs of global oil depletion have been obscured by the
unabashed enthusiasm of energy analysts regarding growing production in the United States from
low-porosity source rocks. Termed "light tight oil," this new resource has been unleashed
through application of the technologies of hydrofracturing (tracking) and horizontal
drilling.
US liquid fuels production has now surpassed its previous peak in 1970, and well-regarded
agencies such as the Energy Information Administration are forecasting continued tight oil
abundance through mid-century.
Auzanneau titles his discussion of this phenomenon (in chapter 30), "Nonconventional
Petroleum to the Rescue?" -- and frames it as a question for good reason: Skeptics of tight oil
hyperoptimism point out that most production so far has been unprofitable. The industry has
managed to stay in the game only due to low interest rates (most companies are heavily in debt)
and investor hype. Since source rocks lack permeability, individual oil wells deplete very
quickly -- with production in each well declining on the order of 70 percent to 90 percent in
the first three years. That means that relentless, expensive drilling is needed in order to
release the oil that's there. Thus the tight oil industry can be profitable only if oil prices
are very high -- high enough, perhaps, to hobble the economy -- and if drilling is concentrated
in the small core areas within each of the productive regions. But these "sweet spots" are
being exhausted rapidly. Further, with tight oil the energy returned on the energy invested in
drilling and completion is far less than was the case with American petroleum in its
heyday.
It takes energy to fell a tree, drill an oil well, or manufacture a solar panel. We depend
on the energy payback from those activities to run society. In the miraculous years of the late
twentieth century, oil delivered an averaged 50:1 energy payback. It was this, more than
anything else, that made rapid economic growth possible, especially for the nations that were
home to the world's largest oil reserves and extraction companies. As the world relies ever
less on conventional oil and ever more on tight oil, bitumen, and deepwater oil, the overall
energy payback of the oil industry is declining rapidly. And this erosion of energy return is
reflected in higher overall levels of debt in the oil industry and lower overall financial
profitability.
Meanwhile the industry is spending ever less on exploration -- for two reasons. First, there
is less money available for that purpose, due to declining financial profitability; second,
there seems comparatively little oil left to be found: Recent years have seen new oil
discoveries dwindle to the lowest level since the 1940s. The world is not about to run out of
oil. But the industry that drove society in the twentieth century to the heights of human
economic and technological progress is failing in the twenty-first century.
Today some analysts speak of "peak oil demand." The assumption behind the phrase is that
electric cars will soon reduce our need for oil, even as abundance of supply is assured by
fracking. But the world is still highly dependent on crude oil. We have installed increasing
numbers of solar panels and wind turbines, but the transition to renewable is going far too
slowly either to avert catastrophic climate change or to fully replace petroleum before
depletion forces an economic crisis. While we may soon see more electric cars on the road,
trucking, shipping, and aviation will be much harder to electrify. We haven't really learned
yet how to make the industrial world work without oil. The simple reality is that the best days
of the oil business, and the oil-fueled industrial way of life, are behind us. And we are not
ready for what comes next.
This fracking can't go on much longer. They've drilled out much of the sweet spots already,
and from what I hear, there are already 7 'child' wells being drilled for every 'parent'
well. (as I understand it, a 'child' well is drilled in close proximity to the 'parent'
without – hopefully-hitting and drawing from the same formation') If fracking were to
stop tomorrow, you'd lose over 600k bbls/day in production immediately and the whatever is
leftover tapering off to zero over the course of two-three years.
The question is: Just how long will the USA be able to continue to increase production in
order to hold off peak oil?
Yes will it go bankrupt first or continue to run on until peak and depletion. Meanwhile it
drags down the oil price artificially making most other oil development less likely, and
increasing volatility.
The FED is reducing money supply by 50 billions per month at the moment. The first feeling it
will be comanies needing to sell junk bonds.
This is a big ploblem for the relentless "drill baby drill" programs of several LTO
companies.
And a global economic crises, even if only a few years long, will crash oil prices AND
credit supply. This will hurt LTO more than the oil price crash from 2015.
On the shale topic; it is marvelously stupefying to observe a heavily indebted shale
industry supplying increasing volumes of oil, to an extent that the price/bbl never hits a
level where any debt reduction can be realized. (to say nothing of profit)
Its' almost as if they have no intention of becoming solvent.
Some time ago presented estimate of oil used to create and move food in the US. My recall is
the number wasn't huge.
Recently came across new data. Will get around to laying it out.
25% of total US consumption. Tractors, insecticides, some fertilizer(transport of those to
the field), transport of animal food to hogs, beef, etc, transport of human food to shelves,
transport of people to the shelf and home. 15% pre transport of human food, 10% transport
human food.
Pretty efficient agriculture in the US. No squeezing that 5 mbpd.
Colonel Salam , what do you think of retired general Abizad becoming new US' ambassador to KSA. To me installing an Arabic speaking
Arab American general as the new ambassador to the kingdom sounds like the Borg is becoming concerned with kingdom' stability
when changes come. They probably don't want to repeat the mistake of keeping Sullivan during IRI. So sorry for OT.
Oil, Power, and War is a story of the dreams and hubris that spawned an era of
economic chaos, climate change, war, and terrorism -- as well as an eloquent framing from which
to consider our options as our primary source of power, in many ways irreplacable, grows ever
more constrained.
In this sweeping, unabashed history of oil, Matthieu Auzanneau takes a fresh,
thought-provoking look at the way oil interests have commandeered politics and economies,
changed cultures, disrupted power balances across the globe, and spawned wars. He upends
commonly held assumptions about key political and financial events of the past 150 years, and
he sheds light on what our oil-constrained and eventually post-oil future might look
like.
Oil, Power, and War follows the oil industry from its heyday when the first oil
wells were drilled to the quest for new sources as old ones dried up. It traces the rise of the
Seven Sisters and other oil cartels and exposes oil's key role in the crises that have shaped
our times: two world wars, the Cold War, the Great Depression, Bretton Woods, the 2008
financial crash, oil shocks, wars in the Middle East, the race for Africa's oil riches, and
more. And it defines the oil-born trends shaping our current moment, such as the jockeying for
access to Russia's vast oil resources, the search for extreme substitutes for declining
conventional oil, the rise of terrorism, and the changing nature of economic growth.
We meet a long line of characters from John D. Rockefeller to Dick Cheney and Rex Tillerson,
and hear lesser-known stories like how New York City taxes were once funneled directly to banks
run by oil barons. We see how oil and power, once they became inextricably linked, drove
actions of major figures like Churchill, Roosevelt, Stalin, Hitler, Kissinger, and the Bushes.
We also learn the fascinating backstory sparked by lesser-known but key personalities such as
Calouste Gulbenkian, Abdullah al-Tariki, and Marion King Hubbert, the once-silenced oil
industry expert who warned his colleagues that oil production was facing its peak.
Oil, Power, and War is a story of the dreams and hubris that spawned an era of
economic chaos, climate change, war, and terrorism -- as well as an eloquent framing from which
to consider our options as our primary source of power, in many ways irreplacable, grows ever
more constrained.
The book has been translated from the highly acclaimed French title, Or Noir .
Saudi Arabia has fully complied with OPEC+ agreement in every month through May. Since then
it has cut supply, but by less than it pledged to curb. October is 1st time it has increased
output above the starting point.
WTI has now retraced 60% of the two-year uptrend...
WTI Crude is now down over 6% YTD to its lowest since Dec 2017.
There are a lot of things that you can running one trillion deficit ;-)
Notable quotes:
"... U.S. crude oil production reached 11.3 million barrels per day (b/d) in August 2018, according to EIA's latest Petroleum Supply Monthly, up from 10.9 million b/d in July. This is the first time that monthly U.S. production levels surpassed 11 million b/d. U.S. crude oil production exceeded the Russian Ministry of Energy's estimated August production of 11.2 million b/d, making the United States the leading crude oil producer in the world. ..."
"... All of this bullshit is straight, I mean straight off Continental's self servicing investor presentation bullshit, Coffee. You need to wrap your head around some SEC filings, use some common sense and think for yourself. As opposed to letting someone else do your thinking for you. ..."
"... Watcher is correct, CLR's credit rating, its credit score, so to speak, is so bad it could not in the real world buy a pickup truck without its mama co-signing the note. If its wells are sooooooo much better, why don't they pay some of that $6 billion plus dollars of debt back? I mean really, who in their right mind would actually WANT to pay $420MM a year in interest on long term debt if it didn't have to? Never mind, you can't answer that. ..."
"... "If its wells are sooooooo much better, why don't they pay some of that $6 billion plus dollars of debt back? I mean really, who in their right mind would actually WANT to pay $420MM a year in interest on long term debt if it didn't have to?" ..."
"... We had 5-6 years of the highest, sustained oil prices in history and the shale oil industry could NOT make a profit. People seem to think now things have changed for some reason, that the shale oil industry has now become more ethical, and temporarily higher productivity of wells, and some imaginary oil price off in the future (for most shale guys its now down in the mid to low $50's) will allow them to pay down debt. Its absurd logic, but keeps people occupied, I guess, speculating about it. ..."
"... One thing to add. The shale companies did all this in the lowest interest rate environment we have had in a long time. They could not pay off their debt or even put a dent in it. What is going to happen when their interest costs increase 30-50% over the next 2-3 years? ..."
"... I was a former employee of Newfield, when we were drilling gas wells in the Arkoma Basin in 2007 and gas prices were the highest they had ever been, it was not cash flow positive. ..."
"... On the price, I understand why you use different scenarios. However, the average price over the next three years could be $100 or $50 WTI. Pretty much close to what we saw 2011-14 and 2015–17. ..."
"... However, the price is far too volatile to model anything very far into the future, just like we cannot budget past one year, and usually have to make adjustments to that. ..."
"... Our price has dropped over $10 in less than one month. That makes a huge difference, yet that level of volatility is common and has been for many years. ..."
"... What oil prices were you modeling in June, 2014 for 2015-17? Our timing was very fortunate to say the least. Many leases bought 1997-2005. Had we bought the same leases 2011-14 for the market prices of 2011-14, we would be bankrupt, absent having hedged everything for four years, which is very difficult to do. ..."
"... Few companies with zero debt ever go BK. We would with WTI at $30 for about three years. Is that likely? No, but oil did drop below that level in 2016. ..."
U.S. crude oil production reached 11.3 million barrels per day (b/d) in August 2018,
according to EIA's latest Petroleum Supply Monthly, up from 10.9 million b/d in July. This is
the first time that monthly U.S. production levels surpassed 11 million b/d. U.S. crude oil
production exceeded the Russian Ministry of Energy's estimated August production of 11.2
million b/d, making the United States the leading crude oil producer in the world.
Dennis, Coffee's comment did not turn me into a shale cheerleader. I suppose I am more in the
shale sceptic camp for the reasons you mention and others.
Nevertheless, I think Coffee's comment was correct, it does appear that shale producers in
the Bakken have expanded the area that produces exceptional wells. As one who underestimated
shale's viability before, I don't want to repeat the same mistake.
As you note, it is difficult to predict when average well productivity in the Bakken (or
anywhere) will occur. I had thought that current drilling levels would be inadequate to
sustain 1.15 million bpd production levels, but somehow they are increasing production there.
It does appear that for now, the shale operators are having some success.
How long that success will last depends not only on the operational decisions made, but macro
factors such as debt, interest rates, and the economy will play out, and eventually Bakken
production will decline. But for now
I have not read Continental's conference call transcript yet (Seeking Alpha provides
them), but it seems the suit from Continental now feels they will recover – from
present completions – 15 to 20 per cent of the OOIP.
That is huge as the norm was 3 to 5 per cent a few years back.
All of this bullshit is straight, I mean straight off Continental's self servicing investor
presentation bullshit, Coffee. You need to wrap your head around some SEC filings, use some
common sense and think for yourself. As opposed to letting someone else do your thinking for
you.
Watcher is correct, CLR's credit rating, its credit score, so to speak, is so bad it could
not in the real world buy a pickup truck without its mama co-signing the note. If its wells
are sooooooo much better, why don't they pay some of that $6 billion plus dollars of debt
back? I mean really, who in their right mind would actually WANT to pay $420MM a year in
interest on long term debt if it didn't have to? Never mind, you can't answer that.
If you are not in the oil business and have never balanced an oil well's checkbook in your
life, which Coffee hasn't, then you don't know that higher productivity comes with a higher
cost in the shale biz. The bottom line then is that the bottom line does not change if it did
the shale oil industry would be paying down some debt, right? Its not. Private debt is
skyrocketing.
Are things getting better for the shale biz? Right. Case in point, the largest pure
Permian Basin oil and associated gas producer, Concho, the genius behind a recent $8 billion
dollar acquisition from RSP, LOST $199MM 3Q2018. Inventories are going back up, prices are
down 18% the past month and what does the shale oil industry do?
It adds more rigs.
Productivity is not the same as profitability. In the real oil biz you learn that on about
day six.
"If its wells are sooooooo much better, why don't they pay some of that $6 billion plus
dollars of debt back? I mean really, who in their right mind would actually WANT to pay
$420MM a year in interest on long term debt if it didn't have to?"
I wonder about debt service, too.
When Dennis runs his scenarios he says that at a certain oil price, these companies will
be quite able to pay down debt.
But will they? Or will they just pay themselves as much as they can as long as they can
get away with it, and then declare bankruptcy and walk away.
We had 5-6 years of the highest, sustained oil prices in history and the shale oil
industry could NOT make a profit. People seem to think now things have changed for some
reason, that the shale oil industry has now become more ethical, and temporarily higher
productivity of wells, and some imaginary oil price off in the future (for most shale guys
its now down in the mid to low $50's) will allow them to pay down debt. Its absurd logic, but
keeps people occupied, I guess, speculating about it.
I urge folks to ignore the guessing, and the lying, (Hamm's 20% of OOIP in the Bakken is a
big 'ol whopper) and look at the shale industry's financial performance over the past 10
years and decide for yourselves if it is sustainable or not.
One thing to add. The shale companies did all this in the lowest interest rate environment we
have had in a long time. They could not pay off their debt or even put a dent in it. What is
going to happen when their interest costs increase 30-50% over the next 2-3 years?
I was a former employee of Newfield, when we were drilling gas wells in the Arkoma Basin in
2007 and gas prices were the highest they had ever been, it was not cash flow positive. It
actually ate all the revenue from the rest of the company. Getting to be in the black for the
play was always a year off. a decade later it never got there, they just got more and more
debt sold more producing assets to pay for it to keep the shell game going and just got
bought by Encanna. I have seen the same at every public company I have worked for, many of
them survived the downturn only because costs dropped and so did the cost of debt. Now with
increasing costs and cost of debt there will likely be many bankruptcies.
Yeah, I agree with Mike, Rystads announcements are mainly just self serving hogwash. Yes, oil
production in the US looks to be close to 11.3 million for August. EIA's reported production
for Texas is only about 50k over my high estimate, so I see nothing to argue about. GOM is
the main surprise, and George and others are better suited to comment on that. The
understanding I had was that it was temporary. As far as Texas goes, I'm pretty sure it is
the high, for awhile. Completions dictate how much oil comes out of the ground, not drilling
rigs. That is for unconventional wells, not conventional. That is why I think the EIA's DPR
is a ridiculous measurement assessment. Apples and oranges. Articles that I have read
indicate a significant decrease in completions in the Permian by the end of August. Texas
production is not all about the Permian. A significant amount was contributed by the Eagle
Ford and other areas. All completions have slowed to the point that by the end of September,
they were at slightly over 60% of June's completion numbers according to RRC statistics.
Significant drop, and it will show up in following months. First years decline rates will
assure that it will drop slightly from this point. $64 WTI won't motivate it to expand to any
extent. The next year will see US wavering along the 11.1 million barrel level, I still
think. Unless, George thinks the GOM increase is somewhat permanent, which I doubt.
And try to locate a time in history when production is trending up, while completions are
trending down. There is usually a several month lag by the time production slows. Takes a
while to get out of the ground if they are completed towards the end of the month.
Don't you just love simple logic? Like: fire burns, water is wet, stuff like that?
I second that. Being from Norway myself, and having actually been working in consulting some
years ago. It looks nice on paper, but the world is changing and it is wise to look out for
deception and that is often the case in consulting (customer/revenue first and reality
second).
Based on the shaleprofile data it looks as if well productivity increased alot in 2016 and
2017 due to longer laterals and increased proppant intensity. 2018 well productivity looks to
be trending pretty close to 2017, so the productivity gains from longer lats and increased
proppant might have been exhausted by now. Therefore, comparing 2018 well completion numbers
to any pre 2017 completion numbers won't tell you much, but a comparison of 2018 and 2017
numbers should. In the 4 months ending in September 2018 completions grew year over year by
almost 70% from 2017, hence the large assumed increase in production in the last four months
of 2018. What is interesting though is that it looks like the free lunch from increased lats
and proppant looks to be almost over, and any future increases in production must be the
result of an increase in completion activity, which should result in some inflation for the
service providers going forward. And, according to Schlumberger, if you adjust for the longer
lats and increased proppant it actually appears that productivity is starting to trend down
(and the increased usage of poor quality in basin sand will likely contribute to this as
well)
I take your word for it. Thank you, BTW. You are the only one left on this site that has any
common sense regarding shale oil economics and the burden all that massive, massive amount of
debt has on running a business where your assets decline at the rate of 28-15% annually.
Everybody else seems mesmerized by productivity.
Paying the debt off will depend very much on future oil and natural gas prices.
Once growth slows the companies will be companies operating many low volume wells.
Investors will want these companies to pay dividends because they will not be in a position
to grow. The operating costs will be higher, even though CAPEX will drop.
You are very confident prices will be high in the future. I suspect they will be volatile
in the future, as they have been for the past 20 years.
So, on a company by company basis, timing will be critical, IMO.
The prices can be thought of as 3 year average prices, yes there will be volatility, my
"low price scenario" has Brent Oil Price in 2017 $ never rising above $80/b. I cannot hope to
predict the exact oil price and of course oil prices will be volatile, but the average over
time allows a pretty good estimate.
Also a company by company model is a little too much work. I just do the industry average,
some companies will be better and some worse than average.
It certainly is the case that oil prices have been volatile and I agree this will
continue, but the three year trend in prices (centered 3 year average) has been up $7/b for
the past year, my expectation is that this trend will continue and the 3 year centered
average price will reach $80/b (in 2017$) by 2021 or 2022. The trend of oil prices will be
higher, if the peak arrives by 2025 as I expect prices (3 year centered average oil price in
2017$) are likely to reach $100/b by 2024 or 2025.
I think company by company because I have an investment in a private company. I know how
important timing is in the upstream industry to individual companies.
Likewise, I understand you aren't all that interested in individual companies. No problem
there.
On the price, I understand why you use different scenarios. However, the average price
over the next three years could be $100 or $50 WTI. Pretty much close to what we saw 2011-14
and 2015–17.
I was recently in a major city and saw more Tesla's than I ever had, including my first
Model 3 sighting.
Our little area now has two Model S, with the early adopter trading his 2012 for a
2018.
Pretty doubtful it will be $50/b over the next three years, in my opinion. If you believe
that you should find another business More likely is a gradual increase in
oil prices as we approach peak oil, the futures strip is likely to be wrong on oil price
(today's future strip). For Brent futures the current strip goes from $73/b (Jan 2019) to $61
(Dec 2026). By Contrast the EIA's AEO 2018 reference oil price scenario for Brent crude has
the spot price at $87.50/b in 2026, chart below has their scenario (which I think may be too
low.)
As always clicking on the chart give a larger view.
The price could be $50 from 2019-2021, and then $125 from 2022-2025. (Averages, of
course).
So in that scenario I'd feel pretty bad if I sold out in say 2020.
Your models are ok, I have no problem with you doing them. We try to make a budget for
every year.
However, the price is far too volatile to model anything very far into the future, just
like we cannot budget past one year, and usually have to make adjustments to that.
Our price has dropped over $10 in less than one month. That makes a huge difference, yet
that level of volatility is common and has been for many years.
What oil prices were you modeling in June, 2014 for 2015-17? Our timing was very fortunate
to say the least. Many leases bought 1997-2005. Had we bought the same leases 2011-14 for the
market prices of 2011-14, we would be bankrupt, absent having hedged everything for four
years, which is very difficult to do.
On a flowing barrel basis, I have seen leases sell as low as $2,000 per barrel and as high
as $180,000 per barrel in our basin from 1997-2018. That is what an oil price range of $8-140
per barrel will do.
Few companies with zero debt ever go BK. We would with WTI at $30 for about three years.
Is that likely? No, but oil did drop below that level in 2016.
The volatility is a big problem, there is no doubt of that. When imagining the "big
picture". I use the estimates of the EIA's AEO as a starting point then add my personal
perspective (that at some point oil output will peak.) Below is a chart with my guess from
Dec 2014 for future Brent oil prices in constant 2014$, nominal Brent spot price is give for
comparison.
Clearly my guess was not very good, the EIA guess from the AEO 2015 was also not great,
but better than my guess. Future guesses will be equally bad.
In 2013 we assumed prices in a range of $60-120 WTI moving forward.
In June of 2014 when oil spiked up and we received $99.25 in the field, we suspected oil
would fall and it began to. We again continued to assume $60 WTI would be a low.
We were dead wrong, of course.
Oil dropped again today. We will get $67 in the field for October sales paid in November.
However, our price today is down to $56.50. That is about a $60,000 per month revenue hit to
a small company which employs 8 full time employees, one part time employee office manager
and utilized numerous contractors (rigs, electricians, etc.).
Corn here is $3.51 per bushel today. Less than a month ago it was $2.96 per bushel.
Yes, yes, a hedging program would mitigate the price volatility.
Until you actually try to hedge with money at risk, don't talk to me about that. It's
about as easy as trading stocks. It is also very expensive due to the volatility. Or, if you
do SWAPS or Collars, you need to put up a lot of margin money.
Hedging seems a risky business, not sure I would come out ahead by hedging. You are in a
tough business, the volatility sucks. The silver lining is that prices will be
increasing.
Shallow Sand Wrote:
"Paying the debt off will depend very much on future oil and natural gas prices."
I don't think so. When energy prices rise, so do prices of everything else, included
interest rates. The only way the shale drillers could play off there debt is if the left
large number of completed wells untapped (ie leave it in the ground) while taking advantage
of cheap debt & low labor\material costs. Then selling the oil when prices & costs
have soared above investment costs.
The issue is that as soon as a well is completed, they start producing, at market prices.
Thus when oil prices rise most of the oil is already produced & drilling new wells (using
more debt) does not pay down the old debt.
Also consider the costs shale drillers will need for decommissioning older\depleted well.
I believe the cleanup cost is between $50K & $100K per drill site. To date have any shale
drillers spent money on clean up for depleted wells yet, or is it all deferred (ie never
going to happen)?
FWIW: I don't believe any of the shale companies are in game for the long term. They are
simply a modern Ponzi scam, taking investor money & providing an illusion of profitabity
by selling a product below cost. They will continue to play the game until investor capital
dries up.
I suspect that most shale drillers will go bust in the next 5 years when the bulk of their
bonds come due & they won't have the ability to refinance it or pay it off. If I recall
correctly Shale drillers will need to payoff or refinance about $270B in high-yield bonds
between 2020 & 2022.
My guess is that much of KSA will look a lot like the shabby end of Yemen before too long. This will perhaps strand some assets.
Once the House of Saud fragments further among competing clans/factions (Faisal, Sudairi, Abdullah, Bin Sultans) things will hasten.
Collapse is preceded by intra-elite rivalry over a shrinking pie, so to speak.
Caspian Report has a nice set on KSA if you look for them. Here's one- https://youtu.be/9tHwvZ9XDLU
And another- https://youtu.be/hh8isVX3H9w
Hightrekker once commented something quite apt, along the lines of~ 'And all this is probably like the Austrians in 1913 arguing
about who their next Habsburg Ruler is going to be'.
From what I understand there are 4000 Saudi princes (a suspiciously round number, so likely an approximate). It all should
make for a very bloody affair. Hopefully Iran will do the right thing and kick 'em while they're down.
It's interesting that Clapper is against abandoned by Trump Iran deal.
Tramp administration is acting more like Israeli marionette here, because while there a
strategic advantage in crushing the Iranian regime for the USA and making a county another Us
vassal in the middle East, the cost for the country might be way to high (especially if we count
in the cost of additional antagonizing Russia and China). Trump might jump into the second
Afghanistan, which would really brake the back of US military -- crushing Iran military is one
thing, but occupying such a county is a very costly task. And that might well doom Israel in the
long run as settlers policies now created really antagonized, unrecognizable minority with a high
birth rate.
Vanishing one-by-one of partners are given due to collapse of neoliberalism as an ideology.
Nobody believes that neoliberalism is the future, like many believed in 80th and early 90th. This
looks more and more like a repetion of the path of the USSR after 1945, when communist ideology
was discredited and communist elite slowly fossilized. In 46 years from its victory in WWII the
USSR was dissolved. The same might happen with the USA in 50 years after winning the Cold
War.
Notable quotes:
"... a vanishing one by one of American partners who were previously supportive of U.S. leadership in curbing Iran, particularly its nuclear program. ..."
"... The United States risks losing the cooperation of historic and proven allies in the pursuit of other U.S. national security interests around the world, far beyond Iran. ..."
Only well calibrated multilateral political, economic and diplomatic pressure brought to
bear on Iran with many and diverse partners will produce the results we seek.
"Then there were none" was Agatha Christie's most memorable mystery about a house party in
which each guest was killed off one by one. Donald Trump's policy toward Iran has resulted in
much the same: a vanishing one by one of American partners who were previously supportive
of U.S. leadership in curbing Iran, particularly its nuclear program.
Dozens of states, painstakingly cultivated over decades of American leadership in blocking
Iran's nuclear capability, are now simply gone. One of America's three remaining allies on
these issues, Saudi Arabia, has become a central player in American strategy throughout the
Middle East region. But the Saudis, because of the Jamal Khashoggi killing and other reasons,
may have cut itself out of the action. The United Arab Emirates, so close to the Saudis, may
also fall away.
Such paucity of international support has left the Trump administration dangerously
isolated. "America First" should not mean America alone. The United States risks losing the
cooperation of historic and proven allies in the pursuit of other U.S. national security
interests around the world, far beyond Iran.
... ... ...
European allies share many of our concerns about Iran's regional activities, but they
strongly oppose U.S. reinstitution of secondary sanctions against them. They see the Trump
administration's new sanctions as a violation of the nuclear agreement and UN Security Council
resolutions and as undermining efforts to influence Iranian behavior. The new sanctions and
those applied on November 5 only sap European interest in cooperating to stop Iran.
... ... ...
The United States cannot provoke regime change in Iran any more than it has successfully in
other nations in the region. And, drawing on strategies used to topple governments in Iraq and
Afghanistan, the United States should be wary of launching or trying to spur a military
invasion of Iran.
Lt. Gen. James Clapper (USAF, ret.) is the former Director of National Intelligence.
Thomas R. Pickering is a former U.S. ambassador to the United Nations, Russia and
India.
"... Later, it emerged that QIA and Glencore planned to sell the majority of the stake they had acquired in Rosneft to China's energy conglomerate CEFC, but the deal fell through after Beijing set its sights on CEFC and launched an investigation that saw the removal of its chief executive. The investigation was reportedly part of a wide crackdown on illicit business practices on the part of private Chinese companies favored by Beijing. ..."
Russian VTB, a state-owned bank, funded a significant portion of the Qatar Investment
Authority's acquisition of a stake in oil giant Rosneft , Reuters
reports , quoting nine unnamed sources familiar with the deal.
VTB, however, has denied to Reuters taking any part in the deal.
"VTB has not issued and is not planning to issue a loan to QIA to finance the
acquisition," the bank said in response for a request for comment.
The Reuters sources, however, claim VTB provided a US$6 billion loan to the Qatar sovereign
wealth fund that teamed up with Swiss Glencore to acquire 19.5 percent in Rosneft last year.
Reuters cites data regarding VTB's activity issued by the Russian central bank that shows VTB
lent US$6.7 billion (434 billion rubles) to unnamed foreign entities and the loan followed
another loan of US$5.20 billion (350 billion rubles) from the same central bank.
The news first made
headlines in December, taking markets by surprise, as Rosneft's partial privatization was
expected by most to be limited to Russian investors. The price tag on the stake was around
US$11.57 billion (692 billion rubles), of which Glencore agreed to contribute US$324 million.
The remainder was forked over by the Qatar Investment Authority, as well as non-recourse bank
financing.
Russia's budget received about US$10.55 billion (
710.8 billion rubles ) from the deal, including US$ 270 million (18 billion rubles) in
extra dividends. Rosneft, for its part, got an indirect stake in Glencore of 0.54 percent.
Later, it
emerged that QIA and Glencore planned to sell the majority of the stake they had acquired
in Rosneft to China's energy conglomerate CEFC, but the deal fell through after Beijing set its
sights on CEFC and launched an investigation that saw the removal of its chief executive. The
investigation was reportedly part of a wide crackdown on illicit business practices on the part
of private Chinese companies favored by Beijing.
Seeking protection against possible new U.S. sanctions, Russian energy majors are
heaping pressure on Western oil buyers to use euros instead of dollars for payments, as
well as penalty clauses in contracts.
Russia supplies over 10% of global oil, so severe sanctions could affect crude prices.
Global oil majors further rely on Russia to feed their refineries, especially in Europe and
Asia, so they cannot just walk away from annual contract negotiations.
Also if administration really wants war, Iran is not Ieaq and will fight more efficiently,
while the US army despite technological supreiority is demoralized. nobody believe into the the
building of global neoliberal empire any longer.
Notable quotes:
"... The administration's policy seems sure to fail on its own terms, and it is also the wrong thing to do. ..."
"... If a foreign power waged an economic war against your country, would you be likely to respond to that foreign coercion by effectively taking their side against your own government? Of course not. The idea that Iranians will do the work of their country's enemies by rising up and toppling the regime has always been far-fetched, but it is particularly absurd to think that Iranians would do this after they have just seen their economy be destroyed by the actions of a foreign government. ..."
"... People normally do not respond to economic hardship and diminishing prospects by risking their lives by starting a rebellion against the state. ..."
"... Making Iranians poorer and more miserable isn't going to encourage them to be more politically active, much less rebellious, but will instead force them to focus on getting by. That is likely to depress turnout at future elections, and that is more likely to be good news for hard-line candidates in the years to come. ..."
"... Iran hawks typically don't understand the country that they obsess over, so perhaps it is not surprising that they haven't thought any of this through, but their most glaring failure is not taking into account the importance of nationalism. ..."
Originally
from: The Futility of Trump's Iran Policy By Daniel LarisonNovember
6, 2018, 10:54 AM • The administration's policy seems sure to fail on its
own terms, and it is also the wrong thing to do.
The Trump administration's plan to throttle
the Iranian economy is as poorly-conceived as it is cruel:
"For ordinary people, sanctions mean unemployment, sanctions mean becoming poor, sanctions
mean the scarcity of medicine, the rising price of dollar," said Akbar Shamsodini, an Iranian
businessman in the oil and gas sector who lost his job six months ago as European companies
started to pull out of Iran in fear of US sanctions.
" By imposing these sanctions, they want to force Iranians to rise up in revolt against
their government but in practice, they will only make them flee their country [bold
mine-DL]," he said, adding that ironically it would be Europe that would have to bear the
burden of such a mass migration.
"We're being squashed here as an Iranian youth who studied here, worked here, the only
thing I'm thinking about now is how to flee my country and go to Europe."
If a foreign power waged an economic war against your country, would you be likely to
respond to that foreign coercion by effectively taking their side against your own government?
Of course not. The idea that Iranians will do the work of their country's enemies by rising up
and toppling the regime has always been far-fetched, but it is particularly absurd to think
that Iranians would do this after they have just seen their economy be destroyed by the actions
of a foreign government.
People normally do not respond to economic hardship and diminishing prospects by risking
their lives by starting a rebellion against the state. As Mr. Shamsodini says above, it is
much more likely that they will leave to find a way to make a living elsewhere. All that
strangling Iran's economy will manage to do is push young and ambitious Iranians to go abroad
while inflicting cruel collective punishment on everyone that remains behind. Making
Iranians poorer and more miserable isn't going to encourage them to be more politically active,
much less rebellious, but will instead force them to focus on getting by. That is likely to
depress turnout at future elections, and that is more likely to be good news for hard-line
candidates in the years to come.
Iran hawks typically don't understand the country that they obsess over, so perhaps it
is not surprising that they haven't thought any of this through, but their most glaring failure
is not taking into account the importance of nationalism. When a foreign power tries
dictating terms to another nation on pain of economic punishment, this is bound to provoke
resentment and resistance. Like any other self-respecting nation, Iranians aren't going to
accept being told what to do by a foreign government, and they are much more likely to band
together in solidarity rather than start an uprising against their own government. The stronger
the nationalist tradition there is in a country, the more likely it is that the reaction to
foreign threats will be one of defiance and unity. It simply makes no sense to think that the
U.S. can pressure a proud nation to capitulate like this.
The administration's policy seems sure to fail on its own terms, and it is also the wrong
thing to do. President Washington exhorted his countrymen in his Farewell Address : "Observe good
faith and justice towards all nations; cultivate peace and harmony with all." The
administration's Iran policy represents the total rejection of that advice. If the U.S.
followed Washington's recommendations, it would not be abrogating an agreement that it had just
negotiated a few years earlier, and it would not be punishing an entire country for the wrongs
of a few. Instead, the U.S. would have built on the success of the earlier negotiations and
would have sought to reestablish normal relations with them.
Alastair Crooke (former UK dip and MI6) knows more about ME than any other white man. He
describes how Jared Kushner became Trump's stovepipe of disinformation on behalf of Netanyahu
and MBS.
The economic sanctions on Iran will be much tighter, beyond what they were, before the
nuclear agreement was signed. "Hit them in their pockets", Netanyahu advised Trump: "if you
hit them in their pockets, they will choke; and when they choke, they will throw out the
ayatollahs"".
This was another bit of 'stovepiped' advice passed directly to the US President. His
officials might have warned him that it was fantasy. There is no example of sanctions alone
having toppled a state; and whilst the US can use its claim of judicial hegemony as an
enforcement mechanism, the US has effectively isolated itself in sanctioning Iran: Europe
wants no further insecurity. It wants no more refugees heading to Europe.
Iran Sanctions Unlikely to Boost Oil ETFs in 2019?
November 06, 2018, 01:00:00 PM EDT Zacks.com
The United States formally levied tough sanctions on Iran from Nov 5. The United States'
sanctions against Iran were first put into place in August. That sanctions were on cars, metals
and minerals as well as U.S. and European aircraft.
The second part of the sanctions that bans import of Iranian energy was enacted starting Nov
5. These sanctions are part of President Donald Trump's initiative to put an embargo on Iran's
missile and nuclear programs and diminish its
influence in the Middle East , per CNBC.
However, Washington has also offered temporary waivers to eight key buyers, China, India,
Greece, Italy, Taiwan, Japan, Turkey and South Korea, allowing them to continue to import oil
from Iran. This in turn kept oil market steady. Iran's oil exports were 1.7
million barrels per day in October , per oilprice.com (read: Oil ETFs: What You
Need to Know ).
But Goldman Sachs revealed in a research note that "as more Iranian supply goes offline, the
market will continue to tighten. Iran could lose nearly 600,000 bpd of exports by the end of
the year, relative to October levels." So, Goldman expects the oil market to record deficit in
the fourth quarter of this year, as quoted on oilprice.com.
Against this backdrop, along with many analysts we believe that oil prices may not shoot up in 2019. We'll
tell you why.
U.S., Russia & Saudi to Scale Up Supplies
As soon as Iranian output is out of the market, high chances are that key producers like
Saudi Arabia and Russia will start pumping more. The United States and Russia have both scaled
up production to a record level of about 11.3 million barrels a day, while members of the
Organization of the Petroleum Exporting Countries (OPEC) boosted production to the highest
levels in two years despite drop-offs in Venezuela and Iran.
Iranian Supplies to Phase Out Slower Than Expected?
Investors should note that following the sanctions, there were not much changes in the
market sentiments. This was because of the fact that Iranian oil exports
plunged to around 1.3 million barrels a day from 2.4 million last spring, as customers
resorted to other suppliers in expectation of the sanctions, nytimes.com. Though the sanctions
are likely to cut about 2% of global oil supplies, administration's waivers hinted at a
patient approach by Washington toward European and Asian customers so that they could find
other suppliers.
Dwindling Demand?
Moreover, economic growth in China is slowing down. It recorded the lowest year-over-year growth
rate in the third quarter of 2018 since the first quarter of 2009. The situation in the
Eurozone in Q3 was the same, marking the feeblest growth rate since the second quarter of 2014 . Such
dwindling growth profile points at weaker demand.
What's in Store for 2019?
Goldman expects backwardation in the oil market. It expects Brent to trade around $80 per
barrel by the end of the year and slip to $65 per barrel by the end of 2019 as midstream
Permian constraints
are likely to be relieved .
ETFs in Focus
Against this backdrop, investors should keep a track of oil ETFs in the coming days. These
funds include the likes of United States Oil Fund USO , Invesco DB Oil Fund DBO , ProShares Ultra Bloomberg Crude Oil UCO and United States 12 Month Oil Fund
USL .
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Zacks' free Fund Newsletter will brief you on top news and analysis, as well as
top-performing ETFs, each week.
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Iran's Foreign Minister Javad Zarif provides Iran's response to the Outlaw US
Empire's unilateral, illegal sanctions that target the Iranian citizenry in an articulate
3 minute video.
Apparently, The Financial Times has published an article, "Europe should work with
Iran to counter US unilateralism," but you must be a subscriber to read the item. Looking
about for a synopsis, I discovered the item's an op/ed by Iranian President Rouhani, with
what seems a
good recap here .
Given the number of waivers issued to its sanctions, the sanctions won't destabilize the
oil market as prices have trended downward the past several days, although what they do
restrict will cause great harm to the Iranian public.
As you certainly know, the oil producers and frackers are technically insolvent, also
China filled up a vast strategic oil reserve, USA filled a vast strategic oil reserve, so
Trump-Pence's intent is the exact same as Bush-Cheney's with Iraq: destroy oil supply to
below demand, and as soon as reserves are depleted this winter heating season, crude prices
will spike back up to a break-even for the frackers, Canucks and Venezuelans, whereupon
supply will rip again, and prices fall to trade within a range of right around $100 a bbl,
...plus €2 a liter petrol surcharge for your IPCC Carbon Catholic tithe.
However, the primary problem would not even be the doubtful profitability, but rather
logistics. Iran's oil fields are in the south. To reach Russia, the oil would have to make its
way to Caspian ports in the north. Iran has no main pipelines connecting its southern oil
fields with northern ports. These ports do have the infrastructure for oil, but they were built
to receive oil from swap deals with Kazakhstan, Russia and Azerbaijan. They were never meant to
export oil.
Consequently, before any exports could begin, Moscow and Tehran would have to invest in
creating the necessary storage and loading infrastructure at the Iranian ports. Iran would also
need to upgrade its transport infrastructure to deliver oil from the south to the Caspian
seashore -- that would also present a challenge.
Finally,
Russia and Iran would have to substantially increase their tanker fleets in the landlocked
Caspian Sea to exchange large quantities of oil, as the local geography does not allow for the
use of large tankers. In this situation, a planned railroad connection between Russia and Iran via
Azerbaijan could increase the volume of oil moved from Iran to Russia, but this project has not
been completed.
Under these circumstances, Russian officials are demonstrating far greater interest in
resuming the so-called oil-for-products program, under which Russia would broker Iranian oil
abroad in exchange for Iran buying Russian industrial machinery and providing investment
opportunities to Moscow.
Russia and Iran have discussed an oil-for-products initiative for years. Initially, it was
supposed to help Tehran evade the oil trade embargo imposed by the United States, European
Union (EU) and their partners. When those sanctions were lifted as part of the 2015 nuclear
deal, the initiative was expected to compensate for Iran's lack of financial reserves, which
kept Tehran from paying for imports of Russian equipment in hard currency. However, after US
President Donald Trump
withdrew from the deal in 2018 and began reimposing sanctions, the oil-for-products deal
again gained importance as a way to evade sanctions.
In November 2017, Moscow received 1 million barrels from Iran as payment for railroad
equipment imported from Russia, and arrangements were in the works for Russia to buy an
additional 5 million tons of oil in 2018. Indeed, in January and February there were reports of
some oil dispatches transferred from Iran to Russian companies. Yet, by March, they stopped . Moscow still plans
to revive the deal in 2019, though it might never happen.
On the one hand, Russia has had problems finding buyers for Iranian oil.
Concerned about the US sanctions, potential clients refused to purchase it. On the other hand,
Iran's main hopes for sanctions relief are more connected to the EU than Russia. There is a
strong belief in Tehran that Europeans will be able to offset the negative influence of US
economic pressure on Iran. The EU wants to salvage as much of the nuclear deal as possible. Yet
the strength of Tehran's belief is hard to explain: Large EU companies have already pulled out
of Iran. The EU officials Al-Monitor interviewed openly said that Tehran should not expect a
lot from Brussels.
Though Russian and Iranian officials have an on-again, off-again marriage of convenience,
Iran's general public and its elite strongly oppose any substantial deals with Moscow. Russia
is not trusted or welcomed by Iranians and the countries have a long history of
differences . A well-informed and respected Iranian expert on Tehran's foreign policy told
Al-Monitor on condition of anonymity that a Russian oil-for-products initiative would be
difficult to implement.
"A large part of Iranian society believes that giving our oil to Russia -- especially at the
discounted prices -- is no better than agreeing to Trump's demands," he said.
The U.S. is going for the jugular with new Iran sanctions intended to punish those who trade
with Teheran. But the U.S. may have a fight on its hands in a possible post- WWII
turning-point...
The next step in the Trump administration's "maximum pressure" campaign against Iran has
begun, with the most severe sanctions being re-imposed on the Islamic Republic. Crucially, they
apply not only to Iran but to anyone who continues to do business with it.
It's not yet clear how disruptive this move will be. While the U.S. intention is to isolate
Iran, it is the U.S. that could wind up being more isolated. It depends on the rest of the
world's reaction, and especially Europe's.
The issue is so fraught that disputes over how to apply the new sanctions have even divided
Trump administration officials.
The administration is going for the jugular this time. It wants to force Iranian exports of
oil and petrochemical products down to as close to zero as possible. As the measures are now
written, they also exclude Iran from the global interbank system known as SWIFT.
It is hard to say which of these sanctions is more severe. Iran's oil exports have already
started falling. They
peaked at 2.7 million barrels a day last May -- just before Donald Trump pulled the U.S.
out of the six-nation accord governing Iran's nuclear programs. By early September oil exports
were averaging a million
barrels a day less .
In August the U.S. barred Iran's purchases of
U.S.-dollar denominated American and foreign company aircraft and auto parts. Since then the
Iranian rial has crashed to
record lows and inflation has risen above 30 percent.
Revoking Iran's SWIFT privileges will effectively cut the nation out of the
dollar-denominated global economy. But there are moves afoot, especially by China and Russia,
to move away from a dollar-based economy.
The SWIFT issue has caused infighting in the
administration between Treasury Secretary Mnuchin and John Bolton, Trump's national security
adviser who is among the most vigorous Iran hawks in the White House. Mnuchin might win a
temporary delay or exclusions for a few Iranian financial institutions, but probably not much
more.
On Sunday, the second round of sanctions kicked in since Trump withdrew the U.S. from the
2015 Obama administration-backed, nuclear agreement, which lifted sanctions on Iran in exchange
for stringent controls on its nuclear program. The International Atomic Energy Agency has
repeatedly certified that the deal is working and the other signatories -- Britain, China,
France, Germany and Russia have not pulled out and have resumed trading with Iran. China and
Russia have already said they will ignore American threats to sanction it for continuing
economic relations with Iran. The key question is what will America's European allies
do?
Europeans React
Europe has been unsettled since Trump withdrew in May from the nuclear accord. The European
Union is developing a trading mechanism to get around U.S. sanctions. Known as a
Special Purpose Vehicle , it would allow European companies to use a barter system similar
to how Western Europe traded with the Soviet Union during the Cold War.
Juncker: Wants Euro-denominated trading
EU officials have also been lobbying to preserve
Iran's access to global interbank operations by excluding the revocation of SWIFT privileges
from Trump's list of sanctions. They count
Mnuchin,who is eager to preserve U.S. influence in the global trading system, among their
allies. Some European officials, including Jean-Claude Juncker, president of the European
Commission, propose making the euro a global trading currency
to compete with the dollar.
Except for Charles de Gaulle briefly pulling France out of NATO in 1967
and Germany and France voting on the UN Security Council against the U.S. invading Iraq in
2003, European nations have been subordinate to the U.S. since the end of the Second World
War.
The big European oil companies, unwilling to risk the threat of U.S. sanctions, have already
signaled they intend to ignore the EU's new trade mechanism. Total SA, the French petroleum
company and one of Europe's biggest, pulled
out of its Iran operations several months ago.
Earlier this month a U.S. official confidently
predicted there would be little demand among European corporations for the proposed barter
mechanism.
Whether Europe succeeds in efforts to defy the U.S. on Iran is nearly beside the point from
a long-term perspective. Trans-Atlantic damage has already been done. A rift that began to
widen during the Obama administration seems about to get wider still.
Asia Reacts
Asian nations are also exhibiting resistance to the impending U.S. sanctions. It is unlikely
they could absorb all the exports Iran will lose after Nov. 4, but they could make a
significant difference. China, India, and South Korea are the first, second, and third-largest
importers of Iranian crude; Japan is sixth. Asian nations may also try to work around the U.S.
sanctions regime after Nov. 4.
India is considering purchases of Iranian crude via a barter system or denominating
transactions in rupees. China, having already said it would ignore the U.S. threat, would like
nothing better than to expand yuan-denominated oil trading, and this is not a hard call: It is
in a protracted trade war with the U.S., and an oil-futures market launched in Shanghai last
spring already claims roughly 14 percent of the global market for "front-month" futures --
contracts covering shipments closest to delivery.
Trump: Unwittingly playing with U.S. long-term future
As with most of the Trump administration's foreign policies, we won't know how the new
sanctions will work until they are introduced. There could be waivers for nations such as
India; Japan is on record asking for one. The E.U.'s Special Purpose Vehicle could prove at
least a modest success at best, but this remains uncertain. Nobody is sure who will win the
administration's internal argument over SWIFT.
Long-term Consequences for the U.S.
The de-dollarization of the global economy is gradually gathering momentum. The orthodox
wisdom in the markets has long been that competition with the dollar from other currencies will
eventually prove a reality, but it will not be one to arrive in our lifetimes. But with
European and Asian reactions to the imminent sanctions against Iran it could come sooner than
previously thought.
The coalescing of emerging powers into a non-Western alliance -- most significantly China,
Russia, India, and Iran -- starts to look like another medium-term reality. This is driven by
practical rather than ideological considerations, and the U.S. could not do more to encourage
this if it tried. When Washington withdrew from the Iran accord, Moscow and Beijing immediately
pledged to support Tehran by staying with its terms.If the U.S. meets significant resistance,
especially from its allies, it could be a turning-point in post-Word War II U.S.
dominance.
Supposedly Intended for New Talks
All this is intended to force Iran back to the negotiating table for a rewrite of what Trump
often calls "the worst deal ever." Tehran has made it clear countless times it has no intention
of reopening the pact, given that it has consistently adhered to its terms and that the other
signatories to the deal are still abiding by it.
The U.S. may be drastically overplaying its hand and could pay the price with additional
international isolation that has worsened since Trump took office.
Washington has been on a sanctions binge for years. Those about to take effect seem
recklessly broad. This time, the U.S. risks lasting alienation even from those allies that have
traditionally been its closest.
"... The key point from my POV was the immediate MSM blanket coverage with every detail explained. No investigation, research, doubts or questions. ..."
"... The US MSM is a propaganda tool and they were pre-prepared, so some US deep state group knew that Bin Salman's bodyguard was heading to the consulate and what they planned to do there (and maybe even set them up to do it). ..."
The Saudis also support the system of petrodollars, which basically requires nearly all
international purchases of petroleum to be paid in dollars. Petrodollars in turn enable the
United States to print money for which there is no backing knowing that there will always be
international demand for dollars to buy oil.
I would emphasize this aspect, except that MbS doesn't so much support the PetroDollar as
the PetroYuan, and this is more than troubling for the US since the PetroDollar is essential to
the dollar's world reserve currency status.
Many American economists have expressed alarm at Saudi Arabia's willingness to borrow in
Chinese yuan, as Riyadh's decision could cause other oil-exporting countries to abandon the
U.S. dollar in favor of the "petro-yuan." A marked decline in the use of the U.S. dollar as
the preferred credit-issuing currency by oil-producing countries would greatly weaken the
U.S. dollar's long-term viability as a global reserve currency.
As the United States views its alliance with Saudi Arabia as the lynchpin of its Middle
East strategy, Washington will likely react strongly if Riyadh uses its influence within OPEC
to strengthen the Chinese yuan. As Saudi Arabia remains dependent on U.S. arms sales to
pursue its geopolitical objectives in the Middle East and counter Iran, intense U.S. pressure
would likely cause Riyadh to distance itself from Beijing, limiting economic integration
between the two countries.
It is no coincidence that these statements from the Crown Prince come days after the
official launch of China's Petroyuan. As every historical trend indicates, the world's most
powerful economy dictates which currency will be used in most international transactions.
This continues to be the case with the US in respect of Dollar, but as China gets set to
fully overtake the US as the world's leading economy, the Dollar will inevitably be replaced
by the Yuan.
China's issuing of oil futures contracts in Petroyuan is the clearest indication yet that
China is keen to make its presence as the world's largest energy consumer known and that it
would clearly prefer to purchase oil from countries like Saudi Arabia in its own currency in
the future, quite possibly in the near future.
Saudi Arabia's Crown Prince appears to understand this trajectory in the global energy
markets and furthermore, he realises that in order to be able to leverage the tremendous
amount of US pressure that will come down on Riaydh in order to force Saudi Arbia to avoid
the Petroyuan, Riyadh will need to embrace other potential partners, including China.
More than anything else, the Petroyuan will have an ability to transform Saudi Arabia by
limiting its negative international characteristics that Muhammad bin Salman himself
described. As a pseudo-satellite state of the US during the Cold War, Muhammad bin Salman
admitted that his country's relationship to the US was that of subservience. China does not
make political let alone geopolitical demands of its partners, but China is nevertheless keen
to foster de-escalations in tensions among all its partners based on the win-win principles
of peace through prosperity as articulated on a regular basis by President Xi Jinping.
Thus one could see China's policies of political non-interference rub off on a potential
future Saudi partner, in the inverse way that the US policies of ultra-interventionism are
often forced upon its partners. Thus, whatever ideological views Muhammad bin Salman does or
does not have, he clearly knows where the wind is blowing: in the direction of China.
If the Khashoggi Affair was planned as a warning to Crown Prince Mohamed bin Salman, then
the US knew exactly what was going to happen in the consulate. It was coupled with an immediate
and orchestrated MSM reaction that was curiously detailed, and delivered at high volume.
Yeah, the US will never get rid of the Saudi regime but will always be dangling the sword
right above their necks, and not just figuratively.
Besides the tangible benefits of the 'strategic' control of oil resources, which the US
believes it needs to control in order to dominate Western Europe and its Asian allies, the
Saudis also function as the CIA's private slush fund for off-the-books operations like
Iran-Contra and many others which surface in the news from time to time. Thus, the CIA
controls such vast sums through the Saudis as to make their budgets effectively
limitless.
During his triumphant tour of the US earlier this year, the Saudi King said something
which I found shocking and incredibly revealing in the way the story dropped like a stone
making absolutely no ripples anywhere in the MSM, nor in the alternative media for that
matter.
When asked about Saudi funding of Wahhabism around the world, he said that 'the allies
(presumably US and UK) had 'asked' the Saudis to 'use their resources' to create the
Madrassas and Wahhabi centers to prevent prevent inroads in Muslim countries by the Soviets
(a premise which is very questionable in the ME context after the fall of Nasser).
Now that seems to be the story of the century because it reveals the operating method of
the CIA wrt the Saudis. And even though MBS was trying to only reveal the distant roots of
the system they put in place, there is absolutely no logical reason why any part of this
system would have been subsequently dismantled; 911 notwithstanding. The continuing
US/Israeli support for and generous use of jihadis in Libya, Syria, etc. only reinforces this
point.
This is ultimately the greatest impediment to anything changing the status quo.
If the consulate was bugged , the Turks must have known the plan to abduct kashooggi.
They let it happen, and now that the abduction turned into a murder, they are accomplice.
US knew exactly what was going to happen in the consulate.
I doubt the US knew "exactly", but they likely knew something bad (a kidnapping
perhaps?) was a strong probability. Alas I wish Khashoggi had been warned. Too it seems
very odd he was willing to set foot in a Saudi embassy anywhere? Maybe Director Haspel can
explain.
Supposedly Khashoggi's smart phone picked it all up and filmed his own murder ??
More likely the room was prepared, and Khashoggi was following US instructions/assurances
in going there. The key point from my POV was the immediate MSM blanket coverage with
every detail explained. No investigation, research, doubts or questions.
The US MSM is a propaganda tool and they were pre-prepared, so some US deep state
group knew that Bin Salman's bodyguard was heading to the consulate and what they planned to
do there (and maybe even set them up to do it).
One question is whether the Halloween show was aimed at removing Bin Salman or just
getting him back in line.
Sibel Edmonds has been following this story from Turkey (she speaks Turkish) and posting her
thoughts and findings on twitter. She seems to think this is about some kind of soft coup
(get rid of MBS b/c getting too cozy with Russia/China, Euroasia). Sibel also says Khashoggi
was actually in Istanbul working with some kind of Soros NGO, maybe for future Color
Revolution/Arab Spring in the Middle East.
Sibel Edmonds @sibeledmonds As Predicted (OnRecord) One Of 3 Objectives in #Scripted
#Khashoggi Case: Get #Trump- Replace BS #RussiaGate with #SaudiGate. (Screenshot Coming In
Reply)- – "Khashoggi fiancee hits at Trump response, warns of 'money' influence"
Sibel Edmonds @sibeledmonds Oct 27
Very Important #Khashoggi Continued: #Khashoggi Relocated To #Turkey To Be a Part of a
Business-ThinkTank-NGO. He set up a business here. He opened Bank Accounts. He bought a
house/expansive Flat. He traveled to #London from #Istanbul paid handsomely by #Neoliberal
#DeepState
Jamal Khashoggi did not die for nothing. His murder was part of the plot to push current
de-facto ruler of the Saudi royal crime family aside.
On the moral side, considering who Khashoggi was, one can only say "serves him right".
However, all the other players involved, the Saudis, Israel, Turkey, and the US, are by no
means morally superior to him. His murder and essential non-reaction by others are useful, as
these events unmasked the hypocrites, who are showing their true colors even as we speak.
Should have added that the Kashoggi murder & extremely strange aftermath, dulled US
political response, smacks of a scene from the film "V for Vendetta."
"There is every indication that the U.S. is not in fact seeking to punish the Saudis for
their alleged role in Khashoggi's apparent murder but instead to punish them for reneging on
this $15 billion deal to U.S. weapons giant Lockheed Martin, which manufactures the THAAD
system.
S-400 gamechanger. / Saudi Plan to Purchase Russian S-400:
@Colin
Wright Thanks for the link. Now we can see that Empire had previously turned against MbS,
and that the scripted Khashoggi affair conveniently arrived on cue – with MbS getting
the full MSM treatment.
In other words the deep state knew exactly what was going to happen in the consulate that
day, set it up and recorded it themselves (nothing to do with Khashoggi's smart phone).
Prince Ahmad bin Abdulaziz, the younger brother of King Salman, has returned to Saudi
Arabia after a prolonged absence in London, to mount a challenge to Crown Prince Mohammed
bin Salman or find someone who can.
The source said that the prince returned "after discussion with US and UK officials",
who assured him they would not let him be harmed and encouraged him to play the role of
usurper.
Meanwhile, in Washington disquiet grows.
Writing in the New York Times, former national security advisor to the Obama
administration and US ambassador to the UN Susan Rice said: "Looking ahead, Washington must
act to mitigate the risks to our own interests. We should not rupture our important
relationship with the kingdom, but we must make clear it cannot be business as usual so
long as Prince Mohammed continues to wield unlimited power.
"It should be United States policy, in conjunction with our allies, to sideline the
crown prince in order to increase pressure on the royal family to find a steadier
replacement," she added.
@Miro23
The mainstream narrative has had "Psyop" written all over it from the first. It wouldn't
surprise me to learn that Khashoggi is still alive and languishing in an undisclosed location
with only the Skripals for company.
@Bill
Jones An interesting bullet-sentence, Bill Jones said to me: "The strange and dulled
aftermath in the US is, I believe, because the lesson was not really meant for US audiences."
Greetings, Bill!
Lessons on dramatic world events are cunningly spun to insouciant &
government-trusting Americans. The weird Jamal Kashoggi murder is an excellent example among
hundreds to choose from!
Fyi, along with FDR administration's cooperation, Zionists helped gin-up war fervor in
order to get the US into World War 2. Such deception resulted in unnecessarily sending-off
another round of American "doughboys" into world war.
Fyr, as recovered from America's Memory Hole Knowledge Disposal / Sewer System," below is
a great Pat Buchanan article titled, "Who forged it?"
The key question not addressed by the author is how long the period of "plato oil
production" (the last stage of the so called "oil age", which started around 1911) might
last -- 10, 20 or 50 years. And the oil age is just a very short blip in Earth
history.
Let's assume that this means less the $100 per barrel; in the past, it was $70 per
barrel that considered the level that guarantees the recession in the USA, but financial
system machinations now probably reached a new level, so that might not be true any
longer. The trillion dollars question is "How long this period can be extended?"
It is important to understand the US shale oil is not profitable and never will be for
prices under $80 or so. At prices below that level, it actually produces three products,
not two – oil, gas and junk bonds.
I view it as a very sophisticated, very innovative gamble to pressure oil prices down
and get compensation for the losses due to large amount of imported oil (the USA export
mainly lightweight oil which is kind of "subprime oil" often used for dilution of heavy
oil in countries such as Canada and Venezuela, but imports quality oil).
If the hypothesis that Saudis and Russians are close to Seneca Cliff (Saudi prince
recently said that Russian are just 10-15 years from it) and that best days of the US
shale and Gulf of Mexico deep oil is in the past if true, then "Houston we have a
problem".
That means that in 20 years, or so the civilization might experience some kind of
collapse, and the population of the Earth might start rapidly shrinking.
While the U.S. Shale Industry
produces a record amount of oil, it continues to be plagued by massive oil decline rates and debt.
Moreover, even as the companies brag about lowering the break-even cost to produce shale oil, the
industry still spends more than it makes. When we add up all the negative factors weighing down
the shale oil industry, it should be no surprise that a catastrophic failure lies dead ahead.
Of course, most Americans have no idea that the U.S. Shale Oil Industry is nothing more than a
Ponzi Scheme because of the mainstream media's inability to report FACT from FICTION. However,
they don't deserve all of the blame as the shale energy industry has done an excellent job hiding
the financial distress from the public and investors by the use of highly technical jargon and BS.
For example, Pioneer published this in the recent Q2 2018 Press Release:
Pioneer placed 38 Version 3.0 wells on production during the second quarter of 2018. The
Company also placed 29 wells on production during the second quarter of 2018 that utilized
higher intensity completions compared to Version 3.0 wells. These are referred to as Version
3.0+ completions. Results from the 65 Version 3.0+ wells completed in 2017 and the first half of
2018 are outperforming production from nearby offset wells with less intense completions. Based
on the success of the higher intensity completions to date, the Company is adding approximately
60 Version 3.0+ completions in the second half of 2018.
Now, the information Pioneer published above wasn't all that technical, but it was full of BS.
Anytime the industry uses terms like "Version 3.0+ completions" to describe shale wells, this
normally means the use of "more technology" equals "more money."
As the shale industry
goes from 30 to 60 to 70 stage frack wells, this takes one hell of a lot more pipe, water, sand,
fracking chemicals and of course, money
.
However, the majority of investors and the public are clueless in regards to the staggering
costs it takes to produce shale oil because they are enamored by the "wonders of technology." For
some odd reason, they tend to overlook the simple premise that
MORE STUFF costs MORE MONEY.
Of course, the shale industry doesn't mind using MORE MONEY, especially if some other poor slob
pays the bill.
Shale Oil Industry: Deep The Denial
According to a recently released article by 40-year oil industry veteran, Mike Shellman,
"Deep
The Denial,"
he provided some sobering statistics on the shale industry:
I recently put somebody very smart on the necessary research (SEC K's, press releases
regarding private equity to private producers, etc.) to determine what total upstream shale oil
debt actually is.
We found it to be between $285-$300B (billion), both public and
private
. Kallanish Energy Consultants recently wrote that there is $240B of long term
E&P debt in the US maturing by 2023 and I think we should assume that at least 90 plus percent
of that is associated with shale oil. That is maturing debt, not total debt.
By year end 2019 I firmly believe the US LTO industry will then be paying over $20B
annually in interest on long term debt.
Using its own self-touted "breakeven" oil price, the shale oil industry must then produce
over 1.5 Million BOPD just to pay interest on that debt each year. Those are barrels of oil that
cannot be used to deleverage debt, grow reserves, not even replace reserves that are declining
at rates of 28% to 15% per year that is just what it will take to service debt.
Using its own "breakeven" prices the US shale oil industry will ultimately have to
produce 9G BO of oil, as much as it has already produced in 10 years just to pay its total long
term debt back
.
Using Mike's figures, I made the following chart below:
For the U.S. Shale Oil Industry just to pay back its debt, it must produce 9 billion
barrels of oil.
That is one heck of a lot of oil as the industry has produced about 10
billion barrels to date. Again, as Mike states, it would take 9 billion barrels of shale oil to
pay back its $285-300 billion of debt (based on the shale industry's very own breakeven prices).
Furthermore, the shale industry may have to sell a quarter of its oil production (1.5
million barrels per day) just to service its debt by the end of 2019.
According to the
EIA, the U.S. Energy Information Agency, total shale oil (tight oil) production is now 6.2 million
barrels per day (mbd):
The majority of shale oil production comes from three fields and regions, the Eagle Ford (Blue),
the Bakken (Yellow) and the Permian (light, medium & dark brown). These three fields and regions
produce 5.2 mbd of the total 6.2 mbd of shale production.
Unfortunately, the shale industry continues to struggle with mounting debt and negative free
cash flow. The EIA recently published this chart showing the cash from operations versus capital
expenditures for 48 public domestic oil producers:
You will notice that capital expenditures (
brown line
) are still higher than
cash from operations (
blue line
). So, it doesn't seem to matter if the oil price
is over $100 (2013-2014) or less than $70 (2017-2018), the shale oil industry continues to spend
more money than it's making.
The shale energy companies have resorted to selling assets,
issuing stock and increasing debt to supplement their inadequate cash flow to fund operations.
A perfect example of this in practice is Pioneer Resources the number one shale oil producer in
the mighty Permian. While most companies increased their debt to fund operations, Pioneer decided
to take advantage of its high stock price by raising money via share dilution.
Pioneer's
outstanding shares ballooned from 115 million shares in 2010 to 170 million by 2017. From 2011 to
2016, Pioneer issued a staggering $5.4 billion in new stock
:
So, as Pioneer issued over $5 billion in stock to produce unprofitable shale oil and gas,
Continental Resources racked up more than $5 billion in debt during the same period. These are
both examples of "Ponzi Finance." Thus, the shale energy industry has been quite creative in
hoodwinking both the shareholder and capital investor.
Now, there is no coincidence that I have focused my research on Pioneer and Continental
Resources.
While Continental is the poster child of what's horribly wrong with the shale
oil industry in the Bakken, Pioneer is a role model for the same sort of insanity and delusional
thinking taking place in the Permian.
Pioneer Spends A Lot More Money With Unsatisfactory Production Results
To be able to understand what is going on in the U.S. shale industry, you have to be clever
enough to ignore the "Techno-jargon" in the press releases and read between the lines. As
mentioned above, Pioneer stated that it was going to add a lot more of its "high-tech" Version 3.0+
completion wells in the second half of 2018 because they were outperforming the older versions.
Well, I hope this is true because Pioneer's first half 2018 production results in the Permian
were quite disappointing compared to the previous period.
If we compare the increase of
Pioneer's shale oil production in the Permian versus its capital expenditures, something must be
seriously wrong
.
First, let's look at a breakdown of Pioneer's Permian energy production from their September
2018 Investor Presentation:
Pioneer's Permian oil and gas production is broken down between its horizontal shale and
vertical convention production. I will only focus on its horizontal shale production as this is
where the majority of their capital expenditures are taking place. The highlighted yellow line
shows Pioneer's horizontal shale oil production in the Permian Basin.
You will notice that Pioneer's shale oil production increased significantly in Q3 & Q4 2017
versus Q1 & Q2 2018. Furthermore, Pioneer's shale gas production surged in Q2 2018 by nearly 50%
(highlighted with a red box) compared to oil production only increasing 5%. That is a serious RED
FLAG for natural gas production to jump that much in one quarter.
Secondly, by comparing the increase of Pioneer's quarterly shale oil production in the Permian
with its capital expenditures, the results are less than satisfactory:
The RED LINE shows the amount of capital expenditures spent each quarter while the OLIVE colored
BARS represent the increase in Permian shale oil production. To simplify the figures in this
chart, I made the following graphic below:
Pioneer spent $1.36 billion in the second half of 2017 to increase its Permian shale oil
production by 30,232 barrels per day (bopd) compared to $1.7 billion in the first half of 2018
which only resulted in an additional 10,832 bopd
. Folks, it seems as if something
seriously went wrong for Pioneer in the Permian as the expenditure of $340 million more CAPEX
resulted in two-thirds less the production growth versus the previous period.
Third, while Pioneer (stock ticker PXD) proudly lists that they are one of the lowest cost
shale producers in the industry, they still suffer from negative free cash flow:
As we can see, Pioneer lists their breakeven oil price at approximately $22, which is downright
hilarious when they spent $132 million more on capital expenditures than the made in cash from
operations:
The public and investors need to understand that "oil breakeven costs" do not include capital
expenditures. And according to Pioneer's Q2 2018 Press Release, the company plans on spending
$3.4 billion on capital expenditures in 2018. The majority of the capital expenditures are spent
on drilling and completing horizontal shale wells.
For example, Pioneer brought on 130 new wells in the first half of 2018 and spent $1.7
billion on CAPEX (capital expenditures) versus 125 wells and $1.36 billion in 2H 2017.
I
have seen estimates that it cost approximately $9 million for Pioneer to drill a horizontal shale
well in the Permian. Thus, the 130 wells cost nearly $1.2 billion.
However, the interesting thing to take note is that Pioneer brought on 125 wells in 2H 2017 to
add 30,000+ barrels of new oil production compared to 130 wells in 1H 2018 that only added 10,000+
barrels.
So, how can Pioneer add five more wells (130 vs. 125) in 1H 2018 to see its oil
production increase a third of what it was in the previous period?
Regardless, the U.S. shale oil industry continues to spend more money than they make from
operations. While energy companies may have enjoyed lower costs when the industry was gutted by
super-low oil prices in 2015 and 2016, it seems as if inflation has made its way back into the
shale patch. Rising energy prices translate to higher costs for the shale energy industry. Rinse
and repeat.
Unfortunately, when the stock markets finally crack, so will energy and commodity prices.
Falling oil prices will cause severe damage to the Shale Industry as it struggles to stay afloat by
selling assets, issuing stock and increasing debt to continue producing unprofitable oil.
I believe the U.S. Shale Oil Industry will suffer catastrophic failure from the impact
of deflationary oil prices along with peaking production.
While U.S. Shale Oil production
has increased exponentially over the past decade, it will likely come down even faster.
"... The fact that the US dollar remains the overwhelming dominant currency for international trade and financial transactions gives Washington extraordinary power over banks and companies in the rest of the world. That's the financial equivalent of a neutron bomb. That might be about to change, though it's by no means a done deal yet. ..."
"... German Foreign Minister Heiko Maas told Handelsblatt, a leading German business daily, "Europe should not allow the U.S. to act over our heads and at our expense. For that reason, it's essential that we strengthen European autonomy by establishing payment channels that are independent of the US, creating a European Monetary Fund and building up an independent SWIFT system ." ..."
"... In addition to the recent statements from the German Foreign Minister, France is discussing expanding the Iran SPV to create a means of insulating the EU economies from illegal extraterritorial sanctions like the secondary sanctions that punish EU companies doing business in Iran by preventing them from using the dollar or doing business in the USA. ..."
"... F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine "New Eastern Outlook." https://journal-neo.org/2018/10/23/the-eu-russia-china-plan-to-avert-iran-oil-sanctions/ ..."
It may well be that the unilateral wrecking ball politics of the Trump Administration are
bringing about a result just opposite from that intended. Washington's decision to abandon the
Iran nuclear agreement and impose severe sanctions on companies trading Iran oil as of 4
November, is creating new channels of cooperation between the EU, Russia, China and Iran and
potentially others. The recent declaration by Brussels officials of creation of an unspecified
Special Purpose Vehicle (SPV) to legally avoid US dollar oil trade and thereby US sanctions,
might potentially spell the beginning of the end of the Dollar System domination of the world
economy.
According to reports from the last bilateral German-Iran talks in Teheran on October 17, the
mechanisms of a so-called Special Purpose Vehicle that would allow Iran to continue to earn
from its oil exports, will begin implementation in the next days. At end of September EU
Foreign Policy chief Federica Mogherini confirmed plans to create such an independent trade
channel, noting, "no sovereign country or organization can accept that somebody else decides
with whom you are allowed to
do trade with ."
The SPV plan is reportedly modelled on the Soviet barter system used during the cold war to
avert US trade sanctions, where Iran oil would be in some manner exchanged for goods without
money. The SPV agreement would reportedly involve the European Union, Iran, China and
Russia.
According to various reports out of the EU the new SPV plan involves a sophisticated barter
system that can avoid US Treasury sanctions. As an example, Iran could ship crude oil to a
French firm, accrue credit via the SPV, much like a bank. That could then be used to pay an
Italian manufacturer for goods shipped the other way, without any funds traversing through
Iranian hands or the normal banking system.A multinational European state-backed financial
intermediary would be set up to handle deals with companies interested in Iran transactions and
with Iranian counter-parties. Any transactions would not be transparent to the US, and would
involve euros and sterling rather than dollars.
It's an extraordinary response to what Washington has called a policy of all-out financial
war against Iran, that includes threats to sanction European central banks and the
Brussels-based SWIFT interbank payments network if they maintain ties to Iran after November 4.
In the post-1945 relations between Western Europe and Washington such aggressive measures have
not been seen before.It's forcing some major rethinking from leading EU policy circles.
New Banking Architecture
The background to the mysterious initiative was presented in June in a report titled,
Europe, Iran and Economic Sovereignty: New Banking Architecture in Response to US Sanctions.
The report was authored by Iranian economist Esfandyar Batmanghelidj and Axel Hellman, a Policy
Fellow at the European Leadership Network (ELN), a London-based policy
think tank .
The report proposes its new architecture should have two key elements. First it will be
based on "gateway banks" designated to act as intermediaries between Iranian and EU commercial
banks tied to the Special Purpose Vehicle. The second element is that it would be overseen by
an EU-Office of Foreign Asset Controls or EU-OFAC, modeled on the same at the US Treasury, but
used for facilitating legal EU-Iran trade, not for blocking it. Their proposed EU-OFAC among
other functions would undertake creating certification mechanisms for due diligence on the
companies doing such trade and "strengthen EU legal protections for entities engaged in Iran
trade and investment ."
The SPV reportedly is based on this plan using designated Gateway Banks, banks in the EU
unaffected by Washington "secondary sanctions," as they do not do business in the US and focus
on business with Iran. They might include select state-owned German Landesbanks, certain Swiss
private banks such as the Europäisch-Iranische Handelsbank (EIH), a European bank
established specifically to engage in trade finance with Iran. In addition, select Iran banks
with offices in the EU could be brought in.
Whatever the final result, it is clear that the bellicose actions of the Trump
Administration against trade with Iran is forcing major countries into cooperation that
ultimately could spell the demise of the dollar hegemony that has allowed a debt-bloated US
Government to finance a de facto global tyranny at the expense of others.
EU-Russia-China
During the recent UN General Assembly in New York, Federica Mogherini said the SPV was
designed to facilitate payments related to Iran's exports – including oil –so long
as the firms involved were carrying out legitimate business under EU law. China and Russia are
also involved in the SPV. Potentially Turkey, India and other countries could later join.
Immediately, as expected, Washington has reacted. At the UN US Secretary of State and former
CIA head Mike Pompeo declared to an Iran opposition meeting that he was "disturbed and indeed
deeply disappointed" by the EU plan. Notably he said ""This is one of the of the most
counterproductive measures imaginable for regional and global peace and security." Presumably
the Washington plan for economic war against Iranis designed to foster regional and global
peace and security?
Non-US SWIFT?
One of the most brutal weapons in the US Treasury financial warfare battery is the ability
to force the Brussels-based SWIFT private interbank clearing system to cut Iran off from using
it. That was done with devastating effect in 2012 when Washington pressured the EU to get SWIFT
compliance, a grave precedent that sent alarm bells off around the world.
The fact that the US dollar remains the overwhelming dominant currency for international
trade and financial transactions gives Washington extraordinary power over banks and companies
in the rest of the world. That's the financial equivalent of a neutron bomb. That might be
about to change, though it's by no means a done deal yet.
In 2015 China unveiled its CIPS or China International Payments System. CIPS was originally
viewed as a future China-based alternative to SWIFT. It would offer clearing and settlement
services for its participants in cross-border RMB payments and trade. Unfortunately, a Chinese
stock market crisis forced Beijing to downscale their plans, though a skeleton of
infrastructure is there.
In another area, since late 2017 Russia and China have discussed possible linking their
bilateral payments systems bypassing the dollar. China's Unionpay system and Russia's domestic
payment system, known as Karta Mir, would be
linked directly .
More recently leading EU policy circles have echoed such ideas, unprecedented in the
post-1944 era. In August, referring to the unilateral US actions to block oil and other trade
with Iran, German Foreign Minister Heiko Maas told Handelsblatt, a leading German business
daily, "Europe should not allow the U.S. to act over our heads and at our expense. For that
reason, it's essential that we strengthen European autonomy by establishing payment channels
that are independent of the US, creating a European Monetary Fund and building up an
independent SWIFT system ."
A Crack in the Dollar Edifice
How far the EU is willing to defy Washington on the issue of trade with Iran is not yet
clear. Most probably Washington via NSA and other means can uncover the trades of the
EU-Iran-Russia-China SPV.
In addition to the recent statements from the German Foreign Minister, France is discussing
expanding the Iran SPV to create a means of insulating the EU economies from illegal
extraterritorial sanctions like the secondary sanctions that punish EU companies doing business
in Iran by preventing them from using the dollar or doing business in the USA. French Foreign
Ministry spokeswoman, Agnes Von der Muhll, stated that in addition to enabling companies to
continue to trade with Iran, that the SPV would, "create an economic sovereignty tool for the
European Union beyond this one case. It is therefore a long-term plan that will protect
European companies in the future from the effect of illegal extraterritorial
sanctions ."
If this will be the case with the emerging EU Special Purpose Vehicle, it will create a
gaping crack in the dollar edifice. Referring to the SPV and its implications, Jarrett Blanc,
former Obama State Department official involved in negotiating the Iran nuclear agreement noted
that, "The payment mechanism move opens the door to a longer-term degradation of US sanctions
power."
At present the EU has displayed effusive rhetoric and loud grumbling against unilateral US
economic warfare and extraterritorial imposition of sanctions such as those against Russia.
Their resolve to potently move to create a genuine alternative to date has been absent. So too
is the case so far in other respects for China and Russia. Will the incredibly crass US
sanctions war on Iran finally spell the beginning of the end of the dollar domination of the
world economy it has held since Bretton Woods in 1945?
My own feeling is that unless the SPV in whatever form utilizes the remarkable technological
advantages of certain of the blockchain or ledger technologies similar to the US-based XRP or
Ripple, that would enable routing payments across borders in a secure and almost instantaneous
way globally, it won't amount to much. It's not that European IT programmers lack the expertise
to develop such, and certainly not the Russians. After all one of the leading blockchain
companies was created by a Russian-born Canadian named Vitalik Buterin. The Russian Duma is
working on new legislation regarding digital currencies, though the Bank of Russia still seems
staunchly opposed. The Peoples' Bank of China is rapidly developing and testing a national
cryptocurrency, ChinaCoin. Blockchain technologies are widely misunderstood, even in government
circles such as the Russian Central Bank that ought to see it is far more than a new "South Sea
bubble." The ability of a state-supervised payments system to move value across borders,
totally encrypted and secure is the only plausible short-term answer to unilateral sanctions
and financial wars until a more civilized order among nations is possible.
"... This is Naked Capitalism fundraising week. 1584 donors have already invested in our efforts to combat corruption and predatory conduct, particularly in the financial realm. Please join us and participate via our donation page , which shows how to give via check, credit card, debit card, or PayPal. Read about why we're doing this fundraiser and what we've accomplished in the last year, and our current goal, more original reporting ..."
"... By Nick Cunningham, freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics based in Pittsburgh, PA. Originally published at OilPrice ..."
"... Evidence of a slowdown in China is also becoming apparent. 3M saw sales dip in China, as did PPG Industries, which makes paint and coatings. "We see other signs of slowing in China; the automotive build rates are down significantly and that has a knock-on effect," Michael Roman, CEO of 3M, said. Sales of cars in China fell 12 percent in September from a year earlier. ..."
"... A strong dollar is another source of trouble for the global economy. Harley-Davidson said that international sales of its motorcycles were hit by a strong greenback. The Federal Reserve has hiked interest rates multiple times in the last year, and is expected to continue on that course. ..."
"... The array of problems raise the prospect of peak industrial earnings . Strong GDP figures and a massive corporate tax cut temporarily juiced profits, and earnings could fall to more pedestrian levels, ..."
"... The housing market is also starting to flash warning signs. For the week ending on October 12, the volume of mortgage applications fell by 7.1 percent . Higher interest rates are clearly being felt in housing, pushing homes out of reach for some prospective buyers. ..."
"... The next steps are unclear. There will be a tension between the supply losses from Iran, which will serve to tighten the oil market, and the supply gains from U.S. shale and Saudi Arabia. The demand side is decidedly more negative, with economic problems potentially forcing a rethink among forecasters. ..."
By Nick Cunningham, freelance writer on oil and gas, renewable energy, climate change,
energy policy and geopolitics based in Pittsburgh, PA. Originally published at OilPrice
Warning signs about the slowing of the global economy continue to crop up, and market
jitters are taking the steam out of oil prices.
U.S. corporate earnings are no longer sky-high, with a range of factors starting to cut into
margins. The U.S.-China trade war has not made headlines in the same way it did a few weeks and
months ago, but the reality is that the impact of tariffs is only growing as costs work their
way through supply chains.
"These trade tensions are coming home to roost and they are impacting the fundamentals of
the market," Tally Leger, equity strategist at OppenheimerFunds,
told Reuters . "Thanks to trade tariffs we are facing the headwinds of a stronger dollar,
higher oil prices, and rising interest rates."
This week, a slew of disappointing earnings came in. Caterpillar said that tariffs cost the
company $40 million in the third quarter, and its share price fell roughly 7.6 percent after it
reported its figures. Poor figures
also came from 3M and Harley-Davidson , prompting selloffs in their stocks as well. 3M said
that tariffs could cost the company $20 million this year, a figure that will balloon to $100
million next year. The results spooked the markets, dragging down equities more broadly. The
S&P machinery index was down more than 4 percent in the last two days.
Evidence of a slowdown in China is also becoming apparent. 3M saw sales dip in China, as
did PPG Industries, which makes paint and coatings. "We see other signs of slowing in China;
the automotive build rates are down significantly and that has a knock-on effect," Michael
Roman, CEO of 3M, said. Sales of cars in China fell 12 percent in September from a year
earlier.
A strong dollar is another source of trouble for the global economy. Harley-Davidson
said that international sales of its motorcycles were hit by a strong greenback. The Federal
Reserve has hiked interest rates multiple times in the last year, and is expected to continue
on that course.
The array of problems raise the prospect of
peak industrial earnings . Strong GDP figures and a massive corporate tax cut temporarily
juiced profits, and earnings could fall to more pedestrian levels, particularly as costs
start to creep up. Some analysts think the fears of weaker earnings are
overblown , but investors have clearly grown worried about the trajectory of the U.S.
economy. And it has been the U.S. that has stood out while much of the rest of the world
already began to lose steam. The U.S. cannot defy gravity forever.
The housing market is also starting to flash warning signs. For the week ending on
October 12, the volume of mortgage applications
fell by 7.1 percent . Higher interest rates are clearly being felt in housing, pushing
homes out of reach for some prospective buyers.
President Trump recognizes the political threat he faces if interest rate hikes spoil the
party. "Every time we do something great, he raises the interest rates," Trump said of Fed
Chairman Jerome Powell in an interview with the
Wall Street Journal on Tuesday. He "almost looks like he's happy raising interest rates."
Trump added that it was "too early to say, but maybe" he regrets nominating Powell. Trump
complained that "Obama had zero interest rates."
The economic
headwinds are deflating the oil market, where supply tightness has dominated attention for
the past few months. Recently, however, some of the supply fears have eased. Saudi Arabia has
vowed to cover any supply gap, should it emerge. Inventories continue to rise. The outages in
Iran are seem to be less of a concern to traders.
Now demand is becoming a concern. As the global economy slows, particularly in China,
consumption could moderate. Brent crude fell by 4 percent on Tuesday amid a broader market
selloff.
"The crude oil price action yesterday was clearly impacted by bearish equity markets,
falling ten-year interest rates, rising gold prices and a clear risk adverse sentiment," said
Bjarne Schieldrop, chief commodities analyst at SEB.
The next steps are unclear. There will be a tension between the supply losses from Iran,
which will serve to tighten the oil market, and the supply gains from U.S. shale and Saudi
Arabia. The demand side is decidedly more negative, with economic problems potentially forcing
a rethink among forecasters.
Oil prices are down a bit, but are still close to multi-year highs. That should leave the
shale industry flush with cash. However, a long list of US shale companies are still struggling
to turn a profit. A new report
from the Institute for Energy Economics and Financial Analysis (IEEFA) and the Sightline
Institute detail the "alarming volumes of red ink" within the shale industry.
"Even after two and a half years of rising oil prices and growing expectations for
improved financial results, a review of 33 publicly traded oil and gas fracking companies shows
the companies posting negative free cash flows through June," the report's authors write.
The 33 small and medium-sized drillers posted a combined $3.9 billion in negative cash flow in
the first half of 2018.
The glaring problem with the poor financial results is that 2018 was supposed to be the year
that the shale industry finally turned a corner. Earlier this year, the International Energy
Agency painted a rosy portrait of US shale,
arguing in a report that "higher prices and operational improvements are putting the US
shale sector on track to achieve positive free cash flow in 2018 for the first time
ever."
The improved outlook came after years of mounting debt and negative cash flow. The IEA
estimates that the US shale industry generated cumulative negative free cash flow of over
$200 billion between 2010 and 2014. The oil market downturn that began in 2014 was supposed to
have changed profligate spending, pushing out inefficient companies and leaving the sector as a
whole much leaner and healthier.
"Current trends suggest that the shale industry as a whole may finally turn a profit in
2018, although downside risks remain," the IEA wrote in July. " Several companies expect
positive free cash flow based on an assumed oil price well below the levels seen so far in 2018
and there are clear indications that bond markets and banks are taking a more positive attitude
to the sector, following encouraging financial results for the first quarter."
But the warning signs
have been clear for some time. The Wall Street Journal reported
in August that the second quarter was a disappointment. The WSJ analyzed 50 companies, finding
that they spent a combined $2 billion more than they generated in the second quarter.
The new report from IEEFA and the Sightline Institute add more detail the industry's recent
performance. Only seven out of the 33 companies analyzed in the report had positive cash flow
in the first half of the year, and the whole group burned through a combined $5 billion in cash
reserves over that time period.
Even more remarkable is the fact that the negative financials come amidst a production boom.
The US continues to break production records week after week, and at over 11 million barrels
per day, the US could soon become the world's largest oil producer. Analysts differ over the
trajectory of shale, but they only argue over how fast output will grow.
Yet, even as drillers extract ever greater volumes of oil from the ground, they still are
not turning a profit. "To outward appearances, the US oil and gas industry is in the midst
of a decade-long boom," IEEFA and the Sightline Institute write in their report. However,
"America's fracking boom has been a world-class bust."
The ongoing struggles raises questions about the long-term. If the industry is still not
profitable – after a decade of drilling, after major efficiency improvements since 2014,
and after a sharp rebound in oil prices – when will it ever be profitable? Is there
something fundamentally problematic about the nature of shale drilling, which suffers from
steep decline rates over relatively short periods of time and requires constant spending and
drilling to maintain?
Third quarter results will start trickling in over the next few days and weeks, which should
provide more clues into the shale industry's health. There is even more pressure on drillers to
post profits because the third quarter saw much higher oil prices.
"Until the industry as a whole improves, producing both sustained profits and
consistently positive cash flows, careful investors would be wise to view fracking companies as
speculative investments," the authors of the report concluded.
"... US tight oil output was about 6200 kb/d in August 2018 according to the EIA, not that the DPR includes oil from the region of tight oil plays that is conventional oil, also it is a model that is not very good so I ignore the DPR ..."
Any guess what the price of crude would be today if we had no fracking in N. America?
Wild guess is all I've got, but I'm saying $142 (and much lower economic growth over the past
9 yrs- maybe even flat averaged for the whole period).
Any other speculations on this?
USA LTO is ~7.5 million bpd. That exceeds global spare capacity over demand as-is today by at
least four times. So if the world was still trying to consume what it is today, we would be
several million short and would have been short by seven figures for several years.
I think we would have found out if there really are any huge but uneconomical fields out
there by now as the panic from that set in a few years ago. A shortage on that scale means
arbitrary prices pending demand cap/destruction.
US tight oil output was about 6200 kb/d in August 2018 according to the EIA, not that the
DPR includes oil from the region of tight oil plays that is conventional oil, also it is a
model that is not very good so I ignore the DPR .
WAG on oil price with zero LTO output is $120/b in 2017$, plus or minus $20/b.
Canada (offshore), Hebron is expected to produce around 150,000 barrels a day, from about
40,000 barrels a day now.
2018-10-22 (The Globe and Mail) It's been one year since ExxonMobil's long-awaited Hebron
platform off the southeast coast of Newfoundland started pumping crude from its first well.
It took four years, $14 billion, 132,000 cubic metres of concrete and a few thousand workers
to bring it online, and so far, it's churning out about 40,000 barrels a day, with the crude
bound for markets in the U.S. Gulf states, Europe and much of eastern North America.
Eventually, Hebron will drill 20 to 30 wells, and is expected to produce around 150,000
barrels a day.
With an expected reserve of 700 million barrels of recoverable crude, the Hebron project is
expected to operate for 30 years. As Newfoundland's fourth offshore platform, it will play a
key role in the province's plan to double overall production to more than 650,000 barrels a
day by 2030.
https://www.theglobeandmail.com/business/article-why-hebron-has-a-leg-up-on-albertas-oil-sands/
Hebron is already at 70 kbpd and has been for a few months. I thinks its expected annual
average for oil only is 135 and it will take a year or so to get there as the coming wells
will be less productive that the first ones. In the mean time the three other platforms are
in decline (Terra Nova was originally due to be taken off line next year – not sure
what the latest thinking is). They dropped about 35 kbpd last year but that may accelerate as
Hibernia is coming off a secondary plateau.
Yeah, that's going to get a lot worse. It's counting Iran production, and not what it can
sell. A lot in floating storage, and being stored close to China and elsewhere. US is the
only one with an increase, and that increase is on a hiatus until new pipelines come on,
regardless of the EIA overstated production numbers. So, we would be short before any demand
increase, or non-OPEC declines. But, never worry, as IEA says peak oil is just a figment of
our imagination
"The Saudi government said it would take another month to complete a full investigation,
which would be overseen by Mohammed.
Mohammad will find that Mohammad had nothing to do with the issue."
Perhaps an anti-KSA Boycott, Divestment, Sanctions (BDS) Movement will get started.
Consumers and competitors might find the idea appealing.
Nice ideas for new KSA flag designs at this link here (I most like the chainsaw instead of
the current sword design- reminds me of Scarface- Mo Bin Clownstick™ is about as
legitimate and sophisticated as a coke runner): https://www.moonofalabama.org/2018/10/saudis-admit-khashoggi-murder.html
The Sultan is playing his hand well (drip drip drip Turkish Int. leaks to the news with an
intensifying puke factor- one recent read that Khashoggi was dismembered alive and dissolved
in acid). Has Mo Bin Clownstick™ met his match? https://lobelog.com/the-geopolitics-of-the-khashoggi-murder/
I can't help but wonder about all those guys he threw into a hotel prison and shook down for
billions of dollars. They can afford a lot of media with the money they had remaining.
From the report: The $3.9 billion in negative cash flows in the first two quarters of 2018 represented an
improvement over the first halves of 2016 and 2017, when red ink totaled $11 billion and $7.2
billion, respectively.
These 33 companies have had positive net income since 2017Q4 and long term debt reached
its peak for these companies in 2018Q1 at 138 billion with a gradual decrease to 126 billion
in 2018Q2. As prices continue to rise debt will gradually be paid down,
When I look at that report I see an improving situation for these companies. I would
prefer it if they broke the data into two groups, oil focused and natural gas focused
companies. There has been a better recovery in oil prices than natural gas prices though it
looks like we might see a spike in natural gas prices if we have a colder than normal
winter.
India's crude oil imports, the average for the first 9 months of 2018 is up +279 kb/day
compared to first 9 months of 2017
Seasonal chart: https://pbs.twimg.com/media/DqGtWDoX4AAYDwJ.jpg
India's crude oil refinery processing, the average for the first 9 months of 2018 is up +231
kb/day compared to first 9 months of 2017
Seasonal chart: https://pbs.twimg.com/media/DqGttFOW4AAr0Uy.jpg
Saudi Arabia spare capacity, there seems to be a consensus that Saudi Arabia can produce 11
million b/day. I guess that producing above that level would be subject to maintenance,
outages and natural decline? (Also I'm guessing that the Khurais field expansion might not be
ready until later in 2019?)
2018-10-22 Saudi Arabia Energy Minister Al Falih speaks to TASS
Saudi Arabia now in October is producing 10.7 million b/day.
And is likely to go up, in the near future, to 11 million b/day on a steady basis.
Our total production capacity is currently 12 million b/day.
And that could be increased to 13 million b/day with an investment of $20 to $30 billion.
Interview with TASS: http://tass.com/economy/1026924
Exxon in Brazil holds potential 41 billion barrels based on preliminary studies
2018-10-18 RIO DE JANEIRO and HOUSTON (Bloomberg) -- In a single year, Exxon Mobil has
gone from being a tiny bit player in Brazil to the second-largest holder of oil exploration
acreage, trailing only state-controlled Petroleo Brasileiro.
The last 24 concessions the U.S. giant bought with its partners may hold 41 billion bbl,
based on preliminary studies, according to Eliane Petersohn, a superintendent at Brazil's
National Petroleum Agency, or ANP. While the existence of the oil still needs to be
confirmed, along with whether its extraction will be cost-effective, it's a huge figure --
almost double Exxon's current reserves.
The Irving, Texas-based company is betting big in particular on Brazil's offshore, where a
single block is currently producing more than all of Colombia and profitability compares to
the best U.S. tight oil, according to Decio Oddone, the head of ANP.
It should take six to eight years for oil to start flowing if economically viable deposits
are discovered, according to ANP.
https://www.worldoil.com/news/2018/10/18/exxon-makes-major-bet-on-brazil-as-petrobras-eases-its-grip
Mike Shellman writes again. No need for me to elaborate much on his persistent and very much needed gentle nudgings about debts
coming due in the U.S. Shale Oil industry.
Ignoring debt doesn't make it go away < cough > Venezuela < cough >
By year end 2019 I firmly believe the US LTO industry will then be paying over $20B annually in interest on long term debt.
...
In other words, at the moment about 29% of total LTO production in America is used just to pay debt interest.
Using its own "breakeven" prices the US shale oil industry will ultimately have to produce 9G BO of oil, as much as it has
already produced in 10 years...just to pay its total long term debt back. Essentially the only chance it has of doing that is
if oil prices go to $125 a barrel, and stays there for a very long time.
"The Saudis say they are countering Iran, which backs the Houthis. But the Houthis are an indigenous group with legitimate grievances,
and the war has only enhanced Iranian influence . As has been obvious for some time, the only solution is a negotiated settlement.
But the Saudis have done their best to sabotage a U.N.-led peace process. Talks planned for Geneva in September failed when Saudi
leaders
would not grant safe travel guarantees to Houthi leaders." Bezos' editorial board at WaPo
---------------
Beneath the largely specious argument that Saudi Arabia has the US by the cojones economically lies the true factor that
has caused the two countries to be glued together.
This factor is the Israeli success in convincing the US government, and more importantly, the American people, that Iran is a
deadly enemy, a menace to the entire world, a reincarnation of Nazi Germany, and that Saudi Arabia, a country dedicated to medieval
methods of operation, is an indispensable ally in a struggle to save the world from Iran. The successful effort to convince us of
the reality of the Iranian menace reflects the previous successful campaign to convince us all that Iraq was also Nazi Germany come
again.
The Iran information operation was probably conceived at the Moshe Dayan Center or some other Israeli think tank. and then passed
on in the form of learned papers and conferences to the Foreign Ministry, the Mossad and the IDF. After adoption as government policy
the Foreign ministry and Zionist organizations closely linked to media ownership in the US and Europe were tasked for dissemination
of the propaganda themes involved. This has been a brilliantly executed plan. The obvious fact that Iran is not presently a threat
to the US has had little effect in countering this propaganda achievement.
Last Saturday morning, the Philadelphia based commentator Michael Smerconish openly asked on his popular talk show why it is that
US policy favors the Sunni Muslims over the Shia. i.e., Saudi Arabia over Iran. To hear that was for me a first. This was an obvious
defiance of the received wisdom of the age. I can only hope that the man does not lose his show.
It is a great irony that the barbaric murder of a personally rather unpleasant but defiant exiled journalist has caused re-examination
of the basis and wisdom of giving strategic protection to a family run dictatorship. pl
Erdogan called the Khashoggi murder brutal and premeditated, but did not reveal any damning audio or video evidence. Elijah Magnier
surmises Erdogan extracted a heavy payment from both the Saudis and the Americans in exchange for his relative silence. We shall
see if the economic pressure on Turkey dissipates in the coming days and weeks.
It appears the central pillar of the Borg creed, so eloquently and precisely described here by Colonel Lang, will survive this
bout of heretical thinking. Will journalists and other members of the press be able to keep challenging the Borg? With Trump so
thoroughly assimilated into the Borg, will the "resistance" keep the issue of Saudi perfidy alive? I have my doubts. The Israeli
information operations machine is a juggernaut. Few have the stamina and will to resist it. But it is a fight worth fighting.
"... It's quite unusual to see such unanimous anti-Saudi reactions from the American political class for the assassination of Mr. Khashoggi – who was just a part-time journalist living in U.S – he was not even an American citizen ..."
"... Oil which is extracted by Fracking method that requires high Oil price above $70 to remain competitive in the global Oil market – by simultaneously sanctioning Iran, Venezuela, and the potential sanction of Saudi Arabia from exporting its Oil, the Trump Administration not only reduces the Global Oil supply which will certainly lead to the rise of Oil price, but also it lowers demand for the US Dollar-Greenback in the global oil market which could lead to subtle but steady devaluation of the US dollar. ..."
"... And perhaps that's what Trump Administration was really aiming for all along; a significant decline of the US Dollar Index and the rise of price of Oil which certainly pleases the American Oil Cartel, though at the expense of Iran, Saudi Arabia and Venezuela – all of which are under some form of U.S sanctions. ..."
"... However gruesome, Mr. Khashoggi's assassination is going to be used by the Trump Administration to help the American Oil Cartel by controlling the Saudi Oil output, hence, to raise the price of Oil and to lower demand for US dollar which is the currency of the global Oil trade. ..."
The overplayed drama of Mr. Khashoggi assassination is going to be used by the American Oil
Cartel to control the Saudis Oil output.
It's quite unusual to see such unanimous anti-Saudi reactions from the American
political class for the assassination of Mr. Khashoggi – who was just a part-time
journalist living in U.S – he was not even an American citizen , so, it's quite
unusual because the same political class remained muted about the Saudis involvement with
ISIS, the bombing and starvation of civilians in Yemen and destruction of Syria, and of
course the Saudis involvement in 9/11 terrorist attack in which 3000 American citizens have
perished in New York, in the heart of America.
So, we must be a bit skeptical about the motive of the American Political Class, as this
again could be just about the OIL Business, but this time around the objective is to help the
American Oil producers as opposed to Oil consumers – with 13.8% of the global daily Oil
production, the US has lately become the world top producer of Crude Oil, albeit, an
expensive Oil which is extracted by Fracking method that requires high Oil price above
$70 to remain competitive in the global Oil market – by simultaneously sanctioning
Iran, Venezuela, and the potential sanction of Saudi Arabia from exporting its Oil, the Trump
Administration not only reduces the Global Oil supply which will certainly lead to the rise
of Oil price, but also it lowers demand for the US Dollar-Greenback in the global oil market
which could lead to subtle but steady devaluation of the US dollar.
And perhaps that's what Trump Administration was really aiming for all along; a
significant decline of the US Dollar Index and the rise of price of Oil which certainly
pleases the American Oil Cartel, though at the expense of Iran, Saudi Arabia and Venezuela
– all of which are under some form of U.S sanctions.
However gruesome, Mr. Khashoggi's assassination is going to be used by the Trump
Administration to help the American Oil Cartel by controlling the Saudi Oil output, hence, to
raise the price of Oil and to lower demand for US dollar which is the currency of the global
Oil trade.
@Alistair History has its weird twists.
Early in WWII FDR was reported that USA oil would be depleted in thirty years time.
So FDR sent Harold L Ickes to Saudi Arabia,where at the end of 1944 the country was made the
USA's main oil supplier.
FDR entertained the then Saud in early 1945 on the cruiser Quincy, laying in the Bitter Lakes
near the Suez Canal.
This Saud and his entourage had never seen a ship before, in any case had never been on board
such a ship.
In his last speech to Congress, seated, FDR did not follow what had been written for him,
but remarked 'that ten minutes with Saud taught him more about zionism than hundreds of
letters of USA rabbi's.
These words do not seem to be in the official record, but one of the speech writers,
Sherwood, quotes them in his book.
Robert E. Sherwood, 'Roosevelt und Hopkins', 1950, Hamburg (Roosevelt and Hopkins, New York,
1948)
If FDR also said to Congress that he would limit jewish migration to Palestine, do not now
remember, but the intention existed.
A few weeks later FDR died, Sherwood comments on on some curious aspects of FDR's death, such
as that the body was cremated in or near Warm Springs, and that the USA people were never
informed that the coffin going from Warm Springs to Washington just contained an urn with
ashes.
At present the USA does not seem to need Saudi oil.
If this causes the asserted cooperation between Saudi Arabia and Israel ?
@Harris ChandlerNow it has made alliances with Israel and between them the tail wags
the dog
The Saudi Royal family and the governments of Israel have always been in cahoots. They
both despise and fear secular governments that are not under their own control in the Middle
East. Witness the fear and dread of both of them of president Nasser in the 1960′s, for
example.
Removing Saudi's contribution of @8.5Mbbls/day from the global oil market would be a blow
that Western countries might not survive.
Looks like somebody in the West want MBS out.
Notable quotes:
"... be honest -- this all seems a bit too convenient for Erdogan, and at a too convenient time. ..."
"... at the moment I cannot believe someone has so much luck like Erdogan has. He stands to gain in the short term, in the long term, tactically and (geo)strategically. From just a stroke of luck, that came to his country. That came to him, for which he didn't even need to get out of his chair? ..."
"... Maybe we're asking the wrong questions. Are factions within the CIA at work, setting up elaborate plans with the ambitious Erdogan to get rid of Trump and MbS, for the sake of what... strategically increasingly important depleting oil fields? ... a better position to strangle Iran? ..."
"... Erdogan doesn't want a Kurdistan martyr in Khasshogi either. He wants to totally controlled-dissent ..."
"... This total psyop, and every piece of 'evidence' in it, is coming from Ankara Intel operatives! ..."
"... Hey, they had two weeks of preparation. You can make a full length Blair Witchcraft in two weeks. ..."
"... Cui bono? Erdogan, Iran Oil transit and EU/RU weapons systems dealers. That's why Germany has jumped on the bandwagon, lol. Expect the whole krew to toe the line, and Putin left with a jumbled mess on the chessboard. ..."
"... Khashoggi has ties to Lockheed Martin through his late uncle Adnan Khashoggi, who used to be one of Saudi Arabia's most powerful weapons dealers. MBS is considering buying Russias S-400 instead of Lockheed Martins 15 billion THADD. Interesting fact but unlikely to be important IMO ..."
"... So regardless of the truth of Khashoggis disappearance there is a Deep State operation in place, the evidence is in the media saturation and persistence and bipartisan support. Its purpose may be as simple as coercing MBS to buy more weapons. Perhaps it may even be that a replacement for MBS even more pro-Israel has been found. ..."
"... Khashoggi is news, because they say its news. They make it news. Why? BC it fits an agenda. Somebody wants MBS out. ..."
"... The bigger play here is bringing turkey back into the western fold. Lose turkey you lose the whole middle east. also, a secondary play - guardianship of Mecca. SA an unreliable partner under mbs. ..."
Khashoggi's murder has transcended questions of foreign policy shaped by values of
democracy, free speech, and due process. The Khashoggi killing raises questions of cold,
unblinking realpolitik.
Three weeks into this affair and with the overwhelming evidence from the Turkish inquiry
and intelligence from US and British services, world leaders have only one question to ask
themselves: is Saudi Arabia safe in the crown prince's hands?
The kingdom is not Libya under Gaddafi. Nor is it Syria under Bashar al-Assad. It is the
world's largest oil producer. It is the region's richest nation.
For better or worse (mainly worse), it is the key Arab state. In the wrong hands, Saudi
Arabia has already proved that it can determine the fate of presidents in Egypt, kidnap
prime ministers from Lebanon, attempt coups in Qatar and, when that fails, blockade it. It
can start wars in Yemen.
The man who runs such a country is therefore a vital strategic Western interest. It is
important that he is mentally stable.
Reuters How the man behind Khashoggi murder ran the killing via Skype
He ran social media for Saudi Arabia's crown prince. He masterminded the arrest of
hundreds of his country's elite. He detained a Lebanese prime minister. And, according to
two intelligence sources, he ran journalist Jamal Khashoggi's brutal killing at the Saudi
consulate in Istanbul by giving orders over Skype.
Posted by: b | Oct 22, 2018 2:45:08 PM | 47
So this guy allegedly working for Public Relations (social media) & security (managing
lists with arrests) for Crown Prince MbS was making absolutely sure that everyone would be
able to follow his actions (attributed to MbS of course). We (the people) were getting fed
minute details of suspects and treatment (during/after the coop in Saudi Arabia) even from the
Alex Jones conspiracy show (been publicly ousted as Fake-News and Mossad ops though since he
was attributing Las Vegas massacre to either MbS or rivals that tried to allegedly assassinate
MbS in Vegas hinting at Iran )
Lo and behold! Las Vegas shooting October 1st 2017. Khassogi murder October 1st
2018! .
Both allegedly MbS involved! Ain't these all suspicious? There is no heaven or hell there is only the.... (let me hear it - The Israeli Intel
Services Sing-Along) sing it with me.... (come on)
Obamabots trying to reverse
history will find it hard to do. That they're trying is significant.
I've seen a few reports musing SKYPE was used during the brief interrogation. If true,
then all advanced intel services will know its content.
Peter AU 1 @55--
Yes, I was aware of that. TASS reports : "Deputy Foreign Minister Mikhail Bogdanov told reporters on Monday.
"'Yes, we [had] visits, our interministerial top-level delegation went, there were
meetings,' the diplomat said in response to the question about whether Russia still plans to
attend the summit in the wake of Khashoggi's murder."
Russian and Saudi cooperation in the energy field trumps other events. China will also
attend.
I don't know.
I'm having these waves of suspicions. I wouldn't put the current narrative past MbS at all,
that's for sure. And he deserves everything he currently gets -- foremost over Yemen. But -- be honest -- this all seems a bit too convenient for Erdogan, and at a too convenient
time. Id est, a too in convenient time for his opponent, that was until two weeks ago
holding Erdogan's ambitious head in a bucket of water -- Trump. With the midterms only a few weeks away, look who's holding whose head in that bucket, who
is holding whose feet to the fire.
If this is truly a coincidence, I'm beginning to believe Allah is Turkish. But at the moment I cannot believe someone has so much luck like Erdogan has. He stands to
gain in the short term, in the long term, tactically and (geo)strategically. From just a
stroke of luck, that came to his country. That came to him, for which he didn't even need to
get out of his chair?
Maybe we're asking the wrong questions. Are factions within the CIA at work, setting
up elaborate plans with the ambitious Erdogan to get rid of Trump and MbS, for the
sake of what... strategically increasingly important depleting oil fields? ... a better
position to strangle Iran?
Erdogan wants to be New Caliph. That's all this is. Caliphate wars. MbS is Erdogan's blood
enemy. MbS-IL-US is shading the New Caliphate! Duhh! Erdogan doesn't want a Kurdistan martyr
in Khasshogi either. He wants to totally controlled-dissent The Parable of a Man Walked Into an
Embassy New Revelations. Erdogan wants to be supplicated by US and IL for His permission to
transit Syria and Kurdistan. Erdogan wants to be Putin's go-to guy in Ankara for Assad.
This
total psyop, and every piece of 'evidence' in it, is coming from Ankara Intel operatives! Khashoggi could has as easily been re-dressed in a thwab, then frog-marched under the cameras
into the waiting Mercedes. His discarded clothes could have been paraded in front of Ankara's
street cameras by Turks.
Hey, they had two weeks of preparation. You can make a full length Blair Witchcraft in
two weeks.
Cui bono? Erdogan, Iran Oil transit and EU/RU weapons systems dealers. That's why
Germany has jumped on the bandwagon, lol. Expect the whole krew to toe the line, and Putin
left with a jumbled mess on the chessboard.
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SCHEDULED TONIGHT!
It's all pure stress-positioning foreplay! JustGoVote!
Scotch Bingeington , Oct 22, 2018 5:00:53 PM |
link
B, amazing work again, thrilling to read. Though this is a yet unfolding story, you manage to
write about it in a profound way.
Regarding the manner in which MbS operates here and subsequently reacts towards other
people's reactions is certainly telling, at least to me. First off, the coercion –
"come back or else " – flat out. The ruthlessness vis-à-vis the victim, the
complete disregard for that individual's life. The crassness of the methods applied. The
carelessness concerning the risks and the half-assed way in which this exercise, by and
large, was carried out. Once word got out, being utterly taken by surprise that this murder
should draw so much attention and should shock and outrage people – like, at all!
Followed by, of course, a sudden switch from ever-so-charming to furious rage.
That's textbook psychopathic behavior. MbS is a psychopath. I don't mean that as an insult,
but as the descriptive term and category that it is. It was already palpable in all the other
incidents, which was duly pointed out here by people at the Moon. To me, it's also in his
eyes. But the thing is, as such, MbS is a befitting representation of his country. The
Kingdom of Saudi Arabia, the way that it works, how it's organized, its history, its outlook
on the world – it's the equivalent among states of a psychopath. I certainly agree, the
sooner MbS gets kicked off the stage, the better for them and for us. But he'll be replaced
and SA will still be the equivalent among states of a psychopath – and act accordingly.
There's much more to be done than just put an end to MbS' games. In that vein, I'd be
appalled if Russia were to seriously consider sucking up to SA should they break away from
the US orbit.
On another aspect: I don't really see how this would seriously upset Trump. Sure, it's a huge
challenge and a lot of accommodating will have to be done, which is always annoying. But if
Congress were to take action, why shouldn't he give in and play along?
At long last, Valdai Club questions about Saudi-Russian relations were added to transcript.
Here is the relevant passage, which mostly repeats what was posted from news stories:
Putin: "If someone understands it and believes that a murder has been committed, then I
hope that some evidence will be presented and we will adopt relevant decisions based on this
evidence. This gives me a pretext to say something else.
"From time to time, there are steps taken against Russia and even sanctions are imposed,
as I have repeatedly said, on the basis of flimsy excuses and pretexts. They groundlessly
claim that we have allegedly used chemical weapons, even though, incidentally, we have
destroyed our chemical weapons, while the United States has failed to do so despite the
obligation to that effect it assumed.
"So, there is no proof against Russia but steps are being taken. According to claims, the
murder was committed in Istanbul, but no steps are being taken.
"Uniform approaches to problems of this kind should be sorted. To reiterate: Our policy
towards Saudi Arabia has evolved over a long period of time, over many years. Of course, it
is a misfortune that a man has disappeared, but we must understand what has really
happened."
The policy investment "over many years" isn't one Russia will suddenly jettison. Yemen is
obviously a much greater tragedy but Russian-Saudi relations haven't suffered -- Geopolitics
creates strange bed-fellows. Russia's international relations are built upon fundamental
principles of International Law of which the sanctity of Sovereignty reigns supreme. As much
as we may dislike it, the Khashoggi Affair falls within the realm of an internal Saudi affair
although it occurred in Turkey; thus, it's up to Saudis to solve. Putin's pointing to the
Double Standards relates to that reality. Would Russia sell weapons for Saudi to use on
Yemen? I have no idea, although I'd like to think it wouldn't. It's quite possible some new
inroads have opened for Russian diplomacy, but they remain hidden from public.
Khashoggi has ties to Lockheed Martin through his late uncle Adnan Khashoggi, who used to
be one of Saudi Arabia's most powerful weapons dealers. MBS is considering buying Russias
S-400 instead of Lockheed Martins 15 billion THADD. Interesting fact but unlikely to be
important IMO
This Khashoggi story never lasts more than a week in MSM unless there is a psyops
operation in place by the Deep State. Media saturation and persistence is the key to any
operation. Inconvenient truths are reported and then dropped and forgotten. Lies without
evidence are repeated constantly until they are accepted as truths, in some cases
inconsequential truths that are convenient serve the same purpose
So regardless of the truth of Khashoggis disappearance there is a Deep State operation
in place, the evidence is in the media saturation and persistence and bipartisan support. Its
purpose may be as simple as coercing MBS to buy more weapons. Perhaps it may even be that a
replacement for MBS even more pro-Israel has been found. Israels influence on the media
is not neglible. This saturation coverage does not happen without them supporting it or at
least not using their influence to suppress it Another more disturbing possibility should MBS
stand his ground , is conditioning the people to accept MBS as the new OBL and Saudis
Wahhabis as the new AQ and repeating history.
There simply is no way to know. Just have to watch and see but whatever it is probably
wont be good
The Saudi bmobing - with US bmobs - of the Yemeni School Bus Full of Babies was truly and
completely horrifying - rotten and utterly detestable by anyone's standards (except for
Trump, Hillary, Bill, Bolton, Graham, Biden, All the Bush's, Rick Scott and etc.)
And Newsworthy. But it was, instead, crickets chirping in that deep east Texas
nighttime.
Khashoggi is news, because they say its news. They make it news. Why? BC it fits an
agenda. Somebody wants MBS out.
The bigger play here is bringing turkey back into the western fold. Lose turkey you lose
the whole middle east. also, a secondary play - guardianship of Mecca. SA an unreliable
partner under mbs.
In excerpts from the interview released by
CNN , Jones asked Kushner whether it is wise to trust MbS to oversee Saudi Arabia's
investigation, given that he's also the prime suspect. Kushner, who, in the absence of a US
ambassador to KSA, has been handling the kingdom's relationship with the Trump administration
directly via his friendship with MbS, said the US will examine facts from "multiple
places."
Jones: Do you trust the Saudis to investigate themselves?
Kushner: We're getting facts in from multiple places. Once those facts come in, the
Secretary of State will work with our national security team to help us determine what we
want to believe, and what we think is credible, and what we think is not credible.
Jones: Do you see anything that seems deceptive.
Kushner: I see things that seem deceptive every day I see them in the Middle East and in
Washington. We have our eyes wide open. The president is looking out for America's strategic
interests...the president is fully committed to doing that."
Given their close relationship, media reports have implied that Kushner has been acting as
an unofficial liaison of sorts to MbS since the crisis began (it has also been reported that
the Crown Prince initially didn't understand why the backlash to Khashoggi's murder had been so
intense). In light of this, Jones asked Kushner what advice, if any, he has given the Saudi
royal during their conversations (to be sure, MbS has also spoken with President Trump directly
on the phone). In a story published over the weekend,
the Washington Post reported that Trump has privately expressed doubts about MbS's story,
and has also lamented his close ties with Kushner, fearing they could be a liability. But
during a phone interview, the president was somewhat more sanguine, pointing out that both
Kushner and MbS are relatively young for the amount of power they wield.
"They're two young guys. Jared doesn't know him well or anything. They are just two young
people. They are the same age. They like each other, I believe," Trump said.
Kushner's interview followed
reports published Sunday night that MbS tried to convince Khashoggi to return to Riyadh
during a brief phone call with the journalist after he had been detained at the Saudi consulate
Khashoggi refused, reportedly because he feared that he would be killed, and was subsequently
killed anyway. Adding another macabre twist to the saga of Khashoggi's murder and
dismemberment, Surveillance footage released Monday showed one of the Saudi operatives leaving
the consulate wearing Khashoggi's clothes with the suspected intent of serving as
a "decoy" to bolster the kingdom's claims that Khashoggi had left after receiving his
papers. It was later reported that Turkish investigators had found an abandoned car that once
belonged to the Saudi consulate.
We imagine we'll be hearing more about these strange developments on Tuesday, when Turkish
President Erdogan is expected to deliver a report on the killings.
Why is "everyone" so ******* upset about the Muslim Brothernood, green-card holding
journalist being offed? I mean, folks in the M.E. are murdered all the ******* time.
Journalists are not immune. Especially ones that are actually agitators that write ****. This
whole thing is ********. How do I know? Just look at the reactions. Media everywhere to level
11.. What about Stormy Daniels? The Playboy bunny? Ford? Scandal # 42, 43, 44, 45, 46, 47 ,
etc??
Saudis murder folks . Turkey murders folks. Turkey crushed a coup a couple years ago and
60K folks disappeared. I don't remember the US media demanding Obama " do something" about
Turkey immediately, do you? Seriously.
true. And I'm sure the CIA gets in on some very disgusting killings as well. Along with
the Mossad and Mi6 (2 groups that get little attention but should).
" Jones: Do you trust the Saudis to investigate themselves?"
"Kushner: We're getting facts in from multiple places. Once those facts come in, the
Secretary of State will work with our national security team to help us determine what we
want to believe , and what we think is credible, and what we think is not credible."
Jones: Do you see anything that seems deceptive.
Kushner:
NO
I (bullshitbullshitbullshit) see things that seem deceptive every day I see them in
the Middle East and in Washington. We have our eyes wide open (bullshitbullshitbullshit.
The president is looking out for America's strategic interests...the president is fully
committed to hanging me out to dry . After that - ho noze bubelah ."
(Can I sukie suckie now black master?
FIFT
All will be well when the head honcho sends this YidTwat to be Royal Commissioner in
either Greenlnd or Antarctica.
Have you heard the latest about the Peace Deal of All Times Kushner has been working on?
And going to deliver any day now... soon...really soon.
After all this time what it comes down to is a leveraged buyout proposal. The buyout is
cash for Palestinians to give in to what Israel's far right wants, give up their land and
get the hell out of Dodge if they can't live with the remnants.. The leverage is Trump
trying to starve them out and Kushner's friends in the IDF Palace Guard at the ready to
pile drive anyone who resists.
" All this nonsense depends on the largesse of Saudi Arabia – whose bungling crown
prince appears to be arguing with his kingly father, who does not want to abandon the
original Saudi initiative for a Palestinian state with Jerusalem as its capital –
"
Jared Kushner was communicating with Saudi Crown Prince Mohammed bin Salman (MBS)
prior to and after the Saudis brutally murdered Washington-based journalist Jamal
Khashoggi
Wayne Madsen - the author of the above - also reckons it was Kushner that supplied the
Saudi Prince HIT LIST to MbS a few months back - to clear the deck for "closer
co-operation" with ISISrael
Unfortunately, the only crime here is that the Turks have no decent respect for the
consular as sovereign territory, thus they are revoking Saudi rights and are operating as
an act of territorial aggression as the US has done to the Russians. Civility is braking
down and one has to ask one's self, for who's benefit.. The Turks are not going to benefit.
Khashoggi was going to die one way or another, so he made a show of it.. Spy vs. spy.
The USA has in the past just 'droned' them (as Hilterary was eager to reveal).
Perhaps you missed the regime change that happened last year, a globally significant
event, by the way.
Khashoggi was on the wrong side of that, and has stayed away from SA ever since, sniping
from the sidelines. MBS has lots of reasons not to like him.
However, his power base was removed when MBS hung his mates up by their heels in the
Hilton Hotel. He was not worth bothering with. So why was he killed then?
Possibly, he was not killed, only used as a foil to bring down hell fire and damnation
on MBS. He probably walked out the back, just as the SA said when this first came out. Now
Marketwatch has a story saying a man dressed in Khashogggi's "still warm clothes" was
photographed going into the Blue Mosque. Yeah, right:
Yes! And tying it together with the Las Vegas Mandalay Bay-Harvest Festival shooting,
and the video of the LV SWAT team escorting a person who looked like MBS through a casino
suggests that there was a 'failed' assassination attempt.
And the fact that Prince Al Talweed, a co-owner of top floors of Manadaly Bay with Bill
Gates, had tweeted his loathing of Trump...
The "Crown" (British or SA or many others) is inviolable. They take threats to
sovereignty seriously unlike Americans who have outsourced Monetary Sovereignty to their
Banks, Military and Economic Sovereignty to their Corporations.
This kid's a ****. A real Chabad Lubavitch **** with a criminal father who I am going to
hazard has never worked a hard day in his life. (Both father and son)
Remember Dan Aykroyd from "Trading Places"? Kushner is like that, only not funny. And
jewish.
Kushner was parachuted into the White House on the sole basis of his being the
President's son-in-law.
He quickly ascended to the top rungs of power in our Nation even receiving Top Security
Clearance and has been privy to our most tightly guarded secrets ever since.
This little ********** has turned out to be a tremendous thorn in our side facilitated
by the President's pleasure.
Is everyone blind? This ******* nobody is practically running the whole show in the
Middle East and with what credentials?
He's a power *** with vast connections, having been chosen to be the front man for the
destruction of America as we know it.
Exactly, plus his arrogance and stupidity has made the middle east even more fraught
with problems.
Just like Trump moving the embassy to Jerusalem; this has caused nothing but
problems.
Going in with no background in the middle east, without knowing anything except what was
told to him in Hebrew school is a recipe for disaster which is unfolding before our
eyes.
Skinny. Stiff. Plastic. Rather defiant, somewhat snotty. I have no reason to decide
whether I like him or not but Kushner comes across to me as somebody I would not trust as
far as I could throw him. Mind you that's quite a distance since I think he probably weighs
about 109 lb.
The CNN interviewer is Van Jones.
This is the same Van Jones who was Obama's "Green Jobs Czar" and was forced to resign his
position in 2009 because of his radical left wing background.
What the hell is Kushner doing in a position of power in the White House, what are his
qualifications for whatever post he holds ?
What the hell is anyone doing dealing with these animals who dress up in dresses? They
behead people in public squares, mutilate people, oppress woman, kill homos, etc. Real
crazy degenerates that got ahold of lots of money via their oil.
Why is "everyone" so ******* upset about the Muslim Brothernood, green-card holding
journalist being offed? I mean, folks in the M.E. are murdered all the ******* time.
Journalists are not immune. Especially ones that are actually agitators that write ****.
This whole thing is ********. How do I know? Just look at the reactions. Media everywhere
to level 11.. What about Stormy Daniels? The Playboy bunny? Ford? Scandal # 42, 43, 44, 45,
46, 47 , etc??
Saudis murder folks . Turkey murders folks. Turkey crushed a coup a couple years ago and
60K folks disappeared. I don't remember the US media demanding Obama " do something" about
Turkey immediately, do you? Seriously.
true. And I'm sure the CIA gets in on some very disgusting killings as well. Along with
the Mossad and Mi6 (2 groups that get little attention but should).
" Jones: Do you trust the Saudis to investigate themselves?"
"Kushner: We're getting facts in from multiple places. Once those facts come in, the
Secretary of State will work with our national security team to help us determine what
we want to believe , and what we think is credible, and what we think is not
credible."
Jones: Do you see anything that seems deceptive.
Kushner:
NO
I (bullshitbullshitbullshit) see things that seem deceptive every day I see them in
the Middle East and in Washington. We have our eyes wide open
(bullshitbullshitbullshit. The president is looking out for America's strategic
interests...the president is fully committed to hanging me out to dry . After that - ho
noze bubelah ."
(Can I sukie suckie now black master?
FIFT
All will be well when the head honcho sends this YidTwat to be Royal Commissioner in
either Greenlnd or Antarctica.
Have you heard the latest about the Peace Deal of All Times Kushner has been working on?
And going to deliver any day now... soon...really soon.
After all this time what it comes down to is a leveraged buyout proposal. The buyout is
cash for Palestinians to give in to what Israel's far right wants, give up their land and
get the hell out of Dodge if they can't live with the remnants.. The leverage is Trump
trying to starve them out and Kushner's friends in the IDF Palace Guard at the ready to
pile drive anyone who resists.
" All this nonsense depends on the largesse of Saudi Arabia – whose bungling crown
prince appears to be arguing with his kingly father, who does not want to abandon the
original Saudi initiative for a Palestinian state with Jerusalem as its capital –
"
Jared Kushner was communicating with Saudi Crown Prince Mohammed bin Salman (MBS)
prior to and after the Saudis brutally murdered Washington-based journalist Jamal
Khashoggi
Wayne Madsen - the author of the above - also reckons it was Kushner that supplied the
Saudi Prince HIT LIST to MbS a few months back - to clear the deck for "closer
co-operation" with ISISrael
Unfortunately, the only crime here is that the Turks have no decent respect for the
consular as sovereign territory, thus they are revoking Saudi rights and are operating as
an act of territorial aggression as the US has done to the Russians. Civility is braking
down and one has to ask one's self, for who's benefit.. The Turks are not going to benefit.
Khashoggi was going to die one way or another, so he made a show of it.. Spy vs. spy.
The USA has in the past just 'droned' them (as Hilterary was eager to reveal).
lose
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I care because I am hoping this assassination will destroy our 80 year old relationship
with The House of Saud which is the epicenter of Wahhabism that brought us 9/11, the ISIS
headchoppers and much more.
Perhaps you missed the regime change that happened last year, a globally significant
event, by the way.
Khashoggi was on the wrong side of that, and has stayed away from SA ever since, sniping
from the sidelines. MBS has lots of reasons not to like him.
However, his power base was removed when MBS hung his mates up by their heels in the
Hilton Hotel. He was not worth bothering with. So why was he killed then?
Possibly, he was not killed, only used as a foil to bring down hell fire and damnation
on MBS. He probably walked out the back, just as the SA said when this first came out. Now
Marketwatch has a story saying a man dressed in Khashogggi's "still warm clothes" was
photographed going into the Blue Mosque. Yeah, right:
Yes! And tying it together with the Las Vegas Mandalay Bay-Harvest Festival shooting,
and the video of the LV SWAT team escorting a person who looked like MBS through a casino
suggests that there was a 'failed' assassination attempt.
And the fact that Prince Al Talweed, a co-owner of top floors of Manadaly Bay with Bill
Gates, had tweeted his loathing of Trump...
The "Crown" (British or SA or many others) is inviolable. They take threats to
sovereignty seriously unlike Americans who have outsourced Monetary Sovereignty to their
Banks, Military and Economic Sovereignty to their Corporations.
This kid's a ****. A real Chabad Lubavitch **** with a criminal father who I am going to
hazard has never worked a hard day in his life. (Both father and son)
Remember Dan Aykroyd from "Trading Places"? Kushner is like that, only not funny. And
jewish.
Kushner was parachuted into the White House on the sole basis of his being the
President's son-in-law.
He quickly ascended to the top rungs of power in our Nation even receiving Top Security
Clearance and has been privy to our most tightly guarded secrets ever since.
This little ********** has turned out to be a tremendous thorn in our side facilitated
by the President's pleasure.
Is everyone blind? This ******* nobody is practically running the whole show in the
Middle East and with what credentials?
He's a power *** with vast connections, having been chosen to be the front man for the
destruction of America as we know it.
Exactly, plus his arrogance and stupidity has made the middle east even more fraught
with problems.
Just like Trump moving the embassy to Jerusalem; this has caused nothing but
problems.
Going in with no background in the middle east, without knowing anything except what was
told to him in Hebrew school is a recipe for disaster which is unfolding before our
eyes.
There have been so many attempts at selling advertising with this article the author
says, "to deliver a report on the killings." I thought they only chopped up one cash-hoggi
now they are trying to turn it into two. What does the author think it was cactus they
killed?
Skinny. Stiff. Plastic. Rather defiant, somewhat snotty. I have no reason to decide
whether I like him or not but Kushner comes across to me as somebody I would not trust as
far as I could throw him. Mind you that's quite a distance since I think he probably weighs
about 109 lb.
G M T Detect
languageAfrikaansAlbanianAmharicArabicArmenianAzerbaijaniBasqueBelarusianBengaliBosnianBulgarianCatalanCebuanoChichewaChinese
(Simplified)Chinese
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It was at least fifty million $1 votes from Israel laundered through Trump supporter and
uber-Zionist Sheldon Adelson's casinos in Macau. Steve Wynn was likely in on that action
too.
Until America wakes up and gets dirty money out of your "(s)elections" you will be
hostage to foreign powers.
No one asked Kavanaugh if he thought "Citizens United" was settled law.
IDK if MbS had anything to do with the confrontation, or it was some 9th cousin royal
guard attempting to give Khashoggi an offer he couldn't refuse. Nobody will ever know what
happened. Just another MSM Piece Beyond Understanding.
Remember though, we *do know* that Obama and Rodham and their WH crew sat there in the
White House Situation Room, watching *live satellite feed* of Ghaddafi's final movements, the
half-meter long bayonet stabbing bloody anal rape to death.
Then Rodham sat there, right afterward, drenched in dewey musk, chortling a paraphrase
from Caesar, "We came, we saw, he died! CAWW, CAWW, CAWW!" Monsters!!
Then everyone forgot about it, like it never happened! Poor! The Lion of Africa, like the
Lion of Panjshir, just another hot blip on Deep State's radar. Same sh*t, different day.
Fahged abahd et.
So why is Khashoggi, a non-entity, *still in the media cross-hairs?!* Pre-election psyop,
and extortion. Saudis, Chinese and Russians want to dump their $Ts in junk 1.88% US
Treasuries. That will implode the US budget deficit, and the SS and MC Trust Funds as 'buyers
of last resort'.
What might Erdogan want out of this gift that has fallen into his lap?
Gulen out of the the US and into his hands.
CIA won't do that, but Gulen is what Erdogan wants from US. He gave up the "Pastor"
without getting anything.
Pompeo tried to pressure him over S-400s. That was laughed off by Ankara.
Erdogan has two big worries: Kurds and Gulen.
He has many desires (dreams, delusions).
But he knows the forces internally that threaten his existence and success as ruler. Already,
the Muslim Brotherhood has suffered great losses.
This noose around MBS's neck that Erdogan may be holding is leverage against the CIA
specifically. It was information handed by Jared Kushner to MBS that led to this and others
being liquidated by the Saudis. Erdogan might be able to tie it all together. That would be
leverage the US cannot ignore. The entire anti-Iran strategy depends on Jared-Bibi and
MBS.
IDK if MbS had anything to do with the confrontation, or it was some 9th cousin royal
guard attempting to give Khashoggi an offer he couldn't refuse. Nobody will ever know what
happened. Just another MSM Piece Beyond Understanding.
Remember though, we *do know* that Obama and Rodham and their WH crew sat there in the
White House Situation Room, watching *live satellite feed* of Ghaddafi's final movements, the
half-meter long bayonet stabbing bloody anal rape to death.
Then Rodham sat there, right afterward, drenched in dewey musk, chortling a paraphrase
from Caesar, "We came, we saw, he died! CAWW, CAWW, CAWW!" Monsters!!
Then everyone forgot about it, like it never happened! Poor! The Lion of Africa, like the
Lion of Panjshir, just another hot blip on Deep State's radar. Same sh*t, different day.
Fahged abahd et.
So why is Khashoggi, a non-entity, *still in the media cross-hairs?!* Pre-election psyop,
and extortion. Saudis, Chinese and Russians want to dump their $Ts in junk 1.88% US
Treasuries. That will implode the US budget deficit, and the SS and MC Trust Funds as 'buyers
of last resort'.
@ 16 "The whole mega-chart of crossed alliances has become so confused nobody knows what is
going on, who to support, who to trust to have an impact, what to do, etc."
Keeping in mind the anti Israel faction helps keep track of, or make sense of alliances.
Syria, Turkey, Iran, Qatar, Jordan and Kuwait headed that way. These are forming into a
faction of strange bedfellows with the US moving their embassy to Jerusalem and the other
Trump machinations with Israel being the catalyst.
Undisputed :::
Saudi Arabia Wahabbism is a leader of Mideast mayhem.
USA supports Saudi Arabia in the ongoing mayhem
So does Canada.
So does Britain.
and France.
Kashoggi a Washington Post reporter.
Washington Post big disseminator of lies.
Same with the New York Times
Both WP and NYT hid the Saudi USA CANADA BRITAIN FRENCH supported aggression on Yemen.
But this is WP and NYT opportunity to disparage Trump.
Therefore it is big "nooze." To be sensationalized. however.
Nothing new to report at all. Same old.
But shame on the alt for sucking along. Stupid is as stupid does.
One WP "journalist" a bigget casualty ? But, hundreds of thousands Syrian and Yemen
casualties? No pro blem for NYT and WP s--t heds.
Grow up, world.
Details continue to spill out. Now, interior royal princes are reported disturbed and trying
to contact the King, but prevented by MbS. A General Mutrib, very close to MbS, one of his
seven bodyguards at the Consulate,left Istanbul before the others with a large bag while the
others celebrated at a dinner re "mission accomplished."
The latest WHAAT? out of me is that MbS spoke to Khashoggi by telephone moments before he
was murdered. If true, this directly shows the lies the man is capable of. Maybe the US
senators calling MbS a liar know something we don't. Jared is in the doghouse for his
complicity in enabling MbS to deal with his critics.
Trump is floundering from "credible" to "deception," as he floundered re Kavanaugh ("both
seemed convincing," he said after the late September hearing with Christine Ford) before
wiping her up one side and down the other with demonizing a few days later. I think the
damage problem here for the midterms is significant, and Trump will not retain the House and
perhaps not the Senate either.
Why this case should rivet so much attention whereas deaths of 40 kids on a bus, then 17
more a few days ago, etc. etc. do not, seems a case of gag me, where is my vomit trough taken
a step too far, possibly because US friends of Khashoggi in the government, CIA, MSM got
upset. And let's not forget the rumor Khash was in on a CIA plot to establish a commission to
run SA (one of a three member board) in the interests of the US. Could add to why MbS was
keen on shutting him up.
I wouldn't think the detail of the fake person in his clothes leaving the back door is
"gratuitous, unneeded" in that it shows once again the lies spun from the Saudis in their
desperate scrabbling as this thing falls apart.
The Turkish government's vacillations and zigzagging in the face of the country's economic
woes reflect how squeezed it has become economically and politically and how concerned it is
about it with elections scheduled for March.
. . .
In mid-2018, Turkey's external debt stock stood at $457 billion. Over the next 12 months, the
country will need $181 billion to roll over maturing debts. The financing of the current
account deficit requires another $40 billion, at the least, though the gap has begun to
decrease under the impact of the economic downturn.
In total, Turkey needs a minimum of $220 billion over the next 12 months, or roughly $18
billion a month, but it has become a high-risk country for creditors. Its risk premium,
reflected in credit default swaps, has decoupled from those of other emerging economies,
hovering above 400 basis points despite occasional drops. In sum, borrowing has become more
expensive for Turkey.
Short Term External Debt Statistics [Central Bank of Turkey]
8/18
As of the end of August 2018, short-term external debt stock was realized as USD 175.2
billion, based on the remaining maturities calculated using external debt data, which was 1
year or less due to the original maturity. The stock's 18.2 billion US dollars portion,
composed of resident banks and the private sector's debts to foreign branches and
subsidiaries are in Turkey. When evaluated on a debtor basis, it is observed that the public
sector has a share of 18.1%, the Central Bank and the private sector have a share of 81% and
0.9%, respectively.
The Duran just published an article titled "Converting Khashoggi into Cash"
It points out that The Turkish/Saudi conflict goes back a long way as the "The first Saudi
state, the Emirate of Diriyah, went belly up in 1818, with the death of head of the house of
al-Saud, Abdullah bin Saud – actually, literally with his head hung on a gate in
Constantinople by Erdogan's Ottoman predecessor, Sultan Mahmud II." https://theduran.com/converting-khashoggi-into-cash/October
21, 2018
"... it's quite unusual to see such unanimous anti-Saudi reactions from the American political class for the assassination of Mr. Khashoggi – who was just a part-time journalist living in U.S – he was not even an American citizen ..."
"... So, it's quite unusual because the same political class remained muted about the Saudis involvement with ISIS, the bombing and starvation of civilians in Yemen and destruction of Syria, and of course the Saudis involvement in 9/11 terrorist attack in which 3000 American citizens have perished in New York, in the heart of America ..."
"... However gruesome, Mr. Khashoggi's assassination is going to be used by the Trump Administration to help the American Oil Cartel by controlling the Saudi Oil output, hence, to raise the price of Oil and to lower demand for US dollar which is the currency of the global Oil trade. ..."
"... The seemingly well-connected news outlet Voltairenet claims that there has been a plot against MbS and that Khashoggi was involved in it. ..."
"... It fares a atrocial war on Yemen, shits on international laws and regulations, just like Israel, Why would they not murder a juorno entering their land? Now this juorno was a man revealing in practices done by head choppers, so I will not cry much. It just shows these people are savages, all of them. What should be done ? You judge. ..."
"... I've read on Zerohedge that Khashoggi was on the verge of publishing an article about the Saudi's and CIA's involvement in 9/11, specifically about his former boss Turki al-Faisal, who ran Saudi intelligence for 23 years then abruptly resigned 10 days before 9/11 without giving any reason. ..."
"... Kashiggi's not a reformer. He's hard core Muslim Brotherhood ..."
The overplayed drama of Mr. Khashoggi assassination is going to be used by the American Oil
Cartel to control the Saudis Oil output.
it's quite unusual to see such unanimous anti-Saudi reactions from the American political
class for the assassination of Mr. Khashoggi – who was just a part-time journalist
living in U.S – he was not even an American citizen.
So, it's quite unusual because the
same political class remained muted about the Saudis involvement with ISIS, the bombing and
starvation of civilians in Yemen and destruction of Syria, and of course the Saudis
involvement in 9/11 terrorist attack in which 3000 American citizens have perished in New
York, in the heart of America.
So, we must be a bit skeptical about the motive of the American Political Class, as this
again could be just about the OIL Business, but this time around the objective is to help the
American Oil producers as opposed to Oil consumers – with 13.8% of the global daily Oil
production, the US has lately become the world top producer of Crude Oil, albeit, an
expensive Oil which is extracted by Fracking method that requires high Oil price above $70 to
remain competitive in the global Oil market – by simultaneously sanctioning Iran,
Venezuela, and the potential sanction of Saudi Arabia from exporting its Oil, the Trump
Administration not only reduces the Global Oil supply which will certainly lead to the rise
of Oil price, but also it lowers demand for the US Dollar-Greenback in the global oil market
which could lead to subtle but steady devaluation of the US dollar.
And perhaps that's what
Trump Administration was really aiming for all along; a significant decline of the US Dollar
Index and the rise of price of Oil which certainly pleases the American Oil Cartel, though at
the expense of Iran, Saudi Arabia and Venezuela – all of which are under some form of US sanctions.
However gruesome, Mr. Khashoggi's assassination is going to be used by the Trump
Administration to help the American Oil Cartel by controlling the Saudi Oil output, hence, to
raise the price of Oil and to lower demand for US dollar which is the currency of the global
Oil trade.
This seems to explain the motive to kill him. A few mildly critical articles by
Khashoggi's pen scarcely seem to be sufficient for such a high-profile murder, even if we
take into account that MbS appears to be impulsive and little capable of thinking ahead.
First of all, when has the death of a journalist made any difference in the relations between
countries? Why act like it should now?
Second, Khashoggi was not simply a journalist -- he was a member of the Saudi elite, an
Intelligence officer, and an activist for the Muslim Brotherhood (the Die Welt article
established that).
Third, the real question is how this story came out, and why it has come out as it has
("journalist murdered by police state agents"). Turkey pushed this story out into the open.
Apparently a calculation that the crown prince is losing ground, and an effort (perhaps
assisted by bribes) to align the AK party with the crown prince's enemies in Saudi.
It fares a atrocial war on Yemen, shits on international laws and regulations, just like
Israel, Why would they not murder a juorno entering their land?
Now this juorno was a man revealing in practices done by head choppers, so I will not cry
much.
It just shows these people are savages, all of them.
What should be done ? You judge.
It seems quite curious why MBS would go through such trouble to waste a guy whose only crime
was writing a few low key disparaging articles about him that nobody read. Maybe there's more
to this story than meets the eye.
I've read on Zerohedge that Khashoggi was on the verge of publishing an article about the
Saudi's and CIA's involvement in 9/11, specifically about his former boss Turki al-Faisal,
who ran Saudi intelligence for 23 years then abruptly resigned 10 days before 9/11 without
giving any reason. The rumor was he knew about the attack as did CIA, but Saudis and CIA
decided not to do anything to use it as pretext to start the "war on terror" and bring down
Saddam Hussein. Personally I find that a little far fetched but you never know when it comes
to the CIA.
The murder of d'Enghien had no effect on the French Revolution, other countries reactions to
the revolution and the subsequent revolutionary and Napoleonic wars. In fact, most of the
liberal pro French Revolution historians consider the execution as necessary and moral as the
execution of other anti revolutionaries
Koshoggi's murder won't make a bit of difference either once the blame Trump media blast
blows over. The Turkish police appear to be doing a good job. They've arrested 18 people involved. At least the moralist pundits won't be punditing and pontificating about Kavanaugh for a
few days. Kashiggi's not a reformer. He's hard core Muslim Brotherhood
That the Saudi regime commits murders does not surprise me, but getting caught not just with
murder, but also with torture, indeed an unbelievable stupidity.
Why torture the man ?
But what also baffles me is that the journalist wrote for Washpost, a friend of Israel.
That Netanyahu and the Saudi regime cooperate to attack Iran, it is asserted by many, and it
sems quite probable to me.
A technical question, can indeed a smartwatch do what it is supposed to have done ?
If so, then the torturers and murderers are even more stupid, I let the moral issue
undiscussed, than one can imagine.
Then there is the assertion, in cases like this one never knows what the facts are, that the
journalist's girl friend waited outside.
Did he expect trouble ?
Did he ask her to record the trouble ?
Did not the consulate security see her ?
A final remark, what now is the difference in cruelty between IS and the USA's ally ?
Early in WWII FDR was reported that USA oil would be depleted in thirty years time.
So FDR sent Harold L Ickes to Saudi Arabia,where at the end of 1944 the country was made the
USA's main oil supplier.
FDR entertained the then Saud in early 1945 on the cruiser Quincy, laying in the Bitter Lakes
near the Suez Canal.
This Saud and his entourage had never seen a ship before, in any case had never been on board
such a ship.
In his last speech to Congress, seated, FDR did not follow what had been written for him,
but remarked 'that ten minutes with Saud taught him more about zionism than hundreds of
letters of USA rabbi's.
These words do not seem to be in the official record, but one of the speech writers,
Sherwood, quotes them in his book.
Robert E. Sherwood, 'Roosevelt und Hopkins', 1950, Hamburg (Roosevelt and Hopkins, New York,
1948)
If FDR also said to Congress that he would limit jewish migration to Palestine, do not now
remember, but the intention existed.
A few weeks later FDR died, Sherwood comments on on some curious aspects of FDR's death, such
as that the body was cremated in or near Warm Springs, and that the USA people were never
informed that the coffin going from Warm Springs to Washington just contained an urn with
ashes. At present the USA does not seem to need Saudi oil.
If this causes the asserted cooperation between Saudi Arabia and Israel ?
@Harris ChandlerNow it has made alliances with Israel and between them the tail wags
the dog
The Saudi Royal family and the governments of Israel have always been in cahoots. They
both despise and fear secular governments that are not under their own control in the Middle
East. Witness the fear and dread of both of them of president Nasser in the 1960′s, for
example.
The US establishment, 'liberal' or not, just fake an outcry to soften the image of 100′s
of 1000′s of yemenis, iraqis, libyan.. war casualties they are wholly or partly
responsible for. Khashoggi's death is no more brutal than that of Gaddafi. What's the big
deal ?
Whether Khashoggi is an islamist or not is very minor.
(Sunni) Islam is basically a caravan of arab tribal or civilizational power and the house of
Saud just rides this vehicle or caravan to siphon off the oil wealth.
The house of Saud, said to be Jewish in origin, have the option to migrate en mass to Israel
or French Riviera, with their swiss/US/caribbean offshore accounts during time of crisis or
after new forms of energy resource displace oil
Equally important, the Saudis and Emiratis are now closely allied to Israel's far right
government. Israel has been a door-opener for the Saudis and Gulf Emirates in Washington's
political circles. The Israel lobby is riding to the Saudi's defense .
The Israelis are defending Old Saudi (pre MBS) -- not the New MBS/Kushner fix Palestine
cabal. The last thing Israel wants is a defined Israeli border recognized by the world. The sycophant Israeli backing Senators in congress (Graham et al) are all backing Israel
by condemning MBS and calling for his head.
@FKA Max Thanks for the excellent Real News Network interview with someone I hadn't heard
about (As'ad AbuKhalil) who has followed the career of Khashoggi for years.
It seems that Khashoggi was lately different things to different people – one voice
in English at the Washington Post following the Israeli line, and another in Arabic and the
Arab media supporting the Palestinians and the Moslem Brotherhood.
Over the long term he was a propagandist for the rule of the Saudi princes, and his
problem seemed to be his too close connection to the wrong ones, while they were overthrown
by Crown Prince Mohammed bin Salman (MbS). There's the suggestion of a plot against MbS where
he may have been involved.
So why are the Israelis, their MSM and their AIPAC congressmen making such a big thing out
of it? Isn't MbS their friend? And why should they care about the assassination of a
pro-Palestinian journalist?
Maybe they've a better knowledge of the forces at play in Saudi Arabia, and concluded that
MbS was too much of a risk (too isolated and independent – e.g. talking with the
Chinese about a Petro/Yuan). Maybe they decided to Regime Change MbS in a usual Israeli/US
Deep State operation with Khashoggi at the centre (the duplicitous sort of character that
they favor) – with the outrage at MbS unexpectedly striking back. It was in fact MbS'
team of bodyguards who arrived in Istanbul. And it would account for the Deep State anger at
having one of its chief conspirators murdered.
The back story has to be that the US/Israel want control of both Saudi and Iranian oil
priced in US Dollars and they'll go with anyone who can give that outcome (currently not
MbS). Or they invade Saudi Arabia Eastern Province on some pretext or other and just take the
oil directly.
I'm surprised that the Saudis didn't ask the Israelis, who are very good at
assassination and kidnapping, to go after Khashoggi.
They probably did, but Israel is gearing up to invade Gaza AGAIN, and that takes time and
resources that they couldn't afford to let go and do some free-lancing in the Murder Inc
Department.
But Blessed are the War Mongers or something, as that oh-so devout Christian, Pat
Robertson, is against holding KSA accountable:
Prominent evangelical leader on Khashoggi crisis: let's not risk "$100 billion worth
of arms sales"
Pat Robertson, founder of the Christian Broadcasting Network, appeared on its flagship
television show The 700 Club on Monday to caution Americans against allowing the United
States' relationship with Saudi Arabia to deteriorate over Khashoggi's death.
"For those who are screaming blood for the Saudis -- look, these people are key allies,"
Robertson said. While he called the faith of the Wahabists -- the hardline Islamist sect to
which the Saudi Royal Family belongs -- "obnoxious," he urged viewers to remember that
"we've got an arms deal that everybody wanted a piece of it'll be a lot of jobs, a lot of
money come to our coffers. It's not something you want to blow up willy-nilly."
Did Robertson take all of that loot he made from smuggling blood diamonds out of
Africa–using his charity as a front–and invest in the defense industry?
If Pat is headed to Heaven after he expires, then send me to the other place, as I have
no desire to be stuck with hypocrites for all eternity.
"Error" ? "Mistake" ? These people (the KSA) are fucking "stupid" .
Now they're saying he died in a "fist fight" in the consulate !
A 13 year old street criminal would know that that excuse is an admission of guilt. These
guys shouldn't be allowed to run a model railroad.
On television in 1988, Donald Trump said he had bought a
US $200 million 85-metre-long yacht ,'The Nabila', from billionaire arms dealer Adnan
Khashoggi, uncle of just-murdered-in-Istanbul journalist Jamal Khashoggi. The yacht was named
after Adnan Khashoggi's daughter. Trump later sold the yacht to Saudi Prince Al-Waleed bin
Talal.
Donald Trump talking about the boat and arms dealers like Khashoggi – "not the
nicest guys in the world"
Once
again my best House of Saud-connected source RE-CONFIRMED Mohammed Bone Saw (MBS) received
direct info on CIA assets in Saudi Arabia from his close whatsapp pal Jared of Arabia.
Jared could only have access to this top secret info because of his high clearance. That led
to the Ritz-Carlton jail saga - and other arrests.
The CIA protégé Mohammed bin Nayef - who was previously made Crown Prince by
the CIA itself - was also arrested and is still under house arrest. The CIA was grooming Nayef
be King.
The CIA managed to elevate Nayef by plotting to get rid of Bandar Bush - who was fired by
then King Abdullah. When King Abdullah died, Nayef continued to be Crown Prince until ousted by
the new King Salman bin Abdulaziz to the benefit of his son.
Big mistake.
MBS moved against the clergy - who had been neutralized by Nayef. He moved against CIA
friends, ousting former King Abdullah's son Prince Miteb as head of the powerful National Guard
- who's after his blood ever since.
Crucially, Khashoggi was also CIA.
MBS ordered the invasion of Yemen - and turned large sectors of the army against him. He met
with AIPAC in New York, befriended Israel and turned the bulk of the Saudi population against
him.
Only misinformed simpletons believe that the Pulp Fiction in Istanbul op could have
proceeded without his green light. Hubris, arrogance and inter-galactic ignorance are MBS's
trademarks.
What kind of intel op does not know that Turkish secret police would be monitoring the Saudi
embassy 24/7?
The Coward Prince, meanwhile, has had ample time to find not one but TWO fall guys.
Fall Guy Number One is Gen. Ahmed al-Assiri, deputy head of Saudi intel (yes, that's an
oxymoron), a senior air force officer with NO (very important) family connections to the Saudi
two-bit royals.
Fall Guy Number Two is Saud al-Qahtani, who was a sort of Desert Grand Inquisitor - totally
controlling the media and supervising the non-stop purge of any critics. Call him the Saudi
Steve Bannon - as he was known in Qatar. He led a mighty troll army spreading fake news on the
murderous war on Yemen, the pathetic blockade of Qatar and non-stop demonization of Iran.
Turkey for its part has masterfully deployed Death by a Thousand Leaks on MBS.
Now the whole planet knows the detailed description of the 15-men hit squad; pics of all of
them; their role in the "mission"; arrival and departure flights; which hotels they stayed for
a few hours.
The hit squad includes the Bone Saw Master; four intel ops; 6 Royal Guard members; a member
of MBS's personal guard; and a free agent.
Compared to all this evidence, the official "fist fight" Saudi explanation as well as the
Jared of Arabia-spun "rogue killer" spin are inter-galactic jokes designed for suckers.
What remains unexplained is whether MBS was striking some sort of dodgy deal with the Trump
administration, via his best pal Jared, behind the back of his House of Saud many rivals.
Consul Pompeus Minimus was on the phone to MBS immediately after the Pulp Fiction news broke
out. This could well turn out to have been a double-double cross.
Comment: Pepe is probably a little too sure it couldn't have happened without MbS's approval.
He may have been involved and it escalated further than he approved, (as Scott Adams
theorizes ), or
it could've been a rogue operation. Mohammed bin Salman has made enough enemies within the
sprawling Saudi royal family with last year's "anti-corruption purge", that more than one
faction would be happy to pin the assassination on him
"... I agree with Jack that when Brennan is writing an op-ed calling for the head of MbS something fishy is up. Kashoggi has had a long career at the heart of Saudi national security power structures. He's no angel. Clearly he touched a nerve to be murdered so openly with no plausible deniability. Or maybe that was intentional. Then....the reaction of the Deep State. Hmm? ..."
"... Please don't get me wrong. Saudi Barbaria has been a corrupting influence for decades and the role they have played in Syria, Libya is not to be condoned. I fully support walking away from our interventionist position in the Middle East and letting the chips fall there. However, I have a deep distrust of Brennan and his motives. I can't put my finger on why the neocons are reacting in this way in light of their previous attitude of ignoring such atrocities or even abetting them. This is raising suspicions. ..."
"... if that is such a common knowledge that host states always bug the guest embassies and consulates, that would mean that Saudis would have to assume that as well, so that they would make sure that these devices were ´blinded´, ..."
"As for arms sales, someone needs to brief Mr. Trump on the actual results of the promises made to him when he visited Riyadh
last year. As Bruce Riedel of the Brookings Institution
sums it up , "The Saudis have not concluded a single major arms deal with Washington on Trump's watch ." Moreover, an end to
supplies of U.S. spare parts and technical support, something Russia cannot provide, would quickly ground the Saudi air force . That
would have the welcome effect of ending a bloody bombing campaign in Yemen that a
U.N. investigation concluded was probably responsible for war crimes." Washpost
-----------
Once again, I am not a great fan of Bezos or his blog, but two days in a row they have printed something I can agree with. Something
has changed for him.
It has become a meme in the blather that runs shrill and shallow in the US media, that Saudi Arabia is a faithful, and indispensable
ally of the US in the ME. Bezos disputes this and so do I.
A few points:
Yes, they chop heads off after Friday prayers outside the local mosque. They also do hands and feet. They stone to death women
found guilty of adultery. They sew them in bags before the men present throw handy five pound rocks at them. The government is deeply
approving of this. Sound familiar? Yes, it should. The jihadis whom the Saudis sponsor in Syria do the same things. The Sunni jihadis
are nearly defeated in Syria and it has become clear that the Saudi government has been evacuating their leaders, probably with US
connivance, so that they can pursue greater visions of jihad elsewhere.
The importance of Saudi Arabia in the world oil market is IMO now much exaggerated. They can undoubtedly do some damage by manipulating
the short term contract (spot) market but this is something they would pay for heavily. The Kingdom is cash strapped. It was not
for nothing that MBS turned the Ritz Carlton in Riyadh into a prison for the wealthy including many of his own kin in order to squeeze
and in some cases torture them into handing over a lot of their cash to the government. Depressed petro sales at artificial prices
will only further reduce revenue to the government.
The notion that Saudi intelligence contributes much to the GWOT is a joke. Saudi intelligence competence is something that exists
only in pitchmen's claims voiced by TV touts. In fact, they get almost everything they have from the US and are like greedy baby
birds always looking to be fed. They cannot organize a trip to the gold plated toilet. It took 15 of them to ambush Khashoggi, well,
OK, 14 of them and a doctor to carry the electric bone-saw.
We need to sell them more equipment that they cannot use? It does not appear to me that any of the contracts that they promised
to DJT has been signed. Their technique is simple. Keep the hope of profit for the US alive as leverage.
Lastly, the chimera of a great Arab alliance (a la NATO) is delusory. The Saudis lack both the organizational ability for such
a thing and significant military power. They possess one of the world's largest static displays of military equipment. They have
neither the manpower nor the aptitude to use such equipment effectively. As I have written previously, the Gulf Arabs have long had
such an alliance. It is the GCC and it has never amounted to anything except a venue for the Arab delight in meetings and blather.
The basis for the desire for such an alliance is the Israeli strategic objective of isolating Iran and its allies; Syria, Hizbullah
and Hamas with an eventual hope of destroying the Iranian theocracy. Israel is frightened of a possible salvo of many thousands of
missiles and rockets into Israel from Lebanon as well as an eventual successful creation of a missile deliverable nuclear weapon
by the Iranians. These are real and credible threats for Israel, but not for FUKUS . Israel has only two really valuable counter-value
targets; Haifa and Tel Aviv. A hit on one or both with a nuclear weapon would be the end of Israel. The Israelis know that.
Adroit information operations carried out over generations by the Israeli government and its supporters have created in the collective
US mind an image of Iran as a disguised 3rd Reich. This was well done. The same operation was run against Iraq with magnificent results
from the POV of Israel
What happened here that all the neocons like Fred Hiatt and Sen. Lindsey Graham now want the blood of MBS? Jamal Kashoggi was
apparently a good pal of Osama and an insider who worked for Prince Turki al-Faisal both when he ran Saudi intelligence and when
he was in DC. My antenna is up when John Brennan starts writing op-eds. After all he was in Riyadh when Turki was the internal
security chief.
Does this have to do with our Deep State? Who may not be happy that MBS has by-passed them with a direct connection through
Jared?
We didn't do anything or demand anything when the Saudis sent terrorists to attack us on 9/11. What's changed now with the
murder of Jamal Kashoggi in Istanbul?
I'm with Jack. Don't get me wrong: I hate MBS as much as the next man, but I can't say I trust Erdogan or Bezos either. And these
days, whenever the WaPo tells me to zig, my instinct tells me to zag. At the very least, I would like to know more about what's
really going here before committing myself to one side or the other. Kashoggi, after all, was not just some random 'journalist'.
He had intimate contact with, and knowledge of, high-ranking personages in the KSA and beyond. He even knew Osama bin Laden! There
could be any number of parties out there in this world who have felt that he knew too much. It's just too early to jump to conclusions.
Over at Consortium News, Asad Abu Khalil, the 'Angry Arab', has up a good piece arguing that Kashoggi was no reformer. In fact,
up until extremely recently, he was doggedly loyal to the régime. As he puts it:
"Western media coverage of Khashoggi's career (by people who don't know Arabic) presents a picture far from reality. They portray
a courageous investigative journalist upsetting the Saudi regime. Nothing is further from the truth: there is no journalism in
Saudi Arabia; there is only crude and naked propaganda."
It is very unlikely that the people, who time and time again have been found to lack even a shred of human decency, compassion
and fairness, Brennan et al and I include WaPo in that, are now going gaga over the murder of a journo, who had strong links with
the power players in the region.
The way that these things have worked out in the media earlier, I think the order has come from higher up to push this incident
to damage either the relationship with SA or mbs. I think that keeping this incident hot has also kept the oil price high just
before the mid-term elections. surely, a higher oil price hurts trump. that might be a reason for the trump-hating crowd including
wapo to discover decency and fairness and other human virtues just right now. very intriguing, this reaction from the MSM.
I note that the British press is not pressing this issue as much, nor is Haaretz. Only the US MSM is pressing this very hard.
The US and the Brits before us have slavishly courted the Saudi Royals since before WWII. This is a constant through Republican
and Democratic administrations. The Trump administration is no exception. Why the murder of one journalist would challenge a half
century of established US policy at this time is beyond my understanding. Perhaps it's the proverbial straw that broke the camel's
back.
Someone from whose writings I have derived a great deal of instruction, as well as amusement, is Vladimir Golstein, a Russian
Jewish émigré now in charge of 'Slavic Studies' at Brown University.
I introduce his explanation of the response to the Khashoggi killing, in a 'Facebook' post, not because I think it should be
taken as some kind of authoritative truth, but because, as often, Golstein's irreverence is thought-provoking.
The post begins:
'Thank you, Saudi Arabia for exposing the utter hypocrisy and moral bankruptcy of British and American gangsta press and equally
gangsta establishment.
'You've been at it for a very long time. And it seems that finally you've got it right.'
After providing a long list of Saudi delinquencies, Golstein continues:
'I understand that you began to feel more and more desperate. You sided with Israel against Iran and Syria, and the rest
of the world said that it is a moral thing to do and put you on the UN human rights board.
'Well, finally, you hit the right cord. Killing innocent people and abusing your moneyed power by buying newspapers, hotels,
city districts or think tanks, was not enough to produce an outrage in the west, but when you whacked another cynical morally
corrupt journalist that proved too much for the cynical and morally corrupt western press. They decided to stand up for one
of their own.'
This does, I think, point to something rather important. And it leads to the thought that MBS and others may have miscalculated,
as a result of an 'hubris' which many in the West have actually encouraged – just as they have a parallel 'hubris' in Israel.
As Golstein, who has a great deal of complex history behind him, can see very clearly, it is an interesting question when
the 'sympathy' of Western 'liberals' is and is not actually felt.
What I think MBS may have missed is, quite precisely, the realisation that for people like Tom Friedman the fact that –
as Golstein is pointing out – Khashoggi is the same kind of animal as they are means that killing him touches them personally.
Second, he is the kind of figure whom they have, as it were, 'cast' in a 'starring role', in their 'narrative' as to how
somehow 'Saudi Barbaria' is going to 'modernise', and in so doing create a Middle East hospitable to a Jewish settler state.
So, in assassinating him, MBS may have unleashed a curious kind of psychological 'maelstrom.'
But, as well as hypocrisy, there is also a basic stupidity.
In fact, if one is reasonably 'worldlywise', one knows that people's sympathies, including one's own, are very often much more
limited than they profess to be. We commonly find it much easier to feel the griefs and pain of people whom we see as like ourselves,
than we do with those of others.
My own history, ironically, has been a move from finding it relatively easy to sympathise with people who write for the 'New
York Times', or the 'Guardian', or the 'New York Review of Books', to finding it really rather difficult.
There is also, however, about so many of these people, an element of sheer stupidity.
Whether one agrees, or disagrees, with 'deplorables' is relevant, but only partly so. Actually, people who would not appear
at the kind of 'party' which Jon Schwarz so aptly characterises have a very wide range of views, and I often agree in whole or
in part with such people, and also often disagree in whole or in part. It is not a simple matter.
A related but distinct question has to do with common prudence.
People who lock themselves in a kind of bubble of the supposedly 'enlightened' are not only doing the rest of us no favours,
but are inherently bound to head off in directions which are liable to be suicidal for themselves.
Prudent élites take the trouble at least to be aware that the world is not controllable by the comfortable people who appear
at their dinner parties, and realise that if they persist in trying to persuade themselves that it is, sooner or later their self-delusion
will blow up in their faces.
In relation to people like MBS, there is a double stupidity. The problem is not simply that he has been playing to their need
to believe that he wants to 'modernise' Saudi Arabia. It is also that they have wanted to believe that such a venture is possible,
which it almost certainly is not.
Yes, Vladimir Golstein has a point. The DC cocktail circuit have been offended as one of their fellow travelers has been offed.
If this will lead to a break with Saudi Barbaria that will be good. I'm cynical however. Brennan, et al just want their boy in
Riyadh not Jared's buddy.
Wait until it becomes clear that Israel in actuality negotiates her safety with Russia (it is ongoing as I type this)--that's
when the party will start in earnest.
"The US and the Brits before us have slavishly courted the Saudi Royals since before WWII."
TTG, as you are doubtless aware, it goes back even further, to early World War I. David Fromkin's seminal 1989 history, "A
Peace to End All Peace: The Fall of the Ottoman Empire and the Creation of the Modern Middle East (also subtitled Creating the
Modern Middle East, 1914–1922)":
https://en.wikipedia.org/wi... describes the machinations by British, French, and (later) Americans to play the competing
desert chieftains against each other, alternately catering to and dumping unceremoniously each one as political necessity dictated.
Recommended to readers wishing to further appreciate the roots of the irresolvable turmoil that is the modern Middle East.
Yes, there's clearly more than meets the eye. I agree with Jack that when Brennan is writing an op-ed calling for the head
of MbS something fishy is up. Kashoggi has had a long career at the heart of Saudi national security power structures. He's no
angel. Clearly he touched a nerve to be murdered so openly with no plausible deniability. Or maybe that was intentional. Then....the
reaction of the Deep State. Hmm?
Please don't get me wrong. Saudi Barbaria has been a corrupting influence for decades and the role they have played in
Syria, Libya is not to be condoned. I fully support walking away from our interventionist position in the Middle East and letting
the chips fall there. However, I have a deep distrust of Brennan and his motives. I can't put my finger on why the neocons are
reacting in this way in light of their previous attitude of ignoring such atrocities or even abetting them. This is raising suspicions.
The evidence I see is that a Saudi citizen who used to be a "regime insider" with high level connections and aligned with the
previous head of Saudi intelligence was brutally murdered by Saudi government officials. Turkey leaked this information and in
the leaks claim they have audio and video evidence of the murder. John Brennan and other neocons who previously have not only
supported but also connived in some of the atrocities committed by the Saudi government are demanding that MbS be held to account.
The question that is nagging me is why are the neocons reacting this way now, considering they have always carried water for
the Saudi royals when real dissidents have been routinely executed after show trials?
for example, how did Turks get the audio and possibly video of the deed, the transmission by Apple watch story may be just a red
herring, they may have independent sources and methods which the US is not privy to the word ´their´ in my remark intended to
say ´Turks´. Sorry about the unclear sentence.
I thought you Germans were supposed to be smart. You don't understand that MIT, the Turkish intelligence service had bugged the
consulate? What part of that do you not understand? Go get some strudel and think about it!
hahaha, I will eat it, BUT - if that is such a common knowledge that host states always bug the guest embassies and consulates,
that would mean that Saudis would have to assume that as well, so that they would make sure that these devices were ´blinded´,
and that would mean that there were other devices which they were not able to ´blind´. Just deep thinking, is that also German
trait?
Sounds like Klarity, a German trait. The Saudis probably lacked the skill to find the Turkish bugs. MIT, the Turkish service are
very skilled at installation.
Maybe this new surprising "moral" attitude has something to do with the mid-terms elections. Yes Saudi Arabia is a kind of traditional
commodity platform and surely not an Ally, but DJT did enhance the Saudis status as Partners in his projected Deal of the Century
(still not published).
The Khasoghi murder has become the DJT problem and while raising his expression for the outrage has also
opened the exit door, and provided a possibility to dilute MBS direct responsibility. Of interest is the Erdogan careful but repeated
supply of details.
What 'terrorists' attacked on 911...?...nobody knows what exactly happened on that day, and who was involved...except that the
official narrative is total BS...
Yes, one could lump me under the dismissive and unflattering epithet of 'truther'...after looking into some of the physical aspects
of the matter, the narrative is impossible on grounds of physics...that is not to say I am speculating on who or even the how...which
is where we see a lot of tinfoil hat stuff...but I have a solid engineering and aviation background...it could not have happened
the way we are told...
The President has authority under the Global Magnitsky Act to impose sanctions against
anyone who has committed a human rights violation. Congress has already requested a HR
investigation which Trump must act on and report to them within 4 months
It appears my prediction of Saudi gate may be right. This potentially is good news for
Iran and Russia. Perhaps not so good for Trump and Saidis. Israel may not be happy. Perhaps
his wife's plane troubles were a warning shot to remind him who is boss. Who knows ?
Haleys resignation beginning to make sense now. The House of Trump and House of Saud may
soon fall, and Bibi wont be happy losing Trump and MBS. We all know what they are capable of
to get things back on track
Why did the media held back on this so for so long?
Yemen (and Gaza).
CGTN & Al-Jazeera are the only global news outlets consistently and regularly reporting on the US facilitated
genocides in Yemen and Jewish-occupied Palestine/Gaza.
The never-ending Khashoggi non-mystery mystery keeps Yemen & Gaza out of the Jew-controlled Western Media
headlines. Saudi Barbaria and "Israel" are natural allies because each of them is an artificial Western political
construct with a cowardly and incompetent military apparatus and an anti-heroic penchant for slaughtering undefended
civilians - for psychopathic reasons.
--------
Talking about psychopathy...
Oz's Christian Zionist PM, Sco Mo, is blathering about following Trump's lead and moving Oz's Embassy in "Israel" to
Jerusalem. Sc Mo, who has never had an original idea in his life, still hasn't woken up to the fact that Trump's
Jerusalem gambit was a trap for Bibi. So it's hilarious that Sco Mo The Unoriginal, is planning to take a flying
leap into the same trap!
Anyone with more than half a brain would realise that...
1. No civilised country has followed Trump's lead.
2. Trump can, and will, reverse his (illegal) Jerusalem decision out of a 'new-found respect' for International Law.
Posted by: Hoarsewhisperer | Oct 18, 2018 12:14:08 AM |
83
Whoever is ultimately behind this campaign (which I
suspect is a loose association of interest groups spread throughout SA, Turkey, London citi, wall street, whoever)
they will not stop until MbS is paraded through the streets in chains or at least his head at the end of a lance. At
this point the only question how many days will it take to see his head on a pike?
"Their target that night: Anssaf Ali Mayo, the local leader of the Islamist
political party Al-Islah. The UAE considers Al-Islah to be the Yemeni branch of the worldwide Muslim Brotherhood,
which the UAE calls a terrorist organization. Many experts insist that Al-Islah, one of whose members won the Nobel
Peace Prize, is no terror group. They say it's a legitimate political party that threatens the UAE not through
violence but by speaking out against its ambitions in Yemen."
Getting to the bottom of the Jamal Khashoggi disappearance is a bit like peeling an onion.
It is known that Khashoggi entered the Saudi Arabian Consulate in Istanbul on October 2
nd to get a document that would enable him to marry a Turkish woman. It is also
known, from surveillance cameras situated outside the building, that he never came out walking
the same way he entered. The presumption is that he was either killed inside or abducted,
though the abduction theory would have to be based on a Consulate vehicle leaving the building
with him presumably concealed inside, something that has not been confirmed by the Turks. If he
was killed inside the building and dismembered, as seems likely, he could have had his body
parts removed in the suitcases carried by the alleged fifteen official Saudis who had arrived
that morning by private jet and left that afternoon the same way. The supposition is that the
fifteen men, which may have included some members of Crown Prince Muhammad bin Salman's
bodyguard as well as a physician skilled in autopsies who was carrying a bone saw, constituted
the execution party for Khashoggi.
There are certain things that should be observed about the Turks, since they are the ones
claiming that the disappearance of Khashoggi may have included a summary execution and
dismemberment. The Turkish intelligence service, known by its acronym MIT, is very good, very
active and very focused on monitoring the activities of foreign embassies and their employees
throughout Turkey. They use electronic surveillance and, if the foreign mission has local
employees, many of those individuals will be agents reporting to the Turkish government. In my
own experience when I was in Istanbul, I had microphones concealed in various places in my
residence and both my office and home phones were tapped. A number of local hire consulate
employees were believed to be informants for MIT but they were not allowed anywhere near
sensitive information.
As Turkey and Saudi Arabia might be termed rivals if not something stronger, it is to be
presumed that MIT had the Consulate General building covered with both cameras and microphones,
possibly inside the building as well as outside, and may have had a Turkish employer inside who
observed some of what was going on. Which is to say that the Turks certainly know exactly what
occurred but are playing their cards closely to see what they can derive from that knowledge.
The two countries have already initiated a joint investigation into what took place. Turkey's
economy is in free fall and would benefit from "investment" from the Saudis to create an
incentive to close the book on Khashoggi. In other words, Turkey's perspective on the
disappearance could easily be influenced by Saudi money and the investigation might well turn
up nothing that is definitive.
Saudi Arabia, for its part, has a couple of cards to play also even if it did kill and
dismember Khashoggi under orders from the Crown Prince. First of all, the system of
petrodollars, which basically requires nearly all purchases of petroleum to be paid in dollars,
is underwritten by the Saudis. Petrodollars in turn enable the United States to print money for
which there is no backing knowing that there will always be international demand for dollars to
buy oil. The Saudis, who also use their own petrodollars to buy U.S. treasury bonds, could pull
the plug on that arrangement. That all means that the United States will be looking for an
outcome that will not do too much damage to the Saudis.
Second, Saudi Arabia is in bed with Israel in opposition to Iran. This means the Israel
Lobby and its many friends in Congress will squawk loudly about Khashoggi but ultimately shy
away from doing anything about it. It already appears that a cover story is halfway in place to
explain what happened. It is being suggested that a "rogue" element from Saudi Arabia might
have carried out without the knowledge of the Crown Prince an interrogation or abduction
attempt that went too far. Donald Trump speculated on Monday that that might be the case,
suggesting that it may already be part of the official line that will be promoted. Those who
know Saudi Arabia well, however, consider a high-level assassination not ordered by the Crown
Prince directly to be extremely unlikely, but that does not necessarily mean that a cover story
including that feature might not be successfully floated.
In regional terms, Saudi Arabia is also key to Trump's anticipated Middle East peace plan.
If it pulls out from the expected financial guarantees aspect, the plan will fall apart. Riyadh
is also committed to buy tens of billions of dollars' worth of American arms, an agreement that
could be canceled if Washington begins to pressure the Saudis for answers. Beyond that, Saudi
Arabia could stop pumping oil or fail to increase production when Iranian oil becomes subject
to U.S. sanctions early next month, driving the price per barrel up dramatically for everyone.
The Saudi government has already indicated that it will respond forcefully to any attempts to
punish it over Khashoggi and there is no reason to doubt the seriousness of that threat.
There are, of course, possible impediments to selling the fake news narrative. Some early
reports suggested that Khashoggi's fiancé had observed and possibly recorded the
execution inside the consulate using the victim's Apple wristwatch linked to an iPad in her
possession. If that is true, the release of such material to the media will create worldwide
demand to learn the truth that will be difficult to control. Also, there are unconfirmed
reports that U.S. intelligence knew in advance of Saudi plans to abduct Khashoggi, which could
prove embarrassing to the Trump administration and could narrow its options.
The trick will be to see how a bit of extreme brutal behavior by the Saudis can be
manipulated by all interested parties to produce a solution that doesn't damage anyone too
much. It will undoubtedly be far from the truth, but truth doesn't necessarily matter much
these days.
"... This is Naked Capitalism fundraising week. 1018 donors have already invested in our efforts to combat corruption and predatory conduct, particularly in the financial realm. Please join us and participate via our donation page , which shows how to give via check, credit card, debit card, or PayPal. Read about why we're doing this fundraiser and what we've accomplished in the last year, and our current goal, extending our reach . ..."
"... By Tsvetana Paraskova, a writer for the U.S.-based Divergente LLC consulting firm. Originally published at OilPrice ..."
"... As long as NATO exists, Washington will continue to use it to drive a wedge between the EU and Russia. Merkel foolishly went along with all of Washington's provocations against Russia in Ukraine, even though none of it benefited Germany's national interest. ..."
"... She did indeed go along with all the provocations and she sat back and said nothing while Putin railed against US sanctions. Yet Putin didn't blame Germany or the EU. Instead he said that the Germany/EU is currently trapped by the US and would come to their senses in time. He is leaving the door open. ..."
"... What US LNG exports? The US is a net importer of NG from Canada. US 2018 NG consumption and production was 635.8 and 631.6 Mtoe respectively (BP 2018 Stats). Even the BP 2018 Statistical Review of World Energy has an asterisks by US LNG exports which says, "Includes re-exports" which was 17.4 BCM or 15 Mtoe for 2018. ..."
"... Natural gas negotiations involve long term contracts so there are lots of money to exchange ensuring business for many years to come. Such a contract has recently been signed between Poland's PGNiG and American Venture Global Calcasieu & Venture Global Plaquemines LNG (Lousiana). According to the Poland representative this gas would be 20% cheaper than Russian gas. (if one has to believe it). Those contracts are very secretive in their terms. This contract in particular is still dependent on the termination of liquefaction facilities in Lousiana. ..."
"... IIRC, the US is pushing LNG because fracking has resulted in a lot of NG coincident with oil production. They've got so much NG coming out of fracked oil wells that they don't know what to do with it and at present, a lot of it just gets flared, or leaks into the atmosphere. ..."
"... So they turn to bullying the EU to ignore the price advantage that Russia is able to offer, due to the economics of pipeline transport over liquefaction and ocean transport, and of course the issues of reliability and safety associated with ocean transport, and high-pressure LNG port facilities compared to pipelines. ..."
"... Trump will probably offer the EU 'free' LNG port facilities financed by low-income American tax-payers, and cuts to 'entitlements', all designed to MAGA. ..."
"... It seems we have been maneuvering for a while to raise our production of LNG and oil (unsustainably) in order to become an important substitute supplier to the EU countries. It sort of looks like our plan is to reduce EU opposition to our attacking Russia. Then we will have China basically surrounded. This is made easier with our nuclear policy of "we can use nuclear weapons with acceptable losses." What could go wrong? ..."
"... The United States should lead by example. Telling Germany not to import Russian gas is rich considering the U.S. also imports from Russia. https://www.forbes.com/sites/rrapier/2018/07/12/russia-was-a-top-10-supplier-of-u-s-oil-imports-in-2017/ ..."
"... I just love the fact that Trump is publicly calling out Merkel on this; she has been nothing but two-faced and hypocritical on the Russia question. ..."
"... She was one of the ones who pushed the EU hard, for example, to sanction Russia in the wake of the coup in Ukraine (which she had also supported). And then she pushed the EU hard to kill off the South Stream pipeline, which would have gone through SE Europe into Austria. She used the excuse of 'EU solidarity' against 'Russian aggression' to accomplish that only to then turn around and start building yet another pipeline out of Russia and straight into Germany! The Bulgarians et al. must feel like real idiots now. It seems Berlin wants to control virtually all the pipelines into Europe. ..."
This
is Naked Capitalism fundraising week. 1018 donors have already invested in our efforts to
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and participate via our donation page , which shows how to give via
check, credit card, debit card, or PayPal. Read about why we're doing
this fundraiser and what we've
accomplished in the last year, and our current goal, extending
our reach .
Yves here. It's not hard to see that this tiff isn't just about Russia. The US wants Germany
to buy high-priced US LNG.
By Tsvetana Paraskova, a writer for the U.S.-based Divergente LLC consulting firm.
Originally published at
OilPrice
The United States and the European Union (EU) are at odds over more than just the Iran
nuclear deal – tensions surrounding energy policy have also become a flashpoint for the
two global powerhouses.
In energy policy, the U.S. has been opposing the Gazprom-led and highly controversial
Nord Stream 2 pipeline project , which will follow the existing Nord Stream natural gas
pipeline between Russia and Germany via the Baltic Sea. EU institutions and some EU members
such as Poland and Lithuania are also against it, but one of the leaders of the EU and the
end-point of the planned project -- Germany -- supports Nord Stream 2 and sees the project as a
private commercial venture that will help it to meet rising natural gas demand.
While the U.S. has been hinting this year that it could sanction the project and the
companies involved in it -- which include not only Gazprom but also major European firms Shell,
Engie, OMV, Uniper, and Wintershall -- Germany has just said that
Washington shouldn't interfere with Europe's energy choices and policies.
"I don't want European energy policy to be defined in Washington," Germany's Foreign
Ministry State Secretary Andreas Michaelis said at a conference on trans-Atlantic ties in
Berlin this week.
Germany has to consult with its European partners regarding the project, Michaelis said, and
noted, as quoted by Reuters, that he was "certainly not willing to accept that Washington is
deciding at the end of the day that we should not rely on Russian gas and that we should not
complete this pipeline project."
"Germany is totally controlled by Russia, because they will be getting from 60 to 70 percent
of their energy from Russia and a new pipeline," President Trump said.
Germany continues to see Nord Stream 2 as a commercial venture, although it wants clarity on
the future role of Ukraine as a transit route, German government spokeswoman Ulrike Demmer
said last month.
Nord Stream 2 is designed to bypass Ukraine, and Ukraine fears it will lose transit fees and
leverage over Russia as the transit route for its gas to western Europe.
Poland, one of the most outspoken opponents of Nord Stream 2, together with the United
States, issued a joint statement last month during the visit of Polish President Andrzej Duda
to Washington, in which the parties
said , "We will continue to coordinate our efforts to counter energy projects that threaten
our mutual security, such as Nord Stream 2."
The president of the Federation of German Industry (BDI), Dieter Kempf, however, told
German daily Süddeutsche Zeitung last month, that he had "a big problem with a third
country interfering in our energy policy," referring to the United States. German industry
needs Nord Stream 2, and dropping the project to buy U.S. LNG instead wouldn't make any
economic sense, he said. U.S. LNG currently is not competitive on the German market and would
simply cost too much, according to Kempf.
The lower price of Russian pipeline gas to Europe is a key selling point -- and one that
Gazprom uses often. Earlier this month Alexey Miller, Chairman of Gazprom's Management
Committee, said at a gas forum in
Russia that "Although much talk is going on about new plans for LNG deliveries, there is no
doubt that pipeline gas supplies from Russia will always be more competitive than LNG
deliveries from any other part of the world. It goes without saying."
The issue with Nord Stream 2 -- which is already
being built in German waters -- is that it's not just a commercial project. Many in Europe
and everyone in the United States see it as a Russian political tool and a means to further
tighten Russia's grip on European gas supplies, of which it already holds more than a third.
But Germany wants to discuss the future of this project within the European Union, without
interference from the United States.
Maybe the US thinks it will also have to go out of its way to accommodate Germany and the
EU by offering to construct the necessary infrastructure in Europe for the import of LNG at
exorbitant US prices. MAGA. How long would that take?
The question is, is it inevitable that the EU/US relationship goes sour?
Continentalism is on the rise generally, and specifically with brexit, couple this with the
geographical gravity of the EU-Russia relationship makes a EU-Russia "alliance" make more
sense than the EU-US relationship.
Ever since the death of the USSR and the accession of the eastern states to the EU, the
balance of power in the EU-US relationship has moved in ways it seems clear that the US is
uncomfortable with.
To all of this we must add the policy differences between the US and the EU – see the
GDPR and the privacy shield for example.
I have said it before – the day Putin dies (metaphorically or literally) is a day
when the post war order in Europe may die, and we see the repairing of the EU-Russia
relationship (by which I mean the current regime in Russia will be replaced with a new
generation far less steeped in cold war dogma and way more interested in the EU).
"The post war order in Europe will doe and we see the repairing of the EU/Russian
relationship "
I think you mean the German/Russian relationship and that repair has been under way for
more than a decade. The post war order is very very frayed already and looks close to a break
point.
This Nord Stream 2 story illustrates more than most Germany's attitudes to the EU and to
the world at large. Germany used its heft within the EU to 1 ) get control of Russian gas
supplies into Central Europe (Germany insisted that Poland could not invest in the project
apparently and refused a landing point for the pipeline in Poland. Instead it offered a flow
back valve from Germany into Poland that the Germans would control) 2) thumb its nose at the
US while outwardly declaring friendship through the structures provided by EU and NATO
membership.
Even Obama suspected the Germans of duplicity (the Merkel phone hacking debacle).
It's is this repairing relationship that will set the tone for Brexit, the Ukraine war,
relations between Turkey and EU and eventually the survival of the EU and NATO. The point ?
Germany doesn't give a hoot about the EU it served its purpose of keeping Germany anchored to
the west and allowing German reunification to solidify while Russia was weak. Its usefulness
is in the past now, however from a German point of view.
Putin dying isn't going to change Washington. As long as NATO exists, Washington will
continue to use it to drive a wedge between the EU and Russia. Merkel foolishly went along
with all of Washington's provocations against Russia in Ukraine, even though none of it
benefited Germany's national interest.
Come to think of it, maybe Merkel dying off would improve German-Russian relations
She did indeed go along with all the provocations and she sat back and said nothing while
Putin railed against US sanctions. Yet Putin didn't blame Germany or the EU. Instead he said
that the Germany/EU is currently trapped by the US and would come to their senses in time. He
is leaving the door open.
Germany won't lose if NATO and the EU break up. It would free itself from a range
increasingly dis-functional entities that, in its mind, restrict its ability to engage in
world affairs.
I think you are right. Russia and Germany are coming together and there's nothing we can
do about it because "private commercial venture." Poetic justice.
And the economic link will
lead to political links and we will have to learn a little modesty. The ploy we are trying to
use, selling Germany US LNG could not have been anything more than a stopgap supply line
until NG from the ME came online but that has been our achilles heel.
It feels like even if
we managed to kick the Saudis out and took over their oil and gas we still could no longer
control geopolitics. The cat is out of the bag and neoliberalism has established the rules.
And it's pointless because there is enough gas and oil and methane on this planet to kill the
human race off but good.
That exactly right. and Gerhard Schroder has been developing those political relationships
for more than a decade. The political/economic links already go very deep on both sides.
if the rapprochement is occurring, Brexit, the refugee crisis and Italy's approaching debt
crisis are all just potential catalysts for an inevitable breakup. Germany likely views these
as potential opportunities to direct European realignment rather than existential crises to
be tackled.
What US LNG exports? The US is a net importer of NG from Canada. US 2018 NG consumption
and production was 635.8 and 631.6 Mtoe respectively (BP 2018 Stats). Even the BP 2018
Statistical Review of World Energy has an asterisks by US LNG exports which says, "Includes
re-exports" which was 17.4 BCM or 15 Mtoe for 2018.
The US produces annually about 33,000,000 million cubic feet and consumes 27.000.000
million according to the EiA . So there is an
excess to export indeed.
Natural gas negotiations involve long term contracts so there are lots of money to
exchange ensuring business for many years to come.
Such a contract has recently been signed between Poland's PGNiG and American Venture
Global Calcasieu & Venture Global Plaquemines LNG (Lousiana). According to the Poland
representative this gas would be 20% cheaper than Russian gas. (if one has to believe it).
Those contracts are very secretive in their terms. This contract in particular is still
dependent on the termination of liquefaction facilities in Lousiana.
I don't know much about NG markets in Poland but according to Eurostat prices for
non-household consumers are very similar in Poland, Germany, Lithuania or Spain.
Gas contracts are usually linked to oil prices. A lot of LNG is traded as a fungible
product like oil, but that contract seems different – most likely its constructed this
way because of the huge capital cost of the LNG facilities, which make very little economic
sense for a country like Poland which has pipelines criss-crossing it. I suspect the
terminals have more capacity that the contract quantity – the surplus would be traded
at market prices, which would no doubt be where the profit margin is for the supplier (I
would be deeply sceptical that unsubsidised LNG could ever compete with Russia gas, the
capital costs involved are just too high).
IIRC, the US is pushing LNG because fracking has resulted in a lot of NG coincident with
oil production. They've got so much NG coming out of fracked oil wells that they don't know what to do
with it and at present, a lot of it just gets flared, or leaks into the atmosphere.
IMO, the folks responsible for this waste are as usual, ignoring the 'externalities', the
costs to the environment of course, but also the cost of infrastructure and transport related
to turning this situation to their advantage.
So they turn to bullying the EU to ignore the price advantage that Russia is able to
offer, due to the economics of pipeline transport over liquefaction and ocean transport, and
of course the issues of reliability and safety associated with ocean transport, and
high-pressure LNG port facilities compared to pipelines.
This doesn't even take into account the possibility that the whole fracked gas supply may
be a short-lived phenomenon, associated with what we've been describing here as basically a
finance game.
Trump will probably offer the EU 'free' LNG port facilities financed by low-income
American tax-payers, and cuts to 'entitlements', all designed to MAGA.
Just to clarify, fracked gas is not usually a by-product of oil fracking – the
geological beds are usually distinct (shale gas tends to occur at much deeper levels than
tight oil). Gas can however be a byproduct of conventional oil production. 'wet' gas
(propane, etc), can be a by-product of either.
It's common for oil wells both fracked and conventional to produce natural gas (NG) though
not all do. The fracked wells in the Permian Basin are producing a great deal of it.
Natural gas does indeed form at higher temperatures than oil does and that means at
greater depth but both oil and NG migrate upward. Exploration for petroleum is hunting for
where it gets captured at depth, not for where it's formed. Those source rocks are used as
indicators of where to look for petroleum trapped stratigraphically higher up.
It seems we have been maneuvering for a while to raise our production of LNG and oil
(unsustainably) in order to become an important substitute supplier to the EU countries. It
sort of looks like our plan is to reduce EU opposition to our attacking Russia. Then we will
have China basically surrounded. This is made easier with our nuclear policy of "we can use
nuclear weapons with acceptable losses." What could go wrong?
I wonder what the secret industry studies say about the damage possible from an accident
at a LNG port terminal involving catastrophic failure and combustion of the entire cargo of a
transport while unloading high-pressure LNG.
They call a fuel-air bomb the size of a school bus 'The Mother of all bombs', what about
one the size of a large ocean going tanker?
Many years ago, someone was trying to build an LNG storage facility on the southwest shore
of Staten Island 17 miles SW of Manhattan involving very large insulated tanks. In spite of
great secrecy, there came to be much local opposition. At the time it was said that the
amount of energy contained in the tanks would be comparable to a nuclear weapon. Various
possible disaster scenarios were proposed, for example a tank could be compromised by
accident (plane crashes into it) or terrorism, contents catch fire and explode, huge fireball
emerges and drifts with the wind, possibly over New Jersey's chemical farms or even towards
Manhattan. The local opponents miraculously won. As far as I know, the disused tanks are
still there.
A 28-inch LNG underground pipeline exploded in Nigeria and the resulting fire engulfed
an estimated 27 square kilometers.
Here's one from Cleveland;
On 20 October 1944, a liquefied natural gas storage tank in Cleveland, Ohio, split and
leaked its contents, which spread, caught fire, and exploded. A half hour later, another
tank exploded as well. The explosions destroyed 1 square mile (2.6 km2), killed 130, and
left 600 homeless.
The locals in Nigeria drill hole in pipeline to get free fuel.
The Nigeria Government has been really wonderful about sharing the largess and riches of
their large petroleum field in the Niger delta. Mostly with owners of expensive property
around the world.
I am trying to think of what might be in it for the Germans to go along with this deal but
cannot see any. The gas would be far more expensive that the Russian deliveries. A fleet of
tankers and the port facilities would have to be built and who is going to pick up the tab
for that? Then if the terminal is in Louisiana, what happens to deliveries whenever there is
a hurricane?
I cannot see anything in it for the Germans at all. Trump's gratitude? That and 50 cents
won't buy you a cup of coffee. In any case Trump would gloat about the stupidity of the
Germans taking him up on the deal, not feel gratitude. The US wants Germany to stick with
deliveries via the Ukraine as they have their thumb on that sorry country and can threaten
Germany with that fact. Nord Stream 2 (and the eventual Nord Stream 3) threaten that
hold.
The killer argument is this. In terms of business and remembering what international
agreements Trump has broken the past two years, who is more reliable as a business partner
for Germany – Putin's Russia or Trump's America?
I find it impossible to believe that a gas supplier would keep to an artificially low LNG
contract if, say, a very cold winter in the US led to a shortage and extreme price spike.
They'd come up with some excuse not to deliver.
My recollection was that there was a law that prohibited export-sales of domestic US
hydrocarbons. That law was under attack, and went away in the last couple years?
LNG with your F35? said the transactional Orangeman
The fracked crude is ultralight and unsuitable for the refineries in the quantities
available, hence export, which caused congress to change the law. No expert, but understand
that it is used a lot as a blender with heavier stocks of crude, quite a bit going to
China.
The petroleum industry has been bribing lobbying the administration for quite a
while to get this policy in place, The so called surplus of NG today (if there is), won't
last long. Exports will create a shortage and will result in higher prices to all.
also, if Germany were to switch to American LNG, for how long would this be a reliable
energy source? Fracking wells are short lived, so what happens once they are depleted? who
foots the bill?
I just love the fact that Trump is publicly calling out Merkel on this; she has been
nothing but two-faced and hypocritical on the Russia question.
She was one of the ones who pushed the EU hard, for example, to sanction Russia in the
wake of the coup in Ukraine (which she had also supported). And then she pushed the EU hard
to kill off the South Stream pipeline, which would have gone through SE Europe into Austria.
She used the excuse of 'EU solidarity' against 'Russian aggression' to accomplish that only
to then turn around and start building yet another pipeline out of Russia and straight
into Germany! The Bulgarians et al. must feel like real idiots now. It seems Berlin wants to
control virtually all the pipelines into Europe.
So, three cheers for Trump embarrassing Merkel on this issue!
Putting money aside for a moment, Trump, as well as the entire American establishment,
doesn't want Russia "controlling" Germany's energy supplies. That's because they want America
to control Germany's energy supplies via controlling LNG deliveries from America to Germany
and by controlling gas supplies to Germany through Ukraine. This by maintaining America's
control over Ukraine's totally dependent puppet government. The Germans know this so they
want Nord Stream 2 & 3.
Ukraine is an unreliable energy corridor on a good day. It is run by clans of rapacious
oligarchs who don't give one whit about Ukraine, the Ukrainian "people", or much of anything
else except business. The 2019 presidential election may turn into a contest among President
Poroshenko the Chocolate King, Yulia Tymoshenko the Gas Princess, as well as some others
including neo Nazis that go downhill from there. What competent German government would want
Germany's energy supplies to be dependent on that mess?
It has been said that America's worst geopolitical nightmare is an
economic-political-military combination of Russia, Iran, and China in the Eurasian
"heartland". Right up there, if not worse, is a close political-economic association between
Germany and Russia; now especially so since such a relationship can quickly be hooked into
China's New Silk Road, which America will do anything to subvert including tariffs,
sanctions, confiscations of assets, promotion of political-ethnic-religious grievances where
they may exist along the "Belt-Road", as well as armed insurrections, really maybe anything
short of all out war with Russia and China.
Germany's trying to be polite about this saying, sure, how about a little bit of LNG along
with Nord Stream 2 & 3? But the time may come, if America pushes enough, that Germany
will have to make an existential choice between subservience to America, and pursuit of it's
own legitimate self interest.
It's hard to make NG explode, as it is with all liquid hydrocarbons. It is refrigerated,
and must change from liquid to gaseous for, and be mixed with air.
I've also worked on a Gas Tanker in the summer vacations. The gas was refrigerated, and
kept liquid. They is a second method, used for NG, that is to allow evaporation from the
cargo, and use it as fuel for the engine (singular because there is one propulsion engine on
most large ships) on the tanker.
The macabre case of missing journalist Jamal Khashoggi raises the question: did Saudi rulers
fear him revealing highly damaging information on their secret dealings? In particular,
possible involvement in the 9/11 terror attacks on New York in 2001.
Even more intriguing are US media
reports now emerging that American intelligence had snooped on and were aware of Saudi
officials making plans to capture Khashoggi prior to his apparent disappearance at the Saudi
consulate in Istanbul last week. If the Americans knew the journalist's life was in danger, why
didn't they tip him off to avoid his doom?
Jamal Khashoggi (59) had gone rogue, from the Saudi elite's point of view. Formerly a senior
editor in Saudi state media and an advisor to the royal court, he was imminently connected and
versed in House of Saud affairs. As one commentator cryptically put it: "He knew where all the
bodies were buried."
For the past year, Khashoggi went into self-imposed exile, taking up residence in the US,
where he began writing opinion columns for the Washington Post.
Khashoggi's articles appeared to be taking on increasingly critical tone against the heir to
the Saudi throne, Crown Prince Mohammed bin Salman. The 33-year-old Crown Prince, or MbS as
he's known, is de facto ruler of the oil-rich kingdom, in place of his aging father, King
Salman.
While Western media and several leaders, such as Presidents Trump and Macron, have been
indulging MbS as "a reformer", Khashoggi was spoiling this Saudi public relations effort by
criticizing the war in Yemen, the blockade on Qatar and the crackdown on Saudi critics back
home.
However, what may have caused the Saudi royals more concern was what Khashoggi knew about
darker, dirtier matters. And not just the Saudis, but American deep state actors as as
well.
He was formerly a
media aide to Prince Turki al Faisal, who is an eminence gris figure in Saudi intelligence,
with its systematic relations to American and British counterparts. Prince Turki's father,
Faisal, was formerly the king of Saudi Arabia until his assassination in 1975 by a family
rival. Faisal was a half-brother of the present king, Salman, and therefore Prince Turki is a
cousin of the Crown Prince – albeit at 73 more than twice his age.
For nearly 23 years, from 1977 to 2001, Prince Turki was the director of the Mukhabarat, the
Saudi state intelligence apparatus. He was instrumental in Saudi, American and British
organization of the mujahideen fighters in Afghanistan to combat Soviet forces. Those militants
in Afghanistan later evolved into the al Qaeda terror network, which has served as a cat's paw
in various US proxy wars across the Middle East, North Africa and Central Asia, including
Russia's backyard in the Caucasus.
Ten days before the 9/11 terror attacks on New York City, in which some 3,000 Americans
died, Prince Turki retired from his post as
head of Saudi intelligence. It was an abrupt departure, well before his tenure was due to
expire.
There has previously been speculation in US
media that this senior Saudi figure knew in advance that something major was going down on
9/11. At least 15 of the 19 Arabs who allegedly hijacked three commercial airplanes that day
were Saudi nationals.
Prince Turki has subsequently been named in a 2002 lawsuit mounted by families of 9/11
victims. There is little suggestion he was wittingly involved in organizing the terror plot.
Later public comments indicated that Prince Turki was horrified by the atrocity. But the
question is: did he know of the impending incident, and did he alert US intelligence, which
then did not take appropriate action to prevent it?
Jamal Khashoggi had long served as a trusted media advisor to Prince Turki, before the
latter resigned from public office in 2007. Following 9/11, Turki was the Saudi ambassador to
both the US and Britain.
A tentative idea here is that Khashoggi, in his close dealings with Prince Turki over the
years, may have gleaned highly sensitive inside information on what actually happened on 9/11.
Were the Arab hijackers mere patsies used by the American CIA to facilitate an event which has
since been used by American military planners to launch a global "war on terror" as a cover for
illegal wars overseas? There is a huge body of evidence that the 9/11 attacks were indeed a
"false flag" event orchestrated by the US deep state as a pretext for its imperialist
rampages.
The apparent abduction and murder last week of Jamal Khashoggi seems such an astoundingly
desperate move by the Saudi rulers. More evidence is emerging from Turkish
sources that the journalist was indeed lured to the consulate in Istanbul where he was
killed by a 15-member hit squad. Reports are saying that the alleged assassination was ordered
at the highest level of the Saudi royal court, which implicates Crown Prince MbS.
Why would the Saudi rulers order such a heinous act, which would inevitably lead to acute
political problems, as we are seeing in the fallout from governments and media coverage around
the world?
Over the past year, the House of Saud had been appealing to Khashoggi to return to Riyadh
and resume his services as a media advisor to the royal court. He declined, fearing that
something more sinister was afoot. When Khashoggi turned up in Istanbul to collect a divorce
document from the Saudi consulate on September 28, it appears that the House of Saud decided to
nab him. He was told to return to the consulate on October 2. On that same day, the 15-member
group arrived from Riyadh on two private Gulfstream jets for the mission to kill him.
Official Saudi claims stretch credulity. They say Khashoggi left the consulate building
unharmed by a backdoor, although they won't provide CCTV images to prove that. The Turks say
their own CCTV facilities monitoring the front and back of the Saudi consulate show that
Khashoggi did not leave the premises. The Turks seem confident of their claim he was murdered
inside the building, his remains dismembered and removed in diplomatic vehicles. The two
private jets left the same day from Istanbul with the 15 Saudis onboard to return to Riyadh,
via Cairo and Dubai.
To carry out such a reckless act, the Saudis must have been alarmed by Khashoggi's critical
commentaries appearing in the Washington Post. The columns appeared to be delivering more and
more damaging insights into the regime under Crown Prince MbS.
The Washington Post this week is
reporting that US intelligence sources knew from telecom intercepts that the Saudis were
planning to abduct Khashoggi. That implicates the House of Saud in a dastardly premeditated act
of murder.
But furthermore this same disclosure could also, unwittingly, implicate US intelligence. If
the latter knew of a malicious intent towards Khashoggi, why didn't US agents warn him about
going to the Saudi consulate in Istanbul? Surely, he could have obtained the same personal
documents from the Saudi embassy in Washington DC, a country where he was residing and would
have been safer.
Jamal Khashoggi may have known too many dark secrets about US and Saudi intel collusion,
primarily related to the 9/11 terror incidents. And with his increasing volubility as a
critical journalist in a prominent American news outlet, it may have been time to silence him.
The Saudis as hitmen, the American CIA as facilitators.
"... He is just an agent of one Saudii faction against the MBS faction, a faction just as evil. ..."
"... After Lebanese prime minister, Saad Hariri, was kidnapped and taken to Riyadh to be re-educated (tortured) Khashoggi left Saudi Arabia . Khashoggi continued with his columns criticizing the Saudi regime, attacking its campaign in Yemen on Al Jazeera. ..."
According to an article in the Duran Khashoggi was an agent in the employ of Riyadh and
the CIA during the Soviet presence in Afghanistan.
Turki bin Faisal Al-Saud was Khashoggi's political protector. Turki bin Faisal Al-Saud was
at the center of relations between Washington and Saudi Arabia against the USSR while it was
in Afghanistan using fighters who later became known as Al Qaeda - armed and trained by
CIA:Pakistan and financed by the Saudis.
Faisal became the leader of Saudi intelligence. He was removed from his post on May 24,
2001, a few months before September 11, 2001 (convenient) .The connections he had with Osama
bin Laden led him to being sued by relatives of 9/11 directed at him and other Saudi
operatives.
In 2005, Turki bin Faisal was appointed Saudi ambassador to the US during the Bush
administration, with Khashoggi accompanying him as a media advisor. During Turki bin Faisal's
ambassadorship in Washington, Khashoggi assumed the position of head of press relations,
coming into direct contact with major national and international organs of US media.
During the Obama administration, Khashoggi supported the Obama administrations strategy of
color revolutions and the Arab Spring to extend US imperialist domination following the
disasters of Iraq and Afghanistan. He was most likely a CIA asset, perhaps also Saudi
intelligence as well
When MBS became the strongman holding power in Saudi Arabia, he triggered a near war with
Qatar with Trumps blessing, and was unhappy over the role of Al Jazeera, which often hosted
Khashoggi and was increasingly critical of MBS.
So whatever the story is I am not losing any sleep over Khashoggi. He is just an agent
of one Saudii faction against the MBS faction, a faction just as evil. Kind of like the
pick between agents of the 2 factions duking it out in the US. Evil does vs Evil do. There
are no white knights here.
After Lebanese prime minister, Saad Hariri, was kidnapped and taken to Riyadh to be
re-educated (tortured) Khashoggi left Saudi Arabia . Khashoggi continued with his columns
criticizing the Saudi regime, attacking its campaign in Yemen on Al Jazeera.
What hypocrisy on display by the US. Unfuckingbelievable. Such concern for a journalist, such
outrage!
There is currently a case working its way through the court system (here in the US)
brought by two journalists, one of them an American, where they are pleading to have their
names removed from the US "kill list". They say their inclusion on the list is erroneous, and
ask that they be given a chance to show that they are not, in fact, terrorists before a drone
blows them into pieces. They are represented by Reprieve lawyers, and they joined their two
suits together as co-plainiffs, although it now appears that the foreign-born journalist was
basically told by the judge he was shit out of luck, having "no standing", since he didn't
sufficiently prove that he was on the list. (He had found his name listed as a "highest
scoring target" on some of Edward Snowden's leaked NSA materials, but that was not enough
"proof" for the judge.)
The American journalist is Bilal Kareem, and the other is a journalist from Pakistan named
Ahmad Zaidan. BTW, both these men were originally targeted under the Obama administration,
but their names remain on the list under Trump. And Trump has increased the use of these
targeted drone killings by 4 to 5 times the number of Obama's, who himself had increased the
assassination program 10 fold over Bush' numbers. Trump has also loosened the "rules" about
where these drone killings can take place, and who can be targeted. US drone warfare has
taken the lives of some 10,858 individuals since 2004, according to the Bureau of
Investigative Journalism (TBIJ).
The Washington Post and the Middle East Monitor both have good stories about the case, but
the best article by far is Matt Taibbi's article in Rolling Stone published on 19 July.
According to
NYT , Khashoggi "had expressed concern to a friend on Monday that he could be
kidnapped and returned to Saudi Arabia if he visited the consulate". He went in at
1:30pm , while his friend and fiancée were waiting outside till 9:00pm .
Isn't it a bit odd that his friend and fiancée, while fully aware the danger of him
being kidnapped insider the consulate, waited for 7:30 hours before alerting Turkish
authorities? Normally it takes 2 or 3 hours get a document, esp. already processed ones.
Why didn't his friend and fiancée alert the Turkish police earlier? Esp. "he
left his cellphone outside with Hatice, who had instructions to alert his friends if Mr.
Khashoggi did not return".
Mr. Khashoggi's wife had remained in Saudi Arabia while he was no longer able to return
freely. Their separation had led to a divorce, and he wanted to remarry to a Turkish woman.
Normally, you don't divorce your wife/husband because of one-year's separation. According
to this NYT article, Khashogg divided his time between the Washington, D.C., London and
Istanbul, how long did he come to know his fiancée? Isn't it a bit too
rush/risky for a 59-year old man suddenly decided to divorce long-year wife and marry a new
Turkish girl friend? Could it be a honey trap?
" Odd dates ?"
- Oct. 2, Khashoggi disappeared.
- Oct. 3, Trump told his supporters that Saudi could last two weeks without American
support.
- Oct. 6, MbS said Suadi could survive 2000 years without US help .
- Now full-blown MSM storm, State Deparment is closely monitor the whole affair, Turkish
government is feeding the media with all sorts of lurid details and claims. (Isn't it much
easier and simpler just to kidnap/shot him on the streets of Istanbul or London than
dismembering his body inside Istanbul consulate?)
Now Saudi is "willing to cooperate" with Turkey, American priest Brauson is set free, plus
MbS now has probably to purchase tens of billions, if not hundreds of billions of US
armaments. What a "coincident" win-win situation for Erdy and Trump.
As another poster commented, something is missing...
It is like a well choreograhped drame, Skripals were the same, this also is tooooo nice
fitting together... Hmfr!
Qui bono? Who makes money on this? I certainly cannot answer that, but lets play safe : The
Russians did it!
They beamed up Kasshoggi to their base on the dark side of the moon, the re killed him in
civilized manner, fucking him to death with nice looking whores and spoonfeeding him Beluga
caviar and interjected wit sips of Russian Starka. He was then made to mush and beamed back
into the Saudi consulate making a real mess. Now poor headchop promoter is all over the
place! He must love that up in his muslum heaven with 72 old hags. There is no martyrdom in
being beamed to the moon and put through a garden shredder, that is nothing special.
So now the Saudi's has Khassoggi al over their faces (literally :)) and the Turks eye a new
way to betray someone (Putin, wake up!!). Ever since democracy was bestowed on these people,
they have made a mess of it.
Back in the day (when I was gung ho Army boy), it was OK for a Turk officer to shoot dead a
couple of conscripts a year, no problemo, the sentries with weapons had no live rounds hi-hi.
Turkey does not need a hard shove and it will crumble, and the Americans will intervene,
unless Russia is first.
This game is about Turkey, and not goat herders in Saudi Sodoma. They have hardly oil left
and the plebs are angry.
The debate about peak oil demand always tends to focus on how quickly electric vehicles will
replace the internal-combustion engine , especially as EV sales are accelerating. However, the
petrochemical sector will be much more difficult to dislodge , and with alternatives far
behind, petrochemicals will account for an increasing share of crude oil demand growth in the
years ahead.
You would have to wonder why Putin opened with the following remarks if you were ignorant of
the global situation:
"You came here to hold an open and trust based discussion on the issues of the
global energy agenda .
"We believe that progress in global energy, as well as the stable energy security of our
entire planet, can only be achieved through global partnership, working in accordance with
general rules that are the same for everyone, and, of course, through conducting transparent
and constructive dialogue among market players which is not politically motivated but is
based on pragmatic considerations and an understanding of shared responsibilities and mutual
interests." [My Emphasis]
His characterization of Skripal came during the Q&A, and there are likely more gems to
be had from that session.
Waging Illegal Aggressive War, Illegal sanctions, Violations of UNSC Resolutions, Breaking
of Contracts, and Ongoing violation of the UN Charter and US Constitution since 1945 are just
a few of the reasons why it must be called the Outlaw US Empire as no other term properly
describes it. 80 years ago, appeasement didn't work, and it's clear it doesn't work today
either. Together the world's nations must bring the Outlaw US Empire to heel and make it obey
the Rule of Law and abandon its unilateral Rule of the Gun.
Ah, there it is. The reason behind this strange week, the dots that few will connect.
Putin speaking at a conference about "sustainable energy in a changing world."
Right there, two phrases that are certain to set off Exxon corp and their puppets in the
political theater. Say "sustainable energy" around an oil giant and watch them shudder. The,
mention "changing world" to any of that class and they have nightmares about their children
having to learn Chinese. Put them all together in one title of a conference at which Putin
himself is speaking and well, now we know why the Shakespearian chorus of Exxon's oil
industry bit players like former Texas Governor Rich "the hair" Perry and former Texas
Senator Hutchinson are suddenly frothing at the bit about the Park Rangers mounting a naval
blockade of Russia (see Yogi Bear for how that's likely to turn out, hey booboo?) and nuclear
first strikes on Russia.
Putin, Sustainable Energy, Changing world .. enough to send some senior executive geezers
at Exxon grabbing for their nitro pills and speed dialing their cardiologists.
For those who like to call Russia "a gas station masquerading as a country" here is Putin's
note on ecology:
"A separate ambitious task for the future is the development of renewable energy sources,
especially in remote, difficult-to-access areas of this country, such as Eastern Siberia, and
the Far East. This is opening a great opportunity for our vast country, the world's largest
country with its diverse natural and climatic conditions.
Friends, in conclusion I would like to tell you the following: sustainable and steady
development of the energy industry is a key condition for dynamic growth of the world
economy, enhancing living standards and improving the wellbeing of all people on our
planet.
Russia is open to cooperation in the energy industry in the interests of global energy
security and for the benefit of the future generations. And we certainly rely on active
dialogue on these subjects and cooperation.
Nothing is going to save us from our energy problems, nothing and especially not renewables.
Spend some time reading and studying Gail Tverberg's material and one will quickly see we
are heading for a financial catastrophe because of affordability issues. On the one hand
there isn't enough money to pay for extraction of oil and gas and on the other the consumer
is strapped because of high pump prices etc. But like she herself says if only the wages of
non elite workers could rise high enough to help pay for the increased costs then likely we
wouldn't have a problem. That though is clearly not happening.
I am deeply afraid we are going to wake up to a world very different from the one we went
to sleep in. Just this one article alone expresses the grave situation the world is in:
Every time Chuck Paar makes the over 500-mile round trip from his home in Mt. Jewett,
Pennsylvania, to Buffalo and Syracuse, New York, his 18-wheel tractor trailer carries 25 tons
of sand or cement and burns about $265 of diesel in one day. That's up from as little as $166
for the same route two years ago, and the increased cost of fuel is squeezing already thin
industry profit margins.
"... "Nobody wants to get caught short, full in the knowledge that more Iranian barrels are poised to be removed from the market, ..."
"... "Against this backdrop of dwindling Iranian oil supplies, the focus will turn to meek levels of global, or more accurately, Saudi spare capacity, ..."
"... "this essentially leaves the world's only swing producer powerless to prevent a supply shock and subsequent price spike in the final quarter of this year," ..."
Crude prices will likely reach $100 per barrel for the first time since 2014, and OPEC has
no leverage to prevent such a scenario, an analyst has warned. "Nobody wants to get caught
short, full in the knowledge that more Iranian barrels are poised to be removed from the
market, " Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note
published on Monday, as quoted by CNBC. Read more Russia's September
oil production set for post-Soviet record high
On Monday, Brent crude surged above $83 per barrel as Iran continues losing its crude
exports ahead of US sanctions which come into force in November. "Against this backdrop of
dwindling Iranian oil supplies, the focus will turn to meek levels of global, or more
accurately, Saudi spare capacity, " Brennock said.
Saudi Arabia has been unable to offset the lost Iranian crude exports. And "this
essentially leaves the world's only swing producer powerless to prevent a supply shock and
subsequent price spike in the final quarter of this year," he added.
Iran could lose up to 1.5 million barrels per day when US sanctions kick in early November.
In May, Iran sold 2.71 million bpd abroad, nearly three percent of daily global oil
consumption.
The US is rapidly increasing its production. In September, it hit a record 11.1 million bpd,
according to data from the Energy Information Administration (EIA). That is an increase of
almost a third since 2016. However, the increase in US production is not enough to offset the
loss of Iranian output.
Ryan Chilcote: President Putin, let's get back to geopolitics. When you were talking
about oil – and when everyone talks about oil and disruptions on the market, they don't
just talk about Iran, they talk about Venezuela – you mentioned Venezuela at the
beginning of our conversation. Last year, I interviewed President Maduro, the President of
Venezuela, here. Venezuela is an ally of Russia. Russia has a lot of oil interests in
Venezuela. Oil production in Venezuela is not going well, and politically, things are going
very poorly, as you know. Millions of people are leaving the country. There's hunger. There is
a lot of talk in the United States, and not only in the United States, in Central and South
America, that perhaps it's time for President Maduro to go. Do you agree with that?
Vladimir Putin: This is up to the people of Venezuela, not anyone else in the
world.
As for various means of influencing the situation in Venezuela, there should be no such
thing All of us influence each other in one way or another, but it should not be done in a way
that makes the civilian population even worse off. This is a matter of principle.
Should we rejoice that life is extremely difficult for people there and want to make things
even worse with a view to overthrowing President Maduro? He was recently targeted in a
terrorist attack, an assassination attempt. Shall we condone such methods of political
resistance too?
I think this is absolutely unacceptable. This and anything like it. The people of the
country should be given a chance to shape their destiny themselves. Nothing should be imposed
from the outside.
This is what has emerged historically in Venezuela. What has emerged historically in the
Persian Gulf has emerged there, and the same in Europe, America and Southeast Asia. Nobody
should go in there like a bull in a china shop without understanding what is taking place
there, instead thinking only that the bull is one of the largest and smartest animals. It is
necessary to take a look and give people a chance to figure it out. I have a very simple
outlook on this.
Indeed, we have now met with the Secretary General and spoke
about our cooperation in detail. I would like to draw your attention to the fact that probably for the first time
in history all participants in the agreements honoured their commitments in full. I believe Russia made a commitment
to reduce production by 30,000 barrels, and we did this, just like all other participants in this agreement.
The market is now balanced. The current growth of oil prices
is by and large not a result of our efforts but triggered by attendant circumstances, expectations of decisions
on Iran – incidentally these decisions are absolutely illegal and harmful to the world economy. The fall in oil
production in North Africa is also linked with political circumstances – a civil war and so on. The reduction
in Venezuela is also taking place for domestic political reasons and in connection with the restrictions it has
introduced. This is what it is all about.
As you said, President Trump considers this price high.
I think he is right to some extent but this suits us very well – $65–$70–$75 per barrel. This is quite enough to ensure
the effective performance of energy companies and the investment process. But let us be straight – such prices have
largely been produced by the activities of the US administration. I am referring to expectations of sanctions against
Iran and political problems in Venezuela. Look what is happening in Libya – the state is destroyed. This is the result
of irresponsible policy that is directly affecting the world economy. Therefore, we must work closer with each other,
not only in the energy industry but also in the political area so as to prevent such setbacks.
As for increasing production – we have already increased it
by 400,000 barrels as we agreed with our partners. We can raise it by another 200,000–300,000 barrels per day if need
be.
Ryan Chilcote
: President Putin, is it right
for the President of the United States to be so actively trying to manage the price of oil? We're coming up on elections
in the United States, he's concerned about the price of gas. A gallon of gas in the United States costs almost $3.
Traditionally, voters punish the party in power when prices rise ahead of elections. Is he doing the right thing,
or actually should he step out of the oil market and let the market dictate what happens?
Vladimir Putin
: I have already said this and want to repeat
it again: we had a very good meeting with the President of the United States in Helsinki. But if we had talked about
the issue we are discussing now, I would have told him: Donald, if you want to find out who is guilty for the increase
in prices, you should look in the mirror. That's the truth.
We have just spoken about the geopolitical factors behind
the price hikes. They exist and really play a role in the market. It is better not to interfere in these market
processes, not to try and get some competitive advantage by using political instruments and not to try to regulate
prices as the Soviet Union did. This does not end well. After all, when talking about our negotiated actions with OPEC
we do not use non-market instruments. We are merely matching supply and demand in the market, no more than that.
Everything else today has to do with geopolitical factors that influence prices.
As for gas prices, they are calculated on the basis of oil
prices. Oil prices are produced by the market whereas gas prices are linked to oil prices. Gas prices fluctuate
depending on oil prices with a small time lag of five to six months. That is all.
What is happening in the United States? The United States is
one of the world's biggest producers of both oil and gas. We know everything about new technology that is being
countered by environmentalists. I agree with them, this production is often carried out using barbarous methods we do
not use.
Who is trying to exert pressure on the administration? I do
not know. Let us talk about the energy industry. Please do not involve me in domestic political processes and squabbles
in the United States. It is for you to figure out or else we will be accused again of meddling in the domestic political
life of the US.
Ryan Chilcote:
When I spoke about the price
of gasoline in the United States, a gallon of gasoline, I meant the price of petrol, of "benzin," not "gaz."
Vladimir Putin
: As you understand, this is the price
of the end product and this applies to oil products. This price is not simply formed from the primary price of oil
or gas if we are talking about gas fuel. State policy also exerts an influence on the final price for consumers.
And what about taxes? Why do some European countries double
prices on our gas before it reaches the final consumers? This is all state policy.
So it would be best not to point your finger at energy
producers all the time. You should figure out what economic policy is being pursued in a country and what is being done
to make sure the product reaches the customers at affordable prices. That is all.
Ryan Chilcote
: President Putin, let me ask you about this
EU initiative. What do you make of it?
Vladimir Putin
:
(commenting on the EU initiative
to protect European companies in connection with US sanctions against Iran)
It is a bit delayed but better late than
never. It is delayed because quite recently the President of France speaking, I believe, in New York directly announced
the need to enhance the economic sovereignty of the European Union and reduce its dependence on the United States. This
is certainly right.
And how can it be otherwise if, as I have already said,
someone is trying to gain competitive advantages in business by using political instruments? I think nobody will like
this but this is happening and we are seeing this today.
This is why Europe is thinking about some new opportunities
in connection with these circumstances, for instance about dollar-free settlements that incidentally will undermine
the dollar. In this context – I have said this many times but would like to repeat it again – I believe that our
American partners are committing a huge strategic mistake and undermining confidence in the dollar as today's only
reserve currency. They are undermining confidence in it as a universal instrument and are really biting the hand that
feeds.
This is strange, even surprising, but I think this is
a typical mistake made by any empire when people believe nothing will happen, that everything is so powerful, so strong
and stable that there will be no negative consequences. But no, they will come sooner or later. This is the first point.
And the second point, Europe wants to fulfil its
international commitments – this is how we understand our European partners – in this case, as regards Iran's nuclear
deal, and sees in it, as we do, an element of stability in global affairs, in global politics, which, in one way
or another, is reflected in the global economy, as we have already noted.
< >
Ryan Chilcote:
President Putin, I'd like to go back
to Iran for a second. One of the things that the United States would like to see Iran do is to obviously withdraw from
Syria. The US national security advisor just last week said that the United States is going to now stay in Syria as long
as Iran and its proxies are there. Russia has been very clear. Russia says that the US military's presence in Iran is
illegal. What can you do about the US being in Syria?
Vladimir Putin
: There are two options available
to remedy the situation.
The first is that the United States must obtain the mandate
of the UN Security Council to have its armed forces on the territory of another country, in this case Syria, or receive
an invitation from the legitimate Syrian government to deploy its troops there for whatever reason. International law
does not allow the presence of any country on the territory of another country for other reasons.
Ryan Chilcote:
What can Russia do to change the US'
position? The US says it's going to stay, that Iran has to leave, and the US will stay until Iran pulls out of Syria. So
what can Russia do?
Vladimir Putin
: As we are all well aware, in this
particular case the United States (just read the UN Charter to see that my point is correct, and this is not news
to anyone) is violating the UN Charter and international law by its presence on the territory of another country without
the authorisation of the UN Security Council, without a corresponding resolution and without the invitation
of the government of that country. There is nothing good about it.
We have been operating on the premise that we nonetheless
cooperate with our US partners in fighting terrorism and ISIS in Syria. But as ISIS gradually ceases to exist in Syria,
there is just no other rationale, even outside the framework of international law.
What, in my opinion, can be done and what should we all
strive to achieve? We must strive to ensure that there are no foreign troops from other countries in Syria at all. This
is what we need to achieve.
Ryan Chilcote
: Including Russian forces, of course.
Vladimir Putin
: Yes, including Russian, if the Syrian
government so decides.
Ryan Chilcote
: You just struck a deal with President
Erdogan on Syria. Do you think that that's going to hold?
Vladimir Putin
: How is that related to oil?
Russian
Energy Week International Forum.
Ryan Chilcote
: It's in a very sensitive geopolitical
area.
Vladimir Putin
: Maybe it is related, since Syria also
produces energy resources and influences the market situation one way or another.
In this sense, yes, we need a stable Syria, no question about
it. I am not even talking about other aspects related to international security and fighting terrorism.
This is a very good deal (between Russia and Turkey in this
particular case), because it prevented more bloodshed. As you may recall, it includes our agreement to create
a demilitarised zone 15–20 kilometres deep, a de-escalation zone near the city of Idlib, known as the Idlib zone.
I would like to note that along with our Turkish partners we are now working to implement these agreements. We can see
it and are grateful to them for their efforts, and we will continue to work with them on this matter with the support
of Iran.
Ryan Chilcote
: Let's return to energy, or at least
more directly to energy, President Putin, and talk about Nord Stream 2. That's the pipeline that Gazprom wants to build
between Russia and Germany. Again, the President of the United States has said his opinion about this. He says that
Germany is effectively a hostage already of Russia, because it depends on Russia for so much of its energy and gas
supplies, and that it's vulnerable to "extortion and intimidation" from Russia. What do you make of that?
Vladimir Putin
: My response is very simple. Donald
and I talked about this very briefly in Helsinki. In any sale, including the sale of our gas to Europe, we are
traditionally the supplier, of pipeline gas I mean. We have been doing this since the 1960s. We are known for doing it
in a highly responsible and professional manner, and at competitive prices for the European market. In general, if you
look at the characteristics of the entire gas market, the price depends on the quantity and on sales volumes.
The distance between Russia and Europe is such that pipeline gas is optimal. And the price will always be competitive,
always. This is something all experts understand.
We have a lot of people here in this room, in the first row,
who could easily be seated next to me, and I would gladly listen to them, because each one is an expert, so each of them
can tell you that. And so Nord Stream 2 is a purely commercial project, I want to emphasise this, warranted by rising
energy consumption, including in Europe, and falling domestic production in European countries. They have to get it from
somewhere.
Russian gas accounts for around 34 percent of the European
market. Is this a lot or a little? It is not insubstantial, but not a monopoly either. Europe certainly can and does
actually buy gas from other suppliers, but American liquefied gas is about 30 percent more expensive than our pipeline
gas on the European market. If you were buying products of the same quality and you were offered the same product for 30
percent more , what would you choose? So, what are we talking about?
If Europe starts buying American gas for 30 percent more than
ours, the entire economy of Germany, in this case, would quickly become dramatically less competitive. Everyone
understands this; it is an obvious fact.
But business is business, and we are ready to work with all
partners. As you know, our German partners have already begun offshore construction. We are ready to begin as well. We
have no problems with obtaining any permits. Finland agreed, and so did Sweden, Germany, and the Russian Federation.
This is quite enough for us. The project will be implemented.
< >
Ryan Chilcote
: President Putin, did you want to jump
in here?
Vladimir Putin:
(following up on the remarks by CEO
of Royal Dutch Shell Ben van Beurden)
We understand the realities and treat all our partners with respect. We have
very good, amiable long-term relations with all our partners, including the company represented by my neighbour
on the left. This company is working in the Russian market and working with great success, but we understand everything
very well and understand the realities. We are carrying out the project ourselves. We do not and will not have any
problems here. That is to say, they may arise, of course, but we will resolve them.
Some things are beyond the realm of political intrigue. Take
supplies to the Federal Republic of Germany. Not everyone knows that the decision was made there to shut down
the nuclear power industry. But that is 34 percent of its total energy balance. We are proud of the development
of the nuclear power industry in the Russian Federation, although the figure for us is just 16 percent. We are still
thinking about how to raise it to 25 percent and are making plans. Theirs is 34 percent and everything will be closed
down. What will this vacuum be filled with? What?
Look at LNG [liquefied natural gas ] which is sold by our
various competitors and partners. Yes, LNG can and should be in the common basket of Europe and Germany. Do you know how
many ports built in Europe are used for LNG transfer? Just 25 percent. Why? Because it is unprofitable.
There are companies and regions for which it is profitable
to supply LNG and this is being done. The LNG market is growing very fast. But as for Europe, it is not very profitable,
or unprofitable altogether.
Therefore, in one way or another we have already seen Nord
Stream 1 through and its performance is excellent. Incidentally, our gas supplies to Europe are continuously growing.
Last year, I believe, they amounted to 194 billion cubic metres and this year they will add up to 200 billion cubic
metres or maybe even more.
We have loaded practically all our infrastructure facilities:
Blue Stream to Turkey, Nord Stream 1 is fully loaded. Yamal-Europe is fully loaded – it is almost approaching 100
percent, while the demand is going up. Life itself dictates that we carry out such projects.
Ryan Chilcote
: President Trump's position on American
LNG exports is perhaps a little bit more nuanced. His point is that instead of buying Russian gas, even perhaps if it's
a bit more expensive, the Germans and other European allies of the United States, because the United States is paying
for their defence, should be buying American gas even if there is, I guess the argument suggests, a little bit
of a higher price for that
Vladimir Putin
: You know, this argument doesn't really
work, in my opinion. I understand Donald. He is fighting for the interests of his country and his business. He is doing
the right thing and I would do the same in his place.
As for LNG, as I have already said, it is not just a little
more expensive in the European market but 30 percent more. This is not a little bit more, it is a lot more, beyond all
reason, and is basically unworkable.
But there are markets where LNG will be adopted, where it is
efficient, for instance in the Asia-Pacific region. By the way, where did the first shipment of LNG from our new company
Yamal-LNG go? Where did the first tanker go? To the United States, because it was profitable. The United States fought
this project but ended up buying the first tanker. It was profitable to buy it in this market, at this place and time,
and it was purchased.
LNG is still being shipped to the American continent. It's
profitable.
It makes no sense to fight against what life brings. We
simply need to look for common approaches in order to create favourable market conditions, including, for example,
conditions conducive to the production and consumption of LNG in the United States itself and securing the best prices
for producers and consumers. This could be achieved by coordinating policy, rather than just imposing decisions
on partners.
As for the argument, "We defend you, so buy this from us even
if it makes you worse off", I don't think it is very convincing either. Where does it lead? It has led to the Europeans
starting to talk about the need to have a more independent defence capability, as well as the need to create a defence
alliance of their own that allegedly will not undermine NATO while allowing the Europeans to pursue a real defence
policy. This is what, in my view, such steps are leading to.
This is why I am sure that a great many things will be
revised. Life will see to that.
< >
Ryan Chilcote:
President Putin, let's get back
to geopolitics. When you were talking about oil – and when everyone talks about oil and disruptions on the market, they
don't just talk about Iran, they talk about Venezuela – you mentioned Venezuela at the beginning of our conversation.
Last year, I interviewed President Maduro, the President of Venezuela, here. Venezuela is an ally of Russia. Russia has
a lot of oil interests in Venezuela. Oil production in Venezuela is not going well, and politically, things are going
very poorly, as you know. Millions of people are leaving the country. There's hunger. There is a lot of talk
in the United States, and not only in the United States, in Central and South America, that perhaps it's time
for President Maduro to go. Do you agree with that?
Vladimir Putin:
This is up to the people of Venezuela,
not anyone else in the world.
As for various means of influencing the situation
in Venezuela, there should be no such thing All of us influence each other in one way or another, but it should not be
done in a way that makes the civilian population even worse off. This is a matter of principle.
Should we rejoice that life is extremely difficult for people
there and want to make things even worse with a view to overthrowing President Maduro? He was recently targeted
in a terrorist attack, an assassination attempt. Shall we condone such methods of political resistance too?
I think this is absolutely unacceptable. This and anything
like it. The people of the country should be given a chance to shape their destiny themselves. Nothing should be imposed
from the outside.
This is what has emerged historically in Venezuela. What has
emerged historically in the Persian Gulf has emerged there, and the same in Europe, America and Southeast Asia. Nobody
should go in there like a bull in a china shop without understanding what is taking place there, instead thinking only
that the bull is one of the largest and smartest animals. It is necessary to take a look and give people a chance
to figure it out. I have a very simple outlook on this.
I would like to return to the previous question. After all,
we are dealing with energy. I would like to confirm what my colleagues said here about Russia's energy resources
and potential. They are indeed enormous. Truly enormous. We are in first place in gas reserves. I believe we have 73.3
trillion cubic metres of gas. The Yamal peninsula was mentioned here but NOVATEK will carry out one more project, Arctic
2, on a neighbouring peninsula. It is about the same size and with the same investment. The first tranche in this
project is $27 billion, and the second tranche is about $25 billion. I believe all this will be carried out.
We have the world's largest coal reserves – 275 billion
tonnes. We are third in oil reserves. Third in the world in oil reserves. We are the world's largest country
by territory. If we take a deeper look we are bound to find many other things. So, we are indeed lucky.
But we were given this not by the Lord alone. Past
generations of ours developed these lands. We should never forget what was done by our predecessors, and we will
continue to build on it. We will work with our partners. Incidentally, almost all major energy companies work in Russia.
Ryan Chilcote:
When we were talking about the EU
initiative to try and allow trade between EU countries and Iran, I couldn't help but remember that Russia itself, faced
with sanctions, is thinking about a plan to wean itself off of the dollar. This is something that many countries have
tried and failed. Why does Russia think that it can succeed in this?
Vladimir Putin
: You used the past tense or is
the translation inaccurate? Faced. Have the sanctions been lifted? Did I miss something?
Ryan Chilcote:
Russia is facing with sanctions.
Vladimir Putin:
Okay then. You know, sometimes I think
that it would be good for us if those who want to impose sanctions would go ahead and impose all the sanctions they can
think of as soon as possible. (
Applause.
) This would free our hands to defend our national interests however we
deem most effective for us.
It is very harmful, in general. It hurts the ones doing it.
We all figured this out long ago. That is why we have never supported and will never support illegal sanctions that
circumvent the United Nations.
Ryan Chilcote:
Since you brought up the subject
of sanctions, as you know after the Skripal poisoning, Russia is facing even more of them, perhaps as soon as November.
What is Russia prepared to do to change the trajectory of relations with the United States and the West?
Vladimir Putin
: We are not the ones introducing
these sanctions against the United States or the West. We are just responding to their actions, and we do this in very
restrained, careful steps so as not to cause harm, primarily to ourselves. And we will continue to do so.
As regards the Skripals and all that, this latest spy
scandal is being artificially inflated. I have seen some media outlets and your colleagues push the idea that Skripal is
almost a human rights activist. But he is just a spy, a traitor to the motherland. There is such a term, a 'traitor
to the motherland,' and that's what he is.
Imagine you are a citizen of a country, and suddenly
somebody comes along who betrays your country. How would you, or anybody present here, a representative of any country,
feel about such a person? He is scum, that's all. But a whole information campaign has been deployed around it.
I think it will come to an end, I hope it will,
and the sooner the better. We have repeatedly told our colleagues to show us the documents. We will see what can be done
and conduct an investigation.
We probably have an agreement with the UK on assistance
in criminal cases that outlines the procedure. Well, submit the documents to the Prosecutor General's Office
as required. We will see what actually happened there.
The fuss between security services did not start yesterday.
As you know, espionage, just like prostitution, is one of the most 'important' jobs in the world. So what? Nobody shut
it down and nobody can shut it down yet.
Ryan Chilcote
: Espionage aside, I think there are
two other issues. One is the use of chemical weapons, and let's not forget that in addition to the Skripal family being
affected in that attack, there was also a homeless person who was killed when they came in contact with the nerve agent
Novichok.
Vladimir Putin:
Listen, since we are talking about
poisoning Skripal, are you saying that we also poisoned a homeless person there? Sometimes I look at what is happening
around this case and it amazes me. Some guys came to England and started poisoning homeless people. Such nonsense. What
is this all about? Are they working for cleaning services? Nobody wanted to poison This Skripal is a traitor,
as I said. He was caught and punished. He spent a total of five years in prison. We released him. That's it. He left. He
continued to cooperate with and consult some security services. So what? What are we talking about right now? Oil, gas
or espionage? What is your question?
Let's move on to the other oldest profession and discuss
the latest developments in that business.
(Laughter.)
Ryan Chilcote
: A lot of what we've discussed today
goes back to Russia's relationship with the United States, and so I'll ask you just a couple of questions about that
and we can move on. The US says you personally ordered the 2016 interference in the elections – I know you deny that.
You have said you wanted Trump elected. What do you want to see in 2018 from these midterm election
Vladimir Putin:
In Russia or the United States? What
are you asking me about?
Ryan Chilcote
: What would you like to see happen
in the 2018 midterm elections in the United States.
Vladimir Putin:
What I want – and I am completely
serious – is that this nightmare about Russia's alleged interference with some election campaign in the United States
ends. I want the United States, the American elite, the US elite to calm down and clear up their own mess and restore
a certain balance of common sense and national interests, just like in the oil market. I want the domestic political
squabbles in the United States to stop ruining Russia-US relations and adversely affecting the situation in the world.
Ryan Chilcote:
I'll ask this final question
on the political front. In Helsinki, you said that you wanted President Trump to win because he favours better relations
with Russia. But in fact, as Russia itself says all of the time, relations between Russia and the United States seem
to get worse every day. Wouldn't it be better for Russia to have a president in the United States that is not
politically compromised by the widely held perception that this country helped him get into the White House?
Vladimir Putin
: Firstly, I do not believe President
Trump was compromised. The people elected him, the people voted for him. There are those who do not like this; those who
do not want to respect the opinion of the American voters. But this is not our business – this is an internal matter
of the United States.
Would we be better off or worse? I cannot say either. As is
known, there are no ifs in politics. Maybe it would have been even worse, how are we to know? We must derive from what
is
, and work with that. Good or bad, there is no other President of the United States; there is no other United
States either.
We will work. The US is the largest world power, a leader
in many spheres, our natural partner in a variety of projects, including global security, the non-proliferation
of weapons of mass destruction, terrorism, climate change, as well as the environment. We have a lot of common problems
which overlap that we have to work on together.
We presume that sooner or later the moment will come when
we will be able to restore full-fledged relations.
< >
Ryan Chilcote
: President Putin, I know you need
to get a meeting with the Austrian Chancellor, so I'm going to wrap this session up with you, sir. The title of our
conversation today is Sustainable Energy for a Changing World. You've been driving Russian energy policy for nearly 20
years now. What changes in the world, or what change in the world, would you identify as the biggest concern for you,
and what gives you the most optimism when it comes to what we're seeing.
Vladimir Putin:
If you allow me, I would stick
to the subject. The questions that you asked concern me as well.
Indeed, we are apparently witnessing global warming, but
the reasons for this are not entirely clear, because there is still no answer. The so-called anthropogenic emissions are
most likely not the main cause of this warming. It could be caused by global changes, cosmic changes, some changes
in the galaxy that are invisible to us – and that's that, we don't even understand what is actually happening. Probably,
anthropogenic emissions influence the situation somehow, but many experts believe they have an insignificant effect.
This is my first point.
Secondly, I already said this, and I can remind you once
again. Everyone blames the United States now. As you see, we have many problems and unresolved matters with the United
States, and the US President and I approach many international affairs differently and evaluate our bilateral relations
differently. But we still have to be objective. There was a time I saw President Bush refuse to sign the Kyoto
agreements. But we still found a solution. I think the same will happen in this case. Well, Trump believes that
the Paris Agreement is unprofitable for his country for a variety of reasons. I will not go into details now, he must
have talked about this many times, and we know his position.
But I think, we should not antagonise the relationship with
the US, because without them it would be impossible to reduce the influence of anthropogenic air pollution on the global
climate even a little bit. Therefore, one way or another we need to involve the US in this discussion and this joint
work. As I understand, President Trump does not object. He says that he dislikes some provisions of the Paris agreement,
but he is not opposed to working with the global community on this matter.
Now, as regards the pollution and the future of the global
energy, in order to fight the heat, we need no less energy resources than to fight the cold. Secondly, my colleagues
were right, millions of people do not have access to energy resources, and we will never prohibit the use
of the contemporary blessings of civilization, it is just unreal. The economy and the industry will keep developing.
Of course, in Russia we also join the best international
practices, so-called energy efficient technology that has a little bit of influence on the environment, and we,
of course, will continue this.
But I also agree with our Saudi colleague. These
alternative sources are very important, but we will not be able to go without hydrocarbons in the next decades. People
will have to use them for many decades to come. We mostly speak about oil, but coal is what is used most.
We are speaking about the need to use electric cars, but
where will the electricity come from? From the socket? Okay, from the socket, but how did it get there? First we need
to burn coal to produce electricity, while gas remains the most environmentally friendly energy resource. So we need
to take a comprehensive approach to all such matters.
Ryan Chilcote
: Patrick Pouyané posed a challenge
to you. He said it would be good if Russia used less coal. Are you prepared to accept that challenge and reduce
consumption of coal here in Russia and production?
Vladimir Putin:
We have signed the relevant Paris
agreements and taken up our responsibilities. We have implemented the first stage of the Kyoto Protocol, and now
the Paris Agreement will replace it. We have taken up all necessary responsibilities and will adhere to them.
The question is not about reducing the usage of coal for domestic needs, we are not the largest emitter, the US
and Asian countries emit much more. Here, we are not the leaders. We sell a lot of coal, but also not more than anyone
else and we only help cover the demand. The question is not about us, but about modern technology that uses primary
energy resources.
Let us go back to the last question, could you please
repeat it?
Ryan Chilcote
: Well, the title of the panel is
Sustainable Energy for a Changing World. You've been driving Russia's energy policy for nearly 20 years now. What
changes, or what is the change that gives you the most hope and what do you think the biggest challenge that you see
amongst the changes is for energy?
Vladimir Putin
: Concern is caused by uncertainty.
In politics, in security, and in the economy. Volatility, in other words. This is it. And the number of uncertainties is
growing. This is what causes concern – the unpredictability of the situation.
Ryan Chilcote
: Are you talking about your colleague,
the President of the United States?
Vladimir Putin
: Not exactly. He certainly makes
a significant contribution to this unpredictability by virtue of being the President of the largest world power, but not
only him. I am talking about the situation in general.
Look at the rise of extremism – where did it come from? Why
is this problem so acute today? Why is this extremism turning into terrorism? Doesn't that concern us? This is what we
need to understand – where it all came from.
I will not go into details because we have a limited amount
of time. But this is happening in many spheres. In the economy – the same thing. This growing uncertainty in all fields
is what causes concern.
Now, what causes optimism? Common sense, I think. No matter
how hard it is, people, humankind have always found ways out of the most difficult situations, guided by the interests
of their countries, their peoples, and it is the goal of any government to ensure the well-being as well as the growth
of the welfare of its people.
I think that sooner or later, and the sooner the better,
the realisation will come that we need to get away from controversy as soon as possible, in any case, away from trying
to resolve this controversy with unacceptable tools and ways that go beyond international law. It seems to me that it is
necessary to strengthen the leading role of the United Nations, and on this foundation, move on.
Ryan Chilcote
: And on that note, please join me
in thanking and congratulating our participants in today's panel and, of course, our host today the President of Russia.
Thanks for your answer, which is what I'd presumed. The bottom line seems to be that
nothing's unhackable--no matter what, it will get hacked.
What follows is OT, but attempts to supply a reason for the propaganda pimple burst. A few
days ago the annual Russian Energy Week conference occurred where Putin gave a speech and
answered numerous questions related to energy and geopolitics. A few of the choice quotes
related to his answers were published, but the transcript portion recording the Q&A had
yet to be published in full at the Kremlin's website. The transcript's now complete regarding
those Q&As directed at and answered by Putin, and what he has to say on a wide spectrum
of issues is highly educational: No one can say they know how Putin feels about a particular
issue without having read his answers. A few days ago, I tried linking to the Kremlin's
website only to have the post eaten by TypePad's Cloud. Here's the link . Reading his answers
and comments might lead Russophobic members of Trump's Swamp to burst a propaganda pimple in
revenge for his honesty.
"... "Barring technology breakthrough beyond what we already assume, we'll need new oil discoveries," ..."
"... "We haven't seen anything like this since the 1940s," ..."
"... "The most worrisome is the fact that the reserve replacement ratio in the current year reached only 11 percent (for oil and gas combined) - compared to over 50 percent in 2012." ..."
"... "The mind set for most E&Ps is still to be conservative, and default is to return capital to shareholders. Yet the duty to shareholders' interests cannot be myopically short term. More of the 'windfall' cash needs to find its way into exploration to sustain the business in the long term," ..."
"... "frontier areas," ..."
"... "Suriname, the Brazilian Equatorial Margin; Mexico; Senegal, Gambia, Namibia and South Africa; Australia and Alaska." ..."
"... "More explorers need to get in on the action if the spectre of 'peak supply' is to be kept at bay," ..."
"The warning signs are there – the industry isn't finding enough oil." That's the
start of a new report from Wood Mackenzie. The report concludes that a supply gap could emerge
in the mid-2020s as demand rises at a time when too few new sources of supply are coming
online.
By 2030, there could be a supply shortfall on the order of 3 million barrels per day (mb/d),
WoodMac argues. By 2035, it balloons to 7 mb/d, and by 2040, it reaches 12 mb/d. "Barring
technology breakthrough beyond what we already assume, we'll need new oil discoveries,"
the report says.
The seeds of the problem were sown during the oil market downturn that began in 2014. Global
upstream exploration spending plunged from $60 billion in 2014 to just $25 billion in 2018,
according to WoodMac. Unsurprisingly, that translated into a steep decline in new discoveries.
In the early part of this decade, the oil industry was discovering around 8 billion barrels of
oil annually. That figure has plunged by three quarters since 2014.
The precise figures vary, but Rystad Energy came a similar conclusion, noting that the total
volume of new oil and gas reserves discovered plunged to a record low in 2017. "We haven't
seen anything like this since the 1940s," Sonia Mladá Passos, Senior Analyst at
Rystad Energy, said in a December 2017
statement . "The most worrisome is the fact that the reserve replacement ratio in the
current year reached only 11 percent (for oil and gas combined) - compared to over 50 percent
in 2012."
This year, the industry has had a bit more success. Spending is on the rebound and new
discoveries are on
track to rise by about 30 percent, although that is heavily influenced by the developments
in Guyana, where ExxonMobil and Hess Corp. have reported nearly a dozen discoveries, and hope
to ramp up production to around
750,000 bpd by 2025.
It still may not be enough. Even if the industry were to somehow return to the good ol' days
prior to the 2014 market crash, and begin discovering around 8 billion barrels of oil each
year, it would only delay the supply crunch into the 2030s, according to WoodMac.
But, of course, that rate of discovery remains far below those levels, so the supply crunch
may take place much sooner. Moreover, because large-scale projects take several years to
develop, the activity taking place today will determine the supply mix in the mid- to
late-2020s.
WoodMac says that the rate of discovery is highly correlated with the level of spending, so
closing the supply gap will require more capital. And because of the run up in oil prices this
year, the industry will have a lot more cash to throw around.
The problem for the industry is that over the last few years the mindset, and the demands of
shareholders, have shifted from production growth to profitability and investor returns.
Shareholders are pressuring executives to return cash in the form of dividends and share
buybacks. Energy stocks are not the darlings of Wall Street in the way they once were,
particularly prior to the 2014 market meltdown. That puts extra pressure on oil and gas
companies to dish out more of their earnings to investors rather than plowing it back into the
ground.
But that means less spending on exploration. "The mind set for most E&Ps is still to
be conservative, and default is to return capital to shareholders. Yet the duty to
shareholders' interests cannot be myopically short term. More of the 'windfall' cash needs to
find its way into exploration to sustain the business in the long term," WoodMac said in
its report.
Shale output will continue to grow, especially after new pipelines come online in Texas,
which will ease the current bottleneck. But the large-scale increases in production in the
medium-term will come from "frontier areas," WoodMac says, as the string of
discoveries in Guyana prove. WoodMac says the areas with the highest potential include
"Suriname, the Brazilian Equatorial Margin; Mexico; Senegal, Gambia, Namibia and South
Africa; Australia and Alaska."
For now, the level of activity is not enough to stave off the supply crunch, WoodMac warns,
unless there is a dramatic increase in spending. "More explorers need to get in on the
action if the spectre of 'peak supply' is to be kept at bay," the consultancy says.
span y gjohnsit on Fri, 09/28/2018 - 9:16pm Last week the Trump Administration
ranted
against OPEC because the Iranian sanctions are driving up
oil prices .
That's called blowback.
Today we see the next level of
blowback.
The State Department says the U.S. consulate in the southern Iraqi city of Basra is being
evacuated following attacks blamed on Iran-backed militias. The U.S. embassy in Baghdad will
provide full consular services for Basra and the surrounding area, the State Department said.
What's most notable is the reaction by US
secretary of state Mike Pompeo.
US secretary of state Mike Pompeo directly threatened retaliation against Iran on Friday,
after accusing Iranian forces of repeatedly directing attacks against US diplomatic
facilities in Iraq.
"Iran should understand that the United States will respond promptly and appropriately to
any such attacks," Mr Pompeo said in a statement, adding both the US consulate general in
Basrah and the US embassy in Baghdad had been targeted.
Recently, #Iran -supported
militias in Iraq launched rocket attacks against the U.S. embassy in Baghdad and our
consulate in Basra. We'll hold #Iran 's regime
accountable for any attack on our personnel or facilities, and respond swiftly and decisively
in defense of American lives. pic.twitter.com/nqbmogbeCA
What is happening in Iraq could lead directly to a proxy war with Iran in Iraq.
The Pentagon says U.S. forces will
stay in Iraq "as long as needed". There are about 5,200 U.S. troops in Iraq, versus about
100,000 Shia militiamen.
Pompeo is working with Saudi Arabia to form an anti-Iran
coalition known as the Middle East Strategic Alliance.
As recently as April, the U.S. was telling those Shia militias were welcome in
Iraq.
Last month those Shia militias threatened to attack foreign
troops in Iraq if they didn't leave.
span y Amanda Matthews on Fri, 09/28/2018 - 9:59pm
" Has the regime in #Iran lived together with other nations in peace? Has it been a good
neighbor? Look around the world and you'll see the answer is a deafening "no."
"Iran-backed militias." That would be Iraqis, no? Is the ultimate plan then to, um,
eliminate Iraq's Shia? I expect to hear, soon, that Iraqi Shia test their chemical weapons on
children.
The UN Charter calls for nations to "live together in peace with one another as good
neighbors." Has the regime in #Iran lived together with other nations in peace? Has it been a
good neighbor? Look around the world and you'll see the answer is a deafening "no."
Why the leaders of the rest of the world didn't walk out on Trump when he threatened other
countries is beyond my comprehension. How much longer will they waste their citizen's lives and
their money just because we told them to jump?
Remember when Obama said that "no country should have to tolerate bombs dropping on them
from outside their borders?
I think those measure have implicit blessing from Washington, which realized how dangerous
withdrawal of Iraq oil from the market can be for the USA economy
The UN General Assembly (UNGA) in New York is a place where world leaders are able to hold
important meetings behind closed doors. Russia, China, the UK, Germany, France, and the EU
seized that opportunity on Sept. 24 to achieve a real milestone.
The EU, Russia, China, and Iran
will create a special purpose vehicle (SPV), a "financially independent sovereign channel,"
to bypass US sanctions against Tehran and breathe life into the Joint Comprehensive Plan of
Action (JCPOA) , which is in jeopardy. "Mindful of the urgency and the need for tangible
results, the participants welcomed practical proposals to maintain and develop payment
channels, notably the initiative to establish a Special Purpose Vehicle (SPV) to facilitate
payments related to Iran's exports, including oil," they announced in a
joint statement. The countries are still working out the technical details. If their plan
succeeds, this will deliver a blow to the dollar and a boost to the euro.
The move is being made in order to save the 2015 Iran nuclear deal. According to Federica
Mogherini , High Representative of the European Union for Foreign Affairs and Security
Policy, the SPV will facilitate payments for Iran's exports, such as oil, and imports so that
companies can do business with Tehran as usual. The vehicle will be available not just to EU
firms but to others as well. A round of US sanctions aimed at ending Iranian oil exports is to
take effect on November 5. Iran is the world's seventh-largest oil producer. Its oil sector
accounts for 70% of the country's exports. Tehran has warned the EU that it should find new
ways of trading with Iran prior to that date, in order to preserve the JCPOA.
The SPV proposes to set up a multinational, European, state-backed financial intermediary to
work with companies interested in trading with Iran. Payments will be made in currencies other
than the dollar and remain outside the reach of those global money-transfer systems under US
control. In August, the EU passed a blocking statute to guarantee the immunity of European
companies from American punitive measures. It empowers EU firms to seek compensation from the
United States Treasury for its attempts to impose extra-territorial sanctions. No doubt the
move will further damage the already strained US-EU relationship. It might be helpful to create
a special EU company for oil exports from Iran.
Just hours after the joint statement on the SPV, US President Trump defended his unilateral
action against Iran in his
UNGA address . US Secretary of State Mike Pompeo condemned the EU initiative ,
stating:
"This is one of the most counterproductive measures imaginable for regional global peace
and security."
To wit, the EU, Russia, and China have banded together in open defiance against unilateral
steps taken by the US. Moscow and Beijing are in talks on how to combine their efforts to fend
off the negative impacts of US trade tariffs and sanctions. A planned Sept 24-25 visit by
Chinese Vice-Premier Liu, who was coming to the United States for trade talks, was cancelled as
a result of the discord and President Trump added more fuel to the fire on Sept. 24 by imposing
10% tariffs on almost half of all goods the US imports from China. "We have far more bullets,"
the president
said before the Chinese official's planned visit. "We're going to go US$200 billion and 25
per cent Chinese made goods. And we will come back with more." The US has recently imposed
sanctions on China to punish it for the purchase of Russian S-400 air-defense systems and
combat planes. Beijing refused to back down. It is also adamant in its desire to continue
buying Iran's oil.
It is true, the plan to skirt the sanctions might fall short of expectations. It could fail
as US pressure mounts. A number of economic giants, including Total, Peugeot, Allianz, Renault,
Siemens, Daimler, Volvo, and Vitol Group have already left Iran as its economy plummets, with
the rial losing two-thirds of its value since the first American sanctions took effect in May.
The Iranian currency dropped to a record low against the US dollar this September.
What really matters is the fact that the leading nations of the EU have joined the global
heavyweights -- Russia and China -- in open defiance of the United States.
This is a milestone event.
It's hard to underestimate its importance. Certainly, it's too early to say that the UK and
other EU member states are doing a sharp pivot toward the countries that oppose the US
globally, but this is a start - a first step down that path. This would all have seemed
unimaginable just a couple of years ago - the West and the East in the same boat, trying to
stand up to the American bully!
The breakout in Brent crude prices above $80 this week has prompted analysts at the sell
side banks to start talking about a return to $100 a
barrel oil . Even President Trump has gotten involved, demanding that OPEC ramp up
production to send oil prices lower before they start to weigh on US consumer spending, which
has helped fuel the economic boom over which Trump has presided, and for which he has been
eager to take credit.
But to hear respected petroleum geologist and oil analyst Art Berman tell it, Trump should
relax. That's because supply fundamentals in the US market suggest that the recent breakout in
prices will be largely ephemeral, and that crude supplies will soon move back into a
surplus.
Indeed, a close anaysis of supply trends suggests that the secular deflationary trend in oil
prices remains very much intact. And in an interview with MacroVoices , Berman laid out his argument using a handy
chart deck to illustrate his findings (some of these charts are excerpted below).
As the bedrock for his argument, Berman uses a metric that he calls comparative petroleum
inventories. Instead of just looking at EIA inventory data, Berman adjusts these figures by
comparing them to the five year average for any given week. This smooths out purely seasonal
changes.
And as he shows in the following chart, changes in comparative inventory levels have
precipitated most of the shifts in oil prices since the early 1990s, Berman explains. As the
charts below illustrate, once reported inventories for US crude oil and refined petroleum
products crosses into a deficit relative to comparative inventories, the price of WTI climbs;
when they cross into a surplus, WTI falls.
Looking back to March of this year, when the rally in WTI started to accelerate, we can on
the left-hand chart above how inventories crossed below their historical average, which Berman
claims prompted the most recent run up in prices.
Comparative inventories typically correlate negatively to the price of WTI. But
occasionally, perceptions of supply security may prompt producers to either ramp up - or cut
back - production. One example of this preceded the ramp of prices that started in 2010 when
markets drove prices higher despite supplies being above their historical average. The ramp
continued, even as supplies increased, largely due to fears about stagnant global growth in the
early recovery period following the financial crisis.
The most rally that started around July 2017 correlated with a period of flat production
between early 2016 and early 2018.
Meanwhile, speculators have been unwinding their long positions. Between mid-June 2017 and
January 2018, net long positions increased +615 mmb for WTI crude + products, and +776 for WTI
and Brent combined. Since then, combined Brent and WTI net longs have fallen -335 mmb, while
WTI crude + refined product net long positions have fallen -225 mmb since January 2018 and -104
mmb since the week ending July 10. This shows that, despite high frequency price fluctuation,
the overall trend in positioning is down.
And as longs have been unwinding, data show that the US export party has been slowing, as
distillate exports, which have been the cash cow driving US refined product exports, have
declined. Though they remain strong relative to the 5-year average, they have fallen relative
to last year. This has accompanied refinery expansions in Mexico and Brazil.
Meanwhile, distillate and gasoline inventories have been building.
Meanwhile, US exports of crude have remained below the 2018 average in recent weeks, even as
prices have continued to climb.
This could reflect supply fears in the global markets. The blowout in WTI-Brent spreads
would seem to confirm this. However, foreign refineries recognize that there are limitations
when it comes to processing US crude (hence the slumping demand for exports).
In recent weeks, markets have been sensitive to supply concerns thanks to falling production
in Venezuela and worries about what will happen with Iranian crude exports after US sanctions
kick in in November.
But supply forecasts for the US are telling a different story than supply forecasts for
OPEC. In the US, markets will likely remain in equilibrium for the rest of the year, until a
state of oversupply returns in 2019. But OPEC production will likely continue to constrict,
returning to a deficit in 2019.
Bottom line: According to Berman, the trend of secular deflation in oil prices remains very
much intact. While Berman expects prices to remain rangebound for the duration of 2018 - at
least in the US - it's likely markets will turn to a supply surplus next year, sending prices
lower once again.
Another landmark for the "Northeastern passage" -- so far only tankers had made the trip
Brendon Petersen
16 hours
ago
|
1,546
5
Explorers and navigators have long searched for a way to move ships through the Arctic Circle as find a faster way
to move goods between the Atlantic and the Pacific without having to go around either Asia or South America.
Groups of people hunted for the fabled Northwest passage through North America for decades. The problem, of
course, is that the Arctic contains too much ice.
Over the past few years, however, ice levels in the Arctic
have been
hitting
record lows
thanks to climate change, and while its effects are almost universally negative, one benefit is
opened northern sea routes. Over the past month, a container ship sailing from Eastern Russia is pioneering a new
Arctic route by
being
the first such ship to cross the Arctic Ocean
.
On August 23, the container ship Venta Maersk left the Russian port of Vladivostok and headed to Bremerhaven in
Germany. Normally, a trip like that would take the Venta Maersk through the Suez Canal on a 34 day trip. Instead,
the ship will sail through the sea north of Russia on a route that will only take 23 days.
Last week, the Venta Maersk passed through the Sannikov Strait, the narrowest and most hazardous part of its
journey, and is expected to arrive in Germany by the end of the week. Once it arrives, it will become the first
container ship to complete a successful route through the Arctic Circle.
We protect the countries of the Middle East, they would not be safe for very long
without us, and yet they continue to push for higher and higher oil prices! We will
remember. The OPEC monopoly must get prices down now!
OPEC does, in fact, control oil supply to a significant extent but that does not necessarily
mean that it is also in full control of the oil prices, Jack Rasmus, a professor of Political
Economy at St. Mary's College of California, told RT, adding that the policies pursued by the
US president himself play a much bigger role in what happens to oil and gasoline prices in the
US.
"The US economy is overstimulated by the Trump $4 trillion tax cuts for investors and
businesses," Rasmus explained, adding that the rising inflation is one of the primary
factors contributing to the oil price surge. Apart from that, Trump's trade war with China and
even with the US allies in the West also drives up the prices, as businesses also have to raise
them to adapt to the tariffs that both the US and its trading partners have imposed
recently.
Trump's sanctions war on Iran also does not make the situation any better. The US sanctions,
which are aimed at bringing Iran's oil exports to "zero," led to a decrease in Iran's
oil sales, thus cutting the supply and driving the prices up. As if it was not enough, Trump's
rhetoric only adds fuel to the fire, according to Rasmus.
"When Trump accuses Iran publicly, it gives the global oil speculators a reason to drive
up the price," he told RT, adding that it is the "global speculators that are driving the
short-term oil prices." "There is a connection between the speculators and Trump policies. When
he makes those statements, it certainly does contribute to the oil prices rise," the analyst
explained.
This rhetoric was more about winning voters' support ahead of the November mid-term
elections than about really remedying the situation in the oil market, Rasmus says. "He is
whipping up his domestic base," the analyst said, adding that "Trump [is] trying to
blame foreigners of all kinds for economic situation in the US."
Trump got elected on a platform of economic nationalism in particular, Rasmus said, adding
that the president now sticks to that narrative and blames foreigners –be they immigrants
or some foreign competitors– for the US' woes. However, this is "another factual
misrepresentation," the analyst said.
As oil prices remain high, prices for gasoline in the US are growing. The average cost of
gasoline has risen 60 percent from $1.87 per gallon in February 2016 to over $3 in
September.
This scenario would leave the US with the main sources of 'low production cost' Middle
East energy in its hands (i.e. Gulf, Iran and Iraqi oil and gas). On the face of this week's
events however, it looks more likely that these resources - or at least, the greater energy
resources of Iran and Iraq - will end up in the Russian sphere (together with Syria's
unexplored Levant Basin prospects). And this Russian 'heartland', energy-producing sphere,
may, in the end, prove to be a more than substantive rival to US (newly emerged as 'the
world's top oil producer') aspirations for restoring its Mideast energy dominance.....
The piece covers both Trump's plans for global energy dominance by taking full control of
middle east oil and also the Trump Kushner moves against the Palestinians.
Perhaps the Eagle Ford will never be profitable, it will depend on the price of oil and
many other factors.
I guess I have a little more faith in the oil industry than you.
EOG has produced a fair amount of oil in the Eagle Ford and their net income in 2014 (when
oil prices were high) was $2.9 billion, about 178 kb/d of C+C was produced from Eagle Ford in
2014 (about 65 million barrels) by EOG (about 62% of total 2014 EOG C+C output). The average
price for C+C in the US received by EOG was about $93/b in 2014.
So it seems in 2014, for a well run oil company, $93/b worked just fine. Over the period
from 2010 to 2014 EOG's net income was about $6 billion. From 2010 to 2017, the total net
income was about $2.6 billion (not adjusted for inflation) as 2015 and 2016 were bad years
with 5 billion losses in net income.
Debt to assets at the end of 2017 was about 21% with debt at $6.4 billion and assets at
$29.8 billion. In 2017 Eagle Ford output was about 47% of EOG's C+C output, the average oil
price EOG received in the US was $50.91/b in 2017, about $600 million of long term debt was
paid off in 2017 with no new long term debt issued, but net cash flow was negative $766
million.
A discounted cash flow at a 10% annual discount rate results in a breakeven oil price (10%
annual ROI) of $90.3/b for the average 2016 Eagle Ford well, if we assume a well cost of 9
million. Note that this is a "real" discount rate as I do costs in real inflation adjusted
dollars, so it is equivalent to a nominal discount rate of 12.5% so would be equivalent to a
nominal annual ROI of 12.5%.
EUR is 238 kb over 13.8 years and the well is shut in at 10 b/d. An assumption of 15 b/d
shut in reduces EUR to 220 kb and well life to 9.75 years, and breakeven oil price rises to
$91/b, an increase of 70 cents per barrel. Well payout is in 46 months at $91/b.
What is the full cost of the average Eagle Ford well?
Note that I have assumed zero revenue from natural gas or NGL in my breakeven analysis and am
considering C+C output only, not sure if there are natural gas pipeline bottlenecks in the
EFS as there seems to be in the Permian basin. In any case, the economics might be slightly
better when natural gas is included.
There wasn't significant drilling in the Eagle Ford Shale until 2011. How many of the 700
inactive wells started producing in 2009 and 2010? By Enno Peters data using Eagle Ford and
unknown wells in Karnes County from Jan 2011 to Dec 2016, I get 2487 horizontal wells
completed in total over that period. Note that the productivity rate distribution at Enno's
site gives some funky numbers at the low end, so they should probably be ignored. "Zero"
output after 24 months should probably be less than 15 b/d after 24 months. For Eagle Ford
2014 wells, supposedly there are 1747 wells with zero production rate after 24 months out of
3962 total wells, this is just a programming error. That is, zero does not mean zero in this
case, would be my guess.
I checked with Enno Peters on this and the lowest column means output at 24 months is 0 to 50
b/d, same is true for each column it is from the previous to the next label so 0-50, 50-100,
etc.
Could over 20% of the horizontal wells in Karnes Co., TX already be shut in for over
one year? These wells first produced 1/1/2019 to 12/31/2016, so they are not old wells at
all? Less than 10 year economic life?
No the wells have not been shut in as you think, for 2009 to 2016 wells in Karnes county
and Eagle Ford Formation I get 763 wells with "zero" production rate at Enno's site. He has
pointed out that this is really 0 to 50 bopd for those 763 wells out of a total of 2425 wells
producing that started production from 2009 to 2016. The average production rate was 86 bopd
for all of the Karnes county Eagle Ford formation wells.
For all counties there were 15,600 wells with 7754 wells with output at 0 to 50 bopd at 24
months. Average for all counties is 63 bopd at 24 months. At 12 months the average rate was
127 bopd for all counties with about 25% of the wells at 0 to 50 bopd at 12 months.
Older article, but more important, now. EIA, and most of the Rystad type companies are
continuing to report significant increases in the Permian. Latest monthlies are from June,
all else is estimated, including drilling info. Completions are happening, and the new wells
included in drilling info are, no doubt, true as to production. Who measures shut ins until
final numbers are accumulated? Who spends significant time communicating with the small
producer? Heck, they make up half the wells drilled in the Permian. I think there are
considerable shut ins that will eventually reduce the magnificent increases that are
currently being reported.
I ran a quick search on horizontal wells in Karnes Co., TX.
I found 2,778 active horizontal wells with first production from 1/1/2009 to
12/31/2016,
In the most recent month, here are the numbers:
170 wells produced 3,001+ BO
1,034 wells produced 1,001-3,000 BO
872 wells produced 501-1,000 BO
702 wells produced 1-500 BO
Could that be correct?
Furthermore, there appear to be over 700 inactive wells, which are defined as wells that
have no recorded oil or gas production in the last 12 months.
Could over 20% of the horizontal wells in Karnes Co., TX already be shut in for over one
year? These wells first produced 1/1/2019 to 12/31/2016, so they are not old wells at all?
Less than 10 year economic life?
I know Mike has commented on how bad the EFS really is economically. It seems the hyper
focus is now on the PB. However, EFS produces significant volumes of oil. Looks like this one
could really collapse once the last locations are completed.
I saw many, many wells with cumulative production of 250K oil, that are now producing
under 500 BO per month.
I ran the same search on De Witt Co., TX. Less wells, but similar results. Interesting to
see all the wells in both counties that have maybe paid out, but are now producing less than
500 BO per month.
Even Karnes County has it's less than tier one oil areas, and a lot of the wells were not up
to par in the beginning. The well has to pay out capex in the first year, or its not worth
drilling. Profit in year two and three, and not much after that. Period. End of story. I
don't see much better out of the Permian, and may be getting worse. Yes, on the whole, less
than a ten year economic life. Gets a lot worse in tier two stuff, and tier three stuff is,
at these prices, a definite loss. But they are still drilling in tier three areas, go figure.
My lease area is producing around 250k to 300k total, and it is barely touched, because EOG
wants 300k. Yeah, when the tier one areas play out, costs to maintain will be prohibitive.
Increase? Just a dream.
Look at EOG's economics of which wells are "premium" locations. There are not many left, and
EOG probably owns the lion's share. It has to produce 200k barrels the first year. They
priced that at $40 oil price, but it makes no difference, because it doesn't change the
number of locations that can generate 200k barrels. They are justifying production to a 5200
ft lateral. Some make significantly more, some less. I have that memorized, as my wells have
proven from the 125k to 175k the first year. Probably, a 250k to 300k EUR. So, I have to
wait. They will be venturing into my area sometime before their "premium" locations are
depleted. Beginning of the year, that count was at 2300. About 10 years at their current
drilling rate, and less if they pick up activity. These are developmental wells, the Permian
is still largely exploratory.
As far as holdings go, EOG is the cream of the crop. So, you can't make averages based on
one company. Most look far, far worse. Their financial info was shit before, as were all the
rest. Setting a bar for where to drill, will, in all likelihood, make them much better. There
are a large number of smaller companies who still complete wells in tier three acreage. It's
amazing, they know what they will get. I see initial production at 500 barrels a day, or
less, and I know that someone is losing money.
Now, do the math. There is not 10 years, or in most cases even five years of economically
recoverable oil from shale. A 60 month payback???? At the highest bracket, it includes wells
with about 3000 barrels a month. And there are only about 10k of those. Less than 3 years of
completions. And if you look at the total number of producing wells it is slightly less now
than in 2014. So, what happened to them??! To make it clearer, the number of wells that has
become inactive is pretty close to the number of wells that has been drilled in four years.
Yeah, production is up, because the wells producing over 3000 a month is up. But applying a
ten year, or even five year economic life to them is pretty stupid. But, I don't have to look
at total numbers to get to that conclusion, I look at individual wells, or groups of wells in
a lease. It's a lot steeper treadmill than the hoopla indicates. Here's the count from Dec
2014. Shale wells will probably not drop down into the last category, so just look at the
first two to compare them to current. If they do drop into the last category, the production
doesn't mean much to the cost of the well, or profitability. About four thousand more, and
tens of thousands of new wells since then. http://www.rrc.state.tx.us/media/26405/welldistribution1214.pdf
So, think about this when your looking at Eno's data, averages are deceiving. Whether they
are tier one, two, or three makes a huge difference.
The links to the report show plugging activity. Substantial. In August EF had 120 oil
completions, and 50 something oil wells plugged. Completions were higher in August. Dec 2017,
oil wells completed and plugged were almost equal. That is not an exact description of EF
horizontals, but that is the main thing going in these districts. $250 sounds low, I think.
Shallow, FTR, last thread: my current est. economic limits of 15-18 BOPD for LTO wells will
be much higher for major integrated companies, yes. The everything is peachy 'assumption' is
that smaller companies will buy those wells and carry on. I do not believe that. A 6-10%
decline in total UR because of premature economic limits IS a big deal. It makes or breaks
thousands of wells.
The liquids rich gas leg of DeWitt and Karnes Counties IMO will see <35% of its wells
be 'significantly' profitable, for instance above 150 ROI. Your data you are showing is a big
deal that seems to be going plum over peoples heads. Sorry. Time will show that the Eagle
Ford was, is the biggest financial toilet of all three shale basins; the economics are indeed
awful. I operate conventional production IN the EF trend and have interest in wells. Folks
don't realize how many $10-12MM dollar wells were drilled from 2009-2013. Jeff Brown and I
guessed eight years ago only 35-40% of shale oil wells in the EF will even pay back
D&C&A costs. I think that is way too high now.
Whatever the definition of "works," means, Dennis, for the EF; newer well designs are
leading to much higher IP180-360, but not higher UR. It does not look that way to me. Now new
wells in the EF must carry the burden of the highest level of legacy debt in the LTO
industry. To maintain and actually pay that debt back will take much higher oil prices than
you think as the play is now pretty much exhausted. At current oil prices it takes 325-350K
BO to pay new wells with longer laterals and much bigger frac's out.
The LTO industry is not in business so people can speculate about how much oil it is going
to make, or the jobs it provides, or how much cheaper gasoline it can provide for
consumers https://www.oilystuffblog.com/single-post/2018/09/12/Cartoon-Of-the-Week
; its in business to MAKE money. 150 ROI's is not making sufficient money to be self
sustainable and be able to kick the credit/debt addiction.
Longhorn is correct, Matador did indeed pay $95K an acre for PMNM acreage. I suggest we
bow our heads and honor its shareholders with a moment of silence and a little prayer to the
Goddess of Wolfcamp in order that she be merciful. Another bench Matador is touting to
justify its "wisdom" is the (De) Cline shale interval. Phftttttt.
The irony is that the majors and large independents divested of many assets in the US lower
48 in the 1990s because they were perceived as high cost with little economic future.
However, folks like us are still producing that stuff profitably.
OTOH the same companies are now spending large sums on shale, which is economically
inferior to what they divested 20-30 years ago.
Mr.Simmons likely never considered the productive wonders of a cash flow negative oil boom
aka USA LTO sarc/
I wonder how many more cash flow negative oil booms the world can endure, and how long USA
LTO will last. While we're at it, I wonder how the pension funds invested in USA LTO are
gonna do for their members once the rats under the floorboards get flushed out.
Buckle your chin strap. Within a few to several years we'll perhaps know better how this
is gonna shake out. George Kaplan and Dennis Coyne had some future production charts in the
comments of last post. By my rough eyeball and memory, I think George Kaplan had future
production down to about 40 million barrels a day by 2050 (see link below). Dennis, ever the
optimist ;), had us down to about 50 million barrels a day by 2050 (see Mr. Coynes comments
in response to George). Either way, those alive in 2050 are gonna be living in a very
different world!
A lot depends on how much oil can be extracted. George Kaplan's scenario looks to be
roughly a URR of 2400 Gb if the 2020 to 2063 trend continues in future years (it is roughly
straight line decline over that period so I just extended the line to zero and estimated URR.
It is more likely, in my view that URR will be about 3060 Gb (including 260 Gb of extra heavy
and LTO oil), that's about midway between a pessimistic HL scenario(2600 GB) and optimistic
USGS scenario (3000 Gb) for conventional oil.
Also higher rates of extraction could keep production a bit higher maybe 64 Mb/d in 2050,
it will depend on the length of Great Depression 2 in 2030. Of course I think that might only
last 4-5 years, being an optimist.
I haven't worked it out but I'd guess the ultimate recovery is more than your estimate.
First, as I said before, the XH production is based on long cycle projects, so it would have
a fat tail extending beyond when most of the conventional oil is exhausted (there are a few
reasons for that but one is that it needs upgraders and those are not built with excess
capacity). Second, as I said twice before, Laherrere has about 180 Gb of "rest of the world"
reserves that I didn't include as I don't know what they represent – if they are
undiscovered oil then at current rates it will take about 40 years to find them, or if the
recent trend for declining discoveries holds then forever.
And that is the last I am going to write – or read – on that Laherrere paper. It
was just a comment on a blog, not an article in Nature or the Times or even a letter to
either of those, or even a letter to the local free advertising paper. I wrote it most for my
own interest, writing things out help clarify ideas, but I rarely do more than a cursory
proofread. Most people who bothered to look at it would have read a couple of sentences and
skimmed the rest, a very few might have got more out of it. It didn't change anything
fundamental. If somebody was going to write another comment they wrote exactly what they were
going to write anyway.
It won't take to 2050 to see a different world. Just a small fall in supply has effects
well out of proportion to the nominal cash value of the oil lost. Cheap flights would
disappear, trade would plummet, GDPs shrink – the books have to balance one way or
another (see recent paper on impact on trade, I think by Barclays, and works by Hall and
Kummel). The biggest impact might be food prices, they could easily double and more short
term, then the few billion who spend half their income on food suddenly have to spend it all.
Turmoil would ensue and likely knock more oil supply off line. There was a paper about Sweden
I think – from memory (don't quote me) a rapid fall by a quarter of the oil available
leads to collapse and by a half to complete loss of civilization.
At the same time the declining cheap and efficient energy would hamper efforts to address
the other big ticket, long term issues: rising population, evolutionary inevitable
aspirations – "poor man wanna be rich, rich man wanna be king, and a king ain't
satisfied till he rules everything" (of course); declining levels in some of the big aquifers
(a few are getting to the point where the basic pump designs don't work, the replacements
needed are much more expensive and much more energy intensive); declining soil loss (at
current rate all the soil on sloped arable land will be gone in 50 years – that's a
third – and most of the rest in another 50); and of course climate change related
extreme weather. This year we've had record heat waves, wild fires, typhoons and (soon)
hurricanes plus droughts etc. Soon those will be weekly events (we're not far off now) but on
top of that we will be having two or three extreme extreme-weather events per year. More and
more of the oil will be going simply to triage on these (but the patient will get worse
anyway). At some point countries will cease to be liberal democracies, the USA seems to be
leading the way there, and say what you like about liberal democracies they have never
declared war on each other, dictatorships on the other hand
People will say oh we just need to do this, that or the other – but there is no
"just" about any of it, and especially as oil disappears: ignoring the externalities there is
absolutely no better real energy source imaginable by some way, especially the cheap stuff we
used to have.
You of course know all this and are preparing much better than me, I do not much more than
appease my conscience by not flying and hardly ever riding in a car, but I think I'm getting
to the "acceptance" stage and pretty much missed out on depression (no physical symptoms
anyway).
[end of rant].
I tend to agree with you George. Only a small decrease a short time after peak, and the
realization that it's not going back up, will likely open a lot of people's eyes to the fact
that almost every stock and equity is overvalued (come to understand that anticipated future
growth will not be realized). I plan to hunker down and catch up on my reading while the dust
settles, and I'm thinking there'll be a lot of dust. I'll send you a map. Password is 'I
think I'm with the band'.
I find this to be also an interesting take on the future of oil
So what does Trump do before the midterms? Live with higher prices? Quietly drop the
sanctions ? Find a way to get Iranian oil on the market while pretending there are sanctions?
Accept the high prices and blame Obama?
Oil price can rise some, now. It's only a month and a half to go. Gasoline stocks are high,
so it will take some trickle down time. Raiding the SPR is overkill.
I'm betting they don't. Saudi production in September is more likely to be down than up. But
if it is up it will only by a tiny amount, not near enough to affect prices. Saudi Arabis is
just not interested in increasing production by any significant amount. They would like to
keep production steady .if possible.
"Just spoke to King Salman of Saudi Arabia and explained to him that, because of the
turmoil & disfunction in Iran and Venezuela, I am asking that Saudi Arabia increase oil
production, maybe up to 2,000,000 barrels, to make up the difference Prices to high! He has
agreed!" the tweet read.
And of course, after the King hung up the phone he probably said: "We are not going
to do any of that shit." The Saudis, just like Trump's staff, know he is an idiot.
"And of course, after the King hung up the phone he probably said: "We are not going to do
any of that shit."
I doubt that happened but I don't have any inside contacts in the WH to confirm. My guess
is that Trump has turned up the heat on Iran because of requests from KSA & Israel.
The USA has been helping MbS with is Yemen war, as well as proxy war in Syria. If KSA want
the US to economically crush Iran, than KSA will need to help but increasing its Oil exports.
Perhaps KSA as some oil stashed in storage that it could release for a short period. My guess
KSA would delay using its storage reserves until there is a price spike that might force the
US to back off on Iran.
I doubt that happened but I don't have any inside contacts in the WH to confirm.
You doubt what happened? The quote was a tweet directly from the President. He sent it out
to the world, you don't need an inside contact to the White House. Trump's tweets go out to
the public.
Yes, it did happen. Of course, the part about what the King did afterward was just
speculation on my part. But he did not increase oil production as Trump requested. That much
we do know.
Not arguing the tweet Trumpet made, but your reasoning that the MbS will ignore the
request.
I am reasonably sure MbS wants the USA to go after Iran, and thus has a motive to try to
comply with Trumpet's request for more Oil. That said, I very much doubt KSA can increase
production, but they may have 50 to 150 mmbl in storage they could release if Oil prices
spike.
FYI:
"Why The U.S. Is Suddenly Buying A Lot More Saudi Oil"
" the Saudis are responding to the demands of their staunch ally U.S. President Donald
Trump, who has repeatedly slammed OPEC for the high gasoline prices, urging the cartel in
early July to "REDUCE PRICING NOW!""
"Saudi Arabia cut last week its official selling price (OSP) for its flagship Arab Light
grade for October to Asia by US$0.10 a barrel to US$1.10 a barrel premium to the Dubai/Oman
average"
So it appears that KSA is trying to comply with Trumpet's request. At least by trying to
lower the oil prices via selling their oil at a discount.
** Note: Not trying to be a PITA, just providing an alternative viewpoint. I do value what
you post. Hope you understand.
"The short-term investment focus adopted since 2014 offers a finite set of opportunities
over a limited period of time, and this period is now clearly coming to an end as seen by
accelerating decline rates in many countries around the world," Kibsgaard pointed out.
BAU won't get it done – no quick fixes, 'new shale revolution' or 'reserve
production' to get us through – my interest is mostly how we (as a society and culture)
will react as constraints on the resource 'haves' and 'have nots' set in.
Went through Irma in South Florida last Fall – and in general order was maintained
– but really only out of Gas for about 3 days – and was more of a shock type
shortage. A very slow decline of world supply will hit those who can't pay for it most
– and maybe wake up enough through higher prices to begin planning for what will be the
greatest energy transition that must take place!
The big oil companies are selling a story of long term stability to their investors, partly
so they can justify the long term investments needed for the mega-projects where they get
most of their oil and cashflow (some of those see no net return for many years). They only
need to sell themselves to their investors, not their customers who just buy the cheapest or
most convenient, be it crude to refineries or petrol to motorists.
The service companies live more year to year – they get hired to help develop and
drill a field and then their workload drops a lot except for some well servicing during
operation. Schlumberger is selling itself to its customers (the 'operators' who are the
E&P companies) and investors as the go to guy for the next couple of years as activity
tries to pick up but faces increasing issues as the easy (and now not so easy but still
OK-ish) oil goes away.
Schlumberger is not a typical service provider to the producers, although that is a large
portion of their business. Since their purchase of Cameron International and other oilfield
manufacturing companies, they have been providing facility engineering and fabrication
services to the oil producers worldwide.
In point of fact, Schlumberger does have the information that the producers have, and then
some. They use those numbers as a basis for facility engineering, and as such are arguably in
a better position to interpret them than the producer as of late.
I've regularly read the BP annual report, and have come to regard it as little more than a
curiosity. Schlumberger, Shell and Total have a firmer grip on the world oil situation, based
on my read of their CEO's comments. However that may be confirmation bias on my part. We
shall see .
Probably the more important item is Russian reserves my estimate is we are at 90% depletion
for existing technology and OIP at cost for western Russian reserves. At this point a squeeze
plan in Syria would ensure foreign reserve earnings to into wars and not fuels outcome is
standard wars as a result of miss spending income
Yes, I assume they have some problems since they reformed the tax system in favor of upstream
risky projects and at the same time imposed more taxes on downstream refineries. But to
assume Russia has problems is like assuming the whole world has a problem. Could be perfectly
right, but why expose Russia as opposed to others? Russia has a lot of higher cost oil; just
look at the land mass and offshore mass. How could there not be prospects? Some inside
knowledge is sorely lacking, since I like most western people don't have connections in that
part of the world.
80% of the world's oil has peaked, and the resulting oil crunch will flatten the
economy.
New scientific research suggests that the world faces an imminent oil crunch, which
will trigger another financial crisis.
A report by HSBC shows that contrary to the commonplace narrative in the industry, even
amidst the glut of unconventional oil and gas, the vast bulk of the world's oil production
has already peaked and is now in decline; while European government scientists show that the
value of energy produced by oil has declined by half within just the first 15 years of the
21st century.
The upshot? Welcome to a new age of permanent economic recession driven by ongoing
dependence on dirty, expensive, difficult oil unless we choose a fundamentally different
path.
Then they say: The HSBC report you need to read, now
Real issue is giants, your article in 2015 real issue is 90% ..real issue is squeeze play in
motion in Syria..goal? if don't have it, don't drill it at home, no rig increases so 'end
game' is cut off Isreali/Saudi friendly arab gas to Europe own Caspian area (city I recall
owned by Ukraine under British treaty Yelsin) in end no WW2 buildup during economic issues
(Russia 5M/day, Saudi similar) no Hilter, just preempt what's left..
I downloaded it then, and just had to look at the date the file was created. You probably
also have it in your hard-drive.
It provided a nice confirmation to my thesis that Peak Oil won't happen in the future. It
is taking place now, and the date we entered the Peak Oil plateau was 2015. You also
forecasted that, as I did.
You are correct. Hey, I am 80 years old and I just can't remember shit anymore.
Okay, I posted a few days ago that I thought peak oil would be in 2019. Perhaps I was
wrong. Hell, I have been wrong quite a few times. But now perhaps peak oil is right now.
Perhaps? We shall see.
But my point is everyone seems to be agreeing with me now. Old giant fields are seeing an
ever increase in decline rates. I predicted this a long time ago. Once the water hits those
horizontal laterals at the very top of the reservoir, the game is over.
The decline rate in those old giant fields is increasing at an alarming rate.
Obviously! Fucking obviously. It could not possibly be otherwise. Thank you and
goodnight.
Memory is less necessary these days with internet, computers, and smart phones, where
searches can be run in a moment. Don't worry too much about that.
"But my point is everyone seems to be agreeing with me now."
I discovered your blog in 2014 when looking for confirmation on my suspicion that the oil
price crash was going to result in Peak Oil. I was impressed to see that you were there years
before through your analyses. I have a lot of respect for you and your intellectual capacity,
and I agree with you in many things, besides Peak Oil, including the population problem, and
your worries about the environment.
I don't believe the world cannot increase its oil production, I just believe it won't do
it. Both Saudi Arabia and Russia have the capacity to go full throttle on what they have
left. Shaybah is the most recent supergiant in KSA and expected to produce until 2060 at
current output. No doubt they could increase production from Shaybah by a lot, but it is not
in their interest to do so. Russia lacks the capacity to quickly increase its production, but
there's still plenty of oil in Eastern Siberia, so they could also produce more. Again it is
also unlikely, as it would require an investment and effort that goes against their own
interest.
Peak Oil is not happening because the world is trying to produce more oil and failing, it
is happening by a combination of economical, geological, and political factors that could not
be easily predicted and that were set in motion in the early 2000's when the low-hanging
fruit of conventional on-shore and off-shore crude oil (the cheapest kind to produce) reached
its production limit. Political errors, like taking out Gaddafi, added unnecessary
difficulties. The collapse of Venezuela is the latest political cause. And when things start
to go wrong, it never rains, but it pours.
"Peak Oil is not happening because the world is trying to produce more oil and failing, it is
happening by a combination of economical, geological, and political factors that could not be
easily predicted and that were set in motion in the early 2000's when the low-hanging fruit
of conventional on-shore and off-shore crude oil (the cheapest kind to produce) reached its
production limit."
Isn't this just a distinction without a difference? It's peak oil.
The issue is that Peak Oil has been misunderstood by most people. The argument that Peak Oil
won't happen until this or that date because ultimate reserves are such or such, so often
read in this forum, is incorrect. Even economically recoverable reserves are not decisive. To
make the problem intractable there are many liquids so some might peak while others don't so
discussions about Peak Oil are endless.
But it is very simple. Peak Oil is when the world no longer gets the oil it needs to keep
expanding its economy. And the best way to measure it is through C+C, because crude oil is
what we have been getting since the late 19th C ans is the stuff that produces everything our
economy needs, from asphalt to diesel, plane fuel, and gasoline. NGL won't cut it. Biofuels
won't cut it.
And Peak Oil is being determined by economical and political factors, besides the
geology.
The difference matters because Peak Oil is going to get almost everybody by surprise. Most
won't realize what is the cause of all the troubles we are going to get and they'll be
reassured that there is plenty of oil to be extracted, which is true but irrelevant.
Thanks for the reply. I also tremble at the prospect of what is to happen because of the
failure of the predictions last decade. I can only describe it through an analogy (being a
lay reader and a writer):
In the 2000s, people were saying that we had an ugly wound and that we had better do
something about it. But instead of properly addressing the wound, we just wrapped it in
gauze, and when the blood stopped showing through, we said, "See? All better." That's my
analogy for the "shale revolution" -- it was essentially a Bandaid. The complacency has only
worsened in the last ten years.
This has just made the infection all the worse. When pus starts showing through the
dressing and we unwrap it this time -- we're going to find gangrene.
I am re-reading Joseph Tainter's 1998 book "The collapse of complex societies." It is a
sober reading that shows that in the end the laws of entropy and diminishing returns always
produce the same result. We are not more intelligent than the people that preceded us. If
anything we can only be stupider on average. We just have a very high opinion of
ourselves.
Time for a wake up and a little bit more darwinism in our lives. The problem is the pain.
With so many people it is just going to be unbearable. On a scale never imagined, not even by
writers of bad sci-fi.
That would be a more important definition of peak oil to me, and I think we are definitely
there. Then we have the absolute production definition, which was the original definition, as
to production. It is now anticlimactic to your definition. As to the date or year it happens,
who cares? More importantly, now, is when demand will lower enough to stop draining
inventories. At what oil price will that start occurring? How fast will alternate sources
replace unmet demand? New directions and everyone is likely to be wrong on estimates. EIA and
IEA were totally useless before, and that will probably not change in the near future.
Looking in the past won't give us much, and the future is anybody's guess.
As to current prices, $68 oil won't get any extra interest from E&Ps outside of the
Permian that is stalled. To any measurable extent. Close to $80 oil is not expanding interest
very much outside of the US. We are just living on borrowed time.
Oil prices are likely to continue to rise, especially if your estimates of future
production (roughly similar to my estimates, but perhaps a bit more pessimistic) are correct,
unless consumption of oil stops increasing. My guess is that oil (C+C) consumption will
continue to increase at 400 to 800 kb/d each year , until oil prices get to about $150/b or
more (around 2025 to 2027),by that time or soon after ( maybe 2030) oil consumption growth
may stop either because of the expansion of electric and natural gas powered transport or
because of a second Great Financial Crisis. My hope is it will be the former, but I think the
latter scenario is much more likely.
Hopefully Keynes' General Theory will make a comeback before then.
Ron Wrote:
"I predicted this a long time ago. Once the water hits those horizontal laterals at the very
top of the reservoir, the game is over. "
FWIW: That's already happened. when it occurs, they drill a new horizontal above the old
one. The new lateral also have valves on there ports. so that when the water breaches one or
more of the ports, they shut them off to reduce water cut. I posted Saudi Aramco tech
articles here back between 2014 and 2016 when they were available on the SA website.
Hi Carlos, thanks for the trip down memory lane. I tend to agree with peak oil being now
(ish). From what I recall the peak month for C+C was, so far, in November 2016. I suppose
there is also a peak day, a peak weak, and a peak year. Folks seem to like packaging time in
various proportions. Hell, there's probably a peak decade and a peak hour. My guess is the
peak year will be 2018. I like, because I'm a bit thick at maths, how Ron has added trailing
12 month average to his world production chart. I just look at the 12 month trailing average
for each December to get an idea of how much was produced in each calendar year. It seems
that 12 month trailing average for December 2018 will beat that of 2017. My guess is 2019
won't beat 2018. Or will any other year after that. So, if Ron say's 2019, and I say 2018,
then it seems that I think he is wrong lol he's probably 100 times smarter than me so doesn't
lose sleep over it lol. Up until this time I have always agreed with Ron on peak oil. But
now, I throw down the gauntlet! 2018 vs 2019. Two will enter, one will leave.
The exact week, month, or year when maximal production is reached has only historical
interest. The point is that since the end of 2015 the 12-month averaged C+C production has
barely increased (EIA data) despite the increase in demand.
Dec 2015 80,564 100.0%
Dec 2016 80,579 100.0%
Dec 2017 80,936 100.5%
Apr 2018 81,363 101.0%
We will have to see how it evolves over to the next December, but so far it is annualized
to a 0.4% increase. To me we are in a bumpy plateau since late 2015 and all those meager
gains and more will be lost in the next crisis. The problem will be evident to many when
after the crisis we are not able to increase production above those values.
Peak Oil is a situation, not a date, and we are in that situation since late 2015. The oil
that the world demands cannot be produced so prices are going up, and up. I suppose it is
possible that the powers that be intervene to reduce global oil demand by favoring a crisis
in developing countries, like Argentina, Brazil, Turkey, South Africa, through interest rate
changes. Wait, it is already happening. It is a dangerous tactic, as crises can spread
around, and the interest rise weakens the economy.
Well one has to define the plateau a bit better. If we make the bounds wide enough one
could say the peak was 2005 or even 1980 and we have been on a bumpy plateau since that
point.
Better in my view to define peak as peak in centered 12 month average output wth center
between month 6 and 7.
I use a 13-month centered average, so it is symmetrical with 6 months at each side.
But really, after a clear period of production growth 2010-2014, there was a strong growth
in production 2014-2015 in response to falling prices, and then production got stuck in late
2015.
It is not a question if we are in a plateau (or very reduced growth) period, but what
happens afterwards. After the previous plateau 2005-2009 there was a clear fall 2009-2010,
before tight oil saved the day.
The recent plateau is due to excess inventory and the resulting low oil price level. Oil
inventories have been reduced over the past 12 to 18 months and as oil prices increase,
output will also increase with perhaps a 6 to 12 month lag. How much will it need to rise
above the Dec 2015 level before you no longer consider that output has not risen above your
"plateau". Give me a number, is it 81.5 Mb/d, 82 Mb/b, I prefer to use a year rather than 13
months, that's 182 days on either side of the middle of the 12 month period. On leap years we
can use Midnight of day 183
One issue that has been corrected is that reserve requirements for large banks have
increased.
Also lenders are more careful with their mortgages making a housing bubble less
likely.
In addition, the assumption that higher oil prices played a major role in the GFC is
incorrect.
Perhaps there is a looming recession, whether this happens in 2018, 2030 or some other
year we will only know when it occurs.
Someone who predicts a recession every year will be right eventually.
I maintain my guess of 2023 to 2027 for the 12 month centered average c+c peak and severe
recession GFC2 starting 2029 to 2033, lasting 5 to 7 years.
So people think that oil production next year will not meet demand. Of course consumption
will equal production, but demand will be higher, and we won't be belabor this further
because the point here is a question above -- how does society react too insufficient oil?
The question is never analyzed in a particular way. It's usually evaluated from the
consumer's perspective. Who does what to get the oil they need. We can imagine they bid
higher, we can imagine that day seize the oil enroute to someone else, and we can imagine a
magical agreement on the part of everyone to stop all economic activity not involved in food
production/distribution to reduce global consumption.
What seldom is described is the decision making process within the leadership of oil
producers and exporters. It seems clear that a sudden awareness of insufficiency would yield
leadership meetings making decisions not about how to distribute more oil to customers, but
rather how to keep the oil for future generations of the producing country, without getting
invaded and destroyed.
One would think that the optimal strategy for a country that has oil is to ally itself
with a military power that can deter invasion by some other military power, without having
the ally's troops actually present on the territory. Or perhaps more effective would be
investing in the necessary explosives or nuclear material for one's own oil fields, and
inform potential invaders that the oil will remain the property of the country whose
geography covers it, or the fields will be contaminated for hundreds of years to deny them to
anyone else.
Clearly this is the optimal path for an oil producer and not seeking some technology that
can allow them to drain the resources of future generations more rapidly now.
So people think that oil production next year will not meet demand. Of course consumption
will equal production, but demand will be higher,
Watcher, I assume you think demand is what people want. But there is no way to measure
what people want but can't afford. So "demand" in that sense has no meaning whatsoever. So
what happens is the price of gasoline, or whatever, rises or falls until supply equals
demand. As prices rise, demand falls and as prices fall, demand rises because people can now
afford it. Therefore demand always equals consumption. Demand is what people buy at the
price they can afford. I wish we had a word for what people want but even if we did there
would be no way to measure it. A poll perhaps?
Estimating demand is essential for a company and can determine its survival. Demand is
dependent on price, so demand estimates are essential for deciding the price of a product.
The curves for price and demand cross at a point that maximizes income.
Demand is estimated statistically (polls sometimes), with models, and expert forecast. It
has a large uncertainty.
"there is no way to measure what people want but can't afford."
That is potential demand at a lower price point. It is estimated in the same way.
Companies decide to lower their prices with hopes to realize that lower-price demand.
"demand always equals consumption."
Exactly. Demand becomes consumption when realized, so it only makes sense to talk about
demand in the future or the present (due to lack of real-time data). It doesn't make sense to
talk about past demand, because it becomes consumption or sales.
There is a numerical measure for how much people want gasoline, regardless of price.
It is the length of the line of cars at the gas station in the 1970s. Demand was measured
in 100s of feet. Price somewhat doesn't matter. If you can't afford it, you put it on a
credit card and then default.
The length of the queue is an interesting metric by which to measure the want that people
have for an item. Nice one. I'm gonna use that. Reminds me of my Dad's old story about lining
up for a week to buy tickets to see The Beatles.
When you are lining up to buy tickets to see the Beatles it might be called a 'Want' or a
'Desire'. However, when it is the line at the soup kitchen it becomes 'Hunger' or
'Desperation'!
And that queue can sometimes feel like a hundred miles
The bigger issue is people, Business, & gov'ts servicing their debt. If the cost of
energy increases, it make it more difficult to service their debt. Recall that Oil prices
peaked at $147 right before the beginning of the 2008/2009 economic crisis. Since then 2008
Debt continued to soar as companies & gov'ts piled on more debt. Debt is promise on
future production. Borrow now and pay it back over time.
I recall the presentation Steven Kopits did about 4 or 5 years ago that stated Oil
production was well below demand. I think real global oil demand was projected to be about
120mmbd back in 2012-2013 (sorry don't recall the actual figures).
I think the bigger factor is how steep the declines will be. Presumably all of the super
giants are in the same shape and likely heavily relied on horizontal drilling to offset
natural decline rates. Presuming as the oil column shrinks in the decline rates will rapidly
accelerate. Most of the Artic\Deep water projects were cancelled back in 2014\2015, and I
believe most of those projects would take about 7 years to complete and need between Oil at
$120 to $150/bbl (in 2012 dollars) to be economical. I am not sure the world can sustainably
afford $120+ oil, especially considering the amount of new debt that has been added in the
past 10 years.
Ron Wrote:
" I wish we had a word for what people want but even if we did there would be no way to
measure it"
Perhaps the word "Gluttony" or the phase "Business As Usual". People don't like change,
especially when the result, is a decrease in living standards.
Being willing to pay more for oil may change who gets it. But it will not alter the fact that
someone who wants oil will not get it. That will be a ripple of market information which will
travel around the world pretty quick, I should imagine!
The vast majority in almost all the places in the world would like to use more oil but their
income is not enough so they end up doing with less. That includes me. Who doesn't want a
bigger faster newer lawn mower, truck, or tractor? What person would not prefer the latest
iphone etc. ? or going on vacation, eating out at high end steakhouses? The main reason they
can't is because it would take more and cheaper oil for them to be able to afford it. Else
they can only try to take it away from someone else? The peak in global oil production/person
happened back in 1979, not because folks were tired of using it all but due to the laws of
physics coming into play.
So there are two 'classes' of 'peak oil'. One class is where oil supply is constrained by
price (throwing more money at production sees an increase in production), the second class is
where oil supply is constrained by physical availability at any price (wave more money at
production, but production cannot increase).
In the first case (price constrained) normal market behaviour will apply – folk pay
more (if they can afford it) to get more.
But in the second case (resource constrained), it does not matter how much is offered,
there is simply no more oil to be had.
With the prevailing declining yields and declining discoveries, are we not in the
transition between these two states – moving from price constrained to resource
constrained? And once we get well into resource constrained, the price a buyer can pay will
determine who gets the remaining available oil, and no amount of screeching and
dollar-bill-waving by those who have missed out will improve the supply situation for
them.
LTO decline rate would be no problem by a conventional / state possessed oil company.
They would have a field with tight oil, and then just equip let's say 20 fracking /
drilling teams and start to produce through their field in 30 or 50 years. They would have a
slow decline by starting at the best location and getting to the worse one, while increasing
experience / technic during the years to compensate a bit.
You have a pretty good argument except for the "30 or 50 years" part. That's where the wheels
fell off your go-cart. Just how large would the tight oil reservoir have to be to keep 20
drilling and fracking units for 30 to 50 years? And if you assume other oil companies are in
that same reservoir doing the same thing? They are going to cover a lot of acreage very fast.
It matters very little. At any time t the available supply is limited and the market price
will determine who gets what is available. Those willing to pay more than others will get the
oil. When we reach a point where no more oil can be supplied at price P, there might always
be some more oil that could be at some higher price P', it is simply a matter of oil prices
reaching the point that there are substitutes that can replace the use of oil in some uses.
Today the biggest use for oil is transport and electricity and natural gas may soon replace a
lot of this use, especially as oil becomes scarce and prices increase.
At $100 to $120/b the transition to EVs could be quite rapid, maybe taking 20 to 25 years
to replace 90% of new ICEV sales and then another 15 years for most of the fleet to be
replaced as old cars are scrapped. So by 2055 most land transport uses for oil will be
eliminated.
The higher oil prices rise, the more incentive there will be to switch to cheaper EVs,
even natural gas will probably not be able to compete with EVs as Natural Gas will also peak
(2030 to 2035) and prices will rise. It will probably be unwise to spend a lot of money for
Natural gas fueling infrastructure, though perhaps it might work for long haul trucking, rail
seems a more sensible option.
Adam Ash Wrote:
"So there are two 'classes' of 'peak oil'. One class is where oil supply is constrained by
price (throwing more money at production sees an increase in production), the second class is
where oil supply is constrained by physical availability at any price (wave more money at
production, but production cannot increase)"
Consider this way:
There is already a huge shortage of $10/bbl oil, and a massive glut of $300/bbl oil. There is
always shortage resources. Price is just a system that balances demand with supply.
Adam Ash Wrote:
"But in the second case (resource constrained), it does not matter how much is offered, there
is simply no more oil to be had no amount of screeching and dollar-bill-waving by those who
have missed out will improve the supply situation for them."
Not exactly. People that can only afford $50/bbl Oil get out priced by people willing to
pay $100/bbl. Supply shifts to the people that can afford the hire price at the expense of
people that cannot afford the higher cost. Higher prices will lead to new production, even if
has a Negative EROEI (ie tar sands using cheap NatGas).
In an ideal world, higher prices lead to less energy waste (flying, recreation boating)
and better efficiency (more energy efficient buildings & vehicles). But I am not sure
that will be the case in our world.
The first to suffer from high energy prices will be the people living in poor nations.
Recall back in 2008-2014 we had the Arab spring when people could afford the food costs, and
started mass riots and overthrough gov'ts. This will return when Oil prices climb back
up.
Its possible that the world make continue to experience price swings, as global demand
struction decreases demand. For instance in July 2008 Oil was at $147/bbl but by Jan 2009 it
was about $30/bbl. I doubt we will see such large price swings, but I also doubt that Oil
will continuously move up without any price corrections.
Realistically we are in deflation driven global economy as the excessive debt applies
deflationary force to the economy. However central banks counter deflation with artificially
low interest rates and currency printing (ie Quantitive Easing). My guess is that
industrialized nation gov't will become increasing dependent on QE and other gimmicks that
lead to high inflation\stagnation.
I think Dennis said some time ago that Saudi's 266 billion barrels of reserves that they
claim was perhaps when they raised P2 reserves to P1 reserves.
Naaaa, that's not where they got it. They still claim 403 billion barrels of P2 reserves
and 802 billion barrels of P3 reserves. And that 802 billion barrels will soon be increased
to 900 billion barrels via enhanced recovery techniques.
This is a good article if you need a good belly laugh today. It is brought to you on the
opinion page of Arab News. Arab News is a Saudi Publication just in case anyone is
wondering. I used to get it in hard copy, free, courtesy of ARAMCO, when I was there.
Saudi Aramco, according to its own records, has about 802.2 billion barrels of oil
resources, including about 261 billion barrels of proven reserves; 403.1 billion of probable,
possible and contingent reserves. The company has produced up to 138 billion barrels of oil
to date out of the 802.2 billion barrels.
It plans to raise oil resources to 900 billion barrels from the 802.2 billion over the
long term as its also plans to increase recovery rate of reserves to 70 percent from the
current 50 percent.
P.S. When I was in Saudi they had a word for this kind of thing. They called it
wasta . Wasta means "deliberate exaggeration" as a way of dialogue. That's just the
way they talk. They don't believe they are lying. They really expect you to know they are
just exaggerating. They don't expect you to take it literally.
Second oil reserves have been flat since around 2010, and declining recently for the first
time since the 1970s. Note, before someone points it out, they don't count Canadian Bitumen.
This is so ridiculous it is funny. Oil discoveries have been going down, down, and down, way
below replacement level. Yet so-called "proven" reserves keep going up, up and up.
"This is so ridiculous it is funny. Oil discoveries have been going down, down, and down, way
below replacement level. Yet so-called "proven" reserves keep going up, up and up."
Well to some degree, technology has been able to extract more oil from a field. Thus a
field discovered in 1950 with an initial proven reserve of 100mbbls, may have 125mbbls or
proven reserves as technology has improved recovery rates. That said technology improvements
likely don't match the paper proven reserves.
The Venezuelan heavy oil reserves are overstated (I assume the large bump prior to 2010 is
the booking of the Magna Reserva in the Orinoco Oil belt, which i know are fake). It's fairly
easy to eyeball the better number by substracting 300 billion a flat line around 1200. If you
want to add future bookings in that heavy oil belt, add up to 50 billion gradually. Dont
forget that at the current decline rate Venezuela will be producing about 1.1 million BOPD in
december, and IF things go as I think they will sometime in the first half of 2019 exports
will drop to zero for a few months.
Third gas reserves also flat. If condensate and NGLs have been meeting the increased demand
that crude has been unable to, then that might be about to stop.
"... Further oil price increases could trigger a slowdown in domestic or global economic growth, which could further complicate the U.S.' Iran policy and Trump's domestic political situation. ..."
Further oil price increases could trigger a slowdown in domestic or global economic
growth, which could further complicate the U.S.' Iran policy and Trump's domestic political
situation. September 12th, 2018
Despite the Trump administration's "
maximum pressure " campaign targeting the Iranian economy, Iran's crude oil and oil product
revenues
jumped a surprising 60 percent from March 21 to July 23. In addition, figures provided by
Iran's Central Bank show that Iran's revenues from oil sales soared by 84.2 percent over that
same period, setting a new record.
The increased revenues seem to have resulted from a jump in oil prices this year as well as
Iran's high oil export volume during part of that period. Notably, the increased revenues were
reported despite the United States' announcement in May that it
would sanction those purchasing Iranian oil starting in early November, with the ultimate
goal of reducing Iranian oil sales to zero in order to place pressure on the Iranian
government.
The U.S.' efforts have had some noticeable effects on Iranian oil exports, as the country's
exports for the month of August were
significantly lower than those of July. However, the drop has only seen exports fall to
near March 2016 levels , when the U.S. was not pursuing a sanctions policy against Iran and
the Iran nuclear deal, officially known as the Joint Comprehensive Plan of Action (JCPOA), was
in effect.
Further dashing U.S. hopes of crushing Iranian oil exports have been recent announcements
from Iran's top two customers,
China and
India , that they would continue to import Iranian crude despite the looming threat of U.S.
sanctions. India, along with some other countries, has sought " waivers
" from Washington that would allow them to continue to import Iranian oil and avoid retaliation
from the U.S. for a certain period of time.
In addition, the European Union, which had previously joined the U.S. in targeting Iranian
oil exports in 2012, has shown its unwillingness to follow Washington's lead this time around,
openly
vowing to rebel against the U.S. sanctions regimen and increasing the likelihood that
Europe will continue to buy some Iranian oil despite U.S. threats.
Risks for U.S. and
global economies
Another indication that efforts to curb Iranian oil exports are backfiring for the Trump
administration is
the jump in oil prices that has resulted from concerns about the U.S. sanctions on Iran's
oil exports. The increase in oil prices is likely to be felt domestically in the U.S., the
world's largest consumer of oil, potentially posing a political risk to Trump and his fellow
Republicans ahead of the November 6 midterm elections. In addition, further oil price increases
could trigger a slowdown in domestic or global economic growth, which could further complicate
the U.S.' Iran policy and Trump's domestic political situation.
Such concerns have prompted
U.S. Energy Secretary Rick Perry to meet his Saudi and Russian counterparts in an effort to
convince those two countries to keep oil output high in order to offset a reduction in future
Iranian oil exports. While Saudi Arabia
has already stated it would increase output, Russia is unlikely to comply, given its
relationship with Iran and Washington's threat to impose new sanctions on Moscow. The U.S.,
Saudi Arabia and Russia
are currently the world's three largest oil producers, accounting for about a third of
global crude oil output.
While the Trump administration may have assumed that U.S. oil producers – and the U.S.
economy in general -- would benefit from the elimination of Iranian oil exports, the growing
rejection of the impending U.S. sanctions by other countries shows that these nations are
unwilling
to pay for more expensive American oil or even Saudi oil,
preferring less expensive Iranian oil despite potential future consequences. Furthermore,
efforts to increase U.S. crude production
have fallen short of government expectations, further complicating the U.S.' efforts to
offset an increase in oil prices resulting from Iranian oil sanctions.
Whitney Webb is a staff writer for MintPress News and a contributor to Ben Swann's Truth
in Media. Her work has appeared on Global Research, the Ron Paul Institute and 21st Century
Wire, among others. She has also made radio and TV appearances on RT and Sputnik. She currently
lives with her family in southern Chile.
"... Fracking has indeed produced oil and gas, but the fields deplete rapidly without massive additional investment. Only the zero-interest rates of the Fed's Quantitative Easing could have financed the fracking boom - without QE, US oil and gas would not even exist on the world's radar. ..."
The Keiser Report has a very upbeat show today on RT, in which they celebrate how the NYT
has finally come round to reporting the truth about US fracking, in ways that Max and Stacy
were reporting 9 years ago.
Fracking has indeed produced oil and gas, but the fields deplete rapidly without massive
additional investment. Only the zero-interest rates of the Fed's Quantitative Easing could
have financed the fracking boom - without QE, US oil and gas would not even exist on the
world's radar.
And yet Neocons are taking the US production of hydrocarbons as a major plank in their
platform of war, building castles in the air from a mythical "energy supremacy" and treating
current production levels as a weapon of war -- but the economics of this relatively minor
industry will shut it down soon.
In the second half of the 30-minute show, Max interviews Wolf Richter and they discuss
Argentina mostly. It's a rapid and valuable overview of how the US Hegemon deals with its
favorite suckers south of the border, and how currencies and bonds work - and also why the
IMF acts only to bail out investors and bond-holders, and never the real economy of the
victim nation.
Basra demonstrators, enraged over polluted water and years of extreme neglect, engage in arson to make their point September
9, 2018 12:48 AM (UTC+8) Basra protesters set the Iranian consulate ablaze on Friday night, the latest manifestation of outrage against
influential actors in Basra city, which should be one of the richest in the country with its massive oil reserves and port, but which
has become one of the most decrepit.
More than 18,000 Basra residents have been poisoned by tap water since the start of the month, according to the Basra province
health directorate. Hospitals, inundated with patients, have collapsed under the pressure.
Basra, like neighboring Iran, is majority Shiite. But in recent years, residents have grown hostile toward Tehran over its dominance
of Iraqi affairs, its support for political parties notorious for public waste and its backing of armed factions that enforce themselves
as morality police.
The torching of the Iranian consulate came just 24 hours after the protesters -- ignoring a government curfew -- set fire to the
offices of powerful Shiite political parties and Iran-backed militias that formed the backbone of the paramilitary Popular Mobilization
Units.
The demonstrators did not spare the local government headquarters and provincial council, setting those ablaze as well.
Basra has been roiled by unrest since July, and the latest round of revolt was met with tear gas and live fire. The first week
of September saw nine demonstrators killed and 93 wounded, according to the UN.
The deadly force has only inflamed the movement. Over the past two nights, security evaporated from the streets while the military
kept to the sidelines. Angry groups of youths roamed the city center, demanding revenge for those killed and for years of neglect.
The city appears out of control.
The unrest has put a spotlight on corruption in Iraq's economic capital, just as the Ministry of Oil seeks foreign investment
– including from China – to transform the country from an importer of oil products to an exporter.
Gulf port closed
Demonstrators on Thursday shut down the country's most important port, Umm Qasr.
Basra province is Iraq's only outlet to the sea, and Umm Qasr is just one of five commercial sea ports that serve as the country's
main gateway for basic necessities.
The costly shutdown prompted the minister of transportation to call for restraint via local radio stations.
"Iraq is losing millions," Kadhim Finjan pleaded over the airwaves. The port was eventually reopened Saturday before dawn.
Like the oil fields, these critical hubs have drawn protesters, who see the wealth they create being siphoned off by corruption.
An officer with the port authority, who spoke to Asia Times on condition of anonymity, said it was "impossible" for security
to control the port
The ports – strategically placed on the Persian Gulf – are shared between the political parties, a phenomenon that saps their
revenues and allows goods to enter without passing through customs.
An officer with the port authority, who spoke to Asia Times on condition of anonymity, said it was "impossible" for security to
control the port.
"The political parties treat the ports like their private property. Goods are exempted from controls and inspection, and the taxes
are reduced for traders dealing with the ruling parties," he said.
Before the ports earned the ire of the demonstrations, it was the oil sector.
Basra's 15 oil fields account for nearly 60% of the country's oil reserves. Revenues from the province generate approximately
$60 million daily, or 3.6 of Iraq's total 4.3 million barrels per day.
The government relies on the sector to finance its activities, but only a fraction of the national budget flows back to Basra.
The stark contrast between Basra's oil wealth and the miserable conditions of the population has prompted demonstrators this summer
to organize sit-ins blocking the gates to the oil fields.
In addition to the 15-hour power cuts and filthy drinking water, they are demanding jobs.
Foreign companies operating in Basra are required to hire locals for at least 50% of job posts, and up to 80% depending on the
contract. But those laws are often flouted.
The government has also allowed foreign companies to acquire vast swathes of agricultural lands to be used as oil fields north
of Basra, resulting in the bulldozing of orchards and date palm fields and increased unemployment.
"The oil extracted from our city lands is not beneficial to us," one demonstrator told Asia Times.
"It is better to stop its extraction than have it stolen," he said, blaming the government and foreign companies alike.
According to provincial council member Ahmed Abdel Hussein, half of Basra residents live in poverty.
The government says unemployment stands at about at 7.8%, but academic studies suggest a far higher rate. There are no official
statistics for the province.
Feared militia takeover
The government in Baghdad fears the deteriorating situation in Basra could disrupt oil production.
"The oil companies have been greatly affected by the protests," said Adel al-Thamari, an academic and investment analyst in Basra.
"The workers cannot access the fields because of the closure of roads or closing of entry gates," he told Asia Times, adding that
"the oil companies have reduced the number of foreign experts for fear of their lives and inability to afford high insurance costs."
The decline in production puts the financial burden on Baghdad. "Companies will raise the terms of credit, which means a great
loss for Iraq, which will have to pay compensation to the companies," he said.
Along with the world's major oil companies, hundreds of logistics and security support companies provide operational services
to the fields in Basra. As security deteriorates, they too will have to withdraw. "The withdrawal of these companies would mean production
stops," Thamari said.
The concerns of oil companies go beyond the protests to fears of a militia takeover.
"The army has taken the position of neutrality toward the demonstrations, and the fear is that the Popular Mobilization Units
will deploy. This would cause a further deterioration of security, because the militias have their own internal divisions and such
an escalation could neutralize the official security forces," Thamari said.
"... The shale oil "miracle" was a stunt enabled by supernaturally low interest rates, i.e. Federal Reserve policy. Even The New York Times said so yesterday ( The Next Financial Crisis Lurks Underground ). ..."
"... As with shale oil, they depend largely on dishonest financial legerdemain. They are also threatened by the crack-up of globalism, and its 12,000-mile supply lines, now well underway. Get ready for business at a much smaller scale. ..."
"... Hard as this sounds, it presents great opportunities for making Americans useful again, that is, giving them something to do, a meaningful place in society, and livelihoods. ..."
"... Pervasive racketeering rules because we allow it to, especially in education and medicine. Both are self-destructing under the weight of their own money-grubbing schemes. ..."
"... A lot of colleges will go out of business. Most college loans will never be paid back (and the derivatives based on them will blow up) ..."
"... The leviathan state is too large, too reckless, and too corrupt. Insolvency will eventually reduce its scope and scale. Most immediately, the giant matrix of domestic spying agencies has turned on American citizens. ..."
"... It will resist at all costs being dismantled or even reined in. One task at hand is to prosecute the people in the Department of Justice and the FBI who ran illegal political operations in and around the 2016 election. These are agencies which use their considerable power to destroy the lives of individual citizens. Their officers must answer to grand juries. ..."
"... As with everything else on the table for debate, the reach and scope of US imperial arrangements has to be reduced. ..."
And so the sun seems to stand still this last day before the resumption of
business-as-usual, and whatever remains of labor in this sclerotic republic takes its ease in
the ominous late summer heat, and the people across this land marinate in anxious
uncertainty.
What can be done?
Some kind of epic national restructuring is in the works. It will either happen consciously
and deliberately or it will be forced on us by circumstance. One side wants to magically
reenact the 1950s; the other wants a Gnostic transhuman utopia. Neither of these is a plausible
outcome.
Most of the arguments ranging around them are what Jordan Peterson calls "pseudo issues."
Let's try to take stock of what the real issues might be.
Energy
The shale oil "miracle" was a stunt enabled by supernaturally low interest rates, i.e.
Federal Reserve policy. Even The New York Times said so yesterday ( The
Next Financial Crisis Lurks Underground ).
For all that, the shale oil producers still
couldn't make money at it. If interest rates go up, the industry will choke on the debt it has
already accumulated and lose access to new loans. If the Fed reverses its current course - say,
to rescue the stock and bond markets - then the shale oil industry has perhaps three more years
before it collapses on a geological basis, maybe less. After that, we're out of tricks. It will
affect everything.
The perceived solution is to run all our stuff on electricity, with the electricity produced
by other means than fossil fuels , so-called alt energy. This will only happen on the most
limited basis and perhaps not at all. (And it is apart from the question of the decrepit
electric grid itself.) What's required is a political conversation about how we inhabit the
landscape, how we do business, and what kind of business we do. The prospect of dismantling
suburbia -- or at least moving out of it -- is evidently unthinkable. But it's going to happen
whether we make plans and policies, or we're dragged kicking and screaming away from
it.
Corporate tyranny
The nation is groaning under despotic corporate rule. The fragility of these operations is
moving toward criticality. As with shale oil, they depend largely on dishonest financial
legerdemain. They are also threatened by the crack-up of globalism, and its 12,000-mile supply
lines, now well underway. Get ready for business at a much smaller scale.
Hard as this sounds, it presents great opportunities for making Americans useful again, that
is, giving them something to do, a meaningful place in society, and livelihoods.
The implosion
of national chain retail is already underway. Amazon is not the answer, because each Amazon
sales item requires a separate truck trip to its destination, and that just doesn't square with
our energy predicament. We've got to rebuild main street economies and the layers of local and
regional distribution that support them. That's where many jobs and careers are.
Climate change is most immediately affecting farming. 2018 will be a year of bad harvests in
many parts of the world. Agri-biz style farming, based on oil-and-gas plus bank loans is a
ruinous practice, and will not continue in any case. Can we make choices and policies to
promote a return to smaller scale farming with intelligent methods rather than just brute
industrial force plus debt? If we don't, a lot of people will starve to death. By the way, here
is the useful work for a large number of citizens currently regarded as unemployable for one
reason or another.
Pervasive racketeering rules because we allow it to, especially in education and medicine.
Both are self-destructing under the weight of their own money-grubbing schemes. Both are
destined to be severely downscaled.
A lot of colleges will go out of business. Most college
loans will never be paid back (and the derivatives based on them will blow up).
We need
millions of small farmers more than we need millions of communications majors with a public
relations minor. It may be too late for a single-payer medical system. A collapsing oil-based
industrial economy means a lack of capital, and fiscal hocus-pocus is just another form of
racketeering. Medicine will have to get smaller and less complex and that means local
clinic-based health care. Lots of careers there, and that is where things are going, so get
ready.
Government over-reach
The leviathan state is too large, too reckless, and too corrupt. Insolvency will eventually
reduce its scope and scale. Most immediately, the giant matrix of domestic spying agencies has
turned on American citizens.
It will resist at all costs being dismantled or even reined in.
One task at hand is to prosecute the people in the Department of Justice and the FBI who ran
illegal political operations in and around the 2016 election. These are agencies which use
their considerable power to destroy the lives of individual citizens. Their officers must
answer to grand juries.
As with everything else on the table for debate, the reach and scope of US imperial
arrangements has to be reduced. It's happening already, whether we like it or not, as
geopolitical relations shift drastically and the other nations on the planet scramble for
survival in a post-industrial world that will be a good deal harsher than the robotic paradise
of digitally "creative" economies that the credulous expect.
This country has enough to do
within its own boundaries to prepare for survival without making extra trouble for itself and
other people around the world. As a practical matter, this means close as many overseas bases
as possible, as soon as possible.
As we get back to business tomorrow, ask yourself where you stand in the blather-storm of
false issues and foolish ideas, in contrast to the things that actually matter.
Most of the arguments ranging around them are what Jordan Peterson calls "pseudo issues."
Let's try to take stock of what the real issues might be.
Energy
The shale oil "miracle" was a stunt enabled by supernaturally low interest rates, i.e.
Federal Reserve policy. Even The New York Times said so yesterday ( The
Next Financial Crisis Lurks Underground ). For all that, the shale oil producers still
couldn't make money at it. If interest rates go up, the industry will choke on the debt it has
already accumulated and lose access to new loans. If the Fed reverses its current course - say,
to rescue the stock and bond markets - then the shale oil industry has perhaps three more years
before it collapses on a geological basis, maybe less. After that, we're out of tricks. It will
affect everything.
The perceived solution is to run all our stuff on electricity, with the electricity produced
by other means than fossil fuels , so-called alt energy. This will only happen on the most
limited basis and perhaps not at all. (And it is apart from the question of the decrepit
electric grid itself.) What's required is a political conversation about how we inhabit the
landscape, how we do business, and what kind of business we do. The prospect of dismantling
suburbia -- or at least moving out of it -- is evidently unthinkable. But it's going to happen
whether we make plans and policies, or we're dragged kicking and screaming away from it.
@82 There is some logic to the Iranians fielding a jet fighter of any sort, even if it is
based on a relic of the 1970s.
An Israeli campaign against Iranian nuclear sites is going to involve F-15 and F-16 jets
loaded to the gills with big-arse bombs. Those will be unable to dogfight even a relic like
an F-5 unless they drop that ordinance.
If that is all those Iranians do that then they will have achieved their purpose.
Alternatively, the Israelis could use fighter escorts but then you have to consider that
each escort represents one less bomb-laden F-16 (or, put another way, twice as many
sorties).
Simply put: Absent any Iranian jet fighters then the Israelis can commit ALL of their jets
to the task of bombing Iranian targets, and do so from the very beginning. But once Iranian
fighters are in the mix then the job becomes much harder: the Israelis either have to take
out those jets first before committing to a bombing campaign, or they have to commit half
their force to escort duties from the very start.
Sure, SU-35s would be much better, but an F-5 is still way better than nothing.
"Third, while the U.S. is now exporting oil to Europe and elsewhere" --
The USA is net importer of oil. That alone discredits the author
Notable quotes:
"... Meanwhile in the North Sea, the new BP owned flow of crude oil from the Forties field was coming on stream and boosted Shell's declining flow of Brent crude oil to the extent that BP were now in a position to control the market. The new Brent/Forties contract rapidly became the preferred global oil price benchmark in preference to land-locked WTI, and the benchmark was later augmented by Statoil's (STO) Oseberg and Ekofisk fields. ..."
"... While this Dark Inventory was funded by investors of petrodollars, the liquidity needed for oil market cash-flows was provided by the Federal Reserve Bank via Quantitative Easing. ..."
"... crude oil in time and space ..."
"... A cynic once said that there are always two reasons for an action: the reason given, and the real reason. ..."
"... "Drillcos are not risk free. If oil prices tumble, investors' ability to grab high returns within a few years fade" ..."
ICE Age – how Wall Street and Enron turned oil into an asset class and wrecked the
global Oil Market.
Transition through Gas – Obama strategy to achieve energy security/resilience through
oil market inflation and a switch to natural gas.
America First - President Trump's new Energy Dominance strategy for a global WTI benchmark
and U.S. oil market domination. Introduction
It has been clear since President Trump was elected to office in November 2016 that major
changes in financial and commodity markets have been taking place since then, but it has taken
until now for any indication to emerge as to any organising principle for the new
administration's foreign policy doctrine.
To an outsider, the foreign policy of the Trump administration appears to be based in no
particular order firstly on a desire to erase all vestiges of President Obama's policies,
whatever they may be, and secondly, on an America First doctrine of primacy of U.S.
interests in the global economy.
Finally, on 29 th June, President Trump announced at an Energy Department event
"Unleashing American Energy" a new doctrine for energy policy which he termed Energy Dominance,
without
specifying what this actually means .
In the four months since then, sufficient data points have emerged to make an educated
guess. The ICE Age
Towards the tail end of the Clinton administration and the Dot Com boom in 2000, Gary Cohn
of Goldman Sachs (NYSE: GS )
had dinner with his counterpart at Morgan Stanley (NYSE: MS ), John Shapiro. From this dinner was hatched an
audacious plan to take control of the global oil market through a new electronic global market
platform.
The first step was to acquire a moribund mid-American electronic trading system
(Intercontinental Exchange – ICE) and its dynamic founder. Secondly, key oil market
intermediary companies (including BP (NYSE: BP ), Shell (NYSE: RDS.A ) & Total (NYSE: TOT )) agreed to provide liquidity in exchange for a
share of ICE equity ownership followed by a second tier of market participants who then joined
on less attractive terms.
Having secured physical and financial oil market liquidity, ICE still needed participation
by end-user producers and consumers. After an abortive effort to acquire the New York
Mercantile Exchange (NYMEX), ICE made the membership of London's International Petroleum
Exchange an offer they could not refuse: either sell IPE to us, or our members take their
hedging elsewhere.
Meanwhile in the North Sea, the new BP owned flow of crude oil from the Forties field
was coming on stream and boosted Shell's declining flow of Brent crude oil to the extent that
BP were now in a position to control the market. The new Brent/Forties contract rapidly became
the preferred global oil price benchmark in preference to land-locked WTI, and the benchmark
was later augmented by Statoil's (STO) Oseberg and Ekofisk fields.
Enron-Style
Financialization
Enron really were the smartest guys in the room. With the complicity of investment banks
they were able to defraud investors and creditors alike for over a decade through the use of
tripartite 'Prepay' funding contracts and accounting chicanery which concealed these
liabilities off-balance sheet. The extraordinary fact is that over the period of Enron's
existence some 70% of their income was entirely illusory.
There is nothing new about such macro (long term) fraud or manipulation: a producer cartel
manipulated the tin market for decades until the price crashed in the 1985 Tin Crisis.
Similarly, Sumitomo's Yasuo Hamanaka manipulated the copper market for ten years, five years of
which was after David Threlkeld had rumbled what they were doing and blown the whistle, only to
be ignored.
From 2001 onwards, the passive investment phenomenon of index fund and ETFs began to make
inroads into the oil market via the inspired marketing narrative of 'inflation hedging' –
ie off-loading dollar risk in favour of oil risk. These long-only passive investors enabled oil
producers such as BP and Shell (who wished to offload oil risk in favour of dollar risk) not
only to hedge production, but also to monetise inventory and even reserves.
There's nothing wrong with the use of prepay financing provided it is done transparently,
but if it is opaque, then as Enron demonstrates, the results can be devastating.
It is my case that several oil market players, particularly BP and Goldman Sachs, and
probably extending to Norway's Statoil and at least one other U.S. investment bank, began to
quietly facilitate and use prepay funding on a big scale. The result was to withhold physical
crude from the market and as the global market tightened this led to the inflation of a bubble
in price which those involved always knew was unsustainable.
This bubble was spiked at $147/barrel in July 2008 (
some say deliberately ) and while global physical demand remained buoyant the reason for
the oil price collapse to $35/barrel was that buyers were unable to actually pay for the oil.
This was because international trade finance clearing through instruments such as letters of
credit became unavailable when trust temporarily evaporated from the dollar system of global
trade clearing and settlement.
Transition through Gas
The organizing principle of U.S. foreign policy has for over 100 years been energy security,
and the means to achieve this has oscillated between (dumb) military and (smart) financial
action.
President Obama's smart financial energy policy doctrine had two key objectives. The first
aim was to reduce reliance on Saudi oil, and this required (as after the 1973/4 Oil Shock)
prices high enough to make viable new U.S. and global production, funded by petrodollars
reinvested by beneficiaries of inflated oil prices.
So, as I documented in a series of Seeking Alpha articles beginning with Oil: The Big Long the oil
price was rapidly re-inflated and supported for 5 years over $80/barrel through Enron-style
prepay funding. This created an opaque Dark Inventory of oil reserves held by a custodian (the
U.S. Big Hill SPR) but where the economic interest is held by fund investors via prepay
contracts with investment banks.
A highly lucrative two tier false market in oil was also created where most market
participants were (and remain) unaware of the true beneficial ownership of oil. This led to
periodic unaccountable moves in inventory and to trading coups (short term micro manipulation)
via 'short squeezes' and otherwise. While this Dark Inventory was funded by investors of
petrodollars, the liquidity needed for oil market cash-flows was provided by the Federal
Reserve Bank via Quantitative Easing.
At these inflated price levels, substitution by renewable energy and investment in energy
efficiency acted to reduce demand, while massive investment in shale oil increased U.S.
production by 5m bpd in 3 years.
The second objective was a switch from oil to natural gas, and when the U.S. was obliged to
leave Saudi Arabia, they thereupon established their biggest regional base in Qatar, who co-own
with Iran the greatest single natural gas reserve on the planet – South
Pars.
Energy Dominance
In the four months since President Trump's announcement, the market strategy developed by
Gary Cohn is now being implemented and its elements are emerging into view.
Firstly, there has been a massive inflow of Managed Money into the oil market, particularly
the Brent contract, which has seen the Brent oil price increase by 35% since the starting
point, which I believe can be dated to the August Brent/BFOE Crude Oil option expiry on June 27
th 2017.
Secondly, on 1 st July 2017 the Saudis ceased to price oil against the BWAVE
weighted average of Brent/BFOE futures contract (perfectly suited for HFT algorithmic trading)
and began to price oil against the ICE Brent settlement price.
This
image shows the striking change in market price activity which took place at that point
Thirdly, now that the spot Brent/BFOE price has been inflated through $60 per barrel,
internationally accessible U.S. oil deliveries are now available to the market which form a
necessary precondition for a successful U.S. based futures contract.
The direct effect of this flow of funds into the market has been to:
Drive the spot Brent futures contract over $60 per barrel;
Encourage oil producers to hedge, particularly U.S. shale oil producers selling future
production in order to lock in finance;
Create a significant Brent backwardation, which has now, via Brent/WTI arbitrage, had the
effect of dragging WTI out of contango.
Finally, and perhaps the most intriguing data point of all, is this chart from Olivier Jakob
of Petromatrix titled crude oil in time and space
Here it will be seen that even while the December 2017 Brent futures contract soared over
$60 per barrel as fund money poured in, the U.S. WTI December 2019 futures contract was pretty
stable around $50 per barrel.
Physical or Financial Demand?
A cynic once said that there are always two reasons for an action: the reason given, and
the real reason.
The dominant market narrative is that the backwardation in Brent is evidence of surging
global oil demand which has emptied inventories and is leading the price to new sunlit uplands.
However, I see the market rather differently.
Firstly, whether the Brent spot month is supported by financial, rather than physical
demand, the result will still be a backwardation, and because few oil producers expect a price
over $60 to be sustainable they therefore hedge and depress the forward price. In support of
this view, I am far from the only market observer who believes that Aramco, and Rosneft would
not be selling equity if either Saudi Arabia or Russia believed the oil price trajectory will
be positive even in the medium term.
Secondly, it is not a matter of if OPEC members cheat, but how and here
Tanker Trackers combination of
tanker geolocation with Planet Labs microsatellite imagery is shining
new light on the dark world of physical flows of oil.
I have yet to find anyone in the market who is either willing or able to answer the simple
question of who exactly is buying down the Brent curve?
Someone has bought Brent futures contracts to the tune of some 200,000 December 2018,
100,000 December 2019, and 45,000 December 2020. In addition there are 250,000 further
contracts from January 2019 onwards in other contract months.
Could this be refiners hedging crude oil supplies? I think not, because refiners do not tend
to hedge oil purchases far forward, and market consensus seems that $55/bbl is an expensive
hedge.
So then it must be investors? But if so, then these investors participate on the ICE market
via funds who take futures market risk either directly (Managed Money) or indirectly via
investment banks (Swap Dealers).
But the problem with this is that Managed Money investors, whether actively speculating for
transaction profit (hedge funds), or passively holding and rolling over long-only positions
(ETFs & Index funds) participate only in the liquid ICE front month contracts.
So what exactly is going on down the curve?
Firstly, one part of the explanation is that financing of shale
oil development has evolved through the entry into the market of DrillCo financing
structures where oil market risk is taken by fund investors (eg Carlyle) in future shale oil
production. But as the article author said: "Drillcos are not risk free. If oil prices
tumble, investors' ability to grab high returns within a few years fade"
Since shale oil production decline rates are high the necessary hedging by investment banks
of some £2bn market risk could account for a great deal of 2018 long open interest.
This still leaves open the $64 billion question of which market participant is motivated and
able to support the ICE Brent term structure for years into the future by swapping dollar risk
(T-Bills) for long term oil risk (oil reserves leased via prepay purchase/resale
contracts).
My conclusion by a process of elimination is that this Big Long can only be Saudi Arabia and
regional allies, with Saudi Arabia now under the management of the thrusting young Mohammad bin
Salman.
America First
So what are the intended outcomes of the U.S. Energy Dominance strategy as outlined
above?
Firstly, the re-establishment of WTI as global oil market pricing benchmark after some 15
years domination by the Brent/BFOE benchmark.
Secondly, to stabilise the global oil price between $50 and $60 per barrel, as forecast by S
& P Global Platts and BP.
Thirdly, preferential America First U.S. and Saudi oil market access, with U.S.
antagonists such as Iran or Russia being able to access the market on inferior terms, if at
all.
Finally, the emergence of an Oil Standard for the U.S. dollar through basing the dollar
directly on monetized U.S. and Saudi oil reserves.
What is meant by the oil standard, and why the Energy Dominance strategy is doomed to fail,
will be the subject of a second article.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate
any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving
compensation for it (other than from Seeking Alpha). I have no business relationship with any
company whose stock is mentioned in this article.
"... The US is run by a somewhat unstable president being advised by nuts like Bolton whose main focus is following Israeli diktats, therefore i would not expect them to be looking out for US interests. ..."
The US is prepared to use sanctions to drive Iranian oil exports down to zero, the US
national security adviser, John Bolton, has said.
"Regime change in Iran is not American policy, but what we want is massive change in the
regime's behaviour," Bolton said on a visit to Israel, as he claimed current sanctions had been
more effective than predicted.
Donald Trump took the US out of Iran's nuclear deal with the west in May and is imposing
escalating sanctions, both to force Iran to renegotiate the deal and to end Tehran's perceived
interference in Yemen, Syria and Lebanon.
Complete removal of Iranian oil from world markets would cut oil supply by more than 4%
probably forcing up prices in the absence of any new supplies.
SNIP
Fuller US sanctions, including actions against countries that trade in Iranian oil are due to
come into force on 5 November, 180 days after the initial Trump announcement to withdraw.
The measures against Iranian oil importers, and banks that continue to trade with the Central
Bank of Iran, will ratchet the pressure to a higher level.
Pompeo has set up an Iran Action group inside the US State Department to coordinate US leverage
on companies and countries that cannot show that their trade, including in oil, has fallen
significantly by November.
Measures may also be taken against firms that insure ships carrying Iranian crude.
It is expected some of the major Iranian oil importers, such as Russia, China and Turkey, will
either ignore the threat of US sanctions, or, possibly in the case of Iraq, Japan and South
Korea, seek exemptions.
China takes a quarter of all Iran's oil exports, and with Chinese banks little exposed to the
US it can avoid the impact of Trump's sanctions.REPLY
I wonder if China could just take all of Iran's oil? I imagine at the right price they
would be happy to do so. China imports about 8 Mb/d, Iran exports about 2.5 Mb/d of oil,
seems possible.
Also note that if this does occur and there is no drop in Iranian output, the impact of
the Iranian sanctions on the World Oil market will be effectively zero.
I wonder what the capacity is of the Chinese and Iranian oil tanker fleet is? If nobody
else will buy it or ship it then the tanker fleet will have to be owned/insured by either
Iran or China.
I'm interested in knowing if Chinese oil tankers are even capable of hauling 2.5 million
barrels a day home from Iran. It seems doubtful that anybody else will be doing it for them.
I can't find much info on the size of the Chinese owned tanker fleet and it's
capabilities.
While US forces have been known to seize North Korean oil tankers hauling Libyan oil, I
find it doubtful that they will seize Chinese ones, for the reason you mentioned; China
punches back. Nothing spells the end of hegemony like getting your ass kicked.
One would assume its easy for the chinese to buy used oil tankers if they offer a bit over
current market prices. This is a very long term conflict, and they could buy tankers,
reregister them Chinese or Iranian or say Russian and start moving that oil.
The US is run by a somewhat unstable president being advised by nuts like Bolton whose
main focus is following Israeli diktats, therefore i would not expect them to be looking out
for US interests.
The message I get from that piece is that companies are getting ready for next year so
they can hit the ground running when the pipeline bottleneck is removed. Output has not
decreased, it is just rising more slowly than capital expenditures. No point in completing
wells if there is not pipeline space to move the oil, so they are building pads and other
facilities and drilling wells, but waiting on completion.
So far this year Permian tight oil output has increased by 478 kb/d, an annual rate of
increase of about 820 kb/d. The annual rate of increase from Jan 2017 to July 2018 has been
about 829 kb/d.
Output has not decreased, productivity has. There's a lot in that article. Yeah, DUCs are
increasing for next year. Late next year. Conoco is the only company that I read about, that
said we do not intend to expand much in the Permian, until they get the infrastructure in
place (pipelines). They started running out of pipeline capacity the beginning of the year. I
don't know about you, but if I was a CEO, I'd feel like an absolute idiot for not figuring
that into the plans. So, for another year, they get to feed the DUCs.
Many a show and tell from the operators, is how they have brought down costs. Now, I have
tell everyone that costs are higher than before. That will never go into an annual report, as
it makes the CEO look like an idiot.
The companies are not making the production per well that was hyped. Er, maybe we should
not include that in the annual report, either. That's what I got from the article.
You don't want people to say you wound up with egg on your face, so you tell them you have
decorated your face with egg. It was your intent to look better. Spin.
I don't follow the dog and pony shows given by the oil companies, I just look at the data
from the EIA, OPEC, and shaleprofile. I guess everyone interprets information differently,
what I see in the article is that output has not risen as high as previously projected
because fewer wells are being completed than was projected. It is also probably true that the
average completed well has lower EUR than the ridiculous well profiles that are typically
presented to investors, but I always dismiss those as hype and smart investors do the same
and look up the information at drilling info, frac focus or shaleprofile.com.
The average well productivity in the Permian basin has not decreased, also no decrease in
the North Dakota Bakken, or the Eagle Ford, or the Niobrara all based on Enno Peter's
presentations at shaleprofile.com.
I also ignore the estimates by the EIA's drilling productivity report as I think that
model is poorly done.
Dennis, respectfully, you need to stop whatever you are doing and go seek help
immediately. In an effort to be the eternal optimist, or the staff contrarian, you are losing
all credibility with regards to analyzing anything oily in the world. I have no charts, or I
would stick them here.
Guy is basically right, there is nothing good to draw from this article whatsoever and the
author is one of the best there is. All costs in the shale biz are significantly higher than
EVER before. Well productivity is declining, not from takeaway restraints but from well
interference, increasing GOR and depletion. Profitability has NOT improved thus far in 2018,
the Permian unconventional oil industry is still outspending revenue and interest rates are
on their way up, up, and up.
If anybody is spending $3.5MM to drill DUC's and not paying back debt, they too need to
seek immediate help. You have become the King of Debt on POB and are discounting completely
the role that debt will play in your lofty supply demand economic theories. Rune has just
written something very good on that and Art has good data now regarding declining gasoline
consumption in the US due to higher prices. That is all debt related, man. You have gone
freaking chart bonkers.
And why argue what the KSA says about its reserves? Its their oil, they can say whatever
they want to about it and no dumb ass American is going to change it. Right here in the good
'ol US of A, reserve reporting under the ever watchful eye of the SEC, is embarrassingly
awful. Shale oil EURS are exaggerated by 30% or more. We now lie in America way better than
the Saudis ever did and get this: a lot of people believe it !! Ahem.
Dennis, I have to work for a living but I don't want you to think I criticized you and
don't have the balls to respond to all your hours of research arguing with me. I got it. And
all the charts. And the models. And the criticism directed at others for guessing, which is
all you EVER do. Have you ever seen the back in of a drilling rig in your life? You gotta
balance about 500 oil well check books to even be allowed to analyze the oil industry,
IMO.
Look, even the EIA seems to thing productivity is declining in the Permian. Goggle it. I
get the full meaning of Enno's work, all of it, including this: "all shale oil wells drilled
in America before January of 2016 now only account for 27% of total LTO production." Let that
sink in a minute.
You embrace debt as thought that is an acceptable thing in the world we live in today, and
especially from the shale oil industry, and though you want to be un-hinged from fossil fuels
as much as any of the permanent residents you have on your blog, rational ones they are, one
and all, you believe strongly in the shale oil industry's ability to pay down its debt,
improve its dismal financial performance, and deliver the goods it has promised to America.
Its very confusing, actually. And hypocritical. I guess when the shale oil industry says past
performance is not indicative of future results, you believe them.
I think, really, all you are doing is defending your damn models.
I have some serious doubts about how much and how fast shale oil will grow over the next few
years. I have accumulated no statistics, and have prepared no computations and charts to back
up my doubts. However, they should be easily understood in theory, as that's all it is, a
general theory.
While I know of no industry standards to define the difference between tier one, tier two,
and tier three oil, I have made my own guesses based on operators statements. Tier one has EUR
of 600k barrels, or more. It will produce over 200k in the first year. Tier two has EUR closer
to 300k, and will produce 100k to 200k the first year, or an off the wall estimate of 150k.
Tier three is probably closer to 150k EUR, and it's long term profitability is dependent on a
very high oil price. It will be drilled, but only when price is high, and tier two is gone.
If you look at tier one, it can be drilled at today's prices, and income from the first year
will fund one or more wells the next year with cash flow, hypothetically.
You would need about twice the number of tier two wells to equal a tier one. At present
prices you would have to borrow money to fund the equivalent number next year.
We have a limited amount of tier one wells left in the Eagle Ford and Bakken. There is
beginning to be some question as to the number of tier one spots in the Permian. Plus
increasing GOR is raising questions.
As more wells are drilled, of course the price of the well increases. Simple micro
supply/demand.
Interest rates will increase, causing borrowing costs to increase.
Even at $100 oil price, I can't see over a two million barrel a day increase in a short
period of time (three to five years).
I could put numbers to this, but I could never reach what it actually would be, anyway. Do
your own figures and see what you come up with. I just can't get to over 2 million barrels, and
that would be tough.
I'm not saying that the estimates for recovery are wrong. I'm saying using past data to
estimate the future does not take into consideration that all rock is not the same, and that
costs and borrowing ability will put their own limits on how much, and how fast growth occurs.
REPLY
All very much guess work. There are factors such as improved well layout, better well
design and so forth that tend to drive well cost for some "optimized" well design (a given
lateral length, number of frac stages and pounds of proppant and other materials) lower that
may offset the microeconomic tendency for costs to go up as constraints are reached (not
enough workers, equipment, or infrastructure). That's the reason I assume for simplicity that
long term well cost in constant dollars remained fixed.
I also have no idea on the numbers of tier one to three wells that potentially can be
drilled. All I have used is average well output for ND Bakken, Eagle Ford, and Permian from
shale profile. That is simply a mix of all wells producing. I assume oil companies attempt to
drill the most prospective areas first (not an exact science) so that as the play is
understood average new well EUR will gradually rise to some maximum (as oil companies figure
out both the best areas to drill and the best well design) and then after some period
(probably 2 to 3 years) the best areas will become saturated with wells so that less
prospective areas will be drilled and new well EUR will gradually decrease. That is my model
in a nutshell and the result for the US is that tight oil output may be able to rise from
6000 kb/d in July 2018 to about 8000 kb/d by July 2023 (about 5 years). This scenario assumes
high oil prices and is optimistic, a "medium" oil price scenario would result in maybe a 1.5
Mb/d increase in tight oil output over 5 years and a "low oil price scenario" ($80/b in 2017$
maximum by 2025) might see only a 500 kb/d increase in tight oil output from 2018 to
2023.
Note that US tight oil output has risen by about 700 kb/d over the first 7 months of 2018.
I do not believe this rate of increase will continue for much longer and will gradually
decrease as we approach 2021.
For the Permian basin specifically the peak is about 1 Mb/d lower for my "low oil price"
scenario relative to the medium price scenario ($80/b vs $113/b max price). Other basins
would also be affected, but I haven't run the scenarios on all tight oil basins so I am not
sure how much the entire US tight oil peak would be affected, probably 1.5 Mb/d lower than
the medium price scenario. For Rune Likvern's near term oil price scenario tight oil output
would be fairly flat from current output levels in my opinion and that would tend to put
upward pressure on oil prices.
We have not had any difference of opinion on future shale output, in the last 6 months,
according to my recollection. Any minor differences that may have been discussed fit into the
"who knows" classification. My comment was for those "other" projections coming out, that
basically are surreal. They have caused, in my opinion, an excess of pipelines being built,
and massive expenditures to be able to export another 3 to four million barrels of oil a day
that will probably never show up.
700k a day out of the Permian, is actually what I am projecting for 2018. Even 800k is
within probability. 200k of extra pipeline is due sometime before year end. Not much more
than that until late 2019 when bigger pipelines may be available. But the amount you could
crank it up to would be limited by the number of months left in 2019.
Agree 100%. Note that 700 kb/d is roughly my estimate for Permian increase in 2018 as
well, for the US tight oil as a whole possibly 1000 to 1200 Kb/d increase in 2018. Many of
the estimates are too high on that point we are definitely on the same page.
I mean, there are only four months left. I know the Eagle Ford can't do hardly anything in
that time fraim, Bakken is stuck at a high of about a 100k increase, so what fields will add
that much?
From Bakken, Eagle Ford, Niobrara, and STACK/SCOOP.
So far non-Permian US tight oil has increased about 215 kb/d through the first 7 months of
2018, I would expect this to accelerate if anything as capital moves to other tight oil
basins due to the low oil prices at Midland. So a 400 kb/d increase from other tight oil
basins (exit rate for 2018), plus 700 kb/d from Permian basin would give us 1100 kb/d.
So far in 2018 we have increases of 92 kb/d in Bakken, 61 kb/d from Eagle Ford, 38 kb/d
from Niobrara, 479 kb/d from Permian, and 24 kb/d from all other US tight oil plays.
If all output stopped increasing in other tight oil plays besides the Permian after July
2018 we would have a 915 kb/d increase in US tight oil output in 2018, if my guess of a 700
kb/d increase for the Permian basin tight oil output in 2018 is correct. My best guess
remains 1100+/-100 kb/d for the US tight oil increase in output from Dec 2017 to Dec
2018.
I only have data through July 2018, so 5 months left for increases, if we extrapolate the
rate of increase for the first 7 months of 2018 we get 1190 kb/d for the 2018 increase in
tight oil output. I scale it back a bit because I expect Permian output increase will slow
down. Other plays might also speed up.
Ok, your looking at EIAs production estimate per play, again. I'm only going to go by
monthlies. There will be other field declines, besides tight oil. GOM, Alaska, and non tight
oil Texas.
Haven't looked at rig counts lately so it's a guess. Just figure the capial may move to
higher profit areas such as Bakken or Niobrara. Yes there are DUCs that could be completed.
There may be more available frac crews in other plays as everyone has flocked to Permian.
The Kashagan oilfield is proving to be a real nightmare for operators and partners. No
wonder a decision was made to expand capacity for the land based Tengiz field. No similar
call was made for Kashagan even if stated reserves are a bit higher than for Tengiz.
It is a bit like offshore deepwater. If the size of a new prospect warrants it, the cost
can be kept down reasonably. And the North Slope is probably one of the places it is possible
to find another or even several gigant oil fields (above 500 million barrels). Just shows
that some majors are betting on higher oil prices.
EIA Weekly U.S. Ending Stocks to Friday 17th August
Crude oil down -5.8 million barrels
Oil products up +1.5
Overall total, down -4.3 (shown on chart)
Natural Gas: Propane & NGPLs up +1.5 (not included in the chart) https://pbs.twimg.com/media/DlZH1X2X0AIPDLR.jpg
Big drop in Iranian exports the first of August, and not close to Nov. yet. One million
looks more likely, eventually. And for those that may have missed it, Sinopec has started
buying US oil, again. To me, that indicates China is attempting to remain somewhat
neutral.
It's pretty clever. They want money from the state before they do any work developing
their own lease. The money would fund . . . haha . . . management salaries, among other
things.
And if it proves out as no oil, well, then they got the state to fund exploration. If
there is oil, they get the money from selling the oil. It's no lose.
Saudi Aramco, apparently there was an audit of their reserves in preparation for the Aramco
IPO. It says Baker Hughes was involved???
2018-04-29 DUBAI/LONDON (Reuters) – An audit of Saudi Aramco's oil reserves – an
essential part of the preparatory work for its planned initial public offering – has
found the state oil giant to have higher reserves than it previously reported, sources familiar
with the matter told Reuters.
Two sources, speaking on condition of anonymity, said the independent external audit has
found the proven oil reserves to be at least 270 billion barrels, which is slightly higher than
the 260.8 billion barrels the company reported in its 2016 annual review.
Dallas-based DeGolyer and MacNaughton, and Gaffney, Cline and Associates, part of Baker
Hughes, are involved in the auditing, sources have said.
Did they pay for the audit? I've found that audits often show the results the customer is
looking for. Its not quite a science. More like a combination of fishing and editing.
"In no way should these results be construed as a true representation of the 'real' ."
au·dit
NOUN
an official inspection of an individual's or organization's accounts, typically by an
independent body.
VERB
conduct an official financial examination of (an individual's or organization's
accounts).
"companies must have their accounts audited"
They audited their books! I have no doubt that they found exactly what Saudi had on
their books. But that is likely to bear no resemblance to what field reserves actually are.
At any rate, it is entirely possible that Saudi could have doctored their books in
anticipation of the audit.
How would one go about actually checking the remaining reserves in Ghawar? Or any of the
other Saudi fields?
Dipstick??🤡 Seriously, they are both oil consulting companies. Hardly an audit.
Just high priced consultants. Key phrase is high priced. Nobody is going to jerk their
consulting license if they accept the high price, and give SA what they want. If SA runs out
of oil tomorrow, the worst that could happen is the companies say, whoops, missed that
one.
New blog post by Rune Likvern on credit creation, interest rates and oil price: https://runelikvern.online/2018/08/21/the-price-of-oil/
. He focuses on the demand side and believes that Brent will trade in $55 – $70/bo range
over the coming year. This seems a bit low IMHO., considering the supply side of the equation.
REPLY
I agree with your opinion. There will be a downward pull from multiple directions. Dollar
strength, Rune's analysis, higher price in general, Iran discounting their oil, and maybe
some others. All of those will not keep price from going up if supply is too low. Just keep
an eye on world inventory levels. They tell the long term story.
Also consider that $80/b at 29.5 Gb consumption is about $2.4 trillion for a World economy
of $80 trillion, that's about 3% of World GDP, in 2013 when prices were $108/b and
consumption was 27.8 Gb and World GDP was $76.5T, oil consumption (C+C) was about 3.9% of
World GDP. Perhaps rising interest rates will make spending 3% of World GDP on oil a problem,
but despite Rune Likvern's excellent analysis, I think the connection between credit creation
and oil prices that he reveals may be a spurious correlation.
Certainly higher credit creation will tend to increase aggregate demand (of which oil
consumption is a part) and will tend to increase demand for oil. The price of oil is
determined by both supply (production of oil) and demand (consumption) of oil.
Just as supply does not create its own demand (Say's Law), demand does not create its own
supply. Even if demand for oil should decrease (which I doubt will occur without a major
recession such as the 80s oil shock or the GFC), eventually the supply of oil is likely to
not keep up with the increase in oil consumption (likely by 2019), the lower oil prices are
the more likely this is to occur because oil production will not be profitable at prices
under $70/b for many shale and deepwater plays, thus their will be a lack of oil investment
and oil will become scarce.
I think Euan Mearns prediction of $80/b for oil (made in early 2018) seems
reasonable .
Good question. Getting rid of power plants buring fuel oil and investing in solar power
seems to be the plan. Wonder if they are able to execute it. In addition the removal of
subsidies on gasoline ought to also reduce consumption.
Very short term exports from SA will be impacted by the annual Hajj pilgrimage now in
August. 2.4 million pilgrims demand huge amounts of extra desalinated water supply and
artificial cooling based on more fuel oil electricity. There are reports of much lower
exports in July compared to June, and August seems to be even lower so far.
it is absolutely clear who is behind the food and medicine boycotts (empty supermarket
shelves), and the induced internal violence. It is a carbon copy of what the CIA under
Kissinger's command did in Chile in 1973 which led to the murder of the legitimate and
democratically elected President Allende and to the Pinochet military coup ; except,
Venezuela has 19 years of revolutionary experience, and built up some tough resistance.
To understand the context 'Venezuela', we may have to look at the country's history.
Before the fully democratically and internationally observed election of Hugo Chavez in
1998, Venezuela was governed for at least 100 years by dictators and violent despots which
were directed by and served only the United States. The country, extremely rich in natural
resources , was exploited by the US and Venezuelan oligarchs to the point that the population
of one of the richest Latin-American countries remained poor instead of improving its
standard of living according to country's natural riches. The people were literally enslaved
by Washington controlled regimes .
A first coup attempt by Comandante Hugo Chavez in 1992 was oppressed by the Government of
Carlos Andrés Pérez and Chavez was sent to prison along with his co-golpistas.
After two years, he was freed by the Government of Rafael Caldera.
During Peréz' first term in office (1974-1979) and his predecessors, Venezuela
attained a high economic growth based on almost exclusive oil exports . Though, hardly
anything of this growth stayed in the country and was distributed to the people. The
situation was pretty much the same as it is in today's Peru which before the 2008 crisis and
shortly thereafter had phenomenal growth rates – between 5% and 8% – of which 80%
went to 5% of the population oligarchs and foreign investors , and 20% was to be distributed
to 95% of the population – and that on a very uneven keel. The result was and is a
growing gap between rich and poor, increasing unemployment and delinquency.
Venezuela before Chavez lived practically on a monoculture economy based on petrol. There
was no effort towards economic diversification. To the contrary, diversification could
eventually help free Venezuela from the despot's fangs, as the US was the key recipient of
Venezuela's petrol and other riches. Influenced by the 1989 Washington Consensus,
Peréz made a drastic turn in his second mandate (1989-1993) towards neoliberal
reforms, i.e. privatization of public services, restructuring the little social safety
benefits laborers had achieved, and contracting debt by the IMF and the World Bank. He became
a model child of neoliberalism, to the detriment of Venezuelans. Resulting protests under
Peréz' successor, Rafael Caldera, became unmanageable. New elections were called and
Hugo Chavez won in a first round with more than 56%. Despite an ugly Washington inspired coup
attempt ("The Revolution will Not be Televised", 2003 documentary about the attempted 2002
coup), Hugo Chavez stayed in power until his untimely death 2013. Comandante Chavez and his
Government reached spectacular social achievements for his country.
Washington will not let go easily – or at all, to re-conquer Venezuela into the new
Monroe Doctrine, i.e. becoming re-integrated into Washington's backyard. Imagine this
oil-rich country, with the world's largest hydrocarbon reserves, on the doorsteps of the
United Sates' key refineries in Texas, just about 3 to 4 days away for a tanker from
Venezuela, as compared to 40 to 45 days from the Gulf, where the US currently gets about 60%
of its petrol imports. An enormous difference in costs and risks, i.e. each shipment has to
sail through the Iran-controlled Strait of Hormuz.
In addition, another socialist revolution as one of Washington's southern neighbor –
in addition to Cuba – is not convenient. Therefore, the US and her secret forces will
do everything to bring about regime change, by constant economic aggressions, blockades,
sanctions, boycotts of imports and their internal distribution – as well as outrights
military threats. The recent assassination attempt of President Maduro falls into the same
category. "
The antagonism between Saudi Arabia and Iran sets off a variety of political reverberations
affecting the countries of the Persian Gulf, unsettling the situation between Turkey, Syria,
and Iraq, and entangling Russia and the United States in the ensuring imbroglio.
... ... ...
The role of the Russian Federation cannot be viewed apart from what is happening in the
energy-rich, formerly Soviet Central Asian republics. The so-called -Stans (Kazakhstan,
Uzbekistan, Azerbaijan, and Turkmenistan) are major players in today's energy markets. Whatever
they do, however, cannot be seen as separate from what Russia is doing or from Russia's
intentions. Although some of them, primarily Azerbaijan, have initiated projects that are not
aligned with Moscow's goals, they nevertheless need to behave in ways that do not upset their
powerful northern neighbour on whom they are heavily reliant, to some extent, for their welfare
(due to their dependence on oil and gas pipeline networks).
Politics is therefore deeply intertwined with energy in most of those cases, bringing
diplomacy front and centre as a determinant of behaviour and economic outcomes.
... ... ...
Europe's problem is that, with the exception of North Sea oil and gas, it relies entirely on
imports to provide it with a comfortable level of energy. Thus, events in the Middle East and
the Russian stance toward the continent determines whether it is adequately supplied with
energy or faces shortages.
The deposits in the North Sea have kept some European states (Britain and Scandinavia among
others) well supplied for quite a while. But unfortunately there is a strong suspicion that
these deposits are diminishing at a dangerous rate. As a result Europe will gradually become
dependent on imports from the Middle East, North Africa, Russia, and the Atlantic (Angola,
Brazil, Mexico, and the US). The situation is disquieting since Japan, and more recently,
China, are seeking to buy their own supplies from the same sources.
"...Things started to change after the fracking and shale gas revolution. The United
States suddenly realized that it could not only became absolutely self-sufficient in oil and
gas, but it also emerged as one of the most important exporters to the rest of the
world..."
Ths is factually untrue. The US still depends on crude oil imports to meet its needs. And
if this simple, verifiable fact is misunderstood by the author, then I have to wonder about
the rest of his analysis...
From the middle of the last century to the present, everything has been about oil. The
peak oilers were correct. What they did not consider was the power of debt to hold this whole
thing together long after it should have collapsed. Shale oil is not profitable. That does
not mater as long as debt underwrites the cost of production. What does matter is the rapid
decline rate of shale oil wells. Yes it is true that shale wells are continuing to produce
long after they have reached their peak but it is the volume of production that matters.
If you read the projections put out by the Hirsch Report, the Llyiods Report and the
Bundeswehr Report, things should get interesting in the next couple of years.
"... but neither are they amenable to a stoic acceptance of national decline" ..."
"... Unleashing American Energy ..."
"... American energy dominance, ..."
"... Countering America's Adversaries Through Sanctions Act ..."
"... "... an Israeli citizen, someone who understands your identity, who has a sense of nationhood and peoplehood, and the history and experience of the Jewish people, you should respect someone like me, who has analogous feelings about whites. You could say that I am a white Zionist – in the sense that I care about my people, I want us to have a secure homeland for us and ourselves. – Just as you want a secure homeland in Israel." ..."
Two weeks ago, we
wrote about how President Trump's foreign policy somehow had 'folded' into
'neo-Americanism', and quoted US Foreign Affairs Professor, Russell-Mead, suggesting that
Trump's 8 May metamorphosis (the exit from JCPOA), represented something new, a step-change of
direction (from his being principally a sharp Art of the Deal negotiator), toward
– pace, Russell-Mead – "a neo-American era in world politics – rather than an
[Obama-ist] post-American one". "The administration wants to enlarge American power,
rather than adjust to decline (as allegedly, Obama did). For now, at least, the Middle
East is the centrepiece of this new assertiveness", Russell-Mead opined, explaining that this
new Trump impulse stems from: [Trump's] instincts telling him that most Americans are anything
but eager for a "post-American" world. Mr. Trump's supporters don't want long wars, but
neither are they amenable to a stoic acceptance of national decline" .
There is something of a paradox here: Trump and his base deplore the cost and commitment of
the huge American defence umbrella, spread across the globe by the globalists (sentiments
aggravated by the supposed ingratitude of its beneficiaries) – yet the President wants to
" enlarge American power, rather than adjust to decline". That is, he wants
more power, but less empire. How might he square this circle?
Well, a pointer arose almost a year earlier, when on 29 June 2017, the President used a
quite unexpected word when speaking at an Energy Department event: Unleashing American
Energy . Instead of talking about American energy independence , as might be
expected, he heralded instead, a new era of American energy "dominance" .
In a speech "that sought to underscore a break with the policies of Barack Obama", the
FTnotes , Mr Trump tied
energy to his America First agenda..."The truth is we now have near limitless supplies
of energy in our country," Mr Trump said. "We are really in the driving seat, and you know
what: we don't want to let other countries take away our sovereignty, and tell us what to do,
and how to do it. That's not going to happen. With these incredible resources, my
administration will seek not only the American energy independence that we've been looking for,
for so long – but American energy dominance, " he said.
It seems, as Chris Cook explains , that
Gary Cohn, then chief economic adviser to the President had a part in the genesis to this
ambition. Cohn (then at Goldman Sachs), together with a colleague from Morgan Stanley,
conceived of a plan in 2000 to take control of the global oil trading market through an
electronic trading platform, based in New York. In brief, the big banks, attracted huge
quantities of 'managed money' (from such as hedge funds), to the market, to bet on future
prices (without their ever actually taking delivery of crude: trading 'paper oil', rather than
physical oil). And, at the same time, these banks worked in collusion with the major oil
producers (including later, Saudi Arabia) to pre-purchase physical oil in such a way
that, by withholding, or releasing physical crude from, or onto the market, the big NY banks
were able to 'influence' the prices (by creating a shortage, or a glut).
To give some idea of the capacity of these bankers to 'influence' price, by mid –
2008, it was estimated that some
$260 billion of 'managed' (speculative) investment money was in play in energy markets,
completely dwarfing the value of the oil actually coming out of the North Sea each month, at
maybe $4 to $5 billion, at most. These 'paper' oil-option plays would therefore often trump the
'fundamentals' of real supply, and real end-user demand.
'Step one' for Cohn, was therefore, for the US to manage the trading market, both in price
and access – with U.S. antagonists such as Iran or Russia, being able to access the
market on inferior terms, if at all. The putative 'step two', has been to nurse US shale
production, build new American LNG export terminals, and open America to further oil and gas
exploration, whilst strong-arming everyone from Germany to South Korea and China, to buy
American LNG exports. And 'thirdly', with Gulf oil exports already under the US umbrella, there
were then, two major Middle East energy producers beyond the boundaries of cartel 'influence'
(falling more into rival Russia's strategic energy-producing 'heartland'): Iran – which
is now the subject of regime change–style, economic siege on its oil exports, and Iraq,
which is subject of intense (soft) political pressures (such as threatening to sanction Iraq
under the Countering America's Adversaries Through Sanctions Act ) to force its
adherence to the western sphere.
What would this Trump notion of energy dominance mean in simple language? The US
– were energy dominance to succeed – simply would control the tap to the economic
development – or its lack thereof – for rivals China, and Asia. And the US could
squeeze Russia's revenues in this way, too. In short, the US could put a tourniquet on China's
and Russia's economic development plans. Is this why JCPOA was revoked by President Trump?
Here then, is the squaring of that circle (more US power, yet less empire): Trump's US aims
for 'domination', not through the globalists' permanent infrastructure of the US defence
umbrella, but through the smart leveraging of the US dollar and financial clearing monopoly, by
ring-fencing, and holding tight, US technology, and by dominating the energy market, which in
turn represents the on/off valve to economic growth for US rivals. In this way, Trump can
'bring the troops home', and yet America keeps its hegemony. Military conflict becomes a last
resort.
Senior advisor Peter Navarro said on NPR earlier
this week that "we can stop them [the Chinese] from putting our high tech companies out of
business" and "buying up our crown jewels of technology ... Every time we innovate something
new, China comes in and buys it, or steals it."
Is this then Trump's plan: By market domination and trade war, to prolong America's
'superiority' of technology, finance and energy – and not somehow be
obliged to "adjust to decline"? And by acting in this way, curtail – or at least postpone
– the emergence of rivals? Two questions in this context immediately present themselves:
Is this formula the adoption of neo-conservatism, by the US Administration, which Trump's own
base so detests? And, secondly, can the approach work?
It is not neo-conservatism, perhaps – but rather a re-working of a theme. The American
neo-conservatives largely wanted to take a hammer to the parts of the world they didn't like;
and to replace it with something they did. Trump's method is more Machiavellian in
character.
The
roots to both of these currents of thought lie however – more than partly –
with Carl Schmitt's influence on American conservative thinking through his friend, Leo
Strauss, at Chicago (whether not, Trump has ever read either man, the ideas still circulate in
the US ether). Schmitt held that politics (in contrast to the liberal/ humanist vein) has
nothing to do with making the world fairer, or more just – that is the work of moralists
and theologians – politics for Schmitt, concerns power and political survival, and
nothing more.
Liberals (and globalists), Schmitt suggested, are queasy at using power to crush alternative
forces from emerging: their optimistic view of human nature leads them to believe in the
possibility of mediation and compromise. The Schmittian optic, however dismissed derisively the
liberal view, in favour of an emphasis on the role of power, pure and simple – based on a
darker understanding of the true nature of 'others' and rivals. This point seems to go to the
root of Trump's thinking: Obama and the 'liberals' were ready to trade the 'crown jewels' of
'Our Culture' (financial, technological and energy expertise) through some multilateral
'affirmative action' that would help less developed states (such as rival China up the ladder).
Perhaps such thoughts too, lay behind Trump's withdrawal from the Climate Accord: Why help
putative rivals, whist, at same time, imposing voluntary handicaps on one's own Culture?
It is on this latter, quite narrow pivot (the imperative of keeping American power intact),
that neo-cons and Trumpists, come together: And both also share in their disdain for utopian
liberals who would fritter away the crown jewels of western Culture – for some or other
humanitarian ideal – only to allow America's determined rivals to rise up and overthrow
America and its Culture (in this optic).
The common ground between both currents, is expressed with remarkable candour through
Berlusconi's
comment that "we must be aware of the superiority of our [western] civilisation". Steve
Bannon says something very similar, though couched in the merits of preserving (a threatened)
western Judeo-Christian culture.
This sense of Cultural advantage that must at all costs be recuperated and preserved perhaps
goes some (but not all) way towards accounting for Trump's ardent support for Israel: Speaking
to Israel's Channel Two, Richard Spencer, a prominent leader of the American Alt-Right
(and one component to Trump's base), highlighted the deeply felt
the dispossession of white people, in their own country [the US]:
"... an Israeli citizen, someone who understands your identity, who has a sense of
nationhood and peoplehood, and the history and experience of the Jewish people, you should
respect someone like me, who has analogous feelings about whites. You could say that I am a
white Zionist – in the sense that I care about my people, I want us to have a secure
homeland for us and ourselves. – Just as you want a secure homeland in
Israel."
So, can the attempt to leverage and weaponise the American élites' Culture –
through the dollar, and putative energy hegemony, and its hold over technology transfer –
succeed in holding on to American 'Culture' (in the reductionist construct of Trump's base)?
This is the sixty-four thousand dollar question, as they say. It may just easily provoke an
equally powerful reaction; and a lot can happen domestically in the US, between now, and the
November, US mid-term, elections, which might either confirm the President in power – or
undo him. It is difficult to hold to any analytic horizon beyond that.
But a larger point is whilst Trump feels passionately about American Culture and hegemony;
the leaders of the non-West today, feel just as passionately that it is time for 'the American
Century' to yield place. Just as after WWII, former colonial states wanted independence –
so, now, today's leaders want an end to dollar monopoly, they want an opt-out from the global,
US-led order and its so-called 'international' institutions; they want to 'be' in their own
distinctive cultural way – and they want their sovereignties back. This is not just
cultural and economic nationalism, it portends a significant inflection point – away from
neo-liberal economics, from individualism and raw commercialism – towards a more rounded
human experience.
The tide, in the wake of WWII, surely was irreversible then. I can even recall the former
European colonialists subsequently bemoaning their forced withdrawal: "They'll [the former
colonies] regret it", they confidently predicted. (No, they never did.) The tide today runs
strongly too, and has spread, even, to Europe. Where – who knows – whether the
Europeans will have the spine to push back against Trump's financial and trade machinations: It
will be an important litmus for what comes next.
But what is different now (from then), is that currency hegemony, technological prowess, and
energy 'domination', are not, at all, assured to western possession. They are no longer theirs.
They began their migration, some time ago.
"... Trump's US aims for 'domination', not through the globalists' permanent infrastructure of the US defence umbrella, but through the smart leveraging of the US dollar and financial clearing monopoly, by ring-fencing, and holding tight, US technology, and by dominating the energy market, which in turn represents the on/off valve to economic growth for US rivals. ..."
"... "Towards the tail end of the Clinton administration and the Dot Com boom in 2000, [Trump's U.S. Treasury Secretary until April 2018] Gary Cohn of Goldman Sachs had dinner with his counterpart at Morgan Stanley, John Shapiro. From this dinner was hatched an audacious plan to take control of the global oil market through a new electronic global market platform." ..."
"... "Wall Street bankers, particularly Goldman Sachs and Morgan Stanley, backed him and he launched ICE in 2000 (giving 80 percent control to the two banks who, in turn, spread out the control among Shell, Total, and British Petroleum)." ..."
"... "The second objective was a switch from oil to natural gas, and when the U.S. [ military ] was obliged to leave Saudi Arabia, they [the U.S.] thereupon established their biggest regional base in Qatar, who co-own with Iran the greatest single natural gas reserve on the planet – South Pars. ..."
"... Energy Dominance ..."
"... In the four months since President Trump's announcement, the market strategy developed by Gary Cohn is now being implemented and its elements are emerging into view. ..."
"... Firstly, there has been a massive inflow of Managed Money into the oil market, particularly the Brent contract, which has seen the Brent oil price increase by 35% since the starting point, which I believe can be dated to the August Brent/BFOE Crude Oil option expiry on June 27 th 2017. ..."
"... The dominant market narrative is that the backwardation in Brent is evidence of surging global oil demand which has emptied inventories and is leading the price to new sunlit uplands. However, I see the market rather differently. ..."
"... Firstly, whether the Brent spot month is supported by financial, rather than physical demand, the result will still be a backwardation, and because few oil producers expect a price over $60 to be sustainable they therefore hedge and depress the forward price. In support of this view, I am far from the only market observer who believes that Aramco, and Rosneft would not be selling equity if either Saudi Arabia or Russia believed the oil price trajectory will be positive even in the medium term. ..."
"... This still leaves open the $64 billion question of which market participant is motivated and able to support the ICE Brent term structure for years into the future by swapping dollar risk (T-Bills) for long term oil risk (oil reserves leased via prepay purchase/resale contracts). ..."
"... My conclusion by a process of elimination is that this Big Long can only be Saudi Arabia and regional allies, with Saudi Arabia now under the management of the thrusting young Mohammad bin Salman." ..."
"... Although Trump routinely talks about withdrawing U.S. troops, he does the exact opposite. ..."
"... the U.S. economy becomes increasingly dependent upon Big Oil and Big Minerals and Big Money and Big Military, ..."
"... War against King Saud's chosen enemies (Iran, Qatar, Syria) and possibly even against the U.S. aristocracy's chosen enemy, Russia (and against Russia's allies: China, Iran, and Syria) -- seems more likely, not less likely, with Trump's geostrategy. ..."
"... "I want to address what Mr. Cohn was talking about from a standpoint of how important American energy is as an option, not as the only option, but as an option to our allies and to count[r]ies around the world. ..."
"... At the G7 it was really kind of interesting. The first thing they beat on the table talking about the Paris accord, you can't get out of it, and I was kind of like OK. Then we would go into our bilats and they'd go, how about some of that LNG you've got? How do we buy your LNG, how do we buy your coal? And it was really interesting, it was a political issue for them. This whole Paris thing is a public relation[s], political issue for them. We made the right decision, the President made the right decision on this. I think it was one of the most powerful messages that early on in this administration that was sent. ..."
"... We are in a position to be able to clearly create a hell of a lot more friends by being able to deliver to them energy and not being held hostage by some countries, Russia in particular. Whether it is Poland, Ukraine, the entirety of the EU. Totally get it, if we can lay in American LNG, if we can be able to have an alternative to Russian anthracite coal that they control in the Ukraine. ..."
"... If that was more the reality of Trump's "Unleashing American Energy" policy than just the pro-global-burnout cheerleading of Trump's mere words, then it seems to be -- in the policy's actual intent and implementation -- more like "send more troops in" than "bring the troops home," to and from anywhere. It is more like energy policy in support of the military policy, than military policy in support of the energy policy. ..."
"... In any aristocracy, some members need to make compromises with other members, no matter how united they all are against the publics' interests. This is the way it's done -- by compromises with each other. ..."
"Trump's US aims for 'domination', not through the globalists' permanent infrastructure of
the US defence umbrella, but through the smart leveraging of the US dollar and financial
clearing monopoly, by ring-fencing, and holding tight, US technology, and by dominating the
energy market, which in turn represents the on/off valve to economic growth for US rivals.
In
this way, Trump can 'bring the troops home', and yet America keeps its hegemony [America's
control of the world, global empire]. Military conflict becomes a last resort."
He bases that crucially upon a landmark 6 November 2017 article by Chris Cook, at Seeking
Alpha, which laid out, and to a significant extent documented, a formidable and complex
geostrategy driving U.S. President Donald Trump's foreign policies. Cook headlined there
"Energy Dominance And
America First" , and noted that,
"Towards the tail end of the Clinton administration and the Dot Com boom in 2000,
[Trump's U.S. Treasury Secretary until April 2018] Gary Cohn of Goldman Sachs had dinner with
his counterpart at Morgan Stanley, John Shapiro. From this dinner was hatched an audacious plan
to take control of the global oil market through a new electronic global market
platform."
This "global market platform," which had been started months earlier in 2000 by Jeffrey Sprecher , is "ICE,"
or InterContinental Exchange, and it uses financial derivatives in order to provide to Wall
Street banks control over the future direction of commodites prices (so that the insiders can
game the markets), by means of the financial-futures markets, locking in future
purchase-and-sale agreements. It also entails Wall Street's
buying enormous commodities-storage warehouses and stashing them with such commodities - such
as, in that case, aluminum) , and so it influences also the real estate markets, and
doesn't only manipulate the commodities markets. Those vast storehouses (and the operation of
the U.S. Government's Strategic Petroleum Reserve, to carry out a similar price-manipulation
function in the oil business) are crucial in order for the entire scheme to be able to
function, because without control over the storehousing of physical commodities, such
futures-price manipulations aren't possible. Consequently, ICE couldn't get off the ground
without major Wall Street partners, which are willing to do that. Cohn and Shapiro (Goldman,
and Morgan Stanley) backed Sprecher's operation; and Wikipedia states that,
"Wall Street bankers, particularly Goldman Sachs and Morgan Stanley, backed him and he
launched ICE in 2000 (giving 80 percent control to the two banks who, in turn, spread out the
control among Shell, Total, and British Petroleum)."
This is today's financial world -- a world in which billionaires control the future
directions of commodities-prices, and thus manipulate markets, and even determine the economic
fates of nations. It's not the myth of capitalism; it is the reality of capitalism. It
functions by means of corruption, as it always has, but the corrupt methods constantly
evolve.
However, Trump's geostrategy goes beyond merely this, especially by bringing into the entire
operation the world's wealthiest person, the trillionaire King Saud, who, as the sole owner of
the Saudi Government, which in turns owns the world's largest corporation Aramco, which in turn
dominates the oil market and which is also #6 in the natural-gas market (far behind the three
giants, which King Saud is trying to destroy -- Russia, Iran, and Qatar -- so that the Sauds
will become able to dominate even there). Trump's geostrategy ties King Saud even more tightly
than before, into America's aristocracy.
King Saud, as Cook noted, is trying to disinvest in petroleum and reposition increasingly
into natural gas, because outside the United States and around the world, people are seriously
concerned to minimize global warming so as to postpone global burnout from uncontrollably
soaring atmospheric carbon. Petroleum has an even worse carbon footprint than does natural gas;
and therefore natural gas is the world's "transition fuel" to a 'survivable' future, while
solar and other alternatives take hold (even if too late). Despite all of the carbon-fuels
industries' propaganda, people outside the United States are determined to delay global
burnout, and the insiders know this. King Saud knows that his petroleum-laden portfolio will
have to diversify fast, because the long-term future for petroleum-prices is decline. And he
won't be able to control prices at all in the natural-gas business unless he's got America's
aristocracy on his side, in the effort to keep those prices up (at least while the Sauds will
be increasing their profits from natural gas). Unlike his dominance over OPEC, Saudi Arabia has
no such position to control natural gas-prices. He thus needs Wall Street's cooperation.
Cook said:
"The second objective was a switch from oil to natural gas, and when the U.S. [
military ] was
obliged to leave Saudi Arabia, they [the U.S.] thereupon established their biggest regional
base in Qatar, who co-own with Iran the greatest single natural gas reserve on the planet
– South Pars.
Energy Dominance
In the four months since President Trump's announcement, the market strategy developed
by Gary Cohn is now being implemented and its elements are emerging into view.
Firstly, there has been a massive inflow of Managed Money into the oil market,
particularly the Brent contract, which has seen the Brent oil price increase by 35% since the
starting point, which I believe can be dated to the August Brent/BFOE Crude Oil option expiry
on June 27 th 2017.
The dominant market narrative is that the backwardation in Brent is evidence of surging
global oil demand which has emptied inventories and is leading the price to new sunlit uplands.
However, I see the market rather differently.
Firstly, whether the Brent spot month is supported by financial, rather than physical
demand, the result will still be a backwardation, and because few oil producers expect a price
over $60 to be sustainable they therefore hedge and depress the forward price. In support of
this view, I am far from the only market observer who believes that Aramco, and Rosneft would
not be selling equity if either Saudi Arabia or Russia believed the oil price trajectory will
be positive even in the medium term.
This still leaves open the $64 billion question of which market participant is motivated
and able to support the ICE Brent term structure for years into the future by swapping dollar
risk (T-Bills) for long term oil risk (oil reserves leased via prepay purchase/resale
contracts).
My conclusion by a process of elimination is that this Big Long can only be Saudi Arabia
and regional allies, with Saudi Arabia now under the management of the thrusting young Mohammad
bin Salman."
However, I do not agree with Alastair Crooke's "In this way, Trump can 'bring the troops
home', and yet America keeps its hegemony [America's control of the world, global empire].
Military conflict becomes a last resort." I explained at Strategic Culture on March 25th
"How the
Military Controls America" and noted there that "on 21 May 2017, US President Donald Trump
sold to the Saud family, who own Saudi Arabia, an all-time-record $350 billion of US
arms-makers' products." This means that not only Wall Street -- the main institutional agency
for America's aristocracy -- and not only American Big Oil likewise, are committed to the royal
Saud family, but U.S. corporations such as Lockheed Martin also are. Vast profits are to be
made, by insiders, in invasions and occupations, just as in gas and oil, and in brokerage.
Although Trump routinely talks about withdrawing U.S. troops, he does the exact opposite.
And even if this trend reverses and America's troop-numbers head down, while
the U.S. economy
becomes increasingly dependent upon Big Oil and Big Minerals and Big Money and Big Military,
America's military budget is, under Trump, the only portion of the entire U.S. federal
Government that's increasing; so, "Military conflict becomes a last resort" does not seem
likely, in such a context. Rather, the reverse would seem to be the far likelier case.
War against King Saud's chosen enemies (Iran, Qatar, Syria) and possibly even against
the U.S. aristocracy's chosen enemy, Russia (and against Russia's allies: China, Iran, and
Syria) -- seems more likely, not less likely, with Trump's geostrategy.
In fact, on 29 June 2017, when President Trump first announced his "Unleashing American
Energy Event," the President spoke his usual platitudes about the supposed necessity to
increase coal-production, and what he said was telecast and
publicized ; but his U.S. Energy Secretary, the barely literate former Governor of Texas,
Rick Perry, also delivered a speech, which was never telecast nor published, except that a few
days later, on July 3rd, an excerpt from it was somehow published on the website of Liquified
Natural Gas Global, and it was this:
"I want to address what Mr. Cohn was talking about from a standpoint of how important
American energy is as an option, not as the only option, but as an option to our allies and
to count[r]ies around the world.
At the G7 it was really kind of interesting. The first thing they beat on the table
talking about the Paris accord, you can't get out of it, and I was kind of like OK. Then we
would go into our bilats and they'd go, how about some of that LNG you've got? How do we buy
your LNG, how do we buy your coal? And it was really interesting, it was a political issue
for them. This whole Paris thing is a public relation[s], political issue for them. We made
the right decision, the President made the right decision on this. I think it was one of the
most powerful messages that early on in this administration that was sent.
We are in a position to be able to clearly create a hell of a lot more friends by
being able to deliver to them energy and not being held hostage by some countries, Russia in
particular. Whether it is Poland, Ukraine, the entirety of the EU. Totally get it, if we can
lay in American LNG, if we can be able to have an alternative to Russian anthracite coal that
they control in the Ukraine. That singularly will have more to do with keeping our allies
free and building their confidence in us than practically anything else that I have seen out
there. It is a positive message around the world right now."
If that was more the reality of Trump's "Unleashing American Energy" policy than just
the pro-global-burnout cheerleading of Trump's mere words, then it seems to be -- in the
policy's actual intent and implementation -- more like "send more troops in" than "bring the
troops home," to and from anywhere. It is more like energy policy in support of the military
policy, than military policy in support of the energy policy.
This sounds even better for the stockholders of Lockheed Martin and other weapons-firms than
for the stockholders of ExxonMobil and other extractive firms. On 6 March 2018, Xinhua News
Agency reported that, "U.S.
President Donald Trump's chief economic adviser Gary Cohn has summoned executives from U.S.
companies that depend on aluminum and steel to meet with Trump this Thursday, in a bid to
persuade the president to drop his tariff plan, media reported Tuesday." After all: Goldman has
warehouses full of aluminum, and has the futures-contracts which already commit the Wall Street
firm to particular manipulations in the aluminum (and other) markets. Controlling the
Government so that it does only what you want it to do, and only when you want the Government
to do it, is difficult. In any aristocracy, some members need to make compromises with
other members, no matter how united they all are against the publics' interests. This is the
way it's done -- by compromises with each other.
Big trouble is brewing in the mighty North Dakota Bakken Oil Field. While oil production in
the Bakken has reversed since it bottomed in 2016 and increased over the past few years, so has
the amount of by-product wastewater. Now, it's not an issue if water production increases along
with oil. However, it's a serious RED FLAG if by-product wastewater rises a great deal more
than oil.
And... unfortunately, that is exactly what has taken place in the Bakken over the past two
years. In the oil industry, they call it, the rising "Water Cut." Furthermore, the rapid
increase in the amount of water to oil from a well or field suggests that peak production is at
hand . So, now the shale companies will have an uphill battle to try to increase or hold
production flat as the water cut rises.
According to the North Dakota Department of Mineral Resources, the Bakken produced 201
million barrels of oil in the first six months of 2018. However, it also produced a stunning
268 million barrels of wastewater:
Thus, the companies producing shale oil in the Bakken had to dispose of 268 million barrels
of by-product wastewater in just the first half of the year. I have spoken to a few people in
the industry, and the estimate is that it cost approximately $4 a barrel to gather, transport
and dispose of this wastewater. Which means, the shale companies will have to pay an estimated
$2.2 billion just to get rid of their wastewater this year.
Now, some companies may be recycling their wastewater, but this isn't free. Actually, I have
seen estimates that it cost more money to recycle wastewater than it does to simply dispose of
it. So, as the volume of wastewater increases while the percentage of oil production declines,
then the shale companies are hit with a double-whammy... less oil revenue and rising wastewater
disposal costs.
To give you an idea just how much more water is being produced versus oil in the Bakken, I
went back to the North Dakota Department of Mineral Resources and looked at their data back to
2015. Unfortunately, the data published in excel only goes back to 2015, even though they have
figures published in PDF form starting in 2003.
Regardless, four years is plenty of time to show just how bad the situation is becoming in
the Bakken. In June 2015, the North Dakota Bakken produced 16% more water than oil. However
June this year, the Bakken field produced 38% more water than oil :
You will notice that overall oil and water production declined in 2016, due to the falling
oil price, but as production grew in 2017 and 2018, the percentage increase of by-product
wastewater surged to 32% and 38% respectively. Here is an interesting comparison:
Bakken Oil & Water Production:
June 2015 Oil = 34.4 million barrels
June 2015 Water = 39.8 million barrels (16% more water)
June 2018 Oil = 33.8 million barrels
June 2018 Water = 46.8 million barrels (38% more water)
As we can see, while overall Bakken oil production in June 2018 was less than it was in June
2015, the volume of waster water increased by an additional 7 million barrels.
I believe there are two negative forces at work in the Bakken as it pertains to the rising
volume of wastewater.
As the wells and field age, more water is produced than oil
Larger Frac Stages, which require more water and sand, are now being utilized to keep
production growing or to keep it from falling
While a rising water cut isn't a surprise to the industry as it is a natural progression of
an aging oil well or field, the use of Larger Frac Stage wells should be a WAKE-UP CALL to
investors. Why? Because Larger Frac Stage wells consume a great deal more water and sand to
produce more oil initially, but the decline rates are even more severe than regular shale
wells.
So, when the Investor Relations are bragging how the companies are using the newer
technology of more complex Large Frac Stage wells, this isn't a good sign. This means that the
company is now desperate to try and grow production, or at worst, to keep it from falling.
Unfortunately, the U.S. Shale Industry is in serious trouble. Most of the shale fields have
reached a peak and when production starts to decline, especially during a collapsing oil price,
I forecast a rapid disintegration of the industry. We must remember, as the oil price and oil
production falls, then company stock and asset values will plummet while the high debt levels
remain. Thus, the shale industry will have increasing difficulty in servicing its debt.
I will continue to monitor the production of oil and wastewater in the Bakken. Please check
back for updates.
Analysts told RT that what Khamenei said is not really surprising given the worsening
economic situation inside the country after the relations with the US went on a downward
spiral. The supreme leader has been trying to keep Iranian society balanced by taking a neutral
position between the liberal and conservative parts of the establishment. Now the former,
including President Hassan Rouhani, are finding themselves in a weaker position, according to
Irina Fedorova from the Russian Academy of Sciences' Center for Middle Eastern Studies.
"The Ayatollah has needed to explain who is to blame for the current situation, to prop
up his regime," Fedorova told RT. She said that "the opponents of the
conservatives," and Rouhani in particular, who supported the JCPOA, will fall victims of
this approach. But it will not lead to his resignation, the researcher noted. However, this
means the conservatives' positions, such as those of Islamic Revolutionary Guard Corps, are to
strengthen significantly.
The statement may also mean a reshuffling of the political elite as well as some economic
changes, Jamal Wakeem, professor of history and international relations at Lebanese University
in Beirut, told RT. He said that "reformists" and those who pressed for the deals with
the West are to be targeted, while the leadership is going to seek alternatives to the West,
including a partnership with Russia and China.
The US reinstated certain economic sanctions against Iran last week, with President Trump
promising more to come in November. The restrictive measures had been lifted under the historic
Joint Comprehensive Plan of Action (JCPOA), but Washington unilaterally withdrew from the
landmark deal despite international condemnation, including from its EU allies. The 2015
agreement placed tight controls on Tehran's nuclear program in exchange for the lifting of
international sanctions. Iran's commitment has been confirmed by the IAEA since then.
Tehran has repeatedly blasted the US for the move, vowing to restart its nuclear program in
retaliation against any foreign restrictions. While the US has been pressing its allies to
completely refuse Iranian oil imports, the Islamic Republic has threatened to close the Strait
of Hormuz, effectively blocking all the oil shipments from the Persian Gulf, should they accede
to American demands.
The row between the US and Iran escalated last month, when their respective leadership
exchanged a barrage of threats. Back then, Iranian President Hassan Rouhani said that a
conflict with Iran would be "mother of all wars," provoking Trump's harsh response
when he promised "consequences the likes of which few have ever suffered before."
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France must be kicking themselves for listening to the US. At this rate, China/Russia will
take all the oil business, leaving Western companies sitting on the sidelines. On the other
hand, I wonder if US O&G companies are waiting for other Western competitors to go
bankrupt.
Uncoy @22:
US sanctions have already failed. Other nations will give lip service, then turn around to
continue on whatever they were doing.
Washington cannot dictate trade rules to others, Germany's economy minister said, adding
that his country should be more assertive and defy American sanctions – particularly
by investing more in Iran.
"We don't let Washington dictate [their will] on trade relations with other countries,"
German Economy Minister Peter Altmaier told Bild newspaper on Saturday. He said the US
sanctions on Iran are one instance in which America's neglect of its partners are clearly
shown.[.]
Only 1/3 of US debt is owed to foreigners and that is denominated in their own currency.
They just print whatever is due.
A country with the land and natural resources the US has to go along with with its
agricultural, human and military capital can never go bankrupt, especially when they control
the debt collectors
As for Germany they are an occupied country, as are many countries. Between the military
bases and CIA controlled NGO's they dance to whatever musuc is played. Some squawking is
permitted for appearances sake so people can maintain their illusions of nationalist
control.
I dont rule out a major financial adverse event in the US (and global) soon so the elite
can profit off the collapse and shrink the wealth of the bottom 90%, but that wont affect
much at all and much of the world will suffer in much the same way
When one looks at the major financial disasters over the last century, many seem to come
in the 8th-9th year of the decade. After the elections we should see a great fall as bubbles
are burst and the 17 trillion dollar + investment firms that maintain liquidity will swoop in
and buy low. This time around the banks wont need a government bail out as the laws have
authorized them to seize deposits like what was done in Greece.
Trump speaks at Washington rally against the Iran deal back in September 2015. Credit:
Olivier Douliery/Sipa USA/Newscom Steven Simon and Jonathan Stevenson
chide Trump for his dangerous Iran obsession:
The United States' treatment of Iran as a serious strategic competitor is deeply
illogical. Iran imperils no core U.S. interests.
Trump's Iran obsession is probably the most conventional part of his foreign policy and it
is also the most irrational. The president's reflexive hostility to Iran is one of the few
constants in his view of the world, and it is one that aligns him most closely with his party's
hawks and parts of the foreign policy establishment. This has been clear for several years ever
since
Trump declared his
opposition to thenuclear
deal and surrounded
himself with hard-liners .
The Iran obsession is among the worst aspects of Trump's presidency, but it is also one of the
least surprising. Over the last eighteen months, Trump's Iran obsession has become more of a
derangement ,
and it is putting the U.S. and Iran on a collision course at the expense of our relations with
many other states and our own economic interests. The risk of unnecessary war continues to rise
because the president and his allies insist on making maximalist demands of Iran while imposing
stringent sanctions on the country without justification.
As Simon and Stevenson capably explain, there is no valid reason to view Iran as a major
threat to the U.S. Contrary to the fevered warnings about Iranian "expansionism," Iranian
military power in the region is quite limited:
Yet Iran's foreign policy has evolved essentially on the basis of opportunistic realism
rather than especially aggressive revisionism, and, as noted, it has a sparse military
presence in the region.
There is certainly no reason for our government to treat Iran as if it were a major
competitor. Our government's fixation on Iran as the source of all the region's problems
exaggerates Iran's influence and puts the U.S. at odds with a regional power whose interests
are sometimes aligned with our own. The obsession simply makes no sense:
Casting Iran as a major strategic rival simply doesn't make sense in terms of traditional
international relations considerations such as threat- and power-balancing.
The authors list a number of causes for the unwarranted obsession with Iran, including
"pro-Israel" influence and the influence of the Saudis and Emiratis in Washington, and I agree
with them. Our political leaders' enthusiasm for engaging in threat inflation and credulously
accepting the threat inflation of others would has to figure prominently in any explanation as
well. Obsessing over a non-existent Iranian threat to U.S. interests obviously has nothing to
do with American security, and it represents an unhealthy subordination of American interests
to those of its reckless regional clients. Indulging those clients in their paranoia about Iran
will only stoke more regional conflicts and ensure that the U.S. becomes more deeply involved
in those wars, and the result will be greater costs for the U.S. and greater turmoil,
instability, and loss of life throughout the region.
Obama's Yemen obsession is probably the most conventional part of his foreign policy and it
is also the most irrational.
Cluster bombs, drone strikes, covert kill teams and, most importantly, the backing for
Saudi Arabia and the UAE to cross the blood-red line and commence an aggressive illegal
bombing campaign, invasion and occupation of Yemeni territory did not start with Trump.
Direct participation of US military logistics personnel and US military assets in this
military aggression – while other US forces operate in the same territory under the
"separate but equal" Authorization To Use Military Force – did not start with
Trump.
Trump might apply his Reverse Midas Touch to this aspect of Obama's legacy as well, but
just because Obama manufactured another transient executive "achievement" in JCOPA does not
mean that his policy with respect to Yemen was any more irrational than Trump's policy
towards Iran, or that Obama's willingness to hire out US military forces to support Saudi
aggression for 100 billion dollars in blood money is any less venal, corrupt and despicable
than Trump's willingness to do the same.
Mattis didn't become fixated on Iran when he joined the Trump administration either,
although he might just be blaming – in the absence of conclusive evidence – Iran
today for the 1983 Beirut barracks bombing targeting Reagan's negligent use of the Marine
Corps. That is even less of a defensible foundation for foreign policy and military
aggression that profiteering.
It is a good guess that Obama's obsession with Yemen was rooted in printer cartridges,
shoe bombs, and the fear to have any terrorist attack "succeed". For Obama & Co. the fear
of the Next Big Blowback led them to Yemen. It would appear that Pence has supplied the Trump
administration with a Grand Unified Theory that all campaigns in the Great War On Terror
ultimately lead to Tehran – or the Trump administration made him their willing
mouthpiece.
Pence is so desperate to connect terrorism to Iran that he has to reach back almost 40yrs to
pin an at best Hezbollah pre-cursor organization on them. Isn't it more telling that
Hezbollah has avoided attacking U.S. troops during their entire existence? Pence doesn't seem
alarmed about the 3,000+ Americans who died on U.S. soil in NYC that we can attribute to the
Saudis and their cohorts.
BTW the Khobar tower bombings was Al Qaeda. The Saudis extracted confessions in their
torture chambers. There was no corroborating evidence that it was a branch of Hezbollah.
This is ,of course, hypothesis by Eric Zuesse, and the idea that the USA elite decided to
abandon EU elite is somewhat questionable, but some of his consideration are interesting...
Notable quotes:
"... Yeah, its the defense contractors. It has nothing to do with the zillions of cars that clog every fucking freeway in this country every morning and every evening, 7 days a week. Its not the assholes cruising around in monster trucks alone, just to show off their stupid trucks. It has nothing to do with the the zillions of jets screaming through the skies carry all those fat assholes to meetings all over the world for no reason. It has nothing to do with the billions of barrels of oil that come to the US on tankers as long as city blocks filled constantly day and night. ..."
The following is entirely from open online sources that I have been finding to be
trustworthy on these matters in the past. These sources will be linked-to here; none of this
information is secret, even though some details in my resulting analysis of it will be entirely
new.
It explains how and why the bottom-line difference between Donald Trump and Barack Obama,
regarding US national security policies, turns out to be their different respective estimations
of the biggest danger threatening the maintenance of the US dollar as the world's leading or
reserve currency. This has been the overriding foreign-policy concern for both Presidents .
Obama placed as being the top threat to the dollar, a breakaway of the EU (America's largest
market both for exports and for imports) from alliance with the United States. He was
internationally a Europhile. Trump, however, places as being the top threat to the dollar, a
breakaway of Saudi Arabia and of the other Gulf Arab oil monarchies from the U.S. Trump is
internationally a Sunni-phile: specifically a protector of fundamentalist Sunni monarchs -- but
especially of the Sauds themselves --
and they hate Shia and especially the
main Shia nation, Iran .
Here's how that change, to Saudi Arabia as being America's main ally, has happened --
actually it's a culmination of decades. Trump is merely the latest part of that process of
change. Here is from the US State Department's official
historian , regarding this history:
By the 1960s, a surplus of US dollars caused by foreign aid, military spending, and
foreign investment threatened this system [the FDR-established 1944 Bretton Woods gold-based US dollar as
the world's reserve currency ], as the United States did not have enough gold to cover
the volume of dollars in worldwide circulation at the rate of $35 per ounce; as a result, the
dollar was overvalued. Presidents John F. Kennedy and Lyndon B. Johnson adopted a series of
measures to support the dollar and sustain Bretton Woods: foreign investment disincentives;
restrictions on foreign lending; efforts to stem the official outflow of dollars;
international monetary reform; and cooperation with other countries. Nothing worked.
Meanwhile, traders in foreign exchange markets, believing that the dollar's overvaluation
would one day compel the US government to devalue it, proved increasingly inclined to sell
dollars. This resulted in periodic runs on the dollar.
It was just such a run on the dollar, along with mounting evidence that the overvalued
dollar was undermining the nation's foreign trading position, which prompted President
Richard M. Nixon to act, on August 13, 1971 [to end the convertibility of dollars to
gold].
When Nixon ended
the gold-basis of the dollar and then in 1974 secretly switched to the current oil-basis,
this transformation of the dollar's backing, from gold to oil, was intended to enable the
debt-financing (as opposed to the tax-financing, which is less acceptable to voters) of
whatever military expenditure would be necessary in order to satisfy the profit-needs of
Lockheed Corporation and of the other US manufacturers whose only markets are the US Government
and its allied governments, as well as of US extractive industries such as oil and mining
firms, which rely heavily upon access to foreign natural resources, as well as of Wall Street
and its need for selling debt and keeping interest-rates down (and stock-prices -- and
therefore aristocrats' wealth -- high and rtising).
This new system didn't only supply a constant flow of Saudi tax-money to the US Government;
it supplied a constant flow of new sales-orders and profits to the military firms that were
increasingly coming to control the US Government -- for the benefit of both aristocracies: the
Sauds, and America's billionaires.
That was near the end of the FDR-produced 37-year period of US democratic leadership of the
world, the era that had started at Bretton Woods in 1944. It came crashing to an end not in
1974 (which was step two after the 1971 step one had ended the 1944 system) but on the day when
Ronald Reagan entered the White House in 1981. The shockingly sudden ascent, from that moment
on, of US federal Government debt (to be paid-off by future generations instead of by current
taxpayers) is shown, right here, in a graph
of "US Federal Debt as Percent of GDP, 1940-2015" , where you can see that the debt had
peaked above 90% of GDP late in WW II between 1944-1948 , and then plunged during Bretton
Woods, but in 1981 it started ascending yet again, until reaching that WW II peak for a second
time, as it has been ever since 2010 , when Obama bailed-out the mega-banks and their
mega-clients, but didn't bail out the American public, whose finances had been destroyed by
those banksters' frauds, which Obama refused to prosecute; and, so, economic inequality in
America got even more extreme after the 2008 George W. Bush crash, instead of less extreme
afterward (as had always happened in the past).
Above 90% debt/GDP during and immediately following WW II was sound policy, but America's
going again above 90% since 2010 has reflected simply an aristocratic heist of America, for
only the aristocracy's benefit -- all of the benefits going only to the super-rich.
Another, and
more-current US graph shows that, as of the first quarter of 2018, this percentage
(debt/GDP) is, yet again, back now to its previous all-time record high of 105-120%%, which had
been reached only in 1945-1947 (when it was justified by the war).
But can the US Government's extreme misallocation of wealth, from the public to the
insiders, continue without turning this country into a much bigger version of today's Greece?
More and more people around the world are worrying about that. Of course, Greece didn't have
the world's reserve currency, but what would happen to the net worths of America's billionaires
if billionaires worldwide were to lose faith in the dollar? Consequently, there's intensified
Presidential worrying about how much longer foreign investors will continue to trust the
oil-based dollar.
America's political class now have two competing ideas to deal with this danger , Obama's
versus Trump's, both being about how to preserve the dollar in a way that best serves the needs
of 'defense' contractors, extractive firms, and Wall Street. Obama chose Europe (America's
largest market) as America's chief ally (he was Euro-centric against Russia); Trump chose the
owner of Saudi Arabia (he's Saudi-Israeli centric against Iran) -- that's the world's largest
weapons-purchaser, as well as the world's largest producer of oil (as well as the largest
lobbies) .
The Saudi King owns Saudi Arabia, including the world's largest and most valuable oil
company, Aramco, whose oil is the "sweetest" -- the least expensive to extract and refine --
and is also the most abundant, in all of the world, and so he can sell petroleum at a profit
even when his competitors cannot. Oil-prices that are so low as to cause economic losses for
other oil companies, can still be generating profits -- albeit lowered ones -- for King Saud;
and this is the reason why his decisions determine how much the global oil-spigot will be
turned on, and how low the global oil-price will be, at any given time. He controls the value
of the US dollar. He controls it far more directly, and far more effectively, than the EU can.
It would be like, under the old FDR-era Bretton Woods system, controlling the exchange-rates of
the dollar, by raising or lowering the amount of gold produced. But this is liquid gold, and
King Saud determines its price.
Furthermore, King Saud also leads the Gulf Cooperation Council of all other Arab oil
monarchs, such as those who own UAE -- all of them are likewise US allies and major
weapons-buyers.
In an extraordinarily fine recent article by Pepe Escobar at Asia Times, "Oil
and gas geopolitics: no shelter from the storm" , he quotes from his not-for-attribution
interviews with "EU diplomats," and reports:
After the Trump administration's unilateral pull-out from the Iran nuclear deal, known as
the Joint Comprehensive Plan of Action (JCPOA), European Union diplomats in Brussels, off the
record, and still in shock, admit that they blundered by not "configuring the eurozone as
distinct and separate to the dollar hegemony". Now they may be made to pay the price of their
impotence via their "outlawed" trade with Iran.
As admitted, never on the record, by experts in Brussels; the EU has got to reevaluate its
strategic alliance with an essentially energy independent US, as "we are risking all our
energy resources over their Halford Mackinder geopolitical analysis that they must break up
[the alliance between] Russia and China."
That's a direct reference to the late Mackinder epigone Zbigniew "Grand Chessboard"
Brzezinski, who died dreaming of turning China against Russia.
In Brussels, there's increased recognition that US pressure on Iran, Russia and China is
out of geopolitical fear the entire Eurasian land mass, organized as a super-trading bloc via
the Belt and Road Initiative (BRI), the Eurasia Economic Union (EAEU), the Shanghai
Cooperation Organization (SCO), [and] the Asia Infrastructure Investment Bank (AIIB), is
slipping away from Washington's influence.
This analysis gets closer to how the three key nodes of 21st century Eurasia integration
-- Russia, China and Iran -- have identified the key issue; both the euro and the yuan must
bypass the petrodollar, the ideal means, as the Chinese stress, to "end the oscillation
between strong and weak dollar cycles, which has been so profitable for US financial
institutions, but lethal to emerging markets."
It's also no secret among Persian Gulf traders that in the -- hopefully unlikely -- event
of a US-Saudi-Israeli war in Southwest Asia against Iran, a real scenario war-gamed by the
Pentagon would be "the destruction of oil wells in the GCC [Gulf Cooperation Council]. The
Strait of Hormuz does not have to be blocked, as destroying the oil wells would be far more
effective."
And what the potential loss of over 20% of the world's oil supply would mean is
terrifying; the implosion, with unforeseen consequences, of the quadrillion derivatives
pyramid, and consequentially [consequently] of the entire Western financial casino
superstructure.
In other words: it's not the 'threat' that perhaps, some day, Iran will have nuclear
warheads, that is actually driving Trump's concern here (despite what Israel's concerns are
about that matter), but instead, it is his concerns about Iran's missiles, which constitute the
delivery-system for any Iranian warheads: that their flight-range be short enough so that the Sauds will be
outside their range . (The main way Iran intends to respond to an invasion backed by the
US, is to attack Saudi Arabia -- Iran's leaders know that the US Government is more dependent
upon the Sauds than upon Israel -- so, Iran's top targets would be Saudi capital Riyadh, and
also the Ghawar oil field, which holds over half of Saudi oil. If US bases have been used in
the invasion, then all US bases in the Middle East are also be within the range
of Iran's missiles and therefore would also probably be targeted.)
Obama's deal with Iran had focused solely upon preventing Iran from developing nuclear
warheads -- which Obama perhaps thought (mistakenly) would dampen Israel's (and its billionaire
US financial backers') ardor for the US to conquer Iran. Israel had publicly said that their
concern was Iran's possibility to become a nuclear power like Israel became; those possible
future warheads were supposed to be the issue; but, apparently, that wasn't actually the issue
which really drove Israel. Obama seems to have thought that it was, but it wasn't, actually.
Israel, like the Sauds, want Iran conquered. Simple. The nuclear matter was more an excuse than
an explanation.
With Trump now in the White House, overwhelmingly by money from the Israel lobbies (proxies
also for the Sauds) -- and with no equivalently organized Jewish opposition to the pro -Israel
lobbies (and so in the United States, for a person to be anti-Israel is viewed as being
anti-Semitic, which is not at all true, but Israel's lies say it's true and many Americans
unfortunately believe it) -- Trump has not only the Sauds and their allies requiring him to be
against Iran and its allies, but he has also got this pressure coming from Israel: both the
Big-Oil and the Jewish lobbies drive him. Unlike Obama, who wasn't as indebted to the Jewish
lobbies, Trump needs to walk the plank for both the Sauds and Israel.
In other words: Trump aims to keep the dollar as the reserve currency by suppressing not
only China but also the two main competitors of King Saud: Iran and Russia. That's why
America's main 'enemies' now are those three countries and their respective allies.
Obama was likewise targeting them, but in a different priority-order , with Russia being the
main one (thus Obama's takeover
of Ukraine in February 2014 turning it against Russia, next door ); and that difference was
due to Obama's desire to be favorably viewed by the residents in America's biggest export and
import market, the EU, and so his bringing another member (Ukraine) into the EU (which still
hasn't yet been culminated).
Trump is instead building on his alliance with King Saud and the other GCC monarchs, a group
who can more directly cooperate to control the value of the US dollar than the EU can.
Furthermore, both conservative (including Orthodox) Jews in the United States, and also white
evangelical Protestants in the US, are strongly supportive of Israel, which likewise sides with
the Arab oil monarchs against Iran and its allies. Trump needs these people's votes.
Trump also sides with the Sauds against Canada. That's a matter which the theorists who
assert that Israel controls the US, instead of that the Sauds (allied with America's and
Israel's billionaires) control the US, ignore; they ignore whatever doesn't fit their theory.
Of course, a lot doesn't fit their theory (which equates "Jews" with "Israelis" and alleges
that "they" control the world), but people whose prejudices are that deep-seated, can't be
reached by any facts which contradict their self-defining prejudice. Since it defines
themselves, it's a part of them, and they can never deny it, because to do so would be to deny
who and what they are, and they refuse to change that. The Sauds control the dollar; Israel
does not, but Israel does the lobbying, and both the Sauds and Israel want Iran destroyed.
Trump gets this pressure not only from the billionaires but from his voters.
And, of course, Democratic Party billionaires push the narrative that Russia controls
America. It used to be the Republican Joseph R. McCarthy's accusation, that the "commies" had
"infiltrated" , especially at the State Department . So: Trump
kicked out Russia's diplomats, to satisfy those
neocons -- the neoconservatives of all Parties and persuasions, both conservative and
liberal.
To satisfy the Sauds, despite the EU, Trump has dumped the Iran deal . And he did it also to
satisfy Israel, the main US lobbyists for the Sauds. (Americans are far more sympathetic to
Jews than to Arabs; the Sauds are aware of this; Israel handles their front-office.) For Trump,
the Sauds are higher priority than Europe; even Israel (who are an expense instead of a
moneybag for the US Government) are higher priority than Europe. Both the Sauds and Israel
together are vastly higher. And the Sauds alone are higher priority for Trump than are even
Canada and Europe combined . Under Trump, anything will be done in order to keep the Sauds
and
their proxy-lobbyists (Israel) 'on America's side'.
Consequently, Trump's political base is mainly against Iran and for Israel, but Obama's was
mainly against Russia and for the EU. Obama's Democratic Party still are controlled by the same
billionaires as before; and, so, Democrats continue demonizing Russia, and are trying to make
as impossible as they can, any rapprochement with Russia -- and, therefore, they smear Trump
for anything he might try to do along those lines.
Both Obama and Trump have been aiming to extend America's aristocracy's dominance around the
world, but they employ different strategies toward that politically bipartisan
American-aristocratic objective: the US Government's global control, for the benefit of the US
aristocracy, at everyone else's expense. Obama and Trump were placed into the White House by
different groups of US billionaires, and each
nominee serves his/her respective sponsors , no public anywhere -- not even their voters'
welfare.
An analogous example is that, whereas Fox News, Forbes, National
Review, The Weekly Standard, American Spectator, Wall Street Journal, Investors Business Daily,
Breitbart News, InfoWars, Reuters, and AP , are propagandists for the Republican Party ; NPR,
CNN, NBC, CBS, ABC, Mother Jones, The Atlantic, The New Republic, New Yorker, New York
Magazine, New York Times, Washington Post, USA Today, Huffington Post, The Daily Beast , and
Salon , are propagandists for the Democratic Party ; but, they all draw their chief sponsors
from the same small list of donors who are America's billionaires, since these few people
control the top advertisers, investors, and charities, and thus control nearly all of the
nation's propaganda. The same people who control the Government control the public; but,
America isn't a one-Party dictatorship. America is, instead, a multi-Party dictatorship . And
this is how it
functions.
Trump cancelled the Iran deal because a different group of billionaires are now in control
of the White House, and of the rest of the US Government. Trump's group demonize especially
Iran; Obama's group demonize especially Russia. That's it, short. That's America's aristocratic
tug-of-war; but both sides of it are for invasion, and for war. Thus, we're in the condition of
'permanent war for permanent peace' -- to satisfy the military contractors and the billionaires
who control them. Any US President who would resist that, would invite assassination; but,
perhaps in Trump's case, impeachment, or other removal-from-office, would be likelier. In any
case, the sponsors need to be satisfied -- or else -- and Trump knows this.
Trump is doing what he thinks he has to be doing, for his own safety. He's just a figurehead
for a different faction of the US aristocracy , than Obama was. He's doing what he thinks he
needs to be doing, for his survival. Political leadership is an extremely dangerous business.
Trump is playing a slightly different game of it than Obama did, because he represents a
different faction than Obama did. These two factions of the US aristocracy are also
now battling each other for political control over Europe .
The US #1 objective is to protect US$ as the only one reserve currency that is the
foundation of US economic and military power as well as the US economic stability and
prosperity
Zionist Banking Mafia controls US$ and both US major political Parties
The USA can accomplish its goals only by destroying China, Russia, and Iran. The USA
cannot achieve its goals short of having a major military confrontation with China. Russia
is only one power that can provide/satisfy China with raw materials including oil &
gas. However, politically Trump is locked in a corner by the Democratic Party and it's
globalists allies who are trying to destroy Russia due to it's "misguided" policies in
Syria and Iran.
China understands the game and does it's best to confront America. Time is on China's
side. Very shortly China will move it's military to Iran and Syria with Turkey becoming a
serious US headache.
The Bottom Line
Trump and its policies have no chance to succeed neither inside nor outside the USA. The
USA has less than 3-5 years to maintain the present status quo.
Yeah, its the defense contractors. It has nothing to do with the zillions of cars that clog every fucking freeway in this
country every morning and every evening, 7 days a week. Its not the assholes cruising around
in monster trucks alone, just to show off their stupid trucks. It has nothing to do with the
the zillions of jets screaming through the skies carry all those fat assholes to meetings all
over the world for no reason. It has nothing to do with the billions of barrels of oil that
come to the US on tankers as long as city blocks filled constantly day and night.
Its not that, its Lockheed selling them airplanes. Thats how the sand niggers got so much
US money, Lockheed.
What a fucking conspiratorial ass-swipe this guy is.
Eric Zeusse ranks in popularity right along the Gatestone Institute - though Eric may just
be ignorant and opinionated whilst Gatestone is an affirmative disinformation propaganda
organ, both are equally annoying to read. I just came for the comments :).
+1. Eric Zuesse is part-and-parcel of the agenda that the Gatestone Institute
espouses.
Eric Zuesse's real agenda can be revealed by his position on 9/11 (see second link below).
He also blames Obama for everything (he shifts the blame away from Israel onto any other
party which could be blamed due to either direct or indirect ties)
Here is Eric Zuesse in his own words:
Notice the absence of Israel/Zionism
Historic New Harpers Article Exposes Who Controls America
Posted on December 17, 2015 by Eric Zuesse.
"The fundamentalist-Sunni royal family of the Sauds have bought the highest levels of the
U.S. government in order to control U.S. foreign policies, especially the ongoing wars to
take down the governments of Iraq, Libya, Syria, and ultimately (they hope) of Russia itself,
which latter nation has allied itself instead with Shia countries. The controlling entities
behind American foreign policies since at least the late 1970s have been the Saud family and
the Sauds' subordinate Arabic aristocracies, which are the ones in Qatar (the al-Thanis),
Kuwait (the al-Sabahs), Turkey (the Turkish Erdoğans, a new royalty), and UAE (its six
royal families: the main one, the al-Nahyans in Abu Dhabi; the other five: the al-Maktoums in
Dubai, al-Qasimis in Sharjah, al-Nuaimis in Ajman, al-Mualla Ums in Quwain, and al-Sharqis in
Fujairah). Other Saudi-dominated nations -- though they're not oil-rich (more like Turkey in
this regard) -- are Pakistan and Afghanistan."
". But, perhaps, one can safely say that the alliance between the U.S. aristocracy and the
royal Sauds, is emerging as a global dictatorship, a dictatorial type of world government.
Because, clearly: those two aristocraciues have been, to a large extent, ruling the world
together, for several decades now. From their perspective, jihadists are themselves a weapon,
not merely a political nuisance.
This is a more realistic explanation of America's decades-long catastrophic failures to
make significant progress in eliminating even a single one of the numerous jihadist groups
around the world: that's how things have been planned to be. It's not just 'intelligence
errors' or 'not being tough enough.' Those 'explanations' are just cover-stories, propaganda,
PR from the aristocrats. It's skillful 'crowd control': keeping the people in their 'proper'
places."
9/11: Israel Didn't Do It; The Plan Was Co-Led by U.S. & Saud Governments
By Eric Zuesse
March 15, 2018
"9/11 was a well-planned operation, whatever it was. Substantial money paid for it, but
little if any of that came from either Iran or Israel. It all came from
fundamentalist-Sunnis.
And, if all of the money was fundamentalist-Sunni, then the only non-Sunni people who
could have been involved in planning the operation would have been George W. Bush and his
friends
The problem certainly isn't Jews nor Muslims. The problem is the aristocracy, which
controls Saudi Arabia, and the aristocracy which controls Israel, and the aristocracy which
controls America. The victim is the public, and the victimizer is the aristocracy. It's not
just 9/11."
Obama's Nazis
Posted on August 17, 2014 by Eric Zuesse.
(Zuesse's obsession with the word nazis or Nazis)
"What Obama has done and is doing in Ukraine is historic, like what Adolf Hitler did, and
like what Slobodan Milosevic* did, and like other racist fascists have done; and he, and we
Americans (if we as a nation continue accepting this), will be remembered for it, like they
and their countries were. Evil on this scale cannot be forgotten. No matter how solidly the
American "news" media hide this history, it is already solidly documented for the history
books. Obama will be remembered as the worst President in U.S. history, just as the
racist-fascist or 'nazi' leaders of other countries are."
Jewish Billionaire Finances Ukraine's Aydar SS Nazi Troops
Posted on April 7, 2015 by Eric Zuesse.
"The hyper-nationalist Ukrainian-Israeli billionaire Ihor Kolomoysky, a friend of the
Obama White House and employer of Joe Biden's son Hunter Biden, is a major donor to far-right
Ukrainian causes. He sides with the followers of Stepan Bandera, the pro-Nazi Ukrainian
leader whom Hitler ditched when Bandera made clear that he wanted Ukraine to be nazi but
independent of Germany's Nazi Party. Briefly, Bandera's #2 in command, Yaroslav Stetsko, led
nazi Ukraine, and approved the slaughter of thousands of Jews there."
"Zuesse is pushing Zionist lies. One of the links in the article goes to a Reuters story,
"Exclusive – Over 100 Russian soldiers killed in single Ukraine battle – Russian
rights activists," that claims to get its info from the "Russian presidential human rights
council."
If you want to read more lies by Zuesse, go to this "AMAZON" link to read reviews of his
book, "Iraq War: The Truth," in which Zuesse claims that GW Bush invaded Iraq to thank Jesus
for his alcohol and drug addiction cure and to neuter the International Criminal Court???
There is one comment lavishing praise on Zuesse's book about the Iraq War by David
Swanson, another Zionist tool and BS artist, who's been outed in the past by the blog,
"American Everyman."
See how fast the internet warriors are to claim the article is rubbish, and not reflecting
reality. No argument to back up their propaganda, but that's not important. Must be
depressing running the Sunday evening shift in the cubicle farm; all the boys in their neatly
pressed uniforms, clicking away to keep us safe from democracy. Well done lads, another day
keeping the evil Russians /Iranians at bay.
I actually find it interesting to see what shakes the foundations, and this article seems
to be something that they don't like, so probably worth a re-read just to get all the
nuances. Of course, the author suggesting that it is not Jews running America will get short
shrift from some commenters, but it is certainly interesting to have pointed out, finally,
that Israel is a net drain, and Saudi Arabia an enormous gain for the US. We always say to
follow the money, and whilst Israel is good profit for the MIC, Saudi Arabia IS the
petrodollar system - mustn't forget that. No oil in Saudi Arabia, no petrodollar. I wonder
how long they have left until it's all gone? That would probably be the over-riding factor in
deciding war with Iran.
I always wondered why the EU did nit make bigger efforts to replace the petrodollar with
the petroeuro but nobody wants to end up as Ghadaffi or Saddam Hussein who threatened to do
just that. Iran has also repeatedly threaten to that. Also Putin has recently said that
Russia wants to move away from the petrodollar. He must know that that is dangerous for one's
health so there must be some sort of alliance against the dollar being formed.
1. Iraq is run by a pro-Iran Shite government that tolerates the US occupation due to the
money provided. Before the USA attacks Iran, it should remove all its 10,000 troops and
10,000 civilians and close its massive embassy there and write that country off. Otherwise,
we'll have thousands of American POWs. Meanwhile, the Kurds will get crushed as the Turks and
Iraqis use the chaos to destroy them.
2. The oil-rich British puppet state of Kuwait is hated by all Iraqis and Iranians. If the
USA attacks Iran, one should expect Iranian and maybe Iraqi units crossing the border, while
Kuwait's army flees as expected. The USA keeps an army brigade there, but that may not be
enough to fend off an invasion, even with air superiority.
3. In past wars, civilian oil tankers did not sail through the straits. The insurers
(mostly Lloyds of London) and others announced they would not cover losses, and unionize ship
crews refused to enter the war zone. So even if the USA keeps the straits open, all that oil
will not flow forth.
4. Iran has a fortified island in the Gulf whose guns cannot be silenced with just air
power. A major amphibious landing is required to clear that island, and it will be bloody.
Note the ship channels in the map. Supertankers are huge, so while the Straits of Hormuz are
large, these big ships can only pass thru these two narrow channels, which are easily
blocked. Iran could park its own tankers in these channels to block them and hope the USA
foolishly sinks them, thus really blocking the entire channel.
These four issues are of more importance than air battles over Iran.
It is a little early to really get a sense of how much the Permian is slowing down. Most
analysts have been assuming an overall slowdown over the next 12 months because of pipeline
constraints. However, the EIA figures might suggest that the problem has already started to
bite. In April, the EIA predicted in its Drilling Productivity
Report that Permian production would jump by 73,000 bpd in May. But the monthly data just
released finds only modest gains in Texas (+20,000 bpd) and New Mexico (+3,000 bpd).
Second, the EIA thinks output broke 11 mb/d in July, an all-time high. But judging by the
overly-optimistic monthly data from April and May, perhaps the agency is also overstating July
figures, which raises the possibility that production is not nearly as high as we currently
think.
In the coming months, if monthly U.S. production figures continue to show output
undershooting expectations, that would have global ramifications. Most analysts still are
baking in strong U.S. shale growth figures into their forecasts. If that additional output
fails to materialize, the oil market could end up being a lot tighter than we all expected it
to be.
"... "As we go more towards (the fourth quarter) that's when we really see the risk of prices going well into the 80s and potentially even into the 90s but very critical is how much Iranian production we lose," ..."
"... "A lot of people think China can just buy all of the Iranian oil but they came out and said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you could see a significant crunch in terms of lost supplies into the market and then that obviously means higher prices," ..."
Looming US sanctions against Iran will likely hit Tehran's oil sales abroad, and
it could lead to a price spike in oil contracts. The first round of renewed US sanctions will
take effect on Tuesday with the harshest sanctions, potentially targeting Iran's oil industry,
expected to return in early November.
"As we go more towards (the fourth quarter) that's when we really see the risk of prices
going well into the 80s and potentially even into the 90s but very critical is how much Iranian
production we lose," Amrita Sen, chief oil analyst at Energy Aspects,
told CNBC Monday.
Oil was trading at $74 per barrel of Brent benchmark, while the US West Texas Intermediate
stood at $69.77 on Monday.
"A lot of people think China can just buy all of the Iranian oil but they came out and
said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you
could see a significant crunch in terms of lost supplies into the market and then that
obviously means higher prices," the analyst added.
The new US sanctions will likely slash oil supply. The last time Iran was sanctioned, it
lost half of its exports, which have now returned to 2.4 million barrels per day. Many analysts
have said that this time, the negative impact on Iranian oil trade will be less significant,
and Iran will lose only half of the previous loss.
Meanwhile, other major producers are ramping up their output. This July, OPEC, Russia and
other significant players agreed to gradually raise output for fear of supply deficit on the
market. OPEC+ countries will increase production by 1 million barrels per day, of which 200,000
bpd will be provided by Russia.
Earlier estimates of OPEC have now changed, and there is no increase from June. Probably, a
slight decrease from SA. From OPEC sources, not Platts. I think they would start increasing
if Iran drops, but not much otherwise. I think Sauds and Kuwait joint venture is set up for
that potential.
Changing the way I gage things, into a much simpler format. Now, I look at world inventory
drops, and look at current increases from OPEC and US. Neither will change much, so inventory
drops should continue. Opec needs to come up with a lot more, or it will look damn scary in
2019. With pipeline constraints, Canada is pretty much out of the picture for further
increases this year, and not much, elsewhere.
Yes the outlook for OPEC's July production is looking more flat now. This is a strange
situation because Platts is one of OPEC secondary sources and so I assume that they see all
the numbers
Thank you. This news confirms that world production is stagnating. Possibly very close to the
decline. We will have to be attentive to the inventories. It will be the first place that the
nations get hold of in order to supply themselves with oil.
The US
Congress has revived
the so-called "NOPEC" bill
for countering OPEC and OPEC+.
Officially called the "
No
Oil Producing and Exporting Cartels Act
",
NOPEC is the definition of so-called
"lawfare" because it enables the US to extra-territorially impose its domestic legislation on
others by giving the government the right to sue OPEC and OPEC+ countries like Russia because of
their coordinated efforts to control oil prices.
Lawsuits, however, are
unenforceable
, which is why the targeted states'
refusal to abide by the US courts' likely predetermined judgement against them will probably be
used to trigger sanctions under the worst-case scenario, with this chain of events being catalyzed
in order to achieve several strategic objectives.
The first is that the US wants to break up the
Russian-Saudi
axis
that forms the core of OPEC+, which leads to the second goal of then unravelling the
entire OPEC structure and heralding in the free market liberalization of the global energy
industry.
This is decisively to the US' advantage as it seeks to become an energy-exporting superpower,
but it must neutralize its competition as much as possible before this happens, ergo the
declaration of economic-hybrid war through NOPEC. How it would work in practice is that the US
could threaten primary sanctions against the state companies involved in implementing OPEC and
OPEC+ agreements, after which these could then be selectively expanded to secondary sanctions
against other parties who continue to do business with them.
The purpose behind this approach is to intimidate the US' European vassals into
complying with its demands so as to make as much of the continent as possible a captive market of
America's energy exporters, which explains why Trump also wants to
scrap
LNG export licenses to the EU
.
If successful, this could further erode Europe's shrinking strategic independence and also
inflict long-term economic damage on the US' energy rivals that could then be exploited for
political purposes.
At the same time, America's recently unveiled "
Power
Africa
" initiative to
invest $175 billion
in gas projects
there could eventually see US companies in the emerging energy frontiers
of
Tanzania
,
Mozambique
,
and elsewhere become important suppliers to their country's Chinese rival, which could make
Beijing's access to energy even more dependent on American goodwill than ever before.
If looked at as the opening salvo of a global energy war being waged in parallel with the
trade
one
as opposed to being dismissed as the populist piece of legislation that it's being
portrayed as by the media,
NOPEC can be seen as the strategic superweapon that it
actually is,
with its ultimate effectiveness being dependent of course on whether it's
properly wielded by American decision makers.
It's too earlier to call it a game-changer because it hasn't even been promulgated
yet, but in the event that it ever is, then it might go down in history as the most impactful
energy-related development since OPEC, LNG, and fracking.
No way US can manipulate oil trade at this
point without hurting themselves or helping
their "enemies". Cause and effect, just think
it through.
The world needs energy, Russia has
energy...and a real surplus for sale. The US
is a net energy consumer with no surplus.
China needs energy in a big way. Trying to
cut off Russian and Iranian oil and trying to
blow up the Chinese economy are acts of war.
The West realizes there is no way they can
survive in their current status of moar with
that kind of competition out there. The
BRICST now constitute $17 trillion in
combined GDP. They have the energy sources
(Russia and Iran), they have the
manufacturing base (China), they have the
agricultural base (Russia, Brazil, South
Africa), and they have plenty of
customers.....even outside the BRICST union.
That is a formidable competitive force to
face when you are an economy structured on
infinite growth on a finite planet......that
you control less and less of each year.
War with Iran? I can not imagine a more foolish thing to do.
Of course they will rally with their own Countrymen, everyone hates the USA.
The World economy will be in a complete tailspin, the US will likely finally go broke over it
and chances are pretty good that Israel will be flattened and paved [one positive thing].
You fight Iran you fight China, you don't go messing with their road. Likely not bombs and
guns either most likely money, something America has not much of.
The faster America dumps this crazy fascination with the Jews the faster it will get it's
act together and become a Country again.
What can that possibly mean? We can bomb Iran back into the Stone Age, but Iran does not
need a modern economy or military to close Hormuz. All they need do is fire a few land-based
artillery and anti-ship missiles at a defenseless freighter or tanker. The insurance
companies would do the rest–remove all commercial shipping from the Persian and Oman
Gulf regions. That eliminates 20% of the World's oil supply, and it would collapse the
World's economy, including our own.
Asymmetric warfare would engulf the entire Middle East, including Israel, with its large
native Arab population and its occupation of large Arab populations in Gaza and the West
Bank.
Iran has the upper hand here. We need to be very careful.
Let's face it-when we impose sanctions on Iran, we are already at war with them. Just like we
are already at war with Russia. Imbeciles, all who run this country.
Oil is the vital strategic Western interest in the Persian Gulf. Yet a war with Iran
would imperil, not secure, that interest.
The American Empire's only strategic three letter word interest in the Middle East is O --
I –L.
The WASP/JEW ruling class of the American Empire and the Jew-controlled Neo-Conservative
faction in the Republican Party wants to elevate the three letter word J -- E –W to
paramount importance in the Middle East.
OIL and only OIL should guide the policy making considerations of the American Empire in
the Middle East.
"... "They could take up the president's offer to negotiate with them, to give up their ballistic missile and nuclear weapons programs fully and really verifiably not under the onerous terms of the Iran nuclear deal, which really are not satisfactory," ..."
"... "If Iran were really serious they'd come to the table. We'll find out whether they are or not," ..."
"... "matter of respecting international agreements and a matter of international security." ..."
"... "behaves like a normal country." ..."
"... "require enormous change" ..."
"... "increase pressure on the Iranian regime by reducing to zero its revenue from crude oil sales." ..."
"... "the mother of all wars." ..."
"... "confronting possible threats." ..."
"... "The hours of our negotiations with America were perhaps unprecedented in history; then Trump signs something and say all [those negotiations] are void; can you negotiate with this person? Is this [negotiations offer] anything but a publicity stunt?" ..."
Closing the Strait of Hormuz would be the biggest mistake Iran has ever made, the US
president's national security advisor John Bolton said. He urged Tehran to sit down for talks
on its nuclear and missile programs with the US. Dismissing Tehran's threats to block the
strait if its oil exports are stopped, Bolton on Monday said the Iranians were
"bluffing." He then quickly changed his tone saying that Iran should actually engage in a dialog with the US instead of
issuing threats.
"They could take up the president's offer to negotiate with them, to give up their
ballistic missile and nuclear weapons programs fully and really verifiably not under the
onerous terms of the Iran nuclear deal, which really are not satisfactory," Bolton told
Fox News, referring to the US President Donald Trump's demands to "re-negotiate" the
2015 Iranian nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA).
"If Iran were really serious they'd come to the table. We'll find out whether they are
or not," Bolton added. The White House national security advisor's remarks came less than
a day before the first round of renewed US sanctions take effect on Tuesday after midnight US
Eastern time. The harshest restrictions are expected to be re-imposed by early November.
Washington decided to reinstate the penalties following Trump's decision to unilaterally
withdraw from the JCPOA in May. Shortly after exiting the agreement, the US penned a 12-point
ultimatum to Iran, which, among other things, demanded that Tehran end its ballistic missile
program, a condition it has repeatedly rejected. The move was then widely condemned by the EU
and other signatories of the deal, including Russia and China, which still consider the
agreement to be an effective means of non-proliferation and have vowed to keep their part of
the deal.
Earlier on Monday, the EU said that starting August, it is enforcing its so-called Blocking
Statute aimed at protecting the European companies doing business in Iran from the
extraterritorial effects of US sanctions. The bloc said that maintaining the nuclear deal with
Iran is a "matter of respecting international agreements and a matter of international
security."
Meanwhile, the US Secretary of State Mike Pompeo vowed to "rigorously" enforce the
sanctions on Iran until it "behaves like a normal country." He added that it would
"require enormous change" on Iran's part for the US to review its increasingly hostile
approach to Tehran.
In July, Brian Hook, the US State Department's director of policy planning, said that
Washington's goal is to "increase pressure on the Iranian regime by reducing to zero its
revenue from crude oil sales."
Iranian leaders repeatedly threatened to shut down the Strait of Hormuz and stop the Persian
Gulf oil exports if its own oil exports are blocked. Iranian President Hassan Rouhani also
cautioned Washington against launching a war against Tehran by saying that it would be "the
mother of all wars." Iran's Revolutionary Guards have recently admitted that its warships
took part in a naval exercise in the Persian Gulf to hone skills in "confronting possible
threats."
Earlier, the Iranian Foreign Minister Javad Zarif has slammed Donald Trump's recent proposal
to enter into talks with Iran by calling it nothing but a PR stunt. "The hours of our
negotiations with America were perhaps unprecedented in history; then Trump signs something and
say all [those negotiations] are void; can you negotiate with this person? Is this
[negotiations offer] anything but a publicity stunt?" he said.
The Trump administration has reportedly requested a meeting with
Rouhani eight times, but the Iranian side refused to participate.
As Iran is preparing for the first wave of returning US sanctions that could largely hamper
its foreign trade, the country's banks appear to have already created a mechanism for imports
of essential goods from
Russia .
Bank Saderat Iran (BSI) announced in a statement on Sunday that it had sealed a deal with
the Moscow offshoot of Bank Melli Iran (BMI) over a re-financing scheme that envisaged
providing €10 million to fund imports of essential commodities, medicines, medical
equipment and the raw materials for industrial units.
New restrictions aim to protect currency from further falls
With US sanctions against Iran officially going back into place on August 6, the Iranian
government is scrambling to take some last minute measures to shore up their economy, and
particularly their currency, before the sanctions start to hit.
Iran wants to make sure that what foreign currency does flow overseas is strictly
allocated to a handful of important industries. The fall of prices for the rial has been
heavy related to the surge in the price of gold, as economic uncertainty has many Iranians
running to precious metals, and gold imports surged in recent weeks.
US sanctions aim to limit, if not totally eliminate, Iran's access to foreign markets.
That also has Iran trying to make some last-minute purchases while they know they still can.
Five new planes were purchased from ATR for the state airline. It's far short of the new
fleet of airliners Iran initially sought, but the best they can do with the US blocking
Boeing and Airbus from fulfilling contracts.
Since the August 6 date has been known for months, it's likely much of the market reaction
to the sanctions is already factored in to Iran's currency pricing. China's refusal to comply
with US sanctions, likewise, is a sign that Iran won't be totally cutoff from world markets.
Still, it will take awhile before the full extent of the US attempt, and its effectiveness,
is known.
It is a little early to really get a sense of how much the Permian is slowing down. Most
analysts have been assuming an overall slowdown over the next 12 months because of pipeline
constraints. However, the EIA figures might suggest that the problem has already started to
bite. In April, the EIA predicted in its Drilling Productivity
Report that Permian production would jump by 73,000 bpd in May. But the monthly data just
released finds only modest gains in Texas (+20,000 bpd) and New Mexico (+3,000 bpd).
Second, the EIA thinks output broke 11 mb/d in July, an all-time high. But judging by the
overly-optimistic monthly data from April and May, perhaps the agency is also overstating July
figures, which raises the possibility that production is not nearly as high as we currently
think.
In the coming months, if monthly U.S. production figures continue to show output
undershooting expectations, that would have global ramifications. Most analysts still are
baking in strong U.S. shale growth figures into their forecasts. If that additional output
fails to materialize, the oil market could end up being a lot tighter than we all expected it
to be.
"... "As we go more towards (the fourth quarter) that's when we really see the risk of prices going well into the 80s and potentially even into the 90s but very critical is how much Iranian production we lose," ..."
"... "A lot of people think China can just buy all of the Iranian oil but they came out and said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you could see a significant crunch in terms of lost supplies into the market and then that obviously means higher prices," ..."
"... For more stories on economy & finance visit RT's business section ..."
"As we go more towards (the fourth quarter) that's when we really see the risk of prices
going well into the 80s and potentially even into the 90s but very critical is how much Iranian
production we lose," Amrita Sen, chief oil analyst at Energy Aspects,
told CNBC Monday.
Oil was trading at $74 per barrel of Brent benchmark, while the US West Texas Intermediate
stood at $69.77 on Monday.
"A lot of people think China can just buy all of the Iranian oil but they came out and
said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you
could see a significant crunch in terms of lost supplies into the market and then that
obviously means higher prices," the analyst added.
The new US sanctions will likely slash oil supply. The last time Iran was sanctioned, it
lost half of its exports, which have now returned to 2.4 million barrels per day. Many analysts
have said that this time, the negative impact on Iranian oil trade will be less significant,
and Iran will lose only half of the previous loss.
Meanwhile, other major producers are ramping up their output. This July, OPEC, Russia and
other significant players agreed to gradually raise output for fear of supply deficit on the
market. OPEC+ countries will increase production by 1 million barrels per day, of which 200,000
bpd will be provided by Russia.
The US Congress has revived the so-called "NOPEC" bill for countering OPEC and OPEC+.
Officially called the " No Oil Producing and
Exporting Cartels Act ", NOPEC is the definition of so-called "lawfare" because it enables
the US to extra-territorially impose its domestic legislation on others by giving the
government the right to sue OPEC and OPEC+ countries like Russia because of their coordinated
efforts to control oil prices.
Lawsuits, however, are unenforceable , which is why the targeted states' refusal to abide by
the US courts' likely predetermined judgement against them will probably be used to trigger
sanctions under the worst-case scenario, with this chain of events being catalyzed in order to
achieve several strategic objectives.
The first is that the US wants to break up the Russian-Saudi axis that
forms the core of OPEC+, which leads to the second goal of then unravelling the entire OPEC
structure and heralding in the free market liberalization of the global energy industry.
This is decisively to the US' advantage as it seeks to become an energy-exporting
superpower, but it must neutralize its competition as much as possible before this happens,
ergo the declaration of economic-hybrid war through NOPEC. How it would work in practice is
that the US could threaten primary sanctions against the state companies involved in
implementing OPEC and OPEC+ agreements, after which these could then be selectively expanded to
secondary sanctions against other parties who continue to do business with them.
The purpose behind this approach is to intimidate the US' European vassals into complying
with its demands so as to make as much of the continent as possible a captive market of
America's energy exporters, which explains why Trump also wants to scrap LNG export licenses to the EU .
If successful, this could further erode Europe's shrinking strategic independence and also
inflict long-term economic damage on the US' energy rivals that could then be exploited for
political purposes. At the same time, America's recently unveiled " Power Africa " initiative to invest $175 billion in gas projects there
could eventually see US companies in the emerging energy frontiers of Tanzania
,
Mozambique , and elsewhere become important suppliers to their country's Chinese rival,
which could make Beijing's access to energy even more dependent on American goodwill than ever
before.
If looked at as the opening salvo of a global energy war being waged in parallel with the
trade
one as opposed to being dismissed as the populist piece of legislation that it's being
portrayed as by the media, NOPEC can be seen as the strategic superweapon that it actually is,
with its ultimate effectiveness being dependent of course on whether it's properly wielded by
American decision makers.
It's too earlier to call it a game-changer because it hasn't even been promulgated yet, but
in the event that it ever is, then it might go down in history as the most impactful
energy-related development since OPEC, LNG, and fracking.
Dearth of investments in oil projects mean a spike in prices above $100 could be on the
horizon
Crude across the globe is being used up faster than it is being replaced, raising the
prospect of even higher oil prices in the coming years. The world isn't running out of oil. Rather, energy companies and petro-states -- burned by
2014's price collapse -- are spending less on new projects, even though oil prices have more
than doubled since 2016. That has sparked concerns among some industry watchers of a massive
price spike that could hurt businesses and consumers. The oil industry needs to replace 33 billion barrels of crude every year to satisfy anticipated
demand growth, particularly as developing countries like China and India are consuming more
oil. This year, new investments are set to account for an increase of just 20 billion barrels,
according to data from Rystad Energy.
The industry's average decline rate -- the speed at which output falls without field
maintenance or new drilling -- was 6.3% in 2016 and 5.7% last year, the Norway-based
consultancy said. In the four years before the crash, that decline rate was 3.9%.
Any shortfall in supply could push prices higher, similar to when oil hit nearly $150 a
barrel in 2008, some industry participants say. "The years of underinvestment are setting the scene for a supply crunch," said Virendra
Chauhan, an oil industry analyst at consultancy Energy Aspects. He believes a production
deficit could come as soon as the end of next year, potentially pushing oil above $100 a
barrel.
SNIP In parts of Brazil and Norway, decline rates are already above 10-15%, Energy Aspects' Mr.
Chauhan said. Output from Venezuela's aging fields fell by more than 700,000 barrels a day over
the past year, according to the IEA. In June, Angola's output hit a 12-year low, while Mexico's
production is down nearly 300,000 barrels a day since the middle of 2016, despite efforts to
open up the industry and reverse declines, the IEA said. "Nobody is really stepping in," said Doug King, chief investment officer of the $140 million
Merchant Commodity hedge fund. "People still got burned by the downturn."
Rystad has first half figures for discoveries a bit better than last year, though more on the
gas side than oil, but there was a billion barrel Equinor discovery in Brazil this week that
will make things look better. I thought things were worse, partly because I assumed the
Guyana discoveries would count as appraisals and be back dated against 2016 and 2017, but it
looks like they are new fields. Overall though it still shows a big drop over the past few
years.
A "remarkable" recovery from "abnormally" low levels – complete bollocks, and pretty
close to self-contadictory. Everything is, and always will be, awesome in the oilprice
universe, if not they'd lose their revenue stream.
x
Ignored says:
07/27/2018 at 3:53 am Iran would not try to block anything unless it is under attack by the
US. The Pentagon is opposed to such an attack, but Trump is heavily influenced by Netanyahu and
is advised by the same neocons who got the US into the fiasco in Iraq. Given the inability of
the US Congress to enforce the constitution by denying the Prsident to start a war without a
congressional declaration of war, it seems the USA may be on its way to destroy the world
economy to please an extremist Israeli right wing government.
I write destroy the world economy because it's doubtful Iran would respond as anticipated by
the Americans, who have a tendency to fight wars with strategies based on previous wars and an
excess of complex gadgets and extremely expensive technology. I don't know what they have in
mind, but I'm sure it would be unexpected, calibrated to avoid nuclear retaliation, and may
evolve over time. But I'm sure others will see the risks, and the oil market will take off into
the $100's and possibly $200's unless there's adults left in the USA senate to block this
craziness.
Hightrekker x
Ignored says:
07/26/2018 at 9:51 am I agree– and with all those KSA installations just
15 minutes away by unstoppable missile technology (1970 midrange seems a little
hard for current technology), we have a quandary, not a problem.
Reply
Fernando Leanme
x Ignored says:
07/27/2018 at 3:57 am Exactly. But I'm not sure US National Security advisor
Bolton knows anything about low technology midrange missiles and drones, some of
which, in a pinch, can be piloted by small light weight kamikaze martyrs.
Eulenspiegel x
Ignored says:
07/26/2018 at 10:24 am The worst thing for a date to guess is politics.
There are 10 countries that have to grow oil production to avoid peak oil –
these with still big reserves.
One knocked out itself – Venezuela
One is under attack from the USA – Iran
Irak isn't that stable, either.
A hot war can break out every moment, or a civil war devasting and blocking
infrastructure for years, while other countries deplete.
Or peace can come and these ressources can get used.
These combined 10 mb/d alone will determine peak oil – by 5 years or more in
either direction. These 10 mb/day can't be replaced by russion oil tsars, US rednecks
with too much Wallstreet money or Saudis opening secret valves of instant oil wonder
production.
Venezuela can get a new government and increase production by a big amount, helped
by international money. It has the ressources to get one of the big producers when the
tar oil is lifted.
So in my eyes, it looks like somewhere between 2020 and 2030, perhaps even
later.
Couldn't agree with you more regarding OPEC reserve estimates, they are all full of
shit, and no one except a handful of people in those countries would know how much they
have left.
Solving this peak oil timing is more similar to a quantum mechanics problem rather
than a Newtonian mechanics one. It complexity, lack of transparency and political and
economic implication make it impossible to have a deterministic answer, its pure
probability, and also speculations.
Like you i think all these projections are wrong. Maybe we will extract a lot more
oil with newer technologies or new field discoveries and end up cooking the planet with
climate change, and we won't see a "peak oil" for 100s of years who knows.
TechGuy x
Ignored says:
07/26/2018 at 2:54 pm "The peak oil experts were dreadfully wrong with their HL 15
years ago, so what prevents their being just as wrong now? "
Why is Oil at $70/bbl? Back in 1999 its was about $10/bbl. If there no supply
constraints why did the price increase ~7 fold in less than 20 years? Also why the need
to to drill for Shale Oil (Source Rocks) & develop in Deep & ultradeep
water?
Conventional oil peaked in 2005, All the growth is coming from offshore & Shale.
New Oil discoveries have dropped off the cliff. We found almost nothing in 2017. Oil
Discoveries peaked in 1960s and been in permanent decline. Thus if we are discovery
less and less new oil fields every year, below the rate of consumption, Oil production
will have to fall to match discoveries at some point in the future.
Other clues:
1. Oil Majors perfer to drill on Wall street (aka using debt to fund stock buybacks)
instead of developing new fields for future production.
2. Shale Debt: Shale drilling never made a profit, except for using OPM (other People's
money) to fund CapEx\OpEx.
3. US invaded or targeted with Regime change in Middle East Oil producing nations. Only
Iran remains and you can already hear the War drumbeats for Iran.
Reply
Michael B x
Ignored says:
07/26/2018 at 3:31 pm Indeed, and thanks. Note that your answer has to do not
with HL but with obvious signs & symptoms. Believe me, I've been watching, too.
The uncertainty is killing me.
Fernando Leanmex
Ignored says:
07/27/2018 at 4:25 am Michael, I have never been a peak oiler. I come at this from
a different perspective: about 30 years ago I noticed exploration results were
decaying, and started working in areas which would allow producing oil and gas in the
far future from sources we weren't tapping much at the time.
I remember sitting in a meeting around 1990 and suggesting to managers in a
committee I was briefing that we needed to focus on locking up hydrocarbon molecules,
wherever they were, cut down exploration and use that money on technology and getting
access.
This is one reason why eventually I got involved in gas conversion to liquids, heavy
oil, and the former Soviet Union, which to us appeared like a happy hunting ground,
including its Arctic targets in the Barents, Kara, Yamal, etc. I also had colleagues
who went into deep water, EOR, North America Arctic, and of course the hydraulic
fracturing of vertical horizontal wells drilled in low perm formations.
So in my case I've been about 30 years now working on replacing conventional oil
barrels with more difficult barrels. And those difficult barrels require higher prices.
So the question is, what can poor countries afford?
Reply
Michael B x
Ignored says:
07/27/2018 at 5:13 am So, "not a peak oiler" means you think the fate of
conventional oil is not really all that important, and cost is the ultimate
arbiter, not the resource?
Reply
Fernando Leanme
x Ignored says:
07/27/2018 at 6:19 am Not a peak oiler means I don't use Hubbert
Linearization or similar techniques. In the past, my job has included the
estimate of resources (not reserves). The preferred technique was to estimate
technical reserves, meaning we supposedly didn't focus on economics. But I
couldn't have staff working out numbers doing endless iterations and model runs
for highly speculative cases, so I gave them the guidance to assume a really
high price, a higher OPEX and CAPEX environment, and prepare conceptual field
redevelopments and marginal field developments or targeting really low quality
reservoirs. We devoted about 5% of the time budget for this effort. And I told
head office I wasn't about to use more manpower working such hypothetical
figures, because we had to focus on reserve studies, and preparing projects to
move reserves along the reserve progression pathway so we could meet our
targets.
The fate of conventional oil is already written, in the sense that most of
the extra oil we get from conventional fields comes from redevelopments which
rely on higher prices, and EOR. The typical field with say 45% recovery factor
can be pounded hard to push it to say 55%, going above 55% gets mighty hard,
and pushing to 60% is nearly impossible. So there are limits, which involve the
huge amount of resources (cash, steel, chemicals, and people) we use up to get
those extra barrels.
One issue to consider is that these redevelopments which include EOR are not
contributing that much extra rate. They stop decline, get a slight bump, and
then yield a slower decline rate for 10-20 years. This means investments take
tine to payout and if the world is suffering from acute shortages they don't
help that much. The on,y fast reaction comes from fracturing "shales" and low
permeability sands, infills in newer fields, and workovers.
Reply
Michael B
x Ignored says:
07/27/2018 at 6:53 am Thanks. If you were doing this in the 90s, sounds
like you were "predicting" the future!
Reply
Hickory
x Ignored says:
07/27/2018 at 9:20 am Sure sounds like a long explanation for your
understanding of 'peak conventional oil'. Nothing to be ashamed of.
Reply
AdamB x
Ignored says:
07/26/2018 at 10:08 am With oil discoveries the last 3 years in the toilet due to lack
of capital investment and lack of major fields its just a matter of time mathematically. Be
thankful we still have time before peak production hits cause I don't think it will be fun
post peak. Hopefully still 5 years until its official maybe less When will Ghawar give up
the ghost .?
Reply
Dennis Coyne x
Ignored says:
07/26/2018 at 11:21 am Saudi Arabia may keep going for many years at 10 Mb/d,
probably until 2030, perhaps beyond.
Reply
AdamB x
Ignored says:
07/26/2018 at 12:02 pm One can hope .they can produce 10 Mb/d to infinity
according to their reserve numbers which never budge .I'd be curious what posters
think their reserves are. 175-225 GB?
Reply
Survivalist
x Ignored says:
07/26/2018 at 2:27 pm It'll be interesting to see how KSA shakes out when
oil consumption begins to zero in on oil production, and exports decrease..
ELM.
Dennis Coyne x
Ignored says:
07/26/2018 at 10:58 am Another consideration is discoveries and reserve appreciation.
Consider estimates of conventional C+C using Hubbert Linearization by Jean Laherrere which
have gradually increased from 1998 (1800 Gb) to 2016 (2500 Gb.) In addition, there is not
any particular reason that output would tend to follow a "Hubbert" type logistical
function.
Generally estimates based on Hubbert Linearization would be a minimum estimate in my
view.
In addition conventional oil Extraction rates (output divided by producing reserves) in
the World (5.6% in 2016) are far lower than the United States (14.8% in 2016, all C+C), so
there is the potential that with higher oil prices the average extraction rate for the
World may increase. The World conventional extraction rate was about 11.6% in 1979. A
gradually increasing rate of extraction might allow a plateau in output to be extended for
many years (to 2030 at least). Impossible to predict of course, the number of scenarios
that can be created is large.
One such scenario is presented below (peak in 2025 at 85.5 Mb/d of C+C or 4275
Mt/year).
The analysis using the logistic function does not account for this potential.
Dennis Coyne x
Ignored says:
07/26/2018 at 6:49 pm I disagree. Oil prices are more likely to increase than
to fall to $30/b and more of these companies are likely to be profitable as oil
prices rise, also 3 of the top companies are profitable, so a "well run" oil
company can indeed be profitable, those that are less well run will either change
the way they operate or they will go out of business. The better companies buy the
worthwhile assets on the cheap and life goes on.
It's called capitalism folks.
Also the DPR is not very good, I ignore that report and use EIA's tight oil
estimates (link below) and shaleprofile.com for good information.
GuyM
x Ignored says:
07/27/2018 at 9:12 am "Also the DPR is not very good", is an understatement.
I have never seen an analysis use so many different fruits to come up with
bananas expected.
Reply
Minqi Li x
Ignored says:
07/26/2018 at 3:55 pm I suppose by "decline rate" they are talking about the
"legacy decline"
Reply
Guym x
Ignored says:
07/26/2018 at 5:48 pm As an example, I will use approximate data from a fairly
good tier 2 well in the Eagle Ford. It starts off production at 33k the first
month, and drops rapidly after that to reach 8k by the final month. Let's say it
produces 175k the first year, which would be profitable at today's prices. The next
year it produces 55k, and the next year 36k. By the fourth year it is producing
less than 100 barrels a day, and by the sixth year it is questionable to keep up.
Little better than stripper status. Tier three stuff is much worse, it may reach
stripper status by the third year. Eventually, all will be tier two and three
status wells. That's the majority of reserves estimated. Estimating future
production from current production doesn't touch on reality. Eventually, to keep up
on initial production, you would have to drill twice as many wells. But, you won't
keep up with twice as many, because the decline rates will be higher. There is a
lot of difference between a 600k EUR well, and a 300k EUR, or a 150k EUR. 2042 for
US peak? Not hardly.
Reply
I agree, probably 2023 to 2025 will be the US peak, after that decline is
likely to be rapid because mostly tier 2 and tier 3 wells will be left, high
oil prices may make them profitable, but it will be impossible to keep up with
the decline rate of legacy wells after 2025 and US output will decline rapidly
(4 or 5% per year) after 2030.
Reply
TechGuy
x Ignored says:
07/26/2018 at 7:48 pm One snag: The Shale Debt starts coming due in
2019 and continues through to 2024. Shale drillers were successful since
the borrowed at rock bottom interest rates and investors practically fought
each other begging Shale drillers to take their money. Not so sure it will
work if interest rates are higher, and The Shale sweet spots aren't
endless.
Reply
Guym
x Ignored says:
07/26/2018 at 8:49 pm That might slow the start up, for sure. If
the price of oil gets high enough, that will barrier will be short
lived.
Reply
TechGuy
x Ignored says:
07/27/2018 at 2:43 pm As oil prices increase so does the costs.
It takes a lot of diesel to haul Water, Sand, and oil. Shale
drillers never really made a real profit, even when Oil was over
$100/bbl. One must consider the EROEI for Shale & rising
CapEx\OpEx as the cost of Oil rises.
Second, its likely that consumers cannot afford high oil prices.
As prices rise, Consumers will cut back and it will plunge the
global economy back into recession. Perhaps the Worlds Central
banks can coach something back into the global economy, but it
won't work over the long term.
FWIW: Some of the recent data is showing weakness in the global
economy: Housing sales are falling and prices in the hot regions
are flatlining. Trumps tariffs are also taking a toll as global
trade is falling. And there are cracks in the developing world
credit markets. We might see a stock market correction this fall,
which would likely see commodity prices fall (including Oil).
Reply
Hickory
x Ignored says:
07/27/2018 at 10:37 pm " consumers cannot afford high oil
prices. As prices rise, Consumers will cut back and it will
plunge the global economy back into recession."
Well, that likely depends on how fast and far the prices go.
Slow steady rise can be well tolerated pretty far. Energy is so
cheap for what you get, after all.
Many other countries have a much better GDP/unit energy
consumed than the USA, and with price pressure the USA could
get there too. I suspect we could shed 10-20% of our oil
consumption without big effect, particularly if we did it
slowly. For example, it wouldn't affect the GDP at all if we
slowed down to max 60 mph. Painless saving of energy, if you
choose good music.
It is the fast changes in price that really tend to hurt.
Reply
TechGuy
x Ignored says:
07/27/2018 at 11:45 pm "I suspect we could shed 10-20%
of our oil consumption without big effect, particularly if
we did it slowly."
It doesn't work that way. Consumers cut back on
spending, from eating out, going on vacations. They loss
confidence and delay major purchases like new cars, homes,
etc.
Most of the population commute to work well below 60
mph. Traffic usually limits speeds to 40 mph or less during
commuting hours.
To understand how high oil prices affect the economy
just research the events around 2007/2008. Schools &
business were planning to reduce work & school days to
3 or 4 days a week. Thieves were draining fuel from parked
trucks and cars. The higher oil prices caused food prices
to soar, which lead to the arab spring in Africa & the
middle east. Europe had frequent riots. Airlines &
shipping companies impose fuel surcharges. People homes had
utilities shutoff. since they could afford their energy
bills.
Funny how quickly people forget the aftermath of high
energy prices. Doesn't anyone read or study economics?
GoneFishing x
Ignored says:
07/26/2018 at 5:28 pm Nice report. Production decline is a short time away if we
don't keep drilling.
Speaking of legacy wells, the huge number of abandoned wells from the past is
leaving us a legacy of leakage. The even bigger number of recent wells will continue
that legacy.
Fernando Leanmex
Ignored says:
07/27/2018 at 4:33 am 150 year old wells in the eastern USA could indeed leak
methane. But I would not rely much on Arstechnica, it's a blog run by a guy with a
liberal arts degree very well crafted to be a cheering section for renewables. It
may even be subsidized by Yingli Green, a Chinese solar panel maker.
Reply
Fred Magyar
x Ignored says:
07/27/2018 at 6:57 am Are you seriously claiming that a peer reviewed
scientific paper, in the 'Proceedings of The National Academy of Sciences of
The United States of America' is somehow untrustworthy because it's conclusions
were mentioned by Ars Technica?!
Identification and characterization of high methane-emitting abandoned oil
and gas wells
Abstract Recent measurements of methane emissions from abandoned oil/gas wells show
that these wells can be a substantial source of methane to the atmosphere,
particularly from a small proportion of high-emitting wells. However,
identifying high emitters remains a challenge. We couple 163 well measurements
of methane flow rates; ethane, propane, and n-butane concentrations; isotopes
of methane; and noble gas concentrations from 88 wells in Pennsylvania with
synthesized data from historical documents, field investigations, and state
databases. Using our databases, we (i) improve estimates of the number of
abandoned wells in Pennsylvania; (ii) characterize key attributes that
accompany high emitters, including depth, type, plugging status, and coal area
designation; and (iii) estimate attribute-specific and overall methane
emissions from abandoned wells. High emitters are best predicted as unplugged
gas wells and plugged/vented gas wells in coal areas and appear to be unrelated
to the presence of underground natural gas storage areas or unconventional
oil/gas production. Repeat measurements over 2 years show that flow rates of
high emitters are sustained through time. Our attribute-based methane emission
data and our comprehensive estimate of 470,000–750,000 abandoned wells in
Pennsylvania result in estimated state-wide emissions of 0.04–0.07 Mt
(1012 g) CH4 per year. This estimate represents 5–8% of annual
anthropogenic methane emissions in Pennsylvania. Our methodology combining new
field measurements with data mining of previously unavailable well attributes
and numbers of wells can be used to improve methane emission estimates and
prioritize cost-effective mitigation strategies for Pennsylvania and
beyond.
Reply
Fernando Leanme
x Ignored says:
07/27/2018 at 8:33 am I am an academy member. I also know how to search
for methane leaks. And I'm aware the academy publishes papers which lack
the quality one would like to see. But if you want credibility, I would
skip Arstechnica and link directly to the paper.
The Arstechnica editor has an axe to grind, publishes a bunch of
garbage, therefore I never pay attention to it. Regarding the paper itself,
it's not representative of what goes on in say Texas. There are areas in
Texas (say Spindletop) where gas leaks should be present from the wells
drilled with cable tools in the old days. But a better sense for what goes
on now is gained from looking at wells drilled and abandoned in Texas and
Louisiana in the last 40 years.
Regarding Pennsylvania methane leaks, in the overall picture they are
meaningless. There are coal mining regions in India and China which can be
seen as very large hot spots from satellites.
Fred Magyar
x Ignored says:
07/27/2018 at 3:11 pm Hippity hoppity! Off to a tea party
with the Mad Hatter and Alice! As in A Large Ion Collider
Experiment at the LHC. Much more fun than dealing with the
crippled egos of idealogues.
Cheers!
Reply
If the wells are plugged, the concrete eventually fails (30 years) so we
have an ongoing source of methane that could last for centuries. Millions
of wells across the US, much more across the world.
And guess what, those ideas of storing CO2 underground, well now we have
millions of pathways for the CO2 to escape, so actual sites would be few
and far between.
The original Canadian study I read a few years ago has disappeared from
the internet. It showed the long term potential leakage of well systems.
Reply
Dave Kimblex
Ignored says:
07/26/2018 at 6:11 pm All this Hubbertian analysis is useful to set a ceiling on
production, but the world's economy runs on making a profit and so producers have a minimum
price they must receive, while the end consumers have a maximum price they can afford to
pay.
In mid-2008 the effect of a 72% price rise in 18 months caused a $1.75 trillion extra
cost on OECD oil imports and the world economy crashed. Recovery required the USG to
guarantee loans to frackers to get the production numbers up. I am not saying that they
won't try that again, but this can only go so far. Surely next time this happens, no one
will be able to avoid the obvious conclusion that there is no future profit in oil
production, and the oil industry will have its share prices downgraded, reducing the
collateral for loans, whereupon they will go out of business in a puff of smoke.
This will happen long before any URR impacts, so I wonder at how much this analysis is
worth.
Reply
Guym x
Ignored says:
07/26/2018 at 8:25 pm USG guaranteed loans to frackers???? Interest rates for
everyone was low then, but I don't remember reading about any guarantees. Drilling
horizontals is a little past SBA stuff.
Reply
George Kaplan x
Ignored says:
07/27/2018 at 1:56 am If the "oil industry" means the IOCs then they are a minor
player now. The NOCs dominate the reserves and production, of course they all seem to
be having money issues as well but maybe they manifest in a slightly different way
– i.e riots, uprisings and infrastructure collapse.
It's already noticeable that many of the big companies are switching to share buy
backs (Total, Shell, Anadarko) and less development spending even as the price has been
rising. The one which has switched the other way is ExxonMobil, and not
uncoincidentally it is the only one with really good recent discoveries. That straight
line H/L for the rest of the world is just the tail run out on existing discoveries,
most of which are also already developed and wouldn't be taken off line even with
bankruptcies for the operators. If only as chemical feedstock oil is way better in
almost every way than anything that could be made from water/CO2/renewable energy so if
civilisation lasts long enough most of it will be used.
Reply
George Kaplan x
Ignored says:
07/27/2018 at 1:44 am Forcing a logistic curve on some of those production histories
might give some big errors, though maybe they cancel out overall. Hubbert said himself that
H/L wouldn't work well on production that had been artificially constrained by a cartel
(e.g. OPEC for Saudi, Kuwait, UAE, Iran and Iraq) or environmental moratoria (e.g. some US
and Canada oil). For oil sands they tend to be built on 50 year project lives, with steady
production and a fast fall off rather than a traditional decline curve. About 50 mmbbls of
reserve is already tied into operating, steady production. Future developments will be
similarly constrained with the additional limit from environmental objectives to both the
extraction and pipelines. Logistics curves might still come close if the reserve estimates
are good, but that is also the biggest unknown as other comments have said.
Reply
Minqi Li x
Ignored says:
07/27/2018 at 2:54 pm Projections are not meant to be predictions. Even EIA or IEA
say that. But they are always useful to illustrate given certain assumptions, what will
or what are likely to happen.
That has been said, given our understanding of the inherent limitations of
projections/data, a careful and cautious application of these projections does provide
us some idea regarding the likely range of future development. For example, the
projection for the US oil used in this report is likely to be too optimistic especially
for years after 2025, as many have pointed out. That will reinforce the case for a
global peak oil before 2025
In addition to production, I think the consumption data in the report also provides
some interesting information. I wonder if someone cares to comment about that.
Reply
Guym x
Ignored says:
07/27/2018 at 7:37 pm Well, obviously consumption can't be over production for
any great amount, or we won't have inventory. Peak production precedes any mythical
peak demand. Consumption mostly follows production is my guess. At probably a much
higher price than today.
Reply
"Pioneer spent $818 million on capital expenditures (CapEx) for additions to oil and gas
properties (drilling and completion costs) during Q1 2018, brought on 63 horizontal wells
in the Permian, and only added 9,000 barrels per day of oil equivalent over the previous
quarter"
So it's round about 13 million $ per well, not 7 million.
Reply
Fernando Leanmex
Ignored says:
07/27/2018 at 8:38 am The number of wells brought on isn't proportional to wells
drilled. And the CAPEX isn't proportional to wells drilled. Therefore it's hard to
derive a per well cost from such figures.
Reply
GuyM x
Ignored says:
07/27/2018 at 9:06 am Yeah, there a lot of DUCs, and you have to consider that
Pioneer lays out some bucks for its gathering system and gas processing plant in the
Permian. Hard to isolate per well from total capex figures.
Reply
(Sale of oil) – well cost – variable cost per barrel = profit
does not work that good – there are lots of hidden costs even under CAPEX,
that are almost as high as completion costs when these 7 million$ / well are
right.
And I think these cost are not one time cost just only in this quarter –
there is alway a pipeline to build, a convertert to install, a gravel road to the
site to build and so on.
Reply
George Kaplan x
Ignored says:
07/27/2018 at 3:42 pm Rystad has first half figures for discoveries a bit better than
last year, though more on the gas side than oil, but there was a billion barrel Equinor
discovery in Brazil this week that will make things look better. I thought things were
worse, partly because I assumed the Guyana discoveries would count as appraisals and be
back dated against 2016 and 2017, but it looks like they are new fields. Overall though it
still shows a big drop over the past few years.
With over 3000 platforms, 25,000 miles of pipeline, all unsecure in the Gulf of Mexico,
they provide a lucrative target in any conflict with the US. Energy disruptions and
environmental calamities would reek havoc. Surely there is a plan to quickly secure the Gulf
from under/over/on the water threats? If not get at it.
More Oilprice.com industry pimping. The world uses 36 billion barrels (Gb) of crude per
year. Plus they are quoting boe, or barrels equivalent. Gas is not crude. The article should
read: "The world is still pumping 9 barrels for every 1 it finds". D day is not something the
industry doesn't wants advertised.
Look at the graph again. Draw a trend line from left to right across the peaks from 2014
til now. Is the line pointing up or down? That's peak oil.
So there's been an up tick this year. How much has been discovered. Ooooh, 4.5 billion
barrels. Sounds like a lot to you? What's the world consumption rate expressed in millions of
barrels per DAY? Don't know? It's around 90 million barrels per DAY. Look it up if you doubt
me. If you divide 4.5 billion by 90 million, you'll calculate how many DAYS it takes to
consume 4.5 billion barrels. To make it easier for you, just reduce the fraction by stroking
6 zeros off each number. That's 4,500/90. Not too hard. That's 50 DAYS of supply!!! OK, maybe
another 4.5 billion will be found in 2H2018. Oooooh, another 50 DAYS worth. We're
saved!!!
In the last paragraph, what's the Reserve Replacement Rate? 10% . That's not so good.
Also, a large portion of the newly discovered oil is offshore, in ultra deep reservoirs.
Do you think that might be more expensive to produce?
As for abiotic oil, as Laws of Physics pointed out, even if that desperate theory were
true -- which it isn't -- it's the rate of replacement that matters, and it's nowhere near 90
million barrels per day.
So, fore-warned is fore-armed, but if you'd rather bury your head in the sand that's your
prerogative.
"... Crude price manipulation is important to maintain the (fraudulent) petrodollar system because the sheeple subconsciously measure inflation through the price of gasoline. The Oligarchy that owns The Fed will not give up the petrodollar system because it is their main weapon for global domination and control. Unprofitable shale companies will continue to be lent money ;) ..."
"... That's not what the article is saying. If we stopped drilling and fracking today, in one month's time, the production would decline by 500k bbl/day. To offset that, 500k bbl/day production from new wells needs to be brought online in a month, which is what they're doing. The problem is, the more production, the more they have to drill just to keep production flat. ..."
"... it really was by the end of aug the production will drop by 1/2 mbpd making 10.5 mbpd unless somewhere else they made up for that loss, and thats prolly not counting your ability to bring that new production to mkt, via VW bus? ..."
"... Shale production is used primarily as a diluent, and as a petro chemical feed stock. The majority of it is used by Canada and Mexico. ..."
"... The Eagle Ford shale play here at home went bust two years ago. It has never recovered and does not look like it ever will. Most of my family have to drive to Odessa for oil work. Now the greed over there is raping the workers with exorbitant rental rates. Those poor slobs can't get a break. Well most working folks just can't get a break period. ..."
While the U.S. reached a new record of 11 million barrels of oil production per day last week,
the top five shale oil fields also suffered the highest monthly decline rate ever. This is bad
news for the U.S. shale industry as it must produce more and more oil each month, to keep oil
production from falling.
According to the newest EIA Drilling Productivity Report, the top five U.S. Shale Oil
fields monthly oil decline rate is set to surpass a half million barrels per day in August.
Thus, the companies will have to produce at last 500,000 barrels of new oil next month just to keep
production flat.
Here are the individual shale oil field charts from the EIA's July Drilling Productivity Report:
The figures that are shown above the UP arrow denote the forecasted new production added next
month while the figures above the DOWN arrow provide the monthly legacy decline rate. For example,
the chart on the bottom right-hand side is for the Permian Region. The EIA forecasts that the
Permian will add 296,000 barrels per day (bpd) of new shale oil production in August, while the
existing wells in the field will decline by 223,000 bpd.
If we add up these top five shale oil fields monthly decline rate for August will be 503,000
bpd. Thus, the shale oil companies must produce at least 503,000 bpd of new oil supply next month
just to keep production from falling. And, we must remember, this decline rate will continue to
increase as shale oil production rises.
We can see this in the following chart below. Again, according to the EIA's figures,
the top five U.S. shale oil fields monthly legacy decline rate increased from 398,000 bpd in
January to 503,000 bpd for August
:
In just the first seven months of 2018, the total monthly decline rate from these top shale
fields increased by 26%. These massive decline rates are the very reason the shale oil and gas
companies are struggling to make money. A perfect example of this is PXD, Pioneer Resources.
Pioneer is the largest shale oil producer in the Permian. According to Pioneer's Q1 2018 Report:
Producing 260 thousand barrels oil equivalent per day (MBOEPD) in the Permian Basin,
an increase of 9 MBOEPD, or 3%, compared to the fourth quarter of 2017;
first quarter
Permian Basin production was at the top end of Pioneer's production guidance range of 252 MBOEPD
to 260 MBOEPD; as previously announced, freezing temperatures in early January resulted in
production losses of approximately 6 MBOEPD; Permian Basin oil production increased to 170
thousand barrels of oil per day (MBOPD);
63 horizontal wells were placed on production
.
Pioneer spent $818 million on capital expenditures (CapEx) for additions to oil and gas
properties (drilling and completion costs) during Q1 2018, brought on 63 horizontal wells in the
Permian, and only added 9,000 barrels per day of oil equivalent over the previous quarter.
So, how much Free Cash Flow did Pioneer make with oil prices at the highest level in almost four
years?? Well, you're not going to believe me... so here is Pioneer's Cash Flow Statement below:
Pioneer reported $554 million in cash from operations and spent $818 million drilling and
completing oil wells in the Permian and a few other locations. Thus, Pioneer's Free Cash Flow was
a negative $264 million. However, Pioneer spent an additional $51 million for additions to other
assets and other property and equipment shown right below the RED highlighted line for a total of
$869 million in total CapEx spending. Total net free cash flow for Pioneer is -$315 million if we
include the additional $51 million.
Therefore, the largest shale oil producer in the Permian spent $264 million more than they made
from operations drilling 63 new wells in the Permian and only added a net 9,000 barrels per day of
oil equivalent. Now, how economical is that???
How long can this insanity go on??
If we look at the Free Cash Flow for some of the top shale energy companies in Q1 2018, here is
the result:
Of the ten shale companies in the chart above (in order: Continental, EOG, Whiting, Concho,
Marathon, Oasis, Occidental, Hess, Apache & Pioneer), only three enjoyed positive free cash flow,
while seven suffered negative free cash flow losses.
The net result of the group was a
negative $455 million in free cash flow.
Even with higher oil prices, the U.S. shale energy companies are still struggling to make money.
So, the question remains. What happens to these shale oil companies when the oil price falls
back towards $30 when the stock market drops by 50+% over the next few years?? And how is the U.S.
Shale Energy Industry going to pay back the $250+ billion in debt??
Lastly, here is my recent video on the Shale Oil Ponzi Scheme if you haven't seen it yet:
Crude price manipulation is important to maintain the (fraudulent)
petrodollar system because the sheeple subconsciously measure inflation
through the price of gasoline. The Oligarchy that owns The Fed will not
give up the petrodollar system because it is their main weapon for global
domination and control. Unprofitable shale companies will continue to be
lent
money
;)
Let's do the math: US produced 11 million bbls a day recently, but
production is declining at a rate of 1/2 million bbls/day according to
the article. So that means US oil production will be zero bbl/day in
about 3 weeks.
That's not what the article is saying. If we stopped drilling and
fracking today, in one month's time, the production would decline by
500k bbl/day. To offset that, 500k bbl/day production from new wells
needs to be brought online in a month, which is what they're doing.
The problem is, the more production, the more they have to drill just
to keep production flat.
This is a well know item, horizontal fracking produces very well
for a couple years and then not so much. Also known that the US uses
17 to 19 (depending on who is telling) million barrels per day so the
US still imports a lot of crude per day. We use it like there is no
tomorrow and one day there won't be but I'm 85 so the three words
to tranquility applies. "Not my problem".
it really was by the end of aug the production will drop by 1/2 mbpd
making 10.5 mbpd unless somewhere else they made up for that loss,
and thats prolly not counting your ability to bring that new
production to mkt, via VW bus?
the yearly chart is very telling. we stayed in a $20-$40 range from the
70's to mid 2000's then bush drove the price up but we fell exactly when
obama won the election BUT UNDER OBAMA WE SETTLED INTO A RANGE OF
$40-$100....fucking double the old range.
The US has 1.7 million operating shale wells. Over the next five years 1.4
million of those wells will have to be replaced to keep production
constant. The decline rate for the average shale well is 89% over its first
five years. At an average replacement cost of $4.4 million per well the
total cost of replacing 1.4 million wells will be $6.2 trillion. The total
cost of all the petroleum products consumed by the US over the next five
years will approximately $2.5 trillion.
To keep the shale industry alive over the next five years it will cost
the US economy 2.5 times as much as it will spend on all the petroleum
products it will consume. Expect a massive dislocation in the petroleum
industry in the very near future!
http://www.thehillsgroup.org/
First... I don't trust Continental
Resources figures, but I can't get into that yet... long story.
Second, EOG is spending twice as much as most shale players on
CapEx per quarter and are making some free cash flow. However,
EOG also paid $97 million in dividends Q1 2018. So, if we
subtract out their dividend payouts, EOG only netted $14 million
after spending $1.4 billion in Capex during Q1 2018.
Lastly, Whiting's oil production is still less than what it was
in 2016. By cutting CapEx spending drastically, from $600 million
a quarter two years ago to only $178 million in Q1 2018, they can
make some free cash flow. But, by drastically cutting CapEx
spending, Whiting won't be able to increase production to pay back
the $2.8 billion in long-term debt that they owe.
And this is the same pattern for our govts.... spend more and
get less..... the result is inevitable, same with our pumped up
markets.... not if, but when.... and it looks to be soon...
Now, Trump wants the EU to buy this gas? It's obviously a very
short term deal, or he hasn't looked at the numbers at all...
which makes him perfect for his role in the 'out with the OWO,
in with the NWO'.
Ponzi scheme is the correct word for this shale industry,
same with all of our industries ,as empires all operate this
way... pushing off paying the bills till tomorrow, always a new
tomorrow... kick that can down the road... the states do it,
the fed govt does it... all those not making money do it... and
these are the opposite of startups.
Buying time. Short and sweet. The mere fact that they are so
actively "buying time" with these short-term policies is
proof that they are aware time is running out, which leaves
one to ponder just exactly "how much" time are they trying
to buy, and toward what end. Big plans are in the works I
suspect, and the end of "buying time" is rapidly
approaching.
For as long as there are enough natural resources left in the
world to be able to strip-mine at about exponentially increasing
rates, as enabled by making "money" out of nothing as debts in order
to "pay" for doing so, which is a debt slavery system based on the
public powers of governments used to back up legalized counterfeiting
by private banks, and the big corporations that grew up around those
big banks. The oil extraction corporations operate inside of that
overall context where everything they are able to do is based on the
degree to which the sources of their funding ultimately depend upon
being able to continue enforcing frauds.
It is too good a phrase to use to refer to those aspects of that
process as being "Ponzi Schemes," since deceived people voluntarily
participated in Ponzi's Scheme. The dominant Pyramid Schemes of
Globalized Neolithic Civilization are systems that offered people a
deal they could not refuse.
The history of oil can not be separated from the history of war.
Within the overall context that money is measurement backed by
murder, the funding of the oil industry developed as vicious feedback
loops due to be able to
enforce frauds
, despite that
about exponentially advancing technologies were enabling about
exponentially increasing fraudulence, with respect to the related
about exponentially increasing strip-mining.
"How long can this insanity go on?"
Probably for a relatively long time for those who are old and
rich, and positioned near the center, toward the top, of the Pyramid
Scheme of enforced frauds which achieve
symbolic robberies
for those people.
Shale oil extraction exemplifies DIMINISHING RETURNS, which
applies across everything else that Civilization is doing.
"It's amazing the amount of money that needs to be invested
just to replace production."
It is more
"amazing"
when one goes through the labyrinth of Money
As Debt, which is the MADNESS of
negative capital
,
which is able to be publicly presented as if that is still positive
capital. While it is abstractly obvious that murder systems are
manifestations of general energy systems, there is relatively little
public appreciation of those murder systems backing up the money
systems.
Around about the 15 minute mark in the video embedded in the
article above, some of the reasons for calling shale oil extraction a
"Ponzi Scheme" are outlined, including "Ponzi Stock Finance," which
are secondary mechanisms where the MAD Money As Debt travels from its
original source
ex nihilo
through other
investors, before going into the shale oil industry. The underlying
issues related to DIMINISHING RETURNS will manifest first and
foremost through the fundamentally fraudulent financial accounting
systems which almost totally dominant Globalized Neolithic
Civilization.
"How long can this insanity go on?"
Until those runaway debt insanities provoke sufficient runaway
death insanities to cause series of crazy collapses which result in
whatever systems of organized crime could continue to operate after
the consequences of DIMINISHING RETURNS have worked their way
through. Since it is barely possible to exaggerate the degree to
which
negative extraction
was presented as
if that was positive production, it is also barely possible to
exaggerate the degree of psychotic breakdowns that will manifest when
runaway enforced frauds finally have their about exponentially
increasing fraudulence go past their tipping points.
The USA became the most important component in Globalized
Neolithic Civilization. The USA has led the way into the development
of globalized monkey money frauds, backed by the threat of force from
apes with atomic bombs, whose lives still mostly became dependent
upon the chemical energy in petroleum resources. The USA, therefore,
also led the way to the development of shale oil extraction, while
that continued to be publicly presented as if that was production.
At the present time, and for the foreseeable finite future, it is
politically impossible for human beings living inside of the dominant
Civilization to better understand themselves as manifestations of
general energy systems. Instead, almost everyone who is adapted to
living inside that Civilization has developed ways to present what
they are actually doing in the most dishonest and absurdly backward
ways possible.
Extracting more and more expensive petroleum resources is merely
one of the leading symbols of what is happening everywhere else one
looks. That Civilization is almost totally based on being able to
back up legalized lies with legalized violence continues to be
socially successful to the degree that most people do not understand
that, because they have been conditioned to not want to understand
that being able to back up lies with violence never stops those lies
from still being fundamentally
false.
THAT
was the source of the
"insanity."
It is too optimistic to expect that will
not continue, despite series of collapses into crazy chaos, and the
related series of psychotic breakdowns. Whatever civilization
survives will continue to operate according to the principles and
methods of organized crime, which will continue to have the related
corollaries that the apparent successfulness of those organized
crimes will depend upon most people not wanting to understand what is
actually happening.
Theoretically, enough people "should" better understand themselves
as manifestations of energy systems, which would then include their
perceptions of the ways that they lived as
nested toroidal
vortices engaged in entropic pumping of environmental energy sources.
That is made even more theoretically imperative to the degree that
some people have better understood some energy systems.
However, throughout everything that operates through Pyramid
Schemes, for those continue requires that the pyramidion people do
everything they can to make sure that those lower down in those
Pyramid Schemes do not understand that those Pyramids are actually
NESTED TOROIDAL VORTICES. At the present time, and in the foreseeable
finite future, the dominant Civilization will continue intensifying
its paradoxical Grand Canyon Contradictions that physical science
makes prodigious progress in understanding some energy systems, while
political science makes no similar progress in understanding human
energy systems, except to the degree that human systems are thereby
enabled to become about exponentially more dishonest.
Fracking symbolizes advancing physical technologies, channeled
through financial systems which only "advance" by becoming about
exponentially more fraudulent. Since almost everything Civilization
is doing has become based on that exponentially increasing
fraudulence, which in turn is based on exponentially increasing
strip-mining, it is politically impossible for that Civilization to
stop that
"insanity"
other than by driving
itself some series of psychotic breakdowns.
That
"lousy shale oil economics will pull down the U.S
economy"
is only one of the more and more painfully
obviously tips of the immense icebergs of enforced frauds, whose own
exponentially increasing fraudulences are melting themselves. (In
that context it is old-fashioned nonsense that possessing precious
metals is a somewhat saner "solution" to the runaway criminal
"insanity"
of Civilization.)
"At an average replacement cost of $4.4 million per well the total cost
of replacing 1.4 million wells will be $6.2 trillion. "
I think your
math is way off, To To date, Shale spent about $500B to $750B drilling &
operating those 1.7M wells. That said, Shale drillers borrowed about
$400B, Its unlikely they'll find more Suckers^H^H^H^H investors to
borrow another $400B. Plus they are running out of sweet spots to drill
in Bakken & Eagle Ford. I believe currently the only remaining sweet
spot they can develop is the Permian Basin. Plus the debt coupon on the
borrowed money start coming due between 2019-2023 (They need to roll
that debt over).
Frackers are really dumb. They can't refracture the wells. As soon as their
wells run dry, it's game over. Financial guys are really smart. They make
pronouncements from their desk. They are never wrong.
I'm going back under my bed and work on my Zombie apocalypse cookbook. On
sale soon.
"Frackers are really dumb. They can't refracture the wells."
They can
re-frack their wells, but the yield is abysmally low; so it is rarely
attempted. Re-fracking produces very little additional oil. Most of what is
produced from refracking is gas, which is a low revenue product. It is, by
far, more cost effective to just drill a new well.
By our calculations the US is selling the oil it produces at 46% below its
full life cycle cost of production. The shale industry is apparently using
a business plan that was developed by an Ivy League business school MBA.
They got their degree in Advance Ponzi Schemes.
http://www.thehillsgroup.org/
My family owned some mineral interest in Blaine County, Oklahoma. It's one of
the hottest shale plays out there right now. A well was drilled and it came in
just gang busters. Within 3 months, the production had fallen by 86%. The well
results out of the gate were so good that the well was mentioned in an investor
presentation for a major oil company. I doubt anyone went back to inform the
investors of the results 90 days later.
That's Shale. If you're lucky you get initial high rates BUT IT WILL drop
in production like hell with time. It's all in the geology. Just look at
the perms and you will understand.
Any idiot can sell goods at half the price it costs them to produce. That
is shale.
Peak oil theory was proved to be correct. It referred to conventional oil.
At the time sour oil wasn't even used, now a majority of the world's oil
is sour. No enhanced oil recovery techniques were available, now every barrel is
geeked out. Water flooding failing Ghawar super giant oilfield, shows the
desperation to keep up oil production.
As far as I know, every Giant in the world (the less than 1% of total
fields that produce 60% of world production) is using some form of
tertiary extraction method to keep producing. Tertiary extraction
methods retrieve anywhere from 2 to 20% of OOIP (original oil in place).
6 to 7% is probably the average. Ghawar is using CO2 injection, in
junction with horizontal wells to extract the last 30 feet of its
original 350 foot oil seam. In other words Ghawar is over 90% depleted.
That was the main reason that the Saudi's $2 trillion IPO for Aramco
fell apart.
With the huge amount of capital outflow now leaving the EM
it seems likely that world demand will begin to decline at about the
same time production begins to decline. The EM constitutes 38% of world
GDP, and 47% of world trade. They also use a greater amount of oil per
GDP $ produced than does the DE. As they continue to fail, as we have
seen recently from Turkey to Venezuela, their petroleum usage will fall.
As Shale has a very limited shelf life (now needing $6.2 trillion over
the next five years to keep production even) the US will find itself in
the situation of having to deal with whipsawing oil markets. Its
precarious debt situation means that it is going to be a rough ride down
from here.
As far as I know no one has called a peak in shale production. As long as
the FED is giving them a $65/ barrel subsidy with ZIRP it is hard to do.
What we can say is that they are planning on taking the $6.2 trillion they
will need for new wells over the next 5 years out of your hide. Invest in
Neosporin, there is gong to be some chapped asses coming down the pike.
I for one want to thank you SOO. Your analysis is also spot on, and
along with your real world experience it reminds me of that ole
detective show Dragnet, "Just the facts Ma'm, just the facts".
Now if
there was an answer that we could all live with....
About what I'd expect. We are 2 years out from the bottom. Exploration and
drilling came to halt. Now that's starting to show up in the declines. It will
start to pick up now with higher prices. Pendulum swings both ways.
"What happens to these shale oil companies when the oil price falls back towards
$30..."
This is the part I don't get, unless you are making two separate
arguments.
Oil is a strategic resource
and as so is an issue of
national security.
They will produce at a loss until they're all dry, if
they have to. The financing will not stop. Same reasoning: Since Musk is
advancing the whole globalist agenda, I hesitate to short the hell out of Tesla.
The financing may just not ever stop. Can the same be said of the broader market?
They've been wiping out EM debt with jubilees; is that how they plan on printing
forever and fueling GDP with debt?
I would protest. They will produce at a fiat loss until dry (assuming fiat
is still accepted of course). The will not produce at an energy loss
though, less than 3 to 4 EROEI.
A Shale well, with an IP (initial production) of 450 b/d, reaches its
energy breakeven point at about 70,000 barrels, or about 10 months. After
that point they must be energy subsidized to keep producing; they go from
being an energy source to become an energy sink. A conventional well
remains an energy source until the WOR (water oil ratio) reaches 45:1, or a
97.8% water cut. At which point they become uneconomical to operate and are
shut in. Shale wells are only operational past their energy source/sink
point because energy is being input from other sources. Much of that comes
from conventional crude - but - the ERoEI of conventional is also falling.
The average conventional well will reach its energy breakeven point by
2030. In thermodynamics that is referred to as the "dead state".
Shale production is used primarily as a diluent, and as a petro chemical
feed stock. The majority of it is used by Canada and Mexico. The Canadians
need it to produce their tar sands oil, and Mexico uses it for their Mayan
Heavy. Both are important raw material sources for US oil refineries.
Even
though Shale is net energy neutral, or negative, and will never be
economical to produce, if the US wants to keep its primary suppliers of
crude in business it has to supply them with diluent. The FED has already
been subsidizing Shale through its ZIRP policy.
Over its full production
life cycle that has contributed about $65 a barrel. In the event that the
FED can no longer keep interest rates suppressed subsidizes will have to
come from some other source. Those may come through the refineries, or like
farmers they may be paid by the bushel. In any event those costs are going
to become extremely burdensome as these high decline rate wells need to be
replaced frequently. Shale will remain a massive, and growing expensive
until the economy has chugged to a halt, and it is no longer needed.
I'm telling you they're lying thru their teeth about oil. We are sucking the
planet dry faster than you can say, "Dry as a popcorn fart."
The powers that
be dont want you to know this because they dont want you to slow down because
they need your tax money to hold up the sick wobbling over weight monster they
created.
It's common knowledge, at least to anyone glancing at the industry, that shale
oil has a two-year boom/bust cycle.
But that oil was not supposed to
exist. Nor any of the last half century's production.
A year ago, there were articles predicting the shale-induced peak would be
2019. (But shale gas was going to be increasing for another couple of
decades.)
You expect profit margins to fall as you squeeze the last of the juice.
Not really sure what the news is, or at least why it is so remarkable.
Calling it a Ponzi scheme, come now.
The Eagle Ford shale play here at home went bust two years ago.
It has never
recovered and does not look like it ever will. Most of my family have to drive
to Odessa for oil work. Now the greed over there is raping the workers with
exorbitant rental rates.
Those poor slobs can't get a break.
Well most working folks just can't get a break period.
The last five economic recessions all were preceded by a spike in crude oil prices. The
recent rise in the price of oil has raised the likelihood of a recession, according to market
forecasts. Oil gained more than 20 percent in the first half of 2018, and odds have been rising
that higher crude oil prices will spark the next economic downturn.
Rosneft's chief executive Igor Sechin expects Brent could reach US$80 a barrel by this
year's end, Interfax reports citing a TV interview of the oil tycoon.
The company's budget for the year is based on a much lower price, at
US$63 a barrel, Sechin added, so it's hardly a surprise the CEO is happy with where prices
are now.
Some more smallish impacts here, but now, with no spare capacity and stocks heading down,
everything is likely to be proportionally more important than before: Hibernia (130 kbpd
Brent like oil) looks set for 40 day turn around in September; Cameroon is heading for civil
war, which could hit its production (70 kbpd) and Chad's exports (130 kbpd); Phoenix field
FPSO in GoM (30 kbpd) will be off station for two months in early 2019. And what's the
biggest news story that some of the trade mags. could come up with this week: a 4000 bpd well
(and I'd guess very short lived) started up a couple of months early in the GoM.
Of course they don't that's why the imaginary oil glut was thought up. Let everyone else
think its glut, it drops the price allows U.S. to buy more. Then deliberate increase
inventory by buying more then claim inventory as a reason to drop the price?
Then take oil from the SPR through its bidirectional pipelines, designed just for that
purpose and pretend it is production, then of course at some stage as I mentioned ages ago, a
fictional drawdown sale of millions of barrels of crude from the SPR would have to be made to
keep the books straight for oil that's already gone!
Add to that the Ponzi shale still churning out oil costing them $100 to produce for them
to sell at $50 then CEO's shouting from rooftops about how profitable it will all be....with
none of them making profits, most of them passing dividends over and selling assets and
borrowing more and more that they will never be able to pay back and where the Fed did
everything possible to fund the at ZIRP or NIRP but failed miserable.
Then of course we get the same old same old Saudi pretending to raise production when its
own wells are falling apart and declining rapidly most subject to water flooding, including
the Super Giant Ghawar field.
perated by high gasoline prices just ahead of the U.S. midterm elections, lawmakers in
Congress are trying to make it easier for the United States to sue OPEC. And unlike previous
failed efforts to go after the oil-exporting cartel, this time Congress will find a
sympathetic ear in the White House.
The bipartisan No Oil Producing and Exporting Cartels Act, or NOPEC bill, would tweak U.S.
antitrust law to explicitly ban just the kind of collusive behavior that OPEC was created to
engage in. The bill, a carbon copy of previous legislation, makes illegal any activity to
restrain the production of oil or gas or set oil and gas prices and knocks away two legal
defenses that in the past have shielded OPEC from U.S. antitrust measures.
The international lawyers of Wall Street did not hide from each other their shared belief
that they understood better than Washington the requirements for running the world. As John
Foster Dulles wrote in the 1930s to a British colleague,
The word "cartel" has here assumed the stigma of a bogeyman which the politicians are
constantly attacking. The fact of the matter is that most of these politicians are highly
insular and nationalistic and because the political organization of the world has under such
influence been so backward, business people who have had to cope realistically with
international problems have had to find ways for getting through and around stupid political
barriers. 44
This same mentality also explains why Allen Dulles as an OSS officer in 1945 simply evaded
orders from Washington forbidding him to negotiate with SS General Karl Wolff about a
conditional surrender of German forces in Italy – an important breach of Roosevelt's
agreement with Stalin at Yalta for unconditional surrender, a breach that is regarded by many
as helping lead to the Cold War. 45 And it explains why Allen, as CIA Director in
1957, dealt summarily with Eisenhower's reluctance to authorize more than occasional U-2
overflights of the USSR, by secretly approving a plan with Britain's MI-6 whereby U-2 flights
could be authorized instead by the UK Prime Minister Macmillan. 46
This mentality exhibited itself in 1952, when Truman's Justice Department sought to break up
the cartel agreements whereby Standard Oil of New Jersey (now Exxon) and four other oil majors
controlled global oil distribution. (The other four were Standard Oil Company of New York,
Standard Oil of California or Socony, Gulf Oil, and Texaco; together with Royal Dutch Shell and
Anglo-Iranian, they comprised the so-called Seven Sisters of the cartel.) Faced with a
government order to hand over relevant documents, Exxon's lawyer Arthur Dean at Sullivan and
Cromwell, where Foster was senior partner, refused: "If it were not for the question of
national security, we would be perfectly willing to face either a criminal or a civil suit. But
this is the kind of information the Kremlin would love to get its hands on." 47
At this time the oil cartel was working closely with the British Anglo-Iranian Oil Company
(AIOC, later BP) to prevent AIOC's nationalization by Iran's Premier Mossadeq, by instituting,
in May 1951, a successful boycott of Iranian oil exports.
In May 1951 the AIOC secured the backing of the other oil majors, who had every interest
in discouraging nationalisation.... None of the large companies would touch Iranian oil;
despite one or two picturesque episodes the boycott held. 48
As a result Iranian oil production fell from 241 million barrels in 1950 to 10.6 million
barrels in 1952.
This was accomplished by denying Iran the ability to export its crude oil. At that time,
the Seven Sisters controlled almost 99% of the crude oil tankers in the world for such
export, and even more importantly, the markets to which it was going. 49
But Truman declined, despite a direct personal appeal from Churchill, to have the CIA
participate in efforts to overthrow Mossadeq, and instead dispatched Averell Harriman to Tehran
in a failed effort to negotiate a peaceful resolution of Mossadeq's differences with London.
50
All this changed with the election of Eisenhower in November 1952, followed by the
appointment of the Dulles brothers to be Secretary of State and head of CIA. The Justice
Department's criminal complaint against the oil cartel was swiftly replaced by a civil suit,
from which the oil cartel eventually emerged unscathed. 51
Eisenhower, an open friend of the oil industry changed the charges from criminal to civil
and transferred responsibility of the case from the Department of Justice to the Department
of State – the first time in history that an antitrust case was handed to State for
prosecution. Seeing as how the Secretary of State was John Foster Dulles and the defense
counsel for the oil cartel was Dulles' former law firm (Sullivan and Cromwell), the case was
soon as good as dead. 52
Thereafter
Cooperative control of the world market by the major oil companies remained in effect,
with varying degrees of success, until the oil embargo of 1973-74. That the cooperation was
more than tacit can be seen by the fact that antitrust regulations were specifically set
aside a number of times during the 1950-1973 period, allowing the major companies to
negotiate as a group with various Mideastern countries, and after its inception [in 1960],
with the Organization of Petroleum Exporting Countries or OPEC. 53
Also in November 1952 CIA officials began planning to involve CIA in the efforts of MI6 and
the oil companies in Iran 54 -- although its notorious Operation TP/AJAX to
overthrow Mossadeq was not finally approved by Eisenhower until July 22, 1953.
55
The events of 1953 strengthened the role of the oil cartel as a structural component of the
American deep state, drawing on its powerful connections to both Wall Street and the CIA.
56 (Another such component was the Arabian-American Oil Company or ARAMCO in Saudi
Arabia, which increased oil production in 1951-53 to offset the loss of oil from Iran. Until it
was fully nationalized in 1980, ARAMCO maintained undercover CIA personnel like William Eddy
among its top advisors.) 57 The five American oil majors in particular were also
strengthened by the success of AJAX, as Anglo-Iranian (renamed BP) was henceforth forced to
share 40 percent of the oil from its Iran refinery with them.
Nearly all recent accounts of Mossadeq's overthrow treat it as a covert intelligence
operation, with the oil cartel (when mentioned at all) playing a subservient role. However the
chronology, and above all the belated approval from Eisenhower, suggest that it was CIA that
came belatedly in 1953 to assist an earlier oil cartel operation, rather than vice versa. In
terms of the deep state, the oil cartel or deep state initiated in 1951 a process that the
American public state only authorized two years later. Yet the inevitable bias in academic or
archival historiography, working only with those primary sources that are publicly available,
is to think of the Mossadeq tragedy as simply a "CIA coup."
Major oil producers agreed Friday to a nominal increase in crude production of about 1
million barrels per day, a bid to put a damper on high oil prices. But in practice, major oil
exporters will likely only be able to add about half that total to global markets, because many
countries are already producing at capacity or face severe threats of supply disruption.
Oil markets weren't calmed by the agreement announced Friday by the Organization of the
Petroleum Exporting Countries after a contentious week of meetings. Crude prices in New York
rose more than 3 percent to almost $68 a barrel and rose about 2 percent in London to more than
$74 a barrel.
OPEC didn't agree to increase production as such. Rather the group, with the addition of
nonmember Russia, agreed to respect its existing program of restricting supplies. But since the
group had gone well overboard and trimmed output by almost 2 million barrels a day, due in
large part to a steep falloff in Venezuelan oil production, respecting the original target will
translate into more oil for the global market -- on paper, at least.
In practice, only Saudi Arabia and Russia have the capacity to add significant amounts of
crude in the next few months. That means Friday's agreement will end up adding about 600,000
barrels of oil a day to the global market.
The contentious meeting took place under the shadow of vituperation from U.S. President
Donald Trump, who worried that high oil and gasoline prices would be politically painful ahead
of midterm elections later this year. Even after the group's decision had been announced, Trump
was still tweeting hopefully about OPEC increasing production.
VK
I posted the sequence of events used to create the petro dollar back in the 2018-33
thread.
Will post them again here as this thread concerns Kissinger.
More specifics can be added to this planned sequence of events, this just the basics.
...........
In the late 1960s, US found oil at Prudhoe bay and by 1970 it was a proved crude oil
reserve.
Due to environmental and other legal challenges, construction of the pipeline was held up.
In late 1972 the US Secretary of the Interior declares the trans-Alaska pipeline to be in
the US national interest
1973-74. OPEC oil embargo due to US backing of Israel pushes oil prices up in an initial
rise.
1973 (OPEC oil embargo) The Trans-Alaska pipeline Authorization Act legislation is quickly
pushed through. Signed by Nixon on November 16 1973. This blocked all further challenges
allowing construction to begin. pdf
Late 1973 Nixon along with Saudi Arabia create the petro dollar beginning in 1974.
1979-80 the price of oil skyrockets due to the Iranian revolution. The US is now the
global economic hegemon as all countries now need US dollars to purchase oil.
I have read that Kissinger withheld information from both Nixon and Israel, but have not
followed that line of research.
Here is a piece from an official Kissinger biography. You can see here he was working both
sides.
https://history.state.gov/departmenthistory/people/kissinger-henry-a
Kissinger entered the State Department just two weeks before Egypt and Syria launched a
surprise attack on Israel. The October War of 1973 played a major role in shaping Kissinger's
tenure as Secretary. First, he worked to ensure Israel received an airlift of U.S. military
supplies. This airlift helped Israel turn the war in Israel's favor, and it also led members
of the Organization of Petroleum Exporting Countries (OPEC) to initiate an oil embargo
against the United States. After the implementation of a United Nation's sponsored ceasefire,
Kissinger began a series of "shuttle diplomacy" missions, in which he traveled between
various Middle East capitals to reach disengagement agreements between the enemy combatants.
These efforts produced an agreement in January 1974 between Egypt and Israel and in May 1974
between Syria and Israel. Additionally, Kissinger's efforts contributed to OPEC's decision to
lift the embargo.
It is noticeable that Trump's US attack any Syrian forces coming too close to US occupied
zones of al Tanf and Dier Ezzor. Also Trumps takeover of the Deir Ezzor oilfields where US
forces simply set up bases or forward posts in the ISIS occupied area.
Under Trump, US has set up a number of new bases in Syria. On the other hand, no concern
about Afrin and Manbij. The Deir Ezzor area is Arab tribes and this and al Hasakah
(Kurd/Arab?) is the top end of the Persian Gulf/Mesopotamia oil field.
US now controls al Hasakah and half of Deir Ezzor province. The have been ongoing efforts
by the US under Trump to take Al Bukamal. US has a base just south of Al Bukamal in Iraq. US
bases are now thick throughout Mesopotamia, with more being built.
Also a new base being installed in Kuwait.
The US controls the Arab shore of the Persian gulf, it now has many bases in Iraq and
Syria. The only thing missing is the oil rich strip of Iran running alongside the Persian
gulf and Mesopotamia.
"... How different is it really from the past 70+ years (since that 45' meeting between FDR and the then ruler of KSA), and especially since the "oil shocks" of the 1970's ? The Trumpians are little more direct and crude in their wording, but that is really the only difference I see. ..."
"... Putin's announcement after Turkey's shooting down of a Russian jet that Turkey has been systematically facilitating ISIS oil sales illustrates how the terror-entity has become a figleaf to justify military action. ..."
"... As INSURGEintelligence has previously reported, there is significant evidence that high-level elements of Turkish government and intelligence agencies have covertly sponsored Islamist terrorist groups in Syria, including ISIS, and that this has involved permitting black market oil sales. ..."
"... Why, however, did Vladimir Putin wait until the murder of a Russian pilot before announcing Russia's possession of intelligence on Turkish state-sponsorship of ISIS? ..."
"... There can be little doubt that Putin had previously been more interested in protecting Russian relations with Turkey as an emerging gas transshipment hub to Europe, under which he and Erdogan planned to build the multibillion Russia-Turkey gas pipeline, Turkish Stream -- now suspended after the recent diplomatic furore. ..."
"... It has become increasingly clear that the US-led coalition strategy is aimed primarily at containment of the group's territorial ambitions within Syria. ..."
"... In this context, as Russia and Iran consolidate their hold on Syria through the Assad regime -- staking the claim to Syria's untapped resources in the Mediterranean -- the acceleration of Western military action offers both a carrot and a stick: the carrot aims to threaten the Assad regime into a political accommodation that capitulates to Western regional energy designs; the stick aims to replace him with a more compliant entity comprised of rebel forces backed by Western allies, the Gulf states and Turkey, whilst containing the most virulent faction, ISIS. ..."
The Saudi's. Interesting watching them agree to whatever Trump wants. The most recent one was Trump telling them to raise oil
output. The Saudi's now are very pro zionist and will back them against the Sunni Palestinians no matter what. If Trumps tells
them to pay for a US war or occupation they pay. If they are told to by lots of useless junk from the US MIC, they buy it and
manage to pull a twisted smile when Trump turns the screws about billions being peanuts.
Seems very much like KSA is now an expendable asset for the US, and their only chance of survival is a lot of 'yes sir, how
high sir'.
How different is it really from the past 70+ years (since that 45' meeting between FDR and the then ruler of KSA), and
especially since the "oil shocks" of the 1970's ? The Trumpians are little more direct and crude in their wording, but that is
really the only difference I see.
Posted by: Peter L. | Jul 1, 2018 11:21:17 PM | 23
Look no further than the first sentence of the text you quote. It has been documented a few times, including in the Intercept,
that there were some very serious money flows towards a certain foundation run by the family of the named person. Money flows
that originated in the Gulf. Money flows that were related to what happened in Libia.
Putin's announcement after Turkey's shooting down of a Russian jet that Turkey has been systematically facilitating ISIS
oil sales illustrates how the terror-entity has become a figleaf to justify military action.
As INSURGEintelligence has previously reported, there is significant evidence that high-level elements of Turkish government
and intelligence agencies have covertly sponsored Islamist terrorist groups in Syria, including ISIS, and that this has involved
permitting black market oil sales.
Why, however, did Vladimir Putin wait until the murder of a Russian pilot before announcing Russia's possession of intelligence
on Turkish state-sponsorship of ISIS?
There can be little doubt that Putin had previously been more interested in protecting Russian relations with Turkey
as an emerging gas transshipment hub to Europe, under which he and Erdogan planned to build the multibillion Russia-Turkey
gas pipeline, Turkish Stream -- now suspended after the recent diplomatic furore.
US, British and French military operations have been similarly inconsistent, inexplicably failing to shut down ISIS supply
lines through Turkey, failing to bomb critical ISIS oil infrastructure including vast convoys of trucks transporting black
market oil, and refusing to arm the most effective and secular Kurdish ground forces combating ISIS.
It has become increasingly clear that the US-led coalition strategy is aimed primarily at containment of the group's
territorial ambitions within Syria.
....
As Russia expands its military presence in the region in the name of fighting ISIS, the US, Britain and France are now scrambling
to ensure they retain a military foothold in Syria -- an effort to position themselves to make the most of a post-conflict
environment. As the US Geological Survey Minerals Yearbook put it:
"Most of the international investors who pulled out of Syria following the deterioration of the safety and security situation
throughout the country are expected to remain so until the military and political conflicts are resolved."
In this context, as Russia and Iran consolidate their hold on Syria through the Assad regime -- staking the claim
to Syria's untapped resources in the Mediterranean -- the acceleration of Western military action offers both a carrot and
a stick: the carrot aims to threaten the Assad regime into a political accommodation that capitulates to Western regional energy
designs; the stick aims to replace him with a more compliant entity comprised of rebel forces backed by Western allies, the
Gulf states and Turkey, whilst containing the most virulent faction, ISIS.
Drop in the bucket to what is happening right now. US will be about 500k less than their
(IEA's) expectations into 2019 due to transportation constraints.
George thinks Venezuela
will approximate zero by 2019, as do others.
Give them the benefit of doubt and say a one
million decrease from 1.6 at the beginning of this year.
IEA is still using production vs
export capabilities, which has to change. Europe's refineries have largely stopped buying
Iran's oil, as has India. That's 1.1 million that has to be sold elsewhere, or not. On
shipping, insurance, and financing that is not affected by the restrictions. I count 2.6
million into 2019 that is not on IEA's plate.
Yeah, as said above, 2019 is going to be quite
interesting, most of which we will see the end of 2018. None of this takes into consideration
any increase in demand for 2019 that is over the US production projection for 2019 (.9). nor
any shortage carried over from 2018. Yeah, we should be hunky dory.
In the investment world, we will still be watching EIA weeklies, to determine what is
happening in the rest of the world for awhile. So increased cognitive function won't happen
soon.
"... "Conclusion. No matter what clever US energy independence calculations are out there, the fact remains that the US is physically dependent on around 8 mb/d of crude oil imports, 4.3 mb/d out of which come from countries where oil production has already peaked and/or where there are socio-economic or geopolitical problems. As of April 2018 US net crude imports were about 6 mb/d, far from oil independence." ..."
"... I note also that about 45% of USA imports come from Canada, as well depicted in in your Fig 1. Thus we are 'captives' of Canada (to use the terminology of trump), but don't seem to have much appreciation or respect for their position. ..."
US total (oil + products) inventories made a new low (from the high February 2017)
US ending stocks July 6th
Crude oil down -12.6 million barrels
Oil products down -0.7
Overall total, down -13.3 (shown on chart)
Natural Gas: Propane & NGPLs up +6.1 (not included in chart)
Chart: https://pbs.twimg.com/media/Dh1-upjXUBEOjvn.jpg
"Conclusion.
No matter what clever US energy independence calculations are out there, the fact remains
that the US is physically dependent on around 8 mb/d of crude oil imports, 4.3 mb/d out of
which come from countries where oil production has already peaked and/or where there are
socio-economic or geopolitical problems. As of April 2018 US net crude imports were about 6
mb/d, far from oil independence."
I note also that about 45% of USA imports come from Canada, as well depicted in in your
Fig 1. Thus we are 'captives' of Canada (to use the terminology of trump), but don't seem to
have much appreciation or respect for their position.
Putin/Russia is also the only entity that can prevent Trump's US from simply walking in and
taking over the rich energy hub (Mafia style) to the south of Eurasia.
Notable quotes:
"... Global Energy Dominance is now part of the US National security Strategy. Although not labeled as global, when reading through the energy dominance section of the NSS, it can clearly been seen to be global. This is not just about sell oil produced in the US. ..."
"... Trump is going for the Achilles heel of Eurasia - energy. Rather than a creative accounting scam that simply racks up huge amounts of debt, Trump is looking for a monopoly or near monopoly business to take over and rake in the profits. ..."
"... Russia supply energy to Eurasia from the North. The opening for the Trump mob is in the south. The meet with Putin may well be to sound out the possibilities of forming a cartel. ..."
"... Yes, it absolutely is. But this is not a new "Trump policy." Certainly Zbiginew Brzezenski laid this out quite clearly in his 1997 book, "The Grand Chessboard: American Primacy and Its Geostrategic Imperatives." It's really all in there, just as you're now identifying. If you can't take the time to read it, please consider at least reading some book reviews. As I've noted before, Ziggy apparently didn't foresee Putin rising to power and restoring the Russian state, which threw the proverbial monkey wrench into the globalists' plans, but really, US foreign policy has continued to follow his plans otherwise. ..."
The latest article at the Saker site by Rostislav Ishchenko - Trump's Geopolitical Cruise
- I think is the best take on Trump's and his backers mindset. Worth a read and covers what I
think was the cause of the split in the US elite.
The petro dollar, kicking off in the late 70s was a piece of creative accounting to give
unlimited credit. This should have been ended with the collapse of the Soviet Union, but
greed got the better of most. Trump and the people backing him could see that this was now in
its terminal stages and US close to collapse itself.
Rostislav Ishchenko, like many thinks that Trump is pulling the US back to a form of
isolation from the world, but I don't think this is the case.
Global Energy Dominance is now part of the US National security Strategy. Although not
labeled as global, when reading through the energy dominance section of the NSS, it can
clearly been seen to be global. This is not just about sell oil produced in the US.
Trump is going for the Achilles heel of Eurasia - energy. Rather than a creative accounting scam that simply racks up huge amounts of debt, Trump is
looking for a monopoly or near monopoly business to take over and rake in the profits.
Russia supply energy to Eurasia from the North. The opening for the Trump mob is in the
south. The meet with Putin may well be to sound out the possibilities of forming a cartel.
Putin/Russia is also the only entity that can prevent Trump's US from simply walking in
and taking over the rich energy hub (Mafia style) to the south of Eurasia.
"Global Energy Dominance is now part of the US National security Strategy."
Yes, it absolutely is. But this is not a new "Trump policy." Certainly Zbiginew Brzezenski
laid this out quite clearly in his 1997 book, "The Grand Chessboard: American Primacy and Its
Geostrategic Imperatives." It's really all in there, just as you're now identifying. If you
can't take the time to read it, please consider at least reading some book reviews. As I've
noted before, Ziggy apparently didn't foresee Putin rising to power and restoring the Russian
state, which threw the proverbial monkey wrench into the globalists' plans, but really, US
foreign policy has continued to follow his plans otherwise.
Kissinger has written much the same, though I don't recall in which books/articles. This
page from the US Navy seems a fine reading list, designed as it appears to indoctrinate
officers in AZ Empire geopolitics.
IMO, the US took the lead in the Empire's Global Energy Dominance quest when FDR met with
King Saud on Great Bitter Lake in the Suez Canal in 1945 (swinging by after the final
post-war world planning meeting with Churchill and Stalin at Yalta). This was when the US
largely replaced Great Britain in primacy over Asian/Middle Eastern energy dominance.
The US is in the Persian Gulf to stay. Trumps face face meet with Putin will be so Trump
can try and gauge what Putin will do - if he will run any blocking moves, his reaction to a
fait accompli ect. Most likely a few more face to face meetings before any move on Iran.
Peter, thanks for pointing out the new and unwanted US base in Iraq. I just read that the US
was building the world's largest Embassy Compound in "Iraqi Kurdistan." I wonder it they're
the same thing?
In a quick web search, failing to find an answer, I noticed that besides the "Green Zone"
compound we built in Baghdad at the start of the current military occupation, the record
holder was the US Embassy Compound in Pakistan.
James and I have discoursed here a bit on the history of US military occupations since WW
II. Boils down to the US has never removed its military from any country it's occupied with
the exception of Vietnam.
veritas semper vincit @103 linked blogpost notes that the US has 40,000 troops still
occupying Germany. His (I presume) post is quite entertaining considering the severe
seriousness of the topic.
Dis is a nice little country ya gotz heyah. Id be a shame if sumpin' bad was ta happen to
it.
MOSCOW (Reuters) - Russian Energy Minister Alexander Novak said on Friday that a deal under which
Russia would provide goods to Iran in exchange for oil is still possible.
Russia is studying all legal issues related to the possible deal, he said.
We expect continued price fluctuations within a wide $50-80/barrel range, with the strip
gravitating lower over the medium-term and a wider Brent/WTI crude differential," JPM
writes.
Looks like OPEC 14 peaked two years. Can they beat it?, perhaps by a small amount in a world
without chaos.
Today orange fatty called out Germany for being captive to Russia. I'm pretty sure he was
referring to German dependence on imported fossil energy from Russia.
As of 2015 Germany net energy imports are 64% of total [USA 12% for comparison]. If this
means 'captive', then perhaps we should acknowledge that 11 of our top 13 trading partners
are highly dependent on imported energy from either Russia or the big OPEC producers.
'Captives' so to speak. Better get used to that idea, and learn how to get along with
others. Only Canada and Mexico aren't 'captives', but we don't look to good at being friends
with them either.
The completed around 95 according to my data. The is lag in the data on confidential wells
that will show up next month in the final data. Also if the Bakken was to get and hold 1.4
million barrels a day the would need to complete around 1500 wells per year.
I managed to erase my own comment on this. And my comment was simple, the only true
measurement of market balance for oil going forward is global inventory level. Everything
else is perhaps manipulation or guesses.
I agree, with all the intentional and unintentional confusion it stays confused. I stay
confused trying to figure out what is confused. Inventory levels will be the only clear
measure of what is happening. US inventories should not be dropping fast, as we are about the
only country with increased production, but we dropped over 30 million last month. That's
really not small potatoes, as commercial stocks are just a little over 400 million. Though, I
think the US will be one of the last that would hit the danger zone.
Good point. My intention was not to give more confusion. These are forecasts from eia and, I
always like to remind this, they forecasted Brent averaging 105$ for 2015 in the STEO of
October 2014. They never forecast big surplus or deficit.
I messed with the numbers of the STEO from 2018 to guess when the are reliable. Inventory
levels are accurate for the US from the monthly report, which is 3 months old (april for July
STEO). Other inventory levels are less accurate, but stock changes are reliable from 4-5
month data.
Global inventories increased in April (0.74 Mb/d) and May (1.14 Mb/d). This would be quite
a change, as April would be a record inventory build since January 2017, and it would be
followed by another record. This have to be confirmed later.
So, now I know what I will look for in these STEO.
How does this fit with production and consumption?
I thought we have still increasing consumption of about 1.5 mb/year, and production in
April/May didn't jumped thad much – Opec flat and Permian already near it's pipeline
bottleneck.
As much as I know, many storages are unknown, especially Opec / China. There are these
satellite measurements, but there are additional deep storages.
Gathering all comsumption / raffinery input / production data would give an additional
picture. Still not easy.
With 1mb/day surplus we should go soon into the next oil price crash to 30-40.
Even if we haven't hit peak yet, the fact that production is likely to be going up by a
snail's pace the next 3 years is a problem. If consumption just goes up 0.75% a year we need
600K extra a year. That seems like a big challenge to a layman like myself.
Well what will happen is that the price of oil will hit $150-$200 a barrel to ration demand.
Which will cause much pain and ruction and gnashing of teeth among the voters, but Europe
has had those oil equivalent prices owing to taxation for quite some time and they manage
high living standards. $200/bbl probably destroys 10 million a day in superfluous 'Becky
driving by herself to the mall in a 3 ton SUV for no reason' kind of demand and incentivizes
quite a bit of production.
The transition period will be moody for sure, but at $200/bbl, the amount of economic EOR
targets in the US is somewhere in excess of 70 BBO from old conventional fields from the
industry reports I have seen – its just not economic to do since there isn't enough CO2
available to flood them, so you need to use more expensive techniques which require very high
prices (ethane flooding might be useful????). Worldwide its hundreds of billions. High prices
that encourage us to use the resource wisely and not waste the goddamn stuff liberally would
be a godsend, if we could quit wasting gigatons of plastic bullshit and 40% of our food
– i.e. if everything made from oil was more expensive as well.
It would be painful economically, but Mad Max isn't coming our way. After 5 years of pain,
we might actually finally get our shit together and research some goddamn alternatives.
I believe sugar cane ethanol is very competitive at $120 per barrel. This allows converting
grass cattle grazing ground to cane. I believe soy and palm will also become very attractive
crops. And I suspect countries like Haiti and Nicaragua will continue having riots.
Yes, I believe you are right. The future energy picture is complex, but authors writing books
about this say sugar cane ethanol could have EROEI (energy return on energy invested) of up
to 4. Even based on mechanised agriculture. And the big advantage of this crop is that it is
not very nitrogen intensive, the biggest fertilizer, currently energy intensive when it comes
to natural gas usage. Even when it comes to preindustrial crop rotation, the nitrogen
intensive main food crops were often rotated with legume crops which were not nitrogen
intesive in the hope to rebuild nitrogen content in the earth. So very long term, sugar cane
ethanol is a superb type of renewable energy. (that is what I read, no expert).
Brazil has the biggest potential out there when it comes to size, and it is not
inconceivable that they can cover much of domestic fuel demand with this outside aviation and
possibly shipping (no need for diesel and gasoline ;-)). It would be in competition with food
crops and concerns about deforestation, but still; a big potential there. Brazil is well off
in a more renewable future btw, having loads of hydro power, wind power, in addition to
biomass power (sugar cane the most promising).
"[Exxon's] approach is a gamble in a new era of energy breakthroughs such
as fracking and electric vehicles. Many of Exxon's competi-tors are
transforming their businesses to move away from oil exploration, and
have begun to spend carefully and diversify into renewable
energy ."
"'Most investors like Exxon, but they like other companies better,'
said Mark Stoeckle, chief executive of Adams Funds, which owns about $100
million in Exxon shares. 'The market is not willing to reward Exxon for
spending today in hopes that it will bring good returns
tomorrow.'
"Exxon has been pledging to produce more oil and gas for years, but its
output of about four million barrels a day is no higher today than it was
after its merger with Mobil Corp. in 1999. Even if Exxon succeeds in
doubling last year's earnings of $15 billion (excluding
impairments and tax reform impacts) by 2025, as Mr. Woods vowed in his
eight-year spending plan, it would still be making far less than in 2008, when it
set what was then a record for annual profits by an American
corporation, at $45 billion .
"Exxon's fracking prospects in the Permian basin in West Texas and New
Mexico, developed by its XTO unit, remain among its most profitable
opportunities, the company says. Still, its U.S. drilling
business has lost money in 11 of the last 15 quarters."
Hi Steve, this is exactly what we have been talking about for the last 8 years. To make
matters worse there seems to be a completely irrational belief that Shale will save the day.
Outside of the fact that shale is not processable without heavier crude, and it is at best
energy neutral, and probably negative, it is also long term unaffordable. There are 1.7
million Shale wells in the US. Over the next 5 years 1.4 million of those wells will have to
be replaced to just keep production even. That will be $6.2 trillion even if done on the
cheap. $6.2 trillion is equal to the total cost of all the finished product that will be
consumed by the US for the next 12.8 years (@ $75/barrel). Expending 12.8 years of sales
revenue to produce 5 years of oil is just not going to happen!
There seems to be a black out on this terrible situation. Some of that may be just plain
ignorance, but I suspect that the main reason is that it is politically unspeakable. For that
reason nothing is being spoken. As I have been saying for some time no one should expect big
oil, big government, or big anything to come riding to the rescue. The individual is now
completely on their own. Chose your options with discretion.
Agreed. The U.S. Shale Oil Ponzi Scheme will likely begin to disintegrate within the next
1-3 years. Already, the Permian oil productivity per well has peaked.
Then when the next Shale Oil ENRON event takes place... watch as the dominos fall.
@SRSrocco, U.S. Tight Oil depends on cheap credit. Regardless of oil prices.
Once cheap credit dries up and the previous debts are unable to be paid by drilling new
wells, the entire scheme falls apart.
Oil prices do not drive U.S. Tight Oil as much as cheap credit from easy loans.
Eventually, U S. Tight Oil using new credit cards to pay debts on old credit cards will
catch up with a vengence. Rising interest rates will be the catalyst. Rising oil prices only
prolong the increasing debt.
Didn't the EIA publish something not long ago stating their concerns that we could see oil
shortages by 2020? And around the same time, I recall that the Saudi Oil Minister came out
and stated that without more investment, we would likely see oil shortages by 2020. And then
at the recent OPEC meeting, I believe it was the Oil Minister from UAE who stated that we
need to find a new North Seas equivalent oil field EVERY YEAR to meet projected demand, which
of course is not going to happen. It has been a long slow grind since 2008 to get to this
point, but from here on out I anticipate that things will start unraveling at an ever faster
pace. Big changes on the way. But one thing that will NEVER happen is that the POTUS or some
other world leader comes out and says we are running short on energy. Instead it will be
Trade Wars, the damned Russians or some other lame propaganda -- anything but the truth.
The mitigation section of the study was most telling. It simply stated that local
sustainable economies would replace the modern era. These economies included local food
production and energy production. As this process unfolds, I simply do not see how a high
rise is going to remain habitable.
Zero hedge put a news story a while ago where (I think 2016) the US oil industry lost more
in that it earned in the previous 7 years (mining in general), so more investment wouldn't
have been coming in the US anyway - the price wasn't high enough to justify it.
Worldwide we are going to see some almightly crunch, whether it will arrive after 2020
will be seen. Ironically it might save Trump anyway if the world is seen to be beset by a oil
supply crunch since its hard to blame that on him.
The U.S. needs to get off its dead ass and start developing better batteries, solar power,
and other alternative energy sources. This was talked about in 1973, during the Oil Embargo
days, and its just astonishing the U.S. has done little since to ween itself off of oil. And
now we now have a tariff against Chinese made solar panels. DUH!!! How dumb can you get?
Look at the energy density of those power sources. You'll never run an industrial
civilization off of them. Electric cars may be great for zipping a couple of people around
town from day to day, but you're never going to run the large mining and shipping equipment
needed for our society. If you want to do that, you're going to have to develop viable
breeder reactors and the technology to manufacture liquid fuels with that energy - and this
is doable.
Right. There is nothing.....NOTHING....that can replace oil and gas as it is used and
utilized by the modern industrial society. Nothing......
What needs to happen right now is a steady rise in prices that will condition our
population to start learning to do with less cheap, easy energy. We have got to curb usage to
give society a chance to begin to learn another way.
The major obstacle to doing this responsible, rational action? The egregious, criminal
banking system that has gotten the world awash in debt to feed their greed. Any cut back in
the use of energy will destroy the economy and their gravy train.
"... President Trump's demand last week that OPEC "reduce prices now" or US military protection of OPEC countries may not continue almost sounded desperate. But if anything, Trump's bluntness is refreshing: if, as he suggests, the purpose of the US military – with a yearly total budget of a trillion dollars – is to protect OPEC members in exchange for "cheap oil," how cheap is that oil? ..."
"... Exactly how traditional 'US Mideast policies' benefit the average American however remains a mystery. Many of these questionable policies are never critically examined in the open – at least not the big ones involving that 'special relationship' with you-know-who. Never. ..."
"... Iran's crime? That nation's alleged 'sponsorship of terrorism' in support of the Palestinian struggle against Zionist occupation, as well as other anti-Zionist resistance movements in Lebanon, Syria and beyond. ..."
"... Yet it is Israel that is foremost occupying power in that region and it is Israel that is the expanding nuclear power. Meanwhile, the Zionist-lead BDS campaign against Iran is nothing less than a full-blown economic war. At the same time, Israel benefits from unconditional and continuous US subsidies. ..."
"... In no small way, Israel sees its mission to dominate the region and expand its borders as a religious duty. Destiny. This puts Israel in a class by itself. And unlike its neighbors (including Iran) Israel has nuclear WMD. ..."
President Trump is finding that his threats and heated rhetoric do not always have the
effect he wishes. As his Administration warns countries to stop buying Iranian oil by November
or risk punishment by the United States, a nervous international oil market is pushing prices
ever higher, threatening the economic prosperity he claims credit for. President Trump's
response has been to demand that OPEC boost its oil production by two million barrels per day
to calm markets and bring prices down.
Perhaps no one told him that Iran was a founding member of OPEC?
When President Trump Tweeted last week that Saudi Arabia agreed to begin pumping additional
oil to make up for the removal of Iran from the international markets, the Saudis very quickly
corrected him, saying that while they could increase capacity if needed, no promise to do so
had been made.
The truth is, if the rest of the world followed Trump's demands and returned to sanctions
and boycotting Iranian oil, some 2.7 million barrels per day currently supplied by Iran would
be very difficult to make up elsewhere. Venezuela, which has enormous reserves but is also
suffering under, among other problems, crippling US sanctions, is shrinking out of the world
oil market.
Iraq has not recovered its oil production capacity since its "liberation" by the US in 2003
and the al-Qaeda and ISIS insurgencies that followed it.
Last week, Bloomberg reported that "a complete shutdown of Iranian sales could push oil
prices above $120 a barrel if Saudi Arabia can't keep up." Would that crash the US economy?
Perhaps. Is Trump willing to risk it?
President Trump's demand last week that OPEC "reduce prices now" or US military
protection of OPEC countries may not continue almost sounded desperate. But if anything,
Trump's bluntness is refreshing: if, as he suggests, the purpose of the US military –
with a yearly total budget of a trillion dollars – is to protect OPEC members in exchange
for "cheap oil," how cheap is that oil?
At the end, China, Russia, and others are not only unlikely to follow Trump's demands that
Iran again be isolated: they in fact stand to benefit from Trump's bellicosity toward Iran. One
Chinese refiner has just announced that it would cancel orders of US crude and instead turn to
Iran for supplies. How many others might follow and what might it mean?
Ironically, President Trump's "get tough" approach to Iran may end up benefitting
Washington's named adversaries Russia and China – perhaps even Iran. The wisest approach
is unfortunately the least likely at this point: back off from regime change, back off from
war-footing, back off from sanctions. Trump may eventually find that the cost of ignoring this
advice may be higher than he imagined.
Trump may eventually find that the cost of ignoring [the advice to back off from Iran]
may be higher than he imagined.
Perhaps he's counting on not being President by then. Another case of IBGYBG (I'll be
gone, you'll be gone), an attitude that seems to be infecting bankers, Wall Street, and the
rest of the U.S. élite lately. A cataclysm is coming, and they can see it.
Why is Zio-America treating Iran with such hostility?
Iran and Israel are locked in a vicious cold war. Their animosities date back to mythical
antiquity. One alleged episode is even celebrated in the Jewish celebration of 'Purim'.
Take a look at the breathtaking insight that Gilad Atzmon has to offer about Purim:
In any case, Iran and Israel's antipathies for one another shouldn't concern superpower
America. Except that it does.
Like American television, Washington happens to be Israeli-held territory. Haven't you
heard?
This is why Zio-Washington invariably sides with Israel in all of its disputes, even when
1) Israel is the aggressor, 2) even when Israel is slaughtering powerless civilians who are
protesting their subjugation, and 3) even when US interests are not at stake or even in play.
And this uniform deference from Washington is thoroughly bipartisan. It is 'business as
usual'. It's basically unanimous. Both Parties. No dissent.
Many just call it 'US Mideast policy'. Ironclad. 'Unshakable'. But don't laugh or smirk.
Doing so might be seen as 'anti-Semitic'.
Exactly how traditional 'US Mideast policies' benefit the average American however
remains a mystery. Many of these questionable policies are never critically examined in the
open – at least not the big ones involving that 'special relationship' with
you-know-who. Never.
These rigid policies help explain how Crypto-Israelis in America – using Washington
as their proxy – have successfully brought the US into Israel's cold war against
Iran.
Zionist operatives have not only orchestrated the decades-long freeze of billions of
dollars in Iranian assets that belong to the Iranian people, but they have launched a global
(and crypto-Zionist) 'Boycott, Divestment and Sanctions' campaign against the relatively
peaceful nation of Iran.
Iran's crime? That nation's alleged 'sponsorship of terrorism' in support of the
Palestinian struggle against Zionist occupation, as well as other anti-Zionist resistance
movements in Lebanon, Syria and beyond.
Yet it is Israel that is foremost occupying power in that region and it is Israel that
is the expanding nuclear power. Meanwhile, the Zionist-lead BDS campaign against Iran is
nothing less than a full-blown economic war. At the same time, Israel benefits from
unconditional and continuous US subsidies.
Politicians who dare question this phenomena – or who wander off the Zionist
plantation in Washington – tend to disappear. Rapidly. Journalists, too.
In no small way, Israel sees its mission to dominate the region and expand its borders
as a religious duty. Destiny. This puts Israel in a class by itself. And unlike its neighbors
(including Iran) Israel has nuclear WMD.
Due to Israeli influence here, Americans are not only actively supporting various Zionist
war efforts, but they are also paying billions more for their gasoline since Zionists have
managed to prohibit the purchase Iranian oil throughout the West. These economic 'choices'
are what Americans unwittingly make – even though the 'average Joe' remains totally
unaware of them.
Indeed, even though Iran wants to be a trading partner with America and bring its oil onto
the world market, Zio-Washington says 'NO!' US consumers be damned. The Iranian people be
damned.
This is not the first time that US economic interests have taken a back seat to Israel's.
Please recall the 1973 Arab-Israeli war, Zio-Washington's intervention on behalf of Israel
during that conflict, the ensuing Arab oil embargo, and the disastrous recession that
followed.
But Zio-America never turned it back on Israel, even though American citizens never had
the opportunity to determine their allies or policies one way or another. US support of
Israel is mandatory. It's been this way since LBJ.
Today, Israel is maneuvering Zio-Washington to do to Iran what it did to Iraq, Libya and
Syria; namely, spread destabilization and impose 'creative destruction' upon all nations that
pose any long-term threat to the Zionist State.
Those suckers from Sanford and Bernstein again try to push thier view that shale oil has
great potential instead of potential to bury even more money in the sand. production of shale oil includes production of a
parallel stream of junk bonds.
"... statements from the U.S. government about "zero tolerance" towards Iran could mean that those losses will end up being much higher. Just by shifting the supply outages from 0.5 to 1 mb/d would translate into an oil price increase of about $8 to $9 per barrel, according to Bank of America Merrill Lynch. ..."
"... "We estimate that every million b/d shift in [supply and demand] balances would push the oil price by $17/bbl on average. So based on those assumptions, we estimate zero Iran exports could push oil up by $50/bbl if Saudi caps out. We expect in this game of chicken, someone will blink before that happens." ..."
"Investors who had egged on management teams to reign in capex and return cash will lament
the underinvestment in the industry," the analysts
wrote . "Any shortfall in supply will result in a super-spike in prices, potentially much
larger than the $150 a barrel spike witnessed in 2008."
... ... ...
Of course, for many, this is a problem for another day. The oil market is
arguably facing a supply crisis right now. Until recently, the oil market assumed a loss of
about 0.5 mb/d from Iran because of U.S. sanctions. But statements from the U.S. government
about "zero tolerance" towards Iran could mean that those losses will end up being much higher.
Just by shifting the supply outages from 0.5 to 1 mb/d would translate into an oil price
increase of about $8 to $9 per barrel, according to Bank of America Merrill Lynch.
"We estimate that every million b/d shift in [supply and demand] balances would push the
oil price by $17/bbl on average. So based on those assumptions, we estimate zero Iran exports
could push oil up by $50/bbl if Saudi caps out. We expect in this game of chicken, someone will
blink before that happens."
In other words, if Saudi Arabia is unable to plug the deficit, the U.S. would likely have to
back down on its "zero tolerance" policy towards Iran. The oil market is too tight, and the
supply gap would be too large. Cutting Iran exports by that much, in an increasingly tight oil
market, would send prices skyrocketing, something that the Trump administration probably won't
be able to stomach. If Trump proceeded, a price spike of that magnitude would lead to a
meltdown in demand.
As the world continues to burn energy like there is no tomorrow, global oil and gas discoveries
fell to another low in 2017. And to make matters worse, world oil investment has dropped 45% from
its peak in 2014. If the world oil industry doesn't increase its capital expenditures
significantly, we are going to hit the Energy Cliff much sooner than later.
According to Rystad Energy, total global conventional oil and gas discoveries fell to a low of
6.7 billion barrels of oil equivalent (Boe). To arrive at a Boe, Rystad Energy converts natural
gas to a barrel of oil equivalent. In 2012, the world discovered 30 billion Boe of oil and gas
versus the 6.7 billion Boe last year:
"We haven't seen anything like this since the 1940s," says Sonia Mladá Passos, senior analyst
at Rystad Energy. "The discovered volumes averaged at ~550 MMboe per month.
The most
worrisome is the fact that the reserve replacement ratio in the current year reached only 11%
(for oil and gas combined) - compared to over 50% in 2012."
According to Rystad's
analysis, 2006 was the last year when reserve replacement ratio reached 100%.
The critical information in the quote above is that the world only replaced 11% of its oil and
gas consumption last year compared to 50% in 2012. However, the article goes on to say that the
last time global oil and gas discoveries were 100% of consumption was back in 2006. So, even at
high $100+ oil prices in 2013 and 2014, oil and gas discoveries were only 25% of global
consumption.
As I mentioned at the beginning of the article, global oil capital investment has fallen right
at the very time we need it the most. In the EIA's International Energy Outlook 2017, world oil
capital investment fell 45% to $316 billion in 2016 versus $578 billion in 2014:
In just ten years (2007-2016), the world oil industry spent $4.1 trillion to maintain and grow
production. However, as shown in the first chart, global conventional oil and gas discoveries fell
to a new low of 6.7 billion Boe in 2017. So, even though more money is being spent, the world
isn't finding much more new oil.
I believe we are going to start running into serious trouble, first in the U.S. Shale Energy
Industry, and then globally, within the next 1-3 years. The major global oil companies have been
forced to cut capital expenditures to remain profitable and to provide free cash flow.
Unfortunately, this will impact oil production in the coming years.
Thus, the world will be facing the Energy Cliff much sooner than later.
Yeah tHis article is ridiculous, resident ZH self-purported Mensa members
like Tmos' have proven beyond any doubt that 'abiotic oil' replenishes the
world's supply of easily accessed hydrocarbons every fifteen minutes or so,
regardless of increasing consumption rates; indeed regardless of any
veritable facts whatsoever.
Worked by whole life in the oil business. Depletion is real. Abiotic oil
replenishment is Magic unicorns dancing on rainbows. Oil won't run out
ever, but the energy required to extract the oil will make remaining oil
reserves uneconomic at some point.
Strange that the oil industry does not agree with you. And it's strange
that reserves all over the world are not stable but decreasing. Your
Mensa idol is full of shit.
With the US and China contemplating their next moves in what is now
officially a trade war, a parallel narrative is developing in the world of energy where Asian
oil refiners are racing to secure crude supplies in anticipation of an escalating trade war
between the US and China, even as Trump demands all US allies cut Iran oil exports to zero by
November 4 following sanctions aimed at shutting the country out of oil markets.
Concerned that the situation will deteriorate before it gets better, Asian refiners are
moving swiftly to secure supplies with South Korea leading the way. Under pressure from
Washington, Seoul has already halted all orders of Iranian oil, according to sources, even as
it braces from spillover effects from the U.S.-China tit-for-tat on trade.
"As South Korea's economy heavily relies on trade, it won't be good for South Korea if the
global economic slowdown happens because of a trade dispute between U.S and China," said Lee
Dal-seok, senior researcher at the Korea Energy Economic Institute (KEEI).
Meanwhile, Chinese state media has unleashed a
full-on propaganda blitzkrieg , slamming Trump's government as a "gang of hoodlums", with
officials vowing retaliation, while the chairman of Sinochem just become China's official
leader of the anti-Trump resistance, quoting Michelle Obama's famous slogan "
when they go low, we go high. " Standing in the line of fire are U.S. crude supplies to
China, which have surged from virtually zero before 2017 to 400,000 barrels per day (bpd) in
July.
Representing a modest 5% of China's overall crude imports, these supplies are worth $1
billion a month at current prices - a figure that seems certain to fall should a duty be
implemented . While U.S. crude oil is not on the list of 545 products the Chinese government
has said it would immediately retaliate with in response to American duties, China has
threatened a 25% duty on imports of U.S. crude which is listed as a U.S. product that will
receive an import tariff at an unspecified later date.
And amid an escalating tit-for-tat war between Trump and Xi in which neither leader is even
remotely close to crying uncle, industry participants expect the tariff to be levied, a move
which would make future purchases of US oil uneconomical for Chinese importers.
"The Chinese have to do the tit-for-tat, they have to retaliate ," said John Driscoll,
director of consultancy JTD Energy, adding that cutting U.S. crude imports was a means "of
retaliating (against) the U.S. in a very substantial way".
In an alarming sign for Washington, and a welcome development for Iran, some locals have
decided not to see which way the dice may fall.
According to
Japan Times , in a harbinger of what's to come, an executive from China's Dongming
Petrochemical Group, an independent refiner from Shandong province, said his refinery had
already cancelled U.S. crude orders .
"We expect the Chinese government to impose tariffs on (U.S.) crude," the unnamed executive
said. " We will switch to either Middle East or West African supplies ," he said.
Driscoll said China may even replace American oil with crude from Iran. " They (Chinese
importers) are not going to be intimidated, or swayed by U.S. sanctions."
Oil consultancy FGE agrees, noting that China is unlikely to heed President Trump's warning
to stop buying oil from Iran. While as much as 2.3 million barrels a day of crude from the
Persian Gulf state at risk per Trump's sanctions, the White House has yet to get responses from
China, while
India or
Turkey have already hinted they would defy Trump and keep importing Iranian oil. Together
three three nations make up about 60 percent of the Persian Gulf state's exports.
Under pressure from Washington, Seoul has already halted all orders of Iranian oil,
according to sources, even as it braces from spillover effects from the U.S.-China
tit-for-tat on trade.
Expecting SA to help supply the World's needs is perhaps going off the deep end. It's their
bread and butter for years to come. As years pass, they become more aware that those years
are limited. This is not the 1970's, it's 2018. They will supply what is profitable for them,
and wasting it early, doesn't sound real smart, does it? If we offered them massive support
to develop their nuclear capabilities, it would probably entice them. Or, jump out of the
pot, and into the frying pan. Iran May have more capacity for new oil.
If I have understood this correctly. When most of their fields are mature, the option they
have is to invest (almost overbuild) in facilities foremost to treat and inject the steadily
higher volume of water to keep oil production steady and at the same time overinvest in
infill drilling to keep the volume rising. All this to sustain or even increase oil output
from mature fields, so that the oil price can stay low. And then there is the extra gain in
extra barrels to consider as a result of the investments that adds to ultimate recovery at
each field. The gain from extra barrels could make up for a mediocre return on investment in
some cases and a questionable one in other cases. Given a relatively low oil price
assumption.
Why would they do that? Keeping the facilities as they are for mature fields, accepting
only small investments where they are highly profitable, limiting infill drilling to the best
locations, let the oil production fall and hope for prices to rise would be a superior
solution for them, would it not? Why rush investments in mature oil fields?
When most of their fields are mature, the option they have is to invest (almost overbuild)
in facilities foremost to treat and inject the steadily higher volume of water to keep oil
production steady and at the same time overinvest in infill drilling to keep the volume
rising. All this to sustain or even increase oil output from mature fields,
Well no, it does not usually increase production, it just drastically reduces the decline
rate. For instance, a very mature field may have a natural decline rate of 6 to 8% per year.
With infill drilling of horizontal wells along the top of the reservoir, they may reduce that
decline rate to 2% per year.
so that the oil price can stay low.
No, that's not why they are doing it. They are doing it to maintain their annual
production. Some do increase production but with oil from new fields. These new fields,
however, will have a much lower URR and will start to decline after only a few years. All the
giant and supergiant field have already been discovered.
The "so that the oil price can stay low" was a well hidden irony from my part. But you
have a point, they want to keep their long term customers supplied, not losing face in OPEC
and their long term allies happy. They stretch to keep everyone happy.
A field is creamed by massive infill drilling with horizontal wells that skim the very top
of the reservoir. The decline rate is the[n] drastically reduced while the depletion rate is
drastically increased. Things will go just great until the water hits those horizontal wells
at the top of the reservoir. Then production will drop like a rock.
I assume this is the money quote. These methods comprise the "game changer" that scuttled
peak oil predictions circa 2005.
By demurring a prediction as to when the stone might–will!–drop, you're
acknowledging the deplorable state of the data. This should give us pause. We might call this
the New Peak Oil Reticence.
Let's grant that what you say is true (I'm certainly not qualified to refute it). If you
know it (that is, that the rock will drop), then "they" know it, and by "they" I mean those
who are in the business of developing these "creaming" methods. They must know it.
No one producing country is looking at the global problem. They are only concerned with their
own country and the problems at home. Most are old men who realize that they will be long
dead if there is ever a catastrophe. And most, like the contributors to this blog, believe
that there will never be a catastrophe. They believe that renewables, or fusion energy, or
God, human ingenuity, or something else will save us from any type of collapse.
But the point is, the oil barons of each individual country, are not even remotely
concerned with the collapse of civilization as we know it. They believe God, or Allah, or
human ingenuity, will simply not allow that to happen.
"And most, like the contributors to this blog, believe that there will never be a
catastrophe. They believe that renewables, or fusion energy, or God, human ingenuity, or
something else will save us from any type of collapse."
But doesn't that require, like, planning? Plenty of planning?
I think Dr. Minqi Li put together an exceptionally well researched paper. The only one I have
a faintest glimmer of knowledge in is oil. 2021. Give or take a couple of years is a good
estimate of when peak oil occurs, based on current findings and technology. Improvements in
either would probably only affect the tail of the decline rate. Which, based on the immense
overstatement of EIA, and the creaming you mentioned, the tail should have much more of a
decline than depicted. I am tending towards 2022 to 2023 as the final peak, due to the little
over a year hiatus on the Permian final push due to pipeline and other constraints. We all
know 2042 is a bad projection for the US, it will get there as soon as it can. It will get
there as soon as it can, because the oil price will be high enough to beg, borrow, or steal
to get there. For that reason, all other sources will be staining to get there at the same
time. We are in the final stage, I do think.
Yes, I agree with you on Dr. Minqi Li's paper. I am not sure, however, that the Permian will
show enough yearly increase to hold off the peak until 2023.
Russia is certainly being creamed. The massive infill is visible from satellites and they
haven't found/opened anything new of size, yet have outlasted what everyone (including them)
calculated would be the start of their decline.
Russia needs the oil revenue badly. But is their ultimate decline going to look like
China? Very likely.
The implied increase in the Permian would be staggering. US onshore outside of fracking is in
terminal decline. US GOM is peak/decline. Eagle Ford is peak/decline. Bakken is close to
peak. Eagle Ford and Bakken have very high existing production decline rates, meaning they
will fall like a brick if drilling moves to the Permian.
There isn't anything new beyond the Permian. People have looked. No more plays.
And after covering all of that and its own existing production decline (not as extreme as
the other plays but large in absolute number), the Permian is supposed to add millions of
barrels per day?
I don't think that adds up no matter what the price of oil is.
2018-07-05 (Platts) While Saudi Aramco CEO Amin Nasser told Platts recently that "maximum
sustainable production" was 12 million b/d, industry experts believe Saudi Arabia will
struggle to pump more than 1 million b/d of additional output.
Yeah, I think that is pretty much what Ron and George have been saying. It is why all these
drops in production, and projected production that will not get out of the ground has to
cause demand to exceed supply within the next year by a substantial amount. Throw in Iran's
sabre rattling over the Homez, and oil prices should be through the roof. That it is not, is
mainly complacency built up over the past four years from the inventory overage. As Scarlet
O'Hara said, "After all tomorrow is another day".
MSNBC announced that the Aramco IPO may never happen. MSNBC didn't say why, however I suppose
those reserves that the Saudis have touted for so long could be very difficult to have
verified based on SEC rules. I think that much of the last two years of prep for their IPO
has been shopping for a exchange that would allow them to get their stock issued without
drastically revising their prior reserve disclosures.
You can also look at this development as an indication that the above discussed "rock" may
have already dropped.
I think that the potential threat of what happens if there is a hot war are more extensive
than just having the Strait of Hormuz being closed. If you look at that map you can see that
Saudi Arabia is just across the Strait. And as luck would have it, Saudi Arabia's oil fields
are mostly in the east which means that they are within close missile range of Iran. Nice oil
fields you have there Saudi Arabia. Shame if something happened to it. The United Arab
Emirates are also within missile range as well. If both countries think that Patriot
batteries will protect them then they must have been disillusioned to find that those
Patriots couldn't even defend against wonky Houthi missiles.
Then there is the fact that Iran shares a border with Pakistan and Afghanistan. Remember how
the CIA shipped all those anti-tank guided missiles (ATGM) and ManPads to the Syrian
Jihadists via countries like Saudi Arabia? Be a real shame if captured stock got passed on to
the Taliban via all those borders and started targeted US/Coalition forces in Afghanistan.
Just these two possibilities show how Iran has a whole range of options to use if it came to
a military confrontation. And it should be remembered. If a US/Coalition could not
successfully occupy Iraq with a population of 37 million, then how can Iran with a population
of 80 million be occupied?
Another factor is that even if a US/Coalition managed to somehow suppress all those missiles
the Iranians are using to guard those Straits, you would never be sure that you got them all.
Who really want to risk their oil tankers going down those Straits and wanting to risk that
bottleneck beig turned into a flaming sea? The trouble there is no way that there would be a
quick campaign possible with everybody home by Christmas. This has the potential of still
being fought during the 2020 US elections and I do not think that the US establishment wants
to risk that one. What they do want is to strangle Iran economically and turn the place into
one of grinding poverty but if pushed too far may go the Sampson option.
Local kids could also be trained to fire rockets across the water. The straits are not
straight and cut into Iran, so there's a good vantage point for Iran.
> probably already is.
>> China is still officially stating that it will not end its Iranian oil imports and
operations.
China's investment of billions into the deep port of Gwadar should not be discounted.
While China has ceded the ocean surface to the US navy, the wei qi way is to surround and not
engage directly. By now the Gulf of Oman should be a sensory organ for information critical
to Iran, and passive systems are much harder to detect & destroy.
We're now three years out from Qiao Liang saying China "thinks that Washington will not
fight Beijing for the next ten years". China doesn't want the fight (and I mean high
explosives, not 'fighting for') yet, but they've been preparing. And let us not forget the
rooster tails on the American fleet fleeing the Persian Gulf in October 2015 when Russia
launched cruise missiles at Syria. That was three months after the 'One Belt, One Road'
speech.
While the Saud's are working out their family disputes they cannot afford to have the
petrodollar disabled. But the US is materially capable of weathering energy disruptions
better than the EU, which would become even more dependent on Russia. Long term, the
petrodollar is gone and climate migrations are coming, so the when of Fortess America could
depend on relative and not absolute 'cui bono, ciu malo'.
tldr: the fight is inevitable, there's more than two in the ring, and there's no
referee.
I doubt if it is mined at this time, but mines would be a logical way to quickly shut the
Strait down. A couple of small fast ships dropping mines at night could shut it down very
quickly. They could drop mines along the far shore which would force ships towards the Iran
side where they would be vulnerable to shore-based anti-ship missiles.
BTW, the standing NATO minesweeping group is three ships (two Lithuanian and one British).
Historically minesweeping is one of the roles carried out by other countries that the US is
currently working hard to alienate. https://en.wikipedia.org/wiki/Standing_NATO_Mine_Countermeasures_Group_1
Mine sweeping ships generally are not heavily armored to avoid magnetic and acoustic
signatures that can trigger mines. So they can struggle in contested waters and would be very
vulnerable to anti-ship missiles.
"Rouhani, considered by European politicians to be a reformist, appears to be showing a
hardline streak that is nearer the strategy of the country's supreme leader, Ayatollah
Khamenei. "
Everybody becomes a hardliner when faced with an existential threat, which Trump's threats
are now creating for Iran.
There's no need to sink any oil tankers to stop all oil shipping. Those tankers don't sail
without full insurance for the cargo, and no maritime insurer will back shipping through the
Strait of Hormuz while the Iranians are on the warpath. Hence, no oil tanker.
That is why a few mines would be very effective. All oil shipping would cease immediately.
Because mines can be redeployed very easily, including by air or fishing boats, insurers
would probably not be assuaged by naval assurances that mines have been swept.
In the 1980's when the Iranians mined the Straits the tankers still moved. What was the
insurance deal then? Did it the US pick it up for that part of the trip?
"If a US/Coalition could not successfully occupy Iraq with a population of 37 million,
then how can Iran with a population of 80 million be occupied?"
Iran is also mostly Persian. Yes, there are Arabs, Armenians, Baluchis, etc., but the vast
majority are Persian and are proud to be Persian. Unlike Iraq, where you have a country with
3 groups you can play off each other.
I visited Iran over 5 years ago and was able to speak to some regular Iranians (English is
not uncommon amongst men and women). They will fight to the last man, woman, and child if
anyone came into their country. And that's what the secular ones who hate their government
say.
Every town has lamppost flags showing the pictures of all the young men who died in the
Iran-Iraq War. It was humbling to see the generational devastation wrought on that country.
Even the youth view that war as a world war, since people from over 25 countries were found
to be fighting on the Iraq side ( https://en.wikipedia.org/wiki/Iran%E2%80%93Iraq_War
– Remember the Soviet Union was ALSO on Iraq's side!). They faced destruction and
survived. They view themselves as an ancient, sophisticated people as well as the greatest
survivors in the world (all with good reason as they are an amazing people with a rubbish
government).
I do not see this ending well if the US thinks they can put the Iranians into a corner and
get compliance. It is an amazingly ahistorical understanding of the geopolitics of Iran.
These are the people we should be allying with not Saudi Arabia. But this is the same group
who think blundering into Iraq or Syria was a good idea, so I really can't be surprised.
Just to add that the people living above the main Saudi oil fields, Eastern Province, are
mainly Shiites. Shiites are also to be found in the south along the ill defined border with
Yemen. Both communities are disaffected and have been for decades, although the BBC, which
advertises its "unparalled global expertise" (sic) between news bulletins and other
programmes, reckons the Arab Spring caused the restiveness in Saudi Arabia.
This said, the Saudis and their Pakistani poodles can foment (Sunni) Arab and Baluch
disorder in Khuzestan and Sistan / Iranian Baluchistan.
I always wonder to myself when, on the BBC News Channel, they pan across the alleged
newsroom in New Broadcasting House and you see all those desks -- rows upon rows of them --
where people are sat, or, occasionally, get up and have a wander around, what the heck are
they doing there? It can't be producing news reports because you see the same half a dozen
so-called news "stories" stripped endlessly across the schedule throughout the day.
Every so often we get "business" news, which is someone from a spread betting company
piffling on about some rot or other then "a look at the markets", not, unfortunately, a view
of Covenant Garden or something, that would be more interesting, but rather some mysterious
figures from world indices and forex rates splayed across the screen like some inscrutable
hieroglyphs.
Then a bit of sport, with a dash of added jingoism.
Finally, some rally round the flag update on "the forces" with some top brass on the poop
deck of an aircraft carrier looking for an F35 ("F35 coming real soon"). Maybe Sophie
Rayworth in a tank.
Or alternatively it's Jenny Hill from Berlin with something about sausages and Merkel with
stock footage of people drinking beer from unfeasibly large glasses wraps it all up apart
from a sky diving granny then the weather.
It could be worse. We all could work in one of these places. It would not matter how great
a story you found, it would all have to get through the editors who report directly to their
owners like with the Murdoch press. The stuff you talk about is just the stuff that gets the
editorial nod i.e. pure pap.
Some of the stuff that I have seen on Australian TV, however, is nothing less than out and
out propaganda. I watch some of this stuff and I compare it with what I read on this site or
what a commentator chips in with and I wonder what these newsreaders actually are thinking as
they read some of these stories. Probably their steady pay packets.
I wish to god I knew. I have seen this creeping in the past decade or more. I suspect that
a lot of bad practices are imported from overseas. There are international conferences for
conservative political parties so you would have American Republicans, British Conservatives,
Australian Coalition, etc. all mixing together and swapping idea and techniques. They even
work together when there is an election in their country.
Just the other day I heard one Coalition member describe another as a "patriot" which you
NEVER hear in Oz. Kinda like a Republican describing another Republican as a good Communist.
You just never hear it. We even have an ex-Prime Minister that sounds like he could be a good
buddy to Mark Rubio running around trying to blow up his own party (currently in power)
saying that we should build as many coal power stations as possible because climate change is
not real.
Historically our governments have been ruled by pragmatism and past US governments have
labelled us as "socialist" due to adopting such things as single-payer health. The past few
years I am noting more and more ideologues going into politics who want to drag the country
into their way of thinking whether it is to pick fights with China (our major trade partner)
or send the Australian military to the ends of the earth as if they were Mercenaries-r-us.
The times they are a changing.
It all reminds me of C S Lewis' description of H -- as a giant bureaucracy. "The Screwtape
Letters" were written at the end of WW-2 and still come across as 'fresh.'
Supposedly the KSA funded development of the Pakistani bomb. There probably is some
agreement to hand some over (if it hasn't already been done) for "existential threats" This
could turn very bad very fast.
Iran has lots of options. Their Navy wouldn't last very long in a hot war but they have
lots of asymetric options. They have reverse engineered Russian torpedoes and these could be
launched from land or from mini-subs in shallow waters (where they are far harder to detect),
making life very difficult for opponents, let alone tankers. They can strike the UAE and much
of Saudi Arabia using a wide variety of ballistic missiles. To prevent this, the US would
have to strike Iranian territory, and this would cause a massive escalation. In almost any
scenario, the Straits would be shut down for many months, and this would be catastrophic for
the world economy. Asia would come off worse as they are most dependent on LNG and oil from
that region.
As you say, the great 'unsaid' is the Taliban. If Iran decided it was in their interest to
supply them with a few dozen trained operators with a few thousand anti-tank missiles and
manpads, then its goodbye Kabul.
The Iranians hate the Taliban and Al Quaeda and ISIS a lot more than we do since we are on
Saudi Arabia's side. They also seem to follow their principles. Don't forget our allies and
proxies in Syria are the headcutters and madmen ..all Sunnis ..although our government does
not want to admit it. They would be a lot smarter to trigger a Shiite uprising in Saudi
Arabia and shut the country down. The Shiites in Saudi are downtrodden and abused.
To escalate a carrier sinking to nuclear war is, I believe a lose/lose proposition. Let
say the Iranians sunk a carrier and the US Nuked Tehran.
The Iranians would not be in a forgiving mood at that point, and it would do little to
remove the somewhat irritated Iranians along the northern side of the Persian Gulf. The
irritated Iranians would initiate incidents over the impact of irradiated Iranians.
The US could nuke the Iranian Coast along the Persian Gulf, but, the gulf is not wide, and
the result would be poor prospects for the US allies on the South side of the Gulf. In
addition one does not know if nuking Shea would provoke a Sunni backlash against "the
infidels, the Christian US."
One could argue that Christians and Nukes cannot be mentioned in the same sentence.
The Prologue of Robert Baer's "Sleeping With the Devil" outlines a potential scenario of a
Shiite attack on the eastern Saudi oil fields. The sub-title is The Doomsday Scenario.
The book is about the US-Saudi relationship by a retired CIA officer. A very good read and
part of trying to understand this entire mess.
Exactly right. Logic dictates that if Iran is attacked, Iranian missiles will soon
thereafter attempt to destroy all of the oil producing capacity selling to Europe, Japan and
the US within range of its missiles. This means ships, oil fields, pipeline, ect. Oil prices
would skyrocket, plunging the US, Japan and Europe into a deep economic downturn.
Why people ignore the outcome you provided is beyond me. If I were Iran, I'd do the same
if Israel attacked too.
Your guess is that nobody will attack the Iranians after they attack the shipping to close
the straits?
In the 1987 Iran attacked about 91 ships in the Gulf. The oil still flowed. On April 18,
1988 the US attacked and severely damaged a number of Iranian ships and bases. After that
things started winding down. Then on July 3, 1988 the US shot down that Iranian airliner.
Then things really quieted down.
What are the differences now? Iran: ballistic missiles and subs?
There's Lt. General Riper, who played the Iranian side in the 2002 Millennium Challenge war
games, "killing" 20,000 Navy personnel and "sinking" 16 American warships
on the first day, so he knows better than to even start such a bottlenecked battle.
There's always General Farnsworth, the great grandson of Colonel Armstrong Custer.
Farnsworth has worked for two decades in the Purchasing & Planning wing of the Pentagon
-- three levels below daylight -- but his confidence in an immediate American victory Over
There is indubitable.
In similar vein, MI5's Eliza Manningham Buller is a descendant of Redvers Buller, British
commander in the second Boer War, but much more of a realist and moderate.
Redvers Buller? Seriously? I have read a lot about his role in the Zulu War of 1879.
Intriguing character being hard-fighting and hard-drinking and yet refused to wear his 1860
China medal on the grounds that it was an unnecessary war. And a descendant of his is head of
MI5?
Here's a little character sketch of Redvers Buller, from " On the Psychology of
Military Incompetence ", by Norman Dixon:
The leading character was the commander-in-chief, General Sir Redvers Buller. According
to a contemporary description there could be no finer choice for our South African
adventure: 'There is no stronger commander in the British Army than this remote, almost
grimly resolute, completely independent, utterly fearless, steadfast and vigorous man.
Big-boned, square-jawed, strong-minded, strong-headed Smartness sagacity administrative
capacity He was born to be a soldier of the very best English type, needless to say the
best type of all.
Unfortunately this assessment was at variance with the facts in all but two particulars.
Firstly, he was indeed big. Secondly, though sadly lacking in moral courage, he was
undoubtedly brave when it came to physical danger. In this respect, as in many others, he
was not unlike Raglan of the Crimean War, and indeed some other commanders of subsequent
years.
Of Sir 'Reverse' Buller, as he came to be known by his troops, Rayne Kruger writes: 'At the
risk of marring [the] contemporary description it should be mentioned that his big bones
were particularly well covered, especially in the region of the stomach, and that his
square jaw was not especially apparent above a double chin. He had entered the army with no
disadvantage, his mother being a Howard and niece of the Duke of Norfolk, and he was very
wealthy, which was fortunate in view of his preference for a diet of ample good food and
champagne.
Such examples of the Peter Principle, wherein people are raised to their own level of
inefficiency, was never better illustrated than in the case of Sir Redvers Buller, who has
been described as 'a superb major, a mediocre colonel and an abysmal general'. In this
case, high-level military incompetence must be laid at the door of heroic leadership, for
this was the quality which eventually put him where he could do the most damage to his own
side.
The US response will be that this unprovoked aggression is an act of war, etc. This
ignores our own unprovoked act of aggression, the embargo.
In case any has forgotten, those dastardly Imperialist Japanese launched an "unprovoked"
attack on Pearl Harbor because the US put Japan under an embargo.
Embargoes themselves are not acts of war, but blockades are. But this is all technical
blather. The US is attempting to strangle Iran. Iran will attempt to strangle the Gulf Arabs
and the US. If Iran starts firing missiles or blockading the straits, the US will attack
Iran. Iran will in turn launch attacks on the Gulf states. This could drive oil over $200,
perhaps higher.
If Iran were clever, they would institute some sort of quarantine or inspection in their
territorial waters. Indeed, they should claim jurisdiction over the entire strait in the
interest of international security (they could certainly find some US document somewhere and
just change the names). Then they could stop every ship going in and out and spend a week or
so inspecting each one for contraband, disease, etc. This would not be an act of war but
would certainly provoke the US into striking first anyway.
Iran has already extended its territorial waters to 12 miles, as did Oman. Given that the
strait is 29 miles at the narrowest, and that to deal with the amount of shipping, pretty
much all of it passes through either Omani or Iranian territorial waters. Technically,
Iran/Oman has right to stop any non "innocent" (read unarmed) shipping trough it territorial
waters. Not sure what is Omani relationship with the US/Saudis at the moment, wasn't paying
much attention to the Gulf.
Once the US decides to strike first, we're going to be on our own. The Saudis will be
completely useless as they always were, understandably not wanting to be cannon fodder for US
interests. And with most of Europe and Asia relying on gulf oil, our 'coalition of the
willing' is going to be a bit shy of members.
But $200 a barrel and the US a solid producer? Seems to be some win-win money to be made for
both Raytheon and Exxon-Mobil.
No Saudi just like no rich American will give his life for his country .in the military.
Life is just too good for them .why fight in the desert when you can cool it at a cafe in
Munich ..why are all the Syrian men of fighting age in Munich and Hamburg? They don't want to
fight for their country.
Considering the restraint Iran has shown regarding Israeli attacks in Syria, it's safe to
assume they want to avoid war at all cost. Don't expect any acts of aggression from them.
Talk of closing the strait is trying to see if there is any spark of independence left in
Europe's political elite. Unfortunately the Europeans only care about money – what they
get personally from the US to run their countries and what their corporations get from doing
business with America. There just isn't enough business between Iran and Europe to offset
that. Now the more unreasonable Washington becomes the more uncomfortable its allies become,
however they will still hold their noses and answer the call to duty. I'm afraid Iran's
courting Europe will produce little to help them. Luckily China and Russia, even Turkey and
India, are far more important.
The nice thing for Iran's hardliners – assuming the MSM narrative that they are
nasty terrorists always looking to cause trouble – is that they don't need to take
aggressive action to start a war. They've got America/Israel and that's the cause of every
war in the 21st century. That pairing will decide if and when there is to be a war. Russia
and China might have the ability to provoke caution but Iran doesn't.
Do not expect any actions from the Iranians to provoke a war. It's a war they cannot win
and they know it. it's also a war they can't lose but the price they could pay by surviving
might be really horrific. I'm not sure they'd close the strait even in a shooting war because
that would risk further escalation. The moment America starts bombing Iran the law of
diminishing return kicks in. The US will be looking for any excuse to go nuclear. Therefore I
doubt Iranian resistance will be more than defensive. Hopefully Russia is providing them with
air defences to be able to shoot down some US planes. Just lay low and ride out the storm.
That's been the philosophy of US/Israeli opponents in the Middle East this decade. It's why
the Russians take so much crap and keep turning the other cheek. They understand that either
they lose such a war or, if they are winning they risk the US going nuclear. Iran can't win a
war with America. Iran, however, can inflict unacceptable casualties but then they run the
same risk of Washington going nuclear in retaliation. In Asian capitals you have rational
players who understand that a nuclear war must be avoided if possible. Thus they avoid any
aggressive actions which they fear could lead to such a war. The problem humanity has is that
we're not sure if there are any rational players in Washington or Tel Aviv.
"The problem humanity has is that we're not sure if there are any rational players in
Washington or Tel Aviv."
+1
Given our belief in being an "exceptional nation" hasn't this been humanity's problem since
the end of WW2?
Will the sanctions pull Iran enough to such an escalation? Would other countries (apart
from Turkey) thing that this is troubling enough to risk US sanctions and disobey? There has
been an escalation in language between the UE and US regarding Iran sanctions but it is still
too soon to know what will be the EU position. We migth know after tomorrow's meeting in
Vienna. I don't know what could happen but be sure the US is running out of "natural allies"
by stepping up too much it's support for Saudi Arab. Trump is inaugurating a new era and it
doesn't look pretty.
The Army might be in trouble but the Marine Corps WILL BE IN A HURT LOCKER FROM HELL if
its ever called on to face Russian forces if they follow thru with published planning.
It is as clear as day that President Trump is obsessed with regime change in Iran. What is
not made clear is how much his gambit is damaging to Americans and American interests.
Without cause or justification, Mr. Trump pulled out of the Joint Comprehensive Plan Of
Action (JCPOA), striking a hard blow to America's European allies – and its own
credibility. Moreover, he threatened European countries with secondary sanctions should they
continue to trade with Iran.
To top it all, in his latest move, he has called for all Iranian oil exports to be cut off
by November. Or in practical terms, he is imposing an economic blockade on Iran. This is a
similar scenario that was played out by the British in 1951 against Iran and Dr. Mossadegh
– who was later overthrown in the 1953 British-US coup. But today, the IR of Iran is not
the Iran of 1953, and the brunt of American demands and actions will not be borne by Iran
alone.
Demanding that no country purchase oil from Iran is in fact an economic blockade. It is an
illegitimate use of power to force a sovereign nation to surrender. It must be made clear
however, that it is not just Iran that is the target here. The Trump administration's demands
arean offensiveexercise of extraterritorial authority with no regard for sovereign equality
between states. All states involved in trade with Iran will either have to cower to his demands
or be punished.
But there is more than state sovereignty and indignation that is involved. These actions
will have a dire effect on the economy of allies, and they will hit Americans in the wallet
– hard. If Mr. Trump is giving a November deadline, he hopes to postpone the impact this
will have on the November elections. He wants total rule over America before totally
bankrupting it.
To fully appreciate how Mr. Trump intends to make 'America great again' where his policy
regarding Iranian oil is concerned, one must take a look at some numbers and empirical
evidence.
The oil strikes leading up to the toppling of Iran's Shah were felt around the world. During
the 1978-79 revolution, Iranian oil production dropped 3.8 million barrels per day for 3
months. Although outside production increased by 1.8 million barrels to make up for the loss,
the net loss to the world was 150 million barrels of oil. However, the compounding results of
the production loss were significant around the globe.
Many Americans may recall the lines at the fuel pumps, but that was just what met the eyes.
The increase in oil prices impacted farming, production, transportation of goods and services,
and so on. At that time, China, currently the second biggest oil consumer behind America, was a
net exporter of oil. The loss to U.S. economy was estimated at many billions of dollars in 1979
and 1980 (Deese and Nye 308-309) [i]
.
More recent studies show that Iranian oil has a major impact on the U.S. economy even though
America does not import a single barrel of oil from Iran. In 2008, economists Dean DeRosa and
Gary Hufbauer presented a paper in which they claimed that if the United States lifted
sanctions on Iran, the world price of oil could fall by 10 percent which would translate into
an annual savings of $38-76 billion for the United States [ii] .
But sanctions alone were not responsible for oil price hikes in 2008 and beyond. In July
2008, oil had reached a peak of $142.05/bbl (see chart HERE ). This price hike
came on the heels of some important events. In May, President Bush sent a ' warning message' to Iran on
the same day that additional aircraft carriers with guided-missile destroyers were sent to the
Persian Gulf.
In June of the same year, the New York
Times reported that: "Israel carried out a major military exercise earlier this month that
American officials say appeared to be a rehearsal for a potential bombing attack on Iran's
nuclear facilities."
In July, then presidential candidate Barak Obama asked for
tougher sanctions to be imposed on Iran.
It was not until September 2008 when President
Bush declined to help Israel attack Iran that oil prices started to relax. They hit a low
of just over $53 /bbl in December 2008.
Oil prices continued to rise again under Obama's sanctions and reached well past the $100
mark. The prices climbed down once again during the JCPOA negotiations reaching an all time low
of $30.24/bbl in January 2016 – after the signing of the JCPOA.
Today, oil prices stands at $74.30/bbl. A fact not lost on any American who has filled up
his/her gas tank lately– and paid for groceries. The deadline for Iran oil cut off is yet
months away, but the impact has started.
Given that other countries may step in to compensate for some of the Iranian oil
loss, other factors which effect prices must be considered – the most important of which
is the security of the Strait of Hormuz. As mentioned previously, the British oil blockade
scenario of 1951 will have far different consequences in 2018 should America impose an economic
blockade or oil embargo.
In the 1950's, Iran did not have the military might to retaliate to the oil embargo and the
naval blockade was aimed at crushing the economy in order to bring about regime change. This
economic blockade, should it be allowed to happen, would crush the economy of much of the
world.
As it stands, 35% of seaborne oil goes through the Strait of Hormuz 85% of which goes to
Asian markets. As the US Energy Information Administration (EIA) has stated: "The blockage of
the Strait of Hormuz, even temporarily, could lead to substantial increases in total energy
costs."Today, Iran not only has the military might to block the Strait of Hormuz in
retaliation, but it also has the legal right.
The 1982 United Nations Convention on the Law of the Sea (UNCLOS) stipulates that vessels
can exercise the right of innocent passage, and coastal states should not impede their passage.
Under UNCLOS framework of international law, a coastal state can block ships from entering its
territorial waters if the passage of the ships harms "peace, good order or security" of said
state, as the passage of such ships would no longer be deemed "innocent" [iii] .
Saudi Arabia and the UAE export oil through Iran's territorial waters. Should they help America
choke Iran's economy, their passage is not deemed 'innocent'.
Even if Iran simply chooses to merely delay the passage of tankers by exercising its right
to inspect every hostile oil tanker that passes through the Strait of Hormuz, such inspections
and subsequent delays would contribute to higher oil prices.
No doubt, the Iranian navy is no match for the formidable US navy. However, the shallow,
narrow waters of Hormuz do not allow for the maneuvering of US battleships. The very presence
of warships can lead to incidents. At its narrowest point, the Strait of Hormuz is 21 miles
wide – hardly wide enough for a naval battle to take place and allow the passage of oil
tankers at the same time. In recent years (2012), the USS Porter, a US navy destroyer,
collided with an oil tanker in the Strait of Hormuz. The collision left a big whole in the
navy destroyer.
American officials and oil companies have attempted to assuage the concern of over oil
shortages by stating that America is one of the top oil producers. Some fact checking is in
order.
According to EIA's latest available data, America's total exports in 2018
(thousands of barrels/month) was 7,730 bblin April. The same governmental body stated that
total imports for the same month was 310,295. According to the EIA: "In 2017, the United States
producedabout 15.4 million barrels of petroleum per day (MMb/d), and it consumed about 19.9
MMb/d. Imports from other countries help to supply demand for petroleum." (Click HERE for
explanation of imports and exports).
These facts do not stop the spread of such news. As recently as June 4, 2018, Offshore Technology announced America is marching toward being the biggest oil
producer. Important factors to bear in mind are that 1. America is the largest oil consumer and
continues to have a deficit, and 2. Shale oil production is up thanks to higher oil prices.
While environmentalists objected to shale oil production, oil companies halted the
extraction of oil when prices dropped. Anything above $50/bbl makes shale oil production
feasible – which also makes it more expensive of the consumer. Although Mr. Trump and his
administration have no regard for the environment, many states and countries have banned shale
oil production (see LINK for list as of December
2017).
So the American people (and much of the rest of the world) is left with a stark choice.
Either cave in to Mr. Trump's demands, accept loss of business, pay much higher oil prices at
the pump and for consumer goods, prepare for a potential war, and sacrifice the environment
– especially water, and mortgage the future of the earth more than we already have, or,
don't heed Trump's demands – even if means a short term loss.
Either way, messing with Iran's oil exports is not an alternative that the world can afford.
It may well be that Mr. Trumpis beholden to Mr. Netanyahu. He may well feel comfortable enough
to subject the American people – and their allies to financial hardship; but the question
is will Americans and the rest of the world sacrifice themselves at the Trump-Netanyahu
altar?
* Soraya Sepahpour-Ulrich is an independent researcher and writer with a focus on
U.S. foreign policy and the role of lobby groups in influencing US foreign policy.
Brent currently above $78 and heading up. A bad EIA twip stock report could mean it goes
above $80 and stays there. Iran is threatening to blockade the Straits or Hormuz and
Venezuela is threatening to invade the White House. The Saudis, Russians and E&Ps must be
hoping for some more "art-of the deal" Trump magic: a couple more contra-interventions for
lowering oil price on his part and we'll see $150 by Xmas.
"... I believe due to OPEC massively inflating their URR, and the inaccuracy of the Hubbert method due to the creaming of all giant fields, the expected peak dates here are highly inaccurate. ..."
In the table below I have converted the data Dr. Minqi Li presented in metric tons per year
to million barrels per day. Again, this is C+C plus natural gas liquids.
2017
At Peak
Year Peak
BPD Increase
us
11.47
15.08
2042
3.61
Saudi
11.29
12.17
2030
0.88
Russia
11.13
12.01
2033
0.88
Canada
4.74
7.85
2049
3.11
Iran
4.70
5.40
2039
0.70
Iraq
4.44
6.51
2042
2.07
China
3.S6
4.32
2015
UAE
3.53
4.38
2037
0.84
Kuwait
2.93
3.35
2040
0.42
Brazil
2.87
3.03
2025
0.16
Rest of W
27.13
33.22
2004
Total World
88.10
90.95
2021
2.85
The source for this chart is the same as the table above. I believe due to OPEC
massively inflating their URR, and the inaccuracy of the Hubbert method due to the creaming of
all giant fields, the expected peak dates here are highly inaccurate.
Well, all except three. The rest of the world did peak in 2004, China did peak in 2015, and
the world will peak by 2021 or before. Congratulations to Dr. Minqi Li, the most accurate
future peak there is the one that he calculated. Guym x Ignored says:
07/04/2018 at 8:10
am
I think Dr. Minqi Li put together an exceptionally well researched paper. The only one I have
a faintest glimmer of knowledge in is oil. 2021. Give or take a couple of years is a good
estimate of when peak oil occurs, based on current findings and technology. Improvements in
either would probably only affect the tail of the decline rate. Which, based on the immense
overstatement of EIA, and the creaming you mentioned, the tail should have much more of a
decline than depicted. I am tending towards 2022 to 2023 as the final peak, due to the little
over a year hiatus on the Permian final push due to pipeline and other constraints. We all
know 2042 is a bad projection for the US, it will get there as soon as it can. It will get
there as soon as it can, because the oil price will be high enough to beg, borrow, or steal
to get there. For that reason, all other sources will be staining to get there at the same
time. We are in the final stage, I do think.
Ron, many thanks for your very informative post about world oil (as always) and your
comments on my post.
However, like much of the peak oil community, having missed some of the previous peak
oil predictions, now I may err on the conservative side. Many have criticized the EIA
projections and OPEC reserves. But again, even with those projections/reserves, the world
oil production is still projected to peak in 2021. This suggests that world oil production
may indeed peak in the near future. As I promised, I will follow up with part 2 on
this.
Regarding China, China's oil consumption growth has re-accelerated as its oil production
is in decline. This development may have some major impact on global economy/geopolitics in
the coming years. On top of that, China is (or will soon become) the world's largest
natural gas importer.
Iran's OPEC governor Hossein Kazempour Ardebili said the US ban amounted to "self harm," adding that Iran's
position is that oil should not be used as a weapon or for political purposes. He predicted that higher oil prices
would end up hurting the US economy.
Historically that has been the case, and with Saudi production already at record levels, Trump's expectation
that the Saudis will make up for Iran's shortfalls are not realistic. Still, US officials continue to demand the
world, including major Asian powers, stop buying from Iran.
Iranian President Hassan Rouhani downplayed the seriousness of the ban, saying he is confident Iran will
survive this round of US sanctions as it has other sanctions in the past. Many coutries have not committed to the
US ban, and if prices rise, Iran may ultimately take in just as much money even with fewer exports.
World cumulative oil production up to 2017 was 192 billion metric tons. The world's
remaining recoverable oil resources are estimated to be 276 billion metric tons and ultimately
recoverable oil resources are estimated to be 468 billion metric tons. By comparison, the BP
Statistical Review of World Energy reports that the world oil reserves at the end of 2017 were
239 billion metric tons.
World oil production is projected to peak at 4,529 million metric tons in 2021.
2017 Production and Peak Production are in million metric tons; Cumulative Production, RRR
(remaining recoverable resources or reserves), and URR (ultimately recoverable resources) are
in billion metric tons. For Peak Production and Peak Year, regular characters indicate
historical peak production and year and italicized blue characters indicate theoretical peak
production and year projected by statistical models. Cumulative production up to 2007 is from
BGR (2009, Table A 3-2), extended to 2017 using annual production data from BP (2018).
The USA elite might now want abandoning of GATT and even WTO as it does not like the results. That single fraud on the west has
had catastrophically perverse consequences for the coterie of killer's future and all because the designers of GATT had never thought
outside the square of economics and failed utterly to grasp the gift of scientific and manufacturing politics.
Notable quotes:
"... The US still depends heavily on oil importation -- it is not "independent" in any manner whatsoever. Here's the most current data while this chart shows importation history since 1980. ..."
"... the only time a biological or economic entity can become energy independent is upon its death when it no longer requires energy for its existence. ..."
"... A big part of the US move into the middle east post WWII was that they needed a strategic reserve for time of war and also they could see US consumption growing far larger than US production. ..."
"... The USA of WAR may have oil independence, but it is temporary. The race is on for release from oil dependency and China intends to win in my view. It is setting ambitious targets to move to electric vehicles and mass transit. That will give it a technology dominance, and perhaps a resource dominance in the EV sphere. We are in the decade of major corporate struggles and defensive maneuverings around China investments in key EV sectors. ..."
"... In ten to twenty years' time the energy story could well be significantly different. The USA and its coterie of killers are still fighting yesterday's war, yesterday's hatred of all things Russian, yesterday's energy monopoly. ..."
"... I don't believe that the USA of WAR has changed or even intends to change the way they play their 'game'. The General Agreement on Tariffs and Trade set the trajectory for technology transfer, fabrication skills transfer, growth of academic and scientific achievement in 'other' countries (China, Russia etc). Their thoughts in the GATT deal were trade = economics = oligarchy = good. ..."
"... That single fraud on the west has had catastrophically perverse consequences for the coterie of killer's future and all because the designers of GATT had never thought outside the square of economics and failed utterly to grasp the gift of scientific and manufacturing politics. ..."
"... Canada and the gulf monarchies are the only countries with large reserves that are not hostile as yet to the US. As the US no longer is totally reliant on imports to meet its consumption, Saudi's, Bahrain and co are now expendable assets. ..."
The US still depends heavily on oil importation -- it is not "independent" in any manner whatsoever.
Here's the most current data
while this chart shows importation
history since 1980.
As I've said before, the only time a biological or economic entity can become energy independent is upon its death when
it no longer requires energy for its existence.
What I am looking at are strategic reserves, not how much oil is currently produced. With shale it now has those reserves and
shale oil I think is now at the point where production could quickly ramp up to full self sufficiency if required. Even if the
US were producing as much oil as they consumed, they would still be importing crude and exporting refined products.
A big part of the US move into the middle east post WWII was that they needed a strategic reserve for time of war and also
they could see US consumption growing far larger than US production.
@Peter AU 1 #28 Thank you for that stimulating post. I just have to respond. And thanks to b and all the commenters here, it is
my daily goto post.
The USA of WAR may have oil independence, but it is temporary. The race is on for release from oil dependency and China intends
to win in my view. It is setting ambitious targets to move to electric vehicles and mass transit. That will give it a technology
dominance, and perhaps a resource dominance in the EV sphere. We are in the decade of major corporate struggles and defensive
maneuverings around China investments in key EV sectors.
In ten to twenty years' time the energy story could well be significantly different. The USA and its coterie of killers
are still fighting yesterday's war, yesterday's hatred of all things Russian, yesterday's energy monopoly.
I don't believe that the USA of WAR has changed or even intends to change the way they play their 'game'. The General Agreement
on Tariffs and Trade set the trajectory for technology transfer, fabrication skills transfer, growth of academic and scientific
achievement in 'other' countries (China, Russia etc). Their thoughts in the GATT deal were trade = economics = oligarchy = good.
That single fraud on the west has had catastrophically perverse consequences for the coterie of killer's future and all
because the designers of GATT had never thought outside the square of economics and failed utterly to grasp the gift of scientific
and manufacturing politics.
By gross ignorance and foolish under-investment, the USA of WAR and its coterie of killers have eaten their future at their
people's expense.
Light sweet vs heavy sour. Light means it contains a lot of diesel/petrol. Sweet means low sulphur. Many oils are heavy sour.
Canada sand. the stuff they get from that is thick bitumen with high sulpher. The sulpher needs to be removed and the bitumen
broken down into light fuels like diesel and petrol.
Canada and the gulf monarchies are the only countries with large reserves that are not hostile as yet to the US. As the
US no longer is totally reliant on imports to meet its consumption, Saudi's, Bahrain and co are now expendable assets.
The great game for the US now is control or denial. Access to oil as a strategically critical resource is no longer a factor
for the US.
"We're an empire now, and when we act, we create our own reality. And while you're studying that reality – judiciously, as
you will – we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're
history's actors . . . and you, all of you, will be left to just study what we do." Karl Rove.
The squealing and consternation coming from the UK indicates that the empire has changed course and the UK is left sitting
on its own shit pile.
I encourage you to give the Escobar article a second reading. I just did to make sure I knew what it was saying. I think karlof1
is making the right points from it.
The collaboration between Saudia Arabia and Russia is a very small part of the article, and no one disputes that this collaboration
is occurring. Russia may even be part of OPEC soon, if it chooses. The relationship works against the US but it's not specifically
made for this reason. Read Adam Garrie's take on this to see that the moves into OPEC by Russia in recent years are clearly from
its own interest as a hugely major supplier, and that Saudi Arabia needs Russia:
The New Russia-Saudi Partnership Has Riyadh's US Ally Over a Barrel
I just skimmed it a third time and I don't see Escobar saying anywhere that the Saudi-Russia relationship is to kill US shale.
He does say that both Russia and Iran are interested in countering it. I think the point here is that all serious oil producers
with profitable reserves take alarm at the US shale oil because it's hard to say that it's a real commodity with an inbuilt profitability.
It's a short-term entry into the market that can serve to disrupt the market temporarily, but it has no staying power. I suspect
most nations would prefer it simply not intrude.
No one actually has to act against US shale - it's something of a pretender in the real oil world anyway, and this has long
been commented upon. Escobar's point that the US shale is largely a myth is not a new concept. At best the reserve will deplete
within 15 years, and that's at best - along the way it will destroy the US potable water table. And its intrinsic value is far
from clear, since the entire industry is dubiously financed using relatively free Federal Reserve money. As Escobar points out,
many call $100 per barrel the profit threshold for shale - that's a ludicrously high bar for profitability in the oil world.
Much of Escobar's article was about the relationship between Russia and Iran, and it served also as a very good primer in world
oil and petro-currency numbers. I found it pretty sound.
"... The Iranians will lose marketspace, sure, but the inevitable increase of the price of oil will somewhat soften the blow. And anything over $100 per barrel, along with a stronger dollar, is proven to be detrimental to energy importing countries. It will be painful to keep the economy rolling. ..."
Oil will continue to flow from Iran, there simply isn't a significant supply stemming from
the Saudi-Russia alliance or US shale to fill the gap.
The Iranians will lose marketspace,
sure, but the inevitable increase of the price of oil will somewhat soften the blow. And
anything over $100 per barrel, along with a stronger dollar, is proven to be detrimental to
energy importing countries. It will be painful to keep the economy rolling.
And when there's less appetite for oil; the price of oil crashes resulting in another big
financial crash (due to bad dept) followed by another round of austerity measures which
spells political turmoil in a number of countries. And the landscape gradually changes.
So Trump asked the Saudis to pump 2 million more barrels per day to offset Iranian exports?
Daffy!. Saudis do not have a spare barrel, let alone 2 million. Ask Simmons. Oh wait, he
has been offed:
LONDON(Reuters) - The leader of Saudi Arabia has assured U.S. President Donald Trump that
the Kingdom can raise oil production if needed and the country has 2 million barrels per
day of spare capacity that could be deployed to help cool down oil prices to compensate for
falling output in Venezuela and Iran.
In a tweet on Saturday, Trump said Saudi Arabia had agreed to increase output by up to
this amount, although a subsequent statement from the White House rowed back on this
assertion.
Either way, the kingdom, OPEC's biggest member, can barely raise output by 1 million bpd
to 11 million bpd and even that would be difficult, according to industry analysts who
forecast a further oil price rally due to a lack of new supply.
Below are comments from some leading OPEC analysts:
[ED: one of several cited below]
"The Saudis do not have 2 million bpd of spare capacity as it would imply production of 12
million bpd. They can likely produce a maximum of 11 million and even that will be running
their system at stress levels," said Ross.
He added that with a potential output fall of up to 1.5 million bpd in Iran and
further outages in Venezuela and Libya, the world could be short of 2 million bpd of oil
output without an increase in Saudi output by the end of the year."
Pepe declares US shale to be a myth, but then says KSA and Russia have teamed up to fight. Us
production figures also left out. Disappointing piece from Pepe, especially this glaring
contradiction where KSA and Russia has to team up to fight what he calls a myth.
Pepe's referring to the assumed longevity of shale which is proven to be a gross lie. I can
provide documentation about that but it will have to wait until I have more time to work.
karlof1
Ok so according to Pepe Russia and KSA are joining forces to fight this gross lie.
either shale is a real and major threat, or Russia and KSA are not joining forces. That is
the glaring contradiction in Pepes piece. the other option is that both Russia and KSA both
of which have some knowledge of oil are mistaken about US shale.
Already have Syria? Not really. Heard of the SDF occupying the North-Eastern third of
Syria. If Trump & Putin can't come to an agreement on Iran what's the bet Trump decides
to pump money, weapons and US troops into North-Eastern Syria to fully support the Kurds?
NordStream II? Sure, it will be built, but Trump can sanction Germany and German industry
- ie automakers - heavily if he so wishes. He might do. He can blame NordStream II. He's
certainly been talking about it.
There are certainly ways and means Trump can create huge trouble for Germany/Russia in
regards to NordStream II even if it is built.
Crimea? Yeah, Russia has it but it is also used as the bludgeon to impose sanctions on
Russia. Perhaps recognising Crimea as part of Russia and dropping all sanctions on Russia
will be offered to Putin in return for Russia staying out of any conflict regarding Iran in
2019.
I'd hardly say Trump has nothing to bargain.
Besides, why would Putin select Medvedev as Prime Minister again despite Medvedev being
obviously a Euro-Atlanticist?
I'd also add - who do you think Russia fears in the future decades.
Is it a decaying Europe/EU who nevertheless can buy lots of Russian goods including oil
& gas obviously?
Or do Russia fear a rising China that always has one eye on the Russian Far East as a
possible place for expansion to take care of their oil & gas & mineral needs?
I suspect - and you can look to the history of Russia/China relations for this - that
Russia retains a more existential fear of China than anyone else.
Russia always clearly seeks to balance Europe/EU/US/Atlantic against China and others.
Where does Iran fit in all this? If Iran is taken out who benefits? Doesn't Iran being
taken out strengthen Russia's hand vis-a-vis China in terms of oil & gas? I'd say it
does. Certainly. Without Iranian oil & gas China becomes more dependent on who?
RUSSIA!
So I bet Russian thought would tend to say to China. Look, we are not going to put
ourselves on the line to defend Iran. But hey, if you want to do that we'll support you doing
so, afterall, Iran is of a more of a vital strategic interest to you than us.
We defended Syria, we can't defend anyone and you can't expect us to defend everyone. If
you want a country to retain its independence you have to step up to the plate every now and
then rather than just relying on the Russian military.
And look - we defended Syria - what did you do in Syria's defence?
Just to finish this comment.
In case you haven't noticed the US has put a date of November 4 on stopping the
export/import of Iranian oil. Which is? It is 2 days before the November 6 Mid-Terms...
It's a clear set-up for 2019.
My prediction.
There will be military action against Iran in the first half of 2019.
I suspect March-April-May being the most likely.
At that time you also have Brexit, European Elections (dominated by populists), Ukrainian
Presidential Elections, South African Elections, Indian Elections... It's a big few
months.
My advice? Buy oil & gas in the second half of this year - it's value is likely to
skyrocket in 2019.
What will Iran's response be? I'd say if you are in any of Saudi Gulf Coast, UAE (Dubai
& Abu Dhabi), Kuwait or Bahrain - get out before New Year's!!!
Re: Posted by: Peter AU 1 | Jul 1, 2018 11:14:41 PM | 27
I'm not judging one way or another on what Putin will necessarily do, but clearly Trump's
gambit is to wean Iran off Russian support.
Will it work? Who knows. But Iran clearly has less strategic importance to Russia than
Syria.
Let me ask you a question. Do you think Russia prefers Iranian-Qatari oil & gas
pipelines through Iraq-Syria-Turkey to Europe or would Russia prefer Saudi-UAE-Qatari oil
& gas pipelines to Europe??
Any effort to understand US foreign policy from actual US interests is a futile exercise in
frustration. US foreign policy is driven by two things:
1. The interests of international financiers (heavily Jewish)
2. The Israeli government.
At consideration for actual US interests is secondary if such things considered at all.
That should be obvious enough to everyone by now.
The one thing that Russia and/or China could do that would do more to avoid another major
power war, is to loudly, clearly and publicly inform the Israelis (the people as well as the
government) that any attack upon Russia, China, or their forces by the US or NATO will be
treated as a direct attack upon Russia/China by the state of Israel and the Jewish people and
these will be utterly destroyed in the first salvo of the Russian/Chinese response.
The second thing that could/should be done, is for Russia to implement a covert campaign
of targeted assassinations of Jewish figures who are actively engaged in efforts to undermine
Russian interests. This would include people like Sheldon Adelson, Haim Saban, key players in
international finance, etc. No Jew anywhere in the world should feel that they are beyond the
reach of Russian retaliation. This is precisely how the Israelis conduct their foreign policy
and Russians should not shirk from engaging fire with fire.
@Julian
I think you underestimate the long term benefit of a stable and prosperous Iran in the
greater Eurasian gambit (Infrastructure Node, stability for the region) vs the short term
gains Russia may achieve from a destroyed and fractured Iran that is in disarray. Russia
doesn't just export energy after all. Exploding oil prices will end up hurting consumer
nations, which in turn affects the global economy and by extension oil producers, there is
always a delayed feedback loop.
Just because someone competes with you in the energy realm doesn't automatically mean you
want that actor weak or destroyed. If that was the case, then why does Russia maintain good
relationships with Azerbaijan, a direct competitor to Russian Gas? Similarly Central Asian
countries are competitors in the gas market for China, yet Russia would never allow these to
be subverted by radical Islamists without acting.
"... The great power game is why there is continuity of government policy in the 'US west' no matter who is elected. Within the great power game democracy in the west is meaningless. ..."
"... If the US is changing how it plays the game, then the Brit players may be getting desperate. They are now small players but unlike the US do not have an oil reserve. ..."
"... This may be the reason the Brits have ramped up the propaganda to the ridiculous and also why they have attempted to take down Trump. ..."
Loot is only a side benefit for post WWII wars and no doubt before. Oil is energy and energy
means power to those that control it. UK, French, US have fucked the MENA region over simple
for control of the oil.
Working to prevent communism, socialism, democracy and pan Arab
movements which are all a threat to FUKUS control of MENA, and then pulling the same dirty
tricks on each other. Russia has its own all and through the Soviet era seems to have only
dabbled in the region.
China needs to import energy and so the great power game of controlling
or denying access to energy continues.
karlof1 @ 3 said"Criminality mostly driven by Greed."
james @ 5 said: "trump isn't much different or he would be addressing this too..."
Two bottom line truths, that are apparent...
As always, profits "trump" humanity. How to change that mindset? I for one, don't know,
but, the so called "religious" among us, should ask themselves that same question. IMO,
religion is, as practiced, mostly crowd control..
The great power game is why there is continuity of government policy in the 'US west' no
matter who is elected. Within the great power game democracy in the west is meaningless.
with USA's new found oil independence, the direction they take may change from the last 70
years or so.
Another recent change is the rise of current Russia and their vision of a multi polar
world, also the rise of China.
If the US is changing how it plays the game, then the Brit
players may be getting desperate. They are now small players but unlike the US do not have an
oil reserve.
This may be the reason the Brits have ramped up the propaganda to the ridiculous and also
why they have attempted to take down Trump.
2018-06-26 (Rudaw) When US sanctions were placed on Iran in 2012, the four Asian countries
were given a waiver, requiring them to reduce their business with Iran by 20 percent each six
months rather than halt trade immediately.
The Asian oil buyers are less likely to receive a similar waiver from the Trump
administration Iran may need to resort to a bartering system to continue selling its oil.
Under the 2012 US sanctions, India imported $10.5 billion worth of goods, mainly crude oil,
and exported commodities worth $2.4 billion.
The barter system will be inefficient, as Iran's oil sales are greater than the value of
what it imports from these countries. It also cannot use the currencies of these countries
for international business transactions. http://www.rudaw.net/english/business/250620181
2018-06-26 (Bloomberg) U.S. presses allies to cut Iran oil imports to *zero* by November
* U.S. isn't granting waivers on Iranian oil imports ban
(State Department Official)
"The global economy looks like the Titanic right now. The iceberg is the incoming oil price
spike and the complacent investment community won't even know what hits them. "
-Baby Domer
So, an important question for this board is, could we have reached peak oil production this
year? The Permian will increase substantially into 2020. However, that will be partially
offset by the Venezuelan drop. Add in other declines, and the drop could easily offset any US
production. At some point, OPEC will see that extra production will never meet demand, and
not just waste what they have.
It depends totally on political scenarios, not technical and not financial.
There's still a lot of growth potential to offset the declines:
– Permian
– Other US shales to a degree
– Kanada with it's vast heavy oil ressources
– Venezuela
– Russia
– Iraq
– Iran
– SA (nobody knows), at least they can call to their spare capacity
– Kuwait
– UAE
-Brasil
That's 10 locations, some are politically knocked out ( Ven, Iran partly) from growth.
The more important thing for world economy is: How long can they support the consumption
growth, additional to the decline of all other countries.
I think peak oil is somewhat more melodramatic: When Ghawar finally dries up, we have
reached peak oil. It will dry fast, due to all these horizontal tapping keeping the oil
flowing until the last feed of oil column. And replacing these 5 mb/d will require an
additional fully developed Permian – something not in sight at the moment.
Libya's Tripoli-based NOC Says Exports from Benghazi-based NOC in the east are "illegal"
2018-05-26 BENGHAZI, Libya/TUNIS (Reuters) – Eastern Libyan commander Khalifa
Haftar's forces have handed control of oil ports to a National Oil Corporation (NOC) based in
the east, a spokesman said on Monday, a move the internationally recognized NOC in Tripoli
dismissed as illegal.
If implemented, the transfer of control would create uncertainty for buyers of Libyan oil who
normally go through NOC Tripoli.
In comments later confirmed to Reuters, Ahmed Mismari, spokesman of Haftar's Libya National
Army (LNA), said on television that no tanker would be allowed to dock at eastern ports
without permission from an NOC entity based in the main eastern city, Benghazi.
https://www.reuters.com/article/us-libya-oil/east-libyan-forces-say-oil-ports-handed-to-eastern-based-noc-idUSKBN1JL2DQ
Tripoli-based NOC https://pbs.twimg.com/media/DgkrEMeXUAADLGS.jpg
Some kind of summary with some details from Libya (from comments section in HFIR article
above – Game Over – Oil Prices Are Going Higher).
Nigeria and Libya are also becoming disruption hotspots. Three of Nigeria's main crude
streams (Forcados, Bonny Light and Qua Iboe) are either halted or severely disrupted, but
violence in Libya grabbed the recent headlines. Militias led by Ibrahim al Jathran, former
head of the local Petroleum Facilities Guard, attacked and briefly seized the 0.35 mb/d Es
Sider and 0.22 mb/d Ras Lanuf terminals from Khalifa Haftar's Libyan National Army (LNA).
Although the LNA are back in control, Libyan oil output has collapsed from 0.95 mb/d to
around 0.55-0.60 mb/d because of the fighting and NOC has declared force majeure at the two
ports (along with apparently unrelated technical issues undermining production at AGOCO-run
fields in the east).
After around 10 days of fighting, the extent of the damage at the two terminals remains
unclear. There is currently no information about the status of Es Sider, which exported
around 0.30 mb/d in the previous three months. The destruction of two storage tanks at Ras
Lanuf, which was exporting around 0.10 mb/d before the clashes, has reduced storage capacity
from 0.95 mb to 0.55 mb. Seven tanks at the terminal had already been damaged in previous
clashes and the destruction of another two leaves only four tanks capable of operating. Once
the fighting is over (and there is a considerable risk of further clashes over the next few
weeks), it will take several days to evaluate the status of Es Sider and Ras Lanuf. This
would be followed by emergency repairs, which could take a week or two, with export capacity
recovering only gradually. Consequently, we expect output to remain at 0.55-0.60 mb/d until
early/mid-July, even as NOC studies options to bypass Ras Lanuf and possibly divert exports
to the Zueitina terminals.
In conclusion: Libya is good for no more than 0.8 Mb/d, but likely less than that in
2018.
The debate seems to be around what effect the risk of secondary sanctions from US
government for international companies will have. Some argue that the US allies and their
companies will not pick a fight over this with the US right now. In either case, it certainly
is not good for the Iranian economy which contracted after the last round of sanctions and
boomed when they were lifted afterwards. Also the Iranians want western equipment and
competence to develop their oil and gas fields (some of their oilfields are somewhat
complicated to develop), and it is not certain Lukoil and russian service companies can be a
good enough replacement.
There are some hurdles with switching customers for large oil volumes. Tanker freight and
insurance services now done by western companies afraid of sanctions will have to be replaced
or the obstacles overcome somehow. But I agree with you that China, while also having a
futures market trading in yuan, will look to Iran when shortage arrives. However the
perception of shortage has still not arrived in oil markets today. Some reduction of export
from Iran is likely both initially and for some time further. Hard to say how much, some
argue that it takes 6-12 months to see the full effects of US sanctions. And once sanctions
now are in place, even if it was untimely given the supply situation in the oil market, it
will not be practical and too confusing as a political move to see them lifted soon (less
than 1 year).
Fun to look at this analysis, and plug in a one million shortage from North America.
Obviously, there would not be a one million drop in Iran, as it would be sold somewhere.
We might be seeing similar articles about gas over the next couple of years. Driving a bit
less is maybe a good thing, pensioners and children freezing to death and industry shut down
with rolling blackouts is maybe less negotiable.
Suppose there is too little oil and the price doesn't change. Producing countries will be
sure their own countries have a sufficient amount so regardless of price, that oil isn't
leaving the country. It stays right there for consumption. External price is meaningless to
that country, as it should be.
There are countries that produce about what they consume. Mexico is one. Argentina. Their
oil isn't going anywhere. A higher price elsewhere tries to get it exported? Clearly the govt
will stop anything like that. Just as the US did with its export ban in the 70s. Price
doesn't matter if bans are in place.
Oh, and another annoying thing in that article. Something like . . . if supply shrinks,
only "demand destruction" can avoid some sort of catastrophe. This is absurd. Demand is not
destroyed. The desire for oil will grow with population. The population demands oil. It is
consumption that is destroyed by lack of supply. Can't consume what doesn't exist.
Besides which, if some level of "grim" is approached, then some decision is going to be
made to liberate that Orinoco heavy from the horrible popularly elected government that
controls it. As I noted before, there is a large ethnic Russian population in Venezuela. The
1917 revolution sent many people there, fleeing confiscation. Liberation may not go
smoothly.
Mexico doesn't use what it produces, it doesn't have the refining capacity – it exports
crude and imports products.
Invading Venezuela wouldn't necessarily stop the decline in production – their
equipment and wells are falling apart, to get back to where they were a couple of years ago
would require a five year occupation, probably with forced labour (or really high wages), and
the investment money all coming from the invading country, with no net returns for longer
than that.
Demand is usually defined with some relation to price, not assuming a commodity is free.
From the Bloomberg article: "The U.S. plans to speak with the governments of Turkey, India
and China, all of which import Iranian oil, about finding other supplies."
Iranian condensate will most likely replace US condensate to China as much as possible.
China is the key to if/when this harsh "embargo" of Iran will ease. They have the strength to
stand up against the US and then others will follow suit (e.g. India). A barter system (goods
vs. goods trade) or payment in yuan could probably be a good enough way to avoid american
banking sanctions. But if China wants to stand up against US at this point is uncertain. If
this strangling of Iran is highly successful, it is hard to see the rewards. A high oil price
that will be the tipping point for the global economy in the wrong direction or indirectly
(hopefully not directly – who needs another war now?) overthrow the Iranian government
and thus the creation of new political problems in the country; a repeat of the Iraq
experience almost. I almost forgot that there is the nuclear issue there as well, maybe that
is also a driver
"We have a lot of diplomatic muscle memory for urging, cajoling, negotiating with our
partners to reduce their investments to zero," the official added.
(This official infers that EU countries will soon capitulate to US demands, but does he
believe that, say, India will agree to this? The CNN reporters don't ask.)
Yeah, we are setting ourselves up for creating a 2.5 million barrel a day shortfall by
sometime in 2019. The US is creating these surprises by far overestimating Permian output,
and the Iran sanctions. Now, Perry is saying the OPEC increase may not be enough. Really, ya
think? What do we do now, President "Not good!"?
Trump's master plan was written on the back of a business card with a crayon. Nobody, can
decipher it, it more difficult than the most complex code.
I think probably the most telling take of his presidency, is the aide in charge of keeping
Presidential documents complaining that he tore every sheet of paper on his desk into little
shreds, constantly. Sure sign of a serious mental disturbance. Captain Queeg.
Guym. I assume most of the small conventional producers are receiving a low price in the
Permian. Bad deal for them, situation not of their making. Hoping very much that does not
spread to the Midcontinent.
Anecdotally, zero rigs presently drilling in our little field. Drove the width of Kansas
twice recently, including OK and TX panhandles. Saw zero drilling rigs. Saw just three
workover rigs.
The shale plays appear to be the USA oil future. The rest are not big enough to draw
outside money.
Really have to wonder how many of the world's fields are "self sufficient" at $70-80 at
this point.
Not much at $70 to $80 anymore. Not very much of a profit, at those prices. But, you get what
you pay for, and soon the world will find out that the price they wanted to pay results in a
deficit to what they need.
Yes, market really overdid it dropping prices to the 2015-17 levels.
I still blame a lot of the overdone price crash on US shale CEO talk. Their true costs
were murky, and they continually talked the price down through 2015 by claiming they could do
well financially at those levels or below.
Those companies should be doing great now, given the claims of 2015-17. Lol.
2015-17 took a lot of the fun out of oil production investment for me. None of us have
much desire to do any drilling or other risk taking. Just feeling relief, but worried the
roller coaster prices will never end.
Watching Trump kill grain prices. If the Dems could find someone that could appeal to
Midwest, I'd say Trump will not win in 2020. Very conservative ag folks are upset. Suprsing
to me how vocal they are about it.
Maybe a trade war will kill oil demand. More roller coaster.
"... tier plays that have been a bust. With the seismic and visualisation technology improvements the E&Ps should know better where and where not to drill. They seem to be more selective with falling wildcat numbers (and that is not much of a function of price that I can see as it has been happening since 2010) and yet the commercial discovery rates are staying fairly low. I can only interpret that as indicating that there just isn't that much left. With Rystad indicating 6 to 8% decline rates in mature fields, and rising, and few new prospects how can there not be a peak? ..."
"... Saudi ministers spout out any thing that comes to mind to support flip-flop policies and their feud with Iran seems to be bubbling in the background of a lot that's going on; every year Iran and/or Iraq say they have a new plan and target for higher production, which is 100% guaranteed not to be met even remotely. ..."
I think if the world economy starts to drop, which is overdue and looking increasingly likely
every time Trump opens his mouth, and keeps the oil price down then it's likely we'll be in a
slow but accelerating decline. That might be a good thing – the further the peak is
pushed out the steeper the decline when it comes.
What has surprised my most recently has been the fall in discoveries for oil and, maybe
more so, gas, and with that the number of new fron tier plays that have been a bust. With
the seismic and visualisation technology improvements the E&Ps should know better where
and where not to drill. They seem to be more selective with falling wildcat numbers (and that
is not much of a function of price that I can see as it has been happening since 2010) and
yet the commercial discovery rates are staying fairly low. I can only interpret that as
indicating that there just isn't that much left. With Rystad indicating 6 to 8% decline rates
in mature fields, and rising, and few new prospects how can there not be a peak?
The oil drop might have been more expected than the gas, and was predicted by some when
peak oil was first mentioned, I think gas less so, but perhaps the price has had a bigger
effect there. Whatever the cause many countries have been banking on ever rising supplies,
either by pipeline or LNG, that might not be forthcoming.
Having said that simple economic arguments rarely seem to work as predicted, oil supplies
would have peaked well before now without, mostly non-proftable, LTO; Venezuela production
should be rising not a basket case; Saudi ministers spout out any thing that comes to
mind to support flip-flop policies and their feud with Iran seems to be bubbling in the
background of a lot that's going on; every year Iran and/or Iraq say they have a new plan and
target for higher production, which is 100% guaranteed not to be met even remotely.
At the moment the traders don't seem certain which way to turn – falling/rising
supplies, short/long term demand rise/fall – you can see why they tend to fixate on US
crude stocks, everything else is too complicated. The next few Wednesday/Thursday trading
patterns will be interesting.
(ps if anything highlights the state of the oil industry at the moment it's that Fram, a
two well, eight year life-cycle, gas condensate tie-back with about 10 mmboe reserves, has
been the main headline news on at least four of the trade magazines this week.)
A little short by over 2 million a day. Perry has to know the Permian is on a hiatus for
at least a year. That's probably over a million. Iran push is for another million. Yeah,
that's a little short. Idiocy reigns. Russia just called for tariffs against the US. Any
assistance from Russia ain't gonna happen.
The slow motion train wreck in progress. No one knows why the driver of the Lower for
Longer Train has picked up speed down the curving stretch .
Ok, I'll forgo the train wreck series. Yeah, it's serious. So was the ridiculous pricing
we've had for the past four years, and no one but the people who relied on oil income
complained. There was not enough for capex to get new oil. The trainweck happened already.
U.S. oil production is booming at record levels, and U.S. oil exports have also reached
new highs -- 3 million barrels a day in the last week, according to government data.
Those exports are more than most OPEC countries can produce each day and only lag two OPEC
countries, Saudi Arabia and Iraq, in terms of exports.
And if you read far enough down in that article they do mention imports, as if they hardly
matter.
As U.S. production has grown, U.S. imports have decreased. The U.S. imported a
relatively high 8.4 million barrels per day last week.
Okay, the US exported 3 million barrels per day and imported 8.4 million barrels per day.
Yet the headline says the US exported more oil than most OPEC countries. Is this Orwellian
Newspeak?
We all agree that 2+ 2 = 5, but what we don't know is which one belongs to the thought
police. I agree the Permian will produce 1.3 million this year, just take the rat cage off my
head.
"the US exported 3 million barrels per day and imported 8.4 million barrels per day. Yet the
headline says the US exported more oil than most OPEC countries. Is this Orwellian Newspeak?"
At the just concluded OPEC meeting, Iran, Iraq and Venezuela were against any increase in
extraction, while the Saudis wanted an increase. What resulted is
detailed in this article . Moneygraph:
"... OPEC does not need to change its output deal since the group had already cut supply
by much more than it had agreed. What Zanganeh offered was for OPEC and Russia to pump back
up to decrease the current cuts to the initial 1.176 million barrels per day (bpd).
"Output in May 2018 was actually down by 1.9 million, somehow 62 percent or 724,000 bpd
more than what was agreed upon in 2016."
The upshot is an increase will occur but no increase will occur--understand? The
extraction amount agreed to in 2016 remains the amount OPEC will extract. There will be
no increase in that amount this year.
"... Houston, 11 June (Argus) Plains All American Pipeline, a prime mover of crude around and away from the Permian, reiterated last week that there is not enough trucking capacity to address skyrocketing production, and potential rail slots are limited. With most material pipeline capacity additions a year or more away, Plains said the logical solution is slowing output ..."
"... That's really kind of funny. The takeaway professionals have to tell them, "come on guys, put a brake on it. It can't be moved." Note, the article stated that the pipeline company said production is already slowing. Wonder if EIA will finally read the memo? Also, it may result in more little fish, being eaten by the bigger fish. ..."
"... The next 3 or 4 months for EF and Bakken might be interesting – they've both been steady or slightly declining with no pick up in drilling or, I think, permitting even as the price has risen, and the initial well production and ultimate recovery look to be declining on recent wells. If Permian is closed off I wonder if the operators will bother to move back to these. ..."
"... Yeah, I think they will. You just won't see growth just overnight from these areas, and the ones who had good areas in these, never left. EOG, Conoco and others are still doing their thing. Growth will mainly show up the first and second quarter of 2019. Maybe some the last quarter of 2018. My guess. It just won't ramp up like the Permian, EIA predicts a bunch, but they are smoking some strong stuff. They believe in teleportation of oil to the coast, and further teleportation to VLCCs off the coast. ..."
"... Wild guess on the 22nd. OPEC releases non-opec from the agreement. Increasing OPEC, at this point, will involve disintegration of OPEC, which it really is, anyway. But, a modest increase may hold them together for a little while. Although, for the Sauds part, I don't know why they would, except to keep up the illusion. ..."
That's really kind of funny. The takeaway professionals have to tell them, "come on guys,
put a brake on it. It can't be moved." Note, the article stated that the pipeline company
said production is already slowing. Wonder if EIA will finally read the memo? Also, it may
result in more little fish, being eaten by the bigger fish.
Energy News, you constantly amaze me with your finds of information. Everything is
extremely pertinent.
The next 3 or 4 months for EF and Bakken might be interesting – they've both been
steady or slightly declining with no pick up in drilling or, I think, permitting even as the
price has risen, and the initial well production and ultimate recovery look to be declining
on recent wells. If Permian is closed off I wonder if the operators will bother to move back
to these.
State of North Dakota came out with a new presentation a few weeks ago showing revised
predictions for Bakken oil output. They now have production likely reaching 1,900,000 BOPD
within the next decade while the best forecast offers better than 2,200,000 BOPD.
Yeah, I think they will. You just won't see growth just overnight from these areas, and
the ones who had good areas in these, never left. EOG, Conoco and others are still doing
their thing. Growth will mainly show up the first and second quarter of 2019. Maybe some the
last quarter of 2018. My guess. It just won't ramp up like the Permian, EIA predicts a bunch,
but they are smoking some strong stuff. They believe in teleportation of oil to the coast,
and further teleportation to VLCCs off the coast.
That not everyone believes the EIA is evident in the huge, many billions of dollars,
losses in stock value of the "Permian pure play" companies recently. EIAs and IEAs fairy
tales are coming unraveled. About the only section of the investment community that still
believes them, is that percentage of adults that still believe chocolate milk comes from
brown cows. What they are still unsure of, is how much excess capacity OPEC now has.
Wild guess on the 22nd. OPEC releases non-opec from the agreement. Increasing OPEC, at
this point, will involve disintegration of OPEC, which it really is, anyway. But, a modest
increase may hold them together for a little while. Although, for the Sauds part, I don't
know why they would, except to keep up the illusion.
"I think not, it's a lot cheaper to add a few more production wells than to add a couple of
million barrels of high pressure water injection capacity (topsides facilities and the wells
needed to inject it"
Water injection isn't the problem, its water cut. The don't need to inject more if they
keep the water cut stable. In order to keep the water cut, they have to perodically drill new
wells to keep the wells in contact with the Oil column. Over time the Water column push up on
the Oil column (ie Oil floats on Water). All the CapEx/Opex goes into drilling to keep in the
Oil Column Zone as well as add new wells to tap oil trapped in pockets. As the Oil column
continues to shrink and and as the water column become increasing contact with the cap rock
its going to required more and more drilling to maintain production.
My guess well know when SA starts running into problems when we start to see the rig count
increase and the production dropping over a period of a couple of years.
"The drilling of new oil wells is to maintain current production, not to increase it"
SA cannot increase Oil production much. They are working on extracting the remaining cream
(oil column) floating on a see of water. Increasing production would just increase the water
cut and also increase trapped oil that would later be more costly to extract. The only way SA
can increase production is to tap new fields or increase drilling for oil trapped in pockets.
But at some point these options will vanish over time as it will be increasing more difficult
to squeeze more oil out, like trying to squeeze trapped toothpaste out of a depleted
toothpaste tube.
I didn't say water injection was the problem I said it was the limit to increasing
production. It is. Water cut is the problem that leads to decline unless they keep drilling
new wells.
Two ways that increasing water cut is a problem are: 1) you have to inject more water for
the same amount of oil, which they don't have, 2) you have to treat more produced water,
which they don't have capacity for. Exactly what I said above. The third is that it reduces
overall well flow and, more so, oil flow; but that is easily got round if it easy to drill
new wells, as is the case for Saudi, even the offshore fields, which are shallow. That also
solves the first two problems because the individual field and overall country water cuts are
held steady.
The limits on surface facilities are much more expensive and long term (5 years at least)
to get round, but it could be done, therefore it is wrong to say that the only way to
increase production is to tap new fields.
(ps – I worked on water flood oil fields, including some minor studies for Saudi,
for at least 15 years through my career, the water is a bigger influence on the design and
operation than the oil.)
That all together sounds like it's completely senseless to keep some spare capacity for
fields like this.
This capacity will cost billions, hold back for not much. A big oil storage is better
there for satisfying demand peaks or temporary supply losses.
Reserve capacity is cheap to have when you are in primary recovery of a conventional
(giant) field.
The only illusion of reserve capacity would be in fields with tertiary recovery would be
to postpone maintainance for a few months to get that 5% more production.
Some spare is always needed, just to maintain production during maintenance or unplanned
outages. Sparing doesn't postpone maintenance, it means maintenance can be done without
taking the plant offline, or at least not for too long, so you get maximum returns on your
investment (when plants are taken down for major turn arounds it is to do work on items for
which there are no online spares).
Depending on the maturity of the field there is also always different amount of sparage in
the different project components – e.g. the wells, compression, power generation, oil
processing, export capacity, water injection, water processing – the limit is the
component with the least amount of sparage.
In Saudi also, at least for the heavy fields, they have been known to rest them completely
for a time, this allows the water contact to settle out and avoid excessive coning, which
provides a much better sweep of the oil and higher recoveries (I don't think any where else
has that luxury).
So when someone says "we have spare capacity" it can mean almost anything from
2×100% pumps on a particular duty to an entirely unused, ready for action oil
field.
From a modern capitalist approach with everything just-in-time and the next quarterly
statement being all important then excess sparing wouldn't please the shareholders, but Saudi
designed facilities with 50 year life times, so it might be different.
From looking at their recent production profiles, which seem to go up when they report a
new start-up and then decline, and stock draws, which have been consistent since January
2016, I find it hard to believe they have a large amount of "real" spare capacity –
i.e. that's easy to bring on line and that doesn't alter any of the performance of the fields
over the long term or compromise planned maintenance schedules – but I can't say for
sure. And, as I've said, the limit to expanding production (that means beyond just using up
the spare) is almost certainly with the surface facilities for water, so it's likely that is
also the part with the least spare capacity.
It sounds like you believe they might be able to maintain a plateau of 10 Mb/d for many
years, if they just drill more wells as needed. Though I may not be understanding
correctly.
There's the big question. Once the horizontal wells are at the top of the reservoir then you
can't drill any more and once the water contact hits them, even with intelligent completions,
then the decline will be fast (but even that is relative, huge fields take longer to decline
than small ones). There was a report in the Oil Drum some time ago that indicated that a lot
of Ghawar wells were near the limit but nothing much seems to have happened since to indicate
this turned into a problem, but then Saudi has a lot of other fields. On some of their
offshore fields they are replacing all the wellheads to add ESPs, that usually means they
have run out of new well options. Their rig count is declining, but maybe jus because they
are drilling much more productive MRC wells.
It's the difference between the size of the tank and the size of the tap (or for water
injection more like the size of the vent that lets air in to stop the tank collapsing under
suction). Might only know what's going on well after the fact.
I've told you that once you start down the Trade War path forever it will dominate your
destiny.
Well here we are. Trump slaps big tariffs on aluminum and steel in a bid to leverage Gary
Cohn's ICE Wall
plan to control the metals and oils futures markets . I'm not sure how much of this stuff I
believe but it is clear that the futures price for most strategically important commodities are
divorced from the real world.
But today's edition of "As the Trade War Churns" is about China and their willingness to
shift their energy purchases away from U.S. producers. Irina
Slav at Oilprice.com has the good bits.
The latest escalation in the tariff exchange, however, is a little bit different than all
the others so far. It's different because it came after Beijing said it intends to slap
tariffs on U.S. oil, gas, and coal imports.
China's was a retaliatory move to impose tariffs on US$50 billion worth of U.S. goods,
which followed Trump's earlier announcement that another US$50 billion in goods would be
subjected to a 25-percent tariff starting July 6.
It's unclear as to what form this will take but there's also this report from
the New York Times which talks about the China/U.S. energy trade.
Things could get worse if the United States and China ratchet up their actions
[counter-tariffs] . Mr. Trump has already promised more tariffs in response to China's
retaliation. China, in turn, is likely to back away from an agreement to buy $70 billion
worth of American agricultural and energy products -- a deal that was conditional on the
United States lifting its threat of tariffs.
"China's proportionate and targeted tariffs on U.S. imports are meant to send a strong
signal that it will not capitulate to U.S. demands," said Eswar Prasad, a professor of
international trade at Cornell University. "It will be challenging for both sides to find a
way to de-escalate these tensions."
But as Ms. Slav points out, China has enjoyed taking advantage of the glut of U.S. oil as
shale drillers flood the market with cheap oil. The West Texas Intermediate/Brent Spread has
widened out to more than $10 at times.
By slapping counter tariffs on U.S. oil, that would more than overcome the current WTI/Brent
spread and send Chinese refiners looking for new markets.
Hey, do you know whose oil is sold at a discount to Brent on a regular basis?
Iran's. That's whose.
And you know what else? Iran is selling tons, literally, of its oil via the new Shanghai
petroyuan futures market.
Now, these aren't exact substitutes, because the Shanghai contract is for medium-sour crude
and West Texas shale oil is generally light-sweet but the point remains that the incentives
would now exist for Chinese buyers to shift their buying away from the U.S. and towards
producers offering substitutes at better prices.
This undermines and undercuts Trump's 'energy dominance' plans while also strengthening
Iran's ability to withstand new U.S. sanctions by creating more customers for its oil.
Trade wars always escalate. They are no different than any other government policy
restricting trade. The market response is to always respond to new incentives. Capital always
flows to where it is treated best.
It doesn't matter if its domestic farm subsidies 'protecting' farmers from the business
cycle or domestic metals producers getting protection via tariffs.
By raising the price above the market it shifts capital and investment away from those
protected industries or producers and towards either innovation or foreign suppliers.
Trump obviously never read anything from Mises, Rothbard or Hayek at Wharton. Because if he
did he would have come across the idea that every government intervention requires an
ever-greater one to 'fix' the problems created by the first intervention.
The net result is that if there is a market for Iran's oil, which there most certainly is,
then humans will find a way to buy it. If Trump tries to raise the price too high then it will
have other knock-on effects of a less-efficient oil and gas market which will create worse
problems in the future for everyone, especially the very Americans he thinks he's
defending.
There is a narrative that oil demand will soon begin dropping due to widespread use of EV.
1 million EV just replaces 14,000 BOPD of demand. Conservatively assuming those one
million EV require $40K per unit of CAPEX, just to replace 14,000 BOPD of demand took $40
billion of CAPEX.
Likewise, to replace 1.4 million BOPD of demand via EV would take $4 trillion of
CAPEX.
Worldwide demand has been growing somewhere between 1.2-2.0 million BOPD annually,
depending on who one believes.
See where I am going with this? How do the EV disruption proponents explain away the
massive CAPEX required just to cause oil demand to flatten, let alone render it near
obsolete?
The average US car gets 25 mpg and travels 12,500 miles per year for 500 gallons of gasoline
per year.
Refineries in the US produce 20 gallons of gasoline per barrel of oil.
That gives 69,000 BOPD per day reduction per million EV cars in the US and 110,000 BOPD oil
equivalent energy due to the multiple energies put into gasoline and distillate
production.
At current rates of EV sales growth the US will reach 50 million EV cars by 2031. That should
put he US to being mostly independent of external oil for gasoline by mid 2030's and
It's tough to predict a complete transition in the US since cars as a service could greatly
reduce the numbers of cars needed, especially in dense population areas. That would mean a
much earlier transition.
If US ICE cars trend upward in mpg during that time, the demand for oil could be quite low
by the early 2030's.
All depends on continuation of trends, for which the auto manufacturers seem to be on board.
Just have to get the public charging infrastructure out ahead of the trend.
Here is an interesting article, from a couple of years ago, showing the trend and sales at
that time.
Cars get replaced all the time and the cost of new EVs will fall over time to the same
price as ICEV, so it's simply a matter of replacing the ICEV currently sold with EVs over
time, in addition cars can get better gas mileage (50 MPG in a Prius vs 35 MPG in a Toyota
Corolla or 25 MPG in a Camry.) There's also plug in hybrids like the Honda Clarity (47 miles
batttery range) or Prius Prime(25 mile range on battery) these have an ICE for when the
battery is used up.
If oil prices rise in the short term to over $100/b (probably around 2022 to 2030), there
will be demand for other types of transport besides a pure ICEV.
EVs and plugin hybrids will become cheaper as manufacturing is scaled up due to economies
of scale.
Surprising stuff. Huge oil consumption growth rates in Eastern Europe. 8+% growth %s in
Poland, Czech Republic and Slovakia. Something weird going on because Romania and Slovenia
didn't show the same thing.
Western Africa grew consumption of oil 13% last year. I'll add a !!!!. East Africa about 6%.
Both are over 600K bpd, so that growth rate is not on tiny burn.
Poland's official oil consumption growth is caused by better fighting with illegal, and
unregistered fuel imports since mid 2016. When taxes are 50% of fuel price, there is big
incentive for illegal activities. Real oil consumption probably didn't increase much.
Poland, Czech and Slovakia are going through a huge economic boom now (I live in Slovakia and
party in Czech Republic). It's visible everywhere, there wasn't this much spending and
employment ever in the last 28 years
Oil demand is mostly determined by GDP growth, oil price has a minor influence on short term
demand. World GDP grew by about 5% from 2016 to 2017 according to the IMF, so oil demand
increased by 1.8% possibly less than one would expect. Real GDP (at market exchange rates)
grew by about 3% in 2017.
The idea behind peak demand is simply that oil supply may at some point become relatively
abundant relative to demand in the future (date unknown). When and if that occurs, OPEC may
become worried that their oil resources will never be used and will begin to fight for market
share by increasing production and driving down the price of oil to try to spur demand. That
is the theory, I think we are probably 20 to 40 years from reaching that point for
conventional oil.
Oil still contributes quite a bit to carbon emissions and while I agree coal use needs to
be reduced (as carbon emissions per unit of exergy is higher for coal than oil), I would
think it may be possible to work on reducing both coal and oil use at the same time. Using
electric rail combined with electric trucks, cars and busses could reduce quite a bit of
carbon emissions from land transport, ships and air transport may be more difficult.
It's better to sell half of your ressources for 90$ / barrel than all at 30$ / barrel.
The gulf states will always have cheap production costs at their side, they will earn more
at each price of oil. Why not make big money, especially when at lower production speed the
production costs are much lower (less expensive infrastructure).
And in the first case you can sell chemical feedstock for a few 100 years ongoing for a
good coin. Theocracies and Kingdoms plan sometimes for a long time. When you bail out
everything at sale prices, you end with nothing ( and even no profit).
You assume half the resource can be sold at $90/b, at some point in the future oil supply
may be greater than demand at a price of $90/b, so at $90/b no oil is sold and revenue is
zero.
In a situation of over supply there will be competition for customers and the supply will
fall to the point where supply and demand are matched. Under those conditions OPEC may decide
to drive higher cost producers out of business and take market share, oil price will fall to
the cost of the most expensive (marginal) barrel that satisfies World demand.
I don't think we are close to reaching this point, but perhaps by 2035 or 2040 alternative
transport may have ramped to the point where World demand for oil falls below World Supply of
oil at $90/b and the oil price will gradually drop to a level where supply and demand
match.
Drilling Productivity Report – what we need is a Permian Plumbing Report. EIA – NOTE: Productivity estimates may overstate actual production which could be limited
by logistical constraints. https://www.eia.gov/petroleum/drilling/#tabs-summary-2
Regarding Saudi Arabia, what seems certain is that they have increased crude exports in
parts of May and early June by either activating "spare capacity" or withdrawal from storage.
Coming into peak domestic demand season it will be hard for OPEC to compensate for Iran,
Venezuela, Libya and any other negative "surprises" coming along in 2H2018. It would be a
real surprise if not the solution is to agree to a moderate production increase due to quite
a few reasons (I can think of at least 5 reasons for this on top of my head). I can imagine
OPEC/Russia want a somewhat controlled price increase to let us guess 90-100 dollars before
the low demand season kicks in 1H2019. If demand growth is still not impacted too much the
supply problems start to become unsolvable in 2019 and in any case 2020. There is both a
potential for a great price spike and recessions in 2019 imho.
I don't think it is Khurais. The project is delayed, but for how long is uncertain.
A quick search on the internet:
"We see Opec building capacity over the coming five years, largely driven by Saudi Arabia
where we see the Khurais expansion in 2019 and the Marjan field start-up by 2021. Saudi
Arabia is pressing ahead with upstream investment as part of its Vision 2030 strategy,"
BofAML said.
I was thinking that the price of WTI is still cheap. But then countries such as Russia have
been complaining that product prices are too high and that their refinery margins are too
low, and so I don't know. I still think prices could spike higher, sometime, due to outages
and lack of long term investment.
It seems that OPEC is looking to prevent supply shortages during peak demand
2018-06-19 OPEC technical panel sees strong oil demand in H2 2018, implying that the
market could absorb additional production, according to 3 OPEC sources
With the most highly-anticipated
OPEC meeting since November 2014 taking place Friday in Vienna, Macrovoices host Erik
Townsend made this week's podcast all about oil. He started his three-part interview series
with Dr. Ellen Wald, the author of "Saudi Inc.", a book about Aramco. During their discussion,
Wald shares what she learned about the Kingdom of Saudi Arabia and - most importantly - how the
royals view both Aramco and the oil market. This perspective is important, she explains, in
interpreting why former Saudi energy minister Ali Al Naimi made the infamous decision back in
November 2014 to
keep OPEC oil production targets unchanged . That decision precipitated another leg lower
in oil prices, eventually sending them to $30 a barrel. Many observers criticized the Saudis
for shooting themselves in the foot by standing against production cuts. But the one thing that
these critics didn't understand, Wald said, is that the Kingdom has always treated Aramco like
a family business.
They have two twin objectives: long-term profit and power. And when they look at Aramco,
they're not concerned about meeting, say, what their quarterly reports are going to show or
their stock price. They're looking at this in the long term, in a generational
perspective.
And so in 2014 when it seemed as though oil production was increasing around the world
– there was lots of other sources – not just shale oil production in the United
States but we had really increasing from all over – they went into that OPEC meeting
and everyone thought oh, they have to cut production. If they don't they won't maintain the
price they need for the budget and this is what has to be.
Instead, they surprised everyone by basically walking out and saying to heck with it,
we're going to produce as much as we possibly can. And the reason, it seemed to me, was very
clear: They knew that no matter how low the oil price went it was going to be that much worse
for everybody else and not as bad for Saudi Arabia.
When Townsend asks about the decision to float 5% of Aramco in a foreign stock market (a
plan that is reportedly on hold, for now at least), Wald explains that the Saudis respect their
company's "American heritage" (the Saudis slowly nationalized Aramco in stages during the 1970s
and 1980s, buying it in stages) and they view the company as an international oil company like
Exxon.
But in another sense, I see this as a natural progression for a company that was an NOC
but has always seen itself as really a major international oil company. And it's expanding
its research, it's expanding its downstream operations, in order to have a profile similar to
that of an IOC. They are very, very proud of the patents that they've acquired and they
compare it to the number of patents that, say, Exxon gets. It's really very evident
throughout this.
Next, Townsend turned to energy analysts Anas Alhajji and Joe McMonigle for a three-way
discussion about what to expect From Friday's meeting. Earlier this month, we heard from fellow
"geological expert" Art Berman, who speculated that the current glut of oil created by the
shale boom in the US is a temporary anomaly
But the bigger factor here is Venezuela and how quickly Venezuelan crude has come off the
market. Venezuela was producing about 1.4 million barrels a day. It's probably 1.3 now, in
June. Under the OPEC agreement, they could be producing close to 2 million barrels a day.
Berman speculated that the global demand curve is growing at a pace much more quickly than
most market experts anticipate, and that - regardless of whether OPEC decides to raise or
maintain production - the world will inevitably find itself mired in a supply crunch. But
McMonigle asserted that the collapse of crude production in Venezuela has left a massive
production hole that should be filled by OPEC members. Because of this, Saudi Arabia doesn't
have a problem with higher prices, and even OPEC
itself is anticipating that demand will remain strong in the second half of the year.
So that's 600-700 thousand barrels extra that has really accelerated crude stock drawdowns
and I think has really supported higher prices quicker than most people thought. I was in the
camp, and I think others were, that in the second half of this year we would be around
between $70 and $75.
Obviously, we got there pretty quickly at $80. And most of that had to do with Venezuela.
And then, of course, you had the Iran sanctions – which we've been talking about for a
long time – that we expected to come. But there are a lot of people on the market that
just didn't think Trump would pull the trigger on it. Well, he did. And so that really pushed
things up to over $80. There isn't any crude yet coming off the market, but we certainly
expect that there will be.
[...]
First of all, I have to say I don't think OPEC is going to give up that easily on higher
prices. I think the Saudis are quite comfortable with prices around $80. They don't really
see a production problem. The physical oil markets are pretty well-supplied, as I think Anas
will talk about. But they really have a political problem instead of a production
problem.
And the political problem is this: You know, higher prices, you've got some calls for
action. Trump, of course, with his tweet a couple of weeks ago while the compliance committee
was meeting in Riyadh I think really took them by surprise. I think there is kind of an
implicit agreement to help because of the Iran sanctions. And that's something that Saudi
Arabia and UAE and all the other Gulf countries support.
However, the one thing that could change their minds, is a political issue concerning their
relationship with the US. Following Trump's aggressive Iran policy, there could be a consensus
forming among the Gulf countries to support higher production levels that would held rein in
prices. But this might not be in the long-term best interest of the Saudis.
Older wells are declining at about 8% per year. A 25 BOPD well with a 10 BOPD economic limit
should have 70,000 barrels of oil left to produce in about 12 years.
Is it safe to assume that newer wells will behave the same as older wells?
Some petroleum engineers that have commented at shaleprofile.com (Enno Peters wonderful
resource) that the high level of extraction from newer wells will likely lead to a thinner
tail.
illustrates this, notice how the 2014 and 2015 wells fall below the 2010 well profile
after 24 months, the same is likely to occur for 2016 and later wells. Also note that the
2010 well profile is representative (close to the mean) for 2009 to 2012 average well
profiles.
Dennis, i would say the decline rate (8%) is very safe to use for all LTO wells, i would
definitely apply it after the 6th year of well life, because by then what counts is rock
quality and fluid type. This is only good for a bulk projection.
By the way I tweaked my price model when I was preparing my CO2 pathway. I took into
account the Venezuela crash, the difficulties the Canadians have moving their crude, etc. The
price projection is $88 per barrel Brent for evaluating projects which start spending in
2019. I also prepared a different look for very long term projects which start spending in
2023: $110 per barrel.
Don't forget these aren't prices predicted for those particular years. They are prices one
can use to evaluate long term projects such as exploring in the Kara Sea, offshore West
Africa deep water, the African rifts, Venezuela heavy oil developments, etc. These prices are
plugged in and escalated with inflation for the 20-30 year project period. Real prices should
oscillate back and forth around these values.
Norwegian crude oil & condensate production (without NGLs) at 1,321
kb/day in May, down -223 m/m, down -297 from 2017 average or -18%. The main reasons that
production in May was below forecast is maintenance work and technical problems on some
fields. http://www.npd.no/en/news/Production-figures/2018/May-2018/ Almost down to the Sept 2012 low at 1,310 kb/day
This is what happens when there are no sizeable new fields coming online for 1/2 year and as
G.Kaplan has mentioned not enough allocation for supply disruptions are included in the
forecast.
A brutal decline, even if this month is an anomaly as NPD say.
Looking at the field numbers (only through April) it looks like Troll Oil is in decline a bit
earlier and a bit steeper than expected. It's the biggest oil producer still bu has dropped
fairly consistently and slightly accelerating from 161 kbpd in October to 121 in April. It's
all horizontal wells and requires continuous drilling to maintain production, it's close to
exhaustion with only 10% remaining at the end of 2017 (about R/P of 3 years) and had been
holding a good plateau around 150 for a few years. The gas is due to be developed starting in
2021 so the oil rim would need to be depleted by then, but maybe dropping a bit sooner than
expected – is a reservoir not behaving as modelled a "technical problem"?
I don't know about the price as it depends on the demand side and the global economy looks to
me increasingly rocky, but the supply side analysis looks pretty good, except as you say a
bit conservative. One thing missing was consideration of increasing decline rates on mature
fields, especially offshore, partly a result of accelerating production in the high price
years and partly because of an increasing ratio for deep and ultra deep water. Additionally I
think the lack of increase in non-US drilling rigs as the price has risen is relevant and
partly represents a shortage of in-fill prospects and short cycle appraisals.
If they are relying on GoM to add the 300 kbpb (or more into 2020) that EIA are predicting
then I think they are going to be short by 400 to 500 kbpd for a 2020 exit rate.
(I don't follow the chart showing new OPEC developments, the numbers can't be number of
projects, probably kbpd added, or maybe mmbbls reserves, and I'm betting they've mixed in gas
with the oil.)
As in all these investment type analyses they don't look too far ahead and there's a kind
of tacit assumption that everything will be sorted out with more investment later on, but
five years of low discoveries and accelerated development of the good ones means there's
actually not that much new to invest in, and if there is then ExxonMobil will be looking to
buy it.
Yeah, demand is always a big question. Hard to measure, even in the rear view mirror.
However, their constant increase of 1.2 million barrels in the US over a three year period,
should offset any question of demand. While 1.2 in 2020 is something I can't predict, 1.2
million for 2018 and 2019 is impossible without increased pipelines long before the second
half of 2019. So, I think it is way conservative.
They say "We believe we are 6-9 months ahead of consensus with our oil forecast. Why is no
one else seeing what we see?." Obviously they haven't been reading POB for the last two
years.
POB made it possible to piece together in my own way, otherwise I would be like most. Staying
confused with constant conflicting info. Predicting price is virtually impossible, as is
demand to a large extent. But, when supply is ready to fall off a cliff, then being exact is
not required.
A simple way to think about C+C demand is to assume over the long run that supply and
demand will be roughly equal (though of course there will be short term imbalances which
changes in the oil price over the short term will try to correct). From 1982 to 2017 C+C
output grew at an average annual rate of about 800 kb/d. It is probably safe to assume that
oil demand will continue to grow at roughly that pace in the absence of a severe global
recession and those are pretty rare. I define a "severe global recession" as one where real
World GDP (constant prices) based on market exchange rates decreases over an annual cycle for
one or more years. Since 1900 there have been two cases where this occurred, the Great
Depression and the Global Financial Crisis (GFC) in 2008/2009. These have been on roughly a
60 to 70 year cycle (a previous crisis occurred in 1870, but this might have only been a US
crisis and possibly not a global one.)
In any case, my guess is that a Global economic crisis may result a the World tries to
adjust to declining (or stagnant) World Oil output after 2025, probably hitting around 2030
to 2035. If economists re-read Keynes General Theory and respond to the crisis with
appropriate policy recommendations, the economic crisis may be short lived. On the other hand
a World response similar to the European response to the GFC, where fiscal austerity is
considered the appropriate response to a lack of aggregate demand (this was also Herbert
Hoover's response to the 1929 Stock Crash), then a prolonged deep depression will be the
result.
The somewhat vast majority of countries say their reserves are flat in 2017 vs 2016. They
pumped billions of barrels, but no change to reserves for . . . lemme count . . . 36
countries (of which the US was one).
World as a whole reserves total declined 0.03%.
BP's flow report is "all liquids". Dunno if that is consumption, too. And if reserves . .
. reserves are in a footnote. Crude, Condensate AND NGLs. Probably excludes algae.
What? Me worry? Rystadt says US has 79 more years of oil still available. Of course, that
is the imaginary oil. They admit that commercially recoverable oil in the world only has 13
years left. Where did we pick up another 50 billion of imaginary oil in the US this year?
read deep into the article -- the best oil goes to China. Europe gets only what is left.
Haven't needed it, but the North Sea is dying. Iran is the next supplier but if sanctions
eliminate them, Russian oil of whatever quality will be the only choice.
Or Europe could ignore sanctions, if they have the courage.
I
wanted to make a comment about the OPEC(and Russia) meeting coming up and a possible production
increase. The speculation going around is that OPEC and Russia might increase production up to
1.80 mbpd. The minimum production increase would be around 500kbpd. What is the most likely
production increase based on past production?
The only four countries that have any ability to increase production are
1) Russia: Current production 10.9mbpd. High production 11.3mbpd Difference -400kbpd 2) Saudi Arabia: Current production 10.0mbpd. High production 10.6mbpd Difference -600kbpd 3) UAE: Current production 2.9mbpd. High production 3.10mbpd Difference -200kbpd 4) Kuwait: Current production 2.70mbpd. High production 2.8mbpd Difference -100kbpd
The high watermark in production for these countries happened from Mid 2016 to Mid 2017.
Currently these four countries are producing about 1.3mbpd below their all-time high production
limits. Ask yourself what is the likelihood that these four countries will increase production
to all-time highs and potentially surpass their highs which would be required to increase
production to 1.80mbpd? When OPEC did announce production cuts at the end of 2016 many believe
they had increased production to unsustainable levels to give each country a higher quota from
the production cuts. The guys a Core Labs believed they had to cut because it would have
threaten the long term integrality of their fields.
My guess is that the most OPEC and Russia can bring back for a sustainable period is about
half of the 1.30mbpd they reduced from their production highs .maybe about 600kbpd
India's oil consumption growth was only 2.9%. Derives from their monetary debacle early in
the year. We should see signs of whether or not that corrects back to their much higher norm
before next year.
China consumption growth 4%. Higher than India. Clearly an aberration.
KSA consumption actually declined fractionally, which allows Japan to still be ahead of them
in consumption.
US consumption growth 1%. So much for EV silliness.
Permian pipelines and steel tariffs – it's a good update but the article doesn't
give any clues as to how long it might take for US steel mills to make the type of pipes that
are now being imported.
HOUSTON (Reuters) – Major U.S. energy companies including Plains All American
Pipeline, Hess Corp and Kinder Morgan Inc are among many seeking exemptions from steel-import
tariffs as the United States ratchets up trade tensions with exporters including China, Canada
and Mexico.
The pipeline industry could face higher costs from tariffs as about 77 percent of the steel
used in U.S. pipelines is imported, according to a 2017 study for the pipeline industry.
Benchmark hot-rolled U.S. steel coil prices are up more than 50 percent from a year ago,
according to S&P Global Platts.
Significant. It may not prevent the pipelines being built, but it will, no doubt, delay the
timing of the start to completion timeline. Extended starts and stops on construction would
be extremely expensive. A 25% tariff on oil to China is also a game changer. That's about
600k a day that now has questionable outlets. India is going to have about 600k a day it
won't buy now from Iran, so that's a possibility. Not as big of a game changer as in the
future, when US production begins increasing, again. I could speculate that there is some
timing connection between India foregoing Iran purchases, and the China tariff decision.
Whole Permian scenario keeps shifting down. Pipeline completion dates are more questionable,
and the future export capabilities have a bigger question mark.
Goldman states that most of the producers have no plans to cut back in the Permian. What
else would they tell the investment bank who helps determine their stock price? Yeah, we are
screwed, and currently looking for a buyer?
"... So far in June, the outlook for Venezuelan production is grimmer. Venezuela was producing about 1.5mn b/d at the start of May, including roughly about 800,000 b/d in the Orinoco oil belt and a combined 700,000 b/d in the company's eastern and western divisions. But output in early June has dropped to 1.1mn-1.2mn b/d, according to three PdV officials. https://www.argusmedia.com/pages/N ewsBody.aspx?id=1697240&menu=yes?utm_source=rss%20Free&utm_medium=sendible&utm_campaign=RSS ..."
The basic problem is the General he put in charge did not understand Maduro's command. He
thought Maduro said oil production needs to decrease a million barrels a day.
They are losing workers especially the technical managers, don't have money for spares and
are going to shut down to repair (I note it says repair not just maintenance for two of them)
and restart all four of the most difficult operations in refining, all at the same time.
These are high temperature fluidised beds with some pretty horrible waste product (highly
viscous, toxic coke in heavy oil residue sludge which can block pipes and burners and corrode
all sorts of stuff). Shutting them down fro extended periods is not always a great idea at
the best of times. Planned maintenance for such things is usually phased so only one is down
at a time to ensure all the planning and purchasing can be completed and the experts are
available to go to each plant in turn. The plants need catalyst replacement which costs
money, and tends to be more frequent if the plant isn't in very good condition or isn't being
operated optimally (the operators need to be well trained). Be interesting to see how long it
takes and how many come back, it's quite possible the best case will be cannibalising a
couple to keep the others going.
As to: "If PDVSA cannot alleviate the shipping bottleneck, the company and its joint
ventures could be forced to slow or temporarily pause production at some Orinoco Belt
oilfields," that is already happening: they have dropped over half the rigs and might be down
to none by September at current rate, without new wells and workovers heavy oil can decline
pretty quickly.
Oil production seems to have left its bumpy 6 year long (2010-2015) plateau of 8.4 mb/d and
is now back to 2004 levels of 7.9 mb/d, a decline of 6% over 2 years.
Base production is the sum of the minimum production levels in each country during the
period under consideration. Incremental production is the production above that base
production. In this way we clearly see that the peak was shaped by China, sitting on a
declining wedge of all other Asian countries together. Note that growing production in Thailand
and India could not stop that decline. Now let's look at the other side of the coin,
consumption:
There has been a relentless increase in consumption since the mid 80s. The growth rate after
the financial crisis in 2008 was an average of 3% pa.
Chinese annual oil consumption growth
rates have been quite variable between 2% and a whopping 16% in 2004 which contributed to high
oil prices. Fig 4 also shows there is little correlation between GDP growth and oil consumption
growth (statistical problems?). There is nothing in this graph that could tell us that the
Chinese economy has a consistent trend to become less dependent on oil. In the years since
2011, oil consumption growth was around 60% of GDP growth.
Let's compare China with the US. China's oil consumption is catching up fast with US
consumption.
On current trends, China's oil consumption would reach US consumption levels of 20 mb/d in
just 14 years.
Contrary to misinformation by the media, the US is still a net importer of oil. Even blind
Freddy can see that there will be intense competition for oil on global markets.
All governments who plan for perpetual growth in Asia (new freeways, road tunnels, airports
etc) should fill in the above graph. Hint: We can see that Asia has diversified its sources of
oil imports but is still utterly dependent on Middle East oil
"Other Middle East" is Iran
and Oman (as Syria and Yemen no longer export oil)
China is preparing for the future by building bases to secure oil supply routes:
Proven reserves have not changed much in the last years meaning that P2 and P3 reserves have
been proved up commensurate with production. The reserve to production ratio is 16.7 years
equivalent to an annual depletion rate of 6%, a little bit higher than a reasonable rate of 5%
(R/P of 20 years).
The depletion rates vary considerably and may only be approximate as oil
reserves will have been estimated by using differing methodology and accuracy. Indonesia's
depletion rate is very high. Not shown in Fig 14 is Thailand where the depletion rate is off
the charts (almost 50%) suggesting reserves are too low.
There are some rumors that KSA has increased exports starting in May (about 0.5 m b/d more
than prior months) by drawing even more from storage. If we are to believe OPEC production
numbers from May which are steady, that must be the case. OPEC has essentially flooded the
market with exports before the meeting on Friday. The nearest month Brent future changed to
contango compared to closest month some weeks ago, but it has now all changed again to
backwardation. Point being, it seems the physical market is getting tighter again and that
the export flood may have something to do with the meeting. Or it could be that reduced
exports from Iran, Venezuela and Libya are starting to impact the market.
If the market balance overall is to change from a a deficit to near balanced, production
within OPEC has to be increased with almost maximum of whatever spare capacity available in
my opinion. The assumption is that spare capacity in reality is smaller than stated by the
agencies.
"... According to US Energy Department figures, China imports approximately 363,000 barrels of US crude oil daily. The country also imports about 200,000 barrels a day of other petroleum products including propane. ..."
Just as China topped the list of nations buying US oil, Beijing – retaliating to
unilateral Trump economic threats – sent jitters through energy markets on Friday by
threatening new tariffs on natural gas, crude oil and many other energy products.
On Friday, Beijing threatened to impose tariffs on US energy products in response to $50
billion in tariffs imposed by US President Donald Trump. Such tariffs would inhibit Chinese
refiners from buying US crude imports, potentially crashing US energy markets and hitting the
fossil fuel industry where it hurts the most: in shareholder approval.
"This is a big deal. China is essentially the largest customer for US crude now, and so for
crude it's an issue, let alone when you involve [refined] products, too. This is obviously a
big development," Matt Smith, director of commodity research at ClipperData, told Reuters.
According to US Energy Department figures, China imports approximately 363,000 barrels of US
crude oil daily. The country also imports about 200,000 barrels a day of other petroleum
products including propane.
The US energy industry has seen its profits boosted by fracking in domestic shale fields,
which produce some 10.9 million barrels of oil per day.
The US is also exporting a record 2 million barrels per day, and encouraging countries like
China to import more US energy products instead of those from Iran, after Trump recently
withdrew from the historic Joint Comprehensive Plan of Action (JCPOA) 2015 nuclear arms deal
with Tehran.
China is currently the largest buyer of Iranian oil as well, purchasing some 650,000 barrels
daily during the first quarter of 2018.
According to Bernadette Johnson with the Denver, Colorado, energy consultancy Drilling info,
tariffs will increase prices for other petroleum products including propane and liquefied
natural gas.
"The constant back-and-forth about the tariffs creates a lot of market uncertainty that
makes it harder to sell cargoes or sign long-term [trade] deals," Johnson noted, cited by
Reuters.
In late March, the White House slapped trade sanctions on China, the world's second largest
economy, including limitations in the investment sector as well as tariffs on $60 billion worth
of products.
Citing "fairness" considerations, Trump referred to the car market, stating that China
charged a tariff ten times higher on US cars than the US did on the few Chinese cars sold in
the US.
Separately, in a bid to deliver on campaign promises, Trump announced his intention to
impose a 25-percent tariff on steel imports and a 10-percent tariff on aluminum imports from an
array of US allies, including the EU, Mexico and Canada. Those nations -- longtime allies to
the US -- have promised retaliatory economic measures.
Trump has also reportedly mulled placing a 25-percent import tax on European cars, something
that would significantly affect the highly-profitable US market for expensive German
automobiles.
by Salma El Wardany (Bloomberg) Two of Libya's biggest oil ports stopped loading on Thursday
after clashes erupted between rival forces for control of the country's economic lifeline,
taking more barrels off the market just as OPEC debates whether to boost production.
Fighting at Es Sider and Ras Lanuf terminals led to the loss of about 240,000 barrels of
Libya's daily oil production, state energy producer National Oil Corp. said in a statement
Thursday. NOC evacuated staff from both terminals, which account for 40 percent of Libya's oil
exports, and declared force majeure on shipments.
The disruptions come a week before OPEC nations hold key meetings in Vienna with other major
producers including Russia to discuss if they should stick with a pact to restrain oil supply
after prices topped $80 a barrel in May. Oil producers were already facing growing pressure,
including from U.S. President Donald Trump, to boost supply to offset disruptions caused by the
economic crisis in Venezuela and renewed American sanctions on Iran.
Libya's oil output has rebounded over the past two years, but remains well below the 1.8
million barrels a day the country pumped before the 2011 campaign to oust Muammar Qaddafi. That
NATO-backed war gave way to years of fighting among rival Libyan groups in which the country's
oil installations became prized targets.
"... The author is a prominent American social critic, blogger, and podcaster , and one of our all-time favorite pessimists. We carry his articles regularly on RI . His writing on Russia-gate has been highly entertaining. ..."
"... He is one of the better-known thinkers The New Yorker has dubbed 'The Dystopians' in an excellent 2009 profile , along with the brilliant Dmitry Orlov, another regular contributor to RI (archive) . These theorists believe that modern society is headed for a jarring and painful crack-up. ..."
"... You can find his popular fiction and novels on this subject, here . To get a sense of how entertaining he is, watch this 2004 TED talk about the cruel misery of American urban design - it is one of the most-viewed on TED. Here is a recent audio interview with him which gives a good overview of his work. ..."
"... If you like his work, please consider supporting him on Patreon . ..."
"... Quite the opposite of a dilettante, Kunstler has dug into the research on oil and related energy technologies, and is extremely well-informed, writing books on the subject. What he says implies a massive wealth transfer to Russia, Iran, and the Middle East, as the wells start to dry up. ..."
"Anyway, we're not going back to the Detroit of 1957. We'll be fortunate if we can turn out brooms and scythes twenty years from
now, let alone flying Teslas." 10 hours ago | 1,690
41 MORE:
Business The author is a prominent American
social critic, blogger, and podcaster , and one of our all-time favorite pessimists.
We carry his articles regularly on RI . His writing
on Russia-gate has been highly entertaining.
He is one of the better-known thinkers The New Yorker has dubbed 'The Dystopians' in
an excellent 2009 profile , along with
the brilliant Dmitry Orlov, another regular contributor to RI
(archive) . These theorists believe that modern society is headed for a jarring and painful crack-up.
If you like his work, please consider supporting him on
Patreon .
Quite the opposite of a dilettante, Kunstler has dug into the research on oil and related energy technologies, and is extremely
well-informed, writing books on the subject. What he says implies a massive wealth transfer to Russia, Iran, and the Middle East,
as the wells start to dry up.
The ill feeling among leaders of the G-7 nations -- essentially, the West plus Japan -- was mirrored early this morning in the
puking financial market futures, so odious, apparently, is the presence of America's Golden Golem of Greatness at the Quebec meet-up
of First World poobahs. It's hard to blame them. The GGG refuses to play nice in the sandbox of the old order.
Completely, totally, delusional
Like many observers here in the USA, I can't tell exactly whether Donald Trump is out of his mind or justifiably blowing up out-of-date
relationships and conventions in a world that is desperately seeking a new disposition of things. The West had a mighty good run
in the decades since the fiascos of the mid-20 th century. My guess is that we're witnessing a slow-burning panic over
the impossibility of maintaining the enviable standard of living we've all enjoyed.
All the jabber is about trade and obstacles to trade, but the real action probably emanates from the energy sector, especially
oil. The G-7 nations are nothing without it, and the supply is getting sketchy at the margins in a way that probably and rightfully
scares them. I'd suppose, for instance, that the recent run-up in oil prices from $40-a-barrel to nearly $80 has had the usual effect
of dampening economic activity worldwide. For some odd reason, the media doesn't pay attention to any of that. But it's become virtually
an axiom that oil over $75-a-barrel smashes economies while oil under $75-a-barrel crushes oil companies.
Mr. Trump probably believes that the USA is in the catbird seat with oil because of the so-called "shale oil miracle." If so,
he is no more deluded than the rest of his fellow citizens, including government officials and journalists, who have failed to notice
that the economics of shale oil don't pencil out -- or are afraid to say.
The oil companies are not making a red cent at it, despite the record-breaking production numbers that recently exceeded the previous
all-time-peak set in 1970. The public believes that we're "energy independent" now, which is simply not true because we still import
way more oil than we export: 10.7 million barrels incoming versus 7.1 million barrels a week outgoing (US EIA).
Shale oil is not a miracle so much as a spectacular stunt: how to leverage cheap debt for a short-term bump in resource extraction
at the expense of a future that will surely be starved for oil. Now that the world is having major problems with excessive debt,
it is also going to have major problems with oil.
The quarrels over trade arise from this unacknowledged predicament: there will be less of everything that the economically hyper-developed
nations want and need, including capital. So, what's shaping up is a fight over the table scraps of the banquet that is shutting
down.
That quandary is surely enough to make powerful nations very nervous. It may also prompt them to actions and outcomes that were
previously unthinkable. At the moment the excessive debt threatens to blow up the European Union, which is liable to be a much bigger
problem for the EU than anything Trump is up to. It has been an admirably stable era for Europe and Japan, and I suppose the Boomers
and X gens don't really remember a time not so long ago when Europe was a cauldron of tribal hatreds and stupendous violence, with
Japan marching all over East Asia, wrecking things.
There is also surprisingly little critical commentary on the notion that Mr. Trump is seeking to "re-industrialize" America. It's
perhaps an understandable wish to return to the magical prosperity of yesteryear. But things have changed. And if wishes were fishes,
the state of the earth's oceans is chastening to enough to give you the heebie-jeebies. Anyway, we're not going back to the Detroit
of 1957. We'll be fortunate if we can turn out brooms and scythes twenty years from now, let alone flying Teslas.
This will be the summer of discontent for the West especially. The fact that populism is still a rising force among these nations
is a clue of broad public skepticism about maintaining the current order. No wonder the massive bureaucracies vested in that order
are freaking out.
I'm not sure Mr. Trump even knows or appreciates just how he represents these dangerous dynamics.
"... My own hunch is that these reports may well be true. How long can the Saudis (and the Western media) conceal what has happened? ..."
"... Second, I believe the trip by our Secretary of State was in response to the incident of April 21st. My hunch is the Crown Prince was gravely wounded and later perished at a Military Hospital. ..."
"... Third, the night of the incident a twitter user named CivMilAir tracked the Royal Medevac jet leaving the airport near the gunfire and documented the airplane turning off its transponder. There was speculation concerning whether or not it was the Crown Prince that night on that thread. There was even push back from other twitter users based in Saudi Arabia. Even one demanding to know how this twitter user obtained this information. ..."
"... Fifth, the outrage at the German Government and the reports from German businesses that the door to trade has been slammed shut this past month. I attribute this to the one and only exile prince from the Royal family, Saudi Prince Khaled Bin Farhan. living in Europe. He was granted asylum by Germany. There were 3 other exiles but they have been tricked or kidnapped back to Saudi Arabia. This Prince was advocating for the removal of the Crown Prince as recently as March 23, 2018. ..."
"... Sixth, I noticed this week in the news that Crown Prince "MBS" has consolidated his control further this week by taking operational control of the construction and cyber security industries in the country. 35% of the Bin Laden group was basically stolen. I watched an interview of Saudi Prince Alwaleed bin Talal after his release from detention and he was clearly shaken. He was playing a confidence game where everything would go back to normal and mention how the Bin Laden group was back working on his projects. Then this? 35% gone overnight. Cyber security crack down or internet crackdown coming in Saudi Arabia? ..."
"... Seventh, there is no way that MBS approved the recent arrest of the feminist. Not after his carefully cultured PR campaign in the United States. ..."
"... Eight, where's Waldo? ..."
"... Here is my speculation. Al-Qaeda will be the cover story. Crown Prince MBS was killed by members of the Royal Family and other powerful individuals he made enemies with in his short rule. ..."
"... The Royal family members who supported MBS are furious at Germany for the above stated reasons and lashing out in all directions. Threatening to invade Qatar if Russia provides them the S-400. I believe even President Trump's bizarre threat to put huge tariffs on German luxury automobiles because the German public doesn't want to buy crappy American cars like the Chevy Impala is his frustration over one of his essential architects on the plan to change regime's in Iran being eliminated. ..."
"... A lot of torture and indiscriminate arrest is going on at this very moment in Saudi Arabia. The family appears split and trust lost. Time will tell. ..."
"... It would appear that there's no one in charge in SA at the moment. One can now expect a period of confusion, and lots of infighting between various factions trying to assert dominance, or just survive. ..."
"... Considering MbS's policies, I think his exit is better for the Middle East. His tilt of SA policy towards the US and Israel is likely to be reversed. ..."
"... All you need to know is that Mr. Media Roadshow decided overnight to shun video cameras, and not come out for Pompeo. The guy is dead as a door knob. He made way too many enemies during the forced corporate retreat he hosted at the Ritz. ..."
"... myself , i think the attack succeed in wounding and ultimately kill the prince , otherwise why no public appearance at all ? ( if i recall , muslim have to be buried no more than 24 hours after death so that's why i assume he was wounded at first and the medical team failed to keep him alive) ..."
"... In Assad's interview with RT he pointed out that the "opposition" first attacked Syria's air defenses at the beginning of the "civil war". Hillary wanted a "no-fly zone" over Syria. All that's missing is Victoria Nuland. ..."
"... The playground version: The neocons and Netanyahu think they're playing Trump, who in turn thinks he's use them. MbS wanted to be one of the cool kids and tried to get in on the action and might have gotten himself dead in the process. ..."
Re Saudi Arabia: I have previously referred to reports regarding the death of the Saudi Crown
Prince, MbS, as a result of the AQ attack on his palace on April 21. Now, pictures are
circulating of his funeral.
There is so far no official announcement, but that means nothing.
My own hunch is that these reports may well be true. How long can the Saudis (and the
Western media) conceal what has happened?
Agree. There is also the report that he was not at the Graduation Ceremony of the King Abdul
Aziz Military College on May 19. (As Defence Minister, he would have been expected to
attend).
I have been following the story. A few things. Yes, I have seen the pictures of the funeral
and his actual corpse prepared for burial under #mbs at twitter. The pictures are not the
best. The size of the corpse and the nose and receding hairline along with the cheekbones and
body size could definitely be MBS along with the eyes.
Second, I believe the trip by our Secretary of State was in response to the incident
of April 21st. My hunch is the Crown Prince was gravely wounded and later perished at a
Military Hospital.
Third, the night of the incident a twitter user named CivMilAir tracked the Royal
Medevac jet leaving the airport near the gunfire and documented the airplane turning off its
transponder. There was speculation concerning whether or not it was the Crown Prince that
night on that thread. There was even push back from other twitter users based in Saudi
Arabia. Even one demanding to know how this twitter user obtained this information.
Fourth, the recent trip of the Lebanon Prime Minister being called to Saudi Arabia when
his schedule indicated no such trip.
Fifth, the outrage at the German Government and the reports from German businesses
that the door to trade has been slammed shut this past month. I attribute this to the one and
only exile prince from the Royal family, Saudi Prince Khaled Bin Farhan. living in Europe. He
was granted asylum by Germany. There were 3 other exiles but they have been tricked or
kidnapped back to Saudi Arabia. This Prince was advocating for the removal of the Crown
Prince as recently as March 23, 2018.
And he asserted that he receives emails and other forms of communications from disaffected
family members and the security services desiring for a change to be made.
Sixth, I noticed this week in the news that Crown Prince "MBS" has consolidated his
control further this week by taking operational control of the construction and cyber
security industries in the country. 35% of the Bin Laden group was basically stolen. I
watched an interview of Saudi Prince Alwaleed bin Talal after his release from detention and
he was clearly shaken. He was playing a confidence game where everything would go back to
normal and mention how the Bin Laden group was back working on his projects. Then this? 35%
gone overnight. Cyber security crack down or internet crackdown coming in Saudi
Arabia?
Seventh, there is no way that MBS approved the recent arrest of the feminist. Not
after his carefully cultured PR campaign in the United States.
Eight, where's Waldo?
Finally, here is what I find so fascinating. The KIng of Saudi Arabia is reported to have
dementia. Unfortunately, I have a great deal of experience with this dreadful disease. My
stepfather. 16 years. There is no King in charge of Saudi Arabia. In fact, if MBS was killed
like I believe there is no legitimate line to the next ruler. Survival of the Fittest.
Here is my speculation. Al-Qaeda will be the cover story. Crown Prince MBS was killed
by members of the Royal Family and other powerful individuals he made enemies with in his
short rule.
The Royal family members who supported MBS are furious at Germany for the above stated
reasons and lashing out in all directions. Threatening to invade Qatar if Russia provides
them the S-400. I believe even President Trump's bizarre threat to put huge tariffs on German
luxury automobiles because the German public doesn't want to buy crappy American cars like
the Chevy Impala is his frustration over one of his essential architects on the plan to
change regime's in Iran being eliminated.
A lot of torture and indiscriminate arrest is going on at this very moment in Saudi
Arabia. The family appears split and trust lost. Time will tell.
Thank you for that excellent rundown of events. I tend to agree with your "speculation".
It would appear that there's no one in charge in SA at the moment. One can now expect
a period of confusion, and lots of infighting between various factions trying to assert
dominance, or just survive.
Considering MbS's policies, I think his exit is better for the Middle East. His tilt of SA
policy towards the US and Israel is likely to be reversed.
All you need to know is that Mr. Media Roadshow decided overnight to shun video cameras,
and not come out for Pompeo. The guy is dead as a door knob. He made way too many enemies
during the forced corporate retreat he hosted at the Ritz.
This is news to me. How big do you think the resulting power struggle would be if MbS was
killed or incapacitated? I can envision outcomes that range from 2nd page news all the way up
to Archduke Ferdinand grade but I don't have any feel for the probabilities.
If true, would it cause you to see the events of the last month in the region in a
different light?
With MBS dead, how will Saudi react to MBS's previous Israel's right to exist scenario,
along with Jerusalem being declared Israel's capital and the embassy move by DT?
How much longer will the Saudi and international press be able to remain silent on
this?
Who do you think will now ascend the Saudi throne as heir apparent?
FB Ali , sir , it is so hard to get info in the AQ Attack that allegedly mortally wound MBS..
as for the shooting reported as a wayward drone , i recall this video (anyone can confirm the
skyline if this is saudi city near palace ?) , the gunfire last for long time , far too long
to be guards firing on a drone.
myself , i think the attack succeed in wounding and ultimately kill the prince ,
otherwise why no public appearance at all ? ( if i recall , muslim have to be buried no more
than 24 hours after death so that's why i assume he was wounded at first and the medical team
failed to keep him alive)
do you think this is the 'blowback' from the massive shakedown that the prince did to his
seniors ?
Has DT done a single thing that has helped Israel? I would say no. In Assad's interview
with RT he pointed out that the "opposition" first attacked Syria's air defenses at the
beginning of the "civil war". Hillary wanted a "no-fly zone" over Syria. All that's missing
is Victoria Nuland.
Your post vividly depicts how isolated Israel has become. I reiterate DT has done nothing
to help Israel and everything to harm it. One is permitted to ask what's going on.
The playground version: The neocons and Netanyahu think they're playing Trump, who in turn
thinks he's use them. MbS wanted to be one of the cool kids and tried to get in on the action
and might have gotten himself dead in the process.
All the while Putin and the SCO crew wait
and play for time as they tangle each other up into an ever larger mess of their own making
hoping to avoid, or minimize, whatever conflict is necessary to get them all to accept the
coming multi-polar world order.
Perhaps in the future when they make a movie about this period it will be called "A Deal
Too Far".
Sand is not a problem. The real question is how much oil is consumed getting this amount od
sand to their designation. 91,000 truckloads of frac sand using, on average say 5 miles per
gallon and 100 miles each way (200 miles roundtrip) would be 3,5 million gallons of fuel per
month. That means that one day a month is essentially lost to sand transportation costs.
The U.S. Shale Oil Industry utilizes a stunning amount of equipment and consumes a massive
amount of materials to produce more than half of the country's oil production. One of the vital
materials used in the production of shale oil is frac sand. The amount of frac sand used in the
shale oil business has skyrocketed by more than 10 times since the industry took off in
2007.
According to the data by
Rockproducts.com and
IHS Markit , frac sand consumption by the U.S. shale oil and gas industry increased from 10
billion pounds a year in 2007 to over 120 billion pounds in 2017. This year, frac sand
consumption is forecasted to climb to over 135 billion pounds, with the country's largest shale
field, the Permian, accounting for 37% of the total at 50 billion pounds.
Now, 50 billion pounds of frac sand in the Permian is an enormous amount when we compare it
to the total 10 billion pounds consumed by the entire shale oil and gas industry in 2007.
(charts courtesy of the EIA - U.S. Energy Information Agency)
As we can see in the graph above, the Permian Region is the largest shale oil field in the
United States with over 3 million barrels per day (mbd) of production compared to 1.7 mbd in
the Eagle Ford, 1.2 mbd at the Bakken and nearly 600,000 barrels per day in the Niobrara.
However, only about 2 mbd of the Permian's total production is from horizontal shale oil
fracking. The remainder is from conventional oil production.
Now, to produce shale oil or gas, the shale drillers pump down the horizontal oil well a
mixture of water, frac sand, and chemicals to release the oil and gas. You can see this process
in the video below (example used for shale gas extraction):
The Permian Region, being the largest shale oil field in the United States, it consumes the
most frac sand. According to BlackMountainSand.com Infographic , the
Permian will consume 68,500 tons of frac sand a day, enough to fill 600 railcars . This equals
50 billion pounds of frac sand a year. And, that figure is forecasted to increase every
year.
Now, if we calculate the number of truckloads it takes to transport this frac sand to the
Permian shale oil wells, it's truly a staggering figure. While estimates vary, I used 45,000
pounds of frac sand per sem-tractor load. By dividing 50 billion pounds of frac sand by 45,000
pounds per truckload, we arrive at the following figures in the chart below:
Each month, over 91,000 truckloads of frac sand will be delivered to the Permian shale oil
wells. However, by the end of 2018, over 1.1 million truckloads of frac sand will be used to
produce the Permian's shale oil and gas . I don't believe investors realize just how much 1.1
million truckloads represents until we compare it to the largest retailer in the United
States.
According to Walmart, their drivers travel approximately 700 million miles per year to
deliver products from the 160 distribution centers to thousands of stores across the country.
From the information, I obtained at MWPWL International on Walmart's distribution
supply chain, the average one-way distance to its Walmart stores is about 130 miles. By
dividing the annual 700 million miles traveled by Walmart drivers by the average 130-mile trip,
the company will utilize approximately 5.5 million truckloads to deliver its products to all of
its stores in 2018.
The following chart compares the annual amount of Walmart's truckloads to frac sand
delivered in the Permian for 2018:
To provide the frac sand to produce shale oil and gas in the Permian this year, it will take
1.1 million truckloads or 20% of the truckloads to supply all the Walmart stores in the United
States. Over 140 million Americans visit Walmart (store or online) every week. However, the
Industry estimates that the Permian's frac sand consumption will jump from 50 billion pounds
this year to 119 billion pounds by 2022. Which means, the Permian will be utilizing 2.6 million
truckloads to deliver frac sand by 2022, or nearly 50% of Walmart's supply chain :
This is an insane number of truckloads just to deliver sand to produce shale oil and gas in
the Permian. Unfortunately, I don't believe the Permian will be consuming this much frac sand
by 2022. As I have stated in several articles and interviews, I see a massive deflationary
spiral taking place in the markets over the next 2-4 years. This will cause the oil price to
fall back much lower, possibly to $30 once again. Thus, drilling activity will collapse in the
shale oil and gas industry, reducing the need for frac sand.
Regardless, I wanted to show the tremendous amount of frac sand that is consumed in the
largest shale oil field in the United States. I calculated that for every gallon of oil
produced in the Permian in 2018, it would need about one pound of frac sand. But, this does not
include all the other materials, such as steel pipe, cement, water, chemicals, etc.
For example, the Permian is estimated to use 71 billion gallons of water to produce oil this
year. Thus, the fracking crews will be pumping down more than 1.5 gallons of water for each
gallon of oil they extract in 2018. So, the shale industry is consuming a larger volume of
water and sand to just produce a smaller quantity of uneconomic shale oil in the Permian .
Lastly, I have provided information in several articles and videos explaining why I believe
the U.S. Shale Oil Industry is a Ponzi Scheme. From my analysis, I see the disintegration of
the U.S. shale oil industry to start to take place within the next 1-3 years. Once the market
realizes it has been investing in a $250+ billion Shale Oil Ponzi Scheme, the impact on the
U.S. economy and financial system will be quite devastating.
Check back for new articles and updates at the SRSrocco Report .
Sand, a material so abundant, you could not give it away, but now, it has worth, thanks
frackers. His article a week or so back was claiming that all the sand had to be shipped out
of michigan, a blatant lie, or perhaps he really is just that ignorant.
A fellow in west texas bought some sparse land a few years back for about $40,000, it was
10's of acres. He was offered $13,000,000 recently, which he lept at. then he found out the
people that bought it from him, flipped it to a sand company for $200,000,000. Now he wants
to sue.
the point being that technology can make formally useless things, worth more. This is the
fundamental reason that economies grow. Knowledge adds value, making the pie larger for
everyone.
Oil may be a ponzi scheme, who knows, if a trade war crashes the global economies and
energy usage plummets by 20-50%, I would expect the deflationary environment he is talking
about. On the other hand if that does not happen, and oil goes to $100 or $200 then we will
hear a bunch of whining, but everything will keep chugging along.
and if graphene filters allow for the energy efficient filtration of salts from produced
water, and those salts are then processed for the elements such as lithium found in them, and
produced water becomes net profit stream instead of a net cost stream, then the whole
equation changes, technology adding value.
A lot of if's, that is what makes the future interesting.
you are an idiot...all sand is not the same. sand runs the gamut of smooth and round to
rough course edged. sand isnt that easy to find when you have to have a particular kind of
sand.....
Permium 1.1 million truckloads per day and + 71 billion gallons of water per year!
People in North America will be in serious need of fresh water soon, however, with
fracking spoiling water nationally and the combined effect of increased earth
tremors/potholes in vast areas, well mother nature is calling in the cards.
Combine that with GM food hidden in most products plus the millions of pharmaceutical
lovers, poisoning their own water supplies and effecting most native species and perhaps a
little radiation from Nukes and the Sun and the cell towers and a few miles of chem trails i
don't give much hope for a sustainable North American future.
I was just telling the second head growing out of my back, the other day, 'man this is the
best it has ever been', and he said ' groik splish!' and bit me on the arm. So I would say we
are of two minds on the matter.
You can make fresh water from sea water for about $2000 per acre foot using expensive
california power. I think that comes to $60 per month for a family of 4 using the fairly high
rate of water consumption by california residents.
(desalination plants already exist in Santa Barbara and San Diego, CA and there are desal
plants all over the world)
80 gallons per day * 4 people * 365 days / 330000 gallons * $2000 / 12 months = $60
An acre foot of water is about 330,000 US gallons.
Reverse osmosis in the home runs about $75 per year and cleans up most of the
problems.
Now what about the cost of distributing that? See that the thing about getting water the
old fashioned ways. Water actually cost nothing to make. The cost is building a system to
distribute the free water. It also come with gravity assist moving water from high to low.
That way you use natural property of water to flow from high places to lower ones. Now in
your system you take sea water and have to move that up from sea level. That cost is addition
to cost of converting sea water to fresh water.
Maybe we could substitute illegal aliens, or Obama-ites convicted of felonies for much of
the frac-sand?
Think of how much money that would save vs incarceration costs!
If we moved up to insane Liberal idiots who were about to explode anyway because their
Liberal world is crashing down, we'd further save the environment from all the silly electric
cars they drive. Its a win-win!
Thanks for pointing out alternatives we never thought of before!
Also "However, a week after the coup speculations, the Crown Prince, along with Saudi King
Salman, was seen at the opening ceremony of a huge entertainment resort Qiddiya – an
ambitious multi-billion dollar project that is expected to include a Six Flags theme park,
water parks, motor sports, cultural events and vacation homes." Sputnik
International
Saudi Arabia's Crown Prince Mohammed Bin Salman, the 32-year-old
media-savvy leader of the oil kingdom, has been unnaturally quiet recently, so much so
that some in the Middle East media couldn't help but wonder if he is dead.
Bin Salman hasn't been seen in the public eye since his meeting with the Spanish royal
family in on April 12. On April 21, heavy gunfire was heard near a royal palace in Riyadh,
the kingdom's capital. Although Saudi Arabia's state news agency claimed it was a security
force
shooting down a toy drone that had gotten too close to the royal property, some wondered
if the gunfire was in fact a coup led by Saudi royals trying to topple King Salman, Bin
Salman's father.
Some of Saudi Arabia's enemies were pretty sure.
Last week, the
Iranian
newspaper Kayhan reported that the Crown Prince was hit by two bullets during
the attack and may actually be dead, citing "a secret service report sent to the senior
officials of an unnamed Arab state."
"There is plenty of evidence to suggest that the absence of nearly 30 days of Muhammad bin
Salman, the Crown Prince of Saudi Arabia, is due to an incident which is being hidden from
the public," the daily paper claimed.
To add credence to the speculation, Kayhan pointed out that Bin Salman was not
seen on camera when the new U.S. Secretary of State Mike Pompeo visited Riyadh in late April,
while his father, Saudi King Salman bin Abdulaziz Al Saud, and Foreign Minister Adel
al-Jubeir were photographed.
"... By Justin Mikulka, a freelance writer, audio and video producer living in Trumansburg, NY. Justin has a degree in Civil and Environmental Engineering from Cornell University. Originally published at DeSmogBlog ..."
"... Wall Street caused the 2008 financial crisis, with some of its architects personally benefiting. However, while a few executives profited, the result was a drop in employment of 8.8 million people, and according to Bloomberg News in 2010, "at one point last year [2009] the U.S. had lent, spent, or guaranteed as much as $12.8 trillion to rescue the economy." ..."
"... JP Morgan (along with much of Wall Street) required large sums of money in the form of bailouts to survive the fallout from all of the bad loans made, which brought about the housing crisis. Is JP Morgan steering clear of making loans to the shale industry? No. Quite the opposite. ..."
"... To understand why JP Morgan and the rest of these banks would loan money to shale companies that continue to lose it, it's important to understand the gambling concept of "the vigorish," or the vig. Merriam-Webster defines vigorish as "a charge taken (as by a bookie or a gambling house) on bets." ..."
"... Wall Street makes money by taking a cut of other people's money. To a gambling house, it doesn't matter if everyone else is making money or losing it, as long as the house gets its cut (the vig) -- or as it's known in the financial world -- fees. ..."
"... Understanding this concept gives insight into why investors have lent a quarter trillion dollars to the shale industry, which has burned through it. If you take the vig on a quarter trillion dollars, you have a big pile of cash. And while those oil companies may all go bankrupt, Wall Street never gives back the vig. ..."
"... Trent Stedman of the investment firm Columbia Pacific Advisors LLC explained to The Wall Street Journal at the end of 2017 why shale producers would keep drilling more oil even when the companies are bleeding money on every barrel produced: ..."
"... "Some would say, 'We know it's bad economics, but it's what The Street wants.'" ..."
"... In 2017 "legendary" hedge fund manager Jim Chanos referred to shale oil companies as "creatures of the capital markets," meaning that without Wall Street money, they would not exist. Chanos is also on record as shorting the stock of heavily leveraged shale oil giant Continental Resources because the company can't even make enough money to pay the interest on its loans. ..."
"... The Wall Street Journal reports ..."
"... Growing production at any cost is the story of the shale "revolution." The financial cost paid so far has been the more than $280 billion the industry has burned through -- money that its companies have received from Wall Street and, despite the plea from Al Walker, continue to receive. ..."
"... Higher oil prices are yielding more stories about how 2018 will be the year that the shale industry finally makes a profit. Harold Hamm refers to it as Continental Resources' "breakout year." Interesting how potentially not losing money for a year is considered a "breakout year" in the shale industry ..."
"... I keep thinking that the whole enterprise was bankrolled specifically to crush oil prices and keep inflation tamped down, which provides much more profit to wall street via the assurance that the Fed's easy money policy lasts a lot longer. ..."
"... " If Wall Street is the bookie then who are the bettors?" It's a great question that leaves everyone guessing. My guess is pension funds, and calling them bettors is being kind. ..."
"... Bernie Sanders: The business of Wall Street is fraud and greed. ..."
"... I've mentioned this book a few times recently that I'm still in the middle of – Railroaded by Richard White . He points out that the 19th century railroad corporations were disorganized, poorly run, money losing enterprises. But that didn't stop people from investing in them and getting filthy rich. All you need is some fast talking and clever accounting. One example he mentions is that the railroads needed all kinds of supplies to keep things moving and so they would buy them from railroad logistics corporations or fuel from coal companies, etc. But guess who owned the suppliers? That's right, the railroad investors would set up separate companies to supply their own railroads and these companies were extremely profitable. ..."
"... But the pool of investors in these supplier companies was limited to the smart money in on the scam. In essence, the initial well heeled investors set up the railroads so that they could deliberately fleece them. He gives the example of one of the coal companies charging the railroad three times the going rate, which beggared the railroad but lined the pockets of the select few investors who owned stakes in both companies. ..."
"... I suspect that something similar may be going on in the fracking industry. So to figure out the whole scam, you would need to know if the logistics companies are making a profit and is there any common ownership between those companies and the frackers. ..."
"... The other book I recently read was The Whiskey Rebellion by William Hogeland which discusses finance and taxation during the period just after the American Revolution. Shorter version – Alexander Hamilton was a crook who deliberately set up a financial system to ensure that the rich get richer off the labor of the rest of us. ..."
"... The more you learn about the history of this country, the more you realize that there really is nothing new going on and the financial crooks of today are just following in the footsteps of their grifter forebears. And maybe someday they too will have cities named after them or at least a statue in the public square, because the US of A does love its con men. ..."
"... Hogeland's book Founding Finance is also great. Michael Perelman's book Railroading Economics is worth a read. The founders of economics in the US were looking at the example of the railroads and other corporations and acknowledging that competition was destructive and wasteful, but in their textbooks for college students they pushed the simplistic and misleading models that came to define neoclassical economics. ..."
"... Perhaps Wall Street and the banks are playing a larger game. When the U.S. had $4.00+ gasoline there was a real motivation to rework transportation systems and rely less on cars. Now, with the lower oil prices we are back to SUV's and pick-up trucks. So maybe a loss leader in the fracking scam has preserved a much larger cash cow in auto finance. There is also the whole oil services industry to consider. With new conventional discoveries at an all time low, what would the oil services sector do if there were no fracking? ..."
"... Can't help but wondering if this isn't all part of the neo-conservatives and their 'Great Games'. Since 1971 and the peak of conventional oil production in the US, the country has been a power in decline, economically if not militarily. If, as Frederick Soddy wrote almost a hundred years ago "Life is fundamentally a struggle for energy", then the country which controls that energy controls life on our planet. (I believe Kissinger said much the same thing.) This has all kinds of implications for issues from world (Middle East) peace and transitioning to renewable energy sources. Accidents of geology have left Middle Eastern countries with most of the world's remaining easily exploitable sources of conventional oil – and also as holders of much of the US and Western government debt upon which the international monetary system is based. ..."
"... Super (monetary) Imperialism ..."
"... I also can't help but wonder if Reagan shouldn't be most remembered for his instructions to White House maintenance personnel to 'take down those solar panels'. This is eight years after Hudson published Super Imperialism ..."
"... What the Saudis did in 2014 – 2016, maximizing output and spending ~2/3 of the 800 billion dollars equivalent in savings they then held to sustain their economy and regime, trying to bankrupt the U.S. oil industry (and secondarily, the Iranians, etc.) they quite literally cannot do again, anytime soon. They're close to broke, and fighting 1 – 2 wars. ..."
"... Regarding " The Saudis trying to bankrupt the U.S. oil industry" – The Saudis were not out to destroy the US oil industry. The US oil industry controls the Saudis through the US Military which keeps them in power. The Saudis were after the wildcat frackers who were not part of the global oil cartel (which includes US Big Oil). The wildcat frackers were not maintaining limited production quotas to maintain the monopoly oil price gouging. US Big Oil allowed the price collapse for long term goals with their Saudi partners. (Source: Antonia Juhasz) Apparently Wall Street was not in on the plan and kept the money flowing in the fracking Ponzi scheme. ..."
"... Luke is an oil man who brings to mind the Upton Sinclair quote "It is difficult to get a man to understand something when his salary depends upon his not understanding it." ..."
"... "There's a sucker born every minute" and Wall Street is P. T. Barnum directing investors with the sign "This Way to the Egress." The con will last as long as investors have cash to burn and think "product growth" is equivalent to "profit growth" – or in the words of Lucy "Well, uh maybe there is no profit on each individual jar, but we'll make it up in volume." ..."
The U.S. shale oil industry hailed as a "revolution" has burned through a quarter
trillion dollars more than it has brought in over the last decade. It has been a
money-losing endeavor of epic proportions.
In September 2016, the financial ratings service
Moody's released a report on U.S. oil companies, many of which were hurting from the
massive drop in oil prices. Moody's found that "the financial toll from the oil bust can only
be described as catastrophic," particularly for small companies that took on huge debt to
finance fracking shale formations when oil prices were high.
And even though shale companies still aren't turning a profit, Wall Street continues to
lend the industry more money while touting
these companies as good investments. Why would investors do that?
David Einhorn, star hedge fund investor and the founder of Greenlight Capital, has referred
to the shale industry as
"a joke ."
"A business that burns cash and doesn't grow isn't worth anything," said Einhorn, who often
goes against the grain in the financial world.
Aren't investors supposed to be focused on putting money toward profitable companies? While,
in theory, yes, the reality is quite different for industries like shale oil and housing.
Wall Street makes money by facilitating deals much like a Vegas bookie makes money by taking
bets. As the saying about Las Vegas goes: "The house always wins." What's true about casinos
and gambling also holds true for Wall Street.
Wall Street caused the 2008 financial crisis, with some of its architects personally
benefiting. However, while a few executives profited, the result was a drop in employment of 8.8 million
people, and according
to Bloomberg News in 2010, "at one point last year [2009] the U.S. had lent, spent, or
guaranteed as much as $12.8 trillion to rescue the economy."
JP Morgan (along with much of Wall Street) required large sums of money in the form
of bailouts to survive the fallout from all of the bad loans made, which brought about the
housing crisis. Is JP Morgan steering clear of making loans to the shale industry? No. Quite
the opposite.
As shown in this chart of which banks are loaning money to shale company EOG Resources,
while all of the big players in Wall Street are in on the action, JP Morgan has the biggest
bet.
To understand why JP Morgan and the rest of these banks would loan money to shale
companies that continue to lose it, it's important to understand the gambling concept of "the
vigorish," or the vig. Merriam-Webster defines vigorish as
"a charge taken (as by a bookie or a gambling house) on bets."
Wall Street makes money by taking a cut of other people's money. To a gambling house, it
doesn't matter if everyone else is making money or losing it, as long as the house gets its cut
(the vig) -- or as it's known in the financial world -- fees.
Understanding this concept gives insight into why investors have lent a quarter trillion
dollars to the shale industry, which has burned through it. If you take the vig on a quarter
trillion dollars, you have a big pile of cash. And while those oil companies may all go
bankrupt, Wall Street never gives back the vig.
Trent Stedman of the investment firm Columbia Pacific Advisors LLC
explained to The Wall Street Journal at the end of 2017 why shale producers would keep
drilling more oil even when the companies are bleeding money on every barrel produced:
"Some would say, 'We know it's bad economics, but it's what The Street
wants.'"
And "The Street" generally gets what it wants, even when it is clear that loaning money to
shale companies that have been losing money for a decade and are already deep in debt is "bad
economics." But Wall Street bonuses are based on how many "fees" an employee can bring to the
bank. More fees mean a bigger bonus. And loans -- even ones that are clearly bad economics --
mean a lot more fees.
Shale Oil Companies Are 'Creatures of the Capital Markets'
In 2017 "legendary" hedge fund manager Jim Chanos referred to shale oil companies as
"creatures of the capital markets," meaning that without Wall Street money, they would not
exist. Chanos is also on record as shorting the stock of heavily leveraged shale oil giant
Continental Resources because the company can't even make enough money to pay the interest on
its loans.
And he has a point. In 2017 Continental spent $294.5
million on interest expenses, which is approximately 155 percent of its 2017 adjusted net
income generation. When you can't even pay the interest on your credit cards, you are
broke.
And yet in 2017, investor capital was still flowing, with Continental Resources among those
bellying up to
the Wall Street trough for another billion in debt.
" In 2017, U.S. [exploration
and production] firms raised more from bond sales than in any year since the price
collapse started in 2014, with offerings coming in at around $60 billion -- up nearly 30
percent from 2016, according to Dealogic. Large-cap players like Whiting Petroleum,
Continental Resources, Southwestern, Noble, Concho and Endeavor Energy Resources each raised
$1 billion or more in the second half of 2017."
How big of a problem is this business of loaning money to an industry burning through
billions and burying itself in debt? So big that the CEO of shale company Anadarko Petroleum is
blaming Wall Street and asking its companies to please stop loaning money to the shale oil
industry. Yes, that's right.
" The biggest problem our industry faces today is you guys. You guys can help us help
ourselves. It's kind of like going to AA . You know, we need a partner. We really need the
investment community to show discipline."
The Wall Street Journal reports that Walker maintains: "Wall Street has become an
enabler that pushes companies to grow production at any cost, while punishing those that try to
live within their means."
Imagine begging banks to stop loaning you money. And being ignored.
Growing production at any cost is the story of the shale "revolution." The financial
cost paid so far has been the more than $280 billion the industry has burned through -- money
that its companies have received from Wall Street and, despite the plea from Al Walker,
continue to receive.
"It [the shale industry] has burned up cash whether the oil price was at $100, as in 2014,
or at about $50, as it was during the past three months. The biggest 60 firms in aggregate
have used up $9 billion per quarter on average for the past five years."
Higher oil prices are now being touted as the industry's savior but, as The Economist noted,
the shale industry was losing money even when oil was $100 a barrel.
Still Wall Street keeps giving the shale industry money and the shale industry keeps losing
it as it ramps up production. To be clear, this arrangement makes shale company CEO s and
financial lenders very rich, which is why the trend is likely to continue. And why Continental
Resources CEO Harold
Hamm will continue to repeat the myth that his industry is making money, as he did at the
end of 2017:
" For anybody to even put forth the suggestion we haven't had great expansion and wealth
creation in this industry with horizontal drilling and all the technology that's come about
the last 10 years, I mean, it's totally ridiculous."
No one will argue that Hamm and his partners on Wall Street are not extremely wealthy. That
has happened despite Hamm's company and the rest of the fracking industry losing epic sums of
money. The same year Hamm made that statement, his company couldn't even cover its interest
expenses. To put that in perspective, Continental Resources couldn't even make the equivalent
of the minimum payment on its credit card.
Watch What the Industry Does, Not What It
Says
Higher oil prices are yielding
more stories about how 2018 will be the year that the shale industry finally makes a
profit. Harold Hamm refers to it as Continental Resources' "breakout year." Interesting how potentially not losing
money for a year is considered a "breakout year" in the shale industry .
As reported on DeSmog, the industry certainly got a huge
boost from the recent tax law, which will help its companies' short-term finances.
Continental Resources alone took home $700 million in tax relief.
Recent reports in the financial press detail how the new approach in the shale industry will
be to focus only on profitable oil production, not just producing more barrels at a
loss. As The Wall Street Journal put it in a headline:
"Wall Street Tells Frackers to Stop Counting Barrels, Start Making Profits."
In that very article, Continental CEO Hamm assures that he is on board with this new
approach, saying, "You are really preaching to the choir." But has Continental actually
embraced this new approach of fiscal responsibility and restraint? Not so much.
The fracking firm appears to have done the opposite, increasing production to record levels
along with the rest of the shale industry. Continental recently reported plans to drill 350 new wells at an estimated
cost of $11.7 million per well, which adds up to over $4 billion in total costs on those wells.
The company currently holds more than $6 billion in debt and less than $100 million cash.
How will Continental fund those new wells? Hamm has promised that going forward, there would
be "absolutely
no new debt." Perhaps Continental will fund it by selling assets because without more debt,
Continental does not have the money to fund those new wells. However, if past is prelude, then
Wall Street will happily lend Continental as much money as it wants. Why would Hamm say one
thing and do another? Well, he personally has accrued billions of dollars while his company has
burned through billions. Despite leading Continental to another money-losing year in 2017, Hamm
took home
a fat raise .
Funny how the news cycle will go nuts if -- insert public pension fund -- has 0.07% of its
holdings in a gun stock.
But not a peep at 'golly aw shucks' Mr. Grandpa USA, Warren Buffet, over Wells Fargo its
retail banking or its fracking enabling. or at (pal of chuck schumer and clintons) Jamie
Dimon or USA-rescued Citi.
Don't forget that warren buffet also owns the trains that eat a lot of the profits of the
koch bros investments in the tar sands. That why they wanted that keystone pipeline soooooooo
baaaad
The article could use an explanation -- for those of use who are financial
dummies -- of who the investors are that are making these apparently foolish bets. If Wall
Street is the bookie then who are the bettors? Or are the Wall Street banks using deposit
money to invest in fracking?
On a recent drive through West Texas I noticed the landscape dotted with what looked like
newish mini factories -- presumably fracking operations. Clearly it's not a low cost
endeavor.
I keep thinking that the whole enterprise was bankrolled specifically to crush oil prices
and keep inflation tamped down, which provides much more profit to wall street via the
assurance that the Fed's easy money policy lasts a lot longer.
All the rest of this talk
about profitability is just BS cover story. It's also an employment plan, in the same way
that bankrolling student loan debt was a a huge employment plan for administration and
construction, and soaked up unemployment by lifting enrollment rates and taking people out of
the labor market.
I think we forget how so much of what happened after the financial crisis
was a way of getting around the fact that they wanted the stimulus so much bigger than the 1
trillion they didn't even manage to get. I mean, look at the for profit school industry
– that was an obvious total racket and a joke, yet they threw money at it, then
pretended to clean up the shocking unexpected mess after when it was safe to do so (when the
economy was more in the clear.)
The wall street insiders make a mint trading the junk stocks
up, then short the hell out of them when they know the game is over and make a mint on the
way down.
I've been wondering the same thing. There must be a huge pile of non-performing debt on
someone's balance sheet or it's being moved around to where significant write downs are
happening, but I have no idea where either of those two things might be. Who are the
stuffees? Is German banks buying subprime again?
" If Wall Street is the bookie then who are the bettors?" It's a great question that leaves everyone guessing. My guess is pension funds, and
calling them bettors is being kind.
A bit off topic but yesterday in links was an article about the long time it takes to sue
Goldman Sachs. Now, it's good to see a little bit of trouble coming their way but the article
describes the lady doing the suing as a sweet innocent young thing being mauled by the male
predators at Goldman and her specialty was the "sale of convertible bonds", a fee generating
bullshit jawb that made her more money in a year than a deplorable can dream of making in a
lifetime.
There were two problems however. One, the sexual predator grabbing her was a bit of a
sideshow and from reading the guts of the article, the much bigger one is about money and how
the ladies of Goldman were being cut out from their rightful share of the fee-loot generated
at Goldman Sachs.
Bernie Sanders: The business of Wall Street is fraud and greed.
Pension funds is a good guess but one would think the consistent losses would start to
show somewhere. The bezzle at this point has to be approaching trillions.
In the case of public pension funds, many of not most of the "shortfalls" are in fact
intentional under-funding of the plans, with contributions to the funds being skimmed off by
state governments and diverted into the general operating funds, because Taxes Bad.
No it isn't a low cost endeavor and that may be precisely how the scam works. Note that
the article mentions at the end that Hamm who founded Continental has made billions
personally while the corporation flounders.
So the question is, what else does he own?
I've mentioned this book a few times recently that I'm still in the middle of –
Railroaded by
Richard White . He points out that the 19th century railroad corporations were
disorganized, poorly run, money losing enterprises. But that didn't stop people from
investing in them and getting filthy rich. All you need is some fast talking and clever
accounting. One example he mentions is that the railroads needed all kinds of supplies to
keep things moving and so they would buy them from railroad logistics corporations or fuel
from coal companies, etc. But guess who owned the suppliers? That's right, the railroad
investors would set up separate companies to supply their own railroads and these
companies were extremely profitable.
But the pool of investors in these supplier companies
was limited to the smart money in on the scam. In essence, the initial well heeled investors
set up the railroads so that they could deliberately fleece them. He gives the example of one
of the coal companies charging the railroad three times the going rate, which beggared the
railroad but lined the pockets of the select few investors who owned stakes in both
companies.
I suspect that something similar may be going on in the fracking industry. So to figure
out the whole scam, you would need to know if the logistics companies are making a profit and
is there any common ownership between those companies and the frackers.
Also, for anyone interested in the shady world of corporate finance and how it came to be
in the US, I can't recommend the book linked to above enough. One other aspect I found
fascinating is how the railroad investors turned to Europe and specifically the Germans to
buy their bonds when they couldn't find enough suckers stateside. Reminds me quite a bit of
the mortgage crisis a decade ago that spilled into Europe.
The other book I recently read was The Whiskey Rebellion by William Hogeland which
discusses finance and taxation during the period just after the American Revolution. Shorter
version – Alexander Hamilton was a crook who deliberately set up a financial system to
ensure that the rich get richer off the labor of the rest of us.
The more you learn about the history of this country, the more you realize that there
really is nothing new going on and the financial crooks of today are just following in the
footsteps of their grifter forebears. And maybe someday they too will have cities named after
them or at least a statue in the public square, because the US of A does love its con
men.
Thank you very much for the book recommendations!
Maybe their back up investments are in "fixing" the externalized, environmental costs e.g.
water filtration systems that remove radiologocals/heavy metals from municipal supplies with
the cost of purchasing being inversely portional to the extent of privatized ownership
permitted?
We spread the radium & strontium flavored "produced water" on as a replacement for
road salt. Slickwater fracking of the Marcellus became sellable, after Katrina messed up
Shell's deep water platforms in the Gulf (ie: a Democrat administration in PA, allowed
fracking in a huge reservoir, 1/4 mile from two 40yr old reactors and "watering down" return
water to "permissable levels" of toxic substances illegal to disclose to the 850,000 folks
drinking "treated" water. (note the dates?) https://vimeo.com/44367635
https://www.propublica.org/article/wastewater-from-gas-drilling-boom-may-threaten-monongahela-river
Hogeland's book Founding Finance is also great. Michael Perelman's book Railroading
Economics is worth a read. The founders of economics in the US were looking at the example of
the railroads and other corporations and acknowledging that competition was destructive and
wasteful, but in their textbooks for college students they pushed the simplistic and
misleading models that came to define neoclassical economics.
I know nothing, but:
Banks can fund loans by creating deposits and then carry the debt on their books as assets.
And they can be hidden there, their assets are secret.
If the stuff can't be paid back it's toxic, just like subprime in 2008 .
And the party goes on until rising rates push the economy into recession, banks stop rolling
over loans, the borrowers go to the Wall, etc.
And then what? The usual thing is for gov to bail out the Tbtf banks rather than take them
over, and sack or jail the officers because can't hurt the biggest donors. But if it all
hangs together until 2020 and Bernie wins there might be a change in the script.
If Sanders thinks of running again, he should say something basically like . . .
" If I am elected, I will have in place some responses ready to roll out and apply when the
next crisis and depression breaks out during my term." And he could say why he is predicting
a "next crisis and depression". If he were to get elected and then we had a next crisis and
depression during his term, he would get public credibility for having predicted it. And he
might have more political latitude for "doing the FDR thing" in response.
Many corporations, education institutions have pulled out of the fossil fuel industry
investment funds, a cursory reading of the press will give you an update
My guess is that even thought the banks aren't necessarily lending directly to the
frackers and the fees they collect are lucrative, they still have some skin in the game
somehow. The investors who are putting up the cash must have got the money from some bank or
another. So the banks wouldn't put up this much money without some guarantee they would be
made whole when it all goes belly up.
And I can't think of a bigger wink and a nod than what happened about ten years ago after
the banks blew up the mortgage industry. If Uncle Sugar came to the rescue then, I think it's
safe for them to assume it will happen again. After all, their friends run Treasury and the
Fed.
And see article in FT posted in links a couple days ago "liquidity ousts debt as the big
market worry." It provides some charts showing that banks are shifting away from holding debt
and playing more of the role of broker (with some anti-regulation propaganda thrown it as
editorial spin).
@Jim M
May 6, 2018 at 8:28 am
-- --
One of the things the banks frequently do when their borrowers go into bankruptcy, is to
participate in the debtor-in-possession financing that the bankruptcy court guarantees to be
repaid. This allows them to earn some interest to offset any losses.
If the fracking companies don't go bankrupt, the debt will be rolled over continuously
until the whole system collapses and the Fed bails out the banks again.
I guess that all the money pumped (no pun intended) into fracking must have originated in
the several trillion dollars worth of Quantitative Easing funds created in the past decade.
All that money sloshing around had to go somewhere. Maybe the only good news is that this
will be all one way to cancel some of these excess funds. The bad news is that supporting an
insupportable industry will screw up huge tracts of land and water supplies for god knows how
long.
Though not as "profitable" as converting as much energy production as possible to solar,
wind, and Pumped Storage Hydro (to store otherwise wasted "free" energy at 1/20th the cost of
batteries), it seems inevitable that people will not keep paying so much extra for what
should be much cheaper energy.
I don't know what price the planet and ones keeping us on too expensive energy will pay in
the long run (financial market losses by suckers, or tax payers for Citizens United enabled
politicians and phony regulators), but I suspect the ones that see the inevitable are getting
as much profit as they can, while they can, and leaving so many more holding the bag
(financially, and in abused environment).
There are some that will make wiser investments in more sustainable energy, as they accept
lower returns more in line with energy production at much better cost benefit ratios (which
are also less environmentally damaging).
Perhaps Wall Street and the banks are playing a larger game. When the U.S. had $4.00+
gasoline there was a real motivation to rework transportation systems and rely less on cars.
Now, with the lower oil prices we are back to SUV's and pick-up trucks. So maybe a loss
leader in the fracking scam has preserved a much larger cash cow in auto finance. There is
also the whole oil services industry to consider. With new conventional discoveries at an all
time low, what would the oil services sector do if there were no fracking?
Can't help but wondering if this isn't all part of the neo-conservatives and their 'Great
Games'. Since 1971 and the peak of conventional oil production in the US, the country has
been a power in decline, economically if not militarily. If, as Frederick Soddy wrote almost
a hundred years ago "Life is fundamentally a struggle for energy", then the country which
controls that energy controls life on our planet. (I believe Kissinger said much the same
thing.) This has all kinds of implications for issues from world (Middle East) peace and
transitioning to renewable energy sources. Accidents of geology have left Middle Eastern
countries with most of the world's remaining easily exploitable sources of conventional oil
– and also as holders of much of the US and Western government debt upon which the
international monetary system is based.
Free the world from its dependence on fossil fuels and you free it from its dependence
reserve currencies, US government and Wall Street-created debt. I wish Hudson would return to
the theme which introduced me to his work, Super (monetary) Imperialism . End it,
i.e. replace the free lunch international monetary system from which the US and its
'exceptional people' derive the funds to spread murder and mayhem around the world, and you
open at least the possibility for the world to enjoy a little peace and get to work on
serious problems like climate change.
I also can't help but wonder if Reagan shouldn't be most remembered for his instructions
to White House maintenance personnel to 'take down those solar panels'. This is eight years
after Hudson published Super Imperialism – more than enough time for at least
policy makers, drawn mostly from the ranks of finance, to understand 'the game' (and the
orders from Saudi Arabia they must follow if they wished to keep playing.) Fracking is / was
just a feeble attempt to show some independence which it and the rest of the world do NOT
have so long as they remain hooked on the Middle East's 'ancient sunlight'.
They were installed on the roof so that the White House kitchen could have hot water. And
they didn't work well. So, Reagan had them removed. ISTR reading that a photovoltaic array was installed while Obama was president.
This does appear to be at the core of human nature, particularly if you substitute "power"
for energy as a term to include both physical BTUs, who's pursuit we share with all other
animals, and the social relations that can be commanded with it which are a strictly human
thing.
The question now front and center is, "is humanity capable of self-conscious restraint on
power, even at the risk of extinction?"
I can only imagine survival for our species if we can make a religion of opposing "power"
at the risk of life as a mater of faith. Power has to be a community resource used for
community aims that intergenerationally sustain the community, but "the coordination problem"
of large groups militates against this notion. A stretch I know, the limits of my creativity
are showing!
Thank you for posting this excellent piece. However, I question whether the domestic shale
oil industry is financially unprofitable when it is considered in the aggregate, or if it is
just the exploration and production sector. Setting aside for a moment the huge
environmental, health and other social costs associated with this industrial activity, there
is a vast network of entities that depend on this debt-fueled oil extraction and development.
They range from oil and gas steel pipe manufacturers in Youngstown and drilling rig
manufacturers in Texas to tank railcar manufacturers in Louisiana to major railroads to
refineries and petrochemical facilities to pipeline companies and to some extent the domestic
auto industry and military, etc. No question the domestic shale oil extraction sector itself
is not cost competitive with other global suppliers, but I am wondering about the cumulative
secondary and tertiary economic and employment effects.
The primary problems with this industry sector lie in the enormous long-term environmental
and social costs it imposes, maybe even raising existential questions. Then there is the
issue of oil pipeline companies being granted eminent domain to deliver this oil for export
when the nation as a whole is a major net importer. Is that really a "public purpose" for
which the eminent domain laws were intended, or simply to line the pockets of a few?
Considering the environmental impact of Non-conventional drilling ( fracking ) it should
be noted that although denied by the industry wells have a considerable leak rate which puts
methane aint the atmosphere and threatens potable water supplies. In addition the uptick in
fracking has suppressed the development of non fossil fuel energy production which leads us
headlong into the 1.5 to 3 degree temperature elevation that the Paris agreement seeks to
avoid. The following links are a good introduction to these dangers. It seems likely that
human intelligence will prove to be a lethal mutation.
What happens when the true costs of fracking- to the land, soil, water, and communities-
become part of
the equation? That can't come soon enough, in my view. The squandering of vast natural resources here in the USA! is just so saddening.
At least the poor warehouse worker knows he doesn't have the time, so he carries his new
P-bottle just in around in case; maybe the frack-daddies should wake up and start packing new
bottles!
This is a good post. It is an existential question.
If I remember my lessons from NC, in 2007 it was clear that the subprime mortgage
securitization scheme would tank as the housing market collapsed. The short spread bettors
couldn't get anyone else to see what was really happening. Then suddenly Bear Stearns was
sold, Lehman Brothers went bankrupt and AIG had to be rescued.
I assume that Wall Street will continue to make loans out of thin air and pocket the Vig.
The Fed assures that the banks have an infinite money supply with deregulation and not
forcing the banks to write off their bad loans. This is similar to the MMT funding of the
military's never ending overseas wars. Wars end – badly most of the time. Fossil fuels
are finite. When the fuel costs more money to produce than it can be sold; the system
collapses. So, does that portion of civilization that is dependent on that energy source if
there is no alternative available.
I work in the oil industry. My job is as a type of low-level geologist, actually living
and working out on oil rigs for weeks or months at a time. (I drive to the nearest town with
a ChinaMart about once a week or so to wash clothes and buy more groceries.)
Several observations:
1) What the Saudis did in 2014 – 2016, maximizing output and spending ~2/3 of the
800 billion dollars equivalent in savings they then held to sustain their economy and regime,
trying to bankrupt the U.S. oil industry (and secondarily, the Iranians, etc.) they quite
literally cannot do again, anytime soon. They're close to broke, and fighting 1 – 2
wars.
2) The U.S. oil industry cut costs dramatically over the 6-9 months from the end of 2014.
That was done primarily by cutting WAY back on drilling (active rig counts in ND declined by
90-95% over that time) and reducing what they would pay drilling and service companies.
Mudloggers, MWD, directional drillers, casing crews, etc., saw their wages go down by over
HALF, if they even still had a job. (Many to most did not.)
3) The oil industry is pretty busy right now, but is running into some constraints. Tops
is they are still in the early stages of raising wages back up; I only make about 3/5 as much
per day as I did in October 2014 (and there has definitely been some inflation in the prices
I pay for most everything since then). Many workers that left were older, so just completely
retired or found retirement jobs. Some bought trucks/farms/small businesses, so are reluctant
(especially at these still-depressed wages by 2014 standards) to uproot and come back. Many
just can't see the math working, while others (or their wives, which = to the same thing)
just can't stomach facing another inevitable downturn at some point, with inevitable job
loss.
4) More than a few oil companies have leases on which they must drill, either in a certain
time period before drilling rights expire, or must actually drill to retain them. Further,
while many oil industry investors sadly poorly understand the delay between "let's drill
there" and having oil to sell, many do. Some, perhaps a lot, of drilling is done in
anticipation of eventually (likely almost certainly) higher prices at some point.
5) Oil companies actually aren't that bad on the environment most of the time.
5-10,000′ feet down where the zones of interest typically are located, WGAF what is
pumped or spilled, as no one travels or lives there. (Very thick, impermeable casing
hydraulically seals off those zones from interacting with the surface, with innumerable
impermeable strata between fracked zones and surface water wells, the latter rarely even
1000′ deep, and usually more like <200'.) By comparison, ethanol (whether from grain
or sugar cane) requires vast acreage be farmed, using POL for many aspects (~90% of
commercial fertilizers and nearly all pesticides have oil origins), while windmills chop up
tens of millions of environmentally desirable, often endangered or protected, birds every
year in the U.S., with little or no sanctions on the windmill companies.
6) People working in the oil industry typically have the same attitude I have about
anti-oil protesters. That is, let the ones who don't use petroleum, complain. That's not just
gasoline, diesel, heating oil, kerosene, etc., but also lubricants, pesticides, fertilizers,
plastics, thermal insulation used in most dwelling and commercial buildings, and anything
produced or manufactured or transported by same. No food, no clothes, no utilities, no
transport besides feet -- that would kill easily 90% of Americans within 6 months. This is
part of why I figure all the sincere environmentalists have already committed suicide -- and
the rest are hypocrites.
Regarding " The Saudis trying to bankrupt the U.S. oil industry" – The Saudis were
not out to destroy the US oil industry. The US oil industry controls the Saudis through the
US Military which keeps them in power. The Saudis were after the wildcat frackers who were
not part of the global oil cartel (which includes US Big Oil). The wildcat frackers were not
maintaining limited production quotas to maintain the monopoly oil price gouging. US Big Oil
allowed the price collapse for long term goals with their Saudi partners. (Source: Antonia
Juhasz) Apparently Wall Street was not in on the plan and kept the money flowing in the
fracking Ponzi scheme.
Regarding: "while windmills chop up tens of millions of environmentally desirable, often
endangered or protected, birds every year in the U.S., with little or no sanctions on the
windmill companies." – This statement is just oil company propaganda. Quoting Stanford
Prof. Mark Jacobson: "Wind turbines reduce bird kills relative to natural gas, coal, and oil
for electricity and cause about the same bird death rate as nuclear power. A recent study
published in Energy Policy found that wind turbines kill less than one‐tenth the bird
deaths caused by each of natural gas, coal, and oil and similar deaths to that caused by
nuclear power. As a result, wind turbines reduce bird kills relative to fossil energy
sources. In addition, according to the American Bird Conservancy, the total number of bird
deaths per year due to wind turbines (a few hundred thousand) is orders of magnitude lower
than the numbers due to communication towers (10‐50 million), cats (80 million), or
buildings (900 million)." Source: https://web.stanford.edu/group/efmh/jacobson/Articles/I/MythsvsRealitiesWWS.pdf
Regarding: "Oil companies actually aren't that bad most of the time." – The same can
also be said of mass murders and child rapists. Oil company pollution and their global
ruthlessness is well documented – and as the oil man I know once told me – to
understand this industry all you need to do is watch the movie "There Will Be Blood."
Luke is an oil man who brings to mind the Upton Sinclair quote "It is difficult to get a
man to understand something when his salary depends upon his not understanding it." He would
have fit right in with those men cutting down the last tree on Easter Island -- unconcerned
about the future of their people. He thinks climate change is a crock because if it is true,
then his job is destroying the planet. For anyone paying attention to global pollution and
climate change, it is clear we need a rapid transition to renewable energy (solar and wind),
a reduction in consumption (transition to more leisure time), and stewardship for the planet
rather than the get-rich-quick mining mentality that leaves a giant mess for future
generations to clean up – assuming human civilization survives. The
economic/engineering outlines for this needed rapid transition are discussed by Prof. Mark
Jacobson in several publications – here is the one for California. ( https://web.stanford.edu/group/efmh/jacobson/Articles/I/CaliforniaWWS.pdf
) Current non-planning for the coming disaster just leave us "circling the drain" -- waiting
for the ultimate collapse.
"There's a sucker born every minute" and Wall Street is P. T. Barnum directing investors
with the sign "This Way to the Egress." The con will last as long as investors have cash to
burn and think "product growth" is equivalent to "profit growth" – or in the words of
Lucy "Well, uh maybe there is no profit on each individual jar, but we'll make it up in
volume."
"... By Irina Slav, a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry. Originally published at OilPrice ..."
By Irina Slav, a writer for the U.S.-based Divergente LLC consulting firm with over a
decade of experience writing on the oil and gas industry. Originally published at OilPrice
"I personally think none of us will be able to get around it," Vitol's chief executive Ian
Taylor
said last week, commenting on the effects that renewed U.S. sanctions against Iran will
have on the oil industry.
The sanctions, to go into effect later in the year, have already started to bite. French
Total, for one,
announced earlier this month it will suspend all work on the South Pars gas field unless it
receives a waiver from the U.S. Treasury Department -- something rather unlikely to happen. The
French company has a lot of business in the United States and cannot afford to lose its access
to the U.S. financial system. So, unless the EU strikes back at Washington and somehow manages
to snag a waiver for its largest oil company, Total will be pulling out of Iran.
Other supermajors have not dared enter the country, so there will be no other pullouts of
producers, but related industries will be affected, too, in the absence of a strong EU reaction
to the sanctions. For example, Boeing and Airbus will both have their licenses for doing
business in Iran revoked, Treasury Secretary Steven Mnuchin said , which
will cost them some US$40 billion -- the combined value of contracts that the two aircraft
makers had won in Iran.
Tanker owners are also taking the cautious approach. They are watching the situation
closely, anticipating Europe's move, but acknowledging that the reinstatement could have
"significant ramifications" for the maritime transport industry, as per the
International Group of PI & Clubs, which insures 90 percent of the global tanker fleet.
Everyone is waiting for Europe to make its move even as European companies in Iran are
beginning
to prepare their exit from the country. Everyone remembers the previous sanctions, apparently,
and they don't want to be caught off guard. But the signals from Europe are for now positive
for these companies, of which there are more
than a hundred .
Earlier this month, an adviser to French President Emmanuel Macron
said that Europe's response to the thread of U.S. sanctions on Iran will be "an important
test of sovereignty." Indeed, unlike the last time there were sanctions against Iran, the
European Union did all it could to save the nuclear deal and has signaled it will continue to
uphold it.
While some doubt there is a lot the EU can do against U.S. sanctions, there is one 1996 law
dubbed a blocking statute that will ban European companies from complying with U.S. sanctions,
which would put companies such as Total between a rock and a hard place.
European Commission President Jean-Claude Juncker
said two weeks ago the commission will amend the statute to include the U.S. sanctions
again Iran and that the amendments should be completed before the first round of sanctions
kicks in in early August.
Many observers believe that if the sanctions are only limited to the U.S. and no other
signatory to the nuclear deal joins them, the effect will be limited as well. As McKinsey
analyst Elif Kutsal
told Rigzone, "Market fundamentals are not expected to change structurally given that Iran
doesn't export crude oil or refined products to the U.S. and exports go mainly to Europe (20
percent) and Asia Pacific (80 percent). Therefore, if the sanctions are only limited to the
United States, then this could cause short-term volatility in prices until a new/revised
agreement framework is put in place."
And this is where Iran's Supreme Leader Ayatollah Ali Khamenei scored a goal: He demanded
that the European Union provide guarantees it will continue to buy Iranian crude. If it
doesn't, he said, Iran will restart its nuclear program. Now, if this happens, the EU will not
have much choice but to join the sanctions, and then hundreds of thousands of barrels of
Iranian crude could be cut off from global markets.
However, even this will result in only a temporary decline in supplies, according to Kutsal,
and others that believe that Asian imports from Iran will offset the effect from the U.S.
sanctions. According to this camp, the only thing that can unleash the full effect of sanctions
is the UN joining the sanction push against Iran.
Qatar's foreign minister reacted publicly on Thursday to the recent wave of visits by
leaders of U.S. Jewish organizations to his country at the invitation of the ruling
Emir.
It seems the Qataris have figured out the best way to influence American foreign policy is to
appeal to the real power brokers in the U.S..
Doha wants to influence D.C. elites. But rather than targeting Congress or the media,
they're lavishly, and disproportionately, focusing on right-wing, pro-Israel Jews
One demand which the Qataris immediately acceded to was the suppression of the al Jezeera
expose on the jewish lobby in American politics.
Two extraordinary events have come together to place Al Jazeera in a vise-like squeeze
that may result in the death of a major TV documentary expose about the power and operations of
the Israel Lobby in the U.S. The same investigative team ... created the remarkable four-part
film, The Lobby, about the UK Israel Lobby.
and
The new documentary follows a similar script. Al Jazeera recruited someone to infiltrate
various Lobby organizations based in Washington...
and
...Haaretz published a story acknowledging that almost all of these American Jewish supplicants
came to Qatar for one very special reason (there may have been others, but this one was key).
They wanted the Al Jazeera documentary killed. They knew if it was aired it would make them
look as shabby, venal, and crude as the UK series did.
Posted by: pantaraxia | May 22, 2018 11:03:42 AM |
6
The Saudi defense ministry announced in a statement on Sunday that Riyadh ruler Faisal bin
Bandar bin Abdolaziz has attended the ceremony instead of bin Salman.
The statement declined to comment on the reason of bin Salman's absence while naturally the
defense minister should participate in such ceremonies.
He didn't appear for any of the Ramadan events either, which is very odd."
Notable quotes:
"... A growing number of videos surfaced the media at the time displaying that a heavy gunfire erupted around King Salman bin Abdulaziz Al Saud's palace in the capital, Riyadh. ..."
"... Witnesses and residents of the neighborhoods near the palace said a coup was underway, adding that the soldiers attacking the palace were guided by footage and intel they were receiving from a drone flying over the palace. ..."
"... Saudi opposition members claimed that "a senior ground force officer has led a raid on the palace to kill the king and the crown prince". ..."
"... Saudi Arabia, the world's top oil exporter, has witnessed a series of radical political changes over the past year as Mohammed bin Salman ousted his cousin as crown prince and jailed well-known princes in an anti-corruption purge. ..."
"... Moreover, bin Salman oversees social and economic reforms that have been censured by several powerful Wahhabi clerics. ..."
"... Notably, bin Salman made no media appearance during the April 28 visit of the newly-appointed US State Secretary Mike Pompeo to Riyadh, his first foreign trip as the top US diplomat. ..."
"... During his stay in Riyadh, Saudi media outlets published images of Pompeo's meetings with King Salman and Foreign Minister Adel al-Jubeir. ..."
According to the Persian-language newspaper, Keyhan, a secret service report sent to the
senior officials of an unnamed Arab state disclosed that bin Salman has been hit by two bullets
during the April 21 attack on his palace, adding that he might well be dead as he has never
appeared in the public ever since.
Heavy gunfire was heard near the Saudi King's palace in Riyadh Saudi Arabia on April 21,
while King Salman was taken to a US bunker at an airbase in the city.
A growing number of videos surfaced the media at the time displaying that a heavy
gunfire erupted around King Salman bin Abdulaziz Al Saud's palace in the capital,
Riyadh.
Reports said the king and his son, Crown Prince Mohammed bin Salman, were evacuated to a
bunker at an airbase in the city that is under the protection of the US troops.
While Saudi officials and media were quiet over the incident, there were contradicting
reports over the incident. Witnesses and residents of the neighborhoods near the palace
said a coup was underway, adding that the soldiers attacking the palace were guided by footage
and intel they were receiving from a drone flying over the palace.
Saudi opposition members claimed that "a senior ground force officer has led a raid on
the palace to kill the king and the crown prince".
Videos also showed that a growing number of armored vehicles were deployed around the
palace. 'Bin Salman's special guard' then took charge of security in the capital. Riyadh's sky
was then closed to all civil and military flights as military helicopters from 'Bin Salman's
special guard' were flying over the palace.
Bin Salman was a man who previously often appeared before the media but his 27-day absence
since the gunfire in Riyadh has raised questions about his health.
Saudi Arabia, the world's top oil exporter, has witnessed a series of radical political
changes over the past year as Mohammed bin Salman ousted his cousin as crown prince and jailed
well-known princes in an anti-corruption purge.
Moreover, bin Salman oversees social and economic reforms that have been censured by
several powerful Wahhabi clerics.
Saudi Arabia is also embroiled in a long running conflict in its Southern neighbor Yemen,
dubbed by the United Nations as the world's worst humanitarian crisis.
Notably, bin Salman made no media appearance during the April 28 visit of the
newly-appointed US State Secretary Mike Pompeo to Riyadh, his first foreign trip as the top US
diplomat.
During his stay in Riyadh, Saudi media outlets published images of Pompeo's meetings
with King Salman and Foreign Minister Adel al-Jubeir.
This is while the state-run outlets used to publish images of meetings in Riyadh between bin
Salman and former US secretary of state Rex Tillerson.
A few days after the April 21 incident, Saudi media published footage and images of bin
Salman meeting several Saudi and foreign officials. But the date of the meetings could not be
verified, so the release of the videos could be aimed at dispelling rumors about bin Salman's
conditions.
It is not clear if bin Salman's disappearance is due to reasons such as him feeling
threatened or being injured in the incident.
It has been almost a month since Saudi Crown Prince Mohamed bin
Salman made a public appearance, triggering questions whether the April 21 incidents at the
Royal Palace had a role in his disappearance.
Several reports claimed that the security incident in April, what Saudi officials said was a
result of a recreational drone flying near the king's palace in Riyadh, was indeed a palace
coup attempt. Saudi Prince Salman was allegedly injured during the attempt, according to
reports, mostly coming from Iran.
As a man who enjoys the public and media's eye, Salman's absence caught attention especially
after he was not seen on camera during U.S. Secretary of State Mike Pompeo's first visit to
Riyadh in late April.
The 32-year-old leader ousted his older cousin as crown prince last summer in a palace coup
and then jailed senior royals as part of an anti-corruption sweep. Prominent clerics have also
been detained in an apparent bid to silence dissent.
Those moves have helped Prince Mohammed consolidate his position in a country where power
had been shared among senior princes for decades and religious figures exercised significant
influence on policy.
But they have also fueled speculation about a possible backlash against the crown prince,
who remains popular with Saudi Arabia's burgeoning youth population
Art presentation raises numerous points that are worth mulling over and at least considering.
According to Art: Eagle Ford production growth is unlikely and that reserves should be exhausted at current production rates
in ~7 years. While Permian production growth is likely, reserves will be exhausted in ~4 years.
Petroleum Age after WWII produced unprecedented economic growth.
Oil shocks of 1974-1986 threatened to end that party.
Demand destruction & oil production bubble resulted in 18 years of cheap energy.
Debt re-started economic growth & debt-based growth of China challenged oil supply
after 2004.
Second oil shock made unconventional oil possible. Zero-interest rates led to 2 nd oil
bubble.
Longest period of high oil prices in history.
That bubble burst in 2014 and oil prices collapsed but without demand destruction.
Now, we are near the end of long-term debt cycle but in denial that the economic basics
have fundamentally changed since the post-war era.
SLIDE 5: Low Interest Rates Created A Capital Bubble For Tight Oil & The Permian
Basin
The oil-price collapse coincided with the end of QE 3 and the beginning of U.S. interest
rate increases.
Continued low interest rates caused margin hunters to focus first on tight oil and then,
specifically on the Permian basin.
$30 oil prices brought large capital flows to a select group of producers seen as
winners.
Tight oil and Permian rig counts have more than doubled since August 2016. Rig
countsincrease with expectation of $55+ oil prices
Increased rig count and fear of ongoing over-supply is a major drag on oil prices.
OPEC production cuts have balanced oil markets since early 2017 & some are now
questioning the lower-for-longer paradigm that dominated the last 3 years.
SLIDE 6: The False Premise that Tight Oil Plays Are the New Swing Producer
No factual support for widespread belief that there is a price war between OPEC &
U.S. tight oil.
OPEC/Saudi Arabia reacted pragmatically to price collapse & recovery.
Prime directive not to repeat mistake of 1982-1986 production cuts.
"Just-in-time production" is another baseless theory.
Shale output reacts to price just like all plays -- slowly & in long-period
cycles.
Idea that U.S. shale is the new swing producer of the world also has no basis.
Being a swing producer means that there is sufficient spare capacity to turn on and off
based on market signals. Shale plays have no spare capacity (they are just-in-time).
Even if DUCs provide some spare capacity, there is no decision-making process that
governs 1000s of independent producers.
SLIDE 7: Shale Cost Reductions 90% Industry Bust, 10% Innovation and Efficiency
Lower costs of shale production widely attributed to technology and efficiency.
Price deflation accounts for 90% of lower costs because of a depression in the oil
industry; 10% is because of technology & efficiency.
That is over for now and prices increased 8% in 2017.
Shale growth has more to do with outside capital supply than break-even prices.
Investors need to believe that significantly higher prices are coming.
"Buy low, sell high" not a sophisticated concept but was responsible for capital flow
into tight oil after price bottom in early 2016.
Smart money has always believed in limits to oil supply.
That will drive the next inflow of capital as markets understand the limits of tight oil
supply.
SLIDE 8: Two of the Largest Tight Oil Plays are in Texas: Eagle Ford & Permian
The Eagle Ford Shale play is expected to recover to 1.3 mmb/d by 2022 & then decline to 1.2 mmb/d by 2050.
The Permian basin plays are anticipated to grow from 2.2 mmb/d in 2018 to more than 3.5 mmb/d by 2044 & then
decline to 3.4 mmb/d by 2050.
On 5/14/2018 at 6:05 PM,
Carlsbad said: So I guess the question is, then, how do we see the oil market,
fundamentally, in that timeframe? Doesn't look great to me, nor does it look disastrous.
Prices are too high right now, but demand is still strong and will be for some time to come.
U.S. shale doesn't always follow fundamentals, though. They seem to binge and purge,
depending on their level of maturity.
Although it appears that we are basically on the same page, I sense one significant
difference in our understanding of the fundamentals, Carl. When I apply sound logic to my
review of past history, I conclude that the price of oil is not a function of supply/demand
levels. In other words, high demand does not cause high prices and plentiful supply does not
cause low prices. Oversupply and undersupply are actually impossible situations. Consumption
draws out whatever supplies that it needs at whatever price is in vogue at that moment. Supply
always matches consumption at every price level. If you question this assessment, I can show
you historical data that refute whichever side of the supposed supply/demand-caused price moves
that you suggest.
Moving on, I agree with your assessment that prices are too high now for a smoothly
sustainable industry. But the time for the system to reach equilibrium, once the price is
established, is much longer than it takes for the system to make a price change. Therefore
demand is forever trying to match the price level, as is supply, but the price changes too
rapidly for either to catch up. Distressing but true.
Turning to shale oil, Mike Shellman has spoken for years about the underlying problem of the
shale industry. He astutely points out the disconnect between the industry's willingness to
borrow and drill, concomitant with no thought of the consequences of their combined output,
allowing the industry to suffer the consequences of desperation marketing. So the roller
coaster price/production profile will likely continue. Binge and purge it shall be!
On 5/14/2018 at 7:42 PM,
Tom Kirkman said: Related to your question, here is a link to Art Berman's recent
presentation.
While I don't expect others to agree with Art's conclusions (he is directly flying in the
face of mainstream opinion), his presentation raises numerous points that are worth mulling
over and at least considering .
Thanks, Tom. I went through Art's presentation, rather quickly I must admit, and I find
agreement with most of his presentation. He was over my head on some of it so my comments
exclude that info.
I should emphasize my strong agreement with his assessment regarding the swing producer. His
views match mine and we both can vigorously defend the validity of that assessment. The US
reserves are much too small for us to ever be considered in the swing producer role. On an
instantaneous basis we can force pricing actions that are basically unsound for the industry,
but we cannot sustain the supply impact that would be necessary to play that game very
long.
His presentation is well worth the time required to understand his points.
Thank you once again, William. I have a long standing "debate" with an analyst who is very
into modeling shale oil growth. His driving factor is price. Our arguments stem around the fact
that the US shale oil phenomena is based entirely on the availability of low interest capital
and has little to do with product price. We more or less already have proof of that, yes? A
portion of the total HZ rig count in America is controlled by loan covenants and lenders; a
much smaller portion driven by "free" cash flow due to higher prices. If the price falls,
rather when it falls, we'll see less growth but there will still be growth; really its the FED
that's has control of the US LTO industry, not OPEC.
Having said that, I do believe OPEC, Russia and Non-OPEC producers know exactly how
shale oil growth is funded in America, what it costs, how unprofitable it is, and understand
rising GOR, decline and depletion very well. They are not stupid about oil and gas production,
in spite of what folks might think in Midland. There is a price level that is good for the US
shale oil industry (this may be it!) that will drive it plum off the cliff in 3-5 years and
that is precisely the plan. We're always in a big damn hurry in America...in this case to
deplete our remaining hydrocarbon resources. The buzzards are circling.
A last word about Art's presentation in Dallas; he has been getting hammered for his
comments by the shale industry and by the MSM because most, in their rush to attack the
messenger, did not even read the message. The PDP, PUD reserves he quoted that might leave the
Permian HZ play with only about 7-8 more years of life were proven reserves estimated by
shale oil companies themselves and reported to the SEC. He did not make that data up; they
did.
Eric, with respect to my friend, Art Berman, and Yahoo finance, the possibility that 27% of shale oil companies in America
made money in 2017 is a stretch to me. In my opinion, there was a lot of non-GAPP, funky accounting that created this
illusion based on asset sales and enormous, one time tax charges. We have to rely on SEC data, of course, but personally I
don't think anybody made money in 2017, in spite of lower costs, higher productivity, and production cuts from OPEC. More
importantly, at least to me, they did not make enough money to put a dent in debt (Devon reduced debt, EOG added debt).
The shale oil industry, even the mighty Permian, is sustainable only as long as the money holds out. Or until they saturate
core, sweet spots and have to start drilling the really lousy rock, then things will go from bad to worse. In the mean time
the shale industry is facing some hefty debt maturities coming up in a few years, with interest rates going up.
Here is a statistic that will knock your socks off, about 75% of all unconventional HZ wells drilled in the Permian, since
the beginning, now make less than 40 BOPD (IHS, shaleprofile.com); the answer to your question might lie there.
But pat yourself on the back; you are on the right track. Question everything. Dig out the facts. Do your own math. This
might be interesting to you also: https://www.scribd.com/document/370742449/Shale-Reality-Check-Drilling-into-The-U-S-Government-s-Rosy-Projections-for-Shale-Gas-Tight-Oil-Production-Through-2050#fullscreen&from_embed
Geologist Arthur Berman, who has been skeptical about the shale boom,
warned on Thursday that the Permian's best years are gone and that the most productive U.S.
shale play has just seven years of proven oil reserves left.
"The best years are behind us," Bloomberg quoted Berman as saying at the Texas Energy
Council's annual gathering in Dallas.
The Eagle Ford is not looking good, either, according to Berman, who is now working as an
industry consultant, and whose pessimistic outlook is based on analyses of data about reserves
and production from more than a dozen prominent U.S. shale companies.
"The growth is done," he said at the gathering.
Those who think that the U.S. shale production could add significant crude oil supply to the
global market are in for a disappointment, according to Berman.
"The reserves are respectable but they ain't great and ain't going to save the world,"
Bloomberg quoted Berman as saying.
Yet, Berman has not sold the EOG Resources stock that he has inherited from his father
"because they're a pretty good company."
The short-term drilling productivity outlook by the EIA estimates that the Permian's oil
production hit 3.110 million bpd in April, and will rise by 73,000 bpd to 3.183
million bpd in May.
Earlier this week, the EIA raised its forecast for total U.S. production
this year and next. In the latest Short-Term Energy Outlook (STEO), the EIA said that it
expects U.S. crude oil production to average 10.7 million bpd in 2018, up from 9.4 million bpd
in 2017, and to average 11.9 million bpd in 2019, which is 400,000 bpd higher than forecast in
the April STEO. In the current outlook, the EIA forecasts U.S. crude oil production will end
2019 at more than 12 million bpd.
Yet, production is starting to outpace takeaway capacity in the Permian, creating
bottlenecks that could slow down the growth pace.
Drillers may soon start to test the Permian region's geological limits, Wood Mackenzie has
warned. And if E&P companies can't overcome the geological constraints with tech
breakthroughs, WoodMac has warned that Permian production could
peak in 2021 , putting more than 1.5 million bpd of future production in question, and
potentially significantly influencing oil prices.
The takeaway bottlenecks have hit WTI crude oil priced in Midland, Texas, which declined
sharply compared with Brent in April, the EIA said in the May STEO.
" As production grows beyond the capacity of existing pipeline infrastructure, producers
must use more expensive forms of transportation, including rail and trucks. As a result, WTI
Midland price spreads widened to the largest discount to Brent since 2014. The WTI Midland
differential to Brent settled at -$17.69/b on May 3, which represents a widening of $9.76/b
since April 2," the EIA said.
"... Several years ago Putin made a speech at the UN in favor of upholding International Law I thought at the time this "diplomatic statesmanship" was going to be Putin's way of bring Russia back into equal power with the Europeans and the US. Some have wondered and been asking about Putin not being as aggressive as he could be in defending Syria and Iran. Putin's holding off on tough talk/action could be amassing more power in the end. Putin comes off as the voice of sanity..exactly what the Europeans want to hear and see. ..."
Several years ago Putin made a speech at the UN in favor of upholding International Law I
thought at the time this "diplomatic statesmanship" was going to be Putin's way of bring
Russia back into equal power with the Europeans and the US. Some have wondered and been
asking about Putin not being as aggressive as he could be in defending Syria and Iran.
Putin's holding off on tough talk/action could be amassing more power in the end. Putin comes
off as the voice of sanity..exactly what the Europeans want to hear and see.
As Europe turns away from the US they turn to Putin.
If anyone remembers all the Jew rags making fun of "old Europe" during the Iraq war run up
and urging that the US break with them as outdated relics no longer needed in the new modern
age -- this is what it was all about -- separating the US from its traditional allies who
were not as subservient to Israel as the US. So .now we are down to the Jew plan Europe and
sanity vr the US Orange Clown and his allies of midget Nazi Israel, Saudi and the UAE.
Germany begs Russia to pick up the torch that US has dropped
"Germany's Foreign Minister, Heiko Maas, who has a history of expressing anti Russian
rhetoric relevant to Russia's presence in Syria as well as an alleged cyber attack on the
German Foreign Ministry which Maas says that he 'has to assume stemmed from Russia', has
turned an about face. He has traveled, for the first time, to Moscow to discuss international
diplomacy, the Iran nuclear deal, peace talks on Ukraine, and Syria.
Maas met with his Russian counterpart, Sergei Lavrov, where he encouraged Russia to
leverage its influence with Iran to help spur the Middle Eastern state in remaining committed
to the nuclear deal, which Trump abandoned earlier in the week.
Germany's Foreign Minister, Heiko Maas, who has a history of expressing anti Russian
rhetoric relevant to Russia's presence in Syria as well as an alleged cyber attack on the
German Foreign Ministry which Maas says that he 'has to assume stemmed from Russia', has
turned an about face. He has traveled, for the first time, to Moscow to discuss international
diplomacy, the Iran nuclear deal, peace talks on Ukraine, and Syria.
Maas met with his Russian counterpart, Sergei Lavrov, where he encouraged Russia to
leverage its influence with Iran to help spur the Middle Eastern state in remaining committed
to the nuclear deal, which Trump abandoned earlier in the week.
Maas then declared that Germany was interested in bringing back the peace talks on the
Ukraine, together with other European partners. Maas also pointed out that the Syrian
conflict can't be settled without Russia, before contributing a wreath to the tomb of the
unknown soldier, which is a dedication to Russian soliders who died fighting the Germans in
WW2.
Deutsche Welle reports:
Germany's top diplomat Heiko Maas and his Russian counterpart Sergey Lavrov both called
for the nuclear deal with Iran to be upheld on Thursday, during Maas' first official visit
to Russia. The appeal marks a rare moment of unity between Moscow and Berlin just days
after US walked out on the 2015 accord.
In Moscow, Maas urged Russia to influence Tehran and make it stick to the deal, which
aims to limit Iran's alleged pursuit of nuclear weapons. The German foreign minister also
said he was seeking details from the US on its plans for future sanctions against Iran
US President Donald Trump has shrugged off pressure from allies to keep the deal in place
and called the accord "defective at its core." However, leaders of the UK, France, and
Germany all contacted Iranian President Hasan Rouhani in the attempt to salvage the
accord.
Germany's Chancellor Angela Merkel called Rouhani on Thursday to reaffirm Germany's
commitment to the deal "as long as Iran continues to fulfil its obligations," said Merkel's
spokesman Steffen Seibert. Merkel also said she was ready to negotiate about Iran's
ballistic missiles and involvement in Syria and Yemen.
Angela Merkel is also set to visit Russia next week.
Visiting Moscow on Thursday, Germany's top diplomat Maas suggested reviving the peace
talks between Germany, France, Ukraine and Russia on the conflict in eastern Ukraine.
Lavrov responded by saying Russia was "ready to consider" this offer.
Maas also called for "honest dialogue" with Moscow and for Russia to be included in
global diplomacy, despite its differences with Berlin. Maas admitted that the conflict in
Syria "cannot be solved without Russia."
The German diplomat also laid a wreath at the Tomb of the Unknown Soldier in Moscow,
which is dedicated to the Soviet soldiers killed during World War II.
Also in a bid to get Russia to assume a leadership position relative to preserving the
nuclear deal, and by extension, the European economy, Merkel got on the phone with Russian
President Vladimir Putin, where he mutually voiced his concern over Trump's action, and
where Merkel also came forward about the situation in Syria.
TASS reports:
BERLIN, May 11. /TASS/. Federal Minister for Economic Affairs and Energy Peter Altmaier
has confirmed that he will visit Moscow at the beginning of the next week, he said in an
interview with German radio station Deutschlandfunk released on Friday.
"I will follow my colleague [German Foreign Minister Heiko] Maas, who attended
negotiations in Moscow yesterday. I will be there on Monday and Tuesday, and Chancellor
[Angela Merkel will visit Sochi -- TASS] during the week," Altmaier said.
Some analysts do expect oil to reach $80 in the coming months.
Francisco Blanch, head of global commodities research at Bank of America Merrill Lynch, told
Bloomberg Daybreak: Americas that he sees oil hitting that level in this quarter, due to
some bottlenecks emerging in the Permian that could slow down the growth pace.
Goldman Sachs, for its part, sees oil prices at
$80 by the fourth quarter of this year due to expectations that global oil demand growth
will stay high this year, and that China's demand growth may be even higher than currently
estimated.
Report post " What exactly do we get from Russian that we couldn't do without? " <== The
willingness to ally with the U.S. vs the Chinese.
There is no denial of what Russia has done in the last few years, and it's wrong! However,
what is entirely missing from the western media is the U.S. ambassador to the USSR, Jack
Matlock, and George Kennan have been warning the American political elites since the 90's,
prior to Putin was even known and in politics, that the American foreign policy is steering us
straight into confrontations with Russia! It's not if but when it will happen REGARDLESS OF who
is in Kremlin! Nobody cared to heed because we were indulging ourselves as the sole superpower
in the world.
Neither has the American media reported even our old friend, Gorbachev, is praising Putin
and has harsh words for the U.S. In a nutshell, the Russians don't like to be treated as a
nobody country, ie. with decisions of world affairs already made and shoved at their face, and
they can either put up or shut up! However, that is exactly how Washington has conducted
business with Russia until the crisis in Ukraine in 2014. Would the American public put up with
a revolution led by a Russian politician in Mexico City or Ottawa, even though it's Mexican or
Canadians self-determination? Then what makes us think the Russians would tolerate John McCain
leading an anti-Russian revolution in Kiev, even if it's Ukrainian self-determination? Don't
forget the U.S. directly invaded Grenada when they were exercising their self-determination to
ally with the USSR!
This is not about defending Russia. The Russians can take care of that themselves. Rather,
can the U.S. afford to have Russia and China solidify their alliance again? It's already
happening unless we can adopt a sensible Russian policy to turn it around. Who would you rather
ally with? Someone (like the U.S.) who expects you to be a subordinate vs another (like China)
who is willing to treat you as an equal?
One can certainly argue how it is possible to ally with a country like Russia, who sponsors
dictators, meddles in our elections and tramples on other nation's self-determination. If you
are willing to be honest with yourself, just Google it. There is not one thing we accuse of the
Russians that our politicians are not doing it overseas, by MULTIPLE magnitude! The biggest
gripe the Russians have toward the U.S. is "are you preaching democracy or hypocrisy?" Yes, one
sin doesn't justify another, but why our politicians can't uphold this principle when they are
committing treacheries overseas?
"... People think this is about Syria, it is not. It's about oil price. Watch on Monday and the days following oil price will rocket up, and Iran, Russia, US will all be celebrating privately. The Chinese stock market will fall because oil will cost them more. ..."
Syrian state TV said that the attack hit the country's army depots in the area of Homs,
Reuters reported.
A Reuters witness said that at least six loud explosions were heard in Damascus with smoke
rising over the Syrian capital where a second witness said the Barzah district, the location of
a major Syrian scientific research center, was also hit in the strikes.
Meanwhile, Syrian state television reported that "Syrian air defense blocks American,
British, French aggression on Syria." It added that 13 missiles were shot down.
The US has been threatening Damascus with military action since April 7, when a suspected
chemical attack on the Syrian town of Douma, Eastern Ghouta, reportedly killed 60 people and
injured hundreds more. The Syrian government has already strongly denied using chemical
munitions in the flashpoint town.
Joe ,
People think this is about Syria, it is not. It's about oil price. Watch on Monday and the
days following oil price will rocket up, and Iran, Russia, US will all be celebrating
privately. The Chinese stock market will fall because oil will cost them more.
"... North Korea's negotiating position has not really changed with the announcement. They have repeatedly said for years they are willing to agree to denuclearization of the Peninsula in return for security guarantees. I find the media trumpeting this as a new development rather vexing. Anyways, China has been putting the screws on them since about September/October (Apparently, they told Kim Jongun they know they can't overthrow the DPRK government, but they can get rid of him personally), which is also why there have not been any new nuclear tests. ..."
"... I think Yves has got it right: USA threatens PRC with tariffs, so PRC pressures NK to make concessions to the USA. i.e. Two big guys screwing the little guy. ..."
"... In the USA, imperialist machtpolitik is a thoroughly bipartisan affair. It doesn't matter how faithfully NK or PRC might fulfill obligations. Trump's successors, whoever they may be, will simply apply more pressure and demand more concessions. They won't stop until somebody else stops them. ..."
I believe Trump could negotiate a deal. But I also believe he could blow up the whole talk
before it even happens. He has shown that he'll bend quickly to neocon pressure, with
increased interest in foreign war (Bolton hiring) and the ramping up of hostilities by
bouncing Russians from the U.S. over the phony poisoning story in the UK.
I don't disagree with your comment, but not comfortable with the term "bend to". Trump
gets enamored with different people at different times, but he always is looking
down at them. They may get enough rope to scare the rest of us, but they are still on a
rope.
Bolton is horrible, but a lot of other horrible people have come and gone in this really
quick year.
Bolton is horrible but probably won't last long. Nobody at Trump's ear has, including his
own children.
Trump just announced that we're withdrawing from Syria. That's more than Obama ever
did.
Part of being a nationalist demagogue is that you're not as interested in foreign wars
unless they enrich the country. Not a single one of our wars does that. There's nothing
interesting in mercantilism, for instance, that we can't do at home (drill baby drill).
I'm not saying I agree with that view, I'm just saying that if he's a nationalist
demagogue, it only follows that he's not interested in, uh, "non-for-profit warmaking".
I am NO Trump fan or voter, but it does appear that he's the first one to apply sanctions
to those specific Chinese banks handling the trade with North Korea.
(Somewhat) OT, but it strikes me that the best way to look at Trump is through the lense
of what he is – the US version of Sylvio Berlusconi. A sleazy billionaire Oligarch with
no core principles and a fondness for Bunga Bunga parties.
Rather than as LITERALLY HITLER as per the verbiage of hashtag the resistance.
Thus, rather than as a crazed madman bent on "evil" at all times one wonders whether Mr.
Bunga Bunga would do a deal with Lil' Kim. Sure he would, assuming that the ruling military
Junta allows him to. It might be in the interest of the latter to de-escalate this particular
hotspot (as NK crisis/hype fatigue may set in) and simply push Iran as the next flashpoint to
hype.
Indeed! They even sound quite similar -- I recall in a speech that Berlusconi gave when he
was still the Italian president and the Italian left was screaming for his resignation,
Sylvio claimed such demands were making him uneasy, since if he was to go home, and he had 20
homes, it would be difficult for him to decide which house or mansion to go to!
It seems the bottom line for negotiations with North Korea have little to do with this
article which covers Trump's thoughts on nuclear proliferation between major powers that have
massive stockpiles.
North Korea is mainly interested in protecting itself from regime change and from becoming
a US outpost (as in target) butt up against China. It is hard to believe that Kim Jong-Un
would get any advantage whatsoever out of dismantling his nuclear arsenal, however small. One
assumes he is aware of Gaddafi in particular and US's track record on keeping it's promises
– particularly over the span of different administrations – in general.
The above comment assumes full disarmament as the minimum condition of any "negotiation"
since Trump has gone so far out of his way to make that clear.
Oh, and now see the lead story at the Financial Times, China uses economic muscle to bring
N Korea to negotiating table:
China virtually halted exports of petroleum products, coal and other key materials to
North Korea in the months leading to this week's unprecedented summit between Kim Jong Un,
the North Korean leader, and his Chinese counterpart Xi Jinping.
The export freeze -- revealed in official Chinese data and going much further than the
limits stipulated under UN sanctions -- shows the extent of Chinese pressure following the
ramping up of Pyongyang's nuclear testing programme. It also suggests that behind Mr Xi's
talk this week of a "profound revolutionary friendship" between the two nations, his
government has been playing hard ball with its neighbour.
I would normally agree but Kim Jong-Un was just summoned to China. Not even given a state
visit. The Chinese announced North Korea would denuclearlize:
North Korea's leader Kim Jong Un pledged his commitment to denuclearization and to meet
U.S. officials, China said on Wednesday after his meeting with President Xi Jinping, who
promised China would uphold friendship with its isolated neighbour.
China has heretofore pretended that it couldn't do anything about North Korea. It looks
like Trump's tariff threat extracted China jerking Kim Jong-Un's chain as a concession. I
don't see how Kim Jong-Un can defy China if China is serious about wanting North Korea to
denuclearlize. Maybe it will merely reduce its arsenal and stop threatening Hawaii (even
though its ability to deliver rockets that far is in doubt) and just stick to being able to
light up Seoul instead.
Agree. I wasn't aware of the details you mention above regarding the export freeze. (I
won't use Google and my normal 'trick' doesn't work to get around FT's paywall – and I
won't use the trial membership either). I'm hopeless.
Anyway, you make a very convincing case. I can only imagine that Kim Jong Un is one
miserable scared rat. My point about a "silk noose" below was perhaps on the mark.
Kim might agree on paper or through an insincere promise to denuclearize, but I don't see
a closed authoritarian regime like the North agreeing to an inspection regime that would
insure that such a pledge would be lived up to. Reduction, but build-up on the sly w/o
inspections.
China may be interested in a deal to the extent that it prevents a bloody war breaking out
that they'll probably expend manpower to help clean up and it insures the security of a North
Korean buffer that keeps American troops off their border; After all, they've got to keep the
powder dry for "reunification" with Taiwan.
I also don't believe that the US would agree to concessions, such as removing American
troops from the peninsula. the pentagon wouldn't like it, the hawks around Trumps wouldn't
like it, and I believe the SK leadership would not be too crazy about the potential
ramifications for their security with such an agreement.
But, can Trump (by extension, the US), make an agreement that can be relied on over its
term?
For any hope of NK trusting any deal with the US he would have to stand by the Iranian
deal. Then there's Bolton and the Neocon Will To War, for deeply pathological reasons which
by nature cannot be debated.
In this case, the mere possibility of a "deal" is possible, but only if there is a third
party to hold both of them to it.
That's the crazy thing about this. What possible inducement could Kim Jong-Un have gotten
to attend his own funeral? Why would anyone trust the US an inch?
I suppose if he can keep his own people in a suspended state of extreme propaganda, then
he might be vulnerable to his own medicine, but that seems at odds with his behavior so far
(such as the assassination of his uncle). If anything, he would be especially leery of
anything coming out of the US.
And then can he really be that psyched out by Bolton, Pompeo and Torture Lady so
that good cop Trump can hand him is own death certificate with a space for his signature?
Whatever happened during this China trip, the overarching theme must have been how to
manage the US. Here's one rough scenario:
NK 'disarms' to some definition, under the auspices of China, acquiring in return an
explicit Chinese security umbrella for the buffer it presents between them and SK. Nobody
really wants a unified Korea in any case. In return, the US vacates SK militarily, ever so
discretely and over time.
Done correctly, and with the finesse necessary for Trump, China is in a position to
extract all sorts of concessions from the US on other fronts as well. Nothing positive is
going to happen here without China, and they hold most of the cards. If nothing positive
happens, we have to consider the pressure that'd build on Trump to do something, anything,
and that probably being something rash. (Better a big disaster over there than a mammoth one
over here thinking).
"he can't go willy nilly and set nukes a-flying just because it struck him as a good idea
that day."
I mean sure. His "button" isn't literally connected to a missile somewhere, but he sure as
hell can ask that nukes be fired whenever and wherever he wants. You could argue that someone
in the chain of command would prevent that from happening, but that's more of a hope than a
guarantee. For a really good read on how this all works and the history of the nuclear
program I highly recommend https://www.amazon.com/Command-Control-Damascus-Accident-Illusion/dp/0143125788
With Bolton on board and seemingly everyone with half a brain, a little logic and the
ability to hold their tongue for more than about 5 seconds out, I highly doubt anything will
come of these negotiations. In fact, I'm more worried that the US will get steamrolled by
China and NK.
That isn't true. See the link I provided, which you clearly did not bother to read.
Various people can refuse his order as illegal. Former Secretary of State Jim Baker, in a
Financial Times, before Trump was elected, said the same thing. Bolton is the National
Security Adviser. He may have a lot of informal power by having direct access to the
President, but he does not tie in to the formal chain of command, either at the DoD or
State.
Oh I read it and I've read many other articles and a lot of non-fiction on the issue.
Again, I would call your position and the position of this article hopeful at best. Trump has
the football, he has the codes in his jacket pocket and everyone responsible for carrying out
the order to launch has been raised up through a military system that ensures no one
questions an order from their superior. Relying on various people to refuse his order as
illegal in this system is not a fail-safe I feel comfortable with. I do find it interesting
that you just assume I didn't read the article as if this one article is the end all be all
on the subject.
The article seems a bit confused about what it's trying to say. Stopping nuclear
proliferation has been a major policy priority of the US and other western governments since
the 1960s, and if I recall correctly it was one of Bolton's priorities when he was in Bush
the Lesser's administration. It's something in which all of the declared nuclear powers have
an interest, because the smaller the number of nuclear powers in the world, the greater the
difference between them and the rest. This is much more important than wild fantasies about
rogue attacks: if N Korea becomes a de facto nuclear power like India, Israel and Pakistan,
then all sorts of other countries might be tempted to have a go, starting with S Korea (which
has the capacity and has been caught cheating before). Whilst this risk is objectively small,
an end to the NK programme would make it even smaller. I suspect the deal will be that NK
denuclearizes and China guarantees its security: a non-nuclear NK will be even more of a
client state than it is now.
Nuclear competition among the superpowers is quite different and involves a whole set of
different issues.
Less warfare = more wall
But remember the last time Trump said something in Syria's favor? A chemical attack happened
in small village for no logical reason and the hawks immediately took to framing Assad. Trump
then backed off and took harder line on Assad, launching missiles into Syria.
So I'm inclined to think he wants a deal. But look out for screaming hawks immediately
trying to scuttle anything.
Perhaps 30 years ago, Trump was an international defense luminary, but I see little
evidence of the boasted emotional control and cool Trump claimed. He is unarguably a
successful grifter. Is that what it takes to make peace? What happens when the other guy
realizes he has been lied to by a congenital liar? Back to square 1.
In my take, the recent meeting between the heads of China and N Korea just Trumped any
leverage the US might have had in peace talks. Trump will be there only if a scapegoat is
needed. Both S. Korea and Japan have expressed doubts about our reliability as a defense
shield against powerful China – Japan and the Koreans' neighbor. What Little Rocketman
has likely achieved is diplomatically checkmating the US. Now Trump's tariff threats serve
only to push US allies in the region closer to China. Should that turn out to be the case,
the economic repercussions are as dangerous and unpredictable as nukes in the air or as Trump
himself. I sure hope I got this all wrong.
"no enduring principles" is a feature of politicians everywhere today. Their concern is to
represent the rich and their qualification is to present those biased arguments in a way that
beguiles the electorate into supposing its a good idea for them as well. Step Two is the "who
would have thought it?" response after the country catches on.
In former times the candidate for public office would assert his principles on the
hustings and the voters would remember what they knew of him before voting. Sure, there were
ambitious unreliable people who were willing to exchange their reputations for office but
they were few. We should get back to those days.
We allowed our merchants and spooks to drive USSR to the precipice without any thoughts
about the nukes they had. It appeared then that warheads supposedly in Ukraine were missing.
We will likely discover what happened to them in due course. It is possible that surveillance
of communications is the main reason they are not a thread for the time being but that does
not mean they have dropped out of existence.
Thank you NC for introducing an issue that should concern economists as much as everyone
else.
North Korea's negotiating position has not really changed with the announcement. They have
repeatedly said for years they are willing to agree to denuclearization of the Peninsula in
return for security guarantees. I find the media trumpeting this as a new development rather
vexing. Anyways, China has been putting the screws on them since about September/October
(Apparently, they told Kim Jongun they know they can't overthrow the DPRK government, but
they can get rid of him personally), which is also why there have not been any new nuclear
tests.
Don't forget the United States has itself promised to denuclearize, under the NPT.
It would certainly bring me great pleasure if Trump of all people were to bring about some
great positive change in regards to the Forever War with North Korea. Imagine all the whining
liberals if Trump, unlike Obama, actually did something worthy of a Nobel Peace Prize.
I think Yves has got it right: USA threatens PRC with tariffs, so PRC pressures NK to make
concessions to the USA. i.e. Two big guys screwing the little guy.
PRC and NK leaders might think that all they have to do is get through a short patch of
bad weather until 2020. If so, they are badly kidding themselves.
In the USA, imperialist machtpolitik is a thoroughly bipartisan affair. It doesn't
matter how faithfully NK or PRC might fulfill obligations. Trump's successors, whoever they
may be, will simply apply more pressure and demand more concessions. They won't stop until
somebody else stops them.
China's rise has made the US fear the loss of its role as the sole superpower. And the
neoliberal elite fights back. That replays on a new level rift of the USSR and China in the
past.
... the plan to impose 25 per cent tariffs on $60bn of (as yet, unspecified) Chinese exports
to the US shows the aggression of Mr Trump's trade agenda. The proposed tariffs are just one of
several actions aimed at China's technology-related policies. These include a case against
China at the World Trade Organization and a plan to impose new restrictions on its investments
in US technology companies.
The objectives of these US actions are unclear. Is it merely to halt alleged misbehaviour,
such as forced transfers -- or outright theft -- of intellectual property? Or, as the labelling
of China as a "strategic competitor" suggests, is it to halt China's technological progress
altogether -- an aim that is unachievable and certainly non-negotiable. Mr Trump also
emphasised the need for China to slash its US bilateral trade surplus by $100bn. Indeed, his
rhetoric implies that trade should balance with each partner. This aim is, once again, neither
achievable nor negotiable.
...A still more pessimistic view is that trade discussions will break down in a cycle of
retaliation, perhaps as part of broader hostilities.
"... By Gary North, Oilprice.com's South-East Asia & Pacific correspondent. He writes about energy matters, geopolitics and international financial markets. Originally published at OilPrice ..."
"... A more conservative rate of growth may simply be desired by some, but it also may be an inevitability. Kevin Holt, chief investment officer of Invesco's U.S. value equities has said that the situation many companies find themselves in is in part a consequence of the link between their leaders' pay and production growth, rather than returns on investment. ..."
"... Ultimately the market is subject to myriad pressures, such as the heterogeneous quality of oil, fluctuations in labor costs and oil prices, as well as changes in the pace of technological development. These pressures shape the nature of the market, and also make it difficult to predict the longevity of tight oil reserves, and the ability of companies to exploit them. Another significant factor is regulation. How long will Trump's EPA remain the castrated shadow of its former self, and how long until it begins to bare its own teeth? ..."
"... The US might produce 11 million bpd of oil and condensates, but it still consumes nearly 20 million bpd. So, while the US might become a large exporter, it will be a large net importer. I don't see how shale or fantasy oil fields offshore Florida or in the ANWR will add 21 million bdp of production which would allow the US to be a net 12 million exporter. And by 2023? This must have been a typo. ..."
"... "The US might produce 11 million bpd of oil and condensates, but it still consumes nearly 20 million bpd." Exactly. The US is going to be a net exporter .and a net importer . of the same thing. And people accept this. We are leaving the Orwellian Age behind, and entering the Age of Insanity. ..."
"... Has anybody worked out how many years it will be until those particular shale formations have been sucked dry? The article mentioned that some formations had already been run dry. This somehow smacks to me of trying to keep the age of cheap oil going a little bit longer. ..."
"... Yes, most of the increase in oil comes from oil shale. Unlike a conventional oil well, shale extraction means a constant process of fracking (driving a hydraulic fluid into the geology to release light oil and gas trapped in the rock pores), so its much harder to assess the long term viability of a reserve than with a conventional well, which is usually an oil filled underground void with a measurable capacity. The typical production life of a single 'frack' is around 9 months or so, although a single well can be fracked multiple times if the geology is right. ..."
"... Ditto Genscape.com regarding overall supply-demand factors. Not a subscriber nor do I regularly follow sector developments, but big inventory drawdowns at Cushing, OK terminal over the past four months are puzzling in the face of rising EIA oil production data. ..."
"... Slow us expansion and the next recession, which might rival the last one because private sector debt, will push price sub 40. But majors have cut back exploration for some time, OPEC and Russia maybe in decline, and conversion to electrical cars minimal I'm guessing new price record in five years. ..."
"... The weird thing about shale is it unites the power of the financial lobby who finance the drilling with the power of the oil barons who control the market – that gives it 'umph' in the capitalist world. ..."
Yves here. The US seems overeager to be exceptional.
By Gary North, Oilprice.com's South-East Asia & Pacific correspondent. He writes
about energy matters, geopolitics and international financial markets. Originally published at
OilPrice
U.S. shale has effectively upended the oil industry, with
predictions that total U.S. oil production will surpass Saudi Arabia's output this year, in
turn rivalling Russia's to become the preeminent global producer. From its position of being
dependent on, and subordinate to OPEC, the U.S. has seemingly become the big bad wolf. Through
a catalogue of tactical errors and misplaced belief in its own muscle, the mighty brick edifice
of OPEC has begun to look more like a bundle of sticks.
The International Energy Agency (IEA) forecasts that the U.S. will become a net energy exporter by
the late 2020s, but how accurate is that forecast, and to what extent is it mere hyperbole? In
October last year there were already caveats
about the nature of U.S. shale, with some warning that aggressive expansion was leading to
rapid initial growth that would ultimately peak too soon. Mark Papa, former head of EOG
Resources (NYSE: EOG)
raised the question of flatlining output in the face of the doubling of the oil rig count,
"(h)ow can a rig count be double and yet production be stagnant?"
Figures have also been influenced by the
rapid pace of technological development, a pace which has itself plateaued. Robert Clarke,
WoodMac research director for Lower 48 upstream,
said that "(i)f future wells are not offset by continued technology evolution, the Permian
may peak in 2021". IEA forecasts then, may be based on rapid growth and technological
development that simply isn't sustainable. Related:
Shell Outsmarts Competition In The Gulf Of Mexico
Is U.S. shale just a sheep in wolf's clothing, its bite ultimately as benign as grandma's?
The IEA is
still forecasting that the U.S. will be the number one oil exporter by 2023 at 12.1 million
bpd, but at the CERAWeek Conference in Houston on Tuesday, Papa is set to turn that thinking on
its head when he warns the industry that shale will hit roadblocks that prevent such forecasts
from being realized. He
says the best drilling locations in North Dakota and South Texas are already tapped out.
"The oil market is in a state of misdirection now," Papa told the WSJ. "Someone needs to speak
out."
How much of this is indeed misdirection on his part? Papa is CEO at Centennial Resource
Development (NASDAQ: CDEV), which holds the rights to 77,000 acres in the oil-rich Delaware
sub-basin of the Permian. A slowdown in expansion and its potential consequence of increased
oil prices is advantageous to Centennial's shareholders, so who are we to believe guilty of
misdirection?
A more conservative rate of growth may simply be desired by some, but it also may be an
inevitability. Kevin Holt, chief investment officer of Invesco's U.S. value equities has said
that the situation many companies find themselves in is in part a consequence of the link
between their leaders' pay and production growth, rather than returns on investment. This
has fostered a drilling frenzy that has resulted in an explosion of production – an
unregulated drilling frenzy that may be at odds with the long term survival of those companies.
Investors have subsequently demanded a more conservative approach to drilling, which appears to
be having a stabilizing effect.
Ultimately the market is subject to myriad pressures, such as the heterogeneous quality
of oil, fluctuations in labor costs and oil prices, as well as changes in the pace of
technological development. These pressures shape the nature of the market, and also make it
difficult to predict the longevity of tight oil reserves, and the ability of companies to
exploit them. Another significant factor is regulation. How long will Trump's EPA remain the
castrated shadow of its former self, and how long until it begins to bare its own
teeth?
Is Papa's anticipated warning about to shake up the industry? Or is it merely the
continuation of the chorus of restraint that many in the industry have been voicing in this
period of massive growth and upheaval? Ultimately the industry will decide whether it will be
eating out of Papa's hand, or persist in biting the hand that feeds it.
The US might produce 11 million bpd of oil and condensates, but it still consumes nearly
20 million bpd. So, while the US might become a large exporter, it will be a large net
importer. I don't see how shale or fantasy oil fields offshore Florida or in the ANWR will
add 21 million bdp of production which would allow the US to be a net 12 million exporter.
And by 2023? This must have been a typo.
In any case, without a major transition away from internal combustion engines and heating
oil, the US will not be a net export any time soon.
As for shale, while the technology is improving, the rig counts show the true story. US
production is not expanding in line with rigs, nowhere near it. Shale is not Ghawar and never
will be.
"The US might produce 11 million bpd of oil and condensates, but it still consumes nearly
20 million bpd." Exactly. The US is going to be a net exporter .and a net importer . of the same thing. And people accept this. We are leaving the Orwellian Age behind, and entering the Age of
Insanity.
I'm probably going to get smacked down on this but all the oil that the US is pushing out
comes from those shale formations, don't they? But they are not like oil wells which you can
keep pumping for decades but are more about sucking all the loose stuff that you can out of
geological formations. And they deplete – rapidly!
Has anybody worked out how many years it will be until those particular shale formations have
been sucked dry? The article mentioned that some formations had already been run dry. This
somehow smacks to me of trying to keep the age of cheap oil going a little bit longer.
Yes, most of the increase in oil comes from oil shale. Unlike a conventional oil well,
shale extraction means a constant process of fracking (driving a hydraulic fluid into the
geology to release light oil and gas trapped in the rock pores), so its much harder to assess
the long term viability of a reserve than with a conventional well, which is usually an oil
filled underground void with a measurable capacity. The typical production life of a single
'frack' is around 9 months or so, although a single well can be fracked multiple times if the
geology is right.
If you google the geologist Arthur Berman, you'll find many of his articles on the topic.
He's long been something of a fly in the ointment for the trade, as he has argued that
extrapolations based on early explorations are likely to be too optimistic, as the industry
is aiming for 'sweet spots', which will provide very good flows, but not a good indication of
longer term potential. He has also pointed out (which is not denied in the industry), that
unless new technologies are developed, the 'drop off' from peak production will be a much
sharper decline than from a conventional oil field, as there will come a point where repeated
fracking is not economically viable.
So nobody ultimately really knows – if you believe the industry, better and cheaper
techniques will allow fracking to extend outwards from known sweet spots to extend over the
truly vast expanse of oil and gas shales that run from Texas up to Pennsylvania and New York
state. The pessimists (who tend to include most oil geologists) say that the extractable oil
is already getting worked, and the point of unviability will come very quickly, and there
will be a very rapid drop-off. Only time will tell.
Another point worth making is that oil is not as fungible a product as is often assumed.
Shale oil is known as 'tight oil – its very light, but there are only very limited
numbers of refineries that can deal with it. This is why it goes hand in hand with the use of
heavier grades to mix in, so it can be refined in existing facilities which are designed
usually for Gulf of Mexico or Alaskan crudes. This oil is mostly Venezuelan heavy crude or
Canadian oil sands product. So there is a sort of dance going on between these products to
ensure tight oils viability. Its notable that so far as I've seen, nobody seems willing to
invest in tight oil refineries, which to me suggests the industry is not optimistic about its
long term potential.
Another point worth making is that oil is not as fungible a product as is often
assumed
Very true. Refineries have to be "tuned" for a specif type of oil. Most refineries can
only process oil from a single origin, and change of origin requires expensive, slow changes,
made reluctantly.
Why reluctant to change? Construction in refineries is dangerous.
Yup. Fracking means scraping the dregs out of spent fields.
Permian Basin(which I've seen touted as the "new saudi arabia", lately) peaked in like 72 or
73.
all over that part of texas are rusty pumpjacks, idle until the oil price gets rather
high(Bush Darkness, they started running again)
These are marginal wells, at best, without extraordinary measures(like fracking what they
used to call bottle-brushing*).
Oil is finite which means that at some point it will no longer be worth it to get it out of
the ground(EROEI).
Ergo, these big plays that will "make us energy independent" are flashes in the pan.
(* my dad used to fish with a guy who did bottle brushing for saudi aramco, circa late
80's, apparently a rare skill at the time. he said back then that they were gonna run out,
because you don't do that to healthy(sic) fields. )
https://peakprosperity.com has
been behind shale oil production issues for the last decade and has published blogs /
podcasts, interviewed experts, etc
Some articles are behind a paywall, but it is a very good source
Ditto Genscape.com regarding overall supply-demand factors. Not a subscriber nor do I
regularly follow sector developments, but big inventory drawdowns at Cushing, OK terminal
over the past four months are puzzling in the face of rising EIA oil production data.
Exports?
Read that OPEC representatives are meeting with US in Houston this week.
Slow us expansion and the next recession, which might rival the last one because private
sector debt, will push price sub 40.
But majors have cut back exploration for some time, OPEC and Russia maybe in decline, and
conversion to electrical cars minimal I'm guessing new price record in five years.
The weird thing about shale is it unites the power of the financial lobby who finance the
drilling with the power of the oil barons who control the market – that gives it 'umph'
in the capitalist world.
My particular fear for America is that the entire country except the east and west coasts
are approved for fracking. An important part of national food production comes from states
like Kansas which use aquifer water entirely. If the farmers pump oil-flavored water on their
fields it will have an effect on the harvests. In profiting one way, the country sustains a
loss in another.
What Is The Right Price For Oil In A Balanced Market?
By
Dan Steffens
-
Feb 21, 2018, 6:00 PM CST
The price of oil is well off the low for this cycle because the OPEC + Russia plan to rebalance supply &
demand has worked. Now the question is
"What is the Right Price for oil in a balanced market?"
(Click to enlarge)
The price of
West Texas Intermediate (WTI)
crude oil, like the stock market, was
overdue for a bit of a pullback or "correction". After peaking at over $66/bbl on January 26, 2018 the
front month NYMEX contract for WTI followed the stock market correction down to just above $59/bbl on
February 13. By the close on February 16 it had rebounded back to $61.55/bbl. The fact that a key
resistance level at $57.65 was not tested during the selloff is encouraging.
WTI has been moving in a strong upward channel since last summer. Right now there is strong support at
$57.65 and strong resistance at $66.70. A close above $67.00 should set up a test of $75.00 sometime in
the 3rd quarter. At least that's what the "tea leaves" are telling me.
In my opinion, there are several "myths" or "false paradigms" that are holding down the price of oil.
Myth #1: U.S. Tight Oil production can meet the world's future demand for oil.
U.S. oil production is on the rise. There is no doubt that vast improvements in horizontal drilling
technology and completion methods have made harvesting oil from shale and other tight zones possible.
U.S. oil production now exceeds 10,000,000 barrels per day; a level no one in the industry believed was
possible at the turn of the century. However, U.S. tight oil production is still only 5% of the global
oil supply. It is highly unlikely that U.S. oil production will be able to ever meet U.S. demand
(currently over 17,000,000 barrels per day), much less supply the rest of the world.
Myth #2: All Shale Leasehold is the same.
The Permian Basin covers 19 million acres, however only a small percentage of the leasehold is
considered "Tier One" for shale oil recovery. Upstream companies are rapidly drilling up their best
acreage, a process called "High Grading". Once they have drilled out the Tier One locations, it will be
extremely difficult to maintain the pace of production growth that we have seen recently.
Adding to the problem is the fact that horizontal wells are completed with massive frac jobs, which
enable the wells to have very strong initial production rates. Initial production ("IP") rates are
unsustainable. After the initial surge, production declines rapidly in all horizontal wells. In most
areas, production declines by more than 50% from the IP rate within a year. After three years, most
horizontal shale wells are producing less than 10% of their "IP Rate".
Related: The U.S. Oil Industry Sets Its Sights On Asia
From a well-level economic standpoint this is great since the wells payout quickly. However, we now
have 100s of thousands of high decline rate horizontal wells online and another 20,000 new shale wells
will be completed this year. Soon after the Tier One areas are developed, it will be mathematically
impossible to drill enough Tier Two wells to maintain production growth. Most people that I talk to think
the Bakken Shale and the Eagle Ford Shale have already seen their peak production.
Myth #3: All oil is the same.
This is really more of a common misunderstanding than a
myth. The oil being extracted from shale and other tight formations has very high API gravity (over 40
degrees). To a point this was good news, but now we are producing so much "Light Oil" that our refineries
cannot handle all of it. This is one reason that the U.S. is now exporting more oil and why Brent oil
trades at about a $4.00/bbl premium to WTI. Per the most recent U.S. Energy Information Administration's
("EIA") weekly report, over the last six weeks ending February 9, 2018 the U.S.:
• Produced 9,926,800 barrels of crude oil per day
• Imported 7,976,500 barrels of crude oil per day (mostly heavy oil)
• Exported 1,341,500 barrels of crude oil per day (all light oil)
• Exported 4,885,000 barrels of refined products per day
I am expecting the problem of too much light oil production to get more press coverage this summer
because (a) it takes more crude oil to produce summer blend gasolines & diesel and (b) there is a limit
to how much light oil we can export.
Myth #4: We no longer need conventional exploration.
You could argue that this is the same as Myth #1. The thinking among investors is why waste capital on
exploration in remote areas or on high risk drilling like deep water prospects when shale can produce all
the oil we will ever need? The truth is that Non-OPEC / Non-U.S. oil accounts for over 45% of this
world's crude oil supply and it is now at risk of going on steady decline because so little capital has
been deployed in these "Other Areas". With demand for oil now increasing by 1.5 to 2.0 million barrels
per day year-after-year, we are going to need lots of new supply outside of the shales.
Myth #5: OPEC and Russia can flood the market with oil whenever they feel like it.
• First of all it would be incredibly stupid for the cartel members to over produce again since they
were the ones that suffered the most during the recent oil price collapse.
• Second, OPEC may actually have very little production capacity beyond what they are producing today.
In the International Energy Agency's most recent "
Oil
Market Report
" that was published on February 13, 2018 it was reported that OPEC members were 137% in
compliance with their production agreement and the Russian lead Non-OPEC group was 85% in compliance with
their agreement. In my opinion, the real reason that OPEC is holding down production is because they
can't produce much more oil than they are producing today. Regardless of the reason, this one is a fear
that should not keep investors up at night.
Related: Frac Sand Shortage Threatens Shale Boom
If you're considering investing in the Saudi Aramco IPO later this year, you may want to think about
the paragrap:above.
One of my friends with decades of oil & gas industry experience sent me this note: "I attended an
energy conference in Houston last year and the speaker from Tudor Pickering Holt & Co. (a highly
respected energy investment & banking firm) made this comment:"
"When oil was over $100/bbl, did any new production come on in OPEC or Russia? The only area that saw
a significant increase in oil production was North America. No other geologic province increased
production. That tells you that if it were there, it would have been brought on to produce during a
period of $100 + oil. It is the belief of TPH that any production outside of North America and big
offshore projects requiring years to develop do not exist".
I'm sure there are many industry experts that believe there are massive recoverable oil reserves out
there, but TPH's comment does give one pause.
Myth #6: Electric Vehicles and Renewables will soon slow oil consumption.
There is no evidence that this is going to happen anytime soon. The "Millennials", defined as persons
reaching adulthood in the early 21st century, have been brainwashed to believe we'd be better off without
hydrocarbon based fuels and feedstock. Nothing could be further from the truth, but that is a subject for
another time. Millennials believe that all educated people will be driving electric cars within a few
years. They never pause to think about where all the rechargeable battery materials will come from or the
massive changes that will be required to the power grid.
If you are over 30, you may recall that biofuels were going to cause oil demand to go down. It never
happened.
We are going to see more electric vehicles in the future, but they won't make a dent in gasoline and
diesel demand for at least another decade. Wind and solar generate electricity and therefore are more of
a threat to coal, but they still cannot compete with gas fired power plants.
Like it or not, this world runs on oil. Nothing can come close to the energy density of gasoline &
diesel and they are still relatively cheap compare to other transportation fuels.
(Click to enlarge)
Fact: In April, demand for crude oil is expect to spike by over 2.0 million barrels per day.
In 2017, demand for oil increased by 2.3 million barrels per day from the first to the second quarter.
Last year, U.S. crude oil inventories were at the top of the five year range. Today, U.S. crude oil
inventories are in the middle of the five year range. Facts eventually top Myths.
Some statistics in the IEA's Oil Market Report that should have raised a few more eyebrows:
• Global oil supply in January edged lower to 97,700,000 barrels per day. Compare this to global
demand that IEA forecasts will exceed 100,000,000 barrels per day by the 4th quarter.
• IEA's oil demand growth forecast for 2018 was raised to 1,400,000 barrels per day. In my opinion, when
the actual data is in for 2018, demand will have gone up by over 2,000,000 barrels per day. Global GDP
growth estimates just keep going up and GDP growth is the primary driver of oil demand.
• OECD commercial stocks (crude oil and refined products) fell in December by 55,600,000 barrels, the
steepest drop in over seven years. OECD stocks are now 2,851 million barrels, which is way below "glut"
level.
My prediction:
When the U.S. refinery maintenance season is over in March,
supply/demand statistics are going to turn VERY BULLISH for oil in April.
By Dan Steffens for Oilprice.com
Mamdouh G Salameh
on February 22 2018 said:
While I agree with you on myths surrounding US shale oil production, I disagree that OPEC can't produce
more given the right oil price. Iraq alone could add more than 2 million barrels a day (mbd) by 2021/22
given the ongoing development of many discovered oilfields. Iraq has a large number of huge discovered
oilfields that are waiting to be developed. A successful development programme could take Iraq's oil
production to more than 10 mbd by 2026/27.
Moreover, OPEC could easily raise their production by more than 2.5 mbd at an oil price of $100/barrel or
higher. But having suffered a real ordeal with the oil price crash in 2014, they are not going to flood
the oil market again.
I totally agree with you that there is a huge hype about the impact of a wider use of electric vehicles (EVs)
on the global oil market and the demand for oil. EVs will hardly make a dent on the global demand for
oil. There will never be a post-oil era during the 21st century and far beyond.
The oil price is heading towards $70/barrel and beyond during 2018 and could even touch $80 in 2019
buoyed by very positive oil market fundamentals and a re-balanced oil market.
In my considered opinion, a fair price for oil ranges from $100-$130. Such a price will provide good
revenues to the oil-producing nations and will enable them to invest in exploration and in expanding
oil-production capacity. It will also enhance global investment in oil and energy projects and will
enable major oil companies to balance their books and invest further in oil projects. All in all, it will
stimulate the global economy and impact positively on it.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Pankaj Kumar
on February 22 2018 said:
What happens if India and China start booming? Their oil consumption and appetite increase beyond the
projected estimate. This could mean oil prices reach the highest threshold they've ever seen. This
is important with many countries (USA) now becoming more territorial and protection driven. $100-130
would be conservative numbers if this happens.
The increase in well productivity comes with a higher cost tag and whether it is 225 or 250K
BO EUR, at a gross WH price of $60 per barrel and a net back price of $30, those kinds of
estimated UR's are barely (in)sufficient to pay out $7.5M well costs. One cannot replace
reserve inventories that are declining precipitously, much less grow reserves, by breaking
even. It is, in my opinion, a mistake to assume the future of unconventional shale oil
resources in our country is strictly price dependent. It is very much money dependent.
I think one of the primary reasons there are any rigs still running in the EF is to comply
with SEC, 5 year, drill-it-or-lose-it rules for proximity related PUD reserves. If you have
borrowed money on PUD reserves and are about ready to have to impair, again, because you are
running out of time, you are up Shit Creek. Or further up Shit Creek than you already were.
Otherwise, I don't know why anyone is drilling Eagle Ford wells anymore unless they know,
guaranteed, the price of oil is going to $85 and will STAY there.
Just thinking about all these stripper horizontal wells gives me LOE nightmares.
A major expense being downhole failures, doesn't it make practical sense that these wells
will be very high cost? Over 10,000' of rods rubbing up and down against 10,000' of tubing,
and in particular in beginning of the "curve" where the down hole pump apparently must sit in
order to keep from pumping off.
We have wells that haven't been pulled in years, but those are slow pumping verticals that
are very shallow. Many drilled with a cable tool. Straight holes, little rod wear.
I just cannot imagine getting a long run without a failure on these hz wells with a 640
Lufkin pounding away 24/7/365.
I drove by 33 Eagle Ford shale oil wells today, Shallow; did a little windshield poll. Twenty
one of them were down. Or on pump-off controls. Either way, they weren't making money. Might
be they were all WOR; everybody has fled S. Texas for points West. Hauling frac sand can now
make you upper middle class in less than 6 months.
Rod lifting those kinds of wells you describe been there, done that. It sucks. Steal one
in a garage sale, or off eBay and for a while you think you hit a big lick. Then along comes
a $135K well intervention that takes 2 years to payout and you wish you'd become a landscape
engineer (lawnmower) instead.
All wells on rod lift eventually will have down hole failures. When wells fail often, or are
low oil volume, they may become uneconomic to produce.
From what I have seen from actual joint interest statements to non-operated working
interest owners, it costs between $3,000-$20,000 per month to operate a shale oil well. Much
of the expense depends upon how much water is produced with the oil. Almost all produced
water is truck hauled. Water disposal systems are being constructed, but those are very
expensive.
The $$ figure I cite does not include repairs of down hole failures such as pump failures
or tubing leaks. About the cheapest downhole repair I have seen for one of these wells was
$15,000. The highest I have seen was almost $500,000.
EUR estimates for these wells are for a 40-50 year well life. Much of that life the well
will produce under 25 BOPD. Most of the wells in TX are burdened with a 1/4 royalty.
So, just for illustrative purposes, let's say a 5 year old EFS in TX is now producing
6,000 net BO to the working interest owners. At $50 WTI it is providing gross income of
$300,000. By the time we subtract LOE, G & A, and severance taxes, there is likely less
than $100,000 left.
Then, realize many shale companies, to raise money, have sold their gathering systems,
something which kind of astonished me at first. Therefore, the working interest owners are
also paying to use those systems. Even less $$ to the bottom line.
So, as Mike says, it just becomes a gamble on how many down hole failures occur. If you
luck out and have none in the year, you might make a little at $50 oil, more than one per
year and you have likely lost $$.
There will be several hundred thousand of these wells onshore US before it is over. Each
with a plugging and abandonment cost of around $250K estimated.
But, at $100+ oil, these might work. Just a big risk.
@4 "For the life of me I cannot figure why Americans want a war/conflict with Russia."
Ever since US Crude Oil peaked its production in 1970, the US has known that at some point
the oil majors would have their profitability damaged, "assets" downgraded, and borrowing
capacity destroyed. At this point their shares would become worthless and they would become
bankrupt. The contagion from this would spread to transport businesses, plastics manufacture,
herbicides and pesticide production and a total collapse of Industrial Civilisation.
In anticipation of increasing Crude Oil imports, Nixon stopped the convertibility of
Dollars into Gold, thus making the Dollar entirely fiat, allowing them to print as much of
the currency as they needed.
They also began a system of obscuring oil production data, involving the DoE's EIA and the
OECD's IEA, by inventing an ever-increasing category of Undiscovered Oilfields in their
predictions, and combining Crude Oil and Condensate (from gas fields) into one category (C+C)
as if they were the same thing. As well the support of the ethanol-from-corn industry began,
even though it was uneconomic. The Global Warming problem had to be debunked, despite its
sound scientific basis. Energy-intensive manufacturing work was off-shored to cheap
labour+energy countries, and Just-in-Time delivery systems were honed.
In 2004 the price of Crude Oil rose from $28 /barrel up to $143 /b in mid-2008. This
demonstrated that there is a limit to how much business can pay for oil (around $100 /b).
Fracking became marginally economic at these prices, but the frackers never made a profit as
over-production meant prices fell to about $60 /b. The Government encourages this destructive
industry despite the fact it doesn't make any money, because the alternative is the end of
Industrial Civilisation.
Eventually though, there must come a time when there is not enough oil to power all the
cars and trucks, bulldozers, farm tractors, airplanes and ships, as well as manufacture all
the wind turbines and solar panels and electric vehicles, as well as the upgraded
transmission grid. At that point, the game will be up, and it will be time for WW3. So we
need to line up some really big enemies, and develop lots of reasons to hate them.
Thus you see the demonisation of Russia, China, Iran and Venezuela for reasons that don't
make sense from a normal perspective.
F Y I :> Putin prefers Aramco to Trump's sword dance
Hardly 10 months after honoring the visiting US president, the Saudis are open to a
Russian-Chinese consortium investing in the upcoming Aramco IPO
By M.K. BHADRAKUMAR
FEBRUARY 16, 2018
[extract]
In the slideshow that is Middle Eastern politics, the series of still images seldom add up
to make an enduring narrative. And the probability is high that when an indelible image
appears, it might go unnoticed -- such as Russia and Saudi Arabia wrapping up huge energy
deals on Wednesday underscoring a new narrative in regional and international security.
The ebb and flow of events in Syria -- Turkey's campaign in Afrin and its threat to
administer an "Ottoman slap" to the United States, and the shooting down of an Israeli F-16
jet -- hogged the attention. But something of far greater importance was unfolding in Riyadh,
as Saudi and Russian officials met to seal major deals marking a historic challenge to the US
dominance in the Persian Gulf region.
The big news is the Russian offer to the Saudi authorities to invest directly in the
upcoming Aramco initial public offering -- and the Saudis acknowledging the offer. Even
bigger news, surely, is that Moscow is putting together a Russian-Chinese consortium of joint
investment funds plus several major Russian banks to be part of the Aramco IPO.
Chinese state oil companies were interested in becoming cornerstone investors in the IPO,
but the participation of a Russia-China joint investment fund takes matters to an entirely
different realm. Clearly, the Chinese side is willing to hand over tens of billions of
dollars.
Yet the Aramco IPO was a prime motive for US President Donald Trump to choose Saudi Arabia
for his first foreign trip. The Saudi hosts extended the ultimate honor to Trump -- a
ceremonial sword dance outside the Murabba Palace in Riyadh. Hardly 10 months later, they are
open to a Russian-Chinese consortium investing in the Aramco IPO.
Riyadh plans to sell 5% of Saudi Aramco in what is billed as the largest IPO in world
history. In the Saudi estimation, Aramco is worth US$2 trillion; a 5% stake sale could fetch
as much as $100 billion. The IPO is a crucial segment of Vision 2030, Saudi Crown Prince
Mohammad bin Salman's ambitious plan to diversify the kingdom's economy.
J.P. Morgan beat all other investment banks in their forecasts for the price of Brent crude this year,
setting its projection at US$70 a barrel. To compare, the second most bullish forecast on Brent is from Bank of America at US$64
a barrel, while Goldman is even more cautious and has not yet upgraded its Brent price forecast from its US$62 a barrel prediction.
J.P. Morgan's reasoning is the same as the other banks': the global economy will continue to expand, which will stimulate growth
in oil demand and healthy prices. This dynamic will also drive WTI prices higher, with the average for the year seen at US$65.63
a barrel by J.P. Morgan's oil analysts.
Despite the upbeat mood, the investment bank's analysts do recognize the danger of growing U.S. and other non-OPEC production.
So, while their price forecasts are for the average level of Brent and WTI this year, the bank's senior oil analyst Abhishek Deshpande
noted in an interview with CNBC that "This 2018 is going to be a year of two halves. The first half is going to be a ... half of
demand, and the second half is more about supply, which is coming back in reaction to the higher oil prices." The first half of the
year will be so strong, Deshpande believes, that Brent could hit US$78 a barrel in the first or the second quarter. Yet in the second
half of the year, drillers will increase their production in response to the higher prices, and this higher production may weigh
on the benchmarks.
There is also something else that may occur before too long: a price correction resulting from the record-high bullish positions
on the six most popular oil-related futures contracts. In his latest
column , Reuters' John Kemp warned that despite the already record number of long bets on these six contracts, money managers
are continuing to place more, with the number of net long bets on Brent alone rising by an equivalent of 14 million barrels in the
week to January 23. In total, net long bets on the six contracts swelled by 44 million barrels to 1.484 billion barrels. More Top
Reads From Oilprice.com:
The positive oil fundamentals of the global oil market can easily support an oil price ranging from $70-$75 a barrel in 2018.
If similar positive market conditions continue into 2019, then we can see oil prices rising to $80/barrel or even higher in 2019
and hitting $100 or higher by 2020. A $70/barrel will be the for for Brent oil prices in 2018.
Prices will also be supported by a fast re-balancing of the market and also by an understanding between Saudi Arabia and Russia
to maintain the OPEC/non-OPEC production cut agreement well beyond 2018 with some adjustments to reflect changing market conditions.
On the supply side, the global oil market will ignore exaggerated claims by the EIA and IEA about US shale oil production averaging
10.3 million barrels a day (mbd) in 2018 and rising to 11 mbd by 2019. My projection for US shale oil production in 2018 is 9.25
mbd made up of 5.10 mbd of shale oil and 4.15 mbd of conventional oil. My projection allows for a 5% depletion in US conventional
wells.
The oil price has to rise beyond $100/barrel before one can talk about a price correction. I have always expressed the view
that a fair price is $100-$130/barrel. Such a price will provide a great impetus to the global economy.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Citizen Oil on January 30 2018 said:
The daily oil prediction nonsense. Wasn't it just a few months ago the daily nonsense was "lower for longer" LOL Haven't heard
that one for a while. Predictions we'd be in a $ 40 to $ 50 oil environment for years if not decades . Oh yeah, then we'd be at
$ 10 when everyone drives an EV.
Looses of shale companies which hedged oil production for 2018 at 2017 prices can be
tremendous.
Notable quotes:
"... Al Rajhi Capital notes that more recently, shale companies ended up locking in hedges at prices that could end up being quite a bit lower than the market price, which could limit their upside exposure should prices continue to rise. ..."
too
much hype surrounding U.S. shale from the Saudi oil minister last week, a new report finds
that shale drilling is still largely not profitable. Not only that, but costs are on the rise
and drillers are pursuing "irrational production."
Riyadh-based Al Rajhi Capital dug
into the financials of a long list of U.S. shale companies, and found that "despite rising
prices most firms under our study are still in losses with no signs of improvement." The
average return on asset for U.S. shale companies "is still a measly 0.8 percent," the financial
services company wrote in its report.
Moreover, the widely-publicized efficiency gains could be overstated, at least according to
Al Rajhi Capital. The firm said that in the third quarter of 2017, the "average operating cost
per barrel has broadly remained the same without any efficiency gains." Not only that, but the
cost of producing a barrel of oil, after factoring in the cost of spending and higher debt
levels, has actually been rising quite a bit.
Shale companies often tout their rock-bottom breakeven prices, and they often use a narrowly
defined metric that only includes the cost of drilling and production, leaving out all other
costs. But because there are a lot of other expenses, only focusing on operating costs can be a
bit misleading.
The Al Rajhi Capital report concludes that operating costs have indeed edged down over the
past several years. However, a broader measure of the "cash required per barrel," which
includes other costs such as depreciation, interest expense, tax expense, and spending on
drilling and exploration, reveals a more damning picture. Al Rajhi finds that this "cash
required per barrel" metric has been rising for several consecutive quarters, hitting an
average $64 per barrel in the third quarter of 2017. That was a period of time in which WTI
traded much lower, which essentially means that the average shale player was not profitable.
Not everyone is posting poor figures. Diamondback Energy and Continental Resources had
breakeven prices at about $52 and $37 per barrel in the third quarter, respectively, according
to the Al Rajhi report. Parsley Energy, on the other hand, saw its "cash required per barrel"
price rise to nearly $100 per barrel in the third quarter.
A long list of shale companies have promised a more cautious approach this year, with an
emphasis on profits. It remains to be seen if that will happen, especially given the recent run
up in prices. But Al Rajhi questions whether spending cuts will even result in a better
financial position. "Even when capex declines, we are unlikely to see any sustained drop in
cash flow required per barrel due to the nature of shale production and rising interest
expenses," the Al Rajhi report concluded. In other words, cutting spending only leads to lower
production, and the resulting decline in revenues will offset the benefit of lower spending.
All the while, interest payments need to be made, which could be on the rise if debt levels are
climbing.
One factor that has worked against some shale drillers is that the advantage of hedging
future production has all but disappeared. In FY15 and FY16, the companies surveyed realized
revenue gains on the order of $15 and $9 per barrel, respectively, by locking in future
production at higher prices than what ended up prevailing in the market. But, that advantage
has vanished. In the third quarter of 2017, the same companies only earned an extra $1 per
barrel on average by hedging. Part of the reason for that is rising oil prices, as well as a
flattening of the futures curve. Indeed, recently WTI and Brent have showed a strong trend
toward backwardation -- in which longer-dated prices trade lower than near-term. That makes it
much less attractive to lock in future production.
Al Rajhi Capital notes that more recently, shale companies ended up locking in hedges at
prices that could end up being quite a bit lower than the market price, which could limit their
upside exposure should prices continue to rise.
In short, the report needs to be offered as a retort against aggressive forecasts for shale
production growth. Drilling is clearly on the rise and U.S. oil production is expected to
increase for the foreseeable future. But the lack of profitability remains a significant
problem for the shale industry.
"... Al Rajhi Capital notes that more recently, shale companies ended up locking in hedges at prices that could end up being quite a bit lower than the market price, which could limit their upside exposure should prices continue to rise ..."
Riyadh-based Al Rajhi Capital dug
into the financials of a long list of U.S. shale companies, and found that "despite rising
prices most firms under our study are still in losses with no signs of improvement." The
average return on asset for U.S. shale companies "is still a measly 0.8 percent," the financial
services company wrote in its report.
Moreover, the widely-publicized efficiency gains could be overstated, at least according to
Al Rajhi Capital. The firm said that in the third quarter of 2017, the "average operating cost
per barrel has broadly remained the same without any efficiency gains." Not only that, but the
cost of producing a barrel of oil, after factoring in the cost of spending and higher debt
levels, has actually been rising quite a bit.
Shale companies often tout their rock-bottom breakeven prices, and they often use a narrowly
defined metric that only includes the cost of drilling and production, leaving out all other
costs. But because there are a lot of other expenses, only focusing on operating costs can be a
bit misleading.
The Al Rajhi Capital report concludes that operating costs have indeed edged down over the
past several years. However, a broader measure of the "cash required per barrel," which
includes other costs such as depreciation, interest expense, tax expense, and spending on
drilling and exploration, reveals a more damning picture. Al Rajhi finds that this "cash
required per barrel" metric has been rising for several consecutive quarters, hitting an
average $64 per barrel in the third quarter of 2017. That was a period of time in which WTI
traded much lower, which essentially means that the average shale player was not
profitable.
Not everyone is posting poor figures. Diamondback Energy and Continental Resources had
breakeven prices at about $52 and $37 per barrel in the third quarter, respectively, according
to the Al Rajhi report. Parsley Energy, on the other hand, saw its "cash required per barrel"
price rise to nearly $100 per barrel in the third quarter.
A long list of shale companies have promised a more cautious approach this year, with an
emphasis on profits. It remains to be seen if that will happen, especially given the recent run
up in prices.
But Al Rajhi questions whether spending cuts will even result in a better financial
position. "Even when capex declines, we are unlikely to see any sustained drop in cash flow
required per barrel due to the nature of shale production and rising interest expenses," the Al
Rajhi report concluded. In other words, cutting spending only leads to lower production, and
the resulting decline in revenues will offset the benefit of lower spending. All the while,
interest payments need to be made, which could be on the rise if debt levels are climbing.
One factor that has worked against some shale drillers is that the advantage of hedging
future production has all but disappeared. In FY15 and FY16, the companies surveyed realized
revenue gains on the order of $15 and $9 per barrel, respectively, by locking in future
production at higher prices than what ended up prevailing in the market. But, that advantage
has vanished. In the third quarter of 2017, the same companies only earned an extra $1 per
barrel on average by hedging. Related: The
Unstoppable Oil Rally
Part of the reason for that is rising oil prices, as well as a flattening of the futures
curve. Indeed, recently WTI and Brent have showed a strong trend toward backwardation -- in
which longer-dated prices trade lower than near-term. That makes it much less attractive to
lock in future production.
Al Rajhi Capital notes that more recently, shale companies ended up locking in hedges at
prices that could end up being quite a bit lower than the market price, which could limit their
upside exposure should prices continue to rise .
In short, the report needs to be offered as a retort against aggressive forecasts for shale
production growth. Drilling is clearly on the rise and U.S. oil production is expected to
increase for the foreseeable future. But the lack of profitability remains a significant
problem for the shale industry.
The last time U.S. drillers pumped 10 million barrels of crude a day, Richard Nixon was in
the White House. The first oil crisis hadn't yet scared Americans into buying Toyotas, and
fracking was an experimental technique a handful of engineers were trying, with meager
success, to popularize. It was 1970, and oil sold for $1.80 a barrel.
Almost five decades later, with oil hovering near $65 a barrel, daily U.S. crude output is
about to hit the eight-digit mark again. It's a significant milestone on the way to
fulfilling a dream that a generation ago seemed far-fetched: By the end of the year, the U.S.
may well be the world's biggest oil producer. With that, America takes a big step toward
energy independence.
The U.S. crowing from the top of a hill long occupied by Saudi Arabia or Russia would
scramble geopolitics. A new world energy order could emerge. That shuffling will be good for
America but not so much for the planet.
For now, though, the petroleum train is chugging. And you can thank the resilience of the
U.S. shale industry for it.
What didn't kill shale drillers made them stronger. The survivors have transformed
themselves into leaner, faster versions that can thrive even at lower oil prices. Shale isn't
any longer just about grit, sweat, and luck. Technology is key. Geologists use smartphones to
direct drilling, and companies are putting in longer and longer wells. At current prices,
drillers can walk and chew gum at the same time -- lifting production and profits
simultaneously.
Fracking -- blasting water and sand deep underground to free oil from shale rock -- has
improved, too. It's what many call Shale 2.0. And it's not just the risk-taking pioneers who
dominated the first phase of the revolution, such as Trump friend Harold Hamm of Continental
Resources Inc., who are benefiting from the surge. Exxon Mobil Corp., Chevron Corp., and
other major oil groups are joining the rush. U.S. shale is "seemingly on steroids," says
Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. in London. "The market
remains enchanted by the ability of shale producers to adapt to lower prices and to continue
to grow."
Geez Mike, your link to the oilprice.com story will surely bring Texas Tea back. Upsetting
the oil minister of KSA is the ultimate sign of victory to the shale/political types.
These shale guys are bound and determined to kill the oil price rally, and IEA and EIA
(which BTW in my opinion are both very political organizations) are really boosting it
too.
I know you feel you have a short window, but hang in there. The current price is pretty
good for "us types" and maybe it will hold between here and $55 WTI for the downside, while
we blow through 10 million and 11 million, all the while thinking, just like 1970, that USA
has unlimited supplies of oil.
I am starting to think the dollar is the key anyway. It was weak in 2011-2014, and oil was
sky high. Might be headed that way again, who knows.
Really enjoying all of the history on Oilystuff. Keep it coming!
2018-01-29 Chatham House Events – Iraqi Oil Minister confident that an oil export
capacity of five million barrels per day will be realized by the end of 2018 – a
"landmark in the oil industry"
Current Iraqi oil reserves of 153 billion barrels due to reach
175 billion in the coming years, says oil minister Luaibi at Annual MENA (Middle East &
North Africa) Energy conference
Iraq's oil minister Luaibi said the country seeks to ramp up refining capacity and reduce
imports of refined products :"I am determined that Iraq will become a product exporter
instead of product importer".
Will be interesting to see US shale production in response to increasing frac hits,
increasing costs, mounting debt wall. These are all legitimate issues which IEA seems to
overlook when issuing rosy predictions. Three Stooges thought they could repair a hole in a
pair of pants by cutting it out .same logic as IEA.
Yeah, it's those items and more. The biggest they overlook is declines from production. The
past two years, they have concentrated in sweet spots, to keep their chins above water. In
doing so, they have miraculously brought production back up to 2015 highs, and not much more,
although the EIA is reporting imaginary oil. Underneath all that production, wells are
declining at a rapid rate. The biggest rates are what they drilled last year. Those wells
will produce less than half of what they produced last year. So, how many wells would need to
be completed to increase production over a million barrels in 2018? More than current
capacity, that's for sure.
Although tight oil output has increased at an annual rate of close to 1000 kb/d over the
past 12 months (Dec 2016 to Nov 2017), I doubt that rate of increase will continue, probably
about half that unless oil prices rise more than I expect (and I expect we might get to $85/b
by Jan 2019).
I'd say it's a crap shoot as to whether it goes up, or down with about the same number of
completions in 2018 as 2017. Ok, let's say we have more completions, I still can't say it
will go up 500k barrels. While people place statistics on depletion rates, I haven't seen a
well, yet, that can comprehend statistics. As a matter of fact, they defy statistics.
There are 180k producing wells in Texas. There were about 5400 completions in 2017. That's
about 3% of total producing wells.
I believe the oil price will be extremely volatile over the coming decade. There are major
developments in both the supply and demand for oil that are very independent of each other
and unlikely to move in tandem, with the likely result that there will be ebbs and flows of
both supply and demand that have little relationship to one another, causing wild price
swings.
I would summarize these as follows:
SUPPLY: The development of medium- and long-term supply appears to be severely curtailed
by fracking and a limited supply of suitable sites for new exploration. CEOs are likely
worried that any developments will not be profitable because shale will overproduce and knock
down prices again. Until a clear picture of this phenomenon is apparent, it will curtail the
willingness of oil companies to tackle bigger and more expensive projects. Possible new
medium-term supply appears to exist in Mexico's Gulf, Guyana, South China Sea, off-shore
Brazil, Canadian Tar Sands, possibly the Arctic. The problem with developing these resources
is fracking.
Fracking leads to a quick hit of oil, based primarily on debt infusion, that quickly
dissipates – hence I like the term "frack cocaine". It prioritizes rapid expansion of
oil supply in the short term to the detriment of medium and long term investments. What Wall
Street giveth, Wall Street can also taketh away. The shale oil industry has a similar profile
to developing countries like Mexico in 1994 and Argentina in 2005. The flow of money can halt
abruptly, and the consequences could be disastrous. The short-term oil will quickly go away,
but the investments for serious longer term oil supply will likely be too little, possibly
much too little.
Political trouble will likely lead to disruptions in Venezuela, Nigeria, and Libya. The
cold war between Iran and KSA will likely remain cold, but if proxy wars get out of hand,
massive oil supply disruptions will likely ensue.
DEMAND: The outlook for short and medium term demand is quite good. Global growth is
strong, and entrenched systems of car production that favor ICEs will continue. Longer term,
EVs and self-driving EVs in terms of taxi systems pose serious threats (perhaps least of all
to the US, where distances tend to be longer, density is lower, and gas taxes are cheapest).
GM is deploying self-driving cars as a taxi service next year based on the EV Bolt.
Developing countries have a big incentive to embrace this technology for their populations:
small diesel engines that primarily power scooters and taxis and larger bus engines lead to
horrible air pollution, and electricity can be generated within borders rather than imported
(whether by coal, gas, wind or solar doesn't matter, so far as oil demand is concerned).
Europe's love affair with diesel cars is over and gas taxes (and parking prices) remain high,
making EVs and EV-based taxi services very appealing. Battery technology is about to enter a
new wave, with solid-state lithium ion batteries that are basically dendrite-free (hence much
longer life), super-safe, easier to charge, and 2-3 times the range of current technologies
now in production. Specifically I am looking at Toyota, who has promised such a vehicle by
2022. All other manufacturers better be able to match Toyota by then or very soon after, or
they will leave everyone in the dust just like they did with hybrids. Lithium-based batteries
and lithium itself could see major price swings based on this rapid increase in demand.
Or, of course, the global economy could fall off a cliff at any moment. Fwiw, I see a
price range for oil over the next decade as between $25-$250, with very little pattern to its
rise and fall. Volatility will be key. Oil may peak and fall several times based on fracking
and other short-term trends – a very bumpy plateau. I reckon by 2030 the peak in oil
will be obvious, although some will call it from supply while others will call it from
demand, based on their preferences. By that date, little to no investment in oil will likley
make financial sense, and it will begin to whither away as a global industry. This will be
from a combination of reduction in demand due to an EV technological wave that will
unstoppable by then, and political collapse that occurs in the interim in countries heavily
depending on exporting or importing oil.
"... Major oil producing countries, Saudi Arabia chief among them, are using technology to stave off production declines. These YouTube videos are a perfect example of the extreme lengths being employed to continue production: ..."
"... When the decline kicks in, these technologies will ensure that the cliff will be steeper. While I believe we are living at the absolute peak of world production and that decline will kick in soon, I'm not so concerned about specific predictions. It will happen soon enough and when it does the impact will be severe. ..."
"... I think of this problem in personal terms -- my son was born in 2000. He will live to see a world of diminishing oil production (as well as sea level rise, resource conflicts, and many other problems). Does anyone doubt that by the time he is 30 (2030) world oil production will be in decline? Does anyone doubt by the time he is 50 (2050) the world will be a drastically different place than it is today? I have lived through the peak period. I cannot envision what comes after. I can only hope that my son finds a way through it. ..."
"... "Does anyone doubt that by the time he is 30 (2030) world oil production will be in decline? Does anyone doubt by the time he is 50 (2050) the world will be a drastically different place than it is today?" ..."
"... Perhaps. But such sentiments were very common ten, fifteen years ago, and they were directed toward today, not 2030. So, yes, I do "doubt" it, but that's not saying much, as it's a subject I find interesting but useless to speculate about. ..."
"... I'm checking in here for the first time in about 9 years. I'm an old-time peaker, who jumped ship in 2009 when it became clear the dire predictions of Campbell, Deffeyes, et al., were failing to materialize. ..."
Ron is absolutely right about the creaming issue. Major oil producing countries, Saudi Arabia
chief among them, are using technology to stave off production declines. These YouTube videos
are a perfect example of the extreme lengths being employed to continue production:
These videos underscore how uniquely valuable oil is as an energy source and how no other
substitute will ever come close to matching its utility.
When the decline kicks in, these technologies will ensure that the cliff will be
steeper. While I believe we are living at the absolute peak of world production and that
decline will kick in soon, I'm not so concerned about specific predictions. It will happen
soon enough and when it does the impact will be severe.
I think of this problem in personal terms -- my son was born in 2000. He will live to see
a world of diminishing oil production (as well as sea level rise, resource conflicts, and
many other problems). Does anyone doubt that by the time he is 30 (2030) world oil production
will be in decline? Does anyone doubt by the time he is 50 (2050) the world will be a
drastically different place than it is today? I have lived through the peak period. I cannot
envision what comes after. I can only hope that my son finds a way through it.
"Does anyone doubt that by the time he is 30 (2030) world oil production will be in decline?
Does anyone doubt by the time he is 50 (2050) the world will be a drastically different place
than it is today?"
Perhaps. But such sentiments were very common ten, fifteen years ago, and they were directed toward
today, not 2030. So, yes, I do "doubt" it, but that's not saying much, as it's a subject I
find interesting but useless to speculate about.
I'm checking in here for the first time in about 9 years. I'm an old-time peaker, who
jumped ship in 2009 when it became clear the dire predictions of Campbell, Deffeyes, et al.,
were failing to materialize.
This doesn't mean I think oil is infinite or anything. I do think our capacity to predict
doom is much more circumscribed than our abilities to avoid it.
Interesting BOEM report attached – their prediction of GOM oil and gas production from
2018-2027.
They predict oil production will increase from 1.65-1.67 mmbopd in the 2017-2019 window to
1.74-1.77 mmbopd in the 2023-2027 time frame. They include future production from current
reserves, contingent resources and undiscovered resources. Contingent resources are mainly
field expansion projects, new fault blocks, new reservoirs, and resources from discoveries
that have not been put on production.
They have initial production from undiscovered resources occurring already in 2019 –
suggesting that a few discoveries will be made and be on line by the end of 2019. Seems
rather ambitious even for subsea tiebacks.
Given the lack of GOM exploration success in the last few years, my biggest challenge to
these predictions are their estimates of production coming from new discoveries. They show
about 1 BBO of production comes from currently undiscovered resources in this 10 year window.
SLG – hope you are well and had a good holidays. Here is my updated effort at the same
thing. I've added some new discoveries, but not as big or developed as fast BOEM show. I've
included all qualified fields as named entries except a few discovered in 2016 and 2017, and
for a lot I've had to make guesses for reserves based on the expected development size
(numbers in brackets show nameplate capacity). I might be able to improve things a bit when
BOEM reserve numbers for end of 2016 come out, but it's still not going to look much like
their estimates. It's noticeable that there's a lot of activity in short term, small tie
backs now – but these only add about 5 to 10 kbpd and immediately start to decline. So
like you I don't know where they are getting such high contingent resource production
additions from unless it is all on existing developments – I guess if a lot of fields
get to grow like Mars-Ursa has and Atlantis might this year then there'd be enough, but that
seems unlikely to me, especially at the rate they show it.
Thanks George, and same to you for the new year.
I've made a stab at comparing numerous production profiles for the 2018-2027 window –
your's from above, my midcase and downside estimates from a little over a year ago, and
BOEM's estimates – both their total estimate, and their total estimate minus any new
resources/discoveries.
I plan to expand on this in a future post – including revised EUR estimate ranges.
They are all models with something worthwhile to add to the discussion, which is not what I
would say about the EIA projections. They just add have some kind of growth rate, with no
basis in actual numbers, and make it look fancy by adding a hurricane effect – and yet
this is the number usually quoted in the MSM. I think their predictions a couple of years ago
had an exit rate for this year of 2.2 mmbpd – miles off, and when they do try to
provide bottom up justification they look ridiculously ill informed.
Maybe they have a higher oil price forecast? Or they don't bother to see if what gets put on
line is worth developing? I know this is hard, but try preparing a forecast with prices
increasing 3% per year above inflation for 30 years, and you will get a higher forecast.
According to one source out of the Far East, China's Yuan denominated oil contract is set to
go live for trading on Jan. 18.
While not an official date announced from government sources, according to an anonymous
member of the Futures market where the new oil contract will trade, this is the expected date
for Beijing to begin its latest challenge to the long-standing Petrodollar system.
According to the Shanghai-based news portal Jiemian, which cited an unidentified person from
a futures company, trading is expected to start Jan. 18.
Multiple rounds of testing have been carried out and all listing requirements met. The State
Council, China's cabinet, was said to have given its approval in December,
one of the final regulatory hurdles. The push for oil futures gained impetus in 2017 when
China surpassed the U.S. as the world's biggest crude importer. -
Zerohedge
While the Chinese markets are not expected to immediately take dominion over the
West's Brent and WTI oil markets, several countries which include Venezuela, Russia, Qatar,
Pakistan, and perhaps even Iran appear ready to transition away from dollar based oil trade.
Additionally, many more nations will likely be willing to dip their toes into this market as it
proves itself to be a viable alternative to dollar hegemony, and as protection from foreign
policy threats from the U.S. which often uses the dollar as leverage in economic sanctions.
The oil market has come to be defined by several narratives over the past couple of years:
market rebalancing, OPEC versus shale, Russia's delicate relationship with OPEC, OPEC's
conformity with production cuts with the latest deal extension running to end of 2018 and
shale's resilience to lower prices.
But these frameworks have created a narrow ideology that could harm the way producers
participate in the oil market this year and beyond.
Myth 1: OPEC's exit strategy means exit
The idea that the 24 producers who came together and struck a deal to cut production by 1.8
million b/d in November 2016 are somehow going to 'exit' the alliance later this year is
misleading. There will be no exit when OPEC, Russia and other non-OPEC producers decide the
market has rebalanced -- based on OECD stock levels reaching their five-year average -- rather
a continuation of the grand alliance under amended, and most probably looser, terms.
OPEC's hands are somewhat tied: unwind from the deal and undo all the good work achieved,
and so it must continue managing the market in another guise to create stability and encourage
long-term investment in oil.
Gary Ross at Platts Analytics has been talking of cuts "into perpetuity" since the historic
deal was made and informed industry sources note that the exit strategy is the wrong phrase to
be using. But while there is uncertainty as to what that new agreement will look like, the
market will anxiously hang on to the exit strategy term and these jitters could serve to keep
an ultimate cap on prices.
Myth 2: OPEC's top priority is market rebalancing
Market rebalancing may be the measure, backwardation may be the means but price is the
ultimate goal.
When prices tanked after a nine-month extension was agreed in May 2017, there was clear
disappointment from OPEC sources even if publicly the whims of the market were dismissed and
ministers anxiously waited for prices to recover in the medium term.
The difficulty with a price target is that nobody knows what an optimal long-term
sustainable price is so the goal posts keep shifting. Besides, different price levels create
new supply-demand dynamics and the price may be influenced by more than just underlying
fundamentals such as geopolitical risk.
Related: Is This The Beginning Of An Oil Sands Revival?
Thus, for now OPEC's clumsy priority is market rebalancing. It just needs remembering that
bringing down the more than 100 million barrels in stocks to its five-year average could prove
elusive given the oversupply in recent years.
There is also the flipside risk in which OPEC tightens too much. Indeed, Saudi Arabia oil
minister Khalid al-Falih has admitted that OPEC may need a more concrete goal at its June
meeting and when it alters its market management strategy it may well coincide with a new
long-term target.
Myth 3: Russia will end its alliance with OPEC
Russian oil companies have begrudgingly stayed on board with the deal due to the iron hand
of President Vladimir Putin and steely determination of oil minister Alexander Novak.
Russia is not so at ease with ongoing market management and the fanfare and media circus
that surrounds OPEC. Russia also arguably needs the extra revenue less and is more worried
about losing market share in Europe and Asia to competition from rising U.S. shale oil exports.
But the growing political nexus between Russia and Saudi Arabia, Russia's increasing swagger as
joint head of this broad OPEC alliance (as noted at the November 30 meeting in Vienna with
everyone awaiting Novak's arrival) as well as the budgetary need for sustained higher prices
means Russia could well be in it for the long haul.
Putin is keenly aware of the U.S.-Saudi ties and has been building relations with Saudi
Arabia since 2007 when it offered the kingdom nuclear aid.
Indeed, the overriding concern for the world's biggest oil producer is that, should the
agreement unravel, prices could plunge putting the country back at ground zero. It may be an
inconvenient truth for both, but to wield the necessary global energy influence, OPEC and
Russia need each other indefinitely.
Myth 4: The battleground is OPEC versus U.S. shale
Ever since OPEC did an about-turn on its pump-at-will strategy and started working on a
market share approach that was first brokered in Algiers in September 2016, the battle between
OPEC and shale has been exaggerated. What may have started out as a move to crush U.S. shale in
2014 has transformed into a broader coexistence at the end of 2017 in a bid to find an
equilibrium that allows profits to be made and coffers to be filled by all producers.
(Click to enlarge)
There has been growing dialogue between U.S. frackers and the oil producer group.
It could be argued that OPEC's first mission was to stop the runaway train that was OPEC
output as producers ramped up production month on month as competition intensified. It could
also be argued that the real target for OPEC is still unconventional and uneconomic oil as once
investment becomes a free for all, OPEC risks a repeat of an oil boom and bust and the
volatility it is trying to guard against. But at what point will deepwater, oil sands and
Arctic drilling in general become economic enough to persuade investors to commit?
For example, the U.S. deepwater Gulf of Mexico sector has struggled since crude dropped in
late 2014, but costs have dropped and efficiencies improved, and analysts suggest the sector
may be at a turning point if prices are maintained.
Myth 5: U.S. shale is simply resilient
U.S. shale producers may well be predicted to make capex gains in 2018, they may have made
technological innovations in drilling and completions that have brought down costs and they may
have adapted to a lower price environment. In fact, Platts Analytics predicts a U.S. shale
production growth of 900,000 b/d in 2018. But, despite all this, a productivity inflection
point may well have been reached, a crossroads for investors.
(Click to enlarge)
Cyclical cost efficiencies and geological productivity are beginning to unwind with a
combination of inflation and a broadening from the sweetest spots and core acreage.
Related: China Is About To Shake Up Oil Futures
In the Permian, rig efficiency peaked in July 2016 according to the EIA, and has since
consistently decreased, while the Eagle Ford and Anadarko (Woodford) plays have experienced a
significant drop-off in rig productivity. Moreover, investors want a return on their capital
and have tired of capturing resources without seeing value being maximized. For almost a
decade, the U.S. exploration and production industry has outspent its cash flows in drilling
costs, requiring a constant inflow of debt and equity financing to keep going.
With prices back above $60 a barrel, can investors make a healthy sum? With the biggest
producers now the oil majors, their shareholders may prefer returns over market share.
There is natural gas coming out of our ears at the moment because of the shale phenomena; the
price is tanking back to the mid $2's and there is no place to put anymore gas.
Notable quotes:
"... Shale companies are on track to spend $20 billion more than they will generate in the next six months if prices hover around $40 a barrel, analysts say. ..."
"... Compensation practices play a role in the behavior of U.S. shale producers: Most of their management teams are paid based on growth or adding new oil and gas reserves -- not on profits -- according to Matt Portillo, an analyst at Tudor Pickering Holt & Co., in Houston. "Until that changes, growth may continue to prevail," he said. ..."
The shale oil industry is NOT profitable. It never has been and in general terms it will not
be in 2018 either. There has always been something fishy about its funding, particularly when
wanders like this guy can make $16M a year in compensation, while his company looses money
year over year for stock holders.
Clearly, however, it is not his fault his company can't be profitable and it is not their
fault they are "forced" to borrow all that money
As we've noted on too many occasions to count, this is aiding and abetting a situation
where these companies effectively sow the seeds of their own demise. They're running up the
down escalator. They're working their asses off to drive down the price of the very
commodity they're producing.
And hilariously, they think maybe you're the problem. Here's the
Journal again:
"The biggest problem our industry faces today is you guys," Al Walker, chief executive
of Anadarko Petroleum Corp. , told investors at a conference last month.
Wall Street has become an enabler that pushes companies to grow production at any
cost, while punishing those that try to live within their means, Mr. Walker said, adding:
"It's kind of like going to AA. You know, we need a partner. We really need the
investment community to show discipline."
Even if companies cut back on drilling now, it wouldn't be enough to stop a new wave
of oil from hitting the market in the second half of the year : U.S. shale output
typically lags behind new drilling by four to six months, analysts say.
Shale companies are on track to spend $20 billion more than they will generate in the
next six months if prices hover around $40 a barrel, analysts say.
Compensation practices play a role in the behavior of U.S. shale producers: Most of
their management teams are paid based on growth or adding new oil and gas reserves -- not
on profits -- according to Matt Portillo, an analyst at Tudor Pickering Holt & Co.,
in Houston. "Until that changes, growth may continue to prevail," he said.
Isn't that last bit about executive compensation great?
So folks like Al Walker are paid based not on profits, but on growth, and that growth is
funded by investors like you.
So if you connect the dots there, it means you are literally giving these management
teams money to fund the growth that ends up boosting their compensation, and that growth is
going to ultimately bankrupt the companies you're investing in by creating a supply
glut.
Welcome to the shale industry, goddammit. Enjoy your stay.
Oil rose further above $68 a barrel on Tuesday, touching its highest since May 2015,
supported by OPEC-led production cuts and expectations U.S. crude inventories fell for an
eighth week.
Every article on oil prices in the last several months says the ONLY downside is US shale.
Do the larger US shale companies pay attention to supply/demand dynamics at all? At
current prices most can show positive EPS, assuming service costs do not surge too much?
For example, auto manufacturers do not produce the maximum vehicles possible. They pay
attention to supply and demand. Almost every single manufacturer tries to forecast demand for
its product.
Even farmers try to grow what crops are in most demand and raise what livestock is most in
demand.
We have not drilled a well in over 3 years due to lack of oil demand, our production has
fallen.
"Rystad Energy is even bullish on American oil. The Norwegian firm sees U.S. crude output
hitting 11 million barrels per day by December, narrowly surpassing global leader Russia and
OPEC kingpin Saudi Arabia."
Absolute poppycock! US output will do good to get to the level that EIA is currently
reporting, about 9.75 by the end of 2018. Mike's post explains why. 11 million barrels a
day,? Man, that is some potent stuff they are smoking.
>Do the larger US shale companies pay attention to supply/demand dynamics at all?
> At current prices most can show positive EPS, assuming service costs do not surge too
much?
This might be a wrong question. The right question IMHO is: "To what extent shale
companies are just prostitutes of Wall Street and to what extent they are independent oil
production companies? "
What if the key role for such companies is to be a part of "price crasher" mechanism
(along with "naked shorts" and similar financial chicanery) ?
I believe that with the shale boom it is Wall Street that obtained mechanism using which
they can dictate oil prices.
Not Saudies or OPEC in general but Wall Street titans are now in the driving seat,
although OPEC and Russia are fighting back by limiting production.
And Wall Street is not shy to step on the throat of "conventional" oil producers and force
them to produce with no or even negative margins because of the specific of oil industry.
When you gets so much money on such lenient conditions something is fishy This dual
production mode (oil plus junk bonds and evergreen loans) looks to me just a variable of
"subprime housing boom" on a new level.
"... Always skeptical of "technical recoverable guesses," my suggestion is to focus on product prices instead and the current reduced level of activity in the GOM. Oil prices are volatile because of the fiscally irresponsible, short investment nature of the shale oil industry and offshore development takes years and years to bring to market. There is natural gas coming out of our ears at the moment because of the shale phenomena; the price is tanking back to the mid $2's and there is no place to put anymore gas. ..."
"... much like Trump turned over Obama's legislation regarding offshore drilling, this one will be turned over as well. I don't think a 3 year time frame and price volatility gives the offshore industry enough time to do anything with this, personally. Its fluff. ..."
From post above:
TRUMP PROPOSES VAST EXPANSION OF OFFSHORE DRILLING
(Zinke) "This is a start on looking at American energy dominance,"
Regardless of emotional reaction to this announcement, I am skeptical of its
viability.
My skeptical mind tells me, when all else fails, look at the numbers. The numbers per MMS
chart on Wikipedia:
Undiscovered technically-recoverable oil resources on the outer continental shelf,
2006:
Washington/Oregon – 0.4Bbo Nor Cal – 2.08 Bbo Central Cal – 2.31
Bbo So Cal – 5.74 Bbo All Atlantic + east FL – 3.84 Bbo GOM – 44.92 Bbo
North Slope – 23.6 Bbo Alaska less NS – 3.0 Bbo
I conclude that most of the "new" oil unleashed by this stunning decision is in the GOM
and and the North slope, both of which are well-known by the industry and which have been
open to Federal leases in the past. After Shell's bad experience, oil will take a much higher
price to get any bids for the NS and for the GOM, this is just BAU. The Atlantic and Pacific
Coasts don't have enough resource to be worth exploring, much less leasing.
OK, there are some sharp oil people here on the forum and I'm just a dumb HVAC engineer.
Help me. Am I missing something? Are they actually going for the natural gas, and is it worth
going after?
Either Trump and his energy folks are so determined to stick it to environmentalists that
they are willing to hurt the industries they claim to help, or they know this won't amount to
anything but it will impress their hardcore supporters.
I believe that is a good summary HVAC, as is Boomers suggestion that this offshore
development legislation is cursory and an otherwise meaningless gesture made toward an agenda
that involves eliminating regulations for the oil and gas industry and "unleashing" America's
energy might on the rest of the world.
Always skeptical of "technical recoverable guesses," my suggestion is to focus on
product prices instead and the current reduced level of activity in the GOM. Oil prices are
volatile because of the fiscally irresponsible, short investment nature of the shale oil
industry and offshore development takes years and years to bring to market. There is natural
gas coming out of our ears at the moment because of the shale phenomena; the price is tanking
back to the mid $2's and there is no place to put anymore gas.
This is another nail in this administrations coffin, from my conservative perspective. It
is enraging the environmental left and will help assure the biggest Democratic turnout in
history in 3 years.
Then, much like Trump turned over Obama's legislation regarding offshore drilling,
this one will be turned over as well. I don't think a 3 year time frame and price volatility
gives the offshore industry enough time to do anything with this, personally. Its
fluff.
The past week of continuous record low temperatures and snowfall has oil-dependent power
plants in the northeast scrambling to secure supplies of some of the dirtiest burning oil
available in the market due to an impending supply shortage, according to a new report by
Hellenic Shipping News .
Oil fuels 30 percent of the New England power plant market, but winter storms could lead to
another foot of snow, making it difficult for tankers or trains to deliver needed commodities,
Marcia Blomberg of regional grid operator ISO New England, said.
Oil imports to the East Coast jumped by almost 60 percent last week in anticipation of
increased demand due to heating needs. JBC Energy predicts distillate use to increase by 90,000
barrels per day in January and February as well.
The cold weather, expected to become a "bomb cyclone" in the coming days, has also
shocked
natural gas markets. Extreme cold is cutting production in North Dakota's Bakken, while demand
is surging because everyone is turning up the thermostat to stay warm.
Reuters said that gas flowing through interstate pipelines from North Dakota dropped from
1.3 billion cubic feet per day in the week ending on December 25 to just 1 bcf/d as of Tuesday.
Texas (-20 percent) Oklahoma (-22 percent) and Pennsylvania (-5 percent) are also reporting
weather-related production problems, Genscape data says.
Yes, it is unreal: either at the Texas RRC they had really HUGE problems in the past months collecting data, or the EIA used only
model estimates without any form of revision.
The correcting factors of the Texas RRC have not changed much and they showed they usual variability, so that I cannot explain
why there is such a big divergence between corrected RRC data and EIA. They only problem that I can think of (on the part of the
RRC) is that the hurricane completely disrupted their work: does anyone know whether the offices and data servers of the Texas
RRC were damaged during the hurricane? Thanks for the information.
I had a very interesting discussion on Twitter: operators in Texas confirmed me that the RRC offices were not affected by the
hurricane and data reporting proceeded normally. At this point the only (legal) reason left to explain the divergence is that
the EIA has started including NGL into their numbers:
Beware this post has "confirmation basis" I am a believer in peak oil...
Notable quotes:
"... Was doing some tax work earlier today and noted for June 2017 oil we got $40.71 per barrel. If 12/29/17 close holds we get $56. $15.29 more on every barrel is huge for us as it is for everyone who operates wells Be it you XOM Harold Hamm Russia OPEC etc. As I recall oil prices rebounded in late 2016 then shale went nuts and the price tanked. Their shares tanked too as I recall. ..."
"... However I am then also sure that you just like us went from making a killing on low decline conventional and $90 oil to making much much less and in your case were using almost all cash to pay for new shale well AFE's. ..."
"... I am happy to see you want $70 even higher than me. So I'll leave you alone now. Take care. I think maybe deep down you too hope US doesn't ram through 10 and then 11 million BOPD next year? ..."
"... Cling to whatever makes you feel good dude. I guess when you're favorite industry produces a lot of product but can't make any profits doing so one has to find the silver lining wherever they can. Shale is a Ponzi scheme. It won't be long until the music stops and the investors lose their shirts. ..."
"... I agree with Mike that LTO producers are not profitable (as a group). I have suggested that if oil prices remain under $65/b (WTI price) that US output may increase by about 600 kb/d (average annual C+C output) in 2018 compared to 2017. If oil prices are higher output may be higher if you tell me what that average oil price will be in 2018 I can make a better output estimate. ..."
"... The oil price may improve in 2018. However it will likely go DOWN CONSIDERABLY first before it continues higher. According to the COT REPORT (Commitment Of Traders) there is a record Commercial Short Position against oil going back 23 years. ..."
"... You will notice right before oil fell from $100 in 2014 there was also a high amount of Commercial Short Positions. Today that level is even higher. ..."
"... WTI is refined to 6% Diesel while global crude average is 34% Diesel. ..."
Unless I missed it I am still waiting for TT to explain how he finances the huge AFE's he must routinely get from $10+
million STACK and SCOOP wells.
Was doing some tax work earlier today and noted for June 2017 oil we got $40.71 per barrel. If 12/29/17 close
holds we get $56. $15.29 more on every barrel is huge for us as it is for everyone who operates wells Be it you
XOM Harold Hamm Russia OPEC etc. As I recall oil prices rebounded in late 2016 then shale
went nuts and the price tanked. Their shares tanked too as I recall.
Say TT owns 10% of a shale monster well that cranks out 200K BO in year one. Say his NRI is 8%.
So he got billed $1 million for his part of the well. A $15 higher oil price nets him $240 000 more in year one
before deducting severance tax.
So I assume TT would rather get an extra $240 000 in year one and have shale not go crazy talk and crazy drill again
as opposed to being able to crow about political crap?
Mike do you know any non-op's on shale wells? How the heck do they finance them?
PS. I know you think it's cold down there in Texas but in my part of the Mid Continent it will be -5 F later tonight.
1 stinking degree F right now. Ouch!!
TT. If you came into shale with a lot of rock solid conventional paid for in full I can see how you could come up
with the money.
However I am then also sure that you just like us went from making a killing on low decline conventional
and $90 oil to making much much less and in your case were using almost all cash to pay for new shale well AFE's.
Even if you have zero debt I assume you at least have an un drawn credit facility just in case a good big deal
were to arise. And therefore I assume you were none too pleased when your borrowing base dropped by more than 2/3 from 2014
to 2015 and again another 20+% in 2016 due to shale over production crashing oil and NG prices.
If you are big enough to cash flow several shale AFE I assume you have net production of somewhere between 2 000-10 000
BOEPD?
So let us say 5 000 BOEPD. Again just hypothetical to show what shale did to a larger private independent
owned by maybe 2-4 shareholders who got very rich 2005-14.
2014 say you could have cashed out for $500 million. 2016 likely cashed out for 1/3 to 1/4 of that. Quite a hit to the net
worth.
Further in 2014 you maybe cleared $90+ million pre income taxes before CAPEX on that 5 000 BOEPD? 2016 that went
to $18 million maybe and of course you are getting AFE and JIB on the shale that is draining that the near zero? So no shareholder
dividends or distributions in 2015 and 2016 after getting big ones in prior years.
We are small and not in a shale area but we have been around the block Dad has been in since the Arab Embargo.
Pretty much everyone had to fire someone in 2015-16 it's good if you didn't. Pretty much everyone had the rug pulled out
from under them just like in 1986 and 1998.
Thing is I think even most of the shale guys aren't real happy about shale. They know shale overproduction will drag
the price. Same bittersweet deal as farmers growing a bumper crop. Farmers made the most $$ during 2012-13 even though most
places 2012 was terrible drought. US commodity producers never do good during periods of oversupply. Just the middle men do good
then.
Again I'm just speculating on how you do things numbers etc. I may be all wrong. If I am I apologize.
I just know in 2015 and 2016 there were a ton of shale wells completed that won't payout. Maybe not as many in 2017 but
they are still out there. Further they hurt cash flow especially when you cannot control the expense recognition time
frames as a non-op.
I am so glad we did not own non-op where drilling was going on 2015-17 as it would have sucked away all our cash
and then some plus sold our flush production at market lows.
I am happy to see you want $70 even higher than me. So I'll leave you alone now. Take care. I think maybe deep down
you too hope US doesn't ram through 10 and then 11 million BOPD next year?
You are insulting to people here who actually understand the basic arithmetic of the oil business a little better than
you give them credit for. There is very clear mounting evidence that things are not getting better in your industry
they are actually getting worse. You on the other hand seem to struggle with reality. Five days ago gas was trading
at $2.55 per MMBTU not $4 and after royalty deductions interest expenses etc. etc. 5 BCF will not come
close to paying for a $10-11M well. I understand now that even after 35 years of whatever it is you do you can't insult
me anymore than you have already tried. I would have to value your opinion first.
If you want to win friends and influence people here on POB it would be helpful if you were to give us your name your
company's name where these awesome wells are so we can check production data and tax roles etc. That would give you
credibility and strengthen your arguments. Otherwise you are just a cute name embarrassing as that is to my beloved Texas
who likes to brag about how much money he makes in the shale oil business. We're interested in the big picture here not
you personally.
@TT Cling to whatever makes you feel good dude. I guess when you're favorite industry produces a lot of product but can't make
any profits doing so one has to find the silver lining wherever they can. Shale is a Ponzi scheme. It won't be long until the
music stops and the investors lose their shirts.
My credentials are irrelevant to the fact that shale oil is a profitless venture. If not for profit then what's it all about?
Take a long hard suck on my ass fuck face. Fucking retard.
Until you post a name and a company you can't complain about anyone else's credentials. We know who Mike is. You are nameless
likely lying and probably a charlatan. And the emojis prove you are a moron.
Watcher I didn't say he had to identify himself I just pointed out that he was a hypocrite to demand other people's credentials
without presenting his own.
To the Teabagger I say "Put up or shut up." Though I do prefer "shut up".
I agree with Mike that LTO producers are not profitable (as a group). I have suggested that if oil prices remain under
$65/b (WTI price) that US output may increase by about 600 kb/d (average annual C+C output) in 2018 compared to 2017. If
oil prices are higher output may be higher if you tell me what that average oil price will be in 2018 I can
make a better output estimate.
I also agree with Mike that I do not know what the future oil price will be. Generally higher World output levels result in
lower oil prices (as in 2015-2017) and generally lower oil prices result in lower profits for oil companies ceteris paribus.
The oil price may improve in 2018. However it will likely go DOWN CONSIDERABLY first before it continues higher.
According to the COT REPORT (Commitment Of Traders) there is a record Commercial Short Position against oil going back 23
years.
You will notice right before oil fell from $100 in 2014 there was also a high amount of Commercial Short Positions.
Today that level is even higher.
World demand for oil products – JODI Data – As everyone knows January is the seasonal low for demand. Comparing demand in December
to January of the next year shows an average drop of -2.2 million barrels per day.
Don't suppose you know if oil fields do blending prior to sending to assay? Doesn't seem too very conspiratorial. Someone could
gin up a rationale and no one would complain provided the refiner gets the same blend as assayed.
Most are blends – i.e. a bunch of producers discharge into a pipeline and what comes out the end is the cargo – it varies a bit
depending on the relative flows from each platform and they might have to blend further in the tank farm (e.g. Forties delivers
Brent crude I think from 15 to 20 different platforms).
I can only think of one time there might not be blending of some kind which is if an offshore platform with storage (e.g.
FPSO) unloads as repeated cargoes which always go to one specific refinery (probably the platform operators – but even then there
are usually more than one owner and they often take the cargos separately in proportion to their stake).
This is from 2015/2016 – but prices are still light/sweet -> expensive; heavy/sour -> cheap. The only thing that can mess that
up is if there are transport bottlenecks which is why WTI is a bit cheaper than Brent (it wasn't before LTO came on line).
Tapis is still the lightest and costliest although almost none of it is produced it is still a useful benchmark against
which other oil can be rated.
Although there are benchmark crudes I think every cargo is basically a negotiated price between the refinery and the producer
(there can be penalties if it isn't quite the quality agreed on and it could even be rejected and I think there is
an adjustment based on the latest benchmark prices as the contract price would have been negotiated well ahead of delivery). And
that is about as much as I know about the trading business except there is a lot of money that can be made and lost on very
small margins and variations.
source of interest my recall of Bakken and Eagle Ford assays of yrs ago and how with an increase in API degs reported in
the new assays the middle distillate yield hasn't changed. Should not be -- well it's possible but should not be likely.
U.S. crude oil production is flirting with record highs heading into the new year thanks to the technological nimbleness
of shale oil drillers who have unleashed the crude bonanza.
The current abundance has erased memories of 1973 gas lines which raised pump prices dramatically traumatizing
the United States and reordering its economy. In the decades since presidents and politicians have mouthed platitudes calling
for U.S. energy independence.
President Jimmy Carter in a televised speech even compared the energy crisis of 1977 to "the moral equivalent of war."
"It's a total turnaround from where we were in the '70s " said Frank Verrastro senior vice president at the Center for
Strategic and International Studies.
Shale oil drills can now plunge deep into the earth pivot and tunnel sideways for miles hitting an oil pocket the
size of a chair Verrastro said.
The United States is so awash in oil that petroleum-rich Saudi Arabia's state-owned oil and natural gas company is reportedly
interested in investing in the fertile Texas Permian Basin shale oil region according to a report last month.
That is a far cry from the days when U.S. production was on what was thought to be an irreversible downward path.
"For years and years we thought we were running out of oil " Verrastro said. "It took $120 for a barrel of oil to make
people experiment with technology and that has been unbelievably successful. We are the largest oil and gas producer in
the world."
The resilience of U.S. oil producers has come as the price of crude rose above $60 per barrel on world markets. Many shale
drillers can start and stop on a dime depending on the world oil price. The sweet spot for shale profit is in the neighborhood
of $55 to $60 per barrel.
"... Rystad Energy concluded this week that 2017 was yet another record low year for discovered conventional volumes globally. Less than seven billion barrels of oil equivalent has been discovered YTD. "We haven't seen anything like this since the 1940s," says Sonia Mladá Passos, Senior Analyst at Rystad Energy. "The discovered volumes averaged at ~550 million barrels of oil equivalent per month. The most worrisome is the fact that the reserve replacement ratio* in the current year reached only 11% (for oil and gas combined) – compared to over 50% in 2012." According to Rystad's analysis, 2006 was the last year when reserve replacement ratio reached 100%; largely thanks to the giant onshore gas field Galkynysh in Turkmenistan. Not only did the total volume of discovered resources decrease – so did the resources per discovered field. An average offshore discovery in 2017 held ~100 million barrels of oil equivalent, compared to 150 million boe in 2012. "Low resources per discovered field can influence its commerciality. Under our current base case price scenario, we estimate that over 1 billion boe discovered during 2017 might never be developed", says Passos. ..."
"... We have recently observed strong empiric evidence for the theory that a positive tendency in initial production rates for shale wells does not always lead to similar improvements in ultimate recovery. ..."
"... But profits and stock valuations are terrible over the past five to ten years. Drillers, Explorers, Services, I'd be shocked if you could find an index combo that has come even close to matching S&P, Biotech, Semiconductors, NASDAQ. Not positive but E&P et al might not even have beaten transportation over the past decade. If you've been invested in Oil and Gas you are officially a loser. ..."
"... The cooperative program and understanding between the Kingdom and Russia, the two largest producers in the market. ..."
"... Last but not least, we need to develop a culture of saving to increase our capital buildup for the economy. This is not an easy task, and requires a total rehabilitation of our consuming behavior." ..."
"... At this posting, New England is burning oil for 17% of their electricity generation. Wholesale spot price for electricity is $230/Mwh, about 10 times regular pricing. Later this afternoon, demand is expected to increase more. ..."
ALL-TIME LOW FOR DISCOVERED RESOURCES IN 2017: AROUND 7 BILLION BARRELS OF OIL EQUIVALENT WAS DISCOVERED
Rystad Energy concluded this week that 2017 was yet another record low year for discovered conventional volumes globally.
Less than seven billion barrels of oil equivalent has been discovered YTD.
"We haven't seen anything like this since the 1940s," says Sonia Mladá Passos, Senior Analyst at Rystad Energy. "The discovered
volumes averaged at ~550 million barrels of oil equivalent per month. The most worrisome is the fact that the reserve replacement
ratio* in the current year reached only 11% (for oil and gas combined) – compared to over 50% in 2012."
According to Rystad's analysis, 2006 was the last year when reserve replacement ratio reached 100%; largely thanks to the giant
onshore gas field Galkynysh in Turkmenistan.
Not only did the total volume of discovered resources decrease – so did the resources per discovered field.
An average offshore discovery in 2017 held ~100 million barrels of oil equivalent, compared to 150 million boe in 2012.
"Low resources per discovered field can influence its commerciality. Under our current base case price scenario, we estimate that
over 1 billion boe discovered during 2017 might never be developed", says Passos.
I think every drilled high impact wildcat well identified by Rystad at the end of 2016 has now turned out dry, with a couple
postponed for lack of finance.
It would be great if they gave the gas/liquids split all rolled up. Does it look to your eyes like a roughly 50/50 gas/liquids
split in 2017, as it does to mine? (Talking about Rystad chart.)
2017 looks likes another very disappointing year for conventional discoveries. I wonder how unconventional resource adds have
been over the last few years. I suspect that is how many of our big oil friends are achieving their annual resource add goals.
The EIA reserves are going to be interesting: even before the price crash the extension numbers, which is where all the LTO growth
came from rather than discoveries, were starting to fall and reserve changes looked like they might be going negative, which I'd
guess is due to decreases in URR estimates; e.g. below for Bakken.
Yes reserves decreased in 2015, probably due (in part) to a fall in oil prices from $59/b in Dec 2014 to $37/b in Dec 2015,
the price in Dec 2016 was $52/b, using spot prices from the EIA, so perhaps reserves increased a bit in 2016, it will be interesting
to see the 2016 estimate.
I think they have to use averages for determining economic recovery not spot prices – I can't remember now if it's six month or
annual (or other – I think maybe six months to March and September when they reevaluate) – 2016 would be bout the same or a bit
lower depending on the time frame.
Initially, SEC rules required a single-day, fiscal-year-end spot price to determine a company's oil and gas reserves and
economic production capability. The SEC Final Rule changes this requirement to a 12-month average of the first-of-the-month prices.
Using this I get
2014, 101
2015, 54
2016, 42
So 2016 reserves should decrease further if prices affect reserves.
EMPIRICAL EVIDENCE FOR COLLAPSING PRODUCTION RATES IN EAGLE FORD
We have recently observed strong empiric evidence for the theory that a positive tendency in initial production rates for
shale wells does not always lead to similar improvements in ultimate recovery.
Cabot announced they are selling up in the EF and concentrating on gas (15,000 bpd), maybe more likr them to come.
I have had to work hard over the years to explain to management that oil completions have to be optimized, and that seeking the
highest peak rate wasn't likely to be the best answer. This of course happens because high level oil company managers are good
at sales and PowerPoint, but have opportunities for improvement in key areas.
This confirms the suspicion of many that the high peak rates on newer wells (often with longer laterals and more frack stages
and proppant, in short more expensive wells) don't boost cumulative output much. In the case of the Eagle Ford, wells in Karnes
county (the core of the play) only increased output by about 40 kb over the older wells with less expensive completion methods.
Looking at Bakken data, it is clear that this is the case as well, with about a 10%to 15 % increase in cumulative output over
the first 24 months and then similar output to older wells thereafter.
Many observers assume that a higher peak production from a well leads to higher cumulative output of the same proportion. That
is if the peak goes from 400 kbo/d for a well projected to have an EUR of 200 kbo to a peak of 800 kbo/d for a newer well, it
is often assumed that the new well will have cumulative output of 400 kbo. This is incorrect, in fact the newer well is more likely
to have an output of 240 kbo an increase of only 20% rather than the 100% often assumed.
However, Rystad Energy argues that there is some evidence that suggests those higher initial production (IP) rates do not
necessarily translate into larger gains in the total volume of oil and gas that is ultimately recovered. A sample of wells in
the Eagle Ford showed steadily higher IPs in recent years, but they also exhibited steeper and steeper decline rates.
It seems a bit unlikely that Canada is going to continue increasing production as shown above over the next 6 to 8 years (after
2018 ramp ups are complete). There are no major greenfiled developments currently under construction and these take at least 5
years from FEED to production, there are continuing redundancies in the oil patch as some of the large, recent developments move
from development to operations, and there is no spare pipeline (or rail) capacity such that the oil is at about $10 to $15 discount
which is likely to increase as Fort Hill's ramps up through next year (and new pipeline permitting and construction is likely
to take even longer than the actual oil sands project).
With Iran and Iraq – they may have oil in the ground, but they need huge,new surface production facilites to process it and
supply water/gas for injection – those too take about 5 years to construct, assuming they can find some outside funding.
"OPEC has already demonstrated it can produce more, before they cut back in Jan 2017"
Yes OPEC may have some capacity to increase production. But many OPEC countries are in decline and Saudi Arabia does not have
any Khurais or Manifa like fields left to develop. If I ruled Saudi Arabia then I wouldn´t produce more than 10 mb/d even if there
were shortages. Better to stay on the platau a little bit longer. Iraq is the country with the biggest possibilities for increases.
But they will do so when they are able to, not because of shortages. The other countries you mentioned have mainly expensive oil
like tar sands in Canada, arctic in Russia and ultra deepwater in Brazil. Sure we can see increases there but it takes a long
time to develop.
"I don't think oil producers were struggling at $100/b, they were overproducing so prices dropped."
For the World Debt to GDP has increased from 226% in 2012 to 243% in 2Q2017, for advanced economies over the same period debt
to GDP went from 272% to 275% and for emerging economies over the same period 145% to 190%.
The story is better access to credit for emerging economies from 2012 to 2017.
A major recession is not very likely.
The IMF forecasts real GDP growth of 3.75% for the World from 2018 to 2022.
Oil prices at over $100/b were no problem for the World economy from 2011-2014, real GDP grew at 3.5% per year. No reason $100/b
oil would cause a recession.
The $160/b (2017$) will only be about 3.3% of World GDP in 2026, assuming medium UN population growth scenario and real per
capita GDP growth at 1.5%/year and 84 Mb/d C+C output in 2026.
There was another big drop in US crude stocks by the twip – down 6.5 mmbbls with gasoline and diesel up 2 mmbbls combined.
The crude level is fast approaching the middle of the 5 year average – how far does it have to undershoot before panic sets in?
US SPR drawdown this year is about 21.5 million barrels, this is usually not included when calculating the 5y average. Planned
annual sales are similar for the next couple of years (
https://www.eia.gov/todayinenergy/detail.php?id=29692
note that the figure shows fiscal year).
The story being told is that oil markets should be in balance next year or slight surplus if LTO maintains its pace. KSA low
production during end of 2017 and the problems in Venezuela should result in continued stock drawdowns or only a small build during
the spring (forties supports this too). Next summer driving season can be interesting, assuming the economy remains healthy. 2019
will be _very_ interesting since it will be revealed how much of the OPEC cuts were made voluntary.
As inventories are still way above historical averages, it is important to bear in mind that substantial infrastructure in form
of tanks and pipelines have been constructed over the last few years. This increased the necessary working inventory to keep the
system functioning. So, the critical inventory level might be much higher than in previous years.
They need a minimum amount of empty capacity to allow for blending and movement, not a minimum amount of stored volume to keep
it working. The storage is to cover for upsets and to allow people to make money from arbitrage.
It was propably close to the point where it was low enough to cause problems at that time. Why? Because from a commercial point
of view, it´s just stupid to have more storage than you need. It´s cost money to store it and it´s better to sell it and get the
money instead of just having it in storage. Also there is the SPR from where you can get oil if there is supply problems. So really
no need to have large amounts of oil in storage.
Yes that was how I interpreted your original comment. At least for US commercial crude stocks for the current week we are currently
about 95 million barrels above the 2012 and 2013 average for the same week of the year, so perhaps another few years before any
panic if stocks continue to decrease by 50 Mb per year as they did from 2016 to 2017. I chose 2012 and 2013 because oil prices
were relatively high in 2012 and 2013 ($88/b and $98/b in Dec 2012 and Dec 2013 for WTI).
On rereading your original comment, I think when it gets near the lower edge of the 5 year average, panics sets in, it may
take a few years.
"You can just say it is an industry in decline and there are better places to put one's money in." yes you can say "the industry
is in decline" but then you would be wrong, not usual for you or many on the board. In this case however, the statement is not
only wrong but delusional. Both production and demand are at record highs for oil natural gas and natural gas liquids. Of course
why let facts get in the way of your political views, to quote a old line; fat, drunk and stupid in no way to go through life,
son
"Both production and demand are at record highs for oil natural gas and natural gas liquids. "
But profits and stock valuations are terrible over the past five to ten years. Drillers, Explorers, Services, I'd be shocked
if you could find an index combo that has come even close to matching S&P, Biotech, Semiconductors, NASDAQ. Not positive but E&P
et al might not even have beaten transportation over the past decade. If you've been invested in Oil and Gas you are officially
a loser.
Now, high yield bonds might be a different story. But in the wake of all the bankruptcies for the past five years was 100%
of all bonds paid? They might have been, not sure.
Oil companies themselves have changed the way they are investing. So I take that as a sign they, too, think their best times are
behind them.
In terms of financial management, there are industries that have done better and are likely to do better than gas and oil.
It's simply not a growth industry anymore.
I think oil prices have an effect on investment, especially outside the LTO focused companies. For the LTO players they seem
to focus on output growth regardless of profits, not a great long term business model.
Regarding the gap, a third of the consumption growth over the last decade was from China. If Chinese consumption plateaus, as
it very well might, then consumption growth from here will be less and the gap smaller. But putting in an assumption to change
an established trend would just add another point of failure. This piece isn't so much a model as a creation story, trying to
figure out why past expectations weren't met and where the known unkowns might come from. A big one of these is what the Permian
might end up doing. I think that is why industry is paying up to get into the Permian. If you are not in the Permian you don't
have a future. And shareholders will pay any amount of money for you to keep your job.
The piece was prompted by Ovi's observation that Non-OPEC less the big three has been in decline since 2004 – very encouraging.
There are some systems in which a price rise does not result in an increase in production simply because the resource is clapped
out. The gold market last decade for example. The gold price rose at an average of about 17% per annum year after year but gold
production fell. That is not supposed to happen. Now some mines are digging up rock with just over one part in a million of gold
in it and that pays for turning that rock into mud.
There was a July report for China imports that extrapolated to another 6.6% consumption growth year for them. No evidence of slow
down. Ditto India.
Reminder to folks because it is a tad obscure. India's consumption growth is 8% but it's concentrated in an unusual way. LPG.
They run motors on LPG, mostly motorbikes.
Vehicle miles driven. The increase is relentless as is US population growth. In the big smash of 2008/2009 there was a flattening
of the increase but not really any sort of collapse. There was in oil price, but there was no need for it since consumption did
not decline more than 5%. A quick look at historical consumption not just miles driven shows essentially the same tiniest of down
ticks during that timeframe.
So I would say we need a new theory as to why price declines during recession. Doesn't appear to be less driving to work.
Consumption of oil would seem to decline a little bit right across the board during a recession, especially a big one. Construction
machinery runs less, people travel less, buy fewer new things. It doesn't take very much by way of falling consumption to reduce
the price of oil. The price of oil is highly inelastic, in the short term, and it's like milk.
The price of milk has to fall a long way before you can find uses for more than the usual amount.
People buy as much milk as they want for their kids, and maybe a little to cook with. NO MORE, even if the price goes down
a lot. They don't have any use for it. So .. if it's coming to market, it has to sell cheaper in order for people to FIND uses
for it. You can feed milk to the cat, and even to the pigs, if it's cheap enough. Farmers have been feeding excess milk to pigs
just about forever, lol. I did so myself when we had more than we could use otherwise when I was a kid.
So . if the price of gasoline falls, maybe you take the ski boat to the lake one extra weekend , which can easily result in
burning a couple of hundred gallons, round trip, as opposed to spending the weekend golfing at a cheap nearby course.
Or you drive the old car that's a gas hog more, because it saves putting miles on a newer car. When the price of gasoline bottomed
out, I drove my old four by four truck a lot more than I would have otherwise, because I knew I would be retiring it before long,
and wanted to get as many miles out of it as I could, saving wear and tear on the car .. which I'm planning on keeping indefinitely.
It broke down yesterday, and while it's not quite dead, I 'm thinking it's time to euthanize it, lol.
I'm also running my big yellow machines a lot more than usual, because when diesel is down close to two bucks, as opposed to
four bucks or so, this saves me a hundred bucks a day, or more, if I stay with it, and I've got some pretty big long term projects
such as a new lake, which I work on at odd times, whenever circumstances permit.
IF I were hiring out, which I don't , I would be able to offer a neighbor a hundred bucks or more off for a days work, with
diesel at two, as opposed to four bucks. That would result in neighbors with cash, and thrifty Scots habits, spending some of
their savings, doing long planned work sooner, or maybe going for a new small project.
Overall though construction falls off during a recession.
Most of the increase in total miles happens as the result of people driving new cars, and by and large, new cars and light
trucks are far more fuel efficient than old ones.
And people who are broke spend as much on gasoline as they can afford, period. They MUST spend to get to work. If a tank at
twenty bucks will get them to Grandma's house and back in their old clunker, they go. A tank a forty bucks often means calling
rather than visiting.
It is pretty much a given that Permian oil needs export market. This is from PAA conference call.
" PAA comments: If you look at the amount of 45-plus gravity. It's about 300,000 barrels a day now, growing to 1 million plus.
So, a lot of those volumes are coming, and that's really the crux of the benefit of a Cactus pipeline being able to take that
directly to the water because I think we are going to see a lot of pushback from refiners. We are already starting to see it as
far as the lightning of the general stream going up to Cushing.
The refiners don't want any lighter. So, it's an integral part of the strategy and a piece of everything we've been building."
Delaware basin produces 56% oil that is greater than API gravity 50 plus according to Woodmac.
Every week I see announcements to export US oil. Here are some.
"OPINION-
Don't be taken in by the surge in oil prices
But oil prices have continued to be volatile. They went down from $114 per barrel in June 2014 to $26 per barrel in early 2016
and moved gradually upward to touch $64 per barrel in late November 2017. On the other hand, economic forecasts expect oil prices
to continue to rise to a range of between $70 to $80 by the end of the first quarter of 2018. Futurists in the field base their
expectations on the following indicators:
1) The cooperative program and understanding between the Kingdom and Russia, the two largest producers in the market.
2) The continuation of efforts to reduce oil surplus in the market 3) The agreement among OPEC members and some non-members to
continue their programs of production reduction up to the end of 2018. 8. Last but not least, we need to develop a culture
of saving to increase our capital buildup for the economy. This is not an easy task, and requires a total rehabilitation of our
consuming behavior."
Interesting development for natgas: Iroquois zone 2 spot prices just shot up to over 32 USD per mcf. This is nearly 1000% up from
last month. As much depends now on the future weather, it shows how volatile the US gas market can be – despite massive efforts
towards more supply.
As the industry has completely shifted the supply from the South to the Northeast, hurricanes are no more a threat to supply,
yet freeze offs become now a major issue. Previously just the supply of the Rockies has been hampered by freeze offs. As this
concerned just 10% of US total production, this has never been an issue for gas supply. However, as currently 70% of supply comes
from the Northeast and the Rockies, freeze off could lead to serious supply disruptions, if the freeze continues.
Not freeze offs, simply lack of pipeline capacity in the face of unprecedented demand. When the receipt figures from the various
transfer points are published, they should show 100% capacity utilization.
At this posting, New England is burning oil for 17% of their electricity generation. Wholesale spot price for electricity
is $230/Mwh, about 10 times regular pricing. Later this afternoon, demand is expected to increase more.
The supply is there in the pipelines, Mr. Leopold, there just isn't enough of them to satisfy demand during this cold spell.
I was expecting your reply. Thanks for your opinion.
Nevertheless, there has been huge infrastructure spending over the last years. The pipelines should be already in place.
However, freeze offs are not an issue just yet. If the gas wells freeze off later in the week (temperatures are going to zero
down until Cincinnati) , the shortage of supply may be really a concern. There is just one week left and we know it.
This is one of the structural weaknesses of Shale gas:you probably do not have it when you need it the most.
The pipelines that have been completed greatly favor delivery west to southwest from the Appalachian Basin.
The Atlantic Sunrise is being built that will deliver into the NYC area via a hookup with Transco, I believe.
Deliveries to the north, that is New York State and New England have been virtually nil.
Yes, the storage aspects of all gas products is a challenge, and – as you mentioned – the coming cold days will highlight the
vulnerabilities of the situation, sadly, at great expense to many.
Are companies which produce it profitable or they survive by generating a parallel stream
of junk bonds and evergreen loans?
Most of them are also shale oil producers and might well depend on revenue from shale oil
to produce gas. Shale oil proved to unsustainable at prices below, say $65-$75 per barrel or
even higher, excluding few "sweet spots". Also a lot of liquids the shale well produce are
"subprime oil" that refiners shun.
They are not only much lighter but also they have fewer hydrocarbons necessary for
producing kerosene and diesel fuel. Mixing it with heavy oil proved to be double edged sword
and still inferior to "natural" oil. So right now the USA imports "quality" oil and sells its
own" subprime oil" at discount to refineries that are capable of dealing with such a mix.
Say, buying a barrel for $60 and selling a barrel of "subprime oil" at $30.
And without revenue from oil and liquids it can well be that natural gas production might
be uneconomical.
I wonder what percentage of the total US oil production now is subprime oil.
Modern multistage shale well now cost around $7-10 million. And that's only beginning as
its exploitation also costs money (fuel, maintenance, pumping back highly salinated and often
toxic water the well produces, etc). So neither oil nor gas from such wells can be very
cheap.
Generally such a well is highly productive only the first couple of years. After that you
need to drill more.
Also there is a damage to environment including such dangerous thing as pollution of
drinking water in the area,
"... In the oil business debt is having stage 2,3 or 4 cancer. Ignoring its treatment is not the cure. Again, take Shallow's CLR's diagnosis: it has $6.6B of debt and only $10M of COH. If independently audited its reserves would not cover its long term debt. It is basically insolvent. It belongs in Hospice Care. You are relying on corporations like that to make your predictions come true. ..."
"... If global oil demand increases by around 1.5mbld as it has done over the last few years then $90 + oil is very possible. Obviously it also depends on how strongly US tight oil grows and what OPEC will do. ..."
"... At the moment US growth and OPEC spare capacity could drive down prices again. I believe in around 3 years time there will be very little OPEC spare capacity and increases from the US, Canada, Brazil, Iraq new developments etc will not be able to meet the extra demand. ..."
"... The big factors for future energy costs is the lack of CapEx in replacing consumption and the lack of finding replacement reserves. A lot of big western projects that would have replaced depletion were cancelled. Western Oil companies opted to drill in Wall Street (ie Stock buybacks) or buying up smaller companies instead of developing newer fields (Artic and Offshore). ..."
"... I suppose sooner or later Middle East Producers will follow the Western Oil Companies by choosing to Drill Wall Street instead (ie the Saudi Aramco IPO). ..."
"... So you own your country, as a practical matter, and you therefore own your own ( national ) oil company. Oil's cheap. You expect it to STAY cheap for years. But maybe you know a buyer that will pay you a hell of a lot of money for your oil company, fifty times, a hundred times, maybe , the net cash flow you're getting after paying the oil company's expenses. Now if you were an ordinary businessman, such as the ones with an MBA from any of the Ivies, you would sell in a flash, and take that cash and put it into another business. ..."
"... I'm as far from an expert as east is from west, but according to everything I read, investment in the oil industry is at very low levels, world wide, and oil wells are like apple trees Ya gotta have new ones, cause the old ones quit on ya. ..."
Dennis, I am not capable of predicting what the price of oil is going to be in six months,
much less six years. Neither are you. Shallow and Fernando, both oily folks, might state a
"range" scenario but if you were to pen them down they'd likely say they don't know either.
If the predictor of our hydrocarbon future has to "qualify" those predictions based on
what the price of oil might be, I am sorry, I don't see the point in the prediction at all.
You, Mr. Archibald, and many others all miss the point entirely with regard to LTO growth in
America. You assume that because LTO has grown, it will continue to grow. You focus on oil
prices to make your predictions come true and ignore, entirely, that shale oil extraction in
America is not nationalized, it is managed by private enterprise. Private enterprise must
succeed, it must be profitable enough to drill new wells from old wells. Now, because of poor
business decisions in the past the US LTO industry must manage its old debt, ultimately pay
down that old debt AND create sufficient net cash flow to drill new wells without getting
further in debt. It cannot do that at prices short of $100 or more for a sustained period of
time. It is a business, Dennis; I am sorry you cannot seem to grasp that.
In the oil business debt is having stage 2,3 or 4 cancer. Ignoring its treatment is not
the cure. Again, take Shallow's CLR's diagnosis: it has $6.6B of debt and only $10M of COH.
If independently audited its reserves would not cover its long term debt. It is basically
insolvent. It belongs in Hospice Care. You are relying on corporations like that to make your
predictions come true.
I suggest you quit worrying about the price of oil and start focusing on profitability and
debt. You seem to embrace debt as being acceptable in the reserve growth LTO business model.
That is a very bad mistake, a mistake common to people that have never been in the oil
"business," that must write checks, receive revenue from the sale of oil and gas production
and be profitable. Or not eat.
Instead I suggest you focus on where the money is going to come from to keep funding this
miracle of US LTO growth. That growth potential is not price sensitive, it is capital
sensitive.
If global oil demand increases by around 1.5mbld as it has done over the last few years
then $90 + oil is very possible. Obviously it also depends on how strongly US tight oil grows
and what OPEC will do.
At the moment US growth and OPEC spare capacity could drive down prices again. I believe in
around 3 years time there will be very little OPEC spare capacity and increases from the US,
Canada, Brazil, Iraq new developments etc will not be able to meet the extra demand.
Many people do not realise how many electric vehicles would have to be sold to cope with a
world where oil production stops growing. About 30 to 40 million of the 100 million vehicles
would have to be fully electric, hybrids would not be enough.
"Global demand has been slowing down in recent years, so the graph does not show a gap of
8 million between demand and supply."
Seems likely that global demand will likely to decline as Western & Asia populations
continue to grow older. Currently the global economy has been propped up by ZIRP and lots of
QE (China, Japan, EU, & US). Worldwide Debt has nearly doubled since 2008 due to cheap
& easy credit. Sooner or later there will another global recessions that forces a
reduction in Oil demand.
The big factors for future energy costs is the lack of CapEx in replacing consumption and
the lack of finding replacement reserves. A lot of big western projects that would have
replaced depletion were cancelled. Western Oil companies opted to drill in Wall Street (ie
Stock buybacks) or buying up smaller companies instead of developing newer fields (Artic and
Offshore).
I suppose sooner or later Middle East Producers will follow the Western Oil Companies by
choosing to Drill Wall Street instead (ie the Saudi Aramco IPO).
My guess is that Oil pricing does not increase much (excluding geopolitical events/natural
disasters) over the next 2 years. I think the odds favor a decrease in prices and consumption
over the next 2 years caused by another global recession: Interest rates are rising at a time
when consumers are borrowing more to meet ends, and consumers savings rates are near zero
(perhaps going negative again).
I don't do any modeling and number crunching. Couldn't even if I wanted to, due to lack
sufficient statistical and computer skills.
But I don't see where all this new production is supposed to come from, without the price
going up. There's nothing in the news I read here, or at a number of other places, indicating
that any huge new fields that are going to be cheap to produce have been discovered in recent
times, and are in the process of being developed.
So how is it that new production adequate to offset the inevitable decline of the huge
older fields that still supply the bulk of the oil, PLUS enough more to actually increase
production somewhat, can be achieved without the price going up quite a bit?
Where's the new CHEAP oil supposed to come from, considering that oil companies these days
are going after ever smaller and more expensive to produce fields ?
Some of my neighbors, and some of my family members, have amazed everybody who knows them,
including their physicians, by continuing to be productive workers right on into their
eighties.
But when they did finally " decline " or "deplete" they went down hill pretty damned fast.
Men and oil fields are subject to the SENECA CLIFF.
I disagree with our honorable and esteemed founder Ron Patterson about the odds of some of
us pulling thru the coming bottleneck more or less whole, but I'm of the opinion he's right
about a lot of production being maintained these days by practices such as infield drilling
and water flooding and so forth that will result in pretty sharp declines in production at
many major oil fields sometime in the not very distant future.
Maybe the people who think like Tony Seba are right, and our need of oil is peaking now, or
will peak, very soon. I don't see it happening within the next ten years though, because I
just don't see electric vehicles displacing oil burners so quickly, considering the size of
the vehicle fleet, and the number of relatively new ICE cars that will continue to be sold
for some years yet.
Matt Simmons was ahead of his time, like a lot of people who are hailed as visionaries
after they're gone, but he nailed it when he said rust and depletion never sleep.
Demand for use as auto and light truck fuel may indeed peak and plateau in rich western
countries, but unless the world wide economy goes sour, demand overall won't peak until
batteries or fuel cells get to be fully competitive in up front terms.
Money has a hell of a lot of time value, and most people aren't going to lay out a lot of
money up front unless they earn an excellent return by doing so . This is particularly true
in the case of small businesses and the large majority of individuals, because they don't
HAVE a lot of money to lay out up front, and lack good enough credit to borrow enough to pay
a significant premium for an electric vehicle, considering their other needs for borrowed
money.
The oil biz is unlike any other, because most of the key players are GOVERNMENTS, and
governments have never been noted for their business acumen.
Sure governments want to make money on their oil, but the ordinary rules that allow us to
predict what other industries will do just don't apply well to oil, because politicians have
too many other things to consider, in addition to the bottom line.
Consider this. Suppose you are the head of government, with enormous power, dictatorial
power, so that you can do more or less as you please. You must have money coming in at all
times, and once you're selling oil , you're HOOKED on the money.
So you own your country, as a practical matter, and you therefore own your own ( national
) oil company. Oil's cheap. You expect it to STAY cheap for years. But maybe you know a buyer
that will pay you a hell of a lot of money for your oil company, fifty times, a hundred
times, maybe , the net cash flow you're getting after paying the oil company's expenses. Now
if you were an ordinary businessman, such as the ones with an MBA from any of the Ivies, you
would sell in a flash, and take that cash and put it into another business.
But since you're a little tin pot dictator, or even time dictator, like the king of Saudi
Arabia, you won't give selling even a passing THOUGHT. ( Remember it always takes at least an
exception or two to prove a rule, lol, and in the case of the Saudi's selling a little ..
it's a pig in a poke, and they're going to maintain total control, and they're just MAYBE
pricing it at a very large premium, lol) .
You CAN'T sell, it just doesn't work that way, because you have to control the oil
industry in order to control your country. Politicians who expect to stay in power more or
less forever very rarely sell national assets that generate cash. The money they could skim
off isn't worth as much to them as the power that comes with control. Sure they sell a money
losing operation such as a water works sometimes, because that HELPS them stay in power.
But even though they are constrained from selling the assets, they are virtually always
compelled to sell produced oil, and the lower the price, the MORE they need to sell, ouch!
And the bigger the bind they're in for cash, the less likely it is that they will be making
the long term investments necessary to bring new production online , or even spending the
cash to preserve current production by properly managing the oil fields.
The amount of money actually spent by the big independent super national oil companies on
new production is trivial, compared to the amounts spent by national oil companies, and they
aren't spending much, not even a piddly hundred million here and there, if they can avoid
doing so.
I kept my old Daddy's orchard up and running right thru some very tough times, losing
money a lot of years, making almost nothing some other years, because it was his LIFE, his
passion. And I had every reason to believe that good times would return, because almost
everybody backed way off on planting new trees, and lots of growers simply quit
altogether.
But I didn't plant new trees, because I was getting old myself. My neighbors who did are
doing VERY well the last few years, as farming goes, because prices are very good in relation
to costs, and will stay that way until the industry as a whole manages to over do production
again. Both oil and apples involve long lead times, lol. If oil production capacity falls
short of demand, the price will go up, substantially, and stay up a long time, as long as the
economy holds up, and as long as there aren't viable substitutes. Batteries are nice, but
it's going to take a LONG time for batteries to displace more even five percent of oil
consumption.
I'm as far from an expert as east is from west, but according to everything I read,
investment in the oil industry is at very low levels, world wide, and oil wells are like
apple trees Ya gotta have new ones, cause the old ones quit on ya.
I'm dead sure oil will go up unless the world wide economy goes to hell. But .. I've been
dead wrong before. ;-)
So, is there a big wall of US shale oil coming from Texas that will dash my "happy times" of
$55-65 WTI?
So thankful to get up to this level after 36 months of headaches about the oil price.
Seems the only thing that could screw it up is US shale, which apparently is set to explode
in 2018.
I saw someone touting Halcon stock today on SA. Making a big deal about having little
debt. Too bad they flushed about $3 billion of debt when they went BK. I'm sure Mr Wilson
(CEO) is, "still getting his" so to speak.
My brother is griping about why he hasn't been able to draw a salary for the last three
years, heck all the shalie management has! Have to remind him we aren't in the shale fantasy
land. He knows, he's just blowing like I'm prone to do.
If I don't post anymore this year, happy New Year everyone!! Things are looking up, just
hope the shale industry doesn't torch it again!
IN my view you will be sleeping well in the next year. Shale increases mostly the supply
of condensate and light distillates, which does little to cover the worldwide shortage of
middle distillates. So, the price of 'real' oil will very likely increase over the next
future whereas the prices of light distillates (propane, butane, pentane , LPG, NGPL
composite .. ) are very likely depressed. Light distillates can substitute middle distillates
to some degree, yet the potential is limited. So, in that sense I wish you a happy and
successful New Year.
There is no question, Shale is a disaster for investors. Nevertheless, it is a blessing for
Wall Street as high oil and gas production ensures dollar stability and a growing bond
bubble. The only question is when will investors will wake up. As it is perfectly OK for
small companies to sacrifice themselves and burn the cash of investors through, big companies
are less willing to do so. Who is next? XOM, Statoil , APA ?
The ratio of commodities / S&P500 is at a record low, S&P_GSCI / S&P_500
The S&P GSCI currently comprises 24 commodities from all commodity sectors – energy
products, industrial metals, agricultural products, livestock products and precious
metals.
Bloomberg chart on Twitter: https://pbs.twimg.com/media/DSCfWj6W4AA7xyW.jpg
Discoveries of new reserves this year were the fewest on record and replaced just 11
percent of what was produced, according to a Dec. 21 report by consultant Rystad Energy.
While shale wells are creating a glut now, without more investment in bigger, conventional
supply, the world may see output deficits as soon as 2019, according to Canadian producer
Suncor Energy Inc.
Are we not now near enough to 2019 to say that there just isn't time to bring major new
conventional projects on-line before mid to late 2019? The only offshore projects that could
be approved and developed earlier than that would be single well tie backs using the
wildcat/appraisal well as a producer, probably no more than 5 to 10 kbpd and in immediate
(and likely rapid) decline, and would be dependent on there being spare processing capacity
on a nearby hub (i.e. production the new production would be mitigating decline not adding
output).
But the issue isn't lack of discoveries this year, as the headline implies, it's the lack of
recent FIDs which might be in part because of the drop off in discoveries in 2012 to 2015
(for all oil, but particularly easily developed oil), coupled with high debt loads, and
prices that aren't high enough (or at least not yet for long enough) to allow development of
what resources there are available to the IOCs. As prices rise and IOCs become more confident
and are able to pay dividends as well as fund longer term developments then the really low
discoveries in 2015 to 2017 might give them far fewer options than people expect (noteworthy
is that any discoveries in that period that have been attractive, like Liza, have been
immediately fast-tracked, so there really isn't much of a backlog of attractive projects at
all).
I was basing my comment on what the article said. Many of the companies are aware that
discoveries have been low and not many projects will be coming online soon.
Mexico may be heading for a period of accelerated decline (above 10%). Their two onshore
regions and the southern marine region are falling at 15 to 20%, and the largest producing
region (Northern Marine, which includes KMZ and Cantarell) looks like it may be starting to
accelerate. The non KMZ nd Cantarell fields had been the only ones increasing, but look to
now be in decline or at least on plateau, and by PEMEX forecast KMZ should be off plateau in
the next couple of months or so. Mexico has now stopped exporting light oil (which mostly
comes from the three smaller regions, with KMZ and Cantarell producing heavy and medium
heavy) and will presumably be looking for increasing imports of it, which is probably good
for the Texas LTO producers. Operating rigs have recently been declining fast.
Do you have any information on how the ramp up of production is going for the Western
isles project following first oil on 15th November. On a side it looks like the Weald basin myth is starting to unravel.
Not yet -first numbers for December start-up should be in March, it's a question of limiting
their losses at current prices I think. All the wells were predrilled so ramp up should be
fast but I wouldn't be surprised if they get pretty low reliability in the first 6 to 12
months given all the construction problems they had. Also interesting that Catcher started up
on time, against most expectations. Wonder if Clair Ridge will make it this year – do
you know if there are big tax benefits from depreciation for starting within a given calendar
year in the UK (or might be financial yar end is more important)?
This shows how fast the SW marine region fields are now falling (a lot of small fields were
added 2007 to 2015 and are now in steep decline).
There seems no reason this and the two land regions shouldn't continue to fall at current
rates (they may even accelerate given how the rig count has dropped), and if KMZ follows the
predicted PEMEX curve Mexico could drop around 350 kbpd this year, possibly the same in 2019
in decline (but with 60 kbpd additions due from Abkatun), but maybe approaching as low as
1000 kbpd by mid 2020, which is probably the earliest ENI will be able to get their shallow
water field on line if they fast track it.
CALGARY -- Imperial Oil says its much-delayed $16.1-billion project to build a natural
gas pipeline across the Northwest Territories from the coast of the Beaufort Sea to northern
Alberta has finally been cancelled.
Originally the plan was to increase Majnoon to over 1 mmbpd. That has now been downgraded
to 400 kbpd (from current 220). Shell and Petronas have pulled out and a "government panel"
will oversee the development. I'd bet on continued decline rather than any increase, and
potential for significant reservoir damage along the way.
Similarly for Nasirya oil field – intend is to increase from 90 kbpd to 200, using a
local oil company that also sounds like it has a lot of government input.
To me none of this ever declining brownfield development with IOCs pulling out, and
promises of more exploration "coming" is compatible with the claims for their discovered
resources (developed or not), or any chance of a quick ramp up if oil prices start to inflate
rapidly after 2018.
So far, the experiences about freeze off Shale wells are limited. Will glycol also work for
Shale wells when there is much water involved? I think nobody knows yet how big the impact of
the cold will be on Shale wells. However, it looks like shorts are getting hyper-nervous.
Oil and Gas Producers Find Frac Hits in Shale Wells a Major Challenge In North America's most active shale fields, the drilling and hydraulic fracturing of new
wells is directly placing older adjacent wells at risk of suffering a premature decline in
oil and gas production.
The underlying issue has been coined as a "frac hit." And though they have long been a
known side effect of hydraulic fracturing, frac hits have never mattered or occurred as much
as they have recently, according to several shale experts who say the main culprit is infill
drilling.
"It is a very common occurrence -- almost to the point where it is a routinely expected
part of the operations," said Bob Barree, an industry consultant and president of
Colorado-based petroleum engineering firm Barree & Associates.
He added that frac hits are also an expensive problem that involve costly downtime to
prepare for, remediation efforts after the fact, and lost productivity in the older wells on
a pad site.
A frac hit is typically described as an interwell communication event where an offset
well, often termed a parent well in this setting, is affected by the pumping of a hydraulic
fracturing treatment in a new well, called the child well. As the name suggests, frac hits
can be a violent affair as they are known to be strong enough to damage production tubing,
casing, and even wellheads https://www.spe.org/en/jpt/jpt-article-detail/?art=2819
FWIW The first SPE paper referenced discusses mediating the negative nature of frac hits.
It discusses the refrakking of a six well pad drilled in 2010 in the middle Bakken and three
forks, North Fork Field, McKenzie. The six wells have a cumulative oil production to date of
3.6mmboe and 7.7bcf.
Since I am not in the field, much of the paper went over my head, I merely skimmed through
it, however it appears that well communication was observed for horizontal and vertical
spacing of 1000 feet.
"... I fully agree that attacking Iran would be yet another disaster but I don't understand why Saudi Arabia is portrayed as an 'enemy', the 'real' one, no less, in alt-media circles like this. I mean let's be honest with ourselves. KSA is the definition of a vassal state. Has been so since the state established established relations with the USA in the 1940s and the status was confirmed during the 1960s under King Faisal. Oil for security. Why pretend that they have any operational clearance from the US? ..."
I fully agree that attacking Iran would be yet another disaster but I don't understand
why Saudi Arabia is portrayed as an 'enemy', the 'real' one, no less, in alt-media circles
like this. I mean let's be honest with ourselves. KSA is the definition of a vassal
state. Has been so since the state established established relations with the USA in the
1940s and the status was confirmed during the 1960s under King Faisal. Oil for security. Why
pretend that they have any operational clearance from the US?
Contrary to the popular view, Wahabism is necessary to keep the local population under
control. Particularly the minority Shia population who live along the eastern coast, an area,
which incidentally also has the all the oil reserves.
USA fully understands this. Which is why they not only tolerated Wahabism, but strongly
promoted it during Afghan jihad. The operation was by and large very successful btw.
It was only during the '90s when religion became the new ideology for the resistance
against the empire across the Muslim world. Zero surprise there because the preceding
ideology, radical left wing politics was completely defeated. Iran became the first country
in this pattern. The Iranian left was decimated by the Shah, another vassal. So the religious
right became the new resistance.
And as far as the KSA is considered, Wahabi preachers aren't allowed to attack the USA
anyway. If any individual preacher so much as makes a squeak, he will be bent over a barrel.
There won't be any "coming down very hard on Saudi Arabia" because USA already owns that
country.
So what's the answer? Well, props to Phillip as he understood – "it would also
require some serious thinking in the White House about the extent to which America's armed
interventions all over Asia and Africa have made many people hate us enough to strap on a
suicide vest and have a go."
Your analysis starts too late. The US supports Wahhabism and the House of Saud because
the pro-Arabic/Islamic English Elites of 1910 and 1920 and 1935 supported Wahhabism and
the House of Saud.
The British Empire 'made' the House of Saud,
Thinking it wise to use Wahhabism to control Shia Islam is like thinking it wise to
use blacks to control the criminal tendencies of Mexicans.
The Last but not LeastTechnology is dominated by
two types of people: those who understand what they do not manage and those who manage what they do not understand ~Archibald Putt.
Ph.D
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damn, I ran out of fingers and toes, I hope that is right.
More likely is a gradual increase in oil prices as we approach peak oil, the futures strip is likely to be wrong on oil price (today's future strip). For Brent futures the current strip goes from $73/b (Jan 2019) to $61 (Dec 2026). By Contrast the EIA's AEO 2018 reference oil price scenario for Brent crude has the spot price at $87.50/b in 2026, chart below has their scenario (which I think may be too low.)
Russia's September oil production set for post-Soviet record high
US sanctions against Iran could give oil a boost to $100 amid dramatic shortfall in supplies
Oil surges to 4-year high as investors see no sign of production rise amid Iran sanctions
FILE PHOTO. © Lucy Nicholson / Reuters The tax and trade policies of Donald Trump are, in fact, what have contributed to the surge in oil prices, a US economics professor told RT, adding that the US President's tough words to OPEC are a political stunt. On Thursday, Trump accused OPEC's Middle East producers of "pushing for higher and higher oil prices" and demanded "they stop it," adding that the US is "protecting those countries." Oil prices showed a mixed reaction to Trump's words. The Brent benchmark fell 43 cents to $78.97 per barrel, while the US Texas Intermediate grew by 9 cents to $71.21.
Trump demands OPEC lower oil prices, claims US 'protects' Middle East countries
Chris Cook Energy, alternative energy, oil & gas, infrastructure ( 908 followers) Summary
FILE PHOTO: Iranian Parliament © Islamic Consultative Assembly News Agency / AFP In a rare statement Iran's Supreme Leader Ayatollah Ali Khamenei has lashed out at the country's authorities, accusing them of poorly handling internal issues. The mismanagement is even worse than US sanctions, he said. "It is not that the sanctions do not play a role; but a major part of the situation is the result of [government's own] actions," Khamenei said, according to Irna, as he was addressing thousands of Iranians in Tehran on Monday.
Rouhani blasts Trump's 'psychological warfare' as Iran braces for US sanctions
© China Stringer Network / Reuters Looming US sanctions against Iran will likely hit Tehran's oil sales abroad, and it could lead to a price spike in oil contracts. The first round of renewed US sanctions will take effect on Tuesday with the harshest sanctions, potentially targeting Iran's oil industry, expected to return in early November.
Is this the end of ultra cheap gasoline in Venezuela?
"Both production and demand are at record highs for oil natural gas and natural gas liquids. "Boomer II, says: 12/22/2017 at 6:40 pm
Saudi Update October 2018
http://crudeoilpeak.info/saudi-update-october-2018