Plato Oil is the moment in time when, on a global scale, the maximum rate of oil production (per
year) is reached. The moment after which oil production, by nature, must decline at the same price level
and the same volume can only be achieved only at higher price level. Since Earth is a closed system,
next to this production event, there must be an equal demand event: Peak Oil Consumption. As higher
price level tent to put economy in recession Peak oil consumption is achievable only on relative low
(say below $100 per ballel price levels).
Peak can be achieved at different time for each country on the earth that produces oil. Some some
of which are already beyond peak oil production That leads to the assumption the world as
a whole soon reaches if not reached the plato oil production and from this point absolute number can
only slowly decline. On consumption side while some countries like China and Arab countries (as well
as other countries with rapidly growing population) still experience significant growth in oil consumption,
some countries are already well beyond Peak Oil Consumption by now. That's probably true for several
European countries with very low population growth.
An extensive new scientific
analysis published in Wiley Interdisciplinary Reviews: Energy & Environment says that proved
conventional oil reserves as detailed in industry sources are likely "overstated" by half.
According to standard sources like the Oil & Gas Journal, BP's Annual Statistical Review of World
Energy, and the US Energy Information Administration, the world contains 1.7 trillion barrels of
proved conventional reserves.
However, according to the new study by Professor Michael Jefferson of the ESCP Europe Business
School, a former chief economist at oil major Royal Dutch/Shell Group, this official figure which
has helped justify massive investments in new exploration and development, is almost double the real
size of world reserves.
Wiley Interdisciplinary Reviews (WIRES) is a series of high-quality peer-reviewed publications
which runs authoritative reviews of the literature across relevant academic disciplines.
According to Professor Michael Jefferson, who spent nearly 20 years at Shell in various senior
roles from head of planning in Europe to director of oil supply and trading, "the five major Middle
East oil exporters altered the basis of their definition of 'proved' conventional oil reserves from
a 90 percent probability down to a 50 percent probability from 1984. The result has been an apparent
(but not real) increase in their 'proved' conventional oil reserves of some 435 billion barrels."
Global reserves have been further inflated, he wrote in his study, by adding reserve figures from
Venezuelan heavy oil and Canadian tar sands – despite the fact that they are "more difficult and
costly to extract" and generally of "poorer quality" than conventional oil. This has brought up global
reserve estimates by a further 440 billion barrels.
Jefferson's conclusion is stark: "Put bluntly, the standard claim that the world has proved conventional
oil reserves of nearly 1.7 trillion barrels is overstated by about 875 billion barrels. Thus, despite
the fall in crude oil prices from a new peak in June, 2014, after that of July, 2008, the 'peak oil'
issue remains with us."
We have owned rigs. We could never keep an operator around long enough to make it
worthwhile. We had a double drum and a single drum. Mud pump. Power swivel. Power tongs on
both. Testing truck. The whole enchilada.
We sold them all to a man who had worked for someone else and then went out on his own. We
gave him a good deal, and he did a lot of work for us. He still does work for us, but he can't
find help that will stay.
We also owned a tank truck. Sold it also. It is currently parked, the man we sold it to
cannot find a driver. He is a one horse tank truck driver. He turns down work all the time. We
had to shut down a lease we haul water on for a few days when he got COVID. Thankfully he
recovered.
All of us around here just cannot quite believe what is going on with the oilfield labor
force. It is a perfect storm.
Meanwhile, most recently we paid $5.63 per foot for 2 3/8" steel tubing, which was under $3
a year ago. We priced a 115 fiberglass tank for $6,800, would have been $3,900 a year ago.
We had a couple wells down for a few weeks because we could neither get new nor rewound
motors for them.
The man who owns the backhoes, trackhoes and cranes that does contract work for us is in his
70's and has great grandkids. He works in the field daily beside his son and grandson.
One of the last rig hands we had broke into our shop last winter. He got out of jail after a
few weeks and immediately got a job in a local factory. Hope he stays clean. He was a good hand
when he was, and had learned to operate a single drum also.
The prosecutor in our county announced the first six months of 2021 that 162 felony cases
had been filed in our small county, that in 2019 the total for the year was 204 felonies, and
that 33 of the 34 jail inmates were addicted to meth.
We do have one pumper now under 50. The rest are from 51 to 63. REPLYINGRAHAMMARK7 IGNORED07/20/2021 at 1:34
am
How much land do you have left? At one well per section how many can you drill and how long
it takes? That's when your business wraps up. REPLYRASPUTIN IGNORED07/20/2021 at 2:40
am
Holy Moly SS
I guess the days of vertical doing things in house are gone. That labor mess is unreal.
However, here in nowhere USA it is hard to find good help but you can usually find help. I was
so surprised at some of the job turnover even during peak covid when some businesses were
restricted and some essential. How are people living that have no jobs? Over the years I hired
relatives that never got it, didn't stay sober and didn't see the long term upside. Maybe it's
all about today for the younger generation.
Over the past year and a half I've been following your posts including labor issues. Were
they so dreadful before covid and helicopter money? It might appear to the uninformed that
training rig help. pumpers and the like is easy, but it's not. One small oops for man is one
huge oops for you.
Perhaps, as we move away from the false narrative that you must have a college degree to get
a good or high paying job, things will improve in the trades and the oilfield.
About 20 years ago I was visiting with a substantial independent stimulation company that
was having labor issues. The head honcho lamented that they had already poached all of the
young guys that grew up on farms and knew machinery, getting up early and how to work. Having
known a few guys and what they earned they most likely didn't point their kids at basket
weaving degrees.
Sure wish I had an answer for you. Personally, I'm shrinking down to a few wells close to
the house/shop/yard, one of which I could walk to for daily exercise. However, I'll run my
equipment myself as long as possible.
The number of basically "homeless" people living here in my part of very rural USA is
startling. People aren't generally sleeping in the parks. They have duffle bags and backpacks
and crash place to place.
We have the tremendous labor shortage, yet the public defender and conflicts public defender
have over 400 clients combined. This in a county of a little less than 20K people. That right
there is the labor force for a decent sized factory around here.
To qualify for the PD you must have income below 125% of federal poverty guidelines, which
is very low. During the height of COVID, nothing got done with their cases because the PD's
couldn't get ahold of them. Few have cell phones that are permanent (track phones) and few have
permanent addresses. The jail is full so there aren't a lot of warrants being issued for the
lower level crimes. So people haven't been showing up for their court cases for months/ over a
year. Our county is going to send close to 100 people to prison this year, almost all for meth
delivery. This is the situation all over rural USA. People who live here and aren't in the
court system are oblivious to it until they get broken into or robbed (or have an addicted
relative, which many do).
The primary reason for the labor shortage here is a combination of young people moving to
larger towns/cities, a very large percentage of the working age population being addicted to
meth (which is now being cut with heroin, fentanyl, etc) and the significant benefits that have
been paid to not work. I hate to think of how many billions of borrowed money stimulus our
future generations are now indebted with that went directly into the pockets of the foreign
drug cartels.
As for the oilfield, add to that the hard work, not the greatest pay in the world at the
bottom end (rig hands) the need to find people who can work unsupervised outdoors, and the
young people being told the industry is dead and a job in that field will soon be gone.
Finally, a ton of "old timers" simply retired during COVID.
Our country has no idea how dependent we are on labor from Mexico and Central America that
keeps us alive. The only farm workers are Hispanic. However, most don't want to work in the
oilfield either, it seems. We just harvested green beans, and all the crew were Hispanic. The
same will be the case here shortly as we harvest watermelons and cabbage. If Trump were
successful and closed the borders and sent everyone back, we would starve.
The largest oil company here shut in everything it owned when oil went negative.
Unfortunately for them they laid off a lot of people. Many of their wells are still idle.
Maybe we are an outlier. But I doubt it. A decent amount people at the lower end of the
labor force seem to have decided they aren't going to work, and offering a lot more $$ won't
bring them back. Maybe they will come back when the government benefits end.
Even the prisons can't find employees. They pay $70K+ plus great benefits. Mentally
difficult work though. Also, can't have a criminal record and cannot use drugs, even pot.
Keep in mind a large percentage of the USA population now smokes or ingests pot. That
doesn't work well in a lot of industries where sobriety is mandatory.
The gas station I fill up at is offering a $300 signing bonus which is paid after 30 days of
no unexcused absences. $13 and hour to start at the cash register. They can't find people to
take that.
I'm rambling now, and I'll stop.
Surely there are some shale basin people reading this. Could any of you comment about
whether there is a labor shortage in your shale basin? If there isn't, maybe we could persuade
a few of them to come to our neck of the woods and work on the simple, shallow wells. Not a lot
of traveling, no weekends unless you pump, and work is daytime only. KANSAS OIL IGNORED07/20/2021 at 9:10
am
Shallow Sand –
I echo all of your sentiments. We are a small operator in Kansas, producing about 300
bbl/day in 13 various counties. We have approximately 50-60 bbl/day offline pushing 3 weeks.
We're talking 8/8ths approximately $75,000 in revenue. Pre-Covid you could count on getting a
pulling unit sometimes next day if you had a mechanical failure. Now it's 3-4 weeks. $20/hour
for green rig hands evidently isn't enough to move the needle, whether it's because the work is
too difficult, or it's easier to keep cashing the government checks. And by my count we are in
a similar situation with oil field pumpers. We have 13 of them. 2 are 50s, and the rest are all
over 60. I'm in my early 40s and my field superintendent is 56. He loves to work and will
probably do so until he's 70-75. When he checks out will probably be when I check out.
REPLYSHALLOW SAND IGNORED07/20/2021 at 9:55
am
Kansas Oil.
Great to hear from you.
Thanks for confirming what we are experiencing.
The big question is whether this is also going on in the shale basins, primarily Permian. If
it is, don't see how USA production grows much.
I drive across Kansas on both I 70 and the South Route through Wichita to the OK panhandle
quite a bit. Always keep my eyes open for whether pumping units are moving or not.
I worry about whether the huge feed lots, hog facilities and packing plants out there can
find enough help. People have no clue how much of the USA is fed from the TX, OK panhandles on
up through Western KS and NE.
"On a daily basis, loadings will decline by 22% in July compared to the current month,
Reuters calculations showed."
REPLYPOLLUX IGNORED06/28/2021
at 1:37 pm
"Russian oil production has declined so far in June from average levels in May despite a
price rally in oil market and OPEC+ output cuts easing, two sources familiar with the data told
Reuters on Monday.
Russia's compliance with the OPEC+ oil output deal was at close to 100% in May, which
means the state is about to exceed its target in June.
Two industry sources said that lower output levels may be due to technical issues some
Russian oil producers are experiencing with output at older oilfields."RON PATTERSON IGNORED
06/28/2021 at 2:38 pm
Yes, they are definitely experiencing issues with their older oilfields, it's called
depletion. But that decline is only 33,000 bpd or .3%. But your post above that one says
exports in the third quarter will decline by 22%. What gives there?
I just checked the Russia site and they have revised up their original May estimate. It is
one week later than the original. Production is now down 9,000 b/d. RON PATTERSON IGNORED06/28/2021
at 4:50 pm
Yeah, they revised it up by 14,000 pbd. A pittance. Now they are down only 9,000 bpd instead
of 23,000. Nothing to get excited about. Basically, they were flat in May.
JEAN-FRANÇOIS FLEURY IGNORED06/28/2021
at 4:09 pm
"Russia plans to decrease oil loadings from its Western ports to 6.22 million tonnes for
July compared to 7.75 million tonnes planned for loading in June, the preliminary schedule
showed." 7,75 x 10^6 – 6,62 x 10^6 = 1130000 t. 1130000×7,3/30 = 274966 b/d.
Therefore, these decrease of oil export suggests a decrease of production of 274966 b/d.
Precedently, it was announced that oil exports of Russia would decrease of 7,2 % for the period
July-September or a decrease of 308222 b/d. Therefore, it's coherent.
https://www.zawya.com/mena/en/markets/story/Russias_quarterly_crude_oil_exports_to_drop_72_schedule-TR20210617nL5N2NY2IQX8/?fbclid=IwAR0ZjvwzjVS427CbUAzTL1vJfqog7R8CDwaJAvI3uUdaw_0z5S5l_57SGFY
I notice that it concerns the "Western ports", therefore the exports toward EU and USA. Well,
EU is also the main customer of Russia with 59% of the oil exports of Russia. RON PATTERSON IGNORED
06/28/2021 at 4:59 pm
Western Syberia is where all the very old supergiant fields are. They produce 60% of Russian
crude oil. Or at least they used to. LIGHTSOUT IGNORED06/29/2021
at 2:11 am
Ron
If one of the West Siberian giants is rolling over in the same way as Daquing did, things could
get very interesting very quickly. RON
PATTERSON IGNORED06/29/2021
at 7:24 am
Four of Russia's five giant fields are in Western Siberia. The fifth is in the Urals, on the
European side. All five have been creamed with infill horizontal drilling for almost 20 years.
All five are on the verge of a steep decline. Obviously, one and possibly more have already hit
that point.
This linked article below is 18 months old but there is a chart here that shows where
Russia's oil is coming from. Notice only a tiny part is coming from Eastern Siberia, the hope
for Russia's oil future. Those hopes are fading fast.
As I have written a few months ago: When you reduce output voluntarily for a longer time,
all the nickel nursers from accounting and controlling will cut you any investing in over
capacity you can't use at the moment. That works like this in any industry.
So you have to drill these additional infills and extensions after the cut is liftet. And
this will take time, while fighting against the ever lasting decline.
"Abu Dhabi's state-owned Adnoc has informed customers that it will implement cuts of
around 15pc to client nominations of all its crude exports loading in September, even as the
Opec+ coalition considers further relaxing production quotas.
It was unclear why Adnoc is deepening reductions for its September-loading term crude
exports, with the decision coming ahead of the next meeting of Opec+ ministers scheduled for 1
July when the group is expected to decide on its production strategy for at least one
month"
What do you mean by confirmation? Do you mean they will confirm that the peak was 2018-2019?
If so, I cannot agree. No, there will be deniers all the way down. There is something about the
human psyche that just cannot accept reality... MATT MUSHALIK IGNORED06/19/2021
at 8:57 pm
Thanks for continuing to monitor crude oil production. As of now, we are back to 2005
levels!
The chart is old and was published in 2016 by Wood Mackenzie and there is no data for 2016.
It also leaves out the discovery of Ghawar in 1948, first bar/spike. I have not seen any
updates since then. Not sure if Guyana had been discovered in 2016. The original is
attached.
Ironically, the wave of ESG investing in global energy markets may lead to much higher
oil prices as a serious lack of capital expenditure on new fossil fuels dries up just as demand
for crude continues to grow
Pressure from investors, tighter emissions regulation from governments, and public
protests against their business have become more or less the new normal for oil companies. What
the world -- or at least the most affluent parts of it -- seem to want from the oil industry is
to stop being the oil industry.
Many investors are buying into this pressure. ESG investing is all the rage, and
sustainable ETFs are popping up like mushrooms after a rain. But some investors are taking a
different approach. They are betting on oil. Because what many in the pressure camp seem to
underestimate is the fact that the supply of oil is not the only element of the oil
equation.
"Imagine Shell decided to stop selling petrol and diesel today," the supermajor's CEO Ben
van Beurden wrote in a LinkedIn post earlier this month. "This would certainly cut Shell's
carbon emissions. But it would not help the world one bit. Demand for fuel would not change.
People would fill up their cars and delivery trucks at other service stations."
Van Beurden was commenting on a Dutch court's ruling that environmentalists hailed as a
landmark decision, ordering Shell to reduce its emissions footprint by 45 percent from 2019
levels by 2030.
Another scenario is that some exporting nations realize they will need this oil as the world
stares into a scarcity of oil. They might say: "Shit, why are we selling this stuff when we
will desperately need it for ourselves in a few years?" And as they cut back, or stop exporting
altogether, the problem gets a lot worse, and prices spike even higher. REPLYDOUG LEIGHTON IGNORED06/13/2021 at 3:34 pm
L.O.L. The decision concerning the proportion of a domestic resource that should be
preserved for domestic needs, and how much to export, is interesting. China's REE deposits come
to mind. Also, the impact of the immediate use of a resource versus a lower level of
exploitation over time might come into play in some (perhaps unrealistic) scenarios as well.
Not many examples of countries that have exhaustible natural resources saving some for future
generations I'm aware of; probably would result in an unwelcome war or another ugly result!
John Kilduff of Again Capital has predicted Brent to hit $80 a barrel and WTI to trade
between $75 and $80 in the summer, thanks to robust gasoline demand. Brent is currently trading
at $71.63 per barrel, while WTI is changing hands at $69.13.
On 05/07/21 the US 10year chart formed a hammer candlestick on daily chart within a consolidation pattern. Which suggested higher
yields coming. Well little over a month later price broke below the bottom of that candlestick which suggest that the bond market
doesn't believe the inflation we have seen is here to stay. Yield headed lower.
The inflation we have had seems to be supply side due to covid. If inflation is at peak which bond market is suggesting. Oil price
might not have much more room to run higher. And I'd take it a step further and say price inflation due to a weaker dollar is starting
to real hurt places like China and they are going to act by tightening monetary policy. You think this would be positive for the
yuan and push the dollar even lower. But when you tightening monetary policy credit contracts and economic activity contracts.
I do expect oil price to rollover and head back to $50-$55 might happen from a slightly higher price from here because of lag
time between when bond market signals rollover in inflation back into deflation and when prices start reacting to this.
REPLYEULENSPIEGEL IGNORED06/11/2021
at 10:07 am
This isn't your history bond market.
Inflation doesn't really matters, what only matters is the one big question: "How much bonds does the one market member with unlimited
funds buy?".
And the time the FED was able to rise more than .25% is in the rear mirror "" when they hike now, inflation or not, all these
zombie companies and zombie banks will fail and no lawyer in the world will be able to clean up the chaos after all these insolvency
filings.
They have to talk the way out of this inflation. They have to talk until it stops, or longer. They can't hike. They can perhaps
hike again when most of the debt is inflated away "" a period with 10+% inflation and 1% bond interrest.
And yes, they can buy litterally any bond dumped onto the market "" shown this in March last year when they stopped the corona
crash in an action of one week.
I think most non-investment-banks are zombies at the moment, and more than 20% of all companies. They all will fail in less than
1 year when we would have realistic interrest rates. On the dirty end, this would mean 10%+ for all this junk out there "" even mighty
EXXON will be downgraded to B fast.
In old times the FED rates would be more than 5% now with these inflation numbers. Nobody can pay this these days.
And now in the USA "" look for how much social justice and social security laws you'll get. The FED has to provide cover for all
of them.
We in Europe will do this, too. New green deal, new CO2 taxes, better social security "" the ECB already has said they will swallow
everything dumped on the market.
So, oil 100$ the next years "" but some kind of strange dollars buying less then they used to.
This is nonsense. They have Brent crude oil prices peaking, so far, in March 2025 at $164.11. And they have WTI peaking the same
month at $132.55, $32.56 lower. There is no way the spread could be that large. Also, they have natural gas prices dropping over
the same period. Just who the hell are these "Longforcast.com" people?
Disregard anything with "forecast" in the title. They don't have a time machine, and extrapolation is a horrible metric with dynamic
markets as complex as the energy ones.
Might as well show me the tea leaves or goat entrails and tell me the price on 11 June 2027.
REPLYSHALLOW SAND IGNORED06/11/2021
at 3:58 pm
Dennis Gartman is still considered a commodities expert.
He infamously said in 2016 that WTI would never be above $44 again in his lifetime. He is still alive last I knew.
Since I have owned working interests in oil wells (1997) I have sold oil for a low of $8 and a high of $140 per barrel. 6/14 oil
sold for $99.25 per barrel. 4/20 oil sold for $15.40 per barrel.
Predicting oil prices is impossible.
About the only oil price prediction I have had right so far is that if Biden won, oil prices would rebound. Of course, we can
argue about why that is, and if there is even any connection.
There are still no drilling rigs running in the field we operate in. There are still hundreds of production wells shut in. There
are still less than 10 workover rigs running in our field. The largest operator still has a help wanted sign up in front of its office.
We finally found one summer worker, he is still in high school, but thankfully covered by our workers comp. He cannot drive our trucks,
and is limited to painting, mowing, weed control, digging with a shovel, cleaning the shops and pump houses and other tasks like
those. That's ok, because we need that, but not being able to drive is a pain. But auto ins won't allow anyone under 21 to be covered.
REPLYIRON MIKE IGNORED06/11/2021
at 11:53 am
Yea Ron i agree with Kleiber, I wouldn't take anything on that site too seriously.
REPLYOVI IGNORED06/11/2021
at 1:34 pm
The IEA is now starting to sound warnings about supply. Last week they were telling the oil companies to stop exploring and to
move toward a renewable energy future.
IEA: OPEC needs to increase supply to keep global oil markets adequately supplied
In its monthly oil report, the International Energy Agency (IEA) has said that global oil demand is set to return to pre-pandemic
levels by the end of 2022, rising by 5.4 million bpd in 2021 and by a further 3.1 million bpd next year. The OECD accounts for 1.3
million bpd of 2022 growth while non-OECD countries contribute 1.8 million bpd. Jet and kerosene demand will see the largest increase
( 1.5 million bpd year-on-year), followed by gasoline ( 660 000 bpd year-on-year) and gasoil/diesel ( 520 000 bpd year-on-year).
World oil supply is expected to grow at a faster rate in 2022, with the US driving gains of 1.6 million bpd from producers outside
the OPEC alliance. That leaves room for OPEC to boost crude oil production by 1.4 million bpd above its July 2021-March 2022 target
to meet demand growth. In 2021, oil output from non-OPEC is set to rise 710 000 bpd, while total oil supply from OPEC could increase
by 800 000 bpd if the bloc sticks with its existing policy.
(IEA) has said that global oil demand is set to return to pre-pandemic levels by the end of 2022, rising by 5.4 million bpd
in 2021 and by a further 3.1 million bpd next year.
That comes to about 500,000 barrels per day monthly increase, every month until the end of 2022. I really don't believe that is
going to happen. No doubt most nations can increase production somewhat, but returning to pre-pandemic levels will be a herculean
task for most of them.
WTI Punched a $70 ticket sometime after 6:00 PM EST, June 6, 2021. The last time this
happened was Oct 16, 2018, $71.92 before falling below $70 the next day.
"Igor Sechin, the head of Russian oil major Rosneft (ROSN.MM), said on Saturday the world
was facing an acute oil shortage in the long-term due to underinvestment amid a drive for
alternative energy, while demand for oil continued to rise."
Exxon Mobil Corp. is
pulling out of a deep-water oil prospect in Ghana just two years after the west African nation
ratified an
exploration and production agreement with the U.S. oil titan.
The company relinquished the entirety of its stake in the Deepwater Cape Three Points block
and resigned as its operator after fulfilling its contractual obligations during the initial
exploration period, according to a letter to Ghana's government seen by Bloomberg and people
familiar with the matter, who asked not to be named because the information isn't
public.
Energy giant BP Plc
sees a strong recovery in global crude demand and expects it to last for some time, with U.S.
shale production being kept in check, according to Chief Executive Officer Bernard Looney.
"There is a lot of evidence that suggests that demand will be strong, and the
shale seems to be remaining disciplined," Looney told Bloomberg News in St. Petersburg,
Russia. "I think that the situation we're in at the moment could last like this for a
while."
Defeats in the courtroom and boardroom mean Royal Dutch Shell (RDSa.L) , ExxonMobil (XOM.N) and Chevron (CVX.N) are all under pressure to cut carbon
emissions faster. That's good news for the likes of Saudi Arabia's national oil company Saudi
Aramco (2222.SE) , Abu
Dhabi National Oil Co, and Russia's Gazprom (GAZP.MM) and Rosneft (ROSN.MM) .
It means more business for them and the Saudi-led Organization of the Petroleum Exporting
Countries (OPEC).
"Oil and gas demand is far from peaking and supplies will be needed, but
international oil companies will not be allowed to invest in this environment, meaning
national oil companies have to step in," said Amrita Sen from consultancy Energy Aspects.
... ... ...
Climate activists scored a major victory with a Dutch court ruling requiring Shell to drastically cut emissions, which in
effect means cutting oil and gas output. The company will appeal.
The same day, the top two U.S. oil companies, Exxon Mobil and Chevron, both lost battles with shareholders who accused them
of dragging their feet on climate change.
...Western oil majors control around 15% of global output, while OPEC and Russia have a share of around 40 percent. That
share has been relatively stable in recent decades as rising demand was met with new producers like smaller private U.S. shale
firms, which face similar climate-related pressures.
...Despite pressure from activists, investors and banks to cut emissions, Western oil majors are also tasked with maintaining
high dividends amid heavy debts. Dividends from oil companies represent significant contributions to pension funds.
"This time is different" may be the most dangerous words in business: billions of dollars
have been lost betting that history won't repeat itself. And yet now, in the oil world, it
looks like this time really will be.
For the first time in decades, oil companies aren't rushing to increase production to
chase rising oil prices as Brent crude approaches $70. Even in the Permian, the prolific shale
basin at the center of the U.S. energy boom, drillers are resisting their traditional
boom-and-bust cycle of spending.
The oil industry is on the ropes, constrained by Wall Street investors demanding that
companies spend less on drilling and instead return more money to shareholders, and climate
change activists pushing against fossil fuels. Exxon Mobil Corp. is paradigmatic of the
trend, after its humiliating defeat at the hands of a tiny activist elbowing itself onto the
board.
And what they don't realize is that the two largest producers in OPEC+, Russia and Saudi
Arabia, are on the ropes also. Russia has admitted it but Saudi is still trying to deny the
fact.
"This time is different" may be the most dangerous words in business: billions of dollars
have been lost betting that history won't repeat itself. And yet now, in the oil world, it
looks like this time really will be.
For the first time in decades, oil companies aren't rushing to increase production to chase
rising oil prices as Brent crude approaches $70. Even in the Permian, the prolific shale basin
at the center of the U.S. energy boom, drillers are resisting their traditional boom-and-bust
cycle of spending.
The oil industry is on the ropes, constrained by Wall Street investors demanding that
companies spend less on drilling and instead return more money to shareholders, and climate
change activists pushing against fossil fuels. Exxon Mobil Corp. is paradigmatic of the trend,
after its humiliating defeat at the hands of a tiny activist elbowing itself onto the
board.
The dramatic events in the industry last week only add to what is emerging as an opportunity
for the producers of OPEC+, giving the coalition led by Saudi Arabia and Russia more room for
maneuver to bring back their own production. As non-OPEC output fails to rebound as fast as
many expected -- or feared based on past experience -- the cartel is likely to continue adding
more supply when it meets on June 1.
'Criminalization'
Shareholders are asking Exxon to drill less and focus on returning money to investors. "They
have been throwing money down the drill hole like crazy," Christopher Ailman, chief investment
officer for CalSTRS. "We really saw that company just heading down the hole, not surviving into
the future, unless they change and adapt. And now they have to."
Exxon is unlikely to be alone. Royal Dutch Shell Plc lost a landmark legal battle last week
when a Dutch court told it to cut emissions significantly by 2030 -- something that would
require less oil production. Many in the industry fear a wave of lawsuits elsewhere, with
western oil majors more immediate targets than the state-owned oil companies that make up much
of OPEC production.
"We see a shift from stigmatization toward criminalization of investing in higher oil
production," said Bob McNally, president of consultant Rapidan Energy Group and a former White
House official.
While it's true that non-OPEC+ output is creeping back from the crash of 2020 -- and the
ultra-depressed levels of April and May last year -- it's far from a full recovery. Overall,
non-OPEC+ output will grow this year by 620,000 barrels a day, less than half the 1.3 million
barrels a day it fell in 2020. The supply growth forecast through the rest of this year
"comes nowhere close to matching" the expected increase in demand, according to the
International Energy Agency.
Beyond 2021, oil output is likely to rise in a handful of nations, including the U.S.,
Brazil, Canada and new oil-producer Guyana. But production will decline elsewhere, from the
U.K. to Colombia, Malaysia and Argentina.
As non-OPEC+ production increases less than global oil demand, the cartel will be in control
of the market, executives and traders said. It's a major break with the past, when oil
companies responded to higher prices by rushing to invest again, boosting non-OPEC output and
leaving the ministers led by Saudi Arabia's Abdulaziz bin Salman with a much more difficult
balancing act.
Drilling Down
So far, the lack of non-OPEC+ oil production growth isn't registering much in the market.
After all, the coronavirus pandemic continues to constrain global oil demand. It may be more
noticeable later this year and into 2022 . By then, vaccination campaigns against Covid-19
are likely to be bearing fruit, and the world will need more oil. The expected return of Iran
into the market will provide some of that, but there will likely be a need for more.
When that happens, it will be largely up to OPEC to plug the gap. One signal of how the
recovery will be different this time is the U.S. drilling count: It is gradually increasing,
but the recovery is slower than it was after the last big oil price crash in 2008-09. Shale
companies are sticking to their commitment to return more money to shareholders via dividends.
While before the pandemic shale companies re-used 70-90% of their cash flow into further
drilling, they are now keeping that metric at around 50%.
The result is that U.S. crude production has flat-lined at around 11 million barrels a day
since July 2020. Outside the U.S. and Canada, the outlook is even more somber: at the end of
April, the ex-North America oil rig count stood at 523, lower than it was a year ago, and
nearly 40% below the same month two years earlier, according to data from Baker Hughes Co.
When Saudi Energy Minister Prince Abdulaziz predicted earlier this year that "'drill, baby,
drill' is gone for ever," it sounded like a bold call. As ministers meet this week, they may
dare to hope he's right.
More stories like this are available on bloomberg.com
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now to stay ahead with the most trusted business news source.
The OPEC Monthly Oil Market Report said the
world oil supply fell by 150,000 barrels per day in April.
World oil supply
Preliminary data indicates that global liquids production in April decreased by 0.15 mb/d to
average
93.06 mb/d compared with the previous month, and was lower by 6.45 mb/d y-o-y.
World oil supply rose 330 kb/d to 93.4 mb/d in April and will increase further in May as
the OPEC+ alliance continues to ease output cuts. Based on the current agreement, global oil
production is set to grow by 3.8 mb/d from April to December. For 2021 as a whole, world oil
production expands by 1.4 mb/d year-on-year versus a collapse of 6.6 mb/d in 2020. Canada leads
non-OPEC+ with growth of 340 kb/d while the US is set to contract by a further 160
kb/d.
That's a difference of just under half a million barrels per day, (480,000 bpd). That's a
huge difference. Which one should we believe? Which organization has the most credibility?
We live in a world of half-truth where words are very carefully chosen. Companies hire
public relations firms to give just the right "spin" to what they are saying. CEO make
statements that suggest that everything is going well. Newspapers would like their advertisers
to be happy. Still is at the limit of Moore's law and fither shriking of dier is
impossible due to physical limits. One of the key challenges of CPU engineering is the design
of transistors gates. As device dimension shrinks, controlling the current flow in the thin
channel becomes more difficult. So callled 8mn process (not that this is a marketing not
technological term) is possible and now used in production, 5mn is problematic but used for
example by Apple in A14 CPU ( iPhone 12) / According to some sources, the A14 processor has the
transistor density of 134 million transistors per mm2. 3mn is probably the current
technological limit (TSMC is on track for production first 3 nm chips at the end of 2022
Anton Shilov, Anandtech April 26, 2021 ). It is unclear, if 2mn process will be
technologically viable or not. So the only way for CPU manufactures to increase the processing
power of CPUs is to increase the number of cores.
I We live in a finite world; we are rapidly approaching limits of many kinds. Which creates
problem, in some ways, somewhat similar to the world of the 1920s.
Yields on the US 10 year formed a bullish hammer within consolidation on Friday. Suggests
that yields are headed to 2% or above. It suggests that the move higher is now. Higher yields
will lead to stronger dollar. Might be the beginning of where price inflation becomes a drag on
economy as yields rise on debt. And as long as price inflation continues yields will rise.
Might put a cap on oil price in near future. Maybe we get another $5-$15 rise in oil price
before credit blows up due to rise in yields.
As the cost of credit rises due to price inflation. If you borrowed money at rock bottom
interest rates and you now have to rollover debt at a higher interest rate that is a problem
for corporate USA.
Anyone that doesn't believe that there will be a huge price to pay for the policy response
of Covid-19 is kidding themselves.
Even just on a relative basis. When you expand monetary and fiscal policy by that much in
one year. Things tighten on a relative basis as what comes next in the years after is less
support.
The important part for future production is that we make a clear distinction between those
three supply sources (counting OPEC and the + states as one source). There are very different
reasons for why production is down from each source and more importantly, what the long term
prospects are.
In the second part of this report, we will discuss the prospects of each source in detail
and show that the pandemic, and the ensuing price crash, have accelerate a process where global
production will hardly be able to grow. At the same time, demand will not peak as quickly as
people believe. This has the potential for a massive supply shortfall in the medium term.
smellmyfingers 2 hours ago
The only real shortage we have is truth.
We're all being fed a huge steaming pile of BS on everything. Oil build/draw. Crypto
currencies based upon what? Fiat money, paper.
All these lying politicians and banksters just jockeying for positions to steal as much as
they can as they push the human family to genocide.
wick7 38 minutes ago
Either way oil is going over the Seneca cliff and then Mad max here we come.
wick7 35 minutes ago
Every oil well that has ever existed has followed a bell curve. Pretending oil is infinite
is like believing in a flat earth.
Galtmandu 1 hour ago (Edited)
This is some weak sauce analysis on the relationship between gold and energy prices. Here
is a summary:
Energy prices and gold prices tend to correlate.
I have simplified,
Galtmandu
PS, your model is basically, interest rate policy, fed reserves of gold supply, and
inflation - not groundbreaking stuff. You have created an algorithm that uses these three
inputs to overlay on gold prices. Simple stuff. In fact, a basic polynomial exercise gets you
your best fit.
Now, predict the movements of fed gold reserves, inflation, and interest rate policy. You
can't. Therefore, your model has no predictive capability beyond your opinion. Otherwise, you
would be spending your days sipping umbrella drinks.
If I seem aggressive about this stuff its because I hate this kind of faux-analytical
b@llsh&t that is just sales propaganda.
Thrashed10 2 hours ago
I'm sitting mostly in cash right now. I do have a little exposure to oil. And food.
The oil market is so manipulated. Probably a smart move long term. But I have to trade so
my kids get ice cream. I already know my trade for Monday if I feel motivated. I trade
commodities and industrials. The boring stuff that is not sexy.
hanekhw 1 hour ago
Oil prices linked to the worthless dollar won't continue and this Administration is
working hard to make our dollars even more worthless.
The 12 nation group might not see annual C plus C output increases of 1400 kbo/d in the
future, but it will take time for the rate of increase to fall to 455 kbo/d (where a
plateau in World output would occur) especially if oil prices rise to $80/bo or more.
No, it will not take time. Why would you think production would graduallly fall off?
Yes, decline slops are usually gradual as well as increasing slopes. But the change from
increase to plateau or increase to decline is seldom, if ever gradual. USA+Saudi+Russia has
already plateaued. Their decline is very likely to be sudden, well, it has actually already
happened.
However, in the two charts below, I have used your method of stopping the chart just before
the Covid induced decline. The charts speak for themselves.
I think it instructive to recall oil and gas investment history. Unregulated oil and gas
markets have always yielded boom bust cycles. There was a bust cycle from 1986 to 2000. A boom
cycle started in 2001 with investment in oil and gas rising on average 11% per year to $780
billion in 2014 (this was from a Kopits talk in 2014, but the link I have no longer works).
There is a lag between increased or decreased investment and the response in extraction
rates. The lag is longer offshore than onshore. For example, in spite of the investment boom
from 2001 to 2014, extraction rates were stagnant between 2005 and 2010.
A bust began in 2015 with investment dropping 25% in 2015 and a further 20% in 2016. The
drop was more pronounced offshore than onshore. Investment stayed essentially flat through
2019. Extraction rates continued to climb through 2018 but were flat in 2019.
The IEA began warning in 2016 that investment was not sufficient to meet demand in the early
2020s. In their 2019 WEO they stated that $650 to $750 billion was needed annually to attain
106 mb/d in 2030. I am assuming this sum referred to oil AND gas investment. In 2019 oil and
gas investment was $483 billion. In 2020 it was $313 billion (close to 2009 levels).
As Dennis noted in response to my comment above, the relationship between a drop in
investment and the corresponding drop in supply is not linear. But unless investment increases,
I don't expect extraction rates to achieve 2018 levels soon.
REPLYSHALLOW SAND IGNORED
03/28/2021 at 6:08 am
Ovi. I appreciate your posts. Thanks.
Schinzy. Look at what the integrated oil companies are forecasting. BP, RDS and TOT are
shrinking production. CVX and XOM are greatly reducing CAPEX. So is COP, the largest
independent. So is PXD, one of the largest shale players. Of course, these companies can change
strategy quickly, likely next year if any do.
For the first time I can recall, the government of the United States is not supportive of it
increasing production. Contrary to popular belief, this matters.
To keep a lid on oil prices, on the supply side, either the USA needs to keep adding barrels
or some other country that does not benefit as a whole from high oil prices will need to step
up. The CAPEX currently isn't budgeted to do that.
Of course, decreased demand due to the continued spikes in COVID cases will continue to put
a lid on demand. Hopefully by fall this won't be much of an issue, not for oils sake, but for
public health sake.
The other demand side lids I see could be Western EV adoption offsetting developing world
oil demand growth. Worried here about both the needed upgrades to the grids, plus the lack of
rare earth metals. The other could be another big economic issue. Don't want that, but seems
economy issues are also going to be with us given the high debt levels. The stimulus in
response to COVID isn't cheap.
REPLYSCHINZY
IGNORED
03/28/2021 at 7:41 am
All very true Shallow. I suspect these companies are reducing CAPEX because of increasing
debt. The more conservative CAPEX spending seems to be helping their share prices. SHALLOW
SAND IGNORED
03/28/2021 at 7:55 am
Schinzy.
IHS Markit doesn't see US CAPEX spending at the 2018-19 levels returning until 2024-25.
Probably too far out in the future to be accurate. However, it's 2021 forecast is for lower
CAPEX in all years since 2010 except for 2020.
I will add another big player to my list above, EOG also lowered CAPEX guidance for 2021
from where it had been pre-pandemic. Will seek to hold production flat in 2021.
Here is the C Plus C chart to to December 2022. In the original chart in the post above, I
only took it out to March 2021.
The March STEO report along with the International Energy Statistics are used to make the
projection. It projects that world crude production December 2022 will be 81,759 kb/d, 2,735
kb/d lower than November 2018
Ovi, thanks for a great chart. And even this, 2,735 kb/d below the previous peak, I think is
overly optimistic.
I think, at least two of the world's three greatest oil producers have peaked, (The USA,
Saudi Arabia, and Russia), have peaked, and the rest of the world has clearly peaked, there is
no way we can possibly surpass that 2018 peak. Actually, I think all three have peaked. I was
just being conservative.
World less USA, Saudi Arabia, and Russia peaked in 2017. All three peaked, yearly average,
in 2019. Of course you can argue that this is just the peak "so far". But I do not believe any
of the three will ever surpass their 2019 yearly average peak.
Dennis, you wrote: Below I use the trend in the ratio of World C plus C to World
petroleum liquids from Jan 2017 to Dec 2019 to estimate World C+C from Jan 2021 to Dec
2022.
Okay, you use past trend lines to estimate future production. Well, I guess there is
also how the EIA does it and the IEA does it. I just don't have confidence in that type of
analysis.
Above I have charted past World oil production less the USA, Russia, and Saudi Arabia. There
is clearly a trend there. Do you think this trend will continue?
World C+C production in 2018 averaged 82,897,000 barrels per day. In 2019 that average was
82,306,000 barrels per day. I have little doubt that future world oil production can come close
to those averages. But I would bet my SS check that the 2018 peak will never be surpassed. (I
like annual averages but if you like centered 12-month averages, then go with that.)
At any rate here are four possible sources for a surge in World oil production:
1. THE USA
2. Russia
3. Saudi Arabia
4. The World less USA, Russia, and Saudi Arabia
If World oil production is yet to peak, which one, or ones, of these four sources, will it
come from? RON PATTERSON IGNORED
03/26/2021 at 12:00 pm
I believe I have seen reports that suggest a plateau near the recent 12 month peak output
can be maintained for 5 to 10 years.
No Dennis, you have not seen that. I posted that myself some time ago. Russia stated that
they hoped to hold production at about 11.2 million barrels per day for the next four years,
2021 through 2024. I have since lost the link but it was posted right here on this list.
However, I think that was wishful thinking on Russia's part. I don't think they will hold that
level, ever again.
The drop in World minus KSA, US, and Russia C plus C output since 2018 has mostly been
due to a combination of lower oil prices and OPEC reducing output to try to bring oil prices
back up,
I am not talking about the drop since 2018, I am talking about the peak and decline
before 2018. The peak month in my chart above was November of 2016 at 52,206,000. The
peak 12-month average was September of 2017 at 51,161,000 barrels per day. At that point, in
September of 2017, the World less USA, Russia, and Saudi produced 63% of all World production.
63% of World oil production peaked in September of 2017.
While World oil production was peaking in 2018, due to increased production by the USA,
Saudi, and Russia, the World less these big three was declining to 50,737,000 barrels per day,
the average for 2018. A decline of almost half a million barrels per day.
Dennis, regardless of what happens in Canada, Brazil, and Norway over the next 5 to 10
years, the World less the big three peaked in 2016 monthly and 2017 annually. Any increase in
World production must come from one or more of the big three. HOLE IN HEAD IGNORED
03/26/2021 at 1:22 pm
Dennis , your post on the last thread .
"I stand by my estimate, in 2020 World C plus C output dropped by 5.5 Mbo/d due to a lack of
oil demand and the resulting drop in oil prices from the 2019 annual average, so a 10 Mbo/d
increase from the 2020 level (annual average) of C plus C output requires a return to the 2019
average level (roughly 82.3 Mb/d) requiring a 5.6 Mbo/d increase and then a further 4.4 Mbo/d
increase in output to reach 87 Mbo/d.
If World demand for C plus C warrants such an increase by 2028, I believe it can be
produced, and yes the model accounts for depletion, which has been ongoing since the first
barrel of oil was produced. The basis for the estimate is likely World resources of 3400 Gb of
C plus C (this includes the 1428 Gb of crude plus condensate that was produced from 1860 to
2020), remaining resources (this includes conventional and unconventional C plus C) are about
1972 Gb (this includes future discoveries and reserve growth).
It is possible less will be produced due to lack of demand, if a rapid transition to
non-fossil fuel energy sources occurs, I hope that is the case, but I am skeptical"
Well, 2020 production came in at an average of 75.93 mbpd . Decline rate was 7.5% compared to
2019. How will you achieve additional 10 mbpd by 2028 ? Ron is correct . Igor Sechin boss at
Rosneft confirms what Ron has stated , shale party is over , KSA is going to cut domestic
consumption by 1mbpd so that it can export that oil . Sorry, Brazil , Norway ,Tom Dick and
Harry are in no position to cover this lag in production .In the future decline rates will
increase as horizontal wells reach their limits of extraction . You must rethink your models
with the new facts . Your statement "If World demand for C plus C warrants such an increase by
2028, I believe it can be produced " does not hold water . Your belief or mine is irrelevant .
Geology prevails . RON PATTERSON
IGNORED
03/27/2021 at 8:55 am
OPEC has been holding back production since 2017 in order to get oil prices up, how much
different nations produce depends on their cost of production relative to price,
I don't see any evidence to support that statement. Average OPEC production in 2018 was only
170,000 barrels per day below the average for 2017. If they were holding back, they weren't
doing a very good job of it. I think they were producing flat out all three years, 2016 through
2018.
I remembered incorrectly, OPEC likely started cutting back on output in the middle of
2016 to get oil prices higher,
You remember very incorrectly. OPEC, in the last months of 2016 was emptying their storage
tanks in order to produce as much oil as they could. They would set their quotas on the amount
produced in November and December of 2016, so they were making heroic attempts to produce every
barrel possible in order to get a higher quota. (November 2016 was the OPEC all-time peak. And
in my opinion, will remain so forever.)
They started cutting in January of 2017. But by June everyone was cheating and they were
all, by July 2017, producing flat out.
Why does OPEC exist?
OPEC was formally constituted in January 1961 by five countries: Saudi Arabia, Iran, Iraq,
Kuwait, and Venezuela. They existed then for the sole reason of trying to drive oil prices
higher. They would like to do that today but squabbling among members has made them somewhat of
a joke. They are a disorganized bunch of buffoons. Yes, they have dramatically cut production
during the pandemic. But so has everyone else in the world. The bottom dropped out of
demand so everyone cut production trying to save money.
A decline in output for the World has occurred since 2018 because oil prices dropped due
to oversupply of oil relative to demand.
Okay, but what about 2017 and 2018? OPEC could not keep their members in line and by June of
2017 everyone was again producing flat out, causing that oversupply. And their cut was a
pittance anyway, not enough to make much difference. For most of 2017 and all of 2018, every
OPEC member was producing every barrel they could. (With the exception of Iran and Venezuela of
course, but that is another story for another thread.)
Just look at the chart Dennis, that is just so damn obvious it cannot be denied.
For OPEC minus Iran, Libya, and Venezuela the centered 12 month average peak was 26759
kbo/d in January 2019.
Okay, you need to update your nations here. Libya is already back, producing at maximum
possible capacity for the last 4 months. Venezuela will never be back, not in the next decade
anyway, long after peak oil is history. That leaves only Iran. Iran, if sanctions were lifted
today, could possibly increase production by approximately 1.6 million barrels per day in the
next six months or so. That would not be nearly enough to make up for the natural decline in
OPEC, especially Saudi Arabia, since the peak in 2016.
Iran is the only nation on earth that can possibly increase production in any significant
amount. So you should only deal with Iran when talking about possible OPEC production
increases.
Dennis, OPEC has done nothing but basically tread water since 2005. Why do you think they
will now save the world?
(In the chart below 2021 is only two months, January and February.
OPEC does not produce at maximum output, except when fighting for quotas.
Dennis, OPEC is not an oil company, they are a cartel. The only ones that increased when
battling for quota were Saudi, the UAE, and Kuwait. The rest just produced flat out all the
time. Check the charts.
Yes, they were all producing flat out most of the time. Only in a few instances did they
actually cut production. Of course, the pandemic hit everyone. But as you can see by the yearly
chart I posted their total share of the market has shrunk dramatically since 2005.
Dennis, OPEC peaked in 2016. Saudi Arabia is in decline. End of story. ALIMBIQUATED
IGNORED
03/27/2021 at 7:47 am
Ron,
Good point about past trends lines being a dubious predictor of future trends. This is testable
too. In this case three years of past data was used to predict the future.
If there is 40 years of data, you could run the algorithm on 35 three-year data sets and
check the accuracy of the prediction. That would give you some idea of how likely the latest
prediction is to be accurate.
My guess is that the accuracy is fairly low, but checking would reveal the truth. POLLUX
IGNORED
03/26/2021 at 3:30 am
In November, Saudi Arabia's domestic crude stockpiles fell to 17-year low: "Saudi Arabia's domestic crude stockpiles fell by 1.2 million barrels in November to 143.43
million barrels, the lowest since November 2003." (
source )
This trend continues and in January, stockpiles fell to 137.207 million barrels: "The country's domestic refinery crude throughput rose to 2.343 million bpd while crude
stocks fell to 137.207 million barrels in January." (
source ) HOLE IN HEAD IGNORED
03/26/2021 at 11:19 am
In an article Steven Kopits wrote "In its February Short Term Energy Outlook (STEO), the EIA
forecasts this month's world oil consumption at 96.7 million barrels per day (mbpd). The oil
supply, however, is much lower, only 93.6 mbpd, with the difference of 3.1 mbpd of necessity
being drawn from crude oil and refined product inventories. This is a shortfall of 3.5% "
Is he correct ? if yes ,then are we in trouble ?
One more observation from my seat in the gallery: FOSSIL ENERGY is the basis of industrial
civilization, and our complete dependence on it portends our extinction as a species. We
might as well accept the fact that we are done.
Dennis, I must disagree with your assessment. OPEC peaked in 2016. Yes, Iran can come back
and increase production by about 1.5 million barrels per day. But that still will not make up
for the decline in the rest of OPEC. No need to mention Venezuela, they may come back around
2030 or so, long after the peak has passed.
Russia said they had peaked in early 2020. I see no reason to think they were lying.
That leaves Brazil, Norway, and Canada. They all three may increase production but nothing
spectacular. Not nearly enough to make up for the rest of the world in decline. REPLYSTEPHEN HREN IGNORED02/27/2021 at
5:58 pm
I'm inclined to agree with Ron. So much investment deferred because of 2014 and 2020 price
crashes. LTO can come back quickly if the price stays consistently high (a big if) but it
won't be enough to save the day. Investors are expecting cash from LTO these days, not
production increases. I imagine most other countries are just coasting after the turmoil of
the last year. Also still plenty of wildcards in the collapse department over the next 5-10
years: Iraq, Nigeria, Libya, etc. WATCHER IGNORED02/28/2021 at
1:12 am
Factions in the administration are on record as wanting sharply higher oil prices. Seems
difficult to see how this would get through the Senate, but it is a green priority.
RON PATTERSON IGNORED02/28/2021 at
8:48 am
Does Occidental know what they are talking about? They are saying that the investors are
just not there for a massive increase in production. And they are one of the two largest
producers in the Permian Basin.
America's oil production will never again reach the record 13 million barrels a day set
earlier this year, just before the pandemic devastated global demand, according to Occidental
Petroleum Corp.
"It's just going to be too difficult to replace the 2 million barrels a day of
production that we've lost, and then to further grow beyond that," Chief Executive Officer
Vicki Hollub said Wednesday at the Energy Intelligence Forum. "Over the next three to four
years there's going to be moderate restoration of production, but not at high
growth."
Occidental is one of the biggest producers in the U.S. shale industry, which added
wells at such a rate prior to the spread of Covid-19 that the country became the world's top
crude producer, overtaking Saudi Arabia and Russia, ushering in an era that President Donald
Trump called "American energy dominance."
U.S. oil production is stuck below it's pre-pandemic high
Shale's debt-fueled expansion came to a juddering halt due to lower gasoline demand and oil
prices, but also because of Wall Street's increasing reluctance to fund growth at any
cost. Shale operators are increasingly prioritizing cash flow and returns to investors over
production growth.
Occidental, which vies with Chevron Corp. to be the biggest producer in the Permian
Basin, has been forced to throttle back capital spending, lower growth targets and cut its
dividend in a bid to save cash during the downturn. Its finances were already severely
challenged by the debt taken on through its $37 billion purchase of rival Anadarko Petroleum
Corp. last year.
Hollub said global consumption stands at about 94 billion barrels a day, and it will
take a Covid-19 vaccine before it returns to 100 million barrels. Due to cutbacks around the
world, supply and demand for oil will likely balance again by the end of 2021, she
said.
Unlike some of her European peers, Hollub sees strong long-term demand for oil. "I
expect we'll get to peak supply before we get to peak demand," she said.HICKORY
IGNORED02/28/2021 at
11:31 am
"Unlike some of her European peers, Hollub sees strong long-term demand for oil. "I expect
we'll get to peak supply before we get to peak demand," she said."
Thanks Ron.
I wonder if she is referring to the balance in the USA, or the world.
It will be a horse-race finish for the whole decade- "and here comes Demand up the
backstretch " RON PATTERSON
IGNORED02/28/2021 at
11:26 am
Figure this one out. The EIA's AEO2021 In
the past they have always given scenarios based on "Low Price" and "High Price". But now it
is "Low Supply" and "High Supply".
They are not making a prediction, they are just saying: "Here is what low supply looks
like", and "Here is what high supply looks like". Hell, we already knew that.
Anyway, it is all about tight oil. Everything depends on tight oil. Occidental says tight
oil has peaked. But the EIA is taking no chances. They are saying in effect: "Here is what it
looks like if tight oil has peaked and here is what it looks like if it has not."
Western hypocrisy revealed 10 years after the event in today's Independent:
"Tony Blair and Iraq: The damning evidence" . And they go on and on about those wicked,
evil Russians and their tyrannical leader causing death and destruction Syria by their
"support" of the Assad government whilst the West arms the "freedom fighters" there.
Issue 3/2010 of the review of Geopolitics "Eurasia", entitled USA: HEGEMONY AND
DECLINE , has been released. This 288-page volume contains 24 articles about the USA, a
still-hegemonic power in decline, on the scene of the transition from unipolarism to the new
multipolarist order. Here follows a list and a short synthesis of each article.
Tiberio Graziani, USA, Turkey and the crisis of the western system
After history put an end to the unipolar moment, the western system led by USA seems to
have entered an irreversible crisis. The economic and financial downfall and the loss of a
secure pillar of the western geopolitical scene like Turkey mark the end of the US driving
force. The USA, today, have to take an epochal decision: either shelving the project of world
supremacy, which means sharing decision-making regarding international politics and economics
with other global actors, or insist on their supremacy plan and even risk their survival as
nation. One or the other will be motivated by the relationships that will be built, on the
middle and long term, between the lobbies which are conditioning American foreign policy and
by the evolution of the multipolarist process.
T. Graziani is managing editor of "Eurasia".
Fabio Falchi, The mirror of knowledge. Giorgio Colli and Eurasianism
This essay aims to show, also through a short exposition of Giorgio Colli's theoretical
philosophy, not only that he has the merit, thanks to his talent of "pondering philologist",
to have caught the deep relation between mysticism and logic in the "Greek knowledge", but
above all that the way he is interpreting the thought of the "pre-Socratic" – an
interpretation characterized by several and meaningful references to the Indian philosophy
– is extremely important for the Eurasianism, if it's true that "Eurasia" is in the
first place a "spiritual concept". In this perspective, it's not important that Colli cannot
be defined an "Eurasiatist" or the fact that probably he himself had refused to define
himself this way. What matters is the path pointed out by his philosophical speech, so that
it's possible to leave behind obsolete and "incapacitating" dichotomies.
F. Falchi is a contributor to "Eurasia".
Phil Kelly, Geopolitics of the United States
The scope of this essay is to identify the different and typical elements of the
traditional US geopolitics. In its path is reflected on the most relevant spatial
characteristics in order to delineate the traditional aspects of North American geopolitics,
rather than focusing on current international affairs; in spite of this, it comes to
conclusion with some observations about the present American and global geopolitics.
P. Kelly is teaching at the University of Emporia (Texas, USA) and member of the
Scientific Committee of "Eurasia".
Daniele Scalea, How an "empire" has risen (and how it will crumble soon)
Today's United States, in origin, were an united group of colonies of a small
underdeveloped island; nevertheless, in a few centuries, they have become the first and the
only world superpower. In this essay are retraced the geopolitical and strategic reasons that
led to the rise of the original thirteen colonies, to their independence and expansion in
North America; the rise of the USA and their informal empire are analyzed and how the passage
from isolationism to hegemonism, that was not ineluctable, is leading them to lose it.
D. Scalea is editor of "Eurasia".
F. William Engdahl, The USA's geopolitical position today
At the end of the first decade of the 21th century it's time to locate the United States
in the political, economic and above all geopolitical world context. It's clear to every
impartial observer that the emerging giant, proclaimed in 1941 by Henry Luce, "the Time-Life"
publisher, as the dawn of the "American Century", is today, in 2010, a nation and a power
whose foundations themselves crumble. In this short essay are analyzed the particular nature
of this disintegration and its implications.
F.W. Engdahl is associate director of "Global Research" and member of the Scientific
Committee of "Eurasia".
Fabio Mini, Projects and debts
The Americans are no more able to recognize their deficiencies and vulnerabilities: they
act as if they still controlled the entire world, when in reality they have lost great part
of their autonomy relating to multinationals which control the economy and to national or
transnational bodies they are indebted to. To the debt financing must be added the political
debts, acquired to nations which are not secure thanks to the US politics of force: Iraq,
Afghanistan, Israel, Palestine, Somalia, Rwanda and even Europe. This essay explains how
power is the destroying drug of the USA, and how the "New American Century" has come to an
end before coming to life.
F. Mini is a retired Lieutenant General of the Italian Army, he led the KFOR and the
NATO's Command Allied Forces Southern Europe".
Eleonora Peruccacci, The evolution of USA-Russia relationships after the downfall of
the bipolar system
The idea – to which Keohane already drew attention – that power is now based
on the influence of ideas, on using cleverly skills like persuasion and cooptation, on the
ability to manipulate mass communication as well, rather than on the traditional attributes
of military force and wealth, is useful for the analysis of this essay, in which it is tried
to comprehend how, after the end of the bipolar system, the relationships between the two ex
world superpowers, USA and Russia, developed and changed, going through the stages of 4
treaties on nuclear disarmament.
E. Peruccacci, MA in International Relations, contributes to "Eurasia".
Spartaco Alfredo Puttini, China, the sea and the United States: the Sino-American naval
antagonism
The development of a modern military fleet in the People's Republic of China has given
rise to serious concerns in Washington and adds an element of tension to their relations. On
the horizon beckons the danger of a naval antagonism between the two giants that could
represent one of the more serious and meaningful elements for the international order of the
21th century. In this essay is talked about the Chinese willingness to develop marine force,
about the stages of the fleet modernization, about the importance that Sino-American naval
antagonism can assume in the near future.
S.A. Puttini, MA in History.
Chiara Felli, A miracle for Obama's "new beginning"
Israeli-American relations seem to be at a crossroads again: new negotiations in order to
achieve the much desired peace in Near East hold the balance of power. In Washington, the
atmosphere is tense, in contemplation of twelve months of negotiations the danger of a
possible immediate bankruptcy outcome is reduced but concerns about the current state of the
international comparison raise. Will the USA be finally able to play on their strong position
as influential mediators? Does Israeli regional isolation risk worsening following the blind
pursuit of nationalistic strategies? Are we really close to the "great compromise" and to the
calm after a decade-long storm?
C. Felli, MA in International relations, contributes to "Eurasia".
Francesco Brunello Zanitti, American Neoconservatism and Israeli Neo-revisionism: a
comparison
The G.W Bush Jr. Presidency has been strongly influenced by a political movement, commonly
known as Neoconservatism, which started at the beginning of the '60s and was already
significant during the Ronald Reagan Presidency. The neoconservatives have inspired in
particular the recent North American politics in the Near East. The last decade, concerning
Israeli politics, has been characterized by the strengthening of the right-wing party, the
Likud, which, since its origins, has been not prone to any form of compromise with the Arab
world. This essay offers a comparison between American Neoconservatism and Israeli
Neo-revisionism, identifying various similarities.
F.Brunello Zanitti, MA in History of society and contemporary culture.
Julien Mercille, The fight against drugs in Afghanistan: a critical
interpretation
This article offers a critical interpretation of the "fight against drugs" waged by the
United States in Afghanistan since 2001, in contrast to the conventional view proposed by
some of the most representative authors. While the conventional interpretation takes for
granted that the US are leading a fight in Afghanistan against drugs in order to reduce their
consumption in the West and to weaken the Taliban, who are closely linked to narcotics
traffic, in this article it's argued that in fact there are few signs from Washington of a
real and concrete struggle against drugs . The rhetoric of the fight against drugs is
largely motivated by the need to justify military intervention in Afghanistan and the fight
against insurgent groups opposing to American hegemony in the region, rather than by a
genuine concern about drugs themselves.
J. Mercille is Professor at the National University of Ireland.
Matías Magnasco, Geopolitics of the United States in the Southern Cone
The South American region is nowadays a geostrategic scenario of great importance and will
grow in importance in the future because of the race for raw materials (oil, gas and
drinking-water) and the rise of Brazil as a regional and world power. South America must look
with concern to US withdrawal from those difficult regions, such as Iraq and Afghanistan, and
from those where Russia and China have virtually overcome their influence, because this
reopens the possibility of looking back at their "backyard" and their "mare nostrum" ( the
Caribbean Sea).
M. Magnasco is Director of the Argentine Centre of International Studies.
Jean-Claude Paye, The euro crisis and the transatlantic market
The offensive against the euro, implemented by the financial markets during the months of
April and May 2010, is not simply an episode in the economic war between the two continents.
It is indeed the symptom of a geopolitical change.
The American initiative aimed to weaken the EU was led with the participation of European
institutions themselves, that sacrificed euro in order to recover the Greek debt. This
convergence confirms the choice of both protagonists which was already made to integrate the
EU into a great future transatlantic market.
J.-C. Paye is a sociologist and essayist.
Ivan Marino, "Nabucco" versus "South Stream"
The US-backed Nabucco pipeline is a choice which sprang from political and economic
reasons, and, in substance, aims to avoid the Russian territory and consequently to contrast
the interests of Moscow; but the choice of "Nabucco" may be dangerous for the same energy
safety of European Union.
Italy's choice of supporting the "South Stream" has a strategic and objective value. The
essay evaluates the strategic importance of this option on the long-term in the dialogue
between EU and Russia.
I. Marino coordinates the Observatory on the Constitutional Political System of the
Russian Federation.
Fabrizio Di Ernesto, US and NATO bases in Europe
More than 60 years after the end of World War II, Europe struggles to regain its political
and military autonomy. This is mainly due to the forced occupation set on by USA through
NATO, the military alliance started in 1949 and that with the passing of time has become the
real armed wing of the Pentagon. During the years of the Cold War Washington justified this
presence with the need of defending its interests against possible attacks of the Red Army
and of the Warsaw Pact. Now that this pretext is becoming ever more anachronistic, the White
House continues to support the need for this forced militarization hiding behind the
scarecrow represented by Islamic terrorism. This presence also leads to various problems,
summarized in this essay.
F. Di Ernesto is a journalist and essayist.
Stefano Vernole, The strange story of the "International Money Orders"
According to some sources, during the first months of 1992 the U.S. government developed a
sophisticated financial-economics operation, using US taxpayers' funds, for secret aims. The
money, nominally allocated for a "humanitarian" operation in Bosnia and Herzegovina, would
have been mainly used to finance Bill Clinton's election campaign and to pay debts acquired
by the Saudi financier Adnan Kashoggi to the procurement office of the JNA (Yugoslav People's
Army), but later it was put back in circulation to be used in the most various
financial-economics operations.
S. Vernole is editor of "Eurasia".
Tomislav Sunic, In Yaweh we trust: the "divine" US foreign policy
The North American aspiration to "guarantee the democracy in the world " is above all
originated by the biblical message. Whatever many European critics of US may say, US military
interventions have never had as their sole purpose economic imperialism, rather the desire to
spread the U.S. democracy all over the world. Anyone who dares to defy the US military,
incurs the risk of being declared out of humankind, or at least of being branded as
terrorist. Once someone is declared a terrorist or out of the human race, it's possible to
dispose of a person or of a nation at one's pleasure. The ideological element in the history
of US foreign policy is described in this essay, a revised version of a chapter, named after
it, of the book Homo Americanus: Child of the Postmodern Age (2007).
T. Sunic was Croatian diplomat and University Professor in the USA.
Kees van der Pijl, Transatlantic ideology and neoliberal capitalism
In this essay we deal with three issues: the first concerns the origins of western
ideology, an ideology marked by possessive individualism, free enterprise and intensive
nature exploitation and that, with zeal of protestant missionary, claims universal validity
for these principles. After that, we observe how neo-liberalism has emerged as the most
radical western ideology and allowed capitalism to become a machine scam into which the world
economy of the last thirty years has been drawn and that just now has suffered a setback.
Finally, some lines of development are drawn, through which Ukraine, and perhaps Russia,
Belarus, Kazakhstan and others, could break with the present strategy of slavish adaptation
to the neoliberal economy, which has damaged them so much, and stop to absorb the western
ideology so different from their traditions, to implement a common strategy that combines
their unique experience with the form of a multinational State and with elements of planned
economy, whose strengths and weaknesses they know better than anybody else.
K. van der Pijl is Professor at the University of Sussex.
Paolo Bargiacchi, Is international law really law? A critique to John Bolton's
negationism
In the US the (minority) idea that the international law does not exist and the (most
common) one that customary international rules only bind States that accept them find a
common root in the improper comparison between International context (and International law)
and internal context (Internal law). This comparison, in turn, is direct consequence of the
Austinian positivism, that, not catching the autonomy of the political and juridical
international context compared to the domestic one, mistakenly uses logics, methodologies and
categories of internal law to analyze the international law. An example of this modus
procedendi comes from J. Bolton, who wonders if "Is There Really "Law" in International
Affairs?" and concludes that "International law is not law". In this essay a
general-theoretical and empirical critique of his thesis is developed.
P. Bargiacchi is Professor at the University Kore of Enna.
Alessandro Lattanzio, US nuclear forces
U.S. strategic forces, that since 1990 are no longer the backbone of US Army, a role now
appertaining to the force projection (aircraft carrier, airborne troops and marine divisions,
tactical air force) have undergone a significant downsizing in quality and above all
quantities. But this reduction has been sold successfully at the table of international
negotiations about nuclear disarmament. With the recent ratification of the START II Treaty,
US strategic forces are kept on 500 ICBMs single-warheads, 14 SSBNs each carrying 24 SLBMs,
and finally 96 strategic bombers. The budget deficit, the cost of Iraq and Afghanistan wars,
the priorities for other programs, including the so-called theatre ballistic missile (THAAD),
and the US financial-economic crisis will probably stop the last modernization programs of
the U.S. strategic arsenal.
A. Lattanzio is editor of "Eurasia".
Claudio Mutti, Pietro Nenni against the Atlantic Pact
Interjecting into the parliamentary debate in accordance to the Italian democracy rules
for enter the NATO, the secretary of the PSI (Italian Socialist Party) pointed put how the
inclusion of Italy among the countries bordering the Atlantic was a violation of the basic
elements of geography and history. He also contested the political justifications of this
accession: partnering with the American superpower, Italy, which "compared to the US is like
San Marino compared to Europe", instead of securing her independence would have further
reduced her sovereignty, already harshly limited by the international treaties imposed by the
winners of the Second World War.
C. Mutti is editor of "Eurasia".
Erika Morucci, 1991-2003: rehearsal of a superpower
In the twenty years since the first Gulf War to the present, different administrations
came one after the other at the White House, giving different directions to American foreign
policy. Apart from that, these were crucial years of a new historical course, that after the
Cold War has opened up a reality whose facets were hidden for a long time and was fed by the
iron curtain that divided the world. For the US widened its perspectives: they behaved as if
they knew they can reach for primacy, pushing it to the manic search for global power. The
multipolarity on the international scene has strongly emerged with the presence of other
actors, including Russian, Chinese, European, and so the perspective is now to defend their
lead and not lead the world.
E. Morucci, MA in International Relations.
Antonio Grego, Interview with Robert Pelo
Roberto Pelo is the director of the Moscow office of Italian Institute for Foreign Trade
(ICE) and coordinator of the ICE office-network in Russia, Armenia, Belarus and
Turkmenistan.
Antonio Grego, Interview with Livio Filippo Colasanto
Livio Filippo Colasanto is the first Director-General of RusEnergosbyt-Enel.
Below are a number of oil (C + C ) production charts for Non-OPEC countries created from
data provided by the EIA's
International Energy Statistics and updated to May 2020. Information from other sources
such as the OPEC and country specific sites is used to provide a short term outlook for future
output and direction.
Non-OPEC production dropped slowly from a high of 52,638 kb/d in December 2019 to 52,396
kb/d in March 2020. In April that changed when we saw the first big drop in output from the
Non-OPEC countries associated with Covid and with the drop in world oil prices. May output
collapsed to 45,340 kb/d, which is close to the production level in September 2013.
The projection to September (red square) was made using the September STEO report. It
projects that after the low of 45,350 kb/d in May, production will increase by close to 3,500
kb/d to just under 49,000 kb/d in September.
Above are listed the worldʼs 15th largest Non-OPEC producers. They produced 83.6% of
the Non-OPEC output in May. On a YoY basis, Non-OPEC production was down by 5,011 kb/d. On a
MoM basis, production was down by 5,282 kb/d. World oil production was down by 11,418 kb/d, MoM
and 10,318 kb/d YoY.
May saw a drop in output to 2,765 kb/d but rebounded in June to 3,013 kb/d according to this
source . Maintenance and extensive turnarounds planned between September and November could
shave around 200,000 b/d from Brazil's output.
The EIA shows Canadian production was down in May by 658 kb/d by 248 kb/d to 3,694 kb/d. The
CER data is higher because it includes NGPLs in their estimates and is close to 6% of total
output.
Canadian oil exports by rail to the US fell from a high of 411,991 b/d in February to a new
low of 48,820 kb/d in June.
April 156,242 kb/d May 58,048 kb/d June 48,820 kb/d
At the same time, according to this
source , "The Trans Mountain pipeline carried a record-breaking amount of oil to British
Columbia from Alberta in August, despite persistent price and demand woes gripping the energy
sector as the COVID-19 pandemic drags on".
"We have been full every day during the COVID period. Demand for the pipeline has not
softened at all," he told The Globe and Mail in an interview Tuesday.
Chinaʼs production peaked in June-15 at 4,408 kb/d and has been in a steady decline up
to September 2018 where it reached an output low of 3,694 kb/d. According to this
source, Chinaʼs August production increased by 2.6% over last August. Output increased
by 59 kb/d to 3,899 kb/d (Red square). However August's output is still slightly lower than the
June 2019 output of 3,918 kb/d even though Chinese oil companies have increased their spending
to reduce the decline rate.
Kazakhstan production hit a new output high in February, 1,976 kb/d. For May, production
dropped by 203 kb/d to 1,738 kb/d. OPEC expects their output to drop by an average 15 kb/d this
year.
Mexicoʼs production decreased in May by 85 kb/d to 1,686 kb/d, according to the EIA.
Data from Pemex shows that production dropped to 1,647 kb/d in July (red square). Under the
OPEC + Declaration of Cooperation, Mexico committed to reduce output by 100 kb/d in May. Their
target was almost met.
The EIA reported that Norway's May production was 1,775 kb/d, a decrease of 14 kb/d from
April.
According to the Norwegian Petroleum Directorate, "average daily liquids production in July
was: 1 739 000 barrels of oil, 296 000 barrels of NGL and 27 000 barrels of condensate. (Red
lines)
On 29 April 2020, the Government decided to implement a cut in Norwegian oil production. The
production figures for oil in July include this cut of 134 000 barrels per day in the second
half of 2020."
In other words, if Norway hadn't made their commitment to reduce production, May's oil
output would have been (1,739 + 134) 1,873 kb/d. This output level would have been very close
to some earlier highs.
According to the Russian Ministry of energy, Russian production increased by 479 kb/d in
August to 9,860 kb/d. July was revised up by 11 kb/d from 9,371 kb/d to 9,382 kb/d.
UKʼs production decreased by 63 kb/d in May to 1,004 kb/d. According to OPEC, crude
production is expected to increase to 1,010 kb/d in June (Red square).
June's production rebounded from May's low by adding 420 kb/d according to the the EIA's
August report. May's output was revised up by 15 kb/d in the EIA's September report.
US and Permian oil rigs decreased by 1 to 179 and 121 respectively in the week of September
18. As a percentage, Permian oil rigs represented 67.5% of the total for the week of Aug
21.
According to the September DPR, the 121 rigs operating in the Permian in September will be
sufficient to raise production in September by 42 kb/d to 4,150 kb/d.
While WTI has remained close to $40/bbbl, there has been essentially no change in drilling
activity since the week of July 17 in the US. There were 180 oil rigs in operation that week vs
179 for the week of September 18.
These five countries complete the list of Non-OPEC countries with annual production between
500 kb/d and 1,000 kb/d. All five are in overall decline. Their combined May production was
3,263 kb/d down 232 kb/d from April's output of 3,495 kb/d. Azerbaijan, Indonesia and India
appear to be in a slow steady decline phase. Columbia's production began to drop in March as
Brent prices began to drop.
According to Colombia's minister of energy, Maria Fernanda Suarez, ANH president Armando
Zamora said if Brent oil prices hit around $35 a
barrel national oil output could average around 850,000 barrels a day, down from a previous
forecast of 900,000 barrels.
Guyana is a new oil producing country that started production in December 2019. According to
this s ource
, production was supposed to reach 120 kb/d by June. However gas re-injection issues have
delayed its planned production rise. Output in June is expected to be close to 80 kb/d (red
square). This new source for oil will offset some of the decline in other countries, which
currently is close to 400 kb/d/yr.
NON OPEC W/O US PRODUCTION
This chart shows that oil production in Non-OPEC countries has only increased by 541 kb/d
from December 2014 t0 December 2019. It is an indication that these countries as a whole are
approaching an output plateau. April is the first month in which the large production drop
associated with CV-19 and the plunge in oil prices shows up in this chart. In May 0utput from
these countries dropped by 3,293 kb/d to 35,348 kb/d.
Using information from the September STEO, output from the Non OPEC countries W/O the US, is
expected to rebound to 37,054 kb/d in September (red square). Looking further out to October
2021, output is predicted to reach 39,692 kb/d. (Blue graph). Note that the October 2021 high
is currently expected to be 143 kb/d lower than the December 2019 peak. The 143 kb/d difference
is probably well within the margin of error in making these projections.
World Oil
Production
World oil production in May decreased by 11,417 kb/d to 71,374 kb/d. This chart also
projects world production out to October 2020. It uses the September STEO along with the
International Energy Statistics to make the projection. It projects that world production will
recover by close to 5,000 kb/d in October 20202 to 76,019 kb/d.
This chart presents world oil production without the US. Note that the November 2016 peak is
two years prior to all the worldʼs peak shown in the previous chart. May production was
61,372 kb/d, a decrease of 9,429 kb/d from April.
Using the STEO and the EIA international Energy Statistics, output for September is
projected to be 63,768 kb/d, an increase of 2,396 kb/d higher than May.
Paper oil sellers essentially dictate prices to real producers. So they are looting
producers. That's hurt the process of replacement of old wells with new ones (and shale oil well
live just several years, with only first two the most procductive) and as "paper oil" is Wall
Street fiction, and at some point paper oil market might collapse and oil prices go to
stratosphere.
As the price of oil begins to falter, Saudi Arabia has stepped up its rhetoric, even going
as far as to warn short sellers not to bet against the price of the commodity.
Saudi Energy Minister Prince Abdulaziz bin Salman gave "clear hints" on Thursday that there
could be a change of direction in production policy forthcoming as the price of oil continues
its slide, according to
Bloomberg .
He said Thursday: "We will never leave this market unattended. I want the guys in the
trading floors to be as jumpy as possible. I'm going to make sure whoever gambles on this
market will be ouching like hell."
At the same time, Brent was falling below $40 per barrel and the market continues to show
signs of waning demand. OPEC and its allies said they would be "proactive and preemptive" in
addressing the diminishing price, recommending "participating counties take further necessary
measures".
Abdulaziz started a meeting on Thursday with what Bloomberg called a "forceful condemnation"
of members who are pumping out too much supply. His ire may have been directed to UAE Energy
Minister Suhail al Mazrouei, who attended the meeting. The UAE has been "one of the worst quota
breakers" in OPEC+, only making 10% of its pledged cuts for August.
Abdulaziz said: "Using tactics to over-produce and hide non-compliance have been tried many
times in the past, and always end in failure. They achieve nothing and bring harm to our
reputation and credibility."
"Attempts to outsmart the market will not succeed and are counterproductive when we have the
eyes, and the technology, of the world upon us," Prince Abdulaziz continued.
UAE was overproducing by about 520,000 barrels per day in August and the country will try to
make additional cuts in October and November to make up for past month shortcomings.
Countries like Iraq and Nigeria have implemented more than 100% of their required cuts,
helping give OPEC and Abdulaziz credibility.
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Harry Tchilinguirian, head of commodities strategy at BNP Paribas SA, concluded: "You have
to hand it to Prince Abdulaziz. Since he became Saudi oil minister, the kingdom has kept OPEC+
in line through his diplomatic and compelling powers of influence."
If that were true, the energy world would be a lot better off. Producers want to contract;
consumers, probably even China, like the market price. For it can be manipulated easier by
consumers than by suppliers; because consumers control the intl banks and capitalist rules.
Unless China is kept from the market table , then it might accept contracting. Tough racket,
this sanctioning stuff is getting to be, eh?
"At present, a total of 117 very large crude carriers (VLCCs) -- each capable of shipping
2 million barrels of oil -- are traveling to China for unloading at its ports between the
middle of May and the middle of August. If those supertankers transport standard-size crude
oil cargoes, it could mean that China expects at least 230 million barrels of oil over the
next three months, according to Bloomberg. The fleet en route to China could be the largest
number of supertankers traveling to the world's top oil importer at one time, ever, Bloomberg
News' Firat Kayakiran says.
Many of the crude oil cargoes are likely to have been bought in April, when prices were
lower than the current price and when WTI Crude futures even dipped into negative territory
for a day.
China was also estimated to have doubled the fill rate at its strategic and commercial
inventories in Q1 2020, taking advantage of the low oil prices and somewhat supporting the
oil market amid crashing demand by diverting more imports to storage, rather than outright
slashing crude imports.
China's crude oil imports jumped in April to about 9.84 million barrels per day as
demand for fuels began to rebound and local refiners started to ramp up crude processing,
according to Chinese customs data cited by Reuters."
Well, now we know who was taking advantage of those pindo negative oil price sales ;-D
The Chinese are at the advantage here, not being neocon/likud bottom rungers. The
desperation of zionazia is expressed in choosing the neocon lowlife to run things in the
western colonies. Yes, their extremism provides the initiative in getting extreme capitalist
policies through and continues the push to the extreme far right in the zionazi-gay colonies.
But it is at the cost of intelligent long term strategy. Short term imaginary gain at the
cost of real gain. The fast food, face feeding, bum bandit approach. The quick fixers.
The oil market is in disarray, a result of a coronavirus-led collapse in demand, surplus
supply following a price war and a shortage of storage. Yet there have been plenty of people
willing to bet on a rebound in basement-level crude prices, and for many retail investors the
vehicle of choice has been an exchange-traded fund. However, those wagers via the biggest
American ETF -– the U.S. Oil Fund, or USO -– have contributed to market mayhem and
helped push crude prices below zero.
1. What did the fund do?
It grew so huge so quickly that it became a sizable player in the market for West Texas
Intermediate, the U.S. benchmark for crude. Investors piled in during March and April,
convinced that oil prices that had been falling -- pushed down by a
price war between Saudi Arabia and Russia that boosted production just as demand
was slashed by pandemic-driven lockdowns -- would eventually recover once economies reopened.
At different stages, the fund held about a quarter of all May and June contracts for
WTI.
2. What's the problem?
Unlike shares that can be held as long as an investor chooses, oil futures have finite terms
and are agreements to buy or sell a physical product. The May futures contract, for example,
expired on April 21. Any holder who had not sold by then would need to take delivery of the oil
-- 1,000 U.S. barrels, or 42,000 gallons, for each contract.
3. Where does USO come
in?
As a favored investment vehicle for
many bullish speculators , the number of shares in the fund ballooned from 145 million at
the end of February to more than 1.4 billion by mid-April. Its outsized portion of the WTI
market -– on paper -- came at a time when demand for physical oil was cratering and
storage space was becoming harder and more expensive to find.
4. What does that have to
do with the price plunge?
For years, USO was
mandated to invest in the most-active WTI contract and to roll it over to the following
contract. (Rolling over means selling it and, often simultaneously, buying the following
month's contract.) The flood of money into May contracts earlier had pushed oil prices up; as
USO sold its May futures as part of the rollover and bought June and July contracts, prices
fell for May and rose for the following months, opening an unusually wide spread. Only a
handful of traders remained in the May contract on Monday, when prices plunged
well below zero .
5. What's the worry now?
With USO holding a significant level of June contracts, there are concerns that prices will
go negative again and that the whole process might repeat -- or might be worse, if the April
20th debacle scares off more investors. To try to mitigate the prospect, USO, which lost 37% of
its value in the first three weeks of April, has moved to allocate some holdings to contracts
expiring later in the year, since those prices tend to be less volatile. But the fund is adding
to pressure on oil prices in other ways.
There was so much demand for USO that it exhausted the number of shares it was allowed to
issue and, on April 20, asked regulators for permission to register an additional 4 billion,
more than double the existing number. Until the new shares are cleared for issuance, the ETF
will not purchase more futures contracts, according to analysts, potentially adding to pressure
on crude prices. Without new oil contracts, the fund will also become untethered from the
prices it's supposed to track.
7. Anything else?
ETF prices are kept in sync with the value of their holdings, their so-called NAV (net-asset
value), through the creation and redemption of shares. So-called "authorized participants" for
instance sell an ETF when it's rising and buy the underlying security to pocket a quick profit,
keeping the fund's price and NAV in lockstep in the process. However, with the authorized
participants no longer able to create shares, that's disrupted demand for the underlying
contracts.
8. How about other ETFs?
USO is hardly the only exchange-traded fund to be hammered by the swings in oil futures; the
effects were felt around the globe. The Samsung S&P GSCI Crude Oil ER Futures ETF, whose
holdings of the derivatives slumped 26% on Tuesday to $378 million , saw its traded units lose
half their value for a time Wednesday. Closing down 46% at HK $1.79 , the ETF had its biggest
drop and lowest finish since trading began in May 2016. Credit Suisse Group AG told investors in a
leveraged exchange-traded note that tracks the price of oil they probably won't get any money
back after the value of the note dropped below zero.
The Reference Shelf
A
QuickTake about the day when oil prices fell below zero.
A Bloomberg Opinion
column on the risks of oil ETFs.
A Bloomberg News
article on how negative oil prices are leading some traders to rewrite risk models, and
one on how others are betting the lows won't
last.
A
QuickTake on the OPEC price war that flooded markets with
oil just as demand cratered.
Bloomberg Professional subscribers can see oil net ETF positions at {.OILETFNT G Index
<GO>}.
The oil market is in disarray, a result of a coronavirus-led collapse in demand, surplus
supply following a price war and a shortage of storage. Yet there have been plenty of people
willing to bet on a rebound in basement-level crude prices, and for many retail investors the
vehicle of choice has been an exchange-traded fund. However, those wagers via the biggest
American ETF -– the U.S. Oil Fund, or USO -– have contributed to market mayhem and
helped push crude prices below zero.
1. What did the fund do?
It grew so huge so quickly that it became a sizable player in the market for West Texas
Intermediate, the U.S. benchmark for crude. Investors piled in during March and April,
convinced that oil prices that had been falling -- pushed down by a
price war between Saudi Arabia and Russia that boosted production just as demand
was slashed by pandemic-driven lockdowns -- would eventually recover once economies reopened.
At different stages, the fund held about a quarter of all May and June contracts for
WTI.
2. What's the problem?
Unlike shares that can be held as long as an investor chooses, oil futures have finite terms
and are agreements to buy or sell a physical product. The May futures contract, for example,
expired on April 21. Any holder who had not sold by then would need to take delivery of the oil
-- 1,000 U.S. barrels, or 42,000 gallons, for each contract.
3. Where does USO come
in?
As a favored investment vehicle for
many bullish speculators , the number of shares in the fund ballooned from 145 million at
the end of February to more than 1.4 billion by mid-April. Its outsized portion of the WTI
market -– on paper -- came at a time when demand for physical oil was cratering and
storage space was becoming harder and more expensive to find.
4. What does that have to
do with the price plunge?
For years, USO was
mandated to invest in the most-active WTI contract and to roll it over to the following
contract. (Rolling over means selling it and, often simultaneously, buying the following
month's contract.) The flood of money into May contracts earlier had pushed oil prices up; as
USO sold its May futures as part of the rollover and bought June and July contracts, prices
fell for May and rose for the following months, opening an unusually wide spread. Only a
handful of traders remained in the May contract on Monday, when prices plunged
well below zero .
5. What's the worry now?
With USO holding a significant level of June contracts, there are concerns that prices will
go negative again and that the whole process might repeat -- or might be worse, if the April
20th debacle scares off more investors. To try to mitigate the prospect, USO, which lost 37% of
its value in the first three weeks of April, has moved to allocate some holdings to contracts
expiring later in the year, since those prices tend to be less volatile. But the fund is adding
to pressure on oil prices in other ways.
There was so much demand for USO that it exhausted the number of shares it was allowed to
issue and, on April 20, asked regulators for permission to register an additional 4 billion,
more than double the existing number. Until the new shares are cleared for issuance, the ETF
will not purchase more futures contracts, according to analysts, potentially adding to pressure
on crude prices. Without new oil contracts, the fund will also become untethered from the
prices it's supposed to track.
7. Anything else?
ETF prices are kept in sync with the value of their holdings, their so-called NAV (net-asset
value), through the creation and redemption of shares. So-called "authorized participants" for
instance sell an ETF when it's rising and buy the underlying security to pocket a quick profit,
keeping the fund's price and NAV in lockstep in the process. However, with the authorized
participants no longer able to create shares, that's disrupted demand for the underlying
contracts.
8. How about other ETFs?
USO is hardly the only exchange-traded fund to be hammered by the swings in oil futures; the
effects were felt around the globe. The Samsung S&P GSCI Crude Oil ER Futures ETF, whose
holdings of the derivatives slumped 26% on Tuesday to $378 million , saw its traded units lose
half their value for a time Wednesday. Closing down 46% at HK $1.79 , the ETF had its biggest
drop and lowest finish since trading began in May 2016. Credit Suisse Group AG told investors in a
leveraged exchange-traded note that tracks the price of oil they probably won't get any money
back after the value of the note dropped below zero.
The Reference Shelf
A
QuickTake about the day when oil prices fell below zero.
A Bloomberg Opinion
column on the risks of oil ETFs.
A Bloomberg News
article on how negative oil prices are leading some traders to rewrite risk models, and
one on how others are betting the lows won't
last.
A
QuickTake on the OPEC price war that flooded markets with
oil just as demand cratered.
Bloomberg Professional subscribers can see oil net ETF positions at {.OILETFNT G Index
<GO>}.
Energy Minister Alexander Novak said that the fall in prices for WTI oil futures is due to
the actions of speculators.
"Yesterday's collapse of oil quotes of the us WTI brand occurred due to the sale of futures
for delivery in may at the end of trading on paper (after April 20, the may futures are not
traded on the exchange), the lack of demand for additional oil supplies in may and the
likelihood of overstocking storage facilities. This caused a speculative fall of the financial
instrument to negative values, " he said, according to TASS.
The head of the energy Ministry urged "not to dramatize the situation". According to him, it
is important to understand that this is "a paper market, not a trade in physical oil," RIA
Novosti reports.
The Minister also noted that the pressure on the oil market will continue until the start of
the OPEC+ agreement in may, after which the reduction of oil production by countries outside
the agreement and the easing of restrictions will begin.
"The oil market is currently in an extremely volatile state due to a sharp drop in demand
associated with measures to counter the spread of coronavirus, with the gradual overstocking of
storage facilities and the uncertainty of the timing of the global economic recovery. Pressure
on the market will continue until the OPEC + agreement begins in may, reducing production by
countries outside the agreement and easing restrictive measures, " he said.
Novak assured that OPEC+ countries are closely monitoring the situation in the oil market
and have all the capabilities to respond.
"But don't dramatize the situation. It is important to understand that this is a paper
market, that is, trading in derivative financial instruments, and not physical oil. Quotes for
June Brent and WTI futures are significantly higher, although they are also subject to
volatility due to the General negative mood in the market," Novak added.
The price of WTI oil for delivery in may ended Monday's main trading on the NYMEX on
negative values, falling to minus 37.63 dollars. The decrease was 300%. Before that, the quotes
reached minus 40.32 dollars per barrel. Later, the price of may WTI futures returned to
positive values, rising by 160% to $ 2.21 per barrel.
The price of a barrel of oil on the morning of April 21 was trading at $ 21.41.
Africa's largest oil producer could see oil production fall by 35 percent as low oil prices
and regulatory uncertainty threaten to prompt oil majors to postpone final investment
decisions. OPEC member Nigeria is the largest oil producer in Africa and it pumped 1.776
million barrels of oil per day (bpd) in January 2020, according to OPEC's secondary sources in
its monthly report published this week. Adding condensate production, Nigeria's total oil
output exceeds 2 million bpd.
However, three deepwater projects offshore Nigeria, operated by oil majors Exxon, Shell, and
Total, could see their start-up dates delayed by two to four years to the late 2020s, according
to the research WoodMac shared with Reuters ahead of publishing it on Friday.
The regulatory changes in Nigeria's oil industry and the still pending final approval of a
petroleum bill - after two decades of delays and wrangling - act as deterrents to the oil
majors' investment decisions, according to Wood Mackenzie.
Moreover, the three deepwater projects - which could add a combined 300,000 bpd to Nigeria's
production - are not profitable at current oil prices with Brent Crude below $60 a barrel, the
consultancy noted.
Just this week, Nigeria assured foreign oil investors that the country is open to business
and can guarantee high returns on investment, the country's President Muhammadu Buhari told an
energy conference on Monday.
Nigeria is set to finally pass a new bill regulating the petroleum industry by the middle of
this year, after nearly two decades of delays, the country's Minister of Petroleum Timipre
Sylva said at the same event.
Mele Kyari, Group Managing Director at the Nigerian National Petroleum Corporation (NNPC),
said at the conference that "We are, more than ever before, committed to working with
stakeholders to increase our crude oil production from 2.3 million bbl per day to 3 million bbl
per day."
The recent amendment to the Deep Offshore Act will improve financial stability and investor
confidence, NNPC's head said.
"... that every nation produces what oil they can produce. Production must have some relation to reserves. ..."
"... The normal R/P ratio is around 20. That doesn't mean a nation with an R/P ratio of 20 will run out of oil in 20 years. Because as their production declines, their R/P ratio will still hold at about 20 because they are producing less oil therefore their reserves will go further. So an R/P ratio of about 20 is the norm for normal size conventional fields. ..."
"... For giant and supergiant fields the R/P ratio would be greater and for smaller fields, as well as shale fields, the R/P ratio would be smaller. ..."
"... Using OPEC's reserves data for both OPEC and Non-OPEC, OPEC has an R/P of 109 while Non-OPEC has an R/P ratio of about 12. That OPEC number is absurd beyond belief. ..."
"... If we exclude the heavy oil then OPEC's share is close to the 70% I suggested. How does this square its share of the production numbers for the world. This was my original question. I would like to read what the thoughts of other posters are on this as well. ..."
What is the explanation that Non-OPEC produces more than OPEC, but OPEC has 70% of world
reserves?
Although this might have been the case in the early history of oil production, I
would think that this should not be the case near the peak. If I recall correctly, Campbell
thought that OPEC's stated reserves are actually the estimated values produced by the government for each OPEC country?
Well, 79.4% to be exact Some people really believe that unbelievable crap. Well hell,
there are still people who believe the earth is flat and that the sun revolves around the
earth. So why should we be surprised? Some people will believe anything.
I would like to think that most people on this list know that OPEC quoted reserves is
pure bullshit.
Hey, we have a president who lies every time he tweets. And sometimes he tweets 200 times
a day. And perhaps 45% of the nation believes him. The capacity of humans to believe the
absurd is unbounded.
Anyway if IEA and EIA projections are made on the basis of OPEC claimed reserves, we
have a serious problem.
Well, I have always stated, on this blog as well as The Oil Drum, that every nation produces
what oil they can produce. Production must have some relation to reserves.
The normal R/P ratio is around 20. That doesn't mean a nation with an R/P ratio of 20 will
run out of oil in 20 years. Because as their production declines, their R/P ratio will still
hold at about 20 because they are producing less oil therefore their reserves will go
further. So an R/P ratio of about 20 is the norm for normal size conventional fields.
For giant and supergiant fields the R/P ratio would be greater and for smaller fields, as
well as shale fields, the R/P ratio would be smaller.
If a giant or supergiant field is nearing the end of its life, but infill drilling,
creaming the top of the reservoir, this will throw a monkey wrench into their R/P ratio.
While in its prime, the field may have had an R/P ration of 40 or even greater, its R/P ratio
while being creamed will be much smaller, less than 20.
Using OPEC's reserves data for both OPEC and Non-OPEC, OPEC has an R/P of 109 while
Non-OPEC has an R/P ratio of about 12. That OPEC number is absurd beyond belief.
According to Hubbert methodology, at the peak production the number of years to exhaust
the reserve is N = 2/a in which "a" is the intrinsic growth rate
dQ/dt=a Q (1-Q/Q_0)
From Laherrere's reports for world peak, this is between 0.04 and 0.05. This means that
the R/P ratio is between 40 and 50 at the peak. Thus if we say that 1/2 of the reserves are
left at the peak and we take Laherre's URR = 2500, this gives R/P=1250/35=36 years. These are
ball park figures, but suggest that R/P ~ 20 is low. These numbers are for the entire world
and for example for North Sea at its peak Hubbert's analysis gave a = 0.12, so
R/P=2/0.12=16.6, and this illustrates the fact that smaller fields are closer to your number
R/P=20.
If we exclude the heavy oil then OPEC's share is close to the 70% I suggested. How does
this square its share of the production numbers for the world. This was my original question.
I would like to read what the thoughts of other posters are on this as well.
"... The Iraq war was about oil. Recently declassified US government documents confirm this ( 1 ), however much US president George W Bush, vice-president Dick Cheney, defence secretary Donald Rumsfeld and their ally, the British prime minister Tony Blair, denied it at the time. ..."
The Iraq war was about oil. Recently declassified US government documents confirm this (
1 ), however much US
president George W Bush, vice-president Dick Cheney, defence secretary Donald Rumsfeld and
their ally, the British prime minister Tony Blair, denied it at the time.
When Bush moved into the White House in January 2001, he faced the familiar problem of the
imbalance between oil supply and demand. Supply was unable to keep up with demand, which was
increasing rapidly because of the growth of emerging economies such as China and India. The
only possible solution lay in the Gulf, where the giant oil-producing countries of Saudi
Arabia, Iran and Iraq, and the lesser producing states of Kuwait and Abu Dhabi, commanded 60%
of the world's reserves.
For financial or political reasons, production growth was slow. In Saudi Arabia, the
ultra-rich ruling families of the Al-Saud, the Al-Sabah and the Zayed Al-Nayan were content
with a comfortable level of income, given their small populations, and preferred to leave their
oil underground. Iran and Iraq hold around 25% of the world's hydrocarbon reserves and could
have filled the gap, but were subject to sanctions -- imposed solely by the US on Iran,
internationally on Iraq -- that deprived them of essential oil equipment and services.
Washington saw them as rogue states and was unwilling to end the sanctions.
How could the US get more oil from the Gulf without endangering its supremacy in the region?
Influential US neoconservatives, led by Paul Wolfowitz, who had gone over to uninhibited
imperialism after the fall of the Soviet Union, thought they had found a solution. They had
never understood George Bush senior's decision not to overthrow Saddam Hussein in the first
Gulf war in 1991. An open letter to President Bill Clinton, inspired by the Statement of
Principles of the Project for the New American Century, a non-profit organisation founded by
William Kristol and Robert Kagan, had called for a regime change in Iraq as early as 1998:
Saddam must be ousted and big US oil companies must gain access to Iraq. Several signatories to
the Statement of Principles became members of the new Republican administration in 2001.
In 2002, one of them, Douglas Feith, a lawyer who was undersecretary of defense to Rumsfeld,
supervised the work of experts planning the future of Iraq's oil industry. His first decision
was to entrust its management after the expected US victory to Kellog, Brown & Root, a
subsidiary of US oil giant Halliburton, of which Cheney had been chairman and CEO. Feith's
plan, formulated at the start of 2003, was to keep Iraq's oil production at its current level
of 2,840 mbpd (million barrels per day), to avoid a collapse that would cause chaos in the
world market.
Privatising oil
Experts were divided on the privatisation of the Iraqi oil industry. The Iraqi government
had excluded foreign companies and successfully managed the sector itself since 1972. By 2003,
despite wars with Iran (1980-88) and in Kuwait (1990-91) and more than 15 years of sanctions,
Iraq had managed to equal the record production levels achieved in 1979-1980.
The experts had a choice -- bring back the concession regime that had operated before
nationalisation in 1972, or sell shares in the Iraqi National Oil Company (INOC) on the Russian
model, issuing transferrable vouchers to the Iraqi population. In Russia, this approach had
very quickly led to the oil sector falling into the hands of a few super-rich oligarchs.
Bush approved the plan drawn up by the Pentagon and State Department in January 2003. The
much-decorated retired lieutenant general Jay Gardner, was appointed director of the Office of
Reconstruction and Humanitarian Assistance, the military administration set up to govern
post-Saddam Iraq. Out of his depth, he stuck to short-term measures and avoided choosing
between the options put forward by his technical advisers.
Reassuring the oil giants
The international oil companies were not idle. Lee Raymond, CEO of America's biggest oil
company ExxonMobil, was an old friend of Dick Cheney. But where the politicians were daring, he
was cautious. The project was a tempting opportunity to replenish the company's reserves, which
had been stagnant for several years, but Raymond had doubts: would Bush really be able to
assure conditions that would allow the company to operate safely in Iraq? Nobody at ExxonMobil
was willing to die for oil. (Its well-paid engineers do not dream of life in a blockhouse in
Iraq.) The company would also have to be sure of its legal position: what would contracts
signed by a de facto authority be worth when it would be investing billions of dollars that
would take years to recover?
In the UK, BP was anxious to secure its own share of the spoils. As early as 2002 the
company had confided in the UK Department of Trade and Industry its fears that the US might
give away too much to French, Russian and Chinese oil companies in return for their governments
agreeing not to use their veto at the UN Security Council ( 2 ). In February 2003 those fears were removed:
France's president Jacques Chirac vetoed a resolution put forward by the US, and the third Iraq
war began without UN backing. There was no longer any question of respecting the agreements
Saddam had signed with Total and other companies (which had never been put into practice
because of sanctions).
To reassure the British and US oil giants, the US government appointed to the management
team Gary Vogler of ExxonMobil and Philip J Carrol of Shell. They were replaced in October 2003
by Rob McKee of ConocoPhilips and Terry Adams of BP. The idea was to counter the dominance of
the Pentagon, and the influential neocon approach (which faced opposition from within the
administration). The neocon ideologues, still on the scene, had bizarre ideas: they wanted to
build a pipeline to transport Iraq's crude oil to Israel, dismantle OPEC (Organisation of the
Petroleum Exporting Countries) and even use "liberated" Iraq as a guinea pig for a new oil
business model to be applied to all of the Middle East. The engineers and businessmen, whose
priorities were profits and results, were more down-to-earth.
In any event, the invasion had a devastating impact on Iraq's oil production, less because
of the bombing by the US air force than because of the widespread looting of government
agencies, schools, universities, archives, libraries, banks, hospitals, museums and state-owned
enterprises. Drilling rigs were dismantled for the copper parts they were believed to contain.
The looting continued from March to May 2003. Only a third of the damage to the oil industry
was caused during the invasion; the rest happened after the fighting was over, despite the
presence of the RIO Task Force and the US Corps of Engineers with its 500 contractors,
specially prepared and trained to protect oil installations. Saddam's supporters were prevented
from blowing up the oil wells by the speed of the invasion, but the saboteurs set to work in
June 2003.
Iraq's one real asset
The only buildings protected were the gigantic oil ministry, where 15,000 civil servants
managed 22 subsidiaries of the Iraq National Oil Company. The State Oil Marketing Organisation
and the infrastructure were abandoned. The occupiers regarded the oil under the ground as
Iraq's one real asset. They were not interested in installations or personnel. The oil ministry
was only saved at the last minute because it housed geological and seismic data on Iraq's 80
known deposits, estimated to contain 115bn barrels of crude oil. The rest could always be
replaced with more modern US-made equipment and the knowhow of the international oil companies,
made indispensible by the sabotage.
Thamir Abbas Ghadban, director-general of planning at the oil ministry, turned up at the
office three days after the invasion was over, and, in the absence of a minister for oil (since
Iraq had no government), was appointed second in command under Micheal Mobbs, a neocon who
enjoyed the confidence of the Pentagon. Paul Bremer, the US proconsul who headed Iraq's
provisional government from May 2003 to June 2004, presided over the worst 12 months in the oil
sector in 70 years. Production fell by 1 mbpd -- more than $13bn of lost income.
The oil installations, watched over by 3,500 underequipped guards, suffered 140 sabotage
attacks between May 2003 and September 2004, estimated to have caused $7bn of damage. "There
was widespread looting," said Ghadban. "Equipment was stolen and in most cases the buildings
were set on fire." The Daura refinery, near Baghdad, only received oil intermittently, because
of damage to the pipeline network. "We had to let all the oil in the damaged sections of the
pipeline burn before we could repair them." Yet the refinery continued to operate, no mean
achievement considering that the workers were no longer being paid.
The senior management of the national oil company also suffered. Until 1952 almost all
senior managers of the Iraq Petroleum Company (IPC) were foreigners, who occupied villas in
gated and guarded compounds while the local workforce lived in shantytowns. In 1952 tension
between Iraq and Muhammad Mossadegh's Iran led the IPC to review its relations with Baghdad,
and a clause of the new treaty concerned the training of Iraqi managers. By 1972, 75% of the
thousand skilled jobs were filled by Iraqis, which helped to ensure the success of the IPC's
nationalisation. The new Iraq National Oil Company gained control of the oilfields and
production reached unprecedented levels.
Purge of the Ba'ath
After the invasion, the US purged Ba'athist elements from INOC's management. Simply
belonging to the Ba'ath, Iraq's single political party, which had been in power since 1968, was
grounds for dismissal, compulsory retirement or worse. Seventeen of INOC's 24 directors were
forced out, along with several hundred engineers, who had kept production high through wars and
foreign sanctions. The founding fathers of INOC were ousted by the Deba'athification
Commission, led by former exiles including Iraq's prime minister Nuri al-Maliki, who replaced
them with his own supporters, as incompetent as they were partisan.
Rob McKee, who succeeded Philip J Carrol as oil adviser to the US proconsul, observed in
autumn 2003: "The people themselves are patently unqualified and are apparently being placed in
the ministry for religious, political or personal reasons... the people who nursed the industry
through Saddam's years and who brought it back to life after the liberation, as well as many
trained professionals, are all systematically being pushed to the sidelines" ( 3 ).
This purge opened the door to advisers, mostly from the US, who bombarded the oil ministry
with notes, circulars and reports directly inspired by the practices of the international oil
industry, without much concern for their applicability to Iraq.
The drafting of Iraq's new constitution and an oil law provided an opportunity to change the
rules. Washington had decided in advance to do away with the centralised state, partly because
of its crimes against the Kurds under Saddam and partly because centralisation favours
totalitarianism. The new federal, or even confederal, regime was decentralised to the point of
being de-structured. A two-thirds majority in one of the three provinces allows opposition to
veto central government decisions.
Baghdad-Irbil rivalry
Only Kurdistan had the means and the motivation to do so. Where oil was concerned, power was
effectively divided between Baghdad and Irbil, seat of the Kurdistan Regional Government (KRG),
which imposed its own interpretation of the constitution: deposits already being exploited
would remain under federal government control, but new licenses would be granted by the
provincial governments. A fierce dispute arose between the two capitals, partly because the KRG
granted licenses to foreign oil companies under far more favourable conditions than those
offered by Baghdad.
The quarrel related to the production sharing agreements. The usual practice is for foreign
companies that provide financial backing to get a share of the oil produced, which can be very
significant in the first few years. This was the formula US politicians and oil companies
wanted to impose. They were unable to do so.
Iraq's parliament, so often criticised in other matters, opposed this system; it was
supported by public opinion, which had not forgotten the former IPC. Tariq Shafiq, founding
father of the INOC, explained to the US Congress the technical reasons for the refusal (
4 ). Iraq's oil deposits
were known and mapped out. There was therefore little risk to foreign companies: there would be
no prospecting costs and exploitation costs would be among the lowest in the world. From 2008
onwards, Baghdad started offering major oil companies far less attractive contracts --
$2/barrel for the bigger oilfields, and no rights to the deposits.
ExxonMobil, BP, Shell, Total, and Russian, Chinese, Angolan, Pakistani and Turkish oil
companies nevertheless rushed to accept, hoping that things would turn to their advantage.
Newsweek (24 May 2010) claimed Iraq had the potential to become "the next Saudi Arabia."
But although production is up (over 3 mbpd in 2012), the oil companies are irritated by the
conditions imposed on them: investment costs are high, profits are mediocre and the oil still
underground is not counted as part of their reserves, which affects their share price.
ExxonMobil and Total disregarded the federal government edict that threatened to strip
rights from oil companies that signed production-sharing agreements relating to oilfields in
Kurdistan. Worse, ExxonMobil sold its services contract relating to Iraq's largest oilfield,
West Qurna, where it had been due to invest $50bn and double the country's current production.
Baghdad is now under pressure: if it continues to refuse the conditions requested by the
foreign oil companies, it will lose out to Irbil, even if Kurdistan's deposits are only a third
of the size of those in the south. Meanwhile, Turkey has done nothing to improve its relations
with Iraq by offering to build a direct pipeline from Kurdistan to the Mediterranean. Without
the war, would the oil companies have been able to make the Iraqis and Kurds compete? One thing
is certain: the US is far from achieving its goals in the oil sector, and in this sense the war
was a failure.
Alan Greenspan, who as chairman of the US Federal Reserve from 1987 to 2006 was well placed
to understand the importance of oil, came up with the best summary of the conflict: "I am
saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war
is largely about oil" ( 5
).
"Myths, Lies, and Oil Wars" by William F. Engdahl is a must read for anyone struggling to
make sense of U.S. foreign policy. Why are U.S. troops in Iraq and Afghanistan? Why did NATO
take out Gaddafi? Why are we going after Iran and Syria? Is there a grand strategy? Was the
"Arab Spring" uprisings really grassroots revolutions or just a second round of color
revolutions?
"Control the food and you control the people. Control the oil and you control the nations"
is a statement that has been attributed to Henry Kissinger. The premise of the book is summed
up by the latter part of Kissinger's statement, the control of oil or more generally the
control of energy.
Engdahl maintains that the geopolitical events we have been witnessing is part of the
Pentagon's "Full Spectrum Dominance" plan. A cornerstone of the plan is the control of oil at
the source. Much of the world's proven oilfields are in the Middle East. For the next two
decades the Mideast oilfields is expected to provide Asia with most of its oil.
Engdahl begins laying out the history of conflicts over oil and provides insightful
revelations into conflicts that benefited the Oil majors by reducing the world supply of oil.
Case in point the Iran-Iraq war of the 1980's. The oil exports from these two nations was
drastically reduced during wartime leading to higher prices.
Another example Engdahl lists is the fact that David Rockefeller lobbied the Carter
Administration to allow the Shah of Iran into the U.S. for medical treatment knowing that it
would cause a crisis with the Ayatollah Khomeini's Iranian government and how Rockefeller's
Bank was able to benefit after the U.S. froze the assets of Iran.
Other topics covered include:
The "Peak Oil Fraud" and the pseudo-science of its creator King Hubbert.
The fact that in Russia the Abiotic theory of oil formation is accepted as the leading
theory for the last fifty years resulting in Russian Geoligist finding oil in places that
western dogma says it shouldn't be.
The rapid rise of China is a source of much concern in Washington. The economic rise of
China must be contained and in no way can Russia and China be allowed to join forces. Many
tacticians have emphasized the importance of not allowing the rise of a unified Eurasian
power. A Eurasian power would be in a position to challenge the dominance of the
Anglo-American Empire.
According to the info the Engdahl provides China's weakness is its lack of oil. Engdahl
illustrates how the Pentagon has been encircling Russia and China and the events we are
seeing is Washington's attempt to knock China out of Africa where China was making steady
inroads signing economic alliances with African nations that the Anglo-Americans were
exploiting.
Engdahl makes the case that the Iraq war was about control of the oil at the source.
The invasion of Afghanistan was about a controlling Caspian sea oil and gas.
Engdahl offers an explanation for NATO alliances with the former Soviet States of Ukraine
and Georgia.
What really was behind the Russian invasion of Georgia? The consequences for Russia.
The establishment of joint ventures between U.S. oil companies and former state run oil
enterprises in Kazakhstan, and Azerbaijan.
Why did the U.S. move Afghani Mujahideen into Chechnya and start a proxy war along a vital
Russian pipeline?
Engdahl provides the information needed to connect the "dots" of seemingly unrelated
conflicts to form a vivid picture of the "New World Order" being assembled in the 21st
Century.
I highly recommend this book along with all of Engdahl's other works. Engdahl wrote two
other books that are especially pertinent to "Myths, Lies, and Oil Wars"
The first is "A Century of War, Anglo-American Oil Politics and the New World Order" which
I consider as a prequel to "Myths, Lies, and Oil Wars"
The second is "Full Spectrum Dominance, Totalitarian Democracy in the New World Order"
which describes the encircling of Russia, the color revolutions, and much more.
These three books together will surely enlighten the lay person to the machinations of the
U.S. Empire. Another point I should mention is, Engdahl's works are concise and thoughtful
hitting on the important points while remaining entertaining and not overwhelming the reader
with a thousand plus page tome.
"... Like most lefty journalists, I assumed that George Bush and Tony Blair invaded Iraq to buy up its oil fields, cheap and at gun-point, and cart off the oil. We thought we knew the neo-cons true casus belli ..."
"... But the truth in the Options for Iraqi Oil Industry was worse than "Blood for Oil". Much, much worse. The key was in the flow chart on page 15, Iraq Oil Regime Timeline & Scenario Analysis: "...A single state-owned company ...enhances a government's relationship with OPEC." ..."
Because it was marked "confidential" on each page, the oil industry stooge couldn't believe
the US State Department had given me a complete copy of their secret plans for the oil fields
of Iraq.
Actually, the State Department had done no such thing. But my line of bullshit had been so
well-practiced and the set-up on my mark had so thoroughly established my fake identity, that I
almost began to believe my own lies.
I closed in. I said I wanted to make sure she and I were working from the same State
Department draft. Could she tell me the official name, date and number of pages? She did.
Bingo! I'd just beaten the Military-Petroleum Complex in a lying contest, so I had a right
to be chuffed.
After phoning numbers from California to Kazakhstan to trick my mark, my next calls were to
the State Department and Pentagon. Now that I had the specs on the scheme for Iraq's oil --
that State and Defense Department swore, in writing, did not exist -- I told them I'd
appreciate their handing over a copy (no expurgations, please) or there would be a very
embarrassing story on BBC Newsnight .
Within days, our chief of investigations, Ms Badpenny, delivered to my shack in the woods
outside New York a 323-page, three-volume programme for Iraq's oil crafted by George Bush's
State Department and petroleum insiders meeting secretly in Houston, Texas.
I cracked open the pile of paper -- and I was blown away.
Like most lefty journalists, I assumed that George Bush and Tony Blair invaded Iraq to
buy up its oil fields, cheap and at gun-point, and cart off the oil. We thought we knew the
neo-cons true casus belli : Blood for oil.
But the truth in the Options for Iraqi Oil Industry was worse than "Blood for Oil".
Much, much worse. The key was in the flow chart on page 15, Iraq Oil Regime Timeline &
Scenario Analysis: "...A single state-owned company ...enhances a government's relationship
with OPEC."
The
tale of what is going on in Syria reads something like this: an insurgency active since March
2011 has been funded and armed by Saudi Arabia and Qatar and allowed to operate out of Turkey
with the sometimes active, but more often passive, connivance of a number of Western powers,
including Britain, France, Germany, and the United States. The intention was to overthrow the
admittedly dictatorial Bashar al-Assad quickly and replace him with a more representative
government composed largely of Syrians-in-exile drawn from the expat communities in Europe and
the United States. The largely ad hoc political organization that was the counterpart to the
Free Syrian Army ultimately evolved into the National Coalition for Syrian Revolutionary and
Opposition Forces (Syrian National Coalition) in November 2012, somewhat reminiscent of
Ahmad Chalabi and the ill-starred Iraqi National Congress. As in the lead-up to regime
change in Iraq, the exiles successfully exploited anti-Syrian sentiment among leading
politicians in Washington and Europe while skillfully manipulating the media narrative to
suggest that the al-Assad regime was engaging in widespread atrocities and threatening to
destabilize its neighbors, most notably Lebanon. As in the case of Iraq, Syria's possession of
weapons of mass destruction was introduced into the indictment of al-Assad and cited as a
regional threat.
If there was a model for what was planned for Syria it must have been the invasion of
Iraq in 2003 or possibly the United Nations-endorsed armed intervention in Libya in
2010 , both of which intended to replace dictatorial regimes with Western-style
governments that would at least provide a simulacrum of accountable popular rule. But the
planners must have anticipated a better outcome.
Both Libya and Iraq have become more destabilized than they were under their autocrats, a
fact that appears to have escaped everyone's notice. It did not take long for the wheels to
fall off the bus in Syria as well. As in Iraq, the Syrian exiles had no real constituency
within their homeland, which meant that the already somewhat organized resistance to al-Assad,
consisting of the well-established Muslim Brotherhood and associated groups, came to the fore.
Al-Assad, who somewhat credibly has described the
rebels as terrorists supported by foreign governments, did not throw in the towel and
leave.
The Turkish people, meanwhile, began to turn sour on a war which seemed endless, was
creating a huge refugee and security problem as Kurdish terrorists mixed in with the refugees,
and was increasingly taking on the shape of a new jihad as foreign volunteers began to assume
responsibility for most of the fighting.
The proposed alternative government of the Syrian National Coalition was quickly recognized by
Washington and the Europeans, primarily because it promised some kind of democratic and
pluralistic future for Syria and control over the disparate and sometimes radical elements in
the Free Syrian Army. The supporters of the rebellion in the West were willing to hold their
collective noses and endorse the enterprise even though it was dominated by the Muslim
Brotherhood and other Islamists rather than by Western-educated liberals and other
secularists. But the painstakingly arrived at distribution of power provided no real solution
as the Coalition had no authority over most of the actual rebel combatants and little ability
to enforce standards on the cadres who were fighting the Syrian Army in Aleppo and Damascus.
Emphasizing its political divisions and also its essential powerlessness, on January 21, 2013
the Coalition was unable
to agree on who might be part of a transitional government to run the areas controlled by the
insurgents, largely because the Muslim Brotherhood was unwilling to cede authority to other
groups. Since that time it has
failed to agree on possible conditions for initiating peace negotiations with the al-Assad
government.
There will be plenty of finger-pointing in Washington and in the European chanceries over
what went wrong, but one issue that will probably not be confronted directly is the competing
objectives of the various supporters of the insurgents, which should have been visible right
from the beginning. The U.S. and the Europeans clearly envisioned some kind of humanitarian
intervention which would lead to a new, more representative government, but that was not the
goal of Turkey, which sought a pliable replacement regime that would clamp down on the
activities of groups like the separatist Kurdish Workers Party (PKK), Ankara's primary
geopolitical security concern.
Perhaps even more important, people in Washington should have also been asking why
Saudi Arabia and Qatar wanted to overthrow al-Assad and what kind of government they had in
mind to replace him . Saudi Arabia's rival as regional hegemon, Iran, is viewed in
Riyadh as ascendant due to the rise to power of a friendly Shia regime in Iraq as a result of
the American invasion and regime change. This has permitted the development of a geographically
contiguous Arab bloc closely tied to Tehran and its regional interests, running through Iraq,
across Syria, and connecting with Hezbollah in Lebanon and Hamas in Gaza. To break up
that de facto coalition, the Saudis, who see Syria as the weak link in the chain, have sought
to replace Assad's Alawite-led government with a Sunni regime. But there is also a
second agenda. Because the ruling minority Alawites are considered to be heretics similar to
Shi'ites, a change in religious orientation would be necessary, with the Saudis serving as
protectors of the Sunni majority. The Riyadh-backed Sunni regime would of course be expected to
conform with the particularly Saudi view of proper religious deportment -- the extremely
conservative Wahhabism that prevails in the Kingdom, which is closer to the views of the more
radical insurgents while hostile to the secularists. It would also make the country's
significant numbers of Christians, Alawites, Shi'ites, and Kurds potential victims of the
arrangement.
All of which means that the Saudis and their allies Qatar believe in change in Syria, but on
their own terms, and they actually oppose enabling a populist or democratic evolution. In fact,
Riyadh has been actively engaged regionally in doing what it can to contain the unrest
resulting from the Arab Spring so that the populism does not become untidy and spill over into
Saudi Arabia itself. This has meant that from the beginning Saudi and Qatari objectives in
Syria have differed from the goals of either Turkey or the Western powers, which should have
been seen as a recipe for disaster.
And it gets even more complicated. In spite of their tendency to support religious groups
rather than secular ones, Saudi Arabia and its ally Qatar view the Muslim Brotherhood's
"political Islam" as one of the divisive elements that has destabilized countries like Egypt,
unleashing forces that could ultimately threaten the Saudis and Qataris
themselves. As a result, working through their surrogates in Lebanon and in Turkey as
well as in Jordan, they have systematically and deliberately starved most of the Free Syrian
Army of money and weapons, instead diverting their assistance to the militant Jabhat al-Nusra,
a Salafist group alleged to have links to al-Qaeda. Al-Nusra is generally regarded as the
most effective insurgent group when it comes to fighting, but it advocates a strict Sunni
religious state as part of a worldwide Caliphate under Sharia law when the fighting is
concluded. It has also become a magnet for the foreign jihadis who have been drawn into the
rebellion, an issue that has raised concerns in Washington because of the likelihood that
any successor regime to al-Assad could easily be dominated by a well-armed and disciplined
Salafist minority.
Ironically, the Saudis are acutely aware that aid to groups like al-Nusra could easily
blowback and feed a new wave of jihadi-led violence -- with al-Nusra playing a similar role to
that of al-Qaeda after it cut its teeth in Afghanistan -- but they are unfortunately locked
into their own rhetoric regarding what is necessary to take down al-Assad and break the
coalition of Arab states aligned with Iran. What it means for the other players in the tragedy
is that Syria is de facto in a bloody civil war that is approaching stalemate, while the United
States and Europeans have no good options and the Turks are increasingly playing damage
control. If there is a solution to the conflict it is not readily discernible, and it is now
doubtful whether some kind of resolution by force could be imposed even if Washington and the
Europeans were inclined to do so, which they are not.
Syria is in danger of ceasing to exist as a nation-state. Its collapse could
inspire a new global jihad and provoke violence throughout the Middle East, while its chemical
weapons could easily fall into dangerous hands. Well-armed bands of the most radical of the
insurgents taking the lead in the conflict without any political direction or control cannot be
what anyone envisioned two years ago, but that is what has emerged, with the United States
again looking on like a helpless giant.
Philip Giraldi, a former CIA officer, is executive director of the Council for the
National Interest.
I coming to sad conclusion that the Syria civil war is following the steps of the Lebanon
civil war and turning into a Spaghetti (Italian) Western. What we have now a whole bunch of
warring sides with guns that are fight until everybody is too exhausted to continue
fighting.
The problem with taking a hands-off approach to Syria is that we have no say in how things
turn out. I am not so sure that we should care one way or another how it turns out. We dont do
business with them, I doubt many of our people travel there for vacation, and they are not a
direct threat to us. We can have an opinion, but shouldnt get too worked up over the
outcome.
If this article is accurate, this Admin. justified the case for the Iraq and Afghanistan
Invasions.
Regime change
And it is folly. So we assist via the back door to overthrow President Assad and replace his
government with those who have not lived the country for ten to twenty years.
Hmmm . . . I think I have seen this game plan before.
This article makes the Syrian civil war sound most like the Afghanistan revolt followed by
civil war against the Soviets after their invasion.
Of course, there limited US attention after the Soviets left meant that Saudi, Iranian, and
Pakistani backed militias fought against one another. Instead of being exhausted, the ultimate
winner decided that they still hated the USA.
The parallel that falls to mind is the Spanish Civil War in which various powers were
willing to fight right down to the last Spaniard. Spain emerged from that civil war with a
stable, non-interventionist regime under Franco but I doubt Syria will be so lucky.
As to "It has also become a magnet for the foreign jihadis who have been drawn into the
rebellion, an issue that has raised concerns in Washington because of the likelihood that any
successor regime to al-Assad could easily be dominated by a well-armed and disciplined Salafist
minority." I can only say that this is an excellent opportunity for the West to discretely fund
some vermin control. The more of these jihadis Assad kills the better off we all are. We should
remember that our defeat of Communist subversion in the Europe of 1946-7 was made easier by the
fact that so many leftist trouble makers were buried in Spain in 1936-8.
One mystery remains. Why on earth are the neo-cons agitating for war with Assad? Surely
Israel is better off with the relatively ineffective Assad regime than they would be under what
would follow.
"Syria is in danger of ceasing to exist as a nation-state". That is the problem right there,
Syria never was a nation state, no different than Yugoslavia which could only be kept together
by a Tito, so is the case with the Assads.
If this author could go beyond his PC thinking, this simple fact would easily explain why
Syria is facing such an intractable problem.
I feared the unrest in Syria would lead to a vicious civil war in which irreplaceable
historical and archaeological treasures are destroyed.
I thought the Saudis were promoting civil war in order to weaken Iran, due in part to Iran's
reckless decision to treble production of uranium enriched to 20 percent.
I also thought "the West" blundered in Libya by making a negotiated resolution of the unrest
more difficult. Same blunder has taken place with Syria.
What is the percentage of foreign fighters? I hear various percentages thrown about, some
over 50%.
The Assad government conducted a constitutional referendum and parliamentary elections, as
well (but that is studiously ignored by western press).
Syria, in its current makeup, is an obstacle to western power & control. Humanitarian
concerns have little to do with it.
In 2007, Seymour Hersh had a New Yorker article, The Redirection, where U. S.
government plans for the destabilization of Syria was reported.
And, as reported by the present author, Mr. Giraldi, the United States has been
significantly involved in facilitating weapons into Syria. What has happened presently is much
like what Hersh reported was planned to happen in his 2007 New Yorker article.
But obviously it didn't go according to plan.
Some analysts submit the United States is the spider in the center of the web, the
prime mover, as far as Syria goes. Would Saudi Arabia act against a strong U. S.
objection?
Syria is potentially also a stepping stone to Iran.
Israel is fine with balkanized neighbors who are weak (maybe a little more land can be taken
down the road).
There is no doubt the fighters use terrorist tactics of indiscriminate large scale bombing,
summary execution, and infastructure destruction (including religous and historical sites).
The U. S. vetoed a U. N. Security Council resolution submitted by Russia condemning last
week's Damascus bombing where over 50 died and hundreds were wounded. The U. S. wanted a
condemnation focusing on Assad with passing reference to the Damascus bombing (subsequently the
al-Nusra front claimed responsibility for the bombing).
So, implicitly, the U. S. government is condoning terrorist acts of al Quaeda linked terror
groups who are on the state department terrorist watch list.
The U. S. government is condoning large-scale terrorism in Syria, plain and simple. It's
immoral. Is that what the U. S. has come to?
It would be easy to turn off the weapons and terrorist supply into Syria, but it would take
political will to change the inertia and an implicit aknowledgement of failure.
That acknowledgement of failure might be the biggest political stumbling block of
all.
very much a 'devil you know vs. devil you don't' with the understanding that we pretty much
'know' both devils; we just don't 'know' what Syria (or Iraq, Libyia, etc.) would be like with
the latter. that said; I think the real question is not so much is it wise to back rebels;
which inevitably invites or at the very least encourages/nurtures jihadists? rather; is it
possible to anticipate the "jihad card" and somehow use it to serve our interests? even if "our
interests" are best served by, as Michael Corleone observed (to Frank Pantangeli re: a turf war
in NYC); " do(ing) nothing ". the truth is; many of these revolutions (Arab Spring movements,
more than Iraq) are as genuine as the 13 colonies revolting against King George. at this point
in our history; you would think we'd be pretty good at "playing" others, when the sad fact is;
we seem to be the ones being played. no doubt the neocon enablers of the military-insustrial
complex certainly act to server their interests, which is probably a good place to look for an
answer.
The great debate that I've been having for years with friends on and offline is whether
American foreign policy planners and officials are idealists or are actively assisting certain
types of Sunni Islamist forces to fill the vacuum when secularist regimes are toppled (or being
attacked, as in Syria's case).
We've seen the exodus of Christian communities and the rise of Sunni extremists in every one
of these countries either invaded by the USA or that have been part of this "Arab Spring".
"One mystery remains. Why on earth are the neo-cons agitating for war with Assad? Surely
Israel is better off with the relatively ineffective Assad regime than they would be under what
would follow."
Israel was actually one of the last to get onside with regime change in Syria, long after
the French, British and the GCC got the ball rolling. Many in Israel prefer Assad as "the devil
you know", but the plus side of a removal of the Ba'athist regime is that the route from Iran
to Hezbollah is cut off, leaving them isolated and surrounded by the IDF and Sunni Islamist
forces in Syria, with Sunni proxies in Lebanon itself.
I guess that the Israelis did the calculus and figured that a degrading of Hezbollah supply
routes is a livable option.
No Sunni forces have been able to challenge the IDF in decades, but Hezbollah gave them a
bloody nose and their entire foreign policy environment is clouded by Iran, Hezbollah's
sponsor.
By what authority does the Washington regime use our nation's money and prestige (what
remains of it) to meddle in the internal affairs of Syria or any other country? This government
is tottering on the edge of bankruptcy and does not even have control its own borders; and it's
trying to bring "stability" to a country halfway around the world. Incredible
imbecility!
Really the most comprehensive short analysis I've seen anywhere. Hard to believe though that
it's passing out of Turkey's hands; it seems to me in terms of proximity, interest, toughness,
Ankara should be the strongest actor.
Syria's war is one of the most irrational and thus criminal Westren wars. Assad is way
closer to an ideal/practical government than any future State would be. Assad government
includes all factions of society, allows market, controls radicals and is less corrupt and more
representative than US allies.
"Well-armed bands of the most radical of the insurgents taking the lead in the conflict
without any political direction or control cannot be what anyone envisioned two years ago, but
that is what has emerged, with the United States again looking on like a helpless giant."
Well this is partly the result of Obama's policy of passivity and timidity in Syria. The CIA
director, the Secretary of State, the Defense Secretary, and the Chairman of the Joint Chiefs
all pushed and supported a plan to train and arm moderate, pro-Western rebel groups in Syria.
But Obama unfortunately was too risk-averse and too worried about domestic politics to approve
the plan. Obama's policy carries at least as many risks as the alternative does. At least the
Obama administration has now decided to send non-lethal aid to the armed rebel groups. Maybe
weapons will come next. But with Kerry and Hagel at State and Defense, I'm not holding my
breath.
The US is less dependent on middle Eastern oil than in the past, and this dependence will
reduce further thanks to fracking and shale oil. As long as the navy has a secure base in Doha
from which to control the Straits of Hormuz, the strategic interests of the country are
secure.
One, it isn't "terrorism" when it's done by "our" sons of bitches. "Ours" is an increasingly
loose definition.
Chaos serves the purpose of weakening rivals for the politically focused, and driving up war
equipment profits for the financially focused. There are no humanitarian considerations among
either of those groups who make policy in our name.
Scott McConnell wrote "Ankara should be the strongest actor"
Yes, Phil thinks Turkey is "playing damage control", but its military strength,
self-interest and 500 mile shared border shuts down nearly all arguments as to who should (and
will) take the lead in handling this among the various candidate state actors.
God knows we could use a break from contemplating disasters resulting from our own
blundering meddling.
Kurds are an ethnic group, rather than a religious one (though the majority happen to be
Sunni). I don't see how they are clear losers if the Saudis are more influential. Maybe the
variety of Sunni Islam they prefer isn't Wahabbist, and in that case you should have made that
explicit.
I appreciate Mr. Giraldi's invaluable contribution to shedding some true light on the war
against Syria, especially in early stages of the conflict where his reporting on the influx of
terrorists and weapons through Turkey and on their training there stood out from the deluge of
vicious hypocritical, lying and outrageous war propaganda in the Western and GCC media.
But it is beyond me why Mr.Giraldi is leaving out form his analysis two crucial issues:
1) the pivotal change in regional energy security puzzle related to the world largest South
PARS gas field shared by Iran and Qatar discovered in 2007
2) the collapse of the oil-backed Petro-dollar also sustain mainly by the the US quest for
full spectrum global dominance since the end of the Soviet Union.
You cannot understand the whole picture without these two factors. To learn more read
Thierry Meyssan et. al. at VoltairNet and Christof Lehmann et. al at NSNBC.me. Also Veterans
Today is very informative with broad spectrum of perspectives on global and domestic
issues.
"... The Threatening Storm: The Case for Invading Iraq ..."
"... Washington Post ..."
"... Rarely do pundits apologize for the horrendous Iraqi losses inflicted by the war: more than a million deaths and millions more wounded with varying lifelong disabilities, including thousands of tortured prisoners, with an estimated 16,000 of them still unaccounted for . Twenty-eight percent of Iraqi children suffer from post-traumatic stress disorder, and 2.8 million people are still ..."
The only message our children will take away from the war in Iraq is that if you repeat a
boldfaced lie enough, it will someday become accepted truth. And as a corollary, saving face is
much more important than admitting a mistake, no matter how destructive the outcome.
Unfortunately for our children, manipulating the truth became the norm for the Bush
administration, which invaded Iraq on what we know now (and the administration almost certainly
knew then) were utterly false pretenses. Thanks to these lies, Americans, including our
soldiers and civilians serving in Iraq, were convinced Saddam Hussein was linked to the 9/11
attacks and had weapons of mass destruction, two of the ever-evolving reasons for getting into
the war. Many still believe this. Engaging in mass deception in order to justify official
policy both degrades and endangers democracy. But by far, it is ordinary Iraqis who have
suffered the most.
We know now beyond any doubt that Iraq was not involved in 9/11 and had no weapons of mass
destruction. But as Paul Pillar, a former senior CIA analyst with the Iraqi portfolio, wrote on
March 14, "Intelligence did not drive the decision to invade Iraq – not by a long shot,
despite the aggressive use by the Bush administration of cherry-picked fragments of
intelligence reporting in its public sales campaign for the war." Indeed, this was a war in
search of a justification from the very beginning, and any little lie would have worked.
It is very fortuitous for all those politicians, policy makers, and bureaucrats with Iraqi
blood on their hands -- Republicans and Democrats both -- that the only courtroom they've been
shuffled into is the court of public opinion, where most received light sentences.
Indeed, the Iraq war boosters are still a fixture on our television screens. Dan Senor , who served
as a spokesman for the U.S occupation authorities and willfully misrepresented events on the
ground during that time, is a regular commentator on MSNBC's "Morning Joe," a veritable
roundtable of Washington establishment punditry. Kenneth Pollack, a longtime Brookings fellow
and CIA analyst who wrote the 2002 book The Threatening Storm: The Case for Invading
Iraq (which is barely mentioned today on the Brookings website), is a familiar face on the
commentary circuit and among think tank salons. Ex-Generals David Petraeus and Stanley
McChrystal, who each left their most recent posts in disgrace, are raking in thousands of
dollars for speeches, lectures, and consulting work.
Sure, there are pundits and reporters who admit they wrongly supported the war, but their
regrets are usually reserved for their blind faith in the war planners and their own lack of
inquisitiveness. For example, Washington Post columnist David Ignatius confessed in a
March 21 column that Iraq was one of "the biggest strategic errors in Modern American history."
But the thrust of his own mea culpa was that he did not write enough "on the
overriding question of whether the war made sense," which would have allowed him to see that
the U.S was not strong enough nor flexible enough to succeed.
Rarely do pundits apologize for the horrendous Iraqi losses inflicted by the war: more
than a million deaths and millions more wounded with varying lifelong disabilities, including
thousands of tortured prisoners, with an estimated 16,000 of
them still unaccounted for . Twenty-eight percent of Iraqi children suffer from
post-traumatic stress disorder, and 2.8 million people are still internally
displaced or living as refugees outside the country. Add to that the
complete upheaval of the Iraqi economy, as well as its transportation, education, and medical
institutions. Don't forget the countless people suffering from trauma and depression, sectarian
strife, terrifying birth defects from toxic pollution, and a brain drain that has left the
country illiterate.
Not since the American Civil War has the U.S citizenry had to endure such horrors. Yet
discussion of these repercussions is noticeably absent as we still struggle to understand the
scope of the Iraq war and what all of its lies have wrought.
Let us start with a sincere apology to the Iraqi people for the crimes the U.S government
has committed. A long-range plan for restitution is a second step. Empires decline due to moral
decay from within. Ten years after the invasion of Iraq, our nation is looking at the moral
abyss. If lies have delivered us to this place, then only the truth will begin our journey
back.
"... Economic growth is more about financialising goods and services that were previously free or are/were social goods. There is no real growth; just taxing the living. ..."
"... So, in my view, the only restraint on destroying Iran is capability, is the cost and the risk of retaliation (not just from Iran) - not the destruction of Iran's capital - better for Iran's capital to be destroyed than for Iran to be independent or a competitor. ..."
My comment @342 should have read: "The petrodollar is the way in which the US gets the
rest of the world to fund its wars,"
---------
Your comment about capitalist accumulation doesn't hold (as a motivator for the US) when
we have a capitalist monopolist situation. Rate of profit is not about growth (of real
goods); it is about reducing competition and scarcity. When you are the monopolist you can
charge what you like but profit becomes meaningless - the monopolist power comes from the
control of resources - the monopolistic capitalist becomes a ruler/monarch. You no longer
need ever-increasing customers so you can dispense with them if you so chose (by reducing the
population). One bottle of water is far more valuable and a lot less trouble to produce that
100 millions bottles of water. There is no point in AI to provide for the needs of "the
many"; AI becomes a means to dispense with "the many" altogether.
Economic growth is more about financialising goods and services that were previously free
or are/were social goods. There is no real growth; just taxing the living.
So, in my view, the only restraint on destroying Iran is capability, is the cost and the risk of
retaliation (not just from Iran) - not the destruction of Iran's capital - better for Iran's
capital to be destroyed than for Iran to be independent or a competitor.
The future of the U.S.'s involvement in the Middle East is in Iraq. The exchange of
hostilities between the U.S. and Iran occurred wholly on Iraqi soil and it has become the site
on which that war will continue.
Israel continues to up the ante on Iran, following President Trump's lead by bombing Shia
militias stationed near the Al Bukumai border crossing between Syria and Iraq.
The U.S. and Israel are determined this border crossing remains closed and have demonstrated
just how far they are willing to go to prevent the free flow of goods and people across this
border.
The regional allies of Iran are to be kept weak, divided and constantly under
harassment.
Iraq is the battleground because the U.S. lost in Syria. Despite the presence of U.S. troops
squatting on Syrian oil fields in Deir Ezzor province or the troops sitting in the desert
protecting the Syrian border with Jordan, the Russians, Hezbollah and the Iranian Quds forces
continue to reclaim territory previously lost to the Syrian government.
Now with Turkey redeploying its pet Salafist head-choppers from Idlib to Libya to fight
General Haftar's forces there to legitimize its claim to eastern Mediterannean gas deposits,
the restoration of Syria's territorial integrity west of the Euphrates River is nearly
complete.
The defenders of Syria can soon transition into the rebuilders thereof, if allowed. And they
didn't do this alone, they had a silent partner in China the entire time.
And, if I look at this situation honestly, it was China stepping out from behind the shadows
into the light that is your inciting incident for this chapter in Iraq's story.
China moving in to sign a $10.1 billion deal with the Iraqi government to begin the
reconstruction of its ruined oil and gas industry in exchange for oil is of vital
importance.
It doubles China's investment in Iraq while denying the U.S. that money and influence.
This happened after a massive $53 billion deal between Exxon-Mobil and Petrochina was put on
hold after the incident involving Iran shooting down a U.S. Global Hawk drone in June.
With the U.S balking over the Exxon/Petrochina big deal, Iraqi Prime Minster Adel Abdul
Mahdi signed the new one with China in October. Mahdi brought up the circumstances surrounding
that in Iraqi parliaments during the session in which it passed the resolution recommending
removal of all foreign forces from Iraq.
Did Trump openly threaten Mahdi over this deal as I covered in my
podcast on this? Did the U.S. gin up protests in Baghdad, amplifying unrest over growing
Iranian influence in the country?
And, if not, were these threats simply implied or carried by a minion (Pompeo, Esper, a
diplomat)? Because the U.S.'s history of regime change operations is well documented. Well
understood color revolution
tactics used successfully in
places like Ukraine , where snipers were deployed to shoot protesters and police alike to
foment violence between them at the opportune time were on display in Baghdad.
Mahdi openly accused Trump of threatening him, but that sounds more like Mahdi using the
current impeachment script to invoke the sinister side of Trump and sell his case.
It's not that I don't think Trump capable of that kind of threat, I just don't think he's
stupid enough to voice it on an open call. Donald Trump is capable of many impulsive things,
openly threatening to remove an elected Prime Minister on a recorded line is not one of
them.
Mahdi has been under the U.S.'s fire since he came to power in late 2018. He was the man who
refused Trump during
Trump's impromptu Christmas visit to Iraq in 2018 , refusing to be summoned to a
clandestine meeting at the U.S. embassy rather than Trump visit him as a head of state, an
equal.
He was the man who declared the Iraqi air space closed after Israeli air attacks on Popular
Mobilization Force (PMF) positions in September.
And he's the person, at the same time, being asked by Trump to act as a mediator between
Saudi Arabia and Iran in peace talks for Yemen.
So, the more we look at this situation the more it is clear that Abdul Madhi, the first
Iraqi prime minister since the 2003 U.S. invasion push for more Iraqi sovereignty, is emerging
as the pivotal figure in what led up to the attack on General Soleimani and what comes after
Iran's subsequent retaliation.
It's clear that Trump doesn't want to fight a war with Iran in Iran. He wants them to
acquiesce to his unreasonable demands and begin negotiating a new nuclear deal which
definitively stops the possibility of Iran developing a nuclear weapon, and as P
atrick Henningsen at 21st Century Wire thinks ,
Trump now wants a new deal which features a prohibition on Iran's medium range missiles ,
and after events this week, it's obvious why. Wednesday's missile strike by Iran demonstrates
that the US can no longer operate in the region so long as Iran has the ability to extend its
own deterrence envelope westwards to Syria, Israel, and southwards to the Arabian Peninsula,
and that includes all US military installations located within that radius.
Iraq doesn't want to be that battlefield. And Iran sent the message with those two missile
strikes that the U.S. presence in Iraq is unsustainable and that any thought of retreating to
the autonomous Kurdish region around the air base at Erbil is also a non-starter.
The big question, after this attack, is whether U.S. air defenses around the Ain al Assad
airbase west of Ramadi were active or not. If they were then Trump's standing down after the
air strikes signals what Patrick suggests, a new Middle East in the making.
If they were not turned on then the next question is why? To allow Iran to save face after
Trump screwed up murdering Soleimani?
I'm not capable of believing such Q-tard drivel at this point. It's far more likely that the
spectre of Russian electronics warfare and radar evasion is lurking in the subtext of this
story and the U.S. truly now finds itself after a second example of Iranian missile technology
in a nascent 360 degree war in the region.
It means that Iran's threats against the cities of Haifa and Dubai were real.
In short, it means the future of the U.S. presence in Iraq now measures in months not
years.
Because both China and Russia stand to gain ground with a newly-united Shi'ite Iraqi
population. Mahdi is now courting Russia to sell him S-300 missile defense systems to allow him
to enforce his demands about Iraqi airspace.
Moqtada al-Sadr is mobilizing his Madhi Army to oust the U.S. from Iraq. Iraq is key to the
U.S. presence in the region. Without Iraq the U.S. position in Syria is unsustainable.
If the U.S. tries to retreat to Kurdish territory and push again for Masoud Barzani and his
Peshmerga forces to declare independence Turkish President Recep Tayyip Erdogan will go
ballistic.
And you can expect him to make good on his threat to close the Incerlik airbase, another
critical logistical juncture for U.S. force projection in the region.
But it all starts with Mahdi's and Iraq's moves in the coming weeks. But, with Trump rightly
backing down from escalating things further and not following through on his outlandish threats
against Iran, it may be we're nearing the end of this intractable standoff.
Back in June I told you
that Iran had the ability to fight asymmetrically against the U.S., not through direct
military confrontation but through the after-effects of a brief, yet violent period of war in
which all U.S., Israeli and Arab assets in the Middle East come under fire from all
directions.
It sent this same message then that by attacking oil tankers it could make the transport of
oil untenable and not insurable. We got a taste of it back then and Trump, then, backed
down.
And the resultant upheaval in the financial markets creating an abyss of losses, cross-asset
defaults, bank failures and government collapses.
Trump has no real option now but to negotiate while Iraq puts domestic pressure on him to
leave and Russia/China come in to provide critical economic and military support to assist
Mahdi rally his country back towards some semblance of sovereignty
How about "what is the goal?" There is none of course. The assholes in the Washington/MIC
just need war to keep them relevant. What if the US were to closed down all those wars and
foreign bases? THEN the taxpayer could demand some accounting for the trillions that are
wasted on complete CRAP. There are too many old leftovers from the cold war who seem to think
there is benefit to fighting wars in shithole places just because those wars are the only
ones going on right now. The stupidity of the ****** in the US military/MIC/Washington is
beyond belief. JUST LEAVE you ******* idiots.
Sometimes, in treading thru the opaque, sandstorm o ******** swept wastes of the '
desert of the really real '...
one must rely upon a marking... some kind of guidepost, however tenuous, to show you to be
still... on the trail, not lost in the vast haunted reaches of post-reality. And you know,
Tommy is that sort of guide; the sort of guy who you take to the fairgrounds, set him up with
the 'THROW THE BALL THRU THE HOOP... GUARANTEED PRIZE TO SCOOP' kiosk...
and he misses every time. Just by watching Tom run through his paces here... zeroing in on
the exact WRONG interpretation of events ... every dawg gone time... one resets their compass
to tru course and relaxes into the flow agin! Thanks Tom! Let's break down ... the Schlitzy
shopping list of sloppy errors:
Despite the presence of U.S. troops squatting on Syrian oil fields in Deir Ezzor
province or the troops sitting in the desert protecting the Syrian border with Jordan, the
Russians, Hezbollah and the Iranian Quds forces continue to reclaim territory previously
lost to the Syrian government. / umm Tom... the Russkies just ONCE AGIN... at Ankaras
request .. imposed a stop on the IDLIB CAMPAIGN. Which by the way... is being conducted
chiefly by the SAA. Or was that's to say. To the east... the Russkies have likewise become
the guarantors of .... STATIS... that is a term implying no changes on the map. Remember
that word Tom... "map" ... I recommend you to find one... and learn how to use it!
Now with Turkey redeploying its pet Salafist head-choppers from Idlib to Libya to fight
General Haftar's forces there to legitimize its claim to eastern Mediterannean gas
deposits, the restoration of Syria's territorial integrity west of the Euphrates River is
nearly complete. See above... with gravy Tom. Two hundred jihadists moving to Libya has not
changed the status quo... except in dreamland.
Israel continues to up the ante on Iran, f ollowing President Trump's lead by bombing
Shia militias stationed near the Al Bukumai border crossing between Syria and Iraq.
Urusalem.. and its pathetically obedient dogsbody USSA ... are busy setting up RIMFISTAN
Tom.. you really need to start expanding your reading list; On both sides of that border
you mention .. they will be running - and guarding - pipeline running to the mothership.
Shia miitias and that project just don't mix. Nobody gives a frying fluck bout your
imaginary 'land bridge to the Med'... except you and the gomers. And you and they aren't
ANYWHERES near to here.
Abdul Madhi, the first Iraqi prime minister since the 2003 U.S. invasion push for
more Iraqi sovereignty, is emerging as the pivotal figure in what led up to the attack on
General Soleimani and what comes after Iran's subsequent retaliation.
Ok... this is getting completely embarrassing. The man is a 'caretaker' Tom...
that's similar to a 'janitor' - he's on the way out. If you really think thats' being
pivotal... I'm gonna suggest that you've 'pivoted' on one of your goats too many
times.
Look, Tom... I did sincerely undertake to hold your arm, and guide you through this to a
happier place. But you... are underwater my man. And that's quite an accomplishment, since we
be traveling through the deserts of the really real. You've enumerated a list of things which
has helped me to understand just how completely distorted is the picture of the situation
here in mudded east.. is... in the minds of the myriad victims of your alt-media madness. And
I thank you for that. But its time we part company.
These whirring klaidescope glasses I put on, in order to help me see how you see things,
have given me a bit of a headache. Time to return to seeing the world... as it really
works!
The whole *target and destroy* Iran (and Iraq) clusterfuck has always been about creating
new profit scenarios, profit theaters, for the MIC.
If the US govt was suddenly forced to stop making and selling **** designed to kill
people... if the govt were forced to stopping selling **** to other people so
they can kill people... if the govt were forced to stop stockpiling **** designed to
kill people just so other people would stop building and stockpiling **** designed to kill
people... first the US then the world would collapse... everyone would finally see... the US
is a nation of people that allows itself to be propped up by the worst sort of people... an
infinitesimally small group of gangsters who legally make insane amounts of money... by
creating in perpetuity... forever new scenarios that allow them to kill other people.
Jesus ******* Christ ZeroHedge software ******* sucks.
Why has Trump no real option? What do you believe are the limits of Trump's options that
assure he must negotiate? Perhaps all out war is not yet possible politically in the US, but
public sentiment has been manipulated before. Why not now?
One must not yet reject the idea that the road to Moscow and Beijing does not run through
Iran. Throwing the US out of the Middle East would be a grievous failure for the deep state
which has demonstrated itself to be absolutely ruthless. It is hard to believe the US will
leave without a much more serious war forcing the issue.
So far Trump has appeared artless and that may continue but that artlessness may well
bring a day when Trump will not back down.
The motivation behind Trump pulling out of the Joint Comprehensive Plan of Action wasn't
because, after careful analytical study of the plan, he decided it was a bad deal. It was
because Israel demanded it as it didn't fit into their best interests and, as with the
refreezing of relationships with Cuba, it was a easier way to undo Obama policy rather than
tackling Obamacare. Hardly sound judgement.
The war will continue in Iraq as the Shia majority mobilize against an occupying force
that has been asked to leave, but refuse. What will quickly become apparent is that this war
is about to become far more multifaceted with Iraqi and Iranian proxies targeting American
interests across numerous fronts.
Trump is the head of a business empire; Downsizing is not a strategy that he's ever
employed; His business history is a case study in go big or go bust.
trump's zionist overlords have demanded he destroy iran.
as a simple lackey, he agreed, but he does need political cover to do so.
thus the equating of any attack or threat of attack by any group of any political
persuasion as originating from iran.
any resistance by the shia in iraq will be considered as being directed from iran, thus an
attack on iran is warranted.
any resistance by the currect governement of iraq will be considered as being directed
from iran, thus an attack on iran is warranted.
any resistance by the sunni in iraq will be considered subversion by iran, or a false flag
by iran, thus an attack on iran is warranted.
trump's refusal to follow the SOFA agreement, and heed the call of the democratic
government we claim to have gone in to install, is specifically designed to lead to more
violence, which in turn can be blamed on iran's "malign" influence, which gives the entity
lackeys cover to spread more democracy.
I'm more positive that Iraq can resolve its issues without starting a Global War.
The information
shared by the Iraqi Prime Minister goes part way to awakening the population as to what
is happening and why.
Once more information starts to leak out (and it will from those individuals who want to
avoid extinction) the broad mass of the global population can take action to protect
themselves from the psychopaths.
China moving in to sign a $10.1 billion deal with the Iraqi government to begin the
reconstruction of its ruined oil and gas industry in exchange for oil is of vital
importance.
Come on Tom, you should know better than that: the U.S will destroy any agreements between
China and the people of Iraq.
The oil will continue to be stolen and sent to Occupied Palestine to administer and the
people of Iraq will be in constant revolt, protest mode and subjugation- but they will never
know they are being manipulated by the thieving zionists in D.C and Tel aviv.
Agreed. It will take nothing short of a miracle to stop this. Time isnt on their side
though so they better get on it. They will do something big to get it going.
This isn't "humanity." Few people are psychopathic killers. It is being run by a small
cliche of Satanists who are well on their way to enslaving humanity in a dystopia even George
Orwell could not imagine. They control most of the levers of power and influence and have
done so for centuries.
Why of course the people don't want war. Why should some poor slob on a farm want to
risk his life in a war when the best he can get out of it is to come back to his farm in one
piece? Naturally, the common people don't want war; neither in Russia, nor in England, nor
for that matter in Germany. That is understood. But, after all, it is the leaders of the
country who determine the policy and it is always a simple matter to drag the people along,
whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist
dictatorship. Voice or no voice, the people can always be brought to the bidding of the
leaders. All you have to do is tell them they are being attacked, and denounce the
peacemakers for lack of patriotism and exposing the country to danger. It works the same in
any country.
- Reichsmarschall Hermann Göring's testimony before the Nuremberg tribunal on crimes
against humanity
When
the United States, the United Kingdom, and the "coalition of the willing" attacked Iraq in
March 2003, millions protested around the world. But the war of "shock and awe" was just the
beginning. The subsequent occupation of Iraq by the U.S.-led Coalition Provisional Authority
bankrupted the country and left its infrastructure in shambles.
It's not just a question of security. Although the breathtaking violence that attended
Iraq's descent into sectarian nightmare has been well documented in many retrospectives on the
10-year-old war, what's often overlooked is that by far more mundane standards, the United
States did a spectacularly poor job of governing Iraq.
It's not that Iraq was flourishing before the occupation. From 1990 to 2003, the UN Security
Council imposed economic sanctions on Iraq that were the harshest in the history of global
governance. But along with the sanctions, at least, came an elaborate system of oversight and
accountability that drew in the Security Council, nine UN agencies, and General Secretary
himself.
The system was certainly imperfect, and the effects of the sanctions on the Iraqi people
were devastating. But when the United States arrived, all semblance of international oversight
vanished.
Under enormous pressure from Washington, in May 2003 the Security Council formally
recognized the occupation of Iraq by the Coalition Provisional Authority (CPA) in Resolution
1483. Among other things, this resolution gave the CPA complete control over all of Iraq's
assets.
At the same time, the Council removed all the forms of monitoring and accountability that
had been in place: there would be no reports on the humanitarian situation by UN agencies, and
there would be no committee of the Security Council charged with monitoring the occupation.
There would be a limited audit of funds, after they were spent, but no one from the UN would
directly oversee oil sales. And no humanitarian agencies would ensure that Iraqi funds were
being spent in ways that benefitted the country.
Humanitarian concerns
In January 2003, the UN prepared a working plan anticipating the impact of
a possible war. Even with only "medium impact" from the invasion, the UN expected that
humanitarian conditions would be severely compromised.
Because the Iraqi population was so heavily reliant on the government's food distribution
system (a consequence of international sanctions), the UN anticipated that overthrowing the
Iraqi regime would also undermine food security. And because the population already suffered
from extensive malnutrition, this disruption would be quite lethal, putting 30 percent of Iraqi
children under five at risk of death. The UN noted that if water and sewage treatment plants
were damaged in the war, or if the electrical system could not operate, Iraqis would lose
access to potable water, which would likely precipitate epidemics of water-borne diseases. And
if electricity, transportation, and medical equipment were compromised, then the medical system
would be unable to respond effectively to these epidemics.
During the occupation, much of this came to pass. A
June 2003 UN report noted that the postwar water and sewage systems for Baghdad and other
central and southern governorates were "in crisis." In Baghdad alone, the report estimated that
40 percent of the city's water distribution network was damaged, leading to a loss of up to
half of the city's potable water through leaks and breaks in the system. And direr still, the
UN reported that neither of Baghdad's two sewage treatment plants was functional, leading to a
massive discharge of raw sewage into the Tigris River.
The food situation was similar. The UN found that farming had collapsed due to "widespread
insecurity and looting, the complete collapse of ministries and state agencies -- the sole
providers of essential farming inputs and services -- together with significant damages to
power supplies."
Likewise, the health system deteriorated dramatically. Less than 50 percent of the Iraqi
population had access to medical care, due in part to the dangers associated with travel.
Additionally, the report estimated that 75 percent of all health-care institutions were
affected by the looting and chaos that occurred in the aftermath of the war. As of June 2003,
the health system as a whole was functioning at 30-50 percent of its pre-war capacity. The
impact was immediate. By early summer, acute malnutrition rates had doubled, dysentery was
widespread, and little medical care was available. In August, when a power outage blacked out
New York, the joke going around Baghdad was "I hope they're not waiting for the Americans to
fix it."
The CPA gave responsibility for humanitarian relief to the U.S. military -- not to agencies
with experience in humanitarian crises -- and marginalized the UN's humanitarian relief
agencies. Over the 14-month course of the CPA's administration, the humanitarian crisis
worsened. Preventable diseases like dysentery and typhoid ran rampant. Malnutrition worsened,
claiming the lives of ever more infants, mothers, and young children. All told, there was an
estimated 100,000
"excess deaths" during the invasion and occupation -- well above and beyond the mortality rate
under Saddam Hussein, even under international sanctions.
The CPA's priorities were clear. After the invasion, during the widespread looting and
robbery, occupation authorities did little to protect water and sewage treatment plants, or
even pediatric hospitals. By contrast, they provided immediate protection for the oil ministry
offices, hired a U.S. company to put out oil field fires, and immediately provided protection
for the oil fields as well.
Corruption
In addition, the U.S.-led CPA was deeply corrupt. Much of Iraq's revenues, from oil sales or
other sources, went to contracts with U.S. companies. Of contracts for more than $5 million, 74
percent went to U.S. companies, with most of the remainder going to U.S. allies. Only 2 percent
went to Iraqi companies.
Over the course of the occupation, huge amounts of money simply disappeared. Kellogg, Brown,
and Root (KBR), a subsidiary of Halliburton, received over 60 percent of all contracts paid for
with Iraqi funds, although it was repeatedly criticized by auditors for issues of honesty and
competence. In the last six weeks of the occupation, the United States shipped $5 billion of
Iraqi funds, in cash, into the country, to be spent before the Iraqi-led government took over.
Auditor reports indicated that Iraqi funds were systematically looted by the CPA officials:
"One contractor received a $2 million payment in a duffel bag stuffed with shrink-wrapped
bundles of currency," read one
report . "One official was given $6.75 million in cash, and was ordered to spend it one
week before the interim Iraqi government took control of Iraqi funds."
U.S. officials were apparently unconcerned about the gross abuses of the funds with which
they were entrusted. In one instance, the CPA transferred some $8.8 billion of Iraqi money
without any documentation as to how the funds were spent. When questioned about how the money
was spent, Admiral David Oliver, the principal deputy for financial matters in the CPA,
replied
that he had "no idea" and didn't think it was particularly important. "Billions of dollars of
their money?" he asked his interlocutor. "What difference does it make?"
In the end, none of this should be terribly surprising -- the corruption, the indifference
to human needs, the singular concern with controlling Iraq's oil wealth. It was obvious from
the moment that the Security Council, under enormous pressure from the United State, passed
Resolution 1483.
By systematically removing nearly every form of oversight from their self-imposed
administration of Iraq, the United States and its allies laid the foundation for the looting of
an entire nation's wealth, abetted by their own wanton indifference to the needs and rights of
Iraqis. Ten years after the start of the war, the CPA's disastrous governance of Iraq stands
alongside the country's horrifying descent into violence as a dark legacy in its own right.
Having spent the last several years of my life engineering investment strategies to profit
from the inevitability of Peak Oil, I've become obsessed with understanding the ramifications
of radically different energy supply dynamics on the global economy. There are many facets to
this, some obvious and some not so obvious. So when ASPO-USA Executive Director Jan Mueller
approached me at the end of this year's conference in Austin and asked for an article
discussing the less obvious economic impacts of Peak Oil, I knew instantly that the
topic should be the threat Peak Oil poses to the International Monetary System (IMS). This
connection is critically important, but far from obvious.
I assure you that this story is very much about Peak Oil, but please bear with me, as I'll
need to start by reviewing what the IMS is and how it came about in the first place. Then I'll
explain the role energy has already played in shaping the present-day IMS, and finally, I'll
tie this back to Peak Oil by explaining why rising energy prices could very well be the
catalyst that will cause the present system to fail.
What is the International Monetary System?
At the end of World War II, many countries were literally lying in ruin, and needed to be
rebuilt. It was clear that international trade would be very important going forward, but how
would it work? World leaders recognized the need to architect a new monetary system that would
facilitate international trade and allow the world to rebuild itself following the most
devastating war in world history.
A global currency was out of the question because the many countries of the world valued
their sovereignty, and wanted to continue to issue their own domestic currencies. In order for
international trade to flourish, a system was needed to allow trade between dozens of different
nations, each with its own currency.
A convention was organized by the United Nations for the purpose of bringing world leaders
together to architect this new International Monetary System . The meetings were held in
July, 1944 at the Mt. Washington Hotel in Bretton Woods, New Hampshire, and were attended by
730 delegates representing all 44 allied nations. The official name for the event was the
United Nations Monetary and Financial Conference , but it would forever be remembered as
The Bretton Woods Conference .
To this day, the system designed in those meetings remains the basis for all international
trade, and is known as the Bretton Woods System. The system has evolved quite a bit
since its inception, but its core principles remain the basis for all international trade. I'm
going to focus this article on the parts of the system which I believe are now at risk of
radical change, with Peak Oil the most likely catalyst to bring about that change. Readers
seeking a deeper understanding of the system itself should refer to the Further Reading
section at the end of this article.
Why is an International Monetary System needed?
It simply wouldn't be practical for all countries to sell their export products to other
countries in their own currencies. If one had to pay for wine from France in French Francs
(there was no Euro currency in 1944), and then pay to import a BMW automobile in German Marks,
then pay for copper produced in Chile in Pesos, each country would face an overwhelming burden
just maintaining reserve deposits of all the various world currencies. The system of trade
would be very inefficient. For centuries, this problem has been solved by using a single
standard currency for all international trade.
Because a standard-currency system dictates that each nation's central bank will need to
maintain a reserve supply of the standard currency in order to facilitate international
trade, the standard currency is known as the reserve currency . At various times in
history, the Greek Drachma, the Roman Denari, and the Islamic Dinar have served as de-facto
reserve currencies. Prior to World War II, the English Pound Sterling was the
international reserve currency.
Throughout history, reserve currencies came into and out of use through happenstance. The
Bretton Woods conference marked the first time that a global reserve currency was established
by formal treaty between cooperating nations. The currency chosen was, of course, the U.S.
Dollar.
How does the IMS work?
The core of the system was the U.S. Dollar serving as the standard currency for
international trade. To assure other nations of the dollar's value, the U.S. Treasury would
guarantee that other nations could convert their U.S. dollars into gold bullion at a fixed
exchange rate of $35/oz. Other nations would then "peg" their currencies to the U.S. dollar at
a fixed rate of exchange. Each nation's central bank would be responsible for "defending" the
official exchange rate to the U.S. dollar by offering to buy or sell any amount of currency bid
or offered at that price. This meant each nation would need to keep a healthy reserve of
U.S. dollars on hand to service the needs of domestic businesses wishing to convert money
between the local currency and the U.S. dollar.
By design, the effect of the system was that each national currency was indirectly
redeemable for gold. This was true because each nation's central bank guaranteed convertibility
of its own currency to U.S. dollars at some fixed rate of exchange, and the U.S. Treasury
guaranteed convertibility of U.S. dollars to gold at a fixed rate of $35/oz. So long as all of
the governments involved kept their promises, each nation's domestic currency would be as good
as gold, because it was ultimately convertible to gold. United States President Richard Nixon
would break the most central promise of the entire system (U.S. dollar convertibility for gold)
on August 15, 1971. I'll come back to that event later in this article.
Triffin's Dilemma
In 1959, three years after M. King Hubbert's now-famous Peak Oil predictions, economist
Robert Triffin would make equally prescient predictions about the sustainability of the "new"
IMS, which was then only 15 years old. Sadly, Triffin's predictions, like Hubbert's, would be
ignored by the mainstream.
The whole reason for choosing the U.S. dollar as the global reserve currency was
that without a doubt, the U.S.was the world's strongest credit in 1944. To assure confidence in
the system, the strongest, most creditworthy currency on earth was chosen to serve as the
standard unit of account for global trade. To eliminate any question about the value of the
dollar, the system was designed so that any international holder of U.S. dollars could convert
those dollars to gold bullion at a pre-determined fixed rate of exchange. Dollars were
literally as good as gold.
Making the USD the world's reserve currency created an enormous international demand for
more dollars to meet each nation's need to hold a reserve of dollars. The USA was happy to
oblige by printing up more greenbacks. This provided sufficient dollars for other nations to
hold as foreign exchange reserves, while at the same time allowing the U.S.to spend beyond its
means without facing the same repercussions that would occur were it not the world's reserve
currency issuer.
Triffin observed that if you choose a currency because it's a strong credit, and then give
the issuing nation a financial incentive to borrow and print money recklessly without penalty,
eventually that currency won't be the strongest credit any more! This paradox came to be known
as Triffin's Dilemma.
Specifically, Triffin predicted that as issuer of the international reserve currency, the
USA would be prone to over consumption, over-indebtedness, and tend toward military
adventurism. Unfortunately, the U.S. Government would prove Triffin right on all three
counts.
Triffin correctly predicted that the USA would eventually be forced off the gold standard.
The international demand for U.S. dollars would allow the USA to create more dollars than it
otherwise could have without bringing on domestic inflation. When a country creates too much of
its own currency and that money stays in the country, supply-demand dynamics kick in and too
much money chasing too few goods and services results in higher prices. But when a country can
export its currency to other nations who have an artificial need to hold large amounts of that
currency in reserve, the issuing country can create far more money than it otherwise could
have, without causing a tidal wave of domestic inflation.
Nixon proves Triffin right
By 1970, the U.S.had drastically over-spent on the Vietnam War, and the number of dollars in
circulation far outnumbered the amount of gold actually backing them. Other nations recognized
that there wasn't enough gold in Fort Knox for the U.S.to back all the dollars in circulation,
and wisely began to exchange their excess USDs for gold. Before long, something akin to a run
on the bullion bank had begun, and it became clear that the USA could not honor the $35
conversion price indefinitely.
On August 15, 1971, President Nixon did exactly what Triffin predicted more than a decade
earlier: he declared force majeure , and defaulted unilaterally on theUSA's promise to
honor gold conversion at $35/oz, as prescribed by the Bretton Woods accord.
Of course Nixon was not about to admit that the reason this was happening was that the U.S.
Government had abused its status as reserve currency issuer and recklessly spent beyond its
means. Instead, he blamed "speculators", and announced that the United Stateswould suspend
temporarily the convertibility of the Dollar into gold. Forty-two years later, the word
temporarily has taken on new meaning.
Exorbitant Privilege
With the whole world conducting international trade in U.S. dollars, nations with large
export markets wound up with a big pile of U.S. dollars (payments for the goods they exported).
The most obvious course of action for the foreign companies who received all those dollars as
payment for their exported products would be to exchange the dollars on the international
market, converting them into their own domestic currencies. What may not be obvious at first
glance is that there would be catastrophic unintended consequences if they actually did
that.
If all the manufacturing companies in Japan or China converted their dollar revenues back
into local currency, the act of selling dollars and buying their domestic currencies would
cause their own currencies to appreciate markedly against the dollar. The same holds true for
oil exporting countries. If they converted all their dollar revenues back into their own
currencies, doing so would make their currencies more expensive against the dollar. That would
make their exports less attractive because, being priced in dollars, they would fetch lower and
lower prices after being converted back into the exporting nation's domestic currency.
The solution for the exporting nations was for their central banks to allow commercial
exporters to convert their dollars for newly issued domestic currency. The central banks of
exporting nations would wind up with a huge surplus of U.S. dollars they needed to invest
somewhere without converting them to another currency . The obvious place to invest them
was into U.S. Government Bonds.
This is the mechanism through which the reserve currency status of the dollar creates
artificial demand for U.S. dollar-denominated treasury debt. That artificial demand allows the
United States government to borrow money from foreigners in its own currency, something most
nations cannot do at all. What's more, this artificial demand for U.S. Treasury debt allows the
USA to borrow and spend far more borrowed foreign money than it would otherwise be able to,
were it not the world's reserve currency issuer. The reason is that, if not for the artificial
need to hold dollar reserves, foreign lenders would be much less inclined to purchase U.S.
debt, and would therefore demand much higher interest rates. Similarly, the more that
international trade has grown as a result of globalization, the more the United States'
exorbitant privilege has grown.
Have you ever wondered why China, Japan, and the oil exporting nations have such enormous
U.S. Treasury bond holdings, despite the fact that they hardly pay any interest these days? The
reason is definitely not because those nations think 1.6% interest on a 10-year
unsecured loan to a nation known to have a reckless spending habit is a good investment. It's
because they have little other choice. The more their own economies rely on exports priced in
dollars, the more they need to keep their own currencies attractively priced relative to the
U.S. dollar in order for their exports to remain competitive on the international market. To
achieve that outcome, they must hold large reserves denominated in U.S. dollars. That's why
China and Japan – major export economies – are the biggest foreign holders of U.S.
debt.
The net effect of this system is that the USA gets to borrow money from foreigners at
artificially low interest rates. Moreover, the USA can become over-indebted without the usual
consequences of increasing borrowing cost and declining creditworthiness. Other nations have
little choice but to maintain a large reserve supply of dollars as the international trade
currency. But the U.S. has no need to maintain large reserves of other nations' currencies,
because those currencies are not used in international trade.
By the mid-1960s, this phenomenon became known as exorbitant privilege : That
phrase refers to the ability of the USA to go into debt virtually for free, denominated in its
own currency, when no other nation enjoys such a privilege. The phrase exorbitant
privilege is often attributed to French President Charles de Gaulle, although it was
actually his finance minister, Valery Giscard d'Estaing, who coined the phrase.
What's important to understand here is that the whole reason the U.S. can get away with
running trillion-dollar budget deficits without the bond market revolting (a la Greece) is
because of exorbitant privilege. And that privilege is a direct consequence of the U.S. dollar
serving as the world's reserve currency. If international trade were not conducted in dollars,
exporting nations (both manufacturers and oil exporters) would no longer need to hold large
reserves of U.S. dollars.
Put another way, when the U.S. dollar loses its reserve currency status, the U.S.will lose
its exorbitant privilege of spending beyond its means on easy credit. The U.S. Treasury bond
market will most likely crash, and borrowing costs will skyrocket. Those increased borrowing
costs will further exacerbate the fiscal deficit. Can you say self-reinforcing vicious
cycle?
But wait Wasn't Gold convertibility the whole basis of the system?
If the whole point of the Bretton Woods system was to guarantee that all the currencies of
the world were "as good as gold" because they were convertible to U.S. dollars, which in turn
were promised to be convertible into gold And then President Nixon broke that promise in 1971
Wouldn't that suggest that the whole system should have blown up in reaction to Nixon slamming
the gold window shut in August of '71?
Actually, it almost did. But miraculously, the system has held together for the last 42
years, despite the fact that the most fundamental promise upon which the system was based no
longer holds true. To be sure, the Arabs were not happy about Nixon's action, and they
complained loudly at the time, rhetorically asking why they should continue to accept dollars
for their oil, if those dollars were not backed by anything, and might just become worthless
paper. After all, if U.S. dollars were no longer convertible into gold, what value did they
really have to foreigners? The slamming of the gold window by President Nixon in 1971 was not
the only cause of the Arab oil embargo, but it was certainly a major influence.
What's holding the IMS together?
Why didn't the rest of the world abandon the dollar as the global reserve currency in
reaction to the USA unilaterally reneging on gold convertibility in 1971? In my opinion, the
best answer is simply "Because there was no clear alternative". And to be sure, the unmatched
power of the U.S.military had a lot to do with eliminating what might otherwise have been
attractive alternatives for other nations.
U.S. diplomats made it clear to Arab leaders that they wanted the Arabs to continue pricing
their oil in dollars. Not just for U.S.customers, but for the entire world. Indeed, U.S.
leaders at the time understood all too well just how much benefit the USA derives from
exorbitant privilege , and they weren't about to give it up.
After a few years of tense negotiations including the infamous oil embargo, the so-called
petro-dollar business cycle was born. The Arabs would only accept dollars for their oil, and
they would re-invest most of their profits in U.S. Treasury debt. In exchange for this
concession, they would come under the protectorate of the U.S. military. Some might even go so
far as to say that the U.S. government used the infamous Mafia tactic of making the Arabs an
"offer they couldn't refuse" – forcing oil producing nations to make financial
concessions in exchange for "protection".
With the Arabs now strongly incented to continue pricing the world's most important
commodity in U.S. dollars, the Bretton Woods system lived on. No longer constrained by the
threat of a run on its bullion reserves, the U.S. kicked its already-entrenched practice of
borrowing and spending beyond its means into high gear. For the past 42 years, the entire world
has continued to conduct virtually all international trade in Dollars. This has forced
China,Japan, and the oil exporting nations to buy and hold an enormous amount of U.S. Treasury
debt. Exorbitant privilege is the key economic factor that allows the U.S.to run trillion
dollar fiscal deficits without crashing the Treasury bond market. So far.
There's a limit to how long this can last
But how long can this continue? The U.S.debt-to-GDP ratio now exceeds 100%, and the U.S.has
literally doubled its national debt in the last 6 years alone. It stands to reason that
eventually, other nations will lose faith in the dollar and start conducting business in some
other currency. In fact, that's already started to happen, and it's perhaps the most
important, under-reported economic news story in all of history.
Some examples China and Brazil are now conducting international trade in their own
currencies, as are Russia and China. Turkey and Iran are trading oil for gold, bypassing the
dollar as a reserve currency. In that case,U.S.sanctions are a big part of the reason Iran
can't sell its oil in dollars. But I wonder if President Obama considered the undermining
effect on exorbitant privilege when he imposed those sanctions. I fear that the present U.S.
government doesn't understand the importance of the dollar's reserve currency role nearly as
well as our leaders did in the 1970s.
The Biggest Risk We Face is a U.S. Bond and Currency Crisis
To be sure, Peak Oil in general represents a monumental risk to humanity because it's
literally impossible to feed all 7+ billion people on the planet without abundant energy to run
our farming equipment and distribution infrastructure. But the risks stemming directly from
declining energy production are not the most imposing, in my view.
Decline rates will be gradual at first, and it will be possible, even if unpopular, to
curtail unnecessary energy consumption and give priority to life-sustaining uses for the
available supply of liquid fuels. In my opinion, the greatest risks posed by Peak Oil are the
consequential risks. These include resource wars between nations, hoarding of scarce
resources, and so forth. Chief among these consequential risks is the possibility that the Peak
Oil energy crisis will be the catalyst to cause a global financial system meltdown. In my
opinion, the USA losing its reserve currency status is likely to be at the heart of such a
meltdown.
A good rule of thumb is that if something is unsustainable and cannot continue forever, it
will not continue forever. The present incarnation of the IMS, which affords the United States
the exorbitant privilege of borrowing a seemingly limitless amount of its own currency from
foreigners in order to finance its reckless habit of spending beyond its means with
trillion-dollar fiscal deficits, is a perfect example of an unsustainable system that cannot
continue forever.
But the bigger the ship, the longer it takes to change course. The IMS is the biggest
financial ship in the sea, and miraculously, it has remained afloat for 42 years after the most
fundamental justification for its existence (dollar-gold convertibility) was eliminated. How
long do we have before the inevitable happens, and what will be the catalyst(s) to bring about
fundamental change? Those are the key questions.
In my opinion, the greatest risk to global economic stability is a sovereign debt crisis
destroying the value of the world's reserve currency. In other words, a crash of the U.S.
Treasury Bond market. I believe that the loss of reserve currency status is the most likely
catalyst to bring about such a crisis.
The fact that the United States' borrowing and spending habits are unsustainable has been a
topic of public discussion for decades. Older readers will recall billionaire Ross Perot
exclaiming in his deep Texas accent, "A national debt of five trillion dollarsis
simply not sustainable!" during his 1992 Presidential campaign. Mr. Perot was right when he
said that 20 years ago, but the national debt has since more than tripled . The big
crisis has yet to occur. How is this possible? I believe the answer is that because the U.S.
dollar is the world's reserve currency and is perceived by institutional investors around the
globe to be the world's safest currency, it enjoys a certain degree of immunity derived from
widespread complacency.
But that immunity cannot last forever. The loss of reserve currency status will be the
forcing function that begins a self-reinforcing vicious cycle that brings about a U.S. bond and
currency crisis. While many analysts have opined that the USA cannot go on borrowing and
spending forever, relatively few have made the connection to loss of reserve currency status as
the forcing function to bring about a crisis.
We're already seeing small leaks in the ship's hull. China openly promoting the idea that
the yuan should be asserted as an alternative global reserve currency would have been
unthinkable a decade ago, but is happening today. Major international trade deals (such as
China and Brazil) not being denominated in U.S. dollars would have been unthinkable a
decade ago, but are happening today.
So we're already seeing signs that the dollar's exclusive claim on reserve currency status
will be challenged. Remember, when the dollar loses reserve currency status, the U.S.loses
exorbitant privilege. The deficit spending party will be over, and interest rates will explode
to the upside. But to predict that this will happen right now simply because the system is
unsustainable would be unwise. After all, by one important measure the system stopped making
sense 42 years ago, but has somehow persisted nonetheless. The key question becomes, what
will be the catalyst or proximal trigger that causes the USD to lose reserve currency status,
igniting a U.S. Treasury Bond crisis?
Elevated Risk
It's critical to understand that the USA is presently in a very precarious fiscal situation.
The national debt has more than doubled in the last 10 years, but so far, there don't seem to
have been any horrific consequences. Could it be that all this talk about the national debt
isn't such a big deal after all?
The critical point to understand is that while the national debt has more than doubled, the
U.S. Government's cost of borrowing hasn't increased at all. The reason is that interest
rates are less than half what they were 10 years ago. Half the interest on twice as much
principal equals the same monthly payment, so to speak. This is exactly the same trap that
subprime mortgage borrowers fell into. First, money is borrowed at an artificially low interest
rate. But eventually, the interest rate increases, and the cost of borrowing skyrockets. The
USA is already running an unprecedented and unsustainable $1 trillion+ annual budget deficit.
All it would take to double the already unsustainable deficit is for interest rates to rise to
their historical norms.
This all comes back to exorbitant privilege. The only reason interest rates are so low is
that the Federal Reserve is intentionally suppressing them to unprecedented low levels in an
attempt to combat deflation and resuscitate the economy. The only reason the Fed has the
ability to do this is that foreign lenders have an artificial need to hold dollar reserves
because the USD is the global reserve currency. They would never accept such low interest rates
otherwise. Loss of reserve currency status means loss of exorbitant privilege, and that in turn
means the Fed would lose control of interest rates. The Fed might respond by printing even more
dollars out of thin air to buy treasury bonds, but in absence of reserve currency status, doing
that would cause a collapse of the dollar's value against other currencies, making all the
imported goods we now depend on unaffordable.
In summary, the U.S. Government has repeated the exact same mistake that got all those
subprime mortgage borrowers into so much trouble. They are borrowing more money than they can
afford to pay back, depending solely on "teaser rates" that won't last. The U.S. Government's
average maturity of outstanding treasury debt is now barely more than 5 years. This is
analogous to cash-out refinancing a 30-year fixed mortgage, replacing it with a much higher
principal balance in a 3-year ARM that offers an initial teaser rate. At first, you get to
borrow way more money for the same monthly payment. But eventually the rate is adjusted, and
the borrower is unable to make the higher payments.
The Janszen Scenario
When it comes to evaluating the risk of a U.S. sovereign debt and currency crisis, most
mainstream economists dismiss the possibility out of hand, citing the brilliant wisdom that
"the authorities would never let such a thing happen". These are the same people who were
steadfastly convinced that housing prices would never crash in the United States because they
never had before, and that Peak Oil is a myth because the shale gas boom solves everything
(provided you don't actually do the math).
At the opposite extreme are the bloggers on the Internet whom I refer to as the
Hyperinflation Doom Squad. Their narrative generally goes something like this: Suddenly,
when you least expect it, foreigners will wise up and realize that the U.S. national debt
cannot be repaid in real terms, and then there will be a panic that results in a crash of the
U.S. Treasury market, hyperinflation of the U.S. dollar, and declaration of martial law. This
group almost always cites the hyperinflations of Zimbabwe and Argentina as "proof" of what's
going to happen in the USA any day now, but never so much as acknowledges the profound
differences in circumstances between the USA and those countries. These folks deserve a little
credit for having the right basic idea, but their analysis of what could actually happen simply
isn't credible when examined in detail.
Little-known economist Eric Janszen stands out as an exception. Janszen is the only credible
macroeconomic analyst I'm aware of who realistically acknowledges just how real and serious the
threat of a U.S.sovereign debt crisis truly is. But his analysis of that risk is based on
credible, level-headed thinking complemented by solid references to legitimate economic theory
such as Triffin's Dilemma. Unlike the Doom Squad, Janszen does not rely on specious comparisons
of the USA to small, systemically insignificant countries whose past financial crises have
little in common with the situation the USA faces. Instead, Janszen offers refreshingly sound,
well constructed arguments. Many of the concepts discussed in this article reflect Janszen's
work.
Janszen also happens to be the same guy who coined the phrase Peak Cheap Oil back in
2006, drawing an important distinction between the geological phenomenon of Hubbert's Peak and
the economic phenomenon which begins well before the actual peak, due to increasing marginal
cost of production resulting from ever-increasing extraction technology complexity.
"But there's no sign of inflation " (Hint: It's coming)
Janszen has put quite a bit of work into modeling what a U.S.bond and currency crisis would
look like. He initially called this KaPoom Theory , because history shows that brief
periods of marked deflation (the 'Ka') usually precede epic inflations (the 'Poom'). He
recently renamed this body of work The Janszen Scenario . Briefly summarized, Janszen's
view is that the U.S. has reached the point where excessive borrowing and fiscal
irresponsibility will eventually cause a catastrophic currency and bond crisis. He believes
that all that's needed at this point is a proximal trigger , or catalyst, to bring about
such an outcome. He thinks there are several potential triggers that could bring such a crisis
about, and chief among the possibilities is the next Peak Cheap Oil price spike.
How Peak Oil could cause a Bond and Currency Crisis
There are several ways that an oil price spike could trigger a U.S.bond and currency crisis.
Energy is an input cost to almost everything else in the economy, so higher oil prices are very
inflationary. The Fed would be hard pressed to continue denying the adverse consequences of
quantitative easing in a high inflation environment, and that alone could be the spark that
leads to higher treasury yields. The resulting higher cost of borrowing to finance the national
debt and fiscal deficit would be devastating to the United States.
A self-reinforcing vicious cycle could easily begin in reaction to oil price-induced
inflation alone. But we must also consider how an oil price shock could lead to loss of USD
reserve currency status, and therefore, loss of U.S.exorbitant privilege. In the 1970s, the USA
represented 80% of the global oil market. Today we represent 20%, and demand growth is
projected to come primarily from emerging economies. In other words, the rationale for oil
producers to keep pricing their product in dollars has seriously deteriorated since the '70s.
The more the global price of oil goes up, the more the U.S. will source oil from Canadian tar
sands and other non-OPEC sources. That means less and less incentive for the OPEC nations to
continue pricing their oil in dollars for all their non-U.S. customers.
Iran and Turkey have already begun transacting oil sales in gold rather than dollars. What
if the other oil exporting nations wake up one morning and conclude "Hey, why are we selling
our oil for dollars that might some day not be worth anything more than the paper they're
printed on?" Oil represents a huge percentage of international trade, so if oil stopped trading
in dollars, that alone would be reason for most nations to reduce the very large dollar
reserves they now hold. They would start selling their U.S. treasury bonds, and that could
start the vicious cycle of higher interest rates and exploding borrowing costs for the U.S.
Government. The precise details are hard to predict. The point is, the system is already
precarious and vulnerable, and an oil price shock could easily detonate the time bomb that's
already been ticking away for more than two decades.
What if U.S. Energy Independence claims were true?
There's another angle here. Peak Oil just might be the catalyst to cause the loss of U.S.
exorbitant privilege, even without an oil price shock.
Astute students of Peak Oil already know better than to believe the recently-popularized
political rhetoric claiming that the USA will soon achieve energy independence, thanks to the
shale oil and gas boom. To be sure, the Bakken, Eagle Ford, and various other U.S. oil and gas
plays are a big deal. The most optimistic forecasts I've seen show these plays collectively
ramping up to as much as 4.8 million barrels per day of production, which is equivalent to
about ½ of Saudi Arabia's current production.
But the infamous "wedge of hope" chart from the EIA projects production declines from
existing global resources of 60 million barrels per day by 2030. By the most optimistic
projections, all the exciting new plays in the U.S. will replace less than 5 million barrels
per day. Where the other 55 million barrels per day will come from remains a mystery! And of
course the politicians never bother to mention such minor details when they make predictions of
energy independence.
But let's just pretend for a moment that hyperbole is reality, and that the USA will achieve
energy-independence in just a few years' time. Now consider the consequences to the IMS. The
oil-exporting nations would lose the USA as their primary export customer, and would no longer
have an incentive to price their oil in dollars, or to maintain large dollar reserves. They
would start selling off their U.S. treasury bonds, and pricing their oil in something other
than dollars. Large oil importers like China and Japan would stop paying for oil in dollars,
and would no longer need to maintain present levels of U.S. dollar reserves. So they too would
start selling U.S. treasury bonds, pushing up U.S. interest rates in the process. Once again,
we have the ingredients for a self-reinforcing vicious cycle of increasing U.S. interest rates
causing U.S. Government borrowing costs to skyrocket.
Without the artificial demand for treasury debt created by exorbitant privilege, the U.S.
would be unable to finance its federal budget deficit. The Federal Reserve might respond with
even more money printing to monetize all the government's borrowing needs, but without the
international demand that results from the dollar's reserve currency status, the dollar would
crash in value relative to other currencies as a result of excessive monetization by the Fed.
The resulting loss of principal value would cause even more international holders of U.S.
Treasury debt to panic and sell their holdings. Once again, a self-reinforcing vicious cycle
would develop, with consequences for the United States so catastrophic that the 2008 event
would pale in contrast.
Rambo to the Rescue?
Let's not forget that the USA enjoys virtually unchallenged global military hegemony. China
is working hard to build out its "blue water navy", including strategic ballistic missile
nuclear submarine capability. But the USA is still top dog on the global power stage, and if
the USA was willing to use its nuclear weapons, it could easily defeat any country on earth,
except perhaps China and Russia.
While the use of nuclear weapons in an offensive capacity might seem unthinkable today, the
USA has yet to endure significant economic hardship. $15/gallon gasoline from the next Peak
Cheap Oil price shock coupled with 15% treasury yields and a government operating in crisis
mode just to hold off systemic financial collapse in the face of rampant inflation would change
the mood considerably.
All the USA has to do in order to secure an unlimited supply of $50/bbl imported oil is to
threaten to nuke any country refusing to sell oil to the U.S. for that price. Unthinkable
today, but in times of national crisis, morals are often the first thing to be forgotten. We
like to tell ourselves that we would never allow economic hardship to cause us to lose our
morals. But just look at the YouTube videos of riots at Wal-Mart over nothing more than
contention over a limited supply of boxer shorts marked down 20% for Black Friday. What we'll
do in a true crisis that threatens our very way of life is anyone's guess.
If faced with the choice between a Soviet-style economic collapse and abusing its military
power, the USA just might resort to tactics previously thought unimaginable. Exactly what those
tactics might be and how it would play out are unknowable. The point is, this is a very complex
problem, and a wide array of factors including military capability will play a role in
determining the ultimate outcome.
I certainly don't mean to predict such an apocalyptic outcome. All I'm really trying
to say is that the military hegemony of the USA will almost certainly play into the equation.
Even if there is no actual military conflict, the ability of the U.S. to defeat almost
any opponent will play into the negotiations, if nothing else.
Conclusions
The current incarnation of the International Monetary System, in which the USA enjoys the
exorbitant privilege of borrowing practically for free, and is therefore able to pursue
reckless fiscal policy with immunity from the adverse consequences that non-reserve currency
issuing nations would experience by doing so, cannot continue indefinitely. Therefore, it will
not continue indefinitely. How and when it will end is hard to say, especially considering the
fact that it's already persisted for 42 years after it stopped making sense. The system will
continue to operate until some catalyst or trigger event brings about catastrophic change.
The next Peak Cheap Oil price spike is not the only possible catalyst to bring about a U.S.
bond and currency crisis, but it's the most likely candidate I'm aware of. I don't believe that
U.S. energy independence is possible, but if it were, the end of oil imports from the Middle
East would also be the catalyst to end exorbitant privilege and bring about a U.S.bond and
currency crisis. To summarize, the music hasn't stopped quite yet, but when it does, this will
end very, very badly. I'm pretty sure we're on the last song, but I don't know how long it has
left to play.
First, thank you b for presenting the 'knowns' as you always do, succinctly and with your
usual clarity. "Iran's missile launch...calls...bluff." That is what it did do, and
effectively.
It should be very clear to all which country defines its own terms and which does not.
Some are pointing to the red flag for confirmation as to who has 'won' this challenge. Not
necessary. A simple comparison of statements before and after, the witness of Iran's
solidarity in the face of atrocity, and now, I think we simply watch and wait.
I will take from Michael Hudson's piece at the Saker site what will be a clear sign,
and that will be who controls the oil? Someone did say on a previous thread that an oilfield
near one of the bases attacked has been relinquished. And for those wondering about 'minimal
damage' it ought to be pointed out that the airfields in question are on Iraq soil, and the
less harm to them the better if Iraq is to be able to recover its assets. So too for Syria -
it should not be forgotten that the problem that was arising was with the protection of
terrorists on the Syria/Iraq border, and the boast that the US had control over the oil
fields in that vicinity.
Also, dominion over the air space is crucial. As I understand it, that is now free of US
planes and drones. How far that extends would be very important to all those who have
shuddered at the sound of approaching engines for weddings and funerals these many years.
What a sorry legacy this empire has left! And, may it have left it!
Looks like Iran is Catch22 for the USA: it can destroy it, but only at the cost of losing empire and dollar hegemony...
Notable quotes:
"... The United States is now turning on the screws demanding that other countries sacrifice their growth in order to finance the U.S. unipolar empire. In effect, foreign countries are beginning to respond to the United States what the ten tribes of Israel said when they withdrew from the southern kingdom of Judah, whose king Rehoboam refused to lighten his demands (1 Kings 12). They echoed the cry of Sheba son of Bikri a generation earlier: "Look after your own house, O David!" The message is: What do other countries have to gain by remaining in the US unipolar neoliberalized world, as compared to using their own wealth to build up their own economies? It's an age-old problem. ..."
"... The dollar will still play a role in US trade and investment, but it will be as just another currency, held at arms length until it finally gives up its domineering attempt to strip other countries' wealth for itself. However, its demise may not be a pretty sight. ..."
"... Conflict in the ME has traditionally almost always been about oil [and of course Israel]. This situation is different. It is only partially about oil and Israel, but OVERWHHEMINGLY it is about the BRI. ..."
"... The salient factor as I see it is the Oil for Technology initiative that Iraq signed with China shortly before it slid into this current mess. ..."
"... This was a mechanism whereby China would buy Iraq oil and these funds would be used directly to fund infrastructure and self-sufficiency initiatives and technologies that would help to drag Iraq out of the complete disaster that the US war had created in this country. A key part of this would be that China would also make extra loans available at the same time to speed up this development. ..."
"... "Iraq's Finance Ministry that the country had started exporting 100,000 barrels per day (bpd) of crude oil to China in October as part of the 20-year oil-for-infrastructure deal agreed between the two countries." ..."
"... "For Iraq and Iran, China's plans are particularly far-reaching, OilPrice.com has been told by a senior oil industry figure who works closely with Iran's Petroleum Ministry and Iraq's Oil Ministry. China will begin with the oil and gas sector and work outwards from that central point. In addition to being granted huge reductions on buying Iranian oil and gas, China is to be given the opportunity to build factories in both Iran and Iraq – and build-out infrastructure, such as railways – overseen by its own management staff from Chinese companies. These are to have the same operational structure and assembly lines as those in China, so that they fit seamlessly into various Chinese companies' assembly lines' process for whatever product a particular company is manufacturing, whilst also being able to use the still-cheap labour available in both Iraq and Iraq." ..."
"... Hudson is so good. He's massively superior to most so called military analysts and alternative bloggers on the net. He can clearly see the over arching picture and how the military is used to protect and project it. The idea that the US is going to leave the middle east until they are forced to is so blind as to be ridiculous. ..."
"... I'd never thought of that "stationary aircraft carrier" comparison between Israel and the British, very apt. ..."
"... Trump et al assassinated someone who was on a diplomatic mission. This action was so far removed from acceptable behavior that it must have been considered to be "by any means and at all costs". ..."
"... This article, published by Strategic Culture, features a translation of Mahdi's speech to the Iraqi parliament in which he states that Trump threatened him with assassination and the US admitted to killing hundreds of demonstrators using Navy SEAL snipers. ..."
"... This description provided by Mr Hudson is no Moore than the financial basis behind the Cebrowski doctrine instituted on 9/11. https://www.voltairenet.org/article ..."
"... "The leading country breaking up US hegemony obviously is the United States itself. That is Trump's major contribution The United States is now turning on the screws demanding that other countries sacrifice their growth in order to finance the U.S. unipolar empire." ..."
"... The US govt. have long since paid off most every European politician. Thusly, Europe, as separate nations that should be remain still under the yolk of the US Financial/Political/Military power. ..."
"... In any event, it is the same today. Energy underlies, not only the military but, all of world civilization. Oil and gas are overwhelmingly the source of energy for the modern world. Without it, civilization collapses. Thus, he who controls oil (and gas) controls the world. ..."
"... the link between the US $$$ and Saudi Oil, is the absolute means of the American Dollar to reign complete. This payment system FEEDS both the US Military, but WALL STREET, hedge funds, the US/EU oligarchs – to name just a few entities. ..."
Introduction: After posting Michael Hudson's article "America
Escalates its "Democratic" Oil War in the Near East" on the blog, I decided to ask
Michael to reply to a few follow-up questions. Michael very kindly agreed. Please see our
exchange below.
The Saker
-- -- -
The Saker: Trump has been accused of not thinking forward, of not having a long-term
strategy regarding the consequences of assassinating General Suleimani. Does the United States
in fact have a strategy in the Near East, or is it only ad hoc?
Michael Hudson: Of course American strategists will deny that the recent actions do not
reflect a deliberate strategy, because their long-term strategy is so aggressive and
exploitative that it would even strike the American public as being immoral and offensive if
they came right out and said it.
President Trump is just the taxicab driver, taking the passengers he has accepted –
Pompeo, Bolton and the Iran-derangement syndrome neocons – wherever they tell him they
want to be driven. They want to pull a heist, and he's being used as the getaway driver (fully
accepting his role). Their plan is to hold onto the main source of their international revenue:
Saudi Arabia and the surrounding Near Eastern oil-export surpluses and money. They see the US
losing its ability to exploit Russia and China, and look to keep Europe under its control by
monopolizing key sectors so that it has the power to use sanctions to squeeze countries that
resist turning over control of their economies and natural rentier monopolies to US buyers. In
short, US strategists would like to do to Europe and the Near East just what they did to Russia
under Yeltsin: turn over public infrastructure, natural resources and the banking system to
U.S. owners, relying on US dollar credit to fund their domestic government spending and private
investment.
This is basically a resource grab. Suleimani was in the same position as Chile's Allende,
Libya's Qaddafi, Iraq's Saddam. The motto is that of Stalin: "No person, no problem."
The Saker: Your answer raises a question about Israel: In your recent article you only
mention Israel twice, and these are only passing comments. Furthermore, you also clearly say
the US Oil lobby as much more crucial than the Israel Lobby, so here is my follow-up question
to you: On what basis have you come to this conclusion and how powerful do you believe the
Israel Lobby to be compared to, say, the Oil lobby or the US Military-Industrial Complex? To
what degree do their interests coincide and to what degree to they differ?
Michael Hudson: I wrote my article to explain the most basic concerns of U.S. international
diplomacy: the balance of payments (dollarizing the global economy, basing foreign central bank
savings on loans to the U.S. Treasury to finance the military spending mainly responsible for
the international and domestic budget deficit), oil (and the enormous revenue produced by the
international oil trade), and recruitment of foreign fighters (given the impossibility of
drafting domestic U.S. soldiers in sufficient numbers). From the time these concerns became
critical to today, Israel was viewed as a U.S. military base and supporter, but the U.S. policy
was formulated independently of Israel.
I remember one day in 1973 or '74 I was traveling with my Hudson Institute colleague Uzi
Arad (later a head of Mossad and advisor to Netanyahu) to Asia, stopping off in San Francisco.
At a quasi-party, a U.S. general came up to Uzi and clapped him on the shoulder and said,
"You're our landed aircraft carrier in the Near East," and expressed his friendship.
Uzi was rather embarrassed. But that's how the U.S. military thought of Israel back then. By
that time the three planks of U.S. foreign policy strategy that I outlined were already firmly
in place.
Of course Netanyahu has applauded U.S. moves to break up Syria, and Trump's assassination
choice. But the move is a U.S. move, and it's the U.S. that is acting on behalf of the dollar
standard, oil power and mobilizing Saudi Arabia's Wahabi army.
Israel fits into the U.S.-structured global diplomacy much like Turkey does. They and other
countries act opportunistically within the context set by U.S. diplomacy to pursue their own
policies. Obviously Israel wants to secure the Golan Heights; hence its opposition to Syria,
and also its fight with Lebanon; hence, its opposition to Iran as the backer of Assad and
Hezbollah. This dovetails with US policy.
But when it comes to the global and U.S. domestic response, it's the United States that is
the determining active force. And its concern rests above all with protecting its cash cow of
Saudi Arabia, as well as working with the Saudi jihadis to destabilize governments whose
foreign policy is independent of U.S. direction – from Syria to Russia (Wahabis in
Chechnya) to China (Wahabis in the western Uighur region). The Saudis provide the underpinning
for U.S. dollarization (by recycling their oil revenues into U.S. financial investments and
arms purchases), and also by providing and organizing the ISIS terrorists and coordinating
their destruction with U.S. objectives. Both the Oil lobby and the Military-Industrial Complex
obtain huge economic benefits from the Saudis.
Therefore, to focus one-sidedly on Israel is a distraction away from what the US-centered
international order really is all about.
The Saker: In your recent article you wrote: " The assassination was intended to escalate
America's presence in Iraq to keep control the region's oil reserves ." Others believe that
the goal was precisely the opposite, to get a pretext to remove the US forces from both Iraq
and Syria. What are your grounds to believe that your hypothesis is the most likely one?
Michael Hudson: Why would killing Suleimani help remove the U.S. presence? He was the
leader of the fight against ISIS, especially in Syria. US policy was to continue using ISIS to
permanently destabilize Syria and Iraq so as to prevent a Shi'ite crescent reaching from Iran
to Lebanon – which incidentally would serve as part of China's Belt and Road initiative.
So it killed Suleimani to prevent the peace negotiation. He was killed because he had been
invited by Iraq's government to help mediate a rapprochement between Iran and Saudi Arabia.
That was what the United States feared most of all, because it effectively would prevent its
control of the region and Trump's drive to seize Iraqi and Syrian oil.
So using the usual Orwellian doublethink, Suleimani was accused of being a terrorist, and
assassinated under the U.S. 2002 military Authorization Bill giving the President to move
without Congressional approval against Al Qaeda. Trump used it to protect Al Qaeda's
terrorist ISIS offshoots.
Given my three planks of U.S. diplomacy described above, the United States must remain in
the Near East to hold onto Saudi Arabia and try to make Iraq and Syria client states equally
subservient to U.S. balance-of-payments and oil policy.
Certainly the Saudis must realize that as the buttress of U.S. aggression and terrorism in
the Near East, their country (and oil reserves) are the most obvious target to speed the
parting guest. I suspect that this is why they are seeking a rapprochement with Iran. And I
think it is destined to come about, at least to provide breathing room and remove the threat.
The Iranian missiles to Iraq were a demonstration of how easy it would be to aim them at Saudi
oil fields. What then would be Aramco's stock market valuation?
The Saker: In your article you wrote: " The major deficit in the U.S. balance of payments
has long been military spending abroad. The entire payments deficit, beginning with the Korean
War in 1950-51 and extending through the Vietnam War of the 1960s, was responsible for forcing
the dollar off gold in 1971. The problem facing America's military strategists was how to
continue supporting the 800 U.S. military bases around the world and allied troop support
without losing America's financial leverage. " I want to ask a basic, really primitive
question in this regard: how cares about the balance of payments as long as 1) the US continues
to print money 2) most of the world will still want dollars. Does that not give the US an
essentially "infinite" budget? What is the flaw in this logic?
Michael Hudson: The U.S. Treasury can create dollars to spend at home, and the Fed can
increase the banking system's ability to create dollar credit and pay debts denominated in US
dollars. But they cannot create foreign currency to pay other countries, unless they willingly
accept dollars ad infinitum – and that entails bearing the costs of financing the U.S.
balance-of-payments deficit, getting only IOUs in exchange for real resources that they sell to
U.S. buyers.
This is the situation that arose half a century ago. The United States could print dollars
in 1971, but it could not print gold.
In the 1920s, Germany's Reichsbank could print deutsche marks – trillions of them.
When it came to pay Germany's foreign reparations debt, all it could do was to throw these
D-marks onto the foreign exchange market. That crashed the currency's exchange rate, forcing up
the price of imports proportionally and causing the German hyperinflation.
The question is, how many surplus dollars do foreign governments want to hold. Supporting
the dollar standard ends up supporting U.S. foreign diplomacy and military policy. For the
first time since World War II, the most rapidly growing parts of the world are seeking to
de-dollarize their economies by reducing reliance on U.S. exports, U.S. investment, and U.S.
bank loans. This move is creating an alternative to the dollar, likely to replace it with
groups of other currencies and assets in national financial reserves.
The Saker: In the same article you also write: " So maintaining the dollar as the world's
reserve currency became a mainstay of U.S. military spending. " We often hear people say
that the dollar is about to tank and that as soon as that happens, then the US economy (and,
according to some, the EU economy too) will collapse. In the intelligence community there is
something called tracking the "indicators and warnings". My question to you is: what are the
economic "indicators and warnings" of a possible (probable?) collapse of the US dollar followed
by a collapse of the financial markets most tied to the Dollar? What shall people like myself
(I am an economic ignoramus) keep an eye on and look for?
Michael Hudson: What is most likely is a slow decline, largely from debt deflation
and cutbacks in social spending, in the Eurozone and US economies. Of course, the decline will
force the more highly debt-leveraged companies to miss their bond payments and drive them into
insolvency. That is the fate of Thatcherized economies. But it will be long and painfully drawn
out, largely because there is little left-wing socialist alternative to neoliberalism at
present.
Trump's protectionist policies and sanctions are forcing other countries to become
self-reliant and independent of US suppliers, from farm crops to airplanes and military arms,
against the US threat of a cutoff or sanctions against repairs, spare parts and servicing.
Sanctioning Russian agriculture has helped it become a major crop exporter, and to become much
more independent in vegetables, dairy and cheese products. The US has little to offer
industrially, especially given the fact that its IT communications are stuffed with US
spyware.
Europe therefore is facing increasing pressure from its business sector to choose the non-US
economic alliance that is growing more rapidly and offers a more profitable investment market
and more secure trade supplier. Countries will turn as much as possible (diplomatically as well
as financially and economically) to non-US suppliers because the United States is not reliable,
and because it is being shrunk by the neoliberal policies supported by Trump and the Democrats
alike. A byproduct probably will be a continued move toward gold as an alternative do the
dollar in settling balance-of-payments deficits.
The Saker: Finally, my last question: which country out there do you see as the most capable
foe of the current US-imposed international political and economic world order? whom do you
believe that US Deep State and the Neocons fear most? China? Russia? Iran? some other country?
How would you compare them and on the basis of what criteria?
Michael Hudson: The leading country breaking up US hegemony obviously is the United States
itself. That is Trump's major contribution. He is uniting the world in a move toward
multi-centrism much more than any ostensibly anti-American could have done. And he is doing it
all in the name of American patriotism and nationalism – the ultimate Orwellian
rhetorical wrapping!
Trump has driven Russia and China together with the other members of the Shanghai
Cooperation Organization (SCO), including Iran as observer. His demand that NATO join in US oil
grabs and its supportive terrorism in the Near East and military confrontation with Russia in
Ukraine and elsewhere probably will lead to European "Ami go home" demonstrations against NATO
and America's threat of World War III.
No single country can counter the U.S. unipolar world order. It takes a critical mass of
countries. This already is taking place among the countries that you list above. They are
simply acting in their own common interest, using their own mutual currencies for trade and
investment. The effect is an alternative multilateral currency and trading area.
The United States is now turning on the screws demanding that other countries sacrifice
their growth in order to finance the U.S. unipolar empire. In effect, foreign countries are
beginning to respond to the United States what the ten tribes of Israel said when they withdrew
from the southern kingdom of Judah, whose king Rehoboam refused to lighten his demands (1 Kings
12). They echoed the cry of Sheba son of Bikri a generation earlier: "Look after your own
house, O David!" The message is: What do other countries have to gain by remaining in the US
unipolar neoliberalized world, as compared to using their own wealth to build up their own
economies? It's an age-old problem.
The dollar will still play a role in US trade and investment, but it will be as just another
currency, held at arms length until it finally gives up its domineering attempt to strip other
countries' wealth for itself. However, its demise may not be a pretty sight.
The Saker: I thank you very much for your time and answers!
Another one that absolutely stands for me out is the below link to a recent interview of
Hussein Askary.
As I wrote a few days ago IMO this too is a wonderful insight into the utterly complicated
dynamics of the tinderbox that the situation in Iran and Iraq has become.
Conflict in the ME has traditionally almost always been about oil [and of course Israel].
This situation is different. It is only partially about oil and Israel, but OVERWHHEMINGLY it
is about the BRI.
The salient factor as I see it is the Oil for Technology initiative that Iraq signed with
China shortly before it slid into this current mess.
This was a mechanism whereby China would buy Iraq oil and these funds would be used
directly to fund infrastructure and self-sufficiency initiatives and technologies that would
help to drag Iraq out of the complete disaster that the US war had created in this country. A
key part of this would be that China would also make extra loans available at the same time
to speed up this development.
In essence, this would enable the direct and efficient linking of Iraq into the BRI
project. Going forward the economic gains and the political stability that could come out of
this would be a completely new paradigm in the recovery of Iraq both economically and
politically. Iraq is essential for a major part of the dynamics of the BRI because of its
strategic location and the fact that it could form a major hub in the overall network.
It absolutely goes without saying that the AAA would do everything the could to wreck this
plan. This is their playbook and is exactly what they have done. The moronic and
extraordinarily impulsive Trump subsequently was easily duped into being a willing and
idiotic accomplice in this plan.
The positive in all of this is that this whole scheme will backfire spectacularly for the
perpetrators and will more than likely now speed up the whole process in getting Iraq back on
track and working towards stability and prosperity.
Please don't anyone try to claim that Trump is part of any grand plan nothing could be
further from the truth he is nothing more than a bludgeoning imbecile foundering around,
lashing out impulsively indiscriminately. He is completely oblivious and ignorant as to the
real picture.
I urge everyone involved in this Saker site to put aside an hour and to listen very
carefully to Askary's insights. This is extremely important and could bring more clarity to
understanding the situation than just about everything else you have read put together. There
is hope, and Askary highlights the huge stakes that both Russia and China have in the
region.
This is a no brainer. This is the time for both Russia and China to act and to decisively.
They must cooperate in assisting both Iraq and Iran to extract themselves from the current
quagmire the one that the vicious Hegemon so cruelly and thoughtlessly tossed them into.
Also interesting is what Simon Watkins reports in his recent article entitled "Is Iraq About
To Become A Chinese Client State?"
To quote from the article:
"Iraq's Finance Ministry that the country had started exporting 100,000 barrels per day
(bpd) of crude oil to China in October as part of the 20-year oil-for-infrastructure deal
agreed between the two countries."
and
"For Iraq and Iran, China's plans are particularly far-reaching, OilPrice.com has been
told by a senior oil industry figure who works closely with Iran's Petroleum Ministry and
Iraq's Oil Ministry. China will begin with the oil and gas sector and work outwards from that
central point. In addition to being granted huge reductions on buying Iranian oil and gas,
China is to be given the opportunity to build factories in both Iran and Iraq – and
build-out infrastructure, such as railways – overseen by its own management staff from
Chinese companies. These are to have the same operational structure and assembly lines as
those in China, so that they fit seamlessly into various Chinese companies' assembly lines'
process for whatever product a particular company is manufacturing, whilst also being able to
use the still-cheap labour available in both Iraq and Iraq."
and
"The second key announcement in this vein made last week from Iraq was that the Oil
Ministry has completed the pre-qualifying process for companies interested in participating
in the Iraqi-Jordanian oil pipeline project. The U$5 billion pipeline is aimed at carrying
oil produced from the Rumaila oilfield in Iraq's Basra Governorate to the Jordanian port of
Aqaba, with the first phase of the project comprising the installation of a
700-kilometre-long pipeline with a capacity of 2.25 million bpd within the Iraqi territories
(Rumaila-Haditha). The second phase includes installing a 900-kilometre pipeline in Jordan
between Haditha and Aqaba with a capacity of 1 million bpd. Iraq's Oil Minister – for
the time being, at least – Thamir Ghadhban added that the Ministry has formed a team to
prepare legal contracts, address financial issues and oversee technical standards for
implementing the project, and that May will be the final month in which offers for the
project from the qualified companies will be accepted and that the winners will be announced
before the end of this year. Around 150,000 barrels of the oil from Iraq would be used for
Jordan's domestic needs, whilst the remainder would be exported through Aqaba to various
destinations, generating about US$3 billion a year in revenues to Jordan, with the rest going
to Iraq. Given that the contractors will be expected to front-load all of the financing for
the projects associated with this pipeline, Baghdad expects that such tender offers will be
dominated by Chinese and Russian companies, according to the Iran and Iraq source."
Hudson is so good. He's massively superior to most so called military analysts and
alternative bloggers on the net. He can clearly see the over arching picture and how the
military is used to protect and project it. The idea that the US is going to leave the middle
east until they are forced to is so blind as to be ridiculous.
They will not sacrifice the
(free) oil until booted out by a coalition of Arab countries threatening to over run them and
that is why the dollar hegemonys death will be slow, long and drawn out and they will do
anything, any dirty trick in the book, to prevent Arab/Persian unity. Unlike many peoples
obsession with Israel and how important they feel themselves to be I think Hudson is correct
again. They are the middle eastern version of the British – a stationary aircraft
carrier who will allow themselves to be used and abused whilst living under the illusion they
are major players. They aren't. They're bit part players in decline, subservient to the great
dollar and oil pyramid scheme that keeps America afloat. If you want to beat America you have
to understand the big scheme, that and the utter insanity that backs it up. It is that
insanity of the leites, the inability to allow themselves to be 'beaten' that will keep
nuclear exchange as a real possibility over the next 10 to 15 years. Unification is the only
thing that can stop it and trying to unite so many disparate countries (as the Russians are
trying to do despite multiple provocations) is where the future lies and why it will take so
long. It is truly breath taking in such a horrific way, as Hudson mentions, that to allow the
world to see its 'masters of the universe' pogram to be revealed:
"Of course American strategists will deny that the recent actions do not reflect a
deliberate strategy, because their long-term strategy is so aggressive and exploitative that
it would even strike the American public as being immoral and offensive if they came right
out and said it."
Would be to allow it to be undermined at home and abroad. God help us all.
Clever would be a better word. Looking at my world globe, I see Italy, Greece, and Turkey on
that end of the Mediterranean. Turkey has been in NATO since 1952. Crete and Cyprus are also
right there. Doesn't Hudson own a globe or regional map?
That a US Admiral would be gushing about the Apartheid state 7 years after the attempted
destruction of the USS Liberty is painful to consider. I'd like to disbelieve the story, but
it's quite likely there were a number of high-ranking ***holes in a Naval Uniform.
The world situation reminds us of the timeless fable by Aesop of The North Wind and the Sun.
Trump et al assassinated someone who was on a diplomatic mission. This action was so far
removed from acceptable behavior that it must have been considered to be "by any means and at
all costs".
Perhaps the most potent weapon Iran or anyone else has at this critical juncture, is not
missiles, but diplomacy.
"Therefore, to focus one-sidedly on Israel is a distraction away from what the US-centered
international order really is all about."
Thank you for saying this sir. In the US and around the world many people become
obsessively fixated in seeing a "jew" or zionist behind every bush. Now the Zionists are
certinly an evil, blood thirsty bunch, and certainly deserve the scorn of the world, but i
feel its a cop out sometimes. A person from the US has a hard time stomaching the actions of
their country, so they just hoist all the unpleasentries on to the zionists. They put it all
on zionisim, and completly fail to mention imperialism. I always switced back and forth on
the topic my self. But i cant see how a beachead like the zionist state, a stationary
carrier, can be bigger than the empire itself. Just look at the major leaders in the
resistance groups, the US was always seen as the ultimate obstruction, while israel was seen
as a regional obstruction. Like sayyed hassan nasrallah said in his recent speech about the
martyrs, that if the US is kicked out, the Israelis might just run away with out even
fighting. I hate it when people say "we are in the middle east for israel" when it can easily
be said that "israel is still in the mid east because of the US." If the US seized to exist
today, israel would fall rather quickly. If israel fell today the US would still continue
being an imperalist, bloodthirsty entity.
The Deeper Story behind the Assassination of Soleimani
This article, published by Strategic Culture, features a translation of Mahdi's speech to
the Iraqi
parliament in which he states that Trump threatened him with assassination and the US
admitted
to killing hundreds of demonstrators using Navy SEAL snipers.
This description provided by Mr Hudson is no Moore than the financial basis behind the
Cebrowski doctrine instituted on 9/11.
https://www.voltairenet.org/article
I wish the Saker had asked Mr Hudson about some crucial recent events to get his opinion
with regards to US foreign policy. Specifically, how does the emergence of cryptocurrency
relate to dollar finance and the US grand strategy? A helpful tool for the hegemon or the
emergence of a new currency that prevents unlimited currency printing? Finally, what is
global warming and the associated carbon credit system? The next planned model of continuing
global domination and balance of payments? Or true organic attempt at fair energy production
and management?
With all due respect, these are huge questions in themselves and perhaps could to be
addressed in separate interviews.
IMO it doesn't always work that well to try to cover too much ground in just one giant
leap.
I have never understood the Cebrowski doctrine. How does the destruction of Middle Eastern state structures allow the US to control Middle
East Oil? The level of chaos generated by such an act would seem to prevent anyone from controlled
the oil.
Dr. Hudson often appears on RT's "Keiser Report" where he covers many contemporary topics
with its host Max Keiser. Many of the shows transcripts are available at Hudson's website . Indeed, after the two Saker items,
you'll find three programs on the first page. Using the search function at his site, you'll
find the two articles he's written that deal with bitcoin and cryptocurrencies, although I
think he's been more specific in the TV interviews.
As for this Q&A, its an A+. Hudson's 100% correct to playdown the Zionist influence
given the longstanding nature of the Outlaw US Empire's methods that began well before the
rise of the Zionist Lobby, which in reality is a recycling of aid dollars back to Congress in
the form of bribes.
Nils: Good Article. The spirit of Nihilism.
Quote from Neocon Michael Ladeen.
"Creative destruction is our middle name, both within our own society and abroad. We tear
down the old order every day, from business to science, literature, art, architecture, and
cinema to politics and the law. Our enemies have always hated this whirlwind of energy and
creativity, which menaces their traditions (whatever they may be) and shames them for their
inability to keep pace. Seeing America undo traditional societies, they fear us, for they do
not wish to be undone. They cannot feel secure so long as we are there, for our very
existence -- our existence, not our politics -- threatens their legitimacy. They must attack
us in order to survive, just as we must destroy them to advance our historic mission."
@NILS As far as crypto currency goes it is a brilliant idea in concept. But since during the
Bush years we have been shown multiple times, who actually owns [and therefore controls] the
internet. Many times now we have also been informed that through the monitoring capability's
of our defense agency's, they are recording every key stroke. IMO, with the flip of a switch,
we can shut down the internet. At the very least, that would stop us from being able to trade
in crypto, but they have e-files on each of us. They know our passwords, or can easily access
them. That does not give me confidence in e=currency during a teotwawki situation.
One thing that troubles me about the petrodollar thesis is that ANNUAL trade in oil is about
2 trillion DAILY trade in $US is 4 trillion. I can well believe the US thinks oil is the
bedrock if dollar hegemony but is it? I see no alternative to US dollar hegemony.
The lines that really got my attention were these:
"The leading country breaking up US hegemony obviously is the United States itself. That
is Trump's major contribution The United States is now turning on the screws demanding that
other countries sacrifice their growth in order to finance the U.S. unipolar empire."
That is so completely true. I have wondered why – to date – there had not been
more movement by Europe away from the United States. But while reading the article the
following occurred to me. Maybe Europe is awaiting the next U.S. election. Maybe they hope
that a new president (someone like Biden) might allow Europe to keep more of the
"spoils."
If that is true, then a re-election of Trump will probably send Europe fleeing for the
exits. The Europeans will be cutting deals with Russia and China like the store is on
fire.
The critical player in forming the EU WAS/IS the US financial Elites. Yes, they had many
ultra powerful Europeans, especially Germany, but it was the US who initiated the EU.
Purpose? For the US Financial Powerhouses & US politicians to "take Europe captive."
Notice the similarities: the EU has its Central Bank who communicates with the private
Banksters of the FED. Much austerity has ensued, especially in Southern nations: Greece,
Italy, etc. Purpose: to smash unions, worker's pay, eliminate unions, and basically allowing
US/EU Financial capital to buy out Italy, most of Greece, and a goodly section of Spain and
Portugal.
The US govt. have long since paid off most every European politician. Thusly, Europe, as
separate nations that should be remain still under the yolk of the US
Financial/Political/Military power.
I have a hard time wrapping my head around this but it sounds like he is saying that the U.S.
has a payment deficit problem which is solved by stealing the world's oil supplies. To do
this they must have a powerful, expensive military. But it is primarily this military which
is the main cause of the balance deficit. So it is an eternally fuelled problem and solution.
If I understand this, what it actually means is that we all live on a plantation as slaves
and everything that is happening is for the benefit of the few wealthy billionaires. And they
intend to turn the entire world into their plantation of slaves. They may even let you live
for a while longer.
I didn't know this until I read a history of World War I.
As you know, World War One was irresolvable, murderous, bloody trench warfare. People
would charge out of the trenches trying to overrun enemy positions only to be cutdown by the
super weapon of the day – the machine gun. It was an unending bloody stalemate until
the development of the tank. Tanks were immune to machine gun fire coming from the trenches
and could overrun enemy positions. In the aftermath of that war, it became apparently that
mechanization had become crucial to military supremacy. In turn, fuel was crucial to
mechanization. Accordingly, in the Sykes Picot agreement France and Britain divided a large
amount of Middle Eastern oil between themselves in order to assure military dominance. (The
United States had plenty of their own oil at that time.)
In any event, it is the same today. Energy underlies, not only the military but, all of
world civilization. Oil and gas are overwhelmingly the source of energy for the modern world.
Without it, civilization collapses. Thus, he who controls oil (and gas) controls the
world.
That is one third of the story. The second third is this.
Up till 1971, the United States dollar was the most trusted currency in the world. The
dollar was backed by gold and lots and lots of it. Dollars were in fact redeemable in gold.
However, due to Vietnam War, the United States started running huge balance of payments
deficits. Other countries – most notably France under De Gaulle – started cashing
in dollars in exchange for that gold. Gold started flooding out of the United States. At that
point Nixon took the United States off of the gold standard. Basically stating that the
dollar was no longer backed by gold and dollars could not be redeemed for gold. That caused
an international payments problem. People would no longer accept dollars as payment since the
dollar was not backed up by anything. The American economy was in big trouble since they were
running deficits and people would no longer take dollars on faith.
To fix the problem, Henry Kissinger convinced the Saudis to agree to only accept dollars
in payment for oil – no matter who was the buyer. That meant that nations throughout
the world now needed dollars in order to pay for their energy needs. Due to this, the dollars
was once again the most important currency in the world since – as noted above –
energy underlies everything in modern industrial cultures. Additionally, since dollars were
now needed throughout the world, it became common to make all trades for any product in
highly valued dollars. Everyone needed dollars for every thing, oil or not.
At that point, the United States could go on printing dollars and spending them since a
growing world economy needed more and more dollars to buy oil as well as to trade everything
else.
That leads to the third part of the story. In order to convince the Saudis to accept only
dollars in payments for oil (and to have the Saudis strong arm other oil producers to do the
same) Kissinger promised to protect the brutal Saudi regime's hold on power against a restive
citizenry and also to protect the Saudi's against other nations. Additionally, Kissinger made
an implicit threat that if the Saudi's did not agree, the US would come in and just take
their oil. The Saudis agreed.
Thus, the three keys to dominance in the modern world are thus: oil, dollars and the
military.
Thus, Hudson ties in the three threads in his interview above. Oil, Dollars, Military.
That is what holds the empire together.
Thank you for thinking through this. Yes, the link between the US $$$ and Saudi Oil, is the
absolute means of the American Dollar to reign complete. This payment system FEEDS both the
US Military, but WALL STREET, hedge funds, the US/EU oligarchs – to name just a few
entities.
I should make one note only to this. That "no man, no problem" was Stalin's motto is a myth.
He never said that. It was invented by a writer Alexei Rybnikov and inserted in his book "The
Children of Arbat".
Wow! Absolutely beautiful summation of the ultimate causes that got us where we are and, if
left intact, will get us to where we're going!
So, the dreamer says: If only we could throw-off our us-vs-them BS political-economic
ideology & religious doctrine-faith issues, put them into live-and-let-live mode, and see
that we are all just humans fighting over this oil resource to which our modern economy (way
of life) is addicted, then we might be able to hammer out some new rules for interacting, for
running an earth-resource sustainable and fair global economy We do at least have the
technology to leave behind our oil addiction, but the political-economic will still is
lacking. How much more of the current insanity must we have before we get that will? Will we
get it before it's too late?
Only if we, a sufficient majority from the lowest economic classes to the top elites and
throughout all nations, are able to psychologically-spiritually internalize the two
principles of Common Humanity and Spaceship Earth soon enough, will we stop our current slide
off the cliff into modern economic collapse and avert all the pain and suffering that's
already now with us and that will intensify.
The realist says we're not going to stop that slide and it's the only way we're going to
learn, if we are indeed ever going to learn.
Thank you for this excellent interview. You ask the kind of questions that we would all like
to ask. It's regrettable that Chalmers Johnson isn't still alive. I believe that you and he
would have a lot in common.
Naxos has produced an incredible, unabridged cd audiobook of
Gibbon's Decline and Fall of the Roman Empire. One of Gibbon's observations really resonates
today: "Assassination is the last resource of cowards". Thanks again.
All maps has been removed. See the original for full article with maps
Notable quotes:
"... Ever since the 1979 Iranian Revolution and seizure of hostages in the U.S. Embassy, Washington has sought to topple the Shi'a revolutionary government in Tehran. That moment was when the demonization of Muslims replaced anti-Communism as the main selling point for military interventions. U.S., Israeli, and Saudi threats have also encouraged a siege mentality among Iranian leaders, who repeatedly used them as a rationale for limiting internal dissent. ..."
"... The nightmare scenario of a regional war has been played out in Central Command strategic planning since the 1980s. The regional blocs have been oversimplified in the western media as merely a Shi'a vs. Sunni rivalry, but Iran has also supported Sunni forces, such as Hamas in Palestine. What is at stake in the Middle East is usually about oil and state power, not simply about religion. ..."
"... Benjamin Netanyahu and Mohammad Bin Salman have been itching for the U.S. to launch strikes against Iran for some time, ostensibly over the nuclear program, but actually to roll back the Tehran-led regional alliance. Trump's tilt toward Russia has been welcomed by Israel and Saudi Arabia, as he tries to "decouple" Moscow from Tehran , in order to make Iran more vulnerable. ..."
"... Part of the neocon agenda for occupying Iraq was to have a staging area for regime change in Iran, but that is clearly no longer possible. Ground forces invading Iran from Kuwait would have to pass through a slice of Iraqi territory. An invasion from Afghanistan or Pakistan would be untenable because of on-going Islamist insurgencies (even though Iran has tended to back the U.S. against the Taliban and ISIS). The U.S. has not built bases to the north in Azerbaijan or Turkmenistan, but Trump's recent tilt toward Turkey may be partly to put more pressure on Iran's northwestern border . ..."
"... Watch for the U.S. stoking ethnic divisions in the diverse country, where ethnic minorities form about 40 percent of the population. The most dangerous sign would be encouraging a rebellion in the Arab province of Khuzestan, called "Ahwaz" by its Arab inhabitants. ..."
"... Back in 2005 I wrote about the possibility that the U.S. would use such an uprising as an excuse to occupy Iran's oil-rich Khuzestan province (next to southern Iraq), with the "humanitarian" rationale of protecting its ethnic Arab population from "ethnic cleansing." Like back then, Tehran's repression of Ahwazi Arab protests and insurgent attacks have recently been increasing, and the possibility again exists of the U.S. exploiting their legitimate grievances for its own interests. ..."
"... My color map makes it clear that the ethnic Ahwazi Arab province of Khuzestan, which Saddam Hussein invaded at the start of the Iran-Iraq War, contains Iran's largest oil reserves (actually about 85% of Iran's oil). In a 2008 New Yorker article, journalist Seymour Hersh exposed CIA assistance to Ahwazi Arab and other ethnic insurgents , later advocated by John Bolton , and a CIA analysis declassified in 2013 referred to Khuzestan as " Iran's Achilles Tendon ." ..."
"... Whether Trump carries out an air war or a ground war, attacking Iran would be far more disastrous than attacking Iraq. It would destroy any chance of political reforms in Iran or Iraq, and rally even Iranian and Iraqi reformers around their governments. Iranian military forces and Revolutionary Guards could counterattack, block oil lanes in the Strait of Hormuz, or melt into an insurgency far deeper and longer than in Iraq. ..."
"... Trump's War would be a self-fulfilling prophecy, because it could stimulate the terrorism and nuclear weapons programs it claims to oppose. ..."
"... The American public has developed a healthy " Iraq Syndrome " that abhors endless wars, much as the "Vietnam Syndrome" temporarily scaled back U.S. military interventions. Even though Iran is very different from Iraq, that strong public sentiment previously prevented both Obama and Trump from attacking Iran. If that sentiment can again be mobilized into an organized antiwar movement in the coming weeks, it can be even more effective. ..."
Since President Trump's assassination of Iranian general Qasem Soleimani, widespread alarm has
centered on whether he is again dragging us into another war like Iraq, to detract from his
impeachment. The bad news is that the situation is even more potentially disastrous.
As a political-cultural geographer who has long studied the history of U.S. military interventions
, I'm alarmed that his action could set into motion a regional conflagration, the violent
break-up of Iran into ethnic enclaves, and a death toll that would make the Iraq War look like
a warm-up exercise. The good news is that Americans can and have stood in the way of such a
war, and we can do so again.
...Iran has
always been more geographically pivotal than Iraq, in land area, population, and economics. It
was one of the few countries that retained independence through the colonial era, and one of
the only Third World societies to successfully reject Western corporate domination.
Ever since the 1979 Iranian Revolution and seizure of hostages in the U.S. Embassy,
Washington has sought to topple the Shi'a revolutionary government in Tehran. That moment was
when the demonization of Muslims replaced anti-Communism as the main selling point for military
interventions. U.S., Israeli, and Saudi threats have also encouraged a siege mentality among
Iranian leaders, who repeatedly used them as a rationale for limiting internal dissent.
The U.S. has already been at war with Iran, during the Iran-Iraq War. In 1987-88, the U.S.
Navy actively sided with Saddam
Hussein in his war with Iran , by escorting tankers carrying Iraqi oil, attacking Iranian
boats and oil rigs, and "accidentally" shooting down an Iranian civilian jetliner. A war with
Iran is not a hypothetical possibility, but a continuation of a long-simmering conflict.
Geopolitical Scenarios
Trump's actions may lead to a full-blown World War I-style regional war in the Middle East,
between two blocs that have emerged in the past decade. On one side are the United States,
Israel, Saudi Arabia, most Gulf states (UAE, Bahrain, Kuwait, Oman), Syrian Sunni insurgents,
and southern Yemen. On the other side are Russia, Iran, Syria, Hezbollah in southern Lebanon,
and Houthi rebels in northern Yemen.
Every major war has been preceded by early rumblings, such as in Morocco before World War I,
or in Spain, Ethiopia, and China before World War II. The horrific civil wars in Syria and
Yemen -- as well as conflicts in Iraq, Lebanon, and Bahrain -- have partly served as proxy wars
(with local origins) between these two emerging blocs. We may now be living in August 1914,
when similar alliances propelled Europe to World War I, also sparked by an assassination.
The nightmare scenario of a regional war has been played out in Central Command strategic
planning since the 1980s. The regional blocs have been oversimplified in the western media as
merely a Shi'a vs. Sunni rivalry, but Iran has also supported Sunni forces, such as Hamas in
Palestine. What is at stake in the Middle East is usually about oil and state power, not simply
about religion.
... ... ...
What's Next?
The Houthi-claimed attacks on Saudi oil infrastructure, attacks on oil tankers in the Gulf,
direct exchange of missiles between Iranian forces in Syria and Israeli forces in the occupied
Golan Heights, the U.S. bombing of Iran-backed militias in Iraq and Syria, and a short siege of
the U.S. Embassy in Baghdad have all taken place since
Trump withdrew the U.S. from the Iran nuclear deal, but their origins are far more complex
and local than the Washington-Tehran rivalry.
This conflict could quickly mushroom out of control, such as in confrontations over islands
contested by Iran and the Gulf states, as well as U.S. military brinkmanship with Iranian
vessels in the Straits of Hormuz, and with Russian and Iranian forces in Syria. Juan Cole has
pointed out that even in the Iran-Iraq War, neither side attacked oil
refineries because they knew they were vulnerable to a counterattack, but the assassination
of an Iranian general is also unprecedented.
Benjamin Netanyahu and Mohammad Bin Salman have been itching for the U.S. to launch strikes
against Iran for some time, ostensibly over the nuclear program, but actually to roll back the
Tehran-led regional alliance. Trump's tilt toward Russia has been welcomed by Israel and Saudi
Arabia, as he tries to
"decouple" Moscow from Tehran , in order to make Iran more vulnerable.
It's possible that Trump is building up war fever as a set-up, in order that he can later
reverse it and portray himself as a peace candidate. But if he does spark a war, he will use it
to the hilt to question the loyalty of anyone who opposes it, and many congressional Democrats
would probably rally around the flag.
Even if Iran reacts militarily to the assassination, Mayor DeBlasio's hysterical
warning of terrorist retaliation in New York is utter B.S. In four decades of conflict,
Iran has never sponsored an attack within the U.S., even as the U.S. has attacked its allies in
Lebanon, Iraq, Syria, and Yemen, and directly attacked its own forces in the Gulf. Only Sunni
terrorists (also opposed by Iran) have attacked targets inside the U.S.
Ground War or Air War?
Unlike Iraq, the U.S. has limited options to invade Iran. One of the most important
differences between Iran and Iraq is in their physical geography. Iraq has largely flat
terrain, and so has been repeatedly invaded by foreign armies. Iran has natural defensive
barriers in the Zagros and Elburz mountain ranges, and a political advantage in having complex
neighbors that may not be willing to host invading forces.
Part of the neocon
agenda for occupying Iraq was to have a staging area for regime change in Iran, but that is
clearly no longer possible. Ground forces invading Iran from Kuwait would have to pass through
a slice of Iraqi territory. An invasion from Afghanistan or Pakistan would be untenable because
of on-going Islamist insurgencies (even though Iran has tended to back the U.S. against the
Taliban and ISIS). The U.S. has not built bases to the north in Azerbaijan or Turkmenistan, but
Trump's recent tilt toward Turkey may be partly to put
more pressure on Iran's northwestern border .
Trump also is aware that U.S. civilians and even the military will be wary of another Middle
East war. Like President Obama in 2013, Trump pulled the Pentagon back from strikes against
Iran and Syria earlier in 2019, understanding (at least before his impeachment) that voters
would not want another war. In a recent
Pew Center poll , 62 percent of civilians and 64 percent of veterans say the war in Iraq
was not worth fighting. A recent Military Times poll shows that half of active-duty military personnel are unhappy
with Trump, and Bernie Sanders actually leads in
donations from them.
These limited options means that a U.S. ground invasion of Iran is very unlikely, so there
would not be a repeat of the 2003 Iraq invasion, followed by an occupation of the entire
country. At least in its initial stages, a war on Iran would be largely an air war of bombs,
missiles, and drones, launched by the Navy and Air Force, with minimal "boots on the
ground."
That's why it may be dangerous for the antiwar movement to warn that an Iran War would be a
repeat of the Iraq War, with massive U.S. casualties and a legacy of combat injuries and PTSD.
During the Vietnam War, facing huge protests because of bodybags coming home, President Nixon
switched from a ground war to an air war, reducing U.S. troop casualties, but vastly increasing
civilian casualties.
President Bush employed a similar strategy in the 1991 Gulf War, sanitizing air strikes on
Iraq as a detached video game. Clinton's 1999 air war on Serbia and Obama's 2011 air war on
Libya were the first time in human history that a one side in a major war had zero deaths by
enemy fire. Trump has inherited these technological tactics of imperial impunity. If the
antiwar movement mainly emphasizes the possibilities of U.S. military casualties, it only plays
into the Pentagon's hands and reinforces high-tech warfare that claims even more civilian
lives.
Playing the Ethnic Card
But there is one scenario that I fear could lead to a ground invasion of Iran. Watch for the
U.S. stoking ethnic divisions in the diverse country, where ethnic minorities form about 40
percent of the population. The most dangerous sign would be encouraging a rebellion in the Arab
province of Khuzestan, called "Ahwaz" by its Arab inhabitants.
Back in 2005 I wrote about the possibility that the U.S. would use such an uprising as an
excuse to
occupy Iran's oil-rich Khuzestan province (next to southern Iraq), with the "humanitarian"
rationale of protecting its ethnic Arab population from "ethnic cleansing." Like back then,
Tehran's repression of Ahwazi Arab protests and insurgent
attacks have recently been increasing, and the possibility again exists of the U.S. exploiting
their legitimate grievances for its own interests.
My color
map makes it clear that the ethnic Ahwazi Arab province of Khuzestan, which Saddam Hussein
invaded at the start of the Iran-Iraq War, contains Iran's largest oil reserves (actually about
85% of Iran's oil). In a 2008 New Yorker article, journalist Seymour Hersh exposed
CIA assistance to Ahwazi Arab and other ethnic insurgents , later advocated by
John Bolton , and a CIA analysis declassified in 2013 referred to Khuzestan as " Iran's
Achilles Tendon ."
The U.S. and Saudis may feel that in this " Khuzestan Gambit ," they could
land Marines and paratroopers on western Khuzestan's flat terrain, and hold its massive oil
fields hostage for concessions from Tehran, without having to push through mountainous barriers
and occupy the rest of Iran.
Like Saddam in 1980, they may be deluded that that Ahwazi Arabs will welcome them in
Khuzestan, much as they thought that Iraqi Shi'as would welcome foreign occupiers in 2003.
Backing an Arab secessionist movement could easily set into motion the violent "Balkanization"
of Iran, which would make Yugoslavia pale in comparison, and even tear apart neighboring
countries.
Even if ethnic grievances are legitimate, the timing of western interest in their grievances
coincides too neatly with the larger desire to pressure and isolate Iran. Washington has a long
history of championing the rights of ethnic minorities against its enemies (such as in Vietnam,
Laos, Nicaragua, and Syria), then abandoning or selling out the minority when it is no longer
strategically useful. We love 'em, we use 'em, and then we dump 'em.
Fighting the Last War
Whether Trump carries out an air war or a ground war, attacking Iran would be far more
disastrous than attacking Iraq. It would destroy any chance of political reforms in Iran or
Iraq, and rally even Iranian and Iraqi reformers around their governments. Iranian military
forces and Revolutionary Guards could counterattack, block oil lanes in the Strait of Hormuz,
or melt into an insurgency far deeper and longer than in Iraq.
Trump's War would be a
self-fulfilling prophecy, because it could stimulate the terrorism and nuclear weapons programs
it claims to oppose.
The American public has developed a healthy " Iraq
Syndrome " that abhors endless wars, much as the "Vietnam Syndrome" temporarily scaled back
U.S. military interventions. Even though Iran is very different from Iraq, that strong public
sentiment previously prevented both Obama and Trump from attacking Iran. If that sentiment can
again be mobilized into an organized antiwar movement in the coming weeks, it can be even more
effective.
But to be effective, the movement has to focus on the horrendous effects of such a war on
Iranian civilians, not only on U.S. troops. And it should understand that this war may unfold
in unpredictable ways that differ from previous invasions. Just as "generals always fight the
last war," antiwar movements will lose if they merely fight against the last war. Join the debate
on Facebook
Zoltan Grossman is a
professor of Geography and Native Studies at The Evergreen State College in Olympia,
Washington, who has been a warm body in peace, justice, and environmental movements for the
past 35 years. His website is http://academic.evergreen.edu/g/grossmaz and
email is [email protected]
In the wake of this, Congress passed the 2002 Authorization Act. This authorized the
President to move against Al Qaeda.
Fast forward to today: Suleimani and Iran were fighting AGANST Al Qaeda and its offshoot,
ISIS/Daesh. Saudi Arabia had asked Suleimani (with U.S. approval) to help negotiate a peace,
whereby the Saudi's would stop backing ISIS. It was an official mission invited by Iraq to
negotiate peace between Saudi Arabia, Iran and Iraq.
This infuriated the United States, which wanted a permanent warfare there as an excuse to
occupy Iraq and prevent a Shi'ite Crescent linking Iran, Iraq, Syria and Lebanon, which
incidentally would serve as part of China's Belt and Road initiative. So it killed Suleimani to
prevent the peace negotiation.
The implication is that the US wants a PERMANENT occupation of Iraq, which is needed to
secure the US grab of Iraq's oil and Syria's oil, as well as to prevent any non-U.S. oil
transit.
The question is, how to get the world's politicians – U.S., European and Asians
– to see how America's all-or-nothing policy is threatening new waves of war, refugees,
extreme weather and the disruption of the oil trade in the Strait of Hormuz. Ultimately, the
aim is to ensure neoliberal dollarization is imposed on all countries to subsidize US imperial
hegemony.
It is a sign of how little power exists in the United Nations that no countries are calling
for a new Nurenberg-style war crimes trial following the assassination, no threat to withdraw
from NATO or even to avoid holding reserves in the form of money lent to the U.S. Treasury to
fund America's military budget.
"... War will allow Trump to claim the mantle of "national" wartime leader, while diverting attention away from his impeachment trial. And in light of the intensification of belligerent rhetoric from this administration, war appears to be increasingly likely. ..."
"... The American people have a moral responsibility to question not only Trump's motives, but to consider the humanitarian disaster that inevitably accompanies war. ..."
"... is an Assistant Professor of Political Science at Lehigh University. He holds a PhD in political communication, and is the author of the newly released: The Politics of Persuasion: Economic Policy and Media Bias in the Modern Era (Paperback, 2018), and Selling War, Selling Hope: Presidential Rhetoric, the News Media , and U.S. Foreign Policy After 9/11 (Paperback: 2016). He can be reached at: [email protected] ..."
The U.S. stands at the precipice of war. President Trump's rhetorical efforts to
sell himself as the "anti-war" president have been exposed as a fraud via his assault on Iran.
Most Orwellian of all is Trump's claim that the assassination of Iranian General Qassam
Soleimani was necessary to avert war, following the New Year's Eve attack on the U.S. embassy
in Baghdad. In reality the U.S. hit on Soleimani represents a criminal escalation of the
conflict between these two countries. The general's assassination was rightly seen as an
act of war , so the claim that the strike is a step toward peace is absurd on its face. We
should be perfectly clear about the fundamental threat to peace posed by the Trump
administration. Iran has already
promised "harsh retaliation" following the assassination, and
announced it is pulling out of the 2015 multi-national agreement prohibiting the nation
from developing nuclear weapons. Trump's escalation has dramatically increased the threat of
all-out war. Recognizing this threat, I sketch out an argument here based on my initial
thoughts of this conflict, providing three reasons for why Americans need to oppose war.
#1: No Agreement about an Iranian Threat
Soleimani was the head of Iran's Islamic Revolutionary Guard Corps – the Quds Force
– a clandestine military intelligence organization that specializes in paramilitary-style
operations throughout the Middle East, and which is
described as seeking to further Iranian political influence throughout the region. Trump
celebrated the assassination as necessary to bringing Soleimani's "reign of terror" to an
end. The strike, he claimed, was vital after the U.S. caught Iran "in the act" of planning
"imminent and sinister attacks on American diplomats and military personnel."
But Trump's justification for war comes from a country with a long history of distorting and
fabricating evidence of an Iranian threat. American leaders have disingenuously and
propagandistically portrayed Iran as on the brink of developing nuclear weapons for decades.
Presidents Bush and Obama were both rebuked, however, by domestic intelligence
and
international weapons inspectors , which failed to uncover evidence that Iran was
developing these weapons, or that it was a threat to the U.S.
Outside of previous exaggerations, evidence is emerging that the Trump administration and
the intelligence community are not of one mind regarding Iran's alleged threat. Shortly after
Soleimani's assassination, the Department of Homeland Security declared
there was "no specific, credible threat" from Iran within U.S. borders. And U.S. military
officials disagree regarding Trump's military escalation. As the New York Times
reports :
"In the chaotic days leading to the death of Maj. Gen. Qassim Suleimani, Iran's most
powerful commander, top American military officials put the option of killing him -- which they
viewed as the most extreme response to recent Iranian-led violence in Iraq -- on the menu they
presented to President Trump. They didn't think he would take it. In the wars waged since the
Sept. 11, 2001, attacks, Pentagon officials have often offered improbable options to presidents
to make other possibilities appear more palatable."
"Top pentagon officials," the Times
reports , "were stunned" by the President's order. Furthermore, the paper reported that
"the intelligence" supposedly confirming Iranian plans to attack U.S. diplomats was "thin," in
the words of at least one U.S. military official who was privy to the administration's
deliberations. According to that
source , there is no evidence of an "imminent" attack in the foreseeable future against
American targets outside U.S. borders.
U.S. leaders have always obscured facts, distorted intelligence, and fabricated information
to stoke public fears and build support for war. So it should come as no surprise that this
president is politicizing intelligence. He certainly has reason to – in order to draw
attention away from his Senate impeachment trial, and considering Trump's increasingly
desperate efforts to demonstrate that he is a serious President, not a tin-pot authoritarian
who ignores the rule of law, while shamelessly coercing and extorting foreign leaders in
pursuit of domestic electoral advantage.
Independent of the corruption charges against Trump, it is unwise for Americans to take the
President at his word, considering the blatant lies employed in the post-9/11 era to justify
war in the Middle East. Not so long ago the American public was sold a bill of goods regarding
Iraq's alleged WMDs and ties to terrorism. Neither of those claims was remotely true, and
Americans were left footing the bill for a war that cost trillions ,
based on the lies of an opportunistic president who was dead-set on exploiting public fears of
terrorism in a time of crisis. The Bush administration sold war based on intelligence they
knew was fraudulent, manipulating the nation into on a decade-long war that led to the
murder of more than
1 million Iraqis and more than 5,000 American servicemen, resulting in a failed Iraqi
state, and paving the way for the rise of ISIS. All of this is to say that the risks of
beginning another war in the Middle East are incredibly high, and Americans would do well to
seriously consider the consequences of entering a war based (yet again) on questionable
intelligence.
#2: The "War on Terrorism" as a Red Herring
U.S. leaders have long used the rhetoric of terrorism to justify war. But this strategy
represents a serious distortion of reality, via the conflation of terrorism – understood
as premeditated acts of violence to intimidate civilians – with acts of war. Trump fed
into this misrepresentation when he
described Soleimani's "reign of terror" as encompassing not only the alleged targeting of
U.S. diplomats, but attacks on "U.S. military personnel." The effort to link the deaths of U.S.
soldiers in wartime to terrorism echoes the State Department's 2019
statement , which designated Iran's Quds Force a "terrorist" organization, citing its
responsibility "for the deaths of at least 603 American service members in Iraq" from "2003 to
2011" via its support for Iraqi militias that were engaging in attacks on U.S. forces.
As propaganda goes, the attempt to link these acts of war to "terrorism" is quite perverse.
U.S. military personnel killed in Iraq were participating in a criminal, illegal occupation,
which was widely condemned by the international community. The U.S. war in Iraq was a crime of
aggression under the Nuremberg Charter, and it violated the United Nations Charter's
prohibition on the use of force, which is only allowed via Security Council authorization
(which the U.S. did not have), or in the case of military acts undertaken in self-defense
against an ongoing attack (Iraq was not at war with the U.S. prior to the 2003 invasion).
Contrary to Trump's and the State Department's propaganda, there are no grounds to classify the
deaths of military personnel in an illegal war as terrorism. Instead, one could argue that
domestic Iraqi political actors (of which Iraqi militias are included, regardless of their ties
to Iran) were within their legal rights under international law to engage in acts of
self-defense against American troops acting on behalf of a belligerent foreign power, which was
conducting an illegal occupation.
#3: More War = Further Destabilization of the Middle East
The largest takeaway from recent events should be to recognize the tremendous danger that
escalation of war poses to the U.S. and the region. The legacy of U.S. militarism in the Middle
East, North Africa, and Central Asia, is one of death, destruction, and instability. Every
major war involving the U.S. has produced humanitarian devastation and mass destruction, while
fueling instability and terrorism. With the 1979 Soviet Invasion of Afghanistan, U.S. support
for Mujahedeen radicals led to the breakdown of social order, and the rise of the radical
Taliban regime, which housed al Qaeda fundamentalists in the years prior to the September 11,
2001 terror attacks. The 2001 U.S. invasion of Afghanistan contributed to the further
deterioration of Afghan society, and was accompanied by the return of the Taliban, ensuing in a
civil war that has persisted over the last two decades.
With Iraq, the U.S. invasion produced a massive security vacuum following the collapse of
the Iraqi government, which made possible the rise of al Qaeda in Iraq. The U.S. fueled
numerous civil wars, in Iraq during the 2000s and Syria in the 2010s, creating mass
instability, and giving rise to ISIS, which became a mini-state of its own operating across
both countries. And then there was the 2011 U.S.-NATO supported rebellion against Muammar
Gaddafi, which not only resulted in the dictator's overthrow, but in the rise of another ISIS
affiliate within Libya's border. Even Obama, the biggest cheerleader for the war, subsequently
admitted
the intervention was his "worst mistake," due to the civil war that emerged after Gaddafi's
overthrow, which opened the door for the rise of ISIS.
All of these conflicts have one thing in common. They brought tremendous devastation to the
countries under assault, via scorched-earth military campaigns, which left death, misery, and
destruction in their wake. The U.S. is adept at destroying countries, but shows little interest
in, or ability to reconstruct them. These wars provided fertile ground for Islamist radicals,
who took advantage of the resulting chaos and instability.
The primary lesson of the "War on Terror" should be clear to rationally minded observers:
U.S. wars breed not only instability, but desperation, as the people victimized by war become
increasingly tolerant of domestic extremist movements. Repressive states are widely reviled by
the people they subjugate. But the only thing worse than a dictatorship is no order at all,
when societies collapse into civil war, anarchy, and genocide. The story of ISIS's rise is one
of citizens suffering under war and instability, and becoming increasingly tolerant of
extremist political actors, so long as they are able to provide order in times of crisis. This
point is consistently neglected in U.S. political and media discourse – a sign of how
propagandistic "debates" over war have become, nearly 20 years into the U.S. "War on
Terrorism."
Where Do We Go From Here?
Trump followed up the Soleimani assassination with a Twitter announcement
that the U.S. has "targeted" 52 additional "Iranian sites," which will be attacked "if Iran
strikes any Americans or American assets." There's no reason in light of recent events to chalk
this announcement up to typical Trump-Twitter bluster. This President is desperate to begin a
war with Iran, as Trump has courted confrontation with the Islamic republic since the early
days of his presidency.
War will allow Trump to claim the mantle of "national" wartime leader,
while diverting attention away from his impeachment trial. And in light of the intensification
of belligerent rhetoric from this administration, war appears to be increasingly likely.
The American people have a moral responsibility to question not only Trump's motives, but to
consider the humanitarian disaster that inevitably accompanies war. War with Iran will only
make the Middle East more unstable, further fueling anti-American radicalism, and increasing
the terror threat to the U.S. This conclusion isn't based on speculation, but on two decades of
experience with a "War on Terror" that's done little but destroy nations and increase terror
threats. The American people can reduce the dangers of war by protesting Trump's latest
provocation, and by pressuring Congress to pass legislation condemning any future attack on
Iran as a violation of national and international law.
To contact your Representative or Senator, use the following links:
Since 1979 the oil has flowed through the government of Russia.
Iran nationalized it's oil production in 1979 and Russia had nothing to do with this.
The era of nationalized oil, 1979–present
...
Following the Revolution, the NIOC took control of Iran's petroleum industry and canceled
Iran's international oil agreements. In 1980 the exploration, production, sale, and export of
oil were delegated to the Ministry of Petroleum. Initially Iran's post-revolutionary oil
policy was based on foreign currency requirements and the long-term preservation of the
natural resource. Following the Iran–Iraq War, however, this policy was replaced by a
more aggressive approach: maximizing exports and accelerating economic growth. From 1979
until 1998, Iran did not sign any oil agreements with foreign oil companies.
...
In the early 2000s, leading international oil firms from China, France, India, Italy, the
Netherlands, Norway, Russia, Spain, and the United Kingdom had agreements to develop Iran's
oil and gas fields. In 2004 China signed a major agreement to buy oil and gas from Iran, as
well as to develop Iran's Yadavaran oil field. The value of this contract was estimated at
US$150 billion to US$200 billion over 25 years.[5][30] In 2009, China National Petroleum Corp
(CNPC) signed a deal with the National Iranian Oil Company whereby the former took ownership
of a 70% stake upon promising to pay 90 percent of the development costs for the South
Azadegan oil field, with the project needing investment of up to $2.5 billion. Earlier that
year, CNPC also won a $2 billion deal to develop the first phase of the North Azadegan
oilfield.[31]
...
US sanctions have pushed Iran firmly into the welcoming arms of both Russia and China. It's
another burgeoning love affair - a ménage à trois? The law of unintended
consequences strikes again.
Trump has from the beginning of his presidential campaign appealed to the worst and most
fascistic elements in American political life. At a time when the US has no credible peer
military rival, he added hundreds of billions of dollars to the Pentagon budget, and the pudgy
old chicken hawk lionized war criminals. Up until now, however, Trump shrewdly calculated that
his base was tired of wasting blood and treasure on fruitless Middle Eastern wars, and he
avoided taking more than symbolic steps. He dropped a big missile on Afghanistan once, and
fired some Tomahawk Cruise missiles at Syria. But he drew back from the brink of more extensive
military engagements.
Now, by murdering Qasem Soleimani , the
head of the Jerusalem (Qods) Brigade of the Iranian Revolutionary Guards Corps, Trump has
brought the United States to the brink of war with Iran. Mind you, Iran's leadership is too
shrewd to rush to the battlements at this moment, and will be prepared to play the long game.
My guess is that they will encourage their allies among Iraqi Shiites to get up a massive
protest at the US embassy and at bases housing US troops.
They will be aided in this task of mobilizing Iraqis by the simultaneous US assassination of
Abu Mahdi
al-Muhandis , the deputy head of the Popular Mobilization Forces. Al-Muhandis is a senior
military figure in the Iraqi armed forces, not just a civilian militia figure. Moreover, the
Kata'ib Hizbullah that he headed is part of a strong political bloc, al-Fath, which has
48 members in parliament and forms a key coalition partner for the current, caretaker prime
minister, Adil Abdulmahdi. Parliament won't easily be able to let this outrage pass.
The US officer corps is confident that the American troops at the embassy and elsewhere in
Baghdad are sufficient to fight off any militia invasion. I'm not sure they have taken into
account the possibility of tens of thousands of civilian protesters invading the
embassy, who can't simply be taken out and shot.
Trump may be counting on the unpopularity among the youth protesters in downtown Baghdad,
Basra, Nasiriya and other cities of Soleimani and of al-Muhandis to blunt the Iraqi reaction to
the murders. The thousands of youth protesters cheered on hearing the news of their deaths,
since they were accused of plotting a violent repression of the rallies demanding an end to
corruption.
Iraq, however, is a big, complex society, and there are enormous numbers of Iraqi Shiites
who support the Popular Mobilization Forces and who view them as the forces that saved Iraq
from the peril of the ISIL (ISIS) terrorist organization. The Shiite hard liners would not need
all Iraqis to back them in confronting the American presence, only a few hundred thousand for
direct crowd action.
You also have to wonder whether Trump and his coterie aren't planning a coup in Iraq. In the
absence of a coup, the Iraqi parliament will almost certainly be forced, after this violation
of Iraqi national sovereignty, to vote to expel American troops. This is foreseeable. So either
the assassination was a drive-by on the way out, or Trump's war cabinet doesn't plan on having
to leave Iraq.
Although Trump justified the murder of Soleimani by calling him a terrorist, that is
nonsense in the terms of international law. The Iranian Revolutionary Guards Corps is the
equivalent of the US National Guard. What Trump did is the equivalent of some foreign country
declaring the US military a terrorist organization (some have) and then assassinating General
Joseph L. Lengyel, the 28th Chief of the National Guard Bureau (God forbid and may he have a
long healthy life).
It's all about the level of geopolitical control of oil-rich regions. In other words Carter
doctrine.
Notable quotes:
"... Don't expect any American journalists to remind viewers that one of Soleimani's achievements was not only to command the entire Iraqi army's campaign against ISIS, but also to do that in cooperation with U.S. forces. ..."
"... Trump doesn't really read. Or even take solace from history. If he did, he would know that many U.S. presidents actually lost the vote at the crucial moment, because of their bungling in the Middle East and, in particular, in Iran. President Reagan for example won the White House in November 1980 after the failed rescue mission of U.S. hostages in April of that year in Iran went spectacularly wrong which gave a "landslide" victory to the former B-movie actor from Hollywood ..."
"... Trump's strike does ring of a president, struggling with an impeachment campaign gaining momentum, who may feel has nothing to lose other than to repeat history, which has doomed him, like Carter or Reagan (who never survived Iran-Contra). ..."
"... But his reckless folly in the Middle East is also a test of how far relations with the U.S. and the rest of the world can go, before something breaks. The assassination of the Iranian general could drive a huge divide between the U.S. and the EU in the next term, if Trump can secure re-election as it will be Europe which pays the real price when the region boils over. ..."
I personally do not think that the strike was a typically
capricious move by Trump. I am more inclined to believe that it has been in the works for a
long time and his advisers might well have offered it to him as a preferable retaliation option
against the Iranian downing of a U.S. drone in June of last year – where Trump floundered
and finally held back from launching a conventional military attack on Iranian forces, through
fear of civilians being killed, or so he claims.
What we are witnessing is unprecedented in the region. It has caught everyone off guard,
even the democrats in the U.S., who can barely believe the stupidity of the move, which
arguably, is a measured one. Trump believes that he can come out the winner of a pseudo war
– or a proxy one – in the region, even though the Iranians have demonstrated that
they easily have the capability of shutting down Saudi Arabia's oil exports with a relatively
minor salvo of ordinance.
In fact, Saudi Arabia might well, in my view, be part of this latest move. Much has been
made of the petulant twitter goading of Tehran's Supreme leader to Trump directly, which may
well have pushed him over a line. But in reality, there is something much deeper and nefarious
at play which may well be the true basis of why the decision was taken for the assassination:
to destroy any possibilities of Iran and Saudi Arabia patching up their differences and
continuing in dialogue, to avoid further tensions.
There is ample evidence to show that since the oilfield attacks carried out by Iran, Saudi
crown prince Mohamed bin Salman has softened his stance on Iran and was looking at ways,
through intermediaries, to build a working relation. It was early days and progress was
slow.
But the Soleimani hit will blow that idea right out of the water. In one fell swoop, the
strike galvanises and polarises an anti-Iran front from Saudi Arabia and Israel, which, whilst
doing wonders for U.S. arms procurement will cause more tension in the region as it places
countries like Qatar, UAE, Turkey and Oman in a really awkward spot with regards to how it
should continue to work with Tehran. It may well put back the Qatar blockade to its earlier
position as 'rogue state' in the region, prompting it to possibly even go rogue and get more
involved in the battle to take Tripoli (supporting Turkish forces, obviously, who are with the
UN-recognised government).
In fact, there is an entire gamut of consequences to the move, beyond merely Iran seeking to
take revenge against America's allies in the region. It is less about a declaration of war
against Iran but more a declaration of anti-peace towards the entire Arab world, which was
starting to unfold in the last six months since Trump stepped back from the region and stood
down from a retaliation strike against Iran in the Straits of Hormuz. Trump is gambling that he
can sustain Saudi Arabia's oil being disrupted and even body bags of U.S. soldiers in Syria and
Iraq in return for a fresh wave of popularity from people too ignorant to understand or wish to
comprehend the nuances of the Middle East and how so many U.S. presidents use the pretext of a
war, or heightened tensions, as part of their chest-beating, shallow popularity campaign.
Don't expect any American journalists to remind viewers that one of Soleimani's
achievements was not only to command the entire Iraqi army's campaign against ISIS, but also to
do that in cooperation with U.S. forces.
Trump doesn't really read. Or even take solace from history. If he did, he would know
that many U.S. presidents actually lost the vote at the crucial moment, because of their
bungling in the Middle East and, in particular, in Iran. President Reagan for example won the
White House in November 1980 after the failed rescue mission of U.S. hostages in April of that
year in Iran went spectacularly wrong which gave a "landslide" victory to the former B-movie
actor from Hollywood .
Reagan, in turn, carried on the great tradition of Middle East histrionics by his notably
'mad dog' Libya campaign, which ran concurrent to two devastating attacks on U.S. soldiers and
embassy staff in Lebanon, while two different CIA teams worked against each other in trying to
secure the release of U.S. hostages in Beirut – while all along he was selling illegal
arms to the Iranians and using the cash to fund Contras in Nicaragua.
Trump's strike does ring of a president, struggling with an impeachment campaign gaining
momentum, who may feel has nothing to lose other than to repeat history, which has doomed him,
like Carter or Reagan (who never survived Iran-Contra).
But his reckless folly in the Middle East is also a test of how far relations with the
U.S. and the rest of the world can go, before something breaks. The assassination of the
Iranian general could drive a huge divide between the U.S. and the EU in the next term, if
Trump can secure re-election as it will be Europe which pays the real price when the region
boils over.
Martin Jay is an award -winning freelance journalist and political
commentator
In fact, the strategic balance – though sorely tested – had been hanging
together. Just to be clear: Iran and Israel both had been keeping – just – within
the parameters of unspoken 'red lines' – despite the inflated rhetoric. And both were
practicing 'strategic patience'. So the strategic balance seemed more or less sustainable:
until its upending with the assassination of Qasem Soleimani and the head of the PMU,
Al-Muhandis, ordered by Trump.
Israel has not – despite its lurid language – been landing strategic blows on
Iran in Syria. It has not been killing Iranians there (apart from seven killed at T4 airport in
eastern Syria last year). It did not target the head of the Iranian air force, some ten days
ago, as some reports have suggested (he was not even in Iraq at the time). Most of the Israeli
air attacks have been on depots in the early hours, when no personnel were present. It has been
a campaign more of a regular, small slicing away at Iranian logistics. It was not strategic
damage.
And Iran, after sending clear 'messages' to Gulf States of its willingness to inflict pain
on parties to its economic siege, plainly had been calibrating this push-back carefully; Iran
still had its eye to global diplomacy (to wit: the joint Iranian naval exercises with Russia
and China in the Persian Gulf) – whilst countering politically, America's 'new' tactic of
inciting 'colour' protests across Lebanon and Iraq (and trying to bust Syria financially, by
stealing its energy revenues).
Here is the point: The US was no longer content with mere sanctions on Iran. It has been
covertly escalating across the board: orchestrating protests in Iraq, in Lebanon, and in Iran
itself; mounting a major cyber offensive on Iran; and a 'messaging' operation aimed at turning
genuine popular frustration with regional mis-governance and corruption, into a weapon aimed at
weakening revolutionary Iran.
The US was having some success with turning protest messaging against Iran – until,
that is – its killing and wounding of so many Iraqi security force members last week
(Ketaib Hizbullah is a part of Iraq's armed forces).
Escalation of maximum-pressure was one thing (Iran was confident of weathering that); but
assassinating such a senior official on his state duties, was quite something else. We have not
observed a state assassinating a most senior official of another state before.
And the manner of its doing, was unprecedented too. Soleimani was officially visiting Iraq.
He arrived openly as a VIP guest from Syria, and was met on the tarmac by an equally senior
Iraqi official, Al-Muhandis, who was assassinated also, (together with seven others). It was
all open. General Soleimani regularly used his mobile phone as he argued that as a senior state
official, if he were to be assassinated by another state, it would only be as an act of
war.
This act, performed at the international airport of Baghdad, constitutes not just the
sundering of red lines, but a humiliation inflicted on Iraq – its government and people.
It will upend Iraq's strategic positioning. The erstwhile Iraqi attempt at balancing between
Washington and Iran will be swept away by Trump's hubristic trampling on the country's
sovereignty. It may well mark the beginning of the end of the US presence in Iraq (and
therefore Syria, too), and ultimately, of America's footprint in the Middle East.
Trump may earn easy plaudits now for his "We're America, Bitch!", as one senior White House
official defined the Trump foreign policy doctrine; but the doubts – and unforeseen
consequences soon may come home to roost.
Why did he do it? If no one really wanted 'war', why did Trump escalate and smash up all the
crockery? He has had an easy run (so far) towards re-election, so why play the always
unpredictable 'wild card' of a yet another Mid-East conflict?
Was it that he wanted to show 'no Benghazi'; no US embassy siege 'on my watch' –
unlike Obama's handling of that situation? Was he persuaded that these assassinations would
play well to his constituency (Israeli and Evangelical)? Or was he offered this option baldly
by the Netanyahu faction in Washington? Maybe.
Some in Israel are worried about a three or four front war reaching Israel. Senior Israeli
officials recently have been speculating about the likelihood of regional conflict occurring
within the coming months. Israel's PM however, is fighting for his political life, and has
requested immunity from prosecution on three indictments – pleading that this was his
legal right, and that it was needed for him to "continue to lead Israel" for the sake of its
future. Effectively, Netanyahu has nothing to lose from escalating tensions with Iran -- but
much to gain.
Opposition Israeli political and military leaders have warned that the PM needs 'war' with
Iran -- effectively to underscore the country's 'need' for his continued leadership. And for
technical reasons in the Israeli parliament, his plea is unlikely to be settled before the
March general elections. Netanyahu thus may still have some time to wind up the case for his
continued tenure of the premiership.
One prime factor in the Israeli caution towards Iran rests not so much on the waywardness of
Netanyahu, but on the inconstancy of President Trump: Can it be guaranteed that the US will
back Israel unreservedly -- were it to again to become enmeshed in a Mid-East war? The Israeli
and Gulf answer seemingly is 'no'. The import of this assessment is significant. Trump now is
seen by some in Israel – and by some insiders in Washington – as a threat to
Israel's future security vis à vis Iran. Was Trump aware of this? Was this act a gamble
to guarantee no slippage in that vital constituency in the lead up to the US elections? We do
not know.
So we arrive at three final questions: How far will Iran absorb this new escalation? Will
Iran confine its retaliation to within Iraq? Or will the US cross another 'red line' by
striking inside Iran itself, in any subsequent tit for tat?
Is it deliberate (or is it political autism) that makes Secretary Pompeo term all the Iraqi
Hash'd a-Sha'abi forces – whether or not part of official Iraqi forces – as
"Iran-led"? The term seems to be used as a laissez-passer to attack all the many Hash'd
a-Sha'abi units on the grounds that, being "Iran-linked", they therefore count as 'terrorist
forces'. This formulation gives rise to the false sequitur that all other Iraqis would somehow
approve of the killings. This would be laughable, if it were not so serious. The Hash'd forces
led the war against ISIS and are esteemed by the vast majority of Iraqis. And Soleimani was on
the ground at the front line, with those Iraqi forces.
These forces are not Iranian 'proxies'. They are Iraqi nationalists who share a common Shi'a
identity with their co-religionists in Iran, and across the region. They share a common
zeitgeist, they see politics similarly, but they are no puppets (we write from direct
experience).
But what this formulation does do is to invite a widening conflict: Many Iraqis will be
outraged by the US attacks on fellow Iraqis and will revenge them. Pompeo (falsely) will then
blame Iran. Is that Pompeo's purpose: casus belli?
But where is the off-ramp? Iran will respond Is this affair simply set to escalate from
limited military exchanges and from thence, to escalate until what? We understand that this was
not addressed in Washington before the President's decision was made. There are no real US
channels of communication (other than low level) with Iran; nor is there a plan for the next
days. Nor an obvious exit. Is Trump relying on gut instinct again?
The murder of Iranian general Qasem Soleimani in Baghdad, in the early hours of January 3 by
US forces, only highlights the extent to which US strategy in the Middle East has failed. It is
likely to provoke reactions that do not benefit US interests in the region.
To understand the significance of this event, it is necessary to quickly reconstruct the
developments in Iraq. The US has occupied Iraq for 17 years, following its invasion of the
country in 2003. During this time, Baghdad and Tehran have re-established ties by sustaining an
important dialogue on post-war reconstruction as well as by acknowledging the importance of the
Shia population in Iraq.
Within two decades, Iraq and Iran have gone from declaring war with each other to
cooperating on the so-called Shia Crescent, favoring cooperation and the commercial and
military development of the quartet composed of Iran, Iraq, Syria and Lebanon. Such ties,
following recent victories over international terrorism, have been further consolidated,
leading to current and planned overland connections between this quartet.
Local movements and organizations have been calling for US troops to leave Iraqi territory
with increasing vigor and force in recent months. Washington has accused Tehran of inciting
associated protests.
At the same time, groups of dubious origin, that have sought to equate the Iranian presence
with the American one, have been calling for the withdrawal of the Popular Mobilization Units
(PMUs) that are linked to Iran from Iraq. The protests from such groups appear to be sponsored
and funded by Saudi Arabia.
With mutual accusations flying around, the US hit a pro-Iranian faction known as Kataib
Hezbollah on December 29. This episode sparked a series of reactions in Iraq that ended up
enveloping the US embassy in Baghdad, which was besieged for days by demonstrators angry about
ongoing airstrikes by US forces.
The US secretary of state, Mike Pompeo, blamed this volatile situation on Iran, warning that
Tehran would be held responsible for any escalation of the situation involving the embassy.
In the early hours of January 3, 2020, another tangle was added to the Gordian Knot that is
the Middle East. Qasem Soleimani was assassinated when his convoy was attacked by a drone near
Baghdad International Airport. The most effective opponents of ISIS and Wahabi jihadism in
general was thus eliminated by the US in a terrorist act carried out in foreign country in a
civilian area (near Baghdad International Airport). The champagne would have no doubt been
flowing immediately upon receiving this news in the US Congress, the Israeli Knesset, Riyadh
royal palace and in Idlib among al Nusra and al Qaeda militants.
It remains to be seen what the reasons were behind Trump's decision to okay the assasination
of such an influential and important leader. Certainly the need to to demonstrate to his base
(and his Israeli and Saudi financiers) plays into his anti-Iranian crusade. But there are other
reasons that better explain Trump's actions that are more related to the influence of the US in
the region; the geopolitical chess game in the Middle East transcends any single leader or any
drone attack.
In Syria, for example, the situation is extremely favorable to the government in Damascus,
with it only being a matter of time before the country is again under the control of the
central government. General Soleimani and Iran have played a central role in ridding the
country of the scourge of terrorism, a scourge directed and financed by the US and her regional
allies.
In Iraq , the political situation is less favorable to the US now than it was back in 2006.
Whatever progress in relations between Baghdad and Tehran has also been due to General
Soleimani, who, together with the PMUs and the Iraqi army, freed the country from ISIS (which
was created and nurtured by Western and Saudi intelligence, as revealed by Wikileaks).
It would seem that the US sanctions against Iran have not really had the intended effect,
instead only serving to consolidate the country's stance against imperialism. The US, as a
result, is experiencing a crisis in the region, effectively being driven out of the Middle
East, rather than leaving intentionally.
In this extraordinary and unprecedented situation, the Russians and Chinese are offering
themselves variously as military, political and economic guarantors of the emerging Eurasian
mega-project (the recent naval exercises between Beijing, Moscow and Tehran serving as a
tangible example of this commitment). Naturally, it is in their interests to avoid any extended
regional conflict that may only serve to throw a monkey wrench into their vast Eurasian
mega-project.
Putin and Xi Jinping face tough days ahead, trying to council Iran in avoiding an excessive
response that would give Washington the perfect excuse for a war against Iran.
The prospects of a region without terrorism, with a reinvigorated Shia Crescent, led by Iran
at the regional level and accompanied by China and Russia at the economic (Belt and Road
Initiative) and military level, offer little hope to Riyadh, Tel Aviv and Washington of being
able to influence events in the region and this is likely going to be the top argument that
Putin and Xi Jinping will use to try to deter any Iranian overt response.
Deciding to kill the leader of the Quds Force in Iraq proves only one thing: that the
options available to Trump and his regional allies are rapidly shrinking, and that the regional
trends over the next decade appear irreversible. Their only hope is for Tehran and her allies
to lash out at the latest provocation, thereby justifying the regional war that would only
serve to benefit Washington by slowing down regional unification under Iranian leadership.
We must remember that whenever the US finds itself in a situation where it cannot control a
country or a region, its tendency is to create chaos and ultimately destroy it.
By killing General Soleimani, the US hopes to wreak havoc in the region so as to slow down
or altogether scupper any prospect of integration. Fortunately, China, Russia and Iran are well
aware that any conflict would not be in any of their own interests.
No drone-launched missiles will be enough to save the US from decades of foreign-policy
errors and their associated horrors; nor will they be enough to extinguish the memory of a
hero's tireless struggle against imperialism and terrorism.
Trump has from the beginning of his presidential campaign appealed to the worst and most
fascistic elements in American political life. At a time when the US has no credible peer
military rival, he added hundreds of billions of dollars to the Pentagon budget, and the pudgy
old chicken hawk lionized war criminals. Up until now, however, Trump shrewdly calculated that
his base was tired of wasting blood and treasure on fruitless Middle Eastern wars, and he
avoided taking more than symbolic steps. He dropped a big missile on Afghanistan once, and
fired some Tomahawk Cruise missiles at Syria. But he drew back from the brink of more extensive
military engagements.
Now, by murdering Qasem Soleimani , the
head of the Jerusalem (Qods) Brigade of the Iranian Revolutionary Guards Corps, Trump has
brought the United States to the brink of war with Iran. Mind you, Iran's leadership is too
shrewd to rush to the battlements at this moment, and will be prepared to play the long game.
My guess is that they will encourage their allies among Iraqi Shiites to get up a massive
protest at the US embassy and at bases housing US troops.
They will be aided in this task of mobilizing Iraqis by the simultaneous US assassination of
Abu Mahdi
al-Muhandis , the deputy head of the Popular Mobilization Forces. Al-Muhandis is a senior
military figure in the Iraqi armed forces, not just a civilian militia figure. Moreover, the
Kata'ib Hizbullah that he headed is part of a strong political bloc, al-Fath, which has
48 members in parliament and forms a key coalition partner for the current, caretaker prime
minister, Adil Abdulmahdi. Parliament won't easily be able to let this outrage pass.
The US officer corps is confident that the American troops at the embassy and elsewhere in
Baghdad are sufficient to fight off any militia invasion. I'm not sure they have taken into
account the possibility of tens of thousands of civilian protesters invading the
embassy, who can't simply be taken out and shot.
Trump may be counting on the unpopularity among the youth protesters in downtown Baghdad,
Basra, Nasiriya and other cities of Soleimani and of al-Muhandis to blunt the Iraqi reaction to
the murders. The thousands of youth protesters cheered on hearing the news of their deaths,
since they were accused of plotting a violent repression of the rallies demanding an end to
corruption.
Iraq, however, is a big, complex society, and there are enormous numbers of Iraqi Shiites
who support the Popular Mobilization Forces and who view them as the forces that saved Iraq
from the peril of the ISIL (ISIS) terrorist organization. The Shiite hard liners would not need
all Iraqis to back them in confronting the American presence, only a few hundred thousand for
direct crowd action.
You also have to wonder whether Trump and his coterie aren't planning a coup in Iraq. In the
absence of a coup, the Iraqi parliament will almost certainly be forced, after this violation
of Iraqi national sovereignty, to vote to expel American troops. This is foreseeable. So either
the assassination was a drive-by on the way out, or Trump's war cabinet doesn't plan on having
to leave Iraq.
The mainstream media are carefully
sidestepping the method behind America's seeming madness in assassinating Islamic Revolutionary Guard general
Qassim Suleimani to start the New Year. The logic behind the assassination this was a long-standing application
of U.S. global policy, not just a personality quirk of Donald Trump's impulsive action. His assassination of
Iranian military leader Suleimani was indeed a unilateral act of war in violation of international law, but it
was a logical step in a long-standing U.S. strategy. It was explicitly authorized by the Senate in the funding
bill for the Pentagon that it passed last year.
The assassination was intended to escalate
America's presence in Iraq to keep control the region's oil reserves, and to back Saudi Arabia's Wahabi troops
(Isis, Al Quaeda in Iraq, Al Nusra and other divisions of what are actually America's foreign legion) to
support U.S. control o Near Eastern oil as a buttress o the U.S. dollar. That remains the key to understanding
this policy, and why it is in the process of escalating, not dying down.
I sat in on discussions of this policy as
it was formulated nearly fifty years ago when I worked at the Hudson Institute and attended meetings at the
White House, met with generals at various armed forces think tanks and with diplomats at the United Nations. My
role was as a balance-of-payments economist having specialized for a decade at Chase Manhattan, Arthur Andersen
and oil companies in the oil industry and military spending. These were two of the three main dynamic of
American foreign policy and diplomacy. (The third concern was how to wage war in a democracy where voters
rejected the draft in the wake of the Vietnam War.)
The media and public discussion have
diverted attention from this strategy by floundering speculation that President Trump did it, except to counter
the (non-)threat of impeachment with a wag-the-dog attack, or to back Israeli lebensraum drives, or simply to
surrender the White House to neocon hate-Iran syndrome. The actual context for the neocon's action was the
balance of payments, and the role of oil and energy as a long-term lever of American diplomacy.
The balance of payments dimension
The major deficit in the U.S. balance of
payments has long been military spending abroad. The entire payments deficit, beginning with the Korean War in
1950-51 and extending through the Vietnam War of the 1960s, was responsible for forcing the dollar off gold in
1971. The problem facing America's military strategists was how to continue supporting the 800 U.S. military
bases around the world and allied troop support without losing America's financial leverage.
The solution turned out to be to replace
gold with U.S. Treasury securities (IOUs) as the basis of foreign central bank reserves. After 1971, foreign
central banks had little option for what to do with their continuing dollar inflows except to recycle them to
the U.S. economy by buying U.S. Treasury securities. The effect of U.S. foreign military spending thus did not
undercut the dollar's exchange rate, and did not even force the Treasury and Federal Reserve to raise interest
rates to attract foreign exchange to offset the dollar outflows on military account. In fact, U.S. foreign
military spending helped finance the domestic U.S. federal budget deficit.
Saudi Arabia and other Near Eastern OPEC
countries quickly became a buttress of the dollar. After these countries quadrupled the price of oil (in
retaliation for the United States quadrupling the price of its grain exports, a mainstay of the U.S. trade
balance), U.S. banks were swamped with an inflow of much foreign deposits – which were lent out to Third World
countries in an explosion of bad loans that blew up in 1972 with Mexico's insolvency, and destroyed Third World
government credit for a decade, forcing it into dependence on the United States via the IMF and World Bank).
To top matters, of course, what Saudi Arabia
does not save in dollarized assets with its oil-export earnings is spent on buying hundreds of billion of
dollars of U.S. arms exports. This locks them into dependence on U.S. supply o replacement parts and repairs,
and enables the United States to turn off Saudi military hardware at any point of time, in the event that the
Saudis may try to act independently of U.S. foreign policy.
So maintaining the dollar as the world's
reserve currency became a mainstay of U.S. military spending. Foreign countries to not have to pay the Pentagon
directly for this spending. They simply finance the U.S. Treasury and U.S. banking system.
Fear of this development was a major reason
why the United States moved against Libya, whose foreign reserves were held in gold, not dollars, an which was
urging other African countries to follow suit in order to free themselves from "Dollar Diplomacy." Hillary and
Obama invaded, grabbed their gold supplies (we still have no idea who ended up with these billions of dollars
worth of gold) and destroyed Libya's government, its public education system, its public infrastructure and
other non-neoliberal policies.
The great threat to this is dedollarization
as China, Russia and other countries seek to avoid recycling dollars. Without the dollar's function as the
vehicle for world saving – in effect, without the Pentagon's role in creating the Treasury debt that is the
vehicle for world central bank reserves – the U.S. would find itself constrained militarily and hence
diplomatically constrained, as it was under the gold exchange standard.
That is the same strategy that the U.S. has
followed in Syria and Iraq. Iran was threatening this dollarization strategy and its buttress in U.S. oil
diplomacy.
The oil industry as buttress of the
U.S. balance of payments and foreign diplomacy
ORDER IT NOW
The trade balance is buttressed by oil and
farm surpluses. Oil is the key, because it is imported by U.S. companies at almost no balance-of-payments cost
(the payments end up in the oil industry's head offices here as profits and payments to management), while
profits on U.S. oil company sales to other countries are remitted to the United States (via offshore
tax-avoidance centers, mainly Liberia and Panama for many years). And as noted above, OPEC countries have been
told to keep their official reserves in the form of U.S. securities (stocks and bonds as well as Treasury IOUs,
but not direct purchase of U.S. companies being deemed economically important). Financially, OPEC countries are
client slates of the Dollar Area.
America's attempt to maintain this buttress
explains U.S. opposition to any foreign government steps to reverse global warming and the extreme weather
caused by the world's U.S.-sponsored dependence on oil. Any such moves by Europe and other countries would
reduce dependence on U.S. oil sales, and hence on U.S. ability to control the global oil spigot as a means of
control and coercion, are viewed as hostile acts.
Oil also explains U.S. opposition to
Russian oil exports via Nordstream. U.S. strategists want to treat energy as a U.S. national monopoly. Other
countries can benefit in the way that Saudi Arabia has done – by sending their surpluses to the U.S. economy –
but not to support their own economic growth and diplomacy. Control of oil thus implies support for continued
global warming as an inherent part of U.S. strategy.
How a "democratic" nation can wage
international war and terrorism
The Vietnam War showed that modern
democracies cannot field armies for any major military conflict, because this would require a draft of its
citizens. That would lead any government attempting such a draft to be voted out of power. And without troops,
it is not possible to invade a country to take it over.
The corollary of this perception is that
democracies have only two choices when it comes to military strategy: They can only wage airpower, bombing
opponents; or they can create a foreign legion, that is, hire mercenaries or back foreign governments that
provide this military service.
Here once again Saudi Arabia plays a
critical role, through its control of Wahabi Sunnis turned into terrorist jihadis willing to sabotage, bomb,
assassinate, blow up and otherwise fight any target designated as an enemy of "Islam," the euphemism for Saudi
Arabia acting as U.S. client state. (Religion really is not the key; I know of no ISIS or similar Wahabi attack
on Israeli targets.) The United States needs the Saudis to supply or finance Wahabi crazies. So in addition to
playing a key role in the U.S. balance of payments by recycling its oil-export earnings are into U.S. stocks,
bonds and other investments, Saudi Arabia provides manpower by supporting the Wahabi members of America's
foreign legion, ISIS and Al-Nusra/Al-Qaeda. Terrorism has become the "democratic" mode of today U.S. military
policy.
What makes America's oil war in the Near
East "democratic" is that this is the only kind of war a democracy can fight – an air war, followed by a
vicious terrorist army that makes up for the fact that no democracy can field its own army in today's world.
The corollary is that, terrorism has become the "democratic" mode of warfare.
From the U.S. vantage point, what
is
a "democracy"? In today's Orwellian vocabulary, it means any country supporting U.S. foreign policy. Bolivia
and Honduras have become "democracies" since their coups, along with Brazil. Chile under Pinochet was a
Chicago-style free market democracy. So was Iran under the Shah, and Russia under Yeltsin – but not since it
elected Vladimir Putin president, any more than is China under President Xi.
The antonym to "democracy" is "terrorist."
That simply means a nation willing to fight to become independent from U.S. neoliberal democracy. It does not
include America's proxy armies.
Iran's role as U.S. nemesis
What stands in the way of U.S.
dollarization, oil and military strategy? Obviously, Russia and China have been targeted as long-term strategic
enemies for seeking their own independent economic policies and diplomacy. But next to them, Iran has been in
America's gun sights for nearly seventy years.
America's hatred of Iran is starts with its
attempt to control its own oil production, exports and earnings. It goes back to 1953, when Mossadegh was
overthrown because he wanted domestic sovereignty over Anglo-Persian oil. The CIA-MI6 coup replaced him with
the pliant Shah, who imposed a police state to prevent Iranian independence from U.S. policy. The only physical
places free from the police were the mosques. That made the Islamic Republic the path of least resistance to
overthrowing the Shah and re-asserting Iranian sovereignty.
The United States came to terms with OPEC
oil independence by 1974, but the antagonism toward Iran extends to demographic and religious considerations.
Iranian support its Shi'ite population an those of Iraq and other countries – emphasizing support for the poor
and for quasi-socialist policies instead of neoliberalism – has made it the main religious rival to Saudi
Arabia's Sunni sectarianism and its role as America's Wahabi foreign legion.
America opposed General Suleimani above
all because he was fighting against ISIS and other U.S.-backed terrorists in their attempt to break up Syria
and replace Assad's regime with a set of U.S.-compliant local leaders – the old British "divide and conquer"
ploy. On occasion, Suleimani had cooperated with U.S. troops in fighting ISIS groups that got "out of line"
meaning the U.S. party line. But every indication is that he was in Iraq to work with that government seeking
to regain control of the oil fields that President Trump has bragged so loudly about grabbing.
Trump's idea that America should "get
something" out of its military expenditure in destroying the Iraqi and Syrian economies simply reflects U.S.
policy.
That explains the invasion of Iraq for oil
in 2003, and again this year, as President Trump has said: "Why don't we simply take their oil?" It also
explains the Obama-Hillary attack on Libya – not only for its oil, but for its investing its foreign reserves
in gold instead of recycling its oil surplus revenue to the U.S. Treasury – and of course, for promoting a
secular socialist state.
It explains why U.S. neocons feared
Suleimani's plan to help Iraq assert control of its oil and withstand the terrorist attacks supported by U.S.
and Saudi's on Iraq. That is what made his assassination an immediate drive.
American politicians have discredited
themselves by starting off their condemnation of Trump by saying, as Elizabeth Warren did, how "bad" a person
Suleimani was, how he had killed U.S. troops by masterminding the Iraqi defense of roadside bombing and other
policies trying to repel the U.S. invasion to grab its oil. She was simply parroting the U.S. media's depiction
of Suleimani as a monster, diverting attention from the policy issue that explains why he was assassinated
now
.
The counter-strategy to U.S. oil,
and dollar and global-warming diplomacy
This strategy will continue, until foreign
countries reject it. If Europe and other regions fail to do so, they will suffer the consequences of this U.S.
strategy in the form of a rising U.S.-sponsored war via terrorism, the flow of refugees, and accelerated global
warming and extreme weather.
Russia, China and its allies already have
been leading the way to dedollarization as a means to contain the balance-of-payments buttress of U.S. global
military policy. But everyone now is speculating over what Iran's response should be.
The pretense – or more accurately, the
diversion – by the U.S. news media over the weekend has been to depict the United States as being under
imminent attack. Mayor de Blasio has positioned policemen at conspicuous key intersections to let us know how
imminent Iranian terrorism is – as if it were Iran, not Saudi Arabia that mounted 9/11, and as if Iran in fact
has taken any forceful action against the United States. The media and talking heads on television have
saturated the air waves with warnings of Islamic terrorism. Television anchors are suggesting just where the
attacks are most likely to occur.
The message is that the assassination of
General Soleimani was to protect us. As Donald Trump and various military spokesmen have said, he had killed
Americans – and now they must be planning an enormous attack that will injure and kill many more innocent
Americans. That stance has become America's posture in the world: weak and threatened, requiring a strong
defense – in the form of a strong offense.
But what is Iran's actual interest? If it
is indeed to undercut U.S. dollar and oil strategy, the first policy must be to get U.S. military forces out of
the Near East, including U.S. occupation of its oil fields. It turns out that President Trump's rash act has
acted as a catalyst, bringing about just the opposite of what he wanted. On January 5 the Iraqi parliament met
to insist that the United States leave. General Suleimani was an invited guest, not an Iranian invader. It is
U.S. troops that are in Iraq in violation of international law. If they leave, Trump and the neocons lose
control of oil – and also of their ability to interfere with Iranian-Iraqi-Syrian-Lebanese mutual defense.
Beyond Iraq looms Saudi Arabia. It has
become the Great Satan, the supporter of Wahabi extremism, the terrorist legion of U.S. mercenary armies
fighting to maintain control of Near Eastern oil and foreign exchange reserves, the cause of the great exodus
of refugees to Turkey, Europe and wherever else it can flee from the arms and money provided by the U.S.
backers of Isis, Al Qaeda in Iraq and their allied Saudi Wahabi legions.
The logical ideal, in principle, would be
to destroy Saudi power. That power lies in its oil fields. They already have fallen under attack by modest
Yemeni bombs. If U.S. neocons seriously threaten Iran, its response would be the wholesale bombing and
destruction of Saudi oil fields, along with those of Kuwait and allied Near Eastern oil sheikhdoms. It would
end the Saudi support for Wahabi terrorists, as well as for the U.S. dollar.
Such an act no doubt would be coordinated
with a call for the Palestinian and other foreign workers in Saudi Arabia to rise up and drive out the monarchy
and its thousands of family retainers.
ORDER IT NOW
Beyond Saudi Arabia, Iran and other
advocates of a multilateral diplomatic break with U.S. neoliberal and neocon unilateralism should bring
pressure on Europe to withdraw from NATO, inasmuch as that organization functions mainly as a U.S.-centric
military tool of American dollar and oil diplomacy and hence opposing the climate change and military
confrontation policies that threaten to make Europe part of the U.S. maelstrom.
Finally, what can U.S. anti-war opponents
do to resist the neocon attempt to destroy any part of the world that resists U.S. neoliberal autocracy? This
has been the most disappointing response over the weekend. They are flailing. It has not been helpful for
Warren, Buttigieg and others to accuse Trump of acting rashly without thinking through the consequences of his
actions. That approach shies away from recognizing that his action did indeed have a rationale -- do draw a line
in the sand, to say that yes, America WILL go to war, will fight Iran, will do anything at all to defend its
control of Near Eastern oil and to dictate OPEC central bank policy, to defend its ISIS legions as if any
opposition to this policy is an attack on the United States itself.
I can understand the emotional response or
yet new calls for impeachment of Donald Trump. But that is an obvious non-starter, partly because it has been
so obviously a partisan move by the Democratic Party. More important is the false and self-serving accusation
that President Trump has overstepped his constitutional limit by committing an act of war against Iran by
assassinating Soleimani.
Congress endorsed Trump's assassination
and is fully as guilty as he is for having approved the Pentagon's budget with the Senate's removal of the
amendment to the 2019 National Defense Authorization Act that Bernie Sanders, Tom Udall and Ro Khanna inserted
an amendment in the House of Representatives version, explicitly not authorizing the Pentagon to wage war
against Iran or assassinate its officials. When this budget was sent to the Senate, the White House and
Pentagon (a.k.a. the military-industrial complex and neoconservatives) removed that constraint. That was a red
flag announcing that the Pentagon and White House did indeed intend to wage war against Iran and/or assassinate
its officials. Congress lacked the courage to argue this point at the forefront of public discussion.
Behind all this is the Saudi-inspired 9/11
act taking away Congress's sole power to wage war – its 2002 Authorization for Use of Military Force, pulled
out of the drawer ostensibly against Al Qaeda but actually the first step in America's long support of the very
group that was responsible for 9/11, the Saudi airplane hijackers.
The question is, how to get the world's
politicians – U.S., European and Asians – to see how America's all-or-nothing policy is threatening new waves
of war, refugees, disruption of the oil trade in the Strait of Hormuz, and ultimately global warming and
neoliberal dollarization imposed on all countries. It is a sign of how little power exists in the United
Nations that no countries are calling for a new Nurenberg-style war crimes trial, no threat to withdraw from
NATO or even to avoid holding reserves in the form of money lent to the U.S. Treasury to fund America's
military budget.
[2]
Michael Crowly, "'Keep the Oil': Trump Revives Charged Slogan for new Syria Troop Mission,"
The New
York Times
, October 26, 2019.
https://www.nytimes.com/2019/10/26/us/politics/trump-syria-oil-fields.html
. The article adds: "'I said
keep the oil,' Mr. Trump recounted. 'If they are going into Iraq, keep the oil. They never did. They never
did.'"
as if it were Iran, not Saudi Arabia that mounted 9/11,
Saudi Arabia mounted 9/11? LOL. As if Michael Hudson is much too smart and well connected to not know that
this is bullshit, so why write it? Oh wait, there's more
Behind all this is the Saudi-inspired 9/11 act taking away Congress's sole power to wage war – its 2002
Authorization for Use of Military Force, pulled out of the drawer ostensibly against Al Qaeda but actually
the first step in America's long support of the very group that was responsible for 9/11, the Saudi airplane
hijackers.
This article appears to be a bullshit banquet. I shall have to reassess my thoughts on Hudson. If you aren't
part of the solution you're part of the problem.
So maintaining the dollar as the world's reserve currency became a mainstay of U.S. military spending.
The main reason for the U.S. military is dollar protection. Idealogical wars(for Israel) don't get very far
without the money.
Fear of this development was a major reason why the United States moved against Libya, whose foreign
reserves were held in gold, not dollars
, an which was urging other African countries to follow suit in
order to free themselves from "Dollar Diplomacy." Hillary and Obama invaded, grabbed their gold supplies (we
still have no idea who ended up with these billions of dollars worth of gold) and destroyed Libya's
government, its public education system, its public infrastructure and other non-neoliberal policies.
I still don't know why the Libyan war doesn't get the attention it should like Iraq's WMD? The lie of "We
were trying to protect brown people in the middle east/north Africa" still stands with most Americans.
@NoseytheDuke
If Hudson got some minor detail wrong, it ultimately isn't that important as we are all struggling to see
through a glass darkly to find the truth in the daily deluge of lies. None of us have connected all of the dots
perfectly, though Hudson has connected more than most, more than you or I. And there are layers of narrative
about September 11, 2001. The idea that it was Saudi-inspired may not be the deepest level of the story, but
neither is it entirely false. And the Saudis provided the manpower for the attacks on the Twin Towers, just as
they are providing the boots on the ground, the Wahabi crazies, e.g., ISIS, Al-Qaeda, Al-Nusra and others, used
by the US/Israeli interests as a proxy army to take out Assad. This is Hudson's larger point.
Hudson gives us
a panoramic economic view of the reasons that neoliberal policies have of necessity become militarized (from
the Empire's point of view), why for instance the attempt to take out Assad had to be made. It is all about
maintaining the dollar as the world's reserve currency and keeping a steady income stream flowing into the US
Treasury, to fund the Empire's wars as well as domestic expenditures. He also explains why this is a war that
the US ultimately will not win. Michael Hudson is to be lauded for his laying out the big picture in clear,
economic terms. Not only is he not a part of the problem (although you might be, my trollish friend) he is a
national treasure and his writing should be read and discussed by all Americans.
The USA now faces two big problems. Iraqis want American troops out and most Americans agree. Now the
spinmasters (like Trump) must explain why American troops must stay. The US military now faces a tough
logistics problem. Bases in Iraq are supplied via trucks driven by local Iraqis. Most drivers will refuse to
work in sympathy with protestors or fear of them. Resupply by airlift is not practical, so thousands more
American troops will be needed as drivers who will be vulnerable to attack.
Once again, as usual, Michael Hudson comes up aces in his analysis. He gets it. It is always about the
Benjamins! As for the Trumptard, our cowardly, compromised, corrupt Congress Critters should fugeddibout their
farcical trumped up "impeachment" and any ridiculous "trial" in the Senate. It is high time to bring back the
Nuremberg Trials. The bloated, bloviating, narcisisstic, ignorant boob and war criminal is ready for his
closeup! The same goes for the enablers, whisperers and political ventriloquists who manipulate the dummy.
Great analysis with the exception of the bits about the climate warming hoax. One of these days–not long
now–this fakery will be completely exposed, and then, a lot of people–including most certainly Mr. Hudson–will
have a lot of egg on their faces. We can only pray for the decline of Saudi Arabia, the ending of NATO, the
de-dollarization of the world, the withdrawal of all US military from the ME (and most of the rest of the
world), and the final debunking of man-made global warming.
America's hatred of Iran is starts with its attempt to control its own oil production, exports and
earnings. It goes back to 1953, when Mossadegh was overthrown because he wanted domestic sovereignty over
Anglo-Persian oil.
It was the British who wanted Mossadegh overthrown because of their profits in the Anglo Iranian Oil Co..
The US was suckered in by the threat of Iran going communist.
1952: Mosaddeq Nationalization of Iran's Oil Industry Leads to CoupEdit event
Iranian President Mohammad Mosaddeq moves to nationalize the Anglo-Iranian Oil Company in order to ensure
that more oil profits remain in Iran. His efforts to democratize Iran had already earned him being named Time
Magazine's Man of the Year for 1951. After he nationalizes it, Mosaddeq realizes that Britain may want to
overthrow his government, so he closes the British Embassy and sends all British civilians, including its
intelligence operatives, out of the country.
Britain finds itself with no way to stage the coup it desires, so it approaches the American intelligence
community for help. Their first approach results in abject failure when Harry Truman throws the British
representatives out of his office, stating that "We don't overthrow governments; the United States has never
done this before, and we're not going to start now."
After Eisenhower is elected in November 1952, the British have a much more receptive audience, and plans for
overthrowing Mosaddeq are produced. The British intelligence operative who presents the idea to the Eisenhower
administration later will write in his memoirs, "If I ask the Americans to overthrow Mosaddeq in order to
rescue a British oil company, they are not going to respond. This is not an argument that's going to cut much
mustard in Washington. I've got to have a different argument. I'm going to tell the Americans that Mosaddeq is
leading Iran towards Communism." This argument wins over the Eisenhower administration, who promptly decides to
organize a coup in Iran.
(see August 19, 1953). [STEPHEN KINZER, 7/29/2003]
Entity Tags: Dwight Eisenhower, Harry S. Truman, Muhammad Mosaddeq
Timeline Tags: US confrontation with Iran, US-Iran (1952-1953
The evolutionary purpose of the human animal is to remove the carbon from the earth's crust and return it to
the atmosphere ..all the while the abundant cheap energy allowing overpopulation, eventually overshoot, and
then extinction. The carbon build up in the atmosphere will then usher in a new golden age of plant
life .eventually returning the carbon to the earth's crust and starting the animal-plant rotation cycle anew.
It's almost poetic ..your houseplant's genes will outlive yours.
Writing such an article without any consideration of the Zionist dimension is quite a feat. Probably it was
done on purpose to muddy the waters. Admit to some part of the story to try and bury another one.
CAGW
(catastrophic anthropogenic global warming) is a lie. To the extent that the world is warming, it is mostly
because of natural causes.
The Saudis and others are not American clients. They function in unison and synergeticaly with other
globalist elites. They play the role that is assigned to them, but the same can be said about all other
factions of these elites. These different factions are clients of each other, so to speak. There is a
hierarchy; we know who sits at the top. It's neither the Saudis nor any Anglo-Saxons walking around and making
noises in beltway circles.
Still, the guy is an economist purporting financial knowledge. (OTOH, he is evidently not rich.) He may care
to comment on the present situation in connection with the Fed's repo bailout and its 90% monetization of US
treasury debt.
America's war of terror is not about "oil"; it is about Israel. The ongoing US war in the Middle East is pushed
and promoted by the Israeli regime, the Zionist media (owned by Jews), and wealthy Jews on behalf of Israel.
The US does not need to control the oil. It is already in control of most of it, in Suadi Arbia, Qatar Kuwait,
UAE, etc. The so-called "US war for oil" is an old and rusty thesis fabricated by Zionist Jews and designed to
deflect attention away from Israel.
It's true that the US grip is slipping and it has been acting here and there to douse the fires that pop up.
However, as things become harder to manage-not like the old days-the question becomes how radical will the US
become in trying to hold on? It's a nuclear power with all sorts of military hardware that can inflict a huge
amount of damage and death. How far will it be willing to go to avoid being dislodged? Would it go nuclear? The
US may become a very dangerous country indeed as it throws whatever it has to keep it's position. Scary times
ahead.
Fantastic Article! The wars are always bankers wars. Follow the money
I got into understanding the
financial sector roughly 10 years ago from various economists (Michael included). I've been telling my friends
the same thing for a very long time. The fiat money system is what has enabled all the wrong in the world i.e.
exponential money printing, exponential population growth. With exponential population growth you have the
requirement for food, shelter, water (all natural finite resources).
Bravo, Michael, that was meant as to the one step further. You are the outsider – insider with balls today. The
key strategy of what holds up the US is the toxic pollution in thin air.
Putin, Xi, alternatively, second
row Germany – France's elites are up for the next move. Unilateralism is over.
Rational and logic dictates pulling in global population counts, migrations, resources, the long term
species survival into the accounting. No US matter, a global essentiality to which should live up local
policies. There are myriad variables as to the outcome, what is predictable, is that a status quo on today's
terms has come apart. Change is upon the power paradigms.
Nothing New here, these type of things go back to our Yangtze Patrol in China for Standard Oil and our Marines
kicking butt in the Caribbean and Central America for United Fruit in the 1920s and before.
@Toxik
Good to see an analysis that goes beyond the usual Trump Derangement- and Israel!- Syndromes. Then again, for
individual actors individual motivations (" wag-the-dog attack, or to back Israeli lebensraum drives, or
simply to surrender the White House to neocon hate-Iran syndrome.") reasonably play primary, co-equal or
supporting roles. It is almost as if people can have a number of intersecting motivations and loyalties.
Michael Hudson is an idiot, albeit a useful one. Or possibly he is crypto. In either case instead of naming the
jew, he rants about global warming and anti-semite conspiracies concerning jewish lebensraum.
In order to
seize Iraqi, Libyan or Syrian oil in general it is wise to leave the infrastructure intact so production can
immediately be resumed. In all of Wesley Clark's 7 countries in 5 years the oil production was decimated.
Why destroy the oil infrastructure? Because the primary goal was not oil, but destruction of society,
culture, economy, and ultimately genocide and Palestinian style ethnic cleansing. Hudson simply cannot point
out the obvious racial supremacist motivations of his judeo-masonic communist masters.
One theory behind the assassination is that both victims had become theats to their respective Iraqi and
Iranian leadership, and that both Iran and Iraq were in on the hit. Amadinijad is a crypto-jew and Iran is
chock full of Masonic architecture.
I still don't know why the Libyan war doesn't get the attention it should
The move or not into Lybia by Erdogan is pertinent as to Libia and it's greater realm these days. It is part
of the bargaining as to how Putin and Xi now are part of global decision making. If Erdogan moves, the top
layer of decision making globally can be confirmed
bi-polar
. As in coordinated decision making and the
nexus into the potential to impose coordinated policies that the US
" and you cannot do anything about it"
cannot deflect.
The impotence of it all no player brings something new to the table, the global masses are in for more
suppression (veganism?). Quality populations, managed proportional quotas, migrations based on quality of life,
global asset management, honest accounting, are into the mist of the generational future.
At first glance they seem to have found the perpetuum mobile:
Monopoly extorted petrodollar can be invested
in furthering the monopoly.
At second, it´s a Ponzi (surprise).
-"[] the Prince who relies on mercenaries will never be safe; (for) they are braggarts among friends and
cowards among the enemy."
– Forcing others to undercut you at any cost hollows out the domestic economy,
IOW the "outsourcings" are an inevitable consequence.
When they did it to Germany it caused the Great Depression (that much was "unintended").
This time?
What this translates to is the stakes keep getting higher, the returns diminishing,
and even with good will – and I rate (not J. Ed) Hoover as the last one with that claim –
there is no halfway palatable way out.
Even if the Orange Golem wanted to do the "right" thing (fat chance), he couldn´t;
not with 23T funded debt, ~260T unfunded liabilities (to include pensions) and nothing to export anyone would
want.
There´s nothing we can do either – just watch it crash and burn.
I wish there was a LOL option for entire articles.
Leftists never back up claims that US wars are for oil with any facts. For example,
they can never point to oil industry lobbyists lobbying for war. But we do see a huge crossover with Jewish
Zionist ideologues and those that actively plan and promote war policy.
Leftists never back up claims that US wars are for oil with any facts. For example, they can never point
to oil industry lobbyists lobbying for war.
But we do see a huge crossover with Jewish Zionist ideologues
and those that actively plan and promote war policy
.
Another mixed bag; some interesting points made here, yet accompanied by nonsensical premises or statements,
such as:
" reverse global warming and the extreme weather caused by the world's U.S.-sponsored dependence on
oil."
and
" the very group that was responsible for 9/11, the Saudi airplane hijackers."
I have come across this phenomenon numerous times already; experts providing valid but controversial
information in their field of expertise, who feel a need for then embedding self-negating passages alongside
it, as a trade-off; for instance also with gratuitously contrived references to allegedly faked moon landings,
or Hollywood's fantastical holocaust narrative. This is a very similar tactic to that of "poisoning the well".
@whattheduck
Follow the money and you find Sheldon Adelson, Bernard Marcus, and Paul Singer, Trump's biggest donors. Their
concern is not with oil or keeping the dollar as the reserve currency.
@Weston Waroda
Obscuring the real perpetrators of 9/11 is not a minor detail whether done intentionally or by accident.
Anything and everything that even appears to give credence to the official bullshit narrative about who really
did 9/11 is harmful to the nation and the entire world. Exposing the 9/11 perps is the most powerful key that
is capable of unlocking the grip on the throat and regaining the reins of the USA. He could have written, "as
if were Iran that mounted 9/11" without including, "not Saudi Arabia". The Devil, as always, is in the details.
And then you wrote the following utter nonsense, "And the Saudis provided the manpower for the attacks on the
Twin Towers". Read more, comment less.
This article appears to be a bullshit banquet. I shall have to reassess my thoughts on Hudson.
That's very very far from the truth the article is in fact extremely enlightening as to the mechanics of US
imperialism by way of petrodollar hegemony the Giant Ponzi Scheme inner workings laid bare
It's too bad you are monomaniacally fixated on one single issue that you cannot appreciate good knowledge
that doesn't pander to your hot button
I naturally don't agree with the silly notion about the Saudi 'hijackers' nor do I agree with the equally
silly conclusion that global warming is
definitely
caused by burning hydrocarbons, rather than much more
powerful natural mechanisms and cycles that have been around for eons
Prof Hudson may or may not be on board with these sentiments also,
but he chooses his battles carefully
as
one probably must in order to be taken seriously by a wider and more mainstream [brainwashed] audience
Consider for a moment that all of his
authoritative
explanations about the economic dimension of our
current scam system would be immediately dismissed by the pinheads that control our narratives, as the ravings
of a climate denier and 911 truther what good would that do ?
@nokangaroos
As for Israel, this is not elective either not even for "Eretz Israel from the Nile to the Euphrates".
It´s
about the water, plain and simple. The groundwater they have been using since independence is fossil (ice age),
not replenished and good as gone; as is the Jordan river.
They are already stealing water from the Palestinians, Jordan, Syria and Lebanon, and it isn´t anywhere near
enough.
They MUST have Southern Lebanon and the Bekaa, or it´s game over.
And who is in the way of that? Well Hassan Nasrallah and his merry company!
Ergo, Iran must go. What´s so hard to understand?
(Like "the greatest army in the world" "the most moral army in the world" should take to wearing pink tutus,
methinks)
So there also is no hope for peace from this side.
@restless94110
"Great analysis with the exception of the bits about the climate warming hoax. "plus, "calling for a new
Nurenberg-style [sic] war crimes trial." Nuremberg was a farce, show-trial to give Stalin cover for grabbing
eastern and central Europe. For the U.S. to be in the dock in a "new Nuremberg-style war crimes trial," it's
people and cities will have to have been bombed to smithereens and its women raped by the victor-armies. Whose
armies will have pulled that off?
Saudi Arabia mounted 9/11? LOL. As if Michael Hudson is much too smart and well connected to not know
that this is bullshit, so why write it?
You're the one who's full of shit, pal.
In 2016, several US Senators called on then President Obama to release 28 pages of official 9/11 report that
they claim reveal aspects of Saudi state involvement in the attacks. That is to say, intelligence agencies of
the United States government officially acknowledge this fact. So, yes, it is technically correct to say,
"Saudi Arabia mounted 9/11." And this is before we get to the Dancing Israelis, which, again, is not a
conspiracy theory, but an officially acknowledged reality.
@Weston Waroda
Hudson gets some things right, but he shoots himself in the foot with his "Saudi inspired 9/11" reference. This
is a major flaw and to describe it as minor is simply wrong or worse.
The only role played by the Saudis was
that of patsy and in doing so they gave just a slither of cover to the actual perpetrators. Such cover, as it
was, has long since been blown out of the water. That people can still repeat
the Saudis did it
line is
quite ridiculous, national treasures or not.
We've known for aeons that the US approach to the rest of the world is about oil and its role in keeping the
intrinsically valueless dollar afloat. Hudson isn't needed for that and his article reeks of sophisticated
damage limitation, concentrating as it does on the reasons why the US does the disgusting things it does.
Right now it is much more relevant to dwell on the unjustifiable brutality, immorality and illegality of the
US in its dealings with the rest of the world.
He may care to comment on the present situation in connection with the Fed's repo bailout and its 90%
monetization of US treasury debt.
Yes, I too would be interested in hearing a coherent analysis on the extraordinary money printing going on
now I understand it's up to half a trillion in a single month it sounds like somebody is trying to plug a
massive leak in the dam a la the little Dutch boy
Is the deluge coming ?
I also think you dismiss the professor's article based on minor quibbles I don't agree with man-made climate
change either, but it doesn't take away from the meat of the article, which is a lot of excellent insight into
the inner workings of the imperialist money machine
@eah
This is not a mutually exclusive thing. Why can't it be both a war for Zionism and a war for oil? It's
absolutely both! There is no reason to believe that the Zionist lobby and the petrodollar don't exist together
in one unholy marriage.
Michael Hudson fails the "9/11 litmus test " by making statements such as "the Saudi-inspired
9/11 act " and implying several times in his essay that the Saudis did 9/11.
@NoseytheDuke
This one hurts. My man Hudson proves here he is an active disinformation agent. As you note, he is too smart to
be a dupe. Starting to think that he and PCR are advanced limited hangout. Their role is to shunt us towards
the next prepared phase of the globalist script, which is the collapse of the west and its bogus "salvation" by
the "multipolar" NWO led by Russia and China. They want us to beg for this next turn of the screw. They want us
to beg for Putin and Xi to "liberate" us. Create problem, offer solution. What they have coming down the
pipeline two iterations from now is worse than we can imagine.
Oil and economics are part of the equation governing U.S. ME policy, but so are Israeli geopolitics, religion
and culture. Making economics the sole focus oversimplifies and over-reduces the holistic reality of our
grossly misdirected, hijacked foreign policy.
The synthetic American Second Founding ethos of civic nationalism along with the synthetic mythos of
"Judeo-Christianity" are a major element of why America sides with Israel and not the Arabs, Persians or other
regional powers. The Jewish-exacerbated and inflamed cultural enmity that Westerners feel toward Muslims, in
large part due to mass immigration championed by Jews and false-flag terror from the Dancing Shlomos on 9/11 to
ISIS today, is the other side of this pincer movement of cultural and political influence.
The author isn't wrong, but he's an economist. When all you have is a hammer
Although the shale resource estimates presented in this report will likely change over time as additional
information becomes available,
it is evident that shale resources that were until recently not included
in technically recoverable resources constitute a substantial share of overall global technically
recoverable oil and natural gas resources
.
Canada has a series of large hydrocarbon basins with thick, organic-rich shales that are assessed by this
resource study.
The claim that the US has an urgent need to secure oil supplies in the Middle East is not really supported
by the evidence vis-a-vis oil production and reserves.
Reminder the same people who want you to fight Iran also want you to live in a pod and eat bugs. Even in the
best case where you actually manage to get back alive, minus a limb or three, what awaits you is a glorified
drawer and maggot patties
@9/11 Inside job
However , Michael Hudson does write of " Saudi Arabia's Wahabi troops (Isis, Al Qaeda in Iraq , Al
Nusra) and other divisions of what are actually America's foreign legion " .
But it wasn't. There was no live TV coverage of the first WTC attack.
Pres. Bush lied about his initial knowledge of the 9/11 attacks, presumably to give them more time to
succeed. ABC News reported that Bush had been informed about the first WTC attack even before he left his
resort hotel that morning.
You are free to think, however, that it was the Saudis who paid for the glue on Bush's chair in that Florida
classroom on 9/11. Maybe they even paid Ari Fleischer to hold up that sign for Bush while the WTC was burning:
DON'T SAY ANYTHING YET
Why was his Press Secretary telling President Bush to keep his mouth shut for the time being? How did
Fleischer even know what Card had whispered in Bush's ear unless he was in on the plot?
All the talk about the Israelis, Jews, or the Saudis -- and now the dead Iranian general Soleimani -- being
responsible for 9/11, but nobody wants to talk about the Americans who were on duty that day, all of whom
dropped the ball in one way or another, starting with Pres. Bush, who sat in his chair rather than taking
immediate action to defend the United States against ongoing terrorist attacks.
Allowing an enemy or false flag attack to succeed is treason.
9/11 was the treasonous event that opened up this entire ugly can of worms in the Middle East, and
elsewhere, Mr. Gettysburg Partisan.
@Toxik
That is true. Just like the Brit WASP Empire. It was always about more money for the 1 to 5%, and if the white
trash – the vast, vast majority of the natives of the British Isles – got hammered over and over, so be it.
@John Burns, Gettysburg Partisan
It is not some of the folks who say that 9/11 is an Israeli false flag, it is all of the folks except for the
Israeli trolls. (And there are a lot of those!)
@NoseytheDuke
In the course of several threads Ron Unz has referred to the Twin Towers coming down at free fall speed into
their own footprints as key evidence against the official story. My recollection is that you have said much the
same. Correct?
So I ask what you make of this link provided by LK, one of the chosen for elephant stamps,
"FEMA, the Federal Emergency Management Agency, performed the first technical review of what brought down
the Twin Towers and WTC 7. Even in its report, FEMA acknowledges (inconveniently for the official story, which
cannot account for this fine destruction of the Twin Towers) that roughly 90% of the Twin Towers' mass fell
outside their footprints. Indeed, the entire plaza was covered with steel pieces and assemblies. Some of the
structural steel was thrown as far away as the Winter Gardens -- 600 feet"
You clearly care a great deal about 9/11 truth, and Ron's language is that of one convinced that the
official story is wrong in ways that matter so I seek to know whether you are given pause and reason to doubt
your own certainties by that evidence by the 3000.
Economic hit man Hudson reminds us of how many people Chase Manhattan killed in Vietnam
but somehow claims he doesn't know how the US stole Gaddafi's 44 tons of gold.
The poverty draft works in the US because we let the poor fight the wars for the rich and corporations. Tell
me who started the Iraq war, the Mullahs in Iran or the Mullahs in DC?
Hudson works the alternative media to disable dissent. The Democrats and Republicans will send internet
dissenters to psychiatric hospitals if they complain too much on the internet. The Iran war really means that
everyone needs to go along with the party line or get banned – total agreement between right wingers and left
wingers.
The wars in the mideast are not for oil, they are for Israel and Israels greater Israel agenda, and since
zionists control the FED and IRS the wars for Israel, which were instigated the last time by the joint Israeli
and ZUS attack on WTC and blamed on the Arabs to give the ZUS the excuse to destroy the mideast for Israel.
@Fluesterwitz
Perceptive as many of Dr Hudson's remarks are, the article is itself a wag-the-dog story inasmuch as, were it
not for US support for Israel, oil production in the ME would have remained under Western control at low prices
indefinitely.
It is not the case that oil prices quadrupled in early '74 because of the US quadrupling the cost of wheat,
which, if I recall correctly, had mainly to do with crop shortages in the USSR, as f.o.b. USGulf prices were
bid up dramatically from around $1.65 a bushel to nearly $7, and not by the US government or its proxies, but
by grain traders. The price of oil quadrupled independently and because of the US yet again backing of Israel
in its wars of aggression against the Arab nations.
There's also Dr Hudson's conspicuous misdirection about 9/11, blaming it on the absurd, fairytale narrative
for childish minds about nineteen Arabs who couldn't handle a Cessna 150 magically flying jetliners into
buildings magically exempted from the laws of physics during 9/11, making it clear he takes readers here for
morons. There are several dozen lines of relevant and substantial evidence overwhelmingly disproving the
official narrative and implicating Israel. If anything, Dr Hudson's participation in these elaborate efforts at
concealing the truth about 9/11 provide powerful evidence that he's a disinformation agent poisoning the well
by cognitive infiltration of sites opposing the ME wars.
We don't blame everyday Jews for any of this any more than we blame Italians for crimes of the Mafia, so
let's not hear hateful lies that we want these wars ended because we're the haters.
@John Burns, Gettysburg Partisan
I agree JB – Its a multi faceted MOnkey F that has as many end games, as the number of Think tanks – " Thinking
of every angle in the quest for Rule." Nokangaroo has it down with water – also. The US isn't just happy owning
the America's – they want Europe too, as they play the strong arm game for Israel. Whereas Russia , seems like
it just wants Russia , the Slavs, and wishes to trade its goods in mostly – Peace. Wanna be -Israel wants the
whole Mid East and the natural resources to itself and China wants a whole lot of the Worlds natural resources
through trade and loans that can't be paid back, or it seems to be. They are all the NWO players, but they have
different ideas on – Splitting the booty.
@Haxo Angmark
Tend to agree and I can see Mr Hudson's logic, which explains why the US wants to control (by allies or
proxies) Middle East oil despite being self-sufficient – but if that was the only reason, why aren't they
flattening wind farms and solar plants all over the world? I assume the Danes don't pay for their offshore
electricity in dollars.
I'm aware though that oil is still pretty unique in that it's the most portable form
of energy. No one is going to build a battery-powered aircraft carrier.
Maybe it's 50/50 between 'defending Israel' by attacking any functioning unfriendly ME state and keeping the
petrodollar, which would explain the attack on Libya, surely no threat to Israel.
Two little quibbles. Climate has always been changing. The desire to fill banks and government coffers for
essentially the air you breathe is what is new.
The second thing is the Democrats are not anti war. Think of the two parties as participants in a scripted
WWE wrestling match. To make matters worse most anti war groups have financially back by a non profit, who is
backed by more non profits. Wouldn't be that surprising is end of the donor road leads to the likes of the
Atlantic Council and its members. We're living in a matrix.
M. Hudson says : "The assassination was intended to escalate America's presence in Iraq to keep control the
region's oil reserves,"
Well, that's one "expert" opinion.
Here's
another :
" ..More than 13 years after Saddam's last hurrah on a Baghdad gallows, the US still has upwards of 30,000
troops and contractors in the immediate vicinity of the Persian Gulf. But why?
..it should be obvious by now that it's not the oil, either. At the moment the US is producing nearly 13
million barrels per day and is the world's leading oil producer – well ahead of Saudi Arabia and Russia; and is
now actually a net exporter of crude for the first time in three-quarters of a century.
Besides, the Fifth Fleet has never been the solution to oil security. The cure for high prices is high
prices – as the great US shale oil and Canadian heavy oil booms so cogently demonstrate, among others.
And the route to global oil industry stability is peaceful commerce because virtually every regime –
regardless of politics and ideology – needs all the oil revenue it can muster to fund its own rule and keep its
population reasonably pacified.
Surely, there is no better case for the latter than that of Iran itself – with an economy burdened by
decades of war, sanctions and mis-rule and an 80-million population that aspires to a western standard of
living.
So left to its own devices, Tehran would produce 5 million barrels per day from its abundant reserves.
That's barely one-tenth of its present meager output, which is owing to Washington's vicious sanctions against
any and all customers for its oil and potential investors in modernizing and expanding it production
capacity "
@BuelahMan
It is with some trepidation that I enter into this discussion.
But my take is the article was about the reason for the recent assassination, not the reason for the
invasion of SW Asia, the Middle East, SE Europe, and N Africa, which began in 1978, BTW.
The article did contain a few throw-away lines which were contentious and not necessary for his point.
All in all, I thought it was great. Thanks Michael.
@Wizard of Oz
Wizard of Oz says : ""FEMA, the Federal Emergency Management Agency, performed the first technical review of
what brought down the Twin Towers and WTC 7. Even in its report, FEMA acknowledges (inconveniently for the
official story, which cannot account for this fine destruction of the Twin Towers) that roughly 90% of the Twin
Towers' mass fell outside their footprints"
Riddle me this: why in god's name would you believe
anything
that FEMA, or, for that matter, any other government agency [e.g. N.I.S.T.] says did or did not happen on 9/11?
Do you also believe
anything
Trump/ Pompeo etc. are claiming as reasons for the [alleged]
assassination?
@John Burns, Gettysburg Partisan
This is true, it seems unlikely these wars are
purely
for the benfit of Zionism and Israel, granted they
are a major component but there are also Gentile interests here.
The only difference is that these wars
benefit Israel as a whole, its people and all. They only serve to beenfit a small handful of Gentiles though
and the rest of us goyim are seeing nothing but losses, this is why there is often a tendency to place the
blame solely on the Jews and push the Gentiles aside as simply
shabbos goyim
, these Gentiles are
actually benefiting but at the expense of their own people.
Michael Hudson has a lot to say about economics. I wish he would stick to that. I can't believe that anyone
with his IQ and interest in politics could be so deluded about 9/11. It's almost like running into a
field-theorist who happens to be a flat-earther.
I know many people have a great deal of difficulty
comprehending just how many wars are started for no other purpose than to force private central banks onto
nations, so let me share a few examples, so that you understand why the US Government is mired in so many wars
against so many foreign nations. There is ample precedent for this.
In the beginning of World War I, Woodrow Wilson had adopted initially a policy of neutrality. But the Morgan
Bank, which was the most powerful bank at the time, and which wound up funding over 75 percent of the financing
for the allied forces during World War I pushed Wilson out of neutrality sooner than he might have done,
because of their desire to be involved on one side of the war.
@Carlton Meyer
Trump has already threatened Iraqis with crippling sanctions if they insist American forces leave Iraq. And in
a bizarre twist to this blackmail, Iraq will be forced to "compensate" the Americans for their "investment".
Any sane individual would think it is Iraq that's owed compensation after a criminal war based on lies
destroyed a once prosperous and secular country. The American criminal gangster protection racket is about to
go full throttle.
@ Ron Unz: When I want to forward this article, or other articles on this site, and i click on email–nothing
happens. Two days ago, and years before, I'd click on email, give my name, email, type in Capcha, and get a
notice, Mail Sent. Now, nothing.
@YetAnotherAnon
It has been argued that Col. Muammar al-Gaddafi´s "Great Man-Made River" (a 40-year irrigation project) was of
no minor concern, as the Jews could have sat on their produce until it hatched
The reason behind the oil increase has nothing to do with the US (undocumented) quadrupling of the price of its
grain exports. It is rather linked to the blind (like today) support of ZioAmerica and the West for Israel in
the 1973 war. After the oil price quadrupling, the OAPEC countries threatened that they would cut their
production an additional 5 per cent per month, 'until Israeli withdrawal is completed from the whole Arab
territories occupied in June 1967 and "the legal rights of the Palestinian people are restored".
The 1973 oil shock was not a shock for everyone. While it had a devastating impact on world industrial growth,
it brought enormous benefits to major US and European banks and above all it was a godsend for oil majors, the
so-called seven sisters.These oil companies were able to invest in the north sea oil fields only when the oil
price quadrupled.
In early 1973, the bilderberg group discussed an imminent "400 per cent future rise in OPEC's price". At
bilderberg they knew beforehand the oil price was going to be quadrupled.
@Wizard of Oz
'Cause when you blow up a four hundred meter high building you can't get it to fall exactly in its own
footprint, no matter how hard you try. The firemen were told "another plane is coming" as the order to get out
when they finished evacuating the employees from buildings which were already 60% vacant. (And the buildings
had been vacant for some time which is why Silverstein bought them on the cheap, and why they were sold,
essentially for scrap.)
Without the dollar's function as the vehicle for world saving – in effect, without the Pentagon's role in
creating the Treasury debt that is the vehicle for world central bank reserves – the U.S. would find itself
constrained militarily and hence diplomatically constrained, as it was under the gold exchange standard.
Fascinating as it always is with this author, I wish Professor Hudson had enlarged on the block quoted
snippet above, or given a link to where he had explained it thoroughly for those of us less quick on the
uptake. He obviously has a great deal of knowledge about these things and the promise of unique insights
motivates me to concentrate. I could be quite negative if I held him to the fire for the absolute truth of
everything he has written in the piece, but such dogmatism would be throwing the baby out with the bathwater.
Most of what Prof, Hudson says is basically correct if you pull back from the detailed allegations he makes.
My criticisms would be he does have a tendency to write as if conscious intention is at work in the way America
acts, and the elite thus understands all the implications of what they are doing. If one is looking at
international politics the debt can be important, but in the final analysis (loans to Germany and its debts
before WW2 were from losing WW1) some nation states view others as a potential threat to be neutralised.
Moreover, countries like Saudi Arabia and Iran, or rather the Persian and Arabs, have a very long history of
enmity. Both are heavily dependant on oil prices for their ability to keep funding proxy wars. Saudi Arabia
tried to put the frackers of the United States Of America–now the world's largest exporter of petroleum–out of
business and failed. It would be silly to say the low interest rates in the US were intended to stop the
fighting in Syria, but they might have had that effect. Bethany McLean says fracking is afloat on a tsunami of
free money that cannot last.
[MORE]
https://www.resilience.org/stories/2019-02-04/venezuelas-collapse-is-a-window-into-how-the-oil-age-will-unravel/
The shift can be best understood through the concept of Energy Return on Investment (EROI), pioneered
principally by the State University of New York environmental scientist Professor Charles Hall, a
ratio which measures how much energy is used to extract a particular quantity of energy from any
resource. Hall has shown that as we are consuming ever larger quantities of energy, we are using more
and more energy to do so, leaving less 'surplus energy' at the end to underpin social and economic
activity. As the surplus energy available to sustain economic growth is squeezed, in real terms the
biophysical capacity of the economy to continue buying the very oil being produced reduces leading
the market price to collapse.
That in turn renders the most expensive unconventional oil and gas projects potentially
unprofitable, unless they can find ways to cover their losses through external subsidies of some kind,
such as government grants or extended lines of credit.
My understanding of ME geopolitics is that Britain created states to separate (gerrymander) the Arab
masses from the oil wealth of the region. Hence Kuwait ect. In 1953 a threadbare Britain told America
that without the income from Iranian Oil the financial status of the UK would be desperate. The US, which
had originally opposed a coup, went along with and funded one. America then deciding that Iran could be
Uncle Sam;s cop on the ME beat
gave
the Shah so much weaponry that the Arab nations became
extremely alarmed. The Shah's second (first was half German) wife told a story about how when she went to
tell their cook what she wanted for dinner her would turn his eyes away because she was wearing a bikini.
He also secretly prayed. It was a very religious country and yet the Shah's father had banned the veil in
1936.
Saudi Arabia gave 40 billion dollars to Saddam's Iraq to fight the Iran Iraq war against the Islamic
regime in Tehran. After a good start Saddam's army was halted and then turned back by the Iranians
ruthless use of their relatively huge population of young men as cannon fodder. The debts Saddam incurred
fighting against the Persians gave him a grudge against the family dictatorship oil wealthy countries and
that was a major reason he invaded Kuwait. If Iraq has so much oil of its own, then why would Saddam have
needed to invade a tiny neighbour?
On loan guarantees and the settlements issue Bush sent the Lobby packing with a flick of his eyebrow
and brought Israel to Madrid only having to give Israel revocation of UN Resolution 3379 (Zionism is
racism). All great stuff. It started the process that led to the Camp David 2000 Summit and Barak making
an offer for a final settlement that was if very hard to accept for the Palestinian side, still a serious
offer that they might have taken and successfully built on.
Bush the Elder and Scowcroft saw the problem of a US army in Iraq, so the just evicted Saddam from
Kuwait, but the US army in Saudi Arabia they did not seem to worry about even though it would have to be
there as long as Saddam ran Iraq, and the 1979 Grand Mosque seizure showed there was a strong dislike of
the Saud regime's westernisation. Bush the Elder sent the Lobby packing with a flick of his eyebrow and
brought Israel to Madrid only having to give Israel revocation of UN Resolution 3379. Down the line there
was the Camp David 2000 Summit and Barak making an offer for a final settlement that was serious.
The Saudi ambassador at the time of 9/11 lobbied hard for an invasion to overthrow Saddam. American
strategists regard Saudi Arabia as a the richest prize in the world and a client state so they had to
invade Iraq and neutralize it as a threat Saudi Arabia in order to be able to withdraw their army (that
had been there since Saddam had been kicked out of Kuwait, but left in power in Iraq) from Saudi Arabia.
Osama bin Laden's main complaint and the cause of domestic unrest in Saudi Arabia was disgust with the
Saud regime's decision to allow the U.S. military into the country in 1990 to deter an attack by Saddam
Hussein. To retain Saudi Arabia within the US's orbit, it was necessary to overthrow Saddam. Yes Iraq has
oil, but not that much. As already mentioned the Middle East was drawn up so the oil is where the Arab
masses cannot get at it without an invasion of another country.
Recently, researchers and academics have revisited the attack on the USS Liberty and have uncovered credible
evidence that the vicious murderous onslaught was a false flag perpetrated by Iranian jets disguised with the
markings of America's best friend in a diabolical attempt to drive a wedge between bosom buddies and shatter
all of judeo-christian civilization. Furthermore, very credible witnesses who can't be named at this time to
insure their safety overheard the swarthy men with rifles on the grassy knoll overlooking Dealy Plaza speaking
Farzi back in 1963. What more evidence could anyone possibly need as to exactly who is threatening world peace
and stability? As to 9/11, everyone knows it was perpetrated by those sneaky Iranians impersonating Saudis and
then trying to promote the event as an inside job perpetrated by our best friend and ally.
This one hurts. My man Hudson proves here he is an active disinformation agent.
No, he cannot touch the third rail!
Hudson is a balance of payments specialist, and he knows full
well how the Petrodollar system works. He has exposed it.
He did good work on Panama papers episode. It is up to us to carefully parse what Hudson is saying, and the
fact that we have to do this implies just how dangerous ZOG has become.
The Saudi's are PART OF ZOG. I have had to repeat this ad-nauseum. You can follow the money. MI6 abets Saudi
Coup at the behest of oil interests e.g. BP/Shell. Compliant Saudi Kingdom is installed and later America takes
over security guarantees via 73 Kissinger agreement. The Petrodollar/Tbill economy is born – Hudson has
explicitly described this mechanism, it is up to you to peer through the veil. Super Imperialism is his first
work on this balance of payment charade that forms our world.
Wahabbism is part of the construct as it enshrines Saudi Kingdom as the leader of Islam (their brand) and
Mecca. Zion/Globo-homo is actually State Sponsored Usury, and their real god is Moloch and Mammon.
I get it that people are tired of the Saudi's did 911, when instead it was a matrix of ZOG, including Mossad
and Sayanim in America along with "international globo-homo interests, including the deep-state."
The common denominator is that all of these players are tethered to international federal reserves notes
(international corporate banking), or finance capital that won WW2.
If the globo-homo cabal can maneuver the polity to win WW2, then it can maneuver to have Hudson
disappeared/executed or however you want to put it.
Hudson is very smart, and is using code language for us to follow, while still exposing the truth of things.
The Saudi's did 911 wink wink nudge nudge.
It would be nice if we could get the truth in one sitting without having to sift through BS, but that is not
the way the world works today.
With regards to PCR, he pretty much has larger stones than Hudson, and does not couch his language as
carefully. PCR will call out the Jew and his usury and you know these two men talk to each other.
Hudson knows full well what is going on. What do you think his important career would look like if he named
the Jew?
Michael Hudson, with whom I often disagree, provides an excellent analysis of one reason behind Suleimani's
assassination, the USA establishment's determination to effectively control the world's energy no matter what
the cost,
Unfortunately Hudson fails to consider the role of Israel. The Israelis cannot establish the local
regional hegemony they want as long as Iran, a traditional regional power, is a functioning nation. Israel is
desperate to destroy Iran. Therefore, Israel's traitorous, Zionist fifth-column in the USA will do everything
in its power to encourage and defend any politician who promotes aggression against Iran and to attack any
politician who stands against this insanely immoral and counterproductive policy. Zionist's in this country
currently have a stranglehold on the USA's policy in North Africa, the Levant, the Near East. And Southwest
Asia. I don't see how this can change unless the people of the United States are brutally forced to deal with
the consequences of this policy and finally become aware of the espionage and lobbying groups responsible for
it.
Wow. I am usually a big fan of Hudson's but this analysis is just an effort to conceal the truth. While it's
true that "dollar hegemony" and and the 'control of oil' factor large in washington's geopolitical
considerations, those considerations could have been adequately addressed by simply observing the "nuke's deal"
which would have allowed Iran to sell oil and gas to Europe in dollars, as was intended.
So why did Trump blow up the deal???
He blew it up for the same reason he made Jerusalem the capital of Israel, and the same reason why he gave
Israel the green light to settle the west Bank. He blew up the nukes deal because that is what is main
deep-pocket constituents wanted him to do and because he believes that his best path to greater personal power
is by placating his zionist constituents. This is the choice Trump has made. and he is one false flag away
from realizing his dream of nearly absolute power.
Hudson's article is a diversion from the ugly truth that is unfolding before our eyes
If people want to know about money and the maneuverings of the cabal, then E Michael Jones serves that role.
Jones has decided to name the Jew, and of course they are doing their best to demonetize and demonize him.
Hudson won't go there -- get over it. Others have also complained about Hudson in this regards. If you look
very carefully you can see that Hudson is not being disingenuous.. he is not a disinfo agent, he is dropping
clues.
People like PCR and myself can still admire the man and we can also admit Hudson is not as much of an Alpha
male as we are.
The world is made up of different kinds of people, including some men who are more girly, reticent and
careful.
@bjondo
I have no idea I have an open mind and just look at facts not religion or place of birth.
December 2, 2018
Bush Family Links to Nazi Germany: "A Famous American Family" Made its Fortune from the Nazis
The Bush family links to Nazi Germany's war economy were first brought to light at the Nuremberg trials in
the testimony of Nazi Germany's steel magnate Fritz Thyssen.
Jan 2, 2012 Bush & Rockefeller family's funded NAZI war effort and laundered NAZI money
IG Farban which is the German company that held the patent for Zyklon B was being funded by Rockefeller
owned Standard Oil. Union Banking Corp whose Director and Vice president was Prescott Bush (father of George)
was money laundering for the Nazis and after the war ended its assets were seized for trading with the enemy.
Recently, researchers and academics have revisited the attack on the USS Liberty and have uncovered
credible evidence that the vicious murderous onslaught was a false flag perpetrated by
Iranian
jets
disguised with the markings of America's best friend in a diabolical attempt to drive a wedge between bosom
buddies and shatter all of judeo-christian civilization.
LoL.
It was Israeli Jets, and sneaky Mossad wanted U.S. to bomb Egypt, so "greater Israel" the Zion project could
come into effect. LBJ was in on the charade. By this point in history, the U.S. was fully infiltrated at the
highest levels.
Through deception do war -- is that what you are doing, being deceptive? The Iranians have never been our
enemy.
Also, there is no such thing as JUDEO-CHRISTIANITY. That is a made up term so Jews can dupe Christian Goyim.
It takes lots of usury to fund deception of this magnitude.
The New TESTAMENT supersedes the old. Christian doctrine of super-session IS OPERATIVE, and means that any
sect emphasizing old testament is a Judaiser, and hence should be shunned.
If you catch yourself saying the words Judeo-Christianity, then do a face-palm and realize you have been
hoaxed and are repeating deception.
@plantman
To me it seems the US and it's lackeys are continually and repeatedly provoking Iran by committing actions
which are acts of war or merit strong retaliation, which could cascade and escalate into causes of war. This
recent assassination is similar to the hijacking of Iranian oil tankers earlier this year. This pattern has
been present and escalating in intensity since immediately after the Iraq war. There was a partial hiatus under
Obama because he personally disliked the zionists so much. We will be at war with Iran sooner or later, just as
with Iraq, if republicans keep the White House.
Hudson is obviously avoiding talking about the Zionist angle,
probably for his own security -- I'll wager he doesn't have tenure yet. He talks about the OPEC embargo of the 70s
without mentioning Israel. It's openly known that this was in retaliation for western support of Israel during
the Yom Kippur war. There's no way he could be that uninformed.
@sarz
Sara says: "Michael Hudson has a lot to say about economics. I wish he would stick to that. I can't believe
that anyone with his IQ and interest in politics could be so deluded about 9/11"
Well, if it's any
consolation, his "government knows best", grandiose economic "theories"are no less delusional than his. 9/11
theories
This essay provides a glimpse of the satanic levels of Greed and Psychopathy of the whitrash civilisation
(previously it was the British, and now the baton is with the AmeriKKKans). This spiritually and morally cursed
cesspool's "success" in this world has been predicated on such unabashed Evil. Surely it will not be worth it
as they will find themselves writhing in a Fiery torment, soon enough.
I think what this world desperately
needs is whitey "genocide." The quotes signify the fact that since I am a true monotheist, I can never ever
condone that level of bloodshed. So, what is required is reducing the number of whiteys in the world, so as to
curtail their demonic Evil.
@Cowboy
Excellent points. Not so sure about Free Masons though.
– And recall that most of the big oil field drilling
/ management contracts went to Russia, China, & Europe after the US / Israel invasions, not the US.
– Zionists love guys like Hudson who all too conveniently attempts to deflect attention away from Israel.
–
US oil companies make about six cents off a single gallon of gasoline, on the other hand there's US Big
Government, taxes per gallon
:
That's before federal taxes of ca. 20 cents per single gallon
@eah
No disrespect, but the EIA report is not entirely correct.
First, While the US is a large producer of hydrocarbons this is not the same as oil. For example, the
Permian Basin produces about 98% condensates which must be blended with overseas oil the produce products in US
oil refineries. As a result the US must import heavy oil, such as Urals heavy for blending purposes. See the
Peak Prosperity website for details.
Second, globalism is not just about ownership of products but also about the control of their rates of
production and the control of the transport routes. America is trying to selectively stop production and if
this fails stop transport from those countries that are not part of the US$/Zionist economy.
Third, technically recoverable oil is not the same as economically recoverable oil. As the Our Finite World
website points out, recoverable oil is limited by what the population can pay for it or products produced or
delivered using that oil. Remember the strong correlation between energy use and GDP.
Fourth, Production of primarily condensates and gas from most fracking operations is overall an economic
loss for most investors and poses external economic and environmental costs not factored into the cost/benefit
analysis of the corporations.
Fifth, the EIA and US DOE are greatly overestimating the lifetime of the fracking boom which will start
declining in the 2022-2025 time-frame.
I will admit that the US needs to export excess natural gas (Freedom gas) from the fracking operations.
Currently, the Permian producers have to pay for the gas to be taken away or flare it at a rate of about
3bcm/year. The dramatic 100% drop in the price of natural gas in Western Europe has derailed the grand plan for
LNG export, or at least caused the countries that entered into long term contracts, such as Poland and Ukraine,
for delivery to pay much more for gas than those that rely on pipeline transported gas.
Currently, natural gas sells for $146/100 cm. In contrast, Cheniere gas prices are 115% of Henry Hub price +
liquefaction fee of around $3 per million British thermal units (mmBtu). This corresponds to as LNG price of
about $320/1000cm. To compete against Russian and Norge natural gas the US government is indirectly subsidizing
those countries receiving "Freedom Gas" via foreign aid to take the gas!
The solution turned out to be to replace gold with U.S. Treasury securities (IOUs) as the basis of
foreign central bank reserves. After 1971, foreign central banks had little option for what to do with their
continuing dollar inflows except to recycle them to the U.S. economy by buying U.S. Treasury securities.
Correct Nixon goes off of international trading gold standard in 1971. This forces dollar accumulation in
central banks to recycle back to the U.S. to buy TBills (debt). Foreign economies can no longer buy gold to
balance international trade.
Saudi Arabia and other Near Eastern OPEC countries quickly became a buttress of the dollar. After these
countries quadrupled the price of oil (in retaliation for the United States quadrupling the price of its
grain exports, a mainstay of the U.S. trade balance),
In 1971, OPEC negotiated a higher posted price and a 55% minimum profit share in the Tehran Agreement.
But the dollar's falling purchasing power after the 1971 Nixon shock had already put a big strain on the
Agreement's fixed posted prices. US support for Israel during the October 1973 Yom Kippur War was the final
straw. A resulting embargo lasted until March 1974, but after it was removed low and stable posted prices
failed to return.
U.S. banks were swamped with an inflow of much foreign deposits – which were lent out to Third World
countries in an explosion of bad loans that blew up in 1972 with Mexico's insolvency, and destroyed Third
World government credit for a decade, forcing it into dependence on the United States via the IMF and World
Bank).
Foreign deposits of surplus dollars were flowing into "private banks' and these private banks then agitated
to have Mexico redefined as "emerging market" instead of third world. This then allowed predatory
"international" loans to go forth. See Perkins, Confessions of an Economic Hitman. Part of Mexinvasion of
Mestizo's into the U.S. can be tracked to this event. Our finance class is an internal enemy and a parasite.
(Never allow your debt to be denominated in a foreign currency – this is an Iron Law of Economics, not
taught in Skools.)
To top matters, of course, what Saudi Arabia does not save in dollarized assets with its oil-export
earnings is spent on buying hundreds of billion of dollars of U.S. arms exports. This locks them into
dependence on U.S. supply o replacement parts and repairs, and enables the United States to turn off Saudi
military hardware at any point of time, in the event that the Saudis may try to act independently of U.S.
foreign policy.
The Saudis are not going against their MI6 masters, and besides are dependent on foreign technology to
extract their oil, and get said oil to dollarized markets. By the time Kissinger shows up in 1973, the pattern
is already in place. The oil shock in 1974 is due to Kissinger Saudi 1973 agreement, which legitimated OPEC
cartel (monopoly). The 1973 Agreement codified the petrodollar Tbill economy that MIC and "liberalism"
globo-homo now depends on.
So maintaining the dollar as the reserve currency became a mainstay of U.S. military spending. Foreign
countries to not have to pay the Pentagon directly for this spending. They simply finance the U.S. Treasury
and U.S. banking system.
Returning petrodollars fund some 800 U.S. overseas military bases. The return path is through purchasing of
TBills, and then said TBills are held in offshore accounts. Dollars then spin out of TBill and spent to enter
into dollarized economies worldwide. This is a form of inflation tax on the world. When U.S. deficit spends new
TBills, then they find returning petrodollars dollars, or said TBill can be monetized by the FED (which has
been happening in recent years.) U.S. government then spends new deficit dollars on MIC. Saudi also recycles
dollars through CIA to buy from MIC. Is it any wonder that China and Russia are working diligently to
de-dollarize their trading affairs?
That is the same strategy that the U.S. has followed in Syria and Iraq. Iran was threatening this
dollarization strategy and its buttress in U.S. oil diplomacy.
Iran is part of Russia/China axis that is de-dollarizing and hence is threatening globo homo deep state
finance capitalism (ZOG). Iran is in the way of Greater Zion, and is central to Belt and Road, and will not bow
down to Globo Homo.
The U.S. is on the wrong side of history, especially after it got brain infected and parasitized in 1912 by
the (((usual suspects))).
The poverty draft works in the US because we let the poor fight the wars for the rich and corporations.
Tell me who started the Iraq war, the Mullahs in Iran or the Mullahs in DC?
More accurate question would be
The poverty draft works in the US because we let the poor fight the wars for the rich and corporations.
Tell me who started the Iraq war, the Mullahs in Iran or the Rabbis in DC
?
That's a brazen hardLeft lie . and the central dynamic isn't oil per se; it's the petrodollar.
1) It's not a hard Left lie, it's a globalist lie. It is the justification for further de-industralization
of the "bad 1st world" who do "all the polluting" and ship it to the 3rd world where peoople are paid slave
wages.
2) If you control the oil, you control the currency/petrodollar.
I do agree that it is indirect, but at the end of the day, it's the same thing. Iraq was invaded because its
oil was primarily going to the EU, and Saddam wanted Euros for it, not US dollars.
More than a decade ago, Iran opened its oil bourse. It was prepared to take any currency for oil sales. It has,
in fact, taken gold from India as payment.
Venezuela's Bolivarian Revolution was to trade oil for a different product. Doctors from Cuba, beef and other
foodstuffs from Brazil and Argentina, for example.
All of the above are examples of de-dollarization, and will never be tollerated. They all link to another facet
of the program: all opponents are the new Hitler. In some respects, this is correct. The German economy was
turned around using its version of Lincoln's greenbacks and trading commodity for commodity, often raw material
for manufactured goods. The (((banks))) were nowhere in that equation, therefore, Hitler had to be demonized,
just as Israel began demonizing Saddam in the early 1980s with the fictitious Saddam's WMD, before a nuclear
reactor was even commissioned. It's all about currency control, or as the vile Congresswoman Omar would put it
"the Benjamins".
CAGW (catastrophic anthropogenic global warming) is a lie.
No, it's not a lie, it's a hypothesis.
To quote the UN International Panel on Climate Change, Third Report, Chapter 14, Section 14.2.2.2, (2001):
In climate research and modelling, we should recognize that we are dealing with a coupled non-linear
chaotic system, and therefore that the long-term prediction of future climate states is not possible.
@NoseytheDuke
I suspect that Prof. Hudson is exaggerating on it being Saudi inspired, however, there is more than a break
even chance they were involved. What you, and others are missing is the reference to legislation. I am
acquainted with a lawyer who worked for the city at the tome of 9/11. When the Patriot Act came out of nowhere
to be passed less than 3 months after 9/11, a controversial city by-law had been proposed. I casually asked,
how long it took to produce a draft by-law, and the response was, typically 4-6 months, as the proposed by-law
had to be cross referenced with all other by-laws to ensure that it neither conflicted with, nor used terms
that would cause confusion in interpretation of the by-law or any court decision.
So, if it takes 4-6 months for a city by-law, how long do you think it might take to cross-reference the
Patriot Act and/or the Authorization for Use of Military Force legislation to check against the Constitution,
all other laws, and all court rulings that would touch on the matter? Hence, the author's "pulled out of the
drawer ostensibly against Al Qaeda ", which is the whole point of his article – the fix is in.
Well, if it's any consolation, his "government knows best", grandiose economic "theories"are no less
delusional than his. 9/11 theories
There goes the Lol-bertarian one born free-dumb again.
If you ignore gravity, you fall down and bump your head.
Human relations are NOT PURELY TWO WAY. This is as axiomatic as gravity. You have to make pretend to be a
lolbertarian, and only little girls and the deluded make pretend about things.
The plain fact of the matter is that human relations include three parties. When you get into trouble, you
will be one of the first to go whining to a sheriff, or some authority (the king) to help.
Civilization is impossible without an honest third party interlocutor. Did I say IMPOSSIBLE.
How this third party interlocutor is controlled or placed into our governing hierarchy is an entirely
different subject.
Everybody's eyes should focus on good government, not some sort of lolbertarian fantasy of a world with only
two way relations and some sort of nebulous laughable "human action," or making gold as a god.
Hudson is doing a good job of showing how the god of money, MOLOCH has infested the mind of man, and has
become our "king."
It will actually take some sort of facism or king to overcome the democrap/finance capital construct which
lolbertarans make excuses for. Dupes.
@Wally
Don't forget BLM land grabs in Nevada and Oregon, and the Soleimani style assassination of Levoy Finicum.
Here is a recent comment I made that b blocked at MofA:
Now we need for Trump to assassinate Lavrov in Berlin and create another Russian martyr that would cause
Germany to end the SOFA and throw the US occupation out after 75 years!
These latest revelations that Soleimani had been invited on behalf of the USA to Bahgdad shows how
deprave the USA has become. The latest Douma "chemical weapons" revelations and the following Trump cruise
missile retaliation illustrates how entire chains of fake action/retaliation chains are created. I think we
have to assume that the entire Katayusha rocket attack and the "dead contractor" are fake/staged. The
retaliation bombing was true, but its justification was faked. The attack on the US Embassy was clearly
staged by US agents provocatuer who were allowed into the green zone.
These plausibly deniable war provocations have an long history. In Germany's case in 1939 it was Polish
atrocities like
Bromberg
.
Germany, like Iraq, still has a constitution crafted by the usual suspects during occupation. Iraq, like
Germany, will never get rid of the Yankee parasites without a fight.
Since then, and upon further consideration, Japan, South Korea, Spain, Italy and most of the planet would
love to expel the US occupation and free themselves. Many would do well to completely destroy their old
Judeo-Masonic constitutions and write something free of talmudic mind control.
Tim Kelly and Joe Atwill have a
recent podcast
where they discuss the occupation of Japan by 33 degree Douglas MacAuthur. It turns out that
MacAurthur hired a 22 year old jewess to write the Feminist Civil Rights clauses into the still valid
occupation constitution. The demographic collapse of Japan, Germany and all the occupied countries was a
deliberate multi-generational conspiracy, just like the one against Iran.
@Smith
Indirectly. All wars are economic wars, only the bankers, and what they own, benefits. The Rothschilds are the
kings of banking, and bankrollers/owners of Israel. The Greater Israel/Rothschild project is to control all of
the oil in the ME. Ignore all of the "tribes of Israel" and "historic homeland" nonsense. It's about wealth and
power.
https://www.globalsecurity.org/military/world/israel/greater-israel-maps.htm
@FB
Hudson's account of the way the US Empire funds its occupation of the world is correct. The World accepts newly
printed US dollars -- ink money as it is sometimes known, in exchange for oil and other goods and assets, and
then hands those dollars back to the US Fed in exchange for bonds yielding a below-inflation rate of interest.
What, depending on you point of view, is a nice side benefit of this arrangement is that corporations, their
share holders and other financially astute investors get to borrow money (directly or indirectly) at what are
near zero or even below zero real interest rates. In that circumstance, naturally, an ever increasing
proportion of all wealth accumulates in the hands the great corporations, investors, and others astute enough
to understand and take advantage of the ongoing scam.
Overall, one would not object too much to American global hegemony, even an American hegemony funded by the
debasement of currency, destruction of savings, and the obscene wealth of the plutocratic few, provided that
said hegemony was exercised in the interests of the people of what the US used to call "The Free World."
But clearly American hegemonists don't give a damn for the American people, let alone the people of the
tributary nations. On the contrary, they seem intent on destroying not only the peoples of subject nations but
their own people too, both culturally and literally, racial genocide being effected by a combination of
repressed fertility and mass replacement immigration.
@Krollchem
I'm aware there are different kinds/grades of crude.
Third, technically recoverable oil is not the same as
economically recoverable oil.
Yes, the lives of young men are so much cheaper, right? -- I guess that's where the term "cannon fodder"
comes from -- anyway, technically vs economically can also be seen as
a matter of national energy policy
,
like e.g. the strategic petroleum reserve -- does the US really need to spend more on its military than all
other countries combined?
Simple question: what is the proximate cause of the tension with Iran? -- answer: it's Iran's nuclear
program, specifically the allegation they intend to produce weapons grade enriched uranium (or plutonium) and
then make a bomb -- another question: how is this a threat to the US, a nation with > 10k nuclear weapons, and
more importantly,
the means to deliver them
? -- answer: it's not -- Israel sees it as a threat -- and re
that, I'll say what I've said before: if MAD (mutually assured destruction) was good enough for the US and the
USSR during the Cold War, it's good enough for the Jews and Iranians today --
it's time to out Israel as a
nuclear power
.
The US has no urgent need for Middle East oil; that's not what this is about.
Islam is not the angloamerican's problem, it's their creation (as in they made it into a
problem). It serves their interest in keeping the oil rich Middle Eastern countries divided
among tribal and sectarian lines and ruled by backward cryptotheocratic despotic dynasties.
The fundamentalist extremist jihadists can be sicked on Europe, Southern Russia and Western
China, to upset society when required by strategic interests.
You totally disregard my objection that there is no need for the Russians to become
aggressive towards (the rest of) Europe. Good trade relations are their best interest. If and
when Europe would socially and economically collapse, they would rather keep the problems
out, instead of getting sucked in themselves.
I agree with you 100% on Trump and Syrian oil. It is smoke and mirrors forced by the
resistance of the Elites. I think Trump knows - and accepts - that grabbing to oil is not
viable and that the US will be forced eventually to relinquish it, but it would be
domestically too difficult to do so at the moment.
i wonder if they're turkish or usa arms that were given these goons? the usa is being
attacked by weapons that gave to the friendly moderate headchoppers? the irony is rich if
so...
And as soon as the SDF fighters make that final break from the US...then it's game
over...it is really inevitable...the die is already cast...
yeah, perhaps. President Assad has an interesting perspective on occupation ...a
much more profound and apparently longer view (from a recent interview )
Journalist:returning to politics, and to the United States, in particular,
President Donald Trump announced his intention to keep a limited number of his troops in
Syria while redeploying some of them on the Jordanian borders and on the borders of the
Israeli enemy, while some of them will protect the oil fields. What is your position in this
regard, and how will the Syrian state respond to this illegitimate presence
President Assad:Regardless of these statements, the reality is that the
Americans are occupiers, whether they are in the east, the north or the south, the result is
the same. Once again, we should not be concerned with his statements, but rather deal with
the reality. When we are finished with the areas according to our military priorities and we
reach an area in which the Americans are present, I am not going to indulge in heroics and
say that we will send the army to face the Americans. We are talking about a super power. Do
we have the capabilities to do that? I believe that this is clear for us as Syrians. Do we
choose resistance? If there is resistance, the fate of the Americans will be similar to their
fate in Iraq. But the concept of resistance needs a popular state of mind that is the
opposite of being agents and proxies, a patriotic popular state which carries out acts of
resistance. The natural role of the state in this case is to provide all the necessary
conditions and necessary support to any popular resistance against the occupier. If we put to
one side the colonial and commercial American mentality which promotes the colonization of
certain areas for money, oil and other resources, we must not forget that the main agents
which brought the Americans, the Turks and others to this region are Syrians acting as agents
of foreigners – Syrian traitors. Dealing with all the other cases is just dealing with
the symptoms, while we should be addressing the causes. We should be dealing with those
Syrians and try to reformulate the patriotic state of the Syrian society – to restore
patriotism, restore the unity of opinion and ensure that there are no Syrian traitors. To
ensure that all Syrians are patriots, and that treason is no longer a matter of opinion, a
mere difference over a political issue. We should all be united against occupation. When we
reach this state, I assure you that the Americans will leave on their own accord because they
will have no opportunity to remain in Syria; although America is a superpower, it will not be
able to remain in Syria. This is something we saw in Lebanon at a certain point and in Iraq
at a later stage. I think this is the right solution
I think Trump has been being loud and blunt about America taking Syria's oil precisely
because he knows that it is neither legal nor viable. If he can establish the narrative that
all it is now about is oil then the US will be forced to do as Trump has wanted all along and
leave Syria.
Reverse psychology.
The role the American President is supposed to be playing for the empire right now
is pushing the narrative of a need for more humanitarian murder and
downplaying/dismissing any suggestion that the US is in Syria for any reason other than pure
altruism. Trump outright stating that the US is going to take the oil is utterly destroying
the only narratives that the US can use to stay in Syria.
That is much more clever than I had ever given Trump credit for being.
> [Lt.Col. Vindman] told lawmakers that he was deeply troubled by what he interpreted as
an attempt by the president to subvert U.S. foreign policy and an improper attempt to coerce
a foreign government into investigating a U.S. citizen. <
That the WaPo scribe lets it stand without pointing out that, constitutionally, the
president sets foreign policies is even worse. An earlier NYT piece about an NSC staffer
who Trump likes and had asked about the Ukraine had a similar bad
construct :
> Any involvement by Mr. Patel in Ukraine issues would signal another attempt by Mr.
Trump's political loyalists to go around American policymakers to shape policy toward Kiev.
<
Former U.S. supplied proxy forces kill other former U.S. supplied proxy forces with U.S.
supplied weapons (video):
Cᴀʟɪʙʀᴇ Oʙsᴄᴜʀᴀ @CalibreObscura -
8:24
PM · Nov 2, 2019
TFSA hitting a YPG/SDF vehicle (Humvee?) with a likely originally US-supplied BGM-71 TOW
ATGM. video
> [Lt.Col. Vindman] told lawmakers that he was deeply troubled by what he interpreted as
an attempt by the president to subvert U.S. foreign policy and an improper attempt to
coerce a foreign government into investigating a U.S. citizen. <
That the WaPo scribe lets it stand without pointing out that, constitutionally, the
president sets foreign policies is even worse. An earlier NYT piece about an NSC
staffer who Trump likes and had asked about the Ukraine had a similar bad
construct :
> Any involvement by Mr. Patel in Ukraine issues would signal another attempt by Mr.
Trump's political loyalists to go around American policymakers to shape policy toward Kiev.
<
Former U.S. supplied proxy forces kill other former U.S. supplied proxy forces with U.S.
supplied weapons (video):
Cᴀʟɪʙʀᴇ Oʙsᴄᴜʀᴀ @CalibreObscura
- 8:24 PM · Nov 2,
2019
TFSA hitting a YPG/SDF vehicle (Humvee?) with a likely originally US-supplied BGM-71 TOW
ATGM. video
From Caitlin Johnstone's piece...
"We were told that the US must intervene in Syria because the Syrian government was
massacring its people. We were told that the US must intervene in Syria in order to promote
freedom and democracy in the Middle East. We were told that the US must intervene in Syria
because Assad used chemical weapons. We were told that the US must occupy Syria to fight
ISIS. We were told that the US must continue to occupy Syria to counter Iranian influence. We
were told the US must continue to occupy Syria to protect the Kurds. Now the US must continue
to occupy Syria because of oil."
US is in Syria for Israel. Keeping the Syrian oil now is about covering the cost of US
long term occupation of the Syrian border for Israel.
Now to see if Trump can come out of the Iraq color revolution holding Iraq's oil. Whatever
the outcome in Iraq, the current operation against it has prevented Iraq making any noises
about what US is doing in Syria and US access of border crossings into Syria.
Iran warned months ago it would take further action to free itself from JCPOA restrictions
if Europe was not going to stand up to USA bullying and that is supposed to happen later this
week. That would likely mean the initiation of the "snap back" process to reimpose UN
sanctions.
We should see some sort of resolution of the Israeli election. Netanyahu's former Defense
Minister is the key decision-maker. Will he bend the knee or force a third election?
I might be willing to explore how democracy is being endangered (by endorsing anything) if I
could find any example of democracy beyond a ham-radio club or boy scout patrol.
The deep state, and every state shallow deep or in-between, "limits" democracy... This is
the essence of all states. And this limitation means that the "democracy" is essentially a
fraud, a deception, a ringer, a method of "perception management" - a way of making the mark
believe in the con.
I don't mind this reality, it's normal and probably a good thing (think about it).
But I do object to the implications, such as, inter alia, that democracy exists in reality
on any significant scale, and that it's desirable - and worst of all, that's it's not a
costume - wizard of oz time boys and girls?
You bet... Now go watch the magic show and stop thinking...
Newer estimates bet on USD 1.7 trn -- much less than the earlier ones. The process will be
slow ("very cautious") and it's not disclosed if they will be negotiated at the LSE or Wall
Street.
The capitalists bet on China capitulating to a "capitalist reform" and opening up its
precious productive chains and financial sector to open exploitation by Western capital. It
didn't happen and now they will sack Saudi wealth. Saudi Arabia will have to "take one for
the team"; as a sweetener, they will probably receive nuclear energy technology from the
Americans (a technology which, as we already know, can be adapted to develop nuclear
weapons).
This notion of USA profiting from the oil is a smokescreen. It seems much more likely that
the oil will be used by, any profits received by, whatever local Syrian organization USA
approves of.
Notice that CJ doesn't cite Israel among the many reasons for USA to stay - despite
Trump's having done so (he did!). And, while she attacks USA's evil intentions, she's careful
not to support Assad ( "I'm not an Assadist -- he's a Caitlinist" ).
I see Joshua Landis' twitter says "In 2012, Erdogan asked al Assad to put Muslim Brothers
into his Cabinet. When al Assad refused, the former minister said, Erdogan made clear that he
would back all efforts to remove the president and replace him with Islamists."
"Turkey May Have Stepped Into Its Own 'Endless War' in Syria"
Ok... and now an entirely unrelated coincidence...Cosmic disaster: Massive fire ravages
astronomy center in Turkish capital (VIDEO)
Also worthy of note is Pat Lang's censorship of a comment that made about how bogus
Russiagate and Ukrainegate are.
Both the Left and the Right love the partisan food fight that distracts and entertains the
masses. LOL.
But it wasn't enough to simply delete the comment, he felt it necessary to smear me, first
as a bitter old pensioner, then as a marxist: A
rule about comments and commenters .
Gabbard. I read the OFF act today. Compared to AOC's Green New Deal, my take.
AOC is more mainstream than TG., third-wayer USA style, supports Sanders (OK.. in the pol
landscape..) and is more influential / accepted in the establishment. Gabbard far better, on
anti-war and other.
A brief look at climate + energy.
Both are pie-in-the sky and 'claim' meeting 100 percent of the power demand in the
United States through clean, renewable, and zero-emission energy sources.
AOC p.7.. TG similar.
Both propose an aim of "zero carbon emissions" or "net zero carbon" by 2035. (not the same
thing of course, but much is confused...)
AOC includes very sweeping societal aims (green jobs etc.), international collab,
education, and even:
ensuring a commercial environment where every businessperson is free from unfair
competition and domination by domestic or international monopolies
Heh! in the US?
..but is prudent in its language, the phrase as much as technologically feasible is
used v. often. Ex.
working collaboratively with farmers and ranchers in the United States to remove
pollution and greenhouse gas emissions from the agricultural sector as much as is techno-
logically feasible ..
AOC promotes removing greenhouse gases from the atmosphere aka,'new' carbon
capture tech (p. 9.)
*Vs.* TG, the language is clear, the position hard and logically consistent, a "zero
carbon economy, using only renewable generation by 2035", > all electric, as nuclear power
is also verboten.
/ -- How and where the electric energy is produced, stored, delivered to the end user, is
not addressed by either bills. Both are against nuclear. These are pol. discourses, and not
based on any analysis of 'energy' -- /
TG OFF act is more sympathetic imho in the sense that it details impacts on poor
communities and that these must be adressed, reversed. Many of the points in it are excellent
(but only tangentially linked to energy policy.. or climate..), she wants to stop / reverse
harm, vs. AOC who touts fantastico green jobs.
Jackrabbit "And, while she attacks USA's evil intentions, she's careful not to support Assad
("I'm not an Assadist -- he's a Caitlinist")."
This seems common amongst those that identify as green or progressive and not just on
Syria and Assad. Assange was similar.
Not long back, I was reading the twitter accounts of a few young and foolish journalists that
believed the crap put out by the likes of bellingcrap, so went to Syria to report on the
'revolution'. They ended up featuring in snuff movies but their twitter accounts are still
open.
Robert Reich:
Thanks to Trump's trade wars, US farm bankruptcies in Sept. soared to 24% -- highest level
since 2011. Nearly 40% of projected farm profit this year will come from trade aid,
disaster assistance, & federal subsidies. Farm aid has now cost more than double the
2009 auto bailout.
thanks b! it's always interesting and thought provoking..
regarding the M. K. BHADRAKUMAR article on nord 2, it seems to me that the coming together
of russia and europe is only a matter of time.. as much as the usa would like to impede this,
i can't see them being successful.. fact is russia is a part of europe! trying to keep them
separate can't work.. new world order...
@7 jackrabbit.. i think where you and i differ is in that you will take a shred of truth -
a molehill - and make a mountain out of it.. that's what it looks like with the cj analysis..
i have to say it seems you do the same with the deep state too.. sure there is some truth to
what you say, but i think your conclusions are wrong mostly because who make a mountain out
of a mole hill.. but regardless, i still appreciate how attached you are to your mountains -
but i just don't see it like you..
@12 noirette... thanks for sharing your perspective on all that! it seems to me AOC has
been given the fast track hard sell in the msm, where as TG has been given the cold
shoulder... someone is really preening AOC for future exploitation as i see it.. i could be
wrong.. i have said this before as well..
Forgetful Biden gave an interview with the WSJ. He speaks for Israel. The same Israel's plan
of some 45 years ago: break up the surrounding countries into warring statelets and we can
live and steal in peace; piece by piece.
[.] Leaving troops behind like [Trump's] doing now – he says that what he wants to do
is we're going to occupy the oil fields and we're going to take 'em. That's like a giant
300-foot recruiting poster for ISIS," Biden said, speaking to the Wall Street Journal.[.]
"Russia's position in the region has just been strengthened. [Syrian President
Bashar] Assad's position has been strengthened. Iran now has a pathway all the way to Syria
and even to Lebanon. If I'm the Israelis I'm not going to be very happy about that. So the
whole thing has been turned upside down and we're in there alone now, basically," the
former vice president said.[.]
Timber Sycamore
During his tenure as Barack Obama's vice president, Biden was a key supporter of sending
US arms to the militants fighting against Damascus. He was involved in the Central
Intelligence Agency's classified weapons supply and training programme, known as Timber
Sycamore, which equipped and trained thousands of fighters between 2012 and 2017, when it
was closed down by the Trump administration.
Those lapel flag pins with the stars and stripes should be replaced by the blue and white
star of David flag pins because it is what it is.
Western/Central Europe coming to terms with Russia and settling down for good relations
between neighbours should've been the obvious path back in 1990. I mean, they did it between
UK-France and Germany after 1945, it was only logical that they would do the same with Russia
- I mean, there's less bad blood between them, overall. Of course, countries like Poland
wouldn't be as enthusiastic, for obvious reasons, so it would've been better to come to a
common understanding before the former Soviet bloc joined EU, and definitely way better to
set up some spheres of influence before the Ukraine mess.
Jackrabbit: Pat Lang can be quite the old thin-skinned "Commies - bad" curmudgeon, which
is at best frustrating. On the other hand, I always have a kick at seeing him campaigning for
the dissolution of CIA and FBI, like in his latest post. I get that he's also arguing from an
efficiency point of view, and I'd agree with him about the efficiency gains, even if I'd be
more interested by the mere fact that US agencies would greatly reduced their fucking-up with
the rest of the world, if these agencies were gone for good. Heck, I could live with a USA
with more efficient agencies this way, since it would still mean them having to get rid of
their Full Spectrum Dominance and Global Hegemon wet-dream, and instead focusing on fighting
against clear and present danger and genuine threats against the US as a country, not as a
global economic and political empire. Heck, I'd be already relieved if not glad if the US
went back to Monroe doctrine and were to submit to a reverse-Monroe (as in the US stops
messing with the Old World once and for all and doesn't interfer with any country outside the
Americas).
@14 US farmers appreciate the $28bn aid package and most of them probably still like Trump.
Aid like that would be called socialism if any other country did it.
It struck me how careful she was about not being viewed as supporting Assad ... while the
elevation of Max B. to be the equal of Assange is just an unimportant detail?
MANY journalists that have suffered much worse than Max B. They don't get elevated to
being the equal of Assange. A few of them:
There's the woman who reported about ISIS (I think she was Turkish) who was killed.
There's Hitchens.
There's the woman who just reported on the paper trail of weapons purchased for the
Syrian "rebels". She's from Bulgeria, I think.
There's Khashoggi.
Assange's struggle is for ALL journalists. It's offensive when used to elevate ONE
journalist. Especially, I might add, THIS journalist who 1) has a deep and abiding connection
to Assange's Deep State adversaries and 2) has previously demonstrated his willingness to act
in a way that furthers Deep State goals.
Regarding that post by Pat Lang so derogatory in image illustrating, and following mockery
he made of pensioners who receive their well deserved pension check, I wonder what this man
who during life long benefitted from such a socialist system like the USAF to enjoy a labour
life fixed job , from recruiting to retirement ( whose only requirement was fullfill
orders...) and limitless access to free of charge education, which allowed him once retired
at such privileged ( with respect the rest of working masses ) young age, be able to profit
in the private sector from the knowledge and experience he gained in the public duty, has
against public pensions, being himself beneficciary of one ( at least I have not notice he
has refused it...and I fear it is not meager...) along with a free of charge full coverage
social health system financed by Us taxpayers including those who he makes mockery of.
For the few I know him, he is still angry about the few taxes he has to pay under Trump
rule feeling that some of what he pays could go to this pensioners....Of course, like every
selfish far-right wing in the military, forgetting that it was those pensioners through their
taxes who payed for their education and salary while in the military.
The more I know the man, I have nowhere to catch him from, and it is not only hiss patent
arrogance and bigotry, nad hatred for everything which could sound social, it is the absolute
lack of solidarity with other human beings ( including those who contributed to what he
is...) except those who form his own close circle, unit, or his own, recently reached, upper
class.
To me it smells of a new rich all that way from Virginia to here...Un asco!
Honestly, I can not see that astounding value some here find in his site, unless the
astounding value to extend the Trump presidency for 4 years more...
Has he pronounced himself about the already recognized stealing of Syrian oil recently? No,
there they are he and that Larry Johnson focussed in what more matters ( for them...) the
shenanigans on fake theater ( and they both know it, because of insiders of the IC..)of the
bipartisan mafiosi system which they beneffit from.
Bhadrakumar "The amazing part has been the dogged resistance by Germany to the US pressure
tactic to abandon Nord Stream 2."
Think Deutsche Bank, Volkswagen plus the rest of the crap US has been pulling to keep
Germany down.
German business had to rebel against this at some point.
working collaboratively with farmers and ranchers in the United States to remove pollution
and greenhouse gas emissions from the agricultural sector as much as is techno- logically
feasible ..
Someone needs to get out of their ivory tower once in a while. No diesel, no food. It's as
simple as that, unless farmers return to the days of huge crowds of cheap migrant workers and
millions of horses to pull small-scale equipment. I don't see many windmill and solar
promoters signing up to hoe cotton by hand. I wonder if all those horses would be allowed
because of horse farts. Maybe someone can invent a horse and cow fart collector.
Some of the first farm tractors were huge steam powered beasts. If steam tractors burned
wood pellets, would that be acceptable?. How big a battery it would take to operate a 300 Hp
tractor for 12 or more hours per day - as big as a house?
Well the good news is there is no actual evidence the sky is falling (Correlation is not
Causation). Man-made global warming is like "democracy" and "freedom". If any of these
actually existed, would the propaganda machines have to tell us a hundred times a day, every
day? In the end, reality has a tendency to shred fanciful plans and it doesn't care what
anybody believes.
@ Hoarsewhisperer who wrote at the end of the last Open Thread
"
I can't shake off the suspicion that cosmology is more about beating around the bush and
obfuscation than about fact-finding - especially the more recent Dark Matter trope...
"
I have only had one college course in Astronomy but I found a sure fire way to stop the
cosmologists in their tracks is to posit that Dark Energy and Dark Matter are not just "out
there" but just as much part of us as well...and where are the studies about that stuff in
us?
another climate change denier troll? the science isn't based on a "propaganda machine". you
know what is? the fossil fuel company funded propaganda campaign that pretends the science is
based on correlation.
" US farmers appreciate the $28bn aid package and most of them probably still like Trump.
Aid like that would be called socialism if any other country did it."
- And aid like that would be called socialism by farmers if it went to people with dark
complexions who live in large cities.
@Posted by: Trailer Trash | Nov 3 2019 17:13 utc | 22
Not to mention that all the allegedly "ecologic" measures which have been promoted so far
result equally if not more polluting than the existing ones. As a sample, this article about
the pollution which will come from solar pannels and electric cars batteries and their costs
of production and elimination who will push the carbon footpirnt to stratospheric levels.
The new "ecocapitalism" is a new form of oblying the working masses to change car more
often that they will be able to aforrd due the frozen wages and increasing of prices, and pay
more for basic goods like electricity and water, plus adding taxes that will be difficult to
justify in a coming environment of recession and economic crisis. This is only the new niche
of gainings some "smart" people of always have found to continue increasing their tax of
profit.
@pretzelattack
So, if one asks questions : 1) Is the climate actually changing (warming), rather than going
through a temporary cycle as in the thirties?
2) If there is a climate change is it totally due to human activities, or only partially, or
is it due to natural factors?
3) If the climate changes, ie warms by a degree or two centigrade, is that change a
catastrophic event or is it benign and requiring
minor adaptations by humans?
Does that make one a troll in your estimation?
These remarks about climate change are a reminder that, as a society, we have lost our
ability to reason together. The discussion is poisoned, largely, by vested
interests-including the fossil fuel industry- using enormous amounts of money to prevent us
from reaching conclusions based upon the objective measurement of empirical data and taking
action accordingly.
Instead of reason "the market" rules: the market buys scientists and publicists, controls
presses and dominates the media. In Congress or Parliament it owns majorities.
My guess is that climate change is real and represents a real threat but that ought not to be
a licence for every demagogue and chancer to impose 'solutions' through government or public
pressure. The future of humanity is too important a subject to be left to liars and
narcissists to play with; it is a matter for serious, considered, unpolluted discussion at
every level. In such discussion idiots will be revealed as such, loudmouths discovered to be
empty and irresponsible and the weight of truth, revealed in masses of observations testable
and available for examination, will lead to popular decision making on a matter too important
to be left to others.
Unlike Greyzone reporting, here we are given specific information about Max's arrest,
including the identify the person who made the charge, the statement that they made, and the
alleged existence of video evidence.
<> <> <> <> <> <> <>
And now thegreyzone.com is out with a follow-up to their reporting last week. Aaron
Maté interviews Max B.
Max B.: It's highly unusual, the whole thing is highly unusual, it's an obvious case of
political persecution and it should be a source of outrage but of course we've heard
nothing from the press ngo's. I guess Press Freedom Track, I just saw them say that uh, I
wasn't involved in reporting at the time so I was .. um .. so I don't count; they said
something like that on twitter in a response to Margret Kimberly. So it's revealing to see
the response but it's also encouraging to see the really organic grassroots solidarity that
I'm getting.
Aaron Mate: Well, you were involved in reporting at the time, broadly, 'cause you were
covering that protest; at the time, specifically, of the incident, you were around when
some food was being delivered inside, right?
Max B.: Well, all I can say is that I'm completely innocent, the charges are fake,
they're phony ...
The shadowproof reporting and this dodge from Max B. suggests to me that Max B. had
decided to help outside activists to deliver food to the activists inside. Thus, he had
joined the activists and was no longer acting as a reporter !
Max B.: The second component [the first being the arrest] of how I was treated - that's how
poor people in Washington D.C and across America are typically treated in the criminal
justice system. People were ALL denied phone calls, they were shackled for long periods. We
were held in cages in extremely cold temperatures for long periods ...
Persecution? Nah, just another day in the US criminal justice system.
Even if the charges against him are false, it's not clear that this is really a matter of
press freedom.
Peter...re the reason for US troops staying Syria...
I think the Al Tanf presence is for Israel's benefit...
But in northeast Syria I think another dynamic is at play...I think Trump really wanted to
get out completely and I think he still does...but he simply has not had the power to pull
this off...
The entire 'foreign policy' establishment plus their media servants went totally berserk
and Trump had to walk back at least some of his plan...
I don't think Syria's oil has much to do with it...Trump simply latched onto that [quick
improvisation there] to justify his reversal to his own base that is feeling frustrated that
their hero can't even fulfill one of his major promises...
As for the establishment's idea for Syria, I think it has more to do with the Kurds...they
are howling about 'betraying' the Kurds...but really it is about USING the Kurds for their
own dream of partitioning Syria...
They just can't let go of that...even as the taillights get dimmer and dimmer in the
distance...these people are not big on reality...
Plus, they do see a situation with the Kurds that they can exploit...some among the Kurds,
like their military commander Mazloum Abdi are totally devoted to the US and will play a
willing spoiler role in the northeast if given half a chance...
If this opportunity to continue at some level with the Kurds was not there, the US
military command would not go along with a harebrained scheme like staying in a region of
Syria that is now more or less controlled by the Syrian government...the shrunken US
footprint means you are isolated and really quite meaningless...
So the situation is still in flux...but here's the thing...the Kurdish political
leadership is a little smarter than people like Mazloum...they see that they have already
lost huge swaths of their heartland to Turkey...not just in the latest incursion, but also
Afrin before that and Euphrates Shield etc...
They realize they will lose everything if they do not start playing ball...with Russia
especially, the only honest broker in Syria...
So today we have a
report that a joint SDF-Russian 'coordination and operations center' has been established
in northern Raqqa province...
Notably, the SAA isn't included in this...probably at the insistence of the SDF, which
like I said is still not on board with reconciling with the SAA...although we note that in
the periphery of the Turkish 'Peace Spring' incursion zone the SDF fighters are fighting
alongside the SAA to repel Turkish-backed militants...
SAA has now also moved heavy weapons to the vicinity of the Ras al Ayn border town which
is in Turkish hands...
So the dynamics of the fighting are already forcing the SDF to throw in their lot with the
SAA...at some point the break will come and the shrinking US influence in the area is not
going to be worth anything tangible to the SDF fighters...
We see also that the US has now evacuated its biggest base with the longest airfield...
Sarrin...
That's where that huge convoy of empty trucks headed to...
So the situation on the ground does not bode well for some kind of continuing partnership
between the SDF and the remaining US forces...especially as the SAA consolidates its control
over the areas in which it has already entered...
So the way I see it, this is a desperate Hail Mary from the die-harders in the
regime-change business...they are grasping at straws, literally...the US footprint has
already shrunk so dramatically, and the SAA footprint taken its place that there is no going
back...
For now the US still have some support among the SDF fighters, as exemplified by that
Mazloum character...but as things progress neither the Kurd population in general, nor the
Arabs in the area are going to continue partnering with the US...for the simple reason that
the US has nothing to offer them...
And as soon as the SDF fighters make that final break from the US...then it's game
over...it is really inevitable...the die is already cast...
That the WaPo scribe lets it stand without pointing out that, constitutionally, the
president sets foreign policies is even worse. An earlier NYT piece about an NSC staffer who
Trump likes and had asked about the Ukraine had a similar bad construct
As Rumsfeld once claimed, "We create our own reality". However there is nothing real about
that so-called reality. More accurate would be "We create our own fantasy, are deluded by it,
and cling desperately to our belief in the reality of it".
@31 flankerbandit.. good overview.. i tend to see it in a similar manner.. thanks!
i got a kick out of one of the commenters on that southfront link -
"Latest News: Even though Vladimir Putin has promised to withdraw all Russian troops from
the US, Russian forces still does not want to leave the US completely, arguing that it wants
to secure oil fields in Texas from ISIS supported by Canada and Mexico, while helping Indians
and Indian Democratic Forces (IDF) who did not want to rejoin the US government and refused
an offer to dissolve the IDF and join the US army. Although initially Russian troops stopped
their support for the IDF.
Wait, there seems to be something wrong with this news! :)"
These remarks about climate change are a reminder that, as a society, we have lost our
ability to reason together. The discussion is poisoned, largely, by vested
interests-including the fossil fuel industry- using enormous amounts of money to prevent us
from reaching conclusions based upon the objective measurement of empirical data and taking
action accordingly.
Posted by: bevin | Nov 3 2019 18:37 utc | 29
Thanks for your well articulated remarks, Bevin. Climate-change science is not something
that can be researched by every Tom Dick and Harry in their kitchen, but, well, some people
still think they can. As a very wise person once remarked: The fool who thinks he is wise is
a fool indeed; but the fool who knows he is a fool, to that extent at least is wise.
Posted by: flankerbandit | Nov 3 2019 18:43 utc | 31
I agree with you 100% on Trump and Syrian oil. It is smoke and mirrors forced by the
resistance of the Elites. I think Trump knows - and accepts - that grabbing to oil is not
viable and that the US will be forced eventually to relinquish it, but it would be
domestically too difficult to do so at the moment.
i wonder if they're turkish or usa arms that were given these goons? the usa is being
attacked by weapons that gave to the friendly moderate headchoppers? the irony is rich if
so...
And as soon as the SDF fighters make that final break from the US...then it's game
over...it is really inevitable...the die is already cast...
yeah, perhaps. President Assad has an interesting perspective on occupation ...a
much more profound and apparently longer view (from a recent interview )
Journalist:returning to politics, and to the United States, in particular,
President Donald Trump announced his intention to keep a limited number of his troops in
Syria while redeploying some of them on the Jordanian borders and on the borders of the
Israeli enemy, while some of them will protect the oil fields. What is your position in this
regard, and how will the Syrian state respond to this illegitimate presence
President Assad:Regardless of these statements, the reality is that the
Americans are occupiers, whether they are in the east, the north or the south, the result is
the same. Once again, we should not be concerned with his statements, but rather deal with
the reality. When we are finished with the areas according to our military priorities and we
reach an area in which the Americans are present, I am not going to indulge in heroics and
say that we will send the army to face the Americans. We are talking about a super power. Do
we have the capabilities to do that? I believe that this is clear for us as Syrians. Do we
choose resistance? If there is resistance, the fate of the Americans will be similar to their
fate in Iraq. But the concept of resistance needs a popular state of mind that is the
opposite of being agents and proxies, a patriotic popular state which carries out acts of
resistance. The natural role of the state in this case is to provide all the necessary
conditions and necessary support to any popular resistance against the occupier. If we put to
one side the colonial and commercial American mentality which promotes the colonization of
certain areas for money, oil and other resources, we must not forget that the main agents
which brought the Americans, the Turks and others to this region are Syrians acting as agents
of foreigners – Syrian traitors. Dealing with all the other cases is just dealing with
the symptoms, while we should be addressing the causes. We should be dealing with those
Syrians and try to reformulate the patriotic state of the Syrian society – to restore
patriotism, restore the unity of opinion and ensure that there are no Syrian traitors. To
ensure that all Syrians are patriots, and that treason is no longer a matter of opinion, a
mere difference over a political issue. We should all be united against occupation. When we
reach this state, I assure you that the Americans will leave on their own accord because they
will have no opportunity to remain in Syria; although America is a superpower, it will not be
able to remain in Syria. This is something we saw in Lebanon at a certain point and in Iraq
at a later stage. I think this is the right solution
>Does that make one a troll in your estimation?
> Posted by: erik | Nov 3 2019 18:05 utc | 27
As in any religion, questions are not allowed. The constant shouting about oil company
anti-"The Sky Is Falling" campaigns is particularly silly. I have never seen a single ad or
even a spokesman on TV or radio saying man-made global warming isn't real. Not this year. Not
last year. Not ever. Global warming promoters have a giant podium and use it all day every
day to shout that they have no voice and drown out everyone else. It's not a good look.
I am no fan of oil companies. I very much resent that people who happen to live on top of
the oil are exposed to sometimes awful conditions. There's no need to make a mess, and not
cleaning up after oneself, harming people in the process, is unforgivable. That's something
oil company managers should have learned in kindergarten.
Currently there is no way to replace petroleum in many applications. People burning whale
oil lamps while watching whale populations decline knew they needed a better way, but would
have had no way to predict that better way would be petroleum. Funding basic research might
find a better way. Building more useless low-density intermittent windmills won't move
anybody off petroleum, except in a few unique situations.
I think Trump has been being loud and blunt about America taking Syria's oil precisely
because he knows that it is neither legal nor viable. If he can establish the narrative that
all it is now about is oil then the US will be forced to do as Trump has wanted all along and
leave Syria.
Reverse psychology.
The role the American President is supposed to be playing for the empire right now
is pushing the narrative of a need for more humanitarian murder and
downplaying/dismissing any suggestion that the US is in Syria for any reason other than pure
altruism. Trump outright stating that the US is going to take the oil is utterly destroying
the only narratives that the US can use to stay in Syria.
That is much more clever than I had ever given Trump credit for being.
>the weight of truth, revealed in masses of observations
> testable and available for examination, will lead to popular
> decision making on a matter too important to be left to others.
> Posted by: bevin | Nov 3 2019 18:37 utc | 29
Yes, actual observations, please, instead of models that don't work. The paleo record
seems to show that temperatures rise before CO2 increases. The modern record shows no
correlation, as in the recent multiyear "pause" in warming while CO2 was steady
increasing.
Claims that global warming causes every kind of unpleasant weather are silly. Too hot, too
cold, too wet, too dry, more snow, less snow, it's all caused by an increase in a trace
molecule. If the weather is unpleasant, it's "carbon". If the weather is good, there's no
comment. That's not very scientific.
regarding "securing syrian oil" - I'd say it was always more about blocking a possible
Iraq-Syria pipeline, which would give Iraq and potentially Iran a route to the Mediterranean
without either Saudi Arabia or Turkey or perhaps a Kurdistan being in the way.
flankerbandit
I have tossed this around myself when thinking about what is happening.
"I don't think Syria's oil has much to do with it...Trump simply latched onto that [quick
improvisation there] to justify his reversal to his own base that is feeling frustrated that
their hero can't even fulfill one of his major promises..."
Ending endless wars, expensive wars, bring the troops home, vs extra US military spending,
vetoing the congress resolution to pull out of the Yemen war, then there is the US deep state
aspect. And then Trumps past statements on the countries US has attacked.
Easy enough to pass off as as a person no deeper than his twitter persona for the seeming
inconsistencies.
Trump is overturning the norms or what developed as norms in the post WWII era. One of those
norms is that the US must try to give an appearance of moral leadership of the world.
Thinking outside the box of the post WWII era, a strategy can be seen in what Trump is
doing.
When it comes to foreign policy, Trumps focus is on oil and Israel. China ties in with the
focus on oil. Russia may well block what I believe to be Trump's strategy in the middle east
and if they do, I may never know for sure if I am right or wrong about the Trump admins
intentions.
But at the moment, I have to take it that Trump's moves are based around 'energy dominance'
and that includes owning other countries oil.
What you posit echoes what Climatologist Michael Mann wrote in Climate Wars .
In Assad's recent interview, on the Outlaw US Empire's illegal occupation and theft of
Syrian property, he's willing to be patient and take care of those areas Syria and its allies
can return to the national fold. Russia, Iran and Assad are all on the same page and of the
same mind when it comes to dealing with the illegal occupation, which they know is untenable
in the long run. In fact, it actually serves an excellent purpose in providing the impetus
for nations to dedollarize and beware of accepting any sort of aid it offers--this is
particularly important in Africa and Latin America. Monthly like clockwork, Lavrov or another
top Russian official calls for the Outlaw US Empire to remove its illegally deployed troops,
which reminds the world of what the Outlaw US Empire is and its aims being opposite of its
rhetoric--Truth is far more potent than propaganda.
"... Washington's basic purpose in deploying the US forces in oil and natural gas fields of Deir al-Zor governorate is to deny the valuable source of income to its other main rival in the region, Damascus. ..."
Before the evacuation of 1,000 American troops from northern
Syria to western Iraq, the Pentagon had 2,000 US forces in Syria.
After the drawdown of US
troops at Erdogan's insistence in order for Ankara to mount a ground offensive in northern Syria,
the US has still deployed 1,000 troops, mainly in oil-rich eastern Deir al-Zor province and
at al-Tanf military base.
Al-Tanf military base is strategically located in southeastern Syria on the border between Syria,
Iraq and Jordan, and it straddles on a critically important Damascus-Baghdad highway, which
serves as a lifeline for Damascus.
Washington has illegally occupied 55-kilometer area around
al-Tanf since 2016, and several hundred US Marines have trained several Syrian militant groups there.
It's worth noting that rather than fighting the Islamic State, the purpose of continued presence
of the US forces at al-Tanf military base is to address Israel's concerns regarding the expansion of
Iran's influence in Iraq, Syria and Lebanon.
Regarding the oil- and natural gas-rich Deir al-Zor governorate, it's worth pointing out
that Syria used to produce modest quantities of oil for domestic needs before the war – roughly 400,000
barrels per day, which isn't much compared to tens of millions barrels daily oil production in the
Gulf states.
Although Donald Trump crowed in a characteristic blunt manner in a tweet after the withdrawal of
1,000 American troops from northern Syria that Washington had deployed forces in eastern Syria where
there was oil,
the purpose of exercising control over Syria's oil is neither to smuggle oil
out of Syria nor to deny the valuable source of revenue to the Islamic State.
There is no denying the fact that the remnants of the Islamic State militants are still found in
Syria and Iraq but its emirate has been completely dismantled in the region and its leadership is on
the run. So much so that the fugitive caliph of the terrorist organization was killed in the bastion
of a rival jihadist outfit, al-Nusra Front in Idlib, hundreds of kilometers away from the Islamic State
strongholds in eastern Syria.
Much like the "scorched earth" battle strategy of medieval warlords – as in the case of the Islamic
State which early in the year burned crops of local farmers while retreating from its former strongholds
in eastern Syria –
Washington's basic purpose in deploying the US forces in oil and
natural gas fields of Deir al-Zor governorate is to deny the valuable source of income to its other
main rival in the region, Damascus.
After the devastation caused by eight years of proxy war, the Syrian government is in dire need
of tens of billions dollars international assistance to rebuild the country. Not only is Washington
hampering efforts to provide international aid to the hapless country, it is in fact squatting over
Syria's own resources with the help of its only ally in the region, the Kurds.
Although Donald Trump claimed credit for expropriating Syria's oil wealth, it bears mentioning
that "scorched earth" policy is not a business strategy, it is the institutional logic of the deep
state.
President Trump is known to be a businessman and at least ostensibly follows a non-interventionist
ideology; being a novice in the craft of international diplomacy, however, he has time and again been
misled by the Pentagon and Washington's national security establishment.
Regarding Washington's interest in propping up the Gulf's autocrats and fighting their wars in regional
conflicts, it bears mentioning that in April 2016, the Saudi foreign minister
threatened
that the Saudi kingdom would sell up to $750 billion in treasury securities and other
assets if the US Congress passed a bill that would allow Americans to sue the Saudi government in the
United States courts for its role in the September 11, 2001 terror attack – though the bill was eventually
passed, Saudi authorities have not been held accountable; even though 15 out of 19 9/11 hijackers were
Saudi nationals.
Moreover, $750 billion is only the Saudi investment in the United States, if we add its investment
in Western Europe and the investments of UAE, Kuwait and Qatar in the Western economies, the sum total
would amount to trillions of dollars of Gulf's investments in North America and Western Europe.
Furthermore, in order to bring home the significance of the Persian Gulf's oil in the energy-starved
industrialized world, here are a few stats from the OPEC data:
Saudi Arabia has the world's
largest proven crude oil reserves of 265 billion barrels and its daily oil production exceeds 10 million
barrels; Iran and Iraq, each, has 150 billion barrels reserves and has the capacity to produce 5 million
barrels per day, each; while UAE and Kuwait, each, has 100 billion barrels reserves and produces 3
million barrels per day, each; thus, all the littoral states of the Persian Gulf, together, hold 788
billion barrels, more than half of world's 1477 billion barrels of proven oil reserves.
No wonder then, 36,000 United States troops have currently been deployed in their numerous military
bases and aircraft carriers in the oil-rich Persian Gulf in accordance with the Carter Doctrine of
1980, which states: "Let our position be absolutely clear: an attempt by any outside force to gain
control of the Persian Gulf region will be regarded as an assault on the vital interests of the United
States of America, and such an assault will be repelled by any means necessary, including military
force."
Additionally, regarding the Western defense production industry's sales of arms to the Gulf Arab
States,
a report
authored
by William Hartung of the US-based Center for International Policy found that the Obama administration
had offered Saudi Arabia more than $115 billion in weapons, military equipment and training during
its eight-year tenure.
Similarly, the top items in Trump's agenda for his maiden visit to Saudi Arabia in May 2017 were:
firstly, he threw his weight behind the idea of the Saudi-led "Arab NATO" to counter Iran's influence
in the region; and secondly, he announced an unprecedented arms package for Saudi Arabia. The package
included between $98 billion and $128 billion in arms sales.
Therefore, keeping the economic dependence of the Western countries on the Gulf Arab States in mind,
during the times of global recession when most of manufacturing has been outsourced to China, it is
not surprising that when the late King Abdullah of Saudi Arabia decided to provide training and arms
to the Islamic jihadists in the border regions of Turkey and Jordan against the government of Bashar
al-Assad in Syria, the Obama administration was left with no other choice but to toe the destructive
policy of its regional Middle Eastern allies, despite the sectarian nature of the proxy war and its
attendant consequences of breeding a new generation of Islamic jihadists who would become a long-term
security risk not only to the Middle East but to the Western countries, as well.
Similarly, when King Abdullah's successor King Salman decided, on the whim of the Crown Prince Mohammad
bin Salman, to invade Yemen in March 2015, once again the Obama administration had to yield to the
dictates of Saudi Arabia and UAE by fully coordinating the Gulf-led military campaign in Yemen not
only by providing intelligence, planning and logistical support but also by selling billions of dollars'
worth of arms and ammunition to the Gulf Arab States during the conflict.
In this reciprocal relationship, the US provides security to the ruling families of the Gulf Arab
states by providing weapons and troops; and in return, the Gulf's petro-sheikhs contribute substantial
investments to the tune of hundreds of billions of dollars to the Western economies.
Regarding the Pax Americana which is the reality of the contemporary neocolonial order,
according to a January 2017
infographic
by the New York Times, 210,000 US military personnel were stationed all over the world,
including 79,000 in Europe, 45,000 in Japan, 28,500 in South Korea and 36,000 in the Middle East.
Although Donald Trump keeps complaining that NATO must share the cost of deployment of US troops,
particularly in Europe where 47,000 American troops are stationed in Germany since the end of the Second
World War, 15,000 in Italy and 8,000 in the United Kingdom, fact of the matter is that the cost is
already shared between Washington and host countries.
Roughly, European countries pay one-third of the cost for maintaining US military bases in Europe
whereas Washington chips in the remaining two-third. In the Far Eastern countries, 75% of the cost
for the deployment of American troops is shared by Japan and the remaining 25% by Washington, and in
South Korea, 40% cost is shared by the host country and the US contributes the remaining 60%.
Whereas the oil-rich Gulf Cooperation Countries (GCC) – Saudi Arabia, UAE, Kuwait and Qatar – pay
two-third of the cost for maintaining 36,000 US troops in the Persian Gulf where more than half of
world's proven oil reserves are located and Washington contributes the remaining one-third.
* * *
Nauman Sadiq is an Islamabad-based attorney, columnist and geopolitical analyst focused on the
politics of Af-Pak and Middle East regions, neocolonialism and petro-imperialism.
I am always amazed (and amused) at
how much smarter "journalists" are
than POTUS. If ONLY Mr. Trump would
read more and listen to those who
OBVIOUSLY are sooo much smarter!!!!
Maybe then he wouldn't be cowed and
bullied by Erdogan, Xi, Jung-on,
Trudeau (OK so maybe that one was
too far fetched) to name a few.
Please note the sarcasm. Do I really
need to go in to the success after
success Mr. Trump's foreign policy
has enjoyed? Come on Man.
What a load of BOLOCKS...The ONLY, I
mean The Real and True Reason for
American Armored presence is one
thing,,,,,,,Ready for IT ? ? ? To
Steal as much OIL as Possible, AND
convert the Booty into Currency,
Diamonds or some other intrinsically
valuable commodity, Millions of
Dollars at a Time......17 Years of
Shadows and Ghost Trucks and Tankers
Loading and Off-Loading the Black
Gold...this is what its all
about......M-O-N-E-Y....... Say It
With Me.... Mon-nee, Money Money
Mo_on_ne_e_ey, ......
From the sale of US oil in Syria
receive 30 million. dollars per
month. Image losses are immeasurably
greater. The United States put the
United States as a robbery bandit.
This is American democracy. The
longer the troops are in Syria, the
more countries will switch to
settlements in national currencies.
"Our interests", "strategic
interests" is always about money,
just a euphemism so it doesn't
look as greedy as it is. Another
euphemism is "security' ,meaning
war preparations.
...The military power of the USA
put directly in the service of "the
original TM" PIRATE STATE.
U are
the man Norm! But wait... now things
get a little hazy... in the
classic... 'alt0media fake
storyline' fashion!
"President Trump is known to be a
businessman and at least ostensibly
follows a non-interventionist
ideology; being a novice in the
craft of international diplomacy,
however, he has time and again been
misled by the Pentagon and
Washington's national security
establishment."
Awww! Poor "DUmb as Rocks
Donnie" done been fooled agin!
...In the USA... the military men
are stirring at last... having been
made all too aware that their
putative 'boss' has been operating
on behalf of foreign powers ever
since being [s]elected, that the
State Dept of the once Great
Republic has been in active cahoots
with the jihadis ...
and that those who were sent over
there to fight against the
headchoppers discovered that the
only straight shooters in the whole
mess turned out to be the Kurds who
AGENT FRIMpf THREW UNDER THE BUS
ON INSTRUCTIONS FROM JIHADI HQ!
Arguably some of the most significant events since the eight-year long war's start have played out in Syria with rapid pace over
just the last month alone, including Turkey's military incursion in the north, the US pullback from the border and into Syria's oil
fields, the Kurdish-led SDF&# deal making with Damascus, and the death of ISIS leader Abu Bakr al-Baghdadi. All of this is why a
televised interview with Presiden39;st Bashar Assad was highly anticipated at the end of this week.
Assad's commentary on the latest White House policy to "secure the oil" in Syria, for which US troops have already been redeployed
to some of the largest oil fields in the Deir Ezzor region, was the biggest pressing question. The Syrian president's response was
unexpected and is now driving headlines, given what he said directly about Trump, calling him the "best American president" ever
– because he's the "most transparent."
"When it comes to Trump you may ask me a question and I'll give you an answer which might seem strange. I tell you he's the best
American president," Assad said, according to a
translation provided by NBC.
"Why? Not because his policies are good, but because he is the most transparent president," Assad continued.
"All American presidents commit crimes and end up taking the Nobel Prize and appear as a defender of human rights and the 'unique'
and 'brilliant' American or Western principles. But all they are is a group of criminals who only represent the interests of the
American lobbies of large corporations in weapons, oil and others," he added.
"Trump speaks with the transparency to say 'We want the oil'." Assad's unique approach to an 'enemy' head of state which has just
ordered the seizure of Syrian national resources also comes after in prior years the US president called Assad "our enemy" and an
"animal."
Trump tweeted in April 2018 after
a new chemical attack allegation had surfaced: "If President Obama had crossed his stated Red Line In The Sand, the Syrian disaster
would have ended long ago! Animal Assad would have been history!"
A number of mainstream outlets commenting on Assad's interview falsely presented it as "praise" of Trump or that Assad thinks
"highly" of him; however,
it appears the Syrian leader was merely presenting Trump's policy statements from a 'realist' perspective , contrasting them from
the misleading 'humanitarian' motives typical of Washington's rhetoric about itself.
That is, Damascus sees US actions in the Middle East as motivated fundamentally by naked imperial ambition, a constant prior theme
of Assad's speeches , across administrations, whether US leadership dresses it up as 'democracy promotion' or in humanitarian terms
characteristic of liberal interventionism. As Assad described, Trump seems to skip dressing up his rhetoric in moralistic idealism
altogether, content to just unapologetically admit the ugly reality of US foreign policy.
I see Americans keep calling Assad and Putin a ''dictator'' Hey, jackasses, they were ELECTED in elections far less corrupt than what you have in the USSA
Assad is a very eloquent speaker. Witty, sharp and always calm when speaking with decadent press. Of course the MSM understood
what he DID mean, but they cannot help themselves, but parse anything to try hurting Trump.
If true. It means the Vatican (the oldest most important money there is) like Saudi Arabia and the UAE sure do seem to care
about stuff like purchasing power in their "portfolios" and a "store of value"?...
I see lots of EU participants taking their money to Moscow as well with that Arctic bonanza that says "come hither" if you
want your money to be worth something!!!
It's always been about oil. Spreading Freedumb, Dumbocracy and Western values, is PR spiel. The reality is, the West are scammers,
plunderers and outright thieves. Forget the billions Shell Oil, is holding for the Biafran people/region in Nigeria, which it
won't give to either the Bianfran states in the east, nor the Nigerian government, dating back to the secessionist state of Biafra/Nigerian civil war 1967-70. The west are nothing more than gang-bangers, but on the world stage.
Yet the department for trade and industry is scratching its head, wondering why their are so few takers for a post-Brexit trade
deal with the UK, where the honest UK courts have the final say? lol
Too bad it is political suicide for an American president to try to establish communication with Assad. He seems like a pretty
practical guy and who knows, it might be possible to work out a peaceful settlement with him.
economic warfare on the syrian civlian population through illegal confiscation of vital civilian economic assets, and as conducted
in venezeula, is called ________________
Assad is saying where before the UKK was a masked thief, with Trompas and his egotism alias exceptionalism, has not bothered
withthe mask. He is still a murderer and thief.
Now Assad has some idea why Trump is so popular with his base, they love him for not being politically correct, for "telling
it like it is". He's like the wolf looking at the sheep and telling them he's going to eat them and the sheep cheering because
he's not being a wolf in sheep's clothing.
Unfortunately in the case of Trump's sheeple, they don't even have a clue they're going to be eaten, the Trumptards all think
he's going to eat someone else like the "deep state" or the "dumbocrats". Meanwhile he's chewing away at their health care, their
export markets, piling up record deficits, handing the tax gold to the rich and corporations while they get the shaft, taking
away program after program that aided students, the poor, and the elderly, appointing lobbyists to dismantle or corrupt departments
they used to lobby against, and in general destroying the international good will that it's taken decades to build.
MOSCOW, October 26, 2019 – RIA Novosti – The Russian Ministry of Defense has
published satellite intelligence images , showing American oil smuggling from Syria.
Image 1: Situation in the Syrian Arab Republic as of October 26, 2019.
According to the ministry, the photos confirm that "Syrian oil, both before and after the
routing defeat of the Islamic State terrorists in land beyond the Euphrates river , under the
reliable protection by US military servicemen, oil was actively being extracted and then the
fuel trucks were massively being sent for processing outside of Syria."
Image 2: Daman oil gathering station, Syria, Deir ez-Zor province, 42 km east of Deir
ez-Zor, August 23, 2019.
Here, in a picture of the Daman oil gathering station (42 kilometers east of the Deir-ez-Zor
province), taken on August 23, a large amount of trucks were spotted. "There were 90 automotive
vehicles, including 23 fuel trucks," the caption to the image said.
In addition, on September 5, there were 25 vehicles in the Al-Hasakah province, including 22
fuel trucks. Three days later, on September 8, in the vicinity of Der Ez-Zor, 36 more vehicles
were recorded (32 of them were fuel trucks). On the same day, 41 vehicles, including 34 fuel
trucks, were in the Mayadin onshore area.
Image 3: Gathering of vehicles in Syria, Al-Hasakah province, 8 km west of Al-Shaddadi,
September 5, 2019.
As the official representative of the Defense Ministry Igor Konashenkov noted, the Americans
are extracting oil in Syria with the help of equipment, bypassing their own sanctions.
Igor Konashenkov:
"Under the protection of American military servicemen and employees of American PMCs, fuel
trucks from the oil fields of Eastern Syria are smuggling to other states. In the event of
any attack on such a caravan, special operations forces and US military aircraft are
immediately called in to protect it," he said.
According to Konashenkov, the US-controlled company Sadcab , established under the so-called
Autonomous Administration of Eastern Syria , is engaged in the export of oil, and the income of
smuggling goes to the personal accounts of US PMCs and special forces.
The Major General added that as of right now, a barrel of smuggled Syrian oil is valued at
$38, therefore the monthly revenue of US governmental agencies exceeds $30 million.
Image 4: Gathering of vehicles in Syria, Deir ez-Zor province, 10 km east of Mayadin,
September 8, 2019.
"For such a continuous financial flow, free from control and taxes of the American
government, the leadership of the Pentagon and Langley will be ready to guard and defend oil
fields in Syria from the mythical 'hidden IS cells' endlessly," he said.
According to Konashenkov, Washington, by holding oil fields in eastern Syria, is engaged in
international state banditry.
Image 5: Gathering of vehicles in Syria, Deir ez-Zor province, 14 km east of Mayadin,
September 8, 2019.
The reason for this activity, he believes, "lies far from the ideals of freedom proclaimed
by Washington and their slogans on the fight against terrorism."
Igor Konashenkov:
"Neither in international law, nor in American legislation itself – there is not and
cannot be a single legal task for the American troops to protect and defend the hydrocarbon
deposits of Syria from Syria itself and its own people, " the representative of the Defense
Ministry concluded.
A day earlier, the Pentagon's head, Mark Esper declared that the United States is studying
the situation in the Deir ez-Zor region and intends to strengthen its positions there in the
near future "to ensure the safety of oil fields."
The Ruskies are mad - Trump is stopping them from taking the oil, it belongs to the Kurds
for their revenue and if US wants to help them have it so what....US is staying to secure
those oilfields against ISIS taking it again!
If everyone listened to the President when he talks there wouldn't be any spin that anyone
could get away with.
The oil is on Kurdish land. This part of Syria is just a small sector of Kurdish territory
that has been stolen from them by dividing it between four "countries", each of which has
oil. This is why the territory was stolen and why the Kurds have become the world's best
fighters.
Putin brokered a deal to stop Turkey wiping the Kurds by having their fighting force
assimilate with the Syrian military and required Russian observers access to ensure the Turks
keep their word and not invade to wipe all the Kurd civilians in order to also take their
Syrian oil.
So the corrupt US generals get caught in the act. Their senators and reps on the payroll
are going to need some more of that fairy tale PR for POTUS to read to us at bedtime.
If we are to believe that this is to protect the oil fields then the oil revenue should be
going to Syria, even though the Kurds are on the land. Follow the money to find the truth
because there is no one you can trust on this stage.
MSM are simply not covering this story. Or the other story about the supposed gas attack
at Douma where evidence was adulterated and/or ignored completely under US pressure.
Expect the same from MH17.
WTF is going on with our leaders and corporate MSM....can no one in a leadership position
distinguish between lies and the truth? Or fantasy and reality? Where are the 'journalists'
who will stand up and tell the truth in MSM? They no longer exist.
18 wheel fuel trucks around here hold 10K gal. 50 truck loads 500K of un processed oil if
it's true? I though they just got there. but no telling who might steal under those
conditions.
That was August. this is now. The Russians must have really wanted that oil to finance
their occupation. Trump is preventing ISIS from using the oil as their piggy bank.
Wasn't Erdogan doing the same not too long ago? Shortly after Erdogan became close friends
with Putin. Does this mean Trump and Putin will become close friends as well? Or is this
simply a common practice between two people who undeservingly place relatives in government
positions? First Turkey hands over Al Baghdadi (he received medical treatment in Southern
Turkey in a private clinic owned by Erdogan's daughter guarded by MIT agents) so that they
can continue to commit genocide against Kurds in Turkey and Syria... and now the US is
stealing Syrian oil like how the Turks initially were doing. What a mess and a
disappointment. Hopefully Erdogan visits DC and unleashes his security guards beating any
person freely walking the streets while Trump smiles and describes him as a great leader.
Watch in coming weeks as the tanker convoys are proven to be rogue operations from an out
of control CIA / Cabal network. Trump removed the troops, and now Russia is shining a light
on it.
No coincidence another article on ZH brung attention to the Ukrainian wareehouse arsos..12
in 2 yrs..2017-2018 where stored munition were carted away...not to fight rebels n Donbass
but sold to Islamic groups in Syria..it was one of Bidens pals..one keeps the wars going
while the others steal siphon of resources..whatever isn't nailed down..I've never seen
anything like this..Democrats are truly CRIME INC
w/o that oil..Syria can never reconstruct itself..Usually in a War or ,after that is, the
victors help rebuild..what we see is pillaging and salting the earth and walk away.. as the
Romans did to enemies like Carthage..it will resemble Libya ...a shambles
So the smuggling is protected by air cover and special forces? Light up the fields using
some scud missiles. I'm sure Iran or Iraq have a few they could lend Syria. Can't sell it if
its burning.
Brits and Americans have pillaged, as any other empire, wherever they conquered.
After WW1 the 'Allies' robbed Germany of all foreign currency and its entire gold. This
triggering hyperinflation and mega crisis.
During WW2 central bank gold was pillaged from countries that were 'liberated' across
Europe.
In more recent history, the gold of Iraq, Ukraine and Libya was flown to Fort Knox.
All well documented.
This is common practice by empires. Just please stop pretending you were the good
guys , spreading freedom and democracy, because that's really a mockery and the
disgusting part of your invasions.
During WW2 central bank gold was pillaged from countries that were 'liberated'.
Exactly, that's where the US got its 8,000 tons of gold. Before WWII, the US had 2000 tons
of gold, after WWII it had 8,000 tons. Even today the US always steals the gold of the
countries it "liberates"
Help me understand why the USA would want to smuggle oil from Syria. When the USA has more
oil than all of the middleast.
Now I can see why Russia would blame the USA if smuggling Oil from Syria. Russia needs
that oil really bad. So to get the USA away from the Syrian oil fields they would of course
create a reason for the rest of the world that the USA is Dishonerable and must not be
trusted with Syrian oil. It is just too obvious to me, what Russia is trying to
accomplish.
Huh? The US is stealing the oil to deprive the Syrian people energy they need to rebuild
the country we destroyed. This is collective punishment of Syrians because they won't
overthrow Assad.
Collective punishment is a crime against humanity according to international law. There's
your impeachable offense. But don't worry, that kind of crime is ok with Shifty Schiff and
the rest of the Israel ***-kissers in Congress.
The US is NOT stealing the oil - the American Military have become PIRATES - no different
than Somali Red Sea Pirates or looters in Newark stealing diapers and TV's
This is nothing new. We've been stealing oil from dozens of countries for the past 75
years since WWII. The only difference is that Trump is being blatant about it which in a way
is weirdly refreshing.
It appears that the US (25% of global oil consumption/waste?) has but 3 choices. 1. Become
Trading partners with Russia and Iran. 2. Get serious on Energy Transition execution. 3. War,
Terror and more regime change 4. Deploy the Alan Parsons Project. https://youtu.be/Ei_GZnrr1nw?t=23
What say You?
Usually 1 and 3 are combined in the resource rich country aren't they? Then it goes wrong
some way down the road when the new regime 'turn', and things get worse than before
Here you go, chew on this. The day there are the initial 2 mile long lines at gasoline
stations, not just in the US but all over the world . . . that day we will still see
announcements of record oil production globally.
This is species killing stuff. Wall Street popular saying . . . no one rings a bell at the
top. Well, no one is going to give you any warning whatsoever that oil scarcity deaths start
that month. You will know nothing of it. You will be told it is all from some temporary
factor that will soon be fixed.
So if you see something now that looks like a warning sign, it's probably not legit.
Perhaps. OPEC is producing at 2011 levels. The world is kept at bay from peak oil only by US
shale production. And US shale production is on shaky legs, just trying to stay ahead of the
red queen.
I just don't see this blind optimism that US shale will continue upward for the next 5 to
6 years.
I well remember when it was said that: "When Saudi Arabia peaks, the world peaks". That
was just not correct. But now it is obvious that when the US of A peaks, the world peaks.
Sanctions are not affecting Venezuela's oil production. It is collapsing for another
reason. And it will take them a decade or more to recover when they finally settle their
economic problems.
But there will always be political problems. They are likely to get worse, not better.
Peak oil will be when the most oil is produced, not what could be produced if there were
no political problems anywhere in the world.
Opec will not save the world and neither will USA . The problem is that all the increase in
the last few years is from shale or LTO ,call it what you will . Problem is that this is
mostly + 45 API so poor in middle distillates . In reality peak oil is when the^ black goo^
peaks . NGL's ,NGPL,s ,bio fuels, LTO and the term ^all liquids^ are used as a fig leaf to
hide the real peak of the ^black goo ^ . We are past peak as far as the ^black goo^ is
concerned .
"The problem is that all the increase in the last few years is from shale or LTO ,call it
what you will . Problem is that this is mostly + 45 API so poor in middle distillates . "
In 2005 (!) on Bloomberg tv channel someone said, in other words, that the most valuable
oil to make kerosene of is increasingly difficult to get. I guess that kerosene is a middle
distillate.
The shale oil boom might last for many decades, for what it is worth
The shale oil boom might last for many decades, for what it is worth.
Shale production may continue for a decade, or a bit longer, but not decades. However,
that is not the point. The point is, how long can shale continue to increase
production.
The legacy decline for shale varies between 5% and 6% per month! The EIA's Drilling
Productivity Report says US Shale production will increase by 85,000 barrels per day in
September. Probably not, but that is not the point. To get an increase of 85,000 barrels per
day, they had to have new well production of 649,000 barrels per day. That is because they
had 564,000 barrels per day of legacy decline. For every one barrel per day of increased
production, they had to produce 7.64 barrels per day of new oil because they had 6.64
barrels per day of legacy decline.
The more they produce the more they have to produce just to stay even.
For every one barrel per day of increased production, they had to produce 7.64 barrels per
day of new oil.
This is the key point regarding shale oil production. The higher the production, the more
new production is needed to increase production. It's essentially an exponential function.
Shale oil production will not increase for much longer because it's not physically possible
to drill/frack at a sustained exponential rate.
Shale production is not oil production, it's mining.
You need 3 drilling teams, 4 fracking teams and get over long time a constant production.
When you want to increase (say you have enough acres, as enough ore in a iron mine) you hire
2 new teams, as in mining employing a new excavator and conveyor belts.
So, like in a mine, when you fire a team production drops almost immediately.
The big ones (XON) in the Permian do Shale oil mining exactly like this – they have
own drilling and fracking team, working constantly.
The same thing as mining is when you have to drill your b-class acres. As in a mine when
the ore veins run out in thickness.
So either close your mine, hire more teams to maintain production or life with decreasing
production at constant costs when the qulity is declining.
I've left out technical progress. This is just a cost reducer (need less drilling /
fracking teams to do the same output).
Eulenspiegel, your mining example is not a good comparison at all. That is because new mines
don't decline in production by 6% per month.
Here is the exponential function of shale oil. They must produce new oil at the decline
rate just to stay even. Growth in production is only accomplished if they produce more oil
than declined that month.
But if they do produce more oil than the decline rate, then the decline will be even
higher the next month. That is, if they had to produce 649,000 barrels of new oil in
September to grow production by 85,000 barrels, then to grow oil by a like amount in October,
they will have to produce more than 649,000 barrels. The more they increase production each
month, then the more they will have to produce the next month just to stay even.
When production increases, the monthly loss through legacy decline also increases.
Therefore just producing the same increase as they did last month will not do. They must
always continue to increase by more than they did last month just to stay even.
Ron, in my opinion it is a better model than conventional oil.
In conventional oil, you can pump 20 years after drilling. For 50 you'll have to do more
things like water flooding etc. So increasing production is just drilling a few more holes
(and install the additional infrastructure).
In mining, you have a decline rate of 100% / day.
You send a team in, they mine 100 tons of ore in their shift, move out and production after
their shift is 0.
When you want more ore, you have to send in a team next day again.
Having 1 minint team gives you constant ore / day. Firing them gives you sudden production
of 0.
So with LTO you send a fracking team in to create 1 well, produce oil for a few months
(I'm exaggerating) and then you have 0 production again.
So you have to send in the team again. And again.
If you use 1 team drillling constantly new holes. you'll have nearly constant production
(after the first ramp up time of overlaying declining productions, in reality a few
years).
Increasing production means more teams constantly drilling new holes (as in mining: drill
hole, fill with explosives, boom, carry away ore, repeat).
The big question for the peak shale oil is here: How many drilling/fracking teams can be
payed and supplied with anything they need for working efficient. It's not just hiring
teams.
To employ more teams they need more road capacity, sand capacity, water transport, take
away pipelines, more stuff you know better than me.
As in deep mining: The elevator capacity / tunnel train capacity limits the maximum
possible production. For increasing production, you have to increase everything, and then
hire new teams.
So the question is: How much money do they invest to stretch all these capacities.
Well the world's conventional oil production certainly peaked a while ago. Even if one treats
Venezuela and Canada as conventional because their production was usually in forecasts, the
USA fracking has to be considered a separate thing. The industry cycle is different, the
grade produced is different, the economics are "different." The tail is *very* different as
without new drilling the entire patch would disappear in less than three years. Blap, gone to
stripper wells.
This is the age of Trump. I know for us simpletons it makes sense the average would be
production. I'm not sure how Trump would do it, but I'll bet the tangerine could make 2019
peak the best ever. A world depression followed by war.
No, but OPEC + Russia + Canada, about 58% of world oil production, is down 667,000 barrels
per day, April to July. I doubt that the other 42% of world oil production is up anywhere
near that amount.
The 2019 7 month average for OPEC + Russia + Canada is 1,629,000 barrels per day below
their 2018 average.
I have posted that chart up top, just below OPEC+ Russia.
Every week we watch these invenstory draws/builds and every week the commentariat is out
to explain how they drive the price fluctuations. Except there's -80% correlation between oil
price and USD Index. Implying that events that have nothing to do with these blessed
draws/builds have much greater pull on price changes... More here: "
Failure of price forecasting: the unit of account conundrum "
It looks like an accumulation at the time crude oil wti.
After the price will cross any border of the triangle with powerful candle we can open
BUY/SELL entry. Potential profit will be in 3...5 times bigger than risk.
It was the best of times, it was the worst of times, it was the age of wisdom, it was
the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was
the season of Light, it was the season of Darkness, it was the spring of hope, it was the
winter of despair, we had everything before us, we had nothing before us, we were all going
direct to Heaven, we were all going direct the other way -- in short, the period was so far
like the present period, that some of its noisiest authorities insisted on its being
received, for good or for evil, in the superlative degree of comparison only. - Charles
Dickens
"... It is bizarre that Qatar was the one country/sheikdom in the Gulf that openly stood by Iran ..."
"... Shale is already deeply unprofitable and always has been. Big-dollar investors like pension funds have continued funding it due to (a) hype and (b) lack of alternative putative sources of return, but it's finally starting to sink in that shale has no future. ..."
Lambert
here: "Both MBS and MBZ consider the last-minute cancellation of the US retaliatory strike [for
Iran shooting down a US drone] a personal affront and humiliation because Trump did not accept
and follow their positions and demands for action. Both MBS and MBZ are now convinced that not
only the US demonstrated weakness and lack of resolve, but that Pres. Trump was personally not
committed to fighting Iran on behalf of Saudi Arabia and the Gulf sheikhdoms." Oh, let's you
and him fight!
By Yossef Bodansky, Director of Research at the International Strategic Studies
Association (ISSA) and Senior Editor of Defense & Foreign Affairs publications (including
the Global Information System: GIS), was, for more than a decade, the Director of the US House
of Representatives Task Force on Terrorism and Unconventional Warfare.
Originally published at OilPrice.com .
All attention is focused on the twists-and-turns of the very noisy US-Iran dispute in the
Persian Gulf, but all the while the People's Republic of China (PRC) is rapidly and quietly
consolidating a dominant presence in the area
with the active support of Russia.
Beijing, as a result, is fast acquiring immense influence over related key dynamics such as
the price of oil in the world market and the relevance of the petrodollar. The PRC and the
Russians are capitalizing on both the growing fears of Iran and the growing mistrust of the US.
Hence, the US is already the main loser of the PRC's gambit.
The dramatic PRC success can be attributed to the confluence of two major trends:
(1) The quality and relevance of what Beijing can offer to both Iran and the Saudi-Gulf
States camp; and
(2) The decision of key Arab leaders -- most notably Saudi Crown Prince Mohammed bin Salman
bin 'Abd al-'Aziz al Sa'ud (aka MBS) and his close ally, the Crown Prince of Abu Dhabi,
Sheikh Mohammed bin Zayed Al Nahyan (aka MBZ) -- to downgrade their traditional close
ties with the US, and reach out to Beijing to provide a substitute strategic umbrella.
Hence, the PRC offer to oversee and guarantee the establishment of a regional collective
security regime -- itself based on the Russian proposals and ideas first raised in late July
2019 -- is now getting considerable positive attention from both shores of the Persian Gulf.
Iran, Saudi Arabia, the United Arab Emirates (UAE), Qatar, and Oman appear to be becoming
convinced that the PRC could be the key to the long-term stability and prosperity in the
Persian Gulf and the Arabian Peninsula.
Iran is also considering the expansion of security cooperation with Russia as an added
umbrella against potential US retaliation.
Overall, according to sources in these areas, the US was increasingly perceived as an
unpredictable, disruptive element.
The profound change in the attitude of the Saudi and Emirati ruling families, who for
decades have considered themselves pliant protégés of the US, took long to
evolve. However, once formulated and adopted, the new policies have been implemented
swiftly.
The main driving issue is the realization by both MBS and MBZ that, irrespective of the
reassuring rhetoric of US Pres. Donald Trump and Jared Kushner, their bitter nemesis -- Qatar
-- is far more important to the US than the rest of the conservative Arab monarchies and
sheikhdoms of the GCC. The last straw came in early July 2019 in the aftermath of the visit of
the Emir of Qatar, Sheikh Tamim bin Hamad Al Thani, to Washington, DC.
Sheikh Tamim received an extravagant reception from both Pres. Trump in person and
official Washington. Trump lavished praises on Qatar and the Emir , and emphasized the
US renewed commitment "to further advancing the high-level strategic cooperation between our
two countries".
There are good reasons for the US preference of Qatar.
The Al-Udeid Air Base in Qatar is by far the most important US base in the entire greater
Middle East. Qatar is mediating between the US and several nemeses, including Afghanistan,
Iran, and Turkey. Qatar is providing "humanitarian cash" to HAMAS in the Gaza Strip, thus
buying quiet time for Israel. Qatar has given generous "political shelter" to numerous leaders,
seniors, and commanders of questionable entities the US would like to protect but would never
acknowledge this (including anti-Russia Chechens and other Caucasians, and anti-China Uighurs).
Related:
Gibraltar Releases Iranian Tanker
Qatari Intelligence is funding and otherwise supporting the various jihadist entities
which serve as proxies of the CIA and M?T ( Milli ?stihbarat Te?kilat?: the Turkish
National Intelligence Organization) in the greater Middle East (mainly Syria, Iraq, Libya,
Jordan, Yemen) and Central Asia (mainly Afghanistan-Pakistan, China's Xinjiang and Russia's
Caucasus and the Turkic peoples of eastern Siberia).
On top of this, Qatar is purchasing billions of dollars' worth of US-made weapons; and
paying cash on-time (unlike the habitually late Saudis who now cannot afford to pay what
they've already promised).
Moreover, the Middle East is awash with rumors that Qatari businessmen saved the financial
empire of the Kushner family by investing at least half-a-billion dollars in the 666 5th Avenue
project in New York. The rumors are very specific in that the investment was made for political
reasons on instruction of the Emir . In the conspiracies-driven Arab Middle East, such
rumors are believed and serve as a viable motive for the policies of the Trump White House: an
ulterior motive the Saudis and Gulfies cannot challenge.
"They discussed coordination of forthcoming regional crises and diplomatic initiatives.
They agreed that the current dynamic vis-à-vis the US could lead to either a US
capitulation and withdrawal, or to a major escalation all over the greater Middle East.
Soleimani believed the latter option was more likely. Therefore, Soleimani and Zarif
discussed how to better utilize the Russian and PRC umbrella to not only shield Iran against
US onslaught, but to also convince the Arab states to stay out of the fighting."
A lot of focus on the Arabs but only a brief mention of the Israelis. I suspect this is
why Soleimani believes escalation is likely: the Israelis are the main driving force pushing
the U.S. take out Iran. My question: How tight is Adelson and Netanyahu's grip on the strange
orange man?
'How tight is Adelson and Netanyahu's grip on the strange orange man?'
I think the refusal to retaliate against Iran for shooting down a drone has already given
an answer to this question. If my guess is correct then we can expect a new outbreak of the
wars between the Deep State and the various populist factions now gaining ground. It seems
the folk are tired of the burdens of empire in spite of being propagandized by their betters
day and night. Better watch out for another major terrorist attack, I suppose.
It is bizarre that Qatar was the one country/sheikdom in the Gulf that openly stood by
Iran, if only because of the idiotic Saudi attempted embargo of it, while at the same time
Qatari funded mercenaries in Syria fought Iranian backed Hezbollah forces there.
As bizarre
as Russia sending S-400s to Turkey last month and Turkish-allied militants shelling a Russian
observation post in Syria yesterday. Also, maybe Qatar's importance to the US is its regional
support for Iran.
China's largest oil company backed out of a large Venezuelan crude purchase last week and
it will be interesting to see if they continue to violate US sanctions on Iran.
Shale is already deeply unprofitable and always has been. Big-dollar investors like
pension funds have continued funding it due to (a) hype and (b) lack of alternative putative
sources of return, but it's finally starting to sink in that shale has no future.
If the bubble doesn't pop by itself, a Chinese end-run would likely do so, thereby
ratcheting the stakes up in the Middle East that much higher. Then we're back to Soleimani's
"latter option".
Different take from MOA, particularly re Russians stationed in Iran which none may call
bases.
None of this in msm but of course, because this is news the contradiscts official narrative.
Msm is reporting Iran oil trans shipped between tankers to bust sanctions but if China takes
large, say 2 million b/d, can't be hid what will us do?
Probably not much if in China ships.
More tariffs?
"... I thought all these foreign countries were international." He explained that "international" means countries that are not really countries. They're Liberia and Panama, countries that only use the US dollar, not their own currency. So the oil industry doesn't have a currency risk. They are flags of convenience and they don't have any income tax. ..."
"... He explained to me that Standard Oil sold its oil at a very low price from the Near East to Liberia or Panama or Lagos, or wherever they have a flag of convenience and no income tax. Then they would sell it at a very high price to its refineries in Europe and America, at such a high price that these "downstream" affiliates don't make any income. So there's no tax to pay. ..."
"... Standard Oil and other U.S. oil companies – and also mining companies – don't earn an income there, because they sell it so low, all the profits are reported to be taken in Liberia or Panama. These are non-countries. ..."
"... Here is a report. I'm from the State Department (I assumed that this meant CIA). "We want to calculate how much money the US could get if we set up bank branches and became the bank for all the criminal capital in the world." He said, "We figured out we can finance, (and he said this in an elevator), we can finance the Vietnam War with all the drug money coming into America, all of the criminal money. Can you make a calculation of how much that might be?" ..."
"... I found that the entire US balance of payments deficit in the 1960s, since the Vietnam War, the entire balance of payments deficit was military spending abroad. The private sector's trade and investment was exactly in balance; tourism, trade and investment were exactly in balance. All the deficit was military. ..."
"... Mr. Barsanti said that McNamara said that Arthur Andersen would never get another government contract if it published my report. ..."
"... There were three people, known as the Columbia Group, saying the Vietnam War was going to destroy the American monetary system as we know it. The group was composed of Terence McCarthy, my mentor; Seymour Melman, a professor at Columbia University's School of Industrial Engineering where Terence also taught; and myself. We would basically go around the New York City giving speeches. ..."
I worked at Chase Manhattan until 1967, then finally I had to quit to finish the
dissertation. I spent a year on that. At Chase I had become the specialist in the oil
industry's balance of payments. When the Vietnam War began and escalated, President Johnson
in January 1965, right after I joined the bank in December 1964, passed the voluntary –
in reality, compulsory – foreign investment rules blocking American companies from
investing more than 5% of the growth of the previous year's investment. The oil industry
objected to that. They came to David Rockefeller and said we've got to convince the
government that we're ripping off other countries so fast, we're able to exploit them so
rapidly, that it really helps the US balance of payments to let us continue investing more
abroad. Can you help us show this statistically?
So David Rockefeller asked me to do a study of the balance of payments of the oil
industry. Rockefeller said, "We don't want to have Chase's oil and gas department do it,
because they would be thought of as lobbyists. Nobody knows who you are, so you're neutral.
We want to know what the real facts are, and if they're what we think they are, we'll publish
what you write; if we don't like it we'll keep it to ourselves, but please just give us the
facts." He said, "You can ask the oil companies all the questions you want. They will fill
out the forms you design for a statistical accounting format. We'll give you a year to write
it all up." To me this was wonderful. Oil was the key sector internationally. It turned out I
found out that the average dollar that actually was invested abroad by oil companies was
recaptured by the US economy within 18 months. The payback period was that fast.
The report that I wrote was put on the desk of every senator and every representative in
the United States and I was celebrated for being the economist of the oil industry. So this
taught me everything about the balance of payments which, as I said, is a topic that's not
taught in any university. So I finished that, finished the dissertation, and then I developed
a methodology for the overall US balance of payments. Most of the balance of payment
statistics were changed when they designed the gross national product accounts. The accounts
now treat exports and imports as if they were paid for fully for cash. So if you make a
million dollars worth of grain exports, you are assumed to bring a million dollars into the
economy. And if you export a million dollars of arms, of military, it all comes back.
What I found out is that only a portion actually of exports actually comes back. And
imports have an even lower balance-of-payment costs as compared to their nominal valuation.
For instance, all of America's oil imports are from American oil companies, so if you pay a
hundred dollars for oil, maybe thirty dollars of that is profit, thirty dollars is
compensation to American management, thirty dollars is the use of American exports to
physical equipment, oil drilling equipment and others to produce the oil.
The closest people that I worked with for the study were at the Standard Oil Company,
which was always very close to the Rockefellers, as you know. So I went over the statistics
and I said, "In the balance of payments, I can't find where Standard Oil makes the profit.
Does it make the profit by producing oil at the production end? Or does it make it selling it
at the gas stations, at the retail sales end?" The treasurer of Standard Oil said, "Ah I can
tell you where we make them. We make them right here in my office." I asked how. "What
countries could I find this in? I don't find it in Europe, I don't find it in Asia, I don't
find it in Latin America or Africa." He said, "Ah, do you see at the very end of the
geography headings for international earnings, there's something called international?"
I said, "Yes that always confused me. Where is it? I thought all these foreign countries
were international." He explained that "international" means countries that are not really
countries. They're Liberia and Panama, countries that only use the US dollar, not their own
currency. So the oil industry doesn't have a currency risk. They are flags of convenience and
they don't have any income tax.
He explained to me that Standard Oil sold its oil at a very
low price from the Near East to Liberia or Panama or Lagos, or wherever they have a flag of
convenience and no income tax. Then they would sell it at a very high price to its refineries
in Europe and America, at such a high price that these "downstream" affiliates don't make any
income. So there's no tax to pay. For all US oil investment in Europe, there's no tax to pay
because the oil companies' accountants price it so high, and pay so little per barrel to
third world countries such as Saudi Arabia, that they only get a royalty. Standard Oil and
other U.S. oil companies – and also mining companies – don't earn an income
there, because they sell it so low, all the profits are reported to be taken in Liberia or
Panama. These are non-countries.
That gave me the clue about what people these days talk about money laundering. In the
last few months that I worked for Chase Manhattan in 1967, I was going up to my office on the
ninth floor and a man got on the elevator and said, "I was just coming to your office,
Michael. Here is a report. I'm from the State Department (I assumed that this meant CIA). "We
want to calculate how much money the US could get if we set up bank branches and became the
bank for all the criminal capital in the world." He said, "We figured out we can finance,
(and he said this in an elevator), we can finance the Vietnam War with all the drug money
coming into America, all of the criminal money. Can you make a calculation of how much that
might be?"
So I spent three months figuring out how much money goes to Switzerland, from drug
dealings, what's the dollar volume of drug dealings. They helped me with all sorts of
statistics on that, and said, "We can become the criminal capital of the world and it'll
finance the dollar and this will enable us to afford the spending to defeat communism in
Vietnam and elsewhere. If we don't do that, the bomb throwers will come to New York."
So I became a specialist in money laundering! Nothing could have better prepared me to
understand how the global economy works! I had all the statistics, I had the help of the
government people explaining to me how the CIA worked with drug dealing and other criminals
and kidnappers to raise the money so it would be off the balance sheet funding and Congress
didn't have to approve it when they would kill people and sponsor revolutions. They were
completely open with me about this. I realized they'd never done a security check on me.
So I wanted to do a study of the balance of payments of the whole United States. I went
to work for Arthur Andersen, which was at that time was one of the Big Five accounting firms
in the United States. Later it was convicted of fraud when it got involved in the Enron
scandal and was closed down. But I was working before the other people went to jail, before
they closed down Arthur Andersen. So I spent a year applying my balance of payments analysis
to the US balance of payments. When I finally finished, I found that the entire US balance of
payments deficit in the 1960s, since the Vietnam War, the entire balance of payments deficit
was military spending abroad. The private sector's trade and investment was exactly in
balance; tourism, trade and investment were exactly in balance. All the deficit was
military.
So I turned in my statistics. My boss Mr. Barsanti, came in to me three days later and
he said, "I'm afraid we have to fire you." I asked, "What happened?" He said, "Well, we sent
it to Robert McNamara." (who was the Secretary of Defense and then became an even more
dangerous person with the World Bank, which probably is more dangerous to the world than the
American military. But that's another story). Mr. Barsanti said that McNamara said that
Arthur Andersen would never get another government contract if it published my report.
In all of the Pentagon Papers that later came out of McNamara's regime, there's no
discussion at all of the balance-of-payments cost of the Vietnam War. This is what was
driving America off gold. At Chase Manhattan from 1964 until I left, every Friday the Federal
Reserve would come out with its goal, its weekly statistics. We could trace the gold stock.
Everybody was talking about General de Gaulle cashing in the gold, because Vietnam was a
French colony and the American soldiers and army would have to use French banks, the dollars
would go to France and de Gaulle would cash it in for gold.
Well, Germany actually was cashing in more gold than de Gaulle, but they didn't make
speeches about it. So I could see that the war spending was going to drive America off gold.
There were three people, known as the Columbia Group, saying the Vietnam War was going to
destroy the American monetary system as we know it. The group was composed of Terence
McCarthy, my mentor; Seymour Melman, a professor at Columbia University's School of
Industrial Engineering where Terence also taught; and myself. We would basically go around
the New York City giving speeches.
"... I'm going to go against the grain of the belt and road initiative theory above, and I admit the US is often hostile to Chinese relations with Europe, especially infrastructure. That might be so because the US hopes to compete in that market, just as to control eurasian access would give it a hegemonic position in new trade through the region. So I think that it is not aimed at stopping that initiative, it is about finding ways to control it. ..."
"... I think that the amplification of differences between Iran and US is an antagonism not viewable by the US public as other than part of either longstanding differences or due to US policy error, but I think that it should be considered that this confrontation is actually being framed up to place the US frontline, something the US itself maybe unwittingly invites by its own rhetoric and posturing of dominance. ..."
"... If the above is the true scenario, then I see little room for de-escalation left. ..."
"... Mental retarded is one form of mental disability. This isn't quite the whopper as "wiping Israel off the map " was. I do expect to see limited strikes against Iran within the next week. Predictions are usually wrong though as events are increasingly unpredictable. I sometimes think that the simple act of predicting something which is actually planned can cause the plan to change. Kind of like Quantum physics where observation of a quantum wave can change its quantum state. Observation alters reality. ..."
"... Trump needs Adelson's continued financial support to get reelected, and he wants a ROI, so I think something happens. Big or small? I expect a limited strike, at least I hope so. Something Iran can ignore at least cause only a token retaliation to save face and not cause escalation. ..."
"... TEHRAN – The Leader of the Islamic Revolution Ayatollah Ali Khamenei said on Wednesday that U.S. officials' claims seeking negotiations with Tehran is an act of "deception," saying such an offer is merely aimed at disarming the Iranian nation of its "elements of power." ..."
"... "Having failed to achieve its goal through pressure, the enemy is coming forward with an offer of talks, while assuming the Iranian nation is simple-minded," the Leader said, according to a Press TV report of his statements. ..."
"... Thanks for posting that link to the ProPublica investigation of the 2016 incident when Iran captured the US sailors in its waters. The whole story is quite large and I haven't finished it yet, but already it paints a very disturbing picture of the US Navy. ..."
Language isn't a problem as Pepe Escobar reports on The
Big Picture on the cusp of the G-20, which revolves round what appears to be the sold
front posed by RIC--Russia, India, China. A tidbit:
"What matters is that the Xi-Modi bilateral at the SCO was so auspicious that Foreign
Secretary Vijay Gokhale was led to describe it as "the beginning of a process, after the
formation of government in India, to now deal with India-China relations from both sides in a
larger context of the 21st century and of our role in the Asia-Pacific region." There will be
an informal Xi-Modi summit in India in October. And they meet again at the BRICS summit in
Brazil in November."
Clearly when the Big Picture's considered--as it ought to always--Iran's seen as the
weak-link in BRI/Eurasian integration by Outlaw US Empire planners, which is the actual
target beyond Iran. Given the number of nations climbing onboard the BRI Train, Trump won't
get many nations aboard his coalition. Aside from Saudi, UAE, Occupied Palestine, and UK, how
many nations have swallowed TrumpCo's lie that Iran's responsible for the current crisis?
Canada, Ukraine, Poland, Albania, Brazil, Netherlands, The Baltic States?
I'm going to go against the grain of the belt and road initiative theory above, and I admit
the US is often hostile to Chinese relations with Europe, especially infrastructure. That
might be so because the US hopes to compete in that market, just as to control eurasian
access would give it a hegemonic position in new trade through the region. So I think that it
is not aimed at stopping that initiative, it is about finding ways to control it.
This rubs off on Syria, which is the Mediterranean access point. To control Syria gives
control of that access point, it would remove direct Russian Mediterranean access also, as
well as buffer Israel. I think EU is more interested in securing the Mediterranean than any
new Eurasian trade route, except for similar reasons to US in terms of control and profit. As
stands I don't see EU achieving any great new trade by that route. So that ties Europe more
closely with US in my opinion. If you look at relations towards Russia, say Cyprus or Ukraine
or sanctions, they do not demonstrate a great friendship or trust, just a balance of power
and certain understandings.
I think that the amplification of differences between Iran and US is an antagonism not
viewable by the US public as other than part of either longstanding differences or due to US
policy error, but I think that it should be considered that this confrontation is actually
being framed up to place the US frontline, something the US itself maybe unwittingly invites
by its own rhetoric and posturing of dominance.
If the above is the true scenario, then I see little room for de-escalation left. To cede at this point by US
would be tantamount to giving Russia, China and Iran hegemony of the region, and I just don't think that is on the books, I
don't think China or Russia will be able to provide the reassurance western or US allied nations or states would accept. For
the US the main state it would not abandon would be Israel, but I don't think the US would just give up the hegemony that it
still has in the region just like that either.
"... [F]inding ways to control it" differs little from "stopping that initiative,"
particularly within the context of the stated #1 policy goal of the Outlaw US Empire--Full
Spectrum Domination. (Oh, and welcome to the forum.)
Pardon me for asking a few questions. First, have you read the White Paper (doc format)
issued by China's Politburo explaining to the Outlaw US Empire why it ceased trade
negotiations and set forth its conditions for their resumption? Second, Have you read Michael
Hudson's short
appraisal of that paper as it integrates with his analysis of the overall Outlaw US
Empire project?
Lastly, please elaborate on what you mean here: "... I don't think China or Russia will be
able to provide the reassurance western or US allied nations or states would accept." I look
forward to your reply.
Mental retarded is one form of mental disability. This isn't quite the whopper as "wiping
Israel off the map " was. I do expect to see limited strikes against Iran within the next week. Predictions are
usually wrong though as events are increasingly unpredictable. I sometimes think that the
simple act of predicting something which is actually planned can cause the plan to change.
Kind of like Quantum physics where observation of a quantum wave can change its quantum
state. Observation alters reality.
Anyways, assuming the strikes happen what happens afterward should be interesting. As
Trump said this wont include boots on the ground so it will be an air show. There is the law
of unintended consequences that applies, so who can say for sure.
But Trump needs Adelson's continued financial support to get reelected, and he wants a
ROI, so I think something happens. Big or small? I expect a limited strike, at least I hope
so. Something Iran can ignore at least cause only a token retaliation to save face and not
cause escalation.
"The Iranian Leader Sayyed Ali Khamenei has reminded Iranian officials of what Imam Khomeini
said during the US-Iran crisis in the 80s. He said: "The behaviour of the US can be compared
to the story of a lion in Persian stories. Carter most probably didn't know about this story.
Although it pains me to compare Carter to a lion, the story fits him perfectly. When a Lion
faces his enemy, it roars and breaks wind to scare his enemy. The lion ends by shaking his
tail, hoping for a mediator. Today the US is mimicking the lion's behaviour: the shouting and
the threats (roaring) don't scare us, and the US's continual announcement of new sanctions is
to us just like the lion breaking wind"."
TEHRAN – The Leader of the Islamic Revolution Ayatollah Ali Khamenei said on Wednesday
that U.S. officials' claims seeking negotiations with Tehran is an act of "deception," saying
such an offer is merely aimed at disarming the Iranian nation of its "elements of power."
Ayatollah Seyyed Ali Khamenei made the remarks in response to numerous offers of negotiations
recently put forward by U.S. President Donald Trump and Secretary of State Mike Pompeo amid a
campaign of "maximum pressure" against Tehran.
"Having failed to achieve its goal through pressure, the enemy is coming forward with an
offer of talks, while assuming the Iranian nation is simple-minded," the Leader said,
according to a Press TV report of his statements.
"The Iranian nation will definitely make progress, but without you and on the condition that
you don't approach it," he said to U.S. officials.. .
here
Thanks for posting that link to the ProPublica investigation of the 2016 incident when
Iran captured the US sailors in its waters. The whole story is quite large and I haven't
finished it yet, but already it paints a very disturbing picture of the US Navy.
The dysfunctions and failures in the hierarchies read more like an old and rigid
institution than like anything one thinks of as military characteristics. I guess, then, the
truth is that the US Navy is such an institution - antiquated, privileged, and beyond
accountability.
I am not a fan of the US military but it still feels strangely sad to read of such decay.
One hates to see degradation in anything. It explains why warships run into things as if
blind, and why sailors seem impossibly incompetent. I have no doubt that the generals and
admirals of the world make their appraisals of US incompetence accordingly, and probably, as
professionals themselves, equally sadly.
It's off-topic but a very important article that I hope we see more discussion of in an
open thread or one relating to US military. That link again, this one to the source:
In 2016, 10 sailors were captured by Iran. Trump is making it a political issue. Our
investigation shows that it was a Navy failure, and the problems run deep.
by Megan Rose, Robert Faturechi, and T. Christian Miller June 24, 2:15 p.m. EDT
@ Grieved 102 I am not a fan of the US military but it still feels strangely sad to read of such
decay.
The Navy doesn't hit moving ships any longer, they've shifted to stationary ones -- alliding.
Jun 25, 2019
US warship allides with moored bulker in Montreal
A US Navy Freedom-class littoral combat ship (LCS) struck a moored commercial vessel in
Montreal as it was about to sail out for its new homeport of Mayport, Florida, on Friday,
June 21.
Eyewitnesses reportedly saw USS Billings, which is scheduled to be commissioned in August,
allide with the moored bulk carrier Rosaire A. Desgagnes as the former departed the wharf
at Montreal with an escort of tugs.
The warship was said to have lost control and ended up hitting the bulk carrier after its
mooring lines were let go. . .Billings' starboard side bridge wing suffered visible minor
damage. .
here
Save you the trouble, allide: To impact a stationary object.
Thank you Don Bacon #79 I have noticed that it is almost always the Navy that f#ucks up or
hoists the false flag, Gulf of Tonkin, USS Vincennes, playing chicken with enormous container
carriers in the sea of Japan, perhaps even the Japanese oil tanker in early June. The list is
much longer than this small excerpt.
Only last week another of USA great new destroyers clips a moored container vessel in
Canada. They are a maritime menace.
Is it a psychosis or a deliberate mission by narcissistic ships commanders? Something is
seriously out of control in the US Navy.
Navy Times, Jan 13 Worse than you thought: inside the secret Fitzgerald probe the Navy doesn't want you to
read
A scathing internal Navy probe into the 2017 collision that drowned seven sailors on the
guided-missile destroyer Fitzgerald details a far longer list of problems plaguing the
vessel, its crew and superior commands than the service has publicly admitted.
Obtained by Navy Times, the "dual-purpose investigation" was overseen by Rear Adm. Brian
Fort and submitted 41 days after the June 17, 2017, tragedy.
. . .Their report documents the routine, almost casual, violations of standing orders on a
Fitz bridge that often lacked skippers and executive officers, even during potentially
dangerous voyages at night through busy waterways.
When Fort walked into the trash-strewn CIC in the wake of the disaster, he was hit with the
acrid smell of urine. He saw kettlebells on the deck and bottles filled with pee. Some
radar controls didn't work and he soon discovered crew members who didn't know how to use
them anyway.
Fort found a Voyage Management System that generated more "trouble calls" than any other
key piece of electronic navigational equipment. Designed to help watchstanders navigate
without paper charts, the VMS station in the skipper's quarters was broken so sailors
cannibalized it for parts to help keep the rickety system working.. .
here
The US attempt to destroy the Iranian economy by bringing its oil exports to zero, thereby
causing untold suffering and death, is an act of war, and should be treated as such, think
sanctions on Iraq causing the deaths of 500,000 children. It is impossible to expect any self
respecting nation to even engage in a conversation when the US holds a gun to Iran's head. So
much for the hubris of the US hegemon that they feel insulted whenever a weaker country says
no, that they feel their credibility is at stake, then they double down on the threats.The US
only wants vassals, such an attitude can only result in war.
The US attempt to destroy the Iranian economy by bringing its oil exports to zero, thereby
causing untold suffering and death, is an act of war, and should be treated as such, think
sanctions on Iraq causing the deaths of 500,000 children. It is impossible to expect any self
respecting nation to even engage in a conversation when the US holds a gun to Iran's head. So
much for the hubris of the US hegemon that they feel insulted whenever a weaker country says
no, that they feel their credibility is at stake, then they double down on the threats.The US
only wants vassals, such an attitude can only result in war.
Oscar Peterson@48 - "...Targeting Saudi or UAE oil infrastructure is possible, but that
will be hard (and risky) if deniability is a goal..."
The second Iran is forced to resort to hitting Saudi or UAE oil infrastructure, we'll see
the Pepe
Escobar-described $1.2 quadrillion global financial Ponzi of fake money (derivatives)
implode and financial markets everywhere will be locked shut. In a matter of hours, not
days.
Now the Swiss banker's claim may be off by a few hundred trillion either way, but it
really doesn't matter. That's way too much money for some kind of secretive global financial
bailout - in fact, there isn't that much REAL money available in the whole world. The guy
that bought oil futures for pennies at $1000/bbl will now be a trillionaire. Except there
won't be anyone that can or will pay him. "But it's a futures contract - someone has to
buy his $1000/bbl oil. That's the rulez!" Yeah, he may as well have bought a stack of
Zimbabwe $10 trillion dollar notes instead and been a hundred trillionaire, for what that's
worth.
Pepe uses extremes to make his point, but oil doesn't really need to go to $1000/bbl. or
even $500/bbl. - $200/bbl oil will lock the oil derivative markets. Which will keep all
linked financial derivative markets (virtually all of them) locked or wiped out. The big
banks will be herding cats at that point and imploding themselves, and nobody will care about
fighting anyone in the Persian Gulf. Besides, all CENTCOM and USSOCOM personnel will be
needed back here in the United States to protect the government from the people.
Iran won't be affected much because the U.S. and Israel made sure they were never
allowed in the global financial sandbox. Poor countries with massive IMF loans? Yeah, they
won't care - the little people never saw a dime of that, anyway. Russia is as prepared as
possible and will do fine. China? Sorry. They're going down with everyone else. I'll let
everyone know how the food riots in the U.S. turn out. That's if I survive until 2025 when
the internet comes back up and if the planet isn't ruled by talking apes. Wait... that last
part already happened. Forget it.
I guess I'll just head north to steal a few barrels of tar sands from Canada. James: how
do I get there from Minnesota on foot? I won't have Google Maps. Nobody will. Do you have any
spare barrels?
US threats and the drone shoot down did effect oil shipments from the gulf:
"Insurance rates also soared after those incidents, with companies charging at least
$180,000 in premiums to go to the Persian Gulf. They were about $30,000 early this year
before tensions began to escalate."
As a result:
"Oil tanker owners are raising the prices they charge to export Middle East crude as tensions
surge in a region that accounts for about a third of all seaborne petroleum shipments."
Rates for transporting 2 million-barrel cargoes from Saudi Arabia to China jumped to
almost $26,000 a day on Thursday, more than double where they were at the start of June,
according to Baltic Exchange in London."
Meanwhile, the punishing sanctions on Iran has been crafted and applied by an Israeli
immigrant to the United States named Sigal Mandelker who is the Israeli-American dual
national who runs the Office of Terrorism and Financial Intelligence (TFI) at the Dept. of
the Treasury.
$150,000 in increased insurance costs on a 2 million bpd tanker = very tiny increase in oil
cost. It isn't nothing, but the primary issue is availability...
Together, five of China's leading crude petroleum suppliers (Russia, Saudi Arabia, Angola,
Iraq plus Oman) represent over half (55.2%) of overall Chinese crude oil imports for
2018.
China's top 10 crude petroleum providers supply almost four-fifths (79%) of its imported
crude oil.
Fastest-Growing Suppliers of China's Imported Crude Oil
The value of Chinese purchases of crude oil from its 15 top suppliers amounted to a subtotal
$216.7 billion in 2018, up by an average 50.7% from the $143.8 billion worth of imported
crude from those same 15 providers during 2017.
Libya: Up 248.1% since 2017
United States: Up 112.8%
Malaysia: Up 79.9%
Congo: Up 76.7%
Brazil: Up 76.6%
Kuwait: Up 67.8%
Iraq: Up 62.3%
United Arab Emirates: Up 60.8%
Russia: Up 58.6%
Colombia: Up 50.6%
Saudi Arabia: Up 44.6%
Oman: Up 40%
Iran: Up 25.8%
Angola: Up 23.6%
Venezuela: Up 6.2%
"... This is classic overproduction based on time-preference mis-coordinating the use of capital due to artificially-low interest rates. It has nothing to do with a normally functioning market. ..."
All of President Trump's foreign policy can be summed up by two
themes,
making the world safe for Israel and controlling the price of energy.
He calls the latter "Energy Dominance."
And to those who still believe Trump has a
plan, these two things are the only ones consistently in evidence.
His reactions to things contrary to his plan, however, are purely limbic.
These two themes converge completely with Iran.
Trump wants Iran neutered to force
Jared Kushner's
now-delayed
again
, "Deal of the Century" onto the Palestinians while also taking Iran's oil off the market to
support surging U.S. domestic production in the hopes of taking market share permanently.
Everything Trump does is in support of these two themes while throwing some red meat at his base
over China, Mexico and the border.
It was never his intention to leave Syria back in December, really. Look how easy was it for John
Bolton and the Joint Chiefs to convince him to stay because how else would we cut Iran's exports to
zero if we didn't stop the land route through Iraq?
This is why we're still harboring ISIS cells in the desert crossing around Al-Tanf at the
Jordan/Iraq/Syria border, to stop Iranian oil from coming into the country.
This feeds right into hurting all of Syria's allies to strengthen Israel's position.
To paraphrase the song from Aladdin, "It's stupid, but hey, it's home."
If the average Trump voter truly understood the lengths we are going to starve the Syrian army from
having enough energy to finish wiping out the Al-Qaeda-linked groups in Idlib and Homs provinces they
would burn their MAGA hats and stay home next November.
But they don't so Trump's approval rating keeps climbing.
On the other hand, people mostly understand exactly what the "Bay of Fat Pigs" operation in
Venezuela was all about, protecting domestic oil production and getting control of Venezuela's.
The sad truth is that many Americans consider this comeuppance for being stupid enough to elect
Nicolas Maduro President.
But this is the guts of Trump's "Energy Dominance" policy. Use tariffs, sanctions, threats and
hybrid warfare to destroy the competition and therefore MAGA.
It would be sad if it wasn't so pathetic.
And the irony is that the whole plan is predicated on sustainable and nigh-exponential growth of
U.S. domestic production.
There's only one problem with that. It's completely unsustainable.
The greatness of the U.S. production story is evident if you only look at the number of barrels
produced. But that story turns into a nightmare the minute you look one inch deeper to see what the
cost of those barrels are and what profit, if any, they produce.
Heading into 2019, the industry promised to stake out a renewed focus on capital discipline and
shareholder returns. But that vow is now in danger of becoming yet another in a long line of unmet
goals.
"Another quarter, another gusher of red ink," the Institute for Energy Economics and Financial
Analysis, along with the Sightline Institute, wrote in a joint report on the first quarter earnings
of the shale industry.
The report studied 29 North American shale companies and found a combined $2.5 billion in
negative free cash flow in the first quarter. That was a deterioration from the $2.1 billion in
negative cash flow from the fourth quarter of 2018. "
This dismal cash flow performance came
despite a 16 percent quarter-over-quarter decline in capital expenditures," the report's authors
concluded.
You can't hide a lack of profitability forever with financial engineering folks. Even Elon Musk is
beginning to figure this out. And, once that reaches critical mass, to quote one of my favorite
philosophers, The Tick, "Gravity is a harsh mistress."
What was that old joke?
"So if we're selling dollars for ninety-cents how do we make money?"
"Volume."
If that doesn't sum up where we are today in the energy space I don't know what does.
All of this is a product of the Fed's ridiculous zero-bound interest rate policy allowing
energy drillers to issue obscene amounts of low-quality shares and lower-quality debt packaged in such
a way to yield the magic 7.5% most pension funds need to maintain their defined benefit payouts
without going broke.
This cycle is only partially derailed by the Fed raising rates a couple of points to 2.75%.
All Trump cares about is getting a 4% GDP print before next year's election to prove his critics
wrong. This is why he wants the Fed to lower rates.
It will keep the shale boom going pumping massive amounts of oil which we can't ship to the
coasts to sell to people who don't want it.
And even if all of the new pipeline capacity alleviates the internal glut that doesn't mean there's
a market for more of it. Remember, shale produces ultra light sweet crude which most refiners have to
blend with heavier feedstock so there really is an upper limit as to how much of this stuff the market
wants.
The current and persistent discount of West Texas to Brent, which is still over $9 per barrel is a
measure of this since most oil is priced in relation to Brent, even heavy sour grades like Russian
Urals,
which
we're importing more of to feed domestic refineries
strapped for stock now that we've embargoes
Venezuelan oil.
Rystad puts it into context, noting that the most productive gas facility in the U.S. Gulf of
Mexico – Shell's Mars-Ursa complex – produces about 260 to 270 MMcfd of gross natural gas.
In
other words, the most productive gas project in the Gulf of Mexico only produces about 40 percent
of the volume of gas that is being flared and vented in West Texas and New Mexico every single day.
Given this situation I think we've reached that part of the story where someone just let a really
big one rip and no one is willing to acknowledge it.
Dood Natural Gas is Awesome!
This is classic overproduction based on time-preference mis-coordinating the use of capital
due to artificially-low interest rates. It has nothing to do with a normally functioning market.
But this situation can go on a lot longer thanks to the realities outside of the U.S. shale
industry.
When the Fed finally does lower interest rates it won't be to save the energy producers in North
Dakota. It will be to save the banking system from a dollar liquidity shock that will implode Europe.
The market's reaction to Friday's horrific jobs report was pure front-running that rate cut
mixed with
safe-haven
behavior knowing that the global growth story is dead.
The U.S. yield curve imploded another 6 basis points. Gold popped to a 2019 high, the Dow put in a
major reversal and the euro rallied after a massive run-up in euro-bonds before the New York open
reversed some of that.
And there's Trump demanding lower oil prices on Twitter which is just feeding the problems of the
shale drillers already underwater. Rock meet hard place.
Dollars for eight-five cents? MOAR volume!
So Trump has gotten what he wants but not for the reasons he wants it. With growth dying thanks, in
part, to his random acts of financial terror, oil prices are now in free fall.
I identified the signals for
my Patrons in a Market
Report on May 26th
, noting a back-to-back-to-back set of reversals I deemed "
hugely
bearish.
" Sometimes, it's just that easy. More often than not the market is telling you
what you need to know, if you would only turn off the spin-machines and read the tape.
But the sad truth is that once the Fed lowers rates the drillers will be encouraged to go
back to the credit well one more time because there will be even more demand for their crappy paper.
In a yield-starved world everyone is trying to stave off the day of reckoning for as long as possible.
And right now, U.S. pension managers are a shale drillers' best friend. And so is an ECB trapped
like an egg in a vice between a faltering German economy and political system undermining what's left
of growth across Europe.
But not a U.S. President intent on creating a world few want and fewer benefit from while wasting a
precious energy by the cubic shit load for a couple hundred thousand votes more than a year from now.
"... The shipments to Cuba and Russia and possibly a few others just aren't enough. Remember that Venezuela's population in 1989 was 19.3 million while today it is 32.7 million. And back then that nation didn't have to cope with smothering economic sanctions of every kind along with the physical attacks and sabotage of infrastructure. ..."
"... I believe Russia buys oil from Venezuela. US refiners then buy oil from Russia to replace the Venezuelan oil. ..."
Venezuela oil exports seem to be imploding. Headline:
Venezuela Oil Exports Slump to a 28-Year Low
By Lucia Kassai January 2, 2019
More recent:
Shipping data shows that imports of fuel and diluents necessary to make Venezuela's extra
heavy crude refinable have dropped to 86,000 b/d in the first part of May from 225,000 b/d
for April. Fuel rationing is being overseen by the military as shortages begin to bite
deeper. As local crude oil production continues to fall, and refineries operate much below
capacity, the lines at gas stations outside of the capital are now miles long.
The shipments to Cuba and Russia and possibly a few others just aren't enough. Remember
that Venezuela's population in 1989 was 19.3 million while today it is 32.7 million. And back
then that nation didn't have to cope with smothering economic sanctions of every kind along
with the physical attacks and sabotage of infrastructure.
... and a worthwhile analysis of the causes of the Venezuelan economic collapse (including
a lot of analysis of their oil export industry) from Francisco Rodriguez who Mark Weisbrot
(from the 40k deaths report with Jeffrey Sachs) says knows more about the Venezuelan economy
than anyone in the world (although he is a critic of Chavez and Maduro).
"... No other country in the Middle East is as important in countering America's rush to provide Israel with another war than Iraq. Fortunately for Iran, the winds of change in Iraq and the many other local countries under similar threat, thus, make up an unbroken chain of border to border support. This support is only in part due to sympathy for Iran and its plight against the latest bluster by the Zio-American bully. ..."
"... For the Russo/Sino pact nations, or those leaning in their direction, the definition of national foreign interest is no longer military, it is economic. Those with resources and therefore bright futures within the expanding philosophy and economic offerings of the Russo/Sino pact have little use any longer for the "Sorrows of Empire." These nation's leaders, if nothing more than to line their own pockets, have had a very natural epiphany: War is not, for them, profitable. ..."
"... Lebanon and Syria also take away the chance of a ground-based attack, leaving the US Marines and Army to stare longingly across the Persian Gulf open waters from Saudi Arabia or one of its too few and militarily insignificant allies in the southern Gulf region. ..."
"... As shown in a previous article, "The Return of the Madness of M.A.D," Iran like Russia and China, after forty years of US/Israeli threats, has developed new weapons and military capabilities, that combined with tactics will make any direct aggression towards it by American forces a fair fight. ..."
"... When Trump's limited political intelligence wakes up to the facts that his Zio masters want a war with Iran more than they want him as president, and that these forces can easily replace him with a Biden, Harris, Bernie or Warren political prostitute instead, even America's marmalade Messiah, will lose the flavor of his master's blood lust for war. ..."
"... I do particularly agree that elimination of Sadam was the greatest mistake US committed in Middle East. Devastating mistake for US policy. In the final evaluation it did create the most powerful Shi_ite crescent that now rules the Levant. Organizing failing uprising in Turkey against Erdogan was probably mistake of the same magnitude. Everything is lost for US now in the ME. ..."
"... The article evaluating the situation in ME is outstanding and perfect. Every move of US is a vanity. There is no more any opportunity to achieve any benefit for US. Who is responsible for all those screw ups ? US or Israel? ..."
"... However, the other side of the military coin is economic -- specifically sanctions on Iran (& China). Here ( I suspect) the US has prospects. Iran has said it has a "PhD" in sanctions busting. I hope that optimism is not misplaced. That US sanctions amount to a declaration of war on Iran is widely agreed. Sadly, it seems the EU in its usual spineless way will offer Iran more or less empty promises. ..."
"... I don't know if Russia and China have been showing restraint or still don't feel up to taking Uncle on very publicly or even covertly. The author assumes they might be willing to step up now for Iran, but the action in places like Syria suggests they might not. ..."
"... "War is a Racket" by Gen Smedley Butler (USMC – recipient of two Medals of Honor – no rear echelon pogue) is a must read. As true today as it was back when he wrote it. ..."
"... "The Axis of Sanity" – I like it, I like it! Probably quite closely related to the "reality-based community". ..."
"... "Karim al-Mohammadawi told the Arabic-language al-Ma'aloumeh news website that the US wants to turn Ain al-Assad airbase which is a regional base for operations and command into a central airbase for its fighter jets. ..."
"... He added that a large number of forces and military equipment have been sent to Ain al-Assad without any permission from the Iraqi government, noting that the number of American forces in Iraq has surpassed 50,000. ..."
"... Sea assault? Amphibious troop deployment? Are you serious? This is not WWII Normandy, Dorothy. That would be an unmitigated massacre. Weapons have improved a bit in the last 70 years if you have not noticed. ..."
"... first is a conspiracy of Israeli owned, Wall Street financed, war profiteering privatizing-pirate corporations These corporations enter, invade or control the war defeated place and privatize all of its infrastructure construction contracts from the defeated place or state (reason for massive destruction by bombing) and garner control over all the citizen services: retail oil and gas distribution, food supplies, electric power, communications, garbage and waste collection and disposal, street cleaning, water provisioning. traffic control systems, security, and so on.. Most of these corporations are privately owned public stock companies, controlled by the same wealthy Oligarchs that control "who gets elected and what the elected must do while in sitting in one of the seats of power at the 527 person USA. ..."
"... This article by Mr. Titley is the most hopeful article I've yet read demonstrating the coming death of US hegemony, with most of the rest of the civilized world apparently having turned against the world's worst Outlaw Nation. ..."
"... Netanyahu and the Ziocons better think twice about their longed for dream of the destruction of Iran. The Jews always push things too far. Karma can be a bitch. ..."
No other country in the Middle East is as important in countering America's rush to provide Israel with another war than Iraq.
Fortunately for Iran, the winds of change in Iraq and the many other local countries under similar threat, thus, make up an unbroken
chain of border to border support. This support is only in part due to sympathy for Iran and its plight against the latest bluster
by the Zio-American bully.
In the politics of the Middle East, however, money is at the heart of all matters. As such, this ring of defensive nations is
collectively and quickly shifting towards the new Russo/Sino sphere of economic influence. These countries now form a geo-political
defensive perimeter that, with Iraq entering the fold, make a US ground war virtually impossible and an air war very restricted in
opportunity.
If Iraq holds, there will be no war in Iran.
In the last two months, Iraq parliamentarians have been exceptionally vocal in their calls for all foreign military forces- particularly
US forces- to leave immediately. Politicians from both blocs of Iraq's divided parliament
called
for a vote to expel US troops and promised to schedule an extraordinary session to debate the matter ."Parliament must clearly
and urgently express its view about the ongoing American violations of Iraqi sovereignty," said Salam al-Shimiri, a lawmaker
loyal to the populist cleric
Moqtada al-Sadr
.
Iraq's ambassador to Moscow, Haidar Mansour Hadi, went further saying that Iraq "does not
want a new devastating war in the region." He t old a press conference in Moscow this past week, "Iraq is a sovereign
nation. We will not let [the US] use our territory," he said. Other comments by Iraqi Prime Minister Adil Abdul-Mahdi agreed.
Other MPs called for
a timetable for complete US troop withdrawal.
Then a motion was introduced
demanding
war reparations from the US and Israel for using internationally banned weapons while destroying Iraq for seventeen years and
somehow failing to find those "weapons of mass destruction."
As Iraq/Iran economic ties continue to strengthen, with Iraq recently signing on for billions of cubic meters of Iranian natural
gas, the shift towards Russian influence- an influence that prefers peace- was certified as Iraq sent a delegation to Moscow to negotiate
the purchase of the Russian S-400 anti-aircraft system.
To this massive show of pending democracy and rapidly rising Iraqi nationalism, US Army spokesman, Colonel Ryan Dillon, provided
the kind of delusion only the Zio-American military is known for, saying,
"Our continued presence in Iraq will be conditions-based, proportional to need, in coordination with and by the approval of
the Iraqi government."
Good luck with that.
US influence in Iraq came to a possible conclusion this past Saturday, May 18, 2019, when it was reported that the Iraqi parliament
would vote
on a bill compelling the invaders to leave . Speaking about the vote on the draft bill, Karim Alivi, a member of the Iraqi parliament's
national security and defense committee, said on Thursday that the country's two biggest parliamentary factions -- the Sairoon bloc,
led by Shia cleric Muqtada al-Sadr, and the Fatah alliance, headed by secretary general of the Badr Organization, Hadi al-Ameri --
supported the bill. Strangely, Saturday's result has not made it to the media as yet, and American meddling would be a safe guess
as to the delay, but the fact that this bill would certainly have passed strongly shows that Iraq well understands the weakness of
the American bully: Iraq's own US militarily imposed democracy.
Iraq shares a common border with Iran that the US must have for any ground war. Both countries also share a similar religious
demographic where Shia is predominant and the plurality of cultures substantially similar and previously living in harmony. Both
also share a very deep seeded and deserved hatred of Zio- America. Muqtada al-Sadr, who, after coming out first in the 2018 Iraqi
elections, is similar to Hizbullah's Hassan Nasrallah in his religious and military influence within the well trained and various
Shia militias. He is firmly aligned with Iran as is Fattah Alliance. Both detest Zio- America.
A ground invasion needs a common and safe border. Without Iraq, this strategic problem for US forces becomes complete. The other
countries also with borders with Iran are Armenia, Azerbaijan, Turkmenistan, Turkey, Afghanistan and Pakistan. All have several good
reasons that they will not, or cannot, be used for ground forces.
With former Armenian President Robert Kocharian under arrest in the aftermath of the massive anti-government 2018 protests, Bolton
can check that one off the list first. Azerbaijan is mere months behind the example next door in Armenia,
with protests increasing and indicating
a change towards eastern winds. Regardless, Azerbaijan, like Turkmenistan, is an oil producing nation and as such is firmly aligned
economically with Russia. Political allegiance seems obvious since US influence is limited in all three countries to blindly ignoring
the massive additional corruption and human rights violations by Presidents Ilham Aliyev and
Gurbanguly Berdimuhamedow .
However, Russian economic influence pays in cash. Oil under Russian control is the lifeblood of both of these countries.
Recent developments and new international contracts with Russia clearly show whom these leaders are actually listening to.
Turkey would appear to be firmly shifting into Russian influence. A NATO member in name only. Ever since he
shot down his first-
and last – Russian fighter jet, Turkish president Recep Tayyip Erdogan has thumbed his nose at the Americans. Recently
he refused to succumb to pressure and will receive Iranian oil and, in July, the Russian S-400 anti-aircraft/missile system. This
is important since there is zero chance Putin will relinquish command and control or see them missiles used against Russian armaments.
Now, Erdogan is considering replacing his purchase of thirty US F-35s with the
far superior Russian SU- 57 and a few S-500s for good measure.
Economically, America did all it could to stop the Turk Stream gas pipeline installed by Russia's Gazprom, that runs through Turkey
to eastern Europe and will provide $billions to Erdogan and Turkey
. It
will commence operation this year. Erdogan continues to purchase Iranian oil and to call for Arab nations to come together against
US invasion in Iran. This week, Turkish Defense Minister Hulusi Akar renewed Turkey's resolve, saying his country
is preparing for potential American
sanctions as a deadline reportedly set by the US for Ankara to cancel the S-400 arms deal with Russia or face penalties draws
near.
So, Turkey is out for both a ground war and an air war since the effectiveness of all those S-400's might be put to good use if
America was to launch from naval positions in the Mediterranean. Attacking from the Black Sea is out since it is ringed by countries
under Russo/Sino influence and any attack on Iran will have to illegally cross national airspace aligned with countries preferring
the Russo/Sino alliance that favours peace. An unprovoked attack would leave the US fleet surrounded with the only safe harbours
in Romania and Ukraine. Ships move much slower than missiles.
Afghanistan is out, as the Taliban are winning. Considering recent peace talks from which they walked out and next
slaughtered a police station near the western border with
Iran, they have already won. Add the difficult terrain near the Iranian border and a ground invasion is very unlikely
Although new Pakistani President Amir Khan has all the power and authority of a primary school crossing guard, the real power
within the Pakistani military, the ISI, is more than tired of American influence
. ISI has propagated the Taliban for years and often gave
refuge to Afghan anti-US forces allowing them to use their common border for cover. Although in the past ISI has been utterly mercenary
in its very duplicitous- at least- foreign allegiances, after a decade of US drone strikes on innocent Pakistanis, the chance of
ground-based forces being allowed is very doubtful. Like Afghanistan terrain also increases this unlikelihood.
Considerations as to terrain and location for a ground war and the resulting failure of not doing so was shown to Israel previously
when, in 2006 Hizbullah virtually obliterated its ground attack, heavy armour and battle tanks in the hills of southern Lebanon.
In further cautionary detail, this failure cost PM Ehud Olmert his job.
For the Russo/Sino pact nations, or those leaning in their direction, the definition of national foreign interest is no longer
military, it is economic. Those with resources and therefore bright futures within the expanding philosophy and economic offerings
of the Russo/Sino pact have little use any longer for the "Sorrows of Empire." These nation's leaders, if nothing more than to line
their own pockets, have had a very natural epiphany: War is not, for them, profitable.
For Iran, the geographic, economic and therefore geo-political ring of defensive nations is made complete by Syria, Lebanon and
Iraq. Syria, like Iraq, has every reason to despise the Americans and similar reasons to embrace Iran, Russia, China and border neighbour
Lebanon. Syria now has its own Russian S-300 system which is already bringing down Israeli missiles. It is surprising that Lebanon
has not requested a few S-300s of their own. No one knows what Hizbullah has up its sleeve, but it has been enough to keep the Israelis
at bay. Combined with a currently more prepared Lebanese army, Lebanon under the direction of Nasrallah is a formidable nation for
its size. Ask Israel.
Lebanon and Syria also take away the chance of a ground-based attack, leaving the US Marines and Army to stare longingly across
the Persian Gulf open waters from Saudi Arabia or one of its too few and militarily insignificant allies in the southern Gulf region.
Friendly airspace will also be vastly limited, so also gone will be the tactical element of surprise of any incoming attack. The
reality of this defensive ring of nations means that US military options will be severely limited. The lack of a ground invasion
threat and the element of surprise will allow Iranian defences to prioritize and therefore be dramatically more effective. As shown
in a previous article, "The Return
of the Madness of M.A.D," Iran like Russia and China, after forty years of US/Israeli threats, has developed new weapons
and military capabilities, that combined with tactics will make any direct aggression towards it by American forces a fair fight.
If the US launches a war it will go it alone except for the few remaining US lapdogs like the UK, France, Germany and Australia,
but with anti-US emotions running as wild across the EU as in the southern Caspian nations, the support of these Zionist influenced
EU leaders is not necessarily guaranteed.
Regardless, a lengthy public ramp-up to stage military assets for an attack by the US will be seen by the vast majority of the
world- and Iran- as an unprovoked act of war. Certainly at absolute minimum Iran will close the Straits of Hormuz, throwing the price
of oil skyrocketing and world economies into very shaky waters. World capitalist leaders will not be happy. Without a friendly landing
point for ground troops, the US will either have to abandon this strategy in favour of an air war or see piles of body bags of US
servicemen sacrificed to Israeli inspired hegemony come home by the thousands just months before the '20 primary season. If this
is not military and economic suicide, it is certainly political.
Air war will likely see a similar disaster. With avenues of attack severely restricted, obvious targets such as Iran's non-military
nuclear program and major infrastructure will be thus more easily defended and the likelihood of the deaths of US airmen similarly
increased.
In terms of Naval power, Bolton would have only the Mediterranean as a launch pad, since using the Black Sea to initiate war will
see the US fleet virtually surrounded by nations aligned with the Russo/Sino pact. Naval forces, it should be recalled, are, due
to modern anti-ship technologies and weapons, now the sitting ducks of blusterous diplomacy. A hot naval war in the Persian Gulf,
like a ground war, will leave a US death toll far worse than the American public has witnessed in their lifetimes and the US navy
in tatters.
Trump is already
reportedly
seething that his machismo has been tarnished by Bolton and Pompeo's false assurances of an easy overthrow of Maduro in Venezuela.
With too many top generals getting jumpy about him initiating a hot war with Iraq, Bolton's stock in trade-war is waning. Trump basks
in being the American bully personified, but he and his ego will not stand for being exposed as weak. Remaining as president is necessary
to stoke his shallow character. When Trump's limited political intelligence wakes up to the facts that his Zio masters want a war
with Iran more than they want him as president, and that these forces can easily replace him with a Biden, Harris, Bernie or Warren
political prostitute instead, even America's marmalade Messiah, will lose the flavor of his master's blood lust for war.
In two
excellent articles in Asia times by Pepe Escobar, he details the plethora of projects, agreements, and cooperation that are
taking place from Asia
to the Mid-East to the Baltics . Lead by Russia and China this very quickly developing Russo/Sino pact of economic opportunity
and its intentions of "soft power" collectively spell doom for Zio-America's only remaining tactics of influence: military intervention.
States, Escobar:
"We should know by now that the heart of the 21 st Century Great Game is the myriad layers of the battle between
the United States and the partnership of Russia and China. The long game indicates Russia and China will break down language and
cultural barriers to lead Eurasian integration against American economic hegemony backed by military might."
The remaining civilized world, that which understands the expanding world threat of Zio-America, can rest easy. Under the direction
of this new Russo/Sino influence, without Iraq, the US will not launch a war on Iran.
This growing Axis of Sanity surrounds Iran geographically and empathetically, but more importantly, economically. This economy,
as clearly stated by both Putin and Xi, does not benefit from any further wars of American aggression. In this new allegiance to
future riches, it is Russian and China that will call the shots and a shooting war involving their new client nations will not be
sanctioned from the top.
However, to Putin, Xi and this Axis of Sanity: If American wishes to continue to bankrupt itself by ineffective military adventures
of Israel's making, rather than fix its own nation that is in societal decline and desiccated after decades of increasing Zionist
control, well
That just good for business!
About the Author:Brett Redmayne-Titley has published over 170 in-depth articles over the past eight years for news
agencies worldwide. Many have been translated and republished. On-scene reporting from important current events has been an emphasis
that has led to his many multi-part exposes on such topics as the Trans-Pacific Partnership negotiations, NATO summit, Keystone XL
Pipeline, Porter Ranch Methane blow-out, Hizbullah in Lebanon, Erdogan's Turkey and many more. He can be reached at: live-on-scene
((at)) gmx.com. Prior articles can be viewed at his archive: www.watchingromeburn.uk
When Trump's limited political intelligence wakes up to the facts that his Zio masters want a war with Iran more than they
want him as president, and that these forces can easily replace him with a Biden, Harris, Bernie or Warren political prostitute
instead, even America's marmalade Messiah, will lose the flavor of his master's blood lust for war.
I believe you are far
too generous in your estimation of his ability to distinguish between flavors of any type. Otherwise, your analysis is insightful
and thorough.
The U.S. is in the same position today that we were aboard Nimitz back in 1980. Too far from Tehran to start a war or even to
find our people. We are perhaps in even a far worse position in that today, Iran holds no hostages. There's nothing so 'noble'
as 44 hostages to inspire war today. This here is merely at the behest of Israel and the deep state profit centers for mere fun
and games and cash and prizes. Iran, overall, is nothing. Obama put Iran away for what, a billion-five? And Jared, Bolton and
Pompeo dredged it all back up again? Care to guess the first-night expense of a shock and awe on Tehran? It's unthinkable.
I used to like Israel. The Haifa-Tel Av-iv-Jerusalem-Galili loop was pretty cool. The PLO hadn't quite started their game,
we could move freely about the country. It's where the whole thing started. And, unlike Italy and Spain, they treated us Americans
ok. They were somewhat war torn. But now? They're a destructive monolith, they're good at hiding it and further, they make disastrous
miscalculations. Eliminating Saddam was huge. Turns out, Saddam was the only sane one. The last vestiges of Saddam's nuclear program
went up in the attacks on the Osirak reactor that Israel bombed in 1981. Why did they push for the elimination of Saddam afterwards?
Why the lies? Miscalculation.
This here with Iran won't travel further than threats and horseshit. I hope. Lots of bleating and farting. Someone agrees.
Oil dropped three or four bucks today.
"the resulting failure of not doing so was shown to Israel previously when, in 2016 Hezbollah virtually obliterated its ground
attack, heavy amour and battle tanks in the hills of southern Lebanon."
I do particularly agree that elimination of Sadam was the greatest mistake US committed in Middle East. Devastating mistake
for US policy. In the final evaluation it did create the most powerful Shi_ite crescent that now rules the Levant. Organizing
failing uprising in Turkey against Erdogan was probably mistake of the same magnitude. Everything is lost for US now in the ME.
Threatening Iran is now simply grotesque.
Concerning the article. The article evaluating the situation in ME is outstanding and perfect. Every move of US is a vanity.
There is no more any opportunity to achieve any benefit for US. Who is responsible for all those screw ups ? US or Israel?
However, the other side of the military coin is economic -- specifically sanctions
on Iran (& China). Here ( I suspect) the US has prospects. Iran has said it has a "PhD" in sanctions busting. I hope that optimism
is not misplaced. That US sanctions amount to a declaration of war on Iran is widely agreed. Sadly, it seems the EU in its usual
spineless way will offer Iran more or less empty promises.
Is the author unaware of the nation of Saudi Arabia and the fact that they are new BFFs with Israel. They have come out quite
openly they'd like to see Iran attacked. That whole Sunni Wahabism vs. Shia thing is a heck of alot older than this current skirmish.
Being that SA has a border w/ the Persian Gulf and that Kuwait who is even CLOSER may be agreeable to be a staging area, why
the hand wringing about this nation & that nation, etc. The US would be welcome to stage an air and sea assault using Saudi bases
followed up by amphibious troop deployment if need be. But given the proximity they could probably strong arm Kuwait to act as
a land bridge, in a pinch.
So will we expect the follow up article discussing this glaring omission, or am I missing some great development re: S.Arabia's
disposition and temperament regarding all this.
The transformed relationship between Russia and Turkey illustrates perfectly the shifting sands of strategic alliances as we cross
the desert towards destiny. https://www.ghostsofhistory.wordpress.com/
I don't know if Russia and China have been showing restraint or still don't feel up to taking Uncle on very publicly or even
covertly. The author assumes they might be willing to step up now for Iran, but the action in places like Syria suggests they
might not.
As for the costs of taking on Iran, while one cannot underestimate the cocksuredness of Uncle to take on Iran with a 2003 "Iraq
will be a cakewalk" attitude, the resulting air war will likely not be as costly to Uncle as the author believes, but the thought
of flag-draped coffins in the thousands will certainly deter a land invasion. If there is any action at all, it will be air interdiction
and missile attack.
It is curious that Uncle has not already resorted to his favorite tactic of declaring a No-Fly zone already but instead merely
hinted that airliner safety cannot be guaranteed; this is likely just another form of sanction since Iran receives money for each
airliner that transits its airspace, and a couple of Uncle's putative allies supply Iran with ATC equipment and services.
Uncle's Navy has already demonstrated a willingness to shoot down an airliner in Iranian airspace, so it is no idle threat,
kind of like the mobster looking at a picture of your family and saying, "Nice family you have there; it would be a shame if anything
happened to them."
"War is a Racket" by Gen Smedley Butler (USMC – recipient of two Medals of Honor – no rear echelon pogue) is a must read.
As true today as it was back when he wrote it.
If the US launches a war it will go it alone except for the few remaining US lapdogs like the UK, France, Germany and Australia,
but with anti-US emotions running as wild across the EU as in the southern Caspian nations, the support of these Zionist influenced
EU leaders is not necessarily guaranteed.
Stasi " Merkel muss weg " (Merkel must go) is too weak to even think about taking Germanstan into such a foolish adventure.
Maybe the Kosher Kingdom of simpletons, especially under American-born Turkish "Englishman" (((Boris Kemal Bey))), another
psycho like (((Baron Levy's))) Scottish warmonger Blair.
Iraqi MP: US after Turning Ain Al-Assad into Central Airbase in Iraq
FARSNEWS
"Karim al-Mohammadawi told the Arabic-language al-Ma'aloumeh news website that the US wants to turn Ain al-Assad airbase
which is a regional base for operations and command into a central airbase for its fighter jets.
He added that a large number of forces and military equipment have been sent to Ain al-Assad without any permission from
the Iraqi government, noting that the number of American forces in Iraq has surpassed 50,000.
Al-Mohammadawi said that Washington does not care about Iraq's opposition to using the country's soil to target the neighboring
states.
In a relevant development on Saturday, media reports said that Washington has plans to set up military bases and increasing
its troops in Iraq, adding the US is currently engaged in expanding its Ain al-Assad military base in al-Anbar province."
The US would be welcome to stage an air and sea assault using Saudi bases followed up by amphibious troop deployment if
need be. But given the proximity they could probably strong arm Kuwait to act as a land bridge, in a pinch.
Sea assault? Amphibious troop deployment? Are you serious? This is not WWII Normandy, Dorothy. That would be an unmitigated
massacre. Weapons have improved a bit in the last 70 years if you have not noticed.
Also minor point, LOL, but Kuwait is a "landbridge" between Saudi Arabia and Iraq Unless you are proposing the US attacks
Iraq (again!) which it would have to do to achieve a "landbridge" to Iran. Another good reason Iraq is acquiring the S-400.
More minor points: 1. South Iraq is ALL shiite. 2. Kuwait is SMALL i.e. a BIG target for thousands of missiles
@Ilyana_Rozumova
your question of responsibility is very intuitive.. two general answers.. both need deep analysis..
first is a conspiracy of Israeli owned, Wall Street financed, war profiteering privatizing-pirate corporations These corporations
enter, invade or control the war defeated place and privatize all of its infrastructure construction contracts from the defeated
place or state (reason for massive destruction by bombing) and garner control over all the citizen services: retail oil and gas
distribution, food supplies, electric power, communications, garbage and waste collection and disposal, street cleaning, water
provisioning. traffic control systems, security, and so on.. Most of these corporations are privately owned public stock companies,
controlled by the same wealthy Oligarchs that control "who gets elected and what the elected must do while in sitting in one of
the seats of power at the 527 person USA.
2nd is the impact of the laws that deny competition in a nation sworn to a method of economics (capitalism) that depends on
competition for its success. Another group of massive in size mostly global corporations again owned from Jerusalem, NYC, City
of London, etc. financed at wall street, use rule of law to impose on Americans and many of the people of the world, a blanket
of economic and anti competitive laws and monopoly powers. These monopolist companies benefit from the copyright and patent laws,
which create monopolies from hot thin air. These laws of monopolies coupled to the USA everything is a secret government have
devastated competitive capitalism in America and rendered American Universities high school level teaching but not learning bureaucracies.
Monopolies and state secrets between insider contractors were suppose to deny most of the world from competing; but without
competition ingenuity is lost. Monopoly lordships and state secrets were supposed to make it easy for the monopoly powered corporations
to overpower and deny any and all would be competition; hence they would be the only ones getting rich.. But China's Huawei will
be Linux based and Tin not Aluminium in design, far superior technology to anything these monopoly powered retards have yet developed
especially in the high energy communications technologies (like 5G, Artificial Intelligence, and Robotics). In other words copyrights,
patents and the US military were suppose to keep the world, and the great ingenuity that once existed in the person of every American,
from competing, but the only people actually forced out of the technology competition were the ingenious, for they were denied
by copyright and patents to compete. Now those in power at the USA will make Americans pay again as the corporations that run
things try to figure out how to catch up to the Chinese and Russian led Eastern world. Modi's election in India is quite interesting
as both China and Russia supported it, yet, Modi says he is going to switch to the USA for copyrighted and patented stuff?
on the issue of continued USA presence in Iraq, Syria, Yemen, Lebanon, ..
"Our continued presence in Iraq will be conditions-based, proportional to need, in coordination with and by the approval of
the Iraqi government." <that's a joke, first off, I never desired to be in Iraq, and I do not desire USA military or American
presence in Iraq, do You? <blatant disregard for the needs of America.. IMO. Bring the troops home. If the USA would only leave
Iraq to the Iraqis and get to work making America competitive again they would once again enjoy a great place in the world. But
one thing i can tell you big giant wall street funded corporations, and reliance on degree credentials instead of job performance,
will never be the reason America is great.
This article by Mr. Titley is the most hopeful article I've yet read demonstrating the coming death of US hegemony, with most
of the rest of the civilized world apparently having turned against the world's worst Outlaw Nation.
Trump has allowed madmen
Bolton and Pompeo to get this country into an awful mess – all for the sake of Israel and the Zionists.
He needs to find a face-saving
way to get out before Washington gets its long needed comeuppance. But how can Trump accomplish this as long as Bolton, in particular,
continues to be the man who most has his ear? If Titley is correct, then Trump had better start listening to his military leaders
instead.
Netanyahu and the Ziocons better think twice about their longed for dream of the destruction of Iran. The Jews always push
things too far. Karma can be a bitch.
"If President Trump had ever read Mackinder -- and there's no evidence he did -- one might
assume that he's aiming at a new anti-Eurasia integration pivot centered on the Persian Gulf.
And energy would be at the heart of the pivot.
If Washington were able to control everything, including "Big Prize" Iran, it would be
able to dominate all Asian economies, especially China. Trump even said were that to happen,
"decisions on the GNP of China will be made in Washington."...
...Arguably the key (invisible) takeaway of the meetings this week between Foreign
Ministers Sergey Lavrov and Wang Yi, and then between Lavrov and Pompeo, is that Moscow made
it quite clear that Iran will be protected by Russia in the event of an American showdown.
Pompeo's body language showed how rattled he was.
What rattled Pomp: "Any use of nuclear weapons against Russia or its allies, be it
small-scale, medium-scale or any other scale, will be treated as a nuclear attack on our
country. The response will be instant and with all the relevant consequences,"
Trump may not have read Mackinder but Kissinger sure would have.
"... Upstream spending rose by a modest 4 percent, which only partially repairs the savage cuts following the 2014 bust, which saw upstream spending fall by about 30 percent. However, the IEA said that 2019 could be a bit of a turning point, with a "new wave of conventional projects" in the works. ..."
"... Despite the increase in spending on new oil projects, "today's investment trends are misaligned with where the world appears to be heading," the IEA said. "Notably, approvals of new conventional oil and gas projects fall short of what would be needed to meet continued robust demand growth." ..."
"... Geographically, investment [in solar and wind] is concentrated in rich countries. Roughly 90 percent of total energy investment – both for fossil fuels and for renewable energy – was funneled into high- and upper-middle income regions. Rich countries alone accounted for 40 percent of total energy investment, despite only making up 15 percent of the global population. ..."
Global energy investment "stabilised" at just over $1.8 trillion in 2018, ending three years
of declines.
Higher spending on oil, natural gas and coal was offset by declines in fossil fuel-based
electricity generation and even a dip in renewable energy spending. China was the largest
market for energy investment, even as the U.S. closed the gap.
After the 2014-2016 oil market bust, spending on oil and gas plunged, and only started to
tick up last year. But the oil industry is not returning to its old spending ways. New
investment is increasingly concentrated in short-cycle projects, namely, U.S. shale, "partly
reflecting investor preferences for better managing capital at risk amid uncertainties over the
future direction of the energy system," the IEA wrote in its report.
Upstream spending rose by a modest 4 percent, which only partially repairs the savage
cuts following the 2014 bust, which saw upstream spending fall by about 30 percent. However,
the IEA said that 2019 could be a bit of a turning point, with a "new wave of conventional
projects" in the works.
Despite the increase in spending on new oil projects, "today's investment trends are
misaligned with where the world appears to be heading," the IEA said. "Notably, approvals of
new conventional oil and gas projects fall short of what would be needed to meet continued
robust demand growth."
... ... ...
The good news is that costs continue to fall. Solar PV has seen costs decline by 75 percent
since 2010, and onshore wind and battery storage costs are down by 20 percent and 50 percent,
respectively. As such, a dollar spent on renewables buys a lot more energy than it used to, so
flat investment is not entirely negative. And in a growing number of places, solar and wind are
the cheapest option for power generation – increasingly
cheaper than existing coal plants .
Geographically, investment [in solar and wind] is concentrated in rich countries.
Roughly 90 percent of total energy investment – both for fossil fuels and for renewable
energy – was funneled into high- and upper-middle income regions. Rich countries alone
accounted for 40 percent of total energy investment, despite only making up 15 percent of the
global population.
Nothing, no EV's, solar, wind, coal or uranium is going to help. No tight shale, Arctic or
North Slope oil is going to lift this sinking ship. There are no more new oil reserves to
find and all the old fields are in a state of desperate high-tech extraction. We took all the
easy stuff, Bakken and Permian are the last ditch effort. That's why all the playas have
negative cash flow. That's why we are fecked.
That was the last great elephant field. The largest resource ever discovered on the
planet. Finally in decline. So goes Saudi Arabia. So goes OPEC. So goes mankind.
Cheap crude was a 100 year party, the hangover has already begun. Fracked oil, tar sands,
were a rescue remedy, funded by low interest rates, (debt). The massive population boom of
the last century and a half directly coordinates with increasing oil production. If you
aren't preparing yourself and your children for energy-down/population-down, you are insuring
that YOUR decedents won't be among the 100 million or so people scratching out a living in
North America in 100 years.
Before 1850 and the discovery of oil and coal, there were 1 billion people on the planet.
Now there are 7 billion. 6 billion will die as the oil economy and oil infrastructure grinds
to a halt. Better make you peace. Your plans are too late.
"...Declining uranium production will make it impossible to obtain a significant increase
in electrical power from nuclear plants in the coming decades."
Thorium Reactors...
"...A similar fate was encountered by another idea that involved "breeding" a nuclear fuel
from a naturally existing element -- thorium. The concept involved transforming the 232
isotope of thorium into the fissile 233 isotope of uranium, which then could be used as fuel
for a nuclear reactor (or for nuclear warheads). The idea was discussed at length during the
heydays of the nuclear industry, andit is still discussed today; but so far, nothing has come
out of it and the nuclear industry is still based on mineral uranium as fuel..."
OPEC was the necessary cartel that helped to stabilize production and prices.
Now all of it including Saudi Arabia, Iran and the rest, all 14 nations past and present,
is defunct. Output has been in decline since Nov. 2016. See IEA data or peakoilbarrel for a
summary
Cool..How do I fill my BMW up with coal? How about that just in time delivery. Anyone ever
try to power a semi-truck with coal? Eactly what do we pave the road ways with? Coal?
Yeesh. All wrong. Most important, slick Willie gave us our china trade problems, and then
demand for raw commods in china soared. In response, his geniuses gave us the cfma, which was
passed to let the JPMs of the world naked short commodities till the cows came home. However,
china demand growth was so far in excess of supply growth that several of the WS firms saw
the writing on the wall and went long. Thus the pols amazement when finding out v=bear
stearns was actually long oil. Finally prices got high enough that supply growth started
overtaking demand growth. We have been going down , on average, since. china demand late 90s
oil wa 3Mbpd, currently 13Mbpd
As many of you, I don't expect business as usual to continue. We get projections based on
past trends, but with oil being finite and the globe already showing the effects of climate
change, I think we are in for a tumultuous future.
Overproduction of capital – seeking a high, no risk return – is a certainty.
Especially with continuing QE. There is no end game now. That capital will find its way into
derivative casino capital gambling – of which only 2% ends up as a commodity changing
hands. The rest is hidden toxic exposure making the banking system untenable. Other outlets
include mergers and acquisitions (toward oligopolies of power); leveraged buyouts; and asset
stripping destroying any last real productive capacity for short term 'Global Death Protocol'
(GDP returns – one of the sensible points Monbiot made it is no substitute Human
Development Index). Pension fund raiding: there is thought to be a $30 tn black hole already
– now they want to release $90tn 'locked assets' without even the slightest chance of
ever getting an ROI. Overproduced capital will also find its way in to the tech bubble
– funding our AI-redundancy. Oil-rent, commodity-rent, bio-pharma-rent, agi-rent, and
tech-rent seems to be a major part of the capitalist death throes. But you cannot rent a host
humanity by making them redundant. Now they also want to rent nature back to us. Add in
spiralling exponential debt; EROI and a slow-burn falling net-energy crisis; and
authoritarian states merging with bureaucratised corporate capital down to the local
infrastructure level its humanity versus corporate state insanity.
And the bleated hope of sheep is that a nativist leader – like Jeremy Corbyn –
will come along and save us. Reality is going to have to hit the majoritarian massif really
hard in the face to wake people up to the systemic fragility of globalised capitalism.
Unfortunately, its internecine internal contradictions may prove fatal before that. My hope
is that something better may rise from the ashes: a humanist society contra all the fatal
contradictions of relentless coercive capital accumulation. Given the level of political and
ecological acumen we encounter on a daily basis I'm presently not too optimistic. But that
can change, rapidly. Consciousness is not timebound or limited by causality (see below). Now!
would be a good time for a consciousness evolutionary explosion a Big Bang of a new reality.
Depending on what the Big Bang of the old leaves intact! There will be a solution. It might
not be optimal though. I presently can't see any smooth transition taking place. Carpe deum
and enjoy the ride over the ever quickening rapids of the net energy falls!
What it really means. 42 more years, and it's gone. 1.531 trillion bbls divided by a no
grow of 100 million bbls consumption a day, simple math. And we rant about finding another 50
billion bbls. That only takes the total of the recoverable oil to 1.581 trillion bbls.
Oil will leave us before we leave oil. We are heading for mass starvation. There are no
electric fire engines, there are no electric ambulances, there are no electric farm
machinery, there are no electric military machinery, there are no electric boats or ships or
ferries, there are no electric airplanes, fighter jets, helicopters, there are 1.4 billion
cars in the world of which 3 million are electric, if Tesla quadruples production it couldn't
replace the gas and diesel powered vehicles in 1200 years, and the Chinese electrics are
crap.
This map is complete BS. No one, especially some spy agency, knows how much of anything is
underground.
The only known fact is current production. "Known Reserves" is a hopelessly politicized
exercise in conjecture, primarily for the purpose of securitizing international loans at
favorable rates.
Proved reserves of crude oil in the United States increased 19.5% (6.4 billion barrels)
to 39.2 billion barrels at Year-End 2017, setting a new U.S. record for crude oil proved
reserves. The previous record was 39.0 billion barrels set in 1970.
The USGS says all 20 billion barrels of oil are "technically recoverable," meaning the
oil could be brought to the surface "using currently available technology and industry
practices."
Between the corrupt politicians, and oil execs. these morons can't even concoct a decent
lie anymore.
Nice summary, Ron. Brought to mind the old Oil Drum days. Thanks for taking the time to
provide this information. Given the admittedly not high-confidence prognostications in
Saudi/world oil production, it looks to me like the global economy may be in for at least one
serious oil shock in the 2020s.
"... add to that the usual woes of increasing internal oil consumption (3 mbd and rising fast) and the need to try and build their way out of their demise (requiring more oil and money), and the usual predictions of the 'export land model' look very reasonable, and disastrous for the House of Saud. There will be a tapered end, but the potential for acute instability in production and the in political and social environments of the country within the next decade is real. ..."
A great article that offers a more realistic view of the very old giant oil fields. It is
very obvious that what they are doing to maintain production will result in a more rapid
decline in the future. When that happens KSA will be in a lot of hurt, and the world will
have an abrupt awakening.
So my simple math says: 256 URR was to last 53 years, 74 URR at the same production rate will
last 15 years. Seneca with a vengeance! Rite? EOLAWKI here we come!
add to that the usual woes of increasing internal oil consumption (3 mbd and rising fast)
and the need to try and build their way out of their demise (requiring more oil and money),
and the usual predictions of the 'export land model' look very reasonable, and disastrous for
the House of Saud. There will be a tapered end, but the potential for acute instability in
production and the in political and social environments of the country within the next decade
is real.
"... Oil consumption has been increasing in all sectors and the growing global economy will require more oil in industry. You seem to think oil is just used in transportation. NOT true. ..."
"... Imagine oil production peaked today. In order for aviation to continue to grow, along with other industries that use oil. How many of the 98 million vehicles sold this year would need to be electric cars? How many electric motorcycles would have to be sold? ..."
"... I believe a Seneca cliff scenario would be a catastrophic one hence the reaction to such a scenario would also be catastrophic. ..."
"... World demand is currently over 100 mb/day, while production is at about 99 mb/day. Does that mean we are using up the already produced reserves? ..."
At some point the Seneca Cliff will be hit. If they are doing all this advanced recovery to to keep flow rates up then fields
will probably hit a wall and crash rather than slow decline. Is my thinking correct on that? Karen
Oil consumption has been increasing in all sectors and the growing global economy will require more oil in industry. You seem
to think oil is just used in transportation. NOT true.
Imagine oil production peaked today. In order for aviation to continue to grow, along with other industries that use oil. How many of the 98 million vehicles sold
this year would need to be electric cars? How many electric motorcycles would have to be sold?
The Seneca cliff for World output requires heroic assumptions which are unlikely to be true in practice.
I strongly disagree with that assessment. I believe the probability of a Seneca cliff is increasing. I think oil extraction is an economic phenomena, not a geological phenomena. During economic expansion, a positive feedback loop is in place: oil extraction produces economic growth which encourages investment in oil extraction producing more economic growth. Once peak oil occurs, I anticipate that this feedback loop will go into reverse: decreased oil production will produce economic contraction which will discourage investment in oil extraction reducing extraction rates leading to economic collapse.
Without investment the IEA estimates that production would fall by 50% in 2025 and by 80% in 2040.
I actually think economic collapse is a great opportunity to introduce a new economic system. The one we have is not only unfair, it encourages environmental devastation.
David Graebner asks rhetorically how a theory such as neoclassic economics based on false hypotheses perdures. His answer is that you teach the biggest lies in the first year. That's why false preconceptions about the economy are so common. I think neoclassical economics chose the wrong mathematical tool to analyse the economy, they chose optimisation. I don't see anything optimal in the economy, I think differential systems would be a much more appropriate mathematical tool with which to analyse the economy, keeping track of money flows.
I assume a Seneca cliff scenario would imply rapid economic collapse, as a result i think there will be war over resources.
Between which countries i don't know, but i assume U.S will go to war with Russia and or China, via direct war or proxy wars in
regions were the countries national security depends on specific resources. So the middle east would as usual be a key area of
conflict.
I believe a Seneca cliff scenario would be a catastrophic one hence the reaction to such a scenario would also be catastrophic.
U.S will go to war with Russia and or China, via direct war or proxy wars in regions were the countries national security depends
on specific resources.
Perhaps! However modern warfare tends to be very energy intensive. It seems to me a rather safe bet that in a post peak oil
world, mostly running on renewables, it might be more likely that societies will be trying to conserve their energy resources
and not waste it on war.
But the verdict is not yet in, on whether or not humans are smarter than yeast!
It simply means we are using oil that is being stored, the so-called oil stocks, eventually as these are reduced, oil prices
start to rise and demand (consumption) decreases while supply (production) increases in response to the change in oil price.
Well, no, Ghawar is not declining at 2% per year. Ghawar did not start declining in 2004. And
the southern two fields are not declining at all. The northern three fields reached their
Seneca Cliff somewhere around 2010 and began declining at several times 2%. They will decline
to near nothing in the next few years. Then Ghawar will have level production at somewhere
around 2 million barrels per day and hold that level for a decade or two.
Ghawar cannot possibly be adequately described as one field. It is five different fields
with five different decline and depletion rates.
When Saudi said, in 2006, that their average decline rate was down to almost 2%, that was
the average for all their fields. Some fields were declining at a much faster rate and some
fields were not declining at all. Khurais and Manifa were still to be ramped up. Those fields
had been in mothballs and would be brought back on line. Now they are likely not declining at
all but other fields are declining at a much faster rate than 2%.
But here is the important point. The depletion rate is another matter altogether. That
figure is likely above 8% per year.
Do you have production data for the various fields from 2006 to 2018?
Dennis, you know better than ask such a silly question. Saudi production of individual
fields is a closely guarded secret.
Dennis, have you ever wondered why the Saudis keep all this data such a secret? Why don't
they just let the actual data known to the world? What was the production data from Safaniya
in 2018? Or what was the production data from Manifa in 2018? Or what was the production data
from Khurais in 2018, or from Berri, or from all their other fields? And how did that compare
to the production in 2017, or 2016?
Dennis, we don't know shit about any of this. We don't know because it is a closely
guarded secret. Why, Dennis, Why?
They know Dennis, they know and they don't want you to know. Why?
I know why Dennis. Because what they actually report, which is almost nothing, is a lie.
You simply choose to believe it. I do not. I choose to believe the analysis who try to figure
out why they are lying. You choose to simply believe the Saudis.
Dennis, the idea that Saudi Arabia has 266 billion barrels of reserves is preposterous
beyond belief. Even the Saudis realize that now are trying to slowly reduce that figure. Yet
some people, like you, Robert Rapier and Michael Lynch, seemed perfectly ready to believe
such an absurd figure. That just floored me. Goddammit, have some people gone insane?
Okay, I have said my peace here and showed my ignorance as to what Saudi Arabia actually
can produce for the next 50 years. But you know, it is what they say they can produce.
You believe them. I don't. And neither of us can prove our case. And there it must rest
until the actual production data comes in next year and next year and ..
When this is true, that's the reason China is pushing electric travel as hard as they
can.
They have more possibilites to know the truth (secret service) than we reading reports.
And with SA and Russia having only round about 80 GB left, and producing each round about 10
mbpd, there are not many years left before a major oil incident.
I wonder why oil prices are that stable at the moment. Oil production fell hard this year
so far, down everywhere except USA. And there the growth is decelerated.
And demand is still climbing, it will use up all the US growth projected by the optimistic
EIA.
A 500 kbpd decline from OPEC is not included here, they still calculate with an increase from
opec.
Last question: Where is Russia standing at the moment?
"... Saudi Arabia, in 2018 produced approximately 3.76 billion barrels of crude only. Their BOE produced was approximately 4.75 billion barrels. That would account for the revenue is they sold every barrel of it. But they consumed a lot themselves. So other than that I have no explanation. Do they count their own consumption as revenue? ..."
In the bond prospectus SA revealed their financials. Puzzling to me was the claim of
revenue of $356 billion.
Why puzzling?
Because Brent averaged ~$75/bbl in 2018. Divide $356 by $75 and you come up with 4.75
Gbbl, which when we divide by 365 days in a year, we get 13 million barrels per day
production.
???
I can't get their numbers to work. Even with a 10% premium on their grades of crude
(generous), that leaves 11.7 mbd of production . I can't get anything to line up here.
They also produce NGL and natural gas, in 2016 it was about 1.94 Mb/d or 708 MMb of NGL, I
have no idea what the average selling price is for NGL on World markets, it would depend on
the mix of NGL of course.
Saudi Arabia, in 2018 produced approximately 3.76 billion barrels of crude only. Their BOE
produced was approximately 4.75 billion barrels. That would account for the revenue is they
sold every barrel of it. But they consumed a lot themselves. So other than that I have no
explanation. Do they count their own consumption as revenue?
The decline is likely to be less steep than the increase
Have you heard about a Seneca cliff? It is called that way because Seneca in his letter
number 91 to Lucillius (Epistulae Morales ad Lucilium), written towards the end of the year
AD 64, a year before he died, refers to the fire that destroyed Lugdunum (Lyon) the summer of
that year in the following terms:
It would be some consolation for the feebleness of our selves and our works, if all
things should perish as slowly as they come into being; but as it is, increases are of
sluggish growth, but the way to ruin is rapid.
It appears he knew almost two thousand years ago what you don't.
I expect that a long slow declining tail of production will have some abrupt
jolts downward along the way, and end up lower quicker as a result.
The jolts downward will come as producing countries become failed states and the chaos
disrupts operations.
For examples of how this comes to be, just look at the past 5 yrs of Venez and Libya as
examples. Sure they may pick back up at some point, but overall effect is diminished global
production, well below a theoretically well managed industry.
Secondly, (and likely a smaller effect) some deposits will likely be kept in the ground
because of choices some cultures make. For example, I could see the USA deciding to keep its
large remaining coal deposits largely in the ground after 2030. Canada could decide to put a
big constraint on oil sand production, keeping just enough for domestic use, if they so
desired.
Why you think such scenario is so improbable?
Venezuela is living a Seneca cliff in its oil production right now. Did anybody predicted it
before it took place?
We have no idea of what will happen after Peak Oil. Some people assume nothing, while
others think it will be the end of our civilization. Somewhere in between probably. But I
fail to see how the economy can take it well if for most applications we can't substitute
oil. The globalization is run on oil and its derivatives.
Your assumptions can only be valid at this side of the peak. If you think otherwise you
fool yourself.
"... Hubbert wrote in 1948: "How soon the decline may set in is not possible to say, Nevertheless the higher the peak to which the production curve rises, the sooner and sharper will be the decline." ..."
"... In fact, Ghawar is not as resilient as we were led to believe. We just found out that its output has fallen substantially since Aramco previously came clean on its reserves and production. If Ghawar is losing momentum fast, peak oil – remember that theory? – might be closer than we had thought. And Ghawar is just one of dozens of enormous conventional-oil reservoirs scattered around the planet that are in various stages of decline. ..."
"... Those include the North Sea, Alaska's Prudhoe Bay, and Reguly reminds us that Mexico's Cantarell reservoir used to supply 2.1 million barrels a day and is now down to 135,000. ..."
It seems that the biggest Saudi field is losing its punch.
Years ago we used to talk a lot about peak oil, the prediction made by M. King Hubbert that
the easy oil was going to run out, that it was going to get harder and harder to find the
stuff, and it was going to get more and more expensive to get out of the ground.
Hubbert
wrote in 1948: "How soon the decline may set in is not possible to say, Nevertheless the
higher the peak to which the production curve rises, the sooner and sharper will be the
decline."
According to the predictions made back in 2005, right about now the Saudis are running
out and we are smack in the middle of confusion, heading for chaos. Of course we are not, we
are flooded with fossil fuels, thanks to the fracking boom.
But according to Eric Reguly, writing in the Globe and Mail, there is trouble ahead,
because that prediction about Saudi oil may not be that far off. He writes that the giant
Ghawar field used to produce ten percent of the world's oil, five million barrels a
day.
The US Permian shale basin now supplies 4.1 million barrels a day, but fracked wells
run out pretty quickly, and the fracking companies are all losing money. Better sell that
pickup truck; it may well cost a lot more to fill it. As Reguly concludes, the Ghawar field
is indeed in trouble,"and if it does collapse, peak oil will come a bit sooner."
In fact, Ghawar is not as resilient as we were led to believe. We just found out that its
output has fallen substantially since Aramco previously came clean on its reserves and
production. If Ghawar is losing momentum fast, peak oil – remember that theory? –
might be closer than we had thought. And Ghawar is just one of dozens of enormous
conventional-oil reservoirs scattered around the planet that are in various stages of
decline.
Those include the North Sea, Alaska's Prudhoe Bay, and Reguly reminds us that Mexico's
Cantarell reservoir used to supply 2.1 million barrels a day and is now down to
135,000.
I'm sure that so long as the world wide economy remains on its feet that there will be huge
increases in demand for oil for transportation.
But nobody seems to give any thought here to things that will reduce demand. Cars will be
driving themselves soon. Think about trains. Before too much longer, railroaders will be able
to move stuff on trains almost as nimbly as truckers do today, at least on city to city basis
when the cities are at least a couple of hundred miles apart. Long distance trucking may be a
thing of the past within, like camera film and typewriters, within a couple of decades. These
possibilities are worthy of thought if you are in the oil biz for the long haul.
Every country that imports oil is going to have a powerful incentive to reduce demand for
it to the extent it can as depletion sooner or later pushes one exporting country after
another into the importer category. Countries in the Middle East with oil and gas to export
are going to find it so profitable to build wind and solar farms that they will be building
them like mushrooms popping up after a spring rain, because they can sell some or maybe even
most of the oil and gas they are burning now to generate electricity, thereby earning a big
profit on their solar and wind farm investment.
My thinking is that these changes will actually PROLONG our dependence on oil, taken all
around, by helping hold the price down so we can afford to run existing legacy equipment, and
have affordable petrol based chemicals, etc. I don't think anybody currently in the biz needs
to worry about selling out anytime soon, lol. But considerations such as these may have a
huge impact on exploration and development starting within a decade or so.
Times change. Doom doesn't necessarily have anything to do with it.
Very important that OPEC increase the flow of Oil. World Markets are fragile, price of Oil
getting too high. Thank you!
The real target of this tweet is unmistakably Saudi Arabia, the one OPEC member with enough
idle capacity to make a difference to the producer group's output. It's also the one over which
the U.S. has the most leverage.
Straightforward economic considerations would see Saudi Arabia dismiss the request out of
hand, but political calculations make its choice more difficult.
OPEC production fell by around 1.5 million barrels a day between December and February, and
probably dropped further in March. Saudi Arabia made by far the biggest voluntary reduction .
It contributed almost two thirds of the group's total output cut as measured against individual
baselines in February, and made deeper cuts than it had promised it would implement each month
this year.
They lost control of Saudi Arabia, after trying to take down MBS and then betraying him by unexpectedly allowing waivers on
Iranian oil in November.
The U.S. cannot take down Iran without Venezuelan oil. What is worse, right now they don't have access to enough heavy oil
to meet their own needs.
Controlling the world oil trade is central to Trump's strategy for the U.S. to continue its empire. Without Venezuelan oil,
the U.S. is a bit player in the energy markets, and will remain so.
Having Russia block the U.S. in Venezuela adds insult to injury. After Crimea and Syria, now Venezuela, Russia exposes the
U.S. as a loud mouthed-bully without the capacity to back up its threats, a 'toothless tiger', an 'emperor without clothes'.
If the U.S. cannot dislodge Russia from Venezuela, its days as 'global hegemon' are finished. For this reason the U.S. will
continue escalating the situation with ever-riskier actions, until it succeeds or breaks.
In the same manor, if Russia backs off, its resistance to the U.S. is finished. And the U.S. will eventually move to destroy
Russia, like it has been actively trying to do for the past 30 years. Russia cannot and will not back off.
Venezuela thus becomes the stage where the final act in the clash of empires plays out. Will the world become a multi-polar
world, in which the U.S. becomes a relatively isolated and insignificant pole? Or will the world become more fully dominated by
a brutal, erratic hegemon?
"The latest Brent rally has brought prices to our peak forecast of $67.5/bbl, three months
early," Goldman Sachs wrote in a note. The investment bank said that "resilient demand
growth" and supply outages could push prices up to $70 per barrel in the near future. It's a
perfect storm: "supply loses are exceeding our expectations, demand growth is beating low
consensus expectations with technicals supportive and net long positioning still depressed,"
the bank said.
The outages in Venezuela could swamp the rebound in supply from Libya, Goldman noted. But
the real surprise has been demand. At the end of 2018 and the start of this year, oil prices
hit a bottom and concerns about global economic stability dominated the narrative. But, for
now at least, demand has been solid. In January, demand grew by 1.55 million barrels per day
(mb/d) year-on-year. "Gasoline in particular is surprising to the upside, helped by low
prices, confirming our view that the weakness in cracks at the turn of the year was supply
driven," Goldman noted. "This comforts us in our above consensus 1.45 mb/d [year-on-year]
demand growth forecast."
If so, economics will suffer and chances for Trump for re-election are much lower, of exist at all due to all his betrayals
In the fable of "The Boy Who Cried Wolf," the wolf actually arrives at the end. Never forget that. Peak oil will arrive. We don't
know when, and we are not prepared for it.
Shale play without more borrowed money might be the next Venezuela. .
I am now of the opinion that 2018 will be the peak in crude oil production, not 2019 as I earlier predicted. Russia is slowing down
and may have peaked. Canada is slowing down and Brazil is slowing down. OPEC likely peaked in 2016. It is all up to the USA. Can
shale oil save us from peak oil?
OPEC + Russia + Canada, about 57% of world oil production.
"I am now of the opinion that 2018 will be the peak in crude oil production, not 2019 as I earlier predicted. Russia
is slowing down and may have peaked. Canada is slowing down and Brazil is slowing down. OPEC likely peaked in 2016. It is all
up to the USA. Can shale oil save us from peak oil?"
IEA´s Oil 2019 5y forecast has global conventional oil on a plateau, i.e. declines and growth match each other perfectly
and net growth will come from LTO, NGL, biofuels and a small amount of other unconventional and "process gains".
Iran is ofc a jocker, since it can quickly add supply. Will be interesting to see how Trump will proceed.
I am quite original in my opinion about Peak Oil. I think it took place in late 2015. I will explain. If we define Peak Oil as
the maximum in production over a certain period of time we will not know it has taken place for a long time, until we lose the
hope of going above. That is not practical, as it might take years.
I prefer to define Peak Oil as the point in time when vigorous growth in oil production ended and we entered an undulating
plateau when periods of slow growth and slow decline will alternate, affected by oil price and variable demand by economy until
we reach terminal decline in production permanently abandoning the plateau towards lower oil production.
The 12-year rate of growth in C+C production took a big hit in late 2015 and has not recovered. The increase in 2 Mb since
is just an anemic 2.5% over 3 years or 0.8% per year, and it keeps going down. This is plateau behavior since there was no economic
crisis to blame. It will become negative when the economy sours.
Peak Oil has already arrived. We are not recognizing it because production still increases a little bit, but we are in Peak
Oil mode. Oil production will decrease a lot more easily that it will increase over the next decade. The economy is going to be
a real bitch.
Interesting thesis, keep in mind that the price of oil was relatively low from 2015 to 2018 because for much of the period
there was an excess of oil stocks built up over the 2013 to 2015 period when output growth outpaced demand growth due to very
high oil prices. Supply has been adequate to keep oil prices relatively low through March 2019 and US sanctions on Iran, political
instability in Libya and Venezuela, and action by OPEC and several non-OPEC nations to restrict supply have resulted in slower
growth in oil output.
Eventually World Petroleum stocks will fall to a level that will drive oil prices higher, there is very poor visibility for
World Petroleum Stocks, so there may be a 6 to 12 month lag between petroleum stocks falling to critically low levels and market
realization of that fact, by Sept to Dec 2019 this may be apparent and oil prices may spike (perhaps to $90/b by May 2020).
At that point we may start to see some higher investment levels with higher output coming 12 to 60 months later (some projects
such as deep water and Arctic projects take a lot of time to become operational, there may be some OPEC projects that might be
developed as well, there are also Canadian Oil sands projects that might be developed in a high oil price environment.
I define the peak as the highest 12 month centered average World C+C output, but it can be define many different ways.
Our capability to store oil is very limited considering the volume being moved at any time from production to consumption.
I understand that it is the marginal price of the last barrel of oil that sets the price for oil, but given the relatively inexpensive
oil between 2015 and now, and the fact that we have not been in an economical crisis, what is according to you the cause that
world oil production has grown so anemically these past three years?
Do you think that if oil had been at 20$/b as it used to be for decades the growth in consumption/production would have been
significantly higher?
I'll give you a hint, with real negative interest rates and comparatively inexpensive oil most OECD economies are unable to
grow robustly.
To me Peak Oil is an economical question, not a geological one. The geology just sets the cost of production (not the price)
too high, making the operation uneconomical. It is the economy that becomes unable to pump more oil. That's why the beginning
of Peak Oil can be placed at late 2015.
The economic system has three legs, cheap energy, demographic growth, and debt growth. All three are failing simultaneously
so we are facing the perfect storm. Social unrest is the most likely consequence almost everywhere.
If prices are low that means there is plenty of oil supply relative to demand. It also means that some oil cannot be produced
profitably, so oil companies invest less and oil output grows more slowly.
So you seem to have the story backwards. Low oil prices means low growth in supply.
So if oil prices were $20/b, oil supply would grow more slowly, we have had an oversupply of oil that ls what led to low oil
prices. When oil prices increase, supply growth will ne higher. Evause profits will be higher and there will be more investment.
It is you who has it backwards, as you only see the issue from an oil price point of view, and oil price responds to supply
and demand, and higher prices are an estimulus to higher production.
But there is a more important point of view, because oil is one of the main inputs of the economy. If the price of oil is sufficiently
low it stimulates the economy. New businesses are created, more people go farther on vacation, and so on, increasing oil demand
and oil production. If the price is sufficiently high it depresses the economy. A higher percentage of wealth is transferred from
consumer countries to producing countries and consumer countries require more debt. During the 2010-2014 period high oil prices
were sustained by the phenomenal push of the Chinese economy, while European and Japanese economies suffered enormously and their
oil consumption depressed and hasn't fully recovered since.
In the long term it is the economy that pumps the oil, and that is what you cannot understand.
The economy decides when and how Peak Oil takes place. If you knew that you wouldn't bother with all those models.
And in my opinion the economy already decided in late 2015 when the drive to increase oil production to compensate for low
oil prices couldn't be sustained.
Both supply and demand matter. I understand economics quite well thank you. You are correct that the economy is very important,
it will determine oil prices to some degree especially on the demand side of the market. If one looks at the price of oil and
economic growth or GDP, there is very little correlation.
The fact is the World economy grew quite nicely from 2011 to 2014 when oil prices averaged over $100/b.
There may be some point that high oil prices are a problem, apparently $100/b in 2014 US$ is below that price. Perhaps at $150/b
your argument would be correct. Why would the economy need more oil when oil prices are low? The low price is a signal that there
is too much oil being produced relative to the demand for oil.
I agree the economy will be a major factor in when peak oil occurs, but as most economists understand quite well, it is both
supply and demand that will determine market prices for oil.
My models are based on the predictions of the geophysicists at the USGS (estimating TRR for tight oil) and the economists at
the EIA (who attempt to predict future oil prices). Both predictions are used as inputs to the model along with past completion
rates and well productivity and assumptions about potential future completion rates and future well productivity, bounded by the
predictions of both the USGS and the EIA along with economic assumptions about well cost, royalties and taxes, transport costs,
discount rate, and lease operating expenses.
Note that my results for economically recoverable resources are in line with the USGS TRR mean estimates and are somewhat lower
when the economic assumptions are applied (ERR/TRR is roughly 0.85), the EIA AEO has economically recoverable tight oil resources
at about 115% of the USGS mean TRR estimate. The main EIA estimate I use is their AEO reference oil price case (which may be too
low with oil prices gradually rising to $110/b (2017$) by 2050.
Assumptions for Permian Basin are royalties and taxes 33% of wellhead revenue, transport cost $5/b, LOE=$2.3/b plus $15000/month,
annual discount rate is 10%/year and well cost is $10 million, annual interest rate is 7.4%/year, annual inflation rate assumed
to be 2.5%/year, income tax and revenue from natural gas and NGL are ignored all dollar costs in constant 2017 US$.
You do incredible work Dennis and I believe you are correct. Demand for oil is relatively inelastic which accounts for huge price
swings when inventories get uncomfortably high or low. If supply doesn't keep up with our needs, price will rise to levels that
will eventually create more supply and create switching into other energy sources which will reduce demand.
Why would the economy need more oil when oil prices are low? The low price is a signal that there is too much oil being
produced relative to the demand for oil.
You don't seem to be aware of historical oil prices. For inflation adjusted oil prices since 1946 oil (WTI) spent:
27 years below $30
13 years at ~ $70
18 years at ~ $40
10 years at ~ $90
5 years at ~ $50 https://www.macrotrends.net/1369/crude-oil-price-history-chart
And the fastest growth in oil production took place precisely at the periods when oil was cheapest.
You simply cannot be more wrong about that.
And your models are based on a very big assumption, that the geology of the reserves is determinant for Peak Oil. It is not.
There is plenty of oil in the world, but the extraction of most of it is unaffordable. The economy will decide (has decided) when
Oil Peak takes place and what happens afterwards. Predictions/projections aren't worth a cent as usual. You could save yourself
the trouble.
I use both geophysics and economics, it is not one or the other it is both of these that will determine peak oil.
Of course oil prices have increased, the cheapest oil gets produced first and oil gradually gets more expensive as the marginal
barrel produced to meet demand at the margin is more costly to produce.
Real Oil Prices do not correlate well with real economic growth and on a microeconomic level the price of oil will affect profits
and willingness of oil companies to invest which in turn will affect future output. Demand will be a function of both economic
output and efficiency improvements in the use of oil.
Also keep in mind that during the 1945-1975 period economic growth rates were very high as population growth rates were very
high and the World economy was expanding rapidly as population grew and the World rebuilt in the aftermath of World War 2. Oil
was indeed plentiful and cheap over this period and output grew rapidly to meet expanding World demand for oil. The cheapness
of the oil led to relatively inefficient use of the resource, as constraints in output became evident and more expensive offshore,
Arctic oil were extracted oil prices increased and there was high volatility due to Wars in the Middle east and other political
developments. Oil output (C+C) since 1982 has grown fairly steadily at about an 800 kb/d annual average each year, oil prices
move up and down in response to anticipated oil stock movements and are volatile because these estimates are often incorrect (the
World petroleum stock numbers are far from transparent.)
On average since the Iran/Iraq crash in output (1982-2017) World output has grown by about 1.2% per year and 800 kb/d per year
on average, prices have risen or fallen when there was inadequate or excess stocks of petroleum, this pattern (prices adjusting
to stock levels) is likely to continue.
There has been little change when we compare 1982 to 1999 to 1999-2017 (divide overall period of interest in half) for either
percentage increase of absolute increase in output.
I would agree that severe shortages of oil supply relative to demand (likely apparent by 2030) is likely to lead to an economic
crisis as oil prices rise to levels that the World economy cannot adjust to (my guess is that this level will be $165/b in 2018$).
Potentially high oil prices might lead to faster adoption of alternative modes of transport that might avert a crisis, but that
is too optimistic a scenario even for me.
China will be in outright deflation soon enough. Economic stimulus is starting to fail in China. They can't fill the so called
bathtub up fast enough to keep pace with the water draining out the bottom. So to speak.
Interest rates in China will soon be exactly where they are in Europe and Japan. Maybe lower.
In order to get oil to $90-$100 the value of the dollar is going to have to sink a little bit. In order to get oil to $140-$160
the dollar has to make a new all time low. Anybody predicting prices shooting up to $200 needs the dollar index to sink to 60
or below.
The reality is oil is going to $20. Because the rest of the world outside the US is failing. Dennis makes some nice graphs
and charts and under his assumptions his charts and graphs are correct. But his assumptions aren't correct.
We got $20 oil and an economic depression coming.
Peak Oil is going to be deflationary as hell. Higher prices aren't in the cards even when a shortage actually shows up. We
will get less supply at a lower price. Demand destruction is actually going to happen when economies and debt bubbles implode
so we actually can't be totally sure we are ever going to see an actual shortage.
We could very well be producing 20-30% less oil than we do now and still not have a shortage.
Oh and EV's are going to have to compete with $20 oil not $150 oil.
When do you expect the oil price to reach $20/b? We will have to see when this occurs.
It may come true when EVs and AVs have decimated demand for oil in 2050, but not before. EIA's oil price reference scenario
from AEO 2019 below. That is a far more realistic prediction (though likely too low especially when peak oil arrives in 2025),
oil prices from $100 to $160/b in 2018 US$ are more likely from 2023 to 2035 (for three year centered average Brent oil price).
My assumptions are based on USGS mean resource estimates and EIA oil price estimates, as well as BIS estimates for the World
monetary and financial system.
Your assumption that oil prices are determined by exchange rates only is not borne out by historical evidence. Exchange
rates are a minor, not a major determinant of oil prices.
Technically speaking. The most relevant trendline on price chart currently comes off the lows of 2016/02/08. It intersects
with 2017/06/19. You draw the trendline on out to where price is currently. Currently price is trying to backtest that trendline.
On a weekly price chart i'd say it touches the underside of that trendline sometime in April in the low 60's somewhere between
$62-$66 kinda depends on when it arrives there time wise. The later it takes to arrive there the higher price will be. I've been
trading well over 20 years can't tell you how many times i've seen price backtest a trendline after it's been broken. It's a very
common occurrence. And i wouldn't short oil until after it does.
But back to your question. $20 oil what kind of timetable. My best guess is 2021-2022. Might happen 2020 or 2023. And FED can
always step in and weaken the dollar. Fundamentally the only way oil doesn't sink to $20 is the FED finds a way to weaken the
dollar.
But understand the FED is the only major CB that currently doesn't have the need to open up monetary policy. It's really the
rest of the worlds CB ultra loose monetary policy which is going to drive oil to $20.
Countries that have reported their January production (shown on the chart)
OPEC14 -822
Alberta -268
Mexico -87
Russian Federation -78
Brazil -60
Norway -48
Total -1,429 kb/day
Chart https://pbs.twimg.com/media/D12BlLBW0AEDR6G.png
So far for February: Russia, OPEC14, Norway
Total: -330 kb/day
Peak oil is the simplest label for the problem of energy resource depletion, or more
specifically, the peak in global oil production.
Oil is a finite, non-renewable resource, one that has powered phenomenal economic and
population growth over the last century and a half.
The rate of oil 'production', meaning extraction and refining (currently about 85 million
barrels/day), has grown almost every year of the last century.
Once we have used up about half of the original reserves, oil production becomes ever more
likely stop growing and begin a terminal decline, hence 'peak'.
The peak in oil production does not signify 'running out of oil', but it does mean the end
of cheap oil, as we switch from a buyers' to a sellers' market.
For economies leveraged on ever increasing quantities of cheap oil, the consequences may
be dire.
Without significant successful cultural reform, severe economic and social consequences
seem inevitable.
There's no doubt that economies suffer under high energy prices. Recently POTUS
acknowledged this when he said oil is too damn high.
Oil producers (frackers) have to be profitable and they just aren't. It seems to unclear
what the break even point is for fracking operations in the US, but let's say $50 per barrel
goes to production costs. That doesn't leave much room. If oil is selling for less than that
on the open market, the frackers are forced to finance their operations. This can't go on.
Clearly the cheap oil era has peaked.
Globalization was fueled by cheap oil. end of cheap oil means the end of globalization.
It looks like people started to notice the "gangster capitalism" nature of Trump administration.
If also raises the speculation that the end of "cheap oil" might signify the end of neoliberalism as a social system. At least
the "classic" version. Whether Trump inspired the evolution of neoliberalism into "national neoliberalism" improves the survival
chances of this social system remains to be seen.
Notable quotes:
"... The whole "political play" going on now seems to be Trump pressuring Saudi Arabia (and OPEC) for the assumable extensive spare capacity that they have. But the problem is, the reality is high oil prices were needed to avoid a deficit in the whole scheme of things. I still guess reality will be hard late 2019/20 as has always been my prediction. ..."
"... To avoid blackmail when it comes to oil the future; sooner or later there is going to be a transition to natural gas (for some decades) and renewable in the West and Asia first. That is how the story goes in my view. The transition to renewable is most likely not going to be smooth, but hurt someone (some part of the population and some countries maybe). Interesting future energy and other resources (e.g lithium, cobalt, nickel and rare magnet ingredients needed for batteries) are going to be even more in focus than today I guess. ..."
I think there are a lot of people that need a delusion check. Because a surplus of oil is
advocated by "western trustable sources" against the natural investment circle of the oil
industry does not automatically mean that the market balance is under control; it is in fact
never going to work.
The whole "political play" going on now seems to be Trump pressuring
Saudi Arabia (and OPEC) for the assumable extensive spare capacity that they have. But the
problem is, the reality is high oil prices were needed to avoid a deficit in the whole scheme
of things. I still guess reality will be hard late 2019/20 as has always been my prediction.
It is difficult to change my mind about the oil market; after all it is not supersonic
speed in this mature market. The digitalisation of data gathering (seismic and reservoir
control) together with horizontal wells represent probably huge gains and I would guess alone
can explain why for example Russia has been doing so well the last decade.
The next point is
that the world is not running out of oil yet, but potential oil reserves are not under
western control (most potential reserves are in Africa, Middle East, Ex USSR countries and
the Arctic). And that makes for an unstable political future between the west and the rest of
the world.
To avoid blackmail when it comes to oil the future; sooner or later there is going to be a
transition to natural gas (for some decades) and renewable in the West and Asia first. That
is how the story goes in my view. The transition to renewable is most likely not going to be
smooth, but hurt someone (some part of the population and some countries maybe). Interesting
future energy and other resources (e.g lithium, cobalt, nickel and rare magnet ingredients
needed for batteries) are going to be even more in focus than today I guess.
In the third decade of the XXI century, which is about to come, one of the main problems
facing humanity, again, as in the 60s, will be its energy supply, as well as the search for
the main "energy carrier of the future."
The three whales that the world's energy industry today holds: oil, natural gas and coal
are, by their nature, non-renewable sources of energy. True, with regard to oil and gas, this
thesis is actively debated at the academic level, but for practical purposes it is
indisputable: modern civilization consumes so much hydrocarbons that their natural
substitution, if it exists, is not able to compensate for this exemption. The energy sources
mentioned above in 2017 accounted for about 81% of world primary energy production, and they
still define the image of our modern industrial world, while all renewable energy sources
provide only about 14% of primary energy production, and about 5% The balance comes from
nuclear energy (International Energy Agency, 2017).
At the same time, the situation with renewable sources is not at all as rosy as it may
seem at first glance: out of 14% of renewable sources, 10% is the energy from burning wood
and biomass, and 2.5% is hydropower. At the same time, the "fashionable" in the last decade,
and having received at the same time gigantic, almost trillion-dollar investments in solar
and wind energy projects, are not as high as 2% in the overall balance of the production of
primary energy. At the same time, it is not even about the absolute figures for the
introduction of new capacities of green energy, which may seem impressive, but about the
exponential dynamics of the relationship between "oil-coal-gas" and "green" in the long term.
After all, a decade ago, in 2008, the world balance of power generation looked like this: 78%
were oil, natural gas and coal, 5% were atomic energy, 3% were hydropower, about 13.5% were
wood and biomass, and 0, 5% produced wind and solar energy. Surprisingly, over the past ten
years, the transition from "wood and straw" to the energy of oil, natural gas and coal, which
occurred naturally, turned out to be two and a half times more significant for the global
energy balance than the development of "green" energy technologies.
The phenomenon of such meager growth of "green" energy is interesting in itself: for the
first time the capitalist mode of production, in which investments in fixed assets imply
quick returns in the form of profits, gives an obvious, albeit programmed failure. Its
essence becomes clear if we take into account in the picture the "quiet" transition of the
world from "firewood and straw" to oil, gas and coal, which lasted throughout the decade of
2008–2018. This process, which no one financed in a targeted manner or advertised in
the world media or Western scientific publications, went forward thanks to economic
expediency. At the same time, the planting of green energy was accompanied not only by a
powerful public relations campaign and trillions of financing, but also forced almost all
countries to accept special, non-economic overpriced tariffs for the purchase of green energy
in order to somehow force capital to finance unprofitable production. energy with wind
turbines and solar panels.
World energy: a general view
Several reputable organizations are engaged in the problem of the global energy balance.
These include the United States Department of Energy (DOE), the International Energy Agency
(IEA), located in Paris, and the well-known oil company BP (ex-British Petroleum). Each of
these organizations publishes annual reports on the situation in the global energy industry
and the prospects for its development. These reports are compiled on the basis of an analysis
of the mass of primary information, often of an incomplete and contradictory nature.
Nevertheless, due to a certain averaging of all the initial data, the annual reports of these
organizations quite fully and clearly reflect the overall world dynamics. In this article, in
order to bring the data to one standard, we will rely on the annual reports of BP, unless
otherwise explicitly stated in the text.
In accordance with the latest available BP report, global energy consumption reached
13,511 million tons of oil equivalent in 2017 (TNE, eng. "Tonne of oil equivalent", TOE). At
the same time, over the decade between 2007 and 2017, world primary energy consumption grew
by an average of 1.5%. That is, the dynamics of energy consumption correlate well with the
observed growth rates of the global economy over the same period – an average of 3.2%
per year (World Bank and IMF, 2018).
The fluctuations of this second parameter, associated with economic crises and recessions
observed in the period under review, make it possible to evaluate the contribution of the
notorious "energy efficiency" to the global growth in demand
No, there does not even remotely a hint of abiotic oil. Read the last two paragraphs again.
That is what it hints to. An average growth of 1.5% in energy consumption and a growth of
3.2% in the global economy has been enabled by a continual growth in energy efficiency. This
cannot possibly continue, especially the 3.2% growth in global economy. When the global
economy does not grow it receeds. This is called a recession.
I think not all
followed the link
article is big.
Maybe someone will be interested
I will write here in several posts.
I hope someone will be interested.
I continue:
The fluctuations of this second parameter, associated with economic crises and recessions
observed in the period under review, make it possible to evaluate the contribution of the
notorious "energy efficiency" to the global increase in energy consumption. In a situation of
almost "zero growth" of the world economy, which occurred in the period 2008–2009, the
consumption of primary energy decreased by 0.8% per year. At the same time, for each percent
of economic growth, it is necessary to "pay off" by increasing the consumption of primary
energy by about 0.6%.
In an expected way, an improvement in energy efficiency was reflected in monetary
indicators: in 2017, each TOE of consumed energy generated $ 8,617 of global GDP, which
corresponds to 1.7% of annual growth over the period 2007–2017.
Of course, the world's primary energy is not evenly distributed across countries. Even the
top five leaders in the use of primary energy: China, the United States, the European Union,
India and Russia – have completely different consumption patterns, which are associated
with the historical, geographical, economic and political differences of these countries.
Thus, as of 2017, China has already been the largest global consumer of primary energy:
its energy consumption has reached 3.132 billion TOE, which is equal to 23% of the global
consumption of primary energy. The growth of Chinese energy consumption is also impressive:
in the period from 1990 to 2013, per capita energy consumption in China increased from 0.602
TOE to 2.14 TOE -- that is, almost four times. Since then, energy consumption growth in China
has somewhat slowed down, and by 2017, per capita energy consumption there was only 2.26 TOE,
which is not only still significantly lower than per capita energy consumption in countries
with developed capitalist economies, but and corresponds to an increase in energy consumption
of about 1.5% per year (and an economic growth of 2% per year).
If we consider the inertia of this historical trend and additionally take into account the
fact that the new policy of the ruling CPC implies a transition to stimulating consumer
demand within the country, then we can assume that by 2050 per capita energy consumption in
China should reach 5-5.5 TOE. This figure takes into account, in addition, the observed
impact of energy efficiency (the same 0.8% per year), but suggests that GDP per capita in
China will grow to about the equivalent of $ 50,000 by 2050. At the same time, it should be
understood that in a part of the population, a conservative forecast is adopted, according to
which the population of China will reach a peak by 2030 and decrease to 1.36 billion by 2050.
Taking into account these factors, China's energy demand in 2050 will exceed 7,000 million
TOE, i.e., it will grow 2.23 times and make up more than half of the current volume of
primary energy production. Information that, according to fertility data, the population of
China in 2018 decreased by 1.27 million people, has not yet been officially confirmed, and it
is clear that the above figure can be significantly adjusted downward, but in any case, China
will pull the world energy "blanket" on themselves.
The United States is the second largest consumer of primary energy in the world. In 2017,
the US energy consumption amounted to 2,235 million TOE, which corresponds to 17% of world
primary energy consumption. US per capita energy consumption peaked at 8.01 TOE in 2000,
which was a historic peak. For the period from 2007 to 2009, per capita energy consumption in
the United States decreased from 7.7 to 7.04 TOE, and in 2017 it reached the level of 6.87
TOE. Nevertheless, the United States continues to be the most "voracious" consumer of primary
energy per capita, and their ability to further reduce the achieved level is very slim if
they are not linked to the global restructuring of their economic and social structure, which
is highly unlikely without a deep national crisis. An additional factor is the steady growth
of the US population, which has no tendency to slow down until 2050.
Still continuing (3):
The European Union is the third largest consumer of primary energy in the world. In 2017, the
energy consumption of the European Union amounted to 1,689 million TOE, which is equivalent
to 13% of world primary energy consumption. Historically, EU per capita energy consumption
was the highest before the onset of the 2008 crisis and amounted to 3.71 TOE in 2006. In the
future, the European Union immediately fell into a double crisis: the global economic year
2008–2009 and its own financial one, connected with the debts of the Mediterranean
countries, first of all – Greece. This led to the fact that energy consumption per
capita in the EU was reduced to a minimum of 3.2 TOE in 2014. By 2017, per capita energy
consumption in the EU was only partially recovered and reached 3.29 TOE. At the same time,
its value has a very pronounced country differentiation, and if for Germany in 2017 this
figure was 3.86 TOE, for France – 3.61 TOE, then for the UK – 2.72 TOE, for
Poland – 2.71 TOE, for Portugal – 2.23 TOE, and for Romania – 1.69 ToE. In
general, this level of per capita energy consumption quite adequately reflects the EU's
longstanding efforts towards supporting energy efficiency, but also vividly shows the limits
of what can be achieved within the framework of a concept combining a set of measures for
energy saving and green energy replacement. As we see, as a result of the implementation of
such programs, the European Union did not become "European China" at all, although it became
less like "European America" in the energy issue.
Thus, it can be assumed that in the long-term trend, the per capita energy consumption of
EU countries will decrease slightly, only by copying the general trend of slow increase in
energy efficiency.
India is the fourth largest consumer of primary energy in the world. In 2017, energy
consumption in India increased to 754 million TOE, which is 5.6% of the world. India, like
China, is characterized by very rapid economic growth, which was expressed in terms of per
capita energy consumption: more than twice since 1990, when it amounted to 0.225 TOE, to
0.562 TOE in 2017. If per capita energy consumption in India continues to follow the same
pace, by 2050 it should reach a mark of 1.21 TOE, while India's GDP per capita will reach
approximately 19 thousand dollars. It is expected that by 2050 the population of India will
grow to 1.72 billion people. That is, it can be expected that by 2050 India's energy demand
will exceed 2 billion THN – or it will grow 2.65 times, overtaking even China in terms
of relative growth, and in absolute figures ahead of the European Union.
And finally, the Russian Federation, which is the fifth of the world's largest energy
consumers. In 2017, primary energy consumption in Russia amounted to 698 million TOE, which
accounted for 5.2% of world primary energy consumption. In 1990, when Russia was still part
of the USSR, per capita energy consumption in Russia was 5.8 TOE. Over the past years, Russia
has already passed its historic low, when the economy of the new country was torn to shreds
by neoliberal "shock therapy", the short-sighted policy of rapid privatization and the total
introduction of the "wild" market – including in the energy sector. This was reflected
in the fact that the minimum energy consumption per capita in Russia was achieved by 1998 and
amounted to 4.03 TOE. Smaller values of per capita consumption, apparently, are
simply impossible in a cold and harsh Russian climate, since heat supply is a vital function
in it – therefore, a value of 4.03 TOE can be considered the level of "basic survival"
in Russia. An interesting fact: in Canada, where the climate is very similar to that of
Russia, per capita energy consumption is 9.5 TOE as of 2017. At the same time, no one in
Canada speaks of "cheap electricity" or "too high costs for heat supply," realizing that this
is the necessary conditions for the survival of the country's population.
Since 1998, per capita energy consumption in Russia has been steadily growing and reached
a level of 4.83 Toe in 2017, which corresponds to about 0.8% per year. Most likely, this
trend will continue in the future, since the living standards of the Russian population are
still lower than the living standards in the European Union or the United States, and the
Russian level of per capita consumption lags behind the level of the late USSR, even taking
into account the accumulated "bonuses" in energy efficiency.
World energy: forecast
As noted above, the parameters of GDP and total energy consumption – just as the
parameters of per capita GDP and per capita energy consumption – in the current economy
have a strong correlation.
Moreover, almost all the leading countries of the world fit into a very clearly traceable
ratio, which corresponds to 10 thousand dollars of per capita GDP for every one TOE per
capita consumption. Smaller values of this parameter are characteristic of a
number of underdeveloped and developing countries, which leads to a "average" value of $
8,617 per 1 TOE for global GDP.
There are deviations and "up" on the scale of specific energy – this is already
mentioned in the text of Russia, Canada and the United States.
For Canada, Russia and the Scandinavian countries, you can build a separate branch of the
graph, on which for the "northern" economies it turns out that for every 10 thousand dollars
of per capita GDP they need to spend about 2 TOE per capita consumption – twice as much
as for those living in tropical or subtropical climate of China or India.
The phenomenon of "overconsumption" of the United States, as is clear, has a different
nature – it is associated with the actual "imperial" energy tax for the whole world,
which allows the United States to still maintain excessive energy consumption, which is in no
way connected with the country's climate the political structure of the United States, which
is the world hegemon.
It is important to emphasize that, if we exclude from consideration the "imperial" United
States and "northern" Russia and Canada, then the correlation between oil consumption and the
GDP of a particular country acquires almost 100% of its character. For example, Japan, not
mentioned above, was the sixth largest energy consumer in the world in 2017 and surpassed
most EU countries in terms of both per capita GDP and per capita oil consumption! Although,
it would seem, the southern conditions of Japan, almost completely located in the subtropical
and tropical zones, suggest lower figures for per capita oil consumption.
In 2017, energy consumption in Japan amounted to 456 million TOE, which amounted to 3.4%
of world primary energy consumption. Historical peak energy consumption per capita in Japan
reached in 2005 and amounted to 4.15 TOE. Since then, energy consumption in Japan has tended
to decline, as the country's national economy fluctuated between a hidden recession and sheer
economic stagnation. The effect of the largest nuclear accident at the Fukushima nuclear
power plant in 2011 is indicative in this respect: despite the radical restructuring of the
energy sector in Japan caused by this catastrophe and the almost complete closure of nuclear
power plants in the country, the consumption of primary energy in the Land of the Rising Sun
has not undergone such a sharp falls: almost all the "fallen out" volumes of atomic energy
were promptly replaced by increased consumption of oil and natural gas. And the general trend
of growth or reduction of primary energy consumption still showed a correlation with only
three parameters: the country's population, the level of per capita GDP of the national
economy and the general trend of improving energy efficiency, which in the case of Japan
describes the same energy saving parameter of 0.8% per year .
By 2016, per capita energy consumption in Japan decreased to 3.55 TOE, which was even
lower than per capita consumption in 1990, with a fundamentally higher GDP and a practically
stable population (an increase of only 3 million people with 123 million in 1990). In 2017,
per capita energy consumption in Japan grew only slightly to 3.6 TOE, which is quite
consistent with the very modest growth of the national economy.
As already mentioned, the practical economic result of "green" energy, observed for the
period 2007–2017, can be optimistically described as "zero" or "poorly distinguishable
from statistical error". Of course, one can complain that the sun and wind today give only 2%
of the global primary energy production and you need to "just give them more time (and
money)", but the sad reality is this: supposedly "promising" new energy sources affect the
economy. Their implementation in the countries of the European Union did not affect the
picture of energy efficiency and did not alter the ratio between GDP and tons of oil
equivalent spent on its production, while the global crisis and the debt crisis of the EU
itself turned out to be much more significant factors.
Still continuing (4):
A simple forecast follows from these sad conclusions: even if over the next decade the volume
of "green" energy again grows 4 times, then its share will reach only 8%. However, even this
level is an almost unrealizable dream: according to most forecasts – for example, the
IEA in 2017 and the Energy Information Administration (EIA) in 2018 – the actual
relative growth of renewable energy sources will be only about 2–20 years before 2030.
2.5 times. Unknown conclusion: even by 2030, the share of oil, natural gas and coal will be
at least 75% of the total primary energy level, which will be related to nuclear and
hydropower and the continuing relative waste from the use of wood energy and biomass. During
the years 2030-2040, the year can be almost fantastic, and all this will be due to the
difficulties that must be achieved in the field of oil, gas and coal in the balance sheet.
energy.
An extremely unpleasant situation with such a pessimistic forecast is expected with world
oil production. At the moment, its growth was concentrated in only nine oil-producing
countries. As an example, oil production in China is expected in 2015, after which it was not
even possible to achieve an increase in Chinese oil production.
Today, this "growing oil subsoil" includes the following countries (the estimated year of
oil production and data source are shown in brackets): Canada (peak in 2049, BP), USA (2042,
EIA), Iraq (2042, BP) , Kuwait (2040, BP), Iran (2039, BP), United Arab Emirates (2037, BP),
Russia (2033, IEA), Saudi Arabia (2030, BP), Brazil (2024, BP).
The exit from almost all the "growing" sources of oil production in the world is caused by
a drop in production from 2030 to 2040, which means the global energy crisis of humanity. and
there is "tasty", and there is energy, and all this economic strategy of modern
civilization.
Of course, partial replacement with liquid motor fuel, which is easily obtained from
petroleum, can be carried out using natural gas, as well as using chemical reforming in
various types of liquid hydrocarbons and molecular hydrogen.
However, this situation is hardly optimistic. In 2015, the world's peak production was
observed. Currently, natural gas production growth is concentrated in only ten countries (the
estimated year of natural gas production and data source are shown in parentheses): Canada
(2074, IEA), USA (2063, EIA), Iran (2046, BP), Qatar (2043 , BP), Saudi Arabia (2037, BP),
Algeria (2027, BP), China (2027, BP), Australia (2026, BP), Russia (2026, BP), Norway (2023,
IEA).
It is easy to see that already after 2030, the natural gas market will, like the oil market,
be practically monopolized by four or five countries, each of which will be able to easily
manipulate prices by simply adjusting its own production, since other players simply will not
have any -or free capacity. Unfortunately, in the case of Russian oil, and when analyzing the
prospects for Russian gas in such an oligopolistic market, it can be noted that Russia will
be in the "first echelon" of losers, at whose expense they will try to solve world problems
with the energy balance.
Of course, a partial replacement of natural gas and oil can be expected in the form of a
return to more "dirty" and expensive coal. By the way, it was precisely such a strategy that
China and India chose in the 1990s, who, without having wide access to the oil and natural
gas market, relied on their own deposits of hard coal. The incidental damage to ecology and
human health in this case was the price paid for the rapid industrialization paid by Indian
and Chinese society.
However, even on the "coal" path, humanity has its own problems. Today, the rapid growth
of coal production is possible only in four (!) Countries of the world. All other countries
have already passed their peak of hard coal mining, some of them more recently, such as the
USA (2008), China (2013) or South Africa (2014).
According to estimates by international energy agencies, today, growth in coal production
is possible only in the following countries (in brackets is the expected year of peak coal
mining and source of data): Russia (2112, BP), India (2052, BP), Australia (2032, IEA) ,
Indonesia (2031, BP).
I apologize for
posting an article here
– It was designed for a reader in Russia.
Ending:
Mirovaya energiya: stsenariy
I
World Energy Scenario
The inertial scenario of the development of mankind suggests that by 2050 the world
consumption of primary energy will increase one and a half times and will be about 20 billion
TOE. This indicator takes into account both the observed effects of energy conservation and a
very conservative estimate of future economic growth – within 2–2.5% of the
annual increase in global GDP.
However, crisis tendencies will be waiting for us much earlier than in 2050: it seems that
the gap between supply and demand on the global energy market will be formed by the early
2030s, when global energy consumption will approach the level of 16-17 billion TNE . As
already mentioned, peak years for world production of oil, natural gas and coal are coming in
the very near future. According to the IEA, the peak of world oil production will come as
early as 2022, when all of humanity will be able to provide about 4,530 million TOE with oil.
According to the same forecast, coal will be at its peak in 2028, when at the expense of it
it will be possible to get about 6 billion THE (which corresponds to about 8.4 billion tons
of physical coal mining, due to its lower energy value). And finally, global natural gas
production will peak in 2036, when this energy carrier can provide 3.9 billion ToE.
It is easy to understand that, taking into account the predicted share of oil, coal and
natural gas in primary energy of about 75% by 2030, the sum of peak production (14,430 TOE)
almost fully corresponds to ¾ the lower bar of estimated consumption in 2030 (16,000
TOE) . It should be understood that the peak values for oil and hard coal in
the world will be reached before 2030, after which these energy carriers will only decrease
in the volume of physical production. In part, this effect can be compensated for through the
involvement of more low-margin fields (as it happened with shale oil and gas), but the limits
of such compensatory mechanisms are not unlimited. In addition, a significant increase in the
price of primary energy in itself is a sign of the crisis of the existing economic structure,
which clearly links social stability with economic growth, and economic growth is fueled
precisely by the available (both physically and in price) energy.
Of course, the increase in the price of oil, natural gas and coal will improve the
economic prospects of "green" energy (simply due to the banal high cost of any energy
available to humanity), but this also means that within future economies huge amounts of
energy will simply be spent on maintaining the internal structure economies and the
livelihoods of the critically needed primary energy sector.
An idea of this kind of economic structure may well be given by the economic
model of the USSR, where such a bias towards the enterprises of "Group A" was dictated by
military and state construction, while consumer goods of the enterprises of "Group B" were in
short supply. However, in the USSR this mechanism was a reflection of the planned economy, in
the case of the supposed "peak" scenario of 2030, it would be formed by purely market
mechanisms within the framework of the "classical" capitalist economy.
It is clear that this implies a "contraction" of the final consumption of the population,
which will be caused by the forced flow of capital to the high-yielding primary energy
production sectors, forced and natural in the framework of the capitalist economy. At the
same time, the "welfare society" of the model countries of the "collective West", such as the
European Union and, in particular, the United States, will collapse. Faced with this kind of
crisis, the "overconsuming" Western countries will unambiguously join the battle for the
remnants of mineral energy resources. Such events and wars are likely to surpass even the
current "oil conflicts" in the Middle East, North Africa and Latin America, in which the
United States and its European allies are directly involved.
Probably, Russia will again be hit, which remains the "last natural storeroom" for large
reserves of sufficiently cheap oil, natural gas and coal. Most likely, the "energy predators"
will try once again to control the richest natural resources of our country, which, under
various pretexts, will strive to declare "the heritage of all mankind". In fact, we will talk
about the banal energy robbery of our country, which will hide behind the fig leaf of
propaganda.
Another disappointing conclusion follows from the energy "poverty" of the "world of the
future": Russia today has to prepare for the fact that our "four hard-earned oil equivalent
per capita", which, as noted above, is the basic condition for survival in Russia's severe
climate should be in the future provided for the population of the country from sources other
than oil, natural gas and coal. The challenges facing the world are facing Russia, but what
the United States is the reason for the rejection of overconsumption turns out to be another
challenge for Russia in the face of cold and death by starvation.
Unfortunately, the "world of the future" does not promise to be a pleasant and comfortable
place to live. And we should prepare for such a negative scenario today.
Thank you for the thought provoking thoughts Opritov Alexander.
It is useful to hear these ideas from the perspective of those from various countries, such
as yours.
The data dovetails closely with what has been presented from other sources, by and large.
The geopolitical ramifications of these challenges is obviously paramount.
I am concerned that countries will be pressured to go to war over the shortfall in energy,
through desperation.
A few points about different countries-
The USA could likely decrease it energy use/capita considerably (perhaps 30%), without
severe economic repercussion. But it is not taking the issue seriously.
Some countries like Korea will have a very hard time decreasing consumption. They are
cold, and heavily industrialized. And rely almost entirely on imported fossil fuel.
I expect India, and China, to lean heavily toward suppliers of fuel as they plan their
position in the world and choose allies. Iran and Australia both seem to be prime suppliers
considering proximity.
Concerns over global warming will be swamped by concerns over energy shortage, despite the
severity of the change, such as food supply disruption and forced migration. These climate
problems will likely be much more severe after energy shortage problems develop due to the
lag in CO2 effects.
Mostly I agree with you.
It's hard to imagine the future.
Much will depend on politicians and the willingness of peoples to reduce consumption for the
sake of an acceptable standard of living in the future.
Passing the peak of energy consumption will lead to a decrease in global GDP.
I believe that in order to save people, they will live in multi-storey buildings, perhaps
without an elevator (of course, it may not be soon for 50 years), the transport will be
public, there will not be enough private cars.
In addition to the peak of hydrocarbons, the peak of copper, gold, silver, tin, and a lot
more is coming. How to solve these problems I don't want to dream
Post scriptum. The problem of CO2 and the problem of global warming in Russia is not a
popular topic. So much that everyone refuses to discuss it and even think about it.
Approximately as an alien topic.
I should have added Russia to the list of few countries that both India and China (and many
others) will be turning to eager for more energy supply.
Secondly, regarding global warming, Russia may experience a large degree of immigration
pressure in later decades.
Fracking has helped the USA boost oil production, but that is pressuring to get oil out of
older wells. Once those have been sucked dry, we'll need to import lots more. You read news
about occasional big new discoveries in the USA, but read the details to see that each
amounts only to a few days of oil consumption in the USA.
The world still runs on oil and the USA wants to control it all. If you doubt the
importance, look at a freeway or airport or seaport to see oil at work.
How they can claim that US tight oil will be produced in larger quantities if they predict stagnant oil prices and at those price
the US production is unprofitable.
So from now on it's all condensate, and very little heavy and medium oil.
I like BP propaganda: "The abundance of oil resources, and risk that large quantities of recoverable oil will never be extracted,
may prompt low-cost producers to use their comparative advantage to expand their market share in order to help ensure their resources
are produced." That's not only stupid but also gives up the intent...
Notable quotes:
"... In the ET scenario, global demand for liquid fuels – crude and condensates, natural gas liquids (NGLs), and other liquids – increases by 10 Mb/d, plateauing around 108 Mb/d in the 2030s. ..."
"... All of the demand growth comes from developing economies, driven by the burgeoning middle class in developing Asian economies. Consumption of liquid fuels within the OECD resumes its declining trend. ..."
"... The increase in liquid fuels supplies is set to be dominated by increases in NGLs and biofuels, with only limited growth in crude ..."
In the ET scenario, global demand for liquid fuels – crude and condensates, natural gas liquids (NGLs), and other liquids
– increases by 10 Mb/d, plateauing around 108 Mb/d in the 2030s.
All of the demand growth comes from developing economies, driven by the burgeoning middle class in developing Asian economies.
Consumption of liquid fuels within the OECD resumes its declining trend. The growth in demand is initially met from non-OPEC
producers, led by US tight oil. But as US tight oil production declines in the final decade of the Outlook, OPEC becomes the main
source of incremental supply. OPEC output increases by 4 Mb/d over the Outlook, with all of this growth concentrated in the 2030s.
Non-OPEC supply grows by 6 Mb/d, led by the US (5 Mb/d), Brazil (2 Mb/d) and Russia (1 Mb/d) offset by declines in higher-cost, mature
basins.
Consumption of liquid fuels grows over the next decade, before broadly plateauing in the 2030s
Demand for liquid fuels looks set to expand for a period before gradually plateauing as efficiency improvements in the transport
sector accelerate. In the ET scenario, consumption of liquid fuels increases by 10 Mb/d (from 98 Mb/d to 108 Mb/d), with the majority
of that growth happening over the next 10 years or so. The demand for liquid fuels continues to be dominated by the transport sector,
with its share of liquids consumption remaining around 55%. Transport demand for liquid fuels increases from 56 Mb/d to 61 Mb/d by
2040, with this expansion split between road (2 Mb/d) (divided broadly equally between cars, trucks, and 2/3 wheelers) and aviation/marine
(3 Mb/d). But the impetus from transport demand fades over the Outlook as the pace of vehicle efficiency improvements quicken and
alternative sources of energy penetrate the
transport system . In contrast, efficiency gains when using oil for non-combusted uses, especially as a feedstock in petrochemicals,
are more limited. As a result, the
non-combusted use of oil takes over as the largest source of demand growth over the Outlook, increasing by 7 Mb/d to 22 Mb/d
by 2040.
The outlook for oil demand is uncertain but looks set to play a major role in global energy out to 2040
Although the precise outlook is uncertain, the world looks set to consume significant amounts of oil (crude plus NGLs) for several
decades, requiring substantial investment. This year's Energy Outlook considers a range of scenarios for oil demand, with the timing
of the peak in demand varying from the next few years to beyond 2040. Despite these differences, the scenarios share two common features.
First, all the scenarios suggest that oil will continue to play a significant role in the global energy system in 2040, with the
level of oil demand in 2040 ranging from around 80 Mb/d to 130 Mb/d. In all scenarios, trillions of dollars of investment in oil
is needed Second, significant levels of investment are required for there to be sufficient supplies of oil to meet demand in
2040. If future investment was limited to developing existing fields and there was no investment in new production areas, global
production would decline at an average rate of around 4.5% p.a. (based on IEA's estimates), implying global oil supply would be only
around 35 Mb/d in 2040. Closing the gap between this supply profile and any of the demand scenarios in the Outlook would require
many trillions of dollars of investment over the next 20 years.
Growth in liquids supply is initially dominated by US tight oil, with OPEC production increasing only as US tight oil declines
Growth in global liquids production is dominated in the first part of the Outlook by US tight oil, with OPEC production gaining
in importance further out. In the ET scenario, total US liquids production accounts for the vast majority of the increase in global
supplies out to 2030, driven by US tight oil and NGLs. US tight oil increases by almost 6 Mb/d in the next 10 years, peaking at close
to 10.5 Mb/d in the late 2020s, before falling back to around 8.5 Mb/d by 2040. The strong growth in US tight oil reinforces the
US's position as the world's largest producer of liquid fuels. As US tight oil declines, this space is filled by OPEC production,
which more than accounts for the increase in liquid supplies in the final decade of the Outlook.
The increase in OPEC production is aided by OPEC members responding to the increasing abundance of global oil resources by reforming
their economies and reducing their dependency on oil, allowing them gradually to adopt a more competitive strategy of increasing
their market share. The speed and extent of this reform is a key uncertainty affecting the outlook for global oil markets (see pp
88-89).
The stalling in OPEC production during the first part of the Outlook causes OPEC's share of global liquids production to fall
to its lowest level since the late 1980s before recovering towards the end of the Outlook.
Low-cost producers: Saudi Arabia, UAE, Kuwait, Iraq and Russia
The abundance of oil resources, and risk that large quantities of recoverable oil will never be extracted, may prompt low-cost
producers to use their comparative advantage to expand their market share in order to help ensure their resources are produced.
The extent to which low-cost producers can sustainably adopt such a 'higher production, lower price' strategy depends on their
progress in reforming their economies, reducing their dependence on oil revenues.
In the ET scenario, low-cost producers are assumed to make some progress in the second half of the Outlook, but the structure
of their economies still acts as a material constraint on their ability to exploit fully their low-cost barrels.
The alternative 'Greater reform' scenario assumes a faster pace of economic reform, allowing low-cost producers to increase their
market share. The extent to which low-cost producers can increase their market share depends on: the time needed to increase production
capacity; and on the ability of higher-cost producers to compete, by either reducing production costs or varying fiscal terms.
The lower price environment associated with this more competitive market structure boosts demand, with the consumption of oil
growing throughout the Outlook.
Growth in liquid fuels supplies is driven by NGLs and biofuels, with only limited growth in crude oil production
The increase in liquid fuels supplies is set to be dominated by increases in NGLs and biofuels, with only limited growth in
crude.
Okay, you will have to read the article to see how Robert arrived at his conclusion. But
his conclusion is:
So, I have no good reason to doubt Saudi Arabia's official numbers. They probably do
have 270 billion barrels of proved oil reserves.
I find his logic horribly flawed. Robert compares Saudi's growing reserve estimates with
those of the USA.
First, the US Securities and Exchange Commission have the strictest oil reporting laws in
the world, or did have in 1982. Also, better technology has greatly improved reserve
estimates. And third, the advent of shale oil has dramatically added to US reserve
estimates.
Saudi has no laws that govern their reserve reporting estimates.
From Wikipedia, US Oil Reserves: Proven oil reserves in the United States were 36.4
billion barrels (5.79×109 m3) of crude oil as of the end of 2014, excluding the
Strategic Petroleum Reserve. The 2014 reserves represent the largest US proven reserves since
1972, and a 90% increase in proved reserves since 2008.
Robert says US reserves are 50 billion barrels. I don't know where he gets that number but
it really doesn't matter. Oil production, along with reserve estimates, are growing in the US
for one reason and one reason only, the advent of shale oil. Reserve estimates before 2008
were based on conventional oil. Onshore conventional oil production in the USA is in steep
decline.
Robert Rapier is brillant oil man, but a brilliant downstream oil man. Refineries are his
forte. He should know better than the shit he produced in that article.
100 percent of Saudi Arabia's reserves are based on conventional oil. Their true reserves
are very likely somewhere in the neighborhood of 70 billion barrels.
OPEC says they have 1214.21 billion barrels of proven reserves. And they say non-OPEC has
268.56 billion barrels of proven reserves. Average OPEC C+C production, over the last four
years, has been 12.78 billion barrels per year according to the EIA. The EIA says the average
non-OPEC C+C production over the last four years has been 16.8 billion barrels per year.
Okay, here is the killer. If those numbers are correct then the average non-OPEC nation
has an R/P ratio of 16 while the average OPEC nation has an R/P ratio of 95. If you think
those R/P ratio numbers are even remotely correct then I have a bridge I would like to sell
you.
I agree that the R/P numbers seem very suspicious. But if this is true then OPEC reserves
are closer to 400-500 billion barrels not 1.2 trillion barrels. That would give us another
trillion barrels at best to consume in the future in addition to the 1.3 trillion already
consumed. This brings the URR to 2.2-2.5 trillion barrels at best including extra heavy. What
do you think of the URR of 3.1 trillion barrels that is commonly assumed? Also canadian tar
sands and venezuelan heavy oil have very low EROI which brings down the extractable oil
reserves further. Do you think that is taken into account?
"... they expect maybe 200 kb/d higher output in the GOM and my interpretation of George Kaplan's and SouthLaGeo's recent comments is that flat or possibly declining GOM output is a more likely scenario. ..."
The EIA's STEO released today. https://www.eia.gov/outlooks/steo/
They forecast US C+C production to increase +0.79 million barrels per day during 2019
From Dec 2018 11.93 million barrels per day
To Dec 2019 12.72 million barrels per day
The EIA's forecast might not be too far off, but I think they expect maybe 200 kb/d
higher output in the GOM and my interpretation of George Kaplan's and SouthLaGeo's recent
comments is that flat or possibly declining GOM output is a more likely scenario.
Venezuela production should take a larger drop in February. Today Interim President
Guaidó announced Feb 23 would be the day a big push would be made to push humanitarian
aid columns into Venezuela. Collection points for food and medicine are now available in
Colombia and Brazil, and others are being prepared.
Maduro moved 700 special forces (FAES) which are usually kept serving as death squads in
large cities, to cover the bridges between Ureña in Venezuela and Cucuta in Colombia,
with orders to fire on the humanitarian relief trucks. Guaidó responded the border was
plenty long and Maduro lacked enough FAES and Cubans to stop the relief from crossing the
border. He also pointed out that if Maduro had to use death squads to patrol the border it
meant he didn't trust the Army, the National Guard or the National Police, so he asked for
volunteers inside Venezuela to help overcome Maduro's thugs with sheer numbers.
Today it became very common to see an individual scream "Maduro!" and the crowd respond "f
k you!". It's the way people pass the time at metro stations and while waiting in line. And
the police seem to have abandoned the usurper, because they seldom do anything about it.
"... Last year, oil production dropped by 37% compared with 2017. So, Maduro has been struggling to pay back the loans and last year, Sechin had to fly to Caracas to negotiate with the Venezuelan leader over delayed oil supplies. ..."
As of 2017, Russia controlled 13% of Venezuela's crude exports, Reuters
reported . According to some experts, Rosneft has been taking advantage of Venezuela's
difficulties to secure deals which will be profitable in the long term.
... ... ...
The beleaguered country's economy is on the verge of collapse and the oil sector, which
accounts for over 90% of national export revenues, has not been spared. Last year, oil
production dropped by 37% compared with 2017. So, Maduro has been struggling to pay back the
loans and last year, Sechin had to fly to Caracas to negotiate with the Venezuelan leader over
delayed oil supplies.
Russia's concern about a collapse in Venezuela's economy is tangible. A delegation of
high-ranking Russian officials flew to Caracas in October to advise the government on how to
overcome the crisis. With the country in a state of turmoil, Russia's Deputy Minister of
Finance Sergei Storchak
said he expects Venezuela to struggle to repay its debt, and the next $100 million tranche
is due next month.
Nations should explore better system to break US hegemony
"The US dollar is used for the international oil and gas trade and a wide part of global
trade. This gives the US an exorbitant privilege to sanction countries it opposes.
..
The latest sanctions on Venezuela's state-owned oil company aim to cut off source of foreign
currency of Venezuelan strongman Nicolas Maduro's government and eventually force him to step
down.
..
A new mechanism should be devised to thwart such a vicious circle"
My question is really about those at the top of the power pyramid (those few hundred
families who own the controling share of the wealth of the world) -- those who position
idiots like Bolton to do their work, do they comprehend 'exergy' decline ?
If we can, then can they not? I agree with Parenti that they are not
'somnambulists'. They are strategists looking out for their own interests, and that means
scrutinising trends in political movements, culture, technology and, well, just about
everything. I find it hard, the idea that all these people -- people who have seen their
businesses shaped by resource discovery, exploitation and then depletion, have no firm grasp
on the realities of dwindling returns on energy.
The models were drawn up 47 years ago. I think that some of them at least, do
understand that economic growth is coming to a halt, and have understood for decades. If true
then they are planning that transition in their favour.
These hard to swallow facts about oil are still on the far fringes of any political
conversation. The neoliberal cultists are deaf to them for obvious reasons; the socialist
idealists believe that a 'New Deal' can lead us off the death train, but mostly ignore the
intractable relationship between energy decline and financial problems; even the anarchists
want their work free utopia run by robots and AI but stop short of asking whether solar
panels and wind turbines can actually provide the power for all that tech. It's the news that
nobody wants to think about, but which they will be forced to thinking about in the very near
future.
The Twitter feed 'Limits to Growth' has less than 800 followers (excellent though it
is).
I do not want to get into the mind of the Walrus of Death Bolton! I do not want to know
what he does, as he does. But at lower levels of government, and corporatism, there is an
awareness of surplus energy economics. And as Nafeez has also pointed out, the military (the
Pentagon) are taking an interest. And though it could rapidly change, who really appreciates
the nuances of EROEI? I'm guessing at less than a single percent of all populations? And how
many include its effects in a integrated political sense?
Its appreciation is sporadic: ranging from tech-utopia hopium to a defeated fatalism of
the inevitability of collapse. Unless and until people want to face the harshness of the
reality that capitalism has created: we are going to be involved in a marginal analysis.
There are very few people who have realised that capitalism is long dead.
Dr Tim Morgan estimates that world capitalism has conservatively had $140tn in stimulus
since 2008 -- without stimulating anything or reviving it at all. In fact, that amounts to
the greatest robbery in history -- the theft of the future. Inasmuch as they can, those
unrepayable debts -- transferred to inflate the parasitic assets of capitalists -- will be
socialised. Except they cannot be. Not without surplus energy.
Brexit, gilets jaunes, Venezuela, unending crises in MENA, China's economic slowdown, etc
-- all linked by EROEI.
It is a common socio-politico-economic energy nexus -- but linked together by whom? And
the emergent surplus energy-mind-environmental ecology nexus? All the information is
available. The formation of a new political manifesto started in the 1960s with the New Left
but it seems to have been in stasis since. Perhaps this might stimulate the conversation.
According to Nate Hagens: there is 4.5 years of human muscle power leveraged by each
barrel of oil. We are all going to be working for a very long time to pay back the debts
the possessing classes have built up for us -- with absolutely no marginal utility for
ourselves.
We are subsidising our own voluntary slavery unless we develop an emergent ecosocialist
and ecosophical alternative to carbon capitalism. We cannot expect paleoconservative carbon
relics like Bolton -- or anyone else -- to do it for us. The current political landscape is
dominated by a hierarchical, vested interest, carbon aristocracy. We can't expect that to
change for our benefit any time ever. Expect the opposite.
Graeber has a point, though. We could already have a post-scarcity, post-production society
but for the egregious maldistribution of resources and employment. Andre Gorz said as much 50
years ago (Critique of Economic Reason). Why do we organise around production: it makes no
sense but for the relations of production are, and remain, the relations of hierarchical
rule. So long as we assign value to a human life on the basis of meritocratic productivity --
we will have dehumanisation, marginalisation, and subjugation (haves and have nots). So why
not organisation around care, freedom and play?
Such a solution would require the transversalistion of society and not-full-employment: so
that no part of the system is subordinate, and no part is privileged. All systems and
sub-ordinate (care) systems would be co-equal, of corresponding value and worth. So, without
invoking EROEI, that would go a long way to solve our exergy, waste, pollution, and
inequality problems. It is the profligate, unproductive superstructure: supporting rentier,
surplus energy accumulating, profit-seeking suprasocieties -- that squanders our excess
energy and puts expansive spatio-temporal pressures on already stretched biophysical
ecological systems that engenders potential collapse. It is their -- the possessing classes
-- assets that are being inflated, at our environmental expense. When it comes to
survivability, we cannot afford a parasitic globalised superstructure draining the host --
the ecologically productive base. Without the over-accumulation, overconsumption, and wastage
(the accursed share) associated with the superstructure of the advanced economies -- and
their cultural, credit, military imperialisms I expect we could live quite well. Without the
pressures of globalised transportation networks, and unnecessary military budgets -- the
pressure on oil is minimised. It could be used for the 1001 other uses it has, rather than
fuelling Saudi Eurofighters bombing Yemeni schoolchildren, for instance. The surplus energy
could be used to educate, clothe and feed them instead. That would be a better use of
resources, for sure.
If we took stock of what we really have, and what we really are -- a form of spiritual
neo-self-sufficiency, augmented and extended into co-mutual care and freedom valorising
ecologies we wouldn't need to chase the perceived loss all over the globe, killing everything
that moves. The solutions are not hard, they are normative, once we are shocked out of this
awful near-life trance state of separationism. Thanks for the link.
It seems to me that there are two parallel arguments going on.
One is about social organisation, attitudes towards and policies determining work, money,
paid employment, technological development and the distribution of weath.
The other is fundamentally based on the laws of thermodynamics and concerns resource limits,
energy surpluses, the role of 'stored sunlight' in producing things and doing work for each
other, pollution and projections about these into the future.
I am surprised that Graeber (just as an example) seems to basically ignore the second of
these even though he clearly is an incisive thinker and makes good points about the first. It
is taken as a given that, theoretically at least, human civilisation could re-organise around
a new ethic, transform the economy into a 'caring economy', re-structure money, government
and do away with militarism. In terms of what to do now, as an individual, what choices to
make, it is disconcerting to me when talk of these ideals seems to ignore those latter
questions about overshoot.
I wonder if the egalitarian nature of much of indiginous North American society was
inescapably bound with the realities of a low population density, low technology,
intimate relationship with the natural world and a culture completely steeped in reverence
for Mother Earth.
The talk I hear from Bastani or Graeber along the lines of 'we could be flying around in jet
packs on the moon, if only society was organised sensibly' rings hollow to me.
Welcome to my world! Apart from as a managerial tool, systems thinking has yet to catch on
in the wider population. According to reductive materialism: there are two unlinked
arguments. According to Dynamic Systems Theory (DST) there is only one integrated argument --
with two inter-connected correlative aspects. We can only organise around what we can
energetically afford. Consequently, we cannot organise around what we cannot afford -- that
is, global industrialised production with a supervenient elitist superstructure.
Let's face it : ethical arguments carry little weight against organisation around
hierarchical rule. The current talk of an ethical capitalism -- in mixed economies with
'commons' elements -- is an appeasement. and distractional to the gathering and ineluctable
reality.
The current (2012) EROI for the UK is 6.2:1 -- barely above the 'energy cliff' of 5:1. The
GDP 'growth' and bullshit jobs are funded by monetised debt (we borrow around £5 to
make every £1 -- from Tim Morgan's SEEDS). From the Earth Overshoot Day website: the UK
is in economic overshoot from May 8th onward.
These are indicators that we will not be "flying jetpacks on the moon": even if we
reorganise. Everyone, and I mean everyone, will have to make do with less. A lot less.
Everything would have to be localised and sustainable. Production would be minimised, and not
at all full. Two major systems of production -- food (agroecology) and energy -- would have
to be sustainable and self-sovereign. And financialisation and the rentier, service economy?
Now you can see why no one, not even Dave the crypto-anarchist, is talking about reality.
Elitism, establishment and entitlement do not figure in an equitable future. We can't afford
it, energetically or ethically.
So when will the debate move on? Not any time the populace is bought into ideational
deferred prosperity. All the time that EROEI is ignored as the fundamental concept governing
dwindling prosperity -- no one, and I mean no one, will be talking about a minimal surplus
energy future. The magic realism is that the economic affordances of cheap oil (unsustainably
mimicked by debt-funding) will return sometime, somehow (the technocratic superfix). The
aporia is that the longer the delay, the less surplus energy we will have available to
utilise. Something like the Green New Deal -- that has been proposed for around two decades
now -- may give us some quality of life to sustain. Pseudo-talk of a Customs Union, 'clean'
coal, and nuclear power, will not.
An integrated reality -- along the model of Guattari's 'Three Ecologies' -- of mind,
economy, and environment is well, we are not alone, but we are ahead of the curve. The other
cultural aporia is that we need to implement such vision now. Actually, about thirty years
ago but let's not get depressive!
We are going to need that cooperative organisation around care and freedom just to get
through the coming century.
As mentioned elsewhere here, Venezualan oil deposits are not all that the hype cracks them up
to be. They are mostly oil sands that produce little in the way of net energy gain after the
lengthy process of extraction.The Venezuala drama is about the empire crushing democracy
(i.e. socialism), not oil. [not that this detracts from Kit's essential point in the
article].
The Left (as well as the Right), by and large have not come to terms with the realities of
the decline in net surplus energy that is unfolding around the world and driving the
political changes that we see. So they still view geopolitics in terms of the oil economy of
pre-2008.
The productive economies of Europe are falling apart (check Steve Keen's latest on Max and
Stacy -- although even i he doesn't delve into the energy decline aspect).
The carbon density of the global economy has not changed in the 27 years since the founding
of the UNFCCC.
The Peak Oil phenomenon was oversimplified, misrepresented and misunderstood as a simple
turning point in overall oil production. In truth it was a turning point in energy
surplus.
I predict that by the end of this or next year, everyone will be talking about ERoEI.
Everyone will realise that there is no way out of this predicament. Maybe there are ways to
lessen the catastrophe, but no way to avert it. This will change the conversation, and even
change what 'politics' means (i.e. you cannot campaign on a 'new start' or a 'better,
brighter future' if everyone knows that that physically cannot happen).
Everyone will understand that their civilisation is collapsing.
Does Bolton understand this?
If you were referring to my earlier comments about Venezuelan extra heavy crude: it's
still massively about the oil. The current carbon capitalist world system does not understand
surplus energy or EROEI, as it is so fixated on maximal short term returns for shareholders.
It can't comprehend that their entire business model is unsustainable and self cannibalising.
Which is bad for us: because carbon net-energy (exergy) economics it is foundational to all
civilisation. The ignorance of it and subsequent environmental and social convergence crises
threatens the systemic failure of our entire civilisation. The Venezuelan crisis affects us
all: and is symptomatic of a decline in cheap oil due to rapidly falling EROEI.
I can't find the EROEI specifically for Venezuelan heavy oil: but it is only slightly more
viscous than bitumen -- which has an EROEI of 3:1. Let's call it 4:1: the same as other tight
oils and shale. Anything less than 5:1 is more or less an energy sink: with virtually no net
energy left for society. The minimum EROEI for societal needs is 11:1. Does Bolton understand
this? Francis hit the nail on the head there.
Do any of our leaders? No. If they did, a transition to decentralisation would be well
under way. Globalised supply chains are systemically threatened and fragile. A globalised
economy is spectacularly vulnerable. Especially a debt-ridden one. Which way are our leaders
trying to take us? At what point will humanity realise we are following clueless Pied Pipers
off the Seneca Cliff -- into globalised energy oblivion?
The rapid investment -- not in a post-carbon transition -- but in increased
militarisation, and resource and market driven aggressive foreign intervention policies
reveal the mindset of insanity. As people come to understand the energy basis of the world
crisis: the fact of permanent austerity and increased pauperisation looms large. What will
the outcome be when an armed nuclear madhouse becomes increasingly protectionsist of their
dwindling share? Too alarmist, perhaps? Let's play pretend that we can plant a few trees and
captive breed a few rhinos and it will all be fine. BAU?
The world runs on cheap oil: our socio-politico-economic expectations of progress depend
on it. Which means that the modern human mind is, in effect, a thought-process predicated on
cheap oil. Oleum ergo sum? Apart from the Middle East: we are already past the point where
oil is a liability, not a viability. Debt funding its extraction, selling below the cost of
production -- both assume the continual expansion of global GDP. Oil is a highly subsidised
-- with our surplus socialisation capital -- negative asset. We foot the bill. A bill that
EROEI predicts will keep on rising. At what point do we realise this? Or do we live in hopium
of a return to historical prosperity? Or hang on the every word of the populist magic realism
demagogue who promises a future social utopia?
EROEI = Energy Returned on Energy Invested (also known as EROI = Energy Return on Investment)
EROEI refers to the amount of usable energy that can be extracted from a resource compared
to the amount of energy (usually considered to come from the same resource) used to extract
it. It's calculated by dividing the amount of energy obtained from a source by the amount of
energy needed to get it out.
An EROEI of 1:1 means that the amount of usable energy that a resource generates is the
same as the amount of energy that went into getting it out. A resource with an EROEI of 1:1
or anything less isn't considered a viable resource if it delivers the same or less energy
than what was invested in it. A viable resource is one with an EROEI of at least 3:1.
The concept of EROEI assumes that the energy needed to get more energy out of a resource
is the same as the extracted energy ie you need oil to extract oil or you need electricity to
extract electricity. In real life, you often need another source of energy to extract energy
eg in some countries, to extract electricity, you need to burn coal, and in other countries,
to extract electricity you need to build dams on rivers. So comparing the EROEI of
electricity extraction across different countries will be difficult because you have to
consider how and where they're generating electricity and factor in the opportunity costs
involved (that is, what the coal or the water or other energy source -- like solar or wind
energy -- could have been used for instead of electricity generation).
That is probably why EROEI is used mainly in the context of oil or natural gas
extraction.
So Trump imposed sanction on the USA too. Of he hopes that Strategic petroleum reserve will
compensate for shortages... If Venezuela color revolution develops into Libya scenario, which
they could oil output can be suppressed for years to come. In other words Trump really has
chances to became Republican Obama.
Moreover, not only are the effects of the sanctions more far-reaching, but also more
immediate than first thought. At first, the U.S. seemed to exempt shipments that were underway,
outlining a sort of phased approach that would allow a handful of American refiners to
gradually unwind their oil purchase from Venezuela. The phased approach, which was supposed to
be extended into April, would help "to minimize any immediate disruptions," U.S. Secretary of
Treasury Steven Mnuchin said in late January.
But that now does not appear to be what is unfolding. PDVSA has demanded upfront payment,
likely because it fears not being paid at all or having the revenues steered to the opposition.
Indeed, the U.S. effort to steer PDVSA and its revenues into the hands of the U.S.-backed
opposition leader Juan Gauidó appears to be a decisive turning point.
Oil tankers linked to Chevron, Lukoil and Respsol are delayed, redirected or sitting
offshore because of lack of payment. The WSJ says that several of those tankers had recently
sent oil to Corpus Christi, Texas, but are now anchored off the coast of Maracaibo sitting
idle. "This is an absolute disaster," Luis Hernández, a Venezuelan oil union leader,
told the WSJ. "There's almost no way to move the oil."
Unable to sell any oil, Maduro's regime could quickly run out of cash. The result could be a
humanitarian catastrophe, a merciless and destructive objective that the Trump administration
seems to have in mind. The U.S. government is essentially betting that by driving the country
into the ground, the military and the people will turn on Maduro. It could yet turn out that
way, but it could also deepen the misery and exact an unspeakable toll on the Venezuelan
population, the very people the Trump administration says it is trying to help.
In the meantime, oil exports are likely heading into a freefall. The WSJ says that labor
problems, including "mass defections of workers" are accelerating declines. PDVSA could soon
run out of refined fuel.
Officials with knowledge of the situation told the WSJ that Venezuela's oil production has
likely already fallen well below 1 million barrels per day (mb/d), down more than 10 percent
– at least – from December levels.
Wood Mackenzie estimates that production
probably stands a little bit higher at about 1.1 mb/d, but that it could soon fall to 900,000
bpd.
... ... ...
That would push up oil prices significantly. But the U.S. government has blown past the
point of no return, leaving it with no other options except to escalate. That means that
Venezuela is set to lose a lot more oil than analysts thought only two weeks ago .
Will loss of Vezuellian oil exports to the USA be compensated from the USA strategic
reserve? Who will compensate this oil? Canada ? Or Trump administration decoded that temporary rise of oil prices is OK in
view of more strategic goal ?
Notable quotes:
"... As for Venezuela's over-reliance on oil exports to support its economy, this is the result of past government policies before Chavez came to power. The US treated Venezuela as a petrol station and pro-US governments in the country turned it into a petrol station. ..."
Bart Hansen@20 - Oil production costs are complex, secret and mostly lies. With that caveat,
Venezuela was thought to have about $10 - $15 production costs on average. That includes
their light and medium crude, and zero investment in repair of their distribution networks.
Well over half of Venezuela's reserves are Orinco extra-heavy, sour crude. Essentially tar
sands, but buried 500m - 1500m deep that require solvent or steam extraction. So (guess)
maybe $30-range/bbl for production. Those tar sand oils produced are so heavy that they need
pre-processing and dilution before they can be refined or exported. Naphtha or other refined
products are used as dilutent and cost maybe $55/bbl today, but were around $75/bbl last
October.
U.S. refineries were pretty much the only ones paying cash for their 500,000 b/d of
Venezuelan crude. Trump's sanctions not only ban those imports, but also ban the 120,000 b/d
of naphtha and other dilutents we sold them.
Interesting to note that part of Trump's beat-down of the Venezuela little people is a ban
on the 120,000 b/d of dilutent last week. That will completely shut down their exports. They
could find another source of naphtha, but that source will be looking for $6.6 million a day
hard cash for it.
Maduro needs to sell Venezuela's gold to buy naphtha to export oil for ANY revenue. The
$2.5 billion the Bank of England can't find and won't deliver is meant to hasten the food
riots and CIA-orchestrated coup. But Mercy Corps is setting up concentration camps on the
Colombian border and we're delivering food aid, so the U.S. is really the hero, here. God
bless America! Obey, or die.
Red Ryder @ 30: Venezuela's economy is as much ruined by US economic sanctions against the
country and (at US behest) Saudi Arabia's flooding of the global oil market that sent oil
prices down in order to crash the economies of other countries like Iran and Russia that were
presumed to be dependent on oil exports, as by mismanagement or poor leadership on Chavez or
Maduro's part.
On top of that, major food importers and producers (several of which are owned by
companies or individuals hostile to Chavez and Maduro) have been withholding food from
supermarkets to manipulate prices and goad the public into demonstrating against the
government.
As for Venezuela's over-reliance on oil exports to support its economy, this is the
result of past government policies before Chavez came to power. The US treated Venezuela as a
petrol station and pro-US governments in the country turned it into a petrol
station.
Chavez did try to encourage local food production and carried out some land redistribution
to achieve this. But his efforts did not succeed because importing food was cheaper than
producing it locally and farm-workers apparently preferred jobs in the oil industry that paid
better and were more secure.
I do not know how the collectives were organised, whether they had some independent
decision-making abilities or not, or whether they were organised from top down rather than
bottom up, so I can't say whether their organisational structures and the internal culture
those encouraged worked against them.
Feb 2, 2019 The REAL Reason The U.S. Wants Regime Change in Venezuela. The U.S. and its
allies have decided to throw their weight behind yet another coup attempt in Venezuela. As
usual, they claim that their objectives are democracy and freedom. Nothing could be farther
from the truth.
Feb 3, 2019 Venezuela's Oil Enough for World's 30 Year Energy Needs
The long bankrupt fiat financial system is pushing the Deep State to target Venezuela for
the latter's natural resources that dwarfs that of its satellite province Saudi Arabia.
Karl- I see that you asked 'what' rather than when.
Seneca Cliff refers to a very rapid decline in a feature (such as global oil production)
after it has achieved a peak. This is as opposed to a very slow decline.
Obviously for oil, a fast decline would be catastrophic.
US production will be close to flat 2019, and if ports are not improved much until late
2020, then 2020 will not be great. After that, I don't see it catching up.
As stated many times on 'theoildrum', State of the art EOR projects deplete oilfields, who
without EOR would go in terminal decline much earlier, very rapidly. So a world oilproduction
cliff cannot be ruled out, especially if money reserves from oil companies dry up.
Oil prices are likely to rise if there is a shortage of oil, this will mean oil companies
will have plenty of financial resources as long as demand is sufficient to consume the oil
produced. Not suggesting there will not be a decline, just unlikely there will be a cliff
unless oil prices drop, so far there is no evidence of a cliff and given World stock level
trend, prices are unlikely to drop further and are more likely to increase in the future.
But to repeat a cliché: depletion never sleeps. Already about fifteen years ago EOR
projects were started that extracted oil from (quite) 'past peak' or 'on plateau production'
oilfields. EOR projects in case of 'quite past peak' fields, to get 'the last recoverable'
barrel out resulting in oil production/day far less than peak production.
I know, the recoverable quantity increases with rising oilprices and better extraction
techniques, but still the production/day way past peak will be much less than on peak.
What will happen when oilprices don't increase a lot for the next ten years, for a
combination of reasons ?
At a certain point in time all the money in the world couldn't prevent world production
decline and the further that point will be in the future, the steeper will be the decline I
think. So better sooner than later oilprices begin to increase significantly, to buy some
time for the transition to EV's, etc.
I am not an expert in engineering nor in geology, far from that, just expressing a feeling
that I got after having read the many posts on theoildrum regarding this matter.
"... US need for heavy oil is also due to declines in conventional oil production. Fracking "oil" ( high in condensates) has been used to mask the peak (real) oil declines and also has a lower energy content/barrel and must be blended with heavy oil for the refineries to process it. Thus, "Prices of heavier U.S. grades like Mars Sour, an offshore medium U.S. crude, and Heavy Louisiana Sweet crude have risen as buyers scramble for supply". ..."
"... Mars currently trades at a premium to U.S. crude at $58.19 vs $53.69 for West Texas Intermediate (WTI)". Currently, the US also imports 500,000 barrels of Venezuelan crude a day to meet refinery blending requirements. ..."
"... All other shale fracking regions than the Permian have peaked or are in decline as shown by http://aheadoftheherd.com/Newsletter/2018/Shale-is-dead-long-live-conventional-oil.pdf ..."
He neglects other factors such as:
(1) poor soil management practices;
(2) demographics such as some 3 million Columbian citizens fleeing the Fascist Columbian
military attacks and putting extra stress on the social programs;
(3) Increasing US needs for Venezuela heavy crude to blend with the light fractions coming
from fracking operations (e.g. Eagle Ford light "oil" condensates;
(4) US military need for War to support funding levels (e.g. Smidley Butler's "war is a
racket";
(5) batshit crazy neocon and neoliberal ideology and world domination.
The EROI issue is worse that many consider. See Gail Tverberg article "How the Peak Oil
Story Could Be "Close," But Not Quite Right". The article points out that wellhead costs do
not capture the downstream costs of production and tax capture that bust further reduce the
EROI. https://www.nakedcapitalism.com/2019/01/peak-oil-story-close-not-quite-right.html
US need for heavy oil is also due to declines in conventional oil production. Fracking
"oil" ( high in condensates) has been used to mask the peak (real) oil declines and also has
a lower energy content/barrel and must be blended with heavy oil for the refineries to
process it. Thus, "Prices of heavier U.S. grades like Mars Sour, an offshore medium U.S.
crude, and Heavy Louisiana Sweet crude have risen as buyers scramble for supply".
The economics of the US fracking light oil condensates industry is much worse when you
consider the offloading of pollution costs (drinking water), health effects, wear and tear of
highways from trucking the oil, water and fracking sands (one pound/barrel), climate change
from massive methane flaring, volatile organic compounds (VOC) release and earthquake damage
from deep injection of the water cut fluids.
"... UN should be probing Washington and allies for regime-change crimes Identical condemnations from the US and allies and the synchronicity show that Venezuela is being targeted for regime change in a concerted plot led by Washington. ..."
"... It is so disappointing that Americans yet to come to realization that this criminal Jewish Mafia does not standing at the end of the old republic. He is DEEPLY involved, but his STYLE is different. He kills and terrorize the same as Regan, Carter, Clinton, Bush, Obama who have killed millions of people. His sanction is the KILLING MACHINE to topple governments TO STEAL THEIR RESOURCES FOR THE DUMMIES. I have NO respect for the liars who are trying to paint a criminal as someone 'standing against' the deep state. TRUMP IS PART OF THE DEEP STATE, ONLY DUMMIES DO NOT GET IT. ..."
"... No matter the situation in Venezuela, whatever the US government and media are saying is just hostile propaganda as they couldn't give a rat's ass about the people living there. The Libyan people were doing well out of their oil, as were the Iraqis, living in reasonable wealth and security, and look at them now after the US decided to meddle in their affairs. Now after all that, even if something the US government says may be true, why believe it? How many times do you need to be fooled to stop being a fool? ..."
"... The nuttiest member of the Trump administration is UN Ambassador Nikki Haley. Her latest neo-nazi stunt was to join protestors last week calling for the overthrow of the democratically elected government of Venezuela. She grabbed a megaphone at a tiny New York rally and told the few "protesters" (organized by our CIA) to say the USA is working to overthrow their President. This was so bizarre that our corporate media refused to report it. ..."
"... Why does everyone make Trump out to be a victim, poor ol Trump, he's being screwed by all those people he himself appointed, poor ol persecuted Trump. Sounds like our Jewish friends with all the victimization BS. ..."
"... By now Trump must be near bat shit crazy. Imagine hundreds of vampires descending on every exposed artery and vein. Does he have a chance in 2020? Not with the people who are around him today ..."
"... Regardless of what the MSM reports, the population is fed-up with all the malarkey, and the same old faces. ..."
"... If he can he should issue an executive order allowing important items like immigration to go directly to public referendum, by passing congress. We're tired of idiots with personal grudges holding our President hostage. Stern times calls for sterner measures. ..."
"... Juan Guaidó is the product of a decade-long project overseen by Washington's elite regime change trainers. While posing as a champion of democracy, he has spent years at the forefront of a violent campaign of destabilization. ..."
Agent76 says:
January 30, 2019 at 7:21 pm GMT 100 Words Jan 24, 2019 Catastrophic Consequences What's Really Happening in Venezuela
In this video, we give you the latest breaking news on the current situation in Venezuela with Maduro, the election, and Trump's
response.
UN should be probing Washington and allies for regime-change crimes Identical condemnations from the US and allies and the
synchronicity show that Venezuela is being targeted for regime change in a concerted plot led by Washington.
@Sergey Krieger Negotiations are not necessarily a sign of weakness. However, Maduro should negotiate with the puppet masters,
not with the puppet. I don't think that killing that pathetic Guaido is a good strategy: you don't want to make a martyr out of
nonentity.
And, in effect, I wish for the success of Juan Guaido in his struggle with Maduro, and I support American diplomatic and
economic pressure on Maduro to step down. After all, Venezuela is in our back yard with huge oil reserves.
FUCK YOU! Venezuela is not "our" back yard. And the oil does not belong to "us".
[Donald Trump, for all that and for his various faults and miscues, is in reality the only thing standing in the way of the end
of the old republic. ]
It is so disappointing that Americans yet to come to realization that this criminal Jewish Mafia does not standing at the
end of the old republic. He is DEEPLY involved, but his STYLE is different. He kills and terrorize the same as Regan, Carter,
Clinton, Bush, Obama who have killed millions of people. His sanction is the KILLING MACHINE to topple governments TO STEAL THEIR
RESOURCES FOR THE DUMMIES. I have NO respect for the liars who are trying to paint a criminal as someone 'standing against' the
deep state. TRUMP IS PART OF THE DEEP STATE, ONLY DUMMIES DO NOT GET IT.
The ignorant Jewish mafia 'president' IS MORE DANGEROUS because he like his 'advisors' is totally ILLITERATE. It is a family
business dummies.
Are dummies going to hold petty people like Bolton who lie to get money from MEK to buy a new suit and new shoes, is responsible
for the policy of the Trump regime where he wages WARS, economic sanction, to starve children to surrender? Then NO ONE Trusts
you. MEK people are not more than 20, but are funded by the US colony, Saudi Arabia where MBS transfers money to the Jewish mafia
family funding US wars.
Maduro has EVERY SINGLE RIGHT to arrest Juan Guiado, a gigolo who is taking orders from a US and an illiterate 'president',
where its dark history known to every living creature on earth. US has massacred millions of people in all continents including
Latin America.
Maduro has every single right to arrest him and put on trail and execute him as a traitor and an enemy of the state. How many
years the people in Venezuela should suffer for the US 'regime change' and its crimes against humanity in Venezuela to STEAL ITS
RESOURCES.
"So let me get this straight: The Russians brought America to its knees with a few facebook ads, but Uncle Sam's concerted and
ongoing efforts to overthrow governments around the world and interfere with elections is perfectly fine? Because democracy? Riiiiiiight."
:
[The last Venezuelan Presidential election was a joke. ]
YOU ARE A JOKE ZIONIST IDIOT.
The Making of Juan Guaidó: How the US Regime Change Laboratory Created Venezuela's Coup Leader
[Juan Guaidó is the product of a decade-long project overseen by Washington's elite regime change trainers. While posing as
a champion of democracy, he has spent years at the forefront of a violent campaign of destabilization.]
Illiterate Jewish Mafia 'president' must be kicked out of the office. Hands of Israel is all over the SELECTION.
The ignorant 'president' is MORE DANGEROUS THANT OTHER CRIMINAL US REGIMES because on top of being a criminal, he is ILLITERATE
as well.
[In 2009, the Generation 2007 youth activists staged their most provocative demonstration yet, dropping their pants on public
roads and aping the outrageous guerrilla theater tactics outlined by Gene Sharp in his regime change manuals.This far-right group
"gathered funds from a variety of US government sources, which allowed it to gain notoriety quickly as the hardline wing of opposition
street movements," according to academic George Ciccariello-Maher's book, "Building the Commune."
That year, Guaidó exposed himself to the public in another way, founding a political party to capture the anti-Chavez energy
his Generation 2007 had cultivated.]
@By-tor See, this is the typical lie. Socialism fails, so the socialist blames the outside wrecker for causing the problem.
If Moscow freezes, then it is because of the wreckers. If Moscow starves, then it is because of the wreckers.
If Venezuela collapses, then it is because of "sanctions," not the failure of the new socialist economy.
America has the right to lock anyone out of its economy that it wants, for whatever reasons. This should not matter because
that nation can still trade with the rest of the world, like China. Venezuela could get everything it wants by simply selling
oil to China in exchange for goods. The problem is, there is not enough oil production to do so and other nations are reluctant
to replace American investment for fear of losing their assets as well.
Think about how wrong-headed the Chavez policy has been. If the Venezuelans have problems with their local ruling class and
want to get rid of them fine do so. But, why go after the American oil company? The Americans don't care who rules Venezuela as
long as their contracts are honored. Chavez could have then been a true socialist an allocate a greater dividend to Venezuelans
that was previously being hoarded by the ruling class an arrangement similar to what Alaskans have with American oil companies.
But no there was an immediate seizure of assets because the only purpose of socialism is to make the socialist leaders rich.
And Chavez and Maduro became very rich indeed.
@AnonFromTN I would happily martyr gorbachov , Yeltsin and all their gang. I think everybody would have been far better of
then. Same is applied to the puppet. Nikolai II was martyred and things got a lot better. What is important is winning and final
outcome, while making some martyrs in the process.
@Harold Smith Trump's personnel picks are mind-boggling. I cannot see how he disapproves Eliot Abrams for deputy SoS with
one breath, then blandly allows Pompeo to appoint him an envoy to a trouble-spot. Bolton, Pompeo, Goldberg et al.
NEOCON America does not want Russian bombers in South America.
Real America doesn't give a f*ck. Bombers are so last century, might as well put up machine-gun equipped Union Pacific Big
Boys to make it marginally more steampunk and become a real danger for the USA.
@Tyrion 2 There is not a single complaint here that did not exist before the election or before Pres Chavez.
There are poor management leaders all over the globe. That';s their business. Hey we have some right here in the US I take
it your solution is a military coup or better yet a coup fostered by the EU or the OAS, or maybe ASEAN or SDG . . .
It would be nice if someone simply asked Trump why it is he originally wanted to get along with Russia and pull out of the middle
east and generally opposed the "neoconservative" approach and now seems to be hiring neocons and doing what they want. Is he trying
to placate Sheldon Adelson and Adelson's lackeys, or what? I don't know of his being asked about this directly.
Venezuelan lawmaker Jose Guerra dropped a bombshell on Twitter Tuesday: The Russian Boeing 777 that had landed in Caracas the
day before was there to spirit away 20 tons of gold from the vaults of the country's central bank. Guerra is a former central
bank economist who remains in touch with old colleagues there. A person with direct knowledge of the matter told Bloomberg News
Tuesday that 20 tons of gold have been set aside in the central bank for loading. Worth some $840 million, the gold represents
about 20 percent of its holdings of the metal in Venezuela.
No matter the situation in Venezuela, whatever the US government and media are saying is just hostile propaganda as they
couldn't give a rat's ass about the people living there. The Libyan people were doing well out of their oil, as were the Iraqis,
living in reasonable wealth and security, and look at them now after the US decided to meddle in their affairs. Now after all
that, even if something the US government says may be true, why believe it? How many times do you need to be fooled to stop being
a fool?
No, Chavez had popular legitimacy. Maduro has nothing but force to keep himself in power now. Yes, there's easy definition
for the above but Chavismo is decrepit.
Pressure for a reasonable Presidential election is based on that.
The Trumptards blindly support me. I can do no wrong.
There are not enough independent thinkers to make a difference as the two main sides bitterly fight each other over every
minute, meaningless issue.
I can pretty much do as I please without consequence ..like pay off all my buddies and pander to the jews/globalist/elites.
I'd add: and by doing the last, I could cut a deal with the real TPTBs as to for what happens after I leave White House.
Chavez had popular support . He felt the need to intimidate opponents from the beginning. Like Bill Bellicheck and Tom
Brady feeling the need to cheat.
Makes sense. They owe a big chunk of money to Russia and a payment of 100 million is coming due. Russia gets security for future
payments while it holds their gold in a safe place. They may ship the rest to China if they are smart
The nuttiest member of the Trump administration is UN Ambassador Nikki Haley. Her latest neo-nazi stunt was to join
protestors last week calling for the overthrow of the democratically elected government of Venezuela. She grabbed a megaphone
at a tiny New York rally and told the few "protesters" (organized by our CIA) to say the USA is working to overthrow their
President. This was so bizarre that our corporate media refused to report it.
She's being paid no doubt by the usual suspects. She is personally 1 million in debt and has signed with a Speakers agency
to give speeches for 200,000 a pop.
COLUMBIA, S.C. (WCIV)
"Haley is currently quoting $200,000 and the use of a private jet for domestic speaking engagements, according to CNBC
In October 2018, when Haley resigned, she said, she would be taking a "step up" into the private sector after leaving the U.N.
According to a public financial disclosure report based on 2017 data, at the rate quoted for her engagements, just a handful would
pay down more than $1 million in outstanding debt that was accrued during her 14 years
3. There are not enough independent thinkers to make a difference as the two main sides bitterly fight each other over every
minute, meaningless issue.
Well people you need to explore this move to take over Venezuela in the context of what having that oil control will mean for
the US and Israel in the increasingly likely event we blow up Iran and up end the ME for Israel.
So what could happen that might make control of oil rich Venezuela necessary? Why has Venezuela become a Bolton and Abrams
project? Why is Netanyahu putting himself into the Venezuela crisis ?
We, otoh, would need all the oil we could get if we blew up the ME, specifically Iran, figuratively or literally. The US signed
a MOU with Israel in 1973 obligating us to supply Israel with oil ( and ship it to them) if they couldn't secure any for themselves.
@Hibernian I hate those two guys so much, and the owner Kraft also. I'm hoping for a helmet to helmet collision for Brady
early in the second quarter with his bell ringing for the rest of the game. (Evil grin)
@Tyrion 2 Yes, the int'l monitors said the elections were fair as Maduro received over 60% of the vote. You think the 'deplorables'
of venezuela elected the known US-Wall Street neo-liberal puppet Guaido? No, the US Tape Worm groomed this twerp, all-the-while
his backers and paymasters in the American neo-Liberal ruling class claim Russian meddling in the 2016 US elections. The shamelessness
and hypocrisy is astounding.
@Tyrion 2 Pres Hugo Chavez's admin was very controversial. And the conditions you speak of have plagued Venezuela even before
Pres Chavez came to government.
This really is none of our affair. We don't have a mandate to go about the planet tossing out whoever we think is crazy. He
is not a threat to the US. There's no indication that he intends to harm US businesses.
Their polity means their polity. You'll have to do better than he's crazy, mean, a despot, etc. That's for them to resolve.
@Commentator Mike Seems some will never learn the definition of insanity, especially the NeoCons who have been running America
for far too long. I recommend John Perkins "Confessions of an Economic Hit Man" for the less informed among us here today. Maybe
at some point they will get a clue.
I heartily dislike and find despicable the socialist government of Maduro, just as I did Hugo Chavez when he was in power.
I have some good friends there, one of whom was a student of mine when I taught in Argentina many years ago, and he and his
family resolutely oppose Maduro. Those socialist leaders in Caracas are tin-pot dictator wannabees who have wrecked the economy
of that once wealthy country; and they have ridden roughshod over the constitutional rights of the citizens. My hope has been
that the people of Venezuela, perhaps supported by elements in the army, would take action to rid the country of those tyrants.
Hard to take this guy seriously when he spouts Fox News level propaganda.
Why does everyone make Trump out to be a victim, poor ol Trump, he's being screwed by all those people he himself appointed,
poor ol persecuted Trump. Sounds like our Jewish friends with all the victimization BS.
Its clear that voting no longer works folks, this is an undemocratic and illegitimate "government" we have here. We let them
get away with killing JFK, RFK, MLK, Vietnam, we let them get away with 9/11, Iraq, Libya, Afghanistan, Syria. They've made a
mess in Africa. All the refugees into Europe, all the refugees from Latin America that have already come from CIA crimes, more
will come.
We wouldn't need a wall if Wall St would stop with their BS down there!
You can't just blame Jews, yes there are lots of Jews in Corporate America, bu t not all of them are, and there are lots of
Jews who speak out against this. We were doing this long before Israel came into existence. You can't just blame everything one
one group, I think Israel/Zionist are responsible for a lot of BS, but you can't exclude CIA, Wall St, Corporations, Banks, The
MIC either. Its not just one group, its all of them. They're all evil, they're imperialists and they're all capitalists. I think
Israel is just a capitalist creation, nothing to do with Jews, just a foothold in he middle east for Wall St to have a base to
control the oil and gas there, they didn't create Israel until they dicovered how much oil was there, and realized how much control
over the world it would give them to control it. Those people moving to Israel are being played, just like the "Christian Zionists"
here are, its a cult. Most "Jews" are atheists anyhow, and it seems any ol greedy white guy can claim to be a Jew. So how do you
solve a "Jewish Problem" if anybody can claim to be a Jew? I think solving the capitalist problem would be a little easier to
enforce.
All of the shills can scream about communists, socialists and marxists all they want. Capitalism is the problem always has
been always will be. Its a murderous, immoral, unsustainable system that encourages greed, it is a system who's driving force
is maximizing profits, and as such the State controlled or aligned with Corporations is the most advanced form of capitalism because
it is the most profitable. They're raping the shit out of us, taking our money to fund their wars, so they can make more money
while paying little to no taxes at all. Everything, everyone here complains about is caused by CAPITALISM, but nobody dares say
it, they've been programmed since birth to think that way.
We should nationalize our oil and gas, instead of letting foreigners come in and steal it, again paying little or no taxes
on it, then selling the oil they took from our country back to us. Russia and Venezuela do it, Libya did it, Iraq did it, and
they used the money for the people of the country, they didn't let the capitalists plunder their wealth like the traitors running
our country. We're AT LEAST $21 trillion in the hole now from this wonderful system of ours, don't you think we should try something
else? Duh!
It is the love of money, the same thing the Bible warned us about. Imperialism/globalism is the latest stage of capitalism,
that is what all of this is about, follow the money. Just muh opinion
@Tyrion 2 From the people fool not by the C.I.A. declaring that well we like the other fellow best for president,after all
using the logic you fail to have Hillary could have said call me madam president and leave the orange clown out in the dark,stupid,stupid
people
"And, in effect, I wish for the success of Juan Guaido in his struggle with Maduro, and I support American diplomatic and
economic pressure on Maduro to step down. After all, Venezuela is in our back yard with huge oil reserves."
OMG, Cathey really said that. Is he always such a shit? He certainly has Venezuela completely wrong.
@AnonFromTN This phylosophical questions should not led to no actions. Modern Russia is actually in much better position now
than it was in 1913. True. There is never final. Sorry for wrong words choice. Dialectics.
@Wizard of Oz The scenario you describe is an accurate. And requires me to make judgments about a dynamic I am unfamiliar
with -- no bite. Several sides to this tale and I have heard and seen it before.
I may however make a call.
In 2017 2/3 of the states in the region chose not to interfere. They have not changed their minds on intervention.
ohh by the way I did ask and here's the familial response:
But reading the data sets makes it clear that what they want is some humanitarian relief. B y and large I have the family telling
me to mind my own business, but they would like a meal, some medicine and some water.
By now Trump must be near bat shit crazy. Imagine hundreds of vampires descending on every exposed artery and vein. Does he
have a chance in 2020? Not with the people who are around him today.
Regardless of what the MSM reports, the population is fed-up with all the malarkey, and the same old faces.
In Trump's remaining 2 years he must throw off the parasites, bring in real men, and go to work on infrastructure, health
care, and real jobs. He has to out the naysayers, the creeps and the war mongers. Throw Bolton from the train, and divorce Netanyahu
and Israel. Appeal directly to the public.
If he can he should issue an executive order allowing important items like immigration to go directly to public referendum,
by passing congress. We're tired of idiots with personal grudges holding our President hostage. Stern times calls for sterner
measures.
@RobinG That would be an easy, almost optimistic explanation: some people are venal enough to say or write anything for money.
Pessimistic explanation is that some people who can read and write are nonetheless dumb or brainwashed enough to sincerely believe
the BS they are writing.
Can you define what capitalism is ? Once that idea is refined, finessed, and compared to multiple color changes of capitalism,
it becomes easier who to fit in the plastic infinitely expandable box of ideas of capitalism starting with the chartered company
to patient laws to companies making military hardwares paid by tax payers to tax cut by government to seizure of foreign asset
by US-UK to protection of the US business by military forces to selling military gadgets to the countries owned by families like
Saudi royals Gulf monarchs and to the African ( American installed ) dictators to printing money .
A great article I posted in another thread few days ago dives deep into who Juan Guaido is and his past grooming for the past
10+ years:
Juan Guaidó is the product of a decade-long project overseen by Washington's elite regime change trainers. While posing
as a champion of democracy, he has spent years at the forefront of a violent campaign of destabilization.
"Whoever believed that Trump will drain the swamp must feel disappointed."
The thing is, Trump just didn't fail to drain the swamp, he "took the ball and ran with
it." Apparently he's an enthusiastic imperialist who gets off on the illegitimate use of
military force. (His attack on the Shayrat airbase in Syria should end any debate about
that).
Supposedly he's been wanting to attack Venezuela for a while:
I can understand Trump's die-hard supporters' argument that Trump is being coerced into
doing evil things (although I don't agree with it), but how can they explain Trump's apparent
enthusiasm?
The only explanation that makes sense to me is that Trump's anti-war/anti-interventionist
tweets from 2013 were insincere and his whole presidential campaign was a brazen fraud.
Edit: I just saw your comment #71; so you apparently see it the same way I do.
@By-tor Maduro is just Venezuelan Mugabe. Has it really come to this? That people on Unz
will support any random lunatic as long as he mouths off about America or Israel every now
and again?
Oh, but the sanctions! Proper economic sanctions were only very recently applied. The
Venezuelan economy was already utterly wrecked by their joke of a government.
Liken the US not trading with Venezuela to a medieval siege if you like, but I suggest you
read up on medieval sieges first. Hint: they weren't merely a government run boycott.
@onebornfree Some all to rare common sense – a writer who understands that both big
government Trump and the big government "opposition" to Trump are not, never were , and never
will be, "the answer":
"The Real Problem Is The Politicization Of Everything"
" While on the market and in radically decentralized systems, disagreements and
polarization are not a problem, centralized political decision-making has in its nature that
only one view can prevail. Suddenly, who is in the White House or whether regulation X or Y
is passed does matter a great deal, and those with a different opinion than you on it may
seem like actual enemies. Within voluntary settings, one can live with people that one
disagrees with. All parties curate a way of life that works while living in peace with
others.
To regain civility in human interactions and finally treat other human beings as human
beings again, we would do well to get politics out of human affairs."
For those who think this coup attempt was sudden, here is something from my blog:
Oct 9, 2018 – Ambassador Supports Coup
Few Americans know that our nation imposed harsh economic sanctions on Venezuela because
the Neocons want to overthrow its democratic government. They hate that oil rich Venezuela
insists on controlling its oil production rather than allowing big American corporations to
run things. Almost three years ago, Neocon puppet Barack Obama declared a national emergency
to impose sanctions by designating Venezuela an "unusual and extraordinary threat" to
national security, and Trump continued sanctions.
The nuttiest member of the Trump administration is UN Ambassador Nikki Haley. Her latest
neo-nazi stunt was to join protestors last week calling for the overthrow of the
democratically elected government of Venezuela. She grabbed a megaphone at a tiny New York
rally and told the few "protesters" (organized by our CIA) to say the USA is working to
overthrow their President. This was so bizarre that our corporate media refused to report it.
Jimmy Dore assembled this great video of CNN presenting their expert calling the President of
Venezuela paranoid for saying the USA wants to overthrow his government. A few hours later, a
different CNN report documented recent efforts by the USA to overthrow his government!
@Tyrion 2 This is not about Maduro, or Guaido, who is likely an even bigger shit, as he
clearly serves foreign masters. Don't you think it should be up to the people of Venezuela to
change their president? The US meddling is against every rule of behavior of countries
towards other countries. How would you feel if Burkina Faso told you who should be the
president of the US? That's exactly how every Venezuelan who has dignity feels, regardless of
their opinion of Maduro and his coterie.
@Tyrion 2 The US has been plotting against Venezuela since the last Wall Street puppet
Pres. Rafael Caldera was defeated by Chavez and ownership of oil assets returned to Venezuela
thereby cutting out anf angering the NYC-London predatory globalist cabal. Trump's hitmen are
now preventing the Venezuelan state from accessing credit and from withdrawing its own money
and gold foolishly deposited in US and London banks. The Venezuelan corporate elite act
against the general population. You do not fully understand the situation.
Ethnonationalist stuff is ridiculous, it's stupid on the face of it, it's ridiculous,
I've said it from day one. Ethnonationalism is a dead end, it's for losers. Economic
nationalism and civic nationalism bind you together as citizens, regardless of your race,
regardless of your ethnicity, regardless of your religion
@Digital Samizdat Digital Samizdat -- As civic nationalism is no kind of nationalism and
presents no obstacle to race replacement, I imagine Jewry will be happy with it. Jewry will
also be happy that
Bannon the race realist ('It's been almost a Camp of the Saints-type invasion into
Central and then Western and Northern Europe') has been successfully neutered.
"... In February 2017, it was reported that Abrams was Secretary of State Rex Tillerson 's first pick for Deputy Secretary of State , but that Tillerson was subsequently overruled by Trump. Trump aides were supportive of Abrams , but Trump opposed him because of Abrams' opposition during the campaign. ..."
"... On January 25, 2019, Secretary of State Mike Pompeo appointed Abrams as the United States' Special Envoy to Venezuela ." ..."
There he was, right there on the stage to the right side of Secretary of State Mike Pompeo
who was briefing the press on America's position concerning the recent coup in Venezuela. I
rubbed my eyes -- was I seeing what I thought I was seeing?
It was Elliot Abrams. What was HE doing there? After all, back in February 2017, after
then-Secretary of State Rex Tillerson had pushed for his nomination as Deputy Secretary of
State, it was President Trump himself who had vetoed his appointment.
Here is how the anodyne account in Wikipedia describes it:
In February 2017, it was reported that Abrams was Secretary of State Rex Tillerson 's first pick
for Deputy Secretary of
State , but that Tillerson was subsequently overruled by Trump. Trump aides were
supportive of Abrams , but Trump opposed him because of Abrams' opposition during the
campaign. [emphasis mine]
Abrams during the 2016 campaign had been a NeverTrumper who vigorously opposed Donald Trump
and who had strongly attacked the future president's "Make America Great Again," America First
foreign policy proposals.
Abrams, a zealous Neoconservative and ardent globalist was -- and is -- one of those foreign
policy "experts" who has never seen a conflict in a faraway country, in a desert or jungle,
where he did not want to insert American troops, especially if such an intervention would
support Israeli policy. He was deeply enmeshed in earlier American interventionist miscues and
blunders in the Middle East, even incurring charges of malfeasance.
Apparently, President Trump either did not know that or perhaps did not remember Abrams's
activities or stout opposition. In any case, back in 2017 it took an intervention by a
well-placed friend with Washington connections who provided that information directly to Laura
Ingraham who then, in turn, placed it on the president's desk And Abrams' selection was
effectively stopped, torpedoed by Donald Trump.
But here now was Abrams on stage with the Secretary of State.
What was that all about?
Again, I went to Wikipedia, and once again, I quote from that source: " On January 25,
2019, Secretary of State Mike Pompeo appointed Abrams as the United
States' Special Envoy to Venezuela ."
Despite President Trump's resolute veto back in February 2017, Abrams was back, this time as
a Special Envoy, right smack in the department that President Trump had forbade him to serve
in. Did the president know? Had he signed off on this specially-created appointment? After all,
the very title "Special Envoy on Venezuela" seems something dreamed up bureaucratically by the
policy wonks at State, or maybe by Mike Pompeo.
Then there was the widely reported news, accompanied by a convenient camera shot of National
Security Adviser John Bolton's note pad (which may or may not have been engineered by him),
with the scribble: "5,000 troops to Colombia."
What gives here?
Last week suddenly there was a coup d'etat in Venezuela, with the head of the national
assembly, Juan Guiado, proclaiming himself as the country's new and rightful president, and the
theoretical deposition of then-current President Nicolas Maduro. And we were told that this
action was totally "spontaneous" and an "act of the Venezuelan people for democracy," and that
the United States had had nothing to do with it.
If you believe that, I have an oil well in my backyard that I am quite willing to sell to
you for a few million, or maybe a bit less.
Of course, the United States and our overseas intelligence services were involved.
Let me clarify: like most observers who have kept up with the situation in oil-rich
Venezuela, I heartily dislike and find despicable the socialist government of Maduro, just as I
did Hugo Chavez when he was in power. I have some good friends there, one of whom was a student
of mine when I taught in Argentina many years ago, and he and his family resolutely oppose
Maduro. Those socialist leaders in Caracas are tin-pot dictator wannabees who have wrecked the
economy of that once wealthy country; and they have ridden roughshod over the constitutional
rights of the citizens. My hope has been that the people of Venezuela, perhaps supported by
elements in the army, would take action to rid the country of those tyrants.
And, in effect, I wish for the success of Juan Guaido in his struggle with Maduro, and I
support American diplomatic and economic pressure on Maduro to step down. After all,
Venezuela is in our back yard with huge oil reserves.
But potentially sending American troops -- as many as 5,000 -- to fight in a country which
is made up largely of jungle and impassible mountains, appears just one more instance, one more
example, of the xenophobic internationalism of men like Bolton and the now state department
official, Abrams, who believe American boots on the ground is the answer to every international
situation. Experience over the past four decades should indicate the obvious folly of such
policies for all but the historically blind and ideologically corrupt.
While we complain that the Russians and Chinese have propped up the Maduro government and
invested deeply in Venezuela, a country within our "sphere of influence" in the Western
Hemisphere (per the "Monroe Doctrine") -- we have done the very same thing, even more
egregiously in regions like Ukraine that were integrally part of historical Russia, and in
Crimea, which was never really part of Ukraine (only for about half a century) but historically
and ethnically Russian. Did we not solemnly pledge to Mikhail Gorbachev, under George H. W.
Bush, that if the old Soviet Union would dissolve and let its some fourteen socialist
"republics" go their own way, leave the Russian Federation, that we, in turn, would not advance
NATO up to the borders of Russia? And then we did the exact opposite almost immediately go back
on our word and move our troops and advisers right up to the borders of post-1991 Russia?
From mid-2015 on I was a strong supporter of Donald Trump, and, in many ways, I still am. In
effect, he may be the only thing that stands in the way of a total and complete recouping of
power by the Deep State, the only slight glimmer of light -- that immovable force who stands up
at times to the power-elites and who has perhaps given us a few years of respite as the
managerial class zealously attempts to repair the breach he -- and we -- inflicted on it in
2016.
My major complaint, what I have seen as a kind of Achilles' Heel in the Trump presidency,
has always been in personnel, those whom the president has surrounded himself with. And my
criticism is measured and prudential, in the sense that I also understand what happens -- and
what did happen -- when a billionaire businessman, a kind of bull-in-the-china shop (exactly
what was needed), comes to Washington and lacks experience with the utterly amoral and
oleaginous and obsequious political class that has dominated and continues to dominate our
government, both Democrats and, most certainly, Republicans.
The wife of a very dear friend of thirty-five years served in a fairly high post during the
Reagan administration. Before her untimely death a few years ago, she recounted to me in stark
detail how the minions and acolytes of George H. W. Bush managed to surround President Reagan
and subvert large portions of the stated Reagan Agenda. Reagan put his vice-president
effectively in charge of White House personnel: and, as they say, that was it, the Reagan
Revolution was essentially over.
In 2016 a number of friends and I created something called "Scholars for Trump." Composed
mostly of academics, research professors, and accomplished professionals, and headed by Dr.
Walter Block, Professor of Economics at Loyola-New Orleans, and Dr. Paul Gottfried,
Raffensperger Professor of Humanities at Elizabethtown College, in Pennsylvania, we attempted
to gather real professed believers in the stated Trump agenda. We received scant mention
(mostly negative) in the so-called "conservative" press, who proceeded to smear us as
"ultra-right wingers" and "paleo-conservatives." And, suddenly, there appeared another
pro-Trump list, and that one composed largely of the same kinds of professionals, but many if
not most of whom had not supported Donald Trump and his agenda during the primary
campaigns.
What was certain was that many of the amoral time-servers and power elitists had decided
that it was time for them to attach themselves to Trump, time for them to insinuate themselves
into positions of power once again, no matter their distaste and scorn for that brash
billionaire upstart from New York.
Remember the (in)famous interview that the President-elect had with Mitt Romney who
desperately wanted to be Secretary of State? Recall the others also interviewed -- some of whom
we remembered as Donald Trump's opponents in the campaign -- who came hat-in-hand to Trump
Tower looking for lucrative positions and the opportunity once again to populate an
administration and direct policy? And, yes, work from within to counteract the stated Trump
agenda?
It would be too facile to blame the president completely: after all, the professional policy
wonks, the touted experts in those along-the-Potomac institutes and foundations, were there
already in place. And, indeed, there was a need politically, as best as possible, to bring
together the GOP if anything were to get through Congress. (As we have seen, under Paul Ryan
practically none of the Trump Agenda was enacted, and Ryan at every moment pushed open
borders.)
Our contacts did try; we did have a few associates close to the president. A few -- but only
a few -- of our real Trump Agenda supporters managed to climb aboard. But in the long run we
were no match for the machinations of the power elites and GOP establishment. And we discovered
that the president's major strength -- not being a Washington Insider -- was also his major
weakness, and that everything depended on his instincts, and that somehow if the discredited
globalists and power-hungry Neoconservatives (who did not give Trump the time of day before his
election) were to go too far, maybe, hopefully, he would react.
And he has, on occasion done just that, as perhaps in the case of Syria, and maybe even in
Afghanistan, and in a few other situations. But each time he has had to pass the gauntlet of
"advisers" whom he has allowed to be in place who vigorously argue against (and undercut) the
policies they are supposed to implement.
Donald Trump, for all that and for his various faults and miscues, is in reality the only
thing standing in the way of the end of the old republic. The fact that he is so violently and
unreservedly hated by the elites, by the media, by academia, and by Hollywood must tell us
something. In effect, however, it not just the president they hate, not even his rough-edged
personality -- it is what he represents, that in 2016 he opened a crack, albeit small, into a
world of Deep State putrefaction, a window into sheer Evil, and the resulting falling away of
the mask of those "body snatchers" who had for so long exuded confidence that their subversion
and control was inevitable and just round the corner.
President Trump will never be forgiven for that. And, so, as much as I become frustrated
with some of the self-inflicted wounds, some of the actions which appear at times to go
flagrantly against his agenda, as much as I become heartsick when I see the faces of Elliot
Abrams -- and Mitt Romney -- in positions where they can continue their chipping away at that
agenda, despite all that, I continue to pray that his better instincts will reign and that he
will look beyond such men, and just maybe learn that what you see first in Washington is
usually not what you'll get.
I cannot imagine a more evil person to be allowed back into govt than this man, who is
more evil than he looks.
It is over, in my mind, with the trump admin; nothing has been done about the long list of
crimes committed by the obama gang during the election and after. Nothing has been done about
seth rich, I would add michael hastings, and the long list of clinton "suicides" and the
clinton crimes. the list is endless with no progress.
The dimos in doj, fbi, etc have completely out-manuevered trump and he really has no junk
yard dog to protect him-guliani is a joke, even if he is sober as he claims to be.
Linh Dinh on this website (June 12, 2016) predicted both the election outcome and its
meaninglessness. He had by then, of course, been blackballed by Scholars, Inc., and is now
helping to run a recycling operation back in Vietnam. But he has emerged as one of the top
Unz columnists, most of his Heritage American attackers who couldn't see past their DNA
having slunk away.
Conversely, go read the comment thread under Mr. Buchanan's latest. People who used to
fall for the "we/us/our" conflation of their country and Uncle Sam are waking up, due largely
to the President in whom you still place your scholarly hope. We may not be scholars, but we
understand that the blood of people in places like Iraq, Libya, Syria, and soon enough
Venezuela is on the hands of those who endorse the warmongering imperialism of Exceptionalia.
Your scholarly enabling, such as:
"And, in effect, I wish for the success of Juan Guaido in his struggle with Maduro, and I
support American diplomatic and economic pressure on Maduro to step down. After all,
Venezuela is in our back yard with huge oil reserves."
is naive at best. As a scholar, did you support the "economic pressure" rationalized by
Secretary of State Albright that killed hundreds of thousands of Iraqis, many of them
children?
Those of you who still expect the Unz readership to give two sh ** s about Donald Trump or
anyone else in the Washington Puppet Show are fast losing your relevance around here.
Yup, Personnel is Policy; always has been. The scale of it all really precludes the kind of
benefit-of-the-doubt explanation the author struggles to formulate. It's not that Trump tried
to do the right thing but some war-hawks, jews, and Wall-Street shysters got through
regardless. Those were the only people that needed apply because Trump wasn't considering
anybody else. One simply has to conclude that the people that currently surround him are
indeed "his kind of people". And let's not forget that after a crash course in the realities
of government he replaced Tillerson and notorious torturer McMaster because they were not
hawkish, not pro-Israel, enough .
What evidence is there that your definition of "doing the right thing" coincides with
Trump's anyway. Yes he made some non-interventionist noises during the campaign, but that was
mostly during the primary before he'd kissed Adelson's ring in exchange for the shekels. But
he was also "a very militaristic guy" who was all for "taking the oil" and who nonstop hated
on Iran. Face it, it was just the Obama playbook: throw an incoherent mishmash to the proles
in the hope that they remember only those parts they liked.
Isn't Trump's CV rather more illuminating on who he is than his campaign rhetoric: casino
operator and pro-wrestling MC. He gets off on playing the rubes.
From mid-2015 on I was a strong supporter of Donald Trump, and, in many ways, I still
am. In effect, he may be the only thing that stands in the way of a total and complete
recouping of power by the Deep State
Donald Trump, for all that and for his various faults and miscues, is in reality the
only thing standing in the way of the end of the old republic.
.despite all that, I continue to pray that his better instincts will reign and that he
will look beyond such men, and just maybe learn that what you see first in Washington is
usually not what you'll get.
The US military has kept some 3000 soldiers in Columbia for years. Maybe that has grown to
5000, but Bolton's yellow pad note was a simple trick to fool simpletons. Invading Venezuela
would require at least 50,000 US troops.
Americans are quick to denounce socialists, especially those in the US military who thrive
in a socialist US military. Most Americans do not realize that their police, firefighters,
schools, most universities, roads, water, and electricity are products of socialism. If you
have an emergency in the USA, you dial 9-11 for socialists to help you. Everyone thinks that
is great!
From my blog:
Jan 27, 2019 – A Clumsy Slow Coup
Corporate America media has not reported basic facts about the attempted takeover of
Venezuela. The Deep State has tried to overthrow the popular, elected government of Venezuela
for a decade as it gradually nationalized its oil production. Several coup attempts failed so
the USA imposed sanctions to punish the people for voting wrong. Sanctions caused shortages
and inflation but the elected government remains in power.
In the past, the USA conducted coups by bribing Generals to conduct a quick military
takeover, and always denied participation. The Trump administration gave up on deception and
began a clumsy, slow coup. I suspect Trump's new CIA appointed attorney general told Trump
that he had the power to appoint foreign presidents, so last week he openly appointed a new
president for Venezuela. The Venezuelan army openly backs the existing president so nothing
changed. The UN did not recognize Trump's puppet president nor did any other major world
power. These facts do not appear in our corporate media, although the internet provides
reality via a Paul Craig Roberts article. (posted at unz.com)
Trump has now ordered other nations to send payments for oil purchases to a bank account
controlled by his new president. This infuriates foreign governments because they know oil
shipments will stop if they fail to pay the legitimate government of Venezuela, and oil
prices will rise worldwide as they scramble to buy oil elsewhere. Meanwhile, a massive
humanitarian and refugee crisis is building as the result of this economic embargo.
I do not know how the fracking is going in the winter. I have read somewhere, that yields
from fracking are going down. also that fracking companies are moving down to Texas.Also I do
not know the state of strategic reserves, But I definitely suspect that moves in Venezuela
were planed long before. so I have to presume that this is all about price of oil.
Trump quite a while ago, quite eagerly said something about moving on Venezuela.
Trump can be easily triggered by any economic subject by which US gains. But I do suspect
that in this case it could be economic necessity. (What would be a real shame.)
@Taras77 I agree Taras. Although I much enjoyed reading Boyd Cathey's essay, sadly, I
think he remains too optimistic. With the D's back in charge of the House, and the R's
impotent in the Senate, (McConnell as majority leader is a joke), Trump's stated agenda is
all over. He got nothing in his first two years besides the traditional GOP tax cut for the
rich. And he waited far too long to get serious about the wall. Yes, Koch-man Paul Ryan
opposed it, but surely Trump could have tried harder to get enough R votes to override him.
His only option now, unless Pelosi budges a little, would be to declare a National Emergency
on Feb 15. There is no way he could shut down the government again. Let's see how that goes.
However I disagree with Realist's comment. With Trump being attacked viciously on all
sides, I don't understand how anyone could think he is part of the Deep State. I think Victor
Davis Hanson got it right when he called Trump a "Tragic Hero."
Whoever believed that Trump will drain the swamp must feel disappointed. The US foreign
policy is run by the swamp now, like it always was. The US uses full range of classical
gangster tactics against Venezuela: blackmail, theft of assets, threats, etc. The US tries to
instigate yet another "color revolution" to bring yet another puppet to power in yet another
country. The only difference is, Maduro resists. But that's the difference in the victim
country, not in DC.
I do not know how the fracking is going in the winter. I have read somewhere, that yields
from fracking are going down. also that fracking companies are moving down to Texas.Also I do
not know the state of strategic reserves, But I definitely suspect that moves in Venezuela
were planed long before. so I have to presume that this is all about price of oil.
Trump quite a while ago, quite eagerly said something about moving on Venezuela.
Trump can be easily triggered by any economic subject by which US gains. But I do suspect
that in this case it could be economic necessity. (What would be a real shame.)
@Ilyana_Rozumova It is not clear whether you are saying that Trump is trying to raise or
lower oil prices.
If he wants to lower oil prices then why is he making it difficult for Iran to sell its
oil?
If he wants to raise oil prices then why does he want the big US oil companies in
Venezuela to sort out that country's oil business and raise exports?
I suspect he, and those around him, have no idea what they want to achieve. They are
simply trying to demonstrate their "power" and ability to change regimes. To give the Monroe
Doctrine a bit of oxygen. To scare the European vassals.
@Taras77 Correct, Trump is a member of the Deep State. Trump's election and big talk is a
charade. It is hard to believe anyone would not see Trump as a chimera after all his
bullshit.
Also I do not know the state of strategic reserves, But I definitely suspect that moves
in Venezuela were planed long before
Trump is doing the same thing he did in his businesses ..using 'other people's
money.assests' to cover his ass.
Now picture this ..sanctions on Iran, sanctions on Russia, sanctions on Venezuela + rising US
interest rates + a slowing economy + half of US oil reserves sold to cover government
spending.
Hope people get use to riding a bike when this perfect storm hits.
U.S. sells 11 million barrels of oil from reserve to Exxon, five other
firmshttps://www.reuters.com/article/us-usa-oil-reserve/u-s-sells-11-million-barrels-of-oil-from-reserve-to-exxon-five-other-firms-idUSKCN1LG2WT
WASHINGTON (Reuters) – Six companies, including ExxonMobil Corp, bought a total of 11
million barrels of oil from the U.S. Strategic Petroleum Reserve, a Department of Energy
document showed on Friday, in a sale timed to take place ahead of U.S. sanctions on Iran that
are expected to remove oil from the global market.
Sale of the oil from the reserve was mandated by previous laws to fund the federal government
and to fund a drug program, but the Trump administration took the earliest available time to
sell the crude under the law.
The sale's timing "would appear to reflect President Donald Trump's concern regarding oil
market tightness associated with the reinstatement of Iran oil sanctions," analysts at
ClearView Energy Partners said after the sale was announced on August 20.
@Carlton Meyer A slight correction is needed here. The UK, Germany, Israel and France has
signed onto this.
Just as all four of them were more than willing to help smash Libya to dust so they could
steal their oil fields and all that gold Gaddafi had hoarded up for his independent gold back
African currency.
I think what is happening in Venezuela is not an isolated event. It is connected to a broad
"connect the dots" South American strategy. The other dots are:
1) Bolsonaro's election victory.
2) Changes in structural relationship with Argentina, Chile, Colombia.
3) Cuba isolation.
4) Bolivia isolation.
5) And finally the recent unexpected dam collapse in Brazil, followed by IDF's offer to fly
in hundreds of soldiers to help.
S America is about to become the next Middle East (Syria). Weapons proliferation. War
profiting. Mass scale disruption. Already a profound refugee crisis. And all the traditional
war hawks there – with IDF leading the charge.
"And, in effect, I wish for the success of Juan Guaido in his struggle with Maduro, and
I support American diplomatic and economic pressure on Maduro to step down. After all,
Venezuela is in our back yard with huge oil reserves."
So in effect, you wish for the success of the globalists in their relentless struggle with
the concept of national sovereignty and the rule of law, and you support American imperialist
efforts to overthrow yet another democratically elected government, no matter how many people
have to die in the process. After all, the victim country is relatively close and its huge
oil reserves make for a reasonable pretext.
Venezuela, the Deep State, and Subversion of the Trump Presidency
Also on UR, link to,
Bolton: We're Taking Venezuela's Oil
Yesterday, Trump's National Security Advisor John Bolton made the US position clear in a
FoxNews interview: Washington will overthrow the Venezuelan
RON PAUL LIBERTY REPORT
@Johnny Rico "How many barrels a day does Venezuela pump?"
Something like 50,000 barrels per day. And pumped is perhaps the wrong word more like mined.
Venezuelan oil is locked up in surface tar sands along the Orinoco River and of very low
quality, rich in metals such as vanadium which catalyze sulfur into sulfuric acid rotting out
engines and turbines if not cleaned up. It is actually sold as a emulsion with about 25%
water to get the stuff to flow. The Canadian tar sands now produce something like 500,000
barrels per day. Try driving through the Alberta tar sands to see mommie earth ravaged
without conscience and birds murdered en masse landing on their vast polluted effluent ponds
but then the loathsome colonial denizens of our Canadian satrap to the north don't care as
long as we let them have a couple of hockey teams and legal pot.
Whoever believed that Trump will drain the swamp must feel disappointed. The US foreign
policy is run by the swamp now, like it always was. The US uses full range of classical
gangster tactics against Venezuela: blackmail, theft of assets, threats, etc. The US tries to
instigate yet another "color revolution" to bring yet another puppet to power in yet another
country. The only difference is, Maduro resists. But that's the difference in the victim
country, not in DC.
@Tyrion 2 Venezuela is under US sanctions that substitute for a medieval siege, and
Venezuela's comprador ruling class are Wall Street loyalists, not nationalists. The US is
trying to starve the population of Venezuela and economically ruin them wherein a US puppet
gov't will enable predatory Americans to buy coveted resources on the cheap. This usurpation
of int'l law and criminality was pulled off by Obama-Nuland-Soros in Ukraine in 2014. The
majority of Venezuelan 'deplorables' who are bearing the brunt of US sanctions know well what
Uncle Sham's man-on-the-ground Guaido is up to, and have, hopefully, organized and armed
themselves with rifles to defend their lives and property from invaders.
@Amon It's possible that Venezuela will be another Libya. But I question whether the US
Imperialists could get away with weeks of saturation bombing on a country in the same
hemisphere, just to its south. I find it hard to believe that the rest of South America would
take this lying down. Then there's the presence of Russia and China, who both have
substantial investments in the country. Will they just sit on their hands too?
With its jungles and mountains, any US invasion would be more like Vietnam, I think. This
could be, and I hope it is, a Bridge Too Far for the Empire. Empires always eventually
overreach.
But, bbbuuuttt, I thought we were gonna be energy independent and export oil all over the
globe. What need have we of some heavy crude in Venezuela if this forecast is at hand? Just
hedging the BS ya know.
Maduro and Chavez are as socialist as I am capitalism fan. They are indeed populist dictators
and regime is still capitalistic. They just rely upon lumpens and military to hold onto
power. Things wound not change for the better and probably for worse if coup succeeds though.
Now, it is neither USA nor author's business to interfere into other countries affairs as
Americans quite obviously only make things worse and what if when USA finally kicks the
bucket as United country others start interfering in USA affairs ? I actually see it coming
considering demographic and cultural realities on the ground in USA. Once $usd is gone as
reserve currency the process as Gorbachiv stated would start.
Last week suddenly there was a coup d'etat in Venezuela,
actually the use of the term coup d'etat is incorrect. A coup occurs when the military
disposes the government and replaces it with a military government.
This has not yet occurred. It has not yet been successful, what is actually happening is
the beginning of a civil war, the outcome which is not clear.
The situation bears a certain similarity with the beginning of the Syrian civil War.
If it follows the Ukrainian scenario like what took place in 2014, then I would expect
some type of situation where foreign mercenaries are employed to create divisions in the
population, like firing on the opposition supporters. It is highly likely that some sort of
false flag incident will be use to fire up the situation.
If the military were to revolt and replace it with civilian rule it would be called a
pronunciamiento
Trump just congratulated self-proclaimed US puppet Guaido in Venezuela. So, he can no longer
pretend to be an innocent bystander: he showed himself to be a willing participant in the
criminal activities of the swamp.
Three notes on the bright side. One, the Empire is getting ever more reckless, no longer
bothers even with fig leaves. That looks like an overreach typical of empires in their death
throws. Two, Maduro, despite his obvious failings, appears to be prepared to defend his
country against banditry. So, maybe he is not just a piece of shit, like Yanuk in Ukraine.
We'll see soon enough. Three, Erdogan, who the same gangsters tried to overthrow not too long
ago, remembers that and voiced his support of Maduro in no uncertain terms, despite Turkey
being a NATO member.
"... The news that the Saudis will cut even more production than specified in their recent pledge in hopes of raising world prices to $80 a barrel was an important part of last week's price jump. Hopes that the US and China would settle their trade dispute during on-going talks was also an important factor in the recent price jump. ..."
"... While the US economy has been bumping along nicely in recent months, the same is not true for the other major centers of economic power – China and Europe. ..."
Oil prices continued to climb last week and are now some $10 a barrel higher than they were
just before Christmas when recent lows were set. Prices now have retraced about 30 percent of
the $35 a barrel drop that took place between late September and late December. Part of the
recent price correction likely is due to technical factors such as closing out long positions
in the futures markets. The news that the Saudis will cut even more production than specified
in their recent pledge in hopes of raising world prices to $80 a barrel was an important part
of last week's price jump. Hopes that the US and China would settle their trade dispute during
on-going talks was also an important factor in the recent price jump.
Looming over the talk about OPEC+ production cuts and how fast US shale oil production might
grow are the prospects for the global economy. A major recession could drive the demand for oil
so low that even current prices would be difficult to maintain. While there have always been
people convinced that a major economic crash is in the offing, in recent weeks there has been a
noticeable increase in the number and stridency of these predictions.
While the US economy has been bumping along nicely in recent months, the same is not true
for the other major centers of economic power – China and Europe. The Washington Post
headlines that "Economic growth is slowing all around the world," citing declines in the equity
markets; sputtering German factories, and Chinese retail sales growing at their slowest pace in
15 years. Even Beijing is looking for its GDP to grow by 6-6.5 percent this year which is way
off from the heady days of double digits ten years ago.
Eurozone economic forecasts fell last Monday again after a survey of economists found that
GDP is expected to grow just below 1.6 percent this year, 0.4 percentage points lower than an
already conservative estimate from March. A new report from the World Bank, citing a variety of
data, including softening international trade and investment, ongoing trade tensions, and
financial turmoil concludes that "the outlook for the global economy in 2019 has darkened."
Among the darker forecasts for the future are those that speculate on a global depression on
the scale of the 1930s where GDPs fall by 10 to 25 percent. Others are saying that the global
economy may be approaching " The Limits to Growth " as discussed in the famous 1972
book.
... ... ...
Virendra Chauhan of Energy Aspects told CNBC last week that "$50 oil is not a level at which
US producers can generate cash flow and production growth, so we do expect a slowdown." In a
Bloomberg radio interview John Kilduff, founding partner of Again Capital Management, said "we
were getting into the zone where U.S. shale producers stop making money particularly when you
sort of add in all the costs, not just the pure say drilling and extraction. It's going to
start to get tough for them right now."
... ... ...
Iran : Iran's crude exports dropped to 1 million b/d in November from 2.5 million b/d
in April, taking exports back to where they stood during the 2012-2016 sanctions. According to
three companies that track Iranian exports, Tehran's crude shipments remained below 1 million
b/d in December and are unlikely to exceed that level in January. Tracking
... ... ...
Iraq : Baghdad posted its highest monthly export total to date in December and,
combined with Kurdistan, set a nationwide annual record of 4.15 million b/d -- more than
100,000 b/d above the previous record, set in December 2016. The government said on Friday it
is committed to the OPEC+ output-cutting deal and would keep its oil production at 4.513
million b/d for the first half of 2019
... ... ...
Saudi Arabia : According to OPEC officials, Saudi Arabia is planning to cut crude
exports to around 7.1 million b/d by the end of January in hopes of lifting oil prices above
$80 a barrel.
... ... ...
Libya: Tripoli plans to pump 2.1 million b/d of crude oil by 2021 if the security
situation improves, the chairman of the National Oil Corporation said last week. The plan would
represent a doubling of the current rate of production, which currently stands at 953,000
b/d.
... ... ....
4. Russia
Moscow has already lowered its oil output by around 30,000 b/d compared with October
volumes, which is used as the baseline under the latest OPEC/non-OPEC crude production
agreement. Russian energy minister Novak said Friday: "We are gradually lowering output; our
plan is that overall production in January will be 50,000 b/d less than in October."
"... Last year, oil production in Norway fell to 1.49 million barrels per day (bpd), down by 6.3 percent compared to the 1.59 million bpd production in 2017, the oil industry regulator, the Norwegian Petroleum Directorate (NPD), said in its annual report this week. Oil production this year is forecast to drop by another 4.7 percent from last year to reach in 2019 its lowest level in thirty years -- 1.42 million bpd, the NPD estimates show. ..."
"... However, the Norwegian oil regulator warned that "resource growth at this level is not sufficient to maintain production of oil and gas at a high level after 2025. Therefore, it is essential that more profitable resources are proven in the next few years." ..."
"... The industry's problem is that after Johan Sverdrup and Johan Castberg there haven't been major discoveries. ..."
Despite cost controls, increased efficiency, and higher activity offshore Norway, oil
production at Western Europe's largest oil producer fell in 2018 compared to 2017 and is
further expected to drop this year to its lowest level since 1988.
Last year, oil production in Norway fell to 1.49 million barrels per day (bpd), down by 6.3
percent compared to the 1.59 million bpd production in 2017, the oil industry regulator, the
Norwegian Petroleum Directorate (NPD), said in its annual report this week. Oil
production this year is forecast to drop by another 4.7 percent from last year to reach in 2019
its lowest level in thirty years -- 1.42 million bpd, the NPD estimates show.
As bad as it sounds, this year's expected low production is not the worst news for the
Norwegian Continental Shelf (NCS) going forward.
Oil production is expected to jump in 2020 through 2023, thanks to the start up in late 2019
of Johan
Sverdrup -- the North Sea giant, as operator Equinor calls it. With expected resources of
2.1 billion -- 3.1 billion barrels of oil equivalent, Johan Sverdrup is one of the largest
discoveries on the NCS ever made. It will be one of the most important industrial projects in
Norway in the next 50 years, and at its peak, the project's production will account for 25
percent of Norway's total oil production, Equinor says.
The worst news for Norway's oil production, as things stand now, is that after Johan
Sverdrup and after Johan Castberg
in the Barents Sea scheduled for first oil in 2022, Norway doesn't have major oil discoveries
and projects to sustain its oil production after the middle of the 2020s.
The NPD
started warning last year that from the mid-2020s onward, production offshore Norway will
start to decline "so making new and large discoveries quickly is necessary for maintaining
production at the same level from the mid-2020s."
In the report this week, NPD Director General Bente Nyland said:
"The high level of exploration activity proves that the Norwegian Shelf is attractive.
That is good news! However, resource growth at this level is not sufficient to maintain a
high level of production after 2025. Therefore, more profitable resources must be proven, and
the clock is ticking".
Norwegian oil production in 2018 was expected to drop compared to the previous year, but the
decline "proved to be greater than expected," the NPD said, attributing part of the production
fall to the fact that some of the newer fields are more complex than previously assumed, and
certain other fields delivered below forecast, mainly because fewer wells were drilled than
expected.
In October 2018, Germany's Wintershall
warned that its Maria oil and gas field off Norway was not fully meeting expectations due
to issues with water injection. Those issues haven't been solved yet, NPD's Nyland told
Reuters this week.
Exploration activity in Norway considerably increased in 2018 compared to 2017, with 53
exploration wells spud, up by 17 wells compared to the previous year. Based on company plans,
this year's exploration activity is expected to remain high and around the 2018 number of wells
spud, the NPD says.
The key reasons for higher exploration activity have been reduced costs, higher oil prices
lifting exploration profitability, and new and improved seismic data on large parts of the
Shelf, the NPD noted.
However, the Norwegian oil regulator warned that "resource growth at this level is not
sufficient to maintain production of oil and gas at a high level after 2025. Therefore, it is
essential that more profitable resources are proven in the next few years."
Norway still holds a lot of oil under its Shelf, and those remaining resources could sustain
its oil and gas production for decades to come. The industry's problem is that after Johan
Sverdrup and Johan Castberg there haven't been major discoveries.
According to the NPD's resource estimate, nearly two-thirds of the undiscovered resources
lie in the Barents Sea.
"Therefore, this area will be important for maintaining production over the longer term,"
the regulator said.
Operators on the NCS have made great efforts to try to make even smaller discoveries
profitable by hooking them to existing platforms and production hubs. However, these smaller
finds alone can't offset maturing production -- Norway needs major oil discoveries, and it
needs them soon , considering that the lead time from discovery to production is several
years.
Chinese crude oil imports up +9.9% higher in full year 2018 compared to FY 2017.
The month of December up +29.9% higher than Dec 2017
2019-01-14 OilyticsData
Another big crude import number from China (2nd consecutive month of imports above 10 MMB/D).
Low oil prices and startup of mega refineries such as RongSheng and Hengli is helping to keep
these numbers near record levels.(Source; GAC China)
Chart https://pbs.twimg.com/media/Dw3fk2GXcAUZ_Vu.jpg
Oilytics https://twitter.com/OilyticsData
Questionable, but still interesting perspective. Ignore marketing crap -- clearly there is marketing push within this presentation
-- she wants your subscriptions. "This is Main Street vs Wall Street" dichotomy sounds plausible. Neoliberalism is, in essence, is the
restoration of power of financial oligarchy.
But the idea of secret open bailout might explain why shale oil became so prominent despite high cost of producing it: Wall Street
was subsidised via backchannels for bringing price downand supporting shale companies by the US goverment
$21 trillion in "missing money" at the DOD and HUD that was discovered by Dr. Mark Skidmore and Catherine Austin Fitts in 2017
has now become a national security issue. The federal government is not talking or answering questions, even though the DOD recently
failed its first ever audit.
Fitts says, "This is basically an open running bailout. Under this structure, you can transfer assets out of the federal government
into private ownership, and nobody will know and nobody can stop it. There is no oversight whatsoever. You can't even know who is
doing it. I'm telling you they just took the United States government, they just changed the governance model by accounting policy
to a fascist government. If you are an investor, you don't know who owns those assets, and there is no evidence that you do. . .
. If the law says you have to produce audited financial statements and you refuse to do so for 20 years, and then when somebody calls
you on it, you proceed to change the accounting laws that say you can now run secret books for all the agencies and over 100 related
entities."
In closing, Fitts says, "We cannot sit around and passively depend on a guy we elected President. The President cannot fix this.
We need to fix this. . . . This is Main Street versus Wall Street. This is honest books versus dirty books. If you want the United
States in 10 years to resemble anything what it looked like 20 years ago, you are going to have to do it, and there is no one else
who can do it. You have to first get the intelligence to know what is happening."
Join Greg Hunter as he goes One-on-One with Catherine Austin Fitts, Publisher of "The Solari Report." Donations:
https://usawatchdog.com/donations/
Greg, with all due respect I don't you understand what CAF is saying. Forget about a dollar reset. The fascists, using
the Treasury, Exchange Stabilization Fund, HUD, DOD and any agency they choose, have turned the US government into a gigantic
money laundering operation. And they maintain two sets of books - the public numbers are a complete sham. Any paper assets held
by private citizens are not secure, are likely rehypothecated, and when convenient can be frozen or siezed by these fascists in
Washington. There is no limit to how many dollars the FED can create secretly and funnel out through the ESF/Treasury to prop
up and bail out any bank, black ops, pet project, mercenary army or paper assets they choose. The missing $21 trillion is probably
a drop in the bucket as there is no audit and no honest books for us to examine. In sum, all paper asset pricing in dollars is
a fraud and a sham. Any paper assets you think you own, whether it be stocks, bonds, or real estate are pure illusion: they can
be repriced or stolen at any time; in reality, you own nothing. To the man and woman on the street I say this: get out of paper,
get out of these markets and convert to tangibles in your physical possession - and do it secretly and privately, avoid insurances,
records, paper trails. This mass defrauding of the American people by this corrupt government in Washington will come crashing
down when the US dollar is displaced from reserve status; this is what China and Russia and the BRICS are setting the stage for:
world trade without the US dollar. When this happens, your dollars will become virtual toilet paper and all of your paper assets
will go poof.
"We have to fix this". Ok how does the individual fix this? Private armies are running around doing whatever private armies
do and I, the one man, is suppose to fix this. Please, will someone tell us what we are suppose to do, specific instructions not
a mix of large words that say " we must fix this", damn, we need a leader. Greg you ask almost every person you interview what
the middle class should be doing to protect themselves and you never get a "real" answer, just a dance around. Also you ask numerous
people what this coming change is going to look like and again, just silence or dance music, no answers. Damn we need a leader.
Your trying very hard to give us information that will help us weather the coming storm, so thank you for all you do, and you
do more than anyone else out there.
Question, why in part do I feel I am being lied to? Is it subscription hustle or is it, don't you believe your lying eyes!
Without knowing exactly what is what, anyone who would've watched Herbert Walker Bush's funeral with reactions from those who
received cards, whether they be Bush family, the Clintons, the Obamas and entourage. Jeb Bush went from being proud and patriotic
to panic like the funeral that he was at was for the whole family.
Joe Biden looked like he had a major personal accident and no way to get to the bathroom for cleanup.
George W. Bush after being asked a question, of which the answer was, "Yep" then proceeded to appear resigned and stoic! What
ever was on those cards essentially amounted to, for all those receiving a card, "the gig is up" and it appears they all damn
well knew it.
So, Catherine Austin Fitts, explain your, "Trump is colluding with the Bushies," I would say, that Canary in this mine of inquiry
is dead. I'm just an old disabled Vietnam vet of plebeian background and certainly not a revolving door Washington DC Beltway
patrician, so any explanation needs to be delivered in slow, logical step-by-step progression for I have not mastered the art
of selling the sizzle in hopes that the dupes will later pay for the steak. I prefer, Greg, when you actually get more combative
with Ms. Fitts. Make America, great again and do so, in the name of the Lord Jesus Christ, Amen.
35 min: Fitts gives a great synopsis of the problem. She never deviates in all of her interviews. greg doesn't seem to understand
at all. She repeats herself MULTIPLE TIMES and greg is still asking the same irrelevant PREPPER questions. IT DOES NOT MATTER
WHAT ASSETS YOU HOLD GREG, AND THAT INCLUDES GOLD!!!! WHEN YOU'RE EXISTING IN A TYRANNICAL SYSTEM THAT STEALS AT WILL FROM ITS'
CONSTITUENCY YOU CAN'T actually OWN ANYTHING!!!! lord! only so many ways to say
She lost credibility when she said Trump has "made a deal with the Bushes." That defies logic. The Bushes made a deal with
Trump! Trump has gained full control of the military with a $ 1 1/2 trillion war chest. Trump and Putin are putting the China
toothpaste back in the tube.
This woman clearly knows nothing about the plan..she has not even mentioned that the world bank president has resigned who
was appointed by obumma. And that is HUGE. She was in government in the corruption, but she doesn't know how things will be fixed..she's
not in that loop of current things in the new reset..shes coming from her own perceptions
This woman always make me sick to my stomach. She comes out and says a bunch of scary stuff and offers no solution. If it's
too much for just one person, then we the people need to take control. We don't need a central bank. We need local and state banks
like the Bank of North Dakota then we can migrate over to them and then shut down the Fed.
2019-01-11 (Bloomberg) Saudi and Canadian cuts are leaving world hungry for heavy crude
Refiners along the Gulf Coast and in the Midwest invested billions of dollars in cokers and
other heavy-oil processing units over the past three decades anticipating supplies of light
oil would become scarce while heavy crude from Canada's oil sands, Venezuela and Mexico would
grow. Instead, the opposite occurred.
The shale revolution, as well as new offshore supplies form Brazil and West Africa, caused a
surge of light oil, while supplies from Venezuela to Mexico declined. Canada's growth has
been stymied by delays in getting new pipelines built.
https://www.bnnbloomberg.ca/saudi-and-canadian-cuts-are-leaving-world-hungry-for-heavy-crude-1.1197259
India – Consumption of Petroleum Products (Without LPG or PetCoke)(kt/day)
December 2018 up +7.01% higher than December 2017
Average full year 2018 up +6.80% higher than full year 2017
Chart https://pbs.twimg.com/media/DwoYp5xWsAA_vRh.jpg
India Light Distillates Consumption (shown in chart)
Average full year 2018 up +9.74% higher than full year 2017
Chart https://pbs.twimg.com/media/DwoY_yjX4AA-S9K.jpg
India Middle Distillates Consumption
Average full year 2018 up +3.92% higher than full year 2017
You guys insist on continuing to think money isn't created from thin air by the Fed and
actually means something in the context of a substance that feeds you food. If you have to
have it, and you do have to have it, things will be done for you to get it. Borrowed money
that was created from thin air . . . who cares if you can't pay it back? You have to eat.
Consumption of oil is up. OPEC and Russia have reduced output. The price falls, because
there is no meaning to anything created from thin air when applied to something that depends
on physics.
You won't know anything until you find yourself sitting in a line waiting for gasoline.
You won't see it coming. You won't predict it. It will just happen someday.
Some truth to that Watcher. Simplistic thinking in investors. If we aren't making much money,
the US won't be making much money, so the price of oil must go lower. Not just simplistic,
flat out stupid.
And the number of people who think oil supply is limited is fairly scarce in relation to
the population as a whole. Probably less than the number of people who think chocolate milk
comes from brown cows.
America is now the largest producer of oil in the world. For the U.S., this is great news as
the dream of energy independence grows and maybe one day we can tell OPEC to go take a
hike.
However, while the shale oil revolution has helped change the energy landscape forever, we
cannot take shale for granted. We can't just assume that the industry can withstand any price
and that production can keep rising despite the market conditions. We can't assume that shale
oil producers can match OPEC production cuts barrel for barrel.
We also can't assume OPEC, weakened by falling prices of late, won't strike back like they
did in 2014. That's when OPEC declared a production war on U.S. shale producers. The then de
facto head of the OPEC Cartel Ali al-Naimi spoke about market share rivalry with the United
States and said that they wanted a battle with the U.S. There were no winners in that
production war. Ali al-Naimi was sacked as he almost bankrupted Saudi Arabia. It took its toll
on U.S. producers as well, as many were forced into bankruptcy despite making significant
progress on efficiency and cost cutting.
With 2019 underway, OPEC, along with Russia, agreed to remove 1.2 million barrels per day
off the market for the first six months of the year. Early reports on OPEC compliance to the
agreed upon production cuts is overwhelming at a time when there are new questions about how
shale oil producers are faring after this recent oil price drop.
Private forecasters are showing that there are major cuts in Saudi exports and even signs
that OPEC production is falling sharply. Bloomberg News confirmed that by reporting "observed
crude exports from Saudi Arabia fell to 7.253 million barrels per day in December on lower
flows to the U.S. and China." Furthermore, other private trackers believe that the drop may be
the biggest in exports since Bloomberg began tracking shipments in early 2017. Oil saw another
boost after Bloomberg reported that OPEC oil production had the biggest monthly drop in two
years falling by 530,000 barrels a day to 32.6 million a day last month. It's the sharpest
pullback since January 2017.
Rewind to 2017, there was talk that shale oil producers would make up the difference and the
cut would not matter, but that was proven wrong. This time expect the same because it is likely
that shale oil producers may have to cut back as the sharp price drop has put them in a bad
position. The Wall Street Journal pointed out that, even now, some shale oil wells are not
producing as much oil as expected. This coupled with a large declining production rate in shale
swells means that they need capital to keep drilling to keep those record production numbers
moving higher. "Two-thirds of projections made by the fracking companies between 2014 and 2017
in America's four hottest drilling regions appear to have been overly optimistic, according to
the analysis of some 16,000 wells operated by 29 of the biggest producers in oil basins in
Texas and North Dakota. Collectively, the companies that made projections are on track to pump
nearly 10% less oil and gas than they forecast for those areas, according to the analysis of
data from Rystad Energy AS, an energy consulting firm. That is the equivalent of almost one
billion barrels of oil and gas over 30 years, worth more than $30 billion at current prices.
Some companies are off track by more than 50% in certain regions" the Journal reported.
"While U.S. output rose to an all-time high of 11.5 million barrels a day, shaking up the
geopolitical balance by putting U.S. production on par with Saudi Arabia and Russia. The
Journal's findings suggest current production levels may be hard to sustain without greater
spending, because operators will have to drill more wells to meet growth targets. Yet shale
drillers, most of whom have yet to consistently make money, are under pressure to cut spending
in the face of a 40% crude-oil price decline since October."
Of course, none of this matters if we see a prolonged slowdown in the global economy, Demand
may indeed turn out to be the great equalizer. Yet if growth comes back, say if we get a China
trade deal or if they ever reopen the U.S. government, we will most likely see a very tight
market in the new year. The OPEC cuts will lead to a big drawdown in supply and shale oil
producers will find it hard to match OPEC and demand growth barrel for barrel.
"... 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. ..."
@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.
It is partially tied direct to the economy of the warmongers as trillions of dollars of
new cold war slop is laying on the ground awaiting the MICC hogs. American hegemony is
primarily about stealing the natural resources of helpless countries. Now in control of all
the weak ones, it is time to move to the really big prize: The massive resources of Russia.
They (US and their European Lackeys) thought this was a slam dunk when Yeltsin, in his
drunken stupors, was literally giving Russia to invading capitalist. Enter Putin, stopped the
looting .........connect the dots.
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.
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.
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?
"... 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...
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.
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.
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 .
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.
"... 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
"... 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
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
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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 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.
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.
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.
"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.
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.
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.
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.
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.
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.
"... "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.
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.
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.
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.
"... 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.
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.
"... 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.
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.
"... 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.
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.
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?
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.
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.
"... 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.
@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.
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.
"... 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.
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:
"... 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.
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.
"... The new 55-page "America First" National Security Strategy (NSS), drafted over the course of 2017, defines Russia and China as "revisionist" powers, "rivals," and for all practical purposes strategic competitors of the United States. ..."
"... The NSS stops short of defining Russia and China as enemies, allowing for an "attempt to build a great partnership with those and other countries." Still, Beijing qualified it as "reckless" and "irrational." The Kremlin noted its "imperialist character" and "disregard for a multipolar world." Iran, predictably, is described by the NSS as "the world's most significant state sponsor of terrorism." ..."
"Russia and China ... have concluded that pumping the US military budget by buying US bonds
... is an unsustainable proposition ..." Pepe Escobar 12,072
198
The new 55-page "America First" National
Security Strategy (NSS), drafted over the course of 2017, defines Russia and China as
"revisionist" powers, "rivals," and for all practical purposes strategic competitors of the
United States.
The NSS stops short of defining Russia and China as enemies, allowing for an "attempt to
build a great partnership with those and other countries." Still, Beijing qualified it as
"reckless" and "irrational." The Kremlin noted its "imperialist character" and "disregard for a
multipolar world." Iran, predictably, is described by the NSS as "the world's most significant
state sponsor of terrorism."
Russia, China and Iran happen to be the three key movers and shakers in the ongoing
geopolitical and geo-economic process of Eurasia integration.
The NSS can certainly be regarded as a response to what happened at the BRICS summit in Xiamen last
September. Then, Russian President Vladimir Putin insisted on "the BRIC countries' concerns
over the unfairness of the global financial and economic architecture which does not give due
regard to the growing weight of the emerging economies," and stressed the need to "overcome the
excessive domination of a limited number of reserve currencies."
That was a clear reference to the US dollar, which accounts for nearly two-thirds of total
reserve currency around the world and remains the benchmark determining the price of energy and
strategic raw materials.
And that brings us to the unnamed secret at the heart of the NSS; the Russia-China "threat"
to the US dollar.
The CIPS/SWIFT face-off
The website of the China Foreign Exchange Trade System (CFETS) recently
announced the establishment of a yuan-ruble payment system, hinting that similar systems
regarding other currencies participating in the New Silk Roads, a.k.a. Belt and Road Initiative
(BRI) will also be in place in the near future.
Crucially, this is not about reducing currency risk; after all Russia and China have
increasingly traded bilaterally in their own currencies since the 2014 US-imposed sanctions on
Russia. This is about the implementation of a huge, new alternative reserve currency zone,
bypassing the US dollar.
The decision follows the establishment by Beijing, in October 2015, of the China
International Payments System (CIPS). CIPS has a cooperation agreement with the private,
Belgium-based SWIFT international bank clearing system, through which virtually every global
transaction must transit.
What matters, in this case, is that Beijing – as well as Moscow – clearly read
the writing on the wall when, in 2012, Washington applied pressure on SWIFT; blocked
international clearing for every Iranian bank; and froze $100 billion in Iranian assets
overseas as well as Tehran's potential to export oil. In the event that Washington might decide
to slap sanctions on China, bank clearing though CIPS works as a de facto sanctions-evading
mechanism.
Last March, Russia's central bank opened its first office in Beijing. Moscow is launching
its first $1 billion
yuan-denominated government bond sale. Moscow has made it very clear it is committed to a
long-term strategy to stop using the US dollar as their primary currency in global trade,
moving alongside Beijing towards what could be dubbed a post-Bretton Woods exchange system.
Gold is essential in this strategy. Russia, China, India, Brazil & South Africa are all
either large producers or consumers of gold – or both. Following what has been
extensively discussed in their summits since the early 2010s, the BRICS countries are bound to
focus on trading
physical gold .
Markets such as COMEX
actually trade derivatives on gold, and are backed by an insignificant amount of physical gold.
Major BRICS gold producers – especially the Russia-China partnership – plan to be
able to exercise extra influence in setting up global gold prices.
The ultimate politically charged dossier
Intractable questions referring to the US dollar as the top reserve currency have been
discussed at the highest levels of JP Morgan for at least five years now. There cannot be a
more politically charged dossier. The NSS duly sidestepped it.
The current state of play is still all about the petrodollar system; since last year, what
used to be a key, "secret" informal deal between the US and the House of Saud, is firmly in the
public domain .
Even warriors in the Hindu Kush may now be aware of how oil and virtually all commodities
must be traded in US dollars, and how these petrodollars are recycled into US Treasuries.
Through this mechanism, Washington has accumulated an astonishing $20 trillion in debt –
and counting.
Vast populations all across MENA (Middle East-Northern Africa) also learned what happened
when Iraq's Saddam Hussein decided to sell oil in euros, or when Muammar Gaddafi planned to
issue a pan-African gold dinar.
But now it's China who's entering the fray, following through on plans set up way back in
2012. And the name of the game is oil-futures trading priced in yuan, with the yuan fully
convertible into gold on the Shanghai and Hong Kong foreign exchange markets.
The Shanghai Futures Exchange and its subsidiary, the Shanghai International Energy Exchange
(INE) have already run four production environment tests for crude oil futures. Operations were
supposed to start at the end of 2017, but even if they start sometime in early 2018, the
fundamentals are clear: this triple win (oil/yuan/gold) completely bypasses the US dollar. The
era of the petro-yuan is at hand.
Of course, there are questions on how Beijing will technically manage to set up a rival mark
to Brent and WTI, or whether China's capital controls will influence it. Beijing has been quite
discreet on the triple win; the petro-yuan was not even mentioned in National Development and
Reform Commission documents following the 19th CCP Congress last October.
What's certain is that the BRICS countries supported the petro-yuan move at their summit in
Xiamen, as diplomats confirmed to Asia Times . Venezuela is also on board. It's
crucial to remember that Russia is number two and Venezuela is number seven among the world's
Top Ten oil producers. Considering the pull of China's economy, they may soon be joined by
other producers.
Yao Wei, chief China economist at Societe Generale in Paris, goes straight to the point,
remarking how "this contract has the potential to greatly help China's push for yuan
internationalization."
The hidden riches of "belt" and "road"
An extensive report by
DBS in Singapore hits most of the right notes linking the internationalization of the yuan
with the expansion of BRI.
In 2018, six major BRI projects will be on overdrive; the Jakarta-Bandung high-speed
railway, the China-Laos railway, the Addis Ababa-Djibouti railway, the Hungary-Serbia railway,
the Melaka Gateway project in Malaysia, and the upgrading of Gwadar port in Pakistan.
HSBC estimates that
BRI as a whole will generate no less than an additional, game-changing $2.5 trillion worth of
new trade a year.
It's important to keep in mind that the "belt" in BRI should be seen as a series of
corridors connecting Eastern China with oil/gas-rich regions in Central Asia and the Middle
East, while the "roads" soon to be plied by high-speed rail traverse regions filled with
– what else - un-mined gold.
A key determinant of the future of the petro-yuan is what the House of Saud will do about
it. Should Crown Prince – and inevitable future king – MBS opt to follow Russia's
lead, to dub it as a paradigm shift would be the understatement of the century.
Yuan-denominated gold contracts will be traded not only in Shanghai and Hong Kong but also
in Dubai. Saudi Arabia is also considering to issue so-called Panda bonds, after the Emirate of
Sharjah is set to take the lead in the Middle East for Chinese interbank bonds.
Of course, the prelude to D-Day will be when the House of Saud officially announces it
accepts yuan for at least part of its exports to China.
A follower of the Austrian school of economics correctly asserts that for
oil-producing nations, higher oil price in US dollars is not as important as market share:
"They are increasingly able to choose in which currencies they want to trade."
What's clear is that the House of Saud simply cannot alienate China as one of its top
customers; it's Beijing who will dictate future terms. That may include extra pressure for
Chinese participation in Aramco's IPO. In parallel, Washington would see Riyadh embracing the
petro-yuan as the ultimate red line.
An independent
European report points to what may be the Chinese trump card: "an authorization to issue
treasury bills in yuan by Saudi Arabia," the creation of a Saudi investment fund, and the
acquisition of a 5% share of Aramco.
Nations under US sanctions, such as Russia, Iran and Venezuela, will be among the first to
embrace the petro-yuan. Smaller producers such as Angola and Nigeria are already selling
oil/gas to China in yuan.
And if you don't export oil but are part of BRI, such as Pakistan, the least you can do is
replace the US dollar in bilateral trade, as Interior Minister Ahsan Iqbal is currently
evaluating.
A key feature of the geoeconomic heart of the world moving from the West towards Asia is
that by the start of the next decade the petro-yuan and trade bypassing the US dollar will be
certified facts on the ground across Eurasia.
The NSS for its part promises to preserve "peace through strength." As Washington currently
deploys no less than 291,000 troops in 183 countries and has sent Special Ops to no less than
149 nations in 2017 alone, it's hard to argue the US is at "peace" – especially when the
NSS seeks to channel even more resources to the industrial-military complex.
"Revisionist" Russia and China have committed an unpardonable sin; they have concluded that
pumping the US military budget by buying US bonds that allow the US Treasury to finance a
multi-trillion dollar deficit without raising interest rates is an unsustainable proposition
for the Global South. Their "threat" – under the framework of BRICS as well as the SCO,
which includes prospective members Iran and Turkey – is to increasingly settle bilateral
and multilateral trade bypassing the US dollar.
It ain't over till the fat (golden) lady sings. When the beginning of the end of the
petrodollar system – established by Kissinger in tandem with the House of Saud way back
in 1974 – becomes a fact on the ground, all eyes will be focused on the NSS
counterpunch.
China and Russia been dumping US bonds for a good while.
They just have to do it slowly, so they can get as much cash, to buy stolen discounted
gold with from the British Anglo Zionist Empire, as possible without tanking the
market.
The Federal reserve, prints currency, "loans" it to USA corporation, at USURY rates,
gives this currency to other "sovereign" puppet states such as Belgium, who then act like
they are buying the bonds for themselves.
It is a scam. Those who trust the USA/British Empire, will wind up with worthless
paper, while the Usury bankers, their bosses, China and Russia, will wind up with
gold.
All you USA worshipers should understand something.
He who has the gold, makes the rules.
Guess the western sheep are going to be the bitc#s of China and Russia for the next
century or so.
Hey Tim or whatever. Yep you always win huh? Vietnam, Afghanistan, Libya, Syria,
Sudan, .ring any bells I could go on but you have been embarrassed enough with your msm
drivel. Always the weak and defenseless you lily livered chicken's. You better avoid war
with the two most powerful countries in the world. Can you guess? and neither are you
pedos and babykillers. You make me sick and disgusted. Voted again the most threat to
world peace. Ussa, ussa, ussa. Proud are ya all. The time is coming where you reap what
you have sown and on that day I shall dance my happy dance that you feel what you and
your evil countrymen have wrought in the world in the name of democracy and freedom hope
it is on cable! You rotten to the core people!
Here here, the US Holocaust, countless millions killed all over the globe as the USA
plunders, wars and props-up evil, despot regimes. Bin Laden, Taleban, just two of the US
former best allies, how long can a 200 year old, degenerate country like the USA keep
sponging-off/ using exploiting the worlds billions to enrich itself? USA... infested with
drugs, crime, rust belts, slums, homeless, street bums VAST inequality.
The Empire sells other peoples gold to China and Russia everyday, having stole and
sold Americans gold long since.
Works like this.
The not Federal, and no Reserve(s) dollar, is worth about 1 cent, of a 1913, pre Usury
criminal banker scam "dollar".
That 1 % is swiftly loosing it's value.
To keep the American people, from realizing, the USA, is using them for cattle, stealing
their labor, through planned hyperinflation,:
Israhell/Washington crime cabal, dumps massive amounts of "paper gold and silver", on the
market, each and every damn day the rigged market is open, in order to artificially keep
the price of gold and silver way the hell below where it should be priced in federal
reserve currency.
This hide s the true inflation rate of the not federal and no reserves private Usury
Banker Currency, falsely identified as the "US Dollar".
Israhell/Washington DC, does not have the physical gold and silver to cover what they
sell.
It is a criminal scam.
Those who buy this paper gold and silver, small guy, will never be given physical for the
paper.
Small guy, traded green paper for white paper. Either will be worthless soon.
Sovereigns, can buy enough of it, to demand delivery of physical.
The day the British Anglo zionist Empire defaults delivering physical gold, to China and
Russia, for the paper gold, is the day the curtain comes down on the illusion of the USA
financial empire.
Washington DC knows this, China knows this, Russia knows this.
In order to buy time, Israhell/Washington DC, has stolen, sold at hugely discounted
prices, to keep the dollar scam alive, just a while longer, all the gold they were
supposably storing for safe keeping, of other sovereigns.
They have stolen privately held gold, which was stored in commercial banks and vaults for
"safe keeping.
They stole the gold which went missing from the basement vaults in the world trade
centers, before they set off the demolition charges.
Then they sold it.
They stole and sold Ukraines gold.
They stole and sold, Libya's gold.
They had intended to have already stole and sold Syria's gold.
They are fast running out of other peoples gold, to deliver to China and Russia at huge
discounts, to prop up the scam, just a while longer.
The day there is no more stolen gold to deliver to China and Russia, the music stops, all
the chairs are removed, this game of musical chars is over. Starving Americans will eat
their pets, rats, and each other.
Thanks Israhell!
Thanks Washington DC/USA.
I want more information on this. Isabella said a similar thing. I want to know more...
So the U$T's that are in actual fact worthless, Russia is using to buy gold at a huge
discount to what should be the true market rate; and then Russia is storing this. I
understand the storing thing. I'm a straight forward kind-of-a-guy. But its the U.$.T.'s
to Physical Gold I can't get my head around.
Why is the U.$. honouring what is a knife-to-its-throat deal that is very soon going
to result in the collapse of the U.$. dollar? And according to this forum fully 20% of
Russia's reserves are still held in fiat U.$.T's..?
Why would Russia hold such a large percentage if its reserves in what will be
worthless U.$.T.'s when it knows that the U.$. is going to try and scam Russia and
default..?
Picture a crime family.
Some branches are pure evil.
Some not so evil.
Some are very open about their evil.
Some are sneaky hypocrites who use the news media to white wash their crimes, and vilify
their victims.
BUT! And this is one huge BUT, they all know too much on each other to start talking
too damn much.
Also, their criminal Empire, (shearing/raping/murdering the sheep for fun and profit) is
all tied together. Common banks, common/interchangeable fiat currencies, Usury debt
practices.
Take part of it down, the other part will suffer great losses, if not go down with
them.
Russia, and China, has gotten tired of the British Anglo zionist Empire lording it over
them and treating them like red headed step children.
Russia and China, have not seen the Light, are not operating for the sake of their
people, but to keep themselves in power, by returning to the people, some of the wealth
they stole from the people to begin with
British Anglo zionist pig fkers Empire, is too greedy to return any of the stolen
loot.
The BAzE, have a let them eat grass like the animals they are elitist attitude.
China and Russia, are trying to position themselves to come out on top when the economic
reset happens.
They both were FORCED, by Empire, to both buy and hold, huge stashes of both Federal
reserve fiat currency, and bonds, to do business in the rest of the world.
The USA military is the enforcement arm for the BAzE.
USA military is corrupted, demoralized, veterans fked over royally, weapons do not work
as their purpose, was to steal the labor of the American working man and women, not to
produce weapons which worked as advertised.
Russia and China, will continue to buy gold, buy time, to get in a better position to
give Uncle Sugar's pedophilic ass both middle fingers.
It is in their interest to do so.
The owners of the British Anglo zionist Empire, have their personal vaults filled with
stolen gold.
The politicians you see, the Rothschild's even, are window dressing to hide the true
owners, and to protect the true owners asses during slave revolts, by offering, kings,
queens, politicians, bankers, heads to get chopped.
These owners have no loyalty to any other person, or country in the world. They see
themselves as the chess players, humanity as the pieces, the earth as their personal
chess board.
They do not give a FF about America, the American people, or the hand puppet political
whore of DC/USA.
The hand puppet whores, are too stupid, and corrupt anyway, to understand whats coming,
or to have the power, intelligence, or balls to stop it
There are all kinds of fun and wealth created, for deviant sick bastards, in creating,
and tearing down empires.
Besides, all the death and destruction gets them sexually excited
Takes years of study, experience with, and intuition, to begin to understand their evil,
and the way the world really works.
Whether someone started years back, educating themselves, preparing for whats coming,
will determine if they will enter the kill zone as a sheep or not.
The only protection sheep have, is the hope, the jackals will rape and murder some other
sheep, not them. That is why they will not stand up or speak up.
That is why they violently attack anyone wants to leave the herd mentality, everyone else
forced to be in the same sheep state as them,
They are afraid the jackal will notice them individually.
Herd numbers and hiding in the herd, are the cowards only protection
Any day now, any week, not very many months, can the scam go on.
In other words, Americans might want to bone up on delicious recipes for Rats, cats, and
their neighbors.
re: "China and Russia been dumping US bonds for a good while.
They just have to do it slowly, so they can get as much cash, to buy stolen discounted
gold with from the British Anglo Zionist Empire, as possible without tanking the
market."
I have been reading this for a while. But I've yet to see it in practice. Rosneft is
still accepting U.$. dollars for oil/gas transactions, the most recent of which I believe
was the gas shipment from St Petersburg to Poland..?
https://tomluongo.me/2017/1...
What you buy by petrodollars ?
Saudi .Arabia buys arms. But SA has got millions of unemployed people , because they
studied Islamic religion , wahabist fanaticism ... Further SA employs millions of workers
from other countries. And owns US assets in value over 1 trillion dollars. So what else
to buy , where to spend their petrodollars? Only get billions dollars arms ,that are in
couple years useless...Population hate the fully corrupt royal family in numbers
approximately 40 thousands princess as they have to get about 500 thousands yearly
salaries...For doing nothing , only to spend it everywhere...
Populations hate US presence in SA. Very much.
But the Great Satan~USA adore such scum as the vile Crooked Saudi royal family, the
snakehead USA ignore all their anti-democracy, anti- human rights their beheading, their
evil ways, they worship money the US swine, its all they see and lap-up, plus they have
Russia/ China /Iran to pick on and blame not their evil Saudi- swine arms buyers.
View
Hide
At the moment, because the US is illegally holding gold prices down using uncovered
shorts on paper gold, and at the same time has used sanctions to devalue the rouble,
Russia is producing oil at reduced - rouble - rates, selling it on the international
market for U$, [artificially inflated] and buying massive amounts of cheap gold with the
huge profits she is making.
Russia is singing all the way to the bank right now. The US backed itself into a corner
on this one it cannot get out from - short of waging war on Russia !!!
Why should anyone who is in love with gold be upset if someone is holding the price
down? It should be a wonderful time to buy.
Russia is MINING gold, its own gold.
It is a great time to buy, if you have some spare cash to store, I agree. It's just a
poor time if you need to realise your gold - you wont get the price for it you should.
But indeed, it's a buyers market. Yes, Russia has a fair bit of gold "reserves" just
sitting in the ground.
There is the face the beast lets you see, and the real face of the beast.
You do not think the beast is stupid enough to show it's real face to all the sheep?
Really?
The sheep who are given personal attention in private places, see the real face of the
beast, because it sexually excites the beast for the chosen sheep to die bleating in
terror.
Guess you just got here you friggin troll. You know nothing you shill. Go back to the
basement mom has brought you dinner and cookies n milk and let the grown men talk, now
that is a good boy bye. Sorry John I have disappointed my Mom said be nice but idiots
bother me. Say hi to your lovely Mom for me and God bless. Merry Christmas everyone! Got
your back as always.
Glad you are so confident in the currency, which has lost 99% of it's buying power
since 1913, when the not Federal and no Reserve(s) was forced on the American people by
the Usury Banker ancestors of the owners of the 'Fed", buying USA politicians.
Where did that 99% value go?
To the I%ters. You know, the pedophile elite.
They want it all, they are coming for the other 1% of the "dollar's" value.
They are coming for Social security, government pensions, private pensions, checking
accounts, any thing with any value.
Oh by the way, just cause you are ignorant of how things work, don't mean they don't
work that way, just means you are ignorant.
Have a wonderful day now!
See mother, i was nice to the bad person who was trying to run interference for pedophile
baby rapers.
Good to see someone else Awake! A good portion of the Sheep are still sleeping, they
think the National Debt and Zero Interest Rates mean nothing (in the Eurozone Interest is
Negative). The US Dollar is soon to be Toilet Paper! Our Military can only overthrow
small countries that defy the PetroDollar system. Now with so many doing it, John
Carleton is right, the National Debt and Retirements Accounts are basically equal. That
is why Obutthead set the start of grabbing them by creating the MYRA, the Theory is the
Sheep are to stupid to manage their own retirement accounts, so the Government would grab
them and put them in a so called safe investment called "Treasury's". Unfortunately the
SS Trust Fund has been raided and is broke, but they do have drawers full of Treasuries.
Trump has to immediately open public lands for Mining & Drilling! A normalization of
Interest Rates to 5-6% would consume Government Revenues just to pay Interest on the
Debt!
Will work like this, they may already be doing it quietly.
Take private pensions.
They are already in trouble, having stocks, bonds, commercial real estate holdings.
All of these will become worthless, or close to it.
Anything with value, currency, decimal dollars, will be taken by the Washington thieves,
and worthless US bonds which will probably never be redeemed, or redeemed for chump
change, will be put in their place by Washington, as they "protect" the retirement
accounts.
Old people will eat rats, each other, dog and cats, die without medical care and meds
which they can not afford.
Some will eat their pistols.
Not going to be nice or orderly.
'Frankland Coverup Sex Scandal,
(pedophile prostitution ring being run out of Reagan's White House)
http://www.johnccarleton.or...
All pedo's, should be given a fair trial, and a fair hanging. A pedophile which was
given a fair trial, and a fair hanging, never again, raped a child.
Amazing how that works.
Correct and very easy at any given moment to be converted in a GOLD.Just follow
dynamic Russia and China buying GOLD on a world market and everything will be clear to
you
While all eyes are on the oil price and the ruble to dollar rate, the Central Bank of
Russia has quietly been buying huge volumes of gold over the past year. In January, 2016,
the latest data available, the Russian Central Bank again bought 22 tons of gold, around
$800 million at current exchange rates, that, amidst US and EU financial sanctions and
low oil prices. It was the eleventh month in a row they bought large gold volumes. For
2015 Russia added a record 208 tons of gold to her reserves compared with 172 tons for
2014. Russia now has 1,437 tonnes of gold in reserve, the sixth largest of any nation
according to the World Gold Council in London. Only USA, Germany, Italy, France and China
central banks hold a larger tonnage of gold reserves.
Notably also, the Russian central bank has been selling its holdings of US Treasury debt
to buy the gold, de facto de-dollarizing, a sensible move as the dollar is waging de
facto currency war against the ruble. As of December, 2015, Russia held $92 billion in US
Treasury Bonds down from $132 billion in January 2014.China bought another 17 tons of
gold in January and will buy a total of another 215 tons this year, approximately equal
to that of Russia. From August to January 2016 China added 101 tonnes of gold to its
reserves. Annual purchases of more than 200 tons by the PBOC would exceed the entire gold
holdings of all but about 20 countries, according to the World Gold Council. China's
central bank reserves of gold have risen 57% since 2009 acording to data the PBOC
revealed in July, 2015. Market watchers believe even that amount of gold in China's
central bank vaults is being politically vastly understated so as not to cause alarm
bells to ring too loud in Washington and London.
Dude stop your only making yourself look stupid by opening your gob and proving or in
this case writing. Merry Christmas or is it happy Hanukkah? Troll boy.
alexwest11 You are stupid ! a flat or house is real money you know ! They are
uneducated in Rothschild finance! are you a russlanddeutsche! or jew from holy ukraine
like poroschenko ?
Russia National Debt: $194,545,062,334
Interest per Year $12,805,556,000
Interest per Second $406
Debt per Citizen $1,330
Debt as % of GDP 19.32%
GDP $1,007,000,000,000
Population 146,300,000
Russia is one of the largest Countries by land mass with a sparse population after the
breakup of the Soviet Union. They run very low deficits and their National Debt is very
low, they are one of the Countries that is best prepared for a major economic crash.
oncefiredbrass alexwest11 • 28 minutes ago Russia
is one of the largest Countries by land mass with a sparse population
after the breakup of the Soviet Union. They run very low defic
--------
but facts say quite opposite!!!!!!!!
during oil selloff of 2008*9 Russian ruble fall 50%, from 23 to 37 per$
during oil selloff of 2014*15 Russian ruble fall 250 %, from 33 to almost 90 per$
right now its about 60 per $ , still 100% devaluation from 2014
-------
i don't remember $ fall against euro or yen during 2000 or/and 2008 crises in USA
The fall of the Ruble was an attack or sanction by the Obama Regime over Ukraine. Why
not trying to look up the Debt to GDP ratio for Russia and then the US and then ask
yourself what economy is actually in a better position to withstand a Depression. Russia
almost has enough Gold to back all their currency. How much gold would it take to back
all the Treasuries and Dollars that the US has spread all over the world?
Hey let the grown men talk baby boy! You are spouting msm talking points you're trying
to debate the choir about hymns. Your not going to make anyone here see the light because
you have no truths behind or in front. Msm drivel. One simple question! Who took Berlin?
In ww2 of course!
Me too. The U.S. has become the evil empire. The bully on the world stage stealing
everyone's lunch money. I know it will devastate us in Canada, but I would still rather
see the U.S. economy crumble if it would cripple their war machine, than to see this
situation go on. Ron Paul was right: Instead of war, why not pursue peaceful trade? But
the U.S. controllers want everyone else under their thumb as obedient serfs. It is evil.
And as Smedley Butler so bluntly put it "War is a Racket"! He said this because he was
sent to war with Guatemala on behalf of the United Fruit Company, aka Chiquita Brands
International. This time, they are trying to steal the lunch money from those who can
defend themselves. We aren't going to sit on our couch watching this war on TV, because
we will watch it out our front windows.
"... Old "classic" land-based oil fields deteriorate to the tune of 5% per year, while deep sea deteriorate more and subprime wells much more. You can probably double the figure for each, although much depends on particular geology. Infill drilling accelerates depletion, allowing to maintain high production for sometimes so changes can be abrupt. ..."
"... Moreover, with each year, "subprime wells" (multi-stage shale well) costs more and now are at a range of n 6-10 million depending on the number and the length of horizontals and number of fracking stages and other factors. Only few area (sweet spots) can recover this capital investment during the life of the shale well at current prices). More at around $80 and almost all around $100 per barrel. The later is also the price that KSA needs to remain solvent (rumored to be in low 90th). ..."
"... The shale oil produced in the USA is really "subprime" because large part of it has lower energy content (by 20% or more) and different mix of various hydrocarbons that "classic" oil. Especially condensate from gas wells. Which optimally can be used only as diluter for heavy oil. EIA does not differentiate between different types oil and use wrong metric (volume instead of weight). May be intentionally. ..."
"... Another factor is that world consumption continue to grow and will do so because population in large part of Asia and Africa is still growing and number of cars on the road increase each year requiring on average 1-1.4 MB/d additionally. ..."
"... By continuing its' easy money policies well past any recession or growth scare, the Fed has created a monster. Most shale companies aren't profitable and are in fact losing money using any kind of GAAP. However, cheap financing allows them to survive and "drill baby drill." The unintended consequences may include destabilizing Saudi Arabia to the point of an economic and political collapse. One can always hope ..."
"... Economic collapse in Venezuela due to low oil prices – good! Economic collapse in Saudi Arabia due to low oil prices – bad! Solution – extend cheap financing to Saudi Arabia via Aramco IPO! ..."
"... The 36″ North Sea Forties pipeline is currently shut down for repairs. Short and medium term prices will carry the effect of that supply loss. In the long term, unexpected developments are common. Considering how completely wrong so many oil analysts have been over the past ten years, including the IEA, there is not a lot of credibility in oil market predictions. ..."
My impression is that this a gap (could be intentional) between IEA statistics and predictions and the reality. This is propaganda
agency after all, with the explicit agenda of keeping the oil price for Us consumers low. So typically that produce too "rosy"
forecasts that later are quietly corrected. Their short-term forecasts are based on oil futures and as such has nothing to do
with the reality on the ground. Which is quite disturbing.
It is undeniable that shale boom which played such a beneficial role for the USA allowing to squeeze oil price (with generous
help from KSA) for two and half years is dead.
Now is kept artificially alive by junk bonds and directs loans that will never be repaid. In other words, the USA now enjoys
a period of "subprime oil. Unless there is a new technological breakthrough there will be an only minor improvement in efficiency
of drilling and oil extraction in the next couple of years, but the lion share of those was already implemented, and on the current
technological level we are close to the "peak efficiency" in drilling and services.
Those minor efficiencies will be negated by rising prices of service industries, which can't take the current pricing any longer
and need to raise prices for their services.
Old "classic" land-based oil fields deteriorate to the tune of 5% per year, while deep sea deteriorate more and subprime
wells much more. You can probably double the figure for each, although much depends on particular geology. Infill drilling accelerates
depletion, allowing to maintain high production for sometimes so changes can be abrupt.
In any case each year you need somehow to find 5 MB/d of oil, finance new wells in those areas and infrastructure required.
All Us shale production is around 6 MD/day. So you get the idea.
Moreover, with each year, "subprime wells" (multi-stage shale well) costs more and now are at a range of n 6-10 million
depending on the number and the length of horizontals and number of fracking stages and other factors. Only few area (sweet spots)
can recover this capital investment during the life of the shale well at current prices). More at around $80 and almost all around
$100 per barrel. The later is also the price that KSA needs to remain solvent (rumored to be in low 90th).
The shale oil produced in the USA is really "subprime" because large part of it has lower energy content (by 20% or more)
and different mix of various hydrocarbons that "classic" oil. Especially condensate from gas wells. Which optimally can be used
only as diluter for heavy oil. EIA does not differentiate between different types oil and use wrong metric (volume instead of
weight). May be intentionally.
So the future remains unpredictable but general trend for oil prices might be up with some spikes, not down. Although many
people, including myself, thought so in early 2015 ;-)
Another factor is that world consumption continue to grow and will do so because population in large part of Asia and Africa
is still growing and number of cars on the road increase each year requiring on average 1-1.4 MB/d additionally.
So it looks like the situation gradually deteriorate despite all efforts and related technological breakthrough which allow
to extract more from the old wells and more efficiently extract shale oil.
The problem is that new large deposits are very hard to find now and several previously oil-exporting countries gradually became
oil-importers. Mexico is one, which will be huge hit.
Obama administration screw the opportunity to move US consumers to hybrid cars so the situation in the USA deteriorates too
despite rise of percentage of more economical vehicle in the personal car fleet each year. Rumors were that they pursue vendetta
against Russia and that was primary consideration - to crash Russian economy and install a new "Yeltsin".
The USA generally is in better position then many other countries as the switch to natural gas and hybrid electric cars for
personal transportation is still possible. It already happened in several European countries for selected types of cars, buses
and trucks (taxi, in-city buses and "daily round trip or short trips trucks).
But there is no money for infrastructure anymore and for example many miles of US rail remain non-electrified. Burning diesel
instead.
As maintenance was neglected for two and half year disruption of existing supply might became more frequent. also mid Eastern
war is also a possibility with Trump saber-rattling against Iran. Recently the leak in undersea pipeline removed 0.5 MB/d from
the market and caused a price spike to $65 for Brent (WTI remains cheaper and never crosses $60 this time).
Also with a young prince in charge and the revolution against "old guard" KSA became more and more unstable so the next "oil
shock" might come from them. They also have problem of depletion which until now they compensated pitting more and more heavy
high sulfur oil deposits online. At some point they will be exhausted too. They also pitch for war with Iran, but they would prefer
somebody else to do heavy lifting.
The only one or countries still can significantly increase oil production now – Libya (were we have problem because of the
civil war after US-sponsored Kaddafi removal and killing), and Iraq where there are still untapped areas that might contain some
oil; nothing big, but still substantial in the range of 1 MB/d. Looks like Iran now exports all it could. Same is true for KSA
and Russia. In this sense OPEN oil production cuts might an attempt to preserve impression that they are untapped reserved. I
doubt that there are much and those cuts are just a reasonable insurance policy against quick depletion of existing wells as higher
price gives some space for innovation.
There is also such thing as EBITRA which gradually deteriorates everywhere and can become negative for certain types of oil
(for oil sands it depends on the price of natural gas and they are primary candidate if the price doubles or triples from the
current level).
By continuing its' easy money policies well past any recession or growth scare, the Fed has created a monster. Most shale companies
aren't profitable and are in fact losing money using any kind of GAAP. However, cheap financing allows them to survive and "drill
baby drill." The unintended consequences may include destabilizing Saudi Arabia to the point of an economic and political collapse. One
can always hope
Economic collapse in Venezuela due to low oil prices – good!
Economic collapse in Saudi Arabia due to low oil prices – bad!
Solution – extend cheap financing to Saudi Arabia via Aramco IPO!
Meanwhile, China says it will be moving to all-electric cars and trucks to help solve its horrible urban air pollution problem.
. . Meaning global demand has nowhere to go but down.
Why do I feel that this will not end well for the American hegemon? Particularly with Trump in office working overtime with
boy genius Rick Perry to promote coal and sabotage renewable energy. . .
The 36″ North Sea Forties pipeline is currently shut down for repairs. Short and medium term prices will carry the effect of
that supply loss. In the long term, unexpected developments are common. Considering how completely wrong so many oil analysts
have been over the past ten years, including the IEA, there is not a lot of credibility in oil market predictions.
"... The fact is that the rise of the West to global dominance is due to a historical anomaly. It was fuelled (literally) by the discovery and harnessing of the chemical energy embedded in coal (late 18thC) and then oil (late 19thC). The first doubled the population, and as first movers gave the West a running start. The second turned on the afterburners, and population grew >3.5 fold. Again the West led the way. To fuel that ahistorical step-function growth curve, control of resources on a global scale became its civilizational imperative. ..."
From Patrick Armstrong's article (a good one, by the way):
A Russian threat is good for business: there's poor money in a threat made of IEDs, bomb
vests and small arms. Big profits require big threats.
Actually, I'd say the Russian threat is necessary to keep the Europeans too
frightened to protest while the U.S. steals wealth from them. After all, when the U.S.
imports goods and "pays" for them with printed money, it is basically stealing those goods.
The U.S. is draining a lot of wealth from Europe (like $150 billion a year), so something
must be done to keep them docile. Russia's perfect for that.
"(Failed) West and a multipolar Rest". The latter is what I think will actually happen
in the near and medium term.
I think we already have it, except I don't think West has failed yet. Or it has in a way,
the process of failing goes on, but the consequences have not been felt much in the West
yet.
Well, exogenous events aside, "decline and fall" is necessarily a process. A
series of steps and plateaus is typical. A major step occurred in 2007/8, when the money
failed. The bankers, in a frankly heroic display of coordination, propped up the $$$ and the
West got a decade long plateau. Things are going wobbly again, financially speaking and I
suspect the next step function to occur rather soon. Stays of execution have been exhausted, so
it'll be interesting how the West handles it, and how the RoW reacts.
Europeans have been invited to join the Eurasian Project, to create a continental market from
"Lisbon to Vladivostok". Latent dreams of Hegemony hold at least some of their elites back. The
USA has also been invited, but its dreams remain much more virile. That is, until Trump who's
backers seem to read the writing on the wall better than the Straussians.
I don't see any other power than the West (=US) aspiring to 'manage the world'....
The other 'powers' have very modest, regional aspirations... US seems to be obsessed with it.
The fact is that the rise of the West to global dominance is due to a
historical anomaly. It was fuelled (literally) by the discovery and harnessing of the chemical
energy embedded in coal (late 18thC) and then oil (late 19thC). The first doubled the
population, and as first movers gave the West a running start. The second turned on the
afterburners, and population grew >3.5 fold. Again the West led the way. To fuel that
ahistorical step-function growth curve, control of resources on a global scale became its
civilizational imperative.
That growth curve has plateaued, and the rest of the world has caught/is catching up
developmentally. The resources the West needs aren't going to be available to it in the way
they were 100 years ago. Them days is over, for everybody really, but especially for the West
because it has depleted its own hi-ROI resources, and both of its means of control (IMF$ System
& U$M) of what's left of everybody else's are failing simultaneously. So its plateau will
not be flat, or not flat for long between increasingly violent steps.
The West rode an ahistorical rogue wave of development to a point just short of Global
Hegemony. That wave broke, and is now rolling back out into the world leaving the West just
short of its civilizational resource requirements. No way to get back on a broken wave. In any
case, China now holds the $$$ hammer, and Russia holds the military hammer, and they've now got
the surfboard. Both of them, led by historically aware elites, know that Hegemony doesn't work,
so will focus on keeping their neck of the woods as stable & prosperous as possible while
hell blazes elsewhere.
What is really going on is that West has over-reached and can barely handle its own
problems.
IMHO, what's really going on is that the West's problems are simply symptomatic of
what "decline and fall", if not "collapse" looks like from within a failing system. A long time
ago I read the diary of a Roman nobleman who in the most matter-of-fact style wrote of exactly
the same things Westerners complain about today. How this, that or the other thing no longer
works the way it did. For all of his 60+ years, every day was infinitesimally worse than the
day before, until finally he decides to pack up his Roman households and move to his estates in
Spain. It took 170(iirc) more years of continuous decline until Alaric finally arrived at the
Gates of Rome. If wholly due to internal causes, collapse is almost always a slow motion train
wreck.
...
'there would be a vacuum' and 'Russians would move in'. This is obvious nonsense and only
elderly paranoid Cold Warrior types believe it (peterAUS?).
Actually, it's just stupid. Cold Warrior or not, the view betrays a deep and
abiding ignorance of both history and a large part of what drove the West's hegemonic
successes. That both militate against anyone else ever even trying such a thing on a global
scale can't be seen if you look at historical developments and the rest of the world through
10' of 1" pipe.
The idea that Russia wants/needs the Baltics is even more laughable than that it wants/needs
the Ukraine or Poland. None of these tarbabies have anything to offer but trouble. Noisome
flies on an elephant, it is only if they make themselves more troublesome as outsiders than
they would be as vassals would Russia move.
"... Carrying Capacity : Carrying capacity is a well-known ecological term that has an obvious and fairly intuitive meaning: "the maximum population size of a species that the environment can sustain indefinitely, given the food, habitat, water and other necessities available in the environment". Unfortunately, that definition becomes more nebulous the closer you look at it – especially when we start talking about the planetary carrying capacity for humans. Ecologists claim that our numbers have already surpassed the carrying capacity of the planet, while others (notably economists and politicians ) claim we are nowhere near it yet! ..."
"... Overshoot : When a population surpasses its carrying capacity it enters a condition known as overshoot. Because carrying capacity is defined as the maximum population that an environment can maintain indefinitely, overshoot must by definition be temporary. Populations ..."
"... to (or below) the carrying capacity. How long they stay in overshoot depends on how many stored resources there are to support their inflated numbers. Resources may be food, but they may also be any resource that helps maintain their numbers. For ..."
"... one of the primary resources is energy, whether it is tapped as flows (sunlight, wind, biomass) or stocks (coal, oil, gas, uranium etc.). A species usually enters overshoot when it taps a particularly rich but exhaustible stock of a resource. Like oil, for instance ..."
"... The zoomass of wild vertebrates is now vanishingly small compared to the biomass of domestic animals. In 1900 there were some 1.6 billion large domesticated animals, including about 450 million head of cattle and water buffalo (HYDE 2011); a century later the count of large domestic animals had surpassed 4.3 billion, including 1.65 billion head of cattle and water buffalo and 900 million pigs (FAO 2011). Calculations using these head counts and average body weights (they have increased everywhere since 1900, but the differences between larger body masses in North America and Europe and lower weights elsewhere persist) yield estimates of at least 35 Mt C of domesticated zoomass in 1900 (more than three times the total of all wild land mammals) and at least 120 Mt C in the year 2000, a 3.5-fold increase in 100 years (and 25 times the total of wild mammalian zoomass). And cattle zoomass alone is now at least 250 times greater than the zoomass of all surviving African elephants, which in turn is less than 2 percent of the zoomass of Africa's nearly 300 million bovines (Table 2). ..."
"... Carrying Capacity, Overshoot and Species Extinction ..."
11/29/2017
Notice:
Please limit your comments below to the subject matter of this post only. There is a petroleum
post above this one for all petroleum and natural gas posts and a non-petroleum post below this one for comments on all
other matters.
First, let us define carrying capacity and overshoot. And none has done that better than
Paul Chefurka
.
Carrying Capacity
: Carrying capacity is a well-known ecological term that has an obvious and
fairly intuitive meaning: "the maximum population size of a species that the environment can sustain indefinitely, given
the food, habitat, water and other necessities available in the environment". Unfortunately, that definition becomes
more nebulous the closer you look at it – especially when we start talking about the planetary carrying capacity for
humans. Ecologists claim that our numbers have already surpassed the carrying capacity of the planet, while others
(notably economists and politicians ) claim we are nowhere near it yet!
Overshoot
: When a population surpasses its carrying capacity it enters a condition known
as overshoot. Because carrying capacity is defined as the maximum population that an environment can
maintain indefinitely, overshoot must by definition be temporary. Populations
always decline
to (or below) the
carrying capacity. How long they stay in overshoot depends on how many stored resources there are to support their
inflated numbers. Resources may be food, but they may also be any resource that helps maintain their numbers. For
humans
one of the primary resources is energy, whether it is tapped as flows (sunlight, wind, biomass)
or stocks (coal, oil, gas, uranium etc.). A species usually enters overshoot when it taps a particularly rich but
exhaustible stock of a resource. Like oil, for instance
When we talk about carrying capacity we need to define exactly who or what we are carrying. Are we talking about
humans, all animals or what? Well, let's just talk about terrestrial vertebrate biomass.
Okay, Vaclav Smil and Paul Chefurka (and the estimates of most earth biologists) are correct, the long-term carrying
capacity of terrestrial vertebrate biomass is a little over 200,000,000 tons. But how do we know that amount is correct?
Easily, because that is what it was for millions of years before the advent of agriculture and other things brought
about by modern day Homo sapiens.
Plant and animal species all struggle to survive. In doing so they have evolved to fill every available niche on
earth. If a plant can grow in an area, any area, it will do so. If an animal can find a habitat in any area on earth, it
will do so. At least since the mid-Triassic, about 225 million years ago, plants and animals have occupied every
available niche on earth. If any animal overshot its habitat, dieoff would soon correct that situation. So for many
millions of years, the terrestrial vertebrate biomass remained at about two hundred million tons, give or take. I say
that because climate change, sea levels rising and falling, continental drift would cause the long-term carrying
capacity to wax or wane. Also, the estimate is just that, an estimate. It could be slightly higher or lower. But the
long-term carrying capacity of the earth always remained at one hundred percent of what it was possible to carry.
Then about 10,000 years ago man invented agriculture. At first, this only enabled a slight increase in population.
Soon only plants that produced the most grain, fruit or tuber per plant, or per area of ground, was selected for
replanting. Genetic engineering goes back thousands of years.
Then they discovered fertilizer. Animal and human waste could greatly increase plant production. Animals were
domesticated and the plow was invented. More food per area of ground could be produced. Then chemical fertilizers were
invented and the population floodgates were opened. At first phosphates from bird guano dramatically increased
agricultural production but around the middle of the last century nitrate fertilizers from the Haber Bosch process
enabled the green revolution and enabled the population to expand three fold.
It's mostly cows, then humans, then pigs then chickens then Interesting that the biomass of chickens is ovwe three
times that of all the wild animals combined. If this chart does not shock you then you are totally unable to be shocked
by anything concerning the earth's biosphere.
The world population is still expanding at an alarming rate. By 1989 the population was expanding by about 88 million
people per year. Then by the year 2000 population growth had slowed to about 77 million per year. Then the slowdown
stopped and started to increase again. it stands at about 79 million per year according to the US Census Bureau.
Now they are saying it will start to slow. But that slowdown has not yet started. True, the fertility rate has been
dropping but that has been offset by the increase in population. The fertility rate is dropping but on more and more
people.
Notice the U.S. Census Bureau starts the slowdown at almost the exact date this chart was drawn, August 2017. If they
had drawn this chart in 1995, then no doubt they would have started their prediction of constant decline in 1995.
But I have no doubt that the population will start to decline. It must, it must because we are destroying the ability
of the planet to feed all its people.
Paul Chefurka created the above graph in May 2011. I think he was a little off. He has the world population hitting
almost 8 billion then starting to drop around 2030.
I am more inclined to agree with the U.S. Census Bureau who thinks the world population will hit 9.4 billion around
2050.
Then
I believe the population will start to fall. The rate of population decline and how far it
will fall is hard to predict. That will depend on many things but primarily on if and when globalization collapses. The
collapse of globalization will bring about civil strife, border wars, and famine around the world.
I want to call your attention to the green, wild animal, portion of the second graph at the top of this post. Notice
the wild animal portion of the terrestrial vertebrate biomass, by 1900, had dropped to about 20% of its historical
value. Then by 2000, it had dropped to half that amount.
Then by 2050, we expect that 2000 value to be cut in
half again.
By 2100, it will very likely all be gone. Well, almost all gone. There will still be plenty of rats and mice and
perhaps a few other small vertebrates will still survive, but all the large megafauna, except humans, will be gone. Gone
forever or at least for the next million years or so. It will take that long for new megafauna to evolve after the
human population has been greatly reduced to a billion or even a few million people.
But the far distant future is of little concern to us now. The sad fact of the matter is your descendants will live
in a world completely free of wild megafauna. There is no way to avoid that fact now, it is already too late to stop the
destruction.
WHY?
Yes, why? Why are we destroying the earth's ecosystem? Why are we driving most all wild animals into extinction? Why
have we dramatically overpopulated the planet with human beings? Why did all this happen? However, when you ask why, you
are implying that all this had a cause, that someone or some group of people are to blame for this damn mess we have
gotten ourselves into.
Was it the early farmers who invented agriculture. Or was it the early industrialists like James Watt or Thomas
Edison? Or was it Fritz Haber and Carl Bosch, are they the villains that got us into such a damn mess? No, it was none
of these people. It was no one person or no group of people. It was not even any revolution like the industrial
revolution, the medical revolution or the green revolution. There is no one to blame and there is nothing to blame.
Agriculture
enabled
the very small early population to expand. The industrial revolution and later
the green revolution
enabled
more people to be fed. The medical revolution
enabled
more babies to survive and people to live much longer. Our population has exploded simply because it could. We have
always lived to the limit of our existence and we always will. It was just human nature pure and simple.
Now many will say that we are now controlling our population, that we have learned how to limit our fertility rate.
Well, yes and no. Reference the below chart and table that were produced by the
Population Reference Bureau
in 2012.
In the developed world, where most of the world's energy is consumed, we almost have zero population growth. But in
the less developed world, the population is still growing.
Here is the perfect example of what is happening, what is
still happening
, in much of the world.
Notice the difference in the infant mortality rate and the annual infant deaths.
Most of the world's people are
still living at the very limit of their existence.
<sarc>But not to worry. The death rate is rising, babies are dying, the population will soon start to fall in the
undeveloped world. </sarc>
Note:
The Paul Chefurka graphs in this post were created, primarily, with data from the research of
Vaclav Smil and is published in this 24 page PDF file:
Harvesting
the Biosphere: The Human Impact
. The file includes over 2 pages of notes and 4 pages of references where Smil
sources and documents every stat he quotes. Below are a table and some text from the paper.
The zoomass of wild vertebrates is now vanishingly small compared to the biomass of domestic animals. In 1900
there were some 1.6 billion large domesticated animals, including about 450 million head of cattle and water buffalo
(HYDE 2011); a century later the count of large domestic animals had surpassed 4.3 billion, including 1.65 billion head
of cattle and water buffalo and 900 million pigs (FAO 2011). Calculations using these head counts and average body
weights (they have increased everywhere since 1900, but the differences between larger body masses in North America and
Europe and lower weights elsewhere persist) yield estimates of at least 35 Mt C of domesticated zoomass in 1900 (more
than three times the total of all wild land mammals) and at least 120 Mt C in the year 2000, a 3.5-fold increase in 100
years (and 25 times the total of wild mammalian zoomass). And cattle zoomass alone is now at least 250 times greater
than the zoomass of all surviving African elephants, which in turn is less than 2 percent of the zoomass of Africa's
nearly 300 million bovines (Table 2).
Please comment below but only on the subject matter of this post.
Great summary. Mainly so I don't have to think about all the depressing aspects: do you not think if humans
disappeared but even a few of our larger domesticated animals survived that evolution could go bonkers and we'd
have new familes and species springing up all over in far less than a million years. After all homo sapiens are
only a few hundred thousand years, and dogs (admittedly still technically wolves) only a few thousand. It would
depend a bit whether we left much of the planet that was actually habitable of course – i.e. there'd need to be
plenty of evolution pressure, but not too much. I guess your point would be we'd get new species but not the
mega fauna, but I think there's evidence that isolated small islands can lead to either pygmy species or giants
depending on the exact environment.
George, I would have to start by saying that humans are not going to disappear. Other than extinction via
natural disaster, like a giant meteorite hitting the earth, species are
driven
into extinction. That
is they are outcompeted for territory and resources. Humans are the drivers of extinction, no species will
drive us into extinction. We occupy every habitable niche on earth and will likely continue to do so even
after our numbers have been dramatically reduced.
If we have a collapse of globalization, and I believe
that is inevitable and will happen within the next one hundred years, then the human population will be
devastated by civil strife, border wars, and famine. Seven to nine billion hungry people will be a disaster
for all other animal life, domestic as well as wild. So I do not believe there will be enough domestic
animal life to kick-start evolution of new wild species of megafauna. As I have said before, we will eat the
songbirds out of the trees. So there sure as hell will not be any cows left.
Okay, so perhaps it will not take a million years for other large megafauna to evolve. Perhaps it will
only be in the hundreds of thousands of years.
So, after we eat the songbirds from the trees, what the hell will we eat then?
Is it not possible that
the human species will drive itself to extinction because we are so successful at destroying the natural
environment which we depend upon for our survival?
After industrial civilization collapses, the great human die-off will rapidly reduce human numbers by
more than 90%. Life for the remaining humans will be extraordinarily hard. If the overall stress level is
high enough, it will be very difficult for humans to raise enough offspring to reproductive age to
maintain the species over time. Biologists call this pre-extinction phase die out. Once a species numbers
fall below replacement level, they go extinct.
And what the hell do you mean: "If we have a collapse of globalization, and I believe that is
inevitable and will happen within the next one hundred years "? Within the next 100 years? You are
dreaming! We are in the early stages of apocalypse right now! Rapid die-off will begin within the next
few years. 100 years from now, there will be no one alive who will remember it.
Cunning said; "After industrial civilization collapses, the great human die-off will rapidly reduce
human numbers by more than 90%." ..
..while what is left of nature will rapidly move into the
niches vacated by species humans have wiped out. If (big if, maybe) there are remaining reproductively
viable human populations, they will exploit those recovering niches at rates which will be far below
the astounding rates of exploitation during the industrial age. Where humans have abandoned their
schemes of destroying the natural world for their own purposes, nature, in some form, recovers quite
quickly.
On the other hand, if global warming goes off the scale (ala Guy McPherson, et al), all bets are
off. Everything larger than a shrew will be toast.
Once a species numbers fall below replacement level, they go extinct.
The replacement level
for animals in the wild and the replacement level for domestic animals are two different things
entirely. For animals in the wild, the replacement level may be several hundred to several thousand.
Animals in the wild have to find each other in order to reproduce. For domestic animals, the
replacement level is two.
In this regard, we Homo sapiens are far more like domestic animals than wild animals. An example
would be the Polynesians who migrated to distant islands in sailing outrigger canoes. Their numbers,
in those canoes, likely numbered only a dozen or so. Yet huge numbers eventually sprang from tiny
numbers.
Yes, stress during periods of great strife and famine will be great. Stress will likely take a
great toll. But there will always be survivors. Everyone is not equally affected by stress. Some can
overcome, some cannot. It is a little like a plague or disease. There are always some who are immune
or otherwise escape the problem.
As for rapid die-off coming within a few years, yes that may happen but I doubt it. Humans
societies are far more resilient than you might expect. For instance, look at Somalia, or Venezuela.
Somalia, a failed state, has been in turmoil for decades yet no massive die-off has occurred.
Venezuela is in a state of almost total anarchy, yet no massive die-off as of yet.
I believe the die-off will start
within
the next hundred years. Next week is within the next
hundred years. But I doubt it will happen by then, or even within the next few years or so. In my
opinion, it will take several decades for things to really fall apart.
You said:
"But I doubt it will happen by then, or even within the next few years or so. In my opinion, it
will take several decades for things to really fall apart."
What about Limits to Growth? That study forecast that real problems would begin in the first or
second decade of the 21st century, in other words, now. Why is Limits to Growth wrong? How do we
avoid sudden, catastrophic collapse once world economic growth comes to an end?
What about the fragile, debt ridden financial/credit/monetary system? Have you read the Korowicz
paper? How will industrial civilization gradually unwind over many decades when the world economy
freezes very suddenly and food stops arriving at the grocery stores? That should lead to a very
rapid die-off as every city suddenly becomes uninhabitable.
What about Limits to Growth? That study forecast that real problems would begin in the first
or second decade of the 21st century, in other words, now. Why is Limits to Growth wrong?
Hey, I have a copy of Limits to Growth right here in my hand. On what page do they predict
catastrophic collapse before 2050. Help me out here but I just can't seem to find it.
As to real problems, hell yes, we are having real problems right now. We have been having
real problems in Venezuela and a lot of other places. But there is a tremendous difference
between real problems and catastrophic collapse.
And what about all the other terrible things you are say are happening right now. Hell yes,
they are happening and they are terrible. But they have
not yet
led to catastrophic
collapse. But it is very likely they will lead to collapse in three or four decades from now.
It's actually from a Guardian article, taken from Bardi's "The Limits to Growth
Revisited". I don't know what page the original graph was on, but I have a copy of the
original 1972 graph which shows the same curves, without the more recent data curves.
Guardian article "Limits to Growth was right. New research shows we're nearing
collapse" :
It depends on what you call collapse. The UK and USA are both following the curve such
that life expectancy is starting to decline. I think industrial productivity might be
going the same way in UK, and definitely our health and old age care systems (which is
one of the measures he uses for "services") are in decline (though the government
always finds a way to massage the numbers so far). One of the authors of LtG has said
that once one of the main curves is definitely through an extrema then the models
probably don't work any more – which I took to mean possible accelerating chaos, but
might mean something else.
This a unique, one-time only collapse because we never relied on fossil fuels in the past, and
we certainly won't in the future. If you look at energyskeptic/3) Fast Crash, you'll see the
many reasons I think collapse will unfold quickly. Turchin, who has looked at the patterns of
collapse in civilizations going back to Mesopotamia, says it takes about 20 years on average.
That is in line with Hook's estimate of a 6% exponential decline, which is the rate at which the
500 giant oil fields decline on average after peaking (something like 270 of them last I
checked), all others (offshore, shale, smaller, and so on) decline much faster, hence Hooks
estimate of an exponential increase of .0015 a year as non-giants increasingly contribute to
what's left of production (giants are now 60% of world oil production). If Hook (2009) is right,
that means we'll be down to 10% of what we produce after global peak production in 16 years. At
that point, even if governments are rationing oil wisely to grow and distribute food, you're
reaching the breaking point. Oil makes all other resources possible, so although many resources
reaching their limits, the decline of oil will be the true beginning of the end. No more pumping
water from the Ogallala 1,000 feet down, going 10,000 miles on factory farm fishing boats, and
so on. Oil is masking how incredibly far we are over overshoot. Above all, 99% of the supply
chain transport – trucks, rail, ships – depends on oil. 80% of communities in the U.S. depend
entirely on oil, by far the least efficient mode of transportation of the three. Well, it is too
big a topic to cover in a comment. I have a lot more to say in my book "When Trucks Stop
Running".
Oh, and when I heard Dennis Meadows speak at the 2006 Pisa Italy ASPO conference, he
said that if anything Limits to growth was head of schedule, with collapse starting as early as
2020. We'll see, too many factors. Also in the past, nations avoided collapse way past their
carrying capacity by trading or conquering other nations, like the Roman Empire, which had to
import food from Carthage and Egypt, no way to grow enough food in Italy.
I'm hoping to see more comments from you in the future, and not just in this one thread,
lol.
It's very common for experts in any given field to presume there are none in other fields
that are capable of solving the problems they see as civilization killers.
There are no guarantees of success, but success is possible when it comes to finding and
implementing solutions to problems such as the eventual depletion of oil.
Once the shit starts hitting the fan pretty hard and fast in terms of declining oil
supplies, both good and bad things will happen on a scale that will take the breath away.
The bad will unquestionably include economic collapse across large swathes of some and
maybe most societies.
The good will come in the form of action on the part of awakened LEVIATHAN, the nation
state. Those of us who cannot see that once LEVIATHAN stirs and focuses on such problems as
we FORCED to deal with soon have little understanding of history , human nature, and
technology.
Now WHETHER , or NOT, Leviathan, Uncle Sam, John BULL, the Russian BEAR, et al, can do
enough to keep the wheels on and turning, instead of falling off, is an open question.
I believe they can, depending on how far gone things are once they begin to come to grips
with the various troubles that will threaten their existence.
People CAN AND DO come together, and work together, sometimes. Consider the case of the
USA. We were mostly all isolationists the day before Pearl Harbor, but within a couple of
days after, we were all ready to to go flat out to murder our enemies on the grand scale, and
DID.
Neither I nor anybody else can prove either way whether we WILL work together well enough
to prevent outright collapse meaning we die hard deaths by the tens of millions even here in
a country such as the USA.
There's no question that we CAN work together, once we realize we must. Whether we get
started soon enough is probably going to determine just how bad things will get in economic
terms.
But between what scientists and engineers can do for us, by way of providing us with
better tools, and what we can collectively do for ourselves by way of collective action,
there's a real possibility that some countries will pull thru ok, no longer sleek and lazy
and fat and wasteful, but at least still functional, and with most of their populations still
alive and leading a reasonably dignified life style.
I will have more to say about what Leviathan awakened, scared and enraged can do later on,
way down thread someplace within the next few days, by relating some historical examples.
I too feel that one day the trucks will stop running. It will be a very interesting
transition to observe. I imagine it will have a progression that goes something like this:
-trucks running will increase in cost as will the things that they are running about with
inside them.
– trucks will run to less and less places.
-trucks will run to less and less places less frequently.
-trucks will run only very rarely and only for high priority reasons.
-trucks will stop running altogether.
As this process takes place I imagine there will be
measures taken to fill some of the void, where and when it is possible to do so.
Ron – do you think humans will still be around in a million years or even a hundred thousand? If they are
I think it will only be because they have made themselves irrelevant to the environment (i.e. small in
numbers and having found a way to live sustainably) and other species will be evolving without too much
human involvement.
Yes, George, I think humans will be around in a million years. Not nearly as many as are around today
however. If I had to guess, and I do have to guess, then I would guess around 10 to 15 million humans
would be around a million years from now. That would be one person alive then for every 500 alive
today.
Of course, all fossil fuel would be gone and everyone would live off the land.
But if you doubt human survival, then just what do you think will wipe everyone out? What will
bring the human population to zero?
That sounds as good a guess as any. Part of my point was that they could only survive if they were
not intrusive, and therefore would not be an impediment to evolution of other mega fauna. I think
average species life time is estimated at around 1 to 2 million years, homo is a family rather than
a species so the sapiens could go and something else come along, like we took out the Neanderthals.
On the other hand if the bottlenecks get small enough in different locations we could just be
whittled away by different causes.
I think average species life time is estimated at around 1 to 2 million years,
The
point is George, Homo sapiens is not an average species. If we were an average species we would
still be competing with other species for food and territory, losing some of those battles and
winning others. But our numbers would be kept in check by our success and failure of that
struggle, just like every other
average
species.
Our dominance has overwhelmed all other species. Like a plague, we are killing them all off.
There is nothing average about us as a species.
Ok, but our numbers were kept in check and we were competing like that for almost all of our
history, until the Holocene interglacial came along and we decided agriculture was a good
idea, or maybe we had a go before and it never took in a less stable climate. But before that
there is evidence of some pretty tight bottlenecks when we were almost gone either locally
(e.g. in India) or globally. And things like the Roman empire collapse suggest we can forget
any kind of technological advantages in a couple of generations.
But since our brains to a degree where we
could create stone tools and use fire, our population has been on a slow increase,
bottlenecks notwithstanding.
What has made us
not average
is our brains, our mental ability. That is the one
thing that has given us a huge advantage over all other species.
We are smart enough to wrestle all the world from every other species that stood in our
way. If another species had something that we wanted, including even their flesh, we got
it. We are smart enough to dominate the world, but not smart enough to see that we are
destroying it.
My point is that unless we find a niche in which we can exist sustainably despite our
intelligence and ability to get whatever we want and dominate the world, then we won't
survive very long, and may not even then.
I think some (you for example) are smart enough to see that we are destroying
our World.
It may not be a majority view, though I think the numbers are increasing.
I would agree that we so far have not demonstrated that we are smart enough to
change what we are doing (reduce the rate that we destroy the planet as rapidly as
possible to zero (or negative, by which I mean restore the planet closer to a natural
or sustainable state).
This may never be accomplished, but we cam move in that direction while reducing our
numbers and our impact.
What it is about our brains that makes us not average is our capacity to deny reality.
The mind over reality transition (Varki &Brower) is arguably what gave "sapiens" the
advantage, successful but apparently impossible risk taking, to do away with
neanderthalensis. In small scale hunter bands surrounded by magafaunal predators,
denial of reality is a decided advantage, but in mass societies with the capacity to
produce mass belief in non-realityy, it is the disadvantage that could do us in.
Although not experimentally demonstrable, the idea that this mind over reality
transition was an evolutionary event in the hominid genus 100-200 thousand years ago is
a plausible explanation for sapiens' dramatic cortical development and the development
or consolidation of female sexual selection, not present in our forebears or current
great apes.
In a future world scratching a living as we did for most of our history
as hunter-gatherer bands, but from a depleted world absent of any predators, we might
evolve the ability to believe reality, without sacrificing cortical development. The
first inhabitants of my country (Australia) managed to get by fot 60,000 years by
killing off the megafauna. They were helped by climate change which dessicated the
continent, but hung in there making it an extremely attractive aquisition by my
ancestors when they came along.
In broad terms, I agree with what you are saying here.
"Our dominance has overwhelmed all other species. Like a plague, we are killing them all
off. There is nothing average about us as a species."
But we aren't doing any better than rats or fire ants, lol.
You're dead on about humanity not being an average species. We will be around at least
until some other species capable of wiping us out evolves, and it's unlikely that we will
ALLOW such a species to exist, unless it's a microbe and we can't wipe it out.
If chimps were to evolve just a little further along the lines of using tools and being
able to communicate and work together, and started attacking humans, numerous humans armed
only with primitive weapons such as fire and bows and arrows would kill every last chimp, and
they wouldn't lose any time in doing so.
This brings up an interesting question. We know chimps use stone tools as hammers to break
nuts, etc, , and that they fight ORGANIZED fights to the death sometimes.
Is there any evidence they are using stones as weapons . YET?
I once heard an interesting story about chimps. Might have been in one of Pinker's
books, I can't recall.
If you hang a bunch of bananas from the ceiling that a chimp
cannot reach and you leave an A-frame ladder laying on the ground the chimp will set
the ladder upright and get the bananas.
If you do the same thing with 2 chimps and a ladder so heavy that one chimp alone
cannot set it upright, but 2 chimps working together could set it upright, they'll
never get on the same page, so to speak, and cooperate in setting up the ladder. They
will both try individually and fail. The bananas will never be reached.
The charts in your post suggest about 1 billion might work, I would say 500 million would
be my guess, not sure where you come up with 10 to 15 million.
Note that 500 million is roughly the World population in 1550 CE.
Just a different guess as I think a sustainable society could be reached by 2300 at these lower
population levels, though perhaps fertility levels will remain below replacement over the long term
so population will continually decline eventually some optimum will be determined and fewer than
two children will not be encouraged.
Humans, that is Homo Sapiens per se, maybe not. Don't forget Cro-Magnons probably caused the
extinction of Homo Neandertalis in about 40,000 years or so ago. Some other future species of the
Genus Homo, very likely will be around for another million or so years. This is what I think they
might look like. Maybe they will be called Homo technoligicus implantabilis, feel free to call them
whatever you want. In any case resistance will be futile and you will be assimilated.
Cheers!
.
First of all, Ron, a species which destroys its own food supply or its own habitat *does* go extinct.
They're currently referred to as "superpredators" -- it's happened repeatedly throughout history.
Second, regarding population growth, my primary charity for 20 years has promoted sex ed, access to
contraceptions, and education of women worldwide. We know how to halt and reverse population growth in
the "underdeveloped world". It's not difficult except for the religious groups which oppose contraception
and oppose women's liberation.
Often the same religious groups who promote burning of fossil fuels. And deforestation.
Basically, whether humans survive depends on whether we defeat those groups, IMO.
Countries like Cuba which are very underdeveloped but essentially *lack* those religious groups (thank
you Godless Communism!) they're doing OK on population stabilization.
There are countries that are religious such as Iran that have seen rapid demographic
transition (15 years for TFR to go from over 5 to under 2). Also non-communist nations such as South
Korea saw rapid transitions.
I agree education and gender equality as well as access to modern contraception are helpful.
Religion has it's points, as Twain used to put it, both good and bad. Preachers and priests have
a way of figuring out what is in their own best interests, short term, medium term, and long term.
There are some religions or cultures, which are not necessarily one and the same thing , that do
encourage or more or less actually force women to bear lots of children.
I come from a culture that is very often ridiculed here in this forum, which doesn't bother me
at all personally. It's ridiculed on such a broad scale that it's hard to find a public forum
peopled with technically well educated people where ridicule isn't the NORM.
As religion goes, my own personal extended family is about as religious as they come in the USA.
My nieces and nephews and third cousins, the children of my FIRST cousins, are having kids at less
than the necessary 2.1 rate needed to maintain our blood lines, lol. My informal seat of the pants
estimate is that the extended family birth rate is down to somewhere around one point five.
It's well known that the birth rate in some countries that are supposedly Catholic has fallen
like a rock over the last couple of decades.
And while I can't prove it, it's my firm opinion that once the priesthood in any country comes
to understand that it's own long term interests are best served by encouraging small families,
small families WILL BE ENCOURAGED. That may not happen for another generation or so, and it may not
happen at all in some countries, if there is no top down control of the culture and religion.
Priests and preachers don't exist to serve GOD, or any combinations of gods, etc. They exist
because they have found a way to provide a secure and relatively easy way of living largely off the
work of their followers.
This is not to say their followers don't get back as much or more as they contribute. Every
society has to have leaders, and priests and preachers can be and have often been very effective
leaders. Some of them are effective leaders today.
First of all, Ron, a species which destroys its own food supply or its own habitat *does* go
extinct. They're currently referred to as "superpredators" -- it's happened repeatedly throughout
history.
Really, I have never heard of that. The only superpredator I ever heard of are human
beings. But if you can give an example of a species destroying its own food supply and habitat, please
enlighten me.
Humans on Easter island is the only thing that comes to my mind when thinking of such an example.
I'm no expert on Easter island, however I understand people there did not go extinct, and that
there was a small group living there when the island was found by Europeans. Again, not terribly
well informed about that particular bit of history.
When things begin to collapse the grid infrastructure will collapse. Coal factories in China and
elsewhere will shut down and dimming will end. James Hansen estimated that warming may be held back by
50% by dimming, so we can expect warming to shoot up.
http://www.columbia.edu/~jeh1/mailings/2013/20130329_FaustianBargain.pdf
With collapses of civilization their will be no remediation of forest fires. Chemical and Nuclear
Dumps will burn as well as the nuclear power plants that have gone Fukushima.
A very underappreciated study is that of decaying leaves around Chernobyl While horses and other
wildlife might now roam around Chernobyl the implications of leaves not decaying is enormous. "However,
there are even more fundamental issues going on in the environment. According to a new study published in
Oecologia, decomposers -- organisms such as microbes, fungi and some types of insects that drive the process
of decay -- have also suffered from the contamination. These creatures are responsible for an essential
component of any ecosystem: recycling organic matter back into the soil. Issues with such a basic-level
process, the authors of the study think, could have compounding effects for the entire ecosystem."
Read more:
http://www.smithsonianmag.com/science-nature/forests-around-chernobyl-arent-decaying-properly-180950075/
To just state that humans wouldn't disappear is nothing more than an assertion, as is stating that
they would certainly disappear. However what faces humans is much more daunting than just the chaos of
civilization collapse. Those who survive everything else will have a hard time reproducing with all that
radiation around
https://chernobylguide.com/chernobyl_mutations/
Of course long before civilization collapses the countries of the world may well play out the scenario
that Richard Heinberg describes – Last Man Standing. Sound like politics today?
I posted this as a reply to a comment by GF a few threads back.
I highly recommend the following three ASU Origins Project debates and panel discussions to get a good feel
for the big picture. It might take up a good four hours or so of your time. This isn't something suitable for
sound bites. It involves a lot of in depth cross disciplinary knowledge.
"Why did all this happen? However, when you ask why, you are implying that all this had a cause, that someone
or some group of people are to blame for this damn mess we have gotten ourselves into".
I would like to
suggest, respectfully, that this wording is the wrong way around. The essence of the problem is that no one has
been in charge, no one has taken responsibility – and that is hardly changing at all.
The world is teeming with governments, corporations, NGOs, and "leaders" of all kinds. But what are all
those leaders, and their estimable organizations, really trying to do? Some are aiming to earn as much money as
possible. Others are trying amass as much power as possible. Most of their programmes have a lot to do with
gaining more money and power – which become interchangeable at a certain point (as can be seen from a study of
the US Congress, for example).
An intelligent alien visitor to our planet would reasonably conclude that, although individual humans are
intelligent to various degrees, the human species as a whole is profoundly unintelligent. It has ample means of
diagnosing what has happened, is happening, and will happen. Yet, because it has never developed any organ
comparable to the individual's conscious brain, it does nothing about the obvious threats it faces.
Tom, I think my wording was correct, you just did not quote all of my explanation. You wrote:
The
essence of the problem is that no one has been in charge, no one has taken responsibility
No one can take responsibility because no one is in charge of the human race. And as far as being
"profoundly unintelligent", I think that is an unfair charge. Having a blind spot in our DNA does not imply
that we are unintelligent. The human race has never been faced with such a dilemma before. Our brains
evolved to its present state during our hunter-gatherer days. We are molded by evolution to do everything
possible to survive and reproduce. There is nothing in our DNA that tells us to protect the biosphere
because the lives of our grandchildren depend upon it. So we don't.
What is happening is just human nature. That's all.
Evolution has resulted in all species, including humans,
having a biotic potential that is greater than the carrying capacity of the niches in which they live.
Populations are limited by resource limits and predation, not by self restraint or mutual agreement.
It would have been very unusual, perhaps unique in evolutionary history, for humans to have
deliberately limited our population, even though it might have been theoretically possible due to our
'intelligent' ability to foresee our probable future. Despite Malthus, Limits to Growth and many other
warnings, no realistic attempt has been made to remain below carrying capacity.
As you note, a massive die-off is inevitable, the only real question is when. Like The Cunning
Linguist, I personally think it will be whenever people lose confidence in the global monetary system, as
in Korowicz's "Trade Off: Financial system supply-chain cross contagion – a study in global systemic
collapse". Once money stops flowing so does the food supply.
What would cause this rejection of the monetary system? I don't follow the argument.
Everyone decides at once that money is no longer a reasonable medium of exchange. Didn't happen during
any financial crisis so far, people couldn't access their money at Banks after the 1929 crash, but
this was less of a problem in OECD nations during the GFC.
The ETP nonsense is just that, anyone who knows their thermodynamics knows that theory is full of
holes.
No, but we did come close in 2008. All
sorts of debt instruments including commercial paper, CDOs (the root of the problem), many
derivatives and letters of credit all froze up. Without prompt dramatic action by the central banks
and the US Treasury, the financial system could have collapsed. Nobody knew who was solvent or
insolvent, so the central banks had to backstop every financial institution. All this over some
mortgage securities based on the US housing market.
Now imagine that growth has turned to continuous worldwide economic recession, the inevitable
fate of the global market economy in the face of energy and resource depletion ( it will happen
despite the stupidity of the Hill's Group). Unemployment increases year after year and tax revenues
continuously fall. Every kind of debt instrument, from sovereign debt to mortgages, to municipal
and corporate bonds is more and more likely never to be repaid. Defaults are increasing with
greater and greater frequency. The equities of every company become suspect as more and more
companies go under.
Sooner or later, a critical mass of people are going to realize that most debts can never be
repaid and are therefore worthless as assets. Since almost all money is created from debt, almost
all money becomes worthless.
The only thing that makes money work is confidence in its value. When confidence in money (debt
repayment) fails, the monetary system fails and without a monetary system, the global market fails.
Billions of lives are dependent on that market functioning smoothly every day. When it fails to
function, people will die. I fully expect to lose every financial asset I own at some point, that's
why I am preparing to live without money. Unfortunately, most people in the developed world can't
do that, though they should be trying to do so with utmost urgency.
I admit that if there were a concerted international effort to declare a debt jubilee and start
all over with a new world currency, some form of monetary system might continue after the present
one collapses, but I really doubt that creditor countries and debtor countries are going to
cooperate with the rapidity and solidarity needed to manage such a transition.
And even though all the productive assets in the world would still continue to exist after a
financial collapse, without a market to mediate their interconnected function, everything would
grind to a halt. I don't see an international command economy taking over either. That would be
harder than creating a whole new monetary system.
The global market economy is very complicated and very fragile. I certainly wouldn't trust my
family's life to something that could collapse virtually overnight and neither should you.
I cannot imagine a continuous world wide economic recession, this is a fundamental flaw in
your argument.
Well, I can't imagine how the global market economy and industrial
civilization are going to have a steady state economy forever at present levels of production
and affluence. Overshoot means eventual retrenchment and die-off.
Up-thread you estimated the carrying capacity of the earth at around 500 million people.
You obviously expect to gracefully reach that level (in 2300!) through birth control while
still maintaining current standards of living.
I expect that we will reach that population, or fewer, due to complications from
resource-depletion-caused economic failure (famine, war, pandemic). There simply isn't enough
energy available to make the transition you desire without also destroying the climate, even
if there were the political will to do so, which there isn't.
I suggest looking at the history of the last 100 years to decide which future is more
probable. Humanity has had the ability to create a high technology, steady-state civilization
with sustainable population levels for over a century, but has failed to do so. There is
still no evidence that we are serious about making the attempt now. I wonder why you can
believe that such a thing will happen at a time when the resources to make it happen will be
declining rapidly. Continuous world-wide recession is a certainty and unless you are very
old, you will live to see it.
And as far as your suggestions for prepping go, my family has already got it's lifeboat
ready in a rural tropical community. I've got the productive land, the community and the
guns. I don't expect to rely on gold at all. To my mind, the best durable trade items are
ammo, fishing equipment and livestock.
If raising my own food and living without money is necessary, I can do it. If your
eco-modernist utopia magically appears, I won't be disappointed, or regret one iota of the
'unnecessary' preparations I will have made, but I prefer to err on the side of prudence.
I don't expect to live forever and as I said don't plan ahead for scenarios I
believe have a very low probability of occurring. As fossil fuel resources become scarce
they will become more expensive and we will use them more carefully (or efficiently).
There has been no need to do so for the past 100 years as they have been relatively cheap
and abundant. There will be enough energy from Wind, solar, hydro, and perhaps nuclear to
make the transition, as fossil fuel becomes expensive these will be produced as they will
become cheaper alternatives. Much of freight traffic can be moved to rail, which can be
electrified, moving goods from rail to factory or store can be done on overhead wires on
main roads with EV used for the last few miles.
Also keep in mind that fossil fuels by nature are quite inefficient in producing
electricity with about 60% of the energy wasted, for heating systems compared to heat
pumps there is also higher energy use. The transition to non-fossil fuels will result in
about one third the energy use for the same exergy (or work and useful heat) provided.
I make no assumptions about living standards being maintained, perhaps the transition
will be very difficult and living standards in the OECD will decrease while living
standards in less developed nations increase. Note that declining population will reduce
resource pressure and realization of resource limits (as will be clear from fossil fuel
scarcity) by the majority of citizens may lead to changes in social behavior.
Also note that we have only been aware of the climate problem for about 38 years (using
Charney report in 1979 as the starting point).
If fossil fuels are very limited (say 1200 Pg C emissions from 1800-2100) then climate
change might be less of a problem, but this will still be adequate for a transition to
non-fossil fuels. Even 1000 Pg of total carbon emissions from all anthropogenic sources
(including fossil fuel, cement and land use change) may be adequate for an energy
transition, though it will need to begin in earnest in the next 5 to 10 years, the sooner
we begin the easier it will be to accomplish.
"What is happening is just human nature. That's all."
EXACTLY.
I posted a long rant down thread trying to get this across to people who somehow think we are
DEFECTIVE because we don't collectively behave more rationally, hoping to get it across in terms that are
intelligible to those of us who have HEARD of evolution, but never actually studied it for more than an
hour or two at the most.
Nonsense, this is just Libertarian propaganda, which is actually a fake religion invented by real
estate investors in the fifties in a political catfight to avoid rent control legislation. It has now
widen to some kind of pseudo-Darwinistic hocus pocus, but it ignores the obvious fact that we became
the world's dominant species be collaboration and long term thinking.
We're doomed if we don't get along with each other, and lots of propaganda is pushing you to
believe we never have or could, and never can or will. But that doesn't make it true.
I'd like to question the assertion that no one is in charge of the human race. In "Against the Grain: A
Deep History of the Earliest States" (Yale, 2017), James C. Scott demonstrates fairly convincingly that
humans actively avoided adopting grain-based agriculture because the labor:reward tradeoff was far less
satisfactory than what could be obtained through hunting and gathering. The accumulation of surplus, and
presumably the insurance a surplus would provide against yearly fluctuations in food supply, in other
words, was an insufficient motivation for humans to give up hunting and gathering. As Scott documents
quite clearly, this refusal to adopt agriculture as the basis of the human economy persisted for more
than 5,000 years in Mesopotamia, and much longer elsewhere.
So what caused the shift? Alas, Scott fails
to explore this in any detail. (Just one of the many weaknesses of the book, which nevertheless manages
to make its central argument very well.)
I will speculate that what caused the change was the coming-together of a sufficiently large number
(five? a dozen? who knows?) of individuals who lacked the ability to feel remorse, shame, or compassion,
and who were motivated purely by a desire to enrich and empower themselves. Modern psychology calls these
types psychopaths. I suggest that it was these individuals who, likely with help from others with the
related disorder of sadism (see recent research on "the dark tetrad"), were first able to subjugate
(Scott uses the very apposite term "domesticate") human communities and force them to labor on the land
to produce a surplus, which of course then could be appropriated by the psychopaths and their henchmen.
I am not aware of anyone else who has advanced the notion that civilization was founded by psychopaths
and sadists. But recent psychological research (popularized in books such as Babiak and Hare, "Snakes in
Suits: When Psychopaths Go to Work") suggest that psychopaths are four times more commonly represented in
upper management than in the population as a whole, so it seems plausible to me, at least, that the
project of civilization and its attendant destruction of the ecosphere has been, from its inception,
forced upon humanity by a small minority.
Phil, thanks for a great post. I have no doubt that psychopaths have had a great influence on
civilization. Many great leaders were no doubt psychopaths. Hitler and Stalin come to mind. However,
not all of them were psychopaths. Rosevelt, Washington, Jefferson, and many other U.S. presidents were
not psychopaths. Neither was Churchill or Gandhi.
However, your original sentence was:
I'd like
to question the assertion that no one is in charge of the human race.
So I kept reading, waiting
for you to tell us just who was in charge of the human race. Of course you did not do that.
My short answer to your question would be to ask "Cui bono?" Doubtless not
everyone who reaps the most benefit from the biocidal trajectory of late capitalism is dominated by
one or more of the traits of the Dark Tetrad, of course. Some of us might even be able to argue
plausibly that we were unaware of the consequences of our actions. But even though late capitalist
society is sufficiently robust that it continues to work out its internal logic without a lot of
direct guidance by the dark few, I doubt it would last long without their presence among the
wealthy and powerful classes. If their interventions on behalf of the killing machine could be
eliminated, my guess is that dismantling the machine would be a much easier project.
Ultimately, it's the ones in positions of power who manifest the traits of the Dark Tetrad whose
interventions are critical to maintaining the status quo. If anyone can be said to rule the earth,
it's them.
An intelligent alien visitor to our planet would reasonably conclude that, although individual humans are
intelligent to various degrees, the human species as a whole is profoundly unintelligent. It has ample means
of diagnosing what has happened, is happening, and will happen. Yet, because it has never developed any
organ comparable to the individual's conscious brain, it does nothing about the obvious threats it faces.
That is my view as well! Though some like E.O. Wilson argue that we have evolved into an eusocial species
and can at least in theory function as a hive or termite mound. Where the collective intelligence emerges
and even though the individual ants or bees are stupid the anthill is an entity unto itself is smart and
knows how to defend itself. See also Douglas Hofstader and Daniel Dennett's book, 'The Mind's I', Chapter 11
titled Prelude Ant Fugue.
http://themindi.blogspot.com/2007/02/chapter-11-prelude-ant-fugue.html
Also check out Curtis Marean's talk at the end of Inconvenient Truths – From Love to Extinctions from the
link I provided above from the ASU origins debates. He specifically makes that analogy about aliens, in his
talk.
Marean is a professor in the School of Human Evolution and Social Change and the associate director of
the Institute of Human Origins at Arizona State University. He is interested in the relation between climate
and environmental change and human evolution, both for its significance as a force driving past human
evolution, and as a challenge to be faced in the near future. Curtis has focused his career on developing
field and laboratory teams and methods that tap the synergy between the disciplines to bring new insights to
old scientific problems. He has spent over 20 years doing fieldwork in Africa, and conducting laboratory
work on the field-collected materials, with the goal of illuminating the final stages of human evolution –
how modern humans became modern.
" Yet, because it has never developed any organ comparable to the individual's conscious brain, it does
nothing about the obvious threats it faces."
Such an organ would be very costly, in terms of depriving humanity of the energy and resources devoted
to it, depriving us of the use of these resources for other purposes.
Evolution doesn't create organs that will be useful in dealing with new circumstances, by plan, ahead
of time, except by accident. It's just a "lucky accident" FOR US TODAY that our own ancestors evolved
hands capable of grasping things such as branches .. which set the stage for us to be able later on to
grasp a stone and use it as a hammer or weapon.
No planning is involved. NONE. Various deists who accept the reality of evolution but still believe in
higher powers disagree of course.
I can't prove they are wrong. I don't believe anybody else can. All we can do is demonstrate that they
have no evidence that such higher powers exist.
An absence of evidence is not evidence of absence, lol.
I doubt if "intelligent" aliens are any different than we are – and therefore probably have a very short
life expectancy should they ever get to an industrial age – evolution can only work from one generation to
the next and is therefore incompatible with longer term planning for species longevity.
"It has often been said that, if the human species fails to make a go of it here on the Earth, some other
species will take over the running. In the sense of developing intelligence this is not correct. We have
or soon will have, exhausted the necessary physical prerequisites so far as this planet is concerned.
With coal gone, oil gone, high-grade metallic ores gone, no species however competent can make the long
climb from primitive conditions to high-level technology. This is a one-shot affair. If we fail, this
planetary system fails so far as intelligence is concerned. The same will be true of other planetary
systems. On each of them there will be one chance, and one chance only." – Sir Fred Hoyle
Thanks for posting this Hoyle quote Steve. I have read it before, many times. And the truth of it is
so obvious. All the things that have enabled this wonderful abundant life will soon be gone. Then
what?
We recycle what we can, we use less of scarce resources as prices rise and we try to find
substitutes for resources as they become scarce. Also population will fall as TFR falls (with a
time lag due to population momentum) putting less pressure on resources.
None of this will be easy, and perhaps not possible, hard to predict the future.
Dennis, Hoyle here, is talking about long-term. Recycle or not, we will run out of all fossil
fuels and eventually all metals. However, recyclig will help, in the short term anyway.
No, we
cannot really predict the future. All we can do is look at what is happening right now and say:
"If this continues ." And Dennis,
it will continue.
Human nature may be changed by
evolution. But that will take many generations and tremendous evolutionary pressure. So right
now, human nature being what it is, we can predict that collapse is just down the road. Just how
far down the road is what we are trying to figure out right now.
Ron, if we look at the apparent numbers, say of many species, collapse appears already here,
just that the shockwave hasn't hit yet. Remember, if you see an explosion in the distance, it
takes awhile to hit.
Yes some things will continue and others will not.
For example fossil fuel output has grown pretty steadily in absolute terms (about 163
million tonnes of oil equivalent per year from 1981 to 2016) and I expect that will change
(it will
not
continue).
The total fertility ratio has decreased at about 1.38% per year from 1965 to 2015, but I
expect this will continue until the World TFR approaches the high income nation average of
about 1.75 (which would be reached in 2040 if the 1965-2015 rate of decrease continues).
There may be more fossil fuels available than either of us think, but if my medium
scenarios are correct there may be enough fossil fuel to enable a transition to non-fossil
fuel, then we just need to deal with other depleting resources.
Note that the fact that fossil fuels have peaked and declined (which should be apparent by
2035 at the latest), may enable people to realize that this will be true for every scarce
resource and perhaps we will plan ahead and recycle, and use resources more efficiently.
Much of this is a matter of education.
Perhaps the meaning of soon we use differently.
When you say "will soon be gone." Can you define soon in years.
The sun will eventually destroy all life on Earth, but not "soon", as I define it.
Well, perhaps I should not have said "gone". There will always be trace amounts of
everything left. And nothing will suddenly disappear. There will be a decline curve for
everything. But let's deal with the one with the least future abundance, oil. I believe we
are at peak oil right, or very near it anyway. The bumpy plateau may last from 5 to 10
years.
Then the decline curve will be much steeper than the ascent.
Dennis, you must be familiar with the phrase "You cannot get blood from a turnip". High
prices will not create more oil in the ground. We will most definitely have higher
prices but they will be high because we have reached the peak. So, $100 oil will not
create a higher peak.
Just my guess but I believe the plateau will average less than
82 million bpd.
Is it a trailing 12 month average of between 80 and 82 Mb/d?
I imagine we will break above 82 Mb/d in 2018 if oil prices are over $65/b (Brent in
2016$) for the annual average in 2016.
For the most recent 12 months (EIA data) ending August 2017 we are at 80.93 Mb/d.
In the low price environment since 2015 the trend in World output is an annual
increase of 280 kb/d. This rate of increase is likely to double (at minimum) with oil
prices over $80/b, which would bring us to 82 Mb/d by 2019 or 2020, perhaps this will
be as high a output rises, but my guess is that there is a 50% probability that output
will continue to rise above this and perhaps a 25% probability it may reach 85 Mb/d
around 2025.
I thought I did that Dennis. I the bumpy plateau will average about 82 million barrels
per day or less. There could be spikes and dips and it will last from 2 to as much as
10 years. But when it heads down, it will do so with a vengeance.
For now, all I have to say is that while Sir Fred forgot more about astronomy than I have or ever
have even DREAMED of knowing, he didn't know shit from apple butter about biological evolution . not
even as much as a good student in a good public high school after finishing one high school level
course in biology.
"The chance that higher life forms might have emerged through evolutionary processes is comparable
with the chance that a tornado sweeping through a junk yard might assemble a Boeing 747 from the
material therein."
It's very common for people who are great experts, sometimes even renowned experts at the very peak
of their professions, to make fools of themselves talking about subjects of which they know less than
nothing.
Hoyle is the best single example I know of and the one I use most often to point out this very
common shortcoming.
For what it's worth, he would be RIGHT if the problem were the one of having a gazillion monkeys
typing at random and one of them eventually turning out Romeo and Juliet, correct to the last letter.
That involves getting every letter right in one try.
Evolution doesn't work that way. It's more like a poker game, in which you can discard cards you
don't want, and keep the ones you do, until you have a GREAT hand.
In a real poker game, discarding is usually limited to two rounds, but in real life and evolution,
the number of rounds is literally unlimited, the same as the number of generations. If you have two
pairs, you can keep on discarding until EVENTUALLY , assuming all the discards go back into the deck,
you have a full house. And given time enough, you could discard your pair, and eventually have four of
a kind.
YOU DON'T usually throw away a pair of aces, lol, even in a game that allows you to ask for a
redeal if you have no more than a pair.
Evolution is a blind, and runs on random chance, at the individual level and generational level,
but at the species level, it's a blind BUILDER, one that generally retains what works from one
generation to the next, and builds on it. Over time .. lots of time, usually.
But significant evolutionary change can happen in very quickly, in terms of evolutionary time.
House flies evolved resistance to DDT within the space of a single generation of humans, lol.
Biologists work with time on roughly the same scale as geologists and astronomers, counting in
billions of years. It's quite possible that life originated not too long after the first stars evolved
to the point that the heavier elements were first created from lighter ones.
• Talking Snake Au Jus (So fresh, you can almost hear it hissing!)
• BBQ Rib-Woman's Ribs
• Stuffed Cabbages for Christ
• Wing Pawn Garlic Prawns
Dessert:
• Apple Pie A La Mode (So sinful, one bite and you will be cast out of Eden, after you pay
your bill.)
• Tree of Knowledge Crepe Flambé (Ask about our Summer Forest Fire special!)
• Adam's Fruit Cobbler
Drinks:
• The Blood of Christ
• Holy Water Cider
• Milk of Holy Cow
• Cider-Marinated Free Range Chicken Wing Pawn Platter for Two
BTW, I just began my first ever apple cider home brew, Nov 30th . (I actually tried
making sauerkraut ages ago.)
What I did was buy half a liter of fresh-pressed raw organic apple juice, and then added
the peel of an organic apple to it for a wild yeast innoculation, and closed up top with a
simple cellophane wrap and elastic with a toothpick-prick hole on top for ventilation
I used
these instructions
and accompanying YouTube video, Eat The Weeds, episode 9.
So now the bottle is just hanging out in one of my lower kitchen cupboards, and we'll
see what happens. (Does it need light?)
I'll try to let POB know if it works and I get a good batch or if it throws a bad one
and I have to start over. I am unsure what a good or bad batch is supposed to taste like,
but I guess if it's tasty, then it's good.
Hi Survivalist, glad you enjoyed it.
Frank Lopez's Sub.Media channel, (which is probably where I sourced the
riot-porn-in-question from), its videos, have been picked up by PeakOil.com,
incidentally.
I'll admit that some of the riot porn was a bit dubious with regard to its 'methodical
randomness', but it could be from the younger 'anarchists' who may be still learning.
That's perhaps also why some of the Antifa members have sometimes gotten criticized for
their (apparent misplaced or misapplied) 'violence' tactics.
The image is of the
cider in question– about one litre. With the unwashed organic apple peel in it as the
only yeast 'starter', it's supposed to take 2 to 3 weeks to start bubbling. The pin you
see is to pop the hole in the plastic when it starts doing so.
If it throws a good flavour, I intend on keeping the yeast, and innoculating some
more juice but also some kind of straight-up water-and-honey or sugar mixture and see
if I can get pure alcohol or 'mead' or something like that from it, using freeze
distillation (a 'jack'). (And yes, I am aware of the methanol issue, but apparently, it
is not a big deal at this scale/amount, although I'll recheck it to be sure.) (You can
of course select the image for a larger image popup.)
If, when or as the 'trucks stop running', we may want– and have– to look into more
local/home-brewing and other locally-/homemade things of course. So we might as well
start sooner rather than later.
Once upon a time I provided health services to inmates in a prison. Generally speaking
I liked the inmates better than the guards, who for the most part were men who had
wanted to become cops but were too stupid to pass selection. I met some real
brewmasters (inmates) working that gig. Good luck with the brew.
Up early today and lit the shop woodstove; just waiting for light to get on with my day which always starts
(after chores) with my dog and I going for a walk.
Ron, I do not disagree with your post or comments, with
the exception of when population will peak and the aspect/timing of social disruption?
On this morning wait for daylight I have been reading various blog sites with CNN ticking over in the
background. Maybe it is the speed of the news cycle and my being used to the insanity of what is being
reported, but today, after seeing the Trump tweets on Muslim Violence (film clips), the so-called tax plan,
sexual misconducts, the recent reports on KSA, Yemen, Syria, and what is ramping up concerning North Korea, I
think we are at a crux right now. I think there will be a Market collapse and war; perhaps global in scale.
Further to that I don't see any desire or mechanism for defusing tensions or a way to recall the situation.
I am 62 and was a kid during a recent/last big social reset. I had older sibs and parents who moved us north
to Canada in '68 because they had had enough. My WW2 veteran parents proclaimed they had seen enough to be
afraid, and sold out to start over and build new lives. While I was thinking about it, and your post, I
realized that in today's situation there are no simple answers and not really any places to run to. It seems
different because of the population numbers and armaments, plus the willingness of people to pretend it's just
'tribal/crooked politics as usual'. Then, I thought about photographs and how a few catapulted us into rapid
change last century. Certainly, the haunted faces of the Dust Bowl sparked a move towards reform. Images from
the south and the stories of the KKK perhaps Rosa Parks herself helped galvanize the Civil Rights Movement. For
me, the image of the young lady holding the dead student at Kent State, (her anguish), the burning Monk and
young girl coated with napalm coupled with the lie about the Gulf of Tonkin incident pushed me into cynicism;
so much that I was not surprised about the non-existent WMD of Iraq.
Perhaps it won't be an image, or story that we look back to as a turning point. Maybe it will be a tweet.
Maybe it will be the Market collapse or a premptive attack on North Korea that sets everything in motion. I
just think we are loaded and tamped down like a pipe bomb ready to blow.
I do not think we will continue to grow in population until 2050. I think it could start to unravel pretty
fast and any day. I don't see any step back from war(s) in either the ME, or Korea.
From Wiki: (just one event that pales alongside today's triggers)
Kent State
"Just five days after the shootings, 100,000 people demonstrated in Washington, D.C., against the war and the
killing of unarmed student protesters. Ray Price, Nixon's chief speechwriter from 1969 to 1974, recalled the
Washington demonstrations saying, "The city was an armed camp. The mobs were smashing windows, slashing tires,
dragging parked cars into intersections, even throwing bedsprings off overpasses into the traffic down below.
This was the quote, student protest. That's not student protest, that's civil war."[10] Not only was Nixon
taken to Camp David for two days for his own protection, but Charles Colson (Counsel to President Nixon from
1969 to 1973) stated that the military was called up to protect the administration from the angry students; he
recalled that "The 82nd Airborne was in the basement of the executive office building, so I went down just to
talk to some of the guys and walk among them, and they're lying on the floor leaning on their packs and their
helmets and their cartridge belts and their rifles cocked and you're thinking, 'This can't be the United States
of America. This is not the greatest free democracy in the world. This is a nation at war with itself.'"
I apologize if this seems North American centric; and in blinders. I wish to reiterate that our population
numbers, plus increasing divide and disparity, proliferation of weapons and intolerance, coupled with
environmental degradation and Climate Change, makes this much much worse. It's a gun waiting for a trigger,
imho.
Yes, things are pretty bad. But things were bad during the Kent State/Nixon era. Yet we survived.
It has been my experience, following this biosphere destruction for many years now, that people who see
and understand the destruction, almost always expect things to fall apart real soon. They never do.
I once spent several months as a stockbroker. One thing I learned during that period was a truth about
insider traders. That is traders who trade the stock of the company they work for. They see things happening
inside their company and expect it to cause great trouble or great profit. They are almost always right and
almost always way too early with their predictions. Things just never seem to happen as fast as they
expected.
We, you and I and a few others, are insiders to this problem that I have described in my above post. We
know something terrible is going to happen. But most of us expect it to happen way before it actually will
happen.
An example is "The Population Bomb" by Paul Ehrlich. I think he was spot on, but things just did not
happen as fast as he expected. I hope to avoid his mistake.
Yep, Ron, and we need to be careful about saying "this time is different". Perhaps we need a list of
things that really are different this time.
One that should be obvious to anyone paying attention is
that, in the late 60s, US debt to GDP was in the mid 30% range. It is now over 100% according to a number
of sources. As Gail T. is wont to say, unservicable debt will likely be the trigger that results in a
cascading failure of financial systems, and everything else is likely to follow. In short, our financial
house of cards has grown three-fold in 50 years, as the global reserve currency is tagged to nothing.
They have been over 100% debt to GDP since 1999 and have been around 200% since 2014.
If Japan has collapsed, I missed it.
Note that I agree with the idea that when the US economy is doing well (which at present is the
case), that paying down debt is a better idea than reducing taxes. I would raise taxes if anything ( a
carbon tax would be ideal) and reduce the deficit to less than zero and pay down the debt.
Or just balance the budget and let economic growth reduce the debt to GDP ratio.
As for Japan, most of what they owe is to themselves while they own a lot of that US debt,
above. Japan also uses the carry trade to stay afloat.
I only posted this as being one of the things that is different about our situation ~50 years
ago. People can make of it what they will. I personally think it is significant since the world
runs on credit. No credit, no growth.
Also in the 1960s there was less borrowing by the government (so less credit) and higher
growth rates (at least in the US) than today.
In the old days there was concern the government would "crowd out" private debt, as if there
was some fixed amount of debt the system could sustain and the system always remained at this
maximum debt level.
Instead it seems the system had room for higher levels of debt as government debt as
increased, but there is little evidence of "crowding out". There may be some maximum debt level
that an economy can sustain and Japan may be there. Also note that 50 years ago debt was at
fairly low levels, but in 1946 Debt to GDP was 118% of GDP, rapid economic growth from 1946 to
1974 reduced this debt to GDP to 31%, by 1992 it was at 61%, and in 2016 it was 105%.
Strange that the Republicans want to raise the debt higher by cutting taxes, this made sense
when the economy was doing poorly during the Obama years and the aftermath of the GFC.
I agree debt could become a problem and would be worried if central government debt to GDP
was 200% (as in Japan).
I also don't buy into the unfunded liabilities argument, laws change and governments don't
always fulfill their promises, that is just a fact of life.
Personally I believe Tverberg is a person who has discovered a niche she can exploit and is making
a living out of it. I had the pleasure of seeing her make her canned presentation at a conference
once, where all the presentations were repeated several times over for three days so the entire
attending crowd could see them all.
If you ask her a real question, she seizes up like a deer in headlights. She knows some
elementary level stuff that is worth some thought, in the case of people who know little or nothing
about the overall economy and environment.
Her answer in the case of a real question is the same answer you get from a politician who
doesn't WANT to answer. She just pretends you asked a DIFFERENT question, and provides a stock
answer to THAT question.
She doesn't have anything to say worth listening to , in terms of the level of understanding of
the contributing members of this forum.
She does not deny AGW. She just doesn't think the effects of AGW are going to be our
biggest problem going forward, especially if we run low on fossil fuel flows in the near
future.
UK government debt to GDP was well over 400% for decades running; it was never a problem. Don't worry
about it. Government debt is not really debt, it's actually money.
Good point on the rate. I remember my grade 11 Social Studies teacher talking to me after class in 1972.
One of our class texts was The Population Bomb. He expected to see, in his lifetime, a collapse of sorts.
When I asked him to expand further he described small scale gardens/farms of no more the 2 acres. The
primary machinery used would be walk-behind tractors.
I smiled at the memory when I bought my BCS
walk-behind ten years ago. I smile every spring when I till the gardens. I still think he was right, just
off on the timing (just like I was when I got out of stocks several years ago and put my money in term
deposits.)
The older I get, the less I understand. I take comfort in knowing my Dad wouldn't get it, either.
I thought Ehrlich's book "The Dominant Animal"was fairly well measured, and generally in line with the
post above (I haven't read the population bomb).
Ehrlich underestimated the Green Revolution and Haber/Bosch factor that was really upping food
production at the time.
Ultimately, he will be proven right.
I met Ehrlich personally when he visited Va Tech sometime around 1972. Visiting scholars often have
smaller seminar meetings after making their presentation to the larger U community, which he did.
Not many people attended the particular seminar I participated in , probably less than a couple of
dozen. I was taking some ag courses there at the time, and enjoyed a long conversation with him.
You're dead on. He badly underestimated what we farmers could do, and are still doing, given the
necessary industrial support system that keeps industrial level agriculture humming.
Sooner or later . We are going to have to deal with the Population Bomb. The resources we are
devoting to industrial ag aren't going to last forever. Neither are nature's one time gifts of soil
and water so long as we are in overshoot.
I was head over heels in love with a milk and corn fed girl from Ohio and we were about ready to
join the Peace Corp or something along that line, and go someplace and save the people in some
backwards community by teaching them how to farm the American way all day and enjoy each other all
night of course.
But one of my crusty and profane old professors took me aside and asked me if I really wanted to
go to XXXXX and teach starving people how to produce twice as much food so that twice as many of
them would starve a generation down the road.
HE was right about the increase in production just resulting in more mouths to feed . back
then. Since then, things have changed dramatically . in SOME countries.
There are good reasons to believe that birth rates may fall dramatically within the next decade
or two in at least some of the countries that still have exploding populations. Maybe a few of them
will manage to avoid starvation on the grand scale long enough for their populations to stabilize
and decline.
It's too late for falling birth rates to prevent famine on the grand scale in a hell of a lot of
places.
First off, do I think it's technically possible that we can feed a population that peaks
around nine billion a few decades down the road?
This answer depends on how well energy supplies and the overall world economy holds up,
with some wild cards thrown in relating to climate, depletion of certain critical resources
such as fresh water and minerals such as easily mined phosphate rock, etc.
New technology and the reactions of the people to it will also play a big role.The role
played by governments local to national to international will be critical, and huge, because
only governments will have power enough to FORCE some changes that may and probably will be
necessary.
Here are a few examples.
It may be necessary to force well to do people aka the middle classes, to give up eating
red meat for the most part, so that grain ordinarily fed to cattle and hogs can be diverted
to human consumption.
(I expect rich people will still be able to get a ribeye or pork chop any time by buying
up ration tickets, or buying on the black market, or paying an exorbitant consumption tax, or
any combination of these strategies.)
Fuels, especially motor fuels, may be tightly rationed, so that enough will be available
to run farms and food processing and distribution industries.
Large numbers of people may be paid or coerced into going to work on farms or in community
gardens or greenhouses.
A substantial fraction of the resources currently devoted to other needs or wants may have
to be diverted to building sewage treatment infrastructure designed to capture and recycle
the nutrients in human sewage.
I could go on all day.
Bottom line, I think that barring bad luck, it is technically possible that we can feed
that many people that long, and for a while afterwards, as the population hopefully starts
trending down.
As a practical matter, I don't think there WILL BE food enough for nine billion.
It's more likely in my opinion that some countries are going to come up desperately short
of food, and be unable to beg, buy or steal it from other countries. Some people, and some
countries, are likely to resort to taking food, and other resources of course by force from
weaker neighbors .. maybe even "neighbors" on the far side of oceans.
I may be too pessimistic, but I'm one of the regulars here who think that climate change
for the worse, much worse, is in the cards, and I spend a few hours every week reading
history. Humans have always been ready to go to war, even without good reasons. A lot of
people in desperate situations are going to see war as their best option, in my opinion, over
the next half century.
Maybe my fellow Yankees will be willing to give up their burgers for beans so that kids in
some far off country can eat. I'm not so sure we are compassionate enough to do so on the
grand scale.
If total fertility ratios continue to fall (for the World they fell from 5 in
1965 to 2.5 in 2015) about a 1.38% per year, there may be no catastrophic collapse.
If that average rate should continue for 16 years then World TFR would be at 2 (below
replacement level) by 2031. If the rate of decrease in TFR experienced from 1965 to 2015 continues
for 35 years (to 2050), the TFR for the World would be 1.54 in 2050.
Based on UN data from 2015, 65% of the World's population had a weighted average TFR (weighted
by population) of 2.05, but a more sophisticated calculation using estimates of the population of
Women of child bearing age I have not done, I simply used total population to weight the TFR from
each nation which implicitly assumes the age structure of each nation is identical which is clearly
false.
Yeah, they shot white people. Can't have that. Nowadays the cops shoot three people on average every day in
America. Nobody cares, life is cheap in America. Gun deaths are the price of freedom. Native Americans run
about three times the risk of white folks, and black folks run about twice the risk.
It is obvious that humans are the major drivers of extinction on the planet. We are in the Sixth Extinction
event and we cause it directly and indirectly through our actions. the why is quite obvious, all species live
to propagate and expand to their limits, our limits are global at this point and so are our effects. I don't
see energy as much of a problem as there is plenty of it in various forms and we can obtain it if we want it.
That however means continuing the high tech industrial form of civilization which we have embarked upon. Can
that be made sustainable and much less harmful, even helpful? Of course it can, it's all about wise choices and
thinking before we act instead of just going for profit.
The loss of vertebrates is just horrible but the loss of invertebrates will be the undoing of our farming
and food production and much of the other life that depends upon them. The loss of insect life due to global
human generated poisoning of the environment, especially food production areas, will unwind much of the food
production.
As collapse starts, the chaos of riots and crime will rise sharply. All those mentally ill and drug addicted
people will no longer have their chemicals, causing a trigger point of violence and chaotic actions.
However the major fast cause of loss of human life will be disease. People forget how it was just a few
generations ago before antibiotics. Diseases will spread rapidly among the weak and starving, public sanitation
will fail causing more disease to spread. Clean water supplies will become absent, compromised or even
purposely wrecked. Hospitals will fail because of both being overrun and the power will fail plus supplies will
fail. Disease will grow and spread among both people and their animals. It could take less than a generation to
drastically reduce the population of the species, with the resulting loss of knowledge, technical ability and
industrial ability the cascade will go further.
In the bad case scenarios much of the infrastructure will burn putting up a cloud of aerosols and GHG's as well
as causing a large toxic pulse to the environment.
But on the other side humans are very inventive and determined to continue the system that supports a huge
population. So we may expand this time forward for quite a while, but only through smart choices and changing
how we do things such as agriculture, industry and technology. Smart choices, not choices just for profit.
Humans need not worry about the Falling EROI, the Falling Carrying Capacity or the degradation
of the environment. Those no longer matter now that BITCOIN is now trading over $11,000.
Technology will solve all our problems and Bitcoin will make us all wealthy once again.
Ron -- The full text of this paper in SCIENCE will cost you 15 bucks but in my opinion, is well worth it; below
is the Abstract. Commenters are welcome to talk about educating women, etc. but its too late for Africa for the
balance of this century. I have personally observed the situation in Central Africa where you can see a school
each containing about 1,000 kids located at roughly one-kilometer intervals along all significant roads -- a lot
of kids. Virtually all schools in Africa are run by churches (of all types), and you can guess what these guys
are teaching about birth control: I've asked, and the answer is NOTHING. AFRICANS LOVE KIDS. And, health care
has improved greatly over the past few decades meaning general health has been upgraded and infant mortality
has been reduced greatly. In fact, I would say the bulk of the UN's efforts in Africa are directed towards
improving general health at which they have been successful.
Sorry for the inarticulate ramble but this is a
rather personal interest of mine partly because our family is supporting a young girl in Uganda who will soon
become a medical doctor. I had promised to stop commenting on the Blog but the African over population crisis
issue is one dear to my heart.
WORLD POPULATION STABILIZATION UNLIKELY THIS CENTURY
"The United Nations recently released population projections based on data until 2012 and a Bayesian
probabilistic methodology. Analysis of these data reveals that, contrary to previous literature, the world
population is unlikely to stop growing this century. There is an 80% probability that world population, now 7.2
billion people, will increase to between 9.6 billion and 12.3 billion in 2100. This uncertainty is much smaller
than the range from the traditional UN high and low variants. Much of the increase is expected to happen in
Africa, in part due to higher fertility rates and a recent slowdown in the pace of fertility decline. Also, the
ratio of working-age people to older people is likely to decline substantially in all countries, even those
that currently have young populations."
There is an 80% probability that world population, now 7.2 billion people, will increase to between 9.6
billion and 12.3 billion in 2100.
I think you are about 237,500,000 too low with your estimate of
world population. Well, that was as of a few minutes ago. It was 7,437,500,000 last time I checked.
World Population Clock
However, I think the UN is way off on their population projection. I believe that world population will
reach 9 billion by 2050, just about a billion and a half above where it is now. However, I doubt it will
ever go much above that. The UN, of course, is predicting no catastrophes. After all, that's not their job.
The UN systematically underestimates the fall in birth rate associated with better education for women
and their access to health care and contraceptives.
My work suggests that the world runs out of more land that can be put under grain by 2035. This is
mainly Brazil and Russia. Just about every country in Africa is importing grain now. Therefore most
of their population growth has to be fed on imported grain. Most of the costs in producing grain
are in energy so a rising oil price will have a leveraged effect on food prices.
Yes Africa is indeed a problem as far as population growth. With education and improved access to health
care and internet access on smart phones, African women may become empowered and decide to control their
fertility using modern birth control. The transition to lower fertility can happen in a generation.
As an anecdotal example, my family and my wife's averaged a Total fertility ratio (TFR) of 5.5 for the
two families (close to the average sub-Saharan TFR), the next generation of 11 children in total had a total
of 6 children for a TFR of about 1.1.
Unscientific and likely too optimistic, but not that different from what occurred in the upper middle
income nations of the World (population about 2.4 billion in 2015) where TFR decreased from 4.93 in 1975 to
1.93 in 2000 a period of 25 years.
It is the low income nations that have lagged in reducing TFR, economic development is a key ingredient
to getting population under control. Easier to say than to accomplish.
Dennis – I guess this site is rightfully energy-centric but what's your view on the other limits that are
showing up like potable water, top soil, phosphorus?
I think recycling human waste might help with top soil and phosphorus, though a Farmer
would know more than me. I think recycling water from sewers can also be done and eventually the
expansion of solar power may allow desalination of sea water.
In short, I think there are solutions to these issues, especially as we move to more sustainability
(less beef production would help) and a peak in population as education levels improve would also
help.
Some nations such as Iran have made amazing progress on their TFR, from 1990 to 2005 (15 years) the
TFR fell from 5.62 to 1.97 and by 2015 it had fallen to 1.75.
African nations should find out what happened in Iran over that period and import some of the
lessons learned.
Note that there are many examples of a rapid demographic transition, another is South Korea where
total fertility ratio (TFR) decreased from 5.63 to 1.60 from 1965 to 1990 and in 2015 had fallen to
1.26.
Using South Korea as an example of increased sustainability (the point here?) is not helping your
case much Dennis. As their TFR decreased, their consumption grew exponentially. Just since 1991:
Seems their per-capita energy use has skyrocketed in the last 60 years or so, and they now
import most of their energy sources. They became 9th in CO2 emissions as of 2005. Looks like
increased standards-of-living and declining birth rates are not much of a solution for reducing
planetary impacts.
I agree. The point was that population growth can be reduced.
We need two things to happen, reduced use of fossil fuels (which peak fossil fuels will take
care of by 2030) and reduced population (which peak population in 2050 to 2070 will take care
of).
Figure below is from page 1153 of the article linked above.
Note that in 2015 the TFR for South Korea was 1.26, if average life expectancy does not rise
above 90 years and World TFR falls to 1.25 by 2100, then World Population falls from 8 billion
to 2 billion in about 100 years. This reduces the use of resources and the pressure on other
species.
Transition to wind and solar with pumped hydro, wind gas, and thermal storage backup can
reduce carbon emissions and reforestation as population falls will help to absorb some of the
carbon in the atmosphere. Carbon capture and storage of burned biofuels and cement that absorbs
CO2 would be other options for reducing atmospheric CO2.
As fossil fuel peaks prices will rise and the transition to non-fossil fuel will speed up.
The process will be messy, but we are likely to muddle through as there is not much
alternative (or not a better one as I see it.)
I think a common factor in all countries seeing large falls in birth rates is that they are
preceded by large falls in death rates. This typically takes a couple of generations, which is one
of the biggest causes of population overshoot. In Iran it was maybe a bit faster but not much –
from above 20 per 1000 in the 50s and 12 in the eighties to around 4 now.
Regarding fertilizers, when you realize that there was a "human bones" market in the 19th century,
and that for instance England "emptied" the catacombs in Sicily for that, or took back the soldiers
bones from Waterloo, you get a sense of the urgency for fertilizer without phosphorus or natural
gas based ones.
See for instance below :
"England is robbing all other countries of their fertility. Already in her eagerness for bones, she
has turned up the battlefields of Leipsic, and Waterloo, and of Crimea; already from the catacombs
of Sicily she has carried away skeletons of many successive generations. Annually she removes from
the shores of other countries to her own the manorial equivalent of three million and a half of
men Like a vampire she hangs from the neck of Europe."
https://livinghistoryfarm.org/farminginthe40s/crops_04.html
Or below :
https://medium.com/study-of-history/the-bones-of-waterloo-a3beb35254a3
I had a better link
regarding the bones from Sicily catacombs (many due to the plague epidemia I think), but cannot
find it back.
And this page above (from "Justus Von Liebig : the chemical gatekeeper" p 178) is also
interesting on other aspects, suggesting Liebig would today address energy ..
The churches which promote childbearing must be destroyed. They are basically the enemies of humanity. Since
they're losing in North America, Europe, South America, and most of Asia, they are targeting Africa.
(And *targeting* is the correct word -- they are deliberately sending missionaries to spread their sick,
twisted doctrines and spending lots of money to do so.)
If you read my story below, Food for the Poor is a religious group. In Jamaica I believe it is affiliated
with
Missionaries for the Poor
, an
international Catholic organisation. So while they are doing yeoman service in providing shelter for poor
folks, they are doing diddly squat to encourage poor folks to stop creating more mouths to feed and
bodies to clothe and shelter. Isn't that just dandy?
Incidentally here's a recent newspaper article
from my neck of the woods:
Youth unemployment in the Caribbean is said to be the highest in the world, and crime, partly
fuelled by this high rate of joblessness, is a major obstacle to economic growth in the region, according
to Christine Lagarde, managing director of the International Monetary Fund (IMF).
The IMF boss, who addressed the sixth High Level Caribbean Forum, held yesterday at The Jamaica
Pegasus hotel in Kingston, said that crime imposed several economic costs such as public spending on
security and the criminal justice system, as well as private spending on security. She also highlighted
social costs arising from the loss of income owing to victimisation and incarceration.
Can anybody spot my comment? Hint: I used a pseudonym that should be familiar with everybody here.
Can we be so unpolitical correct to call for "A Pope onA Rope?"
Someone must draw a line in the sand- or should we all be under a religious spell?
Or do we want to break that spell?
This was discussed just this morning on NYC NPR, concerning homelessness and the housing provided for
low income people. The gist of it was that although there were programs to help the people with food
and housing, very little was really being done to solve the problems.
"This uncertainty is much smaller than the range from the traditional UN high and low variants. Much of
the increase is expected to happen in Africa, in part due to higher fertility rates and a recent slowdown in
the pace of fertility decline. Also, the ratio of working-age people to older people is likely to decline
substantially in all countries, even those that currently have young populations."
I have the
impression that many of us myself included have an outdated and still colonialist view of African societies.
I think changes happening in many parts of Africa will surprise us and technologically leapfrog over much of
the built infrastructure of the OECD countries. I have seen it happen first hand in previously
underprivileged parts of Brazil.
How we're using drones to deliver blood and save lives
Keller Rinaudo wants everyone on earth to have access to basic health care, no matter how hard it is
to reach them. With his start-up Zipline, he has created the world's first drone delivery system to operate
at national scale, transporting blood and plasma to remote clinics in East Africa with a fleet of electric
autonomous aircraft. Find out how Rinaudo and his team are working to transform health care logistics
throughout the world -- and inspiring the next generation of engineers along the way.
BTW, I have a serious question! Does this kind of technology make the population crisis in Africa better
or worse? Would like to hear some thoughts on the matter.
It is uncanny how this lead post has come about just when I have been thinking about this subject recently. I
am currently very depressed, to the point I suspect it may be clouding my better judgment with respect to
various matters. This depression is partly caused by my views of the future of my little island in particular
and the world in general. Let me try and illustrate how my thoughts have been brought into focus recently.
I
travel around the city I live in, passing through all the different types of communities from time to time. We
have pockets of extreme wealth as evidenced by palatial homes with swimming pools, tennis courts and all the
creature comforts you would expect in the home of a wealthy first world resident. Leaving these pockets of
extreme wealth, one doesn't have to drive for more than five minutes to reach pockets of extreme poverty,
people who are so poor, they cannot pay rent and cannot envision ever buying a plot of land or a house, so they
build structures on any piece of land that they can get away with. This type of activity extends across the
island and there is no area that does not experience informal settlement (aka squatting). There is a political
aspect to this, in that in an effort to garner the votes of the large voting block that poor people make up
succesive governments have not discouraged squatting, to the point of encouraging it. See
yesterday's cartoon
in one
of the local rags for a satirical perspective of the situation but, I digress.
I try to avoid too much contact with people outside my socioeconomic and educational class because it
inevitably leads me to being depressed but, sometimes I end up in that exact situation. This past Monday night
was one such case and it was my observations from Monday night that got me thinking about Peak Oil and carrying
capacity and overshoot. I was invited to visit a gathering and told to bring drinks and that they were going to
cook so, I decided not to eat a meal before leaving the city. It was a forty five minute drive, including a
drive through late evening heavy traffic heading westward out of the city, past a big highway construction
project being carried out by a Chinese (honest to God, from China) construction firm that has been active in
the island for a number of years. On arriving at my destination I was told by my host that the gathering was at
another house less than half a mile away.
This particular house was one of
39 houses made possible by the efforts of a couple from Grand Junction, Colorado (with pics)
along with
the local branch
of
Food For The Poor
. I estimate that, these "houses"
measure about 13ft. by 15 ft. inside and are supposed to include a kitchen, a bathroom and two bedrooms. The
sister of my host was the recipient of this house, being qualified for the charity as a result of being
unemployed with four children, one of whom was either newborn or yet to be born at the time the house was
handed over to her. She was not yet thirty years old when her last child was born. Does anybody see where I am
going with this yet?
Back to the gathering. On arriving at the house my host informed that no food had been cooked. By this time
I was hungry and asked where was the nearest cook-shop where I could purchase a meal. I traveled with my host
to Old Harbour, the nearest town apart from Spanish Town. I can only describe Spanish Town as an overpopulated,
crime infested, thug controlled mess, that becomes a ghost town by midnight even though it is surprisingly busy
by day. I asked my host if I should buy a meal for them also and they declined but, by the time we got back to
the house, they declared that they were hungry and needed to get something to cook to go with the rice they
had. So off we went to try and find a local shop that had what they wanted and was still open. First one was a
24 hour joint, built using an old cargo truck body but it didn't have all they wanted so it was off to another
one that we managed to catch just as they were closing. We came away with a small packet of "veggie chunks" and
some cooking oil. The little propane stove had been fired up and the rice was almost done so in less than
fifteen minutes a meal of rice and veggie chunks was being served to four or five adults, one of whom had an
infant, less than a year old, sharing the meal with her.
So let me weave together how all of this ties in with the subject of the lead post. First the "house" was
only possible through the generosity of citizens of a first world, developed country. The materials that made
the house (lumber corrugated, galvanized steel) are the products of extractive industries that rely heavily of
FF, petroleum in particular. The soft drinks and alcohol that I brought to the gathering were manufactured,
distributed and retailed in a system, heavily dependent on external energy. My vehicle runs of diesel. The rice
for the meal I ate and the one at the house was imported from outside the island, again produced and delivered
with lots of help from petroleum. The chicken I ate was locally produced with imported grain, a product of
industrial scale agriculture, probably in the USA. Thankfully many of the chicken farmers are involved in a
project that started with
15 kW systems
at about 40 chicken farms
and seems to be expanding. The veggie chunks are a meat substitute protein made
from soy meal, again a product of industrial scale agriculture.
The cooking oil was probably one of soy, palm, canola, corn or coconut oil, produced at an industrial scale
and imported to the island. Jamaica was once an exporter of coconut oil before the industry was decimated by a
disease called lethal yellowing back in the early 70s. Virtually the entire population of coconut palms on the
island was wiped out by this disease and even though efforts have been made to resuscitate the industry using
disease resistant varieties, more than forty years on, the manufacture of coconut oil in Jamaica is a tiny
cottage industry.
So here we have five or adults, two males and three females, one of which had four children with the other
two having one each. There were other people at the gathering but as far as I am aware only two had jobs, the
brother of my host who left before the meal and the woman with the infant who has a part time job selling lotto
tickets. All of these people are living on the edge, heavily dependent on a system that is in danger of
collapse for their very survival and they are far from alone. there are thousands of them if not hundreds of
thousands on this island alone.
If for whatever reason industrial scale agriculture fails, the songbirds are going to be eaten out of the
trees. I used to dissect rats in my sixth form (12 and 13th grade) biology classes and there ain't much meat on
them but, if we get hungry enough maybe we'll turn on the rats. Without affordable propane, every tree and
shrub will end up as firewood. This is the reason why I have an almost obsessive focus on renewable energy,
solar in particular. It is my hope that the deployment of renewable energy can stay ahead of FF depletion long
enough for global civilization to transition away from FF. It is my hope that our civilization, seeing itself
on a real time, renewable energy budget, will begin to recognize the fragility of our situation. I have to ask
Ron and others to forgive me as I continue to bring attention to the hopeful stories. It is the only way I can
keep myself from sliding into depression and despair. It is the only way I can cope.
The Green Revolution in the 60s was supposed to solve all our problems, and it solved a lot of them,
especially in Europe and Asia. It works well when you have a lot of water and farm intensively, but is
destructive in semi-arid conditions and when used in extensive agriculture, like the American Midwest.
After the Green Revolution, Asia boomed and Africa fell behind, prompting racist theories. Geography and
climate are more likely explanations. In India, for example, the more arid north did less well than the
wetter south. The Chinese were the first to realize the problem, and started a new generation of re-greening
projects to boost agricultural production.
Meanwhile bad farming practices continues to rapidly degrade wide stretches of North America and South
America. I was reading recently about a county in SD that lost 19 inches (not feet!) of topsoil between 1960
and 2014. Many places in America simply abandoned farming, like New England and Appalachia. People blame red
dirt and the crick risin' in Appalachia and glacial rocks in New England, but that wasn't a problem before
soil degradation set in.
The Green Revolution focused on genetics and chemistry, which makes sense if applied correctly.
Development economists were puzzled that Kenyan farmers were uninterested in high yield seeds, but the
explanation as simple: They need a regular water supply, not better seeds. A lot of places in the world get
3-4 weeks of rain a years, and good seeds don't solve this problem. Pumping the water out of the aquifier
isn't the solution either, just ask anyone in Antelope Valley CA, a former grassland turned desert by the
alfalfa farmers.
My mother warned my to watch out for flash floods when camping in the desert. It took me decades to
understand why flash floods are a particular problem in the desert: More or less by definition, deserts are
places where there are flash floods. The flash floods are both cause and symptom of soil degradation.
Deserts aren't places where there isn't enough water -- they are places where rainwater runs off the surface
instead of seeping into the soil. Degraded soil can't absorb water fast enough, surface runoff degrades
soil.
The problem with industrial agriculture is that it treats the great outdoors like a hydroponic farm -- it
ignores soil ecology and just assumes the hydrology will work itself out.
A more modern approach starts with water and soil. It's spreading rapidly in Africa, for example with the
sand dams in Kenya, the terracing in Ethiopia and Kenya, and the various planting pit (like zai and
demi-lunes) in the Sahel and agroforestry (planting trees in fields, or crops in orchards) in a lot of arid
places.
It's true that mankind is pushing the limits of what the current ecosystem can carry, but it's also true
that the ecosystem could be much bigger than it currently is.
Meanwhile bad farming practices continues to rapidly degrade wide stretches of North America and South
America. I was reading recently about a county in SD that lost 19 feet of topsoil between 1960 and 2014.
There is a serious problem with that statement. No place on earth has 19 feet of topsoil, not even 19
inches over an entire county.
Topsoil
Wikipedia
Topsoil is the upper, outermost layer of soil,
usually the top 2 inches
(5.1 cm)
to 8 inches
(20 cm). It has the highest concentration of organic matter and microorganisms and is where most of the
Earth's biological soil activity occurs.
EDIT: Here's a shot from Kalkriese, Germany where they are
digging out a Roman-German battlefield. The artifacts are all found at or just below the border
between the black topsoil and the red dirt underneath it -- that was 7 BC
In the Kalkriese area, the farmers used sod planting ("Plaggendüngung"), i.e. they removed the top
soil on large areas to improve the soil on their fields.
Therefore, Kalkriese is an example how
NOT to do it.
I think the thickness of the topsoil in the area speaks for itself.
My point is that as Ron
points out, there is a limited carrying capacity for the planet, but I don't really think we are
there yet, because there are relatively simple methods available to make huge areas of the
Earth's surface. Of course, even if it's possible, it isn't clear it will happen.
there are relatively simple methods available to make huge areas of the Earth's surface.
That seems to be an incomplete sentence. Make huge areas of the Earth's surface
what
?
Desert? We sure can do that. We are doing more of that every year. Scrubland? We are doing
that also by cutting down the forest and trying to make farmland out of it. After a few years
the land will row nothing of value. That's happening in the Amazon right now.
There is nothing we can do to increase human habitual area without reducing the wild
habitual area. That is what my post is all about. We are destroying every wild thing by
destroying their habitat, by taking their habitat for ourselves.
Your last paragraph is not correct. Much of the world is desert, and that
desert could be much more productive than it is, given the right agriculture methods.
Whether that will actually happen is another question of course.
That very same first world country that donated the materials has plenty of homeless and large amounts of
poor. It also has large amounts of empty buildings and huge amounts of food waste, yet they do not take care
of their own. That is even a sadder situation as people freeze to death, starve, and die of simple
preventable health problems in one of the richest countries in the world. Basic needs are not met and the
governing bodies are constantly fighting to reduce the paltry benefits that are given. It's a country full
of hate for their own people and hate back at the haters.
There's no inherent evolutionary advantage to caring for people you have no relation to. That's the real
reason why all of these 'safety net' programs you describe are hated in the general sense and under
attack as time marches on.
Now Tony, we all know the public programs are under attack because of the greed and selfishness of
people who already have too much money and stuff.
We all know it is the greed and the overconsumption that is causing the destruction of our environment
and possibly the whole human race. That is a huge evolutionary disadvantage.
Helping, sharing and cooperating is the advantage. The selfish and greedy are like ticks sucking the
world dry for their own personal benefit.
I study the evolution of human ultra-sociality and the role of culture in enabling it.
I
am especially interested in how humans evolved the capacity to cooperate with millions of genetically
unrelated individuals, and how this links to the origins of moral sentiments, prosocial behavior,
norms, and large-scale warfare.
To address these issues, I combine formal modeling of the
evolution of cooperation with fieldwork among the Turkana. The Turkana are an egalitarian pastoral
society in East Africa who cooperate, including in costly inter-ethnic raids, with hundreds of other
Turkana who are not kin nor close friends. Through systematic empirical studies in this unique
ethnographic context, my research project here aims to provide a detailed understanding of the
mechanisms underpinning cooperation and moral origins.
I haven't read your good article just yet (although it is doubtful any of it will surprise me or add
to what is already more or less understood), but just to mention that I recently listened to a
podcast
from Chris Martenson's site, Peak Prosperity, featuring William Rees from the University of BC
Two things about the podcast that stood out was that William was in fine form (articulate, clear, concise,
passionate, 'deathly' serious, etc.); and the second was his mention of possibly fundamentally changing the
natural system of Atlantic cod (fisheries), so that they may never recover. Not everything can simply reverse,
and quickly enough, if they can, such as, say, with the depletion of the ozone layer, and when it involves all
kinds of living systems– much, and the intricacies/complex interconnections, of which we are blissfully unaware
of, despite some of our arrogant pretensions to the contrary (such as with regard to the avocation of most if
not all forms of geoengineering)– it is very serious.
What concerns me also is how some people, such as on this site, can ostensibly claim a required greenwashed
BAU from out of one side of their mouths, while on the other side, express grave concerns for the ecosystem. We
cannot have it both ways.
To me, much greenwashed BAU is just swapping out different forms of rampant resource extraction, pollution
and inequability for other forms.
The system, along with its 'power-politics', is still intact.
IOW, there is no real change.
Loren, assuming that's you, I am certain that radical decline, if not outright collapse, is already well
underway, despite the obstinate mindlessness of some people. Just because some don't see something or want to
see something doesn't mean it is not there.
My simple recommendation, especially for certain people WRT this deathwish-for-a-culture is to
let go/
get
out
(and in the process, learn things like permaculture and local community resilience, and how our
ancestors did some of it). Your comforts are much of an illusion (and predicated, for example, on natural
draw-down).
I knew you'd show up sooner or later and since you've always been critical of my support for renewables and
EVs, let's bite.
"To me, much greenwashed BAU is just swapping out different forms of rampant resource
extraction, pollution and inequability for other forms.
The system, along with its 'power-politics', is still intact.
IOW, there is no real change."
Are you saying that "there is no real change" going from corporate owned, centrally located, large scale,
FF fired generators to small scale, individually or community owned, distributed renewable generators? If
so, that's not what the FF and corporate generator class in Australia thinks. They have captured the
Australian federal government and are fighting renewables as hard as they can.
Are you saying "there is no real change" going from ICE powered vehicles to EVs that, are perfectly happy
to suck electrons from any source including renewable sources individually owned or owned by a co-op of
which the vehicle owner is invested? That's not an opinion shared by the Koch brothers who are spending
millions of dollars to try and paint EVs in a bad light in the eyes of the public.
Surely you realize that an individual with solar on their roof and an EV is giving a big middle finger to
the status quo, including FF corporations and utilities who will no longer be able to feed at that
individual's trough. In case you don't realize it, that is a very big disruption of "system, along with its
'power-politics'" and no, in case you haven't been listening, "The system, along with its 'power-politics'",
will not be "still intact."
Now if you read my fairly long narrative further up, I hope the point I am trying to make does not escape
you. That point is that there are millions, no lets make that billions of poor poorly educated folks who
depend on things like industrial agriculture and the current status quo for the basic necessities of life,
food, clothing and shelter. If the status quo collapses they are dead, let me say that again, dead! I'm all
for dismantling the status quo and replacing it with something that is much kinder to all life on this pale
blue dot we call home but, I shudder at the thought of millions or billions of human beings starving to
death, just as I shudder at what we are doing to the biosphere. Can you see why I'm depressed right now?
There is no real change if we are still relying on the monstrosity
that is the crony-capitalist plutarchy/government-big-biz symbiosis, such as for solar panels, etc.
and/or what some misleadingly refer to as 'renewable'.
If you are in the biz– and I think you wrote hereon that you indeed are– then some might suggest,
maybe even me, that you are, say, 'soft-shilling' and/or rationalizing for your product using POB as your
platform, and maybe problematically skewing the narrative a little more towards a dystopic system that we
should be getting the hell out of, while making preparations to do so, like learning how to do the basics
in a local, resilient context so that we do not need industrial agro. The longer we rely on industrial
anything– and as if it's somehow morally/ethically neutral– the harder/faster we will likely fall, maybe
along something of a seneca curve.
We cannot eat solar panels and electricity is not a necessity, except to for the brainwashed and the
brainwashers.
Attempting to play on people's heartstrings, such as about poor people in so-called undeveloped locales
to sell a product they don't need and that would risk locking them– and others– into a certain
('Western') lifestyle, in some contexts, approaches contemptible, by the way.
You should already know how sociogeopoliticultural ideologies like Westernisation is foisted upon the
global masses through physical, cultural, mental and intellectual colonialism, with the result often
being wars and deaths to people and traditional ways of life. Just consider the Middle East right now. In
the name of what? Oil and oligarchy?
You've said it yourself hereon that you have some kind of slavery in your family, yes? Well, many people
are still slaves anyway, if with coats of white paint. Libya was in the news recently about that–
slavery– incidentally.
If we want to do solar panels etc. the right, ethical ways, we need sea changes, such as that avoid
slavery and privilege-by-gun, but I highly doubt we will manage them in time, and suspect that we are
already long past that time.
I am not yet in the business of doing anything with solar PV so, as of right now I have no product
that I am shilling for, soft or hard. I am in a business connected to entertainment if you must know.
The entertainment business can by no means be classified as non-discretionary and recent technology
has allowed far more people to compete with me so it will be necessary to get out of that at some
point. How about viewing this as something I see as as worthwhile pursuit for the future of mankind,
given my skill set and thus my advocating it as a worthwhile area for me to pursue a vocation in? I am
not only advocating for solar PV because it's a field I can participate in but, because I think it can
contribute a great deal to reductions in carbon emissions among other noble aspirations.
Are you
going to start suggesting that I want to get into the business of manufacturing and selling EVs just
because I am suggesting that large scale EV adoption would be a good thing? I ain't no Elon Musk if
that's what your thinking. Now, if the shit hits the fan and motor fuels became really unobtainium, I
might take a stab at an EV conversion business, a la Jack Rickard but, right now even Jack seems
disillusioned with that pursuit, having posted only one new video since the middle of August and only
two new blog posts since the last week of July. At any rate the necessary preconditions for such a
business to be successful in an age of factory made EVs, do not exist.
I am with OFM on the point that some of your ideas for agriculture cannot adequately serve the
needs of a rapidly growing population of 7.5 billion people. My dad who was a descendant of rebel
runaway slaves, known in Jamaica as
Maroons
, was into
agriculture and left me and my surviving sister a six acre homestead when he died. I can tell you
agriculture ain't a walk in the park. It's damned hard work and carries all sorts of risks not faced
by other pursuits (droughts, thieves, diseases pests etc.) . You seem to have some romantic view of
agriculture that I do not share.
As for locking people in to a western lifestyle, that doesn't apply to Jamaica. The western
lifestyle came with colonization and slavery. Do you think that people outside of the developed word
should forgo electricity, computers, cell phones, the internet and other modern conveniences?
Despite all of that, the Caribbean has been bucking western culture for centuries. Trinidad and
Tobago has their carnival and it's music and Jamaica has had as big an impact on western culture with
our music (reggae and ska) as western culture has had on us. Even this past weekend, a dark skinned
Jamaican woman sporting a huge afro, placed third in the Miss Universe pageant. The girl that won was
from South Africa and could pass for Caucasian whether she is or not and I didn't see any other black
women in the contest sporting an afro hairstyle (not that I watched it).
When it comes to some things, that train has already left the station. No point in romanticizing
about what could have been. I'd rather focus on what small steps we can take to improve things in the
here and now, while moving us to a more sustainable future. I will probably remain depressed until the
new year. Probably more to with not having any immediate family around for "the festive season" than
anything else. Maybe the new year will bring some good news on the renewable/sustainability front!
That would cheer me up!
Islandboy–
After being in Central America for quite a while, and that heavy Catholic noose around everyones
neck, it was so liberating to get out to the islands.
Lets Party Mon!
Now you're talking! We in the Caribbean know how to party! I wouldn't be surprised if we woke up
the morning after the collapse and said, "Collapse? What collapse? We were too busy partying to
notice"
Having said that, Trinidad is heavily influenced by catholicism, their carnival being associated
with the catholic observance of Lent. I don't see any evidence of the Trinis (as they are known
in the islands) taking the admonitions of their various religious leaders too seriously. Hell!
I've never been to Trinidad carnival but, I hear it's one wild party!
On the other hand, Trinidad should have some long term concerns about what they are going to
do after Oil and Gas production fall below consumption and they have to start importing
hydrocarbons. What if either prices are too high or supplies are limited? What if prices
collapse due to lack of demand as Seba suggests will happen after EVS and solar begin to
dominate transport and electricity generation?
Way too early to say. The article dated October 4, 2017 says this:
"The feasibility
study will evaluate the viability of installing the wind farm, which would represent one
of the first offshore wind installations in Jamaica and the greater Caribbean region."
I expect the feasibility study is going to take months and I would expect them to do
some detailed analysis of the offshore wind resource in the process. It is good that this
study is being done so soon after two devastating hurricanes have hit the region. Should
keep hurricanes very much in the picture.
Looking at some Caribbean buoy data it looks like wind would be a good source of power for
the islands.
Beside the wind, the island has about 54 billion kwh/day of sunlight falling on it. That
is more than ten times the total energy production per year for the island. Energy is not
a problem, how the energy is generated is the problem.
Cover less than 0.1 percent of the island with solar panels and make up the difference
with wind power.
I have done some numbers in terms of what it would take to power the island entirely
with renewables, mostly solar. Not impossible but the technocrats, one of whom is a
college classmate of mine, cannot wrap their head around 100% renewable electricity!
Incidentally, I came across a video presentation on Youtube (with a really annoying
backing track) that at about
3 minutes in
contains
the following text:
"Seba's forecasts are predicated on the assumption that the cost of generating and
storing electricity will continue to fall – to the point where just about all
generation will be solar by 2030. But electricity production would only have to
increase by 18 percent in the US to cope with a complete switch to EVs, he said"
That 18% figure squares quite nicely with some back of the envelope calculations I
have done.
I've made good friends with a couple of guys from Jamaica who have friends and family here
that have managed to get their permanent paperwork taken care of.
Unfortunately it doesn't
look as if they will ever be able to get permanent resident status. They're older guys, and
about as mellow and fun people to be around as I have ever met. They come up for an extended
family visit every fall, which just HAPPENS to be the time of year local farmers need a lot
of extra help, lol.
As soon as I'm finished with family duties, I'm going down to spend a month with them.
Will be spending some money on food and utilities and a few new nice things for them of
course, because while they're friends, they're not well off.
We cannot eat solar panels and electricity is not a necessity, except to for the brainwashed and
the brainwashers.
Than do the world a favor and unplug yourself from all sources of electricity!
At least we here won't have to read your fantasies!
BTW there are plenty of people who understand that the current capitalist system is not the answer,
read Kate Raeworth's, Donut Economics for starters.
Modern humans could no more live without electricity in the 21st century than they could live
without food and water. Try living without refrigeration in any city in the world. You would cause
massive starvation in a few days. Try providing medical care to an urban population without
electricity.
You have to be completely delusional to suggest that electricity is not a necessity!
That's all irrelevant to my point which still stands– especially when the system is destroying our
planet. We have lived with electricity for a relative split second of our existence as a species on
this planet.
Besides, if we're not treating the planet properly, do we even deserve electricity and its
conveniences? I think not.
And then there are assorted uses for electricity, some being more
questionable as priorities than others.
Electric car versus fridge?
FWIW, I have personally lived without refrigeration for months in a major city, at least at home
after shopping at the grocery store LOL, but also in the country– more hard-core.
If your local community especially is growing and processing its own food, then it's easy.
There's pickling, drying, fermenting, spicing/salting, alcohol, etc., and natural cool-storage,
such as root cellars and simple cooling-by-evaporation systems.
There's also 'eating as you go'. Other animals do that, and I've never heard of an animal that
needs a fridge or electricity, have you? Maybe your cat at home, but even Meow Mix can last outside
the fridge, yes?
But some of us have to actually help make the changes, such as to the narrative, and limit the
cling to some kinds of BAU narratives and fantasies.
Do it for Mother Earth, Fred. Or me. Or Harvey Weinstein or whoever/whatever motivates you.
Coral.
Obviously, we can't just turn off the lights and fridges overnight, but there are plenty of ways
to manage, maintain and consume food that don't require a fridge. So if we can't just turn off the
lights and fridges overnight, maybe we should start talking more about how to live without them
and/or with greater resilience.
But even if the juice stays on forevermore, some juiceless skills and knowledge are great to
learn, have and apply.
BTW, I just watched
this documentary
on rare earths– the apparently highly-polluting stuff that's supposed to help power, until they run
out, all these new and relatively-useless electrical gadgets now and in the future to get off of
those other pollutants.
but just to mention that I recently listened to a podcast from Chris Martenson's site, Peak Prosperity,
featuring William Rees from the University of BC
Highly recommended.
And I'm not a fan of some of Martenson's guests.
I came across the podcast indirectly via another site, but do sometimes run into Chris' material. He
seems good at interviewing and is easy to follow in videos.
This post is going to be a gold mine for me, because it relates directly to so much of what I'm working on for
publication in book form if I ever manage to finish it to my satisfaction. Here's hoping it attracts over a
thousand comments, lol! I'm especially interested in comments that dispute my own, because those are the ones
enable me to understand my own blind spots.
Now so far, nobody has said anything about what I will refer to as the SECOND key fact that one must understand
to understand evolution. Hoyle missed the first one altogether, making a total fool of himself, although he was
a brilliant scientist, one of the top men in HIS field, his mistake being that he failed to understand that
evolution BUILDS on it's PAST " accomplishments".
The second key fact I am hereby pointing out is that while evolution creates new life forms that reproduce
to fill any and all available niches, there's no GUIDANCE involved, no overall PLAN, no GOD in charge, if you
wish to put it that way.
Evolution is characterized in large part by parsimony, by being conservative in the use of resources.
Animals that don't have use for claws don't have claws like tigers, lol, and animals that don't eat grass out
in the fields don't have digestive systems like COWS. Evolution creates organisms that are "good at" taking
advantage of whatever resources are available, WITHOUT REGARD ANY FUTURE CONSEQUENCES because there is NO LONG
TERM PLAN. Behavioral BRAKES that aren't needed don't evolve, lol, and countless things that would be extremely
useful, like eyes in the back of our heads, which would keep us from being attacked from the rear, don't often
evolve either, because .. well because of more factors than I have any inclination to cover at this minute.
Half of the SHORT answer is that eyes in the back of our heads would cost us more in terms of sacrificing
something else than they would gain for us. The other half of the SHORT answer is that since pure chance plays
such a big role . the odds are astronomically high against it happening anyway.
This a comment/ rant, not a BOOK. The BOOK is in the works, and will be available free to member of this
forum who may want to read it and point out shortcomings in it before I publish it, most likely for free on the
net. I'm not so arrogant as to think anybody will PAY for it, lol.
Dead ends, blind alleys, and death, at the individual level, and or at the species level, means absolutely
NOTHING to "Mother Nature" because she is not sentient, she's not moral, she's not even ALIVE in the usual
sense. She's just an artifact, a tool, that we naked apes have invented in our efforts to understand reality.
What I'm getting at, since She IS parsimonious, is that She does not provide brakes where none are needed.
Sometimes things do evolve that prove to be useful under new circumstances, but when this happens, it's just a
lucky accident for the creature involved. If for instance a creature evolves a forelimb capable of grasping a
branch, so that it can climb better, lol, later on the ability to GRASP something MAY come in very handy,
because it sets the stage for that creature being able to grasp a stone which can be used as a tool or weapon.
This does NOT mean the creature WILL eventually discover the use of tools and weapons. It DOES mean the
probability of such evolution is vastly enhanced. There's NO PLANNING INVOLVED . except in the minds of deists
who accept the reality of evolution while also retaining the concept of a God or gods or some guiding force of
some sort.
IF the need arises for BRAKES, well then, die off, or even extinction, takes care of the problem. If a given
species eats only a given plant, and that plant goes extinct, Mother Nature does not grieve for either the
plant, nor the species that feeds exclusively upon it,which very likely also goes extinct. She doesn't even
consciously keep score, as indifferently as a hired bookkeeper keeps books for a client he has never met and
will never meet. She does however inadvertently create a RECORD of historical "scores" , which we can read.
It's the fossil record.
It's rather amusing that professional biologists go around talking about human stupidity as if there is
something inherently WRONG with people, as if we are collectively DEFECTIVE. We are what we are because we are
final product ( up until today ) of our own evolutionary history. We're as " good " or "well designed "as we
are evolved to be, like all other living creatures.
Engineers build in safety margins, and add features that may be useful, under certain circumstances, when
they design things, because they DO work with and from PRECONCEIVED PLANS. Mother Nature doesn't make plans,
she just deals and redeals the cards, over and over, and will continue to do so until all life on this
planet perishes which won't be until the sun expands sufficiently to destroy the last vestiges of life on
it.
We are NOT something different from the rest of biological creation, we do NOT operate under different
rules, we aren't on some sort of fucking pedestal, separate from the rest of the biosphere. THAT whole crock of
shit sort of thinking is one of the cornerstones of kinds of the thinking that some of the regulars here like
to make fun of, such as religion, nationalism, racism, etc.
A biologist who talks about humanity as if humanity SHOULD BE EXPECTED to display a hive like consciousness
has his head up his ass. NO. NO. No.
We have succeeded,basically for no other reason that accident in the last analysis, to the point we compete
mostly with each other, rather than other species.
The evolved PROGRAMS hard wired into our brains that drive our behavior DO NOT include much in the way of
built in brakes, because BRAKES HAVE COSTS. If we over populate, if we use up critical resources on which we
depend for our survival, and perish, there's NOBODY who gives a shit.. other than some of us who are aware of
the fact that we ARE in overshoot. Mother Nature is INCAPABLE of giving a shit.
The whole fucking idea that we are SOMETHING SPECIAL was probably originated by the first priests and their
allies. It's an idea that has little to do with any discussion based on real SCIENCE within the context of
understanding our own overshoot .
Now none of this rant should be interpreted as indicating I don't know and understand that humans are tribal
creatures, that we are social creatures, and that we survive and thrive because we DO live and work
cooperatively. The thing is , we survive and thrive as COMPETING communities, tribes, and nations, rather than
as a SINGLE global community. Wolf packs compete. Prides of lions compete. Bands of chimps compete. We humans
compete with each other. Talking as if we are DEFECTIVE because we behave this way is a waste of time.
When the shit hits the fan hard enough and fast enough, we do sometimes cooperate with our former enemies,
at least temporarily.Old enemies can be new allies.
It's at least THEORETICALLY POSSIBLE that we can cooperate as a SPECIES, at the global level, in order to
solve some or maybe even most of the problems associated with our own overshoot. We have cooperated before at
levels up to and including the global level. In WWII, most of the developed countries of the world were
involved as partisans on one or the other side. We cooperate to some extent at the global level now, in
economic terms, and in terms of our physical security, as for instance in arms control agreements.
But just because it's theoretically possible that we can cooperate at the species level globally doesn't
mean it's going to happen. I don't think there's any real likelihood of it happening, although alliances
consisting of the various major economic and military powers do exist and will continue to exist and some of
these alliances will prove to be critically important in determining the course of future history.
"A biologist who talks about humanity as if humanity SHOULD BE EXPECTED to display a hive like consciousness
has his head up his ass. NO. NO. No." Do you mean E. O. Wilson has his head up his ass?
In his newly published The Social Conquest of the Earth -- the 27th book from this two-time winner of
the Pulitzer Prize -- Wilson argues the nest is central to understanding the ecological dominance not only
of ants, but of human beings, too. Ants rule the microhabitats they occupy, consigning other insects and
small animals to life at the margins; humans own the macroworld, Wilson says, which we have transformed
so radically and rapidly that we now qualify as a kind of geological force. How did we and the ants gain
our superpowers? By being super-cooperators, groupies of the group, willing to set aside our small,
selfish desires and I-minded drive to join forces and seize opportunity as a self-sacrificing,
hive-minded tribe. There are plenty of social animals in the world, animals that benefit by living in
groups of greater or lesser cohesiveness. Very few species, however, have made the leap from merely
social to eusocial, "eu-" meaning true. To qualify as eusocial, in Wilson's definition, animals must live
in multigenerational communities, practice division of labor and behave altruistically, ready to
sacrifice "at least some of their personal interests to that of the group." It's tough to be a
eusocialist. Wouldn't you rather just grab, gulp and go? Yet the payoffs of sustained cooperation can be
huge. Eusociality, Wilson writes, "was one of the major innovations in the history of life," comparable
to the conquest of land by aquatic animals, or the invention of wings or flowers. Eusociality, he argues,
"created superorganisms, the next level of biological complexity above that of organisms." The spur to
that exalted state, he says, was always a patch of prized real estate, a focal point luring group members
back each day and pulling them closer together until finally they called it home. "All animal species
that have achieved eusociality, without exception, at first built nests that they defended from enemies,"
Wilson writes. An anthill. A beehive. A crackling campfire around which the cave kids could play, the
cave elders stay and the buffalo strips blacken all day. Trespassers, of course, would be stoned on
sight.
As is evident by some of the comments on this thread, while the hive may be able to display collective
intelligence, the individual ants can still be pretty dumb! Do check out the link I posted to 'The Mind's
I' chapter 11 Prelude to Ant Fugue.
The idea is still sound! If humans have not yet evolved to the point that they are able to include
the whole globe as a part of their hive Well, that's a separate issue and may indeed mean that we
are collectively fucked! Because not enough of us have reached that particular point in our
evolution.
As George Carlin once said: "The Planet is fine, it's the people that are fucked"
An idea is sound only if it can be implemented, otherwise it is just a bunch of sugars turned to
heat and in this case trees turned to wastepaper.
My point was not that E.O. Wilson is wrong, but that he would not have presented such a point
if he did not think it possible or even probable. It was OFM that was the one saying it was not
possible, which is a rather narrow view of humanity. Humanity cooperates on large scale right
now.
Looking at the update of Limits to Growth I get the feeling that the flattening out of some
of the parameters (energy, industrial output) may be misinterpreted. The same thing would happen
if an energy and industrial transistion were occurring.
The key question is what does a transistion look like initially?
A field to a forest transistion looks a lot like field, then some bushes with a few small
trees, then eventually almost all trees. Originally the trees are hardly there at all and don't
seem to be having much effect as their leaves smoother a lot of plant life around them and they
take up more and more of the solar energy that used to reach the ground. It starts small then
spreads to complete takeover.
An energy and industrial transistion goes hand in hand with a social/governmental
transistion. It looks small and scattered at first but steadily fills in even despite the
resistance of the legacy systems. Key to the fast takeover is the weakening of the previous
growth and it's demise leaving easy space for the takeover.
For example, I have a kitchen ceiling light fixture. It has three bulb positions. I had
replaced the three 60 watt incandescent bulbs years ago with a 100 watt CFL (running actual 25
watts).
Last night the CFL started flickering so I pulled it and it had burn marks on the base of the
bulb. The CFL bulb has now been replaced by two 60 watt equivalent LED bulbs which together use
only 16 watts and provide more light than the CFL.
Also the LED bulbs may never have to be replaced in my lifetime. 180 watts to 16 watts and no
more replacement, that is high ground transistion! Now $4 replaces over $500 on the user end and
eliminates large amounts of pollution.
The power cost and economics have overshadowed the legacy instrument in an inexorable way.
The death of an individual instrument allowed the replacement by a superior one.
I think that effect has been happening all across the world in many areas of energy use and
industrial process for decades. This effect may have been interpreted as a reduction in energy
and industrial output while it is really mostly a transistion in process.
So how do we get a fast takeover? Strand and remove the old legacy assets and systems plus do
not replace dead systems with the same system. The action is harsh, but that is how it is done.
I will know we are on the right course when I see those large glass buildings being stripped
of their components, their glass re-used, their steel reused and recycled, their wiring removed
as they are removed. Why and how do we put up R2 buildings that soak up huge amounts of energy
for heating and cooling? They need to go now. Passenger vehicles that get less than 150 pMPG
need to go now and no passenger vehicle that gets below 400 pMPG should be built ever again.
There are many inefficient, harmful and problematical systems that could be removed and changed.
Trash the old ways now and insert better ways, ones that work longer with less harm. Make new
systems that heal soil and nature in general. The collapse is occurring now, take advantage of
it by putting in superior systems that allow E.O. Wilson's Half-Earth idea to flourish, not
finish.
Personally, until a lot of the old stupid harmful systems are put aside we can't see clearly
if a fast collapse is at hand or not. Maybe if we just stop following bad and stupid we can ease
off our consumption of the planet and reverse some of the major problems we face. There may be
no real need to go through a grand scale collapse and huge loss of species.
""It was OFM that was the one saying it was not possible, which is a rather narrow view of
humanity. "
BULLSHIT.
Here's what I actually said in a comment upthread. It was posted a day previous to your
comment, lol.
"It's at least THEORETICALLY POSSIBLE that we can cooperate as a SPECIES, at the global
level, in order to solve some or maybe even most of the problems associated with our own
overshoot. We have cooperated before at levels up to and including the global level. In WWII,
most of the developed countries of the world were involved as partisans on one or the other
side. We cooperate to some extent at the global level now, in economic terms, and in terms of
our physical security, as for instance in arms control agreements. "
Perhaps I ought to lecture you a little on the meaning of the word EXPECT within the
context I used it, which I think is obvious enough to anybody who WANTS to understand. In
this context, expect means (or not ) that cooperation will happen spontaneously, or with only
moderate incentives.
I don't think global level cooperation will happen, IF it happens, until the incentives to
cooperate are OBVIOUS and overwhelming, when it comes to really changing the way we do
things. I don't think any competent biologist will argue with this position, speaking in the
broadest terms, painting with the so called broad brush.
We do after all have a few thousand years of known history that indicates that we are as
apt to fight as cooperate, lol.
When the shit hits the fan hard enough, id it also hits slowly enough for us wake up , I
EXPECT ( PREDICT ) that WE WILL COOPERATE on the grand scale, at least up to the nation state
level, in most nations, and frequently at the international level, and MAYBE even at the
global level.
I must admit I'm a little behind in reading E O Wilson, who is as capable a scientist as any in his
field, and head and shoulders above almost all the rest, in my opinion. He's also one of the best writers
ever in his field, probably THE best writer in biology in my personal opinion.
But so far as a I know, and I have read all of his older books, unless I'm mistaken, he would
basically agree with me, because I am, as I interpret his work, AGREEING WITH HIM.
There's a HELL OF DIFFERENCE between EXPECTING people to cooperate on the grand scale, and believing
they are capable of doing so.I believe we are capable of cooperating on the grand scale, given sufficient
motivation to do so, and have said so already in this thread. I don't EXPECT us to cooperate with people
we see as outsiders and enemies, but given new circumstances, new conditions, new problems, new fears, we
can and sometimes do find new common ground, and make friends with former enemies.
I'm ready to bet the farm that I'm WITH E O WILSON, rather than AGAINST HIM.
Nuance matters.
To me at least, lol.
A couple of days back in another thread, you lectured me, telling me to THINK GLOBALLY, as if to imply
I 'm unaware that most of the people in the world are still desperately poor. I have never said that most
of humanity is well off. I have never IMPLIED that most of humanity is well off.
What I DID say, is that FOR WHAT IT'S WORTH, quoting myself, that there is a sound case to be made for
the trickle down effect, and that a substantial number of even very poor people humanity HAVE ALREADY
benefited greatly from economic and technological progress.
Hundreds of millions of desperately poor people are benefiting today from progress made in fields
ranging from public health to industrial agriculture to renewable energy , etc. Hundreds of millions of
very poor people are making relatively fast economic progress by some measures, for instance in the rate
at which they are able to make use of at least some electricity, even if it's only a single light powered
by a battery recharged by a small solar panel.
The less you have, the greater the marginal value of anything new you are able to get.
Just one rechargeable light is worth a LOT to a person who has no other option than perhaps a candle
or kerosene lamp or a home made torch.
Incidentally I can remember being told by my grand parents that back when they were kids, it wasn't at
all usual to literally light a ( corn ) shuck to provide some light so as to make a quick run to the
outdoor privy or take care of some other after dark chore. They had kerosene, but it was considered
wasteful to use it unnecessarily.
Things can and do get better sometimes, even on the global scale, lol.
E.O. Wilson would not have written the book Half Earth if he did not think that people could and would
cooperate on a grand scale. I don't think he was just blowing wind. Your statement was a direct
affront to him and many others.
I have not read his latest book yet " The Social Conquest of Earth" which relates to this subject.
" Your statement was a direct affront to him and many others."
Bullshit again. You're deliberately twisting my words into something I didn't say.
You brought up his name, and you have put words in his mouth, as well as mine, in a manner of
speaking.
I will say it again. There's a DIFFERENCE between EXPECTING or PREDICTING cooperation between
large and diverse groups of people EXCEPT when circumstances leave the various groups little or no
choice, and they have COME TO UNDERSTAND that the only real option they have IS to cooperate.
ONCE various competing groups or societies come to understand that they have little or nothing
in the way of viable choice other than cooperation, well then I PREDICT OR EXPECT them to
cooperate.
I believe my position is entirely consistent with E O Wilson's thinking and beliefs, speaking in
general terms.
If you want to play word games,I'm ready, because it's TRAINING as well as entertainment for me.
I need all the practice I can get when it comes to making my arguments clear before I go out on my
own with my own book and web site .. EVENTUALLY.
The audience here is sophisticated enough to understand nuance, lol.
You ask for opposing opinions then you get nasty and personal and show no sign of wanting to
learn or discuss anything, just shove your ideas. Since you apparently are not capable of
dealing with opinions or thoughts other than your own, I will cease interacting with you. Plus
you are always yelling in your comments, very rude.
Here is what you actually said ""A biologist who talks about humanity as if humanity SHOULD
BE EXPECTED to display a hive like consciousness has his head up his ass. NO. NO. No."
I want opposing opinions , and I'm always on the lookout for new facts. I do NOT want my
words twisted into pretzels so that they appear to mean something diametrically opposite to
what I actually said, by taking them out of context.
I think you are more interested in finding personal fault with me than you are in actually
discussing facts, possibilities, and ideas.
I use a lot of caps, but seldom more than five or six words at a time, because caps are a
lot quicker for me than taking time to use italics or bold.
I'm not presenting a paper for publication here, lol. I'm just participating in a
conversation. If you want to take offense, feel free, it's still somewhat of a free country.
" Your statement was a direct affront to him and many others."
Bullshit again. You're deliberately twisting my words into something I didn't say.
You brought up Wilson , and you have put words in his mouth, as well as mine, in a manner of
speaking.
I will say it again.
There's a DIFFERENCE between EXPECTING or PREDICTING cooperation between large and diverse
groups of people under ordinary circumstances versus under new and compelling circumstances.
IF AND WHEN circumstances leave various groups little or no choice other than cooperation, , and
they have COME TO UNDERSTAND that the only real option they have IS cooperation , well then .
I expect or predict that such groups WILL cooperate, sometimes, maybe even almost every time.
I believe my position is entirely consistent with E O Wilson's thinking and beliefs, speaking in
general terms.
The audience here is sophisticated enough to understand nuance, lol.
Well, MOST of the audience here , anyway.
Understanding is tough for those who prefer NOT to understand.
This is pretty much nonsense. People are very different than other animals because they get ideas in their
head and follow them. That's the secret to our success -- we change our game plan all the time instead of
being stuck in a single niche like most species. It's always hard to guess which ideas are going to work
out, but societies choose -- so to speak -- whether to destroy themselves or not.
America has been choosing self destruction for several decades, and the eschatology our wacky creed
planted in our minds seems very attractive, especially to old farts -- the alternative is to try something
different.
Many societies have shown themselves to be resilient an sustainable. America has a colonial mentality
that doesn't support that, even when it's obvious. My grandmother was born in Kansas and when she talked
about the Dust Bowl she would shake her head and say, "I always told them not to cut down those cottonwoods
-- they were the only thing keeping the farm from being blown away". Now they're depleting the aquifier in
Kansas by planting maize for diesel. So the desert will continue to spread.
But the Japanese aren't like that at all. They've been planting trees for centuries. They don't have much
choice, because the hills aren't very stable there. They'll get through.
And the Sahel Zone, the world's worst and poorest place, is changing as well. They've started replanting.
A lot of them will survive.
Crazy hippies like this may do better than you think. Civilizations come and go, the species won't die
for a while.
Root hog or die, as my father used to say. You can't imagine a world without Walmart, but it isn't the
end of the world.
Another thought -- The Tasmanians. They were probably the wolrd's most primitive culture. They were cut
off from the very old Australian mainland after the Ice Ages, and seems to have even forgotten fishhooks one
of mankind's oldest technologies. But they had their ways, and they survived.
thank you Ron for this posting. I am in complete agreement with you on this.
nothing more important. it is a bizarre and tragic spectacle to behold, and to participate in.
what a poor use of such an incredible biosphere.
Many people from the looks of it here try to deal with the crises we face as a species and civilization the
same way as myself. I spend much time here in front of modern electronic gadgetry. It's useful in distracting
the mind from a diseased dying world along with a way to pass the time while waiting on my Lord and Savior to
return to cleanse all the wickedness Satan has saturated humans with. Yes this is truly a sick sad world we
live in now. Matthew 13:38-40.
It's useful in distracting the mind from a diseased dying world along with a way to pass the time while
waiting on my Lord and Savior to return to cleanse all the wickedness Satan has saturated humans with.
You are likely to be waiting a very long time. Religious stupidity makes the problem worse, never better.
1. Any quotes of someone's book on collapse and how collapse happens based on
history . . . all worthless. There is no history.
2) There is no history because there has never been 7 billion before. There has never been collapse with
nuclear weapons involved before. There has never been collapse with the maggot and fly total in the atmosphere
from 6.5 billion corpses before.
3) Chinese oil consumption lags US per capita and they are striving mightily to correct that, as they
should. When per capita consumption growth becomes difficult, they HAVE to take oil from someone else. That
someone else's population starts to starve for lack of food production or transport. They object to the theft
of "their" oil. War. They must. War or starve.
4) Consider Japan. Consider the relations between China and Japan. Japan cries out . . . you're taking this
oil to improve your country's standard of living and you are starving our country to death to do this. How can
you find morality in this? China will have no trouble whatsoever contriving morality in this.
5) Simply that. When there isn't enough to go around, no one will quietly accept inadequate amounts. Nor
should they. All other stuff about global warming and debt and sacrificing lifestyle for someone else is just
so much bizarre delusion. You got too little to live, you kill whoever took it.
'Black Earth: The Holocaust as History and Warning' by Timothy Snyder is quite good. If you're not
into the minutia of east European history circa WW2 then just cut to the conclusion. 'Bloodlands:
Europe Between Hitler and Stalin' is good too.
Almost anyone, I suppose, can call himself or herself an anarchist, if he or she believed that the
society could be managed without the state. And by the state -- I don't mean the absence of any
institutions, the absence of any form of social organisation -- the state really refers to a professional
apparatus of people who are set aside to manage society, to preëmpt the control of society from the
people. So that would include the military, judges, politicians, representatives who are paid for the
express purpose of legislating, and then an executive body that is also set aside from society. So
anarchists generally believe that, whether as groups or individuals, people should directly run society.
-Murray Bookchin
Anarchism is founded on the observation that since few men are wise enough to rule
themselves, even fewer are wise enough to rule others.
-Edward Abbey
Let's assume for a moment a World without any governments at all.
Let's also assume there at 7.4 billion people in the World.
I just don't see how that works. The World is not a perfect place, but it is far from clear that a
World without any government(s) would be an improvement.
When some one comes up with a plan that is appealing to the majority of citizens in some nation,
perhaps such a form of non-government will be instituted.
Collapse Dynamics: Initial Conditions, Media Manipulation and The Short-Circuiting of
Consensuality
Hi Dennis,
I see anarchy, if it is understood correctly, as potentially having government
if
it is
optional/consensual/legitimate.
For example, if I want you to represent me
until which time as I say otherwise
, then
you can
if you wish
.
I also see anarchy as potentially 'hierarchical', or at least pseudohierarchical, if it is
chosen freely.
So, for example, if
I want
you to tie me to a bed and have your way with me as your
'slave'
if you wish
,
until which time as I or you opt out
, then that is still ok.
(fans face with hand)
It is about
consensuality
and a large part of the whole idea behind media manipulation
of the masses is to 'short-circuit' consensuality– IOW, to make the masses consent to what they
might not have normally consented to.
At the moment, I do not consent, for example, to what we call 'government' to take my money, or
'skim my labor', such as in the form of taxation. It is an 'initial condition' (think the butterfly
effect) that can cascade, and seems to have cascaded, over time into dangerous, 'hurricane',
territory. I mention this angle also to hopefully appeal to your apparent understanding and
appreciation of physics and physical dynamics over time.
Right now, there is software available, ostensibly to support government governing consensually,
called
Loomio
. There are likely others as
well.
Your assertion does not necessarily stand to reason and is just an assertion
without support. I could flip/modify it this way:
If taxes were consensual, then people would likely feel a greater sense of belonging to
their locales and how they are shaped and so give them freely and as they see fit.
Consensual tax collection could be viewed as part of the modus operandi of
actual
government, rather than as a kind of large-scale centralized armed coercive mob, such that it
appears.
See also
here
.
I'll paraphrase some of it for you (again)
" if economics is to become an instrument of freedom and prosperity instead of an
instrument of statism, then there are certain fundamental fallacies that must be
continually challenged and discredited. Chief among these is the
persistent non
sequitur
from externality to coercion -- that is, the
bogus conclusion
that coercion is a proper means to solve problems involving economic externalities.
One of the most blatant examples of this non sequitur occurs in discussions of
the 'free rider problem'
and the alleged solution of government provision of
so-called 'public goods'. This is a particularly insidious economic theory that bears a
great deal of the responsibility of derailing economics into the ditch of statism." ~
Ben O'Neill
A system that works for many more people, rather than a handful of elites, would appear to
be a system that truly echoes what the people actually want, rather than what they are forced
to.
On the matter of carrying capacity, I have a minor quibble with some of the ideas presented here. Let me start
by outlining my understanding of what is being said about carrying capacity.
"So for many millions of
years, the terrestrial vertebrate biomass remained at about two hundred million tons, give or take"
So that lays a base line for carrying capacity but, unnatural selection, the selection of higher output
varieties of crops or genetic engineering of crops would have raised the carrying capacity and I suggest, that
increased carrying capacity would be sustainable indefinitely. The use of fertilizer, primarily organic types,
if done in a sustainable way and by that I mean, returning animal and human waste streams to the soil, would
also result in a more or less permanent increase in carrying capacity. So far, I've outlined two methods that
humans could have used to positively influence carrying capacity more or less permanently.
The big change in carrying capacity comes with the FF age and the industrial revolution, first with the
advent of mechanization and then with the Haber-Bosch process. A quick Internet search to refresh my memory of
what the Haber-Bosch process entails, reveals that it is the chemical synthesis of ammonia (NH3) from nitrogen
and hydrogen. Herein lies the basis for the connection between the petroleum industry and fertilizer industries
and by extension carrying capacity. However, if we have enough excess energy we can easily get nitrogen from
the atmosphere and hydrogen from water though I'm not sure how well that would work at a industrial scale at a
global level.
So between the manufacture of fertilizers and the use of diesel powered machinery in farming, we have seen a
huge increase in the ability to produce food. Ostensibly this ability can only last as long as the NG used to
obtain hydrogen at an industrial scale and the petroleum to fuel the farm machines. However, the University of
Minnesota has a
Wind to Nitrogen Fertilizer
project that aims to use excess wind power to
manufacture ammonia so, it may well be that, if sufficient amounts of renewable energy can be harnessed, the
manufacture of nitrogen fertilizers could be extended way beyond the end of the petroleum age.
That is the basis for my minor quibble. Obviously, fossil hydrocarbons have allowed us to increase the
carrying capacity of the planet in a way that can only last as long as the finite hydrocarbon reserves do.
Might it not be the case that, a transition to renewable energy on a massive scale would allow a more or less
sustainable increase in the carrying capacity of the planet above and beyond the 200 million tons of
terrestrial vertebrate biomass that existed 10,000 years ago? I would argue that, from the standpoint of
energy, renewable energy has the potential to yield a far more sustainable increase in carrying capacity than
fossil energy has. What the level of that carrying capacity is would require a fair amount of academic
research.
I fully concede that there are all sorts of other resource limits that will negatively affect carrying
capacity. Maybe I'm just bargaining.
Islandboy, there is no doubt that the carrying capacity of human beings can be increased
somewhat
by
the use of organic fertilizers. But it is chemical fertilizers that have very dramatically and
very
temporally
increased our carrying capacity.
Of course when the carrying capacity of humans is
increased the carrying capacity of wild species, especially megafauna is decreased.
That is one thing that just drives me up the wall. Everyone is concerned about the welfare of human
beings. No one seems to give a rats ass about the welfare of all other species.
Hi Ron, I hope your doing well. Thank you for a great post. It sure explains why Costco was so F'n busy
last weekend.
"No one seems to give a rats ass about the welfare of all other species"
That's just not all true. I'm pretty sure GoneFishing cares about his dog a lot more than myself.
"the selection of higher output varieties of crops or genetic engineering of crops would have raised
the carrying capacity and I suggest, that increased carrying capacity would be sustainable indefinitely"
I think you could include the knowledge of harvesting water and controlled irrigation also increasing
sustainable capacity
Humans evolved to become the equivalent of RNA in cells. We use tools and information, primarily in
technological cells and use them with ATP equivalent fossil fuels to do work. Like organisms or cells in the
ecosystem, human organizations seek to grow, profit and take market share – to further their existence.
The human brain is primarily a reward seeking organ as is most neural tissue in the ecosystem. Since humans
are dissipative structures, not seeking rewards is the greatest threat they face. Most other threats, short of
being chased by a pack of wild dogs, can be watered down and ignored since the brain must concentrate on
getting resources and energy. Even though a human can think about things, it does not substitute for being
greedy and gathering as much wealth as possible and reproducing prolifically. We're selected for doing that.
The natural greed which evolved because of natural scarcity in the ecosystem, did not wane as we evolved
into a technological setting. There is no limit on our desires to be "rich" because we perceive associated
advantages in survival and reproduction. Civilization is an explosive cancer that emerged from the ecosystem to
consume and destroy the ecological body. Humans are the RNA that can't stop reproducing and stimulate the
growth of new cells and distribution systems until the entire consumable earth is covered and the ecosystem
dies or at least becomes much less complex.
In many wealthy nations total fertility has fallen below the replacement level, in fact for
about half the World's population TFR is below replacement (dividing things up by nation state). Generally
it is higher income nations where this is the case and correlation between education level and total
fertility is very strong.
These facts and the trend in Global education levels for women don't square very well with your theory.
As Ron has suggested, homo sapiens sapiens is not your average species.
Even the education occurs in schools, the cellular equivalent of the nucleolus. Instead of pursuing the
rewards of children, women are pursuing "wealth" created by the technological system. I'm not sure which
one is most damaging.
The natural greed which evolved because of natural scarcity in the ecosystem, did not wane as we evolved
into a technological setting. There is no limit on our desires to be "rich" because we perceive associated
advantages in survival and reproduction.
And out of which orifice did you pull all that BS out of?!
Let me guess, you are of the Neo-Liberal Economist school of though, right? Try cracking a few tomes on
human evolution and anthropology instead of failed 20th century memes about the nature of man and
rationality of markets.
You don't see any greed? None in the ecosystem? Why is everyone trying to accumulate more wealth? Why do
all organisms struggle to eat and reproduce to the maximum? Look in the cell, it's all happened before,
but mostly with sunshine at the base.
Why do we worship the likes of Warren Buffett?
Cooperation exists, but only to enhance competition against a similarly cooperating group.
Blowing Up the Territory
Trump's biggest break came from the Democratic party. Booking Hillary Clinton as the good guy
in this match was a colossal error, especially when the most improbable thing in all of politics
was waiting in the wings: a legit babyface.
Bernie Sanders came off like Paddington
Bear next to Hillary Clinton. Bernie was a nice old Jewish man from Vermont who legitimately
meant well, and he got a real pop from his fans. He drew like crazy. Hell, even I sent him
money, the first time I have ever contributed to a political campaign -- every time he got on TV
and started shooting about marijuana smokers going to jail while Wall Street hoodlums were
walking, I Paypaled him five bucks. I had waited my whole life to hear a politician cut a promo
like that -- I think he eventually ended up with a Jackson from me, straight from my personal pot
budget.
As a face, Clinton just had too much baggage, a lot of it achingly familiar: A partner known
for predatory sexual behavior, wicked family ties to big business, an entitled daughter, a
family charity fund loaded with foreign money, lies, flip flops. . . . What was good for the
goose might have been tolerable for the gander, but all she really got was a cheap pop, and if
she had any moral high ground at all, she lost it when former Democratic operative Donna
Brazile, while working for CNN, leaked potential questions to the Clinton campaign before a
debate with Sanders. That was cheating, behavior clearly unbecoming to a babyface. But more
important was that she failed to deliver on the only thing that matters: she didn't draw. For a
while it looked like there might be a "Dusty finish," a gimmick ending (named for Dusty Rhodes,
the legendary wrestler and booker who invented it) in which one wrestler is declared the winner,
only to have the decision reversed on a technicality -- for instance, interference from Russian
hackers. This was a finish guaranteed to drive crowds insane, but Hillary couldn't put it over.
So who's the best worker? If we are using the Hulk Hogan index, it is indisputably Donald
Trump. He won the election. He's the president.
But when it all comes tumbling down, be ready for a fresh wave of Trump-brand
kayfabe -- transparently flawed in both conception and execution, except that he actually believes
it. He'll ride off in his helicopter claiming that Washington was too dirty to clean up, that he
tried but he couldn't drain the swamp, that they wouldn't accept the One Honest Man. He'll blame
obstructionist Democrats for staging a witch hunt, and the Republicans for not having the guts
to back him. In wrestling parlance this is called "blowing up the territory."
Pundits will argue: How much of it was real, how much reality show? How much was a put-on,
how much of it was a guy legit skating at the edges of madness and dementia? Was it a work, a
shoot, or a worked shoot? The only thing we can be sure of is that the secular writers will get
it wrong. And, existentially, at least, Trump will still wear spandex when he mows the lawn. He
can't help himself, that's just the kind of jerk he is.
Organisms evolved a bias to maximize fitness by maximizing power. With greater power, there is greater
opportunity to allocate energy to reproduction and survival, and therefore, an organism that captures
and utilizes more energy than another organism in a population will have a fitness advantage.
Individual organisms cooperate to form social groups and generate more power. Differential power
generation and accumulation result in a hierarchical group structure.
"Politics" is power used by social organisms to control others. Not only are human groups never alone,
they cannot control their neighbors' behavior. Each group must confront the real possibility that its
neighbors will grow its numbers and attempt to take resources from them. Therefore, the best political
tactic for groups to survive in such a milieu is not to live in ecological balance with slow growth,
but to grow rapidly and be able to fend off and take resources from others[5].
The inevitable "overshoot" eventually leads to decreasing power attainable for the group with
lower-ranking members suffering first. Low-rank members will form subgroups and coalitions to demand a
greater share of power from higher-ranking individuals who will resist by forming their own coalitions
to maintain it. Meanwhile, social conflict will intensify as available power continues to fall.
Eventually, members of the weakest group (high or low rank) are forced to "disperse."[6] Those members
of the weak group who do not disperse are killed,[7] enslaved, or in modern times imprisoned. By most
estimates, 10 to 20 percent of all the people who lived in Stone-Age societies died at the hands of
other humans.[8] The process of overshoot, followed by forced dispersal, may be seen as a sort of
repetitive pumping action -- a collective behavioral loop -- that drove humans into every inhabitable
niche of our planet.
Here is a synopsis of the behavioral loop described above:
Step 1. Individuals and groups evolved a bias to maximize fitness by maximizing power, which requires
over-reproduction and/or over-consumption of natural resources (overshoot), whenever systemic
constraints allow it. Differential power generation and accumulation result in a hierarchical group
structure.
Step 2. Energy is always limited, and overshoot eventually leads to decreasing power available to some
members of the group, with lower-ranking members suffering first.
Step 3. Diminishing power availability creates divisive subgroups within the original group. Low-rank
members will form subgroups and coalitions to demand a greater share of power from higher-ranking
individuals, who will resist by forming their own coalitions to maintain power.
Step 4. Violent social strife eventually occurs among subgroups who demand a greater share of the
remaining power.
Step 5. The weakest subgroups (high or low rank) are either forced to disperse to a new territory, are
killed, enslaved, or imprisoned.
Step 6. Go back to step 1.
The above loop was repeated countless thousands of times during the millions of years that we were
evolving[9]. This behavior is inherent in the architecture of our minds -- is entrained in our
biological material -- and will be repeated until we go extinct. Carrying capacity will decline[10]
with each future iteration of the overshoot loop, and this will cause human numbers to decline until
they reach levels not seen since the Pleistocene.
http://www.dieoff.org
"There's no indication that we're going to do anything philosophically different," said Jim Blackburn, an
environmental law professor at Rice University. "With a few modifications, it's business as usual."
As
Houston rebuilds from the most expensive hurricane in U.S. history, local officials plan to dredge waterways,
build new reservoirs and a coastal barrier to protect against storms that experts say are growing in intensity
due to a warming climate.
They have asked Washington for $61 billion to pay for it all.
Apart from our own actions there may be random events that can take us out. There's a report in the Times today
of research into super-eruptions. The Toba explosion, 75,000 years ago, almost took out Homo sapiens. The
latest research indicates such events (maybe not quite as bad) happen on average every 17,000 years instead of
every few hundred thousand as previously thought, and we are currently in an unusually long hiatus from these.
The biggest explosion since "civilization" started was probably Krakatoa in the 6th century, which has been
proposed as the beggining of the dark ages in Europe and the end of a couple of other civilizations, though
there's a bit of controversy about that theory, but it was much milder than an explosion from one of the major
calderas would be.
Continuing from above (this mirrors my own experience in Central Africa where families currently seem to be
averaging about four kids each):
POPULATION GROWTH IN AFRICA: GRASPING THE SCALE OF THE CHALLENGE
"In the past year (2016) the population of the African continent grew by 30 million. By the year 2050,
annual increases will exceed 42 million people per year and total population will have doubled to 2.4 billion,
according to the UN. This comes to 3.5 million more people per month, or 80 additional people per minute since
the early 1990s, family planning programmes in Africa have not had the same attention (as Asia and Latin
America), RESULTING IN SLOW, SOMETIMES NEGLIGIBLE, FERTILITY DECLINES. IN A HANDFUL OF COUNTRIES, PREVIOUS
DECLINES HAVE STALLED ALTOGETHER AND ARE REVERSING."
WHY HAVE FOUR CHILDREN WHEN YOU COULD HAVE SEVEN? FAMILY PLANNING IN NIGER
" but Hamani is unusual in that three babies are enough for her. Despite having the highest fertility rate
in the world, women and men alike in Niger say they want more children than they actually have – women want an
average of nine, while men say they want 11."
Sounds like an explosion that will lead to implosion and migration. Families used to be fairly large in the
European and American regions not long ago. Some still are.
There are 27.7 million people in Uganda. But by 2025 the population will almost double to 56 million,
close to that of Britain, which has a similar land mass. In 44 years its population will have grown by
nearly as much as China's.
"You look at these numbers and think 'that's impossible'," said Carl Haub, senior demographer at the
US-based Population Reference Bureau, whose latest global projections show Uganda as the fastest-growing
country in the world. Midway through the 21st century, if current birthrates persist, Uganda will be the
world's 12th most populous country with 130 million people – more than Russia or Japan.
That sounds about right and from personal observation almost all 27.7 million of them are school kids
who (currently) are quite well nourished and with decent health care. A big problem, as I see it, is that
virtually all schools in Uganda are run by "Western" churches who seen determined to increase the size of
their flock by NOT teaching their students about contraception and the benefits thereof: sound familiar?
Doug – like you I have some sponsorship in Africa – a general women's group rather than an individual.
From their letters what they want is education (both formal for the children and also just tips on
farming and running a business), enough money (very little) to start a business so they can feed their
children, a way to manage HIV if they are infected (many still are) and peace and quiet. What they
don't want is more children, forced marriage through kidnap, the return of their husbands to beat them
up, interference from the elders (all men) in their business. Often they only realise these options
are even possible after they have had contact with the groups set up by the charity.
George – My African experiences are mainly restricted to Uganda (the pearl of Africa) where my
family visit annually and have done so for almost 20 years; we love the country, the people, the
wildlife. Its been a joy watching the girl we assisted progress from kindergarten to medical
school; to meet and relate to her extended family who've become our close friends. The country
(Uganda) and the people are currently doing well, very well indeed (unless you happen to be gay).
Wildlife parks flourish and are well managed. My concerns relate to the future. There are too many
kids. In my opinion, without reigning in population growth the country will face immense
over-population problems in the future. I hope I'm wrong. Having said that, I agree with your
comments -- all of them. And its true, woman's business groups are in many respects the future of
Africa.
For anyone seeking a plausible scientific explanation for why:
– one species has a uniquely powerful brain
– why the brain of that species is capable of visiting the moon but incapable of understanding or acting on
it's own overshoot
– why one small group of hominids exploded about 100,000 to take over the planet
– why religion emerged simultaneous with the behaviorally modern mind about 100,000 years ago
– and more big questions:
https://un-denial.com/2017/06/25/why-my-interest-in-denial/
I find this theory by Ajit Varki and Danny
Brower very satisfying.
That's a smart site you have there. I read that book some time ago, it's interesting but I thought a bit of
a just-so story, but that's maybe becasue the ideas woud be so hard to prove one way or the other. It's a
pity Brower died before his ideas got out to more discussion.
Your initial reaction to the theory is perfectly reasonable and common.
If you dig deeper and start connecting dots I think you may find it is the best available explanation
for many big unanswered questions. The theory may not be correct but there are no known facts that slay
it, nor any other equally elegant theories that fit the data better.
Varki acknowledges the difficulty of testing the theory, but does point to some promising avenues of
research. Unfortunately Varki's speciality and day job is in a different domain so his theory is likely
to sit on the shelf until some young scientist with a defective denial gene picks up the baton.
I did find it neat and convincing as you say, but that's the point of just-so stories, plus it's
difficult to know where to go if it is correct, but I'm going to be visiting your site without
question.
WILL OVERPOPULATION LEAD TO PUBLIC HEALTH CATASTROPHE?
"Our new projections are probabilistic, and we find that there will probably be between 9.6 and 12.3 billion
people in 2100," Prof. Raftery told Medical News Today. "This projection is based on a statistical model that
uses all available past data on fertility and mortality from all countries in a systematic way, unlike previous
projections that were based on expert assumptions."
"A key finding of the study is that the fertility rate in Africa is declining much more slowly than has been
previously estimated, which Prof. Raftery tells us "has major long-term implications for population."
No discussion about human evolution or even biological evolution across all species can be considered complete
without at least a basic understanding of the biochemical and molecular biological basis of CRIPR-Cas9 gene
editing technology and gene drives.
Sam Harris' latest podcast has a discussion of this technology with Jennifer Doudna.
In this episode of the Waking Up podcast, Sam Harris speaks with Jennifer Doudna about the gene-editing
technology CRISPR/Cas9. They talk about the biology of gene editing, how specific tissues in the body can be
targeted, the ethical implications of changing the human genome, the importance of curiosity-driven science,
and other topics.
E.O. Wilson
I have always been a great admirer of E.O Wilson. I have followed his work for years. I especially liked
"Sociobiology" and "Consilience". I have followed his feud with Stephen J. Gould, Steven Rose, R.C. Lewontin,
and Leon Kamin, (as reported by Steven Pinker and Richard Dawkins). (I always came down on the side of Wilson
et al.) And I am very proud to say he is a fellow Alabamian.
That being said, there are areas where I must disagree with him. For instance:
From Kirkus Reviews of "Half Earth":
In this final volume of his trilogy, Wilson (The Meaning of Human Existence, 2014, etc.) opens with a
compelling proposal on how to slow current species extinction rates: set aside half of the planet
(noncontiguously) as wilderness preserves free from human encroachment, a measure that the author claims would
stabilize more than 80 percent of species.
Fred Magyar, above, quotes from Edward O. Wilson's New Take on Human Nature:
Wilson argues the nest is central to understanding the ecological dominance not only of ants, but of human
beings, too ..
By being super-cooperators, groupies of the group, willing to set aside our small, selfish desires and
I-minded drive to join forces and seize opportunity as a self-sacrificing, hive-minded tribe ..
To qualify as eusocial, in Wilson's definition, animals must live in multigenerational communities,
practice division of labor and behave altruistically, ready to sacrifice "at least some of their personal
interests to that of the group." It's tough to be a eusocialist.
First, the idea that we would or could set aside half the earth for wildlife is preposterous. Which parts of
the U.S. would we set aside, parts that make half the land area? Could we convince every African nation to do
the same? Or Russia? Or China, South Korea or Japan?
Second, as much as I admire Wilson, I think he is just flat wrong on his new take on human nature. And I
think Pinker and Dawkins would agree with that opinion. If you had read Pinker's "
The
Blank Slate: The Modern Denial of Human Nature
," and I have, you would know exactly what I mean. Our minds
are not blank slates to be molded by society, to be made to behave like ants in a colony, like a
self-sacrificing, hive-minded tribe. All those traits that Wilson says we must give up are in our genes, human
nature.
I will not deny that humans can be ruled. An Iron Fist could compel us to behave in such a matter. But all
such Iron Fists carry within itself the seeds of its own destruction. Absolute power corrupts absolutely. It's
just human nature.
After reading your eight fifty six am, I'm telling ya straight .. Between your ears, where you live
intellectually, you are a TRUE conservative.
The people who we refer to today as conservatives, meaning those who inhabit the right wing politically,
are not REAL conservatives, not according to my definition.
Don't forget that I am a follower of the Humpty Dumpty School of Linguistics. Words mean exactly what I
intend them to mean, when I use them, rotfl.
To my way of thinking, the first and single most important qualification of a TRUE conservative is that
he must have a sound grasp of human nature. You have it. You understand that we cooperate with friends,
family, known community, and compete with outsiders .. and that when circumstances compel us to do so, we
make friends or at least ally ourselves with former enemies or strangers, and work together .. but mostly
only when we have little or no choice but to do so.
I'm just teasing you a little, not making fun of you.
Decent people, left or right wing, want the same things, when you get down to the basics. Peace,
dignified life, freedom from unnecessary worries, etc.
I haven't yet read Wilson's latest books. Hoping to get around to it, this winter.
We need to keep it in mind that just because somebody presents a grand plan in a book, and writes as if
it might be possible to implement it, he does not necessarily believe there's a snowball's chance on a red
hot stove that his plan will ever actually be implemented.
Such books are sometimes intended as sources of inspiration for a new generation of people following
along in his footsteps .. and such a plan MIGHT be implemented . a few centuries down the road, lol.
Stranger things have happened, historically.
Such a book can be the result of an old man's dreams being put in libraries so as to achieve a sort of
immortality . Wilson had that already of course.
I reckon you're even older than I am, and here's wishing you the best at the personal level.
To my way of thinking, the first and single most important qualification of a TRUE conservative is
that he must have a sound grasp of human nature. You have it. You understand that we cooperate with
friends, family, known community, and compete with outsiders .. and that when circumstances compel us to
do so, we make friends or at least ally ourselves with former enemies or strangers, and work
together .. but mostly only when we have little or no choice but to do so.
Sorry Mac, but I just
don't get the connection. The definition you pen here could just as well be the definition of a
True
Liberal.
I am a conservative when it comes to conserving the environment, saving animal habitat and saving
species from extinction. But those are qualities held by most liberals and not held by so-called
conservatives. Right-wing Republicans call themselves conservatives.
So I just have to accept the lexicon as it exist today. I am a liberal, not a conservative.
"Sorry Mac, but I just don't get the connection. The definition you pen here could just as well be the
definition of a True Liberal."
You DO GET IT, Ron, except you haven't yet quite got around to thinking of labels as jokes or
weapons . Labels are for partisans. Labels are clubs we use to pound each other into submission.
People with real working brains generally come to the same basic conclusions, regardless of the way
they're labeled by themselves or others. There's usually more than one route by which we can travel
and arrive at the truth.
You're a man willing to tell it like it is, as for instance when you have pointed out the realities
of the way things work in some countries where you worked yourself. A partisan D just won't repeat
that sort of stuff, true or not.
When you say you're a liberal, you're just labeling yourself. What you ARE is something else.
You're a man with a working brain, a man who understands reality, a man who tells it like it is, as
you perceive it to be.
It is however true that the so called liberals are more often right by a substantial margin
than the so called conservatives in terms of having objective facts on their side when
considering issues such as the environment, public health, and many others.
But they're not always right. Sometimes the liberal camp seems to have it's head as far up
its backside as the conservative camp.
The leaders of both camps seem to be more interested in having plenty of foot soldiers to
serve as cannon fodder than they are in the actual welfare of the country.
I can provide as good arguments for any sort of truly sound public policy from a conservative
pov as you can from a liberal pov.
To me this proves we both have working brains, and are capable of looking the truth in the
eye, and publicly agreeing on what IS true, and what is not.
If we could free ourselves of goddamned infernal partisan politics and identity politics ,
based on our community cultures, we could make things happen politically.
If for instance we could put the question of subsidizing wind and solar power to a
referendum, I could easily convince most of the so called conservatives I know that voting in
favor of subsidies would be a GREAT BARGAIN for them, long term. Well, the ones with brains
enough that they know a little about the business world anyway. That's at least half of them,
and more than enough.
They won't ordinarily support subsidizing renewable energy as part of a package deal because
they perceive the PACKAGE to be weighted in favor of their political and cultural enemies.
Supporting renewable energy subsidies would mean voting for D's and they don't like the overall
D agenda.
I'm not sure WHERE this comment will appear, but hopefully it will be below my two forty pm.
Allow me to approach this liberal/ conservative label thing from a different direction.
Suppose you meet a new person, and get to talking about oh let us say water pollution, and
fishing, and having to spend your local tax money on a sophisticated water treatment plant,
because there's too much of this or that and the other as well in the river that passes your
town to drink the water, without spending a lot of money. .
If you NEVER MENTION anything that LABELS you as a liberal or conservative, you can talk
meaningfully to just about anybody about this issue.
Identify yourself as a liberal, or a conservative, you more or less automatically blow your
opportunity to say anything to your new POTENTIAL friend who thinks of himself as your opposite
and enemy, politically, other than something he already knows and believes, even if what that
something is factually incorrect.
Label yourself as a liberal, and the typical serious Christian voter in the state of Alabama
automatically thinks of you as a murderer of yet to be born children. Forget labeling yourself,
avoid it to the extent you can, and you have an EXCELLENT shot at talking to that voter about
supporting only candidates who have a decent record of being respectful to women, immigrants,
minorities, etc.
If I label myself as a conservative, I've automatically blown my chance to have a serious
conversation with a liberal about the possibility of having some real choice in education .
meaning breaking the teacher's unions and government's de facto monopoly control of our
educational system.
You may not like this idea, but think about this how much better are your options NOW,
given that we have email, fax, UPS, Fed Ex , etc, when it comes to getting a letter or package
where it needs to go FOR SURE and RIGHT AWAY?
I have heard lots of liberals say that allowing any real choice in the schools would mean the
end of any real opportunity for poor kids, inner city kids, etc, to get a decent education.
Sometimes, in the same breath almost, I hear those same liberals admit that the public schools
in lots of communities large and small are literal disaster areas, where hardly any of the kids
learn anything. I used to know quite a few of this sort , back in my younger days, when I was
living in the Fan and hanging out with the older ( grad students mostly ) kids at VCU having a
good time, taking a course or two per semester to keep my grad student ID up to date. I spent
about ten years there off and on.
Ya know WHAT? EVERY LAST COUPLE I knew among them moved out of town when their OWN kids got
old enough to go to school.
Quite a few of them spent their careers as teachers, lol. And my guess is that not more than
one out of ten of those couples ever moved to a place where the schools were the sort of hell
holes we read about so often these days .. and that tenth couple of course had NO KIDS, lol.
Yet they almost universally believe in the de facto teacher / government educational monopoly
as it exists today, as it totally ruins the prospects of millions of kids denying them, or
more accurately, their parents, any real choice in the schools their kids attend. If liberal
versus conservative comes into the conversation, it's OVER. The liberals aren't going to listen,
any more than conservatives listen.
How many members of this forum think Roy Moore ought to be tarred and feathered ? How many
have ever had the intellectual integrity to say the same thing about Bill Clinton?
Liberals are liberals, and conservatives are conservatives, and the gulf between can be as
vast as the gulf between East and West. Communication is tough to impossible.
But if we avoid the labels . communication can happen.
Incidentally this rant does NOT mean I am a supporter of the Trump administration in general,
or the Trump education department in particular. Nothing I know of concerning the Trump
administration seems to be about the good of the COUNTRY or of the majority of the people of
this country.
First, the idea that we would or could set aside half the earth for wildlife is preposterous.
Even
stopping the rape and scrape accelerating is highly unlikely.
This is total fantasy.
At best, the survivors (if any) on the other side of the wall we are about to crash into, will have enough
wisdom and intelligence to embrace the condition they are in.
First, the idea that we would or could set aside half the earth for wildlife is preposterous.
That isn't what he proposes even though it is the title of his book. May I suggest you read it! What he
is really arguing for is more along the lines of a network of ecological corridors that might connect
already existing nature preserves, parks and private property and therefore allow isolated pockets of
natural ecosystems to be connected with others.
To be very clear, E.O. Wilson is not in any way naive about our predicament and says so.
That's not to say he has thrown in the towel, especially given that he is now in the later portion of his
80's. He apparently doesn't want to go down without a fight.
I have read his book twice already and have the Kindle version on my laptop. To be honest I'm not what
anyone might call overly optimistic about the prospects of his proposals coming to pass. Having said that, I
do admire his deep knowledge base about the natural world and have the greatest admiration for the man! More
power to him for trying!
Fred, I read Half Earth and have to agree with E.O. Wilson. I think my personal bias is toward nature,
but that aside, humans can do what is needed. All the gadgetry in the world cannot replace a functioning
ecosystem. Those functions are mandatory for the preservation of life on earth. We need to preserve,
expand and enhance (if we get smart enough) natural ecosystems around the world.
Why not build armies? Armies called the United Conservation and Environmental Protection Corp, whose job
is to protect and expand natural areas around the world. It would increase employment and be funded by
monies that otherwise go to military purposes. This and other organizations could be doing things that
make the people proud to be human, rather than just wheels and cogs in basically destructive system.
This is not naïve, this is just choices. Humans make choices, that is one of our inherent abilities.
Our current state and appearance is due to a set of previous choices that have not quite worked out. We
get stuck in old choices, time to make new ones.
I think my personal bias is toward nature, but that aside, humans can do what is needed.
Really now? If humans can do what is needed then why the hell are they not doing it. Species are going
extinct at a rate as fast as the last great extinction 65 million years ago. And the extinction rate
is accelerating. If humans can do what is needed it is goddamn time they got started.
Our current state and appearance is due to a set of previous choices that have not quite worked
out. We get stuck in old choices, time to make new ones.
Those choices were made, and are being made, by 7 billion people. And yes, it is time those 7
billion people changed the way they are behaving, it is time they made different choices. But don't
hold your breath.
I am sorry Fishing, but I just don't share your optimism.
Yup, reminds me of China, driving to a restaurant half way across Beijing with a car full of
Chinese because they knew about a hot spot where some endangered species or other was on the menu:
get it before you're too late. Life in the real world!
"Although extinction is a natural
phenomenon, it occurs at a natural "background" rate of about one to five species per year.
Scientists estimate we're now losing species at 1,000 to 10,000 times the background rate, with
literally dozens going extinct every day. It could be a scary future indeed, with as many as 30 to
50 percent of all species possibly heading toward extinction by mid-century."
"If humans can do what is needed then why the hell are they not doing it. "
"I am sorry Fishing, but I just don't share your optimism."
By destroying the environment we
destroy ourselves. I think that will soon become quite apparent and then those who are already on
track can leverage that.
Really now? If humans can do what is needed then why the hell are they not doing it. Species are
going extinct at a rate as fast as the last great extinction 65 million years ago. And the
extinction rate is accelerating. If humans can do what is needed it is goddamn time they got
started.
Ok, let's assume for a moment using round numbers that there are currently 7.5
billion humans living on this tiny planet as I type these words. How many of those humans do you
suppose are actually aware of the fact that we are probably in the midst of the sixth mass
extinction? I'm going to go way out on a limb here and guess about a couple hundred thousand.
Now most of those couple hundred thousand are in shock and denial of reality. So there are maybe
100,000 humans who are aware and are actually starting to do something.
While that may sound like a minuscule amount I can cite data and research that shows that may be
enough to really start to change the current paradigm in a big way.
Yea, the feud between Gould/Lewontin/Rose VS Wilson/Dawkins/Dennett has been interesting.
Being somewhat Marxist in my orientation, I was kinda presupposed to the Gould camp, but the Wilson/Dawkins
have proven to ring much truer.
The Blank Slate
puts the nails in the coffin for Marxist view of human nature, as Marx viewed it as
totally a function of environment. Pinker buried that view.
Orr was always Gould and Lewontin's go to guy with media, as he had power in the NYT's and Boston Globe, and
could often control reviews and and coverage.
It has been interesting.
I'm sure most here are familiar
with what Carl Sagan said about our Pale Blue Dot
This excerpt from Sagan's book Pale Blue Dot was inspired by an image taken, at Sagan's suggestion, by
Voyager 1 on February 14, 1990. As the spacecraft left our planetary neighborhood for the fringes of the solar
system, engineers turned it around for one last look at its home planet. Voyager 1 was about 6.4 billion
kilometers (4 billion miles) away, and approximately 32 degrees above the ecliptic plane, when it captured this
portrait of our world. Caught in the center of scattered light rays (a result of taking the picture so close to
the Sun), Earth appears as a tiny point of light, a crescent only 0.12 pixel in size.
At present, the Voyager 1 spacecraft is 21 billion kilometers from Earth, or about 141 times the distance
between the Earth and Sun. It has, in fact, moved beyond our Solar System into interstellar space. However, we
can still communicate with Voyager across that distance.
This week, the scientists and engineers on the Voyager team did something very special. They commanded the
spacecraft to fire a set of four trajectory thrusters for the first time in 37 years to determine their ability
to orient the spacecraft using 10-millisecond pulses.
FURTHER READING
The Voyagers have reached an anniversary worth celebrating
After sending the commands on Tuesday, it took 19 hours and 35 minutes for the signal to reach Voyager. Then,
the Earth-bound spacecraft team had to wait another 19 hours and 35 minutes to see if the spacecraft responded.
It did. After nearly four decades of dormancy, the Aerojet Rocketdyne manufactured thrusters fired perfectly.
"The Voyager team got more excited each time with each milestone in the thruster test. The mood was one
of relief, joy, and incredulity after witnessing these well-rested thrusters pick up the baton as if no time
had passed at all," said Todd Barber, a propulsion engineer at the Jet Propulsion Laboratory in California.
So was I. Well, sort of. My dad was a Deacon in the Primitive Baptist Church but he was not a
crusading evangelical.
I have told this story before but I will do it again here.
I was about 17 or so when I sidled up to my dad who was sitting in his easy chair. I asked:
"Dad, how did them kangaroos get from Australia to over there where Noah's Ark was? And how did
they get back?" Dad jumped up from his chair, stuck his finger right in my face and yelled: "Son,
that is the word of God and that is not for you to question."
When countries begin to hit the wall economically ( as happened in Germany in the 1930's for example), the
populace will often out of desperation (and ignorance of course) enable a dictator to come to power. This is
with the false hope that grandiose promises of prosperity will be fulfilled.
This explains why Trump was
elected, even though the American has yet to be tested by disruption, much.
As the world hits the wall of growth limits, the risk is for more and more leadership failures, the rise of
warlords, the failure of functioning democracies.
Violent choices and dysfunctional government will serve to be a mechanism of population decline, ugly
population decline. Current events can be seen through this lens as time unfolds.
Hard to watch.
May be better to have no TV.
The de-evolution will be televised, will be televised, will be televised
The general population in Germany did not really enable Hitler to come to power. He was appointed as a
compomise by the two leading parties in an election who had split the main vote. They both thought he would
make such a mess of it that they would sweep the board at the next election. As soon as he was appointed he
started killing or imprisoning these smart opposition leaders, and there wasn't another clean election. It
was more like an extended coupe, admittedly with a large number of supporters, often ex WW-I soldier thugs,
in the general population.
George is in the bullseye about how Hitler came to power, considering he was painting fast with a broad
brush in such a short comment. I have devoted many a long evening to reading the history of war in the
twentieth century, so as to better understand the history of my time.
Wars are usually the result of politicians either wanting them, or being boxed into situations where
they either can't avoid them or consider them the best of an assortment of bad options.
Point taken George. Despite that the general notion that as crunch time develops, there will be a trend
towards extremist and totalitarian regimes throughout the world. Along with pockets of failed states,
anarchy and warlords. 'Have nots' will take big risks.
No devolution involved. Just human nature.
The loose knit groups with similar hates, anger and dislikes were temporarily brought together. It was an
inverse election that utilized the negative and more volatile side of human nature. it only hangs together
with constant stirring and occasional negative results (pound the enemy). Finger pointing and passing the
buck is not enough, the groups start fracturing.
A question for Dennis Coyne, or any other cornucopian who believes renewable energy will save the world from
economic collapse, at least for the next 200 years or so.
Dennis, I understand your very optimistic outlook
for the welfare of future human populations. I don't agree with it but I understand your argument. But as I
understand it, and please correct me if I am wrong, your entire argument deals with the
human population
of the earth. I don't remember reading your predicted outlook for the rest of the animal kingdom? Perhaps you
did make one and I just missed it.
That being said, you have read my outlook many times. And it was all repeated in my post above. Do you agree
or disagree? Just where do you see the large wild animal population in the year 2100? Please elaborate.
Edit:
Dennis, I know you do not consider yourself a cornucopian, however, I was just comparing your
outlook for the future of civilization to mine. And using that comparison?
Nice! I was just thinking about a response to a comment following
one of
mine
further up and this pops up, which dovetails nicely into what I've been thinking. In my comment I
mention using wind power to make ammonia as a foundation for chemical nitrogen fertilizer and you (Ron) in
you reply stated that,
" But it is chemical fertilizers that have very dramatically and very temporally
increased our carrying capacity."
I don't know if you realized this but, that sort of was my point in
that, the manufacture of ammonia and the resulting chemical fertilizer using excess wind (and/or solar)
power might well result in a much extended (permanent) increase in carrying capacity by allowing us to
continue the manufacture of chemical nitrogen fertilizer (ammonium nitrate if memory serves me right) in the
absence of oil and NG.
This can be viewed as a downside to the ongoing exponential increasing capacity of
renewable electricity generation. If renewables grow big enough fast enough, there will be incentives to use
any excess to do things like manufacture fertilizer allowing mankind's expansion into wild habitats to
continue. I think it is important that the existing population of the planet continues to have more or less
adequate food supplies in order to avoid the sort of situation that exist in Haiti but, the real problem as
I see it, is to get poor people in less developed countries to believe that they would be better off not
having as many children. Based on utterances I have heard in my neck of the woods, as recently as last
night, many of these people do not see any problem with having lots of kids. There seems to be an attitude
abroad that there is a great big world out there, just ready for the taking. No limits. I wonder whatever
gives people that idea?
I wanted to post some pictures of garbage, sitting in open storm water channels, just waiting for the
next big shower of rain to be washed out of existence. At least that must be what the people who dump this
stuff into the drains think. I have to wonder if they ever bother to think about where it's going to end up
but, it seems to be a simple case of out of sight, out of mind. I guess some readers will have figured out
that if you visit any area of the Jamaican coastline that does not have a regular, structured clean up crew,
you will see where the trash ends up. I have seen it and it is depressing.
I don't know if you realized this but, that sort of was my point in that, the manufacture of ammonia
and the resulting chemical fertilizer using excess wind (and/or solar) power might well result in a much
extended (permanent) increase in carrying capacity by allowing us to continue the manufacture of chemical
nitrogen fertilizer (ammonium nitrate if memory serves me right)
in the absence of oil and NG.
Errr . I don't know if you realize it but you cannot make nitrogen fertilizer without natural gas . or
some other source of hydrogen. Of course, you might get the hydrogen from water via electrolysis but that
would be super expensive.
Fertilizer Made with Natural Gas Is Lifting Our World
Referred to by some as the most important technological advance of the 20th century .Between 3 and 5
percent of the world's annual natural gas production – roughly 1 to 2 percent of the world's annual
energy supply – is converted using the process to produce more than 500 million tons of nitrogen
fertilizer, which is believed to sustain about 40 percent of the world's 7 billion people. Approximately
half of the protein in today's humans originated with nitrogen fixed through the Haber-Bosch process.
"Of course, you might get the hydrogen from water via electrolysis but that would be super
expensive."
Not if you are experiencing negative electricity prices as has happened when there's
lots of wind and no demand or transmission capacity for the electricity being generated. I think OFM
has alluded to this a few times in his ramblings, suggesting that hydrogen production via electrolysis
or desalination might be useful ways of avoiding otherwise wasted electricity when the resource is
available but, there is limited demand or transmission capacity.
We are pursuing a Grand Challenge – the challenge to feed the world while sustaining the
environment. In the spirit of this grand challenge, a team of researchers across the University are
pursuing an elegant concept in which wind energy, water, and air are used to produce nitrogen
fertilizer.
WCROC energy from the windEnergy generated from the wind is used to separate hydrogen from water.
Nitrogen is pulled from air. The hydrogen and nitrogen are then combined to form nitrogen fertilizer
that nourishes the plants surrounding the farmer.
Next to water, nitrogen fertilizer is the most limiting nutrient for food production. Minnesota
farmers import over $400 million of nitrogen fertilizer each year and are subjected to volatile price
swings. Furthermore, nitrogen fertilizer is currently produced using fossil energy which contributes
significantly to the carbon footprint of agricultural commodities.
Siemens is participating in an all electric ammonia synthesis and energy storage system
demonstration programme at Rutherford Appleton Laboratory, near Oxford. The demonstrator, which will
run until December 2017, is supported by Innovate UK. Collaborators include the University of Oxford,
Cardiff University and the Science & Technology Facilities Council.
I do not know much about the subject so I should probably not offer an opinion, but because you
asked
I agree that humans are the problem and believe that fewer humans (as in reduced population) will improve
the situation. Will humans choose to protect some of the mega fauna, until population falls to a more
sustainable level? I have no idea.
Is it possible? I would say yes.
High probability? My guess would be no (less than a 66% probability).
So I do not have a prediction for the Earth's megafauna in 2100, except to say I doubt your prediction
that we will be reduced to rats and mice, etc. is correct. This is no doubt because I believe there will be
a gradual transition to a more sustainable society. I believe some of the mega fauna might be preserved
until human population falls to 1 billion or so (by 2150 to 2200). Most likely in North America,
Scandanavia, and Siberia, and perhaps in the Himalaya and parts of South America. The rapid expansion of
population in Africa makes it less likely the megafauna will survive there.
I am using the 40 kg cutoff for megafauna, though there are many definitions.
Note that some would consider cornucopian an insult.
Certainly I do not think fossil fuels are as abundant as those who believe scenarios such as the RCP8.5
scenario (with about 5000 Pg of carbon emissions) are plausible.
I also do not believe resources are unlimited or infinitely substitutable, which tends to be the
cornucopian viewpoint. There is great need to utilize resources more efficiently and to recycle as much as
possible (cradle to grave manufacturing should be required by law).
Now if you define cornucopian as someone who is less pessimistic than you, then I am by that definition a
cornucopian.
I am certainly more optimistic than you, but if we all agreed there would be little to discuss.
Clearly the future is unclear.
The outlook for the wild megafauna is tragic and we should do what we can to preserve species diversity.
Getting human population to peak and decline would improve the situation of other species, but I share your
pessimism that this will be enough, I am just less pessimistic than you.
I believe some of the mega fauna might be preserved until human population falls to 1 billion or so
(by 2150 to 2200).
Okay, let's do the math. It looks like the world will reach 9 billion people by
2050. Then if it were to fall to 1 billion by 2150, that would be a decline of 80,000,000 per year or
219,178 per day. That is deaths above births. That would be a catastrophic collapse by any stretch of the
imagination. And of course, most of those deaths would be by starvation. And for sure, as I said before,
we would eat the songbirds out of the trees.
Hell, if that scenario takes place, there will likely be no rats left. No, no, no, Dennis, please
forgive me. You are definitely not a cornucopian. Oh God, how could I have been so wrong?
The most rapid population decreases have been from disease. A few bouts of virulent diseases in a
world with little medical help and control could dramatically reduce population.
Population Collapse
in Mexico (Down to about 5% in a century)
See chart below. If total fertility ratio (TFR) falls to 1.5 by 2050 then population can
fall from 9 billion to 4.5 billion by 2125 and to 2.25 billion by 2200 and to 1 billion by 2300, a
fall in TFR to 1.25 (South Korea is about 1.26) would result in more rapid population decline. It is
not clear how low TFR can go for the World, it was cut in half in 40 years, whether that can continue
so that 1.27 is reached in 2055 is unknown. This scenario assumes life expectancy rises to no higher
than 90 for the World.
Deaths would be natural rather than from starvation, this is just a matter of people choosing to
have fewer children as is the case today in many East Asian countries such as South Korea and Japan
and in many European nations as well.
Education for women and access to birth control and electrification (watch tv, instead of other
forms of entertainment leading to increased family size), and empowerment of women in general will
reduce population growth. Higher income also helps.
Keeping things in perspective, why not go with the experts until they're proven wrong?
WORLD
POPULATION LIKELY TO SURPASS 11 BILLION IN 2100
"American Statistical Association. "World population likely to surpass 11 billion in 2100: US
population projected to grow by 40 percent over next 85 years."
THERE'S A STRONG CHANCE THAT ONE-THIRD OF ALL PEOPLE WILL BE AFRICAN BY 2100
The combination
of declining mortality and relatively high fertility is the driver of rapid population growth in
Africa. Even if fertility would continue to decline, as assumed by the UN medium scenario, it
will not bring down the growth rate in the near future, let alone halt population growth. This
is because of "demographic inertia". And this is because Africa has a high proportion of young
adults of reproductive age. Even if each one had very few children, the number of births would
remain high.
We are all African– it's just some of us have been gone for a while.
(well if you are east of the Wallace Line, you are part Denisovan, and west, part Neanderthal
and a species we haven't discovered yet)
Dennis, you are assuming that the population will alter their fertility rates to a lower value.
Yes, that has already happened in developed countries. The fertility rates in undeveloped countries
are still controlled by what their economy and environment will bear.
The vast majority of the
human population lives in undeveloped countries. They will continue to push, push, push against the
very limits of their existence. And that will still be the case 50 years from now, and 100 years
from now, and 150 years from now.
There are reasons the fertility rate is dropping in developed countries. Female empowerment,
contraception, and so on. There are entirely different reasons the fertility rate is dropping in
undeveloped countries. Poor nutrition, almost no prenatal care and so on. Also, much higher infant
death rate helps keep the population in check. Please check my chart above from the Population
Reference Bureau.
I think that if you could just live just one year in Bangladesh, or the Congo, or Zimbabwe, or .
you would have an entirely different outlook. You would be forced to take off those rose-colored
glasses.
Again, check the Population Reference Bureau chart above.
" if you could just live just one year in Bangladesh, or the Congo, or Zimbabwe, or . you would
have an entirely different outlook. You would be forced to take off those rose-colored glasses."
Wouldn't take a year, one week would do it: even keeping the rose-colored glasses on.
I spent a bit of time on leave in "Liberated Burma"/Karen State shortly after the fall of
Manerplaw. A week would do it, however I was there for about 3 months. I haven't had a bad
day since.
I linked up with some folks in Mae Sot on the Thai side. It was well planned before
hand. There's was a lot of back and forth across the border in those days. Did some
long range mobile medical patrols in Karen and Karenni State. Got chased around by
Tatmadaw/SLORC a bit. When I was 25 that was my idea of a good time. Yeah, kinda fucked
I know.
Yea --
I was the only Farang around in Masi, and everyone else was going back and forth.
Very interesting place.
That was a long time ago, in a land far, far away.
It would be impossible in the homogeneous police state we are currently inhabiting.
I spent about 5 months hitchhiking through North and West Africa in
1981-2. Tunisia, Algeria, Niger, Nigeria, Gabon, Republic of Congo, and Zaire (as it was
known in 1982).
The TFR of half the World's population as of 2015 is less than 2. The World TFR decreased
from 5.02 in 1965 to 2.51 in 2015.
The problem I see with fertility rates is the same problem I see with planting trees. Even
though I support a foundation to plant trees I realize that future changes could allow
people to wipe out those and other trees very quickly, thus rendering the effort useless.
I also realize the preserved areas of nature and wilderness could quickly disappear or be
irreparably harmed by government decree, war and material/food pressures.
The same goes with lower fertility rates. Since they are only based on decisions and not
biological, the lower rates could reverse quite quickly. Just stress the population and
see how fast it will change.
Once people realize that technological progress is an empty dead system that moves us to
an empty dead world, birth rates will climb quickly.
Rather than adding to our
knowledge, Tompkins argues computers and smartphones represent "deskilling devices; they
make us dumber. We're immersed in a system that now requires the use of a cell phone just
to get around, just to function and so the logic of that cell phone has been imposed on
us.
"The computer is a mechanism for acceleration, it accelerates economic activity and
this is eating up the world. It's eating up resources, it's processing, it's
manufacturing, it's distributing, it's consuming. That's what the computer's real work
does and it does that 24/7, 365 days a year, non-stop just to satisfy our own narrow
needs."
Tompkins foresees a dark future dominated as he puts it by more ugliness, damaged
landscapes, extinct species, extreme poverty, and lack of equity and says humanity faces a
stark choice; either to transition now to a different system or face a painful collapse.
"The extinction crisis is the mother of all crises. There will be no society, there
will be no economy, there will be no art and culture on a dead planet basically. We've
stopped evolution."
Rather than adding to our knowledge, Tompkins argues computers and smartphones
represent "deskilling devices; they make us dumber. We're immersed in a system that now
requires the use of a cell phone just to get around, just to function and so the logic
of that cell phone has been imposed on us.
So put the damn cell phones to better
use. They can also make us smarter They can be used to track illegal logging in
endangered rain forests. The fact that I have a device in my pocket that gives me
access to all of human knowledge and access to GPS does not make me dumber.
Really? You have cell service in the rain forests? I barely have cell service where I
live and it disappears totally between the mountains near me. I don't need electronic
mapping and GPS to get around so no problem for me.
Let the rest feel nervous as they get out of touch. For many it's a disaster if they
lose their phones, fully dependent.
I don't need electronic mapping and GPS to get around so no problem for me.
I
actually learned how to use a sextant and a compass but GPS is available so I admit
that I do use it upon occasion.
In any case my point was that it is possible to use technology for purposes other
than tweeting or posting selfies of oneself to Facebook every ten minutes.
Fred, they are highly capable machines but just machines. How they are used is
determined by the machine and the operator interface.
I could go on for hours how they have had very bad effects on personal time and
personal interactions. For many people life is a series of texts and phone calls with
real time life being the background now. Interruptions are the norm now. Sacrilege is
when they have to turn them off.
@Fred
I come close to nailing a textwalker or walkytalky nearly every time I am out on my
bike. SOP, watch out for the buggers. It amazes me that people are unable to move about
(foot, moto, car, bus, truck) without a phone in their hand.
A question for Dennis Coyne, or any other cornucopian who believes renewable energy will save the world
from economic collapse, at least for the next 200 years or so.
Ok, I'll take a nibble!
First of all, why do we have to accept the current definition of what the economy has to be? All of
nature has existed on renewable energy since the beginning of life on this planet 3.8 billion years ago, so
obviously the problem isn't renewable energy. If it were, life wouldn't even exist. The extractive, linear
growth based neo liberal idea of the economy that we have come to accept as normal, is a relatively recent
construct that was created by a small group of people at the beginning of the 20th century and it certainly
is an aberration! Personally I don't think it is worth saving.
That economy will certainly collapse and no energy source can ever make it sustainable. Therefore it will
by definition collapse. However there is nothing that says we need to continue on that path. There are
indeed choices that people and societies can make. Even to the point of something that is considered radical
and taboo like limiting population growth. (that is a separate dissertation from my point here)
With regards alternative economic thinking maybe start with Kate Raeworth. Not everyone in the world who
has ideas that are out of the box are automatically naive cornucopians.
How to Think Like a 21st Century Economist. 45:00 minutes.
What is the goal of economics? Does GDP really tell us all we need to know about a country's wealth
and well-being? Our guest in this show argues that our economic system should be designed to meet everyone's
needs, while living within the means of the planet.
Kate Raworth is the author of the acclaimed book 'Doughnut Economics', and she will join us in the studio
for an exploration of a new 21st century economic model and why she believes so many economists have got it
wrong for so long.
The implications of her Doughnut Economics are profound and and can be read and embraced as a roadmap
for change not just by experts or economists, but by everyone! This is a chance to challenge her with your
questions and critiques.
If you want to think a bit more about how ideas like E.O. Wilson's Half Earth might look here's a TED
talk that touches on it.
Nature is everywhere -- we just need to learn to see it 16:00 minutes
How do you define "nature?" If we define it as that which is untouched by humans, then we won't have
any left, says environmental writer Emma Marris. She urges us to consider a new definition of nature -- one
that includes not only pristine wilderness but also the untended patches of plants growing in urban spaces --
and encourages us to bring our children out to touch and tinker with it, so that one day they might love and
protect it.
Emma Marris is a writer focusing on environmental science, policy and culture, with an approach that
she paints as being "more interested in finding and describing solutions than delineating problems, and more
interested in joy than despair."
I agree with Gone Fishing, we do have choices! There are people all over the world who are making them.
Regarding the first paragraph of your reply. Conflating the functioning of ecosystems
using the renewable energy from the sun with the 'Renewable Energy' required by industrial civilisation
is a common mistake. The energy from the sun is renewable.
The infrastructure required to collect and store that energy requires the mining of the
requisite minerals,transportation,smelting,manufacturing,installation. The energy
required for all of that is supplied by fossil fuels. All of that infrastructure,and all of the
rest of the human-constructed industrial world,has to be rebuilt. Solar panels last
about 25-30 years. Wind Turbines about 50 years. Our industrial constructed world
has an immense amount of embedded fossil fuel energy. The mineral density of many ores are declining
now,which means that the energy required to extract a given amount of mineral is increasing. I haven't
done much reading on this site. No doubt someone has posted this link before. It gives a good idea of the
scale of the construction required.
Natural ecosystems are quite different. The energy collection occurs using biodegradable
and recyclable materials,without the energy input of fossil fuels.
https://en.wikipedia.org/wiki/Cubic_mile_of_oil
Have a read of the numbers in the link. All recycling requires energy. I don't know if anyone has
done an analysis of the amount of energy
required,but it would be very large. It is also worth remembering that some of the minerals in that
infrastructure are difficult to separate and
recycle.
Plenty of people have investigated recycling and are doing it. You obviously haven't. Even the
Giga-Factory is building a recycling facility.
On the personal level, I have just replaced my
washing machine and stove as the old ones were falling apart – literally. The stove is ready to
go to the local recycler where it will be separated and then sent to be melted back to new
steel. The washer will be checked over by a refurbisher who will decide if he can use it or it's
parts and what is left will go to the recycler. Simple. All my waste metal goes to the recycler
but, unfortunately, we have no glass recycling so that just has to go to land fill.
Elton John blares so loudly on Donald Trump's campaign plane that staffers can't hear
themselves think. Press secretary Hope Hicks uses a steamer to press Trump's pants -- while he is still wearing
them. Trump screams at his top aides, who are subjected to expletive-filled tirades in which they get their
"face ripped off."
And Trump's appetite seems to know no bounds when it comes to McDonald's, with a dinner order consisting of
"two Big Macs, two Fillet-O-Fish, and a chocolate malted."
[ ]
In another episode, Lewandowski describes how staffer Sam Nunberg was purposely left behind at a McDonald's
because Nunberg's special-order burger was taking too long. "Leave him," Trump said. "Let's go." And they did.
Trump's fast-food diet is a theme. "On Trump Force One there were four major food groups: McDonald's,
Kentucky Fried Chicken, pizza and Diet Coke," the authors write.
The plane's cupboards were stacked with Vienna Fingers, potato chips, pretzels and many packages of Oreos
because Trump, a renowned germaphobe, would not eat from a previously opened package.
The book notes that "the orchestrating and timing of Mr. Trump's meals was as important as any other
aspect of his march to the presidency," and describes the elaborate efforts that Lewandowski and other top
aides went through to carefully time their delivery of hot fast food to Trump's plane as he was departing his
rallies.
One of the biggest problems we face as population and industry grows is obtaining enough fresh water. Sure
there is a lot of water on the planet, but it is mostly salty.
Marcia Barbosa talks about the many
anomalies of water and how exploiting them with nano-tubes could help address the problem of freshwater
shortages.
Marcia Barbosa has a PhD in physics from Brazil's Universidade Federal do Rio Grande do Sul, where she is
now the director of its Physics Institute. She studies the complex structure of the water molecule, and has
developed a series of models of its properties which may contribute to our understanding of how earthquakes
occur, how proteins fold, and could play an important role in generating cleaner energy and treating diseases.
She is actively involved in promoting Women in Physics and was named the 2013 L'Oreal-UNESCO for Women in
Science Awards Laureate for Latin America.
Tks, GF!
LOL! I'm head over heels in love with her!
I kept imagining her giving her talk to this sound track
https://www.youtube.com/watch?v=Wunq6YlcSX0
Can you see all the dancers dressed as raindrops on a Samba
Float
in a Carnival Parade?
Fred – As you know my bag is astrophysics, with climate change denial being merely irritating BUT when I see
science news headlines like the following then I really get pissed off, or feel sick. Who gives a shit if Earth
can "carry" 7 or 9 or 11 billion people when dolphins & elephants are relegated to "bush meat" and when species
are disappearing at increasingly alarming rates. You're probably the only one here qualified to assess this
issue so please give us your thoughts.
CURRENT EXTINCTION RATE 10 TIMES WORSE THAN PREVIOUSLY THOUGHT
"Life on earth is remarkably diverse. Globally, it is estimated that there are 8.7 million species living on
our planet, excluding bacteria. Unfortunately, human activities are wiping out many species and it's been known
for some time that we are increasing the rate of species extinction. But just how dire is the situation?
According to a new study, it's 10 times worse than scientists previously thought with current extinction rates
1,000 times higher than natural background rates."
Doug, if you get a chance, watch the ASU Origins project debates to which I have posted links recently
addressing the topic of extinction. This is a very serious cross disciplinary discussion and can't really be
done justice in a quick response here. It probably necessitates a full post of similar length to Ron's.
I look on space habitats as being trapped inside a giant iron lung. Exploration is one thing, but
actually thinking of Mars as a possible home for humans is just sad.
Couldn't agree more! And that's from someone who lived and worked in a hyperbaric chamber as a
saturation diver on oil rigs. I'd say that is pretty close to living in an iron lung as well
The part about going to Mars that has always bothered me is the radiation exposure.
Venezuela's oil production has been sliding for years, but the descent accelerated in 2015
amid low oil prices and a deteriorating cash position for PDVSA and the government. Production
dipped below 1.9 million barrels in recent weeks, the lowest level in more than three
decades.
The problems will only grow worse, especially because they tend to snowball. Without cash,
PDVSA will struggle to import diluent to blend with its heavy oil – the result could be
steeper production losses. Again, without cash, existing facilities cannot be maintained,
likely leading to an accelerating pace of decline. An array of refineries are "completely
paralyzed," the head of an oil workers union told Bloomberg. Defaults on more debt payments
could spark retaliation from creditors, which could eventually put oil exports in jeopardy.
In short, the woes in Venezuela's oil industry contributed to the crisis, but the dire
economic situation will accelerate the decline of oil production.
A group of analysts told Bloomberg that they expect Venezuela's output to average 1.84 mb/d
in 2018, a level that seems surprisingly optimistic given the pace of decline underway. Other
analysts predict output will plunge much lower.
Venezuela's oil production has been sliding for years, but the descent accelerated in 2015
amid low oil prices and a deteriorating cash position for PDVSA and the government. Production
dipped below 1.9 million barrels in recent weeks, the lowest level in more than three
decades.
The problems will only grow worse, especially because they tend to snowball. Without cash,
PDVSA will struggle to import diluent to blend with its heavy oil – the result could be
steeper production losses. Again, without cash, existing facilities cannot be maintained,
likely leading to an accelerating pace of decline. An array of refineries are "completely
paralyzed," the head of an oil workers union told Bloomberg. Defaults on more debt payments
could spark retaliation from creditors, which could eventually put oil exports in jeopardy.
In short, the woes in Venezuela's oil industry contributed to the crisis, but the dire
economic situation will accelerate the decline of oil production.
A group of analysts told Bloomberg that they expect Venezuela's output to average 1.84 mb/d
in 2018, a level that seems surprisingly optimistic given the pace of decline underway. Other
analysts predict output will plunge much lower.
This May 20, 2016 post was probably two years early ;-) I remember looking back on the IEA's 2005 World Energy Outlook and being perplexed that
anyone still takes their price or production forecasts with any seriousness whatsoever. Their 2003 WEO is even more hilarious.
Notable quotes:
"... Eventually market sentiment focused on the recency bias of a 2 year glut is going to shift into the realization that disruptions, depletion, and growing demand have thrown the global balance into a dearth where inventories are being drawn to meet demand – such as the news about Saudi's relying on inventory to meet demand, the "missing" 800,000,000 barrels of OECD inventory from Q1 2016, or next weeks inevitable U.S. inventory draw. ..."
"... Suddenly, an extra outage (like say if anything happens to Venezuela) will cause meaningful rallies instead of being mostly written off. ..."
"... The best, live, interactive charts I am most fond of are here: https://www.dailyfx.com/crude-oil ..."
"... I expect one last fight around $50, a few day consolidation move lower. Then market realities will push WTI past $50, and shorts will have to cover pushing it even higher. ..."
"... Next thing you know were range bound in the mid-$50s at the end of June as everyone questions if shale production will magically skyrocket overnight. Maybe the rig count will go up by 3 or 4, and it'll spark a sell-off back to or below $50 because of the psychological recency bias of a "repeat of 2015". ..."
"... I remember looking back on the IEA's 2005 World Energy Outlook and being perplexed that anyone still takes their price or production forecasts with any seriousness whatsoever. Their 2003 WEO is even more hilarious. ..."
"... Most people are simply incapable of seeing a bigger picture, and they'll simply never understand the relationship between depletion, economic and population growth, and the long-term fact that this equals higher prices (and probably also, in the long run, higher poverty and unemployment). ..."
"... It is for that exact same reason that so many people we know will simply never get it. Physics doesn't have agency, it cannot be avoided, cajoled, or "blamed". It simply is, and that is so unsettling to our psyche that most people have a strong, unconscious drive to negate and ignore that conclusion even if they will acknowledge it is a sound and true explanation of how economics, growth, employment, wealth, energy (physics and thermodynamics), and depletion are woven of the same fabric. ..."
"... Brian – I think you are closer to reality than EIA or USGS, it will be interesting to see how it plays out against your scenario. ..."
"... There doesn't necessarily have to be more social breakdown in Venezuela to have an impact – Haliburton and Schlumberger are pulling out and will have immediate effect as the extra heavy oil production needs continuous attention to the wells. I'm surprised Angola and Algeria haven't seen disruptions yet either. ..."
"The joint-venture Syncrude project told customers to expect no further crude shipments for May, trading sources said on Thursday,
extending a force majeure on crude production from earlier in the month."
Eventually market sentiment focused on the recency bias of a 2 year glut is going to shift into the realization that disruptions,
depletion, and growing demand have thrown the global balance into a dearth where inventories are being drawn to meet demand –
such as the news about Saudi's relying on inventory to meet demand, the "missing" 800,000,000 barrels of OECD inventory from Q1
2016, or next weeks inevitable U.S. inventory draw.
Suddenly, an extra outage (like say if anything happens to Venezuela) will cause meaningful rallies instead of being mostly
written off.
In fact, judging by the price action on oil over the last 24 hours, I'd say that sentiment is very close to a shift. From 11
AM forward crude oil marched higher relentlessly, even in opposition to dollar strength. Most every single commodity was down,
as we're most every stock market except oil.
I expect one last fight around $50, a few day consolidation move lower. Then market realities will push WTI past $50, and
shorts will have to cover pushing it even higher.
Next thing you know were range bound in the mid-$50s at the end of June as everyone questions if shale production will
magically skyrocket overnight. Maybe the rig count will go up by 3 or 4, and it'll spark a sell-off back to or below $50 because
of the psychological recency bias of a "repeat of 2015".
That is, until rational minds, or the market itself pushes prices back up as it becomes obvious that a slowdown in U.S. production
declines will mean little in the face of mounting production declines around the globe, and "surprisingly" strong demand – because
apparently predicting that lower prices will cause stronger than average demand growth is beyond the economic capability of the
EIA or IEA, and markets tend to take their word as gospel.
I remember looking back on the IEA's 2005 World Energy Outlook and being perplexed that anyone still takes their price
or production forecasts with any seriousness whatsoever. Their 2003 WEO is even more hilarious.
Every step of the way analysts and talking heads will be confused that prices aren't dropping back to $30 just like they were
for 5 straight years from 2003 to 2008. They'll predict Saudi's will raise production to 12 mbpd any day now, or that shale will
magically take off overnight.
They'll never even realize that they don't understand the history of Saudi production, or the logistical and financial complexities
of shale production rising as fast as it did before. Instead they'll blame the banks, or speculators, or Big Oil for artificially
making oil prices rise (without questioning why they let them fall for 2 years in the first place)
But then again if gas is cheap, which average people are fond of, their brain says "I like this, so it must be right". If gas
is expensive their brain says "I don't like this, it must be wrong, what evil force made this happen?!?"
Most people are simply incapable of seeing a bigger picture, and they'll simply never understand the relationship between
depletion, economic and population growth, and the long-term fact that this equals higher prices (and probably also, in the long
run, higher poverty and unemployment).
Their lives will have ups and down, growth and recession, but they'll know and feel it is generally getting harder. They'll
never be aware that this is the "fault" of nothing but physics and thermodynamics, even if told directly and shown all the rather
clear evidence (I know every one of you has experienced this as I have). Instead, they'll blame those dang immigrants, or the
Chinese, or the Congress, or regulations.
They'll blame anything that fits their paradigm enough to allow cohesiveness so their fragile lives can at least MAKE SENSE.
You can't blame physics, and, frankly, I think that is a large psychological barrier for people comprehending what is happening.
We need to have some agent to blame for things, and physics has no agency. Blaming something for a problem is settling because
it gives us something to focus on to solve the problem, or, at the very least, avoid it. The evolutionarily beneficial need to
assign agents as the cause of events is what pre-disposes us to believing that events we cannot easily assign agency to are, nonetheless,
the will of a greater, invisible, omnipresent agent.
It is for that exact same reason that so many people we know will simply never get it. Physics doesn't have agency, it
cannot be avoided, cajoled, or "blamed". It simply is, and that is so unsettling to our psyche that most people have a strong,
unconscious drive to negate and ignore that conclusion even if they will acknowledge it is a sound and true explanation of how
economics, growth, employment, wealth, energy (physics and thermodynamics), and depletion are woven of the same fabric.
Brian – I think you are closer to reality than EIA or USGS, it will be interesting to see how it plays out against your scenario.
A couple of other impacts are summer maintenance season in North Sea (Buzzard and, I think, Ekofisk have major turnarounds),
Alaska and Canada (maybe Russia as well) and increased demand from driving season in USA and AC use in Middle East.
There doesn't necessarily have to be more social breakdown in Venezuela to have an impact – Haliburton and Schlumberger
are pulling out and will have immediate effect as the extra heavy oil production needs continuous attention to the wells. I'm
surprised Angola and Algeria haven't seen disruptions yet either.
Thank you George. IEA will release their WEO next week (14th).
From the OPEC-report:
"Total non-OPEC liquids supply is now forecast to grow from 57 mb/d in 2016 to 62 mb/d in
2022, with the US alone making up 75% of that increase."
The section on decline rates was interesting too (p.184): "the WOO analysis suggests an
average implied decline rate of around 4.4 mb/d in the 2018–2028 period, or 7%, of
underlying non-OPEC suply. Note that this compares with previous, more in-depth, work done by
the Secretariat, which indicated
that underlying observed decline rates in non-OPEC were lower – on average around 5.4%
– though with significant regional variations.
On the one hand, this analysis shows the challenge facing the upstream sector, with a
requirement for more than 5 mb/d p.a. of new supply, if annual average demand growth of 0.9
mb/d in the Reference Case is added to the implied 4.4 mb/d 'lost' due to natural decline. On
the other hand, the calculated implied decline rates and substantial new upstream volumes
coming online suggest that overall upstream investment activity is perhaps higher than a
quick glance at headline capex numbers would suggest "
"with tight oil making up a substantial and growing share of total non-OPEC supply (around
12% in 2016), and given its innate rapid decline rates after initial production, this may in
a sense have accelerated the underlying decline. In other words, the system can said to be
coping, with supply growth meeting demand needs at the moment"
"that overall upstream investment activity is perhaps higher than a quick glance at headline
capex numbers would suggest "
Nope it would suggest that the developments coming on line now follow a normal project
S-curve with the big investment costs in the middle then slowing down during installation and
commissioning.
There aren't many projects in the middle of the development so costs are down but the new
production coming on line is still fairly high (until the second half of next year). The
investment problem isn't going to show up really until a couple of years out, but it can't be
halted by anything that's done now, just like the over-investment impact kept running even as
oil prices crashed.
With all the kerfuffle in Saudi whatever happened to the independent assessments of their
reserves? There was a leaked report that said everything was exactly as the Saudi had been
reporting, which couldn't possibly have credibility as it came out about a week after the
consultants had started work so they wouldn't even have got their computers working properly
yet, and then something about the reports being released early next year – and since
then nothing.
For the oil markets, the implications are pretty significant. Venezuela has already lost an
estimated 20,000 bpd each month for the past year, according to
Reuters estimates. And in September, Venezuela's output
plunged by more than 50,000 bpd compared to a month earlier. Production could fall by an
additional 240,000 bpd in 2018, a decline made worse by U.S. sanctions.
But that isn't even the worst-case scenario. A default could set off a scramble to seize
Venezuela's overseas assets. That could lead to much steeper production declines. One OPEC
source told Reuters that they see a potential for production declines on the order of 300,000
to 600,000 bpd next year.
"... And this is cool. As of July of last year, 35% of all ECB bond buys (aka lending to private companies with money from nothingness) were of individual bonds with -- get this -- negative yields. They not only loaned money to the company, they paid the company interest for holding the bond. ..."
"... And y'all think money is a meaningful metric for the overall circumstance of oil flow. hahahahahhaah How can it be? Schlumberger!!! Hell, they are funding US shale flow with money from nothingness. ..."
Not gonna scroll. Found some ECB corporate bond buys. Specific companies.
Daimler Deutsche Bahn no idea what that is BMW Eni (!!!!!) Air Liquide Schlumberger (!!!!!) Total (!!!!!)
The specific bond serial number (in the US it would be called CUSIP-like) of each purchase
is known. The buy takes place on the secondary market. Much the same way the Fed never bought
Treasury issuance direct from Treasury. There was always a go between -- which essentially
means nothing. This was never discussed about Mort. Backed Securities. Bought them from who had
them -- at about 1000X market price.
And this is cool. As of July of last year, 35% of all ECB bond buys (aka lending to private
companies with money from nothingness) were of individual bonds with -- get this -- negative
yields. They not only loaned money to the company, they paid the company interest for holding
the bond.
And y'all think money is a meaningful metric for the overall circumstance of oil flow.
hahahahahhaah How can it be? Schlumberger!!! Hell, they are funding US shale flow with money
from nothingness.
As much as
US$1 trillion
of investments has either been deferred or canceled
with the lower-for-longer oil prices, and this underinvestment will
impact the future of energy, Amin Nasser, the chief executive of Saudi
Aramco, said on Tuesday.
"Not much investments have been going into the
energy sector... $1 trillion has been either deferred or cancelled,"
Nasser said at the Future Investment Initiative conference in Riyadh.
Of the US$1 trillion investment, US$300 billion was earmarked for oil
exploration and another US$700 billion for project developments,
according to the CEO of the state-held oil giant of OPEC's biggest
exporter and de facto leader Saudi Arabia.
"This will have an impact on the future of energy if nothing happens,"
Nasser noted, adding that investments are necessary because of "natural
depreciation of fields and normal rise in demand."
"We are witnessing a transformation... But it will be decades before
renewable energy takes a major share in the energy mix," the head of the
oil giant said.
In July, Nasser said that if the oil and gas industry didn't start
investing again, the global oil supply/demand curve will
reach a turning point
in "a couple of years."
"About $1 trillion in investments have already been lost since the
current downturn began," Nasser said in a
speech
at
the World Petroleum Congress in Istanbul in July.
One of the world's largest fossil fuel companies is betting on electric cars.
Royal Dutch Shell (RDSA) revealed a deal on Thursday to acquire NewMotion, one of Europe's
largest electric vehicle charging providers. NewMotion specializes in converting parking
spots into electric charging stations. The Dutch firm has more than 30,000 electric charge
points in Europe.
The acquisition, Shell's first in this space, shows how Big Oil is being forced to confront
the long-term threat posed by electric cars and efforts to phase out gasoline and diesel
vehicles.
Or maybe the other way round – there's no oil left to develop so they have to find
something else to do – or both supply and demand influences, which is the reality of
all economic decisions, not one or the other however much the media feels it has to simplify
things to that level.
Interesting article. I believe we are going to see a more rapid disintegration of the
Ultra-Deepwater Drilling Industry when the markets finally correct by 20-50%. The notion that
the Ultra-Deepwater Drilling Industry will recover by 2020 or 2024 doesn't take into account
that the broader U.S. Stock markets have experienced a 230% increase from the lows without a
typical 15-20% correction.
Hell, I believe the S&P 500 just hit a record of not experiencing a 3% correction for
more than 453 days.
Transocean drilling rig utilization fell from a peak of 95% in 1H 2013 to 37% in the 1H
2017. Of the 17 Ultra-Deepwater rigs currently drilling for oil in the GoM (source: Baker
Hughes), one leased by Chevron was terminated early. So, the total will be down to 16 in
November.
Again, the wild card of much higher oil prices will only occur if the Fed and Central
banks start up the printing press BIG TIME. When the Fed's QE3 program ended, the price of
oil plummeted.
However, when the Central banks print like crazy, this won't last long. Thus, it won't be
enough to allow the Ultra-Deepwater Drilling Industry to recover.
No idea – I don't do the oil price prediction thing because I'm pretty sure nobody in
history has ever got it right for the right reason. For real 'frontier' type exploration to
start again then there would have to be a pick up in lease sales and really they have been
tailing off even in the high price years (I think I put some charts in a previous post on the
GoM showing how the percentage of offered leases taken up has been falling off. I doubt if
shallow a lot of the deep lease areas will pick up again though, there's little left.
In my opinion, exploration will not pick up too much regardless of oil price because of the
maturity of the basin, as George suggests above. (Actually, exploration may pick up a fair
bit with higher oil prices, but significant successes probably won't).
Now there certainly are those that would disagree with that, and, since I'm still in the
industry, I often hear the message about the tremendous remaining potential in the northern
deepwater GOM coming from those in the ra-ra corner.
Not much and no. I think, if anything, the future GoM production will be a bit less than I
expected about six months ago. As far as STEO goes I think they come up with a future profile
once a year and then just bias it up and down to meet this month's production number –
I think a new profile must be due soon. There is about a 10% decline per year, which might
increase a bit now, so about 170,000 bpd is needed to maintain a plateau, but the STEO has
another 100,000 per year of growth. Next year there is only Stampede early on, which has
topsides nameplate of 60,000, but only 50,000 planned with the rest available for tie backs
and probably only about 70% availability in the first year; plus Constellation – which
has maybe 30,000 but depends on decline in the rest of the Caesar-Tonga field to allow
capacity for some of it, so not all of that is net gain; the LLOG fields I described above;
and Big Foot at the end which won't contribute much in 2018. So from July 2017 to Dec. 2018
they lose maybe 230,000 and add about 90,000 to 110,000 maybe with a bit of brownfield as
well. There's also Atlantis North but I think that only maintains a plateau against fast
declines from their other wells. But EIA are saying the GoM adds 330,000. Also in 2019 Big
Foot isn't going to ramp up fast, contrary to what I previously thought. It has dry trees,
only two have been fully predrilled, the others have the top two conductor sections drilled
but the on-platform rig will have to complete them. I think the oil is pretty heavy so not
huge production from a single well, therefore even with a 70,000 nominal topsides nameplate,
the wells and the usual low availability in the first year will be limiting.
EIA's monthly production data to end of July says US production vs 2016 is averaging about
3.4 million barrels per month higher. divided by 30 is 114K bpd increase over last year
averaged month by month. (not month to month)
For Texas it's 90K bpd increase over last year, as of end of July, averaged month by
month. That's most of the 114K.
Don't know if that's far enough back in months for the correction we get here to have
moderated.
It contains a lot of interesting information. For example on page 15 we can see that oil
field discovery rate has dropped from around 20% to only 5% in 2015. Saying that it has
fallen of a cliff is not an exaggeration.
"... I already picked the peak, 2015. So I was slightly off, but not by all that much as you can clearly see by the chart. I think we are on the peak plateau right now. ..."
I already picked the peak, 2015. So I was slightly off, but not by all that much as you can
clearly see by the chart. I think we are on the peak plateau right now.
The actual 12-month
peak could be anywhere from 2017 to 2019 but no later than that. Well, in my humble opinion
anyway.
The question was about US LTO, you have picked the World C+C peak, but as far as I
remember you have not said anything recently about US LTO except that it will be before
2025.
So far the 12 month centered average for US LTO peaked in June 2015.
If US LTO output continues at the August output level (4750 kb/d) for 5 months, then a new
12 month centered average peak will be reached by Aug 2017 (average output from Feb 2017 to
Jan 2018). US LTO output has risen about 600 kb/d over the past 12 months so an assumption of
no further US LTO output increases over the next 5 months is a conservative estimate in my
view.
"... A bit old so you may have seen it already. But if you haven´t then I highly recommend you to read the global oil supply report from HSBC: YouTube clip: https://www.youtube.com/watch?v=7KfVJBNX2U4 The report: https://drive.google.com/file/d/0B9wSgViWVAfzUEgzMlBfR3UxNDg/view contains a lot of interesting information. For example on page 15 we can see that oil field discovery rate has dropped from around 20% to only 5% in 2015. Saying that it has fallen of a cliff is not an exaggeration. ..."
Iraq's oil production has increased by 1.4 million b/day since oil prices last averaged $100
in July 2014. More than any other country
Chart on Twitter: https://pbs.twimg.com/media/DMHrqLZXkAAFiro.jpg
The report:
https://drive.google.com/file/d/0B9wSgViWVAfzUEgzMlBfR3UxNDg/view contains a lot of interesting information. For example on page 15 we can see that oil
field discovery rate has dropped from around 20% to only 5% in 2015. Saying that it has
fallen of a cliff is not an exaggeration.
2017-10-11 BSEEgov: From operator reports, it is estimated that approximately 32.68 percent
of the current oil production in the Gulf of Mexico remains shut-in, which equates to 571,854
barrels of oil per day. It is also estimated that approximately 20.51 percent of the natural
gas production, or 660.55 million cubic feet per day in the Gulf of Mexico is shut-in.
https://www.bsee.gov/newsroom/latest-news/statements-and-releases/press-releases/bsee-tropical-storm-nate-activity-4
Estimate of "Lost" Gulf of Mexico crude production due to Hurricane Nate is 7.82 million
barrels of oil.
(Possible paywall, I can't quite figure out how it works on Energy Voice)
"This is particularly evident when we look at investment. While investments are expected
to pick up slightly this year and in 2018, it is clear that this is not anywhere close to
past levels and it is more evident in short-cycle, rather than long-cycle projects, which are
the industry's baseload.
"The issue of a potential investment shortfall was a recurring theme at last week's
Russia Energy Week conference, with President Vladimir Putin, as well as many oil and
energy ministers making reference to the critical investment challenge.
"As we have all learned from previous price cycles, such pronounced and long-term
declines in investments are a serious threat to future supply. But given our projected
future demand for oil, with our upcoming World Oil Outlook 2017 expecting demand to reach
over 111 million barrels a day by 2040, an increase of almost 16 million barrels a day, the
world simply cannot afford a supply crunch."
It's noticeable that OPEC, IEA and drillers/service companies, even the Aramco CEO are
raising the lack of investment more and more, but they all stay away from discussing the fall
in discoveries and lack of attractive prospective projects. Part of it is real concern,
though it's noticeable they don't offer much in the way of solutions, and definitely none
that might impact their bottom lines in the short term, but part is pre-emptive
arse-coverage.
A lot of factors seem to be lining up for an economic bust next year, but then they have
looked like that for a few years (maybe the low oil price has contributed to staving off the
problem), if it happens a supply crunch might go unnoticed for some time, and only come
appear as the real problem it will be when there is some sort of recovery expected.
"... This year's rise is likely to be closer to about 500,000 barrels, far off an initial forecast by the U.S. Energy Information Administration, according to Hamm, the chairman of Continental Resources Inc. and a pioneer in the shale industry. ..."
"... The EIA projection is "just flat wrong," failing to take into account a new discipline among U.S. drillers, Hamm said in an interview Thursday on Bloomberg TV. "We have capability of producing a whole lot, but you have to get a return on investment," he said, adding, "that's where people have been this last quarter and this year." ..."
"... . "When we're lagging the Brent world price by $6 a barrel, that's not putting America first, that's putting America last. And that's the result of this exaggerated amount that EIA has out there." ..."
"... Once it's clear the EIA is off base, prices could rise to $60 a barrel from around $50 now, Hamm said. ..."
Shale oil entrepreneur Harold Hamm is back doing interviews on the business networks again.
Now he is speaking out against how the oil prices are low due to the EIA.
Shale Billionaire Hamm Slams 'Exaggerated' U.S. Oil Projections
Billionaire oilman Harold Hamm says the government was way too optimistic with its
prediction of more than 1 million new barrels a day in U.S. production, and the snafu is
"distorting" global crude prices.
This year's rise is likely to be closer to about 500,000 barrels, far off an initial
forecast by the U.S. Energy Information Administration, according to Hamm, the chairman of
Continental Resources Inc. and a pioneer in the shale industry.
The EIA projection is "just flat wrong," failing to take into account a new discipline
among U.S. drillers, Hamm said in an interview Thursday on Bloomberg TV. "We have capability
of producing a whole lot, but you have to get a return on investment," he said, adding,
"that's where people have been this last quarter and this year."
The government scenario has contributed to worries about an oversupply that puts U.S. oil
at a steep discount to international crude, according to Hamm. "It's distorting," he said
. "When we're lagging the Brent world price by $6 a barrel, that's not putting America
first, that's putting America last. And that's the result of this exaggerated amount that EIA
has out there."
Once it's clear the EIA is off base, prices could rise to $60 a barrel from around $50
now, Hamm said.
The EIA is making these projections because knuckleheads in the C suite at US shale companies
went hog wild at the first sign of oil price improvement and made these growth projections
for their individual companies, and the EIA just totaled them up.
Every Shale CEO bashes OPEC. OPEC tried to give shale a break by cutting production, and
shale absolutely blew it, just like shale absolutely blew it in late 2014 by not pretty much
shutting down. Instead, shale has lied about profitability for 3 years, and the world E &
P industry has paid the price.
Too bad Oilpro shut down. Lots of non-US E & P Industry folks posted there. They
absolutely could not stand US shale and the US shale CEO smack talk. Hundreds of thousands
out of work, because of shale smack talk and Wall Street encouragement of same, which crashed
oil prices below $30.
Shale better come through. No one seems to be taking serious the possibility of a supply
shock if it cannot.
When shale clearly peaks, what is to keep OPEC and Russia from suddenly making a big cut,
driving prices past $200 and crashing Western economies? Why wouldn't they afterthe hubris of
US shale CEO's, the Wall Street guys who pull their strings, and the US business media who
report everything they say as gospel?
I'd guess a lot of the non-US E&P people complaining about LTO would by from offshore,
and I think that side has been just as much to blame for boom and bust mentality with rose
tinted specs. (see below the UK investment which went nuts when oil went above $100 and now
they have nothing much left). I'd question with the jobs are going to come back offshore even
with a big price rise. As I keep pointing out, there have to be discoveries before
development, and there have to be lease sales before that. We're not seeing either, and
though exploration is down compared with 2011 to 2014, there's still a significant amount
going on, but wildcat, frontier success rates are what have fallen the most (even with the
best seismic methods and computer models we have ever had).
Shallow, I too miss the hell out of Oilpro. That community could debate the unconventional
shale phenomena without bias and with a clear understanding of how it has completely changed
the world oil order.
American's, on the other hand, simply enjoy cheap gasoline; they don't care how they get
it, what it costs, who ultimately pays for it or that it will not last forever. The American
public, and the politicians that govern it, have been lied to and completely deceived about
shale oil and shale gas abundance. It is a matter of American nationalistic pride to believe
what one reads on the internet and to otherwise be stupid about our hydrocarbon future.
I suggested to you several years ago that OPEC and the rest of the world's producing oil
countries were not dumb; they read shale oil K's and Q's and have the same access to SEC
filings we do. They know the shale oil phenomena is failing financially and that in the
process America is drilling the snot out of its last remaining, bottom of the barrel oil
resources. OPEC's production cuts in late 2016, in my opinion, were an effort to give the US
shale oil industry just enough rope to eventually hang itself. It has done just that; in the
past 24 months it has bankrupted out on another $50B, borrowed yet another $50B and is now
back over $300B of upstream long term debt with no current ability to pay that back. Hope
(for higher oil prices) is not a plan. The Bakken and the Eagle Ford have peaked and now well
productivity in the Permian is starting to fade. In a few more years the rest of the world
will have the US right back it its teet and will dictate what the price of oil well be. I
think in the next 12-18 months we are going to see big reserve impairments in the US, again,
and a pretty big shale oil company will end up the toilet, bankrupt. They'll be a bunch of
fist pumping going around the world when that happens.
Harold Hamm is whiner; he has always blamed OPEC for lower oil prices, demanded that OPEC
cut more production, he needs more pipelines, fewer regulations (where are those, by the
way?), needs to be able to export his oil, warned OTHER shale oil companies in the Permian
not to overproduce and drive the price of HIS oil down, the sun is always in his eyes now its
the EIA's fault. He, like the rest of America's shale oil industry, is desperate for
attention and desperate for help. Once again, Shallow, you are spot on.
Mike. It might be worth mentioning here the recent judgment a small OK producer won against
Devon Energy.
Apparently one of Devon's high volume fracs destroyed one of the the conventional
producers' wells.
When I read about these frac hits, I really worry that US is not properly managing these
shale oil resources.
From some reading it appears frac hits are a big deal in PB, and that just a few years in,
PB shale could wind up unperformimg due to reservoir damage from these massive fracs.
So if we assume that since 2014 at least 8 million barrels per day were lost due to aging
fields. Who provided additional supply to keep it steady. Something is fishy here.
Notable quotes:
"... If you're not bringing new production online and the global decline rate is call it 5% then each year from now until 2020 we should see a loss of about four and a half million barrels per day off of supply ..."
"... And in 3 years that's 13 million barrels per day supply reduction and there is no way countries can feed themselves with that quick level of scarcity. ..."
"... Venezuela dropping to 0 while the Lybian civil war flames up again – and there isn't 3 MB/D spare capacity left. Nobody besides SA perhaps does frenetic infill drilling for capacity he don't need and use. Or develops fields and put them on idle. ..."
"... Venezuela is the best example of low oil prices making high one – the production will halt sooner or later. ..."
Way too glib a presumption of supply shortage in the 2020 time frame.
If you're not bringing new production online and the global decline rate is call it 5%
then each year from now until 2020 we should see a loss of about four and a half million
barrels per day off of supply
And in 3 years that's 13 million barrels per day supply reduction and there is no way
countries can feed themselves with that quick level of scarcity.
When one says "supply shortage" the consequence of significance is not higher prices; the
consequence is unfilled orders.
RIO DE JANEIRO, Sept 27 (Reuters) – Only one block in Brazil's prized offshore Santos
basin received a bid in the country's 14th oil round on Wednesday, a sign low global oil
prices may have reduced the allure of potential new crude and gas investments in Latin
America's largest economy.
A lot more interest in the other basins though, especially Campos. It can't be just oil price
that is against Santos, maybe it's similar to the mirror province in Angola, Kwamza, and it's
turning out to be a bust.
I think this year has killed off a few of the promising frontier basins now – Kwanza in
Angola – bust, deep water offshore Canada – mostly bust, Barents – mostly
bust, Santos – looks bust, ultra deep US GoM – mostly played out or uncommercial,
offshore Colombia – looks bust for oil, couple of West Africa areas – dry holes,
offshore Ireland – half way to bust, UK North Sea – very poor lease sale, also
one other lease sale (maybe Oman?) I think didn't do very well from memory.
MARKET SHOULD PREPARE MORE FOR OIL SQUEEZE THAN OPEC SUPPLY GAIN, CITIGROUP SAYS
Those in the oil market fearing a flood of OPEC supply next year will probably be better
off preparing for a shortage, according to Citigroup Inc.
Five countries in the group -- Libya, Nigeria, Venezuela, Iran and Iraq -- may already
be pumping at their maximum capacity this year, Ed Morse, the bank's global head of
commodities research, said in an interview. Rather than a surge in output, there's a risk
of a market squeeze emerging as early as 2018, driven by those nations because of weaker
investment in exploration and development, he said.
"Fear in the market has been that OPEC production will rise dramatically," said Morse.
However, "there could be a supply gap emerging, which could point to a tighter market," he
said in Singapore on the sidelines of the S&P Global Platts APPEC Conference.
Geology has to do a lot with oil prices – the run up in price the last 40 years is
mostly due to geology.
Why? The original oil was the kind of very conventional land based oil. Once discovered,
the most costly thing was the infrastructure to transport it away.
This came to a limit in the 70s. After this, more and more expensive projects where
necessary.
Off shore oil, deep sea oil, small spots on land, arctic oil and last fracking oil. And
old fields with injections, infill, pressure control.
All things with big investments – much more than "we build an oil terminal for
supertankers and drill a few holes".
And so the market gets more and more unstable – these big investments have to pay
out, even when done by a state. And you have bigger and bigger planning time lags, so the
classical pork cycle can get investors in the false moment.
US fracking oil adds to the chaos – it's expensive, but fast rampup – but not
able to replace deep sea oil due to it's pure size.
Old cheap fields are in decline, or not longer cheap as the chinese giants on secondary or
tertiary recovery enhancements. So more and more expensive technology with long planing
horizonts comes to a short paced market, together with the political chaos describes by
you.
And geology gets more complicated, so the long project times you describe will get
longer.
I, without a mathematically model, expect a chaotic market in the future until oil gets
(hopeful) phased out and put in the steam engine age.
Low oil prices make high oil prices, and high ones low. The demand is very inelastic on
the short term, trucks have to drive and people have to drive to work (and the aunt wants the
chrismas visit). Only mid way demand gets flexible, a japanese car instead a SUV next or a
house nearer at the job. Or a company reduces work travelling.
Many 3rd world countries have regulated gas prices – so a price spike don't reduce
demand here on the short term. That makes things even more scary when something happens on
the political scale.
Venezuela dropping to 0 while the Lybian civil war flames up again – and there
isn't 3 MB/D spare capacity left. Nobody besides SA perhaps does frenetic infill drilling for
capacity he don't need and use. Or develops fields and put them on idle.
Venezuela is the best example of low oil prices making high one – the production
will halt sooner or later.
How comes? Annual world demand raises around 1.5 million BPD per year. So since 2014 it rose
probably 4 million BPD. And there is no sizable new discoveries. Iran and Libya cards were
already played and total from them is less then 4 million barrel per day. US output is stagnant.
Canadian is down. Where all this additional oil is coming from ?
Iran is currently exporting about 3 million BPD of crude and condensate vs. less than 1
million BPD when the sanctions were in place.
Libya and Nigeria have increased production by about 0.5 BPD undercutting the 1.2 million BPD
OPEC production cut.
Turkey already threatened to close their border with Iraqi Kurdistan, halting the 0.6 BPD of
oil that the Kurds are exporting through Turkey.
Venezuela problems might take another million BPD off the global market.
KSA has recently been forced to borrow $12.5 billion after borrowing $17.5 billion last
year.
Notable quotes:
"... The cartel revised global oil demand growth for 2017 upward by 50,000 barrels per day (BPD) to 1.42 million BPD. ..."
"... China's oil demand rose by 690,000 BPD in July, marking a 6 percent year-over-year (YOY) increase. China's total oil demand reached 11.67 million BPD in July. Year-to-date data indicates an average growth of 550,000 BPD, more than double the 210,000 BPD growth recorded during the same period in 2016. ..."
OPEC crude oil production decreased by 79,000 BPD in August to average 32.8 million BPD.
This marks the first OPEC production decline since April and was primarily driven by sizable
outages in Libya.
The cartel revised global oil demand growth for 2017 upward by 50,000 barrels per day
(BPD) to 1.42 million BPD. The group reports strong growth from the OECD Americas, Europe,
and China. Global oil demand for 2018 is expected to grow by 1.35 million BPD, an upward
revision of 70,000 BPD from the previous report. Growth next year is expected to be driven by
OECD Europe and China.
China's oil demand rose by 690,000 BPD in July, marking a 6 percent year-over-year (YOY)
increase. China's total oil demand reached 11.67 million BPD in July. Year-to-date data
indicates an average growth of 550,000 BPD, more than double the 210,000 BPD growth recorded
during the same period in 2016.
China's gasoline demand was higher by around 0.10 million BPD YOY, driven by robust sports
utility vehicle (SUV) sales, which were around 17 percent higher than one year ago. China's
overall vehicle sales in July rose by 4 percent YOY, with total sales reaching 1.7 million
units.
The numbers from China are interesting given the constant refrain of weakening Chinese
demand. This seems to be wishful thinking based on China's investments in clean technology.
"... Not only will enhanced recovery affect the economics of present unconventional operations, it has the potential to greatly expand the application to numerous, older conventional sources as well as undeveloped – yet recognized – formations with hydrocarbons within them ..."
"... But the problem isn't so much whether oil is still in the ground, but how much it costs to get it out. ..."
"... New technologies that don't reduce costs to make oil profitable to drill aren't all that helpful in keeping the oil flowing. Right now we have LTO because the system accepts financial loss. That could change if alternatives promise a better financial return. ..."
"... The way I understand the term Maximum Reservoir Contact (MRC) is that it refers to multiple laterals being drilled from a single vertical wellbore. ..."
"... From what I have read MRC technology is a great fit for a number of fields in the gulf countries and may be practical in other places including USA. Of course one of the problems applying it here is that I think you need a unitized field, or at least a very large area to be implemented. ..."
"... At that time, I was amazed to learn of the multi lateral, extended reach drilling using ultra sophisticated whipstocks in the mid east, offshore, and – if memory serves – Sakhalin. Probably do need large reservoir to be viable. ..."
"... The article says this: "On the supply side, global oil production advanced by 0.5 percent to reach 92.2 million BPD." You know, factoring in both population growth and world economic growth, this isn't much. There might be a crunch coming. ..."
New technologies did postoned the day f reconing, but they can't increase the total amount
of oil availble so the effects are temporary. Adn they are costly. right now low oil price is
financial scam.
I agree with George that getting stuff wrong is no reason to quit trying. To do so would be
stupid. To look back at why projections were wrong is a much more interesting thing. To that
end, I have been looking back at predictions from the 2005 to 2010 period, starting with
Simmons and progressing to the oil drum and some others. I do not have the technical
expertise that many of these people had, but looking back is a lot easier than looking
forward.
In my opinion, there are two big reasons the projected decline hasn't come about yet.
First, most of the work done was based upon inferred data. Because, the GCC countries don't
release much, most of the folks making these projections took whatever info was available and
ran with it. I don't blame them for this, as I believe they did what they could with what was
out there, but I think they went too far in some instances, and confirmation bias is
evident.
A part of Mr Simmon's efforts to deal with the lack of hard data was his review of many
SPE papers dealing with various issues. I believe one of these papers is a key to
understanding how KSA and others have exceeded projected production. Paper (SPE 88986) deals
with well "Shaybah-220 A Maximum Reservoir Contact (MRC) Well and its implications for
developing tight-facies reservoirs."
https://www.onepetro.org/download/journal-paper/SPE-88986-PA?id=journal-paper%2FSPE-88986-PA
This paper by N.G. Saleri describes the efforts to develop the Shaybah Field. After some
initial efforts to produce there were unsatisfactory, Aramco kept on trying and came up with
the Shaybah 220, a well with eight laterals of around 40,000 feet of reservoir contact, and
producing around 12,000 bbls per day for its first year. Saleri describes this as a
"disruptive technology".
Simmons devoted a lot of attention to Shaybah, calling it "The difficult last Giant". He
included a discussion of horizontal and MRC wells including the aforementioned paper, but I
don't think he fully appreciated these MRC wells. They have allowed KSA to produce lots of
oil in many fields that were in decline. Another example is shown by the 2008 paper by Mr
Asaad Al-Towalib on "Advanced completion technologies in successful extraction of attic oil
reserves in a mature giant carbonate field." In this paper they describe how this technology
was adapted to produce the attic oil of Abqaiq, KSA's oldest giant. To summarize, Abqaiq had
been produced since the 40's, and had produced about 57% of the original oil, but had around
25 feet of attic oil in poorer reservoir that they had not been able to produce. They tried
to produce this attic oil via vertical and conventional horizontal wells with little success.
They improved their technology and eventually completed many successful MRC wells with
geosteering which allowed them to follow structure, and intelligent completions which delay
the effects of coning.
So, much as most of us would have underestimated how successful our light-tight frac oil
has now become, many underestimated how successful MRC, and associated technology has been
for many gulf nations.
I think the next question is what happens next, so using Abqaiq as an example, after
successfully producing that attic oil is there another encore or does it become just a
depleted field? They have also used this technology to get more out of Ghawar and many other
fields, do they have room to run, or are they done?
That is simply an outstanding display of, and description of, a serious effort in
understanding what is unfolding in the world of hydrocarbon production.
I would suggest that the entire concept of MRC is being currently applied in this 'shale
revolution' primarily in the area of maximizing recovery rates, aka better
fracturing/completion processes.
Not only will enhanced recovery affect the economics of present unconventional
operations, it has the potential to greatly expand the application to numerous, older
conventional sources as well as undeveloped – yet recognized – formations with
hydrocarbons within them
But the problem isn't so much whether oil is still in the ground, but how much it costs
to get it out.
New technologies that don't reduce costs to make oil profitable to drill aren't all
that helpful in keeping the oil flowing. Right now we have LTO because the system accepts
financial loss. That could change if alternatives promise a better financial return.
I kind of 'flipped' the MRC concept in dc's post of 'more iron meeting' oil to 'more oil
meeting iron' via the greatly enhanced fracturing/conductivity recently taking place in the
shales.
Regarding multilaterals, the early (2007-2009) Bakken wells regularly contained 2 or 3
lateral from one vertical.
They used the term "turkey legs' and can still be easily seen on the ND DMR Gis map.
Virtually no one except Slawson still does this and even then, only rarely.
(Correction, might still be done in Madison formation, especially Bottineau county. Would
have to check. Gis map is easiest way to literally see this).
BHP said a year ago that they would attempt to try this in the future, but I've not kept
close track of their efforts.
Thank you very much coffee, I appreciate your kind words.
From what I have read MRC
technology is a great fit for a number of fields in the gulf countries and may be practical
in other places including USA. Of course one of the problems applying it here is that I think
you need a unitized field, or at least a very large area to be implemented.
I'm pretty sure you know a whole lot more about this stuff than I do.
I started digging into it a few years back when the series of stunningly high IPs started
to emerge from the Deep Utica.
Big buzz developed about feasibility of sharing hardware/facilities to develop Marcellus and
Utica together.
At that time, I was amazed to learn of the multi lateral, extended reach drilling
using ultra sophisticated whipstocks in the mid east, offshore, and – if memory serves
– Sakhalin. Probably do need large reservoir to be viable.
Time will tell if this approach makes sense in the shales. Like everything else, economics
will be the ultimate determinator.
The article says this: "On the supply side, global oil production advanced by 0.5 percent
to reach 92.2 million BPD." You know, factoring in both population growth and world economic
growth, this isn't much. There might be a crunch coming.
The 1973 so-called "oil embargo" which reduced oil supply to the USA by somewhere around 3%
or 4%. It slammed the US economy, caused the largest stock market crash since the great
depression, doubled gasoline prices, severely damaged US industry and caused a 55 MPH
national speed limit which remained in effect for ten years.
Just wait until we experience a 10% or 20% drop in oil supplies. In a few years or sooner
we certainly will. When it hits the economic and social damage will be catastrophic.
The end of Western Civilization, from China to Europe, to the US, will not occur when oil
runs out. The economic and social chaos will occur when supplies are merely reduced
sufficiently. As former Saudi Oil Minister Sheikh Yamani once said "The Oil Age may come to
an end for a shortage of oil".
They are talking about 25-30% and the verbage talks about it being in railcars . . . the
suggestion is it's part of the total Bakken flow of 1 million bpd. 25-30% of that is ethane?
What a scam this would be.
"Big Ships Account for 80 Percent of Shipping's CO2"
By Paul Benecki...2017-06-13...20:16:44
"At Nor-Shipping 2017, researchers with DNV GL released a study that points to the difficulty
of reducing the industry's CO2 output below current levels. The problem is structural: big cargo
vessels emit 80 percent of shipping's greenhouse gases, but they're also the industry's most efficient
ships, and squeezing out additional improvements may be a challenge.
Just 35 percent of the fleet – mostly large bulkers, tankers and container ships – is responsible
for 80 percent of shipping's fuel consumption, according to Christos Chryssakis, DNV GL's group leader
for greener shipping. Unfortunately, these are already the fleet's most efficient vessels per ton-mile.
"This is a paradox, but if we want to reduce our greenhouse gas emissions, we actually have to improve
the best performers," Chryssakis says."...
Similar situation with trucking, but in the USA around one half of gas consumption goes into
private cars. So by improving efficiency of private fleet by 100% you can cut total consumption
only by 25%. All this talk about electrical cars like Tesla Model 3 right now is mostly cheap talk. They
by-and-large belong to the luxury segment.
"the President cited this NERA study, commissioned by the American Council for Capital Formation,
and the U.S. Chamber of Commerce. Why didn't the President rely upon his own experts within the
White House?"
Because his CEA is not yet staffed. The NERA "study":
NERA uses its "model" to forecast that the cost to real GDP by2040 will be a 9% shortfall and
the cost to employment will by 31.6 million jobs. Now that sounds BAD, BAD. But it sort of reminds
me of the kind of "quality analysis" we might expect from the Heritage Foundation. Of course that
is what the American Council for Capital Formation, and the U.S. Chamber of Commerce paid NERA
to do.
I learned much reading this about Russia's taxing of its crude oil...you may find it interesting
as well...
Careful though, Irina Slav neglected to mention that Russia never stopped producing as much
oil as it could during OPEC's deal to cut production so this is hardly a balanced article
Putin and the Russian Oligarchs are not going to cut production, Mother Russia (Putin) needs
the cash flow (as do the other OPEC cheaters)
"OPEC Cuts Send Russia's Oil Heartland Into Decline"
By Irina Slav...Jun 03, 2017,...2:00 PM CDT
"Western Siberia is to Russia what the Permian is to the U.S. Well, kind of. Kind of in a sense
that it's one of the longest-producing oil regions and there's still a lot of oil in it. Yet,
thanks to the production cut deal with OPEC, Russian companies have had additional motivation
to move to new territories in the east and the north, where taxes are lower.
In Russia, the older the fields, the higher the taxes operators have to pay. Now that the country
has pledged to continue cutting 300,000 bpd for another nine months, the most obvious choices
for the cut are the mature Western Siberian fields. In the first quarter of 2017, for example,
output at Rosneft's Yugansk field fell by 4.2 percent, Bloomberg reported.
Production at other Western Siberian fields is set for a decline as well, with the daily output
rate from lower-tax deposits in the Caspian Sea, Eastern Siberia, and the North seen to rise to
866,000 bpd by the end of the year, or 74 percent on the year. The shift away from mature fields
to new ones will continue over the medium term, according to BofA analyst Karen Kostanian, as
overall Russian output grows. No wonder, as tax relief on new projects sometimes reaches 90 percent.
Lukoil's output from the Filanovsky field in the Caspian, for instance, is taxed at 15 percent
at a price per barrel of US$50. The average for mature fields is 58.1 percent, in a combination
of mineral resource tax and export duty.
And this is not the end of it: in 2018, the Kremlin will test a new tax regime for the oil
industry as it seeks to maintain production growth and the respective revenues, contributing a
solid chunk of federal budget revenues. The new regime, Deputy Energy Minister Alexei Texler told
Reuters, will first be introduced for a selection of 21 fields with a combined output of 300,000
bpd for a period of five years.
In case the government is happy with the results from the test, the new regime would be expanded
to the whole industry. Hopes are for a substantial increase in output thanks to the new tax regime:
up to 20 percent over the five-year period. These hopes seem to be limited to the Energy Ministry,
however, the Finance Ministry worries that the new regime will make it harder to control the flow
of tax money. The treasury is also against combining the new regime with already existing tax
incentives for the industry.
So, the move away from what Bloomberg calls the oil heartland of the world's top producer is
all but inevitable. It will come at a cost for the state coffers of some US$25 a barrel of Western
Siberian oil, or US$2.7 billion annually, according to a Renaissance Capital analyst, but the
cost will be worth it. The cost would increase, too, if the current output cut arrangement with
OPEC fails to push up prices, which for now is exactly what we are seeing, while the ramp-up in
the U.S. oil heartland continues."
"With enough thrusts pigs can fly. It is just dangerous to stand were they are going to land."
This quote is perfectly applicable to OPEC and Russia oil production now.
Neglecting maintenances and using "in fill" drilling just shorten the life of the traditional
oil fields. And new large oil fields are difficult to come by.
My impression is that most of "cuts" in production by Russia and OPEC are "forced moves". Production
was declining from mid 2016 when old investment were already all put into production and few new
investments were made since late 2014.
If we assume the lag period of two years, than in mid 2018 we will feel the results of decisions
to cut investments made in 2016.
In this situation announcing cuts allow to save face.
The net result is the same -- the oil price should rise to the level when it is economical
to develop "more expensive oil" (deep see drilling, Arctic oil and such) as replacement rate in
traditional fields is insufficient to maintain the production.
As long as The US government allow shale companies to generate junk bonds (which will never
be repaid representing kind of hidden subsidy) along with "subprime oil", shale can slightly compensate
the decline in production, but my impression is that this card was already played. Despite all
hoopla from WSJ and other major MSM.
The fact that oil production for some time was artificially kept flat or slightly rising is
strange and might be politically motivated (Saudi) which put other producers in situation when
they were force to follow Saudi lead or lose customers. China played Russians against Saudi pretty
well and got what they want at lower prices.
Those "intensification of production" were short term measures which in a long run are detrimental
to old oil fields output.
They might even lessen the total amount of oil that can be extracted from a given field.
The key question here is: Does Russian oil firms has the amount of money needed to maintain
production on the current level (at the current oil price levels ) or not.
Obama has a chance to move the US personal fleet to hybrid and more economical cars. He lost
this chance. SUV is now dominant type of personal cars int he USA, the trend opposite to what
it should be. Even hybrid SUVs like RAV4 hybrid get only around 33 miles highway, less in city
traffic.
Transition to Prius type cars (with their around 50 miles per gallon) would allow US consumers
to save almost half of oil spend on personal transportation (which probably represent around 60%
of total US consumption
http://needtoknow.nas.edu/energy/energy-use/transportation/
)
There's a plausible sounding theory, even though posted on Zero Hedge, that the Chinese have been
filling their SPR over the last two years, and that is about to stop. This would mostly account
for why OECD storage levels only took about 35% of the supply-demand imbalance. If they do stop
then about 1 mmbpd of demand would suddenly be lost, but it might also imply that the real economy
demand growth in the period since January 2015 has only been half what it looks to have been.
Taking account of the sudden drop and a slower growth in demand would mean a longer time would
be needed to draw down OECD stocks. However if the China SPR scenario is correct then almost all
the drawdown would come from OECD. By my reckoning this would push a balancing out to late 2018
(although by then we may be seeing some bigger supply drops as the pipeline for new project start-ups
will be drying up). But if the balancing is pushed out then the chances of many FIDs this year
or next will decline and the possibility of a sudden supply crunch in 2019 through 2022 would
be greater. The green curve below gives possible drawdown under this scenario. The red one was
a previous assumption that the OECD stocks would be drawn down at only about 35% of the imbalance
(as happened when they were rising). I seemed a bit iffy when I fitted it that way, and I think
the China SPR filling is a better explanation.
SPRs in general try to have 90 days of domestic consumption in them. This was a standard put into
place mostly in Europe. China has embraced it.
The US at 750ish million barrels and having a consumption (net of production) of about 11 million
bpd (remember, this is real stuff . . . consumption, no refinery gain BS allowed) and so not quite
70 days domestic consumption.
China, at net consumption of about 7 million bpd X 90 needs an SPR of 630 million barrels.
That's about what they have, but of course with 5% consumption growth they'll have to adjust up,
but for now . . . all is well.
There probably is no flow in or out of China for SPR reasons. Already full. Have been for a
while.
This is the chart Zero Hedge had, or linked to – the key is Xinhua CFC, who have Chinese data
not otherwise available and charge a lot of money for it. I don't know how you'd go about checking
if it's correct.
Hello, don't forget that Xinhua doesn't publish China's SPR figures. The SPR figure in the chart
is an estimate based on (Production + Imports – Refinery Inputs). I'm not sure if all the teapots
are included in the official refinery data.
I guess that Chinese demand must be higher than estimated. Like this article was suggesting
Bloomberg – October 11th 2016
China's appetite for oil.
Fuel use grew by about 5 percent in the first half of 2016, according to China's biggest oil refiner,
faster than the 0.4 percent derived from government data. That "official" number is clouded by
rising gasoline exports - blends that don't show up in official figures, according to the International
Energy Agency, Sinopec Group and Energy Aspects Ltd.
Chinese authorities are also having trouble tracking refinery activity because of the surge of
processing by independent refiners, known as teapots, according to Energy Aspects' Meidan.
http://www.bloomberg.com/news/articles/2016-10-10/gasoline-cocktails-mix-with-gaps-in-data-to-cloud-china-oil-view
?
Enno's shaleprofile.com is full of facts. I went back and looked at his 1/17 summary of all US
oil producing shale fields. Interesting that despite adding over 13,000 new wells since the peak
in 3/15, US as of 1/17 was still 600K bopd below the 3/15 peak.
I do realize data is somewhat incomplete due to TX. I also realize not all wells are included.
Still, going to take a lot of CAPEX to climb the ladder back to 5, 6 and maybe 7 million bopd
from the shale fields.
Soon, GOM will start declining. Onshore conventional is like the sun setting. Just 60 or so
straight hole rigs active, half of the 1998-99 trough. Alaska doesn't appear to add anything.
Unless demand tanks, per Tony Seba's theories, maybe its time to be bullish? When it is clear
US shale has hit the wall, price could sky?
XOM – Potential 2nd Downgrade – unless APPL or Bazos jumps to the rescue. /
sarc
"However,
unlike its peers such as Chevron and BP, Exxon Mobil is
not targeting meaningful growth in production.
Although Exxon Mobil is working on a number of shale oil, conventional oil
and LNG projects which will come online in the near term, they will largely
help the company in offsetting the negative impact of field declines and asset
sales -
Shell, Chevron, and BP carry debt loads of $91.6 billion, $45.3
billion and $61.8 billion, respectively. "
China crude oil imports increased to a record 9.21mb/day in March 2017 versus 8.32mb/day in February
2017 (7.33 barrels per ton conversion) – Chinese customs data. I guess China is still filling
it's SPR.
Before I had read this I had been wondering why news articles were saying that world
oil inventories had decreased a little. Inventories often build into April. Also news agencies
estimates are still saying that OPEC oil exports are holding steady and have not decreased in
line with their production cuts, I guess that they have been exporting from their inventories.
It's looking like the shorter cycle times for LTO just means the the
volatility acts over higher frequency but doesn't go away. A fundamental
problem remains that all the E&Ps use basically the same model, and
therefore they all make essentially the same decisions at around the same
time, and therefore you get boom and bust. Volatility may be the biggest
contribution to delaying or preventing long term investment in bigger
(principally deep water and oil sand) projects, but I think the impact of
the big drop off in discoveries is significant, and not being fully
appreciated.
The backlog of discoveries are mostly difficult and expensive
developments that were not considered as top prospects when oil was over
$100.
The few larger, new discoveries are also in frontier, and therefore
generally more expensive, regions. E&Ps are turning to gas, or near field
developments, or are giving up on offshore altogether. Much higher, and
stable, prices might be needed to get these big projects going. If high
prices cause a fast demand collapse, by whatever mix of mechanisms, then
they might well not get done.
"U.S. oil exporters set a new record last week: shipments leaving the country averaged 1.2
million barrels of crude per day, roughly double the levels seen at the end of last year.
Analysts told Bloomberg that the rising American exports are driven in large part by falling
domestic prices. West Texas Intermediate futures (the domestic benchmark) are trading below the
international Brent standard by $2 per barrel or more, and are now cheaper than some Middle Eastern
grades of lesser quality. This makes American crude more attractive to Asian buyers.
There is also an incentive for traders to sell their oil abroad: U.S. storage is costly. If
the price of crude is not expected to rise, brokers have no incentive to hang on to their supply
and pay rent on a tank to put it in."...
You are just regular incompetent chichenhawk. And it shows. Try to read something about US oil
industry before positing. It is actually a very fascinating topic. That's where the battle for
survival of neoliberalism in the USA (with its rampant militarism and impoverishment of lower
50% of population) is now fought.
If you list also domestic consumption, you will understand that you are completely misunderstanding
and misrepresenting the situation. The USA is a huge oil importer (Net Imports: 6.075 Mbbl; see
ilsm post), not an exporter. You can consider it to be exported only after drinking something
really strong.
It refines and re-export refined products and also export condensate and shale light oil that
is used for dilution of heavy oils in Canada and Latin America. That's it.
US shale can't be profitable below, say, $65 per barrel (so called "break-even" price for well
started in 2009-2016), and if interest on already existing loans (all shale industry is deeply
in debt; ) and minimum profitability (2.5%) is factored in, probably $77.
That's why production is declining and will decline further is prices stay low because there
is only fixed amount of "sweet spots" which can produce oil profitably at lower prices. In 2017
they are mostly gone, so what's left is not so attractive at the current prices. And this is an
understatement.
The same is true to Canadian sands. Plans for expansion are now revised down and investments
postponed.
So in order to sustain the US shale industry prices need to grow at least over $65 this year
And those war-crazy militarists from Obama administration essentially continued Bush II policies
and wasted money in Middle East, Afghanistan and Ukraine, instead of facilitating conversion of
passenger cards to hybrids (and electrical for short commutes).
The US as a country waisted its time and now is completely unprepared for down of oil age.
The net result of Obama policies is that SUVs became that most popular type of passenger cars
in the USA. That can be called Iran revenge on the USA.
The conflict between Donald Trump and the US Deep State can be explained that deep state can't
allow Trump détente with Russia and stopping wars on neoliberal expansion at Middle East. That's
why they torpedoed General Flynn. It is not about Flynn, it was about Trump. To show him who is
the boss and warn "You can be fired".
Due to "overconsumption" of oil inherent in neoliberalism with its crazy goods flows that might
cross the ocean several times before getting to customer, US neoliberal empire (and neoliberalism
as social system) can well go off the cliff when cheap oil is gone.
The only question is when it happens and estimates vary from 10 to 50 years.
So in the best case neoliberalism might be able to outlive Bolshevism which lasted 74 years
(1917-1991) by only something like 15 years.
"Noble Energy has sanctioned the first phase of the Leviathan natural gas project offshore Israel,
with first gas targeted for the end of 2019.
Noble Energy is the operator of the Leviathan Field, which contains 22 trillion cubic feet (Tcf)
of gross recoverable natural gas resources.
The announcement was hailed by Israeli Prime Minister Benjamin Netanyahu who has played a key
role in negotiations with Noble. Netanyahu says the discovery of large reserves will bring energy
self-sufficiency and billions of dollars in tax revenues, reports The Times of Israel, but critics
say the deal gave excessively favorable terms to the government's corporate partners...
Production will be gathered at the field and delivered via two 73-mile flowlines to a fixed platform,
with full processing capabilities, located approximately six miles offshore."...
"U.S. oil exporters set a new record last week: shipments leaving the country averaged 1.2
million barrels of crude per day, roughly double the levels seen at the end of last year.
Analysts told Bloomberg that the rising American exports are driven in large part by falling
domestic prices. West Texas Intermediate futures (the domestic benchmark) are trading below
the international Brent standard by $2 per barrel or more, and are now cheaper than some Middle
Eastern grades of lesser quality. This makes American crude more attractive to Asian buyers.
There is also an incentive for traders to sell their oil abroad: U.S. storage is costly.
If the price of crude is not expected to rise, brokers have no incentive to hang on to their
supply and pay rent on a tank to put it in."...
You are just regular incompetent
chichenhawk. And it shows. Try to read something about US oil industry before positing. It
is actually a very fascinating topic. That's where the battle for survival of neoliberalism
in the USA (with its rampant militarism and impoverishment of lower 50% of population) is now
fought.
If you list also domestic consumption, you will understand that you are completely misunderstanding
and misrepresenting the situation. The USA is a huge oil importer (Net Imports: 6.075 Mbbl;
see ilsm post), not an exporter. You can consider it to be exported only after drinking something
really strong.
It refines and re-export refined products and also export condensate and shale light oil
that is used for dilution of heavy oils in Canada and Latin America. That's it.
US shale can't be profitable below, say, $65 per barrel (so called "break-even" price for
well started in 2009-2016), and if interest on already existing loans (all shale industry is
deeply in debt; ) and minimum profitability (2.5% is factored in, probably $77.
That's why production is declining and will decline further is prices stay low because there
is only fixed amount of "sweet spots" which can produce oil profitably at lower prices. In
2017 they are mostly gone, so what's left is not so attractive at the current prices. And this
is an understatement.
The same is true to Canadian sands. Plans for expansion are now revised down and investments
postponed.
So in order to sustain the US shale industry prices need to grow at least over $65 this
year
And those war-crazy militarists from Obama administration essentially continued Bush II
policies and wasted money in Middle East, Afghanistan and Ukraine, instead of facilitating
conversion of passenger cards to hybrids (and electrical for short commutes).
The US as a country wasted its time and now is completely unprepared for down of oil age.
The net result of Obama policies is that SUVs became that most popular type of passenger
cars in the USA. That can be called Iran revenge on the USA.
The conflict between Donald Trump and the US Deep State can be explained that deep state
can't allow Trump détente with Russia and stopping wars on neoliberal expansion at Middle East.
That's why they torpedoed General Flynn. It is not about Flynn, it was about Trump. To show
him who is the boss and warn "You can be fired".
Due to "overconsumption" of oil inherent in neoliberalism with its crazy goods flows that
might cross the ocean several times before getting to customer, US neoliberal empire (and neoliberalism
as social system) can well go off the cliff when cheap oil is gone.
The only question is when it happens and estimates vary from 10 to 50 years.
So in the best case neoliberalism might be able to outlive Bolshevism which lasted 74 years
(1917-1991) by only something like 15 years.
I looked at Mexico production by area as below. The numbers in brackets show
percentage year on year change for exit rate 2016 to 2017. Only the small area
in northern offshore, which is not LMZ or Cantarell, is not declining. Even KMZ
looks like it might be turning over. If it goes like Cantarell as Nitrogen and
or water start hitting the producers then the will be a big acceleration, if
not then the decline might flatten out as the other fields make up increasingly
less of the mix. The plateau that KMZ achieved after N2 injection was started
is now quite long for an offshore field.
"... For the past eight years we were fed the constant stream of stories of mythical economic "recovery" and all the wealth created in this period from the bankers and economist. And as a result of all that illusory "wealth" retail sector was able to sell goods to consumers with empty wallets and maxed credit cards only by smashing prices to the bone – leaving almost nothing for the profit. ..."
"... Imagine the state of economy without this extra unconventional 5-6 mbd and $100 per barrel as a consequence. ..."
Steve,
Oil industry, and particularly Shale & Oil Sands part, lives in hope for the
last 3 years. And that is not reality, because hope means dream. Unless
someone's live in reality, here and now, they are dreaming. They are dead
weight, and tomorrow which will fulfill all their hopes is never to come.
Shale and Oil Sands are mostly North American origin of production with 5-6 mbd.
where we have the most consumption per capita in the entire world.
For the past eight years we were fed the constant stream of stories of
mythical economic "recovery" and all the wealth created in this period from the
bankers and economist. And as a result of all that illusory "wealth" retail
sector was able to sell goods to consumers with empty wallets and maxed credit
cards only by smashing prices to the bone – leaving almost nothing for the
profit.
Imagine the state of economy without this extra unconventional 5-6 mbd
and $100 per barrel as a consequence.
I disagree that it implies subsidies. What is implied is that
when oil is scarce, the price of oil will increase and more of the expensive
oil will be profitable to produce. Eventually the high oil price will lead
to greater efficiency in the use of oil (as measured by real World GDP per
barrel of oil consumed) and also some substitution of natural gas, and
electricity for oil in the transportation sector and after 10 to 20 years
demand for oil might fall below the supply of oil and lead to lower prices.
My main point is that the supply of oil depends on profits, not on net
energy or exergy of the oil produced. Profits will depend on revenue minus
costs and revenue will be determined by the oil price which is a function of
both
supply and demand for oil.
There is strong evidence that the US economy can survive only oil
prices below $100 per barrel without sliding into recession. Some
researchers put this magic "perma-stagnation" oil price as low as $60
per barrel. I think understanding of this fact is partially behind
this prolonged "oil price crush".
So it might well be that we do not have the freedom of "arbitrary"
oil prices in the US economy. and in worst case scenario we have oil
prices already close to the celling, unless the economy is
restructured.
That's why your line of thinking about this problem might be wrong.
In other words, this is a very serious situation for the USA. "The
long emergency" as James Howard Kunstler aptly called it (not that I
agree with his line of thinking or endorse his book).
Meanwhile the US is wasting time and money on the wars of
neoliberal expansion, which partially is "brut force" way of securing
privileged access to remaining oil deposits. Around 5 trillion was
spent so far, or 167 millions of Toyota Priuses at $30K per car, or
half of the US passenger fleet (there were 260 million registered
passenger vehicles in the United States in 2014)
So instead on concentrating on this fundamental problem that nation
is facing, the USA is just "waiving dead chicken" with the military
force. If we add the possibility of Seneca cliff that situation might
be even worse then I described. The nation does need radically cut the
amount of oil spend on personal transportation. Using all ways for
this that are technologically feasible. Because this is the lowest
hanging fruit. But very little was done in this direction on both
federal and state levels.
Meanwhile we expanded the fleet of SUVs for personal transportation
- this is now the most popular "form factor" for personal car, which
overtook sedans. Growth of the fleet of hybrid cars is unacceptably
slow (over 4 million units sold through April 2016; Japan, a much
smaller and compact nation, sold 5 millions).
Even such a symbolic act as switching of all personal government
cars to hybrids was not done by Obama administration, which preferred
only talk about the problem and opened spigot for shale junk bond. The
only their "real" achievement was "Iran deal" which probably was
instrumental in crashing oil prices. Which probably helped Obama much
more than it helped the USA economy as whole, but we should not
inspect the teeth of the horse that was given as a gift, as old saying
goes.
Also attempts to lessen huge traffic jams in large cities like NY
and SF are feeble, despite the fact that the technology is available
both to reroute the cars and to optimize traffic lights.
Converting existing roads network into "one way" network is almost
unheard outside the city center, even when two more or less adequate
parallel roads exists with the short distance of each other.
Variation of the number of lines each way is practiced very rarely,
in some city centers and selected bridges.
Green wave for traffic using Wifi connections between traffic
lights and cameras is in a very rudimentary stage.
The only progress that I noticed is that more and more traffic
lights at night autodetect the presence of the car on intersection and
switch to green light if there is not traffic in "main" direction.
Submitted by Nick Cunningham via OilPrice.com,
Despite the near record increase in U.S. oil inventories last week – an increase of 13.8 million
barrels – oil prices traded up on February 8 and 9 as traders pinned their hopes on a surprise
drawdown in gasoline stocks, which provided some evidence of stronger-than-expected demand.
The abnormal crude stock increase took inventories close to 80-year record levels at 508 million
barrels, and is another bit of damming evidence that should worry oil bulls. But the oil markets
were not deterred. In fact, that has been a defining characteristic of the market in recent weeks
– optimism even in the face of some pretty worrying signals about the trajectory of the market
"adjustment" process.
More signs of optimism abound. Wall Street is pouring the most money into oil and gas companies
in the U.S. since at least 2000, according to Bloomberg. In January alone, drillers and oilfield
service companies raised $6.64 billion in 13 different equity offerings. "The mood is absolutely
different," Trey Stolz, an analyst at the investment banking firm Coker & Palmer Inc., told
Bloomberg. "Go back to a year ago and the knife was still falling. But today, it feels much, much
better."
From what I have seen it is generally accepted that EROEI for FF has
been and will continue (lots of peer reviewed papers documenting this)
to be in a downward trend. Then it is open for projections how fast
this downward trend will develop and its consequences.
What matters
is net affordable energy that will be made available for societies.
In the short term it is about flows, longer term; size and quality of
remaining stocks.
Selling assets to pay down dividends/buy back stocks is
liquidation.
Further up in this post Nathanel shared some great insights;
"Personally, from my background in general financial analysis,
the two really big metrics I've been watching lately: Dividends in
excess of current earnings mean a company in decline. Borrowing money
to pay the dividend means a company which is in unmanaged,
uncontrolled decline. (Managed decline would involve liquidating
assets to pay dividends, and *paying off* debt.)
"
"Look at what they do and not what they say."
Several big oil companies have used money for stock buy backs, but
another trend I found interesting is also how they move into renewable
(solar and wind). This should be an indicator about what these
companies find profitable.
Just to be clear, I think renewables are great, but we also need to
recognize the dominant role of FF.
"... Light, sweet crude for March delivery recently fell 90 cents, or 1.67%, to $52.88 a barrel on the New York Mercantile Exchange. Meanwhile, brent, the global benchmark, dropped $1.02, or 1.8%, to $55.22 a barrel on ICE Futures Europe. ..."
"... We believe the market will soon get the catalyst it has been waiting for to push higher – better inventory stats. Getting ahead of this catalyst is a good risk-reward proposition in our view. ..."
If you were hoping crude oil prices would end the week on a positive note after yesterday's rally,
you're likely to be disappointed.
U.S. and brent crude futures fell Friday as worries about
U.S. drilling activity once again weighed on the market following the release of data showing that
the number of active rigs
rose for a second consecutive week.
Light, sweet crude for March delivery recently fell 90 cents, or 1.67%, to $52.88 a barrel on
the New York Mercantile Exchange. Meanwhile, brent, the global benchmark, dropped $1.02, or 1.8%,
to $55.22 a barrel on ICE Futures Europe.
Crude prices have oscillated between gains and losses over the past several weeks as investor
sentiment has shifted almost daily. OPEC and its allies have so far followed through on promised
production cuts, yet fears linger that U.S. drilling will hurt efforts to curb global supply.
Crude prices
settled Thursday
at their highest prices in several weeks. But today's decline pushed futures contacts into the
red for the week. If U.S. and brent crude contracts settle at current levels, prices will fall more
than 0.6% for the week.
But Vikas Dwivedi and his team at Macquaire recommend increasing
oil exposure, pointing to a tightening sour crude market and storage trends. But he warns that 2018
looks challenging.
We believe the market will soon get the catalyst it has been waiting for to push higher
– better inventory stats. Getting ahead of this catalyst is a good risk-reward proposition in
our view. However, we caution against turning a rally into a structural trade. Our balances
indicate the market is oversupplied again in 2018. Key 2018 drivers include the return of approximately
1.2 MM BPD of post-deal (OPEC and NOPEC ex U.S.) supply and 0.6 MM BPD of U.S. supply growth +
global.
The Energy Select Sector SPDR EnergyETF (XLE)
fell 1.3% in recent market action, while the iShares U.S. Energy ETF (IYE)
dropped 1.2%.
Elsewhere in the ETF realm, the United States Oil Fund (USO)
declined almost 1.8% and the iPath S&P GSCI Crude Oil Total Return Index ETN (OIL
lost 2%. The U.S. Brent Oil Fund (BNO)
also fell 2%.
It might well be that "human induced climate change"
enthusiasts are barking to the wrong tree.
Oil depletion might take care of the "climate change" (as
well as "excessive" humans) even without Trump or and other
politician. This is probably a matter of a decade or two.
The key here is proactive switching the use private car
fleet to more economical model and without draconian measures
such as $4 per gallon gas or $1K per cubic centimeter of
engine volume tax the process is very slow.
Obama administration was pretty inactive in this area,
despite all rhetoric.
There is no justification of using full size SUV or light
truck for communizing to work unless you agree to pay extra
for this privilege.
What % of US oil consumption is food transport? This got tricky quickly.
Average US person eats about 5.4 pounds of food a day. That's just the food.
Average meal travels 1500 miles to reach your mouth.
First tricky item - packaging. It has to transport, too. Amazing variance on
this. Glass jar of pickles vs paper around candy bars. The only estimate out
there is numbers for municipal solid waste and estimates of % of that is food
packaging. Year 2000 US waste generation 4.5 pounds/day/person, and growing.
Probably over 6 by now based on the curve, but will use 5 lbs/day cuz round
number.
31% of that is packaging and half of that number is food packaging. Some
2006 study. So 15% of 5 lbs a day is 0.75 pounds added to the 5.4 pounds of
food is 6.15 pounds shipped a day per person.
For 1500 miles.
Eyeballing some charts looks like typical/average truck hauling weight for
stuff hauled is 60,000 lbs. Typical diesel mileage 6 miles/gallon.
6.15 pounds X 320 million mouths = about 2 billion pounds of food moved each
day
1500 miles / 6 = 250 gallons truck burned
2 billion lbs / 60,000 lbs = 33,333 truck trips X 250 gallons/truck trip =
198.4K bpd to move food.
Ain't much. Maybe there's an error in there. Top of my head . . . things not
included, hauling spare parts for the food moving trucks, spare parts for the
packaging gizmos, plastic packaging, agricultural consumption itself.
[Edit] Blurb says 17% of total US oil use is agricultural, up and downstream
(fertilizer plus fuel). This would be far more than food transport.
I am suspicious of that fifteen hundred mile figure, but it may be accurate.
Or it may have assumed a life of it's own, after being tossed out by one or
two people who really just guessed at it.
Most of the food that is produced in truly huge amounts, staple food, is
shipped by water, and or by rail, if it travels a LONG way. A VERY limited
amount of food, in relation to the total amount, is air freighted.
Here in the USA, it's not too likely that very much in the way of
unprocessed or processed staple food is shipped more than a thousand miles
by truck. Exceptions will be mostly fresh high retail value produce, shipped
as directly and quickly as possible from grower to retailer.
The REAL food miles come at the very tail end of the distribution chain.
I never owned an eighteen wheeler, but I did once own a C70 Chevy which
would legally haul about sixteen thousand pounds of apples to market. The
farthest local growers usually go with their own truck of this sort is about
a hundred miles, one way. Thirty gallons of diesel would take me that far,
and home again.
The people who actually bought my apples at retail, after they were
picked up at the wholesale market and delivered around town in smaller
trucks, usually bought no more than five pounds at a time.
I'm guessing, pulling numbers out of my hat, but I suppose a typical
shoppers average grocery purchase weighs from about twenty five to thirty
pounds, up to a hundred pounds,depending on family size, and is made on
roughly a weekly basis, on average.
And I'm guessing that the average trip to the super market is at least
six to ten miles, round trip. THAT's where the food miles really pile up. A
liter of gasoline burnt to get fifty pounds home, the last five miles, times
around a hundred million households, times fifty weeks, adds up. FAST.
Maybe. The pickle jar weighs a LOT and there's not much food weight part
of that. The whole packaging thing is a significant thing, and that's
another food item I didn't include, disposal of it.
I'm going to guess
the 1500 mile thing came from the coasts' pop centers and their daily
bread from Iowa and Nebraska. The various websites talking about this
like to talk about a head of Imperial Valley California lettuce going to
England. X calories burned for 1 or two calories delivered to the mouth.
But that sort of thing definitely would drag the average up. 1500 miles
maybe is legit.
I am surprised the total transport is south of 1 mbpd, if it truly is.
As for shipping, I can't see Iowa bread going to NYC any way but by
truck. Not going to fly it there. And the canals don't reach.
Everybody driving the last 5 miles to the store . . . maybe that
really doesn't show in the diesel calc. Oh! Of course. The issue is not
diesel. It's the 60,000 pounds per trip. A car is carrying the much lower
weight per your estimate. Will redo.
14 billion pounds of food move the last 5 miles by car per week,
probably at 150 lbs per weekly load (family of 4 at 6 lbs/day/mouth
incl packaging)
14 billion / 150 lbs = 93 million car trips per
week.
5 miles in a 25 mpg car is 0.2 gallons. X 93 million /7 and /42 =
an additional 63,000 bpd from the car trips added to the trucks above.
About 260K bpd for food transport.
Hmmm of course if it's 5 miles each way that's a X 2 on the 63K.
And SUVs for that trip, not a Datsun. Might be up nudging 400K.
It occurs to me that Pepsi and Coke may not be food, and they are
heavy.
I'm having problems with this 400ish K number because the
famous 2004 pie chart of US oil consumption said 65%
transportation, and of that 65% it was only 37% passenger cars, 18%
heavy trucks and 27% light trucks (sums to 45%), and that was
before SUVs (called light trucks) had swept up sales. Though F-150s
may have arrived.
0.37 X 0.65 is only 24% of consumption. Trucks light and heavy
rather more. So what are they hauling. Food as a daily consumable
would seem to be the dominant hauled stuff, but apparently not.
Most of the grain or flour that goes from the midwest to the northeast
probably gets there by rail, where it will then be baked into bread,
packaged, and shipped by truck to food distribution centers, or
directly to supermarkets. But the distribution center food warehouse
seems to rule these days, because it's better to load a truck up to
the doors with a variety of stuff all destined for one address or
maybe two or three, than it is to have a truck stop to deliver bread
and nothing but bread to a bunch of different stores. That means a lot
more total time and miles invested in stop and go driving, compared to
the one stop load. That still happens, but not as often as in the
past.
Grain is milled into flour near where it's grown, when possible,
because this reduces total shipping costs, being that the weight and
volume of flour is less than the weight of whole unprocessed grain,
plus the tailings are used mostly in livestock rations, and customer
for that product is most definitely NOT in NYC, lol.
Most of the cows,hogs and chickens we eat are raised in
confinement, and are raised in the mid west and southeast, closer to
the feed supply, and where land and water are cheaper, and neighbors
less fussy, and mostly in localities where neighbors are relatively
few in number.
Nobody's ever going to operate a modern supersize hog farm anywhere
close to the BIG APPLE,
Watcher's conclusion is probably right – not much fuel used to transport
food compared to the total available. On the other hand, some random
thoughts. 5.4 pounds/day/person is too high. Babies, young children,
seniors, etc. Second, the 1500 miles is too high. Some of the basics make up
a significant amount of the weight – like liquid milk, along with other
dairy products, cheese and eggs. These products generally will never go 1500
miles. Vegetables, seafood, fruit, etc yes. But, chicken, pork and beef – I
think that 1500 miles is too high.
Pre oil, railroad cars had no refrigeration to speak of in summer months.
That's where the term cattle car came from. Had to ship beef alive to the
cities.
I am not at all sure just HOW much of a cow winds up as nekkid ape
chow these days, but YOU most definitely don't WANT to know much about
what goes into processed meat products, if you plan on eating them.
Fifty years ago when I had the "insider tour" of a huge and
extremely famous hog slaugher plant that you get only by personal
invitation from management,even back then, they bragged about selling
everything but the squeal.
I'm pretty sure that well over fifty percent of the live weight of
a cow winds up as nekkid ape chow these days, but how much over I
can't say. Fifty to fifty five percent would be a reasonable guess.
Farmers have been breeding cows for more milk and meat, and less
waste, since the beginning. For the last seventy five years or so,
this breeding has been based on high tech such as artificial
insemination, a solid understanding of genetics, and very sharp
pencils. So a typical cow TODAY is going to yield significantly more
more than she did a decade or two back.
Developing countries, like China and India are urbanizing and their populations are becoming more affluent, this will increase
global energy demand 24% by 2040. This includes the ExxonMobil prediction that energy use efficiency will double (figure 4).
The world population will increase from 7.3 billion today to over 9 billion in 2040, with a much larger middle class population
(defined as >$14,600 and <$29,200 yearly for a family of 4) using energy than today. World GDP will effectively double by 2040.
Living standards will rise dramatically, especially in the developing world.
Natural gas consumption will increase 54 quadrillion BTUs by 2040. Nuclear and renewables will increase 24 and 20 quadrillion
BTUs, respectively. The 2040 energy mix will remain about the same as today (figure 5 and Table 1).
Rising electricity demand will drive the growth in global energy between now and 2040. The increase in the number of homes
with electricity, industrialization of the developing world and our increasingly digital and plugged-in lifestyles will drive
this growth. Half of global electricity demand is from industrial activity; thus good jobs can be lost if electricity costs
are too high. Jobs will move to locations where electricity is cheap, an example is the new Voestalpine steel plant in Corpus
Christi, Texas.
Crude oil and natural gas will remain the world's primary energy source. Even in 2040 oil and natural gas will supply 57%
of all energy demand, this is an increase from 56% today. Oil demand will grow 18% through 2040 and natural gas demand will
grow 44%. The developing world will account for the largest increases. Unconventional ("fracked") oil and gas, oil ("tar")
sands, and deep water oil production will account for over 25% of the liquid supply in 2040.
Carbon dioxide emissions will increase, at least until 2030."
High taxes create a "tax shield". The price at the pump in Europe is approx. 1/3 oil and refining and 2/3 tax and duty (see
http://euanmearns.com/energy-prices-in-europe/ ). Consumption
is therefore less responsive (inelastic) to the international oil market price compared to the USA. Also, Europeans have adapted
to this over time and drive smaller and more fuel efficient cars.
Several oil producers have cut back on subsidies during the last couple of years. This should restrict domestic demand increase.
Most oil exporters' oil consumption/capita will probably level off and never come close to the US figure. However, given the level
of population growth and demographics (young people) in MENA their domestic consumption is unlikely to reduce significantly (slight
increase seems more likely).
The only major exporter not there is Russia at 0.02, but President Trump will help them increase. Not an exporter, but FYI Singapore is highest I've seen at 0.24.
"The only major exporter not there is Russia at 0.02, but President Trump will help them increase."
How? Will he help to increase car fleet in Russia? KSA and its neighbours use a lot of oil for electricity generation.
Russia uses natural gas, nuclear, hydro and coal.
Just to add information, in Europe, taxes are split in two parts: excise (typically fixed amount) and VAT (variable amount). For
gas in Belgium, excise are about 0.60 per litre or half the price of gas.
So price variations due to oil international prices
are attenuated. Add to these that taxes decreases when oil price increase and increase when oil price decrease. This is a way
to guarantee revenue for the State when oil prices decrease.
After the Jean Laherrere post on global reserves I had a go at predicting a future supply trajectory
myself. It is based on 620 Gb developed declining at 4.35% annually; 150 Gb discovered and undeveloped
with about 120 identified from identified conventional projects on companies' books and 30 from
shale; and 25 Gb undiscovered represented by a linear decline from current discovery numbers over
twenty years. That gives 795 Gb reserves remaining – about what he had.
Note the figures in the legend give the overall production in the years shown on the chart.
Extra heavy oil is given as 30 kbpd coming on stream every year until 2023 representing the
drop off in tar sands development and probable falls in Venezuela production, and then 200 kbpd
added for every year after. As the projects take about 5 years to complete this would represent
about 8 in development at any one time, but also requiring projects for 3 or 4 upgraders, 1 or
2 pipelines and a new refinery to be ongoing in parallel.
For new conventional projects I assumed a one-year ramp up, a ten-year plateau and 10% yearly
decline to shut down after 25 years. The numbers coming on line until 2022 I've taken from what
is currently on the E&Ps books with some probable short-term projects that could be developed
in time. After that I just made reasonable guesses, assuming an extra three-year development time
from discoveries for ne fields.
The results aren't very different from Dennis Coyne's except there isn't a new peak (in 2018
which he is predicting – I don't know where that extra production could come from based on current
development activity) and there is a big gap in 2019 to 2022 reflecting the capital cuts over
the past 3 years.
The biggest issue for me is that, assuming exporter countries maintain the same overall internal
demand at about half current production, then net exports would fall by 50% in 2032 and to zero
by 2041. There is also a 20% decline in available exports between 2018 and 2023. Things wouldn't
be quite so clear cut as some countries will continue to export while other producers become net
importers.
If this is close to reality I don't see it making transition very easy. Apart from added renewables
and nuclear, and increasing efficiencies there will be a turn to gas if there is sufficient easily
available, a loss in demand from recession (depression in a lot of places I suspect), and I think
also an inevitable turn back to coal maybe with another push to in-situ gasification.
OK, I have to bring in a not-directly-oil-related comment, because it's related to demand.
My non-oil projections for growth of electric cars - which are the key technology displacing
oil usage. I believe since they are superior technology, they are essentially production-limited.
I believe price issues will be automatically addressed by economies of scale as production
increases.
So my production projections see a big increase in electric car sales in 2018 (thanks
to models we already know about). I believe the high sales in 2018 cause much, much more
capital , which causes much more investment by car companies. This takes 2-5 years to pay
off. So I see a huge increase in production (and therefore sales) in the 2020-2023 time
range.
Specifically - to get back to oil - I believe sometime in that time range, 2020-2023,
is when electric car sales per year become large enough to displace an amount of oil exceeded
the natural decline rate of oil fields (I've seen different estimates for that rate, but
it's a close enough range that it doesn't matter for this projection). This is still well
before market saturation is reached.
So combine this with your projection out to 2022, along with Laherrere's and Coyne's
projections out to 2022, all of which are similar. Before sometime in the 2020-2023 range,
we can expect petroleum demand to remain solid. But after that, demand will be dropping
faster than the natural drop in supply. There will be a *glut* of oil. There will be no
new drilling, or at least not profitably.
If a bunch of oil projects are started in the 2016-2023 period which start producing
after 2023, they won't pay off, they'll be big money-losers and make the glut worse. (With
a three-year project time, the glut will remain brutal for three years afterwards as old
projects go online.)
At that point, low oil prices become the determining factor in the size of reserves.
High-priced producers go bankrupt and shut down. Refineries, now with excess capacity, go
bankrupt and shut down. Refineries have to retool to optimize for aircraft kerosene production
instead of gasoline production. I think it's about this time - after a bunch of bankruptcies
which leave wells in a derelict state - that the regulators start going after the survivors
to cover their environmental liabilities preemptively, making them plug wells properly.
I'm not exactly sure how the rest of the shakeout happens, but I'm glad to be totally out
of the industry before then.
Thanks George. That's a fascinating chart. Thanks for breaking out the different production
sources. How the world is going to get by on 20% less available exports by 2018 to 2023
is going to be interesting. Zero available exports by 2041! That's gonna be a damned mess.
When oil prices rise in 2017 and 2018 there will be
increased output from Russia and OPEC, in my view.
A lot of output in those nations has relatively short time for
development, they just need to develop already discovered reserves, there
will also be some increase in US LTO output and Canadian oil sands output
with higher oil prices. Possibly the peak will be lower, but I expect a
at least a 50% probability that the 2015 peak will be surpassed.
Dennis – can you say what those resources are – i.e. field names,
expected production, time to develop. Because I know of nothing like
that, and can't think of anything in the past where 1 or 2 mmbpd has
been bought on line from FEED to plateau in 18 months, which is what
you seem to be assuming. I can only think of Iran as a possible source
– but most of their stuff is gas flood, that needs big compressors to
provide the injected gas – it is impossible to go through a design,
procurement and start-up cycle on such systems in under 24 months.
There are combined cuts of 1.7 Mb/d. That production from OPEC
and Russia can be brought online in June 2017. Also infill drilling
will increase in other nations as oil prices increase.. My scenario
is pretty conservative relative to IEA and EIA Outlooks.
I do not have information on specific fields and
developments.
The IEA and EIA do have this information and their future
outlooks are quite a bit more optimistic than what I have
presented. I believe that those estimates are too optimistic and
yours may be too pessimistic.
A problem with your analysis is that you seem to assume no
reserve growth just as Jean Laherrere does. I believe an
assumption of no future reserve growth leads to too pessimistic
an outlook.
US reserve growth from 1980 to 2005 was about 63%. I have
assumed C+C minus extra heavy reserves will grow by about 300 Gb
from 2010 to 2060 or 300/850=35% over 50 years. Perhaps that is
too optimistic, time will tell. Also I assume LTO resources in
the US are only about 40 to 50 Gb, possibly too optimistic, but
less so than the EIA.
Oil price appears to be
shyly
creeping up maybe because it's
testing the ceiling at where the economic engine starts sputtering and
backfiring?
A little late, but, just-viewed (and recommended)
The Overnighters
Desperate, broken men chase their dreams and run from their demons in
the
North Dakota oil fields
. A local Pastor risks
everything to help them.
"The Overnighters is a feature documentary produced, directed and
photographed by Jesse Moss was awarded the Special Jury Prize for
Intuitive Filmmaking [etc.]
'The director, Jesse Moss, plays it as it lays. An observational,
near-invisible presence, he fills the frame with the faces of economic
deprivation and bad choices, neither judging nor sugarcoating. What
emerges is a blue-collar meditation on the meaning of community and the
imperative of compassion.' ~ The New York Times, Critics' Pick, Jeanette
Catsoulis
'A remarkable nonfiction essay on golden rules and grand intentions
and oil booms that do not pay off for everyone a rich and troubling
documentary highlight of the year.' ~ The Chicago Tribune, Michael
Phillips
'Like a punch in the gut. I can't remember the last time a documentary
hit me so hard layered, provocative, and surprisingly intimate" ~
Leonard Maltin
'If John Steinbeck were writing in the second decade of the 21st
century, 'The Overnighters' is precisely the story he'd want to tell' ~
Salon, Andrew O'Hehir
Another year; another section of the Russian-roulette rollercoaster ride
(where corkscrews could mean missing rivets )
A ten percent drop in oil production over 12 years appears quite manageable.
All we need is a twenty percent efficiency gain in that time to handle it
easily. It will help push EV production.
Yes, there is value. The long term predicament has
potentially awful implications, and it seems better to prolong the status
quo than face the reality that things are changing. Increased production
efforts now will result in some additional supply coming online a few
years down the road when it will likely be sorely wanted.
Besides, the short term goal is more likely tax reductions and
subsidies that can affect balance sheets in the shorter term. In the oil
business, the long emergency is now. New production for the long term is
less critical than financial survival.
More free money is probably the only thing that will increase
production. I can't see reasoned investment decisions going to E&P in
this uncertain business climate, but free money clouds the view of risk,
so fools will rush in, if history repeats.
Yes, there is value in political hopium. Keeps the masses from
thinking about change.
The politicians won't do what we think they will anyway, for the most
part.
Oil and gas supply is now falling. The chart below shows pretty clearly why
there was a glut: over investment leading to over supply, which is now
correcting. Nothing much to do with demand reduction that I can see. One thing
I haven't seen discussed, and can't find find a lot of analysis on, is how much
either direct motor fuel subsidies (e.g. in producer countries and some other
developing countries) or high taxes in Europe tend to reduce the impact of
prices on demand changes. I'd be interested in any opinions or references.
This is the a boom and bust cycle combined with the end of life in a mature
basin looks like (for the UK – only one new field approval this year to
September).
And this is why the coming bust in supply might be a bit different from
previously – something changed in the oil industry in December 2014 and I
don't think things will play out quite as they have previously, even with
rapidly rising prices, given the debt load.
According to the
Energy Export
Databrowser
they were still exporting about 600,000 bpd in 2015. That
year their exports dropped by 21%. It is entirely possible that export
dropped past zero in 2016 and they became a net importer.
However I guess we will just have to wait until we have the total 2016
data. But if anyone else has any further data I would love to hear it.
"I had read somewhere that the value of imported refined products was
near to equaling the value of their exported crude."
Correct.
The drop in Mexico's net exports of crude oil and refined products was
much steeper in value terms than in volume terms. It declined from
US$26.2bn in 2011 to U.S.15.6 bn in 2014 and just 400 million in 2016.
Mexico: value of the foreign trade of crude oil and refined
products (billion U.S. dollars)
source: PEMEX
"It would be interesting to compare the money they earn exporting
crude to the money they spend importing refined products. Either way,
Mexico is on the brink. Just as Indonesia had to fall back on other
forms of revenue, like destroying their forests, once oil exports
became oil imports, Mexico will have to find something else to lean on
once oil doesn't pay the bills."
A sharp drop in the value of net
crude and product exports had a negative impact on Mexico's foreign
trade balance, which deteriorated from virtually zero in 2012 to a
deficit of US$14-15 in 2015-2016.
But that's not critical, as oil and product exports now account for
only 5% of Mexico's total exports, down from 16% in 2011.
Has there been a country before in which oil and gas production has stopped? I
can't think of one, but Denmark might be the first in coming years, what with
DONG pulling out of fossil fuels, cancellation of an oil project last year (I
think the last real prospect for them – I've forgotten the name though) and now
this:
"Maersk Oil today confirmed it would cease production on its North Sea Trya
field. The operator said it had failed to identify an economically viable
solution for the full recovery of the remaining resources in the Denmark's
largest gas field. Maersk Oil COO Martin Rune Pedersen said: "Tyra has since
1984 been the main hub for gas production and processing in the Danish North
Sea. The Tyra facilities are approaching the end of their operational life, and
together with our partners in DUC we have assessed solutions for safe
decommissioning and possible rebuilding of the Tyra facilities."'
As I recall the seafloor had been subsiding as the reservoir pressure has
been reduced. Jacking up existing facilities or rebuilding would be expensive
for the remaining gas resource. I think the hub receives associated gas from
some oil fields which will need to be rerouted as part of the decommissioning.
December U.S. light-vehicle sales are forecast to finish strong enough for
2016 to top 2015's record 17.396 million units. However, actual volume
largely will be determined by results in the final third of the month,
because a major portion of December's deliveries typically occur after
Christmas.
The forecast
17.7 million-unit seasonally adjusted annual rate
is
below November's 17.8 million, but above December 2015's 17.4 million.
...
Despite the drop in December's volume, total 2016 sales will end at 17.41
million units, barely edging out the all-time high set last year.
emphasis added
Here is a table (source: BEA) showing the 5 top years for light vehicle sales
through November, and the top 5 full years. 2016 will probably finish in the
top 3, and could be the best year ever - just beating last year.
Light Vehicle Sales, Top 5 Years and Through November
"... ...in 2016, 96 percent of all new vehicle sales featured a combustion engine. IHS Markit estimates the average vehicle life globally to be about 15 years, which means that the impact of new vehicle technologies is expected to take time to materially affect the vehicle fleet and overall fuel demand. ..."
...in 2016, 96 percent of all new vehicle sales featured a combustion engine. IHS Markit
estimates the average vehicle life globally to be about 15 years, which means that the impact of
new vehicle technologies is expected to take time to materially affect the vehicle fleet and
overall fuel demand.
Proved reserves of crude oil in the U.S. declined by 4.7 billion barrels or 11.8 percent from
their year-end 2014 level to 35.2 BBbls at year-end 2015. Natural gas proved reserves decreased
64.5 Tcf to 324.3 Tcf, a 16.6 percent decline.
... ... ...
Proved reserves are volumes of oil and natural gas that geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.
"... What's shocking about that chart AlexS is that even with the sharp price increases of oil between 2000 and 2014, the oil R/P ratio has still steadily declined. With investment having been crushed in the last few years, looks like we are facing a Seneca cliff. ..."
The situation with global natural gas is different.
1) There is significant spare capacity in a number of countries. For
example, Russia has reduced gas production in the past few years due to
falling demand from Europe, but can easily increase it if demand returns.
2) There are significant developed and undeveloped proven reserves.
Reserves/production ratio is much higher for natural gas (see the chart
below).
3) Natural gas resources are generally explored less than oil. Potential
for increase in proven reserves is much bigger for natural gas.
The countries and regions with significant resource potential and able to
sharply increase production include: Iran, U.S., Russia, East Mediteranean,
several countries in Asia (including China).
Several countries in Africa are not producing at full potential.
Global proven reserves / production ratio for oil and natural gas
source: BP Statistical Review of World Energy 2016
What's shocking about that chart AlexS is that even with the sharp price
increases of oil between 2000 and 2014, the oil R/P ratio has still
steadily declined. With investment having been crushed in the last few
years, looks like we are facing a Seneca cliff.
The chart is named "Annual conventional oil and gas volumes discovered".
Onshore Canada production is dominated by oil sands; US lower-48 onshore
– by tight oil.
Conventional output in both cases is from mature fields; and there were
no major conventional discoveries for many years.
US shallow-water GoM is also a mature province. New discoveries were
made in deepwater GoM.
Instead of switch to
hybrids and smaller cars as well as using nat gas for local city tranport they are trying to comsume
as much as possible. Without high tax of SUVs and opther "oil waisting" personal tranporation
veiches it is impossible to sustain the US economy. the only question is when it falls from the
cliff.
I've never understood the urgency of using up US oil so quickly. Better to buy someone else's at
a cheap price and save ours for a time when it is depleted elsewhere.
Its' not only the USA. KAS, Iran and Russia are doing
the same. There are a lot of short termism obsessed
politicians besides Obama administration
Especially KAS in 2014-2016. Who were instrumental
in the current oil price crash.
But behavior of the Iran and Russia was also
deplorable. Iran decided to get back its former market
share at all costs. But they like KAS are governed by
religious fanatics, so what we can expect?
At the same time Russia, which theoretically should
be a rational player and have enough space and steel to
build huge national oil reserves, using it as
alternative currency reserves, did nothing. Instead
Russia also increased oil production selling its
national treasure left and right, while prices were
hovering below $50.
Another bunch of short termism obsessed suckers. So
much about Putin as a great statesman. And what he got
in return for his stupidity - only additional sanctions
and allegations that he fixed elections for Trump. Such
a huge payoff.
IMHO of big oil producing nations only China behaved
rationally.
Oil is not renewable resource and burning it in
large SUVs and small trucks carrying one person to
commute to work is a suicide. That's what the USA is
doing on the national scale. Add to this all those wars
for the expansion of the US neoliberal empire, the USA
is fighting, which also consume large amount of oil and
it looks even worse. See
http://www.ucsusa.org/clean_vehicles/smart-transportation-solutions/us-military-oil-use.html
The U.S. military is the largest institutional
consumer of oil in the world. Every year, our armed
forces consume more than 100 million barrels of oil
to power ships, vehicles, aircraft, and ground
operations-enough for over 4 million trips around
the Earth, assuming 25 mpg.
So out of the total US oil consumption (let's say 20
MB/day) around 0.3 MB/day is consumed by military. I
think that the figure in reality might be twice larger
that cited as it is not clear how consumption of planes
operating in Iran, Syria, Libya, Yemen (and generally
outside the USA) is counted. But even 0.3 Mb/day is
approximately the same amount that Greece, or Sweden,
or Philippines are consuming. The latter is a country
with over 100 million people.
In twenty-forty years this period would probably be
viewed as really crazy.
The IEA's estimate from its Oil Market Report shows an even bigger growth: by 300 kb/d to 34.20 mb/d,
led by increases from Angola along with Libya and Saudi Arabia. The group's output stood 1.4 mb/d
higher than a year ago.
https://www.iea.org/oilmarketreport/omrpublic/
China's crude oil production increased 3.6% in November from the previous month to about 3,915
kb/d, the highest since July.
Output was down 382 kb/d (8.9%) from the same month last year.
Crude production has fallen 294 kb/d (6.9%) in the first 11 months of 2016 to 3,984 kb/d.
Comment
from Bloomberg:
"China's output has declined this year as state-owned firms shut wells at mature fields that
are too expensive to operate at current prices. The country needs oil above $50 a barrel to stabilize
production, according to analysts at Sanford C. Bernstein, as well asFu Chengyu, the former chairman
of both Cnooc Ltd. and China Petroleum & Chemical Corp. Production is forecast to drop 335,000
barrels a day this year, followed by a further slide next year of 240,000 barrel a day, the International
Energy Agency said Tuesday.
"November's output pickup is probably just a blip, which won't likely persist," said Gao Jian,
an analyst with Shandong-based industry consultant SCI International. "For the next six months,
unless oil prices stay above $50 a barrel, we we won't see solid recovery."
The rise in production last month was in anticipation of higher crude prices amid OPEC meetings,
said Amy Sun, an analyst with Shanghai-based commodities researcher ICIS-China.
China's annual crude output is seen falling to 200 million tons this year (about 4 million
barrels a day), down roughly 7 percent from nearly 215 million tons last year, according to estimates
from SCI International and ICIS-China."
Yes, the US clearly needs some kind of energy policy, and I think one thing that highlights
how badly this is needed is the ability of anyone who can raise the money to be able
to drill 96 horizontal wells in one section of land (two if the laterals are the two
mile variety).
But, I guess any mention of conservation in the US industry these days
is heresy.
I would not be too critical of Chinese production falling. Seems to me they are buying
up all the cheap oil they can from overproducing nations, and storing it. Makes sense
to me.
The OPEC production agreement, which we called correctly, has already helped hoist the profitable
oil stocks we held, but what about 2017? One way I've looked at oil and oil stocks is by looking at
the crude curve – the differentials between monthly contract prices. And a recent big move in the
curve makes 2017 look very positive indeed.
I've seen all kinds of futures curves in my 30+ years of trading oil, and many analysts believe that
the crude curve is really predictive of the future –but more often than not, it is merely an outline
of what traders and hedgers are thinking.
here's a look at Thursday's curve:
... ... ...
These numbers represent an enormous change from the numbers we saw even two weeks ago, before the
big OPEC deal in Vienna. Since 2014, we had been seeing a deep contango market, where oil prices in
the future were a lot higher than where they were trading in the front (present) months. But what
does a contango market mean?
Many like to look at contango markets as a signal of crude storage, and that has merit – but I like
to look at the curve through the eyes of its participants: when the oil market is collapsing, as it
has been since 2014, players in the futures markets know that the costs of oil recovery fall well
above the trading price, and will buy future oil contracts banking on a recovery. This drives buying
interest away from the present and into the future and creates our contango. This kind of market is
dominated by the speculators, who are willing to buy (bet) on higher prices later on.
In contrast, the hedging players are in retreat in busting markets, dropping capex and working wells
and trying merely to survive to see the next boom. It's when prices begin to recover and they gain
confidence in future prices that they try to hedge and plan for the coming up-cycle. This is when
speculators, if they are buying, are likely to move closer to the front months if they're buying
while producers (commercials) are looking to sell futures 12-24 months out. Suddenly, you have a
curve that is being more dominated by commercial players, selling back months and creating the
backwardation we're starting to see right now.
You may remember that I was able to nearly predict this year's bottom in oil prices by looking
for that flattening move of the crude curve in February. This latest move from a discount to a
premium curve has moved more than two dollars in the last week alone. This gives me added confidence
in oil prices for 2017:
Let's look, as a practical matter, why a premium (backwardated) market is absolutely REQUIRED to
see a long-term recovery in oil.
Imagine you're a shale producer and you've seen prices move from $45 to $52. You've been waiting for
a move like this to restart some non-core acreage that you could have working by the middle of 2017.
With a deep contango market, you might have gotten $55 or even more for a hedged barrel of crude in
June of 2017.
But you're not alone in looking to come out of your bunker, hedge some forward production and
restart some idle wells – every other producer is trying to do the same thing. If all of you could
depend on a future premium, every producer would hedge out new production and ultimately add to the
gluts that have been already slow to disappear.
Related: The OPEC Effect? U.S. Rig Count Spikes Most In 31 Months
If you think about it, a premium market works to DISCOURAGE fast restarts and quick restoration of
gluts that a two-year rebalancing process has only slowly managed to fix – and this is a good thing.
Producers have to be wary of adding wells so quickly, even in a market that is clearly ready to
again rise in price. In a truly backwardated market, the futures work to keep the rebalancing
process on track and production increases slow. That governor on production is the key to keeping a
rallying market strong, and the frantic addition of wells at a minimum.
The proof of all this is in the type of curves we see depending on how the markets are trading.
Now, take another look at the December-December spread chart I put up and you'll see that a Contango
market was a critical component to the bull markets we saw in oil prior to 2014. Unless something
very strange is happening, a Contango curve is indicative of a strong market, while a backwardated
one indicates a market under pressure. It's something I've watched closely for more than 30 years to
help me find major trends.
And convinces me today that oil will have a constructive 2017.
IEA also upped its forecast for global oil demand for this year and next year due
to revised estimates for Russian and Chinese demand. It saw growth of 1.4 mb/d for 2016,
120,000 barrels a day above the previous forecast. Growth in 2017 is now seen at 1.3
mb/d, an increase of 110,000 barrels a day from its previous estimate.
likbez, 12/13/2016 at 11:40 am
Realistically the only country that can substantially increase its oil production in 2017 in
Libya. But that requires the end of the civil war in the country which is unlikely. Iran card was
already played.
Iraq is producing without proper maintenance. At some point they might have substantial
difficulties.
"... The IEA also upped its forecast for global oil demand for this year and next year due to revised estimates for Russian and Chinese demand. It saw growth of 1.4 mb/d for 2016, 120,000 barrels a day above the previous forecast. Growth in 2017 is now seen at 1.3 mb/d, an increase of 110,000 barrels a day from its previous estimate. ..."
...OPEC ... crude output in November was 34.2 million barrels per day (mb/d) - a record high -
and 300,000 barrels a day higher than in October.
The IEA also upped its forecast for global oil demand for this year and next year due to
revised estimates for Russian and Chinese demand. It saw growth of 1.4 mb/d for 2016, 120,000
barrels a day above the previous forecast. Growth in 2017 is now seen at 1.3 mb/d, an increase of
110,000 barrels a day from its previous estimate.
"... Peak oil is not just about cars. Oil is the reason why our civilization exists in its current form. Oil is why we have 7 billion people on this planet. Oil is about agriculture and food supply, it is about distribution of everything we buy and not least it is about the raw materials for many if not most of our goods. It is about almost every economic and social transaction that takes place. ..."
"... It is unbelievable what misinformation has been spread by the media. I attended a public forum of the Australian Energy Council and one participant thought that OPEC had increased oil production. My presentation on the need to replace oil by natural gas as transport fuel (instead of exporting it as LNG) was met with silence and did not spark a debate. Another participant was running away when he heard the word peak oil. ..."
"... Further re climate, most agree CO2 is a greenhouse gas but estimates of the temperature change caused by a doubling of its concentration have been coming down over the last 15 years. In other words, it may not warrant the type of policy response that is being promoted at present. ..."
"... Meanwhile the IPCC projections continue with climate sensitivity estimates of 3 to 6 degrees when the more recent estimates of ECS and TRC are consistently under 2 degrees. So contrary to what is alleged above, there is lots of doubt about the IPCC models. ..."
"... I agree with author. If you look at 2 previous OPEC meetings, the players claim disorder and inability to control output only to find resolution the day after the meeting. I believe OPEC is setting up for a freeze as we are only 1% oversupplied now. If the OPEC big wigs need to fatten the bank accounts, what better way than to set up your own long call on the cheap? ..."
"... Balance this with Iran and Iraq incapable of proper well maintenance and we will soon see inadequate supply not later than 2qtr 17′. ..."
is out with crude only production numbers for October 2016. All charts are in thousand barrels
per day.
OPEC crude only production reached 33,643,000 barrels per day in October. This includes Gabon.
Since May, OPEC production has increased 1.05 million barrels per day.
Algeria is in slow decline.
There was a sudden drop in Angola oil production in October, down 200,000 barrels per day
since August. I have no idea what the problem was. There is nothing in the news to indicate any
problem.
Ecuador was sharply down in August but seems to be holding steady for the last two years.
Gabon was added to OPEC a few months ago but their production is so low it will have little
effect one way or the other.
Indonesia will also not affect OPEC production in a big way one way or the other.
Iran's increase since sanctions were lifted has slowed to a crawl. There are other problems
on the horizon for Iran. They are talking about changing all their oil field contracts to "buy
back" contracts. That is they want the option to nationalize all everything. This will likely
cause a mass exodus of foreign oil companies from Iran and hit their production considerably.
Iraq's production was up 97,000 bpd in September and another 89,000 bpd in October. Iraq,
like everyone else in OPEC, is positioning themselves for an OPEC "freeze" in oil production.
So they are producing every barrel possible in order to freeze at the very highest level possible.
Kuwait has recovered from the problems they had in April. I expect their production to flatten
out soon with a slight decline over the next few years.
Libya's oil production was up 168,000 bpd in October. Is peace breaking out in Libya? I doubt
it but only time will tell.
Nigeria increased production 170,000 bpd in October. It is likely erratic increases and declines
in production will continue.
The decline in Qatar's oil production seems to have slowed since late 2014.
Saudi saw a slight decline in October.
The United Arab Emirates had some problems earlier this year but they seem to have recovered.
I think they will hold production steady for a while now. I really don't think they can increase
production much above 3 million barrels per day.
Venezuela's oil production is still dropping but the decline seems to be slowing. Venezuela has
very serious economic problems. They are nearing the "failed state" status.
World oil supply is very near its November 2015 peak.
All this oil tens of billions of barrels all of it non-renewable, never to be seen- or made
use of again for a hundred million or more years, for all practical purpose, ever!
the greatest bulk of it put into cars where it is wasted, by people driving aimlessly in
circles from gas station to gas station for entertainment purposes only By way of this idiocy
we destroy ourselves and our futures. We aren't doomed, we are damned.
The big mistake most energy illiterates make is to talk about their cars when the peak oil subject
comes up. Most hope or assume that another form of fuel or energy will power their ride post oil.
Peak oil is not just about cars. Oil is the reason why our civilization exists in its current
form. Oil is why we have 7 billion people on this planet. Oil is about agriculture and food supply,
it is about distribution of everything we buy and not least it is about the raw materials for
many if not most of our goods. It is about almost every economic and social transaction that takes
place.
When oil becomes expensive our economies and societies will implode, jobs and goods imported
from far away will disappear. This will apply worldwide. The citizens of Addis Ababa are just
as dependent as the ones in Amsterdam or Atlanta.
We have exhausted most of our soils and lost the skill to eke out a living from Mother Nature
without fertilizers and machines. Could it be that the least "developed" countries will lead post
oil because our "developed" nations are the least able to cope without oil?
Mike, that's exactly what I have been trying to tell folks for years. Most just don't want to
believe it. They see solar, wind and other such things as keeping BAU going for awhile.
Why don't you post over on the post section. We get a lot more traffic over there.
Big mistake thinking that this crisis will not arrive with plenty of time to avoid it. Oil prices
will rise slowly over time. However we create energy, we will find a way to pay for locomotion
or create food.
Oil is down 50% This is because of new sources of supply combined with continuing energy efficiency
improvement. Doomed or damned, don't hold your breath. I am sure you will find something else
-- perhaps global warming, now climate change, to scare people with.
Argh. Your comment suggests that you are a militantly ignorant troll. 97% of the competent climatologists
fully support the IPCC global warming summary model. There is no reasonable doubt about this science.
In my opinion there has been a revolution in drilling technology over recent years. However,
the measured rate of additional improvement is now very modest as measured by the US EIA.
Most of the recent improvement is explained by the discovery and exploitation of sweet
spots which are being rapidly drained. For an objective look at prospects going forward for oil
and gas you should read David Hughes' Drilling Deeper report.
This is an exhaustive analysis based on a data base of all existing US oil and gas wells. It
impressively documents a future of peak oil and gas based on fully exploiting fracking technology.
I don't see any magical technology that will get the projected fossil fuel resources required
for business as usual. It is just not there.
Oil is the reason why our civilization exists in its current form.
Not really. There's nothing magical about oil. 100 years ago civilization was pretty recognizable,
and it didn't require oil.
Oil is about agriculture and food supply
For the moment. Batteries and synthetic fuel can move tractors. Electricity (from many sources)
can create fertilizer.
it is about distribution of everything we buy
Rail works awfully well.
is about the raw materials for many if not most of our goods.
Meh. It produces some of our raw materials. But plastic can be produced from a lot of different
hydrocarbons, and it's production doesn' necessarilly create CO2, so we could produce plastic
from coal for centuries. That's plenty of time for a smooth transition.
"Not really. There's nothing magical about oil. 100 years ago civilization was pretty recognizable,
and it didn't require oil." You missed his point entirely. The reason there is 7 billion people
now is because of oil and what it has done for industrial, agriculture ect ect ect.
There was 1.7 billion people 100 years ago. How many people do you think would be here if not
for oil and all it has done?
">For the moment. Batteries and synthetic fuel can move tractors. Electricity (from many sources)
can create fertilizer<".
This is lack of a better word retarded for you to even consider that a battery will be used
even in the distant future to power agricultural machinery on a mass scale. Maybe the little ride
on mower you cut grass with, but that is it.
" Rail works awfully well."
Ya it does, but when it gets to a terminal, it will have to be unloaded and transported
then. Which basically happens now, so what is your point? And your last comment I wont even pick
apart because you obviously know little to very little about the uses of oil and the advantages
it has brought humanity.
@ Steve from Vaginia: Did you ever consider that some People have to drive to *work* and *produce*
so that you can sit around and swing your testicles and so that your mommy can prepare your lunch
and dinner?
So when you sit around the whole day you can think what happens in 300 years, when most of the
oil and gas has been used up. We don't have time for that, but we are sure that People will find
a solution.
One or the solution will be not driving to work and wasting time in gridlock so we can
have more time to swing our balls be 'productive' on our own and our real community's
terms. Real community that includes momma
Oil will get more expensive, some day slowly. Right now the cost is down (50%!!!) because of new
sources and efficiency improvements. I think that those who predict doom will be disappointed.
The falling EROI destroys your lousy assumption in spades. Your time might be better spent burning books or working on one of the dozen worthless Presidential
campaigns.
Oil is very precious raw material, our demand for oil increases day after day, year after year
and century after another. The search and use other sources such as atomic, wind, tide, solar,
geothermal and others will continue but the prospects / trend to keep on using oil as a main source
of energy still quite high and will continue with time due to the following reasons:
– Worldwide population trend is going up drastically. (Main factor).
– Oil as a source of energy still quite cheap in comparison with other sources.
– It may be easy to apply the new technology in certain fields but not for all fields.
– Oil proofs to be available all over the world and at different levels, hence oil production
cost will suit all the times and condition worldwide but not for all the countries.
– Oil is quite important as a raw material for petrochemical products, and our needs for plastic,
paints and other products increases day after day drastically.
– Oil civilization will continue for a few centuries to come if not for ever and playing with
its prices is subject to market condition, political matters, and other technical issues.
Thanks for the graphs. Saudi Arabia may be ramping up production ahead of the air-conditioning
season. Around 600 kb/d are needed in the hottest month.
It is unbelievable what misinformation has been spread by the media. I attended a public
forum of the Australian Energy Council and one participant thought that OPEC had increased oil
production. My presentation on the need to replace oil by natural gas as transport fuel (instead
of exporting it as LNG) was met with silence and did not spark a debate. Another participant was
running away when he heard the word peak oil.
Im lost by ur comments. 1st of all the graphs clearly show that Opec has increased production
by 2+m/d in the last year.
2ndly, Saudi's oil output charts above are for just Oil not NG. Ive never been there, are you
suggesting they run generators from oil for electricity and subsequent air conditioning. Why
wouldn't
they run thier power plants on Natural Gas? Please educate me.
No doubt that investor sentiment and market makers are playing a significant role in price
decline, as opposed to actual supply/demand issues. How do you find out how much the Opec nations
have sold oil short in the various markets. Not a bad deal for them, if they can lay rigs down
World wide and make the money in the commodity markets while doing so. But prices can only slide
so far and for so long before that game is up. It seems like if short selling or hedging slows,
buyers will outweigh sellers and the price should rise soon
Greg, Saudi Arabia is very short of natural gas and have been for several years now. They would
love to run all their power plants and desal plants on natural gas if they just had enough of
it. They don't. They do burn a lot of natural gas but their supply is far short of what they need.
...Saudi is producing flat out right now just like every other OPEC country except Iran. Sanctions
are holding Iran back. Political violence is holding Libya back, but they are still producing every
barrel they can. It's just that violence keeps them from producing any more.
Re Saudi, yes their domestic usage of oil is around 3 M bopd (they produced 10.5 M in June
but exported around 7 M bopd). Their refinery capacity is increasing but a large amount is burnt
for electricity generation. They have delays in the development of some large gas fields, and
so gas supply is behind the demand curve. Various service companies such as Baker Hughes, Halliburton
and Schlumberger have been demonstrating unconventional gas production in Saudi as a response.
Meanwhile the IPCC projections continue with climate sensitivity estimates of 3 to 6 degrees
when the more recent estimates of ECS and TRC are consistently under 2 degrees. So contrary to
what is alleged above, there is lots of doubt about the IPCC models. The latter point comes from
peer reviewed science, by, among others, Nic Lewis.
Another point of interest is the relative steadiness of Venezuelan production. Allegedly various
of the empresas mixtas (Joint Ventures between PDVSA and International Oil Co.'s) are not proportionally
funded by PDVSA as they should be. As a result production is down or is not reaching targets.
Apparently contractor companies will not accept new contracts from PDVSA unless they set up an
escrow account or other arrangement that guarantees payment in foreign currency. It is surprising
therefore that Venezuelan production shows a slight rise since December.
Yes one day we will be without oil that is pumped from the earth. This is not going to happen
for 100's of years. Our intellect will probably find chemical or biological solution to this problem
long before we run out. If not humanity will survive. Global warming, yes its real and one day
the Sun will double in size and engulf the earth. I am not worried about either. I hate winter
anyway.
The problem humanity will face and not discussed near enough is the lack of clean drinking
water. Everyday it becomes harder to deliver enough clean water to all areas in need. States fight
over the rights to what little water pass through their terrain every year. Many times it has
to be pumped from other states at a premium. The worlds population grows larger every second.
crops demand more and more. Ethanol was forced on us without thought as usual by the oil fear
mongers. You do not grow food to solve a commodity problem.
The land resources, water resources, and corrosive properties that Ethanol introduced far out
weigh any benefit accomplished but still its forced down our throats destroying everything its
poured into. So please build those oil pipelines all across the country and pump that oil at rates
that keep our prices low so I can drive in circles any time I feel like it. I am not going to
worry about it because about the time we run out of oil we will need those pipelines to pump clean
water to all that need it.
I agree with author. If you look at 2 previous OPEC meetings, the players claim disorder and inability
to control output only to find resolution the day after the meeting.
I believe OPEC is setting up for a freeze as we are only 1% oversupplied now. If the OPEC big
wigs need to fatten the bank accounts, what better way than to set up your own long call on the
cheap?
OPEC will shut in wells before the Fed adjusts interest rates resulting in magnified downward
pressure on oil.
Balance this with Iran and Iraq incapable of proper well maintenance and we will soon see inadequate
supply not later than 2qtr 17′.
BP's numbers for oil exports (available from 1980) and production less
consumption (available from 1965) are slightly different, which may reflect
changes in inventories and other balancing items.
According to BP, Middle
East oil exports in 2015 was 20.6 mb/d, the record for the period from 1980.
Production less consumption was 20.5 mb/d vs. all-time high of 20.8 mb/d in
1976-1977.
But 2016 should see a new record due to ramp-up in production and exports
from Saudi Arabia, Iran and Iraq.
Middle East oil exports (mb/d)
Source: BP Statistical Review of World Energy
"... The real danger is that the media, as well as the general public, has been sold the idea that peak oil has now been discredited because of shale oil. It has not. And that only increases the dramatic shock effect it will have when it finally becomes obvious that peak oil has arrived. ..."
"... Of course some will agree but say that "No big deal, renewables will make peak oil a non event!" And these folks are in for an even bigger shock than the peak oil deniers . Well, in my opinion anyway. ..."
"... To me, that is like a farmer saying I estimate next year and beyond that the cost of seed, chemicals, fertilizer, fuel, labor, real estate taxes, etc, will fall by 60%. I am not familiar with any commodity based business where that is reality. Yet almost ALL US LTO did the same thing, 30-60% reduction. ..."
"... The point is, had they not done that, they would have basically lost ALL of their proved reserves at 2015 prices. My point is, how can a company that is losing large amounts, pre-reserve write downs, have any economic reserves? If the costs cannot all be recovered for the well at SEC prices, there are no reserves for that well. ..."
"... 2016 SEC prices are about $10 lower. We shall see what they come up with. ..."
"... I also agree peak oil will be obvious before long, I think eventually (by 2020 at least unless a big recession intervenes) oil prices will rise, maybe to $100/b. Most will expect a big surge in output, but any surge will be small (1 Mb/d at most) and likely short lived (if it happens at all). ..."
Hi Ron. Thanks for your awesome website. The word blog doesn't do it justice.. It is truly the
best, and attracts a great group of commenters. May I ask how you might see 'serious depletion'
playing out, roughly speaking? Do you have any predictions or wild ass guesses on the slope of
the production decline or perhaps where world crude plus condensate production might be by 2020
and/or 2025? Given your wisdom and insight into human nature what are your feelings about the
human response to these future conditions?
Do you have any predictions or wild ass guesses on the slope of the production decline or perhaps
where world crude plus condensate production might be by 2020 and/or 2025?
Not really. We all had a pretty good idea where things were heading until shale oil raised
its ugly head. No one that I know of predicted that. But now it looks like shale oil is a USA
phenomenon with no appreciable production anywhere else in the world.
My strong feeling right now is that the shale oil phenomenon has given the entire world the
idea that peak oil is, or was, an illusion or an idea that had no valid support in the real world.
But peak oil is as real as it ever was. The amount of recoverable oil in the ground is finite.
We may have had the numbers wrong in our personifications because of shale oil. But that does
not change the big picture. The peak oil phenomenon is as real as it ever was.
The real danger is that the media, as well as the general public, has been sold the idea that
peak oil has now been discredited because of shale oil. It has not. And that only increases the
dramatic shock effect it will have when it finally becomes obvious that peak oil has arrived.
Of course some will agree but say that "No big deal, renewables will make peak oil a non event!" And these folks are in for an even bigger shock than the peak oil deniers . Well, in my opinion
anyway.
2016 10K will be out in late February-early March for US LTO producers.
It will be interesting to compare 2014, 2015 and 2016. In particular I am waiting to see the
estimates of future cash flows to see how much more the engineering firms let them slash future
estimated production costs and estimated future development costs.
In my opinion, there was a lot of hocus pocus in those particular numbers, which, of course
provide the basis for proved reserves and PV10.
The amounts slashed from 2014 to 2015 were incredible, for example Mr. Hamm's CLR dropped its
estimate of future production costs by 60%.
To me, that is like a farmer saying I estimate next year and beyond that the cost of seed,
chemicals, fertilizer, fuel, labor, real estate taxes, etc, will fall by 60%. I am not familiar
with any commodity based business where that is reality. Yet almost ALL US LTO did the same thing,
30-60% reduction.
The point is, had they not done that, they would have basically lost ALL of their proved reserves
at 2015 prices. My point is, how can a company that is losing large amounts, pre-reserve write
downs, have any economic reserves? If the costs cannot all be recovered for the well at SEC prices,
there are no reserves for that well.
2016 SEC prices are about $10 lower. We shall see what they come up with.
"And these folks are in for an even bigger shock than the peak oil deniers . Well, in my opinion
anyway."
I think the odds are pretty good that Ron is right. We can hope that Dennis C and the others
who think production will stay on a plateau for a while and then gradually decline rather slowly
are right.
If they are, and the electric car industry does as well as hoped, then the economy national
and world wide can probably adapt fast enough to avoid catastrophic economic depression brought
on specifically by scarce and expensive oil.
If for some reason, any reason, oil production declines sharply and suddenly, for a long period
or permanently, we are going to be in a world of hurt.
People need not starve, at least in richer and economically advanced countries, but millions
of people could lose their jobs and a lot of businesses dependent on cheap travel would fail.
The effects of these lost jobs would expand outward thru the economy doing Sky Daddy alone knows
how much damage.
In poor countries, starvation is a real possibility.
The time frame I have in mind in making this comment is out to twenty or thirty years. After
that, it's anybody's guess what the population will be, and what the economy will be like.Hell,
it's anybody's guess as far as next week is concerned, so far as that goes.
Plateau until 2019 or 2020 then some decline slow at first and gradually accelerating. Unless
a recession hits in that case acceleration is more rapid.
I also agree peak oil will be obvious before long, I think eventually (by 2020 at least unless
a big recession intervenes) oil prices will rise, maybe to $100/b. Most will expect a big surge
in output, but any surge will be small (1 Mb/d at most) and likely short lived (if it happens
at all).
Whether oil prices spike and this leads to either Great Depression(GD) 2 or a lot of EV and
plugin sales is unknown, it might be the latter at first with GD2 following between 2025 and 2030.
It will depend on how quickly oil output falls, I think it might be 1% or less until 2030 if oil
prices are high with faster decline rates once the depression hits.
As usual big WAGs by me. Of course nobody knows, but your insights on how things might play
out would be interesting.
Hi Dennis,
If I am not mistaken, you have moved up your estimate of global petroleum peak, and perhaps the
pace of the decline.
Just months ago, your opinion was that it would not occur until 2025. Are you moved by any specifics
that you would like to share?
Thank you, and as a follower of your good work, I appreciate your insight.
Steve at SRS Rocco report has a new, very informative post up showing that Middle East oil exports
are lower today than 40 years ago!
"According to the 2016 BP Statistical Review, the Middle East produced 30.10 mbd of oil in
2015 compared to 22.35 mbd in 1976. This was a growth of 7.75 mbd. However, Middle East domestic
oil consumption increased from 1.51 mbd in 1976 to 9.57 mbd in 2015. Thus, the Middle Eastern
economies devoured an additional 8.06 mbd of oil during that 40 year time-period."
Would be great to see an update on the global export land model that Jeff Brown (westexas)
used to update us on. How much C+C is available on the global markets as of today after domestic
consumption?
I´m not Jeff B. but if I remember last version of BP stats. correctly, the net export market has
been on a bumpy plateau between 2005-2015. It has varied between 41-44 Mb/day (approx.). 2015
set a record which was just slightly higher than 2005. It´s possible that 2016 will be slightly
higher.
World exports have been bumpy flat for 10 years or so.
Ecuador might be an importer soon'ish.
I like this site as I take an interest in observing the changes as exporters become importers.
The country charts provide some rough idea of those timings.
2015 was indeed a net export record. The increase came mainly from Canada, Iraq and Russia. Iran
may boost net exports in 2016, Kazakhstan will also add some. At least to me it seems unlikely
that net-exports will grow substantially above the 2015/16-level. Increase from the mentioned
countries will be needed to compensate decline in Mexico, Colombia, etc (+problems in Venezuela).
Seems more likely it will continue on the plateau or decline. Nigeria and Libya are wildcards.
mazamascience also use BP-data but seems to give a much higher number, ~48Mb/day. Don't know
why.
How do you calculate world total net export numbers if total global exports = total global imports?
Meanwhile, BP statistics for world oil exports (not net exports) show a rising trend.
I expect further increase in 2016, due to rising exports from Saudi Arabia, Iran, Iraq and Russia.
The IEA Oil Market Report, November 2016 on Iran's oil production and exports:
"With gains of 810 kb/d so far this year, Iran has emerged as the world's fastest source of
supply growth. Crude oil output rose by 40 kb/d in October to reach a pre-sanctions rate of 3.72
mb/d and shipments of crude oil climbed well above 2.4 mb/d, a rate not seen in at least seven
years.
For six straight months, the National Iranian Oil Co (NIOC) has been exporting more than 2 mb/d
of crude – double the volume seen under sanctions."
But that's not what your chart says, in controvention to BP's data.
Your chart says KSA exports at 9. Production is known or thought to be 10.5. And since consumption
is all liquids, that chart's products level is the correct number.
"... I do not understand the financial behavior of shale oil development, no. In the Bakken and the Eagle Ford it was indeed about reserve "growth," as Alex points out. Growth at the expense of profitability. That model failed (look at the debt, debt to asset ratios and losses for operators in those two shale oil plays) because the price of oil collapsed. ..."
"... Now, in spite of that, the Permian is using the same business model; growth at the expense of profitability. It is borrowing billions in the bottom of a price down cycle (it thinks) believing prices have no where to go but up. ..."
"... I think oil prices are a long way away from being high enough to save the shale oil industry. ..."
"... We may be overthinking all this and Alex is right again; it may be a simple matter of everyone taking advantage of a loosey goosey monetary policy in America. Money gets printed, Central Banks give it away, lenders are in desperate need of miniscule yields and CEO's and upper management borrow it, make millions personally on bonuses and incentives for growing reserves, then walk away from the whole shebang (Sheffield) before the loans come due. America looks the other way because they get cheap gasoline. ..."
I do not understand the financial behavior of shale oil development, no. In the Bakken and the
Eagle Ford it was indeed about reserve "growth," as Alex points out. Growth at the expense of profitability.
That model failed (look at the debt, debt to asset ratios and losses for operators in those two shale
oil plays) because the price of oil collapsed.
Now, in spite of that, the Permian is using
the same business model; growth at the expense of profitability. It is borrowing billions in the
bottom of a price down cycle (it thinks) believing prices have no where to go but up.
I would
say this particular shale play might work, except that from the data I see the UR's on those wells
are going to be pitiful at best, far less than the Bakken. Unless it is by the shear number of wells
those operators are not going to have a lot of reserves that will appreciate with rising prices.
It will therefore fail too, just like the others, perhaps for different reasons, I don't know.
I think oil prices are a long way away from being high enough to save the shale oil industry.
We may be overthinking all this and Alex is right again; it may be a simple matter of everyone
taking advantage of a loosey goosey monetary policy in America. Money gets printed, Central Banks
give it away, lenders are in desperate need of miniscule yields and CEO's and upper management borrow
it, make millions personally on bonuses and incentives for growing reserves, then walk away from
the whole shebang (Sheffield) before the loans come due. America looks the other way because they
get cheap gasoline.
Happy
Thanksgiving Mike! This article is for you! The RRC just refused to allow Pioneer to reclassify
oil wells in the Eagle Ford to .. wait for it .GAS WELLS.
I believe Pioneer just admitted the you, Shallow, Alex, and the others have been right all
along about the GOR going up, up and up.
It seems that Pioneer is trying to take advantage of the "high cost gas tax credit" designed
to encourage gas production in HIGH COST low permeable tight gas reservoirs.
Interestingly, this move by Pioneer has initiated a discussion about whether there should
be a new category for classifying wells. Hmmm sounds like the industry is about to hit the
new Texas Legislative session up for some new tax relief to encourage horizontal drilling in
its new favorite geological province the Permian Basin. But it will apply to the Barnett, Haynesville,
Eagle Ford, and all those other disasters.
Happy Thanksgiving to you too, John -- I had actually seen this before. Scoundrels they are,
one and all; Pioneer too, a Texas Company start to finish. The TRRC will roll over in another
year or so, watch.
Despite the CEOs not worrying about profits, I would think at some point the people
buying the bonds or stock of these companies would realize that the Emperor is naked.
Eventually when enough investors get burned, the money will stop flowing. Maybe not in 2016,
and perhaps not in 2017, but if oil prices remain low for the long term as experts in the field
seem to suggest is a likely event (though nobody really knows future oil prices), the money
will dry up. In that case these companies are done.
"... "Our analysis shows we are entering a period of greater oil price volatility (partly) as a result of three years in a row of global oil investments in decline: in 2015, 2016 and most likely 2017," IEA director general Fatih Birol said, speaking at an energy conference in Tokyo. ..."
"... Oil prices have risen to their highest in nearly a month, as expectations grow among traders and investors that OPEC will agree to cut production, but market watchers reckon a deal may pack less punch than Saudi Arabia and its partners want. ..."
"... BMI's outlook is more optimistic than groups like the International Energy Agency, which said last week that the industry might cut spending in 2017 for a third year in a row as companies continue to grapple with weaker finances. Oil prices still hover around $50 a barrel, less than half the level of the summer of 2014. ..."
"... The chart below shows Exxon's E&P capex in 2007-2015 (in US$bn). There was a sharp increase in US capex (both in absolute in relative terms) following the XTO deal. In 2015, the company cut spending both in the US and abroad ..."
Investment in new oil production is likely to fall for a third year in 2017
as a global supply glut persists, stoking volatility in crude markets, the head
of the International Energy Agency (IEA) said on Thursday.
"Our analysis shows we are entering a period of greater oil price
volatility (partly) as a result of three years in a row of global oil
investments in decline: in 2015, 2016 and most likely 2017," IEA director
general Fatih Birol said, speaking at an energy conference in Tokyo.
"This is the first time in the history of oil that investments are
declining three years in a row," he said, adding that this would cause
"difficulties" in global oil markets in a few years.
Oil prices have risen to their highest in nearly a month, as
expectations grow among traders and investors that OPEC will agree to cut
production, but market watchers reckon a deal may pack less punch than Saudi
Arabia and its partners want.
The Organization of the Petroleum Exporting Countries meets next week to try
to finalize to output curbs.
"Our analysis shows that when prices go to $60, we'll make a big chunk of
U.S. shale oil economical and within the nine months to 12 months of time, we
may see a response coming from the shale oil and other high-cost areas," Birol
told Reuters, speaking in an interview on the sidelines of the conference.
"And this may again put downward pressure on the prices."
Birol said that level would be enough for many U.S. shale companies to
restart stalled production, although it would take around nine months for the
new supply to reach the market.
The IEA director general said it is still early to speculate what Donald
Trump's presidency in the United States will have on energy policies.
"Having said that, both U.S. shale oil and U.S. shale gas have a very strong
economic momentum behind them," Birol said.
"Shale gas has significant economic competitiveness today, and we think it
will be so in the next years to come."
• Capital spending seen growing 2.5% in 2017 and 7%-14% in 2018
• U.S. independents, Asian giants seen spurring spending growth
The oil industry may be ready to open its wallet after two years of
slashing investments.
Companies will spend 2.5 percent more on capital expenditure next year
than they did this year, the first yearly growth in such spending since
2014, BMI Research said in a Sept. 22 report. Spending will increase by
another 7 percent to 14 percent in 2018. It will remain well below the $724
billion spent in 2014, before the worst oil crash in a generation caused
firms to cut back on drilling and exploration to conserve cash, the
researcher said.
North American independent producers, Asian state-run oil companies and
Russian firms are prepared to boost investments next year, outweighing
continued cuts from global oil majors such as Exxon Mobil Corp. and Total
SA, BMI said, based on company guidance and its own estimates. Spending will
increase to a total of $455 billion next year from $444 billion this year,
BMI said.
"North America is where we're really expecting things to turn around,"
Christopher Haines, BMI's head of oil and gas research, said by telephone.
"We've seen a push to really reduce costs, reduce spending and take out any
waste and inefficiency. These companies have gotten to the point where
they're all set up to react."
BMI's outlook is more optimistic than groups like the International
Energy Agency, which said last week that the industry might cut spending in
2017 for a third year in a row as companies continue to grapple with weaker
finances. Oil prices still hover around $50 a barrel, less than half the
level of the summer of 2014.
From what I am reading, Permian hz wells will be drilled in greater numbers in
2017, regardless of price.
These wells are generally less prolific than those in the Bakken and EFS.
However, the money has been raised and therefore it will spent.
To me, a good question is how much money is being diverted away from longer
term projects that will ultimately produce more oil, to drill these Permian
wells?
The Permain wells have no staying power. Under 50 bopd after 24 months is
the rule, not the exception. Under 200,000 cumulative in 60 months is the rule,
not the exception.
"To me, a good question is how much money is being diverted away from longer
term projects that will ultimately produce more oil, to drill these Permian
wells?"
shallow sand
The companies that are postponing longer term projects are not the same
companies that are planning to increase drilling in LTO plays.
"The companies that are postponing longer term projects are not the same
companies that are planning to increase drilling in LTO plays."
I
assumed he meant investment money. If investors want to be in gas and
oil, are they picking the companies with best chance of long-term success
(if there is such a thing anymore)?
ExxonMobil, Chevron, ConnocoPhillips, Hess, Marathon and Oxy all
have significant LTO production and all are, or were considered
international upstream producers.
I agree the supermajors are defensive stocks. But there were
many "growth" stock US companies which explored and produced
offshore/internationally or both, prior to the LTO boom.
Most of large US E&Ps and mid-sized integrateds have divested
their overseas assets during the years of shale boom.
I'm not sure that Exxon and Chevron are planning to increase
their shale exposure in the near term. For Exxon, US upstream
operations were hugely loss-making in 2015-16. And it has
recently made two relatively large discoveries outside US.
AlexS. Are those XOM international discoveries primarily oil
or gas?
Also, for the international assets you refer to
which US companies divested, do you know whether the buyers
are aggressively developing them? Just a guess, but I suspect
maybe not.
11/30 is a big day, hoping for a cut, hard to say if it
occurs whether it will be adhered to, other than by maybe the
Gulf States.
Interesting to
note Nexen is a partner in both ventures, while Hess
and Chevron are in one each.
I agree XOM has sustained significant losses in
North America, but they continue to spend money on new
wells. Had they not spent the money they have in North
America (both shale and tar sands) would the money have
been spent elsewhere. A tough one to know the answer
to.
I recall XOM was going to partner in Russia on
projects and those were halted for political reasons?
Did those projects go ahead without them?
I'm not saying that Exxon stopped
investing in U.S. upstream. My point is that oil
supermajors, like Exxon, Chevron, BP, Shell and Total are
not diverting investments from deep offshore, LNG and
other long-term projects to U.S. shale. They cut upstream
capex both in U.S. and in overseas projects.
The chart below shows Exxon's E&P capex in
2007-2015 (in US$bn). There was a sharp increase in US
capex (both in absolute in relative terms) following the
XTO deal. In 2015, the company cut spending both in the US
and abroad
"... In the second quarter of 2016, the companies reduced production by nearly 930,000 bpd, according to Morgan Stanley. ..."
"... Large oilfields, such as deepwater developments off the coasts of the United States, Brazil, Africa and Southeast Asia, typically take three to five years and billions in investment to develop. ..."
"... "Still, unless investment rebounds relatively soon, this steep downward trend is likely to resume in 2018 and beyond." ..."
"... We haven't even begun to see a "steep downward trend" yet. As to "softening" – there is less new production coming on next year, overall and for the IOCs, than this – highlighting Canada, Brazil etc. doesn't change that. ..."
"... Also when are they going to actually understand that the companies don't ever "slash" output, like its a choice – depletion does it for them. ..."
"... I don't know when peak decent reporting happened but it's well into decline now (another big internet age negative). ..."
"... Also, the author quotes a report by Morgan Stanley (that we haven't seen). Apparently, those "109 listed companies that produce more than a third of the world's oil" are covered by MS equity research team. And changes in their output may not fully reflect trends in overall global oil production. ..."
"... But I agree that articles in Reuters, Bloomberg and other MSM sources often misinterpret third party research. A recent example are numerous article about USGS assessment of TRR in the Wolfcamp formation ..."
The world's listed oil companies have slashed oil output by 2.4 percent so
far this year.
The aggregated production of 109 listed companies that produce more than a
third of the world's oil fell in the third quarter of 2016 by 838,000 barrels
per day from a year earlier to 33.88 million bpd, data provided by Morgan
Stanley showed.
In the second quarter of 2016, the companies reduced production by
nearly 930,000 bpd, according to Morgan Stanley.
The firms include national oil champions of China, Russia and Brazil,
international producers such as Exxon Mobil and Royal Dutch Shell, as well as
U.S. shale oil producers like EOG Resources and Occidental Petroleum.
The drop in oil companies' output is particularly compelling given the
increase in 2015, when third-quarter production rose by some 1.9 million bpd.
"Clearly, we have seen a large swing in the year-on-year trend in
production, from strong growth as recent as a year ago, now to steep decline.
This is the outcome of the strong cutbacks in investment," Morgan Stanley
equity analyst Martijn Rats said.
Capital expenditure for the companies combined more than halved from $136
billion in the third quarter of 2014 to $58 billion in the same period this
year, according to Rats.
Oil executives and the International Energy Agency have warned that a sharp
drop in global investment in oil and gas would result in a supply shortage by
the end of the decade.
Large oilfields, such as deepwater developments off the coasts of the
United States, Brazil, Africa and Southeast Asia, typically take three to five
years and billions in investment to develop.
Cost reductions and increased efficiencies have only partly offset the drop
in production as a result of the lower investment. Technological advancements
have also helped boost onshore U.S shale production.
"These declines should temporarily soften in 2017 as new fields are coming
on-stream in Canada, Brazil, the former Soviet Union and U.S. tight oil
probably stabilizes," Rats said.
"Still, unless investment rebounds relatively soon, this steep downward
trend is likely to resume in 2018 and beyond."
We haven't even begun to see a "steep downward trend" yet. As to
"softening" – there is less new production coming on next year, overall and
for the IOCs, than this – highlighting Canada, Brazil etc. doesn't change
that.
When is someone in Reuters or Bloomberg going to figure out that 2017 + 3
(or 5) + 1 (for FEED and FID approval at the beginning and ramp up at the
end) = 2021 (or 2023) so there is no way to cover drops "at the end of the
decade" now.
Also when are they going to actually understand that the
companies don't ever "slash" output, like its a choice – depletion does it
for them.
And how about this paragraph
"Cost reductions and increased efficiencies have only partly offset
the drop in production as a result of the lower investment. Technological
advancements have also helped boost onshore U.S shale production."
He/she has suddenly started to talk about company finances rather than
production, but without actually telling the reading public.
Cost reductions caused the drop for heavens sake. "Increased
efficiencies" and "technological advancements" – do you think the author has
the faintest idea what that actually means and how it is related to anything
else he says.
I don't know when peak decent reporting happened but it's well into
decline now (another big internet age negative).
"When is someone in Reuters or Bloomberg going to figure out that 2017 +
3 (or 5) + 1 (for FEED and FID approval at the beginning and ramp up at
the end) = 2021 (or 2023) so there is no way to cover drops "at the end
of the decade" now."
It should be actually 2015 + 3 (or 5), as pre-FID
projects have been posponed since end-2014 – early 2015.
Also, the author quotes a report by Morgan Stanley (that we
haven't seen). Apparently, those "109 listed companies that produce more
than a third of the world's oil" are covered by MS equity research team.
And changes in their output may not fully reflect trends in overall
global oil production.
But I agree that articles in Reuters, Bloomberg and other MSM
sources often misinterpret third party research. A recent example are
numerous article about USGS assessment of TRR in the Wolfcamp formation
"... I am a petroleum Geologist drilling wells in the Wolfcamp, the USGS report means nothing. They periodically review basins to assess how much petroleum is there, we have been drilling Horizontal wells in the Wolfcamp for almost a decade, and vertical wells for many decades. Right now there are as many rigs running drilling this rock formation as there are in the rest of the country combined, so it is already baked in to the US production data. This is not like a Saudi Arabia field with a low drill and complete and development cost, it will take many billions of drilling capital to get a small percentage of the oil in place. The big deal is that the area is fairly resilient to low oil prices and will cushion the drop in US production due to lack of investment in other basins. ..."
"... I think when seismic, land, surface and down hole equipment is included, the number is much higher. With $20-60K per acre being paid, land definitely has to be factored in. Depending on spacing, $1-5 million per well? ..."
"... In reading company reports, it seems they state a cost to drill and case the hole, another to complete the well, then add the two for well cost. This does not include costs incurred prior to the well being drilled, which are not insignificant. Nor does it include costs of down hole and surface equipment, which also are not insignificant. ..."
"... Land costs are all over the map, and I think Bakken land costs overall are the lowest, because much of the leasing occurred prior to US shale production boom. I think a lot of acreage early on cost in the hundreds per acre. Of course, there was quite a bit of trading around since, so we have to look project by project, unfortunately. For purposes of a model, I think $8 million is probably in the ballpark. ..."
"... I would not include equipment for the well, initially, as OPEX (LOE is what I prefer to stick with, being US based). The companies do not do that, those costs are included in depreciation, depletion and amortization expense. ..."
"... Once the well is in production, and failures occur, I include the cost of repairs, including replacement equipment, in LOE. I am not sure that the companies do that, however. ..."
"... I think the Permian is going to be much tougher to estimate, as there are different producing formations at different depths, whereas the Bakken primarily has two, and the Eagle Ford has 1 or 2. ..."
"... What most interests me are suggestions that there is so much available oil in Wolfcamp and what that will do to oil prices and national policy. Seems like any announcement of more oil will likely keep prices low. And if they stay low, there's little reason to open up more areas for oil drilling. ..."
"... The key question is what part of these estimated technically recoverable resources are economically viable at $50; $60; $70; $80; $90, $100, etc. ..."
"... In November 2015, the EIA estimated proven reserves of tight oil in Wolfcamp and Bone Spring formations as of end 2014 at just 722 million barrels. ..."
"... AlexS. Another key question, which is price dependent, is how many years will it take to fully develop the reserves? ..."
"... If oil prices go back to $100/b in 2018 as the IEA seems to be concerned about, it could ramp up at the speed of the Eagle Ford ..."
"... It's impossible for IEA to make statements like: "the end of low cost oil will negatively affect economic growth", "geology is about to beat human ingenuity" etc. ..."
I am a petroleum Geologist drilling wells in the Wolfcamp, the USGS report means nothing. They
periodically review basins to assess how much petroleum is there, we have been drilling Horizontal
wells in the Wolfcamp for almost a decade, and vertical wells for many decades. Right now there
are as many rigs running drilling this rock formation as there are in the rest of the country
combined, so it is already baked in to the US production data. This is not like a Saudi Arabia
field with a low drill and complete and development cost, it will take many billions of drilling
capital to get a small percentage of the oil in place. The big deal is that the area is fairly
resilient to low oil prices and will cushion the drop in US production due to lack of investment
in other basins.
Thank you, JG -- Straight from the horses mouth, respectfully. The USGS lost all credibility with
me as to estimating TRR in the Monterrey Shale in California. It baffles me, after five years
of publically discussing unconventional shale oil resources, that modelers, internet analysts
and predictors completely ignore economics, debt and finances. Extracting oil is a business; it
must make money to succeed. If it does not succeed, all bets are off regarding predictions.
The Monterrey shale estimate was by the EIA not the USGS. The EIA had a private consultant
do the analysis and it was mostly based on investor presentations, very little geological analysis.
It would be better if the USGS did an economic analysis as they do with coal for the Powder
River Basin. They could develop a supply curve based on current costs, but they don't.
Do you have any idea of the capital cost of the wells (ballpark guess) for a horizontal multifracked
well in the Wolfcamp? Would $7 million be about right (a WAG by me)?
On ignoring economics, I show my oil price assumptions. Other financial assumptions for the
Bakken are $8 million for capital cost of the well (2016$). OPEX=$9/b, other costs=$5/b, royalty
and taxes=29% of gross revenue, $10/b transport cost, and a real discount rate of 7% (10% nominal
discount rate assuming 3% inflation).
I do a DCF based on my assumed real oil price curve. Brent oil price rises to $77/b (2016$)
by June 2017 and continue to rise at 17% per year until Oct 2020 when the oil price reaches $130/b,
it is assumed that average oil prices remain at that level until Dec 2060. The last well is drilled
in Dec 2035 and stops producing 25 years later in Dec 2060.
EUR of wells today is assumed to be 321 kb and EUR falls to 160 kb by 2035. The last well drilled
only makes $243,000 over the 7% real rate of return, so the 9 Gb scenario is probably too optimistic,
it is assumed that any gas sales are used to offset OPEX and other costs, though no natural gas
price assumptions have been made to simplify the analysis.
This analysis is based on the analyses that Rune Likvern has done in the past, though his analyses
are far superior to my own.
I think when seismic, land, surface and down hole equipment is included, the number is much higher.
With $20-60K per acre being paid, land definitely has to be factored in. Depending on spacing,
$1-5 million per well?
I am doing the analysis for the Bakken. A lot of the leases are already held and I don't know
that those were the prices paid. Give me a number for total capital cost that makes sense, are
you suggesting $10.5 million per well, rather than $8 million? Not hard to do, but all the different
assumptions you would like to change would be good so I don't redo it 5 times.
Mostly I would like to clear up "the number".
I threw out more than one number, OPEX, other costs, transport costs, royalties and taxes,
real discount rate (adjusted for inflation), well cost.
I think you a re talking about well cost as "the number". I include down hole costs as part
of OPEX (think of it as OPEX plus maintenance maybe).
Dennis. The very high acreage numbers are for recent sales in the Permian Basin.
In reading company reports, it seems they state a cost to drill and case the hole, another
to complete the well, then add the two for well cost. This does not include costs incurred prior to the well being drilled, which are not insignificant.
Nor does it include costs of down hole and surface equipment, which also are not insignificant.
Land costs are all over the map, and I think Bakken land costs overall are the lowest, because
much of the leasing occurred prior to US shale production boom. I think a lot of acreage early
on cost in the hundreds per acre. Of course, there was quite a bit of trading around since, so
we have to look project by project, unfortunately. For purposes of a model, I think $8 million
is probably in the ballpark.
I would not include equipment for the well, initially, as OPEX (LOE is what I prefer to stick
with, being US based). The companies do not do that, those costs are included in depreciation,
depletion and amortization expense.
Once the well is in production, and failures occur, I include the cost of repairs, including
replacement equipment, in LOE. I am not sure that the companies do that, however.
I think the Permian is going to be much tougher to estimate, as there are different producing
formations at different depths, whereas the Bakken primarily has two, and the Eagle Ford has 1
or 2.
An example:
QEP paid roughly $60,000 per acre for land in Martin Co., TX. If we assume one drilling unit
is 1280 acres (two sections), how many two mile laterals will be drilled in the unit?
1280 acres x $60,000 = $76,800,000.
Assume 440′ spacing, 12 wells per unit.
$76,800,000/12 = $6,400,000 per well.
However, there are claims of up to 8 producing zones in the Permian.
So, 12 x 8 = 96 wells.
$76,800,000 / 96 = $800,000 per well.
Even assuming 96 wells, the cost per well is still significant.
If we assume 96 wells x $7 million to drill, complete and equip, total cost to develop is $.75
BILLION. That is a lot of money for one 1280 acre unit, need to recover a lot of oil and gas to
get that to payout.
I am neither an oil man nor an accountant, so regardless of what we call it I am assuming natural
gas sales (maybe about $3/barrel on average) are used to offset the ongoing costs to operate the
well (LOE, OPEX, financial costs, etc), we could add another million to the cost of the well for
surface and downhole equipment and land costs. Does an average operating cost over the life of
a well of about $17/b ($14/b plus natural gas sales of $3/b of oil produced)seem reasonable?
That
would be about $5.4 million spent on LOE etc. over the life of the well (assuming 320 kbo produced).
Also does the 10% nominal rate of return sound high enough, what number would you use as a cutoff?
You use a different method than a DCF and want the well to pay out in 60 months. This would correspond
to about a 14% nominal rate of return and an 11% real rate of return (assuming a 3% annual inflation
rate.)
"The Monterrey shale estimate was by the EIA not the USGS. The EIA had a private consultant do
the analysis and it was mostly based on investor presentations, very little geological analysis."
Exactly.
USGS' estimate as of October 2015 is very conservative:
"The Monterey Formation in the deepest parts of California's San Joaquin Basin contains an
estimated mean volumes of 21 million barrels of oil, 27 billion cubic feet of gas, and 1 million
barrels of natural gas liquids, according to the first USGS assessment of continuous (unconventional),
technically recoverable resources in the Monterey Formation."
"The volume estimated in the new study is small, compared to previous USGS estimates of conventionally
trapped recoverable oil in the Monterey Formation in the San Joaquin Basin. Those earlier estimates
were for oil that could come either from producing more Monterey oil from existing fields, or
from discovering new conventional resources in the Monterey Formation."
Previous USGS estimates were for conventional oil:
"In 2003, USGS conducted an assessment of conventional oil and gas in the San Joaquin Basin,
estimating a mean of 121 million barrels of oil recoverable from the Monterey. In addition, in
2012, USGS assessed the potential volume of oil that could be added to reserves in the San Joaquin
Basin from increasing recovery in existing fields. The results of that study suggested that a
mean of about 3 billion barrels of oil might eventually be added to reserves from Monterey reservoirs
in conventional traps, mostly from a type of rock in the Monterey called diatomite, which has
recently been producing over 20 million barrels of oil per year."
I am corrected, RE; USGS and Monterrey. I still don't believe there is 20G BO in the Wolfcamp.
Most increases in PB DUC's are not wells awaiting frac's but lower Wolfcamp wells that are TA
and awaiting re-drills; that should tell you something. With acreage, infrastructure and water
costs in W. Texas, wells cost $8.5-9.0M each. The shale industry won't admit that, but that's
what I think. What happens to EUR's and oil prices after April of 2017 is a guess and a waste
of time, sorry.
What most interests me are suggestions that there is so much available oil in Wolfcamp and what
that will do to oil prices and national policy. Seems like any announcement of more oil will likely keep prices low. And if they stay low,
there's little reason to open up more areas for oil drilling.
"Their assessment method for Bakken was pretty simple – pick a well EUR, pick a well spacing,
pick total acreage, pick a factor for dry holes – multiply a by c by d and divide by b."
USGS estimates for average well EUR in Wolfcamp shale look reasonable: 167,ooo barrels in the
core areas and much lower in other parts of the formation.
I do not know if the estimated potential production area is too big, or assumed well spacing
is too tight.
The key question is what part of these estimated technically recoverable resources are economically
viable at $50; $60; $70; $80; $90, $100, etc.
Significant part of resources may never be developed, even if they are technically recoverable.
Keep in mind these USGS estimates are for undiscovered TRR, one needs to add proved reserves times
1.5 to get 2 P reserves and that should be added to UTRR to get TRR. There are roughly 3 Gb of
2P reserves that have been added to Permian reserves since 2011, if we assume most of these are
from the Wolfcamp shale (not known) then the TRR would be about 23 Gb. Note that total proved
plus probable reserves at the end of 2014 in the Permian was 10.5 Gb (7 Gb proved plus 3.5 GB
probable with the assumption that probable=proved/2). I have assumed about 30% of total Permian
2P reserves is in the Wolfcamp shale. That is a WAG.
Note the median estimate is a UTRR of 19 Gb with F95=11.4 Gb and F5=31.4 Gb. So a conservative
guess would be a TRR of 13.4 Gb= proved reserves plus F95 estimate. If prices go to $85/b and
remain at that level the F95 estimate may become ERR, at $100/b maybe the median is potentially
ERR. It will depend how long prices can remain at $100/b before an economic crash, prices are
Brent Crude price in 2016$ with various crude spreads assumed to be about where they are now.
I just looked at Permian Basin crude reserves (Districts 7C, 8 and 8A) and assumed the change
in reserves from 2011 to 2014 was from the Wolfcamp. I didn't know about that page for reserves.
It is surprising it is that low.
In any case the difference is small relative to the UTRR, it will be interesting to see what
the reserves are for year end 2015.
Based on this I would revise my estimate to 20 Gb for URR with a conservative estimate of 12
Gb until we have the data for year end 2015 to be released later this month.
My guess is that the USGS probably already has the 2015 year end reserve data.
The EIA proved reserves estimate for 2015 will be issued this month. I think we will see a
significant increase in the number for the Permian basin LTO.
Also note that USGS TRR estimate is only for Wolfcamp.
I can only guess what could be their estimate for the whole Permian tight oil reserves.
But the share of Wolfcamp in the Permian LTO output is only 24% (according to the EIA/DrillingInfo
report).
That makes sense. I also imagine the USGS focused on the formation with the bulk of the remaining
resources. It is conceivable that the 30 Gb estimate is closer to the remaining oil in place and
that more like 90% of the TRR is in the Wolfcamp, considering that the F5 estimate is about 30
Gb. That older study from 2005 may be an under estimate of TRR for the Permian, likewise the USGS
might have overestimated the UTRR.
If oil prices go back to $100/b in 2018 as the IEA seems to be concerned about, it could ramp
up at the speed of the Eagle Ford (say 2 to 3 years). It will be oil price dependent and perhaps
they won't over do it like in 2011-2014, but who knows, some people don't learn from past mistakes.
If you or Mike were running things it would be done right, but the LTO guys, I don't know.
"This estimate is for continuous (unconventional) oil, and consists of undiscovered, technically
recoverable resources.
Undiscovered resources are those that are estimated to exist based on geologic knowledge and
theory, while technically recoverable resources are those that can be produced using currently
available technology and industry practices. Whether or not it is profitable to produce these
resources has not been evaluated."
If it requires slave labor at gunpoint to get the oil out, then that's what will happen because
you MUST have oil, and a day will soon come when that sort of thing is reqd.
This follows on from reserve post above (two a couple of comments). In terms of changes over the
last three years – there really weren't anything much dramatic. We'll see what 2016 brings, especially
for ExxonMobil, but it looks like they already knocked a big chunk off of their Bitumen numbers
already in 2015.
Note I went through a lot of 20-F and 10-K reports watching the rain fall this morning and
copied out the numbers, I'm not guaranteeing I got everything 100%, but I think the general trends
are shown.
Note the figures are totals for all nine companies I looked at.
IEA WEO is out:
http://www.iea.org/newsroom/news/2016/november/world-energy-outlook-2016.html presentation
slides, fact sheet and summary are available online (report can be purchased). IEA seems to be
_very_ concerned about underinvestment in upstream oil production. Several pages of the report
is devoted to this, the title of that section is "mind the gap". More or less all of the content
has been discussed on this website, including the issue with high levels of debt and that this
can affect suppliers' capacity to rebound, and how much demand can be reduced as a result of a
stringent carbon cap.
From the fact sheet (available free of charge):
"Another year of low upstream oil investment in 2017 would risk a shortfall in oil production
in a few years' time. The conventional crude oil resources (e.g. excluding tight oil and oil sands)
approved for development in 2015 sank to the lowest level since the 1950s, with no sign of a rebound
in 2016. If there is no pick-up in 2017, then it becomes increasingly unlikely that demand (as
projected in our main scenario) and supply can be matched in the early 2020s without the start
of a new boom/bust cycle for the industry"
Presentation 1:09 – Dr. Birol gives his view: "depletion never sleeps"
I wonder who that paragraph is aimed at. As I indicated above the companies that would be investing
in long term conventional projects don't have a very large inventory of undeveloped reserves (17
Gb as of end of 2015, some of this has gone already this year and more is in development and will
come on stream in 2017 and 2018 (and a small amount in later years for approved projects). I'd
guess there might only be less than 10 Gb (and this the most expensive to develop) that is currently
under appraisal among the major western IOCs and larger independents; allowing for their partnerships
with NOCs in a lot of the available projects that could represent 20 to 30 Gb total. That really
isn't very much new supply available, and a large proportion is in complex deep water projects
that wouldn't be ramped up fully until 6 to 7 years after FID (i.e. already too late for 2020).
Really the main players need to find new fields with easy developments, but they obviously aren't,
probably never will, and actually aren't looking very hard at the moment.
My interpretation is that this is IEAs way of saying that it does not look good. Those who can
read between the lines get the message. Also, a few years from they will be able to say "see we
told you so".
It's impossible for IEA to make statements like: "the end of low cost oil will negatively affect
economic growth", "geology is about to beat human ingenuity" etc.
WEO have become more and more bizarre over the years. On the one hand they contain quantitative
projections which tell the story politicians wants to hear. On the other hand, the text describes
all sorts of reason of why the assumptions are unlikely to hold. Normally, if you don't believe
in your own assumptions you would change them.
"... Right now there are as many rigs running drilling this rock formation as there are in the rest of the country combined, so it is already baked in to the US production data. This is not like a Saudi Arabia field with a low drill and complete and development cost, it will take many billions of drilling capital to get a small percentage of the oil in place. The big deal is that the area is fairly resilient to low oil prices and will cushion the drop in US production due to lack of investment in other basins. ..."
"... The USGS lost all credibility with me as to estimating TRR in the Monterrey Shale in California. It baffles me, after five years of publically discussing unconventional shale oil resources, that modelers, internet analysts and predictors completely ignore economics, debt and finances. Extracting oil is a business; it must make money to succeed. If it does not succeed, all bets are off regarding predictions. ..."
I am a petroleum Geologist drilling wells in the Wolfcamp, the USGS report means
nothing. They periodically review basins to assess how much petroleum is there, we have
been drilling Horizontal wells in the Wolfcamp for almost a decade, and vertical wells
for many decades.
Right now there are as many rigs running drilling this rock
formation as there are in the rest of the country combined, so it is already baked in to
the US production data. This is not like a Saudi Arabia field with a low drill and
complete and development cost, it will take many billions of drilling capital to get a
small percentage of the oil in place. The big deal is that the area is fairly resilient
to low oil prices and will cushion the drop in US production due to lack of investment
in other basins.
Thank you, JG -- Straight from the horses mouth, respectfully.
The USGS lost all
credibility with me as to estimating TRR in the Monterrey Shale in California. It
baffles me, after five years of publically discussing unconventional shale oil
resources, that modelers, internet analysts and predictors completely ignore
economics, debt and finances. Extracting oil is a business; it must make money to
succeed. If it does not succeed, all bets are off regarding predictions.
The Monterrey shale estimate was by the EIA not the USGS. The EIA had a private
consultant do the analysis and it was mostly based on investor presentations, very little
geological analysis.
It would be better if the USGS did an economic analysis as they do with coal for the
Powder River Basin. They could develop a supply curve based on current costs, but they
don't.
Do you have any idea of the capital cost of the wells (ballpark guess) for a horizontal
multifracked well in the Wolfcamp? Would $7 million be about right (a WAG by me)?
On ignoring economics, I show my oil price assumptions. Other financial assumptions for
the Bakken are $8 million for capital cost of the well (2016$). OPEX=$9/b, other
costs=$5/b, royalty and taxes=29% of gross revenue, $10/b transport cost, and a real
discount rate of 7% (10% nominal discount rate assuming 3% inflation).
I do a DCF based on my assumed real oil price curve. Brent oil price rises to $77/b
(2016$) by June 2017 and continue to rise at 17% per year until Oct 2020 when the oil price
reaches $130/b, it is assumed that average oil prices remain at that level until Dec 2060.
The last well is drilled in Dec 2035 and stops producing 25 years later in Dec 2060.
EUR of wells today is assumed to be 321 kb and EUR falls to 160 kb by 2035. The last
well drilled only makes $243,000 over the 7% real rate of return, so the 9 Gb scenario is
probably too optimistic, it is assumed that any gas sales are used to offset OPEX and other
costs, though no natural gas price assumptions have been made to simplify the analysis.
This analysis is based on the analyses that Rune Likvern has done in the past, though
his analyses are far superior to my own.
"... But it gets more apparent with each report they are concerned with a sudden drop in supply in the medium term (I think supply will decline gradually through 2017 but then accelerate in 2Q2018 and fall off a cliff in 2019 given current project planning. ..."
"... It is now becoming too late to do much that will impact supplies then and with the likelihood of low prices through next year and few attractive recent discoveries (and getting worse each quarter in that respect) there are unlikely to be many more FIDs next year than this – I think only 12 so far and more gas than oil – therefore that supply drought will probably extend through 2020. ..."
"... Decline rates could increase on existing fields at the same time as in-fill drilling marginal gains start to decline and the impact of reduced maintenance and brownfield spending during these low price years start to impact. ..."
"... People may point to US LTO fields to be able to quickly fill any gap, but I'd point out it took about 5 years for Bakken to ramp up to 1 mmbpd ..."
It looks like this month (Nov.) will probably be a new global oil supply record barring major
disruptions anywhere. But it gets more apparent with each report they are concerned with a sudden
drop in supply in the medium term (I think supply will decline gradually through 2017 but then
accelerate in 2Q2018 and fall off a cliff in 2019 given current project planning.
It is now becoming
too late to do much that will impact supplies then and with the likelihood of low prices through
next year and few attractive recent discoveries (and getting worse each quarter in that respect)
there are unlikely to be many more FIDs next year than this – I think only 12 so far and more
gas than oil – therefore that supply drought will probably extend through 2020.
Decline rates
could increase on existing fields at the same time as in-fill drilling marginal gains start to
decline and the impact of reduced maintenance and brownfield spending during these low price years
start to impact.
People may point to US LTO fields to be able to quickly fill any gap, but I'd point out it
took about 5 years for Bakken to ramp up to 1 mmbpd, and that was when the sweet spots were available
and with an industry not already loaded down with debt. That rate is not much better than a new
conventional basin with similar reserves would have achieved (as long as it wasn't in Kazahkstan
of course).
"It is not the role of the IEA to urge any oil industry player to take one course of
action rather than another, and we are not doing so now. Over time, market forces will do their
job and the oil price will respond to the signals provided by demand and supply. What the IEA
has argued for consistently is the need for investments necessary to meet rising oil demand.
Such investments ensure that the market remains close to balance and that prices are as stable
and as fair for both producers and consumers as can ever be possible in such a dynamic industry."
Related to ExxonMobil – they are the only major company so far this year to have had a couple
of good successes with exploration, that is a reverse previous history when they were known having
much more success "drilling on Wall Street" to boost their reserves – part of the reason for the
Mobil acquisition who always did pretty with with wildcatting.
It would be interesting to know how their reserves (and other companies as well) are broken
down between developed and undeveloped for oil and gas, before Liza in Guyana and the Owowo (Nigeria)
discovery this year they were pretty short of oil projects of any kind, irrespective of price,
except in support of some OPEC countries on buyback contracts, and I don't know how that oil is
counted against their reserves if at all.
Other majors might be in worse shape than them once
the current bubble of projects works through.
"... The approved projects coming on line are about 500 kbpd in 2019, 700 in 2020 and 200 in 2021. There will also be about 1 mmbpd still ramping up, but I think the supply will be slightly in deficit and any stock overhang will have largely gone by the end of 2018 (assuming demand stays as predicted). In terms of decline existing fields it is minimum 3.3% (based on Core labs) up to 5.5% by Rystad – but I think the cuts in maintenance and brownfield work, exhaustion of marginal in-fill drilling benefits and extended use of horizontal drilling over the last 15 years will mean this is likely to accelerate. ..."
"... I, like many, quote start-up date for end of project development but often it takes 12 to 18 months to ramp up to plateau, so all that lack of new supply in 2019 to 2021 can impact through to 2023. ..."
Price depends on supply and demand – I don't know what is going to happen in demand: it seems
to be predictable until suddenly it isn't. Recessions can have reasonably large impacts to demand
and these have proportionally larger impacts on price.
The approved projects coming on line are about 500 kbpd in 2019, 700 in 2020 and 200 in 2021.
There will also be about 1 mmbpd still ramping up, but I think the supply will be slightly in
deficit and any stock overhang will have largely gone by the end of 2018 (assuming demand stays
as predicted). In terms of decline existing fields it is minimum 3.3% (based on Core labs) up
to 5.5% by Rystad – but I think the cuts in maintenance and brownfield work, exhaustion of marginal
in-fill drilling benefits and extended use of horizontal drilling over the last 15 years will
mean this is likely to accelerate.
Note there will of course be other projects added, but another low price year in 2017 with
additional cuts (e.g. see CoP, Statoil, PetroBras, Pemex news over the last weeks) and there just
won't be enough time to get much online before 2021, especially as the service industries and
development groups in the E&Ps are still getting thinned out (see Weatherford, Heerema, Hess news
recently).
I, like many, quote start-up date for end of project development but often it takes
12 to 18 months to ramp up to plateau, so all that lack of new supply in 2019 to 2021 can impact
through to 2023.
"... It would appear that perhaps a lot of infill drilling is taking place in Saudi Arabia, Kuwait and UAE in order to achieve these recent oil production values. It'll be interesting to see how this infill drilling might one day impact the decline side of the curve. ..."
"... According to Bedford Hill and the oil engineers at the Hills Group, Saudi oil production will experience at SENECA CLIFF like decline. I agree. ..."
"... I'm no expert but from what I understand infill drilling causes what might have been a roughly Hubbert shaped production curve to flatten out at the top for a while and then in the future experience a steeper decline curve; basically representing future production on the Hubbert curve being brought forward to maintain a plateau at the peak. This does seem to move the curve profile from Hubbert to Seneca, so to speak. ..."
"... This image from Matt certainly represents a plateau at approx 72 million barrels a day taking place in all jurisdictions outside of Canada and USA. ..."
"... I'm very interested in the timing and the steepness of this impending decline. Figure 10 mentioned above shows the rig count in Kuwait, Saudi and UAE really taking of 'bigly' in 2010-2011 'ish. ..."
It would appear that perhaps a lot of infill drilling is taking place in Saudi Arabia,
Kuwait and UAE in order to achieve these recent oil production values. It'll be interesting to
see how this infill drilling might one day impact the decline side of the curve.
I'm no expert but from what I understand infill drilling causes what might have been a roughly
Hubbert shaped production curve to flatten out at the top for a while and then in the future experience
a steeper decline curve; basically representing future production on the Hubbert curve being brought
forward to maintain a plateau at the peak. This does seem to move the curve profile from Hubbert
to Seneca, so to speak.
This image from Matt certainly represents a plateau at approx 72 million barrels a day
taking place in all jurisdictions outside of Canada and USA.
I'm very interested in the timing and the steepness of this impending decline. Figure 10
mentioned above shows the rig count in Kuwait, Saudi and UAE really taking of 'bigly' in 2010-2011
'ish.
"... It would appear that perhaps a lot of infill drilling is taking place in Saudi Arabia, Kuwait and UAE in order to achieve these recent oil production values. It'll be interesting to see how this infill drilling might one day impact the decline side of the curve. ..."
It would appear that perhaps a lot of infill drilling is taking place
in Saudi Arabia, Kuwait and UAE in order to achieve these recent oil production
values. It'll be interesting to see how this infill drilling might one day
impact the decline side of the curve.
I'm no expert but from what I understand infill drilling causes what
might have been a roughly Hubbert shaped production curve to flatten
out at the top for a while and then in the future experience a steeper
decline curve; basically representing future production on the Hubbert
curve being brought forward to maintain a plateau at the peak. This
does seem to move the curve profile from Hubbert to Seneca, so to speak.
This image from Matt certainly represents a plateau at approx 72 million
barrels a day taking place in all jurisdictions outside of Canada and
USA.
I'm very interested in the timing and the steepness of this impending
decline. Figure 10 mentioned above shows the rig count in Kuwait, Saudi
and UAE really taking of 'bigly' in 2010-2011 'ish.
I am working (on and off) on something on world crude oil supplies that may end up as a post
on Fractionalflow.
I agree with Rystad Energy (ref Caelan's post further up. Disclosure, I have never had anything
to do with Rystad) that global oil extraction will decline towards the end of this decade.
I look at this through the lenses of discoveries (and their sizes) not FID, expected changes
to the oil companies' balance sheets at end 2016 (financial leverage will by default come up,
assets/equity come down due to lower oil price and lower reserves [of which some will be rebooked
at a higher price]), CAPEX constraints, their Reserves Replacement Ratios (RRR), likely near term
(oil) price and cost developments to name the most important ones.
The chart below [note scaling on the right axis] is now my conceptual understanding of global
crude oil supplies towards the end of 2018. We are soon entering November 2016 which makes me
now expect the period with decline to last longer.
I expect capacity of about 5 Mb/d of global crude oil capacities to vanish by end 2018. That
will have some implications. It took years with a high oil price ($100/b) to grow supplies with
5 Mb/d.
During the next upturn in the price things will be different, most of the "easy" oil was developed
during the last high price cycle.
I do not expect the decline to accurately follow my suggested span. Depletion induced declines
never sleeps and some portion of world crude oil supplies is now from sources (like LTO, "small"
offshore discoveries) that depletes fast and other legacy sources are also in general decline.
The decline is already baked into the cake. It does not matter if oil prices moved above $80/bo
as of next week. This would stimulate more drilling for tight oil, but for other developments,
it would take anywhere between 2-4 years from these are FIDed (Final Investment Decision) until
they flow.
The oil companies drew down their portfolios of discoveries being profitable at $80/bo during
the high oil price period that ended during the summer of 2014, and still there are some developments
in the pipeline that will start up during the next few years, but this portfolio is shrinking
fast. The tight oil companies have drilled most of their sweet spots and are now cash flow constrained
wrt drilling.
"... China and Mexico are in rapid decline at the moment but are supposed to have respectively, contingent 10 and 8 Gb and undiscovered 17 and 56 (!) – that has to be assuming a big shale resource for Mexico I'd guess. ..."
"... China has more rigs relative to its production than anywhere and this year is probably going to drill the most wells of any country. And yet they haven't found a new oil field for many years (quite a bit of gas though) and have only bought on a couple of small offshore fields recently. ..."
"... Norway and UK combined have developed a lot of their older contingent fields over the last few years, at very high cost and in some cases are now losing money on the investment. ..."
"... The biggest two confirmed finds are gas offshore Angola and Senegal (400+ and 800+ mmboe respectively), both probably need to be developed through LNG so might be years away given the current glut and normal schedules for such projects). ..."
"... In the North Sea reserves have been downgraded, not only because of price but also as some of the smaller finds no longer have options for tie backs because the possible hubs are coming to the end of their lives an new finds are in the 20 to 50 mmbbls range and heavy (also a number of dry wells there). I'd say it will likely be significantly worse than last year (which was the worst for 70 years) for both oil and gas discoveries. ..."
"... By coincidence, this morning: "BP dumps plans to drill for oil in the Great Australian Bight" ..."
"... I would imagine the reserve numbers by Rystad Energy are likely to be more FICTION than REALITY. I spent a few hours talking to Bedford Hill of the Hills Group on their "Thermodynamic Oil Collapse" model, and the more I find out about it, the more I am convinced the reserve numbers shown in the table above are completely out of touch with reality. ..."
"... According to the Hills Group Thermodynamic Oil Limit model, they took the total amount of energy in a barrel of oil and subtracted the waste heat. They then programmed into the software all the inputs from the oil industry. Bedford stated that according to the second law of Thermodynamics the amount of energy consumed in the production of oil continues to increase. Their model predicted the oil price collapse and forecasts that within a decade (+/- 4%) there will be no more net energy from a barrel of oil by the oil industry. ..."
"... There is this notion that SUPPLY & DEMAND or CREDIT & DEBT have distorted this thermodynamic oil limit. While these factors have changed the oil production graph, the Hills Group model suggests this has not changed the date. What has changed is that we have pulled future oil production forward which will make the Seneca Cliff much steeper. ..."
"... EROI is falling for new sources of oil but I don't know that it would count as "rapid" yet and it doesn't change much for already developed fields as they age – in fact if energy for the development stage is taken out then the EROI increases during operations. ..."
The numbers are even harder to understand looking at some of the other individual countries.
China and Mexico are in rapid decline at the moment but are supposed to have respectively,
contingent 10 and 8 Gb and undiscovered 17 and 56 (!) – that has to be assuming a big shale
resource for Mexico I'd guess.
China has more rigs relative to its production than anywhere
and this year is probably going to drill the most wells of any country. And yet they haven't
found a new oil field for many years (quite a bit of gas though) and have only bought on a
couple of small offshore fields recently. Mexico has decided they need help from outside IOCs
to find and develop all that resource.
Norway and UK combined have developed a lot of their older contingent fields over the last
few years, at very high cost and in some cases are now losing money on the investment.
Exploration
success is now very low, reserve are being downgraded and yet they are supposed to have 7 +
4 Gb contingent and 13 + 6 Gb undiscovered. The 13 Gb for Norway includes frontier territory
in the Barents Sea, but I think it's turning out that there is more gas there (TBC).
It will be interesting to see the final discovery number for this year from IHS, Richmond Energy
Partners, Rystad and Wood Mackenzie. I doubt if they will include the recent Alaska discovery
given that the test well wasn't flowed – the announcement looks to be more of a ploy to get
some tax break and/or outside money into the private company. The other supposed monster find
by Apache in Permian shale is 3 Gb equivalent oil in place, I'd expect it to be at the lower
end for shale recovery, say 3 to 5%, so that could be only around 75 to 125 mmbbbls oil.
In GoM Fort Sumter was 125 mmbbls (equivalent) but it cn only be developed through Appomatox
so might be many years away before there is processing capacity for it. Anadarko announced
Caisco, but with no numbers which is usually a bad sign. On the other hand Hopkins looks to
have been downgraded maybe 50%, so it is only a tie back option. Kaskida has gone quiet (HTHP
and high sand), Shenandoah/Coronado (very HTHP probably needing 20 ksi wellheads) looks like
it might be relatively smaller as a development than expected (or a series of smaller projects)
, Freeport MacMoran projects (such as Horn Mountain Deep) are all on hold while it tries to
sell up. Next year there is only Thunder Horse extension (27,000 bpd) and the year after Stampede
(75,000) and Big Foot (80,000) ramping up in late 2018 through 2019.
A couple of highly anticipated and expensive frontier wildcats have been dry (Total offshore
Uruguay and Shell offshore Nova Scotia – still drilling a second well there though). The Bight
Basin in Australia is delayed because of environmental concerns.
The biggest two confirmed finds are gas offshore Angola and Senegal (400+ and 800+ mmboe
respectively), both probably need to be developed through LNG so might be years away given
the current glut and normal schedules for such projects).
In the North Sea reserves have been downgraded, not only because of price but also as some
of the smaller finds no longer have options for tie backs because the possible hubs are coming
to the end of their lives an new finds are in the 20 to 50 mmbbls range and heavy (also a number
of dry wells there). I'd say it will likely be significantly worse than last year (which was
the worst for 70 years) for both oil and gas discoveries.
At some point soon there's surely going to be realisation, maybe starting with the investors,
that oil and gas industry BAU as it's been for the past 40 odd years is over and isn't going
to come back the same no matter what the oil price does. I don't know what comes in it's place
though.
Hi Matt, thanks for the interesting posts. I sent a comment to Art Berman to both his websites
(artberman.com and forbes.com) about the post dealing with the unaccounted oil storage and
I report it below (the comment is not yet visible there):
"Hi Art,
I agree with most of your article, but I would like to point out your attention to a possible
explanation which can account for part of the unaccounted oil storage.
In the last 4 years, I have developed a methodology to re-construct the "real" Texas oil
and gas production data using the data published by the Texas RRC: as it is well known, these
data are only preliminary and it may take up to 2 years to have the final estimates. My method
has proved to be reliable over time, providing estimates of Texas oil production very close
to the final data and much earlier than the latter are published. Moreover, these estimates
proved to be closer to the real data than the official EIA data for Texas: for example, on
the 31/08/2016, with more than a 1-year delay, the EIA revised its Texas data for 2014 and
2015 and aligned it to my corrected Texas RRC data.
Having said that, if we compare my corrected Texas RRC data with the EIA data, it is visible
that the EIA has started to increasingly underestimate Texas crudeoil production data since
July 2015, and the cumulative sum of this discrepancy is approximately 46 million barrels.
Of course, this does not explain all unaccounted oil storage, and I agree with you that
the real inventories are probably much lower than what is reported. However, one (minor) reason
is the underestimated EIA production data for Texas. Thanks"
I would imagine the reserve numbers by Rystad Energy are likely to be more FICTION than REALITY.
I spent a few hours talking to Bedford Hill of the Hills Group on their "Thermodynamic Oil
Collapse" model, and the more I find out about it, the more I am convinced the reserve numbers
shown in the table above are completely out of touch with reality.
The reason the Hills Group decided to design the software model to forecast the Thermodynamic
oil Limit was due to one of the members losing money when a shale oil company overstated reserves
by a wide margin. Thus, these engineers were tired of the crapola put out by either the EIA
or the companies themselves.
It took several years and about 10,000 hours to create this ETP Oil price model as well
as the Thermodynamic Oil Limit model. After they hit "ENTER", it took several hours before
the results came out. From what Bedford told me, the results were so shocking, that they decided
to sit on them for a few years before publishing.
From what I understand, a small team of oil engineers helped design the program. I asked
Bedford how many of the engineers DID NOT AGREE with the results. He replied by saying, "Not
one disagreed."
Furthermore, The Hills Group sent their report to dozens of professors in leading colleges
(mostly professors teaching Thermodynamics), and none of them disagreed with the results, even
though some had questions on the data or inputs used.
There is this notion that SUPPLY & DEMAND will continue to be the leading driver in controlling
the price of oil in the future. However, the rapidly falling EROI is destroying the remaining
net energy, thus leaving very little supply. Thus, Thermodynamics has been and will be the
leading economic driver of human economies, not supply and demand.
According to the Hills Group Thermodynamic Oil Limit model, they took the total amount of
energy in a barrel of oil and subtracted the waste heat. They then programmed into the software
all the inputs from the oil industry. Bedford stated that according to the second law of Thermodynamics the amount of energy consumed
in the production of oil continues to increase. Their model predicted the oil price collapse and forecasts that within a decade (+/- 4%)
there will be no more net energy from a barrel of oil by the oil industry.
There is this notion that SUPPLY & DEMAND or CREDIT & DEBT have distorted this thermodynamic
oil limit. While these factors have changed the oil production graph, the Hills Group model
suggests this has not changed the date. What has changed is that we have pulled future oil
production forward which will make the Seneca Cliff much steeper.
With Chevron, ConocoPhillips and ExxonMobil losing $18 billion in the first six months of
2016 after CAPEX and Dividends were paid reveals just how bad the situation has become in the
Major Oil Companies.
Furthermore, the U.S. Energy Sector interest on the debt consumed 86% of their operating
income in the first quarter of 2016. The situation is much worse than the market has realized.
Anyhow, I will be interviewing Bedford Hill and Louis Arnoux in a few weeks on their ETP
Oil Price Model and Thermodynamic Oil Collapse.
"According to the Hills Group Thermodynamic Oil Limit model, they took the total amount
of energy in a barrel of oil and subtracted the waste heat. They then programmed into the software
all the inputs from the oil industry."
And the explanation in English is? Burning oil will ultimately lead to some thermodynamic
losses.
Hint oil is about 30-33% the worlds total energy consumption.
"Their model predicted the oil price collapse and forecasts that within a decade (+/-
4%) there will be no more net energy from a barrel of oil by the oil industry."
Was the oil price collapse due to thermodynamic reasons?
If that is so [no net energy from a barrel of oil within a decade (2026)], then there should
already be several real world examples to support this with.
What portion of present global oil production (C+C) is consumed by the oil industry? Surely
the Hills Group must have the estimates for that as they have projected the development for
the next decade.
"With Chevron, ConocoPhillips and ExxonMobil losing $18 billion in the first six months
of 2016 after CAPEX and Dividends were paid reveals just how bad the situation has become in
the Major Oil Companies. "
Are you confusing losses/profits with cash flows? Using figures for only Q1 16 does not justify a trend and certainly not justify a conclusion
or projection.
Yes, I was referring to the companies Free Cash Flow minus Dividends. While one quarter
does not justify a trend, the Hills Group forecasts the price of oil to fall to $12 by 2020.
This is due to what a net barrel would be worth to the Global Industrialized World.
Rune, they have calculated the waste energy of a barrel of oil to be one-third. So, what
remains is net energy. However, the energy cost to produce this energy has continued to increase
since the world started producing oil.
The waste energy of a barrel of oil is missed by most economists or analysts when forecasting
price.
Rune, you are more than welcome to check out the Hills Group work at the site here:
http://thehillsgroup.org/
I am getting 40.7% for oil (in 2012?) and electricity is a secondary energy source, so I am
wondering if the 40.7% includes some oil for that.
Even so, how does that reflect the utility of oil, compared with the rest on that list? How
well can the projection of political/military power and control be run on them?
In any case, money/price, as a symbol, is a detachment from reality, along with too many
human detachments from reality to list, so whatever the price of oil is, once thermodynamic
reality and reality in general really start to kick in, the price of it, among a litany of
other human detachments, won't matter anymore. I guess that's when things will be considered
increasingly in the process of collapse or decline.
Steve, I am unsure about gold or silver by the way, since they are still mere symbols for
reality (that rely on some sort of 'trust' of some system that may be dubious). Maybe they
are more 'pegged' to it, but still symbols nonetheless, and so woefully-limited in their peg,
their 'visceral tangibility'.
Also, as gold and silver are hoardable, would those who have and hoard more of it, such
as governpimps and the elite, etc., be able to control it more, such as at the expense of those
who have less of it?
Electricity is NOT an energy source – it is an energy carrier like hydrogen.
BP SR 2016 has oil at about 33% of global energy consumption in 2015 which does not include
biofuels and biomass.
Electricity is considered a SECONDARY ENERGY SOURCE derived from whatever (nuclear power, wind,
etc.). Of course, strictly speaking, electricity is just an accumulation OR motion of electrons.
Therefore, a battery or a capacitor (accumulation of electrons) is a potential energy carrier.
I should have specified primary energy sources.
Lumping together primary and secondary sources confuses the issue.
Where in nature is there free electricity (apart from lightening)?
Follow the flow and all energy is solar.
:-)
To some degree costs acts as a proxy for EROI. The general trend is for costlier oil.
Low priced oil => Higher (composite) EROI (Unprofitable oil is shut down)
High priced oil => Lower (composite) EROI
This article by Ron is about stocks and flows.
Thermodynamics is about flows.
– If net energy from oil move towards zero during the next decade, this implies that
the oil companies would morph into giant heat engines and become bankrupt long before this
(net energy becomes zero) happens. Are there now any signs of this happening?
– If EROI declines at the rate referred and estimated by the Hills Group, net oil
(energy) would enter a steep decline and prices would move significantly and steadily up to
reflect this.
It could be useful to present estimates at what EROI (based on flow) a well or field becomes
shut in and later P&A ed.
'Cost', to me at least, is real and is different from 'price', which is symbolic, and 'Energy
Returned on Energy Invested' is different than 'Energy Return On Investment', but I suppose
it is treated the same to some.
Right now, from what has been read and understood at least, the 'money/finance/banking/BAU-cum-government-as-usual'
clusterfuck of 'establishments' are looking very strange/bizarre/weird/crazy/etc. to the clusterfuck
of many 'analysts/experts/pundits/etc.'. This seems indicative of an overlying symbolic/sociopolitical/socioeconomic
(denialistic/extend-and-pretend) 'formative' response to an underlying thermodynamic issue/problem
and maybe other problems as well, some as feedbacks/perturbations in/from the system.
Along with the ostensibly-increasing and increasingly perverted financial smoke-and-mirrors,
I wonder, in part, what the statistics are on company bankruptcies, takeovers and cannibalizations
these days, as well as investments in so-called alternative energies.
Where's this stuff going?
Steve apparently says 'gold and silver', yes?, but I don't buy it (pun intended too) from
a fundamental-problem-solving standpoint and neither should he.
Gold and silver seem just part of the same or similar scams, but just operate a little differently.
Steve, if you're reading this, I noticed, under one of your articles on Zero Hedge, you
arguing with some of the 'commentgentsia'…
Well, of coure, they know 'nothing', I know 'nothing', you know 'nothing' and Rune knows
'nothing'. Of course we know things, but we are all 'insignificant' cogs in this machined clusterfuck
with limited autonomy and spending too much of our industrially-derived/putrified food energy
and internet energy arguing about known unknowns and unknown knowns and what we and 'the others'
know, don't know, think they know and want everyone to know, even if it's not true– whatever
that means.
Alas, 'Leviathan', as Oldfarmermac has put it, will do what it has to to survive, come hell
or high water or the puny little humans that it squishes along the way– maybe in its death
throes. Why, there appear to be purveyors of Leviathan, or aspects thereof, right here on this
very blog.
I just wish that I was not on the same ship, as I really dislike being dragged along for the
ride.
This comment was brought to you this week by the word, clusterfuck .
"Where's this stuff going?"
That is something I observe a growing number of people wants to inform them about.
As we come to learn something we discover it is just a small piece of the BIG puzzle. We all
have blind spots and are delusional.
Sometime ago I watched some (BBC) documentaries about Keynes, Hayek and Marx and a very
interesting interview with Bank of England's former director Sir Mervyn King (this appears
to be a man of integrity and good moral compass).
There is one common message from all these;
"It is not possible to accurately predict human behavior."
Therein lies a very important bit of information.
I hear you, Rune.
(That BBC piece might be on You Tube.)
Alas, it is of course impossible to predict anything with 100% certainty. If we could, then
there would no consciousness, maybe no universe. And what fun would that be? 'u^
" … within a decade (+/- 4%) there will be no more net energy from a barrel of oil by the oil
industry."
EROI is falling for new sources of oil but I don't know that it would count as "rapid" yet
and it doesn't change much for already developed fields as they age – in fact if energy for
the development stage is taken out then the EROI increases during operations.
If no more wells were drilled starting today then world oil production would fall at around
5%. So in a decade there would be 60% of current supply. The EROI on that wouldn't have changed
much from today – there'd be proportionally a bit more water and gas to handle, but equally
it could all go to the most efficient refineries. Therefore for the overall net energy to be
zero would imply all new stuff bought on line is hugely negative. No such project would be
even considered at conceptual stage and it would stand out a mile. The closest anything gets
to that is Tar Sands where there is arbitrage from energy in natural gas converted to energy
in synthetic oil, but while energy in gas is cheap this still makes sense (or made sense rather
– as soon as the economics became bad, partly as a result of the net energy issues, the projects
were stopped). So if new projects are so bad don't do them – the world might be in a mess at
that point but the remaining oil would be a much sort after entity.
Also the shale reserve that initiated the study wasn't overstated because it's net energy
was incorrectly estimated, it was because someone in the E&P company lied, or rather let's
say 'dissimulated'.
The reason much of the damage of the rapidly falling EROI is not made its way into global
oil industry and the world financial-economic system is due to the massive amount of debt.
The Hills Group model calculates that the second law of Thermodynamics says that the amount
of energy to produce oil has continued to increase since we started producing the liquid over
150 years ago.
They have developed this model showing the average increase in energy cost in terms of a
barrel of oil. They remove the waste heat which is approximately one-third of the barrel. They
model shows that within a decade, the Thermodynamic limit for oil will be reached, thus no
net energy will be available.
Again, the massive amount of debt has distorted the global oil production curve, not the
ultimate date of the thermodynamic collapse. So, we experience a much higher on violent SENECA
CLIFF due to the massive amount of debt that has brought forward production.
Some are waking up to the Magnitude of the Challenge:
"At the same time, the engineer in me cannot be blinded by the physics of logistics underlying
the quintessential challenge posed by oil: how to replace the 560 exajoules of energy that is
required every year to keep the world turning.
That's 5.6 followed by 20 zeroes, whose magnitude was explored in my previous post hocus pocus.
80% of the world's energy requirements are supplied by hydrocarbon combustion."
IMFDirect - "futures markets point to slight gains in oil
prices. But a glance at shifts in futures-price curves in the
past few months suggests that the prospects for higher prices
have been worsening (see Chart 3)."
Ten years ago, oil
prices were $60 a barrel. These charts are pointing at $60 a
barrel. Which would translate into $2.50 per gallon for
gasoline. Of course that assumes the current level of
gasoline taxes.
A carbon tax is sounding more and more like a good idea.
Greg Mankiw insist this should be "revenue neutral". Some of
his would spend some of the extra revenue on public
investments in green technology and infrastructure
investment.
Reply
Friday, October 28, 2016 at 01:44 AM
likbez -> pgl...
, -1
IMF is always predicting lower oil prices :-). That the
nature of the beast.
I am not a specialist, but I do see the picture
differently.
Outside the Middle East, there is not much oil left in the
world that can be extracted profitably for $60 a barrel. IMHO
spikes to $100 are now quite possible. Sustained oil price
over $100 per barrel means recession and reversal of
neoliberal globalization with its crazy and often useless
transport flows from one continent to another (salmon caught
in Europe processed in China, apples flown to NJ, etc).
The current period of low prices masks rapid depletion of
major oil reserves in non OPEC countries and decimation of
shale oil industry in the USA.
Capital investment is now slashed to the bone. And that
might have an outsize effect on oil production in non-OPEC
countries in 2018 - 2020 (such predictions always skip the
next year in a hope that people will forget about them, if
they do not materialize :-)
That means that while the crisis of supply is not
immediate it is looming on the horizon. And might well be
within less then a decade to reach.
Obama administration policy in this area was classic
"after me, the deluge". Low oil prices partially reversed the
replacement process for private transportation and made SUVs
the most popular class of personal cars in the USA. In other
words they reversed the trend to more economical cars in the
USA. So the USA might enter the crisis in worse shape then it
would be, if the energy saving policies were the focus of the
current administration. Obama focused on wars of neoliberal
expansion.
The USA pretty shrewdly used Saudis and Iran as two Trojan
horses able to keep prices low since late 2014. Saudi Arabia
is now issuing bonds left and right as they can't balance the
budget at prices below $100 or so. Iran in general behaves
pretty crazy in this respect as if it has unlimited reserves
and does not need to save them for future generations. They
are fighting for return of their pre-sanctions market share
in $40-$50 environment, as if this is the life and death
question for them. But if they managed to survive sanctions
for so long, why the rush ?
In any case my point is simple: if something can't run
forever it will eventually stop. That include both Saudis and
Iran. They have large reserves, but they are not unlimited
and the most profitable fields with high quality oil already
substantially depleted. Low quality high sulfur oil still is
more plentiful.
The problem is that high oil prices mean trouble for
Western economies. That's why Western MSM reacted so paranoid
on OPEC+Russia decision to freeze production starting Nov. 1.
Also it is not clear how the US oil stocks were/are kept
on such a high level (depressing oil prices): manipulation of
stats by EIA, hidden sale from the strategic reserve,
unaccounted by state oil production (black market oil ;-)
Art Bergman has an interesting article on the subject
"... The Norwegian Petroleum Directorate reported that Norway's oil production in July reached its highest level in 5 years because many fields were "producing above prognosis ..."
"... Oil output of 1.728 million b/d was 10% above July 2015 and about 18% above this past June, which had 1.449 million b/d. [June production was low due to maintenance ..."
"The Norwegian Petroleum Directorate reported that Norway's oil production in July reached its
highest level in 5 years because many fields were "producing above prognosis."
Oil output of 1.728 million b/d was 10% above July 2015 and about 18% above this past June, which
had 1.449 million b/d. [June production was low due to maintenance – AlexS].
The July liquids total averaged 2.136 million b/d after combining the oil number with 375,000
b/d of natural gas liquids and 33,000 b/d of condensate."
"... As worldwide net exports capacity barely changed over the last ten years, the fall of net imports from 2008 to 2015 created a gap of surplus export capacity of 4 mill b/d in 2015. Even higher Chinese and Indian net oil imports could not compensate for the fall in worldwide net imports. Should US producers really increase production (and reduce US net imports further) over the coming years, this gap will not vanish and oil prices will be low. If US oil producers go as far as oil independence over the next ten years, it will take ten years until the oil price can go up again as this will bring out another 6 mill b/d of net imports which gives a total gap of 10 mill b/d. This gap can only be filled by China and India (together roughly 1 mill/d per year) over the next ten years. ..."
"... It would make much more sense for US producers to cut production another 2 mill b/d, which will bring up the oil price with the help of higher Chinese and Indian net imports over the next two years ( net imports would then surpass net exports of 40 mill b/d again), and then reduce net imports at a slower rate than Chinese and Indian growth. This could be done at much higher oil prices and much less pain for shareholders and investors. ..."
"... With hindsight this is what US oil producers should have done over the last five years. It was just unnecessary greed, which has led to the current disaster. It is unrealistic to expect low cost oil producers to cut net export capacity. As long this capacity is there, it will be used. It is however another question how much oil net exporter can increase their capacity. This is in my view another unlikely scenario. ..."
"... That shows nothing, of course. The price of oil in Argentina is now over $67/barrel. ..."
"... Oil price won't be low for long – deep see oil will see no investments if prices keep low for longer, 3rd world states with low production costs but high deficit will go into political unrest – and won't invest in infill drilling, gas injection to keep up performance, but in weapons and bribing important people. ..."
"... No one except the US shale producers can keep producing red ink permanently – so if there will be cheap oil, it will be much less than now. It's like filling a car in the socialistic countries in the 80s – you will pay only cheap money, but will have to wait to get some gas. ..."
As oil moved down during the last few days, the question arises about where oil prices are
heading for the next few years. Wall Street and friends have advertised for the x-th time that
oil prices will be at 70 by year end , by the summer, by fall …
…some people are not so sure about higher oil prices in the future.
My personal view is that it is in the hands of Wall Street and US oil producers, where oil
prices are heading. Below chart shows that US oil producers triggered themselves the fall in oil
prices by rapidly reducing US net imports since 2008. From 1991 wordlwide increasing net imports
– up a staggering 15 mill b/d – drove the oil price to record highs when net imports went over
available net exports of 40 mill b/d.
As worldwide net exports capacity barely changed over the last ten years, the fall of net
imports from 2008 to 2015 created a gap of surplus export capacity of 4 mill b/d in 2015. Even
higher Chinese and Indian net oil imports could not compensate for the fall in worldwide net imports.
Should US producers really increase production (and reduce US net imports further) over the coming
years, this gap will not vanish and oil prices will be low. If US oil producers go as far as oil
independence over the next ten years, it will take ten years until the oil price can go up again
as this will bring out another 6 mill b/d of net imports which gives a total gap of 10 mill b/d.
This gap can only be filled by China and India (together roughly 1 mill/d per year) over the next
ten years.
It would make much more sense for US producers to cut production another 2 mill b/d, which
will bring up the oil price with the help of higher Chinese and Indian net imports over the next
two years ( net imports would then surpass net exports of 40 mill b/d again), and then reduce
net imports at a slower rate than Chinese and Indian growth. This could be done at much higher
oil prices and much less pain for shareholders and investors.
With hindsight this is what US oil producers should have done over the last five years.
It was just unnecessary greed, which has led to the current disaster. It is unrealistic to expect
low cost oil producers to cut net export capacity. As long this capacity is there, it will be
used. It is however another question how much oil net exporter can increase their capacity. This
is in my view another unlikely scenario.
Oil price won't be low for long – deep see oil will see no investments if prices keep low
for longer, 3rd world states with low production costs but high deficit will go into political
unrest – and won't invest in infill drilling, gas injection to keep up performance, but in weapons
and bribing important people.
North sea oil will die, it's already in decline and if a few producers stop the common infrastructure
will be too expensive for the rest to maintain.
No one except the US shale producers can keep producing red ink permanently – so if there
will be cheap oil, it will be much less than now. It's like filling a car in the socialistic countries
in the 80s – you will pay only cheap money, but will have to wait to get some gas.
"... As worldwide net exports capacity barely changed over the last ten years, the fall of net imports from 2008 to 2015 created a gap of surplus export capacity of 4 mill b/d in 2015. Even higher Chinese and Indian net oil imports could not compensate for the fall in worldwide net imports. Should US producers really increase production (and reduce US net imports further) over the coming years, this gap will not vanish and oil prices will be low. If US oil producers go as far as oil independence over the next ten years, it will take ten years until the oil price can go up again as this will bring out another 6 mill b/d of net imports which gives a total gap of 10 mill b/d. This gap can only be filled by China and India (together roughly 1 mill/d per year) over the next ten years. ..."
"... It would make much more sense for US producers to cut production another 2 mill b/d, which will bring up the oil price with the help of higher Chinese and Indian net imports over the next two years ( net imports would then surpass net exports of 40 mill b/d again), and then reduce net imports at a slower rate than Chinese and Indian growth. This could be done at much higher oil prices and much less pain for shareholders and investors. ..."
"... With hindsight this is what US oil producers should have done over the last five years. It was just unnecessary greed, which has led to the current disaster. It is unrealistic to expect low cost oil producers to cut net export capacity. As long this capacity is there, it will be used. It is however another question how much oil net exporter can increase their capacity. This is in my view another unlikely scenario. ..."
"... That shows nothing, of course. The price of oil in Argentina is now over $67/barrel. ..."
As oil moved down during the last few days, the question arises about where oil prices are
heading for the next few years. Wall Street and friends have advertised for the x-th time that
oil prices will be at 70 by year end , by the summer, by fall …
…some people are not so sure about higher oil prices in the future.
My personal view is that it is in the hands of Wall Street and US oil producers, where oil
prices are heading. Below chart shows that US oil producers triggered themselves the fall in oil
prices by rapidly reducing US net imports since 2008. From 1991 wordlwide increasing net imports
– up a staggering 15 mill b/d – drove the oil price to record highs when net imports went over
available net exports of 40 mill b/d.
As worldwide net exports capacity barely changed over the last ten years, the fall of net imports
from 2008 to 2015 created a gap of surplus export capacity of 4 mill b/d in 2015. Even higher
Chinese and Indian net oil imports could not compensate for the fall in worldwide net imports.
Should US producers really increase production (and reduce US net imports further) over the coming
years, this gap will not vanish and oil prices will be low. If US oil producers go as far as oil
independence over the next ten years, it will take ten years until the oil price can go up again
as this will bring out another 6 mill b/d of net imports which gives a total gap of 10 mill b/d.
This gap can only be filled by China and India (together roughly 1 mill/d per year) over the next
ten years.
It would make much more sense for US producers to cut production another 2 mill b/d, which
will bring up the oil price with the help of higher Chinese and Indian net imports over the next
two years ( net imports would then surpass net exports of 40 mill b/d again), and then reduce
net imports at a slower rate than Chinese and Indian growth. This could be done at much higher
oil prices and much less pain for shareholders and investors.
With hindsight this is what US oil producers should have done over the last five years. It
was just unnecessary greed, which has led to the current disaster. It is unrealistic to expect
low cost oil producers to cut net export capacity. As long this capacity is there, it will be
used. It is however another question how much oil net exporter can increase their capacity. This
is in my view another unlikely scenario.
That shows nothing, of course. The price of oil in Argentina is now over $67/barrel.
http://oilprice.com/Energy/Crude-Oil/Would-Regulated-Oil-Prices-Argentine-Style-Help-US-Shale.html
Eulenspiegel ,
08/10/2016 at 10:51 am
Oil price won't be low for long – deep see oil will see no investments if prices keep low for
longer, 3rd world states with low production costs but high deficit will go into political
unrest – and won't invest in infill drilling, gas injection to keep up performance, but in
weapons and bribing important people.
North sea oil will die, it's already in decline and if a few producers stop the common infrastructure
will be too expensive for the rest to maintain.
No one except the US shale producers can keep producing red ink permanently – so if there
will be cheap oil, it will be much less than now.
It's like filling a car in the socialistic countries in the 80s – you will pay only cheap
money, but will have to wait to get some gas.
"... Output was 79,784 kb/d in April 2016, I believe the decline rate will decrease by Oct and output will be around 78.5 +/- 0.5 Mb/d in Nov 2016, decline will continue into 2017 and the rate of decline may reach zero some time in 2017. ..."
World C+C using EIA data, but substituting the Russian Ministry of Energy Data for Russia
shown in the chart below. The monthly peak was 81, 047 kb/d in Nov 2015. The centered 12 month running
average is also shown with a peak at 80,642 kb/d in Sept 2015. The annual decline rate since the
Nov 2015 peak has been 4.2% per year or about 3.4 Mb/d over a 12 month period if the rate does not
change before Nov 2016. That would imply 77.6 Mb/d by Nov 2016.
Output was 79,784 kb/d in April 2016, I believe the decline rate will decrease by Oct and output
will be around 78.5 +/- 0.5 Mb/d in Nov 2016, decline will continue into 2017 and the rate of decline
may reach zero some time in 2017.
"... There seems to be a general assumption that the larger conventional producers can choose to significantly ramp up production when they like, but I doubt that is true. Saudi have just bought on line the Shaybah extension which was a pretty big job to extend production facilities for 'just' 250,000 bpd. ..."
"... Usually in mature fields the wells become limiting. For example as water cut increases not only does the water displace the oil but also, as it is significantly heavier than the oil/gas mix in the wellbore, the overall flow rate declines rapidly. ..."
There seems to be a general assumption that the larger conventional producers can choose to
significantly ramp up production when they like, but I doubt that is true. Saudi have just bought
on line the Shaybah extension which was a pretty big job to extend production facilities for 'just'
250,000 bpd.
Production from a given field may be limited by different parts of the facilities at different
times. Typically the limit will be the lowest nameplate capacity between each of: the reservoir
/ wells; oil processing; produced water handling; associated gas compression; total liquids flow;
water (or gas) injection capacity. Overall power availability may also be limiting at some combination
of oil/water/gas flow below each one of their individual limits.
Usually in mature fields the wells become limiting. For example as water cut increases
not only does the water displace the oil but also, as it is significantly heavier than the oil/gas
mix in the wellbore, the overall flow rate declines rapidly. However this need not always
be the case. In Saudi I think they design and manage their facilities to keep the production at
the oil flow design capacity, which is nominally set to give 2% depletion of the original estimated
ultimate reserves per year. To maintain this they maintain excess capacity in the other key facilities.
In particular they need to control the water cut by using intelligent wells, expandable liners,
and recompletions, or when needed drill new wells higher in the formation. If they lose control
of the water cut, which must happen one day (ideally for them it would be the day they flow the
last barrel of oil and shut in but that is not going to happen) then the likely limit will be
water injection capacity. Water has to be pumped in to maintain pressure to exactly balance the
volume pumped out. For the produced water in the oil that is about one for one, for a stock tank
barrel of oil it is higher because the oil shrinks as it cools, but mainly because of the gas
that is lost. This is ratio is called the formation volume factor and typically is 1.1 to 1.8.
Say for a field the water cut is 50% and the FVF is 1.5, this means 2.5 bbls of injection water
are needed to give one bbl of oil. I don't know the Saudi figures but something like that for
them means 25 mmbwpd injection (that represents a huge amount of large pipes and pumps, and power
– the water isn't like domestic supply, it has to be at high pressure). It's not normally economic
to build in much spare capacity for the piping systems (but who knows with Saudi). Once water
can't be controlled in horizontal wells the cut increases quickly, if it can't be handled within
the facilities and enough pressure maintenance from injected water supplied then the oil production
has to fall (i.e. wells choked back) accordingly.
If at a capacity limit (or limits) increasing production may need new wells, but more than
that completely new topsides facilities, anything more than a few tweaks would need at least 2
to 3 years engineering, procurement and construction effort.
Very good overview. I worked with a field set up to handle extra water, but they forgot the water
heat capacity requires more heaters. So as water cut climbed we had to use lots of chemicals to
get clean oil, until we could install more heaters and heat exchangers. These bottlenecks can
be really subtle, so I took to asking for full surface system simulation runs at 90 % field water
cut to see where the troubles were bound to pop up.
I think Survivalist and Petro have nailed a very good analysis of the situation. When prices crashed
most National Oil Companies and many independent producers tried (and are trying) to produce more
to maintain income. The real tragedy comes when prices remain low and production falls like in
Venezuela. Lack of investments guarantees that this will happen eventually to most producers,
and then once production falls enough we will get very destructive price spikes.
Petro, we see eye to eye on much these issues, but I do think that the world economy will be able
to pay much more for oil than 60$ without crashing. Probably more than $100.
The stuff is too useful, and money will be diverted from other uses to keep buying it.
We'll see, one way or another….
You cannot simply look at the oil price between 2010 and 2014 and deduce that those prices
are sustainable for the World economy. You need to understand the situation under which those
prices were made possible at the time. The period 2009-2014 was a time when Chinese debt was growing
at unsustainable levels to fuel an oil demand that compensated the demand contraction from an
overindebted Europe that could not accept those high oil prices and went into recession and debt
crisis. The period 2009-2014 was also a time when central banks engaged in exceptional ZIRP and
quantitative easing policies with most countries significantly increasing their public debt.
But there is only one China and all significant economies have now a high level of indebtment
so a very rapid growth of debt has become a lot less likely. At the same time ZIRP and quantitative
easing policies are a one way avenue of increasing risk, decreasing effect, and extremely difficult
return.
The oil price crash has probably delayed the next economic crisis. However the world economy
is in no position to assume the oil prices required to guarantee the level of investment required
to increase oil production above 2015 levels.
Oil depletion, debt, and low economic growth, will all work to make 2015 the year of Peak Oil.
If we enter a period of high oil price volatility due to mismatches between production and demand
that will be very destructive both to the economy and to oil production.
Possibly $100/b is a problem, but there is a lot of room between $50/b and $100/b. When oil
supply decreases, oil price will increase. How much oil prices can increase without damaging the
World economy is far from clear.
One can arbitrarily claim $75/b is the magic number that will make the economy crash,
nobody knows. There might be a sweet spot between $75/b and $95/b where oil supply can
either be maintained or possibly increase slightly and not cause World output to decline. World
debt to GDP has been relatively stable since 2010 based on BIS data.
Javier- you (and Petro etc) may be right, and the civil difficulties of Venez and poverty of Moldova
may be coming to places far and wide.
I'm thinking that most commerce will still churn on, even if oil is 100$. Maybe just wishful thinking.
I agree. There is very little evidence that oil over $75/b kills the economy, what it has done
recently is result in too much oil production relative to demand.
What has changed is that there is no one willing to cut back on output. From 1930-1970, Texas
was the World's swing producer and from 1985-2014 Saudi Arabia fulfilled that role. Now we will
see volatility in oil prices unless some new cartel is formed, maybe OPPC (Organization of Petroleum
Producing Countries).
US, Norway, UK, Russia, Brazil, and Canada could join the OPEC nations and have a production agreement
to control oil prices.
This would never happen, but maybe each nation should regulate output as the RRC once did for
Texas, it would help with oil price volatility.
Reply
"... Survey of international spending reveals a 19% decline compared with an initial estimate of 14% in January. The Middle East remains an area of stability while the largest negative revisions come from large IOCs, Latin America, and the Asia Pacific region, excluding China. Latin America is still the weakest region, where spending is expected to decline 30%. ..."
"... IOCs and independents are projected to have spending declines of 24% this year, while other independents are expected to spend 45% less. This compares with prior decline estimates of 10% and 17%, respectively." ..."
E&P spending is much lower this year than was expected even after the big cuts initially announced.
US independents and Canada in particular are hurting. Middle East is the only place holding up.
"In its midyear E&P spending update, Cowen & Co. now estimates global expenditures to fall
24% compared with a 16% decline in its January survey. The downward revisions were primarily driven
by larger spending cuts from North America-focused E&Ps and major international oil companies.
In this update, Cowen & Co. expects US spending to decline 45%, reflecting oil prices of $40/bbl
and natural gas prices of $2.50/MMbtu. This was down from a 22% estimate at the time of January's
survey, which was based on $48.5/bbl oil and $2.50/MMbtu gas. Canada spending is expected to fall
33% compared with an earlier estimate of an 18% falloff.
Survey of international spending reveals a 19% decline compared with an initial estimate of 14%
in January. The Middle East remains an area of stability while the largest negative revisions
come from large IOCs, Latin America, and the Asia Pacific region, excluding China. Latin America
is still the weakest region, where spending is expected to decline 30%.
IOCs and independents are projected to have spending declines of 24% this year, while other independents
are expected to spend 45% less. This compares with prior decline estimates of 10% and 17%, respectively."
"... It took a while, but Exxon has decreed force majeure on Qua Iboe. That's the export terminal they have repeatedly said was not attacked first of this week. 300,000 bpd that will not be exported, for a while ..."
Maybe my imagination has become to active, but I believe the story of the NDA attacking Mobile's
Qua Iboe terminal should be getting more interest. Monday night the NDA announced they had blown
up the 300,000 bpd export line. Exxon was quick to deny that an attack had taken place. Someone
is lying and it is not clear who.
http://footprint2africa.com/nigeria-militants-exxonmobil-tug-words/
Although it seems almost inconcievable that Exxon would lie about this, there are a couple
of things that make you consider the possibility. One is that in May there were reports of a militant
strike on the facility, which was denied by Exxon. Shortly after that Exxon reported that a malfunctioning
rig had caused damage to the facility, and it was shut down for a short while.
Another is that after the latest attack claimed, Shell reportedly shut in the trans-Niger pipeline,
and there have been reports of oil companies evacuating 700 staff.
It took a while, but Exxon has decreed force majeure on Qua Iboe. That's the export terminal
they have repeatedly said was not attacked first of this week. 300,000 bpd that will not be exported,
for a while
"... Steve Kopits at Princeton energy advisors has shown that between 1998-2005 $1.5 Trillion was spent on oil CapEX to increase oil output by 8.4 Mbpd and that from 2005-2013, $4.0 Trillion was spent on CapEx to increase output by just 2.4 Mbpd. ..."
The price of oil seems pretty darn important. Art Berman had an interview with Chris Martenson
on peak prosperity that projects with some 20 Billion barrels of oil have been deferred due to
the current low price. That's a pretty large amount of oil that's not coming online when required
as a result of price.
Not to mention that oil is becoming much harder to find, Steve Kopits at Princeton energy advisors
has shown that between 1998-2005 $1.5 Trillion was spent on oil CapEX to increase oil output by
8.4 Mbpd and that from 2005-2013, $4.0 Trillion was spent on CapEx to increase output by just
2.4 Mbpd.
Society is energy constrained and it's showing up in the economy with crazy effects like NIRP,
where $13 Trillion worth of global bonds now yield negative returns from Zero just a few years
ago, think about that, paying someone to borrow your money!! Also an economy where young people
aren't getting decent jobs to pay for incredibly overpriced house prices as evidenced by affordability
ratios, where populism and extremism is on the rise globally as well as large swathes of society
are left out of prosperity. Energy is the ability to do work, without increasing energy supplies
society has to fundamentally change.
"... There are still a lot of projects due this year and next and even into 2018, but not quite enough to make up for the declines. ..."
"... Probably 2.5 to 3.5 mmbpd fall over the three years barring big, unexpected outages. In 2019, 2020 and 2021 there will be dramatic and accelerating falls unless a lot of expensive, and currently delayed, oil developments are fast tracked soon, or a lot of very cheap oil is found somewhere, or in fill drilling ramps up quickly on the big reservoirs. ..."
"... It's time lag. Simply said, when prices where at 100$+, everyone had lot's of money to invest and drilled like mad to get even more oil, explored, developed new fields. These operations have normally completion times of a few years, so they come alltogether online now. A typically pork circle. Price does matter – now new projects are delayed or canceled, ready to go into the next round. ..."
"... How can anyone possibly deny the effect the price of oil has on the production of oil? The very high price of oil brought on the shale revolution. Oil prices above $80 a barrel caused shale oil production to boom. However shale oil production is just uneconomical at prices below $60 a barrel, or somewhere in that neighborhood. ..."
"... Almost every barrel being produced cost a different amount to produce. There is a thing called "the margin". That is what it cost to produce the most expensive barrel of oil being produced. As the price of oil drops, barrels being produced "at the margin" starts to drop off. More expensive oil stops being produced, less expensive oil continues to be produced. Of course there is a delay between the price dropping below the margin and that marginal barrel dropping from production. ..."
Has depletion finally gained the upper hand? My back of the envelope calculation:
Conventional: 78 million barrels at 4% = 3.1 million barrels.
All other: 19 million barrels at 10% = 1.9 million barrels.
Total: 5 million barrels per year
2015 was a year where a lot of projects came online that were developed in previous years. There
is less of that this year. So 2 million for this year seem reasonable. Next year will be interesting.
If demand keeps growing, there should be a substantial shortfall, draining storage. The only way
to close the fast growing gap is a miraculous recovery of Libya and others that are currently
hampered by political unrest.
There are still a lot of projects due this year and next and even into 2018, but not quite enough
to make up for the declines.
Probably 2.5 to 3.5 mmbpd fall over the three years barring big,
unexpected outages. In 2019, 2020 and 2021 there will be dramatic and accelerating falls unless
a lot of expensive, and currently delayed, oil developments are fast tracked soon, or a lot of
very cheap oil is found somewhere, or in fill drilling ramps up quickly on the big reservoirs.
We'll get to see the truth behind LTO sustainability and flexibility; that and depending on how
demand goes, plus the real storage numbers will determine prices and therefore future supply developments.
Overall though I agree, I think we will suddenly find ourselves short at some point in the next
5 years, and without many options.
Watcher – I think that Ron "almost" has you pegged. Basically he notes that no one can be that
Fu–ing stupid. But, he may be wrong. What in the hell are you talking about when you say "you
can kill competing consumption with weapons?" Why would anyone in the supply chain want to kill
"CONSUMPTION?"
It's time lag. Simply said, when prices where at 100$+, everyone had lot's of money to invest
and drilled like mad to get even more oil, explored, developed new fields.
These operations have normally completion times of a few years, so they come alltogether online
now. A typically pork circle. Price does matter – now new projects are delayed or canceled, ready to go into the next round.
How can anyone possibly deny the effect the price of oil has on the production of oil? The very
high price of oil brought on the shale revolution. Oil prices above $80 a barrel caused shale
oil production to boom. However shale oil production is just uneconomical at prices below $60
a barrel, or somewhere in that neighborhood.
Dammit, it is as plain as the nose on your face. Price determines production. Does Watcher
really deny that simple fact? No, Dennis, you are simply mistaken. Watcher is not so dumb as to
deny that simple fact…. Is he???
Watcher has BEEN denying it, as steadily as if somebody were paying him by the word, for as far
back as I can remember.
Some people, quite a few actually, believe God looks after their lives for them on an every
day basis, and no amount of evidence, good or bad, is enough to shake this conviction.
Watcher apparently believes in some UNIDENTIFIED POWER that keeps oil coming regardless of
the price, or perhaps more accurately, keeps it coming even while controlling the price and forcing
it down by half or three quarters.
Of course there might be another explanation. Maybe he just enjoys rubbing everybody nose in
the apparent failure of the market system in the case of oil.
The explanation is simple enough, in principle. The oil industry is the biggest and slowest
moving of all industries, when it comes to NECESSARILY operating on a five to ten year time scale
in terms of making production decisions.
Being an orchardist, I am personally quite comfortable with such planning time scales, because
my kind of work is planned on a very similar time scale. If I miscalculate , meaning guess, really,
what the price of apples will be ten years down the road, and plant too many new trees, I am not
just going to take a chainsaw or bulldozer to my orchard because the price collapses. I wait it
out, and hopefully OTHER orchardists go broke first. Old trees will be dying, there is depletion
in apples, lol.
The production decision making process is triply compounded in difficulty by what we usually
forget , because in a forum such as this one, the discussion is centered around BUSINESSMEN out
to make a living, folks such as Mike, Shallow Sand, Texas Tea, etc. They make rational decisions,
as best they can.
What we forget is that the oil industry is an industry dominated by governments, and governments
are notoriously clumsy in managing their business affairs when circumstances demand action.
Politicians, be they Saudi kings or socialist Venezuelans, or right wing dictators or more
middle of the road types, are NOT going to do anything to upset their citizens, or piss them off,
if it can be avoided. Laying off a few tens of thousands of people is just not DONE until there
is NO OTHER choice.
Nobody would notice if we laid off half the people who work in the post office here in the
USA. Every body I know , excepting my cousin who is a carrier, and the post master, thinks we
could get along JUST FINE delivering the mail three days a week instead of six.
Politicians at the top of the heap are mostly interested in one thing, that thing being to
stay in power, and to do that, they play an incredibly complicated, fluid game maintaining the
network of supporters who ENABLE them to STAY in power.
Expecting them to act like BUSINESSMEN running a business is naive. As a rule, they will never
do anything proactive in order to solve a problem that might just go away by itself. When they
DO do something , it is to be expected that the doing will be undertaken much later than it ought
to be, and that it will be inadequate to deal with the problem until the problem becomes an existential
emergency.
ONCE all the chips are on the table, and it's literally do or die, or be sent home, out of
office and out of power, governments can do some pretty spectacular things, such as mobilize to
fight a flat out war.
Things aren't that bad yet, in the countries dependent on oil revenues,excepting Venezuela.
Maduro is actively constructing a police state in hopes of staying in power.
The industry has excess capacity. It took years to build that capacity, and the economy couldn't
absorb the amount of oil coming to market at a hundred bucks, so the price collapsed. The economy
IS absorbing the oil coming to market, about the same amount , at about forty bucks.
It will take a WHILE for the excess capacity to dry up.Maybe another year or two, maybe less,
maybe longer. If the economy turns sour, it will take longer.If the electric car revolution really
comes to pass, on the GRAND SCALE, and very quickly, demand destruction will mean there is so
much excess capacity that the price will stay low for a long time.
There is nothing involved in understanding the oil price question that requires more than a
basic understanding of supply and demand, plus an additional understanding of the relevant time
scales and the nature of GOVERNMENTS as opposed to BUSINESSMEN making decisions.
If businessmen were running the post office, we would have half as many postal employees, lol.
Maybe even less.
Farmers have generally done the same thing, collectively, when the price of whichever crop they
produced crashed.
As an individual guy growing corn, or wheat, or rice, or apples, I cannot produce enough, or
cut back far enough, to influence the market price. What I CAN do, is go flat out to produce every
possible last bushel, going for the all important marginal dollar that might enable me to survive
short term. This is what the SMALLER oil producers are doing, by and large.
While producing flat out individually, and collectively, we make the price crash even lower,
and stay in the pits longer, but then this is what drowning men who cannot swim do in the water-
try to survive by pushing themselves up by pushing another man under.
The game changes when one (or more) supplier is big enough and rich enough to have pricing
power and staying power running at a loss. In that case, the big boy can "sweat" the little fellow
, in the words of John D Rockefeller, running him out of business, deliberately.
Now this didn't take long at all while Rockefeller was running a small local company out back
in the early days of big oil, but it can take a hell of a long time when the little guy is a sovereign
government, or a giant corporation. I should say that SA and Russia are engaged in BOTH ways,
producing flat out to maximize revenues, plus hoping to run some competitors out of the market,
at least temporarily.
Folks who aren't TOO simple minded to think a little also realize there is such a thing as
war and politics, and that war can be fought in markets as well as with guns. The USA basically
broke the old USSR by making it impossible for that now dead empire to compete with us on building
guns, never mind butter, plus encouraging the Saudis to flood the market and deprive the Soviets
of oil revenue. Hard core D types will never admit that this is true however, because it is grounds
for being kicked out of the party to admit that a Republican has ever succeeded at doing anything
at all except creating more and bigger problems.
There is an element of WAR being played out in the oil markets now, and for the last year or
two, and it will continue to be important for a while.
Anybody who thinks anybody in DC, excepting oil state congress critters and oil lobbyists,
gives a flying fuck about the oil industries problems has a near zero understanding of economic
politics. Cheap gasoline is an elixer that is damned good for the OVERALL economy, and as good
as a zanax for soothing the nerves of consumers. To expect the Obama administration to do anything
to raise the price of oil, when raising it would cost D 's elections, is tantamount to insanity.
Who can remember this quote? "It's the economy, stupid"?
Hells bells, the R party rakes the D 's over the coals for LOWERING the price of oil by insisting
on higher fuel economy standards, lol.
And one last little bit of ranting, and I will lay off for an hour or two , at least, so help
me Jesus. This is history we are talking about, not a goddamned thirty minute tv show.
Looking at what Ron has said that the threshold for LTO production is $60, what I find important
is that just a few years ago that threshold was in the $80 to $100 range.
Even at today's prices, $45 to $50 range, we have seen the oil directed rig count, increase
over the past few weeks.
This indicates that some of the better plays have a lower threshold.
As we go out in time I would not be surprised that the $60 threshold will move down again.
R DesRoches,
absence of some new technology, I expect we are at the lows of what LTO break-even cost will be
for the best LTO plays. As oil prices pick up and balance sheets get better the drilling companies,
Fracking co will begin to have some better pricing power and I expect they will use it. So for
a time expect break even to stay low but begin to rise "somewhat" as prices move up. I still think
$75 WTI is what the best companies in the best plays really need to MAKE MONEY not just break-even
in a normal business environment. (lets says 1200 rigs running lower 48 ) I know I would be drilling
in the areas I am active at that price, $50 not so much and only with a gun to my head :-)
RDR – I am never sure of what anybody said about breakeven, unless it is accompanied by a complete
financial statement.
If an oil company has undrilled land in an LTO area, that (1) needs production to "hold" the
lease, and/or (2) has bank debt related to its lease acquisition, then: Their breakeven point
and perspective is totally different (lower) than if you or I tried to determine our breakeven
point if we went someplace, bought acreage and drilled a well.
OTOH, I notice 2 yrs later KSA is producing 600K bpd more oil at less than half the price.
And what is Russia producing now at less than half the price?
Watcher, you cannot measure every barrel produced with the same yard stick.
It cost KSA about $20 a barrel to produce oil, more in some places less in others. Therefore
they want to produce every barrel possible in order to meet their budget.
It cost Russia pretty much the same to produce oil from their old fields. But it cost them
much more to find new oil and produce it. The price of oil is hitting Russia very hard but will
hit them much harder unless the price rises soon.
The low price of oil is killing Venezuela. Their production is dropping. It will drop much
further unless the price starts to rise soon.
Almost every barrel being produced cost a different amount to produce. There is a thing
called "the margin". That is what it cost to produce the most expensive barrel of oil being produced.
As the price of oil drops, barrels being produced "at the margin" starts to drop off. More
expensive oil stops being produced, less expensive oil continues to be produced. Of course
there is a delay between the price dropping below the margin and that marginal barrel dropping
from production.
Watcher, it is just fucking insane to claim that price has no effect on production. You have
to know better than that. Why on earth do you think the number of oil rigs working in North Dakota
dropped fro 215 rigs four years ago today, to 30 today? It was because the price of oil dropped
and for no other reason. And that decline in the number of rigs is currently having a dramatic
effect on oil production in North Dakota.
Dennis, I was just being sarcastic. I know that Watcher really does believe that the price of
oil makes no difference. Imagine that! He also believes that money is just a piece of paper.
If you go to any of the big LTO independent oil companies web sites and look at their investor
presentations you will find two trends.
First the day to drill wells have come down in the last couple of years, in many cases by over
30%.
Second with bigger fracs and changes in the mix, IPs and EURs have gone up, in many cases above
25%.
What this means is that the break even price of oil has been coming down.
We are starting to see rigs coming back to the patch at oil prices below $50. IMO as the oil
prices moves up towards the $60 level the rate of increase in rig counts will also increase.
Well costs went down and then back up as more esoteric well designs have become common. Note
that supd costs may have gone down and LOE might also have gone down, but you are leaving out
completion costs which is about 2/3 of the capital cost of the well, the decrease in spud cost
has been more than offset by increases in completion costs (this includes the fracking). On balance
total well cost has probably not decreased much and for the newer designs with more stages (up
to 40 or so in the Bakken) and higher amounts of proppant, total well cost has probably increased.
The "lower well cost" presented in the investor presentations is for an older "standard well
design". The newer well designs that have increased the output per well cost an extra 1 or 2 million
per well (in the ND Bakken/Three Forks).
What does frac water cost per barrel, or at least a range? How many barrels of water are needed
to drill and complete a hz well? How much does trucking the water cost.
I know all this can vary, so just some ranges will do.
I took a look at oil rigs operating in the Permian, Bakken and Eagle Ford.
For those 3 plays we have:
Total oil rigs- 213
Horizontal-191
Vertical- 22
Bakken – 28T, 27H
EF- 27T, 26H
Permian-158T, 138H, 74% of oil rigs in the big 3 LTO plays.
Of the 28 oil rigs added since May 27, 2016, 22 were added to the Permian and all were horizontal
rigs. The Bakken added 5 horizontal rigs and 1 vertical and the EF 1 vertical rig.
Based on this, Eagle Ford is probably the high cost play, then Bakken, with the Permian perceived
as best at the moment of the LTO plays.
-Not only price does matter, but It is PRECISELY due to the low prices that everybody is producing
in a " …the last big party…" mode, … last oomph, if you will!
All in!
All they can!
….and has little to do with the "delayed effect"…. if there is such a thing.
Some 20 carmakers have committed to making automatic emergency braking systems a standard feature
on virtually all new cars sold in the U.S. by 2022, according to a new plan from the
National Highway Traffic Safety Administration and the Insurance Institute for Highway Safety.
Automatic brakes are designed to stop a vehicle before it collides with a car or another object.
Experts say that making them standard could prevent as much as 20 percent of accidents.
NPR's Sonari Glinton reports for our Newscast unit:
"Many cars on the road now have automated brakes. And when you're new to them, it's pretty scary
when the car stops on its own. But experts say automatic brakes could make the fender bender a
thing of the past.
...
"It's part of a push to fight the growing problem of driver distraction and a step closer to
driverless cars. Now carmakers have to figure out by 2022 how they'll integrate the systems."
NHTSA released a list of the car companies that have committed to the system:
"Audi, BMW, FCA US LLC, Ford, General Motors, Honda, Hyundai, Jaguar Land Rover, Kia, Maserati,
Mazda, Mercedes-Benz, Mitsubishi Motors, Nissan, Porsche, Subaru, Tesla Motors Inc., Toyota, Volkswagen
and Volvo."
"In 2012, one-third of all police-reported crashes involved a rear-end collision with another
vehicle as the first harmful event in the crash," according to the government's information page
on Automatic Emergency Braking systems.
It adds that AEB systems can either avoid or reduce the severity of some of those rear-end crashes.
In a statement about the plan, NHTSA says the "unprecedented commitment" from the automakers will
bring the safety technology to "more consumers more quickly than would be possible through the regulatory
process."
Looking at Art Berman's chart below. World oil production since 2005, less US and Canada, has
been pretty much flat. This is despite the fact that prices have risen dramatically in that period
of time. So lets look at the other huge gainers since 2005.
Russia: See the EIA's take above. Even if they are wrong, Russia's huge gains are gone forever.
Angola, Brazil, China and Colombia: China and Colombia have definitely peaked. Angola peaked
in 2010 and has declined slightly and been flat since then. Only Brazil has any hope of increasing
production, and tat not by very much.
Iraq: I believe Iraq has peaked. Some may disagree but there is no doubt that their best days
are behind them. They have far more downside potential than upside potential.
There is little doubt that all those countries will decline in the next few years regardless
of what the price of oil is. After all, if oil above $100 a barrel in the past did not sent them
producing massive amounts of oil, there is no reason to believe it will do so in the future.
That leaves the USA and Canada. To those massive high prices in the past few years, only
the USA and Canada responded. So… will higher prices bring on enough US and Canadian production,
to make up for the decline in the rest of the world… plus increase production enough to push production
above the 2015 peak?
Sobering, as Euan writes. Alarming I'd say.
In a possible future's retrospect, it may turn out to have come as a surprise how fast things
unraveled sociogeopolitically so close after the peak.
Fossil fuel, within a certain EROEI range is, of course, power. It powers pseudoeconomies,
governpimps, and their militaries. And now China and Russia, for two examples, are not nearly
as 'backwoods' as they may have been, historically. They have become, 'Westernized'…
After a year of trying to increase their production they have been unable to do so. Now things
are likely to get worse. Iraq depends almost entirely on outside contractors. Also there has been
a steady stream of skeptical news coming out of Iraq.
Iraq is Opec's second-largest producer after Saudi Arabia and has ambitious plans to increase
production capacity to between 5.5m b/d and 6m b/d by 2020.
This target, which has been revised downward in recent months, has been viewed with scepticism
as a budget crisis is limiting the federal government's ability to pay companies that are producing
oil in Iraq. These include from BP, Royal Dutch Shell and Russia's Lukoil.
Although they are developing some of the lowest cost easy-to-access deposits of oil in the
world, the fields need more investment to maintain production at current levels and increase future
capacity. At the same time, the government in Baghdad is requesting companies reduce spending.
"We're taking more risk to keep production the same, while not getting paid. We can't
continue to produce for 2-3 years like this, it's not possible," said one executive at an oil
company operating in Iraq. "Maybe they can achieve 6m b/d by 2030."
These numbers are through June. As you can see they still have not matched January's numbers.
And their contractors are not getting paid. Now what would you think would be the likely effect
on Iraqi oil production?
My guess is that Iraq oil production will struggle to maintain current levels over the next
couple of years and then drop rapidly as their ongoing religious civil war makes the situation
too dangerous for continued foreign investment.
Another guess is that the global economy will be in recession by 2020, reducing demand, lowering
world oil prices, and pushing many national economies into bankruptcy. The impact for countries
highly dependent on oil revenue to maintain social services and stability will be devastating
and we'll see the breakdown of societies and the rise of dictatorship.
All wags of course. But it seems to me, generally, that geopolitics and social/economic problems
will begin to overtake any geologic and technological limitations in world oil production. Venezuela
is a current example, and now Iraq, starting with their "budget crisis" and workers "not getting
paid", as your article describes. In other words, above ground factors are determining production
and not the lack of oil in place.
Thanks for your reply, always appreciate your clear-headed thinking.
Probably Art is basing his incremental graph in Matt's ones.
Also very noteworthy is Matt's graph on "Conventional Oil Plateau" from his May 2015 update on
that link.
"... China, the world's fourth-largest oil producer, pumped 5.6% less crude year-on-year in April ..."
"... The Asian nation reduced oil output in May by 7.3% from a year ago ..."
"... In June alone, China pumped 8.9 percent less crude than a year earlier ..."
"... 8,9% in June and the decline just continue to increase!! Lets see what happens in the future, but right now it certainly looks like its collapsing. ..."
"... Some Chinese production is very expensive and they will get their oil from the least costly source. I know this because I've worked there with their senior resource people and had the discussion. Of course, China is facing serious oil depletion as well. ..."
"... In fact, China's production increased 62 kb/d in June vs. May to 4.03 mb/d. But y-o-y decline accelerated to 8.5% in June 2016 (not 8.9% as says Reuters article quoted by oilprice.com). June 2015 was the peak month for China's oil production (4.41 mb/d). ..."
"... China has seen in the past significant drops in monthly oil production, most likely related with maintenance. But this time is different. I agree with Ron that China has peaked. ..."
"... Ok good to know. But 8,5% is still huge. Looking at the graph I see that the number will continue to increase untill end of year unless production levels out or start to increase. ..."
Some Chinese production is very expensive and they will get their oil from the least costly source.
I know this because I've worked there with their senior resource people and had the discussion.
Of course, China is facing serious oil depletion as well.
In fact, China's production increased 62 kb/d in June vs. May to 4.03 mb/d.
But y-o-y decline accelerated to 8.5% in June 2016 (not 8.9% as says Reuters article quoted by
oilprice.com).
June 2015 was the peak month for China's oil production (4.41 mb/d).
I am using original data from the National Bureau of Statistics and conversion factor of 7.3
barrels/ton
China oil production (kb/d) and year-on-year change
China has seen in the past significant drops in monthly oil production, most likely related with
maintenance.
But this time is different. I agree with Ron that China has peaked.
What's makes this time different for China? I'm curious to hear what you base your thoughts on
(as you seem to have a good understanding of what's going on).
Ok good to know. But 8,5% is still huge. Looking at the graph I see that the number will continue
to increase untill end of year unless production levels out or start to increase.
If we had a whole century ahead of
us to transition, it would be
comparatively easy.
Unfortunately, we no longer have
that leisure since the second key
challenge is the remaining
timeframe for whole system
replacement. What most people
miss is that the rapid end of the
Oil Age began in 2012 and will be
over within some 10 years. To the
best of my knowledge, the most
advanced material in this matter
is the thermodynamic analysis of
the oil industry taken as a whole
system (OI) produced by The Hill's
Group (THG) over the last two
years or so (
http://www.thehillsgroup.org
).
THG are seasoned US oil industry
engineers led by B.W. Hill. I
find its analysis elegant and rock
hard. For example, one of its
outputs concerns oil prices. Over
a 56 year time period, its
correlation factor with historical
data is 0.995. In consequence,
they began to warn in 2013 about
the oil price crash that began
late 2014 (see:
http://www.thehillsgroup.org/depletion2_022.htm
).
In what follows I rely on THG's
report and my own work.
Three figures summarise the
situation we are in rather well,
in my view.
Figure
SEQ Figure \* ARABIC 1
– End Game
For purely thermodynamic reasons
net energy delivered to the
globalised industrial world (GIW)
per barrel by the oil industry (OI)
is rapidly trending to zero. By
net energy we mean here what the
OI delivers to the GIW,
essentially in the form of
transport fuels, after the energy
used by the OI for exploration,
production, transport, refining
and end products delivery have
been deducted.
However, things break down well
before reaching
"ground zero"
;
i.e. within 10 years the OI as we
know it will have disintegrated.
Actually, a number of analysts
from entities like Deloitte or
Chatham House, reading financial
tealeaves, are progressively
reaching the same kind of
conclusions.
[1]
The Oil Age is finishing now, not
in a slow, smooth, long slide down
from
"Peak Oil"
, but in a
rapid fizzling out of net energy.
This is now combining with things
like climate change and the global
debt issues to generate what I
call a
"Perfect Storm"
big
enough to bring the GIW to its
knees.
In an Alice world
At present, under the prevailing
paradigm, there is no known way to
exit from the
Perfect Storm
within the emerging time
constraint (available time
has shrunk by one order of
magnitude, from 100 to 10 years).
This is where I think that
Doomstead Diner's
readers are
guessing right. Many readers are
no doubt familiar with the
so-called
"Red Queen"
effect illustrated in REF
_Ref329530846 \h Figure 2
08D0C9EA79F9BACE118C8200AA004BA90B02000000080000000E0000005F005200650066003300320039003500330030003800340036000000
– to have to run fast to stay put, and even faster to be able to move forward.
The OI is fully caught in it.
I find in this article
too many crass claims
and too few simple
facts, and even those
questionable.
Take graph 1. It
suggests, that in
2015, i.e. a year ago,
the EROI of oil were
1.17. In fact it was
always more than 5, in
most cases even more
then 10, afaik, even
for the "new sources",
i.e. tar sands &c.
Concerning the
energetic cost of the
transition: In a first
approximation, energy
investment in
renewables and saving
has paid for itself
within a year. This
means, that if we
transform 10 % of our
energy infrastructure
to renewables and
saving per year, we
have to use 10 % of
our available power
for it. This is
certainly a lot. But
it is certainly
doable, if we want.
The latter, of course,
is the nub of the
matter.
I have the feeling i
have to wade through a
rhetoric jungle to
search for valuable
information. May be a
matter of taste, i
admit.
It is
important
to not
confuse
EROi or
EROEI at
the well
head and
for the
whole
system up
to the
end-users.
The Hill's
Group
people
have shown
that the
EROIE as
defined by
them
passed
below the
critical
viability
level of
10:1
around
2010 and
that along
current
dynamics
by circa
2030 it
will be
about
6.89:1, by
which time
no net
energy per
barrel
will reach
end-users
(assuming
there is
still an
oil
industry
at this
point,
which a
number of
us
consider
most
unlikely,
at least
not the
oil
industry
as we
presently
know it).
Net energy
here means
what is
available
to
end-users
typically
to go from
A to B,
the energy
lost as
waste heat
(2nd
principle)
and the
energy
used by
the oil
industry
having
been fully
deducted -
as such it
cannot be
directly
linked in
reverse to
evaluate
an EROI.
Re the
necessary
energy
investments
to
build-up a
renewable
capacity,
Parts 2
and 3 will
elaborate
on the
matter.
Let's just
say for
now that
we are
talking
here of
whole
system
replacement,
globally,
and not
just
considering
the energy
embodied
in the
implementation
of this or
that bit
of
renewable
technology
- the
pictures
look very
different
at the
micro and
macro
levels.
"... In June alone, China pumped 8.9 percent less crude than a year earlier, with state-owned giants such as PetroChina and CNOOC shuttering unprofitable fields ..."
"... Crude oil imports in January-June jumped 14 percent, China's national Bureau of Statistics said ..."
China's crude oil output over the first half of the year stood at 101.59 million metric tons,
down 4.6 percent and the lowest six-month figure since 2012, Bloomberg
reports. The decline reflects China's stated shift from an industry-focused economic model
to a more service-oriented one. It is also related to a drive by the government to cut the country's
environmental footprint, struggling with a reputation of China as one of the most polluted places
on earth. Low oil prices were also a factor in the production trend.
In June alone, China pumped 8.9 percent less crude than a year earlier, with state-owned giants
such as PetroChina and CNOOC shuttering unprofitable fields and turning to low-cost imports instead.
Crude oil imports in January-June jumped 14 percent, China's national Bureau of Statistics said,
with June recording the weakest growth.
The developed proved and probable is 655 Gb, which would equate to about 4.5% natural decay
rate.
There is supposed to be about 900 Gb undiscovered, which at last years rates would take about
300 years to find (and my guess is that if there is that much hydrocarbon it has a significant
amount of gas).
And there are 500 Gb discovered and undeveloped, I don't follow that much but there is a country
break down to check out, but the IOCs stopped development with prices at $110 per barrel so it's
probably going to cost more than $8 trillion to put that much on line.
"... So he's covered. I'm about to publish something here maybe today and the sub title of this section is called "It's not a lie if we tell you it's a lie." That's the name of the game. As long as the investor presentation or the news release says somewhere that we're using language here that we would never ever use in an SEC filing because they'd put us in jail. And so you guys need to know that. In other words, "we're lying," then it's technically not a lie. It's not fraud because we told you it was a lie. ..."
"... Well we started this conversation with your important observation that we're only talking about a million or million and a half barrels a day of oversupply. So we could go from over supply to deficit pretty quickly ..."
"... So just the capital cuts in US companies have effectively deferred $20 billion-or maybe the world, I'm sorry-$20 billion barrels of development of known proven reserves. ..."
"... Well there's a big lag. There's a huge time lag between when the price responds and people actually get around to drilling and they actually start bringing the oil onto the market and it becomes available as supply, because they've been asleep at the wheel for how many months or years. You don't just turn a valve and all of a sudden everything is okay again. ..."
"... There's this tremendous gap between "okay we know there's a reserve," but what's it take to turn it into supply? Well it takes time and it takes money and it doesn't happen overnight. ..."
"... EIA says average price in 2016 will be $53 a barrel. They're not always right and in fact they're often wrong but they're not stupid either. They're doing the best they can. They have got some good people there. ..."
"... Well just turn the clock back to 2012-2013 when oil prices were sky high, were $100 a barrel or more, and what we saw was consistent negative cash flow from virtually all of the major players. So what that says is they weren't making money when oil prices were high, so is it a big shock that they're hemorrhaging when oil prices are lower? So oil prices go back up-the bottom line Chris is the only way that they were able to stay looking fairly good back then to somebody, not me, was that people were giving them money. They had infinite access to capital at almost no cost, and so they were spending it. But their income statements and balance sheets look like crap and the investment community I guess was willing to look past that or didn't want to look at it or whatever. ..."
Chris Martenson: ... And still when I look at the operators in those plays they're claiming that they're going to get
twice that, sometimes even more than twice that out of each well. When I've calculated the economics
in that play myself-I got a little spreadsheet, I did my level best. And then I found that you had
calculated what's going on in that play as well. So let's cut right to that. In the Bakken, how many
wells that get drilled out here right now would be economic in today's prices?
Arthur Berman:
Almost none at today's prices. The latest from the North Dakota Department of Mineral Resources
says that wellhead prices are in the 20's so… I published a report not very long ago that said that
1% of the Bakken was breaking even at $30 oil prices. So now we're below that and I don't remember
exactly what percentage of wells but it was something like maybe 5 or 6%. But so right now let's
face it Chris, let's just get it right out there in the open: Everybody is losing their ass at current
oil prices. I don't care what they say. I'm in this business, okay? I just drilled two discoveries
in the last month or two at the bottom of the cycle and we can make a weak profit off of what we
found-first of all they're conventional reservoirs so they didn't cost us $6-$10 million to drill.
And we don't have to drill them horizontally. We don't have to frack them. And we have got no overhead
and we have got no debt; so that puts us in kind of a really different situation for most public
companies.
The truth is that everybody-the best positions in the best plays in the United States, the core
of the core, if you will-nobody can break even at less than about $45 a barrel and that's just reality.
That's not sticking them with their land costs that they sunk and wrote off long ago; that's just
basic operating expenses and severance taxes and stuff that I publish in all of my reports and nobody
ever argues with me about that. They may disagree with a lot of my conclusions or etc. but they never
say "Oh no, your economic assumptions were way off base." No they're not off base.
So take that to the bank and let's just get that whole silly conversation off the table. Everybody
is losing their ass at $20 or $30 oil, everybody. And that includes Saudi Arabia, Kuwait and everybody
in the world is. But certainly US producers, very best of the best, they got to have $45 or $50,
and that's a small subset of their wells in a play. And realistically $60-$65 is bare bones for the
average well positioned company, all of their better wells or current wells in play. That's just
the way it works. And if you hear something else, ask a lot of questions, like: "Tell me what costs
you're excluding," because that's the only way to get there is just be excluding costs.
Chris Martenson:
... When I look at it that way, just sort of high level, I'm looking at 10 billion barrels, what are the reserves? Total reserves? Across all the plays that these operators are in? It can't be a whole heck of a lot more than that, can it?
Arthur Berman:
Proven reserves in the United States as of EIA's latest report a couple weeks ago are 40 billion barrels of oil. Now there is a Proven Undeveloped which is another category that is also proven, which you can add another 40 or 50% but the number you're talking about there is a huge proportion of the total United States' proven reserves, any way you cut it. And so yeah, be scared. That's the message.
.
... ... ...
Arthur Berman:
There is no difference between what EIA is saying and the companies are
saying, okay? So there's two realities here. There is the reality of truth, like go to jail
truth-that's what the companies actually report in their quarterly and annual filings to the
Securities and Exchange Commission. That's where EIA gets its data. That's where EIA's proven
reserves come from; so there's that reality and that truth, and I think it's reasonably close to
the truth. And then there's what companies tell investors, who believe almost anything and don't
understand-again like Yergin's lifting cost. They don't understand, nor should they be required to
understand that he's not actually talking about total cost. He's talking about a subset of costs.
So your question: The proven reserves of the Bakken, according to the latest EIA, which comes from
companies, is 6 billion barrels. The Eagle Ford is a little more than 5, and the Permian is about
700 million. You add up all the rest of them, the Niobrara and the whatever, the Mississippi Lime
and you name it, and the total is about 13.5 billion barrels. That's the truth. And there's
probably an almost – there's a slightly smaller but large proven undeveloped reserve category as
well.
Chris Martenson:
Art I was just reading an investor presentation where one company
claimed to have access to almost that same number just in the Spraberry play.
Arthur Berman:
Well yeah, Pioneer Natural Resources, that truthfully is not a bad company,
if you just look at their financials. But their CEO, Scott Sheffield, has been making just
absolutely preposterous claims for several years now about this Spraberry resource that they have
out in the Permian Basin. The Spraberry was discovered in 1946 for God's sake. In the industry, we
talk about and have talked about the Spraberry as being the largest non-commercial field in the
world. And we've talked about that for 50 years because nobody can figure out how to make money
off of that deal. So Sheffield says that they've got 10 billion barrels in the Spraberry. But
listen to his words; what is he really saying? He's got himself protected. He says that they've
got 10 billion net recoverable, resource potential. That's not a reserve.
Okay so what is a resource? Well a resource-and I'm going to the Society of Petroleum Engineers
here. The definition is a known and yet-to-be-discovered accumulation. It's vapor. We kind of know
it's there but we haven't found it yet. And so that's a resource, and now he's talking about a
resource potential. So it's not even a resource; it's a potential resource. So what he's saying is
that it's some vague number that we kind of think may be out there. And of course a resource has
nothing whatever to do with price. It's absolutely not – it doesn't have anything – it's any
price. It just says it's technically recoverable. So it means nothing, zero, zip. It means
nothing.
So he's covered. I'm about to publish something here maybe today and the sub title of this
section is called "It's not a lie if we tell you it's a lie." That's the name of the game. As long
as the investor presentation or the news release says somewhere that we're using language here
that we would never ever use in an SEC filing because they'd put us in jail. And so you guys need
to know that. In other words, "we're lying," then it's technically not a lie. It's not fraud
because we told you it was a lie.
... ... ...
Chris Martenson:
Well yes with over
200 trillion dollars of debt
outstanding of course you
have to service that debt and
high oil prices just don't
help that. The model I've
been working with for a long
time is there's a price of
oil at which the world
economy chokes and there's a
floor at which the energy
company's don't want to
pursue oil anymore and that
ceiling and that floor have
been coming closer and closer
together. So here we are,
we're clearly at a price
below which oil and natural
gas-in America here, I'm
staring at natural gas at
$1.83 is the quote I've got
on my screen right now,
yikes. That's way below the
all-in costs for most
companies that I've been
looking at.
But let's dial
this back a bit. Globally
we've see this astonishing
pull back in CAPEX spending
by the oil majors, by the
mids, the minors, national
oil companies, all of
them-over a trillion dollars,
by a bunch of estimates. Talk
to us about what's the impact
on future oil supplies with
this just absolute
destruction of CAPEX spending
globally?
Arthur Berman:
Somewhere between
profound and extreme
[laughter]. We've got to be
constantly discovering
several million barrels of
oil per day to make up for
our consumption. It's easy to
get confused and to say well
geez, we've got such an
oversupply right now, we
don't have to worry about
that.
Well we started
this conversation with your
important observation that
we're only talking about a
million or million and a half
barrels a day of oversupply.
So we could go from over
supply to deficit pretty
quickly
because we're
not investing in finding that
additional couple of million
barrels a day that we need to
be discovering. So we're
deferring major, major
investments and we're not
just deferring exploration,
we're deferring development
of proven reserves.
So
just the capital cuts in US
companies have effectively
deferred $20 billion-or maybe
the world, I'm sorry-$20
billion barrels of
development of known proven
reserves.
And so if we get to a
point- and we will, we almost
certainly will-where suddenly
everybody wakes up and says
"Oh my God we don't have
enough oil." We're now half a
million barrels a day low,
and what happens? The price
shoots up, okay? That's the
way commodity markets work.
And everybody says "Whoopee,
let's get back to drilling
big time."
Well there's a
big lag. There's a huge time
lag between when the price
responds and people actually
get around to drilling and
they actually start bringing
the oil onto the market and
it becomes available as
supply, because they've been
asleep at the wheel for how
many months or years. You
don't just turn a valve and
all of a sudden everything is
okay again.
We saw this during the
Libyan Civil War. Saudi
Arabia said "Don't worry
guys, we've got all this
spare capacity. We'll just
turn it on and produce it and
the world won't see a
shortage." It never happened
because they had to actually
drill wells. Their spare
capacity means they have got
to drill wells to produce it
and that takes time. They
have got to drill it, they
have to test it, they have to
build pipelines, and by the
time they actually got any of
that work done, the Libyan
conflict was over. We've now
seen low production because
the Civil War continues, but
that's another story.
There's this
tremendous gap between "okay
we know there's a reserve,"
but what's it take to turn it
into supply? Well it takes
time and it takes money and
it doesn't happen overnight.
Chris Martenson:
Well no and as you
mentioned it hasn't just been
the exploration but the more
pedestrian stuff like infill
drilling-that's pretty much
come to a complete halt in
the North Sea as far as I can
tell. And it looks like
Mexico is not doing a lot
with their investment down in
their plays at this point in
time, and Brazil doesn't even
begin to know how to get
started with their whole
Petrobras scandal and
drilling through those
really, really expensive deep
water finds they've got. Just
don't make any sense at this
price. So when I look across
really where the oil supply
growth is coming from, Art,
I'm pretty much-like it's
really down to the Middle
East and this hope that the
United States could rapidly
ramp up its shale "miracle"
if prices spike back up.
But I'm with you. I think
that as much as people are
focused on the oversupply
right now-and in two or three
years I'll be really
surprised, unless the world
economy crashes and demand
goes down, with that caveat
attached-I think the world
will be equally surprised by
the shortages that are
coming, because you can't
just… Here's what I see: I
look at this chart and I talk
about this in talks and I say
"Hey look from 2005 to 2012
the world spent about three
trillion dollars on upstream
oil and gas exploration and
production and basically got
the same amount of crude and
condensate out of ground for
its trouble," right? We
doubled our investment on a
yearly basis from $300 to
$600 billion and basically
held production flat. I can
only imagine what happens to
production once you take a
trillion in spend off of the
top of that.
Obviously it looks like to
me we're going to be facing a
multi-million barrel a day
shortfall, as long as things
don't fall apart on the world
economy stage.
Arthur Berman:
And I think even if
things do fall apart on the
world economy stage. I
haven't done this, because
the records aren't there, but
you go back to a period like
the Great Depression in the
world and it's not as if
people stopped buying and
selling goods or transporting
themselves or materials. It
was a big – it was a
depression, and there were a
lot of people out of work,
but the world moves along and
consumption of oil and
natural gas isn't going to go
to zero. I think the forecast
that we've just recently seen
from the International Energy
Agency just last week,
they're saying "okay so
demand is probably going to
be down from 1.8 million
barrels a day of growth to
1.2 million barrels a day of
growth," and that's awful.
But wait a minute, 1.2
million barrels a day of
growth is – you're still
growing at a fairly high
rate. So you have got to be
replenishing your supply or
else you reach this zero
point where you're in deep
trouble.
So I'm with you Chris.
Even in my darkest view of
where the economy could go, I
find myself on a very
different page than most of
the forecasters who think
that we're in for a decade or
decades of low oil prices. I
think we're going to be
struggling under the yolk of
much higher oil prices,
probably beginning next year.
I'm not a price forecaster
but it's hard for me to see-I
am a supply/demand kind of
guy and I would be very
surprised if by this time
next year we're not seeing
oil prices moving toward
something like $60 a barrel.
And you look at the forecast-
EIA
says average price in 2016
will be $53 a barrel. They're
not always right and in fact
they're often wrong but
they're not stupid either.
They're doing the best they
can. They have got some good
people there.
So I think
this notion that we're
somehow stuck in $30 or $40
oil forever and ever, it just
doesn't square with the
reality.
Chris Martenson:
Well it would mean
that we're anticipating that
oil is going to stay below
its marginal cost of
production for a very long
time. It's very difficult for
any commodity to stay there
for long but oil in
particular because of its
stock versus flows. Yes
there's 3 billion barrels
above ground right now but
hey, that's only so many days
of consumption if you decided
to stop producing. So yes,
I'm with you. I think that
obviously oil has to go up in
price at some point and
that's even exclusive of any
geopolitical accidents that
might happen in the Middle
East; just simple
supply/demand and all of
that.
If oil does go back up,
last question, you study the
companies that are involved
in this very carefully and I
think a lot of investors,
especially the banks who have
put the lines of credit out
there, are really double
fingers crossed hoping that
the price of oil moves back
up and all these problems
that these companies are
facing economically will sort
of be in the rear view
mirror. Would you share that
view or do you think that
even if oil rebounds there's
a number of companies here
that have gotten themselves
in over their heads with
respect to debt versus
assets?
Arthur Berman:
Well just turn the
clock back to 2012-2013 when
oil prices were sky high,
were $100 a barrel or more,
and what we saw was
consistent negative cash flow
from virtually all of the
major players. So what that
says is they weren't making
money when oil prices were
high, so is it a big shock
that they're hemorrhaging
when oil prices are lower? So
oil prices go back up-the
bottom line Chris is the only
way that they were able to
stay looking fairly good back
then to somebody, not me, was
that people were giving them
money. They had infinite
access to capital at almost
no cost, and so they were
spending it. But their income
statements and balance sheets
look like crap and the
investment community I guess
was willing to look past that
or didn't want to look at it
or whatever.
So rearview mirror? No,
these are companies that are
highly leveraged and unless
and until that changes-maybe
that's one of the positive
outcomes of this. Maybe we
see a turnover of players.
There are better companies
whose balance sheets look
better and they're the ones
who can afford to say "Okay,
we're going to slow down
production right now because
we don't have the same debt
service that the guy next
door does." So my hope is
that like all crises this is
going to flush out a lot of
the bad players, or at least
some of them. But will higher
oil prices solve the problem
and save the day for the
people that hold the debt?
No. It won't hurt, but if
they couldn't make a profit
at higher prices, going back
to higher prices doesn't fix
the problem.
Chris Martenson:
So for many of these
investors and players, in
many cases, the best that
they can hope for if oil
prices rise is a higher
recovery of cents on the
dollar, but they're probably
not going to get back to
whole on this?
Arthur Berman:
No. Unless somebody
is willing to forgive debt.
If we get that bad, then
there's the solution of last
recourse, right?
"... "The world is seeing ever-stronger competition for resources, and some players try to disregard all the rules, Russian President Vladimir Putin has said , adding that potential for conflict is growing worldwide. " ..."
"... If there was any doubt what Putin was thinking, I don't think there should be any more. ..."
"... "…If production falls under consumption (as opposed to demand) then the result is not a shrug and the price goes up. The result is someone doesn't get the oil they ordered…" ..."
If Ron's 2015 prediction is correct ( I think it is, and I never get this kind of stuff wrong
… lol)
These are the types of articles we should be seeing.
"The world is seeing ever-stronger competition for resources, and some players try to disregard
all the rules, Russian President Vladimir Putin has said , adding that potential for conflict
is growing worldwide. "
If there was any doubt what Putin was thinking, I don't think there should be any more.
The new release of BPs data on oil statistics is getting too little focus.
Consumption globally was UP last year. 1.9%. 1.9ish million bpd.
Lotsa talk about global reductions in production . . . sometimes. Other times we hear about
new records from someone.
But pay heed here. THERE IS NO DELAY IN THIS. If production falls under consumption (as opposed
to demand) then the result is not a shrug and the price goes up. The result is someone doesn't
get the oil they ordered.
Cushing has about 100 million barrels of capacity. If there were 1 million bpd shortfall on
US imports, you got basically 3 months before . . . someone . . . some truck driver at a gas station
. . . doesn't get the diesel he ordered. The SPR would be another few months, but tapping it for
such an emergency would pretty much announce to the world . . . there ain't enough.
"…If production falls under consumption (as opposed to demand) then the result is not a shrug
and the price goes up. The result is someone doesn't get the oil they ordered…" ~Watcher
"... In a business as usual demand case (linear trends), Asia needs an additional 11 mb/d of oil imports (crude and products) by 2031. That oil would have to come from following sources ..."
In a business as usual demand case (linear trends), Asia needs an additional 11 mb/d of
oil imports (crude and products) by 2031. That oil would have to come from following sources
8.4 mb/d or 76% would have to come from taking away market share of other importing countries.
That's what the Asian Century will be all about.
"... The STEO has Colombia production holding at around 1 mmbpd for the next two years, but in fact they are declining at about 12% y-o-y ..."
"... Their internal consumption is rising fast as well and at this decline rate they could need to import within three or four years (Figures in chart from Reuters and Energy Ministry, one value for March 2015 looked a bit off so I interpolated). ..."
"... Note also for Norway May figures are down 87,000 bpd and a bigger drop expected for June, mainly for maintenance but overall they are now expected to be in decline again following a small secondary peak until Johan Sverdrup starts up in 2020. ..."
The STEO has Colombia production holding at around 1 mmbpd for the next two years, but in
fact they are declining at about 12% y-o-y (903 kbpd for May). Some might be due to sabotage,
but they have a low R/P ratio (2.2 Gb of reserves so only about 6 years) and rig counts have dropped
by 90% over the year.
I think they were using some EOR methods to boost production as well. Therefore a rapid decline
might not be unexpected. They might have some offshore oil, but only two exploration wells so
far, and both dry, and some shale potential (either way any production is at least 5 years away).
Their internal consumption is rising fast as well and at this decline rate they could need
to import within three or four years (Figures in chart from Reuters and Energy Ministry, one value
for March 2015 looked a bit off so I interpolated).
Note also for Norway May figures are down 87,000 bpd and a bigger drop expected for June,
mainly for maintenance but overall they are now expected to be in decline again following a small
secondary peak until Johan Sverdrup starts up in 2020.
The EIA's
Petroleum Supply Monthly is out with US and individual states production data through April,
2016.
The Petroleum Supply Monthly now agrees almost exactly with the Monthly Energy Review.
The Petroleum Supply Monthly has US production dropping 222,000 barrels per day in April. The
Monthly Energy Review has US production dropping 212,000 bpd in April and 148,000 bpd in May.
Texas production fell 47,000 barrels per day in April. Texas production is down 414,000 barrels
per day since peaking in March 2015.
Ron, are you able to post a graph comparing this peak to the 1970s and 1980s peaks?
I looked at the one on EIA website from 1920 to date, really shows how the shale boom rose
much more steeply, and looks poised to likewise fall much more steeply than in early 1970s or
mid 1980s.
This EIA site, Monthly
Crude Oil and Natural Gas Production , gives us the percentage change for the last month and
the last 12 months for the US and all states and other producing areas. The US was down 2.4%
in April and 7.9% since April of 2015. Texas was down 1.4% in April and down 10% since April
2015. North Dakota was down 6% in April and down 10.6% since April 2015. It looks like April was
just a catch up month for North Dakota.
"... China produced 7.4 percent less domestic crude oil in May compared to a year ago, settling at 16.76 million tonnes. This was due to plans by state-owned oil companies to slash output that is weighed down by languishing oil prices, official data showed. ..."
"... All the Chinese decline is not due to the price drop. China had peaked and would be in decline even if the price had stayed high. The price drop just made it a bit worse. ..."
China produced 7.4 percent less domestic crude oil in May compared to a year ago, settling
at 16.76 million tonnes. This was due to plans by state-owned oil companies to slash output that
is weighed down by languishing oil prices, official data showed.
Time for a special post on rate of decay from peak oil? I am not liking what I am seeing because
it matches quite well my [bad] outlook. Perhaps there is hope that prices will increase to a level
that will reduce the rate of fall. It is going to be very difficult to recover production.
All the Chinese decline is not due to the price drop. China had peaked and would be in decline
even if the price had stayed high. The price drop just made it a bit worse.
"... Higher declines were observed for several of the major non-OPEC countries such as Russia, United States, Canada and Norway in 2014 and 2015. For 2016, the decline is expected to continue increasing and in terms of barrels, this represents a 700 kbbl/d increase in the yearly decline from the mature oil fields. ..."
"... The 2016 report will be more interesting but it might not be issued and/or available for free for some time. For oil they give 168 Gb reserves and 12 Gb production – without any discovery, extension or purchase that would give 7.5% natural decline. ..."
Rystad Energy's latest analysis shows that, for the first time since the 1980s, we will have
two consecutive years of decreased global E&P investments. A lot of the investment cuts have been
related to new projects and shale drilling, but we have also observed lower activity on mature
producing fields. This decreased activity is starting to show on the production side, with the
decline rates starting to increase. Higher declines were observed for several of the major
non-OPEC countries such as Russia, United States, Canada and Norway in 2014 and 2015. For 2016,
the decline is expected to continue increasing and in terms of barrels, this represents a 700
kbbl/d increase in the yearly decline from the mature oil fields.
The 2016 report will be more interesting but it might not be issued and/or available for
free for some time. For oil they give 168 Gb reserves and 12 Gb production – without any discovery,
extension or purchase that would give 7.5% natural decline. I think that might be what's
coming in 2018 at current discovery and development levels (only covering 35% of production though,
NOCs should still be holding up better overall).
"... Imports are definitely rising. The three month NET imports of crude oil and petroleum products bottomed out last November at 4,661,000 barrels per day and last week stood at 5,890,000 bpd for an increase of 1,229,000 bpd. ..."
"... The fact that imports are rising even faster than production is declining is a sure sign that production is actually falling and not just an anomaly of the EIA's measuring algorithm. This decline is real people. ..."
Imports are definitely rising. The three month NET imports of crude oil and petroleum products
bottomed out last November at 4,661,000 barrels per day and last week stood at 5,890,000 bpd for
an increase of 1,229,000 bpd.
The fact that imports are rising even faster than production is declining is a sure sign that
production is actually falling and not just an anomaly of the EIA's measuring algorithm. This
decline is real people.
"... Looking at the drop in iranian export of 20% you would have to assume that the story is similar….which makes their approach/policy even more idiotic ..."
"... Ron, the Monthly energy review also gave an estimate for May natural gas plant liquids of 3,256,000 bpd. A decline of 258,000 bpd (7.3%) from April's estimate of 3,514,000 bpd. So, thats a decline of 406,000 bpd crude and ngpl. ..."
"... It is starting to look worrisome. US has lost almost 1 mbpd from peak and almost 0.5 mbpd in the last 5 months. It is looking as if US loses might constitute the bulk of the world oil production loses in 2016. ..."
The EIA's Monthly
Energy Review is out with US production numbers for May 2016. US production down 148,000 barrels
per day. US Lower 48 down 161,000 bpd, Alaska up 13,000 bpd.
Ron, the Monthly energy review also gave an estimate for May natural gas plant liquids of
3,256,000 bpd. A decline of 258,000 bpd (7.3%) from April's estimate of 3,514,000 bpd. So, thats
a decline of 406,000 bpd crude and ngpl.
Even if it is an estimate, thats a huge decline.
It is starting to look worrisome. US has lost almost 1 mbpd from peak and almost 0.5 mbpd
in the last 5 months. It is looking as if US loses might constitute the bulk of the world oil
production loses in 2016.
"... This new drop in oil price has to do with extreme financial instability and not with supply and demand. Everybody is pumping with full force regardless of price for various reasons. Price does not matter at this point. When Total went to buy Iranian oil it brought with them Airbus people to pay for the oil. ..."
"... you have to keep dancing even if you don't like the music. Look at the drop in US production in the last 1 year and that is still with 400-600 rigs running in the last year with all extra printed money (aka "new investors") being available to them. It's very bleak. ..."
"... At some point there can be shortages. That would be a game changer. Before that this is just kicking the can down the road. ..."
"... In a short term shortages will be avoided by removing credit to certain countries and certain segments of population in synchronized effort by major Central Banks so it will appear that there are no shortages. ..."
"... There is no shortage of oil in Greece but there is a shortage of credit. But if Greece wants independent policy they get threatened with a shutting down of their banking system. ..."
"... The Brexit marks the end of the ideological domination of this neoliberal economy. How long the disintegration process will last it is very hard to predict but it could be very short like in the case of Soviet system. ..."
Is there already a reaction in the oil countries, this should demotivate companies to pick
up drilling again, or creditors to hand out new billions to be buried in the rocks?
This new drop in oil price has to do with extreme financial instability and not with supply
and demand. Everybody is pumping with full force regardless of price for various reasons. Price
does not matter at this point. When Total went to buy Iranian oil it brought with them Airbus
people to pay for the oil.
NA producers are taking paper for oil because there is no other option and with negative interest
rates approaching it is a losing option even if the oil goes somehow to unimaginable price at
this point of $70-80. But if you stop drilling the game is over. So you have to keep dancing
even if you don't like the music. Look at the drop in US production in the last 1 year and that
is still with 400-600 rigs running in the last year with all extra printed money (aka "new investors")
being available to them. It's very bleak.
At some point there can be shortages. That would be a game changer. Before that this is
just kicking the can down the road.
Ves, 06/27/2016 at 10:14 pm
likbez,
In a short term shortages will be avoided by removing credit to certain countries and certain
segments of population in synchronized effort by major Central Banks so it will appear that there
are no shortages. That is why you see all the effort in creating big currency blocks that
could control emission of the currency. One of the reasons is to control oil consumption by the
center through credit emission. Then you depend on the center for credit emission.
There is no shortage of oil in Greece but there is a shortage of credit. But if Greece
wants independent policy they get threatened with a shutting down of their banking system.
So they are allocated certain amount of credit and that is their available oil foot print.
But it is the same in so called "rich" G7 countries where large segments of population live below
poverty line and that is because they don't have access to credit. That's why it was so easy to
pull Brexit stunt because elite already had very fertile ground to work with. Majority felt less
well off then 20 years ago. That is the main reason; all other reasons like EU bureaucracy, refugees
are just nonsense. Bureaucracy, refugees of course exist but these are just borrowed reasons that
they have been told to adopt on TV to frame the debate.
likbez, 06/28/2016 at 7:37 pm
Ves,
Allocation of credit works while there are growing economies. In this case this is a regular neoliberal
redistribution of wealth by other name. So countries with "exorbitant privilege" can just print
money while everyone else are the second class citizens who were robbed at daylight. Debt slaves
by other name.
But after conversion of most countries into debt slaves, in order for the system to work you need
positive GDP growth. Otherwise there is nothing to rob. Even if the GDP "growth" is fake and is
just an accounting trick based of underestimating of inflation or including in the total vices
like prostitution and gambling, the system can work. Get negative GDP for a substantial period
of time (secular negative growth) and all bets are off. Capitalism was not designed for such an
environment, and neoliberalism, which is just a modern flavor of corporatism, can't work either.
In shrinking economies allocation of the credit is like pushing on the string. You just can't
pay credit lines back in shrinking economies. That means financial collapse. Now what ?
Barter?
Ves, 06/28/2016 at 10:31 pm
" That means financial collapse.Now what ? Barter?"
Well, it looks to me we are watching collapse "LIVE". Look, the magnitude of Brexit is hardly
even understood or no-one seems comprehend the consequences. This is on the scale of fall of Berlin
wall in 1989 and shortly after the dissolution of the USSR in 1991.
The Brexit marks the end of the ideological domination of this neoliberal economy. How
long the disintegration process will last it is very hard to predict but it could be very short
like in the case of Soviet system.
Brexit is more response and break with Wall Street then EU in order to save what can be saved
and that is mainly finance of the City of London for probable Yuan trade in near future. So this
pretty much tells you where this is all going in terms of global trade.
In terms of debt that is straightforward "Debt that cannot be paid will not be paid".
In terms of trade it will be much smaller world for trade then in the past and with new sets
of rules.
I don't think it will be barter but it will start with clean slate and with a new currency
in the indebted countries.
"... It is also interesting to see how year over year % declines are leading the actual production data and indicate that the drop will march on much further. Even if drilling resumes, natgas production will not rise before year end due to the drilling time lag. ..."
Texas RRC data for April 2016 are out. As others will probably elaborate more on the data, I cannot
resist to show the interesting situation of Texan natgas production (see below chart), which is
in a stage of freefall and in complete contradiction to above scenarios for US natgas production.
It is also interesting to see how year over year % declines are leading the actual production
data and indicate that the drop will march on much further. Even if drilling resumes, natgas production
will not rise before year end due to the drilling time lag.
In the meantime, natgas prices continue to soar, smashing through USD 2.70. A heat wave in
the SouthWest helps as power burn will reach very likely 5.5 bcf/d over the next few days. Natgas
consumption soars despite – and in my view because of – high solar capacity in California. The
high solar capacity does not reduce natgas demand yet drives it to record highs.
"... Some commentators have asserted that the 2008 financial crises was due to high fuel costs, and not necessarily due to the cascading collapse of Wall Street financial legerdemain (although this undoubtedly helped fan the flames). ..."
"... Social Security is a big part of the "unfunded liabilities". That's a transfer. It's not available to the working person who gets it deducted from their paycheck, but it's available to the retiree who gets it. And, the retiree is more likely to spend it. ..."
Thank you for your excellent reply, and as Cracker says the extensive work you've done provide
a constructive counter to the less optimistic among us, of which I am one.
I am with Cracker in that I think your charts are chronically optimistically lopsided, but
held my opinion on this for a long time until now.
The resources amounting to URR 8-9.2GB of oil as you surmise may indeed be there, however I
remain highly skeptical of this reported volume for a variety of reasons.
At the end of the day, whether the URR of 8-9.2GB is there or not, I am of the opinion that
only a fraction of it will ever be recovered and the true amount never realized. The reason is
that the condition of the world economy won't support anything higher than $50 based on what I've
seen this year. To wit;
1. Student and consumer debt is at an all-time high, compounded with the problem that most
highly paid jobs are disappearing for the middle class . The June 2016 jobs report was pretty
lackluster, with a +38,000 nonfarm payroll jobs increase reported. It is to be noted that the
civilian long term unemployed has changed little at about 7.4 million.
2. Most driving is of itself for non-productive activities, and includes travel to jobs
that are generally non-productive. If fuel gets more expensive, I expect that much of this
non-essential travel will drop off. Some commentators have asserted that the 2008 financial
crises was due to high fuel costs, and not necessarily due to the cascading collapse of Wall Street
financial legerdemain (although this undoubtedly helped fan the flames).
3. The FED has pumped over $4 trillion of cash into the US economy, but the net benefit
is estimated to be less than $1 trillion to GDP. It is unknown how the FED is going to unload
this pure dreck on its books, and I suspect that it will not comport with higher oil prices in
the cogs and wheels of the economy;
4. US debt is at a fantastic level of $19.3 trillion, with another $67 trillion of unfunded
liabilities on the books. It's hard to see how this debt will be reduced to manageable levels
with higher oil prices.
5. An Internet 2.0, or some other economically transformative technology, doesn't appear
to be on the horizon. Currently, all we know how to do is burn fuel, heat a working fluid,
and use it to drive a piston or turbine. The alternatives, such as solar and wind, will only come
on as oil heads into it's retirement party.
6. Related to point #1; if the current trend to transfer jobs over to automation continues,
it's hard to see how there will be people driving to their (former) employment, and for that matter
afford things that are (of course) produced by petroleum;
7. For what it's worth, I think that the 2008 crises hasn't gone away despite massive money
printing efforts. They're trying to keep demand artificially supported with easy money and
the incurring of unrepayable debt, which is terrifyingly criminal as it is simply passed unto
the very young and the unborn. How can we expect them to pay our debts and then go out and buy
fuel, when their jobs have been outsourced and/or automated? The whole thing has gone far over
the top and is way beyond the point of no return. As mentioned previously, I see no significant
industrial (i.e inventive) development or for that matter, improvements in demographics that will
turn this around.
So at the end of all this, I think that baring hyperinflation the prospects for oil over $50-$55
for the next couple of years is looking fairly dim. Hence, that claimed 8-9.2 GB UR is not going
to be realized in real production.
There are many that are very pessimistic about the economy. Unfunded liabilities are not the
same as debt, so I don't count those.
The retirement age can be raised and eventually the US will follow the rest of the advanced
economies and reform the health care system to control costs.
(First we need to exhaust all other possibilities, before doing the right thing.)
Note that my scenario has oil prices rising very gradually. Also oil prices were over $100/b
for 3 years with the World economy continuing to grow.
All that money printing has had very little positive or negative effect, mostly the velocity
of money has slowed because most of that money is just sitting in bank accounts. Inflation is
not high, if it were the Fed would simply reduce the money supply.
A debt of $19 trillion for an economy with an income of $18.2 trillion is not really a problem.
A debt free consumer with a good credit rating and a 20% down payment in savings can typically
borrow up to 3 times their income for a mortgage. The US government debt is at 104% based on fred
data.
According to BIS for the US total non-financial sector debt is about 250% of GDP.
For all counties that report to the Bank for International Settlements (BIS) the total non-financial
sector debt to GDP was 235% in the fourth quarter of 2015 (most recent data point) at market weighted
exchange rates. (220% using PPP weighted exchange rates.) See
"Unfunded liabilities are not the same as debt, so I don't count those."
I'd like to point out that both of these things act as a dead weight on a chain that must be
carried by those who are working and generating income, as we go forward in time.
And income, or savings derived from it, must then be used to service the debt and pay for the
liabilities/entitlements.
This is money that then cannot go towards buying fuel, or funding innovation and transition- things
like EV, solar, etc.
A dead weight is a dead weight.
And going into a crisis you have a better chance of surviving it if you are lean and mean, not
if you have this ugly balance sheet. It doesn't help that most of the worlds countries are in
poor shape in this regard as well.
I have to agree with Mike Sutherlands view that these factors could very well decrease the URR
significantly.
On the other hand, the other 7 Billion people of the world will keep increasing their demand
and, along with depletion, this will leave less cheap oil for the USA to import. This will tend
to raise the price here.
These are conflicting forces, and I think we will end up with a scenario with both lower URR
of these domestic sources, and yet also higher prices. Good for solar/wind I suppose- if we can
afford it.
Very tough on the average family and local businesses.
Social Security is a big part of the "unfunded liabilities". That's a transfer. It's not available
to the working person who gets it deducted from their paycheck, but it's available to the retiree
who gets it. And, the retiree is more likely to spend it.
So, SS doesn't slow down the economy, it helps it.
Transferring money from a working family to a retired one doesn't help the economy, it helps the
elderly person, and hurts the working family (in the here and now).
Its overall pretty neutral, but it surely takes resources that could go towards energy infrastructure
and development and shifts it towards the pharma industry, for example.
I'm not trying to make a value judgement here, just pointing out that in the scope of our prior
discussion, this is fairly neutral and doesn't change the conclusions.
Currently, all we know how to do is burn fuel, heat a working fluid, and use it to drive a
piston or turbine. The alternatives, such as solar and wind, will only come on as oil heads into
it's retirement party.
Well, no, we know a lot more than that. We have superior alternatives for most of the uses
for oil, and adequate ones for the rest.
The single biggest use is personal transportation, and EVs will work fine for that. We don't
need turbines for that, electric motors will do just fine.
And…we don't need wind or solar to get rid off oil. Not at the moment. All we need is electricity,
and we have plenty of that, right now.
My humble apologies, Dennis, just too funny, and appropriate. I do appreciate your charts,
but I wish you would occasionally plug is some other values to provide a contrast to your ever-optimistic
assumptions. My reaction to your chart was the same as Ron's.
Make your chart reflect lower and fluctuating oil prices, instead of coynecopian, steady-state
high prices and it might make more sense. Add a factor for debt restraining new wells at higher
oil prices (see SS's comment about $75 without debt below). Your assumptions just seem too optimistic
to be realistic. Maybe I just underestimate BAU's ability to fund stupidity and you don't:-)
It will be interesting to see what really happens.
Thanks to all for your comments. Always educational.
"... The production drop is 100% DEPLETION of existing wells. This is a critical distinction because if wells were shut, they could be turned back on. If wells deplete, generally, new ones must be drilled to replacement them, ..."
"... The reality is that the only way this production comes back (or stops decreasing) is the application of massive amounts of new capital, the redeployment of tens of thousands of service workers laid off during the crash, and billions of dollars of equipment. This is even more true internationally. As large mature projects deplete, of which there are thousands in decline, new large projects must be developed to replace them. ..."
"... The typical approach would be to shut in low rate high water cut producers, and any other wells that have been experiencing high costs. When prices rise and wells have been shut in for months they will have built up some pressure. And some of them will come in at 100 % water due to self injection. It can be a real crap shoot. ..."
Just a note to correct a popular misconception; production DID NOT drop in Bakken due to SHUT
IN wells. The production drop is 100% DEPLETION of existing wells. This is a critical distinction
because if wells were shut, they could be turned back on. If wells deplete, generally, new ones
must be drilled to replacement them, implying radically different time, service intensity and
capital requirements. The popular press is ate up with the concept that when prices rise, all
this production will magically reappear, once again swamping the market with excess supplies.
The reality is that the only way this production comes back (or stops decreasing) is the application
of massive amounts of new capital, the redeployment of tens of thousands of service workers laid
off during the crash, and billions of dollars of equipment. This is even more true internationally.
As large mature projects deplete, of which there are thousands in decline, new large projects
must be developed to replace them.
"The production drop is 100% DEPLETION of existing wells. This is a critical distinction because
if wells were shut, they could be turned back on."
Brad,
Yes. So essentially oil price does not matter at this point at the end of the game for these marginal
and high depletion plays. Price could go even higher but drop in production will just continue.
I think it's a mix. I've been in these circumstances before. The typical approach would be to
shut in low rate high water cut producers, and any other wells that have been experiencing high
costs. When prices rise and wells have been shut in for months they will have built up some pressure.
And some of them will come in at 100 % water due to self injection. It can be a real crap shoot.
"... Yes it is the normal cycle pattern, but going into Q3, we have been seeing draws over the last few weeks, and world S/D has been close to being balanced. ..."
"... It is normal for Q2 to have storage builds, and this year the builds were on the low side. ..."
"... The market is not expecting to see higher demand than supply, and the next step in prices may be soon than expected. ..."
I know that this presentation is about production, but on the other side
of production, that is demand, according to the IEA demand tables, going
from Q2 to Q3 increases demand by about 1.5 million barrels a day.
There is also a additional small increase going from Q3 to Q4.
With supply decreasing and demand increasing looks like oil prices may
be headed higher over the next six months.
The Alberta fires along with Nigeras problems came at the right time
yo tighten things up a bit.
Yes it is the normal cycle pattern, but going into Q3, we have been
seeing draws over the last few weeks, and world S/D has been close to being
balanced.
It is normal for Q2 to have storage builds, and this year the builds
were on the low side.
The market is not expecting to see higher demand than supply, and
the next step in prices may be soon than expected.
"... Global demand is indeed strong. All key forecasting agencies are still projecting annual demand growth of 1.2mb/d, but it may surprise on the upside (~1.4mb/d). But supply/demand rebalancing is mainly due to declining non-OPEC output and supply outages. ..."
Global demand is indeed strong. All key forecasting agencies are still projecting annual demand
growth of 1.2mb/d, but it may surprise on the upside (~1.4mb/d).
But supply/demand rebalancing is mainly due to declining non-OPEC output and supply outages.
Quarterly global oil demand (mb/d)
source: IEA Oil Market Report, May 2016
It appears that world oil exports has increased very little, if any, since 2005.
Notable quotes:
"... I can only guess that oil production in importing nations, which are generally capitalist countries, is more sensitive to oil price changes than exporters (whose systems of govt allows for maintaining production regardless of price). ..."
"... The largest increase in production, by far, came from the US which is an importing nation. And huge declines came from Norway, the UK and Mexico, all exporting nations. That is largely why we see production increasing while exports stayed flat. ..."
"... Exporting nations, the UK and Indonesia, became net importers during that period. There may have been others, I haven't looked that closely. ..."
"... I find Mexico to be an interesting case. I read somewhere that 30% of federal tax revenue is received from taxation of Pemex. Mexico exports are down 21% in 2015 compared to 2014. I'm not sure what is going to happen to Mexico when it becomes a net oil importer. ..."
This mostly means that importers have simply increased production right?
Gains in U.S. and Canadian production reduced imports, and allowed countries like China and
India to import more even though net export availability remained flat.
I can only guess that oil production in importing nations, which are generally capitalist
countries, is more sensitive to oil price changes than exporters (whose systems of govt allows
for maintaining production regardless of price).
The next 12 months may see increasing prices even if net exports do not decline simply due
to increased export demand from countries like the U.S. that flip from a multi-year decline in
import demand.
Yes, exactly. The largest increase in production, by far, came from the US which is an importing
nation. And huge declines came from Norway, the UK and Mexico, all exporting nations. That is
largely why we see production increasing while exports stayed flat.
Exporting nations, the UK and Indonesia, became net importers during that period. There
may have been others, I haven't looked that closely.
Hi Ron, according to the Energy Export Data Browser UK is an importer.
I find Mexico to be an interesting case. I read somewhere that 30% of federal tax revenue
is received from taxation of Pemex. Mexico exports are down 21% in 2015 compared to 2014. I'm
not sure what is going to happen to Mexico when it becomes a net oil importer. Whenever it
is it won't be good. Perhaps Mexico will join their neighbors to the south (El Salvador, Guatemala
and Honduras) in being failed states.
"... Worldwide investment in the development of oil and gas resources from 2015 to 2020 will be 22 percent, or $740 billion, lower than anticipated before prices plunged in 2014, with the deepest cuts in the U.S., Wood Mackenzie said in a statement Wednesday. A further $300 billion will be eliminated from exploration spending. Global production this year will be 3 percent lower than previously forecast, the consultant said. ..."
The oil and gas industry will cut $1 trillion from planned spending on exploration and development
because of the slump in prices, leading to slower growth in production, according to consultant Wood
Mackenzie Ltd.
Worldwide investment in the development of oil and gas resources from 2015 to 2020 will be 22 percent,
or $740 billion, lower than anticipated before prices plunged in 2014, with the deepest cuts in the
U.S., Wood Mackenzie said in a statement Wednesday. A further $300 billion will be eliminated from
exploration spending. Global production this year will be 3 percent lower than previously forecast,
the consultant said.
"... According to data from National Bureau of Statistics released today, oil output in May was down 7.3% from a year ago to 16.87 million metric tons (3.97 m/d, using 7.3 ton/barrel conversion factor). Daily output declined 1.6% from April and 10% from June 2015 peak of 4.41 mb/d. ..."
According to data from National Bureau of Statistics released today, oil output in May was down
7.3% from a year ago to 16.87 million metric tons (3.97 m/d, using 7.3 ton/barrel conversion factor).
Daily output declined 1.6% from April and 10% from June 2015 peak of 4.41 mb/d.
I think the decline is a result of both ageing onshore oil fields and reduced infill drilling
due to lower upstream investments.
China oil production (kb/d) and year-on-year change (%)
source: National Bureau of Statistics
The best thing here is:
Capex is slashed worldwide, hidden capex from 3rd world states I think even more since they are
simply broke with the current oil prices.
And the production continues to increase – why this Capex frenzy the last years, if you can
increase production simply on no money spending, rust and decline being no problem anymore.
"... The major factor pushing prices higher last week was the unplanned production outages in Alberta, Nigeria, and Venezuela. Although the fires are now well past the Alberta tar sands, it will be several weeks before the 1 million b/d of production that had to be shut down during the firestorms can return fully to production. In the meantime, the Alberta outage and the one in Nigeria have likely removed much or all of the production surplus that has overhung the markets and for now, there may be a rough balance of supply and demand. ..."
"... In recent years, these companies have seen a string of massive cost overruns such as in the Caspian and Bering Seas, and disasters such is Deepwater Horizon in the Gulf of Mexico. Last year the oil industry discovered only 12 billion barrels of new reserves, about a third of annual global consumption. ..."
"... Nearly all of the major oil companies reduced capital spending to less than half of what it as been in recent years. With decreasing oil production, supply is likely to start falling short of demand later this year, if it has not already, due to the various outages. ..."
Oil prices hovered just below the $50 level last week with Brent closing just above $50 on
Thursday before settling at $49.46 on Friday. As has been the case lately, there were numerous
factors pressuring oil prices one way or another. The week opened with much enthusiasm that OPEC
would agree to a production freeze, but this went away when the OPEC meeting failed to take any
action. The major factor pushing prices higher last week was the unplanned production outages
in Alberta, Nigeria, and Venezuela. Although the fires are now well past the Alberta tar sands,
it will be several weeks before the 1 million b/d of production that had to be shut down during
the firestorms can return fully to production. In the meantime, the Alberta outage and the one in
Nigeria have likely removed much or all of the production surplus that has overhung the markets
and for now, there may be a rough balance of supply and demand.
While production in Alberta is returning to normal, the political/economic situations in Nigeria
and Venezuela continue to get worse with the likelihood that both countries will soon see a
significant drop in oil production – possibly enough to offset surplus production elsewhere.
There is no end in sight to the problems in either of these countries, and their situations
seemed destined to get worse before they get better.
The US crude inventory saw a small drawdown last week, which is not surprising considering the
outages in Alberta over the past month. The EIA continues to estimate that US production is still
dropping. However, the US oil rig count climbed by nine units last week as drillers responded to
oil prices approaching $50 a barrel coupled with a buyers' market for oil production services and
oilfield workers. The meager increase in US employment last week has some worried about the
outlook for US economic growth in the near future. At a minimum, the widely expected interest
rate increase by the Federal Reserve is likely to go on hold for a while.
The problems of the oil industry continue, however, with US bank earnings down 2 percent in the
first quarter largely due to delinquent loans to the oil industry where bankruptcies continue to
be announced. Observers are starting to talk about the inevitable decline of the large
international oil companies. These companies are finding it increasingly difficult to find new
reserves to exploit and those that are available are mostly in deepwater projects where the costs
of extraction are well above the current selling price of oil. In recent years, these
companies have seen a string of massive cost overruns such as in the Caspian and Bering Seas, and
disasters such is Deepwater Horizon in the Gulf of Mexico. Last year the oil industry discovered
only 12 billion barrels of new reserves, about a third of annual global consumption.
Nearly all of the major oil companies reduced capital spending to less than half of what it
as been in recent years. With decreasing oil production, supply is likely to start falling short
of demand later this year, if it has not already, due to the various outages. Global crude
reserves are still at record levels, so daily shortages of even a million b/d or two are unlikely
to send prices into three figures right away.
By 2020, give or take a bit, prices are likely to start climbing into new territory as
shortages become larger, and rationing-by-price again comes into effect.
IEA is probably OK for use as historical data source, but any use of their forecasts is a sign
of gross negligence, based on their track record. Their 'waterfall" style forecasts are just
propaganda.
My feeling is that 80 dollars bbl are needs to increase shale oil production. Before that it will might be
continue to decline. Saudis are a spent bullet. So chances of them coming into play again with more oil to
suppress oil price further are close to zero.
If so, the key question we need to answer is when oil will hit this magic price point.
U.S. crude oil production averaged 9.4 million barrels per day (b/d) in 2015. Production is
forecast to average 8.6 million b/d in 2016 and 8.2 million b/d in 2017, both unchanged from last
month's STEO.
EIA estimates that crude oil production for May 2016 averaged 8.7 million b/d,
which is more than 0.2 million b/d below the April 2016 level, and approximately 1 million b/d
below the 9.7 million b/d level reached in April 2015.
Dennis – you asked at some previous post about discovered, undeveloped reserves. Overall I'd
go with Jean Laherrere, he knows more about these things than most and definitely understands
the politics behind some government forecasts, looks at things globally and probably still has
access to some of the more confidential figures. My less informed view is as follows.
So far about 1350 billion barrels C&C have been produced. Current production is about 28 billion
per year excluding extra heavy oil. Recently Rystad indicated mature filed decline rates at 5%
per year, if that held through the complete depletion (unlikely but all I have to go on) that
would mean another 540 billion, at 3% average decline it would be 900 billion. For 2200 billion
total that could mean (say) another 100 billion to find, 50 billion which is developed but offline
(in Libya, neutral zone, Abqaiq maybe, Syria etc.) and 150 billion discovered but undeveloped.
If there is that amount (or more for higher URR or higher overall decline rates, maybe up to 900
billion by your figures) it must be in OPEC Middle East countries or Russia. A lot of the older
undeveloped, mostly heavy oil, reserves elsewhere have been developed recently (e.g. in the North
Sea) in response to high oil prices. Similarly deep sea in GoM and offshore Africa and Brazil
(see the paper above – there isn't much left in the GoM and discoveries have dropped to near zero
per year). The larger reserves that I know about are complicated and expensive to develop (e.g.
Brazil pre salt, Kazakhstan high sulphur) or have some political issues (offshore Nigeria). I
don't think these would total more than 50 billion though.
If the Middle East OPEC countries have significant known undeveloped reserves they don't act
like it – i.e. why develop tight gas fields, or explore deep sea pre-salt, or double or more the
number of exploration and in fill wells, or get IOCs to come in and redeveloped existing fields.
Somewhere I read that Saudi assume 75% recovery and develop their fields to deplete 2% of the
field per year during plateau phase. That sounds about right for a URR of 250 billion (i.e. assuming
they report total recoverable resources, not what is left) but would mean pretty much everything
they have is on production with nothing much known but undeveloped. 75% may be high but I think
probably achievable for huge onshore fields (not so much for heavy oil offshore like Safinayah;
Abqaiq, which may be exhausted by now; or the neutral zone, which sounds like it needs steam flood
to recover much more). To me Saudi's recent posturing is about setting up excuses for post peak
declines, without having to admit they don't have as much oil as they've stated. Also Kuwait's
initiative as described in terms of new exploration and debottlenecking existing facilities, not
developing known fields.
IHS, Rystad and Wood Mackenzie probably know more, but their past performance at predicting
anything makes you wonder (Rystad seems better than the others though).
For extra heavy oil I think the recovery factors are probably overstated and based on the early,
and easiest to exploit developments. However this probably doesn't make much difference as the
limiting factor is the surface production facilities, and will be for the next few decades. CAPP
predict Canadian oil sands rising to about 3 to 4 mmbpd by 2030, but even this presupposes another
two pipelines approved and built and a sustained, high oil price (i.e. above $100, and probably
more if natural gas prices start to rise at the same time).
In Venezuela exploiting the extra heavy oil would be difficult even for a stable society. It
needs a large amount of oil wells in areas without that great infrastructure (I think around 5
to 10,000 per mmbpd), additional pipelines (I guess piggybacked so the Naphtha diluent can be
recycled), and a bunch of new upgraders – one for every new 200 to 300,000 bpd. The existing upgraders
aren't in great shape, a lot of the skilled workforce from these actually left for USA when the
industry was nationalised. There is a significant shrinkage (I think 15 to 30%) in the upgraders
as they take out carbon to make the oil lighter (compared to hydrocrackers used in places in Canada
which add hydrogen from natural gas). They produce highly toxic waste streams of coke, sulphur
and heavy metals, which need to be safely stored for ever after (I wonder how that's going there
at the moment). The three phases of the Carabobo development, which was supposed to get to 1.2
mmbpd by 2018 don't seem to be going anywhere – oil is still being trucked I think, the new upgraders
are on permanent hold, the well services companies are pulling out, and the government can't afford
to buy the diluent naphtha. That is a recipe for prolonged decline, not growth to 8 mmbpd, which
was once proposed.
Ecuador has ultra heavy oil, discovered and undeveloped, of about 6 billion – but no-one has
figured out how to develop it commercially. The upgrader required has really been proved technically.
They were working with Ivanhoe on something that looked to me a bit like a CTL system, but Ivanhoe
went bust so I don't think this is going anywhere. Overall anything more than about 5 or 6 mmbpd
from extra heavy sources would be stretch over the next 20 to 30 years.
The recent UK production benefited mostly from Golden Eagle ramp up through 2015. Buzzard is by
far the largest single producer at about 180,000 bpd. It is due for an extended turn around this
year. It also more than doubled it's water cut over the last six months, so could be coming off
plateau quickly (ramp up was through 2007). It will be a contest between it's decline against
new production from Clair Ridge and Glen Lyon and 3 or 4 smaller projects over the next 2 years
(about 300,000 bpd combined plateaus).
The government prediction is for a gentle decline of about 15% overall to 2021, but if a lot
of the smaller producers get shut down in the near term it might be a bit steeper.
• Decade-long improvement in fuel efficiency in U.S. seen ending
• Light trucks, vans, SUVs account for 60% of U.S. vehicle sales
Last year, SUVs outsold any other type of passenger vehicle in Europe
for the first time, according to auto industry consultants JATO Dynamics.
The trend has continued in 2016, with demand for SUVs … accounting for a
quarter of sales in the biggest European countries.
Europe is a mirror of what's happening across the world. From China to the
U.S., drivers are buying bigger vehicles, while sales of fuel-efficient
hybrids struggle.
[In the U.S.] the average car sold in April achieved a fuel economy of
25.2 miles per gallon, down from a peak of 25.8 set in August 2014, just
before oil prices crashed, according to data from the Transportation Research
Institute at the University of Michigan. At current trends, this year will
mark the first drop in average U.S. fuel economy since at least 2007, the
data show.
"Fuel-economy improvement is really flatlining," said Sam Ori, executive
director of theEnergy Policy Institute at the University of Chicago. "The
gains completely stopped right at the same time that oil prices started
to decline."
Today in the U.S., light trucks, vans and SUVs account for 60 percent of
total vehicle sales - a level only reached briefly in 2005, when Brent crude,
the global oil benchmark, averaged $55 a barrel. It's now around $50. The
International Energy Agency said in May that less-efficient vehicles, including
four-wheel drives, "remain very much in vogue, a consequence of persistently
lower retail pump prices."
In 2008, when oil prices averaged $100 a barrel, the share of gas guzzlers
in U.S. total vehicles sales dropped at one point to just 43 percent.
With larger vehicles hitting the roads and Americans driving longer distances
as the economy recovers, U.S. gasoline consumption is set to rise to a record
in 2016, according to the Energy Information Administration. U.S. gasoline
demand will average 9.3 million barrels a day this year, surpassing the
peak set in 2007, the EIA said in its most recent monthly report.
The EIA forecast U.S. drivers will enjoy the cheapest gasoline this driving
season in 12 years.
In China, the world's second-biggest oil consumer, drivers are also opting
for larger vehicles as never before. While cheaper gasoline and diesel helps,
analysts said it's higher incomes - and a desire to impress relatives and
friends - that's driving the purchases. According to official data, vehicles
such as light trucks and SUVs accounted for almost 35 percent of total Chinese
passenger sales in April, up from 10 percent in 2010 and less than 5 percent
a decade ago.
You are right AlexS, Americans need to be more frugal and forward thinking.
My town wants to allow a gas station to be put in near the highway, there
is a gas station a short drive away. Not only will the gas station be mere
feet from a Category 1 trout stream, it will be almost at the level of the
stream. The three large tanks will be actually buried in the aquifer for
the town and have to be held down from floating. Everything runs off wells
here, so contamination will effect much of the town and wreck the aquifer.
To top it all off, the land is now a ride-sharing lot, something that
reduces fuel use and pollution as well as reduces the wear and tear on cars
(slowing down the need for vehicle replacement and all the energy/pollution
that involves).
There are gas stations just a few miles in either direction along the
highway.
"... But… the decline has only just begun. The price collapse caused the plateau in world oil production that begun about March 2015. However, the decline did not actually begin until January 2016. The dramatic rise in production from Iran has kept the decline from becoming obvious to everyone. However when the May production numbers come in, I think it will then become obvious to everyone. ..."
In conclusion, In spite of the recent increase in Russian production, as well as the slight increase
from the North Sea, and in spite of the dramatic production increase from Iran due to the lifting
of sanctions, world crude oil production is in decline. And while it is true that most of this decline
is due to the price crash, it remains to be seen just how much production will recover when the price
returns to… to… wherever it returns to before it stops.
But… the decline has only just begun. The price collapse caused the plateau in world oil production
that begun about March 2015. However, the decline did not actually begin until January 2016. The
dramatic rise in production from Iran has kept the decline from becoming obvious to everyone. However
when the May production numbers come in, I think it will then become obvious to everyone.
"... It is hard to pinpoint these decline rates exactly since each field is unique unto itself. What the industry generally believes is that offshore production declines at twice the rateof conventional onshore. ..."
"... That would put the offshore decline rate somewhere between 15-20% per year. These higher decline rates mean that the sudden halt to offshore development will result in BIG offshore production declines. ..."
"... Off a 22 million barrel per day production base-15-20%= 3.3-4.4 million barrels a day-gone. That is substantially more than the spare capacity of OPEC right now. That means that in just one year, the world oil supply could be put into deep undersupply (pardon the pun) as offshore exploration and development stagnate. ..."
"Offshore production has lower decline rates than shale does, but considerably higher decline
rates than onshore vertical developments.
It is hard to pinpoint these decline rates exactly since each field is unique unto itself.
What the industry generally believes is that offshore production declines at twice the rateof
conventional onshore.
That would put the offshore decline rate somewhere between 15-20% per year. These higher
decline rates mean that the sudden halt to offshore development will result in BIG offshore production
declines.
Off a 22 million barrel per day production base-15-20%= 3.3-4.4 million barrels a day-gone.
That is substantially more than the spare capacity of OPEC right now. That means that in just
one year, the world oil supply could be put into deep undersupply (pardon the pun) as offshore
exploration and development stagnate.
"... Offshore production has lower decline rates than shale does, but considerably higher decline rates than onshore vertical developments. ..."
"... That would put the offshore decline rate somewhere between 15-20 percent per year. These higher decline rates mean that the sudden halt to offshore development will result in BIG offshore production declines. ..."
"... That is substantially more than the spare capacity of OPEC right now. ..."
Offshore production accounts for 30 percent of total global oil
production. The percentage of global production has remained the same
since the early 2000s but the absolute amount of production has grown.
(Click to enlarge)
Today nearly 22 million barrels of oil per day is produced offshore;
the figure in the chart above includes all liquids.
Offshore production has lower decline rates than shale does, but
considerably higher decline rates than onshore vertical developments.
It is hard to pinpoint these decline rates exactly since each field is
unique. What the industry generally believes is that offshore production
declines at twice the rate of conventional onshore.
That would put the offshore decline rate somewhere between 15-20
percent per year. These higher decline rates mean that the sudden halt to
offshore development will result in BIG offshore production declines.
Off a 22 million barrel per day production base, 15-20 percent would
equal 3.3 to 4.4 million barrels a day-gone. That is substantially
more than the spare capacity of OPEC right now. That means that in
just one year, the world oil supply could be put into deep undersupply
(pardon the pun) as offshore exploration and development stagnate.
On Friday, May 13, IHS Energy released an alarming new study. It found that the volumes
of oil and gas discovered outside of the U.S. last year were the lowest since 1952.
Oil alone set a record low, with only 2.8 billion barrels of oil equivalent found during
2015.
The vast majority of large, conventional undiscovered oil and gas fields are offshore. Unfortunately,
these fields are uneconomical to develop with oil prices below $80 per barrel.
That's why a few years ago, when prices first dipped under $60, many oil companies refocused
their efforts. They bet big on U.S. shale.
Now, many are regretting that decision. Most shale basins – other than the Permian – are
losers at current WTI prices. (Though there are some winners, as I showed you
here .)
Reply
"... Financialization is the lubricant that makes it possible to think of everything as an asset that could immediately be liquidated at near full value, including hypothetical growth options. When everything is fully financialized and real world frictions are removed, it will always make more sense to buy and sell the assets and their affiliated options that to actually invest and improve anything. ..."
Sinking rig counts worldwide doesn't correspond to these fantastic planned production increases
– if it was that easy to crank up production, why has everyone hasn't done it before?
And opening the chokes, damaging the oilfied only works short term before new infills / CO2
or other expensive stuff is neccessary.
Sinking rig counts worldwide doesn't correspond to these fantastic planned production increases
– if it was that easy to crank up production, why has everyone hasn't done it before?
A relevant quote:
Financialization is the lubricant that makes it possible to think of everything as an asset
that could immediately be liquidated at near full value, including hypothetical growth options.
When everything is fully financialized and real world frictions are removed, it will always
make more sense to buy and sell the assets and their affiliated options that to actually invest
and improve anything.
This is one of the most straightforward ways to visualize how increased financialization
can harm the economy. Although simply calling bankers parasites is arguably even more straightforward.
"... Some days ago I had the opportunity to watch a picture titled "The Big Short", an opus on the 2008 financial crisis. It portraits remarkably well how the marriage of ignorance with the lack of scruples can concoct the most toxic of outcomes. The so called "shale oil boom" is not much of a different story, only perhaps at a different scale. ..."
"... This contraction cycle will resound for years to come. Existing fields decline at a rate somewhere between 4% to 5% per year, meaning that the industry needs to bring online additional 3 Mb/d to 4 Mb/d every year just to keep extraction levelled. The investment deferrals under way and the time lag required to bring new fields online guarantee this replacement will be missed several years going forwards. ..."
"... Rystad Energy, a Norwegian petroleum and gas business intelligence consultancy, projects new extraction projects to miss the yearly decline of existing fields for at least the next five years . This consultancy expects an overall extraction decline of 300 kb/d this year, 1.2 Mb/d in 2017 and 2018 and deeper declines in 2019 and 2020. ..."
"... There are also reasons to believe the IEA is underestimating consumption , but this estimate produces a conservative (nearly best case) scenario: growth of 1.25 %/a. ..."
"... the extra stocks built by the OECD can alone keep consumers happy until the end of 2017; to go beyond that China has to follow the same strategy. However, if the trends identified here prevail, by the beginning of 2018 consumption will be exceeding extraction by almost 3 Mb/d, exhausting the remaining stocks of 0.5 Gb in a matter of months. ..."
"... The successive supply destruction - demand destruction cycles are the key dynamics of peak oil at an yearly scale. These cycles push left and transform each curve in succession, eventually producing a stall of traded volumes and finally a decline. The petroleum market has endured a supply destruction cycle for almost two years now, that while clearly closing, is yet far from the 100+ $/b price required to provide a reversing signal to the industry. With various petroleum exporting nations on the brink - in great measure due to the financial machinations concocted in the US - this supply destruction cycle might have been just too long. ..."
"... Present supply destruction cycle is coming to an end. ..."
Titling the
last press review of 2015
I asked if that had been the year petroleum peaked. The question mark
was not just a precaution, the uncertainty was really there. Five months later the reported world
petroleum extraction rate is pretty much still were it was then. This is not a surprise, but the
impact of two years of depressed prices is over due.
Nevertheless, during these five months of lethargy the information I gathered brings me considerably
closer to remove the question mark from the sentence and acknowledge that a long term decline is
settling in. Understanding the present petroleum market as a feature of the supply destruction -
demand destruction cycle makes this case clear.
Looking Backwards
Worldwide petroleum extraction hit some sort of ceiling back in 2004, once it crossed above 70
Mb/d. The volume coming to the market kept increasing, but at a shy pace. From 2004 to 2012 the extraction
rate grew only 3%, from 72 Md/b to 74 Mb/d.
At the same time, the Brent index endured a remarkable rise from 2004 to 2008. Some called this
the "end of cheap oil", alluding to the increasing need for lower return-on-investment resources:
ultra-deep water, heavy petroleums, Arctic, etc. Nevertheless, the price collapsed to a third from
2008 to 2009. Back then I explained how
the concept of an ever rising petroleum price was at odds with "peak oil"
. For the world extraction
to enter a declining trend, periods of supply destruction must take place to keep those higher entropy
resources at bay.
Today the market lives the second supply destruction cycle since the 2004 shift. In reality these
cycles are lasting far longer than I anticipated, showing a considerable time lag in the adjustment
of the supply curve. There is however something especial to this supply destruction cycle, that could
possibly be sealing the end of growth to what petroleum is concerned.
The Miracle
Some days ago I had the opportunity to watch a picture titled "The Big Short", an opus on the
2008 financial crisis. It portraits remarkably well how the marriage of ignorance with the lack of
scruples can concoct the most toxic of outcomes. The so called "shale oil boom" is not much of a
different story, only perhaps at a different scale.
From 2011 to 2013 the extraction of petroleum from source rocks and other low permeability
reservoirs in the US grew almost 2 Mb/d. These were remarkable days for the industry, with plenty
of jobs created and a major revival to the American hands-on approach to business. However, such
a rapid growth on a relatively small resource left many wondering if something else was at play.
By the beginning of 2014 it was becoming evident that the "shale oil boom" had been largely fuelled
by the finance industry, that was feeding relentless amounts of what is sometimes called "dumb money"
to be burned on America's source rocks. The scheme was simple: petroleum companies inflated their
reserve assessments 10 times or more and imprudent investors kept buying bonds irrespective of losses.
They thought they were investing on conventional 30 years petroleum bearing wells, when in fact were
getting 3 years lifetime wells.
By late 2014 "shale oil" extraction in the US had increased 3.5 Mb/d since 2011, but at that point
the price of petroleum in international markets was already coming off a cliff. 200 G$ rested on
the American junk bond market, left to be trounced by a deep supply destruction cycle.
A bond default and bankruptcy wave formed throughout 2015, and is still surging today. One third
of the companies involved in the "shale boom"
should go belly up
this year alone
. However, these financial owes have not yet translated into a visible decline
in extraction rates. This means that even bankrupt, petroleum companies are still bringing new source
rock wells online, only deepening further the present supply destruction cycle.
When the WTI index (the regional equivalent to Brent) sank under 40 $/b late last year, Arthur
Berman produced
a most elucidating set of maps
spatially portraying well profitability. At those prices only
a small fraction of the wells extracting petroleum in the Permian formation were profitable.
And this is the remarkable achievement engendered by the marriage of America's petroleum and finance
industries. Petroleum extraction became effectively insulated from prices; bankrupt or not, the wells
on the Permian, Bakken and Eagle Ford formations will keep pumping - because the dumb money keeps
burning. For the rest of the world, this is like inserting a sliver of 4 Mb/d at 0 $ at the far left
of the supply curve, pushing all other resources rightwards. For an international industry already
in contraction, this is like adding gasoline to the fire.
Supply Destruction
The present supply destruction cycle dates back to the beginning of 2014 - it actually unfolded
before the price collapse. While prices still held above 100 $/b, international petroleum companies
started facing issues regarding shareholder revenues. The supply curve is simply becoming too steep,
when resources such as "Arctic oil" or "pre-salt" enter the portfolios of petroleum companies. The
scale down of exploration activities started that year, as so the slashing of staff. In 2014 circa
100 000 jobs were laid off by the industry
.
The price rout brought about by the shale miracle only accelerated this contraction. In 2015 the
number of jobs laid off
is estimated to have hit 250 000
. 2016 could end up close to that.
In panic mode, petroleum companies have been postponing or outright cancelling projects. Recent
estimates point to
a total of 400 G$ in deferred investments
. A new wave of mergers in the industry is now expected.
This contraction cycle will resound for years to come. Existing fields decline at a rate somewhere
between 4% to 5% per year, meaning that the industry needs to bring online additional 3 Mb/d to 4
Mb/d every year just to keep extraction levelled. The investment deferrals under way and the time
lag required to bring new fields online guarantee this replacement will be missed several years going
forwards.
Rystad Energy, a Norwegian petroleum and gas business intelligence consultancy, projects new
extraction projects to miss the yearly decline of existing fields
for at least the next five years
. This consultancy expects an overall extraction decline of 300
kb/d this year, 1.2 Mb/d in 2017 and 2018 and deeper declines in 2019 and 2020.
Looking Forwards
In a previous post
I analysed the gap between petroleum extraction and consumption reported by
the IEA. Using data fragments published by the press I then produced an estimate for China's stock
flows that greatly explains what have been heretofore unaccounted barrels. In essence, the OECD and
China could have amassed together a total of extra 900 Mb in stocks since the beginning of 2014.
Using this estimate for worldwide stocks I was then able to compute world petroleum consumption
for the past two years.
There are also reasons to believe
the IEA is underestimating consumption
, but this estimate produces a conservative (nearly best
case) scenario: growth of 1.25 %/a.
Matching the outlook produced by Rystad with this consumption trend one can start the always risky
exercise of predicting the future. In this case I projected forwards the consumption pattern of 2015
- with a double slump in later Winter and Spring, and the Summer up-tick - increasing at the steady
pace identified before. As for extraction, I simple spread Rystad's outlook into a monthly dataset.
The end result can be observed in the graph below.
The extraordinary stocks built by the OECD and China since 2014 are projected to hit 1 Gb right about
now, but also to soon stop growing. None of this counts with the fires in Alberta, or the social-economic
owes endured presently by Nigeria or Venezuela. Still, in this conservative scenario consumption
is just about to exceed extraction.
In the scenario above I also made the exercise of estimating how long can these extraordinary
stocks last if they are immediately released on the market to stave off an immediate price reaction.
That being the case,
the extra stocks built by the OECD can alone keep consumers happy until
the end of 2017; to go beyond that China has to follow the same strategy. However, if the trends
identified here prevail, by the beginning of 2018 consumption will be exceeding extraction by almost
3 Mb/d, exhausting the remaining stocks of 0.5 Gb in a matter of months.
How likely is this scenario? Is the OECD willing to bring its stocks promptly on the market to
keep prices where they are now? Or will it wait for prices to rise to provide breathing air to the
petroleum industry? And for how long can countries like Iraq, Nigeria or Venezuela withstand prices
under 100 $/b?
As the events of recent months show, it might be far more likely for some disruptive happening
to shake things up, than for these pretty trends to endure. In any case, this supply destruction
cycle is coming to an end sooner rather than later. The market will eventually have to fix the widening
gap projected in the graph above.
Consequences
These two years of supply destructive prices have pushed various important petroleum nations and
regions to the brink. If there is some unexpected event shaking up the petroleum market, it will
likely be in one of these places.
Iraq
- a country in war and divided in four different zones of military influence.
The impact of low petroleum prices on the Bagdad budget is postponing a victory over Daesh and
brewing political chaos. The increase in extraction of recent years halted and could reverse if
the politico-military situation does not improve. Daesh' burnt land policy is not helping either.
Nigeria
- shortages of hard currency have greatly impaired daily economic life and
an IMF intervention seems likely. In parallel, rebel groups have entailed a series of sabotage
operations on petroleum assets. Petroleum extraction should decline visibly in the next few years
and some fields even abandoned if petroleum prices stay below 60 $/b.
Venezuela
- overwhelmed by a snowball effect where under-priced petroleum causes such
economic disruption that impacts extraction itself. Exporting less petroleum for less money and
on the verge of serious social convulsion.
Canada
- petroleum regions in depression menace to drag down the whole economy with
visible impacts on housing and all industries related to extraction. Number and size of new projects
greatly reduced in recent months may augur an almost unthinkable long term extraction decline
in the country with the largest claimed petroleum reserves in the world. The long term effect
of the wild fires raging presently in Alberta is still unknown. If petroleum facilities are destroyed,
it might not be easy to recover with prices under 50 $/b.
Angola
- ran out of hard currency reserves to pay foreign contractors, sending the
latter on the run. Presently negotiating an aid programme with the IMF. Meanwhile, the ruling
regime has imprisoned numbers of opponents. Petroleum extraction bound to decline in the next
few years.
Azerbaidjan
- for long in "secret" talks with the IMF over an aid programme. Ambitious
prospects for export hikes are likely unattainable.
Mexico
- lost 1 Mb/d to depletion during the past ten years and is unlikely to hold
or halt the decline. Relevant downwards reserve revisions have been conducted in recent times.
Brasil
- engulfed in political chaos tied to misuse and mismanagement of its national
petroleum company, Petrobras, one of the most indebted companies in the world. The pre-salt resource
seems adjourned
sine die
.
North Sea
- extraction is expected to stop in 100 different fields throughout 2016.
Conclusion
Depending on how the OECD (and perhaps China) decide to manage their extra petroleum stocks, the
shift to a new demand destruction cycle closing the gap portrayed in the graph above will be complete
by early 2018 the latest. If something goes seriously wrong with one of the key petroleum exporting
nations, this shift could happen overnight.
What will such new cycle bring? Recent experience provides some clues: it took eight years for
world extraction to rise from 72 Mb/d to 74 Mb/d; the so called "shale boom" required four years
at prices above 110 $/b. These long time lags mean that Rystad's declining outlook is by this time
almost certain.
The coming demand destruction cycle is therefore likely to be a long one too. And at some point
it can invert the extraction trend upwards. In such a scenario, can extraction return to the 80 Mb/d
rate of 2015? That is the big question, which I will abstain from answering definitively. Looking
at it from the other side of the equation, for such a scenario to ever materialize, demand must withstand
again a good number of years at high prices without undershooting.
The successive supply destruction - demand destruction cycles are the key dynamics of peak
oil at an yearly scale. These cycles push left and transform each curve in succession, eventually
producing a stall of traded volumes and finally a decline. The petroleum market has endured a supply
destruction cycle for almost two years now, that while clearly closing, is yet far from the 100+
$/b price required to provide a reversing signal to the industry. With various petroleum exporting
nations on the brink - in great measure due to the financial machinations concocted in the US - this
supply destruction cycle might have been just too long.
The Take Away
"Shale oil" is effectively insulated from prices by the US finance industry.
Present supply destruction cycle is coming to an end.
After two years of low prices, extraction is set for a multi-year decline.
New demand destruction cycle to start in the next 18 months, depending on how stocks are managed.
A return to an extraction rate of 80 Mb/d seems unlikely for the foreseeable future.
"... I will tell you how "sane" companies react to down turns like we are going through. They batten down the hatches, cut costs to bare minimum. When prices recover, they do not immediately go great guns. They first get caught up on the maintenance that was delayed due to the downturn. Then, once that is done, they slowly begin to spend money on new wells. ..."
"... Early on, most companies were hoping for a quick recovery. 2015 persistent low prices, followed by the hammer of $20 oil in Q1 has really taken a toll, IMO. This is why we are now seeing many BK. Q1 knocked them out. ..."
"... What I think should worry many people is that those of us considered "marginal" are weathering this storm better than many of the large companies. We are operating stuff that the majors/large independent companies got rid of decades ago, that was deemed to be too costly for them to continue to operate. ..."
"... Now, those majors/large independents are finding there is almost nothing left of "cheap" to develop oil. Deep water, no. Shale, no. Tar sands, no. ..."
"... The shale companies are spending over $5 million per well to obtain 150-400K BO over a period of 20+ years. Folks, they have sold off assets all over the world to go after this stuff. That should be a big concern. ..."
"... In December 2008 oil price was $40. Shale started expansion around that time with the free money from the banks. Today in mid 2016 price of oil is $48 and it is evident that Shale is gradually closing the shop with just additional life-support from the banks to scrape the bottom of the barrel in the remaining sweet spots. ..."
"In fact the price has collapsed hasn't it, in spite of steadily worsening EROI and now
virtual cessation of exploration and development. Gail's explanation fits the evidence we have
in front of us today. Simple EROI or depletion models don't so well. "
The 2014-16 price collapse was due to over-production, which was a result of a 4-fold increase
in upstream capex over the previous 10 years. It's a cyclical event, like in 1982-86, 1998, 2001-02
and 2008-09. The global supply and demand are gradually rebalancing. Prices are already recovering
(+80% since Fenruary lows) and will rise much further in the next several years due to the current
sharp decrease in exploration and development spending.
One point I would like to make is that, unlike in response to prior cyclical downturns, OPEC,
thus far at least, has not cut production. I question if anyone has spare capacity, outside of
that caused by war/political strife.
It took massive amounts of leverage for the US and Canada to ramp up production, along with
a relatively stable oil price band of $85-$105.
It remains to be seen if that type of leverage will occur again in the immediate future.
I note, despite the price improvement, the rig count we all follow, North Dakota, is down to
24, with one still listed as stacking.
I will tell you how "sane" companies react to down turns like we are going through. They
batten down the hatches, cut costs to bare minimum. When prices recover, they do not immediately
go great guns. They first get caught up on the maintenance that was delayed due to the downturn.
Then, once that is done, they slowly begin to spend money on new wells.
Early on, most companies were hoping for a quick recovery. 2015 persistent low prices,
followed by the hammer of $20 oil in Q1 has really taken a toll, IMO. This is why we are now seeing
many BK. Q1 knocked them out.
If OPEC's goal is to finish off US companies, they will figure out a way to keep a lid on prices
this summer, and then drive prices back down into the $20s again. However, I am not sure if this
can be accomplished, or if OPEC members can even handle that. Further, it is clear to me that
Russia can ride out low prices better than most, but not $20s. The Q1 price collapse caused Russia
to act.
We are still here, and cautiously optimistic, but it is a very, very cautious optimism.
What I think should worry many people is that those of us considered "marginal" are weathering
this storm better than many of the large companies. We are operating stuff that the majors/large
independent companies got rid of decades ago, that was deemed to be too costly for them to continue
to operate.
Now, those majors/large independents are finding there is almost nothing left of "cheap"
to develop oil. Deep water, no. Shale, no. Tar sands, no.
The shale companies are spending over $5 million per well to obtain 150-400K BO over a
period of 20+ years. Folks, they have sold off assets all over the world to go after this stuff.
That should be a big concern.
This point has been made here repeatedly. Despite this severe price downturn and the alleged
glut, I think it is still true. There may be a lot of oil out there left to produce, but it will
cost a lot per BO to get it out of the ground.
…but it will cost a lot per BO to get it out of the ground.
Can you define "a lot" ?
I think $75/b (2015$) will allow a fair amount of oil to be produced profitably, but agree
it will take 6 to 12 months before there will be much of a production increase (say 1 Mb/d Worldwide)
in response to oil prices at $75/b. I imagine the slow response will result in a price spike to
$100/b as supply starts to run short (probably in 2018).
In December 2008 oil price was $40. Shale started expansion around that time with the free
money from the banks. Today in mid 2016 price of oil is $48 and it is evident that Shale is gradually
closing the shop with just additional life-support from the banks to scrape the bottom of the
barrel in the remaining sweet spots.
So the price in Shale case did not play ANY role. So where is that "cycle" that you see it?
There is no cycle. Shale was drilled regardless of price to kick the can just for few years to
mask over-leveraged economy.
Also from Dec 2008 to March 2008 only 27 wells per month were added in the Bakken/Three Forks.
Other LTO plays didn't really get going until 2010.
By August 2009 Brent was up to $72/b, from March 2009 to July 2009 the average wells added
per month in the Bakken was 40 wells/month.
Also it was the high prices earlier in 2008 that got things started, oil prices were over $80/b
from Oct 2007 to Sept 2008, the dip in oil prices was relatively brief, the oil price was under
$60/b for only 7 months from Nov 2008 to May 2009. The oil industry takes some time to react to
oil price changes. Chart with annual average Brent oil price in nominal dollars below. The price
has been above $70/b for all but 2 years from 2007 to 2015 (2009 and 2015).
There is no free market CYCLE if OPEC cuts 4.2mbd in January 2009 and then it does not cut
single barrel in November 2014. Of course there is always a "cycle" in long term.
"Prices did not remain between $40 and $48 per barrel"
That just shows you that price points are irrelevant. In 2008 when price was $40 did Shale
had crystal ball to know that price will go $100 in the next 6-7 years?
400 rigs that are drilling right now in US do they know where the price will be next year?
Reply
"... I also question as to whether or not this extreme debt-fueled LTO production will ever be able to ramp up again as we have recently seen? It looks as if gullible investors are lining up with every increase in price, but the real onslaught of bankruptcies are just beginning, imho. ..."
"... This is a pretty big bust, and as mentioned by a few insiders in the last post, (Doug Leighton and a few others), will the experienced and knowledgeable 'hands' be available to ramp up production in such big numbers, ever again? Will there be financing? Will they be forced to produce by Govt decree/intervention? How about by a 2 for 1 tax incentive like Canada has done in the past? ..."
"... Not to doom and gloom a new reality, mostly because I am optimistic by nature, nevertheless, an acknowledged Plateau or decline will shake society to its very core as we move forward. I think it will be like those cheap B level movies about the looming asteroid casting a shadow on Earth, with hordes of people frantically looking for any means to escape the ramifications. ..."
regarding statement: "but the USGS may be mistaken in assuming that US reserve growth is a good
analog for the rest of the world."
Is oil distribution different than every other resource as it applies to the US? I don't think
so. That is a very big assumption and does not take into account misrepresented reserves by more
secretive countries, as well as political unrest and other disruptions that may occur going forward.
Furthermore, as the Majors seem to be dropping in profitability will they be able to continuing
producing at today's rates, or will they wind down and/or diversify with respect to their shareholders,
their first responsibility? I also question as to whether or not this extreme debt-fueled LTO
production will ever be able to ramp up again as we have recently seen? It looks as if gullible
investors are lining up with every increase in price, but the real onslaught of bankruptcies are
just beginning, imho.
This is a pretty big bust, and as mentioned by a few insiders in the last post, (Doug Leighton
and a few others), will the experienced and knowledgeable 'hands' be available to ramp up production
in such big numbers, ever again? Will there be financing? Will they be forced to produce by Govt
decree/intervention? How about by a 2 for 1 tax incentive like Canada has done in the past?
Every one of these graphed scenarios but one show the 'Peak' 15-20 years out. Ron P, who I
respect very highly, has said in the past he believes that 2015-16 will/might/just may be the
peak, which we will know only in hindsight. Has anything really changed beyond dodgy economics
and a slowing economy? I suppose if the economy continues slowing the peak might ultimately be
delayed, but then if this is the case BAU is finished, anyway.
Not to doom and gloom a new reality, mostly because I am optimistic by nature, nevertheless,
an acknowledged Plateau or decline will shake society to its very core as we move forward. I think
it will be like those cheap B level movies about the looming asteroid casting a shadow on Earth,
with hordes of people frantically looking for any means to escape the ramifications.
I sent an oil post to my best friend last week. Actually, it was the article I shared with
this forum in the last post about Ft Mac. His response was, "wasn't Jeff Rubin the guy who once
predicted Peak Oil"? I wrote back with several other articles attached and said, "This is Peak
right now, it is beginning….the effects are simply not acknowledged, etc etc etc". The conundrum,
as I see it, is that every time this industry goes bust, for whatever reason(s), the entrenched
say, "See, there's no Peak, what a bunch of bullshit. If there was a Peak the prices would be
climbing"!
Dennis, I would really appreciate reading a strong prediction from you, and others from this
forum. I appreciate that you kind of did this with the caveat, (very polite I might add) that
said, "a more realistic decline scenario might be"… (or words to that effect), but it's driving
me nuts. I kind of see why TOD shut down, now. Their reasons were that there were simply not enough
solid articles about PO to keep a good discussion flowing. I reluctantly switched to PO.com for
daily background reading and the quality of discussion and ideas have been reduced on that site
to playground levels of name calling with lots of swearing and personal attacks tossed in. The
contibutors on this forum are the only game in town these days. I thank you all in advance for
sharing you opinions and knowledge.
Denis does good work, but its very difficult to pin down numbers when nobody releases detailed
data. The ones who have the better data bases are IHS and the oil companies which purchase it
from IHS. But nobody is about to release something that's probably worth several hundred million
$.
For example, what is the usgs estimate for reserv increases at El Furrial in Venezuela? That
reservoir has been badly mismanaged over the last 10 years. The mismanagement reduces booked reserves,
and also makes impossible the introduction of a large tertiary process project such as CO2 injection.
The same applies to dozens of fields. Several Venezuelan heavy oil fields with more than 10
billion barrels of oil in place are headed towards less than half of the pdvsa booked reserves.
And given the current practices and political regime, the reservoirs will be left gutted, which
makes impossible introducing meaningful changes in the future. The Maduro regime has turned into
a full blown dictatorship as of this week, it will change for the worse, so it looks like the
ongoing reserve destruction will continue for at least a decade.
"... Financial crises are always ultimately credit crises. Even when the proximate cause seems to be a stock market crash, the amount of damage done depends on how much leveraged speculation took place and how that affects critical lending and payment systems. Even though Japan's payment system was never at risk in the implosion of its colossal credit bubble, its banks and economy have been in a zombie state for a full quarter century. Japan's massive bubble took place through a mere 11 massive "city banks" and another three "long term credit banks". By contrast, China has a large shadow banking system. Just like our officialdom in 2007 and 2008, it's very unlikely that they have a good grasp of the extent and the interconnectedness of the risks. They may find out very soon. ..."
"... Remember the shoddy construction in schools – earthquake collapse. Then there is the bubble in unoccupied "ghost cities" that go on forever. ..."
"... Why did Xi burst the bubble. I had suspected the smog and pollution have done more damage in death and disability than admitted. I wonder if the population is even in decline not just the labor force. ..."
"... If China is suddenly officially ready to countenance a huge rise in unemployment, one presumes they have some plan to socialize the pain, to take care of the population. ..."
"... If this is true, what's in store may be something like IIRC Lambert proposed in comments the other day: nationalize the financial institution, file the Chinese equivalent of RICO charges, impound the wealth and tie the former elite up in jail/litigation for the next decade. ..."
"... "impound the wealth" –including all the wealth offshore? including the wealth Chinese oligarchs have invested in foreign real estate? Are Chinese oligarchs any more likely to go against their own class than Western oligarchs? ..."
"... I missed that Telegraph article – it really is quite alarming. I have to say though that anecdotally, my Chinese friends are no more pessimistic than usual, so I don't think that ordinary Chinese are feeling worried yet – property prices are still going up, which is reassuring to most middle class there, and there is no evidence I've heard of any panic in the various 'informal' or shadow investing markets (lots of Chinese run what amount to unofficial banks, borrowing and investing on behalf of friends). ..."
"... AEP suggests that Xi may not be the firm hand on the tiller that everyone assumes – his overt confidence may well be a front for some very confused ideas. I think there is increasing evidence that this may be the case. For all the sound and fury, there is little real evidence of reform from within. But I think the safe bet is that the CCP has enough of a firm hand that they can prevent an outright crash – much more likely is the sort of crippling slow motion collapse that we saw in Japan a quarter of a century ago. But the longer they insist on shovelling fuel on to the fire, the less likely that happens. As Pettis constantly points out, economists consistently underestimate the speed and severity of crashes. ..."
"... Given the huge amount of foreign investment in china and how much it is likely leveraged, the global financial system will collapse again triggering the collapse of many states. proposals of bailouts would be likely met with violent resistance, even revolution. far right politicians would seize power and, where they haven't been politically neutered, maybe some leftists would, too. were it to happen before november, we could welcome into office president trump in january. ..."
Ambrose Evans-Pritchard has a must-read article on what may be the beginning of the end of the
China-as-economic-wunderkind story. The reason for the hesitancy is that the lengthy article that
appeared in early May on the front page of the house organ of the Politboro may either be an official
declaration or an effort by a powerful minority to press for a meaningful, sustained effort to stop
the growth in debt levels. Particularly since the global financial crisis, China has relied heavily
on increases in private-sector debt to keep growth levels up. Mind you, borrowing to invest is not
necessarily a bad idea if it goes into projects that are sufficiently productive. But as readers
know well, China has had investment at an unprecedented proportion of GDP for years, and most of
it has gone into assets created for speculation (housing that sits vacant and is seen by investors
as an alternative to the stock market) or unproductive increases in industrial capacity. Consider
this extract from a
March article in the South China Morning Post:
At the peak of its cement production in 2014, China turned out more cement in just two years
than the United States had produced in the previous century.
As the first chart shows, the trend finally topped out last year but it still indicates almost
30 times as much cement production in China as in the US, a much larger economy. Is this huge
volume of cement really needed? Is this sustainable?
There is certainly an argument for more cement production in China than in the US, which has
largely built its cities and its transport infrastructure. China is still in the process of doing
so. Its cement requirements are thus proportionately much greater.
True, but 30 times as great with as much cement production in two years as the US recorded
in 100 years? That's pushing things.
And while economic growth in China is faster than in the US, much of it represents just this
pouring of cement. Fixed capital formation accounts for 45 per cent of gross domestic product,
about twice the average of the rest of Asia, and higher multiples yet than the rest of the world.
This sort of excess crashes if demand turns sour. And it could take a lot more with it than just
cement and steel plants
The story is told in many more sectors than just cement. The second chart shows you that China's
steel production is topping out but is still running at five times the rate of all 28 countries
in the European Union combined and almost 10 times steel production in the US.
This steel is still being used but there are reasons to doubt the continued demand. Car production
last year of 12 million units, for instance, was three times the equivalent of domestic production
in the US.
Yes, I know Americans are importing ever more cars as they begin to share the rest of the world's
doubts about their own Chevrolets and Chryslers and, yes, car ownership ratios are still much
higher in the US than in China, but three times as much car production in China as in the US still
has a feeling of unreality. China is not rich enough yet to afford so large a car market.
AEP recaps the well-known-if-you've been-watching signs that China is in the advanced stages of
a monster debt binge. The problem with bubbles, as anyone who has lived through them knows so well,
is they typically run much further than clinical observers imagine possible. So the nay-sayers look
like gloomy Gusses while the momentum traders party until the whole thing goes kaboom. AEP's danger
signals,
from his Telegraph account :
China's debt is approaching $30 trillion. The fresh credit alone created since 2007 is greater
than the outstanding liabilities of the US, Japanese, German, and Indian commercial banking systems
combined…
To put matters in context, leverage rose by roughly 50 percentage points of GDP in Japan before
the Nikkei bubble burst in 1990, or in Korea before the East Asia crisis in 1998, or in the US
before the subprime debacle. This gauge is an almost mechanical indicator of a future credit crisis.
As we all know, China is in a class of its own. Debt has risen by 120 to 140 percentage points.
The scale of excess industrial capacity – and China's power and life and death over commodity
markets – mean that any serious policy pivot by the Communist Party would set off an international
earthquake.
Yet that is what at least an important group of the officialdom is prepared to do. The logic for
a crackdown now is that delaying a day of reckoning will only make the inevitable contraction worse:
China watchers are still struggling to identify the author of an electrifying article in the
People's Daily that declares war on debt and the "fantasy" of perpetual stimulus…
The 11,000 character text – citing an "authoritative person" – was given star-billing on the
front page. It described leverage as the "original sin" from which all other risks emanate, with
debt "growing like a tree in the air".
It warned of a "systemic financial crisis" and demanded a halt to the "old methods" of reflexive
stimulus every time growth falters. "It is neither possible nor necessary to force economic growing
by levering up," it said.
It called for root-and-branch reform of the SOE's – the redoubts of vested interests and the
patronage machines of party bosses – with an assault on "zombie companies". Local governments
were ordered to abandon their illusions and accept the inevitable slide in tax revenues, and the
equally inevitable rise in unemployment.
If China does not bite the bullet now, the costs will be "much higher" in the future. "China's
economic performance will not be U-shaped and definitely not V-shaped. It will be L-shaped," said
the text. We have been warned.
The article also describes how China put its foot on the accelerator in recent quarters, so if
this article represents a policy change, it would be a real gear shift:
The latest stop-go credit cycle began in mid-2015 and has since accelerated to an epic blow-off,
with the M1 money supply now growing at 22.9pc, by the fastest pace since the post-Lehman blitz.
Wei Yao from Societe Generale estimates that total loans rose by $1.15 trillion in the first
quarter, equivalent to 46pc of quarterly GDP. "This looks like an old-styled credit-backed investment-driven
recovery, which bears an uncanny resemblance to the beginning of the 'four trillion stimulus'
package in 2009. The consequence of that stimulus was inflation, asset bubbles and excess capacity,"
she said.
House sales rose 60pc in April, despite curbs to cool the bubble. New starts were up 26pc.
Prices jumped 63pc in Shenzhen, 34pc in Shanghai, 20pc in Beijing, and 18pc in Hefei. Panic buying
is spreading to the smaller Tier 3 and 4 cities with the greatest glut.
There is still some fiscal spending in the pipeline, so the robust times will continue at least
through the summer. But liquidity is already starting to dry up despite all the money creation as
investors are getting more and more evidence that the government will not rescue wealth management
products (which are often invested in real estate projects sponsored by local government entities)
or the bond issues of state owned enterprises (SOEs).
Again from AEP's report :
Moody's warned this month that China's state-owned entities (SOEs) have alone racked up debts
of 115pc of GDP, and a fifth may require restructuring. The defaults are already spreading up
the ladder from local SOE's to the bigger state behemoths, once thought – wrongly – to have a
sovereign guarantee…
The rot in the country's $7.7 trillion bond markets is metastasizing. Bo Zhuang from Trusted
Sources said more than 100 firms cancelled or delayed bond issues in April due to widening credit
spreads…
Ten companies have defaulted this year, with the shipbuilder Evergreen, Nanjing Yurun Foods,
and the solar group Yingli Green Energy all in trouble this month. But what has really spooked
markets is the suspension of nine bonds issued by the AA+ rated China Railways Materials, the
first of the big central SOE's to signal default. "This has greatly weakened investors' long-standing
expectation of implicit government support," he said.
Bo Zhuang said investors have poured money into bonds in the latest frenzy. The stock of corporate
bonds has jumped by 78pc to $2.3 trillion over the last year. It is the epicentre of leverage
through short-term 'repo' transactions, and it is now coming unstuck.
Financial crises are always ultimately credit crises. Even when the proximate cause seems
to be a stock market crash, the amount of damage done depends on how much leveraged speculation took
place and how that affects critical lending and payment systems. Even though Japan's payment system
was never at risk in the implosion of its colossal credit bubble, its banks and economy have been
in a zombie state for a full quarter century. Japan's massive bubble took place through a mere 11
massive "city banks" and another three "long term credit banks". By contrast, China has a large shadow
banking system. Just like our officialdom in 2007 and 2008, it's very unlikely that they have a good
grasp of the extent and the interconnectedness of the risks. They may find out very soon.
There is no evidence that cement is being stockpiled to my knowledge – its all being poured.
The problem is that the construction projects just don't have a productive return any more.
However, there is a serious point to be made about concrete in China – it is generally low
quality. This is ok for regular engineering, but for specialist needs, such as High Speed Rail,
it seriously reduces the life span of the structure. I can't find a link to it now, but a few
years ago an engineering journal was estimating that Chinas
High Speed
Rail network would have to reduce its speed limits by several mpg per year as the structures
were degrading very rapidly. It estimated that in 20 years the HSR network would be no faster
than a conventional railway network.
Our imports from China fell big last month and the department stores that sell the junk are
gone down even faster so if we lost half or 200 billion of their junk I an not sure it would be
missed or replaced. I do think that this China implosion is important. I have some questions.
China has a pork shortage and owns Smithfield but is not importing. Why?
Why did Xi burst the bubble. I had suspected the smog and pollution have done more damage
in death and disability than admitted. I wonder if the population is even in decline not just
the labor force.
Please keep covering whatever it is that is going on in China.
If China is suddenly officially ready to countenance a huge rise in unemployment, one presumes
they have some plan to socialize the pain, to take care of the population.
If this is true, what's in store may be something like IIRC Lambert proposed in comments
the other day: nationalize the financial institution, file the Chinese equivalent of RICO charges,
impound the wealth and tie the former elite up in jail/litigation for the next decade.
"impound the wealth" –including all the wealth offshore? including the wealth Chinese oligarchs
have invested in foreign real estate? Are Chinese oligarchs any more likely to go against their
own class than Western oligarchs?
I missed that Telegraph article – it really is quite alarming. I have to say though that
anecdotally, my Chinese friends are no more pessimistic than usual, so I don't think that ordinary
Chinese are feeling worried yet – property prices are still going up, which is reassuring to most
middle class there, and there is no evidence I've heard of any panic in the various 'informal'
or shadow investing markets (lots of Chinese run what amount to unofficial banks, borrowing and
investing on behalf of friends).
As one Chinese friend put it to me 'everyone in my town owes more money than they have to everyone
else'. I've always suspected its the informal/shadow system that would show stress before the
formal system. The only thing I do know is that a friend of mine who runs a business helping Chinese
people move to Europe using 'investment' visas has found more and more people of very modest means
attempting to do it – its not just the rich who are buying properties.
The usually reliable
Michael Pettis also seems his usual gently bullish, but steady self, I'd expect him to write
something if there was something nasty growing.
AEP suggests that Xi may not be the firm hand on the tiller that everyone assumes – his
overt confidence may well be a front for some very confused ideas. I think there is increasing
evidence that this may be the case. For all the sound and fury, there is little real evidence
of reform from within. But I think the safe bet is that the CCP has enough of a firm hand that
they can prevent an outright crash – much more likely is the sort of crippling slow motion collapse
that we saw in Japan a quarter of a century ago. But the longer they insist on shovelling fuel
on to the fire, the less likely that happens. As Pettis constantly points out, economists consistently
underestimate the speed and severity of crashes.
let's try to imagine the global impact of a Chinese implosion.
as china is the main source of global export demand, if they hit a brick wall it would devastate
all but the most diversified or isolated economies. from Australia to Zaire, the impact would
be devastating to employment.
Given the huge amount of foreign investment in china and how much it is likely leveraged,
the global financial system will collapse again triggering the collapse of many states. proposals
of bailouts would be likely met with violent resistance, even revolution. far right politicians
would seize power and, where they haven't been politically neutered, maybe some leftists would,
too. were it to happen before november, we could welcome into office president trump in january.
domestically, Chinese job losses would be enormous causing mass discontent and protests. indeed,
the only thing to do with legions of disgruntled, unemployed, unmarried men would be to draft
them into the army. but so much fodder requires cannons, and so, the likelihood of war would be
very high.
The International Energy Agency estimates that the world is dealing with a supply surplus of 1.3
million barrels per day (mb/d) right now, which should last through the end of the second quarter.
By the third and fourth quarters, however, the surplus shrinks to just 0.2 mb/d.
The IEA reiterated its forecast that demand will hold at 1.2 mb/d, and expressed a growing sense
of confidence that oil markets are only a few months away from moving into balance.
For its part, OPEC largely agreed in its May
Oil Market Report. But OPEC also chose to focus on the slightly longer-term, citing the massive
cut in capital expenditures taken over the past two years. The industry has slashed $290 billion
from 2015 and 2016 spending levels so far, with more cuts expected. The spending reductions contributed
to the shockingly low level of new oil discoveries last year – the industry discovered less than
3 billion barrels of new oil reserves in 2015, the lowest level in six decades. With few new discoveries,
and a rising number of projects deferred, there is a very low level of new projects in the pipeline,
so to speak. In other words, oil supply and demand curves are converging towards a balance, and could
even cross over at some point a few years down the line as supply fails to keep up with demand.
... ... ...
Canadian wildfires knocked off more than 1.2 million barrels per day of production, a disruption
that will be temporary, but ultimately could last a few weeks.
Nigeria has lost roughly 0.4 to 0.5 mb/d due to a handful of attacks on oil pipelines and platforms.
Shell and Chevron have shut down facilities and evacuated personnel because of attacks from the Niger
Delta Avengers. Venezuela has seen production
decline at least 0.1 mb/d from last year, and could fall another 0.2 mb/d at least over the course
of 2016.
All of these supply disruptions come on top of the expected decline in output from around
the world, especially high cost U.S. shale. U.S. oil production has fallen to 8.8 mb/d as of early
May, taking the loss in U.S. oil production to about 900,000 barrels per day since April 2015.
"... Angola has become Africa's biggest oil producer as Nigeria's output slumped to 1.4 million barrels a day, Oil Minister Ibe Kachikwu said Monday, endangering a budget based on production of 2.2 million barrels. ..."
"... Some 70 percent of Nigerians are living below the poverty line, according to the United Nations, despite the country's wealth. ..."
"... The threatened strike comes as militants in the Niger Delta resumed attacks and forced oil majors to evacuate some workers. There are reports the Niger Delta Avengers are sponsored by southern politicians to sabotage Buhari. The president has deployed thousands of troops to the area, where the Avengers are demanding a greater share of the country's oil wealth and protesting cuts to a 2009 amnesty program that paid 30,000 militants to guard installations they once attacked. ..."
LAGOS, Nigeria (AP) - Militant attacks on oil installations and a threatened nationwide strike
are driving Nigeria's petroleum production and its naira currency to new lows.
Angola has become Africa's biggest oil producer as Nigeria's output slumped to 1.4 million barrels
a day, Oil Minister Ibe Kachikwu said Monday, endangering a budget based on production of 2.2 million
barrels. Angolan production was steady at near 1.8 million barrels daily, according to the Organization
of Petroleum Exporting Countries.
The naira fell to 350 to the dollar on the parallel market, against an official rate of 199, amid
reports and denials that President Muhammadu Buhari's government plans an imminent devaluation, bowing
to demands of the International Monetary Fund in exchange for soft loans.
Nigeria's National Labour Congress and the Trade Union Congress, which say they represent 6.5
million workers, and some civic organizations called for a strike Wednesday to protest a 70 percent
increase in gasoline prices, forced by shortages of foreign currency. Nigeria is dependent upon imports
with oil accounting for 70 percent of government revenue.
The crisis is dividing labor leaders on religious and ethnic lines, with those from the mainly
Muslim north against the strike and Christians who dominate the oil-producing south urging citizens
to "Occupy Nigeria!" Buhari is a northerner.
The division may mean that the country will not be subjected to the massive protests that forced
the previous government to shelve plans to do away with a fuel subsidy in 2012, although many Nigerians
are stocking up on food and water.
Inflation officially rose nearly 14 percent last month and prices of food and electrical goods
have doubled while tens of thousands of workers have not been paid in months. Many angry Nigerians
say the government could not have chosen a worse time to drop the fuel subsidy, though shortages
forced people to pay double the fixed price anyway.
Some 70 percent of Nigerians are living below the poverty line, according to the United Nations,
despite the country's wealth.
Buhari took over a year ago from President Goodluck Jonathan, whose government is accused of looting
the treasury of billions of dollars.
The threatened strike comes as militants in the Niger Delta resumed attacks and forced oil majors
to evacuate some workers. There are reports the Niger Delta Avengers are sponsored by southern politicians
to sabotage Buhari. The president has deployed thousands of troops to the area, where the Avengers
are demanding a greater share of the country's oil wealth and protesting cuts to a 2009 amnesty program
that paid 30,000 militants to guard installations they once attacked.
"... China, the world's fourth-largest oil producer, pumped 5.6 percent less crude year-on-year in April, official data showed, as oil firms struggled with cost pressures with crude prices hovering around $40 a barrel. ..."
China, the world's fourth-largest oil producer, pumped 5.6 percent less crude year-on-year
in April, official data showed, as oil firms struggled with cost pressures with crude prices hovering
around $40 a barrel.
Data from the National Bureau of Statistics released on Saturday showed China produced 16.59 million
tonnes of crude oil last month, or about 4.04 million barrels per day (bpd), the lowest rate since
July 2013 on a daily basis.
Production in the first four months was down 2.7 percent over the same year-ago period to 68.14
million tonnes, or about 4.11 million bpd.
PetroChina, the country's top producer, recorded a 0.2 percent drop in oil and gas production
in the first quarter and Sinopec scaled back domestic crude production by 10.35 percent in the
same period, companies said in April.
Offshore specialist CNOOC Ltd, however, delivered a 5.1 percent rise in total net oil and gas
production in the first quarter over a year ago, thanks to new Chinese offshore fields.
Natural gas output last month rose 5.6 percent on the year to 10.6 billion cubic meters, with
production up 5.3 percent in the first four months, the data showed.
China has reported April 2016 production at 4.04 mbpd. A 5.6% decline year on year. It's down
380,000 bopd (8.6%) from the 4.42 mbpd JODI lists for June 2015.
"... Daniel Katzenberg, a senior analyst at Robert W. Baird, says investors aren't worried about profits as much as production. Quarter after quarter, the output of Pioneer's new horizontal wells has exceeded expectations, and that's why the stock price keeps rising. "What the market sees is that they're sitting on one of the most attractive and economic resource plays in the world," says Katzenberg. "Pioneer is tasked with proving their acreage is as good as the hype." ..."
"... I like this way of thinking: "investors aren't worried about profits as much as production". However absurd it sounds, that is true. There is a class of investors that aren't worried about profits. Same can be said about investors in Tesla: "investors aren't worried about profits as much as new EV technologies". ..."
"... New financing will be tough for survivors, and debt overhand will not dissipate any time soon. As for investors putting money into questionable companies (that Alex used as a counterargument) this is just throwing good money after bad. Most of those "new" investors are already up to the neck in this s**t and are afraid to write down holdings. So they decided to double down hoping that rising oil price will bail them out. ..."
"... Nothing new here. America became the nation of speculators, big and small, so a new sucker is born every minute. They expect that the rising tide will lift all boats. And they already forgot lessons of 2008: I do not think investors memory (as a class) lasts more then five years. So a new bubble and related fraud can have any period larger then five years. Almost eight year passed from previous crash, so it's about time to milk those suckers again :-) ..."
"... I think there will observable divergence between oil price rise and energy mutual funds/ETFs price rise. The latter will rise more slowly as bankruptcies might spoil the show. ..."
"... US Production is falling (substantially) and rigs are still declining so obviously "investors" are not interested in production either. So Mr Katzenberg is talking baloneys. There are no investors. This just last gasps of money printing. You can see the cracks everywhere. ..."
"... "If oil prices average $40 per barrel, U.S. shale oil production will likely decline by 3 million barrels per day between 2015 and 2020, and even if oil prices reach $60 per barrel, a decline is still imminent, according to the International Energy Agency (IEA). US shale production is not expected to halt the decline until we reach prices of $70 per barrel over the same period." ..."
"... There will be time in a year when EIA will report the same and Wall Street will proclaim "We are shocked. No one could have predicted this". Same old same old. ..."
US E&Ps were able to sell 10 billion not for the purpose of investing but for hiding the losses
for little bit longer. That shale business model is dead.
But investors don't think so.
Despite all those bankrupcies, they continue to invest in shale players, particularly in those
who continue to increase production volumes.
A good example is Pioneer, which is up almost 60% from 52-week lows.
Interesting quotes from an article in Bloomberg:
"The company, meanwhile, is spending a lot of money now in the belief that oil prices will
soon rise. Not everyone thinks it will pay off. Criticizing shale drillers at the Sohn Investment
Conference a year ago, David Einhorn singled out Pioneer, in which he has a short position, as
the "Mother-Fracker." Einhorn, president of Greenlight Capital, argued that Pioneer lost $12 for
every barrel it developed over the previous nine years. "That's like using $50 bills to counterfeit
$20s," he said.
…………………….. Daniel Katzenberg, a senior analyst at Robert W. Baird, says investors aren't worried about
profits as much as production. Quarter after quarter, the output of Pioneer's new horizontal wells
has exceeded expectations, and that's why the stock price keeps rising. "What the market sees
is that they're sitting on one of the most attractive and economic resource plays in the world,"
says Katzenberg. "Pioneer is tasked with proving their acreage is as good as the hype."
I like this way of thinking: "investors aren't worried about profits as much as production".
However absurd it sounds, that is true. There is a class of investors that aren't worried about
profits. Same can be said about investors in Tesla: "investors aren't worried about profits as
much as new EV technologies".
Dead - no. Severely squeezed - yes. New financing will be tough for survivors, and debt
overhand will not dissipate any time soon. As for investors putting money into questionable companies
(that Alex used as a counterargument) this is just throwing good money after bad. Most of those
"new" investors are already up to the neck in this s**t and are afraid to write down holdings.
So they decided to double down hoping that rising oil price will bail them out.
Nothing new here. America became the nation of speculators, big and small, so a new sucker
is born every minute. They expect that the rising tide will lift all boats. And they already forgot
lessons of 2008: I do not think investors memory (as a class) lasts more then five years. So a
new bubble and related fraud can have any period larger then five years. Almost eight year passed
from previous crash, so it's about time to milk those suckers again :-)
I think there will observable divergence between oil price rise and energy mutual funds/ETFs
price rise. The latter will rise more slowly as bankruptcies might spoil the show.
" Daniel Katzenberg, a senior analyst at Robert W. Baird, says investors aren't worried
about profits as much as production"
Alex,
" investors aren't worried about profits as much as production".
Is this America? Profits are not important? Well if investors are not worried about profits
than what is this? Charity, non-profit think-tank venture?
US Production is falling (substantially) and rigs are still declining so obviously "investors"
are not interested in production either. So Mr Katzenberg is talking baloneys. There are no investors.
This just last gasps of money printing. You can see the cracks everywhere.
Tesla is different. Tesla is still in hype 'stage" considering the number of vehicles sold..
You can run up Tesla stock so high just outside solar system and crash back and nobody will notice
a thing. Oil is different because all 7 billions of us are using it.
"If oil prices average $40 per barrel, U.S. shale oil production will likely decline by
3 million barrels per day between 2015 and 2020, and even if oil prices reach $60 per barrel,
a decline is still imminent, according to the International Energy Agency (IEA). US shale
production is not expected to halt the decline until we reach prices of $70 per barrel over the
same period."
IEA is completely disagreeing with anyone who is still claiming that shale has life below $70.
And you know what is interesting is that that 2 years ago IEA & EIA were singing the same song
but at this point IEA is splitting with that narrative because it is so obvious that you cannot
hide it anymore.
There will be time in a year when EIA will report the same and Wall Street will proclaim
"We are shocked. No one could have predicted this". Same old same old.
"... From the Iranian side, I have no doubts that an increase of another 1m barrels a day is precisely what they hope will happen, but the reality will surely be different. For all oil production, whether it is from an independent oil company or a sovereign nation, capital expenditures will determine the increase or decrease that can be achieved. Iran has a decidedly arthritic oil infrastructure, slowed by the lack of Western technology and the impact of a decade of sanctions. Their own economy is too weak to generate anywhere near the capex required to increase another 1 million barrels in the next year, and their overtures to foreign oil companies for leases inside Iran has been met cooly by prime contenders Total (TOT) and Eni (E). There is a lagged amount of already developed barrels that Iran can push onto the global market – perhaps 300,000 barrels a day; but by my reckoning, already 150,000 of those barrels have been added – making their ultimate targets very unlikely indeed to be reached. ..."
"... It wouldn't be consistent to believe that for the last year and a half, the Saudis have been capable of increasing their production by another 20 percent, but have so far kept that potential under wraps. Instead, I am fully of the opinion that the Saudis are near, if not at their full production potential right now. ..."
"... The oil market seems to agree – in February, if the threat of another 3 million barrels of oil hitting the global market had been unleashed, oil might have reached below $20 a barrel; today, oil is getting very close to rallying towards $50 a barrel instead. ..."
In light of the missed opportunity at Doha to curb OPEC production, angry statements have emerged
from both Iran and Saudi Arabia on oil production – the Iranians saying that they cannot be stopped
in increasing their exports another 1m barrels a day in the next 12 months, the Saudi oil minister
in turn threatening to increase production another 2m barrels a day. Both of these statements need
to be taken with not a grain, but a 5-pound bag of salt.
From the Iranian side, I have no doubts that an increase of another 1m barrels a day is precisely
what they hope will happen, but the reality will surely be different. For all oil production, whether
it is from an independent oil company or a sovereign nation, capital expenditures will determine
the increase or decrease that can be achieved. Iran has a decidedly arthritic oil infrastructure,
slowed by the lack of Western technology and the impact of a decade of sanctions. Their own economy
is too weak to generate anywhere near the capex required to increase another 1 million barrels in
the next year, and their overtures to foreign oil companies for leases inside Iran has been met cooly
by prime contenders Total (TOT) and Eni (E). There is a lagged amount of already developed barrels
that Iran can push onto the global market – perhaps 300,000 barrels a day; but by my reckoning, already
150,000 of those barrels have been added – making their ultimate targets very unlikely indeed to
be reached.
The Saudis do not have any of the capex or technology problems that plague the Iranians. But the
question of how much capacity the Saudis actually do have comes into play when they threaten to increase
production by another 2 million barrels. For my entire career in oil, there has always been a dark
question on Saudi 'spare capacity' – How much could the Saudis ultimately pump, if they were willing
to open the spigots up fully? For years, the speculation from most oil analysts was near to 7.5m
or 8m barrels a day – a number that was blown out in the last two years as Saudi production rocketed
above 10m barrels a day.
But the strategy the Saudis have pursued has been clear – they have been working towards full
production and an aggressive fight for market share since the failure of the Vienna OPEC meeting
in November of 2014. It is very difficult to believe that the Saudis have had much, if any, remaining
capacity to easily put on the market since that time, or if any spare capacity could be developed
at all. It wouldn't be consistent to believe that for the last year and a half, the Saudis have been
capable of increasing their production by another 20 percent, but have so far kept that potential
under wraps. Instead, I am fully of the opinion that the Saudis are near, if not at their full production
potential right now.
The oil market seems to agree – in February, if the threat of another 3 million barrels of oil
hitting the global market had been unleashed, oil might have reached below $20 a barrel; today, oil
is getting very close to rallying towards $50 a barrel instead.
"... Americans are driving more than ever before. Vehicle miles traveled (VMT) reached an all-time high of 3.15 trillion miles in February 2016 (Figure 2). VMT have increased 97 billion miles per month (3 percent) since the beginning of 2015 and gasoline sales have increased 187 kbpd (2 percent). The rates of increase are not proportional. ..."
Americans are driving more than ever before. Vehicle miles traveled (VMT) reached an all-time
high of 3.15 trillion miles in February 2016 (Figure 2). VMT have increased 97 billion miles per
month (3 percent) since the beginning of 2015 and gasoline sales have increased 187 kbpd (2 percent).
The rates of increase are not proportional.
... ... ...
From April 2015 to March 2016, oil production decreased 660 kbpd (-7 percent) but net crude oil
imports increased 800 kbpd (+10 percent) (Figure 5).
"... Last year, the seven biggest oil companies in the West only replaced 75 percent of their reserves. This is seriously bad news, especially combined with the fact that many new discoveries made in the last four years have disappointed. ..."
"... In the last four years the industry has seen disappointing - largely gas prone - exploration results, with the volume of liquids discovered annually falling from around 19 billion barrels between 2008 and 2011 to 8 billion barrels between 2012 and 2015 ..."
The third part of the problem is reserves replacement. New exploration is not just a form of art
for art's sake, or a means of expansion to boost bottom lines. It's an essential part of the operations
of an oil business. Oil is finite, and in order to stay profitable, an oil company needs to maintain
a consistent rate of reserves replacement.
And here's more bad news: Last year, the seven biggest oil companies in the West
only replaced 75 percent of their reserves. This is seriously bad news, especially combined with
the fact that many new discoveries made in the last four years have disappointed.
Wood Mac's exploration research vice-president told Offshore magazine that "In the last four years
the industry has seen disappointing - largely gas prone - exploration results, with the volume of
liquids discovered annually falling from around 19 billion barrels between 2008 and 2011 to 8 billion
barrels between 2012 and 2015."
"... Chevron Corp. shut down about 90,000 barrels a day of output following an attack on a joint-venture offshore platform that serves as a gathering point for production from several fields. Even before that strike on Wednesday night, Nigerian oil production had fallen below 1.7 million barrels a day for the first time since 1994, according to data compiled by Bloomberg. ..."
• Strike on Chevron platform cuts output by about 90,000 b/d
• Crude output fell in April to lowest in more than two decades
Nigeria is suffering a worsening bout of oil disruption that has pushed production to the lowest
in 20 years, as attacks against facilities in the energy-rich but impoverished nation increase
in number and audacity.
Chevron Corp. shut down about 90,000 barrels a day of output following an attack on a joint-venture
offshore platform that serves as a gathering point for production from several fields. Even before
that strike on Wednesday night, Nigerian oil production had fallen below 1.7 million barrels a
day for the first time since 1994, according to data compiled by Bloomberg.
"... that ND general stats show 13012 wells producing in Feb 2016 and 13212 in Oct 2016 (this is net i.e. wells added minus wells shut in), and 5) that taken together these do not indicate that there is any potential for a large production increase in the near or far future. ..."
"... I think we will have to see what happens when oil prices rise to $75/b or so, my expectation is that there will be at least 15,000 more wells completed in the Bakken/Three Forks in the next 10 years or so if oil prices rise to $75/b and remain at that level or higher. ..."
"... I expect ND Bakken/Three Forks output will increase gradually to maybe 1.22 Mb/d (only 60 kb/d above the previous peak) by about 2022 and then will gradually decline. This is under a scenario where the completion rate increases to 155 new wells per month and then gradually declines along with output. Total ERR of about 8.4 Gb and 27k total Bakken/Three Forks wells completed. The scenario requires high oil prices ($155/b in 2015$) by 2020, lower oil prices will mean less output. ..."
"... They know where it is because they searched heavily up to 2012. They didn't stop searching because of the price, or because they had so much acreage they didn't need any more. They stopped because they were hitting dry holes and ran out of places to look. That definitely does mean lack of success at the periphery. ..."
Dennis, I didn't look at well productivity, which is what you seem to be discussing. My points
were:
1) that there is no exploration drilling being conducted at present and that it declined quickly
after 2012 when prices were high, implying that there aren't any areas left worth looking at,
2) that 5 counties had high exploration success and these are the ones now responsible for
almost all production (and actually all in decline) and that the development in each county quickly
followed the exploration, suggesting core areas are key for overall production rates,
3) that other counties have been explored without success and are likely to be unproductive,
4) that ND general stats show 13012 wells producing in Feb 2016 and 13212 in Oct 2016 (this
is net i.e. wells added minus wells shut in), and 5) that taken together these do not indicate
that there is any potential for a large production increase in the near or far future.
If you think productivity increase is going to compensate for overall depletion and lack of
new exploration success then I think you are wrong.
They know where the oil is, there is not much need for exploration. I do not expect well productivity
to continue to increase, the chart was intended to show that there has been no productivity decrease
so far. I agree that at some point the sweet spots will be fully drilled and drilling will need
to move to less productive areas.
When that point is reached we will see new well productivity decrease.
Older low output wells from the non-Bakken formations have been shut in at faster rates due
to low prices, though some may be reactivated as oil prices rise. The NDIC seems to think there
are another 30,000 potential well locations, perhaps they are mistaken, the USGS also thinks there
are that many potential well sites and they could also be wrong.
I think we will have to see what happens when oil prices rise to $75/b or so, my expectation
is that there will be at least 15,000 more wells completed in the Bakken/Three Forks in the next
10 years or so if oil prices rise to $75/b and remain at that level or higher.
I also agree there won't be a large production increase (though we have not defined large).
I expect ND Bakken/Three Forks output will increase gradually to maybe 1.22 Mb/d (only
60 kb/d above the previous peak) by about 2022 and then will gradually decline. This is under
a scenario where the completion rate increases to 155 new wells per month and then gradually declines
along with output. Total ERR of about 8.4 Gb and 27k total Bakken/Three Forks wells completed.
The scenario requires high oil prices ($155/b in 2015$) by 2020, lower oil prices will mean less
output.
Exploration drilling in shale plays is important only in early stages of development. The
geology of the Bakken, Eagle Ford and the Permian is already very well known, and there is
no need for additional exploration. The fact that activity is currently concentrated in the
sweet spots does not mean lack of exploration success in the periphery. Resources are there,
but they are too costly to produce at current oil prices.
They know where it is because they searched heavily up to 2012. They didn't stop searching
because of the price, or because they had so much acreage they didn't need any more. They stopped
because they were hitting dry holes and ran out of places to look. That definitely does mean
lack of success at the periphery.
"... "Mr Sechin warned last week that the current shale boom could be another "dotcom bubble" about to burst after drillers, loaded up on risky debt, and hedge funds piled in to make a quick buck over the last five years." Seems like he was prescient in that observation as well. ..."
"... The elephant in the room is the cost of production which for most countries including the USA and Canada is far higher then the current prices. That means that the wave of bankruptcies and drop in the USA production will continue unabated. The total loss might be above 1 Mb/d for the 2016. Canada also lost some production (currently 0.5 Mb/d due to fires) and needs about $80 for tar sand production to be profitable. Chances that oil price will reach this level in 2016 are slim, so the future of Canadian tar sand oil production is grim. ..."
"... Several oil producing countries are on the verge of bankruptcy (Nigeria, Venezuela, Iraq). Saudi are losing around 100 billion a year in currency reserves while still playing a role of Trojan horse of the West in oil markets. ..."
"... This situation is unsustainable and speculator/HFT driven suppression of oil prices at some point might break and will be replaced by a new price boom. It in highly probable that the price of oil will reach, at least temporary, the level of $55 this year. ..."
"... But oil is a strategic product and high oil prices mean stagnation of Western economies. The key problem is that high oil prices threaten neoliberalism as a social system and derail neoliberal globalization. So they will be fought tooth and nail by the US and the EU elites. That's why agreement to freeze oil production by OPEN was derailed. Another victory of western diplomacy. ..."
Perhaps Igor Sechin is right (Sechin is head of the Russian energy company Rosneft and a close
ally of Putin). In a Telegraph article on 2/2/15, discussing Sechin and the remarks he made at
an oil consortium, the author comments that, "However, the real "haymaker" punch he ( meaning
Sechin ) aimed at the global energy system came with the accusation that oil futures markets
in London and New York, which set the price of the world's most vital energy commodity, are essentially
being rigged by a feral cabal of speculators and traders." That would explain the obvious disconnect
discussed by the author here concerning the red herrings put out by the oil sector. Interesting
as well, in the article mentioned above the author also notes, "Mr Sechin warned last week
that the current shale boom could be another "dotcom bubble" about to burst after drillers, loaded
up on risky debt, and hedge funds piled in to make a quick buck over the last five years." Seems
like he was prescient in that observation as well.
The elephant in the room is the cost of production which for most countries including the
USA and Canada is far higher then the current prices. That means that the wave of bankruptcies
and drop in the USA production will continue unabated. The total loss might be above 1 Mb/d for
the 2016. Canada also lost some production (currently 0.5 Mb/d due to fires) and needs about $80
for tar sand production to be profitable. Chances that oil price will reach this level in 2016
are slim, so the future of Canadian tar sand oil production is grim.
Several oil producing countries are on the verge of bankruptcy (Nigeria, Venezuela, Iraq).
Saudi are losing around 100 billion a year in currency reserves while still playing a role of
Trojan horse of the West in oil markets.
This situation is unsustainable and speculator/HFT driven suppression of oil prices at
some point might break and will be replaced by a new price boom. It in highly probable that the
price of oil will reach, at least temporary, the level of $55 this year.
But oil is a strategic product and high oil prices mean stagnation of Western economies.
The key problem is that high oil prices threaten neoliberalism as a social system and derail neoliberal
globalization. So they will be fought tooth and nail by the US and the EU elites. That's why agreement
to freeze oil production by OPEN was derailed. Another victory of western diplomacy.
Arthur Berman was a very keen observer of shale bubble in the USA until recently. Then something
changed.
"... Iraq: Production at an oilfield near Kirkuk, in northern Iraq, has been stopped after unidentified gunmen set at least two wells on fire on Tuesday night. ..."
"... US: An official update will be released next week, but Director of Mineral Resources Lynn Helms told an oil industry group in Williston he expects to see a "severe" production drop. ..."
"... IPD's prediction comes on the heels of its quarterly sector survey, which estimated Venezuela's oil output tumbled 6.8 percent to 2.59 million bpd in the first quarter compared with the same period of 2015, due to drilling delays, insufficient maintenance, theft, and diluent shortfalls. ..."
"... …Morgan Stanley's Benny Wong … estimates that the total number of offline capacity will be anywhere between 400 and 500 mbbl/d, with the shut-in expected to last about 10 days, potentially reducing total market output by as much as 5 million barrels. ..."
"... Americans are driving more than ever before. Vehicle miles traveled (VMT) reached an all-time high of 3.15 trillion miles in February 2016 Figure 2). VMT have increased 97 billion miles per month (3 percent) since the beginning of 2015 and gasoline sales have increased 187 kbpd (2 percent). The rates of increase are not proportional. ..."
Canada: Taken together this amounts to some 0.5 million [barrels a day] of capacity that is
currently offline. Infrastructure is being affected too, with the 560,000 b/d Corridor pipeline
shut down and movement along the 140,000 b/d Polaris pipeline significantly curtailed.
Lybia: An official at the port told the news agency that tanks at Hariga were 7-10 days away
from hitting their full capacity. This means, Reuters reported, that with no tankers loading oil
at the port, Libya will be forced to shut in about 120,000 bpd of output, which is the export
capacity of the port.
Iraq: Production at an oilfield near Kirkuk, in northern Iraq, has been stopped after unidentified
gunmen set at least two wells on fire on Tuesday night.
US: An official update will be released next week, but Director of Mineral Resources Lynn Helms
told an oil industry group in Williston he expects to see a "severe" production drop.
And all of that is worth a $1.17 of increase on WTI/Brent in the last 24h!!! Really? :-)
Venezuela's oil output may fall to average some 2.35 million barrels-per-day this year, as
the South American OPEC country's cash crunch and shortages weigh on production, according to
energy consulting firm IPD Latin America.
IPD's prediction comes on the heels of its quarterly sector survey, which estimated Venezuela's
oil output tumbled 6.8 percent to 2.59 million bpd in the first quarter compared with the same
period of 2015, due to drilling delays, insufficient maintenance, theft, and diluent shortfalls.
That estimate is a whisker above the 2.53 million bpd Venezuela produced in the first quarter,
according to OPEC numbers. But it marks the first time since the third quarter of 2008 that production
fell in all districts, including the extra-heavy crude Orinoco Belt, IPD added.
"…Analysts noted that Shell shut its Albian Sands mine and Suncor shut its base plant, while
producers Syncrude Canada and Connacher Oil & also reduced output in the region."Taken together
this amounts to some 0.5 million b/d of capacity that is currently offline. Infrastructure
is being affected too, with the 560,000 b/d Corridor pipeline shut down and movement along
the 140,000 b/d Polaris pipeline significantly curtailed. On top of that, trains are not operating
near Fort McMurray, according to the Canadian National Railway," said the analysts.
…Morgan Stanley's Benny Wong … estimates that the total number of offline capacity will
be anywhere between 400 and 500 mbbl/d, with the shut-in expected to last about 10 days, potentially
reducing total market output by as much as 5 million barrels.
Americans are driving more than ever before. Vehicle miles traveled (VMT) reached an all-time
high of 3.15 trillion miles in February 2016 Figure 2). VMT have increased 97 billion miles
per month (3 percent) since the beginning of 2015 and gasoline sales have increased 187 kbpd
(2 percent). The rates of increase are not proportional.
…From April 2015 to March 2016, oil production decreased 660 kbpd (-7 percent) but net crude
oil imports increased 800 kbpd (+10 percent) (Figure 5).
The surplus in early 2016 was closer to about 500,000 b/d, he says, and should continue to
fall. "The oversupply in the market is grossly overstated," King says.
A lag in output data is partly due to the high estimates, King says, and surpluses are likely to
be much lower in the coming months as surplus numbers begin to catch up with the real decreases
in supplies. "People are still suggesting it's one million or two million barrels per day-it's
nothing even close to that."
FirstEnergy sees prices for West Texas Intermediate averaging $55 for 2017, then rising to
$66.25 over 2018 and $74 in 2019, according to its quarterly market update. "In 2017 you'll start
to see things look a little bit better," King said. "The market in our view is reaching a
balanced position. Inventories are starting to roll over, demand is doing great and supplies are
coming off-the three basics you need for better pricing."
Some analysts have suggested the gradual rise in WTI prices could trigger a simultaneous rise in
U.S. shale oil production, which would ultimately offset any gains in prices. King said this
scenario was unlikely, as many producers have already locked in their 2016 spending programs, and
capital markets remain tight and the high-yield debt market continues to sputter.
"... 72% of petroleum used is for transportation. 63% of that is light duty
vehicles. So of 90mbod, 40 million barrels are subject to potential substitution
by electric vehicles. The adoption curve need only stay ahead of the decline curve.
..."
"... As an ex Mack Trucks sales person. I always considered SUVs and pickups
as light duty. I agree they will be electrified but it's going to take a little
longer than passenger vehicles. Right now hybrids are much more feasible because
of the more extreme workload they preform. Towing a 10k trailer a couple of hundred
of miles is going to take a lot of juice. ..."
"... America already runs hybrid buses if you consider that electric. To get
were the world needs to be, we're going to need a lot of f'n batteries. Once the
world solves the battery issue, there is not much reason class 8's can't be electrified
starting with local delivery trucks. ..."
Differences of opinion are what make discussion interesting.
72% of petroleum used is for transportation. 63% of that is light
duty vehicles. So of 90mbod, 40 million barrels are subject to potential
substitution by electric vehicles. The adoption curve need only stay ahead
of the decline curve.
Why worry about Caterpillars first when transportation is the biggest
slice of the petroleum pie, and the most readily subject to supercession
by other energy sources?
Transition may be improbable, but that's different than impossible.
Assuming that an ICE is 20% as efficient as an EV, which seems reasonable
as one barrel of oil is energy equivalent to 1628.2kWh, and will produce
19 gallons of gasoline, and 12 gallons of diesel. Assuming 30 mpg economy
for each, the barrel of oil provides 930 miles of travel, while 1628.2 kWh
at 3mpkWh will provide 4,884 miles of travel.
So if the light duty transport fleet was replaced 100% with electric
vehicles, 40.8 mbo/day would require 13.3 TWh of electric power substitution.
We have increased global annual renewable power production by 3,250 TWh's
in the last decade, so to increase renewable power production by 2030 to
produce 13TWh/day to offset 40.8 MBO/day used in the transportation sector
would require that we accomplish in the next fifteen years what we have
accomplished in the last ten (+3,250TWhp/decade).
As for the vehicles, all we must do is replace 100% of the light duty
fleet with EV's in that same 15 years. Easy as pie, right? :-)
As an ex Mack Trucks sales person. I always considered SUVs and pickups
as light duty. I agree they will be electrified but it's going to take a
little longer than passenger vehicles. Right now hybrids are much more feasible
because of the more extreme workload they preform. Towing a 10k trailer
a couple of hundred of miles is going to take a lot of juice.
America already runs hybrid buses if you consider that electric.
To get were the world needs to be, we're going to need a lot of f'n batteries.
Once the world solves the battery issue, there is not much reason class
8's can't be electrified starting with local delivery trucks.
"... As a warning to investors, EIA (Energy Information Administration) and IEA (International Energy Agency) data is reliable; however, their judgments are politically motivated. ..."
"... Also, there is no "glut" of oil. The market need is to power a 365-day food cycle. The reported "glut" is a storage problem of having 33.8 Days of Supply, 10 days more than the 24 Days of Supply typical for the past decade. ..."
As a warning to investors, EIA (Energy Information Administration) and IEA (International
Energy Agency) data is reliable; however, their judgments are politically motivated. Here is
a graph by the Dallas Federal Reserve on how, year after year, EIA forecasts repeatedly estimated
oil prices would drop as the 2008 economic collapse approached.
...As with failing to warn of higher oil costs in the ramp to the 2008 economic collapse, the
EIA is failing to warn the nation of the economic consequences of Peak Fracking. This provides investors
a knowledge gap.
... ... ...
To better understand oil geology and economics here are two links:
The mega-trends will force oil prices higher much faster than most believe.
Also, there is no "glut" of oil. The market need is to power a 365-day food cycle. The reported
"glut" is a storage problem of having 33.8 Days of Supply, 10 days more than the 24 Days of Supply
typical for the past decade. Economic fragility is created by not having 365 Days of Supply to meet
the needs of a 365-day food cycle; Examples: 1973 Oil Embargo, 1979 Iranian Revolution. Having 33.8
Days of Supply is only a 9% safety factor on a survival need. Take away the 18 Days of Supply required
to fill pipelines and there is a 4% safety margin on a non-elastic survival need. Fragility is extreme.
"... a true crisis is looming-and for the moment, there is no apparent way around it. ..."
"... Wood Mac's exploration research vice-president told Offshore magazine that "In the last four years the industry has seen disappointing - largely gas prone - exploration results, with the volume of liquids discovered annually falling from around 19 billion barrels between 2008 and 2011 to 8 billion barrels between 2012 and 2015." ..."
A
report by Wood Mackenzie has warned the world may face a daily oil shortage of 4.5 million barrels
by 2035. The amount represents around half of the global consumption
estimate of the International Energy Agency (IEA)
for 2016. In other words, a true crisis is looming-and for the moment, there is no apparent way around
it.
The most obvious reason is that energy companies don't want to spend money on exploration when
prices are so disappointingly low. Many of them simply can't afford to spend on exploration if they
want to survive in today's price environment. Ironically, their long-term survival can only be guaranteed
by further exploration spending.
A lot of costly projects have been shelved since the summer of 2014 when oil prices started falling,
with the initial investments basically written off. Reviving these projects will cost more money.
Where this money will come from is unclear-there is no certainty where oil prices are going in the
near term, let alone any longer period, and the European Commission today forecasted $41/barrel oil
for the rest of this year and just over $45 for 2017.
... ... ...
The third part of the problem is reserves replacement. New exploration is not just a form of art
for art's sake, or a means of expansion to boost bottom lines. It's an essential part of the operations
of an oil business. Oil is finite, and in order to stay profitable, an oil company needs to maintain
a consistent rate of reserves replacement.
And here's more bad news: Last year, the seven biggest oil companies in the West
only replaced 75 percent of their reserves. This is seriously bad news, especially combined with
the fact that many new discoveries made in the last four years have disappointed.
Wood Mac's exploration research vice-president told Offshore magazine that "In the last four years
the industry has seen disappointing - largely gas prone - exploration results, with the volume of
liquids discovered annually falling from around 19 billion barrels between 2008 and 2011 to 8 billion
barrels between 2012 and 2015."
the fundamentally unsustainable pricing that we've seen for much of 2016, particularly after
the 2nd failed OPEC meeting, has been much more dependent upon speculative short positions in the
market, particularly from algorithmic momentum funds. We could track the speculative short
positions against the price of crude almost exactly as prices dropped below $40 the first time,
with long positions decreasing to their lowest levels in five years as crude dropped under $30 a
barrel.
"... According to Professor Michael Jefferson, who spent nearly 20 years at Shell in various senior roles from head of planning in Europe to director of oil supply and trading, "the five major Middle East oil exporters altered the basis of their definition of 'proved' conventional oil reserves from a 90 percent probability down to a 50 percent probability from 1984. The result has been an apparent (but not real) increase in their 'proved' conventional oil reserves of some 435 billion barrels." ..."
"... Global reserves have been further inflated, he wrote in his study, by adding reserve figures from Venezuelan heavy oil and Canadian tar sands – despite the fact that they are "more difficult and costly to extract" and generally of "poorer quality" than conventional oil. This has brought up global reserve estimates by a further 440 billion barrels. ..."
"... Jefferson's conclusion is stark: "Put bluntly, the standard claim that the world has proved conventional oil reserves of nearly 1.7 trillion barrels is overstated by about 875 billion barrels. Thus, despite the fall in crude oil prices from a new peak in June, 2014, after that of July, 2008, the 'peak oil' issue remains with us." ..."
An extensive new scientific
analysis published in Wiley Interdisciplinary Reviews: Energy & Environment says that proved
conventional oil reserves as detailed in industry sources are likely "overstated" by half.
According to standard sources like the Oil & Gas Journal, BP's Annual Statistical Review of World
Energy, and the US Energy Information Administration, the world contains 1.7 trillion barrels of
proved conventional reserves.
However, according to the new study by Professor Michael Jefferson of the ESCP Europe Business
School, a former chief economist at oil major Royal Dutch/Shell Group, this official figure which
has helped justify massive investments in new exploration and development, is almost double the real
size of world reserves.
Wiley Interdisciplinary Reviews (WIRES) is a series of high-quality peer-reviewed publications
which runs authoritative reviews of the literature across relevant academic disciplines.
According to Professor Michael Jefferson, who spent nearly 20 years at Shell in various senior
roles from head of planning in Europe to director of oil supply and trading, "the five major Middle
East oil exporters altered the basis of their definition of 'proved' conventional oil reserves from
a 90 percent probability down to a 50 percent probability from 1984. The result has been an apparent
(but not real) increase in their 'proved' conventional oil reserves of some 435 billion barrels."
Global reserves have been further inflated, he wrote in his study, by adding reserve figures from
Venezuelan heavy oil and Canadian tar sands – despite the fact that they are "more difficult and
costly to extract" and generally of "poorer quality" than conventional oil. This has brought up global
reserve estimates by a further 440 billion barrels.
Jefferson's conclusion is stark: "Put bluntly, the standard claim that the world has proved conventional
oil reserves of nearly 1.7 trillion barrels is overstated by about 875 billion barrels. Thus, despite
the fall in crude oil prices from a new peak in June, 2014, after that of July, 2008, the 'peak oil'
issue remains with us."
Looks like you was right about timing of peak oil. The trend of production down is becoming
more clear with each month. It might be disrupted by some noise (end of Libya civil war, etc),
but still with no new major deposits discovered I do not see factors that can change it.
Higher oil prices might change things and that chart is US only.
IEA expects non-OPEC output to fall 750 kb/d in 2016, some of this may be made up by increases
in Iranian, Iraqi, and Libyan output. On an annual basis 2016 may be pretty close to average annual
output in 2015 for C+C. It will be interesting to see how things play out, I still like the plateau
scenario which I will define as World C+C output remaining between 79 and 81 Mb/d on average for
any 12 month period from now until 2025.
Higher oil prices might change things and that chart is US only.
I understand that the chart is the US only but it is the harbinger of things to come globally.
As for higher oil prices, they need to get into $70-$80 range first where high cost oil projects
including US LTO became profitable to change the current trend. Before that "recovery of oil prices"
does not change much for non conventional oil producers. For some (for example the USA) conventional
oil producers the lower range you provided before might be OK, but most oil producing countries
with national oil companies could not balance budget below $90.
IMHO prices below $70-$80 mean for non conventional producers the continuation of "survival
mode" or "extend and pretend". With the only difference that the dates of renewal of credit lines
coming closer. And that magic range of prices $70-$80 probably will not be reached this year.
So I would say your expectations are too optimistic.
When you cite IEA it make sense to provide some information of their track record of production
forecasting accuracy during previous sharp reversals of oil prices trends. My impression is that
they are way too "linear extrapolation" type of animal.
This conclusion strengthen considerably if we take into account that this is 50% propaganda
agency which needs to support "low oil price forever" regime as a part of their institutional
agenda. In other words this an agency that is serving G7 countries interested in low oil prices.
That creates certain limits on what they can say so it is natural for them to try to downplay
any possible drop in oil production. It would extremely stupid to expect from them any other behavior.
So IMHO you can safely double their estimates in such cases.
Reality is pretty grim now for oil producers and you need to understand that a lot of skeletons
in the closet (including financial skeletons) remain hidden. So actual situation can be much worse
then we assume and another quarter of low prices by which I mean prices below which conventional
oil production in the USA is unprofitable (let's say $55) might be the straw that broke the camel's
back.
So there is a hope that neoliberals lose control over oil prices at some point.
I agree with you about wild cards like Iran and Libya. But the US is ambivalent about allowing
Iran to recover oil production and there are moves directed at confiscation part of their "frozen"
funds without which this is almost impossible with the current prices. But still we can expect
that both of those cards be played to slow down price recovery (and ayatollahs proved to be extremely
stupid, if you ask me; not much different from Wahhabis sheiks. why they did not cooperate with
oil price freeze (for six months; only six months!) is beyond me. But even Iran ayatollahs arrogant
stupidity can't change general trend, which is down.
Iraq can't meaningfully increase production right now as this is an almost bankrupt by civil
war country and chances to restore peace this year are slim. Saudis and friends continue to finance
Sunni insurgency. It was inertia from "good old times" that drove their production up in 2015.
This is over.
Shale card was already played once (and it was played very well) but that's it. Now "carpet
drilling" trick will not be repeated again even if price reach magic level of $80: unlimited financing
of shale drilling is gone for good.
My impression is that there are powerful forces that are not interested in oil price recovery
and do not care about negative long term consequences of waiting so much oil instead of extending
conservation technologies.
Unless those forces (of neoliberalism) are somehow suppressed I doubt that prices can recover
to the level that allow expansion of production. And in oil prices world the tail still wags the
dog: Wall Street still determine oil prices in a sense that it is able vastly amplify the moves
via HFT.
Also oil producers also now are disorganized mob unable to protect their own interests, so
I would not expect meaningful actions from OPEC unless there is a coup d'état in KSA that removes
the young gambler prince who almost halved country currency reserves.
…found in the third group of experiments (see the scenarios for an unequal society in section
5.3), where we introduced economic stratification. Under such conditions, we find that
collapse is difficult to avoid , which helps to explain why economic stratification
is one of the elements consistently found in past collapsed societies. Importantly, in the
first of these unequal society scenarios, 5.3.1, the solution appears to be on a sustainable
path for quite a long time, but even using an optimal depletion rate () and starting with a
very small number of Elites, the Elites eventually consume too much, resulting in a famine
among Commoners that eventually causes the collapse of society. It is important to note that
this Type-L collapse is due to an inequality-induced famine that causes a loss of workers,
rather than a collapse of Nature. Despite appearing initially to be the same as the sustainable
optimal solution obtained in the absence of Elites, economic stratification changes the final
result: Elites' consumption keeps growing until the society collapses . The
Mayan collapse -in which population never recovered even though nature did recover- is an example
of a Type-L collapse, whereas the collapses in the Easter Island and the Fertile Crescent -where
nature was depleted- are examples of a Type-N collapse.
In scenario 5.3.2, with a larger depletion rate, the decline of the Commoners occurs faster,
while the Elites are still thriving, but eventually the Commoners collapse completely, followed
by the Elites. It is important to note that in both of these scenarios, the Elites -due to
their wealth- do not suffer the detrimental effects of the environmental collapse until much
later than the Commoners. This buffer of wealth allows Elites to continue 'business
as usual' despite the impending catastrophe . It is likely that this is an important
mechanism that would help explain how historical collapses were allowed to occur by elites
who appear to be oblivious to the catastrophic trajectory (most clearly apparent in the Roman
and Mayan cases). This buffer effect is further reinforced by the long, apparently sustainable
trajectory prior to the beginning of the collapse. While some members of society might
raise the alarm that the system is moving towards an impending collapse and therefore
advocate structural changes to society in order to avoid it, Elites and their supporters, who
opposed making these changes, could point to the long sustainable trajectory 'so far' in support
of doing nothing."
-------------–
"It is well known that Americans consume far more natural resources and live much less sustainably
than people from any other large country of the world. 'A child born in the United States will
create thirteen times as much ecological damage over the course of his or her lifetime than
a child born in Brazil', reports the Sierra Club's Dave Tilford, adding that the average American
will drain as many resources as 35 natives of India and consume 53 times more goods and services
than someone from China.
Tilford cites a litany of sobering statistics showing just how profligate Americans have
been in using and abusing natural resources. For example, between 1900 and 1989 U.S. population
tripled while its use of raw materials grew by a factor of 17. ' With less than 5 percent
of world population, the U.S. uses one-third of the world's paper, a quarter
of the world's oil, 23 percent of the coal , 27 percent of the aluminum, and 19 percent
of the copper', he reports. 'Our per capita use of energy, metals, minerals, forest products,
fish, grains, meat, and even fresh water dwarfs that of people living in the developing world.'.
He adds that… Americans account for only five percent of the world's population
but create half of the globe's solid waste.
Americans' love of the private automobile constitutes a large part of their poor
ranking . The National Geographic Society's annual Greendex analysis of global consumption
habits finds that Americans are least likely of all people to use public transportation-only
seven percent make use of transit options for daily commuting. Likewise, only one in three
Americans walks or bikes to their destinations… the U.S. remains the per capita consumption
leader for most resources.
Overall, National Geographic's Greendex found that American consumers rank last of 17 countries
surveyed in regard to sustainable behavior. Furthermore, the study found that U.S. consumers
are among the least likely to feel guilty about the impact they have on the environment…" ~
Scientific American
"The American way of life is not up for negotiation." ~ George Bush Sr.
Yes but China is burning that coal to make all of the "stuff" that the US buys so you could argue
that the US is consuming that coal. I may even be greater than 23%.
exactly Jef. this whole globalization is just a buzzword to hide what is really trashing the mother
earth by the global 1%. Pointing fingers who trash more is illusion fed to us so we can chew on
it and be distracted because the real game is played between 1% versus 99% no matter where they
live.
U.S. gasoline consumption, averaged over four weeks, rose 3.9 percent from
a year earlier to 9.39 million barrels a day through April 15, Energy Information
Administration data show. Demand this summer will increase 1.4 percent to a
record, the EIA said April 12. Americans drove 232.2 billion vehicle miles in
February, up 5.6 percent from a year earlier, Transportation Department data
show.
"Gasoline demand is quite strong and that's all price driven," said Thomas
Finlon, director of Energy Analytics Group LLC in Wellington, Florida. "Demand
for gasoline should provide support for crude."
The average price of regular gasoline at the pump nationwide was $2.136 a
gallon on Sunday, down 15 percent from a year earlier, according to data from
Heathrow, Florida-based AAA, a national federation of motor clubs.
Speculators' net-long position in WTI gained by 30,357 futures and options
combined to 245,987, CFTC data show. Long positions, or bets that prices will
rise, increased 4.8 percent, while shorts tumbled 19 percent.
In other markets, net bullish bets on Nymex gasoline climbed 15 percent to
23,357 contracts. Gasoline futures declined 3.5 percent in the period. Net bearish
wagers on U.S. ultra low sulfur diesel decreased 11 percent to 7,773 contracts,
the least since June as futures slipped 1 percent.
"... All of them are already in decline, as well as fields discovered in the sixties and seventies. There are a few exception – fields discovered several decades ago, but developed only recently (Manifa in Saudi Arabia, Kashagan in Kazakhstan). ..."
"... Rystad Energy estimates that only 9 Billion boe were discovered during 2015. This is 30% down from 2014 which was an all-time low. For comparison, world oil production is in the order of 30+ billion barrels each year. ..."
"... only 19% of the produced conventional resources were replaced by new discovered volumes last year, says Nils-Henrik Bjurstrøm, Senior Project Manager, in Rystad Energy ..."
"... Regrettably, the negative trend continues. In January 2016, only 250 million boe were discovered (in comparison, the Goliath field in the Barents Sea has reserves of approximately 200 MMbo), indicating a possibility for an even lower exploration result in 2016, says Bjurstrøm. ..."
"... So potentially going from just 9 billion BOE in 2015 to maybe 3 billion BOE in 2016. When will the oil markets take notice of this? Also, wonder how much of that is natural gas and condensate? ..."
"... Nobody is arguing that "all the supergiants" will come off their plateaus at the same time. That's a cheap straw man argument. Plus it's meaningless because there's no sense of that "at the same time" means. ..."
"... We don't need all of the super giants to go into decline all at the same time - two or three going into decline within a five year period would suffice. Or just one - Gawhar - would do. I think the probability of several super giants going into decline more or less at the same time is quite possible. But since nobody knows what the probabilities are, making any statements about the probabilities is pointless. ..."
"... I agree. Furthermore, I think everyone here realizes most oil comes from oilfields discovered prior to 1970 and almost all oilfields that still produce an average of over 500,000 barrels per day are 70-ish years old. So, ignoring Ghawar, Burgan and Daquing, oilfields that HAD a productive capacity exceeding one million barrels a day include Samotlor (1965), Prudhoe Bay (1968) and Cantarell (1976). That's not a flush but it is three of a kind. ..."
"... And all of those 1mb/d+ supergiants are already in decline (the most recent – Daquing) ..."
From a statistics perspective the chances of all the supergiants coming off their plateaus
at about the same time is quite an unrealistic assumption. Do you guys get a lot of straight flushes
when you play poker (no wild cards)? I have played a little poker and have never seen a straight
flush in real life, only in the movies.
You are no doubt correct that the old supergiants won't all go into terminal decline together,
but it does seem reasonable to assume that most of them will peak and begin to go downhill within
some particular time frame measured from first production.
Now I am going to pull some numbers out of thin air to illustrate my point, and then maybe
somebody who knows more can elaborate on the significance of it.
Let us suppose that the really big oil fields mostly peak between say thirty and forty years
from first production.
It is my impression as a casual observer rather than a numbers cruncher or hands on investor
that just about all the really big oil fields were discovered and put into production at least
that long ago.
So taken as a group, they will probably begin going into decline AS A GROUP all together over
about the same time frame as they were discovered as a group.
Fields discovered and first produced in the fifties, if I am right about this, will probably
mostly all go into decline together over a period of about a decade or so, by way of example.
Basically what I am trying to say is that oil fields probably have a statistically predictable
life span, and that most of the really big ones are probably all roughly about the same age, in
terms of being produced. Nearly all of them will probably peak with in ten to fifteen more years,
since all of them are getting to be up around thirty or forty years of production history.
IIRC, it's been a hell of a long time since somebody discovered a new super giant or giant
field.
Somebody like Fernando ought to be able to take this observation and run with it.
"Fields discovered and first produced in the fifties, if I am right about this, will probably
mostly all go into decline together over a period of about a decade or so, by way of example."
All of them are already in decline, as well as fields discovered in the sixties and seventies.
There are a few exception – fields discovered several decades ago, but developed only recently
(Manifa in Saudi Arabia, Kashagan in Kazakhstan).
As I understand, the main sources of growth in global proved oil reserves in the past 10 years
were:
1) Rising oil prices, which enabled to include Venezuela's ultra-heavy oil from the Orinoco
belt and some other high-cost resources into proved reserve category;
2) New discoveries (which, as you say, are now much smaller than in previous decades);
3) Upward revisions of reserve estimate of the already developed fields due to reserves extension,
new reservoir discoveries in old fields, use of improved recovery techniques or equipment, etc.;
4) Inclusion of part of LTO resources into proved reserve category.
The contribution of new discoveries was actually a secondary factor.
The year 2015 was a global all-time low in terms of conventional oil and gas discoveries, says
Nils-Henrik Bjurstrøm in Rystad Energy.
Rystad Energy estimates that only 9 Billion boe were discovered during 2015. This is 30%
down from 2014 which was an all-time low. For comparison, world oil production is in the order
of 30+ billion barrels each year.
– As a result, only 19% of the produced conventional resources were replaced by new discovered
volumes last year, says Nils-Henrik Bjurstrøm, Senior Project Manager, in Rystad Energy ,
to geo365.no.
Regrettably, the negative trend continues. In January 2016, only 250 million boe were discovered
(in comparison, the Goliath field in the Barents Sea has reserves of approximately 200 MMbo),
indicating a possibility for an even lower exploration result in 2016, says Bjurstrøm.
Note: 9 Billion boe discovered during 2015 and 250 mboe discovered in 1Q16 are oil and gas.
And the discovered volumes are not immediately included in proved reserve category
So potentially going from just 9 billion BOE in 2015 to maybe 3 billion BOE in 2016. When
will the oil markets take notice of this? Also, wonder how much of that is natural gas and condensate?
Note: XOM produces over 4 million BOEPD. In 2015 proved reserves fell 24%. First time they
didn't replace 100% of reserves since 1990s.
Yes, I understand price has something to do with that. But still?
Exxon's total liquids proved reserves actually increased from 13713 million barrels on December
31, 2014 to 14724 million barrels on December 31, 2015
(source: 10-k)
There was a sharp downward revision in nat gas proved reserves, reflecting lower gas prices.
ExxonMobil Corp. added 1 billion boe of proved oil and gas reserves in 2015, replacing just
67% of production during the year compared with 115% over the past 10 years.
In 2014, the firm replaced 104% of its production by adding proved oil and gas reserves totaling
1.5 billion boe.
The 2015 total includes a 219% replacement ratio for crude oil and other liquids.
However, proved reserves of natural gas were reduced by 834 million boe primarily in the US, reflecting
the change in gas prices. The company expects this gas to be developed and booked as proved reserves
in the future.
At yearend, ExxonMobil's proved reserves totaled 24.8 billion boe. Liquids represented 59% of
proved reserves, up from 54% in 2014. ExxonMobil's reserves life at current production rates is
16 years.
Reserves during the year were added in Abu Dhabi, Canada, Kazakhstan, and Angola. Liquid additions
totaled 1.9 billion bbl.
ExxonMobil added 1.4 billion boe to its resource base through by-the-bit exploration discoveries,
undeveloped resource additions, and strategic acquisitions.
The firm's exploration activity in 2015 included the Liza oil discovery offshore Guyana (OGJ
Online, May 20, 2015), and additional discoveries in Iraq, Australia, Romania, and Nigeria. Strategic
unconventional resource additions were made in the Permian basin, Canada, and Argentina.
Overall, the company's resource base totaled more than 91 billion boe at yearend 2015, taking
into account field revisions, production, and asset sales. The resource base includes proved reserves,
plus other discovered resources that are expected to be ultimately recovered.
Really Dennis? From a statistics perspective? Assuming what probability distribution and correlation
matrix?
Nobody is arguing that "all the supergiants" will come off their plateaus at the same time.
That's a cheap straw man argument. Plus it's meaningless because there's no sense of that "at
the same time" means.
We don't need all of the super giants to go into decline all at the same time - two or
three going into decline within a five year period would suffice. Or just one - Gawhar - would
do. I think the probability of several super giants going into decline more or less at the same
time is quite possible. But since nobody knows what the probabilities are, making any statements
about the probabilities is pointless.
I agree. Furthermore, I think everyone here realizes most oil comes from oilfields discovered
prior to 1970 and almost all oilfields that still produce an average of over 500,000 barrels per
day are 70-ish years old. So, ignoring Ghawar, Burgan and Daquing, oilfields that HAD a productive
capacity exceeding one million barrels a day include Samotlor (1965), Prudhoe Bay (1968) and Cantarell
(1976). That's not a flush but it is three of a kind.
I was responding to a comment by George Kaplan, he said:
…all the supergiants have been developed with extensive IOR/EOR methods and may come off
plateau and collapse production at about the same time (for me this sudden high decline rate,
more than the actual peak is what is going to destroy the world economy if we don't do something
– in fact a lot – beforehand).
So based on the excellent comments by AlexS and Rune Likvern, we know that most of the supergiant
fields are already declining, but the question would be is it very likely they all begin a "collapse
in production" at about the same time time.
I believe the probability is low and I interpret "about the same time" as within 5 years and
"collapse in production" as a field decline of 10% or more.
It would be interesting in hearing other opinions on how likely this scenario is, I would guess
it is less than 5%.
Hi Doug,
Using the Wikipedia list of giant oil fields there are 59 fields that have a URR of 5 Gb or
more. The point is that the most notable "collapse" has been Cantarell, as long as the "collapse"
doesn't happen "at about the same time" in all 59 fields we are unlikely to see a steep decline
in World output, as long as there is adequate demand for oil to keep oil prices at a level where
it continues to be profitable to develop reserves.
If there is an economic collapse due to excessive debt, or some other reason (high oil prices
maybe), then decline might be steeper, essentially this will depend on the extent of the economic
downturn. That is difficult to predict.
Teapot refiners continue to show ability to process additional volumes of oil, which suggest that
a Chinese economy might be turning a corner
Notable quotes:
"... In the first quarter of this year China diverted about 787,000 barrels per day into its strategic stockpile, the highest rate since Bloomberg has been tracking the data in 2004. Overall, as of March, China was importing around 7.7 million barrels per day. ..."
"... These so-called "teapot refineries," with capacities of around 20,000 to 100,000 barrels of production per day, struggled under the old restrictions, producing at only 30 to 40 percent of capacity because of an inability to import oil. That has changed, and domestic refining production is set to rise, and with it, so are imports. ..."
In the first quarter of this year China diverted about 787,000 barrels per day into its strategic
stockpile, the highest rate since Bloomberg has been tracking the data in 2004. Overall, as of March,
China was importing around 7.7 million barrels per day.
... ... ...
Another source of additional demand comes from a policy change in the downstream sector. The central
government recently
loosened the rules on oil imports, allowing smaller refineries to import more crude oil.
These so-called "teapot refineries," with capacities of around 20,000 to 100,000 barrels of production
per day, struggled under the old restrictions, producing at only 30 to 40 percent of capacity because
of an inability to import oil. That has changed, and domestic refining production is set to rise,
and with it, so are imports.
"... Oil discoveries have dropped to being almost insignificant over the last 5 years, ..."
"... There is very little reserve growth on discoveries over the last 10 years ..."
"... The arctic is at least 25 years away or never the Atlantic and Pacific coasts are off limits, ..."
"... The current CAPEX collapse is going to be extremely disruptive ..."
"... Once investors see oil companies repeatedly unable to replace reserves they will pull all their money, ..."
"... All the supergiants have been developed with extensive IOR/EOR methods and may come off plateau and collapse production at about the same time ..."
"... Spot on George. The only thing I might have included in your list is Reservoir Creaming whereby horizontal production holes are put across the caps of oil pools to maintain high production rates at the expense of increasing depletion rates. This seems to have become standard practice ..."
"... All your six points are true (although point 5 needs clarification - you need stable oil price and diminishing reserves for this to happen; otherwise speculative forces will drive stock prices up in anticipation of higher oil prices). ..."
I think things will be worse than Jeffersons study indicates for several
reasons:
Oil discoveries have dropped to being almost insignificant over
the last 5 years,
There is very little reserve growth on discoveries over the
last 10 years (technology is so good now at estimating the oil
in place, projects are so expensive that the operators need to know
exactly what they will recover before investing, and putative drilling
in deep sea is too expensive),
The arctic is at least 25 years away or never the Atlantic and
Pacific coasts are off limits,
The current CAPEX collapse is going to be extremely disruptive
(the GoM curve above stops just at the point when production is going
to collapse as there will be very few new projects being completed and
the surge of projects that came online over the last 2 to 3 years will
suddenly come off their short plateaus and go into 10% plus decline
rates,
Once investors see oil companies repeatedly unable to replace
reserves they will pull all their money,
All the supergiants have been developed with extensive IOR/EOR
methods and may come off plateau and collapse production at about the
same time (for me this sudden high decline rate, more than the
actual peak is what is going to destroy the world economy if we don't
do something – in fact a lot – beforehand).
Spot on George. The only thing I might have included in your list is
Reservoir Creaming whereby horizontal production holes are put across the
caps of oil pools to maintain high production rates at the expense of increasing
depletion rates. This seems to have become standard practice.
All your six points are true (although point 5 needs clarification
- you need stable oil price and diminishing reserves for this to happen;
otherwise speculative forces will drive stock prices up in anticipation
of higher oil prices).
So the main efforts now should be in oil conservation area and to start
those we heed high (as in over $100 per barrel) oil price. And I think it
is coming.
"... As for OPEC reserves, I have no clue how those are arrived at, same as I seriously doubt Kuwait is producing almost 3 million BOPD from less than 2,000 oil wells, especially as the major field, Burgan, had first production 70 years ago. ..."
"... I would note your chart ends in 2014. The average oil price in 2014 was about $95 WTI. ..."
"... As Warren Buffet is fond of saying, it's only when the tide goes out that you find out who's been swimming naked. It should be obvious to anyone that countries with static reserve numbers are not being truthful. But there is a willingness among analysts and news providers to accept the published numbers. What else can they do? They can't make up their own numbers or rely on guesses from gadfly oil watchers. When production from these coutries starts going into steady decline, the truth will be known. ..."
"... Venezuela Orinoco Belt accounted for 68% of the increase in the world proved oil reserves between 2005-14, according to BP's estimate. This is entirely due to higher oil prices. Interestingly, according to BP's estimate, Canada' oil reserves actually declined in the past 10 years. ..."
Given that proved reserves are largely a function of price it is inevitable that reserves would
significantly drop as price dropped. The only reasons proved reserves have grown over the last
ten years when very few new discoveries have been made has been refined drilling techniques (fracking)
and high prices.
Andrew, although proven reserves are reserves that must be "economically recoverable" and that
would change somewhat if the price of oil changes drastically, you will find that no oil company
or nation changes their reserves up or down with the price of oil. It is assumed that what is
economically recoverable will average out as the oil price moves up and down over the years.
So no, proven reserves are not largely a function of the price of oil as you put it.
Proven reserves should decline as the oil is extracted and only about one fourth of the extracted
oil is replaced with new discoveries. But neither nations nor oil companies change their stated
proven reserves in response to the changes in the price of oil.
Publically traded oil companies are obliged to change the value of their proven reserves
up or down according to the price of oil however, but not the amount in barrels.
Ron: SEC rules do require reserve changes as oil prices change. This is reflected in the standard
measure forms. However, we can change opex and do have other considerations….for example, when
prices drop we cover the required reserve drop with performance increases (if we can back it up).
It's all done in a back office ceremony we do while wearing black robes and golden masks. So I
can't discuss it any more.
Reserves calculated per SEC guidelines definitely are affected by oil prices, although as Fernando
seems to imply, especially when there has been such a large crash in price, some magic is performed.
As for OPEC reserves, I have no clue how those are arrived at, same as I seriously doubt
Kuwait is producing almost 3 million BOPD from less than 2,000 oil wells, especially as the major
field, Burgan, had first production 70 years ago.
I would note your chart ends in 2014. The average oil price in 2014 was about $95 WTI.
As Warren Buffet is fond of saying, it's only when the tide goes out that you find out who's
been swimming naked. It should be obvious to anyone that countries with static reserve numbers
are not being truthful. But there is a willingness among analysts and news providers to accept
the published numbers. What else can they do? They can't make up their own numbers or rely on
guesses from gadfly oil watchers. When production from these coutries starts going into steady
decline, the truth will be known.
Venezuela Orinoco Belt accounted for 68% of the increase in the world proved oil reserves
between 2005-14, according to BP's estimate. This is entirely due to higher oil prices. Interestingly,
according to BP's estimate, Canada' oil reserves actually declined in the past 10 years.
World proved oil reserves (billion barrels)
source: BP Statistical Review of World Energy 2015
"... "U.S. Secretary of State John Kerry sidestepped the issue (of a US-Saudi plot) after a trip to Saudi Arabia in September. Asked if past discussions with Riyadh had touched on Russia's need for oil above $100 to balance its budget, he smiled and said: "They (Saudis) are very, very well aware of their ability to have an impact on global oil prices." ( Saudi oil policy uncertainty unleashes the conspiracy theorists , Reuters) ..."
"... Of course, they're in bed together. Saudi Arabia is a US client. It's not autonomous or sovereign in any meaningful way. It's a US protectorate, a satellite, a colony. They do what they're told. Period. True, the relationship is complex, but let's not be ridiculous. The Saudis are not calling the shots. The idea is absurd. Do you really think that Washington would let Riyadh fiddle prices in a way that destroyed critical US domestic energy industries, ravaged the junk bond market, and generated widespread financial instability without uttering a peep of protest on the matter? ..."
"... Dream on! If the US was unhappy with the Saudis, we'd all know about it in short-order because it would be raining Daisy Cutters from the Persian Gulf to the Red Sea, which is the way that Washington normally expresses its displeasure on such matters. The fact that Obama has not even alluded to the shocking plunge in prices just proves that the policy coincides with Washington's broader geopolitical strategy. ..."
"... It happened again in 1986, when Saudi Arabia-led OPEC allowed prices to drop precipitously, and then in 1990, when the Saudis sent prices plummeting as a way of taking out Russia, which was seen as a threat to their oil supremacy. In 1998, they succeeded. When the oil price was halved from $25 to $12, Russia defaulted on its debt. ..."
"... Bottom line: Falling oil prices and the plunging ruble are not some kind of free market accident brought on by oversupply and weak demand. That's baloney. They're part of a broader geopolitical strategy to strangle the Russian economy, topple Putin, and establish US hegemony across the Asian landmass. It's all part of Washington's plan to maintain its top-spot as the world's only superpower even though its economy is in irreversible decline. ..."
"Saudi oil policy… has been subject to a great deal of wild and inaccurate conjecture in recent
weeks. We do not seek to politicize oil… For us it's a question of supply and demand, it's purely
business."
– Ali al Naimi, Saudi Oil Minister
"There is no conspiracy, there is no targeting of anyone. This is a market and it goes up and
down."
– Suhail Bin Mohammed al-Mazroui, United Arab Emirates' petroleum minister
"We all see the lowering of oil prices. There's lots of talk about what's causing it. Could
it be an agreement between the U.S. and Saudi Arabia to punish Iran and affect the economies of
Russia and Venezuela? It could."
Are falling oil prices part of a US-Saudi plan to inflict economic damage on Russia, Iran and
Venezuela?
Venezuelan President Nicolas Maduro seems to think so. In a recent interview that appeared in
Reuters, Maduro said he thought the United States and Saudi Arabia wanted to drive down oil prices
"to harm Russia."
Bolivian President Evo Morales agrees with Maduro and told journalists at RT that: "The reduction
in oil prices was provoked by the US as an attack on the economies of Venezuela and Russia. In the
face of such economic and political attacks, the nations must be united."
Iranian President Hassan Rouhani said the same thing,with a slightly different twist: "The main
reason for (the oil price plunge) is a political conspiracy by certain countries against the interests
of the region and the Islamic world … Iran and people of the region will not forget such … treachery
against the interests of the Muslim world."
US-Saudi "treachery"? Is that what's really driving down oil prices?
Not according to Saudi Arabia's Petroleum Minister Ali al-Naimi. Al-Naimi has repeatedly denied
claims that the kingdom is involved in a conspiracy. He says the tumbling prices are the result of
"A lack of cooperation by non-OPEC production nations, along with the spread of misinformation and
speculator's greed." In other words, everyone else is to blame except the country that has historically
kept prices high by controlling output. That's a bit of a stretch, don't you think? Especially since–according
to the Financial Times - OPEC's de facto leader has abandoned the cartel's "traditional strategy"
and announced that it won't cut production even if prices drop to $20 per barrel.
Why? Why would the Saudis suddenly abandon a strategy that allowed them to rake in twice as much
dough as they are today? Don't they like money anymore?
And why would al-Naimi be so eager to crash prices, send Middle East stock markets into freefall,
increase the kingdom's budget deficits to a record-high 5 percent of GDP, and create widespread financial
instability? Is grabbing "market share" really that important or is there something else going on
here below the surface?
The Guardian's Larry Elliot thinks the US and Saudi Arabia are engaged a conspiracy to push down
oil prices. He points to a September meeting between John Kerry and Saudi King Abdullah where a deal
was made to boost production in order to hurt Iran and Russia. Here's a clip from the article titled
"Stakes are high as US plays the oil card against Iran and Russia":
"…with the help of its Saudi ally, Washington is trying to drive down the oil price by flooding
an already weak market with crude. As the Russians and the Iranians are heavily dependent on oil
exports, the assumption is that they will become easier to deal with…
John Kerry, the US secretary of state, allegedly struck a deal with King Abdullah in September
under which the Saudis would sell crude at below the prevailing market price. That would help
explain why the price has been falling at a time when, given the turmoil in Iraq and Syria caused
by Islamic State, it would normally have been rising.
The Saudis did something similar in the mid-1980s. Then, the geopolitical motivation for a
move that sent the oil price to below $10 a barrel was to destabilize Saddam Hussein's regime.
This time, according to Middle East specialists, the Saudis want to put pressure on Iran and to
force Moscow to weaken its support for the Assad regime in Syria… (Stakes
are high as US plays the oil card against Iran and Russia, Guardian)
That's the gist of Elliot's theory, but is he right?
Vladimir Putin isn't so sure. Unlike Morales, Maduro and Rouhani, the Russian president has been
reluctant to blame falling prices on US-Saudi collusion. In an article in Itar-Tass, Putin opined:
"There's a lot of talk around" in what concerns the causes for the slide of oil prices, he
said at a major annual news conference. "Some people say there is conspiracy between Saudi Arabia
and the US in order to punish Iran or to depress the Russian economy or to exert impact on Venezuela."
"It might be really so or might be different, or there might be the struggle of traditional
producers of crude oil and shale oil," Putin said. "Given the current situation on the market
the production of shale oil and gas has practically reached the level of zero operating costs."
(Putin says oil market price conspiracy
between Saudi Arabia and US not ruled out, Itar-Tass)
As always, Putin takes the most moderate position, that is, that Washington and the Saudis may
be in cahoots, but that droopy prices might simply be a sign of over-supply and weakening demand.
In other words, there could be a plot, but then again, maybe not. Putin is a man who avoids passing
judgment without sufficient evidence.
The same can't be said of the Washington Post. In a recent article, WP journalist Chris Mooney
dismisses anyone who thinks oil prices are the result of US-Saudi collaboration as "kooky conspiracy
theorists". According to Mooney:
"The reasons for the sudden (price) swing are not particularly glamorous: They involve factors
like supply and demand, oil companies having invested heavily in exploration several years ago
to produce a glut of oil that has now hit the market - and then, perhaps, the "lack of cohesion"
among the diverse members of OPEC." (Why
there are so many kooky conspiracy theories about oil, Washington Post)
Oddly enough, Mooney disproves his own theory a few paragraphs later in the same piece when he
says:
"Oil producers really do coordinate. And then, there's OPEC, which is widely referred to in
the press as a "cartel," and which states up front that its mission is to "coordinate and unify
the petroleum policies" of its 12 member countries…. Again, there's that veneer of plausibility
to the idea of some grand oil related strategy." (WP)
Let me get this straight: One the one hand Mooney agrees that OPEC is a cartel that "coordinates
and unify the petroleum policies", then on the other, he says that market fundamentals are at work.
Can you see the disconnect? Cartels obstruct normal supply-demand dynamics by fixing prices, which
Mooney seems to breezily ignore.
Also, he scoffs at the idea of "some grand oil related strategy" as if these cartel nations were
philanthropic organizations operating in the service of humanity. Right. Someone needs to clue Mooney
in on the fact that OPEC is not the Peace Corps. They are monopolizing amalgam of cutthroat extortionists
whose only interest is maximizing profits while increasing their own political power. Surely, we
can all agree on that fact.
What's really wrong with Mooney's article, is that he misses the point entirely. The debate is
NOT between so-called "conspiracy theorists" and those who think market forces alone explain the
falling prices. It's between the people who think that the Saudis decision to flood the market is
driven by politics rather than a desire to grab "market share." That's where people disagree. No
denies that there's manipulation; they merely disagree about the motive. This glaring fact seems
to escape Mooney who is on a mission to discredit conspiracy theorists at all cost. Here's more:
(There's) "a long tradition of conspiracy theorists who have surmised that the world's great
oil powers - whether countries or mega-corporations - are secretly pulling strings to shape world
events."…
"A lot of conspiracy theories take as their premise that there's a small group of people who
are plotting to control something, to control the government, the banking system, or the main
energy source, and they are doing this to the disadvantage of everybody else," says University
of California-Davis historian Kathy Olmsted, author of "Real Enemies: Conspiracy Theories and
American Democracy, World War I to 9/11″. (Washington Post)
Got that? Now find me one person who doesn't think the world is run by a small group of rich,
powerful people who operate in their own best interests? Here's more from the same article:
(Oil) "It's the perfect lever for shifting world events. If you were a mad secret society with
world-dominating aspirations and lots of power, how would you tweak the world to create cascading
outcomes that could topple governments and enrich some at the expense of others? It's hard to
see a better lever than the price of oil, given its integral role in the world economy." (WP)
"A mad secret society"? Has Mooney noticed that - in the last decade and a half - the US has only
invaded nations that have huge natural resources (mainly oil and natural gas) or the geography for
critical pipeline routes? There's nothing particularly secret about it, is there?
The United States is not a "mad secret society with world-dominating aspirations". It's a empire
with blatantly obvious "world-dominating aspirations" run by political puppets who do the work of
wealthy elites and corporations. Any sentient being who's bright enough to browse the daily headlines
can figure that one out.
Mooney's grand finale:
"So in sum, with a surprising and dramatic event like this year's oil price decline, it would
be shocking if it did not generate conspiracy theories. Humans believe them all too easily. And
they're a lot more colorful than a more technical (and accurate) story about supply and demand."
(WP)
Ah, yes. Now I see. Those darn "humans". They're so weak-minded they'll believe anything you tell
them, which is why they need someone as smart as Mooney tell them how the world really works.
Have you ever read such nonsense in your life? On top of that, he gets the whole story wrong.
This isn't about market fundamentals. It's about manipulation. Are the Saudis manipulating supply
to grab market share or for political reasons? THAT'S THE QUESTION. The fact that they ARE manipulating
supply is not challenged by anyone including the uber-conservative Financial Times that deliberately
pointed out that the Saudis had abandoned their traditional role of cutting supply to support prices.
That's what a "swing state" does; it manipulates supply keep prices higher than they would be if
market forces were allowed to operate unimpeded.
So what is the motive driving the policy; that's what we want to know?
Certainly there's a strong case to be made for market share. No one denies that. If the Saudis
keep prices at rock bottom for a prolonged period of time, then a high percentage of the producers
(that can't survive at prices below $70 per barrel) will default leaving OPEC with greater market
share and more control over pricing.
So market share is certainly a factor. But is it the only factor?
Is it so far fetched to think that the United States–which in the last year has imposed harsh
economic sanctions on Russia, made every effort to sabotage the South Stream pipeline, and toppled
the government in Kiev so it could control the flow of Russian gas to countries in the EU–would coerce
the Saudis into flooding the market with oil in order to decimate the Russian economy, savage the
ruble, and create favorable conditions for regime change in Moscow? Is that so hard to believe?
Apparently New York Times columnist Thomas Freidman doesn't think so. Here's how he summed it
up in a piece last month: "Is it just my imagination or is there a global oil war underway pitting
the United States and Saudi Arabia on one side against Russia and Iran on the other?"
It sounds like Freidman has joined the conspiracy throng, doesn't it? And he's not alone either.
This is from Alex Lantier at the World Socialist Web Site:
"While there are a host of global economic factors underlying the fall in oil prices, it is
unquestionable that a major role in the commodity's staggering plunge is Washington's collaboration
with OPEC and the Saudi monarchs in Riyadh to boost production and increase the glut on world
oil markets.
As Obama traveled to Saudi Arabia after the outbreak of the Ukraine crisis last March, the
Guardian wrote, "Angered by the Soviet invasion of Afghanistan in 1979, the Saudis turned on the
oil taps, driving down the global price of crude until it reached $20 a barrel (in today's prices)
in the mid-1980s… [Today] the Saudis might be up for such a move-which would also boost global
growth-in order to punish Putin over his support for the Assad regime in Syria. Has Washington
floated this idea with Riyadh? It would be a surprise if it hasn't." (Alex Lantier,
Imperialism
and the ruble crisis, World Socialist Web Site)
And here's an intriguing clip from an article at Reuters that suggests the Obama administration
is behind the present Saudi policy:
"U.S. Secretary of State John Kerry sidestepped the issue (of a US-Saudi plot) after a trip to
Saudi Arabia in September. Asked if past discussions with Riyadh had touched on Russia's need for
oil above $100 to balance its budget, he smiled and said: "They (Saudis) are very, very well aware
of their ability to have an impact on global oil prices." (Saudi
oil policy uncertainty unleashes the conspiracy theorists, Reuters)
Wink, wink.
Of course, they're in bed together. Saudi Arabia is a US client. It's not autonomous or sovereign
in any meaningful way. It's a US protectorate, a satellite, a colony. They do what they're told.
Period. True, the relationship is complex, but let's not be ridiculous. The Saudis are not calling
the shots. The idea is absurd. Do you really think that Washington would let Riyadh fiddle prices
in a way that destroyed critical US domestic energy industries, ravaged the junk bond market, and
generated widespread financial instability without uttering a peep of protest on the matter?
Dream on! If the US was unhappy with the Saudis, we'd all know about it in short-order because
it would be raining Daisy Cutters from the Persian Gulf to the Red Sea, which is the way that Washington
normally expresses its displeasure on such matters. The fact that Obama has not even alluded to the
shocking plunge in prices just proves that the policy coincides with Washington's broader geopolitical
strategy.
And let's not forget that the Saudis have used oil as a political weapon before, many times before.
Indeed, wreaking havoc is nothing new for our good buddies the Saudis. Check this out from Oil Price
website:
"In 1973, Egyptian President Anwar Sadat convinced Saudi King Faisal to cut production and
raise prices, then to go as far as embargoing oil exports, all with the goal of punishing the
United States for supporting Israel against the Arab states. It worked. The "oil price shock"
quadrupled prices.
It happened again in 1986, when Saudi Arabia-led OPEC allowed prices to drop precipitously,
and then in 1990, when the Saudis sent prices plummeting as a way of taking out Russia, which
was seen as a threat to their oil supremacy. In 1998, they succeeded. When the oil price was halved
from $25 to $12, Russia defaulted on its debt.
The Saudis and other OPEC members have, of course, used the oil price for the obverse effect,
that is, suppressing production to keep prices artificially high and member states swimming in
"petrodollars". In 2008, oil peaked at $147 a barrel." (Did
The Saudis And The US Collude In Dropping Oil Prices?, Oil Price)
1973, 1986, 1990, 1998 and 2008.
So, according to the author, the Saudis have manipulated oil prices at least five times in the
past to achieve their foreign policy objectives. But, if that's the case, then why does the media
ridicule people who think the Saudis might be engaged in a similar strategy today?
Could it be that the media is trying to shape public opinion on the issue and, by doing so, actually
contribute to the plunge in oil prices?
Bingo. Alert readers have probably noticed that the oil story has been splashed across the headlines
for weeks even though the basic facts have not changed in the least. It's all a rehash of the same
tedious story reprinted over and over again. But, why? Why does the public need to have the same
"Saudis refuse to cut production" story driven into their consciousness day after day like they're
part of some great collective brainwashing experiment? Could it be that every time the message is
repeated, oil sells off, and prices go down? Is that it?
Precisely. For example, last week a refinery was attacked in Libya which pushed oil prices up
almost immediately. Just hours later, however, another "Saudis refuse to cut production" story conveniently
popped up in all the major US media which pushed prices in the direction the USG wants them to go,
er, I mean, back down again.
This is how the media helps to reinforce government policy, by crafting a message that helps to
push down prices and, thus, hurt "evil" Putin. (This is called "jawboning") Keep in mind, that OPEC
doesn't meet again until June, 2015, so there's nothing new to report on production levels. But that
doesn't mean we're not going to get regular updates on the "Saudis refuse to cut production" story.
Oh, no. The media is going to keep beating that drum until Putin cries "Uncle" and submits to US
directives. Either that, or the bond market is going to blow up and take the whole damn global financial
system along with it. One way or another, something's got to give.
Bottom line: Falling oil prices and the plunging ruble are not some kind of free market accident
brought on by oversupply and weak demand. That's baloney. They're part of a broader geopolitical
strategy to strangle the Russian economy, topple Putin, and establish US hegemony across the Asian
landmass. It's all part of Washington's plan to maintain its top-spot as the world's only superpower
even though its economy is in irreversible decline.
"... By Nafeez Ahmed,s an investigative journalist and international security
scholar. He writes the System Shift column for VICE's Motherboard, and is the winner
of a 2015 Project Censored Award for Outstanding Investigative Journalism for his
former work at the Guardian. He is the author of A User's Guide to the Crisis of
Civilization: And How to Save It (2010), and the scifi thriller novel Zero Point,
among other books. Originally published at AlterNet ..."
"... I'm not a huge Rolling Stones fan, but whenever I see a complex economic
analysis like this, I'm reminded of what Mick Jagger said when they asked him why
he dropped out of the London School of Economics: "There's too many variables."
..."
"... It's a lot more complicated even than that, it really depends on where
you draw the boundaries of the system. Prieto and Hall did an analysis of Spanish
solar that was probably the most comprehensive yet, including things like the truck
trips to lay the gravel for the surface roads, maintenance trips to clean the panels,
etc, and got a much lower EROEI figure than is typically given for solar. ..."
"... The carbon-energy situation needs to be placed in a context of the slow
burn debt deflation we are experiencing, which at a minimum is usually death for
the financial performance of commodities and any long term debt supported business.
NC has well documented the issues this poses for actuarial based investments (life
insurance, think Japan in the early '90s, pensions, etc.). ..."
"... Last thought, the debt situation is likely much worse in the short run
as the decline in oil revenues are likely already causing local and regional recessions
(e.g., Bakken, Houston) and correlated impact on commercial real estate, home values,
mortgages, etc. plus are we facing a sovereign debt crisis in such countries as
Venezuela (which used PDVSA to massively borrow on the countries behalf), Brazil,
Russia, etc. ..."
"... This short term glut will probably accentuate the coming problems because
it gives the impression that there is no peak oil. People have trouble understanding
that there are short-term cycles within a long-term cycle. This bad signal is giving
us the impetus to continue investing in energy intensive projects instead of reshaping
our economy. And this will make things even worse in 5-10 years. ..."
"... If the total cost of extraction is more than 40$ and consumers are paying
$40 or less, then somewhere along the way, someone is subsidizing the cost. It could
be low tax rates, eZ money, growing deficits, underfunded pensions, underfunded
restoration funds, etc. ..."
"... There is no glut. All the oil is being bought. The problem is that there
in not yet enough of a shortage to drive the price up. A small distinction but huge
ramifications if you understand it. And by the way higher prices is not a solution
to what ails us. ..."
"... The way I see it is that you have convinced yourself that you will be on
the winning side when calamity strikes. Whether you are is another matter… just
like the slowest bug does not get to the field on time to get exterminated by the
sprayed pesticides, work and efficiency do not guarantee anything. ..."
"... The author blames the oil patch bust on a geophysical crisis. There is
some truth to this argument but by far the biggest driver of the bust is Fed policy.
Artificially cheap debt financing led to overcapacity and a vicious cycle of continued
overproduction as drillers desperately try to avoid defaulting. ..."
Yves here. The strength and weakness of this article is the range of information
it covers. That comes at points at the expense of providing context. For instance,
it describes how 65% of the independent oil and gas companies are at risk of
going bankrupt. But it doesn't tell you how large the independents are relative
to the "majors". Similarly, it appears to switch two paragraphs later to the
total debt of oil and gas companies, which is $2.5 trillion. So one should read
this with some attention to definitions and context.
By Nafeez Ahmed,s an investigative journalist and international
security scholar. He writes the System Shift column for VICE's Motherboard,
and is the winner of a 2015 Project Censored Award for Outstanding Investigative
Journalism for his former work at the Guardian. He is the author of A User's
Guide to the Crisis of Civilization: And How to Save It (2010), and the scifi
thriller novel Zero Point, among other books. Originally published at
AlterNet
It's not looking good for the global fossil fuel industry. Although the world
remains heavily dependent on oil, coal and natural gas-which today supply around
80 percent of our primary energy needs-the industry is rapidly crumbling.
This is not merely a temporary blip, but a symptom of a deeper, long-term
process related to global capitalism's escalating overconsumption of planetary
resources and raw materials.
New scientific research shows that the growing crisis of profitability facing
fossil fuel industries is part of an inevitable period of transition to a post-carbon
era.
But ongoing denialism has led powerful vested interests to continue clinging
blindly to their faith in fossil fuels, with increasingly devastating and unpredictable
consequences for the environment.
Bankruptcy Epidemic
In February, the financial services firm Deloitte
predicted [3] that over 35 percent of independent oil companies worldwide
are likely to declare bankruptcy, potentially followed by a further 30 percent
next year-a total of 65 percent of oil firms around the world. Since early last
year, already 50 North American oil and gas producers have filed bankruptcy.
The cause of the crisis is the dramatic drop in oil prices-down by two-thirds
since 2014-which are so low that oil companies are finding it difficult to generate
enough revenue to cover the high costs of production, while also repaying their
loans.
Oil and gas companies most at risk are those with the largest debt burden.
And that burden is huge-as much as
$2.5 trillion [4] , according to The Economist. The real figure is probably
higher.
At a speech at the London School of Economics in February, Jaime Caruana
of the Bank for International Settlements
said [5] that outstanding loans and bonds for the oil and gas industry had
almost tripled between 2006 and 2014 to a total of $3 trillion.
This massive debt burden, he explained, has put the industry in a double-bind:
In order to service the debt, they are continuing to produce more oil for sale,
but that only contributes to lower market prices. Decreased oil revenues means
less capacity to repay the debt, thus increasing the likelihood of default.
Stranded Assets
This $3 trillion of debt is at risk because it was supposed to generate a
3-to-1 increase in value, but
instead [6] -thanks to the oil price decline-represents a value of less
than half of this.
Worse, according to a Goldman Sachs
study [7] quietly published in December last year, as much as $1 trillion
of investments in future oil projects around the world are unprofitable; i.e.,
effectively stranded.
Examining 400 of the world's largest new oil and gas fields (except U.S.
shale), the Goldman study found that $930 billion worth of projects (more than
two-thirds) are unprofitable at Brent crude prices below $70. (Prices are now
well below that.)
The collapse of these projects due to unprofitability would result in the
loss of oil and gas production equivalent to a colossal 8 percent of current
global demand. If that happens, suddenly or otherwise, it would wreck the global
economy.
The Goldman analysis was based purely on the internal dynamics of the industry.
A further issue is that internationally-recognized climate change risks mean
that to avert dangerous global warming, much of the world's remaining fossil
fuel resources cannot be burned.
All of this is leading investors to question the wisdom of their investments,
given fears that much of the assets that the oil, gas and coal industries use
to estimate their own worth could consist of resources that will never ultimately
be used.
The Carbon Tracker Initiative, which analyzes carbon investment risks, points
out that over the next decade, fossil fuel companies risk wasting up to $2.2
trillion of investments in new projects that could turn out to be "uneconomic"
in the face of international climate mitigation policies.
More and more fossil fuel industry shareholders are pressuring energy companies
to stop investing in exploration for fear that new projects could become worthless
due to climate risks.
"Clean technology and climate policy are already reducing fossil fuel demand,"
said James Leaton, head of research at Carbon Tracker. "Misreading these trends
will destroy shareholder value. Companies need to apply 2C stress tests to their
business models now."
In a prescient report published last November, Carbon Tracker identified
the energy majors with the greatest exposures-and thus facing the greatest risks-from
stranded assets: Royal Dutch Shell, Pemex, Exxon Mobil, Peabody Energy, Coal
India and Glencore.
At the time, the industry scoffed at such a bold pronouncement. Six months
after this report was released-a week ago-Peabody went bankrupt. Who's next?
The Carbon Tracker analysis may underestimate the extent of potential losses.
A new paper just out in the journal Applied Energy, from a team at Oxford University's
Institute for New Economic Thinking,
shows [8] that the "stranded assets" concept applies not just to unburnable
fossil fuel reserves, but also to a vast global carbon-intensive electricity
infrastructure, which could be rendered as defunct as the fossil fuels it burns
and supplies to market.
The Coming Debt Spiral
Some analysts believe the hidden trillion-dollar black hole at the heart
of the oil industry is set to trigger another global financial crisis, similar
in scale to the Dot-Com crash.
Jason Schenker, president and chief economist at Prestige Economics,
says [9] : "Oil prices simply aren't going to rise fast enough to keep oil
and energy companies from defaulting. Then there is a real contagion risk to
financial companies and from there to the rest of the economy."
Schenker has been ranked by Bloomberg News as one of the most accurate financial
forecasters in the world since 2010. The US economy, he forecasts, will dip
into recession at the end of 2016 or early 2017.
Mark Harrington, an oil industry consultant, goes further. He believes the
resulting economic crisis from cascading debt defaults in the industry could
make the 2007-8 financial crash look like a cakewalk. "Oil and gas companies
borrowed heavily when oil prices were soaring above $70 a barrel," he
wrote [6] on CNBC in January.
"But in the past 24 months, they've seen their values and cash flows erode
ferociously as oil prices plunge-and that's made it hard for some to pay back
that debt. This could lead to a massive credit crunch like the one we saw in
2008. With our economy just getting back on its feet from the global 2008 financial
crisis, timing could not be worse."
Ratings agency Standard & Poor (S&P) reported this week that 46 companies
have defaulted on their debt this year-the highest levels since the depths of
the financial crisis in 2009. The total quantity in defaults so far is $50 billion.
Half this year's defaults are from the oil and gas industry, according to
S&P, followed by the metals, mining and the steel sector. Among them was coal
giant Peabody Energy.
Despite public reassurances, bank exposure to these energy risks from unfunded
loan facilities remains high. Officially, only 2.5 percent of bank assets are
exposed to energy risks.
But it's probably worse. Confidential Wall Street sources
claim [10] that the Federal Reserve in Dallas has secretly advised major
U.S. banks in closed-door meetings to cover-up potential energy-related losses.
The Federal Reserve denies the allegations, but refuses to respond to Freedom
of Information requests on internal meetings, on the obviously false pretext
that it keeps no records of any of its meetings.
According to Bronka Rzepkoswki of the financial advisory firm Oxford Economics,
over a third of the entire U.S. high yield bond index is vulnerable to low oil
prices, increasing the risk of a tidal wave of corporate bankruptcies: "Conditions
that usually pave the way for mounting defaults-such as growing bad debt, tightening
monetary conditions, tightening of corporate credit standards and volatility
spikes – are currently met in the U.S."
The End of Cheap Oil
Behind the crisis of oil's profitability that threatens the entire global
economy is a geophysical crisis in the availability of cheap oil. Cheap here
does not refer simply to the market price of oil, but the total cost of production.
More specifically, it refers to the value of energy.
There is a precise scientific measure for this, virtually unknown in conventional
economic and financial circles, known as Energy Return on Investment-which essentially
quantifies the amount of energy extracted, compared to the inputs of energy
needed to conduct the extraction. The concept of EROI was first proposed and
developed by Professor Charles A. Hall of the Department of Environmental and
Forest Biology at the State University of New York. He found that an approximate
EROI value for any energy source could be calculated by dividing the quantity
of energy produced by the amount of energy inputted into the production process.
Therefore, the higher the EROI, the more energy that a particular source
and technology is capable of producing. The lower the EROI, the less energy
this source and technology is actually producing.
A new peer-reviewed
study [11] led by the Institute of Physics at the National Autonomous University
of Mexico has undertaken a comparative review of the EROI of all the major sources
of energy that currently underpin industrial civilization-namely oil, gas, coal,
and uranium.
Published in the journal Perspectives on Global Development and Technology,
the scientists note that the EROI for fossil fuels has inexorably declined over
a relatively short period of time: "Nowadays, the world average value EROI for
hydrocarbons in the world has gone from a value of 35 to a value of 15 between
1960 and 1980."
In other words, in just two decades, the total value of the energy being
produced via fossil fuel extraction has plummeted by more than half. And it
continues to decline.
This is because the more fossil fuel resources that we exploit, the more
we have used up those resources that are easiest and cheapest to extract. This
compels the industry to rely increasingly on resources that are more difficult
and expensive to get out of the ground, and bring to market.
The EROI for conventional oil, according to the Mexican scientists, is 18.
They estimate, optimistically, that: "World reserves could last for 35 or 45
years at current consumption rates." For gas, the EROI is 10, and world reserves
will last around "45 or 55 years." Nuclear's EROI is 6.5, and according to the
study authors, "The peak in world production of uranium will be reached by 2045."
The problem is that although we are not running out of oil, we are running
out of the cheapest, easiest to extract form of oil and gas. Increasingly, the
industry is making up for the shortfall by turning to unconventional forms of
oil and gas-but these have very little energy value from an EROI perspective.
The Mexico team examine the EROI values of these unconventional sources,
tar sands, shale oil, and shale gas: "The average value for EROI of tar sands
is four. Only ten percent of that amount is economically profitable with current
technology."
For shale oil and gas, the situation is even more dire: "The EROI varies
between 1.5 and 4, with an average value of 2.8. Shale oil is very similar to
the tar sands; being both oil sources of very low quality. The shale gas revolution
did not start because its exploitation was a very good idea; but because the
most attractive economic opportunities were previously exploited and exhausted."
In effect, the growing reliance on unconventional oil and gas has meant that,
overall, the costs and inputs into energy production to keep industrial civilization
moving are rising inexorably.
It's not that governments don't know. It's that decisions have already been
made to protect the vested interests that have effectively captured government
policymaking through lobbying, networking and donations.
Three years ago, the British government's Department for International Development
(DFID) commissioned and published an in-depth
report [12] , "EROI of Global Energy Resources: Status, Trends and Social
Implications." The report went completely unnoticed by the media.
Its findings are instructive: "We find the EROI for each major fossil fuel
resource (except coal) has declined substantially over the last century. Most
renewable and non-conventional energy alternatives have substantially lower
EROI values than conventional fossil fuels."
The decline in EROI has meant that an increasing amount of the energy we
extract is having to be diverted back into getting new energy out, leaving less
for other social investments.
This means that the global economic slowdown is directly related to the declining
resource quality of fossil fuels. The DFID report warns: "The declining EROI
of traditional fossil fuel energy sources and its eventual effect on the world
economy are likely to result in a myriad of unforeseen consequences."
Shortly after this report was released, I met with a senior civil servant
at DFID familiar with its findings, who spoke to me on condition of anonymity.
I asked him whether this important research had actually impacted policymaking
in the department.
"Unfortunately, no," he told me, shrugging. "Most of my colleagues, except
perhaps a handful, simply don't have a clue about these issues. And of course,
despite the report being circulated widely within the department, and shared
with other relevant government departments, there is little interest from ministers
who appear to be ideologically pre-committed to fracking."
Peak Oil
The driving force behind the accelerating decline in resource quality, hotly
denied in the industry, is 'peak oil.'
An extensive
scientific analysis [13] published in February in Wiley Interdisciplinary
Reviews: Energy & Environment lays bare the extent of industry denialism. Wiley
Interdisciplinary Reviews (WIRES) is a series of high-quality peer-reviewed
publications which runs authoritative reviews of the literature across relevant
academic disciplines.
The new WIRES paper is authored by Professor Michael Jefferson of the ESCP
Europe Business School, a former chief economist at oil major Royal Dutch/Shell
Group, where he spent nearly 20 years in various senior roles from Head of Planning
in Europe to Director of Oil Supply and Trading. He later became Deputy Secretary-General
of the World Energy Council, and is editor of the leading Elsevier science journal
Energy Policy.
In his new study, Jefferson examines a recent 1865-page "global energy assessment"
(GES) published by the International Institute of Applied Systems Analysis.
But he criticized the GES for essentially ducking the issue of 'peak oil."
"This was rather odd," he wrote. "First, because the evidence suggests that
the global production of conventional oil plateaued and may have begun to decline
from 2005."
He went on to explain that standard industry assessments of the size of global
conventional oil reserves have been dramatically inflated, noting how "the five
major Middle East oil exporters altered the basis of their definition of 'proved'
conventional oil reserves from a 90 percent probability down to a 50 percent
probability from 1984. The result has been an apparent (but not real) increase
in their 'proved' conventional oil reserves of some 435 billion barrels."
Added to those estimates are reserve figures from Venezuelan heavy oil and
Canadian tar sands, bringing up global reserve estimates by a further 440 billion
barrels, despite the fact that they are "more difficult and costly to extract"
and generally of "poorer quality" than conventional oil.
"Put bluntly, the standard claim that the world has proved conventional oil
reserves of nearly 1.7 trillion barrels is overstated by about 875 billion barrels.
Thus, despite the fall in crude oil prices from a new peak in June, 2014, after
that of July, 2008, the 'peak oil' issue remains with us."
Jefferson believes that a nominal economic recovery, combined with cutbacks
in production as the industry reacts to its internal crises, will eventually
put the current oil supply glut in reverse. This will pave the way for "further
major oil price rises" in years to come.
It's not entirely clear if this will happen. If the oil crisis hits the economy
hard, then the prolonged recession that results could dampen the rising demand
that everyone projects. If oil prices thus remain relatively depressed for longer
than expected, this could hemorrhage the industry beyond repair.
Eventually, the loss of production may allow prices to rise again. OPEC estimates
that investments in oil exploration and development are at their lowest level
in six years. As bankruptcies escalate, the accompanying drop in investments
will eventually lead world oil production to fall, even as global demand begins
to rise.
This could lead oil prices to climb much higher, as rocketing demand-projected
to grow 50 percent by 2035-hits the scarcity of production. Such a price spike,
ironically, would also be incredibly bad for the global economy, and as happened
with the 2007-8 financial crash, could feed into inflation and
trigger another spate [14] of consumer debt-defaults in the housing markets.
Even if that happens, the assumption-the hope-is that oil industry majors
will somehow survive the preceding cascade of debt-defaults. The other assumption,
is that demand for oil will rise.
But as new sources of renewable energy come online at a faster and faster
pace, as innovation in clean technologies accelerates, old fossil fuel-centric
projections of future rising demand for oil may need to be jettisoned.
Clean Energy
According to another
new study [15] released in March in Energy Policy by two scientists at Texas
A&M University, "Non-renewable energy"-that is "fossil fuels and nuclear power"-"are
projected to peak around mid-century … Subsequent declining non-renewable production
will require a rapid expansion in the renewable energy sources (RES) if either
population and/or economic growth is to continue."
The demise of the fossil fuel empire, the study forecasts, is inevitable.
Whichever model run the scientists used, the end output was the same: the almost
total displacement of fossil fuels by renewable energy sources by the end of
the century; and, as a result, the transformation and localisation of economic
activity.
But the paper adds that to avoid a rise in global average temperatures of
2C, which would tip climate change into the danger zone, 50 percent or more
of existing fossil fuel reserves must remain unused.
The imperative to transition away from fossil fuels is, therefore, both geophysical
and environmental. On the one hand, by mid-century, fossil fuels and nuclear
power will become obsolete as a viable source of energy due to their increasingly
high costs and low quality. On the other, even before then, to maintain what
scientists describe as a 'safe operating space' for human survival, we cannot
permit the planet to warm a further 2C without risking disastrous climate impacts.
Staying below 2C, the study finds, will require renewable energy to supply
more than 50 percent of total global energy by 2028, "a 37-fold increase in
the annual rate of supplying renewable energy in only 13 years."
While this appears to be a herculean task by any standard, the Texas A&M
scientists conclude that by century's end, the demise of fossil fuels is going
to happen anyway, with or without considerations over climate risks:
… the 'ambitious' end-of-century decarbonisation goals set by the G7
leaders will be achieved due to economic and geologic fossil fuel limitations
within even the unconstrained scenario in which little-to-no pro-active
commitment to decarbonise is required… Our model results indicate that,
with or without climate considerations, RES [renewable energy sources] will
comprise 87–94 percent of total energy demand by the end of the century.
But as renewables have a much lower EROI than fossil fuels, this will "quickly
reduce the share of net energy available for societal use." With less energy
available to societies, "it is speculated that there will have to be a reprioritization
of societal energetic needs"-in other words, a very different kind of economy
in which unlimited material growth underpinned by endless inputs of cheap fossil
fuel energy are a relic of the early 21st century.
The 37-fold annual rate of increase in the renewable energy supply seems
unachievable at first glance, but new data just released from the Abu Dhabi-based
International Renewable Energy Agency shows that clean power is well on its
way, despite lacking the massive subsidies behind fossil fuels.
The data reveals that last year, solar power capacity rose by 37 percent.
Wind power grew by 17 percent, geothermal by 5 percent and hydropower by 3 percent.
So far, the growth rate for solar power has been exponential. A Deloitte
Center for Energy Solutions
report [16] from September 2015 noted that the speed and spread of solar
energy had consistently outpaced conventional linear projections, and continues
to do so.
While the costs of solar power is consistently declining, solar power generation
has doubled every year for the last 20 years. With every doubling of solar infrastructure,
the production costs of solar photovoltaic (PV) has dropped by 22 percent.
At this rate, according to analysts like Tony Seba-a lecturer in business
entrepreneurship, disruption and clean energy at Stanford University-the growth
of solar is already on track to go global. With eight more doublings, that's
by 2030, solar power would be capable of supplying 100 percent of the world's
energy needs. And that's even without the right mix of government policies in
place to support renewables.
According to Deloitte, while Seba's forecast is endorsed by a minority of
experts, it remains a real possibility that should be taken seriously. But the
firm points out that obstacles remain:
"It would not make economic sense for utility planners to shutter thousands
of megawatts of existing generating capacity before the end of its economic
life and replace it with new solar generation."
Yet Deloitte's study did not account for the escalating crisis in profitability
already engulfing the fossil fuel industries, and the looming pressure of stranded
assets due to climate risks. As the uneconomic nature of fossil fuels becomes
evermore obvious, so too will the economic appeal of clean energy.
Race against time
The question is whether the transition to a post-carbon energy system-the
acceptance of the inevitable death of the oil economy-will occur fast enough
to avoid climate catastrophe.
Given that the 2C target for a safe climate is widely recognized to be inadequate-scientists
increasingly argue that even a 1C rise in global average temperatures would
be sufficient to trigger dangerous, irreversible changes to the earth's climate.
According to a 2011 report by the National Academy of Sciences, the scientific
consensus
shows [17] conservatively that for every degree of warming, we will see
the following impacts: 5-15 percent reductions in crop yields; 3-10 percent
increases in rainfall in some regions contributing to flooding; 5-10 percent
decreases in stream-flow in some river basins, including the Arkansas and the
Rio Grande, contributing to scarcity of potable water; 200-400 percent increases
in the area burned by wildfire in the US; 15 percent decreases in annual average
Arctic sea ice, with 25 percent decreases in the yearly minimum extent in September.
Even if all CO2 emissions stopped, the climate would continue to warm for
several more centuries. Over thousands of years, the National Academy warns,
this could unleash amplifying feedbacks leading to the disappearance of the
polar ice sheets and other dramatic changes. In the meantime, the risk of catastrophic
wild cards "such as the potential large-scale release of methane from deep-sea
sediments" or permafrost, is impossible to quantify.
In this context, even if the solar-driven clean energy revolution had every
success, we still need to remove carbon that has already accumulated in the
atmosphere, to return the climate to safety.
The idea of removing carbon from the atmosphere sounds technologically difficult
and insanely expensive. It's not. In reality, it is relatively simple and cheap.
A new book by Eric Toensmeier, a lecturer at Yale University's School of
Forestry and Environmental Studies, The Carbon Farming Solution, sets out in
stunningly accessible fashion how 'regenerative farming' provides the ultimate
carbon-sequestration solution.
Regenerative farming is a form of small-scale, localised, community-centred
organic agriculture which uses techniques that remove carbon from the atmosphere,
and sequester it in plant material or soil.
Using an array of land management and conservation practices, many of which
have been tried and tested by indigenous communities, it's theoretically possible
to scale up regenerative farming methods in a way that dramatically offsets
global carbon emissions.
Toensmeier's valuable book discusses these techniques, and unlike other science-minded
tomes, offers a practical toolkit for communities to begin exploring how they
can adopt regenerative farming practices for themselves.
According to the
Rodale Institute [18] , the application of regenerative farming on a global
scale could have revolutionary results:
Simply put, recent data from farming systems and pasture trials around
the globe show that we could sequester more than 100 percent of current
annual CO2 emissions with a switch to widely available and inexpensive organic
management practices, which we term 'regenerative organic agriculture'…
These practices work to maximize carbon fixation while minimizing the loss
of that carbon once returned to the soil, reversing the greenhouse effect.
This has been widely corroborated. For instance, a 2015
study [19] part-funded by the Chinese Academy of Sciences found that "replacing
chemical fertilizer with organic manure significantly decreased the emission
of GHGs [greenhouse gases]. Yields of wheat and corn also increased as the soil
fertility was improved by the application of cattle manure. Totally replacing
chemical fertilizer with organic manure decreased GHG emissions, which reversed
the agriculture ecosystem from a carbon source… to a carbon sink."
Governments are catching on, if slowly. At the Paris climate talks, 25 countries
and over 50 NGOs signed up to the French government's '4 per 1000' initiative,
a
global agreement [20] to promote regenerative farming as a solution for
food security and climate disaster.
The Birth of Post-Capitalism
There can be no doubt, then, that by the end of this century, life as we
know it on planet earth will be very different. Fossil fueled predatory capitalism
will be dead. In its place, human civilization will have little choice but to
rely on a diversity of clean, renewable energy sources.
Whatever choices we make this century, the coming generations in the post-carbon
future will have to deal with the realities of an overall warmer, and therefore
more unpredictable, climate. Even if regenerative processes are in place to
draw-down carbon from the atmosphere, this takes time-and in the process, some
of the damage climate change will wreak on our oceans, our forests, our waterways,
our coasts, and our soils will be irreversible.
It could take centuries, if not millennia, for the planet to reach a new,
stable equilibrium.
But either way, the work of repairing and mitigating at least some of the
damage done will be the task of our childrens' children, and their children,
and on.
Economic activity in this global society will of necessity be very different
to the endless growth juggernaut we have experienced since the industrial revolution.
In this post-carbon future, material production and consumption, and technological
innovation, will only be sustainable through a participatory 'circular economy'
in which scarce minerals and raw materials are carefully managed.
The fast-paced consumerism that we take for granted today simply won't work
in these circumstances.
Large top-down national and transnational structures will begin to become
obsolete due to the large costs of maintenance, the unsustainability of the
energy inputs needed for their survival, and the shift in power to new decentralized
producers of energy and food.
In the place of such top-down structures, smaller-scale, networked forms
of political, social and economic organization, connected through revolutionary
information technologies, will be most likely to succeed. For communities to
not just survive, but thrive, they will need to work together, sharing technology,
expertise and knowledge on the basis of a new culture of human parity and cooperation.
Of course, before we get to this point, there will be upheaval. Today's fossil
fuel incumbency remains in denial, and is unlikely to accept the reality of
its inevitable demise until it really does drop dead.
The escalation of resource wars, domestic unrest, xenophobia, state-militarism,
and corporate totalitarianism is to be expected. These are the death throes
of a system that has run its course.
The outcomes of the struggles which emerge in coming decades-struggles between
people and power, but also futile geopolitical struggles within the old centers
of power (paralleled by misguided struggles between peoples)-is yet to be written.
Eager to cling to the last vestiges of existence, the old centers of power
will still try to self-maximize within the framework of the old paradigm, at
the expense of competing power-centers, and even their own populations.
And they will deflect from the root causes of the problem as much as possible,
by encouraging their constituents to blame other power-centers, or worse, some
of their fellow citizens, along the lines of all manner of 'Otherizing' constructs,
race, ethnicity, nationality, color, religion and even class.
Have no doubt. In coming decades, we will watch the old paradigm cannibalize
itself to death on our TV screens, tablets and cell phones. Many of us will
do more than watch. We will be participant observers, victims or perpetrators,
or both at once.
The only question that counts, is as follows: amidst this unfolding maelstrom,
are we going to join with others to plant the seeds of viable post-carbon societies
for the next generations of human-beings, or are we going to stand in the way
of that viable future by giving ourselves entirely to defending our 'interests'
in the framework of the old paradigm?
Whatever happens over coming decades, it will be the choices each of us make
that will ultimately determine the nature of what survives by the end of this
pivotal, transitional century.
And one such solution is at hand. People. Too many people to subsist
in a crazed-fossil-fueled capitalists world means there will be changes.
If the MIT professor is correct and the solution is decentralized regenerative
farming, aka organic farming on a vast scope, then we've certainly got the
people power to do it. It's always good to hear that China understands these
things. I'm sure India does too.
Thanks, Yves, for posting this information rich and pertinent article.
Your curation is impeccable.
The cited documents are lengthy and I intend to read further. At a glance,
I was surprised to learn that, despite years of Peak Oil investigations:
1) EROI is virtually unknown in conventional economic and financial circles.
2) Lack of institutional awareness and disinterest at DFID is widespread,
such that research isn't influencing policy. The essence of irony!
3) Experts remain focused on comparitively high energy solutions (such as
underground carbon capture technologies) over low energy biological solutions
(such as carbon sequestration by soil organisms, trees and plants).
I'm heartened, though, to see some regenerative farming citations. Eric
Toensmeier and the Rodale Institute are wonderful. Bill Mollison, David
Holmgren, Brad Lancaster, Geoff Lawton and Darren J. Doherty are also excellent
resources. BTW, the 60999 EROI Global Energy Resources pdf cites a Lambert,
et al 2013. Is that THE Lambert?
A broader understanding of energy is and will remain critical in a post-capitalism,
post-carbon future. Currently, work is neglected because "it doesn't pay"
to do it. That is a tragic squandering of available resources. By any meaningful
metric, it pays to liberate latent energy to do the work of restoring the
environment.
There was a lively discussion this week about community building. I'm
happy to spend my days installing earthworks, natural building, growing
yummy stuff…
Thx for highlighting the regenerative agriculture references. An important
resource I'd add to the list regarding regenerative agriculture and large
scale carbon sink benefits is the
Savory Institute . Their
website is constantly adding links to recent research.
I'm not a huge Rolling Stones fan, but whenever I see a complex economic
analysis like this, I'm reminded of what Mick Jagger said when they asked
him why he dropped out of the London School of Economics: "There's too many
variables."
Fascinating article. One niggling question about EROI. I get how it's
relatively easy to calculate the EROI of a barrel of oil - the barrel holds
a specific number of gallons and each gallon is capable of producing X amount
of energy. But what about renewables? You know the production cost of a
wind turbine, for instance, but the energy it produces over its lifetime
is much more open-ended. So the Energy Return for it must be the total expected
energy returned over the turbine's projected service life, right? If so,
the longer it lasts, the higher it's EROI.
It's a lot more complicated even than that, it really depends on
where you draw the boundaries of the system. Prieto and Hall did an analysis
of Spanish solar that was probably the most comprehensive yet, including
things like the truck trips to lay the gravel for the surface roads, maintenance
trips to clean the panels, etc, and got a much lower EROEI figure than is
typically given for solar. As far as wind goes, turbines tend to fail
at a higher frequency than manufacturers estimate (go figure) so the best
way to measure things like turbine lifespan is to look at those in the field.
The article is generally correct that renewable EROEI tends to be lower
than that of fossil fuels, although it seems not to contemplate that there
is a lower bound on EROEI beyond which these systems can't/won't be sustained
anyway. It's not just that less energy is available for non-energy production
use but that there is an EROEI return below which you probably can't operate
the infrastructure necessary to mine/smelt materials for renewables on the
scale being contemplated here (total replacement of FF-burning infrastructure)
It's best to think of these as order-of-magnitude comparisons with each
other. Local conditions provide huge variability on energy generated by
renewables. Likewise fossil fuel extraction.
I've invested in LED lighting for a long time. Output per unit increases
by a rule-of-thumb called Haitz's law, about a factor of 20 per decade.
Many bulbs tout a lifetime of 20 years, but haven't been around that long,
so that's an extrapolation, and I have the dead bulbs to prove the point.
So when someone talks about LED efficiency, it's not a static number, but
it's still useful for discussion.
A factor that I believe is missing from EROI is cost of clean up or,
lacking clean up, the cost of consequences, which should be determined taking
into account the negative effects of our propensity for corruption, personal
gain at the expense of the whole, (which is why nuclear should have a stratosphericly
high cost, for ex.). For oil, coal and uranium, this is a high cost that
should be subtracted from EROI. For solar and wind, the cost is
much less, except possibly in the manufacture of components that convert
sun/wind into electricity. Life span is supposed to be around 30 years so
the clean up/consequence cost of manufacture should be divided by that number.
I am quite a bit disappointed with this "article". First off, we have
to acknowledge that other than meteorologists (and yes demographics) we
have we skill at forecasting the future. So to me this article reads as
though it started from a future condition than constructed a series of facts
and thesis that get you there. The reality is we don't know and one may
as well flip a coin.
That said, there is clearly right now much to be concerned about. Humans
seem to be internally wired to be short-term based. "Tell me where my next
meal is coming from is all I care about". So, tackling issues like climate
change is not something we're good at; and there is no historic precedent
I can think of for all of mankind collaborating to solve a problem.
The carbon-energy situation needs to be placed in a context of the
slow burn debt deflation we are experiencing, which at a minimum is usually
death for the financial performance of commodities and any long term debt
supported business. NC has well documented the issues this poses for actuarial
based investments (life insurance, think Japan in the early '90s, pensions,
etc.).
Last thought, the debt situation is likely much worse in the short
run as the decline in oil revenues are likely already causing local and
regional recessions (e.g., Bakken, Houston) and correlated impact on commercial
real estate, home values, mortgages, etc. plus are we facing a sovereign
debt crisis in such countries as Venezuela (which used PDVSA to massively
borrow on the countries behalf), Brazil, Russia, etc.
This short term glut will probably accentuate the coming problems
because it gives the impression that there is no peak oil. People have trouble
understanding that there are short-term cycles within a long-term cycle.
This bad signal is giving us the impetus to continue investing in energy
intensive projects instead of reshaping our economy. And this will make
things even worse in 5-10 years.
If the total cost of extraction is more than 40$ and consumers are
paying $40 or less, then somewhere along the way, someone is subsidizing
the cost. It could be low tax rates, eZ money, growing deficits, underfunded
pensions, underfunded restoration funds, etc.
A country's most important asset is energy and historically, countries
have never willingly cut total energy consumption. They might increase efficiencies
but the total does not drop. This means that most countries, as long as
there exist other sectors that can be squeezed, will continue to subsidize
the energy sector squeezing out these sectors that are deemed less important
or simply those with less clout.
It is quite obvious that our lives are even more energy dependent than
they were when this monetary cycle started in the early 70s. And our system
is still based on growing this even more. With NIRP, we are getting very
close to the end of this cycle.
There is no glut. All the oil is being bought. The problem is that
there in not yet enough of a shortage to drive the price up. A small distinction
but huge ramifications if you understand it. And by the way higher prices
is not a solution to what ails us.
A few thoughts:
-time scale – this thing we are in will roll on for thousands of years –
the K-T mass extinction took 2-3 million years before species started to
increase again;
-They (we) will keep the oil flowing as long as they can – look how ugly
the coal industry's slow death is getting – until climate events are overwhelming
and require extraordinary efforts just to mitigate. My money's on sea level
rise focusing all attention;
-billions of humans will die – many in climate change-triggered wars
and famines – the Four Horsemen are saddling up;
-like it or not, people in the developed world, less densely populated
parts, anyway (USA, Canada, e.g.) once they are over the necessities like
lower standards of living (no more trinkets and geegaws ) and hard physical
labor in sustainable agriculture, are way better off than over-populated
places. However, it will get ugly at the borders, as Europe is experiencing
right now.
-expect more authoritarian governments – the human response to crisis.
Tribalism will rule.
-and the doom-and-gloomers can fuck off they are useless, unable to adapt
or evolve, and are just scaring the stupid unnecessarily. The living planet
will adapt and evolve as it has always done – and humans in some form or
other also. DO you really think the most adaptable species, inhabiting every
biome, will not?
No my strategy is hard work. Respectful of the planet's living processes.
And honesty.
Most doomers are at an early stage of consciousness of the magnitude
of our society's death spiral. My aim is to shake them out of their (totally
understandable) depression – work is the cure. COllective efforts on a large
scale but managed locally – resilient ecology requires complexity – monocultures
are doomed.
The way I see it is that you have convinced yourself that you will
be on the winning side when calamity strikes. Whether you are is another
matter… just like the slowest bug does not get to the field on time to get
exterminated by the sprayed pesticides, work and efficiency do not guarantee
anything.
The doomers are those who are not convinced they will be spared. Maybe
they can place themselves in the winning group with positive thinking and
hard work, but maybe not so in such a case they need help deluding themselves
so they can become perma-optimists.
Well I'm glad you have that insight into my thinking! Not!
I see it rather that my own death is inevitable, and that of my lineage
and tribe as having a probability of greater than 0. Luck (divine providence?)
counts for a lot, as you note.
Deluded optimists can be organized to do useful work. Better than idle
pessimists.
I utterly reject the "winning side" as a useful concept – there is only
living struggle through the generations.
I have to wonder, if it is really so easy to clean up the carbon and
other toxins we have polluted the atmosphere and oceans with, then why bother
to stop producing oil, coal and nuclear other than that they come to be
less economical?
i strongly doubt the projected ease of such a clean up whether it be
the biological feasibility or the willingness of humans to work together
for common goals – extinction seem to be almost an afterthought – (or conversely,
the more realistic "Hillary" element in people to work feverishly for personal
gain at the expense of others). Going from coal to sunlight is easy. Going
from Clinton to Sanders, not so much.
Well President Trump will make the thing go faster and expose the failings
of fossil-fueled society as he has the corruption of our fundamentally racist
nation. By being the bad thing.
All major cultures are in terminal decline, which should be expected,
and is not to say that they will not be replaced or that some will not recover,
which is neither good nor bad.
The geneticists and psychologists are snakeoil salesmen. All the geneticists
have proven is that you have the same basic gene set as a worm, making up
about 2% of your DNA. They haven't begun to decipher the 98% if then feedback
code. Science tells you that the last thing you want to do is inject everyone
with the same mitochondrial DNA, but medicine isn't about science; its about
printing money on fear.
What the psychologists learned is that an irrational majority can be
conditioned to do whatever you want. Ironically, in America you are an unfit
parent if you have a scientific mind or believe in others, as a Christian,
leaving the majority, which lives in fear, to raise children, which doesn't
bode well except for the morons running the show, for now.
Projecting the future on biased data is a waste of time, the status quo.
Too funny, critters who have never developed seed debating corporate versus
yuppie farming techniques.
Medicine will never understand synaptic response, immunological adaptation,
intercellular signalling or blood clotting / mRNA feedback, because it is
not paid to do so. You are nature's test tube, and the majority fears the
unknown, as conditioned by the cave people running public education.
As a carbon based life form, it is in your interest to learn how that
carbon chain is popped on and off the stack to maintain event horizons.
That last line is too funny, but I agree with you.
Getting out there and doing something now that we understand what is
going on is probably a better use of our time than trying to protect the
current economic structure. Build a new energy paradigm that better fits
our ecosystem and see what kind of economic, social, and political structures
begin to develop around that.
Surely, whatever develops will model what has come before it but it needs
to be rooted in the physical environment, which clearly it is not currently.
The author blames the oil patch bust on a geophysical crisis. There
is some truth to this argument but by far the biggest driver of the bust
is Fed policy. Artificially cheap debt financing led to overcapacity and
a vicious cycle of continued overproduction as drillers desperately try
to avoid defaulting.
"... Jean Laherrere's graph confirms that inflection point happened around 1980, roughly 20 years after the peak in discoveries. This puts a 40 year lag between the peak in discoveries and the peak in production, the latter being scheduled for about the year 2000. ..."
"... We are now at the peak of that much broader and flatter curve (which has been frequently mis-characterized as an "undulating plateau") with conventional global annual production well below 40 Gb and looking very much like it is finally on its way down. This despite the giant pump and dump scheme otherwise known as the "shale revolution". ..."
Jean Laherrere's graph is particularly interesting.
Anyone familiar with Hubbert's full statistical analysis knows that the peak of proved reserves
roughly corresponds to the same point in time when the production curve crosses the discovery
curve (also backdated), which is roughly the halfway point between the peaks of the discovery
and production curves.
Jean Laherrere's graph confirms that inflection point happened around 1980, roughly 20 years
after the peak in discoveries. This puts a 40 year lag between the peak in discoveries and the
peak in production, the latter being scheduled for about the year 2000.
All of which is perfectly consistent with Hubbert's 1972 Congressional analysis of global discoveries
and production which he put at about 2 trillion bbl URR and a production peak of about 40 Gb per
year in 1995 or thereabouts.
What happened, you may ask, to the production peak? The years 1995 and 2000 have come and gone.
Simple, the global geopolitics of oil. The Arab oil embargo and Iranian revolution of the 70's
but a huge crimp in the global production curve and pushed a significant portion of the area under
the curve into the future by a decade or two.
In Jean Laherrere's world discoveries and production graph above you can clearly see the inflection
point in 1980, before which the world was clearly on the "ideal" Hubbert curve that would have
reached 40 Gb per year in 2000. After 1980 the reality of the geopolitics of oil and energy set
in and constrained global production which visibly flattened out the curve.
Something which Hubbert himself fully acknowledged could happen, both in his analysis and in
subsequent interviews.
We are now at the peak of that much broader and flatter curve (which has been frequently mis-characterized
as an "undulating plateau") with conventional global annual production well below 40 Gb and looking
very much like it is finally on its way down. This despite the giant pump and dump scheme otherwise
known as the "shale revolution".
"... The level of effort dedicated to overcoming challenges will depend in part on sustained high oil prices to encourage sufficient investment in and demand for alternatives. ..."
The U.S. economy depends heavily on oil, particularly in the transportation sector. World oil production
has been running at near capacity to meet demand, pushing prices upward. Concerns about meeting increasing
demand with finite resources have renewed interest in an old question: How long can the oil supply
expand before reaching a maximum level of production--a peak--from which it can only decline? GAO
(1) examined when oil production could peak, (2) assessed the potential for transportation technologies
to mitigate the consequences of a peak in oil production, and (3) examined federal agency efforts
that could reduce uncertainty about the timing of a peak or mitigate the consequences. To address
these objectives, GAO reviewed studies, convened an expert panel, and consulted agency officials.
Most studies estimate that oil production will peak sometime between now and 2040. This range of
estimates is wide because the timing of the peak depends on multiple, uncertain factors that will
help determine how quickly the oil remaining in the ground is used, including the amount of oil still
in the ground; how much of that oil can ultimately be produced given technological, cost, and environmental
challenges as well as potentially unfavorable political and investment conditions in some countries
where oil is located; and future global demand for oil. Demand for oil will, in turn, be influenced
by global economic growth and may be affected by government policies on the environment and climate
change and consumer choices about conservation. In the United States, alternative fuels and transportation
technologies face challenges that could impede their ability to mitigate the consequences of a peak
and decline in oil production, unless sufficient time and effort are brought to bear. For example,
although corn ethanol production is technically feasible, it is more expensive to produce than gasoline
and will require costly investments in infrastructure, such as pipelines and storage tanks, before
it can become widely available as a primary fuel.
Key alternative technologies currently supply the
equivalent of only about 1 percent of U.S. consumption of petroleum products, and the Department
of Energy (DOE) projects that even by 2015, they could displace only the equivalent of 4 percent
of projected U.S. annual consumption. In such circumstances, an imminent peak and sharp decline in
oil production could cause a worldwide recession. If the peak is delayed, however, these technologies
have a greater potential to mitigate the consequences. DOE projects that the technologies could displace
up to 34 percent of U.S. consumption in the 2025 through 2030 time frame, if the challenges are met.
The level of effort dedicated to overcoming challenges will depend in part on sustained high oil
prices to encourage sufficient investment in and demand for alternatives. Federal agency efforts
that could reduce uncertainty about the timing of peak oil production or mitigate its consequences
are spread across multiple agencies and are generally not focused explicitly on peak oil. Federally
sponsored studies have expressed concern over the potential for a peak, and agency officials have
identified actions that could be taken to address this issue.
For example, DOE and United States
Geological Survey officials said uncertainty about the peak's timing could be reduced through better
information about worldwide demand and supply, and agency officials said they could step up efforts
to promote alternative fuels and transportation technologies. However, there is no coordinated federal
strategy for reducing uncertainty about the peak's timing or mitigating its consequences.
"... This short term glut will probably accentuate the coming problems because it gives the impression that there is no peak oil. People have trouble understanding that there are short-term cycles within a long-term cycle. This bad signal is giving us the impetus to continue investing in energy intensive projects instead of reshaping our economy. And this will make things even worse in 5-10 years. ..."
"... A country's most important asset is energy and historically, countries have never willingly cut total energy consumption. They might increase efficiencies but the total does not drop. This means that most countries, as long as there exist other sectors that can be squeezed, will continue to subsidize the energy sector squeezing out these sectors that are deemed less important or simply those with less clout. ..."
"... It is quite obvious that our lives are even more energy dependent than they were when this monetary cycle started in the early 70s. And our system is still based on growing this even more. With NIRP, we are getting very close to the end of this cycle. ..."
"... There is no glut. All the oil is being bought. The problem is that there in not yet enough of a shortage to drive the price up. A small distinction but huge ramifications if you understand it. And by the way higher prices is not a solution to what ails us. ..."
"... The author blames the oil patch bust on a geophysical crisis. There is some truth to this argument but by far the biggest driver of the bust is Fed policy. Artificially cheap debt financing led to overcapacity and a vicious cycle of continued overproduction as drillers desperately try to avoid defaulting. ..."
This short term glut will probably accentuate the coming problems because it gives the impression
that there is no peak oil. People have trouble understanding that there are short-term cycles
within a long-term cycle. This bad signal is giving us the impetus to continue investing in energy
intensive projects instead of reshaping our economy. And this will make things even worse in 5-10
years.
If the total cost of extraction is more than 40$ and consumers are paying $40 or less, then
somewhere along the way, someone is subsidizing the cost. It could be low tax rates, eZ money,
growing deficits, underfunded pensions, underfunded restoration funds, etc.
A country's most important asset is energy and historically, countries have never willingly
cut total energy consumption. They might increase efficiencies but the total does not drop. This
means that most countries, as long as there exist other sectors that can be squeezed, will continue
to subsidize the energy sector squeezing out these sectors that are deemed less important or simply
those with less clout.
It is quite obvious that our lives are even more energy dependent than they were when this
monetary cycle started in the early 70s. And our system is still based on growing this even more.
With NIRP, we are getting very close to the end of this cycle.
There is no glut. All the oil is being bought. The problem is that there in not yet enough of a shortage to drive the price up. A small distinction
but huge ramifications if you understand it. And by the way higher prices is not a solution to what ails us.
The author blames the oil patch bust on a geophysical crisis. There is some truth to this argument
but by far the biggest driver of the bust is Fed policy. Artificially cheap debt financing led
to overcapacity and a vicious cycle of continued overproduction as drillers desperately try to
avoid defaulting.
"... "There can be no doubt, then, that by the end of this century, life as we know it on planet earth will be very different. Fossil fueled predatory capitalism will be dead. In its place, human civilization will have little choice but to rely on a diversity of clean, renewable energy sources." ..."
"... My quibble is that predatory capitalism will be dead. The Machiavellian ideology arrived prior to fossil fuels of any sort, and I think likely will be around quite a bit longer. ..."
"... Large top-down national and transnational structures will begin to become obsolete due to the large costs of maintenance, the unsustainability of the energy inputs needed for their survival, and the shift in power to new decentralized producers of energy and food. ..."
"... The end of cheap oil probably means end of neoliberalism. It is still unclear what will replace it as a dominant social system. ..."
This article seems to me to be an attempt at taking a long term look at a huge issue – humanities
future over the next 85-years or so. Given the available text space (no doubt many volumes could
cover a small fraction of the subject) Ahmed does a great job of summarizing and provides some
promising links to sources.
One quick quibble, Ahmed writes,
"There can be no doubt, then, that by the end of this century, life as we know it on
planet earth will be very different. Fossil fueled predatory capitalism will be dead. In its
place, human civilization will have little choice but to rely on a diversity of clean, renewable
energy sources."
Of course, I agree life will be different in 2100. I also agree that we are witnessing the
fossil fuel end game (as Amory Lovins at RMI would say), and certainty if one looks at current
rates of investment in various energy technologies, renewable sources are the future. My quibble
is that predatory capitalism will be dead. The Machiavellian ideology arrived prior to fossil
fuels of any sort, and I think likely will be around quite a bit longer.
Granted, Ahmed makes some caveats in the article about how difficult the next few decades will
be. He then writes,
" Large top-down national and transnational structures will begin to become obsolete
due to the large costs of maintenance, the unsustainability of the energy inputs needed for
their survival, and the shift in power to new decentralized producers of energy and food.
In the place of such top-down structures, smaller-scale, networked forms of political, social
and economic organization, connected through revolutionary information technologies, will be
most likely to succeed. For communities to not just survive, but thrive, they will need to
work together, sharing technology, expertise and knowledge on the basis of a new culture of
human parity and cooperation."
Imagine the Sanders campaign working on issues outside electoral politics, run by occupy wall
street organizers for example. I suspect there is some truth in Ahmed's speculations. Enough to
be hopeful about. It may just come down to a choice – despair in business as usual, or taking
a leap to hope, and work for, the success of some rational changes for the better.
likbez, April 23, 2016 at 3:51 pm
The end of cheap oil probably means end of neoliberalism. It is still unclear what will
replace it as a dominant social system.
"... My guess at this point is sometime between 2018 & 2020 we will begin to see substantial declines of 3% to 7% per year (slow at first, but increasing over time). The current investment in CapEx isn't sufficient to prevent much higher depletion rates. ..."
"The scenario I think most likely is and undulating plateau in C+C output to about 2021 and then
gradual decline of under 1.5% though about 2027 and by 2030 that declining output will cause an
economic crisis and a World recession."
I have serious doubts that infill drilling will hold
out anywhere near that long. if it wasn't for infill drilling scraping the bottom of depleted
fields, we would already be in a serious decline, even with the shale bubble. How long can infill
drilling last, I don't know, but its not-sustainable.
My guess at this point is sometime between 2018 & 2020 we will begin to see substantial declines
of 3% to 7% per year (slow at first, but increasing over time). The current investment in CapEx
isn't sufficient to prevent much higher depletion rates.
DC Wrote:
"By that time it will be clear that peak oil has been reached and perhaps policy measures will
be aggressively implemented to alleviate the problem."
It will be to late by then. Its already too late now. I expect when production problems develop.
the World gov't will turn to the same old tactics that make the problems worse: Price Controls,
Rationing, even more excessive gov't regulation, cronyism, and of course, more war.
DC wrote:
"An economic crisis (such as the 1930s in some parts of the World) can lead to positive social
changes, they can also be very negative."
I cannot recall a single period in history that an economic crisis lead to positive social
change. Its only after a wave of bloodshed and destruction that civilization makes a change. However,
never in history did the world experience a economic collapse rife with revolution/social change,
armed with nuclear weapons and nuclear power plants. Whatever remains of humanity in the aftermath,
will likely be another 1000 years of the dark ages (ie the fall of Rome)
Also consider in most cases it was war that made the economy better. Since the beginning of
the industrial revolution, war has create a rapid progress in technology. For instance, WW1 paved
the way for rapid use of machinery (farm tractors, trucks, cars, etc). The factories built to
make tanks, trucks, etc during the war, started mass producing consumer goods after the war, and
increase worker productivity. WW2 create the electronic revolution (computers, development of
broad antibiotics, new materials: Plastics, etc).
Unfortunately nuclear weapons rules out future tech revolutions since our weapons can now destroy
civilization and damage the global environment for hundreds to thousands of years. A nuclear war
will be over in a matter of a few days perhaps as long as few weeks, killing billions and there
will be no time to develop new technologies. Nuclear weapons are the Apex of war developed tech.
We've become the Suicide race.
DC Wrote:
"Hopefully we will not forget our history."
We already did! See the rise of socialism in the West as a prime example. The lessons of war and
politcican follies are lost after the last generation that suffered the horrors dies off. The
WW 2 generation is nearly gone, Thus ushering in a new wave of folly.
"... The Telegraph has a story indicating Chinese oil imports are jumping from 6.7 million barrels per day in 2015 to 8 million barrels per day in 2016. Estimated to be 10 million barrels per day in 2018. Barclays estimates. Chinese production is set to fall slightly in 2016. ..."
"... US production looks to fall to 8 million bopd by end of 2016. US oil demand is also rising. ..."
"... Yeah I'm biased. I'm sick of sub $40 in the field. We have been below $40 in the field since 7/15. Haven't seen above $55 in the field since 11/14. Havent seen these oil prices since 2003-2004. ..."
"... Oil is still very low, yet gasoline has popped up over $2. Low here was $1.29. ..."
"... Refining friends say US gasoline demand will be very high this summer. Their turnaround is winding down, they are going to refine a record number of barrels this year. Just observations. ..."
The Telegraph has a story indicating Chinese oil imports are jumping from 6.7 million barrels
per day in 2015 to 8 million barrels per day in 2016. Estimated to be 10 million barrels per day
in 2018. Barclays estimates.
Chinese production is set to fall slightly in 2016.
US production looks to fall to 8 million bopd by end of 2016. US oil
demand is also rising.
Yeah I'm biased. I'm sick of sub $40 in the field. We have been below $40 in the field since
7/15. Haven't seen above $55 in the field since 11/14. Havent seen these oil prices since 2003-2004.
Great weather here today. People driving all over the place in our little burg. Didnt see one
electric
car today. Still know of one Tesla in town. There is, however, also one
used Leaf. That is new in the past
year. It is driven by a teenager to and from school. Her father has an F350 diesel, her mother
has a Chevy Suburban. The Tesla owner also has two gasoline powered vehicles.
Oil is still very low, yet gasoline has popped up over $2. Low here was $1.29.
Refining friends say US gasoline
demand will be very high this summer. Their turnaround is winding
down, they are going to refine
a record number of barrels this year. Just observations.
"... This could be a really big deal. First sign that the people of the GCC are not going to take reduced living standards easily. ..."
"... Good! I will go with Ron. They are all maxed out anyway. If they had signed a freeze agreement, then everyone would say that the price is rigged and blame the oil companies. I am willing [lost my ass on a lot of oil stock investments] to just wait and see how everything plays out without artificial agreements, that, in my opinion, would have meant nothing. ..."
"... Clueless. I understand where you are coming from. Given early signs from Kuwait, there may be no need for a cut or freeze. Assuming Kuwait just went down about 2 million, wouldn't it be prudent for the rest to wait and see what happens? I think austerity in the kingdoms maybe is not going so smoothly? ..."
"... As for us, we are kind of like Russia, don't want to see another sub $30 test. Would like to get to $55-60 WTI and see how shale, tar sands, etc react. So, if freeze talk is why we had a bounce, and we drop back below $30 WTI, we wont be happy campers about no freeze deal. ..."
Kuwait Oil Company (KOC) has lowered crude output to 1.1 million barrels per day (bpd) from its
normal production level of about 3 million bpd, company spokesman Saad Al-Azmi said in a posting
on the KOC Twitter account.
Now thats a cut to write home about. So not sure about that how much the "glut" is but if they
take of 2mb/d does it mean we are below daily demand now.
Some talk about freeze – the are definitely not talking, :-)
Oh sorry. Just copied a slice of the article and missed that vital information.
Anyway, let the market party start. It will definitely test the fundamentals of the oil market.
Words vs. Supply
DOHA OIL PRODUCERS MEETING ENDS WITHOUT AN AGREEMENT
"A summit in Doha between the world's largest oil producing countries ended without an agreement
on Sunday, as country leaders failed to strike a deal to freeze output and boost sagging crude
prices."
Good! I will go with Ron. They are all maxed out anyway. If they had signed a freeze agreement,
then everyone would say that the price is rigged and blame the oil companies. I am willing [lost
my ass on a lot of oil stock investments] to just wait and see how everything plays out without
artificial agreements, that, in my opinion, would have meant nothing.
Clueless. I understand where you are coming from.
Given early signs from Kuwait, there may be no need for a cut or freeze. Assuming Kuwait just went down about 2 million, wouldn't it be prudent for the rest to wait
and see what happens? I think austerity in the kingdoms maybe is not going so smoothly?
As for us, we are kind of like Russia, don't want to see another sub $30 test. Would like to
get to $55-60 WTI and see how shale, tar sands, etc react. So, if freeze talk is why we had a
bounce, and we drop back below $30 WTI, we wont be happy campers about no freeze deal.
In retrospect, costs got out of hand at $100 oil. Pretty much everything is cheaper now, except
for electricity.
$55-60 WTI would be wonderful. It would better if the market achieves it than through a cut.
However, history is that a cut is necessary to get the traders to dump their shorts.
There are a lot of John Kilduff's out there who are almost maniacal in their desire to drive
WTI back below $26.
I long ago quit trying to figure out why oil trades like it does, or how it can get so high
or low for periods of time.
I'd say the new Saudi prince who is apparently now in charge seems to be taking a different
approach than his predecessors.
The world's major oil producing nations failed to strike an agreement on Sunday
night to freeze production, saying they needed more time to agree a deal to
try to buoy the price of oil.
What producers had hoped would be the
first deal in 15 years ran into difficulty after
Saudi Arabia
– the largest exporter of oil – demanded that Iran join an
agreement to freeze output.
Iran
has been reluctant to agree to hold back on oil production while it
attempts to return its market share to pre-sanction levels.
The meeting in Doha had been called on Sunday for 18 countries to sign off
on a deal that would helped to put a floor on the price of crude oil which,
at
$45 a barrel
, has risen 60% from its lows in January.
But Reuters quoted sources saying that Saudi Arabia wanted all
Opec
members to attend talks, despite insisting earlier on excluding Iran,
its political rival in the region, because Tehran had refused to freeze production.
If a deal cannot be struck soon, it is possible that recent rises in the
price of oil will stall.
Economists at French bank Société Générale said: "When it comes to oil, the
principle of Goldilocks applies in full. Too low a price raises fear of a vicious
circle of default, spillover to bank balance sheets, eroding financial conditions
and a new headwind for the real economy.
"Too high a price, on the other hand, erodes the welcome boost to purchasing
power. But, if higher oil prices are driven by stronger demand, then this is
good news."
They noted that a recent report by the
International Energy Agency
warned that a mere production freeze would have
a limited effect on physical oil supply.
Even so, expectations had been high before the Sunday meeting that a deal
could be struck between Opec and non-Opec oil producers to hold output at January's
levels until October. Reuters was reporting that producers were instead agreeing
to freeze oil production at "an agreeable level" as long as all Opec countries
and major exporting nations participated.
"If there is no deal today, it will be more than just Iran that Saudi Arabia
will be targeting. If there is no freeze, that would directly affect North American
production going forward, perhaps something Saudis might like to see," Natixis
oil analyst Abhishek Deshpande told Reuters.
China's exports jumped 11.5%, the most in a year, and declines in imports narrowed to 7.6%
, adding to evidence of stabilization in the world's second-biggest economy.
(b) continuing growth in vehicle sales, supporting strong growth in gasoline consumption
"Vehicle sales in China rose 8.8 percent in March from a year earlier to 2.4 million, the China
Association of Automobile Manufacturers said on Tuesday, supporting strong gasoline demand in
the country." http://www.reuters.com/article/us-global-oil-idUSKCN0X800I
Average oil demand in the world's second-largest crude consumer is expected to grow by 420,000
barrels a day this year, the bank [Standard Chartered] said, adding that apparent oil product
demand expanded 6.2 percent last year to 9.4 million barrels a day. China will account for 37
percent of global demand growth this year, Standard Chartered estimates.
http://www.bloomberg.com/news/articles/2016-03-25/china-seen-sustaining-strong-crude-imports-on-refining-reserves
2/ Falling domestic oil production (for the first time in many years)
"China Petroleum and Chemical Corp, or Sinopec Corp., plans to … cut crude production by 5%
in 2016 as a result of cutting capital expenditures by 10.6% from 2015"
"Total upstream production last year fell 1.7% to 471.91 million barrels of oil equivalent, with
crude output down 3.1%"
[ Hong Kong (Platts)–30 Mar 2016
http://www.platts.com/latest-news/oil/hongkong/chinas-sinopec-expects-steady-throughput-5-lower-27408416
]
"PetroChina Co. sees oil and gas output falling the first time in 17 years as it shuts high-cost
fields that have "no hope" of making profits at current prices."
"PetroChina forecasts crude production this year at 924.7 million barrels, down 4.9 percent."
"China's output in 2016 will decline as much as 5 percent from last year's record 4.3 million
barrels a day, according to estimates last month from Nomura Holdings Inc. and Sanford C. Bernstein
& Co. That would be the first drop in seven years, and the biggest in records going back to 1990."
5/ Strong refining margins, which encourage increasing processing volumes and contribute to
increasing oil product exports (which means that the increase in net imports was less than gross
imports)
They are owed almost a billion. I wonder how that works. They say if you owe a bank a million
and can't pay, you have a problem. If you owe a billion, the bank has a problem. I wonder if they
will actually pull out or be forced to continue to provide services to protect their receivables.
Maduro has been alleging that the US is seeking to scrap the OPEC freeze plan.
"... The weekly decline stands now at -31 kb/d which is annualized 1.6 mill b/d. In my view decline rates will now accelerate until oil prices – and more importantly drilling – are up. So, it is also my opinion that the next rise in US liquid hydrocarbon production will not be up before summer 2017. ..."
The weekly decline stands now at -31 kb/d which is annualized 1.6 mill b/d. In my view
decline rates will now accelerate until oil prices – and more importantly drilling – are up. So,
it is also my opinion that the next rise in US liquid hydrocarbon production will not be up before
summer 2017.
Interesting also that 'other supply' (including fuel ethanol and processing gains) is down
70 kb/d. So, the market works and lays the foundation of a price recovery.
"... KSA is the primary driver into the turmoil in Syria. KSA is sitting on vast NatGas fields underneath their oil fields. However, producing NatGas from these fields would cause severe Oil production issues, so they won't tap the NatGas until their Oil fields are tapped out. KSA needs to path to get its NatGas into Europe, which requires a pipeline through Syria. So if they are pressing to remove Assad from power, I suspect that KSA production problems aren't too far into the future. ..."
"... Iran & KSA appear to be gearing up for war. Both nations are buying military equipment and are running multiple proxy wars. I believe KSA is now has the 4 or 5 biggest military budget for 2016. Both KSA and Iran also have a limited number of nuclear weapons. Should the proxy wars turn into a hot war, then it really doesn't matter how much oil is left to be produced. ..."
"... I have wondered this for awhile too. They appear to handle so much water. As I have stated, handling water is a major expense in producing oil. I wonder how much chemical KSA has to use and as well how much electricity. I also wonder what pressure is required on the injected water. There are very few water floods in the US with LOE much under $15 per BOE. Most are well over $20. Same applies to steam floods, CO2 and polymer floods. ..."
"... What happens as the "old" big fields that provided decades of oil comes to an end of their economic life, shortened by the collapse in the oil price and the lasting low oil price? Generally the discoveries that wait in line for development are smaller, so to keep the level and/or grow becomes THE Red Queen race. Then throw in that several of the majors have had a Reserves Replacement Ratio (RRR) of less than 100%, meaning reserves are depleted faster than they are being replaced. ..."
"... Let's say Ghawar begins to decline, that is one field, I imagine that you believe it is unlikely that all the large fields in the World will begin their decline phase simultaneously. So let's assume they do not. For simplicity we will assume Ghawar produces about 5 Mb/d and that it will decline at 3%/ year (similar to US before LTO production started from 1985-2004), we will also assume each year the equivalent of one Ghawar begins to decline until all World production is eventually declining at 3% per year. For simplicity we will assume all fields decline at 3% (in reality some will be more than this and some will be less and the rate won't be constant over time. This is a very simple model. ..."
"... I expect than when the Oil column dips some where between 10 feet and 3 feet, Production is going to collapse at a much faster rate than 3% per year, Perhaps as high 10 to 20% per year. I think as the remaining Oil column shrinks its going to be much harder to extract oil since it will be difficult to steer laterals to follow the uneven remaining oil column. The water cut will grow increasing problematic, and drilling will need to increase to keep laterals on near the top of the oil column. ..."
"... My understanding average large fields are declining at a rate of 5% to 7% per year. Horizontal and other advance drilling\extraction tech has prevented significant production declines so far, but this trend isn't sustainable. At some point I believe we will see shocking decline rates no matter what tech is developed, or how much the Price of Oil increases into. ..."
"... Yes. But I think KSA would likely go to war first as a diversion to internal unrest. Ron Patternson would be a better source than me, since I never visited or worked in KSA. Ron has. So far KSA is using brutal tactics to prevent protests and uprisings. ..."
"... Will economic and social problems become a crisis before Oil production collapses begin? Lots of nations are downing in debt, have aging population with no or inadequate retirement savings, and younger labor pools unequipped (educated/skilled) to meet the needs of businesses. I can't image that the global economy can be sustained for much longer (EU, Asia & South America in recession & the US teetering on the end of another recession). Since when in history have major industrial powers have negative interest rates? ..."
"... I believe the most of the Ghawar formation has a profile where its narrow at the bottom and much wider at the top. There is more volume at the top of the formation than at the bottom. So the decline in oil column depth is not linear. ..."
"... "The 2009 study focused on 331 giant oil fields from a database previously created for the groundbreaking work of Robelius mentioned above. Of those, 261 or 79 percent are considered past their peak and in decline." "The average annual production decline for those 261 fields has been 6.5 percent. " ..."
"... "Now, here's the key insight from the study. An evaluation of giant fields by date of peak shows that new technologies applied to those fields have kept their production higher for longer only to lead to more rapid declines later. As the world's giant fields continue to age and more start to decline, we can therefore expect the annual decline in their rate of production to worsen. Land-based and offshore giants that went into decline in the last decade showed annual production declines on average above 10 percent." ..."
"... The increased use of in-fill drilling (e.g. moving horizontal producers up dip) and IOR/EOR techniques was foreseen with it's effect on prolonging the plateau, we are yet to see if the sudden collapse that was also predicted. The thing that was missed in the predictions around 2009 to 2013 was a flood of free money and with it the ability of the oil industry to ramp up non-conventional production, and I'd also say for Iraq. ..."
"... Great post George: an excellent summary of PO describing rapid ongoing production decline from most key fields that has been temporarily deferred by enormous pulse of infill drilling and EOR paid for via free money leading to current situation. What else do we need to know? ..."
"... As I have repeated many times on this blog, Saudi has been able to mask the decline of its old giant oil fields by bringing old oil previously mothballed fields back on line. These fields are Shaybah, Khurais and Manifa. ..."
"... to even suggest that Ghawar might go into decline is preposterous. Ghawar has long been into decline. I am shocked that you are ignorant of that fact. ..."
"... I have no idea what Ghawar's current production numbers are because it is a Saudi state secret. But I would guess somewhere in the neighborhood of 3 million barrels per day. But if it were not a state secret and Saudi were proud of the numbers, then it would be in the neighborhood of 5 million barrels per day. ..."
"... "Although Saudi Arabia has about 100 major oil and gas fields, more than half of its oil reserves are contained in eight fields in the northeast portion of the country…The Ghawar field has estimated remaining proved oil reserves of 75 billion barrels" ..."
"... The EIA estimates Saudi Arabia's oil production capacity (ex NGLs) at around 12 mb/d, including ~300kb/d in the Saudi part of the Neutral zone. The latest estimate by the IEA is 12.26 mb/d ..."
"... Alex, Ghawar can in no way produce anywhere near 5.8 million barrels per day. But then if you believe anything that is printed on the internet then….. ..."
"... Incidentally, the EIA agrees with Saudi Arabia on their proven reserves of 266 billion barrels. Which says nothing other than "We take Saudi's word for everything. ..."
"... The recent increase in Saudi Arabia's oil production was largely due to higher utilization of production capacity. The last large increase in capacity was in 2009, when Khurais field capacity was increased to 1.2 mb/d. The start of the Manifa field in 2013 and its ramp-up in 2014 largely offset declining production at the mature fields. ..."
"... If we assume a 6.5% annual decline rate since 2009 we would be at 3.4 Mb/d in 2015. At some point Saudi Arabia as a whole will begin to decline, when this will happen I do not know. Just as in the US where there has been extensive infill drilling and secondary, tertiary recovery methods employed and decline rates have remained under a 3% annual rate, the same is likely to be true of other large producing nations with a combination of on shore and offshore projects. ..."
"... The best analogy for Ghawar is probably Cantarell, they have both been developed with the best available secondary and tertiary recovery methods. Cantarell production dropped like a stone once those techniques were exhausted (about 15% per year in 2006 to 2008). My guess is Ghawar will go (or is going) even faster as the IOR/EOR techniques and software models available for its development are more advanced and it is onshore, making their application easier. Daqing might go the same way. Samotlor has been declining at around 5%. ..."
"... I know this is probably an impossible question but how long do you think it will take to deplete the remaining oil column? If it is correct that it took 10 years to drop from 100 to 25 feet (assuming this is correct too) then that doesn't bode well for future production from Ghawar over the next decade. ..."
"... The next five years should tell a lot if the oil column is now that thin. 5 mbopd can't continue forever, nor can 3% decline in a permeable reservoir under water flood. When the water mostly reaches the top, the oil stained water becomes too expensive to separate out and production stops at greater than a 3% rate. ..."
1. Ghawar started with a Oil column of ~1300. I believe by 2005, the Oil column shrunk to about
100 feet. Today its about 20-25 feet. The remaining Oil is floating on water and KSA is using
horizontal drilling to extract it. In some regions of Ghawar they are on their second or third
string of horizontal wells as the water column flood above the wells, and they had to drill above
to get back into the Oil column.
2. KSA restarted production in existing wells that have already been depleted decades ago.
Better tech and mapping information permitted them to sweep up trapped oil in these wells.
3. KSA is now using advanced Oil recovery in Ghawar and other fields (CO2/Nitrogen injection)
in order to free up trapped oil.
4. Saudi Americo, posts tech articles (quarterly) on their website. They usually don't include
which fields they are discussing, but with a little bit of effort, its not to difficult to determine
which fields discussed. This is where I found the three above items. I posted excerpts on this
blog over the past couple of years from SA tech articles.
5. KSA is the primary driver into the turmoil in Syria. KSA is sitting on vast NatGas fields
underneath their oil fields. However, producing NatGas from these fields would cause severe Oil
production issues, so they won't tap the NatGas until their Oil fields are tapped out. KSA needs
to path to get its NatGas into Europe, which requires a pipeline through Syria. So if they are
pressing to remove Assad from power, I suspect that KSA production problems aren't too far into
the future.
FWIW: Its just not KSA that is the problem. Most of the global production has been maintained
from old depeleted wells, using new tech to sweep up trapped oil. Obviously this can't be continued
indefinitely. I fear that at some point all of the major fields will begin to see sharp declines
as remains of trap oil is extracted, an newer technology isn't going to extract Oil that doesn't
exist. With the extremely low oil prices, no one is developing any new fields (deep water, arctic,
etc). By the time oil prices recover that makes it profitable resume these expensive projects
it will be too late and there will likely be permanent crisis. It may take 5 to 7 years to develop
new project to produce Oil. 5 to 7 years is a long lag time, which depletion continues to march
on.
That said, its possible that other problems trump Oil production problems, such as, the Debt
crisis or the demographic crisis (aging populations). We are very close to another major debt
crisis as gov'ts start going bankrupt (ie rest of the PIGS – Portugal, Spain, Italy), China, Japan,
Most of South America, and perhaps a lot of US cities and even US states (Puerto Rico, Illinois,
Pennsylvania, West Virginia, and perhaps California).
Iran & KSA appear to be gearing up for war. Both nations are buying military equipment
and are running multiple proxy wars. I believe KSA is now has the 4 or 5 biggest military budget
for 2016. Both KSA and Iran also have a limited number of nuclear weapons. Should the proxy wars
turn into a hot war, then it really doesn't matter how much oil is left to be produced.
I have wondered this for awhile too. They appear to handle so much water. As I have stated,
handling water is a major expense in producing oil. I wonder how much chemical KSA has to use
and as well how much electricity. I also wonder what pressure is required on the injected water.
There are very few water floods in the US with LOE much under $15 per BOE. Most are well over
$20. Same applies to steam floods, CO2 and polymer floods.
What happens as the "old" big fields that provided decades of oil comes to an end of their
economic life, shortened by the collapse in the oil price and the lasting low oil price? Generally
the discoveries that wait in line for development are smaller, so to keep the level and/or grow
becomes THE Red Queen race. Then throw in that several of the majors have had a Reserves Replacement
Ratio (RRR) of less than 100%, meaning reserves are depleted faster than they are being replaced.
Let's say Ghawar begins to decline, that is one field, I imagine that you believe it is
unlikely that all the large fields in the World will begin their decline phase simultaneously.
So let's assume they do not. For simplicity we will assume Ghawar produces about 5 Mb/d and that
it will decline at 3%/ year (similar to US before LTO production started from 1985-2004), we will
also assume each year the equivalent of one Ghawar begins to decline until all World production
is eventually declining at 3% per year. For simplicity we will assume all fields decline at 3%
(in reality some will be more than this and some will be less and the rate won't be constant over
time. This is a very simple model.
Chart below has World C+C output in Mb/d on left axis and annual decline rate (dashed line)
on right axis. It is assumed in this scenario that a nuclear war in the middle east does not occur.
I expect than when the Oil column dips some where between 10 feet and 3 feet, Production
is going to collapse at a much faster rate than 3% per year, Perhaps as high 10 to 20% per year.
I think as the remaining Oil column shrinks its going to be much harder to extract oil since it
will be difficult to steer laterals to follow the uneven remaining oil column. The water cut will
grow increasing problematic, and drilling will need to increase to keep laterals on near the top
of the oil column.
My understanding average large fields are declining at a rate of 5% to 7% per year. Horizontal
and other advance drilling\extraction tech has prevented significant production declines so far,
but this trend isn't sustainable. At some point I believe we will see shocking decline rates no
matter what tech is developed, or how much the Price of Oil increases into.
That said I don't have a crystal ball or a time machine that shows me what is going to happen.
George Kaplan Asked:
"Do you think there is a significant risk of internal disruption"
Yes. But I think KSA would likely go to war first as a diversion to internal unrest. Ron
Patternson would be a better source than me, since I never visited or worked in KSA. Ron has.
So far KSA is using brutal tactics to prevent protests and uprisings.
"Based upon your thoughts, what do you think that the average cost per barrel is for KSA oil?"
I don't have a clue. I would imagine production costs are constantly rising.
Rune rhetorically asked:
"What happens as the "old" big fields that provided decades of oil comes to an end of their
economic life, shortened by the collapse in the oil price and the lasting low oil price?
yes, that was the point I was leading to. That said: Will economic and social problems
become a crisis before Oil production collapses begin? Lots of nations are downing in debt, have
aging population with no or inadequate retirement savings, and younger labor pools unequipped
(educated/skilled) to meet the needs of businesses. I can't image that the global economy can
be sustained for much longer (EU, Asia & South America in recession & the US teetering on the
end of another recession). Since when in history have major industrial powers have negative interest
rates?
Dave P asked:
"I know this is probably an impossible question but how long do you think it will take to deplete
the remaining oil column?"
I don't' have a clue. I believe the most of the Ghawar formation has a profile where its
narrow at the bottom and much wider at the top. There is more volume at the top of the formation
than at the bottom. So the decline in oil column depth is not linear.
"The 2009 study focused on 331 giant oil fields from a database previously created for
the groundbreaking work of Robelius mentioned above. Of those, 261 or 79 percent are considered
past their peak and in decline." "The average annual production decline for those 261 fields has
been 6.5 percent. "
"Now, here's the key insight from the study. An evaluation of giant fields by date of peak
shows that new technologies applied to those fields have kept their production higher for longer
only to lead to more rapid declines later. As the world's giant fields continue to age and more
start to decline, we can therefore expect the annual decline in their rate of production to worsen.
Land-based and offshore giants that went into decline in the last decade showed annual production
declines on average above 10 percent."
The increased use of in-fill drilling (e.g. moving horizontal producers up dip) and IOR/EOR
techniques was foreseen with it's effect on prolonging the plateau, we are yet to see if the sudden
collapse that was also predicted. The thing that was missed in the predictions around 2009 to
2013 was a flood of free money and with it the ability of the oil industry to ramp up non-conventional
production, and I'd also say for Iraq.
Great post George: an excellent summary of PO describing rapid ongoing production decline
from most key fields that has been temporarily deferred by enormous pulse of infill drilling and
EOR paid for via free money leading to current situation. What else do we need to know?
Dennis, Ghawar is not one oil field, it is five. That is not even counting Fazran. There are
Ain Dar, Shedgum, Uthmaniyah,
Hawiyah, and Haradh. Four of the five Gahwar fields are in decline and the fifth, Haradh,
is on a plateau.
To even suggest that Ghawar "might" begin to decline shows an astonishing ignorance of Saudi
oil production capabilities.
As I have repeated many times on this blog, Saudi has been able to mask the decline of
its old giant oil fields by bringing old oil previously mothballed fields back on line. These
fields are Shaybah, Khurais and Manifa.
Dennis, for God's sake, to even suggest that Ghawar might go into decline is preposterous.
Ghawar has long been into decline. I am shocked that you are ignorant of that fact.
I have no idea what Ghawar's current production numbers are because it is a Saudi state
secret. But I would guess somewhere in the neighborhood of 3 million barrels per day. But if it
were not a state secret and Saudi were proud of the numbers, then it would be in the neighborhood
of 5 million barrels per day.
But it is a state secret and it is not, in my estimation, anywhere near 5 million barrels
per day.
"Although Saudi Arabia has about 100 major oil and gas fields, more than half of its oil
reserves are contained in eight fields in the northeast portion of the country…The Ghawar field
has estimated remaining proved oil reserves of 75 billion barrels"
The EIA estimates Saudi Arabia's oil production capacity (ex NGLs) at around 12 mb/d, including
~300kb/d in the Saudi part of the Neutral zone.
The latest estimate by the IEA is 12.26 mb/d
more than half of its oil reserves are contained in eight fields in the northeast portion of
the country
More than half no less. Well hell, I cannot argue with that.
Alex, all your listed fields come to 11.75 million barrels per day. And that is more than
half. Wow! Alex, do you really believe that shit?
That does not include Berri? How could they not count Berri? Or Safah? Or any of the
other fields that would be giant fields in any other country? If you add them all up it would
likely come to at least 15 to 20 million barrels per day. Which is a joke of course. Saudi is
now producing flat out.
Alex, Ghawar can in no way produce anywhere near 5.8 million barrels per day. But then
if you believe anything that is printed on the internet then…..
If 11.75 is more than half then they likely figure around 20 million barrels per day
is possible. Yeah right!
Incidentally, the EIA agrees with Saudi Arabia on their proven reserves of 266 billion
barrels. Which says nothing other than "We take Saudi's word for everything.
Ron, I am actually rather skeptical about EIA's international statistics. Obviously, I'm not saying
that those numbers are correct.
Do you think they may have included NGLs (given that KSA produces more than 2 mb/d of NGLs)?
Alex, the EIA does have a tendency to include NGLs in their estimates. That is likely here since
Saudi is producing nowhere near what they say their their major fields are capable of.
But no one has any idea what each individual field in Saudi is producing. They have only Saudi's
word for it. Which is worth about the same as a bucket of warm spit.
The recent increase in Saudi Arabia's oil production was largely due to higher utilization
of production capacity. The last large increase in capacity was in 2009, when Khurais field capacity
was increased to 1.2 mb/d. The start of the Manifa field in 2013 and its ramp-up in 2014 largely
offset declining production at the mature fields.
Saudi Arabia's oil production and capacity (mb/d)
source: IEA (capacity), JODI (production)
I do not know the output of Ghawar, nor it's decline rate as we have no data. If the output
is 3 Mb/d, it is less of a factor than if output was 5 Mb/d. Yes there are several fields that
are grouped together and called Ghawar. All fields will decline eventually, the "might" is only
about when those declines occur. The simple illustrative model is to show what happens
when all fields don't start their decline at one moment in time. The 5 Mb/d was chosen simply
because at one time "Ghawar" supposedly produced 5 Mb/d in 2009 (according to the Wikipedia article).
What is your source for your 3 Mb/d estimate?
If we assume a 6.5% annual decline rate since 2009 we would be at 3.4 Mb/d in 2015. At
some point Saudi Arabia as a whole will begin to decline, when this will happen I do not
know. Just as in the US where there has been extensive infill drilling and secondary, tertiary
recovery methods employed and decline rates have remained under a 3% annual rate, the same is
likely to be true of other large producing nations with a combination of on shore and offshore
projects.
A lower URR oil shock model (3000 Gb including 500 Gb oil sands) still has an annual decline
rate under 2%/year.
Your analogy of the USA with Ghawar is not applicable. Aggregates of differently aged individuals
do not behave like an oversized average of those individuals. A country does not represent a basin,
a basin does not represent a field and a field does not represent an individual well.
The best analogy for Ghawar is probably Cantarell, they have both been developed with the
best available secondary and tertiary recovery methods. Cantarell production dropped like a stone
once those techniques were exhausted (about 15% per year in 2006 to 2008). My guess is Ghawar
will go (or is going) even faster as the IOR/EOR techniques and software models available for
its development are more advanced and it is onshore, making their application easier. Daqing might
go the same way. Samotlor has been declining at around 5%.
Burgan is probably the best placed of the super giants as it has natural water drive and didn't
use secondary recovery until 2010, and still not much, so there is a lot of potential to accelerate
production and arrest the decline (at the expense of rapid decline later of course). Note however
that wiki indicates 14% decline there, but with no citation so maybe just a guess.
I am comparing US with Saudi Arabia. I expect when Saudi Arabia begins to decline the annual
rate of decline will be 3% per year or less.
Cantarell was pushed much harder than Ghawar, relative to reserves and is an exceptional case.
In any case I do not know what will happen to the fields that make up Ghawar, I don't have any
data so I will not speculate any further. World output will be determined by the output of all
fields, Ghawar is important, but if Ron's estimate is correct, it is 4% of World output.
The 3000 Gb scenario above with 2500 Gb of C+C less oil sands (or extra heavy oil) and 500
Gb of extra heavy (XH) oil is based on Jean Laherrere's 2013 estimate of XH oil and a Hubbert
Linearization of C+C-XH from 1993 to 2015 in chart below.
Dennis – you state "For simplicity we will assume Ghawar produces about 5 Mb/d and that it will
decline at 3%/ year (similar to US before LTO production started from 1985-2004)", and then say
"I am comparing US with Saudi Arabia. I expect when Saudi Arabia begins to decline the annual
rate of decline will be 3% per year or less.". Which one is it, because they aren't both correct?
"Cantarell was pushed much harder than Ghawar" Please provide details of how you know this.
Thanks Techguy, that was an interesting post. I know this is probably an impossible question
but how long do you think it will take to deplete the remaining oil column? If it is correct that
it took 10 years to drop from 100 to 25 feet (assuming this is correct too) then that doesn't
bode well for future production from Ghawar over the next decade.
Much as I love Dennis' charts, I just don't see his 3% continuing very long, if Ghawar is indeed
down to a thin layer of oil over water. There could just be a clunk as the field is shut down
after a short period of steeper decline.
The next five years should tell a lot if the oil column is now that thin. 5 mbopd can't
continue forever, nor can 3% decline in a permeable reservoir under water flood. When the water
mostly reaches the top, the oil stained water becomes too expensive to separate out and production
stops at greater than a 3% rate.
There will be fields that decline more than 3% and fields that will decline less, the average
will roughly match the US decline (the most mature large oil producing nation) from 1986 to 2004
which was less than 3% per year.
Ghawar is several fields, Tech Guy's comments probably do not apply to all the fields of Ghawar.
People also seem to forget that new fields will continue to be developed and infill drilling
and EOR will continue in many fields. These factors will reduce the rate of decline for overall
World C+C output.
5. KSA is the primary driver into the turmoil in Syria. KSA is sitting on vast NatGas fields
underneath their oil fields. However, producing NatGas from these fields would cause severe Oil
production issues,
I assume you are referring to the Kluff nat gas field under lying the Ghawar oil field. I know
the Kluff field was being produced, but not sure if it was near its potential or very restricted
flow. I remember a discussion with some Exxon reservoir people, on the liquids being produced,
and how to define them. Oil or condensate. The Saudis chose condensate as they were not counted
in the export quotas at the time.
Are you saying that Kluff is in communication the Ghawar? If they were surely there would be
pressure issues in the upper field.
I believe there is communication in the water table between Burgan and Safaniya, but that is
a different issue.
It is hard to see where the production of an under lying gas field would affect an over lying
oilfield, apart from a few drilling issues of under pressure thief zones, which can be dealt with
by casing design, mud properties, and maybe even a little managed pressure drilling if required.
"Are you saying that Kluff is in communication the Ghawar? If they were surely there would
be pressure issues in the upper field."
I was just referred to what I read in Saudi Americo's tech articles. If I recall, correctly,
several fields in KSA had NatGas reserves. The article(s) I recall reading referred to delaying
production of NatGas to avoid impacting Oil production. I don't recall the exact details, and
I don't believe that the article(s) mention which fields they are delaying NatGas Production.
These Saudi Americo tech articles do not disclose which fields they are about.
Toolpush wrote:
"It is hard to see where the production of an under lying gas field would affect an over
lying oilfield, apart from a few drilling issues of under pressure thief zones"
I would image drawing down the NatGas would alter the levels were the Oil is located. Since
most of the Oil is now extracted via horizontal wells. I am speculating on how it impacts production.
Perhaps there are more details in the articles than I recall. You can read them as the are publicly
available on SA's website.
Thanks for the feedback. Do you have a link to where these reports are located?
As for gas communication. If the reservoir has a gas cap, then this gas cap can't be drawn
down without effecting the pressure in the reservoir, and therefore oil production. The fact that
most if not all the fields have water injection to maintain well bore pressure, we can assume
pressure maintenance is at a premium.
Now if as you described and I know the Kluff field conforms to this line. The gas is in a separate
trap, separated by it's own cap rock from the oil, then there can't be any communication. If there
was, the gas would ride to the high oil reservoir, and as the gas in at a greater depth than the
oil, is will also have a pressure. If this higher pressure was allowed to communicate with the
upper reservoir, then the upper reservoir would become over pressured, and this over pressure
would have been discovered in the exploration wells.
So I will be very interested to read their explanation to gas production being held back from
under lying gas reserves, rather than any gas bubbles sitting on top of the oil currently being
produced.
Regarding ToolPush Question about NatGas reserves in Oil Fields:
Yes, you have the correct link. I don't recall which article had discuss delaying natGas production
from their oil fields, I read through over a dozen their Tech Publications.
I have found where Kluff has been widely discussed, but not other gas fields, though I have
only scratched the surface. I can see I have a lot of reading to do, but I know I will learn a
lot by the time i am finished.
One little point I noticed. The unconventional gas they talk about, seems to be in carbonates!
Yet to see any shale mentioned, but i will keep going. Closer to Austin Chalk than Eagle Ford.
"... I don't get Dennis' contention that only an outside event such as a world
war can create a Seneca cliff. Of course, a definition of what comprises a Seneca
cliff would be useful. Let's get away from that and just talk about what rate of
decline in oil production would be sufficient to throw the world into a tizzy. I
think something as low as 3% annually would be enough. After a few years at that
rate we would be in a bad situation. Doesn't require a huge drop. ..."
"... I believe we have entered the end game. ..."
"... Geology – drillers need prospects and as more and more fields go dry they
aren't going to drill them again. It took $100 oil to get Bakken going, I think
it will take even more than that as sweet spots are tapped out. And once oil gets
to that level, the economy will push demand back down. ..."
"... It's hard for me to imagine money flowing back into drilling the way it
did in the past few years. Wall Street follows fads and the tight oil fad has run
its course. There will still be money for selected investments, but the terms will
be tougher, the scrutiny will be greater, and the opportunities fewer. ..."
"... Exactly. "Carpet drilling" can't return without return of "loan abundance"
regime. And the latter is gone for good. The trend in production is not their friend
anymore. As Arthur Berman said "EIA forecasts that [natural] gas prices will increase
to $3.31 by the end of 2017 but that is overly conservative because it assumes an
immediate and improbable return to production growth once the supply deficit and
higher prices are established. " ..."
"... The same thinking is applicable to subprime oil. ..."
Also, I don't get Dennis' contention that only an outside event such
as a world war can create a Seneca cliff. Of course, a definition of what
comprises a Seneca cliff would be useful. Let's get away from that and just
talk about what rate of decline in oil production would be sufficient to
throw the world into a tizzy. I think something as low as 3% annually would
be enough. After a few years at that rate we would be in a bad situation.
Doesn't require a huge drop.
And with rig counts declining as fast as they are, I could imagine such
a drop. And furthermore, I don't see the rigs coming back as quickly as
they are being dropped even if prices do recover to the $100 level.
I can't see any compelling that drilling wouldn't pick up quickly again
if oil went back to a hundred bucks and supplies got chancy with inventories
declining fast.
The biggest two problems would be the hands on guys retiring, but enough
money will entice them to work again, if not actually pulling levers and
turning wrenches, then standing over trainees, one on one if necessary.
The other thing would be the money. In a real pinch, governments will provide
emergency financing or loan guarantees to drillers and steam roller some
environmental regs.
But I do think peak oil is either here now, or will be here within the
next two or three years.
It might take a while for exploratory drilling to pick up again, I am
thinking about new wells in producing fields and fields already explored
but not yet well developed.
Drilling will increase at higher prices, no argument there. But I don't
see rig counts going up as fast as they are now coming down. Two reasons:
1. Geology – drillers need prospects and as more and more fields
go dry they aren't going to drill them again. It took $100 oil to get Bakken
going, I think it will take even more than that as sweet spots are tapped
out. And once oil gets to that level, the economy will push demand back
down.
2. Finances – It's hard for me to imagine money flowing back into
drilling the way it did in the past few years. Wall Street follows fads
and the tight oil fad has run its course. There will still be money for
selected investments, but the terms will be tougher, the scrutiny will be
greater, and the opportunities fewer.
There will still be money for selected investments, but the terms
will be tougher, the scrutiny will be greater, and the opportunities
fewer.
Exactly. "Carpet drilling" can't return without return of "loan abundance"
regime. And the latter is gone for good. The trend in production is not
their friend anymore. As Arthur Berman said "EIA forecasts that [natural]
gas prices will increase to $3.31 by the end of 2017 but that is overly
conservative because it assumes an immediate and improbable return to production
growth once the supply deficit and higher prices are established. "
There are too few new projects being sanctioned by non-state oil companies to offset the
inevitable decline in output from existing fields and to meet additional demand. This is expected
to increase by 1.2 million barrels a day each year for the rest of the decade. New fields due to
start producing this year and next are the result of investment decisions taken when oil was
about $100 and expected to stay there.
The collapse in company spending is illustrated perfectly by the level of drilling activity.
After all, if you don't drill, you can't get the oil out of the ground.
Baker Hughes updated its monthly international drilling statistics last week. Unsurprisingly,
they showed another steep drop in rigs drilling for oil, a 12 percent decline between February
and March. There were 1,551 rigs active last month in the countries covered by Baker Hughes, the
least since September 1999 and down nearly 60 percent in little more than a year.
"... Looks like China is importing a lot of oil as there is also a traffic jam in Qingdao, China. ..."
"... A surge in oil buying by China's newest crude importers has created delays of up to a month for vessels to offload cargoes at Qingdao port, imposing costly fees and complicating efforts to sell to the world's hottest new buyers. ..."
"... China's independent refiners, freed of government constraints after securing permission to import just last year, have gorged on plentiful low-cost crude in 2016. This has created delays for tankers that have quadrupled to between 20 to 30 days at Qingdao port in Shandong province, the key import hub for the plants, known as teapots, according to port agents and ship-tracking data. ..."
China has recently allowed imports of crude oil by small independent "teapot"
refineries. So tanker jams do not necessarily mean an increase in final
demand.
From Reuters:
China teapot refiner oil buying spree creates tanker jam at Qingdao
A surge in oil buying by China's newest crude importers has created
delays of up to a month for vessels to offload cargoes at Qingdao port,
imposing costly fees and complicating efforts to sell to the world's hottest
new buyers.
China's independent refiners, freed of government constraints after
securing permission to import just last year, have gorged on plentiful low-cost
crude in 2016. This has created delays for tankers that have quadrupled
to between 20 to 30 days at Qingdao port in Shandong province, the key import
hub for the plants, known as teapots, according to port agents and ship-tracking
data.
"... Thanks for the analysis and forecast of Norwegian crude oil production. Figure 01 shows that combined output of the currently producing fields will drop from 1.57mb/d in 2015 to around 250 kb/d in 2030. That implies an average annual decline rate of 11.5%. ..."
"... Looking at the total production from fields started as of 2004 and 2012 these had a year over year decline of more than 15% from 2014 to 2015. ..."
"... This illustrates how many smaller fields with short plateaus and steep declines influences the total decline rate and until Johan Sverdrup starts to flow, these smaller fields' portion of total extraction will grow. ..."
"... The low oil price recently caused the Vette development to be scrapped. All things equal this makes for a steeper decline in total extraction than what is now reflected in my forecast. ..."
"... I am [and have for some years been] firmly in the camp that think it will take a loooooong time before we again see a sustained $100+/b [$2016], even as the present supply overhang from whatever reasons comes to an end. ..."
Thanks for the analysis and forecast of Norwegian crude oil production.
Figure 01 shows that combined output of the currently producing fields will
drop from 1.57mb/d in 2015 to around 250 kb/d in 2030. That implies an average
annual decline rate of 11.5%.
Decline for the fields that were producing in 2001 during the period
to 2013 was about 9% per year. Is this projected acceleration due to the
rising share of the small deepwater fields with higher decline rates? What
are combined decline rates for the old mature fields?
What are your oil price assumptions? Do you think that potential sharp
increase in oil prices after 2020 may slow production decline, like in 2014-15?
For several of the mature fields that still contributes meaningfully,
the developments of discoveries within their business areas (like Gullfaks,
Oseberg) and infill drilling [made commercial/profitable from a higher oil
price] makes it now difficult to pull out/estimate their [call it "underlying"]
decline rates [from data in the public domain] post these developments.
The reserves added from these developments and infill drilling are reported
within the business areas [reserve growth].
For all fields started before 2002;
From 2012 to 2013 the decline slowed to 2 %/a.
From 2013 to 2014 extraction grew about 3%/a.
From 2014 to 2015 extraction grew about 2%/a.
Several of the decisions that led to this reversal was made while the oil
price was high and thus funding available.
Looking at the total production from fields started as of 2004 and
2012 these had a year over year decline of more than 15% from 2014 to 2015.
(Grane [reserves 900+Mb] started in 2003 and saw a slowdown in its decline
in 2015.) This illustrates how many smaller fields with short plateaus
and steep declines influences the total decline rate and until Johan Sverdrup
starts to flow, these smaller fields' portion of total extraction will grow.
As alluded to in the text I have not made any oil price assumptions for
the forecast [which is based on sanctioned developments]. Presently, several
fields are planned plugged and abandoned (P&A) as the lasting, low oil price
has shortened their economic life. Plans now call for Jette, Varg, Volve
to be P&A later this year.
More will follow according to various sources.
The low oil price recently caused the Vette development to be scrapped.
All things equal this makes for a steeper decline in total extraction than
what is now reflected in my forecast.
I am [and have for some years been] firmly in the camp that think
it will take a loooooong time before we again see a sustained $100+/b [$2016],
even as the present supply overhang from whatever reasons comes to an end.
"... The last few years have shown declining oil discoveries since 2010. What has been found is more often than not deep water and relatively small. Such fields generally have short plateaus and steep decline rates (not much better of those seen in LTO for fields less than about 150 million barrels). The larger basins found offshore have been in the 5 to 10 mmboe range rather than around 50 found in the earlier days. ..."
"... There has been a noticeable reduction in development times for projects in GoM and North Sea in recent years from around 7 years down to as low as 3. That to me indicates a dearth of good, large projects to choose from. ..."
In terms of a C&C peak pushed out for 10 years my question would be "Where's the oil?" even at
$120 per barrel.
Apologies that the following is too long, with no charts for many (or any) to read all the
way but some parts may be of interest.
The last few years have shown declining oil discoveries since 2010. What has been found is
more often than not deep water and relatively small. Such fields generally have short plateaus
and steep decline rates (not much better of those seen in LTO for fields less than about 150 million
barrels). The larger basins found offshore have been in the 5 to 10 mmboe range rather than around
50 found in the earlier days.
I don't have access to IHS or Rystad databases but picking amongst recent press releases I'd
say 2013 was about eight billion, 2014 nine or so and 2015 four or five. This year maybe only
three discoveries with a significant amount of oil – Kuwait might be significant. More gas than
oil is being found
There has been a noticeable reduction in development times for projects in GoM and North Sea
in recent years from around 7 years down to as low as 3. That to me indicates a dearth of good,
large projects to choose from.
Of some of the main producers:
Saudi; 50% increase in rig count since 2012 to keep production just about steady, announced
"the most fields discovered" in 2012 or 2013 but a combination of oil and gas and they didn't
give quantities, have spoken of developing tight gas and solar to allow increased oil exports.
Russia; some conflicting announcements but it looks like a decline next year, largest recent
find was by Repsol at about 240 mmboe. Sanctions have had an impact and may continue to do so,
especially offshore.
http://uk.reuters.com/article/uk-russia-oil-rosneft-idUKKCN0WV1I3
Canada; very little drilling activity, four fields coming on over the next 2 to 3 years will
add up to 400,000 bpd, but then nothing planned and at least 4 year lead times for tar sands projects.
Tar sands projects have long plateaus but it appears some of the earliest mining operations are
starting to see thinner seams so decline will become more evident.
Brazil; cut backs in developments and may start to decline next year, they have mostly deep
water production with high decline rates and rely on continuous stream of new projects to maintain
production – the oil price, 'carwash' scandal, debt/bankruptcy problems and (maybe) just running
out of suitable projects have stopped this, expect 6 to 10% decline through 2017.
http://oilprice.com/Energy/Crude-Oil/Future-Of-Brazils-Oil-Industry-In-Serious-Doubt.html
USA; discussed a lot here, some expansion in GoM through 2017, unknown response to LTO drillers
depending on price and credit availability, liquids from gas have been another significant and
rapid boost to production recently which EIA indicate are still rising (mostly for NGLs), but
surely must run out of steam sometime soon. Possibly some shut in stripper wells won't be worth
restarting.
http://www.theenergycollective.com/u-s-production-of-hydrocarbon-gas-liquids-expected-to-increase-through-2017/
China; reliant on EOR recently to maintain plateau (including a lot of steam flood from the
EIA report) but predicting 5% decline next year, no great success on offshore discoveries.
North Sea; saw a spate of projects recently, mostly heavy oil, with a few more to come over
the next two years and then Johan Sverdrup and Johan Castberg but these only delay decline for
2 or 3 years, recent discoveries especially in UK sector have been very poor.
Offshore Africa; Nigeria and Angola have a number of projects this year and next ( a bit more
oil than gas), but after that I'm not clear, political unrest might be particularly important
here as well. That said recent exploration success has been relatively good in Africa overall
(e.g. Kenya, Ghana).
http://www.offshore-technology.com/projects/region/africa/
Venezuela; not sure if their numbers can be trusted but they seem to be in decline, I know
little of their particular technical issues but assume that in order to increase extra heavy oil
production they would need new upgraders and possibly a source of natural gas, like Canada, and
possibly dedicated refineries to handle the heavy metal content (and assuming they can find willing
creditors and EPC partners).
Iran and, possibly, Iraq and Kuwait look like the only likely areas that can show some increase,
but Iran is developing South Pars gas field more than oil and Iraq/Kurdistan might have run out
of impetus. Burgan field in Kuwait looks in better shape than other aging super giants and Kuwait
has an active exploration and development program. And of course maybe US LTO takes off again,
$80 appears a threshold but that is for WTI, ND oil has a $10 discount, the lighter LTO oil everywhere
may be lower still and overall away from the sweet spots above $100 might be nearer the mark.
The seven largest oil majors have shown declining reserves of 1 and then 2 billion barrel equivalent
over the last two years – this may be purely price related, but I'm not so sure especially with
BP, Shell and Chevron looking to sell assets, also I don't have the figures but I'd guess that
they have lost more in oil reserves as some of their big finds have been for gas.
To ramp up of production is going to be dependent on a work force which was aging and retiring
in 2014 and now has been decimated by layoffs and recruitment cut backs. Increasing prominence
of environmental issues may hinder both future recruitment efforts and the pace at which projects
can be developed. Significant new oil, including reserve growth, has to come from deep water –
those rigs are complicated and very expensive to run, a lot are currently being stacked.
Ramp up also needs the main stakeholders to regain their acceptance of financial risk, which
is currently as low as I can remember, and significantly higher sustained prices. The other side
to the equation for prices is demand. The world economy doesn't look great to me, we're due a
recession based on approximate 8 year cycles, TPTB have chucked everything but the kitchen sink
at it and industrial output is definitely in decline or growing only slowly (I don't know how
energy use is split for service versus manufacturing but I'd guess it's of smaller relative importance
in the service sector). A relatively small oil price increase might be enough to kick a recession
off properly.
Hubbert Linearization of C+C less oil sands suggests about 2500 Gb for a URR, in the past this
method has tended to underestimate the URR, we have produced about half of this so far. There
is also about 600 Gb of URR in the oil sands of Canada and Venezuela. The USGS estimates TRR of
C+C less oil sands at about 3100 Gb, I use the average of the HL estimate and USGS estimate with
a URR of 2800 for C+C less oil sands and oil sands URR of 600 Gb. Total C+C URR is 3400 Gb in
my medium scenario. If extraction rates continue to grow at the rate of the past 6 years and then
level off we get the scenario below.
Model based on Webhubbletelescope's Oil Shock Model.
Those confirmed so far are Saudi Arabia, Russia, Kuwait, the United Arab Emirates, Venezuela,
Nigeria, Algeria, Indonesia, Ecuador, Bahrain, Oman and Qatar.
The collapse in oil prices has demolished investment in new projects,
the results of which will be felt in the 2018 to 2021 timeframe, due to
multiyear lead times
Oil production in the UK actually
increased a bit in 2015, after about two decades of steady declines.
The additional 100,000 barrels per day came from new offshore oil projects
that were initiated in 2012 when oil prices were much higher, plus extra
oil squeezed out from existing fields.
The collapse in oil prices has demolished investment in new projects,
the results of which will be felt in the 2018 to 2021 timeframe, due to
multiyear lead times. The number of new projects greenlighted in 2015 was
less than half of the level seen in 2013 and 2014.
As a result, beginning in 2018, the UK could see more severe production
declines.
Oil prices have hovered at $40 per barrel for much of the last week, as the
markets try to avoid falling back after the strong rally since February.
Investors
see shale production falling and demand continuing to rise, which point to the
ongoing oil market balancing.
But it is unclear at this point if the rally from
$27 per barrel in February to today's price just below $40 per barrel is here
to stay. Fundamentals, while trending in the right direction, are still weak.
India consumed 4.2 million barrels per day (mb/d) in 2016, overtaking Japan as the world's third largest oil consumer. The Indian
government is hoping to incentivize domestic oil production to help meet rising demand.
"... The problem for the international community is while destroying ISIS is their stated priority, both Libya's rival camps see each other as the greater threat. ISIS is a threat, but neither camp believes it is an existential threat, so the priority for both camps is fighting each other. ..."
The problem for the international community is while destroying ISIS is their stated priority,
both Libya's rival camps see each other as the greater threat. ISIS is a threat, but neither camp
believes it is an existential threat, so the priority for both camps is fighting each other.
"... Iraq war and its aftermath failed to stop the beginning of peak oil in 2005 ..."
"... I think the Iraq war was instigated by an alliance of neocon/Israel lobby plus oil/service company and weapons complex interests. But the overriding interest seems to have been the neocon strategy to get the USA tangled in Middle East wars. This in turn would weaken Israel's enemies and increase animosity between the Muslim and Christian worlds. Such animosity plays very well if it leads to all out war between "the West" and Muslims. As long as the USA keeps behaving as an Israeli puppet the conflict will intensify. ..."
"... What I outlined above is a distilled version of writings/books by former CIA analyst Michael Scheuer, former CIA operatives, and books such as "Fiasco" by Thomas E. Ricks. I've also incorporated recent material written about ISIS and its birthing at the US Army's Camp Bucca. ..."
I think the Iraq war was instigated by an alliance of neocon/Israel lobby plus oil/service company
and weapons complex interests. But the overriding interest seems to have been the neocon strategy
to get the USA tangled in Middle East wars. This in turn would weaken Israel's enemies and increase
animosity between the Muslim and Christian worlds. Such animosity plays very well if it leads
to all out war between "the West" and Muslims. As long as the USA keeps behaving as an Israeli
puppet the conflict will intensify.
What I outlined above is a distilled version of writings/books by former CIA analyst Michael
Scheuer, former CIA operatives, and books such as "Fiasco" by Thomas E. Ricks. I've also incorporated
recent material written about ISIS and its birthing at the US Army's Camp Bucca.
"In 2015, the seven biggest publicly traded Western energy companies, including Exxon Mobil Corp.
and Royal Dutch Shell PLC, replaced just 75% of the oil and natural gas they pumped, on average,
according to a Wall Street Journal analysis of company data. It was the biggest combined drop
in inventory that companies have reported in at least a decade."
Production down 30 kb/d;
Total crude and product stocks up 6.9 million barrels (to new records);
Net crude imports up 691 kb/d in just one week (!) and 1.1 mb/d from a year ago.
Despite a glut in the local market, U.S. refiners and traders are rapidly increasing crude
imports.
A typical disinformation bunged with the obvious attempt to amplify differences
within the OPEC. In spite of all this noise about oversupply i t will be difficult
to return to the lows of the year. Oil prices have surged more than 50 percent from
12-year lows since the OPEC floated the idea of a production freeze, boosting Brent
up from around $27 a barrel and U.S. crude from around $26. 15 oil-producing nations
representing about 73% of oil production have agreed to take part.
Notable quotes:
"... Qatar, which has been organizing the meeting, has invited all 13 OPEC members and major outside producers. The talks are expected to widen February's initial output freeze deal by Qatar, Venezuela and Saudi Arabia, plus non-OPEC Russia. ..."
"... Iran produced about 2.9 million bpd in January and officials are talking about adding a further 500,000 bpd to exports. So far though, Iran has sold only modest volumes to Europe after sanctions were removed. ..."
...Libya has made its wish to return to pre-conflict oil production rates
clear since four countries reached a preliminary deal on freezing output in
February. Other producers understand this, the delegate said. "They appreciate
the situation we are in."
Qatar, which has been organizing the meeting, has invited all 13 OPEC
members and major outside producers. The talks are expected to widen February's
initial output freeze deal by Qatar, Venezuela and Saudi Arabia, plus non-OPEC
Russia.
The initiative has supported a rally in oil prices, which were about $41
a barrel on Tuesday, up from a 12-year low near $27 in January, despite doubts
over whether the deal is enough to tackle excess supply in the market.
Iran has yet to say whether it will attend the meeting. But Iranian officials
have made clear Tehran will not freeze output as it wants to raise exports following
the lifting of Western sanctions in January.
The potential volume Libya and Iran could add to the market is significant.
But conflict in Libya has slowed output to around 400,000 barrels per day since
2014, a fraction of the 1.6 million bpd it pumped before the 2011 civil war.
Iran produced about 2.9 million bpd in January and officials are talking
about adding a further 500,000 bpd to exports. So far though, Iran has sold
only modest volumes to Europe after sanctions were removed.
"... Crude Mystery: Where Did 800,000 Barrels of Oil Go? Last year, there were 800,000 barrels of oil a day unaccounted for by the International Energy Agency, the energy monitor that puts together data on crude supply and demand. Where these barrels ended up, or if they even existed, is key to an oil market that remains under pressure from the glut in crude. ..."
"... "The most likely explanation for the majority of the missing barrels is simply that they do not exist," said Paul Horsnell, an oil analyst at Standard Chartered. ..."
Crude Mystery: Where Did 800,000 Barrels of Oil Go?
Last year, there were 800,000 barrels of oil a day unaccounted for by the International Energy
Agency, the energy monitor that puts together data on crude supply and demand. Where these barrels
ended up, or if they even existed, is key to an oil market that remains under pressure from the
glut in crude.
Some analysts say the barrels may be in China. Others believe the barrels were created by flawed
accounting and they don't actually exist. If they don't exist, then the oversupply that has driven
crude prices to decade lows could be much smaller than estimated and prices could rebound faster.
Whatever the answer, the discrepancy underscores how oil prices flip around based on data that
investors are often unsure of.
… "The most likely explanation for the majority of the missing barrels is simply that they do not
exist," said Paul Horsnell, an oil analyst at Standard Chartered.
"... It looks more like the chaos of a failed state rather than a popular uprising to remove an authoritarian government. The implication of this difference is that a return of Libyan oil production to prior levels is highly unlikely until there is a massive stabilization achieved, and I wouldn't be holding my breathe for that. ..."
"... The people are hungry and without hope as long as conditions remain the way they are so they riot to try to change them. It is, very likely, just the first stages of world collapse. ..."
"... Arab spring is a variant of a "color revolution". From Google search of the term: ..."
Minor quibble Dennis.
You commented- "Libya is struggling with their own Arab Spring"
I think that characterization of what is going there on is off base.
It looks more like the chaos of a failed state rather than a popular uprising to remove an authoritarian
government.
The implication of this difference is that a return of Libyan oil production to prior levels is
highly unlikely until there is a massive stabilization achieved, and I wouldn't be holding my
breathe for that.
It's Ron, not Dennis. It all depends on your definition of "Arab Spring" And I see you have provided
your own definition, "a popular uprising to remove an authoritarian government."
The Arab Spring was a series of anti-government protests, uprisings and armed rebellions
that spread across the Middle East in early 2011. But their purpose, relative success and outcome
remain hotly disputed in Arab countries, among foreign observers, and between world powers looking
to cash in on the changing map of the Middle East….
But the events in the Middle East went in a less straightforward direction.
Egypt, Tunisia and Yemen entered an uncertain transition period, Syria and Libya were
drawn into a civil conflict, while the wealthy monarchies in the Persian Gulf remained largely
unshaken by the events. The use of the term the "Arab Spring" has since been criticized for
being inaccurate and simplistic.
The Arabs themselves cannot agree on the definition of "Arab Spring". It is basically just
an uprising of the general population protesting the hardships of their lives. I would say that
the Arab Spring, in any country, is just the first stages of a failed state. I think there is no doubt that what is happening in Libya was caused by the same conditions
that has caused similar uprisings throughout the Arab world. The people are hungry and without
hope as long as conditions remain the way they are so they riot to try to change them. It is, very likely, just the first stages of world collapse.
The dream of transition to a 'consuming' economy just crashed into
the wall of excess debt and leverage. 2016 has started with a
44% collapse in China passenger car sales
. This is
the
biggest sequential crash and is 50% larger than any
other plunge in history.
Coming at a time when vehicle
inventories are near record highs relative to sales, the world's
automakers - all toeing the narrative line that growth will be from
China - now face a harsh reality of massie mal-investment deja vu.
"... Light tight oil is not your average crude oil. I suspect it is clogging up US inventories after the import substitution phase ended and after some modifications to US refineries were completed. This glut created the perception in markets that there is a global glut (and contributed to bring down oil prices) while it is not ..."
"... Where actually is that much-hyped global oil glut? http://crudeoilpeak.info/where-actually-is-that-much-hyped-global-oil-glut ..."
Light tight oil is not your average crude oil. I suspect it is clogging up US inventories after
the import substitution phase ended and after some modifications to US refineries were completed.
This glut created the perception in markets that there is a global glut (and contributed to bring
down oil prices) while it is not
In fact crude imports went up again in the last months. Anyway, shale production has peaked
now according to the latest drilling productivity report. The following 2014 report describes
the mismatch between shale oil production and US refinery capabilities (slides 7-9)
This author was probably one year early in his forecasts, but the direction was right -- we might
face oil shortages in 2017.
Notable quotes:
"... "In permitting low oil prices, the Saudis seek to bring the market back into equilibrium. At present, our calculation of break-even system-wide is in the $85–$100 a barrel range on a Brent basis." ..."
Low oil prices today may be setting the world up for an oil shortage as early as 2016. Today we
have just 2% more crude oil supply than demand and the price of gasoline is under $2.00/gallon in
Texas. If oil supply falls too far, we could see gasoline prices doubling within 18 months. For a
commodity as critical to our standard of living as oil is, it only takes a small shortage to drive
up the price.
On Thanksgiving Day, 2014 Saudi Arabia decided to maintain their crude oil output of approximately
9.5 million barrels per day. They've taken this action despite the fact that they know the world's
oil markets are currently over-supplied by an estimated 1.5 million barrels per day and the severe
financial pain it is causing many of the other OPEC nations. By now you are all aware this has caused
a sharp drop in global crude oil prices and has a dark cloud hanging over the energy sector. I believe
this will be a short-lived dip in the long history of crude oil price cycles. Oil prices have always
bounced back and this is not going to be an exception.
To put this in prospective, the world currently consumes about 93.5 million barrels per day of
liquid fuels, not all of which are made from crude oil. About 17% of the world's total fuel supply
comes from natural gas liquids ("NGLs") and biofuels.
One thing that drives the Bears opinion that oil prices will go lower during the first half of
2015 is that demand does decline during the first half of each year. Since most humans live in the
northern hemisphere, weather does have an impact on demand. I agree that this fact will play a part
in keeping oil prices depressed for the next few months. However, low gasoline prices in the U.S.
are certain to play a part in the fuel demand outlook for this year's vacation driving season.
Brent oil prices are now hovering around $60 a barrel. In my opinion, this is quite a bit lower
than Saudi Arabia thought the price would go and may lead to an "Emergency" OPEC meeting during the
first quarter. But for now, I am assuming that Saudi Arabia is willing to let the other OPEC members
suffer until the next scheduled OPEC meeting in June.
The commonly held belief is that Saudi Arabia is doing this to put a stop to the rapid growth
of production from the U.S. shale oil plays. Others believe it is their goal to crush the Russian
and Iranian economies. If the oil price remains at the current level for a few months longer it will
do all of the above.
My forecast models for 2015 assume that crude oil prices will remain depressed during the first
quarter, then slowly ramp up and accelerate as next winter approaches. I believe that by December
we will see a much tighter oil market and significantly higher prices. In a December 24, 2014 article
in The National, Steven Kopits managing director of Princeton Energy Advisors states that, "In
permitting low oil prices, the Saudis seek to bring the market back into equilibrium. At present,
our calculation of break-even system-wide is in the $85–$100 a barrel range on a Brent basis."
Mark Mobius, an economist and regular guest on Bloomberg TV recently said he sees Brent rebounding
to $90/bbl by the end of 2015.
Since 2005, only North America has been able to add meaningful crude oil supply. Outside of Canada
and the United States (including the Gulf of Mexico), the rest of the world's crude oil production
netted to a decline of a million barrels per day from December, 2010 to December, 2013. More than
half of the OPEC nations are now in decline. We've been able to supplement our fuel supply during
the last ten years with biofuels, but that is limited since we need the farmland for food supply.
I believe the current low crude oil price could be overkill and result in the next "Energy Crisis"
by early 2016. Enjoy these low gasoline prices while they last.
The upstream U.S. oil companies we follow closely are all announcing 20% to 50% cuts in capital
spending for 2015. We will start seeing the impact on supply at the same time the annual increase
in demand kicks in. Our model portfolio companies are all expected to report year-over-year increases
in production, but at a much slower pace than the last few years.
The current market turmoil has created a once in a generation opportunity for savvy energy
investors.
Whilst the mainstream media prints scare stories of oil prices falling through the floor
smart investors are setting up their next winning oil plays.
A study released by Credit Suisse two weeks ago shows that U.S. independents expect capital-expenditure
(Capex) cuts of one-third against production gains of 10 per cent next year. This would imply production
growth of 600,000 bpd of shale liquids, and perhaps another 200,000 bpd from Gulf of Mexico deepwater
projects. At the same time, U.S. conventional onshore production continues to fall. I have seen estimates
of 500,000 to 700,000 bpd declines within twelve months. If these forecasts are accurate, U.S. oil
production growth would be barely positive next year and headed for a material downturn in 2016.
North American unconventionals (oil sands, shale and other tight formations) have been almost
all of net global supply growth since 2005. If unconventional growth grinds to zero and conventional
growth is falling outright, the supply side heading into 2016 looks highly compromised. At today's
oil price, only the "Sweet Spots" in the North American Shale Plays and the Canadian Oil Sands generate
decent financial returns to justify the massive capital requirements needed to continue development.
Global deepwater exploration is rapidly coming to a halt.
Were demand growth muted, this might not matter. Demand for liquid fuels goes up year-after-year.
It even increased in 2008 during the "Great Recession" and ramped up sharply during 2009 and 2010
despite a sluggish global economy. Low fuel prices are increasing demand today and my guess is that,
with U.S. GDP growth now forecast at 5% in 2015, we could see demand for fuels increase by close
to 1.5 million barrels per day this year. The current IEA forecast is for oil demand to increase
by 900,000 bpd in 2015.
If this plays out, the oil markets will be heading into a significant squeeze in the first half
of 2016.
The last extended period of low oil prices was 1985 to 1990. In 1985, when oil prices collapsed
similar to what's happening now, the world had 13 million bpd of spare capacity, with 7 million bpd
in Saudi Arabia alone. OPEC was well-positioned to comfortably meet any increase in demand.
Today, just about all of the world's discretionary spare capacity resides in Saudi Arabia and
amounts to an estimate 2 million bpd. Lou Powers, an EPG member and author of "The
World Energy Dilemma," has said that Saudi Arabia will have difficulty maintaining production
at over 10 million bpd for an extended period. If we do swing to a supply shortage, Saudi Arabia
may find itself in the position of needing to run the taps full out for much of 2016. In such an
event, the world will be headed right back into an oil shock and we will see much higher oil prices
than $100/bbl.
"... If consumption is 10 million metric tons burned each day, it is 3,652,500,000 tonnes per year consumed by the gaping maws of industry to allow civilization be in the gluttony mode, with half of it gone, 150,000,000,000 tonnes to go, then there is a fifty year supply in the ground and under the seas and oceans. ..."
"The two basic factors of the world's oil supply are (1) geologic (discoveries) and (2) economic
(distribution). Petroleum geologists have done such a good job of finding oil that it looks as
easy as growing crops, and our engineers deliver the petroleum like clockwork. Consequently, the
public and many planners consider global distribution to be the only supply problem and attribute
all price swings to simple economics. They erroneously ignore critical long-term geological facts
and assume that cash spent = oil found. This premise is invalid where no oil exists or where prospects
are poor. Most people are unaware that the global quality of geological/oil prospects has declined
so much that the amount of new oil found per wildcat well has dropped 50% since a 1969 peak. Discoveries
of the most critical but easiest to find giant fields (each with over 500 million bbl of recoverable
oil) are now stalled at 315 known worldwide. We are simply no longer finding enough new crude
oil to replace the world's huge consumption of 20 billion bbl (840 billion gal) per year."
2,200,000,000,000/7.3=301,369,863,014 metric tons
of total oil extracted, yet of be extracted, past production and future production.
If consumption is 10 million metric tons burned each day, it is 3,652,500,000 tonnes per year
consumed by the gaping maws of industry to allow civilization be in the gluttony mode, with half
of it gone, 150,000,000,000 tonnes to go, then there is a fifty year supply in the ground and
under the seas and oceans.
The metric system is of an advantage when calculating the numbers, IMO.
Thanks to Robert Wilson for the links to L.F. Ivanhoe's findings and conclusions, appreciate
it.
2,200,000,000,000/7.3=301,369,863,014 metric tons
of total oil extracted, yet of be extracted, past production and future production.
If consumption is 10 million metric tons burned each day, it is 3,652,500,000 tonnes per year
consumed by the gaping maws of industry to allow civilization be in the gluttony mode, with half
of it gone, 150,000,000,000 tonnes to go, then there is a fifty year supply in the ground and
under the seas and oceans.
The metric system is of an advantage when calculating the numbers, IMO.
Thanks to Robert Wilson for the links to L.F. Ivanhoe's findings and conclusions, appreciate
it.
Global debt has grown some $57 trillion since the collapse of Lehman Brothers in 2008, reaching
a back-breaking $199 trillion in 2014, more than 2.5 times global GDP, according to the McKinsey
Global Institute. Servicing these debts will most likely become increasingly difficult over
the coming years, especially if growth continues to stagnate, interest rates begin to rise,
export opportunities remain subdued, and the collapse in commodity prices persists.
Much of the concern about debt has been focused on the potential for defaults in the eurozone.
But heavily indebted companies in emerging markets may be an even greater danger. Corporate
debt in the developing world is
estimated to have reached more than $18 trillion dollars, with as much as $2 trillion of it
in foreign currencies. The risk is that – as in Latin America in the 1980s and Asia in the
1990s – private-sector defaults will infect public-sector balance sheets.
If global growth stagnates, interest rates won't rise by much. So high interest
rates and low GDP growth is not a very realistic scenario. Very poor monetary policy could accomplish
it (like Volcker in the 80s), but we may have learned something since then about monetary policy.
Chinese crude imports hit a record of 8 million b/d in February despite severe economic
problems and contracting imports and exports. One reason for the surge may have been the
extremely low oil prices in January which attracted more buying for strategic stocks and to
refine for exports. China's small independent refiners were only recently allowed to import oil
for their needs rather than procuring it domestically.
"... All of this is to say that the level of effort and the focus of Western states in Libya, at least as regards ISIS, are on strict counterterrorism as opposed to creating conditions in which competing claimants to governing legitimacy can work out a compromise. In the meanwhile, the competing governing factions will have to defend themselves against not only other claimants to legitimacy but also ISIS and other smaller groups that have begun to attack Libyan oil production and export facilitates with increasing regularity. ..."
"... The recent attack in neighboring Tunisia also points to the problem of ISIS presence in Libya not only helping to continue the instability and political stalemate there but also spreading unrest further in Northern Africa. ..."
Sarah Emerson, Managing Principal, Petroleum & Alternative Fuels | Energy Security Analysis Inc.
(ESAI)
... ... ...
While there are ongoing negotiations, or attempts at negotiations pushed by Washington and key
European states, so far it does not look at all hopeful. In the meanwhile, the efforts of the West
are focused on two issues. First is conducting strikes against ISIS leaders and key operatives who
might be either planning on targeting Western targets or who might be consolidating control over
parts of Libya. Second is keeping refugees from flowing into southern Europe (whether they are Libyans
or Africans who are taking advantage of the lack of governance in Libya to launch from its shores).
News reports indicate that the United States, France, the United Kingdom and Italy all have Special
Forces on the ground in Libya largely to support intelligence gathering and targeting ISIS cells
or leaders. The recent U.S. airstrikes two weeks ago against ISIS leaders and a training camp in
Libya may or may not reflect this small ground presence, but the attacks indicate that Washington
is focusing on elements of the terrorist group that might be planning attacks on Western targets.
The news information on the French aircraft carrier also hints that any strikes that Paris may carry
out will be against those potentially plotting against French targets. All of this is to say that
the level of effort and the focus of Western states in Libya, at least as regards ISIS, are on strict
counterterrorism as opposed to creating conditions in which competing claimants to governing legitimacy
can work out a compromise. In the meanwhile, the competing governing factions will have to defend
themselves against not only other claimants to legitimacy but also ISIS and other smaller groups
that have begun to attack Libyan oil production and export facilitates with increasing regularity.
The recent attack in neighboring Tunisia also points to the problem of ISIS presence in Libya
not only helping to continue the instability and political stalemate there but also spreading unrest
further in Northern Africa.
Sarah Emerson, Managing Principal, Petroleum & Alternative Fuels | Energy Security Analysis Inc.
(ESAI)
"... We all are living under neoliberalism , aren't we? And current fascinating developments with Bernie and Trump is nothing more than unorganized protest of shmucks against " masters of the universe " - neoliberal elite that captured Washington, DC (along with London, Paris, Berlin and other G7 capitals). And they still have quite strong fifth column in Moscow too (Yeltsin was their man) ..."
"... The revolt which BTW have little chances for success. As Orwell aptly stated, contrary to Marx delusions "the lower classes are never, even temporarily, successful in achieving their aims". ..."
"... The key idea of neoliberalism is redistribution of wealth up from shmucks to international (predominately financial) elite. So nobody care that either camel lovers or Putin lovers lose money on oil and that they are selling it below the cost. What is important that the "masters of the universe" became richer. And sustainability is provided by grabbing asset of distressed countries and companies when they go too deeply in debt slavery. So the key idea here is get those countries and companies "conditioned" enough to grab them on a cheap. In old days that was called "shock therapy" now it is called "disaster capitalism". ..."
"... Destabilization as in "drop of oil prices to unsustainable levels" can be extremely profitable (see The Shock Doctrine: The Rise of Disaster Capitalism. ). This is the way the neoliberalism enforces its Washington consensus rules on other countries, especially resource nationalists like Putin's Russia. ..."
"... This was not done in case of "shale bubble" and other countries were implicitly stimulated by it to rump up production as well as by regime of high oil prices and cheap Western credits. Now we have a real crisis when "resource nationalist" are quickly running out of money. If Washington is able to crush them, it is also will show the other countries who are trying to oppose neoliberal globalization "who is the boss". It is not accidental that all establishment candidates in the current presidential race are extremely, pathologically jingoistic and are ready to bomb yet another half-dozen of countries in short order after coming to power. In this sense differences between H, C and R are superficial. They all are servants of neoliberal oligarchy in Washington and Wall Street (for H in the opposite order). ..."
Art Berman looks at the numbers and says oil should go back to $30, or even lower. It
does take capitalism time to work.
This looks like too theoretical post well outside the scope of this blog, but still there are
some basic facts that everybody needs to be aware of.
We all are living under
neoliberalism, aren't we? And current fascinating developments with Bernie and Trump is
nothing more than unorganized protest of shmucks against "masters of the universe" -
neoliberal elite that captured Washington, DC (along with London, Paris, Berlin and other G7
capitals). And they still have quite strong fifth column in Moscow too (Yeltsin was their man)
The revolt which BTW have little chances for success. As Orwell aptly stated, contrary to
Marx delusions "the lower classes are never, even temporarily, successful in achieving their
aims".
The key idea of neoliberalism is redistribution of wealth up from shmucks to international
(predominately financial) elite. So nobody care that either camel lovers or Putin lovers lose
money on oil and that they are selling it below the cost. What is important that the "masters
of the universe" became richer. And sustainability is provided by grabbing asset of distressed
countries and companies when they go too deeply in debt slavery. So the key idea here is get
those countries and companies "conditioned" enough to grab them on a cheap. In old days that
was called "shock therapy" now it is called "disaster capitalism".
Destabilization as in "drop of oil prices to unsustainable levels" can be extremely
profitable (see
The Shock Doctrine: The Rise of Disaster Capitalism.). This is the way the neoliberalism
enforces its Washington
consensus rules on other countries, especially resource nationalists like Putin's Russia.
The countries and companies in question were gently pushed to increase the production to
the level that assured the crisis to happen. While this sounds like another conspiracy theory,
and can well be such, the simple logic suggests that in XXI century the elite understands the
natural dynamics of capital accumulation well enough to freeze too enthusiastic Ponzi schemers
before they do the major damage, if they want it. At least suppress them enough to avoid "Minsky
moment."
This was not done in case of "shale bubble" and other countries were implicitly stimulated
by it to rump up production as well as by regime of high oil prices and cheap Western credits.
Now we have a real crisis when "resource nationalist" are quickly running out of money. If
Washington is able to crush them, it is also will show the other countries who are trying to
oppose neoliberal globalization "who is the boss". It is not accidental that all establishment
candidates in the current presidential race are extremely, pathologically jingoistic and are
ready to bomb yet another half-dozen of countries in short order after coming to power. In
this sense differences between H, C and R are superficial. They all are servants of neoliberal
oligarchy in Washington and Wall Street (for H in the opposite order).
It can well be that US shale was a part this Brzezinski's
The Grand Chessboard " gambit and now is a pawn sacrificed in a wider geopolitical game.
China did increase its oil imports over the last few months to over 30 mill tons per month
(see below chart). Together with natgas and cyclical hydrocarbon imports this adds up to 40 mill
tons of hydrocarbons per month, which is around 10 mill barrels per day.
Slowly the fundamentals are building up for an oil price rise, although I think we will get
a pullback over summer.
"The data also showed China's February crude oil imports jumped 20 percent on year to their highest
ever on a daily basis, driven by import quotas and stockpiling."
In addition to the surge of oil imports, natgas is up year over year 100%, copper 50%, copper
ore and extractives up 92%. The increase is all up in volume as imports in dollar terms are still
very low due to low prices. However these numbers are huge as China is one of the largest importers
in the world.
To me this looks like the early sign of a nascent commodity recovery.
1) state and commercial stockpiling
2) robust gasoline demand (not closely correlated with economic growth, as opposed to weak diesel
demand).
3) rising fuel exports
"Fuel exports in February rose 71.8 percent on a daily basis compared to the same month last
year, reaching 2.99 million tonnes, or 721,700 bpd, after hitting a record 975,500 bpd in December,
as China continues to export more diesel amid weakening domestic demand for the industrial fuel."
"…as China continues to export more diesel amid weakening domestic demand for the industrial
fuel."
Plus: There's increasing demand in China for gasoline as more cars are built and sold. More
gasoline coming from refineries means more diesel coming from refineries, as they produce both.
The small "teapot" refineries are being given permission to import gasoline now, I believe,
so that will help reduce overproduction of diesel, and the government has imposed a price floor
too; that helps reduce the panic exporting.
The Chinese car market is much bigger than the US car market. And also growing much faster.
When a commodity cycle starts, metals (gold, silver, base metals…) are first to soar. Oil is
actually the last to rise as oil in most cases brings a commodity cycle to its end due to higher
inflation.
There is little doubt that China is in the early stage of a massive upswing. Anyone who hopes
for higher oil prices should hope also for a Chinese recovery. Oil prices will not go up without
a Chinese recovery.
As the demand growth in 2015 has been way underestimated in 2014, it is again underestimated
for 2016.
The IEA numbers for 2016 are just an estimate and not yet a fact. Car registrations and import
numbers reveal way higher numbers are likely for China in 2016.
A strong sign of a Chinese recovery is the recent strength of the yuan, record high of new
loans (2500 bn yuan) and strong money suppley (+14%).
You are right, the IEA has significantly increased its estimate of China's oil demand for 2015.
Last year, incremental demand was actually higher that in the previous 4 years.
I also agree with you that IEA likely underestimates China's demand growth in 2016.
But this growth will still be slower than last year; it will not accelerate.
Growing imports reflect buying by the government and oil companies for stockpiling and increasing
exports.
As I said above, there is also a serious structural shift in China's oil consumption.
It is now driven by gasoline, which is due to growing private car ownership.
By contrast, demand for diesel, which is mainly consumed in the industry and construction, has
sharply decelerated.
And this seems to be a long-term trend, as China is gradually changing its economic model from
export-oriented, based on heavy industries and construction, to a more focused on private consumption.
China: y-o-y growth in gasoline consumption
source: IEA
It is possible that diesel fuel is being used more efficiently by the Chinese economy. For
example diesel is essentially the same as heating oil and as China develops less will be used
for heating buildings as natural gas pipeline infrastructure expands, there might also be some
switching to heat pumps for heating. These switches take time and there is a significant time
lag between high oil prices (from 2011 to mid-2014) and when we see the long run demand effects.
Also the expansion of auto sales tends to increase employment and economic activity throughout
the economy.
For these reasons I think a focus on total oil demand makes more sense than a focus on only
diesel demand.
Yes, there is an effect of fuel substitution.
I'm not sure if a lot of diesel is used for heating in China (I think they are mostly using LPG,
coal, firewood, etc.), but certainly there are sectors of the economy where it can be substituted
or used more efficiently.
For example, in the 2000s, a lot of diesel and residual fuel was used for power generation,
as despite a rapid growth in generation capacity China often experienced serious power shortages.
In particular, that explains a spike in oil consumption in 2004. China now has sufficient generation
capacity, so diesel use for power generation in the commercial and residential sectors is diminishing.
But more important is a structural shift in China's economy and energy consumption patterns.
The country is undergoing a gradual transition to an economy oriented toward private consumption.
The share of less energy-intensive sectors, such as services, in GDP is increasing. Fixed investment/GDP
ratio is declining from 40-50% to more sustainable levels, which means relatively slower growth
and less infrastructural developments. All this should lead to a less energy-intensive economy
and relatively lesser use of industrial fuels, including diesel.
By contrast, gasoline demand is driven by rising living standards, growing middle class, and
hence rapidly increasing car ownership. Gasoline consumption will continue to grow at a high rate,
even though economic growth is slowing.
Here's the deal. China may actually be the country where EVs take off in a big way first (if you
leave Norway out of it). The following insideevs.com piece rates China as the number one EV market
in the world. I don't understand the metrics used by the author for the countries below China
on the list but, it is hard to deny that China is the fastest growing market for EVs or that the
highest absolute numbers of EVs are being sold in China.
up from #3; local sales 207,000, plus a lot more buses and commercial trucks. Claim to fame:
easily overtook USA this year for the global volume title; increased 300% over 2014; most sales
locally made by a diverse domestic industry; makes and deploys the vast majority of the world's
EV Buses.
China has once again proven that despite its huge size, it can turn its economy and industry
on a dime. They've been doing this every few years now, in a manner rivaling what the USSR and
USA accomplished during World War II.
As always, when you crank out an omelette this big, eggs will break. Indeed, the sooty fallout
of last decade's massive industrial push is one big reason why China is in such a hurry now to
clean up its energy grid, and its car and bus fleet. Hopefully they are learning some lessons,
and not just causing problems just as big downstream.
This concern is important. For example, in January Amnesty International published a meticulous
report, showing that China's Huyaou Cobalt company buys cobalt mined off of Congolese child and
slave labor. It then sells the cobalt directly or indirectly to Li-ion battery makers, including
BYD and interestingly, Korean LG Chem and Samsung. This must stop.
That said.
It is simply mind-boggling, that in 2012 China had all of 3,000 EV sales. The US was already
at 52,000 at the time. Three years later, they have apparently crossed 200,000 sales for the year,
with 35,000 EV sold in December 2015 alone.
he Chinese government intends to further augment plug-in electric vehicle sales by increasing
purchases from various government departments.
The latest move sets buying guidelines of more than 50% of new purchases to be NEVs (New
Energy Vehicles – electric or plug-in hybrid).
What this means for future gasoline consumption growth in China is anybody's guess but, it
appears to me that EVs are in the early stages of an exponential growth phase.
Crude oil traders like Vitol Group and BP (BP)
take advantage of the broader contango market. These traders buy front-month crude oil futures contracts
and take delivery upon their expiration. They store this crude oil in Cushing, Oklahoma, and then
sell it at higher prices in six months. Industry surveys estimate that leasing costs at large tanks
in Cushing were 25–35 cents per barrel per month compared to the 12-month contango price of $8.27
per barrel, as shown in the chart above. Thus, the storage cost of crude oil for 12 months could
be $4.20 per barrel at most, keeping administrative fees and other pumping costs at $1 per barrel
for 12 months. This means traders could make a profit of $3 per barrel.
Further, the EIA (U.S. Energy Information Administration) estimates that storing crude oil in
large oil tankers for several months is expensive. It estimates that the trade will be unviable until
contango conditions reach $10–$12 per barrel. Citigroup suggests that if oil prices fall below $30
per barrel, it would be unviable to store crude oil at sea.
Effect on crude oil tankers
However, long-term oversupply and the broader contango market have benefited oil tankers like
Nordic American Tankers (NAT),
Teekay Tankers (TNK), Frontline
(FRO), Euronav (EURN),
DHT Holdings (DHT), and Tsakos
Energy Navigation (TNP).
The steep contango conditions in the ultra-low sulfur diesel market provide opportunity for contango
traders and supertankers. Ultra-low sulfur diesel inventories in the United States have risen more
than total motor gasoline inventories since the middle of June 2014.
ETFs and ETNs like the United States Oil Fund (USO),
the iPath S&P GSCI Crude Oil Total Return Index ETN (OIL),
the VelocityShares 3X Long Crude Oil ETN (UWTI),
and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO)
are also influenced by the rises and falls in crude oil prices.
In the next part of this series, we'll shift our focus to the US crude oil rig count.
"... The trader's life is also made trickier by the volatility in the market, which has seen prices rise and fall by several dollars a barrel in a day. "Over the last two or three years we've seen a huge increase in volatility and that's probably due to moving more from a physical group of companies trading to a financial-based scenario," he says. ..."
"... "It's the momentum of these big hedge funds and financial institutions, which makes the market move by percentage points rather than the 30 or 40 cents you used to get three or four years ago." ..."
"... Those sudden, big movements make it difficult for traders to be off-duty. "You can never leave your position, even if technically you've left it, ie you've gone home," Ms Clubley says. ..."
Oil traders never stop talking to each other. Oil traders have to weigh up a great deal of
information
The most popular software among oil traders is not an oil trading package or even a news service
such as Reuters - it is Yahoo Instant Messenger.
"Trading oil is about getting information and knowing where the market is," says Eivind Lie who
runs the trading desk at the Norwegian oil company StatoilHydro's offices in London.
"So being a trader your life is pretty much either on Yahoo or on the telephone trying to get an
overview of the market."
Keeping in touch
While people trading shares or currencies can get a lot of their information from analysts' notes
and computerised trading systems, the oil trader still relies on chatting to a wide range of
people, ranging from other traders to specialist oil trading journalists, to try to find out what
is going on in the world.
Everything from war or natural disasters to more mundane events such as seasonal changes to
temperatures or elections can affect oil prices, so for the traders it pays to be informed.
Richard Wickham, one of the crude oil traders at Statoil, makes his first call to the office on
the way to the station after he has dropped his children off at the nursery.
Then as soon as he gets to the office he will read price reports and messages from Statoil staff
who have been trading in the US and Asia and talk to the London-based analyst.
After that, the less formal process of talking to people really gets going.
"Collating information is more than half the job," Mr Wickham says.
"Executing trades is almost small in comparison - if you don't have the information you're
blind," he says, staring at the four computer screens on his desk, which display a bewildering
array of graphs, figures, reports and message windows.
There is little else on the desk besides family photographs and a strategically-placed Norwegian
dictionary, for when he is trying to understand messages from the company's head office in
Stavanger.
Distressed cargoes
Statoil is one of the world's largest exporters of oil and, with oil topping $100 a barrel on
supply concerns, its products are in great demand.
Yet it has a relatively small trading desk in London, with just a handful of traders. "If it's a
weak market then we have to go out and sell it more actively, if it's a strong market they come
and buy it from us," Mr Lie says. Currently, demand is strong, though the traders are
nevertheless on the phone, talking to other traders, analysts and brokers.
Everyone in the market for physical oil - as opposed to paper market traders, who do not want to
end up owning any oil - is looking for that precious piece of information that will allow them to
sell oil for more, or buy it for less.
"From our side, as the seller of oil, we want to get to know the buyer's position," Mr Lie says.
"Are they short of oil, do they really need more?" The holy grail for buyers is to find a seller
having difficulty selling a shipment. "If you get too close to the delivery date, when it's taken
aboard a ship in the North Sea, and it's not sold, then the buyers know that we have what's
called a 'distressed cargo', so they will try to get a cheap price for that," he adds.
Volatile market
It may be a good time to be a seller of oil, but the way oil is traded means it can still be
nerve-wracking. "There are a lot of market price contracts where I would sell you oil today, but
we price it the day the ship loads, which might be in three of four weeks time," says Sally
Clubley, an independent oil consultant who trains oil traders.
"So we've done the deal today, but we don't know the price today and there's a lot of oil traded
on that basis."
The trader's life is also made trickier by the volatility in the market, which has seen
prices rise and fall by several dollars a barrel in a day. "Over the last two or three years
we've seen a huge increase in volatility and that's probably due to moving more from a physical
group of companies trading to a financial-based scenario," he says.
"It's the momentum of these big hedge funds and financial institutions, which makes the
market move by percentage points rather than the 30 or 40 cents you used to get three or four
years ago."
Those sudden, big movements make it difficult for traders to be off-duty. "You can never
leave your position, even if technically you've left it, ie you've gone home," Ms Clubley says.
"It really is a 24-hour job because they don't trust anybody else with it."
Mr Lie agrees.
"I think some of the traders always carry their phones, even on vacations," he says. "It's a
lifestyle more than a job so you have to enjoy it."
Looks like the range of oil prices below $70 which represents the "death valley" for US LTO production
also exists for UK North Sea fields.
Most fields might degrade at natural depletion rate already
in 2016. Which is up to 22%.
Investment in the UK's embattled oil and gas industry is expected to fall by almost 90 per
cent this year, raising urgent industry calls for the Government to reform its North Sea tax
regime to safeguard the industry's future, reports
RT reports that if Brent price in 2016 stays in 0-70 range capex in the North Sea fields might
be reduced by almost 90%.
According to the report of the British Association of oil and gas industry, with current prices,
almost half of the oil fields in the UK produce oil at a loss.
The fall in oil prices has a negative impact on the UK economy. According to the report
of the British Association of oil and gas industry, the country plans to reduce by 90% investments
in the development of offshore fields in the North Sea. According to the expert in the field
of oil industry of Mamdouh Salamah, for the United Kingdom will be cheaper to import crude,
not to invest in new projects.
With current prices, almost half of the oil fields in the UK produce oil at a loss.
An expert in the field of oil industry Mamdouh Salama believes that in this situation for
the United Kingdom would be more profitable to import oil, not to invest in new projects. According
to him, for resumption of capital investments, the level of oil prices should be higher than
$60-70 per barrel.
"Given the fall in oil prices it's more profitable for the UK to import crude oil and refine
it locally, rather than invest in the North sea fields" said Salam.
"... Bullshit. Imports are rising because oil from shale is shitty shitty oil. It is barely better than condensate. ..."
"... Refineries dont make much money on very light crude, API 45. It doesnt produce a very high volume of fuels. It is feedstock material, and there is a limited market for feedstock. Much of US LTO production is greater than API 45. ..."
Despite domestic production declining and demand surging, the EIA reported oil inventories
surge by more than 10 million barrels, or more than three times what was expected.
The 10.4 million barrel increase was mostly due to a near record increase in imports of
490,000 b/d (3.4 million barrels weekly) and an adjustment swing of 352,000 b/d (2.5 million
barrels weekly) by the EIA. The latter has been a repeated pattern to exaggerate the levels of inventory,
a pattern going back to 2015. Thus, over half of the said increase in inventory was driven
by higher imports and an arbitrary adjustment that seems routine by the EIA. Domestic production
actually fell by 25,000 B/D in the week ending on February 26. Also gasoline inventories fell 455,000
barrels, or nearly 5 percent, as capacity utilization rose 1 percent. Total gasoline supplied, which
is a gauge of demand over last 4 weeks, has risen a whopping 7 percent.
Now the real question is with U.S. production declining and inventories at record levels,
why are refiners still importing at such heights? The 8.2 million barrels per day
imported in the week came very close to the record in December, missing by some few percentage points.
U.S. commercial domestic crude oil stocks are now nearly 17 percent above last year levels. None
of this adds up: We are producing less, inventories are rising, while demand is at records and yet
we are using more imported oil?
Although raw shale oil can be immediately burnt as a fuel oil, many of its applications require
that it be upgraded. The differing properties of the raw oils call for correspondingly various
pre-treatments before it can be sent to a conventional
oil refinery . [35]
Shale oil produced by some technologies, such as the
Kiviter process ,
can be used without further upgrading as an oil constituent and as a source of
phenolic compounds
. Distillate oils from the Kiviter process can also be used as
diluents for petroleum-originated
heavy oils and as an adhesive-enhancing additive in
bituminous materials such
as asphalt
Refineries are designed to use specific types of crude, with some flexibility. Those set
up to use heavy crude need something close or at least a blend. US shale oil isn't heavy crude,
it's very light oil from what I understand.
Koch Industries spent large to modify their northern refineries to take bitumen from Canada
because it is heavily discounted (cheap). Output in Canada hasn't changed much, although exploration
and development have been greatly reduced.
US shale oil has pipeline issues in some areas and has to be transported by rail which
is considerably more expensive. Especially significant for refineries with port access.
The Saudi's have some guarantees as to minimum imports, or so I have read. When they partnered
with Shell to expand a joint refinery project on the Gulf and make it the largest refinery
in the US, apparently they got a guarantee from the US gov't on how much heavy crude they could
import. That was back when there was supposedly a great deal of excess refining capacity in
that area.
Long term availability of shale / tight oil may be in doubt to the extent investing in
refinery modifications to handle different feedstock may not be attractive.
Refineries don't make much money on very light crude, API >45. It doesn't produce a very
high volume of fuels. It is feedstock material, and there is a limited market for feedstock. Much
of US LTO production is greater than API 45.
"It was a tumultuous week in the world of hydraulic fracturing ("fracking")
for shale oil and gas, with a few of the biggest companies in the U.S. announcing
temporary shutdowns at their drilling operations in various areas until
oil prices rise again from the ashes."
And if the sordid news for the frackers were not bleak enough on the bottoming
out of oil prices, David Hughes - a former oil industry geoscientist and
current fellow with the Post Carbon Institute - recently delivered sworn
testimony to the North Carolina Utilities Commission that shale gas production
will peak in 2017 nationwide and then begin a rapid productivity decline.
"... The meeting of oil-producing countries will be held on March 20th in Russia, the Minister of oil of Nigeria, Emmanuel Kachikwu, announced. According to him, it will be attended by representatives of countries who are OPEC members and countries that are not members in the organization. Mr. Kachikwu noted that producers seek to restore oil prices to $50 per barrel ..."
here is some good news. You have heard it first from me here on POB 2 weeks ago. We are moving
in direction of restoring the prices to acceptable level that major producers can live temporarily.
"The meeting of oil-producing countries will be held on March 20th in Russia, the Minister
of oil of Nigeria, Emmanuel Kachikwu, announced. According to him, it will be attended by representatives
of countries who are OPEC members and countries that are not members in the organization. Mr.
Kachikwu noted that producers seek to restore oil prices to $50 per barrel."
"... Instead, it reprieved the fading remnants of the military-industrial-congressional complex, the neocon interventionist camp and Washingtons legions of cold war apparatchiks. All of the foregoing would have been otherwise consigned to the dust bin of history. ..."
"... The Saudis geopolitical goal is to contain the economic and political power of the kingdoms principal rival, Iran, a Shiite state, and close ally of Bashar Assad. The Saudi monarchy viewed the U.S.-sponsored Shiite takeover in Iraq (and, more recently, the termination of the Iran trade embargo) as a demotion to its regional power status and was already engaged in a proxy war against Tehran in Yemen, highlighted by the Saudi genocide against the Iranian backed Houthi tribe. ..."
"... But the Sunni kingdoms with vast petrodollars at stake wanted a much deeper involvement from America. On September 4, 2013, Secretary of State John Kerry told a congressional hearing that the Sunni kingdoms had offered to foot the bill for a U.S. invasion of Syria to oust Bashar Assad. In fact, some of them have said that if the United States is prepared to go do the whole thing, the way weve done it previously in other places [Iraq], theyll carry the cost. Kerry reiterated the offer to Rep. Ileana Ros-Lehtinen (R-Fla.): With respect to Arab countries offering to bear the costs of [an American invasion] to topple Assad, the answer is profoundly yes, they have. The offer is on the table. ..."
"... Gazproms gas exports to Europe – including Turkey – had increased to 158.6 billion cubic meters in 2015 with a 8.2 percent increase compared to 2014 ..."
Stockman's Tales of western intervention into the ME Oil Puzzle.
"The Trumpster Sends The GOP/Neocon Establishment To The Dumpster"
"And most certainly, this lamentable turn to the War Party's disastrous reign had nothing to do
with oil security or economic prosperity in America. The cure for high oil is always and everywhere
high oil prices, not the Fifth Fleet"
It goes all the way back to the collapse of the old Soviet Union and the elder Bush's historically
foolish decision to invade the Persian Gulf in February 1991. The latter stopped dead in its
tracks the first genuine opportunity for peace the people of the world had been afforded since
August 1914.
Instead, it reprieved the fading remnants of the military-industrial-congressional complex,
the neocon interventionist camp and Washington's legions of cold war apparatchiks. All of the
foregoing would have been otherwise consigned to the dust bin of history.
Yet at that crucial inflection point there was absolutely nothing at stake with respect
to the safety and security of the American people in the petty quarrel between Saddam Hussein
and the Emir of Kuwait.
Having alienated Iraq and Syria, Kim Roosevelt fled the Mideast to work as an executive
for the oil industry that he had served so well during his public service career at the CIA.
Roosevelt's replacement as CIA station chief, James Critchfield, attempted a failed assassination
plot against the new Iraqi president using a toxic handkerchief, according to Weiner. Five
years later, the CIA finally succeeded in deposing the Iraqi president and installing the Ba'ath
Party in power in Iraq. A charismatic young murderer named Saddam Hussein was one of the distinguished
leaders of the CIA's Ba'athist team.
… … …
The EU, which gets 30 percent of its gas from Russia, was equally hungry for the pipeline,
which would have given its members cheap energy and relief from Vladimir Putin's stifling economic
and political leverage. Turkey, Russia's second largest gas customer, was particularly anxious
to end its reliance on its ancient rival and to position itself as the lucrative transect hub
for Asian fuels to EU markets. The Qatari pipeline would have benefited Saudi Arabia's conservative
Sunni monarchy by giving it a foothold in Shia-dominated Syria. The Saudis' geopolitical goal
is to contain the economic and political power of the kingdom's principal rival, Iran, a Shiite
state, and close ally of Bashar Assad. The Saudi monarchy viewed the U.S.-sponsored Shiite
takeover in Iraq (and, more recently, the termination of the Iran trade embargo) as a demotion
to its regional power status and was already engaged in a proxy war against Tehran in Yemen,
highlighted by the Saudi genocide against the Iranian backed Houthi tribe.
Of course, the Russians, who sell 70 percent of their gas exports to Europe, viewed the
Qatar/Turkey pipeline as an existential threat. In Putin's view, the Qatar pipeline is a NATO
plot to change the status quo, deprive Russia of its only foothold in the Middle East, strangle
the Russian economy and end Russian leverage in the European energy market. In 2009, Assad
announced that he would refuse to sign the agreement to allow the pipeline to run through Syria
"to protect the interests of our Russian ally."
… … …
But the Sunni kingdoms with vast petrodollars at stake wanted a much deeper involvement
from America. On September 4, 2013, Secretary of State John Kerry told a congressional hearing
that the Sunni kingdoms had offered to foot the bill for a U.S. invasion of Syria to oust Bashar
Assad. "In fact, some of them have said that if the United States is prepared to go do the
whole thing, the way we've done it previously in other places [Iraq], they'll carry the cost."
Kerry reiterated the offer to Rep. Ileana Ros-Lehtinen (R-Fla.): "With respect to Arab countries
offering to bear the costs of [an American invasion] to topple Assad, the answer is profoundly
yes, they have. The offer is on the table."
"The EU, which gets 30 percent of its gas from Russia, was equally hungry for the pipeline, which
would have given its members cheap energy and relief from Vladimir Putin's stifling economic and
political leverage."
That is nonsense. The issue is that Russia has quite limited leverage: They can not replace
the European customers on short notice – pipeline chain producer to certain customers – and they
urgently need the income.
The more interesting question for Russia is how to cope with a customers who may reduce the
demand for NG by 1% per year for the next few decades.
"The issue is that Russia has quite limited leverage: They can not replace the European customers
on short notice"
Leverage is always mutual in the gas trade that involves long term contracts and long gas supply
lines. It is like marriage :-)
"The more interesting question for Russia is how to cope with a customers who may reduce the
demand for NG by 1% per year for the next few decades."
I am not sure that this is the case.
"Gazprom's gas exports to Europe – including Turkey – had increased to 158.6 billion cubic
meters in 2015 with a 8.2 percent increase compared to 2014."
Hedge funds and other money managers held a combined net long position in the three main crude oil
futures and options contracts amounting to 383 million barrels on Feb. 23.
The combined net long
position has increased in eight of the last 11 weeks from a recent low of 230 million barrels on
Dec. 8. (tmsnrt.rs/1XUWJih)
But the increase in hedge fund and other money manager net long positions has been concentrated
in Brent rather than WTI. (tmsnrt.rs/1XUWS5i)
The net long position in Brent futures and options traded on ICE Futures has jumped by more than
100 million barrels to 320 million barrels from 183 million barrels.
The net long position in WTI futures and options traded on ICE and the New York Mercantile Exchange
has risen less than 20 million barrels to 63 million barrels from 47 million barrels. (tmsnrt.rs/1XUWVy1)
Extreme pessimism about the near-term outlook for prices, which reached its height in December
and early January, seems to have dissipated a little.
There is more confidence that the long-awaited rebalancing of supply and demand is now underway in
earnest which could help stabilize stockpiles and prices later in 2016.
U.S. shale producers seem to be finally cracking under the strain from low prices, with more than 100 oil drilling rigs idled over the past month, and many producers now openly talking about producing less in 2016.
"... In the USA we use crude for various purposes. Based on old data of 2007 we use close to half for passenger travel, and only
2% for on farm use, for example. Probably hasn't changed much. How much of the passenger travel is important to GDP, or is "productive"
vs "frivolous"? ..."
"... An even better question is how much of GDP itself is "productive" or "frivolous"? ..."
"... Households spent $306 billion on gasoline in 2015 which is ~1.7% of ~$18 trillion of GDP. If 2016 gasoline prices average $1.98
per gallon (EIA February STEO report), household spending on gasoline relative to total household spending will be the lowest in the
69 year history of the data set. ..."
"... Gasoline on its own it is pretty much useless unless you want just to start camp fire for marshmallows. If you want to include
the true cost of using gasoline in the household you have to include the cost of vehicles that have never been higher in the history,
you have to include the cost of insurance that is also marching higher every year. And let's not even go into ever increasing cost of
building and maintaining each mile of highway network. So you have to look at built in price inflation in today's monetary system to
realize the true costs. And anyway example that you provide for 2016 that "gasoline relative to total household spending will be the
lowest in the 69 year history" is anomaly. Do you understand why it is anomaly? It is anomaly because at that price nobody in oil industry
makes any profit. So you won't have this anomaly for very long. ..."
In the USA we use crude for various purposes. Based on old data of 2007 we use close to half for passenger travel, and only
2% for on farm use, for example. Probably hasn't changed much. How much of the passenger travel is important to GDP, or is "productive"
vs "frivolous"?
Households spent $306 billion on gasoline in 2015 which is ~1.7% of ~$18 trillion of GDP. If 2016 gasoline prices average
$1.98 per gallon (EIA February STEO report), household spending on gasoline relative to total household spending will be the lowest
in the 69 year history of the data set.
Gasoline on its own it is pretty much useless unless you want just to start camp fire for marshmallows. If you want to include
the true cost of using gasoline in the household you have to include the cost of vehicles that have never been higher in the history,
you have to include the cost of insurance that is also marching higher every year. And let's not even go into ever increasing
cost of building and maintaining each mile of highway network. So you have to look at built in price inflation in today's monetary
system to realize the true costs. And anyway example that you provide for 2016 that "gasoline relative to total household spending
will be the lowest in the 69 year history" is anomaly. Do you understand why it is anomaly? It is anomaly because at that price
nobody in oil industry makes any profit. So you won't have this anomaly for very long.
U.S. market is so oversupplied with oil that traders are experimenting with a new place
for storing excess crude
There are plenty to choose from: Thousands of railcars ordered up to transport oil now sit idle
because current ultralow crude prices have made shipping by train unprofitable.
The OPEC cartel needs to take action to stabilize the oil market because crude prices have fallen
to "totally unacceptable" levels, Nigerian President Muhammadu Buhari said on Sunday.
Nigeria, Africa's biggest oil producer which earns around 90 percent of its foreign exchange earnings
from crude oil exports, has been hit hard by the erosion of vital revenues caused by the global slump
in oil prices which has also hammered its currency.
"The current market situation in the oil industry is unsustainable and totally unacceptable,"
Buhari told Qatar's ruler during a meeting in Doha, his office said in a statement.
Speaking on the second day of his visit, Buhari highlighted the need for cooperation between OPEC
and non-OPEC producers.
"We must cooperate both within and outside our respective organizations to find a common ground
to stabilize the market," said Buhari, who also discussed ways to stabilize prices with Saudi Arabia's
King Salman in Riyadh last week.
On Thursday, Venezuela's oil minister said Qatar, Russia, and Saudi Arabia had agreed to a meeting
in mid-March as part of efforts to stabilize oil markets.
Buhari's spokesman, Femi Adesina, added that delegations from Nigeria and Qatar signed two bilateral
agreements to "boost economic cooperation" between the countries.
There was an agreement to avoid double taxation and tax evasion as well as another that would
pave the way for direct flights between major cities of both countries.
Nigeria should be worried. With a population of 173 Mil Nigeria is a huge African nation. Nigeria
just barely feeds many of its poor people. Climate change appears to not be a benefit to Nigeria
with increasing instances of drought. This country is flirting with failure if low oil prices
and drought continue. Oil has allowed this country to expand many times past what it should have.
Lagos metropolitan area is approximately 16Mil. This is a mega city in an overpopulated country.
If you think Nigeria can just fail and everyone will do fine without them think again. Some of
the best oil in the world comes from Nigeria. They are a significant producer at 2.5 mbd. They
are an important anchor to West Africa the world can ill afford to lose.
Rick Bronson on Sun, 28th Feb 2016 5:10 pm
If big oil can produce at $30 / barrel, they can survive, otherwise they close.
More than 1/2 the rigs were closed, that means Shale is not viable at $30 / barrel.
It has nothing to do with the leadership. Its the market economy.
But even at this low oil prices, electric vehicles are selling decently.
Garden-City Boy on Sun, 28th Feb 2016 5:49 pm
Oil is the only glue that holds the Nigerian patchwork together. The tanking oil price triggering
Nigeria's export earnings' nosedive is probably the best thing to happen to the Nigerian contrivance.
Nigerians and indeed the World should brace up for the inevitable and learn to come to terms
with what crystalizes from the precariously fragile mosaic.
"... Once this project is completed DECC will be able to better quantify system costs to inform policy decisions. Any future policy development, such as future renewable support, will be informed by the improved evidence base developed through this project . ..."
"... The additional costs of having variable generation on the system are low and for the most part renewable generators already pay these costs, said Renewable UKs director of policy, Dr Gordon Edge. If were going to talk about system costs, then we also need to talk about the undoubted economic benefits that wind generators also bring, he added. ..."
"... At a White House meeting between the CIAs director of plans, Frank Wisner, and John Foster Dulles, in September 1957, Eisenhower advised the agency, We should do everything possible to stress the holy war aspect, according to a memo recorded by his staff secretary, Gen. Andrew J. Goodpaster. ..."
"... When oil is selling for below its full life cycle production cost; when the industrys revenue has fallen by $2.3 trillion per year in the last two years; when the Saudis are borrowing money to pay their bills; when the nation with the largest petroleum resource on the planet cant afford toilet paper for its citizens; when hundreds of US producers are going out of business; when the world is using petroleum eight times faster than it is finding it; when the Etp Model said that this was going to happen years ago -– yep, I believe it. ..."
Nor, for that matter, of peak coal or gas. Fossil fuels, said to be on the path for an effective
demise in the rich world later this century, will actually continue to fulfil the major part of our
energy needs for the foreseeable future. So says the latest
BP Energy Outlook
.
... ... ...
...As oil prices dropped steeply in 2014, the once-dominant OPEC producers kept the taps open,
looking to maintain market share in the face of surging US competition, rather than cutting production
to force prices up. However, the forecasters were wrong in this case as well. Rather than decimating
the North American shale oil producers, the weaker ones went to the wall but many carried on pumping.
The costs of fracking (and re-fracking) and drilling multiple horizontal wells from a single well-head
had come down to a point at which losses were bearable, albeit further drilling was discouraged.
Breakeven cost for US oil in general is about $36 per barrel, although the average for shale is around
$58 (see
breakeven cost for top oil exporters
). The figure for Saudi Arabia, in contrast, is just $9.90.
Nevertheless, the consequences of continuing low oil prices are worse for Middle Eastern countries
and other 'cheap' oil producers because their economies are also heavily dependent on oil exports.
So, while a single industrial sector may take a hammering in the USA, Saudi Arabia needs about $105/barrel
to balance its budget (
Fiscal breakeven cost for the top oil-dependent economies
). For such countries, the economic
and social costs could be severe, while shale oil production can be scaled back but then quickly
revived when the market picks up.
On a more parochial note, plans in EU member states for continued expansion of renewable energy
were based on a projected reducing need for subsidies as conventional energy prices rose steadily.
Now, however, it begins to look as though subsidies will escalate for the foreseeable future. In
the UK, for example, the realities of photovoltaics having very limited potential at such a high
latitude and the building of more onshore wind farms meeting continued resistance from local communities
has made offshore wind an increasingly attractive proposition politically.
Politically attractive maybe, but hardly so economically. As last week's newsletter pointed out,
offshore wind farm operators are being offered energy prices of at least £115 per MWh, over £20 more
than the much-criticised strike price for electricity from the proposed Hinkley C nuclear plant (
(Guaranteed) power to the people
). Even these inflated prices, paid for by consumers, don't take account of the additional costs
of transmission, grid strengthening and conventional backup.
The result is a rethink of at least some aspects of the subsidy regime and a somewhat lukewarm
attitude to renewables in the UK (although Germany seemingly is set to push ahead with yet more wind
and solar, seemingly oblivious to the negative consequences of the policy instruments chosen: replacement
of clean and flexible gas by new lignite stations). The much-vaunted prospects of carbon capture
and storage (CCS), always just over the horizon and apparently destined to remain so, has had yet
another false start as funding for a demonstration project has been pulled.
Even the renewable energy industry itself if not united.
Power firm Drax urges biomass
subsidy rethink puts the case for biomass being a more cost-effective option than other renewables,
taking into account additional costs not normally included in the headline figures. The £105 per
MWh paid to Drax for energy generated mainly from imported American wood pellets is certainly higher
than the maximum of £82.50 paid for the latest onshore wind farms. However, an analysis conducted
for the energy generator by NERA Economic Consulting and Imperial College argues that the overall
cost to consumers of decarbonisation could be £2bn lower if biomass power stations were allowed to
bid for new renewable energy contracts.
The precise figures can be criticised, but the thrust of the argument is undeniable: the only
valid way of comparing competing technologies is to analyse the overall system cost. The Department
of Energy and Climate Change is said to be looking into the use of whole system costing, with work
due to finish shortly. According to energy minister Angela Leadsom, "Once this project is completed
DECC will be able to better quantify system costs to inform policy decisions. Any future policy development,
such as future renewable support, will be informed by the improved evidence base developed through
this project".
Let's hope so. The wind and solar industries will doubtless put up strong resistance, because
the higher-than-reported overall costs of their technologies is a secret they would rather was not
made public. We can expect to hear much more of this kind of thing: "The additional costs of
having variable generation on the system are low and for the most part renewable generators already
pay these costs," said Renewable UK's director of policy, Dr Gordon Edge. "If we're going to talk
about system costs, then we also need to talk about the undoubted economic benefits that wind generators
also bring," he added.
What those 'undoubted economic benefits may be to those other than the foreign-owned suppliers
of wind turbines and photovoltaic panels, we wait to find out.
The massive global debt bubble is the surest sign yet that we have reached peak oil. Without
growth in oil production, there can not be economic growth.
Debt was used to buy today's oil yesterday. Facilitated by cheap credit, we are currently producing
tomorrow's oil today. Tomorrow's oil, the last of the easy stuff, will have been depleted and
the debts will not only have not been paid but, will have gotten bigger.
Peak oil mates, peak oil. This is it. We are living it now. As I have stated previously, those
that deny peak oil do not understand it.
Plantagenet on Sat, 27th Feb 2016 8:48 pm
As long as global oil production continues to go up, we are not at peak oil.
We'll see a global peak in oil production sometime in the next 10 years, but we aren't quite
there yet.
CHEERS!
Harquebus on Sat, 27th Feb 2016 9:32 pm
Yeah but, oils ain't necessarily oils.
A lot of oil production is called oil but, it isn't sold on the oil market so, it isn't really
oil.
Truth Has A Liberal Bias on Sat, 27th Feb 2016 9:45 pm
Global oil production is down. July 2015 exceeds January 2016. And it will continue to decline
as we go forward.
Apneaman on Sat, 27th Feb 2016 9:53 pm
Yergin's a fuctard cheerleader and any prize can be bought. Pulitzer – Big fucking deal. Obama
has a Nobel and drone bombs babies and their mommas daily.
Apneaman on Sat, 27th Feb 2016 10:01 pm
Middle Eastern Wars Have ALWAYS Been about Oil
"Robert Kennedy Jr. notes:
For Americans to really understand what's going on, it's important to review some details about
this sordid but little-remembered history. During the 1950s, President Eisenhower and the Dulles
brothers - CIA Director Allen Dulles and Secretary of State John Foster Dulles - rebuffed Soviet
treaty proposals to leave the Middle East a neutral zone in the Cold War and let Arabs rule Arabia.
Instead, they mounted a clandestine war against Arab nationalism - which Allen Dulles equated
with communism - particularly when Arab self-rule threatened oil concessions.
They pumped secret
American military aid to tyrants in Saudi Arabia, Jordan, Iraq and Lebanon favoring puppets with
conservative Jihadist ideologies that they regarded as a reliable antidote to Soviet Marxism [and
those that possess a lot of oil].
At a White House meeting between the CIA's director of plans,
Frank Wisner, and John Foster Dulles, in September 1957, Eisenhower advised the agency, "We should
do everything possible to stress the 'holy war' aspect," according to a memo recorded by his staff
secretary, Gen. Andrew J. Goodpaster."
Rising debt might be a sign of approaching peak oil – excess energy is diminishing and therefore
unable to general excess capital production in society in order to pay interest and principal.
But in and of itself Debt is not definitive. Even if the return on energy were between 1 and
0 (costs more input than you get out), which would result in ginormous debts, but we could still
produce more total volume on a consistent basis, by the standard definition, no peakum oilum.
Now, its been at least six years that many have suggested we need to change the definition
of peak oil to mean: amount of Net Energy Available (from oil) to Society (nate hagens, et al).
And from that perspective, we've almost certainly reached peak net available energy or peak oil.
the question also about the different "liquids" going into the number is a solid question.
Will any of these questions make a difference to the MSM or doubters on this site? No.
rockman on Sat, 27th Feb 2016 10:53 pm
And again if folks keep allowing themselves to be baited into debates about PO dates and the
silly position that supply won't always meet demand (which it will thanks to the modulation effect
of pricing) then the reality of the complexity of the Peak Oil Dynamic will be ignored.
Just consider how few citizens don't understand that the current low oil prices are a result
of the diminishing capacity to develop meaningful new long term reserves.
shortonoil on Sun, 28th Feb 2016 7:07 am
"Breakeven cost for US oil in general is about $36 per barrel, although the average for
shale is around $58 (see breakeven cost for top oil exporters). The figure for Saudi Arabia, in
contrast, is just $9.90."
Crude stayed in the $100 range for almost four years. According to the quote above the industry
was making incredible profits during that period; so incredible that one would have to be an absolute
idiot to believe it? At $36 the profit margin on gross sales would have been 278%. On $58 it would
have been 172%, and on $9.90 it would have been 1010%.
That very easily explains how the Shale industry managed to accumulate over a $1 trillion in
debt to build annual sales of $360 billion. A 172% profit margin on gross sales will do that using
a combination of the New Math, and some very creative accounting. These guys are quoting EBITDA
numbers, not break even numbers. Of course, they think they have enough stupid, credulous readers
that they can get away with it.
Put it in print, and someone is dumb enough to believe it!
eugene on Sun, 28th Feb 2016 9:31 am
Another of the endless debates amongst people with little or no knowledge of the energy situation
but lots of opinions with each convinced their opinion is absolutely the correct one. I'd add
mine but I'm just an old man sitting in the woods with an "opinion" based on very limited knowledge.
One thing I do "know", oil is vital to our lifestyle and is a finite resource of which we have
extracted most of the cheap, easy stuff so will have to produce ever more expensive stuff. I like
the word "stuff" as it appears to me the definition of oil is changing according to the agenda
of the person speaking.
onlooker on Sun, 28th Feb 2016 11:21 am
"Just consider how few citizens don't understand that the current low oil prices are a result
of the diminishing capacity to develop meaningful new long term reserves." But some even here
say it is a glut. Hahaha. Funny isn't Rockman. Oh and for those who may not know Rockman is in
the Oil business he is not just some armchair pundit.
shortonoil on Sun, 28th Feb 2016 11:49 am
When the world is burning 32 Gb per year, and discovering 4Gb to replace the 32 it just used,
you apparently have a "glut". Is that the result of how you use your Facebook account? Maybe its
a Twitter brain thing?
onlooker on Sun, 28th Feb 2016 12:09 pm
Short thanks. Another person in the trenches. Not some denier, BAU cheerleader or shill. Because
they are the only ones harping on how Shale/Tar will bring about a revolution of new energy. Of
those 4Gb, I wonder now much of that per year we will even be able to bring to market. I think
depletion and the fizziling out of LTO will make in short term a mockery of the so called glut
and its advocates.
"The Cambridge Network is a commercial business networking organisation for business people
and academics[1][2] working in technology fields in the Cambridge area of the UK."
"Activities[edit] The organisation's mission is "We raise the game for business in Cambridge, and through that we
try to raise the game for economic growth in the UK."
Looker – I wish I didn't have to result to an worn anology but it works so perfectly: the blind
men trying to ID an elephant by each analyzing individual parts of the critter. PO (or more correctly
the POD…peak oil dynamic) is more than the date of global max oil production, storage volumes
at Cushing, KSA production levels, debt incurred by the US shale players, frac'ng costs, US oil
exports, a lot of dilbit made with Eagle Ford condensate, etc, etc, etc.
It's no different the
arguing that critter is a snake because only it's trunk has been analyzed. We see the same approach
here: PO isn't a factors because we see XXX or PO is the end of life as we know it because YYY
is happening.
Some don't like the POD because it's to inclusive. Which is the same as saying we shouldn't
study the entire anatomy of the elephant in order to ID it because that data is "too inclusive".
As I've stated before: the oil price spike which lead to the shale boom which led to increased
US oil production while cooling the global economy and leading to consumers who were unable/unwilling
to pay more then $40 per bbl which led to a drastic decline of shale rigs and a slew of oil companies
pushed to and over the brink of failure: collectively these events along with others indicate
to true nature of the PO dynamic.
At this point if one can't grasp the entire picture I doubt
they ever will.
IOW it's a f*cking elephant. LOL.
onlooker on Sun, 28th Feb 2016 2:58 pm
Thanks for the clear explanation of recent peak oil dynamics Rock. I being a layman have tried
to understand what is going on relative to PO and other matters affecting the planet as the least
we can do is know what the heck is really going on in the world we live. Now if they still don't
understand then they are dense or have an agenda.
shortonoil on Sun, 28th Feb 2016 3:17 pm
"Short thanks. Another person in the trenches."
When oil is selling for below its full life cycle production cost; when the industry's revenue
has fallen by $2.3 trillion per year in the last two years; when the Saudis are borrowing money
to pay their bills; when the nation with the largest petroleum resource on the planet can't afford
toilet paper for its citizens; when hundreds of US producers are going out of business; when the
world is using petroleum eight times faster than it is finding it; when the Etp Model said that
this was going to happen years ago -– yep, I believe it.
It's not that hard to get your head wrapped around, unless your head is made out of concrete.
Anonymous on Sun, 28th Feb 2016 3:37 pm
That was my point Ape
The word 'Cambridge' is intended to be associated with Cambridge University. Thus=Academic,
credible source.
And 'Science' of course, is pretty self explanatory. It is there to reinforce the 'Cambridge'
association.
Sort of doubling up on the implications that this source is a credible, rational, impartical
scientific org. (LOL). And not,(its hopeed) as you point out, basically, a high sounding cheerleader
for UK commercial energy corporations. And others I am sure…
makati1 on Sun, 28th Feb 2016 7:01 pm
Recent signs of oil's peak…
"Global Trade Is Collapsing--Chinese Exports To Brazil Down 60% In January Y/Y; All Containerized
Shipments To LatAm Down 50%" "Bond Vigilantes Push $258 Billion of Oil Debt Past Junk"
"Halliburton to cut 5,000 jobs in new round of layoffs" "Slashing Start for European Energy Sector"
"Apache Slashes 2016 Budget By More Than Half, Sees Lower Output" "World outside US and Canada doesn't produce more crude oil than in 2005"
"Shale Oil Architect Predicts Doom for Some Drillers Amid Slump" "UK Oil Industry At The "Edge Of A Chasm"
"Mansion sales and discount dining: oil rout hits Houston's rich" "Watch Five Years of Oil Drilling Collapse in Seconds"
And for chuckles: " Former Mexican President To Donald Trump: 'I'm Not Gonna Pay For That [Expletive] Wall,' Vicente
Fox Says" "Clinton Defends Ongoing Anarchy In Libya: We Are Still In Korea, We Are Still In Germany"
Looks like Russian oil minister decided to play the role of a regular supply and demand jerk, may
be intentionally. Generally Russians unlike Chinese's behaved like idiots in this situation. Inread
of building state petroleum reserves like Chinese did and later selling oil later at reasonable prices
they continued to dump the oil on market helping Saudis to crash the price. Russia is still buying US
treasures instead as if oil is not as reliable as currency. Russia is the only major country that does
not have strategic oil reserves.
Alexander Novak mostly sounded like a regular member of the neoliberal cosmopolitan elite not as
a Russian oil minister who is interested in well-being of Russian citizens. As Soros aptly mentioned
such people have more in common with Wall Street financial oligarchs that with interests
of their own country.
Whether this was intentional of this is a his assumed position for Die Welt I do no know.
Notable quotes:
"... Given the pricing environment we expect in 2016 further reductions of 15-40%. Thus, this year 30 largest companies in the world can cut $200 billion from capex budgets . At the same time, we see that rise in in the price of the credit for oil producers in the US hinders their access to financial markets. ..."
"... On a global scale in the short term, these effects will be minimal. However, in the medium and long term they will be dramatic, because many of the cancelled projects were important for stability of oil supply from the point of view of growing global demand, have been postponed or frozen. So we can assumed that after 2020 a stable supply of oil is under threat. In this regard, Russia seeks to remain a stable supplier of oil globally. ..."
24.02.2016 | Die Welt/InoSMI
Russia is suffering from extremely low oil prices. Energy Minister Alexander Novak warned us
against the dramatic consequences of falling oil prices for the entire world. After the oversupply
of oil, according to him, a severe deficit is coming.
Die Welt: You have agreed with the oil Minister of Saudi Arabia on the limitation of oil
production. At first the market reacted to the results of your negotiations negativity and oil prices
continued to fall. What, in general, gives us this arrangement?
Alexander Novak: I Think our meeting with the colleagues from Saudi Arabia, Qatar and Venezuela
were very productive. The main result was a preliminary agreement on limiting oil production in 2016
at the level of January of this year. The final decision will be made when this initiative will join
most other oil producers. In our view, this approach would gradually reduce the oversupply and stabilize
prices at a level that will ensure the stability of the industry in the long term.
- Let's assume that others will agree with this. However, experts believe that price stabilization
is necessary not just freeze, and a reduction in oil production.
- Such proposals are periodically received. But we think that this may soon lead to an abrupt
artificial increase in prices. Because such a rise in prices entails the inflow of speculative
money into capital-intensive projects, for example, in the production of shale oil that, in turn,
will lead to rapid increase of oil production and as a result another round of oil prices fall. Of
crucial importance is the level of prices at which US shale oil is unprofitable. If the oil price
moved higher higher, we will again be faced with the effect of plummeting oil prices. That is why
we need mutual consultation in order better to access the current supply and demand situation.
- But the decline in prices over the last 18 months ago is already having a serious negative
impact on producers with higher costs.
- Yes, albeit slower than expected. This is a change from previous oil price cycles, when only
the oil exporting countries influenced the market by voluntarily reducing the production. But after
the invention of the technology for shale gas extraction in 2009, the situation has changed.
- So you agree with the International energy Agency, believes that in 2016, contrary to expectations,
oil prices stabilize?
- In general yes. Because when in mid-2014 oil prices began to decline, many thought that soon
shale oil will fall prey of it. However, this did not happen. We can see that the price at around
$100 per barrel was too high, but shale oil companies for more then a year managed to withstood the
falling oil prices and continue oil extraction is volumes comparable with the volume at peak.
Demand and supply grow equally, and the gap between them did not became smaller. That's why in 2016
everyone is adjusting their predictions about the end of low oil prices regime.
Limited access to funding by high cost producers and delay in implementation of capital intensive
projects will play a role in the alignment of supply and demand in the market and the volume of oil
production outside OPEC, primarily in North America, will be reduced. For example, in the US, the
number of drilling rigs already has declined by two-thirds.
- Not only in the United States. All the world's leading oil companies reduced their investment
programs by 10-35%. What reductions we can expect in 2016?
- Given the pricing environment we expect in 2016 further reductions of 15-40%. Thus, this
year 30 largest companies in the world can cut $200 billion from capex budgets . At the same time,
we see that rise in in the price of the credit for oil producers in the US hinders their access to
financial markets.
- What can be the consequences of reducing investments in the foreseeable future?
- On a global scale in the short term, these effects will be minimal. However, in the medium
and long term they will be dramatic, because many of the cancelled projects were important
for stability of oil supply from the point of view of growing global demand, have been postponed
or frozen. So we can assumed that after 2020 a stable supply of oil is under threat. In this regard,
Russia seeks to remain a stable supplier of oil globally.
- Can Russia to help stabilize prices, "selling" to OPEC and other major producers the
idea to reduce production?
- We haven't made exact calculations. For Russia, this is a difficult question due to the technological
aspects of oil extraction, the current state of the projects under construction and climatic conditions.
You can understand our situation from a simple fact: Russia has more than 170 thousand wells, and
to reduce their number very difficult. And in the middle East much less wells: Saudi Arabia produces
the same amount of oil as we do, with only 3500 wells. In addition, our oil companies are independent
joint-stock companies which are independently planning the level of their own production.
- The head of the second largest Russian oil company LUKOIL Vagit Alekperov said recently that
the Russian oil sector is most afraid that the government will change tax rules for him.
- I share the opinion of the head of the Lukoil concern. We needs a stable tax system. Oil prices,
along with the ruble and so fell and to this created for oil companies the problems of financing
of the oil extraction. If in addition we change the rules of taxation, the future would
become impossible to predict and the companies would be unable to plan their activities for more
then one year. We in the last two years had introduced some tax breaks which should encourage the
production at new fields in Eastern Siberia and the far East. Their effect is already noticeable:
in 2015, we got from those fields additional 60 million tons.
- And in the Arctic region?
- This region now is off-limit due to the costs. But the investments in the extraction of Okhotsk
and Caspian seas have risen because they are attractive from the point of view of taxation. In the
long run we are - regardless of the dynamics of oil prices - will have to change the tax system.
Together with the Ministry of Finance we will develop in the course of this year proposals.
- Russia, as you know, is struggling with declining production in current fields. If the investment
will be reduced, won't this mean that in 2017 the volume of oil production will fail?
- Much will depend on the situation with oil prices and the ruble exchange rate. All our major
companies confirm that they will be able to maintain production at the current fields at the current
level. However, at the current oil prices, investment in new projects will be reduced - at least
by 20-30%.
- In the medium to long term additional load on unconventional and expensive projects will
fall and Western sanctions. How noticeable the effect of them now?
- Impact on overall production is extremely small. In the last two years we have extracted from
these "difficult" fields were we do need western technology just 18 million tons, or around
3% of our total production. The growth of their share is a matter of the future.
- However, without the Western technologies to achieve it will be difficult.
- I expect the opposite effect. Since our companies cannot cooperate with the West in this
area, they had to do this work independently and to develop new technologies in Russia.
- Let me get this straight: in the next few years Russia can't eliminate technological handicap
with the West. This will not work.
At least, we achieve our goals. In three years we seriously upgraded the level of our current
technology. Professionals, scientific and practical basis of all that we have. Many companies are
working on it.
- As for the gas sector, the European Commission seeks to obtain access to all of the gas contracts.
What is that in your shows?
- It's hard for me to comment on it. We believe that commercial contracts are a matter between
the two companies.
- Are you concerned about the behaviour of the EU?
- European authorities want the contract on deliveries was coordinated by the European Commission.
However, many countries disagree. Much will depend on them.
- Differences between the EU and Gazprom have a long tradition. For a long time Gazprom attitude
to the EU's was aggressive and disrespectful. Now his tone was softer. How do you evaluate the bilateral
relations at the moment?
- We believe that Russia is a reliable supplier and that the relationship is beneficial to both
parties. Thus the entire current infrastructure was created. Now, however, we have to expand
it taking into account the fact that production in Europe will decrease and demand will increase.
But differences remain. Can we call the position of Europe a constructive policy ?
- Political aspects now take precedence over the economic aspect of natural gas and oil supplies.
So, for political reasons the project "South stream" was blocked . For political reasons, there
are attempts to prevent the expansion of Nord stream. It is obvious that the construction of the
first two lines of the "Nord stream" conformed to European legal norms. However, the attitude
to the two new branches is different. In addition, we see that in the new energy strategy of the
EU does n mention relations with Russia. How can this be considering the fact that we are the main
supplier of energy to EU? We hope, however, that pragmatism will prevail. We need to develop relations
based on mutual interests, guarantees and long-term prospects.
- I can assume that you are counting on the support of Germany to expand the "Nord stream".
- We presume that we are talking, primarily, about economic project. Major energy companies of
Europe are interested in him. Because this is a long term project. And we will compete with other
suppliers of natural and liquefied gas, which is the rate now.
"... Chinas output in 2016 will decline between 3 percent and 5 percent from last years record 4.3 million barrels a day, according to analysts from Nomura Holdings Inc. and Sanford C. Bernstein Co. That would be the first decline in seven years and the biggest drop in records going back to 1990. The country is the worlds fifth-largest producer and biggest consumer after the U.S. ..."
"... Fellow state-run energy giant China Petroleum Chemical, also known as Sinopec, said on Jan. 27 that oil and gas output in 2015 fell for the first time in 16 years as a slump in domestic crude production outweighed record volumes of natural gas ..."
"... While some Middle East suppliers can operate with oil at $25 a barrel, the break-even cost for Chinas Cnooc is closer to $41, according to Nomura Holdings Inc. analyst Gordon Kwan, who predicts the countrys domestic crude production will fall by 5 percent this year. ..."
"... The plateau, 2008 – 2014, was made possible by infill drilling. I suspect that the decline curve will be steeper than indicated in the above chart. ..."
• Domestic production forecast to fall first time since 2009
• Crude output may decline by as much as 5 percent: Nomura
China's output in 2016 will decline between 3 percent and 5 percent from last year's record
4.3 million barrels a day, according to analysts from Nomura Holdings Inc. and Sanford C. Bernstein
& Co. That would be the first decline in seven years and the biggest drop in records going back
to 1990. The country is the world's fifth-largest producer and biggest consumer after the U.S.
"We expect significant cuts in upstream production as the companies cut output at loss-making
fields," said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co. "Chinese
explorers need to take more radical action to cut operating costs and increase efficiency."
CNPC plans to maintain crude output near 2015 levels, Deputy General Manager Wang Dongjin was
quoted in a statement posted last month on the company's website. The country's biggest producer
has only a "limited amount" of money to invest this year and will spend on oil and gas projects
that improve efficiency or promote sales, Wang said.
Fellow state-run energy giant China Petroleum & Chemical, also known as Sinopec, said on
Jan. 27 that oil and gas output in 2015 fell for the first time in 16 years as a slump in domestic
crude production outweighed record volumes of natural gas.
Cnooc. Ltd., the country's biggest offshore crude explorer, said last month that output will
fall this year, the first time in more than a decade, as it accelerates spending cuts.
While some Middle East suppliers can operate with oil at $25 a barrel, the break-even cost
for China's Cnooc is closer to $41, according to Nomura Holdings Inc. analyst Gordon Kwan, who
predicts the country's domestic crude production will fall by 5 percent this year.
China announced last month fuel prices won't be cut in line with crude as long as it trades
below $40 a barrel. The National Development and Reform Commission said the floor is designed
in part to shield domestic oil producers from the global price collapse.
"The policy is designed to provide explorers room to breathe," said Laban Yu, head of Asia
oil and gas equities at Jefferies Group LLC in Hong Kong. "China cannot afford to shut down domestic
production no matter how cheap crude gets."
The articles I referred to above show a decline in actual Chinese production of 2.5 percent in
one month. China produces around 4 million bopd, so it is a top producer. Any producing area can
show a lot of variability from one month to another and production could rebound or have a small
decline next month, however 2.5 percent decline in a month is big.
As a comparison, If the EIA came out with actual USA production falling 2.5 percent in January
that would be a decline of around 230,000 barrels per day from December 2015. That's big!
On the other hand, Ron's historical production charts for China do show a lot of variation
from one month to next. I don't know anything about xinhuanet which ran this report, or the National
Development and Reform Commission which is supposedly reporting this information.
Click on 5 Yrs. Looks like relentless increase in Chinese oil production since mid 2014 when
price decline started and when oil was > $100. Apparently EIA data.
No reason this can't be so given they have their own central bank.
Nope, its an actual reported one month reduction of 2.5%. The data is in tons and I'm not sure
how it would convert but it would probably be a little over 100,000 bopd.
My point was that rate of decline in the US would be about 230,000 bopd in a month, so it is
a large percentage decline.
It is hard to say how free oil companies are in China to go their own way, as they see fit, when
it comes to production policy. The government exercises an enormous amount of power over Chinese
industry.
Now if I were a Chinese commie, in a high position, knowing my country has a huge stash of
dollars possibly subject to depreciation due to inflation, I would opt to buy oil, and hold on
to domestic oil in the ground inside the country.
It seems like a damned safe bet it will be worth a lot more in a few years than it is now,
and the interest China earns on dollars is trivial.
I was referring to Nomura's prediction of a 5% yearly fall in China's 2016 oil production. If
it comes to happen this should set back production to 2012-13 levels.
China's mature onshore oil fields are declining.
This includes Daqing, China's largest field, currently accounting for a fifth of the country's
output.
excerpts from an article:
"In late 2014, CNPC essentially threw in the towel on its workhorse field, Daqing, announcing
that it would allow the field to essentially enter a phase of managed decline over the next five
years. Under this new approach, the field's oil production will fall from 800,000 barrels per
day (kbd) in 2014 to 640 kbd by 2020: a 20 percent decrease.
Daqing's oil production has declined relentlessly, despite PetroChina's significant increase
in drilling activity in the field during recent years. This suggests a significant risk that production
could fall faster than planned. For reference, PetroChina drilled 1,975 development wells in 2002
when oil production averaged 1.079 million barrels per day, but was forced to boost this to 4,498
development wells in 2014, when oil output at Daqing averaged 792,000 barrels per day. In short,
the number of development wells drilled increased by nearly 250 percent while oil production fell
by roughly 27 percent."
China's second largest field is Shengli, operated by Sinopec (China Petroleum & Chemical Corp.).
Although Shengli is a mature field (discovered in 1961, developed since 1964), production there
remained relatively stable within a range between 510 and 540 kb/d for many years, thanks to intensive
drilling program.
While Shengli's output was plateauing, Sinopec's other fields in China have delivered impressive
growth, having doubled oil production from around 150 kb/d in 1999 to 310 kb/d in 2014 (see the
chart below).
The growth trend was reversed in 2015, when Sinopec's output in China declined by 4.7% – the
first decline since the company's IPO in 2000. Further decline is expected in 2016.
The quote below is from Bloomberg:
"Sinopec has been maintaining output in its aging oil fields by over-investing and this is
no longer possible in the current oil price environment," said Neil Beveridge, a Hong Kong-based
analyst at Sanford C. Bernstein, who estimates the company needs oil to stay above $50 a barrel
to break even. "We expect Sinopec's domestic oil production to drop 5 percent to 10 percent this
year as it shuts down aging high-cost oil fields."
"Sinopec Shengli Oilfield Co. [Sinopec's subsidiary – AlexS] will shut the Xiaoying, Yihezhuang,
Taoerhe and Qiaozhuang fields to save as much as 130 million yuan ($19.9 million) in operating
costs, the company said in a statement.
The four oilfields are among the least profitable among 70 run by Sinopec Shengli, according to
the statement.
Fu Chengyu, the former chairman of Sinopec, said last year that output at the unit was being cut
"proactively" because of low oil prices."
"... My level of knowledge in the oil world is too low, but from what I have seen in this blog we might be seeing a loss of 1 to 1.5 mbpd in 2016, depending on how much Iran is able to increase production. ..."
"... I guess then between 1 and 2 mbpd defines the possible loss of oil production in 2016. Is this a reasonable estimate? ..."
"... If Oil prices remain low 2015 will be the peak. I doubt oil prices will remain low after 2018. ..."
"... Not just discovery shortages, but the oil industry will have a severally compromised development capacity. It could barely overcome decline rates for conventional oil over the past 10 years, the LTO got developed at a loss, and about 30 to 40% of the industry is currently being laid off or shut down. ..."
"... I would love to see your rational for this. Who will return to 2015 output levels or higher? Obviously not everyone because so many nations have already peaked and are in decline. So for production to return to 2015 levels, and higher since you are not predicting peak oil until a decade or so from now, who will increase their production to well above 2015 levels? We know this will have to happen, for your scenario to be correct, because post peak nations will continue to decline regardless of price. ..."
Yes, OFM, I also shared Ron's opinion by late 2014 that 2015 was going to
be the year of Peak Oil.
But this is now a fact. Summer of 2015 (July for C+C, August for all
liquids) is a peak oil for everybody for as long as production doesn't start
increasing again. Since nobody is predicting an increase in production for
2016, the most fundamental issue in the oil world right now is how fast
is production going to fall and for how long.
My level of knowledge in the oil world is too low, but from what
I have seen in this blog we might be seeing a loss of 1 to 1.5 mbpd in 2016,
depending on how much Iran is able to increase production.
On the other hand people usually talk about a level of annual depletion
of around 6%. That's about 4.5 mbpd for the entire world, so if only half
of the world depletes at those rates we are talking upwards of a fall of
2 mbpd.
I guess then between 1 and 2 mbpd defines the possible loss of oil
production in 2016. Is this a reasonable estimate?
Not just discovery shortages, but the oil industry will have a severally
compromised development capacity. It could barely overcome decline rates
for conventional oil over the past 10 years, the LTO got developed at a
loss, and about 30 to 40% of the industry is currently being laid off or
shut down. There is no way it will be able to ramp up to about 150% of the
capacity it had say in 2013 to overcome accelerating decline rates and add
production on what will be ever more complex new fields (i.e. small, heavy,
deep water etc.)
When the oil price rises we will return to 2015 output levels or higher
by 2022 to 2025.
I would love to see your rational for this. Who will return to 2015 output
levels or higher? Obviously not everyone because so many nations have already
peaked and are in decline. So for production to return to 2015 levels, and
higher since you are not predicting peak oil until a decade or so from now,
who will increase their production to well above 2015 levels? We know this
will have to happen, for your scenario to be correct, because post peak
nations will continue to decline regardless of price.
So who will it be Dennis? Where will all this new production come from?
In any case, oil prices this low aren't likely to last long. The market for crude is driven increasingly
by high-frequency, computer-based momentum trading. In July, the CME Group-formerly the Chicago Mercantile
Exchange-ended the 167-year history of actual humans trading commodity futures in open pits in Chicago
and New York. Computer trading has proved more efficient, but not always better. "There was a governing
quality of human input that's been lost in the market, that sort of prevented this kind of lunacy,"
says Dan Dicker, a former oil trader on the Nymex and president of MercBloc, a wealth-management
firm. "People could only move but so fast."
"... Although these reports are very interesting, they ignore in my opinion financial conditions – mainly the bond market – and oil prices as major drivers for oil production. Jean Laherrere is fully aware of this fact, yet does not provide oil production scenarios at different oil price and bond market conditions. ..."
"... So, if oil prices would fall below 20 USD per barrel for a long period I am pretty sure, oil production for Bakken and Eagle Ford would tend to zero within a short time and all above production scenarios would be irrelevant. ..."
"... Possibly the availability of cheap money through most of 2015 overrode any price signals and they just kept on drilling no matter how much losses they incurred. You talking about a maturity wall now – how would that have impacted production in the past, especially when in the beginning of the price fall producers were expecting prices to recover at any time and later were concentrating solely in staying alive for the next month and couldnt afford to look much further ahead. ..."
"... Bottom line, there is about 25-30 Gb of combined URR in the Bakken/Three Forks(10 Gb), Eagle Ford(8 Gb), and Permian (9 GB, LTO only), but $80 to $150/b oil prices will be needed for it to be profitable to produce. If oil prices never rise above $80/b the URR will be about half this estimate. ..."
Although these reports are very interesting, they ignore in my opinion financial conditions
– mainly the bond market – and oil prices as major drivers for oil production. Jean Laherrere
is fully aware of this fact, yet does not provide oil production scenarios at different oil price
and bond market conditions.
So, if oil prices would fall below 20 USD per barrel for a long period I am pretty sure, oil
production for Bakken and Eagle Ford would tend to zero within a short time and all above production
scenarios would be irrelevant.
If oil prices would recover, production will start again.
Yet it is in my view not possible to sustain horrendous losses for a long time. Somebody has
to pay the bill. It is already clear now that high US oil production supports the US dollar, yet
brings the bond market to its knees. The bond – and equity holders are paying currently the bill,
yet for how long?
Might be so. If the production continues to follow the Hughes predictions though, I'd say that
will cast a lot of doubts over how much impact short term price swings have had.
Possibly the
availability of cheap money through most of 2015 overrode any price signals and they just kept
on drilling no matter how much losses they incurred. You talking about a maturity wall now – how
would that have impacted production in the past, especially when in the beginning of the price
fall producers were expecting prices to recover at any time and later were concentrating solely
in staying alive for the next month and couldn't afford to look much further ahead.
With data currently available the main message I've got from this is that there is probably
a lot less oil in the Bakken and Eagle Ford than EIA are saying – at any price.
Laherrere's estimate is too low. Hughes has a good estimate for the Eagle Ford, but I think
he may have assumed the USGS Assessment for the Bakken in April 2013 was for the TRR, but it was
the undiscovered TRR, when proved reserves and cumulative production (in Dec 2012) are
added, the TRR increases to 10 Gb and if probable reserves are also added the TRR becomes 11.4
Gb.
If we only consider proved reserves plus cumulative production we come close to Hughes estimate
for the URR of the Bakken/Three Forks, for the North Dakota Bakken/Three Forks this is about 6.7Gb
at the end of 2014.
Bottom line, there is about 25-30 Gb of combined URR in the Bakken/Three Forks(10 Gb), Eagle
Ford(8 Gb), and Permian (9 GB, LTO only), but $80 to $150/b oil prices will be needed for it to
be profitable to produce. If oil prices never rise above $80/b the URR will be about half this
estimate.
Yes, has anyone noticed swimming pools filled with oil in their neighborhood?
I haven't.
Why would anyone let oil go on a tanker and leave port unless they were paid for it?
Answer: They wouldn't. They get paid for it because they had an order for it and filled
the order. Why would they cut output and refuse to fill customer orders?
So who placed an order for oil they weren't going to sell to someone else who would
then burn it? Answer: No one did. They had customers and the customers placed orders
for it because they needed to burn it, and then took possession of it and burned it.
Why contort thinking on this? It's simple and clear.
"Why would anyone let oil go on a tanker and leave port unless they were paid for
it? "
This is a common practice. The tankers leave ports and can several times change
directions as the owner/seller of oil is trying to find the best buyer.
Interesting. How about offloading? That ever happen without paying the producer?
Because if the theory proposed here is all the storage is in tankers, you're going
to have to find about a billion barrels sitting unpaid for - all whilst KSA says
they produce what they have orders for.
About 20 to 25 of the world's 650 supertankers, which can hold two million
barrels and are called very large crude carriers, are in use as floating
storage,
That's 2 X 25 = 50 million barrels. The alleged oversupply of 3 mbpd for
20 mos (since June 2014) is 20 X 30 X 3 = 1.8 billion barrels.
There was never 3 mb/d oversupply, not to say for 20 months.
The oversupply peaked at 2.2-2.4mb/d in 2Q15, according to various estimates
(see the chart below).
From IEA OMR, January 2016:
"A notional 1 billion barrels of oil was added to global inventories
over 2014 – 2015 and our latest supply and demand balances suggest builds
will persist with up to 285 mb expected to be added to stocks over the
course of 2016. Despite estimations of current space storage capacity
and the outlook for significant capacity expansions over 2016, this stock
build will likely put midstream infrastructure under pressure and could
see floating storage become profitable. "
The volume in floating storage is a small part of total global inventories.
It can belong to producers (particularly, the NOCs) or to large traders.
Oil stored in tankers may belong to:
1) oil producers, particularly the NOCs (national oil companies). For
example, Iran's ~40 million barrels of crude and condensate stored
in tankers belongs to the Iranian national oil company.
2) oil traders, who have bought that oil and are storing it in tankers
in a hope that they could sell it later at a higher price.
Can you please explain how in oversupplied Europe Iran suddenly
found customers for more then 0.3 Mb/d (Italy, Greece and France;
Spain is next).
You should see inventories rising by the same amount because
according to the "oil glut" theory this oil can't be consumed, don't
you ? And 0.3Mb/d is 9 Mb/month. Most large oil contracts are long
term and you can't break them without penalties.
Also in the USA no producer with reasonably good quality oil
("sweet" with reasonable API gravity) has any difficulties selling
any volume he can produce. Moreover buyers ask for additional volumes.
Note the word "selling", not putting in storage at his own expense.
Theoretically within "oil glut" framework there is no place for
this oil to go other then in storage. And storage costs now are
very high in Continental US so there should be reasonable attempts
to minimize losses due to large amount of stored oil, which should
limit "new" oil buying.
So it looks like "glut theory" (which is essentially an extension
of neoclassical supply/demand model) has some serious holes in it.
"... Opec's strategy began to shift last week, when the oil ministers of Saudi Arabia and Russia agreed to freeze their output at the January level, provided other oil-rich countries joined. Mr El-Badri said the new policy will be evaluated in three to four months before deciding whether to take other steps. ..."
"... "This is the first step to see what we can achieve," he said. "If this is successful, we will take other steps in the future." He refused to explain what steps Opec could take." ..."
"The balance sheets of shale producers are in disrepair," said Mr Hess"
and
"Opec launched a price war against US shale and other high-cost producers, including Canadian
oil sands and Brazilian deep-water oilfields, in November 2014 by not reducing output despite
a global oversupply. Since then, oil prices have plunged by more than half, hitting a 12-year
low of about $26 on February 11.
In a rare admission that the policy hasn't worked out as planned, Mr El-Badri said that Opec
didn't expect oil prices to drop this much when it decided to keep pumping near flat-out.
Opec's strategy began to shift last week, when the oil ministers of Saudi Arabia and Russia
agreed to freeze their output at the January level, provided other oil-rich countries joined.
Mr El-Badri said the new policy will be evaluated in three to four months before deciding whether
to take other steps.
"This is the first step to see what we can achieve," he said. "If this is successful, we will
take other steps in the future." He refused to explain what steps Opec could take."
"... If oil prices remain under $40/b for the remainder of 2016, we might see more significant decline in LTO output than 600 kb/d, my more optimistic forecasts for LTO were based on an assumption of an oil price recovery in 2016, which is looking less likely due to continued oversupply of oil. ..."
"... At some point a "Minsky moment" may occur in the LTO sector and as all the investors head for the exit at once, we might see a sharp drop in LTO output as companies go bankrupt and financial chaos ensues. ..."
"... The scenario of a 'Minsky' moment in the shale industry is exactly what I think is necessary to bring oil prices up again. Some call it capitulation. ..."
"... As the shale industry is still fighting to keep production up, the situation gets more tense and more painful by the day. ..."
I don't have access to the report is there a reference oil price scenario?
If oil prices remain under $40/b for the remainder of 2016, we might see more significant decline
in LTO output than 600 kb/d, my more optimistic forecasts for LTO were based on an assumption
of an oil price recovery in 2016, which is looking less likely due to continued oversupply of
oil.
At some point a "Minsky moment" may occur in the LTO sector and as all the investors head for
the exit at once, we might see a sharp drop in LTO output as companies go bankrupt and financial
chaos ensues. I don't think this is high probability, but don't think it highly unlikely either,
maybe a 1/3 chance that a major crisis in the LTO sector is in the cards.
The scenario of a 'Minsky' moment in the shale industry is exactly what I think is necessary
to bring oil prices up again. Some call it capitulation.
There are still many people invested hoping for a turnaround without capitulation. Yet this
will take a lot of time and will be painful. A sudden capitulation is much more likely and will
be at the end less painful.
As the shale industry is still fighting to keep production up, the situation gets more tense
and more painful by the day.
This interesting hypothesis about the elite split is not supported by the facts. It is unclear that
is this is true, why faction of elite which represent Big Oil can't get their own Presidential candidate.
Hillary is definitely a neocon. Same its true for Jeb! (he was a member of neocon think tank "Project
for New American century" and used Wolfowitz as a political advisor), Cruz and Rubio (both are probably
to the right of Jeb!).
Notable quotes:
"... This is power struggle between two opposite approaches between two camps. Elite is split along
the lines who has more to lose between two approaches: continuous world conflict or cohabitation and
gradual shifting of power to other parts of the world. Everything points that Bankers Big Oil are in
two opposite camps. Rest of us, including small medium oil, are just collateral damage in all of this.
..."
"... Do really believe that Bankers via their shale pet project just pumped 4.5 mbpd within just
6-7 years for reason of profit? There is no profit. Don't you see the blame game and the deflection
from the bankers that Saudis are "flooding" the oil market? ..."
"... Saudis are "flooding" oil as much Norwegians are "flooding" and that is – same as before. Do
you see that only shale are the "chosen one" and have a luxury of keeping the credit lines open while
Big Oil is forced cutting dividends for the first time in 100 years? Too many things are pointing to
this struggle that would make this just coincidence. ..."
I know where you are coming from but all I am trying to see through the fog of lies and
disinformation. This whole oil price crash is not about renewables , or how big our carbon foot
print is and if people should feel "not good enough" because of that.
This is power struggle between two opposite approaches between two camps. Elite is split
along the lines who has more to lose between two approaches: continuous world conflict or cohabitation
and gradual shifting of power to other parts of the world. Everything points that Bankers & Big
Oil are in two opposite camps. Rest of us, including small & medium oil, are just collateral damage
in all of this.
Do you really believe that these critical articles about Exxon are just suddenly appearing
after 100 years of pumping oil? Do really believe that Bankers via their shale pet project
just pumped 4.5 mbpd within just 6-7 years for reason of profit? There is no profit. Don't you
see the blame game and the deflection from the bankers that Saudis are "flooding" the oil market?
Saudis are "flooding" oil as much Norwegians are "flooding" and that is – same as before.
Do you see that only shale are the "chosen one" and have a luxury of keeping the credit lines
open while Big Oil is forced cutting dividends for the first time in 100 years? Too many things
are pointing to this struggle that would make this just coincidence.
This is power struggle between two opposite approaches between two camps. Elite is split along
the lines who has more to lose between two approaches: continuous world conflict or cohabitation
and gradual shifting of power to other parts of the world.
Very interesting hypothesis.
Thank you --
Now one question.
Was not Jeb! a representative of Bush clan and by extension Big Oil in the current
Presidential race ? If so, then please note that he is a typical neocon (former member of the Project for New American
Century; with Wolfowitz as a political advisor). Also it was an oil man Bush II who got us into Iraq.
Those facts make your hypothesis about Big Oil being against imperial adventures somewhat weaker.
If 20-30 million bopd of non-US, non-OPEC, non Russian
production fell by as much as 10% from 12/14 to 12/15 and world demand increased 1.2 million
bopd we have 3.2-4.2 million bopd gap between supply and demand.
Notable quotes:
"... The states with higher 11/15 than 12/14 are OH, OK, NM and CO. From my review, these are the ones with the highest overall [low] API liquids of the shale plays, so API gravity has likely continued the upward climb for the entire US liquids production profile. ..."
"... I expect 12/15 for the non shale states to be lower than 11/15, thus steeping YOY decline. ..."
"... If non shale, non OPEC and non Russia world wide oil production follows the US non shale state pattern, OPEC and Russia would really need to ramp up, absent a decrease in YOY demand from 2015. Instead, they seem ready to at least cap, if not cut for the remainder of 2016. ..."
"... demand is expected to increase 1.2 million bopd from 2015. ..."
US less the shale states of PA, ND, OH, OK, NM, TX, CO, as well as less Alaska and GOM:
12/14: 1,597 bopd.
11/15: 1,425 bopd.
Data Per EIA.
Some thoughts:
The states with higher 11/15 than 12/14 are OH, OK, NM and CO. From my review, these are the
ones with the highest overall [low] API liquids of the shale plays, so API gravity has likely continued
the upward climb for the entire US liquids production profile.
Next, some of the non shale states actually went higher into the spring, so the decline is
steeper than what is shown.
I expect 12/15 for the non shale states to be lower than 11/15, thus steeping YOY decline.
I expect January through at least April, 2016 to continue to decline regardless of price as
Feb oil sales are not paid until late March and any sudden price swing would not be reflected
until at least May. In reality, given the carnage, it is unlikely any of these states would rebound
until 2017 given most will wait several months to see if price recovery is for real.
If $20s-$30s persists all year, there will be a steeper decline from 15 to 16 than from 14
to 15.
If non shale, non OPEC and non Russia world wide oil production follows the US non shale state
pattern, OPEC and Russia would really need to ramp up, absent a decrease in YOY demand from 2015.
Instead, they seem ready to at least cap, if not cut for the remainder of 2016. Further,
demand
is expected to increase 1.2 million bopd from 2015.
I suppose it is not realistic to think that 20-30 million bopd of non-US, non-OPEC, non Russian
production fell by as much as 10% from 12/14 to 12/15?
"... When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill done. ..."
"... The implication of Keynes comment, and therefore of the title that Strange appropriated, is that speculation and efficient investment - capital development - are inversely related. ..."
"... Economists, especially those who are comfortable wearing the blinders of neoclassical theory, tend to believe that the evolution of markets and institutions results mainly from the utility and profit seeking behavior of units . ..."
"... economic evolution leads to shifts in the balance of power between markets and [ oil producing - likbez] states. [ read OPEC - likbez] ..."
"... This insight helps explain how the Bretton Woods system broke down [and petrodollars emerged]. The chaos that Strange now finds in the international monetary regime is imputed to key decisions and nondecisions, mainly by the United States ..."
"... The term [ Minsky Moment ] was coined by Paul McCulley of PIMCO in 1998, to describe the 1998 Russian financial crisis, and was named after economist Dr. Hyman Minsky, who noted that bankers, traders, and other financiers periodically played the role of arsonists, setting the entire economy ablaze. Minsky opposed the deregulation that characterized the 1980s. ..."
While Marion King Hubbert was a revolutionary in oil industry, forecasting that American oil production
would peak surprisingly soon and decline steadily thereafter, Hyman Minsky was a similar revolutionary
in economics pointing out inherent instability of casino capitalism.
He advanced so called "Minsky
financial instability hypothesis" which postulates that the booms and busts are inevitable under
neoliberalism (aka "free market economy") due to the nature of financial system (
https://en.wikipedia.org/wiki/Hyman_Minsky
):
Minsky proposed theories linking financial market fragility, in the normal life cycle
of an economy, with speculative investment bubbles endogenous to financial markets. Minsky
claimed that in prosperous times, when corporate cash flow rises beyond what is needed to pay
off debt, a speculative euphoria develops, and soon thereafter debts exceed what borrowers
can pay off from their incoming revenues , which in turn produces a financial crisis. As
a result of such speculative borrowing bubbles, banks and lenders tighten credit availability,
even to companies that can afford loans , and the economy subsequently contracts.
This slow movement of the financial system from stability to fragility, followed by crisis,
is something for which Minsky is best known, and the phrase "Minsky moment" refers to this
aspect of Minsky's academic work .
What we experienced in July 2014 can probably be called "Minsky moment" for oil industry (although
it is not the exact meaning of the term).
The flavor of concerns that should have been central to Strange's volume was captured by
Keynes in a passage in The General Theory that is part of the currency of every economist:
Speculators may do no harm on a steady stream of enterprise. But the position is serious
when enterprise becomes a bubble on a whirlpool of speculation. When the capital development
of a country becomes a by-product of the activities of a casino, the job is likely to be
ill done.(p. 159)
The implication of Keynes' comment, and therefore of the title that Strange appropriated,
is that speculation and efficient investment - capital development - are inversely related.
It follows that a volume on Casino Capitalism needs to begin with a serious consideration
of the determinants of investment in capitalist economies with sophisticated and ever evolving
financial structures. Although in the beginning of the book some awareness of the relation
between speculation and efficient investment is evident, Strange does not examine closely how
the capital development of capitalist economies was affected by the financial evolution of
the past decades. What she does do is present in a discursive and somewhat journalistic fashion
the development of the international financial structure in recent years as well as a partial
review of some interpretations of the import of financial arrangements.
In spite of her approach the volume is useful. Economists, especially those who are
comfortable wearing the blinders of neoclassical theory, tend to believe that the evolution
of markets and institutions results mainly from the utility and profit seeking behavior of
units. To this Strange offers the useful antidote that "a monetary system cannot work effectively unless
there is a political authority . . ." , i.e., contracts need to be enforced. Therefore the
outcomes in both the short and the longer runs are the joint result of decisions by market
participants and authorities. Furthermore, economic evolution leads to shifts in the balance
of power between markets and [ oil producing - likbez]
states. [ read OPEC - likbez]
This insight helps explain how the Bretton Woods system broke down [and petrodollars emerged].
The "chaos" that Strange now finds in the international monetary regime is imputed to key decisions
and nondecisions, mainly by the United States, both early on in the postwar period and after
1971. Her main point is that domestic concerns dominated decisions in the United States both
when the United States acted and when it did not. As a result havoc was played with the
order [ including oil price - likbez ] needed for world
economic stability.
"Marvin[Hyman] Minsky was a similar revolutionary in economics pointing
out inherent instability of casino capitalism." ~ likbez
"The term [Minsky
Moment] was coined by Paul McCulley of PIMCO in 1998, to describe
the 1998 Russian financial crisis, and was named after economist Dr. Hyman Minsky,
who noted that bankers, traders, and other financiers periodically played the role of arsonists,
setting the entire economy ablaze. Minsky opposed the deregulation that characterized the
1980s." ~ Wikipedia
"... If additional oil were not supplied to the market, then the global surplus of oil would fall by at least 1.3 million barrels per day, Novak added. ..."
MOSCOW Consultations on a preliminary deal between leading oil producers to freeze output
should be concluded by March 1 after a group led by Russia and Saudi Arabia reached a common
position this week in Doha, Russia's energy minister said.
... ... ...
Novak said talks between Venezuela and Iran were still ongoing, and said consultations would
also be held with non-OPEC countries, including Mexico and Norway.
"I believe that they (Mexico and Norway) would take a constructive stance," he said.
If additional oil were not supplied to the market, then the global surplus of oil would fall
by at least 1.3 million barrels per day, Novak added.
... ... ...
Novak also said it was "discussed with colleagues" that an oil price of $50 per barrel would
suit consumers and exporters in the long term. He did not elaborate.
What's really behind falling
oil prices? Are there more conspiratorial forces at work here?
There are certainly some who believe so…
According to CNBC, Iranian President Hassan Rouhani told a cabinet meeting
back on Dec. 10, 2014, that the
oil price collapse was "politically motivated" and a "conspiracy against the interests of the
region, the Muslim people, and the Muslim world."
... ... ...
Echoing Rouhani's sentiment, Russian President Vladimir Putin said, "We all see the lowering of
the oil price. There's lots of talk about what's causing it. Could it be the agreement between the
U.S. and Saudi Arabia to punish Iran and affect the economies of Russia and Venezuela? It could."
... ... ...
Oil Conspiracy Theory No. 3: I'll Have Iranian Oil with a Side of Economic Prosperity, Please
On April 7, 2015, the Energy Information Administration released the following statement: "Oil
prices could tumble $15 a barrel next year if sanctions are lifted following a final nuclear deal
with Iran."
While Iran and other world powers reached a preliminary deal on April 2, 2015, further negotiations
are needed to complete an agreement by a June 30 deadline.
Bloomberg Financial reports that "Iran's full return to the oil market
risks delaying a recovery in prices, which have slumped by almost half since last year amid a supply
glut. Iran could boost output by at least 700,000 barrels a day by the end of 2016."
That's right, Iran itself is a potential whale of an oil exporter – it sits on at least 10% of
the world's reserves. But because of sanctions, the country lacked the foreign investment it needs
to actually get the darn oil out of the ground.
Until now.
The oil price conspiracy theory here is that the Iran nuclear deal was made simply to boost the
U.S. economy, while further damaging Russia's. After all, there are several reasons why a drop in
oil prices is great for the American economy: it encourages consumer spending, it improves the job
market and it provides businesses with more profits.
Oil Conspiracy Theory No. 4: Sneaky, Sneaky POTUS
One conspiracy theory suggests that U.S. President Barack Obama colluded with the Saudis to flood
the global market with oil to bring down the U.S. shale oil industry. Why would he want to do that?
Because the shale oil glut threatens the development of renewable energy and slows progress in
cutting U.S. greenhouse gas emissions. According to this theory, POTUS is using the oil glut to destroy
anti-environmental projects across the board within the U.S.
In an article published by Slate, "Senate Democrats narrowly defeated
the Keystone XL pipeline
[bill on Tues., Nov. 18, 2014] in part because President Obama was expected to veto it even if it
did pass. He likely feels more comfortable about that stance than he would if oil were priced at
more than $100 a barrel right now."
Furthermore, Saudi Arabia hates the American shale oil industry as well. Though King Riyadh is
an ally, relations with the country are fraught over this particular subject. So what better way
to kill two birds with one stone? Let's just keep our Saudi allies happy while covertly
destroying the purportedly environmentally unfriendly fracking industry from within. More oil, please!
"... A friend of mine who is a financial person predicted $20s oil in 2013. I told him he was nuts, explained to him costs. He said he could care less about costs, said price has to revert to historical norms. ..."
"... He now says oil will average below $35 for at least the next five years. I tell him that will bankrupt almost all US producers and many nations. He says doesnt matter, that stuff is not relevant, not even a part of the equation. ..."
"... I would say he is full of it except he predicted $20s. He says oil producers in no way determine oil prices, that prices are all determined by traders. He says traders do not care about anything concerning the upstream industry. ..."
"... I do not agree with him, but this is the way financial folks think. And they are the ones trading the oil futures. ..."
John S. I agree but many of the financial people do not.
A friend of mine who is a financial person predicted $20s oil in 2013. I told him he was
nuts, explained to him costs. He said he could care less about costs, said price has to revert
to historical norms.
He now says oil will average below $35 for at least the next five years. I tell him that
will bankrupt almost all US producers and many nations. He says doesn't matter, that stuff is
not relevant, not even a part of the equation.
I would say he is full of it except he predicted $20s. He says oil producers in no way
determine oil prices, that prices are all determined by traders. He says traders do not care about
anything concerning the upstream industry.
I do not agree with him, but this is the way financial folks think. And they are the ones
trading the oil futures.
Ron, you were in the financial industry. I assume you agree my friend is full of crap?
"How is it possible that monster wells in PA and OH can keep prices at a level where virtually
all gas in the US is being produced at a loss on an operating basis?" ~ Shallow Sand
-You continue to think and analyze the situation the old fashion way: supply-demand fundamentals.
That is why you are (continue to be…) puzzled!
-This time is different (as I explained "thusly" numerous times before).
The way things stand at the moment, price upstream means very little to price down stream…
"... And this, just in: ExxonMobils reserve-replacement ratio for 2015: 67%. First time in 22 years it hasnt been at least 100%. ..."
"... Usually when Exxon, cant be bother drill exploration wells, they go drilling on the corner of Wall and Broad St NY. Obviously the prognosis is not looking so good there as well! ..."
Usually when Exxon, can't be bother drill exploration wells, they go drilling on the corner
of Wall and Broad St NY. Obviously the prognosis is not looking so good there as well!
"... I see this debt cliff as a yet another blowback of neoliberalism, which automatically generates bubble after bubble. Not that different in nature from dot-com bubble of subprime bubble. You see, all an effective CEO does is juicing shareholder value , often measured quarterly. So, with low or no profits, many chose to borrow money to increase shareholder value by carpet bombing fields with wells thereby increasing share price. Or they chose to juice dividends. Those easy money is what created and sustained shale boom. After all they used to have huge hopes for the future. ..."
"... Now Wall Street is keeping them by the balls as the level of debt does not allow to cut production which would rebalance the market. So this downtrend proved to be sticky. They need all the money they can make to service the debt or they are gone with the wind. In other words they are hostages of their own debt and financial companies which provide it and cant cut production without severe adverse effects. That actually include not only shale players but such conventional players as Rosneft. ..."
It is a foolish argument to think that financial manipulations or trading vehicles can change
the value of the underlying (a barrel of oil or a british pound) for more than a short timeframe,
if the the market for the underlying is a wide open high volume one.
So, to think that Soros caused the British Pound to fall is faulty thinking. He and his partners
just saw the writing on the wall earlier and more clearly than others, and had the balls to take
a big risk that they had the timeframe right. Regardless of his trades, that pound was way overvalued
relative to other currencies and the market would have worked it down just same (likely more slowly).
Today, the most over-valued big currency is the Chinese renimbi. I just don't have the sophistication
to put a big bet on it, or I would.
"It is a foolish argument to think that financial manipulations or trading vehicles can change
the value of the underlying (a barrel of oil or a british pound) for more than a short timeframe,
if the market for the underlying is a wide open high volume one."
I like your faith in the innocuous nature of neoliberal marketplace. As reflected in your statement
above. Yes we can. Keep the faith brother --
Another consideration is that there is no market as we used to understand it. Instead there
is a financial casino in which due to commodities modernization act the trend down can be fed
with dollars and acquire its own momentum like snow avalanche and crush everybody and everything
on its way. Amount of dollars that can participate is the amplifying the downtrend ("paper oil")
is much larger then the amount of ""real oil" so it a way it does not matter. Add HFT to the picture
(which really can drive the prices down as was confirmed by GS during Aleynikov trial) and you
have more or less complete image of the modern "marketplace" were most trades are executed by
robots not by people.
Still if "a short timeframe" is 18-36 month you are probably right. But it can be longer, especially
if you add some help from Saudis (predatory pricing). I doubt that this situation can last till
the end of 2017.
I see this debt cliff as a yet another blowback of neoliberalism, which automatically generates
bubble after bubble. Not that different in nature from dot-com bubble of subprime bubble. You
see, all an effective CEO does is juicing "shareholder value", often measured quarterly. So, with
low or no profits, many chose to borrow money to increase shareholder value by "carpet bombing"
fields with wells thereby increasing share price. Or they chose to juice dividends. Those easy
money is what created and sustained shale boom. After all they used to have huge hopes for the
future.
Now Wall Street is keeping them by the balls as the level of debt does not allow to cut
production which would rebalance the market. So this downtrend proved to be sticky. They need
all the money they can make to service the debt or they are gone with the wind. In other words
they are hostages of their own debt and financial companies which provide it and can't cut production
without severe adverse effects. That actually include not only shale players but such conventional
players as Rosneft.
In other words they are no longer independent players capable of making their own decisions.
Negative cash flow can do wonders with the management worrying about managing their own debt.
Which explains
"masters of the universe" mentality better then my post:
John S. I agree but many of the financial people do not.
A friend of mine who is a financial person predicted $20s oil in 2013. I told him he was
nuts, explained to him costs. He said he could care less about costs, said price has to revert
to historical norms.
He now says oil will average below $35 for at least the next five years. I tell him that
will bankrupt almost
all US producers and many nations. He says doesn't matter, that stuff is not relevant, not
even a part of the equation.
I would say he is full of it except he predicted $20s. He says oil producers in no way determine
oil prices, that prices are all determined by traders. He says traders do not care about anything
concerning the upstream industry.
I do not agree with him, but this is the way financial folks think. And they are the ones
trading the oil futures.
Ron, you were in the financial industry. I assume you agree my friend is full of crap?
The Center on Global Energy Policy hosted a presentation and discussion with
Steven Kopits, Managing Director, Douglas-Westwood, on the different approaches
to global oil market forecasting. Mr. Kopits' remarks focused on both supply and demand-based methodologies,
including how these models result in different assumptions and implications for oil supply (OPEC
and non-OPEC), total oil demand and oil price. He also reviewed other key drivers such as changes
in the transport sector and overall economic growth and discussed how these variables can further
impact oil demand and supply.
"... To wit, the industry propaganda machine convinced Wall St et al that it could produce virtually unlimited quantities of oil and profits at ever lower numbers: $80/bbl, then $60/bbl, then $40/bbl. ..."
"... Until this emperor is shown to have no clothes (and that will likely take a few years and a significant extended oil shortage), the oil price will rise very slowly. This is on top of the Saudi myth that they will also flood the market if there is too much fracked oil on the market. ..."
"... Stories drive the market, just like our lives, methinks. ..."
As a writer, it is very interesting to me how the myth-making of the fracking industry as it ramped
up is now coming to bite itself on the ass. To wit, the industry propaganda machine convinced
Wall St et al that it could produce virtually unlimited quantities of oil and profits at ever
lower numbers: $80/bbl, then $60/bbl, then $40/bbl.
Whether it is all true or not I am not one to say, although it does seem unlikely. But the
myth is out there, and has effectively put a ceiling on the price, because all the traders are
telling themselves that if oil goes up too high, all the frackers will ramp everything back up
again and then there will be another glut.
Until this emperor is shown to have no clothes (and that will likely take a few years and
a significant extended oil shortage), the oil price will rise very slowly. This is on top of the
Saudi myth that they will also flood the market if there is too much fracked oil on the market.
Stories drive the market, just like our lives, methinks.
Thanks a lot for your post. We need more critical thinkers like you. Mythology is an important
tool in human societies and a very powerful force. I agree with your point:
Until this emperor is shown to have no clothes (and that will likely take a few years
and a significant extended oil shortage), the oil price will rise very slowly
It resonates with my thinking.
The whole neoclassical supply-demand model for oil is highly questionable. I think oil should
be thought for civilization much like water is for plants. So increased supply of oil (up to a
limit) is beneficial to the economy growth and, if you wish, GDP growth (and please note that
GDP is a very questionable measure of economy growth).
IMHO excessive supply within several percent of total volume (let's say 3-5%) is seamlessly
absorbed, so for this range of excessive supply the whole idea of "oil glut" is open to review.
The illusion of glut can be created by exogenous factors like "Great Condensate Con" hypothesis
suggests or by action of particular countries (Watcher idea of predatory pricing used by Saudi
Arabia to decimate oil price for purely political motives) .
For example, none of oil producers in the USA other then those with high sulfur oil have any
difficulties selling all what they can produce and actually can sell more.
Iran magically found the possibility to supple Western Europe with at least 0.3 Mb/d of additional
oil despite all those fairy tales of "oil glut".
To me all those talks is just the game of market speculators to increase their profits via
creating an artificial trend from which they can extract their rent. And they control media (contrary
to Ron's thinking they do). As low oil price are beneficial to the US economy and geopolitical
interests, EIA (which is at least 50% a propaganda agency and only 50% statistical agency) is
on board. So they have a field day now. IEA is more or less a US lapdog too.
So the question now is not a balance (calculated on data with high error margin that agencies
provide) but a severe, undeniable shortage which can ruin the myth. The myth which obtained its
staying power due to constant repetition (brainwashing effect). It confines itself to a few points
and repeat them over and over." As Joseph Goebbels aptly noted
"It would not be impossible to prove with sufficient repetition and a psychological understanding
of the people concerned that a square is in fact a circle. They are mere words, and words can
be molded until they clothe ideas and disguise."
― Joseph Goebbels
"Stories drive the market, just like our lives, methinks."
I will go along with this generalization to a certain extent, because the human species really
does live by the narrative. Group think rules, to a substantial extent, in the lives of men.
But in the end, people buy as much oil, and as many services dependent on oil, as they want
and can afford.
I find it just about impossible to believe that the people running the nationalized oil companies
in the Middle East, or the oil companies in Russia, or Mexico, or China or Venezuela, believe
that traders can control the price of oil. Traders can BET on what they think the price of oil
will be, and they can thus exert great influence on oil companies that are independently owned
and operated, in terms of how much they will invest in future production.
But just because the futures market says REAL physical barrels will be available at a X per
barrel on a certain date is no assurance at all that such barrels WILL be available. Who ever
has the REAL barrels might be able to sell them for considerably more, or might have to sell them
for considerably less. The folks holding contracts for paper barrels will either win or lose.
Producers who have hedged will know how much they will get for their oil,guaranteed, after settling
up their wins or losses on their hedges. That will be the price at which they hedged, minus the
actual cost of hedging.
So far, other than arguing that the actions of Wall Street have a big or controlling influence
on the ENTIRE world economy, I have not seen any rational argument made concerning just how traders
can control the DEMAND FOR OIL. If the demand is there, it will be produced, if it can be produced
at a profit.
The low price expectation could vanish like fog in bright morning sun, just like the high
price expectation vanished.
Nor have I seen any rational argument to the effect that they can control the investment decisions
of Saudi Aramco, etc.
We simply don't know how fast production might drop off as depletion bites, and as BUSINESS
oriented oil companies shut in marginal production, and scale back upstream spending in the face
of low prices. We don't have any RELIABLE way to predict whether the world economy will have a
heart attack, or soldier on, for the next two or three years, maybe even perking up a little,
or soldier on , just gradually contracting a little.
I must assume that the people who run such oil companies as Saudi Aramco have superb access
to the actual DATA involving the geological situation, via their business muscle, and via industrial
spying operations. This data access would extend to just about the entire world, so far as the
data actually exists.
So they will have a pretty good idea how much oil can be produced at how much cost, and where,
barring new technological developments, which usually take a good while to be debugged and widely
adopted.
So -If the Saudis for example think oil will be worth eighty or ninety bucks again within the
next few years, a straight up business decision on their part would be to continue upstream investment.
Of course geopolitical power struggle considerations might trump the business decision, at least
temporarily.
If anybody at all has a TRULY RELIABLE crystal ball when it comes to predicting the behavior
of the economy, I have not yet heard who they are.
The futures market might be way off. Futures are a win / lose game.
So far I have never run across a convincing example of anybody being able to control the price
of any good or service, unless by means of either controlling demand for it, or controlling the
supply of it. Gasoline would get to be dirt cheap indeed if getting caught in possession of a
gallon of it meant paying a thousand dollar fine. This absurd example is merely intended to illustrate
that demand CAN be controlled, if the controlling agency has power enough.
Why should I believe that Wall Street can control demand for oil, specifically ?
Why should I believe that Wall Street can control the behavior of oil producers, especially
producers that are not in need of Wall Street money, or controlled by yankee regulatory departments
or agencies?
Why should I believe that Wall Street can control the behavior of oil producers, especially
producers that are not in need of Wall Street money, or controlled by Yankee regulatory departments
or agencies?
They do not control producers directly. Their control is indirect due to the fact that moneywise
physical oil now dwarf paper oil and futures contracts and options are allowed to settle in dollars
without any commodity changing hands. In other words oil became just another currency and its
price is driven up or down using all the dirty tricks of the currency games (See Soros attack
on British pound).
Typical USA volume is about one million contracts a day. One contract is 1000 barrels. So one
billion barrels of paper oil changes hands daily only in the USA. Add London and other European
exchanges and ratio of 1:200 of "real" to "paper" oil is not unrealistic.
Susan Strange was probably the first to analyze this new "casino capitalism" model for oil
boom and bust. Here is a relevant quote from her book (1997):
As with interest rates, the problem with oil prices is not so much that they have been
high, but rather that they have also been so unpredictable and so unstable. Again the instability
has engendered a new game in the great financial casino – oil futures.
This evolved in the following way. In the 1980s as OPEC's command over the oil market
weakened, with some producers desperate for foreign exchange ready to undercut the agreed
price with secret, under the-counter deals, more and more oil cargoes came to be traded
on what is rather misleadingly called the Rotterdam spot market .
But this is not a market in the ordinary sense in which buyers and sellers are identifiable
and prices known to everyone. It is just a network of about a hundred oil traders and brokers,
connected with each other by long distance intercontinental telephone and telex. Like other
brokers in grain or porkbellies or frozen orange-juice, they are often tempted to increase
their profits by talking the market price up or down.
As late as 1978, the spot market deals still accounted for only 5 per cent of all trade
in oil. They now account for 40 per cent or more.
Inevitably, because of the close connection between oil prices, generally denominated
in dollars, and the price of the dollar in foreign exchange markets, there has grown up
in London and New York a futures market in 'paper barrels' to match the forward and futures
markets in dollars and dollar assets.
These 'paper barrel' contracts can change hands as many as 50 times, and do not need
to be based on barrels of real oil. Futures contracts on the British Brent blend of North
Sea oil are thought to add up to as much as eight times the total annual output of the Brent
field (Hooper, 1985).
In short, while there is little doubt that the instability of exchange rates has helped
to destabilize the oil market, the oil market is now adding its own gambling game to all
the others.
The picture so far is one of an international financial system in which the gamblers
in the casino have got out of hand, almost beyond, it sometimes seems, the control of governments.
The question has occurred already to a good many people whether it is the governments
that have got weaker over the past 15 years, or whether it is a fortuitous coincidence of
economic forces that have combined to make the markets more powerful. It is an important
question, for the answer will dictate what has to be done to control, to moderate, or to
close down the great financial gambling game.
That question is linked with a second one: have all states weakened in relation to markets,
or only one, or perhaps just a few of the more important governments? Those who think that
all governments have weakened tend to find rather broad general explanations of how this
has come about. If they offer solutions they are apt to be of the most vague and general
kind. In contrast, those who think the explanation lies with the few, or even just with
the USA as the dominant power in the international financial system – as all the figures
show it to be – tend to be much more specific both in the explanations they put forward
and in the solutions they suggest.
I think in 1997 the term "neoliberalism" was not yet common and "casino capitalism" was
used as a substitute for depiction of essentially the same phenomenon. She "feels the pain"
but did not understand that it was a "quite coup" that installed neoliberalism as a dominant
social system all over the world, displacing both New Deal Capitalism and Socialism. Kind of
global coup detat of financial oligarchy. So governments were already captured and can't serve
as a countervailing force for gambling.
Quote above is cited from
Casino Capitalism Reprint Edition, by Susan Strange. Paperback: 224 pages. Publisher: Manchester
University Press; Reprint edition (October 16, 1997)http://www.amazon.com/gp/product/0719052351?keywords=Susan%20Strange%20Casino%20capitalism
In other words "paper oil" radically changed the game.
DUBAI, United Arab Emirates - The United Arab Emirates threw its support on Thursday behind a
plan by major oil producers to freeze output levels in an attempt to halt a slide in crude prices
that has pushed them to their lowest point in more than a decade.
Russia, Saudi Arabia, Qatar and Venezuela announced their willingness to cap output at last
month's levels at a surprise meeting in Qatar this week - but only if other major oil producers
join them. OPEC member Kuwait has since said it supports the proposal.
The support from the Emirates, a close Saudi ally, does not come as a major surprise but is still
significant. The seven-state federation is OPEC's third-largest oil producer.
Energy Minister Suhail Mohammed al-Mazrouei said in a statement to state news agency WAM that the
Emirates supports any proposal to freeze output through consensus with OPEC and Russia, which is
not part of the oil-producing bloc.
"We believe that freezing production levels by members of OPEC and Russia will have a positive
impact on balancing future demand based on the current oversupply," he said.
He was also quoted as saying he believes current conditions will prompt producing countries to
cap existing output, if not cut supply. The UAE, he said, "is always open for cooperation with
everyone in order to serve the higher interests of the producers and the balance of the market."
A day earlier, Iranian Oil Minister Bijan Namdar Zanganeh said after talks with counterparts from
Iraq, Venezuela and Qatar that his country "supports any measure to boost oil prices" but stopped
short of committing Iran to capping its own output. Iran has previously said it aims to boost
production above its roughly 2.9 million barrels a day now that sanctions related to its nuclear
program have been lifted.
"... Mining and exploration investment declined from $135 billion in 2014 to $87.7 billion in 2015, weighing down investment growth more than any other segment of nonresidential investment. ..."
Mining and exploration
investment declined 35% in 2015, the second largest year-over-year decline since the U.S.
Bureau of Economic Analysis (BEA) began reporting the series in 1948. Most mining and exploration
investment reflects petroleum exploration and development, but the category also includes natural
gas, coal, and other minerals.
Mining and exploration investment declined from $135 billion in 2014 to $87.7 billion in
2015, weighing down investment growth more than any other segment of nonresidential investment.
Total private fixed investment, of which mining and exploration is a small subset, grew 4% in
2015 to $2.7 trillion. Low
commodity prices remain a significant factor in U.S. firms' investment decisions.
"... This year, global exploration-and-production investments will fall by $170 billion, or 20%, according to Rystad Energy. If international oil prices average $50 a barrel next year-a level many analysts said appears optimistic-investment could fall by one-fifth in 2016, the Oslo-based energy consulting firm estimates. ..."
"... That would be the first time the industry has registered two consecutive years of investment declines in 30 years, according to the International Energy Agency, a global industry monitor. . . . ..."
"... The stage is set for a supply crunch down the line, Mr. Mahesh said. Supply from existing fields will fall, while new projects wont come online to replace them. ..."
"... Barclays sees Brent reaching $85 a barrel by 2020, while others see the potential for an even steeper rise. ..."
"... You could see prices shooting up from $30 to $100 pretty quickly, said Iain Reid, head of European oil and gas at Macquarie bank. At some point the chickens will come home to roost. ..."
"... Based on the WSJ article, global upstream capex was about $1.5 Trillion in 2014 2015 combined. I dont know what the division was between crude oil and gas + associated liquids (condensate NGL), but its plausible that it took about a trillion dollars over a two year period, in order to keep our global crude oil production base approximately stable, at around 68 to 69 million bpd, versus an estimated 69 million bpd in 2005. ..."
"... If that was solely CAPEX it seems high – assuming 4 mmbpd per year is needed to be bought on line and $70 to $90,000 per bpd average development costs gives $560 to $720 billion. maybe up to $1 to $1.2 trillion with gas developments included. So maybe it includes exploration DRILLEX as well, or costs have gone up a bit (or decline is higher than Ive assumed). But I think it must include all oil and all natural gas, greenfield and brownfield. ..."
"... According to the most recent Barclays survey, the primary source of data on global upstream capex, total spending was $673.2bn in 2014; $520.5bn in 2015 and is projected at $444.4bn in 2016 ..."
With the world awash in crude*, the oil industry is contemplating a new problem the oversupply
could tee up: an oil shortage.
As the oil glut has sent prices to decade lows, plummeting investment by oil-producing countries
such as Venezuela and Russia and oil drillers such as Exxon Mobil Corp. and Royal Dutch Shell
PLC means fewer barrels will be produced.
That could leave the world in exactly the opposite situation as now: short of oil and willing
to pay more to get it.
This may herald the beginning of a cycle that other commodities, from gold to copper, find
more familiar-a cycle in which a glut leads to lower prices that lead to investment cuts, which
chokes supply and prompts the price gains that lead to renewed expansion and future gluts.
"A big gap is forming in oil-industry investment," Claudio Descalzi, chief executive of
Italian energy company Eni SpA, recently told reporters. "That will lead in two to three years
to an imbalance between supply and demand that will push prices higher."
This year, global exploration-and-production investments will fall by $170 billion,
or 20%, according to Rystad Energy. If international oil prices average $50 a barrel next year-a
level many analysts said appears optimistic-investment could fall by one-fifth in 2016, the
Oslo-based energy consulting firm estimates.
That would be the first time the industry has registered two consecutive years of investment
declines in 30 years, according to the International Energy Agency, a global industry monitor.
. . .
"The stage is set for a supply crunch down the line," Mr. Mahesh said. "Supply from
existing fields will fall, while new projects won't come online to replace them."
Barclays sees Brent reaching $85 a barrel by 2020, while others see the potential for
an even steeper rise.
"You could see prices shooting up from $30 to $100 pretty quickly," said Iain Reid,
head of European oil and gas at Macquarie bank. "At some point the chickens will come home
to roost."
*Awash in total liquids perhaps, but IMO not in actual crude oil
Based on the WSJ article, global upstream capex was about $1.5 Trillion in 2014 & 2015
combined. I don't know what the division was between crude oil and gas + associated liquids (condensate
& NGL), but it's plausible that it took about a trillion dollars over a two year period, in order
to keep our global crude oil production base approximately stable, at around 68 to 69 million
bpd, versus an estimated 69 million bpd in 2005.
If that was solely CAPEX it seems high – assuming 4 mmbpd per year is needed to be bought
on line and $70 to $90,000 per bpd average development costs gives $560 to $720 billion. maybe
up to $1 to $1.2 trillion with gas developments included. So maybe it includes exploration DRILLEX
as well, or costs have gone up a bit (or decline is higher than I've assumed). But I think it
must include all oil and all natural gas, greenfield and brownfield.
Either the current ongoing cuts, which for me go back to the cancellation of the Voyageur upgrader
in May 2013 with about $3 billion write off of sunk costs, are going to have a huge impact over
the next five years for oil. Maybe a bit longer for gas as the LNG projects are still coming on
line feeding an already large glut.
The cuts in exploration budget will impact as well, but given how little oil in large fields
has really been found since Johan Sverdrup in 2010, maybe it's not such a big deal (the lack of
discoveries with or without exploration will of course be a large impact).
This year, global exploration-and-production investments will fall by $170 billion, or 20%,
according to Rystad Energy. If international oil prices average $50 a barrel next year-a level
many analysts said appears optimistic-investment could fall by one-fifth in 2016, the Oslo-based
energy consulting firm estimates.
You're right. I was a little off with my math. They were projecting that 2015 + 2016 total
global capex (oil and gas + associated liquids) would be about $1.2 Trillion, not $1.5 Trillion.
So, then the question is the allocation between crude oil and gas reservoirs.
According to the most recent Barclays survey, the primary source of data on global upstream
capex, total spending was
$673.2bn in 2014; $520.5bn in 2015 and is projected at $444.4bn in 2016
I haven't seen this discussed, but my apologies if it is a duplicate. Paragon Offshore to file
Chapter 11 – is this the largest bankruptcy for offshore drillers so far?
"... If we believe that world has on average 2 Mb/d surplus for at least 18 month thats one super-large tanker full of oil/condensate a day. 30 tankers a month, 365 tankers a year (over 700 Mb a year). In other words for the total duration of oil glut period 1000 Mb or more - a billion barrels of oil - should now be stored somewhere on customer sites. ..."
"... Where on the globe such a huge oil inventory is located. And where you can store such amount physically. Not of the ground - storage costs way too much and data about ground shortage does not show such a huge built-up of inventories. Not in tankers - cost of storage is even more (~1% a month if we assume $30 per barrel average price) and number of tankers of such a size is very limited and they are very expensive. ..."
"... USA is the primary glut country , but glut oil somehow definitely did not landed here. ..."
"... It is interesting to me that those inventories shot up very quickly between 1/1/15 and 5/15 and then have bounced around for the most part since, although somewhat higher now than last spring. ..."
"... Going back an looking at EIA historical data, I dont see a very strong correlation between crude prices and US commercial inventories. ..."
"... I think traders make too big of a deal about US commercial inventories. I have never heard of any US oil producer being unable to sell crude oil from a lease because commercial crude inventories were too high. ..."
"... Our crude purchaser is not happy we have shut in some wells. They want all they can buy. Further, in our little corner of the world, two more crude buyers have entered drumming up business, which is somewhat helping our basis. This is after several years of the same purchasers, no entrants or exits from 2003-2014, suddenly there are two more chomping at the bit. ..."
"... the problem is real and quite different: the US elite is afraid to go full force into oil conservation mode and preferred to drop oil price instead, adopting Madame de Pompadour "Après nous le deluge" ("after us deluge") mentality… ..."
"... What Jeffrey Brown points out over and over is the so-called 'glut' is simply another finance industry -slash- media narrative, a pleasant lie that glosses over the fact that fuel supply is declining, that purchasing power is declining along with it and that no easy solutions to these declines exist. The only solution is stringent conservation… ..."
"... Another noble lie in best Leo Strauss style, so to speak. See http://peakoilbarrel.com/collapse-of-shale-gas-production-has-begun/#comment-558479 ..."
The last few years have been very interesting in that when prices were high we saw non OPEC
producers going as hard as they can to produce oil, and now that prices are low we're seeing
OPEC members going as hard as they can to produce oil. In the non OPEC group it was Canada
and USA with the big gains. In the OPEC group it's Saudi Arabia and Iraq. This gives us a rough
indication of whose got what in their hand. Perhaps what a competitive card player/gambler
might call 'a tell'.
A real "tell". Why they are increasing production if the world is already full of unused (and
already delivered somewhere) oil? Because they are still able to sell it despite "glut".
If we believe EIA and friends it is impossible to consume all this oil. So it's the customer
who pays and then is hoarding all this cheap oil.
But the problem is that the cost of private storage is pretty high those days, especially in
the USA and ordinary companies and refineries can get only losses out of such strategy: "…limited
crude oil storage facilities caused crude oil storage costs to rise to $0.90 per barrel on February
9, 2016-compared to $0.10 per barrel in August 2015. " (
https://marketrealist.com/2016/02/crude-oil-storage-costs-rose-9-times-us-crude-oil-tests-new-limits/
)
If we believe that world has on average 2 Mb/d surplus for at least 18 month that's one
super-large tanker full of oil/condensate a day. 30 tankers a month, 365 tankers a year (over
700 Mb a year). In other words for the total duration of oil glut period 1000 Mb or more - a billion
barrels of oil - should now be stored somewhere on customer sites.
Where on the globe such a huge oil inventory is located. And where you can store such amount
physically. Not of the ground - storage costs way too much and data about ground shortage does
not show such a huge built-up of inventories. Not in tankers - cost of storage is even more (~1%
a month if we assume $30 per barrel average price) and number of tankers of such a size is very
limited and they are very expensive.
USA is the primary "glut country", but "glut oil" somehow definitely did not landed here.
EIA does not see any increase in storage in the USA since March 2015:
Europe is the same. Only China remains - it did bought some oil for strategic reserves
"The IEA says that in the first quarter the gap between China's measure of demand and
supply stood at 650,000 barrels a day – equivalent to storing 58m barrels over the three-month
period."
OK. let's assume that china absorbs 0.5 Mb/d from this glut. So we still have 1.5Mb/day glut
left.
Where are those volumes? Does this make the hypothesis of 2 MB/d "oil glut" completely absurd?
That means that all this period of sharply dropping oil prices supply and demand of physical oil
were pretty finely balanced and Iraq and Saudis were recruited to avoid shortages of physical
oil, which would spoil the whole game. If this is true, then "oil glut" existed only in "paper
oil". In other words it was artificially created. Or I misunderstand something ?
BTW Russians now feel they were taken for a ride by "casino capitalism" sharks. Below are laments
of hapless Rosneft top honcho Igor Sechin:
Oil price forecast as an instrument for oil price manipulation. Edited Google translation.
Originally from http://izvestia.ru/news/603843
In his today's speech at International Petroleum Week in London 2016 the President of the
Russian oil giant "Rosneft" Igor Sechin said that panic forecasts are a part of a selfish game
of market participants who are engaged in the game of artificial suppression of oil prices.
According to Sechin, financial market players are ready to "test" any and all levels of
oil prices, informs "RIA Novosti". "I must admit that we underestimated the fact that financial
market participants do not know any restrictions in their greed and are ready to "test" any
oil price levels - $27 in January and now down to $10 per barrel as recently forecasted by
one of the major banks. But this is nothing but "an irresponsible game" designed to fleece
oil producers said Sechin.
In the morning on the London stock exchange the price of barrel of Brent crude fell $2.5
to $30,5 for barrel.
"If we believe that world has on average 2 Mb/d surplus for at least 18 month"
According
to the EIA, the surplus exceeded 2 mb/d only in 2Q15.
The average surplus for 2015 was 1.85 mb/d, for a total of 675 million barrels.
The accumulated surplus since the beginning of 2014 is 995 million barrels.
World oil stock change & balance (global liquids supply – global liquids consumption), mb/d
Source: EIA STEO February 2016
"EIA does not see any increase in storage in the USA since March 2015"
According to the EIA,
from March 2015 to January 2016, the U.S. commercial inventory increased by 125 million barrel.
Over the period 2014-2015, the OECD commercial inventories of crude oil and refined products
increased by 493 million barrels, including 277 mbbl in the U.S. and 216 mbbl in other OECD
countries.
In January 2016, total OECD commercial inventories amounted to 3066 million barrels, of
which the U.S. acounted for 1342 million barrels.
The U.S. Strategic Petroleum Reserve remained flat at around 695 million barrels.
So the OECD in-land storage absorbed about a half of total estimated global surplus over
the period 2014-2015.
The rest is the increase in commercial and strategic inventories in China, other oil-importing
non-OECD countries, oil exporting non-OECD countries, floating storage, and the so called "balancing
items".
OECD Commercial Inventory (million barrels)
Source: EIA STEO February 2016
BTW who you think made such a huge blunder paying quite a lot of money for useless stock
(for at least another two years) plus storage fees and why ? We need to know the names of our
heroes.
Even more interesting question is who paid for other 430 Mb ? With their set of financial
problems (which include Greece, and other Southern states) all money in Europe are needed to
bail out banks. Europeans now are scroogy as hell and they definitely are not inclined to buy
useless oil. They have reliable suppliers. Only Germany has some money but they don't do such
stupid things. They have a direct pipeline from Russia. French? This would be a good joke.
They barely found money for barter with Iranians 0.2Mb/d supplies (or less) in exchange of
Iran buying several Eurojets. GB? They have their own production which is suffering huge losses
and no money.
Something is fishy here. Looks like we have several agencies under one roof in EIA each
of which produces its own set of data. In humans such condition is a symptom of schizophrenia
In no way this is "Commercial inventory" for the USA.
Those figures from EIA include strategic reserve (which is around 695 Mb; nobody knows exactly
as caverns might be leaking).
Commercial crude inventories as of Feb 5,2016 are around 500 Mb. So we should have around 1200Mb
as of today with SPR. Why EIA reports higher numbers I do not know.
On November 13, 2001, President George W. Bush ordered the SPR to be filled to approximately
700 million barrels by continuing to use the royalty-in-kind program carried out jointly between
the Department of Energy and the Department of the Interior. The royalty-in-kind program applied
to oil owed to the U.S. government by producers who operate leases on the federally-owned Outer
Continental Shelf. The producers are required to provide from 12.5 percent to 16.7 percent
of the oil they produce to the U.S. government. Under the royalty-in-kind program, the government
could either acquire the oil itself or receive the equivalent dollar value. (Note: in September
2009, the Department of the Interior announced the cancellation of the royalty-in-kind program
but honored its commitments in existing contracts. The SPR's final cargo of December 25-27,
2009, was royalty-in-kind crude oil.)
Faced with the choice between changing one's mind and proving that there is no need to do so,
almost everyone gets busy on the proof. So I am not surprised at your reaction.
Let's begin from the very beginning.
1. There is a claim that there is a huge, unpalatable world oil glut around 2Mb/d or 60 Mb/month
or 700 MB/year, give or take 100 Mb. And that this glut caused sharp drop of oil prices due lack
of "price elasticity" - the theory taken from neoclassical economics bible.
2. Due to this we need to see a rapid increase of commercial oil inventories which somehow
currently in the USA are around 500 Mb and did not grow substantially from March-April 2015.
As the USA was the country that caused "oil glut", this effect should be pronounced in the
USA crude oil inventories (moreover there was an export ban on raw oil until recently).
3. If we assume that some idiot bought this oil and stored commercially that does not mean
that there are bigger idiots who refine this oil losing even more money. So refined products,
ethanol, etc which are included in EIA figure 1,337,939 ("Total Crude and refined products excluding
SPR") for Feb 05 (which you love so much) are of no interest here. We should use only "Crude oil
commercial inventories" which are, I would like to stress again, around 500Mb as of 02/05/2016.
And they were already 471.444 MB on Mar 28, 2015. Rising only around 29 Mb for 10 month period
or 2.9Mb/month or 0.09Mb/d. And God knows how much of this oil was bought for arbitrage.
4. So logically the "oil glut" should result in a rapid growth of commercial oil inventories.
Reading with interest your debate about US crude oil commercial crude oil stocks.
It is interesting to me that those inventories shot up very quickly between 1/1/15 and
5/15 and then have bounced around for the most part since, although somewhat higher now than last
spring.
Going back an looking at EIA historical data, I don't see a very strong correlation between
crude prices and US commercial inventories.
Further, shouldn't world inventories be much more important than US commercial? What countries
have SPR's? Couldn't a country or group of them strategically empty some from a large SPR and
store it in this US?
I think traders make too big of a deal about US commercial inventories. I have never heard
of any US oil producer being unable to sell crude oil from a lease because commercial crude inventories
were too high.
Our crude purchaser is not happy we have shut in some wells. They want all they can buy.
Further, in our little corner of the world, two more crude buyers have entered drumming up business,
which is somewhat helping our basis. This is after several years of the same purchasers, no entrants
or exits from 2003-2014, suddenly there are two more chomping at the bit.
Anecdotal I know, but I still question why have been so volatile. I understand clueless's musical
chair example. But come on, there isn't hardly anything that works at $10-25 oil. Do the traders
have info we don't re worldwide production and inventories?
US inventories 2011-2014 were generally higher than 1998-1999 I believe. When it comes to the
huge importance of US commercial crude inventory on the worldwide crude price, I am more clueless
than Clueless.
I still question why [oil price] have been so volatile.
So am I. And I also do not have an answer. But what I suspect is that "glut/deficit" model
of oil price volatility based on balance of supply and demand as reported by agencies like EIA
is not valid anymore.
"Casino capitalism" model looks to me more and more plausible: price of oil in short and medium
term now is detached from the volume of production and inventories and is determined purely via
"paper oil" bought and sold in financial casino. The "glut/deficit" model is still valid in a
long run, but "in a long run we are all dead" and there can be multi-year discrepancies between
behavior of prices and behavior of supply and demand.
In other words a sharp drop of oil prices now in possible with zero or minimal glut, or glut
in a different category of petroleum products - for example condensate (as "Great Condensate Con"
hypothesis suggests).
That's what I tried to demonstrate in my discussion with Alex - the dynamics of cruse inventories
in the USA from April 2015 to Jan 2016 does not support hypothesis of correlation of oil prices
with supply/demand dynamics. We saw a huge price drop with rather stagnant commercial crude oil
inventories in the USA.
Since late 1990th the volume of "paper oil" contracts far (by orders of magnitude) exceeds
volume of physical oil and tail is wagging the dog. Oil producers are now hostages of financial
casino, pawns, not an independent players like they were in "good old days" before deregulation
of financial industry (https://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000
)
As I have occasionally opined, you are talking about Crude + Condensate (C+C) inventories.
As US C+C inventories increased by 100 million barrels from late 2014 to late 2015, US net
crude oil imports increased from 6.9 million bpd to 7.3 million bpd (four week running average
data for last four weeks of 2014 & 2015). Most people by now know what my explanation is, but
here is a link to a post on condensate versus crude that the folks at Oilpro.com asked me to put
together:
Jeffrey. I read your Oilpro article. I like that website. Has some good content.
I read a report from the American Oil Pipeline Association that crude oil pipeline mileage
in the US increased from 49K miles in 2004 to 61K miles in 2013. I haven't been able to find 2014
and 2015 mileage statistics.
I believe EIA includes crude in pipelines as storage.
Does anyone have information as to how much "crude oil storage" has been added by crude oil
pipelines since 2004?
Not yet. Or only in a sense "The road to hell is paved with good intentions".
The article is just fear mongering. But the problem is real and quite different: the US elite
is afraid to go full force into oil conservation mode and preferred to drop oil price instead,
adopting Madame de Pompadour "Après nous le deluge" ("after us deluge") mentality…
What Jeffrey Brown points out over and over is the so-called 'glut' is simply another finance
industry -slash- media narrative, a pleasant lie that glosses over the fact that fuel supply
is declining, that purchasing power is declining along with it and that no easy solutions to
these declines exist. The only solution is stringent conservation…
Repeating after Steve: "so-called 'glut' is simply another finance industry/media narrative".
"... I don't see how shale production, with it's rapid decline rate and high costs, can act as a cap on the price of oil. Wouldn't it be more likely that foreign producers with lower costs for production will keep a cap on the price of oil? ..."
"... I think oil price will remain somewhat volatile over the next decade since it is heavily tied to transport. ..."
"... However, in a way the oil industry people may be correct in the long run. Every time the price of fuels go up, society will make more permanent changes to reduce the use of those fuels. So the long term outlook for the oil industry is downhill. Short term, probably not. ..."
"... Rep. Jared Huffman (D-CA) introduced the Keep It in the Ground Act on Thursday. Under the bill, there would be no new leases for extraction of fossil fuels - such as coal, oil, and gas - on all federal lands. ..."
"... Don't worry, none of this "keep it in the ground" noise will last very long. When prices go back up, and when peak oil ceases to be called a theory, then the "keep it in the ground" folks will be looking for a hole in the ground to hide. ..."
...THE OIL INDUSTRY GOT TOGETHER AND AGREED THINGS MAY NEVER GET BETTER
"The thousands of attendees seeking reasons for optimism didn't find
them at the annual International Petroleum Week. Instead they were greeted
by a cacophony of voices from some of the largest oil producers, refiners
and traders delivering the same message: There are few reasons for optimism.
The world is awash with oil. The market is overwhelmingly bearish."
"Producers are bracing for a tough year. Prices will stay low for
up to a decade as Chinese economic growth slows and the U.S. shale industry
acts as a cap on any rally"
Doug,
I don't see how shale production, with it's rapid decline rate and
high costs, can act as a cap on the price of oil. Wouldn't it be more likely
that foreign producers with lower costs for production will keep a cap on
the price of oil?
I think oil price will remain somewhat volatile over the next decade
since it is heavily tied to transport. As that scenario changes, oil
production will be in natural descent anyway so alternatives and efficiency
might just be playing catch-up for quite a while.
However, in a way the oil industry people may be correct in the long
run. Every time the price of fuels go up, society will make more permanent
changes to reduce the use of those fuels. So the long term outlook for the
oil industry is downhill. Short term, probably not.
Struggling oil and gas companies are maxing out revolving credit lines
typically used to cover short-term funding gaps, raising fresh concerns
about banks' exposure to the decline in energy prices.
And yet the oil industry seems to think prices will stay low for the
next decade.
Just another indicator of economic downturn, CSCL has warned of loss.
"China Shipping Container Lines (CSCL) has issued a profit warning announcing
an expected loss of RMB 2.8 billion (USD 425 million) for the financial
year ending December 31st."
Rat's congressman proposes Stranded Assets International Bioreserve
Rep. Jared Huffman (D-CA) introduced the Keep It in the Ground Act
on Thursday. Under the bill, there would be no new leases for extraction
of fossil fuels - such as coal, oil, and gas - on all federal lands.
It would also stop new leases for offshore drilling in the Pacific and the
Gulf of Mexico and prohibit offshore drilling in the Atlantic and Arctic
Oceans.
Don't worry, none of this "keep it in the ground" noise will last very
long. When prices go back up, and when peak oil ceases to be called a theory,
then the "keep it in the ground" folks will be looking for a hole in the
ground to hide.
"... When I look at the world total liquids production chart, it looks like production dropped from about 96.7mmbls/d in summer 2015 to about 95.1mmbbls/d in January – a drop of roughly 1.5 mmbbls/d from peak. ..."
"... That's a decline of 1.51 million barrels per day from August to January. I am sure that is not exactly accurate because all the January numbers are not in yet but I would think that it is pretty close. I am not really shocked by those numbers. ..."
When I look at the world total liquids production chart,
it looks like production dropped from about 96.7mmbls/d in summer 2015 to about 95.1mmbbls/d in
January – a drop of roughly 1.5 mmbbls/d from peak. Do you think this is accurate? If not, how
accurate do you think those numbers are?
That's a decline of 1.51 million barrels per day from August to January. I am sure that is
not exactly accurate because all the January numbers are not in yet but I would think that it
is pretty close. I am not really shocked by those numbers.
I am not really shocked by their projection through the end of 2017 either. But I just flat
don't believe those numbers at all.
"... Core estimates that the current production decline curve rate for U.S. production is approximately 7.8% net which will expand as 2016 progresses and could reach 10% net by the end of the year 2016. ..."
"... Core believes that the worldwide crude oil supply and demand markets will balance in the second half of 2016. ..."
"... U.S. unconventional production peaked at approximately 5.5 million barrels of oil per day in March of 2015, has since fallen by over 600,000 barrels a day owing to high decline curve rates associated with tight oil reservoirs (offset by unsustainable adds of 250,000 bopd (we had noticed the adjustments in the data stream). ..."
"... The sharp declines from U.S. land production will continue into 2016 and Core believes these decreases could reach 900,000 barrels a day by the year-end 2016. Lower levels of new wells and delayed production maintenance will exacerbate this 2016 fall in U.S. land production. ..."
"... the short gains from legacy deepwater Gulf of Mexico projects will not materialize in 2016 to offset the significant decreases in U.S. land production as they did in late 2015. ..."
"... Core estimates that the current production decline curve rate for U.S. production is approximately 7.8% net which will expand as 2016 progresses and could reach 10% net by the end of the year 2016. ..."
David Demshur, CEO of Core Labs had a lot to say in their earnings release of Jan. 28, 2016.
Regarding US oil production.
Core estimates that the current production decline curve rate for U.S. production is approximately
7.8% net which will expand as 2016 progresses and could reach 10% net by the end of the year 2016.
Regarding World oil production.
Core estimates that crude oil production decline curve has expanded to 3.1% net, up some 60
basis points from year earlier estimates. Applying the 3.1% net decline curve rate to the worldwide
crude oil production base of approximately 85 million barrels a day means that the planet will
need to produce approximately 2.6 million new barrels by this date next year to maintain current
worldwide production totals.
With the long-term worldwide spare capacity nearing zero, Core believes that worldwide producers
will not be able to offset the estimated 3.1% net production decline curve rate in 2016, leading
to falling global crude oil production by the second half of 2016.
Therefore, Core believes crude oil markets rationalize in the second half of 2016 and price
stability followed by price increases return to the energy complex. Remember, the immutable laws
of physics and thermodynamics mean that the crude oil production decline curve always wins and
that it never sleeps.
1) "Core believes that the worldwide crude oil supply and demand markets will balance in the
second half of 2016.",
2) "U.S. unconventional production peaked at approximately 5.5 million barrels of oil per day
in March of 2015, has since fallen by over 600,000 barrels a day owing to high decline curve rates
associated with tight oil reservoirs" (offset by unsustainable adds of 250,000 bopd (we had noticed
the adjustments in the data stream).
3) "The sharp declines from U.S. land production will continue into 2016 and Core believes
these decreases could reach 900,000 barrels a day by the year-end 2016. Lower levels of new wells
and delayed production maintenance will exacerbate this 2016 fall in U.S. land production."
4) "the short gains from legacy deepwater Gulf of Mexico projects will not materialize in 2016
to offset the significant decreases in U.S. land production as they did in late 2015."
5) "Core estimates that the current production decline curve rate for U.S. production is
approximately 7.8% net which will expand as 2016 progresses and could reach 10% net by the end
of the year 2016."
"... Since his appointment, there has been a genuine effort in the field of PR. the goal is to create
for him an image of a politician of an international stature. He seeks to become the counterpart, if
not the equal of the great western powers. ..."
"... It is important to be opportunistic at this level and not to alienate the fringe wahhabi elements
of Saudi Arabia is of paramount importance. A little interaction with the West it OK, too much of interactions
with the West, this is detrimental to his image and his credibility. Therefore he tries to advance his
goal, while at the same time trying not to offend nobody. It is, after all, a dive of discovery in the
international political universe. ..."
"... Regardless of his background, he needs to prove that he matters, that he is a hardliner, that
he is a good minister of Defence, and that that he is anti-shiite, he is a man capable of confronting
Iran. At the same time, he needs to satisfy needs of Saudi population which is increasingly flocks to
jihadism. ..."
"... It is necessary to remove the ground under the feet of those who believe that the monarchy
has for too long been moderate, particularly during the reign of the former king Abdallah. It is this
desire to build his leadership, which leads to the direct confrontation with the shia, including such
political decisions as the execution of the leader of shiite Nimr al-Nimr, and the increased tension
with Iran. Finally, it also represents a reaction of the Saudi monarchy, which was disappointed by the
United States. He would like to stop normalization of Iranian-American relations, because in the event
of a confrontation with Iran, the Saudis would find themselves in a difficult position without 100%
US support. ..."
"... Prince Mohammed bin Salman tenure as the head of the armed forces can be characterized as a
failure. In Yemen, there has been a stalemate ..."
"... Moreover, where he was able to displaced the allies of Iran, the radicals from Al Qaeda and
DAESH took the control of those area. Iran became firmly positioned at the southern gateway to Saudi
Arabia. It is anything but a success. ..."
"... Nevertheless, he was applauded because he stood up and responded, tried to stop to Iran. He
responded to the Iran thereat, but has not managed to achieve his goals, which was expected of him.
However, in the eyes of the Saudis, a manly reaction that tha fact that has the the will to challenge
to the hegemony of Iran in the region was positive steps. ..."
"... In addition, Mohammed bin Salman has a revenge in mind: in 2009, the houthis crossed the Saudi
border, and despite the superiority of Saudis weaponry, the Saudi troops were able to repel that offence
only after 3 months of fighting which left 130 soldiers dead. ..."
"... It is perceived as dangerous because of the war, reckless and ineffective in Yemen as well
as its strategy of tension vis-à-vis Iran. Moreover, for the Germans, Iran is a huge market. They have
relied heavily on Iran in recent years, in the logical continuation of the long tradition of trade between
the two countries. Dont forget that it is a country that lives from exports, and that it is therefore
very important for the Germans to arrive at an agreement with Iran. Moreover, Germany is a country whose
strategy is intimately linked to that of the United States and totally dependent on NATO due to the
fact that it is forbidden to have an army of its own. Germany knows that if it was a direct confrontation
between Saudi Arabia and Iran, it would be required to be supportive of Saudi Arabia – regardless of
the efforts by Barack Obama to move closer to Iran. ..."
"... the strategy of the prince Mohammed Bin Salman is to push Iran to the fault in causing the
tensions that can go up to a risk of open warfare that would force the west to choose Saudi Arabia against
Iran ..."
"... The Prince Mohammed bin Salman is now the most powerful man in Saudi Arabia. It has exclusive
access to his father, King Salman, and effectivly he can rule the coutries inread of him. He is head
of his office, which means that nobody can contact or be received by the King without going through
the son ..."
"... Saudi Arabia is extremely disturbed by the detente with Iran on the international scene. We
are witnessing more or less a reversal of alliances, and of countries images in the eyes of the West.
A short time ago, Iran was demonized in the West. Today, it is accepted as a normal partner. Iran, therefore,
benefits from a relatively favorable treatment, while at the same time when the Arab monarchies, particularly
Saudi Arabia, are seen as retrograde, unable to provide for reforms and creating the flow of Islamic
radicals... The nature of Hezbollah, interference military and terrorists of Iran is currently forgotten.
..."
"... I think it will be very difficult to see any reapprochement with Iran in the coming months
as Saudi Arabia has two hardliners in the young rising generation of leaders. The heir and the vice-inherit
the Kingdom share the same radical line toward Iran. ..."
"... Moreover, Saudi Arabia pays very dear to his strategy of crushing oil prices, which makes it
less able to buy social peace than before. Therefore, there is an internal demand of radicalism, because
the discontent rumbles in the parts of the Saudi population fueled by the effects of the falling oil
prices. ..."
"... If one wanted to summaries, we could say that to buy a peace with Islamist Wahhabi radicals,
it is necessary to kill shia... besides, the Saudis have a genuine complex of encirclement by the Shiite
states. They try to counter it by creating an opposite ark of Sunni radicals. ..."
"... even if this does not lead to open warfare, the tension between Saudi Arabia and Iran is sustainable,
if only because this new generation of Saudis leaders is more combative. They differ from the former
kings who belonged to a generation that was distinguished rather by its search for a compromise and
some consensus. This is absolutely not the case for those two heirs of the throne. ..."
Atlantico : While today Saudi Arabia play the central role in the conflicts around the Middle
East which are worried the whole world. What do we know bout young chief of the armed forces of Saudi
Arabia ?
Antoine Basbous : His position is more precarious than the last year, and it looks like
he is trying to double cross his cousin crown prince.
He tries to use the advantage of the presence of his father on the throne to become a direct successor.
It is an assumption that is pretty crazy since theoretically, Mohammed bin Salman does
not belong to the chain of the succession because of his position in the family. In addition, it
is clearly lacking experience and legitimacy, compared to its brothers and cousins, but also to public
opinion.
He is someone of impulsive, short-tempered, as we already observed in the past. He behaves somewhat
like like his father when he was young. Previously, when he was less in the spotlight, he could afford
some mistakes. But since his appointment to the ministry of defense, he embodies the virile answer
of the kingdom to the set of challenges from Iran. Now, he certainly has placed contracts with firms
of communication that has allowed him to acquire the elements of language needed to smooth impression
about himself. They also help him to appear on major foreign media : recently, he appeared in the
journal The Economist. Since his appointment, there has been a genuine effort in the field of
PR. the goal is to create for him an image of a politician of an international stature. He seeks
to become the counterpart, if not the equal of the great western powers.
It is important to be opportunistic at this level and not to alienate the fringe wahhabi elements
of Saudi Arabia is of paramount importance. A little interaction with the West it OK, too much of
interactions with the West, this is detrimental to his image and his credibility. Therefore he tries
to advance his goal, while at the same time trying not to offend nobody. It is, after all, a dive
of discovery in the international political universe.
Inside, however, his authority comes from his status of the son to the King to whom his father
is listening a lot. In one year, it has greatly expanded its power. It controls not only the military,
budgets but also key sectors of the economy. It has separated the' ARAMCO (the biggest oil company
in the world) from the ministry of oil. This dramatically increases his economic power. In addition,
the minister of oil shall soon leave the position, and should be replaced by his half-brother. Mohammed
bin Salman leaves him a ministry deprived of any substance.
For his education, we know that he has studied the Law in Saudi Arabia, but has not, to my knowledge,
pursued follow-up studies in the West. Currently, he oversees the operations of the Coalition in
Yemen, together with his cousin prince Mohammed bin Nayef, the Interior minister and deputy crown
prince. So far, they are not in rivalry, on the contrary: as the minister of the Interior had no
sons, he might appoint Mohammed bin Salman to be a crown prince since their age gap is 21 years.
Moreover, the two men appear together on the front.
Alexander del Valle : Regardless of his background, he needs to prove that he matters,
that he is a hardliner, that he is a good minister of Defence, and that that he is anti-shiite, he
is a man capable of confronting Iran. At the same time, he needs to satisfy needs of Saudi population
which is increasingly flocks to jihadism. To consolidate its legitimacy, it is obliged to give
grain to grind to the islamists because a large part of the Saudi society is seduced by the dream
of Daech. It is also in a logic of competition with her uncle, who is the current heir of the thone,
as well as with the other princes. It is necessary to remove the ground under the feet of those
who believe that the monarchy has for too long been moderate, particularly during the reign of the
former king Abdallah. It is this desire to build his leadership, which leads to the direct confrontation
with the shia, including such political decisions as the execution of the leader of shiite Nimr al-Nimr,
and the increased tension with Iran. Finally, it also represents a reaction of the Saudi monarchy,
which was disappointed by the United States. He would like to stop normalization of Iranian-American
relations, because in the event of a confrontation with Iran, the Saudis would find themselves in
a difficult position without 100% US support.
Why his actions caused the concerns of the German intelligence services ? What assessment can
we make of year tenure at the head of the armed forces of Saudi Arabia ?
Antoine Basbous : It is important to understand the origins of this report. It is not excluded
that it comes from someone with an interest to harm the image of the Kingdom or of the Prince.
Prince Mohammed bin Salman tenure as the head of the armed forces can be characterized as a failure.
In Yemen, there has been a stalemate. The conflict began in April. We are in January. Nine months
later, despite the multiple bombardments, all of the money spent, the control of the Yemen government
from Ryad remains illusive... He has not managed to clean, to conquer and to install a protected
area. Moreover, where he was able to displaced the allies of Iran, the radicals from Al Qaeda
and DAESH took the control of those area. Iran became firmly positioned at the southern gateway to
Saudi Arabia. It is anything but a success.
Nevertheless, he was applauded because he stood up and responded, tried to stop to Iran. He
responded to the Iran thereat, but has not managed to achieve his goals, which was expected of him.
However, in the eyes of the Saudis, a "manly" reaction that tha fact that has the the will to challenge
to the hegemony of Iran in the region was positive steps. Iran has claimed control of four Arab
capitals. Hassan Rohani has announced the training of 200 000 militia in the five nations in their
neighborhood. A reaction of Saudi Arabia, in the light of these elements, is not unexpected or abnormal.
However, the latter has been slow to arrive and is not manifested in the most timely, the most intelligent
or the most effective.
However, this operation was his baptism of fire. Prior to the commencement thereof, the Prince
was suffering from a bad press. This conflict, it was his moment of truth so to speak. It should
be judged on its ability to generate a "surge" of military and diplomatic activities in the region,
so that Saudi Arabia free itself the control of the Us administration, and that the country acquires
a greater autonomy. The fact that Barack Obama has approved the nuclear deal with Iran has been perceived
as a lesson for the Turks and the Saudis. In addition, Mohammed bin Salman has a revenge in mind:
in 2009, the houthis crossed the Saudi border, and despite the superiority of Saudis weaponry, the
Saudi troops were able to repel that offence only after 3 months of fighting which left 130 soldiers
dead.
Alexander del Valle : It is perceived as dangerous because of the war, reckless and
ineffective in Yemen as well as its strategy of tension vis-à-vis Iran. Moreover, for the Germans,
Iran is a huge market. They have relied heavily on Iran in recent years, in the logical continuation
of the long tradition of trade between the two countries. Don't forget that it is a country that
lives from exports, and that it is therefore very important for the Germans to arrive at an agreement
with Iran. Moreover, Germany is a country whose strategy is intimately linked to that of the United
States and totally dependent on NATO due to the fact that it is forbidden to have an army of its
own. Germany knows that if it was a direct confrontation between Saudi Arabia and Iran, it would
be required to be supportive of Saudi Arabia – regardless of the efforts by Barack Obama to move
closer to Iran.
In fact, since the Covenant of Quincy, Saudi Arabia is bound by a close alliance with the United
States and through this with the western countries. Thus, the strategy of the prince Mohammed
Bin Salman is to push Iran to the fault in causing the tensions that can go up to a risk
of open warfare that would force the west to choose Saudi Arabia against Iran. This tactic is
based on the alliance of ultra-strategic-Pact of Quincy, which was renewed in 2006 by George W. Bush
and still valid today that fact that in any conflict, as soon as Saudi Arabia is struggling with
a rival in the region, the United States should support it. This looks like what Erdogan doing shoot
down a Russian plane. It was to prevent a warming of relations between the Russians and the Americans.
What are the limits of his influence in Saudi Arabia ? In what extent his role as the Minister
of Defence is decisive for his own future in the kingdom ?
Antoine Basbous :The Prince Mohammed bin Salman is now the most powerful man in Saudi
Arabia. It has exclusive access to his father, King Salman, and effectivly he can rule the coutries
inread of him. He is head of his office, which means that nobody can contact or be received by the
King without going through the son. He also can say to anyone inside as well as abroad, "This
is the will of the King". So he has phenomenal power, and does not suffer from the luch of desire
to exercise it. As to whether his role as Defence minister, is decisive for his own future, it is
obvious. If he succeeds in this position and it shows the virility of the military success, this
can strengthen its position. On the other hand, if this gets stuck into yeme war quadmire, if the
failures multiply, it is not excluded that this will ruin completely his chances of succeeding his
father. In a situation like this, He might well became a falling star. It is vital that he achive
a good results in the war on the ground, although in a majority of arab countries, the people is
not necessarily looking very attentively at the quality of governance.
What is the analysis of personality of this key figure and the balance sheet of his first year as
the Defense minister can say about the position of Saudi Arabia on the international scene in the
comong months ? What will be developments in the relations of Saudis and Iran ?
Antoine Basbous
:Saudi Arabia is extremely disturbed by the detente with Iran on the international scene.
We are witnessing more or less a reversal of alliances, and of countries images in the eyes of the
West. A short time ago, Iran was demonized in the West. Today, it is accepted as a normal partner.
Iran, therefore, benefits from a relatively favorable treatment, while at the same time when the
Arab monarchies, particularly Saudi Arabia, are seen as retrograde, unable to provide for reforms
and creating the flow of Islamic radicals... The nature of Hezbollah, interference military and terrorists
of Iran is currently forgotten.
Mohammed bin Salman is still an "emerging" politician, politician in the course of "on the job"
training. But despite of that he is exercising functions that are extremely strategic, and he must
demonstrate whether he can adapt to situations to which the country is facing.
Alexander del Valle : I think it will be very difficult to see any reapprochement with
Iran in the coming months as Saudi Arabia has two "hardliners" in the young rising generation of
leaders. The heir and the vice-inherit the Kingdom share the same radical line toward Iran.
Moreover, Saudi Arabia pays very dear to his strategy of crushing oil prices, which makes
it less able to buy social peace than before. Therefore, there is an internal demand of radicalism,
because the discontent rumbles in the parts of the Saudi population fueled by the effects of the
falling oil prices. An increase of sympathy for jihadism can be felt with those segments of
the population. So even if the prince Mohammed bin Salman and prince Mohammed ben Nayef – heir to
the throne and minister of the Interior - were moderate, they would be obliged to give pledges to
their people, who account for more of the "appeasers of Shiites". If one wanted to summaries,
we could say that to buy a peace with Islamist Wahhabi radicals, it is necessary to kill shia...
besides, the Saudis have a genuine complex of encirclement by the Shiite states. They try to counter
it by creating an opposite ark of Sunni radicals.
I thus do not see how there could be a rapprochement with Iran. Or it can be only via the pressure
of the United States, as was the case between Greece and Turkey in the past. Therefore, even
if this does not lead to open warfare, the tension between Saudi Arabia and Iran is sustainable,
if only because this new generation of Saudis leaders is more combative. They differ from the former
kings who belonged to a generation that was distinguished rather by its search for a compromise and
some consensus. This is absolutely not the case for those two heirs of the throne.
This is not an end of oil price slum, but we might well be close to inflection point.
Notable quotes:
"... Well here is the thing about what has happened with oil production and where is it going. A year ago I have said when we saw the first glimpse of production stall that for low oil prices the best cure is low oil prices. It took a year to confirm that and sometimes it is like watching the paint dry but numbers are finally confirming that. NA production is the first one to show decrease in oil production since oil crash started. ..."
"... Shale Play: Bakken is fallen 13% from December of 2014, EF was steeper, 28% from high March 2015. ..."
"... Oil Sand/Deep water: These high-cost, low-decline projects are all cancelled meaning that in their absence decline rates are going to increase. ..."
"... Russias producers had a silver lining of comparatively lower cost of production and currency exchange rate that helped them show a paper profit but hard to see how with $33 Brent there would be any significant increase in production in the near future. ..."
"... North Dakota Active Drilling Rig List at 40 including one stacking … 137 one year ago (-71%) ..."
Well here is the thing about what has happened with oil production and where is it going.
A year ago I have said when we saw the first glimpse of production stall that for low oil prices
the best cure is low oil prices. It took a year to confirm that and sometimes it is like watching
the paint dry but numbers are finally confirming that. NA production is the first one to show
decrease in oil production since oil crash started.
Shale Play: Bakken is fallen 13% from December of 2014, EF was steeper, 28% from high March
2015. Total production from the seven shale plays is down 10% since September 2014. With
the number of active rigs there is only one way for oil production to go in the near future and
it is down.
Oil Sand/Deep water: These high-cost, low-decline projects are all cancelled meaning that
in their absence decline rates are going to increase.
The rest of the world is little bit harder to determine since I don't follow very closely.
Except few general observations that North Sea production is between rock and hard place. High
cost production considering $30-33 Brent and high cost of decommissioning so take your poison
pill wisely. Russia's producers had a silver lining of comparatively lower cost of production
and currency exchange rate that helped them show a paper profit but hard to see how with $33 Brent
there would be any significant increase in production in the near future.
OPEC – well Opec got fragmented if not totally disintegrated in 2 blocks: Sunni and
Shiite + Latino block so any talk about OPEC speaking with one voice is misplaced. So as result
every OPEC member produces as much as they can in order to keep head above water.
Three offshore workers died in a fire outbreak that struck an
offshore platform operated by the Mexican oil company Pemex
on Sunday.
According to Pemex, two deceased workers were
Pemex employees, one of which died in a hospital, while the
third worked for Cotemar. Nine workers, including the one who
died at the hospital, were injured in the incident.
The accident happened aboard the Abkatun A platform in the
Campeche Bay. According to Pemex, the fire is under control.
Pemex further said that there was no need to evacuate the
Abkatun A, as the fire was already isolated.
This is not the first time the Abkatun platform has been
involved in a fatal accident. In April 2015, at least four
workers died when a fire hit the platform, causing a
substantial damage.
What is more, the news of the latest accident comes only
two weeks after Pemex evacuated workers from its Zaap E
production platform in the Gulf of Mexico due to a fire
outbreak on Friday. No injuries were reported during the
incident.
"... while historically OPEC exercised a rational production strategy, as of the 2014 OPEC Thanksgiving
massacre, there is no more OPEC, as can be seen by the relentless attempts by roughly half the members
to call an OPEC meeting unsuccessfully, confirming what we said in late 2014 - OPEC no longer exists,
which means it is every oil producer for themselves. ..."
Whether it's $50 or $70 by the end of 2016 will largely be determined by the global economy, he added,
reiterating the same flawed thesis he used to justify his bullishness a year ago: "We're still building
inventories, and we will for the next several months. And then we'll start to draw," Pickens said.
"Once you start to draw, you're not going to start back building again. The draw will come here in
the next few months. It'll become pretty clear."
He was wrong then, and he will be wrong this time
again for the simple fact that while historically OPEC exercised a rational production strategy,
as of the 2014 OPEC Thanksgiving massacre, there is no more OPEC, as can be seen by the relentless
attempts by roughly half the members to call an OPEC meeting unsuccessfully, confirming what we said
in late 2014 - OPEC no longer exists, which means it is every oil producer for themselves.
Putting T Boone's forecasts in context, in a CNBC commentary in October, Pickens conceded his
prediction for $70 oil by the end of 2015 wasn't going to happen, because worldwide demand did not
go up as much as he thought and supply did not markedly go down. Oil closed the year at $37: his
prediction was off by 50%.
By Nick Cunningham is definitely short-sider. It is clear from the way he interprets
the data. For example 100 Mb/d the he sites does not include natural depletion which is more strong
source to diminishing volume when capex is cut to the bones. Also it is unclear what Wood Mackenzie
means by "cash negative' and how "break even" price was calculated. If it is just lifting price it should
be doubles to get more realistic estimate of break even". Without understand of components of
prices Wood Mackenzie uses this is pure propaganda.
Worldwide, oil companies delayed making decisions on 68 major projects in 2015, accounting for around
27 billion barrels of oil and equivalent natural gas spending. All told, the industry deferred spending
$380 billion last year, energy consultancy Wood Mackenzie
found in a
January report.
Notable quotes:
"... We expect significant cuts in upstream production as the companies cut output at loss-making fields, ..."
"... In the U.S., there are signs of adjustment as well, although very slowly. Continental Resources gutted its spending program for 2016, reducing capex by 66 percent. That will translate in a dip in production. ..."
"... Overall, the EIA expects U.S. production to fall by 700,000 barrels per day by the end of 2016 to 8.5 mb/d, or more than 1 mb/d below the 2015 peak. ..."
"... A new report from Wood Mackenzie finds that 3.4 mb/d of oil production is cash negative at todays prices, equivalent to about 3.5 percent of global production. But shutting down has its own costs, and could make restarting more difficult and expensive. For some oil fields, shutting down could cause permanent damage to reservoirs ..."
"... there are significant volumes underwater. Wood Mackenzie says that the 2.2 mb/d of expensive oil sands in Canada are in the red. Venezuela is also sitting on 230,000 barrels per day of heavy oil is being produced at a loss. Offshore in the North Sea is another high-cost area, and there is about 220,000 barrels per day of "cash negative" production there. Nevertheless, instead of shutting down, most companies producing at a loss – even at a loss! – will continue to produce, and divert their production into storage rather than suffer the costs of shutting down. ..."
"... That, of course, will mean that it will take much longer than expected for oil prices to rebound, which will only occur when demand rises and soaks up the excess supply and/or natural depletion saps global production. Maintenance or mechanical problems could knock some output offline as well. But the whole process will take still more time. ..."
"... Morgan Stanley cut its estimated oil price for 2016. The bank now expects oil prices to continue falling through the year instead of rebounding in the second half. The investment bank expects Brent to average $29 per barrel in the fourth quarter, rather than its previous estimate of $59 per barrel issued just last month. ..."
"We expect significant cuts in upstream production as the companies cut output at loss-making
fields," Neil Beveridge, an analyst at Sanford C. Bernstein & Co, told Bloomberg in an
interview. "Chinese explorers need to take more radical action to cut operating costs and increase
efficiency." China's Cnooc, one of its main oil producers, probably has a breakeven price near $41
per barrel. The company says that it will spend less and produce less in 2016.
In the U.S.,
there are signs of adjustment as well, although very slowly. Continental Resources
gutted its spending program for 2016, reducing capex by 66 percent. That will translate in a
dip in production. Output will fall steadily over the course of the year, and the company expects
to close out the fourth quarter with production of 180,000 to 190,000 barrels of oil equivalent per
day, which could be 10 to 15 percent below its 2015 average. Continental Resources might be
illustrative of the ravages of low oil prices, since it had much less of its output hedged at
higher prices over the past year after liquidating a lot of its hedged positions in 2014. As such,
many more companies could begin suffering the same misfortune of lower production as their hedges
roll off.
Overall, the EIA expects U.S. production to fall by 700,000 barrels per day by the end of
2016 to 8.5 mb/d, or more than 1 mb/d below the 2015 peak.
However, the oil markets are still suffering terribly because of the ongoing glut. Much of that
can be pinned on the fact that oil producers are reluctant to shut in production, even if they are
losing money on every barrel sold. A new report from Wood Mackenzie finds that 3.4 mb/d of oil
production is "cash negative" at today's prices, equivalent to about 3.5 percent of global production.
But shutting down has its own costs, and could make restarting more difficult and expensive. For
some oil fields, shutting down could cause permanent damage to reservoirs
... .... ...
That means many companies have every incentive to keep as much production online as possible, even
if it ends up being a net-loss. "Given the cost of restarting production, many producers will continue
to take the loss in the hope of a rebound in prices," Robert Plummer, VP of investment research at
Wood Mackenzie said, according to
Reuters. "Curtailed
budgets have slowed investment which will reduce future volumes, but there is little evidence of
production shut-ins for economic reasons."
Wood Mackenzie came up with a pretty shocking figure that will make the hearts of every oil bull
sink: only 100,000 barrels per day of global production – out of total global output of 96.1 mb/d
– has actually been shut in so far (output declining because of natural depletion is a separate thing.
This refers to production intentionally shut down because of economic reasons).
It is an unbelievable statistic, given today's prices, and it demonstrates the difficulty that
the oil markets will have in finding some sort of equilibrium.
Still, there are significant volumes underwater. Wood Mackenzie says that the 2.2 mb/d of
expensive oil sands in Canada are in the red. Venezuela is also sitting on 230,000 barrels per day
of heavy oil is being produced at a loss. Offshore in the North Sea is another high-cost area, and
there is about 220,000 barrels per day of "cash negative" production there. Nevertheless, instead
of shutting down, most companies producing at a loss – even at a loss! – will continue to produce,
and divert their production into storage rather than suffer the costs of shutting down.
That, of course, will mean that it will take much longer than expected for oil prices to rebound,
which will only occur when demand rises and soaks up the excess supply and/or natural depletion saps
global production. Maintenance or mechanical problems could knock some output offline as well. But
the whole process will take still more time.
In a dramatic move, Morgan Stanley
cut its estimated oil price for 2016. The bank now expects oil prices to continue falling through
the year instead of rebounding in the second half. The investment bank expects Brent to average $29
per barrel in the fourth quarter, rather than its previous estimate of $59 per barrel issued just
last month.
Then again, what if OPEC and Russia meet in February to coordinate production cuts? It still seems
unlikely, but unless that happens, oil prices may not stage a rally this year.
Pretty interesting interview Jan Stuart, despite that fact that it was on Bloomberg... he
conveniently ignore the destructive role of Wall Street in amplifying oil price move, but other then
that it was a good interview. Good point is that futures curve is even more wrong then
economists. But due to futures curve that exist now a lot of people will lose their jobs,
despite the fact that it predict that production of oil will continue at any price. It is
essentially predict that demand will not go up and oil will ever be produced at low costs. Both
those postulates are wrong and we already know that situation is not sustainable. Unless china
has hard landing demand will go up. Slow supply response in the very last month. When you look
back at 2015 its is clear people overspend by very significant amount which was very start or not so
smart, Some people though we are almost done with price slide. That are now for rude awakening.
that also means that at the end of the year or somewhere in 2017 price can well be higher then $65
"... the global oil market is not a market like those for smartphones, automobiles or ladies purses. The global oil ( gas) market is a STRATEGIC one. Which goes on to say that the core states, such as first of all, North America, then NW Europe get to have the first and final say. ..."
"... This problem is compounded by the fact that high oil prices enable geo-strategic rivals such as Russia/Iran/Iraq/Venezuela to be more defiant than they would otherwise be. ..."
"... The oil rich countries that are directly controlled by the US co (the US Empire) also known as GCC, follow an oil production policy that largely suits the core states themselves, depending on the situation and their ability to affect the global market. ..."
"... As North America was a massive oil importer circa 2009 (Canada cannot be seen in isolation, but as appendix to the US) this increased oil production went a lot way in: a)boosting economic growth (North America has easily outpaced other advanced economies since the Lehman crisis) b) Minimize the US trade deficit and therefore: c) Boosting the value of the US dollar. ..."
"... Countries outside of the US, Canada (to a lesser extent UK, Norway ) that are major oil producers, need to accrue massive profits from their oil sales, since they universally divert most of those funds into financing the government, the military and social spending, while they must also keep some for re-investments into their oil sectors. US Canada are uber-happy if they can more or less break-even. ..."
Could this have been due to the special place US has in the hierarchy.
When camels are thirsty
they are chewing thistle to relieve their thirst, but the thistle is dry, so in fact their own
blood relieve their thirst.
Dogs chew old bones but there is nothing in them, but pieces of splited bone pierce their mouth
ceiling and fresh blood makes them think there is food in there.
This is what US has done f.ed the little economic moment it still had because is the forefront
of the empire, he is going for the fresh blood of shale.
As I have repeatedly stated on this blog, the global oil market is not a market like those
for smartphones, automobiles or ladies purses. The global oil (& gas) market is a STRATEGIC one.
Which goes on to say that the core states, such as first of all, North America, then NW Europe
get to have the first and final say.
The problem for the US, Canada, Norway and the UK (the only wealthy countries producing large
quantities of oil) is that their oil reserves are extremely marginal and can only be accessed
with high oil prices (in the long-run) This problem is compounded by the fact that high oil
prices enable geo-strategic rivals such as Russia/Iran/Iraq/Venezuela to be more defiant than
they would otherwise be.
The oil rich countries that are directly controlled by the US & co (the US Empire) also
known as GCC, follow an oil production policy that largely suits the core states themselves, depending
on the situation and their ability to affect the global market.
In my view, this is what preceded the recent oil market collapse:
NATO-GCC to Russia in 2011/12: "Give up Assad, or we'll fill our media with BS stories
about you. We will also 'encourage' our corporations to not invest in your country"
Russia to NATO-GCC: "You have been doing that for ages, who cares for even more propaganda.
Assad stays"
NATO-GCC to Russia in 2013/14: "Give up Assad, or we will turn Ukraine against you, there
will be serious trouble for you, as now we will make our economic warfare against you, official.
Moreover, our 'regime-change' efforts will intensify"
Russia replies to NATO-GCC: "Bring it on, Assad stays"
NATO-GCC to Russia in 2014: "We will pummel the oil price into oblivion*, we promise that
you will feel the strain, just give up on Assad or we will destroy you"
Russia replies to NATO-GCC: "I have seen worse. Assad stays"
*Notice that NATO-GCC did not use the oil-price weapon until one of two things happened:
a) Time-pressure on regime-changing-Syria became serious.
b) The shale and tar sands infrastructure had been already put in place under high oil prices.
But back to Ron's core (and largely correct) claim that the global oil production gains of
recent years have been a North American phenomenon (I would also add Iraq)
North America has been able to ramp-up production spectacularly in recent years because of
the following reasons:
a) It's capital rich. Instead of diverting all of that QE-enabled loans to the parasitic "housing
market" and lots of inane Silicon Valley start-ups (that fail 99 times of 100) it was wiser to
have some dough flow into the "shale oil & gas miracle" as well as Alberta's vast tar sands deposits.
Which made both economic as well as strategic sense.
b) As North America was a massive oil importer circa 2009 (Canada cannot be seen in isolation,
but as appendix to the US) this increased oil production went a lot way in: a)boosting economic
growth (North America has easily outpaced other advanced economies since the Lehman crisis) b)
Minimize the US trade deficit and therefore: c) Boosting the value of the US dollar.
As I have noted many times before on this blog, some (maybe several) countries around the world
have massive oil reserves that are far more prolific than those currently being exploited in North
America. But these countries, do not enjoy neither the political/military clout over the GCC,
nor remotely the financial capital to engage in such massive (and risky) investments.
Countries outside of the US, Canada (to a lesser extent UK, Norway ) that are major oil
producers, need to accrue massive profits from their oil sales, since they universally divert
most of those funds into financing the government, the military and social spending, while they
must also keep some for re-investments into their oil sectors. US & Canada are uber-happy if they
can more or less break-even.
But the peak-oil-environmental bias of many, does not allow them to see this.
Your strategic analyses are very interesting Stavros, and fit many of the things we all know are
true. However I have a problem with the "We will pummel the oil price into oblivion" part.
The available evidence is that the price of oil followed very closely the supply/demand ratio.
The chart below is from Dr. Ed's blog.
I am always skeptical of interpretations that are not supported by evidence. There are multiple
theories about who caused the oil price to go down and why. I rather stick with the data, it is
not a PO bias but quite the opposite. A supply/demand mismatch caused it and nobody wanted to
cut production unilaterally.
The oil rich countries that are directly controlled by the US & co (the US Empire) also
known as GCC, The oil rich countries that are directly controlled by the US & co (the US Empire)
also known as GCC, follow an oil production policy that largely suits the core states themselves,
depending on the situation and their ability to affect the global market.
That statement makes no sense whatsoever. Just who is/are "US & Co"? Would that be Obama? Or
perhaps the US Congress? Or perhaps the US Oil Companies? Then in the second half of that long
sentence, you completely contradict the first half of the sentence. You say: follow an oil
production policy that largely suits the core states themselves," Now which is it? Are they
controlled by US & co, or are do they pay no attention to whomever in the US that is doing the
controlling and follow a policy that simply suits themselves?
I would definitely agree with the second half of your sentence, the GCC states do exactly what
they damn well please. And I would definitely disagree with the first half of your sentence. They
would pay no attention to any US politician or businessman that might call them up and try to
tell them what to do.
But back to Ron's core (and largely correct) claim that the global oil production gains
of recent years have been a North American phenomenon (I would also add Iraq).
Well no, that's not what I said. Yes, recent oil production gains have been from US, Canada,
Iraq and Saudi Arabia. But what I said was:
The recent surge in world production that was brought about by high prices…
The recent gains in Iraq and Saudi Arabia were after the price already started to fall. Those
gains were not brought about by high prices. They were despite a steep decline in prices.
That statement makes no sense whatsoever. Just who is/are "US & Co"?
"US and Co" is essentially a codename for NATO. It is ruled by international financial elite
(Davos crowd) which BTW consider the USA (and, by extension, NATO) as an enforcer, a tool for
getting what they want, much like Bolsheviks considered Soviet Russia to be such a tool.
The last thing they are concerned is the well-being of American people.
LAGOS, Nigeria - The Nigerian National Petroleum Corp. says it lost 267 billion naira ($1.3
billion) in 2015, even as it tried to pump more oil to counter slashed world prices. The
corporation's monthly report posted at its website Thursday shows the biggest losses recorded at
its headquarters, by three refineries and a subsidiary that sources and distributes refined
products. ...
When glut of condensate is called glut of oil production that's one thing, but when the
situation is distorted and Broomberg published articles about how shale oil became cash position at
$35 per barrel is another. That's casino stooges propaganda.
Wood Mackenzie's latest global oil production analysis indicates that 3.4 MMbpd of production
is cash negative at a Brent oil price of $35. Since the dramatic drop in prices from late 2014,
there have been few halts in production-with around 100,000 bpd shut-in globally to date.
According to Wood Mackenzie, the areas with the largest volumes shut-in so far have been
Canada onshore and oil sands, conventional U.S. onshore projects and aging UK North Sea fields.
However, Wood Mackenzie cautions that the number of shut-ins is unlikely to increase at the
rate some might expect, as many producers hold out in the hope of a price rebound.
"Our latest 2016 production data indicates that with Brent crude oil prices at $35/bbl
3.4 MMbpd of oil production is cash negative, which equates to 3.5% of global supply," Stewart
Williams, V.P. of upstream research at Wood Mackenzie, explained.
Wood Mackenzie's study collates oil production data from over 10,000 fields and calculates
the cash operating costs-identifying the price at which the fields turn cash negative, and
the volume of oil production associated with this price level.
What is being affected, far more than current production, is profits. And profits determine
upstream investment in exploration and new drilling. This will affect production for several
years to come.
3.4 million barrels per day (b/d) of oil production is cash negative at a Brent oil price of
US$35, but the number of projects that have ceased production is minimal. With the oil price hitting
a record 12-year low recently, why aren't more producers turning off the taps? Using our Upstream
Data Tool and global team of analysts, we have created exclusive insight into economics of production.
Using our global database of over 10,000 oil producing fields –which account for total liquids
production of 79.7 million b/d – we have concluded that less than 0.1% of global production has
stopped. This represents around 100,000 b/d shut in so far globally; a very low number considering
the amount of producing wells that become uneconomic in this sustained low crude price.
What assets have stopped producing?
The areas hit the hardest have been Canada onshore and oil sands, aging UK North Sea fields
and conventional US onshore projects. Oil sand projects are suffering because of their high costs
and distance from the market place, while the North sea closures are mainly aged wells coming
to the end of their lifespan being sacrificed to wider project economics.
Conventional US onshore projects that have turned off the taps can be accounted for by ultra-low
output wells, or US "stripper" wells. This points to a lack of significant assets that have stopped
producing. Our analysis highlights that this is unlikely to increase at the rate some might expect.
Why are there not more production shut-ins?
Many companies will opt to take the loss, holding out for a rebound in prices. There is a cost
attached to restarting production that many will wish to avoid, offsetting the loss against capex
reductions in other areas. In other areas, the logistics of halting production is too complicated
and expensive to remain a viable option.
This still leaves the fact that 3.5% of 96.1 million b/d global supply is cash negative. Although
companies are cutting costs in other areas as our 2016 pre-FID insight highlights, this fall below
breakeven is not sustainable in the long term for many.
EDINBURGH/HOUSTON 5th February 2016 – Wood Mackenzie's latest global oil production analysis
indicates that 3.4 million barrels per day (b/d) of oil production is cash negative at a Brent
oil price of US$35. Since the dramatic drop in prices from late 2014, there have been few halts
in production – with around 100,000 b/d shut-in globally to date. According to Wood Mackenzie,
the areas with the largest volumes shut-in so far have been Canada onshore and oil sands, conventional
US onshore projects and aging UK North Sea fields. However, Wood Mackenzie cautions that the number
of shut-ins is unlikely to increase at the rate some might expect, as many producers hold out
in the hope of a price rebound.
Stewart Williams, Vice President of upstream research at Wood Mackenzie explains: "Our latest
2016 production data indicates that with Brent crude oil prices at US$35 per barrel ($/bbl), 3.4
million b/d of oil production is cash negative, which equates to 3.5% of global supply (96.1 million
b/d)."
Wood Mackenzie's latest study collates oil production data from over 10,000 fields and calculates
the cash operating costs – identifying the price at which the fields turn cash negative, and the
volume of oil production associated with this price level.
Mr Williams continues: "Since the drop in oil prices from late 2014, there have been relatively
few production shut-ins with less than 0.1% of global production halted so far – around 100,000
b/d globally."
So why aren't producers turning off the taps? Robert Plummer, Vice President of investment
research at Wood Mackenzie explains: "Being cash negative simply means that production costs are
higher than the price that the producer receives and does not necessarily mean that production
will be halted altogether. Curtailed budgets have slowed investment which will reduce future volumes,
but there is little evidence of production shut-ins for economic reasons.
"Given the cost of restarting production, many producers will continue to take the loss in
the hope of a rebound in prices. In terms of our current oil price forecast, we have recently
revised our annual average to $41 per barrel for Brent in 2016. The operator's first response
is usually to store production in the hope that the oil can be sold when the price recovers. For
others the decision to halt production is more complex and we expect that volumes are more likely
to be impacted where mechanical or maintenance issues arise and operators can't rationalise further
investment at current prices," Mr Plummer adds.
The areas hardest hit are Canada onshore and oil sands, conventional US Onshore projects and
some aging UK North Sea fields. Wood Mackenzie attributes the hit on Canadian production from
oil sands and conventional onshore to high costs and distance from market place. There have also
been production shut-in from US 'stripper' wells (onshore, ultra-low output wells) and in the
North Sea, where some operators have prematurely ceased production of aged fields.
Mr Plummer elaborates: "At a Brent oil price of US$35, Canada has 2.2 million b/d of production
which has a negative cash operating cost – predominantly from oil sands and small producing conventional
wells in Alberta and British Colombia. Venezuela is second with 230,000 b/d from its heavy oil
fields, followed by the UK with 220,000 b/d."
Mr Williams adds in closing: "In the past year we have seen a significant lowering of production
costs in the US, which has resulted in only 190,000 b/d being cash negative at a Brent price of
US$35. In fact, the biggest reductions have been from tight oil, the majority of which only becomes
cash negative at Brent prices well-below US$30/bbl."
It is clear that US shale industry now does not matter that much in this game anymore. Even if
we believe absurd extrapolation of breakeven cost that now are propagated by MSM and "Fuser law"
of breakeven price for LTO. "The Moor has done his duty, the Moor can go." (
http://canadafreepress.com/article/the-moors-can-go
). Revolutions tend to eat its own children.
What measures such counties will be able to take take outside of growing of own refining and
petrochemical sector is difficult to say, but I suspect that such measures will be taken by most
oil producing countries other then completely dysfunctional or in the state of civil war (Libya,
Iraq). Barter deals and direct swaps of currencies which avoid using dollars might became more
common. If I were Russia I would dump Western Europe market in favor of Asia and watch how they
would scramble to adjust using Saudis and Iran to compensate for those losses. Such a swap of
customers with Saudis and Iran might be a sufficient shock to change market dynamics. For example,
using "sanctions" as a justification ( by adopting the law that prohibit to sale of Russian oil
to countries that implemented sanctions against Russia ). It' a gamble but possible losses might
well be compensated by jump in global oil prices due to this shock therapy.
I suspect that the second half of this year and the next year probably will be much more interesting
and provide more surprises for linear extrapolation lovers then the second half of 2014 and 2015.
The current "glut theory" (aka "Great condensate con") is still promoted by EIA (aptly named
here "Energy Disinformation Agency"), IEA and thier friends in MSM by all means including tossing
biofuels in the mix and reporting "bloated" inventories". Until some "the last straw that broke
the camel back" moment arrives (aka "tipping point"
http://www.amazon.com/The-Tipping-Point-Little-Difference/dp/0316346624 ). At which moment
panic might start.
I doubt that in such a destabilized system we can avoid the tipping point.
One unexpected blowback of "Operation Oil Glut" is that deflation of "shale bubble" might well
take some "Internet economy" companies with it. LinkedIn today skids 40%, erases $10B in market
cap.
It is clear that US shale industry now does not matter that much in this game anymore. Even if
we believe absurd extrapolation of breakeven cost that now are propagated by MSM and "Fuser law"
of breakeven price for LTO. "The Moor has done his duty, the Moor can go." (
http://canadafreepress.com/article/the-moors-can-go
). Revolutions tend to eat its own children.
What measures such counties will be able to take take outside of growing of own refining and
petrochemical sector is difficult to say, but I suspect that such measures will be taken by most
oil producing countries other then completely dysfunctional or in the state of civil war (Libya,
Iraq). Barter deals and direct swaps of currencies which avoid using dollars might became more
common. If I were Russia I would dump Western Europe market in favor of Asia and watch how they
would scramble to adjust using Saudis and Iran to compensate for those losses. Such a swap of
customers with Saudis and Iran might be a sufficient shock to change market dynamics. For example,
using "sanctions" as a justification ( by adopting the law that prohibit to sale of Russian oil
to countries that implemented sanctions against Russia ). It' a gamble but possible losses might
well be compensated by jump in global oil prices due to this shock therapy.
I suspect that the second half of this year and the next year probably will be much more interesting
and provide more surprises for linear extrapolation lovers then the second half of 2014 and 2015.
The current "glut theory" (aka "Great condensate con") is still promoted by EIA (aptly named
here "Energy Disinformation Agency"), IEA and thier friends in MSM by all means including tossing
biofuels in the mix and reporting "bloated" inventories". Until some "the last straw that broke
the camel back" moment arrives (aka "tipping point"
http://www.amazon.com/The-Tipping-Point-Little-Difference/dp/0316346624 ). At which moment
panic might start.
I doubt that in such a destabilized system we can avoid the tipping point.
One unexpected blowback of "Operation Oil Glut" is that deflation of "shale bubble" might well
take some "Internet economy" companies with it. LinkedIn today skids 40%, erases $10B in market
cap.
Susan Strange was probably the first to analyze this new "casino capitalism" model for oil boom
and bust. Here is a relevant quote from her book (1997):
As with interest rates, the problem with oil prices is not so much that they have been high,
but rather that they have also been so unpredictable and so unstable. Again the instability
has engendered a new game in the great financial casino – oil futures.
This evolved in the following way. In the 1980s as OPEC's command over the oil market weakened,
with some producers desperate for foreign exchange ready to undercut the agreed price with
secret, under the-counter deals, more and more oil cargoes came to be traded on what is rather
misleadingly called the Rotterdam spot market.
But this is not a market in the ordinary sense in which buyers and sellers are identifiable
and prices known to everyone. It is just a network of about a hundred oil traders and brokers,
connected with each other by long distance intercontinental telephone and telex. Like other
brokers in grain or porkbellies or frozen orange-
juice, they are often tempted to increase their profits by talking the market price up or down.
As late as 1978, the spot market deals still accounted for only 5 per cent of all trade
in oil. They now account for 40 per cent or more.
Inevitably, because of the close connection between oil prices, generally denominated in
dollars, and the price of the dollar in foreign exchange markets, there has grown up in London
and New York a futures market in 'paper barrels' to match the forward and futures markets in
dollars and dollar assets.
These 'paper barrel' contracts can change hands as many as 50 times, and do not need to
be based on barrels of real oil. Futures contracts on the British Brent blend of North Sea
oil are thought to add up to as much as eight times the total annual output of the Brent field
(Hooper, 1985).
In short, while there is little doubt that the instability of exchange rates has helped
to destabilize the oil market, the oil market is now adding its own gambling game to all the
others.
The picture so far is one of an international financial system in which the gamblers in
the casino have got out of hand, almost beyond, it sometimes seems, the control of governments.
The question has occurred already to a good many people whether it is the governments that
have got weaker over the past 15 years, or whether it is a fortuitous coincidence of economic
forces that have combined to make the markets more powerful. It is an important question, for
the answer will dictate what has to be done to control, to moderate, or to close down the great
financial gambling game.
That question is linked with a second one: have all states weakened in relation to markets,
or only one, or perhaps just a few of the more important governments? Those who think that
all governments have weakened tend to find rather broad general explanations of how this has
come about. If they offer solutions they are apt to be of the most vague and general kind.
In contrast, those who think the explanation lies with the few, or even just with the USA as
the dominant power in the international financial system – as all the figures show it to be
– tend to be much more specific both in the explanations they put forward and in the solutions
they suggest.
I think in 1997 the term "neoliberalism" was not yet common and "casino capitalism" was used
as a substitute for depiction of essentially the same phenomenon. She "feels the pain" but did
not understand that it was a "quite coup" that installed neoliberalism as a dominant social system
all over the world, displacing both New Deal Capitalism and Socialism. Kind of global coup
detat of financial oligarchy. So governments were already captured and can't serve as a countervailing
force for gambling.
Quote above is cited from
Casino Capitalism Reprint Edition, by Susan Strange. Paperback: 224 pages. Publisher: Manchester
University Press; Reprint edition (October 16, 1997)http://www.amazon.com/gp/product/0719052351?keywords=Susan%20Strange%20Casino%20capitalism
I wonder who writes this stuff? "3.4 million b/d of oil production is cash negative, which equates
to 3.5% of global supply (96.1 million b/d)." Which I would instead identify as "more than twice
as much as the current oversupply."
And, a comedian could not do better than this: "Being cash
negative simply means that production costs are higher than the price that the producer receives."
WTF!! Tell every company that has ever filed for bankruptcy that you "simply" spent more money
than you received. [And, so you "simply" committed financial suicide. Nothing to see here, move
along.]
"Being cash negative simply means that production costs are higher than the price that the
producer receives and does not necessarily mean that production will be halted altogether. .."
"Given the cost of restarting production, many producers will continue to take the loss in the
hope of a rebound in prices."
Shutting and then restarting wells is not as easy as to turn off and again turn on the tap
in your bathroom. It may be costly and it can damage the reservoir. It many cases it is easier
and less costly to continue producing at loss for several months
"To abandon one of the North Sea's bigger platforms, and plug up to 30 wells, can cost more
than £700m. As a result, even at $30 a barrel, some operators may prefer to keep pumping."
The posted oil price here is around $16 bbl now. On a drive I took earlier this week, I counted
9 pump jacks that were idle, and 6 pumping. I know that some of the idle pumps may be on a timer
where they pump intermittently, but it seems likely to me that many of the wells have been shut-in.
There isn't a lot of production in this area, and whats here is mostly old conventional stripper
production.
The Woodmac report references $35 oil so we don't know exactly when it was prepared. With the
declines of January , and high differentials, many areas are now at $15 to $20 oil. At that price
a lot of these wells will be producing revenue of much less than cash costs. I would think that
operators would be forced into reducing their production if prices stay this low for a while.
But, if Woodmac says they aren't shutting in, maybe they are not.
Since the dramatic drop in prices from late 2014, there have been few halts in production-with
around 100,000 bpd shut-in globally to date.
Only 100,000 barrels per day has been shut
in so far. Yet according to the EIA, Non-OPEC C+C production peaked in December 2015 at 47,207
and as of October, stood at 46,444 bpd, a drop of 763,000 barrels per day.
Obviously, production growth has stopped and the decline has begun, regardless of Wood Mackenzie's
figures.
100 kb/d mentioned by Woodmac is production shut-in due to high oil prices. This does not include
the effects of natural declines, lower drilling activity and delayed projects.
The IEA says Non-OPEC production was up 1.3 million bpd in 2015 but will be down 0.7
million bpd in 2016. Below are their numbers. They do not include biofuels or process gain.
2014 51.8
2015 53.1
2016 52.4
The IEA has Non-OPEC liquids in December 2015 down about 650,000 bpd compared to December 2014
Well, production has followed price in the USA and Canada. But elsewhere everyone just seems
to be producing flat out regardless of the price. Just as the price was peaking in early 2011,
Non-OPEC production, less USA and Canada, began to decline. Production in this chart is only
through October.
The recent surge in world production that was brought about by high prices was a USA and
Canadian phenomenon only.
"... The media puts forth a continuous stream of completely unadulterated crap to its readership. Saudi Arabia is not going to spend $175 billion per year to put out of business producers that produce an entirely different product, and which sells to an entirely different market. LTO is as much like Saudi crude as Shetland Ponies are to an Arabian race horses. The similarities stop at horse. ..."
"... LTO is a very light hydrocarbon that is used as a diluent, and feed stock. Its API is 45. It is used to thin heavier hydrocarbons like Canadian bitumen to allow it to be transported by pipe. It is used as a feedstock to make hundreds of different products from paint to plastic pipe. ..."
"... Saudis light sweet crude has an API 45, and the heavier ones, API 40, deliver entirely different products as show in the graph below: ..."
"... Goldman Sachs is an unscrupulous pack of thieves who have no qualms about lying to their clients, or the public if it serves their purposes. They, and others in the shale financing business will continue to push the Saudi/ US LTO myth for as long as they can find investors that are credulous enough to believe them. ..."
"... Some see only what they want to see. Others see the whole forest. Bloomberg and Goldman are both habitual liars and thieves. Goldman says it and Bloomberg backs it up, as if either have any credibility left. ..."
"... Short has it correct. All you see in the US MSM is bullshit in ever higher and smellier piles. As we approach the end, the cries will be louder, shriller and continuous. Wait and see. ..."
"A deal is not only "highly unlikely," in the estimation of Goldman Sachs, but "self-defeating"
for the Saudis. By cutting production now and boosting prices, Saudi Arabia would effectively
bail out U.S. shale producers just as the Saudi strategy of keeping prices low to squeeze them
out of the market is beginning to work, Goldman's Jeff Currie argues."
The media puts forth a continuous stream of completely unadulterated crap to its readership.
Saudi Arabia is not going to spend $175 billion per year to put out of business producers that
produce an entirely different product, and which sells to an entirely different market. LTO is
as much like Saudi crude as Shetland Ponies are to an Arabian race horses. The similarities stop
at horse.
LTO is a very light hydrocarbon that is used as a diluent, and feed stock. Its API is >
45. It is used to thin heavier hydrocarbons like Canadian bitumen to allow it to be transported
by pipe. It is used as a feedstock to make hundreds of different products from paint to plastic
pipe.
Saudi's light sweet crude has an API 45, and the heavier ones, API < 40, deliver entirely
different products as show in the graph below:
Saudi's light sweet crude, and LTO are entirely different products that sell to entirely different
markets. Saudi's crude is no competition to LTO and LTO is no competition for Saudi's crude.
Goldman Sachs is an unscrupulous pack of thieves who have no qualms about lying to their
clients, or the public if it serves their purposes. They, and others in the shale financing business
will continue to push the Saudi/ US LTO myth for as long as they can find investors that are credulous
enough to believe them.
makati1 on Thu, 4th Feb 2016 7:59 pm
Some see only what they want to see. Others see the whole forest. Bloomberg and Goldman
are both habitual liars and thieves. Goldman says it and Bloomberg backs it up, as if either have
any credibility left.
Short has it correct. All you see in the US MSM is bullshit in ever higher and smellier
piles. As we approach the end, the cries will be louder, shriller and continuous. Wait and see.
"... If the 2016 OPEC basket oil price does average around $35/bbl it will be about $15/bbl lower than the $49.49/bbl average basket price in 2015, meaning that OPEC will lose yet another $130 billion in annual oil revenues if it maintains production at current levels. ..."
If the 2016 OPEC basket oil price does average around $35/bbl it will be about $15/bbl lower
than the $49.49/bbl average basket price in 2015, meaning that OPEC will lose yet another $130 billion
in annual oil revenues if it maintains production at current levels.
Can OPEC survive another hit like this? Well, those waiting for a prediction are going to
be disappointed because I'm not going to make one.
There are just too many unknowns. We'll just have to wait and see.
"... it appears to me that the increase in take away capacity and adequate demand, is what was required in the NE to increase production. ..."
"... Yesterday's Northeast production estimate was revised up from 22.29 Bcf/d to 22.83 Bcf/d, making February 1 the new all-time high, surpassing the previous all-time high of 22.55 set just this past weekend. ..."
Not sure how this fits in to the theme of the guest post, but it appears to
me that the increase in take away capacity and adequate demand, is what was
required in the NE to increase production.
Yesterday's Northeast production estimate was revised up from 22.29
Bcf/d to 22.83 Bcf/d, making February 1 the new all-time high, surpassing
the previous all-time high of 22.55 set just this past weekend. This was
driven by an increase to yesterday's Appalachian-Ohio figure of 0.25 Bcf/d
and a 0.18 Bcf/d increase in the PA Northeast Dry.
This helped drive a 1.3 Bcf/d upward revision to yesterday's dry US production, bringing it to 73
Bcf/d, the highest it has been all year.
Production fell 0.4 Bcf/d today
with the Northeast and Texas accounting for the majority of this. US Demand
increased by 2.9 Bcf/d, with ResComm accounting for about 2.4 Bcf/d of this
driven by a 1 Bcf/d increase in the Southwest. Total powerburn climbed to
23.3 Bcf/d, as increases of 0.3 Bcf/d and 0.2 Bcf/d in the Southwest and
Southeast, respectively, offset modest declines in Texas, the Northeast, and
the Midcon Market.
Half of oil production from future developments is uneconomic at US$60/bbl Brent. These comprise
of conventional projects which have yet to receive final investment decision (pre-FID) and future
drilling in US onshore Lower 48 plays; which are critical for future oil supply.
By 2025, production from pre-FID projects and US Lower 48 future drilling could be nearly 15 million
b/d. Only 7.6 million b/d comes from projects which achieve commerciality at US$60/bbl, a likely
screening criteria.
Production from most future developments is required to fill the supply gap between declining
commercial fields and projected growth in demand.
Under our Macro Oils supply-demand outlook over 22 million b/d is needed from new developments
by 2025 to meet demand. We expect the pre-FID pipeline to contribute around half of this. However,
the number of deferred pre-FID projects is growing as the oil price remains low. Without significant
structural cost deflation, the majority of these projects, are at risk of further delay or a major
overhaul of development plans.
Prices need to support the development of the next tranche of supply. This breakeven analysis
provides support for an oil price floor in the longer term of above US$70/bbl.
Deepwater and ultra-deepwater projects sit high on the cost curve and are at greatest risk of
delay. Production from Angola, Nigeria, US Gulf of Mexico and Brazil is at risk due to weak project
economics. Over 80%, or around 16 billion barrels, of deepwater and ultra-deepwater reserves are
uneconomic at $60/bbl.
The economics are relatively robust within onshore, tight oil and shallow water projects. In fact
US Lower 48 is now the key low cost area and by 2025 contributes 70% of volumes produced under
$60/bbl.
Total global liquids supply in 2040: 136 mb/d,
or 133 mb/d excluding refinery processing gains.
or 129 mb/d ex. proc. gains and biofuels.
Note, that AEO 2015 was issued in early 2015 and apparently prepared in late 2014, when oil
prices were significantly higher.
The AEO 2015 projects Brent price at $71 in 2016 gradually rising to $141 (in $2013) by 2040.
I expect AEO 2016 global liquids supply projections to be lower than last year's issue.
Total global liquids supply in 2040: 121.7 mb/d,
or 118,8 mb/d excluding refinery processing gains.
or 114.5 mb/d ex. proc. gains and biofuels.
Note, that AEO 2015 was issued in early 2015 and apparently prepared in late 2014, when oil
prices were significantly higher.
The AEO 2015 projects Brent price at $71 in 2016 gradually rising to $141 (in $2013) by 2040.
I expect AEO 2016 global liquids supply projections to be lower than in last year's issue.
If they showed a chart with declining production would anyone use their services anymore?
Maybe that is why they are so "optimistic".
The "Yet to be found" and "Yet to be developed" looks suspicious since it is exactly the amount
needed to keep us on the same level as today for conventional production.
How can they predict we will find more oil 2040 than in 2025? Sounds fishy.
Sorry, I thought that was a WoodMac chart not an IEA chart.
Shows what I know.
Having worked for some consulting companies (not in oil), sales and billable hours trumps everything
(except anything that risks legal claims against the owners /partners personal assets).
Otherwise you will go out of business and not exist.
If WoodMac is predicting a better scenario than that chart Alex posted, it is sales commissions
and/or billable consultants.
Anyway…I should probably let the smart guys discuss…lol
Enhanced recovery don't seem to get much credit here.
Notice that the IEA don't have us reaching 80 mbd, C+C, until 2030, a point that the EIA says
we are at today. They, the IEA, has us at about 75 million barrels per day today. My guess is
that is about right.
The IEA has conventional oil + tight oil+oil sands + GTL and CTL at ~75 mb/d and NGLs at @
15 mb/d in 2014
Total (ex. biofuels and processing gains) ~ 90 mb
The EIA has conventional oil + tight oil+oil sands + GTL and CTL at ~79.4 mb/d and NGLs at
@ 9.5 mb/d in 2014
Total (ex. biofuels and processing gains) ~ 89 mb
The IEA has included all OPEC NGLs and condensate in global NGLs number.
The EIA apparently classifies large part of OPEC NGLs and condensate as condensate (part of global
conventional C+C).
(Total OPEC NGLs and condensate production in 2014 was 6.36mb/d)
Thanks for the clarification. Looks like about 4-5 Mb/d of condensate is produced in the World.
As long as this can be easily blended into liquid fuels (such as gasoline) at refineries, it makes
sense to call it "oil" as there is a wide range of stuff we are willing to call oil (such as bitumen).
We have been counting crude plus condensate for a long time, excluding C2, C3, and C4 makes
sense to me, but excluding C5 does not. Just one person's opinion.
the IEA is including only OPEC crude in global C+C numbers both in the monthly reports (OMR)
and WEO.
NGLs and total OPEC condensate is classified as NGLs.
For other countries, the IEA includes condensate in C+C.
The EIA somehow separates "OPEC NGLs" into NGLs and lease condensate. The later is included
in global C+C numbers.
The EIA puts US Lower 48 C+C production in excess of 45 API Gravity at about 2 million bpd in
2015 (so total US 45+ in 2015, inclusive of Alaska, was presumably a little in excess of 2 million
bpd), and OPEC 12 Implied Condensate* was 2.5 million bpd in 2014.
The US and OPEC 12 combined accounted for 53% of global C+C production in 2014.
In any case, as I have previously said, the issue of crude versus condensate quality is something
of a red herring.
My point is and has been is that the data strongly suggest that actual global crude oil production
(45 API Gravity and lower) has been on an undulating plateau since 2005, while global gas and
associated liquids, condensate and NGL, have so far continued to increase.
*EIA OPEC 12 C+C less OPEC 12 Crude Only, subject of course to usual caveats about data quality
Given that for the past five years oil discoveries have been getting steadily less (and I think
this year so far there may not have been any really new ones – only a some gas and one oil confirmation
find) and that reservoir growth has mostly been associated with large, conventional fields, of
which there are no more, the "yet to find" wedges in all these charts might be a bit optimistic.
Why does the "yet to be developed" wedge expand continuously? This implies that discoveries
we know about would be bought on line over the next 25 years and more and be able to compensate
for decline in previous (new) developments plus add more capacity (i.e. they'd be growing in development
size over time). It should surely look like a bulge with a taper to zero over time.
Presumably the NGL, oil sands and tight oil sections have their own components of development
required, maybe a larger proportion than for the conventional oil as well. There's a lot of development
money needs to be spent to fill the gaps, and pretty much from a standing start where we are at
the moment.
Why does the "yet to be developed" wedge expand continuously?
George, that is mostly OPEC "proven" but undeveloped reserves that the IEA assumes will be
brought on line as needed.
OPEC claims 1.2 trillion barrels of reserves. And about two thirds of that is "yet to be developed".
And it will forever remain "yet to be developed" because it does not exist.
I disagree with the 2 out of 3 barrels missing and the 400 Gb OPEC reserve estimate.
Jean Laherrere estimates OPEC 2P reserves in 2010 at about 500 Gb for C+C less extra heavy
(which leaves out Orinoco belt reserves in Venezuela) and that is a very conservative estimate.
Most astute observers realize the Orinoco reserves are overstated and indeed for these 220
Gb of claimed reserves, the 2 of 3 missing barrels may be apt.
For the C+C less extra heavy OPEC reserves in 2010, BP has 940 Gb. Based on Jean Laherrere's
estimate it would be roughly 1 out of 2 barrels are missing.
I agree OPEC overstates its reserves. I think that the 1 of 3 barrels is real graphic (which
is cute) overstates the "missing barrels" case.
I disagree with the 2 out of 3 barrels missing and the 400 Gb OPEC reserve estimate.
I don't. I think 400 Gb is likely an overestimate. That is, if
OPEC's estimate
of Non-OPEC reserves of 286.9 billion barrels is anywhere close to being correct. Not counting
bitumen or oil sands, OPEC does not have more reserves than Non-OPEC.
Every country in the world produces every barrel they possibly can. And the more oil they have
to produce the more oil they do produce…. on average that is. According to the EIA, Non-OPEC
produces 58% of the world' C+C and OPEC produces 42%. To assume that OPEC has three times the
proven reserves as Non-OPEC is truly absurd. How can anyone believe such shit?
Ron – that makes sense, thanks. If I was country or region with 800 billion barrels of undeveloped
reserves that's what I'd be talking up. I wouldn't be promoting tight gas and renewables to free
up oil for export; or pre-salt, deep sea exploration to find new reserves (which is what Saudi
and Kuwait have been doing), and we wouldn't be seeing , what looks like, peaks for most of the
OPEC members developing (if you assume a peak is at about 50% depletion they shouldn't be peaking
for a good few years yet if there are another 1.2 trillion barrels available).
For oil remaining now I think I'd go with Sadad al-Husseini from a few years ago (2010) who
indicated there are maybe only 1.2 to 1.5 trillion barrels left (found and unfound). Since then
we've produced about 150 billion and maybe 100 to 200 billion might not be there or can't be developed
(in Arctic and Deep Sea). So we may have only 850 to 1150 billion left now, which would put us
well past 50% URR (although maybe condensate and NGL may be higher and compensate somewhat).
That is an outstanding thread on a very high quality site.
If you did not view the video on Haliburton's CobraMax DM BHA that Lenny Masseras (sp?) embedded
in that thread, you may greatly appreciate checking it out.
I think that is the approach Haliburton is pushing for both frac'ing and refrac'ing.
The tsunami of expected bad news is starting. Freeport McMoran announced late last week that it
is immediately idling all 3 of its drillships in the Gulf of Mexico. The 3 are under leases that
extend into 2017 for amounts that average over $500,000 per day. They are recording a charge of
about $1.5 billion IIRC. If they continued to drill with them, they said that their spend would
be double that. So they are trying to conserve cash and also will be trying to negotiate amended
contracts. Today Ultra Petroleum was downgraded to junk as it appears that they will not be able
to meet a $62 million debt payment due in March. Restructuring ahead. Traded at $100 in 2008.
The good news might be that 60 days from now, everyone will realize that either the oil industry
is going away or that prices have to rise. By then, it should be obvious that production is going
to fall significantly.
Today, Michael Rothman [he used to be Merrill Lynch's chief oil analyst for many years dating
back to the at least the early 90's, and who is now on his own] said that after the winter is
over, it will be pretty obvious that supply and demand are in fairly close balance. His prediction
– back to $85 by year end. He always was a very analytical numbers guy. He also said that once
you start to see a draw in inventories, it will be a long time before they start building again.
Today, Pickens called the $26.10 as the bottom, with a double by year end.
In January, China had a record number of tankers under contract to fill storage. As you know,
they are building an oil reserve like the US has. That should be "permanent" storage for the foreseeable
future.
I think that Ron's call of an oil production peak for the 12 month period ending in October
2015 (?) should be good for at least four years, if not forever.
"Peak oil is dead,"
Rob Wile declared
last week. Colin Sullivan
says it has "gone the way of the Flat Earth Society", writing
Those behind the theory appear to have been dead wrong, at least in terms of when the peak
would hit, having not anticipated the rapid shift in technology that led to exploding oil and
natural gas production in new plays and areas long since dismissed as dried up.
These comments inspired me to revisit some of the predictions made in 2005 that received a lot
of attention at the time, and take a look at what's actually happened since then.
Here's how Boone Pickens
saw the world in a speech given May 3, 2005:
"Let me tell you some facts the way I see it," he began. "Global oil (production)
is 84 million barrels (a day). I don't believe you can get it any more than 84 million barrels.
I don't care what (Saudi Crown Prince) Abdullah, (Russian Premier Vladimir) Putin or anybody
else says about oil reserves or production. I think they are on decline in the biggest oil
fields in the world today and I know what's it like once you turn the corner and start declining,
it's a tread mill that you just can't keep up with....
"Don't let the day-to-day NYMEX (New York Mercantile Exchange) fool you, because
it can turn and go the other direction. I may be wrong. Some of the experts say we'll be
down to $35 oil by the end of the year. I think it'll be $60 oil by the end of the year.
You're going to see $3 gasoline twelve months from today, or some time during that period."
But others, like Daniel Yergin, chairman of Cambridge Energy Research Associates, were not
as concerned.
Yergin wrote on July 31, 2005:
Prices around $60 a barrel, driven by high demand growth, are fueling the fear of
imminent shortage -- that the world is going to begin running out of oil in five or 10 years.
This shortage, it is argued, will be amplified by the substantial and growing demand from
two giants: China and India.
Yet this fear is not borne out by the fundamentals of supply. Our new, field-by-field
analysis of production capacity, led by my colleagues Peter Jackson and Robert Esser, is
quite at odds with the current view and leads to a strikingly different conclusion: There will be a large, unprecedented buildup of oil supply in the next few years. Between
2004 and 2010, capacity to produce oil (not actual production) could grow by 16 million
barrels a day-- from 85 million barrels per day to 101 million barrels a day-- a 20 percent
increase. Such growth over the next few years would relieve the current pressure on supply
and demand.
Let's start by taking a look at what happened to global oil production in the years since
those two very different views were offered. Total world liquids production as reported by
the EIA had reached 85.2 million barrels a day at the time Pickens issued his pronouncement.
It briefly passed that level again in June 2006 and June 2008, though mostly was flat or down
over 2005-2009 before resuming a modest and erratic climb since then. The most recent number
(December 2012) was 89.3 million barrels a day, 4 mb/d higher than where it had been in May
2005, and 12 mb/d below the levels that Yergin had expected we'd be capable of by 2010.
Figure 1. Global liquids production, monthly, Jan 2000 - Dec 2012, in millions of barrels
per day. Includes field production of crude oil, crude condensate, natural gas plant liquids,
refinery process gain, and other liquids such as biofuels. Vertical line marks May 2005.
Data source:
EIA
But more than half of that 4 mb/d increase has come in the form of
natural gas liquids-- which can't be used to make gasoline for your car-- and biofuels--
which require a significant energy input themselves to produce. If you look at just field production
and lease condensate, the increase since May 2005 has only been 1.7 mb/d.
Figure 2. Global production of crude oil (including lease condensate), monthly, Jan
2000 - Dec 2012, in millions of barrels per day. Excludes natural gas plant liquids, refinery
process gain, and other liquids such as biofuels. Vertical line marks May 2005. Data source:
EIA
Gasoline in the United States reached $3.00 a gallon in July 2006, just as Pickens had predicted
it would. Today we'd consider that cheap.
Figure 3. Average U.S. retail gasoline price, all grades and formulations, Jan 2000
- Dec 2012, in dollars per gallon. Vertical line marks May 2005. Data source:
EIA
Crude oil only took two months after Pickens' prediction to reach $60/barrel. Brent is almost
twice that today.
Figure 4. Price of Brent crude oil, Jan 2000 - Dec 2012, in dollars per barrel. Vertical
line marks May 2005. Data source:
EIA
Knowing all the facts today, of the assessments offered in 2005 by Pickens and Yergin, which
one would an objective observer characterize as having been closer to the truth? How could
anyone come away with the conclusion that those who saw the world as Pickens did were "dead
wrong"?
The rush to judgment seems to be based on the remarkable recent success from using horizontal
fracturing to extract oil from tighter rock formations. Here for example is a graph of production
from the state of Texas, one of the areas experiencing the most dramatic growth in tight oil
production. In 2012, Texas produced almost 2 million barrels each day, up 800,000 barrels a
day from 2010.
Figure 5. Top panel: Texas field production of crude oil, annual, 1946-2012, in millions
of barrels per day, from
Hamilton (2012)
and EIA.
Bottom panel: Price of West Texas Intermediate crude oil in 2012 dollars, calculated as
average nominal price over year (from
FRED)
divided by ratio of end-of-year seasonally unadjusted CPI to Dec 2012 CPI (from
FRED).
But Texas production in 2012 was still 1.4 mb/d below the state's peak production in 1970,
and I haven't heard anyone suggest that Texas is ever going to get close again to 1970 levels.
Production from any individual tight-formation well in Texas has been observed to fall very
rapidly over time, as has also been the experience everywhere else.
Figure 6. Type decline curve for Eagle Ford liquids production. Source:
Hughes
(2013).
Total U.S. production-- including Texas, offshore, and every other state-- is up 1 mb/d
since 2012. But interestingly, that's almost the magnitude by which Saudi production (which
accounted for 13% of the 2012 total in Figure 2 above) has recently declined.
Figure 7. Alternative estimates of Saudi daily oil production (mb/d, left scale) and
Saudi oil rig count (right scale). Source:
Stuart Staniford.
Stuart Staniford speculates that the recent Saudi cutback may have been a deliberate response
to U.S. production gains in an effort to prevent oil prices from declining. On the other hand,
his graph shows that Saudi effort (as measured by active drilling rigs) has ramped up significantly
in the last two years.
Perhaps it's the case that Saudi Arabia isn't willing to maintain its previous production
levels, or perhaps it's the case that Saudi Arabia isn't able to maintain its previous production
levels. But whatever the explanation, this much I'm sure about: those who assured us that Saudi
production was going to continue to increase from its levels in 2005 are the ones who so far
have proved to be dead wrong.
Posted by James Hamilton at April 3, 2013 11:55 AM
The question arises whether oil consumption is falling due to peak demand or peak supply.
The general view in the market--and this includes Citi, GS, the IEA and BP--is that it's peak
demand. Consumers, bless their hearts, just don't want oil anymore. They love small under-powered
cars and staying at home. Facebook and face time have changed the world!
Those in the peak oil camp see OECD oil consumption simply bid away by a combination of
inadequate supply growth and strong underlying non-OECD demand. In this world, the OECD economies
struggle, the price of oil stays high, and the oil supply remains unresponsive--which is actually
what we observe.
As for Stuart: In what sense do you claim oil demand is inelastic? US (and OECD) demand
is falling fast in the face of steady oil prices. That is very much price elastic demand.
During the recession, we toggled from inelastic to elastic demand. That's a very important
point! It means that the damage from a constrained oil supply is coming through volumes, not
prices.
I'll get around to writing something about this at some point. We have a couple billion
dollars of commercial diligence to complete this month, as well as launching a new product
line, so it will have to wait until we hit some clear air.
A trip down memory lane . . . with hypothetical headline and news story:
US Net Oil Imports
Drop by Half in 9 Years, US on track to become net oil exporter
US crude + condensate production is up by almost one million barrels per day, which, combined
with lower consumption, has caused US net oil imports to fall by half in 9 years. Many experts
believe that it is not if, but when, that the US once again becomes a net oil exporter.
Of course, these data points pertain to the 1976 to 1985 time frame.
US crude + condensate (C+C) production hit a peak of 9.6 mbpd (million barrels per day)
in 1970, and dropped to 8.1 mbpd in 1976 (EIA). Primarily because of Alaskan production coming
on line, US C+C production rebounded, hitting 9.0 mbpd in 1985. Production then fell to 5.0
mbpd in 2008 (the decline was somewhat accelerated because of the 2005 Gulf Coast hurricanes).
Production rebounded to 6.5 mbpd in 2012 (and to about 7.1 mbpd currently).
However, I suspect, and the EIA appears to concur, that the current rebound in US C+C production
is likely to fall short of the 9.0 mbpd secondary peak that we saw in 1985, resulting in a
tertiary peak in US C+C production. In other words, we are probably seeing a continuing "Undulatling
Decline" in US C+C production.
And here's the problem. Our supply base consists of discrete sources of oil like Alaska's
North Slope production:
What surprises me about the almost daily "Peak Oil Is Dead" stories is the implication that
production will increase virtually forever.
If the rate of increase in oil production from the North Slope did not increase forever,
why would the rate of increase in production from the finite sum of discrete producing regions
like the North Slope increase forever?
Take a look at the world per-capita level and rate basis 2005-08 and the 3-, 5-, and 10-yr.
rates of change of crude and total liquids.
Then compare with real GDP per capita and production and the levels and rates of world cereals
production and supplies.
Regressing and interpolating the change rates, the world has very little production and
supply margins of safety per capita at a 1.2% rate of population growth and production and
supplies that are growing slower than population plus replacement.
There are four key definitions of "Oil Production."
(1) Crude oil (less than 45 API gravity)
(2) Crude + Condensate (basically gasoline)
(3) Crude + Condensate + NGL's (Natural Gas Liquids), AKA total petroleum liquids
(4) Crude + Condensate + NGL's + Biofuels + Processing Gains + All other liquids, AKA total
liquids
Unfortunately, it appears that no one tracks US and global crude oil production (defined
as less than 45 API gravity crude). All we have is regional crude oil data, e.g., Texas Railroad
Commission (RRC) and OPEC. But based on regional data, it appears quite likely that there was
no material increase in global crude oil production from 2005 to 2012, despite a doubling in
annual global crude oil prices.
Even if we include condensate, I estimate that global Crude + Condensate production only
increased from 73.6 mbpd in 2005 to about 75.5 mbpd in 2012 (a rate of increase of only 0.36%/year).
For purposes of this discussion, crude oil = oil with less than 45 Degrees API Gravity,
and not crude + condensate (C+C).
Condensate and NGL's (natural gas liquids, e.g., ethane, propane and butane) are byproducts
of natural gas (NG) production, from both gas wells and from associated gas sources (NG produced
along with oil). Condensate is basically natural gasoline, and it can easily be processed into
finished gasoline, but it is not of much use in producing distillates, such as jet fuel and
diesel.
Based on OPEC crude oil production data data and based on the high percentage of condensate
production in many US shale plays, I suspect that virtually all of the post-2005 increase in
global hydrocarbon liquids production (crude + condensate + NGL's) comes from natural gas sources
(as condensate + NGL's).
As noted above, even if we count condensate, note that global C+C production was only up
by about 2% in 2012, versus 2005, a rate of increase of about 0.36%/year.
Here is the question the Cornucopians don't want to address: If we have virtually unlimited
crude oil reserves, i.e., "Peak Oil is Dead," why has a doubling in global crude oil prices,
from $55 in 2005 to $111 or more in both 2011 and 2012, almost certainly not resulted in a
material increase in global crude oil production?
I would argue that the post-2005 story has been one of higher prices causing (partial) substitution
for crude oil (increased condensate, NGL's and biofuels production), with probably no material
increase in actual global crude oil production for seven straight years--even as the annual
Brent price doubled from 2005 to 2011/2012.
Of course, there have been some efforts to substitute compressed and liquified natural gas
for liquid fuels, but note that the EIA shows that US dry natural gas (NG) production has been
virtually flat since April, 2011 Given the very high decline rates that we see in shale gas
wells, there is a serious question as to whether the industry will be able to fully reverse
a NG production decline and bring NG production back to prior levels, given that the underlying
decline rates from existing wells are so much higher now than at the start of the shale gas
boom.
Global Net Exports of oil
We have seen a material post-2005 decline in Global Net Exports of oil (GNE), which I define
as combined net oil exports from the (2005) top 33 net oil exporters (BP + EIA data, total
petroleum liquids).
In my opinion, increased production of the liquid substitutes only made an incremental difference,
and not a material difference, in the global net export market, as the developing countries,
led by China, consumed an increasing share of a declining post-2005 volume of Global Net Exports
of oil.
Summary
So, in summary Brent doubled from $55 in 2005 to $111 in 2011 and $112 in 2012. In response,
globally, regarding liquids production, we saw:
(1) Increased condensate, NGL's and biofuels production, all less than ideal substitutes
for crude oil.
(2) Probably flat global crude oil production.
(3) Declining Global Net Exports (GNE), with developing countries consuming an increasing
share of GNE.
For more information on the outlook for Global Net Exports, you can search for: Export Capacity
Index, a very long and detailed analysis of the global export market.
The Export Capacity Index (ECI): A New Metric For Predicting Future Supplies of Global Net Oil Exports http://aspousa.org/2013/02/commentary-the-export-capacity-index/
Excerpt:
Saudi Arabia, the world's largest net oil exporter, is one of the 19 countries showing declining
net oil exports from 2005 to 2011, and this case history is very interesting. (2012 data not
yet available.)
The observed 2005 to 2011 rate of change in Saudi Arabia's net exports was -1.5%/year, as
their net exports fell from 9.1 mbpd in 2005 to 8.3 mbpd in 2011 (with lower values in several
intervening years).
From 2005 to 2011, the Saudi ECI* ratio fell from 5.6 to 3.9, a decline of 30%. The extrapolated
2005 to 2011 rate of change in the ECI ratio, -6.0%/year, suggests that Saudi Arabia would
approach zero net oil exports around 2034, with estimated post-2005 CNE (Cumulative Net Exports)
of about 45 Gb (billion barrels).
I estimate that the 2005 to 2011 post-2005 Saudi CNE depletion rate was about 8.0%/year,
with estimated remaining post-2005 CNE of about 28 Gb. These estimates are, needless to say, somewhat at odds with conventional wisdom regarding Saudi
reserves and net exports.
The following chart, Figure 14, shows Saudi Arabia's ECI ratio from 2002 to 2011, extrapolated
out to 2030 based on the 2005 to 2011 rate of decline in their ECI ratio:
In the article, Saudi oil minister, Ali al-Naimi (in 2005) told an audience that Saudi Arabia
was embarked on a crash program to raise capacity to 12.5 mbpd by 2009 and this gem: "'I can
assure you that we haven't peaked,'' he responded. ''If we peaked, we would not be going to
12.5 and we would not be visualizing a 15-million-barrel-per-day production capacity. . . .
We can maintain 12.5 or 15 million for the next 30 to 50 years.''
As Figure 7 above shows - that clearly didn't work out.
Based on BP + EIA data, Iraq's average rate of increase in
net exports from 2008 to 2011 was 45,000 bpd per year, to 2.0 mbpd in 2011. I estimate that
their net exports in 2012 were around 2.1 mbpd.
Even though Iraq's net exports increased slightly from 2008 to 2011, their ECI Ratio fell
from 4.15 in 2008 to 3.42 in 2011, a -6.4%/year rate of change, because the rapid increase
in the rate of consumption exceeded the rate of increase in production. At this rate of decline
in the ECI ratio, Iraq would approach an ECI ratio of 1.0, and thus zero net exports, around
2031.
In a similar fashion, ANE were up from 2002 to 2005, and then declined, but the GNE/CNI
ratio fell from 2002 on (because the rate of increase in CNI exceeded the rate of increase
in GNE from 2002 to 2005). In other words, the falling GNE/CNI ratio from 2002 to 2005 was
forecasting future problems with the ANE supply.
GNE = Global Net Exports, the top 33 net exporters in 2005, BP + EIA data, total petroleum
liquids CNI = Chindia's (China + India's) Net Imports ANE = GNE less CNI ECI Ratio = Ratio of total petroleum liquids production to liquids consumption
Why do you narrow your data input? Technology has reduced demand in the US significantly.
But monetary deflation and inflation as indicated by the price of gold may be the closest correlation.
Your graph of the Real Price of WTI is very instructive. Notice that the peak of oil price
in the late 1970s early 1980s tracks with the huge jump in the price of gold. Then there was
a significant decline in the price of oil as the price of gold fell due to the monetary contraction
of Volker and then Greenspan. In the late 1980s Texas had an oil recession. (see Changing Texas
Economy:Dynamics of the Free Market by Brown, Yücel, and Taylor Dallas FED December 10, 1998)
Then notice another sudden dip in the price in the late 1990s when once again the price
of gold signaled deflation. The Texas oil infrastructure was devastated and could not produce
to keep up with the increased demand of 2000. There was another Texas oil recession in the
late 1990s.
There is much more impacting the price of WTI and the supply of oil.
Posted by: Ricardo at April 3, 2013 02:14 PM
Steven Kopits,
Great response once again.
Posted by: Ricardo at April 3, 2013 02:15 PM
After decades of Little Chicken screaming "Peak Oil," it should become obvious and apparent
to nearly everyone that the supply part is determined less by discovery and technology and
more by regulation and taxes.
That said, the technology is readily available for natural
gas powered vehicles to lighten the demand on gasoline. The NG distribution network is mature
and reliable. Only the retail distribution points need to be set up and that can be done very quickly. Once again, it is not discovery or technology that is the issue; it
is regulation [EPA] and taxation.
Karl Smith put this as moving from a boom and bust production style to a steady incremental
demand style, one where real oil prices will stay more or less steady. This should support
more stable growth and the transition away from oil, not a return to abundant oil and low prices.
That extends the peak into a plateau, but doesn't end it, and the real story is in the transition
away from it.
Peak oil is a red herring. The real issue is peak CHEAP oil. It doesn't matter that oil comes
on the market when its at a price that is too high for us to keep using it the way we're used
to. Oil that is drawn on the market BY high oil prices, such as shale oil and deep sea oil,
can not bring DOWN oil prices. This is elementary logic.
Oil prices remain sharply elevated
WHILE the OECD is undergoing an unprecedented growth rate slump. Why isn't the demand vaccuum
suppressing oil prices? Where would the price have been if these crises hadn't been going on?
This of course in addition to the fact that economic crisis was an implicit prediction of
the peak oil thesis.
Daniel Yergin has been making the prediction that the price of oil would return to 20-30$
throughout the run-up in oil prices of the last decade. In that respect he as been as wrong
as the worst of the peak oil doomers.
What happened was that the Hubbert curve is implicitly based on an assumption of constant price
(details below), which was close enough to the truth up to about 2004 for the model to work.
If the price of oil were still $25 per barrel, we'd be seeing peak oil in spades. What's happened
is that the price of oil has increased, making more oil worth drilling. Essentially, the production
of oil now requires an ever-increasing price (over the long term) just to stay constant. Eventually,
of course, the price will get high enough to crush demand and we'll see true peak oil.
How
fast the price must go up and how high it will get before we switch away from oil are difficult
questions and I've not seen any serious data-based effort to determine them. Traditional peak
oil theory is useless for predicting the future; it pretty accurately predicted when we exited
the old regime of increasing production under roughly stable prices but it no longer applies.
The Hubbert curve predicting peak oil follows naturally from a predator-prey model where
the prey can't reproduce (http://www.theoildrum.com/node/5731). This would correspond to a
real-world situation where drilling is done by capital-limited companies and where the usability
of any given potential well never changes. More or less this means drillers don't learn and
bankers and other financiers are completely useless for any predictions about drilling or exploration.
The fact that a model with such strong implicit assumptions does so well explaining what happened
is kind of interesting in itself. Basically, it's a model for the "immature" phase where use
of oil is expanding to the optimization of short-term profits.
The model fails, of course, if there are reliable long-term changes in the price of oil.
Higher prices mean more wells are profitable, so it's like prey has been added to the model.
The big question is the available oil-vs-price curve. Recent event don't give us good numbers
because there is a huge lag time (5 to 10 years) between a potential well becoming profitable
and it actually getting drilled. The Bakken, for example, is still in the exponential growth
phase of the predator-prey model. Over the next few years we should see the price of oil settle
down to a steady increase and that will allow real prediction of the duration of this "mature"
phase of widespread oil use.
Thank goodness that we "finally" have a topic that interests you. The rest of us, who apparently
have a broader set of interests than you, won't have to suffer through another one of your
off-topic posts.
Repeat after me..."I am not the representative agent, I am not the representative agent,...".
I enjoy your posts on the oil sector, but please stop whining about the choice of topics
when the topic doesn't suit your preferences.
Posted by: tj at April 3, 2013 06:26 PM
Rob Wile is the best! I read everything by him. Awesome that you quoted him!
The only thing I'd pick as wrong in this is that you haven't considered the relative decline
on the US dollar in terms of pricing, for example vs the AUD the USD is nearly half the value
it was from around the mid 2000's.
Whether agreed with or not, got it right last time around
while both Krugman and Hamilton did not...there are reasons people look away from what is properly
neoclassic econ.
Would have been nice to see some consumption graphs along side the production graphs to complete
the story.
US consumption of oil/gas
World consumption
Emerging markets consumption
Posted by: Rob at April 4, 2013 04:34 AM
Sloppy labeling tends to produce sloppy thinking. The success of Hubbert's prediction has meant
fame for the term he used. As sure as night follows day, fame for a technical term means the
technical term becomes overused (if I never hear another "pushing the envelope" or "ahead of
the curve", it will be too soon) and serves as fodder for weak arguments.
"Peak oil" predictions
assume fixed technology. Like many assumptions in forecasting, this one is required to make
calculations tractable. It is not necessarily a claim that technology is fixed. If an individual
declares the assumption of fixed technology to be accurate in the real world, then that individual
is vulnerable to being proven wrong. If the assumption is made in order to predict oil field
production, knowing that technological change (or price change) will change the result, that's
doesn't mean the concept of "peak oil" is wrong. In this case, it just means that those arguing
against peak oil either don't understand what they are talking about, or don't care that they
are being sloppy.
Based on recent data, US crude + condensate (C+C) production is about 7.1 mbpd and C+C refinery
inputs are about 14.6 mbpd. In round numbers, we would have to double US C+C production in
order to have approximately zero net crude oil imports.
But given the recurring "Peak Oil is Dead" theme in the media, the current discussion is
about when, not if, that the US becomes a net oil exporter. Following is a link to, and excerpt
from, an item in the Fort Worth, Texas paper:
Energy executive predicts U.S. will export crude oil http://www.star-telegram.com/2013/04/03/4748346/energy-executive-predicts-us-will.html
Scott Sheffield has a quick word of advice to observers of the continuing oil boom in West
Texas' venerable Permian Basin: Get used to the idea of exporting U.S. crude oil.
"We'll be exporting crude at some time. We'll have to," Sheffield, CEO of Irving-based
Pioneer Natural Resources, told an audience at Hart Energy's DUG Permian Basin conference
at the Fort Worth Convention Center. The annual meeting traditionally spotlighted the hometown
Barnett Shale and other natural gas plays in the country. But with growing attention paid
to the state's crude oil production, this year's gathering focused on West Texas.
The EUR for the current production on Alaska's North Slope are about 21 Gb (billion barrels).
Prudhoe Bay accounts for the majority of the reserves, see link to graph up the thread. In
order to double US C+C production, we would need the equivalent of about four North Slopes
(and over 80 GB in proven reserves), and of course, contrary to conventional wisdom, depletion
marches on, requiring us to continue finding more North Slope equivalents. Also, we would have
to offset the declines from existing wellbores.
Unfortunately, the fractured tight/shale plays in the Lower 48 have much higher decline
rates that what we see in plays like the North Slope. In my opinion, a reasonable expectation
is that at least 90% of currently producing shale oil wells will be plugged and abandoned or
down to 10 bpd or less in 10 years.
Peak oil isn't just about what resources exist in what form. It's also about what can be produced
at prevailing prices. We can produce tight oil and tar-sands as long as prices are consistently
above $100 a barrel. Regulatory forbearance is important here too---the costs of habitat recovery
and groundwater remediation are going to run in the tens of billions. Right now those costs
are being externalized on the basis that they are "unknown".
At prices consistently over $150, keragen can be produced from oil shale in the Green River
formation. There's more hydrocarbons there than in the whole of Arabia. But you've basically
got to strip out the tributary areas of the Green and Colorado rivers, putting tens of thousands
of farmers out of business and possibly making the water for 40 million people undrinkable.
I don't think those environmental impacts can be externalized for long.
The upside is that oil prices over $100 a barrel make biofuels from algae and agricultural
waste profitable, so maybe we can flatten out the extraction curve over the next 15 to 20 years.
So I would argue that yes, we've seen peak oil, and right now we're converting less economical
stuff to cope with it. Real oil prices will continue to climb at 3 to 5% per year, and much
more once the public wises up to the environmental costs.
I have no problems with posts about MF or Wisconsin (but what about North Carolina, or California--these
states are regularly anomalies in the national data). However, four posts in a week when Cyprus
was melting down? When the North Koreans appear to have completely lost their minds?
If we had had a guest post from Gary Gorton on Eurogroup policy and the prospects for Europe-wide
bankruns, or some similar topic, I would have thought it a splendid week for Econbrowser. If
Menzie had thrown out a link to Susan Patton's letter to the women on Princeton, all would
have been fine.
But there was, from my perspective, the appearance of a lack of focus on the blog. Now,
I understand that a blog can be an unforgiving task master (as can your commenters!). But the
appropriate response to that is to share the load--link rather than write, or get a guest-poster,
or add another regular poster to the roster--rather than posting less. If you post less, then
you'll find yourself losing readers, and that can unravel a blog over time.
Something else that could have been linked last week. Uncle George's piece in the WSJ:
Constitutional Mob Rule in Hungary
By GEORGE KOPITS
A number of recent constitutional amendments by Hungary's Parliament have received well-deserved
criticism from foreign governments and the European Union. Particularly troubling is the amendment
granting practically unlimited power to Parliament to overturn decisions of the constitutional
court, including retroactively.
With these changes in hand, and commanding a disciplined two-thirds majority in Parliament,
Prime Minister Viktor Orban is now capable of exercising constitutional mob rule. By the definition
attributed to Thomas Jefferson, this is government by which a majority may take away the rights
of the rest of the population.
These developments would be worrisome enough on their own. But the international community
has paid far less attention to the creeping centralization of economic policy under Mr. Orban.
The recent appointment of Gyorgy Matolcsy as central bank governor is the culmination of Mr.
Orban's relentless campaign to extinguish checks and balances-a campaign that began nearly
three years ago with the passage of an amendment curtailing the constitutional court's jurisdiction
over cases involving budgetary and tax measures.
Mr. Matolcsy was previously Mr. Orban's economy minister and architect of the government's
self-described "unorthodox" policies. He has pledged to closely cooperate with the government,
as underscored by the recent creation of a position, within the bank, of director in charge
of "fiscal cooperation."
A radical reorganization is also occurring at lower levels of the Hungarian central bank.
Senior officials with proven professional qualifications-among them the former director for
research, an internationally reputed young economist with a Ph.D. from the Massachusetts Institute
of Technology-have been sacked.
And the central bank is hardly the exception. The presidency, the state audit office, the
fiscal council, the central bank and the competition office are all now headed by Fidesz party
loyalists with little, if any, relevant professional experience. The staffs of these institutions
have been abolished or decimated. Ostensibly independent and de jure in line with EU statutes,
these institutions-built and nurtured painstakingly since the post-communist transition-are
being turned into de facto government implements.
The most visible effects have been in fiscal policy, which the Orban government conducts
with a two-pronged goal. The first is to limit the budget deficit to the 3% of GDP required
by EU law. This is accomplished via high and distortionary taxes, levied mostly on foreign-owned
banks and energy companies, and on proceeds from nationalized pension funds.
The other goal of fiscal policy is to preserve generous entitlement programs for key constituencies.
In a recent move along these lines, largely foreign-owned power companies have been ordered
to reduce tariffs by 10%. This "goulash populism" is becoming increasingly intense, as the
government seeks to recover from a significant slide in opinion polls ahead of general elections
scheduled for next year.
Can anything keep Hungary from its path of democratic and economic erosion? Financial markets
have not punished Hungary unbearably so far. Hungary's stagnant economy and high public debt
mean that Budapest pays a high risk premium on its junk-rated sovereign bonds. It lacks the
supply of natural resources that has served as an economic cushion for populist governments
in Venezuela and Argentina.
But EU membership and the Hungarian central bank's foreign-exchange reserves have so far
helped fend off a sudden stop in capital inflows. The Orban government also benefits from the
widespread appeal of high-yield junk bonds, both corporate and sovereign, in today's low-interest
rate environment.
The EU has also been reluctant to penalize Hungary for Mr. Orban's excesses. But the institutional
erosion in Budapest clearly violates the spirit, if not the letter, of fundamental European
values and statutes. Today's Hungary is eerily reminiscent of the communist regime of Janos
Kadar, under which all public institutions were potemkin bodies that dared not challenge the
hegemony of the Politburo.
The time has come for European authorities to consider taking action, with a view to enforcing
good practices for the welfare of Hungarians, and to deterring governments in other EU states
from following Mr. Orban's example. Otherwise, the EU leadership, along with financial markets,
will be seen as the enablers of a destructive trend that will lead to regrets.
Mr. Kopits is a senior scholar at the Woodrow Wilson International Center for Scholars.
He served as the first chair of Hungary's fiscal council, from 2009 to 2011, and as a member
of the monetary council of the Hungarian central bank from 2004 to 2009.
There is a sense in which Yergin has been winning the debate. Some in the peak oil debate are
technicians. But others bring a quasi-religious apocalytical energy to peak oil, seeing it
(sometimes with a sense of glee) as the end of civilization. For an example of that kind of
pseudo-thinking, you might want to check out Thom Hartmann's "The Last Hours of Ancient Sunlight."
Yergin did us a favor by pushing back on those people, even if he was too optimistic on
prices.
You can't credit Yergin for pushing back on the peak oil apocalypse types. If anything, his
ludicrous predictions give them support for their claim the non-peak-oilers are nuts. The pushback
against the nuttier strains of peak oil is the reality that higher prices have made more oil
available. They would actually look even more ridiculous if Yergin hadn't been spouting nonsense
in the other direction.
Obviously, a finite world cannot support exponential increases in crude oil production into
infinity, nor can oil continue to be pumped indefinitely without depleting. Where the peak
oil theorists went wrong, however, was in assuming that the typical experience of individual
wells and even entire oil fields could be simply extrapolated upwards to the entire planet.
It is much more complicated than that, not least because at the global level political and
well as economic factors start coming into play.
That's the whole point isn't it? Discrete oil wells peak and decline, discrete oil fields
peak and decline, and discrete regions, e.g., the North Slope graph linked above, peak and
decline, but something magical happens when we sum the output of these discrete sources that
peak and decline.
According to the Cornucopians, the sum of the output of discrete regions that peak and decline
will either: (1) Never peak and decline or (2) The peak is so far away that by the time it
happens we will have Mr. Fusion devices on our cars.
Meanwhile, back here on Planet Earth, the fact remains that developed net oil importing
countries like the US are gradually being shut out of the global market for exported oil, as
developing countries, led by China, consume an increasing share of a declining volume of Global
Net Exports of oil (GNE). And so far, the rate of decline in the ratio of GNE to Chindia's
Net Imports (CNI) has accelerated (through 2011, 2012 data not yet available).
To use another analogue, the accelerating rate of decline in the GNE/CNI ratio is analogous
to a commercial airliner in an ever steepening dive, headed toward a non-survivable crash,
as the passengers talk about dinner plans, oblivious to the ever steepening dive.
GNE = Global Net Exports, the top 33 net exporters in 2005, BP + EIA data, total petroleum
liquids CNI = Chindia's (China + India's) Net Imports ANE = GNE less CNI ECI Ratio = Ratio of total petroleum liquids production to liquids consumption
A very good piece. But though I'm on your side, I think it's unfair to use Boone, a businessman
not a "peak oil" writer, against Yergin. Simmons vs Yergin would have been more fair.
The
story so far has turned out to be neither what Simmons nor Yergin predicted. What we've had
is more like "plateau oil", with basically flat volumes and rising average production costs.
That seems most likely to continue for the next decade or three. It still looks like we are
heading for a drop from the plateau when the fracking fields deplete. Perhaps then it will
be arctic oil.
Posted by: Tom at April 4, 2013 09:45 AM
As Matt Simmons pointed out (Twilight in the Desert) taking Saudi production at face value
does not factor in the "water cut", i.e., the percent of water in every barrel of oil pumped.
Those who dismiss the fact of limited natural resources on earth (including the the energy
needed to transform them into usable goods) and the ability of the global ecosystem to absorb
CO2 must have an otherworldly view of the physical world.
Food prices since 2000 are rising at a 7% rate, accelerating to ~9% since Peak Oil in 2005.
Cereals prices are rising at 9%, accelerating to 12-13% since 2005.
The share of the world with the fastest growth of population tends to be the areas with
the highest pct. of income spent on food, i.e., 30-50%. Given the share of income spent on
food and consumer spending to GDP, to sustain purchasing power vs. the increase in food and
energy prices, incomes in the developing world must rise at least 4-5%/year, which implies
sustained growth of GDP of a minimum of 6-7% for the more developed countries, such as China
and India, and faster for less developed areas.
Does anyone actually expect the developing world to continue to grow at a doubling time
of 5-10 years to keep up with the increase in energy and food prices?
By definition, persistently high oil/liquid fuels and food prices will constrain growth
of one-third of world real GDP per capita in which the fastest growth has occurred since the
1980s-90s.
Given our tendency to be US-centric, if you will, we tend not to examine the larger global
macroeconomic conditions nor the areas of the world that are the weak links in the global distribution
chain, so to speak. That the global economy is now nearly fully integrated and there is GDP
parity between the three major trading blocs, China-Asia/MENA/sub-Sahara Africa is now increasingly
vulnerable to energy and food supply and price shocks, which in turn makes North America and
the EU vulnerable to diminishing returns to FDI in China-Asia to support continuing growth
of the global production system, supply chain, and mass-consumer economy.
This is the larger global structural implication of Peak Oil and by extension peak public
and private debt and peak real GDP per capita.
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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When
the United States, the United Kingdom, and the "coalition of the willing" attacked Iraq in
March 2003, millions protested around the world. But the war of "shock and awe" was just the
beginning. The subsequent occupation of Iraq by the U.S.-led Coalition Provisional Authority
bankrupted the country and left its infrastructure in shambles.
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
