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Guest Post: The Shale Oil Boom is More "Mirage" than "Miracle"

Tyler Durden's picture





 

Submitted by Adam Taggart of Peak Prosperity,

Gail Tverberg, is a professional actuary who applies classic risk assessment procedures to global resources: studying issues such as oil & natural gas depletion, water shortages, climate change, etc. She is widely known in the Peak Cheap Oil space for her reports issued across energy websites over the years under the penname "GailTheActuary".

In this week's podcast, Chris asks Gail to assess the merits of the shale oil "revolution". Does it usher in a new Golden Age of American oil independence?

With her actuarial eyeshade firmly in place, Gail quickly begins discounting the underlying economics behind the shale model:

We have to ask: At what price is the oil available? Is this shale oil available because prices are high and in fact, because interest rates are low, as well? Or is it available if it were cheap oil with interest rates at more normal levels?

 

I think what we have is a very peculiar situation where it is available ,but it is available only because of this peculiar financial situation we are in right now with very high oil prices and very low interest rates.

 

...

 

The shale oil plays are going to be probably much less than a 10-year flash in the pan. They are very dependent on a lot of different things, including low interest rates and the ability to keep borrowing - which could turn around very quickly. Lower oil prices would tend to do the same thing. But even if you hypothesize that we can keep the low interest rates and that the oil price will stay up there, under the best of circumstances, the Barnett data says they probably will not go for very long.

 

You know, when you take how long the payout really is on those wells, I think the companies drilling these plays have been very optimistic as to how long those wells are going to be economic. There was a recent study done saying just that: 10 years or 5 years; but certainly not 40 years.

 

And so these companies put together optimistic financial statements that have the benefit of these extremely low interest rates. They keep adding debt onto debt onto debt. How long can they continue to get more debt to finance this whole operation? It's not a model that anybody who is very sensible would follow.

Similar to many energy experts Chris has interviewed prior, Gail looks at the math and concludes that humans (especially those in the West) have been living on an energy subsidy that is beginning to run out. We have been living outside of our natural budget, and will be forced to live within what remains going forward. As a result, she expect great changes in store for the next several decades: socially, politically and lifestyle-wise.

Click the play button below to listen to Chris's interview with Gail Tverberg (38m:07s):

 

 

A further excerpt:

....

Chris Martenson: Okay. So which comes first, then – low oil prices or low oil supplies leading to higher prices? Which do you see is driving the future here?

Gail Tverberg: I see government problems that are being brought on by oil as being the next step. And the government problems will bring the oil prices down. So as oil prices come down, then that brings the supply down. But it is the government problems that are the intervening step in there. It is the fact that the governments are put in a position where they need to support all of these people who cannot find work, and this is related to the high price of oil. And also, it is supporting promises that we have made over the years.

There is also the debt part of it. We depend on very low interest rates to keep the cost of that debt low right now. But the debt has been escalating since 2008, the federal debt has. And so the government is in a very tight situation, and it is the government problems that have the potential to spill over into the rest of the world situation. And it is through that mechanism that we will see the decline in oil supply. That is the way I see it going.

Chris Martenson: All right, so make sure I have got this: Because the government has taken on a whole lot of debt, it is trying to support a lot of people who are out of work; the economy is basically moribund because of high oil prices, so there is a little self-feedback loop in there. But ultimately, it is going to be the fiscal condition of the government – let’s say the U.S. government?

Gail Tverberg: It is going to be the fiscal condition of the U.S. government, and it is going to be all of the debt outstanding. It is going to be the fact that we cannot keep those interest rates low permanently. We cannot keep this quantitative easing up. And what is going to happen is the interest rates will rise, and that will cause a big problem. Or at least that is one scenario. There are so many different scenarios that could cause a problem. That is just one of them, anyhow.

Chris Martenson: You are talking about all of this leading to a deflationary outcome at some point. The Federal Reserve obviously is working double-overtime to prevent that outcome exactly. A lot of people have staked complete faith that the Fed has this all in hand and will lead to an inflationary outcome, I believe. World bond market prices, equity pricings, resurgence in real estate values, things like that are all collectively telling me that the bet has been made. The Fed will not lose this battle. Do you think they might?

Gail Tverberg: What happens is all of the extra money from the quantitative easing is going into speculation. And it is pumping up the prices of the stock market, the bond market, housing prices, farm prices, you name it. And so it is off in these places where it is not Main Street, it is not doing things that are getting people jobs. And so we have this temporary bubble on assets that cannot stay there if interest rates go up.

Chris Martenson: That is the big “if” in this story. Well, for me, it is a “when” – when interest rates go back up. We have hundreds of years of history on interest rates. And right now, I believe the U.K. or English gilts are at a 400-year low in terms of interest rates. So you might say there is a small chance of reversion to the mean in that story.

Good chance that might happen, and yet, we have this collective bet on such an outcome not happening. People are really hoping for something other. This is, I think, the heart of what you write about a lot – this idea that capital formation is a very different process from printing money. And I have seen otherwise very well-credentialed economists mixing those two things up, using the words interchangeably, that the Fed is basically creating capital. In my mind, capital is something that happens after you have performed some useful economic activity and there is a surplus left over. And then, that capital can be saved and that savings can go back into investment. That loop seems to be pretty well broken, as far as I can tell.

When we look at capital expenditures by corporations, we look at infrastructure spent by the Federal government. Very much a decade of lows. So we are not plowing any of this money back in. It is being used instead for speculation.

But the common story right now says that hey, high asset prices are a cure; they work. High housing prices, prices going up, that creates a wealth effect.

 


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Sun, 12/08/2013 - 15:44 | Link to Comment Flakmeister
Flakmeister's picture

Oh goodie....

There is also this out recently on the Monteray...

http://www.postcarbon.org/reports/Drilling-California_FINAL.pdf

Not all it is fracked up to be...

Sun, 12/08/2013 - 15:48 | Link to Comment Colonel Klink
Colonel Klink's picture

Oils well that ends well.  But it doesn't sound like it's going to.

Sun, 12/08/2013 - 17:03 | Link to Comment Occident Mortal
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I agree that rates in the West are going to tick up soon.

But oil consumption has changed, China now imports more oil than the US and China is expected to be consuming more oil than the US in about 3-4 years time.

So global oil demand isn't as US sensitive as it once was.

The thing is USA used to be 26% of global GDP. Today USA is just 17% of world GDP and falling.

Sun, 12/08/2013 - 19:25 | Link to Comment 0b1knob
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Don't we get a slight variation of this "peak oil" nonsense every day on Zero Hedge?

Sun, 12/08/2013 - 19:46 | Link to Comment NoDebt
NoDebt's picture

Peak oil or not, there is no way to support a county the size of China turning into another US in terms of meeting oil needs.  Not at current prices, and certainly not back at the prices of only a decade or so ago.

Peak oil?  No idea if that's true or not.

Peak demand for oil?  Maybe in the US but not worldwide with China coming on-line.

Sun, 12/08/2013 - 20:47 | Link to Comment Money Squid
Money Squid's picture

the peak concept has been demonstrated for each well, each lease, each field, each country. Oil companies go for the easiest, least expensive, highest quality oil first. Produce at the max, no thought about tomorrow. There is a stock price to improve, dividends to pay, bonuses to pay. Wells are constantly worked over, redrilled, re-completed, re-stimulated to keep trying to increase the oil cut. Look at any production graph for a well - that is reality right there. Look at the production graphs for individual wells and cumulative production for wells (look at the number of wells drilled per year and the total number of wells now and how there are clustered) and think if that production level can be sustained. If not, it peaked. simple. Oil cos are not charities. As soon the prices drops too low for a well, lease, field, the well are shut in.

Mon, 12/09/2013 - 00:19 | Link to Comment Money Squid
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I am curious if the single down voter has any oil field experience, or just quick with the voting.

Sun, 12/08/2013 - 21:48 | Link to Comment mumbo_jumbo
mumbo_jumbo's picture

and there's the rub, China is nothing like nor will it ever be like the USA......taking the current trend and extending it forever into the future is a fools game.

personally i think the sun is setting on the china story.

Sun, 12/08/2013 - 20:38 | Link to Comment Money Squid
Money Squid's picture

the peak oil conept is nonsense to anyone who can not grasp the concept.

On a side note - EIA contracts out to put out much higher tight oil reserves than USGS. The maps showing the location/extent of the resources changes constantly, but are mostly very positive in appearance. When the price of oil was peaking there not only demand reduction but some demand destruction. The paper oil market was developed to control the price and the price can be pushed up or down depending on what is needed to throttle the western economies and keep the majors pumping enought to keep things going, but to also hide the peak production number. Low financing is key to keep the drilling going for nat gas even when nat gas prices are too low to support the additional drillig.

ZH had a few articles on cheesy peak engergy and their financial matters.

Sun, 12/08/2013 - 22:11 | Link to Comment El Tuco
El Tuco's picture

Someone once said here that if oil is so abundant why are we pressure washing sand to get it or drilling shale rock to extract it.

I am sure there is plenty of oil around but when you have to burn 2 barrels to get 2 does it make sense anymore?

Mon, 12/09/2013 - 00:16 | Link to Comment Money Squid
Money Squid's picture

you got that right Tuco. It is not just "is there any oil left" but what is the cost to get the remaining oil out.

Oil used to shoot out of the ground. Now lots of technologies are employed, and new ones being developed, to try to produce what is left after all the easily produced oil is gone.

Mon, 12/09/2013 - 00:47 | Link to Comment daveO
daveO's picture

There's still incredible amounts left, they're just deeper. If interest rates were normal, that's where Big Oil would be concentrating. Since rates are too low, manpower is being diverted to shallow 'easy pickings', that aren't economic in the long run. Thanks Bernanke, you're setting us up for shortages. 

Mon, 12/09/2013 - 02:06 | Link to Comment Money Squid
Money Squid's picture

The easy pickens are long gone friend, long gone. Standard Oil was working over Indonesia in the 1890s. If there was so much easy pickin oil why would Standard travel all the way over there before 1900?

If I recall correctly the well that was just completed by the offshore drilling platform, Deepwater Horizon, was about 30,000 feet below the surface of the ocean when it blew out. To extract that oil the price per barrel must be high enough to offset the exploration, drilling and operation costs, in addition to the pool being large enough to supply the needed volume to make it all worth the inestment. Interesting how some people think there is so much oil left, but it takes $500,000,000 drilling platform operating in 5,000 feet of water to drill a $100,000,000 well (and that was the second well, BP f'd up the first one too).

The discoveries off Venuzuella is very thick heavy stuff.

The huge reserves predicted in the Caspian did not pan out.

Better keep looking.

Mon, 12/09/2013 - 01:56 | Link to Comment cynicalskeptic
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'when you have to burn 2 barrels to get 2 does it make sense anymore?'

 

or when you consume 90% of the locally available water at a rate that's 100 times higher than other uses and pollute what's left is it worth it?

Fracking, tar sands oil and water injection all are major users of water - and cause serious pollution where used (despite claims to the contrary).


Mon, 12/09/2013 - 12:33 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

A little basic chemistry chum: what are the basic products of combustion? 

Mon, 12/09/2013 - 09:39 | Link to Comment TrumpXVI
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Yes that, AND WHY are we cutting it with ETHANOL????

That, to me is a dead givaway that something is seriously wrong with availablity of high quality supply.  No one cuts high quality naptha with ethanol unless they are getting desperate.  It's nothing new.  The Germans and the Japanese were both forced into that situation during WWII....because they couldn't get their hands on enough crude oil.

Mon, 12/09/2013 - 12:35 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

Two words: "Farm Lobby".

 

Geez, just 'follow the money'. 

Mon, 12/09/2013 - 14:39 | Link to Comment Flakmeister
Flakmeister's picture

There is more to it than that....

But the Farm lobby is clearly supportive of the ethanol policies that led to the current mess...

Mon, 12/09/2013 - 02:15 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

"Oils well that ends well" you say?
Oh frack! Here come the frack ho's, looking to SNAP up deals.

Mon, 12/09/2013 - 09:28 | Link to Comment Obese-Redneck
Obese-Redneck's picture

Remember when Ronnie was king and we pissed away the entire North Slope and North Sea oil on jet skis, 300 hp bass boats and Hummers?
What do you think will happen when the "cheap" shale runs out? You think 2.99 is bad! ha! Enjoy your Camaro.

Sun, 12/08/2013 - 16:11 | Link to Comment prains
prains's picture

....so what you're say ins this is just another little short run ponzi scheme

Sun, 12/08/2013 - 16:42 | Link to Comment Gringo Viejo
Gringo Viejo's picture

More Mirage than Miracle?
You can say that about most everything in today's America.

Sun, 12/08/2013 - 21:55 | Link to Comment mess nonster
mess nonster's picture

Peak Cheap Oil is right. Here is a little perspective. The Otto steel overshot waterwheel on modern bronze/graphite bearings was the world's most efficient machine. In the 1920's an otto waterwheel was estimated to operate at 95% efficiency. of course, as the energy left the prime mover, effciencies drop with gearing, etc, but what other prime mover can boast of such efficiencies? The most efficient heat engine is a steam turbine, and it never does better than 30%.

When one couples the incredible efficiency of a waterwheel with the fact that its power souce was essentially free, one has to wonder why water powered mils went out of business with the advent of cheap petroleum and electrical power, which operate at end use efficiencies less than 15%,and sometimes, especially with electricity, at negative efficiencies, taking into account all embodied energy inputs.

Some part of this can be explained by faster production rates for motors using fuel or electricity, but did the upswing in production make the difference? If an energy source can cpompete with free, then it has to be effectively cheaper than free. i say that the massive thermal inefficiencies more than compensate for increased productive capacity. I make the contention that until now, fossil fuel and especially petroleum has effectively been cheaper than free, and that is the only reason it has become the dominant fuel source..

Now that fossil fuel actually has a cost, it is no longer competitive. F**k bitcoin, I'm building waterwheels.

Mon, 12/09/2013 - 01:13 | Link to Comment daveO
daveO's picture

The Rockefellers(from Standard Oil) had a lot to do with it. The EPA is there to keep their competion away. They depend on gov. regulations for their market share. Mining coal is much cheaper than driling for oil. That's why BHO's determined to stop it!

A personal experince taught me this when I was a kid. There were plans to dam a river near here for hydro power. Well, before you know it, people were fighting it. Then, an organization popped up to fight it. The money for this org. came from out of state. I wouldn't be surprised if the Rockefeller Foundation chipped in a few bucks, or the coal miners, who were big back then. They convinced the Feds to stop it, in the name of the environment, after millions had already been invested. Since then, they've managed to shut down mines for the same reason (lie). Now, they're talking the same trash about fracking. Gee, I couldn't see that one coming! /sarc. 

Mon, 12/09/2013 - 02:58 | Link to Comment Flakmeister
Flakmeister's picture

My what an active imagination you have....

Mon, 12/09/2013 - 12:39 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

 

 

daveO - picking your fave bogey man again?

 

Take a look at what they DID for the common man and KEPT prices low!

 

'course, this does not match well with your built-in OWS mindset ..

 


Sun, 12/08/2013 - 16:22 | Link to Comment starfcker
starfcker's picture

don't think this bitch doesn't have an agenda, bought and paid for. i have listened to all the same arguements about water scarcity here in florida. how you going to make something expensive if you can't make it scarce. there is a LOT of shale. the middle  east has enormous proven reserves that they haven't bothered to tap yet, and vast areas unexplored by geologists. is it finite? of course. but not in our lifetimes.

Sun, 12/08/2013 - 16:26 | Link to Comment greatbeard
greatbeard's picture

>> the same arguements about water scarcity here in florida.

When will you believe it is becoming scarce?  I live in an area that's fortunate to be flush with springs and water.  But springs that were putting out 10M gallons a day 30 years ago are now putting out 1M gallons a day.  This is a direct result of pumping and consumption.  Do the wells have to run dry for you to believe water is a scarce resource in Florida?

Mon, 12/09/2013 - 00:08 | Link to Comment CuriousPasserby
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I have one word for you, desalination. 2/3 of the Earth's surface is water.

Mon, 12/09/2013 - 01:16 | Link to Comment daveO
daveO's picture

My grandparents used rain barrels. FLA ain't exactly a desert.

Mon, 12/09/2013 - 02:56 | Link to Comment Kirk2NCC1701
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Northerners are not designed to live in FL, w/o massive amounts of cheap water, energy and AC.

The 20 yr outlook for FL is not exactly "compelling". But, even so, as long as "there's a sucker born every minute", there'll always be plenty of realtors, shills, and snake oils salesmen happy to sell you "great property" in FL.

We were happy when we arrived, and even happier still when we left. FL? Never again! Not even on vacation. Sorry.

Mon, 12/09/2013 - 03:07 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

And the Dirty Little Secret about water consumption, whether in FL or anywhere else, is that Residential usage is a tiny fraction of overall usage.

The usage for Industrial and Agricultural demand dwarf Residential usage. They also pay far, FAR less per gallon than Residential users. What a total SCAM water usage and prices are.

Sun, 12/08/2013 - 17:59 | Link to Comment Errol
Errol's picture

Greatbeard, I live in Greater Miami and fish a canal about 8 miles from the ocean.  It is now brackish.  There is no longer a strong enough hydraulic pressure from onshore freshwater in the aquifer to keep the more dense seawater offshore where it belongs.  It will be a horse race whether Miami first dies of thirst or is inundated by sea level rise.  I no longer own real estate in Miami.

Regarding the Middle East nations' phoney-baloney "reserves" numbers, here is all you need to know: the OPEC export quota for each nation is based on its "reserves" number.  No temptation for exageration there, huh?  Saudia Arabia's official policy on reserves audit: "Nothing to see here - move on buddy".

Sun, 12/08/2013 - 18:31 | Link to Comment starfcker
starfcker's picture

yeah and the reason that water is brackish is that they dump the water out of lake okeechobee into the ocean sideways throuth the st. lucie canal and the caloosahatchee river that discharges into the gulf. they can fuck urban miami and u.s. agriculture in homestead at the same time. water management always has a reason why they have to dump water. it's all run to create scarcity. they do the same thing to atlanta. always a great reason to dump atlanta's water out of lake lanier into the gulf. wake up. there are places water is finite. south florida isn't one of them

Mon, 12/09/2013 - 01:17 | Link to Comment daveO
daveO's picture

Of Course!

Judging by the number of down votes, there must be a lot of Arab Sheikhs reading this page.

Sun, 12/08/2013 - 16:29 | Link to Comment DaveyJones
Sun, 12/08/2013 - 22:03 | Link to Comment mess nonster
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The saddest blog death on record. Everyone should read The Oil Drum archives and educate themselves. Energy is economy.

Sun, 12/08/2013 - 22:07 | Link to Comment DaveyJones
DaveyJones's picture

you said it mess

Mon, 12/09/2013 - 12:42 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

 

 

 

Boo Hoo.

 

If 'they' a) had a market for their spiel and b) any credibility they would be doing land-office business.

 

They're not, and the 'market' saw that ...

 

End of story and TOD.

 

Mon, 12/09/2013 - 14:44 | Link to Comment Flakmeister
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They refused to accept advertising and most of their authors bootstraped themselves to better things... 

Sun, 12/08/2013 - 17:36 | Link to Comment Eeyores Enigma
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Total R E S P E C T Flakmeister!

I find it interesting that no one even questions WHY are we relying on fracking for new oil production anymore as if it were an obvious advancement in oil production. New tech and all.

It's not! More like 50 year old tech.

It's a major step backwards. It's scraping the bottom of the barrel. It's an act of desperation.

Sun, 12/08/2013 - 19:15 | Link to Comment Radical Marijuana
Radical Marijuana's picture

"scraping the bottom of the barrel" gets uglier and uglier.

Similarly in Canada:

http://www.cbc.ca/m/touch/canada/edmonton/story/1.2454849

Environment minister says negative environmental effect of more oil sands development is 'justified in the circumstances'

Fracking, like oil sands, etc., use HUGE amounts of water, and leave those water supplies, and everything else that depended upon them, in very degraded and toxic conditions for a long, long time. There is nothing to stop that, since the most dishonest and violent people prevail in getting what they want in the short-term, while the longer term consequences get delibertately ignored.

Human beings act like robbers in their environment. Technological progress ends up being used to maximum the short-term interests of the best organized gangs of robbers, who get what they want through applying the methods of organized crime to control civilization. Hence, collectively, we behave in runaway, criminally insane ways, and so, we more and more are scraping the bottom of the barrel, in ways that are getting uglier and uglier, while those doing that are asserting that is 'justified in the circumstances' ...

The true long-term costs of energy developments are usually discounted down to nothing. It is always privatizing the profits, while socializing the losses. However, eventually almost everyone shares in the much greater, longer lasting, losses, BUT, the short-term privatized profits are able to dominate the political processes, so that we collectively agree to prepare to commit suicide, while a few benefit in the short-term, from preparing that well-paved road to hell.

Sun, 12/08/2013 - 23:59 | Link to Comment DaveyJones
DaveyJones's picture

"Human beings act like robbers in their environment"

Stanislavsky method

Mon, 12/09/2013 - 18:45 | Link to Comment Radical Marijuana
Radical Marijuana's picture

http://en.wikipedia.org/wiki/Stanislavski%27s_system

Indeed DaveyJones, paradoxically yes!

Human beings are not actually separated from their environment, but only relatively perceive themselves as so. More profoundly, we do not know ourselves as the noumenon, but only know ourselves as phenomena to ourselves, just like everything else is not known as the thing in itself, but only as the appearance of some thing.

Therefore, humans "act" like robbers in their environment, BECAUSE THEY ACTUALLY ARE THEIR ENVIRONMENT.

Human beings "draw believable emotions to their performances" to the degree that they are attached to their relative illusions, such as perceiving themselves as separate from their environment. To that degree, the ego, operating its attachment to relative separation, operates through systems of illusions, or relative lies, whereby the mind has constructed a model of the world, with a model of itself, inside of that model of the world. Of course, we are as strongly attached to that illusion of self as we are informed of our relative survival as a toroidal vortex, by the evolutionary selection pressures which made us evolve to feel pain and pleasure, and therefore, to "act" on that basis.

From the relative subtraction of self from Self, or the part from the Whole, or the organism from its Environment, there then follows the relative reality of the boundary of that individual, across which relatively defined boundary that individual must obtain energy and matter, in order to continue living. Therefore, the relatively separated individual, or groups of individuals, MUST "ACT like robbers in their environment."

Mon, 12/09/2013 - 01:31 | Link to Comment daveO
daveO's picture

You got 10 uppies for that? EPA workers? Trust fund babies with their money in Exxon?

Mon, 12/09/2013 - 01:35 | Link to Comment daveO
daveO's picture

It's caused by low interest rates creating Malinvestments. If rates were normal, oil prices would be over half as cheap. Then, only deep, rich reserves would have potential. North Dakota roughnecks are making over 6 figures. Back in the mid 80's, the ones I knew were making $7.50-8.50/hr. That oil boom occurred with interest rates in double digits(a real boom). I'll guarantee that field workers in the ME haven't seen a pay rise like that. It's an incredible Malinvestment.

Mon, 12/09/2013 - 03:20 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

It's all relative, but the really, really BIG reason is summed up in the words "Petro-Dollar".

W/o frikkin fracking, the USD can kiss its GRC status good-bye.

Dick Cheney's old outfit (Halliburton) is the poster child of fracking.

And then there's that MILF from Alaska: "Drill, baby, drill!" Hey, Palin, I got a new one-liner for you: "Frack and fill that crack!" Hey, I'm getting/claiming Copyright 2013 on that.

Sun, 12/08/2013 - 19:42 | Link to Comment AngelEyes00
AngelEyes00's picture

Here's another good weblink for info. on shale oil:  http://peakoilbarrel.com/

Ron Patterson started that website.  He was the most prolific expert poster at the oil drum under the moniker 'Darwinian', before they started getting so controlling and chased off the best posters.  Anyway, it's a good website to frequent for peak oil information, including what's happening at the Bakken and other shale oil fields.  He only recently started it and it is building but the information and other experts going there are very well informed.

Sun, 12/08/2013 - 20:21 | Link to Comment Jack Burton
Jack Burton's picture

Flakmeister, I have read a lot of your posts on this energy issue, oil prices and especially the fracking boom. I believe you are taking a rational, evidence based view and that results in a common sense opinion on the fracking future. I tend to agree with most of your points on this issue. I can NOT see the costs of fracking ever going down, in fact, I think they are in a low point right now. The cost of money is zero, they have only begun to tap into local water supplies, that cost should rise as water in many places becomes an issue. Even things like frack sand are going to be an upward pressure on costs. Then there is the debate about how much oil these new wells produce after the initial gusher from the fracking process, over a short time that runs down and only trickles of oil come out. Then they need more drilling and blasting to open more shale up.

Input costs are dependent on leverage to fund. Right now zirp printing can feed zero cost cash into it. As she says above, that can not last.

Just as an aside, I made the drive to my Daughters for Thanksgiving, I cross south from the Boreal forests into the beginning of Upper Midwest farmlands. Down in the agricultural lands there is a border where the great glaciers stopped, and these deposited masses of sand at that border line. This year, in just a few months, six giant sand mines have opened, railroads have been built into the processing areas, and mass sand piles sit on the raw side waiting for processing and clean sand ready for loading on rail cars sits on the output side near the new rail spurs. I counted 6 within a 5 miles stip where the sand deposits lie. One after the other, each with it's won new rail spurs and I also saw a large railroad yard where the trains are formed up for the run to the fracking areas like out west in ND. Just the cost to mine the sand, process it for use, load it on trains and ship it to ND. Well, it can not be cheap, I hear the frackers are desperate for this smooth type clean brown sand that the area here has. One more big cost that conventional oil does NOT have.

Fracking will never, ever be cheap oil, it can't look at all the energy inputs, I bet the energy out ratio will continue to shrink, and at an alarming rate.

I think this woman above is smart, and I think she has used rational study, not patriotic hype. Fracking isn't going to bring in onther age of cheap gas and monster SUVs and monster Trucks in every driveway.

 

Mon, 12/09/2013 - 01:39 | Link to Comment daveO
daveO's picture

You've described Malinvestment created by Loose Monetary Policy perfectly. ND is riding on top of a balloon that's looking for a pin!

Mon, 12/09/2013 - 12:45 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

 

 

We shall see, won't we?

 

Peak 'oilers' like roaches ... stamp them out in one area they show up in another ...

 

 

Mon, 12/09/2013 - 01:27 | Link to Comment Not_Sure
Not_Sure's picture

Ya know, the idea of fracking around the San Andreas fault system just doesn't sound like a very good idea.

 

Oh well, maybe it's just me.

 

I guess I'll wait for my beach front property here in Arizona.

Mon, 12/09/2013 - 02:54 | Link to Comment phaedrus1952
phaedrus1952's picture

I usually get a kick out of checking out your sources, Flak, and this one is certainly no exception.  Although I only had the time to read and re-read the executive summary of the PCI's "study", the use of the qualifier "LIKELY" was used no less than FIVE times in only three short paragraphs.

The "study" used - puzzlingly - data that contained no horizontal wells whatsoever, only verticals. 

While anyone familiar with the geology of these shale plays recognizes their individual charactaristics, dismissing 15 BILLION barrels of technically recoverable oil (USGS estimate, payzones measured in the thousands of feet in thickness) as not feasible might LIKELY be a little fracked in the head.

Mon, 12/09/2013 - 10:29 | Link to Comment Flakmeister
Flakmeister's picture

Did you really read the study? Start at page 20 to learn that this no redux of the Bakken or EFS... 

Remember that the drillers always drill the best prospects first....

And for me, that is the tell: If the Monterey was such a bloody hot play why have they been dicking around with the Niobarra and TMS first?

----

On a related matter Pg 70 from the November update of Hughes major work is also a screaming tell. It shows what happens to a tight oil play when you run out of drilling sites...

Mon, 12/09/2013 - 13:16 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

 

 

 

" And for me, that is the tell: If the Monterey was such a bloody hot play why have they been dicking around with the Niobarra and TMS first? "

 

Ever heard of 'politics'?

 


Mon, 12/09/2013 - 12:50 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

 

 

Thanks for the appraisal and post, phaedrus1952.

 

WHy can't we get this kind of open honesty from Flak?

 

Oh - I forgot ... he has 'skin' in the game on the other side ...

Mon, 12/09/2013 - 14:47 | Link to Comment Flakmeister
Flakmeister's picture

I got no skin in the game...

BTW, ask Phadraeus about Rossi's E-CAT. that should give an idea of ability for critical evaluation or lack thereof...

Are you still falling for shills touting the wonders of kerogen?

Sun, 12/08/2013 - 15:48 | Link to Comment SRSrocco
SRSrocco's picture

PORTER STANSBERRY..... EAT YOUR HEART OUT...

Mon, 12/09/2013 - 03:28 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

PS is a total fracking shill, who knows how to front-run news. So does that GS guy he hired.

He talks out of both sides of his mouth: Doom & Gloom, then Energy Boom. A total "AFAB" guy.

Sun, 12/08/2013 - 15:47 | Link to Comment ILikeBoats
ILikeBoats's picture

IF the current oil price is "high oil price", then what is a "neither high nor low oil price"?  What is a "low oil price"?

Sun, 12/08/2013 - 16:00 | Link to Comment Xibalba
Xibalba's picture

$5

Sun, 12/08/2013 - 16:28 | Link to Comment massornament
massornament's picture

I think the average price (adjusted for inflation) for the middle of the 20th century (40s to 60s) was $20USD/barrel.

In Texas in the 1930s, a barrel sold for 3 cents at one point... that's stupid cheap (but more to do with the fact that there was much less demand in the 30s and massive supply increases in Texas in the thirties).

But the $20/barrel figure mentioned above... that is also very cheap and THAT is the price that a lot of the North American middle class was built upon... in fact, up until then the West and USSR were the only real users of oil in any meaningful quantity. Now China and India have expanding middle classes and auto industries, and since the sixties the world's population has doubled.

I'm from Alberta, Canada... I have seen credible estimates that oil/tar sands production only makes sense at $40-70/barrel... and that is itself dependent upon low natural gas prices too because oil/tar sand production requires a lot of nat gas for processing.

Sun, 12/08/2013 - 20:29 | Link to Comment Jack Burton
Jack Burton's picture

True. Canada's large Natural Gas reserves in the area make the Tars Sands possible. The tar sand must be cooked with fresh water to seperate to oils. Canada has the gas available up there to make tar sands profitable, but I believe tar sands has the worst energy in versus energy out ratio of all the production methods. I look at tar sand mines and processing sites and it makes me realize just how truely desperate we are now for oil. This is not like West Texas wells, or Saudi wells, or even the wells in Siberia, nope, this is desperte oil, right on the edge of profitability, if Canada was no blessed with lots of cheap natural gas right near the tar mines, then these mines would not be economically viable. But with high oil prices, Canada is going to go full steam ahead to mine the Tar Sands. That much is clear from the top of government down to local governments near the mines. As long as a profit can be turned, those tar mines will run flat out.

Mon, 12/09/2013 - 12:51 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

 

 

but I believe "

 

No substitute for actual facts.

 

But, you run with that Jack ...

 


Mon, 12/09/2013 - 02:11 | Link to Comment IrritableBowels
IrritableBowels's picture

I used to work for an exploration company, researching mineral rights in lands occupying northcentral and northwestern ND.  When $/barrel dropped to 55 in early 2009, there were MASS layoffs-like in the area of around 80-95% of employees of most companies involved with research and acquisition. I'm not entirely sure how it affected the roughnecks...

Mon, 12/09/2013 - 12:55 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

 

 

Hmmm ... mineral rights. A field dominated by Chesapeake now? Is that who they are working for now?

Sun, 12/08/2013 - 15:50 | Link to Comment Flakmeister
Flakmeister's picture

As for interest rates reverting to the mean, one could also argue that the population of H. Sapiens has been zero for most of the history of the planet. Whaddya say that might also revert to the mean...

Sun, 12/08/2013 - 15:56 | Link to Comment Trimmed Hedge
Trimmed Hedge's picture

On a long enough timeline, the survival rate for everyone drops to zero...

Mon, 12/09/2013 - 09:13 | Link to Comment SelfGov
SelfGov's picture

Won't be too long now. Each $10,000,000.00 tight oil well produces 10 minutes of oil globally speaking.

Sun, 12/08/2013 - 16:04 | Link to Comment ItsDanger
ItsDanger's picture

LOL, low interest rates?  Oil prices are the BIG factor by far.   Maybe when oil was around $25, interest rate changes were more of a consideration.  Not today.  Even a 5% rate increase wouldnt affect business that much.  Only its indirect impact on oil prices (i.e. if oil fell to $40 due to rapidly increasing rates).

Mon, 12/09/2013 - 01:48 | Link to Comment daveO
daveO's picture

A 5% point rate increase would kill it dead, and tar sands, too. This is because this nation is stacked full of debt slaves who can't afford to pay more to their masters, in NYC, and for oil at the same time. ObamaCare, alone, may do it, for the same reason. If rates hadn't been taken down to a 300 year low, those projects wouldn't have been profitable.  

Sun, 12/08/2013 - 16:08 | Link to Comment AynRandFan
AynRandFan's picture

I'm pretty sure oil companies are making lots of money now, and they project making lots of money on oil shale into the future.  How long?  Who cares?  The wells pay out, the distribution facilities pay out, and they are left with a handsome profit.  Will this make the U.S. energy independent for a long time?  That's a completely different question.

Sun, 12/08/2013 - 17:48 | Link to Comment What you talkin...
What you talkin about Willis's picture

 "Will this make the U.S. energy independent for a long time?"

You are falling for the propganda.  Unless you are talking major demand destruction the us will never become energy independent.  No way will shale get us anywhere near the 8 million barrles we are importing a day.  

Mon, 12/09/2013 - 01:50 | Link to Comment daveO
daveO's picture

Shale conversion would, but that requires even higher prices w/o interference from Exxon and the like. Not very likely.

Sun, 12/08/2013 - 16:20 | Link to Comment DaveyJones
DaveyJones's picture

"I see government problems"

funny how every story has this subplot

we've lied to ourselves for a long time

but the truth will come quickly  

Sun, 12/08/2013 - 16:25 | Link to Comment Trimmed Hedge
Trimmed Hedge's picture

Have no fear:

Last I heard, Kramer & Jerry were working on their big ball of oil..

Hel-looooooooooooo...!

Sun, 12/08/2013 - 16:34 | Link to Comment So Close
So Close's picture

These folks amuse me.   Perhaps I am jaded sitting here in the EagleFord looking at a drilling rig.  Perhaps I am dumb or mis-informed.   Perhaps I am right to think of them, the people that write these kind of articles as sytemcatically and emotinally biased against oil.   (A view which on the emtotional level I understand but quickly overcame as the latest globabl wamring heat wave roused me at 3:00 am to send my crew to chip ice off of our equpment this morning.)  The fact of the matter is that at these HIGH oil prices  (for the record I believe this IS the new normal) and current interst rates we return our CAPEX on these wells in between 12-16 months.  So the question I am find myself asking is that even if interest rates went to 10% on our financing what does that push our 100% ROI window out to?  14-18 months?  And that will cause us to stop drilling?  I think not.  But then again maybe I am just dumb.

Sun, 12/08/2013 - 16:49 | Link to Comment Flakmeister
Flakmeister's picture

No body is saying that you cannot make money while the party lasts...

How many more wells at "standard" spacing will fit into the well defined boundaries of the EFS? How many wells are drilled per month? 

Do the math....

BTW, would you like to comment on the legacy decline? Do you know what that means in the context of a tight oil play?

Sun, 12/08/2013 - 17:19 | Link to Comment So Close
So Close's picture

Do you think before you type?  I do.  Some intersting questions for you to ponder BTW.  How long has the party been going on?  What percent of the EagleFord has been drilled?   What formations lie beneath the EagleFord and what do they hold as a percentage of reserves of the EagleFord?   What percentage of oil does current techology allow to be  recovered?  What is in on the horizion in terms of improvement in this regrard?

Sun, 12/08/2013 - 17:21 | Link to Comment Flakmeister
Flakmeister's picture

Why don;t you look at what is going on in the EFS here

http://legacy.firstenergy.com/UserFiles/HUGHES%20First%20Energy%20Nov%2019%202013.pdf

Starts at page 67....

Pay special attention to page 70

Sun, 12/08/2013 - 17:38 | Link to Comment So Close
So Close's picture

I get that feild prodcution delcine.  I understand well production fall off. Do you understand what that means in and in what context to view it?  Do you know how to multiply?   I have the idea you have no idea what you are looking at or what it means.  After all we are out here doing charity work.  Not making a profit.

Sun, 12/08/2013 - 17:52 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

The folks who make a living drilling for oil measure success in paychecks.  How could they not?

Society has to measure it differently -- in joules.  Or in barrels/day.  After all, dollars are whimsically defined.  Joules are not.

With India and China still far behind the US per capita oil consumption level, there is no sign consumption increase is going to slow down.  Anything that looks like upcoming production "decline" is doom material.

Sun, 12/08/2013 - 19:57 | Link to Comment thunderkiss
thunderkiss's picture

Hey So Close, I'm glad you're pointing out how much money is being made down there and will continue to be made for a good while.  I live in Dallas but I'm from little 'ole Three Rivers, TX and there's some awesome things going on down there.  I'm tired of people shitting on this shale boom.  It might not make us energy independent and of course it won't last forever but in the meantime, it's going to produce a lot of jobs and make a lot of people rich.  I figure about $5 billion is going to south Texas mineral rights owners in just this year alone.  Drill baby drill and God bless Texas!

Mon, 12/09/2013 - 03:42 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

"Frack and fill that crack!" (C) 2013.

Mon, 12/09/2013 - 02:09 | Link to Comment IrritableBowels
IrritableBowels's picture

Regarding production decline, I'm curious as to your take on this presentation issued by North Dakota Department of Mineral Resources.  Page 10 is where my jaw hits the floor:

https://www.dmr.nd.gov/oilgas/presentations/WBPC2011Activity.pdf

 

(that's a SHITLOAD of multiplying)

 

Sun, 12/08/2013 - 19:56 | Link to Comment Casey Stengel
Casey Stengel's picture

So Close, are you starting to drill into the Persall shale yet? If I recall correctly this was around 15,000 ft.

Sun, 12/08/2013 - 20:11 | Link to Comment thunderkiss
thunderkiss's picture

I think the Pearsall (in the Eagleford area) is more in the range of 18-22,000 ft.  I can't wait to see what that one holds (gas or oil).  In Maverick county it's gas but the word is that there's more liquids as you go east.

Sun, 12/08/2013 - 20:57 | Link to Comment Casey Stengel
Casey Stengel's picture

I was over near Crystal City/Cariso Springs. Is that in the Maverick county area? The gas in our area was pretty wet.

Sun, 12/08/2013 - 22:22 | Link to Comment thunderkiss
thunderkiss's picture

yeah Maverick County is a short ways west of Carizo Springs.  I meant to also say Webb County (just south) has the gas wells going into the Pearsall.

Mon, 12/09/2013 - 00:08 | Link to Comment So Close
So Close's picture

The pearsall has not offically been drilled and produced by anyone yet.   That being said there is a lot of anedotal evidence that many of the minors and 1 of the majors has drilled and is producing it.   Like the EF the TVD (vertical depth) of that shale shale play varies depending where you are in Texas.  In general the further North you are the shallower it is and vice versa.   That will be the next play drilled.  To say nothing of the Chicago and deeper.

Mon, 12/09/2013 - 02:12 | Link to Comment daveO
daveO's picture

Before Greenspan started 'rigging' rates down(2000), gasoilne was below $1.00/gal. Don't tell me about Asian demand, that's been supported by our FED's low rates supporting their markets. If rates were normalized tomorrow, that monetary tide would leave their country in a flash. They'd have no cash for oil. I know the FED isn't going to raise rates, but they have taken them almost to zero in 5 years from nearly normal. The Chinese have built empty cities in that very same time period. They call it a boom too. It is. It's being funded by raiding everyone else's capitol. How long can that pilfering last? We're closer to the end than the begining.   

Mon, 12/09/2013 - 13:02 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

 

 

 

 

 

Flakmeister admits:

" No body is saying that you cannot make money while the party lasts...] "

 

SOME TRUTH AT LAST FROM FLAK!

 

How long will this last?

 

NEWSFLASH!! IT IS THE NEW NORNAL, DUMBO!!!!

 

 

 

Sun, 12/08/2013 - 16:52 | Link to Comment disabledvet
disabledvet's picture

she's a dope trying to keep the Ponzi alive. Iraq production? flatlined. Libya? flatlined. Nigeria? No longer exporting. Venezuela? hyperinflating. Brazil? PTB has now rolled over in a big way. you want an actuary to define oil production? who doesn't want to believe prices won't go to infinity. she's probably the same clown that said Detroit would never have to declare bankruptcy because "making cars are like printing money too!" the more interesting question is "what if prices collapse and shale keeps producing?" the Gulf of Mexico production has been shut in due to the BP disaster...but not anymore. XOM's production numbers are now rising for the first time in a decade. http://online.wsj.com/news/articles/SB1000142405270230372210457924057305...

Sun, 12/08/2013 - 17:05 | Link to Comment Flakmeister
Flakmeister's picture

Your link points to an article on Time Warner bonds or some such...

Do you understand the difference between boe and bbl? If you think Exxon has increased production, then it is clear you don't know what boe means....

Sun, 12/08/2013 - 22:44 | Link to Comment FeralSerf
FeralSerf's picture

Some posters here (not me) believe that the only thing that matters is joules.

Mon, 12/09/2013 - 13:11 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

 

 

Shazzam .. someone realizing the 'physics' at last ... 

Sun, 12/08/2013 - 17:20 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Your link is irrelevant. 

This one says what you wanted:http://www.bloomberg.com/news/2013-10-31/exxon-third-quarter-profit-decl...

They had a boe production increase for the first time in years, but that's not oil.  It's natgas.  Barrels of Oil Equivalent is the new term used to conceal declines in crude from the major private oil companies.  Their problem is the national oil companies have scarfed up reserves and cut the Exxons and Totals and Shells out.  So you're way off base on this.

Shale will keep producing if price falls.  Non shale will keep producing if price falls.  But Not As Much.  Production will fall.  The world of oil is a world of calculus, not arithmetic.  Flow rates matter.  Rate of change of flow rates matter.  Barrels in total, not particularly unless divided by some unit of time.

 

Sun, 12/08/2013 - 22:32 | Link to Comment DaveyJones
DaveyJones's picture

yeah, what does she know, running that loser site oildrum. It never got any recognition   

Sun, 12/08/2013 - 18:03 | Link to Comment Cloud9.5
Cloud9.5's picture

No, So Close you are not dumb.  Your concepts are affected by your surroundings.  That is true for all of us.  Here in central Florida where there are no oil wells and businesses are strangling it is easy to see the decline.  There where you are hope and opportunities abound.   The real question before us is this sustainable or is it just a surge? 

 

The fact that we are expending more energy to extract kerogen and bitumen, the fact that we are even spending the time and energy to convert these products into oil tells me something has changed.

 

I suspect that you are living in a boom town.  I would urge you to make as much as you can as fast as you can and salt the majority of it away.  If you have a wad of cash, you may during the deflation be able to pick up a nice little spread and have a sustainable lifestyle for you and yours.

 

Good luck and God bless and thanks for keeping the lights on for a little while longer.

Sun, 12/08/2013 - 22:34 | Link to Comment DaveyJones
DaveyJones's picture

exploding buildings and faking wars tells me something too 

Sun, 12/08/2013 - 20:20 | Link to Comment starfcker
starfcker's picture

great post, so close

Sun, 12/08/2013 - 22:55 | Link to Comment jerry_theking_lawler
jerry_theking_lawler's picture

I think Tyler, et al, is hitting upon this exact point. You return your CAPEX in 12-16 months....the life of most shale wells is 12-16 months (there is exact data on here somewhere).....see where this is going...?...

Your wells return their capex under current life and pricing, but don't make any money...only break even. No company survives very long breaking even (especially when prices decline and the returns aren't made).

Mon, 12/09/2013 - 02:16 | Link to Comment IrritableBowels
IrritableBowels's picture

Not sure why you were downvoted, but the link to the ND DMR typical Bakken well production (effective life) is posted above.  See page 10.

Mon, 12/09/2013 - 01:30 | Link to Comment Not_Sure
Not_Sure's picture

You are.

Mon, 12/09/2013 - 02:17 | Link to Comment daveO
daveO's picture

Look at the big picture. If your interest rates are 10%, so is everyone elses. If debt slaves are living day to day now, when their debt expense goes up that much they have less to spend on everything. If oil eats up enough of their income, just to get to work, they will move closer to work. That's already happening. This boom would not exist, if not for Bernanke's counterfeiting. He's helping you greatly. i hope you send him a Thanks and Happy Hannukah card. It's the least you can do! 

Sun, 12/08/2013 - 16:43 | Link to Comment Cycle
Cycle's picture

Another item to factor into oil prices going forward is the changeover to the 30 year cold phase of the Pacific Decadal Oscillation cycle - think back to the weather in the mid-late 70's.

Sun, 12/08/2013 - 17:17 | Link to Comment Flakmeister
Flakmeister's picture

Oh my, we got one in the it's all natural camp...

A proponent of the ABC theory of climate variation...

ABC = Anything but Carbon....

Sun, 12/08/2013 - 18:56 | Link to Comment BurningFuld
BurningFuld's picture

The more CO2 we put in the atmosphere the better plants grow.

Myself, I consider this to be an important FACT, given our ever increasing population. How about you?

Sun, 12/08/2013 - 19:24 | Link to Comment Flakmeister
Flakmeister's picture

Yep, write a paper demonstrating the pros out weigh cons and get back to us. In fact even if you could just reference anything but a "think tank" piece or blog drivel that had passed some semblance of peer review would suffice...

But we all know that you can't do that, because it doesn't exist... 

Mon, 12/09/2013 - 02:19 | Link to Comment daveO
daveO's picture

I look forward to moving to the Yukon, if it ever thaws out. Siberia and Canada both are neary empty, while I'm crammed down here with a bunch of kids being brainwashed by the Rockefeller Foundation.

Sun, 12/08/2013 - 23:24 | Link to Comment DaveyJones
DaveyJones's picture

good point, you're right, you can increase the concentration of any chemical in a fixed system and its nothing but healthy

it's just like dollars

taking millions of years of condensed carbon and putting it in the atmosphere in a hundred can't do a thing can it

and the ice cores have always shown the same rapidly rising pattern in the last 100 years right?

Sun, 12/08/2013 - 21:04 | Link to Comment Cycle
Cycle's picture

Funny how the acronym "PDO" elicits all kinds of predictable stereotyped behavior in some people.  With responses as thoughtful as Pavlov's dogs.

Sun, 12/08/2013 - 21:06 | Link to Comment Cycle
Cycle's picture

dupe

Sun, 12/08/2013 - 22:49 | Link to Comment yofish
yofish's picture

Somehow I did not conclude the same from my reading. 

Sun, 12/08/2013 - 17:01 | Link to Comment magnetic_silver...
magnetic_silver_ideas's picture

Quick this is bullish for gold.... pretty soon Janet Yellen will make a press release to inform the public that the Federal Reserve will reverse 100 years of tradition and return to a gold backed Bank Note redeemable for value.

Sun, 12/08/2013 - 17:02 | Link to Comment Black-Man
Black-Man's picture

Peak Prosperity and Post Carbon do nothing but bash fossil fuels in any way possible. The only thing they want is windmills and solar panels. This is NOT NEWS - this is fabrication from a group w/ an agenda.

Sun, 12/08/2013 - 17:05 | Link to Comment Flakmeister
Flakmeister's picture

Ok, make your case and explain where Hughes went wrong...

It other words put up or shut up...

PS Do you think that Exxon et al don't have an "agenda"? 

Mon, 12/09/2013 - 01:45 | Link to Comment starfcker
starfcker's picture

come on flak, of course exxon has an agenda. last time their CEO testified before congress he said if you got the wall street skimming operation out of the way, he could deliver gas to americans for under two bucks a gallon. sounds good to me

Mon, 12/09/2013 - 10:36 | Link to Comment Flakmeister
Flakmeister's picture

IIRC, he also promised he wouldn't come in anyone mouth...

Mon, 12/09/2013 - 02:27 | Link to Comment daveO
daveO's picture

They were talking the very same profitable book in the 70's when the FED suppressed rates. At least things, then, things weren't so bad that they had to buy the US debt directly. We are now nearer the end of the whole fraud. 

Sun, 12/08/2013 - 17:10 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

For those who care about the particulars, when you frack a well, it's short for fracturing.  You drill the vertical and horizontal portions and then you pump liquid at high pressure into it to create fracturing of the rock so the pores with oil can flow from pore to pore.  After you do the fracuring, you need to hold the fractures open (remember, there are miles of rock above exerting weight trying to close them down again) and you do that with little ceramic particles called proppant.

Here's a picture of some, and where it came from.  Think about energy required to get energy out and how much fuel that ship's engines burned.

http://static4.businessinsider.com/image/4f5681fd69bedd0f60000048-1200/h...

Sun, 12/08/2013 - 17:22 | Link to Comment Pure Evil
Pure Evil's picture

I like the Made In China logo on all the bags.

Sun, 12/08/2013 - 17:40 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

What did you think my point was?

Sun, 12/08/2013 - 17:45 | Link to Comment Pure Evil
Pure Evil's picture

I dunno.

Maybe we can get Mundaceus Fagonere to drop by and rate your troll worthyness.

Mon, 12/09/2013 - 02:19 | Link to Comment IrritableBowels
IrritableBowels's picture

HINT: "Here's a picture of some, and where it came fromThink about energy required to get energy out and how much fuel that ship's engines burned."

Sun, 12/08/2013 - 18:20 | Link to Comment Notarocketscientist
Notarocketscientist's picture

Scientists Wary of Shale Oil and Gas as U.S. Energy Salvation

Hughes sums up: "Tight oil is an important contributor to the U.S. energy supply, but its long-term sustainability is questionable. It should be not be viewed as a panacea for business as usual in future U.S. energy security planning."

http://www.sciencedaily.com/releases/2013/10/131028141516.htm

 

 

U.S. Shale-Oil Boom May Not Last as Fracking Wells Lack Staying Power

“I look at shale as more of a retirement party than a revolution,” says Art Berman, a petroleum geologist who spent 20 years with what was then Amoco and now runs his own firm, Labyrinth Consulting Services, in Sugar Land, Tex. “It’s the last gasp.”

http://www.businessweek.com/articles/2013-10-10/u-dot-s-dot-shale-oil-boom-may-not-last-as-fracking-wells-lack-staying-power

 

THE FRACKING PONZI SCHEME

Robert Ayres, a scientist and professor at the Paris-based INSEAD business school, wrote recently that a "mini-bubble" is being inflated by shale gas enthusiasts. “Drilling for oil in the U.S. in 2012 was at the rate of 25,000 new wells per year, just to keep output at the same level as it was in the year 2000, when only 5,000 wells were drilled."  http://www.forbes.com/sites/insead/2013/05/08/shale-oil-and-gas-the-contrarian-view/

 

Why America's Shale Oil Boom Could End Sooner Than You Think

http://www.forbes.com/sites/christopherhelman/2013/06/13/why-americas-shale-oil-boom-could-end-sooner-than-you-think/

 

FRACKING WILL CREATE AN ECONOMIC CRISIS

Overinflated industry claims could pull the rug out from optimistic growth forecasts within just five years.  A report released in March by the Berlin-based Energy Watch Group (EWG) concluded that: "... world oil production has not increased anymore but has entered a plateau since about 2005."  Crude oil production was "already in slight decline since about 2008."   

http://www.guardian.co.uk/environment/earth-insight/2013/jun/21/shale-gas-peak-oil-economic-crisis 

Sun, 12/08/2013 - 20:12 | Link to Comment Hongcha
Hongcha's picture

TPTB know what's coming down the road; they are loading phalanxes of storm troopers, bulletproof glass over teller windows, roiling the unwashed broken middle class with sadhappyfear headlines, getting them ready to wake up to overnight devluation, $6, $8, $9 gas and National Guard units at every pump and Safeway exit.

Or Israel hits Iran and we get an even more horrfying result.  Or Fukushima blows up even worse.

The first I could live with; but permanent destruction of Mother Earth's goodness and history is over.

I remember in college this girl couldn't smoke bonghits any more because she kept "sliding through the slit of sadhappy".  

Sun, 12/08/2013 - 20:14 | Link to Comment blindman
blindman's picture

the financial and monetary systems have diverged, become totally blind
with no normal advancement in other senses such as hearing or auditory
capacity. energy potential and necessity must be integrated with infrastructure
or capacity to utilize as functional kinetic is devalued. (many examples)
this statement seems to mystify the
high priest of econo-mommy and their little ones; it is that simple.
.
the dream has divergent dis utility into oblivion then
there is a stark and unknown that no one could see coming.

Sun, 12/08/2013 - 20:27 | Link to Comment blindman
blindman's picture

you can not resolve anything when fraudulent induction
is ignored as the "sacred" root of the money system, imho.
anyway ....
this lot is not a friend or even capable of it.

Sun, 12/08/2013 - 20:52 | Link to Comment Oldwood
Oldwood's picture

It would be nice to think this is about cheap oil, but ultimately it is about cheap everything. We sell our jobs to China for cheap electronics. We sell our jobs to illegals for cheap fastfood, homes and landscaping. People have always known what the right thing to do is but there is always a better deal out there. We will always support those who help us justify what we know to be lies..

On another note, why can we not pay the unemployed of the world to pedal generators for power? Renewable...I think so. Obviously we have to power the matrix somehow.

Sun, 12/08/2013 - 21:20 | Link to Comment Blame Crash
Blame Crash's picture

Good thing for all of us that the real do-ers in society don't listen to these know-nothing nattering nabobs of negativity.  Otherwise we'd all be freezing in the dark about now. What a load of bunk this article is! 

There was no miracle. Shale Oil production happened because people who are in-the-know, made it happen. It's as simple as that.

Sun, 12/08/2013 - 23:00 | Link to Comment Fred123
Fred123's picture

I think you are correct. I've heard these types since the mid-seventies, always chattering on about the end of the oil era, shortages, economic doom etc etc etc. How long has that been? Almost 40 years and we still can get oil relatively cheap and readily available.  The only reason we are having economic difficulties is because of gov't actions and not the price of oil. Hopefully we will survive the 0bama era and move on to the next great period of economic health for America.

Mon, 12/09/2013 - 00:12 | Link to Comment phaedrus1952
phaedrus1952's picture

Blame, I am so tired after a long day's work I didn't plan on posting on another ZH Peak Oil/Shale Oil article, but your strraight-forward, common sense observation prompted me to 'speak up'.

The ACTUAL, REAL-LIFE data coming out of Eagle Ford, the Bakken, Niobrara so blows away these 'extrapolations, computer simulations, projections' etc. that one would think naysayers would at least pause before their agenda is completely demolished by real world events ... as it demonstrably is on a day by day basis.

For one and all reading these words, please, by all means read the Post Carbon Institue's work. Read Mr.Patterson's Peak Oil Barrel blogs and the like.  If you DO NOT at least contrast their views with the likes of Mike Filloon's at Seeking Alpha, you will never be aware of how this shale revolution is now - and for the forseeable future - having a major impact on all our lives.

ONE small example, the OOIP in the Bakken is - according to US gov - 500 BILLION barrels, with 7 billion technically, economically recoverable. If the newest, most effective well completion/stimulation techniques increase the recovery rate JUST ONE PERCENT it will near double the EUR to 12 billion barrels. As the lower formation, Three Forks, is thought to be almost as big as the Bak, the ultimate recovery will prove to be far higher.

One other item that has puzzled/irked me regarding all this 'sweet spot' talk and all the "good" wells being already drilled ... HELD BY PRODUCTION  is a very significant aspect in why, how and when many of the wells are drilled by companies.  To take data from early wells (which are near antiquated by 2013 standards) and project forward from them is woefully inadequate and misleading.

Sun, 12/08/2013 - 21:37 | Link to Comment anomalous
anomalous's picture

And now for something completely different.....

The Neanderthals populating the oil industry are only able to recover a very small portion of the oil reserves that they're exploiting at any given time, but it is still pretty easy to fill your tank whenever wherever.

The inventory of leftovers is overwhelming and growing!

Recovery efficiencies seem to correlate with technology advances that correlate with both economics and the passing of time.

Known oil reserves waiting to be produced keep snowballing!

Not to be insensitive, but..., if you're really in the oil/commodity space wouldn't you wish that producible hydrocarbons were more "exotic" on this planet(in the context of human lifetimes? Don't show my kid's this post)?

Sun, 12/08/2013 - 21:56 | Link to Comment MSO
MSO's picture

Peak oil, peak food, peak people or even widow's peak; there's always something. Everthing runs out eventually and the fewer the things we start with, the faster we run out. When everything runs out the games over.  We have a certain scientific knowledge, most of which has been gained in past 150 years.  We need to combine that knowledge with the the materials around us to proveide energy, food and housing. As we do this, hopefully we'll learn how to do other things.

There is an entire universe out there that is brimful of resources; currently, we look only in our back yard and then jump right into the chicken little routine. Titan, Saturn's largest moon, is believed to have an almost unlimted supply of methane. Now there is a supply of energy but it won't be harvested until the price is high enough.

What can we get from the moon, what can we get from Mars, what can we get from Venus? Answering these questions is a start; when will an asteroid destroy the Earth? When will the sun expire and end life on Earth as we know it?  When will the Earth's population exceed our capacity to maintain it?

Answering those questions will determine if mankind can continue beyond the Earth and/or the solar system.  It's similar to 15th century Europe; they knew America was there, but thought it an unpleasent and barren place to live. We face our own challenges today.

Mon, 12/09/2013 - 02:35 | Link to Comment daveO
daveO's picture

Collapse of the Petro Dollar would bring about cheaper energy within a few years. No need for space travel or even 35,000 feet deep wells.

Mon, 12/09/2013 - 03:04 | Link to Comment Flakmeister
Flakmeister's picture

You have to be a troll if you believe that...

Sun, 12/08/2013 - 23:28 | Link to Comment Duude
Duude's picture

But, but, but, but, but, this time will be different.

Do NOT follow this link or you will be banned from the site!