Russia And The Ukraine – The Worrisome Connection To World Oil And Gas Problems

Tyler Durden's picture


Submitted by Gail Tverberg via Our Finite World blog,

What is behind the Russia/Ukraine problem? It seems to me that what we are seeing is Russia’s attempt to fix a two-part problem:

  1. Some oil and gas exporters, including Russia, are not receiving enough oil and gas revenue to meet their needs. They are not able to collect enough taxes to provide the services they have promised to their citizens, plus allow the amount of reinvestment that is needed to maintain production. Russia is starting to experience economic contraction because of the low revenue situation. This situation very closely related similar problems I have written about  previously. In one post I talked about major independent oil companies not producing enough profit to provide the revenue needed for reinvestment, and because of this, cutting back on new investment. In another, I talked about the problem of too low US natural gas sales prices, relative to the cost of extraction.
  2. Some oil and gas importers, including the Ukraine, are not using their imported oil and gas in productive enough ways that they are able to afford to pay the market price for oil and gas. Russia gave the Ukraine a lower natural gas price because some of Russia’s pipelines cross the Ukraine, and the Ukraine must maintain the pipeline. But even with this lower natural gas price, the Ukraine is behind on its payments to Russia.

If a person thinks about the situation, it looks a lot like a situation where the world is reaching limits on oil and gas production. The marginal producers (including Russia) are being pushed out, at the same time that the marginal consumers (including the Ukraine) are being pushed out.

Russia is trying to fix this situation, as best it can. One part of its approach is to make certain that the Ukraine will in fact pay at least the European market price for natural gas. To do this, Russia will make the Ukraine prepay for its natural gas; otherwise it will cut off its gas supply. Russia is also looking for new customers who can afford to pay higher prices  for natural gas. In particular, Russia is working on a contract to sell LNG to China, quite possibly reducing the amount of natural gas it has available to sell to Europe. Russia is also signing a $10 billion contract with Iran in which it promises to construct new hydroelectric and thermal energy plants in Iran, in return for oil exports from Iran. This contract will increase the amount of oil Russia has to sell, and will increase the oil available on the world market. Russia’s plan will do an end run around US and European sanctions.

Gradually, or perhaps not so gradually, Russia’s exports are being redirected to those who can afford to pay higher prices. European Union purchases of natural gas imports have declined since 2008, presumably because they are having difficulty affording the current price of gas, so they are being relied on less for future sales.

The Russian approach seems to include building a new axis of power, including Russia, China, Iran and perhaps other countries. This new axis of power may threaten the US dollar’s reserve currency status. With the dollar as reserve currency, the US has been able to buy far more goods from other countries than it sells to others. Putting an end to the US dollar as reserve currency would leave more and oil and gas for other countries. If purchases by the US are cut back, it will leave more oil and gas for other countries. The danger is that prices will drop too low because of the drop in US demand, leading to lower production. It this should happen, everyone might lose out.

I am doubtful that Russia’s approach to fixing its problems will work. But if Russia is “between a rock and a hard place,” I can understand its willingness to try something very different. It now has more power than it has had in the past because of its oil and gas exports, and is willing to use that power.

The US/European approach to this problem is to loan the Ukraine $17 billion to pay for past natural gas bills. The hope is that with this loan, the Ukraine will be able to make changes that will allow it to afford future natural gas bills. There is also the hope that the United States can step in with large natural gas exports to Europe and the Ukraine. In addition, the US and Europe are trying to impose sanctions on Russia.

I find it very difficult to believe that the US/European approach will work. The idea that the United States can start exporting huge amounts of natural gas to Europe in the near future borders on the bizarre. There are many hurdles that would need to be overcome for this to happen. Installing LNG export facilities is among the least of these hurdles.

In fact, the West badly needs both the oil and gas that Russia is producing, so it really is in a very precarious position. If Russia cuts off exports, or if Russia is forced to cut off exports because of financial difficulties, both the US and Europe will suffer. It is clear that Europe will suffer because of its dependence on pipeline exports of oil and gas from Russia. But the US will suffer as well, because the US is tied closely to Europe by financial ties, and by import and export arrangements with Europe.

Furthermore, the US/European approach involves a great deal of new debt, in an attempt to fix an inherent inability of the Ukrainian economy to afford high energy prices. Without a huge transformation, the Ukraine will be in even more financial difficulty when it comes time to pay back the new debt–it will need make debt payments at the same time that it needs to pay for more expensive future natural gas. More debt doesn’t necessarily fix the situation; it may make it worse.

The US powers that be do not understand what Russia (and the world) is up against, so the policies they propose are likely to make the situation worse, rather than better.



We live in a world in which some countries use far more energy products than others. One question that the new proposed axis of power raises is whether this disproportionate share of energy use should be allowed to continue to exist.

Figure 1. Per Capita Energy Consumption, based on BP 2013 Statistical Review of World Energy data and EIA population data.

Figure 1. Per Capita Energy Consumption, based on BP 2013 Statistical Review of World Energy data and EIA population data.

The United States, Europe and Japan got to the position of using a disproportionate share of energy resources by way of being first with industrialization. This early industrialization set up a pattern of using energy for “frivolous” things–large, heated homes; private passenger automobiles for individual citizens; businesses that were not necessarily as energy-efficient as they might be. In the early days, imports were limited and cheap. As local supplies became depleted, imports rose. The cost of imported oil and imported gas (except for natural gas in the US) rose as well, making the imported fuel harder to afford. Now the early users–that is, the US, EU, and Japan, are the ones struggling to keep up past consumption levels.

In some ways, the Ukraine is not too different from the EU is this respect.  The Ukraine also got to the position of using an above average share of energy resources, by being early in its industrialization, during the era of the Soviet Union. The Ukraine, prior to the collapse of the Soviet Union, was using as much as energy on a per-capita basis as the US-Europe-Japan group (Figure 2), because of its heavy industry.

Figure 2. Figure similar to Figure 1, but including Ukraine's per capita energy consumption as well.

Figure 2. Figure similar to Figure 1, but including Ukraine’s per capita energy consumption as well.

Once the Soviet Union collapsed, the Ukraine had huge difficulties: Exports of oil and gas from Russia (upon which the Ukraine’s industry depended) collapsed. The Ukraine’s industry had been set up under the Soviet-Era model, and didn’t produce the variety of goods, cheaply, that people outside the Soviet Union expected to buy. The Ukraine also didn’t have alternate sources of energy supply, if Russian supplies were cut off, because a major source of energy was pipelines of both oil and gas from Russia.

The Ukraine economy has struggled for many years. Trying to transform it now to be successful competitor in the world economy is likely to be a difficult task. If the Ukraine tries to make goods for the world market, it will find itself in competition with Asian competitors. The Asians are hard to outcompete, in part because their labor costs are low (because it uses workers with little energy use, so they can live on low salaries) and in part because their energy costs are low (often from coal). Safety standards are often low as well, adding to their low-cost structure.

If, instead of making goods for the world market, the Ukraine decides to specialize in high-priced services, such as financial, medical, or educational services, it will find that it has a great deal of competition from the EU. It will also find that the EU is having difficulty making the service model work. The service model provides little for export, for one thing.

The Russian Energy Situation 

Russia’s cost of producing oil is among the highest in the world. Mark Lewis, in a presentation at the November 2012 ASP-USA meeting estimated that Russia needed a price of $115.90  a barrel, to cover both its cost of extraction, plus Russian budget needs from taxes. If costs are rising at, say, 10% per year, the current required cost today would be about $134 barrel. Current oil prices are not much over $100 barrel, which is too low.

Russia is the second largest oil exporter in the world (after Saudi Arabia), exporting approximately 7.2 million barrels a day. We in the rest of the world very badly need Russia’s oil exports to continue, to keep up world oil supply. Without this oil, the world economy would suffer badly.

With respect to natural gas, Russia is the single largest exporter in the world (Figure 3, below), exporting more natural gas than all the Middle Eastern countries combined. The cost of producing Russia’s natural gas is likely very high, because Russia is extracting it from more and more difficult locations. Also, Russia is transporting this natural gas greater and greater distances. New pipelines or LNG facilities are necessary to facilitate this transportation, and these are expensive as well.

Figure 3. Natural gas exports by country, with some countries grouped. Exports from the New World are excluded, since they historically have mostly stayed in the New World.

Figure 3. Natural gas exports by country, with some countries grouped. Exports from the New World are excluded, since they historically have mostly stayed in the New World. For example, Canada exports natural gas to the United States by pipeline.

When an oil/natural gas exporter doesn’t get enough revenue, there is a danger of recession, or even collapse. A major part of the problem is that oil and gas exporters depend on tax revenue to fund government services, such as roads, schools, and public health. This tax revenue depends on profitability of the companies selling oil and gas. If prices are not high enough, tax revenue suffers. In fact, the 1991 collapse of the Soviet Union took place after a period of low oil prices made it impossible to justify investment in new more-expensive-to-extract fields. Russia began to recover once oil prices began rising again, making new investment oil investments profitable again.

The Ukraine has been a particular problem with respect to natural gas exports for Russia, because it has used a significant share of Russia’s natural gas exports, without paying market price for them (Figure 4). In fact, some of the time, it didn’t even pay the below-market price the Ukraine had contracted for, for natural gas exports–the reason for the Ukraine’s debt to Russia.

Figure 4. Ukraine natural gas imports as a percentage of Russia's natural gas exports.

Figure 4. Ukraine natural gas imports as a percentage of Russia’s natural gas exports.

Also, with Russia’s total natural gas exports close to flat (see Figure 3), the high exports to Ukraine have limited the amount available to members of the European Union. If Russia bases its economy on the sale of oil and natural gas, it needs a high enough average price, to fund its overall costs.

The Ukraine continues to need Russia, because Russia is the source of its oil and gas supplies. The IMF recently approved a $17 billion loan to the Ukraine, to pay off its debt to Russia and for other purposes. The loan is contingent on fiscal reforms, including a 50% increase in natural gas prices, raising taxes and freezing the minimum wage. My expectation is that the Ukrainian situation will spiral downward, with lower and lower energy use (because citizens won’t be able to afford the high cost of energy).

Russia needs the US, because it is having trouble obtaining enough investment capital, because of current low oil prices. It needs to continue relationships with oil companies such as Exxon Mobil, hoping these companies will help provide investment capital. The catch is that they too are having difficulty. Exxon Mobil has reported falling profits for four quarters. The same Exxon article mentions that the company cut capital and exploration costs by 28% as a way of getting income and outgo back into line. So Exxon Mobil is “hurting” as well, for the same reason that Russia is hurting: inadequate oil and gas prices.

To keep income in line with necessary expenditures, Russia has essentially no choice but to insist on higher prices from the country that is a big consumer, but can’t pay its bills–the Ukraine. These higher prices are likely to push the Ukraine’s economy down further, likely making the IMF loan impossible to repay.

To Which Countries Can Russia’s Natural Gas Be Exported?

The market for Natural Gas imports is somewhat restricted, as shown in Figure 5, below. This chart includes natural gas imports from all sources, including the Middle East and Africa, not just Russia. I have omitted the Americas, because it currently tends to operate as a separate system, with the US, Canada, and Mexico connected by pipelines.

Figure 5. Natural gas imports (excluding new world) by country grouping. FSU is "Former Soviet Union." Based on EIA data. Chart omits Switzerland and other non-EU European natural gas importers.

Figure 5. Natural gas imports (excluding new world) by country grouping. FSU is “Former Soviet Union.” Based on EIA data. Chart omits Switzerland and other non-EU European natural gas importers.

When it comes to finding locations for Russia to export natural gas to, the countries of the European Union are a large share of the natural gas market. (In Figure 5, I have omitted a few small European importers that are not part of the EU, and not part of the FSU, such as Switzerland, but this omission should be small.) The Ukraine and other Former Soviet Union countries are gradually being squeezed out, because they cannot afford today’s natural gas prices. Asia is growing in its natural gas use. The prices paid in Asia have tended to be higher than in Europe (Figure 6, below), so it is natural for Russia to look to Asia as a growth area for its natural gas exports.

Russia cannot easily walk away from the countries it currently exports to, because it needs natural gas revenue, and the pipelines are already in place.

Can the United States Actually Help the Ukraine with Natural Gas? 

The Ukraine’s big problem with natural gas is that it can’t afford to pay market prices for it. This issue is likely to continue to be a huge problem in the future, regardless of which country is planning to export natural gas to it. Greece has had a similar problem, with inability to pay for natural gas imports from Russia. On my view, the Ukraine’s inability to afford natural gas is its number one problem. The problem can be temporarily “papered over” with an IMF loan, but unless there are huge structural changes to the economy, the basic problem won’t be fixed.

Let’s suppose that the Ukraine actually finds money to pay for imports. Can the US provide the natural gas imports required? Can it also help with European imports? Many people look at the disparity in natural gas prices around the world (Figure 6), and expect that US can provide natural gas to Europe as well .

Figure 6. Comparison of natural gas prices based on World Bank "Pink Sheet" data. Also includes Pink Sheet world oil price on similar basis.

Figure 6. Comparison of natural gas prices based on World Bank “Pink Sheet” data. Also includes Pink Sheet world oil price on similar basis.

If a person looks at the situation closely, it is hard to see that US exports will happen in large enough quantity, in a fast enough time frame, to make any difference. I recently wrote a post pointing out some of the issues, called The Absurdity of US Natural Gas Exports. I point out in that post that the United States is currently a natural gas importer. Our own natural gas in storage reservoirs is at record low levels, and there is concern that we may not be able to refill them in time for next winter. The amount of natural gas required by Europe is huge, if it were to try to replace Russia’s contribution. So we are talking about the need for a very large change for the US to be able to help Europe and the Ukraine.

There is one scenario in which the United States might theoretically be able to help Europe. This scenario would require a lot more than putting LNG export terminals in place. In particular, we would need:

  • Much higher US natural gas prices than are currently the case, in order to make it economic to extract shale gas that seems to be present, but that is not economic to extract at this time. US natural gas prices would likely need to rise to two to three times current levels, perhaps to current European levels.
  • The US economy would need to weather the storm that these higher natural gas prices would cause. Homeowners would find that the cost of heating their homes is much higher, but that their salaries are not any higher. Utilities that use natural gas would find that their sales price of electricity needs to be much higher, affecting both homes and businesses. The US economy would suddenly become much less competitive in the world market place, because of its higher cost structure compared to countries using coal as their primary fuel.
  • In order to extract this higher-priced natural gas, we would need to greatly ramp up the number of shale gas wells drilled, perhaps to 10 times the current number of wells drilled per year. Part of the big increase would take place because of the greater total amount of natural gas required. Part of the increase would take place because we would now be drilling wells with lower productivity–partly because of lower monthly output, and partly because of shorter productive lives. Without adding low-productivity wells such as these, there is no way that production can be ramped up as much as required. (This is the reason that higher natural gas prices are needed.)
  • To drill this huge number of wells, we would need many more drilling rigs. We would need many more engineers. We would need many more trucks hauling water for hydraulic fracturing fluid. In dry areas, we would likely need to transport the water required for fracking much longer distances than in the past. We would need to dispose of much more waste material, causing potentially many more problems with pollution and with earthquakes. We would need communities willing to put up with all of these problems, in order to help other countries in need of natural gas imports.
  • Someone would need to build a huge number of LNG transport ships to carry all of this natural gas. It is not clear whether LNG import terminals would be needed as well–the ones currently in place tend to be underutilized.
  • Many more pipelines would be needed, both in the US from the new wells to the terminals, and in Europe, connecting LNG terminals to the new users. Many of these pipelines will be used for only a short period of time, as wells deplete quickly.
  • The cost of LNG the US will be able to send to Europe will likely be more expensive than current European natural gas prices, when the combination of the higher US natural gas cost, plus LNG transport cost, is considered. If there are new European natural gas imports, say from Israel, the additional high-priced natural gas from the US may not be needed. It is also not clear that Europeans will be able to afford the new expensive natural gas, either. The high-priced gas will tend to make the European economy shrink, because salaries will not rise to match the new higher costs.


The US approach to the Russia /Ukraine situation reflects a serious misunderstanding of the situation. Russia has little choice but to try to raise the price of products it is selling, any way it can. It needs to cut out those who cannot afford its products, including the Ukraine. If Europe increasingly cannot afford its products, Russia needs to find customers who can afford them.

There is little chance that the United States is going to be able to help Europe with its natural gas needs in any reasonable timeframe. Our best chance at keeping the global economy “working” for a little longer is to try to keep globalization working as best we can. This will likely require “making nice” to countries we are unhappy with, and putting up with what looks like aggression.

Policymakers like to think that the US has more power than it really does, and like to encourage stories suggesting great power in the press.  Unfortunately, these stories are not true; we need policymakers who understand our real situation.

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Thu, 05/08/2014 - 21:04 | 4741913 reader2010
reader2010's picture

Mao was right when he said the US is the Paper Tiger. 

Thu, 05/08/2014 - 21:22 | 4741972 TwoShortPlanks
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The Rabbit Hole

Another shameless blog by TwoShortPlanks

Thu, 05/08/2014 - 22:24 | 4742081 ZerOhead
ZerOhead's picture

< Say "yes" to Keystone

< Say "no" to Keystone

Normally you have to attack and defeat a country like Iraq at considerable expense to take control over its oil and gas.

Yet Canada is offering a safe and stable (albeit somewhat nasty) supply of oil through the Keystone XL without the need for warfare but the Obama braintrust would rather see them ship it to China.

Go figure...

Thu, 05/08/2014 - 22:27 | 4742140 MountainsRoam
MountainsRoam's picture

Peak energy is gonna be a MFer for the enviroment regardless of a pipeline.. Huge mistake to not build this pipeline in this energy dependent country ASAP..

Thu, 05/08/2014 - 22:35 | 4742157 ZerOhead
ZerOhead's picture

ASAP is critical cuz when this sucker goes down hard at least you have the desperately needed additional energy infrastructure in place already...

Fri, 05/09/2014 - 10:02 | 4743135 sessinpo
sessinpo's picture

Peak energy, like global warming. Sarc

Fri, 05/09/2014 - 10:27 | 4743229 Citxmech
Citxmech's picture

Yes, the Titanic is unsinkable.

Thu, 05/08/2014 - 22:04 | 4742086 booboo
booboo's picture

In proxy wars with China we are 0-2, Vietnam and Korea, Mcstain wants to give it another go.

Thu, 05/08/2014 - 22:21 | 4742122 Rakshas
Rakshas's picture

....... are questioning Mcliars Patriotism???   Boy are you in for a frowning :(

.....seems he don't like that sorta thing so much........


 Obama/McCreepy ....... the illusion of choice

" have no choice .....they don't care about you, they don't give a fuck about you at all at all at all......." G Carlin 

Thu, 05/08/2014 - 21:06 | 4741920 dirtyfiles
dirtyfiles's picture

just wait for next winter

we'll see who is the boss


Thu, 05/08/2014 - 21:58 | 4742076 robertocarlos
robertocarlos's picture

Could be eatting Danza next winter. Finished third.

Fri, 05/09/2014 - 06:11 | 4742712 atthelake
atthelake's picture

As we read ZH and others, I wonder how many of us are trying to go in to CYA mode. Some of this could affect oil and gas prices in the US. It could affect food prices, which are, already, high. If you can, buy a wood stove, have a large garden, can your food. Things could get much worse, here, next winter.

Fri, 05/09/2014 - 13:59 | 4744142 The Blank Stare
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My plans are in my head and on paper. Still need the land and the log house. Don't forget the solar panels and batteries. Oh, and that wood gas thingy.

Thu, 05/08/2014 - 21:16 | 4741953 Big Boss Man
Big Boss Man's picture

Since I became aware of politics-government, I'm 61, it seems to me that the so-called leaders, (who now call themselves 'lawmakers"), have no clue as to how the rest of the world will react, and are befuddled, like Obama is disappointed with the World, when things don't go as planned.

Calling yourself exceptional does not make you exceptional.

Thu, 05/08/2014 - 22:09 | 4742097 Dr. Engali
Dr. Engali's picture

"Calling yourself exceptional does not make you exceptional."

So I guess I'm not really a big swinging dick eye candy for hot young babes. ...... Bummer.

Fri, 05/09/2014 - 04:36 | 4742652 Drifter
Drifter's picture

This isn't just another president screwing up in a never-ending procession of screwups while America somehow holds on to superpower status. 

This is the end of the road for America's superpower status.  The asian alliance (most Americans aren't even aware of) is gonna shock the world in the next 12 months, maybe before the end of 2014.

I've been looking for it my whole adult life, now it's happening.  20 years later than I thought it would, but 20 years is a rounding error in geoplitics.

And it's not about oil. It's about justice.  The east ganging up and delivering justice on the west (finally) after 70 years of playing world bully.

They just weren't strong enough till now, and we weren't weak enough till now.  Like Rome couldn't be brought down till they were weak enough.

Obama and the CIA thought Ukraine would be just another regime change.  Actually CIA, Obama doesn't have clue what's happening.  They should have read the warning signs in Syria, the Russian bear is waking up from hybernation.  And the dragon is already pissed off over CIA meddling in Iran.  And everybody else has been pissed off way longer. 

Conditions are finally good for asia coming together, the time is right, and we'll see it happen way faster than anyone realizes.

Fri, 05/09/2014 - 11:05 | 4743387 El Vaquero
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The problem is, if you want to dish out justice on a global scale without the existing stockpile of nuclear weapons, you're going to have to burn through a lot of oil.  Whether you implement this justice through trade or through war, it will take oil in our current society.  Even justice depends on oil in these times.  That is why, if it is possible to get off oil and maintain an industrial society, the first country/region that does so, wins.

Fri, 05/09/2014 - 12:08 | 4743679 MEAN BUSINESS

In the wake of AR5, I very much doubt Paris 2015 will be a replay of Copenhagen 2009, nor will the Paris Protocol be a copy of the Kyoto Protocol. Question is how rough is the road to Paris? There was Snow on the road last summer, chemicals on the road last autumn, and Humanity is struggling to find a spring in their steppe at the moment, but Paris is still the Destination.

I don't think Russia will be too concerned about exporting oil and gas. Her mitigation strategy will be centered around SMRs and they will be exporting them packaged with a maintenance and SECURITY agreement. Russia seems to be better and keeping their agreements than USA/NATO

Fri, 05/09/2014 - 14:08 | 4744188 The Blank Stare
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"And it's not about oil. It's about justice. The east ganging up and delivering justice on the west (finally) after 70 years of playing world bully."

Minus Japan I would add.

Fri, 05/09/2014 - 09:10 | 4742966 Tenshin Headache
Tenshin Headache's picture

There are no participation trophies in global geopolitics.

Thu, 05/08/2014 - 21:20 | 4741964 xtop23
xtop23's picture

Why on Earth would we want to keep this farce going on longer?

Hurry up and implode while the proles still have the merest fraction of backbone and wherewithal to resist their coming enslavement.

Thu, 05/08/2014 - 21:35 | 4742012 CrashisOptimistic
CrashisOptimistic's picture

Gail has an item wrong.

Russian investment in maintaining its field output doesn't come from the Russian budget.  It comes from the highest bidder, usually BP.

The ENI CEO recently commented on this, overall.  They invest, they get paid a (small) portion of what comes out of the ground, and they thus get a return on the investment.  Russia can deliver nat gas to Europe several dollars cheaper than the US ever will be able to.  And he concludes powerfully:

We were doing the work.  We know the numbers.  They will be far under the $9 price the US will always cost for ng because the LNG freezing process and transport isn't cheap.  Russia will always just need to put it in a pipeline.

Gail has this a bit wrong.  The Russian government is not stressed to find money in the budget to keep drilling.  That money comes from outside.

Thu, 05/08/2014 - 22:34 | 4742160 Jack Burton
Jack Burton's picture

Outstanding comment, thank you for putting this straight! I didn't read the whole article, but just the beginning made me suspect this guy was off base in some basic facts, which you have put right. This is what makes ZH comments such a good read. Intelligent posters.

Thu, 05/08/2014 - 23:13 | 4742252 sushi
sushi's picture

The cost to ship NGL to Europe from the USSA is around $6 per mcf.

At present the market price of gas in the US is below production cost. The price will need to rise to $5 to $6 per mcf for the drilling industry to generate a reasonable return.

These figures result in a landed price of $11 to $12 per mcf for US gas to Europe. I don't know what Russia charges but they will be able to underprice any US exports.

The key problem with the US gas to Europe scenario is that the US does not have the gas to spare and has been drawing down its own stocks.

One of the chief reasons for the high cost of Russian oil is that Russian E&P activity has to account for the hgh costs of operating in a harsh weather environment. Steel gets brittle at 40 below. It breaks. People break. But firms absorb this high cost as they have no access to any other cheaper resource.



Fri, 05/09/2014 - 03:36 | 4742620 avenriv
avenriv's picture

isn't the canadian, alaskan oil come from harsh weather conditions places ?


Thu, 05/08/2014 - 22:21 | 4742108 ZerOhead
ZerOhead's picture

< Collapse NOW dammit!

< Collapse LATER thanks!

I still have a great deal of sentimental attachment to the ongoing farce. The mother-of-all-collapses can take it's sweet time as far as I'm concerned...

Fri, 05/09/2014 - 20:46 | 4745316 Drifter
Drifter's picture

"while the proles still have the merest fraction of backbone and wherewithal to resist their coming enslavement."

Too late.

Thu, 05/08/2014 - 21:29 | 4741998 0b1knob
0b1knob's picture

"the world is reaching limits on oil and gas production. The marginal producers (including Russia) are being pushed out..."

Well its certainly difficult to argue with logic like that.

Thu, 05/08/2014 - 21:44 | 4742019 Dr. Engali
Dr. Engali's picture

Further on down the article she says:

"Russia is the second largest oil exporter in the world (after Saudi Arabia), exporting approximately 7.2 million barrels a day. We in the rest of the world very badly need Russia’s oil exports to continue, to keep up world oil supply. Without this oil, the world economy would suffer badly."

How does that reconcile with the statement of her's you highlighted?

Thu, 05/08/2014 - 21:36 | 4742000 Dr. Engali
Dr. Engali's picture

Seems like a long winded way to say we have an energy problem. Infinite growth on a finite planet doesn't workout so well now does it? Now.... hold that thought while I close the deal on my new Hummer.

Thu, 05/08/2014 - 21:40 | 4742021 CrashisOptimistic
CrashisOptimistic's picture

Not one of her better efforts.


She understands some things, but didn't communicate well here. 

I also sense the perpetual care in peak oil types not to say extreme things, even if they are warranted.

Like if Russia cut off its exports "the global economy would suffer".  Rather than "mass starvation would sweep the world" -- which it would, because there is nowhere else to get 6 million bpd and that oil funds grocery shelf stocking.

Thu, 05/08/2014 - 21:46 | 4742043 Spastica Rex
Spastica Rex's picture

In addition to the slight mincing of words, I've also noticed that Gail is controlling her Flesch-Kincaid levels very carefully. I think she's trying to reach a wider audience.

Thu, 05/08/2014 - 21:49 | 4742053 CrashisOptimistic
CrashisOptimistic's picture

Good call.


Some of those folks pour words like inexorable or relentless into their text, but then want to imagine if enough people read their stuff that something is going to change.

Fri, 05/09/2014 - 10:03 | 4743139 Citxmech
Citxmech's picture

There's enough evidence out there for folks to make up their own minds on what's coming and when.  Either you believe the Titanic is sinking, or you think technological "just in time" innovation will save us again.

The folks that really believe that peak oil is upon us are prepping like MFers right now.  

Too many passengers, not enough lifeboats. . .

Fri, 05/09/2014 - 03:31 | 4742617 Rakshas
Rakshas's picture

The general lack of understanding of hydrocarbon dependancy for the very basics of life in western society is astounding, not so much of a problem in the more agrarian 3W societies but it'll still hurt no doubt.  In the heart of Hanoi I can get chicken on the hoof and fresh vegetables within a stone's throw of my nest, back home in NA I need to burn a couple gallons of gas just to get to the nearest farm fresh produce ........ the crazy thing is I am aware of this most of my flock ..... not so much... they don't even know wtf I'm yammering about...... this is gonna hurt........... 

Fri, 05/09/2014 - 07:57 | 4742816 StychoKiller
StychoKiller's picture

This flock of yours, sheep or chickens?

Fri, 05/09/2014 - 10:40 | 4743259 Rakshas
Rakshas's picture

both Shickens and Cheep actually...... we're a multi-cultural (read inbred) lot 

.....the chikens are always fleecing the sheep 

the sheep are plucking the chikens 

the Froots are taking advantage of the vegatables 

and pretty much everybody is always phucking everybody else

..........oh it's a show man  :-)

Thu, 05/08/2014 - 21:31 | 4742006 Spastica Rex
Spastica Rex's picture

One might imagine that a world approaching hard physical environmental constraints might look a lot like the actual world.

Thu, 05/08/2014 - 22:09 | 4742100 Poor Grogman
Poor Grogman's picture

One benefit of living in a collapsed economy is that you never have to show up for work.

There is that to look forward to....

Fri, 05/09/2014 - 06:28 | 4742732 espirit
espirit's picture

Right, you'll never have to go further than your front yard for the grass and weeds needed for the next meal once the neighbors cats have been eaten.

I won't even bother to downvote that stupid comment.

USSA Exceptionalism amazes even me.

Fri, 05/09/2014 - 09:49 | 4743090 Poor Grogman
Poor Grogman's picture

Sorry that went over your head.

The cats will purrrrfectly ok...

Thu, 05/08/2014 - 21:39 | 4742027 NoWayJose
NoWayJose's picture

History has shown that most wars are started over resources (or lack thereof). We can be somewhat thankful that our current global financial system allows the Chinese to buy all the resources they want. In fact, there is a fairly good balance between commodity suppliers and commodity consumers. If there is going to be a war, it will be because the central banks have trashed their own currencies to the point where commodities become unaffordable. Of course, there is also a history of idiot leaders starting wars too...

Fri, 05/09/2014 - 10:17 | 4743175 sessinpo
sessinpo's picture

NoWayJose   History has shown that most wars are started over resources (or lack thereof). We can be somewhat thankful that our current global financial system allows the Chinese to buy all the resources they want. In fact, there is a fairly good balance between commodity suppliers and commodity consumers. If there is going to be a war, it will be because the central banks have trashed their own currencies to the point where commodities become unaffordable. Of course, there is also a history of idiot leaders starting wars too..


Not sure I understand. The Chinese are buying said resources and hoarding them so that others will then be in lack thereof. Currencies get destroyed by debt. It takes time but each civilization was basically overextended and couldn't afford to maintain there empire (simplified). They still fought for resources. Those that lost, had to learn to live with less resources. Those that won, got resourced and wrote history.

This time is no different. While it is a currency war, your first sentence is correct on resources. The US is fighting to maintain world currency reserve in order to maintain its buying power of resources. This is also why we see massive hoarding of PMs to China and other nations.

Thu, 05/08/2014 - 21:42 | 4742033 Strat-O-Sphere
Strat-O-Sphere's picture

So the world has an energy supply problem. Instead of investing into an array of alternative energy sources and buying time by attemting to reduce 100% dependence on finite fossil fuels as much as possible, the world "leaders" will rather squander this opportunity and invest whatever resources their countries have (and more) to go to war with one another over the energy deposits that are left. Cave men must have been smarter than this.

Fri, 05/09/2014 - 01:22 | 4742502 buyingsterling
buyingsterling's picture

We tried that, it was called the 'stimulus'. Giving money to bureaucrats doesn't work.

Fri, 05/09/2014 - 06:51 | 4742737 espirit
espirit's picture

Ever try to make a solar panel or wind generator without oil resources?  Build a Nuke plant?

100% Green with infinite population growth on finite resources is what they're selling me?

Go figure. Go Bullshit.

Fri, 05/09/2014 - 10:14 | 4743173 Citxmech
Citxmech's picture

The "renewable green energy would save us" crowd doesn't seem to realize that the world they would get would look more like 1863 than 2110.

Fri, 05/09/2014 - 14:28 | 4744272 The Blank Stare
The Blank Stare's picture

Yeah, you might be right about that. But is that such a bad thing?

Fri, 05/09/2014 - 18:14 | 4744963 Citxmech
Citxmech's picture

I personally don't think the end result will be that bad - but I do fear that the road from here to there is going to be pretty traumatic.

Fri, 05/09/2014 - 10:20 | 4743204 sessinpo
sessinpo's picture

Strat-O-Sphere          the world "leaders" will rather squander this opportunity and invest whatever resources their countries have (and more) to go to war with one another over the energy deposits that are left. Cave men must have been smarter than this.


It would seem to me that those leaders have outsmarted the population they rule through propaganda and dumbing down society, while encouraging socialist dependence on government. The opportunity for them is not so invest for society, but to invest for themselves.

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