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Eight Pieces Of Our Oil Price Predicament
Via Gail Tverberg via Our Finite World blog,
A person might think that oil prices would be fairly stable. Prices would set themselves at a level that would be high enough for the majority of producers, so that in total producers would provide enough–but not too much–oil for the world economy. The prices would be fairly affordable for consumers. And economies around the world would grow robustly with these oil supplies, plus other energy supplies. Unfortunately, it doesn’t seem to work that way recently. Here are at least a few of the issues involved.
1. Oil prices are set by our networked economy.
As I have explained previously, we have a networked economy that is made up of businesses, governments, and consumers. It has grown up over time. It includes such things as laws and our international trade system. It continually re-optimizes itself, given the changing rules that we give it. In some ways, it is similar to the interconnected network that a person can build with a child’s toy.
Thus, these oil prices are not something that individuals consciously set. Instead, oil prices reflect a balance between available supply and the amount purchasers can afford to pay, assuming such a balance actually exists. If such a balance doesn’t exist, the lack of such a balance has the possibility of tearing apart the system.
If the compromise oil price is too high for consumers, it will cause the economy to contract, leading to economic recession, because consumers will be forced to cut back on discretionary expenditures in order to afford oil products. This will lead to layoffs in discretionary sectors. See my post Ten Reasons Why High Oil Prices are a Problem.
If the compromise price is too low for producers, a disproportionate share of oil producers will stop producing oil. This decline in production will not happen immediately; instead it will happen over a period of years. Without enough oil, many consumers will not be able to commute to work, businesses won’t be able to transport goods, farmers won’t be able to produce food, and governments won’t be able to repair roads. The danger is that some kind of discontinuity will occur–riots, overthrown governments, or even collapse.
2. We think of inadequate supply being the number one problem with oil, and at times it may be. But at other times inadequate demand (really “inadequate affordability”) may be the number one issue.
Back in the 2005 to 2008 period, as oil prices were increasing rapidly, supply was the major issue. With higher prices came the possibility of higher supply.
As we are seeing now, low prices can be a problem too. Low prices come from lack of affordability. For example, if many young people are without jobs, we can expect that the number of cars bought by young people and the number of miles driven by young people will be down. If countries are entering into recession, the buying of oil is likely to be down, because fewer goods are being manufactured and fewer services are being rendered.
In many ways, low prices caused by un-affordability are more dangerous than high prices. Low prices can lead to collapses of oil exporters. The Soviet Union was an oil exporter that collapsed when oil prices were down. High prices for oil usually come with economic growth (at least initially). We associate many good things with economic growth–plentiful jobs, rising home prices, and solvent banks.
3. Too much oil in too short a time can be disruptive.
US oil supply (broadly defined, including ethanol, LNG, etc.) increased by 1.2 million barrels per day in 2013, and is forecast by the EIA to increase by close to 1.5 million barrels a day in 2014. If the issue at hand were short supply, this big increase would be welcomed. But worldwide, oil consumption is forecast to increase by only 700,000 barrels per day in 2014, according to the IEA.
Dumping more oil onto the world market than it needs is likely to contribute to falling prices. (It is the excess quantity that leads to lower world oil prices; the drop in price doesn’t say anything at all about the cost of production of the additional oil.) There is no sign of a recent US slowdown in production either. Figure 2 shows a chart of crude oil production from the EIA website.
Figure 2. US weekly crude oil production through October 10, as graphed by the US Energy Information Administration.
4. The balance between supply and demand is being affected by many issues, simultaneously.
One big issue on the demand (or affordability) side of the balance is the question of whether the growth of the world economy is slowing. Long term, we would expect diminishing returns (and thus higher cost of oil extraction) to push the world economy toward slower economic growth, as it takes more resources to produce a barrel of oil, leaving fewer resources for other purposes. The effect is providing a long-term downward push on demand, and thus on price.
In the short term, though, governments can make oil products more affordable by ramping up debt availability. Conversely, the lack of debt availability can be expected to bring prices down. The big drop in oil prices in 2008 (Figure 3) seems to be at least partly debt-related. See my article, Oil Supply Limits and the Continuing Financial Crisis. Oil prices were brought back up to a more normal level by ramping up debt–increased governmental debt in the US, increased debt of many kinds in China, and Quantitative Easing, starting for the US in November 2008.
Figure 3. Oil price based on EIA data with oval pointing out the drop in oil prices, with a drop in credit outstanding.
In recent months, oil prices have been falling. This drop in oil prices seems to coincide with a number of cutbacks in debt. The recent drop in oil prices took place after the United States began scaling back its monthly buying of securities under Quantitative Easing. Also, China’s debt level seems to be slowing. Furthermore, the growth in the US budget deficit has also slowed. See my recent post, WSJ Gets it Wrong on “Why Peak Oil Predictions Haven’t Come True”.
Another issue affecting the demand side is changes in taxes and in subsidies. A change toward more taxes such as carbon taxes, or even more taxes in general, such as the Japan’s recent increase in sales tax, tends to reduce demand, and thus give a push toward lower world oil prices. (Of course, in the area with the carbon tax, the oil price with the tax is likely to be higher, but the oil price elsewhere around the world will tend to decrease to compensate.)
Many governments of emerging market countries give subsidies to oil products. As these subsidies are lessened (for example in India and in Brazil) the effect is to raise local prices, thus reducing local oil demand. The effect on world oil prices is to lower them slightly, because of the lower demand from the countries with the reduced subsidies.
The items mentioned above all relate to demand. There are several items that affect the supply side of the balance between supply and demand.
With respect to supply, we think first of the “normal” decline in oil supply that takes place as oil fields become exhausted. New fields can be brought on line, but usually at higher cost (because of diminishing returns). The higher cost of extraction gives a long-term upward push on prices, whether or not customers can afford these prices. This conflict between higher extraction costs and affordability is the fundamental conflict we face. It is also the reason that a lot of folks are expecting (erroneously, in my view) a long-term rise in oil prices.
Businesses of course see the decline in oil from existing fields, and add new production where they can. Examples include United States shale operations, Canadian oil sands, and Iraq. This new production tends to be expensive production, when all costs are included. For example, Carbon Tracker estimates that most new oil sands projects require a price of $95 barrel to be sanctioned. Iraq needs to build out its infrastructure and secure peace in its country to greatly ramp up production. These indirect costs lead to a high per-barrel cost of oil for Iraq, even if direct costs are not high.
In the supply-demand balance, there is also the issue of oil supply that is temporarily off line, that operators would like to get back on line. Libya is one obvious example. Its production was as much as 1.8 million barrels a day in 2010. Libya is now producing 800,000 barrels a day, but was producing only 215,000 barrels a day in April. The rapid addition of Libya’s oil to the market adds to pricing disruption. Iran is another country with production it would like to get back on line.
5. Even what seems like low oil prices today (say, $85 for Brent, $80 for WTI) may not be enough to fix the world’s economic growth problems.
High oil prices are terrible for economies of oil importing countries. How much lower do they really need to be to fix the problem? Past history suggests that prices may need to be below the $40 to $50 barrel range for a reasonable level of job growth to again occur in countries that use a lot of oil in their energy mix, such as the United States, Europe, and Japan.
Figure 4. Average wages in 2012$ compared to Brent oil price, also in 2012$. Average wages are total wages based on BEA data adjusted by the CPI-Urban, divided total population. Thus, they reflect changes in the proportion of population employed as well as wage levels.
Thus, it appears that we can have oil prices that do a lot of damage to oil producers (say $80 to $85 per barrel), without really fixing the world’s low wage and low economic growth problem. This does not bode well for fixing our problem with prices that are too low for oil producers, but still too high for customers.
6. Saudi Arabia, and in fact nearly all oil exporters, need today’s level of exports plus high prices, to maintain their economies.
We tend to think of oil price problems from the point of view of importers of oil. In fact, oil exporters tend to be even more affected by changes in oil markets, because their economies are so oil-centered. Oil exporters need both an adequate quantity of oil exports and adequate prices for their exports. The reason adequate prices are needed is because most of the sales price of oil that is not required for investment in oil production is taken by the government as taxes. These taxes are used for a variety of purposes, including food subsidies and new desalination plants.
A couple of recent examples of countries with collapsing oil exports are Egypt and Syria. (In Figures 5 and 6, exports are the difference between production and consumption.)
Figure 5. Egypt’s oil production and consumption, based on BP’s 2013 Statistical Review of World Energy data.
Figure 6. Syria’s oil production and consumption, based on data of the US Energy Information Administration.
Saudi Arabia has had flat exports in recent years (green line in Figure 7). Saudi Arabia’s situation is better than, say, Egypt’s situation (Figure 5), but its consumption continues to rise. It needs to keep adding production of natural gas liquids, just to stay even.
Figure 7. Saudi oil production, consumption and exports based on EIA data.
As indicated previously, Saudi Arabia and other exporting countries depend on tax revenues to balance their budgets. Figure 8 shows one estimate of required oil prices for OPEC countries to balance their budgets in 2014, assuming that the quantity of exported oil is pretty much unchanged from 2013.
Figure 8. Estimate of OPEC break-even oil prices, including tax requirements by parent countries, from APICORP.
Based on Figure 8, Qatar and Kuwait are the only OPEC countries that would find $80 or $85 barrel oil acceptable, assuming the quantity of exports remains unchanged. If the quantity of exports drops, prices would need to be even higher.
Saudi Arabia has set aside funds that it can tap temporarily, so that it can withstand a lower oil price. Thus, it has the ability to withstand low prices for a year or two, if need be. Its recent price-cutting may be an attempt to “shake out” producers who have less-deep pockets when it comes to weathering low prices for a time. Almost any oil producer elsewhere in the world might be in that category.
7. The world really needs all existing oil production, plus more, if the world economy is to grow.
It takes oil to transport goods, and it takes oil to operate agricultural and construction equipment. Admittedly, we can cut back world oil production with lower price, but this gets us into “a heap of trouble”. We will suddenly find ourselves less able to do the things that make the economy function. Governments will stop fixing roads. Services we take for granted, like long distance flights, will disappear.
A lot of people have a fantasy view of a world economy operating on a much smaller quantity of fossil fuels. Unfortunately, there is no way we can get there by way of a rapid drop in oil prices. In order for such a change to take place, we would have to actually figure out some kind of transition by which we could operate the world economy on a lot less fossil fuel. Meeting this goal is still a very long ways away. Many people have convinced themselves that high oil prices will help make this transition possible, but I don’t see this as happening. High prices for any kind of fuel can be expected to lead to economic contraction. If transition costs are high as well, this will make the situation worse.
The easiest way to reduce consumption of oil is by laying off workers, because making and transporting goods requires oil, and because commuting usually requires oil. As a result, the biggest effect of a cutback on oil production is likely to be huge job layoffs, far worse than in the Great Recession.
8. The cutback in oil supply due to low prices is likely to occur in unexpected ways.
When oil prices drop, most production will continue as usual for a time because wells that have already been put in place tend to produce oil for a time, with little added investment.
When oil production does stop, it won’t necessarily be from high-cost production, because relative to current market prices, a very large share of production is high-cost. What will tend to happen is that production that has already been “started” will continue, but production that is still “in the pipeline” will wither away. This means that the drop in production may be delayed for as much as a year or even two. When it does happen, it may be severe.
It is not clear exactly how oil from shale formations will fare. Producers have leased quite a bit of land, and in some cases have done imaging studies on the land. Thus, these producers have quite a bit of land available on which a share of the costs has been prepaid. Because of this prepaid nature of costs, some shale production may be able to continue, even if prices are too low to justify new investments in shale development. The question then will be whether on a going-forward basis, the operations are profitable enough to continue.
Prices for new oil development have been too low for many oil producers for many months. The cutback in investment for new production has already started taking place, as described in my post, Beginning of the End? Oil Companies Cut Back on Spending. It is quite possible that we are now reaching “peak oil,” but from a different direction than most had expected–from a situation where oil prices are too low for producers, rather than being (vastly) too high for consumers.
The lack of investment that is already occurring is buried deeply within the financial statements of individual companies, so most people are not aware of it. Dividends remain high to confuse the situation. By the time oil supply starts dropping, the situation may be badly out of hand and largely unfixable because of damage to the economy.
One big problem is that our networked economy (Figure 1) is quite inflexible. It doesn’t shrink well. Even a small amount of shrinkage looks like a major recession. If there is significant shrinkage, there is danger of collapse. We haven’t set up a new type of economy that uses less oil. We also don’t have an easy way of going backward to a prior economy, such as one that uses horses for transport. It looks like we are headed for “interesting times”.
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#Banker Suicide Record
List of 31 Bankers / members of financial industrie that committed suicide in 2014:
http://www.mmnews.de/index.php/wirtschaft/24988-selbstmordwelle-bei-bankern
No one reads text books anymore. A brief, but more complete version of wut she said.
1. There is no equilibrium, in prices or in nature.
2. Therefore, prices tend to over react, and stay out of wack for extended periods.
3. Both supply and demand are inelastic for oil (changing less in percentage terms, than the change in price), but demand is relatively stable and even less elastic.
4. There are many unknowns about marginal costs of production, political factors, and substitution effects.
5. Go Ebola!!!
Balance is a myth.
+1
Why, oh, why does ZH give a platform to a pundit from the now defunct and totally discredited Oil Drum? The author's background has nothing to do with the oil business, economics, government policy or anything relevant to the issue at hand.
As for the article's main point: the claim is low oil prices are bad. Really?
How can the drag of debt on the real global economy be offset? Low oil prices are perhaps the only way, since no one will restructure. Will this effect the internal economies of the oil-producing countries? Yes. So did the Iraqi wars.
"Why, oh, why does ZH give a platform to a pundit from the now defunct and totally discredited Oil Drum?"
Umm, maybe because she has a point ? The low oil prices are highly disruptive for all the new "technological advances" that are supposed to save the day, as their development incentives kick in and CONSOLIDATE only when the price of oil climbs up. Case point: at current oil & gas prices the entire US fracking/shale oil & gas industry is pretty much fucked ! And yes, that includes the LNG export wet dreams of those who see themselves as world saviours, riding ultra fat ships of very cold gas...
Pretty good on balance. We've all seen a lot worse. I think her main point was how inflexible energy use is. Quite true. The following is less about this piece, than the issue in general.
Pundits and writers focus too much on current price. Producers and users focus on the expected price over the next 5-10 years, a much more stable number.
The Saudi announcement of an $80 target was a smart move. It's called anchoring, and it has a profound effect on price expectations, until there are significant market pressures. Costs them nothing.
LNG is expensive and godawful dangerous. Should be avoided.
I love how there's no discussion of the unit of account that oil is priced in. Um do you think the supply of that might affect the "market price"? And I also love how people think there is a "free" market for oil. Check out ICE, and who participates there. Supposedly it costs them $500M annually to hit the bid, absent demand, and drive the price up by billions per year. Same old shite.
It's a thousand British barrels on futures and options, which I have traded. One of the simpler and more rational futures contracts. As to how the big boyz do it, I have no clue. Very deep pockets.
The Oil Drum collapsed because it's rigid "peak oil" party line became unsustainable.
You could say the gushers of methane and light, sweet out of the Bakken and West Texas dealt the website a mortal blow.
So solly, Chollie.
Angel_of_joy
Why don't you and your fellow oil-drummers piss off. The funding for your little propaganda site dried up. Go wander the internet somewhere else.
I don't feel I have to ask for permission from anybody to post my opinion wherever I consider fit. Be so kind and fuck-off... and don't let the door hit you. Enjoy your dreams of energy abundance for a few more years until they'll die-off for good. Say, 10 years tops... tick-tock.
Your opinion is bought and paid for BS. In to the shit bin of history with you, all peak oilers and global warmers. Mainly corrupt academics and other useful idiots.
I give Maltese Falcon 2 thumbs up. I used to post comments on the oildrum. I picked the name Gusher just to shove it in their face that their constant sky is falling mentality was rediculous. So many on that blog were negative that I was able to pick the name Gusher no problem. You would think on an oil bliog it would have been taken. I was booed all the time on there when I would post comments stating that we are not running out of oil and the dynamic between supply and demand would keep us supplied and keep the price affordable too. Oil is VERY affordable today priced in copper, gold, farmland, S. & P., etc. Not as affordable priced in paper dollars. I would love to see 2 dollar gas as it would be great for our economy. Maybe we will. ND oil is already priced at a low $60 a barrel. It is discounted because of a lack of pipelines.
Because Obama.
I'm sure "ND oil" won't be a problem even at negative prices. Such is the level of delusion in today's America...
So what's a negative price?
A price that doesn't cover the expenses ? It would be possible, since money are "free"...
Gusher
1) North Dakota does NOT have oil. It's more like kerosene. Good for gasoline
2) Pipeline is on stage 4 (proposed) but it won’t work because the wells keep moving
Bakken well averages 60 barrels per day for 30 years, the total oil will be in the neighborhood of 7 billion barrels range URR with 11,209 wells pumping for a thirty year time frame.
60 x 365 x 30 x 11,209 = 7 364 313 000 barrels of oil
With 40,000 wells and applying some math, the estimate is possibly 29 billion barrels of oil over a thirty year period of pumping oil.
98 days of supply for the entire world and it will take 30 years to extract it. Looks like a severe shortage will occur somewhere along the timeline. The price is going to increase in the future.
http://peakoilbarrel.com/bakken-oil-production-county/comment-page-2/#comment-364221
So given your numbers we can say that the world consumes more oil in 15 minutes than a single Bakken well will produce in its lifetime?
Sounds about right.
I thought these Bakken wells give up half of their productivity in under 30 months each,. That's why they have to keep drilling more. That's why the debt piled into these companies will always be chasing a forever moving time horizon of repayment.
Yep giving each well 30 years of life in that calculation is generous.
They do, but start out producing much more than 60 barrels a day. Here is some info from the state website on average initial production from 2010:
https://www.dmr.nd.gov/ndgs/Publication_List/pdf/geoinv/GI_123.pdf
Initial production seems to have been much higher than 60 barrels in 2010 - and many of the wells on that map were drilled in the 1960-1980 time frame. Most of the open parts in the Bakken have now been drilled. Here is a current map:
https://www.dmr.nd.gov/OaGIMS/viewer.htm
Zoom in and you can see all the wells that have been drilled since 2010. I didn't find any current initial production figures in the public area. However, a quick look at the info subscribers hare available indicates that these wells are starting off at about 500 barrels a day. This drops to 175 a day after one year, and to 100 a day for the next few years. These are new wells thus older production figures are not available. This is based on the production records of a few wells northwest of Williston. 60 barrels a day may be a fairly good estimate for the long-term production of these wells.
Escrava: Your math is wrong: 60 X365 X 30 X11,209 etc.
You do not employ depletion rates in your 'oil' math, which is crucial to predicting future hydrocarbon yield as any shale formation declines very rapidly.
Yes, one can keep developing the well by more fracking, or by more horizontal drilling to 'open up' the formation but that costs money which is not either in your crude calculations.
I down voted you because your math is much too simplistic, incorrect.
oudinot
1) I do not follow depletion. I follow decline, because I can get a more honest view of the situation.
2) The math is very simplistic but easily for most people to ‘quickly’ grasp the issue.
3) This is not my math. The math is by Ronald Walter that too, does not follow depletion--the elephant in the room that most people in the room pretend the elephant is not there so they can avoid dealing with the looming big issue.
Tadeusz (Tad) Patzek
A better way of looking at the permanent C&C (condensate oil & conventional oil) decline, which will happen in several years, is to subtract the actual oil production from the population-based projections and calculate the unrealized oil consumption.
By this standard, the peak of global per capita consumption happened in 2005, and we now live in an era of permanent destruction of consumption.
The US and EU consume more per capita, have exported their manufacturing elsewhere, and are unable to withstand the high price of oil.
Hence the destruction of demand for 1.6 million bbl per day that already happened in the U.S. A similar destruction trend will continue to happen in the future, because the U.S. can no longer compete for expensive oil with China.
I do not think that anyone in Washington D.C. understands this simple and unpleasant fact, and you have the Paul Krugman's of this world reporting their dreams from the Keynesian Wonderland.
http://patzek-lifeitself.blogspot.com/2012/11/a-gobal-oil-peak-or-plateau.html
Escrava: Just because you don't believe in 'depletion' rates does not mean they don't exist: they do.
As well, you talk about less demand for oil-"1.6 million bbl per day"- in the US, yet you don't take into consideration conservation effects such as cafe standards for cars (using less gas per mile driven) nor other variables such as greater use of solar power, wind power, ethanol or electric cars.
Certainly these other ways to use energy other than oil such that there is less use for oil, NOT lack of demand.
I am working with a company that has a patent pending on an oil solvent that can be employed to increase producation of old wells whose thick oil in the formation can be 'lightened' so as to flow to the oil well and much, much greater oil production can be achieved.
I don't believe 'peak oil' will happen in our lifetime.
Escrava: Just because you don't believe in 'depletion' rates does not mean they don't exist: they do.
As well, you talk about less demand for oil-"1.6 million bbl per day"- in the US, yet you don't take into consideration conservation effects such as cafe standards for cars (using less gas per mile driven) nor other variables such as greater use of solar power, wind power, ethanol or electric cars.
Certainly these other ways to use energy other than oil such that there is less use for oil, NOT lack of demand.
I am working with a company that has a patent pending on an oil solvent that can be employed-without heat or pressure- to increase producation of old wells whose thick oil in the formation can be 'lightened' so as to flow to the oil well and much, much greater oil production can be achieved.
I don't believe 'peak oil' will happen in our lifetime.
oudinot
I hope you're right, that it won't happen in yours and mine lifetime. And, that's great that you're working solutions to 'buy' us time.
Good luck on that solvent. And hope it works. Wonder Why?
It’s not complicated. Just forget about the supply and demand balance.
There is a shrinking input of economically extractable oil. The global economy can temporally function in an unsustainable mode by cannibalizing its less essential parts:
“It’s clear that other parts of the economy are being sacrificed to pay for ‘hundred dollar oil’, or vain attempts at inferior substitution; similar to an addict selling things or not paying bills to support his addiction.
Some of these things are considered discretionary by those who do the sacrificing; not so discretionary for those who make their livings in those sectors, or planned to retire on the surplus they thought they had produced.
It seems these ‘surpluses’ are being targeted to provide the illusion that we, collectively, haven’t overshot our resource base. Prices creeping up relative to incomes, pension funds disappearing, increasing costs of necessary services; how much of this is due to our perceived need to support the increasing costs of our oil addiction? I, for one, can’t call this ‘resilience’. It’s triage.” – symmetrybreaker, at OFW.
The collapse comes to pass in the end of 2014 AD:
http://2012wiki.com/index.php?title=Novelty_theory
http://www.theoildrum.com/node/10213#comment-976184
http://ourfiniteworld.com/2014/10/22/eight-pieces-of-our-oil-price-predicament/#comment-46033
I gave you an uptick.
I gave you a greenie-Maybe you are right, I don't know.
I admire your passion and your research ability.
And , you are absolutely right about resources into infinity: there is only a finite amount of oil, resources, space etc. so you will beright sometime in the future ...
The paradox reminds me of Nietzche's idea of ,'Eternal Recurrence": If one agrees to the two premises :
The amount of matter in the Universe, however unimaginably large is a finite number.
Time , howver, is infinite.
Such that: Everything that can happen will happen, and everything that happens will happen again.
So-you you maybe right this time or another, but, in the fullness of time, I will beat you in most of the Universal circumstances ...........
Bakken wells don't average anything over 30 years. They produce up to 65 percent of their TOTAL lifetime production in the first year and fall off to stripper well status within five-six years. Note the production graphs at your link.
Coast Watcher
I understand that.... See my “elephant in the room that most people in the room pretend the elephant is not there so they can avoid dealing with the looming big issue” comment above.
If things were gushing, then why is there economic stress just about everywhere? Consider the PIGS countries, Egypt, Detroit, Libya, France, England, Wall Street, Banks, Venezuela, assorted places in the middle east, Iceland, China, Hong Kong, JAPAN, UKRAINE, the Mall (any mall, just pick one and see the stores empty, closded, looking for leaseEEs), governments at the city, county, state, and national levels. Things look more like they are FLUSHING than GUSHING. The price of oil means squat. Price is not causality. Too many people know the prices of many things but the value of nothing. Statistics are fudged and packed for you in a variety of ways. True value and causality and nothing else or it's just delusion/illusion. See what's left when you strip away the bunk, it's pretty much a facade.
"If things were gushing, then why is there economic stress just about everywhere?"
3 reasons:
1) Because of "printing," theft, by the Rothschild central banks backed by the violence of their government stooges.
2) Because of "printing," theft, by the Rothschild central banks backed by the violence of their government stooges.
3) Because of "printing," theft, by the Rothschild central banks backed by the violence of their government stooges.
An American, not US subject.
"To discuss solutions and not discuss guillotining the banksters, is not discussing solutions."
Yup,
Oil is plentiful, as plentiful as they'll allow it to be. I believe the famous 1956 "Peak Oil" speech was actually given before a group of nuke energy interests. The paper the speech came from is, Energy and the Fossil Fuels.
At the time nuke and oil energy interests were in a heated battle for supremacy. Oil won, and nuke energy was hog-tied with the moniker "unsafe," and huge, inefficient, and expensive plants--nuke energy is safe, but grows exponentially unsafe as the plants are scaled up.
Many don't realize that Iraq was essentially invaded and occupied to keep oil OFF the market. China, Russia and France had cornered future extraction contracts for after the failing sanctions ended. That would have enabled the contract holders, especially China, to bypass the west's big oil firms and get a foothold in the ME as well.
One of the first things they did was repudiate all of those contracts.
Also there is a lot of evidence supporting "abiotic oil." Thomas Gold's book, Deep Hot Biosphere, is a good read on it. I am not saying that abiotic oil is a fact, but even as a kid, the bio-genesis explanation didn't really make any since to me. Here is a link discussing both sides of the argument.
I guess that was more of a brain-dump than a comment. Oh well.
An American, not US subject.
MalteseFalcon
Ohh Gosh!
Because US financial system has the world, and its commodities, by the balls, Buddy!
They can manipulate commodities, trade, and currencies, at a loss to the real economy and its entrepreneurs.
US financial system can bankrupt pretty much any nation, because they OWN the global reserve currency.
Then, buy the whole world, at a discount.
Does real estate, in America, and Argentina economy, in South America, ring a bell?
Yo, ma man Escrava, if you go and start referencing the Peakoilbarrel guys, you may want to at least consider expanding your source data to, say, state government sites - such as North Dakota's dmr.nd.gov.oilgas. The POB guys shun any views/sources that do not hew to the Party line like Bella Lugosi avoids the noonday sun. (Such as ANY private industry source.)
To parrot the drivel that the Bak's low sulpher, high API is not oil is an embarrassingly ignorant display that contradicts the industry's historical recognition and appreciation of 'light, sweet oil'.
You have always seemed to me to be a sincere, bright seeker of truth - as in fact many of the 'peakers' such as the authoress (Ms. Tverberg) of the above article are.
Absent having a cogent, verifiable data set that both explains the present state of affairs regarding the petroleum/hydrocarbon universe and providing a reasonably justifiable range of projections, you guys will remain in the decreasingly populated, increasingly discredited group of people sounding the peak oil meme ... just like TOD.
phaedrus1952
You asked for a: “verifiable data set that both explains the present state of affairs regarding the petroleum/hydrocarbon”
So, see if these meet your standard:
Condensate versus conventional oil (CvsC)
http://www.fluidynenz.250x.com/aug10/condensate.html
What If There Is Peak Oil?
http://patzek-lifeitself.blogspot.com/2013/05/what-if-there-is-peak-oil.html
Maybe you should ask yourself are low oil prices really good?
Look at the record. The last time we had low oil prices at the end of 2008, after they fell off from $147 a barrel in the summer. We had been in an unannounced recession for almost a year (that's why they call it the Recession of 2007).
Then, as you no doubt remember, we landed in the worst economic situation since 1929.
In 2008 the price of oil was being manipulated, just as it is today.
In addition to being a glut of supply, low prices also indicate a lack of demand, which is never good. $33 crude oil in December 2008 did nothing to prevent the subprime bubble from bursting and its sequela.
Look how much worse off we are today. Unless, you think $4 trillion in QE is a good thing.
Every single market, including oil, is manipulated every day and has been for a very long time.
The demand for gasoline has been falling in the US since 2005 and that will continue.
I don't see how high oil prices gets the US, Japan or Europe out of a recession or increases demand for oil.
The relationship between QE and the price of oil is not as strong as you think it is. And I doubt there is much of a causal relationship.
Caught a lot of red arrows, which doesn't bother me. But I can't help but think there are more than a few oil traders here that are disappointed because their commodity is being deflated like so many other commodities. Oil is never going to $200 per barrell. Not even for a micro-second, because demand will completely collapse well before $200.
MF
Yet so many can't wait for their next paycheck to buy more stocks and commodities.
To what do you attribute that? '05 and '06 were prosperous years. Were the sub prime owners scrimping on gas to pay their mortgages?
I don't see anything of this planet that does that. Except a reset back to 1945 and the end WWII.
I didn't know there was a relationship at all. I guess when the banks have some spare change after buying and buoying the Dow stocks, they probably amble over to the crude oil futures pit to see what the Goldman trader is doing.
Never say never, MF. I can see oil at $200. 200 Weimar dollars, that is.
Every single market, including oil, is manipulated every day.
Yet so many can't wait for their next paycheck to buy more stocks and commodities.
Are you saying that their is a retail market and that it is rational?
demand for gasoline has been falling in the US since 2005
To what do you attribute that? '05 and '06 were prosperous years. Were the sub prime owners scrimping on gas to pay their mortgages?
I attribute it to people dropping their SUVs and buying econo cars and hybrids. Also less commuting due to fewer jobs and less vacation driving. Now that electric cars are returning I expect that the demand for gasoline in the US at least is in a permanent secular downtrend
I don't see how high oil prices gets the US, Japan or Europe out of a recession.
I don't see anything of this planet that does that. Except a reset back to 1945 and the end WWII.
Oil at a certain price point will do the trick for the greater economy.
The relationship between QE and the price of oil is not as strong as you think it is.
I didn't know there was a relationship at all. I guess when the banks have some spare change after buying and buoying the Dow stocks, they probably amble over to the crude oil futures pit to see what the Goldman trader is doing.
Ambled over? The banks are ground zero for oil manipulation. The the rise in the price of gasoline went stright to the banks for purposes of recapitalizing them. r
Oil is never going to $200 per barrell.
Never say never, MF. I can see oil at $200. 200 Weimar dollars, that is.
In a Weimar scenario there may be a ticker somewhere that says $200 for oil, but no one will be getting any. Oil will not be sold for Weimar dollars. And Weimar is a total breakdown which means there won't be any demand either.
No, I'm saying what you said: "Every market is manipulated. The trick is to never forget that and get out a little before the manipulators do. "Nobody ever went broke taking a profit."
I don't know where you live, but those SUVs seem to be dropping right on top of the community where I live. I've never seen more of them.
Until demand reprises 'peak oil.' Howdy, M. King. Where you been? Hmmm. What do you think Exxon, Chevron, etc are? Potted plants? Don't you ever think that a total breakdown is part of the plan? I mean crude oil is a FINITE resource of the planet and the human population of the planet is INFINITE.The spice must flow.
I like it when people try to explain manipulated markets by using bullshit. It's pretty simple: When oil prices drop, it hurts Russia, Iran, and Venezuela. We can (and do) work with OPEC under the table to 'supplement' lost income...
www.TopTheNews.com
Yes. We are in a delicate balance: we can lower prices to hurt Russia for a while. Meanwhile we pay opec in funny money that needs to be kept out of circulation else we get hyperinflation ( aka petrodollar system)
Does it hurt Russia, etc. more than it hurts the local fracking "miracle" ? Why so ?
because oil is already being sold profitably out of Bakken and Eagle Ford at $60 / bbl, a price which just so happens to be the Russian central bank's "line in the sand" for economic intervention
I'm going to stop calling them RTylers and start calling them "neocomms", because they all think that communism would work if we just did it "right" this time around... too bad it never has and never will
And, of course, you can prove that... the 60 $/bbl story for Bakken, I mean...
Less speculative momo chasing FED gravy to go into the black gold.
But more importantly, slowing demand because the economies of the World suck.
"It takes oil to transport goods"
Perhaps but nobody can give me a explanation why its cheaper for me to buy a Henieken brewed & canned in Amsterdam , shipped to Dublin and trucked to Cork rather then buy a Pint of the stuff brewed within a few hundred meters of me pub.
This long distance trade of beer has never happened before in world history and is a example of how pointless the euro thingy is for most of us not inside the circle.
In truth much of Euro "trade" is designed to give a illusion of scarcity.
The rise of the Euro = the rise of the price of oil.
The ending of the euro experiment on us will reduce the price of oil perhaps to late 1990s levels but with early 1970s like supply.
THE DORK OF CORK
The same happens when I buy fruits and vegetables at some supermarket/Costco. They’re cheaper than the local farmers that come over the weekend “Farmers Market” on my neighborhood.
There are likely several contributing factors to that, one being that your local farmer who sells at a farmer's market does not recieve government subsidies.
El Vaquero
You might appreciate this. It complements your post.
In 1984 New Zealand's Labor government took the dramatic step of ending all farm subsidies, which then consisted of 30 separate production payments and export incentives.
This was a truly striking policy action, because New Zealand's economy is roughly five times more dependent on farming than is the U.S. economy, measured by either output or employment.
Subsidies in New Zealand accounted for more than 30 percent of the value of production before reform, somewhat higher than U.S. subsidies today. And New Zealand farming was marred by the same problems caused by U.S. subsidies, including overproduction, environmental degradation and inflated land prices."
As the country is a large agricultural exporter, continued subsidies by other countries are a long-standing bone of contention...
http://en.wikipedia.org/wiki/Agricultural_subsidy#New_Zealand
Looks like they're doing fine without the subsidies: http://www.interest.co.nz/sites/default/files/embedded_images/image/anz-...
I would say the issue is more why Heineken tastes like snake's piss strained through a Jap's jockstrap than the transport logistics. Give me a local microbrew any day even if it costs more.
I am afraid a volume drinker of Stout rather then that stuff.
But I do like it with fish and chips for some reason.
(A couple of micros have formed in my city recently)
The rise of the Euro went with the rise of the health fascist.
And it was no small coincidence.
You see these guys could not give a toss about your life force.
The goal of these taxes is to extract your local purchasing power and waste it on economic growth which in europe at least means the rise of the machines.
Below you can see that the purpose of these taxes has nothing to do with raising revenue
http://www.irishtimes.com/news/politics/noonan-cigarette-hike-was-only-tax-increase-in-budget-2015-1.1964281
They simply want to kill all social life.
To make your life a miserable atomic existence.
https://www.youtube.com/watch?v=5t-rIofv4tc
What we are dealing with is a group of people who want to impose modernity on us even if it kills us.
To tear up the fabric of compact Medieval towns , to force you into a car so that you can save tokens bulk buying in some souless hypermarket 2 miles from the town center.
The energy shortage is a illusion of the banks as they direct most of the energy into machines that chase scarce money.
How about Spike Milligan's "Puckoon" as an antidote -- been on my bookshelf since the 60s.
Read that one (along with other Milligan offerings) as a 14 yo in the seventies - I must revisit them.
The bit in Puckoon where "The cat's pissed on the matches" in the church still sticks in my dwindling memory bank.
just a few that stuck in my mind-
-the Lord will provide, but to date he had been behind with his payments
-Foggerty was sitting on the wall, eating an unpeeled banana
-trees were felled as a "danger to lightning"
-when she saw a sign "members only", she thought of the Major
-she gave him a small measure of cheap whisky. Even in moments of charity, there was no need to be uneconomical...
Answer:
- Restaurants as a whole require a huge markup because they're labor and real estate intensive businesses
- The customer throughput rate does not particularly support making a good return from that large initial capital investment
- Employee turnover is a bitch to deal with give how low a dollar value is placed on their labor and how difficult it is to find people who are actually good at the job
- There's a lot of tax and regulatory burden on liquor sales
- It's not a particularly profiotable industry in the first place
- It's easy for a few simple things to go wrong which will leave a lasting negative impact on sales
- The industry tends to take a dive every time there's a recession and people start losing their jobs
Pubs tend to have quite an advantage over traditional restaurants because the beer is usually higher margin than the food, but often their food is correspondingly less profitable because their focus is usually on the booze.
A mainly wrong micro answer to a macro problem.
The problem is of course a lack of purchasing power.
The French & Italians at one time were the biggest wine drinkers in the world , now not even close.
Dingle town once had 52 pubs of distinction , now perhaps a dozen shitholes without any local character remaining.
Irish drink consumption peaked in 2001 (the year before physical euro entry)
In Europe they extract our purchasing power to overbuilt something or other.
Then it depreciates on the banks books and they add on the bill for it yet again.
This is the reason for the implosion of European society.
The nature of the consumption is totally detached from the human.
The human becomes a conduit.#
The pub becomes "a product" to be exported rather then remaining a simple watering hole.
The article is wasted effort because the oil price, like the precious metals, is manipulated to fuck squared and back again (a) in the paper futures market (b) in the physical market by withdrawing supply and storing it in underground bunkers or floating in tankers.
Let the premises in the article explain why crude oil dropped from 147 $ to 33 $ per barrel in the space of 6 months in 2008-9.
PS and OT Fuck ios8, fuck Apple and fuck safari browser with the wrong end of a pineapple for disabling all ad- and popup blocking since September. Visit ZH and get smashed in the face with popups and ads. Yes, you can switch off javascript in the settings menu but then you can't post comments or see other non-ad material on other websites. End of rant.
That is called demand destruction which usually coincides with economic recession. :)
THE END IS NIGH............
Is it really failing?
Or is all going roughly according to plan?
Awesome.
Russia cuts off the gas to EU.
PTBs manipulate oil price to below cost of production
Producers cut production ( do they have a choice??? )
EU supplies of oil reduced as well, just in time for winter.
Notice who gets it in the neck either ways???
If the EU had a clue they'd ask Russia to join,
not that welfare case north of the Crimea...
A imaginative nationalistic irish minister would be able to solve a gas shortage pronto.
All he needs to do is to wipe out all tax on pub served beer ...........
All irish would immediatly stop burning BTUs staring at their computer screens, watching television , keeping warm etc etc etc.
100 people in a Shebeen do not require heat , just a bit of light and if really needed a tele in the corner.
Irish energy problem solved.
Of course the agenda is to preserve us as atomic units of consumption - which requires huge energy inputs to maintain the control grid.
In Dublin we now find African immigrants wandering around aimlessly in small groups, begging on street corners, others lined up for free handouts, and more coming each day. Why is Ireland doing something as crazy as this?
directaction, I would not say Ireland is doing something crazy like this so much as the Irish people are allowing this craziness to occur ... and in an ongoing manner at that.
There was a time when Irish were tougher than that. They were once resilient, unwilling to sit back and alllow an invasion to occur without a fight.
Imagine them today, handing over their country to immigrants, Africans, Islamics, thereby taking a road that'll destroy this once-proud nation, a people now so weakened they even pay for the invasion, a nation with a rich history going back thousands of years and it's now slowly dying out. It's sickening.
My own American point of view thoughts on the Zionist West's anti-Russia and anti-Iran oil price game: Over 40% of Mexico's federal budget is dependent on oil revenues from Pemex. It approaches 50% when related taxes revenues are included.
More misery for Mexicans. More cannon fodder for the fascists north of the Rio.
An American not US subject.
https://en.wikipedia.org/wiki/Pemex
Could there be any better a picture of what the Zionist and DC US ponzi-empire resembles most than that Leonardo Sticks dome picture?!
An American, not US subject.
https://gailtheactuary.files.wordpress.com/2014/06/leonardo-sticks-dome-...
The second little pig met a man with a bundle of sticks and said:
'Please, man, give me those sticks to build a house.'
Which the man did, and the pig built his house. Then along came the wolf, and...
...he huffed, and he puffed, and he puffed, and he huffed, and at last he blew the house down, and he ate up the little pig.
There was a price drop before the 2012 election also.
That was because the markets were afraid of a second term for Barry.
Look how wrong they were about The Chosen One.
He really delivered on his promise of sweetness, light and free stuff.
He runs for UN Sec Gen in 2017 and declares a OneWorld government..
Here's what I want to know, which is the part that nobody ever seems to mention. Canada is anywhere from #5 to #8 in any list of top oil producing countries you can find. BUT, that really means China, since they recently acquired a controlling interest in the last remaining non-Chinese controlled oil company operating in Canada. Yes, every oil company operating in Canada is Chinese-controlled. Google it if you don't believe it.
So, where do they come into the global picture of oil price manipulation?
US likes their natural resource protectionism, so they are willing to pay a lot less per barrel for our oil than they are willing to pay to extract their own, despite the fact that we'er one of their largest producers. They know they can get away with screwing us because we have no one else to sell to...yet. China is trying to change that however, they're buying our oil industry up today so that they'll have it tomorrow, while the US stupidly neglects us. The end result is that we'll have some of the lowest cost production in the world once we get our lack of pipelines figured out, and it will mostly be going to China, of course, which will only help to lock them in as the lowest cost mass manufacturer in the world.
As usual, China is playing chess while the US plays checkers.
It would be surprisingly easy to cut irish demand for oil in half within less then a decade and also oversee a major rise in local purchasing power,
However the agenda within Ireland remains ...........to use people as a conduit so as to bail out the car (German) and oil (London) sector.
The population of old Cork and Waterford has seen a decline during the Euro corporate boom period.
Despite Ireland having seen the second largest population rise in its history.
The reasons for this is obvious.
It is built inside the structure of the euro.
The euro extracts massive amounts of your purchasing power and directs it into machines so as to search for yield.
Cities the size of Cork (pre boom) can easily be serviced by their local hinterland to a large extent.
However the money flows to national and financial capitals and we get their highly capital concentrated products in return.
The highly concentrated & centralized nature of production within the eurozone is at the center of the worlds oil price increase.
Under a social credit system the goods produced would be of a very different nature.
I sm the Nostradamus, the Alpha and the Omega, the only one to pick the bottom and top of the 31 year bull market in bonds.
Oil bottoms by Dec.
Nah, you're just a shithead.
In this attempt to layout a comprehensive study of issues driving oil prices, the author makes only an indirect passing reference to one of the most important factors impacting oil prices -- the growth of oil consumption in China and India. Oil consumption has leveled off and is even starting to drop in the US. The US has reached per capita saturation. Per capita consumption of oil in China and India is a small fraction of the per capita use in the US. These countries (and other rapidly growing countries) have a long way to go to reach western per capita consumption. Read this: Within Four Years, China To Consume More Oil Than U.S.
If you have hung your multi-colored, propellered beanie on shale oil production in North Dakota, Texas, etc. to make America a net exporter of oil:
DO NOT VISIT THIS LINK!
http://www.businessinsider.com/arthur-berman-shale-is-magical-thinking-2...
Heartburn may occur.
oil usually drops at this time of year. It looks like the market manipulators used it to give the price a little extra kick to the curb this time around
Similar as with PMs, there is way more paper oil traded each day than there is actual pysical oil. So, just like with PMs, if they want to drive down the price 30% or so, no problem. But just as with PMs, current levels of price are roughly ~ cost of production, and for some below that. Not sustainable... but while there's inventory and thus no supply shock, anything goes in the short term.
"If there is significant shrinkage, there is danger of collapse. "
That's what she said.
,in another related article today (10/26/13) in the Boston Globe by Thanassis Cambanis of the Internationalist... "The Toothless Cartel" :: "Why it's time to stop fearing, 'OPEC'"
http://www.bostonglobe.com/ideas/2014/10/25/why-time-stop-fearing-opec/v...
jmo
Link Note: top bar navigate today's paper, click ideas section... great read[?]
1. Bullshit. Consumers have no power. Producers may have some power, but the vast majority of the pricing power lies with the bankers who run the energy pricing markets. In today's environment where there is an infinite supply of money controlled by a limited number of player, the idea of market forces setting price is a complete fairy tale. This is a problem.
2., 3., 4. ... yeah, so what?!?
5. Now you are getting to the point. Price is set lower by those who control price in an attempt to get people to divert money they would have spent on energy to other consumables and give a boost to the economy. It is like giving people a tax break or discount. They have more money in their pocket, which they might spend. Debt does not have the same effect.
One should also not underestimate the effect of setting price lower to manipulate election results. People are more likely to support incumbents if they feel more economically viable. Let's see what happens to oil price after the mid-terms.
This is true:
4. The balance between supply and demand is being affected by many issues, simultaneously.
And in the case of the crash of the price of oil at the end of 2008, by far the greatest issue of all was the TREMENDOUS FIX and manipulation of the market.
It was almost as blatant as the Hunt brothers corner of the silver market in 1979. After buying a sizable number of oil futures between $90 and $100, a 7.8 rumor on the Richter scale was started that oil was going $150 and beyond!
Lo and behold, the price of oil slowly climbed the wall of manipulation until by the summer of 2008 it was over $140 a barrel. On its way, the rumor players were sure, to over $150.
At what price the manipulators began to short the stock, I can't tell you. But when the trading public got tired of waiting for oil to go to $150, the manipulators started to sell the stock they had originally bought between 90 and 100, 6 or 7 months before. When the price hit $33, they covered their shorts.
VOILA
So, yes