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The Real Cause Of Low Oil Prices: Interview With Arthur Berman
Submitted by James Stafford via OilPrice.com,
With all the conspiracy theories surrounding OPEC’s November decision not cut production, is it really not just a case of simple economics? The U.S. shale boom has seen huge hype but the numbers speak for themselves and such overflowing optimism may have been unwarranted. When discussing harsh truths in energy, no sector is in greater need of a reality check than renewable energy.
In a third exclusive interview with James Stafford of Oilprice.com, energy expert Arthur Berman explores:
- How the oil price situation came about and what was really behind OPEC’s decision
- What the future really holds in store for U.S. shale
- Why the U.S. oil exports debate is nonsensical for many reasons
- What lessons can be learnt from the U.S. shale boom
- Why technology doesn’t have as much of an influence on oil prices as you might think
- How the global energy mix is likely to change but not in the way many might have hoped
OP: The Current Oil Situation - What is your assessment?
Arthur Berman: The current situation with oil price is really very simple. Demand is down because of a high price for too long. Supply is up because of U.S. shale oil and the return of Libya’s production. Decreased demand and increased supply equals low price.
As far as Saudi Arabia and its motives, that is very simple also. The Saudis are good at money and arithmetic. Faced with the painful choice of losing money maintaining current production at $60/barrel or taking 2 million barrels per day off the market and losing much more money—it’s an easy choice: take the path that is less painful. If there are secondary reasons like hurting U.S. tight oil producers or hurting Iran and Russia, that’s great, but it’s really just about the money.
Saudi Arabia met with Russia before the November OPEC meeting and proposed that if Russia cut production, Saudi Arabia would also cut and get Kuwait and the Emirates at least to cut with it. Russia said, “No,” so Saudi Arabia said, “Fine, maybe you will change your mind in six months.” I think that Russia and maybe Iran, Venezuela, Nigeria and Angola will change their minds by the next OPEC meeting in June.
We’ve seen several announcements by U.S. companies that they will spend less money drilling tight oil in the Bakken and Eagle Ford Shale Plays and in the Permian Basin in 2015. That’s great but it will take a while before we see decreased production. In fact, it is more likely that production will increase before it decreases. That’s because it takes time to finish the drilling that’s started, do less drilling in 2015 and finally see a drop in production. Eventually though, U.S. tight oil production will decrease. About that time—perhaps near the end of 2015—world oil prices will recover somewhat due to OPEC and Russian cuts after June and increased demand because of lower oil price. Then, U.S. companies will drill more in 2016.
OP: How do you see the shale landscape changing in the U.S. given the current oil price slump?
Arthur Berman: We’ve read a lot of silly articles since oil prices started falling about how U.S. shale plays can break-even at whatever the latest, lowest price of oil happens to be. Doesn’t anyone realize that the investment banks that do the research behind these articles have a vested interest in making people believe that the companies they’ve put billions of dollars into won’t go broke because prices have fallen? This is total propaganda.
We’ve done real work to determine the EUR (estimated ultimate recovery) of all the wells in the core of the Bakken Shale play, for example. It’s about 450,000 barrels of oil equivalent per well counting gas. When we take the costs and realized oil and gas prices that the companies involved provide to the Securities and Exchange Commission in their 10-Qs, we get a break-even WTI price of $80-85/barrel. Bakken economics are at least as good or better than the Eagle Ford and Permian so this is a fairly representative price range for break-even oil prices.
But smart people don’t invest in things that break-even. I mean, why should I take a risk to make no money on an energy company when I can invest in a variable annuity or a REIT that has almost no risk that will pay me a reasonable margin?
Oil prices need to be around $90 to attract investment capital. So, are companies OK at current oil prices? Hell no! They are dying at these prices. That’s the truth based on real data. The crap that we read that companies are fine at $60/barrel is just that. They get to those prices by excluding important costs like everything except drilling and completion. Why does anyone believe this stuff?
If you somehow don’t believe or understand EURs and 10-Qs, just get on Google Finance and look at third quarter financial data for the companies that say they are doing fine at low oil prices.
Continental Resources is the biggest player in the Bakken. Their free cash flow—cash from operating activities minus capital expenditures—was -$1.1 billion in the third- quarter of 2014. That means that they spent more than $1 billion more than they made. Their debt was 120% of equity. That means that if they sold everything they own, they couldn’t pay off all their debt. That was at $93 oil prices.
And they say that they will be fine at $60 oil prices? Are you kidding? People need to wake up and click on Google Finance to see that I am right. Capital costs, by the way, don’t begin to reflect all of their costs like overhead, debt service, taxes, or operating costs so the true situation is really a lot worse.
So, how do I see the shale landscape changing in the U.S. given the current oil price slump? It was pretty awful before the price slump so it can only get worse. The real question is “when will people stop giving these companies money?” When the drilling slows down and production drops—which won’t happen until at least mid-2016—we will see the truth about the U.S. shale plays. They only work at high oil prices. Period.
OP: What, if any, effect will low oil prices have on the US oil exports debate?
Arthur Berman: The debate about U.S. oil exports is silly. We produce about 8.5 million barrels of crude oil per day. We import about 6.5 million barrels of crude oil per day although we have been importing less every year. That starts to change in 2015 and after 2018 our imports will start to rise again according to EIA. The same thing is true about domestic production. In 2014, we will see the greatest annual rate of increase in production. In 2015, the rate of increase starts to slow down and production will decline after 2019 again according to EIA.
Why would we want to export oil when we will probably never import less than 37 or 38 percent (5.8 million barrels per day) of our consumption? For money, of course!
Remember, all of the calls for export began when oil prices were high. WTI was around $100/barrel from February through mid-August of this year. Brent was $6 or $7 higher. WTI was lower than Brent because the shale players had over-produced oil, like they did earlier with gas, and lowered the domestic price.
U.S. refineries can’t handle the light oil and condensate from the shale plays so it has to be blended with heavier imported crudes and exported as refined products. Domestic producers could make more money faster if they could just export the light oil without going to all of the trouble to blend and refine it.
This, by the way, is the heart of the Keystone XL pipeline debate. We’re not planning to use the oil domestically but will blend that heavy oil with condensate from shale plays, refine it and export petroleum products. Keystone is about feedstock.
Would exporting unrefined light oil and condensate be good for the country? There may be some net economic benefit but it doesn’t seem smart for us to run through our domestic supply as fast as possible just so that some oil companies can make more money.
OP: In global terms, what do you think developing producer nations can learn from the US shale boom?
Arthur Berman: The biggest take-away about the U.S. shale boom for other countries is that prices have to be high and stay high for the plays to work. Another important message is that drilling can never stop once it begins because decline rates are high. Finally, no matter how big the play is, only about 10-15% of it—the core or sweet spot—has any chance of being commercial. If you don’t know how to identify the core early on, the play will probably fail.
Not all shale plays work. Only marine shales that are known oil source rocks seem to work based on empirical evidence from U.S. plays. Source rock quality and source maturity are the next big filter. Total organic carbon (TOC) has to be at least 2% by weight in a fairly thick sequence of shale. Vitrinite reflectance (Ro) needs to be 1.1 or higher.
If your shale doesn’t meet these threshold criteria, it probably won’t be commercial. Even if it does meet them, it may not work. There is a lot more uncertainty about shale plays than most people think.
OP: Given technological advances in both the onshore and offshore sectors which greatly increase production, how likely is it that oil will stay below $80 for years to come?
Arthur Berman: First of all, I’m not sure that the premise of the question is correct. Who said that technology is responsible for increasing production? Higher price has led to drilling more wells. That has increased production. It’s true that many of these wells were drilled using advances in technology like horizontal drilling and hydraulic fracturing but these weren’t free. Has the unit cost of a barrel of oil gas gone down in recent years? No, it has gone up. That’s why the price of oil is such a big deal right now.
Domestic oil prices were below about $30/barrel until 2004 and companies made enough money to stay in business. WTI averaged about $97/barrel from 2011 until August of 2014. That’s when we saw the tight oil boom. I would say that technology followed price and that price was the driver. Now that prices are low, all the technology in the world won’t stop falling production.
Many people think that the resurgence of U.S. oil production shows that Peak Oil was wrong. Peak oil doesn’t mean that we are running out of oil. It simply means that once conventional oil production begins to decline, future supply will have to come from more difficult sources that will be more expensive or of lower quality or both. This means production from deep water, shale and heavy oil. It seems to me that Peak Oil predictions are right on track.
Technology will not reduce the break-even price of oil. The cost of technology requires high oil prices. The companies involved in these plays never stop singing the praises of their increasing efficiency through technology—this has been a constant litany since about 2007—but we never see those improvements reflected in their financial statements. I don’t doubt that the companies learn and get better at things like drilling time but other costs must be increasing to explain the continued negative cash flow and high debt of most of these companies.
The price of oil will recover. Opinions that it will remain low for a long time do not take into account that all producers need about $100/barrel. The big exporting nations need this price to balance their fiscal budgets. The deep-water, shale and heavy oil producers need $100 oil to make a small profit on their expensive projects. If oil price stays at $80 or lower, only conventional producers will be able to stay in business by ignoring the cost of social overhead to support their regimes. If this happens, global supply will fall and the price will increase above $80/barrel. Only a global economic collapse would permit low oil prices to persist for very long.
OP: How do you see the global energy mix changing in the coming decades? Have renewables made enough advances to properly compete with fossil fuels or is that still a long way off?
Arthur Berman: The global energy mix will move increasingly to natural gas and more slowly to renewable energy. Global conventional oil production peaked in 2005-2008. U.S. shale gas production will peak in the next 5 to 7 years but Russia, Iran, Qatar and Turkmenistan have sufficient conventional gas reserves to supply Europe and Asia for several decades. Huge discoveries have been made in the greater Indian Ocean region—Madagascar, offshore India, the Northwest Shelf of Australia and Papua New Guinea. These will provide the world with natural gas for several more decades. Other large finds have been made in the eastern Mediterranean.
There will be challenges as we move from an era of oil- to an era of gas-dominated energy supply. The most serious will be in the transport sector where we are thoroughly reliant on liquid fuels today —mostly gasoline and diesel. Part of the transformation will be electric transport using natural gas to generate the power. Increasingly, LNG will be a factor especially in regions that lack indigenous gas supply or where that supply will be depleted in the medium term and no alternative pipeline supply is available like in North America.
Of course, natural gas and renewable energy go hand-in-hand. Since renewable energy—primarily solar and wind—are intermittent, natural gas backup or base-load is necessary. I think that extreme views on either side of the renewable energy issue will have to moderate. On the one hand, renewable advocates are unrealistic about how quickly and easily the world can get off of fossil fuels. On the other hand, fossil fuel advocates ignore the fact that government is already on board with renewables and that, despite the economic issues that they raise, renewables are going to move forward albeit at considerable cost.
Time is rarely considered adequately. Renewable energy accounts for a little more than 2% of U.S. total energy consumption. No matter how much people want to replace fossil fuel with renewable energy, we cannot go from 2% to 20% or 30% in less than a decade no matter how aggressively we support or even mandate its use. In order to get to 50% or more of primary energy supply from renewable sources it will take decades.
I appreciate the urgency felt by those concerned with climate change. I think, however, that those who advocate a more-or-less immediate abandonment of fossil fuels fail to understand how a rapid transition might affect the quality of life and the global economy. Much of the climate change debate has centered on who is to blame for the problem. Little attention has been given to what comes next namely, how will we make that change without extreme economic and social dislocation?
I am not a climate scientist and, therefore, do not get involved in the technical debate. I suggest, however, that those who advocate decisive action in the near term think seriously about how natural gas and nuclear power can make the change they seek more palatable.
The great opportunity for renewable energy lies in electricity storage technology. At present, we are stuck with intermittent power and little effort has gone into figuring out ways to store the energy that wind and solar sources produce when conditions are right. If we put enough capital into storage capability, that can change everything.
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Yup
Banksters lying and talking their own booook..... naw just another conspiracy theory /sarc off.
If we can figure out storage of renewable energy, then it's all about harnessing tidal energy. Endless!
LOL, you forgot the /sarc tag.
The corrosive effects of salt water are monumental. Tidal energy is so far behind wind and solar that it probably will never be able to compete.
You can also get intermittent power to work if you have a grid that is robust and connected enough.
you are correct, but grid improvements cost a fortune, and figuring out exactly who pays for what is a political and regulatory nightmare.
"The corrosive effects of salt water are monumental. "
Plus; Hurricanes, winter storms can wreck billions $$$ in seconds. Same applies to off shore wind and solar that can be destroyed by hurricanes, tornados and other severe weather events.
Use tidal power to hydrolize seawater.
there is no comparison. tidal energy is not even nonsense. it is below nonsense. not for a thousand years will it even amount to anything.
it is possible that the future sees a world with far more wind and solar , but not guaranteed.
tidal energy has ZERO value for producing electricity in mass for terrestrial environments and it never will.
Teslaberry - Research what is going on off the coast of Maine.
Isn't it also about crashing demand in China? Or did I miss that point in there somewhere?
Rundown of mainstream media cowardice in covering today's Islamo-terror attack in Paris:
http://tinyurl.com/kcdmf2z
A part of it is. They've slowed down a lot but right now they are topping up their reserve while it's cheap. China is getting ready to throw another trillion dollar at infrastructure projects though its effects are problematic at best, we'll just have to wait and see.
“Fine, maybe you will change your mind in six months.” - lol, ya think? I can see the reps walking out of the room now... "bitchez don't know who they're fuckin' with, wait 'til they get a load of this"
Nobody is going to change their mind. This is leading to an all out battle to the death. Living in Canada, I was reading the business paper today about some of our larger tarsands companies decisions. Same exact story, and I quote:
"Nobody will cut, cutting is death."
Oversupply glut from Hell going bigger and bigger uñtil the whole fucking complex implodes, that's where we're going.
I agree, this isn't going to be pretty... races to the bottom never have a winner
Its dance or die time for a lot of the serious players. They are hoping to outlast the optimists, kind of an iffy proposition.
"Faced with the painful choice of losing money maintaining current production at $60/barrel or taking 2 million barrels per day off the market and losing much more money—it’s an easy choice: take the path that is less painful."
The most recent charts I saw shows Saudi has an average production cost of $25 per barrel, produces 10.7 million barrels per day and consumes 3 million barrels per day, leaving 7.7 million barrels per day for exports. OPEC site says Saudi produces 9.7 and exports 7.6 million barrels per day, which means they consume only 2.1 million barrels.
At $50 per barrel, that means they need to produce 4.2 million and export half to cover their domestic use. That leaves 5.5 million barrels per day export to make $137.5 million per day.
IEA shows there is currently a supply exceeding demand of 1 million barrels per day. Before this situation, oil prices were about $90 per barrel.
If the Saudi's cut production by 1 million barrels, they would have 6.6 million times $65 per barrel profit = $429 million minus ( 2.1 million barrels times $25 / barrel = $52.5 million for the oil they use ) for a total of $376.5 million per day, nearly triple the amount they are making.
I understand that if oil prices stay high, shale oil will grow, but I still think it would be better to make more money per barrel and more money over all, and keep more reserves for the future. I suspect the problem is that the King is 91 and in ill health, and is not playing the long game anymore.
Exactly. SA all by itself could cut 2 million barrels per day, reducing their daily income by 120 million. If that resulted in the oil price rising back to $90, they'd make more than that 120 million, not to mention extending their reserves life. There must be other reasons, aside from money, for their intransigence. Or, perhaps they concluded that the way things were going, if the world expected them and them alone to be the swing producer, they'd have to constantly be reducing their oil exports, year after year.
thanks for doing the math. One thing you didn't mention is the fact that these aren't cars, and they aren't businesses. If Saudi Arabia quits pumping 1 million BPD they save 1 million BPD. That oil is in the ground and maintains it's value. It doesn't rust away if no one buys it and they don't lose market share when oil is basically fungible and demand is increasing over the long term and ever present.
By lowering production they lose far less. By pumping the same/more, that is money and assets gone.
As for stopping shale production. The oil will be worth more the longer it sits and while shale production may slow or even stop, it's still in the ground, still in the US and the technology only gets better at extracting it. When oil goes back to XX then shale production goes back up. Again, the oil has been there at least 100 years (that's all I can imagine) and am pretty sure it will be there for a hundred or more. Lowering the price does nothing to the market share when longer time periods are considered.
If all oil exporting nations cut back what would it be? Maybe 50-100k BPD? Or if just OPEC cut then maybe a couple hundred k each? In that context then the Saudi's and all are losing even more by not cutting.
The whole demand explanation is bullshit. Maybe demand precipitated it, or maybe it was an opportunity, but unless there is a drop in demand of say 10 million BPD then it's easy for anyone to see that every oil exporter is getting killed.
So this leads to one of two conclusions. Either the world economy is fucked way beyond anyone's worst nightmare, or it's an attack on some oil exporting countries (duh, Russia and Iran).
Really good article.
Thanks
"Peak oil doesn’t mean that we are running out of oil. It simply means that once conventional oil production begins to decline, future supply will have to come from more difficult sources that will be more expensive or of lower quality or both. This means production from deep water, shale and heavy oil. It seems to me that Peak Oil predictions are right on track."
I vote for these two statements
"First of all, I’m not sure that the premise of the question is correct. Who said that technology is responsible for increasing production? Higher price has led to drilling more wells. That has increased production. It’s true that many of these wells were drilled using advances in technology like horizontal drilling and hydraulic fracturing but these weren’t free"
this is my runner up
two years ago on ZH most commenters denied global warming was even real and just a socialist scam, wat up!
E-scat
And there you have it. This baby will blow much faster and bigger than anyone expects.
Gee somebody who makes sense
Yeah, except he is misguided about using electricity and natural gas to power automobiles and trucks. Not. Gonna. Happen.
Gas-to-liquids direct conversion of natural gas to diesel and other refined products seems much more likely. We have an entire supply chain designed to distribute liquid fuels, and a gigantic installed base of gasoline and diesel vehicles, that would cost trillions to replace. Spending hundreds of billions to build plants to convert natural gas to diesel and jet fuel seems to make more economic sense.
why stop at converting straight natural gas?
http://en.wikipedia.org/wiki/Coal_gasification
http://en.wikipedia.org/wiki/Fischer%E2%80%93Tropsch_process
Electricity is a loser, just not efficient enough. NatGas for local commercial use like Fedex and UPS can be viable if done right. The gas to liquids thing is flying under the radar but is a very strong bet 2-3 years out, at least if the economy isn't completely slagged.
GTL is a sure bet because, if push came to shove, the USAF is going to be able to get fuel for its planes come hell or high water... if it's synthetic it's synthetic, they don't care and everything's already been cleared to use synfuel anyway... same goes for trucks and tanks... the US Navy would go all nuclear if they had to and certainly have all the right people with the right skills to pull it off (I'm looking at you, Naval Reactors)...
We also have an entire supply chain for delivering electricity. What's your point?
And we generate electricity, not gas, from most of our "renewable" energy sources, so in the long run electricity will probably always be around while gas will start to shrink.
This is not black and white. All of these forms of energy are already used in our society. The only thing that's changing is the balance between them. Given the push that electric cars are receiving these days (from the masses, from the gov, etc), unless something big changes, they could plausibly be the future of personal automobiles.
Next someone claims that Saudi Arabia loses money on every barrel at current prices
/sarc
How do you know they aren't.
Nobody knows but the Saudi's and they ain't telling....
Very true
Everybody gets to make a guess.
I believe they are - or why did I put /sarc on my comment.
But the term "loses money" doesn't apply if you have the ability to change the rules at will mid-game or to blackmail others into covering your "losses."
Bet it crimps their ability to fund the CIA's "liver eating" proxie armies all over the world.
Berman can't explain the fact that output nearly tripled in Texas in only five years and that since the RRC started collecting data, the only time it doubled was from 1935 to 1946 from 1mmbbl/day to 2mmbbl/day. From 1980 to 1985 there were 35,000 wells added and production fell by 200mbbl/d while in this last five years there have ben 28,500 wells added and production has gone from 980mbbl/d to 2.85mmbbl/day. That can't be explained by the nonsense he is spouting about decline rates and shale organic density and so forth. He is talking about wells that were drilled four years ago.
I will give you an example of something simple that made a huge difference in the Wolfcamp. Originally wells were being drilled east/west and more gel was used than water. Now wells are drilled north south and very little gel is used while more sand and water is used. These are called slick water fracs and they produce a different type of fracture geometry. The IPs on the north/south slick water frac wells are in excess of 1000 bbl/day while the other wells were around 300 or so. The EUR of these wells is 1mmbbl while the others were more like 200-200mbbl. Look at the hockey stick and understand that it's not a price, it's actual production and it's not malinvestment, it's real results of real improved process and knowledge. That is what man is best at, improving process.
Here is a year of data on a recent Wolfcamp well and they are now getting even better than this. That is a 50% decline rate and a first year prodution of 147,000 bbl oil and 837,000 mcf gas. That is close to 300,000 BOE or what Berman was calculating as the average EUR of a shale well. Obviously he is using outdated information because this is just the first year recovery with about a 50% decline rate.
http://tinyurl.com/m4pbpql
Yeah, technology and improved procsses are changing things but the economic hurricane is messing up making improvements.
no amount of tech is going to save you from being over-leveraged... cash is king
That is until the Dollar goes POOF !
All GONE !
It is called CONfidence.
Physical Gold & Silver anyone?
"Domestic oil prices were below about $30/barrel until 2004 and companies made enough money to stay in business. " -Arthur Berman
Well. What changed, pray tell?
Could it be that immediately before the Great Recession we ran out of oil altogether?
No?
Gouging perhaps? Has excess global monetary emission manifest itself in a disasterous concentrated speculative bubble and crippling inflation in this core global energy commodity?
"Demand is down because of a high price for too long." -Arthur Berman
You don't say...
Arthur Berman: The current situation with oil price is really very simple. Demand is down because of a high price for too long. Supply is up because of U.S. shale oil and the return of Libya’s production. Decreased demand and increased supply equals low price
Bollox
I, for one, find Berman's analysis useful. He's proved right in the past 6 months, at least.
Ha! They call this a "low price".
Gas is still $2 a gallon on Main Street. I remember when everyone was freaking out over gas hitting $2 for the first time ever in 2004. That was only a decade ago guys.
These blowhards must have been born yesterday if they think that oil at these rates is "low". Where were these guys in the early 2000s, the 1990s, 1980s, 1970s?
Seriously aren't most of these "experts" at least in their 40s, 50s, and 60s? I mean if you are a teenager in high school or a college kid, then these prices would be low to you, but if you have been on this earth for a minute, calling these prices "low" is a sick joke.
My friend was just telling me he remembers filling up with gasoline for 17.9 to 19.9 cents per gallon in the 1970s. And that includes taxes for all road building and repair.
So, $1.79 to $1.99 gasoline is 10x higher.
And that's "cheap"? Thanks to the federal reserve and others in the financial system and government.
I am not saying that it works out dollar for dollar but how much was the average worker making in the 70's. I think a loaf of bread was much cheaper then too. Milk also.
I remember in the 70's, that big building there, well it wasn't. Wasn't a Mcdonalds there either, and the girls, well the girls...
Anyways, my point if lost in rambling is to not compare nominal dollars without adjusting for inflation.
I have never read a more concise evaluation on energy in my life, wait, sorry, Jim Cramer had a button he would push that made a cow sound*--that also was good!
*The cow sound was not a fart, if it was it would be methane gas which we could use for alternative energy, but I still like the sound!
Sorry, I down arrowed you for the Cramer reference. I cannot help myself.
I had to up arrow you for plugging renewable methane alternative.
"The great opportunity for renewable energy lies in electricity storage technology."
I agree. Then again, energy storage technology by its very nature equates to 'Freedom', as in: Not not being 'bound' to the system. Can you imagine whole communities living 'off-the-grid' - or should I say: 'Allowed' to live off-the-grid...? Hardly...
And the great opportunity for my cock is for it to fuck Kate Upton.
Dream on.
talking about cocks, there was a cock fight in Manila the other day and guess what : a cock called Banzai won the finals against a cock called Kardashian.
Thrilla in Manila.
I wonder if William knew about that. Cock-a-doodle randy.
Coming back to round-about weathervane cocks on wind farms, something tells me they will be crowing more and more.
Lets hope that electrical storage becomes a reality before Upton's titties begin to sag like sad sacks.
Right now they are top of morning to you quality !
Nuclear is a good solution if we all want babies that look like the elephant man.
Fukushimas can't happen here!
As yet another dead cat bounce fools the Drill Baby Drill oil suckers, we continue to have the ill informed commentators trying to make sense of something way beyond their comprehension.
Oil has lost half its value in six months, you would think they would get a clue.
The Fossil Fuel Age is dead.
A verified working LENR killed it.
Scientists working for the organisation that decides who gets the Nobel prizes good enough for you?
Scientists working for the Swedish Royal Academy of Science and Swedish Energy Research Institute Elforsk, completed a verification of a working LENR in February, they finished the report in June/July, when it started doing the rounds in scientific circles, where it soon reached the eyes of those who had been shorting the Market in preperation for the verification, after a lot of critiquing and review they released the report that they had verified the working reactor at the beginning of October:
http://amsacta.unibo.it/4084/1/LuganoReportSubmit.pdf
It has been replicated by an independent Russian Scientist:
https://docviewer.yandex.com/?url=ya-disk-public%3A%2F%2FejFRuMB3GiCF6ZXZHI9lIxg2OeCo5GTI6HuLUo5jb5Y%3D&name=%D0%90%D0%BD%D0%B0%D0%BB%D0%BE%D0%B3%20%D0%A0%D0%BE%D1%81%D1%81%D0%B8.pdf&c=54a72ecd60ef
http://www.univrmagazine.it/sito/vedi_articolo.php?id=2820
And according to other sources has been involved for some time.
A primitive version was demonstrated in front of an invited audience, including representatives of Big Oil and various other big industry players in September of 2011. This was the trigger for Big Oil to sell their oil fields, though Shell who had a department watching this particular Black Swan started to divest their oil fields even before then, Big Oil then gave the cash from the sales to the merchant banks along with a nod and a wink, the commitment of traders report shows they then built the massive short position in oil that we are now experiencing.
http://oilprice.com/Finance/investing-and-trading-reports/Why-Are-the-Bi...
Big Oil did not want the SEC to blab on them so they:
http://uk.reuters.com/article/2013/03/27/oil-derivatives-regulation-idUK...
http://uk.reuters.com/article/...
After the demonstration and additional testing a $2 Billion US company: Cherokee Investment Corp's Industrial Heat bought up the inventor and all his IP and have been developing it for market, it got tested and verified by them and other scientists and then the full independent test above. Since then they have been running a pilot plant at an undisclosed customer site believed to be in the US, and have negotiated with the Chinese to build a mass production facility there.
There are a dozen other players in the race to market including major names and research organisations.
It will take a conservative maximum of 30 years until LENR is fully adopted in all energy markets. New technology adoption times are 12 years on average though the speed of adoption is increasing exponentially, read your Ray Kurzweil.
Saudi Arabia knows all this they have enough money to employ the best and brightest minds to work out their strategy and it is simple. If the fossil fuel market its dead then it is time to have fire sale.
Saudi Arabia has more than enough reserves to drop its prices right down to $10 per barrel, with that it it will kill off 98% of its competition. Then it can take all the market for the last thirty years of oil as a fuel and prevent any competion in a post LENR market for lubricants and chemical feed stocks for plastics etc.
So Saudi Arabia's strategy is the classic stack em high sell em cheap Tesco tin of beans strategy and it is dropping the price of oil to its bare minimum to slow down adoption of LENR and so that Saudi Arabia can maximise its profits by taking thinner margins on higher volume, by wiping out all its competition.
http://uk.businessinsider.com/r-saudis-naimi-says-opec-will-not-cut-outp...
http://uk.businessinsider.com/...
even if, indeed, any kind of "fusion power" or equivalent energy miracle killed "fossil" fuel (yes, I put "fossil" in quotes)... you still need cheap hydrocarbon stocks for all the other stuff that oil & gas are used for... I don't see demand for cheap plastic shit falling anytime soon, maybe at least we can use it for that instead of converting 23% of it as shaft horsepower and letting the rest out of the tailpipe as waste heat & vibration/noise...
"In summary, the performance of the E-Cat reactor is remarkable. We have a device giving heat energy
compatible with nuclear transformations, but it operates at low energy and gives neither nuclear radioactive
waste nor emits radiation. From basic general knowledge in nuclear physics this should not be possible.
Nevertheless we have to relate to the fact that the experimental results from our test show heat production
beyond chemical burning, and that the E-Cat fuel undergoes nuclear transformations. It is certainly most
unsatisfying that these results so far have no convincing theoretical explanation, but the experimental results
cannot be dismissed or ignored just because of lack of theoretical understanding. Moreover, the E-Cat results
are too conspicuous not to be followed up in detail. In addition, if proven sustainable in further tests the ECat
invention has a large potential to become an important energy source. Further investigations are required
to guide the interpretational work, and one needs in particular as a first step detailed knowledge of all
parameters affecting the E-Cat operation. Our work will continue in that direction."
In the interview, Naimi said in no uncertain terms that neither the Kingdom nor OPEC has any intention to cut production. He said that Saudi production costs are no more than $5 per barrel, and that marginal costs of development are “at most” $10 per barrel.
Thus, Naimi said, “As a policy for OPEC, and I convinced OPEC of this [...] it is not in the interest of OPEC producers to cut their production, whatever the price is.” He added: “Whether it goes down to $20, $40, $50, $60, it is irrelevant.”
http://news.newenergytimes.net/2014/10/12/rossi-handles-samples-in-alleg...
Rossi is a scam artist.
That "scientific" paper you present is pure garbage. It would never pass the scientic method sniff test.
The authors are collaborators of Rossi and allowing him to interfere with the experiment is a fatal flaw.
There seems to be a concerted effort by many people on the web to present this crap as science. I've seen three differnet ZH posters presenting the same links as you.
If you think the big banks and oil companies are getting out of oil plays because of LNER, I'd like to have some of what you are smoking.
"I am not a climate scientist and, therefore, do not get involved in the technical debate. I suggest, however, that those who advocate decisive action in the near term think seriously about how natural gas and nuclear power can make the change they seek more palatable."
It's not a 'technical debate' at its core, Arthur... It's about elimination -- not of carbon gasses per se, but of bipedal carbon beings who represent nothing more than 'useless eaters' to the Elite who foster and $fund this movement.
Oecd demand down just 350 kbd in sep relative to 2013 according to the IEA.
This is a mere two Irish spits in the bucket.
Libya also happens to be offline the last time I checked.
Oecd demand down just 350 kbd in sep relative to 2013 according to the IEA. This is a mere two Irish spits in the bucket. Libya also happens to be offline the last time I checked.
In Europe at least it is the rich who burn the oil.
The poor burn other fossil fuels.
Oecd demand down just 350 kbd in sep relative to 2013 according to the IEA. This is a mere two Irish spits in the bucket. Libya also happens to be offline the last time I checked.
In Europe at least it is the rich who burn the oil.
The poor burn other fossil fuels.
Goddamn. Great analysis.
Why don't you show us the Saudi math where selling oil at $50 is better than $95? I'd rather keep it in the ground and sell it at a higher price at a later date thans sell for cheap.
Also, related to Continental resources, up front costs are huge, so it's not as simple as drilling and fracking like crazy and saying you spent more money than you made. If I go drill a well out in my backyard the up front costs are huge, I might not make money for several years, but then the next 15 to 20 I make a bunch of money.
Yeah, there is going to be much pain for shale drillers but he talks fast over points like breakeven $80 to $85. The rock varies very much. Continental and the Oasis will cut their rigs back and focus on the very best areas to keep their heads above water. Continental, in my opinion, majorly fucked up by selling their hedges.
I'm definitely not an expert but I'm not convinced this guy is either.
Like I said, don't look a cheap gas gift horse in the mouth. Just appreciate it.
Too bad we spent $9 trillion bailing out the bankers and political puppets investments. That could of been spent on subsidizing hydrogen transporation, tidal power, etc.
Henry Ford liked to prove sustainable economic models like introducing a Model-T that ran on peanut oil back in 1908. But government and Rockerfellers with Standard Oil kiboshed that idea.
Like my Grandmother that live through the Great Depression I'll invest in oil stocks in 2016 based on the greed of human rulers. So close to completing our evolution but yet so far...
Speaking for the dozen or so criminally insane, clinically sick ZH posters who are orgasmic for the blood of Jews, isn't the author a Jew/Zionist and consequently is so utterly devoid of humanity...a devil incarnate, that the jew must have an angle here to ensnare the world? Just sayin...Geo Washington? Come drink some Jew blood....Just sayin :)
Yes, Art Berman has been quite amusing in the industry for some years now. Seems to really have had a twig up his ass for having completely missed the paradigm shift to the unconventional resources of hydrocarbons. Boo Twiddly Hoo! You'll still probably end up as The new Hydrocarbon Czar and lunch w/ that Summers dude. Bravo!
Good article very interesting.
Mr Stafford, tip of the hat for a well written article.
The last paragraph was the cherry on top. Milestones
Don't agree with the conventional thinking that the best we can do with solar and wind is 20%-30 in the next 10 years.
We could do a hell of a lot better than that if all the crooks making decisions in DC weren't all bought and sold by the petroleum industry.
How about a Marshall plan to replace fossil fuels with solar and wind? We managed to convert all the factories in the US (back when we were an industrial power) to making war materials in the 1940s.
NASA just announced in May that West Antarctic is now in an irreversible process of melting, which will raise global sea levels by 4 feet. This will likely trigger East Antarctic ice to melt, raising sea levels another 12-15 feet; this will be a certainty if we keep burning fossil fuels at the rate we do now.
In light of this information, the "extremist" position is to keep doing the same damn thing.
"In light of this information, the "extremist" position"
Yours or his?
The Marshall plan was a post war re-building of Europe using banker debt after the Banker Wars of 1939-45 destroyed Europe and to stop World Banker sponsored communism.
A Marshall Plan like approach to solar energy is a Banker wet dream using banker debt to force governments to convert their entire energy system into a unworkable Solyndra type ponzi scheme to strip wealth out of the tax serfs. This has to be done first by using useful idiots screaming fantasy nightmarish scenerios on nightly news broadcast, blogs and in kiddy text books.
Go tell Germany all about your ideas. They've outright admitted that their renewable energy efforts have failed. They are moving back to lignite coal as a primary source. The combination of cost and the instability that alt. energy adds to the grid made their program FLOP.
Let's see, we've discovered vast reserves at an $80-$100 per barrel that we didn't know we had. But right now the oil market is telling us that there is enough conventional oil to clear the market at $40-$50 a barrel. And this proves that peak oil has been right all along...
Alrighty then...
It neither proves nor disproves peak energy. It's called a global recession...supply and demand and all that tedious and boring economic stuff.
Okay well then, quoting the OP, "It seems to me that Peak Oil predictions are right on track."
You've got to hand it to a theory, that if prices go up it is on the right track, if prices go down it is on the right track, if prices go sideways it is on the right track. No matter what happens, it is on the right track.
Whatever else you say about it, that is one helluva robust theory.
"You've got to hand it to a theory, that if prices go up it is on the right track, if prices go down it is on the right track, if prices go sideways it is on the right track. No matter what happens, it is on the right track.
Whatever else you say about it, that is one helluva robust theory. "
+1
...And this is the bust part of the theory apparently... LOL
I believe more attention needs to be given to the use of the storage potential of hydropower to cover events when wind and sun slacken. The use of wind turbines and/or solar panels at hydro sites to pump water back into reservoirs during wind and sun surplus would seem to be a mechanism to accomplish this.
Has there been a 40% reduction in demand during the last six months?
This shit don't make no sense.
So much fucking oil they don't even have anywhere to put it after pumping it anymore.
That Keystone Pipeline would be very long and conceivably hold how much when full??
If built and used it would be much a ginormous continent spanning storage tank as a transit pipeline.
Consider how many barrels Keystone would hold ( off market ) during 'transportation'. Anyone have an idea?
IMHO, Keystone would actually have been yet another way for speculators to hold over-supply off market.
Figure out how many tankers worth of oil that would equal and the light bulb might go off...
Why aren't there more articles like this posted here and less of the low content doomer porn?
I don't mind the doomer porn, but let's be honest, most of it is lazy copypasta garbage without any substance.
Berman is part of the Big Lie
Demand is down because the global recovery is bordering on a full fledged global depression. The US is slightly better off because their Central bank has been printing money since 2009.
Supply is up because the Saudis have been ordered to pump the way the the Fed was printing. 24/7. The Saudis are pumping up a glut of oil and selling it to Western Europe at a double discount in the hopes of averting the Western European nations' rendezvous with deflation. Cheap oil for Europe along with heavy selling of their inexpensive exports to America in return for today's strong dollar was supposed to turn things around.
Anybody seeing anything turning around? Well Tyler will tell us and show us a chart.
I have read countless times in ND newspapers that Bakken breakeven is generally $40 and below. This story claims it is $80. But even at $50 a barrel these wells typically pay for themselves in one year. Do the math and at $30 they would pay for themselves in 2.5 years. I think the Bakken is here to stay.....
The author needs to get his calculator out.
Let's do the maths:
Saudi produces 9.5 million barrels per day and there is an oversupply of 2 million barrels per day (quite small).
For those 9.5 million barrels per day it is now getting $50 per barrel.
= $475 million.
If it cut 2 million barrels per day; supply and demand would be on a knife edge and oil would go back up to $100.
Revenue = 7.5 X 100 = $750 million
Saudi, in the short term, is not making a rational decision, but doesn't want to be the one that always has to cut production to keep prices high.
Saudi is letting all players see they would benefit from some long term planning and stability by forming a cartel (i.e an expanded OPEC), if everyone cut their supply a little the over-supply would disappear and prices would climb.
Let's see: the whole world has fallen into a Keynesian delusion and now everyone is surprised said world is in the mother of all recessions/depressions with no demand for oil - or much of anything else for that matter? Maybe the MSM Kool-Aid drinkers are surprised but nobody on this board should be.
Is it also no coincidence that as the Fed had taken a (probably temporary) break from destroying the value of the dollar - the same dollar used to buy oil on the international market - the Saudis decide it's ok to sell oil at $50/bbl and going lower fast? If I was selling you MY oil and you wanted to buy it with a currency you are in the process of destroying, you can bet your ASS I'd want more of it per bbl. Stop destroying it, and my price goes down...