Softpanorama

Home Switchboard Unix Administration Red Hat TCP/IP Networks Neoliberalism Toxic Managers
May the source be with you, but remember the KISS principle ;-)
Bigger doesn't imply better. Bigger often is a sign of obesity, of lost control, of overcomplexity, of cancerous cells

Paper oil, Minsky financial instability hypothesis and casino capitalism

 Why Peak Oil Threatens the Casino Capitalism

News Peak Cheap Energy and Oil Price Slump Recommended Links The idea of Minsky moment Oil glut fallacy Neoliberalism as a New Form of Corporatism Great condensate con
Paper oil and record oil futures trading volumes Oil prices and debt bubble Slightly skeptical view of oil price forecasts        
Russia oil production Deflation of the USA shale oil bubble MSM propagated myth about Saudis defending this market share Iran return to western oil markets fearmongering

Slightly skeptical view of oil price forecasts

 

Oil consumption growth Secular Stagnation
 Energy returned on energy invested (ERoEI) Energy Geopolitics Energy Bookshelf Bakken Reality Check Junk bond bubble Energy disinformation agency and friends US military energy consumption
A note of ERoEI decline  Why Peak Oil Threatens the Casino Capitalism All wars are bankers wars Fiat money, gold and petrodollar Financial Quotes Financial Humor Etc

 

Note: This article sounds pretty counterintuitive in view of current slump of oil prices with a barrel of oil prices below $30 (more then 4 times drop from the highest level achieved.), In other words, instead of peak oil temporary the world is living in the regime of "oil glut" (which is a misnomer, as in reality this is an overproduction of condensate not oil, but at least low prices are real). 

But the key reason for this was extremely rapid increase  of production in the US and Canada in 2012-2014 fueled by cheap credit. Essentially producing "subprime oil" and in parallel the stream of junk bonds that will never be repaid (aka subprime oil as a Ponzi scheme).

At the same time this was not a revolution but a retirement party as fundamental did not change -- abundance of credit for shale oil and tar sand project was just a side effect of QE.

Reprinted from: Commentary: Why Peak Oil Threatens the International Monetary System By Erik Townsend

| January 6, 2013 (Note: Commentaries do not necessarily represent the position of ASPO-USA. )

Introduction

Having spent the last several years of my life engineering investment strategies to profit from the inevitability of Peak Oil, I’ve become obsessed with understanding the ramifications of radically different energy supply dynamics on the global economy. There are many facets to this, some obvious and some not so obvious. So when ASPO-USA Executive Director Jan Mueller approached me at the end of this year’s conference in Austin and asked for an article discussing the less obvious economic impacts of Peak Oil, I knew instantly that the topic should be the threat Peak Oil poses to the International Monetary System (IMS). This connection is critically important, but far from obvious.

I assure you that this story is very much about Peak Oil, but please bear with me, as I’ll need to start by reviewing what the IMS is and how it came about in the first place. Then I’ll explain the role energy has already played in shaping the present-day IMS, and finally, I’ll tie this back to Peak Oil by explaining why rising energy prices could very well be the catalyst that will cause the present system to fail.

What is the International Monetary System?

At the end of World War II, many countries were literally lying in ruin, and needed to be rebuilt. It was clear that international trade would be very important going forward, but how would it work? World leaders recognized the need to architect a new monetary system that would facilitate international trade and allow the world to rebuild itself following the most devastating war in world history.

A global currency was out of the question because the many countries of the world valued their sovereignty, and wanted to continue to issue their own domestic currencies. In order for international trade to flourish, a system was needed to allow trade between dozens of different nations, each with its own currency.

A convention was organized by the United Nations for the purpose of bringing world leaders together to architect this new International Monetary System. The meetings were held in July, 1944 at the Mt. Washington Hotel in Bretton Woods, New Hampshire, and were attended by 730 delegates representing all 44 allied nations. The official name for the event was the United Nations Monetary and Financial Conference, but it would forever be remembered as The Bretton Woods Conference.

To this day, the system designed in those meetings remains the basis for all international trade, and is known as the Bretton Woods System. The system has evolved quite a bit since its inception, but its core principles remain the basis for all international trade. I’m going to focus this article on the parts of the system which I believe are now at risk of radical change, with Peak Oil the most likely catalyst to bring about that change. Readers seeking a deeper understanding of the system itself should refer to the Further Reading section at the end of this article.

Why is an International Monetary System needed?

It simply wouldn’t be practical for all countries to sell their export products to other countries in their own currencies. If one had to pay for wine from France in French Francs (there was no Euro currency in 1944), and then pay to import a BMW automobile in German Marks, then pay for copper produced in Chile in Pesos, each country would face an overwhelming burden just maintaining reserve deposits of all the various world currencies. The system of trade would be very inefficient. For centuries, this problem has been solved by using a single standard currency for all international trade.

Because a standard-currency system dictates that each nation’s central bank will need to maintain a reserve supply of the standard currency in order to facilitate international trade, the standard currency is known as the reserve currency. At various times in history, the Greek Drachma, the Roman Denari, and the Islamic Dinar have served as de-facto reserve currencies. Prior to World War II, the English Pound Sterling was the international reserve currency.

Throughout history, reserve currencies came into and out of use through happenstance. The Bretton Woods conference marked the first time that a global reserve currency was established by formal treaty between cooperating nations. The currency chosen was, of course, the U.S. Dollar.

How does the IMS work?

The core of the system was the U.S. Dollar serving as the standard currency for international trade. To assure other nations of the dollar’s value, the U.S. Treasury would guarantee that other nations could convert their U.S. dollars into gold bullion at a fixed exchange rate of $35/oz. Other nations would then “peg” their currencies to the U.S. dollar at a fixed rate of exchange. Each nation’s central bank would be responsible for “defending” the official exchange rate to the U.S. dollar by offering to buy or sell any amount of currency bid or offered at that price. This meant each nation would need to keep a healthy reserve of U.S. dollars on hand to service the needs of domestic businesses wishing to convert money between the local currency and the U.S. dollar.

By design, the effect of the system was that each national currency was indirectly redeemable for gold. This was true because each nation’s central bank guaranteed convertibility of its own currency to U.S. dollars at some fixed rate of exchange, and the U.S. Treasury guaranteed convertibility of U.S. dollars to gold at a fixed rate of $35/oz. So long as all of the governments involved kept their promises, each nation’s domestic currency would be as good as gold, because it was ultimately convertible to gold. United States President Richard Nixon would break the most central promise of the entire system (U.S. dollar convertibility for gold) on August 15, 1971. I’ll come back to that event later in this article.

Triffin’s Dilemma

In 1959, three years after M. King Hubbert’s now-famous Peak Oil predictions, economist Robert Triffin would make equally prescient predictions about the sustainability of the “new” IMS, which was then only 15 years old. Sadly, Triffin’s predictions, like Hubbert’s, would be ignored by the mainstream.

The whole reason for choosing the U.S. dollar as the global reserve currency was that without a doubt, the U.S.was the world’s strongest credit in 1944. To assure confidence in the system, the strongest, most creditworthy currency on earth was chosen to serve as the standard unit of account for global trade. To eliminate any question about the value of the dollar, the system was designed so that any international holder of U.S. dollars could convert those dollars to gold bullion at a pre-determined fixed rate of exchange. Dollars were literally as good as gold.

Making the USD the world’s reserve currency created an enormous international demand for more dollars to meet each nation’s need to hold a reserve of dollars. The USA was happy to oblige by printing up more greenbacks. This provided sufficient dollars for other nations to hold as foreign exchange reserves, while at the same time allowing the U.S.to spend beyond its means without facing the same repercussions that would occur were it not the world’s reserve currency issuer.

Triffin observed that if you choose a currency because it’s a strong credit, and then give the issuing nation a financial incentive to borrow and print money recklessly without penalty, eventually that currency won’t be the strongest credit any more! This paradox came to be known as Triffin’s Dilemma.

Specifically, Triffin predicted that as issuer of the international reserve currency, the USA would be prone to over consumption, over-indebtedness, and tend toward military adventurism. Unfortunately, the U.S. Government would prove Triffin right on all three counts.

Triffin correctly predicted that the USA would eventually be forced off the gold standard. The international demand for U.S. dollars would allow the USA to create more dollars than it otherwise could have without bringing on domestic inflation. When a country creates too much of its own currency and that money stays in the country, supply-demand dynamics kick in and too much money chasing too few goods and services results in higher prices. But when a country can export its currency to other nations who have an artificial need to hold large amounts of that currency in reserve, the issuing country can create far more money than it otherwise could have, without causing a tidal wave of domestic inflation.

Nixon proves Triffin right

By 1970, the U.S.had drastically over-spent on the Vietnam War, and the number of dollars in circulation far outnumbered the amount of gold actually backing them. Other nations recognized that there wasn’t enough gold in Fort Knox for the U.S.to back all the dollars in circulation, and wisely began to exchange their excess USDs for gold. Before long, something akin to a run on the bullion bank had begun, and it became clear that the USA could not honor the $35 conversion price indefinitely.

On August 15, 1971, President Nixon did exactly what Triffin predicted more than a decade earlier: he declared force majeure, and defaulted unilaterally on the USA’s promise to honor gold conversion at $35/oz, as prescribed by the Bretton Woods accord.

Of course Nixon was not about to admit that the reason this was happening was that the U.S. Government had abused its status as reserve currency issuer and recklessly spent beyond its means. Instead, he blamed “speculators”, and announced that the United States would suspend temporarily the convertibility of the Dollar into gold. Forty-two years later, the word temporarily has taken on new meaning.

Exorbitant Privilege

With the whole world conducting international trade in U.S. dollars, nations with large export markets wound up with a big pile of U.S. dollars (payments for the goods they exported). The most obvious course of action for the foreign companies who received all those dollars as payment for their exported products would be to exchange the dollars on the international market, converting them into their own domestic currencies. What may not be obvious at first glance is that there would be catastrophic unintended consequences if they actually did that.

If all the manufacturing companies in Japan or China converted their dollar revenues back into local currency, the act of selling dollars and buying their domestic currencies would cause their own currencies to appreciate markedly against the dollar. The same holds true for oil exporting countries. If they converted all their dollar revenues back into their own currencies, doing so would make their currencies more expensive against the dollar. That would make their exports less attractive because, being priced in dollars, they would fetch lower and lower prices after being converted back into the exporting nation’s domestic currency.

The solution for the exporting nations was for their central banks to allow commercial exporters to convert their dollars for newly issued domestic currency. The central banks of exporting nations would wind up with a huge surplus of U.S. dollars they needed to invest somewhere without converting them to another currency. The obvious place to invest them was into U.S. Government Bonds.

This is the mechanism through which the reserve currency status of the dollar creates artificial demand for U.S. dollar-denominated treasury debt. That artificial demand allows the United States government to borrow money from foreigners in its own currency, something most nations cannot do at all. What’s more, this artificial demand for U.S. Treasury debt allows the USA to borrow and spend far more borrowed foreign money than it would otherwise be able to, were it not the world’s reserve currency issuer. The reason is that, if not for the artificial need to hold dollar reserves, foreign lenders would be much less inclined to purchase U.S. debt, and would therefore demand much higher interest rates. Similarly, the more that international trade has grown as a result of globalization, the more the United States’ exorbitant privilege has grown.

Have you ever wondered why China, Japan, and the oil exporting nations have such enormous U.S. Treasury bond holdings, despite the fact that they hardly pay any interest these days? The reason is definitely not because those nations think 1.6% interest on a 10-year unsecured loan to a nation known to have a reckless spending habit is a good investment. It’s because they have little other choice. The more their own economies rely on exports priced in dollars, the more they need to keep their own currencies attractively priced relative to the U.S. dollar in order for their exports to remain competitive on the international market. To achieve that outcome, they must hold large reserves denominated in U.S. dollars. That’s why China and Japan – major export economies – are the biggest foreign holders of U.S. debt.

The net effect of this system is that the USA gets to borrow money from foreigners at artificially low interest rates. Moreover, the USA can become over-indebted without the usual consequences of increasing borrowing cost and declining creditworthiness. Other nations have little choice but to maintain a large reserve supply of dollars as the international trade currency. But the U.S. has no need to maintain large reserves of other nations’ currencies, because those currencies are not used in international trade.

By the mid-1960s, this phenomenon became known as exorbitant privilege: That phrase refers to the ability of the USA to go into debt virtually for free, denominated in its own currency, when no other nation enjoys such a privilege. The phrase exorbitant privilege is often attributed to French President Charles de Gaulle, although it was actually his finance minister, Valery Giscard d’Estaing, who coined the phrase.

What’s important to understand here is that the whole reason the U.S. can get away with running trillion-dollar budget deficits without the bond market revolting (a la Greece) is because of exorbitant privilege. And that privilege is a direct consequence of the U.S. dollar serving as the world’s reserve currency. If international trade were not conducted in dollars, exporting nations (both manufacturers and oil exporters) would no longer need to hold large reserves of U.S. dollars.

Put another way, when the U.S. dollar loses its reserve currency status, the U.S. will lose its exorbitant privilege of spending beyond its means on easy credit. The U.S. Treasury bond market will most likely crash, and borrowing costs will skyrocket. Those increased borrowing costs will further exacerbate the fiscal deficit. Can you say self-reinforcing vicious cycle?

But wait… Wasn’t Gold convertibility the whole basis of the system?

If the whole point of the Bretton Woods system was to guarantee that all the currencies of the world were “as good as gold” because they were convertible to U.S. dollars, which in turn were promised to be convertible into gold… And then President Nixon broke that promise in 1971… Wouldn’t that suggest that the whole system should have blown up in reaction to Nixon slamming the gold window shut in August of ’71?

Actually, it almost did. But miraculously, the system has held together for the last 42 years, despite the fact that the most fundamental promise upon which the system was based no longer holds true. To be sure, the Arabs were not happy about Nixon’s action, and they complained loudly at the time, rhetorically asking why they should continue to accept dollars for their oil, if those dollars were not backed by anything, and might just become worthless paper. After all, if U.S. dollars were no longer convertible into gold, what value did they really have to foreigners? The slamming of the gold window by President Nixon in 1971 was not the only cause of the Arab oil embargo, but it was certainly a major influence.

What’s holding the IMS together?

Why didn’t the rest of the world abandon the dollar as the global reserve currency in reaction to the USA unilaterally reneging on gold convertibility in 1971? In my opinion, the best answer is simply “Because there was no clear alternative”. And to be sure, the unmatched power of the U.S.military had a lot to do with eliminating what might otherwise have been attractive alternatives for other nations.

U.S. diplomats made it clear to Arab leaders that they wanted the Arabs to continue pricing their oil in dollars. Not just for U.S.customers, but for the entire world. Indeed, U.S. leaders at the time understood all too well just how much benefit the USA derives from exorbitant privilege, and they weren’t about to give it up.

After a few years of tense negotiations including the infamous oil embargo, the so-called petro-dollar business cycle was born. The Arabs would only accept dollars for their oil, and they would re-invest most of their profits in U.S. Treasury debt. In exchange for this concession, they would come under the protectorate of the U.S. military. Some might even go so far as to say that the U.S. government used the infamous Mafia tactic of making the Arabs an “offer they couldn’t refuse” – forcing oil producing nations to make financial concessions in exchange for “protection”.

With the Arabs now strongly incented to continue pricing the world’s most important commodity in U.S. dollars, the Bretton Woods system lived on. No longer constrained by the threat of a run on its bullion reserves, the U.S. kicked its already-entrenched practice of borrowing and spending beyond its means into high gear. For the past 42 years, the entire world has continued to conduct virtually all international trade in Dollars. This has forced China, Japan, and the oil exporting nations to buy and hold an enormous amount of U.S. Treasury debt. Exorbitant privilege is the key economic factor that allows the U.S.to run trillion dollar fiscal deficits without crashing the Treasury bond market. So far.

There’s a limit to how long this can last

But how long can this continue? The U.S.debt-to-GDP ratio now exceeds 100%, and the U.S. has literally doubled its national debt in the last 6 years alone. It stands to reason that eventually, other nations will lose faith in the dollar and start conducting business in some other currency. In fact, that’s already started to happen, and it’s perhaps the most important, under-reported economic news story in all of history.

Some examples…China and Brazil are now conducting international trade in their own currencies, as are Russia and China. Turkey and Iran are trading oil for gold, bypassing the dollar as a reserve currency. In that case, US sanctions are a big part of the reason Iran can’t sell its oil in dollars. But I wonder if President Obama considered the undermining effect on exorbitant privilege when he imposed those sanctions. I fear that the present U.S. government doesn’t understand the importance of the dollar’s reserve currency role nearly as well as our leaders did in the 1970s.

The Biggest Risk We Face is a US Bond and Currency Crisis

To be sure, Peak Oil in general represents a monumental risk to humanity because it’s literally impossible to feed all 7+ billion people on the planet without abundant energy to run our farming equipment and distribution infrastructure. But the risks stemming directly from declining energy production are not the most imposing, in my view.

Decline rates will be gradual at first, and it will be possible, even if unpopular, to curtail unnecessary energy consumption and give priority to life-sustaining uses for the available supply of liquid fuels. In my opinion, the greatest risks posed by Peak Oil are the consequential risks. These include resource wars between nations, hoarding of scarce resources, and so forth. Chief among these consequential risks is the possibility that the Peak Oil energy crisis will be the catalyst to cause a global financial system meltdown. In my opinion, the USA losing its reserve currency status is likely to be at the heart of such a meltdown.

A good rule of thumb is that if something is unsustainable and cannot continue forever, it will not continue forever. The present incarnation of the IMS, which affords the United States the exorbitant privilege of borrowing a seemingly limitless amount of its own currency from foreigners in order to finance its reckless habit of spending beyond its means with trillion-dollar fiscal deficits, is a perfect example of an unsustainable system that cannot continue forever.

But the bigger the ship, the longer it takes to change course. The IMS is the biggest financial ship in the sea, and miraculously, it has remained afloat for 42 years after the most fundamental justification for its existence (dollar-gold convertibility) was eliminated. How long do we have before the inevitable happens, and what will be the catalyst(s) to bring about fundamental change? Those are the key questions.

In my opinion, the greatest risk to global economic stability is a sovereign debt crisis destroying the value of the world’s reserve currency. In other words, a crash of the U.S. Treasury Bond market. I believe that the loss of reserve currency status is the most likely catalyst to bring about such a crisis.

The fact that the United States’ borrowing and spending habits are unsustainable has been a topic of public discussion for decades. Older readers will recall billionaire Ross Perot exclaiming in his deep Texas accent, “A national debt of five trillion dollars is simply not sustainable!” during his 1992 Presidential campaign. Mr. Perot was right when he said that 20 years ago, but the national debt has since more than tripled. The big crisis has yet to occur. How is this possible? I believe the answer is that because the U.S. dollar is the world’s reserve currency and is perceived by institutional investors around the globe to be the world’s safest currency, it enjoys a certain degree of immunity derived from widespread complacency.

But that immunity cannot last forever. The loss of reserve currency status will be the forcing function that begins a self-reinforcing vicious cycle that brings about a U.S. bond and currency crisis. While many analysts have opined that the USA cannot go on borrowing and spending forever, relatively few have made the connection to loss of reserve currency status as the forcing function to bring about a crisis.

We’re already seeing small leaks in the ship’s hull. China openly promoting the idea that the yuan should be asserted as an alternative global reserve currency would have been unthinkable a decade ago, but is happening today. Major international trade deals (such as China and Brazil) not being denominated in US dollars would have been unthinkable a decade ago, but are happening today.

So we’re already seeing signs that the dollar’s exclusive claim on reserve currency status will be challenged. Remember, when the dollar loses reserve currency status, the U.S.loses exorbitant privilege. The deficit spending party will be over, and interest rates will explode to the upside. But to predict that this will happen right now simply because the system is unsustainable would be unwise. After all, by one important measure the system stopped making sense 42 years ago, but has somehow persisted nonetheless. The key question becomes, what will be the catalyst or proximal trigger that causes the USD to lose reserve currency status, igniting a U.S. Treasury Bond crisis?

Elevated Risk

It’s critical to understand that the USA is presently in a very precarious fiscal situation. The national debt has more than doubled in the last 10 years, but so far, there don’t seem to have been any horrific consequences. Could it be that all this talk about the national debt isn’t such a big deal after all?

The critical point to understand is that while the national debt has more than doubled, the U.S. Government’s cost of borrowing hasn’t increased at all. The reason is that interest rates are less than half what they were 10 years ago. Half the interest on twice as much principal equals the same monthly payment, so to speak. This is exactly the same trap that subprime mortgage borrowers fell into. First, money is borrowed at an artificially low interest rate. But eventually, the interest rate increases, and the cost of borrowing skyrockets. The USA is already running an unprecedented and unsustainable $1 trillion+ annual budget deficit. All it would take to double the already unsustainable deficit is for interest rates to rise to their historical norms.

This all comes back to exorbitant privilege. The only reason interest rates are so low is that the Federal Reserve is intentionally suppressing them to unprecedented low levels in an attempt to combat deflation and resuscitate the economy. The only reason the Fed has the ability to do this is that foreign lenders have an artificial need to hold dollar reserves because the USD is the global reserve currency. They would never accept such low interest rates otherwise. Loss of reserve currency status means loss of exorbitant privilege, and that in turn means the Fed would lose control of interest rates. The Fed might respond by printing even more dollars out of thin air to buy treasury bonds, but in absence of reserve currency status, doing that would cause a collapse of the dollar’s value against other currencies, making all the imported goods we now depend on unaffordable.

In summary, the U.S. Government has repeated the exact same mistake that got all those subprime mortgage borrowers into so much trouble. They are borrowing more money than they can afford to pay back, depending solely on “teaser rates” that won’t last. The U.S. Government’s average maturity of outstanding treasury debt is now barely more than 5 years. This is analogous to cash-out refinancing a 30-year fixed mortgage, replacing it with a much higher principal balance in a 3-year ARM that offers an initial teaser rate. At first, you get to borrow way more money for the same monthly payment. But eventually the rate is adjusted, and the borrower is unable to make the higher payments.

The Janszen Scenario

When it comes to evaluating the risk of a U.S. sovereign debt and currency crisis, most mainstream economists dismiss the possibility out of hand, citing the brilliant wisdom that “the authorities would never let such a thing happen”. These are the same people who were steadfastly convinced that housing prices would never crash in the United States because they never had before, and that Peak Oil is a myth because the shale gas boom solves everything (provided you don’t actually do the math).

At the opposite extreme are the bloggers on the Internet whom I refer to as the Hyperinflation Doom Squad. Their narrative generally goes something like this: Suddenly, when you least expect it, foreigners will wise up and realize that the U.S. national debt cannot be repaid in real terms, and then there will be a panic that results in a crash of the U.S. Treasury market, hyperinflation of the U.S. dollar, and declaration of martial law. This group almost always cites the hyperinflations of Zimbabwe and Argentina as “proof” of what’s going to happen in the USA any day now, but never so much as acknowledges the profound differences in circumstances between the USA and those countries. These folks deserve a little credit for having the right basic idea, but their analysis of what could actually happen simply isn’t credible when examined in detail.

Little-known economist Eric Janszen stands out as an exception. Janszen is the only credible macroeconomic analyst I’m aware of who realistically acknowledges just how real and serious the threat of a U.S. sovereign debt crisis truly is. But his analysis of that risk is based on credible, level-headed thinking complemented by solid references to legitimate economic theory such as Triffin’s Dilemma. Unlike the Doom Squad, Janszen does not rely on specious comparisons of the USA to small, systemically insignificant countries whose past financial crises have little in common with the situation the USA faces. Instead, Janszen offers refreshingly sound, well constructed arguments. Many of the concepts discussed in this article reflect Janszen’s work.

Janszen also happens to be the same guy who coined the phrase Peak Cheap Oil back in 2006, drawing an important distinction between the geological phenomenon of Hubbert’s Peak and the economic phenomenon which begins well before the actual peak, due to increasing marginal cost of production resulting from ever-increasing extraction technology complexity.

“But there’s no sign of inflation…” (Hint: It’s coming)

Janszen has put quite a bit of work into modeling what a U.S. bond and currency crisis would look like. He initially called this KaPoom Theory, because history shows that brief periods of marked deflation (the ‘Ka’) usually precede epic inflations (the ‘Poom’). He recently renamed this body of work The Janszen Scenario.

Briefly summarized, Janszen’s view is that the U.S. has reached the point where excessive borrowing and fiscal irresponsibility will eventually cause a catastrophic currency and bond crisis. He believes that all that’s needed at this point is a proximal trigger, or catalyst, to bring about such an outcome. He thinks there are several potential triggers that could bring such a crisis about, and chief among the possibilities is the next Peak Cheap Oil price spike.

How Peak Oil could cause a Bond and Currency Crisis

There are several ways that an oil price spike could trigger a U.S. bond and currency crisis. Energy is an input cost to almost everything else in the economy, so higher oil prices are very inflationary. The Fed would be hard pressed to continue denying the adverse consequences of quantitative easing in a high inflation environment, and that alone could be the spark that leads to higher treasury yields. The resulting higher cost of borrowing to finance the national debt and fiscal deficit would be devastating to the United States.

A self-reinforcing vicious cycle could easily begin in reaction to oil price-induced inflation alone. But we must also consider how an oil price shock could lead to loss of USD reserve currency status, and therefore, loss of U.S. exorbitant privilege. In the 1970s, the USA represented 80% of the global oil market. Today we represent 20%, and demand growth is projected to come primarily from emerging economies. In other words, the rationale for oil producers to keep pricing their product in dollars has seriously deteriorated since the ‘70s. The more the global price of oil goes up, the more the U.S. will source oil from Canadian tar sands and other non-OPEC sources. That means less and less incentive for the OPEC nations to continue pricing their oil in dollars for all their non-U.S. customers.

Iran and Turkey have already begun transacting oil sales in gold rather than dollars. What if the other oil exporting nations wake up one morning and conclude “Hey, why are we selling our oil for dollars that might some day not be worth anything more than the paper they’re printed on?” Oil represents a huge percentage of international trade, so if oil stopped trading in dollars, that alone would be reason for most nations to reduce the very large dollar reserves they now hold. They would start selling their U.S. treasury bonds, and that could start the vicious cycle of higher interest rates and exploding borrowing costs for the U.S. Government. The precise details are hard to predict. The point is, the system is already precarious and vulnerable, and an oil price shock could easily detonate the time bomb that’s already been ticking away for more than two decades.

What if U.S. Energy Independence claims were true?

There’s another angle here. Peak Oil just might be the catalyst to cause the loss of U.S. exorbitant privilege, even without an oil price shock.

Astute students of Peak Oil already know better than to believe the recently-popularized political rhetoric claiming that the USA will soon achieve energy independence, thanks to the shale oil and gas boom. To be sure, the Bakken, Eagle Ford, and various other U.S. oil and gas plays are a big deal. The most optimistic forecasts I’ve seen show these plays collectively ramping up to as much as 4.8 million barrels per day of production, which is equivalent to about ½ of Saudi Arabia’s current production.

But the infamous “wedge of hope” chart from the EIA projects production declines from existing global resources of 60 million barrels per day by 2030. By the most optimistic projections, all the exciting new plays in the U.S. will replace less than 5 million barrels per day. Where the other 55 million barrels per day will come from remains a mystery! And of course the politicians never bother to mention such minor details when they make predictions of energy independence.

But let’s just pretend for a moment that hyperbole is reality, and that the USA will achieve energy-independence in just a few years’ time. Now consider the consequences to the IMS. The oil-exporting nations would lose the USA as their primary export customer, and would no longer have an incentive to price their oil in dollars, or to maintain large dollar reserves. They would start selling off their U.S. treasury bonds, and pricing their oil in something other than dollars. Large oil importers like China and Japan would stop paying for oil in dollars, and would no longer need to maintain present levels of U.S. dollar reserves. So they too would start selling U.S. treasury bonds, pushing up U.S. interest rates in the process. Once again, we have the ingredients for a self-reinforcing vicious cycle of increasing U.S. interest rates causing U.S. Government borrowing costs to skyrocket.

Without the artificial demand for treasury debt created by exorbitant privilege, the U.S. would be unable to finance its federal budget deficit. The Federal Reserve might respond with even more money printing to monetize all the government’s borrowing needs, but without the international demand that results from the dollar’s reserve currency status, the dollar would crash in value relative to other currencies as a result of excessive monetization by the Fed. The resulting loss of principal value would cause even more international holders of U.S. Treasury debt to panic and sell their holdings. Once again, a self-reinforcing vicious cycle would develop, with consequences for the United States so catastrophic that the 2008 event would pale in contrast.

Rambo to the Rescue?

Let’s not forget that the USA enjoys virtually unchallenged global military hegemony. China is working hard to build out its “blue water navy”, including strategic ballistic missile nuclear submarine capability. But the USA is still top dog on the global power stage, and if the USA was willing to use its nuclear weapons, it could easily defeat any country on earth, except perhaps China and Russia.

While the use of nuclear weapons in an offensive capacity might seem unthinkable today, the USA has yet to endure significant economic hardship. $15/gallon gasoline from the next Peak Cheap Oil price shock coupled with 15% treasury yields and a government operating in crisis mode just to hold off systemic financial collapse in the face of rampant inflation would change the mood considerably.

All the USA has to do in order to secure an unlimited supply of $50/bbl imported oil is to threaten to nuke any country refusing to sell oil to the U.S. for that price. Unthinkable today, but in times of national crisis, morals are often the first thing to be forgotten. We like to tell ourselves that we would never allow economic hardship to cause us to lose our morals. But just look at the YouTube videos of riots at Wal-Mart over nothing more than contention over a limited supply of boxer shorts marked down 20% for Black Friday. What we’ll do in a true crisis that threatens our very way of life is anyone’s guess.

If faced with the choice between a Soviet-style economic collapse and abusing its military power, the USA just might resort to tactics previously thought unimaginable. Exactly what those tactics might be and how it would play out are unknowable. The point is, this is a very complex problem, and a wide array of factors including military capability will play a role in determining the ultimate outcome.

I certainly don’t mean to predict such an apocalyptic outcome. All I’m really trying to say is that the military hegemony of the USA will almost certainly play into the equation. Even if there is no actual military conflict, the ability of the U.S. to defeat almost any opponent will play into the negotiations, if nothing else.

Conclusions

The current incarnation of the International Monetary System, in which the USA enjoys the exorbitant privilege of borrowing practically for free, and is therefore able to pursue reckless fiscal policy with immunity from the adverse consequences that non-reserve currency issuing nations would experience by doing so, cannot continue indefinitely. Therefore, it will not continue indefinitely. How and when it will end is hard to say, especially considering the fact that it’s already persisted for 42 years after it stopped making sense. The system will continue to operate until some catalyst or trigger event brings about catastrophic change.

The next Peak Cheap Oil price spike is not the only possible catalyst to bring about a U.S. bond and currency crisis, but it’s the most likely candidate I’m aware of. I don’t believe that U.S. energy independence is possible, but if it were, the end of oil imports from the Middle East would also be the catalyst to end exorbitant privilege and bring about a U.S.bond and currency crisis. To summarize, the music hasn’t stopped quite yet, but when it does, this will end very, very badly. I’m pretty sure we’re on the last song, but I don’t know how long it has left to play.

Further Reading

Erik Townsend is a hedge fund manager based in Hong Kong.


Top Visited
Switchboard
Latest
Past week
Past month

NEWS CONTENTS

Old News ;-)

[Sep 21, 2018] A Container Ship Is Sailing Through Russia's Arctic Passage for the First Time

Sep 21, 2018 | russia-insider.com

Another landmark for the "Northeastern passage" -- so far only tankers had made the trip Brendon Petersen 16 hours ago | 1,546 5 Explorers and navigators have long searched for a way to move ships through the Arctic Circle as find a faster way to move goods between the Atlantic and the Pacific without having to go around either Asia or South America. Groups of people hunted for the fabled Northwest passage through North America for decades. The problem, of course, is that the Arctic contains too much ice.

Over the past few years, however, ice levels in the Arctic have been hitting record lows thanks to climate change, and while its effects are almost universally negative, one benefit is opened northern sea routes. Over the past month, a container ship sailing from Eastern Russia is pioneering a new Arctic route by being the first such ship to cross the Arctic Ocean .

On August 23, the container ship Venta Maersk left the Russian port of Vladivostok and headed to Bremerhaven in Germany. Normally, a trip like that would take the Venta Maersk through the Suez Canal on a 34 day trip. Instead, the ship will sail through the sea north of Russia on a route that will only take 23 days.

Last week, the Venta Maersk passed through the Sannikov Strait, the narrowest and most hazardous part of its journey, and is expected to arrive in Germany by the end of the week. Once it arrives, it will become the first container ship to complete a successful route through the Arctic Circle.

[Sep 21, 2018] Trump blames OPEC for high oil prices, but his polices drive them up analyst to RT -- RT US News

Notable quotes:
"... "pushing for higher and higher oil prices" ..."
"... "they stop it," ..."
"... "protecting those countries." ..."
"... "The US economy is overstimulated by the Trump $4 trillion tax cuts for investors and businesses," ..."
"... "When Trump accuses Iran publicly, it gives the global oil speculators a reason to drive up the price," ..."
"... "He is whipping up his domestic base," ..."
"... "Trump [is] trying to blame foreigners of all kinds for economic situation in the US." ..."
"... "another factual misrepresentation," ..."
"... Like this story? Share it with a friend! ..."
Sep 21, 2018 | www.rt.com

Trump blames OPEC for high oil prices, but his polices drive them up – analyst to RT Published time: 21 Sep, 2018 21:03 Edited time: 21 Sep, 2018 21:28 Get short URL Trump blames OPEC for high oil prices, but his polices drive them up – analyst to RT FILE PHOTO. © Lucy Nicholson / Reuters The tax and trade policies of Donald Trump are, in fact, what have contributed to the surge in oil prices, a US economics professor told RT, adding that the US President's tough words to OPEC are a political stunt. On Thursday, Trump accused OPEC's Middle East producers of "pushing for higher and higher oil prices" and demanded "they stop it," adding that the US is "protecting those countries." Oil prices showed a mixed reaction to Trump's words. The Brent benchmark fell 43 cents to $78.97 per barrel, while the US Texas Intermediate grew by 9 cents to $71.21.

We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!

-- Donald J. Trump (@realDonaldTrump) September 20, 2018

OPEC does, in fact, control oil supply to a significant extent but that does not necessarily mean that it is also in full control of the oil prices, Jack Rasmus, a professor of Political Economy at St. Mary's College of California, told RT, adding that the policies pursued by the US president himself play a much bigger role in what happens to oil and gasoline prices in the US.

Read more © Nick Oxford Trump demands OPEC lower oil prices, claims US 'protects' Middle East countries

"The US economy is overstimulated by the Trump $4 trillion tax cuts for investors and businesses," Rasmus explained, adding that the rising inflation is one of the primary factors contributing to the oil price surge. Apart from that, Trump's trade war with China and even with the US allies in the West also drives up the prices, as businesses also have to raise them to adapt to the tariffs that both the US and its trading partners have imposed recently.

Trump's sanctions war on Iran also does not make the situation any better. The US sanctions, which are aimed at bringing Iran's oil exports to "zero," led to a decrease in Iran's oil sales, thus cutting the supply and driving the prices up. As if it was not enough, Trump's rhetoric only adds fuel to the fire, according to Rasmus.

"When Trump accuses Iran publicly, it gives the global oil speculators a reason to drive up the price," he told RT, adding that it is the "global speculators that are driving the short-term oil prices." "There is a connection between the speculators and Trump policies. When he makes those statements, it certainly does contribute to the oil prices rise," the analyst explained.

This rhetoric was more about winning voters' support ahead of the November mid-term elections than about really remedying the situation in the oil market, Rasmus says. "He is whipping up his domestic base," the analyst said, adding that "Trump [is] trying to blame foreigners of all kinds for economic situation in the US."

#US will find it difficult to cut #Iran 's oil exports completely as the oil market is already tight - Tehran https://t.co/T1oiFmGvOq pic.twitter.com/uaJO0Qn8gt

-- RT (@RT_com) September 15, 2018

Trump got elected on a platform of economic nationalism in particular, Rasmus said, adding that the president now sticks to that narrative and blames foreigners –be they immigrants or some foreign competitors– for the US' woes. However, this is "another factual misrepresentation," the analyst said.

As oil prices remain high, prices for gasoline in the US are growing. The average cost of gasoline has risen 60 percent from $1.87 per gallon in February 2016 to over $3 in September.

Like this story? Share it with a friend!

[Sep 20, 2018] This scenario would leave the US with the main sources of 'low production cost' Middle East energy in its hands (i.e. Gulf, Iran and Iraqi oil and gas).

Sep 20, 2018 | www.moonofalabama.org

Peter AU 1 , Sep 19, 2018 9:05:12 PM | link

Alastair Crooke's latest at Strategic Culture.

https://www.strategic-culture.org/news/2018/09/18/two-major-middle-east-projects-afoot-gaining-mass-they-may-collide-before-long.html
....But a turnaround in Iraq also puts a spike into the balloon of President Trump's aspiration to reassert US energy dominance over the Mideast. Iran – it was hoped – would ultimately capitulate and fall to economic and political pressures, and as the Iranian domino capsized, it would take with it, crashing down into political acquiescence, the Iraqi domino.

This scenario would leave the US with the main sources of 'low production cost' Middle East energy in its hands (i.e. Gulf, Iran and Iraqi oil and gas). On the face of this week's events however, it looks more likely that these resources - or at least, the greater energy resources of Iran and Iraq - will end up in the Russian sphere (together with Syria's unexplored Levant Basin prospects). And this Russian 'heartland', energy-producing sphere, may, in the end, prove to be a more than substantive rival to US (newly emerged as 'the world's top oil producer') aspirations for restoring its Mideast energy dominance.....

The piece covers both Trump's plans for global energy dominance by taking full control of middle east oil and also the Trump Kushner moves against the Palestinians.

[Sep 19, 2018] So it seems in 2014, for a well run shale oil company, $93/b worked just fine

Sep 19, 2018 | peakoilbarrel.com

Dennis Coyne x Ignored says: 09/17/2018 at 8:27 am

Hi Mike,

Perhaps the Eagle Ford will never be profitable, it will depend on the price of oil and many other factors.

I guess I have a little more faith in the oil industry than you.

EOG has produced a fair amount of oil in the Eagle Ford and their net income in 2014 (when oil prices were high) was $2.9 billion, about 178 kb/d of C+C was produced from Eagle Ford in 2014 (about 65 million barrels) by EOG (about 62% of total 2014 EOG C+C output). The average price for C+C in the US received by EOG was about $93/b in 2014.

So it seems in 2014, for a well run oil company, $93/b worked just fine. Over the period from 2010 to 2014 EOG's net income was about $6 billion. From 2010 to 2017, the total net income was about $2.6 billion (not adjusted for inflation) as 2015 and 2016 were bad years with 5 billion losses in net income.

Debt to assets at the end of 2017 was about 21% with debt at $6.4 billion and assets at $29.8 billion. In 2017 Eagle Ford output was about 47% of EOG's C+C output, the average oil price EOG received in the US was $50.91/b in 2017, about $600 million of long term debt was paid off in 2017 with no new long term debt issued, but net cash flow was negative $766 million.

A discounted cash flow at a 10% annual discount rate results in a breakeven oil price (10% annual ROI) of $90.3/b for the average 2016 Eagle Ford well, if we assume a well cost of 9 million. Note that this is a "real" discount rate as I do costs in real inflation adjusted dollars, so it is equivalent to a nominal discount rate of 12.5% so would be equivalent to a nominal annual ROI of 12.5%.

EUR is 238 kb over 13.8 years and the well is shut in at 10 b/d. An assumption of 15 b/d shut in reduces EUR to 220 kb and well life to 9.75 years, and breakeven oil price rises to $91/b, an increase of 70 cents per barrel. Well payout is in 46 months at $91/b.

What is the full cost of the average Eagle Ford well?

Dennis Coyne x Ignored says: 09/17/2018 at 3:23 pm
Note that I have assumed zero revenue from natural gas or NGL in my breakeven analysis and am considering C+C output only, not sure if there are natural gas pipeline bottlenecks in the EFS as there seems to be in the Permian basin. In any case, the economics might be slightly better when natural gas is included.
Dennis Coyne x Ignored says: 09/18/2018 at 7:07 am
Shallow Sand,

There wasn't significant drilling in the Eagle Ford Shale until 2011. How many of the 700 inactive wells started producing in 2009 and 2010? By Enno Peters data using Eagle Ford and unknown wells in Karnes County from Jan 2011 to Dec 2016, I get 2487 horizontal wells completed in total over that period. Note that the productivity rate distribution at Enno's site gives some funky numbers at the low end, so they should probably be ignored. "Zero" output after 24 months should probably be less than 15 b/d after 24 months. For Eagle Ford 2014 wells, supposedly there are 1747 wells with zero production rate after 24 months out of 3962 total wells, this is just a programming error. That is, zero does not mean zero in this case, would be my guess.

Dennis Coyne x Ignored says: 09/18/2018 at 1:29 pm
I checked with Enno Peters on this and the lowest column means output at 24 months is 0 to 50 b/d, same is true for each column it is from the previous to the next label so 0-50, 50-100, etc.
Dennis Coyne x Ignored says: 09/18/2018 at 1:50 pm
Shallow sand,

You said:

Could over 20% of the horizontal wells in Karnes Co., TX already be shut in for over one year? These wells first produced 1/1/2019 to 12/31/2016, so they are not old wells at all? Less than 10 year economic life?

No the wells have not been shut in as you think, for 2009 to 2016 wells in Karnes county and Eagle Ford Formation I get 763 wells with "zero" production rate at Enno's site. He has pointed out that this is really 0 to 50 bopd for those 763 wells out of a total of 2425 wells producing that started production from 2009 to 2016. The average production rate was 86 bopd for all of the Karnes county Eagle Ford formation wells.

For all counties there were 15,600 wells with 7754 wells with output at 0 to 50 bopd at 24 months. Average for all counties is 63 bopd at 24 months. At 12 months the average rate was 127 bopd for all counties with about 25% of the wells at 0 to 50 bopd at 12 months.

[Sep 19, 2018] I think there are considerable shut ins that will eventually reduce the magnificent increases that are currently being reported

Sep 19, 2018 | peakoilbarrel.com

Guym says: 09/14/2018 at 7:22 am

https://mobile.reuters.com/article/amp/idUSL1N1TM1VJ

Older article, but more important, now. EIA, and most of the Rystad type companies are continuing to report significant increases in the Permian. Latest monthlies are from June, all else is estimated, including drilling info. Completions are happening, and the new wells included in drilling info are, no doubt, true as to production. Who measures shut ins until final numbers are accumulated? Who spends significant time communicating with the small producer? Heck, they make up half the wells drilled in the Permian. I think there are considerable shut ins that will eventually reduce the magnificent increases that are currently being reported.

shallow sand x Ignored says: 09/14/2018 at 3:25 pm
Guym

You seem to be pretty in tune with the EFS.

I ran a quick search on horizontal wells in Karnes Co., TX.

I found 2,778 active horizontal wells with first production from 1/1/2009 to 12/31/2016,

In the most recent month, here are the numbers:

170 wells produced 3,001+ BO
1,034 wells produced 1,001-3,000 BO
872 wells produced 501-1,000 BO
702 wells produced 1-500 BO

Could that be correct?

Furthermore, there appear to be over 700 inactive wells, which are defined as wells that have no recorded oil or gas production in the last 12 months.

Could over 20% of the horizontal wells in Karnes Co., TX already be shut in for over one year? These wells first produced 1/1/2019 to 12/31/2016, so they are not old wells at all? Less than 10 year economic life?

I know Mike has commented on how bad the EFS really is economically. It seems the hyper focus is now on the PB. However, EFS produces significant volumes of oil. Looks like this one could really collapse once the last locations are completed.

I saw many, many wells with cumulative production of 250K oil, that are now producing under 500 BO per month.

I ran the same search on De Witt Co., TX. Less wells, but similar results. Interesting to see all the wells in both counties that have maybe paid out, but are now producing less than 500 BO per month.

GuyM x Ignored says: 09/14/2018 at 4:22 pm
Even Karnes County has it's less than tier one oil areas, and a lot of the wells were not up to par in the beginning. The well has to pay out capex in the first year, or its not worth drilling. Profit in year two and three, and not much after that. Period. End of story. I don't see much better out of the Permian, and may be getting worse. Yes, on the whole, less than a ten year economic life. Gets a lot worse in tier two stuff, and tier three stuff is, at these prices, a definite loss. But they are still drilling in tier three areas, go figure. My lease area is producing around 250k to 300k total, and it is barely touched, because EOG wants 300k. Yeah, when the tier one areas play out, costs to maintain will be prohibitive. Increase? Just a dream.
Dennis coyne x Ignored says: 09/14/2018 at 7:40 pm
Efs works at higher prices for average well. Probably needs 85 per barrel for well to payout in 60 months, maybe 90 per barrel for 36 month payout.
Guym x Ignored says: 09/15/2018 at 8:47 am
Look at EOG's economics of which wells are "premium" locations. There are not many left, and EOG probably owns the lion's share. It has to produce 200k barrels the first year. They priced that at $40 oil price, but it makes no difference, because it doesn't change the number of locations that can generate 200k barrels. They are justifying production to a 5200 ft lateral. Some make significantly more, some less. I have that memorized, as my wells have proven from the 125k to 175k the first year. Probably, a 250k to 300k EUR. So, I have to wait. They will be venturing into my area sometime before their "premium" locations are depleted. Beginning of the year, that count was at 2300. About 10 years at their current drilling rate, and less if they pick up activity. These are developmental wells, the Permian is still largely exploratory.

As far as holdings go, EOG is the cream of the crop. So, you can't make averages based on one company. Most look far, far worse. Their financial info was shit before, as were all the rest. Setting a bar for where to drill, will, in all likelihood, make them much better. There are a large number of smaller companies who still complete wells in tier three acreage. It's amazing, they know what they will get. I see initial production at 500 barrels a day, or less, and I know that someone is losing money.

But a big overview gives:
http://www.rrc.state.tx.us/media/47629/wells-monitored-0818.pdf

From completions of close to 15k oil wells in 2017 and 2018.

http://www.rrc.state.tx.us/media/43382/ogdc1217.pdf

http://www.rrc.state.tx.us/media/47577/ogdc0818.pdf

Now, do the math. There is not 10 years, or in most cases even five years of economically recoverable oil from shale. A 60 month payback???? At the highest bracket, it includes wells with about 3000 barrels a month. And there are only about 10k of those. Less than 3 years of completions. And if you look at the total number of producing wells it is slightly less now than in 2014. So, what happened to them??! To make it clearer, the number of wells that has become inactive is pretty close to the number of wells that has been drilled in four years. Yeah, production is up, because the wells producing over 3000 a month is up. But applying a ten year, or even five year economic life to them is pretty stupid. But, I don't have to look at total numbers to get to that conclusion, I look at individual wells, or groups of wells in a lease. It's a lot steeper treadmill than the hoopla indicates. Here's the count from Dec 2014. Shale wells will probably not drop down into the last category, so just look at the first two to compare them to current. If they do drop into the last category, the production doesn't mean much to the cost of the well, or profitability. About four thousand more, and tens of thousands of new wells since then.
http://www.rrc.state.tx.us/media/26405/welldistribution1214.pdf

So, think about this when your looking at Eno's data, averages are deceiving. Whether they are tier one, two, or three makes a huge difference.

shallow sand x Ignored says: 09/15/2018 at 12:12 pm
What are the operators doing with all of these inactive wells?

Are they able to keep them shut in or do they have to produce or plug within a certain amount of time.

The financial liability for all of these wells is huge.

700 wells x $250K per well to P&A? In just Karnes Co.

Guym x Ignored says: 09/15/2018 at 1:19 pm
The links to the report show plugging activity. Substantial. In August EF had 120 oil completions, and 50 something oil wells plugged. Completions were higher in August. Dec 2017, oil wells completed and plugged were almost equal. That is not an exact description of EF horizontals, but that is the main thing going in these districts. $250 sounds low, I think.
shallow sand x Ignored says: 09/15/2018 at 7:08 pm
I was assuming $250K net of salvage.

I assume given all the activity in PB, a lot of those 640's, etc, might be traveling from EF to PB.

Maybe those guys P & A this stuff are making the real money?

Mike x Ignored says: 09/15/2018 at 6:25 am
Shallow, FTR, last thread: my current est. economic limits of 15-18 BOPD for LTO wells will be much higher for major integrated companies, yes. The everything is peachy 'assumption' is that smaller companies will buy those wells and carry on. I do not believe that. A 6-10% decline in total UR because of premature economic limits IS a big deal. It makes or breaks thousands of wells.

The liquids rich gas leg of DeWitt and Karnes Counties IMO will see <35% of its wells be 'significantly' profitable, for instance above 150 ROI. Your data you are showing is a big deal that seems to be going plum over peoples heads. Sorry. Time will show that the Eagle Ford was, is the biggest financial toilet of all three shale basins; the economics are indeed awful. I operate conventional production IN the EF trend and have interest in wells. Folks don't realize how many $10-12MM dollar wells were drilled from 2009-2013. Jeff Brown and I guessed eight years ago only 35-40% of shale oil wells in the EF will even pay back D&C&A costs. I think that is way too high now.

Whatever the definition of "works," means, Dennis, for the EF; newer well designs are leading to much higher IP180-360, but not higher UR. It does not look that way to me. Now new wells in the EF must carry the burden of the highest level of legacy debt in the LTO industry. To maintain and actually pay that debt back will take much higher oil prices than you think as the play is now pretty much exhausted. At current oil prices it takes 325-350K BO to pay new wells with longer laterals and much bigger frac's out.

The LTO industry is not in business so people can speculate about how much oil it is going to make, or the jobs it provides, or how much cheaper gasoline it can provide for consumers
https://www.oilystuffblog.com/single-post/2018/09/12/Cartoon-Of-the-Week ; its in business to MAKE money. 150 ROI's is not making sufficient money to be self sustainable and be able to kick the credit/debt addiction.

Longhorn is correct, Matador did indeed pay $95K an acre for PMNM acreage. I suggest we bow our heads and honor its shareholders with a moment of silence and a little prayer to the Goddess of Wolfcamp in order that she be merciful. Another bench Matador is touting to justify its "wisdom" is the (De) Cline shale interval. Phftttttt.

shallow sand x Ignored says: 09/15/2018 at 7:59 am
The irony is that the majors and large independents divested of many assets in the US lower 48 in the 1990s because they were perceived as high cost with little economic future.

However, folks like us are still producing that stuff profitably.

OTOH the same companies are now spending large sums on shale, which is economically inferior to what they divested 20-30 years ago.

Lightsout x Ignored says: 09/15/2018 at 1:29 pm
Since when did big oil ever have a plan?

[Sep 19, 2018] Shale boom was cash flow negative oil production boom

Sep 19, 2018 | peakoilbarrel.com

MudGod, 09/12/2018 at 11:52 am

I remember Matthew Simmons saying that when Saudi peaks, the world peaks.
Survivalist x Ignored says: 09/12/2018 at 2:21 pm
Mr.Simmons likely never considered the productive wonders of a cash flow negative oil boom aka USA LTO sarc/

I wonder how many more cash flow negative oil booms the world can endure, and how long USA LTO will last. While we're at it, I wonder how the pension funds invested in USA LTO are gonna do for their members once the rats under the floorboards get flushed out.

Buckle your chin strap. Within a few to several years we'll perhaps know better how this is gonna shake out. George Kaplan and Dennis Coyne had some future production charts in the comments of last post. By my rough eyeball and memory, I think George Kaplan had future production down to about 40 million barrels a day by 2050 (see link below). Dennis, ever the optimist ;), had us down to about 50 million barrels a day by 2050 (see Mr. Coynes comments in response to George). Either way, those alive in 2050 are gonna be living in a very different world!

http://peakoilbarrel.com/eias-latest-usa-world-oil-production-data/#comment-651548

Dennis Coyne x Ignored says: 09/12/2018 at 3:29 pm
Survivalist,

A lot depends on how much oil can be extracted. George Kaplan's scenario looks to be roughly a URR of 2400 Gb if the 2020 to 2063 trend continues in future years (it is roughly straight line decline over that period so I just extended the line to zero and estimated URR. It is more likely, in my view that URR will be about 3060 Gb (including 260 Gb of extra heavy and LTO oil), that's about midway between a pessimistic HL scenario(2600 GB) and optimistic USGS scenario (3000 Gb) for conventional oil.

Also higher rates of extraction could keep production a bit higher maybe 64 Mb/d in 2050, it will depend on the length of Great Depression 2 in 2030. Of course I think that might only last 4-5 years, being an optimist. 🙂

George Kaplan x Ignored says: 09/13/2018 at 1:10 am
I haven't worked it out but I'd guess the ultimate recovery is more than your estimate. First, as I said before, the XH production is based on long cycle projects, so it would have a fat tail extending beyond when most of the conventional oil is exhausted (there are a few reasons for that but one is that it needs upgraders and those are not built with excess capacity). Second, as I said twice before, Laherrere has about 180 Gb of "rest of the world" reserves that I didn't include as I don't know what they represent – if they are undiscovered oil then at current rates it will take about 40 years to find them, or if the recent trend for declining discoveries holds then forever.
And that is the last I am going to write – or read – on that Laherrere paper. It was just a comment on a blog, not an article in Nature or the Times or even a letter to either of those, or even a letter to the local free advertising paper. I wrote it most for my own interest, writing things out help clarify ideas, but I rarely do more than a cursory proofread. Most people who bothered to look at it would have read a couple of sentences and skimmed the rest, a very few might have got more out of it. It didn't change anything fundamental. If somebody was going to write another comment they wrote exactly what they were going to write anyway.
George Kaplan x Ignored says: 09/13/2018 at 1:11 am
Survivalist

It won't take to 2050 to see a different world. Just a small fall in supply has effects well out of proportion to the nominal cash value of the oil lost. Cheap flights would disappear, trade would plummet, GDPs shrink – the books have to balance one way or another (see recent paper on impact on trade, I think by Barclays, and works by Hall and Kummel). The biggest impact might be food prices, they could easily double and more short term, then the few billion who spend half their income on food suddenly have to spend it all. Turmoil would ensue and likely knock more oil supply off line. There was a paper about Sweden I think – from memory (don't quote me) a rapid fall by a quarter of the oil available leads to collapse and by a half to complete loss of civilization.

At the same time the declining cheap and efficient energy would hamper efforts to address the other big ticket, long term issues: rising population, evolutionary inevitable aspirations – "poor man wanna be rich, rich man wanna be king, and a king ain't satisfied till he rules everything" (of course); declining levels in some of the big aquifers (a few are getting to the point where the basic pump designs don't work, the replacements needed are much more expensive and much more energy intensive); declining soil loss (at current rate all the soil on sloped arable land will be gone in 50 years – that's a third – and most of the rest in another 50); and of course climate change related extreme weather. This year we've had record heat waves, wild fires, typhoons and (soon) hurricanes plus droughts etc. Soon those will be weekly events (we're not far off now) but on top of that we will be having two or three extreme extreme-weather events per year. More and more of the oil will be going simply to triage on these (but the patient will get worse anyway). At some point countries will cease to be liberal democracies, the USA seems to be leading the way there, and say what you like about liberal democracies they have never declared war on each other, dictatorships on the other hand

People will say oh we just need to do this, that or the other – but there is no "just" about any of it, and especially as oil disappears: ignoring the externalities there is absolutely no better real energy source imaginable by some way, especially the cheap stuff we used to have.

You of course know all this and are preparing much better than me, I do not much more than appease my conscience by not flying and hardly ever riding in a car, but I think I'm getting to the "acceptance" stage and pretty much missed out on depression (no physical symptoms anyway).
[end of rant].

Lightsout x Ignored says: 09/13/2018 at 1:18 pm
If I remember correctly someone once asked Matt Simmons how best to prepare for peak oil. His response was "be over 50".
Hickory x Ignored says: 09/13/2018 at 3:38 pm
And that was , what, about 15 yrs ago? So make it 65 now.
Survivalist x Ignored says: 09/13/2018 at 5:56 pm
I tend to agree with you George. Only a small decrease a short time after peak, and the realization that it's not going back up, will likely open a lot of people's eyes to the fact that almost every stock and equity is overvalued (come to understand that anticipated future growth will not be realized). I plan to hunker down and catch up on my reading while the dust settles, and I'm thinking there'll be a lot of dust. I'll send you a map. Password is 'I think I'm with the band'.

I find this to be also an interesting take on the future of oil

Fracking (Tight Oil) delays Peak Oil by some years
https://aleklett.wordpress.com/2017/04/16/fracking-tight-oil-forskjuter-peak-oil-med-nagra-ar/

[Sep 19, 2018] There is no spare capacity from Iran

Sep 19, 2018 | peakoilbarrel.com

Guym x Ignored says: 09/14/2018 at 7:44 pm

https://oilprice.com/Energy/Energy-General/Iran-There-Is-No-Spare-Oil-Capacity.html

There is no spare capacity from Iran.

Boomer II x Ignored says: 09/14/2018 at 8:07 pm
So what does Trump do before the midterms? Live with higher prices? Quietly drop the sanctions ? Find a way to get Iranian oil on the market while pretending there are sanctions? Accept the high prices and blame Obama?
Hightrekker x Ignored says: 09/14/2018 at 9:03 pm
Well, he is not the brightest porch light on the block -- -
Survivalist x Ignored says: 09/14/2018 at 11:04 pm
I had read a couple months ago that Trump was nattering about tapping the SPR around the time of the mid terms.
Guym x Ignored says: 09/15/2018 at 4:49 pm
Oil price can rise some, now. It's only a month and a half to go. Gasoline stocks are high, so it will take some trickle down time. Raiding the SPR is overkill.
Dennis coyne x Ignored says: 09/15/2018 at 8:39 am
Boomer,

Trump will blame Saudis for not increasing output, Saudis will then raise output in Sept to tamp prices down before midterms.

Ron Patterson x Ignored says: 09/15/2018 at 9:30 am
I'm betting they don't. Saudi production in September is more likely to be down than up. But if it is up it will only by a tiny amount, not near enough to affect prices. Saudi Arabis is just not interested in increasing production by any significant amount. They would like to keep production steady .if possible.
Dennis coyne x Ignored says: 09/16/2018 at 1:00 pm
Ron,

You may be right, but Trump may try to get Saudis to raise output and he may slow down aggressive action on Iranian sanctions until after midterms.

Hightrekker x Ignored says: 09/16/2018 at 1:25 pm
Seems Iran always has the trump cards.
Now if they could just get rid of religious oppression, and have a better functioning government–
Ron Patterson x Ignored says: 09/16/2018 at 2:19 pm
Trump already tried that. Here is his tweet.

Trump asks Saudi Arabia to increase oil production

"Just spoke to King Salman of Saudi Arabia and explained to him that, because of the turmoil & disfunction in Iran and Venezuela, I am asking that Saudi Arabia increase oil production, maybe up to 2,000,000 barrels, to make up the difference Prices to high! He has agreed!" the tweet read.

And of course, after the King hung up the phone he probably said: "We are not going to do any of that shit." The Saudis, just like Trump's staff, know he is an idiot.

TechGuy x Ignored says: 09/18/2018 at 1:54 am
"And of course, after the King hung up the phone he probably said: "We are not going to do any of that shit."

I doubt that happened but I don't have any inside contacts in the WH to confirm. My guess is that Trump has turned up the heat on Iran because of requests from KSA & Israel.

The USA has been helping MbS with is Yemen war, as well as proxy war in Syria. If KSA want the US to economically crush Iran, than KSA will need to help but increasing its Oil exports. Perhaps KSA as some oil stashed in storage that it could release for a short period. My guess KSA would delay using its storage reserves until there is a price spike that might force the US to back off on Iran.

Ron Patterson x Ignored says: 09/18/2018 at 3:54 am
I doubt that happened but I don't have any inside contacts in the WH to confirm.

You doubt what happened? The quote was a tweet directly from the President. He sent it out to the world, you don't need an inside contact to the White House. Trump's tweets go out to the public.

Yes, it did happen. Of course, the part about what the King did afterward was just speculation on my part. But he did not increase oil production as Trump requested. That much we do know.

TechGuy x Ignored says: 09/18/2018 at 2:54 pm
Hi Ron,

Not arguing the tweet Trumpet made, but your reasoning that the MbS will ignore the request.

I am reasonably sure MbS wants the USA to go after Iran, and thus has a motive to try to comply with Trumpet's request for more Oil. That said, I very much doubt KSA can increase production, but they may have 50 to 150 mmbl in storage they could release if Oil prices spike.

FYI:
"Why The U.S. Is Suddenly Buying A Lot More Saudi Oil"

https://oilprice.com/Energy/Crude-Oil/Why-The-US-Is-Suddenly-Buying-A-Lot-More-Saudi-Oil.html

" the Saudis are responding to the demands of their staunch ally U.S. President Donald Trump, who has repeatedly slammed OPEC for the high gasoline prices, urging the cartel in early July to "REDUCE PRICING NOW!""

"Saudi Arabia Boosts Oil Supply To Asia As Iran Sanctions Return"
https://oilprice.com/Energy/Crude-Oil/Saudi-Arabia-Boosts-Oil-Supply-To-Asia-As-Iran-Sanctions-Return.html

"Saudi Arabia cut last week its official selling price (OSP) for its flagship Arab Light grade for October to Asia by US$0.10 a barrel to US$1.10 a barrel premium to the Dubai/Oman average"

So it appears that KSA is trying to comply with Trumpet's request. At least by trying to lower the oil prices via selling their oil at a discount.

** Note: Not trying to be a PITA, just providing an alternative viewpoint. I do value what you post. Hope you understand.

[Sep 19, 2018] A very slow decline of world supply will hit those who can't pay for it most and maybe wake up enough through higher prices to begin planning for what will be the greatest energy transition that must take place!

Sep 19, 2018 | peakoilbarrel.com

Captjohn x Ignored says: 09/12/2018 at 1:50 pm

Here is someone that does have a clue – CEO of Schlumberger:

http://www.northamericanshalemagazine.com/articles/2497/schlumberger-ceo-can-u-s-shale-meet-future-global-oil-demand

"The short-term investment focus adopted since 2014 offers a finite set of opportunities over a limited period of time, and this period is now clearly coming to an end as seen by accelerating decline rates in many countries around the world," Kibsgaard pointed out.

BAU won't get it done – no quick fixes, 'new shale revolution' or 'reserve production' to get us through – my interest is mostly how we (as a society and culture) will react as constraints on the resource 'haves' and 'have nots' set in.

Went through Irma in South Florida last Fall – and in general order was maintained – but really only out of Gas for about 3 days – and was more of a shock type shortage. A very slow decline of world supply will hit those who can't pay for it most – and maybe wake up enough through higher prices to begin planning for what will be the greatest energy transition that must take place!

George Kaplan x Ignored says: 09/14/2018 at 2:52 am
The big oil companies are selling a story of long term stability to their investors, partly so they can justify the long term investments needed for the mega-projects where they get most of their oil and cashflow (some of those see no net return for many years). They only need to sell themselves to their investors, not their customers who just buy the cheapest or most convenient, be it crude to refineries or petrol to motorists.

The service companies live more year to year – they get hired to help develop and drill a field and then their workload drops a lot except for some well servicing during operation. Schlumberger is selling itself to its customers (the 'operators' who are the E&P companies) and investors as the go to guy for the next couple of years as activity tries to pick up but faces increasing issues as the easy (and now not so easy but still OK-ish) oil goes away.

Mike Sutherland x Ignored says: 09/14/2018 at 10:22 am
Schlumberger is not a typical service provider to the producers, although that is a large portion of their business. Since their purchase of Cameron International and other oilfield manufacturing companies, they have been providing facility engineering and fabrication services to the oil producers worldwide.

In point of fact, Schlumberger does have the information that the producers have, and then some. They use those numbers as a basis for facility engineering, and as such are arguably in a better position to interpret them than the producer as of late.

I've regularly read the BP annual report, and have come to regard it as little more than a curiosity. Schlumberger, Shell and Total have a firmer grip on the world oil situation, based on my read of their CEO's comments. However that may be confirmation bias on my part. We shall see .

[Sep 19, 2018] My estimate is we are at 90% depletion for existing technology

Sep 19, 2018 | peakoilbarrel.com

conacher says: 09/14/2018 at 10:42 am

Probably the more important item is Russian reserves my estimate is we are at 90% depletion for existing technology and OIP at cost for western Russian reserves. At this point a squeeze plan in Syria would ensure foreign reserve earnings to into wars and not fuels outcome is standard wars as a result of miss spending income
kolbeinh x Ignored says: 09/14/2018 at 2:00 pm
Yes, I assume they have some problems since they reformed the tax system in favor of upstream risky projects and at the same time imposed more taxes on downstream refineries. But to assume Russia has problems is like assuming the whole world has a problem. Could be perfectly right, but why expose Russia as opposed to others? Russia has a lot of higher cost oil; just look at the land mass and offshore mass. How could there not be prospects? Some inside knowledge is sorely lacking, since I like most western people don't have connections in that part of the world.
conacher x Ignored says: 09/14/2018 at 1:38 pm
https://medium.com/insurge-intelligence/brace-for-the-financial-crash-of-2018-b2f81f85686b

only way to 'pull off above' is both Russia western province and gehwar at "90%" OIP gone.

Ron Patterson x Ignored says: 09/14/2018 at 2:49 pm
Thanks for the link Conacher. Folks this article makes a prediction that needs to be read.

Brace for the oil, food and financial crash of 2018

80% of the world's oil has peaked, and the resulting oil crunch will flatten the economy.

New scientific research suggests that the world faces an imminent oil crunch, which will trigger another financial crisis.

A report by HSBC shows that contrary to the commonplace narrative in the industry, even amidst the glut of unconventional oil and gas, the vast bulk of the world's oil production has already peaked and is now in decline; while European government scientists show that the value of energy produced by oil has declined by half within just the first 15 years of the 21st century.

The upshot? Welcome to a new age of permanent economic recession driven by ongoing dependence on dirty, expensive, difficult oil unless we choose a fundamentally different path.

Then they say: The HSBC report you need to read, now

Global Oil Supply, Will Mature Field Declines Drive Next Supply Crunch?

This thing came out two years ago. Why did I not hear about it before? Has this been posted here and talked about already?

conacher x Ignored says: 09/14/2018 at 2:56 pm
Real issue is giants, your article in 2015 real issue is 90% ..real issue is squeeze play in motion in Syria..goal? if don't have it, don't drill it at home, no rig increases so 'end game' is cut off Isreali/Saudi friendly arab gas to Europe own Caspian area (city I recall owned by Ukraine under British treaty Yelsin) in end no WW2 buildup during economic issues (Russia 5M/day, Saudi similar) no Hilter, just preempt what's left..
Carlos Diaz x Ignored says: 09/14/2018 at 5:08 pm

"This thing came out two years ago. Why did I not hear about it before? Has this been posted here and talked about already?"

Yes, it was. Here:

http://peakoilbarrel.com/open-thread-petroleum-jan-8-2017/#comment-591795

Here:

http://peakoilbarrel.com/opec-december-production-data/#comment-593747

And here:

http://peakoilbarrel.com/texas-update-january2017/#comment-594346

I downloaded it then, and just had to look at the date the file was created. You probably also have it in your hard-drive.

It provided a nice confirmation to my thesis that Peak Oil won't happen in the future. It is taking place now, and the date we entered the Peak Oil plateau was 2015. You also forecasted that, as I did.

Ron Patterson x Ignored says: 09/14/2018 at 8:14 pm
You are correct. Hey, I am 80 years old and I just can't remember shit anymore.

Okay, I posted a few days ago that I thought peak oil would be in 2019. Perhaps I was wrong. Hell, I have been wrong quite a few times. But now perhaps peak oil is right now.

Perhaps? We shall see.

But my point is everyone seems to be agreeing with me now. Old giant fields are seeing an ever increase in decline rates. I predicted this a long time ago. Once the water hits those horizontal laterals at the very top of the reservoir, the game is over.

The decline rate in those old giant fields is increasing at an alarming rate. Obviously! Fucking obviously. It could not possibly be otherwise. Thank you and goodnight.

Carlos Diaz x Ignored says: 09/15/2018 at 4:31 am
Memory is less necessary these days with internet, computers, and smart phones, where searches can be run in a moment. Don't worry too much about that.

"But my point is everyone seems to be agreeing with me now."

I discovered your blog in 2014 when looking for confirmation on my suspicion that the oil price crash was going to result in Peak Oil. I was impressed to see that you were there years before through your analyses. I have a lot of respect for you and your intellectual capacity, and I agree with you in many things, besides Peak Oil, including the population problem, and your worries about the environment.

I don't believe the world cannot increase its oil production, I just believe it won't do it. Both Saudi Arabia and Russia have the capacity to go full throttle on what they have left. Shaybah is the most recent supergiant in KSA and expected to produce until 2060 at current output. No doubt they could increase production from Shaybah by a lot, but it is not in their interest to do so. Russia lacks the capacity to quickly increase its production, but there's still plenty of oil in Eastern Siberia, so they could also produce more. Again it is also unlikely, as it would require an investment and effort that goes against their own interest.

Peak Oil is not happening because the world is trying to produce more oil and failing, it is happening by a combination of economical, geological, and political factors that could not be easily predicted and that were set in motion in the early 2000's when the low-hanging fruit of conventional on-shore and off-shore crude oil (the cheapest kind to produce) reached its production limit. Political errors, like taking out Gaddafi, added unnecessary difficulties. The collapse of Venezuela is the latest political cause. And when things start to go wrong, it never rains, but it pours.

Michael B x Ignored says: 09/15/2018 at 5:01 am
"Peak Oil is not happening because the world is trying to produce more oil and failing, it is happening by a combination of economical, geological, and political factors that could not be easily predicted and that were set in motion in the early 2000's when the low-hanging fruit of conventional on-shore and off-shore crude oil (the cheapest kind to produce) reached its production limit."

Isn't this just a distinction without a difference? It's peak oil.

Carlos Diaz x Ignored says: 09/15/2018 at 5:35 am
The issue is that Peak Oil has been misunderstood by most people. The argument that Peak Oil won't happen until this or that date because ultimate reserves are such or such, so often read in this forum, is incorrect. Even economically recoverable reserves are not decisive. To make the problem intractable there are many liquids so some might peak while others don't so discussions about Peak Oil are endless.

But it is very simple. Peak Oil is when the world no longer gets the oil it needs to keep expanding its economy. And the best way to measure it is through C+C, because crude oil is what we have been getting since the late 19th C ans is the stuff that produces everything our economy needs, from asphalt to diesel, plane fuel, and gasoline. NGL won't cut it. Biofuels won't cut it.

And Peak Oil is being determined by economical and political factors, besides the geology.

The difference matters because Peak Oil is going to get almost everybody by surprise. Most won't realize what is the cause of all the troubles we are going to get and they'll be reassured that there is plenty of oil to be extracted, which is true but irrelevant.

Michael B x Ignored says: 09/15/2018 at 6:27 am
Thanks for the reply. I also tremble at the prospect of what is to happen because of the failure of the predictions last decade. I can only describe it through an analogy (being a lay reader and a writer):

In the 2000s, people were saying that we had an ugly wound and that we had better do something about it. But instead of properly addressing the wound, we just wrapped it in gauze, and when the blood stopped showing through, we said, "See? All better." That's my analogy for the "shale revolution" -- it was essentially a Bandaid. The complacency has only worsened in the last ten years.

This has just made the infection all the worse. When pus starts showing through the dressing and we unwrap it this time -- we're going to find gangrene.

Carlos Diaz x Ignored says: 09/15/2018 at 7:39 am
Michael,

I am re-reading Joseph Tainter's 1998 book "The collapse of complex societies." It is a sober reading that shows that in the end the laws of entropy and diminishing returns always produce the same result. We are not more intelligent than the people that preceded us. If anything we can only be stupider on average. We just have a very high opinion of ourselves.

Time for a wake up and a little bit more darwinism in our lives. The problem is the pain. With so many people it is just going to be unbearable. On a scale never imagined, not even by writers of bad sci-fi.

Guym x Ignored says: 09/16/2018 at 9:20 am
That would be a more important definition of peak oil to me, and I think we are definitely there. Then we have the absolute production definition, which was the original definition, as to production. It is now anticlimactic to your definition. As to the date or year it happens, who cares? More importantly, now, is when demand will lower enough to stop draining inventories. At what oil price will that start occurring? How fast will alternate sources replace unmet demand? New directions and everyone is likely to be wrong on estimates. EIA and IEA were totally useless before, and that will probably not change in the near future. Looking in the past won't give us much, and the future is anybody's guess.

As to current prices, $68 oil won't get any extra interest from E&Ps outside of the Permian that is stalled. To any measurable extent. Close to $80 oil is not expanding interest very much outside of the US. We are just living on borrowed time.

Dennis Coyne x Ignored says: 09/17/2018 at 9:13 am
Guym,

Oil prices are likely to continue to rise, especially if your estimates of future production (roughly similar to my estimates, but perhaps a bit more pessimistic) are correct, unless consumption of oil stops increasing. My guess is that oil (C+C) consumption will continue to increase at 400 to 800 kb/d each year , until oil prices get to about $150/b or more (around 2025 to 2027),by that time or soon after ( maybe 2030) oil consumption growth may stop either because of the expansion of electric and natural gas powered transport or because of a second Great Financial Crisis. My hope is it will be the former, but I think the latter scenario is much more likely.

Hopefully Keynes' General Theory will make a comeback before then.

It is a dollar on Kindle

https://www.amazon.com/General-Theory-Employment-Interest-Illustrated-ebook/dp/B018055I7Q/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=&sr=

TechGuy x Ignored says: 09/18/2018 at 1:43 am
Ron Wrote:
"I predicted this a long time ago. Once the water hits those horizontal laterals at the very top of the reservoir, the game is over. "

FWIW: That's already happened. when it occurs, they drill a new horizontal above the old one. The new lateral also have valves on there ports. so that when the water breaches one or more of the ports, they shut them off to reduce water cut. I posted Saudi Aramco tech articles here back between 2014 and 2016 when they were available on the SA website.

Survivalist x Ignored says: 09/14/2018 at 11:32 pm
Hi Carlos, thanks for the trip down memory lane. I tend to agree with peak oil being now (ish). From what I recall the peak month for C+C was, so far, in November 2016. I suppose there is also a peak day, a peak weak, and a peak year. Folks seem to like packaging time in various proportions. Hell, there's probably a peak decade and a peak hour. My guess is the peak year will be 2018. I like, because I'm a bit thick at maths, how Ron has added trailing 12 month average to his world production chart. I just look at the 12 month trailing average for each December to get an idea of how much was produced in each calendar year. It seems that 12 month trailing average for December 2018 will beat that of 2017. My guess is 2019 won't beat 2018. Or will any other year after that. So, if Ron say's 2019, and I say 2018, then it seems that I think he is wrong lol he's probably 100 times smarter than me so doesn't lose sleep over it lol. Up until this time I have always agreed with Ron on peak oil. But now, I throw down the gauntlet! 2018 vs 2019. Two will enter, one will leave.
Carlos Diaz x Ignored says: 09/15/2018 at 5:08 am
Hi Survivalist,

The exact week, month, or year when maximal production is reached has only historical interest. The point is that since the end of 2015 the 12-month averaged C+C production has barely increased (EIA data) despite the increase in demand.

Dec 2015 80,564 100.0%
Dec 2016 80,579 100.0%
Dec 2017 80,936 100.5%
Apr 2018 81,363 101.0%

We will have to see how it evolves over to the next December, but so far it is annualized to a 0.4% increase. To me we are in a bumpy plateau since late 2015 and all those meager gains and more will be lost in the next crisis. The problem will be evident to many when after the crisis we are not able to increase production above those values.

Peak Oil is a situation, not a date, and we are in that situation since late 2015. The oil that the world demands cannot be produced so prices are going up, and up. I suppose it is possible that the powers that be intervene to reduce global oil demand by favoring a crisis in developing countries, like Argentina, Brazil, Turkey, South Africa, through interest rate changes. Wait, it is already happening. It is a dangerous tactic, as crises can spread around, and the interest rise weakens the economy.

Dennis coyne x Ignored says: 09/15/2018 at 8:59 am
Carlos,

Well one has to define the plateau a bit better. If we make the bounds wide enough one could say the peak was 2005 or even 1980 and we have been on a bumpy plateau since that point.

Better in my view to define peak as peak in centered 12 month average output wth center between month 6 and 7.

Carlos Diaz x Ignored says: 09/15/2018 at 12:42 pm
Dennis,

I use a 13-month centered average, so it is symmetrical with 6 months at each side.

But really, after a clear period of production growth 2010-2014, there was a strong growth in production 2014-2015 in response to falling prices, and then production got stuck in late 2015.

It is not a question if we are in a plateau (or very reduced growth) period, but what happens afterwards. After the previous plateau 2005-2009 there was a clear fall 2009-2010, before tight oil saved the day.

Dennis Coyne x Ignored says: 09/17/2018 at 9:23 am
Carlos,

The recent plateau is due to excess inventory and the resulting low oil price level. Oil inventories have been reduced over the past 12 to 18 months and as oil prices increase, output will also increase with perhaps a 6 to 12 month lag. How much will it need to rise above the Dec 2015 level before you no longer consider that output has not risen above your "plateau". Give me a number, is it 81.5 Mb/d, 82 Mb/b, I prefer to use a year rather than 13 months, that's 182 days on either side of the middle of the 12 month period. On leap years we can use Midnight of day 183 🙂

Dennis coyne x Ignored says: 09/14/2018 at 8:11 pm
One issue that has been corrected is that reserve requirements for large banks have increased.

Also lenders are more careful with their mortgages making a housing bubble less likely.

In addition, the assumption that higher oil prices played a major role in the GFC is incorrect.

Perhaps there is a looming recession, whether this happens in 2018, 2030 or some other year we will only know when it occurs.
Someone who predicts a recession every year will be right eventually.

I maintain my guess of 2023 to 2027 for the 12 month centered average c+c peak and severe recession GFC2 starting 2029 to 2033, lasting 5 to 7 years.

[Sep 19, 2018] One would think that the optimal strategy for a country that has oil is to ally itself with a military power that can deter invasion by some other military power, without having the ally's troops actually present on the territory

Sep 19, 2018 | peakoilbarrel.com

Watcher

x Ignored says: 09/13/2018 at 2:27 am
So people think that oil production next year will not meet demand. Of course consumption will equal production, but demand will be higher, and we won't be belabor this further because the point here is a question above -- how does society react too insufficient oil?

The question is never analyzed in a particular way. It's usually evaluated from the consumer's perspective. Who does what to get the oil they need. We can imagine they bid higher, we can imagine that day seize the oil enroute to someone else, and we can imagine a magical agreement on the part of everyone to stop all economic activity not involved in food production/distribution to reduce global consumption.

What seldom is described is the decision making process within the leadership of oil producers and exporters. It seems clear that a sudden awareness of insufficiency would yield leadership meetings making decisions not about how to distribute more oil to customers, but rather how to keep the oil for future generations of the producing country, without getting invaded and destroyed.

One would think that the optimal strategy for a country that has oil is to ally itself with a military power that can deter invasion by some other military power, without having the ally's troops actually present on the territory. Or perhaps more effective would be investing in the necessary explosives or nuclear material for one's own oil fields, and inform potential invaders that the oil will remain the property of the country whose geography covers it, or the fields will be contaminated for hundreds of years to deny them to anyone else.

Clearly this is the optimal path for an oil producer and not seeking some technology that can allow them to drain the resources of future generations more rapidly now.

Ron Patterson x Ignored says: 09/13/2018 at 6:13 am
So people think that oil production next year will not meet demand. Of course consumption will equal production, but demand will be higher,

Watcher, I assume you think demand is what people want. But there is no way to measure what people want but can't afford. So "demand" in that sense has no meaning whatsoever. So what happens is the price of gasoline, or whatever, rises or falls until supply equals demand. As prices rise, demand falls and as prices fall, demand rises because people can now afford it. Therefore demand always equals consumption. Demand is what people buy at the price they can afford. I wish we had a word for what people want but even if we did there would be no way to measure it. A poll perhaps? 😉

Carlos Diaz x Ignored says: 09/13/2018 at 6:35 am
Ron,

I answered that above
http://peakoilbarrel.com/opec-august-production-data-2/#comment-651890

Estimating demand is essential for a company and can determine its survival. Demand is dependent on price, so demand estimates are essential for deciding the price of a product. The curves for price and demand cross at a point that maximizes income.

Demand is estimated statistically (polls sometimes), with models, and expert forecast. It has a large uncertainty.

"there is no way to measure what people want but can't afford."

That is potential demand at a lower price point. It is estimated in the same way. Companies decide to lower their prices with hopes to realize that lower-price demand.

"demand always equals consumption."

Exactly. Demand becomes consumption when realized, so it only makes sense to talk about demand in the future or the present (due to lack of real-time data). It doesn't make sense to talk about past demand, because it becomes consumption or sales.

Watcher x Ignored says: 09/13/2018 at 12:26 pm
There is a numerical measure for how much people want gasoline, regardless of price.

It is the length of the line of cars at the gas station in the 1970s. Demand was measured in 100s of feet. Price somewhat doesn't matter. If you can't afford it, you put it on a credit card and then default.

Guym x Ignored says: 09/13/2018 at 2:20 pm
Put it on the credit card and not pay it. Because, it was de fault of the company to give it to you in the first place.
Survivalist x Ignored says: 09/13/2018 at 7:18 pm
The length of the queue is an interesting metric by which to measure the want that people have for an item. Nice one. I'm gonna use that. Reminds me of my Dad's old story about lining up for a week to buy tickets to see The Beatles.
Fred Magyar x Ignored says: 09/13/2018 at 9:30 pm
When you are lining up to buy tickets to see the Beatles it might be called a 'Want' or a 'Desire'. However, when it is the line at the soup kitchen it becomes 'Hunger' or 'Desperation'!
And that queue can sometimes feel like a hundred miles
Hightrekker x Ignored says: 09/13/2018 at 9:17 pm
I remember that -- -
It was eye opening.
TechGuy x Ignored says: 09/18/2018 at 12:58 am
The bigger issue is people, Business, & gov'ts servicing their debt. If the cost of energy increases, it make it more difficult to service their debt. Recall that Oil prices peaked at $147 right before the beginning of the 2008/2009 economic crisis. Since then 2008 Debt continued to soar as companies & gov'ts piled on more debt. Debt is promise on future production. Borrow now and pay it back over time.

I recall the presentation Steven Kopits did about 4 or 5 years ago that stated Oil production was well below demand. I think real global oil demand was projected to be about 120mmbd back in 2012-2013 (sorry don't recall the actual figures).

I think the bigger factor is how steep the declines will be. Presumably all of the super giants are in the same shape and likely heavily relied on horizontal drilling to offset natural decline rates. Presuming as the oil column shrinks in the decline rates will rapidly accelerate. Most of the Artic\Deep water projects were cancelled back in 2014\2015, and I believe most of those projects would take about 7 years to complete and need between Oil at $120 to $150/bbl (in 2012 dollars) to be economical. I am not sure the world can sustainably afford $120+ oil, especially considering the amount of new debt that has been added in the past 10 years.

Ron Wrote:
" I wish we had a word for what people want but even if we did there would be no way to measure it"

Perhaps the word "Gluttony" or the phase "Business As Usual". People don't like change, especially when the result, is a decrease in living standards.

Adam Ash x Ignored says: 09/14/2018 at 3:11 am
Being willing to pay more for oil may change who gets it. But it will not alter the fact that someone who wants oil will not get it. That will be a ripple of market information which will travel around the world pretty quick, I should imagine!
Dennis coyne x Ignored says: 09/14/2018 at 7:31 pm
There is always somebody who wants oil but cannot afford it.

This is unlikely to change in the next 30 to 40 years.

farmboy x Ignored says: 09/16/2018 at 10:52 am
The vast majority in almost all the places in the world would like to use more oil but their income is not enough so they end up doing with less. That includes me. Who doesn't want a bigger faster newer lawn mower, truck, or tractor? What person would not prefer the latest iphone etc. ? or going on vacation, eating out at high end steakhouses? The main reason they can't is because it would take more and cheaper oil for them to be able to afford it. Else they can only try to take it away from someone else? The peak in global oil production/person happened back in 1979, not because folks were tired of using it all but due to the laws of physics coming into play.
Adam Ash x Ignored says: 09/16/2018 at 11:05 pm
So there are two 'classes' of 'peak oil'. One class is where oil supply is constrained by price (throwing more money at production sees an increase in production), the second class is where oil supply is constrained by physical availability at any price (wave more money at production, but production cannot increase).

In the first case (price constrained) normal market behaviour will apply – folk pay more (if they can afford it) to get more.

But in the second case (resource constrained), it does not matter how much is offered, there is simply no more oil to be had.

With the prevailing declining yields and declining discoveries, are we not in the transition between these two states – moving from price constrained to resource constrained? And once we get well into resource constrained, the price a buyer can pay will determine who gets the remaining available oil, and no amount of screeching and dollar-bill-waving by those who have missed out will improve the supply situation for them.

Boomer II x Ignored says: 09/17/2018 at 12:43 am
The second case is my main interest. And I think we are already there. We wouldn't be looking at LTO and oil sands if there were cheaper options.

LTO decline rates should make the issue more obvious when there are fewer places to drill new wells.

Eulenspiegel x Ignored says: 09/17/2018 at 3:43 am
LTO decline rate would be no problem by a conventional / state possessed oil company.

They would have a field with tight oil, and then just equip let's say 20 fracking / drilling teams and start to produce through their field in 30 or 50 years. They would have a slow decline by starting at the best location and getting to the worse one, while increasing experience / technic during the years to compensate a bit.

Ron Patterson x Ignored says: 09/17/2018 at 6:23 am
You have a pretty good argument except for the "30 or 50 years" part. That's where the wheels fell off your go-cart. Just how large would the tight oil reservoir have to be to keep 20 drilling and fracking units for 30 to 50 years? And if you assume other oil companies are in that same reservoir doing the same thing? They are going to cover a lot of acreage very fast.
Dennis Coyne x Ignored says: 09/17/2018 at 9:35 pm
Adam Ash,

It matters very little. At any time t the available supply is limited and the market price will determine who gets what is available. Those willing to pay more than others will get the oil. When we reach a point where no more oil can be supplied at price P, there might always be some more oil that could be at some higher price P', it is simply a matter of oil prices reaching the point that there are substitutes that can replace the use of oil in some uses. Today the biggest use for oil is transport and electricity and natural gas may soon replace a lot of this use, especially as oil becomes scarce and prices increase.

At $100 to $120/b the transition to EVs could be quite rapid, maybe taking 20 to 25 years to replace 90% of new ICEV sales and then another 15 years for most of the fleet to be replaced as old cars are scrapped. So by 2055 most land transport uses for oil will be eliminated.

The higher oil prices rise, the more incentive there will be to switch to cheaper EVs, even natural gas will probably not be able to compete with EVs as Natural Gas will also peak (2030 to 2035) and prices will rise. It will probably be unwise to spend a lot of money for Natural gas fueling infrastructure, though perhaps it might work for long haul trucking, rail seems a more sensible option.

TechGuy x Ignored says: 09/18/2018 at 1:23 am
Adam Ash Wrote:
"So there are two 'classes' of 'peak oil'. One class is where oil supply is constrained by price (throwing more money at production sees an increase in production), the second class is where oil supply is constrained by physical availability at any price (wave more money at production, but production cannot increase)"

Consider this way:
There is already a huge shortage of $10/bbl oil, and a massive glut of $300/bbl oil. There is always shortage resources. Price is just a system that balances demand with supply.

Adam Ash Wrote:
"But in the second case (resource constrained), it does not matter how much is offered, there is simply no more oil to be had no amount of screeching and dollar-bill-waving by those who have missed out will improve the supply situation for them."

Not exactly. People that can only afford $50/bbl Oil get out priced by people willing to pay $100/bbl. Supply shifts to the people that can afford the hire price at the expense of people that cannot afford the higher cost. Higher prices will lead to new production, even if has a Negative EROEI (ie tar sands using cheap NatGas).

In an ideal world, higher prices lead to less energy waste (flying, recreation boating) and better efficiency (more energy efficient buildings & vehicles). But I am not sure that will be the case in our world.

The first to suffer from high energy prices will be the people living in poor nations. Recall back in 2008-2014 we had the Arab spring when people could afford the food costs, and started mass riots and overthrough gov'ts. This will return when Oil prices climb back up.

Its possible that the world make continue to experience price swings, as global demand struction decreases demand. For instance in July 2008 Oil was at $147/bbl but by Jan 2009 it was about $30/bbl. I doubt we will see such large price swings, but I also doubt that Oil will continuously move up without any price corrections.

Realistically we are in deflation driven global economy as the excessive debt applies deflationary force to the economy. However central banks counter deflation with artificially low interest rates and currency printing (ie Quantitive Easing). My guess is that industrialized nation gov't will become increasing dependent on QE and other gimmicks that lead to high inflation\stagnation.

[Sep 19, 2018] Deliberate exaggeraton of Saudi reserves

Sep 19, 2018 | peakoilbarrel.com

Ron Patterson

x Ignored says: 09/16/2018 at 9:35 am
I think Dennis said some time ago that Saudi's 266 billion barrels of reserves that they claim was perhaps when they raised P2 reserves to P1 reserves.

Naaaa, that's not where they got it. They still claim 403 billion barrels of P2 reserves and 802 billion barrels of P3 reserves. And that 802 billion barrels will soon be increased to 900 billion barrels via enhanced recovery techniques.

This is a good article if you need a good belly laugh today. It is brought to you on the opinion page of Arab News. Arab News is a Saudi Publication just in case anyone is wondering. I used to get it in hard copy, free, courtesy of ARAMCO, when I was there.

Does Saudi Arabia have enough oil?

Saudi Aramco, according to its own records, has about 802.2 billion barrels of oil resources, including about 261 billion barrels of proven reserves; 403.1 billion of probable, possible and contingent reserves. The company has produced up to 138 billion barrels of oil to date out of the 802.2 billion barrels.

It plans to raise oil resources to 900 billion barrels from the 802.2 billion over the long term as its also plans to increase recovery rate of reserves to 70 percent from the current 50 percent.

P.S. When I was in Saudi they had a word for this kind of thing. They called it wasta . Wasta means "deliberate exaggeration" as a way of dialogue. That's just the way they talk. They don't believe they are lying. They really expect you to know they are just exaggerating. They don't expect you to take it literally.

[Sep 19, 2018] This is so ridiculous it is funny. Oil discoveries have been going down, down, and down, way below replacement level. Yet so-called "proven" reserves keep going up, up and up.

Sep 19, 2018 | peakoilbarrel.com

George Kaplan

x Ignored says: 09/15/2018 at 6:14 am Some interesting figures from the OPEC annual statistical review earlier this year that I missed when it came out: https://asb.opec.org/index.php/interactive-charts

First crude only peaked in 2016, with 2017 below 2016 and 2015.

Reply


George Kaplan x Ignored says: 09/15/2018 at 6:15 am

Second oil reserves have been flat since around 2010, and declining recently for the first time since the 1970s. Note, before someone points it out, they don't count Canadian Bitumen.

Ron Patterson x Ignored says: 09/15/2018 at 9:23 am
This is so ridiculous it is funny. Oil discoveries have been going down, down, and down, way below replacement level. Yet so-called "proven" reserves keep going up, up and up.

Timthetiny x Ignored says: 09/17/2018 at 1:03 am
That's to be expected.
TechGuy x Ignored says: 09/18/2018 at 2:00 am
"This is so ridiculous it is funny. Oil discoveries have been going down, down, and down, way below replacement level. Yet so-called "proven" reserves keep going up, up and up."

Well to some degree, technology has been able to extract more oil from a field. Thus a field discovered in 1950 with an initial proven reserve of 100mbbls, may have 125mbbls or proven reserves as technology has improved recovery rates. That said technology improvements likely don't match the paper proven reserves.

Fernando Leanme x Ignored says: 09/15/2018 at 9:44 am
The Venezuelan heavy oil reserves are overstated (I assume the large bump prior to 2010 is the booking of the Magna Reserva in the Orinoco Oil belt, which i know are fake). It's fairly easy to eyeball the better number by substracting 300 billion a flat line around 1200. If you want to add future bookings in that heavy oil belt, add up to 50 billion gradually. Dont forget that at the current decline rate Venezuela will be producing about 1.1 million BOPD in december, and IF things go as I think they will sometime in the first half of 2019 exports will drop to zero for a few months.
George Kaplan x Ignored says: 09/15/2018 at 6:15 am
Third gas reserves also flat. If condensate and NGLs have been meeting the increased demand that crude has been unable to, then that might be about to stop.

[Sep 12, 2018] Trump Sanctions on Iran May Already Be Backfiring as Tehran's Oil Revenues Soar by Whitney Webb

Notable quotes:
"... Further oil price increases could trigger a slowdown in domestic or global economic growth, which could further complicate the U.S.' Iran policy and Trump's domestic political situation. ..."
Sep 12, 2018 | www.mintpressnews.com

Further oil price increases could trigger a slowdown in domestic or global economic growth, which could further complicate the U.S.' Iran policy and Trump's domestic political situation. September 12th, 2018

Despite the Trump administration's " maximum pressure " campaign targeting the Iranian economy, Iran's crude oil and oil product revenues jumped a surprising 60 percent from March 21 to July 23. In addition, figures provided by Iran's Central Bank show that Iran's revenues from oil sales soared by 84.2 percent over that same period, setting a new record.

The increased revenues seem to have resulted from a jump in oil prices this year as well as Iran's high oil export volume during part of that period. Notably, the increased revenues were reported despite the United States' announcement in May that it would sanction those purchasing Iranian oil starting in early November, with the ultimate goal of reducing Iranian oil sales to zero in order to place pressure on the Iranian government.

The U.S.' efforts have had some noticeable effects on Iranian oil exports, as the country's exports for the month of August were significantly lower than those of July. However, the drop has only seen exports fall to near March 2016 levels , when the U.S. was not pursuing a sanctions policy against Iran and the Iran nuclear deal, officially known as the Joint Comprehensive Plan of Action (JCPOA), was in effect.

Further dashing U.S. hopes of crushing Iranian oil exports have been recent announcements from Iran's top two customers, China and India , that they would continue to import Iranian crude despite the looming threat of U.S. sanctions. India, along with some other countries, has sought " waivers " from Washington that would allow them to continue to import Iranian oil and avoid retaliation from the U.S. for a certain period of time.

In addition, the European Union, which had previously joined the U.S. in targeting Iranian oil exports in 2012, has shown its unwillingness to follow Washington's lead this time around, openly vowing to rebel against the U.S. sanctions regimen and increasing the likelihood that Europe will continue to buy some Iranian oil despite U.S. threats.

Risks for U.S. and global economies

Another indication that efforts to curb Iranian oil exports are backfiring for the Trump administration is the jump in oil prices that has resulted from concerns about the U.S. sanctions on Iran's oil exports. The increase in oil prices is likely to be felt domestically in the U.S., the world's largest consumer of oil, potentially posing a political risk to Trump and his fellow Republicans ahead of the November 6 midterm elections. In addition, further oil price increases could trigger a slowdown in domestic or global economic growth, which could further complicate the U.S.' Iran policy and Trump's domestic political situation.

Such concerns have prompted U.S. Energy Secretary Rick Perry to meet his Saudi and Russian counterparts in an effort to convince those two countries to keep oil output high in order to offset a reduction in future Iranian oil exports. While Saudi Arabia has already stated it would increase output, Russia is unlikely to comply, given its relationship with Iran and Washington's threat to impose new sanctions on Moscow. The U.S., Saudi Arabia and Russia are currently the world's three largest oil producers, accounting for about a third of global crude oil output.

While the Trump administration may have assumed that U.S. oil producers – and the U.S. economy in general -- would benefit from the elimination of Iranian oil exports, the growing rejection of the impending U.S. sanctions by other countries shows that these nations are unwilling to pay for more expensive American oil or even Saudi oil, preferring less expensive Iranian oil despite potential future consequences. Furthermore, efforts to increase U.S. crude production have fallen short of government expectations, further complicating the U.S.' efforts to offset an increase in oil prices resulting from Iranian oil sanctions.

Whitney Webb is a staff writer for MintPress News and a contributor to Ben Swann's Truth in Media. Her work has appeared on Global Research, the Ron Paul Institute and 21st Century Wire, among others. She has also made radio and TV appearances on RT and Sputnik. She currently lives with her family in southern Chile.

[Sep 10, 2018] Only the zero-interest rates of the Fed's Quantitative Easing could have financed the fracking boom - without QE, US oil and gas would not even exist on the world's radar.

Notable quotes:
"... Fracking has indeed produced oil and gas, but the fields deplete rapidly without massive additional investment. Only the zero-interest rates of the Fed's Quantitative Easing could have financed the fracking boom - without QE, US oil and gas would not even exist on the world's radar. ..."
Sep 10, 2018 | www.moonofalabama.org

Grieved , Sep 9, 2018 11:27:48 PM | link

Money. Finance. Currency.

The Keiser Report has a very upbeat show today on RT, in which they celebrate how the NYT has finally come round to reporting the truth about US fracking, in ways that Max and Stacy were reporting 9 years ago.

Fracking has indeed produced oil and gas, but the fields deplete rapidly without massive additional investment. Only the zero-interest rates of the Fed's Quantitative Easing could have financed the fracking boom - without QE, US oil and gas would not even exist on the world's radar.

And yet Neocons are taking the US production of hydrocarbons as a major plank in their platform of war, building castles in the air from a mythical "energy supremacy" and treating current production levels as a weapon of war -- but the economics of this relatively minor industry will shut it down soon.

In the second half of the 30-minute show, Max interviews Wolf Richter and they discuss Argentina mostly. It's a rapid and valuable overview of how the US Hegemon deals with its favorite suckers south of the border, and how currencies and bonds work - and also why the IMF acts only to bail out investors and bond-holders, and never the real economy of the victim nation.

Fracking financial crisis lurking (Keiser E1277)

[Sep 09, 2018] Iraq protests threaten oil production and critical ports by Omar al-Jaffal and Safa Khalaf

Notable quotes:
"... Basra demonstrators, enraged over polluted water and years of extreme neglect, engage in arson to make their point ..."
Sep 09, 2018 | www.atimes.com

Basra demonstrators, enraged over polluted water and years of extreme neglect, engage in arson to make their point September 9, 2018 12:48 AM (UTC+8) Basra protesters set the Iranian consulate ablaze on Friday night, the latest manifestation of outrage against influential actors in Basra city, which should be one of the richest in the country with its massive oil reserves and port, but which has become one of the most decrepit.

More than 18,000 Basra residents have been poisoned by tap water since the start of the month, according to the Basra province health directorate. Hospitals, inundated with patients, have collapsed under the pressure.

Basra, like neighboring Iran, is majority Shiite. But in recent years, residents have grown hostile toward Tehran over its dominance of Iraqi affairs, its support for political parties notorious for public waste and its backing of armed factions that enforce themselves as morality police.

The torching of the Iranian consulate came just 24 hours after the protesters -- ignoring a government curfew -- set fire to the offices of powerful Shiite political parties and Iran-backed militias that formed the backbone of the paramilitary Popular Mobilization Units.

The demonstrators did not spare the local government headquarters and provincial council, setting those ablaze as well.

Basra has been roiled by unrest since July, and the latest round of revolt was met with tear gas and live fire. The first week of September saw nine demonstrators killed and 93 wounded, according to the UN.

The deadly force has only inflamed the movement. Over the past two nights, security evaporated from the streets while the military kept to the sidelines. Angry groups of youths roamed the city center, demanding revenge for those killed and for years of neglect. The city appears out of control.

The unrest has put a spotlight on corruption in Iraq's economic capital, just as the Ministry of Oil seeks foreign investment – including from China – to transform the country from an importer of oil products to an exporter.

Gulf port closed

Demonstrators on Thursday shut down the country's most important port, Umm Qasr.

Basra province is Iraq's only outlet to the sea, and Umm Qasr is just one of five commercial sea ports that serve as the country's main gateway for basic necessities.

The costly shutdown prompted the minister of transportation to call for restraint via local radio stations.

"Iraq is losing millions," Kadhim Finjan pleaded over the airwaves. The port was eventually reopened Saturday before dawn.

Like the oil fields, these critical hubs have drawn protesters, who see the wealth they create being siphoned off by corruption.

An officer with the port authority, who spoke to Asia Times on condition of anonymity, said it was "impossible" for security to control the port

The ports – strategically placed on the Persian Gulf – are shared between the political parties, a phenomenon that saps their revenues and allows goods to enter without passing through customs.

An officer with the port authority, who spoke to Asia Times on condition of anonymity, said it was "impossible" for security to control the port.

"The political parties treat the ports like their private property. Goods are exempted from controls and inspection, and the taxes are reduced for traders dealing with the ruling parties," he said.

Before the ports earned the ire of the demonstrations, it was the oil sector.

Basra's 15 oil fields account for nearly 60% of the country's oil reserves. Revenues from the province generate approximately $60 million daily, or 3.6 of Iraq's total 4.3 million barrels per day.

The government relies on the sector to finance its activities, but only a fraction of the national budget flows back to Basra.

The stark contrast between Basra's oil wealth and the miserable conditions of the population has prompted demonstrators this summer to organize sit-ins blocking the gates to the oil fields.

In addition to the 15-hour power cuts and filthy drinking water, they are demanding jobs.

Foreign companies operating in Basra are required to hire locals for at least 50% of job posts, and up to 80% depending on the contract. But those laws are often flouted.

The government has also allowed foreign companies to acquire vast swathes of agricultural lands to be used as oil fields north of Basra, resulting in the bulldozing of orchards and date palm fields and increased unemployment.

"The oil extracted from our city lands is not beneficial to us," one demonstrator told Asia Times.

"It is better to stop its extraction than have it stolen," he said, blaming the government and foreign companies alike.

According to provincial council member Ahmed Abdel Hussein, half of Basra residents live in poverty.

The government says unemployment stands at about at 7.8%, but academic studies suggest a far higher rate. There are no official statistics for the province.

Feared militia takeover

The government in Baghdad fears the deteriorating situation in Basra could disrupt oil production.

"The oil companies have been greatly affected by the protests," said Adel al-Thamari, an academic and investment analyst in Basra.

"The workers cannot access the fields because of the closure of roads or closing of entry gates," he told Asia Times, adding that "the oil companies have reduced the number of foreign experts for fear of their lives and inability to afford high insurance costs."

The decline in production puts the financial burden on Baghdad. "Companies will raise the terms of credit, which means a great loss for Iraq, which will have to pay compensation to the companies," he said.

Along with the world's major oil companies, hundreds of logistics and security support companies provide operational services to the fields in Basra. As security deteriorates, they too will have to withdraw. "The withdrawal of these companies would mean production stops," Thamari said.

The concerns of oil companies go beyond the protests to fears of a militia takeover.

"The army has taken the position of neutrality toward the demonstrations, and the fear is that the Popular Mobilization Units will deploy. This would cause a further deterioration of security, because the militias have their own internal divisions and such an escalation could neutralize the official security forces," Thamari said.

[Sep 04, 2018] Kunstler Warns -Some Kind Of Epic National Restructuring Is In The Works

Highly recommended!
Notable quotes:
"... The shale oil "miracle" was a stunt enabled by supernaturally low interest rates, i.e. Federal Reserve policy. Even The New York Times said so yesterday ( The Next Financial Crisis Lurks Underground ). ..."
"... As with shale oil, they depend largely on dishonest financial legerdemain. They are also threatened by the crack-up of globalism, and its 12,000-mile supply lines, now well underway. Get ready for business at a much smaller scale. ..."
"... Hard as this sounds, it presents great opportunities for making Americans useful again, that is, giving them something to do, a meaningful place in society, and livelihoods. ..."
"... Pervasive racketeering rules because we allow it to, especially in education and medicine. Both are self-destructing under the weight of their own money-grubbing schemes. ..."
"... A lot of colleges will go out of business. Most college loans will never be paid back (and the derivatives based on them will blow up) ..."
"... The leviathan state is too large, too reckless, and too corrupt. Insolvency will eventually reduce its scope and scale. Most immediately, the giant matrix of domestic spying agencies has turned on American citizens. ..."
"... It will resist at all costs being dismantled or even reined in. One task at hand is to prosecute the people in the Department of Justice and the FBI who ran illegal political operations in and around the 2016 election. These are agencies which use their considerable power to destroy the lives of individual citizens. Their officers must answer to grand juries. ..."
"... As with everything else on the table for debate, the reach and scope of US imperial arrangements has to be reduced. ..."
Sep 04, 2018 | www.zerohedge.com

Authored by James Howard Kunstler via Kunstler.com,

And so the sun seems to stand still this last day before the resumption of business-as-usual, and whatever remains of labor in this sclerotic republic takes its ease in the ominous late summer heat, and the people across this land marinate in anxious uncertainty.

What can be done?

Some kind of epic national restructuring is in the works. It will either happen consciously and deliberately or it will be forced on us by circumstance. One side wants to magically reenact the 1950s; the other wants a Gnostic transhuman utopia. Neither of these is a plausible outcome.

Most of the arguments ranging around them are what Jordan Peterson calls "pseudo issues." Let's try to take stock of what the real issues might be.

Energy

The shale oil "miracle" was a stunt enabled by supernaturally low interest rates, i.e. Federal Reserve policy. Even The New York Times said so yesterday ( The Next Financial Crisis Lurks Underground ).

For all that, the shale oil producers still couldn't make money at it. If interest rates go up, the industry will choke on the debt it has already accumulated and lose access to new loans. If the Fed reverses its current course - say, to rescue the stock and bond markets - then the shale oil industry has perhaps three more years before it collapses on a geological basis, maybe less. After that, we're out of tricks. It will affect everything.

The perceived solution is to run all our stuff on electricity, with the electricity produced by other means than fossil fuels , so-called alt energy. This will only happen on the most limited basis and perhaps not at all. (And it is apart from the question of the decrepit electric grid itself.) What's required is a political conversation about how we inhabit the landscape, how we do business, and what kind of business we do. The prospect of dismantling suburbia -- or at least moving out of it -- is evidently unthinkable. But it's going to happen whether we make plans and policies, or we're dragged kicking and screaming away from it.

Corporate tyranny

The nation is groaning under despotic corporate rule. The fragility of these operations is moving toward criticality. As with shale oil, they depend largely on dishonest financial legerdemain. They are also threatened by the crack-up of globalism, and its 12,000-mile supply lines, now well underway. Get ready for business at a much smaller scale.

Hard as this sounds, it presents great opportunities for making Americans useful again, that is, giving them something to do, a meaningful place in society, and livelihoods.

The implosion of national chain retail is already underway. Amazon is not the answer, because each Amazon sales item requires a separate truck trip to its destination, and that just doesn't square with our energy predicament. We've got to rebuild main street economies and the layers of local and regional distribution that support them. That's where many jobs and careers are.

Climate change is most immediately affecting farming. 2018 will be a year of bad harvests in many parts of the world. Agri-biz style farming, based on oil-and-gas plus bank loans is a ruinous practice, and will not continue in any case. Can we make choices and policies to promote a return to smaller scale farming with intelligent methods rather than just brute industrial force plus debt? If we don't, a lot of people will starve to death. By the way, here is the useful work for a large number of citizens currently regarded as unemployable for one reason or another.

Pervasive racketeering rules because we allow it to, especially in education and medicine. Both are self-destructing under the weight of their own money-grubbing schemes. Both are destined to be severely downscaled.

A lot of colleges will go out of business. Most college loans will never be paid back (and the derivatives based on them will blow up).

We need millions of small farmers more than we need millions of communications majors with a public relations minor. It may be too late for a single-payer medical system. A collapsing oil-based industrial economy means a lack of capital, and fiscal hocus-pocus is just another form of racketeering. Medicine will have to get smaller and less complex and that means local clinic-based health care. Lots of careers there, and that is where things are going, so get ready.

Government over-reach

The leviathan state is too large, too reckless, and too corrupt. Insolvency will eventually reduce its scope and scale. Most immediately, the giant matrix of domestic spying agencies has turned on American citizens.

It will resist at all costs being dismantled or even reined in. One task at hand is to prosecute the people in the Department of Justice and the FBI who ran illegal political operations in and around the 2016 election. These are agencies which use their considerable power to destroy the lives of individual citizens. Their officers must answer to grand juries.

As with everything else on the table for debate, the reach and scope of US imperial arrangements has to be reduced. It's happening already, whether we like it or not, as geopolitical relations shift drastically and the other nations on the planet scramble for survival in a post-industrial world that will be a good deal harsher than the robotic paradise of digitally "creative" economies that the credulous expect.

This country has enough to do within its own boundaries to prepare for survival without making extra trouble for itself and other people around the world. As a practical matter, this means close as many overseas bases as possible, as soon as possible.

As we get back to business tomorrow, ask yourself where you stand in the blather-storm of false issues and foolish ideas, in contrast to the things that actually matter.

[Sep 04, 2018] The shale oil "miracle" was a stunt enabled by supernaturally low interest rates

Sep 04, 2018 | www.zerohedge.com

Most of the arguments ranging around them are what Jordan Peterson calls "pseudo issues." Let's try to take stock of what the real issues might be.

Energy

The shale oil "miracle" was a stunt enabled by supernaturally low interest rates, i.e. Federal Reserve policy. Even The New York Times said so yesterday ( The Next Financial Crisis Lurks Underground ). For all that, the shale oil producers still couldn't make money at it. If interest rates go up, the industry will choke on the debt it has already accumulated and lose access to new loans. If the Fed reverses its current course - say, to rescue the stock and bond markets - then the shale oil industry has perhaps three more years before it collapses on a geological basis, maybe less. After that, we're out of tricks. It will affect everything.

The perceived solution is to run all our stuff on electricity, with the electricity produced by other means than fossil fuels , so-called alt energy. This will only happen on the most limited basis and perhaps not at all. (And it is apart from the question of the decrepit electric grid itself.) What's required is a political conversation about how we inhabit the landscape, how we do business, and what kind of business we do. The prospect of dismantling suburbia -- or at least moving out of it -- is evidently unthinkable. But it's going to happen whether we make plans and policies, or we're dragged kicking and screaming away from it.

[Sep 02, 2018] An Israeli campaign against Iranian nuclear sites is going to involve F-15 and F-16 jets loaded to the gills with big-arse bombs. Those will be unable to dogfight even a relic like an F-5 unless they drop that ordinance.

Sep 02, 2018 | www.moonofalabama.org

Yeah, Right , Sep 2, 2018 1:27:48 AM | link

@82 There is some logic to the Iranians fielding a jet fighter of any sort, even if it is based on a relic of the 1970s.

An Israeli campaign against Iranian nuclear sites is going to involve F-15 and F-16 jets loaded to the gills with big-arse bombs. Those will be unable to dogfight even a relic like an F-5 unless they drop that ordinance.

If that is all those Iranians do that then they will have achieved their purpose.

Alternatively, the Israelis could use fighter escorts but then you have to consider that each escort represents one less bomb-laden F-16 (or, put another way, twice as many sorties).

Simply put: Absent any Iranian jet fighters then the Israelis can commit ALL of their jets to the task of bombing Iranian targets, and do so from the very beginning. But once Iranian fighters are in the mix then the job becomes much harder: the Israelis either have to take out those jets first before committing to a bombing campaign, or they have to commit half their force to escort duties from the very start.

Sure, SU-35s would be much better, but an F-5 is still way better than nothing.

partizan , Sep 2, 2018 3:40:55 AM | link

@Yeah, Right | Sep 2, 2018 1:27:48 AM | 144

the Iranian defense budget is one of lowest in that part of the world. even tiny Dubai has higher one.

upgrading an old fighter jet (not only jet) is sometime more costly than developing a new one.

su-35 flanker-e 4++ costs about $85 million a piece. i simply refuse to believe they cannot afford that.

[Aug 29, 2018] Energy Dominance And America First

"Third, while the U.S. is now exporting oil to Europe and elsewhere" -- The USA is net importer of oil. That alone discredits the author
Notable quotes:
"... Meanwhile in the North Sea, the new BP owned flow of crude oil from the Forties field was coming on stream and boosted Shell's declining flow of Brent crude oil to the extent that BP were now in a position to control the market. The new Brent/Forties contract rapidly became the preferred global oil price benchmark in preference to land-locked WTI, and the benchmark was later augmented by Statoil's (STO) Oseberg and Ekofisk fields. ..."
"... While this Dark Inventory was funded by investors of petrodollars, the liquidity needed for oil market cash-flows was provided by the Federal Reserve Bank via Quantitative Easing. ..."
"... crude oil in time and space ..."
"... A cynic once said that there are always two reasons for an action: the reason given, and the real reason. ..."
"... "Drillcos are not risk free. If oil prices tumble, investors' ability to grab high returns within a few years fade" ..."
Aug 29, 2018 | seekingalpha.com
BNO , DBO , DNO , DTO , DWT , OIL , OILK , OILX , OLEM , OLO , SCO , SZO , UCO , USL , USO , USOI , UWT , WTID , WTIU Chris Cook Chris Cook Energy, alternative energy, oil & gas, infrastructure ( 908 followers) Summary

ICE Age – how Wall Street and Enron turned oil into an asset class and wrecked the global Oil Market.

Transition through Gas – Obama strategy to achieve energy security/resilience through oil market inflation and a switch to natural gas.

America First - President Trump's new Energy Dominance strategy for a global WTI benchmark and U.S. oil market domination. Introduction

It has been clear since President Trump was elected to office in November 2016 that major changes in financial and commodity markets have been taking place since then, but it has taken until now for any indication to emerge as to any organising principle for the new administration's foreign policy doctrine.

To an outsider, the foreign policy of the Trump administration appears to be based in no particular order firstly on a desire to erase all vestiges of President Obama's policies, whatever they may be, and secondly, on an America First doctrine of primacy of U.S. interests in the global economy.

Finally, on 29 th June, President Trump announced at an Energy Department event "Unleashing American Energy" a new doctrine for energy policy which he termed Energy Dominance, without specifying what this actually means .

In the four months since then, sufficient data points have emerged to make an educated guess. The ICE Age

Towards the tail end of the Clinton administration and the Dot Com boom in 2000, Gary Cohn of Goldman Sachs (NYSE: GS ) had dinner with his counterpart at Morgan Stanley (NYSE: MS ), John Shapiro. From this dinner was hatched an audacious plan to take control of the global oil market through a new electronic global market platform.

The first step was to acquire a moribund mid-American electronic trading system (Intercontinental Exchange – ICE) and its dynamic founder. Secondly, key oil market intermediary companies (including BP (NYSE: BP ), Shell (NYSE: RDS.A ) & Total (NYSE: TOT )) agreed to provide liquidity in exchange for a share of ICE equity ownership followed by a second tier of market participants who then joined on less attractive terms.

Having secured physical and financial oil market liquidity, ICE still needed participation by end-user producers and consumers. After an abortive effort to acquire the New York Mercantile Exchange (NYMEX), ICE made the membership of London's International Petroleum Exchange an offer they could not refuse: either sell IPE to us, or our members take their hedging elsewhere.

Meanwhile in the North Sea, the new BP owned flow of crude oil from the Forties field was coming on stream and boosted Shell's declining flow of Brent crude oil to the extent that BP were now in a position to control the market. The new Brent/Forties contract rapidly became the preferred global oil price benchmark in preference to land-locked WTI, and the benchmark was later augmented by Statoil's (STO) Oseberg and Ekofisk fields.

Enron-Style Financialization

Enron really were the smartest guys in the room. With the complicity of investment banks they were able to defraud investors and creditors alike for over a decade through the use of tripartite 'Prepay' funding contracts and accounting chicanery which concealed these liabilities off-balance sheet. The extraordinary fact is that over the period of Enron's existence some 70% of their income was entirely illusory.

There is nothing new about such macro (long term) fraud or manipulation: a producer cartel manipulated the tin market for decades until the price crashed in the 1985 Tin Crisis. Similarly, Sumitomo's Yasuo Hamanaka manipulated the copper market for ten years, five years of which was after David Threlkeld had rumbled what they were doing and blown the whistle, only to be ignored.

From 2001 onwards, the passive investment phenomenon of index fund and ETFs began to make inroads into the oil market via the inspired marketing narrative of 'inflation hedging' – ie off-loading dollar risk in favour of oil risk. These long-only passive investors enabled oil producers such as BP and Shell (who wished to offload oil risk in favour of dollar risk) not only to hedge production, but also to monetise inventory and even reserves.

There's nothing wrong with the use of prepay financing provided it is done transparently, but if it is opaque, then as Enron demonstrates, the results can be devastating.

It is my case that several oil market players, particularly BP and Goldman Sachs, and probably extending to Norway's Statoil and at least one other U.S. investment bank, began to quietly facilitate and use prepay funding on a big scale. The result was to withhold physical crude from the market and as the global market tightened this led to the inflation of a bubble in price which those involved always knew was unsustainable.

This bubble was spiked at $147/barrel in July 2008 ( some say deliberately ) and while global physical demand remained buoyant the reason for the oil price collapse to $35/barrel was that buyers were unable to actually pay for the oil. This was because international trade finance clearing through instruments such as letters of credit became unavailable when trust temporarily evaporated from the dollar system of global trade clearing and settlement.

Transition through Gas

The organizing principle of U.S. foreign policy has for over 100 years been energy security, and the means to achieve this has oscillated between (dumb) military and (smart) financial action.

President Obama's smart financial energy policy doctrine had two key objectives. The first aim was to reduce reliance on Saudi oil, and this required (as after the 1973/4 Oil Shock) prices high enough to make viable new U.S. and global production, funded by petrodollars reinvested by beneficiaries of inflated oil prices.

So, as I documented in a series of Seeking Alpha articles beginning with Oil: The Big Long the oil price was rapidly re-inflated and supported for 5 years over $80/barrel through Enron-style prepay funding. This created an opaque Dark Inventory of oil reserves held by a custodian (the U.S. Big Hill SPR) but where the economic interest is held by fund investors via prepay contracts with investment banks.

A highly lucrative two tier false market in oil was also created where most market participants were (and remain) unaware of the true beneficial ownership of oil. This led to periodic unaccountable moves in inventory and to trading coups (short term micro manipulation) via 'short squeezes' and otherwise. While this Dark Inventory was funded by investors of petrodollars, the liquidity needed for oil market cash-flows was provided by the Federal Reserve Bank via Quantitative Easing.

At these inflated price levels, substitution by renewable energy and investment in energy efficiency acted to reduce demand, while massive investment in shale oil increased U.S. production by 5m bpd in 3 years.

The second objective was a switch from oil to natural gas, and when the U.S. was obliged to leave Saudi Arabia, they thereupon established their biggest regional base in Qatar, who co-own with Iran the greatest single natural gas reserve on the planet – South Pars.

Energy Dominance

In the four months since President Trump's announcement, the market strategy developed by Gary Cohn is now being implemented and its elements are emerging into view.

Firstly, there has been a massive inflow of Managed Money into the oil market, particularly the Brent contract, which has seen the Brent oil price increase by 35% since the starting point, which I believe can be dated to the August Brent/BFOE Crude Oil option expiry on June 27 th 2017.

Secondly, on 1 st July 2017 the Saudis ceased to price oil against the BWAVE weighted average of Brent/BFOE futures contract (perfectly suited for HFT algorithmic trading) and began to price oil against the ICE Brent settlement price.

This image shows the striking change in market price activity which took place at that point

Thirdly, now that the spot Brent/BFOE price has been inflated through $60 per barrel, internationally accessible U.S. oil deliveries are now available to the market which form a necessary precondition for a successful U.S. based futures contract.

The direct effect of this flow of funds into the market has been to:

Finally, and perhaps the most intriguing data point of all, is this chart from Olivier Jakob of Petromatrix titled crude oil in time and space

Here it will be seen that even while the December 2017 Brent futures contract soared over $60 per barrel as fund money poured in, the U.S. WTI December 2019 futures contract was pretty stable around $50 per barrel.

Physical or Financial Demand?

A cynic once said that there are always two reasons for an action: the reason given, and the real reason.

The dominant market narrative is that the backwardation in Brent is evidence of surging global oil demand which has emptied inventories and is leading the price to new sunlit uplands. However, I see the market rather differently.

Firstly, whether the Brent spot month is supported by financial, rather than physical demand, the result will still be a backwardation, and because few oil producers expect a price over $60 to be sustainable they therefore hedge and depress the forward price. In support of this view, I am far from the only market observer who believes that Aramco, and Rosneft would not be selling equity if either Saudi Arabia or Russia believed the oil price trajectory will be positive even in the medium term.

Secondly, it is not a matter of if OPEC members cheat, but how and here Tanker Trackers combination of tanker geolocation with Planet Labs microsatellite imagery is shining new light on the dark world of physical flows of oil.

So for instance, Russia has been overstating production on a grand scale while China is continuing to act as buyer of last resort and had accumulated over 300 million more barrels of inventory at an average rate rate of over 1m bpd in Q1, Q2 & Q3 of 2017 .

Third, while the U.S. is now exporting oil to Europe and elsewhere, October 2017 saw Gunvor landing themselves with an extraordinary 14 out of 21 cargoes of Forties crude oil and a 'record-breaking' fleet of six VLCC tankers then took 12 million barrels of crude oil half way around the world to Asia to buyers of last resort.

The $64 Billion Question

I have yet to find anyone in the market who is either willing or able to answer the simple question of who exactly is buying down the Brent curve?

Someone has bought Brent futures contracts to the tune of some 200,000 December 2018, 100,000 December 2019, and 45,000 December 2020. In addition there are 250,000 further contracts from January 2019 onwards in other contract months.

Could this be refiners hedging crude oil supplies? I think not, because refiners do not tend to hedge oil purchases far forward, and market consensus seems that $55/bbl is an expensive hedge.

So then it must be investors? But if so, then these investors participate on the ICE market via funds who take futures market risk either directly (Managed Money) or indirectly via investment banks (Swap Dealers).

But the problem with this is that Managed Money investors, whether actively speculating for transaction profit (hedge funds), or passively holding and rolling over long-only positions (ETFs & Index funds) participate only in the liquid ICE front month contracts.

So what exactly is going on down the curve?

Firstly, one part of the explanation is that financing of shale oil development has evolved through the entry into the market of DrillCo financing structures where oil market risk is taken by fund investors (eg Carlyle) in future shale oil production. But as the article author said: "Drillcos are not risk free. If oil prices tumble, investors' ability to grab high returns within a few years fade"

Since shale oil production decline rates are high the necessary hedging by investment banks of some £2bn market risk could account for a great deal of 2018 long open interest.

This still leaves open the $64 billion question of which market participant is motivated and able to support the ICE Brent term structure for years into the future by swapping dollar risk (T-Bills) for long term oil risk (oil reserves leased via prepay purchase/resale contracts).

My conclusion by a process of elimination is that this Big Long can only be Saudi Arabia and regional allies, with Saudi Arabia now under the management of the thrusting young Mohammad bin Salman.

America First

So what are the intended outcomes of the U.S. Energy Dominance strategy as outlined above?

Firstly, the re-establishment of WTI as global oil market pricing benchmark after some 15 years domination by the Brent/BFOE benchmark.

Secondly, to stabilise the global oil price between $50 and $60 per barrel, as forecast by S & P Global Platts and BP.

Thirdly, preferential America First U.S. and Saudi oil market access, with U.S. antagonists such as Iran or Russia being able to access the market on inferior terms, if at all.

Finally, the emergence of an Oil Standard for the U.S. dollar through basing the dollar directly on monetized U.S. and Saudi oil reserves.

What is meant by the oil standard, and why the Energy Dominance strategy is doomed to fail, will be the subject of a second article.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

[Aug 26, 2018] US ready to drive Iranian oil exports to zero, says US national security adviser

Notable quotes:
"... The US is run by a somewhat unstable president being advised by nuts like Bolton whose main focus is following Israeli diktats, therefore i would not expect them to be looking out for US interests. ..."
Aug 26, 2018 | peakoilbarrel.com

Ron Patterson

Ignored says: 08/22/2018 AT 3:47 PM

US ready to drive Iranian oil exports to zero, says US national security adviser

The US is prepared to use sanctions to drive Iranian oil exports down to zero, the US national security adviser, John Bolton, has said.
"Regime change in Iran is not American policy, but what we want is massive change in the regime's behaviour," Bolton said on a visit to Israel, as he claimed current sanctions had been more effective than predicted.
Donald Trump took the US out of Iran's nuclear deal with the west in May and is imposing escalating sanctions, both to force Iran to renegotiate the deal and to end Tehran's perceived interference in Yemen, Syria and Lebanon.
Complete removal of Iranian oil from world markets would cut oil supply by more than 4% probably forcing up prices in the absence of any new supplies.
SNIP
Fuller US sanctions, including actions against countries that trade in Iranian oil are due to come into force on 5 November, 180 days after the initial Trump announcement to withdraw.
The measures against Iranian oil importers, and banks that continue to trade with the Central Bank of Iran, will ratchet the pressure to a higher level.
Pompeo has set up an Iran Action group inside the US State Department to coordinate US leverage on companies and countries that cannot show that their trade, including in oil, has fallen significantly by November.
Measures may also be taken against firms that insure ships carrying Iranian crude.
It is expected some of the major Iranian oil importers, such as Russia, China and Turkey, will either ignore the threat of US sanctions, or, possibly in the case of Iraq, Japan and South Korea, seek exemptions.
China takes a quarter of all Iran's oil exports, and with Chinese banks little exposed to the US it can avoid the impact of Trump's sanctions.
REPLY


Dennis Coyne

Ignored says: 08/22/2018 AT 4:13 PM

I wonder if China could just take all of Iran's oil? I imagine at the right price they would be happy to do so. China imports about 8 Mb/d, Iran exports about 2.5 Mb/d of oil, seems possible.

Also note that if this does occur and there is no drop in Iranian output, the impact of the Iranian sanctions on the World Oil market will be effectively zero.

Survivalist

Ignored says: 08/22/2018 AT 4:34 PM

https://www.reuters.com/article/us-china-iran-oil-shipping/exclusive-china-shifts-to-iranian-tankers-to-keep-oil-flowing-amid-us-sanctions-sources-idUSKCN1L50RZ

I wonder what the capacity is of the Chinese and Iranian oil tanker fleet is? If nobody else will buy it or ship it then the tanker fleet will have to be owned/insured by either Iran or China.

Watcher

Ignored says: 08/22/2018 AT 10:07 PM

Previously posted.

The big issue is the insurance. A US seized cargo triggers insurance on either party, Iran or China. No way that doesn't escalate to violence.

Survivalist

Ignored says: 08/23/2018 AT 2:08 PM

I'm interested in knowing if Chinese oil tankers are even capable of hauling 2.5 million barrels a day home from Iran. It seems doubtful that anybody else will be doing it for them. I can't find much info on the size of the Chinese owned tanker fleet and it's capabilities.

While US forces have been known to seize North Korean oil tankers hauling Libyan oil, I find it doubtful that they will seize Chinese ones, for the reason you mentioned; China punches back. Nothing spells the end of hegemony like getting your ass kicked.

Fernando Leanme

Ignored says: 08/25/2018 AT 8:26 AM

One would assume its easy for the chinese to buy used oil tankers if they offer a bit over current market prices. This is a very long term conflict, and they could buy tankers, reregister them Chinese or Iranian or say Russian and start moving that oil.

The US is run by a somewhat unstable president being advised by nuts like Bolton whose main focus is following Israeli diktats, therefore i would not expect them to be looking out for US interests.

[Aug 26, 2018] Permian -- more cost, less production, more DUCs

Aug 26, 2018 | peakoilbarrel.com

Guym

Ignored says: 08/21/2018 AT 6:37 PM

https://oilprice.com/Energy/Crude-Oil/Spending-Boost-Fails-To-Raise-Production-In-The-Permian.html

Permian- more cost, less production, more DUCs. Faces decorated with eggs. REPLY


Dennis Coyne

Ignored says: 08/22/2018 AT 4:03 PM

Guym,

The message I get from that piece is that companies are getting ready for next year so they can hit the ground running when the pipeline bottleneck is removed. Output has not decreased, it is just rising more slowly than capital expenditures. No point in completing wells if there is not pipeline space to move the oil, so they are building pads and other facilities and drilling wells, but waiting on completion.

So far this year Permian tight oil output has increased by 478 kb/d, an annual rate of increase of about 820 kb/d. The annual rate of increase from Jan 2017 to July 2018 has been about 829 kb/d.

Guym

Ignored says: 08/22/2018 AT 7:53 PM

Output has not decreased, productivity has. There's a lot in that article. Yeah, DUCs are increasing for next year. Late next year. Conoco is the only company that I read about, that said we do not intend to expand much in the Permian, until they get the infrastructure in place (pipelines). They started running out of pipeline capacity the beginning of the year. I don't know about you, but if I was a CEO, I'd feel like an absolute idiot for not figuring that into the plans. So, for another year, they get to feed the DUCs.

Many a show and tell from the operators, is how they have brought down costs. Now, I have tell everyone that costs are higher than before. That will never go into an annual report, as it makes the CEO look like an idiot.

The companies are not making the production per well that was hyped. Er, maybe we should not include that in the annual report, either. That's what I got from the article.

You don't want people to say you wound up with egg on your face, so you tell them you have decorated your face with egg. It was your intent to look better. Spin.

Dennis Coyne

Ignored says: 08/23/2018 AT 12:43 PM

Guym,

I don't follow the dog and pony shows given by the oil companies, I just look at the data from the EIA, OPEC, and shaleprofile. I guess everyone interprets information differently, what I see in the article is that output has not risen as high as previously projected because fewer wells are being completed than was projected. It is also probably true that the average completed well has lower EUR than the ridiculous well profiles that are typically presented to investors, but I always dismiss those as hype and smart investors do the same and look up the information at drilling info, frac focus or shaleprofile.com.

The average well productivity in the Permian basin has not decreased, also no decrease in the North Dakota Bakken, or the Eagle Ford, or the Niobrara all based on Enno Peter's presentations at shaleprofile.com.

I also ignore the estimates by the EIA's drilling productivity report as I think that model is poorly done.

Mike

Ignored says: 08/22/2018 AT 8:13 PM

Dennis, respectfully, you need to stop whatever you are doing and go seek help immediately. In an effort to be the eternal optimist, or the staff contrarian, you are losing all credibility with regards to analyzing anything oily in the world. I have no charts, or I would stick them here.

Guy is basically right, there is nothing good to draw from this article whatsoever and the author is one of the best there is. All costs in the shale biz are significantly higher than EVER before. Well productivity is declining, not from takeaway restraints but from well interference, increasing GOR and depletion. Profitability has NOT improved thus far in 2018, the Permian unconventional oil industry is still outspending revenue and interest rates are on their way up, up, and up.

If anybody is spending $3.5MM to drill DUC's and not paying back debt, they too need to seek immediate help. You have become the King of Debt on POB and are discounting completely the role that debt will play in your lofty supply demand economic theories. Rune has just written something very good on that and Art has good data now regarding declining gasoline consumption in the US due to higher prices. That is all debt related, man. You have gone freaking chart bonkers.

And why argue what the KSA says about its reserves? Its their oil, they can say whatever they want to about it and no dumb ass American is going to change it. Right here in the good 'ol US of A, reserve reporting under the ever watchful eye of the SEC, is embarrassingly awful. Shale oil EURS are exaggerated by 30% or more. We now lie in America way better than the Saudis ever did and get this: a lot of people believe it !! Ahem.

Take two aspirin and call me in the morning.

Mike

Ignored says: 08/23/2018 AT 8:51 PM

Dennis, I have to work for a living but I don't want you to think I criticized you and don't have the balls to respond to all your hours of research arguing with me. I got it. And all the charts. And the models. And the criticism directed at others for guessing, which is all you EVER do. Have you ever seen the back in of a drilling rig in your life? You gotta balance about 500 oil well check books to even be allowed to analyze the oil industry, IMO.

Look, even the EIA seems to thing productivity is declining in the Permian. Goggle it. I get the full meaning of Enno's work, all of it, including this: "all shale oil wells drilled in America before January of 2016 now only account for 27% of total LTO production." Let that sink in a minute.

You embrace debt as thought that is an acceptable thing in the world we live in today, and especially from the shale oil industry, and though you want to be un-hinged from fossil fuels as much as any of the permanent residents you have on your blog, rational ones they are, one and all, you believe strongly in the shale oil industry's ability to pay down its debt, improve its dismal financial performance, and deliver the goods it has promised to America. Its very confusing, actually. And hypocritical. I guess when the shale oil industry says past performance is not indicative of future results, you believe them.

I think, really, all you are doing is defending your damn models.

This fella Cunningham is a smart cookie. Listen up: https://oilprice.com/Energy/Crude-Oil/US-Oil-Data-Has-Markets-Confused.html

[Aug 26, 2018] I have some serious doubts about how much and how fast shale oil will grow over the next few years

Aug 26, 2018 | peakoilbarrel.com

Guym

Ignored says: 08/23/2018 AT 9:39 AM

I have some serious doubts about how much and how fast shale oil will grow over the next few years. I have accumulated no statistics, and have prepared no computations and charts to back up my doubts. However, they should be easily understood in theory, as that's all it is, a general theory.

While I know of no industry standards to define the difference between tier one, tier two, and tier three oil, I have made my own guesses based on operators statements. Tier one has EUR of 600k barrels, or more. It will produce over 200k in the first year. Tier two has EUR closer to 300k, and will produce 100k to 200k the first year, or an off the wall estimate of 150k. Tier three is probably closer to 150k EUR, and it's long term profitability is dependent on a very high oil price. It will be drilled, but only when price is high, and tier two is gone.

If you look at tier one, it can be drilled at today's prices, and income from the first year will fund one or more wells the next year with cash flow, hypothetically.

You would need about twice the number of tier two wells to equal a tier one. At present prices you would have to borrow money to fund the equivalent number next year.

We have a limited amount of tier one wells left in the Eagle Ford and Bakken. There is beginning to be some question as to the number of tier one spots in the Permian. Plus increasing GOR is raising questions.
As more wells are drilled, of course the price of the well increases. Simple micro supply/demand.
Interest rates will increase, causing borrowing costs to increase.

Even at $100 oil price, I can't see over a two million barrel a day increase in a short period of time (three to five years).

I could put numbers to this, but I could never reach what it actually would be, anyway. Do your own figures and see what you come up with. I just can't get to over 2 million barrels, and that would be tough.
I'm not saying that the estimates for recovery are wrong. I'm saying using past data to estimate the future does not take into consideration that all rock is not the same, and that costs and borrowing ability will put their own limits on how much, and how fast growth occurs. REPLY


Dennis Coyne

Ignored says: 08/23/2018 AT 11:05 AM

Guym,

All very much guess work. There are factors such as improved well layout, better well design and so forth that tend to drive well cost for some "optimized" well design (a given lateral length, number of frac stages and pounds of proppant and other materials) lower that may offset the microeconomic tendency for costs to go up as constraints are reached (not enough workers, equipment, or infrastructure). That's the reason I assume for simplicity that long term well cost in constant dollars remained fixed.

I also have no idea on the numbers of tier one to three wells that potentially can be drilled. All I have used is average well output for ND Bakken, Eagle Ford, and Permian from shale profile. That is simply a mix of all wells producing. I assume oil companies attempt to drill the most prospective areas first (not an exact science) so that as the play is understood average new well EUR will gradually rise to some maximum (as oil companies figure out both the best areas to drill and the best well design) and then after some period (probably 2 to 3 years) the best areas will become saturated with wells so that less prospective areas will be drilled and new well EUR will gradually decrease. That is my model in a nutshell and the result for the US is that tight oil output may be able to rise from 6000 kb/d in July 2018 to about 8000 kb/d by July 2023 (about 5 years). This scenario assumes high oil prices and is optimistic, a "medium" oil price scenario would result in maybe a 1.5 Mb/d increase in tight oil output over 5 years and a "low oil price scenario" ($80/b in 2017$ maximum by 2025) might see only a 500 kb/d increase in tight oil output from 2018 to 2023.

Note that US tight oil output has risen by about 700 kb/d over the first 7 months of 2018. I do not believe this rate of increase will continue for much longer and will gradually decrease as we approach 2021.

Dennis Coyne

Ignored says: 08/23/2018 AT 2:26 PM

Guym,

For the Permian basin specifically the peak is about 1 Mb/d lower for my "low oil price" scenario relative to the medium price scenario ($80/b vs $113/b max price). Other basins would also be affected, but I haven't run the scenarios on all tight oil basins so I am not sure how much the entire US tight oil peak would be affected, probably 1.5 Mb/d lower than the medium price scenario. For Rune Likvern's near term oil price scenario tight oil output would be fairly flat from current output levels in my opinion and that would tend to put upward pressure on oil prices.

Guym

Ignored says: 08/23/2018 AT 6:13 PM

We have not had any difference of opinion on future shale output, in the last 6 months, according to my recollection. Any minor differences that may have been discussed fit into the "who knows" classification. My comment was for those "other" projections coming out, that basically are surreal. They have caused, in my opinion, an excess of pipelines being built, and massive expenditures to be able to export another 3 to four million barrels of oil a day that will probably never show up.

700k a day out of the Permian, is actually what I am projecting for 2018. Even 800k is within probability. 200k of extra pipeline is due sometime before year end. Not much more than that until late 2019 when bigger pipelines may be available. But the amount you could crank it up to would be limited by the number of months left in 2019.

Dennis Coyne

Ignored says: 08/23/2018 AT 8:44 PM

Guym,

Agree 100%. Note that 700 kb/d is roughly my estimate for Permian increase in 2018 as well, for the US tight oil as a whole possibly 1000 to 1200 Kb/d increase in 2018. Many of the estimates are too high on that point we are definitely on the same page.

Guym

Ignored says: 08/23/2018 AT 9:36 PM

What tight oil are you adding to the 700 to get 1000 to 1200????

Guym

Ignored says: 08/24/2018 AT 7:28 AM

I mean, there are only four months left. I know the Eagle Ford can't do hardly anything in that time fraim, Bakken is stuck at a high of about a 100k increase, so what fields will add that much?

Dennis Coyne

Ignored says: 08/24/2018 AT 10:47 AM

Guym,

From Bakken, Eagle Ford, Niobrara, and STACK/SCOOP.

So far non-Permian US tight oil has increased about 215 kb/d through the first 7 months of 2018, I would expect this to accelerate if anything as capital moves to other tight oil basins due to the low oil prices at Midland. So a 400 kb/d increase from other tight oil basins (exit rate for 2018), plus 700 kb/d from Permian basin would give us 1100 kb/d.

So far in 2018 we have increases of 92 kb/d in Bakken, 61 kb/d from Eagle Ford, 38 kb/d from Niobrara, 479 kb/d from Permian, and 24 kb/d from all other US tight oil plays.

If all output stopped increasing in other tight oil plays besides the Permian after July 2018 we would have a 915 kb/d increase in US tight oil output in 2018, if my guess of a 700 kb/d increase for the Permian basin tight oil output in 2018 is correct. My best guess remains 1100+/-100 kb/d for the US tight oil increase in output from Dec 2017 to Dec 2018.

I only have data through July 2018, so 5 months left for increases, if we extrapolate the rate of increase for the first 7 months of 2018 we get 1190 kb/d for the 2018 increase in tight oil output. I scale it back a bit because I expect Permian output increase will slow down. Other plays might also speed up.

Guym

Ignored says: 08/24/2018 AT 1:21 PM

Ok, your looking at EIAs production estimate per play, again. I'm only going to go by monthlies. There will be other field declines, besides tight oil. GOM, Alaska, and non tight oil Texas.

Dennis coyne

Ignored says: 08/24/2018 AT 7:51 PM

Guym,

Yes I was only talking about tight oil. I am not sure hoe much decline there will be elsewhere, haven't guessed.

shallow sand

Ignored says: 08/24/2018 AT 1:36 PM

Dennis.

Looking at rig count, drilling capital is not going to other US shale basins from PB.

Maybe you are seeing an increase in frac spreads in the basins to speed up completion of DUC wells?

Dennis coyne

Ignored says: 08/24/2018 AT 7:57 PM

Shallow sand,

Haven't looked at rig counts lately so it's a guess. Just figure the capial may move to higher profit areas such as Bakken or Niobrara. Yes there are DUCs that could be completed. There may be more available frac crews in other plays as everyone has flocked to Permian.

shallow sand

Ignored says: 08/25/2018 AT 12:23 AM

Look at YOY rig counts in the the post by Energy News.

Cana Woodford, EFS, DJ Niobrara and Bakken are down a combined 5 rigs from one year ago, while Permian is over 100 rigs above last year.

ktoś

Ignored says: 08/23/2018 AT 8:28 PM

In My Mind: https://www.youtube.com/watch?v=W9P_qUnMaFg
Europe imports it's oil, but produces best club music! And cars 😉 Like Audi, https://tinyurl.com/y7cuxm6u https://tinyurl.com/y9jmfjg7

Energy News

Ignored says: 08/23/2018 AT 1:42 PM

2018-08-23 (Reuters) Production at Kazakhstan's Kashagan oilfield has dropped since mid-August, hit by a 35-day maintenance outage, the Kazakh Energy Ministry said in response to a Reuters query.
https://af.reuters.com/article/commoditiesNews/idAFL8N1VE5HM
chart to the 22nd https://pbs.twimg.com/media/DlTiSCLWwAAvObc.jpg

kolbeinh

Ignored says: 08/23/2018 AT 4:35 PM

The Kashagan oilfield is proving to be a real nightmare for operators and partners. No wonder a decision was made to expand capacity for the land based Tengiz field. No similar call was made for Kashagan even if stated reserves are a bit higher than for Tengiz.

john keller

Ignored says: 08/24/2018 AT 12:48 PM

Nickname is Cash All Gone

Guym

Ignored says: 08/24/2018 AT 7:11 AM

https://oilprice.com/Energy/Crude-Oil/This-Super-Basin-Is-About-To-Make-An-Epic-Comeback.amp.html

North Slope fracing? Conoco's decisions continue to impress me. Right or wrong, they are not in group think.

kolbeinh

Ignored says: 08/24/2018 AT 8:50 AM

It is a bit like offshore deepwater. If the size of a new prospect warrants it, the cost can be kept down reasonably. And the North Slope is probably one of the places it is possible to find another or even several gigant oil fields (above 500 million barrels). Just shows that some majors are betting on higher oil prices.

Guym

Ignored says: 08/25/2018 AT 9:02 AM

Yeah, in the middle of nowhere with no infrastructure. Take a while. Purely exploratory at these prices.

Energy News

Ignored says: 08/24/2018 AT 12:21 PM

Baker Hughes US rig count, down -13 to 1,044 (-9 oil: -4 gas: 0 misc)
Permian -1
Williston -4
Table https://pbs.twimg.com/media/DlYXQ5kW0AMN0y-.jpg

Energy News

Ignored says: 08/24/2018 AT 3:45 PM

EIA Weekly U.S. Ending Stocks to Friday 17th August
Crude oil down -5.8 million barrels
Oil products up +1.5
Overall total, down -4.3 (shown on chart)
Natural Gas: Propane & NGPLs up +1.5 (not included in the chart)
https://pbs.twimg.com/media/DlZH1X2X0AIPDLR.jpg

A weekly measure of inventories
https://pbs.twimg.com/media/DlZIRTmXoAARLxp.jpg
just the products https://pbs.twimg.com/media/DlZJyLOXsAElWDv.jpg

Guym

Ignored says: 08/25/2018 AT 8:53 AM

https://www.spglobal.com/platts/en/market-insights/latest-news/oil/082218-analysis-irans-oil-exports-down-sharply-in-first-half-august

Big drop in Iranian exports the first of August, and not close to Nov. yet. One million looks more likely, eventually. And for those that may have missed it, Sinopec has started buying US oil, again. To me, that indicates China is attempting to remain somewhat neutral.

Energy News

Ignored says: 08/25/2018 AT 11:41 AM

International Energy Agency – Oil Market Report: 10 August 2018
now available to non-subscribers
download from here: https://www.iea.org/oilmarketreport/omrpublic/currentreport/

OECD Industry Stocks
Crude & products: https://pbs.twimg.com/media/DldYmV6XcAYtF6B.jpg
Gasoline & Middle: https://pbs.twimg.com/media/DldZdQmX4AEtM3P.jpg

Energy News

Ignored says: 08/25/2018 AT 1:17 PM

A look at July's crude oil production numbers. The official numbers released so far.
https://pbs.twimg.com/media/Dldt7PUW0AQ-2OF.jpg

Petroleos Mexicanos crude oil & condensates production (without NGLs)
July 2018 1,840 kb/day
2017 avergage 1,949 kb/day
https://pbs.twimg.com/media/Dldu7wFXsAA6_eP.jpg

India crude oil & condensates production
July 2018 695 kb/day
2017 avergage 732 kb/day
Seasonal https://pbs.twimg.com/media/Dld6devW0AADBXA.jpg
Onshore & offshore
https://pbs.twimg.com/media/Dld63cWWsAAn4SY.jpg

Watcher

Ignored says: 08/26/2018 AT 1:07 AM

The Smith Bay oil discovery in Alaska claiming 10 billion barrels is starting to get old. 2016ish and still nothing about drilling.

http://www.rcinet.ca/eye-on-the-arctic/2017/06/14/caelus-delays-drilling-at-smith-bay-leaving-a-big-alaska-energy-prospect-unconfirmed/

Note date.

It's pretty clever. They want money from the state before they do any work developing their own lease. The money would fund . . . haha . . . management salaries, among other things.

And if it proves out as no oil, well, then they got the state to fund exploration. If there is oil, they get the money from selling the oil. It's no lose.

[Aug 26, 2018] Did Saudi pay for the audit? I've found that audits often show the results the customer is looking for. Its not quite a science. More like a combination of fishing and editing.

Aug 26, 2018 | peakoilbarrel.com

Energy News

Ignored says: 08/22/2018 AT 3:54 AM

Saudi Aramco, apparently there was an audit of their reserves in preparation for the Aramco IPO. It says Baker Hughes was involved???

2018-04-29 DUBAI/LONDON (Reuters) – An audit of Saudi Aramco's oil reserves – an essential part of the preparatory work for its planned initial public offering – has found the state oil giant to have higher reserves than it previously reported, sources familiar with the matter told Reuters.

Two sources, speaking on condition of anonymity, said the independent external audit has found the proven oil reserves to be at least 270 billion barrels, which is slightly higher than the 260.8 billion barrels the company reported in its 2016 annual review.

Dallas-based DeGolyer and MacNaughton, and Gaffney, Cline and Associates, part of Baker Hughes, are involved in the auditing, sources have said.

Baker Hughes and DeGolyer did not respond to a request for comment.
https://in.reuters.com/article/saudi-aramco-reserves/audit-finds-aramco-oil-reserves-slightly-higher-than-reported-sources-idINKBN1I00D2 REPLY


Hickory

Ignored says: 08/22/2018 AT 9:50 AM

Did they pay for the audit? I've found that audits often show the results the customer is looking for. Its not quite a science. More like a combination of fishing and editing.

"In no way should these results be construed as a true representation of the 'real' ."

Ron Patterson

Ignored says: 08/22/2018 AT 10:13 AM

au·dit
NOUN
an official inspection of an individual's or organization's accounts, typically by an independent body.
VERB
conduct an official financial examination of (an individual's or organization's accounts).
"companies must have their accounts audited"

They audited their books! I have no doubt that they found exactly what Saudi had on their books. But that is likely to bear no resemblance to what field reserves actually are. At any rate, it is entirely possible that Saudi could have doctored their books in anticipation of the audit.

How would one go about actually checking the remaining reserves in Ghawar? Or any of the other Saudi fields?

Guym

Ignored says: 08/22/2018 AT 10:19 AM

Dipstick??🤡 Seriously, they are both oil consulting companies. Hardly an audit. Just high priced consultants. Key phrase is high priced. Nobody is going to jerk their consulting license if they accept the high price, and give SA what they want. If SA runs out of oil tomorrow, the worst that could happen is the companies say, whoops, missed that one.

[Aug 26, 2018] There might be be a downward pull on oil price from multiple direction so the price can flutuate in 60 to 100 dollar rang for a while

Notable quotes:
"... I think Euan Mearns prediction of $80/b for oil (made in early 2018) seems reasonable ..."
Aug 26, 2018 | peakoilbarrel.com

Jeff

Ignored says: 08/23/2018 AT 5:35 AM

New blog post by Rune Likvern on credit creation, interest rates and oil price: https://runelikvern.online/2018/08/21/the-price-of-oil/ . He focuses on the demand side and believes that Brent will trade in $55 – $70/bo range over the coming year. This seems a bit low IMHO., considering the supply side of the equation. REPLY


Guym

Ignored says: 08/23/2018 AT 8:07 AM

I agree with your opinion. There will be a downward pull from multiple directions. Dollar strength, Rune's analysis, higher price in general, Iran discounting their oil, and maybe some others. All of those will not keep price from going up if supply is too low. Just keep an eye on world inventory levels. They tell the long term story.

Dennis Coyne

Ignored says: 08/23/2018 AT 12:21 PM

Guym,

Also consider that $80/b at 29.5 Gb consumption is about $2.4 trillion for a World economy of $80 trillion, that's about 3% of World GDP, in 2013 when prices were $108/b and consumption was 27.8 Gb and World GDP was $76.5T, oil consumption (C+C) was about 3.9% of World GDP. Perhaps rising interest rates will make spending 3% of World GDP on oil a problem, but despite Rune Likvern's excellent analysis, I think the connection between credit creation and oil prices that he reveals may be a spurious correlation.

Certainly higher credit creation will tend to increase aggregate demand (of which oil consumption is a part) and will tend to increase demand for oil. The price of oil is determined by both supply (production of oil) and demand (consumption) of oil.

Just as supply does not create its own demand (Say's Law), demand does not create its own supply. Even if demand for oil should decrease (which I doubt will occur without a major recession such as the 80s oil shock or the GFC), eventually the supply of oil is likely to not keep up with the increase in oil consumption (likely by 2019), the lower oil prices are the more likely this is to occur because oil production will not be profitable at prices under $70/b for many shale and deepwater plays, thus their will be a lack of oil investment and oil will become scarce.

I think Euan Mearns prediction of $80/b for oil (made in early 2018) seems reasonable .

Ignored says: 08/23/2018 AT 8:42 AM

https://www.middleeasteye.net/columns/collapse-saudi-arabia-inevitable-1895380679

Will SA be limited on exports in the future due to domestic demand?

kolbeinh

Ignored says: 08/23/2018 AT 4:07 PM

Good question. Getting rid of power plants buring fuel oil and investing in solar power seems to be the plan. Wonder if they are able to execute it. In addition the removal of subsidies on gasoline ought to also reduce consumption.

Very short term exports from SA will be impacted by the annual Hajj pilgrimage now in August. 2.4 million pilgrims demand huge amounts of extra desalinated water supply and artificial cooling based on more fuel oil electricity. There are reports of much lower exports in July compared to June, and August seems to be even lower so far.

George Kaplan

Ignored says: 08/24/2018 AT 2:03 AM

Short term I think they are looking at shale gas for power generation, though with mixed results so far.

[Aug 26, 2018] What Really Happens to Nicaragua, Venezuela and Ecuador

Aug 26, 2018 | peakoilbarrel.com

Caelan MacIntyre

Ignored says: 08/23/2018 AT 5:14 AM

What Really Happens to Nicaragua, Venezuela and Ecuador

" On Venezuela

it is absolutely clear who is behind the food and medicine boycotts (empty supermarket shelves), and the induced internal violence. It is a carbon copy of what the CIA under Kissinger's command did in Chile in 1973 which led to the murder of the legitimate and democratically elected President Allende and to the Pinochet military coup ; except, Venezuela has 19 years of revolutionary experience, and built up some tough resistance.

To understand the context 'Venezuela', we may have to look at the country's history.

Before the fully democratically and internationally observed election of Hugo Chavez in 1998, Venezuela was governed for at least 100 years by dictators and violent despots which were directed by and served only the United States. The country, extremely rich in natural resources , was exploited by the US and Venezuelan oligarchs to the point that the population of one of the richest Latin-American countries remained poor instead of improving its standard of living according to country's natural riches. The people were literally enslaved by Washington controlled regimes .

A first coup attempt by Comandante Hugo Chavez in 1992 was oppressed by the Government of Carlos Andrés Pérez and Chavez was sent to prison along with his co-golpistas. After two years, he was freed by the Government of Rafael Caldera.

During Peréz' first term in office (1974-1979) and his predecessors, Venezuela attained a high economic growth based on almost exclusive oil exports . Though, hardly anything of this growth stayed in the country and was distributed to the people. The situation was pretty much the same as it is in today's Peru which before the 2008 crisis and shortly thereafter had phenomenal growth rates – between 5% and 8% – of which 80% went to 5% of the population oligarchs and foreign investors , and 20% was to be distributed to 95% of the population – and that on a very uneven keel. The result was and is a growing gap between rich and poor, increasing unemployment and delinquency.

Venezuela before Chavez lived practically on a monoculture economy based on petrol. There was no effort towards economic diversification. To the contrary, diversification could eventually help free Venezuela from the despot's fangs, as the US was the key recipient of Venezuela's petrol and other riches. Influenced by the 1989 Washington Consensus, Peréz made a drastic turn in his second mandate (1989-1993) towards neoliberal reforms, i.e. privatization of public services, restructuring the little social safety benefits laborers had achieved, and contracting debt by the IMF and the World Bank. He became a model child of neoliberalism, to the detriment of Venezuelans. Resulting protests under Peréz' successor, Rafael Caldera, became unmanageable. New elections were called and Hugo Chavez won in a first round with more than 56%. Despite an ugly Washington inspired coup attempt ("The Revolution will Not be Televised", 2003 documentary about the attempted 2002 coup), Hugo Chavez stayed in power until his untimely death 2013. Comandante Chavez and his Government reached spectacular social achievements for his country.

Washington will not let go easily – or at all, to re-conquer Venezuela into the new Monroe Doctrine, i.e. becoming re-integrated into Washington's backyard. Imagine this oil-rich country, with the world's largest hydrocarbon reserves, on the doorsteps of the United Sates' key refineries in Texas, just about 3 to 4 days away for a tanker from Venezuela, as compared to 40 to 45 days from the Gulf, where the US currently gets about 60% of its petrol imports. An enormous difference in costs and risks, i.e. each shipment has to sail through the Iran-controlled Strait of Hormuz.

In addition, another socialist revolution as one of Washington's southern neighbor – in addition to Cuba – is not convenient. Therefore, the US and her secret forces will do everything to bring about regime change, by constant economic aggressions, blockades, sanctions, boycotts of imports and their internal distribution – as well as outrights military threats. The recent assassination attempt of President Maduro falls into the same category. "

[Aug 25, 2018] The Geopolitics Of Energy

Very amateur level of analysis...
Aug 25, 2018 | www.zerohedge.com

The antagonism between Saudi Arabia and Iran sets off a variety of political reverberations affecting the countries of the Persian Gulf, unsettling the situation between Turkey, Syria, and Iraq, and entangling Russia and the United States in the ensuring imbroglio.

... ... ...

The role of the Russian Federation cannot be viewed apart from what is happening in the energy-rich, formerly Soviet Central Asian republics. The so-called -Stans (Kazakhstan, Uzbekistan, Azerbaijan, and Turkmenistan) are major players in today's energy markets. Whatever they do, however, cannot be seen as separate from what Russia is doing or from Russia's intentions. Although some of them, primarily Azerbaijan, have initiated projects that are not aligned with Moscow's goals, they nevertheless need to behave in ways that do not upset their powerful northern neighbour on whom they are heavily reliant, to some extent, for their welfare (due to their dependence on oil and gas pipeline networks).

Politics is therefore deeply intertwined with energy in most of those cases, bringing diplomacy front and centre as a determinant of behaviour and economic outcomes.

... ... ...

Europe's problem is that, with the exception of North Sea oil and gas, it relies entirely on imports to provide it with a comfortable level of energy. Thus, events in the Middle East and the Russian stance toward the continent determines whether it is adequately supplied with energy or faces shortages.

The deposits in the North Sea have kept some European states (Britain and Scandinavia among others) well supplied for quite a while. But unfortunately there is a strong suspicion that these deposits are diminishing at a dangerous rate. As a result Europe will gradually become dependent on imports from the Middle East, North Africa, Russia, and the Atlantic (Angola, Brazil, Mexico, and the US). The situation is disquieting since Japan, and more recently, China, are seeking to buy their own supplies from the same sources.

skbull44 Cosmicserpent Wed, 08/22/2018 - 21:37 Permalink

"...Things started to change after the fracking and shale gas revolution. The United States suddenly realized that it could not only became absolutely self-sufficient in oil and gas, but it also emerged as one of the most important exporters to the rest of the world..."

Ths is factually untrue. The US still depends on crude oil imports to meet its needs. And if this simple, verifiable fact is misunderstood by the author, then I have to wonder about the rest of his analysis...

Cloud9.5 Wed, 08/22/2018 - 21:08 Permalink

From the middle of the last century to the present, everything has been about oil. The peak oilers were correct. What they did not consider was the power of debt to hold this whole thing together long after it should have collapsed. Shale oil is not profitable. That does not mater as long as debt underwrites the cost of production. What does matter is the rapid decline rate of shale oil wells. Yes it is true that shale wells are continuing to produce long after they have reached their peak but it is the volume of production that matters.

If you read the projections put out by the Hirsch Report, the Llyiods Report and the Bundeswehr Report, things should get interesting in the next couple of years.

[Aug 25, 2018] What Trump's Policy of Energy Dominance Means for the World

Notable quotes:
"... Art of the Deal ..."
"... but neither are they amenable to a stoic acceptance of national decline" ..."
"... Unleashing American Energy ..."
"... American energy dominance, ..."
"... Countering America's Adversaries Through Sanctions Act ..."
"... "... an Israeli citizen, someone who understands your identity, who has a sense of nationhood and peoplehood, and the history and experience of the Jewish people, you should respect someone like me, who has analogous feelings about whites. You could say that I am a white Zionist – in the sense that I care about my people, I want us to have a secure homeland for us and ourselves. – Just as you want a secure homeland in Israel." ..."
Aug 25, 2018 | www.strategic-culture.org

ALASTAIR CROOKE | 05.06.2018 | WORLD / ASIA PACIFIC | FEATURED STORY

Two weeks ago, we wrote about how President Trump's foreign policy somehow had 'folded' into 'neo-Americanism', and quoted US Foreign Affairs Professor, Russell-Mead, suggesting that Trump's 8 May metamorphosis (the exit from JCPOA), represented something new, a step-change of direction (from his being principally a sharp Art of the Deal negotiator), toward – pace, Russell-Mead – "a neo-American era in world politics – rather than an [Obama-ist] post-American one". "The administration wants to enlarge American power, rather than adjust to decline (as allegedly, Obama did). For now, at least, the Middle East is the centrepiece of this new assertiveness", Russell-Mead opined, explaining that this new Trump impulse stems from: [Trump's] instincts telling him that most Americans are anything but eager for a "post-American" world. Mr. Trump's supporters don't want long wars, but neither are they amenable to a stoic acceptance of national decline" .

There is something of a paradox here: Trump and his base deplore the cost and commitment of the huge American defence umbrella, spread across the globe by the globalists (sentiments aggravated by the supposed ingratitude of its beneficiaries) – yet the President wants to " enlarge American power, rather than adjust to decline". That is, he wants more power, but less empire. How might he square this circle?

Well, a pointer arose almost a year earlier, when on 29 June 2017, the President used a quite unexpected word when speaking at an Energy Department event: Unleashing American Energy . Instead of talking about American energy independence , as might be expected, he heralded instead, a new era of American energy "dominance" .

In a speech "that sought to underscore a break with the policies of Barack Obama", the FT notes , Mr Trump tied energy to his America First agenda..."The truth is we now have near limitless supplies of energy in our country," Mr Trump said. "We are really in the driving seat, and you know what: we don't want to let other countries take away our sovereignty, and tell us what to do, and how to do it. That's not going to happen. With these incredible resources, my administration will seek not only the American energy independence that we've been looking for, for so long – but American energy dominance, " he said.

It seems, as Chris Cook explains , that Gary Cohn, then chief economic adviser to the President had a part in the genesis to this ambition. Cohn (then at Goldman Sachs), together with a colleague from Morgan Stanley, conceived of a plan in 2000 to take control of the global oil trading market through an electronic trading platform, based in New York. In brief, the big banks, attracted huge quantities of 'managed money' (from such as hedge funds), to the market, to bet on future prices (without their ever actually taking delivery of crude: trading 'paper oil', rather than physical oil). And, at the same time, these banks worked in collusion with the major oil producers (including later, Saudi Arabia) to pre-purchase physical oil in such a way that, by withholding, or releasing physical crude from, or onto the market, the big NY banks were able to 'influence' the prices (by creating a shortage, or a glut).

To give some idea of the capacity of these bankers to 'influence' price, by mid – 2008, it was estimated that some $260 billion of 'managed' (speculative) investment money was in play in energy markets, completely dwarfing the value of the oil actually coming out of the North Sea each month, at maybe $4 to $5 billion, at most. These 'paper' oil-option plays would therefore often trump the 'fundamentals' of real supply, and real end-user demand.

'Step one' for Cohn, was therefore, for the US to manage the trading market, both in price and access – with U.S. antagonists such as Iran or Russia, being able to access the market on inferior terms, if at all. The putative 'step two', has been to nurse US shale production, build new American LNG export terminals, and open America to further oil and gas exploration, whilst strong-arming everyone from Germany to South Korea and China, to buy American LNG exports. And 'thirdly', with Gulf oil exports already under the US umbrella, there were then, two major Middle East energy producers beyond the boundaries of cartel 'influence' (falling more into rival Russia's strategic energy-producing 'heartland'): Iran – which is now the subject of regime change–style, economic siege on its oil exports, and Iraq, which is subject of intense (soft) political pressures (such as threatening to sanction Iraq under the Countering America's Adversaries Through Sanctions Act ) to force its adherence to the western sphere.

What would this Trump notion of energy dominance mean in simple language? The US – were energy dominance to succeed – simply would control the tap to the economic development – or its lack thereof – for rivals China, and Asia. And the US could squeeze Russia's revenues in this way, too. In short, the US could put a tourniquet on China's and Russia's economic development plans. Is this why JCPOA was revoked by President Trump?

Here then, is the squaring of that circle (more US power, yet less empire): Trump's US aims for 'domination', not through the globalists' permanent infrastructure of the US defence umbrella, but through the smart leveraging of the US dollar and financial clearing monopoly, by ring-fencing, and holding tight, US technology, and by dominating the energy market, which in turn represents the on/off valve to economic growth for US rivals. In this way, Trump can 'bring the troops home', and yet America keeps its hegemony. Military conflict becomes a last resort.

Senior advisor Peter Navarro said on NPR earlier this week that "we can stop them [the Chinese] from putting our high tech companies out of business" and "buying up our crown jewels of technology ... Every time we innovate something new, China comes in and buys it, or steals it."

Is this then Trump's plan: By market domination and trade war, to prolong America's 'superiority' of technology, finance and energy – and not somehow be obliged to "adjust to decline"? And by acting in this way, curtail – or at least postpone – the emergence of rivals? Two questions in this context immediately present themselves: Is this formula the adoption of neo-conservatism, by the US Administration, which Trump's own base so detests? And, secondly, can the approach work?

It is not neo-conservatism, perhaps – but rather a re-working of a theme. The American neo-conservatives largely wanted to take a hammer to the parts of the world they didn't like; and to replace it with something they did. Trump's method is more Machiavellian in character.

The roots to both of these currents of thought lie however – more than partly – with Carl Schmitt's influence on American conservative thinking through his friend, Leo Strauss, at Chicago (whether not, Trump has ever read either man, the ideas still circulate in the US ether). Schmitt held that politics (in contrast to the liberal/ humanist vein) has nothing to do with making the world fairer, or more just – that is the work of moralists and theologians – politics for Schmitt, concerns power and political survival, and nothing more.

Liberals (and globalists), Schmitt suggested, are queasy at using power to crush alternative forces from emerging: their optimistic view of human nature leads them to believe in the possibility of mediation and compromise. The Schmittian optic, however dismissed derisively the liberal view, in favour of an emphasis on the role of power, pure and simple – based on a darker understanding of the true nature of 'others' and rivals. This point seems to go to the root of Trump's thinking: Obama and the 'liberals' were ready to trade the 'crown jewels' of 'Our Culture' (financial, technological and energy expertise) through some multilateral 'affirmative action' that would help less developed states (such as rival China up the ladder). Perhaps such thoughts too, lay behind Trump's withdrawal from the Climate Accord: Why help putative rivals, whist, at same time, imposing voluntary handicaps on one's own Culture?

It is on this latter, quite narrow pivot (the imperative of keeping American power intact), that neo-cons and Trumpists, come together: And both also share in their disdain for utopian liberals who would fritter away the crown jewels of western Culture – for some or other humanitarian ideal – only to allow America's determined rivals to rise up and overthrow America and its Culture (in this optic).

The common ground between both currents, is expressed with remarkable candour through Berlusconi's comment that "we must be aware of the superiority of our [western] civilisation". Steve Bannon says something very similar, though couched in the merits of preserving (a threatened) western Judeo-Christian culture.

This sense of Cultural advantage that must at all costs be recuperated and preserved perhaps goes some (but not all) way towards accounting for Trump's ardent support for Israel: Speaking to Israel's Channel Two, Richard Spencer, a prominent leader of the American Alt-Right (and one component to Trump's base), highlighted the deeply felt the dispossession of white people, in their own country [the US]:

"... an Israeli citizen, someone who understands your identity, who has a sense of nationhood and peoplehood, and the history and experience of the Jewish people, you should respect someone like me, who has analogous feelings about whites. You could say that I am a white Zionist – in the sense that I care about my people, I want us to have a secure homeland for us and ourselves. – Just as you want a secure homeland in Israel."

So, can the attempt to leverage and weaponise the American élites' Culture – through the dollar, and putative energy hegemony, and its hold over technology transfer – succeed in holding on to American 'Culture' (in the reductionist construct of Trump's base)? This is the sixty-four thousand dollar question, as they say. It may just easily provoke an equally powerful reaction; and a lot can happen domestically in the US, between now, and the November, US mid-term, elections, which might either confirm the President in power – or undo him. It is difficult to hold to any analytic horizon beyond that.

But a larger point is whilst Trump feels passionately about American Culture and hegemony; the leaders of the non-West today, feel just as passionately that it is time for 'the American Century' to yield place. Just as after WWII, former colonial states wanted independence – so, now, today's leaders want an end to dollar monopoly, they want an opt-out from the global, US-led order and its so-called 'international' institutions; they want to 'be' in their own distinctive cultural way – and they want their sovereignties back. This is not just cultural and economic nationalism, it portends a significant inflection point – away from neo-liberal economics, from individualism and raw commercialism – towards a more rounded human experience.

The tide, in the wake of WWII, surely was irreversible then. I can even recall the former European colonialists subsequently bemoaning their forced withdrawal: "They'll [the former colonies] regret it", they confidently predicted. (No, they never did.) The tide today runs strongly too, and has spread, even, to Europe. Where – who knows – whether the Europeans will have the spine to push back against Trump's financial and trade machinations: It will be an important litmus for what comes next.

But what is different now (from then), is that currency hegemony, technological prowess, and energy 'domination', are not, at all, assured to western possession. They are no longer theirs. They began their migration, some time ago.

[Aug 25, 2018] The Geostrategy That Guides Trump's Foreign Policies by ERIC ZUESSE

Notable quotes:
"... Trump's US aims for 'domination', not through the globalists' permanent infrastructure of the US defence umbrella, but through the smart leveraging of the US dollar and financial clearing monopoly, by ring-fencing, and holding tight, US technology, and by dominating the energy market, which in turn represents the on/off valve to economic growth for US rivals. ..."
"... "Towards the tail end of the Clinton administration and the Dot Com boom in 2000, [Trump's U.S. Treasury Secretary until April 2018] Gary Cohn of Goldman Sachs had dinner with his counterpart at Morgan Stanley, John Shapiro. From this dinner was hatched an audacious plan to take control of the global oil market through a new electronic global market platform." ..."
"... "Wall Street bankers, particularly Goldman Sachs and Morgan Stanley, backed him and he launched ICE in 2000 (giving 80 percent control to the two banks who, in turn, spread out the control among Shell, Total, and British Petroleum)." ..."
"... "The second objective was a switch from oil to natural gas, and when the U.S. [ military ] was obliged to leave Saudi Arabia, they [the U.S.] thereupon established their biggest regional base in Qatar, who co-own with Iran the greatest single natural gas reserve on the planet – South Pars. ..."
"... Energy Dominance ..."
"... In the four months since President Trump's announcement, the market strategy developed by Gary Cohn is now being implemented and its elements are emerging into view. ..."
"... Firstly, there has been a massive inflow of Managed Money into the oil market, particularly the Brent contract, which has seen the Brent oil price increase by 35% since the starting point, which I believe can be dated to the August Brent/BFOE Crude Oil option expiry on June 27 th 2017. ..."
"... The dominant market narrative is that the backwardation in Brent is evidence of surging global oil demand which has emptied inventories and is leading the price to new sunlit uplands. However, I see the market rather differently. ..."
"... Firstly, whether the Brent spot month is supported by financial, rather than physical demand, the result will still be a backwardation, and because few oil producers expect a price over $60 to be sustainable they therefore hedge and depress the forward price. In support of this view, I am far from the only market observer who believes that Aramco, and Rosneft would not be selling equity if either Saudi Arabia or Russia believed the oil price trajectory will be positive even in the medium term. ..."
"... This still leaves open the $64 billion question of which market participant is motivated and able to support the ICE Brent term structure for years into the future by swapping dollar risk (T-Bills) for long term oil risk (oil reserves leased via prepay purchase/resale contracts). ..."
"... My conclusion by a process of elimination is that this Big Long can only be Saudi Arabia and regional allies, with Saudi Arabia now under the management of the thrusting young Mohammad bin Salman." ..."
"... Although Trump routinely talks about withdrawing U.S. troops, he does the exact opposite. ..."
"... the U.S. economy becomes increasingly dependent upon Big Oil and Big Minerals and Big Money and Big Military, ..."
"... War against King Saud's chosen enemies (Iran, Qatar, Syria) and possibly even against the U.S. aristocracy's chosen enemy, Russia (and against Russia's allies: China, Iran, and Syria) -- seems more likely, not less likely, with Trump's geostrategy. ..."
"... "I want to address what Mr. Cohn was talking about from a standpoint of how important American energy is as an option, not as the only option, but as an option to our allies and to count[r]ies around the world. ..."
"... At the G7 it was really kind of interesting. The first thing they beat on the table talking about the Paris accord, you can't get out of it, and I was kind of like OK. Then we would go into our bilats and they'd go, how about some of that LNG you've got? How do we buy your LNG, how do we buy your coal? And it was really interesting, it was a political issue for them. This whole Paris thing is a public relation[s], political issue for them. We made the right decision, the President made the right decision on this. I think it was one of the most powerful messages that early on in this administration that was sent. ..."
"... We are in a position to be able to clearly create a hell of a lot more friends by being able to deliver to them energy and not being held hostage by some countries, Russia in particular. Whether it is Poland, Ukraine, the entirety of the EU. Totally get it, if we can lay in American LNG, if we can be able to have an alternative to Russian anthracite coal that they control in the Ukraine. ..."
"... If that was more the reality of Trump's "Unleashing American Energy" policy than just the pro-global-burnout cheerleading of Trump's mere words, then it seems to be -- in the policy's actual intent and implementation -- more like "send more troops in" than "bring the troops home," to and from anywhere. It is more like energy policy in support of the military policy, than military policy in support of the energy policy. ..."
"... In any aristocracy, some members need to make compromises with other members, no matter how united they all are against the publics' interests. This is the way it's done -- by compromises with each other. ..."
Jun 10, 2018 | www.strategic-culture.org

According to Alastair Crooke, writing at Strategic Culture, on June 5 th :

"Trump's US aims for 'domination', not through the globalists' permanent infrastructure of the US defence umbrella, but through the smart leveraging of the US dollar and financial clearing monopoly, by ring-fencing, and holding tight, US technology, and by dominating the energy market, which in turn represents the on/off valve to economic growth for US rivals.

In this way, Trump can 'bring the troops home', and yet America keeps its hegemony [America's control of the world, global empire]. Military conflict becomes a last resort."

He bases that crucially upon a landmark 6 November 2017 article by Chris Cook, at Seeking Alpha, which laid out, and to a significant extent documented, a formidable and complex geostrategy driving U.S. President Donald Trump's foreign policies. Cook headlined there "Energy Dominance And America First" , and noted that,

"Towards the tail end of the Clinton administration and the Dot Com boom in 2000, [Trump's U.S. Treasury Secretary until April 2018] Gary Cohn of Goldman Sachs had dinner with his counterpart at Morgan Stanley, John Shapiro. From this dinner was hatched an audacious plan to take control of the global oil market through a new electronic global market platform."

This "global market platform," which had been started months earlier in 2000 by Jeffrey Sprecher , is "ICE," or InterContinental Exchange, and it uses financial derivatives in order to provide to Wall Street banks control over the future direction of commodites prices (so that the insiders can game the markets), by means of the financial-futures markets, locking in future purchase-and-sale agreements. It also entails Wall Street's buying enormous commodities-storage warehouses and stashing them with such commodities - such as, in that case, aluminum) , and so it influences also the real estate markets, and doesn't only manipulate the commodities markets. Those vast storehouses (and the operation of the U.S. Government's Strategic Petroleum Reserve, to carry out a similar price-manipulation function in the oil business) are crucial in order for the entire scheme to be able to function, because without control over the storehousing of physical commodities, such futures-price manipulations aren't possible. Consequently, ICE couldn't get off the ground without major Wall Street partners, which are willing to do that. Cohn and Shapiro (Goldman, and Morgan Stanley) backed Sprecher's operation; and Wikipedia states that,

"Wall Street bankers, particularly Goldman Sachs and Morgan Stanley, backed him and he launched ICE in 2000 (giving 80 percent control to the two banks who, in turn, spread out the control among Shell, Total, and British Petroleum)."

This is today's financial world -- a world in which billionaires control the future directions of commodities-prices, and thus manipulate markets, and even determine the economic fates of nations. It's not the myth of capitalism; it is the reality of capitalism. It functions by means of corruption, as it always has, but the corrupt methods constantly evolve.

However, Trump's geostrategy goes beyond merely this, especially by bringing into the entire operation the world's wealthiest person, the trillionaire King Saud, who, as the sole owner of the Saudi Government, which in turns owns the world's largest corporation Aramco, which in turn dominates the oil market and which is also #6 in the natural-gas market (far behind the three giants, which King Saud is trying to destroy -- Russia, Iran, and Qatar -- so that the Sauds will become able to dominate even there). Trump's geostrategy ties King Saud even more tightly than before, into America's aristocracy.

King Saud, as Cook noted, is trying to disinvest in petroleum and reposition increasingly into natural gas, because outside the United States and around the world, people are seriously concerned to minimize global warming so as to postpone global burnout from uncontrollably soaring atmospheric carbon. Petroleum has an even worse carbon footprint than does natural gas; and therefore natural gas is the world's "transition fuel" to a 'survivable' future, while solar and other alternatives take hold (even if too late). Despite all of the carbon-fuels industries' propaganda, people outside the United States are determined to delay global burnout, and the insiders know this. King Saud knows that his petroleum-laden portfolio will have to diversify fast, because the long-term future for petroleum-prices is decline. And he won't be able to control prices at all in the natural-gas business unless he's got America's aristocracy on his side, in the effort to keep those prices up (at least while the Sauds will be increasing their profits from natural gas). Unlike his dominance over OPEC, Saudi Arabia has no such position to control natural gas-prices. He thus needs Wall Street's cooperation.

Cook said:

"The second objective was a switch from oil to natural gas, and when the U.S. [ military ] was obliged to leave Saudi Arabia, they [the U.S.] thereupon established their biggest regional base in Qatar, who co-own with Iran the greatest single natural gas reserve on the planet – South Pars.

Energy Dominance

In the four months since President Trump's announcement, the market strategy developed by Gary Cohn is now being implemented and its elements are emerging into view.

Firstly, there has been a massive inflow of Managed Money into the oil market, particularly the Brent contract, which has seen the Brent oil price increase by 35% since the starting point, which I believe can be dated to the August Brent/BFOE Crude Oil option expiry on June 27 th 2017.

The dominant market narrative is that the backwardation in Brent is evidence of surging global oil demand which has emptied inventories and is leading the price to new sunlit uplands. However, I see the market rather differently.

Firstly, whether the Brent spot month is supported by financial, rather than physical demand, the result will still be a backwardation, and because few oil producers expect a price over $60 to be sustainable they therefore hedge and depress the forward price. In support of this view, I am far from the only market observer who believes that Aramco, and Rosneft would not be selling equity if either Saudi Arabia or Russia believed the oil price trajectory will be positive even in the medium term.

This still leaves open the $64 billion question of which market participant is motivated and able to support the ICE Brent term structure for years into the future by swapping dollar risk (T-Bills) for long term oil risk (oil reserves leased via prepay purchase/resale contracts).

My conclusion by a process of elimination is that this Big Long can only be Saudi Arabia and regional allies, with Saudi Arabia now under the management of the thrusting young Mohammad bin Salman."

However, I do not agree with Alastair Crooke's "In this way, Trump can 'bring the troops home', and yet America keeps its hegemony [America's control of the world, global empire]. Military conflict becomes a last resort." I explained at Strategic Culture on March 25th "How the Military Controls America" and noted there that "on 21 May 2017, US President Donald Trump sold to the Saud family, who own Saudi Arabia, an all-time-record $350 billion of US arms-makers' products." This means that not only Wall Street -- the main institutional agency for America's aristocracy -- and not only American Big Oil likewise, are committed to the royal Saud family, but U.S. corporations such as Lockheed Martin also are. Vast profits are to be made, by insiders, in invasions and occupations, just as in gas and oil, and in brokerage.

Although Trump routinely talks about withdrawing U.S. troops, he does the exact opposite. And even if this trend reverses and America's troop-numbers head down, while the U.S. economy becomes increasingly dependent upon Big Oil and Big Minerals and Big Money and Big Military, America's military budget is, under Trump, the only portion of the entire U.S. federal Government that's increasing; so, "Military conflict becomes a last resort" does not seem likely, in such a context. Rather, the reverse would seem to be the far likelier case.

War against King Saud's chosen enemies (Iran, Qatar, Syria) and possibly even against the U.S. aristocracy's chosen enemy, Russia (and against Russia's allies: China, Iran, and Syria) -- seems more likely, not less likely, with Trump's geostrategy.

In fact, on 29 June 2017, when President Trump first announced his "Unleashing American Energy Event," the President spoke his usual platitudes about the supposed necessity to increase coal-production, and what he said was telecast and publicized ; but his U.S. Energy Secretary, the barely literate former Governor of Texas, Rick Perry, also delivered a speech, which was never telecast nor published, except that a few days later, on July 3rd, an excerpt from it was somehow published on the website of Liquified Natural Gas Global, and it was this:

"I want to address what Mr. Cohn was talking about from a standpoint of how important American energy is as an option, not as the only option, but as an option to our allies and to count[r]ies around the world.

At the G7 it was really kind of interesting. The first thing they beat on the table talking about the Paris accord, you can't get out of it, and I was kind of like OK. Then we would go into our bilats and they'd go, how about some of that LNG you've got? How do we buy your LNG, how do we buy your coal? And it was really interesting, it was a political issue for them. This whole Paris thing is a public relation[s], political issue for them. We made the right decision, the President made the right decision on this. I think it was one of the most powerful messages that early on in this administration that was sent.

We are in a position to be able to clearly create a hell of a lot more friends by being able to deliver to them energy and not being held hostage by some countries, Russia in particular. Whether it is Poland, Ukraine, the entirety of the EU. Totally get it, if we can lay in American LNG, if we can be able to have an alternative to Russian anthracite coal that they control in the Ukraine. That singularly will have more to do with keeping our allies free and building their confidence in us than practically anything else that I have seen out there. It is a positive message around the world right now."

If that was more the reality of Trump's "Unleashing American Energy" policy than just the pro-global-burnout cheerleading of Trump's mere words, then it seems to be -- in the policy's actual intent and implementation -- more like "send more troops in" than "bring the troops home," to and from anywhere. It is more like energy policy in support of the military policy, than military policy in support of the energy policy.

This sounds even better for the stockholders of Lockheed Martin and other weapons-firms than for the stockholders of ExxonMobil and other extractive firms. On 6 March 2018, Xinhua News Agency reported that, "U.S. President Donald Trump's chief economic adviser Gary Cohn has summoned executives from U.S. companies that depend on aluminum and steel to meet with Trump this Thursday, in a bid to persuade the president to drop his tariff plan, media reported Tuesday." After all: Goldman has warehouses full of aluminum, and has the futures-contracts which already commit the Wall Street firm to particular manipulations in the aluminum (and other) markets. Controlling the Government so that it does only what you want it to do, and only when you want the Government to do it, is difficult. In any aristocracy, some members need to make compromises with other members, no matter how united they all are against the publics' interests. This is the way it's done -- by compromises with each other.

Tags: Energy

[Aug 19, 2018] Economics

Notable quotes:
"... each click brings us closer to the bang ..."
"... Every ten years or so, the United States needs to pick up some small crappy little country and throw it against the wall, just to show the world we mean business ..."
"... there will be no war and no negotiations ..."
"... carries out the decrees, and answers to the Supreme Leader of Iran, who functions as the country's head of state ..."
"... Trump's ALL IN CAPS meme ..."
"... This is where Ali Khamenei's stance is more puzzling, at least to me: when he says that there will be no war, does he mean that the US threats are not credible or does he mean that Iran has the means to deter a US attack? His words make it sound like he is quite certain that there will be no war. How can he be so sure? I am especially amazed by the apparent Iranian confidence that the AngloZionists will not attack them when I compare it with the obvious Russian policy of actively preparing for war since at least 2014 (also see here , here , here , here , here and here ). Of course, Iran has been preparing for war with the US for almost 40 years now whereas the Russians only woke up to reality comparatively recently. I see several potential explanations for Ali Khamenei's statement (there might be more, of course) ..."
"... Personally, every time I think of a possible US attack on Iran I think of the Israeli attack on Lebanon in 2006 which happened in spite of the fact that it was plainly visible to everybody that the Israelis were waltzing straight into a conflict which they could not win and which, in fact, resulted into one of the most abjects defeats in military history. Conversely, while Hezbollah did win a truly historical victory, it also remains a fact that Hezbollah leaders did not expect the Israelis to launch a full-scale ground offensive. Finally, history is full of examples of wars which were started in spite of all objective factors indicating that they would end up in disaster. ..."
"... If it weren't for its nuclear arsenal, the US could be dismissed as a particularly obnoxious country led by ignorant leaders with bloated and mostly ineffective armed forces. Alas, the US nuclear arsenal is very real (and still very capable) and we know that top-level US Neocons have already considered using tactical nuclear weapons against a non-nuclear state's conventional force in the past . In a twisted way, this makes sense: if you are a megalomaniac infused with a sense of messianic superiority then international or even civilizational norms of behavior are of no interest (or even relevance) to you. Listening to US Presidents, pretty much all of them (but especially Obama and Trump) it is pretty clear that these folks consider themselves to be the Kulturträger ..."
"... Shaytân-e Bozorg ..."
"... It would be a big mistake to dismiss the US because of its incapable military or moral bankruptcy. The truth is that in terms of aggregate national power, the US still remains the most powerful country on the planet (even if we don't include nuclear weapons). Anyone doubting that needs to look how how the currencies of the countries the US is singles out for attack suddenly began slipping: the Russian ruble (which has since bounced back), the Iranian rial, the Venezuelan bolivar, the Turkish lira , etc.) or how little time it took Trump to bring the (admittedly spineless) Europeans to heel . ..."
"... As for Russia, for all her military might, she remains only a semi-sovereign country in which the pro-US/pro-Israeli "Atlantic Integrationists" continue to try to sabotage (often successfully) everything Putin and his supporters are doing . I would not place big hopes in China either, especially considering the lack of meaningful Chinese action in Syria where Russia and Iran did all the heavy lifting. ..."
"... So count with yet another imperial war of aggression, a barrel of crude at over 100$ and oil shortages, rocketing inflation, job losses, a stagnant real estate market and stock exchange, and a national debt and government deficit which would make even Reagan proud. And plenty of dead Americans (nevermind the Iranians, right?). But don't worry: there will still be a huge supply of Chinese-made US flags to wave! ..."
Aug 19, 2018 | www.unz.com


Ideology History
Science Bloggers


Columnists Videos
Books Print Archives
Announcements Popular
Comments Articles
Authors Settings
More... ← Making Sense of a Few Rumors About Russ... Blogview The Saker Archive Blogview The Saker Archive Iran's Reply: No War and No Negotiations The Saker August 17, 2018 2,500 Words 81 Comments Reply 🔊 Listen ॥ ■ ► RSS Email This Page to Someone
Remember My Information


=> Remove from Library B Show Comment Next New Comment Next New Reply Add to Library
Bookmark Toggle All ToC Search Text Case Sensitive Exact Words Include Comments List of Bookmarks

We can all thank God for the fact that the AngloZionists did not launch a war on the DPRK, that no Ukronazi attack on the Donbass took place during the World Cup in Russia and that the leaders of the Empire have apparently have given up on their plans to launch a reconquista of Syria. However, each of these retreats from their hysterical rhetoric has only made the Neocons more frustrated and determined to show the planet that they are still The Hegemon who cannot be disobeyed with impunity. As I wrote after the failed US cruise missile strike on Syria this spring, " each click brings us closer to the bang ". In the immortal words of Michael Ledeen , " Every ten years or so, the United States needs to pick up some small crappy little country and throw it against the wall, just to show the world we mean business ". The obvious problem is that there are no "small crappy little countries" left out there, and that those who are currently the object of the Empire's ire are neither small nor crappy.

Having now shown several times that for all its hysterical barking the Empire has to back down when the opponent does not cower away in fear, the Empire is now in desperate need to prove its "uniqueness" and (racial?) superiority. The obvious target of the AngloZionist wrath is Iran. In fact, Iran has been in the cross-hairs of the Empire ever since the people of Iran dared to show the AngloZionists to the door and, even worse, succeed in creating their own, national and Islamic democracy. To punish Iran, the US, the USSR, France and all the other "democratic" countries unleashed their puppet (Saddam Hussein) and gave him full military support, and yet the Iranians still prevailed, albeit at a terrible cost. That Iranian ability to prevail in the most terrible circumstances is also the most likely explanation for why there has not been an overt attack on Iran for the past four decades (there have, of course, there has been plenty of covert attacks during all these years).

I won't list all the recent AngloZionist threats against Iran – we all know about them. The bottom line is this: the US, Israel and the KSA are, yet again, working hand in hand to set the stage for a major war under what we could call the " Skripal-case rules of evidence " aka " highly likely ". And yet, in spite of all this saber-rattling, Iranian Supreme Leader Ali Khamenei has summed up Iran's stance in the following words " there will be no war and no negotiations ".

First, let's first look at Iranian rationale for "no negotiations"

The obvious: "no negotiations"

Ayatollah Ali Khamenei has been very clear in his explanations for why negotiating with the US makes no sense. On his Twitter account he wrote:

The Iranian Supreme Leader even posted a special graphic summary to summarize and explain the Iranian position:

Finally, Ayatollah Ali Khamenei reiterated his fundamental approach towards the AngloZionist Empire:

The contrast between the kindergarten-level low-IQ bumbling hot air and threats coming out of the White House and the words of Ali Khamenei could not be greater, especially if we compare the words the two leaders decided to post all in caps;

Trump : To Iranian President Rouhani: NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!

Khamenei : THERE WILL BE NO WAR, NOR WILL WE NEGOTIATE WITH THE U.S..

Notice first that in his typical ignorance, Trump fails to realize that Hassan Rouhani is only the President of Iran and that threatening him makes absolutely no sense since he does not make national security decisions, which is the function of the Supreme Leader. Had Trump taken the time to at the very least check with Wikipedia he would have understood that the Iranian President " carries out the decrees, and answers to the Supreme Leader of Iran, who functions as the country's head of state ". It is no wonder that Trump's infantile threats instantly turned into an Internet meme !

In contrast, Khamenei did not even bother to address Trump by name but, instead, announced his strategy to the whole world.

Trump's ALL IN CAPS meme

Of course, issuing ALL IN CAPS threats just to be treated with utter contempt by the people you are trying to hard to bully and having your words become a cause of laughter on the Internet will only further enrage Trump and his supporters. When you are desperately trying to show the world how tough and scary you are, there is nothing more humiliating as being treated like some stupid kid. Therein also lies the biggest danger: such derision could force Trump and the Neocons who run him to do something desperate to prove to the word that their "red button" is still bigger than everybody else's.

ORDER IT NOW

It is important to note here that making negotiations impossible is something the Trump administration seems to have adopted as a policy. This is best illustrated by the conditions attached to the latest sanctions against Russia which, essentially, demand that Russia admit poisoning the Skripals. In fact, all the western demands towards Russia (admitting that Russia is guilty for the Skripal case, that Russia shot down MH-17, that Russia hand over Crimea to the Ukronazis, etc.) are carefully crafted to make absolutely sure that Russia will not negotiate. The sames, of course, goes for the ridiculous Pompeo demands towards the DPRK (including handing over to the US 60 to 70 percent of its nukes within six to eight months; no wonder the North Koreans denounced a "gangster-like" attitude) or the latest US grandstanding towards Turkey. Sadly, but the Neocon run media has successfully imposed the notion that negotiations are either a sign of weakness, or treason, or both. Thus to be "patriotic" and "strong" no US official can afford to be caught red-handed negotiating with the enemy of the day.

Under these conditions, why would anybody want to negotiate with the US?

Frankly, the "no negotiations" approach makes perfectly good sense, and while the Iranians are the only ones who have openly said so, the Russians have hinted to the same on many occasions (see their words about the US being "non-agreement capable" or about US diplomats confusing Austria and Australia). To any objective observer it should by now be completely obvious by now that a) the US cannot negotiate (due to intellectual, cultural and political limitations) and b) the US has no desire to negotiate. This is, of course, a highly undesirable and dangerous situation, but it would only make things worse to pretend that civilized negotiations with the US are possible.

So, if both sides agree on "no negotiations", what about war?

The not so obvious: No war?

This is where Ali Khamenei's stance is more puzzling, at least to me: when he says that there will be no war, does he mean that the US threats are not credible or does he mean that Iran has the means to deter a US attack? His words make it sound like he is quite certain that there will be no war. How can he be so sure? I am especially amazed by the apparent Iranian confidence that the AngloZionists will not attack them when I compare it with the obvious Russian policy of actively preparing for war since at least 2014 (also see here , here , here , here , here and here ). Of course, Iran has been preparing for war with the US for almost 40 years now whereas the Russians only woke up to reality comparatively recently. I see several potential explanations for Ali Khamenei's statement (there might be more, of course):

Personally, every time I think of a possible US attack on Iran I think of the Israeli attack on Lebanon in 2006 which happened in spite of the fact that it was plainly visible to everybody that the Israelis were waltzing straight into a conflict which they could not win and which, in fact, resulted into one of the most abjects defeats in military history. Conversely, while Hezbollah did win a truly historical victory, it also remains a fact that Hezbollah leaders did not expect the Israelis to launch a full-scale ground offensive. Finally, history is full of examples of wars which were started in spite of all objective factors indicating that they would end up in disaster.

It seems to me that in purely military terms (not in political ones!) Israel could be seen as a stand-in for the US and Hezbollah as a stand-in for Iran and that the outcome of any future US-Iranian war will be very similar to the outcome of the war in 2006, albeit on a much larger (and bloodier) scale. I am confident that the folks in the Pentagon realize that, but what about their Neocon bosses – do they even care about Iranian or, for that matter, US casualties? I highly doubt it: all they care about is their power and messianic ideology.

If it weren't for its nuclear arsenal, the US could be dismissed as a particularly obnoxious country led by ignorant leaders with bloated and mostly ineffective armed forces. Alas, the US nuclear arsenal is very real (and still very capable) and we know that top-level US Neocons have already considered using tactical nuclear weapons against a non-nuclear state's conventional force in the past . In a twisted way, this makes sense: if you are a megalomaniac infused with a sense of messianic superiority then international or even civilizational norms of behavior are of no interest (or even relevance) to you. Listening to US Presidents, pretty much all of them (but especially Obama and Trump) it is pretty clear that these folks consider themselves to be the Kulturträger and the Herrenvolk of the 21st century and their messianism is in no way less delusional than the one of their Nazi predecessors (or, for that matter, the one of the Popes of the past 1000 years). And why would the people who nuked two Japanese cities under the (entirely fallacious) pretext of "shortening the war" (almost a humanitarian operation!) not do the same thing in Iran?

Of sure, they probably realize that using nukes will result in a massive political backlash, but they are confident that no matter what happens in the end, they will always be able to say "screw you!" to the rest of the planet. After all, this is something which Israel and the US have been doing with almost total inpunity for decades already – why would they stop now? As for the fact that the Persian people have been dealing with all kinds of invaders since no less than 2500 years will not stop the AngloZionists from trying to crush them. After all, having laid waste to a country which many see as the cradle of civilization, Iraq, why not do the same thing to Iran? Iraq, Iran – what's the difference, they are all just "sand niggers" and our red button is bigger than theirs, right?

Standing up to Shaytân-e Bozorg (almost alone?)

It would be a big mistake to dismiss the US because of its incapable military or moral bankruptcy. The truth is that in terms of aggregate national power, the US still remains the most powerful country on the planet (even if we don't include nuclear weapons). Anyone doubting that needs to look how how the currencies of the countries the US is singles out for attack suddenly began slipping: the Russian ruble (which has since bounced back), the Iranian rial, the Venezuelan bolivar, the Turkish lira , etc.) or how little time it took Trump to bring the (admittedly spineless) Europeans to heel .

As for Russia, for all her military might, she remains only a semi-sovereign country in which the pro-US/pro-Israeli "Atlantic Integrationists" continue to try to sabotage (often successfully) everything Putin and his supporters are doing . I would not place big hopes in China either, especially considering the lack of meaningful Chinese action in Syria where Russia and Iran did all the heavy lifting.

Sadly, but the only ally Iran can truly count on is Hezbollah. And while Hezbollah is considered a "non-state actor", it has a formidable capability to strike at the US's colonial masters, especially in terms of missiles .

This will not protect Iran, but it could serve as a very real deterrent to the Israelis, especially since Hezbollah Secretary General Hassan Nasrallah he has made it clear that Hezbollah more than capable of taking on Israel .

For the time being, the Israelis are already preparing for a re-match against Hezbollah and they are massing forces in the north to prepare for a war against Hezbollah .

Does that look to you like there will be no war against Iran?

I hope so. But to me it very much looks like an attack is pretty much inevitable. I have been predicting such an attack since 2007 and, so far, I have been completely wrong (and thank God for that!). The very first article I ever wrote for my blog was entitled " Where the Empire meets to plan the next war " ended with the following words:

So count with yet another imperial war of aggression, a barrel of crude at over 100$ and oil shortages, rocketing inflation, job losses, a stagnant real estate market and stock exchange, and a national debt and government deficit which would make even Reagan proud. And plenty of dead Americans (nevermind the Iranians, right?). But don't worry: there will still be a huge supply of Chinese-made US flags to wave!

And yet, 11 years later, the AngloZionist attack which looked so imminent in 2007 has not happened yet. Could it be that this time again an attack on Iran can be avoided? Ayatollah Ali Khamenei appears to be very confident that it will not happen. I am not so sure, but I fervently hope that he is right.

[Aug 18, 2018] BIG TROUBLE BREWING AT THE BAKKEN Rapid Rise In Water Production Signals Red Flag Warning Zero Hedge Zero Hedge

Aug 18, 2018 | www.zerohedge.com

By the SRSrocco Report ,

Big trouble is brewing in the mighty North Dakota Bakken Oil Field. While oil production in the Bakken has reversed since it bottomed in 2016 and increased over the past few years, so has the amount of by-product wastewater. Now, it's not an issue if water production increases along with oil. However, it's a serious RED FLAG if by-product wastewater rises a great deal more than oil.

And... unfortunately, that is exactly what has taken place in the Bakken over the past two years. In the oil industry, they call it, the rising "Water Cut." Furthermore, the rapid increase in the amount of water to oil from a well or field suggests that peak production is at hand . So, now the shale companies will have an uphill battle to try to increase or hold production flat as the water cut rises.

According to the North Dakota Department of Mineral Resources, the Bakken produced 201 million barrels of oil in the first six months of 2018. However, it also produced a stunning 268 million barrels of wastewater:

Thus, the companies producing shale oil in the Bakken had to dispose of 268 million barrels of by-product wastewater in just the first half of the year. I have spoken to a few people in the industry, and the estimate is that it cost approximately $4 a barrel to gather, transport and dispose of this wastewater. Which means, the shale companies will have to pay an estimated $2.2 billion just to get rid of their wastewater this year.

Now, some companies may be recycling their wastewater, but this isn't free. Actually, I have seen estimates that it cost more money to recycle wastewater than it does to simply dispose of it. So, as the volume of wastewater increases while the percentage of oil production declines, then the shale companies are hit with a double-whammy... less oil revenue and rising wastewater disposal costs.

To give you an idea just how much more water is being produced versus oil in the Bakken, I went back to the North Dakota Department of Mineral Resources and looked at their data back to 2015. Unfortunately, the data published in excel only goes back to 2015, even though they have figures published in PDF form starting in 2003.

Regardless, four years is plenty of time to show just how bad the situation is becoming in the Bakken. In June 2015, the North Dakota Bakken produced 16% more water than oil. However June this year, the Bakken field produced 38% more water than oil :

You will notice that overall oil and water production declined in 2016, due to the falling oil price, but as production grew in 2017 and 2018, the percentage increase of by-product wastewater surged to 32% and 38% respectively. Here is an interesting comparison:

Bakken Oil & Water Production:

June 2015 Oil = 34.4 million barrels

June 2015 Water = 39.8 million barrels (16% more water)

June 2018 Oil = 33.8 million barrels

June 2018 Water = 46.8 million barrels (38% more water)

As we can see, while overall Bakken oil production in June 2018 was less than it was in June 2015, the volume of waster water increased by an additional 7 million barrels.

I believe there are two negative forces at work in the Bakken as it pertains to the rising volume of wastewater.

  1. As the wells and field age, more water is produced than oil
  2. Larger Frac Stages, which require more water and sand, are now being utilized to keep production growing or to keep it from falling

While a rising water cut isn't a surprise to the industry as it is a natural progression of an aging oil well or field, the use of Larger Frac Stage wells should be a WAKE-UP CALL to investors. Why? Because Larger Frac Stage wells consume a great deal more water and sand to produce more oil initially, but the decline rates are even more severe than regular shale wells.

So, when the Investor Relations are bragging how the companies are using the newer technology of more complex Large Frac Stage wells, this isn't a good sign. This means that the company is now desperate to try and grow production, or at worst, to keep it from falling.

Unfortunately, the U.S. Shale Industry is in serious trouble. Most of the shale fields have reached a peak and when production starts to decline, especially during a collapsing oil price, I forecast a rapid disintegration of the industry. We must remember, as the oil price and oil production falls, then company stock and asset values will plummet while the high debt levels remain. Thus, the shale industry will have increasing difficulty in servicing its debt.

I will continue to monitor the production of oil and wastewater in the Bakken. Please check back for updates.

IMPORTANT NOTE: If you are new to the SRSrocco Report, please consider subscribing to my: SRSrocco Report Youtube Channel .

[Aug 14, 2018] Mismanagement hits Iran more than US sanctions Iran's supreme leader -- RT World News

Notable quotes:
"... "It is not that the sanctions do not play a role; but a major part of the situation is the result of [government's own] actions," ..."
"... "better and stronger" ..."
"... "The Ayatollah has needed to explain who is to blame for the current situation, to prop up his regime," ..."
"... "the opponents of the conservatives," ..."
"... "mother of all wars," ..."
"... "consequences the likes of which few have ever suffered before." ..."
"... Think your friends would be interested? Share this story! ..."
Aug 13, 2018 | www.rt.com
Get short URL Mismanagement hits Iran more than US sanctions – Iran's supreme leader FILE PHOTO: Iranian Parliament © Islamic Consultative Assembly News Agency / AFP In a rare statement Iran's Supreme Leader Ayatollah Ali Khamenei has lashed out at the country's authorities, accusing them of poorly handling internal issues. The mismanagement is even worse than US sanctions, he said. "It is not that the sanctions do not play a role; but a major part of the situation is the result of [government's own] actions," Khamenei said, according to Irna, as he was addressing thousands of Iranians in Tehran on Monday.

The supreme leader added that if Tehran acted "better and stronger" itself US sanctions would have not been so harmful.

Read more  Iran's President Hassan Rouhani © Lisi Niesner Rouhani blasts Trump's 'psychological warfare' as Iran braces for US sanctions

Analysts told RT that what Khamenei said is not really surprising given the worsening economic situation inside the country after the relations with the US went on a downward spiral. The supreme leader has been trying to keep Iranian society balanced by taking a neutral position between the liberal and conservative parts of the establishment. Now the former, including President Hassan Rouhani, are finding themselves in a weaker position, according to Irina Fedorova from the Russian Academy of Sciences' Center for Middle Eastern Studies.

"The Ayatollah has needed to explain who is to blame for the current situation, to prop up his regime," Fedorova told RT. She said that "the opponents of the conservatives," and Rouhani in particular, who supported the JCPOA, will fall victims of this approach. But it will not lead to his resignation, the researcher noted. However, this means the conservatives' positions, such as those of Islamic Revolutionary Guard Corps, are to strengthen significantly.

The statement may also mean a reshuffling of the political elite as well as some economic changes, Jamal Wakeem, professor of history and international relations at Lebanese University in Beirut, told RT. He said that "reformists" and those who pressed for the deals with the West are to be targeted, while the leadership is going to seek alternatives to the West, including a partnership with Russia and China.

The US reinstated certain economic sanctions against Iran last week, with President Trump promising more to come in November. The restrictive measures had been lifted under the historic Joint Comprehensive Plan of Action (JCPOA), but Washington unilaterally withdrew from the landmark deal despite international condemnation, including from its EU allies. The 2015 agreement placed tight controls on Tehran's nuclear program in exchange for the lifting of international sanctions. Iran's commitment has been confirmed by the IAEA since then.

READ MORE: US can't force trade rules on others, Germany must invest more in Iran – economy minister

Tehran has repeatedly blasted the US for the move, vowing to restart its nuclear program in retaliation against any foreign restrictions. While the US has been pressing its allies to completely refuse Iranian oil imports, the Islamic Republic has threatened to close the Strait of Hormuz, effectively blocking all the oil shipments from the Persian Gulf, should they accede to American demands.

The row between the US and Iran escalated last month, when their respective leadership exchanged a barrage of threats. Back then, Iranian President Hassan Rouhani said that a conflict with Iran would be "mother of all wars," provoking Trump's harsh response when he promised "consequences the likes of which few have ever suffered before."

Think your friends would be interested? Share this story!

[Aug 14, 2018] France must be kicking themselves for listening to the US. At this rate, China/Russia will take all the Iran oil business

Aug 14, 2018 | www.moonofalabama.org

Ian , Aug 12, 2018 8:55:07 PM | 23

Likklemore @17:

France must be kicking themselves for listening to the US. At this rate, China/Russia will take all the oil business, leaving Western companies sitting on the sidelines. On the other hand, I wonder if US O&G companies are waiting for other Western competitors to go bankrupt.


Uncoy @22:

US sanctions have already failed. Other nations will give lip service, then turn around to continue on whatever they were doing.

Likklemore , Aug 12, 2018 10:28:02 PM | 24
Ian @ 24

Come November we are spectators of the comeuppance.

Imho, US "prosperity" built on debt and avoiding the knock on the door. The Bailiff cometh. How does one go bankrupt? Slowly, then all at once.

We will see if Germany is turning east.
RT Link
US can't force trade rules on others, Germany must invest more in Iran

Washington cannot dictate trade rules to others, Germany's economy minister said, adding that his country should be more assertive and defy American sanctions – particularly by investing more in Iran.

"We don't let Washington dictate [their will] on trade relations with other countries," German Economy Minister Peter Altmaier told Bild newspaper on Saturday. He said the US sanctions on Iran are one instance in which America's neglect of its partners are clearly shown.[.]

Pft , Aug 12, 2018 11:40:17 PM | 27
Likklemore@25

Only 1/3 of US debt is owed to foreigners and that is denominated in their own currency. They just print whatever is due.

A country with the land and natural resources the US has to go along with with its agricultural, human and military capital can never go bankrupt, especially when they control the debt collectors

As for Germany they are an occupied country, as are many countries. Between the military bases and CIA controlled NGO's they dance to whatever musuc is played. Some squawking is permitted for appearances sake so people can maintain their illusions of nationalist control.

I dont rule out a major financial adverse event in the US (and global) soon so the elite can profit off the collapse and shrink the wealth of the bottom 90%, but that wont affect much at all and much of the world will suffer in much the same way

When one looks at the major financial disasters over the last century, many seem to come in the 8th-9th year of the decade. After the elections we should see a great fall as bubbles are burst and the 17 trillion dollar + investment firms that maintain liquidity will swoop in and buy low. This time around the banks wont need a government bail out as the laws have authorized them to seize deposits like what was done in Greece.

[Aug 13, 2018] The Perils of Trump's Iran Obsession by Daniel Larison

Aug 13, 2018 | www.theamericanconservative.com
Trump speaks at Washington rally against the Iran deal back in September 2015. Credit: Olivier Douliery/Sipa USA/Newscom Steven Simon and Jonathan Stevenson chide Trump for his dangerous Iran obsession:

The United States' treatment of Iran as a serious strategic competitor is deeply illogical. Iran imperils no core U.S. interests.

Trump's Iran obsession is probably the most conventional part of his foreign policy and it is also the most irrational. The president's reflexive hostility to Iran is one of the few constants in his view of the world, and it is one that aligns him most closely with his party's hawks and parts of the foreign policy establishment. This has been clear for several years ever since Trump declared his opposition to the nuclear deal and surrounded himself with hard-liners . The Iran obsession is among the worst aspects of Trump's presidency, but it is also one of the least surprising. Over the last eighteen months, Trump's Iran obsession has become more of a derangement , and it is putting the U.S. and Iran on a collision course at the expense of our relations with many other states and our own economic interests. The risk of unnecessary war continues to rise because the president and his allies insist on making maximalist demands of Iran while imposing stringent sanctions on the country without justification.

As Simon and Stevenson capably explain, there is no valid reason to view Iran as a major threat to the U.S. Contrary to the fevered warnings about Iranian "expansionism," Iranian military power in the region is quite limited:

Yet Iran's foreign policy has evolved essentially on the basis of opportunistic realism rather than especially aggressive revisionism, and, as noted, it has a sparse military presence in the region.

There is certainly no reason for our government to treat Iran as if it were a major competitor. Our government's fixation on Iran as the source of all the region's problems exaggerates Iran's influence and puts the U.S. at odds with a regional power whose interests are sometimes aligned with our own. The obsession simply makes no sense:

Casting Iran as a major strategic rival simply doesn't make sense in terms of traditional international relations considerations such as threat- and power-balancing.

The authors list a number of causes for the unwarranted obsession with Iran, including "pro-Israel" influence and the influence of the Saudis and Emiratis in Washington, and I agree with them. Our political leaders' enthusiasm for engaging in threat inflation and credulously accepting the threat inflation of others would has to figure prominently in any explanation as well. Obsessing over a non-existent Iranian threat to U.S. interests obviously has nothing to do with American security, and it represents an unhealthy subordination of American interests to those of its reckless regional clients. Indulging those clients in their paranoia about Iran will only stoke more regional conflicts and ensure that the U.S. becomes more deeply involved in those wars, and the result will be greater costs for the U.S. and greater turmoil, instability, and loss of life throughout the region.


b. August 13, 2018 at 3:08 pm

Obama's Yemen obsession is probably the most conventional part of his foreign policy and it is also the most irrational.

Cluster bombs, drone strikes, covert kill teams and, most importantly, the backing for Saudi Arabia and the UAE to cross the blood-red line and commence an aggressive illegal bombing campaign, invasion and occupation of Yemeni territory did not start with Trump.

Direct participation of US military logistics personnel and US military assets in this military aggression – while other US forces operate in the same territory under the "separate but equal" Authorization To Use Military Force – did not start with Trump.

Trump might apply his Reverse Midas Touch to this aspect of Obama's legacy as well, but just because Obama manufactured another transient executive "achievement" in JCOPA does not mean that his policy with respect to Yemen was any more irrational than Trump's policy towards Iran, or that Obama's willingness to hire out US military forces to support Saudi aggression for 100 billion dollars in blood money is any less venal, corrupt and despicable than Trump's willingness to do the same.

Mattis didn't become fixated on Iran when he joined the Trump administration either, although he might just be blaming – in the absence of conclusive evidence – Iran today for the 1983 Beirut barracks bombing targeting Reagan's negligent use of the Marine Corps. That is even less of a defensible foundation for foreign policy and military aggression that profiteering.

b. , says: August 13, 2018 at 3:18 pm
It is not just Trump, either, and not even just neolibcons, but also the basement crusaders:

'In 2017, US Vice President Mike Pence called the bombings "the opening salvo in a war that we have waged ever since – the global war on terror".'

http://www.newsweek.com/trump-administration-says-war-terror-began-911-hezbollah-attack-us-troops-691653
https://en.wikipedia.org/wiki/1983_Beirut_barracks_bombings

It is a good guess that Obama's obsession with Yemen was rooted in printer cartridges, shoe bombs, and the fear to have any terrorist attack "succeed". For Obama & Co. the fear of the Next Big Blowback led them to Yemen. It would appear that Pence has supplied the Trump administration with a Grand Unified Theory that all campaigns in the Great War On Terror ultimately lead to Tehran – or the Trump administration made him their willing mouthpiece.

Christian Chuba , says: August 13, 2018 at 3:47 pm
Pence is so desperate to connect terrorism to Iran that he has to reach back almost 40yrs to pin an at best Hezbollah pre-cursor organization on them. Isn't it more telling that Hezbollah has avoided attacking U.S. troops during their entire existence? Pence doesn't seem alarmed about the 3,000+ Americans who died on U.S. soil in NYC that we can attribute to the Saudis and their cohorts.

BTW the Khobar tower bombings was Al Qaeda. The Saudis extracted confessions in their torture chambers. There was no corroborating evidence that it was a branch of Hezbollah.

[Aug 13, 2018] The Real Reason Why Trump Cancelled The Iran Deal by Eric Zuesse

This is ,of course, hypothesis by Eric Zuesse, and the idea that the USA elite decided to abandon EU elite is somewhat questionable, but some of his consideration are interesting...
Notable quotes:
"... Yeah, its the defense contractors. It has nothing to do with the zillions of cars that clog every fucking freeway in this country every morning and every evening, 7 days a week. Its not the assholes cruising around in monster trucks alone, just to show off their stupid trucks. It has nothing to do with the the zillions of jets screaming through the skies carry all those fat assholes to meetings all over the world for no reason. It has nothing to do with the billions of barrels of oil that come to the US on tankers as long as city blocks filled constantly day and night. ..."
Aug 12, 2018 | www.zerohedge.com
45 SHARES Authored by Eric Zuesse via The Strategic Culture Foundation,

The following is entirely from open online sources that I have been finding to be trustworthy on these matters in the past. These sources will be linked-to here; none of this information is secret, even though some details in my resulting analysis of it will be entirely new.

It explains how and why the bottom-line difference between Donald Trump and Barack Obama, regarding US national security policies, turns out to be their different respective estimations of the biggest danger threatening the maintenance of the US dollar as the world's leading or reserve currency. This has been the overriding foreign-policy concern for both Presidents .

Obama placed as being the top threat to the dollar, a breakaway of the EU (America's largest market both for exports and for imports) from alliance with the United States. He was internationally a Europhile. Trump, however, places as being the top threat to the dollar, a breakaway of Saudi Arabia and of the other Gulf Arab oil monarchies from the U.S. Trump is internationally a Sunni-phile: specifically a protector of fundamentalist Sunni monarchs -- but especially of the Sauds themselves -- and they hate Shia and especially the main Shia nation, Iran .

Here's how that change, to Saudi Arabia as being America's main ally, has happened -- actually it's a culmination of decades. Trump is merely the latest part of that process of change. Here is from the US State Department's official historian , regarding this history:

By the 1960s, a surplus of US dollars caused by foreign aid, military spending, and foreign investment threatened this system [the FDR-established 1944 Bretton Woods gold-based US dollar as the world's reserve currency ], as the United States did not have enough gold to cover the volume of dollars in worldwide circulation at the rate of $35 per ounce; as a result, the dollar was overvalued. Presidents John F. Kennedy and Lyndon B. Johnson adopted a series of measures to support the dollar and sustain Bretton Woods: foreign investment disincentives; restrictions on foreign lending; efforts to stem the official outflow of dollars; international monetary reform; and cooperation with other countries. Nothing worked. Meanwhile, traders in foreign exchange markets, believing that the dollar's overvaluation would one day compel the US government to devalue it, proved increasingly inclined to sell dollars. This resulted in periodic runs on the dollar.

It was just such a run on the dollar, along with mounting evidence that the overvalued dollar was undermining the nation's foreign trading position, which prompted President Richard M. Nixon to act, on August 13, 1971 [to end the convertibility of dollars to gold].

When Nixon ended the gold-basis of the dollar and then in 1974 secretly switched to the current oil-basis, this transformation of the dollar's backing, from gold to oil, was intended to enable the debt-financing (as opposed to the tax-financing, which is less acceptable to voters) of whatever military expenditure would be necessary in order to satisfy the profit-needs of Lockheed Corporation and of the other US manufacturers whose only markets are the US Government and its allied governments, as well as of US extractive industries such as oil and mining firms, which rely heavily upon access to foreign natural resources, as well as of Wall Street and its need for selling debt and keeping interest-rates down (and stock-prices -- and therefore aristocrats' wealth -- high and rtising).

This 1974 secret agreement between Nixon and King Saud lasts to the present day, and has worked well for both aristocracies. It met the needs of the very same "military-industrial complex" (the big US Government contractors) that the prior Republican President, Dwight Eisenhower, had warned might take control of US foreign policies. As Bloomberg's Andrea Wong on 30 May 2016 explained the Nixon system that replaced the FDR system, "The basic framework was strikingly simple. The US would buy oil from Saudi Arabia and provide the kingdom military aid and equipment. In return, the Saudis would plow billions of their petrodollar revenue back into Treasuries and finance America's spending."

This new system didn't only supply a constant flow of Saudi tax-money to the US Government; it supplied a constant flow of new sales-orders and profits to the military firms that were increasingly coming to control the US Government -- for the benefit of both aristocracies: the Sauds, and America's billionaires.

That was near the end of the FDR-produced 37-year period of US democratic leadership of the world, the era that had started at Bretton Woods in 1944. It came crashing to an end not in 1974 (which was step two after the 1971 step one had ended the 1944 system) but on the day when Ronald Reagan entered the White House in 1981. The shockingly sudden ascent, from that moment on, of US federal Government debt (to be paid-off by future generations instead of by current taxpayers) is shown, right here, in a graph of "US Federal Debt as Percent of GDP, 1940-2015" , where you can see that the debt had peaked above 90% of GDP late in WW II between 1944-1948 , and then plunged during Bretton Woods, but in 1981 it started ascending yet again, until reaching that WW II peak for a second time, as it has been ever since 2010 , when Obama bailed-out the mega-banks and their mega-clients, but didn't bail out the American public, whose finances had been destroyed by those banksters' frauds, which Obama refused to prosecute; and, so, economic inequality in America got even more extreme after the 2008 George W. Bush crash, instead of less extreme afterward (as had always happened in the past).

Above 90% debt/GDP during and immediately following WW II was sound policy, but America's going again above 90% since 2010 has reflected simply an aristocratic heist of America, for only the aristocracy's benefit -- all of the benefits going only to the super-rich.

Another, and more-current US graph shows that, as of the first quarter of 2018, this percentage (debt/GDP) is, yet again, back now to its previous all-time record high of 105-120%%, which had been reached only in 1945-1947 (when it was justified by the war).

Currently, companies such as Lockheed Martin are thriving as they had done during WW II, but the sheer corruption in America's military spending is this time the reason , no World War (yet); so, this time, America is spending like in an all-out-war situation, even before the Congress has issued any declaration of war at all. Everybody except the American public knows that the intense corruptness of the US military is the reason for this restoration of astronomical 'defense' spending, even during peace-time. A major poll even showed that 'defense' spending was the only spending by the federal Government which Americans in 2017 wanted increased; they wanted all other federal spending to be reduced (though there was actually vastly more corruption in military spending than in any other type -- the public have simply been hoodwinked).

But can the US Government's extreme misallocation of wealth, from the public to the insiders, continue without turning this country into a much bigger version of today's Greece? More and more people around the world are worrying about that. Of course, Greece didn't have the world's reserve currency, but what would happen to the net worths of America's billionaires if billionaires worldwide were to lose faith in the dollar? Consequently, there's intensified Presidential worrying about how much longer foreign investors will continue to trust the oil-based dollar.

America's political class now have two competing ideas to deal with this danger , Obama's versus Trump's, both being about how to preserve the dollar in a way that best serves the needs of 'defense' contractors, extractive firms, and Wall Street. Obama chose Europe (America's largest market) as America's chief ally (he was Euro-centric against Russia); Trump chose the owner of Saudi Arabia (he's Saudi-Israeli centric against Iran) -- that's the world's largest weapons-purchaser, as well as the world's largest producer of oil (as well as the largest lobbies) .

The Saudi King owns Saudi Arabia, including the world's largest and most valuable oil company, Aramco, whose oil is the "sweetest" -- the least expensive to extract and refine -- and is also the most abundant, in all of the world, and so he can sell petroleum at a profit even when his competitors cannot. Oil-prices that are so low as to cause economic losses for other oil companies, can still be generating profits -- albeit lowered ones -- for King Saud; and this is the reason why his decisions determine how much the global oil-spigot will be turned on, and how low the global oil-price will be, at any given time. He controls the value of the US dollar. He controls it far more directly, and far more effectively, than the EU can. It would be like, under the old FDR-era Bretton Woods system, controlling the exchange-rates of the dollar, by raising or lowering the amount of gold produced. But this is liquid gold, and King Saud determines its price.

Furthermore, King Saud also leads the Gulf Cooperation Council of all other Arab oil monarchs, such as those who own UAE -- all of them are likewise US allies and major weapons-buyers.

In an extraordinarily fine recent article by Pepe Escobar at Asia Times, "Oil and gas geopolitics: no shelter from the storm" , he quotes from his not-for-attribution interviews with "EU diplomats," and reports:

After the Trump administration's unilateral pull-out from the Iran nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), European Union diplomats in Brussels, off the record, and still in shock, admit that they blundered by not "configuring the eurozone as distinct and separate to the dollar hegemony". Now they may be made to pay the price of their impotence via their "outlawed" trade with Iran.

As admitted, never on the record, by experts in Brussels; the EU has got to reevaluate its strategic alliance with an essentially energy independent US, as "we are risking all our energy resources over their Halford Mackinder geopolitical analysis that they must break up [the alliance between] Russia and China."

That's a direct reference to the late Mackinder epigone Zbigniew "Grand Chessboard" Brzezinski, who died dreaming of turning China against Russia.

In Brussels, there's increased recognition that US pressure on Iran, Russia and China is out of geopolitical fear the entire Eurasian land mass, organized as a super-trading bloc via the Belt and Road Initiative (BRI), the Eurasia Economic Union (EAEU), the Shanghai Cooperation Organization (SCO), [and] the Asia Infrastructure Investment Bank (AIIB), is slipping away from Washington's influence.

This analysis gets closer to how the three key nodes of 21st century Eurasia integration -- Russia, China and Iran -- have identified the key issue; both the euro and the yuan must bypass the petrodollar, the ideal means, as the Chinese stress, to "end the oscillation between strong and weak dollar cycles, which has been so profitable for US financial institutions, but lethal to emerging markets."

It's also no secret among Persian Gulf traders that in the -- hopefully unlikely -- event of a US-Saudi-Israeli war in Southwest Asia against Iran, a real scenario war-gamed by the Pentagon would be "the destruction of oil wells in the GCC [Gulf Cooperation Council]. The Strait of Hormuz does not have to be blocked, as destroying the oil wells would be far more effective."

And what the potential loss of over 20% of the world's oil supply would mean is terrifying; the implosion, with unforeseen consequences, of the quadrillion derivatives pyramid, and consequentially [consequently] of the entire Western financial casino superstructure.

In other words: it's not the 'threat' that perhaps, some day, Iran will have nuclear warheads, that is actually driving Trump's concern here (despite what Israel's concerns are about that matter), but instead, it is his concerns about Iran's missiles, which constitute the delivery-system for any Iranian warheads: that their flight-range be short enough so that the Sauds will be outside their range . (The main way Iran intends to respond to an invasion backed by the US, is to attack Saudi Arabia -- Iran's leaders know that the US Government is more dependent upon the Sauds than upon Israel -- so, Iran's top targets would be Saudi capital Riyadh, and also the Ghawar oil field, which holds over half of Saudi oil. If US bases have been used in the invasion, then all US bases in the Middle East are also be within the range of Iran's missiles and therefore would also probably be targeted.)

Obama's deal with Iran had focused solely upon preventing Iran from developing nuclear warheads -- which Obama perhaps thought (mistakenly) would dampen Israel's (and its billionaire US financial backers') ardor for the US to conquer Iran. Israel had publicly said that their concern was Iran's possibility to become a nuclear power like Israel became; those possible future warheads were supposed to be the issue; but, apparently, that wasn't actually the issue which really drove Israel. Obama seems to have thought that it was, but it wasn't, actually. Israel, like the Sauds, want Iran conquered. Simple. The nuclear matter was more an excuse than an explanation.

With Trump now in the White House, overwhelmingly by money from the Israel lobbies (proxies also for the Sauds) -- and with no equivalently organized Jewish opposition to the pro -Israel lobbies (and so in the United States, for a person to be anti-Israel is viewed as being anti-Semitic, which is not at all true, but Israel's lies say it's true and many Americans unfortunately believe it) -- Trump has not only the Sauds and their allies requiring him to be against Iran and its allies, but he has also got this pressure coming from Israel: both the Big-Oil and the Jewish lobbies drive him. Unlike Obama, who wasn't as indebted to the Jewish lobbies, Trump needs to walk the plank for both the Sauds and Israel.

In other words: Trump aims to keep the dollar as the reserve currency by suppressing not only China but also the two main competitors of King Saud: Iran and Russia. That's why America's main 'enemies' now are those three countries and their respective allies.

Obama was likewise targeting them, but in a different priority-order , with Russia being the main one (thus Obama's takeover of Ukraine in February 2014 turning it against Russia, next door ); and that difference was due to Obama's desire to be favorably viewed by the residents in America's biggest export and import market, the EU, and so his bringing another member (Ukraine) into the EU (which still hasn't yet been culminated).

Trump is instead building on his alliance with King Saud and the other GCC monarchs, a group who can more directly cooperate to control the value of the US dollar than the EU can. Furthermore, both conservative (including Orthodox) Jews in the United States, and also white evangelical Protestants in the US, are strongly supportive of Israel, which likewise sides with the Arab oil monarchs against Iran and its allies. Trump needs these people's votes.

Trump also sides with the Sauds against Canada. That's a matter which the theorists who assert that Israel controls the US, instead of that the Sauds (allied with America's and Israel's billionaires) control the US, ignore; they ignore whatever doesn't fit their theory. Of course, a lot doesn't fit their theory (which equates "Jews" with "Israelis" and alleges that "they" control the world), but people whose prejudices are that deep-seated, can't be reached by any facts which contradict their self-defining prejudice. Since it defines themselves, it's a part of them, and they can never deny it, because to do so would be to deny who and what they are, and they refuse to change that. The Sauds control the dollar; Israel does not, but Israel does the lobbying, and both the Sauds and Israel want Iran destroyed. Trump gets this pressure not only from the billionaires but from his voters.

And, of course, Democratic Party billionaires push the narrative that Russia controls America. It used to be the Republican Joseph R. McCarthy's accusation, that the "commies" had "infiltrated" , especially at the State Department . So: Trump kicked out Russia's diplomats, to satisfy those neocons -- the neoconservatives of all Parties and persuasions, both conservative and liberal.

To satisfy the Sauds, despite the EU, Trump has dumped the Iran deal . And he did it also to satisfy Israel, the main US lobbyists for the Sauds. (Americans are far more sympathetic to Jews than to Arabs; the Sauds are aware of this; Israel handles their front-office.) For Trump, the Sauds are higher priority than Europe; even Israel (who are an expense instead of a moneybag for the US Government) are higher priority than Europe. Both the Sauds and Israel together are vastly higher. And the Sauds alone are higher priority for Trump than are even Canada and Europe combined . Under Trump, anything will be done in order to keep the Sauds and their proxy-lobbyists (Israel) 'on America's side'.

Consequently, Trump's political base is mainly against Iran and for Israel, but Obama's was mainly against Russia and for the EU. Obama's Democratic Party still are controlled by the same billionaires as before; and, so, Democrats continue demonizing Russia, and are trying to make as impossible as they can, any rapprochement with Russia -- and, therefore, they smear Trump for anything he might try to do along those lines.

Both Obama and Trump have been aiming to extend America's aristocracy's dominance around the world, but they employ different strategies toward that politically bipartisan American-aristocratic objective: the US Government's global control, for the benefit of the US aristocracy, at everyone else's expense. Obama and Trump were placed into the White House by different groups of US billionaires, and each nominee serves his/her respective sponsors , no public anywhere -- not even their voters' welfare.

An analogous example is that, whereas Fox News, Forbes, National Review, The Weekly Standard, American Spectator, Wall Street Journal, Investors Business Daily, Breitbart News, InfoWars, Reuters, and AP , are propagandists for the Republican Party ; NPR, CNN, NBC, CBS, ABC, Mother Jones, The Atlantic, The New Republic, New Yorker, New York Magazine, New York Times, Washington Post, USA Today, Huffington Post, The Daily Beast , and Salon , are propagandists for the Democratic Party ; but, they all draw their chief sponsors from the same small list of donors who are America's billionaires, since these few people control the top advertisers, investors, and charities, and thus control nearly all of the nation's propaganda. The same people who control the Government control the public; but, America isn't a one-Party dictatorship. America is, instead, a multi-Party dictatorship . And this is how it functions.

Trump cancelled the Iran deal because a different group of billionaires are now in control of the White House, and of the rest of the US Government. Trump's group demonize especially Iran; Obama's group demonize especially Russia. That's it, short. That's America's aristocratic tug-of-war; but both sides of it are for invasion, and for war. Thus, we're in the condition of 'permanent war for permanent peace' -- to satisfy the military contractors and the billionaires who control them. Any US President who would resist that, would invite assassination; but, perhaps in Trump's case, impeachment, or other removal-from-office, would be likelier. In any case, the sponsors need to be satisfied -- or else -- and Trump knows this.

Trump is doing what he thinks he has to be doing, for his own safety. He's just a figurehead for a different faction of the US aristocracy , than Obama was. He's doing what he thinks he needs to be doing, for his survival. Political leadership is an extremely dangerous business. Trump is playing a slightly different game of it than Obama did, because he represents a different faction than Obama did. These two factions of the US aristocracy are also now battling each other for political control over Europe .

caconhma -> MoreSun • Mon, 08/13/2018 - 00:57 Permalink

The article is correct:

The Bottom Line

Trump and its policies have no chance to succeed neither inside nor outside the USA. The USA has less than 3-5 years to maintain the present status quo.

PitBullsRule -> PitBullsRule • Sun, 08/12/2018 - 23:40 Permalink

Yeah, its the defense contractors. It has nothing to do with the zillions of cars that clog every fucking freeway in this country every morning and every evening, 7 days a week. Its not the assholes cruising around in monster trucks alone, just to show off their stupid trucks. It has nothing to do with the the zillions of jets screaming through the skies carry all those fat assholes to meetings all over the world for no reason. It has nothing to do with the billions of barrels of oil that come to the US on tankers as long as city blocks filled constantly day and night.

Its not that, its Lockheed selling them airplanes. Thats how the sand niggers got so much US money, Lockheed.

What a fucking conspiratorial ass-swipe this guy is.

NiggaPleeze -> wet_nurse Mon, 08/13/2018 - 00:02 Permalink

Eric Zeusse ranks in popularity right along the Gatestone Institute - though Eric may just be ignorant and opinionated whilst Gatestone is an affirmative disinformation propaganda organ, both are equally annoying to read. I just came for the comments :).

JSBach1 -> NiggaPleeze Mon, 08/13/2018 - 00:38 Permalink

+1. Eric Zuesse is part-and-parcel of the agenda that the Gatestone Institute espouses.

Eric Zuesse's real agenda can be revealed by his position on 9/11 (see second link below). He also blames Obama for everything (he shifts the blame away from Israel onto any other party which could be blamed due to either direct or indirect ties)

Here is Eric Zuesse in his own words:

Notice the absence of Israel/Zionism

Historic New Harpers Article Exposes Who Controls America
Posted on December 17, 2015 by Eric Zuesse.

"The fundamentalist-Sunni royal family of the Sauds have bought the highest levels of the U.S. government in order to control U.S. foreign policies, especially the ongoing wars to take down the governments of Iraq, Libya, Syria, and ultimately (they hope) of Russia itself, which latter nation has allied itself instead with Shia countries. The controlling entities behind American foreign policies since at least the late 1970s have been the Saud family and the Sauds' subordinate Arabic aristocracies, which are the ones in Qatar (the al-Thanis), Kuwait (the al-Sabahs), Turkey (the Turkish Erdoğans, a new royalty), and UAE (its six royal families: the main one, the al-Nahyans in Abu Dhabi; the other five: the al-Maktoums in Dubai, al-Qasimis in Sharjah, al-Nuaimis in Ajman, al-Mualla Ums in Quwain, and al-Sharqis in Fujairah). Other Saudi-dominated nations -- though they're not oil-rich (more like Turkey in this regard) -- are Pakistan and Afghanistan."

". But, perhaps, one can safely say that the alliance between the U.S. aristocracy and the royal Sauds, is emerging as a global dictatorship, a dictatorial type of world government. Because, clearly: those two aristocraciues have been, to a large extent, ruling the world together, for several decades now. From their perspective, jihadists are themselves a weapon, not merely a political nuisance.

This is a more realistic explanation of America's decades-long catastrophic failures to make significant progress in eliminating even a single one of the numerous jihadist groups around the world: that's how things have been planned to be. It's not just 'intelligence errors' or 'not being tough enough.' Those 'explanations' are just cover-stories, propaganda, PR from the aristocrats. It's skillful 'crowd control': keeping the people in their 'proper' places."

http://washingtonsblog.com/2015/12/historic-new-harpers-article-exposes

9/11: Israel Didn't Do It; The Plan Was Co-Led by U.S. & Saud Governments
By Eric Zuesse

March 15, 2018

"9/11 was a well-planned operation, whatever it was. Substantial money paid for it, but little if any of that came from either Iran or Israel. It all came from fundamentalist-Sunnis.

And, if all of the money was fundamentalist-Sunni, then the only non-Sunni people who could have been involved in planning the operation would have been George W. Bush and his friends

The problem certainly isn't Jews nor Muslims. The problem is the aristocracy, which controls Saudi Arabia, and the aristocracy which controls Israel, and the aristocracy which controls America. The victim is the public, and the victimizer is the aristocracy. It's not just 9/11."

http://www.informationclearinghouse.info/48957.htm

Obama's Nazis
Posted on August 17, 2014 by Eric Zuesse.

(Zuesse's obsession with the word nazis or Nazis)

"What Obama has done and is doing in Ukraine is historic, like what Adolf Hitler did, and like what Slobodan Milosevic* did, and like other racist fascists have done; and he, and we Americans (if we as a nation continue accepting this), will be remembered for it, like they and their countries were. Evil on this scale cannot be forgotten. No matter how solidly the American "news" media hide this history, it is already solidly documented for the history books. Obama will be remembered as the worst President in U.S. history, just as the racist-fascist or 'nazi' leaders of other countries are."

http://washingtonsblog.com/2014/08/obamas-nazis.html

Jewish Billionaire Finances Ukraine's Aydar SS Nazi Troops
Posted on April 7, 2015 by Eric Zuesse.

"The hyper-nationalist Ukrainian-Israeli billionaire Ihor Kolomoysky, a friend of the Obama White House and employer of Joe Biden's son Hunter Biden, is a major donor to far-right Ukrainian causes. He sides with the followers of Stepan Bandera, the pro-Nazi Ukrainian leader whom Hitler ditched when Bandera made clear that he wanted Ukraine to be nazi but independent of Germany's Nazi Party. Briefly, Bandera's #2 in command, Yaroslav Stetsko, led nazi Ukraine, and approved the slaughter of thousands of Jews there."

http://washingtonsblog.com/2015/04/jewish-billionaire-finances-ukraines

"Zuesse is pushing Zionist lies. One of the links in the article goes to a Reuters story, "Exclusive – Over 100 Russian soldiers killed in single Ukraine battle – Russian rights activists," that claims to get its info from the "Russian presidential human rights council."

If you want to read more lies by Zuesse, go to this "AMAZON" link to read reviews of his book, "Iraq War: The Truth," in which Zuesse claims that GW Bush invaded Iraq to thank Jesus for his alcohol and drug addiction cure and to neuter the International Criminal Court???

There is one comment lavishing praise on Zuesse's book about the Iraq War by David Swanson, another Zionist tool and BS artist, who's been outed in the past by the blog, "American Everyman."

https://careandwashingofthebrain.blogspot.com/2014/09/stay-away-from-wh

http://beforeitsnews.com/survival/2015/01/i-expect-my-apology-from-wash

Winston Churchill -> wet_nurse Mon, 08/13/2018 - 00:06 Permalink

A total one, although his mention of MacKinder was only bright spot.

The US has been using the Heartland strategy since before the occupation of Afghanistan, which

was in response to the Taliban approving oil pipelines from Iran to China thru the Kush.The real reason

for the everlasting war there.With the defection of Pakistan to the SCO, the only option is take out Iran

and Turkey now that Syria is lost.Its not even a matter of which faction of billionaires controls empire

policy, its pure geography.You build the alliances around that geography,not the other way around.

The Great Game was played for 200 years over this same ground,only the players have changed.

Hence both the Turkey and Iran situation now, the empire wants control of both,but will probably get neither.

The last roll of the dice.

Hyjinx Sun, 08/12/2018 - 23:42 Permalink

What is this rambling unfocused BS? Just because Trump thought the Iran deal was shitty doesn't mean he works for the Saudis.

OverTheHedge -> My Days Are Ge Mon, 08/13/2018 - 00:20 Permalink

See how fast the internet warriors are to claim the article is rubbish, and not reflecting reality. No argument to back up their propaganda, but that's not important. Must be depressing running the Sunday evening shift in the cubicle farm; all the boys in their neatly pressed uniforms, clicking away to keep us safe from democracy. Well done lads, another day keeping the evil Russians /Iranians at bay.

I actually find it interesting to see what shakes the foundations, and this article seems to be something that they don't like, so probably worth a re-read just to get all the nuances. Of course, the author suggesting that it is not Jews running America will get short shrift from some commenters, but it is certainly interesting to have pointed out, finally, that Israel is a net drain, and Saudi Arabia an enormous gain for the US. We always say to follow the money, and whilst Israel is good profit for the MIC, Saudi Arabia IS the petrodollar system - mustn't forget that. No oil in Saudi Arabia, no petrodollar. I wonder how long they have left until it's all gone? That would probably be the over-riding factor in deciding war with Iran.

Joe A Mon, 08/13/2018 - 00:55 Permalink

I always wondered why the EU did nit make bigger efforts to replace the petrodollar with the petroeuro but nobody wants to end up as Ghadaffi or Saddam Hussein who threatened to do just that. Iran has also repeatedly threaten to that. Also Putin has recently said that Russia wants to move away from the petrodollar. He must know that that is dangerous for one's health so there must be some sort of alliance against the dollar being formed.

hugin-o-munin Mon, 08/13/2018 - 01:15 Permalink

Well written article that sums it up nicely:

The United States is in a state of constant war with the entire world.

[Aug 08, 2018] In past wars, civilian oil tankers did not sail through the straits

Aug 08, 2018 | www.unz.com

Carlton Meyer , • Website August 4, 2018 at 6:03 am GMT

Four key points:

1. Iraq is run by a pro-Iran Shite government that tolerates the US occupation due to the money provided. Before the USA attacks Iran, it should remove all its 10,000 troops and 10,000 civilians and close its massive embassy there and write that country off. Otherwise, we'll have thousands of American POWs. Meanwhile, the Kurds will get crushed as the Turks and Iraqis use the chaos to destroy them.

2. The oil-rich British puppet state of Kuwait is hated by all Iraqis and Iranians. If the USA attacks Iran, one should expect Iranian and maybe Iraqi units crossing the border, while Kuwait's army flees as expected. The USA keeps an army brigade there, but that may not be enough to fend off an invasion, even with air superiority.

3. In past wars, civilian oil tankers did not sail through the straits. The insurers (mostly Lloyds of London) and others announced they would not cover losses, and unionize ship crews refused to enter the war zone. So even if the USA keeps the straits open, all that oil will not flow forth.

4. Iran has a fortified island in the Gulf whose guns cannot be silenced with just air power. A major amphibious landing is required to clear that island, and it will be bloody. Note the ship channels in the map. Supertankers are huge, so while the Straits of Hormuz are large, these big ships can only pass thru these two narrow channels, which are easily blocked. Iran could park its own tankers in these channels to block them and hope the USA foolishly sinks them, thus really blocking the entire channel.

These four issues are of more importance than air battles over Iran.

[Aug 08, 2018] The U.S. Oil Production "Mirage" by Nick Cunningham

Aug 08, 2018 | oilprice.com

It is a little early to really get a sense of how much the Permian is slowing down. Most analysts have been assuming an overall slowdown over the next 12 months because of pipeline constraints. However, the EIA figures might suggest that the problem has already started to bite. In April, the EIA predicted in its Drilling Productivity Report that Permian production would jump by 73,000 bpd in May. But the monthly data just released finds only modest gains in Texas (+20,000 bpd) and New Mexico (+3,000 bpd).

Second, the EIA thinks output broke 11 mb/d in July, an all-time high. But judging by the overly-optimistic monthly data from April and May, perhaps the agency is also overstating July figures, which raises the possibility that production is not nearly as high as we currently think.

In the coming months, if monthly U.S. production figures continue to show output undershooting expectations, that would have global ramifications. Most analysts still are baking in strong U.S. shale growth figures into their forecasts. If that additional output fails to materialize, the oil market could end up being a lot tighter than we all expected it to be.

[Aug 08, 2018] Prepare for $90 oil after sanctions against Iran take effect analyst

Notable quotes:
"... "As we go more towards (the fourth quarter) that's when we really see the risk of prices going well into the 80s and potentially even into the 90s but very critical is how much Iranian production we lose," ..."
"... "A lot of people think China can just buy all of the Iranian oil but they came out and said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you could see a significant crunch in terms of lost supplies into the market and then that obviously means higher prices," ..."
Aug 06, 2018 | www.rt.com

Looming US sanctions against Iran will likely hit Tehran's oil sales abroad, and it could lead to a price spike in oil contracts. The first round of renewed US sanctions will take effect on Tuesday with the harshest sanctions, potentially targeting Iran's oil industry, expected to return in early November.

"As we go more towards (the fourth quarter) that's when we really see the risk of prices going well into the 80s and potentially even into the 90s but very critical is how much Iranian production we lose," Amrita Sen, chief oil analyst at Energy Aspects, told CNBC Monday.

Oil was trading at $74 per barrel of Brent benchmark, while the US West Texas Intermediate stood at $69.77 on Monday.

"A lot of people think China can just buy all of the Iranian oil but they came out and said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you could see a significant crunch in terms of lost supplies into the market and then that obviously means higher prices," the analyst added.

The new US sanctions will likely slash oil supply. The last time Iran was sanctioned, it lost half of its exports, which have now returned to 2.4 million barrels per day. Many analysts have said that this time, the negative impact on Iranian oil trade will be less significant, and Iran will lose only half of the previous loss.

Meanwhile, other major producers are ramping up their output. This July, OPEC, Russia and other significant players agreed to gradually raise output for fear of supply deficit on the market. OPEC+ countries will increase production by 1 million barrels per day, of which 200,000 bpd will be provided by Russia.

For more stories on economy & finance visit RT's business section

Read more

[Aug 08, 2018] US World Oil Production and ExxonMobil Outlook

Aug 08, 2018 | peakoilbarrel.com

Guym says: 08/06/2018 at 8:58 am

Earlier estimates of OPEC have now changed, and there is no increase from June. Probably, a slight decrease from SA. From OPEC sources, not Platts. I think they would start increasing if Iran drops, but not much otherwise. I think Sauds and Kuwait joint venture is set up for that potential.

Changing the way I gage things, into a much simpler format. Now, I look at world inventory drops, and look at current increases from OPEC and US. Neither will change much, so inventory drops should continue. Opec needs to come up with a lot more, or it will look damn scary in 2019. With pipeline constraints, Canada is pretty much out of the picture for further increases this year, and not much, elsewhere.

Energy News says: 08/06/2018 at 11:07 am
Yes the outlook for OPEC's July production is looking more flat now. This is a strange situation because Platts is one of OPEC secondary sources and so I assume that they see all the numbers

Argus – Surprise Saudi decline depresses Opec output
https://www.argusmedia.com/en/news/1729615-surprise-saudi-decline-depresses-opec-output

Yes all the tanker trackers are saying that OPEC exports fell in July, this is Reuters version
Reuters on Twitter: https://pbs.twimg.com/media/Dj541N2WwAAy55o.png

kolbeinh says: 08/06/2018 at 11:54 am
The Platts vs Argus divergence is for sure strange. It is easier to track exports than production numbers.
Monsieur George says: 08/06/2018 at 11:57 am
Thank you. This news confirms that world production is stagnating. Possibly very close to the decline. We will have to be attentive to the inventories. It will be the first place that the nations get hold of in order to supply themselves with oil.

[Aug 08, 2018] America's About To Unleash Its NOPEC 'Superweapon' Against The Russians Saudis

Aug 08, 2018 | www.zerohedge.com

Authored by Andrew Korybko via Oriental Review,

The US Congress has revived the so-called "NOPEC" bill for countering OPEC and OPEC+.

Officially called the " No Oil Producing and Exporting Cartels Act ", NOPEC is the definition of so-called "lawfare" because it enables the US to extra-territorially impose its domestic legislation on others by giving the government the right to sue OPEC and OPEC+ countries like Russia because of their coordinated efforts to control oil prices.

Lawsuits, however, are unenforceable , which is why the targeted states' refusal to abide by the US courts' likely predetermined judgement against them will probably be used to trigger sanctions under the worst-case scenario, with this chain of events being catalyzed in order to achieve several strategic objectives.

The first is that the US wants to break up the Russian-Saudi axis that forms the core of OPEC+, which leads to the second goal of then unravelling the entire OPEC structure and heralding in the free market liberalization of the global energy industry.

This is decisively to the US' advantage as it seeks to become an energy-exporting superpower, but it must neutralize its competition as much as possible before this happens, ergo the declaration of economic-hybrid war through NOPEC. How it would work in practice is that the US could threaten primary sanctions against the state companies involved in implementing OPEC and OPEC+ agreements, after which these could then be selectively expanded to secondary sanctions against other parties who continue to do business with them.

The purpose behind this approach is to intimidate the US' European vassals into complying with its demands so as to make as much of the continent as possible a captive market of America's energy exporters, which explains why Trump also wants to scrap LNG export licenses to the EU .

If successful, this could further erode Europe's shrinking strategic independence and also inflict long-term economic damage on the US' energy rivals that could then be exploited for political purposes. At the same time, America's recently unveiled " Power Africa " initiative to invest $175 billion in gas projects there could eventually see US companies in the emerging energy frontiers of Tanzania , Mozambique , and elsewhere become important suppliers to their country's Chinese rival, which could make Beijing's access to energy even more dependent on American goodwill than ever before.

If looked at as the opening salvo of a global energy war being waged in parallel with the trade one as opposed to being dismissed as the populist piece of legislation that it's being portrayed as by the media, NOPEC can be seen as the strategic superweapon that it actually is, with its ultimate effectiveness being dependent of course on whether it's properly wielded by American decision makers.

It's too earlier to call it a game-changer because it hasn't even been promulgated yet, but in the event that it ever is, then it might go down in history as the most impactful energy-related development since OPEC, LNG, and fracking.

bshirley1968 -> HilteryTrumpkin Mon, 08/06/2018 - 14:47 Permalink

No way US can manipulate oil trade at this point without hurting themselves or helping their "enemies". Cause and effect, just think it through.

The world needs energy, Russia has energy...and a real surplus for sale. The US is a net energy consumer with no surplus. China needs energy in a big way. Trying to cut off Russian and Iranian oil and trying to blow up the Chinese economy are acts of war. The West realizes there is no way they can survive in their current status of moar with that kind of competition out there. The BRICST now constitute $17 trillion in combined GDP. They have the energy sources (Russia and Iran), they have the manufacturing base (China), they have the agricultural base (Russia, Brazil, South Africa), and they have plenty of customers.....even outside the BRICST union. That is a formidable competitive force to face when you are an economy structured on infinite growth on a finite planet......that you control less and less of each year.

[Aug 07, 2018] OIL and only OIL should guide the policy making considerations of the American Empire in the Middle East

Aug 07, 2018 | www.unz.com

Renoman , August 3, 2018 at 9:21 am GMT

War with Iran? I can not imagine a more foolish thing to do.
Of course they will rally with their own Countrymen, everyone hates the USA.
The World economy will be in a complete tailspin, the US will likely finally go broke over it and chances are pretty good that Israel will be flattened and paved [one positive thing].
You fight Iran you fight China, you don't go messing with their road. Likely not bombs and guns either most likely money, something America has not much of.

The faster America dumps this crazy fascination with the Jews the faster it will get it's act together and become a Country again.

Sally Snyder , August 3, 2018 at 11:29 am GMT
As shown in this article, the U.S. Secretary of State is trying to manipulate Iranian Americans into supporting regime change in Iran:

https://viableopposition.blogspot.com/2018/07/manipulating-iranian-americans-laying.html

Washington is working overtime to lay the groundwork for a war in Iran.

bob sykes , August 3, 2018 at 12:19 pm GMT
"ultimately prevail"

What can that possibly mean? We can bomb Iran back into the Stone Age, but Iran does not need a modern economy or military to close Hormuz. All they need do is fire a few land-based artillery and anti-ship missiles at a defenseless freighter or tanker. The insurance companies would do the rest–remove all commercial shipping from the Persian and Oman Gulf regions. That eliminates 20% of the World's oil supply, and it would collapse the World's economy, including our own.

Asymmetric warfare would engulf the entire Middle East, including Israel, with its large native Arab population and its occupation of large Arab populations in Gaza and the West Bank.

Iran has the upper hand here. We need to be very careful.

nickels , August 3, 2018 at 12:23 pm GMT
Let's face it-when we impose sanctions on Iran, we are already at war with them. Just like we are already at war with Russia. Imbeciles, all who run this country.
WorkingClass , August 3, 2018 at 1:13 pm GMT
Paranoid thug Bibi to Trump: Destroy Iran for me or I will feed you to your domestic enemies.
Charles Pewitt , August 3, 2018 at 3:07 pm GMT

Oil is the vital strategic Western interest in the Persian Gulf. Yet a war with Iran would imperil, not secure, that interest.

The American Empire's only strategic three letter word interest in the Middle East is O -- I –L.

The WASP/JEW ruling class of the American Empire and the Jew-controlled Neo-Conservative faction in the Republican Party wants to elevate the three letter word J -- E –W to paramount importance in the Middle East.

OIL and only OIL should guide the policy making considerations of the American Empire in the Middle East.

[Aug 06, 2018] Bolton Blocking Strait of Hormuz will be Iran's 'worst mistake' instead it must 'come to table'

Notable quotes:
"... "They could take up the president's offer to negotiate with them, to give up their ballistic missile and nuclear weapons programs fully and really verifiably not under the onerous terms of the Iran nuclear deal, which really are not satisfactory," ..."
"... "If Iran were really serious they'd come to the table. We'll find out whether they are or not," ..."
"... "matter of respecting international agreements and a matter of international security." ..."
"... "behaves like a normal country." ..."
"... "require enormous change" ..."
"... "increase pressure on the Iranian regime by reducing to zero its revenue from crude oil sales." ..."
"... "the mother of all wars." ..."
"... "confronting possible threats." ..."
"... "The hours of our negotiations with America were perhaps unprecedented in history; then Trump signs something and say all [those negotiations] are void; can you negotiate with this person? Is this [negotiations offer] anything but a publicity stunt?" ..."
Aug 06, 2018 | www.rt.com

Closing the Strait of Hormuz would be the biggest mistake Iran has ever made, the US president's national security advisor John Bolton said. He urged Tehran to sit down for talks on its nuclear and missile programs with the US. Dismissing Tehran's threats to block the strait if its oil exports are stopped, Bolton on Monday said the Iranians were "bluffing." He then quickly changed his tone saying that Iran should actually engage in a dialog with the US instead of issuing threats.

"They could take up the president's offer to negotiate with them, to give up their ballistic missile and nuclear weapons programs fully and really verifiably not under the onerous terms of the Iran nuclear deal, which really are not satisfactory," Bolton told Fox News, referring to the US President Donald Trump's demands to "re-negotiate" the 2015 Iranian nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA).

"If Iran were really serious they'd come to the table. We'll find out whether they are or not," Bolton added. The White House national security advisor's remarks came less than a day before the first round of renewed US sanctions take effect on Tuesday after midnight US Eastern time. The harshest restrictions are expected to be re-imposed by early November.

Washington decided to reinstate the penalties following Trump's decision to unilaterally withdraw from the JCPOA in May. Shortly after exiting the agreement, the US penned a 12-point ultimatum to Iran, which, among other things, demanded that Tehran end its ballistic missile program, a condition it has repeatedly rejected. The move was then widely condemned by the EU and other signatories of the deal, including Russia and China, which still consider the agreement to be an effective means of non-proliferation and have vowed to keep their part of the deal.

Earlier on Monday, the EU said that starting August, it is enforcing its so-called Blocking Statute aimed at protecting the European companies doing business in Iran from the extraterritorial effects of US sanctions. The bloc said that maintaining the nuclear deal with Iran is a "matter of respecting international agreements and a matter of international security."

Meanwhile, the US Secretary of State Mike Pompeo vowed to "rigorously" enforce the sanctions on Iran until it "behaves like a normal country." He added that it would "require enormous change" on Iran's part for the US to review its increasingly hostile approach to Tehran.

In July, Brian Hook, the US State Department's director of policy planning, said that Washington's goal is to "increase pressure on the Iranian regime by reducing to zero its revenue from crude oil sales."

Iranian leaders repeatedly threatened to shut down the Strait of Hormuz and stop the Persian Gulf oil exports if its own oil exports are blocked. Iranian President Hassan Rouhani also cautioned Washington against launching a war against Tehran by saying that it would be "the mother of all wars." Iran's Revolutionary Guards have recently admitted that its warships took part in a naval exercise in the Persian Gulf to hone skills in "confronting possible threats."

Earlier, the Iranian Foreign Minister Javad Zarif has slammed Donald Trump's recent proposal to enter into talks with Iran by calling it nothing but a PR stunt. "The hours of our negotiations with America were perhaps unprecedented in history; then Trump signs something and say all [those negotiations] are void; can you negotiate with this person? Is this [negotiations offer] anything but a publicity stunt?" he said.

The Trump administration has reportedly requested a meeting with Rouhani eight times, but the Iranian side refused to participate.

Read more

[Aug 06, 2018] US sanctions forcing creation of work arounds

Aug 06, 2018 | www.veteranstoday.com

As Iran is preparing for the first wave of returning US sanctions that could largely hamper its foreign trade, the country's banks appear to have already created a mechanism for imports of essential goods from Russia .

Bank Saderat Iran (BSI) announced in a statement on Sunday that it had sealed a deal with the Moscow offshoot of Bank Melli Iran (BMI) over a re-financing scheme that envisaged providing €10 million to fund imports of essential commodities, medicines, medical equipment and the raw materials for industrial units.

[Aug 06, 2018] Iran Scrambles to Ready Economy for US Sanctions by Jason Ditz

Sanctions might hit Iran oil industry hard.
Aug 06, 2018 | news.antiwar.com

New restrictions aim to protect currency from further falls

With US sanctions against Iran officially going back into place on August 6, the Iranian government is scrambling to take some last minute measures to shore up their economy, and particularly their currency, before the sanctions start to hit.

Trying to protect the rial is a high priority, with a former central bank deputy governor and a number of foreign exchange dealers arrested amid the rial plummeting to all-time lows. On Monday, a rash of strict new measures are to be imposed on foreign currency access to try to limit any further falls.

Iran wants to make sure that what foreign currency does flow overseas is strictly allocated to a handful of important industries. The fall of prices for the rial has been heavy related to the surge in the price of gold, as economic uncertainty has many Iranians running to precious metals, and gold imports surged in recent weeks.

US sanctions aim to limit, if not totally eliminate, Iran's access to foreign markets. That also has Iran trying to make some last-minute purchases while they know they still can. Five new planes were purchased from ATR for the state airline. It's far short of the new fleet of airliners Iran initially sought, but the best they can do with the US blocking Boeing and Airbus from fulfilling contracts.

Since the August 6 date has been known for months, it's likely much of the market reaction to the sanctions is already factored in to Iran's currency pricing. China's refusal to comply with US sanctions, likewise, is a sign that Iran won't be totally cutoff from world markets. Still, it will take awhile before the full extent of the US attempt, and its effectiveness, is known.

[Aug 06, 2018] The U.S. Oil Production "Mirage" OilPrice.com

Aug 06, 2018 | oilprice.com

It is a little early to really get a sense of how much the Permian is slowing down. Most analysts have been assuming an overall slowdown over the next 12 months because of pipeline constraints. However, the EIA figures might suggest that the problem has already started to bite. In April, the EIA predicted in its Drilling Productivity Report that Permian production would jump by 73,000 bpd in May. But the monthly data just released finds only modest gains in Texas (+20,000 bpd) and New Mexico (+3,000 bpd).

Second, the EIA thinks output broke 11 mb/d in July, an all-time high. But judging by the overly-optimistic monthly data from April and May, perhaps the agency is also overstating July figures, which raises the possibility that production is not nearly as high as we currently think.

In the coming months, if monthly U.S. production figures continue to show output undershooting expectations, that would have global ramifications. Most analysts still are baking in strong U.S. shale growth figures into their forecasts. If that additional output fails to materialize, the oil market could end up being a lot tighter than we all expected it to be.

By Nick Cunningham of Oilprice.com

[Aug 06, 2018] Prepare for $90 oil after sanctions against Iran take effect analyst -- RT Business News

Notable quotes:
"... "As we go more towards (the fourth quarter) that's when we really see the risk of prices going well into the 80s and potentially even into the 90s but very critical is how much Iranian production we lose," ..."
"... "A lot of people think China can just buy all of the Iranian oil but they came out and said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you could see a significant crunch in terms of lost supplies into the market and then that obviously means higher prices," ..."
"... For more stories on economy & finance visit RT's business section ..."
Aug 06, 2018 | www.rt.com

Prepare for $90 oil after sanctions against Iran take effect – analyst Published time: 6 Aug, 2018 21:03 Get short URL Prepare for $90 oil after sanctions against Iran take effect – analyst © China Stringer Network / Reuters Looming US sanctions against Iran will likely hit Tehran's oil sales abroad, and it could lead to a price spike in oil contracts. The first round of renewed US sanctions will take effect on Tuesday with the harshest sanctions, potentially targeting Iran's oil industry, expected to return in early November.

"As we go more towards (the fourth quarter) that's when we really see the risk of prices going well into the 80s and potentially even into the 90s but very critical is how much Iranian production we lose," Amrita Sen, chief oil analyst at Energy Aspects, told CNBC Monday.

Read more © Jorge Silva Is this the end of ultra cheap gasoline in Venezuela?

Oil was trading at $74 per barrel of Brent benchmark, while the US West Texas Intermediate stood at $69.77 on Monday.

"A lot of people think China can just buy all of the Iranian oil but they came out and said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you could see a significant crunch in terms of lost supplies into the market and then that obviously means higher prices," the analyst added.

The new US sanctions will likely slash oil supply. The last time Iran was sanctioned, it lost half of its exports, which have now returned to 2.4 million barrels per day. Many analysts have said that this time, the negative impact on Iranian oil trade will be less significant, and Iran will lose only half of the previous loss.

Meanwhile, other major producers are ramping up their output. This July, OPEC, Russia and other significant players agreed to gradually raise output for fear of supply deficit on the market. OPEC+ countries will increase production by 1 million barrels per day, of which 200,000 bpd will be provided by Russia.

For more stories on economy & finance visit RT's business section

[Aug 06, 2018] America's About To Unleash Its NOPEC 'Superweapon' Against The Russians Saudis

Aug 06, 2018 | www.zerohedge.com

Authored by Andrew Korybko via Oriental Review,

The US Congress has revived the so-called "NOPEC" bill for countering OPEC and OPEC+.

Officially called the " No Oil Producing and Exporting Cartels Act ", NOPEC is the definition of so-called "lawfare" because it enables the US to extra-territorially impose its domestic legislation on others by giving the government the right to sue OPEC and OPEC+ countries like Russia because of their coordinated efforts to control oil prices.

Lawsuits, however, are unenforceable , which is why the targeted states' refusal to abide by the US courts' likely predetermined judgement against them will probably be used to trigger sanctions under the worst-case scenario, with this chain of events being catalyzed in order to achieve several strategic objectives.

The first is that the US wants to break up the Russian-Saudi axis that forms the core of OPEC+, which leads to the second goal of then unravelling the entire OPEC structure and heralding in the free market liberalization of the global energy industry.

This is decisively to the US' advantage as it seeks to become an energy-exporting superpower, but it must neutralize its competition as much as possible before this happens, ergo the declaration of economic-hybrid war through NOPEC. How it would work in practice is that the US could threaten primary sanctions against the state companies involved in implementing OPEC and OPEC+ agreements, after which these could then be selectively expanded to secondary sanctions against other parties who continue to do business with them.

The purpose behind this approach is to intimidate the US' European vassals into complying with its demands so as to make as much of the continent as possible a captive market of America's energy exporters, which explains why Trump also wants to scrap LNG export licenses to the EU .

If successful, this could further erode Europe's shrinking strategic independence and also inflict long-term economic damage on the US' energy rivals that could then be exploited for political purposes. At the same time, America's recently unveiled " Power Africa " initiative to invest $175 billion in gas projects there could eventually see US companies in the emerging energy frontiers of Tanzania , Mozambique , and elsewhere become important suppliers to their country's Chinese rival, which could make Beijing's access to energy even more dependent on American goodwill than ever before.

If looked at as the opening salvo of a global energy war being waged in parallel with the trade one as opposed to being dismissed as the populist piece of legislation that it's being portrayed as by the media, NOPEC can be seen as the strategic superweapon that it actually is, with its ultimate effectiveness being dependent of course on whether it's properly wielded by American decision makers.

It's too earlier to call it a game-changer because it hasn't even been promulgated yet, but in the event that it ever is, then it might go down in history as the most impactful energy-related development since OPEC, LNG, and fracking.

[Jul 29, 2018] The industry's average decline rate -- the speed at which output falls without field maintenance or new drilling -- was 6.3% in 2016 and 5.7% last year

Jul 29, 2018 | peakoilbarrel.com

Ron Patterson says: 07/28/2018 at 12:40 pm

Behind a paywall but here is the gist of the article

WSJ: As Oil Industry Recovers From a Glut, a Supply Crunch Might Be Looming

Dearth of investments in oil projects mean a spike in prices above $100 could be on the horizon

Crude across the globe is being used up faster than it is being replaced, raising the prospect of even higher oil prices in the coming years.
The world isn't running out of oil. Rather, energy companies and petro-states -- burned by 2014's price collapse -- are spending less on new projects, even though oil prices have more than doubled since 2016. That has sparked concerns among some industry watchers of a massive price spike that could hurt businesses and consumers.
The oil industry needs to replace 33 billion barrels of crude every year to satisfy anticipated demand growth, particularly as developing countries like China and India are consuming more oil. This year, new investments are set to account for an increase of just 20 billion barrels, according to data from Rystad Energy.

The industry's average decline rate -- the speed at which output falls without field maintenance or new drilling -- was 6.3% in 2016 and 5.7% last year, the Norway-based consultancy said. In the four years before the crash, that decline rate was 3.9%.

Any shortfall in supply could push prices higher, similar to when oil hit nearly $150 a barrel in 2008, some industry participants say.
"The years of underinvestment are setting the scene for a supply crunch," said Virendra Chauhan, an oil industry analyst at consultancy Energy Aspects. He believes a production deficit could come as soon as the end of next year, potentially pushing oil above $100 a barrel.

SNIP
In parts of Brazil and Norway, decline rates are already above 10-15%, Energy Aspects' Mr. Chauhan said. Output from Venezuela's aging fields fell by more than 700,000 barrels a day over the past year, according to the IEA. In June, Angola's output hit a 12-year low, while Mexico's production is down nearly 300,000 barrels a day since the middle of 2016, despite efforts to open up the industry and reverse declines, the IEA said.
"Nobody is really stepping in," said Doug King, chief investment officer of the $140 million Merchant Commodity hedge fund. "People still got burned by the downturn."

[Jul 29, 2018] Rystad has first half figures for discoveries a bit better than last year, though more on the gas side than oil

Jul 29, 2018 | peakoilbarrel.com

George Kaplan says: 07/27/2018 at 3:42 pm

Rystad has first half figures for discoveries a bit better than last year, though more on the gas side than oil, but there was a billion barrel Equinor discovery in Brazil this week that will make things look better. I thought things were worse, partly because I assumed the Guyana discoveries would count as appraisals and be back dated against 2016 and 2017, but it looks like they are new fields. Overall though it still shows a big drop over the past few years.

https://www.rystadenergy.com/newsevents/news/press-releases/2018-conventional-discovered-resources-on-track-increase/

Watcher says: 07/28/2018 at 2:37 am
Oilprice.com is presenting the same data with a lot more hype and celebration.
George Kaplan says: 07/28/2018 at 4:03 am
A "remarkable" recovery from "abnormally" low levels – complete bollocks, and pretty close to self-contadictory. Everything is, and always will be, awesome in the oilprice universe, if not they'd lose their revenue stream.
Michael B says: 07/28/2018 at 7:00 am
George, I admit I had to rub my eyes when I read that op.com version.

Loathsome Nonsense.

Guym says: 07/28/2018 at 8:28 am
Yeah, because they are mostly deep sea stuff, we should expect to see that pumping by next month? 🤡

[Jul 28, 2018] Fernando Leanme

Jul 28, 2018 | blogspot.com.es

x Ignored says: 07/27/2018 at 3:53 am Iran would not try to block anything unless it is under attack by the US. The Pentagon is opposed to such an attack, but Trump is heavily influenced by Netanyahu and is advised by the same neocons who got the US into the fiasco in Iraq. Given the inability of the US Congress to enforce the constitution by denying the Prsident to start a war without a congressional declaration of war, it seems the USA may be on its way to destroy the world economy to please an extremist Israeli right wing government.

I write destroy the world economy because it's doubtful Iran would respond as anticipated by the Americans, who have a tendency to fight wars with strategies based on previous wars and an excess of complex gadgets and extremely expensive technology. I don't know what they have in mind, but I'm sure it would be unexpected, calibrated to avoid nuclear retaliation, and may evolve over time. But I'm sure others will see the risks, and the oil market will take off into the $100's and possibly $200's unless there's adults left in the USA senate to block this craziness.

  1. Mushalik x Ignored says: 07/26/2018 at 8:11 am Here is something:

    Trump, Iran and the New Guns of August
    https://www.bloomberg.com/view/articles/2018-07-24/trump-iran-and-the-new-guns-of-august

      • Hightrekker x Ignored says: 07/26/2018 at 9:51 am I agree– and with all those KSA installations just 15 minutes away by unstoppable missile technology (1970 midrange seems a little hard for current technology), we have a quandary, not a problem. Reply
        • Fernando Leanme x Ignored says: 07/27/2018 at 3:57 am Exactly. But I'm not sure US National Security advisor Bolton knows anything about low technology midrange missiles and drones, some of which, in a pinch, can be piloted by small light weight kamikaze martyrs.
    • Eulenspiegel x Ignored says: 07/26/2018 at 10:24 am The worst thing for a date to guess is politics.

      There are 10 countries that have to grow oil production to avoid peak oil – these with still big reserves.

      One knocked out itself – Venezuela
      One is under attack from the USA – Iran

      Irak isn't that stable, either.

      A hot war can break out every moment, or a civil war devasting and blocking infrastructure for years, while other countries deplete.

      Or peace can come and these ressources can get used.

      These combined 10 mb/d alone will determine peak oil – by 5 years or more in either direction. These 10 mb/day can't be replaced by russion oil tsars, US rednecks with too much Wallstreet money or Saudis opening secret valves of instant oil wonder production.

      Venezuela can get a new government and increase production by a big amount, helped by international money. It has the ressources to get one of the big producers when the tar oil is lifted.

      So in my eyes, it looks like somewhere between 2020 and 2030, perhaps even later.

    • Iron Osiris x Ignored says: 07/26/2018 at 10:47 am Hi Michael B,

      Couldn't agree with you more regarding OPEC reserve estimates, they are all full of shit, and no one except a handful of people in those countries would know how much they have left.

      Solving this peak oil timing is more similar to a quantum mechanics problem rather than a Newtonian mechanics one. It complexity, lack of transparency and political and economic implication make it impossible to have a deterministic answer, its pure probability, and also speculations.

      Like you i think all these projections are wrong. Maybe we will extract a lot more oil with newer technologies or new field discoveries and end up cooking the planet with climate change, and we won't see a "peak oil" for 100s of years who knows.

    • TechGuy x Ignored says: 07/26/2018 at 2:54 pm "The peak oil experts were dreadfully wrong with their HL 15 years ago, so what prevents their being just as wrong now? "

      Why is Oil at $70/bbl? Back in 1999 its was about $10/bbl. If there no supply constraints why did the price increase ~7 fold in less than 20 years? Also why the need to to drill for Shale Oil (Source Rocks) & develop in Deep & ultradeep water?

      Conventional oil peaked in 2005, All the growth is coming from offshore & Shale. New Oil discoveries have dropped off the cliff. We found almost nothing in 2017. Oil Discoveries peaked in 1960s and been in permanent decline. Thus if we are discovery less and less new oil fields every year, below the rate of consumption, Oil production will have to fall to match discoveries at some point in the future.

      Other clues:
      1. Oil Majors perfer to drill on Wall street (aka using debt to fund stock buybacks) instead of developing new fields for future production.
      2. Shale Debt: Shale drilling never made a profit, except for using OPM (other People's money) to fund CapEx\OpEx.
      3. US invaded or targeted with Regime change in Middle East Oil producing nations. Only Iran remains and you can already hear the War drumbeats for Iran. Reply

      • Michael B x Ignored says: 07/26/2018 at 3:31 pm Indeed, and thanks. Note that your answer has to do not with HL but with obvious signs & symptoms. Believe me, I've been watching, too. The uncertainty is killing me.
    • Fernando Leanme x Ignored says: 07/27/2018 at 4:25 am Michael, I have never been a peak oiler. I come at this from a different perspective: about 30 years ago I noticed exploration results were decaying, and started working in areas which would allow producing oil and gas in the far future from sources we weren't tapping much at the time.

      I remember sitting in a meeting around 1990 and suggesting to managers in a committee I was briefing that we needed to focus on locking up hydrocarbon molecules, wherever they were, cut down exploration and use that money on technology and getting access.

      This is one reason why eventually I got involved in gas conversion to liquids, heavy oil, and the former Soviet Union, which to us appeared like a happy hunting ground, including its Arctic targets in the Barents, Kara, Yamal, etc. I also had colleagues who went into deep water, EOR, North America Arctic, and of course the hydraulic fracturing of vertical horizontal wells drilled in low perm formations.

      So in my case I've been about 30 years now working on replacing conventional oil barrels with more difficult barrels. And those difficult barrels require higher prices. So the question is, what can poor countries afford? Reply

      • Michael B x Ignored says: 07/27/2018 at 5:13 am So, "not a peak oiler" means you think the fate of conventional oil i