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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.


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[Jul 20, 2018] Of course they don't that's why the imaginary oil glut was thought up. Let everyone else think its glut, it drops the price allows U.S. to buy more. Then deliberate increase inventory by buying more then claim inventory as a reason to drop the price?

Jul 20, 2018 | www.zerohedge.com

Sapere aude -> MusicIsYou Thu, 07/19/2018 - 17:36 Permalink

Of course they don't that's why the imaginary oil glut was thought up. Let everyone else think its glut, it drops the price allows U.S. to buy more. Then deliberate increase inventory by buying more then claim inventory as a reason to drop the price?

Then take oil from the SPR through its bidirectional pipelines, designed just for that purpose and pretend it is production, then of course at some stage as I mentioned ages ago, a fictional drawdown sale of millions of barrels of crude from the SPR would have to be made to keep the books straight for oil that's already gone!

Add to that the Ponzi shale still churning out oil costing them $100 to produce for them to sell at $50 then CEO's shouting from rooftops about how profitable it will all be....with none of them making profits, most of them passing dividends over and selling assets and borrowing more and more that they will never be able to pay back and where the Fed did everything possible to fund the at ZIRP or NIRP but failed miserable.

Then of course we get the same old same old Saudi pretending to raise production when its own wells are falling apart and declining rapidly most subject to water flooding, including the Super Giant Ghawar field.

[Jul 19, 2018] Proposed Law Would Allow U.S. to Sue OPEC for Manipulating Oil Market

Jul 19, 2018 | foreignpolicy.com

S 2929 text

perated by high gasoline prices just ahead of the U.S. midterm elections, lawmakers in Congress are trying to make it easier for the United States to sue OPEC. And unlike previous failed efforts to go after the oil-exporting cartel, this time Congress will find a sympathetic ear in the White House.

The bipartisan No Oil Producing and Exporting Cartels Act, or NOPEC bill, would tweak U.S. antitrust law to explicitly ban just the kind of collusive behavior that OPEC was created to engage in. The bill, a carbon copy of previous legislation, makes illegal any activity to restrain the production of oil or gas or set oil and gas prices and knocks away two legal defenses that in the past have shielded OPEC from U.S. antitrust measures.

[Jul 19, 2018] Iran in 1953: How an Oil Cartel Operation Became a Job for the CIA

Jul 19, 2018 | www.informationclearinghouse.info

Extracted from: The State, the Deep State, and the Wall Street Overworld By Peter Dale Scott

The international lawyers of Wall Street did not hide from each other their shared belief that they understood better than Washington the requirements for running the world. As John Foster Dulles wrote in the 1930s to a British colleague,

The word "cartel" has here assumed the stigma of a bogeyman which the politicians are constantly attacking. The fact of the matter is that most of these politicians are highly insular and nationalistic and because the political organization of the world has under such influence been so backward, business people who have had to cope realistically with international problems have had to find ways for getting through and around stupid political barriers. 44

This same mentality also explains why Allen Dulles as an OSS officer in 1945 simply evaded orders from Washington forbidding him to negotiate with SS General Karl Wolff about a conditional surrender of German forces in Italy – an important breach of Roosevelt's agreement with Stalin at Yalta for unconditional surrender, a breach that is regarded by many as helping lead to the Cold War. 45 And it explains why Allen, as CIA Director in 1957, dealt summarily with Eisenhower's reluctance to authorize more than occasional U-2 overflights of the USSR, by secretly approving a plan with Britain's MI-6 whereby U-2 flights could be authorized instead by the UK Prime Minister Macmillan. 46

This mentality exhibited itself in 1952, when Truman's Justice Department sought to break up the cartel agreements whereby Standard Oil of New Jersey (now Exxon) and four other oil majors controlled global oil distribution. (The other four were Standard Oil Company of New York, Standard Oil of California or Socony, Gulf Oil, and Texaco; together with Royal Dutch Shell and Anglo-Iranian, they comprised the so-called Seven Sisters of the cartel.) Faced with a government order to hand over relevant documents, Exxon's lawyer Arthur Dean at Sullivan and Cromwell, where Foster was senior partner, refused: "If it were not for the question of national security, we would be perfectly willing to face either a criminal or a civil suit. But this is the kind of information the Kremlin would love to get its hands on." 47

At this time the oil cartel was working closely with the British Anglo-Iranian Oil Company (AIOC, later BP) to prevent AIOC's nationalization by Iran's Premier Mossadeq, by instituting, in May 1951, a successful boycott of Iranian oil exports.

In May 1951 the AIOC secured the backing of the other oil majors, who had every interest in discouraging nationalisation.... None of the large companies would touch Iranian oil; despite one or two picturesque episodes the boycott held. 48

As a result Iranian oil production fell from 241 million barrels in 1950 to 10.6 million barrels in 1952.

This was accomplished by denying Iran the ability to export its crude oil. At that time, the Seven Sisters controlled almost 99% of the crude oil tankers in the world for such export, and even more importantly, the markets to which it was going. 49

But Truman declined, despite a direct personal appeal from Churchill, to have the CIA participate in efforts to overthrow Mossadeq, and instead dispatched Averell Harriman to Tehran in a failed effort to negotiate a peaceful resolution of Mossadeq's differences with London. 50

All this changed with the election of Eisenhower in November 1952, followed by the appointment of the Dulles brothers to be Secretary of State and head of CIA. The Justice Department's criminal complaint against the oil cartel was swiftly replaced by a civil suit, from which the oil cartel eventually emerged unscathed. 51

Eisenhower, an open friend of the oil industry changed the charges from criminal to civil and transferred responsibility of the case from the Department of Justice to the Department of State – the first time in history that an antitrust case was handed to State for prosecution. Seeing as how the Secretary of State was John Foster Dulles and the defense counsel for the oil cartel was Dulles' former law firm (Sullivan and Cromwell), the case was soon as good as dead. 52

Thereafter

Cooperative control of the world market by the major oil companies remained in effect, with varying degrees of success, until the oil embargo of 1973-74. That the cooperation was more than tacit can be seen by the fact that antitrust regulations were specifically set aside a number of times during the 1950-1973 period, allowing the major companies to negotiate as a group with various Mideastern countries, and after its inception [in 1960], with the Organization of Petroleum Exporting Countries or OPEC. 53

Also in November 1952 CIA officials began planning to involve CIA in the efforts of MI6 and the oil companies in Iran 54 -- although its notorious Operation TP/AJAX to overthrow Mossadeq was not finally approved by Eisenhower until July 22, 1953. 55

The events of 1953 strengthened the role of the oil cartel as a structural component of the American deep state, drawing on its powerful connections to both Wall Street and the CIA. 56 (Another such component was the Arabian-American Oil Company or ARAMCO in Saudi Arabia, which increased oil production in 1951-53 to offset the loss of oil from Iran. Until it was fully nationalized in 1980, ARAMCO maintained undercover CIA personnel like William Eddy among its top advisors.) 57 The five American oil majors in particular were also strengthened by the success of AJAX, as Anglo-Iranian (renamed BP) was henceforth forced to share 40 percent of the oil from its Iran refinery with them.

Nearly all recent accounts of Mossadeq's overthrow treat it as a covert intelligence operation, with the oil cartel (when mentioned at all) playing a subservient role. However the chronology, and above all the belated approval from Eisenhower, suggest that it was CIA that came belatedly in 1953 to assist an earlier oil cartel operation, rather than vice versa. In terms of the deep state, the oil cartel or deep state initiated in 1951 a process that the American public state only authorized two years later. Yet the inevitable bias in academic or archival historiography, working only with those primary sources that are publicly available, is to think of the Mossadeq tragedy as simply a "CIA coup."

[Jul 18, 2018] Major oil producers agreed Friday to a nominal increase in crude production of about 1 million barrels per day by Keith Johnson

Jun 22, 2018 | foreignpolicy.com

Major oil producers agreed Friday to a nominal increase in crude production of about 1 million barrels per day, a bid to put a damper on high oil prices. But in practice, major oil exporters will likely only be able to add about half that total to global markets, because many countries are already producing at capacity or face severe threats of supply disruption.

Oil markets weren't calmed by the agreement announced Friday by the Organization of the Petroleum Exporting Countries after a contentious week of meetings. Crude prices in New York rose more than 3 percent to almost $68 a barrel and rose about 2 percent in London to more than $74 a barrel.

OPEC didn't agree to increase production as such. Rather the group, with the addition of nonmember Russia, agreed to respect its existing program of restricting supplies. But since the group had gone well overboard and trimmed output by almost 2 million barrels a day, due in large part to a steep falloff in Venezuelan oil production, respecting the original target will translate into more oil for the global market -- on paper, at least.

In practice, only Saudi Arabia and Russia have the capacity to add significant amounts of crude in the next few months. That means Friday's agreement will end up adding about 600,000 barrels of oil a day to the global market.

The contentious meeting took place under the shadow of vituperation from U.S. President Donald Trump, who worried that high oil and gasoline prices would be politically painful ahead of midterm elections later this year. Even after the group's decision had been announced, Trump was still tweeting hopefully about OPEC increasing production.

[Jul 18, 2018] The United States and the Russian Federation would seem to be natural allies

Jul 18, 2018 | www.moonofalabama.org

Oil as a tool of geopolitics

Peter AU 1 , Jul 17, 2018 4:23:41 PM | 112
VK
I posted the sequence of events used to create the petro dollar back in the 2018-33 thread.
Will post them again here as this thread concerns Kissinger.
More specifics can be added to this planned sequence of events, this just the basics.
...........
In the late 1960s, US found oil at Prudhoe bay and by 1970 it was a proved crude oil reserve.
Due to environmental and other legal challenges, construction of the pipeline was held up.

In late 1972 the US Secretary of the Interior declares the trans-Alaska pipeline to be in the US national interest

1973-74. OPEC oil embargo due to US backing of Israel pushes oil prices up in an initial rise.

1973 (OPEC oil embargo) The Trans-Alaska pipeline Authorization Act legislation is quickly pushed through. Signed by Nixon on November 16 1973. This blocked all further challenges allowing construction to begin. pdf

Late 1973 Nixon along with Saudi Arabia create the petro dollar beginning in 1974.

The trans-Alaska pipeline is pushed through to meet a deadline, no costs spared, first oil delivered through the pipeline 28th July 1977, extra pumps then installed and pipeline running at full capacity by 1980. https://en.wikipedia.org/wiki/Construction_of_the_Trans-Alaska_Pipeline_System

1979-80 the price of oil skyrockets due to the Iranian revolution. The US is now the global economic hegemon as all countries now need US dollars to purchase oil.

Historical crude oil price chart https://img-fotki.yandex.ru/get/65661/111554736.48/0_118d4e_344fb37_orig
..................


I have read that Kissinger withheld information from both Nixon and Israel, but have not followed that line of research.
Here is a piece from an official Kissinger biography. You can see here he was working both sides.

https://history.state.gov/departmenthistory/people/kissinger-henry-a
Kissinger entered the State Department just two weeks before Egypt and Syria launched a surprise attack on Israel. The October War of 1973 played a major role in shaping Kissinger's tenure as Secretary. First, he worked to ensure Israel received an airlift of U.S. military supplies. This airlift helped Israel turn the war in Israel's favor, and it also led members of the Organization of Petroleum Exporting Countries (OPEC) to initiate an oil embargo against the United States. After the implementation of a United Nation's sponsored ceasefire, Kissinger began a series of "shuttle diplomacy" missions, in which he traveled between various Middle East capitals to reach disengagement agreements between the enemy combatants. These efforts produced an agreement in January 1974 between Egypt and Israel and in May 1974 between Syria and Israel. Additionally, Kissinger's efforts contributed to OPEC's decision to lift the embargo.

[Jul 18, 2018] Syria and geopolitics of oil

Jul 18, 2018 | www.moonofalabama.org

Peter AU 1 , Jul 17, 2018 6:46:40 PM | 141

Daniel,

It is noticeable that Trump's US attack any Syrian forces coming too close to US occupied zones of al Tanf and Dier Ezzor. Also Trumps takeover of the Deir Ezzor oilfields where US forces simply set up bases or forward posts in the ISIS occupied area.

Under Trump, US has set up a number of new bases in Syria. On the other hand, no concern about Afrin and Manbij. The Deir Ezzor area is Arab tribes and this and al Hasakah (Kurd/Arab?) is the top end of the Persian Gulf/Mesopotamia oil field.

US now controls al Hasakah and half of Deir Ezzor province. The have been ongoing efforts by the US under Trump to take Al Bukamal. US has a base just south of Al Bukamal in Iraq. US bases are now thick throughout Mesopotamia, with more being built.

Also a new base being installed in Kuwait.

The US controls the Arab shore of the Persian gulf, it now has many bases in Iraq and Syria. The only thing missing is the oil rich strip of Iran running alongside the Persian gulf and Mesopotamia.

[Jul 16, 2018] Big Oil s has a long history of compromising national security for profit

Notable quotes:
"... How different is it really from the past 70+ years (since that 45' meeting between FDR and the then ruler of KSA), and especially since the "oil shocks" of the 1970's ? The Trumpians are little more direct and crude in their wording, but that is really the only difference I see. ..."
"... Putin's announcement after Turkey's shooting down of a Russian jet that Turkey has been systematically facilitating ISIS oil sales illustrates how the terror-entity has become a figleaf to justify military action. ..."
"... As INSURGEintelligence has previously reported, there is significant evidence that high-level elements of Turkish government and intelligence agencies have covertly sponsored Islamist terrorist groups in Syria, including ISIS, and that this has involved permitting black market oil sales. ..."
"... Why, however, did Vladimir Putin wait until the murder of a Russian pilot before announcing Russia's possession of intelligence on Turkish state-sponsorship of ISIS? ..."
"... There can be little doubt that Putin had previously been more interested in protecting Russian relations with Turkey as an emerging gas transshipment hub to Europe, under which he and Erdogan planned to build the multibillion Russia-Turkey gas pipeline, Turkish Stream  --  now suspended after the recent diplomatic furore. ..."
"... It has become increasingly clear that the US-led coalition strategy is aimed primarily at containment of the group's territorial ambitions within Syria. ..."
"... In this context, as Russia and Iran consolidate their hold on Syria through the Assad regime  --  staking the claim to Syria's untapped resources in the Mediterranean  --  the acceleration of Western military action offers both a carrot and a stick: the carrot aims to threaten the Assad regime into a political accommodation that capitulates to Western regional energy designs; the stick aims to replace him with a more compliant entity comprised of rebel forces backed by Western allies, the Gulf states and Turkey, whilst containing the most virulent faction, ISIS. ..."
Jul 03, 2018 | www.moonofalabama.org

Peter AU 1 | Jul 2, 2018 1:17:16 AM | 28

The Saudi's. Interesting watching them agree to whatever Trump wants. The most recent one was Trump telling them to raise oil output. The Saudi's now are very pro zionist and will back them against the Sunni Palestinians no matter what. If Trumps tells them to pay for a US war or occupation they pay. If they are told to by lots of useless junk from the US MIC, they buy it and manage to pull a twisted smile when Trump turns the screws about billions being peanuts.

Seems very much like KSA is now an expendable asset for the US, and their only chance of survival is a lot of 'yes sir, how high sir'.

Philippe , Jul 2, 2018 2:01:24 AM | 30

@ Peter AU 1 | Jul 2, 2018 1:17:16 AM | 28

How different is it really from the past 70+ years (since that 45' meeting between FDR and the then ruler of KSA), and especially since the "oil shocks" of the 1970's ? The Trumpians are little more direct and crude in their wording, but that is really the only difference I see.

Posted by: Peter L. | Jul 1, 2018 11:21:17 PM | 23

Look no further than the first sentence of the text you quote. It has been documented a few times, including in the Intercept, that there were some very serious money flows towards a certain foundation run by the family of the named person. Money flows that originated in the Gulf. Money flows that were related to what happened in Libia.

Daniel , Jul 2, 2018 2:30:17 AM | 32
Peter AU1, KSA has been a client state of the US ever since FDR muscled in on Great Britain's deal in 1845.
somebody , Jul 2, 2018 10:52:45 AM | 43
That would have something to do with Big Oil's long history of compromising national security for profit

Russia effectively dried up oil deliveries by ISIS from Syria and Iraq via Turkey .

This here is Nafez Ahmeed on what went on when splitting up Syria was considered feasible.

Putin's announcement after Turkey's shooting down of a Russian jet that Turkey has been systematically facilitating ISIS oil sales illustrates how the terror-entity has become a figleaf to justify military action.

As INSURGEintelligence has previously reported, there is significant evidence that high-level elements of Turkish government and intelligence agencies have covertly sponsored Islamist terrorist groups in Syria, including ISIS, and that this has involved permitting black market oil sales.

Why, however, did Vladimir Putin wait until the murder of a Russian pilot before announcing Russia's possession of intelligence on Turkish state-sponsorship of ISIS?

There can be little doubt that Putin had previously been more interested in protecting Russian relations with Turkey as an emerging gas transshipment hub to Europe, under which he and Erdogan planned to build the multibillion Russia-Turkey gas pipeline, Turkish Stream  --  now suspended after the recent diplomatic furore.

US, British and French military operations have been similarly inconsistent, inexplicably failing to shut down ISIS supply lines through Turkey, failing to bomb critical ISIS oil infrastructure including vast convoys of trucks transporting black market oil, and refusing to arm the most effective and secular Kurdish ground forces combating ISIS.

It has become increasingly clear that the US-led coalition strategy is aimed primarily at containment of the group's territorial ambitions within Syria.

....

As Russia expands its military presence in the region in the name of fighting ISIS, the US, Britain and France are now scrambling to ensure they retain a military foothold in Syria  --  an effort to position themselves to make the most of a post-conflict environment. As the US Geological Survey Minerals Yearbook put it:

"Most of the international investors who pulled out of Syria following the deterioration of the safety and security situation throughout the country are expected to remain so until the military and political conflicts are resolved."

In this context, as Russia and Iran consolidate their hold on Syria through the Assad regime  --  staking the claim to Syria's untapped resources in the Mediterranean  --  the acceleration of Western military action offers both a carrot and a stick: the carrot aims to threaten the Assad regime into a political accommodation that capitulates to Western regional energy designs; the stick aims to replace him with a more compliant entity comprised of rebel forces backed by Western allies, the Gulf states and Turkey, whilst containing the most virulent faction, ISIS.

[Jul 16, 2018] 2019 is going to be quite interesting and the events might start at the end of 2018

Jun 20, 2018 | peakoilbarrel.com

Energy news, 06/14/2018 at 4:42 am

BENGHAZI, Libya, June 14 (Reuters) – Libya's Es Sider oil port was shut on Thursday due to armed clashes nearby and at least one storage tank in the neighbouring Ras Lanuf terminal was set alight, an engineer in the area said.
https://www.reuters.com/article/libya-security-oil/update-2-clashes-shut-libyas-es-sider-oil-port-ras-lanuf-tank-on-fire-engineer-idUSL8N1TG1L6
Photo on Twitter: https://pbs.twimg.com/media/DfpGCWwWAAA2wUj.jpg Reply

Guym , 06/14/2018 at 8:40 am

Drop in the bucket to what is happening right now. US will be about 500k less than their (IEA's) expectations into 2019 due to transportation constraints.

George thinks Venezuela will approximate zero by 2019, as do others.

Give them the benefit of doubt and say a one million decrease from 1.6 at the beginning of this year.

IEA is still using production vs export capabilities, which has to change. Europe's refineries have largely stopped buying Iran's oil, as has India. That's 1.1 million that has to be sold elsewhere, or not. On shipping, insurance, and financing that is not affected by the restrictions. I count 2.6 million into 2019 that is not on IEA's plate.

Yeah, as said above, 2019 is going to be quite interesting, most of which we will see the end of 2018. None of this takes into consideration any increase in demand for 2019 that is over the US production projection for 2019 (.9). nor any shortage carried over from 2018. Yeah, we should be hunky dory.

In the investment world, we will still be watching EIA weeklies, to determine what is happening in the rest of the world for awhile. So increased cognitive function won't happen soon.

[Jul 16, 2018] US total (oil + products) inventories made a new low (from the high February 2017)

Notable quotes:
"... "Conclusion. No matter what clever US energy independence calculations are out there, the fact remains that the US is physically dependent on around 8 mb/d of crude oil imports, 4.3 mb/d out of which come from countries where oil production has already peaked and/or where there are socio-economic or geopolitical problems. As of April 2018 US net crude imports were about 6 mb/d, far from oil independence." ..."
"... I note also that about 45% of USA imports come from Canada, as well depicted in in your Fig 1. Thus we are 'captives' of Canada (to use the terminology of trump), but don't seem to have much appreciation or respect for their position. ..."
Jul 16, 2018 | peakoilbarrel.com

Energy News, 07/11/2018 at 1:14 pm

US total (oil + products) inventories made a new low (from the high February 2017)

US ending stocks July 6th
Crude oil down -12.6 million barrels
Oil products down -0.7
Overall total, down -13.3 (shown on chart)
Natural Gas: Propane & NGPLs up +6.1 (not included in chart)
Chart: https://pbs.twimg.com/media/Dh1-upjXUBEOjvn.jpg

Weekly change in US total (oil + products) inventories
Chart: https://pbs.twimg.com/media/Dh1_SuAXUAcbc5M.jpg

Mushalik , 07/11/2018 at 3:45 pm
11/7/2018
US crude oil imports and exports update April 2018 data
http://crudeoilpeak.info/us-crude-oil-imports-and-exports-update-april-2018-data
Hickory , 07/12/2018 at 11:12 am
Yes indeed, excellent article as always Matt.

"Conclusion. No matter what clever US energy independence calculations are out there, the fact remains that the US is physically dependent on around 8 mb/d of crude oil imports, 4.3 mb/d out of which come from countries where oil production has already peaked and/or where there are socio-economic or geopolitical problems. As of April 2018 US net crude imports were about 6 mb/d, far from oil independence."

I note also that about 45% of USA imports come from Canada, as well depicted in in your Fig 1. Thus we are 'captives' of Canada (to use the terminology of trump), but don't seem to have much appreciation or respect for their position.

[Jul 15, 2018] Global Energy Dominance is now part of the US National security Strategy

Putin/Russia is also the only entity that can prevent Trump's US from simply walking in and taking over the rich energy hub (Mafia style) to the south of Eurasia.
Notable quotes:
"... Global Energy Dominance is now part of the US National security Strategy. Although not labeled as global, when reading through the energy dominance section of the NSS, it can clearly been seen to be global. This is not just about sell oil produced in the US. ..."
"... Trump is going for the Achilles heel of Eurasia - energy. Rather than a creative accounting scam that simply racks up huge amounts of debt, Trump is looking for a monopoly or near monopoly business to take over and rake in the profits. ..."
"... Russia supply energy to Eurasia from the North. The opening for the Trump mob is in the south. The meet with Putin may well be to sound out the possibilities of forming a cartel. ..."
"... Yes, it absolutely is. But this is not a new "Trump policy." Certainly Zbiginew Brzezenski laid this out quite clearly in his 1997 book, "The Grand Chessboard: American Primacy and Its Geostrategic Imperatives." It's really all in there, just as you're now identifying. If you can't take the time to read it, please consider at least reading some book reviews. As I've noted before, Ziggy apparently didn't foresee Putin rising to power and restoring the Russian state, which threw the proverbial monkey wrench into the globalists' plans, but really, US foreign policy has continued to follow his plans otherwise. ..."
Jul 15, 2018 | www.moonofalabama.org

Peter AU 1 , Jul 14, 2018 4:55:33 PM | 101

The latest article at the Saker site by Rostislav Ishchenko - Trump's Geopolitical Cruise - I think is the best take on Trump's and his backers mindset. Worth a read and covers what I think was the cause of the split in the US elite.

The petro dollar, kicking off in the late 70s was a piece of creative accounting to give unlimited credit. This should have been ended with the collapse of the Soviet Union, but greed got the better of most. Trump and the people backing him could see that this was now in its terminal stages and US close to collapse itself.

Rostislav Ishchenko, like many thinks that Trump is pulling the US back to a form of isolation from the world, but I don't think this is the case.

Global Energy Dominance is now part of the US National security Strategy. Although not labeled as global, when reading through the energy dominance section of the NSS, it can clearly been seen to be global. This is not just about sell oil produced in the US.

Trump is going for the Achilles heel of Eurasia - energy. Rather than a creative accounting scam that simply racks up huge amounts of debt, Trump is looking for a monopoly or near monopoly business to take over and rake in the profits.

Russia supply energy to Eurasia from the North. The opening for the Trump mob is in the south. The meet with Putin may well be to sound out the possibilities of forming a cartel.

Putin/Russia is also the only entity that can prevent Trump's US from simply walking in and taking over the rich energy hub (Mafia style) to the south of Eurasia.

Daniel , Jul 14, 2018 5:35:42 PM | 104

Peter @101

"Global Energy Dominance is now part of the US National security Strategy."

Yes, it absolutely is. But this is not a new "Trump policy." Certainly Zbiginew Brzezenski laid this out quite clearly in his 1997 book, "The Grand Chessboard: American Primacy and Its Geostrategic Imperatives." It's really all in there, just as you're now identifying. If you can't take the time to read it, please consider at least reading some book reviews. As I've noted before, Ziggy apparently didn't foresee Putin rising to power and restoring the Russian state, which threw the proverbial monkey wrench into the globalists' plans, but really, US foreign policy has continued to follow his plans otherwise.

Kissinger has written much the same, though I don't recall in which books/articles. This page from the US Navy seems a fine reading list, designed as it appears to indoctrinate officers in AZ Empire geopolitics.

http://www.navy.mil/ah_online/CNO-ReadingProgram/partnernetwork.html#!

IMO, the US took the lead in the Empire's Global Energy Dominance quest when FDR met with King Saud on Great Bitter Lake in the Suez Canal in 1945 (swinging by after the final post-war world planning meeting with Churchill and Stalin at Yalta). This was when the US largely replaced Great Britain in primacy over Asian/Middle Eastern energy dominance.

Peter AU 1 , Jul 14, 2018 5:42:51 PM | 105
Daniel, I will read through the Grand Chessboard again.
Peter AU 1 , Jul 14, 2018 5:49:29 PM | 106
US setting up more bases. A base in Iraq, and a large airfreight logistics base in Kuwait.
https://sputniknews.com/middleeast/201807141066354147-new-us-bases-iraq/

The US is in the Persian Gulf to stay. Trumps face face meet with Putin will be so Trump can try and gauge what Putin will do - if he will run any blocking moves, his reaction to a fait accompli ect. Most likely a few more face to face meetings before any move on Iran.

Daniel , Jul 14, 2018 6:52:45 PM | 108
Peter, thanks for pointing out the new and unwanted US base in Iraq. I just read that the US was building the world's largest Embassy Compound in "Iraqi Kurdistan." I wonder it they're the same thing?

In a quick web search, failing to find an answer, I noticed that besides the "Green Zone" compound we built in Baghdad at the start of the current military occupation, the record holder was the US Embassy Compound in Pakistan.

James and I have discoursed here a bit on the history of US military occupations since WW II. Boils down to the US has never removed its military from any country it's occupied with the exception of Vietnam.

veritas semper vincit @103 linked blogpost notes that the US has 40,000 troops still occupying Germany. His (I presume) post is quite entertaining considering the severe seriousness of the topic.

Dis is a nice little country ya gotz heyah. Id be a shame if sumpin' bad was ta happen to it.

[Jul 15, 2018] Russia studying possible oil-for-goods deal with Iran - Novak

Jul 15, 2018 | uk.reuters.com

MOSCOW (Reuters) - Russian Energy Minister Alexander Novak said on Friday that a deal under which Russia would provide goods to Iran in exchange for oil is still possible.

Russia is studying all legal issues related to the possible deal, he said.

[Jul 15, 2018] JPM raised its forecast for Brent crude to average $70/bbl in both 2018 and 2019, up from an earlier forecast of $65 in 2018 and $60 in 2019

Jul 15, 2018 | seekingalpha.com

We expect continued price fluctuations within a wide $50-80/barrel range, with the strip gravitating lower over the medium-term and a wider Brent/WTI crude differential," JPM writes.

[Jul 14, 2018] Today orange fatty called out Germany for being captive to Russia.

The USA is "captive" of Canada (to use the terminology of trump), but don't seem to have much appreciation or respect for their position.
Jul 14, 2018 | peakoilbarrel.com

Hickory

x Ignored says: 07/11/2018 at 11:20 am
Looks like OPEC 14 peaked two years. Can they beat it?, perhaps by a small amount in a world without chaos.

Today orange fatty called out Germany for being captive to Russia. I'm pretty sure he was referring to German dependence on imported fossil energy from Russia.

As of 2015 Germany net energy imports are 64% of total [USA 12% for comparison]. If this means 'captive', then perhaps we should acknowledge that 11 of our top 13 trading partners are highly dependent on imported energy from either Russia or the big OPEC producers.

'Captives' so to speak. Better get used to that idea, and learn how to get along with others. Only Canada and Mexico aren't 'captives', but we don't look to good at being friends with them either.

[Jul 14, 2018] If the Bakken was to get and hold 1.4 million barrels a day the would need to complete around 1500 wells per year

Jul 14, 2018 | peakoilbarrel.com

coffeeguyzz x Ignored says: 07/13/2018 at 6:22 pm

Director's Cut out for May North Dakota just released.

New record production for both oil and gas with pretty low – 42 -- well completions reported as preliminary figures.

Guym x Ignored says: 07/13/2018 at 9:17 pm
How much was production?
coffeeguyzz x Ignored says: 07/13/2018 at 9:36 pm
38,583,489 bbl. 1,244,629 bbld. 96% from Bakken TF (1,189,982 bbld).

Gas – 71,881,378 Bcf. 2.3 Bcfd.

Oil increase is about 1.6% above previous month.

phatom x Ignored says: 07/13/2018 at 8:19 pm
The completed around 95 according to my data. The is lag in the data on confidential wells that will show up next month in the final data. Also if the Bakken was to get and hold 1.4 million barrels a day the would need to complete around 1500 wells per year.

[Jul 14, 2018] The only true measurement of market balance for oil going forward is global inventory level. Everything else is perhaps manipulation or guesses.

Jul 14, 2018 | peakoilbarrel.com

kolbeinh x Ignored says: 07/11/2018 at 6:11 pm

I managed to erase my own comment on this. And my comment was simple, the only true measurement of market balance for oil going forward is global inventory level. Everything else is perhaps manipulation or guesses.
Guym x Ignored says: 07/11/2018 at 7:31 pm
I agree, with all the intentional and unintentional confusion it stays confused. I stay confused trying to figure out what is confused. Inventory levels will be the only clear measure of what is happening. US inventories should not be dropping fast, as we are about the only country with increased production, but we dropped over 30 million last month. That's really not small potatoes, as commercial stocks are just a little over 400 million. Though, I think the US will be one of the last that would hit the danger zone.
Tita x Ignored says: 07/12/2018 at 3:57 pm
Good point. My intention was not to give more confusion. These are forecasts from eia and, I always like to remind this, they forecasted Brent averaging 105$ for 2015 in the STEO of October 2014. They never forecast big surplus or deficit.

I messed with the numbers of the STEO from 2018 to guess when the are reliable. Inventory levels are accurate for the US from the monthly report, which is 3 months old (april for July STEO). Other inventory levels are less accurate, but stock changes are reliable from 4-5 month data.

Global inventories increased in April (0.74 Mb/d) and May (1.14 Mb/d). This would be quite a change, as April would be a record inventory build since January 2017, and it would be followed by another record. This have to be confirmed later.

So, now I know what I will look for in these STEO.

Guym x Ignored says: 07/12/2018 at 4:35 pm
You gave data that I did not use before, and understand better, now. You did not confuse.
Eulenspiegel x Ignored says: 07/13/2018 at 3:55 am
How does this fit with production and consumption?

I thought we have still increasing consumption of about 1.5 mb/year, and production in April/May didn't jumped thad much – Opec flat and Permian already near it's pipeline bottleneck.

As much as I know, many storages are unknown, especially Opec / China. There are these satellite measurements, but there are additional deep storages.

Gathering all comsumption / raffinery input / production data would give an additional picture. Still not easy.

With 1mb/day surplus we should go soon into the next oil price crash to 30-40.

Permian price is then at 0-10$.

AdamB x Ignored says: 07/11/2018 at 11:14 am
Even if we haven't hit peak yet, the fact that production is likely to be going up by a snail's pace the next 3 years is a problem. If consumption just goes up 0.75% a year we need 600K extra a year. That seems like a big challenge to a layman like myself.
Timthetiny x Ignored says: 07/11/2018 at 12:57 pm
Well what will happen is that the price of oil will hit $150-$200 a barrel to ration demand.

Which will cause much pain and ruction and gnashing of teeth among the voters, but Europe has had those oil equivalent prices owing to taxation for quite some time and they manage high living standards. $200/bbl probably destroys 10 million a day in superfluous 'Becky driving by herself to the mall in a 3 ton SUV for no reason' kind of demand and incentivizes quite a bit of production.

The transition period will be moody for sure, but at $200/bbl, the amount of economic EOR targets in the US is somewhere in excess of 70 BBO from old conventional fields from the industry reports I have seen – its just not economic to do since there isn't enough CO2 available to flood them, so you need to use more expensive techniques which require very high prices (ethane flooding might be useful????). Worldwide its hundreds of billions. High prices that encourage us to use the resource wisely and not waste the goddamn stuff liberally would be a godsend, if we could quit wasting gigatons of plastic bullshit and 40% of our food – i.e. if everything made from oil was more expensive as well.

It would be painful economically, but Mad Max isn't coming our way. After 5 years of pain, we might actually finally get our shit together and research some goddamn alternatives.

Fernando Leanme x Ignored says: 07/11/2018 at 1:51 pm
I believe sugar cane ethanol is very competitive at $120 per barrel. This allows converting grass cattle grazing ground to cane. I believe soy and palm will also become very attractive crops. And I suspect countries like Haiti and Nicaragua will continue having riots.
kolbeinh x Ignored says: 07/11/2018 at 4:32 pm
Yes, I believe you are right. The future energy picture is complex, but authors writing books about this say sugar cane ethanol could have EROEI (energy return on energy invested) of up to 4. Even based on mechanised agriculture. And the big advantage of this crop is that it is not very nitrogen intensive, the biggest fertilizer, currently energy intensive when it comes to natural gas usage. Even when it comes to preindustrial crop rotation, the nitrogen intensive main food crops were often rotated with legume crops which were not nitrogen intesive in the hope to rebuild nitrogen content in the earth. So very long term, sugar cane ethanol is a superb type of renewable energy. (that is what I read, no expert).

Brazil has the biggest potential out there when it comes to size, and it is not inconceivable that they can cover much of domestic fuel demand with this outside aviation and possibly shipping (no need for diesel and gasoline ;-)). It would be in competition with food crops and concerns about deforestation, but still; a big potential there. Brazil is well off in a more renewable future btw, having loads of hydro power, wind power, in addition to biomass power (sugar cane the most promising).

[Jul 14, 2018] "Exxon has been pledg ing to pro duce more oil and gas for years, but its out put of about four mil lion bar rels a day is no higher to day than it was af ter its merger with Mobil Corp. in 1999

Jul 14, 2018 | peakoilbarrel.com

Boomer II x Ignored says: 07/13/2018 at 6:11 pm

From the WSJ Exxon story.

"[Exxon's] approach is a gam­ble in a new era of en­ergy break­throughs such as frack­ing and elec­tric ve­hi­cles. Many of Exxon's com­peti-tors are trans­form­ing their busi­nesses to move away from oil ex­plo­ration, and have be­gun to spend care­fully and di­ver­sify into re­new­able energy ."

"'Most in­vestors like Exxon, but they like other com­pa­nies bet­ter,' said Mark Stoeckle, chief ex­ec­u­tive of Adams Funds, which owns about $100 mil­lion in Exxon shares. 'The mar­ket is not will­ing to re­ward Exxon for spend­ing to­day in hopes that it will bring good re­turns to­mor­row.'

"Exxon has been pledg­ing to pro­duce more oil and gas for years, but its out­put of about four mil­lion bar­rels a day is no higher to­day than it was af­ter its merger with Mo­bil Corp. in 1999. Even if Exxon suc­ceeds in dou­bling last year's earn­ings of $15 bil­lion (ex­clud­ing im­pair­ments and tax re­form im­pacts) by 2025, as Mr. Woods vowed in his eight-year spend­ing plan, it would still be mak­ing far less than in 2008, when it set what was then a record for an­nual prof­its by an Amer­i­can cor­po­ra­tion, at $45 bil­lion .

"Exxon's frack­ing prospects in the Per­mian basin in West Texas and New Mex­ico, de­vel­oped by its XTO unit, re­main among its most prof­itable op­por­tu­ni­ties, the com­pany says. Still, its U.S. drilling busi­ness has lost money in 11 of the last 15 quar­ters."

Boomer II x Ignored says: 07/13/2018 at 3:46 pm
The Wall Street Journal has a big article on Exxon. I won't bother with a link because you won't be able to see it if you aren't a subscriber.

Basically it says we've seen peak Exxon.

[Jul 14, 2018] The energy cliff approaches: World Oil Gas Discoveries Continue To Decline

Jul 14, 2018 | www.zerohedge.com

shortonoil -> SRSrocco Sun, 07/08/2018 - 16:00 Permalink

Hi Steve, this is exactly what we have been talking about for the last 8 years. To make matters worse there seems to be a completely irrational belief that Shale will save the day. Outside of the fact that shale is not processable without heavier crude, and it is at best energy neutral, and probably negative, it is also long term unaffordable. There are 1.7 million Shale wells in the US. Over the next 5 years 1.4 million of those wells will have to be replaced to just keep production even. That will be $6.2 trillion even if done on the cheap. $6.2 trillion is equal to the total cost of all the finished product that will be consumed by the US for the next 12.8 years (@ $75/barrel). Expending 12.8 years of sales revenue to produce 5 years of oil is just not going to happen!

There seems to be a black out on this terrible situation. Some of that may be just plain ignorance, but I suspect that the main reason is that it is politically unspeakable. For that reason nothing is being spoken. As I have been saying for some time no one should expect big oil, big government, or big anything to come riding to the rescue. The individual is now completely on their own. Chose your options with discretion.

BW

http://www.thehillsgroup.org/

SRSrocco -> shortonoil Sun, 07/08/2018 - 16:55 Permalink

shortonoil,

Agreed. The U.S. Shale Oil Ponzi Scheme will likely begin to disintegrate within the next 1-3 years. Already, the Permian oil productivity per well has peaked.

Then when the next Shale Oil ENRON event takes place... watch as the dominos fall.

steve

Zen Xenu -> SRSrocco Sun, 07/08/2018 - 19:48 Permalink

@SRSrocco, U.S. Tight Oil depends on cheap credit. Regardless of oil prices.

Once cheap credit dries up and the previous debts are unable to be paid by drilling new wells, the entire scheme falls apart.

Oil prices do not drive U.S. Tight Oil as much as cheap credit from easy loans.

Eventually, U S. Tight Oil using new credit cards to pay debts on old credit cards will catch up with a vengence. Rising interest rates will be the catalyst. Rising oil prices only prolong the increasing debt.

MrNoItAll -> SRSrocco Sun, 07/08/2018 - 21:21 Permalink

Didn't the EIA publish something not long ago stating their concerns that we could see oil shortages by 2020? And around the same time, I recall that the Saudi Oil Minister came out and stated that without more investment, we would likely see oil shortages by 2020. And then at the recent OPEC meeting, I believe it was the Oil Minister from UAE who stated that we need to find a new North Seas equivalent oil field EVERY YEAR to meet projected demand, which of course is not going to happen. It has been a long slow grind since 2008 to get to this point, but from here on out I anticipate that things will start unraveling at an ever faster pace. Big changes on the way. But one thing that will NEVER happen is that the POTUS or some other world leader comes out and says we are running short on energy. Instead it will be Trade Wars, the damned Russians or some other lame propaganda -- anything but the truth.

Cloud9.5 -> Anonymous_Bene Mon, 07/09/2018 - 07:23 Permalink

This is a synopsis of the German Army study produced in 2010. https://www.youtube.com/watch?v=ZyUe7w1gDZo

If you want the English translation of the study in its entirety, it can be found here: https://www.permaculturenews.org/files/Peak%20Oil_Study%20EN.pdf

The mitigation section of the study was most telling. It simply stated that local sustainable economies would replace the modern era. These economies included local food production and energy production. As this process unfolds, I simply do not see how a high rise is going to remain habitable.

EddieLomax -> JamcaicanMeAfraid Mon, 07/09/2018 - 04:33 Permalink

Zero hedge put a news story a while ago where (I think 2016) the US oil industry lost more in that it earned in the previous 7 years (mining in general), so more investment wouldn't have been coming in the US anyway - the price wasn't high enough to justify it.

Worldwide we are going to see some almightly crunch, whether it will arrive after 2020 will be seen. Ironically it might save Trump anyway if the world is seen to be beset by a oil supply crunch since its hard to blame that on him.

Chief Joesph Sun, 07/08/2018 - 13:02 Permalink

The U.S. needs to get off its dead ass and start developing better batteries, solar power, and other alternative energy sources. This was talked about in 1973, during the Oil Embargo days, and its just astonishing the U.S. has done little since to ween itself off of oil. And now we now have a tariff against Chinese made solar panels. DUH!!! How dumb can you get?

El Vaquero -> Chief Joesph Sun, 07/08/2018 - 13:31 Permalink

Look at the energy density of those power sources. You'll never run an industrial civilization off of them. Electric cars may be great for zipping a couple of people around town from day to day, but you're never going to run the large mining and shipping equipment needed for our society. If you want to do that, you're going to have to develop viable breeder reactors and the technology to manufacture liquid fuels with that energy - and this is doable.

bshirley1968 -> El Vaquero Sun, 07/08/2018 - 14:10 Permalink

Right. There is nothing.....NOTHING....that can replace oil and gas as it is used and utilized by the modern industrial society. Nothing......

What needs to happen right now is a steady rise in prices that will condition our population to start learning to do with less cheap, easy energy. We have got to curb usage to give society a chance to begin to learn another way.

The major obstacle to doing this responsible, rational action? The egregious, criminal banking system that has gotten the world awash in debt to feed their greed. Any cut back in the use of energy will destroy the economy and their gravy train.

[Jul 11, 2018] Why Trump's Iran Isolation Plan May Backfire by Ron Paul

Notable quotes:
"... President Trump's demand last week that OPEC "reduce prices now" or US military protection of OPEC countries may not continue almost sounded desperate. But if anything, Trump's bluntness is refreshing: if, as he suggests, the purpose of the US military – with a yearly total budget of a trillion dollars – is to protect OPEC members in exchange for "cheap oil," how cheap is that oil? ..."
"... Exactly how traditional 'US Mideast policies' benefit the average American however remains a mystery. Many of these questionable policies are never critically examined in the open – at least not the big ones involving that 'special relationship' with you-know-who. Never. ..."
"... Iran's crime? That nation's alleged 'sponsorship of terrorism' in support of the Palestinian struggle against Zionist occupation, as well as other anti-Zionist resistance movements in Lebanon, Syria and beyond. ..."
"... Yet it is Israel that is foremost occupying power in that region and it is Israel that is the expanding nuclear power. Meanwhile, the Zionist-lead BDS campaign against Iran is nothing less than a full-blown economic war. At the same time, Israel benefits from unconditional and continuous US subsidies. ..."
"... In no small way, Israel sees its mission to dominate the region and expand its borders as a religious duty. Destiny. This puts Israel in a class by itself. And unlike its neighbors (including Iran) Israel has nuclear WMD. ..."
Jul 11, 2018 | www.unz.com

... ... ...

President Trump is finding that his threats and heated rhetoric do not always have the effect he wishes. As his Administration warns countries to stop buying Iranian oil by November or risk punishment by the United States, a nervous international oil market is pushing prices ever higher, threatening the economic prosperity he claims credit for. President Trump's response has been to demand that OPEC boost its oil production by two million barrels per day to calm markets and bring prices down.

Perhaps no one told him that Iran was a founding member of OPEC?

When President Trump Tweeted last week that Saudi Arabia agreed to begin pumping additional oil to make up for the removal of Iran from the international markets, the Saudis very quickly corrected him, saying that while they could increase capacity if needed, no promise to do so had been made.

The truth is, if the rest of the world followed Trump's demands and returned to sanctions and boycotting Iranian oil, some 2.7 million barrels per day currently supplied by Iran would be very difficult to make up elsewhere. Venezuela, which has enormous reserves but is also suffering under, among other problems, crippling US sanctions, is shrinking out of the world oil market.

Iraq has not recovered its oil production capacity since its "liberation" by the US in 2003 and the al-Qaeda and ISIS insurgencies that followed it.

Last week, Bloomberg reported that "a complete shutdown of Iranian sales could push oil prices above $120 a barrel if Saudi Arabia can't keep up." Would that crash the US economy? Perhaps. Is Trump willing to risk it?

President Trump's demand last week that OPEC "reduce prices now" or US military protection of OPEC countries may not continue almost sounded desperate. But if anything, Trump's bluntness is refreshing: if, as he suggests, the purpose of the US military – with a yearly total budget of a trillion dollars – is to protect OPEC members in exchange for "cheap oil," how cheap is that oil?

At the end, China, Russia, and others are not only unlikely to follow Trump's demands that Iran again be isolated: they in fact stand to benefit from Trump's bellicosity toward Iran. One Chinese refiner has just announced that it would cancel orders of US crude and instead turn to Iran for supplies. How many others might follow and what might it mean?

Ironically, President Trump's "get tough" approach to Iran may end up benefitting Washington's named adversaries Russia and China – perhaps even Iran. The wisest approach is unfortunately the least likely at this point: back off from regime change, back off from war-footing, back off from sanctions. Trump may eventually find that the cost of ignoring this advice may be higher than he imagined.

Vidi , July 10, 2018 at 6:05 am GMT

Trump may eventually find that the cost of ignoring [the advice to back off from Iran] may be higher than he imagined.

Perhaps he's counting on not being President by then. Another case of IBGYBG (I'll be gone, you'll be gone), an attitude that seems to be infecting bankers, Wall Street, and the rest of the U.S. élite lately. A cataclysm is coming, and they can see it.

mark green , July 10, 2018 at 7:01 am GMT
Why is Zio-America treating Iran with such hostility?

Iran and Israel are locked in a vicious cold war. Their animosities date back to mythical antiquity. One alleged episode is even celebrated in the Jewish celebration of 'Purim'.

Take a look at the breathtaking insight that Gilad Atzmon has to offer about Purim:

https://www.counterpunch.org/2007/03/03/from-esther-to-aipac/

In any case, Iran and Israel's antipathies for one another shouldn't concern superpower America. Except that it does.

Like American television, Washington happens to be Israeli-held territory. Haven't you heard?

This is why Zio-Washington invariably sides with Israel in all of its disputes, even when 1) Israel is the aggressor, 2) even when Israel is slaughtering powerless civilians who are protesting their subjugation, and 3) even when US interests are not at stake or even in play. And this uniform deference from Washington is thoroughly bipartisan. It is 'business as usual'. It's basically unanimous. Both Parties. No dissent.

Many just call it 'US Mideast policy'. Ironclad. 'Unshakable'. But don't laugh or smirk. Doing so might be seen as 'anti-Semitic'.

Exactly how traditional 'US Mideast policies' benefit the average American however remains a mystery. Many of these questionable policies are never critically examined in the open – at least not the big ones involving that 'special relationship' with you-know-who. Never.

These rigid policies help explain how Crypto-Israelis in America – using Washington as their proxy – have successfully brought the US into Israel's cold war against Iran.

Zionist operatives have not only orchestrated the decades-long freeze of billions of dollars in Iranian assets that belong to the Iranian people, but they have launched a global (and crypto-Zionist) 'Boycott, Divestment and Sanctions' campaign against the relatively peaceful nation of Iran.

Iran's crime? That nation's alleged 'sponsorship of terrorism' in support of the Palestinian struggle against Zionist occupation, as well as other anti-Zionist resistance movements in Lebanon, Syria and beyond.

Yet it is Israel that is foremost occupying power in that region and it is Israel that is the expanding nuclear power. Meanwhile, the Zionist-lead BDS campaign against Iran is nothing less than a full-blown economic war. At the same time, Israel benefits from unconditional and continuous US subsidies.

Politicians who dare question this phenomena – or who wander off the Zionist plantation in Washington – tend to disappear. Rapidly. Journalists, too.

In no small way, Israel sees its mission to dominate the region and expand its borders as a religious duty. Destiny. This puts Israel in a class by itself. And unlike its neighbors (including Iran) Israel has nuclear WMD.

Due to Israeli influence here, Americans are not only actively supporting various Zionist war efforts, but they are also paying billions more for their gasoline since Zionists have managed to prohibit the purchase Iranian oil throughout the West. These economic 'choices' are what Americans unwittingly make – even though the 'average Joe' remains totally unaware of them.

Indeed, even though Iran wants to be a trading partner with America and bring its oil onto the world market, Zio-Washington says 'NO!' US consumers be damned. The Iranian people be damned.

This is not the first time that US economic interests have taken a back seat to Israel's. Please recall the 1973 Arab-Israeli war, Zio-Washington's intervention on behalf of Israel during that conflict, the ensuing Arab oil embargo, and the disastrous recession that followed.

But Zio-America never turned it back on Israel, even though American citizens never had the opportunity to determine their allies or policies one way or another. US support of Israel is mandatory. It's been this way since LBJ.

Today, Israel is maneuvering Zio-Washington to do to Iran what it did to Iraq, Libya and Syria; namely, spread destabilization and impose 'creative destruction' upon all nations that pose any long-term threat to the Zionist State.

[Jul 10, 2018] We estimate that every million b/d shift in [supply and demand] balances would push the oil price by $17/bbl on average.

Those suckers from Sanford and Bernstein again try to push thier view that shale oil has great potential instead of potential to bury even more money in the sand. production of shale oil includes production of a parallel stream of junk bonds.
My impression is the EROEI of shale oil soon might become negative. It was around Oil shale: 1.5:1 to 4:1 in 2011 by some estimates Energy Returned on Energy Invested (EROEI) for Shale Oil and Shale Gas which is trun extracted it from Richard Heinberg, Searching for a Miracle: 'Net Energy' Limits & the Fate of Industrial Society .
Notable quotes:
"... statements from the U.S. government about "zero tolerance" towards Iran could mean that those losses will end up being much higher. Just by shifting the supply outages from 0.5 to 1 mb/d would translate into an oil price increase of about $8 to $9 per barrel, according to Bank of America Merrill Lynch. ..."
"... "We estimate that every million b/d shift in [supply and demand] balances would push the oil price by $17/bbl on average. So based on those assumptions, we estimate zero Iran exports could push oil up by $50/bbl if Saudi caps out. We expect in this game of chicken, someone will blink before that happens." ..."
Jul 10, 2018 | oilprice.com

"Investors who had egged on management teams to reign in capex and return cash will lament the underinvestment in the industry," the analysts wrote . "Any shortfall in supply will result in a super-spike in prices, potentially much larger than the $150 a barrel spike witnessed in 2008."

... ... ...

Of course, for many, this is a problem for another day. The oil market is arguably facing a supply crisis right now. Until recently, the oil market assumed a loss of about 0.5 mb/d from Iran because of U.S. sanctions. But statements from the U.S. government about "zero tolerance" towards Iran could mean that those losses will end up being much higher. Just by shifting the supply outages from 0.5 to 1 mb/d would translate into an oil price increase of about $8 to $9 per barrel, according to Bank of America Merrill Lynch.

"We estimate that every million b/d shift in [supply and demand] balances would push the oil price by $17/bbl on average. So based on those assumptions, we estimate zero Iran exports could push oil up by $50/bbl if Saudi caps out. We expect in this game of chicken, someone will blink before that happens."

In other words, if Saudi Arabia is unable to plug the deficit, the U.S. would likely have to back down on its "zero tolerance" policy towards Iran. The oil market is too tight, and the supply gap would be too large. Cutting Iran exports by that much, in an increasingly tight oil market, would send prices skyrocketing, something that the Trump administration probably won't be able to stomach. If Trump proceeded, a price spike of that magnitude would lead to a meltdown in demand.

By Nick Cunningham of Oilprice.com

[Jul 09, 2018] THE ENERGY CLIFF APPROACHES World Oil Gas Discoveries Continue To Decline Zero Hedge Zero Hedge

Jul 09, 2018 | www.zerohedge.com

THE ENERGY CLIFF APPROACHES: World Oil & Gas Discoveries Continue To Decline

by SRSrocco Sun, 07/08/2018 - 11:25 17 SHARES

By the SRSrocco Report ,

As the world continues to burn energy like there is no tomorrow, global oil and gas discoveries fell to another low in 2017. And to make matters worse, world oil investment has dropped 45% from its peak in 2014. If the world oil industry doesn't increase its capital expenditures significantly, we are going to hit the Energy Cliff much sooner than later.

According to Rystad Energy, total global conventional oil and gas discoveries fell to a low of 6.7 billion barrels of oil equivalent (Boe). To arrive at a Boe, Rystad Energy converts natural gas to a barrel of oil equivalent. In 2012, the world discovered 30 billion Boe of oil and gas versus the 6.7 billion Boe last year:

In the article, All-time low for discovered resources in 2017, Rystad reports , it stated the following:

"We haven't seen anything like this since the 1940s," says Sonia Mladá Passos, senior analyst at Rystad Energy. "The discovered volumes averaged at ~550 MMboe per month. The most worrisome is the fact that the reserve replacement ratio in the current year reached only 11% (for oil and gas combined) - compared to over 50% in 2012." According to Rystad's analysis, 2006 was the last year when reserve replacement ratio reached 100%.

The critical information in the quote above is that the world only replaced 11% of its oil and gas consumption last year compared to 50% in 2012. However, the article goes on to say that the last time global oil and gas discoveries were 100% of consumption was back in 2006. So, even at high $100+ oil prices in 2013 and 2014, oil and gas discoveries were only 25% of global consumption.

As I mentioned at the beginning of the article, global oil capital investment has fallen right at the very time we need it the most. In the EIA's International Energy Outlook 2017, world oil capital investment fell 45% to $316 billion in 2016 versus $578 billion in 2014:

In just ten years (2007-2016), the world oil industry spent $4.1 trillion to maintain and grow production. However, as shown in the first chart, global conventional oil and gas discoveries fell to a new low of 6.7 billion Boe in 2017. So, even though more money is being spent, the world isn't finding much more new oil.

I believe we are going to start running into serious trouble, first in the U.S. Shale Energy Industry, and then globally, within the next 1-3 years. The major global oil companies have been forced to cut capital expenditures to remain profitable and to provide free cash flow. Unfortunately, this will impact oil production in the coming years.

Thus, the world will be facing the Energy Cliff much sooner than later.

Check back for new articles and updates at the SRSrocco Report . Tags Business Finance Environment

Comments Vote up! 6 Vote down! 0

He-He That Tickles Sun, 07/08/2018 - 12:44 Permalink

Guess they better sell what's left really, really expensively.

GoinFawr -> He-He That Tickles Sun, 07/08/2018 - 13:17 Permalink

Yeah tHis article is ridiculous, resident ZH self-purported Mensa members like Tmos' have proven beyond any doubt that 'abiotic oil' replenishes the world's supply of easily accessed hydrocarbons every fifteen minutes or so, regardless of increasing consumption rates; indeed regardless of any veritable facts whatsoever.

ThorAss -> GoinFawr Sun, 07/08/2018 - 15:11 Permalink

Worked by whole life in the oil business. Depletion is real. Abiotic oil replenishment is Magic unicorns dancing on rainbows. Oil won't run out ever, but the energy required to extract the oil will make remaining oil reserves uneconomic at some point.

Zen Xenu -> ThorAss Sun, 07/08/2018 - 19:35 Permalink

Well said. Agreed.

DanDaley -> ThorAss Mon, 07/09/2018 - 06:17 Permalink

Hence Colin Campbell's book The End of Cheap Oil .

ZIRPdiggler -> ThorAss Mon, 07/09/2018 - 06:27 Permalink

It went from the cost of one barrel to extract 100 back in the 19th century, to present day 5 barrels.

Sid Davis -> GoinFawr Sun, 07/08/2018 - 16:12 Permalink

So I guess in your experience, oil wells don't go dry, ever.

But I wonder, why do you think the Saudis pump water into oil wells or the Mexicans pump in Nitrogen?

GoinFawr -> Sid Davis Sun, 07/08/2018 - 18:03 Permalink

"So I guess in your experience, oil wells don't go dry, ever."

indeed, regardless of any veritable facts whatsoever...

Thanks for comin' out!

Shemp 4 Victory -> GoinFawr Sun, 07/08/2018 - 20:33 Permalink

Good sarcasm is an underappreciated art form.

Victor999 -> GoinFawr Mon, 07/09/2018 - 01:21 Permalink

Strange that the oil industry does not agree with you. And it's strange that reserves all over the world are not stable but decreasing. Your Mensa idol is full of shit.

Adahy -> Victor999 Mon, 07/09/2018 - 02:47 Permalink

*whoosh* Right over the head.
I know /s is more difficult to detect with only text but damn, he was pretty obvious in his sarcasm.

ebear -> Adahy Mon, 07/09/2018 - 08:16 Permalink

"...he was pretty obvious in his sarcasm."

Plain as day.

Slomotrainwreck -> GoinFawr Mon, 07/09/2018 - 06:41 Permalink

I was unaware of abiotic oil. Looked it up. Seems like a reverse shale oil scam to me. Not much profit motive to either explore or drill.

I'm out.

[Jul 09, 2018] Chinese Refiner Halts US Oil Purchases, May Use Iran Oil Instead

Jul 08, 2018 | www.zerohedge.com
With the US and China contemplating their next moves in what is now officially a trade war, a parallel narrative is developing in the world of energy where Asian oil refiners are racing to secure crude supplies in anticipation of an escalating trade war between the US and China, even as Trump demands all US allies cut Iran oil exports to zero by November 4 following sanctions aimed at shutting the country out of oil markets.

Concerned that the situation will deteriorate before it gets better, Asian refiners are moving swiftly to secure supplies with South Korea leading the way. Under pressure from Washington, Seoul has already halted all orders of Iranian oil, according to sources, even as it braces from spillover effects from the U.S.-China tit-for-tat on trade.

"As South Korea's economy heavily relies on trade, it won't be good for South Korea if the global economic slowdown happens because of a trade dispute between U.S and China," said Lee Dal-seok, senior researcher at the Korea Energy Economic Institute (KEEI).

Meanwhile, Chinese state media has unleashed a full-on propaganda blitzkrieg , slamming Trump's government as a "gang of hoodlums", with officials vowing retaliation, while the chairman of Sinochem just become China's official leader of the anti-Trump resistance, quoting Michelle Obama's famous slogan " when they go low, we go high. " Standing in the line of fire are U.S. crude supplies to China, which have surged from virtually zero before 2017 to 400,000 barrels per day (bpd) in July.

Representing a modest 5% of China's overall crude imports, these supplies are worth $1 billion a month at current prices - a figure that seems certain to fall should a duty be implemented . While U.S. crude oil is not on the list of 545 products the Chinese government has said it would immediately retaliate with in response to American duties, China has threatened a 25% duty on imports of U.S. crude which is listed as a U.S. product that will receive an import tariff at an unspecified later date.

And amid an escalating tit-for-tat war between Trump and Xi in which neither leader is even remotely close to crying uncle, industry participants expect the tariff to be levied, a move which would make future purchases of US oil uneconomical for Chinese importers.

"The Chinese have to do the tit-for-tat, they have to retaliate ," said John Driscoll, director of consultancy JTD Energy, adding that cutting U.S. crude imports was a means "of retaliating (against) the U.S. in a very substantial way".

In an alarming sign for Washington, and a welcome development for Iran, some locals have decided not to see which way the dice may fall.

According to Japan Times , in a harbinger of what's to come, an executive from China's Dongming Petrochemical Group, an independent refiner from Shandong province, said his refinery had already cancelled U.S. crude orders .

"We expect the Chinese government to impose tariffs on (U.S.) crude," the unnamed executive said. " We will switch to either Middle East or West African supplies ," he said.

Driscoll said China may even replace American oil with crude from Iran. " They (Chinese importers) are not going to be intimidated, or swayed by U.S. sanctions."

Oil consultancy FGE agrees, noting that China is unlikely to heed President Trump's warning to stop buying oil from Iran. While as much as 2.3 million barrels a day of crude from the Persian Gulf state at risk per Trump's sanctions, the White House has yet to get responses from China, while India or Turkey have already hinted they would defy Trump and keep importing Iranian oil. Together three three nations make up about 60 percent of the Persian Gulf state's exports.

... ... ...

beemasters -> divingengineer Sun, 07/08/2018 - 19:50 Permalink

"Meanwhile, Chinese state media has unleashed a full-on propaganda blitzkrieg, slamming Trump's government as a "gang of hoodlums""

And how's that a propaganda?
Oh, Trump was just following Bibi's order on Iran issue. Got it.

DingleBarryObummer -> 2banana Sun, 07/08/2018 - 20:11 Permalink

Did you even READ the article?

Yes it looks like he did.

Under pressure from Washington, Seoul has already halted all orders of Iranian oil, according to sources, even as it braces from spillover effects from the U.S.-China tit-for-tat on trade.

[Jul 06, 2018] Saudi amount on infill drilling almost guarantee a sharp decline

Jul 06, 2018 | peakoilbarrel.com

Mushalik x Ignored says: 07/04/2018 at 9:08 am

This is about Trump's tweet to Saudi Arabia

5/7/2018
Saudi Arabia was supposed to pump almost 14 mb/d in 2018
http://crudeoilpeak.info/saudi-arabia-was-supposed-to-pump-almost-14-mbd-in-2018

Guym x Ignored says: 07/04/2018 at 9:38 am
Expecting SA to help supply the World's needs is perhaps going off the deep end. It's their bread and butter for years to come. As years pass, they become more aware that those years are limited. This is not the 1970's, it's 2018. They will supply what is profitable for them, and wasting it early, doesn't sound real smart, does it? If we offered them massive support to develop their nuclear capabilities, it would probably entice them. Or, jump out of the pot, and into the frying pan. Iran May have more capacity for new oil.
eduard flopinescu x Ignored says: 07/04/2018 at 9:58 am
This graph shows that it was supposed to peak in 2018
http://crudeoilpeak.info/wp-content/uploads/Saudi-Arabia_oil-production_1970-2030_IEA-actual.jpg
Kolbeinh x Ignored says: 07/04/2018 at 12:12 pm
If I have understood this correctly. When most of their fields are mature, the option they have is to invest (almost overbuild) in facilities foremost to treat and inject the steadily higher volume of water to keep oil production steady and at the same time overinvest in infill drilling to keep the volume rising. All this to sustain or even increase oil output from mature fields, so that the oil price can stay low. And then there is the extra gain in extra barrels to consider as a result of the investments that adds to ultimate recovery at each field. The gain from extra barrels could make up for a mediocre return on investment in some cases and a questionable one in other cases. Given a relatively low oil price assumption.

Why would they do that? Keeping the facilities as they are for mature fields, accepting only small investments where they are highly profitable, limiting infill drilling to the best locations, let the oil production fall and hope for prices to rise would be a superior solution for them, would it not? Why rush investments in mature oil fields?

Ron Patterson x Ignored says: 07/04/2018 at 12:23 pm
When most of their fields are mature, the option they have is to invest (almost overbuild) in facilities foremost to treat and inject the steadily higher volume of water to keep oil production steady and at the same time overinvest in infill drilling to keep the volume rising. All this to sustain or even increase oil output from mature fields,

Well no, it does not usually increase production, it just drastically reduces the decline rate. For instance, a very mature field may have a natural decline rate of 6 to 8% per year. With infill drilling of horizontal wells along the top of the reservoir, they may reduce that decline rate to 2% per year.

so that the oil price can stay low.

No, that's not why they are doing it. They are doing it to maintain their annual production. Some do increase production but with oil from new fields. These new fields, however, will have a much lower URR and will start to decline after only a few years. All the giant and supergiant field have already been discovered.

Kolbeinh x Ignored says: 07/04/2018 at 12:48 pm
Ok, thanks!

The "so that the oil price can stay low" was a well hidden irony from my part. But you have a point, they want to keep their long term customers supplied, not losing face in OPEC and their long term allies happy. They stretch to keep everyone happy.

[Jul 06, 2018] A field is creamed by massive infill drilling with horizontal wells that skim the very top of the reservoir. The decline rate is the[n] drastically reduced while the depletion rate is drastically increased.

Jul 06, 2018 | peakoilbarrel.com

Michael B. x Ignored says: 07/04/2018 at 7:18 am

A field is creamed by massive infill drilling with horizontal wells that skim the very top of the reservoir. The decline rate is the[n] drastically reduced while the depletion rate is drastically increased. Things will go just great until the water hits those horizontal wells at the top of the reservoir. Then production will drop like a rock.

I assume this is the money quote. These methods comprise the "game changer" that scuttled peak oil predictions circa 2005.

By demurring a prediction as to when the stone might–will!–drop, you're acknowledging the deplorable state of the data. This should give us pause. We might call this the New Peak Oil Reticence.

Let's grant that what you say is true (I'm certainly not qualified to refute it). If you know it (that is, that the rock will drop), then "they" know it, and by "they" I mean those who are in the business of developing these "creaming" methods. They must know it.

So what the fuck are they thinking?

eduard flopinescu x Ignored says: 07/04/2018 at 9:51 am
I think only the big fields offer a cushion, in a way or the other, in the end it all depends a lot on Ghawar. Matt Simmons was right about that.

As I see it in a pyramid scheme if a big player suddenly wants to get out their money it's over.

George Kaplan x Ignored says: 07/04/2018 at 9:59 am
In IOCs they are mostly thinking how can I satisfy my boss and/or the stockholders enough in the next quarterly report to keep my job.

[Jul 06, 2018] The possibility of Seneca cliff in oil production

Jul 06, 2018 | peakoilbarrel.com

Ron Patterson x Ignored says: 07/04/2018 at 8:18 pm

No one producing country is looking at the global problem. They are only concerned with their own country and the problems at home. Most are old men who realize that they will be long dead if there is ever a catastrophe. And most, like the contributors to this blog, believe that there will never be a catastrophe. They believe that renewables, or fusion energy, or God, human ingenuity, or something else will save us from any type of collapse.

But the point is, the oil barons of each individual country, are not even remotely concerned with the collapse of civilization as we know it. They believe God, or Allah, or human ingenuity, will simply not allow that to happen.

Michael B x Ignored says: 07/05/2018 at 5:10 am
"And most, like the contributors to this blog, believe that there will never be a catastrophe. They believe that renewables, or fusion energy, or God, human ingenuity, or something else will save us from any type of collapse."

But doesn't that require, like, planning? Plenty of planning?

Ron Patterson x Ignored says: 07/05/2018 at 7:22 am
Of course not. If someone else, or something else, is going to save you, you just sit back and let it happen. You do not need to do anything.
Guym x Ignored says: 07/04/2018 at 8:10 am
I think Dr. Minqi Li put together an exceptionally well researched paper. The only one I have a faintest glimmer of knowledge in is oil. 2021. Give or take a couple of years is a good estimate of when peak oil occurs, based on current findings and technology. Improvements in either would probably only affect the tail of the decline rate. Which, based on the immense overstatement of EIA, and the creaming you mentioned, the tail should have much more of a decline than depicted. I am tending towards 2022 to 2023 as the final peak, due to the little over a year hiatus on the Permian final push due to pipeline and other constraints. We all know 2042 is a bad projection for the US, it will get there as soon as it can. It will get there as soon as it can, because the oil price will be high enough to beg, borrow, or steal to get there. For that reason, all other sources will be staining to get there at the same time. We are in the final stage, I do think.
Ron Patterson x Ignored says: 07/04/2018 at 8:47 am
Yes, I agree with you on Dr. Minqi Li's paper. I am not sure, however, that the Permian will show enough yearly increase to hold off the peak until 2023.

[Jul 06, 2018] The possibility of Seneca cliff: Russia is certainly being creamed. The massive infill is visible from satellites and they haven't found/opened anything new of size

Jul 06, 2018 | peakoilbarrel.com

ProPoly 07/04/2018 at 10:28 am

More money now.

Russia is certainly being creamed. The massive infill is visible from satellites and they haven't found/opened anything new of size, yet have outlasted what everyone (including them) calculated would be the start of their decline.

Russia needs the oil revenue badly. But is their ultimate decline going to look like China? Very likely.

Hightrekker 07/04/2018 at 2:20 pm
Only Russia has more resources, a much smaller population, imports little, and is better educated.

Plus (not a given), global warming will ring some benefit. China doesn't have a chance (if one is biologist looking at it).

[Jul 06, 2018] Seneca cliff in shale oil may be closer that we think

Jul 06, 2018 | peakoilbarrel.com

ProPoly x Ignored says: 07/04/2018 at 10:21 am

The implied increase in the Permian would be staggering. US onshore outside of fracking is in terminal decline. US GOM is peak/decline. Eagle Ford is peak/decline. Bakken is close to peak. Eagle Ford and Bakken have very high existing production decline rates, meaning they will fall like a brick if drilling moves to the Permian.

There isn't anything new beyond the Permian. People have looked. No more plays.

And after covering all of that and its own existing production decline (not as extreme as the other plays but large in absolute number), the Permian is supposed to add millions of barrels per day?

I don't think that adds up no matter what the price of oil is.

Hightrekker x Ignored says: 07/04/2018 at 2:37 pm
The shale industry has more debt than Venezuela and Saudi Arabia combined

https://imgur.com/a/t7ulB

[Jul 06, 2018] While Saudi Aramco CEO Amin Nasser told Platts recently that "maximum sustainable production" was 12 million b/d, industry experts believe Saudi Arabia will struggle to pump more than 1 million b/d of additional output.

Jul 06, 2018 | peakoilbarrel.com

Energy News x Ignored says: 07/05/2018 at 2:42 pm

2018-07-05 (Platts) While Saudi Aramco CEO Amin Nasser told Platts recently that "maximum sustainable production" was 12 million b/d, industry experts believe Saudi Arabia will struggle to pump more than 1 million b/d of additional output.

Platts Analytics says even if Saudi Arabia produces close to 11 million b/d it would be running its system at stress levels.
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/070518-factbox-anatomy-of-saudi-arabias-crude-oil-capabilities ?
OPEC June oil production (Platts) https://pbs.twimg.com/media/DhWBRxDXcAAlaqq.jpg

Guym x Ignored says: 07/05/2018 at 3:18 pm
Yeah, I think that is pretty much what Ron and George have been saying. It is why all these drops in production, and projected production that will not get out of the ground has to cause demand to exceed supply within the next year by a substantial amount. Throw in Iran's sabre rattling over the Homez, and oil prices should be through the roof. That it is not, is mainly complacency built up over the past four years from the inventory overage. As Scarlet O'Hara said, "After all tomorrow is another day".

[Jul 06, 2018] The Aramco IPO may never happen.

Jul 06, 2018 | peakoilbarrel.com

dclonghorn x Ignored says: 07/05/2018 at 1:27 pm

MSNBC announced that the Aramco IPO may never happen. MSNBC didn't say why, however I suppose those reserves that the Saudis have touted for so long could be very difficult to have verified based on SEC rules. I think that much of the last two years of prep for their IPO has been shopping for a exchange that would allow them to get their stock issued without drastically revising their prior reserve disclosures.

You can also look at this development as an indication that the above discussed "rock" may have already dropped.

[Jul 06, 2018] Iran Threatens To Close the Strait of Hormuz naked capitalism

Notable quotes:
"... On the Psychology of Military Incompetence ..."
Jul 06, 2018 | www.nakedcapitalism.com

The Rev Kev , July 5, 2018 at 2:13 am

I think that the potential threat of what happens if there is a hot war are more extensive than just having the Strait of Hormuz being closed. If you look at that map you can see that Saudi Arabia is just across the Strait. And as luck would have it, Saudi Arabia's oil fields are mostly in the east which means that they are within close missile range of Iran. Nice oil fields you have there Saudi Arabia. Shame if something happened to it. The United Arab Emirates are also within missile range as well. If both countries think that Patriot batteries will protect them then they must have been disillusioned to find that those Patriots couldn't even defend against wonky Houthi missiles.
Then there is the fact that Iran shares a border with Pakistan and Afghanistan. Remember how the CIA shipped all those anti-tank guided missiles (ATGM) and ManPads to the Syrian Jihadists via countries like Saudi Arabia? Be a real shame if captured stock got passed on to the Taliban via all those borders and started targeted US/Coalition forces in Afghanistan. Just these two possibilities show how Iran has a whole range of options to use if it came to a military confrontation. And it should be remembered. If a US/Coalition could not successfully occupy Iraq with a population of 37 million, then how can Iran with a population of 80 million be occupied?
Another factor is that even if a US/Coalition managed to somehow suppress all those missiles the Iranians are using to guard those Straits, you would never be sure that you got them all. Who really want to risk their oil tankers going down those Straits and wanting to risk that bottleneck beig turned into a flaming sea? The trouble there is no way that there would be a quick campaign possible with everybody home by Christmas. This has the potential of still being fought during the 2020 US elections and I do not think that the US establishment wants to risk that one. What they do want is to strangle Iran economically and turn the place into one of grinding poverty but if pushed too far may go the Sampson option.

jCandlish , July 5, 2018 at 3:31 am

Mines.

The straight could be mined, and probably already is.

Colonel Smithers , July 5, 2018 at 4:30 am

Thank you.

Local kids could also be trained to fire rockets across the water. The straits are not straight and cut into Iran, so there's a good vantage point for Iran.

Steve H. , July 5, 2018 at 7:28 am

> probably already is.
>> China is still officially stating that it will not end its Iranian oil imports and operations.

China's investment of billions into the deep port of Gwadar should not be discounted. While China has ceded the ocean surface to the US navy, the wei qi way is to surround and not engage directly. By now the Gulf of Oman should be a sensory organ for information critical to Iran, and passive systems are much harder to detect & destroy.

We're now three years out from Qiao Liang saying China "thinks that Washington will not fight Beijing for the next ten years". China doesn't want the fight (and I mean high explosives, not 'fighting for') yet, but they've been preparing. And let us not forget the rooster tails on the American fleet fleeing the Persian Gulf in October 2015 when Russia launched cruise missiles at Syria. That was three months after the 'One Belt, One Road' speech.

While the Saud's are working out their family disputes they cannot afford to have the petrodollar disabled. But the US is materially capable of weathering energy disruptions better than the EU, which would become even more dependent on Russia. Long term, the petrodollar is gone and climate migrations are coming, so the when of Fortess America could depend on relative and not absolute 'cui bono, ciu malo'.

tldr: the fight is inevitable, there's more than two in the ring, and there's no referee.

rd , July 5, 2018 at 12:04 pm

I doubt if it is mined at this time, but mines would be a logical way to quickly shut the Strait down. A couple of small fast ships dropping mines at night could shut it down very quickly. They could drop mines along the far shore which would force ships towards the Iran side where they would be vulnerable to shore-based anti-ship missiles.

BTW, the standing NATO minesweeping group is three ships (two Lithuanian and one British). Historically minesweeping is one of the roles carried out by other countries that the US is currently working hard to alienate. https://en.wikipedia.org/wiki/Standing_NATO_Mine_Countermeasures_Group_1

The US Navy has minesweeping ships stationed in Bahrain. https://en.wikipedia.org/wiki/Avenger-class_mine_countermeasures_ship

Mine sweeping ships generally are not heavily armored to avoid magnetic and acoustic signatures that can trigger mines. So they can struggle in contested waters and would be very vulnerable to anti-ship missiles.

"Rouhani, considered by European politicians to be a reformist, appears to be showing a hardline streak that is nearer the strategy of the country's supreme leader, Ayatollah Khamenei. "

Everybody becomes a hardliner when faced with an existential threat, which Trump's threats are now creating for Iran.

Antifa , July 5, 2018 at 12:59 pm

There's no need to sink any oil tankers to stop all oil shipping. Those tankers don't sail without full insurance for the cargo, and no maritime insurer will back shipping through the Strait of Hormuz while the Iranians are on the warpath. Hence, no oil tanker.

rd , July 5, 2018 at 2:03 pm

That is why a few mines would be very effective. All oil shipping would cease immediately. Because mines can be redeployed very easily, including by air or fishing boats, insurers would probably not be assuaged by naval assurances that mines have been swept.

Lambert Strether , July 5, 2018 at 3:31 pm

"What's mined is minded, and what's yours is negotiable."

Bill Smith , July 5, 2018 at 5:22 pm

In the 1980's when the Iranians mined the Straits the tankers still moved. What was the insurance deal then? Did it the US pick it up for that part of the trip?

Redlife 2017 , July 5, 2018 at 4:11 am

"If a US/Coalition could not successfully occupy Iraq with a population of 37 million, then how can Iran with a population of 80 million be occupied?"

Iran is also mostly Persian. Yes, there are Arabs, Armenians, Baluchis, etc., but the vast majority are Persian and are proud to be Persian. Unlike Iraq, where you have a country with 3 groups you can play off each other.

I visited Iran over 5 years ago and was able to speak to some regular Iranians (English is not uncommon amongst men and women). They will fight to the last man, woman, and child if anyone came into their country. And that's what the secular ones who hate their government say.

Every town has lamppost flags showing the pictures of all the young men who died in the Iran-Iraq War. It was humbling to see the generational devastation wrought on that country. Even the youth view that war as a world war, since people from over 25 countries were found to be fighting on the Iraq side ( https://en.wikipedia.org/wiki/Iran%E2%80%93Iraq_War – Remember the Soviet Union was ALSO on Iraq's side!). They faced destruction and survived. They view themselves as an ancient, sophisticated people as well as the greatest survivors in the world (all with good reason as they are an amazing people with a rubbish government).

I do not see this ending well if the US thinks they can put the Iranians into a corner and get compliance. It is an amazingly ahistorical understanding of the geopolitics of Iran. These are the people we should be allying with not Saudi Arabia. But this is the same group who think blundering into Iraq or Syria was a good idea, so I really can't be surprised.

Colonel Smithers , July 5, 2018 at 4:27 am

Thank you, Kev.

Just to add that the people living above the main Saudi oil fields, Eastern Province, are mainly Shiites. Shiites are also to be found in the south along the ill defined border with Yemen. Both communities are disaffected and have been for decades, although the BBC, which advertises its "unparalled global expertise" (sic) between news bulletins and other programmes, reckons the Arab Spring caused the restiveness in Saudi Arabia.

This said, the Saudis and their Pakistani poodles can foment (Sunni) Arab and Baluch disorder in Khuzestan and Sistan / Iranian Baluchistan.

The Rev Kev , July 5, 2018 at 4:51 am

Oh my. I forgot all about the Shiites of the Eastern Provinces. Thanks for correcting that omission.

ex-PFC Chuck , July 5, 2018 at 7:53 am

And Bahrain is also predominantly Shiite, although ruthlessly ruled by Sunnis. And they're restive Shiites at that.

Clive , July 5, 2018 at 7:27 am

I always wonder to myself when, on the BBC News Channel, they pan across the alleged newsroom in New Broadcasting House and you see all those desks -- rows upon rows of them -- where people are sat, or, occasionally, get up and have a wander around, what the heck are they doing there? It can't be producing news reports because you see the same half a dozen so-called news "stories" stripped endlessly across the schedule throughout the day.

Every so often we get "business" news, which is someone from a spread betting company piffling on about some rot or other then "a look at the markets", not, unfortunately, a view of Covenant Garden or something, that would be more interesting, but rather some mysterious figures from world indices and forex rates splayed across the screen like some inscrutable hieroglyphs.

Then a bit of sport, with a dash of added jingoism.

Finally, some rally round the flag update on "the forces" with some top brass on the poop deck of an aircraft carrier looking for an F35 ("F35 coming real soon"). Maybe Sophie Rayworth in a tank.

Or alternatively it's Jenny Hill from Berlin with something about sausages and Merkel with stock footage of people drinking beer from unfeasibly large glasses wraps it all up apart from a sky diving granny then the weather.

Is it some kind of comedy, I ask at this point ?

The Rev Kev , July 5, 2018 at 8:08 am

It could be worse. We all could work in one of these places. It would not matter how great a story you found, it would all have to get through the editors who report directly to their owners like with the Murdoch press. The stuff you talk about is just the stuff that gets the editorial nod i.e. pure pap.
Some of the stuff that I have seen on Australian TV, however, is nothing less than out and out propaganda. I watch some of this stuff and I compare it with what I read on this site or what a commentator chips in with and I wonder what these newsreaders actually are thinking as they read some of these stories. Probably their steady pay packets.

Clive , July 5, 2018 at 8:20 am

I briefly watched ABC a couple of months ago. I thought I'd tuned into The War Channel. How on earth did that happen?

The Rev Kev , July 5, 2018 at 8:58 am

I wish to god I knew. I have seen this creeping in the past decade or more. I suspect that a lot of bad practices are imported from overseas. There are international conferences for conservative political parties so you would have American Republicans, British Conservatives, Australian Coalition, etc. all mixing together and swapping idea and techniques. They even work together when there is an election in their country.
Just the other day I heard one Coalition member describe another as a "patriot" which you NEVER hear in Oz. Kinda like a Republican describing another Republican as a good Communist. You just never hear it. We even have an ex-Prime Minister that sounds like he could be a good buddy to Mark Rubio running around trying to blow up his own party (currently in power) saying that we should build as many coal power stations as possible because climate change is not real.
Historically our governments have been ruled by pragmatism and past US governments have labelled us as "socialist" due to adopting such things as single-payer health. The past few years I am noting more and more ideologues going into politics who want to drag the country into their way of thinking whether it is to pick fights with China (our major trade partner) or send the Australian military to the ends of the earth as if they were Mercenaries-r-us. The times they are a changing.

ambrit , July 5, 2018 at 10:48 am

It all reminds me of C S Lewis' description of H -- as a giant bureaucracy. "The Screwtape Letters" were written at the end of WW-2 and still come across as 'fresh.'

upstater , July 5, 2018 at 9:41 am

Supposedly the KSA funded development of the Pakistani bomb. There probably is some agreement to hand some over (if it hasn't already been done) for "existential threats" This could turn very bad very fast.

PlutoniumKun , July 5, 2018 at 5:02 am

Iran has lots of options. Their Navy wouldn't last very long in a hot war but they have lots of asymetric options. They have reverse engineered Russian torpedoes and these could be launched from land or from mini-subs in shallow waters (where they are far harder to detect), making life very difficult for opponents, let alone tankers. They can strike the UAE and much of Saudi Arabia using a wide variety of ballistic missiles. To prevent this, the US would have to strike Iranian territory, and this would cause a massive escalation. In almost any scenario, the Straits would be shut down for many months, and this would be catastrophic for the world economy. Asia would come off worse as they are most dependent on LNG and oil from that region.

As you say, the great 'unsaid' is the Taliban. If Iran decided it was in their interest to supply them with a few dozen trained operators with a few thousand anti-tank missiles and manpads, then its goodbye Kabul.

Felix_47 , July 5, 2018 at 11:02 am

The Iranians hate the Taliban and Al Quaeda and ISIS a lot more than we do since we are on Saudi Arabia's side. They also seem to follow their principles. Don't forget our allies and proxies in Syria are the headcutters and madmen ..all Sunnis ..although our government does not want to admit it. They would be a lot smarter to trigger a Shiite uprising in Saudi Arabia and shut the country down. The Shiites in Saudi are downtrodden and abused.

Synoia , July 5, 2018 at 12:20 pm

One tanker sunk would eliminate the carriage of oil.

The maritime insurers would not insure the tankers in a war zone.

I believe the insurance term is "Force Majeure"

Bill Smith , July 5, 2018 at 5:42 pm

What is the pipeline capacity to get around the straits? Much there?

Synoia , July 5, 2018 at 9:18 pm

What pipeline? There are pipeline from Iraq to the Mediterranean coast. I don't believe there are any from Saudi Arabia to the Mediterranean.

One has to remember:

Mechanical Engineers build weapons
Civil Engineers build Targets

To escalate a carrier sinking to nuclear war is, I believe a lose/lose proposition. Let say the Iranians sunk a carrier and the US Nuked Tehran.

The Iranians would not be in a forgiving mood at that point, and it would do little to remove the somewhat irritated Iranians along the northern side of the Persian Gulf. The irritated Iranians would initiate incidents over the impact of irradiated Iranians.

The US could nuke the Iranian Coast along the Persian Gulf, but, the gulf is not wide, and the result would be poor prospects for the US allies on the South side of the Gulf. In addition one does not know if nuking Shea would provoke a Sunni backlash against "the infidels, the Christian US."

One could argue that Christians and Nukes cannot be mentioned in the same sentence.

Ape , July 5, 2018 at 6:02 am

If you want to successfully occupy a society, they must believe you are willing and capable of genocide.

JIm Thomson , July 5, 2018 at 11:25 am

The Prologue of Robert Baer's "Sleeping With the Devil" outlines a potential scenario of a Shiite attack on the eastern Saudi oil fields. The sub-title is The Doomsday Scenario.
The book is about the US-Saudi relationship by a retired CIA officer. A very good read and part of trying to understand this entire mess.

TimmyB , July 5, 2018 at 3:12 pm

Exactly right. Logic dictates that if Iran is attacked, Iranian missiles will soon thereafter attempt to destroy all of the oil producing capacity selling to Europe, Japan and the US within range of its missiles. This means ships, oil fields, pipeline, ect. Oil prices would skyrocket, plunging the US, Japan and Europe into a deep economic downturn.

Why people ignore the outcome you provided is beyond me. If I were Iran, I'd do the same if Israel attacked too.

Bill Smith , July 5, 2018 at 5:56 pm

Your guess is that nobody will attack the Iranians after they attack the shipping to close the straits?

In the 1987 Iran attacked about 91 ships in the Gulf. The oil still flowed. On April 18, 1988 the US attacked and severely damaged a number of Iranian ships and bases. After that things started winding down. Then on July 3, 1988 the US shot down that Iranian airliner. Then things really quieted down.

What are the differences now? Iran: ballistic missiles and subs?

kimyo , July 5, 2018 at 3:45 am

which general should be put in charge of the u.s. military response to iran's threat?

the one who won the war in afghanistan? iraq? vietnam? syria?

surely we have somebody who is up to the task? a 'best of the best', 'with honors' kinda guy?

Antifa , July 5, 2018 at 8:17 am

There's Lt. General Riper, who played the Iranian side in the 2002 Millennium Challenge war games, "killing" 20,000 Navy personnel and "sinking" 16 American warships on the first day, so he knows better than to even start such a bottlenecked battle.

There's always General Farnsworth, the great grandson of Colonel Armstrong Custer. Farnsworth has worked for two decades in the Purchasing & Planning wing of the Pentagon -- three levels below daylight -- but his confidence in an immediate American victory Over There is indubitable.

Colonel Smithers , July 5, 2018 at 10:07 am

Thank you.

Custer's spawn? Super!

In similar vein, MI5's Eliza Manningham Buller is a descendant of Redvers Buller, British commander in the second Boer War, but much more of a realist and moderate.

The Rev Kev , July 5, 2018 at 10:48 am

Redvers Buller? Seriously? I have read a lot about his role in the Zulu War of 1879. Intriguing character being hard-fighting and hard-drinking and yet refused to wear his 1860 China medal on the grounds that it was an unnecessary war. And a descendant of his is head of MI5?

blennylips , July 5, 2018 at 2:54 pm

Here's a little character sketch of Redvers Buller, from " On the Psychology of Military Incompetence ", by Norman Dixon:

The leading character was the commander-in-chief, General Sir Redvers Buller. According to a contemporary description there could be no finer choice for our South African adventure: 'There is no stronger commander in the British Army than this remote, almost grimly resolute, completely independent, utterly fearless, steadfast and vigorous man. Big-boned, square-jawed, strong-minded, strong-headed Smartness sagacity administrative capacity He was born to be a soldier of the very best English type, needless to say the best type of all.
Unfortunately this assessment was at variance with the facts in all but two particulars. Firstly, he was indeed big. Secondly, though sadly lacking in moral courage, he was undoubtedly brave when it came to physical danger. In this respect, as in many others, he was not unlike Raglan of the Crimean War, and indeed some other commanders of subsequent years.
Of Sir 'Reverse' Buller, as he came to be known by his troops, Rayne Kruger writes: 'At the risk of marring [the] contemporary description it should be mentioned that his big bones were particularly well covered, especially in the region of the stomach, and that his square jaw was not especially apparent above a double chin. He had entered the army with no disadvantage, his mother being a Howard and niece of the Duke of Norfolk, and he was very wealthy, which was fortunate in view of his preference for a diet of ample good food and champagne.

Such examples of the Peter Principle, wherein people are raised to their own level of inefficiency, was never better illustrated than in the case of Sir Redvers Buller, who has been described as 'a superb major, a mediocre colonel and an abysmal general'. In this case, high-level military incompetence must be laid at the door of heroic leadership, for this was the quality which eventually put him where he could do the most damage to his own side.

The Rev Kev , July 5, 2018 at 9:07 am

I think that we found our best of the best-

https://www.youtube.com/watch?v=OXRi28W-ENY

Synoia , July 5, 2018 at 9:22 pm

Eggzactly

Expat , July 5, 2018 at 5:38 am

The US response will be that this unprovoked aggression is an act of war, etc. This ignores our own unprovoked act of aggression, the embargo.
In case any has forgotten, those dastardly Imperialist Japanese launched an "unprovoked" attack on Pearl Harbor because the US put Japan under an embargo.
Embargoes themselves are not acts of war, but blockades are. But this is all technical blather. The US is attempting to strangle Iran. Iran will attempt to strangle the Gulf Arabs and the US. If Iran starts firing missiles or blockading the straits, the US will attack Iran. Iran will in turn launch attacks on the Gulf states. This could drive oil over $200, perhaps higher.
If Iran were clever, they would institute some sort of quarantine or inspection in their territorial waters. Indeed, they should claim jurisdiction over the entire strait in the interest of international security (they could certainly find some US document somewhere and just change the names). Then they could stop every ship going in and out and spend a week or so inspecting each one for contraband, disease, etc. This would not be an act of war but would certainly provoke the US into striking first anyway.

vlade , July 5, 2018 at 6:38 am

Iran has already extended its territorial waters to 12 miles, as did Oman. Given that the strait is 29 miles at the narrowest, and that to deal with the amount of shipping, pretty much all of it passes through either Omani or Iranian territorial waters. Technically, Iran/Oman has right to stop any non "innocent" (read unarmed) shipping trough it territorial waters. Not sure what is Omani relationship with the US/Saudis at the moment, wasn't paying much attention to the Gulf.

Colonel Smithers , July 5, 2018 at 10:04 am

Thank you, Vlade.

The Omanis would stay out.

The variation of Islam practiced there is very different to Saudi Wahhabism.

Also, many foreigners there, not just Muslims, have Omani nationality.

Bill Smith , July 5, 2018 at 7:48 pm

Sounds like there are 4 miles in the center? The marked shipping lanes are all on the Oman side of the half way point.

JohnnySacks , July 5, 2018 at 9:35 am

Once the US decides to strike first, we're going to be on our own. The Saudis will be completely useless as they always were, understandably not wanting to be cannon fodder for US interests. And with most of Europe and Asia relying on gulf oil, our 'coalition of the willing' is going to be a bit shy of members.
But $200 a barrel and the US a solid producer? Seems to be some win-win money to be made for both Raytheon and Exxon-Mobil.

Felix_47 , July 5, 2018 at 11:04 am

No Saudi just like no rich American will give his life for his country .in the military. Life is just too good for them .why fight in the desert when you can cool it at a cafe in Munich ..why are all the Syrian men of fighting age in Munich and Hamburg? They don't want to fight for their country.

sierra7 , July 5, 2018 at 5:32 pm

Isn't that what the Kuwaiti leaders did during the "First Persian Gulf War"? They fled to Monaco .

EoinW , July 5, 2018 at 7:45 am

Considering the restraint Iran has shown regarding Israeli attacks in Syria, it's safe to assume they want to avoid war at all cost. Don't expect any acts of aggression from them. Talk of closing the strait is trying to see if there is any spark of independence left in Europe's political elite. Unfortunately the Europeans only care about money – what they get personally from the US to run their countries and what their corporations get from doing business with America. There just isn't enough business between Iran and Europe to offset that. Now the more unreasonable Washington becomes the more uncomfortable its allies become, however they will still hold their noses and answer the call to duty. I'm afraid Iran's courting Europe will produce little to help them. Luckily China and Russia, even Turkey and India, are far more important.

The nice thing for Iran's hardliners – assuming the MSM narrative that they are nasty terrorists always looking to cause trouble – is that they don't need to take aggressive action to start a war. They've got America/Israel and that's the cause of every war in the 21st century. That pairing will decide if and when there is to be a war. Russia and China might have the ability to provoke caution but Iran doesn't.

Do not expect any actions from the Iranians to provoke a war. It's a war they cannot win and they know it. it's also a war they can't lose but the price they could pay by surviving might be really horrific. I'm not sure they'd close the strait even in a shooting war because that would risk further escalation. The moment America starts bombing Iran the law of diminishing return kicks in. The US will be looking for any excuse to go nuclear. Therefore I doubt Iranian resistance will be more than defensive. Hopefully Russia is providing them with air defences to be able to shoot down some US planes. Just lay low and ride out the storm. That's been the philosophy of US/Israeli opponents in the Middle East this decade. It's why the Russians take so much crap and keep turning the other cheek. They understand that either they lose such a war or, if they are winning they risk the US going nuclear. Iran can't win a war with America. Iran, however, can inflict unacceptable casualties but then they run the same risk of Washington going nuclear in retaliation. In Asian capitals you have rational players who understand that a nuclear war must be avoided if possible. Thus they avoid any aggressive actions which they fear could lead to such a war. The problem humanity has is that we're not sure if there are any rational players in Washington or Tel Aviv.

Kilgore Trout , July 5, 2018 at 9:53 am

"The problem humanity has is that we're not sure if there are any rational players in Washington or Tel Aviv."
+1
Given our belief in being an "exceptional nation" hasn't this been humanity's problem since the end of WW2?

Synoia , July 5, 2018 at 9:23 pm

hasn't this been humanity's problem since the end of WW2?

No. Ask the Indians.

Ignacio , July 5, 2018 at 8:01 am

Will the sanctions pull Iran enough to such an escalation? Would other countries (apart from Turkey) thing that this is troubling enough to risk US sanctions and disobey? There has been an escalation in language between the UE and US regarding Iran sanctions but it is still too soon to know what will be the EU position. We migth know after tomorrow's meeting in Vienna. I don't know what could happen but be sure the US is running out of "natural allies" by stepping up too much it's support for Saudi Arab. Trump is inaugurating a new era and it doesn't look pretty.

Tom Stone , July 5, 2018 at 9:20 am

Always bet on stupid.

Edward , July 5, 2018 at 9:38 am

Iran is now working with Russia. I wonder what discussions are occurring between these countries on this subject?

Bobby Gladd , July 5, 2018 at 12:22 pm

I have a relation who is a Marine Corps Major and Osprey pilot. His take on a serious major military conflict: "We are SO not ready."

blennylips , July 5, 2018 at 4:17 pm

Snafu agrees, in spades:

The Army might be in trouble but the Marine Corps WILL BE IN A HURT LOCKER FROM HELL if its ever called on to face Russian forces if they follow thru with published planning.

https://www.snafu-solomon.com/2018/07/dr-phillip-karber-on-russian-way-of-war.html

Bill Smith , July 5, 2018 at 7:55 pm

Lots of hype there – The Russians had a plan to invade the Ukraine! Shocking! Only 1 plan?

[Jul 06, 2018] Trump's Iran Gambit Won't Pay Off by Soraya Sepahpour-Ulrich

Notable quotes:
"... Offshore Technology ..."
"... * Soraya Sepahpour-Ulrich ..."
Mar 07, 2018 | www.opednews.com
By Soraya Sepahpour-Ulrich

It is as clear as day that President Trump is obsessed with regime change in Iran. What is not made clear is how much his gambit is damaging to Americans and American interests.

Without cause or justification, Mr. Trump pulled out of the Joint Comprehensive Plan Of Action (JCPOA), striking a hard blow to America's European allies – and its own credibility. Moreover, he threatened European countries with secondary sanctions should they continue to trade with Iran.

To top it all, in his latest move, he has called for all Iranian oil exports to be cut off by November. Or in practical terms, he is imposing an economic blockade on Iran. This is a similar scenario that was played out by the British in 1951 against Iran and Dr. Mossadegh – who was later overthrown in the 1953 British-US coup. But today, the IR of Iran is not the Iran of 1953, and the brunt of American demands and actions will not be borne by Iran alone.

Demanding that no country purchase oil from Iran is in fact an economic blockade. It is an illegitimate use of power to force a sovereign nation to surrender. It must be made clear however, that it is not just Iran that is the target here. The Trump administration's demands arean offensiveexercise of extraterritorial authority with no regard for sovereign equality between states. All states involved in trade with Iran will either have to cower to his demands or be punished.

But there is more than state sovereignty and indignation that is involved. These actions will have a dire effect on the economy of allies, and they will hit Americans in the wallet – hard. If Mr. Trump is giving a November deadline, he hopes to postpone the impact this will have on the November elections. He wants total rule over America before totally bankrupting it.

To fully appreciate how Mr. Trump intends to make 'America great again' where his policy regarding Iranian oil is concerned, one must take a look at some numbers and empirical evidence.

The oil strikes leading up to the toppling of Iran's Shah were felt around the world. During the 1978-79 revolution, Iranian oil production dropped 3.8 million barrels per day for 3 months. Although outside production increased by 1.8 million barrels to make up for the loss, the net loss to the world was 150 million barrels of oil. However, the compounding results of the production loss were significant around the globe.

Many Americans may recall the lines at the fuel pumps, but that was just what met the eyes. The increase in oil prices impacted farming, production, transportation of goods and services, and so on. At that time, China, currently the second biggest oil consumer behind America, was a net exporter of oil. The loss to U.S. economy was estimated at many billions of dollars in 1979 and 1980 (Deese and Nye 308-309) [i] .

Read also: When Netanyahu slept at the Kushners - media tales of Trump's Jewish confidants

More recent studies show that Iranian oil has a major impact on the U.S. economy even though America does not import a single barrel of oil from Iran. In 2008, economists Dean DeRosa and Gary Hufbauer presented a paper in which they claimed that if the United States lifted sanctions on Iran, the world price of oil could fall by 10 percent which would translate into an annual savings of $38-76 billion for the United States [ii] .

But sanctions alone were not responsible for oil price hikes in 2008 and beyond. In July 2008, oil had reached a peak of $142.05/bbl (see chart HERE ). This price hike came on the heels of some important events. In May, President Bush sent a ' warning message' to Iran on the same day that additional aircraft carriers with guided-missile destroyers were sent to the Persian Gulf.

In June of the same year, the New York Times reported that: "Israel carried out a major military exercise earlier this month that American officials say appeared to be a rehearsal for a potential bombing attack on Iran's nuclear facilities."

In July, then presidential candidate Barak Obama asked for tougher sanctions to be imposed on Iran.

It was not until September 2008 when President Bush declined to help Israel attack Iran that oil prices started to relax. They hit a low of just over $53 /bbl in December 2008.

Oil prices continued to rise again under Obama's sanctions and reached well past the $100 mark. The prices climbed down once again during the JCPOA negotiations reaching an all time low of $30.24/bbl in January 2016 – after the signing of the JCPOA.

Today, oil prices stands at $74.30/bbl. A fact not lost on any American who has filled up his/her gas tank lately– and paid for groceries. The deadline for Iran oil cut off is yet months away, but the impact has started.

Given that other countries may step in to compensate for some of the Iranian oil loss, other factors which effect prices must be considered – the most important of which is the security of the Strait of Hormuz. As mentioned previously, the British oil blockade scenario of 1951 will have far different consequences in 2018 should America impose an economic blockade or oil embargo.

Read also: 'Infamous liar': Iran blasts Netanyahu for claims Tehran had nuclear weapons program

In the 1950's, Iran did not have the military might to retaliate to the oil embargo and the naval blockade was aimed at crushing the economy in order to bring about regime change. This economic blockade, should it be allowed to happen, would crush the economy of much of the world.

As it stands, 35% of seaborne oil goes through the Strait of Hormuz 85% of which goes to Asian markets. As the US Energy Information Administration (EIA) has stated: "The blockage of the Strait of Hormuz, even temporarily, could lead to substantial increases in total energy costs."Today, Iran not only has the military might to block the Strait of Hormuz in retaliation, but it also has the legal right.

The 1982 United Nations Convention on the Law of the Sea (UNCLOS) stipulates that vessels can exercise the right of innocent passage, and coastal states should not impede their passage. Under UNCLOS framework of international law, a coastal state can block ships from entering its territorial waters if the passage of the ships harms "peace, good order or security" of said state, as the passage of such ships would no longer be deemed "innocent" [iii] . Saudi Arabia and the UAE export oil through Iran's territorial waters. Should they help America choke Iran's economy, their passage is not deemed 'innocent'.

Even if Iran simply chooses to merely delay the passage of tankers by exercising its right to inspect every hostile oil tanker that passes through the Strait of Hormuz, such inspections and subsequent delays would contribute to higher oil prices.

No doubt, the Iranian navy is no match for the formidable US navy. However, the shallow, narrow waters of Hormuz do not allow for the maneuvering of US battleships. The very presence of warships can lead to incidents. At its narrowest point, the Strait of Hormuz is 21 miles wide – hardly wide enough for a naval battle to take place and allow the passage of oil tankers at the same time. In recent years (2012), the USS Porter, a US navy destroyer, collided with an oil tanker in the Strait of Hormuz. The collision left a big whole in the navy destroyer.

American officials and oil companies have attempted to assuage the concern of over oil shortages by stating that America is one of the top oil producers. Some fact checking is in order.

According to EIA's latest available data, America's total exports in 2018 (thousands of barrels/month) was 7,730 bblin April. The same governmental body stated that total imports for the same month was 310,295. According to the EIA: "In 2017, the United States producedabout 15.4 million barrels of petroleum per day (MMb/d), and it consumed about 19.9 MMb/d. Imports from other countries help to supply demand for petroleum." (Click HERE for explanation of imports and exports).

Read also: After Greece and Cyprus, they prepare to attack Italy

These facts do not stop the spread of such news. As recently as June 4, 2018, Offshore Technology announced America is marching toward being the biggest oil producer. Important factors to bear in mind are that 1. America is the largest oil consumer and continues to have a deficit, and 2. Shale oil production is up thanks to higher oil prices.

While environmentalists objected to shale oil production, oil companies halted the extraction of oil when prices dropped. Anything above $50/bbl makes shale oil production feasible – which also makes it more expensive of the consumer. Although Mr. Trump and his administration have no regard for the environment, many states and countries have banned shale oil production (see LINK for list as of December 2017).

So the American people (and much of the rest of the world) is left with a stark choice. Either cave in to Mr. Trump's demands, accept loss of business, pay much higher oil prices at the pump and for consumer goods, prepare for a potential war, and sacrifice the environment – especially water, and mortgage the future of the earth more than we already have, or, don't heed Trump's demands – even if means a short term loss.

Either way, messing with Iran's oil exports is not an alternative that the world can afford. It may well be that Mr. Trumpis beholden to Mr. Netanyahu. He may well feel comfortable enough to subject the American people – and their allies to financial hardship; but the question is will Americans and the rest of the world sacrifice themselves at the Trump-Netanyahu altar?

* Soraya Sepahpour-Ulrich is an independent researcher and writer with a focus on U.S. foreign policy and the role of lobby groups in influencing US foreign policy.

[Jul 06, 2018] Trump magic: a couple more contra-interventions for lowering oil price on his part and we'll see $150 by Xmas.

Notable quotes:
"... Brent currently above $78 and heading up. A bad EIA twip stock report could mean it goes above $80 and stays there. ..."
Jul 06, 2018 | peakoilbarrel.com

George Kaplan,: 07/05/2018 at 6:36 am

Brent currently above $78 and heading up. A bad EIA twip stock report could mean it goes above $80 and stays there. Iran is threatening to blockade the Straits or Hormuz and Venezuela is threatening to invade the White House. The Saudis, Russians and E&Ps must be hoping for some more "art-of the deal" Trump magic: a couple more contra-interventions for lowering oil price on his part and we'll see $150 by Xmas.

[Jul 06, 2018] Ming Li paper

Notable quotes:
"... I believe due to OPEC massively inflating their URR, and the inaccuracy of the Hubbert method due to the creaming of all giant fields, the expected peak dates here are highly inaccurate. ..."
Jul 06, 2018 | peakoilbarrel.com

In the table below I have converted the data Dr. Minqi Li presented in metric tons per year to million barrels per day. Again, this is C+C plus natural gas liquids.

2017 At Peak Year Peak BPD Increase
us 11.47 15.08 2042 3.61
Saudi 11.29 12.17 2030 0.88
Russia 11.13 12.01 2033 0.88
Canada 4.74 7.85 2049 3.11
Iran 4.70 5.40 2039 0.70
Iraq 4.44 6.51 2042 2.07
China 3.S6 4.32 2015
UAE 3.53 4.38 2037 0.84
Kuwait 2.93 3.35 2040 0.42
Brazil 2.87 3.03 2025 0.16
Rest of W 27.13 33.22 2004
Total World 88.10 90.95 2021 2.85

The source for this chart is the same as the table above. I believe due to OPEC massively inflating their URR, and the inaccuracy of the Hubbert method due to the creaming of all giant fields, the expected peak dates here are highly inaccurate.

Well, all except three. The rest of the world did peak in 2004, China did peak in 2015, and the world will peak by 2021 or before. Congratulations to Dr. Minqi Li, the most accurate future peak there is the one that he calculated. Guym x Ignored says: 07/04/2018 at 8:10 am

I think Dr. Minqi Li put together an exceptionally well researched paper. The only one I have a faintest glimmer of knowledge in is oil. 2021. Give or take a couple of years is a good estimate of when peak oil occurs, based on current findings and technology. Improvements in either would probably only affect the tail of the decline rate. Which, based on the immense overstatement of EIA, and the creaming you mentioned, the tail should have much more of a decline than depicted. I am tending towards 2022 to 2023 as the final peak, due to the little over a year hiatus on the Permian final push due to pipeline and other constraints. We all know 2042 is a bad projection for the US, it will get there as soon as it can. It will get there as soon as it can, because the oil price will be high enough to beg, borrow, or steal to get there. For that reason, all other sources will be staining to get there at the same time. We are in the final stage, I do think.

Minqi Li x Ignored says: 07/04/2018 at 9:17 pm

Ron, many thanks for your very informative post about world oil (as always) and your comments on my post.

However, like much of the peak oil community, having missed some of the previous peak oil predictions, now I may err on the conservative side. Many have criticized the EIA projections and OPEC reserves. But again, even with those projections/reserves, the world oil production is still projected to peak in 2021. This suggests that world oil production may indeed peak in the near future. As I promised, I will follow up with part 2 on this.

Regarding China, China's oil consumption growth has re-accelerated as its oil production is in decline. This development may have some major impact on global economy/geopolitics in the coming years. On top of that, China is (or will soon become) the world's largest natural gas importer.

[Jul 05, 2018] Iran Warns Trump's Oil Ban Is 'Self Harm'

Jul 05, 2018 | news.antiwar.com

Iran's OPEC governor: Oil should not be used as a weapon

Jason Ditz Posted on July 4, 2018 July 4, 2018 Categories News Tags Iran The growing US pressure on the world to totally stop buying Iranian oil has produced a warning from top Iranian officials that the world economy, and America's economy in particular, would pay a severe price from such a ban .

President Hassan Rouhani

Iran's OPEC governor Hossein Kazempour Ardebili said the US ban amounted to "self harm," adding that Iran's position is that oil should not be used as a weapon or for political purposes. He predicted that higher oil prices would end up hurting the US economy.

Historically that has been the case, and with Saudi production already at record levels, Trump's expectation that the Saudis will make up for Iran's shortfalls are not realistic. Still, US officials continue to demand the world, including major Asian powers, stop buying from Iran.

Iranian President Hassan Rouhani downplayed the seriousness of the ban, saying he is confident Iran will survive this round of US sanctions as it has other sanctions in the past. Many coutries have not committed to the US ban, and if prices rise, Iran may ultimately take in just as much money even with fewer exports.

[Jul 04, 2018] World Energy 2018-2050 World Energy Annual Report (Part 1) " Peak Oil Barrel

Jul 04, 2018 | peakoilbarrel.com

World cumulative oil production up to 2017 was 192 billion metric tons. The world's remaining recoverable oil resources are estimated to be 276 billion metric tons and ultimately recoverable oil resources are estimated to be 468 billion metric tons. By comparison, the BP Statistical Review of World Energy reports that the world oil reserves at the end of 2017 were 239 billion metric tons.

World oil production is projected to peak at 4,529 million metric tons in 2021.

chart/
2017 Production and Peak Production are in million metric tons; Cumulative Production, RRR (remaining recoverable resources or reserves), and URR (ultimately recoverable resources) are in billion metric tons. For Peak Production and Peak Year, regular characters indicate historical peak production and year and italicized blue characters indicate theoretical peak production and year projected by statistical models. Cumulative production up to 2007 is from BGR (2009, Table A 3-2), extended to 2017 using annual production data from BP (2018).

[Jul 03, 2018] The squealing and consternation coming from the UK indicates that the empire changed course as for neoliberal globalization, and the UK is left out

The USA elite might now want abandoning of GATT and even WTO as it does not like the results. That single fraud on the west has had catastrophically perverse consequences for the coterie of killer's future and all because the designers of GATT had never thought outside the square of economics and failed utterly to grasp the gift of scientific and manufacturing politics.
Notable quotes:
"... The US still depends heavily on oil importation -- it is not "independent" in any manner whatsoever. Here's the most current data while this chart shows importation history since 1980. ..."
"... the only time a biological or economic entity can become energy independent is upon its death when it no longer requires energy for its existence. ..."
"... A big part of the US move into the middle east post WWII was that they needed a strategic reserve for time of war and also they could see US consumption growing far larger than US production. ..."
"... The USA of WAR may have oil independence, but it is temporary. The race is on for release from oil dependency and China intends to win in my view. It is setting ambitious targets to move to electric vehicles and mass transit. That will give it a technology dominance, and perhaps a resource dominance in the EV sphere. We are in the decade of major corporate struggles and defensive maneuverings around China investments in key EV sectors. ..."
"... In ten to twenty years' time the energy story could well be significantly different. The USA and its coterie of killers are still fighting yesterday's war, yesterday's hatred of all things Russian, yesterday's energy monopoly. ..."
"... I don't believe that the USA of WAR has changed or even intends to change the way they play their 'game'. The General Agreement on Tariffs and Trade set the trajectory for technology transfer, fabrication skills transfer, growth of academic and scientific achievement in 'other' countries (China, Russia etc). Their thoughts in the GATT deal were trade = economics = oligarchy = good. ..."
"... That single fraud on the west has had catastrophically perverse consequences for the coterie of killer's future and all because the designers of GATT had never thought outside the square of economics and failed utterly to grasp the gift of scientific and manufacturing politics. ..."
"... Canada and the gulf monarchies are the only countries with large reserves that are not hostile as yet to the US. As the US no longer is totally reliant on imports to meet its consumption, Saudi's, Bahrain and co are now expendable assets. ..."
Jul 03, 2018 | www.moonofalabama.org

karlof1 | Jun 29, 2018 5:51:08 PM | 32

Peter AU 1 @28--

The US still depends heavily on oil importation -- it is not "independent" in any manner whatsoever. Here's the most current data while this chart shows importation history since 1980.

As I've said before, the only time a biological or economic entity can become energy independent is upon its death when it no longer requires energy for its existence.

Peter AU 1 , Jun 29, 2018 6:11:54 PM | 33

karlof1 32

What I am looking at are strategic reserves, not how much oil is currently produced. With shale it now has those reserves and shale oil I think is now at the point where production could quickly ramp up to full self sufficiency if required. Even if the US were producing as much oil as they consumed, they would still be importing crude and exporting refined products.

A big part of the US move into the middle east post WWII was that they needed a strategic reserve for time of war and also they could see US consumption growing far larger than US production.

uncle tungsten , Jun 29, 2018 9:25:02 PM | 41
@Peter AU 1 #28 Thank you for that stimulating post. I just have to respond. And thanks to b and all the commenters here, it is my daily goto post.

The USA of WAR may have oil independence, but it is temporary. The race is on for release from oil dependency and China intends to win in my view. It is setting ambitious targets to move to electric vehicles and mass transit. That will give it a technology dominance, and perhaps a resource dominance in the EV sphere. We are in the decade of major corporate struggles and defensive maneuverings around China investments in key EV sectors.

In ten to twenty years' time the energy story could well be significantly different. The USA and its coterie of killers are still fighting yesterday's war, yesterday's hatred of all things Russian, yesterday's energy monopoly.

I don't believe that the USA of WAR has changed or even intends to change the way they play their 'game'. The General Agreement on Tariffs and Trade set the trajectory for technology transfer, fabrication skills transfer, growth of academic and scientific achievement in 'other' countries (China, Russia etc). Their thoughts in the GATT deal were trade = economics = oligarchy = good.

That single fraud on the west has had catastrophically perverse consequences for the coterie of killer's future and all because the designers of GATT had never thought outside the square of economics and failed utterly to grasp the gift of scientific and manufacturing politics.

By gross ignorance and foolish under-investment, the USA of WAR and its coterie of killers have eaten their future at their people's expense.

Peter AU 1 , Jun 29, 2018 9:25:04 PM | 42
karlof1 32

This is the chart for US exports of crude and petroleum products.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MTTEXUS2&f=M

Peter AU 1 , Jun 30, 2018 4:07:22 AM | 65
61

Light sweet vs heavy sour. Light means it contains a lot of diesel/petrol. Sweet means low sulphur. Many oils are heavy sour. Canada sand. the stuff they get from that is thick bitumen with high sulpher. The sulpher needs to be removed and the bitumen broken down into light fuels like diesel and petrol.

Canada and the gulf monarchies are the only countries with large reserves that are not hostile as yet to the US. As the US no longer is totally reliant on imports to meet its consumption, Saudi's, Bahrain and co are now expendable assets.

The great game for the US now is control or denial. Access to oil as a strategically critical resource is no longer a factor for the US.

Peter AU 1 , Jun 30, 2018 4:30:22 AM | 67
"We're an empire now, and when we act, we create our own reality. And while you're studying that reality – judiciously, as you will – we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors . . . and you, all of you, will be left to just study what we do." Karl Rove.

The squealing and consternation coming from the UK indicates that the empire has changed course and the UK is left sitting on its own shit pile.

[Jul 03, 2018] No one actually has to act against US shale - it s something of a pretender in the real oil world anyway, and this has long been commented upon

Jul 03, 2018 | www.moonofalabama.org

Grieved , Jul 1, 2018 11:31:44 PM | 30

@24 Peter AU 1

I encourage you to give the Escobar article a second reading. I just did to make sure I knew what it was saying. I think karlof1 is making the right points from it.

The collaboration between Saudia Arabia and Russia is a very small part of the article, and no one disputes that this collaboration is occurring. Russia may even be part of OPEC soon, if it chooses. The relationship works against the US but it's not specifically made for this reason. Read Adam Garrie's take on this to see that the moves into OPEC by Russia in recent years are clearly from its own interest as a hugely major supplier, and that Saudi Arabia needs Russia: The New Russia-Saudi Partnership Has Riyadh's US Ally Over a Barrel

I just skimmed it a third time and I don't see Escobar saying anywhere that the Saudi-Russia relationship is to kill US shale. He does say that both Russia and Iran are interested in countering it. I think the point here is that all serious oil producers with profitable reserves take alarm at the US shale oil because it's hard to say that it's a real commodity with an inbuilt profitability. It's a short-term entry into the market that can serve to disrupt the market temporarily, but it has no staying power. I suspect most nations would prefer it simply not intrude.

No one actually has to act against US shale - it's something of a pretender in the real oil world anyway, and this has long been commented upon. Escobar's point that the US shale is largely a myth is not a new concept. At best the reserve will deplete within 15 years, and that's at best - along the way it will destroy the US potable water table. And its intrinsic value is far from clear, since the entire industry is dubiously financed using relatively free Federal Reserve money. As Escobar points out, many call $100 per barrel the profit threshold for shale - that's a ludicrously high bar for profitability in the oil world.

Much of Escobar's article was about the relationship between Russia and Iran, and it served also as a very good primer in world oil and petro-currency numbers. I found it pretty sound.

In fact, I recommend it to those who may be interested: How the Iran sanctions drama intersects with OPEC-plus

[Jul 03, 2018] Oil will continue to flow from Iran, there simply isn't a significant supply stemming from the Saudi-Russia alliance or US shale to fill the gap

Notable quotes:
"... The Iranians will lose marketspace, sure, but the inevitable increase of the price of oil will somewhat soften the blow. And anything over $100 per barrel, along with a stronger dollar, is proven to be detrimental to energy importing countries. It will be painful to keep the economy rolling. ..."
Jul 03, 2018 | www.moonofalabama.org

never mind , Jul 1, 2018 4:46:05 PM | 12

Oil will continue to flow from Iran, there simply isn't a significant supply stemming from the Saudi-Russia alliance or US shale to fill the gap.

The Iranians will lose marketspace, sure, but the inevitable increase of the price of oil will somewhat soften the blow. And anything over $100 per barrel, along with a stronger dollar, is proven to be detrimental to energy importing countries. It will be painful to keep the economy rolling.

And when there's less appetite for oil; the price of oil crashes resulting in another big financial crash (due to bad dept) followed by another round of austerity measures which spells political turmoil in a number of countries. And the landscape gradually changes.

Because we've been there before.

Likklemore , Jul 1, 2018 6:05:34 PM | 16

So Trump asked the Saudis to pump 2 million more barrels per day to offset Iranian exports?

Daffy!. Saudis do not have a spare barrel, let alone 2 million. Ask Simmons. Oh wait, he has been offed:


LONDON(Reuters) - The leader of Saudi Arabia has assured U.S. President Donald Trump that the Kingdom can raise oil production if needed and the country has 2 million barrels per day of spare capacity that could be deployed to help cool down oil prices to compensate for falling output in Venezuela and Iran.

In a tweet on Saturday, Trump said Saudi Arabia had agreed to increase output by up to this amount, although a subsequent statement from the White House rowed back on this assertion.

Either way, the kingdom, OPEC's biggest member, can barely raise output by 1 million bpd to 11 million bpd and even that would be difficult, according to industry analysts who forecast a further oil price rally due to a lack of new supply.

Below are comments from some leading OPEC analysts:

[ED: one of several cited below]

"The Saudis do not have 2 million bpd of spare capacity as it would imply production of 12 million bpd. They can likely produce a maximum of 11 million and even that will be running their system at stress levels," said Ross.

He added that with a potential output fall of up to 1.5 million bpd in Iran and further outages in Venezuela and Libya, the world could be short of 2 million bpd of oil output without an increase in Saudi output by the end of the year."

[.]

Reuters

Get ready to shell out at the pump.

Peter AU 1 , Jul 1, 2018 8:50:52 PM | 20
Pepe declares US shale to be a myth, but then says KSA and Russia have teamed up to fight. Us production figures also left out. Disappointing piece from Pepe, especially this glaring contradiction where KSA and Russia has to team up to fight what he calls a myth.
karlof1 , Jul 1, 2018 9:13:17 PM | 22
Pepe's referring to the assumed longevity of shale which is proven to be a gross lie. I can provide documentation about that but it will have to wait until I have more time to work.
Peter AU 1 , Jul 1, 2018 9:22:31 PM | 24
karlof1
Ok so according to Pepe Russia and KSA are joining forces to fight this gross lie.
either shale is a real and major threat, or Russia and KSA are not joining forces. That is the glaring contradiction in Pepes piece. the other option is that both Russia and KSA both of which have some knowledge of oil are mistaken about US shale.
Julian , Jul 1, 2018 10:59:24 PM | 26
Re: Posted by: PutinToTrump | Jul 1, 2018 1:32:09 PM | 6
Re: Posted by: Šabaniri | Jul 1, 2018 2:02:23 PM | 7
Re:

Already have Syria? Not really. Heard of the SDF occupying the North-Eastern third of Syria. If Trump & Putin can't come to an agreement on Iran what's the bet Trump decides to pump money, weapons and US troops into North-Eastern Syria to fully support the Kurds?

NordStream II? Sure, it will be built, but Trump can sanction Germany and German industry - ie automakers - heavily if he so wishes. He might do. He can blame NordStream II. He's certainly been talking about it.

There are certainly ways and means Trump can create huge trouble for Germany/Russia in regards to NordStream II even if it is built.

Crimea? Yeah, Russia has it but it is also used as the bludgeon to impose sanctions on Russia. Perhaps recognising Crimea as part of Russia and dropping all sanctions on Russia will be offered to Putin in return for Russia staying out of any conflict regarding Iran in 2019.

I'd hardly say Trump has nothing to bargain.

Besides, why would Putin select Medvedev as Prime Minister again despite Medvedev being obviously a Euro-Atlanticist?

I'd also add - who do you think Russia fears in the future decades.

Is it a decaying Europe/EU who nevertheless can buy lots of Russian goods including oil & gas obviously?

Or do Russia fear a rising China that always has one eye on the Russian Far East as a possible place for expansion to take care of their oil & gas & mineral needs?

I suspect - and you can look to the history of Russia/China relations for this - that Russia retains a more existential fear of China than anyone else.

Russia always clearly seeks to balance Europe/EU/US/Atlantic against China and others.

Where does Iran fit in all this? If Iran is taken out who benefits? Doesn't Iran being taken out strengthen Russia's hand vis-a-vis China in terms of oil & gas? I'd say it does. Certainly. Without Iranian oil & gas China becomes more dependent on who? RUSSIA!

So I bet Russian thought would tend to say to China. Look, we are not going to put ourselves on the line to defend Iran. But hey, if you want to do that we'll support you doing so, afterall, Iran is of a more of a vital strategic interest to you than us.

We defended Syria, we can't defend anyone and you can't expect us to defend everyone. If you want a country to retain its independence you have to step up to the plate every now and then rather than just relying on the Russian military.

And look - we defended Syria - what did you do in Syria's defence?

Just to finish this comment.

In case you haven't noticed the US has put a date of November 4 on stopping the export/import of Iranian oil. Which is? It is 2 days before the November 6 Mid-Terms...

It's a clear set-up for 2019.

My prediction.

There will be military action against Iran in the first half of 2019.

I suspect March-April-May being the most likely.

At that time you also have Brexit, European Elections (dominated by populists), Ukrainian Presidential Elections, South African Elections, Indian Elections... It's a big few months.

My advice? Buy oil & gas in the second half of this year - it's value is likely to skyrocket in 2019.

What will Iran's response be? I'd say if you are in any of Saudi Gulf Coast, UAE (Dubai & Abu Dhabi), Kuwait or Bahrain - get out before New Year's!!!

Julian , Jul 1, 2018 11:34:55 PM | 31
Re: Posted by: Peter AU 1 | Jul 1, 2018 11:14:41 PM | 27

I'm not judging one way or another on what Putin will necessarily do, but clearly Trump's gambit is to wean Iran off Russian support.

Will it work? Who knows. But Iran clearly has less strategic importance to Russia than Syria.

Let me ask you a question. Do you think Russia prefers Iranian-Qatari oil & gas pipelines through Iraq-Syria-Turkey to Europe or would Russia prefer Saudi-UAE-Qatari oil & gas pipelines to Europe??

Answer: Neither of course.

Bob , Jul 1, 2018 11:53:00 PM | 32
Any effort to understand US foreign policy from actual US interests is a futile exercise in frustration. US foreign policy is driven by two things:

1. The interests of international financiers (heavily Jewish)
2. The Israeli government.

At consideration for actual US interests is secondary if such things considered at all. That should be obvious enough to everyone by now.

The one thing that Russia and/or China could do that would do more to avoid another major power war, is to loudly, clearly and publicly inform the Israelis (the people as well as the government) that any attack upon Russia, China, or their forces by the US or NATO will be treated as a direct attack upon Russia/China by the state of Israel and the Jewish people and these will be utterly destroyed in the first salvo of the Russian/Chinese response.

The second thing that could/should be done, is for Russia to implement a covert campaign of targeted assassinations of Jewish figures who are actively engaged in efforts to undermine Russian interests. This would include people like Sheldon Adelson, Haim Saban, key players in international finance, etc. No Jew anywhere in the world should feel that they are beyond the reach of Russian retaliation. This is precisely how the Israelis conduct their foreign policy and Russians should not shirk from engaging fire with fire.

Alexander P , Jul 2, 2018 2:09:24 AM | 33
@Julian
I think you underestimate the long term benefit of a stable and prosperous Iran in the greater Eurasian gambit (Infrastructure Node, stability for the region) vs the short term gains Russia may achieve from a destroyed and fractured Iran that is in disarray. Russia doesn't just export energy after all. Exploding oil prices will end up hurting consumer nations, which in turn affects the global economy and by extension oil producers, there is always a delayed feedback loop.

Just because someone competes with you in the energy realm doesn't automatically mean you want that actor weak or destroyed. If that was the case, then why does Russia maintain good relationships with Azerbaijan, a direct competitor to Russian Gas? Similarly Central Asian countries are competitors in the gas market for China, yet Russia would never allow these to be subverted by radical Islamists without acting.

[Jul 03, 2018] Oil is energy and energy means power to those that control it

Notable quotes:
"... As always, profits "trump" humanity. ..."
"... The great power game is why there is continuity of government policy in the 'US west' no matter who is elected. Within the great power game democracy in the west is meaningless. ..."
"... If the US is changing how it plays the game, then the Brit players may be getting desperate. They are now small players but unlike the US do not have an oil reserve. ..."
"... This may be the reason the Brits have ramped up the propaganda to the ridiculous and also why they have attempted to take down Trump. ..."
Jul 03, 2018 | www.moonofalabama.org

Peter AU 1 | Jun 29, 2018 4:14:35 PM | 24

Loot is only a side benefit for post WWII wars and no doubt before. Oil is energy and energy means power to those that control it. UK, French, US have fucked the MENA region over simple for control of the oil.

Working to prevent communism, socialism, democracy and pan Arab movements which are all a threat to FUKUS control of MENA, and then pulling the same dirty tricks on each other. Russia has its own all and through the Soviet era seems to have only dabbled in the region.

China needs to import energy and so the great power game of controlling or denying access to energy continues.

ben , Jun 29, 2018 4:15:18 PM | 25

karlof1 @ 3 said"Criminality mostly driven by Greed."

james @ 5 said: "trump isn't much different or he would be addressing this too..."

Two bottom line truths, that are apparent...

As always, profits "trump" humanity. How to change that mindset? I for one, don't know, but, the so called "religious" among us, should ask themselves that same question. IMO, religion is, as practiced, mostly crowd control..

Peter AU 1 , Jun 29, 2018 5:16:04 PM | 28
The great power game is why there is continuity of government policy in the 'US west' no matter who is elected. Within the great power game democracy in the west is meaningless.

with USA's new found oil independence, the direction they take may change from the last 70 years or so.

Another recent change is the rise of current Russia and their vision of a multi polar world, also the rise of China.

If the US is changing how it plays the game, then the Brit players may be getting desperate. They are now small players but unlike the US do not have an oil reserve.

This may be the reason the Brits have ramped up the propaganda to the ridiculous and also why they have attempted to take down Trump.

[Jun 28, 2018] Well, Iran sanctions explains why oil prices are up right now.

Jun 28, 2018 | peakoilbarrel.com

Energy News x Ignored says: 06/26/2018 at 10:19 am

2018-06-26 (Rudaw) When US sanctions were placed on Iran in 2012, the four Asian countries were given a waiver, requiring them to reduce their business with Iran by 20 percent each six months rather than halt trade immediately.

The Asian oil buyers are less likely to receive a similar waiver from the Trump administration Iran may need to resort to a bartering system to continue selling its oil. Under the 2012 US sanctions, India imported $10.5 billion worth of goods, mainly crude oil, and exported commodities worth $2.4 billion.

The barter system will be inefficient, as Iran's oil sales are greater than the value of what it imports from these countries. It also cannot use the currencies of these countries for international business transactions.
http://www.rudaw.net/english/business/250620181

Energy News x Ignored says: 06/26/2018 at 10:29 am
2018-06-26 (Bloomberg) U.S. presses allies to cut Iran oil imports to *zero* by November
* U.S. isn't granting waivers on Iranian oil imports ban
(State Department Official)

added link https://www.bloomberg.com/news/articles/2018-06-26/u-s-is-said-to-press-allies-to-end-iran-oil-imports-by-nov-4

Kolbeinh x Ignored says: 06/26/2018 at 10:49 am
Well, maybe that explains why oil prices are up right now.
Hightrekker x Ignored says: 06/26/2018 at 10:59 am
"The global economy looks like the Titanic right now. The iceberg is the incoming oil price spike and the complacent investment community won't even know what hits them. "
-Baby Domer
Guym x Ignored says: 06/26/2018 at 7:13 am
So, an important question for this board is, could we have reached peak oil production this year? The Permian will increase substantially into 2020. However, that will be partially offset by the Venezuelan drop. Add in other declines, and the drop could easily offset any US production. At some point, OPEC will see that extra production will never meet demand, and not just waste what they have.
Eulenspiegel x Ignored says: 06/26/2018 at 7:28 am
It depends totally on political scenarios, not technical and not financial.

There's still a lot of growth potential to offset the declines:
– Permian
– Other US shales to a degree
– Kanada with it's vast heavy oil ressources
– Venezuela
– Russia
– Iraq
– Iran
– SA (nobody knows), at least they can call to their spare capacity
– Kuwait
– UAE
-Brasil

That's 10 locations, some are politically knocked out ( Ven, Iran partly) from growth.

The more important thing for world economy is: How long can they support the consumption growth, additional to the decline of all other countries.

I think peak oil is somewhat more melodramatic: When Ghawar finally dries up, we have reached peak oil. It will dry fast, due to all these horizontal tapping keeping the oil flowing until the last feed of oil column. And replacing these 5 mb/d will require an additional fully developed Permian – something not in sight at the moment.

Energy News x Ignored says: 06/26/2018 at 2:17 am
Libya's Tripoli-based NOC Says Exports from Benghazi-based NOC in the east are "illegal"

2018-05-26 BENGHAZI, Libya/TUNIS (Reuters) – Eastern Libyan commander Khalifa Haftar's forces have handed control of oil ports to a National Oil Corporation (NOC) based in the east, a spokesman said on Monday, a move the internationally recognized NOC in Tripoli dismissed as illegal.
If implemented, the transfer of control would create uncertainty for buyers of Libyan oil who normally go through NOC Tripoli.
In comments later confirmed to Reuters, Ahmed Mismari, spokesman of Haftar's Libya National Army (LNA), said on television that no tanker would be allowed to dock at eastern ports without permission from an NOC entity based in the main eastern city, Benghazi.
https://www.reuters.com/article/us-libya-oil/east-libyan-forces-say-oil-ports-handed-to-eastern-based-noc-idUSKBN1JL2DQ
Tripoli-based NOC https://pbs.twimg.com/media/DgkrEMeXUAADLGS.jpg

Kolbeinh x Ignored says: 06/26/2018 at 4:22 am
Some kind of summary with some details from Libya (from comments section in HFIR article above – Game Over – Oil Prices Are Going Higher).

Nigeria and Libya are also becoming disruption hotspots. Three of Nigeria's main crude streams (Forcados, Bonny Light and Qua Iboe) are either halted or severely disrupted, but violence in Libya grabbed the recent headlines. Militias led by Ibrahim al Jathran, former head of the local Petroleum Facilities Guard, attacked and briefly seized the 0.35 mb/d Es Sider and 0.22 mb/d Ras Lanuf terminals from Khalifa Haftar's Libyan National Army (LNA). Although the LNA are back in control, Libyan oil output has collapsed from 0.95 mb/d to around 0.55-0.60 mb/d because of the fighting and NOC has declared force majeure at the two ports (along with apparently unrelated technical issues undermining production at AGOCO-run fields in the east).
After around 10 days of fighting, the extent of the damage at the two terminals remains unclear. There is currently no information about the status of Es Sider, which exported around 0.30 mb/d in the previous three months. The destruction of two storage tanks at Ras Lanuf, which was exporting around 0.10 mb/d before the clashes, has reduced storage capacity from 0.95 mb to 0.55 mb. Seven tanks at the terminal had already been damaged in previous clashes and the destruction of another two leaves only four tanks capable of operating. Once the fighting is over (and there is a considerable risk of further clashes over the next few weeks), it will take several days to evaluate the status of Es Sider and Ras Lanuf. This would be followed by emergency repairs, which could take a week or two, with export capacity recovering only gradually. Consequently, we expect output to remain at 0.55-0.60 mb/d until early/mid-July, even as NOC studies options to bypass Ras Lanuf and possibly divert exports to the Zueitina terminals.

In conclusion: Libya is good for no more than 0.8 Mb/d, but likely less than that in 2018.

Kolbeinh x Ignored says: 06/26/2018 at 5:02 am
Regarding the Iran discussion.

The debate seems to be around what effect the risk of secondary sanctions from US government for international companies will have. Some argue that the US allies and their companies will not pick a fight over this with the US right now. In either case, it certainly is not good for the Iranian economy which contracted after the last round of sanctions and boomed when they were lifted afterwards. Also the Iranians want western equipment and competence to develop their oil and gas fields (some of their oilfields are somewhat complicated to develop), and it is not certain Lukoil and russian service companies can be a good enough replacement.

There are some hurdles with switching customers for large oil volumes. Tanker freight and insurance services now done by western companies afraid of sanctions will have to be replaced or the obstacles overcome somehow. But I agree with you that China, while also having a futures market trading in yuan, will look to Iran when shortage arrives. However the perception of shortage has still not arrived in oil markets today. Some reduction of export from Iran is likely both initially and for some time further. Hard to say how much, some argue that it takes 6-12 months to see the full effects of US sanctions. And once sanctions now are in place, even if it was untimely given the supply situation in the oil market, it will not be practical and too confusing as a political move to see them lifted soon (less than 1 year).

[Jun 28, 2018] Driving a bit less is maybe a good thing, pensioners and children freezing to death and industry shut down with rolling blackouts is maybe less negotiable.

Jun 28, 2018 | peakoilbarrel.com

Guym

x Ignored says: 06/25/2018 at 6:18 pm
https://seekingalpha.com/amp/article/4183852-game-oil-prices-going-higher

Fun to look at this analysis, and plug in a one million shortage from North America. Obviously, there would not be a one million drop in Iran, as it would be sold somewhere.

George Kaplan x Ignored says: 06/26/2018 at 12:41 am
We might be seeing similar articles about gas over the next couple of years. Driving a bit less is maybe a good thing, pensioners and children freezing to death and industry shut down with rolling blackouts is maybe less negotiable.
Watcher x Ignored says: 06/26/2018 at 12:58 am
Suppose there is too little oil and the price doesn't change. Producing countries will be sure their own countries have a sufficient amount so regardless of price, that oil isn't leaving the country. It stays right there for consumption. External price is meaningless to that country, as it should be.

There are countries that produce about what they consume. Mexico is one. Argentina. Their oil isn't going anywhere. A higher price elsewhere tries to get it exported? Clearly the govt will stop anything like that. Just as the US did with its export ban in the 70s. Price doesn't matter if bans are in place.

Oh, and another annoying thing in that article. Something like . . . if supply shrinks, only "demand destruction" can avoid some sort of catastrophe. This is absurd. Demand is not destroyed. The desire for oil will grow with population. The population demands oil. It is consumption that is destroyed by lack of supply. Can't consume what doesn't exist.

Besides which, if some level of "grim" is approached, then some decision is going to be made to liberate that Orinoco heavy from the horrible popularly elected government that controls it. As I noted before, there is a large ethnic Russian population in Venezuela. The 1917 revolution sent many people there, fleeing confiscation. Liberation may not go smoothly.

George Kaplan x Ignored says: 06/26/2018 at 2:28 am
Mexico doesn't use what it produces, it doesn't have the refining capacity – it exports crude and imports products.
Invading Venezuela wouldn't necessarily stop the decline in production – their equipment and wells are falling apart, to get back to where they were a couple of years ago would require a five year occupation, probably with forced labour (or really high wages), and the investment money all coming from the invading country, with no net returns for longer than that.
Demand is usually defined with some relation to price, not assuming a commodity is free.
Eulenspiegel x Ignored says: 06/26/2018 at 3:47 am
If you would pay a tenth of the wage of an oil redneck in Texas, there would be long queues before the recruiting offices.

Forced labour is no good idea – especially when handling expensive equipment. Pay a good local! wage, and you'll have enough people.

You'll have to import foreign workforce, too, to rebuild this mess to modern standard. So billions will be needed before the oil starts flowing again.

[Jun 27, 2018] Iranian condensate will most likely replace US condensate to China as much as possible.

Jun 27, 2018 | peakoilbarrel.com

Kolbeinh x Ignored says: 06/27/2018 at 4:57 am

From the Bloomberg article: "The U.S. plans to speak with the governments of Turkey, India and China, all of which import Iranian oil, about finding other supplies."

Iranian condensate will most likely replace US condensate to China as much as possible. China is the key to if/when this harsh "embargo" of Iran will ease. They have the strength to stand up against the US and then others will follow suit (e.g. India). A barter system (goods vs. goods trade) or payment in yuan could probably be a good enough way to avoid american banking sanctions. But if China wants to stand up against US at this point is uncertain. If this strangling of Iran is highly successful, it is hard to see the rewards. A high oil price that will be the tipping point for the global economy in the wrong direction or indirectly (hopefully not directly – who needs another war now?) overthrow the Iranian government and thus the creation of new political problems in the country; a repeat of the Iraq experience almost. I almost forgot that there is the nuclear issue there as well, maybe that is also a driver

  1. Boomer II 06/26/2018 at 10:16 pm Reply

[Jun 27, 2018] Unnamed "Senior State Department Official" says the USA "expects all countries to reduce their Iranian oil imports to zero or face US sanctions

Jun 27, 2018 | www.moonofalabama.org

jayc | Jun 26, 2018 7:25:46 PM | 17

Unnamed "Senior State Department Official" says the USA "expects all countries to reduce their Iranian oil imports to zero or face US sanctions."

https://www.cnn.com/2018/06/26/politics/us-iran-oil-imports/index.html

"We have a lot of diplomatic muscle memory for urging, cajoling, negotiating with our partners to reduce their investments to zero," the official added.

(This official infers that EU countries will soon capitulate to US demands, but does he believe that, say, India will agree to this? The CNN reporters don't ask.)

[Jun 27, 2018] Yes to higher oil prices. There are too many negative things all starting at the same time: trade tariffs, interest rates rising, sanctions

Jun 27, 2018 | peakoilbarrel.com

Energy News x Ignored says: 06/26/2018 at 11:03 am

Yes higher oil prices. There are too many negative things all starting at the same time: trade tariffs, interest rates rising, sanctions
Guym x Ignored says: 06/26/2018 at 12:24 pm
Yeah, we are setting ourselves up for creating a 2.5 million barrel a day shortfall by sometime in 2019. The US is creating these surprises by far overestimating Permian output, and the Iran sanctions. Now, Perry is saying the OPEC increase may not be enough. Really, ya think? What do we do now, President "Not good!"?
Kolbeinh x Ignored says: 06/26/2018 at 1:25 pm
So strangling Iran to force SA to release their spare capacity is the master plan? I am confused.
Guym x Ignored says: 06/26/2018 at 2:01 pm
Trump's master plan was written on the back of a business card with a crayon. Nobody, can decipher it, it more difficult than the most complex code.

I think probably the most telling take of his presidency, is the aide in charge of keeping Presidential documents complaining that he tore every sheet of paper on his desk into little shreds, constantly. Sure sign of a serious mental disturbance. Captain Queeg.

ProPoly x Ignored says: 06/26/2018 at 5:48 pm
There is no plan. The only thought process is hurt Iran. The huge implications of that with everything else going on are lost on these people.

[Jun 27, 2018] 2015-17 took a lot of the fun out of oil production investment for me. None of us have much desire to do any drilling or other risk taking. Just feeling relief, but worried the roller coaster prices will never end.

Jun 27, 2018 | peakoilbarrel.com

shallow sand

x Ignored says: 06/26/2018 at 9:27 pm
Guym. I assume most of the small conventional producers are receiving a low price in the Permian. Bad deal for them, situation not of their making. Hoping very much that does not spread to the Midcontinent.

Anecdotally, zero rigs presently drilling in our little field. Drove the width of Kansas twice recently, including OK and TX panhandles. Saw zero drilling rigs. Saw just three workover rigs.

The shale plays appear to be the USA oil future. The rest are not big enough to draw outside money.

Really have to wonder how many of the world's fields are "self sufficient" at $70-80 at this point.

Guym x Ignored says: 06/26/2018 at 10:11 pm
Not much at $70 to $80 anymore. Not very much of a profit, at those prices. But, you get what you pay for, and soon the world will find out that the price they wanted to pay results in a deficit to what they need.
shallow sand x Ignored says: 06/26/2018 at 11:00 pm
Yes, market really overdid it dropping prices to the 2015-17 levels.

I still blame a lot of the overdone price crash on US shale CEO talk. Their true costs were murky, and they continually talked the price down through 2015 by claiming they could do well financially at those levels or below.

Those companies should be doing great now, given the claims of 2015-17. Lol.

2015-17 took a lot of the fun out of oil production investment for me. None of us have much desire to do any drilling or other risk taking. Just feeling relief, but worried the roller coaster prices will never end.

Watching Trump kill grain prices. If the Dems could find someone that could appeal to Midwest, I'd say Trump will not win in 2020. Very conservative ag folks are upset. Suprsing to me how vocal they are about it.

Maybe a trade war will kill oil demand. More roller coaster.

[Jun 27, 2018] Are we close to plato oil situation, when all efforts to raise production fail?

Notable quotes:
"... tier plays that have been a bust. With the seismic and visualisation technology improvements the E&Ps should know better where and where not to drill. They seem to be more selective with falling wildcat numbers (and that is not much of a function of price that I can see as it has been happening since 2010) and yet the commercial discovery rates are staying fairly low. I can only interpret that as indicating that there just isn't that much left. With Rystad indicating 6 to 8% decline rates in mature fields, and rising, and few new prospects how can there not be a peak? ..."
"... Saudi ministers spout out any thing that comes to mind to support flip-flop policies and their feud with Iran seems to be bubbling in the background of a lot that's going on; every year Iran and/or Iraq say they have a new plan and target for higher production, which is 100% guaranteed not to be met even remotely. ..."
Jun 27, 2018 | peakoilbarrel.com

George Kaplan x Ignored says: 06/27/2018 at 12:19 am

I think if the world economy starts to drop, which is overdue and looking increasingly likely every time Trump opens his mouth, and keeps the oil price down then it's likely we'll be in a slow but accelerating decline. That might be a good thing – the further the peak is pushed out the steeper the decline when it comes.

What has surprised my most recently has been the fall in discoveries for oil and, maybe more so, gas, and with that the number of new fron tier plays that have been a bust. With the seismic and visualisation technology improvements the E&Ps should know better where and where not to drill. They seem to be more selective with falling wildcat numbers (and that is not much of a function of price that I can see as it has been happening since 2010) and yet the commercial discovery rates are staying fairly low. I can only interpret that as indicating that there just isn't that much left. With Rystad indicating 6 to 8% decline rates in mature fields, and rising, and few new prospects how can there not be a peak?

The oil drop might have been more expected than the gas, and was predicted by some when peak oil was first mentioned, I think gas less so, but perhaps the price has had a bigger effect there. Whatever the cause many countries have been banking on ever rising supplies, either by pipeline or LNG, that might not be forthcoming.

Having said that simple economic arguments rarely seem to work as predicted, oil supplies would have peaked well before now without, mostly non-proftable, LTO; Venezuela production should be rising not a basket case; Saudi ministers spout out any thing that comes to mind to support flip-flop policies and their feud with Iran seems to be bubbling in the background of a lot that's going on; every year Iran and/or Iraq say they have a new plan and target for higher production, which is 100% guaranteed not to be met even remotely.

At the moment the traders don't seem certain which way to turn – falling/rising supplies, short/long term demand rise/fall – you can see why they tend to fixate on US crude stocks, everything else is too complicated. The next few Wednesday/Thursday trading patterns will be interesting.

(ps if anything highlights the state of the oil industry at the moment it's that Fram, a two well, eight year life-cycle, gas condensate tie-back with about 10 mmboe reserves, has been the main headline news on at least four of the trade magazines this week.)

[Jun 27, 2018] GoM First Quarter 2018, Production Summary " Peak Oil Barrel

Jun 27, 2018 | peakoilbarrel.com

Guym x Ignored says: 06/27/2018 at 7:49 am

https://www.rt.com/business/430902-russia-us-iran-oil-sanctions/amp/

A little short by over 2 million a day. Perry has to know the Permian is on a hiatus for at least a year. That's probably over a million. Iran push is for another million. Yeah, that's a little short. Idiocy reigns. Russia just called for tariffs against the US. Any assistance from Russia ain't gonna happen.

The slow motion train wreck in progress. No one knows why the driver of the Lower for Longer Train has picked up speed down the curving stretch .

Kolbeinh x Ignored says: 06/27/2018 at 8:51 am
Let us have fun now, because I am not sure the chaos at the station coming further down the stretch somewhere is equally funny.
Guym x Ignored says: 06/27/2018 at 9:17 am
Ok, I'll forgo the train wreck series. Yeah, it's serious. So was the ridiculous pricing we've had for the past four years, and no one but the people who relied on oil income complained. There was not enough for capex to get new oil. The trainweck happened already.

[Jun 27, 2018] Bloomberg cheerleading: U.S. oil production is booming at record levels, and U.S. oil exports have also reached new highs -- 3 million barrels a day in the last week. OK, but the US exported 3 million barrels per day and imported 8.4 million barrels per day

Jun 27, 2018 | peakoilbarrel.com

Ron Patterson x Ignored says: 06/27/2018 at 3:44 pm

US oil exports boom to record level, surpassing most OPEC nations

U.S. oil production is booming at record levels, and U.S. oil exports have also reached new highs -- 3 million barrels a day in the last week, according to government data.
Those exports are more than most OPEC countries can produce each day and only lag two OPEC countries, Saudi Arabia and Iraq, in terms of exports.

And if you read far enough down in that article they do mention imports, as if they hardly matter.

As U.S. production has grown, U.S. imports have decreased. The U.S. imported a relatively high 8.4 million barrels per day last week.

Okay, the US exported 3 million barrels per day and imported 8.4 million barrels per day. Yet the headline says the US exported more oil than most OPEC countries. Is this Orwellian Newspeak?

Guym x Ignored says: 06/27/2018 at 4:31 pm
We all agree that 2+ 2 = 5, but what we don't know is which one belongs to the thought police. I agree the Permian will produce 1.3 million this year, just take the rat cage off my head.
Hickory x Ignored says: 06/27/2018 at 4:35 pm
"the US exported 3 million barrels per day and imported 8.4 million barrels per day. Yet the headline says the US exported more oil than most OPEC countries. Is this Orwellian Newspeak?"

I think we can call it 'trump math'

[Jun 26, 2018] There will be no increase in the amount of oil produced by OPEC this year

Jun 26, 2018 | www.moonofalabama.org

karlof1 | Jun 26, 2018 4:25:16 PM | 11

CarlD @9 Et al--

At the just concluded OPEC meeting, Iran, Iraq and Venezuela were against any increase in extraction, while the Saudis wanted an increase. What resulted is detailed in this article . Moneygraph:

"... OPEC does not need to change its output deal since the group had already cut supply by much more than it had agreed. What Zanganeh offered was for OPEC and Russia to pump back up to decrease the current cuts to the initial 1.176 million barrels per day (bpd).

"Output in May 2018 was actually down by 1.9 million, somehow 62 percent or 724,000 bpd more than what was agreed upon in 2016."

The upshot is an increase will occur but no increase will occur--understand? The extraction amount agreed to in 2016 remains the amount OPEC will extract. There will be no increase in that amount this year.

[Jun 21, 2018] Increases in the US shale production are limited by available transport

Notable quotes:
"... Houston, 11 June (Argus) Plains All American Pipeline, a prime mover of crude around and away from the Permian, reiterated last week that there is not enough trucking capacity to address skyrocketing production, and potential rail slots are limited. With most material pipeline capacity additions a year or more away, Plains said the logical solution is slowing output ..."
"... That's really kind of funny. The takeaway professionals have to tell them, "come on guys, put a brake on it. It can't be moved." Note, the article stated that the pipeline company said production is already slowing. Wonder if EIA will finally read the memo? Also, it may result in more little fish, being eaten by the bigger fish. ..."
"... The next 3 or 4 months for EF and Bakken might be interesting – they've both been steady or slightly declining with no pick up in drilling or, I think, permitting even as the price has risen, and the initial well production and ultimate recovery look to be declining on recent wells. If Permian is closed off I wonder if the operators will bother to move back to these. ..."
"... Yeah, I think they will. You just won't see growth just overnight from these areas, and the ones who had good areas in these, never left. EOG, Conoco and others are still doing their thing. Growth will mainly show up the first and second quarter of 2019. Maybe some the last quarter of 2018. My guess. It just won't ramp up like the Permian, EIA predicts a bunch, but they are smoking some strong stuff. They believe in teleportation of oil to the coast, and further teleportation to VLCCs off the coast. ..."
"... Wild guess on the 22nd. OPEC releases non-opec from the agreement. Increasing OPEC, at this point, will involve disintegration of OPEC, which it really is, anyway. But, a modest increase may hold them together for a little while. Although, for the Sauds part, I don't know why they would, except to keep up the illusion. ..."
Jun 21, 2018 | peakoilbarrel.com

Energy News, 06/12/2018 at 5:11 pm

Houston, 11 June (Argus) Plains All American Pipeline, a prime mover of crude around and away from the Permian, reiterated last week that there is not enough trucking capacity to address skyrocketing production, and potential rail slots are limited. With most material pipeline capacity additions a year or more away, Plains said the logical solution is slowing output
https://www.argusmedia.com/pages/NewsBody.aspx?id=1696409&menu=yes?utm_source=rss%20Free&utm_medium=sendible&utm_campaign=RSS
Guym , 06/12/2018 at 5:53 pm
That's really kind of funny. The takeaway professionals have to tell them, "come on guys, put a brake on it. It can't be moved." Note, the article stated that the pipeline company said production is already slowing. Wonder if EIA will finally read the memo? Also, it may result in more little fish, being eaten by the bigger fish.

Energy News, you constantly amaze me with your finds of information. Everything is extremely pertinent.

George Kaplan , 06/12/2018 at 11:36 pm
The next 3 or 4 months for EF and Bakken might be interesting – they've both been steady or slightly declining with no pick up in drilling or, I think, permitting even as the price has risen, and the initial well production and ultimate recovery look to be declining on recent wells. If Permian is closed off I wonder if the operators will bother to move back to these.
Dan Goudreault , 06/13/2018 at 3:05 am
State of North Dakota came out with a new presentation a few weeks ago showing revised predictions for Bakken oil output. They now have production likely reaching 1,900,000 BOPD within the next decade while the best forecast offers better than 2,200,000 BOPD.

https://www.dmr.nd.gov/oilgas/presentations/WBPC052418_2400.pdf

Guym , 06/13/2018 at 8:10 am
Yeah, I think they will. You just won't see growth just overnight from these areas, and the ones who had good areas in these, never left. EOG, Conoco and others are still doing their thing. Growth will mainly show up the first and second quarter of 2019. Maybe some the last quarter of 2018. My guess. It just won't ramp up like the Permian, EIA predicts a bunch, but they are smoking some strong stuff. They believe in teleportation of oil to the coast, and further teleportation to VLCCs off the coast.

That not everyone believes the EIA is evident in the huge, many billions of dollars, losses in stock value of the "Permian pure play" companies recently. EIAs and IEAs fairy tales are coming unraveled. About the only section of the investment community that still believes them, is that percentage of adults that still believe chocolate milk comes from brown cows. What they are still unsure of, is how much excess capacity OPEC now has.

Wild guess on the 22nd. OPEC releases non-opec from the agreement. Increasing OPEC, at this point, will involve disintegration of OPEC, which it really is, anyway. But, a modest increase may hold them together for a little while. Although, for the Sauds part, I don't know why they would, except to keep up the illusion.

[Jun 21, 2018] Spare capacity of Saudis might be just oil in storage as they can't increase production much without adverse affects

Jun 14, 2018 | peakoilbarrel.com

TechGuy , 06/14/2018 at 4:29 pm

"I think not, it's a lot cheaper to add a few more production wells than to add a couple of million barrels of high pressure water injection capacity (topsides facilities and the wells needed to inject it"

Water injection isn't the problem, its water cut. The don't need to inject more if they keep the water cut stable. In order to keep the water cut, they have to perodically drill new wells to keep the wells in contact with the Oil column. Over time the Water column push up on the Oil column (ie Oil floats on Water). All the CapEx/Opex goes into drilling to keep in the Oil Column Zone as well as add new wells to tap oil trapped in pockets. As the Oil column continues to shrink and and as the water column become increasing contact with the cap rock its going to required more and more drilling to maintain production.

My guess well know when SA starts running into problems when we start to see the rig count increase and the production dropping over a period of a couple of years.

"The drilling of new oil wells is to maintain current production, not to increase it"

SA cannot increase Oil production much. They are working on extracting the remaining cream (oil column) floating on a see of water. Increasing production would just increase the water cut and also increase trapped oil that would later be more costly to extract. The only way SA can increase production is to tap new fields or increase drilling for oil trapped in pockets. But at some point these options will vanish over time as it will be increasing more difficult to squeeze more oil out, like trying to squeeze trapped toothpaste out of a depleted toothpaste tube.

Michael B , 06/14/2018 at 5:32 pm
But this can't be right because it makes so much sense that I understand it.
George Kaplan , 06/14/2018 at 11:41 pm
I didn't say water injection was the problem I said it was the limit to increasing production. It is. Water cut is the problem that leads to decline unless they keep drilling new wells.

Two ways that increasing water cut is a problem are: 1) you have to inject more water for the same amount of oil, which they don't have, 2) you have to treat more produced water, which they don't have capacity for. Exactly what I said above. The third is that it reduces overall well flow and, more so, oil flow; but that is easily got round if it easy to drill new wells, as is the case for Saudi, even the offshore fields, which are shallow. That also solves the first two problems because the individual field and overall country water cuts are held steady.

The limits on surface facilities are much more expensive and long term (5 years at least) to get round, but it could be done, therefore it is wrong to say that the only way to increase production is to tap new fields.

(ps – I worked on water flood oil fields, including some minor studies for Saudi, for at least 15 years through my career, the water is a bigger influence on the design and operation than the oil.)

Eulenspiegel , 06/15/2018 at 3:36 am
That all together sounds like it's completely senseless to keep some spare capacity for fields like this.

This capacity will cost billions, hold back for not much. A big oil storage is better there for satisfying demand peaks or temporary supply losses.

Reserve capacity is cheap to have when you are in primary recovery of a conventional (giant) field.

The only illusion of reserve capacity would be in fields with tertiary recovery would be to postpone maintainance for a few months to get that 5% more production.

Did I understand it right?

George Kaplan , 06/15/2018 at 5:37 am
Some spare is always needed, just to maintain production during maintenance or unplanned outages. Sparing doesn't postpone maintenance, it means maintenance can be done without taking the plant offline, or at least not for too long, so you get maximum returns on your investment (when plants are taken down for major turn arounds it is to do work on items for which there are no online spares).

Depending on the maturity of the field there is also always different amount of sparage in the different project components – e.g. the wells, compression, power generation, oil processing, export capacity, water injection, water processing – the limit is the component with the least amount of sparage.

In Saudi also, at least for the heavy fields, they have been known to rest them completely for a time, this allows the water contact to settle out and avoid excessive coning, which provides a much better sweep of the oil and higher recoveries (I don't think any where else has that luxury).

So when someone says "we have spare capacity" it can mean almost anything from 2×100% pumps on a particular duty to an entirely unused, ready for action oil field.

From a modern capitalist approach with everything just-in-time and the next quarterly statement being all important then excess sparing wouldn't please the shareholders, but Saudi designed facilities with 50 year life times, so it might be different.

From looking at their recent production profiles, which seem to go up when they report a new start-up and then decline, and stock draws, which have been consistent since January 2016, I find it hard to believe they have a large amount of "real" spare capacity – i.e. that's easy to bring on line and that doesn't alter any of the performance of the fields over the long term or compromise planned maintenance schedules – but I can't say for sure. And, as I've said, the limit to expanding production (that means beyond just using up the spare) is almost certainly with the surface facilities for water, so it's likely that is also the part with the least spare capacity.

Dennis Coyne , 06/15/2018 at 10:25 am
Thanks George.

It sounds like you believe they might be able to maintain a plateau of 10 Mb/d for many years, if they just drill more wells as needed. Though I may not be understanding correctly.

George Kaplan , 06/15/2018 at 12:33 pm
There's the big question. Once the horizontal wells are at the top of the reservoir then you can't drill any more and once the water contact hits them, even with intelligent completions, then the decline will be fast (but even that is relative, huge fields take longer to decline than small ones). There was a report in the Oil Drum some time ago that indicated that a lot of Ghawar wells were near the limit but nothing much seems to have happened since to indicate this turned into a problem, but then Saudi has a lot of other fields. On some of their offshore fields they are replacing all the wellheads to add ESPs, that usually means they have run out of new well options. Their rig count is declining, but maybe jus because they are drilling much more productive MRC wells.

It's the difference between the size of the tank and the size of the tap (or for water injection more like the size of the vent that lets air in to stop the tank collapsing under suction). Might only know what's going on well after the fact.

Dennis Coyne , 06/17/2018 at 9:27 am
Indeed there is much that we do not know about KSA.

[Jun 21, 2018] China's Oil Trade Retaliation Is Iran's Gain by Tom Luongo

Jun 21, 2018 | www.zerohedge.com

China's Oil Trade Retaliation Is Iran's Gain

by Tyler Durden Wed, 06/20/2018 - 23:05 13 SHARES Authored by Tom Luongo,

I've told you that once you start down the Trade War path forever it will dominate your destiny.

Well here we are. Trump slaps big tariffs on aluminum and steel in a bid to leverage Gary Cohn's ICE Wall plan to control the metals and oils futures markets . I'm not sure how much of this stuff I believe but it is clear that the futures price for most strategically important commodities are divorced from the real world.

Alistair Crooke also noted the importance of Trump's 'energy dominance' policy recently , which I suggest strongly you read.

But today's edition of "As the Trade War Churns" is about China and their willingness to shift their energy purchases away from U.S. producers. Irina Slav at Oilprice.com has the good bits.

The latest escalation in the tariff exchange, however, is a little bit different than all the others so far. It's different because it came after Beijing said it intends to slap tariffs on U.S. oil, gas, and coal imports.

China's was a retaliatory move to impose tariffs on US$50 billion worth of U.S. goods, which followed Trump's earlier announcement that another US$50 billion in goods would be subjected to a 25-percent tariff starting July 6.

It's unclear as to what form this will take but there's also this report from the New York Times which talks about the China/U.S. energy trade.

Things could get worse if the United States and China ratchet up their actions [counter-tariffs] . Mr. Trump has already promised more tariffs in response to China's retaliation. China, in turn, is likely to back away from an agreement to buy $70 billion worth of American agricultural and energy products -- a deal that was conditional on the United States lifting its threat of tariffs.

"China's proportionate and targeted tariffs on U.S. imports are meant to send a strong signal that it will not capitulate to U.S. demands," said Eswar Prasad, a professor of international trade at Cornell University. "It will be challenging for both sides to find a way to de-escalate these tensions."

But as Ms. Slav points out, China has enjoyed taking advantage of the glut of U.S. oil as shale drillers flood the market with cheap oil. The West Texas Intermediate/Brent Spread has widened out to more than $10 at times.

By slapping counter tariffs on U.S. oil, that would more than overcome the current WTI/Brent spread and send Chinese refiners looking for new markets.

Hey, do you know whose oil is sold at a discount to Brent on a regular basis?

Iran's. That's whose.

And you know what else? Iran is selling tons, literally, of its oil via the new Shanghai petroyuan futures market.

Now, these aren't exact substitutes, because the Shanghai contract is for medium-sour crude and West Texas shale oil is generally light-sweet but the point remains that the incentives would now exist for Chinese buyers to shift their buying away from the U.S. and towards producers offering substitutes at better prices.

This undermines and undercuts Trump's 'energy dominance' plans while also strengthening Iran's ability to withstand new U.S. sanctions by creating more customers for its oil.

Trade wars always escalate. They are no different than any other government policy restricting trade. The market response is to always respond to new incentives. Capital always flows to where it is treated best.

It doesn't matter if its domestic farm subsidies 'protecting' farmers from the business cycle or domestic metals producers getting protection via tariffs.

By raising the price above the market it shifts capital and investment away from those protected industries or producers and towards either innovation or foreign suppliers.

Trump obviously never read anything from Mises, Rothbard or Hayek at Wharton. Because if he did he would have come across the idea that every government intervention requires an ever-greater one to 'fix' the problems created by the first intervention.

The net result is that if there is a market for Iran's oil, which there most certainly is, then humans will find a way to buy it. If Trump tries to raise the price too high then it will have other knock-on effects of a less-efficient oil and gas market which will create worse problems in the future for everyone, especially the very Americans he thinks he's defending.

* * *

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[Jun 21, 2018] There is a narrative that oil demand will soon begin dropping due to widespread use of EV.

Jun 21, 2018 | peakoilbarrel.com

shallow sand x Ignored says: 06/18/2018 at 2:36 pm

There is a narrative that oil demand will soon begin dropping due to widespread use of EV.

1 million EV just replaces 14,000 BOPD of demand. Conservatively assuming those one million EV require $40K per unit of CAPEX, just to replace 14,000 BOPD of demand took $40 billion of CAPEX.

Likewise, to replace 1.4 million BOPD of demand via EV would take $4 trillion of CAPEX.

Worldwide demand has been growing somewhere between 1.2-2.0 million BOPD annually, depending on who one believes.

See where I am going with this? How do the EV disruption proponents explain away the massive CAPEX required just to cause oil demand to flatten, let alone render it near obsolete?

I'd like to see some explanation with numbers.

GoneFishing x Ignored says: 06/18/2018 at 3:28 pm
The average US car gets 25 mpg and travels 12,500 miles per year for 500 gallons of gasoline per year.

Refineries in the US produce 20 gallons of gasoline per barrel of oil.

That gives 69,000 BOPD per day reduction per million EV cars in the US and 110,000 BOPD oil equivalent energy due to the multiple energies put into gasoline and distillate production.

At current rates of EV sales growth the US will reach 50 million EV cars by 2031. That should put he US to being mostly independent of external oil for gasoline by mid 2030's and

It's tough to predict a complete transition in the US since cars as a service could greatly reduce the numbers of cars needed, especially in dense population areas. That would mean a much earlier transition.

If US ICE cars trend upward in mpg during that time, the demand for oil could be quite low by the early 2030's.
All depends on continuation of trends, for which the auto manufacturers seem to be on board. Just have to get the public charging infrastructure out ahead of the trend.

Here is an interesting article, from a couple of years ago, showing the trend and sales at that time.

https://www.nanalyze.com/2017/03/electric-cars-usa/

Dennis Coyne x Ignored says: 06/18/2018 at 6:04 pm
Shallow sand,

Cars get replaced all the time and the cost of new EVs will fall over time to the same price as ICEV, so it's simply a matter of replacing the ICEV currently sold with EVs over time, in addition cars can get better gas mileage (50 MPG in a Prius vs 35 MPG in a Toyota Corolla or 25 MPG in a Camry.) There's also plug in hybrids like the Honda Clarity (47 miles batttery range) or Prius Prime(25 mile range on battery) these have an ICE for when the battery is used up.

If oil prices rise in the short term to over $100/b (probably around 2022 to 2030), there will be demand for other types of transport besides a pure ICEV.

EVs and plugin hybrids will become cheaper as manufacturing is scaled up due to economies of scale.

[Jun 21, 2018] Strange consumption growth in Eastern Europe

Jun 21, 2018 | peakoilbarrel.com

Watcher, 06/17/2018 at 11:37 pm

Got time to go thru the bible more carefully.

Surprising stuff. Huge oil consumption growth rates in Eastern Europe. 8+% growth %s in Poland, Czech Republic and Slovakia. Something weird going on because Romania and Slovenia didn't show the same thing.

Western Africa grew consumption of oil 13% last year. I'll add a !!!!. East Africa about 6%. Both are over 600K bpd, so that growth rate is not on tiny burn.

World oil consumption growth 1.8%.

(population in africa . . . . . .)

Ktoś, 06/18/2018 at 8:44 am

Poland's official oil consumption growth is caused by better fighting with illegal, and unregistered fuel imports since mid 2016. When taxes are 50% of fuel price, there is big incentive for illegal activities. Real oil consumption probably didn't increase much.
Strummer, 06/18/2018 at 2:00 pm
Poland, Czech and Slovakia are going through a huge economic boom now (I live in Slovakia and party in Czech Republic). It's visible everywhere, there wasn't this much spending and employment ever in the last 28 years
Watcher, 06/19/2018 at 12:04 am
South Africa grew at 0.6%.

Middle Africa is listed as growing at 0.4%. North Africa is divided up Egypt, Morocco and "Other North Africa". Other was +4.7% consumption growth.

It's gotta be Nigeria west and Angola east.

Watcher, 06/18/2018 at 2:43 pm
Pssssst.

Oil consumption 2017 increased 1.8% from 2016.

Oil price 2016 about $41/b. Oil price 2017 about $55/b.

hahahahhaa

Dennis Coyne, 06/19/2018 at 6:41 am
Oil demand is mostly determined by GDP growth, oil price has a minor influence on short term demand. World GDP grew by about 5% from 2016 to 2017 according to the IMF, so oil demand increased by 1.8% possibly less than one would expect. Real GDP (at market exchange rates) grew by about 3% in 2017.

[Jun 21, 2018] The idea behind peak demand fallacy is simply that oil supply may at some point become relatively abundant relative to demand in the future (date unknown).

Jun 21, 2018 | peakoilbarrel.com

Dennis Coyne x Ignored says: 06/18/2018 at 5:54 pm

Hi George,

The idea behind peak demand is simply that oil supply may at some point become relatively abundant relative to demand in the future (date unknown). When and if that occurs, OPEC may become worried that their oil resources will never be used and will begin to fight for market share by increasing production and driving down the price of oil to try to spur demand. That is the theory, I think we are probably 20 to 40 years from reaching that point for conventional oil.

Oil still contributes quite a bit to carbon emissions and while I agree coal use needs to be reduced (as carbon emissions per unit of exergy is higher for coal than oil), I would think it may be possible to work on reducing both coal and oil use at the same time. Using electric rail combined with electric trucks, cars and busses could reduce quite a bit of carbon emissions from land transport, ships and air transport may be more difficult.

Eulenspiegel x Ignored says: 06/19/2018 at 3:56 am
Why making a fire sale?

It's better to sell half of your ressources for 90$ / barrel than all at 30$ / barrel.

The gulf states will always have cheap production costs at their side, they will earn more at each price of oil. Why not make big money, especially when at lower production speed the production costs are much lower (less expensive infrastructure).

And in the first case you can sell chemical feedstock for a few 100 years ongoing for a good coin. Theocracies and Kingdoms plan sometimes for a long time. When you bail out everything at sale prices, you end with nothing ( and even no profit).

Dennis Coyne x Ignored says: 06/20/2018 at 8:00 am
Eulenspeigel,

You assume half the resource can be sold at $90/b, at some point in the future oil supply may be greater than demand at a price of $90/b, so at $90/b no oil is sold and revenue is zero.

In a situation of over supply there will be competition for customers and the supply will fall to the point where supply and demand are matched. Under those conditions OPEC may decide to drive higher cost producers out of business and take market share, oil price will fall to the cost of the most expensive (marginal) barrel that satisfies World demand.

I don't think we are close to reaching this point, but perhaps by 2035 or 2040 alternative transport may have ramped to the point where World demand for oil falls below World Supply of oil at $90/b and the oil price will gradually drop to a level where supply and demand match.

[Jun 21, 2018] I can imagine OPEC/Russia want a somewhat controlled price increase to let us guess 90-100 dollars before the low demand season kicks in 1H2019

Jun 21, 2018 | peakoilbarrel.com

Energy Newss: 06/18/2018 at 5:17 pm

Drilling Productivity Report – what we need is a Permian Plumbing Report.
EIA – NOTE: Productivity estimates may overstate actual production which could be limited by logistical constraints.
https://www.eia.gov/petroleum/drilling/#tabs-summary-2

Goldman Sachs: Executive summary for oil
https://pbs.twimg.com/media/Df95qylXcAA00EK.jpg
https://pbs.twimg.com/media/Df95qymXUAEU7bx.jpg

Bloomberg: Saudi Arabia, crude oil export increase in early June
https://pbs.twimg.com/media/Df_B5DmXUAAZTUN.jpg

Saudi Arabia, some export charts for April – JODI Data
Product exports: https://pbs.twimg.com/media/DgAOnCMXkAAaDYS.jpg
Long term exports: https://pbs.twimg.com/media/DgAOYJOXkAEssEk.jpg
Domestic demand (they raised product prices): https://pbs.twimg.com/media/DgANzp-XkAAr_PN.jpg Reply

Kolbeinh x Ignored says: 06/19/2018 at 3:49 am

Thanks for providing a lot of info!

Regarding Saudi Arabia, what seems certain is that they have increased crude exports in parts of May and early June by either activating "spare capacity" or withdrawal from storage. Coming into peak domestic demand season it will be hard for OPEC to compensate for Iran, Venezuela, Libya and any other negative "surprises" coming along in 2H2018. It would be a real surprise if not the solution is to agree to a moderate production increase due to quite a few reasons (I can think of at least 5 reasons for this on top of my head). I can imagine OPEC/Russia want a somewhat controlled price increase to let us guess 90-100 dollars before the low demand season kicks in 1H2019. If demand growth is still not impacted too much the supply problems start to become unsolvable in 2019 and in any case 2020. There is both a potential for a great price spike and recessions in 2019 imho.

George Kaplan,06/19/2018 at 4:06 am
Is it spare capacity or is it 300 kbpd from Khurais expansion start-up (which was due in May and even then was a year later than planned)?
Kolbeinh, 06/19/2018 at 4:39 am
I don't think it is Khurais. The project is delayed, but for how long is uncertain.

A quick search on the internet:

"We see Opec building capacity over the coming five years, largely driven by Saudi Arabia where we see the Khurais expansion in 2019 and the Marjan field start-up by 2021. Saudi Arabia is pressing ahead with upstream investment as part of its Vision 2030 strategy," BofAML said.

https://www.hellenicshippingnews.com/oil-prices-to-average-50-70-till-2023-bofaml/

No timeline given here either (if someone is a contractor and signs up here, maybe there are some details):
https://www.protenders.com/companies/saudi-aramco/projects/khurais-oilfield-expansion

Energy News, 06/19/2018 at 5:14 am
I was thinking that the price of WTI is still cheap. But then countries such as Russia have been complaining that product prices are too high and that their refinery margins are too low, and so I don't know. I still think prices could spike higher, sometime, due to outages and lack of long term investment.

It seems that OPEC is looking to prevent supply shortages during peak demand

2018-06-19 OPEC technical panel sees strong oil demand in H2 2018, implying that the market could absorb additional production, according to 3 OPEC sources

[Jun 21, 2018] Why OPEC Isn't Going To Give Up On High Oil Prices That Easily

Jun 21, 2018 | www.zerohedge.com

With the most highly-anticipated OPEC meeting since November 2014 taking place Friday in Vienna, Macrovoices host Erik Townsend made this week's podcast all about oil. He started his three-part interview series with Dr. Ellen Wald, the author of "Saudi Inc.", a book about Aramco. During their discussion, Wald shares what she learned about the Kingdom of Saudi Arabia and - most importantly - how the royals view both Aramco and the oil market. This perspective is important, she explains, in interpreting why former Saudi energy minister Ali Al Naimi made the infamous decision back in November 2014 to keep OPEC oil production targets unchanged . That decision precipitated another leg lower in oil prices, eventually sending them to $30 a barrel. Many observers criticized the Saudis for shooting themselves in the foot by standing against production cuts. But the one thing that these critics didn't understand, Wald said, is that the Kingdom has always treated Aramco like a family business.

They have two twin objectives: long-term profit and power. And when they look at Aramco, they're not concerned about meeting, say, what their quarterly reports are going to show or their stock price. They're looking at this in the long term, in a generational perspective.

And so in 2014 when it seemed as though oil production was increasing around the world – there was lots of other sources – not just shale oil production in the United States but we had really increasing from all over – they went into that OPEC meeting and everyone thought oh, they have to cut production. If they don't they won't maintain the price they need for the budget and this is what has to be.

Instead, they surprised everyone by basically walking out and saying to heck with it, we're going to produce as much as we possibly can. And the reason, it seemed to me, was very clear: They knew that no matter how low the oil price went it was going to be that much worse for everybody else and not as bad for Saudi Arabia.

When Townsend asks about the decision to float 5% of Aramco in a foreign stock market (a plan that is reportedly on hold, for now at least), Wald explains that the Saudis respect their company's "American heritage" (the Saudis slowly nationalized Aramco in stages during the 1970s and 1980s, buying it in stages) and they view the company as an international oil company like Exxon.

But in another sense, I see this as a natural progression for a company that was an NOC but has always seen itself as really a major international oil company. And it's expanding its research, it's expanding its downstream operations, in order to have a profile similar to that of an IOC. They are very, very proud of the patents that they've acquired and they compare it to the number of patents that, say, Exxon gets. It's really very evident throughout this.

Next, Townsend turned to energy analysts Anas Alhajji and Joe McMonigle for a three-way discussion about what to expect From Friday's meeting. Earlier this month, we heard from fellow "geological expert" Art Berman, who speculated that the current glut of oil created by the shale boom in the US is a temporary anomaly

But the bigger factor here is Venezuela and how quickly Venezuelan crude has come off the market. Venezuela was producing about 1.4 million barrels a day. It's probably 1.3 now, in June. Under the OPEC agreement, they could be producing close to 2 million barrels a day. Berman speculated that the global demand curve is growing at a pace much more quickly than most market experts anticipate, and that - regardless of whether OPEC decides to raise or maintain production - the world will inevitably find itself mired in a supply crunch. But McMonigle asserted that the collapse of crude production in Venezuela has left a massive production hole that should be filled by OPEC members. Because of this, Saudi Arabia doesn't have a problem with higher prices, and even OPEC itself is anticipating that demand will remain strong in the second half of the year.

So that's 600-700 thousand barrels extra that has really accelerated crude stock drawdowns and I think has really supported higher prices quicker than most people thought. I was in the camp, and I think others were, that in the second half of this year we would be around between $70 and $75.

Obviously, we got there pretty quickly at $80. And most of that had to do with Venezuela. And then, of course, you had the Iran sanctions – which we've been talking about for a long time – that we expected to come. But there are a lot of people on the market that just didn't think Trump would pull the trigger on it. Well, he did. And so that really pushed things up to over $80. There isn't any crude yet coming off the market, but we certainly expect that there will be.

[...]

First of all, I have to say I don't think OPEC is going to give up that easily on higher prices. I think the Saudis are quite comfortable with prices around $80. They don't really see a production problem. The physical oil markets are pretty well-supplied, as I think Anas will talk about. But they really have a political problem instead of a production problem.

And the political problem is this: You know, higher prices, you've got some calls for action. Trump, of course, with his tweet a couple of weeks ago while the compliance committee was meeting in Riyadh I think really took them by surprise. I think there is kind of an implicit agreement to help because of the Iran sanctions. And that's something that Saudi Arabia and UAE and all the other Gulf countries support.

However, the one thing that could change their minds, is a political issue concerning their relationship with the US. Following Trump's aggressive Iran policy, there could be a consensus forming among the Gulf countries to support higher production levels that would held rein in prices. But this might not be in the long-term best interest of the Saudis.

JailBanksters Wed, 06/20/2018 - 18:51 Permalink

$80 just happens to be the point to make shale oil and fracking become profitable.

Until that point they are sinking more money into getting the oil out than what they can sell the Oil for.

Oldguy05 Wed, 06/20/2018 - 18:51 Permalink

"Why OPEC Isn't Going To Give Up On High Oil Prices That Easily"

Cause they need money?

[Jun 21, 2018] Older wells are declining at about 8% per year

Jun 21, 2018 | peakoilbarrel.com

Fernando Leanme , 06/19/2018 at 2:17 pm

Older wells are declining at about 8% per year. A 25 BOPD well with a 10 BOPD economic limit should have 70,000 barrels of oil left to produce in about 12 years.
Dennis Coyne , 06/20/2018 at 7:53 am
Hi Fernando,

Is it safe to assume that newer wells will behave the same as older wells?

Some petroleum engineers that have commented at shaleprofile.com (Enno Peters wonderful resource) that the high level of extraction from newer wells will likely lead to a thinner tail.

Chart below from

https://shaleprofile.com/index.php/2018/06/19/north-dakota-update-through-april-2018/

illustrates this, notice how the 2014 and 2015 wells fall below the 2010 well profile after 24 months, the same is likely to occur for 2016 and later wells. Also note that the 2010 well profile is representative (close to the mean) for 2009 to 2012 average well profiles.

Fernando Leanme , 06/20/2018 at 9:08 am
Dennis, i would say the decline rate (8%) is very safe to use for all LTO wells, i would definitely apply it after the 6th year of well life, because by then what counts is rock quality and fluid type. This is only good for a bulk projection.

By the way I tweaked my price model when I was preparing my CO2 pathway. I took into account the Venezuela crash, the difficulties the Canadians have moving their crude, etc. The price projection is $88 per barrel Brent for evaluating projects which start spending in 2019. I also prepared a different look for very long term projects which start spending in 2023: $110 per barrel.

Don't forget these aren't prices predicted for those particular years. They are prices one can use to evaluate long term projects such as exploring in the Kara Sea, offshore West Africa deep water, the African rifts, Venezuela heavy oil developments, etc. These prices are plugged in and escalated with inflation for the 20-30 year project period. Real prices should oscillate back and forth around these values.

[Jun 21, 2018] Norwegian production is down

Jun 21, 2018 | peakoilbarrel.com

Energy News, 06/19/2018 at 3:47 am 2018-06-19

Norwegian crude oil & condensate production (without NGLs) at 1,321 kb/day in May, down -223 m/m, down -297 from 2017 average or -18%. The main reasons that production in May was below forecast is maintenance work and technical problems on some fields.
http://www.npd.no/en/news/Production-figures/2018/May-2018/
Almost down to the Sept 2012 low at 1,310 kb/day

George Kaplan , 06/19/2018 at 4:01 am

Big unplanned outages coming on the gas side for June numbers as well.
Kolbeinh , 06/19/2018 at 4:26 am
This is what happens when there are no sizeable new fields coming online for 1/2 year and as G.Kaplan has mentioned not enough allocation for supply disruptions are included in the forecast.
A brutal decline, even if this month is an anomaly as NPD say.
George Kaplan, 06/19/2018 at 4:39 am
Looking at the field numbers (only through April) it looks like Troll Oil is in decline a bit earlier and a bit steeper than expected. It's the biggest oil producer still bu has dropped fairly consistently and slightly accelerating from 161 kbpd in October to 121 in April. It's all horizontal wells and requires continuous drilling to maintain production, it's close to exhaustion with only 10% remaining at the end of 2017 (about R/P of 3 years) and had been holding a good plateau around 150 for a few years. The gas is due to be developed starting in 2021 so the oil rim would need to be depleted by then, but maybe dropping a bit sooner than expected – is a reservoir not behaving as modelled a "technical problem"?

[Jun 21, 2018] Personally I think all the conventional oil in the ground will eventually be used, it's just too useful. It's just a matter of how long it takes. It would be better if it was used for chemicals and something else used for fuel

Jun 21, 2018 | peakoilbarrel.com

dclonghorn, 06/17/2018 at 10:57 pm

Here's a link to an interesting oil market assessment from 9 point energy.

http://www.ninepoint.com/commentary/commentaries/052018/energy-strategy-052018/

They come up with a projection of 100 oil by 2020 using some conservative assumptions.

George Kaplan , 06/18/2018 at 1:35 am
I don't know about the price as it depends on the demand side and the global economy looks to me increasingly rocky, but the supply side analysis looks pretty good, except as you say a bit conservative. One thing missing was consideration of increasing decline rates on mature fields, especially offshore, partly a result of accelerating production in the high price years and partly because of an increasing ratio for deep and ultra deep water. Additionally I think the lack of increase in non-US drilling rigs as the price has risen is relevant and partly represents a shortage of in-fill prospects and short cycle appraisals.

If they are relying on GoM to add the 300 kbpb (or more into 2020) that EIA are predicting then I think they are going to be short by 400 to 500 kbpd for a 2020 exit rate.

(I don't follow the chart showing new OPEC developments, the numbers can't be number of projects, probably kbpd added, or maybe mmbbls reserves, and I'm betting they've mixed in gas with the oil.)

As in all these investment type analyses they don't look too far ahead and there's a kind of tacit assumption that everything will be sorted out with more investment later on, but five years of low discoveries and accelerated development of the good ones means there's actually not that much new to invest in, and if there is then ExxonMobil will be looking to buy it.

Guym , 06/18/2018 at 8:55 am
Yeah, demand is always a big question. Hard to measure, even in the rear view mirror. However, their constant increase of 1.2 million barrels in the US over a three year period, should offset any question of demand. While 1.2 in 2020 is something I can't predict, 1.2 million for 2018 and 2019 is impossible without increased pipelines long before the second half of 2019. So, I think it is way conservative.
George Kaplan , 06/18/2018 at 4:47 am
They say "We believe we are 6-9 months ahead of consensus with our oil forecast. Why is no one else seeing what we see?." Obviously they haven't been reading POB for the last two years.
Energy News , 06/18/2018 at 5:40 am
SLB seems to agree with Simmons, that outside of OPEC & the USA overall World oil production is going to continue falling

2018-06-12 Schlumberger Investor Presentations – Wells Fargo West Coast Energy Conference
aggregate base decline, which increased from approx 5% in 2015 to around 7% in 2017. Given this acceleration, it is probably not realistic to expect the new projects slated to come online during the next few years to be enough to reverse production decline outside of the US and Middle East.
Some slides on Twitter
https://pbs.twimg.com/media/DfgLlUHV4AEqYOl.jpg
https://pbs.twimg.com/media/DfgLlUHVAAAx_l8.jpg
Simmons charts https://pbs.twimg.com/media/DfcPDiBV4AMwNH2.jpg

Guym , 06/18/2018 at 9:06 am
POB made it possible to piece together in my own way, otherwise I would be like most. Staying confused with constant conflicting info. Predicting price is virtually impossible, as is demand to a large extent. But, when supply is ready to fall off a cliff, then being exact is not required.
Dennis Coyne , 06/18/2018 at 11:19 am
Guym,

A simple way to think about C+C demand is to assume over the long run that supply and demand will be roughly equal (though of course there will be short term imbalances which changes in the oil price over the short term will try to correct). From 1982 to 2017 C+C output grew at an average annual rate of about 800 kb/d. It is probably safe to assume that oil demand will continue to grow at roughly that pace in the absence of a severe global recession and those are pretty rare. I define a "severe global recession" as one where real World GDP (constant prices) based on market exchange rates decreases over an annual cycle for one or more years. Since 1900 there have been two cases where this occurred, the Great Depression and the Global Financial Crisis (GFC) in 2008/2009. These have been on roughly a 60 to 70 year cycle (a previous crisis occurred in 1870, but this might have only been a US crisis and possibly not a global one.)

In any case, my guess is that a Global economic crisis may result a the World tries to adjust to declining (or stagnant) World Oil output after 2025, probably hitting around 2030 to 2035. If economists re-read Keynes General Theory and respond to the crisis with appropriate policy recommendations, the economic crisis may be short lived. On the other hand a World response similar to the European response to the GFC, where fiscal austerity is considered the appropriate response to a lack of aggregate demand (this was also Herbert Hoover's response to the 1929 Stock Crash), then a prolonged deep depression will be the result.

Hopefully the former course will be chosen.

[Jun 21, 2018] BP's Proven Reserves tab, historical says some interesting things

Jun 21, 2018 | peakoilbarrel.com

Watcher x Ignored says: 06/19/2018 at 12:15 am

BP's Proven Reserves tab, historical says some interesting things:

US reserves did not grow or shrink last year 50B.

Canada reserves shrank about 1%. Weird.

Brazil reserves grew 1% but are down a lot from 2014.

KSA flat. Venezuela Orinoco reserves slight uptick 0.4%.

The somewhat vast majority of countries say their reserves are flat in 2017 vs 2016. They pumped billions of barrels, but no change to reserves for . . . lemme count . . . 36 countries (of which the US was one).

World as a whole reserves total declined 0.03%.

BP's flow report is "all liquids". Dunno if that is consumption, too. And if reserves . . . reserves are in a footnote. Crude, Condensate AND NGLs. Probably excludes algae.

[Jun 21, 2018] What? Me worry? Rystadt says US has 79 more years of oil still available.

Jun 21, 2018 | peakoilbarrel.com

Guym

x Ignored says: 06/19/2018 at 11:46 am
https://oilprice.com/Energy/Crude-Oil/US-Outstrips-Saudis-In-Largest-Recoverable-Oil-Reserves.html

What? Me worry? Rystadt says US has 79 more years of oil still available. Of course, that is the imaginary oil. They admit that commercially recoverable oil in the world only has 13 years left. Where did we pick up another 50 billion of imaginary oil in the US this year?

[Jun 20, 2018] Best Russian oil is going to china; Europe gets only whatg is left

Jun 20, 2018 | peakoilbarrel.com

alimbiquated x Ignored says: 06/18/2018 at 6:30 pm

Anyone careto comment on the quality of Russianoil?

http://uawire.org/europe-cuts-back-on-russian-oil-purchases-by-20-due-to-poor-quality

Watcher x Ignored says: 06/18/2018 at 9:39 pm
read deep into the article -- the best oil goes to China. Europe gets only what is left. Haven't needed it, but the North Sea is dying. Iran is the next supplier but if sanctions eliminate them, Russian oil of whatever quality will be the only choice.

Or Europe could ignore sanctions, if they have the courage.

[Jun 20, 2018] The only four countries that have any ability to increase production -- Russia, Saudis, UAE and Kuwait

Jun 20, 2018 | peakoilbarrel.com

Don, 06/20/2018 at 11:16 am

I wanted to make a comment about the OPEC(and Russia) meeting coming up and a possible production increase. The speculation going around is that OPEC and Russia might increase production up to 1.80 mbpd. The minimum production increase would be around 500kbpd. What is the most likely production increase based on past production?

The only four countries that have any ability to increase production are

1) Russia: Current production 10.9mbpd. High production 11.3mbpd Difference -400kbpd
2) Saudi Arabia: Current production 10.0mbpd. High production 10.6mbpd Difference -600kbpd
3) UAE: Current production 2.9mbpd. High production 3.10mbpd Difference -200kbpd
4) Kuwait: Current production 2.70mbpd. High production 2.8mbpd Difference -100kbpd

The high watermark in production for these countries happened from Mid 2016 to Mid 2017. Currently these four countries are producing about 1.3mbpd below their all-time high production limits. Ask yourself what is the likelihood that these four countries will increase production to all-time highs and potentially surpass their highs which would be required to increase production to 1.80mbpd? When OPEC did announce production cuts at the end of 2016 many believe they had increased production to unsustainable levels to give each country a higher quota from the production cuts. The guys a Core Labs believed they had to cut because it would have threaten the long term integrality of their fields.

My guess is that the most OPEC and Russia can bring back for a sustainable period is about half of the 1.30mbpd they reduced from their production highs .maybe about 600kbpd

[Jun 20, 2018] Consumption of oil continues to grow in 2018

Jun 20, 2018 | peakoilbarrel.com

Watcher, 06/13/2018 at 12:54 pm

The bible is out. A few surprises.

India's oil consumption growth was only 2.9%. Derives from their monetary debacle early in the year. We should see signs of whether or not that corrects back to their much higher norm before next year.

China consumption growth 4%. Higher than India. Clearly an aberration.

KSA consumption actually declined fractionally, which allows Japan to still be ahead of them in consumption.

US consumption growth 1%. So much for EV silliness.

[Jun 20, 2018] Ho>w long it might take for US steel mills to make the type of pipes that are now being imported.

Jun 20, 2018 | peakoilbarrel.com

Energy News: 06/19/2018 at 8:28 am

Permian pipelines and steel tariffs – it's a good update but the article doesn't give any clues as to how long it might take for US steel mills to make the type of pipes that are now being imported.

HOUSTON (Reuters) – Major U.S. energy companies including Plains All American Pipeline, Hess Corp and Kinder Morgan Inc are among many seeking exemptions from steel-import tariffs as the United States ratchets up trade tensions with exporters including China, Canada and Mexico.

The pipeline industry could face higher costs from tariffs as about 77 percent of the steel used in U.S. pipelines is imported, according to a 2017 study for the pipeline industry. Benchmark hot-rolled U.S. steel coil prices are up more than 50 percent from a year ago, according to S&P Global Platts.

https://www.reuters.com/article/us-usa-trade-tariffs/u-s-oil-pipeline-companies-producers-seek-relief-from-steel-tariffs-idUSKBN1JF0DZ

Guym,06/19/2018 at 9:36 am

Significant. It may not prevent the pipelines being built, but it will, no doubt, delay the timing of the start to completion timeline. Extended starts and stops on construction would be extremely expensive. A 25% tariff on oil to China is also a game changer. That's about 600k a day that now has questionable outlets. India is going to have about 600k a day it won't buy now from Iran, so that's a possibility. Not as big of a game changer as in the future, when US production begins increasing, again. I could speculate that there is some timing connection between India foregoing Iran purchases, and the China tariff decision. Whole Permian scenario keeps shifting down. Pipeline completion dates are more questionable, and the future export capabilities have a bigger question mark.

Goldman states that most of the producers have no plans to cut back in the Permian. What else would they tell the investment bank who helps determine their stock price? Yeah, we are screwed, and currently looking for a buyer?

[Jun 20, 2018] So far in June, the outlook for Venezuelan production is grimmer.

Notable quotes:
"... So far in June, the outlook for Venezuelan production is grimmer. Venezuela was producing about 1.5mn b/d at the start of May, including roughly about 800,000 b/d in the Orinoco oil belt and a combined 700,000 b/d in the company's eastern and western divisions. But output in early June has dropped to 1.1mn-1.2mn b/d, according to three PdV officials. https://www.argusmedia.com/pages/N ewsBody.aspx?id=1697240&menu=yes?utm_source=rss%20Free&utm_medium=sendible&utm_campaign=RSS ..."
Jun 20, 2018 | peakoilbarrel.com

Energy News , 06/12/2018 at 2:34 pm

2018-06-12 – CARACAS/HOUSTON (Reuters) – Venezuela's state-run PDVSA and partners have halted operations at two upgraders that convert extra-heavy oil into exportable crude and plan to stop work at two others, according to six sources close to the projects, a move aimed at easing the strains from a tanker backlog that is delaying shipments.
https://www.reuters.com/article/us-venezuela-pdvsa-crude/venezuelas-oil-upgraders-to-be-halted-amid-export-crisis-sources-idUSKBN1J82FX
Guym , 06/12/2018 at 3:27 pm
As I said above, the article points out that if they can't relieve the bottleneck; they will be forced to slow or shut in production.
Energy News , 06/12/2018 at 4:11 pm
2018-06-12 (Argus Media) So far in June, the outlook for Venezuelan production is grimmer. Venezuela was producing about 1.5mn b/d at the start of May, including roughly about 800,000 b/d in the Orinoco oil belt and a combined 700,000 b/d in the company's eastern and western divisions. But output in early June has dropped to 1.1mn-1.2mn b/d, according to three PdV officials.
https://www.argusmedia.com/pages/N ewsBody.aspx?id=1697240&menu=yes?utm_source=rss%20Free&utm_medium=sendible&utm_campaign=RSS
Guym , 06/12/2018 at 6:09 pm
Bigger drops coming, soon.

I agree with his take, mostly. At this level of confusion, and lack of money and personnel capital, it's not fixable.
https://oilprice.com/Energy/Energy-General/Venezuela-Wont-Have-Enough-Oil-To-Export-By-2019.html

The basic problem is the General he put in charge did not understand Maduro's command. He thought Maduro said oil production needs to decrease a million barrels a day.

George Kaplan , 06/12/2018 at 11:31 pm
They are losing workers especially the technical managers, don't have money for spares and are going to shut down to repair (I note it says repair not just maintenance for two of them) and restart all four of the most difficult operations in refining, all at the same time. These are high temperature fluidised beds with some pretty horrible waste product (highly viscous, toxic coke in heavy oil residue sludge which can block pipes and burners and corrode all sorts of stuff). Shutting them down fro extended periods is not always a great idea at the best of times. Planned maintenance for such things is usually phased so only one is down at a time to ensure all the planning and purchasing can be completed and the experts are available to go to each plant in turn. The plants need catalyst replacement which costs money, and tends to be more frequent if the plant isn't in very good condition or isn't being operated optimally (the operators need to be well trained). Be interesting to see how long it takes and how many come back, it's quite possible the best case will be cannibalising a couple to keep the others going.

As to: "If PDVSA cannot alleviate the shipping bottleneck, the company and its joint ventures could be forced to slow or temporarily pause production at some Orinoco Belt oilfields," that is already happening: they have dropped over half the rigs and might be down to none by September at current rate, without new wells and workovers heavy oil can decline pretty quickly.

Stephen Hren , 06/16/2018 at 12:59 pm
Good article in NYT about Venezuela's oil industry collapse.

https://www.nytimes.com/2018/06/14/world/americas/venezuela-oil-economy.html

[Jun 20, 2018] Excellent write-up on peak oil supply

Images removes
Jun 20, 2018 | crudeoilpeak.info

Peak oil in Asia Pacific (part 1)

This post uses data released by the BP Statistical Review in June 2018

https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html

Oil production seems to have left its bumpy 6 year long (2010-2015) plateau of 8.4 mb/d and is now back to 2004 levels of 7.9 mb/d, a decline of 6% over 2 years.

Base production is the sum of the minimum production levels in each country during the period under consideration. Incremental production is the production above that base production. In this way we clearly see that the peak was shaped by China, sitting on a declining wedge of all other Asian countries together. Note that growing production in Thailand and India could not stop that decline. Now let's look at the other side of the coin, consumption:

There has been a relentless increase in consumption since the mid 80s. The growth rate after the financial crisis in 2008 was an average of 3% pa.

Chinese annual oil consumption growth rates have been quite variable between 2% and a whopping 16% in 2004 which contributed to high oil prices. Fig 4 also shows there is little correlation between GDP growth and oil consumption growth (statistical problems?). There is nothing in this graph that could tell us that the Chinese economy has a consistent trend to become less dependent on oil. In the years since 2011, oil consumption growth was around 60% of GDP growth.

Let's compare China with the US. China's oil consumption is catching up fast with US consumption.

On current trends, China's oil consumption would reach US consumption levels of 20 mb/d in just 14 years.

Contrary to misinformation by the media, the US is still a net importer of oil. Even blind Freddy can see that there will be intense competition for oil on global markets.

All governments who plan for perpetual growth in Asia (new freeways, road tunnels, airports etc) should fill in the above graph. Hint: We can see that Asia has diversified its sources of oil imports but is still utterly dependent on Middle East oil

"Other Middle East" is Iran and Oman (as Syria and Yemen no longer export oil)

China is preparing for the future by building bases to secure oil supply routes:

Proven reserves have not changed much in the last years meaning that P2 and P3 reserves have been proved up commensurate with production. The reserve to production ratio is 16.7 years equivalent to an annual depletion rate of 6%, a little bit higher than a reasonable rate of 5% (R/P of 20 years).

The depletion rates vary considerably and may only be approximate as oil reserves will have been estimated by using differing methodology and accuracy. Indonesia's depletion rate is very high. Not shown in Fig 14 is Thailand where the depletion rate is off the charts (almost 50%) suggesting reserves are too low.

In part 2 we look at the oil balance in each country. Tags: BP Statistical Review , China oil demand , china peak oil , Middle East , South China Sea , South East Asia

[Jun 20, 2018] it seems the physical market is getting tighter again and that the export flood may have something to do with the meeting. Or it could be that reduced exports from Iran, Venezuela and Libya are starting to impact the market.

Jun 20, 2018 | peakoilbarrel.com

Kolbeinh, 06/18/2018 at 6:21 am

There are some rumors that KSA has increased exports starting in May (about 0.5 m b/d more than prior months) by drawing even more from storage. If we are to believe OPEC production numbers from May which are steady, that must be the case. OPEC has essentially flooded the market with exports before the meeting on Friday. The nearest month Brent future changed to contango compared to closest month some weeks ago, but it has now all changed again to backwardation. Point being, it seems the physical market is getting tighter again and that the export flood may have something to do with the meeting. Or it could be that reduced exports from Iran, Venezuela and Libya are starting to impact the market.

If the market balance overall is to change from a a deficit to near balanced, production within OPEC has to be increased with almost maximum of whatever spare capacity available in my opinion. The assumption is that spare capacity in reality is smaller than stated by the agencies.

[Jun 18, 2018] China blindsides US with new energy tariffs threat by Jim W. Dean

Notable quotes:
"... According to US Energy Department figures, China imports approximately 363,000 barrels of US crude oil daily. The country also imports about 200,000 barrels a day of other petroleum products including propane. ..."
Jun 18, 2018 | www.veteranstoday.com
Just as China topped the list of nations buying US oil, Beijing – retaliating to unilateral Trump economic threats – sent jitters through energy markets on Friday by threatening new tariffs on natural gas, crude oil and many other energy products.

On Friday, Beijing threatened to impose tariffs on US energy products in response to $50 billion in tariffs imposed by US President Donald Trump. Such tariffs would inhibit Chinese refiners from buying US crude imports, potentially crashing US energy markets and hitting the fossil fuel industry where it hurts the most: in shareholder approval.

"This is a big deal. China is essentially the largest customer for US crude now, and so for crude it's an issue, let alone when you involve [refined] products, too. This is obviously a big development," Matt Smith, director of commodity research at ClipperData, told Reuters.

According to US Energy Department figures, China imports approximately 363,000 barrels of US crude oil daily. The country also imports about 200,000 barrels a day of other petroleum products including propane.

The US energy industry has seen its profits boosted by fracking in domestic shale fields, which produce some 10.9 million barrels of oil per day.

The US is also exporting a record 2 million barrels per day, and encouraging countries like China to import more US energy products instead of those from Iran, after Trump recently withdrew from the historic Joint Comprehensive Plan of Action (JCPOA) 2015 nuclear arms deal with Tehran.

China is currently the largest buyer of Iranian oil as well, purchasing some 650,000 barrels daily during the first quarter of 2018.

According to Bernadette Johnson with the Denver, Colorado, energy consultancy Drilling info, tariffs will increase prices for other petroleum products including propane and liquefied natural gas.

"The constant back-and-forth about the tariffs creates a lot of market uncertainty that makes it harder to sell cargoes or sign long-term [trade] deals," Johnson noted, cited by Reuters.

In late March, the White House slapped trade sanctions on China, the world's second largest economy, including limitations in the investment sector as well as tariffs on $60 billion worth of products.

Citing "fairness" considerations, Trump referred to the car market, stating that China charged a tariff ten times higher on US cars than the US did on the few Chinese cars sold in the US.

Separately, in a bid to deliver on campaign promises, Trump announced his intention to impose a 25-percent tariff on steel imports and a 10-percent tariff on aluminum imports from an array of US allies, including the EU, Mexico and Canada. Those nations -- longtime allies to the US -- have promised retaliatory economic measures.

Trump has also reportedly mulled placing a 25-percent import tax on European cars, something that would significantly affect the highly-profitable US market for expensive German automobiles.

[Jun 15, 2018] Libyan Oil Exports Impaired as Some in OPEC Seek More Supply

Jun 15, 2018 | www.msn.com

by Salma El Wardany (Bloomberg) Two of Libya's biggest oil ports stopped loading on Thursday after clashes erupted between rival forces for control of the country's economic lifeline, taking more barrels off the market just as OPEC debates whether to boost production.

Fighting at Es Sider and Ras Lanuf terminals led to the loss of about 240,000 barrels of Libya's daily oil production, state energy producer National Oil Corp. said in a statement Thursday. NOC evacuated staff from both terminals, which account for 40 percent of Libya's oil exports, and declared force majeure on shipments.

The disruptions come a week before OPEC nations hold key meetings in Vienna with other major producers including Russia to discuss if they should stick with a pact to restrain oil supply after prices topped $80 a barrel in May. Oil producers were already facing growing pressure, including from U.S. President Donald Trump, to boost supply to offset disruptions caused by the economic crisis in Venezuela and renewed American sanctions on Iran.

Libya's oil output has rebounded over the past two years, but remains well below the 1.8 million barrels a day the country pumped before the 2011 campaign to oust Muammar Qaddafi. That NATO-backed war gave way to years of fighting among rival Libyan groups in which the country's oil installations became prized targets.

[Jun 15, 2018] Libya Halts Sharara Oil Loadings as Biggest Field Shuts Down - Bloomberg

Jun 15, 2018 | www.bloomberg.com

[Jun 09, 2018] Shale Is a Debt-Fueled Mirage, and We re Running Out of Energy - Forget Your Flying Teslas by James Howard Kunstler

Notable quotes:
"... The author is a prominent American social critic, blogger, and podcaster , and one of our all-time favorite pessimists. We carry his articles regularly on RI . His writing on Russia-gate has been highly entertaining. ..."
"... He is one of the better-known thinkers The New Yorker has dubbed 'The Dystopians' in an excellent 2009 profile , along with the brilliant Dmitry Orlov, another regular contributor to RI (archive) . These theorists believe that modern society is headed for a jarring and painful crack-up. ..."
"... You can find his popular fiction and novels on this subject, here . To get a sense of how entertaining he is, watch this 2004 TED talk about the cruel misery of American urban design - it is one of the most-viewed on TED. Here is a recent audio interview with him which gives a good overview of his work. ..."
"... If you like his work, please consider supporting him on Patreon . ..."
"... Quite the opposite of a dilettante, Kunstler has dug into the research on oil and related energy technologies, and is extremely well-informed, writing books on the subject. What he says implies a massive wealth transfer to Russia, Iran, and the Middle East, as the wells start to dry up. ..."
Jun 09, 2018 | russia-insider.com

"Anyway, we're not going back to the Detroit of 1957. We'll be fortunate if we can turn out brooms and scythes twenty years from now, let alone flying Teslas." 10 hours ago | 1,690 41 MORE: Business The author is a prominent American social critic, blogger, and podcaster , and one of our all-time favorite pessimists. We carry his articles regularly on RI . His writing on Russia-gate has been highly entertaining.

He is one of the better-known thinkers The New Yorker has dubbed 'The Dystopians' in an excellent 2009 profile , along with the brilliant Dmitry Orlov, another regular contributor to RI (archive) . These theorists believe that modern society is headed for a jarring and painful crack-up.

You can find his popular fiction and novels on this subject, here . To get a sense of how entertaining he is, watch this 2004 TED talk about the cruel misery of American urban design - it is one of the most-viewed on TED. Here is a recent audio interview with him which gives a good overview of his work.

If you like his work, please consider supporting him on Patreon .


Quite the opposite of a dilettante, Kunstler has dug into the research on oil and related energy technologies, and is extremely well-informed, writing books on the subject. What he says implies a massive wealth transfer to Russia, Iran, and the Middle East, as the wells start to dry up.


The ill feeling among leaders of the G-7 nations -- essentially, the West plus Japan -- was mirrored early this morning in the puking financial market futures, so odious, apparently, is the presence of America's Golden Golem of Greatness at the Quebec meet-up of First World poobahs. It's hard to blame them. The GGG refuses to play nice in the sandbox of the old order.

Completely, totally, delusional

Like many observers here in the USA, I can't tell exactly whether Donald Trump is out of his mind or justifiably blowing up out-of-date relationships and conventions in a world that is desperately seeking a new disposition of things. The West had a mighty good run in the decades since the fiascos of the mid-20 th century. My guess is that we're witnessing a slow-burning panic over the impossibility of maintaining the enviable standard of living we've all enjoyed.

All the jabber is about trade and obstacles to trade, but the real action probably emanates from the energy sector, especially oil. The G-7 nations are nothing without it, and the supply is getting sketchy at the margins in a way that probably and rightfully scares them. I'd suppose, for instance, that the recent run-up in oil prices from $40-a-barrel to nearly $80 has had the usual effect of dampening economic activity worldwide. For some odd reason, the media doesn't pay attention to any of that. But it's become virtually an axiom that oil over $75-a-barrel smashes economies while oil under $75-a-barrel crushes oil companies.

Mr. Trump probably believes that the USA is in the catbird seat with oil because of the so-called "shale oil miracle." If so, he is no more deluded than the rest of his fellow citizens, including government officials and journalists, who have failed to notice that the economics of shale oil don't pencil out -- or are afraid to say.

The oil companies are not making a red cent at it, despite the record-breaking production numbers that recently exceeded the previous all-time-peak set in 1970. The public believes that we're "energy independent" now, which is simply not true because we still import way more oil than we export: 10.7 million barrels incoming versus 7.1 million barrels a week outgoing (US EIA).

Shale oil is not a miracle so much as a spectacular stunt: how to leverage cheap debt for a short-term bump in resource extraction at the expense of a future that will surely be starved for oil. Now that the world is having major problems with excessive debt, it is also going to have major problems with oil.

The quarrels over trade arise from this unacknowledged predicament: there will be less of everything that the economically hyper-developed nations want and need, including capital. So, what's shaping up is a fight over the table scraps of the banquet that is shutting down.

That quandary is surely enough to make powerful nations very nervous. It may also prompt them to actions and outcomes that were previously unthinkable. At the moment the excessive debt threatens to blow up the European Union, which is liable to be a much bigger problem for the EU than anything Trump is up to. It has been an admirably stable era for Europe and Japan, and I suppose the Boomers and X gens don't really remember a time not so long ago when Europe was a cauldron of tribal hatreds and stupendous violence, with Japan marching all over East Asia, wrecking things.

There is also surprisingly little critical commentary on the notion that Mr. Trump is seeking to "re-industrialize" America. It's perhaps an understandable wish to return to the magical prosperity of yesteryear. But things have changed. And if wishes were fishes, the state of the earth's oceans is chastening to enough to give you the heebie-jeebies. Anyway, we're not going back to the Detroit of 1957. We'll be fortunate if we can turn out brooms and scythes twenty years from now, let alone flying Teslas.

This will be the summer of discontent for the West especially. The fact that populism is still a rising force among these nations is a clue of broad public skepticism about maintaining the current order. No wonder the massive bureaucracies vested in that order are freaking out.

I'm not sure Mr. Trump even knows or appreciates just how he represents these dangerous dynamics.


Source: Kunstler.com

[Jun 05, 2018] With MBS supposedly dead, how will Saudi will change their oil policy? How much longer will the Saudi and international press be able to remain silent on this?

Notable quotes:
"... My own hunch is that these reports may well be true. How long can the Saudis (and the Western media) conceal what has happened? ..."
"... Second, I believe the trip by our Secretary of State was in response to the incident of April 21st. My hunch is the Crown Prince was gravely wounded and later perished at a Military Hospital. ..."
"... Third, the night of the incident a twitter user named CivMilAir tracked the Royal Medevac jet leaving the airport near the gunfire and documented the airplane turning off its transponder. There was speculation concerning whether or not it was the Crown Prince that night on that thread. There was even push back from other twitter users based in Saudi Arabia. Even one demanding to know how this twitter user obtained this information. ..."
"... Fifth, the outrage at the German Government and the reports from German businesses that the door to trade has been slammed shut this past month. I attribute this to the one and only exile prince from the Royal family, Saudi Prince Khaled Bin Farhan. living in Europe. He was granted asylum by Germany. There were 3 other exiles but they have been tricked or kidnapped back to Saudi Arabia. This Prince was advocating for the removal of the Crown Prince as recently as March 23, 2018. ..."
"... Sixth, I noticed this week in the news that Crown Prince "MBS" has consolidated his control further this week by taking operational control of the construction and cyber security industries in the country. 35% of the Bin Laden group was basically stolen. I watched an interview of Saudi Prince Alwaleed bin Talal after his release from detention and he was clearly shaken. He was playing a confidence game where everything would go back to normal and mention how the Bin Laden group was back working on his projects. Then this? 35% gone overnight. Cyber security crack down or internet crackdown coming in Saudi Arabia? ..."
"... Seventh, there is no way that MBS approved the recent arrest of the feminist. Not after his carefully cultured PR campaign in the United States. ..."
"... Eight, where's Waldo? ..."
"... Here is my speculation. Al-Qaeda will be the cover story. Crown Prince MBS was killed by members of the Royal Family and other powerful individuals he made enemies with in his short rule. ..."
"... The Royal family members who supported MBS are furious at Germany for the above stated reasons and lashing out in all directions. Threatening to invade Qatar if Russia provides them the S-400. I believe even President Trump's bizarre threat to put huge tariffs on German luxury automobiles because the German public doesn't want to buy crappy American cars like the Chevy Impala is his frustration over one of his essential architects on the plan to change regime's in Iran being eliminated. ..."
"... A lot of torture and indiscriminate arrest is going on at this very moment in Saudi Arabia. The family appears split and trust lost. Time will tell. ..."
"... It would appear that there's no one in charge in SA at the moment. One can now expect a period of confusion, and lots of infighting between various factions trying to assert dominance, or just survive. ..."
"... Considering MbS's policies, I think his exit is better for the Middle East. His tilt of SA policy towards the US and Israel is likely to be reversed. ..."
"... All you need to know is that Mr. Media Roadshow decided overnight to shun video cameras, and not come out for Pompeo. The guy is dead as a door knob. He made way too many enemies during the forced corporate retreat he hosted at the Ritz. ..."
"... myself , i think the attack succeed in wounding and ultimately kill the prince , otherwise why no public appearance at all ? ( if i recall , muslim have to be buried no more than 24 hours after death so that's why i assume he was wounded at first and the medical team failed to keep him alive) ..."
"... In Assad's interview with RT he pointed out that the "opposition" first attacked Syria's air defenses at the beginning of the "civil war". Hillary wanted a "no-fly zone" over Syria. All that's missing is Victoria Nuland. ..."
"... The playground version: The neocons and Netanyahu think they're playing Trump, who in turn thinks he's use them. MbS wanted to be one of the cool kids and tried to get in on the action and might have gotten himself dead in the process. ..."
Jun 05, 2018 | turcopolier.typepad.com

FB Ali , a day ago

Re Saudi Arabia: I have previously referred to reports regarding the death of the Saudi Crown Prince, MbS, as a result of the AQ attack on his palace on April 21. Now, pictures are circulating of his funeral.

There is so far no official announcement, but that means nothing.

My own hunch is that these reports may well be true. How long can the Saudis (and the Western media) conceal what has happened?

Pat Lang Mod -> FB Ali , a day ago
If he was killed in the April 21 incident that would explain why the women activists have now been targeted.
FB Ali -> Pat Lang , a day ago
Agree. There is also the report that he was not at the Graduation Ceremony of the King Abdul Aziz Military College on May 19. (As Defence Minister, he would have been expected to attend).
Harlan Easley -> FB Ali , 17 hours ago
I have been following the story. A few things. Yes, I have seen the pictures of the funeral and his actual corpse prepared for burial under #mbs at twitter. The pictures are not the best. The size of the corpse and the nose and receding hairline along with the cheekbones and body size could definitely be MBS along with the eyes.

Second, I believe the trip by our Secretary of State was in response to the incident of April 21st. My hunch is the Crown Prince was gravely wounded and later perished at a Military Hospital.

Third, the night of the incident a twitter user named CivMilAir tracked the Royal Medevac jet leaving the airport near the gunfire and documented the airplane turning off its transponder. There was speculation concerning whether or not it was the Crown Prince that night on that thread. There was even push back from other twitter users based in Saudi Arabia. Even one demanding to know how this twitter user obtained this information.

Fourth, the recent trip of the Lebanon Prime Minister being called to Saudi Arabia when his schedule indicated no such trip.

Fifth, the outrage at the German Government and the reports from German businesses that the door to trade has been slammed shut this past month. I attribute this to the one and only exile prince from the Royal family, Saudi Prince Khaled Bin Farhan. living in Europe. He was granted asylum by Germany. There were 3 other exiles but they have been tricked or kidnapped back to Saudi Arabia. This Prince was advocating for the removal of the Crown Prince as recently as March 23, 2018.

https://www.middleeastmonit...

And he asserted that he receives emails and other forms of communications from disaffected family members and the security services desiring for a change to be made.

Sixth, I noticed this week in the news that Crown Prince "MBS" has consolidated his control further this week by taking operational control of the construction and cyber security industries in the country. 35% of the Bin Laden group was basically stolen. I watched an interview of Saudi Prince Alwaleed bin Talal after his release from detention and he was clearly shaken. He was playing a confidence game where everything would go back to normal and mention how the Bin Laden group was back working on his projects. Then this? 35% gone overnight. Cyber security crack down or internet crackdown coming in Saudi Arabia?

Seventh, there is no way that MBS approved the recent arrest of the feminist. Not after his carefully cultured PR campaign in the United States.

Eight, where's Waldo?

Finally, here is what I find so fascinating. The KIng of Saudi Arabia is reported to have dementia. Unfortunately, I have a great deal of experience with this dreadful disease. My stepfather. 16 years. There is no King in charge of Saudi Arabia. In fact, if MBS was killed like I believe there is no legitimate line to the next ruler. Survival of the Fittest.

Here is my speculation. Al-Qaeda will be the cover story. Crown Prince MBS was killed by members of the Royal Family and other powerful individuals he made enemies with in his short rule.

The Royal family members who supported MBS are furious at Germany for the above stated reasons and lashing out in all directions. Threatening to invade Qatar if Russia provides them the S-400. I believe even President Trump's bizarre threat to put huge tariffs on German luxury automobiles because the German public doesn't want to buy crappy American cars like the Chevy Impala is his frustration over one of his essential architects on the plan to change regime's in Iran being eliminated.

A lot of torture and indiscriminate arrest is going on at this very moment in Saudi Arabia. The family appears split and trust lost. Time will tell.

FB Ali -> Harlan Easley , 2 hours ago
Thank you for that excellent rundown of events. I tend to agree with your "speculation".

It would appear that there's no one in charge in SA at the moment. One can now expect a period of confusion, and lots of infighting between various factions trying to assert dominance, or just survive.

Considering MbS's policies, I think his exit is better for the Middle East. His tilt of SA policy towards the US and Israel is likely to be reversed.

Vicky SD -> Harlan Easley , 4 hours ago
All you need to know is that Mr. Media Roadshow decided overnight to shun video cameras, and not come out for Pompeo. The guy is dead as a door knob. He made way too many enemies during the forced corporate retreat he hosted at the Ritz.
EEngineer -> FB Ali , 17 hours ago
This is news to me. How big do you think the resulting power struggle would be if MbS was killed or incapacitated? I can envision outcomes that range from 2nd page news all the way up to Archduke Ferdinand grade but I don't have any feel for the probabilities.

If true, would it cause you to see the events of the last month in the region in a different light?

disqus_f5ibuyVBnZ -> FB Ali , 4 hours ago
Brigadier,

With MBS dead, how will Saudi react to MBS's previous Israel's right to exist scenario, along with Jerusalem being declared Israel's capital and the embassy move by DT?

How much longer will the Saudi and international press be able to remain silent on this?

Who do you think will now ascend the Saudi throne as heir apparent?

J.

SurfaceBook -> FB Ali , 8 hours ago
FB Ali , sir , it is so hard to get info in the AQ Attack that allegedly mortally wound MBS.. as for the shooting reported as a wayward drone , i recall this video (anyone can confirm the skyline if this is saudi city near palace ?) , the gunfire last for long time , far too long to be guards firing on a drone.

myself , i think the attack succeed in wounding and ultimately kill the prince , otherwise why no public appearance at all ? ( if i recall , muslim have to be buried no more than 24 hours after death so that's why i assume he was wounded at first and the medical team failed to keep him alive)

do you think this is the 'blowback' from the massive shakedown that the prince did to his seniors ?

Play Hide
Bill Herschel , 18 hours ago
Has DT done a single thing that has helped Israel? I would say no. In Assad's interview with RT he pointed out that the "opposition" first attacked Syria's air defenses at the beginning of the "civil war". Hillary wanted a "no-fly zone" over Syria. All that's missing is Victoria Nuland.

Your post vividly depicts how isolated Israel has become. I reiterate DT has done nothing to help Israel and everything to harm it. One is permitted to ask what's going on.

EEngineer -> Bill Herschel , 3 hours ago
The playground version: The neocons and Netanyahu think they're playing Trump, who in turn thinks he's use them. MbS wanted to be one of the cool kids and tried to get in on the action and might have gotten himself dead in the process.

All the while Putin and the SCO crew wait and play for time as they tangle each other up into an ever larger mess of their own making hoping to avoid, or minimize, whatever conflict is necessary to get them all to accept the coming multi-polar world order.

Perhaps in the future when they make a movie about this period it will be called "A Deal Too Far".

/sarcasm

Pat Lang Mod -> Bill Herschel , 6 hours ago
The Israelis are quite pleased with him, but then, it is true tht they are short sighted fools.

[Jun 03, 2018] The Unbelievable Amount Of Frac Sand Consumed By U.S. Shale Oil Industry

Sand is not a problem. The real question is how much oil is consumed getting this amount od sand to their designation. 91,000 truckloads of frac sand using, on average say 5 miles per gallon and 100 miles each way (200 miles roundtrip) would be 3,5 million gallons of fuel per month. That means that one day a month is essentially lost to sand transportation costs.
Jun 03, 2018 | www.zerohedge.com

By the SRSrocco Report ,

The U.S. Shale Oil Industry utilizes a stunning amount of equipment and consumes a massive amount of materials to produce more than half of the country's oil production. One of the vital materials used in the production of shale oil is frac sand. The amount of frac sand used in the shale oil business has skyrocketed by more than 10 times since the industry took off in 2007.

According to the data by Rockproducts.com and IHS Markit , frac sand consumption by the U.S. shale oil and gas industry increased from 10 billion pounds a year in 2007 to over 120 billion pounds in 2017. This year, frac sand consumption is forecasted to climb to over 135 billion pounds, with the country's largest shale field, the Permian, accounting for 37% of the total at 50 billion pounds.

Now, 50 billion pounds of frac sand in the Permian is an enormous amount when we compare it to the total 10 billion pounds consumed by the entire shale oil and gas industry in 2007.

To get an idea of the U.S. top shale oil fields, here is a chart from my recent video, The U.S. Shale Oil Ponzi Scheme Explained :

(charts courtesy of the EIA - U.S. Energy Information Agency)

As we can see in the graph above, the Permian Region is the largest shale oil field in the United States with over 3 million barrels per day (mbd) of production compared to 1.7 mbd in the Eagle Ford, 1.2 mbd at the Bakken and nearly 600,000 barrels per day in the Niobrara. However, only about 2 mbd of the Permian's total production is from horizontal shale oil fracking. The remainder is from conventional oil production.

Now, to produce shale oil or gas, the shale drillers pump down the horizontal oil well a mixture of water, frac sand, and chemicals to release the oil and gas. You can see this process in the video below (example used for shale gas extraction):

https://www.youtube.com/embed/PQKjLFY5YEY?rel=0

The Permian Region, being the largest shale oil field in the United States, it consumes the most frac sand. According to BlackMountainSand.com Infographic , the Permian will consume 68,500 tons of frac sand a day, enough to fill 600 railcars . This equals 50 billion pounds of frac sand a year. And, that figure is forecasted to increase every year.

Now, if we calculate the number of truckloads it takes to transport this frac sand to the Permian shale oil wells, it's truly a staggering figure. While estimates vary, I used 45,000 pounds of frac sand per sem-tractor load. By dividing 50 billion pounds of frac sand by 45,000 pounds per truckload, we arrive at the following figures in the chart below:

Each month, over 91,000 truckloads of frac sand will be delivered to the Permian shale oil wells. However, by the end of 2018, over 1.1 million truckloads of frac sand will be used to produce the Permian's shale oil and gas . I don't believe investors realize just how much 1.1 million truckloads represents until we compare it to the largest retailer in the United States.

According to Walmart, their drivers travel approximately 700 million miles per year to deliver products from the 160 distribution centers to thousands of stores across the country. From the information, I obtained at MWPWL International on Walmart's distribution supply chain, the average one-way distance to its Walmart stores is about 130 miles. By dividing the annual 700 million miles traveled by Walmart drivers by the average 130-mile trip, the company will utilize approximately 5.5 million truckloads to deliver its products to all of its stores in 2018.

The following chart compares the annual amount of Walmart's truckloads to frac sand delivered in the Permian for 2018:

To provide the frac sand to produce shale oil and gas in the Permian this year, it will take 1.1 million truckloads or 20% of the truckloads to supply all the Walmart stores in the United States. Over 140 million Americans visit Walmart (store or online) every week. However, the Industry estimates that the Permian's frac sand consumption will jump from 50 billion pounds this year to 119 billion pounds by 2022. Which means, the Permian will be utilizing 2.6 million truckloads to deliver frac sand by 2022, or nearly 50% of Walmart's supply chain :

This is an insane number of truckloads just to deliver sand to produce shale oil and gas in the Permian. Unfortunately, I don't believe the Permian will be consuming this much frac sand by 2022. As I have stated in several articles and interviews, I see a massive deflationary spiral taking place in the markets over the next 2-4 years. This will cause the oil price to fall back much lower, possibly to $30 once again. Thus, drilling activity will collapse in the shale oil and gas industry, reducing the need for frac sand.

Regardless, I wanted to show the tremendous amount of frac sand that is consumed in the largest shale oil field in the United States. I calculated that for every gallon of oil produced in the Permian in 2018, it would need about one pound of frac sand. But, this does not include all the other materials, such as steel pipe, cement, water, chemicals, etc.

For example, the Permian is estimated to use 71 billion gallons of water to produce oil this year. Thus, the fracking crews will be pumping down more than 1.5 gallons of water for each gallon of oil they extract in 2018. So, the shale industry is consuming a larger volume of water and sand to just produce a smaller quantity of uneconomic shale oil in the Permian .

Lastly, I have provided information in several articles and videos explaining why I believe the U.S. Shale Oil Industry is a Ponzi Scheme. From my analysis, I see the disintegration of the U.S. shale oil industry to start to take place within the next 1-3 years. Once the market realizes it has been investing in a $250+ billion Shale Oil Ponzi Scheme, the impact on the U.S. economy and financial system will be quite devastating.

Check back for new articles and updates at the SRSrocco Report .


Gusher -> Stuck on Zero Sun, 06/03/2018 - 13:02 Permalink

Yawn is right. 64 trainloads a year is nothing. One large coal fired electric generation plant uses that much coal every month.

Juggernaut x2 -> Gusher Sun, 06/03/2018 - 14:07 Permalink

Fracking is a capital-intensive scam and fueled by cheap $ from the Fed.

jmack Sun, 06/03/2018 - 13:48 Permalink

Sand, a material so abundant, you could not give it away, but now, it has worth, thanks frackers. His article a week or so back was claiming that all the sand had to be shipped out of michigan, a blatant lie, or perhaps he really is just that ignorant.

A fellow in west texas bought some sparse land a few years back for about $40,000, it was 10's of acres. He was offered $13,000,000 recently, which he lept at. then he found out the people that bought it from him, flipped it to a sand company for $200,000,000. Now he wants to sue.

the point being that technology can make formally useless things, worth more. This is the fundamental reason that economies grow. Knowledge adds value, making the pie larger for everyone.

Oil may be a ponzi scheme, who knows, if a trade war crashes the global economies and energy usage plummets by 20-50%, I would expect the deflationary environment he is talking about. On the other hand if that does not happen, and oil goes to $100 or $200 then we will hear a bunch of whining, but everything will keep chugging along.

and if graphene filters allow for the energy efficient filtration of salts from produced water, and those salts are then processed for the elements such as lithium found in them, and produced water becomes net profit stream instead of a net cost stream, then the whole equation changes, technology adding value.

A lot of if's, that is what makes the future interesting.

hannah -> jmack Sun, 06/03/2018 - 19:17 Permalink

you are an idiot...all sand is not the same. sand runs the gamut of smooth and round to rough course edged. sand isnt that easy to find when you have to have a particular kind of sand.....

webmatex Sun, 06/03/2018 - 14:45 Permalink

Permium 1.1 million truckloads per day and + 71 billion gallons of water per year!

People in North America will be in serious need of fresh water soon, however, with fracking spoiling water nationally and the combined effect of increased earth tremors/potholes in vast areas, well mother nature is calling in the cards.

Combine that with GM food hidden in most products plus the millions of pharmaceutical lovers, poisoning their own water supplies and effecting most native species and perhaps a little radiation from Nukes and the Sun and the cell towers and a few miles of chem trails i don't give much hope for a sustainable North American future.

What you think?

jmack -> webmatex Sun, 06/03/2018 - 15:00 Permalink

I was just telling the second head growing out of my back, the other day, 'man this is the best it has ever been', and he said ' groik splish!' and bit me on the arm. So I would say we are of two minds on the matter.

snblitz -> webmatex Sun, 06/03/2018 - 15:46 Permalink

You can make fresh water from sea water for about $2000 per acre foot using expensive california power. I think that comes to $60 per month for a family of 4 using the fairly high rate of water consumption by california residents.

(desalination plants already exist in Santa Barbara and San Diego, CA and there are desal plants all over the world)

80 gallons per day * 4 people * 365 days / 330000 gallons * $2000 / 12 months = $60

An acre foot of water is about 330,000 US gallons.

Reverse osmosis in the home runs about $75 per year and cleans up most of the problems.

Angry Plant -> snblitz Sun, 06/03/2018 - 19:13 Permalink

Now what about the cost of distributing that? See that the thing about getting water the old fashioned ways. Water actually cost nothing to make. The cost is building a system to distribute the free water. It also come with gravity assist moving water from high to low. That way you use natural property of water to flow from high places to lower ones. Now in your system you take sea water and have to move that up from sea level. That cost is addition to cost of converting sea water to fresh water.

Red Raspberry -> webmatex Sun, 06/03/2018 - 17:07 Permalink

You left out the volcanoes...

OCnStiggs -> webmatex Sun, 06/03/2018 - 17:15 Permalink

Maybe we could substitute illegal aliens, or Obama-ites convicted of felonies for much of the frac-sand?

Think of how much money that would save vs incarceration costs!

If we moved up to insane Liberal idiots who were about to explode anyway because their Liberal world is crashing down, we'd further save the environment from all the silly electric cars they drive. Its a win-win!

Thanks for pointing out alternatives we never thought of before!

[May 31, 2018] Is Saudi Arabia's 32-Year-Old Crown Prince Dead? by Sissi Cao

May be he was just wounded and recovering. To hide the death is tricky politically and usually is not done for that long.
Notable quotes:
"... Last week, the Iranian newspaper Kayhan ..."
May 25, 2018 | observer.com

Also "However, a week after the coup speculations, the Crown Prince, along with Saudi King Salman, was seen at the opening ceremony of a huge entertainment resort Qiddiya – an ambitious multi-billion dollar project that is expected to include a Six Flags theme park, water parks, motor sports, cultural events and vacation homes." Sputnik International

Saudi Arabia's Crown Prince Mohammed Bin Salman, the 32-year-old media-savvy leader of the oil kingdom, has been unnaturally quiet recently, so much so that some in the Middle East media couldn't help but wonder if he is dead.

Bin Salman hasn't been seen in the public eye since his meeting with the Spanish royal family in on April 12. On April 21, heavy gunfire was heard near a royal palace in Riyadh, the kingdom's capital. Although Saudi Arabia's state news agency claimed it was a security force shooting down a toy drone that had gotten too close to the royal property, some wondered if the gunfire was in fact a coup led by Saudi royals trying to topple King Salman, Bin Salman's father.

Some of Saudi Arabia's enemies were pretty sure.

Last week, the Iranian newspaper Kayhan reported that the Crown Prince was hit by two bullets during the attack and may actually be dead, citing "a secret service report sent to the senior officials of an unnamed Arab state."

"There is plenty of evidence to suggest that the absence of nearly 30 days of Muhammad bin Salman, the Crown Prince of Saudi Arabia, is due to an incident which is being hidden from the public," the daily paper claimed.

To add credence to the speculation, Kayhan pointed out that Bin Salman was not seen on camera when the new U.S. Secretary of State Mike Pompeo visited Riyadh in late April, while his father, Saudi King Salman bin Abdulaziz Al Saud, and Foreign Minister Adel al-Jubeir were photographed.

[May 29, 2018] How Wall Street Enabled the Fracking 'Revolution' That's Losing Shale Oil Companies Billions naked capitalism

Notable quotes:
"... By Justin Mikulka, a freelance writer, audio and video producer living in Trumansburg, NY. Justin has a degree in Civil and Environmental Engineering from Cornell University. Originally published at DeSmogBlog ..."
"... Wall Street caused the 2008 financial crisis, with some of its architects personally benefiting. However, while a few executives profited, the result was a drop in employment of 8