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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
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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 21, 2021] The Oil Industry Is Borrowing Again, But This Time It's Different

A lot of shale companies hedge their output at levels that they have no upside from the current prices...
Jul 18, 2021 | oilprice.com

Two years ago, Wall Street banks were on their way out of a long-term relationship with the oil industry. Now, with oil prices over $70 for the first time in three years, big bond buyers are snapping up oil bonds once again.

Only there is a condition this time.

The Wall Street Journal's Joe Wallace and Collin Eaton wrote this week that Wall Street was buying bonds from non-investment-grade U.S. energy companies, which took advantage of record low interest rates to raise some $34 billion in fresh debt in the first half of the year.

That's twice as much as the industry raised over the same period last year. But investors don't want borrowers to use the cash to drill new wells. They want them to use it to pay off older debt and shore up balance sheets.

It makes sense, really, although it is a marked departure from how banks normally react to oil industry crises. The 2014 oil price collapse, in hindsight, may have been the last "normal" crisis. Oil prices fell, funding dried up, supply tightened, prices went up, banks were willing to lend again, and producers poured the money into boosting production.

Since then, however, the energy transition push has really gathered pace and banks have more than one reason to not be so willing to lend to the oil industry. With the world's biggest asset managers setting up net-zero groups to effectively force their institutional clients to reduce their carbon footprint and with the Biden administration throwing its weight behind the push for lower emissions, banks really have little choice but to follow the current. Their own shareholders are increasingly concerned about the environment, too.

https://www.youtube.com/embed/aQXqMVeoOPs

Yet business is business, and nowhere is this clearer than in banks' dealings with the oil industry. Bank shareholders may be concerned about the environment, but they certainly would be more concerned about their dividend""and part of that comes from income made from lending to oil. And the higher oil prices go, the more willing banks will be to lend to those that produce it.

When they were unwilling to lend to the oil industry, other lenders stepped in . Last year, alternative investment firms scooped up hundreds of millions in oil industry debt from banks that were cutting their exposure to the politically incorrect industry. Hedge funds and other so-called shadow lenders don't seem to have banks' misgivings about profiting from oil and gas.

Now banks have mellowed towards oil somewhat, but it is an interesting twist that the current loans come with the condition of not boosting output. Again, it makes sense. For years, the shareholders of U.S. shale oil companies have been complaining about poor returns as the companies put everything into output growth. Now it's payback time, and shareholders want their returns.

So do lenders, apparently.

Per the WSJ article, this year, bond buyers "want to see companies repairing their balance sheets and delivering to creditors and shareholders rather than plowing money into new wells."

[Jul 20, 2021] Problems with labor in oil sector are real

Jul 20, 2021 | peakoilbarrel.com

SHALLOW SAND IGNORED 07/19/2021 at 10:33 pm

Rasputin.

We have owned rigs. We could never keep an operator around long enough to make it worthwhile. We had a double drum and a single drum. Mud pump. Power swivel. Power tongs on both. Testing truck. The whole enchilada.

We sold them all to a man who had worked for someone else and then went out on his own. We gave him a good deal, and he did a lot of work for us. He still does work for us, but he can't find help that will stay.

We also owned a tank truck. Sold it also. It is currently parked, the man we sold it to cannot find a driver. He is a one horse tank truck driver. He turns down work all the time. We had to shut down a lease we haul water on for a few days when he got COVID. Thankfully he recovered.

All of us around here just cannot quite believe what is going on with the oilfield labor force. It is a perfect storm.

Meanwhile, most recently we paid $5.63 per foot for 2 3/8" steel tubing, which was under $3 a year ago. We priced a 115 fiberglass tank for $6,800, would have been $3,900 a year ago.

We had a couple wells down for a few weeks because we could neither get new nor rewound motors for them.

The man who owns the backhoes, trackhoes and cranes that does contract work for us is in his 70's and has great grandkids. He works in the field daily beside his son and grandson.

One of the last rig hands we had broke into our shop last winter. He got out of jail after a few weeks and immediately got a job in a local factory. Hope he stays clean. He was a good hand when he was, and had learned to operate a single drum also.

The prosecutor in our county announced the first six months of 2021 that 162 felony cases had been filed in our small county, that in 2019 the total for the year was 204 felonies, and that 33 of the 34 jail inmates were addicted to meth.

We do have one pumper now under 50. The rest are from 51 to 63. REPLY INGRAHAMMARK7 IGNORED 07/20/2021 at 1:34 am

How much land do you have left? At one well per section how many can you drill and how long it takes? That's when your business wraps up. REPLY RASPUTIN IGNORED 07/20/2021 at 2:40 am

Holy Moly SS

I guess the days of vertical doing things in house are gone. That labor mess is unreal. However, here in nowhere USA it is hard to find good help but you can usually find help. I was so surprised at some of the job turnover even during peak covid when some businesses were restricted and some essential. How are people living that have no jobs? Over the years I hired relatives that never got it, didn't stay sober and didn't see the long term upside. Maybe it's all about today for the younger generation.

Over the past year and a half I've been following your posts including labor issues. Were they so dreadful before covid and helicopter money? It might appear to the uninformed that training rig help. pumpers and the like is easy, but it's not. One small oops for man is one huge oops for you.

Perhaps, as we move away from the false narrative that you must have a college degree to get a good or high paying job, things will improve in the trades and the oilfield.

About 20 years ago I was visiting with a substantial independent stimulation company that was having labor issues. The head honcho lamented that they had already poached all of the young guys that grew up on farms and knew machinery, getting up early and how to work. Having known a few guys and what they earned they most likely didn't point their kids at basket weaving degrees.

Sure wish I had an answer for you. Personally, I'm shrinking down to a few wells close to the house/shop/yard, one of which I could walk to for daily exercise. However, I'll run my equipment myself as long as possible.

The best to you. REPLY SHALLOW SAND IGNORED 07/20/2021 at 5:53 am

Rasputin.

The number of basically "homeless" people living here in my part of very rural USA is startling. People aren't generally sleeping in the parks. They have duffle bags and backpacks and crash place to place.

We have the tremendous labor shortage, yet the public defender and conflicts public defender have over 400 clients combined. This in a county of a little less than 20K people. That right there is the labor force for a decent sized factory around here.

To qualify for the PD you must have income below 125% of federal poverty guidelines, which is very low. During the height of COVID, nothing got done with their cases because the PD's couldn't get ahold of them. Few have cell phones that are permanent (track phones) and few have permanent addresses. The jail is full so there aren't a lot of warrants being issued for the lower level crimes. So people haven't been showing up for their court cases for months/ over a year. Our county is going to send close to 100 people to prison this year, almost all for meth delivery. This is the situation all over rural USA. People who live here and aren't in the court system are oblivious to it until they get broken into or robbed (or have an addicted relative, which many do).

The primary reason for the labor shortage here is a combination of young people moving to larger towns/cities, a very large percentage of the working age population being addicted to meth (which is now being cut with heroin, fentanyl, etc) and the significant benefits that have been paid to not work. I hate to think of how many billions of borrowed money stimulus our future generations are now indebted with that went directly into the pockets of the foreign drug cartels.

As for the oilfield, add to that the hard work, not the greatest pay in the world at the bottom end (rig hands) the need to find people who can work unsupervised outdoors, and the young people being told the industry is dead and a job in that field will soon be gone. Finally, a ton of "old timers" simply retired during COVID.

Our country has no idea how dependent we are on labor from Mexico and Central America that keeps us alive. The only farm workers are Hispanic. However, most don't want to work in the oilfield either, it seems. We just harvested green beans, and all the crew were Hispanic. The same will be the case here shortly as we harvest watermelons and cabbage. If Trump were successful and closed the borders and sent everyone back, we would starve.

The largest oil company here shut in everything it owned when oil went negative. Unfortunately for them they laid off a lot of people. Many of their wells are still idle.

Maybe we are an outlier. But I doubt it. A decent amount people at the lower end of the labor force seem to have decided they aren't going to work, and offering a lot more $$ won't bring them back. Maybe they will come back when the government benefits end.

Even the prisons can't find employees. They pay $70K+ plus great benefits. Mentally difficult work though. Also, can't have a criminal record and cannot use drugs, even pot.

Keep in mind a large percentage of the USA population now smokes or ingests pot. That doesn't work well in a lot of industries where sobriety is mandatory.

The gas station I fill up at is offering a $300 signing bonus which is paid after 30 days of no unexcused absences. $13 and hour to start at the cash register. They can't find people to take that.

I'm rambling now, and I'll stop.

Surely there are some shale basin people reading this. Could any of you comment about whether there is a labor shortage in your shale basin? If there isn't, maybe we could persuade a few of them to come to our neck of the woods and work on the simple, shallow wells. Not a lot of traveling, no weekends unless you pump, and work is daytime only. KANSAS OIL IGNORED 07/20/2021 at 9:10 am

Shallow Sand –

I echo all of your sentiments. We are a small operator in Kansas, producing about 300 bbl/day in 13 various counties. We have approximately 50-60 bbl/day offline pushing 3 weeks. We're talking 8/8ths approximately $75,000 in revenue. Pre-Covid you could count on getting a pulling unit sometimes next day if you had a mechanical failure. Now it's 3-4 weeks. $20/hour for green rig hands evidently isn't enough to move the needle, whether it's because the work is too difficult, or it's easier to keep cashing the government checks. And by my count we are in a similar situation with oil field pumpers. We have 13 of them. 2 are 50s, and the rest are all over 60. I'm in my early 40s and my field superintendent is 56. He loves to work and will probably do so until he's 70-75. When he checks out will probably be when I check out. REPLY SHALLOW SAND IGNORED 07/20/2021 at 9:55 am

Kansas Oil.

Great to hear from you.

Thanks for confirming what we are experiencing.

The big question is whether this is also going on in the shale basins, primarily Permian. If it is, don't see how USA production grows much.

I drive across Kansas on both I 70 and the South Route through Wichita to the OK panhandle quite a bit. Always keep my eyes open for whether pumping units are moving or not.

I worry about whether the huge feed lots, hog facilities and packing plants out there can find enough help. People have no clue how much of the USA is fed from the TX, OK panhandles on up through Western KS and NE.

Hang in there!

[Jul 20, 2021] The Oil Industry Is Borrowing Again, But This Time It's Different

A lot of shale companies hedge their output at levels that they have no upside from the current prices...
Jul 18, 2021 | oilprice.com

Two years ago, Wall Street banks were on their way out of a long-term relationship with the oil industry. Now, with oil prices over $70 for the first time in three years, big bond buyers are snapping up oil bonds once again.

Only there is a condition this time.

The Wall Street Journal's Joe Wallace and Collin Eaton wrote this week that Wall Street was buying bonds from non-investment-grade U.S. energy companies, which took advantage of record low interest rates to raise some $34 billion in fresh debt in the first half of the year.

That's twice as much as the industry raised over the same period last year. But investors don't want borrowers to use the cash to drill new wells. They want them to use it to pay off older debt and shore up balance sheets.

It makes sense, really, although it is a marked departure from how banks normally react to oil industry crises. The 2014 oil price collapse, in hindsight, may have been the last "normal" crisis. Oil prices fell, funding dried up, supply tightened, prices went up, banks were willing to lend again, and producers poured the money into boosting production.

Since then, however, the energy transition push has really gathered pace and banks have more than one reason to not be so willing to lend to the oil industry. With the world's biggest asset managers setting up net-zero groups to effectively force their institutional clients to reduce their carbon footprint and with the Biden administration throwing its weight behind the push for lower emissions, banks really have little choice but to follow the current. Their own shareholders are increasingly concerned about the environment, too.

https://www.youtube.com/embed/aQXqMVeoOPs

Yet business is business, and nowhere is this clearer than in banks' dealings with the oil industry. Bank shareholders may be concerned about the environment, but they certainly would be more concerned about their dividend""and part of that comes from income made from lending to oil. And the higher oil prices go, the more willing banks will be to lend to those that produce it.

When they were unwilling to lend to the oil industry, other lenders stepped in . Last year, alternative investment firms scooped up hundreds of millions in oil industry debt from banks that were cutting their exposure to the politically incorrect industry. Hedge funds and other so-called shadow lenders don't seem to have banks' misgivings about profiting from oil and gas.

Now banks have mellowed towards oil somewhat, but it is an interesting twist that the current loans come with the condition of not boosting output. Again, it makes sense. For years, the shareholders of U.S. shale oil companies have been complaining about poor returns as the companies put everything into output growth. Now it's payback time, and shareholders want their returns.

So do lenders, apparently.

Per the WSJ article, this year, bond buyers "want to see companies repairing their balance sheets and delivering to creditors and shareholders rather than plowing money into new wells."

[Jul 14, 2021] The US shale oil model does not work without credit.

Jul 05, 2021 | peakoilbarrel.com

MIKE IGNORED 07/05/2021 at 9:29 am

No. Not true and badly misleading. Remaining EIA PDP from the Permian will not generate sufficient net cash flow to self fund 123,000 wells (your estimate) costing nearly $1T, much less do that AND pay down over $100 B of existing debt in the Permian. That's using EIA PDP estimates; whack those by 30%. It is not possible to drill $9MM wells for a 135% ROI over 15 years and be financially self-sufficient, service and pay down debt, provide returns to investors and maintain a 100% RRR. The US shale oil model does not work without credit. $70 "assumptions" do NOT solve the issue of where the money is going to come from for your miracle of abundance to actually occur. ANCIENTARCHER IGNORED 07/05/2021 at 6:01 am

EIA is expecting excess supply in 2022.

Are they smoking some really good stuff to come up with this? I'd like to smoke that too 😉

As I see it, demand will slowly go back up to previous level of 100mmbpd and then resume its slow march upwards. Where is it that EIA are seeing that extra production from that will lead to oversupply 6-7 months down the line? All I see is that various regions of the world are slowly declining in production due to a combination of worsening asset quality and a paucity of capex over the last several years, especially in 2020/21. US Shale, Russia, Offshore, conventional onshore, small members of OPEC and even Saudi"¦ all are experiencing pressure on production.

OPEC seems to be concerned about the possibility of excess supply next year, probably due to this report by EIA. The Saudis are especially concerned and therefore are pushing to extend the supply cut to the end of 2022 which UAE is opposing.

So, am I missing a crucial element or are the EIA on to something here?

[Jul 09, 2021] Shale companies are paying off debt and sharing with investors rather than drilling more

The U.S. is producing roughly 2 million barrels a day less than it was before the pandemic.
In the USA shale patch many "sweet spots" are now gone and what remains is less proficableto drill and thus requres higher prices. In this sense the currentoil price might be not enough to spur additional activity.
Jul 09, 2021 | www.wsj.com

Frackers have been forced to rein in spending and live within their means after many investors lost faith in the companies following years of poor returns, lenders reduced their credit lines and capital markets showed little interest in funding expansive new drilling campaigns.

The result is that shale drillers, which in the past have played the role of the oil world's swing producer by quickly increasing output to meet demand, are largely standing pat for now, as the reopening of Western economies leads to a resurgence of global oil and gas prices .

The companies are raking in more cash than ever. Public shale companies that drill primarily for oil collectively generated a record $4.1 billion in free cash flow in the first quarter of 2021 and are poised to take in almost $15 billion for the year if prices remain higher, according to consulting firm Rystad Energy.

U.S. shale producers generated more free cash flow in the first quarter than any time in the industry's history, analysts said. Free cash flow Source: Rystad Energy billion 2014 '15 '16 '17 '18 '19 '20 '21 -12.5 -10.0 -7.5 -5.0 -2.5 0 .0 2.5 $5.0

But instead of pumping that money back into drilling as they have historically done, large producers such as Occidental Petroleum Corp. OXY +2.09% and Ovintiv Inc., the company formerly known as Encana Corp., have said they plan to focus on reducing debt , keeping U.S. output flat. Other sizable shale drillers such as Pioneer Natural Resources Co. PXD +0.66% and Devon Energy Corp. DVN +3.40% are socking away money to return to investors in the form of variable dividends, one of the enticements they want to use to lure more investors back.

"We're producing all this free cash flow, but it's not going out to investors yet," said Scott Sheffield, chief executive of Pioneer, noting that many companies are focusing on debt before they return cash to investors. "There's no reason for them to buy into this sector at this point in time."

... ... ...

In the heyday of the shale boom, publicly traded oil producers typically reinvested more than 100% of the cash flow they made from operations back into drilling campaigns. Now they are using about half of the income they generate on new drilling and are only growing output slightly, if at all.

... ... ...

Shale companies had about $148.6 billion in debt coming into the year, according to energy consulting firm Wood Mackenzie, and much of the cash they are collecting is going toward that debt pile. Securing new capital is increasingly difficult for many.

Many large U.S. banks have cut their energy lending, and some European ones such as Deutsche Bank AG and Société Générale SA SCGLY 5.48% have exited fossil fuel financing altogether...

Laredo Petroleum Inc., LPI +6.49% Centennial Resource Development Inc. and Callon Petroleum Co. CPE +4.88% saw the amount of money banks would lend to them on their revolving lines of credit cut about 24%, 42% and 36% respectively, during the pandemic. Lenders didn't increase their borrowing bases this year, despite higher energy prices.

Callon said it would cut its 2021 capital expenditures to $430 million, a 12% reduction from its 2020 budget. In 2019, it spent $515 million. As a result, the company said it would produce about 90,000 barrels of oil and gas a day in 2021, down from more than 101,000 barrels a day in 2020. Callon said it is focused on reducing its roughly $3 billion in debt. The company declined to comment.

M

Michael Hickey

Many frackers made bad bets early this year, hedging their production with oil in the forties and low fifties - especially Pioneer and Devon. This article, for some reason, fails to mention that fact and it's impact on their current production.
PAUL HUNT
After 38years in O&G E&P I filtered out of the industry due to changing industry. The loss of expertise and technology in the energy industry over the last 5 years has been huge. USA has given the energy industry to China. Look for overall energy prices to triple in less than 10 years.
DAVID LAWRENCE
What is left out in this article are the returns of the 600lb gorilla of frackers in the room.
XOM alone generated almost $7 billion in free cash flow last quarter. With oil prices where they are that figure is likely to rise to $10 billion next quarter. The company has only $53 billion in debt outstanding having already pared down $6 billion during the pandemic.

They are going to gobble up even more weaker little guys shortly.

Peter Sullivan
I don't see XOM significantly increasing production in US shale anytime soon. They are focusing CAPEX on deepwater assets that present a better ROI than shale. Who would of thought we have reached a time where it is less risky for a US based company to drill in a small South American country than within our own borders?
DAVID LAWRENCE
XOM CAPEX is greatly reduced (1/2) in 2021 across the board. This is because they spent nearly $20 billion in 2020 using piles of borrowed money that so many junior analysts obsessed over.. The plan is to pay that pile down with the windfall those investments are generating.

XOM is far from a pure play fracker and have always developed the largest offshore assets of any company and Guyana is a hot prospect!

Edward Cotterell
The oil market has always been boom and bust. When the pandemic hit people stopped driving and the oil market went bust. Prices fell and drillers went bankrupt. Now the economy is reviving, people are driving again and oil is booming. To those who think otherwise, get a grip. The price of gasoline today is about where it was in 2018 and 2019 pre-pandemic. You know, when Trump was president.

This article points out a longer term change in the market. The hype over fracking is over. The lenders want their principal back plus interest and they are not taking exaggerations from drillers any more. So oil prices may have to go a bit higher until the lenders are satisfied that they will get their money. Then they will lend to drillers and fracking will crank up.

Trash that 12 mpg pickup. Get a vehicle that gets better mileage. Some hybrids get over 50 miles a gallon. Electrics get the energy equivalent of 100 miles a gallon.

Ben Griffith
How is the electricity produced ? Coal, oil, natural gas produced by fracking, nuclear, hydroelectric dam, harnessing the hot air of Climate Change speech ?
ROBERT STUPP
Many don't realize how many older, experienced energy professionals took retirement over the last few years. Similar to the 1980's energy bloodbath, it will take a while to establish teams able to stabilize the companies, let alone grow them from survival mode. You can't turn on production like your kitchen faucet.
Jerome Abernathy
Fracking wells deplete so fast that the capex expenditures needed to maintain and grow production result in a low ROI for the industry. Worse yet, given the volatility of oil prices and the precarious state of their balance sheets, frackers are unattractive borrowers. The industry needs a new, creative financing model.
Matthew Oatway
An interesting article, but the authors should have acknowledged (a) the impact of consolidation in the sector on production discipline and (b) the fact that many shale producers have a large portion of their production hedged at lower crude prices. Both factors point to a more restrained return to production growth that we have seen in the past.

[Jul 08, 2021] The Real Reason OPEC Talks Broke Down - ZeroHedge

Jul 08, 2021 | www.zerohedge.com

While much of the analysis of the recent OPEC+ disagreement has focused on why the UAE refused to commit to the new export plan, there are other factors that have been largely overlooked. A closer look at the ongoing investments by the UAE in its upstream and downstream industry is one such example. Abu Dhabi's national oil company ADNOC has put in place a production capacity increase that calls for a total reassessment of the underlying OPEC production baselines, which were agreed in 2018. At present Abu Dhabi is allowed to produce around 3.2 million bpd, based on the 2018 baseline, but has a capacity now of more than 3.8-4 million bpd. Looking at ongoing new projects and planned investments, production of more than 4 million bpd is possible in the coming years.

The aggressive investment strategy of ADNOC means that the UAE is plenty of incentives to increase production. An extended and controlled OPEC+ export quota system would not only impact the UAE's revenue streams but could even turn some of its multi-billion dollar investments into stranded assets in the long term.

Recently, Crown Prince Mohammed bin Zayed has been pushing an independent geopolitical and economic strategy for the UAE. After years of cooperating with Saudi Arabia on everything from OPEC policy to regional geopolitical crises, the two powers are now beginning to diverge. Former cooperation on issues such as the Yemen war and the Qatar blockade has weakened drastically.

At the same time, Mohammed bin Salman has been aggressively pushing Saudi Arabia's regional power. Saudi Arabia's Vision 2030, the Kingdom's economic diversification plan, has driven the crown prince to take aim on other GCC countries as he attempts to force international investors and companies to set up shop in Saudi Arabia rather than Dubai or Doha. This transformation in the relationship between Saudi Arabia and the UAE certainly played a part in the recent OPEC+ conflict.

Riyadh is also targeting the logistics industry, an industry that the UAE has long dominated, establishing itself as a regional hub for logistics and connecting EU-Asian commodity and trade flows. In the last couple of months, Saudi Arabia has become increasingly aggressive in this space. While there has no been a direct conflict in this area, it is generally assumed that there is not enough space in the region for two supra-regional maritime logistic hubs. MBZ and Dubai are clearly unimpressed with Saudi Arabia's attempts to muscle in on the industry.

Another area of discord between the two nations is the UAE's increased cooperation with Israel. UAE-Israel cooperation in logistics, technology, defense, and agriculture, is a possible threat to Saudi Arabia's Vision 2030 projects. By bringing Israeli tech and know-how to Abu Dhabi and Dubai, the UAE projects will compete with the Saudi Giga-Projects, such as NEOM, for international investment. In response to these moves by the UEA, Riyadh has blocked technology and products exports by the UAE that are linked to Israel.

This economic and geopolitical confrontation is normal in the Arab world and is unlikely to cause a major rift between the two nations. The current cracks will likely be mended when one of the two parties is calling for a Majlis in the Desert. MBS and MBZ have more to win from cooperation than confrontation. A breakthrough in the OPEC discussions is certainly a possibility, but first, some saber-rattling must be done. Ultimately, MBS understands that both Aramco's and ADNOC's future revenues are important. Both NOCs will be able to gain a lot of market share in the coming years if they play their cards right. By being flexible while not losing face, both the nations could go on to cooperate in other fields. Emirati SWFs are still a viable source of financing for major projects in Saudi Arabia, while energy-transition projects in the Emirates thrive on Saudi cooperation and cash.

By showing a strong position in international and regional media, both Crown Princes aim to boost their own positions. MBS's strong approach towards regional economic issues is clear and will inevitably come into conflict with others. MBZ's more aggressive regional and supra-regional power aspirations are also set out for all to see. OPEC's infighting is a natural place for these tensions to play out. Both parties know that their long-term alliance will be key in the future. A full confrontation between the two nations would only serve as an advantage to the long list of regional adversaries for these two nations. By threatening non-compliance, Abu Dhabi is showing its willingness to confront market developments head-on. Saudi Arabia and Russia now need to understand that a Riyadh-Moscow agreement is not going to be enough to placate the other members. ADNOC is unlikely to destabilize the market by opening up its taps, but the symbolism of its resistance is important. Statements about the UAE's willingness to leave OPEC are based purely on rumors, not on facts. Stability is key in oil and gas, being part of the discussion inside of OPEC is more valuable to the UAE than being independent. There is plenty of complexity to unpick behind the scenes, but this particular disagreement is unlikely to cause any real problems for OPEC+

play_arrow
slokhmet 1 hour ago

I have another hypothesis: with covid lockdowns and restricted travel, UAE's income from prostitution and laundering crashed. They needed to make it up somewhere else.

Simple, really.

jimmy12345 1 hour ago

An oil glut is coming. As electric vehicles get cheaper and better year by year, there will a rapid adoption of EV's creating a glut in the oil market. In 2022, 10% of china's vehicles sales will be electric and the auto industry has announce over 100 billion dollars in investments in electric vehicles. The Russian cucks on here are screwed.

GregT 1 hour ago

Wrong. Ev's have been around for over a decade & still don't have 1% of the automobile market. They're a novelty. Not a viable path to move billions of people around in the world. Look at a previous article from today on ZH. China produced 225k this yr. If you live to be a million they might catch up to combustion engine cars & trucks.

Ron_Paul_Was_Right 1 hour ago

I don't know about it taking a million years to get there, but to your point yes - EVs just aren't competitive with fuel burning vehicles at this time. It just doesn't work to drive 400 miles and have to wait an hour plus for a "fill up" to drive another 400 miles. Not when it takes 5 minutes to fill a gas tank, it just isn't competitive.

Delusion Spotter 45 minutes ago

More Correct Analysis:

" Statements about the UAE's willingness to leave OPEC are based purely on rumors, not on facts. Stability is key in oil and gas, being part of the discussion inside of OPEC is more valuable to the UAE than being independent. "

UAE's going to stay in OPEC, and the latest OPEC sideshow will result in higher Oil Prices, not lower.

radical-extremist 1 hour ago

How are world leaders allowing OPEC to produce or even exist at all...while Climate Change threatens our very existence on earth? They seem to be sending mixed messages.

GregT 1 hour ago

Because world leaders know climate change is a hoax to scare people into paying governments more taxes. They need & want oil as bad as everyone else.

bustdriver 1 hour ago

I am guessing there is money angle in the mix.

[Jul 03, 2021] Shadow Lenders Take Over In The U.S. Shale Patch

Jul 03, 2021 | peakoilbarrel.com

RON PATTERSON IGNORED 07/03/2021 at 1:51 pm

Shadow Lenders Take Over In The U.S. Shale Patch

Banks have started to cut their exposure to the U.S. shale patch, seeing more than 100 producers and oilfield services firms go bust last year and feeling the environmental, social, and governance (ESG) pressure to reduce credits to fossil fuels. While traditional lenders are cutting their losses and de-risking energy loan portfolios, alternative capital providers are stepping up to scoop up U.S. energy debt at a discount and take part in debt or equity transactions that could give them returns sooner than a loan would for a bank.

Since the oil price crash in 2020 and the downturn in the U.S. shale industry, banks have been wary of their exposure to the sector. The commodity price slump last year dramatically cut the value of the assets of oil and gas firms, against which they have traditionally obtained loans from banks.

Running for the Exit

Lenders slashed the amounts of reserve-based loans to the U.S. shale firms in the middle of last year.

But it is not only purely financial considerations that are driving reduced bank exposure to the oil and gas industry. ESG lending and aligning loan portfolios to the Paris Agreement goals are now more prominent than ever.

For example, asset manager Schroders, which holds many bonds in the banking sector, is engaging with banks to understand their fossil fuel exposure.

"Banks that are highly exposed to the fossil fuel industry face significant financial, regulatory and reputational risks as a result of the transition to a low-carbon economy," Schroders said, explaining its rationale to identify the exposure of the banks to oil, gas, and coal.

Increased pressure from the ESG universe, coupled with years of poor returns of U.S. shale firms, have prompted several major transactions in which banks have sold energy debt to hedge funds and private equity firms.

Hancock Whitney, for example, agreed last year to sell $497 million worth of energy loans to certain funds and accounts managed by alternative investment provider Oaktree Capital Management. Hancock Whitney expected to receive $257.5 million from the sale of the reserve-based loans (RBL), midstream, and non-drilling service credits.

Hancock Whitney's main reason to sell the energy loans was to minimize the risks to its loan portfolio.

"The primary objective of this sale is to continue de-risking our loan portfolio by accelerating the disposition of assets that have been impacted by ongoing issues within the energy industry, and have now been further complicated by COVID-19," Hancock Whitney's President and CEO John M. Hairston said.

At the end of 2020, Bank of Montreal decided it would wind down its non-Canadian investment and corporate banking energy business.

Most recently, ABN AMRO announced last week it would sell a $1.5 billion portfolio of energy loans to funds managed by Oaktree Capital Management and affiliates of Sixth Street Partners. The portfolio consists of loans to around 75 companies active in the North American energy markets.

With this sale, ABN AMRO is withdrawing from oil and gas related lending in North America as part of a process to wind down its non-core activities and significantly reducing the non-core loan book.

[Jul 03, 2021] We should know sometime between January and December 2022 if Russia is in decline

Jul 03, 2021 | peakoilbarrel.com

RON PATTERSON IGNORED 07/03/2021 at 1:44 pm

We should know for sure sometime between January and December 2022. We will know when it is confirmed that Russia is in decline. That will be the tipping point. Many producers are already in decline but Russia is now the largest. Of course, the US being in decline, the two largest producers in the world, would leave no doubt about it. LIGHTSOUT IGNORED 07/03/2021 at 11:47 am

Thanks Ovi. KSA,Russia and US are starting to look like a line of domino's.

[Jul 03, 2021] Iraqi minister says BP mulls quitting Iraq, Lukoil wants to sell up

Jul 03, 2021 | peakoilbarrel.com

POLLUX IGNORED 07/03/2021 at 2:27 pm

Some news about Iraq:

Iraqi minister says BP mulls quitting Iraq, Lukoil wants to sell up

Iraqi Oil Minister Ihsan Abdul Jabbar said in a video posted on Saturday on the ministry's Facebook page that BP (BP.L) was considering withdrawing from Iraq, and that Russia's Lukoil (LKOH.MM) had sent a formal notification saying it wanted to sell its stake in the West Qurna-2 field to Chinese companies.

Iraqi tax commission cracks down on international energy companies

Iraq's top tax authority has ordered government departments to stop issuing visas and halt imports for nearly two dozen international energy companies whom it accuses of late tax payments.

If enforced, the orders, dated June 27, 2021, could prevent some of the biggest players in Iraq's oil, gas, and electricity sectors from bringing staff and equipment into Iraq, effectively depriving the country of work that is needed to meet its own production targets at a time when insufficient gas feedstock is causing nationwide electricity failures.

Iraq power cuts stir protests as summer temperatures scorch country

The power cuts have hit the south of Iraq especially hard. In Basra, where Iraq's oil wells are situated, people have started taking to the streets in protest and main roads had to be shut down. POLLUX IGNORED 07/03/2021 at 2:59 pm

Gasoline Shortages In Iran As Tanker Drivers Shun Fuel Shipments

An official of Iranian Truck and Fuel Tanker Drivers' Union said Thursday that drivers were refusing to transport fuel due to low or late payments from the government. There has been a shortage of supply in gasoline stations in recent days in various parts of the country.

In a statement published on social media Thursday, the National Association of Drivers' Unions expressed solidarity with striking contract oil and petrochemical workers and said drivers would join their strike if the oil workers' demands were ignored.

[Jul 03, 2021] Plato oil: Russia edition

Jun 30, 2021 | peakoilbarrel.com

POLLUX IGNORED 06/28/2021 at 5:46 am

Russia plans to cut oil exports from its Western ports by 22% in July vs June – schedule

"On a daily basis, loadings will decline by 22% in July compared to the current month, Reuters calculations showed." REPLY POLLUX IGNORED 06/28/2021 at 1:37 pm

Russia struggles to raise oil output despite price rally -sources

"Russian oil production has declined so far in June from average levels in May despite a price rally in oil market and OPEC+ output cuts easing, two sources familiar with the data told Reuters on Monday.

Russia's compliance with the OPEC+ oil output deal was at close to 100% in May, which means the state is about to exceed its target in June.

Two industry sources said that lower output levels may be due to technical issues some Russian oil producers are experiencing with output at older oilfields." RON PATTERSON IGNORED 06/28/2021 at 2:38 pm

Yes, they are definitely experiencing issues with their older oilfields, it's called depletion. But that decline is only 33,000 bpd or .3%. But your post above that one says exports in the third quarter will decline by 22%. What gives there?

Their decline in May was 23,000 bpd. OVI IGNORED 06/28/2021 at 3:25 pm

Ron

I just checked the Russia site and they have revised up their original May estimate. It is one week later than the original. Production is now down 9,000 b/d. RON PATTERSON IGNORED 06/28/2021 at 4:50 pm

Yeah, they revised it up by 14,000 pbd. A pittance. Now they are down only 9,000 bpd instead of 23,000. Nothing to get excited about. Basically, they were flat in May. JEAN-FRANÇOIS FLEURY IGNORED 06/28/2021 at 4:09 pm

"Russia plans to decrease oil loadings from its Western ports to 6.22 million tonnes for July compared to 7.75 million tonnes planned for loading in June, the preliminary schedule showed." 7,75 x 10^6 – 6,62 x 10^6 = 1130000 t. 1130000×7,3/30 = 274966 b/d. Therefore, these decrease of oil export suggests a decrease of production of 274966 b/d. Precedently, it was announced that oil exports of Russia would decrease of 7,2 % for the period July-September or a decrease of 308222 b/d. Therefore, it's coherent. https://www.zawya.com/mena/en/markets/story/Russias_quarterly_crude_oil_exports_to_drop_72_schedule-TR20210617nL5N2NY2IQX8/?fbclid=IwAR0ZjvwzjVS427CbUAzTL1vJfqog7R8CDwaJAvI3uUdaw_0z5S5l_57SGFY I notice that it concerns the "Western ports", therefore the exports toward EU and USA. Well, EU is also the main customer of Russia with 59% of the oil exports of Russia. RON PATTERSON IGNORED 06/28/2021 at 4:59 pm

Western Syberia is where all the very old supergiant fields are. They produce 60% of Russian crude oil. Or at least they used to. LIGHTSOUT IGNORED 06/29/2021 at 2:11 am

Ron
If one of the West Siberian giants is rolling over in the same way as Daquing did, things could get very interesting very quickly. RON PATTERSON IGNORED 06/29/2021 at 7:24 am

Four of Russia's five giant fields are in Western Siberia. The fifth is in the Urals, on the European side. All five have been creamed with infill horizontal drilling for almost 20 years. All five are on the verge of a steep decline. Obviously, one and possibly more have already hit that point.

This linked article below is 18 months old but there is a chart here that shows where Russia's oil is coming from. Notice only a tiny part is coming from Eastern Siberia, the hope for Russia's oil future. Those hopes are fading fast.

The Worrying Truth About Russia's Oil Industry EULENSPIEGEL IGNORED 06/29/2021 at 6:32 am

As I have written a few months ago: When you reduce output voluntarily for a longer time, all the nickel nursers from accounting and controlling will cut you any investing in over capacity you can't use at the moment. That works like this in any industry.

So you have to drill these additional infills and extensions after the cut is liftet. And this will take time, while fighting against the ever lasting decline.

[Jul 03, 2021] Annual Reserve Revisions Part IV- Shale Producers "" Peak Oil Barrel

Jul 03, 2021 | peakoilbarrel.com

SHALLOW SAND IGNORED 06/26/2021 at 8:19 pm

I haven't paid attention for awhile, but I think OXY was the number one producer of CO2 flood oil in the lower 48.

Anadarko also owned a lot of lower 48 secondary and tertiary production, as I recall.

These big, public US operators have a lot more in common with us stripper well folks than they care to admit.

Old freakin fields discovered over a century ago is where they operate. REPLY LIGHTSOUT IGNORED 06/27/2021 at 3:15 am

Don't worry shallow the Paradox basin will save the day. (Sarc)

https://www.zephyrplc.com/ REPLY HOLE IN HEAD IGNORED 06/27/2021 at 1:17 pm

🙂 REPLY JOHN S IGNORED 06/28/2021 at 1:21 pm

Shallow Sand,

You are damned right about that! REPLY D COYNE IGNORED 06/27/2021 at 8:46 am

On Fri the July futures contact for WTI closed at 74/bo and on June 21, 2021 (last data points at EIA) the spot price for WTI was $73.64/bo and Brent spot price was $74.49/bo, so a spread of under a dollar, quite unusual in the past 5 years or so when typical spread has been roughly $5/bo between WTI and Brent (Brent usually has been higher). FRUGAL IGNORED POLLUX IGNORED 06/28/2021 at 5:42 am

Adnoc imposes deeper cuts to September crude exports

"Abu Dhabi's state-owned Adnoc has informed customers that it will implement cuts of around 15pc to client nominations of all its crude exports loading in September, even as the Opec+ coalition considers further relaxing production quotas.

It was unclear why Adnoc is deepening reductions for its September-loading term crude exports, with the decision coming ahead of the next meeting of Opec+ ministers scheduled for 1 July when the group is expected to decide on its production strategy for at least one month"

06/27/2021 at 6:41 pm

World Oil Situation 2021

https://www.youtube.com/watch?v=EaXoAfa1tAw

This is an in-depth video of World production and consumption.

[Jul 03, 2021] Plato oil, Abu Dabi edition

Jul 03, 2021 | peakoilbarrel.com

POLLUX IGNORED 06/28/2021 at 5:42 am

Adnoc imposes deeper cuts to September crude exports

"Abu Dhabi's state-owned Adnoc has informed customers that it will implement cuts of around 15pc to client nominations of all its crude exports loading in September, even as the Opec+ coalition considers further relaxing production quotas.

It was unclear why Adnoc is deepening reductions for its September-loading term crude exports, with the decision coming ahead of the next meeting of Opec+ ministers scheduled for 1 July when the group is expected to decide on its production strategy for at least one month"

[Jun 26, 2021] Oil Prices Set To Head Even Higher As Market Tightens by Tsvetana Paraskova

Jun 23, 2021 | oilprice.com

By Tsvetana Paraskova

In the paper market, Brent Crude prices already hit $75 a barrel this week, for the first time in over two years.

WTI Crude was above $73 early on Wednesday as demand strengthened and as U.S. crude oil inventories were estimated by the American Petroleum Institute (API) to have shrunk by 7.199 million barrels for the week ending June 18.

Backwardation in the WTI futures continues to tighten "a sign of a tighter market.

For example, the September-October spread is at a seven-year high at $1.09 per barrel on expectations that storage levels at the WTI futures delivery hub at Cushing will continue to decline amid strong Midwest refinery demand, Saxo Bank said on Tuesday.

[Jun 26, 2021] Here comes $100 oil prices- BofA strategist

Jun 22, 2021 | finance.yahoo.com

The growing consensus on Wall Street is that the rally in oil prices has more room to the upside

At more than $74.63 a barrel currently , brent crude oil prices are trading at levels not seen since fall 2018. The price of brent crude is up about 88% over the past year .

... ... ...

Similar to BofA, Goldman Sachs is expecting firmer oil prices moving forward. Strategists at the investment bank don't rule out prices nearing $100 a barrel before year end.

"Near term our highest conviction long is oil where we still see brent [crude oil] averaging $80/bbl this third quarter with potential spikes well above $80/bbl. Global demand likely rose to 97.0 million barrels a day in recent days from 95.0 million barrels a day just a few weeks ago as the U.S. passes the baton to Europe and emerging markets, where even India is beginning to show improvements," Goldman Sachs global head of commodities research Jeffrey Currie contends .

Adds Currie, "With such robust demand growth against an almost inelastic supply curve outside of core OPEC+ (GCC + Russia), the global oil market is facing its deepest deficits since last summer at nearly 3.0 million barrels a day. With refiners quickly responding to small improvements in margins, petroleum product supplies have broadly matched this jump in end-use demand, leaving this deficit almost entirely in crude."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance . Follow Sozzi on Twitter @BrianSozzi and on LinkedIn . ->

[Jun 26, 2021] The peak in shale was (is) the peak of oil production in USA . I have commented earlier that " all liquids " is BS . The 6mbpd of NGPL, CTL , GTL etc. are just "fill in the blanks"

Jun 22, 2021 | peakoilbarrel.com

TED WILSON IGNORED 06/20/2021 at 11:56 am

As oil price stays above $70/barrel, most shale will come back. However the max reached by USA was 13,100 million b/d. So whether World will hit 75 million b/d is doubtful. But NGL keeps increasing because of increase in natgas output. Besides nearly 6 million b/d that comes from CTL, GTL and bio-fuels will keep overall oil consumption above 100 million b/d.

Despite rapid increase in electric vehicles, oil will hold above 100 minion b/d mark. REPLY HOLE IN HEAD IGNORED 06/20/2021 at 1:34 pm

Ted , demand is governed by price and availability . Demand of 100 mbpd is immaterial if the supply is only 80mbpd . Shale is not coming back . USA has peaked . Period . The peak in shale was (is) the peak of oil production in USA . I have commented earlier that " all liquids " is BS . The 6mbpd of NGPL ,CTL , GTL etc. are just " fill in the blanks " . These are not transportation fuels and have 65% of the BTU of crude . HICKORY IGNORED 06/20/2021 at 2:30 pm

Hole- Hydrocarbon Gas Liquids are nothing to belittle. It is a lot of energy-
"HGLs accounted for over a quarter of total U.S. petroleum products output in 2018"

https://www.kindermorgan.com/getAttachment/babe6db9-ba7a-4f51-a100-5fd46b944540/White_Natural_Gas_Liquids.pdf D COYNE IGNORED 06/20/2021 at 3:04 pm

Hickory,

NGL has about 70% of the energy content of a barrel of crude. In addition most uses for HGLs are not for transportation which is the the main use for crude plus condensate.

As Ron has said we don't count bottled gas. I would say NGL should be put in a basket with natural gas.

Or we could define liquid petroleum as that which is a liquid at 1 atmosphere pressure and 25C aka STP.

By that standard only pentanes plus would qualify, which makes sense as it is essentially condensate, the proportion of pentanes plus in the US NGL mix is less than 12% by volume, 2020 data (582
kbpd). RON PATTERSON IGNORED 06/21/2021 at 4:01 pm

I am expecting prices a lot higher in 2022. An average of $85 would not shock me at all. They will be higher because oil production will not fully recover to the 2019 level as everyone expects it to.

The EIA Short Term Outlook has production fully recovered by the end of 2022 and total liquids about one million barrels per day higher for non-OPEC.

[Jun 26, 2021] US oil output growth will likely remain limited in 2021 despite rising prices,

Jun 20, 2021 | peakoilbarrel.com

OVI IGNORED 06/19/2021 at 8:37 pm

OPEC officials heard from industry experts that US oil output growth will likely remain limited in 2021 despite rising prices,

While there was general agreement on limited US supply growth this year, an industry source said for 2022 forecasts ranged from growth of 500,000 bpd to 1.3 million bpd

The forecasts for 2021 were for average output to be close to 200 kb/d. The 1.3 Mb/d prediction for 2022 is out to lunch. The 500 kb/d has a chance but I think the average will be closer to 350 kb/d.

https://economictimes.indiatimes.com/markets/commodities/news/opec-told-to-expect-limited-us-oil-output-growth-for-now-sources/articleshow/83639450.cms OVI IGNORED 06/20/2021 at 3:26 pm

Dennis

I think WTI will be $85 plus/minus $5 in mid 2022. This will push the average price of gasoline slightly above $3/gal. As for output, the US will add somewhere close to 300 kb/d average in 2022 over 2021. I am betting on some restraint on the part of the drillers. The Permian is the pivotal basin and I see that the early results for 2021 wells are not as good as 2020.

The big unknown for me is: What is a sustainable price for WTI, $100? At what point does gasoline suck too much money out of the economy. Once the economy starts to slow, oil demand will slow. We can all remember 2008.

If WTI crosses $90, OPEC might start to worry. However will they have the spare capacity to try to control it? Six months from now we can revise our estimates.

[Jun 26, 2021] I think we are heading for the confirmation of peak oil sometime between mid 2022 and late 2023

Jun 23, 2021 | peakoilbarrel.com

OVI IGNORED 06/19/2021 at 8:01 pm

Ron

Enjoy a fourth. I wonder how much production will drop due to Claudette.

I think we are heading for the confirmation of peak oil sometime between mid 2022 and late 2023. REPLY RON PATTERSON IGNORED 06/19/2021 at 8:16 pm

What do you mean by confirmation? Do you mean they will confirm that the peak was 2018-2019? If so, I cannot agree. No, there will be deniers all the way down. There is something about the human psyche that just cannot accept reality... MATT MUSHALIK IGNORED 06/19/2021 at 8:57 pm

Thanks for continuing to monitor crude oil production. As of now, we are back to 2005 levels!

I have been looking at BP

17/6/2021
BP peak oil (UK decline, asset sales and decommissioning part 2)
https://crudeoilpeak.info/bp-peak-oil-uk-decline-asset-sales-and-decommissioning-part-2

30/4/2021
BP peak oil (UK decline, asset sales and decommissioning part 1)
https://crudeoilpeak.info/bp-peak-oil-uk-decline-asset-sales-and-decommissioning-part-1

Many problems we see are now worse than in any peak oil scenario, especially in the airline industry. So I have been looking at the numbers and found:

22/5/2021
China-Australia passenger traffic has peaked 2018-19 before Covid
https://crudeoilpeak.info/china-australia-passenger-traffic-has-peaked-2018-19-before-covid

It is also generally assumed that electric vehicles will take over.

But in Australia power generation is insufficient to support any number of EVs which would be relevant to reduce oil demand:

14/6/2021
NSW power spot price spikes May 2021 become regular (part 2)
https://crudeoilpeak.info/nsw-power-spot-price-spikes-may-2021-become-regular-part-2

7/6/2021
NSW power spot price spikes May 2021 become regular (part 1)
https://crudeoilpeak.info/nsw-power-spot-price-spikes-may-2021-become-regular-part-1

[Jun 26, 2021] Why fracking is banned in France

Jun 20, 2021 | twitter.com


Frac Sand Baroness @sand_frac · Jun 16 There is currently a @chevron well uncontrollably blowing out on my land that I live and raise cattle on in West Texas. It is injecting super concentrated brine and benzene into my water supply. The casing (metal pipe) is so corroded that Chevron literally cannot re plug it. 5.7K views 0:01 / 0:06 3 60 117 Frac Sand Baroness @sand_frac · Jun 16 More concerningly, this well was plugged and abandoned (P&A) in 1995. For those not in the oil industry, a P&A blowout is extremely rare. A plugged well is exactly that: plugged. It is filled with concrete plugs, and considered to be permanently deactivated and safe. 2 7 67 Frac Sand Baroness @sand_frac · Jun 16 We've had issues with Chevron before. In 2002, we flushed a toilet at the ranch house (approximately 1.5 miles south of the blowout) and crude oil bubbled up. The leak source was never fully identified, and we shut in that water well. 2 6 66 Frac Sand Baroness @sand_frac · Jun 16 Chevron had operations nearby, so drilled water monitoring wells. These monitoring wells identified a crude oil plume in the groundwater, and also found a large salt water plume. See Texas Railroad Commission OCP #08-2423. Again, we never found the source. 1 5 57 Frac Sand Baroness @sand_frac · Jun 16 This required Chevron to provide an annual water test result to the landowners (me). Of course, they didn't comply from 2007 through 2013. We never heard about this, and thought our water was safe again.

[Jun 22, 2021] You Cannot Fight Geology

Jun 22, 2021 | peakoilbarrel.com

STEPHEN HREN

IGNORED 06/16/2021 at 12:44 pm

It looks like Shell is planning on selling all of its Permian holdings, could be a bellwether for the whole LTO business:

https://www.worldoil.com/news/2021/6/14/shell-said-to-consider-sale-of-largest-oil-field-in-the-us-valued-at-up-to-10-billion

RON PATTERSON IGNORED 06/17/2021 at 5:48 am

A very interesting article came out a couple of days ago concerning Shell:

Royal Dutch Shell: You Cannot Fight Geology , The Dutch Court Ruling Doesn't Change Their Future

One of the biggest pieces of news for Royal Dutch Shell recently has been the Dutch court ruling that forces them to make a larger 45% emissions reduction by 2030.

Despite this sounding very transformation, considering the geological and economic reality of their current situation, it actually does not significantly change their underlying future.

Their reserve life is only sitting at just above seven years and thus even if they wished to maintain their fossil fuel production, they already required significant investments before 2030.
SNIP
You Cannot Fight Geology

Upon reviewing their reserves, it may initially sound very impressive to hear that their oil and gas reserves currently stand at slightly over nine billion barrels of oil equivalent. Although in reality this actually sits rather low when compared to their annual production during 2020 of 1.239b barrels of oil equivalent. This effectively only leaves their reserve life at just above seven years, which is not particularly long and thus means that their fossil fuel production would already begin shrinking dramatically by the latter half of this decade. Admittedly they would likely continue replacing a portion of their oil and gas reserves in the future but their current production rate would still see them running very low by 2030 if approximately half were replaced per annum, as the graph included below displays.

There are two charts in this article. The second on titled: Oil Discoveries Lowest Since 1847 is alarming. STEPHEN HREN IGNORED 06/17/2021 at 8:25 am

Hi Ron, any thoughts on why Shell would bag their operations in the Permian while they are also running low on reserves everywhere else? Seems like they would be holding on to every scrap of producing land they could. Unless one of two things: 1) they are making a serious attempt to transition to a low carbon energy company; and/or 2) their holdings in the Permian are worth squat REPLY RON PATTERSON IGNORED 06/17/2021 at 9:22 am

Well, yes. One reason is (in bold) here:

Interest in Shell's Permian assets seen as a bellwether for shale demand

NEW YORK/HOUSTON, June 15 (Reuters) – A cadre of oil companies, seeing continued profits in shale, are mulling Royal Dutch Shell's (RDSa.L) holdings in the largest U.S. oil field as the European giant considers an exit from the Permian Basin, according to market experts.

The potential sale of Shell's Permian holdings, located in Texas, would be a litmus test of whether rivals are willing to bet on shale's profitability through the energy transition to reduce carbon emissions.

Shell would follow in the footsteps of other producers, including Equinor (EQNR.OL) and Occidental Petroleum (OXY.N) that have shed shale assets this year, looking to cut debt and reduce carbon output in the face of investor pressure.

Shell, like a lot of other companies, sees shale assets as a very low profit, or even a losing proposition. They can take the money from the sale, reduce their debt, and reduce carbon emissions of their company in one fell swoop. More from the article:

Against this backdrop, estimates for Shell's acreage run from $7 billion to over $10 billion, the latter implying a valuation of almost $40,000 an acre.

That would be in line with the per-acre price Pioneer Natural Resources (PXD.N) paid for DoublePoint Energy in April, the most costly deal since a 2014-2016 rush by producers to grab positions in the Permian.

Most Permian deals this year have closed between $7,000 and $12,000 per acre, said Andrew Dittmar, senior mergers and acquisitions analyst at data provider Enverus.

If they can get $40,000 per acre they have found a greater fool to offload their acreage on. HICKORY IGNORED 06/17/2021 at 9:44 am

Something about that doesn't make sense. The need or desire to downsize is likely due to an inability to project making profit on the shale assets rather than any concern over a carbon footprint- I don't believe they are in business to win any kind of beauty contest. REPLY ROGER IGNORED 06/17/2021 at 8:17 pm

https://en.wikipedia.org/wiki/Brent_Spar

"Shell's position as a major European enterprise has become untenable. The Spar had gained a symbolic significance out of all proportion to its environmental effect. In consequence, Shell companies were faced with increasingly intense public criticism, mostly in Continental northern Europe. Many politicians and ministers were openly hostile and several called for consumer boycotts. There was violence against Shell service stations, accompanied by threats to Shell staff."

Things are a little different for European companies I recall "Greenpeace sympathizers" fire-bombed a gas station back then; in light of what has transpired in the US recently who is to say it couldn't happen again?

Shell is well aware of peak oil, and can't solve the problem. So, what would you have them do? REPLY KOLBEINIH IGNORED 06/17/2021 at 1:26 pm

"Shell would follow in the footsteps of other producers, including Equinor (EQNR.OL) and Occidental Petroleum (OXY.N) that have shed shale assets this year, looking to cut debt and reduce carbon output in the face of investor pressure."

I don't think it has anything to do with shale oil specifically. For Equinor it has to do with that it can draw on competence in Norway in the harsh offshore environment in the North Sea. Floating offshore wind power is where Equinor is world leading with technology and know how; now about to be utilised in the North Sea, Japan, US East coast and California. It is not more economical than ground based offshore wind mills, but has some advantages when it comes to lifecycle costs. For one, the wind mills can be placed in optimal wind condition areas not in the way of fishing resources. The big size of wind mills will not cause problems (the height and diameter of the blades are necessary to capture enough wind energy). And also the wind mills can be more easily moved to land and recycled, e.g. the steel. Wear and tear offshore is on the minus side.
Usually the blades are made of carbon fiber to make it lighter, but it can also be made of aluminum in the future with lower efficiency.

Shell is just now investing in North Sea South II in Norway for ground based offshore mill farms together with BP. To make the North Sea work with the enormous amount of wind power coming online and connection cables everywhere is very serious business and just a priority. Shale oil is too much of a distraction for Shell and Equinor, not even within their core competence area. REPLY JAY WOODS IGNORED 06/18/2021 at 7:50 am

Shell was ordered by a Dutch court to cut by 45%. Of course, they will cut their "losers" first.

[Jun 22, 2021] Possibility of Seneca cliff are increasing

Jun 22, 2021 | peakoilbarrel.com

OVI IGNORED 06/17/2021 at 10:03 am

Ron

The chart is old and was published in 2016 by Wood Mackenzie and there is no data for 2016. It also leaves out the discovery of Ghawar in 1948, first bar/spike. I have not seen any updates since then. Not sure if Guyana had been discovered in 2016. The original is attached.

REPLY SCHINZY IGNORED 06/18/2021 at 5:57 am

Here is Rystad's discovery graph 2013-2019 including gas. 2019 was better than 2016-2018 in terms of BOE, but it was a bit gassy:

REPLY RON PATTERSON IGNORED 06/17/2021 at 6:00 am

Is the energy transition just a fad??? Irina Slav at Oil Price.com says it is.

Energy Transition Fad Will Send Oil Sky High

Ironically, the wave of ESG investing in global energy markets may lead to much higher oil prices as a serious lack of capital expenditure on new fossil fuels dries up just as demand for crude continues to grow

Pressure from investors, tighter emissions regulation from governments, and public protests against their business have become more or less the new normal for oil companies. What the world -- or at least the most affluent parts of it -- seem to want from the oil industry is to stop being the oil industry.

Many investors are buying into this pressure. ESG investing is all the rage, and sustainable ETFs are popping up like mushrooms after a rain. But some investors are taking a different approach. They are betting on oil. Because what many in the pressure camp seem to underestimate is the fact that the supply of oil is not the only element of the oil equation.

"Imagine Shell decided to stop selling petrol and diesel today," the supermajor's CEO Ben van Beurden wrote in a LinkedIn post earlier this month. "This would certainly cut Shell's carbon emissions. But it would not help the world one bit. Demand for fuel would not change. People would fill up their cars and delivery trucks at other service stations."

Van Beurden was commenting on a Dutch court's ruling that environmentalists hailed as a landmark decision, ordering Shell to reduce its emissions footprint by 45 percent from 2019 levels by 2030.

[Jun 22, 2021] Energy Transition Fad Will Send Oil Sky High

Jun 22, 2021 | peakoilbarrel.com

RON PATTERSON IGNORED 06/17/2021 at 6:00 am

Is the energy transition just a fad??? Irina Slav at Oil Price.com says it is.

Energy Transition Fad Will Send Oil Sky High

Ironically, the wave of ESG investing in global energy markets may lead to much higher oil prices as a serious lack of capital expenditure on new fossil fuels dries up just as demand for crude continues to grow

Pressure from investors, tighter emissions regulation from governments, and public protests against their business have become more or less the new normal for oil companies. What the world -- or at least the most affluent parts of it -- seem to want from the oil industry is to stop being the oil industry.

Many investors are buying into this pressure. ESG investing is all the rage, and sustainable ETFs are popping up like mushrooms after a rain. But some investors are taking a different approach. They are betting on oil. Because what many in the pressure camp seem to underestimate is the fact that the supply of oil is not the only element of the oil equation.

"Imagine Shell decided to stop selling petrol and diesel today," the supermajor's CEO Ben van Beurden wrote in a LinkedIn post earlier this month. "This would certainly cut Shell's carbon emissions. But it would not help the world one bit. Demand for fuel would not change. People would fill up their cars and delivery trucks at other service stations."

Van Beurden was commenting on a Dutch court's ruling that environmentalists hailed as a landmark decision, ordering Shell to reduce its emissions footprint by 45 percent from 2019 levels by 2030. REPLY HICKORY IGNORED 06/18/2021 at 9:37 am

Cute headline.
'Energy Transition Fad'
Wrong terminology.
Its a shift that has barely started.
The global economy isn't going to just sit around while fossil fuel sources go into decline, despite how poorly large human organizations perform in the job of planning.
The effort is very weak to this point.
Poor grasp of the situation.
It will be grasped eventually, and then the effort will be strong.
Fad no. REPLY likbez 06/22/2021 at 4:10 pm There is a possibility of Seneca cliff as major Western countries probably will not be able to adapt to dramatically shirking of oil supply. That raises the question of the size of Earth population which is sustainable without "cheap oil" and several other interesting questions about the destiny of the current civilization and neoliberalism. Which is already in crisis since 2008 and the USA economy is in "secular stagnation" mode since the same date. The USA standard of living is partially based on cheap oil and when cheap oil is gone the crisis of neoliberalism will probably became more acute. It is difficult to predict what forms it will take but Trump in the past and the current woke movement are two examples of mal-adaptation to the crisis of neoliberalism in the USA and loss of legitimacy of neoliberal elite (woke movement=, which is supported by Dems and several major companies, is the attempt to switch the attention from this issue -- "look squirrel") I suspect this that current "irrational exuberance" about EV among the neoliberal elite and upper middle class (especially techno hamsters of Silicon Valley) will play a bad joke with the USA. Prols can't care less about this fashion and will stick to tried and true combustion engine cars, especially with the current exorbitant prices on EV.

[Jun 18, 2021] Total DUCs in shale basins are falling at the rate of about 250 per month

Most of remaining DUC are unprofitable to finish...
Jun 14, 2021 | peakoilbarrel.com

RON PATTERSON IGNORED 06/14/2021 at 3:10 pm

Total DUCs in shale basins are falling at the rate of about 250 per month. I don't know how long this can continue. I have been told by some experts in the field that there are some DUCs that will never be completed because they would not produce enough oil to pay the completion cost. So we just cannot count the DUCs and divide by 250. The decline in DUCs will have to stop sooner or later.

REPLY FRUGAL IGNORED 06/14/2021 at 4:41 pm

What I don't understand is why wells are drilled but not completed right away? REPLY RON PATTERSON IGNORED 06/14/2021 at 5:02 pm

Frugal, I am not an oilman, and an oilman could obviously give a better answer than I. But I will give it a shot, and hopefully, I will be corrected for any mistakes I make.

Drillers are not frackers and frackers are not drillers. That is an entirely different operation requiring different crews, different equipment, and different CAPEX. But the driller leaves behind samples from the well, indicating just how productive the well should be. The best wells will obviously be fracked first. The less promising wells will be left for times when the price is high enough to justify the fracking cost.

But"¦. the total cost of the well is the drilling cost plus the fracking cost. And in a DUC, the drilling cost has already been spent. So when times get hard, and you can get a well, though it might not be the best well, you have already paid the drilling cost, so you can get it for only the fracking cost now. So you pay the fracking cost and recover what you can. And this would be the case especially if the new wells that are coming in are less promising than the poor wells already drilled.

But then, that's just my opinion, for what it's worth.

[Jun 14, 2021] Oil price supression agency (mistakenly called EIA) wants OPEC to increase input.

Jun 14, 2021 | www.zerohedge.com

Authored by Cyril Widdershoven via OilPrice.com,

In its latest Monthly Oil Report, the IEA called on OPEC+ to increase production in order to counter higher demand in 2022.

... ... ...

The current market situation is very clear. OPEC+ is leading the sector, no matter what political strategies or activist shareholders at IOCs are planning. The market is still fully hydrocarbon addicted, and this will not change overnight.

The IEA also needs to reassess its current strategies and press approach, as a continuation of the diffuse ''Lala-land predictions'' will not make their case stronger.

As indicated by the IEA OMR report demand will increase by 5.36 million bpd in 2021, and another 3.07 million bpd in 2022. At the end of 2022, global demand is expected to be at 99.46 million b/d on average.

This optimism in the market is widely shared, looking at price predictions from Goldman Sachs, Bank of America, and Citibank, with some analysts even predicting $100 per barrel in 2022.


cowdiddly 1 hour ago (Edited)

I do not listen to government clowns.

"You want to know what the price of oil is going to do watch the rig count" T. Boone Pickins

Single best piece of energy investment advice I ever had.

gregga777 48 minutes ago (Edited) remove link

The IEA seems to be following this very mature behavioral advice:

"When in trouble,

When in doubt,

Run in circles,

Scream and shout."

Falconsixone 40 minutes ago

Tanks eat a lot of fuel.

GrayManSix 23 minutes ago

Instead of "kill all the lawyers," it should now be "kill all the academics." People in ivory towers who have no inkling of the real world realities....

radical-extremist 39 minutes ago remove link

I highly recommend "Unsettled" by Steven E. Koonin.

He does the best job to date of unpacking what we know and don't know about Climate Change.

Educate yourself on it...and hurry before the book is banned.

19331510 48 minutes ago remove link

There is no climate emergency and absolutely no reason to pursue net-zero emissions.

Co2 is 0.04% of the atmosphere and it is impossible for that small amount of gas to significantly impact the climate.

Co2 is the key driver of photosynthesis and higher levels of atmospheric co2 increase agricultural production necessary to feed an ever growing population.

The UAH temperature data indicates the average global temperature is 0.08 C above the 30 year average. There is no global warming.

The severity of storms and and number of severe storms are not increasing.

The oceans may be rising between 1.8 mm/yr to 3.6 mm/yr if at all. Tide gauges a wrought with issues.

The pursuit of a green economy will destroy our economy. manhattan-institute.org Mark P. Mills

There is no need to end the use hydrocarbons. Please educate yourself.

SonOfSam 48 minutes ago remove link

...The IEA has ALWAYS wanted OPEC+ to keep their pumps running...

[Jun 13, 2021] Exxon (XOM) Sees US Shale Oil Production Decline Per Well

Jun 13, 2021 | peakoilbarrel.com

RON PATTERSON IGNORED e 06/13/2021 at 3:49 pm

Exxon (XOM) Sees US Shal Oil Production Decline Per Well Bold mine.

Exxon Mobil Corporation XOM has been generating fewer barrels of oil from the prolific shale fields of the United States since 2019, per Reuters.

According to a latest report, the company's oil wells, which are involved in some of the most promising shale fields, produced fewer barrels of oil per well despite an increase in overall expenditure and production.

In 2017, Exxon, which is one of the largest shale oil producers, acquired $6.6 billion of net acres in New Mexico, which doubled the company's assets in the Permian basin that spans west Texas and New Mexico. Notably, the company intends to boost shale output in the New Mexico portion of the Permian basin to 700,000 barrels per day (bpd) by 2025.

Per data released by the Institute for Energy Economics and Financial Analysis ("IEEFA"), Exxon's average liquid output for the first 12 months of a well dropped to 521 bpd in 2019 from an average of 635 bpd in 2018 in its Delaware basin assets of New Mexico.

That's an 18% drop in production per well. And this was before the pandemic

[Jun 13, 2021] Another scenario doe Seneca cliff is that some exporting nations realize they will need this oil as the world stares into a scarcity of oil. They might say: "Shit, why are we selling this stuff when we will desperately need it for ourselves in a few years?"

Jun 13, 2021 | peakoilbarrel.com

RON PATTERSON IGNORED 06/13/2021 at 2:44 pm

Another scenario is that some exporting nations realize they will need this oil as the world stares into a scarcity of oil. They might say: "Shit, why are we selling this stuff when we will desperately need it for ourselves in a few years?" And as they cut back, or stop exporting altogether, the problem gets a lot worse, and prices spike even higher. REPLY DOUG LEIGHTON IGNORED 06/13/2021 at 3:34 pm

L.O.L. The decision concerning the proportion of a domestic resource that should be preserved for domestic needs, and how much to export, is interesting. China's REE deposits come to mind. Also, the impact of the immediate use of a resource versus a lower level of exploitation over time might come into play in some (perhaps unrealistic) scenarios as well. Not many examples of countries that have exhaustible natural resources saving some for future generations I'm aware of; probably would result in an unwelcome war or another ugly result!

[Jun 13, 2021] WTI at $70 is probably still bearable. Higher numbers dramatically increase chances of the recession (actually the USA is in secular stagnation since 2008).

Jun 13, 2021 | peakoilbarrel.com

LIKBEZ IGNORED 06/07/2021 at 6:40 pm

WTI at $70 is probably still bearable. Higher numbers dramatically increase chances of the recession (actually the USA is in secular stagnation since 2008).

Today I read the EROEI of solar is around 0.8 outside of deserts. A recent paper by Ferroni and Hopkirk estimated an EROI=0.8 for PV in Switzerland. https://www.sciencedirect.com/science/article/pii/S0301421516307066

You need EROEI around 7 for the source of energy to be economically viable. Wind barely makes it, but solar, outside of deserts does not.

Another interesting figure is that the energy density ( KW/kg ) of lithium batteries is approximately 100 times less then energy density of diesel (gas has slightly lower energy density; kerosene approximately the same).

A subcompact car with a 10-gallon gas tank can store the energy equivalent of 7 Teslas, 15 Nissan Leafs or 23 Chevy Volts, according to industry sources. REPLY PHIL S IGNORED 06/07/2021 at 7:50 pm

" interesting figure is that the energy density ( KW/kg ) of lithium batteries is approximately 100 times less then energy density of diesel "
but don't forget the energy in the diesel is about 30% efficient converting into work while the battery is over 90% efficent doing work – so comparing energy "stored" in compact cars and teslas etc is either pretty useless or pretty misleading REPLY MIKE SUTHERLAND IGNORED HOLE IN HEAD IGNORED 06/12/2021 at 6:35 am

Likbez , I will make an effort to answer your 3 questions .
1. Peak oil was /is 2018 . Plateau will be 5 years . Why ? The parameter is exportable oil production and not total oil production . ELM is a bitch .
2 . Nuclear fusion . Not going to happen . It is like the horizon . We can see it but we can't reach it .
3 . USA situation . I am least qualified to comment as I am in Europe , but still the safest is that the current political system cannot continue for long especially when I look at it with the lenses of resource availability . There are no volunteers for starvation . What will replace this ? I don't know .
P.S :Your sentence "Like in war this is the question of strategy. Wrong strategy usually leads to defeat. " I am going to be using this . Hope you don't have a copyright on this . 🙂

06/09/2021 at 9:11 am

But your post is also misleading and leaves the reader with the impression that you're little more than an EV propagandist. Even at 30% efficiency for diesel, there is still 100/3 = 33.3x more energy available than a comparably sized lithium battery. That huge difference is far and anyway superior to anything a battery will ever do, ever. It will never be matched by any electrochemical storage scheme. So there is that. REPLY KLEIBER IGNORED 06/09/2021 at 1:42 pm

Indeed. The advantages EVs have come from efficiency in weight reduction (aside from the battery pack) and aerodynamics, along with electric motors being super simple and efficient. But in terms of raw energy density, you cannot beat chemical fuels, and there really isn't anything that threatens this by virtue of the chemistry.

Batteries, for all their advantages in simplicity, are never going to be lighter and more energy dense. Lithium is just about the best there is in terms of weight to energy ratio, something quite key for a moving vehicle. REPLY LIKBEZ IGNORED 06/09/2021 at 7:10 pm

Mike,

Electrical engines proved to be viable for small cars and delivery trucks with short ranges. No question about it. But that does not mean they are optimal. This is just a fashion partially fueled by people who missed their STEM classes 😉

I think natural gas is currently a viable competitor to EV and is IMHO a much better feat.

First of all charging efficiency of lithium battery is only 80%.
That's true that electrical motor is more efficient, but when you have a transmission using multiple gears most of this difference is lost.

Also you overestimated the efficiency of the tandem lithium battery -- electrical motor, as it includes converter with efficiency less then 90% and a lithium battery has its own internal resistance which increases with age and also lead to losses. 0.8*0.8*0.9=0.57. BTW modern diesel engines efficiency is about 43%-44%, based on 2013-2014 certified engines.

Moreover the efficiency of lithium battery in winter is dismal. And not only because at low temperatures is simply does not work well and its capacity is less. A lot of energy is consumed by the cabin heater. IMHO driving EV in severe winter is dangerous not withstanding short trips to nearby sky resort that some make on their Tesla 3 🙂 REPLY JOHN NORRIS IGNORED 06/10/2021 at 7:06 am

The average US car goes 0.74 miles on a kWh of gasoline. Many Teslas and the Hyundai Kona (among others) go 4.0 miles per kWh.

Cost per mile is $0.12 for gasoline, $0.06 for California EV, $0.03 for average EV. HICKORY IGNORED 06/07/2021 at 10:35 pm

Likbez.
Switzerland has poorer solar input than any place in the lower 48, even pacific northwest coastal, so its a lame site to use as a yardstick.
I know people who do 100% of their driving miles with solar from the roof, at lower cost than your miles.
And they didn't check the EROEI figures before or after the purchase of equipment.
The solar is already paid off for them, and they've got 2 to 4 more decades of electricity coming from that system.
And I know people who have driven across the entire country with no liquid fuel tank-nothing for energy storage in their EV but lithium. And the acceleration of their car will pin you deep in your seat if they aren't careful with the pedal.

Hey- look on the bright side- every mile that solar/electric vehicles travel is just another mile of gasoline left for you. REPLY MIKE SUTHERLAND IGNORED 06/09/2021 at 9:22 am

Hickory, how many of those solar panels were subsidized by government? A lot of them. And what's more, even though early adopters charged their Teslas from those subsidized panels, did that somehow change the EREOI from 0.8? How is the rest of society going to benefit if all the early opportunists managed to get cheap cells at an artificially low price, that actually were fantastically expensive in real terms regarding the cheap energy (at the time) that was used to make them?

And so what if they drove across the country in electric power??? WTF? What does that prove? Was there actually anything productive generated by this hugely energy intensive self-interested activity? No, there was not. It was nothing more than a display of self indulgence, and an excessive one at that. REPLY HICKORY IGNORED 06/09/2021 at 10:11 am

MikeS.
"The Energy Payback Time of PV systems is dependent on the geographical location: PV systems in Northern Europe need around 1.5 years to balance the input energy, while PV systems in the South equal their energy input after 1 year and less,"
https://www.ise.fraunhofer.de/content/dam/ise/de/documents/publications/studies/Photovoltaics-Report.pdf
After 25 years modern panels still have between 82-93% peak capacity output.

In regard to the feasibility of lithium batteries- I was pointing out that they work well enough (are dense enough) to get the job done. Its not a complicated idea. Likebz referenced diesel energy density. Thats very good, but in case you haven't been keeping up- peak crude oil is upon us, so time to adapt. Past time actually.

Bottomline- both solar energy and electric vehicles are viable systems for transportation. And that is nice considering the world faces peak oil supply.

Some people would prefer to witness the countries economy crash and burn as peak oil becomes a reality. I guess they think they would make more money for the short term. Others would like to see the country gradually deploy other ways to get around. REPLY KLEIBER IGNORED 06/09/2021 at 1:57 pm

If nothing else, this scenario will lead to a radical reshaping of how we as a species go about doing logistics. If the pandemic hasn't called into question the application of JIT logistics for all industries, then the loss of cheap diesel certainly will. Even if long haul electric trucks become a thing, it will require a different approach to matters.

Cars are otherwise a solved issue with EVs. There's nothing that an ICE can really offer over an EV. Trucking and heavy industry is another matter, and that's where problems will be. Frankly, I welcome this uprooting of a paradigm that has no resilience built in whatsoever. LIKBEZ IGNORED 06/10/2021 at 3:26 pm

You are both funny and superficial.

There is no question that "electric vehicles are viable systems for transportation. " that's true since 1940th I think. Just think about electric trains and diesel-electric trains :-). Also as compact cars they are viable in temperate climate (Leaf, Tesla, etc) and possibly in big cities and corresponding metropolitan areas.

Some people would prefer to witness the countries economy crash and burn as peak oil becomes a reality. I guess they think they would make more money for the short term. Others would like to see the country gradually deploy other ways to get around.

Like in war this is the question of strategy. Wrong strategy usually leads to defeat. I think the current EV fashion driven by people who missed their STEM classes is counterproductive and probably harmful.
It might well lead to problems in the near future. You should never put all eggs into one basket. Lightweight and emotion-driven arguments like your above just does not make the cut, if we are taking about the strategy.

Some interesting questions are

1. If we reached "plato oil" stage (I think so), then how long it will last before Seneca cliff? 10 year, 50 years, 100 years ? That's a big difference.

2. Will we get fusion energy driven energy generation or not.

3. Will neoliberalism be replaced in the USA by some other social system, because neoliberalism (and connected with it imperial tendencies ("Full Spectrum Domination" doctrine), and the corresponding level of military expenses -- money that should be allocated toward the energy transition are simply waited on maintaining and expanding of the empire) can't reform itself and probably will drive this country off the economic cliff, or to the WWIII (with even worse results).

[Jun 13, 2021] Chronic underinvestment in oil and gas supply while operational oilfields mature would lead to a supply crunch and a spike in oil prices down the road, analysts and Big Oil top executives such as TotalEnergies

Notable quotes:
"... "Ideology will obviously always trump common sense." So true ;). ..."
Jun 13, 2021 | peakoilbarrel.com

FRUGAL IGNORED ROGER IGNORED 06/11/2021 at 9:35 am

"Ideology will obviously always trump common sense." So true ;).

06/10/2021 at 6:22 pm

Saudi Arabia And Russia Warn Of Major Oil Supply Crunch

Environmentalists and activist shareholders intensified pressure on large public oil firms to align their businesses with a net-zero scenario, while some of the international majors acknowledged they have a part to play in the energy transition.

But the leaders of the OPEC+ group, Saudi Arabia and Russia, will continue to invest in oil and gas because, they say, the world will still need those resources for decades, despite the growing push against fossil fuels and investment in new supply.

Chronic underinvestment in oil and gas supply while operational oilfields mature would lead to a supply crunch and a spike in oil prices down the road, analysts and Big Oil top executives such as TotalEnergies' Patrick Pouyanné say.

Apologies if this has already been posted. REPLY RON PATTERSON IGNORED 06/10/2021 at 6:57 pm

From your link: BP's chief executive Bernard Looney wrote that forecasts of much lower investments in oil and gas were "in many ways consistent with our approach – to reduce our oil and gas production by 40% in the next decade.
Snip.
In Russia, the chief executive of the largest Russian oil producer, state-controlled Rosneft, warned that underinvestment in oil is setting the stage for a severe deficit in supply.

Yes, oil production will be falling and oil prices will be rising. Anyone with half a brain can see that. But it will have to happen before the world will be able to see what is right now as plain as the nose on their face. Their worldview keeps them from seeing the very blatantly obvious. Ideology will obviously alwayse trump common sense. REPLY FRUGAL IGNORED 06/10/2021 at 8:17 pm

It's looking more and more like peak oil is here right now. REPLY RON PATTERSON IGNORED 06/10/2021 at 8:56 pm

Nah, peak oil was in 2018.

[Jun 12, 2021] Jet Fuel Demand Poised For A 30% Surge During Summer

Jun 12, 2021 | oilprice.com

John Kilduff of Again Capital has predicted Brent to hit $80 a barrel and WTI to trade between $75 and $80 in the summer, thanks to robust gasoline demand. Brent is currently trading at $71.63 per barrel, while WTI is changing hands at $69.13.

[Jun 12, 2021] Annual Reserve Revisions Part III- Larger Independents Peak Oil Barrel

Jun 11, 2021 | peakoilbarrel.com

HHH IGNORED 06/11/2021 at 4:57 am

On 05/07/21 the US 10year chart formed a hammer candlestick on daily chart within a consolidation pattern. Which suggested higher yields coming. Well little over a month later price broke below the bottom of that candlestick which suggest that the bond market doesn't believe the inflation we have seen is here to stay. Yield headed lower.

The inflation we have had seems to be supply side due to covid. If inflation is at peak which bond market is suggesting. Oil price might not have much more room to run higher. And I'd take it a step further and say price inflation due to a weaker dollar is starting to real hurt places like China and they are going to act by tightening monetary policy. You think this would be positive for the yuan and push the dollar even lower. But when you tightening monetary policy credit contracts and economic activity contracts.

I do expect oil price to rollover and head back to $50-$55 might happen from a slightly higher price from here because of lag time between when bond market signals rollover in inflation back into deflation and when prices start reacting to this. REPLY EULENSPIEGEL IGNORED 06/11/2021 at 10:07 am

This isn't your history bond market.

Inflation doesn't really matters, what only matters is the one big question: "How much bonds does the one market member with unlimited funds buy?".

And the time the FED was able to rise more than .25% is in the rear mirror "" when they hike now, inflation or not, all these zombie companies and zombie banks will fail and no lawyer in the world will be able to clean up the chaos after all these insolvency filings.

They have to talk the way out of this inflation. They have to talk until it stops, or longer. They can't hike. They can perhaps hike again when most of the debt is inflated away "" a period with 10+% inflation and 1% bond interrest.

And yes, they can buy litterally any bond dumped onto the market "" shown this in March last year when they stopped the corona crash in an action of one week.

I think most non-investment-banks are zombies at the moment, and more than 20% of all companies. They all will fail in less than 1 year when we would have realistic interrest rates. On the dirty end, this would mean 10%+ for all this junk out there "" even mighty EXXON will be downgraded to B fast.

In old times the FED rates would be more than 5% now with these inflation numbers. Nobody can pay this these days.

And now in the USA "" look for how much social justice and social security laws you'll get. The FED has to provide cover for all of them.

We in Europe will do this, too. New green deal, new CO2 taxes, better social security "" the ECB already has said they will swallow everything dumped on the market.

So, oil 100$ the next years "" but some kind of strange dollars buying less then they used to.

Just my 2 cents. REPLY D COYNE IGNORED 06/11/2021 at 7:58 am

From

https://longforecast.com/oil-price-today-forecast-2017-2018-2019-2020-2021-brent-wti

better resolution at link above, a very different oil price forecast from HHH. Over $100/bo for Brent by the end of 2021.

REPLY RON PATTERSON IGNORED 06/11/2021 at 8:28 am

This is nonsense. They have Brent crude oil prices peaking, so far, in March 2025 at $164.11. And they have WTI peaking the same month at $132.55, $32.56 lower. There is no way the spread could be that large. Also, they have natural gas prices dropping over the same period. Just who the hell are these "Longforcast.com" people?

REPLY KLEIBER IGNORED 06/11/2021 at 11:35 am

Disregard anything with "forecast" in the title. They don't have a time machine, and extrapolation is a horrible metric with dynamic markets as complex as the energy ones.

Might as well show me the tea leaves or goat entrails and tell me the price on 11 June 2027. REPLY SHALLOW SAND IGNORED 06/11/2021 at 3:58 pm

Dennis Gartman is still considered a commodities expert.

He infamously said in 2016 that WTI would never be above $44 again in his lifetime. He is still alive last I knew.

Since I have owned working interests in oil wells (1997) I have sold oil for a low of $8 and a high of $140 per barrel. 6/14 oil sold for $99.25 per barrel. 4/20 oil sold for $15.40 per barrel.

Predicting oil prices is impossible.

About the only oil price prediction I have had right so far is that if Biden won, oil prices would rebound. Of course, we can argue about why that is, and if there is even any connection.

There are still no drilling rigs running in the field we operate in. There are still hundreds of production wells shut in. There are still less than 10 workover rigs running in our field. The largest operator still has a help wanted sign up in front of its office. We finally found one summer worker, he is still in high school, but thankfully covered by our workers comp. He cannot drive our trucks, and is limited to painting, mowing, weed control, digging with a shovel, cleaning the shops and pump houses and other tasks like those. That's ok, because we need that, but not being able to drive is a pain. But auto ins won't allow anyone under 21 to be covered. REPLY IRON MIKE IGNORED 06/11/2021 at 11:53 am

Yea Ron i agree with Kleiber, I wouldn't take anything on that site too seriously. REPLY OVI IGNORED 06/11/2021 at 1:34 pm

The IEA is now starting to sound warnings about supply. Last week they were telling the oil companies to stop exploring and to move toward a renewable energy future.

IEA: OPEC needs to increase supply to keep global oil markets adequately supplied

In its monthly oil report, the International Energy Agency (IEA) has said that global oil demand is set to return to pre-pandemic levels by the end of 2022, rising by 5.4 million bpd in 2021 and by a further 3.1 million bpd next year. The OECD accounts for 1.3 million bpd of 2022 growth while non-OECD countries contribute 1.8 million bpd. Jet and kerosene demand will see the largest increase ( 1.5 million bpd year-on-year), followed by gasoline ( 660 000 bpd year-on-year) and gasoil/diesel ( 520 000 bpd year-on-year).

World oil supply is expected to grow at a faster rate in 2022, with the US driving gains of 1.6 million bpd from producers outside the OPEC alliance. That leaves room for OPEC to boost crude oil production by 1.4 million bpd above its July 2021-March 2022 target to meet demand growth. In 2021, oil output from non-OPEC is set to rise 710 000 bpd, while total oil supply from OPEC could increase by 800 000 bpd if the bloc sticks with its existing policy.

https://www.iea.org/reports/oil-market-report-june-2021

https://www.oilfieldtechnology.com/special-reports/11062021/iea-opec-needs-to-increase-supply-to-keep-global-oil-markets-adequately-supplied/ REPLY RON PATTERSON IGNORED 06/11/2021 at 2:09 pm

(IEA) has said that global oil demand is set to return to pre-pandemic levels by the end of 2022, rising by 5.4 million bpd in 2021 and by a further 3.1 million bpd next year.

That comes to about 500,000 barrels per day monthly increase, every month until the end of 2022. I really don't believe that is going to happen. No doubt most nations can increase production somewhat, but returning to pre-pandemic levels will be a herculean task for most of them.

[Jun 07, 2021] Saudi Arabia Says It is energy producting country, not An Oil Producing Country pointing to diversification of enery sources produced

Essentially it's an admission that they've peaked. Looks like Saudis themselves can see the end of high production in their oil fields.
Jun 07, 2021 | peakoilbarrel.com
RON PATTERSON IGNORED 06/06/2021 at 5:21 pm

Saudi Arabia Says It is No Longer An Oil Producing Country

When Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman announced that Saudi Arabia was no longer an oil-producing country, he likely didn't mean literally.

"Saudi Arabia is no longer an oil country, it's an energy-producing country," the Energy Minister told S&P Global Platts this week.

Saudi Arabia has high green ambitions that include gas production, renewables, and hydrogen.

"I urge the world to accept this as a reality. We are going to be winners of all these activities.

Saudi Arabia will surely benefit from the green transition. While the Exxons, Chevrons, and Shells of the world are busy doing climate activists' bidding in the boardroom and courtroom, NOCs–particularly in various OPEC nations–are all-too-eager to take advantage of what will surely be increased oil prices.

Already Saudi Arabia has raised its official selling price for the month of July to Asia.

But that doesn't stop Saudi Arabia from pursuing its green ambitions–the Saudi Green Initiative–while funding those green ambitions through oil sales. Saudi Arabia plans to generate 50% of its energy from renewables by 2030, in part to reduce its dependence on oil. In 2017, renewables made up just 0.02% of the overall energy share in Saudi Arabia.

Saudi sees the handwriting on the wall. They know damn well that their high production numbers are limited, even if the rest of the world does not. I think they are actually hoping for a green transition and they hope to be a part of it. After all, what choice do they have? ANCIENTARCHER IGNORED 06/07/2021 at 5:51 am

Ron,
I have been following your posts for a while now. Thank you for sharing your knowledge.
You seem to be certain that the Saudis themselves can see the end of high production in their oil fields. I understand that all the super-giants in Saudi are very, very old and that Aramco is doing all sorts of things to keep production up and that is expected for old fields, even these super giants. However, we also haven't seen Cantarell type field declines from the Saudi super giants yet, or rather we don't know of any.

I can't understand why you believe Saudis are near their maxiumum production capacity and from here on their production is going to decline (rather sharply?). Nothing that I read in Aramco's annual report gave me that feeling. But I also understand that they will not divulge bad numbers.

In short, please can you share your views on Saudi future production and the reasons?

Many thanks REPLY RON PATTERSON IGNORED 06/07/2021 at 9:52 am

However, we also haven't seen Cantarell type field declines from the Saudi super giants yet, or rather we don't know of any.

Saudi announced in 2006, 15 years ago, that Abqaiq, (pronounced Abb -kay) was 74% depleted and Ghawar was almost 50% depleted; Saudi Arabia's Strategic Energy Initiative

They claimed, in 2006, that all Saudi was only 29% depleted. But that was a blatant falsehood. Ghawar, at that time, was about 60 to 70% depleted and all Saudi was well past the 50% mark. Around 2000, Their decline rate was about 8% per year but they, around that time, initiated an enormous infill drilling program that got their decline rate down to almost 2%:

• Without "maintain potential" drilling to make up for production,
Saudi oil fields would have a natural decline rate of a hypothetical
8%. As Saudi Aramco has an extensive drilling program with a
budget running in the billions of dollars, this decline is mitigated to
a number close to 2%.

The Saudi author of this piece then confuses decline rates with depletion rates:

• These depletion rates are well below industry averages, due
primarily to enhanced recovery technologies and successful
"maintain potential" drilling operations.

What anyone should realize is that when you decrease decline rates, by pumping the oil out faster, you increase the depletion rates. They began creaming the top of their fields, staying above the rising water, about 20 years ago. Really, what the hell would one expect to be happening by now?

Saudi, in their IPO a few years ago, said production from Ghawar was 3.8 million barrels per day. For the world's largest field, that is a Cantrell-style decline rate. Remember, the smaller the field, the faster the natural decline rate. And they have admitted that they brought old mothballed fields of Khoreis, Shaybah, and Munifa online, at massive expense, to make up for the decline in their older fields. However, they have no more mothballed fields.

I spent 5 years in Saudi and my son just retired from ARAMCO a couple of years ago after spending about 23 years there. You must understand that exaggeration is part of their way of life. They do it and they expect everyone else to do it. They will never admit that their total production is in steep decline. No, Khoreis, Shaybah, and Munifa are not in decline but their combined output is only around 2.5 million barrels per day. ANCIENTARCHER IGNORED 06/07/2021 at 1:25 pm

Very many thanks Ron.This is super.

Saudi has also been claiming that their proven reserves of oil are about 267bn bbl for the last, what 20-30 years now, notwithstanding the 3bn bbl they take out every year! Must be magic!

Cantarell is now at a bit more than 100kbpd down from 2.2mmbpd in the early 2000s. If any of the Saudi super-giants, especially Ghawar, are following that trend, it's going to make an impact. And it's a question of 'when' rather than 'if'.

There is also a rumour that their war in Yemen was because they wanted to get their hands on the oil in the rub al-khali because they don't have much left within their territories. Apparently, there's a lot of oil in the empty quarter and they don't want to share that with Yemen.

I agree with your judgment – exaggeration is a part of their culture in much the same way that every shopkeeper there expects you to bargain because prices are also exaggerated. You can barely trust the financials of Western companies, so can't take the Saudis at their word.

Very many thanks again for your comments. Your opinion informed by your experience is worth its weight in gold (or should I say bitcoin! :-)! REPLY RON PATTERSON IGNORED ROGER IGNORED 06/07/2021 at 8:53 am

" Saudi sees the handwriting on the wall. They know damn well that their high production numbers are limited, even if the rest of the world does not. "

Yep. Think about it every barrel they displace from (what I assume is) highly subsidized domestic consumption, is a "new " barrel for export -- a new revenue stream. That is, since they don't have the reserves to meet the anticipated future OPEC call, these additional export barrels are essentially "free money" (after pay-out on the so-called renewable energy investments) i.e., they do no defer any otherwise producible oil. Hence, expect SA to be a "world leader" in so called renewable energy of course, done in the name of a greener world for us all. 😉

06/07/2021 at 2:20 pm

Since 2005 they have averaged producing 3.43 billion barrels per year, crude only. That comes to about 55 billion since the beginning of 2005. If you count total liquids it would be well over 60 billion.

But as you say, they have "magic oil". For every barrel they pump out of the ground, another barrel magically appears to replace it.

[Jun 07, 2021] Rossneft CEO Sechin said that the world was facing an acute oil shortage in the long-term due to underinvestment amid a drive for alternative energy, while demand for oil continued to rise

Jun 07, 2021 | peakoilbarrel.com

OVI IGNORED 06/06/2021 at 8:40 pm

WTI Punched a $70 ticket sometime after 6:00 PM EST, June 6, 2021. The last time this happened was Oct 16, 2018, $71.92 before falling below $70 the next day.

HICKORY IGNORED 06/06/2021 at 10:59 pm

"Igor Sechin, the head of Russian oil major Rosneft (ROSN.MM), said on Saturday the world was facing an acute oil shortage in the long-term due to underinvestment amid a drive for alternative energy, while demand for oil continued to rise."

Indeed.

[Jun 07, 2021] Exxon Exits Oil Exploration Prospect in Ghana After Seismic Work - Bloomberg

Jun 07, 2021 | www.bloomberg.com

Exxon Mobil Corp. is pulling out of a deep-water oil prospect in Ghana just two years after the west African nation ratified an exploration and production agreement with the U.S. oil titan.

The company relinquished the entirety of its stake in the Deepwater Cape Three Points block and resigned as its operator after fulfilling its contractual obligations during the initial exploration period, according to a letter to Ghana's government seen by Bloomberg and people familiar with the matter, who asked not to be named because the information isn't public.

[Jun 07, 2021] BP Sees Global Crude Oil Demand to Last, CEO Bernard Looney Says - Bloomberg

Jun 07, 2021 | www.bloomberg.com

Energy giant BP Plc sees a strong recovery in global crude demand and expects it to last for some time, with U.S. shale production being kept in check, according to Chief Executive Officer Bernard Looney.

"There is a lot of evidence that suggests that demand will be strong, and the shale seems to be remaining disciplined," Looney told Bloomberg News in St. Petersburg, Russia. "I think that the situation we're in at the moment could last like this for a while."

[Jun 03, 2021] Climate activists scored a major victory with a Dutch court ruling requiring Shell to drastically cut emissions, which in effect means cutting oil and gas output

Jun 03, 2021 | www.reuters.com

Defeats in the courtroom and boardroom mean Royal Dutch Shell (RDSa.L) , ExxonMobil (XOM.N) and Chevron (CVX.N) are all under pressure to cut carbon emissions faster. That's good news for the likes of Saudi Arabia's national oil company Saudi Aramco (2222.SE) , Abu Dhabi National Oil Co, and Russia's Gazprom (GAZP.MM) and Rosneft (ROSN.MM) .

It means more business for them and the Saudi-led Organization of the Petroleum Exporting Countries (OPEC).

"Oil and gas demand is far from peaking and supplies will be needed, but international oil companies will not be allowed to invest in this environment, meaning national oil companies have to step in," said Amrita Sen from consultancy Energy Aspects.

... ... ...

Climate activists scored a major victory with a Dutch court ruling requiring Shell to drastically cut emissions, which in effect means cutting oil and gas output. The company will appeal.

The same day, the top two U.S. oil companies, Exxon Mobil and Chevron, both lost battles with shareholders who accused them of dragging their feet on climate change.

...Western oil majors control around 15% of global output, while OPEC and Russia have a share of around 40 percent. That share has been relatively stable in recent decades as rising demand was met with new producers like smaller private U.S. shale firms, which face similar climate-related pressures.

...Despite pressure from activists, investors and banks to cut emissions, Western oil majors are also tasked with maintaining high dividends amid heavy debts. Dividends from oil companies represent significant contributions to pension funds.

[Jun 03, 2021] US March Oil Production Rebounds Strongly From Winter Storm Low

Jun 03, 2021 | peakoilbarrel.com

RON PATTERSON IGNORED 06/03/2021 at 7:34 am

Dennis,

If all sanctions on Iran are lifted, very soon, they may reach 3.5 million barrels per day by Q1 2022, but no way before then. I doubt they will ever reach 3.8 million again.

At any rate, to get to 29.54 million bpd by Q4 OPEC would need to increase production by 4.5 million bpd from April's production level. Dennis, we both know that is not going to happen.

[Jun 01, 2021] Oil Price Hits Two-Year High as OPEC Sees More Demand

Usual WSL take -- partially false reasoning mostly along EIA talking points. The real problem is that there is no cheap way to increase oil output Iran or no Iran. It would be funny to read WSJ coverage in February -May of 2020 in view of current events and the price level. They completely discredited themselves.
Jun 01, 2021 | www.wsj.com

Brent crude rose 93 cents, or 1.3%, to $70.25 a barrel, the highest close since May 2019. West Texas Intermediate futures gained $1.40, or 2.1%, to $67.72 a barrel. The U.S. gauge settled at its highest level since October 2018.

... ... ...

The OPEC cartel and its allies agreed Tuesday to press ahead with earlier plans to increase output by 450,000 barrels a day starting in July. Meanwhile, Saudi Arabia will continue to unwind its unilateral cuts of one million barrels a day that it put in place earlier this year.

"Demand growth is outpacing supply gains even with the agreed month-by-month OPEC+ production increases taken into account," said Ann-Louise Hittle, vice president of Macro Oils at consulting firm Wood Mackenzie. "Sticking to increases planned at the April meeting is what the market needs," she added.

... ... ...

Both oil prices and future OPEC+ policy could be affected if as much as 1.5 million barrels a day of Iranian oil, currently restricted by U.S. sanctions, return to the market, according to Robert McNally, a former adviser in the George W. Bush administration and president of consulting firm Rapidan Energy Group.

[May 31, 2021] Oil is the strategic resource and all dirty tricks with "paper oil" and the power of Wall Street financial behemoths will be used to keep price low

May 31, 2021 | peakoilbarrel.com

DENNIS COYNE IGNORED 05/30/2021 at 10:05 am

Ron,

If non-OPEC+ output grows slowly or not at all, oil prices are likely to rise. Eventually the price may rise to a level that entices non-OPEC+ producers to invest in new oil production. My guess is that a $75 or $80/bo Brent oil price might change things, we may know by November 2021 whether my guess is correct. REPLY LIKBEZ 05/30/2021 at 5:53 pm

Dennis,

You assume that oil price is independent of the general condition of the USA economy and is determined by supply and demand. I think this is a fallacy.

Oil is the strategic resource and all dirty tricks with "paper oil" and the power of Wall Street financial behemoths will be used to keep price low. Rise of oil prices is an invitation to the recession which Biden administration is determined to avoid.

The only established fact now that the rise of oil output probably will never happen and the countries need to adapt. The USA put all eggs into EV backets and is toying with wind and solar; which means that it probably will be burned because the increase of the number of EV on the roads above single digits will destroy the stability of the USA electrical network.

In 2020, there were 286.9 million cars in the US. Of them the plug-in are less then 1.4 million. Forty-five models were sold in 2019 (the last "normal" year), but the all-electric Tesla Model 3 was the most popular by far, with over 154,000 vehicles sold -- or 47% of total plug-in electric sales in 2019.

So currently EV are less then 0.5% of the total car fleet despite all the noise.

Consequences of reaching 10% are tremendous both for electrical grid and for consumers (lion share of those cars are luxury personal cars, exemplified by Tesla and are badly suited (even dangerous; somebody here proposed Norway as a counterexample, but that's plainly stupid as they have their share of problems (dead Tesla in airports car lots after a week or less, strangled vehicles on country roads, etc) and is a tiny country with climate determined by Golfstream ).

EV in northern states (think not only border with Canada like Chicago and Alaska but even NY, PA and NJ ) or a state with very hot summer (think Texas, Florida) and generally outside California (or any similar region without harsh winter and/or very hot summer) are very problematic.

Building of new nuclear stations is politically incorrect and that will have consequences of EV deployments. Burning natural gas to produce electrical energy, while gas can be used as a car fuel directly is plain vanilla stupid. But this is the path the USA had taken.

As neoliberal elite lost legitimacy political stability in the USA is also an interesting question to ponder. The rise of gas price might serve as a yet another tipping point.

[May 30, 2021] US March Oil Production Rebounds Strongly From Winter Storm Low

May 30, 2021 | peakoilbarrel.com

RON PATTERSON IGNORED OVI IGNORED 05/30/2021 at 9:16 am

Ron

Great find.

For me that article was behind a paywall. Yahoo has it here.

https://ca.finance.yahoo.com/news/time-different-outside-opec-oil-040000053.html

05/30/2021 at 7:49 am

Well, I'm not one to say "I told you so", but I did, didn't I. 🙂 Bold mine.

This Time Is Different: Outside OPEC+, Oil Growth Stalls

"This time is different" may be the most dangerous words in business: billions of dollars have been lost betting that history won't repeat itself. And yet now, in the oil world, it looks like this time really will be.

For the first time in decades, oil companies aren't rushing to increase production to chase rising oil prices as Brent crude approaches $70. Even in the Permian, the prolific shale basin at the center of the U.S. energy boom, drillers are resisting their traditional boom-and-bust cycle of spending.

The oil industry is on the ropes, constrained by Wall Street investors demanding that companies spend less on drilling and instead return more money to shareholders, and climate change activists pushing against fossil fuels. Exxon Mobil Corp. is paradigmatic of the trend, after its humiliating defeat at the hands of a tiny activist elbowing itself onto the board.

And what they don't realize is that the two largest producers in OPEC+, Russia and Saudi Arabia, are on the ropes also. Russia has admitted it but Saudi is still trying to deny the fact.

[May 30, 2021] This Time Is Different- Outside OPEC+, Oil Growth Stalls by Javier Blas

May 30, 2021 | finance.yahoo.com

"This time is different" may be the most dangerous words in business: billions of dollars have been lost betting that history won't repeat itself. And yet now, in the oil world, it looks like this time really will be.

For the first time in decades, oil companies aren't rushing to increase production to chase rising oil prices as Brent crude approaches $70. Even in the Permian, the prolific shale basin at the center of the U.S. energy boom, drillers are resisting their traditional boom-and-bust cycle of spending.

The oil industry is on the ropes, constrained by Wall Street investors demanding that companies spend less on drilling and instead return more money to shareholders, and climate change activists pushing against fossil fuels. Exxon Mobil Corp. is paradigmatic of the trend, after its humiliating defeat at the hands of a tiny activist elbowing itself onto the board.

The dramatic events in the industry last week only add to what is emerging as an opportunity for the producers of OPEC+, giving the coalition led by Saudi Arabia and Russia more room for maneuver to bring back their own production. As non-OPEC output fails to rebound as fast as many expected -- or feared based on past experience -- the cartel is likely to continue adding more supply when it meets on June 1.

'Criminalization'

Shareholders are asking Exxon to drill less and focus on returning money to investors. "They have been throwing money down the drill hole like crazy," Christopher Ailman, chief investment officer for CalSTRS. "We really saw that company just heading down the hole, not surviving into the future, unless they change and adapt. And now they have to."

Exxon is unlikely to be alone. Royal Dutch Shell Plc lost a landmark legal battle last week when a Dutch court told it to cut emissions significantly by 2030 -- something that would require less oil production. Many in the industry fear a wave of lawsuits elsewhere, with western oil majors more immediate targets than the state-owned oil companies that make up much of OPEC production.

"We see a shift from stigmatization toward criminalization of investing in higher oil production," said Bob McNally, president of consultant Rapidan Energy Group and a former White House official.

While it's true that non-OPEC+ output is creeping back from the crash of 2020 -- and the ultra-depressed levels of April and May last year -- it's far from a full recovery. Overall, non-OPEC+ output will grow this year by 620,000 barrels a day, less than half the 1.3 million barrels a day it fell in 2020. The supply growth forecast through the rest of this year "comes nowhere close to matching" the expected increase in demand, according to the International Energy Agency.

Beyond 2021, oil output is likely to rise in a handful of nations, including the U.S., Brazil, Canada and new oil-producer Guyana. But production will decline elsewhere, from the U.K. to Colombia, Malaysia and Argentina.

As non-OPEC+ production increases less than global oil demand, the cartel will be in control of the market, executives and traders said. It's a major break with the past, when oil companies responded to higher prices by rushing to invest again, boosting non-OPEC output and leaving the ministers led by Saudi Arabia's Abdulaziz bin Salman with a much more difficult balancing act.

Drilling Down

So far, the lack of non-OPEC+ oil production growth isn't registering much in the market. After all, the coronavirus pandemic continues to constrain global oil demand. It may be more noticeable later this year and into 2022 . By then, vaccination campaigns against Covid-19 are likely to be bearing fruit, and the world will need more oil. The expected return of Iran into the market will provide some of that, but there will likely be a need for more.

When that happens, it will be largely up to OPEC to plug the gap. One signal of how the recovery will be different this time is the U.S. drilling count: It is gradually increasing, but the recovery is slower than it was after the last big oil price crash in 2008-09. Shale companies are sticking to their commitment to return more money to shareholders via dividends. While before the pandemic shale companies re-used 70-90% of their cash flow into further drilling, they are now keeping that metric at around 50%.

The result is that U.S. crude production has flat-lined at around 11 million barrels a day since July 2020. Outside the U.S. and Canada, the outlook is even more somber: at the end of April, the ex-North America oil rig count stood at 523, lower than it was a year ago, and nearly 40% below the same month two years earlier, according to data from Baker Hughes Co.

When Saudi Energy Minister Prince Abdulaziz predicted earlier this year that "'drill, baby, drill' is gone for ever," it sounded like a bold call. As ministers meet this week, they may dare to hope he's right.

More stories like this are available on bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2021 Bloomberg L.P.

[May 15, 2021] Which organization OPEC or IEA has the most credibility?

May 15, 2021 | peakoilbarrel.com

RON PATTERSON IGNORED 05/14/2021 at 7:23 am

The OPEC Monthly Oil Market Report said the world oil supply fell by 150,000 barrels per day in April.

World oil supply
Preliminary data indicates that global liquids production in April decreased by 0.15 mb/d to average
93.06 mb/d compared with the previous month, and was lower by 6.45 mb/d y-o-y.

While the IEA Oil Market Report – May 2021 sais the world oil supply rose by 330,000 barrels per day.

World oil supply rose 330 kb/d to 93.4 mb/d in April and will increase further in May as the OPEC+ alliance continues to ease output cuts. Based on the current agreement, global oil production is set to grow by 3.8 mb/d from April to December. For 2021 as a whole, world oil production expands by 1.4 mb/d year-on-year versus a collapse of 6.6 mb/d in 2020. Canada leads non-OPEC+ with growth of 340 kb/d while the US is set to contract by a further 160 kb/d.

That's a difference of just under half a million barrels per day, (480,000 bpd). That's a huge difference. Which one should we believe? Which organization has the most credibility?

[May 12, 2021] The Energy Crisis That No One Is Talking About - OilPrice.com

May 12, 2021 | oilprice.com

GAIL TVERBERG

Gail Tverberg is a writer and speaker about energy issues. She is especially known for her work with financial issues associated with peak oil. Prior

More Info SHARE Facebook Twitter Linkedin Reddit PREMIUM CONTENT Russia Withdraws Troops From The Ukrainian Border Why The Outlook For Oil Prices Shifted This Week Fighting Continues In Yemen Amid Secret Ceasefire Talks U.S. Natural Gas Production Poised To Soar By Gail Tverberg - May 06, 2021, 5:00 PM CDT Trade Oil Futures Now

We live in a world of half-truth where words are very carefully chosen. Companies hire public relations firms to give just the right "spin" to what they are saying. CEO make statements that suggest that everything is going well. Newspapers would like their advertisers to be happy. Still is at the limit of Moore's law and fither shriking of dier is impossible due to physical limits. One of the key challenges of CPU engineering is the design of transistors gates. As device dimension shrinks, controlling the current flow in the thin channel becomes more difficult. So callled 8mn process (not that this is a marketing not technological term) is possible and now used in production, 5mn is problematic but used for example by Apple in A14 CPU ( iPhone 12) / According to some sources, the A14 processor has the transistor density of 134 million transistors per mm2. 3mn is probably the current technological limit (TSMC is on track for production first 3 nm chips at the end of 2022 Anton Shilov, Anandtech April 26, 2021 ). It is unclear, if 2mn process will be technologically viable or not. So the only way for CPU manufactures to increase the processing power of CPUs is to increase the number of cores.

I We live in a finite world; we are rapidly approaching limits of many kinds. Which creates problem, in some ways, somewhat similar to the world of the 1920s.

[May 11, 2021] January Non-OPEC Oil Production Climbs Again

May 11, 2021 | peakoilbarrel.com

HHH IGNORED 05/09/2021 at 9:35 am

Yields on the US 10 year formed a bullish hammer within consolidation on Friday. Suggests that yields are headed to 2% or above. It suggests that the move higher is now. Higher yields will lead to stronger dollar. Might be the beginning of where price inflation becomes a drag on economy as yields rise on debt. And as long as price inflation continues yields will rise.

Might put a cap on oil price in near future. Maybe we get another $5-$15 rise in oil price before credit blows up due to rise in yields.

As the cost of credit rises due to price inflation. If you borrowed money at rock bottom interest rates and you now have to rollover debt at a higher interest rate that is a problem for corporate USA.

Anyone that doesn't believe that there will be a huge price to pay for the policy response of Covid-19 is kidding themselves.

Even just on a relative basis. When you expand monetary and fiscal policy by that much in one year. Things tighten on a relative basis as what comes next in the years after is less support.

[May 02, 2021] Goldman- Oil To Hit $80 On Largest Ever Demand Jump, by Tsvetana Paraskova

May 02, 2021 | oilprice.com

Apr 28, 2021

Goldman Sachs expects global oil demand to realize the biggest jump ever over the next six months, the investment bank said on Wednesday, keeping its bullish forecasts for oil prices this summer.

... ... ...

At the beginning of March, the bank expected Brent Crude prices to hit $80 a barrel in the third quarter this year, up by $5 compared to the previous forecast issued two weeks earlier.

Even after the sell-off in oil in mid-March, Goldman said that the "big breather" was a buying opportunity for oil and continued to forecast Brent hitting $80 per barrel in the summer.

[Apr 30, 2021] Shallow Sand has remarked that in the 1990s $20/barrel was considered a good price but today most wells, either onshore or off, are not profitable at $50/barrel

Apr 30, 2021 | peakoilbarrel.com

HOLE IN HEAD IGNORED 04/26/2021 at 5:35 am

Mr Shellman has it correct .
https://www.oilystuffblog.com/single-post/decline-baby-decline?postId=607d9b8fae97f80015baa566 REPLY DENNIS COYNE IGNORED 04/26/2021 at 6:48 am

Hole in head,

He is right that it doesn't work at $55/b, at $61 (today's price for WTI) it works in the Permian basin. Note that I also use the data from shaleprofile as the basis for my models. Though I clearly don't know the oil business as well as an old pro like Mike, not even close.

The average price of oil in 2020 was about $36/b, in 2021 it will be about $60/b and in 2022 about $70/b (WTI prices). Decline will stop at $70/b for sure and probably at $60/b.
Note that in 2017 the average WTI price was about $52/b, and in 2018 it was $67/b, and in 2019 it was $60/b. 2018 saw a very large increase in tight oil output and the increase in 2019 was pretty big as well.

My Permian model assumes new wells are financed from cash flow rather than new debt, debt paid back in full by 2026. REPLY SCHINZY IGNORED 04/27/2021 at 4:21 am

Dennis,

Your observations are correct with the implicit assumption that extraction costs do not rise at the same rate as the price of oil. Shallow Sand has remarked that in the 1990s $20/barrel was considered a good price but today most wells, either onshore or off, are not profitable at $50/barrel. Shallow is our invaluable guide to the evolution of costs in the oil patch.

My prediction is that oil prices will stay in the current range ~$55-$65/ barrel until decreased investment (see http://peakoilbarrel.com/december-non-opec-oil-output-continues-rebound-from-may-low/#comment-715646 ) results in a shortage. I believe the shortage will cause oil prices to kick on the order of 50% in a year. The price kick will then provoke a financial crisis similar to that of 2008, but central banks will have far fewer options to alleviate the crisis. REPLY HOLE IN HEAD IGNORED 04/27/2021 at 6:24 am

Schinzy , I agree with you . Dennis is underestimating a few critical issues ;
1. End of OPM finance .
2. Underestimating the GOR and WOR rise .
3. Underestimating decline rates in shale .
4. Underestimating the rise in costs now ( steel above by 50% in 2021) which makes $ 75 non viable .
5 . His contention that the big corporations will buy out the bankrupt corporations . The flaw is that the big corporations themselves want to exit . Further as Mike S has pointed out " who wants to buy wells which are at the tail end of their production and are going to have a shutdown expense of $ 100000 to bear " .
All three agree that there is going to be shortage in 2022 sometime in the second or third half and your scenario that the resultant high price will provoke an even deeper financial crisis than that exists now will play out . Let me add that Covid damage cannot be assessed at this stage as the virus is mutating at a rapid pace . It has moved from India to Pakistan.
https://www.rt.com/news/522199-pakistan-military-coronavirus-khan/
P.S : He always give's EOG as an example of a well run shale play but " one swallow does not the summer make " . For every one EOG there are 10/15 waiting in line for bankruptcy . SHALLOW SAND IGNORED 04/26/2021 at 6:48 am

I don't see how these wells can be profitably operated by a company with a lot of overhead, which I assume these publicly traded companies have. DENNIS COYNE IGNORED 04/26/2021 at 7:31 pm

Shallow sand,

See

https://finance.yahoo.com/quote/EOG/financials?p=EOG

From 2017 to 2019 EOG's cumulative net income was $8.7 billion.

It can be done by a well run company. REPLY SHALLOW SAND IGNORED 04/28/2021 at 6:57 am

Dennis.

I have discussed before the uselessness of GAAP accounting in US shale.

Raw Energy, who writes articles on Seeking Alpha, has addressed this much better than I can.

Over 3,000 of the approximately 19,000 oil wells in ND produced 0 barrels of oil in the last reported month, 2/21. Some of this could be weather related. I suspect more of the problem is economic, even at improved oil prices.

I suspect the numbers are similar in the other shale basins. Mike says there are many inactive shale wells in EFS, where he operates his conventional production.

[Apr 30, 2021] Around 80% of Russia oil wells will be in serious decline for the rest of this decade.

Apr 30, 2021 | peakoilbarrel.com

RON PATTERSON IGNORED 04/25/2021 at 2:12 pm

A bit more about Russia. Dennis first posted this link a couple of weeks ago. It has a wealth of information. It was published in September 2019 . The Future of Russian Oil Production in the Short, Medium, and Long Term

They published another paper in 2017 predicting Russian production would hit 11,268,000 bpd in 2018. They did not quite make it but they did average 11,252,000 bpd in 2019. They predicted Russia to peak at 11.5 million bpd in 2020.

In our 2017 paper we identified that projects already in the pipeline, combined with efforts to slow the
natural decline of brownfields, could push oil production from an average of below 11 mb/d in 2016 to
around 11.5 mb/d by 2020 before going into gradual decline towards 2025.

Of course, the pandemic hit and kept that from happening. But from their 2019 paper, linked above, concerning brownfield management:

However, the success to date can be seen in the performance of six of the country's largest production companies, all of which are subsidiaries of the Russian oil majors. (These majors) have demonstrated a combined average rate of decline of 2 percent per annum over the past decade, compared to a natural decline rate for fields in West Siberia of around 10-15 percent per annum.

Massive infill drilling has gotten their brownfield decline down from a natural decline rate of 10-15 percent to 2 percent. But they do not believe this decline rate can be held:

An additional concern is that our long-term forecast for brownfield decline, of 2-3 percent per annum,
may be too optimistic if the current performance cannot be maintained as fields move further into their
final years

And they say, concerning the below chart", bold mine.

Figure 10 below. As can be seen, the overall output figure in 2030 of just over 8 mb/d is close to the "Brownfield+2 per cent" case in the corporate analysis above, implying that the regional analysis assumes a more normal decline curve for average oilfields in Russia. In other words, it confirms that the corporate analysis assumes continued technology progression, especially in slowing the brownfield decline, and therefore it is important to assess how this may be achieved. Indeed, an overall question is how can the Russian oil industry
achieve the target set for it by the Ministry of Energy of maintaining production at 550 mm tonnes per
annum (11.05 mb/d) until the end of the next decade? In other words, will the Russian oil sector be
able to fill a 2.5 mb/d gap by 2030, particularly when it seems that its major producing regions (West
Siberia and the Volga-Urals) will be in permanent decline by then?

What they are saying here is there may be serious problems with the Ministry of Energy's production goals. They seem to doubt it. Their brownfield production, (West Siberia and the Volga-Urals) shown in blue in the chart below, was about 80 percent of total Russian production in 2018 and 2019. Hey, 80% of their production will be in serious decline for the rest of this decade. Does anyone really believe the small fields they are finding in the East Siberian Arctic will replace that?

REPLY
RATIONALLUDDITE IGNORED 04/25/2021 at 6:39 pm

Terrific post. Thanks Ron. I like the candidness of the Russians on important issues. Far more realistic than EIA et al elevation of "wishful thinking" to the status of "data".

OVI IGNORED 04/25/2021 at 11:42 pm

HICKORY

I totally disagree with this statement, which is very commonly made by too many.

" I suspect that combustion-only vehicles will only make a small percent of new vehicles sales by 2030, but it will take a long time to retire the current fleet of combustion-only vehicles throughout the world. "

Last week Honda said that by 2030. they were expecting their vehicles sales to be 40% EVs. While I certainly respect their decision, which is less ambitious and more conservative than other auto manufacturers, let's just do a quick and simple calculation to see what this really means.

US EV sales, BEVs plus PHEVs, in 2020 were close to 2%. So how much of a yearly rate increase in sales do we need to get to 40% in 10 years. How about 2*(1.3493^10) = 40. So EV sales have to increase at the rate of a shade less than 35% each year to get to 40% by 2030. Recent trends have been closer to 10% and slowing.

I think 40% by 2040 is more realistic. That would only take a 16% annual increase to get to 40% and even that may be a stretch.

[Apr 26, 2021] Oil-Field Services -- Lots to Like Beneath the Surface

Apr 26, 2021 | www.wsj.com

The macro conditions for oil and gas are undoubtedly improving: OECD oil inventories have been drawn down to levels near their five-year average, working off the massive overbuild from the last year. Brent crude prices also are back to their immediate pre-pandemic levels. Halliburton noted in its Wednesday earnings call that while smaller, private energy companies have dominated the recovery so far, listed drillers are expected to pick up activity in the second half of the year.

Oil field servicers' collective discipline should help them command higher prices as energy companies require more of their services. Despite flattish revenue compared to the prior quarter, all three saw continued margin improvement , benefiting from efforts last year to pare costs, including head count reductions and the use of remote technology for certain services. Also helping their outlook is considerably weakened competition: Oil field services bankruptcies rose to an all-time high of $45 billion in debt affected in 2020 and are continuing this year.

... ... ...

Despite their resilience, oil field service companies have underperformed a broad basket of oil-and-gas exploration companies year to date. The three industry leaders are trading at or below their historical multiple of enterprise value to earnings before interest, tax, depreciation and amortization.

For investors looking to ride the coattails of the oil demand recovery, servicers are an inexpensive way to do it.

[Apr 25, 2021] Gold The Coming Oil Shortage - Part II - ZeroHedge

Apr 25, 2021 | www.zerohedge.com

US shale oil:

US shale oil producers shut in production because it became hugely. A large part of US production even saw negative prices. But even as prices recovered quickly to $40/bbl, hardly any producer could cover their operating costs, let alone being profitable. This lead to a continuous decline in output and only very recently we saw a modest recovery in production. At this point, production is down around 2.5mb/d from peak.

One might argue that we have seen the same dynamics before. Back in 2014, US shale oil production was also growing at breakneck pace. This eventually led to a much oversupplied global market and a price crash from $110/bbl to $30/bbl over 18 months. As a consequence, US shale oil production also sharply declined, which eventually rebalanced the market. Prices recovered and stabilized at around $60-70/bbl. Subsequently US shale producers slowly adapted to the new price environment and by 2019, production again grew at over 2mb/d. But in 2019, the market had not much trouble absorbing that kind of production. In fact, it depended on it.

However, the recent price crash and ensuing production decline doesn't seem to follow the same path. Oil prices have fully recovered by now, but production has not. In fact, US production is near the lowest it has been since the outbreak of the pandemic. Moreover, drilling activity is also greatly lagging. Arguably the US oil rig count has recovered from 172 in August 2020 to currently 344, but this seems not enough to keep production even constant.

Exhibit 11: US production has yet to show any meaningful recovery despite the full price recovery (Kb/d year-over-year)

Source: EIA. Goldmoney Research

In fact, the reason why US shale output is not lower despite this very low rig count is because producers reverted to high grading. High grading means the producers are producing from their most prolific acreage. This also means that any production increase would require a massive redeployment of rigs as new wells would be less prolific than the current ones. But US producers vowed to their investors as well as to their banks that – unlike the last time prices recovered – they would refrain from growing output and focus on profitability instead.

Exhibit 12: As the rig count fell, average production per rig increased due to high grading (B/d and rig count (Permian Basin))

Source: EIA, Goldmoney Research

A further issue is the size of US shale output and the steep decline rates. Unlike shale gas producers which somehow managed to flatten their decline curves, shale oil producers still struggling with decline rates around 70% in the first year. The larger total US shale oil output gets, the more new production has to be brought online to simply offset the decline rates in existing output. This is not a new problem, but the recent reluctance of US producers to grow output at all costs means this issue is now real.

Exhibit 13: Steep decline rates remain a problem as US shale oil output remains high even after the crash (B/d all basins)

Source: EIA, Goldmoney Research

The pandemic and the price crash have also accelerated phenomenon that was already known from the shale gas market, but is new to the shale oil market. In the US, there used to be multiple shale oil basins which all showed production growth, albeit at different speeds. The Permian basin became sort of the king of shale oil, but other basins such as the Bakken (the first), Eagle Ford, Mississippi Lime and Niobrara all grew as well. But in this price recovery, and despite the rebound in the rig count, all those basins show a continuous decline. The Permian Basin is the only shale oil Basin that shows a recovery in supply (albeit a small one). This is not unlike what we have seen in US gas, where shale gas production started in the Barnett shale, then Haynesville Basin outgrew everything else, but now the Marcellus shale is dominating US gas markets.

Exhibit 14: Only the Permian Basin shows some output recovery (b/d)

Source: EIA, Goldmoney Research

If this fully repeats in the shale oil space, then production is limited to how much pipeline space can grow out of the Permian. Arguably that was an issue before, but if production continues to decline in other basins, then the Permian has to offset those declines as well. This would further restrict how fast production can growth in the future.

We believe that the necessary focus on profitability, combined with the issue of high decline rates which become more dominate as base production grows, limit US shale oil production growth long term. We don't think we see production again growing at the record rates of the past, certainly not at these prices. Much higher prices would likely ignite another rush in the sector, but eventually the decline rates will dominate and effetely limit production growth.

The future of global supply growth:

On net, this means that supply will struggle to return to pre-COVID-19 levels quickly as non-OPEC ex US shale will be permanently lower and continue to decline while it will take time for US to reach old highs. US shale oil production is unlikely to grow again at past rates, particularly with current prices. And once US shale production has reached the previous peaks, it will be increasingly difficult to grow much further as high decline rates simply limit to how high production can go. Even before the pandemic, most OPEC countries were already more concerned about maintaining their production rather than growing it over the long run. Low prices and high spare capacity also prompted core OPEC members to lower their CAPEX, at least temporarily.

The duration mismatch between supply and demand peaks

The problem is, while oil producers are preparing for a low carbon future with potentially declining oil demand, oil demand itself will still grow for many years to come. The oil space is facing a duration mismatch.

Oil demand is primarily driven by the transportation sector and to a lower extent by the petrochemical industry and industrial sector as a whole. Together they account for 84% of global oil demand, 87% if demand from the agricultural, forestry and fishing sectors are added (as it is likely also mostly transportation related oil demand). The transportation sector accounts for about 2/3 of global oil demand and it is still growing. The petrochemical sector accounts for 11% and is the fastest growing sector for oil demand. Industrial demand comes in third at 7% and it has been declining for decades.

The future of oil demand

Industrial demand will likely continue to decline slowly. Wherever possible it's substituted as oil tends to be one of the most expensive energy sources compared to power or gas. But this is an ongoing process and the low hanging fruits have been harvested decades ago. Hence this future decline is irrelevant in the grand scheme of things.

In contrast, demand from the petrochemical sector will continue to grow in the foreseeable future as plastics demand will continue to rise with population growth and global economic expansion. We expect Petchem demand growth to offset declines from all sectors other than the transportation sector.

The big question therefore is what will happen to transportation demand. Transportation fuel demand has been declining for many years in most Western economies even as Western economies continued to expand and both the population as whole and mobility continued to rise. This is mainly due to much better fuel economies in transportation vehicles driven mostly by regulations. Importantly, the regulatory frameworks that drive these efficiency gains are not new. In the US, the Corporate Average Fuel Economy (CAFE) standards were introduced already in 1975 as a reaction to the 1973-1974 oil embargo. The regulatory frameworks aims at fuel consumptions directly. The CAFE standards have been continuously tightened over the past 45 years.

Exhibit 17: Fuel efficiencies have been increasing for decades without electrification

Source: Wikipedia

The European Union adopted a regulatory framework with a dual mandate that not just targets fuel economy, but also emissions. European manufacturers have a binding emission target of CO2 95g/km for the average mass of their vehicles from 2021 onwards. It was CO2 130g/km from 2015-2019. Other OECD nations have similar standards that have tightened over the past decades.

The result is that fuel consumption in most OECD countries has actually peaked a while ago. Countries with high population growth such as the US have seen their overall fuel consumption rising, but not at the same speed as their population and economy was growing.

The main contributor to fuel demand growth over the past 20+ years this were the emerging markets. In Emerging Markets, the fuel economy of newly sold cars is already quite high as the cars sold tend to be smaller, lighter and equipped with smaller engines. According to the SIPA center on global energy policy, the fuel economy of average car sold in China in 2018 was roughly 5.8 liters per 100km, equivalent to 40.5Mpg. In contrast, the average vehicle sold in the US had a fuel economy of around 33.8Mpg. However, given the rapid expansion of the car fleets in these countries, fuel demand has been strongly rising over the past decades.

Importantly, the rise in popularity of hybrid cars and EVs over the past years has not yet lead to a complete change in trend in fuel consumption. The efficiency gains over the past years were still primarily driven by more fuel efficient cars with combustion units. The reason is that despite their popularity, hybrid and full EVs are still only a small fraction of all transportation vehicles sold in the world and even a smaller share of the global car fleet.

According to the international Energy Agency (IEA) roughly 90 million of cars are sold worldwide, up from around 60 million units by 2005. According the IEA, only 2.1 of the vehicles sold in 2019 were electric in some form, which includes hybrid cars.

According to Bloomberg, there are currently 1.2 billion vehicles in the world. According to the IEA, the total electric car flight is just 7 million. Again, this includes hybrid cars.

[Apr 24, 2021] Gold The Coming Oil Shortage Part I - ZeroHedge

Apr 24, 2021 | www.zerohedge.com

The important part for future production is that we make a clear distinction between those three supply sources (counting OPEC and the + states as one source). There are very different reasons for why production is down from each source and more importantly, what the long term prospects are.

In the second part of this report, we will discuss the prospects of each source in detail and show that the pandemic, and the ensuing price crash, have accelerate a process where global production will hardly be able to grow. At the same time, demand will not peak as quickly as people believe. This has the potential for a massive supply shortfall in the medium term.


smellmyfingers 2 hours ago

The only real shortage we have is truth.

We're all being fed a huge steaming pile of BS on everything. Oil build/draw. Crypto currencies based upon what? Fiat money, paper.

All these lying politicians and banksters just jockeying for positions to steal as much as they can as they push the human family to genocide.

wick7 38 minutes ago

Either way oil is going over the Seneca cliff and then Mad max here we come.

wick7 35 minutes ago

Every oil well that has ever existed has followed a bell curve. Pretending oil is infinite is like believing in a flat earth.

Galtmandu 1 hour ago (Edited)

This is some weak sauce analysis on the relationship between gold and energy prices. Here is a summary:

Energy prices and gold prices tend to correlate.

I have simplified,

Galtmandu

PS, your model is basically, interest rate policy, fed reserves of gold supply, and inflation - not groundbreaking stuff. You have created an algorithm that uses these three inputs to overlay on gold prices. Simple stuff. In fact, a basic polynomial exercise gets you your best fit.

Now, predict the movements of fed gold reserves, inflation, and interest rate policy. You can't. Therefore, your model has no predictive capability beyond your opinion. Otherwise, you would be spending your days sipping umbrella drinks.

If I seem aggressive about this stuff its because I hate this kind of faux-analytical b@llsh&t that is just sales propaganda.

Thrashed10 2 hours ago

I'm sitting mostly in cash right now. I do have a little exposure to oil. And food.

The oil market is so manipulated. Probably a smart move long term. But I have to trade so my kids get ice cream. I already know my trade for Monday if I feel motivated. I trade commodities and industrials. The boring stuff that is not sexy.

hanekhw 1 hour ago

Oil prices linked to the worthless dollar won't continue and this Administration is working hard to make our dollars even more worthless.

[Apr 19, 2021] As demand picks up further, global inventories will decline at a rate of 2.2 million barrels a day in the second half, propelling Brent crude to $74 a barrel or even higher, Citigroup predicts

Originally from Historic Oil Glut Amassed During the Pandemic Has Almost Gone By Grant Smith and Julian Lee
Apr 18, 2021 | www.bloomberg.com

..."Commercial oil inventories across the OECD are already back down to their five-year average," said Ed Morse, head of commodities research at Citigroup Inc. "What's left of the surplus is almost entirely concentrated in China, which has been building a permanent petroleum reserve."

... Oil inventories in developed economies stood just 57 million barrels above their 2015-2019 average as of February, down from a peak of 249 million in July, the IEA estimates.

... In the U.S., the inventory pile-up has effectively cleared already.

Total stockpiles of crude and products subsided in late February to 1.28 billion barrels -- a level seen before coronavirus erupted -- and continue to hover there, according to the Energy Information Administration. Last week, stockpiles in the East Coast fell to their lowest in at least 30 years.

... There have also been declines inside the nation's Strategic Petroleum Reserve, the warren of salt caverns used to store oil for emergency use. Traders and oil companies were allowed to temporarily park oversupply there by former President Trump, and in recent months have quietly removed about 21 million barrels from the location, according to people familiar with the matter.

...For the 23-nation OPEC+ coalition led by Saudi Arabia and Russia, the decline is a vindication of the bold strategy they adopted a year ago. The alliance slashed output by 10 million barrels a day last April -- roughly 10% of global supplies -- and is now in the process of carefully restoring some of the halted barrels.

The Organization of Petroleum Exporting Countries has consistently said its key objective is to normalize swollen inventories, though it's unclear whether the cartel will open the taps once that's achieved. In the past, the lure of high prices has prompted the group to keep production tight even after reaching its stockpile target.

... For better or worse, the re-balancing should continue. As demand picks up further, global inventories will decline at a rate of 2.2 million barrels a day in the second half, propelling Brent crude to $74 a barrel or even higher, Citigroup predicts.

[Apr 12, 2021] Many Drilled U.S. Wells Will Never Be Completed by Julianne Geiger

Apr 12, 2021 | oilprice.com

...Raymond James analyst John Freeman, who claimed this year in a note to clients that the United States' true DUC count is much lower, given that many of the wells included in the EIA's DUC count are dead in the water and many years old, likely never to be completed. According to Freeman, this figure is as much as 22% too high.

A 2019 Federal Reserve of Dallas survey of oil and gas company executives suggests that half of the respondents agree that the EIA is overestimating the number of DUCs. Related: Investors Rush To Oil Stocks Despite ESG Push

In a low oil price environment, oil and gas companies may spend money on finishing off an already drilled well, rather than on drilling a new well. But companies will continue to strive to keep that DUC inventory in their back pocket should the market call for it. But when oil prices have been low for a long time -- and demand for crude or gas remains low, those low oil prices may never justify completing a well, resulting in another dead DUC.

Still, those DUCs are counted.

... ... ...

By Julianne Geiger for Oilprice.com

[Apr 12, 2021] The U.S. Shale Ponzi Scheme will continue a bit longer until the day the highly-leveraged over-inflated broader stock markets finally crash

The essence of shale operation is generation of the stream of junk bonds along with the stream of oil and gas. In other words profitability is low or nagative. Junk bond need buyers do this is a confidence gate -- as sson as confidence drops buyers will evaporate. At this point there will be writing on the wall. We do not need necessary a stock crash for that. But as just bond moves in parallel with stock that will also be the Minsky moment for shale oil production.
Apr 12, 2021 | peakoilbarrel.com
SRSROCCO IGNORED 04/10/2021 at 8:56 am

George,

Nice charts and summary of U.S. Oil & Gas Reserves.

However, it seems to me that a large percentage of these "supposed" unconventional reserves will never be extracted. Thus, the U.S. Shale Industry will have permanent DUCs that will never be completed and proved undeveloped reserves that will evaporate into thin air.

Why? Well, if we look at some of the top shale players, total long-term debt from just five companies increased from $17 billion in 2006 to $133 billion in 2020 (XOM, CVX, EOG, OXY & CLR).

With Equinor selling its Bakken assets (liabilities), writing down $11.5 billion from the company's original price-tag, and saying it was a big mistake to get into shale . why would it be any different for ExxonMobil or OXY?

Indeed, the U.S. Shale Ponzi Scheme will continue a bit longer until the day the highly-leveraged over-inflated broader stock markets finally crash. At that point there will not be a SHALE 3.0. I see U.S. shale oil production falling 75% by 2030. WATCHER IGNORED 04/09/2021 at 11:05 pm

Feb this year Exxon erased oil sands from its reserves.

Article talked pandemic so doubt they sold anything. Probably just a price determinant. JEAN-FRANÇOIS FLEURY IGNORED 04/11/2021 at 2:51 pm

This one is also laughable : "That gives plenty of incentive for giants like Total or Royal Dutch Shell Plc, plus the hundreds of smaller explorers that remain in business, to keep searching the world's frontiers for the next place to sink their drill bits." Royal Dutch Shell stated that their production did peak in 2019 and that their production will decrease by 1 or 2 % per year. That means that they decided to cease exploration and implementation of new oilfields or gasfields, if I am not wrong.Therefore, why there are still people who decide that oil companies should look for new oilfields ? They want to make real their dreams despite the crude reality ?

[Apr 04, 2021] The level of incompetence of some authors at OilPrice.com is just staggering

Russia a major producer of electricity using nuclear power. Which is preferable to Wind turbines or burning money for solar panels (Russia is a northern country with no so much sunlight). As simple as that.
Apr 04, 2021 | oilprice.com

Originally from: Russia Is Being Left Behind In The Energy Transition By Haley Zaremba

When it comes to climate change and the need to update and innovate in the face of changing weather patterns, Russian President Vladmir Putin's strategy is simple: deny, deny, deny. While other fossil-fuel dependent economies scramble to diversify or race to build up clean energy infrastructure in a bid to put themselves at the forefront of the coming renewable revolution, Russia has taken the opposite approach: the world's largest nation is sitting tight and waiting to be the last man standing in a shrinking fossil fuels market. While Russia, with its massive land area and enviable geopolitical positioning, is extremely resource-rich, its oil is more costly to extract than other oil superpowers. Nevertheless, Putin is trying to outlast them all as they are forced to transition away from the oil due to falling prices and political pressure. The world is still decades away from weaning itself off fossil fuels and there will potentially be even more money to be made as the competition begins to fall away. The calculation Russia needs to make is when will its oil industry move from being a profit driver to a burden as demand plateaus and then falls.

While the potential for profit is undeniably in oil markets, when it comes to the clean energy transition, Russia is being left behind . They are being left behind in terms of infrastructure, innovation, and a dogmatic attachment to business as usual. "Putin and other Russian leaders have periodically flirted with outright climate change denial," Bloomberg reports. "Scientists have estimated that melting permafrost could cost Russia $84 billion in infrastructure damage by mid-century while releasing vast quantities of greenhouse gases. Carbon Action Tracker, a non-profit, gives Russia's climate policies a bottom grade of 'critically insufficient.'"

While Russia will soon be feeling the pain from the side effects of climate change, there will also be a silver lining to all that northern ice-melt for the world's largest country. The receding ice caps will unveil a veritable treasure trove of oil, gas, and minerals never before accessible - not to mention an extremely valuable set of new sea lanes to ease access for trade. The tradeoffs for this new natural capital, however, are so costly in terms of devastating ecological externalities that almost all of the world's biggest banks won't touch it .

Related: Recent SEC Decision Could Spark Investment In Big Oil

In the meantime, Russia has doubled down on natural gas. "In recent years, the Kremlin has bet the country's economic and geopolitical future on natural gas," Bloomberg reports, "building new pipelines to China, Turkey, and Germany, while aiming to take a quarter of the global LNG market, up from zero in 2008 and around 8% today." Within the vast expanses of Russia, where entire regions are reliant on fossil fuel for their entire economy, the prevailing belief is that natural gas is the future, and will always be cheaper domestically than renewable alternatives. "What's the alternative? Russia can't be an exporter of clean energy, that path isn't open for us," Konstantin Simonov, director of the Moscow consultancy National Energy Security Fund, told Bloomberg. "We can't just swap fossil fuel production for clean energy production, because we don't have any technology of our own."

While renewable energy is still an emerging sector, with plenty of potential opportunities for Russia to stake its claim in the global clean energy game, it's clear that the Kremlin has a long way to go in terms of ideological politicking for that to become possible.

By Haley Zaremba for Oilprice.com

[Apr 03, 2021] Rapid production increases in tight oil are likely a thing of the past. Most likely a good thing for everyone.

Apr 03, 2021 | peakoilbarrel.com

STEPHEN HREN IGNORED 04/02/2021 at 11:43 pm

Consolidation continues in the Permian. Pioneer CEO Sheffield has stated repeatedly recently that the goal is free cash flow now and not growth at all costs. As smaller producers continue to get marginalized, rapid production increases in tight oil are likely a thing of the past. Most likely a good thing for everyone.

https://www.msn.com/en-us/money/news/fracking-titan-is-bulking-up-with-dollar64-billion-acquisition-as-oil-prices-recover/ar-BB1ffqwP

[Apr 01, 2021] Many shale companies have hedged a majority of expected 2021 oil production at an average price below $45 a barrel discouraging near-term growth

Apr 01, 2021 | peakoilbarrel.com

RON PATTERSON IGNORED 03/30/2021 at 7:43 am

Why US shale oil production will not show a recovery this year. This article was published yesterday, March 29th.

Exxon, Chevron take a slow walk on the path to U.S. shale recovery Bold mine

(Reuters) – Exxon Mobil and Chevron Corp have scaled back activity dramatically in the top U.S. shale oil field, where just a year ago the two companies were dominating in the high-desert landscape.

The cautious approach of the two largest U.S. oil companies is a major reason domestic oil production has been slow to rebound since prices crashed during pandemic lockdowns in 2020. Production now is about 11 million barrels per day (bpd), down sharply from the record of nearly 13 million bpd hit in late 2019.

The share of drilling activity by Exxon and Chevron in the Permian Basin oil field in Texas and New Mexico dropped to less than 5% this month from 28% last spring, according to data from Rystad Energy.

"We essentially hit a pause button," said Chevron Chief Financial Officer Pierre Breber. "When the world was oversupplied we didn't see the virtue in putting more capital to add barrels." (Graphic: Exxon and Chevron slash Permian drilling, here)

Neither company is likely to boost spending until next year, according to the companies and analysts. Chevron expects to produce around 1 million barrels daily by 2025 and Exxon 700,000 bpd by 2025, the companies said at investor days this month.

Chevron will increase Permian spending from $2 billion now to pre-Covid levels of $4 billion annually "over the course of the next several years," Breber said, but the company will not increase drilling in the Permian this year. It is currently running about five rigs in the Permian with two completion crews, down from just under 20 a year ago.
SNIP
However, output is unlikely to increase dramatically, due to the swift decline rates for shale wells.

"We would need three months of oil prices sustained at current levels followed by six months of drilling activity before production begins to climb higher on a sustained basis," said Peter McNally at Third Bridge.

Exxon and Chevron are not the only producers keeping spending down. Many shale companies have hedged a majority of expected 2021 oil production at an average price below $45 a barrel, well below current market prices, Enverus' Andy McConn said. The hedges reduce exposure to the recent increase in oil prices, discouraging near-term growth. (Graphic: Permian oil production stalls, )

It looks like they hope to return to normal production by 2025.

[Apr 01, 2021] if expensing intangible drilling costs is eliminated, the shale boom will officially be dead.

Apr 01, 2021 | peakoilbarrel.com

SHALLOW SAND IGNORED 04/01/2021 at 1:53 am

Biden's plan will end tax preferences for fossil fuel companies. I am not sure if there are more specifics than that.

However, if expensing intangible drilling costs is eliminated, the shale boom will officially be dead.

As percentage depletion applies only to the first 1,000 BOEPD per company, elimination of that would primarily hurt marginal wells.

Also, Biden has proposed $16 billion to plug abandoned wells and reclaim abandoned mines.

Of course, at this point, the infrastructure bill is not entirely specific. There will be a lot of negotiation in Congress.

To me, it would seem short to medium term positive for oil prices. Shale companies will finally have to pay income taxes, and assuming the corporate rate goes to 28%, I don't see how there would be another drilling boom in shale, absent a super spike in oil and/or natural gas prices.

Further, the bill would cause a spike in US oil demand. Lots of heavy equipment and materials that will consume petroleum, even that needed for more clean energy.

Future will be more clear once the plan is signed into law.

I would note grain spiked on the USDA estimates for corn and soybean acres. This could affect oil prices short term.

[Apr 01, 2021] Oil price might get one last surge off this infrastructure bill

Apr 01, 2021 | peakoilbarrel.com

HHH IGNORED 03/28/2021 at 2:03 pm

Short interest in US stock is at all time lows. Hardly anybody is short. Means there are hardly any shorts to squeeze out to ramp valuations higher. My guess is there will be one last ramp higher on the release of US infrastructure bill. Which Biden will release I think it is Wed of this coming week.

Short interest in the dollar is near all time highs. Hardly anybody is long. These shorts will start to be squeezed out soon sending dollar much higher as shorts cover.

Oil price might get one last surge off this infrastructure bill but it will be short lived if it comes at all.

With margin debt set to shrink starting April 1st. There won't be a continued ramp of prices. There will be a contraction of prices. Might take a month for this contraction to start showing itself in prices as banks tighten down on margin debt.

[Mar 28, 2021] The five largest fields in Russia produce approximately 75% of Russian oil. And they are all in serious decline.

Mar 28, 2021 | peakoilbarrel.com

POLLUX IGNORED 03/25/2021 at 9:18 am

Russia's crude oil export set to drop 3pc in Q2 vs Q1

Russia plans to decrease its oil exports in the second quarter 2021 despite an OPEC decision to allow the state an additional output hike from April.

On a daily basis, Russia's oil exports will drop by some 3% in April-June compared to the first quarter of 2021, Reuters calculations showed. REPLY RON PATTERSON IGNORED 03/25/2021 at 12:23 pm

And no one asked why? There is a reason for everything.

Hint: Four of the five largest fields in Russia are located in West Siberia, Samotlor, Priob, Lyantor, and Fedorov. 61% of Russian production currently comes from Western Siberia.

Russia's second-largest field, Romashkino, discovered in 1948, is located in the Volga-Ural Basin and is also in serious decline.

The five largest fields in Russia produce approximately 75% of Russian oil. And they are all in serious decline. RON PATTERSON IGNORED 03/25/2021 at 1:00 pm

I wrote, in 2015: Reserve Growth in West Siberian Oil Fields

"Russian oil production will not get any help from reserve growth in Western Siberia. Old dying fields, like old dying men do not grow."

I really don't like to brag, but I was dead on. From 2015 to 2019, Russian oil production increased by about 200,000 barrels per day per year, for a total of 800k barrels per day. That growth came from new fields in Eastern Siberia. The largest of those new fields, Vankor, peaked in 2019 at just under 500,000 barrels per day. Hell, even their new fields are starting to peak.

But those old dying fields did not grow one iota. They are all now in decline. JEAN-FRANÇOIS FLEURY IGNORED 03/26/2021 at 6:14 am

And world oil production is going to skyrocket, according to IEA and EIA projections. Of course. JEAN-FRANÇOIS FLEURY IGNORED 03/28/2021 at 7:39 am

...About Brazil, the oil production will increase at most of 500 kb/d according to the post of George Kaplan. ... About Irak, they are not going to produce more oil. Indeed, after different episodes of wars, UNO sanctions, invasion by US, insurrections against US and British troops and after EI insurrection, they did extract less than half of their oil reserves.

... About Norway, by looking at the post of Georges Kaplan about current state of oil reserves and production, it seems rather unlikely that they will be able to increase significantly their oil production.

[Mar 28, 2021] RON PATTERSON

Mar 28, 2021 | peakoilbarrel.com

IGNORED 03/28/2021 at 10:22 am

The 12 nation group might not see annual C plus C output increases of 1400 kbo/d in the future, but it will take time for the rate of increase to fall to 455 kbo/d (where a plateau in World output would occur) especially if oil prices rise to $80/bo or more.

No, it will not take time. Why would you think production would graduallly fall off? Yes, decline slops are usually gradual as well as increasing slopes. But the change from increase to plateau or increase to decline is seldom, if ever gradual. USA+Saudi+Russia has already plateaued. Their decline is very likely to be sudden, well, it has actually already happened.

However, in the two charts below, I have used your method of stopping the chart just before the Covid induced decline. The charts speak for themselves.

REPLY RON PATTERSON IGNORED 03/28/2021 at 10:26 am

The second chart. The rest of the world is in serious decline.

[Mar 28, 2021] Unless investment increases, I don't expect extraction rates to achieve 2018 levels soon.

Mar 28, 2021 | peakoilbarrel.com

SCHINZY IGNORED 03/28/2021 at 2:26 am

I think it instructive to recall oil and gas investment history. Unregulated oil and gas markets have always yielded boom bust cycles. There was a bust cycle from 1986 to 2000. A boom cycle started in 2001 with investment in oil and gas rising on average 11% per year to $780 billion in 2014 (this was from a Kopits talk in 2014, but the link I have no longer works).

There is a lag between increased or decreased investment and the response in extraction rates. The lag is longer offshore than onshore. For example, in spite of the investment boom from 2001 to 2014, extraction rates were stagnant between 2005 and 2010.

A bust began in 2015 with investment dropping 25% in 2015 and a further 20% in 2016. The drop was more pronounced offshore than onshore. Investment stayed essentially flat through 2019. Extraction rates continued to climb through 2018 but were flat in 2019.

The IEA began warning in 2016 that investment was not sufficient to meet demand in the early 2020s. In their 2019 WEO they stated that $650 to $750 billion was needed annually to attain 106 mb/d in 2030. I am assuming this sum referred to oil AND gas investment. In 2019 oil and gas investment was $483 billion. In 2020 it was $313 billion (close to 2009 levels).

As Dennis noted in response to my comment above, the relationship between a drop in investment and the corresponding drop in supply is not linear. But unless investment increases, I don't expect extraction rates to achieve 2018 levels soon. REPLY SHALLOW SAND IGNORED 03/28/2021 at 6:08 am

Ovi. I appreciate your posts. Thanks.

Schinzy. Look at what the integrated oil companies are forecasting. BP, RDS and TOT are shrinking production. CVX and XOM are greatly reducing CAPEX. So is COP, the largest independent. So is PXD, one of the largest shale players. Of course, these companies can change strategy quickly, likely next year if any do.

For the first time I can recall, the government of the United States is not supportive of it increasing production. Contrary to popular belief, this matters.

To keep a lid on oil prices, on the supply side, either the USA needs to keep adding barrels or some other country that does not benefit as a whole from high oil prices will need to step up. The CAPEX currently isn't budgeted to do that.

Of course, decreased demand due to the continued spikes in COVID cases will continue to put a lid on demand. Hopefully by fall this won't be much of an issue, not for oils sake, but for public health sake.

The other demand side lids I see could be Western EV adoption offsetting developing world oil demand growth. Worried here about both the needed upgrades to the grids, plus the lack of rare earth metals. The other could be another big economic issue. Don't want that, but seems economy issues are also going to be with us given the high debt levels. The stimulus in response to COVID isn't cheap. REPLY SCHINZY IGNORED 03/28/2021 at 7:41 am

All very true Shallow. I suspect these companies are reducing CAPEX because of increasing debt. The more conservative CAPEX spending seems to be helping their share prices. SHALLOW SAND IGNORED 03/28/2021 at 7:55 am

Schinzy.

IHS Markit doesn't see US CAPEX spending at the 2018-19 levels returning until 2024-25. Probably too far out in the future to be accurate. However, it's 2021 forecast is for lower CAPEX in all years since 2010 except for 2020.

I will add another big player to my list above, EOG also lowered CAPEX guidance for 2021 from where it had been pre-pandemic. Will seek to hold production flat in 2021.

[Mar 28, 2021] Looks like the world's three greatest oil producers(The USA, Saudi Arabia, and Russia), have peaked

Mar 28, 2021 | peakoilbarrel.com

OVI IGNORED 03/25/2021 at 5:47 pm

Dennis

Here is the C Plus C chart to to December 2022. In the original chart in the post above, I only took it out to March 2021.

The March STEO report along with the International Energy Statistics are used to make the projection. It projects that world crude production December 2022 will be 81,759 kb/d, 2,735 kb/d lower than November 2018

REPLY RON PATTERSON IGNORED 03/25/2021 at 6:44 pm

Ovi, thanks for a great chart. And even this, 2,735 kb/d below the previous peak, I think is overly optimistic.

I think, at least two of the world's three greatest oil producers have peaked, (The USA, Saudi Arabia, and Russia), have peaked, and the rest of the world has clearly peaked, there is no way we can possibly surpass that 2018 peak. Actually, I think all three have peaked. I was just being conservative.

World less USA, Saudi Arabia, and Russia peaked in 2017. All three peaked, yearly average, in 2019. Of course you can argue that this is just the peak "so far". But I do not believe any of the three will ever surpass their 2019 yearly average peak.

RON PATTERSON IGNORED 03/26/2021 at 8:57 am

Dennis, you wrote: Below I use the trend in the ratio of World C plus C to World petroleum liquids from Jan 2017 to Dec 2019 to estimate World C+C from Jan 2021 to Dec 2022.

Okay, you use past trend lines to estimate future production. Well, I guess there is also how the EIA does it and the IEA does it. I just don't have confidence in that type of analysis.

Above I have charted past World oil production less the USA, Russia, and Saudi Arabia. There is clearly a trend there. Do you think this trend will continue?

World C+C production in 2018 averaged 82,897,000 barrels per day. In 2019 that average was 82,306,000 barrels per day. I have little doubt that future world oil production can come close to those averages. But I would bet my SS check that the 2018 peak will never be surpassed. (I like annual averages but if you like centered 12-month averages, then go with that.)

At any rate here are four possible sources for a surge in World oil production:

1. THE USA
2. Russia
3. Saudi Arabia
4. The World less USA, Russia, and Saudi Arabia

If World oil production is yet to peak, which one, or ones, of these four sources, will it come from? RON PATTERSON IGNORED 03/26/2021 at 12:00 pm

I believe I have seen reports that suggest a plateau near the recent 12 month peak output can be maintained for 5 to 10 years.

No Dennis, you have not seen that. I posted that myself some time ago. Russia stated that they hoped to hold production at about 11.2 million barrels per day for the next four years, 2021 through 2024. I have since lost the link but it was posted right here on this list. However, I think that was wishful thinking on Russia's part. I don't think they will hold that level, ever again.

The drop in World minus KSA, US, and Russia C plus C output since 2018 has mostly been due to a combination of lower oil prices and OPEC reducing output to try to bring oil prices back up,

I am not talking about the drop since 2018, I am talking about the peak and decline before 2018. The peak month in my chart above was November of 2016 at 52,206,000. The peak 12-month average was September of 2017 at 51,161,000 barrels per day. At that point, in September of 2017, the World less USA, Russia, and Saudi produced 63% of all World production. 63% of World oil production peaked in September of 2017.

While World oil production was peaking in 2018, due to increased production by the USA, Saudi, and Russia, the World less these big three was declining to 50,737,000 barrels per day, the average for 2018. A decline of almost half a million barrels per day.

Dennis, regardless of what happens in Canada, Brazil, and Norway over the next 5 to 10 years, the World less the big three peaked in 2016 monthly and 2017 annually. Any increase in World production must come from one or more of the big three. HOLE IN HEAD IGNORED 03/26/2021 at 1:22 pm

Dennis , your post on the last thread .
"I stand by my estimate, in 2020 World C plus C output dropped by 5.5 Mbo/d due to a lack of oil demand and the resulting drop in oil prices from the 2019 annual average, so a 10 Mbo/d increase from the 2020 level (annual average) of C plus C output requires a return to the 2019 average level (roughly 82.3 Mb/d) requiring a 5.6 Mbo/d increase and then a further 4.4 Mbo/d increase in output to reach 87 Mbo/d.

If World demand for C plus C warrants such an increase by 2028, I believe it can be produced, and yes the model accounts for depletion, which has been ongoing since the first barrel of oil was produced. The basis for the estimate is likely World resources of 3400 Gb of C plus C (this includes the 1428 Gb of crude plus condensate that was produced from 1860 to 2020), remaining resources (this includes conventional and unconventional C plus C) are about 1972 Gb (this includes future discoveries and reserve growth).

It is possible less will be produced due to lack of demand, if a rapid transition to non-fossil fuel energy sources occurs, I hope that is the case, but I am skeptical"
Well, 2020 production came in at an average of 75.93 mbpd . Decline rate was 7.5% compared to 2019. How will you achieve additional 10 mbpd by 2028 ? Ron is correct . Igor Sechin boss at Rosneft confirms what Ron has stated , shale party is over , KSA is going to cut domestic consumption by 1mbpd so that it can export that oil . Sorry, Brazil , Norway ,Tom Dick and Harry are in no position to cover this lag in production .In the future decline rates will increase as horizontal wells reach their limits of extraction . You must rethink your models with the new facts . Your statement "If World demand for C plus C warrants such an increase by 2028, I believe it can be produced " does not hold water . Your belief or mine is irrelevant . Geology prevails . RON PATTERSON IGNORED 03/27/2021 at 8:55 am

OPEC has been holding back production since 2017 in order to get oil prices up, how much different nations produce depends on their cost of production relative to price,

I don't see any evidence to support that statement. Average OPEC production in 2018 was only 170,000 barrels per day below the average for 2017. If they were holding back, they weren't doing a very good job of it. I think they were producing flat out all three years, 2016 through 2018.

Average 2016 – 31,701 (Peak)
Average 2017 – 31,507
Average 2018 – 31,336 RON PATTERSON IGNORED 03/27/2021 at 4:49 pm

I remembered incorrectly, OPEC likely started cutting back on output in the middle of 2016 to get oil prices higher,

You remember very incorrectly. OPEC, in the last months of 2016 was emptying their storage tanks in order to produce as much oil as they could. They would set their quotas on the amount produced in November and December of 2016, so they were making heroic attempts to produce every barrel possible in order to get a higher quota. (November 2016 was the OPEC all-time peak. And in my opinion, will remain so forever.)

They started cutting in January of 2017. But by June everyone was cheating and they were all, by July 2017, producing flat out.

Why does OPEC exist?

OPEC was formally constituted in January 1961 by five countries: Saudi Arabia, Iran, Iraq, Kuwait, and Venezuela. They existed then for the sole reason of trying to drive oil prices higher. They would like to do that today but squabbling among members has made them somewhat of a joke. They are a disorganized bunch of buffoons. Yes, they have dramatically cut production during the pandemic. But so has everyone else in the world. The bottom dropped out of demand so everyone cut production trying to save money.

A decline in output for the World has occurred since 2018 because oil prices dropped due to oversupply of oil relative to demand.

Okay, but what about 2017 and 2018? OPEC could not keep their members in line and by June of 2017 everyone was again producing flat out, causing that oversupply. And their cut was a pittance anyway, not enough to make much difference. For most of 2017 and all of 2018, every OPEC member was producing every barrel they could. (With the exception of Iran and Venezuela of course, but that is another story for another thread.)

Just look at the chart Dennis, that is just so damn obvious it cannot be denied.


RON PATTERSON IGNORED 03/27/2021 at 6:04 pm

For OPEC minus Iran, Libya, and Venezuela the centered 12 month average peak was 26759 kbo/d in January 2019.

Okay, you need to update your nations here. Libya is already back, producing at maximum possible capacity for the last 4 months. Venezuela will never be back, not in the next decade anyway, long after peak oil is history. That leaves only Iran. Iran, if sanctions were lifted today, could possibly increase production by approximately 1.6 million barrels per day in the next six months or so. That would not be nearly enough to make up for the natural decline in OPEC, especially Saudi Arabia, since the peak in 2016.

Iran is the only nation on earth that can possibly increase production in any significant amount. So you should only deal with Iran when talking about possible OPEC production increases.

Dennis, OPEC has done nothing but basically tread water since 2005. Why do you think they will now save the world?

(In the chart below 2021 is only two months, January and February.


RON PATTERSON IGNORED 03/27/2021 at 8:42 pm

OPEC does not produce at maximum output, except when fighting for quotas.

Dennis, OPEC is not an oil company, they are a cartel. The only ones that increased when battling for quota were Saudi, the UAE, and Kuwait. The rest just produced flat out all the time. Check the charts.

Yes, they were all producing flat out most of the time. Only in a few instances did they actually cut production. Of course, the pandemic hit everyone. But as you can see by the yearly chart I posted their total share of the market has shrunk dramatically since 2005.

Dennis, OPEC peaked in 2016. Saudi Arabia is in decline. End of story. ALIMBIQUATED IGNORED 03/27/2021 at 7:47 am

Ron,
Good point about past trends lines being a dubious predictor of future trends. This is testable too. In this case three years of past data was used to predict the future.

If there is 40 years of data, you could run the algorithm on 35 three-year data sets and check the accuracy of the prediction. That would give you some idea of how likely the latest prediction is to be accurate.

My guess is that the accuracy is fairly low, but checking would reveal the truth. POLLUX IGNORED 03/26/2021 at 3:30 am

In November, Saudi Arabia's domestic crude stockpiles fell to 17-year low:
"Saudi Arabia's domestic crude stockpiles fell by 1.2 million barrels in November to 143.43 million barrels, the lowest since November 2003." ( source )

This trend continues and in January, stockpiles fell to 137.207 million barrels:
"The country's domestic refinery crude throughput rose to 2.343 million bpd while crude stocks fell to 137.207 million barrels in January." ( source ) HOLE IN HEAD IGNORED 03/26/2021 at 11:19 am

We will apply sanctions and abuse you but please give us your oil .
https://www.rt.com/business/519108-us-import-record-oil-russia/
Also Saudi facility is under drone attack as per Saudi govt .
https://www.spa.gov.sa/viewfullstory.php?lang=en&newsid=2207999#2207999 HOLE IN HEAD IGNORED 03/26/2021 at 2:32 pm

In an article Steven Kopits wrote "In its February Short Term Energy Outlook (STEO), the EIA forecasts this month's world oil consumption at 96.7 million barrels per day (mbpd). The oil supply, however, is much lower, only 93.6 mbpd, with the difference of 3.1 mbpd of necessity being drawn from crude oil and refined product inventories. This is a shortfall of 3.5% "
Is he correct ? if yes ,then are we in trouble ?

[Mar 28, 2021] Unfortunately the paper market (or electronic market) is what most US producers are paid on.

Mar 28, 2021 | peakoilbarrel.com

SHALLOW SAND IGNORED 03/24/2021 at 9:21 pm

Ovi.

Unfortunately the paper market (or electronic market) is what most US producers are paid on.

As I have posted before, we are paid on a monthly average of the daily settles of WTI, less a discount which primarily is due to transportation expenses. Saturday and Sunday are the same price as Friday's close, so we watch the Friday close a little more closely.

After a very difficult 2020, 2021 has been mostly good oil price wise. I thought prices might run a little higher, but COVID just has not subsided worldwide like I had hoped it would by now. Maybe this summer? REPLY OVI IGNORED 03/24/2021 at 9:40 pm

Shallow Sand

Thanks for the info. I hope that WTI stays up for you.

I used to follow a Cdn oil company that sold some of their oil on a daily basis and some a month or two forward, based on the settled price of WTI. I later found out that the CEO was a believer in peak oil and did well with oil on the rise to $147. The company doesn't exist today. POLLUX IGNORED 03/25/2021 at 9:52 am

Four scenarios going forward:

1) Higher output and higher prices
Dennis?

2) Higher output and lower prices
"Brent crude oil prices will average $64 per barrel (b) in the second quarter of 2021 and then fall to less than $60/b through the end of 2022" ( source )
– EIA

3) Lower output and higher prices
Many "Peak Oil:ers"

4) Lower output and lower prices
"Within a few months to a year, the worldwide debt bubble will start to collapse, bringing oil prices down by more than 50%." ( source )
– Gail Tverberg

Schinzy?
"I have long maintained that peak oil is a low price phenomenon, not a high priced phenomenon" ( source ) RON PATTERSON IGNORED 03/25/2021 at 10:40 am

The EIA's latest Monthly Energy Review is out.

They have US C+C production falling 58,000 barrels per day in December, 108,000 bpd in January, and 591,000 bpd in February to 10,364,000 barrels per day. The huge February drop was due, mostly, to bad weather. SCHINZY IGNORED 03/26/2021 at 3:09 am

I have trouble with this scenario given Rystad Energy's investment outlook for 2021: flat with respect to 2020 which was 35% below that of 2019 which only got 2019 extraction rate just shy of 2018. See https://www.rystadenergy.com/newsevents/news/press-releases/drilling-activity-is-set-for-two-consecutive-years-of-growth-but-will-lag-pre-pandemic-levels/

[Mar 28, 2021] China Signs 25-Year Deal With Iran in Challenge to the U.S-

Mar 28, 2021 | www.msn.com

A draft copy of the accord that surfaced on media last year showed plans for long-term supply of Iranian crude to China as well as investment in oil, gas, petrochemical, renewables and nuclear energy infrastructure.

Lured by the prospect of cheaper prices, China has already increased its imports of Iranian oil to around 1 million barrels a day, eroding U.S. leverage as it prepares to enter stalled talks with Tehran to revive a nuclear deal.

The Biden administration has indicated that it's open to reengaging with Iran after then-President Donald Trump abandoned the accord nearly three years ago and reimposed economic sanctions, but the two sides have yet to even agree to meet. Iran exported around 2.5 million barrels of oil a day before American penalties resumed.

Iran's closer integration with China may help shore up its economy against the impact of the U.S. sanctions, while sending a clear signal to the White House of Tehran's intentions. Wang Yi, who arrived in Tehran on Friday, also met with Rouhani to discuss the nuclear deal.

In a televised speech, Rouhani raised the prospect of restrictions being eased before the end of his second and final term as president in early August.

"We're ready for the lifting of sanctions," he said on Saturday. "If obstacles are removed, all or at least some sanctions can be lifted."

[Mar 28, 2021] Iran, China sign strategic long-term cooperation agreement

Mar 28, 2021 | www.politico.com

No additional details of the agreement were revealed as Iran's Foreign Minister Mohammad Javad Zarif and Chinese counterpart Wang Yi took part in a ceremony marking the event.

me title=

The deal marked the first time Iran has signed such a lengthy agreement with a major world power. In 2001, Iran and Russia signed a 10-year cooperation agreement, mainly in the nuclear field, that was lengthened to 20 years through two five-year extensions.

Before the ceremony Saturday, Yi met Iranian President Hassan Rouhani and special Iranian envoy in charge of the deal Ali Larijani.

Saeed Khatibzadeh, spokesman for Iran's Foreign Ministry, on Friday called the agreement "deep, multi-layer and full-fledged."

The deal, which had been discussed since 2016, also supports tourism and cultural exchanges. It comes on the 50th anniversary of the establishment of diplomatic relations between China and Iran.

The two countries have had warm relations and both took part in a joint naval exercise in 2019 with Russia in the northern Indian Ocean.

Reportedly, Iran and China have done some $20 billion in trade annually in recent years. That's down from nearly $52 billion in 2014, however, because of a decline in oil prices and U.S. sanctions imposed in 2018 after then-President Donald Trump pulled the U.S. unilaterally out of a nuclear deal between Iran and world powers, saying it needed to be renegotiated.

Iran has pulled away from restrictions imposed under the deal under those sanctions in order to put pressure on the other signatories -- Germany, France, Britain, Russia and China -- to provide new economic incentives to offset U.S. sanctions.

[Mar 28, 2021] Iran, China sign strategic long-term [25 yr] cooperation agreement

Mar 28, 2021 | peakoilbarrel.com

HICKORY IGNORED 03/28/2021 at 12:29 pm

Thanks Dennis.
It is easy for us to discount the production capacity of Iran, however this could be a mistake.
If China needs oil it will fund production in Iran, regardless of the 'worlds' concern over Iranian nuclear and regional ambitions [very aggressive ambitions that are largely theocratically driven].

This weekend-
'Iran, China sign strategic long-term [25 yr] cooperation agreement
The agreement covers a variety of economic activity from oil and mining to promoting industrial activity in Iran, as well as transportation and agricultural collaboration.'
https://www.politico.com/news/2021/03/27/iran-china-agreement-478236

[Mar 24, 2021] Oil demand 'will surge this summer'- expert

Mar 24, 2021 | finance.yahoo.com

Both OPEC Russia and here in North America, have done a good job of curtailing their output. So with regard to supply, the market is more in balance. Yes, we are in the midst of a strong rally today. But that all comes on the heels of a massive sell-off, a $4 barrel sell-off yesterday.

So the market's in the process of balancing itself out. Keep in mind that we've rallied from about $30 a barrel before the winter to upwards of-- we knocked on the doorstep a couple of weeks ago-- $70 a barrel. So we've had a terrific run over this one season. We're now at a level, 57, 58, the high 50s, low 60s, which, more or less, where the market was trading in 2019, i.e. the year when the economy was strong, no one heard of COVID.

... what the really positive to come out of COVID is the consistently strong demand for diesel fuel. Now diesel fuel is your primary industrial fuel, and that never really took a significant hit. It obviously took a hit at this time last year when everything took a hit, but it was the first in energy market to rebound, and it stayed strong. And we're at very high levels.

... if we are correct, we don't go into another set of COVID lockdowns like last year, that demand certainly should be enough to propel us back above that 70 even with Brent in that, towards that $80 range.

[Mar 19, 2021] Fossil fuels are the basis of industrial civilization. Thier disapperiance portends our extinction as a species. We might as well accept as the fact that as soon as the Western civilization experience Seneca cliff it will be severaly damaged

Mar 19, 2021 | www.moonofalabama.org

norecovery , Mar 19 2021 0:05 utc | 42

One more observation from my seat in the gallery: FOSSIL ENERGY is the basis of industrial civilization, and our complete dependence on it portends our extinction as a species. We might as well accept the fact that we are done.

[Mar 12, 2021] When sweet spots will be exhausted in the US shale

At some point geology takes upper hand over technology
Mar 12, 2021 | oilprice.com

... ... ...

On the technical side, drillers have vastly lengthened the horizontal leg of the typical shale well, from slightly over a mile in 2014 to an average of 8,500 feet in early 2019. The ability to do this has come in part from improvements in drilling fluids design to permit entry into longer sections, and better rotary steerable MWD/LWD assemblies that enable more reliable real time drilling data from the bit to ensure they are staying in the sweet spot of the reservoir. Improvements in perforating, frac stage design with 4-D fracking that takes into account the frac's progress over time have also contributed to this increase in productivity.

The amount of sand or proppant pumped per foot of interval has also increased hugely from around a 1,000 pounds per foot-PPF, to between 2,000 and 2,500 PPF. Increasing the amount of proppant ads to the well's cost, but it also hugely increases the permeability of the completion. Permeability is a measure of the flow capacity of the rock. More permeability results in more production for longer periods of time.

High grading of drilling opportunities has been a prime contributor to being able to maintain a lower decline rate that originally supposed in my calculations. What this means is that operators have been focusing on their Tier I acreage and bypassing lower tier opportunities.

When you take this performance and multiply it across the top twenty or so drillers, you can begin to see how shale production manages to hover around the 7.5 mm BOEPD level.

... ... ...

One of the questions that often comes up is what will happen when Tier I acreage is drilled up. Some estimates have been put forward that this might occur within the next decade.

Rystad has challenged those estimates showing an estimate of the longevity of Tier I shale in years at present rates of drilling.

It comes as no surprise the Delaware sub-basin of the larger Permian basin is the king of shale, and operators there will retain a low cost drilling advantage for a number years beyond other plays.

By David Messler for Oilprice.com

[Mar 12, 2021] Looks like US shale oil production do not have much upside even at current prices

Mar 12, 2021 | oilprice.com

Most analysts believe that most public companies will stick to discipline. OPEC+ also seems to have gambled on expectations that U.S. shale will look at higher profits instead of production this time - unlike in any of the previous oil price spikes in recent years - when it decided not to raise production from April, except for small increases for Russia and Kazakhstan.

In view of the recent high prices, JP Morgan now expects U.S. oil production to average 11.36 million bpd in 2021, slightly up from 11.32 million bpd last year.

[Mar 11, 2021] How Oil Could Go To $100 Per Barrel

Mar 11, 2021 | oilprice.com

The EIA sees demand continuing to recover at a good pace to mid-year, with July world oil consumption forecast at 98.2 mbpd (but still about 4 mbpd below 'normal'). This incremental demand is being materially supplied by two sources, Brazil and OPEC. We might accept Brazil's crude oil production growth as given, allowing that the timing might be off by a month or two. The pivotal question is instead OPEC's intentions.

The EIA uses a volume (or demand) driven model, implying that OPEC will passively increase production to meet demand, and thereby keep oil prices low. But why would OPEC do this? If OPEC simply maintained current production levels, the world would be 3.5 mbpd short of supply by mid-year. A shortfall of 3.5 mbpd -- 3.6% of global consumption -- is a lot. It would rapidly drain remaining excess inventories, leaving only oil prices to mediate between supply and demand just as the world economy is showing both strength and momentum as the pandemic ends. In other words, in the coming months consumers will be prepared to compete for the available barrels of oil, and that should push oil prices up sharply.

... ... ...

... now is OPEC's best opportunity to make real money in the short to medium term. They would be fools to let the opportunity slip by.

By Steven Kopits of Princeton Energy Advisors via Zerohedge.com

[Mar 07, 2021] Private shale Firms want to go all in as for production in their small spots, but will they get capital and do they have any sweet spots? by Tsvetana Paraskova

Sweet spots depletion might be a problem for them. U.S. shale production as a whole is unlikely to return to the levels before the pandemic. The high decline rates of shale well are more acure outside of sweet spot. Larger firms which still have sweet spots feel the pressure from investors to produce level of dividends expected in the industry. That excude "all-in" drilling as happned inthe past when Wall Stertt money were abundant and discipline was lacking.
Mar 07, 2021 | oilprice.com

Currently, OPEC itself sees U.S. crude oil production for 2021 at 11.2 million bpd, slightly down from an estimated 11.28 million bpd output for 2020. In its latest Monthly Oil Market Report (MOMR) for February, the cartel actually revised down its 2021 forecast for U.S. oil production by 210,000 bpd and now expects a 70,000-bpd annual decline from 2020, as continued capital expenditure discipline is "expected to weigh on production prospects in 2021."

Larger listed U.S. producers are concerned that some drillers would break promises of output restraint.

"There are going to be bad actors [who pursue] growth for growth's sake," Matthew Gallagher, an executive at Pioneer Natural Resources, told the Financial Times in January.

Pioneer Natural Resources itself will look to limit production growth to an average 5 percent over the long term, CEO Scott Sheffield said on the Q4 earnings call last week. Moreover, Pioneer expects to return up to 75 percent of its annual free cash flow to shareholders after the base dividend is paid, Sheffield noted. This will be returned in the form of variable dividends paid out quarterly the following year, the executive said. Related: Is This The World's Next Big Offshore Oil Region?

While Pioneer and other major listed shale players seem to be heeding investors' calls for higher returns to shareholders, the smaller closely held operators are not promising anything other than chasing higher returns on their investment, which is being generated by more oil production.

[Mar 01, 2021] The 13-member Organization of the Petroleum Exporting Countries pumped 24.89 million barrels per day (bpd) in February, the survey found, down 870,000 bpd from January.

Mar 01, 2021 | peakoilbarrel.com

POLLUX IGNORED 03/01/2021 at 9:33 am

OPEC oil output falls in February on Saudi additional cut – survey

The 13-member Organization of the Petroleum Exporting Countries pumped 24.89 million barrels per day (bpd) in February, the survey found, down 870,000 bpd from January.

Riyadh achieved about 850,000 bpd of that reduction in February, the Reuters survey found.

Compliance with pledged cuts in February was 121%, the survey found, up from 103% in January.

[Mar 01, 2021] Art Berman on Twitter

Mar 01, 2021 | twitter.com

In the past decade, capital employed in Exxon's upstream business has risen by a third -- and...production fell 17% & proved reserves by 39%.

"In the past decade, capital employed in Exxon's upstream business has risen by a third -- and...production fell 17% & proved reserves by 39%. This...has trashed Exxon's return on capital." https:// bloomberg.com/opinion/articl es/2021-02-25/exxon-reserves-debooking-of-6-billion-barrels-matters?sref=866aH6XX #OOTT #oilandgas #oil #WTI #CrudeOil #fintwit #OPEC #Commodities

[Feb 28, 2021] Possible end of "plato oil": Increase in countries that shtill have unpapped reserves now is unable to make up for the decline of production of the rest of the world

Feb 28, 2021 | peakoilbarrel.com

The natural annual deline from exiting wells is around 800 kb/d/yr.

Originally from: US December Oil Production Drops – Peak Oil Barrel

RON PATTERSON IGNORED 02/27/2021 at 5:25 pm

Dennis, I must disagree with your assessment. OPEC peaked in 2016. Yes, Iran can come back and increase production by about 1.5 million barrels per day. But that still will not make up for the decline in the rest of OPEC. No need to mention Venezuela, they may come back around 2030 or so, long after the peak has passed.

Russia said they had peaked in early 2020. I see no reason to think they were lying.

That leaves Brazil, Norway, and Canada. They all three may increase production but nothing spectacular. Not nearly enough to make up for the rest of the world in decline. REPLY STEPHEN HREN IGNORED 02/27/2021 at 5:58 pm

I'm inclined to agree with Ron. So much investment deferred because of 2014 and 2020 price crashes. LTO can come back quickly if the price stays consistently high (a big if) but it won't be enough to save the day. Investors are expecting cash from LTO these days, not production increases. I imagine most other countries are just coasting after the turmoil of the last year. Also still plenty of wildcards in the collapse department over the next 5-10 years: Iraq, Nigeria, Libya, etc. WATCHER IGNORED 02/28/2021 at 1:12 am

Factions in the administration are on record as wanting sharply higher oil prices. Seems difficult to see how this would get through the Senate, but it is a green priority. RON PATTERSON IGNORED 02/28/2021 at 8:48 am

Does Occidental know what they are talking about? They are saying that the investors are just not there for a massive increase in production. And they are one of the two largest producers in the Permian Basin.

U.S. Oil Production Has Already Passed Its Peak, Occidental Says Bold Mine
By Kevin Crowley
October 14, 2020, 1:49 PM CDT

America's oil production will never again reach the record 13 million barrels a day set earlier this year, just before the pandemic devastated global demand, according to Occidental Petroleum Corp.

"It's just going to be too difficult to replace the 2 million barrels a day of production that we've lost, and then to further grow beyond that," Chief Executive Officer Vicki Hollub said Wednesday at the Energy Intelligence Forum. "Over the next three to four years there's going to be moderate restoration of production, but not at high growth."

Occidental is one of the biggest producers in the U.S. shale industry, which added wells at such a rate prior to the spread of Covid-19 that the country became the world's top crude producer, overtaking Saudi Arabia and Russia, ushering in an era that President Donald Trump called "American energy dominance."

U.S. oil production is stuck below it's pre-pandemic high
Shale's debt-fueled expansion came to a juddering halt due to lower gasoline demand and oil prices, but also because of Wall Street's increasing reluctance to fund growth at any cost. Shale operators are increasingly prioritizing cash flow and returns to investors over production growth.

Occidental, which vies with Chevron Corp. to be the biggest producer in the Permian Basin, has been forced to throttle back capital spending, lower growth targets and cut its dividend in a bid to save cash during the downturn. Its finances were already severely challenged by the debt taken on through its $37 billion purchase of rival Anadarko Petroleum Corp. last year.

Hollub said global consumption stands at about 94 billion barrels a day, and it will take a Covid-19 vaccine before it returns to 100 million barrels. Due to cutbacks around the world, supply and demand for oil will likely balance again by the end of 2021, she said.

Unlike some of her European peers, Hollub sees strong long-term demand for oil. "I expect we'll get to peak supply before we get to peak demand," she said. HICKORY IGNORED 02/28/2021 at 11:31 am

"Unlike some of her European peers, Hollub sees strong long-term demand for oil. "I expect we'll get to peak supply before we get to peak demand," she said."

Thanks Ron.
I wonder if she is referring to the balance in the USA, or the world.

It will be a horse-race finish for the whole decade- "and here comes Demand up the backstretch " RON PATTERSON IGNORED 02/28/2021 at 11:26 am

Figure this one out. The EIA's AEO2021 In the past they have always given scenarios based on "Low Price" and "High Price". But now it is "Low Supply" and "High Supply".

They are not making a prediction, they are just saying: "Here is what low supply looks like", and "Here is what high supply looks like". Hell, we already knew that.

Anyway, it is all about tight oil. Everything depends on tight oil. Occidental says tight oil has peaked. But the EIA is taking no chances. They are saying in effect: "Here is what it looks like if tight oil has peaked and here is what it looks like if it has not."

REPLY

[Feb 28, 2021] Bank Of America Expects Fastest Oil Price Rise In 30 Years - OilPrice.com

Feb 28, 2021 | oilprice.com

Oil prices are set to rise by the fastest rate since the 1970s over the next three years, Bank of America said in a new report, joining the growing group of analysts forecasting a return of oil to three-digit territory.

The average price of Brent over the next five years, however, will be between $50 and $70 per barrel, according to the bank, as quoted by The National.

[Feb 28, 2021] OPEC+ Faces Calls to Cool Oil Market Frenzy With Extra Barrels

At some point changes in oil price will became qualitative and all this paper oil speculation designed to keep them down will stop working. It might well be that the moment of declining world production is near or already reached.
There is a finite amount of oil in the ground and with the current size of population it will eventually be depleted. The only question is how soon.
Bloomberg, of course, repeats IEA propaganda as the USA need low oil prices to survive as transportation of goods is mainly done by trucks and to keep it global empire from shrinking. So take the information provided with a grain of salt.
The problem for the USA is that shale oil production (which actually mostly produce light fractions; the fact carefully hidden in EIA statistics) is in decline and can't be revived without huge subsidies and the write down of debt.
Feb 28, 2021 | finance.yahoo.com

From trading houses in Geneva to Wall Street banks, much of the oil world agrees that global markets could use some more barrels. The big question is whether OPEC+ will provide enough of them.

A crude glut that piled up during the pandemic is vanishing fast. Global inventories are plunging at the steepest rate in two decades, according to Morgan Stanley. Prices have rallied to pre-virus levels, while U.S. production has taken a hit from freezing storms. Talk swirls of market supercycles, and even the return of $100 oil.

With the need for more supply evident, traders expect the OPEC+ coalition, led by Saudi Arabia and Russia, will agree to increase production when it meets on March 4, reversing some of the output cuts made last year.

But it's unclear if the group will act vigorously enough. Wary of the virus's persisting threat to demand, Saudi Energy Minister Prince Abdulaziz bin Salman has urged fellow producers to remain "extremely cautious."

If the alliance agrees an output hike that falls short of requirements, however, it could trigger a further price surge

... ... ...

Goldman Sachs Group Inc. sees Brent hitting $75 a barrel in the third quarter as a new commodities supercycle beckons , while trading giant Trafigura Group says it's "very bullish" on the months ahead. Socar Trading SA, a unit of Azerbaijan's state oil company, predicts $80 could be reached this summer and triple digits within two years.

"The fear is that in 12 months there will be a shortage" even if OPEC+ revives output, said Socar Chief Trading Officer Hayal Ahmadzada. "It will drive the price very high, very fast."

... ... ...

Prices are still far below the levels most OPEC nations need to cover government spending , and the International Energy Agency -- a leading forecaster -- anticipates a market setback in the second quarter as a seasonal lull briefly causes inventories to accumulate again.

[Feb 20, 2021] The USA is the only large oil producer which consumes more than it produces and the only one of the three that favors lower prices

Feb 20, 2021 | peakoilbarrel.com

SHALLOW SAND IGNORED 02/15/2021 at 8:49 am

There are a few factors at play IMO.

One factor is a change in one of the three large producer's policies. This large producer is also the only producer that consumes more than it produces and therefore the only one of the three that favors lower prices. I'm referring to USA, of course.

USA shale (and to a much lesser extent GOM) growth kept a lid on prices. Where would prices have been 2010-19 without USA adding 7 million BOPD?

USA growth doesn't appear to be headed toward adding 1 million BOPD or more per year in the future. USA companies are all being pressured to pay dividends. To cover dividends, USA companies need much higher prices. USA companies aren't forecasting growth like past years.

For the first time ever, the USA government is not making oil production growth, either domestic or foreign, a priority. I am not making a "political" statement here trying to rile up the left on the board. Just look at oil prices since the USA election on 11/3. Not a coincidence. Not likely USA will be intervening anytime soon in the ME to protect oil supplies. At least not in a big way.

I have no idea how high oil prices will go. I wonder what happens politically in USA with $3 gasoline? $4 ? Are high gasoline prices no longer a political liability? They weren't for Obama in 2012. But USA was drilling like crazy in 2012. Not sure what happens this time if that occurs, given clear desire of Biden Administration to discourage USA oil production growth.

Another factor is the Western European producers have told the market recently in a very straightforward manner that their oil production is past peak. The CEO's of both BP and RDS have stated this. Total is also transitioning away from oil. Equinor also, it changed its name to remove the word oil.

Next, even though total worldwide demand will still be below a record, demand growth from 2020 to 2021 worldwide will be big, much bigger than from 2009 to 2010 after GFC. What did prices do from the depths of GFC to 2011? Compare GFC stimulus to COVID stimulus.

Last, how many paper barrels are traded per physical barrel? With the increase in paper barrels (I would call them more accurately day trader barrels) volatility in the oil market has grown. The price went negative big time one day last April. It was purely a day trader phenomenon.

Just my thoughts. Feel free to disagree. REPLY HICKORY IGNORED 02/15/2021 at 11:28 am

Everyday you can find headlines that point to a huge transition underway in the world energy scene.
For example today-
-Exclusive: Equinor considers more US asset sales in global strategy revamp, and
-Ford bets $29B on leading the 'electric vehicle revolution'

There is a huge scramble underway to adapt to the conditions these big companies now see coming to be over this decade.
In the meantime, I think that oil demand growth will be very strong over the next 18-24 months.
And as the price of gas in the USA goes up in this rebound phase, the great difference in travel cost/mile between plug-in vehicles (like a Ford mustang) and ICE vehicles will become a widely known fact. Ford (and the other manufacturers) all know that now, even if they were slow on the uptake.

This world is going to change rapidly this decade in so many ways. REPLY ALIMBIQUATED IGNORED 02/15/2021 at 11:34 am

I think a general feeling of optimism that there is light at the end of the Covid 19 tunnel is helping as well. REPLY SURVIVALIST IGNORED 02/15/2021 at 12:23 pm

" For the first time ever, the USA government is not making oil production growth, either domestic or foreign, a priority."

Great observation. I recall when GWB2 went to KSA to 'kiss the ring' and ask for more oil production. I wonder how it will play out next time. REPLY HICKORY IGNORED 02/15/2021 at 12:33 pm

"" For the first time ever, the USA government is not making oil production growth, either domestic or foreign, a priority."

Of much greater impact- For the first time ever, the major oil companies are not making oil production growth, either domestic or foreign, a priority. REPLY SHALLOW SAND IGNORED 02/15/2021 at 1:11 pm

Both are happening simultaneously.

Both are making a big impact. REPLY SHALLOW SAND IGNORED 02/15/2021 at 1:12 pm

Trump jumped on KSA when oil prices went up during his admin.

Will Biden? REPLY PAOIL IGNORED 02/15/2021 at 1:57 pm

The Biden administration is under pressure to see oil prices rise. The green agenda of wind, solar and EV's is only cost competitive with fossil fuels in two ways: 1) green subsidies; or 2) higher oil prices. Until high oil prices threaten the economy, the Biden administration will enact policies that gladly see oil prices rise. And with the oil price experience of 2009 to 2014 still relatively fresh in people's minds, the Biden administration is not afraid of $60, $70, or even $90 oil. They are hoping for it. REPLY HICKORY IGNORED 02/15/2021 at 2:13 pm

"$60, $70, or even $90 oil. They are hoping for it."
As are the people working in the oil industry. REPLY STEPHEN HREN IGNORED 02/15/2021 at 4:59 pm

As far as anyone on this board is considered, the higher the price of oil the better. Let's phase out oil production in the US over the next three decades and keep the price high the entire time so the producers make money and people are incentivized to switch to less polluting EVs. It'll be like the TRC for the whole country but heading towards a bottleneck. Auction drilling rights so only the best wells get drilled. Keep restricting drilling in a phased manner, enact a gradually lower cap on the number of wells that can be drilled until it goes to zero in twenty years and then maintain these stripper wells until they are empty. REPLY PAULO IGNORED 02/15/2021 at 6:33 pm

Can you imagine any US party that would actually dare to promote a higher cost for gasoline? Personally, I think there should be a big carbon tax and fuel tax surcharge imposed to fix infrastructure, but whatever.

Confession: I am not anti oil. My son works in the Cdn industry. I just think people drive more than they should and that energy should be priced higher. Win win. LLOYD IGNORED 02/16/2021 at 3:55 pm

So $90 oil is good for:
-Saudi
-Democrats
-Shallow
-Tesla
-Renewables

But not for:
-Rednecks with huge vehicles

The election calculus gets tricky here. REPLY ALIMBIQUATED IGNORED 02/16/2021 at 4:09 am

PAOIL-
I disagree that high oil prices are needed to make green energy competitive, because oil is already very expensive energy, which is why it is rarely used to generate electricity. Wind and solar compete against coal, nuclear and gas, not oil.

Oil shines as a way to store energy in a moving vehicle and power internal combustion engines. As such, it really competes with batteries, not with the rest of the energy market at all. And batteries still have a tiny impact on oil markets.

So higher oil prices might be useful for the EVs, but not particularly useful for wind and solar. But in reality, the EV market is suffering from chronic battery shortages as manufacturers struggle to build factories fast enough to meet 20% or more annual demand growth. The oil price really isn't an issue, and raising oil prices wouldn't help.

If Biden's goal was to make EVs more competitive, the government has an easy way to raise oil prices, which is to raise taxes at the pump. This would be more or less neutral to the oil price from the producer point of view. It would just encourage exports and discourage imports, improving America's balance of payments. But it hasn't worked in Europe, where taxes are over 60% of the price at the pump. The most effective way to promote EVs is subsidizing the purchase price of the vehicle. That has been very effective.

Hoping that the American consumer will keep oil demand up internationally no longer makes sense, as America's relative economic importance has been falling since 1945. I'm not sure what the previous administration was trying to accomplish by talking down the price. REPLY JEFF IGNORED 02/16/2021 at 5:13 am

"But it hasn't worked in Europe, where taxes are over 60% of the price at the pump. "

So average fuel economy in Europe and US is the same? REPLY EULENSPIEGEL IGNORED 02/16/2021 at 8:47 am

I have driven a Toyota Corolla on an 4 week US trip.

With an engine for the US market – you can't buy this modell in Europe. It was very steady going – and thirsty. At least for european thinking, we used 7-8 litres / 100 km by mostly driving country roads in cruise control at the given speed (didn't wanted to deal with US police). Slow for my feeling, I'm driving faster in Germany.

And use only round about 6 litres with a car of similar size, which is a bit faster than this Corolla – with this lazy slow driving I would use below 5 litres with my car (and get a lot of flashing).

So there is a difference in fuel economy. ALIMBIQUATED IGNORED 02/16/2021 at 5:55 pm

Jeff –
That was a little unclear on my part. I meant high gasoline prices haven't gotten people to buy, EVs, but direct subsidies seem to work.

It's also worth mentioning that $120 oil didn't really dent consumption much, and certainly didn't inspire many to buy EVs.

In my opinion liquid fuel is cheap. I mean I think that consumers aren't willing to make significant changes in behavior even if prices increase significantly. S IGNORED 02/17/2021 at 3:05 am

Alimbiquated, as an European in a well-to-do country, the matter of car buying is somewhat more complicated than just gasoline price. E.g. fully electric car availibily, their price, distances that need to be travelled (range anxiety in other words) are still important. Hybrid cars are also rather expensive. Here it seems that these two car groups are selling better and better, public charging points are increasing etc so we will see what happens. As I have a full electric car I got relatively cheaply (still a bit of ouch ) I think I will not get a petroleum or diesel car ever J HOUSMAN IGNORED 02/18/2021 at 4:08 pm

"The green agenda of wind, solar and EV's is only cost competitive with fossil fuels in two way" Three ways, actually. The third is when we finally start to realize the actual cost of destroying the environment by burning fossil fuels REPLY MATT MUSHALIK IGNORED 02/15/2021 at 10:01 pm

Global crude oil may have peaked 2018-19 before Covid

https://pbs.twimg.com/media/EsHyv1FVQAIDRAd?format=jpg

If ever we come out of the Covid tunnel, there could be surprises ahead REPLY POLLUX IGNORED 02/15/2021 at 5:30 am

Strike threatens shutdown at Norway's giant Johan Sverdrup offshore oilfield

A dozen workers that are members of the Safe union are threatening to down tools at the Mongstad terminal from midnight on Monday if talks with the industry body aimed at breaking an impasse over a 2020 wage settlement with Equinor fail.

Other fields that could be impacted include Kvitebjorn, Visund, Byrding, Fram and Valemon, with gas output exports from the Troll area also in danger of being hit. REPLY MATT MUSHALIK IGNORED 02/15/2021 at 8:05 am

With an excursion to Gabon and Azerbaijan

15/2/2021
Exxon-Mobil's refinery closure in Australia: peak oil context
https://crudeoilpeak.info/exxon-mobils-refinery-closure-in-australia-peak-oil-context REPLY TULSAGEO IGNORED 02/15/2021 at 9:37 am

An interesting scenario showing what happens when demand outstrips supply due to lack of investment is playing out right now in Oklahoma and Texas. There has been a lack of investment in the region last year due to the drop in prices, and in Oklahoma, the slowing of investment has been happening for a few years. The massive cold snap that descended on the region made spot prices (not the futures price you can look up on Bloomberg etc) rise from $2 an MMBTU, to $5, to $9, to $300, to $600, all in the course of a week. It is currently higher. The cold weather has caused shut ins of wells, and processing plants. You have a situation where demand is increasing but supply cannot keep up. I know this is a micro problem that will resolve itself as temperatures increase, in the coming weeks, but this could be an example of what oil prices might see in the near future. There has been a lack of investment for years in large projects, if demand rebounds quickly as vaccine roll out continues, we will not be able to turn back on new production fast enough to keep prices from running higher, resulting in some temporary ridiculous price spikes. REPLY SHALLOW SAND IGNORED 02/15/2021 at 10:31 am

I saw this resulted in a lot of wells that have been shut in for 5-10 years being reactivated. REPLY GREENBUB IGNORED 02/15/2021 at 8:25 pm

Shallow, are you affected by the cold snap or power outages? REPLY SHALLOW SAND IGNORED 02/16/2021 at 12:41 am

Yes. We have about 10% frozen off. Our pumpers decided what to drain and shut in, and what to keep on. They are real pros. You can't find better.

Our people are the key. We owe them bigtime. They have been out there in this stuff keeping the rest from freezing.

We will be good soon, temps will come up.

Keep in mind, with one exception, our pumpers are 50+ years old.

Are there millennials that are going to keep the strippers going 24/7/365?

Takes special people. REPLY STEPHEN HREN IGNORED 02/16/2021 at 4:33 pm

No. I work in construction biz. 90% of twenty somethings can't work five minutes without looking at their phones. They are useless. All my buddies have the same complaint. REPLY OVI IGNORED 02/15/2021 at 9:49 pm

An interesting clip from this article:
"This isn't a consensus view yet but it's quickly coming. Two heavyweights in the past week have stepped up and called out the problem.

The first was Goldman Sach's Jeff Currie, who called the bull market in the early 2000s.

"I want to be long oil and hang on for the ride," Currie said in an interview with S&P Global Platts on Feb. 5, warning "there is a lot of upside here."

"Is it back to $150/b? I don't know as it is a macro repricing we are talking about and everything needs to reprice."

The other is JPMorgan and Marko Kolanovic, who said Friday that oil and commodities appear to be entering a supercycle.

"We believe that the new commodity upswing, and in particular oil up cycle, has started," the JPMorgan analysts said in their note. "The tide on yields and inflation is turning."

"We believe that the last supercycle peaked in 2008 (after 12 years of expansion), bottomed in 2020 (after a 12-year contraction) and that we likely entered an upswing phase of a new commodity supercycle."

https://www.forexlive.com/news/!/what-an-incredible-turnaround-for-oil-prices-20210215 REPLY RON PATTERSON IGNORED 02/16/2021 at 2:31 pm

WTI hit $60 today. How come high oil prices seem to be doing nothing for the shale business.

Anyone? Anyone? Bueller? Dennis? 😉

REPLY STEPHEN HREN IGNORED 02/16/2021 at 4:34 pm

They're too busy spending all their earnings REPLY OVI IGNORED 02/16/2021 at 6:45 pm

Drillers Trying New Pricing Structure

Shale driller bases rig lease costs on well performance

Rigs are typically rented out at a daily rate for a period of a few months, which has meant less money for oilfield service providers as drilling becomes quicker and more efficient. So Helmerich & Payne Inc. is touting a new pricing model based on overall well performance, and almost a third of its U.S. rigs are now being leased on that basis, CEO John Lindsay said Wednesday on an earnings call.

In the Permian Basin of West Texas and New Mexico, home to the busiest shale patch in North America, operators are now drilling the same number of wells with 180 rigs as they were with 300 rigs a year ago, according to industry data provider Lium.

https://www.worldoil.com/news/2021/2/16/shale-driller-bases-rig-lease-costs-on-well-performance REPLY RON PATTERSON IGNORED 02/16/2021 at 8:45 pm

Yeah okay. That's all great. But what I was looking at was oil production. It's going down, not up. With these prices oil production should be increasing, not decling. Why is that? After all, that's really all that matters.

[Feb 20, 2021] Did the USA eneterd that stage of permanet decline of oil production?

Feb 20, 2021 | peakoilbarrel.com

OVI IGNORED 02/16/2021 at 10:19 pm

Good to hear from you Ron.

In ShaleProfile published today, the Permian is showing a slight bump up in production. It may have hit bottom. The latest STEO is showing US production dropping till June and July before beginning to increase. Looks like many more LTO wells have to be put on line before the decline from all of the current wells can be offset. OVI IGNORED 02/16/2021 at 6:36 pm

U.S. oil output plunges as Arctic air freezes Permian shale fields

(Bloomberg) –U.S. oil production has plunged by more than 2 million barrels a day as the coldest weather in 30 years brings havoc to key producing states that rarely have to deal with frigid Arctic blasts.

Oil traders and company executives, who asked not to be identified, lifted their forecasts for supply losses from an earlier estimate on Monday of 1.5 million to 1.7 million barrels. They said the losses were particularly large in the Permian Basin, the most prolific U.S. oil region, which straddles West Texas and southeast New Mexico. Output cuts were also significant in the Eagle Ford, in southern Texas, and the Anadarko basin in Oklahoma.

Two million barrels would be the equivalent of about 18% of overall U.S. crude production, based on the most recent government data.

Wonder if this drop will show up as a drop in US inventories on Feb 24. While production is down, so is driving.

https://www.worldoil.com/news/2021/2/16/us-oil-output-plunges-as-arctic-air-freezes-permian-shale-fields WATCHER IGNORED 02/17/2021 at 2:30 am

Reminder back in the day in the Bakken they had to equip their onsite huge storage of fracking water with heaters, because NoDak is cold. One suspects the Permian is not equipped with that and widespread frozen pipe damage can be expected. HOLE IN HEAD IGNORED 02/18/2021 at 8:31 am

From the Blog of Mike Shellman , TSHTF in Texas . He says about 3.5 million barrels will go off line and for how long don't know .
https://www.oilystuffblog.com/single-post/update-from-texas?postId=602d1a9d98be8f0017126cd1 HHH IGNORED 02/18/2021 at 10:28 pm

There is a lot of reasons to be bullish on oil at the moment. There is one problem lurking over next 4-5 months though. Treasury will shrink the TGA by about 1 trillion USD. Most assume this will be bullish for most things other than the dollar. But as this cash gets pushed into the economy/markets. Banks are forced to hold more collateral, mainly T bills. Short end of treasury yield curve is without a doubt going negative as banks have to have collateral to except all this cash. Likely another collateral shortage in the making (repo blowup) Fed would likely have to cut QE purchases to get yields back into positive territory. Which is no different than hiking interest rates on an economy with a massive debt load that can't handle higher rates.

Most of the US government debt is on short end of the curve. Therefore most of the debt will have a negative yield. This would likely end the reflation narrative/ inflation narrative we currently have. It's likely dollar bullish because the collateral underpinning everything just went negative yield. And if it turns out to be highly dollar bearish. Well lookout oil prices would be well beyond the moon.

[Feb 20, 2021] Russia Oil Output Below OPEC+ Quota

Feb 20, 2021 | peakoilbarrel.com

POLLUX IGNORED 02/17/2021 at 1:39 pm

Russia Oil Output Below OPEC+ Quota Amid Cold Siberian Weather
The OPEC+ member pumped 1.38 million tons a day of crude and condensate on average from Feb. 1 to 15, according to two people with knowledge of production data, who spoke on condition of anonymity. That equates to a daily rate of 10.115 million barrels, about 44,000 barrels lower than January's level.

Rosneft oil production to decline as it parts with legacy assets
Russia's Rosneft is braced for a decline in oil production this year despite a gradual removal of output restrictions that have been imposed on the company by the Kremlin under its commitments to members of the Opec+ alliance.

Speaking on a conference call on Friday, Rosneft first vice president Eric Liron said the oil giant expects annual output of oil and condensate to fall by 5% in 2021.

In 2020, Rosneft reported an 11% annual decline in oil and condensate production to 4.1 million barrels per day and a 6% drop in gas output to 63 billion cubic metres.

[Feb 10, 2021] Short summary of Saudi Arabia

Feb 10, 2021 | peakoilbarrel.com

POLLUX IGNORED 02/09/2021 at 6:03 am

Short summary of Saudi Arabia

The economy is in bad shape:

"Saudi Arabia projected its 2020 budget deficit will soar to around $79 billion,
Riyadh has posted a budget deficit every year since the last oil price rout in 2014, prompting the petro-state to borrow heavily and draw from its reserves to plug the shortfall."
https://www.france24.com/en/live-news/20201215-saudi-says-2020-budget-deficit-will-surge-to-79-bn-amid-pandemic

Oil rig count is falling fast:

https://pbs.twimg.com/media/EsmaAwkXEAg91D7?format=jpg&name=large

Saudi crude stocks fell to 143 mb in November 2020 (17-year low) from over 300 mb in 2015:

https://www.hellenicshippingnews.com/rising-saudi-crude-exports-leaves-domestic-stocks-at-17-year-low/

The few drilling rigs is (probably) located in Ghawar:

"Further work programs on fields such as Khursaniyah, and legacy assets like Khurais and Abqaiq that need workovers and rehabilitation, are being delayed, the source said, whereas at Aramco's low-cost giant fields such as Ghawar -- the world's largest -- production is increasing.

"There isn't a place in Ghawar that doesn't have a drill, it is very dense. They're beating the hell out of it.""

and contractors are not being paid in time:

"Aramco's tighter spending has resulted in several international contractor companies working on pipeline and offshore projects not getting paid for several months, three sources told S&P Global Platts. The payments are set to be delayed further, with Aramco not intending to make any payments to these companies until 2021, a source added."
https://www.hellenicshippingnews.com/feature-saudi-aramco-faces-tough-2021-as-rivals-race-for-oil-capacity/

Oil production was cut by 1 mb/d this month and is currently just over 8 mb/d, not far from Euan Mearns forecast in 2007:
http://theoildrum.com/node/9321#comment-904645

Population has grown from 20 million in 2000 to 35 million in 2021:
https://www.worldometers.info/world-population/saudi-arabia-population/

Groundwater is falling fast:

"Groundwater resources of Saudi Arabia are being depleted at a very fast rate," declared the UN Food and Agriculture Organisation as far back as 2008. "Most water withdrawn comes from fossil deep aquifers, and some predictions suggest that these resources may not last more than about 25 years." Saudi Arabia leads the world in the volume of desalinated water it produces, and now operates 31 desalination plants. Desalinated water, as distinct from naturally occurring fresh water, makes up 50% of water consumed in Saudi Arabia. The remaining 50% is pulled from groundwater."
https://www.theguardian.com/cities/2019/aug/06/oil-built-saudi-arabia-will-a-lack-of-water-destroy-it

So, what is done to solve the problem?

"According to Bin Salman, who is also the chairman of the Neom company board of directors, construction of The Line will start in the first quarter of 2021.
The 100-mile-long (170 kilometres) mega-city will consist of connected communities – which it calls "city modules" – and link the Red Sea coast with the north-west of Saudi Arabia.
In a statement, The Line's developers said its communities will be "cognitive" and powered by AI, which will "continuously be learning predictive ways to make life easier"."
https://www.dezeen.com/2021/01/13/line-saudi-arabia-170-kilometres-long-city-neom/

What could possibly go wrong? REPLY HOLE IN HEAD IGNORED 02/09/2021 at 6:54 am

Pollux , thanks for the info and update . What could possibly go wrong ? Answer 1 ;: More days for some princes to spend at the Ritz Carlton . Answer 2 ; Heads roll for MBS and company . :-0 REPLY POLLUX IGNORED 02/09/2021 at 7:51 am

The situation is not better in Kuwait:

Economy is in bad shape:

"Source says government has transferred the last of its performing assets to wealth fund in exchange for cash.
Years of lower oil prices have forced the Kuwaiti government to burn through its cash reserves while a festering political standoff has prevented it from borrowing.
"It's a very immediate crisis now, not a long-term one like it was before," said Nawaf Alabduljader, a business management professor at Kuwait University."
https://www.arabianbusiness.com/politics-economics/458217-kuwait-facing-immediate-crisis-as-it-seeks-cash-to-plug-deficit

And oil projects are getting canceled:

"KOC's Board of Directors has decided to cancel the heavy crude project that involves 11 oil wells although it has been awarded recently," the report said without naming the company that had won that contract.
It said KOC and other local oil firms intend to freeze more projects in line with instructions by the Kuwait Petroleum Corporation to slash capital expenditure "
https://www.hellenicshippingnews.com/projects-kuwait-scraps-400mln-oil-project-report/

REPLY HOLE IN HEAD IGNORED 02/09/2021 at 8:06 am

Pollux , do you have any info on Ghawar ? As they say " As goes Ghawar ,so goes the world " . REPLY POLLUX IGNORED 02/09/2021 at 8:28 am

True, or as Matthew Simmons wrote in "Twilight in the Desert": "Ghawar is the king of Saudi oilfields. There is no "crown prince" waiting to assume the throne. It is the same in an oil basin as it is in chess: Once the king has fallen, the game is over."

Sorry, no new info on Ghawar but the situation was pretty bad in north Ghawar over twelve years ago so it is probably not better now: "If the area with remaining oil were an island, it would be time to look for a boat."
http://satelliteoerthedesert.blogspot.com/2008/06/north-ghawar-updated.html REPLY HOLE IN HEAD IGNORED 02/09/2021 at 1:35 pm

Just a query for some old TOD carry overs . There use to be "Memmel" who use to post a lot on KSA and stuff . Any info on him . Tks Pollux for your response . We are in agreement . REPLY WEEKENDPEAK IGNORED 02/09/2021 at 4:44 pm

I loved that post on TOD on Ghawar by Joules.

Has anyone ever done an update on it – that would be fascinating. When I look at google earth I see lots of dots but I can't tell injection wells from extraction wells so I have frankly no clue what I am looking at REPLY OVI IGNORED 02/09/2021 at 5:15 pm

HH

The latest data that was published on Ghawar came from the Aramco IPO. They included a table which listed their primary oil fields along with their production. The following statement was included:

The Ghawar field has accounted for more than half of the total cumulative crude oil production in the Kingdom but still maintained MSC of 3.800 million barrels of crude oil per day as at 31 December 2018.

In a presentation given by Nawaf Obaid in Nov 2006, the following statement was made: Without "maintain potential" drilling to make up for production, Saudi oil fields would have a natural decline rate of a hypothetical 8%. As Saudi Aramco has an extensive drilling program with a budget running in the billions of dollars, this decline is mitigated to a number close to 2%.

This raises the question of whether with today's reduced income, can Aramco maintain its extensive drilling program to reduce the natural decline rate to 2%.

REPLY JEAN-FRANÇOIS FLEURY IGNORED 02/09/2021 at 6:47 pm

Thank you for the analysis. That's very important to know for European oil supply. Do you consider to do the same with Norvegian production?

[Feb 02, 2021] Drilled Uncompleted Wells Won't Save U.S. Oil Production by Art Berman

Notable quotes:
"... U.S. oil production has fallen more than 2 million barrels per day since March 2020. It will fall much lower. ..."
"... EIA's forecast is impossible. It does not account for the low level of drilling and for the high decline rates of U.S. wells. It seems more likely that production will drop by at least another million barrels per day below October's level later in 2021. ..."
Feb 02, 2021 | www.artberman.com

U.S. oil production has fallen more than 2 million barrels per day since March 2020. It will fall much lower.

Output has fallen from almost 13 mmb/d in late 2019 to below 10.5 mmb/d in October 2020 (Figure 1). EIA forecasts an increase in November to 11.0 mmb/d and then an average level of about 11.1 mmb/d for the rest of 2021.

... ... ...

EIA Forecast is Impossible

EIA's forecast is impossible. It does not account for the low level of drilling and for the high decline rates of U.S. wells. It seems more likely that production will drop by at least another million barrels per day below October's level later in 2021.

... ... ...

What About DUCs?

Many reasonably expect that DUCs (drilled uncompleted wells) provide a solution to the lag between drilling and production. There are, after all, about 5,800 DUCs in the main U.S. tight oil plays. These are already drilled and could be converted into producing wells for the cost of completion which is about half the total well cost.

Most DUCs, however, are uncompleted for a reason namely, that their owners don't believe that their performance will be as good as wells that they chose to complete instead.

... It doesn't matter whether wells are newly drilled and completed or DUCs -- there are simply too few wells being added to maintain present levels of production.

... ... ...

It is unlikely that the tight oil business will recover from the effect of Covid-19 and lower oil prices. Markets will continue to send higher price signals until rig counts recover to the 800 or so rigs needed to support EIA's 11 mmb/d forecast.

The public and many investors have the peculiar belief that the world will be just fine without oil. The world will be fine. It has survived meteor impacts and mass extinctions but humans are more fragile. Higher oil prices are the last thing the global economy needs right now.

Javier JANUARY 17, 2021 AT 11:56 AM REPLY

Art, I couldn't agree more. Commodities are rising and oil price is set to rise, in the midst of a global economic crisis. A perfect storm is brewing and no amount of money printing can fix that. If things take a turn for the worst the economic crisis could be followed by a monetary crisis. Energy per capita and standard of living are going down for the majority no matter what.

That could easily add a social crisis whose first signs we are all seeing. Peter Turchin predicted the increase in social instability 10 years ago in Nature Vol 46, 4 February 2010, pg 608.

The pandemic was just a catalyst for what was already brewing. We are living in interesting times.

[Feb 02, 2021] The natural decline rate of Ghawar was 8% per annum but continuous drilling reduced that to 2%.

Notable quotes:
"... "There isn't a place in Ghawar that doesn't have a drill, it is very dense. They're beating the hell out of it." ..."
"... Around 2005, speculation was that Ghawar was producing somewhere between 5 Mb/d and 5.5 Mb/d. To get to 3.8 Mb/d by 2018, implies a roughly 2% annual decline rate. This turns out to be consistent with what some SA spokesperson said around 2005. Something along the lines of "The natural decline rate of Ghawar was 8% per annum but continuous drilling reduced that to 2%." ..."
Feb 02, 2021 | peakoilbarrel.com

POLLUX 01/20/2021 at 8:32 am

https://www.spglobal.com/platts/en/market-insights/latest-news/oil/012021-feature-saudi-aramco-faces-tough-2021-as-rivals-race-for-oil-capacity

Further work programs on fields such as Khursaniyah, and legacy assets like Khurais and Abqaiq that need workovers and rehabilitation, are being delayed, the source said, whereas at Aramco's low-cost giant fields such as Ghawar -- the world's largest -- production is increasing.

"There isn't a place in Ghawar that doesn't have a drill, it is very dense. They're beating the hell out of it."

OVI 01/20/2021 at 4:53 pm

Pollux,

When Saudi Aramco went public, this statement was in their IPO.

"The Company believes that the Ghawar field is the largest oil field in the world in terms of conventional proved reserves, totaling 58.32 billion barrels of oil equivalent as at 31 December 2018 for the Concession term, including 48.25 billion barrels of liquids reserves.

The Kingdom's original reserves of the Ghawar field increased from 19.0 billion barrels of crude oil in 1951G, when production began at the field, to 127.7 billion barrels of crude oil in 2018.

The Ghawar field has accounted for more than half of the total cumulative crude oil production in the Kingdom but still maintained MSC of 3.800 million barrels of crude oil per day as at 31 December 2018."

Around 2005, speculation was that Ghawar was producing somewhere between 5 Mb/d and 5.5 Mb/d. To get to 3.8 Mb/d by 2018, implies a roughly 2% annual decline rate. This turns out to be consistent with what some SA spokesperson said around 2005. Something along the lines of "The natural decline rate of Ghawar was 8% per annum but continuous drilling reduced that to 2%."

[Jan 26, 2021] USA domestic petroleum liquids production is scheduled to drop to 5 million bbl / day by july.

Jan 26, 2021 | www.moonofalabama.org

Dr. George W Oprisko , Jan 26 2021 0:44 utc | 170

How will the USA regain its advantage in this world?

It will not.....

USA domestic petroleum liquids production is scheduled to drop to 5 million bbl / day by july. Shale is loss making at prices less than $80 / bbl. Investors/banks have wised up. $$$ has dried up. There are no greater fools with $$ to burn... Drop in production ~ 45% / annum exponential declining function.

US corporate governance favors quick returns via share buybacks stock kiting schemes instead of product development. Boeing / GE / Lockheed / and other Fortune 500 firms not hiring engineers, not developing new products. Experienced engineers going to China for work or retiring. Shortly, US will not have enough petroleum geologists, mining engineers, software engineers, hardware engineers, electrical engineers, civil engineers, chemical engineers, etc to run it's industries.

Lawyers, political scientists, historians, economists... can't do the math.... are useless....

INDY

[Jan 01, 2021] Military And Political Trends Of 2020 That Will Shape 2021 - ZeroHedge

Jan 01, 2021 | www.zerohedge.com

The past year began with the assassination of the Iranian military genius General Qasem Soleimani by the United States, and it ended with the murder of the prominent scholar Mohsen Fakhrizadeh by the Israelis. In early January, Iran, expecting another aggressive action from the West, accidently shot down a Ukrainian civil aircraft that had inexplicably altered its course over Tehran without request nor authorization. Around the same time, Turkey confirmed the deployment of its military in Libya, beginning a new phase of confrontation in the region, and Egypt responding with airstrikes and additional shows of force. The situation in Yemen developed rapidly: taking advantage of the Sunni coalition's moral weakness, Ansar Allah achieved significant progress in forcing the Saudis out of the country in many regions. The state of warfare in northwestern Syria has significantly changed, transforming into the formal delineation of zones of influence of Turkey and the Russian-Iranian-Syrian coalition. This happened amid, and largely due to the weakening of U.S. influence in the region. Ankara is steadily increasing its military presence in the areas under its responsibility and along the contact line. It has taken measures to deter groups linked to Al-Qaeda and other radicals. As a result, the situation in the region is stabilizing, which has allowed Turkey to increasingly exert control over most of Greater Idlib.

ISIS cells remain active in the eastern and southern Syrian regions. Particular processes are taking place in Quneitra and Daraa provinces, where Russian peace initiatives were inconclusive by virtue of the direct destructive influence of Israel in these areas of Syria. In turn, the assassination of Qasem Soleimaniin resulted in a sharp increase in the targeting of American personnel, military and civil infrastructure in Iraq. The U.S. Army was forced to regroup its forces, effectively abandoning a number of its military installations and concentrating available forces at key bases. At the same time, Washington flatly rejected demands from Baghdad for a complete withdrawal of U.S. troops and promised to respond with full-fledged sanctions if Iraq continued to raise this issue. Afghanistan remains stable in its instability. Disturbing news comes from Latin America. Confrontation between China and India flared this year, resulting in sporadic border clashes. This situation seems far from over, as both countries have reinforced their military posture along the disputed border. The aggressive actions of the Trump administration against China deepen global crises, which has become obvious not only to specialists but also to the general public. The relationship between the collective West and the Russian Federation was re-enshrined in "the Cold War state", which seems to have been resurrected once again.

The turbulence of the first quarter of 2020 was overshadowed by a new socio-political process – the corona-crisis, the framework of which integrates various phenomena from the Sars-Cov2 epidemic itself and the subsequent exacerbation of the global economic crisis. The disclosure of substantial social differences that have accumulated in modern capitalist society, lead to a series of incessant protests across the globe. The year 2020 was accompanied by fierce clashes between protesters professing various causes and law enforcement forces in numerous countries. Although on the surface these societal clashes with the state appear disassociated, many share related root causes. A growing, immense wealth inequality, corruption of government at all levels, a lack of any meaningful input into political decision making, and the unmasking of massive censorship via big tech corporations and the main stream media all played a part in igniting societal unrest.

In late 2019 and early 2020 there was little reason for optimistic projections for the near future. However, hardly anyone could anticipate the number of crisis events and developments that had taken place during this year. These phenomena affected every region of the world to some extent.

Nevertheless, Middle East has remained the main source of instability, due to being an arena where global and regional power interests intertwine and clash. The most important line of confrontation is between US and Israel-led forces on the one hand, and Iran and its so called Axis of Resistance. The opposing sides have been locked in an endless spiral of mutual accusations, sanctions, military incidents, and proxy wars, and recently even crossed the threshold into a limited exchange of strikes due to the worsening state of regional confrontation. Russia and Turkey, the latter of which has been distancing itself from Washington due to growing disagreements with "NATO partners" and changes in global trends, also play an important role in the region without directly entering into the confrontation between pro-Israel forces and Iran.

As in the recent years, Syria and Iraq remain the greatest hot-spots. The destruction of ISIS as a terrorist state and the apparent killing of its leader Abu Bakr al-Baghdadi did not end its existence as a terror group. Many ISIS cells and supporting elements actively use regional instability as a chance to preserve the Khalifate's legacy. They remain active mainly along the Syria-Iraq border, and along the eastern bank of the Euphrates in Syria. Camps for the temporary displaced and for the families and relatives of ISIS militants on the territory controlled by the Syrian Democratic Forces (SDF) in north-eastern Syria are also breeding grounds for terrorist ideology. Remarkably, these regions are also where there is direct presence of US forces, or, as in the case of SDF camps, presence of forces supported by the US.

The fertile soil for radicalism also consists of the inability to reach a comprehensive diplomatic solution that would end the Syrian conflict in a way acceptable to all parties. Washington is not interesting in stabilizing Syria because even should Assad leave, it would strengthen the Damascus government that would naturally be allied to Russia and Iran. Opposing Iran and supporting Israel became the cornerstone of US policy during the Trump administration. Consequently, Washington is supporting separatist sentiments of the Kurdish SDF leadership and even allowed it to participate in the plunder of Syrian oil wells in US coalition zone of control in which US firms linked to the Pentagon and US intelligence services are participating. US intelligence also aids Israel in its information and psychological warfare operations, as well as military strikes aimed at undermining Syria and Iranian forces located in the country. In spite of propaganda victories, in practice Israeli efforts had limited success in 2020 as Iran continued to strengthen its positions and military capabilities on its ally's territory. Iran's success in establishing and supporting a land corridor linking Lebanon, Syria, Iraq, and Iraq, plays an important role. Constant expansion of Iran's military presence and infrastructure near the town of al-Bukamal, on the border of Iraq and Syria, demonstrates the importance of the project to Tehran. Tel-Aviv claims that Iran is using that corridor to equip pro-Iranian forces in southern Syria and Lebanon with modern weapons.

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The Palestinian question is also an important one for Israel's leadership and its lobby in Washington. The highly touted "deal of the century" turned out to be no more than an offer for the Palestinians to abandon their struggle for statehood. As expected, this initiative did not lead to a breakthrough in Israeli-Palestinian relations. Rather the opposite, it gave an additional stimulus to Palestinian resistance to the demands that were being imposed. At the same time, Trump administration scored a diplomatic success by forcing the UAE and Bahrain to normalize their relations with Israel, and Saudi Arabia to make its collaboration with Israel public. That was a historic victory for US-Israel policy in the Middle East. Public rapprochement of Arab monarchies and Israel strengthened the positions of Iran as the only country which not only declares itself as Palestine's and Islamic world's defender, but actually puts words into practice. Saudi Arabia's leadership will particularly suffer in terms of loss of popularity among its own population, already damaged by the failed war in Yemen and intensifying confrontation with UAE, both of which are already using their neighbor's weakness to lay a claim to leadership on the Arabian Peninsula.

The list of actors strengthening their positions in the Red Sea includes Russia. In late 2020 it became known that Russia reached an agreement with Sudan on establishing a naval support facility which has every possibility to become a full-blown naval base. This foothold will enable the Russian Navy to increase its presence on key maritime energy supply routes on the Red Sea itself and in the area between Aden and Oman straits. For Russia, which has not had naval infrastructure in that region since USSR's break-up, it is a significant diplomatic breakthrough. For its part. Sudan's leadership apparently views Russia's military presence as a security factor allowing it to balance potential harmful measures by the West.

During all of 2020, Moscow and Beijing continued collaboration on projects in Africa, gradually pushing out traditional post-colonial powers in several key areas. The presence of Russian military specialists in the Central African Republic where they assist the central government in strengthening its forces, escalation of local conflicts, and ensuring the security of Russian economic sectors, is now a universally known fact. Russian diplomacy and specialists are also active in Libya, where UAE and Egypt which support Field Marshal Khaftar, and Turkey which supports the Tripoli government, are clashing. Under the cover of declarations calling for peace and stability, foreign actors are busily carving up Libya's energy resources. For Egypt there's also the crucial matter of fighting terrorism and the presence of groups affiliated with Muslim Brotherhood which Cairo sees as a direct threat to national security.

The Sahel and the vicinity of Lake Chad remain areas where terror groups with links to al-Qaeda and ISIS remain highly active. France's limited military mission in the Sahara-Sahel region has been failure and could not ensure sufficient support for regional forces in order to stabilize the situation. ISIS and Boko-Haram continue to spread chaos in the border areas between Niger, Nigeria, Cameroun, and Chad. In spite of all the efforts by the region's governments, terrorists continue to control sizable territories and represent a significant threat to regional security. The renewed conflict in Ethiopia is a separate problem, in which the federal government was drawn into a civil war against the National Front for the Liberation of Tigray controlling that province. The ethno-feudal conflict between federal and regional elites threatens to destabilize the entire country if it continues.

The explosive situation in Africa shows that post-colonial European powers and the "Global Policeman" which dominated that continent for decades were not interested in addressing the continent's actual problem. Foreign actors were mainly focused on extracting resources and ensuring the interests of a narrow group of politicians and entities affiliated with foreign capitals. Now they are forced to compete with the informal China-Russia bloc which will use a different approach that may be a described as follows: Strengthening of regional stability to protect investments in economic projects. Thus it is no surprise that influential actors are gradually losing to new but more constructive forces.

Tensions within European countries have been on the rise during the past several years, due to both the crisis of the contemporary economic paradigm and to specific regional problems such as the migration crises and the failure of multiculturalism policies, with subsequent radicalization of society.

Unpleasant surprises included several countries' health care and social protection networks' inability to cope with the large number of COVID-19 patients. Entire systems of governance in a number of European countries proved incapable of coping with rapidly developing crises. This is true particularly for countries of southern Europe, such as Italy, Spain, Portugal, and Greece. Among eastern European countries, Hungary's and Romania's economies were particularly badly affected. At the same time, Poland's state institutions and economy showed considerable resilience in the face of crisis. While the Federal Republic of Germany suffered considerable economic damage in the second quarter of 2020, Merkel's government used the situation to inject huge sums of liquidity into the economy, enhanced Germany's position within Europe, and moreover Germany's health care and social protection institutions proved capable and sufficiently resilient.

Coronavirus and subsequent social developments led to the emergence of the so-called "Macron Doctrine" which amounts to an argument that EU must obtain strategic sovereignty. This is consistent with the aims of a significant portion of German national elites. Nevertheless, Berlin officially criticized Macron's statements and has shown willingness to enter into a strategic partnership with Biden Administration's United States as a junior partner. However, even FRG's current leadership understands the dangers of lack of strategic sovereignty in an era of America's decline as the world policeman. Against the backdrop of a global economic crisis, US-EU relations are ineluctably drifting from a state of partnership to one of competition or even rivalry. In general, the first half of 2020 demonstrated the vital necessity of further development of European institutions.

The second half of 2020 was marked by fierce mass protests in Germany, France, Great Britain, and other European countries. The level of violence employed by both the protesters and law enforcement was unprecedented and is not comparable to the level of violence seen during protests in Russia, Belarus, and even Kirgizstan. Mainstream media did their best to depreciate and conceal the scale of what was happening. If the situation continues to develop in the same vein, there is every chance that in the future, a reality that can be described as a digital concentration camp may form in Europe.

World media, for its part, paid particular attention to the situation in Belarus, where protests have entered their fourth month following the August 9, 2020 presidential elections. Belarusian protests have been characterized by their direction from outside the country and choreographed nature. The command center of protest activities is officially located in Poland. This fact is in and of itself unprecedented in Europe's contemporary history. Even during Ukraine's Euromaidan, external forces formally refused to act as puppetmasters.

Belarus' genuinely existing socio-economic problems have led to a rift within society that is now divided into two irreconcilable camps: proponents of reforms vs. adherents of the current government. Law enforcement forces which are recruited from among President Lukashenko's supporters, have acted forcefully and occasionally harshly. Still, the number of casualties is far lower than, for example, in protests in France or United States.

Ukraine itself, where Western-backed "democratic forces" have already won, remains the main point of instability in Eastern Europe. The Zelenskiy administration came to power under slogans about the need to end the conflict in eastern Ukraine and rebuild the country. In practice, the new government continued to pursue the policy aimed at maintaining military tension in the region in the interests of its external sponsors and personal enrichment.

For the United States, 2020 turned out to be a watershed year for both domestic and foreign policy. Events of this year were a reflection of Trump Administration's protectionist foreign policy and a national-oriented approach in domestic and economic policy, which ensured an intense clash with the majority of Washington Establishment acting in the interests of global capital.

In addition to the unresolved traditional problems, America's problems were made worse by two crises, COVID-19 spread and BLM movement protests. They ensured America's problems reached a state of critical mass.

One can and should have a critical attitude toward President Trump's actions, but one should not doubt the sincerity of his efforts to turn the slogan Make America Great Again into reality. One should likewise not doubt that his successor will adhere to other values. Whether it's Black Lives Matter or Make Global Moneymen Even Stronger, or Russia Must Be Destroyed, or something even more exotic, it will not change the fact America we've known in the last half century died in 2020. A telling sign of its death throes is the use of "orange revolution" technologies developed against inconvenient political regimes. This demonstrated that currently the United States is ruled not by national elites but by global investors to whom the interests of ordinary Americans are alien.

This puts the terrifying consequences of COVID-19 in a new light. The disease has struck the most vulnerable layers of US society. According to official statistics, United States has had about 20 million cases and over 330,000 deaths. The vast majority are low-income inhabitants of mega-cities. At the same time, the wealthiest Americans have greatly increased their wealth by exploiting the unfolding crisis for their own personal benefit. The level of polarization of US society has assumed frightening proportions. Conservatives against liberals, blacks against whites, LGBT against traditionalists, everything that used to be within the realm of public debate and peaceful protest has devolved into direct, often violent, clashes. One can observe unprecedented levels of aggression and violence from all sides.

In foreign policy, United States continued to undermine the international security system based on international treaties. There are now signs that one of the last legal bastions of international security, the New START treaty, is under attack. US international behavior has prompted criticism from NATO allies. There are growing differences of opinion on political matters with France and economic ones with Germany. The dialogue with Eastern Mediterranean's most powerful military actor Turkey periodically showed a sharp clash of interests.

Against that backdrop, United States spent 2020 continuously increasing its military presence in Eastern Europe and the Black Sea basin. Additional US forces and assets were deployed in direct proximity to Russia's borders. The number of offensive military exercises under US leadership or with US participation has considerably increased.

In the Arctic, the United States is acting as a spoiler, unhappy with the current state of affairs. It aims to extend its control over natural resources in the region, establish permanent presence in other countries' exclusive economic zones (EEZ) through the use of the so-called "freedom of navigation operations" (FONOPs), and continue to encircle Russia with ballistic missile defense (BMD) sites and platforms.

In view of the urgent and evident US preparations to be able to fight and prevail in a war against a nuclear adversary, by defeating the adversary's nuclear arsenal through the combination of precision non-nuclear strikes, Arctic becomes a key region in this military planning. The 2020 sortie by a force of US Navy BMD-capable AEGIS destroyers into the Barents Sea, the first such mission since the end of the Cold War over two decades ago, shows the interest United States has in projecting BMD capabilities into regions north of Russia's coastline, where they might be able to effect boost-phase interceptions of Russian ballistic missiles that would be launched in retaliatory strikes against the United States. US operational planning for the Arctic in all likelihood resembles that for South China Sea, with only a few corrections for climate.

In Latin America, the year of 2020 was marked by the intensification Washington efforts aimed at undermining the political regimes that it considered to be in the opposition to the existing world order.

Venezuela remained one of the main points of the US foreign policy agenda. During the entire year, the government of Nicolas Maduro was experiencing an increasing sanction, political and clandestine pressure. In May, Venezuelan security forces even neutralized a group of US mercenaries that sneaked into the country to stage the coup in the interests of the Washington-controlled opposition and its public leader Juan Guaido. However, despite the recognition of Guaido as the president of Venezuela by the US and its allies, regime-change attempts, and the deep economic crisis, the Maduro government survived.

This case demonstrated that the decisive leadership together having the support of a notable part of the population and working links with alternative global centers of power could allow any country to resist to globalists' attacks. The US leadership itself claims that instead of surrendering, Venezuela turned itself into a foothold of its geopolitical opponents: China, Russia, Iran and even Hezbollah. While this evaluation of the current situation in Venezuela is at least partly a propaganda exaggeration to demonize the 'anti-democratic regime' of Maduro, it highlights parts of the really existing situation.

The turbulence in Bolivia ended in a similar manner, when the right wing government that gained power as a result of the coup in 2019 demonstrated its inability to rule the country and lost power in 2020. The expelled president, Evo Morales, returned to the country and the Movement for Socialism secured their dominant position in Bolivia thanks to the wide-scale support from the indigenous population. Nonetheless, it is unlikely that these developments in Venezuela and Bolivia would allow to reverse the general trend towards the destabilization in South America.

The regional economic and social turbulence is strengthened by the high level of organized crime and the developing global crisis that sharpened the existing contradictions among key global and regional players. This creates conditions for the intensification of existing conflicts. For example, the peace process between the FARC and the federal government is on the brink of the collapse in Colombia. Local sources and media accuse the government and affiliated militias of detentions and killings of leaders of local communities and former FARC members in violation of the existing peace agreement. This violence undermine the fragile peace process and sets conditions for the resumption of the armed struggle by FARC and its supporters. Mexico remains the hub for illegal migration, drug and weapon trafficking just on the border with the United States. Large parts of the country are in the state of chaos and are in fact controlled by violent drug cartels and their mercenaries. Brazil is in the permanent state of political and economic crisis amid the rise of street crime.

These negative tendencies affect almost all states of the region. The deepening global economic crisis and the coronavirus panic add oil to the flame of instability.

Countries of South America are not the only one suffering from the crisis. It also shapes relations between global powers. Outcomes of the ongoing coronavirus outbreak and the global economic crisis contributed to the hardening of the standoff between the United States and China.

Washington and Beijing have insoluble contradictions. The main of them is that China has been slowly but steadily winning the race for the economic and technological dominance simultaneously boosting own military capabilities to defend the victory in the case of a military escalation. The sanction, tariff and diplomatic pressure campaign launched by the White House on China since the very start of the Trump Presidency is a result of the understanding of these contradictions by the Trump administration and its efforts to guarantee the leading US position in the face of the global economic recession. The US posture towards the South China Sea issues, the political situation in Hong Kong, human rights issues in Xinjiang, the unprecedented weapon sales to Taiwan, the support of the militarization of Japan and many other questions is a part of the ongoing standoff. Summing up, Washington has been seeking to isolate China through a network of local military alliances and contain its economic expansion through sanction, propaganda and clandestine operations.

The contradictions between Beijing and Washington regarding North Korea and its nuclear and ballistic missile programs are a part of the same chain of events. Despite the public rhetoric, the United States is not interested in the full settlement of the Korea conflict. Such a scenario that may include the reunion of the North and South will remove the formal justification of the US military buildup. This is why the White House opted to not fulfill its part of the deal with the North once again assuring the North Korean leadership that its decision to develop its nuclear and missile programs and further.

Statements of Chinese diplomats and top official demonstrate that Beijing fully understands the position of Washington. At the same time, China has proven that it is not going to abandon its policies aimed at gaining the position of the main leading power in the post-unipolar world. Therefore, the conflict between the sides will continue escalating in the coming years regardless the administration in the White House and the composition of the Senate and Congress. Joe Biden and forces behind his rigged victory in the presidential election will likely turn back from Trump's national-oriented economic policy and 'normalize' relations with China once again reconsidering Russia as Enemy #1. This will not help to remove the insoluble contradictions with China and reverse the trend towards the confrontation. However, the Biden administration with help from mainstream media will likely succeed in hiding this fact from the public by fueling the time-honored anti-Russian hysteria.

As to Russia itself, it ended the year of 2020 in its ordinary manner for the recent years: successful and relatively successful foreign policy actions amid the complicated economic, social and political situation inside the country. The sanction pressure, coronavirus-related restrictions and the global economic crisis slowed down the Russian economy and contributed to the dissatisfaction of the population with internal economic and social policies of the government. The crisis was also used by external actors that carried out a series of provocations and propaganda campaigns aimed at undermining the stability in the country ahead of the legislative election scheduled for September 2021. The trend on the increase of sanction pressure, including tapering large infrastructure projects like the Nord Stream 2, and expansion of public and clandestine destabilization efforts inside Russia was visible during the entire year and will likely increase in 2021. In the event of success, these efforts will not only reverse Russian foreign policy achievements of the previous years, but could also put in danger the existence of the Russian statehood in the current format.

Among the important foreign policy developments of 2020 underreported by mainstream media is the agreement on the creation of a Russian naval facility on the coast of the Red Sea in Sudan. If this project is fully implemented, this will contribute to the rapid growth of Russian influence in Africa. Russian naval forces will also be able to increase their presence in the Red Sea and in the area between the Gulf of Aden and the Gulf of Oman. Both of these areas are the core of the current maritime energy supply routes. The new base will also serve as a foothold of Russia in the case of a standoff with naval forces of NATO member states that actively use their military infrastructure in Djibouti to project power in the region. It is expected that the United States (regardless of the administration in the White House) will try to prevent the Russian expansion in the region at any cost. For an active foreign policy of Russia, the creation of the naval facility in Sudan surpasses all public and clandestine actions in Libya in recent years. From the point of view of protecting Russian national interests in the Global Oceans, this step is even more important than the creation of the permanent air and naval bases in Syria.

As well as its counterparts in Washington and Beijing, Moscow contributes notable efforts to the modernization of its military capabilities, with special attention to the strategic nuclear forces and hypersonic weapons. The Russians see their ability to inflict unacceptable damage on a potential enemy among the key factors preventing a full-scale military aggression against them from NATO. The United Sates, China and Russia are in fact now involved in the hypersonic weapon race that also includes the development of means and measures to counter a potential strike with hypersonic weapons.

The new war in Nagorno-Karabakh became an important factor shaping the balance of power in the South Caucasus. The Turkish-Azerbaijani bloc achieved a sweeping victory over Armenian forces and only the involvement of the Russian diplomacy the further deployment of the peacekeepers allowed to put an end to the violence and rescue the vestiges of the self-proclaimed Armenian Republic of Artsakh. Russia successfully played a role of mediator and officially established a military presence on the sovereign territory of Azerbaijan for the next 5 years. The new Karabakh war also gave an additional impulse in the Turkish-Azerbaijani economic and military cooperation, while the pro-Western regime in Armenia that expectedly led the Armenian nation to the tragedy is balancing on the brink of collapse.

The Central Asia traditionally remained one of the areas of instability around the world with the permanent threat of militancy and humanitarian crisis. Nonetheless, despite forecasts of some analysis, the year of 2020 did not become the year of the creation of ISIS' Caliphate 2.0 in the region. An important role in preventing this was played by the Taliban that additionally to securing its military victories over the US-led coalition and the US-backed Kabul government, was fiercely fighting ISIS cells appearing in Afghanistan. The Taliban, which controls a large part of Afghanistan, was also legalized on the international scene by direct talks with the United States. The role of the Taliban will grow and further with the reduction of the US military presence.

While some media already branded the year of 2020 as one of the worst in the modern history, there are no indications that the year of 2021 will be any brighter or the global crises and regional instability will magically disappear by themselves. Instead, most likely 2020 was just a prelude for the upcoming global shocks and the acute standoff for markets and resources in the environment of censorship, legalized total surveillance, violations of human rights under 'democratic' and 'social' slogans' and proxy wars.

The instability in Europe will likely be fueled by the increasing cultural-civilizational conflict and the new wave of newcomers that have acute ideological and cultural differences with the European civilization. The influx of newcomers is expected due to demographic factors and the complicated security, social situation in the Middle East and Africa. Europe will likely try to deal with the influx of newcomers by introducing new movement and border restrictions under the brand of fighting coronavirus. Nonetheless, the expected growth of the migration pressure will likely contribute to the negative tendencies that could blow up Europe from inside.

The collapse of the international security system, including key treaties limiting the development and deployment of strategic weapons, indicates that the new detente on the global scene will remain an improbable scenario. Instead, the world will likely move further towards the escalation scenario as at least a part of the current global leadership considers a large war a useful tool to overcome the economic crisis and capture new markets. Russia, with its large territories, rich resources, a relatively low population, seems to be a worthwhile target. At the same time, China will likely exploit the escalating conflict between Moscow and the US-led bloc to even further increase its global positions. In these conditions, many will depend on the new global order and main alliances within it that are appearing from the collapsing unipolar system. The United States has already lost its unconditional dominant role on the international scene, but the so-called multipolar world order has not appeared yet. The format of this new multipolar world will likely have a critical impact on the further developments around the globe and positions of key players involved in the never-ending Big Game.

* * *

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[Nov 11, 2020] With or Without - Kunstler

Nov 11, 2020 | kunstler.com

Oil production, which stood just under 13 million barrels-a-day at its peak November, 2019, is down over 2 million barrels a day now, and will be sinking to about 7 million barrels-a-day in 2021, which is far short of what we use. Shale oil is a bust. It costs too much to get out of the ground and the companies that put their mojo into shale can't make any money at it, and can't pay off their loans, and won't get new loans to continue operations. So, the whole industry is going to shit. Oil is what has supported the US economy for a hundred years, and it's over. Our attempt to compensate for that quandary by borrowing more and more money at every level is also drawing to a close. It will break the bond markets, the dollar, and the banks. This is the essence of the long emergency and we're entering the heart of the storm now.

[Nov 07, 2020] Tramp role in Syria and Iraq

Nov 07, 2020 | www.moonofalabama.org

Jackrabbit , Nov 7 2020 15:08 utc | 56

RSH's warning that Trump could still start a war should be taken very seriously. Trump has vowed that he will never allow Iran to have a nuclear weapon. Will he leave office without ENSURING that they cannot?

Israel Warns Of Coming War With Iran If Biden Wins As Trump Calls

I don't think for a minute think that Zionist Biden will do anything to upset Israel. But the election of Biden is a convenient excuse for Trump to start a war (probably based on a false flag of some sort) that Biden (or Kamala-Hillary) will "inherit".

!!


Don Bacon , Nov 7 2020 15:14 utc | 57

@ pnyx #43
. . .on Biden. Just think of the warmongering role he played for the Iraq war. The Neocons would have an easier time with Biden than with Tronald
Yes. Biden is a Clintonite, Trump was anti-Clinton.
The US war in Iraq - Operation Iraqi Freedom - with its death, destruction and displacement has been rightly called the worst US foreign policy move ever.
The Clintons started it, and then promoted it with Biden's assistance as Chair of the Senate Foreign Relations Committee.
President Clinton signed the Iraq Liberation Act into law on October 31, 1998.
On December 16, 1998, President Bill Clinton announces he has ordered air strikes against Iraq because it refused to cooperate with United Nations (U.N.) weapons inspectors.
David , Nov 7 2020 15:35 utc | 66

Trump's foreign policies were remarkably different? How? He assassinated an Iranian general, which nearly had the US enter into a hot war with Iran, bombed Syria twice, put additional sanctions on Iran, Venezuela, Russia and the DPRK. Trump's State Department has successfully enacted regime change in Zimbabwe, Sudan, El Salvador, Chile, Honduras, Bolivia (Mike Pompeo congratulating Luis Arce on his win -- very suspicious), and is trying regime change in Hong Kong, Belarus, Venezuela, Nicaragua, Iran, Eritrea, and Zimbabwe again, and as of late, Nigeria.

You could argue that Trump wants Iran to be somewhat stronger so he can sell more weapons to his MIC buddies and profit that way, therefore he pulled out of the Iran nuclear deal, and the weapons import/export sanctions on Iran expired. But that's a different and more brash method of managing Empire. It's different from Biden's "strategic de-escalation" policy with Iran via the Iran nuclear deal, but not that one that necessarily yields better results for Iran in the long term.

dave , Nov 7 2020 15:35 utc | 67

Calm down folks, the elected officials in the US have been puppets of the elite for the entire history of the country.
The problem we're facing is within the elite community and far above any government's control.

They didn't legalize drone striking "terrorists" any where on the globe by accident.
This means the elite are terrified of the fact that the internet and Trump both have exposed them for the morally bankrupt, greedy, mass murdering psychopaths they truly are.

The accidental presidency of Trump made them realize that their useful idiots(elected officials) where more idiots than useful and that they had to use the state sponsored monopolies in the press as well as their privately controlled publicly funded covert community to steer the narrative away from actual reality into their alternative commoditized version of reality.

Trump was never trying to defend America from the elite for the common man. He was trying to exploit the elite who had rejected him and his father for decades as well as cash in on their predicament in order to pay off his debts and start his own reality TV network.

I agree Trump was useful and informative but in the end he, like us is just along for the ride.

Don't do anything rash and don't for one second think a regime change in America is a rare occurrence. Remember the Kennedy's ?

The only way to win is to not become one of the elite's useful idiots by lashing out against another citizen. Poor and middle class only get the illusion they help decide policy.
The policy is decided and auctioned off within the billionaire funded think tanks and sent to the useful idiots in DC to be rubber stamped in order to trick you into thinking the legislative branch is legitimate. These people could f*ck up a two car parade and prove it over and over again.

Stay sane folks, the motives haven't changed in centuries and the elite are far more scared of us than they are the other elite's because they all know they're all cowards.

David , Nov 7 2020 15:37 utc | 69

In addition, considering Trump was supposedly a Russian puppet, Congress under his admin passed a bill which allowed the US to arm Ukraine against Russia even more.

GeorgeV , Nov 7 2020 15:39 utc | 70

Wonderful and thought provoking analysis of current political affairs b. However I would like to add that Biden and Trump are the products of political trends that have deep roots in modern US and world political affairs that have been ongoing for some 100 years or more. Biden and Trump did not occur in a vacuum. Both are products of the two world wars that were fought in the last century. More recently, the US since 1940 and continuing to the present day, has been actively preparing or fighting a major war somewhere on this planet. This development has in turn created a vast military and civilian bureaucracy that constantly needs to be fed a diet of real or imagined threats in order to survive.

[Nov 06, 2020] Did the Iraq War Cause the Great Recession?'

Highly recommended!
Iran war might be too much for the US economy
Apr 07, 2013 | marknesop.wordpress.com

Moscow Exile ,

April 7, 2013 at 12:46 am
Western hypocrisy revealed 10 years after the event in today's Independent: "Tony Blair and Iraq: The damning evidence" . And they go on and on about those wicked, evil Russians and their tyrannical leader causing death and destruction Syria by their "support" of the Assad government whilst the West arms the "freedom fighters" there.

[Nov 06, 2020] USA Hegemony and Decline

Mar 01, 2010 | www.eurasia-rivista.org

Issue 3/2010 of the review of Geopolitics "Eurasia", entitled USA: HEGEMONY AND DECLINE , has been released. This 288-page volume contains 24 articles about the USA, a still-hegemonic power in decline, on the scene of the transition from unipolarism to the new multipolarist order. Here follows a list and a short synthesis of each article.

Tiberio Graziani, USA, Turkey and the crisis of the western system

After history put an end to the unipolar moment, the western system led by USA seems to have entered an irreversible crisis. The economic and financial downfall and the loss of a secure pillar of the western geopolitical scene like Turkey mark the end of the US driving force. The USA, today, have to take an epochal decision: either shelving the project of world supremacy, which means sharing decision-making regarding international politics and economics with other global actors, or insist on their supremacy plan and even risk their survival as nation. One or the other will be motivated by the relationships that will be built, on the middle and long term, between the lobbies which are conditioning American foreign policy and by the evolution of the multipolarist process.

T. Graziani is managing editor of "Eurasia".

Fabio Falchi, The mirror of knowledge. Giorgio Colli and Eurasianism

This essay aims to show, also through a short exposition of Giorgio Colli's theoretical philosophy, not only that he has the merit, thanks to his talent of "pondering philologist", to have caught the deep relation between mysticism and logic in the "Greek knowledge", but above all that the way he is interpreting the thought of the "pre-Socratic" – an interpretation characterized by several and meaningful references to the Indian philosophy – is extremely important for the Eurasianism, if it's true that "Eurasia" is in the first place a "spiritual concept". In this perspective, it's not important that Colli cannot be defined an "Eurasiatist" or the fact that probably he himself had refused to define himself this way. What matters is the path pointed out by his philosophical speech, so that it's possible to leave behind obsolete and "incapacitating" dichotomies.

F. Falchi is a contributor to "Eurasia".

Phil Kelly, Geopolitics of the United States

The scope of this essay is to identify the different and typical elements of the traditional US geopolitics. In its path is reflected on the most relevant spatial characteristics in order to delineate the traditional aspects of North American geopolitics, rather than focusing on current international affairs; in spite of this, it comes to conclusion with some observations about the present American and global geopolitics.

P. Kelly is teaching at the University of Emporia (Texas, USA) and member of the Scientific Committee of "Eurasia".

Daniele Scalea, How an "empire" has risen (and how it will crumble soon)

Today's United States, in origin, were an united group of colonies of a small underdeveloped island; nevertheless, in a few centuries, they have become the first and the only world superpower. In this essay are retraced the geopolitical and strategic reasons that led to the rise of the original thirteen colonies, to their independence and expansion in North America; the rise of the USA and their informal empire are analyzed and how the passage from isolationism to hegemonism, that was not ineluctable, is leading them to lose it.

D. Scalea is editor of "Eurasia".

F. William Engdahl, The USA's geopolitical position today

At the end of the first decade of the 21th century it's time to locate the United States in the political, economic and above all geopolitical world context. It's clear to every impartial observer that the emerging giant, proclaimed in 1941 by Henry Luce, "the Time-Life" publisher, as the dawn of the "American Century", is today, in 2010, a nation and a power whose foundations themselves crumble. In this short essay are analyzed the particular nature of this disintegration and its implications.

F.W. Engdahl is associate director of "Global Research" and member of the Scientific Committee of "Eurasia".

Fabio Mini, Projects and debts

The Americans are no more able to recognize their deficiencies and vulnerabilities: they act as if they still controlled the entire world, when in reality they have lost great part of their autonomy relating to multinationals which control the economy and to national or transnational bodies they are indebted to. To the debt financing must be added the political debts, acquired to nations which are not secure thanks to the US politics of force: Iraq, Afghanistan, Israel, Palestine, Somalia, Rwanda and even Europe. This essay explains how power is the destroying drug of the USA, and how the "New American Century" has come to an end before coming to life.

F. Mini is a retired Lieutenant General of the Italian Army, he led the KFOR and the NATO's Command Allied Forces Southern Europe".

Eleonora Peruccacci, The evolution of USA-Russia relationships after the downfall of the bipolar system

The idea – to which Keohane already drew attention – that power is now based on the influence of ideas, on using cleverly skills like persuasion and cooptation, on the ability to manipulate mass communication as well, rather than on the traditional attributes of military force and wealth, is useful for the analysis of this essay, in which it is tried to comprehend how, after the end of the bipolar system, the relationships between the two ex world superpowers, USA and Russia, developed and changed, going through the stages of 4 treaties on nuclear disarmament.

E. Peruccacci, MA in International Relations, contributes to "Eurasia".

Spartaco Alfredo Puttini, China, the sea and the United States: the Sino-American naval antagonism

The development of a modern military fleet in the People's Republic of China has given rise to serious concerns in Washington and adds an element of tension to their relations. On the horizon beckons the danger of a naval antagonism between the two giants that could represent one of the more serious and meaningful elements for the international order of the 21th century. In this essay is talked about the Chinese willingness to develop marine force, about the stages of the fleet modernization, about the importance that Sino-American naval antagonism can assume in the near future.

S.A. Puttini, MA in History.

Chiara Felli, A miracle for Obama's "new beginning"

Israeli-American relations seem to be at a crossroads again: new negotiations in order to achieve the much desired peace in Near East hold the balance of power. In Washington, the atmosphere is tense, in contemplation of twelve months of negotiations the danger of a possible immediate bankruptcy outcome is reduced but concerns about the current state of the international comparison raise. Will the USA be finally able to play on their strong position as influential mediators? Does Israeli regional isolation risk worsening following the blind pursuit of nationalistic strategies? Are we really close to the "great compromise" and to the calm after a decade-long storm?

C. Felli, MA in International relations, contributes to "Eurasia".

Francesco Brunello Zanitti, American Neoconservatism and Israeli Neo-revisionism: a comparison

The G.W Bush Jr. Presidency has been strongly influenced by a political movement, commonly known as Neoconservatism, which started at the beginning of the '60s and was already significant during the Ronald Reagan Presidency. The neoconservatives have inspired in particular the recent North American politics in the Near East. The last decade, concerning Israeli politics, has been characterized by the strengthening of the right-wing party, the Likud, which, since its origins, has been not prone to any form of compromise with the Arab world. This essay offers a comparison between American Neoconservatism and Israeli Neo-revisionism, identifying various similarities.

F.Brunello Zanitti, MA in History of society and contemporary culture.

Julien Mercille, The fight against drugs in Afghanistan: a critical interpretation

This article offers a critical interpretation of the "fight against drugs" waged by the United States in Afghanistan since 2001, in contrast to the conventional view proposed by some of the most representative authors. While the conventional interpretation takes for granted that the US are leading a fight in Afghanistan against drugs in order to reduce their consumption in the West and to weaken the Taliban, who are closely linked to narcotics traffic, in this article it's argued that in fact there are few signs from Washington of a real and concrete struggle against drugs . The rhetoric of the fight against drugs is largely motivated by the need to justify military intervention in Afghanistan and the fight against insurgent groups opposing to American hegemony in the region, rather than by a genuine concern about drugs themselves.

J. Mercille is Professor at the National University of Ireland.

Matías Magnasco, Geopolitics of the United States in the Southern Cone

The South American region is nowadays a geostrategic scenario of great importance and will grow in importance in the future because of the race for raw materials (oil, gas and drinking-water) and the rise of Brazil as a regional and world power. South America must look with concern to US withdrawal from those difficult regions, such as Iraq and Afghanistan, and from those where Russia and China have virtually overcome their influence, because this reopens the possibility of looking back at their "backyard" and their "mare nostrum" ( the Caribbean Sea).

M. Magnasco is Director of the Argentine Centre of International Studies.

Jean-Claude Paye, The euro crisis and the transatlantic market

The offensive against the euro, implemented by the financial markets during the months of April and May 2010, is not simply an episode in the economic war between the two continents. It is indeed the symptom of a geopolitical change.

The American initiative aimed to weaken the EU was led with the participation of European institutions themselves, that sacrificed euro in order to recover the Greek debt. This convergence confirms the choice of both protagonists which was already made to integrate the EU into a great future transatlantic market.

J.-C. Paye is a sociologist and essayist.

Ivan Marino, "Nabucco" versus "South Stream"

The US-backed Nabucco pipeline is a choice which sprang from political and economic reasons, and, in substance, aims to avoid the Russian territory and consequently to contrast the interests of Moscow; but the choice of "Nabucco" may be dangerous for the same energy safety of European Union.

Italy's choice of supporting the "South Stream" has a strategic and objective value. The essay evaluates the strategic importance of this option on the long-term in the dialogue between EU and Russia.

I. Marino coordinates the Observatory on the Constitutional Political System of the Russian Federation.

Fabrizio Di Ernesto, US and NATO bases in Europe

More than 60 years after the end of World War II, Europe struggles to regain its political and military autonomy. This is mainly due to the forced occupation set on by USA through NATO, the military alliance started in 1949 and that with the passing of time has become the real armed wing of the Pentagon. During the years of the Cold War Washington justified this presence with the need of defending its interests against possible attacks of the Red Army and of the Warsaw Pact. Now that this pretext is becoming ever more anachronistic, the White House continues to support the need for this forced militarization hiding behind the scarecrow represented by Islamic terrorism. This presence also leads to various problems, summarized in this essay.

F. Di Ernesto is a journalist and essayist.

Stefano Vernole, The strange story of the "International Money Orders"

According to some sources, during the first months of 1992 the U.S. government developed a sophisticated financial-economics operation, using US taxpayers' funds, for secret aims. The money, nominally allocated for a "humanitarian" operation in Bosnia and Herzegovina, would have been mainly used to finance Bill Clinton's election campaign and to pay debts acquired by the Saudi financier Adnan Kashoggi to the procurement office of the JNA (Yugoslav People's Army), but later it was put back in circulation to be used in the most various financial-economics operations.

S. Vernole is editor of "Eurasia".

Tomislav Sunic, In Yaweh we trust: the "divine" US foreign policy

The North American aspiration to "guarantee the democracy in the world " is above all originated by the biblical message. Whatever many European critics of US may say, US military interventions have never had as their sole purpose economic imperialism, rather the desire to spread the U.S. democracy all over the world. Anyone who dares to defy the US military, incurs the risk of being declared out of humankind, or at least of being branded as terrorist. Once someone is declared a terrorist or out of the human race, it's possible to dispose of a person or of a nation at one's pleasure. The ideological element in the history of US foreign policy is described in this essay, a revised version of a chapter, named after it, of the book Homo Americanus: Child of the Postmodern Age (2007).

T. Sunic was Croatian diplomat and University Professor in the USA.

Kees van der Pijl, Transatlantic ideology and neoliberal capitalism

In this essay we deal with three issues: the first concerns the origins of western ideology, an ideology marked by possessive individualism, free enterprise and intensive nature exploitation and that, with zeal of protestant missionary, claims universal validity for these principles. After that, we observe how neo-liberalism has emerged as the most radical western ideology and allowed capitalism to become a machine scam into which the world economy of the last thirty years has been drawn and that just now has suffered a setback.

Finally, some lines of development are drawn, through which Ukraine, and perhaps Russia, Belarus, Kazakhstan and others, could break with the present strategy of slavish adaptation to the neoliberal economy, which has damaged them so much, and stop to absorb the western ideology so different from their traditions, to implement a common strategy that combines their unique experience with the form of a multinational State and with elements of planned economy, whose strengths and weaknesses they know better than anybody else.

K. van der Pijl is Professor at the University of Sussex.

Paolo Bargiacchi, Is international law really law? A critique to John Bolton's negationism

In the US the (minority) idea that the international law does not exist and the (most common) one that customary international rules only bind States that accept them find a common root in the improper comparison between International context (and International law) and internal context (Internal law). This comparison, in turn, is direct consequence of the Austinian positivism, that, not catching the autonomy of the political and juridical international context compared to the domestic one, mistakenly uses logics, methodologies and categories of internal law to analyze the international law. An example of this modus procedendi comes from J. Bolton, who wonders if "Is There Really "Law" in International Affairs?" and concludes that "International law is not law". In this essay a general-theoretical and empirical critique of his thesis is developed.

P. Bargiacchi is Professor at the University Kore of Enna.

Alessandro Lattanzio, US nuclear forces

U.S. strategic forces, that since 1990 are no longer the backbone of US Army, a role now appertaining to the force projection (aircraft carrier, airborne troops and marine divisions, tactical air force) have undergone a significant downsizing in quality and above all quantities. But this reduction has been sold successfully at the table of international negotiations about nuclear disarmament. With the recent ratification of the START II Treaty, US strategic forces are kept on 500 ICBMs single-warheads, 14 SSBNs each carrying 24 SLBMs, and finally 96 strategic bombers. The budget deficit, the cost of Iraq and Afghanistan wars, the priorities for other programs, including the so-called theatre ballistic missile (THAAD), and the US financial-economic crisis will probably stop the last modernization programs of the U.S. strategic arsenal.

A. Lattanzio is editor of "Eurasia".

Claudio Mutti, Pietro Nenni against the Atlantic Pact

Interjecting into the parliamentary debate in accordance to the Italian democracy rules for enter the NATO, the secretary of the PSI (Italian Socialist Party) pointed put how the inclusion of Italy among the countries bordering the Atlantic was a violation of the basic elements of geography and history. He also contested the political justifications of this accession: partnering with the American superpower, Italy, which "compared to the US is like San Marino compared to Europe", instead of securing her independence would have further reduced her sovereignty, already harshly limited by the international treaties imposed by the winners of the Second World War.

C. Mutti is editor of "Eurasia".

Erika Morucci, 1991-2003: rehearsal of a superpower

In the twenty years since the first Gulf War to the present, different administrations came one after the other at the White House, giving different directions to American foreign policy. Apart from that, these were crucial years of a new historical course, that after the Cold War has opened up a reality whose facets were hidden for a long time and was fed by the iron curtain that divided the world. For the US widened its perspectives: they behaved as if they knew they can reach for primacy, pushing it to the manic search for global power. The multipolarity on the international scene has strongly emerged with the presence of other actors, including Russian, Chinese, European, and so the perspective is now to defend their lead and not lead the world.

E. Morucci, MA in International Relations.

Antonio Grego, Interview with Robert Pelo

Roberto Pelo is the director of the Moscow office of Italian Institute for Foreign Trade (ICE) and coordinator of the ICE office-network in Russia, Armenia, Belarus and Turkmenistan.

Antonio Grego, Interview with Livio Filippo Colasanto

Livio Filippo Colasanto is the first Director-General of RusEnergosbyt-Enel.

[Oct 23, 2020] Oil Production Cuts Could Be Extended- Putin -

Oct 23, 2020 | www.zerohedge.com

Submitted by OilPrice.com

Russia does not rule out the possibility that OPEC+ could extend its current 7.7 million barrels per day of production cuts into next year, according to Russian President Vladimir Putin .

The comments could be merely jawboning to a market that is desperately seeking reassurances that oil production will not ramp up too quickly beyond demand. But Russia has in the past been reluctant to keep up its end of the oil production cuts, so any mention that it is even thinking about a slower tapering of the cuts is noteworthy.

In fact, Russia had failed to bring its own oil production down to the level it agreed to for most of the period of cuts in 2019 and early 2020.

Russia also was the spark that ignited the oil price war between it and Saudi Arabia-and by default the United States, when it refused to agree to additional cuts using the argument that as OPEC decreases its production, it opens the door for U.S. producers to increase theirs.

Vladimir Putin has had several discussions with Saudi Arabia and the United States on the state of the oil markets. "We believe there is no need to change anything in our agreements," Putin said. "We will watch how the market is recovery. The consumption is on the rise."

Putin added, however, that they did not "rule out" the possibility that OPEC+ could keep the current production cuts instead of removing them at the pace it had initially agreed upon.

But Putin didn't stop there. "If need be, maybe, we can take other decisions on further reductions. But we don't see such a necessity now," Putin said, intimating that more cuts were at least possible.

Russia's willingness to even consider additional cuts or waiting longer to ease the cuts than planned will be viewed positively by the markets, which has been struggling to break out of a rut where oil prices have traded in a relatively tight band for months.

[Oct 19, 2020] The USA had more than doubled its oil imports from Russia last year and is now the world's second largest importer of Russian heavy oil

Notable quotes:
"... "Maas added that Germany takes decisions related to its energy policy and energy supply 'here in Europe', saying that Berlin accepts ' the fact that the US had more than doubled its oil imports from Russia last year and is now the world's second largest importer of Russian heavy oil .'" [My Emphasis] ..."
Oct 19, 2020 | www.moonofalabama.org

karlof1 , Oct 17 2020 17:50 utc | 14

Heavy oil is needed for the chemical industry (as opposed to transport). The three biggest producers of heavy oil are Iran, Venezuella and Russia.

The US produces mostly light oil, thus it needs to import the heavy oil. Since the US sanctioned Iran and Venezuella, the only significant option remaining is Russia. It would be ironic if they are buying iranian oil sold to Russia.

winston2 , Oct 17 2020 18:09 utc | 20

karlof1 , Oct 17 2020 17:50 utc | 14

It appears Lavrov's saying we'll just ignore the EU and its major components for awhile got quick results as Germany's FM just announced "Nord Stream 2 will be completed" ; but he also said this:

"Maas added that Germany takes decisions related to its energy policy and energy supply 'here in Europe', saying that Berlin accepts ' the fact that the US had more than doubled its oil imports from Russia last year and is now the world's second largest importer of Russian heavy oil .'" [My Emphasis]

Now isn't that the interesting bit of news!! The greatest fracking nation on the planet needs to import heavy oil (likely Iranian, unlikely Venezuelan) from its #1 adversary. As for the end game, I've written many times what I see as the goal and don't see any need to add more.

Passer by , Oct 17 2020 17:58 utc | 16

[Sep 29, 2020] The USA can probably be energy independent but it requires $4 or higher price at the pump

Sep 29, 2020 | www.unz.com

JoaoAlfaiate , says: September 29, 2020 at 3:37 pm GMT

Trump said "I like being energy independent, don't you? I'm sure that most of you noticed when you go to fill up your tank in your car, oftentimes it's below two dollars "

But energy "independence" has got little to do with price at the pump. The marginal barrel sets the price. If the world price for crude goes to $100/barrel, West Texas Intermediate is going to the same level and gasoline will rise to $4.00.

Oil is at $40/barrel because the Gulf producers and Saudi Arabia want to insure a long term market for their one export product while making a lot of high cost production unsustainable and alternate energy sources less attractive.

[Sep 28, 2020] May Non-OPEC Oil Production drops to 2013 levels by Ovi

Images deleted: see the original for images
Sep 28, 2020 | peakoilbarrel.com

A post by Ovi on peakoilbarrel

Below are a number of oil (C + C ) production charts for Non-OPEC countries created from data provided by the EIA's International Energy Statistics and updated to May 2020. Information from other sources such as the OPEC and country specific sites is used to provide a short term outlook for future output and direction.

Non-OPEC production dropped slowly from a high of 52,638 kb/d in December 2019 to 52,396 kb/d in March 2020. In April that changed when we saw the first big drop in output from the Non-OPEC countries associated with Covid and with the drop in world oil prices. May output collapsed to 45,340 kb/d, which is close to the production level in September 2013.

The projection to September (red square) was made using the September STEO report. It projects that after the low of 45,350 kb/d in May, production will increase by close to 3,500 kb/d to just under 49,000 kb/d in September.

Above are listed the worldʼs 15th largest Non-OPEC producers. They produced 83.6% of the Non-OPEC output in May. On a YoY basis, Non-OPEC production was down by 5,011 kb/d. On a MoM basis, production was down by 5,282 kb/d. World oil production was down by 11,418 kb/d, MoM and 10,318 kb/d YoY.

May saw a drop in output to 2,765 kb/d but rebounded in June to 3,013 kb/d according to this source . Maintenance and extensive turnarounds planned between September and November could shave around 200,000 b/d from Brazil's output.

The EIA shows Canadian production was down in May by 658 kb/d by 248 kb/d to 3,694 kb/d. The CER data is higher because it includes NGPLs in their estimates and is close to 6% of total output.

Canadian oil exports by rail to the US fell from a high of 411,991 b/d in February to a new low of 48,820 kb/d in June.

April 156,242 kb/d May 58,048 kb/d June 48,820 kb/d

At the same time, according to this source , "The Trans Mountain pipeline carried a record-breaking amount of oil to British Columbia from Alberta in August, despite persistent price and demand woes gripping the energy sector as the COVID-19 pandemic drags on".

"We have been full every day during the COVID period. Demand for the pipeline has not softened at all," he told The Globe and Mail in an interview Tuesday.

Chinaʼs production peaked in June-15 at 4,408 kb/d and has been in a steady decline up to September 2018 where it reached an output low of 3,694 kb/d. According to this source, Chinaʼs August production increased by 2.6% over last August. Output increased by 59 kb/d to 3,899 kb/d (Red square). However August's output is still slightly lower than the June 2019 output of 3,918 kb/d even though Chinese oil companies have increased their spending to reduce the decline rate.

Kazakhstan production hit a new output high in February, 1,976 kb/d. For May, production dropped by 203 kb/d to 1,738 kb/d. OPEC expects their output to drop by an average 15 kb/d this year.

Mexicoʼs production decreased in May by 85 kb/d to 1,686 kb/d, according to the EIA. Data from Pemex shows that production dropped to 1,647 kb/d in July (red square). Under the OPEC + Declaration of Cooperation, Mexico committed to reduce output by 100 kb/d in May. Their target was almost met.

The EIA reported that Norway's May production was 1,775 kb/d, a decrease of 14 kb/d from April.

According to the Norwegian Petroleum Directorate, "average daily liquids production in July was: 1 739 000 barrels of oil, 296 000 barrels of NGL and 27 000 barrels of condensate. (Red lines)

On 29 April 2020, the Government decided to implement a cut in Norwegian oil production. The production figures for oil in July include this cut of 134 000 barrels per day in the second half of 2020."

In other words, if Norway hadn't made their commitment to reduce production, May's oil output would have been (1,739 + 134) 1,873 kb/d. This output level would have been very close to some earlier highs.

According to the Russian Ministry of energy, Russian production increased by 479 kb/d in August to 9,860 kb/d. July was revised up by 11 kb/d from 9,371 kb/d to 9,382 kb/d.

UKʼs production decreased by 63 kb/d in May to 1,004 kb/d. According to OPEC, crude production is expected to increase to 1,010 kb/d in June (Red square).

June's production rebounded from May's low by adding 420 kb/d according to the the EIA's August report. May's output was revised up by 15 kb/d in the EIA's September report.

US and Permian oil rigs decreased by 1 to 179 and 121 respectively in the week of September 18. As a percentage, Permian oil rigs represented 67.5% of the total for the week of Aug 21.

According to the September DPR, the 121 rigs operating in the Permian in September will be sufficient to raise production in September by 42 kb/d to 4,150 kb/d.

While WTI has remained close to $40/bbbl, there has been essentially no change in drilling activity since the week of July 17 in the US. There were 180 oil rigs in operation that week vs 179 for the week of September 18.

These five countries complete the list of Non-OPEC countries with annual production between 500 kb/d and 1,000 kb/d. All five are in overall decline. Their combined May production was 3,263 kb/d down 232 kb/d from April's output of 3,495 kb/d. Azerbaijan, Indonesia and India appear to be in a slow steady decline phase. Columbia's production began to drop in March as Brent prices began to drop.

According to Colombia's minister of energy, Maria Fernanda Suarez, ANH president Armando Zamora said if Brent oil prices hit around $35 a barrel national oil output could average around 850,000 barrels a day, down from a previous forecast of 900,000 barrels.

Guyana is a new oil producing country that started production in December 2019. According to this s ource , production was supposed to reach 120 kb/d by June. However gas re-injection issues have delayed its planned production rise. Output in June is expected to be close to 80 kb/d (red square). This new source for oil will offset some of the decline in other countries, which currently is close to 400 kb/d/yr.

NON OPEC W/O US PRODUCTION

This chart shows that oil production in Non-OPEC countries has only increased by 541 kb/d from December 2014 t0 December 2019. It is an indication that these countries as a whole are approaching an output plateau. April is the first month in which the large production drop associated with CV-19 and the plunge in oil prices shows up in this chart. In May 0utput from these countries dropped by 3,293 kb/d to 35,348 kb/d.

Using information from the September STEO, output from the Non OPEC countries W/O the US, is expected to rebound to 37,054 kb/d in September (red square). Looking further out to October 2021, output is predicted to reach 39,692 kb/d. (Blue graph). Note that the October 2021 high is currently expected to be 143 kb/d lower than the December 2019 peak. The 143 kb/d difference is probably well within the margin of error in making these projections.

World Oil Production

World oil production in May decreased by 11,417 kb/d to 71,374 kb/d. This chart also projects world production out to October 2020. It uses the September STEO along with the International Energy Statistics to make the projection. It projects that world production will recover by close to 5,000 kb/d in October 20202 to 76,019 kb/d.

This chart presents world oil production without the US. Note that the November 2016 peak is two years prior to all the worldʼs peak shown in the previous chart. May production was 61,372 kb/d, a decrease of 9,429 kb/d from April.

Using the STEO and the EIA international Energy Statistics, output for September is projected to be 63,768 kb/d, an increase of 2,396 kb/d higher than May.

[Sep 18, 2020] Saudi Prince Abdulaziz Warns Oil Short Sellers- -We Will Never Leave This Market Unattended

Paper oil sellers essentially dictate prices to real producers. So they are looting producers. That's hurt the process of replacement of old wells with new ones (and shale oil well live just several years, with only first two the most procductive) and as "paper oil" is Wall Street fiction, and at some point paper oil market might collapse and oil prices go to stratosphere.
Sep 18, 2020 | www.zerohedge.com

As the price of oil begins to falter, Saudi Arabia has stepped up its rhetoric, even going as far as to warn short sellers not to bet against the price of the commodity.

Saudi Energy Minister Prince Abdulaziz bin Salman gave "clear hints" on Thursday that there could be a change of direction in production policy forthcoming as the price of oil continues its slide, according to Bloomberg .

He said Thursday: "We will never leave this market unattended. I want the guys in the trading floors to be as jumpy as possible. I'm going to make sure whoever gambles on this market will be ouching like hell."

At the same time, Brent was falling below $40 per barrel and the market continues to show signs of waning demand. OPEC and its allies said they would be "proactive and preemptive" in addressing the diminishing price, recommending "participating counties take further necessary measures".

Abdulaziz started a meeting on Thursday with what Bloomberg called a "forceful condemnation" of members who are pumping out too much supply. His ire may have been directed to UAE Energy Minister Suhail al Mazrouei, who attended the meeting. The UAE has been "one of the worst quota breakers" in OPEC+, only making 10% of its pledged cuts for August.

Abdulaziz said: "Using tactics to over-produce and hide non-compliance have been tried many times in the past, and always end in failure. They achieve nothing and bring harm to our reputation and credibility."

"Attempts to outsmart the market will not succeed and are counterproductive when we have the eyes, and the technology, of the world upon us," Prince Abdulaziz continued.

UAE was overproducing by about 520,000 barrels per day in August and the country will try to make additional cuts in October and November to make up for past month shortcomings.

https://lockerdome.com/lad/13084989113709670?pubid=ld-dfp-ad-13084989113709670-0&pubo=https%3A%2F%2Fwww.zerohedge.com&rid=www.zerohedge.com&width=890

Countries like Iraq and Nigeria have implemented more than 100% of their required cuts, helping give OPEC and Abdulaziz credibility.

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Harry Tchilinguirian, head of commodities strategy at BNP Paribas SA, concluded: "You have to hand it to Prince Abdulaziz. Since he became Saudi oil minister, the kingdom has kept OPEC+ in line through his diplomatic and compelling powers of influence."


y_arrow Fabelhaft , 3 hours ago

If that were true, the energy world would be a lot better off. Producers want to contract; consumers, probably even China, like the market price. For it can be manipulated easier by consumers than by suppliers; because consumers control the intl banks and capitalist rules. Unless China is kept from the market table , then it might accept contracting. Tough racket, this sanctioning stuff is getting to be, eh?

[Aug 24, 2020] Oil price and the USA surge capacity

Aug 24, 2020 | peakoilbarrel.com

Ovi Ignored says: 08/16/2020 AT 5:32 PM

Ron/Dennis

I do not consider Canada, Brazil and Russia to be in the same category as the US. The US has what I call "Sustained Surge Capacity". The other three don't. For a few years, starting in August 2016, the US increased production at rate of more than 1 Mb/d, forcing OPEC to cut back because the US, by itself was meeting annual world demand increases of 1 Mb/d to 1.3 Mb/d.

From August 2016 to November 2019, US increased production from 8,534 kb/d to 12,866 kb/d an increase of 4,333 kb/d or an average increase of close to 1330 kb/d/yr. No other country could or has done that. Does that capability still exist? I think that will be decided by the future price of oil along with demand.

From Ron's chart, from August 2016 to November 2019, there was an increase of approximately 6,000 kb/d. Russia, Canada and Brazil only contributed 1,567 kb/d of the 6,000 kb/d, slightly more than 1/3 of of what the US added.

In other words, I think that a world production minus the US chart is more useful in assessing the probability of exceeding the November 2018 peak. On a world minus US chart, the peak occurred in November 2016. That peak was exceeded in November 2018 because the US added 3,102 kb/d over those two years, offset partially by OPEC cutting back. Clearly the US will be a major player in determining whether the November 2018 peak will be exceeded.

The only other countries that have some short term surge capacity is Saudi Arabia, Kuwait and the UAE as shown in Ron's charts above. However their demonstrated surge capacity may be more related to wells that were drilled and oil coming out of inventory and could not be sustained for three years like the US did.

I think that there is a likelihood that the next peak oil will be lower than the November 2018 peak and it will be a question of whether increasing demand around 2023 to 2024 can be met by supply and whether the associated increasing world oil prices begin to strangle world economic growth.

Ron Patterson Ignored says: 08/16/2020 AT 8:11 PM

Thanks Ovi, I agree with almost everything you say. The one place where I disagree is here. You said: The US has what I call "Sustained Surge Capacity". I would make a slight change in that statement. I would say: "The US had what I call "Sustained Surge Capacity". Of course, we don't have that anymore.

That ended in December 2019 but the virus came along and disguised that point. Of course we can increase from where we are today, but not past that December 2019 point.

There was a reason the rig count was dropping during the last half of 2019. There was a reason crack spreads were being decommissioned and sold for scrap well before that peak.

All oil reservoirs contain a finite amount of oil. It is absolutely astonishing that some people simply cannot understand that simple fact.

Ovi Ignored says: 08/16/2020 AT 10:07 PM

Ron

I grappled with that statement for a while and then I put it in because I still think that the US has that sustained surge capacity. What I don't know is whether the remaining/dormant SSC is large enough to exceed the 12,866 kb/d reached in November 2019. At that time the STEO was projecting a small increase into 2020, indicating the US was getting close to peak capacity.

Ron Patterson Ignored says: 08/17/2020 AT 8:49 AM

I have no doubt that US production can increase from where it is today. My point was the glory days are over for so-called "Saudi America". We will never get back to the point we reached in November 2019. Therefore we will never be able to cause world oil production to reach new highs.

[Aug 24, 2020] OPEC July 2020 Production Charts " Peak Oil Barrel

Notable quotes:
"... $40s WTI and Brent are wholly unsustainable prices. I'd argue that $50s and $60s are also if growth is being sought outside of a few areas. ..."
"... SS, there is no doubt that the pandemic will hasten peak oil supply. Many shut-in wells will not re-open. Frac spreads are being sold for scrap. Rigs are being decommissioned. Plus we are still producing at 80 to 90% of former levels. That means depletion is still continuing. So when they do get around to producing flat out again, the oil will just not be there. ..."
"... close to 100,000 job losses in the oil industry, many folks in their 50s and 60s. Hard to see how they bring folks on for another boom with the loss of all that skilled labor. ..."
"... So, maybe $100 oil over a period of time could turn this tide, but sub-$50 WTI sure won't. ..."
"... Yes, the future is hard to predict. But absent some tremendous financial return potential, why would young people have any interest in making a career of US upstream E & P? ..."
Aug 24, 2020 | peakoilbarrel.com

Ron Patterson Ignored says: 08/15/2020 AT 8:15 AM

OPEC peaked in 2016, Russia peaked in 2019, and the USA very likely peaked in 2019 also. And the vast majority of all other nations have peaked also as evidenced by their continuing decline. That should be enough evidence for anyone.

shallow sand Ignored says: 08/15/2020 AT 8:33 AM

Ron.

$40s WTI and Brent are wholly unsustainable prices. I'd argue that $50s and $60s are also if growth is being sought outside of a few areas.

The longer prices stay low due to the pandemic, the more likely the world has passed peak supply.

I don't see any sign that this pandemic will be over anytime soon.

Ron Patterson Ignored says: 08/15/2020 AT 8:46 AM

SS, there is no doubt that the pandemic will hasten peak oil supply. Many shut-in wells will not re-open. Frac spreads are being sold for scrap. Rigs are being decommissioned. Plus we are still producing at 80 to 90% of former levels. That means depletion is still continuing. So when they do get around to producing flat out again, the oil will just not be there.

As to the longevity of the pandemic, one can only guess. But things will never be back to the free and easy ways of the past. International travel will never be back to what it once was. There will be fewer travel vacations even within nations. The possibility of the virus returning will forever be on everyone's mind.

Stephen Hren Ignored says: 08/15/2020 AT 12:47 PM

Also close to 100,000 job losses in the oil industry, many folks in their 50s and 60s. Hard to see how they bring folks on for another boom with the loss of all that skilled labor.

Han Neumann Ignored says: 08/16/2020 AT 8:08 PM

Ron,

Once that a, in most cases, curative combination of medicines is available and one or a few very effective vaccins are registered and rolled out, it remains to be seen how 'normal' life will get again.

I don't think the virus will be forever on everyone's mind. Already now many young people have started to party like before the pandemic, even in Europe (infections rising in almost all European countries, so a lot of 'Trumpites' and Bolsonarites' also in Europe).

When vaccines are widely available at least everyone who is planning to travel by plane will be going to get a vaccin.
A good chance that vacations and air travel is close to normal somewhere in 2022 or 2023.

Dennis Coyne Ignored says: 08/16/2020 AT 9:42 AM

Shallow sand,

The pandemic will eventually subside an the US and other nations that have responded poorly to the pandemic will eventually learn from nations that have responded relatively better, compare Europe and US.

If peak supply is reached, but demand resumes 1% annual growth, I expect we will soon see Brent at $65/bo+/-5 at minimum, by 2025 to 2030.

shallow sand Ignored says: 08/16/2020 AT 10:37 AM

Dennis. Brent $65 in 2025-30 is only helpful if one or both of the following happens:

1. Capital markets continue to the pattern of 2015-19 and fund drilling that provides marginal returns or losses, but has no hope of providing superior returns.

2. Some other new, economical supply source is discovered.

Low oil prices to 2025-2030 would seem to mean supply will be constrained unless one or both of the above occur.

Conventional oil pretty much peaked in 2005.

I look at $10K invested in a major oil company in 2010. I look at $10K invested in a shale company in 2010. I then compare that to the S&P 500 return since 2010, all other industry groups, specific companies, etc.

Investing in oil is like investing in tobacco. The only allure is yield. Upstream E & P will have to keep borrowing to pay the dividend even if oil returns to $50 Brent. Same with $60 Brent.

shallow sand Ignored says: 08/16/2020 AT 11:03 AM

Dennis. One thing that you are missing is just how poor the future of the upstream oil industry is.

When the shale boom started, EV's were a pipe dream.

When the shale boom started, there wasn't widespread sentiment against oil. Global warming/climate change was on the radar, but not like now.

BP is trying to remake itself in large part because they cannot find talented and skilled younger workers who want to work for a fossil fuel company.

We have been in this industry since the 1970s. We have some of the best leases in our field and have made more money in this industry than in our professions or in other investments. There is a third generation in our family ranging from late teens to mid twenties. None are interested at all in this family business/investment. Same for one of my best friends who makes his living at this. Same for another, whose engineer son started working with him out of college, but before oil crashed in 2014 left and took a job in a "Green Energy" field.

Mike is in the same boat.

I know all of the major players in our field. All companies are family owned. There are a total of four in all of those families working in oil and gas who are under the age of 50, and those four are at or nearing 40, and started working in their family oil companies at least over 15 years ago.

As I have posted before, our employees range from 47-61 years of age. The two we hired who were in their twenties have both long ago left, and no longer work in upstream E & P.

We have participated in some Zoom meetings with the National Stripper Well Association. Almost all on those meetings is old (50-80 years old).

We hope to sell out on the next recovery, if that ever comes. But we are concerned there will not be any buyers.

So, maybe $100 oil over a period of time could turn this tide, but sub-$50 WTI sure won't.

Yes, the future is hard to predict. But absent some tremendous financial return potential, why would young people have any interest in making a career of US upstream E & P?

Hickory Ignored says: 08/15/2020 AT 9:35 AM

I capitulate. Ron you are correct, we are post peak.
Post Peak

OK, now what?
It is so strange to be post-peak and not have high prices for crude,
and food.
I guess that will be coming.

note- biofuels should not be counted in liquids tally. It is a different animal, with the source being dependent on farming and soil, not drilling and geology. Just because ethanol is used for propulsion shouldn't matter- electrons and batteries aren't counted either, and rightly so. Those belong in a different category- transportation energy.

Schinzy Ignored says: 08/15/2020 AT 12:02 PM

I have argued for several years that peak oil is a low price phenomenon, not a high priced phenomenon.

The most overrated law in economics is that of supply and demand. This law suffers from what Richard Feynman called "vagueness" (see
https://www.youtube.com/watch?v=EYPapE-3FRw ). The problem is that it is always satisfied and hence gives absolutely no information about prices.

The latest iteration of our article on the oil cycle can be found at
http://www.math.univ-toulouse.fr/~schindle/articles/2020_oil_cycle_notes.pdf

alimbiquated Ignored says: 08/16/2020 AT 9:52 AM

Another problem with market theory (beyond vagueness) is that it lacks a time axis.

The theory states that the relationship between price and supply moves along the demand curve, but doesn't say how fast, just that "in the long run" the system will reach equilibrium. Being in equilibrium means being somewhere on the demand curve.

https://www.economicsonline.co.uk/Competitive_markets/Demand_curves.html

So for example, if prices go up, the demand quantity is expected to go down. The question is when.

Where does this go wrong? In classical market theory, for example, unemployment is impossible, because if labor supply outstrips demand prices (wages) should fall until until equilibrium is attained. This has been observed to be false on many occasions, including right now.

As Feymann states in the video, "If it disagrees with experiment, it's WRONG! That's all there is to it." Classical economics isn't just too vague, it is wrong.

Keynes joked about this that in the long term we'll all be dead. He meant equilibrium will never be reached, so we are never on the demand curve. He argued that "sticky prices", meaning the unwillingness to accept pay cuts, kept labor markets permanently out of equilibrium.

It's worth pondering whether oil prices are "sticky" as well. Saying yes is saying the law of supply and demand doesn't apply (in the short term). This year we have seen that both OPEC's politicking and panicky traders can cause wild swings in price unrelated to supply and demand.

Where market theory is vague is the shape of the demand curve. For example, if oil supply can't meet demand in the near future, as some here have posited, how high will prices go? Some claim it will go over $200, as people get desperate for it. Some claim that higher prices would increase efforts to find and drill more, putting a lid on prices. Some claim the shortage would crash the world economy, depressing prices. Some claim that faced with oil shortages, the world would simply switch to EVs, or stop wasting the gunk on poorly designed transportation systems, so prices would stay more or less the same.

Who is right? Nobody knows. So we don't know the shape of the demand curve. The theory is hopelessly vague.

hole in head Ignored says: 08/16/2020 AT 1:48 PM

A comment posted on ^peakoil.com^ . Interesting .
"The price action of WTI shows it quite clearly that the non oil extracting part of the economy can't afford to pay a high enough price that would allow the extracting, processing and delivery of oil products to it.

It's that simple, most of the oil still in the ground will stay there unless somehow you find a way to pay $100++ per barrel. The last 12 years has shown that we can't!

The best yearly average weekly price of WTI was right around $100
Average weekly price of WTI for years 2008 thru 2013 was $88.
Average weekly price of WTI for years 2014 thru 2019 was $53.

The trend is what it is and it shows no signs of changing, the price of WTI is still hitting lower lows and lower high.

I have no idea what the future will bring but the next 3 years are going to be interesting and not in a good way.

Have fun everyone."

Dennis,repeating myself ,the price of oil is going to trend down . Supply and demand curves do not apply where the world^s economic system is now placed . Alimbiquated has done a very good job explaining that .

Ron Patterson Ignored says: 08/15/2020 AT 6:38 PM

Much of the fall in output of the other 9 is from Iran, Nigeria, Libya, and Venezuela, much of that decline is due to political problems

No doubt it was. But political upheaval is part of the story, and always will be. There will be political problems ongoing for decades. Dennis, if your model excludes political problems, then you are living in a dream world.

Anyway, in addition to the political problems that you point out in those four nations, which will most likely continue, we have the natural decline in the other five nations in the chart below.

Hightrekker Ignored says: 08/15/2020 AT 6:42 PM

Nov 2018 is getting further in the rear view mirror -- –

Dennis Coyne Ignored says: 08/16/2020 AT 9:03 AM

Hightrekker,

Yes and oil prices have been low from Nov 2018 until now, do you expect that to continue for the next 10 years? I do not, perhaps that's the difference. 2025 to 2030 there is likely to be a new peak for World C plus C centered 12 month average output probably 1 to 3 Mb per day higher than the Nov 2018 peak. This assumes oil prices reach $64/bo or higher in 2020$ by June 2030.

Hightrekker Ignored says: 08/16/2020 AT 9:51 AM

Yes, I do not think we will surpass Nov 2018.
But I'm a European Historian, viewing other factors.

Survivalist Ignored says: 08/18/2020 AT 1:54 AM

I seem to recall, not too long ago, various talking heads prattling on about how USA LTO is now the new "swing producer"/source of swing supply. I guess we'll now get to see how well it swings on and off, as swing producers are wont to do.
My WAG is that it doesn't swing back on so well, as the swing off phase seems to be damaging (not just a tap you see), and when demand recovers after COVID, circa 2023, we'll see a price run up. Perhaps it'll be a damaging price run up. 2023 will be in the middle of Biden's first term, presumably.

Westexasfanclub Ignored says: 08/16/2020 AT 3:57 AM

And: Nigeria and Venezuela could ramp up their production only very, very slowly. They could not stem the general trend. Lybia is too little to make any serious difference. The only real wildcard is Iran. And it's the less probable to be played.

[Aug 08, 2020] Saudi Arabia is insolvent- --- Foreign Affairs - Sic Semper Tyrannis

Aug 08, 2020 | turcopolier.typepad.com

Saudi Arabia is insolvent? --- Foreign Affairs

"An ambitious leader never lets a crisis go to waste, and MBS is nothing if not ambitious. During the early days of the pandemic, he increased the kingdom's value-added tax from five percent to 15 percent, and the government earmarked $1 billion in stimulus payments to Saudi businesses struggling with the economic downturn. MBS directed his sovereign wealth fund to shop for bargains on global stock markets. He even went nose to nose with Russian President Vladimir Putin on oil prices: when Russia refused to respect production limits set in 2017, Saudi Arabia opened the spigot, driving the price of oil down, very briefly, into negative territory . Even with oil prices back around $40 per barrel, the Saudis are left with only half the revenue they need to balance the government's books. " FA

--------------

Well pilgrims, Trumpy and Jared may love the Saudis and the murderer MBS, but I do not. I was the Defense Attaché there for three years. It was one of the most unpleasant experiences of my army career. The level of social and legal restriction imposed by the theocracy was stifling. Normal life was simply impossible. Even as a diplomat I felt imprisoned in the embassy. For a foreigner to speak Arabic in public was most unwise because the immediate suspicion, often voiced, was that the foreigner was a SPY!

The one thing the Saudis have historically had "going for them" was the money that flooded the country from the ever flowing oil and gas stream. Now, that is largely finito. Good! That means less money to use in spreading the Wahhabi cult, and less money to spend on futile fantasies like the war against the Zeidi mountaineers in Yemen.

A million gastarbeiters have left the country? Good! Perhaps the Saudis will learn how to do actual work. Perhaps. pl

https://www.foreignaffairs.com/articles/saudi-arabia/2020-08-04/end-saudi-arabias-ambitions


Jack , 07 August 2020 at 12:27 PM

Sir

What's your opinion on the dynamics that could lead to the fall of the House of Saud?

I'm sure in an insular country like that there must be much palace intrigue and suspicions on loyalty among those that bear arms. How does MbS insure his survival?

Linda , 07 August 2020 at 02:04 PM

It couldn't happen to better folks

BABAK MAKKINEJAD , 07 August 2020 at 03:37 PM

Col. Lang:

It will be decades before the identification of Salafi ideas as True Islam is discarded.

Decades of strife and bloodshed still lies ahead, in my opinion.

upstater , 07 August 2020 at 04:52 PM

With "friends" like KSA and Israel, who needs enemies? These two have driven US foreign policy for decades and the smouldering wreakage of MENA is the legacy of these miguided corrupt alliances. Between the fed and Treasury we'll be bailing out both of these monstrosities.

Unfortunately the 2 presidential candidates promise us of more of the same. I was so hopeful that Trump might make a break, but he seems to have been a weak leader with little follow through. Biden, of course, will put these misguided alliances on steroids administered by proven losers.

Richard Ong , 07 August 2020 at 07:14 PM

There's a positively classic scene at the beginning of the movie "A New Leaf." Walter Matthau's character is visited on the golf course by his accountant who's come to tell him that there's no more money in his trust account. Matthau is bewildered by this news uttering something along the lines of "But I still have plenty of checks." It's hilarious and someone in Saudi will also soon be visiting the Wahhabi loons to tell them the party is over. Life imitates art.

Polish Janitor , 07 August 2020 at 07:20 PM

Saudi Arabia has been in the news lately and none of them is good. One is WSJ's report on the quasi-secret China-Saudi nuclear cooperation and the 'Yellow-cake' production in a secret desert facility in the country's NW. I can already see the heat the Saudi's will be getting from this!

Two, is the story of the 'Tiger Squad' assassins who were ordered by MbS personally to pull off a Khashoggi on a former Saudi intelligence officer for his refusal to get back to the country.

The idea of the Saudi's march to nuclear weapons development is a terrifying idea, but the rumor is that they already have (at least) one in Pakistan. I particularly find it very strange that the Trump admin was positively 'nudging' the Saudis toward nuclear energy development until very recently, when Rick Perry was still in the administration! But a few days ago the official at the State Dep's arms control and non-proliferation desk poured cold water on Saudis and made it clear that the U.S. would not let them to do funny stuff wit uranium behind their backs.

Also of note is the part in the WSJ's report that caught my attention and where it mentions the involvement of an Argentinian energy firm that recently set up a nuclear reactor for the Saudis and that they were very keen on developing the enrichment cycle supposedly for 'research' purposes and under secrecy. This reminded me of the 'colorful' history of Israeli-Argentine secret nuclear weapons development cooperation in the 60's, in which Israel got its'yellow-cake' it needed from Argentina to develop its nukes. Which begs the question that are Saudis going the same route as Israel did back in the early 60s? Why not working with Japan, Germany, France, U.S. then if it is all peaceful?

I have had my fair share of interactions with the Saudi people. while the culture is pretty medieval with regards to social and religious matters, but when it comes to hospitality and alike they are welcoming, especially during the month of Ramadan and after Iftar, that is when they break their fasts at dusk. For the Saudis it is like a custom to be 'extra' generous and they donate free meals frequently to everyone.

nbsp; The Twisted Genius , 07 August 2020 at 09:09 PM

Years ago, I suggested a cyber operation to drain the royal family of their disposable wealth for the sole purpose of depriving the jihadists of further material support. Glad to see that the "invisible hand of capitalism" and the royal's own stupidity are doing just that. I don't want to see the royals toppled. Who knows what would replace them. But if they were weakened enough so that all their remaining resources and concentration are focused on keeping their people from rising up and ripping them to shreds, it would be fine by me. Let the jihadis be reduced to angry men in the mosque without the resources to turn their anger into meaningful action.

BTW, this idea of a cyber operation was from SST not from my time in DIA.

J , 08 August 2020 at 09:27 AM

While MBS's Tiger Squad assassins were denied entry into Canada to whack former Saudi Intel type/MBS critic Saad Aljabri, MBS succeeded in obtaining a fatwa directed against Saad Aljabri.

james , 08 August 2020 at 10:09 AM

pat - i think your personal experience of ksa reflects what most people in ksa probably feel on some level.. i can't know this for a fact, but i would say if there was any place where the usa was into doing a regime change, i would go along with this one.. anything would be better then what they have wrought.. the export of wahabbism - salafist ideology has also been a plague on the planet... at what point does this transfer of oil money into crazy religious ideology indoctrination bite the dust? it can't happen soon enough as i see it..

here is a link to one of the stories polish janitor refers to in their post above.. https://www.cbc.ca/player/play/1773116483748

Babak makkinejad , 08 August 2020 at 12:55 PM

James

The Salafist approach to Islam is not crazy, i.e. insane. It is very much like Protestanism in as much as it rejects even the theoretical possibility of a Legitimate Central Religious Authority, it rejects Tradition, it rejects the possibility of sainthood - Olya allah -, it posits that any fool can read and interpret the Scriptures, and it rejects Theoretical Reason.

I think behind both Salafism and Protestanism appeals is a yearning for a simple moral and intellectual order that does not put too much strain on the believers' cognitive faculties; live under these black tents, follow these rules, and you are granted redemption in this life as well as the next.

"No need to trouble your pretty little brains to grapple with the world as you find it and not as you think it ought to be."

nbsp; turcopolier , 08 August 2020 at 01:48 PM

Babak

By "theoretical reason" you mean Kalaam?

Babak makkinejad , 08 August 2020 at 02:44 PM

I meant Philosophy.

Babak makkinejad , 08 August 2020 at 02:47 PM

James:

I should have written:

"...read and understand...", rather than "read and interpret..."

nbsp; turcopolier , 08 August 2020 at 03:02 PM

Babak

Felsafa is not highly regarded among the Sunnis because of the ancient closure of the Gate of Ijtihad. Felsafa is much more highly regarded among you Shia because you still have widely and highly regarded mujtahideen. Khomeini was a philosopher.

james , 08 August 2020 at 03:06 PM

babak... thanks... i have a hard time understanding the distinctions... i don't know enough of protestant ideology to appreciate the comparison.. as i understand it salafist ideology adopts sharia and sharia is handed down from 'religious authorities'.. do you agree in general with the description wikpedia gives on the salafi movement?? or is this slanted too much from your point of view?
https://en.wikipedia.org/wiki/Salafi_movement

james , 08 August 2020 at 03:29 PM

is it too much to say that without philosophy there is just literalism? literalism seems to reflect the bare minimum of understanding when everything boils down to this...

nbsp; turcopolier , 08 August 2020 at 04:57 PM

james

Sunni Islam has been mostly about "literalism" since the defeat of the mu'tazila.

nbsp; turcopolier , 08 August 2020 at 05:03 PM

james

Sunni Islam does not admit of hierarchy except within consensus groups (Ijma'). Some are large and some are small. 12er Shiism effectively is hierarchical through mechanism of the "Hawza" schools of mujtahids (Ayatollahs). i will be surprised if you understand that. Ask for clarifications.

Babak makkinejad , 08 August 2020 at 06:22 PM

James

Sharia is just the Laws of Islam, the concept is common to all Muslim sects and schools, the content is common.

In my opinion, Seyyed Jamal Al Din Qazwini was not a Salafi as the worf is understood today. He was a Shia Muslim who was campaigning for a unified Muslim response to the ascendancy of the Western Diocletian civilization as well as the Russian Empire.

He was, in the final analysis, only partly successful in his effort, in as much as they could only make sense among the Seljuk Muslims.

Salafi ideas, in my opinion, are best understood as a response of Non-Seljuk Muslims to the Western Diocletian civilization. It reminds me of the Deobandis, another Muslim response to the Western Diocletian civilization, exemplified by Great Britain, in India.

Both Salafis and Deobandis consider Shia Muslims to be heretics. The Wiki omits that.

nbsp; turcopolier , 08 August 2020 at 08:13 PM

babak
"the content is common" Untrue. There are many different collections of hadith and jurisprudence that make it obvious that the content is not common among the different sects.

james , 08 August 2020 at 10:15 PM

pat... thanks for the additional comments... yes, i am confused by it all and think i am in way over my head here! maybe i ought to just bow out of the conversation...

babak.. thank you as well...as i said to pat, i believe i am in over my head on the topic... i have a viewpoint - a very subjective one again - generally all religion - the orthodox kind anyway - have all struck me as not all that religious.. it is more like a system where the so called authorities or leaders get to dictate how it is and the followers have to go along with it... the whole spirit of religion seems overlooked or upside down.. i was naive and thought religion was about love and kindness to others and basic tenets like that, but i believe in the upper echelons of these religious systems, it is one big power game... i don't know that chrisitianity is all that different from islam in this regard.. i don't know enough about buddhism to comment, but i have heard similar stories in this religion as well... call me agnostic...

i hope for the best for everyone, but in the case of saudi arabia - i personally think the ksa-uae and etc leadership exporting wahabbism and really whacked out ideologies around to places like pakistan and etc have not done the world or themselves any favours.. i hope it ends soon.. it reminds me of the christian evangelicals exporting christianity to far off places round the globe... it is a lot like that and i don't think it does much of any good.. all the generousity has serious strings attached as i see it..

and finally - i agree with pats comment at the top and would like to repeat that.. i can't see any good coming out of ksa and think it would be better gone, or replaced with something more tolerant..

[Jul 28, 2020] Turkey On The Warpath

Putin decision to save Erdogan from the coup in retrospect looks like a blunder...
Jul 28, 2020 | www.zerohedge.com

Authored by Uzay Bulut via The Gatestone Institute,

Turkey is currently involved in quite a few international military conflicts -- both against its own neighbors such as Greece, Armenia, Iraq, Syria and Cyprus, and against other nations such as Libya and Yemen. These actions by Turkey suggest that Turkey's foreign policy is increasingly destabilizing not only several nations, but the region as well.

In addition, the Erdogan regime has been militarily targeting Syria and Iraq, sending its Syrian mercenaries to Libya to seize Libyan oil and continuing, as usual, to bully Greece. Turkey's regime is also now provoking ongoing violence between Armenia and Azerbaijan.

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Erdogan leads first Muslim prayer after Hagia Sophia mosque reconversion

Istanbul's Hagia Sophia reconversion to a mosque, 'provocation to civilised world', Greece says

Turkish top court revokes Hagia Sophia's museum status, 'tourists should still be allowed in'

Erdogan: Interference over Hagia Sophia 'direct attack on our sovereignty'

Libya's GNA says Egypt's warning on Sirte offensive a 'declaration of war'

Erdogan says 'agreements' reached with Trump on Libya

What Turkish Election Results Mean for the Lira

Erdogan Sparks Democracy Concerns in Push for Istanbul Vote Rerun

Since July 12, Azerbaijan has launched a series of cross-border attacks against Armenia's northern Tavush region in skirmishes that have resulted in the deaths of at least four Armenian soldiers and 12 Azerbaijani ones. After Azerbaijan threatened to launch missile attacks on Armenia's Metsamor nuclear plant on July 16, Turkey offered military assistance to Azerbaijan.

"Our armed unmanned aerial vehicles, ammunition and missiles with our experience, technology and capabilities are at Azerbaijan's service," said İsmail Demir, the head of Presidency of Defense Industries, an affiliate of the Turkish Presidency.

One of Turkey's main targets also seems to be Greece. The Turkish military is targeting Greek territorial waters yet again. The Greek newspaper Kathimerini reported :

"There have been concerns over a possible Turkish intervention in the East Med in a bid to prevent an agreement on the delineation of an exclusive economic zone (EEZ) between Greece and Egypt which is currently being discussed between officials of the two countries."

Turkey's choice of names for its gas exploration ships are also a giveaway. The name of the main ship that Turkey is using for seismic "surveys" of the Greek continental shelf is Oruç Reis , (1474-1518), an admiral of the Ottoman Empire who often raided the coasts of Italy and the islands of the Mediterranean that were still controlled by Christian powers. Other exploration and drilling vessels Turkey uses or is planning to use in Greece's territorial waters are named after Ottoman sultans who targeted Cyprus and Greece in bloody military invasions. These include the drilling ship Fatih "the conqueror" or Ottoman Sultan Mehmed II, who invaded Constantinople in 1453; the drilling ship Yavuz , "the resolute", or Sultan Selim I, who headed the Ottoman Empire during the invasion of Cyprus in 1571; and Kanuni , "the lawgiver" or Sultan Suleiman, who invaded parts of eastern Europe as well as the Greek island of Rhodes.

Turkey's move in the Eastern Mediterranean came in early July, shortly after the country had turned Hagia Sophia, once the world's greatest Greek Cathedral, into a mosque. Turkish President Recep Tayyip Erdogan then linked Hagia Sophia's conversion to a pledge to "liberate the Al-Aqsa Mosque" in Jerusalem.

https://lockerdome.com/lad/13084989113709670?pubid=ld-dfp-ad-13084989113709670-0&pubo=https%3A%2F%2Fwww.zerohedge.com&rid=www.zerohedge.com&width=890

On July 21, the tensions arose again following Turkey's announcement that it plans to conduct seismic research in parts of the Greek continental shelf in an area of sea between Cyprus and Crete in the Aegean and Eastern Mediterranean.

"Turkey's plan is seen in Athens as a dangerous escalation in the Eastern Mediterranean, prompting Prime Minister Kyriakos Mitsotakis to warn that European Union sanctions could follow if Ankara continues to challenge Greek sovereignty," Kathimerini reported on July 21.

Here is a short list of other countries where Turkey is also militarily involved:

In Libya , Turkey has been increasingly involved in the country's civil war. Associated Press reported on July 18:

"Turkey sent between 3,500 and 3,800 paid Syrian fighters to Libya over the first three months of the year, the U.S. Defense Department's inspector general concluded in a new report, its first to detail Turkish deployments that helped change the course of Libya's war.

"The report comes as the conflict in oil-rich Libya has escalated into a regional proxy war fueled by foreign powers pouring weapons and mercenaries into the country."

Libya has been in turmoil since 2011, when an armed revolt during the "Arab Spring" led to the ouster and murder of dictator Muammar Gaddafi. Political power in the country, the current population of which is around 6.5 million, has been split between two rival governments. The UN-backed Government of National Accord (GNA), has been led by Prime Minister Fayez al Sarraj. Its rival, the Libyan National Army (LNA), has been led by Libyan military officer, Khalifa Haftar.

Backed by Turkey, the GNA said on July 18 that it would recapture Sirte, a gateway to Libya's main oil terminals, as well as an LNA airbase at Jufra.

Egypt, which backs the LNA, announced , however, that if the GNA and Turkish forces tried to seize Sirte, it would send troops into Libya. On July 20, the Egyptian parliament gave approval to a possible deployment of troops beyond its borders "to defend Egyptian national security against criminal armed militias and foreign terrorist elements."

Yemen is another country on which Turkey has apparently set its sights. In a recent video , Turkey-backed Syrian mercenaries fighting on behalf of the GNA in Libya, and aided by local Islamist groups, are seen saying, "We are just getting started. The target is going to be Gaza." They also state that they want to take on Egyptian President Sisi and to go to Yemen.

"Turkey's growing presence in Yemen," The Arab Weekly reported on May 9, "especially in the restive southern region, is fuelling concern across the region over security in the Gulf of Aden and the Bab al-Mandeb.

"These concerns are further heightened by reports indicating that Turkey's agenda in Yemen is being financed and supported by Qatar via some Yemeni political and tribal figures affiliated with the Muslim Brotherhood."

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In Syria , Turkey-backed jihadists continue occupying the northern parts of the country. On July 21, Erdogan announced that Turkey's military presence in Syria would continue. "Nowadays they are holding an election, a so-called election," Erdogan said of a parliamentary election on July 19 in Syria's government-controlled regions, after nearly a decade of civil war. "Until the Syrian people are free, peaceful and safe, we will remain in this country."

Additionally, Turkey's incursion into the Syrian city of Afrin, created a particularly grim situation for the local Yazidi population:

"As a result of the Turkish incursion to Afrin," the Yazda organization reported on May 29, "thousands of Yazidis have fled from 22 villages they inhabited prior to the conflict into other parts of Syria, or have migrated to Lebanon, Europe, or the Kurdistan Region of Iraq... "

"Due to their religious identity, Yazidis in Afrin are suffering from targeted harassment and persecution by Turkish-backed militant groups. Crimes committed against Yazidis include forced conversion to Islam, rape of women and girls, humiliation and torture, arbitrary incarceration, and forced displacement. The United States Commission on International Religious Freedom (USCIRF) in its 2020 annual report confirmed that Yazidis and Christians face persecution and marginalization in Afrin.

"Additionally, nearly 80 percent of Yazidi religious sites in Syria have been looted, desecrated, or destroyed, and Yazidi cemeteries have been defiled and bulldozed."

In Iraq , Turkey has been carrying out military operations for years. The last one was started in mid-June. Turkey's Defense Ministry announced on June 17 that the country had "launched a military operation against the PKK" (Kurdistan Workers' Party) in northern Iraq after carrying out a series of airstrikes. Turkey has named its assaults "Operation Claw-Eagle" and "Operation Claw-Tiger".

The Yazidi, Assyrian Christian and Kurdish civilians have been terrorized by the bombings. At least five civilians have been killed in the air raids, according to media reports . Human Rights Watch has also issued a report , noting that a Turkish airstrike in Iraq "disregards civilian loss."

Given Turkey's military aggression in Syria, Iraq, Libya, and Armenia, among others, and its continued occupation of northern Cyprus, further aggression, especially against Greece, would not be unrealistic. Turkey's desire to invade Greece is not exactly a secret. Since at least 2018, both the Turkish government and opposition parties have openly been calling for capturing the Greek islands in the Aegean, which they falsely claim belong to Turkey.

If such an attack took place, would the West abandon Greece?


Gaius Konstantine , 10 hours ago

If such an attack took place, it will get real messy, real fast. The Turkish military is only partially adept at fighting irregular forces that lack heavy weaponry while Turkey has absolute control of the sky. Even then, the recent performance of Turkish forces has been lacklustre for "the 2nd largest Army in NATO".

Turkey should understand that a fight with Greece will mean that the advantages she enjoyed in her recent adventures will not be there. Nor should Turkey look to the past and expect an easy victory, the Greek Army will not be marching deep into Anatolia this time, (which was the wrong type of war for Greece).

So what happens if they actually take it to war?

The larger Greek islands are well defended, they won't be taken, but defending the smaller ones is hard and Turkey will probably grab some of those. The Greeks, who have absolute control and dominance in the Aegean will do several things. Turkish naval and air bases along the Aegean coastline will be attacked as will the bosphorus bridges, (those bridges WILL go down). The Greek army, which is positioned well, will blitz into eastern Thrace and stop outside Istanbul where they will dig in and shell the city, thereby causing the civilians to flee and clogging up the tunnels to restrict military re-enforcement.

That's Greece acting alone, a position will be achieved where any captured islands will be traded for eastern Thrace. Should the French intervene, (even if it's just air and naval forces), it gets a lot more interesting.

The mighty Turkish fleet was just met by the entire Greek navy in the latest stand-off, it was enough to cause Turkey to reconsider her options. There will be no Ottoman empire 2.0

OliverAnd , 9 hours ago

The Greeks need their navy for surgically precise attacks against Turkey's navy. Every island, especially the large ones are unsinkable aircraft carriers. No one has mentioned in any article that Turkey's navy is functioning with less than minimum required personnel. No one has mentioned that their air force is flying with Pakistani pilots. The only way Turks will land on Greek uninhabited islands is only if they are ship wrecked and that for a very very short period of time. Turkey's population is composed of 25% Kurds... that will also be very interesting to see once they awaken from their hibernation and realize their great and holy goal of Kurdistan. Egypt will not waste the opportunity to join in to devastate whatever Turkish navy remains. Serbian patriots will not allow the opportunity to go to waste and will attack Kosovo and indirectly Albania composed primarily of Turkish descendants... realize the coverage lately of how the US did wrong for supporting these degenerate Muslim Albanians.

I have no doubt Greeks will make it to Aghia Sophia but will not pass Bosporus. The result will be a Treaty that is a hybrid of the Treaty of Lausanne and the Treaty of Sevron. If the Albanians decide to support the Turks by attacking Greeks in the North and in Northern Epeirus they should expect annexation of Northern Epeirus to Greece. Erdogan bases his bullying on Trump's incompetences and false friendship. This is why America is non existent in any of these regions. If Trump wins the election it will be a long war and very destabilized for the region. If Trump loses the war will be much much quicker. The outcome will remain the same. The Russians will not allow Turkey to dictate in the area. Israel will not allow Turkey to dictate in the area. Egypt will not allow Turkey to dictate in the area. Not even European Union. UK is the questionable.

bobcatz , 2 hours ago

And the US in the Middle East is not????????

ALL MidEast terrorism, shenanigans, and warmongering are for APARTHEID Israhell.

Joy Division , 7 hours ago

The West has Turkey's back otherwise the Turkish currency the Turkish Lira would have collapsed by now under attacks from the City of London Freemasonic Talmudic bankers.

Remember what happened to the Russian Rouble when Russia annexed Crimea?

The Fed and the ECB in cahoots with the usual Talmudic interests, are supporting the Turkish Lira and propping up the Erdogan regime.

There is NO OTHER explanation.

The Turks have NO foreign currency reserves, no net positive euro nor dollar reserves. Their tourism industry and main hard currency generator has COLLAPSED (hotels are 95 percent empty). The Turkish central bank has resorted to STEALING Turkish citizens' dollar-denominated bank accounts via raising Turkish Banks' foreign currency reserve requirements which the Turkish central bank SPENDS upon receipt to buy TLs and prop up the Turkish Lira.

This is utter MADNESS and FRAUD and LARCENY.

London-based currency traders would be all over the Turkish Lira and/or Turkish bonds and stocks by now UNLESS they had been instructed by the Fed and the ECB or the Talmudic bankers that own and control both, to lay off the Turkish Lira.

Despite the noise on TV or the press,

BY DEFINITION,

Erdogan and the Turks are only doing the bidding of the TRIBE hence Erdogan has the blessing and the protection of the people ZH censors the name.

BUT

You know how those parasites treat their host and what the inevitable outcome is, right?

Indeed,

Erdogan and the Turks are being set up to be thrown under the proverbial bus at the appropriate time.

The Neo-Ottoman Sultan has inadvertently set up his (ill begotten) country for eventual destruction and partition. The Kurds will get a piece of it. Who knows, maybe even the Armenians will be able to recover some bits of their ancient homeland.

Greeks in Constantinople? Nothing is impossible thanks to the hubris and chutzpah of Erdogan who is purported to have "Amish" blood himself.

Know thyself , 5 hours ago

Good for the UK that they have left the EU.

Apart from the Greeks, who would be fighting for their lives and homeland, the only EU forces capable of acting are the French. German does not have an operative army or navy; Italy, Spain and Portugal have neglected their armed forces for many years, and the Baltic and Eastern Nations are unlikely to want to get involved. The Netherlands have very good forces but not many of them.

MPJones , 7 hours ago

We can live in hope. Erdogan certainly seems to need external enemies to hold the country together. Let us also hope that Erdogan's adventurism finally wakes up Europe to the reality of the ongoing Muslim invasion so that the necessary Muslim repatriation can get going without the bloodshed which Islam's current strategy in Europe will otherwise inevitably lead to.

Know thyself , 5 hours ago

The Turkish army is a conscript army. They will need to be whipped up with religious fervour to perform. Otherwise they will look after their own skins.

But remember that the Turks put up a good defence in the Dardanelles in the First World War.

HorseBuggy , 9 hours ago

What do you expect? He killed Russian fighter pilots and he survived, this empowers terrorists like him. Those pilots were the only ones at that time fighting ISIS. May they RIP.

Max.Power , 9 hours ago

Turkey is in a "proud" group of failed empires surrounded by nations they severely abused less than 100 years ago.

Other two are Germany and Japan. Any military aggression from their side will be met with rage by a coalition of nations.

US position will be irrelevant at this point, because local historical grievances will overweight anything else.

monty42 , 10 hours ago

"Libya has been in turmoil since 2011, when an armed revolt during the "Arab Spring" led to the ouster and murder of dictator Muammar Gaddafi. Political power in the country..."

Kinda gave yourself away there. The coordinated assault on Libya by the US, Britain, France, and their Al-CiA-da allies on the ground resulted in the torture, sodomizing, and murder of Gaddafi, as well as his son and grandchildren killed in bombings by the US.

Also, let's not forget that Turkey is still in NATO, and their actions in Syria were alongside the US regime and terrorist proxies labeled "moderate rebels". The same terrorists originally used in Libya, then shipped to destroy Syria, now flown back to Libya. The attempt to paint all of those things as Turkey's actions alone is not honest.

When Turkey isn't in NATO anymore, let me know.

TheZeitgeist , 10 hours ago

Don't forget that Hiftar guy Turks are fighting in Libya was a CIA toadie living in Virginia for a decade before they gave him his "chance" to among other things become a client of the Russians apparently. Flustercluck of the 1st order everywhere one looks.

monty42 , 10 hours ago

Then they put on this whole production where it's the CIA guy or the terrorist puppet regime they installed, so that the rulers win regardless of the outcome. The victims are those caught up in their sick game.

GalustGulbenkyan , 9 hours ago

Turkish population has been recently getting ****** due to the economic contractions and devaluation of the Lira. Once Turkey starts fighting against a real army the Turks will realize that they are going to be ****** by larger dildos. In 1990's they sent thousands of volunteers to Nagorno Karabagh to fight against irregular Armenian forces and we know how that ended for them. Greeks and Egyptians are not the Kurds. Erdogan is a lot of hot air and empty threats. You can't win wars with Modern drones which even Armenians have learned how to jam and shoot down with old 1970's soviet tech.

Guentzburgh , 5 hours ago

Greece should be aligned with Russia, EU and USA are a bad choice that Greece will regret.

Greece needs to pivot towards Russia which will open huge opportunities for both countries

KoalaWalla , 6 hours ago

Greeks are bitter and prideful - they would not only defend themselves if attacked but would counter attack to reclaim land they've lost. But, I don't know that Erdogan is clever enough to realize this.

60s Man , 9 hours ago

Turkey is America's Mini Me.

currency , 3 hours ago

Erdogan is in Trouble at home declining economy and his radical conservative/Thug type policies. Turks are moving away from him except the hard core radicals and conservatives. He and his family are Corrupt - they rule with threats and use of THUGS. Sense his constant wars may be over stretched Time for a Turkish Spring.

Time for US, Nato and etc. to say goodbye to this THUG

OrazioGentile , 7 hours ago

Turkey seems to be on a warpath to imploding from within. Erdogan looks like a desperate despot with a failing economy, failing political clout, and failing modernization of his Country. Like any despot, he has to rally the troops or he will literally be a dead man walking.

HorseBuggy , 9 hours ago

The world fears loud obnoxious tyrants and Erdogan is the loudest tyrant since Hitler. Remember how countries pandered to Hitler early on? Same thing is happening with Erdogan.

This terrorist will do a lot more damage than he has already before the world wakes up.

By the time Hitler was done, 70 million people were dead, what will Erdogan cause?

OliverAnd , 9 hours ago

Turkey is not Germany. Not by far. Erdogan may be a bigger lunatic than Hitler, but Turkey is not Germany of the 30's. Without military equipment/parts from Germany, Italy, Spain, France, USA, and UK he cannot even build a nail. Economies are very integrated; he will be disposed of very very quickly. He has been warned. He is running out of lives.

NewNeo , 9 hours ago

You should research a lot more. Turkey is a lot more power thank Nazi Germany of the 1930's. Turkey currently have brand new US made equipment. It even houses the nuclear arsenal of NATO.

You should probably look at information from stratfor and George Friedman to give you a better understanding.

The failed coupe a few years ago was because the lunatic had gone off the reservation and was seen as a threat to the region. Obviously the bankers thought it in their benefit to keep him going and tipped him off.

OliverAnd , 8 hours ago

Clearly the lockdown has hindered your already illiteracy. Turkey has modern US equipment. Germany did not need US equipment. They made their own equipment; in fact both the US and USSR used Grrman old tech to develop future tech.

The coup was designed by Erdogan to bring himself to full power. When this is all done he will be responsible for millions of Turkish lives; after all he is not a Turk but a Muslim Pontian.

[Jul 19, 2020] The Shale Bust Has Arrived

Jul 19, 2020 | neznaika-nalune.livejournal.com


1. Shale bust is here
- Shale wells decline somewhere between 70 and 90 percent from their initial peak within 3 years, with the bulk of that decline coming within the first 12 months.
- As a result, the pause in drilling quickly translates into U.S. oil production declines.
- "We just have no new drilling and these decline curves are going to catch up," Mark Rossano, founder and chief executive officer of private-equity firm C6 Capital Holdings LLC, told Bloomberg. "That hits really fast when you're not looking at new production."
- With no drilling at all, U.S. shale oil production would theoretically fall by more than a third to less than 5 mb/d by the end of the year.

2. Bankruptcies to spike
- Between 2015 and 2019, there were roughly 200 bankruptcies in the North American oil and gas sector.
- Through April of this year, there have been another 7 bankruptcies, according to Haynes and Boone, although the value of the debt involved is 2.8 times larger compared to the first quarter bankruptcies in 2019.
- Around 70 companies are on track for bankruptcy by the end of the year with WTI averaging $30 per barrel, according to Rystad Energy. If WTI remains stuck at $30, that total would rise to 150 to 200 by the end of 2021.
- "In our view, we will need WTI prices of $40 to $45 per barrel to eliminate the upcoming explosion in the number of financially distressed US E&Ps,
https://oilprice.com/Energy/Energy-General/The-Shale-Bust-Has-Arrived.html

[Jul 13, 2020] Fracking Firms Fail, Rewarding Executives and Raising Climate Fears

Jul 13, 2020 | www.moonofalabama.org

vk , Jul 13 2020 13:46 utc | 176

It's now canonized in American public opinion, as the NYT has published an authorial article (in the pedantic upper middle class I-wanna-win-a-Pulitzer style) about it:

Fracking Firms Fail, Rewarding Executives and Raising Climate Fears

[Jul 03, 2020] Fracking: From Revolution to Money Pit

Highly recommended!
See original for the video. it is definitely worth to watch in full. Essentially this is a reset of Art Berman's maxim "Shale is a retirement party for the oil industry"
This is about Wall street manipulation, not so much about technology. It's an indictment of our screwed-up system of Finance
Jul 02, 2020 | www.bloomberg.com
For most any nation, let alone a superpower, energy independence is considered the geopolitical holy grail. So when fracking lured in American investors, everyone had high hopes the country would finally break free of OPEC. But oil is a complex game, and 2020 saw sharp declines in demand caused by the cartel's maneuvering, shale oil's oversupply, and now the devastating effects of the coronavirus. What's worse, the startup mentality of the U.S. fracking industry promised investors mythical growth and nonexistent returns. In the end, it burned a $340 billion hole in Wall Street's pocket. (Source: Bloomberg)

[May 25, 2020] US oil companies are cutting production much faster than expected -- RT Business News

Notable quotes:
"... "Well, I think it's automatic. Because they're already cutting. I mean, if you look, they're cutting back. Because it's it's market. It's demand. It's supply and demand. They're already cutting back, and they're cutting back very seriously," ..."
May 25, 2020 | www.rt.com

The United States is on track to cut 1.7 million barrels of oil production per day, according to Reuters calculations of state and company data shared on Thursday. It was US President Donald Trump that suggested at the beginning of April, prior to the most recent OPEC deal signing that the United States would cut its oil output as a natural response to the worsening market conditions. The statement was not initially good enough for OPEC, who wanted more of a commitment from the world's largest producer and consumer of crude oil.

"Well, I think it's automatic. Because they're already cutting. I mean, if you look, they're cutting back. Because it's it's market. It's demand. It's supply and demand. They're already cutting back, and they're cutting back very seriously," US President Trump said at a press briefing early last month.

OPEC+ eventually agreed to cut production by 9.7 million bpd -- a landmark figure that is significantly larger than previous OPEC cuts in recent years. Its non-OPEC allies who partnered with OPEC in the deal pledged to cut an additional 10 million bpd. Also on rt.com OPEC+ strikes last-minute deal to cut almost 10 mn barrels a day of oil production

US Energy Secretary said last month that the DoE expected that production in the United States would fall by between two and three million bpd by the end of the year -- it appears the cuts have come even quicker than the department expected.

The need for the production cuts grew more evident as the United States shut down nearly all activity in an attempt to flatten that curve of infections that sought to overwhelm the country's healthcare system. Doing so, however, has idled much of the economy and crippled demand -- and as such, its oil and gas industry that fuels that economy.

READ MORE: The shale suffering has only just begun

The cuts from US producers may seek to quiet the disgruntlement of OPEC and Russia, in particular, who expressed their displeasure that the US would not require its producers to curb production. After all, the US shale industry has benefited greatly from previous rounds of OPEC cuts.

[May 21, 2020] The 'Clean Break' Doctrine OffGuardian

Highly recommended!
Notable quotes:
"... A Clean Break: A New Strategy for Securing the Realm ..."
"... "the right to plunder anything one can get their hands on" ..."
"... "the UK and France in March 2011 which led the international community to support an intervention in Libya to protect civilians from forces loyal to Muammar Gaddafi" ..."
May 21, 2020 | off-guardian.org

n 1996 a task force, led by Richard Perle, produced a policy document titled A Clean Break: A New Strategy for Securing the Realm for Benjamin Netanyahu, who was then in his first term as Prime Minister of Israel, as a how-to manual on approaching regime change in the Middle East and for the destruction of the Oslo Accords.

The "Clean Break" policy document outlined these goals:

Ending Yasser Arafat's and the Palestinian Authority's political influence, by blaming them for acts of Palestinian terrorism Inducing the United States to overthrow Saddam Hussein's regime in Iraq. Launching war against Syria after Saddam's regime is disposed of. Followed by military action against Iran, Saudi Arabia, and Egypt.

"Clean Break" was also in direct opposition to the Oslo Accords, to which Netanyahu was very much itching to obliterate. The Oslo II Accord was signed just the year before, on September 28th 1995, in Taba, Egypt.

During the Oslo Accord peace process, Likud leader Benjamin Netanyahu accused Rabin's government of being "removed from Jewish tradition and Jewish values." Rallies organised by the Likud and other right-wing fundamentalist groups featured depictions of Rabin in a Nazi SS uniform or in the crosshairs of a gun.

In July 1995, Netanyahu went so far as to lead a mock funeral procession for Rabin, featuring a coffin and hangman's noose.

The Oslo Accords was the initiation of a process which was to lead to a peace treaty based on the United Nations Security Council Resolutions 242 and 338, and at fulfilling the "right of the Palestinian people to self-determination." If such a peace treaty were to occur, with the United States backing, it would have prevented much of the mayhem that has occurred since.

However, the central person to ensuring this process, Yitzak Rabin, was assassinated just a month and a half after the signing of the Oslo II Accord, on November 4th, 1995. Netanyahu became prime minister of Israel seven months later. "Clean Break" was produced the following year.

On November 6th, 2000 in the Israeli daily Ha'aretz, Israeli Justice Minister Yossi Beilin, who was the chief negotiator of the Oslo peace accords, warned those Israelis who argued that it was impossible to make peace with the Palestinians:

Zionism was founded in order to save Jews from persecution and anti-Semitism, and not in order to offer them a Jewish Sparta or – God forbid – a new Massada."

On Oct. 5, 2003, for the first time in 30 years, Israel launched bombing raids against Syria, targeting a purported "Palestinian terrorist camp" inside Syrian territory. Washington stood by and did nothing to prevent further escalation.

"Clean Break" was officially launched in March 2003 with the war against Iraq, under the pretence of "The War on Terror". The real agenda was a western-backed list of regime changes in the Middle East to fit the plans of the United Kingdom, the U.S. and Israel.

However, the affair is much more complicated than that with each player holding their own "idea" of what the "plan" is. Before we can fully appreciate such a scope, we must first understand what was Sykes-Picot and how did it shape today's world mayhem.

Arabian Nights

WWI was to officially start July 28th 1914, almost immediately following the Balkan wars (1912-1913) which had greatly weakened the Ottoman Empire.

Never one to miss an opportunity when smelling fresh blood, the British were very keen on acquiring what they saw as strategic territories for the taking under the justification of being in war-time, which in the language of geopolitics translates to "the right to plunder anything one can get their hands on" .

The brilliance of Britain's plan to garner these new territories was not to fight the Ottoman Empire directly but rather, to invoke an internal rebellion from within. These Arab territories would be encouraged by Britain to rebel for their independence from the Ottoman Empire and that Britain would support them in this cause.

These Arab territories were thus led to believe that they were fighting for their own freedom when, in fact, they were fighting for British and secondarily French colonial interests.

In order for all Arab leaders to sign on to the idea of rebelling against the Ottoman Sultan, there needed to be a viable leader that was Arab, for they certainly would not agree to rebel at the behest of Britain.

Lord Kitchener, the butcher of Sudan, was to be at the helm of this operation as Britain's Minister of War. Kitchener's choice for Arab leadership was the scion of the Hashemite dynasty, Hussein ibn Ali, known as the Sherif of Mecca who ruled the region of Hejaz under the Ottoman Sultan.

Hardinge of the British India Office disagreed with this choice and wanted Wahhabite Abdul-Aziz ibn Saud instead, however, Lord Kitchener overruled this stating that their intelligence revealed that more Arabs would follow Hussein.

Since the Young Turk Revolution which seized power of the Ottoman government in 1908, Hussein was very aware that his dynasty was in no way guaranteed and thus he was open to Britain's invitation to crown him King of the Arab kingdom.

Kitchener wrote to one of Hussein's sons, Abdallah, as reassurance of Britain's support:

If the Arab nation assist England in this war that has been forced upon us by Turkey, England will guarantee that no internal intervention take place in Arabia, and will give Arabs every assistance against foreign aggression."

Sir Henry McMahon who was the British High Commissioner to Egypt, would have several correspondences with Sherif Hussein between July 1915 to March 1916 to convince Hussein to lead the rebellion for the "independence" of the Arab states.

However, in a private letter to India's Viceroy Charles Hardinge sent on December 4th, 1915, McMahon expressed a rather different view of what the future of Arabia would be, contrary to what he had led Sherif Hussein to believe:

[I do not take] the idea of a future strong united independent Arab State too seriously the conditions of Arabia do not and will not for a very long time to come, lend themselves to such a thing."

Such a view meant that Arabia would be subject to Britain's heavy-handed "advising" in all its affairs, whether it sought it or not.

In the meantime, Sherif Hussein was receiving dispatches issued by the British Cairo office to the effect that the Arabs of Palestine, Syria, and Mesopotamia (Iraq) would be given independence guaranteed by Britain, if they rose up against the Ottoman Empire.

The French were understandably suspicious of Britain's plans for these Arab territories. The French viewed Palestine, Lebanon and Syria as intrinsically belonging to France, based on French conquests during the Crusades and their "protection" of the Catholic populations in the region.

Hussein was adamant that Beirut and Aleppo were to be given independence and completely rejected French presence in Arabia. Britain was also not content to give the French all the concessions they demanded as their "intrinsic" colonial rights.

Enter Sykes and Picot.

... ... ...

Throughout the 1920s and 1930s violent confrontations between Jews and Arabs took place in Palestine costing hundreds of lives. In 1936 a major Arab revolt occurred over 7 months, until diplomatic efforts involving other Arab countries led to a ceasefire.

In 1937, a British Royal Commission of Inquiry headed by William Peel concluded that Palestine had two distinct societies with irreconcilable political demands, thus making it necessary to partition the land.

The Arab Higher Committee refused Peel's "prescription" and the revolt broke out again. This time, Britain responded with a devastatingly heavy hand. Roughly 5,000 Arabs were killed by the British armed forces and police. Following the riots, the British mandate government dissolved the Arab Higher Committee and declared it an illegal body.

In response to the revolt, the British government issued the White Paper of 1939, which stated that Palestine should be a bi-national state, inhabited by both Arabs and Jews.

Due to the international unpopularity of the mandate including within Britain itself, it was organised such that the United Nations would take responsibility for the British initiative and adopted the resolution to partition Palestine on November 29th, 1947.

Britain would announce its termination of its Mandate for Palestine on May 15th, 1948 after the State of Israel declared its independence on May 14th, 1948.

A New Strategy for Securing Whose Realm?

Despite what its title would have you believe, "Clean Break" is neither a "new strategy" nor meant for "securing" anything. It is also not the brainchild of fanatical neo-conservatives: Dick Cheney and Richard Perle, nor even that of crazed end-of-days fundamentalist Benjamin Netanyahu, but rather has the very distinct and lingering odour of the British Empire.

"Clean Break" is a continuation of Britain's geopolitical game, and just as it used France during the Sykes-Picot days it is using the United States and Israel.

The role Israel has found itself playing in the Middle East could not exist if it were not for over 30 years of direct British occupation in Palestine and its direct responsibility for the construction of the Israeli-Palestinian conflict, which set a course for destruction and endless war in this region long before Israel ever existed.

It was also Britain who officially launched operation "Clean Break" by directly and fraudulently instigating an illegal war against Iraq to which the Chilcot Inquiry, aka Iraq Inquiry , released 7 years later, attests to.

This was done by the dubious reporting by British Intelligence setting the pretext for the U.S.' ultimate invasion into Iraq based off of fraudulent and forged evidence provided by GCHQ, unleashing the "War on Terror", aka "Clean Break" outline for regime change in the Middle East.

In addition, the Libyan invasion in 2011 was also found to be unlawfully instigated by Britain.

In a report published by the British Foreign Affairs Committee in September 2016, it was concluded that it was "the UK and France in March 2011 which led the international community to support an intervention in Libya to protect civilians from forces loyal to Muammar Gaddafi" .

The report concluded that the Libyan intervention was based on false pretence provided by British Intelligence and recklessly promoted by the British government.

If this were not enough, British Intelligence has also been caught behind the orchestrations of Russia-Gate and the Skripal affair .

Therefore, though the U.S. and Israeli military have done a good job at stealing the show, and though they certainly believe themselves to be the head of the show, the reality is that this age of empire is distinctly British and anyone who plays into this game will ultimately be playing for said interests, whether they are aware of it or not.

Originally published by Strategic Culture


Almondson ,

Yossi B said:

Zionism was founded in order to save Jews from persecution and anti-Semitism

Ever heard of Dumbo? He's a flying elephant.

The crusade in the ME will continue, with Israel the top dog until America's military support is no longer there. Even without the Israeli eastern european invaders, the area is primed for perpetual tribal warfare because the masses are driven by tribalist doctrines and warped metaphysics dictated by insane and inhumane parasites (priests). It is the epicenter of a spiritual plague that has infected most of the planet.

paul ,

There is complete continuity between the activities of Zionist controlled western countries and those of the present day.

In the 1930s, there were about 300,000 adult Palestinian males. Over 10% were killed, imprisoned and tortured or driven into exile. 100,000 British troops were sent to Palestine to destroy completely Palestinian political and military organisations. Wingate set up the Jew terror gangs who were given free rein to murder, rape and burn, in preparation for the complete ethnic cleansing of the country.

We see the same ruthless, genocidal brutality on an even greater scale in the present day, serving exactly the same interests. Nothing has ever come of trying to negotiate with the Zionists and their western stooges – just further disasters. It is only resolute and uncompromising resistance that has ever achieved anything. Hezbollah kicking their Zionist arses out of Lebanon in 2000 and keeping them out in 2006. Had they not done so, Lebanon would still be under Zionist occupation and covered with their filthy illegal settlements.

They have never stopped and they never will. The objective is to create a vast Zionist empire comprising the whole of Palestine, Jordan, Lebanon and Syria, and parts of Egypt, Turkey, Iraq, and Saudi Arabia. This plan has never changed and it never will. The Zionist thieves will shortly steal what little is left of Palestine. But the thieving will not end there. It will just move on to neighbouring countries.

The prime reason they have been able to get away with this is not their control of British and US golems. It is by playing the old, dirty colonial games of divide and rule, with the Quisling stooge dictators serving their interests. They have always been able to set Sunni against Shia, and different factions against others. The dumb Arabs fall for it every time. Their latest intrigues are directed at the destruction of Iran, the next victim on their target list after Iraq, Libya and Syria. And the Quisling dictators of Saudi Arabia are openly agitating for this and offering to pay for all of it. Syria sent troops to join the US invasion of Iraq in 1991, though Iraqi troops fought and died in Syria in 1973 against Israel. Egypt allows Israel to use its airspace to carry out the genocidal terror bombing of Gaza.

All this is contemptible enough and fits into racist stereotypes of Arabs as stupid, irrational, corrupt, easily bought, violent and treacherous. This of course does not apply to the populations of those countries, but it is a legitimate assessment of their Quisling dictators, with a (very) few honourable exceptions.

Seamus Padraig ,

Of course, Arab rulers who don't tow the Zionist line generally get overthrown, don't they? And that usually requires the efforts/intervention of FUKUS, doesn't it? So you can't really pretend that 'Arab stupidity' is the main factor.

Richard Le Sarc ,

The fact that, as the Yesha Council of Rabbis and Torah Sages declared in 2006, as Israel was bombing Lebanon 'back to the Stone Age', under Talmudic Judaism, killing civilians is not just permissible, but a mitzvah, or good deed, explains Zionist behaviour. Other doctrines allow an entire 'city' eg Gaza, to be devastated for the 'crimes' of a few, and children, even babies, to be killed if they would grow up to 'oppose the Jews'. Dare mention these FACTS, seen everyday in Israeli barbarity, and the 'antisemitism' slurs flow, as ever.

Julia ,

" is that this age of empire is distinctly British"

.it takes some balls to make such an absurd statement and still expect to be taken seriously. The US of course with its 800 military bases around the world and gifts of 40 billion a year to Israel has no opinion on the future of the Middle East. You would have us believe that they are just humble onlookers, as a small bankrupt country tells them what to do. We are being told that the CIA, the most formidable spy agency and manipulator of countries in history, sits quietly by as the British and Israel tells the US what to do.
Absurd isn't it., Clearly the truth is that Israel is just another military base for the US in the Middle East, easily the most important geopolitical region in the world. They fund it, arm it, and protect it from all attacks, Israel does as it is told by the US for the most part despite the pantomime on the surface.
Many on the far right like to hide US interests behind a wall of antisemitism that likes to paint 'the jews' as an all powerful enemy but this is just cover for Israel's real geopolitical roll as a US puppet.
Time and time again all we are seeing is attempt to write the US, the largest empire in the history out of the news and out of the history books, like it is some invisible benign force that has not interests, no control and does noting to forward it's interests and it's empire.

''To find out who rules over you, simply find out who you are not allowed to criticise."

I don't know about you, but I'm not 10 years old and I know I am looking at Empire and it's power being flexed every day in every part do the world, especial in the parts of the world that it funds with trillions of dollars.

Julia ,

" is that this age of empire is distinctly British"

.it takes some balls to make such an absurd statement and still expect to be taken seriously. The US of course with its 800 military bases around the world and gifts of 40 billion a year to Israel has no opinion on the future of the Middle East. You would have us believe that they are just humble onlookers, as a small bankrupt country tells them what to do. We are being told that the CIA, the most formidable spy agency and manipulator of countries in history, sits quietly by as the British and Israel tells the US what to do.
Absurd isn't it., Clearly the truth is that Israel is just another military base for the US in the Middle East, easily the most important geopolitical region in the world. They fund it, arm it, and protect it from all attacks, Israel does as it is told by the US for the most part despite the pantomime on the surface.
Many on the far right like to hide US interests behind a wall of antisemitism that likes to paint 'the jews' as an all powerful enemy but this is just cover for Israel's real geopolitical roll as a US puppet.
Time and time again all we are seeing is attempt to write the US, the largest empire in the history out of the news and out of the history books, like it is some invisible benign force that has not interests, no control and does noting to forward it's interests and it's empire.

''To find out who rules over you, simply find out who you are not allowed to criticise."

I don't know about you, but I'm not 10 years old and I know I am looking at Empire and it's power being flexed every day in every part do the world, especial in the parts of the world that it funds with trillions of dollars.

Richard Le Sarc ,

The antithesis of the truth. It is US politicians who flock to AIPAC's meeting every year to pledge UNDYING fealty to Israel, not Israeli politicians pledging loyalty to the USA. It is Israeli and dual loyalty Jewish oligarchs funding BOTH US parties, it is US politicians throwing themselves to the ground in adulation when Bibi the war criminal addresses the Congress with undisguised contempt, not Israeli politicians groveling to the USA. The master-servant relationship is undisguised.

Pyewacket ,

In Daniel Yergin's The Prize, a history of the Oil industry, he provides another interesting angle to explain British interest in the region. He states that at that time, Churchill realised that a fighting Navy powered by Coal, was not nearly as good or efficient as one using Oil as a fuel, and that securing supplies of the stuff was the best way forward to protect the Empire.

BigB ,

Yergin would be right. The precursor of the First World War was a technological arms race and accelerated 'scientific' perfection of arsenals – particularly naval – in the service of imperialism. British and German imperialism. The full story involves the Berlin to Cairo railway and the resource grab that went with it. I'm a bit sketchy on the details now: but Churchill had a prominent role, rising to First Lord of the Admiralty.

Docherty and Macgregor have exposed the hidden history. F W Engdahl has written about WW1 being the first oil war.

Andreas Schlüter ,

And don´t forget which of the US Military command regions into which the US Military divided the WHOLE World is named "US CENTCOM"!
„One Thing Must be Clear to the World: The US Power Elite Regards the Whole Globe as Their Colony!": https://wipokuli.wordpress.com/2016/10/26/one-thing-must-be-clear-to-the-world-the-us-power-elite-regards-the-whole-globe-as-their-colony/

Antonym ,

In 1996 a task force, led by Richard Perle, produced a policy document titled A Clean Break: A New Strategy for Securing the Realm for Benjamin Netanyahu

No source link for this!

By the way 1996 was during the Clinton administration. Warren Christopher was secretary of state and John Deutch was the Director of Central Intelligence . George Tenet was appointed the Deputy Director of Central Intelligence in July 1995. After John Deutch's abrupt resignation in December 1996, Tenet served as acting director.

Reg ,

Here you go, sonny boy

http://www.dougfeith.com/docs/Clean_Break.pdf

Richard Le Sarc ,

Antsie, what are you going to deny next? The USS Liberty? Deir Yassin? The Lavon Affair? Sabra, Shatilla? Qana (twice)? The Five Celebrating Israelis on 9/11?Does not impress.

[May 20, 2020] Trump administration behaviour is the byproduct of having too much money and not enough brain

May 07, 2020 | www.moonofalabama.org

bevin , May 7 2020 19:17 utc | 13

"..all of these tin pot dictatorship oil rich countries are really a sick bunch.... i guess it is the byproduct off having too much money and not enough brains..

@james@ 3

karlofi beat me to it james - or were you referring to Alberta?

[May 20, 2020] A huge fleet of 117 tankers is bringing super cheap crude to China

May 20, 2020 | www.unz.com

vot tak , says: Show Comment May 20, 2020 at 5:01 am GMT

A huge fleet of 117 tankers is bringing super cheap crude to China

https://www.rt.com/business/488927-china-buys-super-cheap-oil/

"At present, a total of 117 very large crude carriers (VLCCs) -- each capable of shipping 2 million barrels of oil -- are traveling to China for unloading at its ports between the middle of May and the middle of August. If those supertankers transport standard-size crude oil cargoes, it could mean that China expects at least 230 million barrels of oil over the next three months, according to Bloomberg. The fleet en route to China could be the largest number of supertankers traveling to the world's top oil importer at one time, ever, Bloomberg News' Firat Kayakiran says.

Many of the crude oil cargoes are likely to have been bought in April, when prices were lower than the current price and when WTI Crude futures even dipped into negative territory for a day.

Last month, emerging from the coronavirus lockdown, China's oil refiners were already buying ultra-cheap spot cargoes from Alaska, Canada, and Brazil, taking advantage of the deep discounts at which many crude grades were being offered to China with non-existent demand elsewhere. ( https://oilprice.com/Energy/Crude-Oil/Chinese-Bargain-Hunters-Are-Stucking-Up-On-Ultra-Cheap-Crude-Oil.html )

China was also estimated to have doubled the fill rate at its strategic and commercial inventories in Q1 2020, taking advantage of the low oil prices and somewhat supporting the oil market amid crashing demand by diverting more imports to storage, rather than outright slashing crude imports.

China's crude oil imports jumped in April to about 9.84 million barrels per day as demand for fuels began to rebound and local refiners started to ramp up crude processing, according to Chinese customs data cited by Reuters."

Well, now we know who was taking advantage of those pindo negative oil price sales ;-D

The Chinese are at the advantage here, not being neocon/likud bottom rungers. The desperation of zionazia is expressed in choosing the neocon lowlife to run things in the western colonies. Yes, their extremism provides the initiative in getting extreme capitalist policies through and continues the push to the extreme far right in the zionazi-gay colonies. But it is at the cost of intelligent long term strategy. Short term imaginary gain at the cost of real gain. The fast food, face feeding, bum bandit approach. The quick fixers.

[May 16, 2020] "A Seller's Market for Bankruptcy Talent:" The Beginning of the End of Methane-Producing Fracking? by Juan Cole

Mar 17, 2020 | www.truthdig.com
On Monday, the price of West Texas Intermediate petroleum fell below $30 a barrel for the first time in four years. Elliot Smith at CNBC reports that BP CFO Brian Gilvary is braced for petroleum demand actually to contract in 2020.

This prediction is very bad news for US fracking firms, most of which need a price point of from $40 to $60 a barrel to make their hydraulic fracturing method of oil production profitable.

In the Democratic primary debate on Sunday, Bernie Sanders pledged to ban fracking entirely, and even Joe Biden said no new fracking would be allowed. Fracking may be moribund anyway by November, and if a Democrat wins the presidency, the industry may never recover.

Not only is petroleum likely headed way below that profitability floor, but many energy firms involved with fracking are deeply in debt, and had taken out the debts with their petroleum fields as collateral. Since their collateral is worth only half what it used to be, the banks will call in their loans. Other energy firms involved in fracking have held significant assets in their own stocks, the price of which just zoomed to earth like a crashing meteor.

Reuters observed,

Fracking has been banned by countries such as France, and by states such as New York because it is highly polluting, leaving behind ponds of toxic water. Moreover, research has demonstrated that the process of fracking, which involves pumping water under high pressure underground to break up rocks and release oil or natural gas, causes gargantuan methane emissions that had earlier been underestimated as much as 45% . The methane in the atmosphere is burgeoning, and scientists had puzzled over why. But scientists have fingered the culprit: fracking. Methane is 80 times as potent a heat-trapping gas as carbon dioxide over two decades, and carbon dioxide is no slouch. A quarter of the global heating effect of greenhouse gas emissions put out by humans burning fossil fuels is owing to methane emissions. Rapid heating is melting the North and South Poles, causing sea level rise that will soon be calamitous.

Given that the world population is increasing and that developing countries such as China and India and Indonesia are seeing more and more people abandoning their bicycles or bus rides for mopeds or automobile ownership, for the world to want less petroleum this year than it did last is extremely unusual.

We are getting a preview courtesy COVID-19 of what will happen through the next decade and a half as electric vehicles take off, significantly reducing demand.

The world produces about $100 million barrels of petroleum a day, and given the Saudi determination to expand production starting on April 1, it could be producing 102 million barrels a day later this spring. The world may only want 90 mn. barrels a day this spring. What with the novel coronavirus pandemic, fewer trucks and cars will be on the road. Petroleum is largely used for transportation fuel.

Do you know what happens if demand falls and production increases? The price falls. In fact, it doesn't just fall. It collapses. It takes a deep dive. It falls off a cliff. It craters deep beneath the earth's crust.

How steep the fall is depends in part on whether Saudi Arabia and Russia keep playing chicken. Saudi Arabia wants to discipline Moscow, which rejected OPEC + production quotas aimed at reducing supply and supporting a $60 per barrel price. So Riyadh is opening the spigots, upping its production by two million barrels a day. Saudi Aramco says it is comfortable with a price point of $30 a barrel. But unfortunately for Aramco, the price may not have stopped falling.

Andreas de Vries at Oilspot.com believes the price could fall to as little as $10 a barrel later this spring. In 2019 the price tended to be around $60 a barrel.

The fossil fuel companies that lack deep pockets could well just fail this year. Brenda Sapino Jeffreys quotes Jason Cohen, an attorney at Bracewell in Houston, as saying of the oil industry, "There is, I'd say, a sellers market for bankruptcy talent." His observation gave me my title.

This steep decline in stock prices and oil prices comes on top of a 5-year run in which the market has destroyed 90% of the value of US investor stocks in oil services. That is, we could this year be entering an oil market crisis as severe as the Asian banking crash of 1997-1998 .

The difference is that by the time fossil fuels come out of their economic doldrums, renewables will have stolen a further march on them. From here on in, hydrocarbons are beginning their death spiral. Friends don't let friends invest in petroleum companies, and nobody should have those stocks in their retirement accounts– if they want ever to retire.

[May 05, 2020] The oil business in America is going to take a very long time to recover.

May 05, 2020 | turcopolier.typepad.com

Oilman2 , 04 May 2020 at 01:54 PM

Colonel, you are NOT wrong. The oil business in America is going to take a very long time to recover. There are complete shutterings of businesses, bankruptcies and more - all while we were in the middle of a downturn. Personally, I just folded up my tent because my my active client list went from 21 to zero over this last month (and that includes intl clients).

As the number one buyer of US steel, the oilpatch represents much more than people realize. We have also been the number one buyer of many other items - where sales have disappeared as company quietly and reluctantly face the reality of the current induced glut.

I'm being forced to change livelihoods - interesting for me, as I am short of the age to get my SS check and too old to employ by most corporate masters....

[May 02, 2020] Special Report Trump told Saudis Cut oil supply or lose U.S. military support - sources

May 02, 2020 | www.msn.com

WASHINGTON/LONDON/DUBAI - As the United States pressed Saudi Arabia to end its oil price war with Russia, President Donald Trump gave Saudi leaders an ultimatum.

In an April 2 phone call, Trump told Saudi Crown Prince Mohammed bin Salman that unless the Organization of the Petroleum Exporting Countries (OPEC) started cutting oil production, he would be powerless to stop lawmakers from passing legislation to withdraw U.S. troops from the kingdom, four sources familiar with the matter told Reuters.

The threat to upend a 75-year strategic alliance, which has not been previously reported, was central to the U.S. pressure campaign that led to a landmark global deal to slash oil supply as demand collapsed in the coronavirus pandemic - scoring a diplomatic victory for the White House.

Trump delivered the message to the crown prince 10 days before the announcement of production cuts. The kingdom's de facto leader was so taken aback by the threat that he ordered his aides out of the room so he could continue the discussion in private, according to a U.S. source who was briefed on the discussion by senior administration officials.

The effort illustrated Trump's strong desire to protect the U.S. oil industry from a historic price meltdown as governments shut down economies worldwide to fight the virus. It also reflected a telling reversal of Trump's longstanding criticism of the oil cartel, which he has blasted for raising energy costs for Americans with supply cuts that usually lead to higher gasoline prices. Now, Trump was asking OPEC to slash output.

A senior U.S. official told Reuters that the administration notified Saudi leaders that, without production cuts, "there would be no way to stop the U.S. Congress from imposing restrictions that could lead to a withdrawal of U.S. forces." The official summed up the argument, made through various diplomatic channels, as telling Saudi leaders: "We are defending your industry while you're destroying ours."

Reuters asked Trump about the talks in an interview Wednesday evening at the White House, at which the president addressed a range of topics involving the pandemic. Asked if he told the crown prince that the U.S. might pull forces out of Saudi Arabia, Trump said, "I didn't have to tell him."

"I thought he and President Putin, Vladimir Putin, were very reasonable," Trump said. "They knew they had a problem, and then this happened."

Asked what he told the Crown Prince Mohammed, Trump said: "They were having a hard time making a deal. And I met telephonically with him, and we were able to reach a deal" for production cuts, Trump said.

[May 02, 2020] MBS's doomed attempt to play with the big boys over oil,

May 02, 2020 | thenewkremlinstooge.wordpress.com

Cortes April 26, 2020 at 2:55 pm

After riffing on the theme of MBS's doomed attempt to play with the big boys over oil, Andrei Martyanov goes on to suggest a possible way for superpowers to cooperate:

https://smoothiex12.blogspot.com/2020/04/one-doesnt-need-to-be.html

The intersection of great power Noblesse Oblige and The Final Frontier?

[Apr 23, 2020] What an Oil ETF Has to Do With Plunging Oil Prices

Apr 23, 2020 | www.bloomberg.com

The oil market is in disarray, a result of a coronavirus-led collapse in demand, surplus supply following a price war and a shortage of storage. Yet there have been plenty of people willing to bet on a rebound in basement-level crude prices, and for many retail investors the vehicle of choice has been an exchange-traded fund. However, those wagers via the biggest American ETF -– the U.S. Oil Fund, or USO -– have contributed to market mayhem and helped push crude prices below zero.

1. What did the fund do?

It grew so huge so quickly that it became a sizable player in the market for West Texas Intermediate, the U.S. benchmark for crude. Investors piled in during March and April, convinced that oil prices that had been falling -- pushed down by a price war between Saudi Arabia and Russia that boosted production just as demand was slashed by pandemic-driven lockdowns -- would eventually recover once economies reopened. At different stages, the fund held about a quarter of all May and June contracts for WTI.

2. What's the problem?

Unlike shares that can be held as long as an investor chooses, oil futures have finite terms and are agreements to buy or sell a physical product. The May futures contract, for example, expired on April 21. Any holder who had not sold by then would need to take delivery of the oil -- 1,000 U.S. barrels, or 42,000 gallons, for each contract.

3. Where does USO come in?

As a favored investment vehicle for many bullish speculators , the number of shares in the fund ballooned from 145 million at the end of February to more than 1.4 billion by mid-April. Its outsized portion of the WTI market -– on paper -- came at a time when demand for physical oil was cratering and storage space was becoming harder and more expensive to find.

4. What does that have to do with the price plunge?

For years, USO was mandated to invest in the most-active WTI contract and to roll it over to the following contract. (Rolling over means selling it and, often simultaneously, buying the following month's contract.) The flood of money into May contracts earlier had pushed oil prices up; as USO sold its May futures as part of the rollover and bought June and July contracts, prices fell for May and rose for the following months, opening an unusually wide spread. Only a handful of traders remained in the May contract on Monday, when prices plunged well below zero .

5. What's the worry now?

With USO holding a significant level of June contracts, there are concerns that prices will go negative again and that the whole process might repeat -- or might be worse, if the April 20th debacle scares off more investors. To try to mitigate the prospect, USO, which lost 37% of its value in the first three weeks of April, has moved to allocate some holdings to contracts expiring later in the year, since those prices tend to be less volatile. But the fund is adding to pressure on oil prices in other ways.


6. How is that?

https://buy.tinypass.com/checkout/template/show?displayMode=inline&containerSelector=.inline-newsletter&templateId=OTK9NE7VLZ7E&offerId=fakeOfferId&showCloseButton=false&trackingId=%7Bjcx%7DH4sIAAAAAAAAAFWQXU_CMBSG_0uvKWm7fnKHyHAoCony4V3tuq1xbHMdYGL873ZENDQnTXqe8755e76AdikYgeQuvvVxUrVzMACNzu3a2VPSE4IIgohCQvqiuL-l5LBkq-0mmdX5ZDfRYzSH5M2ITGQWY0GJxlFGLUc2jbh8E5gpEoztZ2NbZytjz9bTLZ7coqWKX15uruj005pD5-rqPIYlksxLVIQc4RCf0o666P1DHvfvLGcpq8v6Sj82f2Jf1Kdnu29K3dnZckmTRfS0iNEMR0FRaH9hYNS1BzsA3e_7LH56vlePU7F-eBVT8M_WunW66vqR6lCWA2D0vtEur_ylcXTenTk4wusFRgIiCZUg8EgTv9ssHucn8epWRQPDN6MIccqyTEqDjRIpyhQzUrIUc5KGBK4JllwOsVJDgvhQytA8eNuOc1t1gaUn0wftSjDCTAquOBL0-wc_ZnWZ5gEAAA&experienceId=EX1CD0P9FUUB&tbc=%7Bjzx%7Dt_3qvTkEkvt3AGEeiiNNgAAU00osQjCe0eF96F_9vcluNhIruyJ5U_hxmYIoR_aQC3rHe7849TeV2Z2AEouDIc2XbqmfsITfbdl6zvDN4VT5RP0yLhL9h60mm8w09XJtjylU0Z664w9lha1BgkmqDg&iframeId=offer-0-ScnYD&url=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2020-04-22%2Fwhat-an-oil-etf-has-to-do-with-plunging-oil-prices-quicktake%3Fsrnd%3Dpremium&parentDualScreenLeft=1536&parentDualScreenTop=0&parentWidth=1536&parentHeight=762&parentOuterHeight=864&aid=IHFDsFInrJ&contentSection=content-article&pageViewId=2020-04-22-22-41-22-886-l5QXWIGogCYCaA0J-2bc7f7fe11742a13f4e60ed368b71592&visitId=v-2020-04-22-22-37-08-972-v4IsYWMNJw7ZiQhp-808330645ff88c1c97d0f95c885d162d&userProvider=publisher_user_ref&userToken=&customCookies=%7B%7D&hasLoginRequiredCallback=false&width=170&_qh=46cb607e8b

There was so much demand for USO that it exhausted the number of shares it was allowed to issue and, on April 20, asked regulators for permission to register an additional 4 billion, more than double the existing number. Until the new shares are cleared for issuance, the ETF will not purchase more futures contracts, according to analysts, potentially adding to pressure on crude prices. Without new oil contracts, the fund will also become untethered from the prices it's supposed to track.

7. Anything else?


ETF prices are kept in sync with the value of their holdings, their so-called NAV (net-asset value), through the creation and redemption of shares. So-called "authorized participants" for instance sell an ETF when it's rising and buy the underlying security to pocket a quick profit, keeping the fund's price and NAV in lockstep in the process. However, with the authorized participants no longer able to create shares, that's disrupted demand for the underlying contracts.

8. How about other ETFs?

USO is hardly the only exchange-traded fund to be hammered by the swings in oil futures; the effects were felt around the globe. The Samsung S&P GSCI Crude Oil ER Futures ETF, whose holdings of the derivatives slumped 26% on Tuesday to $378 million , saw its traded units lose half their value for a time Wednesday. Closing down 46% at HK $1.79 , the ETF had its biggest drop and lowest finish since trading began in May 2016. Credit Suisse Group AG told investors in a leveraged exchange-traded note that tracks the price of oil they probably won't get any money back after the value of the note dropped below zero.

The Reference Shelf

[Apr 22, 2020] What an Oil ETF Has to Do With Plunging Oil Prices

Apr 22, 2020 | www.bloomberg.com

The oil market is in disarray, a result of a coronavirus-led collapse in demand, surplus supply following a price war and a shortage of storage. Yet there have been plenty of people willing to bet on a rebound in basement-level crude prices, and for many retail investors the vehicle of choice has been an exchange-traded fund. However, those wagers via the biggest American ETF -– the U.S. Oil Fund, or USO -– have contributed to market mayhem and helped push crude prices below zero.

1. What did the fund do?

It grew so huge so quickly that it became a sizable player in the market for West Texas Intermediate, the U.S. benchmark for crude. Investors piled in during March and April, convinced that oil prices that had been falling -- pushed down by a price war between Saudi Arabia and Russia that boosted production just as demand was slashed by pandemic-driven lockdowns -- would eventually recover once economies reopened. At different stages, the fund held about a quarter of all May and June contracts for WTI.

2. What's the problem?

Unlike shares that can be held as long as an investor chooses, oil futures have finite terms and are agreements to buy or sell a physical product. The May futures contract, for example, expired on April 21. Any holder who had not sold by then would need to take delivery of the oil -- 1,000 U.S. barrels, or 42,000 gallons, for each contract.

3. Where does USO come in?

As a favored investment vehicle for many bullish speculators , the number of shares in the fund ballooned from 145 million at the end of February to more than 1.4 billion by mid-April. Its outsized portion of the WTI market -– on paper -- came at a time when demand for physical oil was cratering and storage space was becoming harder and more expensive to find.

4. What does that have to do with the price plunge?

For years, USO was mandated to invest in the most-active WTI contract and to roll it over to the following contract. (Rolling over means selling it and, often simultaneously, buying the following month's contract.) The flood of money into May contracts earlier had pushed oil prices up; as USO sold its May futures as part of the rollover and bought June and July contracts, prices fell for May and rose for the following months, opening an unusually wide spread. Only a handful of traders remained in the May contract on Monday, when prices plunged well below zero .

5. What's the worry now?

With USO holding a significant level of June contracts, there are concerns that prices will go negative again and that the whole process might repeat -- or might be worse, if the April 20th debacle scares off more investors. To try to mitigate the prospect, USO, which lost 37% of its value in the first three weeks of April, has moved to allocate some holdings to contracts expiring later in the year, since those prices tend to be less volatile. But the fund is adding to pressure on oil prices in other ways.


6. How is that?

https://buy.tinypass.com/checkout/template/show?displayMode=inline&containerSelector=.inline-newsletter&templateId=OTK9NE7VLZ7E&offerId=fakeOfferId&showCloseButton=false&trackingId=%7Bjcx%7DH4sIAAAAAAAAAFWQXU_CMBSG_0uvKWm7fnKHyHAoCony4V3tuq1xbHMdYGL873ZENDQnTXqe8755e76AdikYgeQuvvVxUrVzMACNzu3a2VPSE4IIgohCQvqiuL-l5LBkq-0mmdX5ZDfRYzSH5M2ITGQWY0GJxlFGLUc2jbh8E5gpEoztZ2NbZytjz9bTLZ7coqWKX15uruj005pD5-rqPIYlksxLVIQc4RCf0o666P1DHvfvLGcpq8v6Sj82f2Jf1Kdnu29K3dnZckmTRfS0iNEMR0FRaH9hYNS1BzsA3e_7LH56vlePU7F-eBVT8M_WunW66vqR6lCWA2D0vtEur_ylcXTenTk4wusFRgIiCZUg8EgTv9ssHucn8epWRQPDN6MIccqyTEqDjRIpyhQzUrIUc5KGBK4JllwOsVJDgvhQytA8eNuOc1t1gaUn0wftSjDCTAquOBL0-wc_ZnWZ5gEAAA&experienceId=EX1CD0P9FUUB&tbc=%7Bjzx%7Dt_3qvTkEkvt3AGEeiiNNgAAU00osQjCe0eF96F_9vcluNhIruyJ5U_hxmYIoR_aQC3rHe7849TeV2Z2AEouDIc2XbqmfsITfbdl6zvDN4VT5RP0yLhL9h60mm8w09XJtjylU0Z664w9lha1BgkmqDg&iframeId=offer-0-ScnYD&url=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2020-04-22%2Fwhat-an-oil-etf-has-to-do-with-plunging-oil-prices-quicktake%3Fsrnd%3Dpremium&parentDualScreenLeft=1536&parentDualScreenTop=0&parentWidth=1536&parentHeight=762&parentOuterHeight=864&aid=IHFDsFInrJ&contentSection=content-article&pageViewId=2020-04-22-22-41-22-886-l5QXWIGogCYCaA0J-2bc7f7fe11742a13f4e60ed368b71592&visitId=v-2020-04-22-22-37-08-972-v4IsYWMNJw7ZiQhp-808330645ff88c1c97d0f95c885d162d&userProvider=publisher_user_ref&userToken=&customCookies=%7B%7D&hasLoginRequiredCallback=false&width=170&_qh=46cb607e8b

There was so much demand for USO that it exhausted the number of shares it was allowed to issue and, on April 20, asked regulators for permission to register an additional 4 billion, more than double the existing number. Until the new shares are cleared for issuance, the ETF will not purchase more futures contracts, according to analysts, potentially adding to pressure on crude prices. Without new oil contracts, the fund will also become untethered from the prices it's supposed to track.

7. Anything else?


ETF prices are kept in sync with the value of their holdings, their so-called NAV (net-asset value), through the creation and redemption of shares. So-called "authorized participants" for instance sell an ETF when it's rising and buy the underlying security to pocket a quick profit, keeping the fund's price and NAV in lockstep in the process. However, with the authorized participants no longer able to create shares, that's disrupted demand for the underlying contracts.

8. How about other ETFs?

USO is hardly the only exchange-traded fund to be hammered by the swings in oil futures; the effects were felt around the globe. The Samsung S&P GSCI Crude Oil ER Futures ETF, whose holdings of the derivatives slumped 26% on Tuesday to $378 million , saw its traded units lose half their value for a time Wednesday. Closing down 46% at HK $1.79 , the ETF had its biggest drop and lowest finish since trading began in May 2016. Credit Suisse Group AG told investors in a leveraged exchange-traded note that tracks the price of oil they probably won't get any money back after the value of the note dropped below zero.

The Reference Shelf

[Apr 22, 2020] Energy Minister Alexander Novak said that the fall in prices for WTI oil futures is due to the actions of speculators.

Apr 22, 2020 | vz.ru

Energy Minister Alexander Novak said that the fall in prices for WTI oil futures is due to the actions of speculators.

"Yesterday's collapse of oil quotes of the us WTI brand occurred due to the sale of futures for delivery in may at the end of trading on paper (after April 20, the may futures are not traded on the exchange), the lack of demand for additional oil supplies in may and the likelihood of overstocking storage facilities. This caused a speculative fall of the financial instrument to negative values, " he said, according to TASS.

The head of the energy Ministry urged "not to dramatize the situation". According to him, it is important to understand that this is "a paper market, not a trade in physical oil," RIA Novosti reports.

The Minister also noted that the pressure on the oil market will continue until the start of the OPEC+ agreement in may, after which the reduction of oil production by countries outside the agreement and the easing of restrictions will begin.

"The oil market is currently in an extremely volatile state due to a sharp drop in demand associated with measures to counter the spread of coronavirus, with the gradual overstocking of storage facilities and the uncertainty of the timing of the global economic recovery. Pressure on the market will continue until the OPEC + agreement begins in may, reducing production by countries outside the agreement and easing restrictive measures, " he said.

Novak assured that OPEC+ countries are closely monitoring the situation in the oil market and have all the capabilities to respond.

"But don't dramatize the situation. It is important to understand that this is a paper market, that is, trading in derivative financial instruments, and not physical oil. Quotes for June Brent and WTI futures are significantly higher, although they are also subject to volatility due to the General negative mood in the market," Novak added.

The price of WTI oil for delivery in may ended Monday's main trading on the NYMEX on negative values, falling to minus 37.63 dollars. The decrease was 300%. Before that, the quotes reached minus 40.32 dollars per barrel. Later, the price of may WTI futures returned to positive values, rising by 160% to $ 2.21 per barrel.

The price of a barrel of oil on the morning of April 21 was trading at $ 21.41.

[Apr 21, 2020] The most acute pain was among so called hedges, namely who sold the obligations to buy oil at a certain price.

Nobody can cancel the end of cheap oil. those manipulations with futures and paper oil is just a blip of the radar. "Bottom line is that we live on a finite world which capitalism treats as an infinite resource."
Apr 21, 2020 | www.moonofalabama.org
juliania , Apr 21 2020 15:43 utc | 61

On the previous thread, Piotr Berman @ 417 did bring up the subject of this post by b, and had the following final comment: "...Actually, the most acute pain is among the clever folk who provided the so-called hedges, namely who sold the obligations to buy oil at a certain price. They are losing hundreds of billions -- my guess. Now they are forced to buy AND store, hence the negative price."

Thanks, Piotr. Some of what is happening makes a bit more sense to me as far as the strange dealings in the stock market are concerned.

Also, just above at 416, karlof1 had this to say: "...Was the West ever on the path to making its goal the improvement of the Common Man as advocated by Wallace and his political allies?..." His answer is NO (exclamation point.)

My answer is YES (exclamation point.) Even if you only progress as far as the creation of the UN, with the leadership of Eleanor, that is an important pivotal moment for mankind which we cannot ignore. But I will state uncategorically that the JFK administration had similar idealistic goals and would have carried them out, had it not been for divisive powers plotting against it. That such dastardly powers succeeded does not negate the previous effort.

And even the example of China proves that this is not an impossible dream for mankind in general. As also is the example of Russia. We are fortunate in this generation to have two role models instead of one.

I don't have the Frost poem at hand so I will thusly mangle the last lines (sorry)

Two paths lay in the woods, and I
Took the one less travelled by
And that has made all the difference.

I've mangled it, but the meaning is there, I think. (I'll go find the correct version, and point of reference, I was a college student when Robert Frost came to Johns Hopkins and I heard him read his poems. He did so also at Kennedy's inaugural.)


gm , Apr 21 2020 10:36 utc | 8

What -$37/bbl oil means to you:

Oil futures paper contracts market (in normal times of stable->rising oil prices and plenty of tank storage capacity a simple safe "buy low, hold, sell high" investment vehicle used heavily by investment banks, hedge funds, ETFs and teachers', municipal employees', etc, retirement/pension funds) explained in 5 minutes by Chris Martenson starts at ~minute 35:00:

https://www.youtube.com/watch?v=R8Pv77R3g1E

arby , Apr 21 2020 12:10 utc | 17
Emily, We may still be at or around peak oil. That does not mean that all of the heavily indebted countries and oil companies won't pump what's left as fast and hard as they can.

Now you have to stir in a massive plunge in demand to the equation. Seems to me that all newer oil discoveries are deep sea or shale. All of which require much more energy to produce then say thirty years ago.

When it takes the equivalent of one barrel of energy to produce one barrel of energy it will be lights out.

William Gruff , Apr 21 2020 12:10 utc | 18
dan of steele @2

The petrodollar was not in and of itself the mechanism that the US used to "export debt" and enrich itself off global trade. Rather, the petrodollar was the mechanism used to lock-in the US$ as the global reserve currency. If you wanted oil, you needed US$. After that it was just convenient to use US$ for other internationally traded commodities as well. Of course, this made even more sense way back in the distant past of the middle of last century because most of the international trade in manufactured goods was for American products, for which you'd have to use dollars to buy anyway.

The empire fanbois will cook up all kinds of explanations for why the dollar will remain the Global Reserve Currency in order to reassure themselves of the empire's continued hegemony, but the fact is that all of the "locks" locking other countries into that regime are now gone. Countries can choose to walk away now whereas in the past that would mean giving up access to oil and no longer importing all of those awesome things that the US used to make. That is not a barrier anymore.

Emily , Apr 21 2020 12:56 utc | 24
Arby 17.
Thank you for taking the time to reply.
But something to ponder
Forbes
https://www.forbes.com/sites/michaellynch/2018/06/29/what-ever-happened-to-peak-oil/
Yergin
https://www.technologyreview.com/2011/09/22/191161/peak-oil-debunked/
Well good news for those of us who agree with Edgar Cayce.
'Russia is the hope of the world'.
Russia has 60 years worth left and thats with its known reserves.
Hasn't touched the Arctic yet.....
https://www.worldometers.info/oil/russia-oil/
gm , Apr 21 2020 13:19 utc | 27
US/Western financial markets are a "musical chairs" game, where right now more chairs are being pulled out from the game faster than the FED and the central banks can 'digitally print' new chairs to keep the game going.
Peter AU1 , Apr 21 2020 14:27 utc | 39
Looks like energy dominance will get a bail out.
"We will never let the great US Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!" Trump said via Twitter.

https://sputniknews.com/us/202004211079043543-trump-instructs-treasury-energy-depts-to-devise-plan-to-fund-us-oil-gas-industry/
juliania , Apr 21 2020 14:36 utc | 41
Is this a result of all the lockdowns? A sort of automotive general strike occasioned by the virus, aided and abetted by government enforcement of restrictions on industry, travel, general hulabaloo?

Peace has descended upon a weary world. Nature has commanded us to cease and desist from gigantic insults upon the earth. Stop digging! she says, Leave it in the ground! Cease and desist making war for oil!

What does it profit a man? It profits him nothing! I have no idea where this leads, but it is a delicious moment. Look, see the power we have to bring everything to a standstill, even when we only do it because we are forced to! What if we did it willingly?

Where are your trillions now, moghuls?

The earth has spoken. We should all listen. Me, I am going out to plant potatoes.

Trisha , Apr 21 2020 15:27 utc | 56
Peak shale has arrived. The energy inefficiency of fracking - directly related to the economic efficiency of producing shale - killed it off. This would have happened even without COVID-19.

The same will (eventually) happen with oil. The global economy - already teetering - has now been pushed over the edge by COVID-19. The demand side of capitalist growth has been temporarily (and in some cases permanently) crushed - which is a good thing for the planet - as workers are idled for the foreseeable future, and many out of a job forever.

Bottom line is that we live on a finite world which capitalism treats as an infinite resource.

[Apr 21, 2020] 20 April 2020 at 05:20 PM

Apr 21, 2020 | turcopolier.typepad.com
div This (oil + the virus) is looking like an economic Pearl Harbor for shale oil industry This (oil + the virus) is looking like an economic Pearl Harbor. I think BRICS is playing a far better game of chess so far and will win if we don't replace The Swamp with dedicated people with vision and smarts and who put country above cronyism and self-enrichment.

JJackson , 20 April 2020 at 05:33 PM

What has the fluctuating price of oil got to do with peak oil? One is reflection of demand, plus manipulation of the price by producers, and the other has to do with the long term rates of extraction relative to the creation of new reserves by deposition of marine micro-organism and there decay under pressure and temperature conditions only geological time scales. the two are as similar as the price of fish and oranges.
Jack , 20 April 2020 at 07:00 PM
Sir

You were spot on about Peak Oil. US shale will not die. While shareholders and bond holders will take a haircut today, the extraction technology will continue to improve and their costs of production will decline. As oil prices improve shale production will return. The US is in a strong position as it doesn't have to be concerned about oil at least for the next several decades.

From a supply/demand perspective, oil density in the west will continue to decline as our economies become more efficient and as solar and nuclear becomes more cost competitive for electricity generation.

An investment maxim is to buy when there's blood in the streets. We will continue to use oil for at least another couple generations IMO.

The big issue in the short term is going to be the drastic impacts for those economies entirely dependent on crude revenues. The last time crude prices were lower for a sustained period the Soviet Union collapsed. MbS is running massive budget deficits as he keeps his population from revolting against the monarchy. One possible good outcome is there's going to be less funding for the jihadists in the short term.

Jack , 20 April 2020 at 08:21 PM
BTW, huge opportunity for Trump administration. Buy paper futures for May delivery at negative prices and then accept delivery of physical.

This is the real Art of the Deal.

srw , 20 April 2020 at 08:36 PM
There is oil out there and there will be for a long, long, time. The only determining factor is the price to get it out of the ground. Here in North America fracking has opened the spigot but the price is $40+ a barrel to get it out of the ground.

What I can't fathom is why Canada is pushing through with the Keystone XL pipeline taking tar sands oil from Alberta to Nebraska and eventually to the gulf coast.

Obama put the stop to it but the Trumpster reversed his executive order and they started building again this month, although a federal judge just stopped it due to environmental review.

Several years ago I read that tar sands oil costs $70+/barrel and that doesn't include shipping cost. Does Canada know something about the future price of oil or are they just subsiding their oil companies/workers? I sure wouldn't invest in it.

[Apr 17, 2020] Oil price probably depends on whether the USA can deliver or will deliver: Scott Ritter thinks it can't.

Apr 17, 2020 | turcopolier.typepad.com

OIL WARS. After a lot of phonecalls – especially between Putin, Trump and Riyadh , OPEC plus Russia plus USA have agreed to a production cut. How long will the agreement last? Your guess – it probably depends on whether the USA can deliver or will deliver: Scott Ritter thinks it can't . On the other hand, Washington has had a chance to learn its lesson – shale oil needs price about twice what it is today back down to about $20/bbl ; one producer has already gone bust . COVID has so greatly reduced demand that the cuts may have little effect anyway .

[Apr 11, 2020] Exclusive U.S. banks prepare to seize energy assets as shale boom goes bust by David French and Imani Moise

Notable quotes:
"... JPMorgan Chase & Co, Wells Fargo & Co, Bank of America Corp and Citigroup Inc are each in the process of setting up independent companies to own oil and gas assets, said three people who were not authorized to discuss the matter publicly. The banks are also looking to hire executives with relevant expertise to manage them, the sources said. ..."
"... U.S. oil and gas producers have increasingly relied on banks for cash over the past year, as debt or equity options dried up. Lenders have been conservative in valuing hydrocarbons used as collateral, but recent restructurings have left them spooked. ..."
Apr 11, 2020 | finance.yahoo.com

NEW YORK (Reuters) - Major U.S. lenders are preparing to become operators of oil and gas fields across the country for the first time in a generation to avoid losses on loans to energy companies that may go bankrupt, sources aware of the plans told Reuters.

JPMorgan Chase & Co, Wells Fargo & Co, Bank of America Corp and Citigroup Inc are each in the process of setting up independent companies to own oil and gas assets, said three people who were not authorized to discuss the matter publicly. The banks are also looking to hire executives with relevant expertise to manage them, the sources said.

The banks did not provide comment in time for publication.

Energy companies are suffering through a plunge in oil prices caused by the coronavirus pandemic and a supply glut, with crude prices down more than 60% this year.

Although oil prices may gain support from a potential agreement Thursday between Saudi Arabia and Russia to cut production, few believe the curtailment can offset a 30% drop in global fuel demand, as the coronavirus has grounded aircraft, reduced vehicle use and curbed economic activity more broadly.

Oil and gas companies working in shale basins from Texas to Wyoming are saddled with debt.

The industry is estimated to owe more than $200 billion to lenders through loans backed by oil and gas reserves. As revenue has plummeted and assets have declined in value, some companies are saying they may be unable to repay.

Whiting Petroleum Corp became the first producer to file for Chapter 11 bankruptcy on April 1. Others, including Chesapeake Energy Corp, Denbury Resources Inc and Callon Petroleum Co, have also hired debt advisers.

If banks do not retain bankrupt assets, they might be forced to sell them for pennies on the dollar at current prices. The companies they are setting up could manage oil and gas assets until conditions improve enough to sell at a meaningful value.

Big banks will need to get regulatory waivers to execute their plans, because of limitations on their involvement with physical commodities, sources said.

Banks are hoping their planned ownership time frame of a year or so will pass a Federal Reserve requirement that they do not plan to hold assets for a long time. Because lenders would be stepping in to support part of the economy that is important to any potential rebound, and which has not gotten direct bailouts from the federal government, that might help applications, too.

For now, the banks are establishing holding companies that can sit above limited liability companies (LLCs) containing seized assets. The LLCs would be owned proportionally by banks participating in the original secured loan.

To run the oil-and-gas operations, banks might hire former industry executives or specialty firms that have done so for private equity, sources said. Houston-based EnerVest Operating LLC would be among the most likely operators, sources said.

"We regularly look for opportunities to operate on behalf of other entities, that is no different in this market," said EnerVest Operating's chief executive, Alex Zazzi.


GETTING ASSERTIVE

U.S. banks have not done anything like this since the late-1980s, when another oil-price rout bankrupted a bunch of energy companies. More recently, they have relied on restructuring processes that prioritize them as secured creditors and leave bondholders to seek control in lieu of payment.

But banks are becoming more assertive because of the coronavirus recession and balance sheet vulnerabilities that have developed in recent years.

U.S. oil and gas producers have increasingly relied on banks for cash over the past year, as debt or equity options dried up. Lenders have been conservative in valuing hydrocarbons used as collateral, but recent restructurings have left them spooked.

Alta Mesa Resources' bankruptcy will likely provide banks with less than two-thirds of their money, while Sanchez Energy's could leave them with nothing.

The structures banks are setting up will take a few months to establish, sources said. That gives producers until the fall - the next time banks will evaluate the collateral behind energy loans - to get their houses in order.

After several years of on-and-off issues with energy borrowers, lenders have little choice but to take more dramatic steps, said Buddy Clark, a restructuring partner at law firm Haynes and Boone.

"Banks can now believably wield the threat that they will foreclose on the company and its properties if they don't pay their loan back," he said.

(Reporting by David French and Imani Moise in New York; Additional Reporting by Elizabeth Dilts Marshall; Editing by Leslie Adler; Editing by Lauren Tara LaCapra)

[Apr 01, 2020] Trump, Putin Will Discuss The End Of U.S. Shale Oil

Apr 01, 2020 | www.moonofalabama.org

Jackrabbit , Mar 30 2020 18:14 utc | 6

Trump announced that he would use the cheap prices to fill the U.S. strategic oil reserve. But the spare room in the reserve storage at that time was only some 150 million barrels. As it can only be filled at a rate of 2 million barrels per day the topping off of the reserve is insignificant in the current market.

The oil producers at first pumped their oil into storage tanks to be sold later. When those filled up they rented supertankers to store the oil at sea. But empty supertankers are now also getting rare and the price for them is increasing :

The CEO of the world's largest tanker owner, Frontline Ltd., said on Friday that he'd never known such demand to hire ships for long-term storage. Traders could book ships to put 100 million barrels at sea this week alone, he estimated, but even that could accounts for less than a week's oversupply.

The only solution will be a shut down of the more expensive oil fields. Canada and Brazil are already doing it. U.S. shale producers who are bleeding cash will now have to follow.

That is clearly what Russia wants :

As soon as U.S. shale leaves the market, prices will rebound and could reach $60 a barrel, Rosneft's Igor Sechin said recently. As fate would have it, in what many would have until recently considered an impossible scenario, a lot of U.S. shale might do just that.

Breakeven prices for U.S. shale basins range between $39 and $48 a barrel, according to data compiled by Reuters. Meanwhile, West Texas Intermediate (WTI) is trading below $25 a barrel and has been for over a week now.

The Trump administration has asked the Saudis to produce less oil but as the Saudi tourist industry is currently also dead the Saudi clown prince needs every dollar he can get. The Saudis will continue to pump and they will sell their oil at any price.

The White House is now concerned that it will completely lose its beloved shale oil industry and all the jobs connected to it.

Russia of cause knows this and a few days ago it made an interesting offer :

A new OPEC+ deal to balance oil markets might be possible if other countries join in, Kirill Dmitriev, head of Russia's sovereign wealth fund said, adding that countries should also cooperate to cushion the economic fallout from coronavirus.
...
"Joint actions by countries are needed to restore the(global) economy... They (joint actions) are also possible in OPEC+ deal's framework," Dmitriev, head of the Russian Direct Investment Fund (RDIF), told Reuters in a phone interview.
...
"We are in contact with Saudi Arabia and a number of other countries. Based on these contacts we see that if the number of OPEC+ members will increase and other countries will join there is a possibility of a joint agreement to balance oil markets."

Dmitriev declined to say who the new deal's members should or could be. U.S. President Donald Trump said last week he would get involved in the oil price war between Saudi Arabia and Russia at the appropriate time.

A logical new member of an expanded crude oil cartel would be one of the biggest global producer that so far was not a member of that club - the U.S. of A.

We now learn that Trump is ready to talk about that or other concepts:

As Ria reports (in Russian) the topics of upcoming phone call [between Putin and Trump] will be Covid-19, trade (???) and, you guessed it, oil prices.

Trump, who sanctioned the Russian-German Nord-Stream II pipeline while telling Germany to buy U.S. shale gas, is now in a quite bad negotiation position. Russia does not need a new OPEC deal right now. It has many financial reserves and can live with low oil prices for much longer than the Saudis and other oil producing countries. Trump would have to make a strategic offer that Russia could not resist to get some cooperation on oil prices.

But what strategic offer could Trump make that would move Putin to agree to some new deal?

Ukraine? Russia is not interested in that unrulable , bankrupt and fascist infested entity.

Syria? The Zionist billionaires would stop their donations to Trump if he were to give up on destroying it.

Joining an OPEC++ deal and limit U.S. oil production? That would be an anti-American intervention in free markets and Congress would never agree to it.

And what reason has Russia to believe that Trump or his successor would stick to any deal? As the U.S. is non-agreement-capable it has none.

The outcome of the phone call will therefore likely be nothing.

The carnage in the oil markets will continue and will ravage those producer countries that need every penny while the corona virus is ravaging their people. Meanwhile the U.S. shale market will go bust . US financial companies had a big exposure to the Shale Oil frackers.

Good thing trillions of dollars of 'liquidity' has been shoveled their way.

<> <> <> <> <>

Lender of last resort: the unborn.

!!


Thomas Minnehan , Mar 30 2020 18:15 utc | 7

FWIW:
One aspect of the crude complete collapse is to keep an eye on futures and the serious contango at the moment: contango=prices on future contracts are higher than current contract.

e.g. May 2020 CL contract=~$20, May 2021 =~$35.50.

Someone or someones are betting that the crude market will improve, i.e. they are storing crude in very large crude carriers (VLCC) @>$200k per day lease cost. That is a serious commitment/bet on future price/mkt improvement.

karlof1 , Mar 30 2020 18:32 utc | 9
Unmentioned is the connection between Fracking Fraud and the Bond Market Bubble with Congress actively intervening/abetting the Fraud by providing more money to the Ponzi Scheme.
vk , Mar 30 2020 19:18 utc | 22
It was time. The shale industry already was a huge bubble even when oil prices were at USD 60.00 (because it had to borrow a lot to invest, and the more wells drilled, the lower was the oil output per USD invested), which insiders in Wall Street were already discussing how to burst it.

And this is a 100% intentional by the Russians. If American shale really go down, then it would be ironic, since it was the oil crisis of 1975 that effectively ended the Soviet Union.

Vengeance is dish best served cold indeed.

Krollchem , Mar 30 2020 19:28 utc | 26
Another factor going against the shale fracking pipe dream is that the Strategic Petroleum Reserve (SPR) is filled with real oil. Fracking produces light condensate (not oil) that does not meet this criteria, and thus the frackers will not benefit from filling the SPR (unless Trump changes the rules)

Besides, Exxon wants to crush the independent oil shale players and pick up the pieces at pennies on the dollar. Furthermore, former ExxonMobil head Lee Raymond once stated that "Exxon U.S. is not a "company and I don't make decisions based on what's good for the U.S."
https://www.desmogblog.com/2020/03/27/shale-bailout-trump-oil-exxon-strategic-petroleum-reserve

David , Mar 30 2020 19:35 utc | 28
A study by the Wall Street Journal concluded that in one ten year period, the shale oil companies' total costs had exceeded their revenues by two hundred and eighty billion dollars. They have stayed in business by issuing new stock and more debt to cover their losses. Their prime fields are seeing production declines. Their costs are rising as the price of is oil tanking. Collapse is imminent. It's going to have far-reaching consequences.
TG , Mar 30 2020 20:04 utc | 37
Yet another example of the utter intellectual bankruptcy of the US ruling class. They've been playing a rigged game for so long, they've forgotten how to think.

As others here have pointed out, not to worry, the US fracking industry will get bailed out.

The real thing the US might do, is not to join an expanded OPEC+, but to limit imports of foreign oil and protect the domestic industry. Contrary to current 'free trade' dogma, protectionism does work (example A: the United States from 1776 to 1970. Any questions?), but classically you want to limit imports of MANUFACTURED goods and keep the cost of raw materials low. Increasing the relative costs of raw materials in the US while still allowing mass importation of manufactured goods from low-wage nations is anti-Hamiltonian and will crush what remains of US domestic manufacturing..)

Krypton , Mar 30 2020 20:06 utc | 38
Meanwhile Western Canadian Select is now going for $5 a barrel - less than the price of a coffee and muffin at Starbucks.
Michael Droy , Mar 30 2020 20:11 utc | 40
Not sure the US shale market can "go bust" as such. The owners can go bankrupt, but that just means banks and bondholders become the new owners, and their debt investment suddenly turns into equity investment with zero gearing. Once that happens the US shale producers become solid companies financed with zero debt and no incentive to hold back on production. They pump and pump and pump until the pumps no longer work.
Sure, no new developments, but the existing infrastructure will last a few years yet.
Hal Duell , Mar 30 2020 20:15 utc | 41
I don't see a way out for the US fracking industry. Their product is too expensive in the current times, and those setting the rules in these times (Russia and Saud Arabia) have no good reason to help.
The social damage from a collapse in the US will be papered over with printed money. I don't know how that will play out.
One scenario is time being called on the US's forever-wars in the Middle East, but would they be replaced by an invasion of Venezuela? There is good stuff down there, as well as the heavy stuff they've been pulling out. And just across the border into Brazil there is some high ground that looks like a good spot to build a command post.
The US could cut its losses in the wider world, something that seems to be happening anyway, and return to America, north and south. I don't see it just quietly going down the gurgler, but the European Union might.
Stonebird , Mar 30 2020 20:35 utc | 46
Of course it is already a war. The question I ask is, who is fighting and against whom?
The tactical aim at the moment is the end of the petro-dollar. A secondary aim is finding a limit to US militarism. Which in turn depends on the pork.... soorry.... the grifting of large sums of unlimited largess. Third, is trade and domination of markets including sanctions and "treaties". Fourth, is the "domination" of population dissent and overriding Judicial systems.

So the US, China and Russia are at it "hammer and tongs" (old saying but apt). Covid is just one means to an end, regime change another. Who else is in the fight? I would suggest that the Oligarchy and the Termites, the Fed and the deep parallel financial pool, the uncontrolled but unified intelligence "agencies", all have their own agendas.

naiverealist , Mar 30 2020 20:40 utc | 48
Posted by: Laguerre | Mar 30 2020 19:14 utc | 21

"The slow collapse of the US position in Iraq means that the US is not going to hold those oil-fields for too long."

Remember where this oil is going to. During the previous presidential term, it was discovered that the oil was going into Turkey, aided and abetted by the profiteers Erdogan and his son, and then onto oil tankers that shipped it to Occupied Palestine. Current production is also going into Jordan, where it is being shipped by pipeline into the refinery in Eliat(?). I can only surmise the price to be extremely cheap.

So the inhabitants of Occupied Palestine will expect the US to maintain this flow as long as they can, come hell or dead GIs.

vk , Mar 30 2020 20:41 utc | 49
The problem with shale became clear right after the first wells were drilled.

If I understood the reports from the "shale bubble" website correctly, originally the magic over shale gas and oil came from the fact that Wall Street was involved since the beginning (so it was a "coastal elites/heartland rednecks alliance" from birth) and the expectation was that a horizontal well would perform the same way as the traditional vertical well.

A traditional vertical well follows are normal curve graphic, imitating a hill. It starts low, but keeps growing until reaching a peak, maintains this peak for a while (some decades) and then begin a suave fall, which also takes decades.

No wonder, then, the huge euphoria that started in Wall Street when those horizontal wells begun pumping out oil at absurd quantities - they imagine that was the output floor of such wells, and that productivity would only rise after the decades. Indeed, it was predicted at the time that the USA not only was firmly walking towards self-sufficiency - many also predicted it would become the world's greatest oil exporter (yes, above Saudi Arabia, Venezuela, Russia etc.).

But this euphoria was short-lived, as, some years later, productivity of the horizontal wells begun to suddenly fall. It was then realized, after further research, that those wells performed differently than the vertical wells: they begun directly with peak production, then immediately started to fall. Their output graphic looks like an upside-down, slightly inclined letter L.

Even after this discovery, the investors didn't immediately give up. They thought: let's just drill longer wells. And they did. It was then that another problem came out: it seems that, after 3-5 miles, those horizontal wells suddenly lose a lot of pressure necessary to pump the oil out of it. To make things worse, after this length, they begin to suck out pressure from the neighboring wells as well. Therefore, it is a self-defeating enterprise to extend the horizontal wells beyond 3 miles length. And the situation is even direr because shale reserves are usually concentrated in one specific area - it's not like you can drill one horizontal well in Ohio and another one in Florida and so on: the rule of thumb that the oil and gas "must be there" to be extracted in economically viable quantities still do apply to horizontal wells.

After that, all that kept the American shale industry alive was Wall Street and its rotten papers recycling machine.

El Cid , Mar 30 2020 20:44 utc | 50
The US unilateral economic siege on Venezuela and Iran has the affect of cutting world oil supply that benefits US shale and fracking industry.
karlof1 , Mar 30 2020 20:56 utc | 55
A friendly reminder to all barflies that fracking within the Outlaw US Empire also takes more energy to operate than the energy extracted. The business was bankrupt before it began, and nothing can change that fundamental fact.
Likklemore , Mar 30 2020 22:00 utc | 70
China will 'compel' Saudi Arabia to trade oil in yuan -- and that's going to affect the US dollar
from CNBC, Oct.2017
"I believe that yuan pricing of oil is coming and as soon as the Saudis move to accept it -- as the Chinese will compel them to do -- then the rest of the oil market will move along with them," Carl Weinberg, chief economist and managing director at High Frequency Economics, told CNBC

Also, recall the recent ARAMCO IPO, reportedly China took a 5 % stake. Hmmm. Was it with USTs?

occupatio , Mar 31 2020 0:16 utc | 89
The minute the Al Saud family begins accepting yuan for oil their days are numbered.
The US put them there, put the Saudi in Saudi Arabia. Any move to accept yuan will be seen as betrayal, and the Al Sauds will be removed, either replaced or simply obliterated.
Posted by: Realist | Mar 30 2020 23:21 utc | 86

+++

If Saudi Arabia shifts to the Yuan, it would have to diversify away from buying US arms. They might be the undisclosed buyer of high-end Chinese missiles, said to have an "urgent need" for them, as per Chinese media on 2020/3/29. This news might be functioning as diplomatic signalling.

Chinese high-end missile sees first export delivery despite pandemic
https://www.globaltimes.cn/content/1184117.shtml

It was the first time a third-generation anti-tank weapon system developed by the Chinese company has been exported, according to the statement.

As the client was in urgent need of the missiles, the successful delivery had significant meaning for establishing Norinco's (China North Industries Group Corporation) market position and further opening up the market, the company said.

Norinco did not disclose more details on the deal in the statement, including the name of the buyer, the quantity purchased and the value of the deal.

Likklemore , Mar 31 2020 0:37 utc | 91
The US put them there, put the Saudi in Saudi Arabia. Any move to accept yuan will be seen as betrayal, and the Al Sauds will be removed, either replaced or simply obliterated.

You hug that thought. Newsflash: The horses camels have already bolted. China is expanding its presence/influence in ME.

These 35 agreements with KSA,'centered around ways to align the Saudi Vision 2030 with the Chinese Belt and Road Initiative' will not be in USD - unless China is unloading USTs. There is nothing US can do except sell more arms to the kingdom. Reuters, WSJ reported the big signing and likely, CNN, Fox, ABC buried it.


"Saudi crown prince signs raft of cooperation agreements with China
Feb.22, 2019
BEIJING: Crown Prince Mohammed bin Salman on Friday met with Chinese Vice Premier Han Zheng to discuss ways of further developing relations between the Kingdom and China.

The meeting took place in the grand surroundings of the Great Hall of the People in the Chinese capital Beijing. After their talks, the crown prince headed the Saudi delegation at the third session of the China-Saudi Arabia High-Level Joint Committee which he co-chaired with Zheng.

Delegates at the meeting discussed moves to strengthen cooperation between the two countries on trade, investment, energy, culture and technology, as well as the coordination of political and security matters. The committee also reviewed plans for greater integration between China's Belt and Road development strategy and the Saudi Vision 2030 reform program.

After agreeing on the minutes of the meeting, the Saudi royal and Zheng took part in the signing of a range of agreements, memorandums of understanding (MoU), investment projects and bilateral cooperation accords between the Kingdom and China:[.]

MoU between the Kingdom's Ministry of Energy, Industry and Mineral Resources and the National Development and Reform Commission in China, signed by Saudi Energy Minister Khalid Al-Falih and Ning Jizhe, vice chairman of the National Development and Reform Commission.

MoU between the Chinese Ministry of Commerce and Saudi Ministry of Commerce and Investment to form a working group to facilitate trade, signed by Abdul Rahman Al-Harbi, the Kingdom's deputy minister of commerce and investment, and Qian Keming, Chinese vice minister of commerce.[.]

Piotr Berman , Mar 31 2020 1:46 utc | 99
Deciphering the mental processes of MBS is always speculative, but it is very hard for KSA to deliver on the threat to increase the deliveries by 2.5 mln bbl/day. As we can see, planes fly only a fraction of pre-virus level, people on quarantine drive much less, you can offer fuel for free and it will not sell more. Now, if you could offer some hand sanitizer and facial tissues with each "full tank", perhaps it could work... But stopping oil production is troublesome for some reasons, to the ignorant me it seems that if you interrupt flow dynamic of oil, it is troublesome to restart it, shale oil may suffer from something similar. Thus tanker ships are being filled up and used for storage as destination ports refuse to take cargoes invoking "higher power". Hapless KSA cannot find enough tankers, and when they find them, hard to find a port to accept them. So KSA combative threat could impact psychology of the traders, but the virus made a dent in demand of several times larger magnitude.

Nobody knows how long the demand will stay low, but as it does, storage will be bursting, renting tanker ships became expensive. so the glut it will take time to dissipate (folks renting the tanker ships will be pressed to get rid of the cargoes at the first opportunity), and with no coordination to cut the production, low prices may stay for a year or more. This seems necessary to cut shale oil and other high cost oil project down to size. Periodic down period of pricing does not change long term calculations, but long periods will drive a lot of small players out of business. This means so-called consolidation, creditors become owners and sell it to vultures (regular folks cannot own something that costs more to maintain than it brings revenue). And what do the vultures do? "Paring excess capacity". Happened to many industries in the past. And even brainless bankers will give it two thoughts before lending money for projects in high cost oil production.

BTW, Putin is doing a gently MBS-like manouver, with the assist from Trump. To wit, Russia started to tax repatriated profits -- no need to imprison the account holders in Ritz Carton. But why would they be motivated to repatriate the profits back to Mother Russia? A patriotic virus? Or pestering with account freezes that Trumpian robbers are so fond of doing?

One mystery for me is why Canadians bother to produce oil with single-digit prices. Stopping tar oil production should be simple, just mothball the equipment.

One rumour in the oil patch is that USG will give them bail out. That could be a boon for green thinking idealists who are hostile to carbon energy production, because many deplorables do not like bailout (unless they are the beneficiaries). This could allow Trump to be defeated by a brain dead opponent.

daffyDuct , Mar 31 2020 2:28 utc | 101
"Bloomberg reports that Plains All American Pipeline asked its suppliers to scale back production,
and Plains and Enterprise Products Partners is requiring customers to prove they have a buyer or place to offload the crude they are shipping
The companies made the requests during the past week.

This is a clear sign that a growing glut of crude is overwhelming storage capacity. Pipeline companies are running out of storage space for oil. Coronavirus related lockdowns are resulting in plunging demand."

https://www.forexlive.com/news/!/pipeline-operators-asking-oil-producers-to-reduce-output-growing-glut-is-capacity-20200329

Bill , Mar 31 2020 15:34 utc | 137
@Vic

Hajj revenues poised to exceed $150bn by 2022: Experts

(the article refers to both Hajj and Umrah revenues)

https://www.arabnews.com/node/1151751/saudi-arabia

If that actually occurred it would exceed SA's 2019 $88bn oil revenue by a good margin

Canthama , Mar 31 2020 17:26 utc | 152
It is payback time for Russia no doubt, but Russia plays always the long game, any decision or concession will always be related to the long game. for Russia, which is the global leader in energy supplier (oil, gas & nuclear).
Russia got really mad with the Nordstream II delay, this is something Russia will not forget that easy, besides costing them a lot, it was some sort of global humiliation, that combination is pure fire. Even if the sanction are lifted now, Nordstream would start late 2020 and not late 2019....1 year delay anyway, so lifting sanctions won't matter here.
My first reaction is that Russia will not agree with the USA in anything, it will drive the shale market dry for a little longer, it must if it wants to cause long term problems for the players in the US, so no short term relieve for the shale players here, and if Russia does agree in the OPEC++ with the US and other export players then this will take time, and then US Gov can not intervene in the local production, more time...and no results, at the end the US will have to give up something, and I do not think lifting sanctions will be it, they may try it, bit it has no real value for Russia....only a global military retreat, something that will cost dearly, politically and in image will. serve Russia and its key strategic ally...China, mind you that cheap oil and gas helps China's recovery...March nbrs came in from China and it has already shown a better recovery than expected.
This is the only way I can see Russia playing the long game, together with China and a major strategic geopolitical defeat for the US.
JC , Mar 31 2020 17:46 utc | 154
Posted by: Canthama | Mar 31 2020 17:26 utc | 152

"This is the only way I can see Russia playing the long game, together with China and a major strategic geopolitical defeat for the US."

I like what you said, but Russia and China must continue supports one another. Both should also supports Iran and Venezuela too.

[Mar 24, 2020] The government will again bail out shale industry

Mar 24, 2020 | www.unz.com

Mr McKenna , says: Show Comment March 23, 2020 at 6:20 am GMT

@Kim

They're going to have to bail out/nationalize the shale oil industry.

Or "They" could just ignore it.

It has achieved these outcomes – despite steep decline rates and a constant need for huge numbers of new wells – through massive levels of junk debt forced into existence by almost zero interest rates and by having little to no profits since 2008.

Sounds like a really rotten business model. "steep decline rates and a constant need for huge numbers of new wells" describes an industry in eclipse, to put it kindly.

The break-even for shale oils wells varies, but $70 a barrel is a good average figure.

Even worse. This 'business' is essentially fake and should be shuttered. Every dollar thrown at it will be wasted. If everything in the world somehow reverses itself one day and shale oil is once again needed, we can restart it. Won't happen, though. Obsolete.

anachronism , says: Show Comment March 23, 2020 at 7:38 am GMT
@Kim One part of the New Deal, that seemed to work very well for all parties concerned, was the Department of Agriculture's willingness to buy up excess grain/dairy production in order to encourage an ample supply of grain/dairy and a sustainable price, so that farmers could get out of the boom/bust cycle. These excess stores were intended to provide supplies when weather or disasters disrupted the harvests. The AG Dept. also established guidelines for farmers on how much acreage should be allocated to which type of food product, based upon its own estimates of aggregate demand and needs for strategic reserves. It even paid farmers to keep acreage fallow at times.

The Department of Energy could do something similar (provided the Congress should legislate it). For this to work, the government must limit foreign sources from supplying the US markets to serve only as augmentation to US energy production whenever/wherever the US energy producers can't meet the demand at the price level that the Energy Department sets. If the price is determined on an average COST+ ROI basis, our energy producers would effectively become utilities.

Miro23 , says: Show Comment March 23, 2020 at 8:35 am GMT
@Kim

They're going to have to bail out/nationalize the shale oil industry.

Why? These were private failed investment decisions, so let the industry go bankrupt along with their shareholders and junk bond investors.

The world doesn't need oil supplied at $70 – And what has this got to do with the US public? They didn't make these shale oil investment decisions.

TBTF (Too Big To Fail) is another fake argument. If the investment banks had been allowed to fail in 2008, we would now have a smaller and more prudent banking sector. There are always some serious banks out there to pick up the pieces.

[Mar 11, 2020] Saudi's budget requires $85//bbl and flooding the market on no demand is stupid.

Mar 11, 2020 | www.moonofalabama.org

Likklemore , Mar 10 2020 19:38 utc | 13

Posted by: Michael Droy | Mar 10 2020 18:34 utc | 8

" Oil. Saudi has 92 years of reserves.

No. There is no independent third party certification letter with respect to the balance of the kingdom's proven oil equivalent reserves. Could be near 40 years and that figure is with heaping generosity.

Poor Matt:
Twilight in the Dessert by Matt Simmons
he was found in his swimming pool. Tut, tut.

With tiny production costs, doubling output at half the price makes sense.

if you think they can, I have two acres of oceanfront at a fair deal --- priced in cents.

Saudi's budget requires $85//bbl and flooding the market on no demand is stupid.


karlof1 , Mar 10 2020 20:22 utc | 18

Can't completely agree with Tyler Durden here on his wide-ranging postulation, "Putin Launches 'War On US Shale' After Dumping MbS & Breaking Up OPEC+" mainly because it consists of too much speculation and not enough on facts and statements of those involved in the decisions. The Bloomberg story on which this is mostly based is almost 100% speculation. IMO, this is yet another attempt to bash Russia for the massive mistakes made by the Outlaw US Empire--for years, fracking's been known as a Ponzi Scheme to those closely watching, and it was already set to implode. This Sputnik article calls the Bloomberg item Bantha Pudu and offers a completely different explanation that looks at Saudi behavior which all the Western BigLie Media outlets omitted from their coverage.

Additional opinions and analyses were provided in this Sputnik article that tend to back the analysis from the previous article. But with the internal turmoil within Saudi over what's clearly an ongoing power struggle surly contributed to Saudi's choices. As with almost all reports coming from the West about anything Russian or Chinese, they must be treated with much skepticism. This makes at least the third time lowering the price of oil through increased production aimed to harm Russia and is likely the genuine reason at work again.

As for the Outlaw US Empire's fracking corps, we shall see if today's rebound is merely a dead cat bounce, as it's now close to impossible to further hide their Enron Accounting as their bonds descend to Junk status.

J Swift , Mar 10 2020 21:06 utc | 31
karlof1 @ 18

Alexander Mercouris at the Duran also recently posted his take, saying he felt the oil market meltdown was almost entirely the doing of MbS. Essentially he posits that MbS was getting more and more panicky, and Russia was in effect so preoccupied with the antics of Erdogan that they weren't paying MbS the attention he thought he deserved...and it isn't impossible that there was indeed a CIA plot to take him out. At any rate, Mercouris believes he was basically just firing one across the bow of Russia to get their attention, but of course by taking a demanding tone with Putin he almost guaranteed that he would receive the lesson in manners for which the Russians are becoming more and more well known. Mercouris feels after letting him sweat it a bit to learn his lesson, they will work out something with the Saudis, but their return demands may be stiff.

While I do tend to agree this was probably all precipitated by MbS and his mental instability, I can easily see the Russians long-range planning having long known that this day--for one reason or another-- would eventually come, and deciding to bask in the glow for just a bit more than Mercouris anticipates. After all, US fracked gas prices will now be massively greater than Russia can provide its gas for, which with Merkle on the ropes anyway Putin might feel is a very good time to send the Germans a reminder of what they risk if they don't consummate the Nordstream 2 project. And after the years of illegal sanctions, it must feel very good to be in Russia's position, where they know they can weather the storm far better than their antagonists. So while I don't think this was Russia's doing, I can easily see them taking their sweet time to come to a new deal, and even then at a price level that will keep the Saudis and US frackers on their back foot...and maybe try to put more distance between MbS and the US, too.

Peter AU1 , Mar 10 2020 22:17 utc | 39
Regarding Putin and MBS on the oil. Who funds and supports HTS al qaeda in Idlib. I am guessing the Saudi's have a big input there. Reports some time back that the drones AQ was using to attack the Russian airbase used high tech US components.
Tuyzentfloot , Mar 10 2020 22:23 utc | 41
I recall ex UK ambassador Peter Ford saying somewhere last year that the Saudis were outspent by an order of magnitude by Qatar in Syria. That Qatar is funding like 80% of it all. Things may have shifted a bit since.
Abe , Mar 10 2020 23:58 utc | 51
Regarding KSA and their oil gamble - if I were Houthi strategist, I would wait for a while for KSA to get knee deep into this experiment, then launch missile attack on their biggest refineries and pipes. With one salvo whole KSA statehood could be shattered. Sweet sweet revenge and guarantee not to get oppressed by KSA genocidal maniacs in future.
ARN , Mar 11 2020 0:43 utc | 57
and regarding how much oil is left in Saudi even here they are calling them liers..

"the Kingdom will desperately need another primary energy source in the relatively near future because it has nowhere near the amount of oil remaining that it has stated since the early 1970s"

https://oilprice.com/Geopolitics/International/The-Great-Saudi-Shale-Swindle.html

[Mar 11, 2020] KSA will need another energy source in the relatively near future because they have much less oil remaining that it has stated since the early 1970s

Mar 11, 2020 | www.moonofalabama.org

ARN , Mar 11 2020 0:43 utc | 58

and regarding how much oil is left in Saudi even here they are calling them liers..

"the Kingdom will desperately need another primary energy source in the relatively near future because it has nowhere near the amount of oil remaining that it has stated since the early 1970s"

https://oilprice.com/Geopolitics/International/The-Great-Saudi-Shale-Swindle.html

[Mar 10, 2020] Oil war between KSA and Russia

Mar 10, 2020 | www.nakedcapitalism.com

timbers , March 9, 2020 at 8:04 am

It could crash Mr Market oil stocks and wipe out fracking and such, creating possible liquidity issues and bankruptcies which could spread. But honestly I'm not up on the details if this could even cause any domino affects with bankruptcies, or not.

But to the Fed, Mr Market is the whole economy and nothing but the economy, Fed job #1 being to make stocks always go up.

Saudi Arabia is far more dependent on oil and tourism (also being hit) than Russia. Hence Russia's reserves I think would last far longer that SA's can.

The Rev Kev , March 9, 2020 at 8:37 am

Saudi Arabia is already in the hurt locker and has run down their financial reserves under Mohammad Bin Salman Al Saud. In addition, their little expedition to Yemen is costing them billions of dollars per month which is not helping. With international tourism fading away, the threat of some two million pilgrims not being able to travel to Mecca and spending their money there as well as plummeting oil prices, 2020 is not going to be a good year for Saudi Arabia. Just to make things worse, they have their own problems with Coronavirus which may knock out important links in the Royal family.

timbers , March 9, 2020 at 8:58 am

Indeed. A pattern with Salman seems to be emerging, of him rashly starting wars or policies he can't win/finish. Makes you wonder if others in the royal family are seeing this and noticing SA is burning thru it's reserves and the solution might be a change in leadership?

The Rev Kev , March 9, 2020 at 9:06 am

I was just reading an article saying how Saudi Arabia need $60 a barrel for their budget but that now it is heading towards $20 a barrel. If they wanted to achieve a massive cost-saving, they could give their Royal Family the chop – perhaps literally so. Last I heard there were over 6,000 of them-

https://asiatimes.com/2020/03/oil-to-hit-20-amid-saudi-russian-price-war/

vlade , March 9, 2020 at 9:16 am

SA would have more problems with reserves than Russia, that's definite – if nothing else, Russia exports/has other things than oil, SA doesn't.

Oil stock crash would not cause Western recession. It could well cause recession in Texas and similar, but I very much doubt it would cause even US recession, as the problems in Texas & co would be offset by the much lower prices at the pump.

Oil debt crash would be much worse, but still I suspect brunt of it would be borne by investors, not banks.

farmboy , March 9, 2020 at 10:01 am

best energy writer Gregor McDonald breaks it down

barefoot charley , March 9, 2020 at 12:21 pm

Thanks for this excellent analysis! When oil consumption permanently plateaus, as it's about to, the stock and debt value of the industry . . . flatlines.
That's the good news from Grow or Die.

[Mar 10, 2020] The US shale sector is getting completely killed. A complete bloodbath. Billions of dollars in equity wiped out

Mar 10, 2020 | www.moonofalabama.org

karlof1 , Mar 9 2020 20:12 utc | 36

This bird tweets :

"The U.S. shale sector is getting completely killed. A complete bloodbath. Billions of dollars in equity wiped out.

"Occidental Petroleum is down 44%. EOG is down 35%. Continental Resources down 40%. Smaller players like Parsley down more than 50%."

I suggest this bird look at one of those corp's balance sheets since they had very little equity but lots of liabilities (Assets=Liabilities+Equity) as Assets and Liabilities where allowed to grow with the use of interest-free money to keep the Ponzi Scheme afloat. Also recall that CEOs often get paid in shares which get dividends. Often those dividends are paid using the zero interest loan money leaving the corp with a bigger, unstable pile of debt and the CEO with a purse fattened by the loan instead of actual company performance, ie, profits.

[Mar 09, 2020] Russia's 2020 federal budget assumes a price of $42.4 per barrel of Urals crude oil blend (

Mar 09, 2020 | www.moonofalabama.org

S , Mar 9 2020 6:19 utc | 73

@Likklemore #26:
Russia will be fine all the way down to $20//bbl

Russia's 2020 federal budget assumes a price of $42.4 per barrel of Urals crude oil blend (the prices of other oil & gas exports, such as other crude oil blends, natural gas, LNG and petroleum products, are converted into Urals blend prices using statistical formulas). If the market price turns out to be higher, the surplus goes into the National Wealth Fund ($124 bn as of December 1, 2019; currency composition is 45% U.S. dollars, 45% euros, 10% pound sterling); conversely, if the price is lower, the deficit is financed from the NWF. This is known in Russia as "the budget rule" ( бюджетное правило ).

You can see the prices of various crude oil blends at the OilPrice.com 's Oil Price Charts page, but note that the Urals blend prices shown are lagging by three days as of the time of this comment. Generally, Urals blend price is somewhere between WTI and Brent blend prices, so it should be around $32/bbl at the moment. Meaning, Russia will now have to start taking money from the NWF.

If the low prices persist for a long period of time, Russia can balance the budget by devaluing the ruble, as its foreign debt is one of the lowest in the world -- no budget cuts are necessary. Russia's foreign exchange reserves currently stand at $570 bn (77.1% foreign currencies, 1.2% SDR, 0.7% reserve position in the IMF, 21.0% gold).

[Mar 08, 2020] Why "orphan" oil and gas wells are a growing problem for states

Mar 08, 2020 | www.moonofalabama.org

Trailer Trash , Mar 6 2020 22:22 utc | 35

>USA shale producers

Soon people won't have to worry much about damage from new wells. Instead they will have to worry about existing-and-soon-to-be-abandoned wells. This is already a huge problem in Alberta, where "it's estimated that more than 155,000 Alberta energy wells have no economic potential and will eventually require reclamation".

But not to worry. It will only cost $47 Billion for Alberta to clean up the mess .

No surprise that it is worse in the US. I couldn't quickly find a cost estimate.

Nobody knows how many orphan and abandoned drilling sites litter farms, forests and backyards nationwide. The U.S. Environmental Protection Agency estimates there are more than a million of them. Unplugged wells can leak methane, an explosive gas, into neighborhoods and leach toxins into groundwater.

Why "orphan" oil and gas wells are a growing problem for states

[Mar 07, 2020] Is the U.S. Fracking Boom Based on Fraud?

Notable quotes:
"... As Fastow explained, in finance, the difference between a loophole and fraud isn't always easy to identify. And that may be something the U.S. fracking industry is working to its advantage. ..."
Mar 07, 2020 | www.nakedcapitalism.com

Posted on March 6, 2020 by Yves Smith Yves here. It really is remarkable how super low interest rates have led investors on a widespread basis to pour money down ratholes. Unicorns is one. Another has been fracking, which despite being another widespread cash sink, remarkably has kept sucking in funding. As we pointed out in 2014 :

John Dizard at the Financial Times (hat tip Scott) gives a more intriguing piece of the puzzle: the degree to which production is still chugging along despite it being uneconomical. The oil majors have been criticized for levering up to continue developing when it is cash-flow negative; they are presumably betting that prices will be much higher in short order.

But the same thing is happening further down the food chain, among players that don't begin to have the deep pockets of the industry behemoths: many of them are still in "drill baby, drill" mode. Per Dizard:

Even long-time energy industry people cannot remember an overinvestment cycle lasting as long as the one in unconventional US resources. It is not just the hydrocarbon engineers who have created this bubble; there are the financial engineers who came up with new ways to pay for it.

Justin Mikulka argues that one reason these persistently unprofitable fracking companies keep going is via fraud.

By Justin Mikulka, a freelance writer, audio and video producer living in Trumansburg, NY. Originally published at DeSmogBlog

In a 2016 interview with Fraud Magazine , former Enron CFO Andrew Fastow explained what he thought made him so successful while at the former energy corporation that's now infamous for financial scandal.

"I think my ability to do structured financing, to finance things off-balance sheet and to find ways to manipulate financial statements -- there's no nice way to say it. Like I said at the conference, I was good at finding loopholes."

As Fastow explained, in finance, the difference between a loophole and fraud isn't always easy to identify. And that may be something the U.S. fracking industry is working to its advantage.

Fastow, the convicted fraudster, does admit that what they did at Enron misled investors. "We created something that was monstrously misleading, but any one of those deals alone wasn't necessarily considered fraudulent," he said.

Fast-forward to today and a different part of the energy industry: The U.S. shale oil and gas industry has lost more than a quarter trillion dollars since 2007, while being sold to investors as an economic boom, even at oil prices much lower than those of recent years. Does that financial mismatch seem misleading? Or perhaps, familiar?

In an unexpected twist, Fastow now gives talks to the energy industry on ethical leadership.

Sounding the Alarm

Bethany McLean was the first reporter to question whether Enron was a financially sound company in a 2001 article for Fortune magazine. McLean went on to co-author the book The Smartest Guys in the Room , which documented the fall of Enron due to its fraudulent practices, including the ones Fastow engineered.

In 2018, McLean also published the book Saudi America , which highlighted many of the financial challenges the fracking industry has faced. In a recent interview for Texas Monthly's podcast Boomtown , McLean explained one of the very accepted and blatantly misleading practices of the fracking industry:

I'd raise a couple of points. One is that companies have long hyped these break-even numbers. They say we can break even at $25 a barrel, we can break even at $20 a barrel. And then you look at their consolidated financial statements and they are losing money. And so something is going wrong the people called it to me [sic] corporate math or investor economics. So they were trying to put together these investor pitch decks that would show investors a set of economics that weren't real. So they would show you that they could break even on a well at $25 barrel of oil but then yet you'd go to the corporate financial statements and they were losing money.

Is that a loophole? Where you can openly misrepresent to investors the financial reality of your business? Or is it fraud?

As more and more players in the fracking industry run out of options and file for bankruptcy, investors are beginning to ask questions about why all the money is gone.

"This is an industry that has always been filled with promoters and stock scams and swindlers and people have made billions when investors have lost their shirts."

In a bonus episode of #Boomtown , we speak to @bethanymac12 about the fracking industry. https://t.co/sSmXUM3ANu

-- Texas Monthly (@TexasMonthly) February 6, 2020

The Blank Check Companies

Much like with the housing crisis that caused the financial crisis of 2008, the fracking boom has led to Wall Street bankers finding innovative ways to finance a money-losing endeavor. Some companies are now even selling bonds based on future well performance , a concept similar to the mortgage-backed securities that led to the 2008 housing crisis.

Another Wall Street invention is what is called a "special purpose acquisition company" ( SPAC ), or, as they are also known, blank check companies. The way these investments work is a big bank or private equity firm backs a management team to raise money for the SPAC with the agreement that the leaders of the SPAC will then at some point make a "special purpose acquisition" -- which means they will find an existing company and buy it.

They are called blank check companies because the management is given a blank check to buy whatever they choose. In the 1980s, the Wall Street Journal ( WSJ ) noted that "blank-check companies were often associated with penny-stock frauds." In a 2017 article on the oil industry, the WSJ reported that " SPAC s were a hallmark of the frothy days before the financial crisis [of 2008]."

Understandably, SPAC s were often seen as a risky investment, but much like with the housing crisis, the biggest names on Wall Street are getting involved and giving the concept legitimacy, with Goldman Sachs starting to back SPAC s in 2016. And new fracking companies have come about as a result.

Ben Dell, a managing partner at investment firm Kimmeridge Energy, explained one of the risks of SPAC investments to the Wall Street Journal. " SPAC management teams have an incentive to spend the money they have raised no matter what, so they can collect fees and pay themselves a salary and stock options at the company they purchase," Dell said.

" SPAC s are the most egregious example in the industry of executive misalignment with investors," Dell told the WSJ .

As I have previously reported , one of the problems with the fracking industry is that CEO s are paid very well even when the companies lose money. According to Dell, SPAC s take this problem to a new "egregious" level.

Alta Mesa: A Star Is Born

To successfully raise money for a blank check company, having some star power in the management helps. As the Wall Street Journal has noted, investments in SPAC s " are largely bets on their executives ."

Jim Hackett would seem to be the ideal candidate to lead a SPAC in the fracking industry. Hackett has an impressive resume: the former CEO of fracking company Anadarko, former chairman of the Federal Reserve Bank of Dallas , an executive committee member of the industry lobbying group American Petroleum Institute , and partner at the major private equity firm Riverstone Holdings.

In 2013 Hackett retired from Anadarko to attend Harvard Divinity School to get a degree in theology. However, he was still a partner at Riverstone and in 2017 was lured back to the fracking business to run a SPAC backed by Riverstone.

The SPAC raised a billion dollars while being advised by the biggest names in the business, including Goldman Sachs and CitiGroup. The initial blank check company was called Silver Run Acquisition Corp. II .

Hackett used the money to buy two companies in Oklahoma -- an oil producer and a pipeline -- and the new combined company Alta Mesa was valued at $3.8 billion.

The Future Was Bright for Alta Mesa

Hackett and Alta Mesa had big plans for making money fracking wells in Oklahoma, which included forecasts for big increases in oil and gas production from the newly acquired assets with very low break-even numbers.

When the Wall Street Journal reported the creation of Alta Mesa, it noted , "Alta Mesa's core acreage in Northeast Kingfisher County has among the lowest breakevens in the U.S. at around $25 per barrel, the company said." Because oil was well over that price at the time, the future looked good, according to Hackett and Alta Mesa. Forbes reported that Hackett said Alta Mesa's holdings were "oil that will be economic even at $40 WTI [West Texas Intermediate]" and oil has been well over that mark since Hackett made that statement in 2017.

Like break-even numbers, another area where misleading investors in the oil industry might be particularly easy is making overly optimistic forecasts about how much oil will be produced by future wells. The Wall Street Journal has documented this as a significant problem for the U.S. shale industry.

Description of Alta Mesa assets in investor proxy statement. Credit: Screen capture from proxy statement.

In early 2018 when touting the potential of the proposed new company Alta Mesa, Hackett said that "its average well would produce nearly 250,000 barrels of oil over its life." A year later, Alta Mesa said it expected those wells would produce less than half that, only 120,000 barrels of oil over the life of the well.

In May last year, Alta Mesa was under investigation by the Securities and Exchange Commissions ( SEC ) "for possible issues in its financial reporting."

Later in 2019, Alta Mesa filed for bankruptcy after writing down its assets by $3.1 billion. The billion-dollar blank check had been spent, and it took less than two years to lose it all.

SEC Investigation and Multiple Investor Lawsuits

Alta Mesa's assets were sold off earlier this year. The SEC declined to comment on the status of the investigation.

In May 2019, the Houston Chronicle reported , "Alta Mesa also is facing a series of lawsuits. Some shareholders are suing claiming they were defrauded and lied to about the value of the company and its assets when the company was formed."

One lawsuit filed by the Plumbers and Pipefitters National Pension Fund claims that the proxy statement for Alta Mesa contained materially false and misleading information. That filing lays out a lot of facts to support that claim.

Statement for complaint for violation of the Securities Exchange Act of 1934. Credit: Screen capture of court documents

Another lawsuit alleges that Alta Mesa didn't pay the proper amount of royalties to landowners, with state investigations into this issue.

Yet another lawsuit has been filed against Riverstone for " misleading statements ."

Investors are saying they were misled by Hackett and Riverstone. The allegations are based on the claims that were made about how much oil the company could produce. In hindsight, those claims appeared wildly inaccurate and misleading. But is that fraud? Or just taking advantage of a loophole?

In January, the Houston Chronicle summed up the situation as it described Alta Mesa's downfall : "It was a dramatic fall from grace after significantly overestimating its potential in Oklahoma's STACK shale play "

While Alta Mesa is a spectacular example of how fast the fracking business can make large sums of money disappear after "significantly overestimating its potential," it also likely marks the beginning of investor lawsuits against many other failing fracking companies with similar histories.

Learning From Enron

When Jim Hackett decided to go to Harvard Divinity School, several favorable profiles about his choice were written, including one on the Harvard website. That article noted that one of the reasons Hackett decided to go to school was because of "the collapse of Enron, a disaster that he attributed to 'a failure in leadership' among people he knew well."

The speed with which Hackett and Alta Mesa went bankrupt is remarkable, indicating a likely failure in leadership.

However, Hackett seems to have learned something from former Enron executive Andrew Fastow: that there is work for former executives like them to teach the energy industry about ethics and morality.

Hackett is now a lecturer at the University of Texas at Austin Center for Leadership and Ethics .

Fraud? Or Just a Laughing Matter?
Good reporting is hard work but sometimes involves a bit of luck. Like when a Wall Street Journal reporter , in a room full of people hired to make forecasts of fracked oil and gas production, learned about the existence of much more accurate methods for predicting that oil production. And also learned that with accuracy comes much lower estimates of shale oil reserves.

The WSJ article that followed quoted Texas A&M professor and expert on calculating oil and gas reserves John Lee. "There are a number of practices that are almost inevitably going to lead to overestimates," said Lee. Those are the practices used by the industry, with Alta Mesa serving as just one example.

Overestimates are why Alta Mesa received funding but now no longer exists.

The Wall Street Journal reported that during a presentation given by Lee, an audience member "stood up and challenged the engineers in attendance," asking why the forecasters weren't using accurate models like the ones that were available -- as Lee had described.

Another audience member explained the reason.

" Because we own stock," replied another engineer, "sparking laughter," according to the Wall Street Journal.

Is it misleading to laugh at your company's investors if you know the estimates you are giving them are inflated, but because you own the stock that benefits from those estimates, you do it anyway? Is that fraud? Perhaps that depends on if you get you get ethics lessons from Andrew Fastow and Jim Hackett.

Will the biggest innovation of the fracking revolution be making financial fraud a laughing matter?

A lot of people on EFT like to talk about how shale is fraudulent. That's simply not true:

You can't commit fraud when the rules are so lax you can just make shit up and it's still allowed.

-- Alpine High Fire Sale (@losingyourmoney) February 19, 2020


PlutoniumKun , March 6, 2020 at 6:43 am

While I've little doubt there is a lot of fraud, so much of the stupidity around fracking comes down to the old saying that its hard to make a man undrestand something when his job is to not understand it.

The financing of the oil and gas industry is almost entirely dependent on projections – projections of flow per well, and projections of future prices. All you need to do is make a few optimistic projections of one or both, and you've suddenly turned a dud into a highly valuable asset. Anyone can look at the pricing and question it, but with oil/gas, that is much harder with 'novel' types of well as there are few if any precedents. So if someone says 'the well is producing X per day, we can continue this flow for 3 years and when thats finished, we can drill down another 200 metres and replicate the same flow', there is nobody to contradict it. The drilling guys aren't going to argue, they want to keep their jobs. The geologist isn't going to argue, he has his mortgage to pay. The senior manager won't argue, he wants a promotion. The drilling company owners won't argue, they want to cash out. And the Wall Street financier won't argue, because he can pass on the risk to the equivelent of the last booms 'German bankers'.

So when someone like Arthur Berman – a geologist who has continuously being questioning the underlying geological assumptions – raises concerns – he's listened to politely, even invited to some conferences, but is otherwise ignored. Because its not in anyones interest to listen. There is literally nobody who's job it is to shout 'stop'. So much for self regulating markets.

While there may well be very severe economic consequences if and when this blows up in everyones face (and I suspect that Covid-19 will be the catalyst for this, oil demand is collapsing day by day), the big loser is the planet we depend on for our survival.

jackiebass , March 6, 2020 at 7:15 am

I live in NY on the PA border. Fracking is still happening south in PA but is only a fraction of what it once was. If you drive into PA you will see lots full of fracking materials that have sat there for a long time. At first for about two years it was a boom. The activity from fracking was amazing. Then as fast as it started it slowed down to a crawl. There are a few reasons in my opinion. The so called sweet sports were quickly fracked leaving less attractive sights. It was concealed that a fracked well produced most of it's gas in the first two years. After that the production from a well dropped off drastically. Locals soon lost their enthusiasm for fracking.There is still some fracking but it is hardly noticeable. Local people thought this would be great but attitudes soon soured. A few made big bucks at the expense of the rest. The fracking was in former coal country. The difference is coal lasted a lot longer. Now the majority of people in the area oppose fracking. I'm thankful that NY state banned fracking because of the negatives associated with fracking. I own 50 acres near the PA border. Before fracking was banned I was constantly hounded by leasing companies. I refuse to lease because to me my land was more important than a few bucks. I hope in my life time NY doesn't reverse the fracking ban. On another note there are wind farms where I live. I would leas to a wind company because there are fewer negatives and it's less intrusive.

jefemt , March 6, 2020 at 9:31 am

The good news is that if the companies were chasing you, you own the minerals. You can donate them to a conservation land trust and assure that no mineral extraction takes place, and get a tax benefit for the foregone production.

Win Win!

Ignacio , March 6, 2020 at 7:27 am

So, one first profits from fraud to later profit by lecturing everybody about ethics?
A-ma-zing!

Kevin C. Smith , March 6, 2020 at 10:02 am

BIG red flag for me when someone like Jim Hackett decides to go to Harvard Divinity School

Shiloh1 , March 6, 2020 at 10:22 am

Daniel Plainview was baptiized, but that was so he could drink Eli's milkshake later and club him to death with a bowling pin.

Colonel Smithers , March 6, 2020 at 11:09 am

Thank you, Kevin.

That sounds like my former CEO and chairman, Stephen Green, becoming an Anglican clergyman.

Ignacio , March 6, 2020 at 7:49 am

It can be argued that the money invested in many fracking companies with such inflated pay-back periods, ROIs or breakeven estimates, apart from fraud, could be considered as a private subsidy, just like Uber investors subsidize Uber taxi services. If we can blame it to low interest rates resulting in such subsidies, for fracking oil, unicorns, education, housing etc. to my knowledge this has only been argued in very few sites like here at NC or Wolf Street but merits a close examination. If pension and mutual funds are pouring a lot of money in such business with low to negative returns what consequences are to be expected in the future?

Trent , March 6, 2020 at 8:18 am

Eight to Ten years ago you would have seen giant trucks moving water and dirt from fracking sites when you got off the turnpike around Donegal PA. Since about 2015 or 2016 i'd say that completely died. Pittsburgh actually had one year of population gain due to the fracking boom but thats done. Yves mentioned investors and low interest rates chasing bad investments and fraud. I'd say the same thing is going on in healthcare based on my exp. of it and the amount of money floating around. We need higher interest rates to nip this stuff in the bud and re-balance the economy.

a different chris , March 6, 2020 at 12:11 pm

>We need higher interest rates

Yup. In so many ways.

tegnost , March 6, 2020 at 8:25 am

This pretty much says it all regarding the health of our eCONomy, but hey, after it all falls apart we should have plenty of reformed criminals to teach ethics classes

"The Wall Street Journal reported that during a presentation given by Lee, an audience member "stood up and challenged the engineers in attendance," asking why the forecasters weren't using accurate models like the ones that were available -- as Lee had described.

Another audience member explained the reason.

"Because we own stock," replied another engineer, "sparking laughter," according to the Wall Street Journal."

fresno dan , March 6, 2020 at 8:39 am

In a 2016 interview with Fraud Magazine,
==============================================
I have to say, I was shocked, SHOCKED to find that there is a magazine actually, only devoted to fraud – that is published bi-monthly.
AND than I was shocked to find out that the magaine actually, only devoted to fraud is ONLY published bi-monthly

Zamfir , March 6, 2020 at 2:19 pm

That's what they say. After you take subscription, you'll find they publish monthly.

The Rev Kev , March 6, 2020 at 9:39 am

Is the U.S. Fracking Boom Based on Fraud? Is the Pope Catholic? There are going to have to be major structural changes in the world's economy in the next few years and with the demand for oil dropping, prices have gotten cheaper which is turning fracking into a non-profit industry. In any case, how are you suppose to frack with sick crews? This is one industry that needs to go away before it causes any more damage. You'd find more honesty in a boiler room brokerage firm than in this industry.

xkeyscored , March 6, 2020 at 12:33 pm

I did wonder why 'Fracking Boom' was in the title.

Carolinian , March 6, 2020 at 10:11 am

There's a recent documentary called The Price of Everything that is about the enormous sums being paid for every latest fad in modern art. The show says that all the great masters, old and new, have been locked up by museums or the super rich and so a recent flood of new investors are looking for any excuse to spend lots of money on paintings. Apparently there is so much money sloshing around at the top of our unequal economy that that these plutocrats don't even care if they lose their shirts on bad investments. The main thing is to keep it out of the hands of the poor.

Clearly we as a society are suffering from affluenza, at least among the elites who should all be virus quarantined and then maybe we will forget to check back.The show tries to pretend that this money driven art world is a cool thing. It had this viewer thinking of guillotines.

xkeyscored , March 6, 2020 at 12:37 pm

Unfortunately, those most negatively affected by affluenza are those not infected with it.

JBird4049 , March 6, 2020 at 6:11 pm

Yes, like all the people who cannot see the art. It's mostly buried in storage. What is the point of having over two thousand years of art from multiple civilizations, if most of it is hidden away and often only known from catalog descriptions or cramped tiny pictures.

TimH , March 6, 2020 at 10:51 am

If Enron was fraud, how come Uber isn't considered fraud?

a different chris , March 6, 2020 at 12:12 pm

Because people can still make money off it.

No, not *you*. Not *us*. But people that "matter".

lyman alpha blob , March 6, 2020 at 1:46 pm

You must mean the insiders who suckered the rubes into taking shares off their hands at the IPO. IIRC the IPO price was over $70/share. Right now it's just under $32 with no signs of every being a profitable enterprise.

Grifters, charlatans and mountebanks everywhere you look.

franklin kirk , March 6, 2020 at 11:03 am

Charging mineral resource rent, which everyone has an equal claim to, would help to reduce the tendency of financial shenanigans. The profit motive is crack to rent seekers.

Colonel Smithers , March 6, 2020 at 11:06 am

Thank you, Yves.

Speaking of Enron, it is perhaps appropriate that my employer's head of non core assets, toxic waste for fire sale, came from Enron. Standard Chartered has some, too.

Polar Donkey , March 6, 2020 at 11:32 am

It seems like the Russians today decided to put the final nail in U.S. fracking industry and turn the screws on Saudi Arabia.

inode_buddha , March 6, 2020 at 2:22 pm

Is the US a fraud?
.
Fixed it for you.

rd , March 6, 2020 at 5:31 pm

I think the big issue goes back to the investors and bond rating agencies, similar to the subprime mortgage crisis. If bondholders aren't willing to do the homework, then they don't get paid for the risk that they are undertaking. with the multiple prediction tools for well production, you can make up an optimistic and pessimistic case. If the bond yield doesn't cover that risk to your satisfaction, then you don't buy the bond or you demand a higher interest yield and lower bond price.

Instead, it seems like the industry is raising money from people who don't want to think more than a few months ahead on a multi-year investment. The challenges faced by the fracking industry have been well publicized for several years now. If an investor doesn't understand those challenges now and isn't looking at specific methods of calculating production yield etc., then they have only themselves to blame if their investment loses money.

This is a very different issue than if somebody flat out lies about whether or not wells exist etc.

A single well can make financial sense even if there will never be a net profit from it. Fracking is pretty similar to the Hollywood film industry where nobody ever has any net profits despite living high on the hog. "Don't ever settle for net profits. It's called 'creative accounting'." – Lynda Carter: https://en.wikipedia.org/wiki/Hollywood_accounting

elkern , March 6, 2020 at 5:52 pm

I dunno. There may be a sucker born every minute, but I can't picture enough of them getting born with a million (or billion) Dollars to blow on rackets like this to keep it going this long.

Sad to see that the Plumbers' Union Pension Fund was a victim; I hope that's not a pattern, but it would make sense. If it's a pattern, then it's no wonder the Fed tried so hard to postpone the next Crash until after the elections. How much junk paper has Wall Street sold to other Pension Funds? States & Municipalities are already squeezed by "unfunded liabilities"; how much repackaged funky Fracking paper are held by public (governmental) agencies? Damn, this is gonna be a mess.

I'd advise investing in popcorn, except that my 401k will probably evaporate soon, so maybe it's pitchforks.

JBird4049 , March 6, 2020 at 6:01 pm

CFO Fastow of Enron. How nice to see him land on his feet. The company made listening to the rolling blackout reports for California while driving to work a requirement.

[Mar 06, 2020] Is the U.S. Fracking Boom Based on Fraud?

Mar 06, 2020 | www.nakedcapitalism.com

Posted on March 6, 2020 by Yves Smith Yves here. It really is remarkable how super low interest rates have led investors on a widespread basis to pour money down ratholes. Unicorns is one. Another has been fracking, which despite being another widespread cash sink, remarkably has kept sucking in funding. As we pointed out in 2014 :

John Dizard at the Financial Times (hat tip Scott) gives a more intriguing piece of the puzzle: the degree to which production is still chugging along despite it being uneconomical. The oil majors have been criticized for levering up to continue developing when it is cash-flow negative; they are presumably betting that prices will be much higher in short order.

But the same thing is happening further down the food chain, among players that don't begin to have the deep pockets of the industry behemoths: many of them are still in "drill baby, drill" mode. Per Dizard:

Even long-time energy industry people cannot remember an overinvestment cycle lasting as long as the one in unconventional US resources. It is not just the hydrocarbon engineers who have created this bubble; there are the financial engineers who came up with new ways to pay for it.

Justin Mikulka argues that one reason these persistently unprofitable fracking companies keep going is via fraud.

By Justin Mikulka, a freelance writer, audio and video producer living in Trumansburg, NY. Originally published at DeSmogBlog

In a 2016 interview with Fraud Magazine , former Enron CFO Andrew Fastow explained what he thought made him so successful while at the former energy corporation that's now infamous for financial scandal.

"I think my ability to do structured financing, to finance things off-balance sheet and to find ways to manipulate financial statements -- there's no nice way to say it. Like I said at the conference, I was good at finding loopholes."

As Fastow explained, in finance, the difference between a loophole and fraud isn't always easy to identify. And that may be something the U.S. fracking industry is working to its advantage.

Fastow, the convicted fraudster, does admit that what they did at Enron misled investors. "We created something that was monstrously misleading, but any one of those deals alone wasn't necessarily considered fraudulent," he said.

Fast-forward to today and a different part of the energy industry: The U.S. shale oil and gas industry has lost more than a quarter trillion dollars since 2007, while being sold to investors as an economic boom, even at oil prices much lower than those of recent years. Does that financial mismatch seem misleading? Or perhaps, familiar?

In an unexpected twist, Fastow now gives talks to the energy industry on ethical leadership.

Sounding the Alarm

Bethany McLean was the first reporter to question whether Enron was a financially sound company in a 2001 article for Fortune magazine. McLean went on to co-author the book The Smartest Guys in the Room , which documented the fall of Enron due to its fraudulent practices, including the ones Fastow engineered.

In 2018, McLean also published the book Saudi America , which highlighted many of the financial challenges the fracking industry has faced. In a recent interview for Texas Monthly's podcast Boomtown , McLean explained one of the very accepted and blatantly misleading practices of the fracking industry:

I'd raise a couple of points. One is that companies have long hyped these break-even numbers. They say we can break even at $25 a barrel, we can break even at $20 a barrel. And then you look at their consolidated financial statements and they are losing money. And so something is going wrong the people called it to me [sic] corporate math or investor economics. So they were trying to put together these investor pitch decks that would show investors a set of economics that weren't real. So they would show you that they could break even on a well at $25 barrel of oil but then yet you'd go to the corporate financial statements and they were losing money.

Is that a loophole? Where you can openly misrepresent to investors the financial reality of your business? Or is it fraud?

As more and more players in the fracking industry run out of options and file for bankruptcy, investors are beginning to ask questions about why all the money is gone.

"This is an industry that has always been filled with promoters and stock scams and swindlers and people have made billions when investors have lost their shirts."

In a bonus episode of #Boomtown , we speak to @bethanymac12 about the fracking industry. https://t.co/sSmXUM3ANu

-- Texas Monthly (@TexasMonthly) February 6, 2020

The Blank Check Companies

Much like with the housing crisis that caused the financial crisis of 2008, the fracking boom has led to Wall Street bankers finding innovative ways to finance a money-losing endeavor. Some companies are now even selling bonds based on future well performance , a concept similar to the mortgage-backed securities that led to the 2008 housing crisis.

Another Wall Street invention is what is called a "special purpose acquisition company" ( SPAC ), or, as they are also known, blank check companies. The way these investments work is a big bank or private equity firm backs a management team to raise money for the SPAC with the agreement that the leaders of the SPAC will then at some point make a "special purpose acquisition" -- which means they will find an existing company and buy it.

They are called blank check companies because the management is given a blank check to buy whatever they choose. In the 1980s, the Wall Street Journal ( WSJ ) noted that "blank-check companies were often associated with penny-stock frauds." In a 2017 article on the oil industry, the WSJ reported that " SPAC s were a hallmark of the frothy days before the financial crisis [of 2008]."

Understandably, SPAC s were often seen as a risky investment, but much like with the housing crisis, the biggest names on Wall Street are getting involved and giving the concept legitimacy, with Goldman Sachs starting to back SPAC s in 2016. And new fracking companies have come about as a result.

Ben Dell, a managing partner at investment firm Kimmeridge Energy, explained one of the risks of SPAC investments to the Wall Street Journal. " SPAC management teams have an incentive to spend the money they have raised no matter what, so they can collect fees and pay themselves a salary and stock options at the company they purchase," Dell said.

" SPAC s are the most egregious example in the industry of executive misalignment with investors," Dell told the WSJ .

As I have previously reported , one of the problems with the fracking industry is that CEO s are paid very well even when the companies lose money. According to Dell, SPAC s take this problem to a new "egregious" level.

Alta Mesa: A Star Is Born

To successfully raise money for a blank check company, having some star power in the management helps. As the Wall Street Journal has noted, investments in SPAC s " are largely bets on their executives ."

Jim Hackett would seem to be the ideal candidate to lead a SPAC in the fracking industry. Hackett has an impressive resume: the former CEO of fracking company Anadarko, former chairman of the Federal Reserve Bank of Dallas , an executive committee member of the industry lobbying group American Petroleum Institute , and partner at the major private equity firm Riverstone Holdings.

In 2013 Hackett retired from Anadarko to attend Harvard Divinity School to get a degree in theology. However, he was still a partner at Riverstone and in 2017 was lured back to the fracking business to run a SPAC backed by Riverstone.

The SPAC raised a billion dollars while being advised by the biggest names in the business, including Goldman Sachs and CitiGroup. The initial blank check company was called Silver Run Acquisition Corp. II .

Hackett used the money to buy two companies in Oklahoma -- an oil producer and a pipeline -- and the new combined company Alta Mesa was valued at $3.8 billion.

The Future Was Bright for Alta Mesa

Hackett and Alta Mesa had big plans for making money fracking wells in Oklahoma, which included forecasts for big increases in oil and gas production from the newly acquired assets with very low break-even numbers.

When the Wall Street Journal reported the creation of Alta Mesa, it noted , "Alta Mesa's core acreage in Northeast Kingfisher County has among the lowest breakevens in the U.S. at around $25 per barrel, the company said." Because oil was well over that price at the time, the future looked good, according to Hackett and Alta Mesa. Forbes reported that Hackett said Alta Mesa's holdings were "oil that will be economic even at $40 WTI [West Texas Intermediate]" and oil has been well over that mark since Hackett made that statement in 2017.

Like break-even numbers, another area where misleading investors in the oil industry might be particularly easy is making overly optimistic forecasts about how much oil will be produced by future wells. The Wall Street Journal has documented this as a significant problem for the U.S. shale industry.

Description of Alta Mesa assets in investor proxy statement. Credit: Screen capture from proxy statement.

In early 2018 when touting the potential of the proposed new company Alta Mesa, Hackett said that "its average well would produce nearly 250,000 barrels of oil over its life." A year later, Alta Mesa said it expected those wells would produce less than half that, only 120,000 barrels of oil over the life of the well.

In May last year, Alta Mesa was under investigation by the Securities and Exchange Commissions ( SEC ) "for possible issues in its financial reporting."

Later in 2019, Alta Mesa filed for bankruptcy after writing down its assets by $3.1 billion. The billion-dollar blank check had been spent, and it took less than two years to lose it all.

SEC Investigation and Multiple Investor Lawsuits

Alta Mesa's assets were sold off earlier this year. The SEC declined to comment on the status of the investigation.

In May 2019, the Houston Chronicle reported , "Alta Mesa also is facing a series of lawsuits. Some shareholders are suing claiming they were defrauded and lied to about the value of the company and its assets when the company was formed."

One lawsuit filed by the Plumbers and Pipefitters National Pension Fund claims that the proxy statement for Alta Mesa contained materially false and misleading information. That filing lays out a lot of facts to support that claim.

Statement for complaint for violation of the Securities Exchange Act of 1934. Credit: Screen capture of court documents

Another lawsuit alleges that Alta Mesa didn't pay the proper amount of royalties to landowners, with state investigations into this issue.

Yet another lawsuit has been filed against Riverstone for " misleading statements ."

Investors are saying they were misled by Hackett and Riverstone. The allegations are based on the claims that were made about how much oil the company could produce. In hindsight, those claims appeared wildly inaccurate and misleading. But is that fraud? Or just taking advantage of a loophole?

In January, the Houston Chronicle summed up the situation as it described Alta Mesa's downfall : "It was a dramatic fall from grace after significantly overestimating its potential in Oklahoma's STACK shale play "

While Alta Mesa is a spectacular example of how fast the fracking business can make large sums of money disappear after "significantly overestimating its potential," it also likely marks the beginning of investor lawsuits against many other failing fracking companies with similar histories.

Learning From Enron

When Jim Hackett decided to go to Harvard Divinity School, several favorable profiles about his choice were written, including one on the Harvard website. That article noted that one of the reasons Hackett decided to go to school was because of "the collapse of Enron, a disaster that he attributed to 'a failure in leadership' among people he knew well."

The speed with which Hackett and Alta Mesa went bankrupt is remarkable, indicating a likely failure in leadership.

However, Hackett seems to have learned something from former Enron executive Andrew Fastow: that there is work for former executives like them to teach the energy industry about ethics and morality.

Hackett is now a lecturer at the University of Texas at Austin Center for Leadership and Ethics .

Fraud? Or Just a Laughing Matter?
Good reporting is hard work but sometimes involves a bit of luck. Like when a Wall Street Journal reporter , in a room full of people hired to make forecasts of fracked oil and gas production, learned about the existence of much more accurate methods for predicting that oil production. And also learned that with accuracy comes much lower estimates of shale oil reserves.

The WSJ article that followed quoted Texas A&M professor and expert on calculating oil and gas reserves John Lee. "There are a number of practices that are almost inevitably going to lead to overestimates," said Lee. Those are the practices used by the industry, with Alta Mesa serving as just one example.

Overestimates are why Alta Mesa received funding but now no longer exists.

The Wall Street Journal reported that during a presentation given by Lee, an audience member "stood up and challenged the engineers in attendance," asking why the forecasters weren't using accurate models like the ones that were available -- as Lee had described.

Another audience member explained the reason.

" Because we own stock," replied another engineer, "sparking laughter," according to the Wall Street Journal.

Is it misleading to laugh at your company's investors if you know the estimates you are giving them are inflated, but because you own the stock that benefits from those estimates, you do it anyway? Is that fraud? Perhaps that depends on if you get you get ethics lessons from Andrew Fastow and Jim Hackett.

Will the biggest innovation of the fracking revolution be making financial fraud a laughing matter?

A lot of people on EFT like to talk about how shale is fraudulent. That's simply not true:

You can't commit fraud when the rules are so lax you can just make shit up and it's still allowed.

-- Alpine High Fire Sale (@losingyourmoney) February 19, 2020


PlutoniumKun , March 6, 2020 at 6:43 am

While I've little doubt there is a lot of fraud, so much of the stupidity around fracking comes down to the old saying that its hard to make a man undrestand something when his job is to not understand it.

The financing of the oil and gas industry is almost entirely dependent on projections – projections of flow per well, and projections of future prices. All you need to do is make a few optimistic projections of one or both, and you've suddenly turned a dud into a highly valuable asset. Anyone can look at the pricing and question it, but with oil/gas, that is much harder with 'novel' types of well as there are few if any precedents. So if someone says 'the well is producing X per day, we can continue this flow for 3 years and when thats finished, we can drill down another 200 metres and replicate the same flow', there is nobody to contradict it. The drilling guys aren't going to argue, they want to keep their jobs. The geologist isn't going to argue, he has his mortgage to pay. The senior manager won't argue, he wants a promotion. The drilling company owners won't argue, they want to cash out. And the Wall Street financier won't argue, because he can pass on the risk to the equivelent of the last booms 'German bankers'.

So when someone like Arthur Berman – a geologist who has continuously being questioning the underlying geological assumptions – raises concerns – he's listened to politely, even invited to some conferences, but is otherwise ignored. Because its not in anyones interest to listen. There is literally nobody who's job it is to shout 'stop'. So much for self regulating markets.

While there may well be very severe economic consequences if and when this blows up in everyones face (and I suspect that Covid-19 will be the catalyst for this, oil demand is collapsing day by day), the big loser is the planet we depend on for our survival.

jackiebass , March 6, 2020 at 7:15 am

I live in NY on the PA border. Fracking is still happening south in PA but is only a fraction of what it once was. If you drive into PA you will see lots full of fracking materials that have sat there for a long time. At first for about two years it was a boom. The activity from fracking was amazing. Then as fast as it started it slowed down to a crawl. There are a few reasons in my opinion. The so called sweet sports were quickly fracked leaving less attractive sights. It was concealed that a fracked well produced most of it's gas in the first two years. After that the production from a well dropped off drastically. Locals soon lost their enthusiasm for fracking.There is still some fracking but it is hardly noticeable. Local people thought this would be great but attitudes soon soured. A few made big bucks at the expense of the rest. The fracking was in former coal country. The difference is coal lasted a lot longer. Now the majority of people in the area oppose fracking. I'm thankful that NY state banned fracking because of the negatives associated with fracking. I own 50 acres near the PA border. Before fracking was banned I was constantly hounded by leasing companies. I refuse to lease because to me my land was more important than a few bucks. I hope in my life time NY doesn't reverse the fracking ban. On another note there are wind farms where I live. I would leas to a wind company because there are fewer negatives and it's less intrusive.

jefemt , March 6, 2020 at 9:31 am

The good news is that if the companies were chasing you, you own the minerals. You can donate them to a conservation land trust and assure that no mineral extraction takes place, and get a tax benefit for the foregone production.

Win Win!

Ignacio , March 6, 2020 at 7:27 am

So, one first profits from fraud to later profit by lecturing everybody about ethics?
A-ma-zing!

Kevin C. Smith , March 6, 2020 at 10:02 am

BIG red flag for me when someone like Jim Hackett decides to go to Harvard Divinity School

Shiloh1 , March 6, 2020 at 10:22 am

Daniel Plainview was baptiized, but that was so he could drink Eli's milkshake later and club him to death with a bowling pin.

Colonel Smithers , March 6, 2020 at 11:09 am

Thank you, Kevin.

That sounds like my former CEO and chairman, Stephen Green, becoming an Anglican clergyman.

Ignacio , March 6, 2020 at 7:49 am

It can be argued that the money invested in many fracking companies with such inflated pay-back periods, ROIs or breakeven estimates, apart from fraud, could be considered as a private subsidy, just like Uber investors subsidize Uber taxi services. If we can blame it to low interest rates resulting in such subsidies, for fracking oil, unicorns, education, housing etc. to my knowledge this has only been argued in very few sites like here at NC or Wolf Street but merits a close examination. If pension and mutual funds are pouring a lot of money in such business with low to negative returns what consequences are to be expected in the future?

Trent , March 6, 2020 at 8:18 am

Eight to Ten years ago you would have seen giant trucks moving water and dirt from fracking sites when you got off the turnpike around Donegal PA. Since about 2015 or 2016 i'd say that completely died. Pittsburgh actually had one year of population gain due to the fracking boom but thats done. Yves mentioned investors and low interest rates chasing bad investments and fraud. I'd say the same thing is going on in healthcare based on my exp. of it and the amount of money floating around. We need higher interest rates to nip this stuff in the bud and re-balance the economy.

a different chris , March 6, 2020 at 12:11 pm

>We need higher interest rates

Yup. In so many ways.

tegnost , March 6, 2020 at 8:25 am

This pretty much says it all regarding the health of our eCONomy, but hey, after it all falls apart we should have plenty of reformed criminals to teach ethics classes

"The Wall Street Journal reported that during a presentation given by Lee, an audience member "stood up and challenged the engineers in attendance," asking why the forecasters weren't using accurate models like the ones that were available -- as Lee had described.

Another audience member explained the reason.

"Because we own stock," replied another engineer, "sparking laughter," according to the Wall Street Journal."

fresno dan , March 6, 2020 at 8:39 am

In a 2016 interview with Fraud Magazine,
==============================================
I have to say, I was shocked, SHOCKED to find that there is a magazine actually, only devoted to fraud – that is published bi-monthly.
AND than I was shocked to find out that the magaine actually, only devoted to fraud is ONLY published bi-monthly

Zamfir , March 6, 2020 at 2:19 pm

That's what they say. After you take subscription, you'll find they publish monthly.

The Rev Kev , March 6, 2020 at 9:39 am

Is the U.S. Fracking Boom Based on Fraud? Is the Pope Catholic? There are going to have to be major structural changes in the world's economy in the next few years and with the demand for oil dropping, prices have gotten cheaper which is turning fracking into a non-profit industry. In any case, how are you suppose to frack with sick crews? This is one industry that needs to go away before it causes any more damage. You'd find more honesty in a boiler room brokerage firm than in this industry.

xkeyscored , March 6, 2020 at 12:33 pm

I did wonder why 'Fracking Boom' was in the title.

Carolinian , March 6, 2020 at 10:11 am

There's a recent documentary called The Price of Everything that is about the enormous sums being paid for every latest fad in modern art. The show says that all the great masters, old and new, have been locked up by museums or the super rich and so a recent flood of new investors are looking for any excuse to spend lots of money on paintings. Apparently there is so much money sloshing around at the top of our unequal economy that that these plutocrats don't even care if they lose their shirts on bad investments. The main thing is to keep it out of the hands of the poor.

Clearly we as a society are suffering from affluenza, at least among the elites who should all be virus quarantined and then maybe we will forget to check back.The show tries to pretend that this money driven art world is a cool thing. It had this viewer thinking of guillotines.

xkeyscored , March 6, 2020 at 12:37 pm

Unfortunately, those most negatively affected by affluenza are those not infected with it.

JBird4049 , March 6, 2020 at 6:11 pm

Yes, like all the people who cannot see the art. It's mostly buried in storage. What is the point of having over two thousand years of art from multiple civilizations, if most of it is hidden away and often only known from catalog descriptions or cramped tiny pictures.

TimH , March 6, 2020 at 10:51 am

If Enron was fraud, how come Uber isn't considered fraud?

a different chris , March 6, 2020 at 12:12 pm

Because people can still make money off it.

No, not *you*. Not *us*. But people that "matter".

lyman alpha blob , March 6, 2020 at 1:46 pm

You must mean the insiders who suckered the rubes into taking shares off their hands at the IPO. IIRC the IPO price was over $70/share. Right now it's just under $32 with no signs of every being a profitable enterprise.

Grifters, charlatans and mountebanks everywhere you look.

franklin kirk , March 6, 2020 at 11:03 am

Charging mineral resource rent, which everyone has an equal claim to, would help to reduce the tendency of financial shenanigans. The profit motive is crack to rent seekers.

Colonel Smithers , March 6, 2020 at 11:06 am

Thank you, Yves.

Speaking of Enron, it is perhaps appropriate that my employer's head of non core assets, toxic waste for fire sale, came from Enron. Standard Chartered has some, too.

Polar Donkey , March 6, 2020 at 11:32 am

It seems like the Russians today decided to put the final nail in U.S. fracking industry and turn the screws on Saudi Arabia.

inode_buddha , March 6, 2020 at 2:22 pm

Is the US a fraud?
.
Fixed it for you.

rd , March 6, 2020 at 5:31 pm

I think the big issue goes back to the investors and bond rating agencies, similar to the subprime mortgage crisis. If bondholders aren't willing to do the homework, then they don't get paid for the risk that they are undertaking. with the multiple prediction tools for well production, you can make up an optimistic and pessimistic case. If the bond yield doesn't cover that risk to your satisfaction, then you don't buy the bond or you demand a higher interest yield and lower bond price.

Instead, it seems like the industry is raising money from people who don't want to think more than a few months ahead on a multi-year investment. The challenges faced by the fracking industry have been well publicized for several years now. If an investor doesn't understand those challenges now and isn't looking at specific methods of calculating production yield etc., then they have only themselves to blame if their investment loses money.

This is a very different issue than if somebody flat out lies about whether or not wells exist etc.

A single well can make financial sense even if there will never be a net profit from it. Fracking is pretty similar to the Hollywood film industry where nobody ever has any net profits despite living high on the hog. "Don't ever settle for net profits. It's called 'creative accounting'." – Lynda Carter: https://en.wikipedia.org/wiki/Hollywood_accounting

elkern , March 6, 2020 at 5:52 pm

I dunno. There may be a sucker born every minute, but I can't picture enough of them getting born with a million (or billion) Dollars to blow on rackets like this to keep it going this long.

Sad to see that the Plumbers' Union Pension Fund was a victim; I hope that's not a pattern, but it would make sense. If it's a pattern, then it's no wonder the Fed tried so hard to postpone the next Crash until after the elections. How much junk paper has Wall Street sold to other Pension Funds? States & Municipalities are already squeezed by "unfunded liabilities"; how much repackaged funky Fracking paper are held by public (governmental) agencies? Damn, this is gonna be a mess.

I'd advise investing in popcorn, except that my 401k will probably evaporate soon, so maybe it's pitchforks.

JBird4049 , March 6, 2020 at 6:01 pm

CFO Fastow of Enron. How nice to see him land on his feet. The company made listening to the rolling blackout reports for California while driving to work a requirement.

[Feb 16, 2020] Africa's largest oil nation could see production drop 35%

Feb 16, 2020 | www.rt.com

Africa's largest oil producer could see oil production fall by 35 percent as low oil prices and regulatory uncertainty threaten to prompt oil majors to postpone final investment decisions. OPEC member Nigeria is the largest oil producer in Africa and it pumped 1.776 million barrels of oil per day (bpd) in January 2020, according to OPEC's secondary sources in its monthly report published this week. Adding condensate production, Nigeria's total oil output exceeds 2 million bpd.

However, three deepwater projects offshore Nigeria, operated by oil majors Exxon, Shell, and Total, could see their start-up dates delayed by two to four years to the late 2020s, according to the research WoodMac shared with Reuters ahead of publishing it on Friday.

Also on rt.com Russia to bring back to life Nigeria's major steel plant project, abandoned for decades

The regulatory changes in Nigeria's oil industry and the still pending final approval of a petroleum bill - after two decades of delays and wrangling - act as deterrents to the oil majors' investment decisions, according to Wood Mackenzie.

Moreover, the three deepwater projects - which could add a combined 300,000 bpd to Nigeria's production - are not profitable at current oil prices with Brent Crude below $60 a barrel, the consultancy noted.

Just this week, Nigeria assured foreign oil investors that the country is open to business and can guarantee high returns on investment, the country's President Muhammadu Buhari told an energy conference on Monday.

Nigeria is set to finally pass a new bill regulating the petroleum industry by the middle of this year, after nearly two decades of delays, the country's Minister of Petroleum Timipre Sylva said at the same event.

Also on rt.com Africa to become 'land of opportunity' if US & China strike trade deal – Bank of America

Mele Kyari, Group Managing Director at the Nigerian National Petroleum Corporation (NNPC), said at the conference that "We are, more than ever before, committed to working with stakeholders to increase our crude oil production from 2.3 million bbl per day to 3 million bbl per day."

The recent amendment to the Deep Offshore Act will improve financial stability and investor confidence, NNPC's head said.

This article was originally published on Oilprice.com

[Feb 09, 2020] US troops have stolen tens of millions in Iraq and Afghanistan

Many of these crimes grew out of shortcomings in the military's management of the deployments that experts say are still present: a heavy dependence on cash transactions, a hasty award process for high-value contracts, loose and harried oversight within the ranks, and a regional culture of corruption that proved seductive to the Americans troops transplanted there.
Notable quotes:
"... "this thing going on" ..."
"... a regional culture of corruption that proved seductive to the Americans troops transplanted there. ..."
May 09, 2015 | slate.com

The Fraud of War: U.S. troops in Iraq and Afghanistan have stolen tens of millions through bribery, theft, and rigged contracts.

U.S. Army Specialist Stephanie Charboneau sat at the center of a complex trucking network in Forward Operating Base Fenty near the Afghanistan-Pakistan border that distributed daily tens of thousands of gallons of what troops called "liquid gold": the refined petroleum that fueled the international coalition's vehicles, planes, and generators.

A prominent sign in the base read: "The Army Won't Go If The Fuel Don't Flow." But Charboneau, 31, a mother of two from Washington state, felt alienated after a supervisor's harsh rebuke. Her work was a dreary routine of recording fuel deliveries in a computer and escorting trucks past a gate. But it was soon to take a dark turn into high-value crime.

She began an affair with a civilian, Jonathan Hightower, who worked for a Pentagon contractor that distributed fuel from Fenty, and one day in March 2010 he told her about "this thing going on" at other U.S. military bases around Afghanistan, she recalled in a recent telephone interview.

Troops were selling the U.S. military's fuel to Afghan locals on the side, and pocketing the proceeds. When Hightower suggested they start doing the same, Charboneau said, she agreed.

In so doing, Charboneau contributed to thefts by U.S. military personnel of at least $15 million worth of fuel since the start of the U.S. war in Afghanistan. And eventually she became one of at least 115 enlisted personnel and military officers convicted since 2005 of committing theft, bribery, and contract-rigging crimes valued at $52 million during their deployments in Afghanistan and Iraq, according to a comprehensive tally of court records by the Center for Public Integrity.

Many of these crimes grew out of shortcomings in the military's management of the deployments that experts say are still present: a heavy dependence on cash transactions, a hasty award process for high-value contracts, loose and harried oversight within the ranks, and a regional culture of corruption that proved seductive to the Americans troops transplanted there.

Charboneau, whose Facebook posts reveal a bright-eyed woman with a shoulder tattoo and a huge grin, snuggling with pets and celebrating the 2015 New Year with her children in Seattle Seahawks jerseys, now sits in Carswell federal prison in Fort Worth, Texas, serving a seven-year sentence for her crime.

[Feb 09, 2020] Trump demand for 50% of Iraq oil revenue sound exactly like a criminal mob boss

Highly recommended!
Jan 21, 2020 | www.unz.com

Tucker , says: Show Comment January 21, 2020 at 12:27 pm GMT

I've heard and read about a claim that Trump actually called PM Abdul Mahdi and demanded that Iraq hand over 50 percent of their proceeds from selling their oil to the USA, and then threatened Mahdi that he would unleash false flag attacks against the Iraqi government and its people if he did not submit to this act of Mafia-like criminal extortion. Mahdi told Trump to kiss his buttocks and that he wasn't going to turn over half of the profits from oil sales.

This makes Trump sound exactly like a criminal mob boss, especially in light of the fact that the USA is now the world's #1 exporter of oil – a fact that the arrogant Orange Man has even boasted about in recent months. Can anyone confirm that this claim is accurate? If so, then the more I learn about Trump the more sleazy and gangster like he becomes.

I mean, think about it. Bush and Cheney and mostly jewish neocons LIED us into Iraq based on bald faced lies, fabricated evidence, and exaggerated threats that they KNEW did not exist. We destroyed that country, captured and killed it's leader – who used to be a big buddy of the USA when we had a use for him – and Bush's crime gang killed close to 2 million innocent Iraqis and wrecked their economy and destroyed their infrastructure. And, now, after all that death, destruction and carnage – which Trump claimed in 2016 he did not approve of – but, now that Trump is sitting on the throne in the Oval office – he has the audacity and the gall to demand that Iraq owes the USA 50 percent of their oil profits? And, that he won't honor and respect their demand to pull our troops out of their sovereign nation unless they PAY US back for the gigantic waste of tax payers money that was spent building permanent bases inside their country?

Not one Iraqi politician voted for the appropriations bill that financed the construction of those military bases; that was our mistake, the mistake of our US congress whichever POTUS signed off on it.

melpol , says: Show Comment January 21, 2020 at 1:41 pm GMT
...Trump learned the power of the purse on the streets of NYC, he survived by playing ball with the Jewish and Italian Mafia. Now he has become the ultimate Godfather, and the world must listen to his commands. Watch and listen as the powerful and mighty crumble under US Hegemony.
World War Jew , says: Show Comment January 21, 2020 at 1:42 pm GMT
Right TG, traditionally, as you said up there first, and legally too, under the supreme law of the land. Economic sanctions are subject to the same UNSC supervision as forcible coercion.

UN Charter Article 41: "The Security Council may decide what measures not involving the use of armed force are to be employed to give effect to its decisions, and it may call upon the Members of the United Nations to apply such measures. These may include complete or partial interruption of economic relations and of rail, sea, air, postal, telegraphic, radio, and other means of communication, and the severance of diplomatic relations."

https://www.un.org/en/charter-united-nations/index.html

US "sanctions" require UNSC authorization. Unilateral sanctions are nothing but illegal coercive intervention, as the non-intervention principle is customary international law, which is US federal common law.

The G-192, that is, the entire world, has affirmed this law. That's why the US is trying to defund UNCTAD as redundant with the WTO (UNCTAD is the G-192's primary forum.) In any case, now that the SCO is in a position to enforce this law at gunpoint with its overwhelmingly superior missile technology, the US is going to get stomped and tased until it complies and stops resisting.

Charlie , says: Show Comment January 21, 2020 at 7:53 pm GMT
@Tucker This idea that the US is any sort of a net petroleum exporter is just another lie.

https://www.eia.gov/tools/faqs/faq.php?id=268&t=6

In 2018 total US petroleum production was under 18 million barrels per day, total consumption north of 20 mmb/d. What does it matter if the US exports a bunch of super light fracked product the US itself can't refine if it turns around and imports it all back in again and then some.

The myths we tell ourselves, like a roaring economy that nevertheless generates a $1 trillion annual deficit, will someday come back to bite us. Denying reality is not a winning game plan for the long run.

Christophe GJ , says: Show Comment January 21, 2020 at 8:00 pm GMT
I long tought that US foreign policies were mainly zionist agenda – driven, but the Venezuelan affair and the statements of Trump himself about the syrian oil (ta be "kept" (stolen)) make you think twice.

Oil seems to be at least very important even if it's not the main cause of middle east problems

So maybe it's the cause of illegal and cruel sanctions against Iran : Get rid of competitor to sell shale oil everywhere ?( think also of Norstream 2 here)

Watch out US of A. in the end there is something sometimes referred to as the oil's curse . some poor black Nigerians call oil "the shit of the devil", because it's such a problem – related asset Have you heard of it ? You get your revenues from oil easily, so you don't have to make effort by yourself. And in the end you don't keep pace with China on 5G ? Education fails ? Hmm
Becommig a primary sector extraction nation sad destiny indeed, like africans growing cafe, bananas and cacao for others. Not to mention environmental problems
What has happened to the superb Nation that send the first man on the moon and invented modern computers ?
Disapointment
Money for space or money for war following the Zio. Choose Uncle Sam !
Difficult to have both

OverCommenter , says: Show Comment January 21, 2020 at 8:24 pm GMT
Everyone seems to forget how we avoided war with Syria all those years ago It was when John Kerry of all people gaffed, and said "if Assad gives up all his chemical weapons." That was in response to a reporter who asked "is there anything that can stop the war?" A intrepid Russian ambassador chimed in loud enough for the press core to hear his "OK" and history was averted. Thinking restricting the power of the President will stop brown children from dying at the hands of insane US foreign policy is a cope. "Bi-partisanship" voted to keep troops in Syria, that was only a few months ago, have you already forgotten? Dubya started the drone program, and the magical African everyone fawns over, literally doubled the remote controlled death. We are way past pretending any elected official from either side is actually against more ME war, or even that one side is worse than the other.

The problem with the supporters Trump has left is they so desperately want to believe in something bigger than themselves. They have been fed propaganda for their whole lives, and as a result can only see the world in either "this is good" or "this is bad." The problem with the opposition is that they are insane. and will say or do anything regardless of the truth. Trump could be impeached for assassinating Sulimani, yet they keep proceeding with fake and retarded nonsense. Just like keeping troops in Syria, even the most insane rabid leftoids are just fine with US imperialism, so long as it's promoting Starbucks, Marvel and homosex, just like we see with support for HK. That is foreign meddling no matter how you try to justify it, and it's not even any different messaging than the hoax "bring democracyhumanrightsfreedom TM to the poor Arabs" justification that was used in Iraq. They don't even have to come up with a new play to run, it's really quite incredible.

Just passing through , says: Show Comment January 21, 2020 at 8:44 pm GMT
@OverCommenter A lot of right-wingers also see military action in the Middle East as a way for America to flex its muscles and bomb some Arabs. It also serves to justify the insane defence budget that could be used to build a wall and increase funding to ICE.

US politics has become incredibly bi-partisan, criticising Trump will get you branded a 'Leftist' in many circles. This extreme bipartisanship started with the Obama birth certificate nonsense which was being peddled by Jews like Orly Taitz, Philip J. Berg, Robert L. Shulz, Larry Klayman and Breitbart news – most likely because Obama was pursuing the JCPOA and not going hard enough on Iran – and continued with the Trump Russian agent angle.

Now many Americans cannot really think critically, they stick to their side like a fan sticks to their sports team.

Weston Waroda , says: Show Comment January 21, 2020 at 9:11 pm GMT
The first person I ever heard say sanctions are acts of war was Ron Paul. The repulsive Madeleine Albright infamously said the deaths of 500,000 Iranian children due to US sanctions was worth it. She ought to be tried as a war criminal. Ron Paul ought to be Secretary of State.

[Feb 09, 2020] OPEC has almost 80% of World oil reserves

Notable quotes:
"... that every nation produces what oil they can produce. Production must have some relation to reserves. ..."
"... The normal R/P ratio is around 20. That doesn't mean a nation with an R/P ratio of 20 will run out of oil in 20 years. Because as their production declines, their R/P ratio will still hold at about 20 because they are producing less oil therefore their reserves will go further. So an R/P ratio of about 20 is the norm for normal size conventional fields. ..."
"... For giant and supergiant fields the R/P ratio would be greater and for smaller fields, as well as shale fields, the R/P ratio would be smaller. ..."
"... Using OPEC's reserves data for both OPEC and Non-OPEC, OPEC has an R/P of 109 while Non-OPEC has an R/P ratio of about 12. That OPEC number is absurd beyond belief. ..."
"... If we exclude the heavy oil then OPEC's share is close to the 70% I suggested. How does this square its share of the production numbers for the world. This was my original question. I would like to read what the thoughts of other posters are on this as well. ..."
Dec 21, 2019 | peakoilbarrel.com

What is the explanation that Non-OPEC produces more than OPEC, but OPEC has 70% of world reserves?

Although this might have been the case in the early history of oil production, I would think that this should not be the case near the peak. If I recall correctly, Campbell thought that OPEC's stated reserves are actually the estimated values produced by the government for each OPEC country?


Ron Patterson 12/12/2019 at 11:08 pm

No, no, no, OPEC has almost 80% of World oil reserves: OPEC Share of World Oil Reserves, 2018

Well, 79.4% to be exact Some people really believe that unbelievable crap. Well hell, there are still people who believe the earth is flat and that the sun revolves around the earth. So why should we be surprised? Some people will believe anything.

I would like to think that most people on this list know that OPEC quoted reserves is pure bullshit.

Hey, we have a president who lies every time he tweets. And sometimes he tweets 200 times a day. And perhaps 45% of the nation believes him. The capacity of humans to believe the absurd is unbounded.

Anyway if IEA and EIA projections are made on the basis of OPEC claimed reserves, we have a serious problem.

Ron Patterson 12/13/2019 at 2:15 pm
Well, I have always stated, on this blog as well as The Oil Drum, that every nation produces what oil they can produce. Production must have some relation to reserves.

The normal R/P ratio is around 20. That doesn't mean a nation with an R/P ratio of 20 will run out of oil in 20 years. Because as their production declines, their R/P ratio will still hold at about 20 because they are producing less oil therefore their reserves will go further. So an R/P ratio of about 20 is the norm for normal size conventional fields.

For giant and supergiant fields the R/P ratio would be greater and for smaller fields, as well as shale fields, the R/P ratio would be smaller.

If a giant or supergiant field is nearing the end of its life, but infill drilling, creaming the top of the reservoir, this will throw a monkey wrench into their R/P ratio. While in its prime, the field may have had an R/P ration of 40 or even greater, its R/P ratio while being creamed will be much smaller, less than 20.

Using OPEC's reserves data for both OPEC and Non-OPEC, OPEC has an R/P of 109 while Non-OPEC has an R/P ratio of about 12. That OPEC number is absurd beyond belief.

Seppo Korpela 12/15/2019 at 5:55 pm
Ron,

According to Hubbert methodology, at the peak production the number of years to exhaust the reserve is N = 2/a in which "a" is the intrinsic growth rate

dQ/dt=a Q (1-Q/Q_0)

From Laherrere's reports for world peak, this is between 0.04 and 0.05. This means that the R/P ratio is between 40 and 50 at the peak. Thus if we say that 1/2 of the reserves are left at the peak and we take Laherre's URR = 2500, this gives R/P=1250/35=36 years. These are ball park figures, but suggest that R/P ~ 20 is low. These numbers are for the entire world and for example for North Sea at its peak Hubbert's analysis gave a = 0.12, so R/P=2/0.12=16.6, and this illustrates the fact that smaller fields are closer to your number R/P=20.

If we exclude the heavy oil then OPEC's share is close to the 70% I suggested. How does this square its share of the production numbers for the world. This was my original question. I would like to read what the thoughts of other posters are on this as well.

[Feb 09, 2020] The Oil War by Jean-Pierre Séréni

Notable quotes:
"... The Iraq war was about oil. Recently declassified US government documents confirm this ( 1 ), however much US president George W Bush, vice-president Dick Cheney, defence secretary Donald Rumsfeld and their ally, the British prime minister Tony Blair, denied it at the time. ..."
Mar 06, 2013 | www.zcommunications.org

Source: Le Monde Diplomatique

The Iraq war was about oil. Recently declassified US government documents confirm this ( 1 ), however much US president George W Bush, vice-president Dick Cheney, defence secretary Donald Rumsfeld and their ally, the British prime minister Tony Blair, denied it at the time.

When Bush moved into the White House in January 2001, he faced the familiar problem of the imbalance between oil supply and demand. Supply was unable to keep up with demand, which was increasing rapidly because of the growth of emerging economies such as China and India. The only possible solution lay in the Gulf, where the giant oil-producing countries of Saudi Arabia, Iran and Iraq, and the lesser producing states of Kuwait and Abu Dhabi, commanded 60% of the world's reserves.

For financial or political reasons, production growth was slow. In Saudi Arabia, the ultra-rich ruling families of the Al-Saud, the Al-Sabah and the Zayed Al-Nayan were content with a comfortable level of income, given their small populations, and preferred to leave their oil underground. Iran and Iraq hold around 25% of the world's hydrocarbon reserves and could have filled the gap, but were subject to sanctions -- imposed solely by the US on Iran, internationally on Iraq -- that deprived them of essential oil equipment and services. Washington saw them as rogue states and was unwilling to end the sanctions.

How could the US get more oil from the Gulf without endangering its supremacy in the region? Influential US neoconservatives, led by Paul Wolfowitz, who had gone over to uninhibited imperialism after the fall of the Soviet Union, thought they had found a solution. They had never understood George Bush senior's decision not to overthrow Saddam Hussein in the first Gulf war in 1991. An open letter to President Bill Clinton, inspired by the Statement of Principles of the Project for the New American Century, a non-profit organisation founded by William Kristol and Robert Kagan, had called for a regime change in Iraq as early as 1998: Saddam must be ousted and big US oil companies must gain access to Iraq. Several signatories to the Statement of Principles became members of the new Republican administration in 2001.

In 2002, one of them, Douglas Feith, a lawyer who was undersecretary of defense to Rumsfeld, supervised the work of experts planning the future of Iraq's oil industry. His first decision was to entrust its management after the expected US victory to Kellog, Brown & Root, a subsidiary of US oil giant Halliburton, of which Cheney had been chairman and CEO. Feith's plan, formulated at the start of 2003, was to keep Iraq's oil production at its current level of 2,840 mbpd (million barrels per day), to avoid a collapse that would cause chaos in the world market.

Privatising oil

Experts were divided on the privatisation of the Iraqi oil industry. The Iraqi government had excluded foreign companies and successfully managed the sector itself since 1972. By 2003, despite wars with Iran (1980-88) and in Kuwait (1990-91) and more than 15 years of sanctions, Iraq had managed to equal the record production levels achieved in 1979-1980.

The experts had a choice -- bring back the concession regime that had operated before nationalisation in 1972, or sell shares in the Iraqi National Oil Company (INOC) on the Russian model, issuing transferrable vouchers to the Iraqi population. In Russia, this approach had very quickly led to the oil sector falling into the hands of a few super-rich oligarchs.

Bush approved the plan drawn up by the Pentagon and State Department in January 2003. The much-decorated retired lieutenant general Jay Gardner, was appointed director of the Office of Reconstruction and Humanitarian Assistance, the military administration set up to govern post-Saddam Iraq. Out of his depth, he stuck to short-term measures and avoided choosing between the options put forward by his technical advisers.

Reassuring the oil giants

The international oil companies were not idle. Lee Raymond, CEO of America's biggest oil company ExxonMobil, was an old friend of Dick Cheney. But where the politicians were daring, he was cautious. The project was a tempting opportunity to replenish the company's reserves, which had been stagnant for several years, but Raymond had doubts: would Bush really be able to assure conditions that would allow the company to operate safely in Iraq? Nobody at ExxonMobil was willing to die for oil. (Its well-paid engineers do not dream of life in a blockhouse in Iraq.) The company would also have to be sure of its legal position: what would contracts signed by a de facto authority be worth when it would be investing billions of dollars that would take years to recover?

In the UK, BP was anxious to secure its own share of the spoils. As early as 2002 the company had confided in the UK Department of Trade and Industry its fears that the US might give away too much to French, Russian and Chinese oil companies in return for their governments agreeing not to use their veto at the UN Security Council ( 2 ). In February 2003 those fears were removed: France's president Jacques Chirac vetoed a resolution put forward by the US, and the third Iraq war began without UN backing. There was no longer any question of respecting the agreements Saddam had signed with Total and other companies (which had never been put into practice because of sanctions).

To reassure the British and US oil giants, the US government appointed to the management team Gary Vogler of ExxonMobil and Philip J Carrol of Shell. They were replaced in October 2003 by Rob McKee of ConocoPhilips and Terry Adams of BP. The idea was to counter the dominance of the Pentagon, and the influential neocon approach (which faced opposition from within the administration). The neocon ideologues, still on the scene, had bizarre ideas: they wanted to build a pipeline to transport Iraq's crude oil to Israel, dismantle OPEC (Organisation of the Petroleum Exporting Countries) and even use "liberated" Iraq as a guinea pig for a new oil business model to be applied to all of the Middle East. The engineers and businessmen, whose priorities were profits and results, were more down-to-earth.

In any event, the invasion had a devastating impact on Iraq's oil production, less because of the bombing by the US air force than because of the widespread looting of government agencies, schools, universities, archives, libraries, banks, hospitals, museums and state-owned enterprises. Drilling rigs were dismantled for the copper parts they were believed to contain. The looting continued from March to May 2003. Only a third of the damage to the oil industry was caused during the invasion; the rest happened after the fighting was over, despite the presence of the RIO Task Force and the US Corps of Engineers with its 500 contractors, specially prepared and trained to protect oil installations. Saddam's supporters were prevented from blowing up the oil wells by the speed of the invasion, but the saboteurs set to work in June 2003.

Iraq's one real asset

The only buildings protected were the gigantic oil ministry, where 15,000 civil servants managed 22 subsidiaries of the Iraq National Oil Company. The State Oil Marketing Organisation and the infrastructure were abandoned. The occupiers regarded the oil under the ground as Iraq's one real asset. They were not interested in installations or personnel. The oil ministry was only saved at the last minute because it housed geological and seismic data on Iraq's 80 known deposits, estimated to contain 115bn barrels of crude oil. The rest could always be replaced with more modern US-made equipment and the knowhow of the international oil companies, made indispensible by the sabotage.

Thamir Abbas Ghadban, director-general of planning at the oil ministry, turned up at the office three days after the invasion was over, and, in the absence of a minister for oil (since Iraq had no government), was appointed second in command under Micheal Mobbs, a neocon who enjoyed the confidence of the Pentagon. Paul Bremer, the US proconsul who headed Iraq's provisional government from May 2003 to June 2004, presided over the worst 12 months in the oil sector in 70 years. Production fell by 1 mbpd -- more than $13bn of lost income.

The oil installations, watched over by 3,500 underequipped guards, suffered 140 sabotage attacks between May 2003 and September 2004, estimated to have caused $7bn of damage. "There was widespread looting," said Ghadban. "Equipment was stolen and in most cases the buildings were set on fire." The Daura refinery, near Baghdad, only received oil intermittently, because of damage to the pipeline network. "We had to let all the oil in the damaged sections of the pipeline burn before we could repair them." Yet the refinery continued to operate, no mean achievement considering that the workers were no longer being paid.

The senior management of the national oil company also suffered. Until 1952 almost all senior managers of the Iraq Petroleum Company (IPC) were foreigners, who occupied villas in gated and guarded compounds while the local workforce lived in shantytowns. In 1952 tension between Iraq and Muhammad Mossadegh's Iran led the IPC to review its relations with Baghdad, and a clause of the new treaty concerned the training of Iraqi managers. By 1972, 75% of the thousand skilled jobs were filled by Iraqis, which helped to ensure the success of the IPC's nationalisation. The new Iraq National Oil Company gained control of the oilfields and production reached unprecedented levels.

Purge of the Ba'ath

After the invasion, the US purged Ba'athist elements from INOC's management. Simply belonging to the Ba'ath, Iraq's single political party, which had been in power since 1968, was grounds for dismissal, compulsory retirement or worse. Seventeen of INOC's 24 directors were forced out, along with several hundred engineers, who had kept production high through wars and foreign sanctions. The founding fathers of INOC were ousted by the Deba'athification Commission, led by former exiles including Iraq's prime minister Nuri al-Maliki, who replaced them with his own supporters, as incompetent as they were partisan.

Rob McKee, who succeeded Philip J Carrol as oil adviser to the US proconsul, observed in autumn 2003: "The people themselves are patently unqualified and are apparently being placed in the ministry for religious, political or personal reasons... the people who nursed the industry through Saddam's years and who brought it back to life after the liberation, as well as many trained professionals, are all systematically being pushed to the sidelines" ( 3 ).

This purge opened the door to advisers, mostly from the US, who bombarded the oil ministry with notes, circulars and reports directly inspired by the practices of the international oil industry, without much concern for their applicability to Iraq.

The drafting of Iraq's new constitution and an oil law provided an opportunity to change the rules. Washington had decided in advance to do away with the centralised state, partly because of its crimes against the Kurds under Saddam and partly because centralisation favours totalitarianism. The new federal, or even confederal, regime was decentralised to the point of being de-structured. A two-thirds majority in one of the three provinces allows opposition to veto central government decisions.

Baghdad-Irbil rivalry

Only Kurdistan had the means and the motivation to do so. Where oil was concerned, power was effectively divided between Baghdad and Irbil, seat of the Kurdistan Regional Government (KRG), which imposed its own interpretation of the constitution: deposits already being exploited would remain under federal government control, but new licenses would be granted by the provincial governments. A fierce dispute arose between the two capitals, partly because the KRG granted licenses to foreign oil companies under far more favourable conditions than those offered by Baghdad.

The quarrel related to the production sharing agreements. The usual practice is for foreign companies that provide financial backing to get a share of the oil produced, which can be very significant in the first few years. This was the formula US politicians and oil companies wanted to impose. They were unable to do so.

Iraq's parliament, so often criticised in other matters, opposed this system; it was supported by public opinion, which had not forgotten the former IPC. Tariq Shafiq, founding father of the INOC, explained to the US Congress the technical reasons for the refusal ( 4 ). Iraq's oil deposits were known and mapped out. There was therefore little risk to foreign companies: there would be no prospecting costs and exploitation costs would be among the lowest in the world. From 2008 onwards, Baghdad started offering major oil companies far less attractive contracts -- $2/barrel for the bigger oilfields, and no rights to the deposits.

ExxonMobil, BP, Shell, Total, and Russian, Chinese, Angolan, Pakistani and Turkish oil companies nevertheless rushed to accept, hoping that things would turn to their advantage. Newsweek (24 May 2010) claimed Iraq had the potential to become "the next Saudi Arabia." But although production is up (over 3 mbpd in 2012), the oil companies are irritated by the conditions imposed on them: investment costs are high, profits are mediocre and the oil still underground is not counted as part of their reserves, which affects their share price.

ExxonMobil and Total disregarded the federal government edict that threatened to strip rights from oil companies that signed production-sharing agreements relating to oilfields in Kurdistan. Worse, ExxonMobil sold its services contract relating to Iraq's largest oilfield, West Qurna, where it had been due to invest $50bn and double the country's current production. Baghdad is now under pressure: if it continues to refuse the conditions requested by the foreign oil companies, it will lose out to Irbil, even if Kurdistan's deposits are only a third of the size of those in the south. Meanwhile, Turkey has done nothing to improve its relations with Iraq by offering to build a direct pipeline from Kurdistan to the Mediterranean. Without the war, would the oil companies have been able to make the Iraqis and Kurds compete? One thing is certain: the US is far from achieving its goals in the oil sector, and in this sense the war was a failure.

Alan Greenspan, who as chairman of the US Federal Reserve from 1987 to 2006 was well placed to understand the importance of oil, came up with the best summary of the conflict: "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil" ( 5 ).

[Feb 09, 2020] Myths, Lies and Oil Wars (9783981326369) F. William Engdahl Books

Feb 09, 2020 | www.amazon.com

J. Montz , October 29, 2012

Engdahl is Concise, Relevant, & Thought-provoking

"Myths, Lies, and Oil Wars" by William F. Engdahl is a must read for anyone struggling to make sense of U.S. foreign policy. Why are U.S. troops in Iraq and Afghanistan? Why did NATO take out Gaddafi? Why are we going after Iran and Syria? Is there a grand strategy? Was the "Arab Spring" uprisings really grassroots revolutions or just a second round of color revolutions?

"Control the food and you control the people. Control the oil and you control the nations" is a statement that has been attributed to Henry Kissinger. The premise of the book is summed up by the latter part of Kissinger's statement, the control of oil or more generally the control of energy.

Engdahl maintains that the geopolitical events we have been witnessing is part of the Pentagon's "Full Spectrum Dominance" plan. A cornerstone of the plan is the control of oil at the source. Much of the world's proven oilfields are in the Middle East. For the next two decades the Mideast oilfields is expected to provide Asia with most of its oil.

Engdahl begins laying out the history of conflicts over oil and provides insightful revelations into conflicts that benefited the Oil majors by reducing the world supply of oil. Case in point the Iran-Iraq war of the 1980's. The oil exports from these two nations was drastically reduced during wartime leading to higher prices.

Another example Engdahl lists is the fact that David Rockefeller lobbied the Carter Administration to allow the Shah of Iran into the U.S. for medical treatment knowing that it would cause a crisis with the Ayatollah Khomeini's Iranian government and how Rockefeller's Bank was able to benefit after the U.S. froze the assets of Iran.

Other topics covered include:

The "Peak Oil Fraud" and the pseudo-science of its creator King Hubbert.

The fact that in Russia the Abiotic theory of oil formation is accepted as the leading theory for the last fifty years resulting in Russian Geoligist finding oil in places that western dogma says it shouldn't be.

The rapid rise of China is a source of much concern in Washington. The economic rise of China must be contained and in no way can Russia and China be allowed to join forces. Many tacticians have emphasized the importance of not allowing the rise of a unified Eurasian power. A Eurasian power would be in a position to challenge the dominance of the Anglo-American Empire.

According to the info the Engdahl provides China's weakness is its lack of oil. Engdahl illustrates how the Pentagon has been encircling Russia and China and the events we are seeing is Washington's attempt to knock China out of Africa where China was making steady inroads signing economic alliances with African nations that the Anglo-Americans were exploiting.

Engdahl makes the case that the Iraq war was about control of the oil at the source.

The invasion of Afghanistan was about a controlling Caspian sea oil and gas.

Engdahl offers an explanation for NATO alliances with the former Soviet States of Ukraine and Georgia.

What really was behind the Russian invasion of Georgia? The consequences for Russia.

The establishment of joint ventures between U.S. oil companies and former state run oil enterprises in Kazakhstan, and Azerbaijan.

Why did the U.S. move Afghani Mujahideen into Chechnya and start a proxy war along a vital Russian pipeline?

Engdahl provides the information needed to connect the "dots" of seemingly unrelated conflicts to form a vivid picture of the "New World Order" being assembled in the 21st Century.

I highly recommend this book along with all of Engdahl's other works. Engdahl wrote two other books that are especially pertinent to "Myths, Lies, and Oil Wars"

The first is "A Century of War, Anglo-American Oil Politics and the New World Order" which I consider as a prequel to "Myths, Lies, and Oil Wars"

The second is "Full Spectrum Dominance, Totalitarian Democracy in the New World Order" which describes the encircling of Russia, the color revolutions, and much more.

These three books together will surely enlighten the lay person to the machinations of the U.S. Empire. Another point I should mention is, Engdahl's works are concise and thoughtful hitting on the important points while remaining entertaining and not overwhelming the reader with a thousand plus page tome.

A Century of War: : Anglo-American Oil Politics and the New World Order
Full Spectrum Dominance: Totalitarian Democracy in the New World Order

[Feb 09, 2020] The Real Reason for the Iraq War

Notable quotes:
"... Like most lefty journalists, I assumed that George Bush and Tony Blair invaded Iraq to buy up its oil fields, cheap and at gun-point, and cart off the oil. We thought we knew the neo-cons true casus belli ..."
"... But the truth in the Options for Iraqi Oil Industry was worse than "Blood for Oil". Much, much worse. The key was in the flow chart on page 15, Iraq Oil Regime Timeline & Scenario Analysis: "...A single state-owned company ...enhances a government's relationship with OPEC." ..."
Feb 09, 2020 | www.vice.com

Because it was marked "confidential" on each page, the oil industry stooge couldn't believe the US State Department had given me a complete copy of their secret plans for the oil fields of Iraq.

Actually, the State Department had done no such thing. But my line of bullshit had been so well-practiced and the set-up on my mark had so thoroughly established my fake identity, that I almost began to believe my own lies.

I closed in. I said I wanted to make sure she and I were working from the same State Department draft. Could she tell me the official name, date and number of pages? She did.

Bingo! I'd just beaten the Military-Petroleum Complex in a lying contest, so I had a right to be chuffed.

After phoning numbers from California to Kazakhstan to trick my mark, my next calls were to the State Department and Pentagon. Now that I had the specs on the scheme for Iraq's oil -- that State and Defense Department swore, in writing, did not exist -- I told them I'd appreciate their handing over a copy (no expurgations, please) or there would be a very embarrassing story on BBC Newsnight .

Within days, our chief of investigations, Ms Badpenny, delivered to my shack in the woods outside New York a 323-page, three-volume programme for Iraq's oil crafted by George Bush's State Department and petroleum insiders meeting secretly in Houston, Texas.

I cracked open the pile of paper -- and I was blown away.

Like most lefty journalists, I assumed that George Bush and Tony Blair invaded Iraq to buy up its oil fields, cheap and at gun-point, and cart off the oil. We thought we knew the neo-cons true casus belli : Blood for oil.

But the truth in the Options for Iraqi Oil Industry was worse than "Blood for Oil". Much, much worse. The key was in the flow chart on page 15, Iraq Oil Regime Timeline & Scenario Analysis: "...A single state-owned company ...enhances a government's relationship with OPEC."

[Jan 12, 2020] Luongo Fears "An Abyss Of Losses" As Iraq Becomes MidEast Battleground

Highly recommended!
Jan 12, 2020 | www.zerohedge.com

Authored by Tom Luongo via Gold, Goats, 'n Guns blog,

The future of the U.S.'s involvement in the Middle East is in Iraq. The exchange of hostilities between the U.S. and Iran occurred wholly on Iraqi soil and it has become the site on which that war will continue.

Israel continues to up the ante on Iran, following President Trump's lead by bombing Shia militias stationed near the Al Bukumai border crossing between Syria and Iraq.

The U.S. and Israel are determined this border crossing remains closed and have demonstrated just how far they are willing to go to prevent the free flow of goods and people across this border.

The regional allies of Iran are to be kept weak, divided and constantly under harassment.

Iraq is the battleground because the U.S. lost in Syria. Despite the presence of U.S. troops squatting on Syrian oil fields in Deir Ezzor province or the troops sitting in the desert protecting the Syrian border with Jordan, the Russians, Hezbollah and the Iranian Quds forces continue to reclaim territory previously lost to the Syrian government.

Now with Turkey redeploying its pet Salafist head-choppers from Idlib to Libya to fight General Haftar's forces there to legitimize its claim to eastern Mediterannean gas deposits, the restoration of Syria's territorial integrity west of the Euphrates River is nearly complete.

The defenders of Syria can soon transition into the rebuilders thereof, if allowed. And they didn't do this alone, they had a silent partner in China the entire time.

And, if I look at this situation honestly, it was China stepping out from behind the shadows into the light that is your inciting incident for this chapter in Iraq's story.

China moving in to sign a $10.1 billion deal with the Iraqi government to begin the reconstruction of its ruined oil and gas industry in exchange for oil is of vital importance.

It doubles China's investment in Iraq while denying the U.S. that money and influence.

This happened after a massive $53 billion deal between Exxon-Mobil and Petrochina was put on hold after the incident involving Iran shooting down a U.S. Global Hawk drone in June.

With the U.S balking over the Exxon/Petrochina big deal, Iraqi Prime Minster Adel Abdul Mahdi signed the new one with China in October. Mahdi brought up the circumstances surrounding that in Iraqi parliaments during the session in which it passed the resolution recommending removal of all foreign forces from Iraq.

Did Trump openly threaten Mahdi over this deal as I covered in my podcast on this? Did the U.S. gin up protests in Baghdad, amplifying unrest over growing Iranian influence in the country?

And, if not, were these threats simply implied or carried by a minion (Pompeo, Esper, a diplomat)? Because the U.S.'s history of regime change operations is well documented. Well understood color revolution tactics used successfully in places like Ukraine , where snipers were deployed to shoot protesters and police alike to foment violence between them at the opportune time were on display in Baghdad.

Mahdi openly accused Trump of threatening him, but that sounds more like Mahdi using the current impeachment script to invoke the sinister side of Trump and sell his case.

It's not that I don't think Trump capable of that kind of threat, I just don't think he's stupid enough to voice it on an open call. Donald Trump is capable of many impulsive things, openly threatening to remove an elected Prime Minister on a recorded line is not one of them.

Mahdi has been under the U.S.'s fire since he came to power in late 2018. He was the man who refused Trump during Trump's impromptu Christmas visit to Iraq in 2018 , refusing to be summoned to a clandestine meeting at the U.S. embassy rather than Trump visit him as a head of state, an equal.

He was the man who declared the Iraqi air space closed after Israeli air attacks on Popular Mobilization Force (PMF) positions in September.

And he's the person, at the same time, being asked by Trump to act as a mediator between Saudi Arabia and Iran in peace talks for Yemen.

So, the more we look at this situation the more it is clear that Abdul Madhi, the first Iraqi prime minister since the 2003 U.S. invasion push for more Iraqi sovereignty, is emerging as the pivotal figure in what led up to the attack on General Soleimani and what comes after Iran's subsequent retaliation.

It's clear that Trump doesn't want to fight a war with Iran in Iran. He wants them to acquiesce to his unreasonable demands and begin negotiating a new nuclear deal which definitively stops the possibility of Iran developing a nuclear weapon, and as P atrick Henningsen at 21st Century Wire thinks ,

Trump now wants a new deal which features a prohibition on Iran's medium range missiles , and after events this week, it's obvious why. Wednesday's missile strike by Iran demonstrates that the US can no longer operate in the region so long as Iran has the ability to extend its own deterrence envelope westwards to Syria, Israel, and southwards to the Arabian Peninsula, and that includes all US military installations located within that radius.

Iraq doesn't want to be that battlefield. And Iran sent the message with those two missile strikes that the U.S. presence in Iraq is unsustainable and that any thought of retreating to the autonomous Kurdish region around the air base at Erbil is also a non-starter.

The big question, after this attack, is whether U.S. air defenses around the Ain al Assad airbase west of Ramadi were active or not. If they were then Trump's standing down after the air strikes signals what Patrick suggests, a new Middle East in the making.

If they were not turned on then the next question is why? To allow Iran to save face after Trump screwed up murdering Soleimani?

I'm not capable of believing such Q-tard drivel at this point. It's far more likely that the spectre of Russian electronics warfare and radar evasion is lurking in the subtext of this story and the U.S. truly now finds itself after a second example of Iranian missile technology in a nascent 360 degree war in the region.

It means that Iran's threats against the cities of Haifa and Dubai were real.

In short, it means the future of the U.S. presence in Iraq now measures in months not years.

Because both China and Russia stand to gain ground with a newly-united Shi'ite Iraqi population. Mahdi is now courting Russia to sell him S-300 missile defense systems to allow him to enforce his demands about Iraqi airspace.

Moqtada al-Sadr is mobilizing his Madhi Army to oust the U.S. from Iraq. Iraq is key to the U.S. presence in the region. Without Iraq the U.S. position in Syria is unsustainable.

If the U.S. tries to retreat to Kurdish territory and push again for Masoud Barzani and his Peshmerga forces to declare independence Turkish President Recep Tayyip Erdogan will go ballistic.

And you can expect him to make good on his threat to close the Incerlik airbase, another critical logistical juncture for U.S. force projection in the region.

But it all starts with Mahdi's and Iraq's moves in the coming weeks. But, with Trump rightly backing down from escalating things further and not following through on his outlandish threats against Iran, it may be we're nearing the end of this intractable standoff.

Back in June I told you that Iran had the ability to fight asymmetrically against the U.S., not through direct military confrontation but through the after-effects of a brief, yet violent period of war in which all U.S., Israeli and Arab assets in the Middle East come under fire from all directions.

It sent this same message then that by attacking oil tankers it could make the transport of oil untenable and not insurable. We got a taste of it back then and Trump, then, backed down.

And the resultant upheaval in the financial markets creating an abyss of losses, cross-asset defaults, bank failures and government collapses.