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Peak Cheap Energy

Fighting MSM disinformation and oversimplifications about cost of shale oil and other energy related topics:
as Arthur Berman noted "Shale oil is not a revolution, it is a retirement party"

News Casino Capitalism Recommended Links Secular Stagnation Gas wars Oil glut fallacy Subprime oil: Deflation of the USA shale oil bubble
Paper oil, Minsky financial instability hypothesis and casino capitalism Slightly skeptical view of oil price forecasts Paper oil and record oil futures trading volumes MSM propagated myth about Saudis defending this market share Russia oil production Iran return to western oil markets fear mongering Oil Burden: amount on money spend on energy vs. global GDP
Energy returned on energy invested (ERoEI) Energy Geopolitics Great condensate con A note of ERoEI decline Cushing is filling up hysteria Plato Oil as Hubert Peak in condition of rising oil prices Media disinformation about Plato oil and Hubert peak
Energy disinformation agency and friends Big Fukushima Debate Oil consumption growth The fiasco of suburbia US military energy consumption Media-Military-Industrial Complex Neoconservatism
Neocolonialism as Financial Imperialism  All wars are bankers wars Predator state Bakken Reality Check Junk bond bubble Debt enslavement Neoliberalism as a New Form of Corporatism
IMF as the key institution for neoliberal debt enslavement Media disinformation about Plato oil and Hubert peak Fiat money, gold and petrodollar Energy Bookshelf Financial Quotes Financial Humor Etc
80 years ago the Nobel Prize winning chemist explained where oil DOES come into the picture:

Though it was not understood a century ago, and though as yet the applications of the knowledge to the economics of life are not generally realized, life in its physical aspect is fundamentally a struggle for energy, …

Soddy, Frederick M.A., F.R.S.. Wealth, Virtual Wealth and Debt (Kindle Locations 1089-1091). Distributed Proofreaders Canada.

The ‘backing’ for the petrodollar now includes the monetized value of Chinese and third world labor and natural resources as well as OPEC oil. But controlling the outcome of life’s “struggle for energy” is still the crumbling cornerstone of both US foreign and domestic economic policies:

  • control the world’s access to energy and it has no choice but submitting to the hegemon’s will
  • the U.S. political system is now owned lock, stock and barrel by a financial / military industrial / fossil fuels complex (am I forgetting anybody?). The powers that be are trying to preserve the existing status quo by insuring that life remains a “struggle for energy”.

The denizens of Wall Street and Washington can perhaps be forgiven for believing they were the “masters of the universe” at the conclusion of WWII. What they can NOT be forgiven is their belief – then or now – is that “the end of history” had arrived (unless they cause it).

Steven comment on Michael Klare Delusional Thinking in Washington, The Desperate Plight of a Declining Superpower


Introduction

Nemesis eventually catches hubris.

"Shale oil is not a revolution, it is a retirement party"
Arthur Berman

When oil is traded too cheaply, the victim of such trades is always the future generations. The drop in oil prices in 2014-2017 might have been a curse, not the blessing as it slowed down or stopped the adaptation processes to the "end of cheap oil". The process that was already in place with $4 per gallon ($1 per liter) gas in the USA, when sales of large SUV dropped considerably and used large SUV could be  bought for a half of its usual price.  The reality is a harsh mistress: the situation in 2018 with depletion of existing oil deposits and new discoveries is now worse than in, say, 2000.  Technology an and will prolong the agony so so far there is no viable solution to "hydrocarbon age".

As of 2018 in the USA consumer still continue to do the same things as before 2008. Such as buying large SUVs. Which fits Albert Einstein definition of insanity ("doing the same thing over and over again and expecting different results"). As one NYT commenter noted (Moscow on the Brazos):

I don't get it. We're supposed to be running out of oil, right? Or has that changed? $2 gas and we've gone past the Bell Curve of supply and use? And now we're all drunk on cheap gas. I'm happy to see new innovative efficient technology, new electric and hybrid cars but now they're selling boatloads of SUVs and pickup trucks. They are back in big style. They are better now, instead of 11 mpg they're 15 mpg.

As IEA )which is a noted chaierleader of position "do not worry, be happy" as for the end of chep oil) noted in iea.org

In a Low Oil Price Scenario, longer payback periods mean that the world misses out on almost 15% of the energy savings seen in our central scenario, foregoing around $800 billion-worth of efficiency improvements in cars, trucks, aircraft and other end-use equipment, holding back the much-needed energy transition.

At the same time, the current slump in oil prices proved to be pretty long (started in Sept 2018)  and defy all expectations. That means that any person who tried to predict commodities price in the current environment is suspect ;-).  In a "very long run" the supply/demand dynamic is at work, but market for the period less then a year prices can be pretty arbitrary and completely disconnected with the cost of producing oil and supply and remand ration. This is a side effect of financialization when the volume of "paper oil" traded is the order of magnitude larger then the volume of actual oil expected for any given period.  That is another proof that neoliberalism is an unstable system with a built-in positive feedback loop. As such neoliberalism is quite capable of dragging us through shortages, depressions, environmental disasters, and even wars on the way from one equilibrium to another. So all those general considerations that are provided below are nothing but an educated guess. As John Kenneth Galbraith aptly said: "The only function of economic forecasting is to make astrology look respectable." Readers beware...

This is a skeptical page that was created due to strong doubts about MSM coverage of the current oil prices slump. Especially the idea of oil glut (which in the USA for some strange reason coincide with rising imports of oil.

in this sense MSM cries about getting close to self-sufficency look strange. Yes some tipes of oil-like products produced by shale wells are not very desirable (condensate) and they are stored distorting the whole picture but with rising imports thee can be not "oil glut". But not for the US MSMs. This looks like a phenomenon which came directly from  Geroge Orwell's novel 1984  where it was called "doublespeak". 

The first thing to understand is that at a given stage of developing of drilling and other related technologies there is a minimal price of oil below which production can be continued only at a loss. This price point is different for different types of oil, and slightly varies between different regions but it does exist. For example, a shale/tight oil well often costs around $6-8 million, which needs to be amortized over the life of a well which in the case of shale/tight oil is approximately five-six years. To make things worse unlike conventional wells that can produce approximately at the same rate for a decade, those wells experience a steep decline after two first years. With more half of oil extracted in the first two years. The cost is much higher for non-conventional oil producers than for conventional producers and that means that at prices below, say, $70-$80 per barrel production of shale oil leaves the trail of junk bonds production as well. One is impossible without the other. 

Canadian tar sand production is even more expensive. Deep water drilling is somewhere in between conventional and non-conventional oil, pricewise.

There are different estimates, but most analysts agree that the US shale/tight oil producers need around $70-$80 per barrel to be able to pay their debts and around $60-$70 to break even. Those numbers are slightly less for deep water oil ($40-$50) and slightly higher for Canadian tar sands. The picture below illustrated difference prices to produce different types of oil ( see below) is reproduced from What Me Worry About Peak Oil  by Art Berman (December 27, 2015 ):

This means that production of light oil from tight zones need the price of $70-80 per barrel to pay the debt.  The same applies to extra heavy, deep water, and EOR projects. Offshore arctic and ultra deep water are extremely expensive and with their own special environmental risks as BP recently discovered. The implication seems to be that "non-conventional" oil projects do require prices in $80-$100 range to continue pump oil at the same rate (Red Queen's race - Wikipedia) and this implies continued drilling of new wells.

In this sense 2010-2013 were gold age for oil production worldwide, as prices were close or above $100 and billions were invested in high cost oil resources

All-in-all it looks that "Shale oil is not a revolution, it is a retirement party" as aptly observed Arthur Berman).

Now prices dropped below $33 (as of Jan 6, 2015) and at this level of prices all tight oil producers  are losing money  on each barrel of oil they produce. Debt fueled boom in the shale space will most likely never return. Most shale players managed to survive 2015 (some due to hedges; some due to junk bond dent they accumulate and still did not put into capex). But to survive in 2016 will be more difficult and they are in danger of defaulting on their bonds. Mass extinction might well be in the cards, if low prices persist for the whole year.

 when the almighty money almagamations like the Carlyle Group swoop in and buy up all the distressed assets, we just might see oil prices rebound. The vultures won’t have the motive to short the heck out of oil, like they are now.

Junk bonds has duration around five-seven years, so bonds taken in 2010 will be due soon and refinancing them now is very difficult. That means weaker non-conventional oil producers will probably be bankrupt if not in 2016, then in 2017, if prices stay low. This process already stated with something like a dozen bankruptcies in 2015. According to OilPrice.com more expected in 2016:

At the same time world demand for oil will continues to grow and will grow in 2016 probably by 1.3 Mb/d or more.  In 2015 it rose from 92.45 to 93.82 Mb/d. The only country that has additional capacities now is Iran but how quickly it can expand production in low price regime and whether it will be willing to sell additional oil at such low prices to get currency is difficult to predict. Some think that Iran will be able to add another 0.5 Mb/d in 2016 which can only compensate for the drop of US production and nothing else. Production in all other countries will be iether stable or slightly declining due to natural decline of wells with age and lack of capital investments in new drilling. Typical estimate is 1% decline or around 1MB/d of lost supply. Natural rate of decline of most conventional wells is around 6% and non-conventional around 20 (not evenly distributed; the first year production can even rise).  It it doubtful that remaining capital investments will be able to offset everything but 1% of decline. Real decline from non-OPEC members in 2016 can be more.

Actually even Saudis managed only marginally increase their exports in 2015; they just exported slightly more oil  (around  +0.3Mb/d more) at very low prices which supports the current low oil price regime, but not their economy which ended 2015 with a record deficit around $100 billions by Saudis estimates ($150 by IMF estimates). What is Saudis motivation of doing this (and depleting both their coffers and oil reserves) is a difficult question to answer but probably this is an economic war with Iran. The second important source of support of low prices is Wall Street games with futures.

The key problem here is that shale and tight oil producers were not that profitable at above $100 per barrel oil price range that existed in 2010-2013 and accumulated large amount of debt (several hundreds of billions, mostly in junk bonds) during those "good times" . The debt that now needs to be serviced so they have an albatross around their necks.

The destruction of oil supply while very gradual already started albeit slowly, as decline of wells is still compensated by hedging, new drilling and projects that have been started in the "good old days" are still coming online. This decline might well accelerate toward the middle of 2016, if prices do not recover. In any case hedges will expire somewhere in 2016 and after that it will be clear who is swimming naked.

In other words the current oil prices are IMHO not sustainable (too low) even in one-two year timeframe. When most hedges expire and the number of bankruptcies start to increase, Wall Street might be unable to press oil futures down anymore so push back in prices can be pretty violent. .

BTW Saudis lost around $100 billions this year and their foreign reserves shrunk to around $600 billions. Projected loss for 2016 is around $85 billions. So they need around one decade to deplete their foreign currency reserves.

Some suspicious consistency in the US MSM stories about oil price slump

“Where ideas are concerned, America can be counted on to do one of two things: take a good idea and run it completely into the ground, or take a bad idea and run it completely into the ground.”

—George Carlin

Oh what a tangled web we weave, When first we practice to deceive!"

Walter Scott, Marmion, Canto vi, Stanza 17

 

To make the story short current MSM behaviour is highly irresponsible and suggests that all of them are in the pockets of Wall Street or worse. After all oil is a irreplaceable commodity that will eventually run out. Low oil prices from this point of view are the last thing we need. It's like drinking party on the deck of Titanic. What should be done is creating the infrastructure for living with much less oil available. Which is possible only with high prices for this commodity. also the destruction of oil patch that now is happening should be get so much cheerleading. It is a tragedy for many people. The ability to fill gas tank for less then 2 dollars is not everything in this life. 

Economist Herbert Stein (1916-1999) wrote in 1986: "if it can’t go on forever it will stop." Despite this self-evident truth there is interesting, highly correlated bias, in coverage of oil prices slump for most of the US MSM: all predict essentially that current low oil prices will stay if nor forever, then for a very long time. And that what happened in 2015 is not anomaly, despite clear indicators that at this price most US producers sell their barrels at loss.  They salivate that this situation will continue in the first half of 2016 and well into 2017. They also completely discard negative externalities of this event.  As oil has crashed to $33 levels there is  a lot of MSM talk that the current price is really the long term historical average price, that 2005-2014 was an anomaly (bubble) and that we will stay in this range (say, $20-$40) for years to come.  Actually you can bet that at any price point MSM will claim that the cost of extraction is 20% lower, no matter what the price level is.

You can bet that at any price point MSM will claim that the cost of extraction is 20% lower, no matter what the price level is.

Yes, there are few places in the Middle East and Russia from which oil can be profitably extracted at this price range. But those countries depend on oil for revenue to balance the budget so even in those places this situation is unsustainable.  More then 80% sources of oil are unprofitable at those prices. That includes all shale/tight oil and all deep offshore anywhere in the world.

Still for some unknown to me reason in MSM low oil prices (below the cost of production) and depletion of valuable natural resource are now considered to be a universal good. While at best this is nothing more then initiated by Saudis "Hail Mary pass" to save Western civilization from secular stagnation. Externalities be damned, full speed ahead. Shale oil industry and destruction of its workforce, junk bond market troubles are just collateral damage. Does not matter one bit. Give us cheap oil brother and all will be fine.
 

For some unknown to me reason in MSM low oil prices (below the cost of production) and depletion of valuable natural resource are now considered to be a universal good. While at best this is nothing more then initiated by Saudis "Hail Mary pass" to save Western civilization from secular stagnation. Externalities be damned, full speed ahead. Shale oil industry and destruction of its workforce, junk bond market troubles are just collateral damage. Does not matter one bit. Give us cheap oil brother and all will be fine.

But at the same time never try to catch falling oil barrel ;-). Market can stay irrational longer than you can stay solvent.

Also strange and suspicious is that most MSM peruse suspiciously similar and questionable, or outright false, if we look at the facts, stories:

  1. Quicker depletion of a valuable and irreplaceable national resource due to low prices does not matter.  Existing wells deplete 5-8% per year (tight oil more that that) so you need to discover, drill and put on line at least the same amount in order to maintains the same volume of oil production. That costs money, and if money are not here nobody will drill. So natural tendency of production at low oil price (which now man below $70-$80 per barrel) is down, not up. 
     
  2. Saudis are fighting for their market share and flooding the world with oil.  This hypothesis is advanced despite the fact that their exports are stagnant and had grown in 2015 only by around 0.2-0.3 Mb/d (see Saudi Arabia oil production and forecast for 2016). Which is a miserable amount. What fight for market share: they can sell all theoil they produce.  In 2014 they exported around 7.1 Mb/d and in 2015 around 7.3 Mb/d. Plus/minus 0.1 Mb/d. So nothing essentially changed as for the level of their exports taking into account that the growth of world consumption for 2015 is over 1 Mb/d.   Their real strategy is dumping their exports at low price undercutting other producers to bring the price down.  In other words they are using what is called "predatory pricing" and to achieve that they tapped into their currency reserves to the tune of $100 billion a year. They are burning their currency reserves at the speed at which they can exhaust them from six years to decade, losing the investment grade in three.  Also most of their fields are old and semi-exhausted, so maintaining high production might even damage them, cutting short their useful life and the total amount of oil Saudis can recover from them. 

    Saudi shipments rose to 7.364 million barrels a day in October, 2015, according to the latest figures from the Joint Organizations Data Initiative (JODI).  Shipments averaged 7.11 million barrels a day in 2014, down from an 11-year high of 7.54 million barrels a day in 2013 and the lowest in three previous years. So Saudis failed even match their 2013 exports in 2015.

  3. Iran is able and willing to throw on the market another 0.5-0.7 Mb/d in 2016 further depressing prices. This hypothesis is advanced despite explicit statements from the Iran leadership that they will not give any future customer additional discounts above those that exist today.  while Iran leadership is definitely irrational, blocking the temporary freeze agreement, and willing to hurt the county future by increasing oil production as much as they can in low oil price environment (hurting their ally Russia in the process), they are not completely stupid and they do not have much money to drill anyway.  As they now have access to their previously frozen foreign reserves they definitely can wait a year or two before coming to the market with the new supply.  also increase of supply is not instant, it requires time and money, even taking into account that Iran has some underdeveloped fields that can be profitably put into production even at low prices that exist to today. This is a better strategy then coming with new supply at the point of ridiculously low prices. Although everything can happen. Middle Eastern nations are unpredictable.
     
  4. A very conservative estimate of the decline of non-OPEC production for the next year. Most assume that it will be limited to roughly 0.5 Mb/d. But the rate of natural decline of existing conventional oil wells is 3-6% and reduced capital expenses mean less new production is coming online in 2016 and 2017. Assuming 1% depletion that's around 1MB/d that should disappear in 2016. Add to this hard crash that is possible for the US shale producers and the estimate 1.5 Mb/d drop does not look outrageously high. But those consideration somehow disappeared from all considerations from MSM and they operate under assumption that supply from existing wells is indefinite and decline is a rounding error.  Only increase in supply is material and eminent (again Iran supply story get the most prominence). 
     
  5. The US MSM propagate the following bogus narrative: "there is an oil glut in the USA market in particular despite the fact that the USA increasing their import of oil. To cry about glut on oil in the country which imports each month in 2015 more and more oil is something new to me.  This is something from Orwell novel Nineteen Eighty-Four and is called doublespeak. If you are an oil producer, you don’t pump oil unless you have orders for it.  If you pump oil without orders, then you need your own storage to store it. In no way you ship it to Cushing, Oklahoma with their 80 Mb storage capacity as your customers can be in completely different part of the USA and it's you who need to pay for storage. That's the privilege used by refineries to regulate their input in case of maintenance, seasonal peaks, etc.  You don’t ship any oil without getting paid for it. So oil glut theory claim that they are producers which have oil shipped to customers and customers did not use it. Putting it in storage instead. And this bogus "theory" is propagated by MSM for more then 18 month now. It' time for MSM to stop to propagate this nonsense. 
     
  6. Cheap oil is here to stay and current situation will last to 2017 in worst case or to 2020-2040 in the best. IEA forecasts are viewed as facts, despite clear interest in lower oil prices.  In reality just cutting capital investment along with depletion of  existing fields (almost 6% for conventional wells, around 20% per year but very unevenly spread for shale/tight oil wells) guarantee diminishing supply. To compensate for 5% depletion the world now needs to find and put into production approximately 5 Mb/d of oil. In other words the world is losing approximately 1 Mb/s of supply per quarter. This loss a very difficult to stop, although it was possible for the last several years because huge capital investments in oil industry caused by high oil prices. 2010-2014 has shown that with high oil prices the decline can be stopped and reversed.  The problem is that adequate capital investments are thing in the past and now most oil companies need to adapt to starvation mode as for capital investment in the oil industry. That spells huge trouble for Norway, Russia, GB,  and other nations with mostly conventional wells.  It will be a miracle if they can maintain they level of production at prices below $40 for more then one-two years (there is some inertia here and new projects are continuing to come online for around 18 months since the start of the price drop; that means till mid, or last quarter of 2016, depending were you put the start of oil price drop). 
     
  7. MSM instantly forgot about previous concerns and the reversal of efficiency of the US car fleet. In 2015 SUVs again became the most popular category of personal car with sales of large SUVs booming. This deterioration of the US fleet efficiency happens along with slow down of sales of hybrids and, especially, electrical cars.
     
  8. Growth of demand during the current period of below $2 per gallon gas for some, unexplained reason will be slower then the explosive growth of demand in 2015. for some reason is is expected to be  limited to around 1% or 1.3-1.4 Mb/d worldwide.
     
  9. China slowed down and her oil consumption will be stagnant or down despite boom in car sales, as if the number of cars of the road is disconnected with oil use. In reality transportation is around 60% of country oil use. Right, but China oil consumption is still growing and will continue to grow in 2016. Those trends can co-exist for a while. So electrical consumption decline does not mean that the oil consumption decline is eminent.

    The same situation can exist in other countries such as the USA - slowing of the economy along with growth of oil consumption. All those new SUVs on the road need fuel to run.
     
  10. The assumption that the destruction of shale/tight oil companies with excessive debt loads in the USA  will be gradual and slow. Despite the fact that they currently produce at a loss  each barrel of oil they sell.  Also it will be orderly without major disruption of production -- just a gradual decline despite dramatically lower capital expenses. The assumption of most US MSM is that US production will stay close to current levels due to Gulf production or due to by waiving some magic wand by Obama administration.
     
  11. Junk bond problem does not exist or is of minor importance despite the fact that there are over 100 billions of shale oil book related junk bonds on the market. Similarly losses of financial sector from hedges in 2015 are non-existent as well (only Mexicans got several billions or additional revenue due to hedges).

The question is from where all those MSM deceptive and false  "talking points" originate.

The end of cheap oil hypothesis

The "end of cheap oil" hypothesis can be simplified to several postulates:

  1. Mankind demand for oil will continues to grow, although the pace of growth slows down with the increase of the price of oil as well as due to stagnation of world economy caused by high oil prices. That does not exclude temporary (often multiyear) oil price slumps or highs: instability is the nature of financial system under neoliberalism. 
  2. The supply of oil profitably extractable at any given price point below $100 (such $40, $50, $60 per barrel) will continue to shrink. Total extractable supply of oil can grow only by adding more and more expensive source of oil, sources with lower EROEI. New technology of extraction (especially horizontal drilling) can somewhat offset decline of EROEI but can't reverse it.  Simple calculation by dividing "proven world reserves" by annual consumption suggest that at prices below $100 in 2014 dollars they will be exhausted in approximately half a century (assuming $50 a barrel price point) peakoilbarrel.com, comment 12/11/2015 at 7:34 am)
    Proved oil reserves at 1700.1 billion barrels, 52.5 years of supply.

    Reference:

    http://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy/oil-review-by-energy-type/oil-reserves.html

    At 50 USD per barrel, the value is 50×1,700,100,000,000=85,005,000,000,000 usd

    Not enough, 100 USD per barrel will be better. 85 trillion dollars to spend so 1700.1 billion barrels of oil can be extracted and burned in 52.5 years. An absolute bargain. Current consumption at 32.85 billion per year, 365×90,000,000, 1700.1/32.85=51.75 years.

  3. The search for new sources of hydrocarbons by G7 countries will intensify over time and will likely generate resources wars. At least two resource wars already happened: Iraq and Libya. Wars are fought over access to and control of oil resources with high EROEI as well as other vital natural resources. With rising human population, competition for these resources might increase triggering conflicts, large and small. Industrialized nations already started to invade weaker countries to secure access to oil which is essential to the survival of modern industrial civilization (Iraq and Libya, and if we think about pipelines to Europe, Syria). 
  4. Very high price of oil (let's say above $100 per barrel)  leads to stagnation in all major industrialized countries and first of all the USA as well as eventual debt collapse of neoliberal economies and slow down or reverse of neoliberal globalization.
  5. The current "Race to burn what's left" is irrational.  Low oil prices destroy and delay investment in new supplies, slow down efficiency gains, encourage consumption and sow the seeds of the next big boom in prices.  If we assume that at each price point only a finite amount of oil can be profitably extracted from Earth (which is a planet, that is now well researched for oil), the current year and a half slump in oil prices looks extremely suspicious. It means robbing future generations, as conservation efforts are now derailed. Sales of SUVs and small trucks in the USA are up.  Trillions in equity and bond losses, hundred thousands of ruined retirement accounts and there is a severe recession knocking on the door for the US economy. The US are selling their last drops of oil at prices below production cost. In my opinion it would be wiser to save the oil that is currently  produce in strategic reserves and sell it when prices are much higher.

Please note that the US government patiently observes the current situation and does not try to influence the price by buying oil for their strategic oil reserve, although in the past it used to do such things. MSM coverage of oil also suggests strong establishment bias toward lower prices. As if this is the last "Heil Mary" pass in geostrategic game for the USA dominance.  So there are higher priorities in play here then the destiny of the US shale industry and more rapid exhaustion of national oil reserves. At the same time oil price slum is equivalent to a huge stimulus  to the USA economy, but it does have some significant side affects. If we assume $93.17-49.08=44.09 price drop for 2015 and the daily consumption of around  19.58 Mb/s that comes to 222 billions a year.

The current drop of oil prices also represent huge stimulus to EU,  China, Japan and other all other industrialized countries without or with little own oil reserves. If this were organized as a part of Russian sanctions package, this was a brilliant strategy. All industrialized countries in which own consumption far exceeds own production, are essentially isolated from negative affect of countersanctions   by the low price of oil.  In other worlds this is a huge global economic stimulus to the "masters of the universe" and at the same time stern warning to one of the last "resource nationalists" which try to pursue independence from Washington foreign policy.

The key question here: was it engineered by neoliberal strategists in Washington, DC and their masters in major Wall Street banks (in this case this was a really brilliant move)? Or is this ugly side effect of unhinged capitalism known as neoliberalism where oil companies overinvested in new projects due to greed and many new projects are coming simultaneously  online, while demand for oil grows more slowly then they expected. In any case at one point Saudi Arabia decided to dump its oil on the market and fun started. Was it the order from Washington or thier own initiave is unclear.

In recent years oil consumption was growing at slower pace dur to high oil prices. Per Michael Klare 2005 projection of oil consumption in 2015 was 105 Mb/d (millions of barrels per day); actual in 2015 was around 93 Mb/d as high price of oil stimulated investment in energy saving technologies. That includes not only small and hybrid cars (which actually did not improve much from, say, 1990 level, as the size of small car in the USA had grown considerably, but also cars and trucks working on natural gas, blending gas with alcohol (up to 10%), tax breaks for electrical cars ($7500 currently on many "pure electrical" models of small passenger cars, half of that on hybrids). Now this positive trend is partially reversed.  

But there were other signs of introduction of energy saving technologies which indirectly cut oil consumption, especially in chemical industry which will stay:     

For example the energy cost to major chemicals of running their plants is significant in the united states this about 6% of the national energy consumption. Since 1994, Dow has reduced its energy intensity by 22 percent through a structured program targeting process improvements. This has saved 1.6 quadrillion BTUs, equivalent to the energy required to generate all of the residential electricity used in California for one year. The savings have totaled $8.6 billion on an investment of $1 billion.

Note on the term "conspiracy theories"

Conspiracy theory was the term invented by CIA to whitewash their participation in JFK assassination, which got a wider use and became a common term in English language.  Here is how the term is defined in Wikipedia:

A conspiracy theory is an explanatory hypothesis that suggests that two or more persons, a group, or an organization of having caused or covered up, through secret planning and deliberate action, an event or situation which is typically taken to be illegal or harmful. Although the existence of a proven conspiracy involving United States President Richard Nixon and his aides in the Watergate scandal of the 1970s has been claimed as validation of conspiracy theories in general,[1] the term "conspiracy theory" has acquired a derogatory meaning and is often used to dismiss or ridicule beliefs in conspiracies.[2]

Such things as the current oil slump probably could never happen purely due to market forces (and notion of "free market" is another neoliberal lie; neoliberal markets are neither free nor fair). Oil is not a regular commodity. Oil is a strategic resource. So I think it is naïve to analyze it strictly in supply-demand terms.  Geopolitics plays very important role in oil prices and always was. Remember how the USSR was brought to its knees by dropping the oil prices in late 80th.

Remember Iraq war with one million of Iraqis dead. Was not this a blatant attempt to secure oil resources for the USA majors? Remember Libyan color revolution and Hillary reaction to the horrible death of poor colonel. Is not this about collision of French desire to secure oil supplies and Washington desire to get rid on a dictator who was an obstacle to neoliberal agenda?

And Syria war unleashed to achieve what ? It all about remapping Middle East by toppling "not friendly enough" to Washington regimes. It took longer then "seven countries in five years"  as Rumsfeld promised (https://www.youtube.com/watch?v=9RC1Mepk_Sw) but it looks like the plan itself is still current: 

“We’re going to take out seven countries in 5 years, starting with Iraq, and then Syria, Lebanon, Libya, Somalia, Sudan and, finishing off, Iran”

General Wesley Clark. Retired 4-star U.S. Army general,
Supreme Allied Commander of NATO during the 1999 War on Yugoslavia .

It is clear that recent "petro wars" in the Middle East were about execution of a  US strategy which was not only about globalism and the USA world dominance, but also about oil.

The oil market has always been driven by geopolitics, and it was a factor that contributed to unleashing both WWI and WWII. Or, if you want, geopolitics has been very strongly influenced by the supply and distribution of crude oil for at least a century. To talk in pure supply/demand terms about such a strategic, vital for human civilization commodity is absurd.
and the whole idea the Kingdom of  Saudi Arabia, a vassal state completely dependent in its survival on the USA unleashes a price war against the USA shale production looks very suspect. nevertheless it is propagated by major MSM like 100% true.

In other words oil was and is a major weapon of economic war. And dumping oil prices is especially potent weapon against countries with significant oil exports such as Russia, Venezuela, Iran, Iraq, etc.  You can kill several birds with one stone.

The key question here is classic cue bono ? Which country is the major beneficiary of the current oil prices crash. The answer is -- the USA (despite some troubles of shale producers which started in late 2015 when most hedges expired). So  it is plausible to suggest that the USA elite including Wall Street banks played an important role in slamming oil prices to reach some important geopolitical goal, significance of which supersede the value of destruction of the USA shale industry.  After all the US financial industry can for a short time distort price of any commodity to any desired level.  HFT is a perfect tool for that and that was explicitly mentioned on Aleynikov trial  by Goldman officials.

It might well be that the current low price is playing double role: to stimulate Western economies and simultaneously serve as the most important part of package of sanctions against Russia. Obama actually hinted that this is true. And Saudi Arabia did play similar role in the past -- crash of oil prices did  facilitated the dissolution of the USSR, which lost the major part of its export revenue).

I would like to stress it again that the idea that Saudi Arabia is engaged in price war against the USA to defend its market share is extremely questionable. By all measures KSA is a satellite state, vassal of the USA if you like. How vassal state can act in such a way without the USA blessing ?  Economic conditions are now not equal to 2008 so the current drop of oil prices can't be explained by panic.  And without using the power of US-controlled financial markets it id doubful that it is possible to accomplish such a quick and sustained drop. 

The USA has long history of using oil as a geopolitical tool. Not only to crash the USSR but also to lure Japan into WWII. Oil embargo against imperial Japan served essentially as a declaration of war and it was read by Imperial Japan leadership exactly this way  (the leadership, which actually has little or no illusions that Japan will lose, but decided not to surrender without armed struggle). There is some evidence that Perl Harbor was not defended specifically to make entrance into the war with Japan more dramatic and more acceptable to the population of the USA, as a reaction on the clear act of aggression by Japan (although air carriers were sent to sea to save them).

And population of Earth still grow, as well as the number of cars and, especially tracks on the road. Similarly the number of airplanes and ships.  Until that trend stops the "long term"  trend for oil price should be up as chances of finding large deposit of "cheap oil" are not close to zero.  Of course "In a long run we all are dead" maxim applies.

But as of 2015 the planet is pretty well explored for this vital commodity. That means that the cost of oil extraction rises with time because the cheapest to extract oil is removed first. Actually this is now true for most commodities, including metals.

To get oil now deeper wells are needed, or fracking equipment and fracking sand and liquids, or you get oil that is too heavy or oil which contains too much sulfur. That means that  special refineries need to be build. In any case more resources are need to produce the same amount of petrol and diesel for transportation and other purposes. It is natural to think that price will gradually rise due to diminishing returns on capital used for extraction.  According to Barclays Capital (cited by  Steven Kopits),  the costs of extracting oil began increasing by 10.9% per year, since 1999 from $5 to almost $25 per barrel.  Add to this transportation cost to refineries, interest on debt, etc and we are probably talking about "magic" figure of $60 per barrel.  So in 2015 any price below it is strongly suspect and probably is temporary. Although the4 rule is "never to say never" and for investors in oil ETNs (such USO, OIL, etc) Keyes saying that market can be irrational longer the you can stay solvent fully applies.  The same saying is now looming over the heads of shale companies executives. As of December 2015 bloodbath has began.

So the question is really about how long the current low oil prices (oil slump) will last. One year is definitely enough to eliminate hedges. And in December of 2015 they are mostly gone (two year hedges do exist but are a rarety)  Capital expenses are now slashed to the bones, but project that take several years to complete will still come into production and that will support the level of oil production at least for one year till Jan 2017. We also can probably see some consolidation of the oil industry. Weak players start being eliminated.

Three years are enough to eliminate most new capital investment and to finish projects which started before slump. Capital investment goes to a screeching halt. After that much depends on the speed of decline of existing wells and pace on increasing of global consumption. that actually includes growth of internal consumption in three major oil producing nations such as USA, Russia and Saudi Arabia. Of those three Saudi Arabia experiences especially quick rise in internal oil demand.

In any case since mid 2015 the price of oil on spot market dropped almost to one third of max price previously achieved. As of Aug 8, 2015 the spot price for October, 2015 delivery was around $44 per barrel. This is a dramatic drop from over $100 per barrel price peak achieved earlier. 

"Cheap oil" is the cornerstone of the current neoliberal world order; it's end means end of US dominated world

We need to understand that "cheap oil" is the cornerstone of the current neoliberal social system including the level of neoliberal globalization that is underway since late 80th. So for the USA elite a lot is in stake if price of oil consistently stays, say, over $100. The USA world domination which is so cherished by neocons and for which they are ready to fight endless wars is in stake.  Also countries that "do not deserve it in view of neoliberal elite (and are only partially controlled by the USA), such as Iran and Russia, can became fabulously rich. And they understand that "the end of cheap oil" might bring great socio-economic changes within the USA itself as neolibel fairy tale about "tricke down" prosperity will be exposed as a fraud. and American people can became rightfully angry, despite all efforts to brainwash them and to fond external target for their anger. In this sense we can view the current oil slump as a brave attempt, "The Last Hurrah" attack of the old neoliberal guard  which came to power in 1980th to postpone inevitable social changes (and first of all demise of neoliberalism and by extension the USA role as a global hegemon). the important of oil for the US as the center or global neoliberal empire was well described in 2002 article by Bill Christison (Oil and the Middle East)

April 5, 2002

Back in March CounterPunch published Christison's devastating critique of the strategies and conduct of the US war of terrorism. (See our archive by scrolling down to "Search CounterPunch.)) These new remarks, which he has made available to CounterPunch were delivered to various peace groups in Santa Fe, New Mexico on early April.Bill Christison joined the CIA in 1950, and served on the analysis side of the Agency for 28 years. From the early 1970s he served as National Intelligence Officer (principal adviser to the Director of Central Intelligence on certain areas) for, at various times, Southeast Asia, South Asia and Africa. Before he retired in 1979 he was Director of the CIA's Office of Regional and Political Analysis, a 250-person unit His wife Kathy also worked in the CIA, retiring in 1979.Since then she has been mainly preoccupied by the issue of Palestine.

I've been asked to talk today about the topic, "U.S. Oil Policy as a Juggernaut in U.S. Foreign Policy." That's a great title. When you hear the word "juggernaut," what you think of--at least what I think of--is a monster machine of some sort, maybe the heaviest heavy tank you can imagine, rumbling down a city street, unstoppable, crushing everything in its way, and even destroying the paving of the street as it goes. Well, that comes pretty close to describing what I believe about the long-term effects of our oil, and other, foreign policies in the Middle East. But if we look ahead, rather than at the past or the present, my hope is that, by changing some of our own foreign policies, U.S. oil policy will in the future no longer be a destructive juggernaut.

It's worth spending a minute to talk about why oil is so important to the United States. The world's total use of energy from all sources--from petroleum, natural gas, coal, wood, hydropower, nuclear, geothermal, solar, and wind power--has increased in recent years roughly as the global population has also increased. Petroleum contributes the greatest single amount -- about two-fifths of the world's total energy output, and natural gas (which is in some ways related to oil) more than another one-fifth. The United States alone uses about one-quarter of the world's total energy output, but has less than five percent of the world's population. The U.S. itself does not produce anywhere near the amount of energy that it consumes. According to statistics of the U.S. Department of Energy, the United States used in the year 2000 almost 100 quadrillion Btu's--or British Thermal Units--of energy. But of those 100 quadrillion Btu's, the U.S. had to import close to 30 percent. The United States is, hands down, the most profligate user of energy, by far, on this whole globe.

With respect to oil alone, the U.S. imported in the year 2000 almost two-thirds of the oil that it used. The importance of Saudi Arabia as a supplier of the U.S., needs to be emphasized, but not just because the Saudis hold the largest known but still untapped oil reserves in the world. What is even more important to the U.S. at the moment is that Saudi Arabia has the largest installed but unused rapid production capacity--that is, oil wells, pumping equipment and so forth already there but not used to meet current, or "normal," production needs. In any emergency that cut off oil supplies from anywhere else in the world, Saudi Arabia would one of very few, and maybe the only, nation that could easily and quickly increase its oil production without a waiting period measured in months rather than a few days. This obviously adds to what any general or admiral would call the strategic value of Saudi Arabia to the United States.

There is another characteristic of the global oil industry that we should all understand. It is an industry dominated by a half-dozen extremely large, global corporations--including ExxonMobil (these two firms merged in 1999), British Petroleum, Shell, Texaco, Gulf and Socal. Fifty to 75 years ago these companies might have been swashbuckling, unregulated corporations seeking to maximize profits and avoid the controls of any governments by all means fair or foul. Today, however, these companies by no means have the same personalities that they had years ago. In the Middle East, at least, the governments of the area have nationalized practically all oil production, and the companies or their subsidiaries have gradually worked out mutually supportive relationships with the local governments, under which the companies continue to manage most of the oil production and global oil trade, while the governments, and OPEC, make the basic decisions on how much oil to produce. The companies continue to make large profits, which keep them happy enough.

In their relations with the U.S. and other advanced nations, the companies no longer shun government regulation, because most of the regulations imposed on them are supportive of, and increase the profits of, the companies themselves. The regulations fall more into the area of corporate welfare than into the area of inducing the corporations to become better citizens. In the U.S., the ties of the oil companies with both of the major political parties are close and mutually profitable. Up to a few months ago, these same comments would have applied to Enron, which was clearly one of the world's largest energy companies, even though it was not one of the largest global oil companies.

I started out by comparing the long-term effects of U.S. oil policies to a juggernaut. To show you why, I want to go back almost 60 years, to February 1945. In that month, President Franklin D. Roosevelt, while returning from the Yalta Conference, met with King Ibn Saud of Saudi Arabia on a U.S. warship in the middle of the Suez Canal. Two months later, Roosevelt was dead, but this meeting was probably one of his most important acts as a world leader The actual records of the conversations between these two men have never been released by either of their governments, but it is quite clear that an agreement was reached under which the United States guaranteed for the indefinite future the security and stability of the Saudi monarchy. In return, the Saudi King guaranteed U.S. access to, and joint development of, the massive Saudi oil reserves, also for the indefinite future. These mutual guarantees were later, implicitly at least, extended to apply to the other, and smaller, Gulf state monarchies, from the Arab Emirates to Bahrain and Kuwait. All of these guarantees were reinforced by the U.S. war against Iraq in 1990-1991, and these guarantees still today form the basis of U.S. oil policies in the Middle East.

So for close to 60 years now, the U.S. has continued to prop up and support these authoritarian governments. I'd like to give you an example of how this has worked in the case of Saudi Arabia. This is from an article that appeared in The Nation magazine last November, written by a British expert on world security affairs. Here are a few lines from this article. "To protect the Saudi regime against its external enemies, the United States has steadily expanded its military presence in the region. [T]o protect the royal family against its internal enemies, US personnel have become deeply involved in the regime's internal security apparatus. At the same time, the vast and highly conspicuous accumulation of wealth by the royal family has alienated it from the larger Saudi population and led to charges of systemic corruption. In response, the regime has outlawed all forms of political debate in the kingdom (there is no parliament, no free speech, no political party, no right of assembly) and used its US-trained security forces to quash overt expressions of dissent. All these effects have generated covert opposition to the regime and occasional acts of violence"

The United States pursued policies like these not only in Saudi Arabia and the smaller Gulf States, but elsewhere in the Middle East as well. When the U.S. overthrew Mossadegh in Iran in 1953, and reinstalled the Shah in power, Washington began carrying out precisely the same policies in Iran as it employed in Saudi Arabia. The Shah's secret police, known as SAVAK, and the Iranian military forces both grew markedly stronger. For 26 years the Shah's repressive regime succeeded in smothering internal dissent. In 1979, however, major internal dissent did erupt, supported by radical Islamic clerics who wanted all U.S. influence out of their land. The Shah was quickly overthrown. U.S. experiences in Iran since that date should have suggested to people in Washington that just perhaps the strong U.S. support for repressive regimes in the Middle East was not the ideal long-term policy for us to pursue. No reexamination of U.S. foreign policy ever got started, however, because the United States was immediately consumed by the horrible insult Iranians imposed on us when they held over 50 Americans from the U.S. Embassy hostage for more than a year.

Then, in the 1980s, the U.S. spent the decade quietly cozying up to Saddam Hussein, the dictatorial ruler of Iraq, which was and is another big oil producer of the Middle East. Since Iran was now a U.S. enemy, the U.S. supported Iraq in its war against Iran. The U.S. did not criticize Saddam Hussein even when he employed chemical warfare to gas sizable numbers of Kurdish people in his own country. The United States only abandoned him in 1990, when he crossed the U.S. over Kuwait. Even here, the diplomatic signals Saddam received from the U.S. until shortly before he invaded Kuwait were very unclear. Once again, when the break finally came, the U.S. administration gave no thought to reappraising its own policies throughout the region. A decision was made in favor of going to war to end this threat to U.S. hegemony and U.S. access to oil, and that was that.

Now, in the year 2002, this almost-60-year-old Middle East oil policy of the United States is showing signs of even more fraying at the edges. Beyond any question in my opinion, one of the root causes behind the terrorism of September 11 was this very U.S. policy of supporting for the past half-century and more these authoritarian and often corrupt Arab and Muslim governments. There exists a high degree of anger among many Muslims with their own governments, which have for so long been supported by the U.S.

Osama bin Laden is a good example of this particular root cause behind the September 11 terrorism. His wrath was directed as much against the Saudi government, for example, as it was against the United States. His opposition to what used to be his own government was probably the main reason why he had the support of a majority of the young men under 25 in Saudi Arabia. He received similar support from many young men in other Arab and Muslim states as well. Right now these groups of angry young men obviously no longer have a viable leader in Osama bin Laden, but other extremist leaders are almost sure to arise. In addition, the next generation of leaders in at least some of these states may well emerge from among these young men. If any of them do come into power, their future governments will likely be more anti-American than the present governments, which Washington likes to call "moderate," but which are really nothing of the sort. If we have not reduced our energy dependence on oil in the meantime, we may face serious trouble.

The U.S. should therefore adopt quite draconian measures immediately to reduce its overall energy usage, including its dependence on Mideast oil. It is unlikely, for the near future at least, that the U.S. will solve a future energy crunch through alternative power sources or by "clean" coal, nuclear power, or Alaskan oil usage. The U.S. also should not count on oil supplies from Central Asia as a way to ignore the need for conservation.

The U.S. should also, over time and gradually, reduce its ties with the present governments in many Muslim states, and try to develop improved relations with opposition elements there, actively seeking out democratically inclined groups. Such steps will be necessary if there is to be any hope of reducing support for future Osama bin Ladens that arises from the anger of Arabs and Muslims with their own governments.

I want to turn now to another foreign policy problem that the U.S. faces in the Middle East, one that has become more tightly intertwined with U.S. oil policies since September 11. Ever since shortly after World War II, the U.S. has had not one but two fundamental foreign policies in the Middle East. The first policy, which I've already talked about, has been to support authoritarian and undemocratic governments in the oil nations in an effort to guarantee the long-term easy access to Middle East oil at "reasonable" prices. The other policy, equally important, has been to provide strong support to Israel and to guarantee the security of Israel as a Jewish state, also for the long term.

Over the last fifty-plus years, there has been a fair amount of tension and conflict between these two policies. The United States under President Harry Truman was, as I'm sure you all know, instrumental in helping to establish the state of Israel in 1948. But even then, one of the reasons for the opposition to Truman's desires by many other U.S. officials, including the Secretary of State, General George Marshall, was that it might endanger the west's access to oil from the Arab nations.

As it has turned out, for most of the period since World War II, the U.S. has managed to keep its two basic policies in the Middle East pretty much apart from each other--in separate boxes so to speak--and to keep the tensions between them in check. The very existence of the Cold War, which provided the bogey-man of a common enemy, helped in this regard. The one obvious time when the U.S. proved unable to keep the tensions between its two policies under control was the OPEC oil embargo against the west in late 1973 and early 1974. The Arab-Israeli war of 1973, and specifically the U.S. response of resupplying Israel with large amounts of new military equipment, precipitated the embargo, and many of us here can remember the gas lines that resulted in this country. But the gas lines only lasted a few months, and then we all went back to normal. But we should remember those months as a perfect example of the fact that there are indeed real conflicting interests involved in the two basic U.S. foreign policies in the Middle East.

Overall, though, because the United States has been able to hold these conflicting interests in check for most of the past half century, I think that Washington has allowed the tensions to grow, more or less ignored by U.S. policymakers, to a point where they are going to be exceedingly difficult to deal with in the future. Since September 11, a number of things have happened that make it more impossible than ever to separate the effects of the Israel-Palestine problem from the effects of the continuing U.S. support for most authoritarian governments of the oil nations in the area.

In Saudi Arabia and most of the small Gulf States, the position of the monarchies has become more precarious, as these monarchies have been subjected to more criticism since September 11 from public opinion in the United States than has been the case for years. In normal circumstances, when these monarchies are confident that the U.S. guarantee of their security is strong and unbreakable, most of them will not worry too much about other issues that might further weaken their domestic position. The George W. Bush administration is undoubtedly reassuring them that the U.S. security guarantee is still in effect, but they cannot help but be worried about its permanence when they see public opinion in this country changing. This puts pressure on the monarchies to pay more attention to the opinion of their own Arab "street." And the opinion of this Arab "street" is today more intensely critical than ever of Israel's policies on Palestine and the continued occupation of the West Bank and Gaza.

The U.S. government, from September 11 right up to the present, has made it clearer than ever to the world at large that it will unilaterally decide what actions around the world constitute "terrorism," and what actions do not. Specifically, in the minds of Arabs and Muslims everywhere, the U.S. seems to have accepted all actions by Palestinians against Israelis, including acts against Israeli soldiers as well as those against innocent civilians, as being terrorism. At the same time, however, the U.S. appears to believe that no acts by Israelis against Palestinians constitute terrorism. Arabs see this as a double standard. When, also at the same time, Arabs see their own rulers expressing support for the "war on terrorism" as it is defined by the U.S., their antagonism toward their own rulers intensifies. And the rulers themselves, recognizing this antagonism, feel greater concern for their own positions.

I'd like to express a note of caution here. I certainly do not know for sure whether any, or some, or all of the governments in Arab oil nations--the dictatorial governments whose stability and security the U.S. has guaranteed for almost 60 years--will collapse in the near future. Of course change can happen rapidly and without warning. The best minds in the U.S. government had no inkling that the Shah of Iran was going to be ousted a week before it happened in 1979. But even governments that seem to be falling apart can sometimes last for years, until some totally unforeseen shove comes along that pushes them over the edge.

What I am more sure of is that these Arab oil governments are now under greater pressure to change than they have been for years, because of developments since September 11. Therefore the U.S. should be actively encouraging--though never using military force to do so--a gradual movement toward greater political democracy in these nations. And in order to reduce the importance of one major factor leading to greater instability in the region, the U.S. should immediately begin to play a far more active role than it has recently in pressing for a solution to the Israel-Palestine problem based on two truly sovereign nations, with strong treaty guarantees from the United States of the future security of both of these nations.

Simultaneously,  wars for access to cheap oil (Iraq, Libya) can  be viewed as desperate attempts to find a way out of "secular stagnation", in which advanced economies found themselves after 2008 (or, more correctly, after 2000). And history proves that war is not always necessary. Sometimes other mechanisms work as well. So lowering of oil price for a considerable perios can also be viewed as a  clever "Hail Mary" pass to save Western economies which suffer from stagnation (aka "new normal") characterized by low economic growth, high level of debt,  and high unemployment rate --  along with deflationary tendencies at the end of debt expansion super cycle. 

And this precious product then is by-and-large wasted. In most Western countries population uses a lot more energy than they absolutely have to use, burning lion share of it in personal transportation.  Industries produce a lot of unnecessary or outright harmful crap, which sell only by the power of marketing.  Some industries produce crap exclusively and can be eliminated ;-). Most people in the USA could probably cut their private gas consumption by 50% or more with little or no harful effects (less car trips, sharing of cars, use of hybrid and electrical cars for commute, telecommuting, etc).

But this is not true of major industries, air and sea transport.  Those are areas where the limits set by "end of cheap oil" strike hard. At $4 per gallon and higher some (heavy/bulky) goods produced in China are already uneconomic to ship to the USA. That already started to affect  furniture industry. And we need get serious about planning, and the subsequent modifications in our energy usage pattern. Transition to the world with less "cheap oil" takes a lot of time and money to implement.

It might well be possible to replace around 20% of today’s oil consumption with renewable. Hybrid and electrical cars don't save much energy (lithium battery production consumes a lot of energy and rare metals which are very expensive to mine and refine) but they allow to substitute burning of oil to burning coal to produce electricity. 

Just the fact that oil industry now resorted to two  ecologically dangerous methods of extraction of shale oil and tar sands oil indirectly proves "top cheap oil" hypothesis. Why bother if cheap oil is plentiful? It's simply stupid to invest money in such extraction schemes unless you really believe in the "end of cheap oil".  If you object to this that means that you can't think clearly an dispassionately.

In both cases the size of ecological damage will be certain only decades later. it might be something like destroying America to save it. IMHO in no way the US shale production could be the decisive factor in spot prices drop of this magnitude (to closer $30 in 2015 dollars which so 30/2.4 in 1983 dollars ). And in 2014-2015 economic contraction did not reached 2008 levels to justify it from this point of view. EROEI of shale oil is way too low for shale oil to be competitive at current prices:  it is a complex and not very efficient process of conversion of energy and junk bonds into oil. It is far from just drilling a hole  and collecting oil which  flows under internal pressure  like in old good times.  Horizontal drilling greatly helps (and is the essence of most new methods of oil extraction with one (upper) well used to inject stream or chemicals and the other below it to collect oil) , but does not change the whole picture or lower EROEI of those methods. According to Wikipedia:

A 1984 study estimated the EROEI of the various known oil-shale deposits as varying between 0.7–13.3[75] although known oil-shale extraction development projects assert an EROEI between 3 to 10. According to the World Energy Outlook 2010, the EROEI of ex-situ processing is typically 4 to 5 while of in-situ processing it may be even as low as 2. However, according to the EIA most of used energy can be provided by burning the spent shale or oil-shale gas.[76]

Same problem of low EROEI is true about tar sands. Simplifying you can think about extraction of oil from tar sands as the industrial process of converting energy of  natural gas and junk bonds into oil. Approximately  280–350 kWh of energy is needed to extract a barrel of bitumen and upgrade it to synthetic crude. Most of this energy is produced by burning natural gas. Assuming $.1 per kilowatt we will get energy cost alone around 28-$35 a barrel. You probably should double this number to account for capital expenses and other costs.  

Is oil commodity or under neoliberalism this is another currency subject to standard currency attacks

A commodity currency is a name given to currencies of countries which depend heavily on the export of certain raw materials for income. These countries are typically developing countries, e.g. countries like Burundi, Tanzania, Papua New Guinea; but also include developed countries like Canada and Australia.

Befor assendance of neoliberalism in 1980th world oil prices were determined largely by real daily supply and demand. It was the province of oil buyers and oil sellers. Then Goldman Sachs decided to buy the small Wall Street commodity brokerage, J. Aron in the 1980th They had their eye set on transforming how oil is traded in world markets.

It was the advent of “paper oil,” oil traded in futures, contracts independent of delivery of physical crude, easier for the large banks to manipulate based on rumors and derivative market skullduggery, as a handful of Wall Street banks dominated oil futures trades and knew just who held what positions, a convenient insider role that is rarely mentioned inn polite company. It was the beginning of transforming oil trading into a casino where Goldman Sachs, Morgan Stanley, JP MorganChase and a few other giant Wall Street banks ran the crap tables. Essentially they invented another commodity currency. In the foreign exchange market, commodity currencies generally refer to the Australian dollar, Canadian dollar, New Zealand dollar, Norwegian krone, South African rand, Brazilian real, Russian ruble and the Chilean peso.

It looks like oil also became not pure commodity, but a new commodity currency. New York really trades overwhelmingly on a non-physical oil basis these days. Nobody checks if sellers of the futures have actual oil to settle. All settmenta are in dollar. In other words oil was virtualized.

In addtionan there are multiple oil ETFs (which are prefect way to rob lemmings -- naive investors who decided that oil is more reliable store of value then stocks)

Symbol  Name  Assets*  Avg Vol  YTD  1 Year  3 Year  5 Year  Inception  ER  ETF Home Page  Liquidity  Expenses 
USO United States Oil Fund $2,578,400.00 25,967,785 -28.05% -57.77% -59.14% -56.62% 2006-04-10 0.45% View A+ A+
OIL S&P GSCI Crude Oil Tot Ret Idx ETN $866,760.90 4,389,938 -33.41% -63.17% -64.50% -62.10% 2006-08-15 0.75% View A B
DBO DB Oil Fund $513,040.00 331,095 -27.39% -58.67% -58.24% -53.53% 2007-01-05 0.78% View A B-
BNO United States Brent Oil Fund $91,324.50 128,165 -26.08% -57.43% -59.34% -35.66% 2010-06-02 0.90% View A- C+
USL United States 12 Month Oil $70,752.00 84,619 -22.71%

As with futures, several questions arise about OIL ETFs. In any case as dollar finance is unlimited (via printing press) that creates completely new environment for commodities, when the price can be completely detached from reality.  In a way, oil ETFs are not that different then gold EFT which became pure "virtual currency" called "gold"  -- yet another financial speculation vehicle (Something Just Snapped At The Comex Zero Hedge):

As of Friday the comex gold "coverage" or amount of paper claims on every ounce of physical, was literally off the chart, soaring to a mindblowing 207 ounces of paper gold claims for every ounce of deliverable gold. This also means that the dilution ratio between physical gold and paper gold has hit a new all-time low of just 0.48%!

Similarly to games with gold we see "naked" shorting of oil:

United States Oil Fund LP (ETF) Short Interest Down 6.7% in July (USO) by Max Byerly

Aug 18th, 2015 | Ticker Report

Shares of United States Oil Fund LP (ETF) (NYSE:USO) were the target of a significant decline in short interest in the month of July. As of July 31st, there was short interest totalling 45,855,306 shares, a decline of 6.7% from the July 15th total of 49,139,106 shares, AnalystRatings.NET reports. Based on an average trading volume of 23,230,679 shares, the short-interest ratio is currently 2.0 days.

United States Oil Fund LP (NYSE:USO) opened at 13.89 on Tuesday. United States Oil Fund LP has a 52 week low of $13.86 and a 52 week high of $35.83. The company’s 50-day moving average is $16.41 and its 200 day moving average is $18.44.

United States Oil Fund, LP (NYSE:USO) is a commodity pool that issues limited partnership interests (shares) traded on the NYSE Arca, Inc. The investment objective of USO is for changes in percentage terms of its shares’ per share net asset value (NAV) to reflect the changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in the price of the futures contract for light, sweet crude oil traded on the New York Mercantile Exchange (the NYMEX). The Company’s general partner is United States Commodity Funds LLC. The net assets of USO consist primarily of investments in futures contracts for light, sweet crude oil, other types of crude oil, diesel-heating oil, gasoline, natural gas and other petroleum-based fuels that are traded on the NYMEX, ICE Futures or other the United States and foreign exchanges.

Here is an interesting graph of money manager positions on NYMEX WTI (only NYMEX and only WTI):

The key question here is: "To what extent oil is still a commodity, and to what extent it is now yet another "virtual currency" subject to standard currency attacks ?" Naked selling of oil futures via shorting of OIL ETFs is not only possible, but highly profitable path for such attacks (4 Ways to Short Oil with ETFs - May 16, 2013 - Zacks.com).  All those tricks are possible due to free convertibility to US dollars, which unlike oil do not have any Earth-based limitations as for quantity and, what is more important, quality (gas liquids and shale oil are not equivalent to "classic' oil and refining of them produce mainly gasoline, instead of full spectrum of products; they should be considered "oil substitutes" and counted separately). And small amount injected in ETF can move spot oil market vary efficiently. So tail can wag the dog.

Who finance such attacks as losses can be substantial is an interesting question the answer on which I do not know, but recent behaviour of oil prices is typical for a currency attack as data about real oil extraction does not produce any optimism as for elimination of "peal cheap oil" phenomenon. But for speculators and gulling retail investors this does not matter. Casino is a casino. What is interesting the US MSM produce highly deceptive and well coordinated picture suggesting that there is government involvement in the whole scheme ( see below Russia sanctions section).

All those talks about crisis of overproduction are suspect. To a certain extent this might be a factor  due to slowing down of China economy and perma recession in the USA along with better small cars efficiency. But it is impossible to hide the fact that it was Saudi Arabia that decided to lower the oil prices and started to move in this direction ( An Oil Price 'Cold War' With Saudi Arabia Experts Disagree - US News) much like that did to economically crash the USSR in late 80th, early 90th.  I think that talk about attack on the USA shale industry does not make much sense, as Saudi Arabia is a vassal state and such move is punishable for a vassal:

Some experts declared it the start of a “cold war” with Saudi Arabia, as described by two University of Texas professors in an op-ed in the Dallas Morning News. Other analysts, however, contend that the Saudis are merely trying to defend against other exporters to the U.S.

“There’s another conflict brewing in the Middle East — the intensifying oil battle between Saudi Arabia and Texas,” Isaac Barchas and Michael Webber, who teach at the University of Texas at Austin, wrote in the op-ed.

As Webber, deputy director of the university's Energy Institute, describes to U.S. News, "Ford versus GM, Dell versus Apple: these are big companies duking it out for market share. Why would it be any different for oil. Is it a military war? No. But it's a market share war."

There are three main parts to his and Barchas' argument:

  1. Hydraulic fracturing, or fracking, has unleashed an energy boom here in the U.S., reducing net crude oil and petroleum product imports to their lowest levels since 1987.
  2. With more oil now available on the market, combined with a sluggish global economy that’s reduced demand in Europe and China, benchmark Brent crude oil prices have fallen by roughly 27 percent since June – their lowest point in four years.
  3. Saudi Arabia, the U.S's.second-largest source of imported oil behind Canada, is trying to retain its market share by undercutting American producers. The goal: drive down prices far enough to scare away Wall Street investors or simply make fracking unprofitable, forcing U.S. companies to take their drill rigs offline to reduce supply and clearing the way for more Saudi oil imports.

As Chip Register, managing director of consulting firm Sapient Global Markets asserted in a blog post on Forbes, “The Saudis have put a bull’s-eye on the U.S. shale industry.”

Other experts, however, expressed strong skepticism with this view.

“It’s not a personalized attack,” Steven Kopits, managing director of the consulting firm Princeton Energy Advisors, says of the Saudi discount. “Saudi Arabia is looking out for its own interests, not trying to undermine other people’s interests.” 

Jan Kalicki, public policy scholar and energy lead at The Wilson Center, a nonpartisan think tank, agrees.

“Any real impact on shale in the U.S. is going to require more than a price adjustment of this kind," he says.

U.S. shale fields can start and stop production relatively quickly. Technological advances, meanwhile, have sharply lowered the break-even point – no longer does fracking rank as one of the most expensive forms of oil production. It can still turn a profit at current prices of $80 a barrel, but depending on the type of well, fracking operations might even be able make money at prices as low as $55 a barrel.

Hence, “trying to apply predatory pricing in the oil business will only work in the very short run, if at all,” says Paul Sullivan, economics professor at National Defense University.

I think here the target is probably Russia. Telegraph reported  that Saudis offer Russia secret oil deal if it drops Syria - Telegraph

The revelations come amid high tension in the Middle East, with US, British, and French warship poised for missile strikes in Syria. Iran has threatened to retaliate.

The strategic jitters pushed Brent crude prices to a five-month high of $112 a barrel. “We are only one incident away from a serious oil spike. The market is a lot tighter than people think,” said Chris Skrebowski, editor of Petroleum Review.

Leaked transcripts of a closed-door meeting between Russia’s Vladimir Putin and Saudi Prince Bandar bin Sultan shed an extraordinary light on the hard-nosed Realpolitik of the two sides.

Prince Bandar, head of Saudi intelligence, allegedly confronted the Kremlin with a mix of inducements and threats in a bid to break the deadlock over Syria. “Let us examine how to put together a unified Russian-Saudi strategy on the subject of oil. The aim is to agree on the price of oil and production quantities that keep the price stable in global oil markets,” he said at the four-hour meeting with Mr Putin. They met at Mr Putin’s dacha outside Moscow three weeks ago.

“We understand Russia’s great interest in the oil and gas in the Mediterranean from Israel to Cyprus. And we understand the importance of the Russian gas pipeline to Europe. We are not interested in competing with that. We can cooperate in this area,” he said, purporting to speak with the full backing of the US.

Oil futures

Oil ETNs such USO or OIL does not have any intrinsic value. They are based on oil futures. Like is that case with currency future contracts, empirical studies suggest, not only is the oil futures price a biased estimate of the future spot price, but more often  it even gets the direction wrong. If the futures price suggests the oil will depreciate, it can well appreciate instead. In addition you can buy or sell options on oil making this commodity a real paradise for speculators.

Speculators definitely have expectations about the future oil spot price.  But often they demonstrate herd behavior driving the price to extremes as trading futures is trading "virtual oil" (futures are settled in dollars, never in actual commodity). This is especially true about short selling which can drive oil to really unprofitable for all major producers price. Recently they manage to drive it to less then $40 a barrel, the price at which only selected low cost producers can get the oil form the ground (to say nothing to invest in additional exploration or pay the cost of infrastructure and such). You ability to see oil short via specialized ETF or other means is limited only by your dollar reserves and the availability of counter party (and you can play certain games with this counterparty issue). 

Here is example of prices on Aug 31, 2015 (which also is a nice demonstration of dramatic dynamics that is possible in a single day) :

Chart Current Session Prior Day Opt's
Open Time Set Chg Vol Set Op Int
Oct'15 45.00 19:28
Aug 31
49.20
3.98 719704 45.22 440212 Call Put
Nov'15 45.69 19:28
Aug 31
49.93
3.95 137067 45.98 215025 Call Put
Dec'15 46.57 19:29
Aug 31
50.77
3.91 162736 46.86 243840 Call Put
Jan'16 47.50 19:28
Aug 31
51.63
3.91 57430 47.72 102471 Call Put
Feb'16 47.50 19:28
Aug 31
52.38
3.93 38475 48.45 50167 Call Put
Mar'16 48.25 19:29
Aug 31
52.98
3.92 38170 49.06 73615 Call Put
Apr'16 48.75 19:29
Aug 31
53.47
3.86 14106 49.61 25925 Call Put
May'16 48.99 19:28
Aug 31
53.85
3.76 7934 50.09 23357 Call Put
Jun'16 49.86 19:28
Aug 31
54.16
3.64 44230 50.52 103798 Call Put
Jul'16 50.29 19:28
Aug 31
54.38
3.53 3938 50.85 21832 Call Put
Aug'16 50.03 19:28
Aug 31
54.61
3.42 2511 51.19 16337 Call Put
Sep'16 50.72 19:28
Aug 31
54.87
3.31 8091 51.56 42572 Call Put
Oct'16
-
19:28
Aug 31
55.16
3.20 1164 51.96 17226 Call Put
Nov'16
-
19:28
Aug 31
55.48
3.11 1038 52.37 17809 Call Put
Dec'16 52.59 19:28
Aug 31
55.81
3.02 56618 52.79 133005 Call Put
Jan'17
-
19:28
Aug 31
56.05
2.94 598 53.11 14894 Call Put
Feb'17
-
19:29
Aug 31
56.31
2.87 277 53.44 8034 Call Put
Mar'17 55.45 19:29
Aug 31
56.59
2.81 988 53.78 9195 Call Put
Apr'17
-
19:28
Aug 31
56.85
2.75 465 54.10 3543 Call Put
May'17
-
19:29
Aug 31
57.08
2.69 435 54.39 2930 Call Put
Jun'17 53.69 19:29
Aug 31
57.34
2.64 5669 54.70 21475 Call Put
Jul'17 56.32 19:28
Aug 31
57.55
2.60 143 54.95 3120 Call Put
Aug'17
-
19:29
Aug 31
57.81
2.57 48 55.24 1760 Call Put
Sep'17
-
19:28
Aug 31
58.11
2.56 71 55.55 3982 Call Put
Oct'17
-
19:28
Aug 31
58.41
2.54 15 55.87 1184 Call Put
Nov'17
-
19:28
Aug 31
58.73
2.53 15 56.20 1270 Call Put
Dec'17 55.75 19:28
Aug 31
59.05
2.51 9588 56.54 44135 Call Put
Jan'18
-
19:28
Aug 31
59.21
2.49
-
56.72 1532 Call Put
Feb'18
-
19:28
Aug 31
59.38
2.46
-
56.92 312 Call Put
Mar'18
-
19:28
Aug 31
59.57
2.43
-
57.14 2688 Call Put
Apr'18
-
19:29
Aug 31
59.77
2.40
-
57.37 63 Call Put
May'18
-
19:28
Aug 31
59.98
2.37
-
57.61 516 Call Put
Jun'18
-
19:29
Aug 31
60.21
2.34 226 57.87 3700 Call Put
Jul'18
-
19:28
Aug 31
60.35
2.30
-
58.05 296 Call Put
Aug'18
-
19:28
Aug 31
60.52
2.27
-
58.25 61 Call Put
Sep'18
-
19:28
Aug 31
60.69
2.23
-
58.46 461 Call Put
Oct'18
-
19:28
Aug 31
60.87
2.20
-
58.67 61 Call Put
Nov'18
-
19:28
Aug 31
61.05
2.16
-
58.89 311 Call Put
Dec'18 58.54 19:28
Aug 31
61.24
2.12 2002 59.12 19416 Call Put
Jan'19
-
19:28
Aug 31
61.35
2.10
-
59.25 204 Call Put
Feb'19
-
19:28
Aug 31
61.48
2.08
-
59.40 4 Call Put
Mar'19
-
19:28
Aug 31
61.62
2.06
-
59.56 454 Call Put
Apr'19
-
19:28
Aug 31
61.78
2.04
-
59.74 4 Call Put
May'19
-
19:28
Aug 31
61.96
2.02
-
59.94 4 Call Put
Jun'19
-
19:28
Aug 31
62.15
2.00
-
60.15 1185 Call Put
Jul'19
-
19:28
Aug 31
62.20
1.98
-
60.22 5 Call Put
Aug'19
-
19:28
Aug 31
62.29
1.96
-
60.33 4 Call Put
Sep'19
-
19:28
Aug 31
62.41
1.94
-
60.47 4 Call Put
Oct'19
-
19:28
Aug 31
62.55
1.92
-
60.63 4 Call Put
Nov'19
-
19:28
Aug 31
62.72
1.90
-
60.82 104 Call Put
Dec'19
-
19:28
Aug 31
62.93
1.88 158 61.05 6628 Call Put
Jan'20
-
19:29
Aug 31
63.00
1.86
-
61.14
-
Call Put
Feb'20
-
19:29
Aug 31
63.08
1.84
-
61.24
-
Call Put
Mar'20
-
19:28
Aug 31
63.17
1.82
-
61.35
-
Call Put
Apr'20
-
19:28
Aug 31
63.28
1.80
-
61.48
-
Call Put
May'20
-
19:28
Aug 31
63.41
1.78
-
61.63
-
Call Put
Jun'20
-
19:28
Aug 31
63.56
1.76
-
61.80
-
Call Put
Jul'20
-
19:28
Aug 31
63.57
1.74
-
61.83
-
Call Put
Aug'20
-
19:28
Aug 31
63.62
1.72
-
61.90
-
Call Put
Sep'20
-
19:29
Aug 31
63.70
1.70
-
62.00
-
Call Put
Oct'20
-
19:29
Aug 31
63.83
1.68
-
62.15
-
Call Put
Nov'20
-
19:28
Aug 31
63.97
1.66
-
62.31
-
Call Put
Dec'20 64.00 19:28
Aug 31
64.14
1.64 14 62.50 1935 Call Put
Jun'21
-
19:28
Aug 31
64.59
1.57
-
63.02
-
Call Put
Dec'21
-
19:28
Aug 31
65.04
1.50 1 63.54 440 Call Put
Jun'22
-
19:28
Aug 31
65.34
1.50
-
63.84
-
Call Put
Dec'22
-
19:28
Aug 31
65.64
1.50
-
64.14 180 Call Put
Jun'23
-
19:29
Aug 31
65.64
1.50
-
64.14
-
Call Put

Is this  the mixture of overproduction crisis and intelligence operation with unforeseen side effects (blowback)

If we assume that the current event are a complex mixture of overproduction crisis, secular stagnation and intelligence operation with the goal to squeeze Russia (and as a side effect hurt Iran revenues)  that we should expect it lasting for several years, enough to destroy the opponents economically. So changes of recovering of oil prices in 2016 from this point of view are slip. For Russia this is a double blow as oil prices also affect natural gas prices. And it is true that Russian leadership were completely unprepared to this course of events, so the damage is great and real. As noted "Obama’s foreign policy goals get a boost from plunging oil prices" (Washingtonpost, Dec 23, 2015):

Plunging crude oil prices are diverting hundreds of billions of dollars away from the treasure chests of oil-exporting nations, putting some of the United States’ adversaries under greater stress.

After two years of falling prices, the effects have reverberated across the globe, fueling economic discontent in Venezuela, changing Russia’s economic and political calculations, and dampening Iranian leaders’ hopes of a financial windfall when sanctions linked to its nuclear program will be lifted next year.

At a time of tension for U.S. international relations, cheap oil has dovetailed with some of the Obama administration’s foreign policy goals: pressuring Russian President Vladi­mir Putin, undermining the popularity of Venezuelan President Nicolás Maduro and tempering the prospects for Iranian oil revenue. At the same time, it is pouring cash into the hands of consumers, boosting tepid economic recoveries in Europe, Japan and the United States.

https://www.washingtonpost.com/business/economy/as-crude-oil-prices-plunge-so-do-oil-exporters-revenue-hopes/2015/12/23/ed552372-a900-11e5-8058-480b572b4aae_story.html?hpid=hp_hp-top-table-main_oil-910pm%3Ahomepage%2Fstory

But there are some visible side effect, with some probably not well anticipated:

All that means that dramatic drop in oil prices is a mixed blessing. Mike Whitney lists several other factors( Oil Price Blowback , Jan 6, 2015, Counterpunch)

Up to now, of course, Russia, Iran and Venezuela have taken the biggest hit, but that will probably change as time goes on. What the Obama administration should be worried about is the second-order effects that will eventually show up in terms of higher unemployment, market volatility, and wobbly bank balance sheets. That’s where the real damage is going to crop up because that’s where red ink and bad loans can metastasize into a full-blown financial crisis. Check out this blurb from Nick Cunningham at Oilprice.com and you’ll see what I mean:

“According to an assessment from the Federal Reserve Bank of Dallas, an estimated 250,000 jobs across eight U.S. states could be lost in 2015 if oil prices don’t rise. More than 50 percent of those job losses would occur in Texas, which leads the nation in oil production.

There are some early signs that a slowdown in drilling could spread to the manufacturing sector in Texas… One executive at a metal manufacturing company said in the survey, “the drop in crude oil prices is going to make things ugly… quickly.” Another company that manufactures machinery told the Dallas Fed, “Low oil prices will drive reductions in U.S. drilling rigs, which will in turn reduce the market for our products.”

The sentiment was similar for a chemical manufacturer, who said “lower oil prices will adversely impact margins. Energy volatility will cause our customers to keep inventories tight.”

States like Texas, North Dakota, Oklahoma, and Louisiana have seen their economies boom over the last few years as oil production surged. But the sector is now deflating, leaving gashes in employment rolls and state budgets.” (Low Prices Lead To Layoffs In The Oil Patch, Nick Cunningham, Oilprice.com)

Of course industries lay-off workers all the time and it doesn’t always lead to a financial crisis. But unemployment is just one part of the picture, lower personal consumption is another. Take a look:

“Falling oil prices are a bigger drag on economic growth than the incremental “savings” received by the consumer…..Another way to show this graphically is to look at the annual changes in Personal Consumption Expenditures (PCE) in aggregate as compared to the subsection of PCE spent on energy and related products. This is shown in the chart below.

Lower Energy Prices To Lower PCE (Personal Consumption Expenditures):

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(The Gasoline Price Myth, Lance Roberts, oilprice.com)

See? So despite what you might have read in the MSM, lower gas prices do not translate into greater personal consumption or more robust growth. Quiet the contrary, they tend to intensify deflationary pressures and reduce activity which is a damper on growth.

Then there’s the knock-on effects that crashing prices and layoffs have on other industries like mining, manufacturing and chemical production. Here’s more from Oil Price:

“Oil and gas production makeup a hefty chunk of the “mining and manufacturing” component of the employment rolls. Since 2000, when the oil price boom gained traction, Texas has comprised more than 40% of all jobs in the country according to first quarter data from the Dallas Federal Reserve…

The majority of the jobs “created” since the financial crisis have been lower wage paying jobs in retail, healthcare and other service sectors of the economy. Conversely, the jobs created within the energy space are some of the highest wage paying opportunities available in engineering, technology, accounting, legal, etc. In fact, each job created in energy related areas has had a “ripple effect” of creating 2.8 jobs elsewhere in the economy from piping to coatings, trucking and transportation, restaurants and retail….

The obvious ramification of the plunge in oil prices is that eventually the loss of revenue will lead to cuts in production, declines in capital expenditure plans (which comprise almost 1/4th of all capex expenditures in the S&P 500), freezes and/or reductions in employment, and declines in revenue and profitability…

Simply put, lower oil and gasoline prices may have a bigger detraction on the economy than the “savings” provided to consumers.” (The Gasoline Price Myth, Lance Roberts, oilprice.com)

None of this sounds very reassuring, does it? And yet, all we hear from the media is how the economy is going to reach “escape velocity” on the back of cheap oil. Nonsense. This is just more “green shoots” baloney wrapped in public relations hype. The fact is, the economy needs the good-paying jobs more than it needs low-priced energy. But now that prices are tumbling, those jobs are going to disappear which is going to be a drag on growth.

Now check out these headlines I picked up on Google News that help to show what’s going on off the radar:

Measuring oil production and consumption: BBL,  MMbbl and Mb/d

In a way the USA (along with Canada) is an exceptional (read backward) country which still was unable (or more correctly unwilling) to switch to metric system.  In the USA oil production and  consumption by volume is usually measured in  barrels (BBL). One BBL equals 42 US gallons  or approximately 159 liters; 6.29 barrels equal one cubic meter and (on average) 7.33 barrels weigh one metric ton (1000 kilograms). Energy-wise one barrel of crude approximately equals 5604 cubic-feet of natural gas, 1.45 barrels of liquefied natural gas (LNG), or about one barrel of gas condensate.

When converting volume measures into weight measures a coefficient based on so called API gravity  is used. The latter is a measure of how heavy or light a petroleum liquid is compared to water: if its API gravity is greater than 10, it is lighter and floats on water; if less than 10, it is heavier and sinks. In other words this is a measure that is inverse of density. Although mathematically, API gravity is a dimensionless value,  for historical reasons it is measures in 'degrees' like angles. In this case this is degrees on a hydrometer instrument. API gravity values of most petroleum liquids fall between 10 and 70 degrees. From Wikipedia:

Crude oil is classified as light, medium, or heavy according to its measured API gravity.

Crude oil with API gravity less than 10° is referred to as extra heavy oil or bitumen. Bitumen derived from oil sands deposits in Alberta, Canada, has an API gravity of around 8°. It can be diluted with lighter hydrocarbons to produce diluted bitumen, which has an API gravity of less than 22.3°, or further "upgraded" to an API gravity of 31 to 33° as synthetic crude.[7]

Oil companies that are listed on American stock exchanges typically report their production in thousand or million barrels. Abbreviations like Mbbl (one thousand barrels), or MMbbl (one million barrels) are used. Often Mb/d is used instead of MMbbl per day.  This actually preferable notation that is used in this page.

As density of the oil varies it is not that easy to convert one metric into another for example volume into weight  as the following quote illustrates (Open Thread, Oil and Gas - Peak Oil Barrel ):

One problem is the estimate of Russian average barrels per metric ton, often it is assumed that this is 7.3 or 7.33 barrels per metric ton. If 7.33 barrels per ton is correct the average API gravity would be 33.4 degrees.

The Urals blend is about 31.7 degrees API or 7.25 barrels per metric ton.

On political motives for reporting less Russian output, possibly the US government wants the sanctions to affect Russian oil output and has some influence on what is reported by the EIA. Likewise the Russian government wants to show that sanctions are not affecting them and might influence the Russian oil ministry to report higher output.

Possibly this could happen or the average API gravity of Russian output may be different than we think, if API gravity is 31.7 degrees (Urals blend) then output in April would have been 10.55 Mb/d, JODI had about 10.1 Mb/d in April.

AlexS showed that the NGL numbers reported by the EIA and Jodi may be about 350 kb/d too high (perhaps some condensate is being included in NGL that should be part of C+C output). If we added 350 kb/d to JODI’s April 2015 estimate of C+C output we get about 10.45 Mb/d for Russia, now the difference is only 100 kb/d, take the average and call it 10.5 Mb/d+/- 50 kb/d. That is a better explanation than “politics” in my opinion.

Great Condensate Con: What liquids are counted as oil in statistical reports such as EIA

There are several different liquids that are usually counted as oil.  Three major are crude, condensate and Natural Gas Liquids. The total all three is often counted as would oil production which now is over 90 Mb/d. But by how much nobody knows. The EIA reports crude plus condensate  as "oil".  EIA has total world production of Crude Oil, NGPL, and Other Liquids at 93,770,000 barrels per day in June 2015.  This type of reporting provides oil traders with wrong data and was called "Great condensate con" :

Lease condensate consists of very light hydrocarbons which condense from gaseous into liquid form when they leave the high pressure of oil reservoirs and exit through the top of an oil well. This condensate is less dense than oil and can interfere with optimal refining if too much is mixed with actual crude oil. The oil industry's own engineers classify oil as hydrocarbons having an API gravity of less than 45--the higher the number, the lower the density and the "lighter" the substance. Lease condensate is defined as hydrocarbons having an API gravity between 45 and 70. (For a good discussion about condensates and their place in the marketplace, read "Neither Fish nor Fowl – Condensates Muscle in on NGL and Crude Markets.")

Refiners are already complaining that so-called "blended crudes" contain too much lease condensate, and they are seeking out better crudes straight from the wellhead. Brown has dubbed all of this the great condensate con.

Brown points out that U.S. net crude oil imports for December 2015 grew from the previous December, according to the U.S. Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy. U.S. statistics for crude oil imports include condensate, but don't break out condensate separately. Brown believes that with America already awash in condensate, almost all of those imports must have been crude oil proper.

Brown asks, "Why would refiners continue to import large--and increasing--volumes of actual crude oil, if they didn’t have to--even as we saw a huge build in [U.S.] C+C [crude oil plus condensate] inventories?"

Part of the answer is that U.S. production of crude oil has been declining since mid-2015. But another part of the answer is that what the EIA calls crude oil is actually crude plus lease condensate. With huge new amounts of lease condensate coming from America's condensate-rich tight oil fields -- the ones tapped by hydraulic fracturing or fracking -- the United States isn't producing quite as much actual crude oil as the raw numbers would lead us to believe. This EIA chart breaking down the API gravity of U.S. crude production supports this view.

Exactly how much of America's and the world's presumed crude oil production is actually condensate remains a mystery. The data just aren't sufficient to separate condensate production from crude oil in most instances.

Brown explains: "My premise is that U.S. (and probably global) refiners hit in late 2014 the upper limit of the volume of condensate that they could process" and still maintain the product mix they want to produce. That would imply that condensate inventories have been building faster than crude inventories and that the condensate is looking for an outlet.

That outlet has been in blended crudes, that is heavier crude oil that is blended with condensates to make it lighter and therefore something that fits the definition of light crude. Light crude is generally easier to refine and thus more valuable.

The trouble is, the blends lack the characteristics of nonblended crudes of comparable density (that is, the same API gravity), and refiners are discovering to their chagrin that the mix of products they can get out of blended crudes isn't what they expect.

So, now we can try to answer our questions. Brown believes that worldwide production of condensate "accounts for virtually all of the post-2005 increase in C+C [crude plus condensate] production." What this implies is that almost all of the 4 million-barrel-per-day increase in world "oil" production from 2005 through 2014 may actually be lease condensate. And that would mean crude oil production proper has been nearly flat during this period -- a conjecture supported by record and near record average daily prices for crude oil from 2011 through 2014. Only when demand softened in late 2014 did prices begin to drop.

Here it is worth mentioning that when oil companies talk about the price of oil, they are referring to the price quoted on popular futures exchanges -- prices which reflect only the price of crude oil itself. The exchanges do not allow other products such as condensates to be mixed with the oil that is delivered to holders of exchange contracts.

But when oil companies (and governments) talk about oil supply, they include all sorts of things that cannot be sold as oil on the world market including biofuels, refinery gains and natural gas plant liquids as well as lease condensate. Which leads to a simple rule coined by Brown: If what you're selling cannot be sold on the world market as crude oil, then it's not crude oil.

The glut that developed in 2015 may ultimately be tied to some increases in actual, honest-to-god crude oil production. The accepted story from 2005 through 2014 has been that crude oil production has been growing, albeit at a significantly slower rate than the previous nine-year period--15.7 percent from 1996 through 2005 versus 5.4 percent from 2005 through 2014 according to the EIA. If Brown is right, we have all been victims of the great condensate con which has lulled the world into a sense of complacency with regard to actual oil supplies--supplies he believes have been barely growing or stagnant since 2005.

"Oil traders are acting on fundamentally flawed data," Brown told me by phone. Often a contrarian, Brown added: "The time to invest is when there's blood in the streets. And, there's blood in the streets."

He explained: "Who of us in January of 2014 believed that prices would be below $30 in January of 2016? If the conventional wisdom was wrong in 2014, maybe it's similarly wrong in 2016" that prices will remain low for a long time.

Brown points out that it took trillions of dollars of investment from 2005 through today just to maintain what he believes is almost flat production in oil. With oil companies slashing exploration budgets in the face of low oil prices and production declining at an estimated 4.5 and 6.7 percent per year for existing wells worldwide, a recovery in oil demand might push oil prices much higher very quickly.

That possibility is being obscured by the supposed rise in crude oil production in recent years that may just turn out to be an artifact of the great condensate con.

 

But counting such a diverse group of liquids is impossible without substantial errors in each category. That mean that the error margin of and global production figure has margin or error around  +- 0.5% or even 1% or one Mb/d.  for example amount of oil produced and pumped to the surface at wellhead is different and greater that amount of oil that got to refineries (which along with chemical plants are major consumers) because of losses during transportation and evaporation or light fractions in case weather is hot during the period before oil is processed at refinery or chemical plant.  Also there are differences in reporting and errors in measuring oil density by various countries, difficulties of converting weight into volume and vice versa, etc.  There are also large differences in reporting between agencies ( aspofrance.viabloga.com)

Reporting of small producers (and small producer countries) is often very fuzzy and here various games can be and often are played with those report with compete impunity, if you have some agenda.  So any analyst who take published by agencies figures  as precise amount produced accuracy equal to five meaningful digits is iether idiot or crook. Only first three digits  probably can be countered as meaningful. In no way the forth digit is.  If the analyst is talking about "oil glut" based on those figures he/she is definitely a crook ;-). 

Now you understand that all talk about 1Mb/d glut is very suspect.

Que Bono and Wall Street HFT games with oil futures

Low oil prices are essentially a crime against humanity as oil is exhaustible resources and burning it now in oversized SUVs means depriving of fuel and extremely important important for chemical industry commodity future generations. So the question is "que bono"

From this point if view (which is a standard starting point of any crime investigation) the origin of low oil prices lies probably in Wall Street  which capitalized on the US government desire to hurt Russian economy, Saudi machinations (with Saudis as a partner in this crime ;-) related to thier declining market share in oil market.

It is not that difficult on the level of Wall street cguant to play the short game for a long time,  skillfully dropped the market prices by exploiting rumores, and with the help of MSM distorting statistics (just read a typical CNBC article to feel the level of crap they are trying to infuse in readers), exploiting Saudi desire to preserve market share combined with temporary oil overproduction. Temporary overproduction due to the period of oil prices over $100, when everybody and his brother in the USA were trying to discover and drill new shale well and convert junk bonds into flow of oil trying to get rich in such supposlydly lucrative market. 

World production at the same time stagnated. Russia exports are actually in decline for many years. After all Libya production now is off the market, due to destruction of their country and subsequent civil war caused by French intervention in alliance with the USA, Qatar and several other mid-eastern countries. If you analyze the US press the bias toward lower oil prices is  evident. 

 

Production by country and total world production

Estimated average world daily production of 95.71  Mb/d for 2015 ( (Jan 12, 2016 forecast) exceeds EIA’s Annual Energy Outlook 2015 forecast (April 2015) by 2.6 Mb/d! so much for EIA forecasting abilities.

For 2016 IEA predicts 95.93 (Jan 12, 2016 forecast) and for 2017 96.69 (also  Jan 12, 2016 forecast)

OPEC predictions were 94.5 Mb/d for 2015 (December 2015  forecast) with growth in 2020 to 97.6 (it presupposes investment of  around $250 billion each year in non OPEC countries and $40 billions annually by OPEC countries; money that with current oil prices are nowhere to come by):

In the downside supply scenario, 3.3 mb/d from non-OPEC supply is assumed to be lost by 2040 with respect to the Reference Case.

Oil production is highly concentrated.  The top dozen of out of 100 oil-producing countries accounted for over 73% of the world's oil production. The top three (Russia, Saudi Arabian and the USA) account for almost 40%. 

Here is a chart from  Bloomberg Business

Iraq and Iran are also large and important players but currently  they are definitely the second tier players.  That might change in the future.

Now what will (most probably) happen in 2016 with the major players

Now let's discuss Iran and Iraq

All three major oil producers (troika) are severely affected by the oil price slump, but for the USA as one of the largest world oil importers it is a mixed blessing (destruction of shale  industry and connected with it jobs is just a collateral damage for approximately $200 billion stimulus due to lower prices.

For the Russia and Saudis this is a huge negative development which  leads to unbalanced budgets (especially for Saudies who need $100 oil to balance the budget and  lost $100 billions of their foreign reserves in 2015) and depletion  of currency reserves (more for Saudis then Russia, but Saudis had bigger currency reserves and can benefit from being a vassal of the USA by commanding a higher prices for state assets in fire sale). 

All-in-all around 100 countries produce oil with top three producing around 40%,  and the top ten over 63% of the world's oil production.

According to International Energy Agency (EIA), in 2011 the top ten oil-producing countries accounted for over 63% of the world's oil production.[2] As of November 2012, Russia produced 10.9 million barrels of crude per day, while Saudi Arabia produced 9.9 million barrels.[3]

Top oil producers: According to EIA top 10 oil producer countries produced over 64 % of the world oil production in 2012. The top oil producers in 2012 were: Russia 544 Mt (13 %), Saudi Arabia 520 Mt (13 %), United States 387 Mt (9 %), China 206 Mt (5%), Iran 186 Mt (4 %), Canada 182 Mt (4 %), United Arab Emirates 163 Mt (4 %), Venezuela 162 Mt (4 %), Kuwait 152 Mt (4 %) and Iraq 148 Mt (4 %). In 2012 total oil production was 4,142 Mt. [4] In 2011 the world oil production was 4,011 Mt demonstrating an annually rising trend in oil production.[5]

  Country Production (bbl/day) Production (MT) Share of
World %
Date of
Information
 World 84,951,200 10,194 100% 2014 est. Peak Production
1 Russia 10,107,000 1212 14.05% 3/2015.[6] 10,107,000 (3/2015)
2 Saudi Arabia 9,735,200 1168 13.09% 12/2014.[6] 9,900,000 (1/1980)
3 United States 9,373,000 1124 12.23% 4/2015.[6] 9,610,000 (6/2015)
4 China 4,189,000 502 5.15% 5/2015.[6] 4,189,000 (5/2015)
5 Canada 3,603,000   4.54% 12/2014.[6] 3,603,000 (1/2015)
6 Iraq 3,368,000   4.45% 5/2015.[6] 3,368,000 (5/2015)
7 Iran 3,113,000   4.14% 12/2014.[6] 6,060,000 (1/1974)
8 United Arab Emirates 2,820,000   3.32% 12/2014.[6] 2,820,000 (1/2013)
9 Kuwait 2,619,000   2.96% 12/2014.[6] 2,650,000 (1/2013)
10 Mexico 2,562,000   3.56% 12/2014.[6] 3,476,000 (1/2004)
11 Venezuela 2,501,000   3.56% 12/2014.[6] 3,280,000 (1/1997)
12 Nigeria 2,423,000   2.62% 12/2014.[6] 2,627,000 (1/2005)
13 Brazil 2,255,000   3.05% 12/2014.[6] 2,255,000 (1/2015)
14 Angola 1,831,000   2.31% 12/2014.[6] 1,946,000 (1/2008)
15 Kazakhstan 1,573,000   1.83% 12/2014.[6]
16 Qatar 1,553,000   1.44% 12/2014.[6]
17 Norway 1,539,000   2.79% 12/2014.[6]
18 Algeria 1,462,000   2.52% 12/2014.[6]
19 Colombia 1,003,000   1.19% 12/2014.[6]
20 Oman 940,000   0.95% 12/2014.[6]
21 Azerbaijan 871,000   1.20% 12/2014.[6]
22 Indonesia 828,000   1.66% 12/2014.[6]
23 United Kingdom 801,000   1.78% 12/2014.[6]
24 India 772,000   1.04% 12/2014.[6]
25 Malaysia 570,000   0.82% 12/2014.[6]
26 Argentina 540,000   0.93% 12/2014.[6]
27 Ecuador 526,000   0.58% 12/2014.[6]
28 Egypt 514,000   0.80% 12/2014.[6]
29 Libya 470,000   0.85% 5/2015.[6]
30 Australia 338,000   0.70% 12/2014.[6]
31 Vietnam 337,000   0.36% 12/2014.[6]
32 Equatorial Guinea 270,000   0.41% 12/2014.[6]
33 Congo, Republic of the 265,000   0.33% 12/2014.[6]
34 Sudan 259,000   0.13% 12/2014.[6]
35 Thailand 241,000   0.45% 12/2014.[6]
36 Gabon 239,000   0.29% 12/2014.[6]
37 Turkmenistan 229,000   0.22% 12/2014.[6]
38 Denmark 175,000   0.31% 12/2014.[6]
39 Yemen 131,000   0.34% 12/2014.[6]
40 Brunei 112,000   0.17% 12/2014.[6]
41 Italy 106,000   0.17% 12/2014.[6]
42 Ghana 105,000   0.01% 12/2014.[6]
43 Chad 98,000   0.13% 12/2014.[6]
44 Romania 85,000   0.14% 12/2014.[6]
45 Trinidad and Tobago 81,000   0.18% 12/2014.[6]
46 Pakistan 81,000   0.16% 12/2014.[6]
47 Cameroon 81,000   0.09% 12/2014.[6]
48 Timor-Leste 79,000   0.11% 12/2014.[6]
49 Peru 69,000   0.17% 12/2014.[6]
50 Uzbekistan 65,000   0.08% 12/2014.[6]
51 Tunisia 55,000   0.11% 12/2014.[6]
52 Germany 52,000   0.19% 12/2014.[6]
53 Bolivia 51,000   0.06% 12/2014.[6]
54 Bahrain 50,000   0.06% 12/2014.[6]
55 Cuba 50,000   0.06% 12/2014.[6]
56 Turkey 48,000   0.06% 12/2014.[6]
57 Ukraine 41,000   0.12% 12/2014.[6]
58 New Zealand 40,000   0.07% 12/2014.[6]
59 Ivory Coast 36,000   0.07% 12/2014.[6]
60 Papua New Guinea 34,000   0.04% 12/2014.[6]
61 Belarus 30,000   0.04% 12/2014.[6]
62 Netherlands 28,000   0.07% 12/2014.[6]
63 Syria 23,000   0.48% 12/2014.[6]
64 Philippines 21,000   0.02% 12/2014.[6]
65 Albania 21,000   0.01% 12/2014.[6]
66 Mongolia 21,000   0.01% 12/2014.[6]
67 Burma 20,000   0.02% 12/2014.[6]
68 Congo, Democratic Republic of the 20,000   0.02% 12/2014.[6]
69 Poland 19,000   0.04% 12/2014.[6]
70 Austria 17,000   0.03% 12/2014.[6]
71 France 15,000   0.08% 12/2014.[6]
72 Suriname 15,000   0.07% 12/2014.[6]
73 Serbia 12,000   0.01% 12/2014.[6]
74 Hungary 11,000   0.03% 12/2014.[6]
75 Guatemala 10,000   0.02% 12/2014.[6]
76 Croatia 10,000   0.03% 12/2014.[6]
77 Chile 7,000   0.01% 12/2014.[6]
78 Mauritania 7,000   0.02% 12/2014.[6]
79 Spain 6,000   0.03% 12/2014.[6]
80 Japan 5,000   0.16% 12/2014.[6]
81 South Africa 4,000   0.22% 12/2014.[6]
82 Bangladesh 4,000   0.01% 12/2014.[6]
83 Czech Republic 3,000   0.01% 12/2014.[6]
84 Lithuania 2,000   0.01% 12/2014.[6]
85 Belize 2,000   0.00% 12/2014.[6]
86 Bulgaria 1,000   0.00% 12/2014.[6]
87 Georgia 1,000   0.00% 12/2014.[6]
88 Kyrgyzstan 1,000   0.00% 12/2014.[6]
89 Barbados 1,000   0.00% 12/2014.[6]
90 Greece 1,000   0.00% 12/2014.[6]

Global oil production has been split into three geo-political categories: 1) USA and Canada, 2) OPEC and 3) the Rest of the World (RoW). RoW production bears the hallmarks of having peaked in the period 2005 to 2010 and this has consequences for oil prices, demand and prosperity in parts of the world, especially the OECD. Most of the growth in oil supply has been in the USA and Canada where the market has been flooded with expensive oil.

Here are the data for crude oil + condensate + natural gas liquids (C+C+NGL) and exclude biofuels and refinery gains that are included by the EIA in their total liquids number.

The 1.1 million bpd gain in US oil production was the largest year over year gain for any country in 2013, and the largest gain in US history. Mostly due to shale oil. The US remained the world’s third-largest oil producer at 10 million bpd in 2013, trailing Saudi Arabia’s 11.5 million bpd and Russia’s 10.8 million bpd. Rounding out the top five were China (4.2 million bpd) and Canada (3.9 million bpd).

Just to put the current US oil boom into further perspective, over the past five years global oil production has increased by 3.85 million bpd. During that same time span, US production increased by 3.22 million bpd — 83.6 percent of the total global increase.

If the current “low oil price crisis”  does indeed destroy high cost production capacity then this will raise the question if the high cost sources can  be brought back? And at what cost?  Especially interesting is the question: "Can the shale industry can come back from the near death experience?"

What MSM do not discuss: depletion rates

Low oil prices are suicidal for mankind in a long run. Oil is too valuable and irreplaceable resource  for chemical industry to be burned in excessive qualities in transport due to low prices, especially when hybrid and all electrical cars is a reality and price differential with ordinary cars for small card is not that great (less then twice). Electricity unlike oil can be produced from renewable resources such as nuclear (breeder reactors are a reality), wind and solar (solar panels improved dramatically in the last ten years).  At the same time in the USA (and probably elsewhere) sales of SUVs and light trucks are again booming.  That say something about level of intelligence of the USA government. 

With producers in the US and across the world pumping as much as they can, they are doing it at a cost of running into diminishing production rates (depletion) on those existing wells sooner. The 2008 IEA survey of ~800 major fields (including all giants and supergiants) which produced over 60% of that year crude showed an average annual decline rate of 5.1%.

Most countries in the world now face depletion of their reserves. Some face acute depletion (Indonesia, Mexico, etc), some still manage to maintain plato (Russia, Saudi Arabia) or even increase production (the USA, Canada, Iraq, Iran, in the future probably Libya and Syria),  But generally around 4% of total world capacity is depleted per year and without adequate investment can't be replaced. in 2008 IHS estimated global oil field decline rates to be around 4.5%. EIA did a study estimated the worldwide decline rates to be around 6.7%.

When peak oil has been discussed decades ago it was considered a 3% decline rate in production was manageable -- 5% would considered extremely difficult to deal with  (The Guardian)

Now depletion rates are higher (source: IHS, Deloitte & Touche and USGS databases; other industry sources; EIA estimates and analysis)

Outside a couple of countries such as Iran, Iraq and Venezuela offshore production grows faster the onshore production. Shale production growth in the past was the fastest, especially in the USA.  That means a switch to more expensive sources of oil.

Given the increasing decline rates, the oil industry needs considerable capex investments. In the absence of them it slide into irreversible decline.  New technologies greatly help but there are natural limits of what you can achieve with them. they are not substitute to finding new fields which is a very expensive activity.

US oil production and forecast for 2016

Among three major oil producing nations (USA, Russia and Saudi Arabia) the USA is the most dynamic nation, and the most difficult to predict due to large share of shale oil in the USA output. Gradual destruction of the US shale industry ability to pump oil  due to low prices is now established fact. That only discussable item is how quick it will proceed. The first 12 months were cushioned by hedges, but at the and of 2015 most companies are now  "swimming naked". 

Still there are signs that the US oil production peaked in 2015. Decimation of shale can't be compensated by offshore drilling. The sinking shale that could easily lose 1 Mb/d in 2016

At the same time in 2015 total US oil production remained remarkably stable, bank loans were extended or refinanced and bankruptcies were few and does not look like an epidemic. So forecaster of "doom and gloom" were wrong by at least one year. There are no signs of panic in view of drop of oil prices below the level of sustainable production. After all oil is the strategic industry and to leave to market forces is extremely unwise. Wall Street probably has other opinion. As John Kenneth Galbraith said “The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil.” (The Great Crash of 1929). They live by the next quarter results.

Dec 8, 2015 EIA data  can be found http://www.eia.gov/forecasts/steo/tables/?tableNumber=29#

EIA estimates that total U.S. crude oil production declined by about 60,000 b/d in November 2015 compared with October. That decline will accelerate in December. Crude oil production will probably gradually decrease through the third quarter of 2016 before growth resumes late in 2016, it higher oil prices (at least above $50) materialize. 

Projections of the U.S. crude oil production

Saudi Arabia oil production and forecast for 2016

Oil production

There are signs that Saudi Arabia oil production peaked or close to a peak. A terror attack in 2016 Saudi Arabia is not very likely. Shiite organizations have not resorted to terrorism in many years and they seem now focused on fighting ISIS. which although sponsored by Saudis is a distinct organization.

Saudi Arabia produced 10.28 million barrels a day in October, 2015,  up from 9.69Mb/done year ago.   Chances that production will reach 11 Mb/d are slim. There are strong signs that they have huge difficulties in increasing oil extraction volume.  All their efforts to increase production led to increase of less then 1Mb/d  increase in 2015 (7% increase in production). Which is partially offset by  increase in internal consumption (In 2015 Saudi Arabia oil demand rose by a notable 0.21 mb/d, which equates to a nearly 8% rise y-o-y, )  Here is relevant quote (OilPrice.com, Dec 21, 2015)

Crude exports from Saudi Arabia rose from an average of 7.111 million barrels per day in September to 7.364 million per day in October, according to the latest data from the Joint Organizations Data Initiative (JODI), which monitors the oil industry. The report said this quantity was the most oil exported from Saudi Arabia since June and 7 percent higher than in October 2014.

And those doubts about Saudis ability to increase production exist for some time. When U.S. president George W. Bush asked the Saudis to raise production on a visit to Saudi Arabia in January 2008 they declined. After that Bush questioned whether they had the ability to raise production any more.

But they did managed to achieve temporary production peak: in April 2015, the Saudi oil minister Ali Al-Naimi said that Saudi Arabia produced 10.3 million barrels per day in March that year, which was the highest figure based on records since the early 1980s.  The previous peak in production was in August 2013 at 10.2 million barrels per day.

Theoretically as its own population and internal consumption is growing and depletion of its wells reached critical level, they should concentrate of providing the standard of living for future generations, not dump the oil at the lowest price.  In three decades if the current annual increase in internal consumption continues at, say, 5% and production stays flat Saudi Arabia paradoxically may became oil importing county.

Still Saudi are known to use the most advanced (and most expensive) technologies of boosting the extraction rate to counter the natural decline curve.   They now are exploring shale technology and reportedly are trying to hire workers from the USA who became unemployed during the downturn of shale industry started in mid 2014.

Exports

Contrary to MSM coverage about Saudis flooding world with their oil, year over year increase in exports is slim. Basically they are flat (due to rapidly increasing population and domestic consumption): 

Net exports were around 7.111 Mb/d (September, 2015). But with current low prices this is an economic suicide, even if this is an economic war against Iran -- attempt to hurt its major competitor when  sanctions are lifted.

The net revenue dropped more then a half and the country is burining its currency reserves (which are substantial and at current burn rate will last for more then three years)  So there is something fishy in this propagated by Western MSM idea of Saudis defending their market share. The cost of defending their market share proved to be in hundred billions of lost revenue, which far exceeds their losses from rise of the US shale oil production (if the prices remained above $100 per barrel).  Also the question arise, why now. Shale was a long story in the USA and reached present size around decade ago (2005).

This is definitely a declation of war. But if the target is not the USA (and it can't be the target as Saudis are the USA vassal state), then war of whom ?  The USA is actually a beneficially of this  war (like most wars in this region) and  got a half trillion subsidy due to lower price of oil.  And  "corrupt and atheistic" Western Europe also got similar subsidy.

Business Insider

A report by Citigroup has warned that Saudi Arabia could run out of oil to export by 2030, raising fears that oil prices may rise significantly in coming years.

... ... ...

Its export capacity could steadily reduce and, “if nothing changes, Saudi may have no available oil for export by 2030”, Citi analyst Heidy Rehman wrote.

Saudi Arabia consumes 25pc of its oil output and oil accounts for about 50pc of its electricity production. With peak power demand rising by about 8pc per year, the nation is aiming to more than double its power capacity by 2032 through new nuclear and solar instalations.

Internal consumption

Saudi Arabia produced 10.28 million barrels a day in October 2015 and exported  7.364 million barrels a day. the difference  is less then 3 Mb/d

In September figure were 10.28 and 7.111. The difference is above 3 Mb/d.

So we can assume that 2015 internal consumption is approximately 3 million barrel a day.  In 2015 Saudi Arabia oil demand rose by a notable 0.21 mb/d, which equates to a nearly 8% rise y-o-y, driven by transportation fuels such as jet/kerosene, gasoline and diesel oil, which grew at high rates. The higher consumption of jet fuel reflects the increase in travel activity towards the end of the summer vacation, which coincided with the Hajj season.

Internal consumptions rapidly growing year over year with some years (2009) close to 10% growth (Saudi Arabia Crude Oil Consumption by Year (Thousand Barrels per Day)):

2005 1,963.64 4.20 %
2006 2,020.02 2.87 %
2007 2,094.33 3.68 %
2008 2,236.99 6.81 %
2009 2,436.12 8.90 %
2010 2,579.73 5.90 %
2011 2,760.91 7.02 %
2012 2,861.00 3.63 %
2013 2,925.00 2.24 %

Russia oil production and forecast for 2016

Russian oil production considered to be at "over peak" stage with increases mainly due to offshore drilling. In 2014 total petroleum and other liquids production in 2014 were 10.8 Mb/d  (EIA). Russia crude oil production in late 2015 was around 10.20M, up from  10.08Mb/done year ago. That's was an unanticipated, even by Russian Ministry of Energy result of activities of small companies. which managed to increase of  production by  1.12% from one year ago, when most analysts expected a slight decline (Russia Crude Oil Production (Monthly, Barrels per Day).

Despite severe depreciation of ruble and sanctions, in 2015 Russia managed to reach the level of production that exceed the level of former USSR period. At the same time most of Russia's fields are mature fields and the production from them is declining for long time,  offset only by new more expensive projects with less total volume. Unless Arctic oil and other expensive oil are economical to produce (which requires over $100 bbl price) the national path for Russian production is iether long plato or down. 

Russian oil extraction (red) and oil exports (green) in metric tons

 

In 2015 Russia managed to increase exports the first time in six years, but that does not change general situation: internal consumption is growing pretty robustly with growth of car fleet and decline of production due to national depletion of oil conventional wells became more and more difficult to compensate with new discoveries. And new fields, even if such exist, can't be now tapped because capital expenditures by most Russian oil companies now are slashed to the bone (russia is more like the USA in this respect with over dozen of major oil companies producing   oil).

At current oil prices Arctic oil now is out of reach and only existing platforms will remain in production. All of them are losing money. conventional wells are still profitable with same remaining profitable up to $20 per barrel. Still for the next several years Russia probably will be able to keep the current level of production due to huge previous investments dome in 2010-2014 in a few new fields (Bloomberg Business, December 20, 2015):

The other big boosts to Russian production this year have come from a few mid-sized new fields like those of Severenergia in the Arctic Yamal region. Co-owners Novatek OJSC and Gazpromneft PJSC invested in the $9.2 billion project back when oil prices were high. With most of the capital already committed, operating costs now are relatively low and output of gas condensate, a light and especially valuable form of crude, is up five-fold this year.

One side effect of falling oil prices -- the 52 percent plunge in the ruble over the last two years -- has helped Russian oil producers, chopping their costs in dollar terms since between 80 and 90 percent of their spending comes in rubles.

... ... ...

To be sure, few in the industry expect Russia to be able to sustain the current performance for more than a few years. Tax hikes and lack of financing have cut deeply into exploration drilling, which is down 21 percent this year, and handicap the larger new projects that are needed to replace the country’s older fields as they run dry.

... ... ...

In some parts of the Russian oil patch, low prices are already causing pain. At $40 a barrel, “half of our fields could be stopped. Heavy oil, low horizons, mature horizons are all unprofitable at a price of $40-45. We are waiting for better times,” Russneft OJSC Board Chairman Mikhail Gutseriev said in an interview on state television early this month.

Unfortunately just before the oil prices crush Russia was engaged in several high cost drilling projects in Arctic and was caught naked when oil price dropped. ( see Petroleum industry in Russia - Wikipedia).  Timing can't be more bad as this is a really expensive oil, probably around $60 per barrel or higher at wellhead.  Which are now sold at a huge discount.  Igor Sechin proved to be a weak leader of the Russia major state owned oil company Rosneft.  Government refused to bail out the company which faces large external debt and it was saved by some "white knife" billionaire.

Moscow Exile, December 19, 2015 at 11:19 am

Undeterred by OPEC’s decision to keep pumping and drive out U.S. shale rivals, Russian oil output continued to grow, in October setting a new monthly record for the post-Soviet era. Explorers have remained profitable under a friendly tax system and low production costs.

Mystery Benefactor

Rosneft assuaged concerns over the sustainability of Russia’s biggest corporate debt load after the company received a $15 billion advance payment for oil supplies from a source the company didn’t identify, according to quarterly reports published Nov. 13. The inflow of cash will help Rosneft meet $2.5 billion in debt due in the fourth quarter, $13.7 billion in 2016 and $11.3 billion in 2017, according to a presentation on its website.

See: One Year Into New OPEC Era, You Made 12% Buying These Oil Bonds

It looks like the board is in denial of the blunder with overinvest they made:

18 December 2015
Rosneft Holds Board of Directors Meeting

On December 18, Rosneft Board of Directors considered in Vladivostok interim results of its 2015 operations, the business-plan for 2016-2017, the Long-term development program and the energy efficiency program of the Company.

The following decisions were taken:

1. The Board of Directors considered and acknowledged 2015 Rosneft interim results and the intermediate results of the implementation of the long-term development program of the Company. The Board of Directors welcomed the results of the implementation of programs aimed at raising efficiency in challenging economic environment: the Company maintained low levels of OPEX and eased its debt burden.

2. The Board of Directors considered and acknowledged the business-plan for 2016-2017, structured in accordance with a conservative macroeconomic scenario and focused on the implementation of the Long-term development program of the Company, approved by the Government of the Russian Federation.

Within the ambit of delivering strategic goals of boosting production, securing deliveries of oil and oil products, maintaining a market share (both in Russia and abroad), the Company plans to increase capital expenditures by a third (compared to 2015 levels). The investment development program envisages the achievement of strategic goals of hydrocarbon production growth by means of accelerated commencement of oil and gas greenfields whilst exercising a balanced external financing program. After the completion of transition to Euro-5 motor fuels production in December 2015, refineries’ modernization program will be focused on increasing processing depth. Also, the program of cutting operating costs and enhancing operating and financial efficiency will be continued. Hence the leadership in the industry by the operating costs and capital costs will be guaranteed.

... .... ...

Commenting on the results of the Board meeting, Rosneft Chairman of the Management Board Igor Sechin said: “Measures taken by the Company for strengthening its oilfield services business dimension in 2015 enabled Rosneft to increase production in order to guarantee supplies to its traditional markets while keeping operating and capital expenditures at the record-low levels. The Company consistently generates free cash flow, providing funding sources for its investment decisions in accordance with 2015-2016 business plan approved by the Board of Directors and the Long-term Development Program”.

In August 2014, it was announced that preparations by the Russian government to sell a 19.5 percent stake in the company were underway and would most likely be sold in two tranches. So far this chunk of the company was not sold, probably because of low oil prices. 

Russia oil internal consumption is generally more or less stable and growling at a very slow page outside several 'abnormal" years. In 2016 it will not probably grow much as the economy remain is conditions close to recession. Lukoil chairman has said that he  expects Russia to produce less oil  in 2016 than in 2015

Russia internal oil consumption is currently around 3.3 Mb/d, up from 3.2 Mb/d one year ago. This is a change of 3.15% from one year ago.

2005 2,785.14 1.25 %
2006 2,803.47 0.66 %
2007 2,885.10 2.91 %
2008 2,981.92 3.36 %
2009 2,888.53 -3.13 %
2010 3,081.82 6.69 %
2011 3,352.11 8.77 %
2012 3,395.11 1.28 %
2013 3,320.00 -2.21 %

It is expected that it will continue to grow by around 0.1 Mb/d per year as car fleet is rapidly growing.. Also Russia will process more raw oil in 2016 then in 2015 which also negatively influence export of raw oil

Oil producing countries with civil wars/sanctions/military conflicts  

This is a very complex topic that is beyond the scope of this analyses. But paradoxically such countries are the "last hurrah" for increasing the oil production, as they do have reserve that can't be tapped at reasonable costs now but at the same time represent the last spot of "cheap oil" deposits. Some facts:

Oil consumption

Mankind dependency on oil is hardwired into fabric of our civilization.  It is an irreplaceable product. But as much as  2/3 of this extremely valuable chemical industry resource is burned in transportation. That actually means that sales of cars and trucks are instrumental to predicting future demand at least one year ahead.  And they are growing especially fast in China and India. They also accelerated in the USA.

World oil consumption is often given in millions barrels per day (mbpd or Mb/d). BP stated that in 2014 global oil demand increased by 1.4 Mb/d over 2012 to 91.3 Mb/d.  Assuming on average $60 per barrel this is 5.5 trillion dollars a year of additional expenses on energy.   Here are actual figures of world consumption for the last decade ( World Crude Oil Consumption by Year (Thousand Barrels per Day))

2005 84,668.04 1.79 %
2006 85,586.39 1.08 %
2007 86,700.09 1.30 %
2008 86,027.86 -0.78 %
2009 84,953.36 -1.25 %
2010 87,839.10 3.40 %
2011 88,657.70 0.93 %
2012 89,668.91 1.14 %
2013 90,354.27 0.76 %

As BP noted in February 2015 "Global demand for energy is expected to rise by 37% from 2013 to 2035, or by an average of 1.4% a year".  So it is reasonable to assume that oil demand will rise approximately the same rate, which taking into account the current rate of consumption is above 1Mb/d.

The oil consumption proved to be extremely resilient  to economic conditions (that only drop in the last decade happened in 2009) and is growing globally each year by rate about 1 Mb/d due to increase of population and cars and trucks on the road. ( Peak oil - Wikipedia )

The table above does not contain data for 2014 and 205. Here they are:

As for the forecast of 2015, the growth of consumption is predicted in the range of 1.2-1.4 MB/d:

According to IEA "an annual $630 billion in worldwide upstream oil and gas investment – the total amount the industry spent on average each year for the past five years – is required just to compensate for declining production at existing fields and to keep future output flat at today’s levels" (iea.org). It is easy to see that such amount is difficult to come by when prices of oil are in $30-$40 range,  do the decline of world oil output might happen faster then growth of consumption.

OPEC forecast is usually more reliable then EIA but generally very similar, despite having different set of biases (G7 bias in case of IEA and Saudi Arabia bias for OPEC forecast) They predict higher growth of demand in 2015 and lower growth in 2016:

World oil demand is expected to grow by 1.50 mb/d in 2015 to average 92.86 mb/d, ...  In 2016, world oil demand growth is seen reaching 1.25 mb/d ...  to average 94.14 mb/d.

India is set to become the world’s third largest oil importer after the US and China before 2025, according to the International Energy Agency (IEA). India’s energy needs would overtake Japan as the third largest net importer of oil before 2025. EIA predict stable consumption level until 2040 only 1.1% growth on average (EIA)

The bulk of that demand growth is expected to come from developing countries in Asia. With U.S. supply falling, where are the new oil supplies coming from ? There simply isn’t enough to go around.

Double-digit percentage increases in oil consumption were recorded by Pakistan, Venezuela, and Azerbaijan from 2012 to 2013, and over the past five years double-digit percentage consumption increases were recorded by Central and South America (15.2 percent), the Middle East (18.3 percent), Africa (12 percent), Asia Pacific (17.4 percent), and the former Soviet Union (12.8 percent). World Sets New Oil Production and Consumption Records

Per country picture: not all countries are created equal

The most significant factor affecting petroleum demand has been human population growth. Large countries that previously were dirt poor and consumed minuscule amount of oil now now rapidly growing (India and China) are primary drivers of consumption. Arab countries also experience rapid population growth (Saudi Arabia is one example). The United States Census Bureau predicts that world population in 2030 will be almost double that of 1980. Oil production per capita peaked in 1979 at 5.5 Giga barrels/year but then declined to fluctuate around 4.5 Giga barrels/year since. In this regard, the decreasing population growth rate since the 1970s has somewhat ameliorated the per capita decline.

Not all consumers of oil are created equal.

Source: CIA World Factbook - Unless otherwise noted, information in this page is accurate as of January 1, 2014

See also: Oil consumption per capita bar chart

Country Name Oil consumption per capita
 (bbl/day per 1000 people)
Year of Estimate
Singapore 202 2012
Nauru 139 2012
Kuwait 134 2012
Luxembourg 119 2012
Bahamas, The 111 2012
United Arab Emirates 103 2012
Saudi Arabia 100 2012
Falkland Islands (Islas Malvinas) 96 2008
Seychelles 89 2012
Qatar 85 2012
Greenland 69 2012
Canada 64 2012
United States 61 2012
Netherlands 60 2012
Belgium 60 2012
Cayman Islands 57 2012
Antigua and Barbuda 56 2012
Iceland 56 2012
New Caledonia 54 2012
Libya 51 2012
Norway 47 2012
Malta 46 2012
Oman 46 2012
Korea, South 45 2012
Australia 44 2012
Taiwan 43 2012
Hong Kong 42 2012
Brunei 42 2012
Finland 41 2012
Puerto Rico 41 2012
Saint Kitts and Nevis 39 2012
Sweden 39 2012
Bahrain 38 2012
Japan 35 2012
New Zealand 35 2012
Greece 34 2012
Austria 34 2012
Trinidad and Tobago 33 2012
Slovenia 32 2012
Israel 31 2010
Barbados 31 2012
Germany 31 2012
Spain 31 2012
Switzerland 31 2012
Ireland 30 2012
Macau 29 2012
France 28 2012
Panama 28 2012
Grenada 28 2012
Suriname 27 2012
Venezuela 27 2012
Portugal 26 2012
United Kingdom 26 2012
Lebanon 26 2012
Denmark 25 2012
Italy 25 2012
Turkmenistan 25 2012
Estonia 24 2012
Iran 23 2012
Iraq 22 2012
Jamaica 22 2012
Belize 21 2012
Saint Vincent and the Grenadines 19 2012
Czech Republic 19 2012
Malaysia 19 2012
Lithuania 19 2012
Saint Lucia 18 2012
Mexico 18 2012
Chile 18 2012
Mauritius 18 2012
Armenia 18 2012
Belarus 17 2012
Fiji 17 2012
Cuba 16 2012
Djibouti 15 2012
Russia 15 2012
Brazil 10 2012
Turkey 8 2012
China 7 2012
India 3 2012
Pakistan 2 2012
Bangladesh 1 2012

Consumption in net oil exporting countries is limited to the volume of production and price while consumption in net oil importing countries by the price of oil and the oil that is left for export after internal consumer got their share (which depends on price of oil).  In other words, to paraphrase “Animal Farm,”  all pigs are equal but some pigs are more equal then others.

Of course pigs with strong military (read G7) are also more equal then others and can change this equation in their favor by force and already started doing this (USA in Iraq, France in Libya).

While demand for oil continues to increase globally, oil producing countries also increase their internal consumption rapidly. For example increase in internal consumption of Saudi Arabia led to a situation when since 2005 their exports are essentially flat despite increase of production.

Having noted Steven Kopits’ continuing track record of being remarkably prescient regarding global oil supply and demand analysis, I do have one issue with global supply & demand analysis -– consumption in net oil exporting countries versus consumption in net oil importing countries, to -- wit, to paraphrase “Animal Farm,” in my opinion some consumers are more equal than others.

Let’s assume a scenario where all oil production and refining operations are in oil exporting countries and let’s ignore things like refinery gains. Total petroleum liquids production is 80 mbpd and consumption in the oil exporting countries is 40 mbpd, and they therefore net export 40 mbpd to oil importing countries.

Production rises by 2.5 mbpd in the oil exporting countries, so total supply increases from 80 mbpd to 82.5 mbpd. However, consumption in the oil exporting countries rose by 5 mbpd. So, Net Exports = Production – Consumption = 82.5 mbpd – 45 mbpd = 37.5 mbpd.

My point is that a global supply and demand analysis would not accurately represent the situation in the net oil importing countries, i.e., a 6.25% decline in the supply available to net importers (40 mbpd to 37.5 mbpd), although global supply is up by 3.125%, 80 mbpd to 82.5 mbpd.

Of course, the crux of what I call “Export Land Model” or ELM, is that for a number of reasons (subsidies, proximity to production, legal restrictions, etc.), consumption in oil exporting countries tends to be satisfied before oil is exported.

Interesting enough, the case histories tend to show that regardless of how oil exporters treat internal consumption, given an ongoing production decline, the net export decline rate tends to exceed the production decline rate and the net export decline rate tends to accelerate with time.

For example, Indonesia subsidizes petroleum consumption and the UK heavily taxes petroleum consumption, but both former net oil exporters showed accelerating rates of decline in their net exports (in excess of their respective production decline rates).

Here are the ELM Mathematical Facts of Life:

Given an ongoing production decline in a net oil exporting country, unless they cut their domestic oil consumption at the same rate as the rate of decline in production or at a faster rate, the resulting net export decline rate will exceed the production decline rate and the net export decline rate will accelerate with time. Furthermore, a net oil exporter can become a net oil importer, even with rising production, if the rate of increase in consumption exceeds the rate of increase in production, e.g., the US and China.

The (2005) Top 33 net exporters showed a slight increase in production from 2005 to 2013, from about 62 mbpd to 63 mbpd (total petroleum liquids + other liquids, EIA), but their rate of increase in consumption exceed their rate of increase in production and their combined net exports (what I call Global Net Exports, or GNE) fell from 46 mbpd in 2005 to 43 mbpd in 2013.

Furthermore, China and India (“Chindia”) consumed an increasing share of a post-2005 declining volume of GNE. What I call Available Net Exports (ANE, or GNE less Chinidia’s Net Imports, CNI) fell from 41 mbpd in 2005 to 34 mbpd in 2013.

Here’s the Available Net Exports problem:

Given an ongoing decline in GNE–and it’s when, not if–then unless the Chindia region cuts their oil consumption at the same rate as the rate of decline in GNE, or at a faster rate, the resulting rate of decline in ANE will exceed the GNE decline rate and the ANE decline rate will accelerate with time.

From 2005 to 2013, GNE fell at 0.8%year. From 2005 to 2013, ANE -- the supply of Global Net Exports of oil available to importers other than China & India -- fell at 2.3%/year.

The USA consumption

The United States remains the world's largest consumer of petroleum. The United States uses most of oil per capita in the world.  Between 1995 and 2005, US consumption grew from 17.7 Mb/d (2,810,000 m3/d) to 20.7 Mb/d (3,290,000 m3/d), a 3,000,000 barrels per day (480,000 m3/d) increase. According to EIA Jan 12, 2016 report (eia.gov):

In other words the USA consumption is approximately equal to total Saudi export capacity. 

The U.S. Energy Information Administration (EIA) includes volumes of biofuels in data on total petroleum consumption. Per capita consumption of oil in the USA is one of the highest in the worlds and exceeds, for example, Russian per capita consumption four times.

Looking forward, both the EIA and the EIA project that U.S. oil demand will oscillate around 20 Mb/d mark. That might change if oil price stays low for several years.

The USA consumption is highly concentrated on transportation sector and in private cars sector is quite wasteful. The same population in Germany, Great Britain, France, Poland, the low countries and Scandinavia use 10 Mb/d.

Peter, 12/21/2015 at 4:33 pm
Watcher

1)US consumption is besides a couple of small countries the highest in the world.

http://www.indexmundi.com/map/?v=91000

compared to other western industrial countries it’s consumption is totally unjustifiable.

2) Driving a Ford F150 or an ampera to work has nothing to do with GDP and everything to do with needless oil consumption. So stop saying things which even an 8 year old would find obvious

US consumers will not cut consumption out of the goodness of their hearts, they will be forced to do so when prices make cuts necessary.

China consumption

China, by comparison, increased consumption from 3,400,000 barrels per day (540,000 m3/d) to 7,000,000 barrels per day (1,100,000 m3/d), an increase of 3,600,000 barrels per day (570,000 m3/d), in the same time frame.

China surpassed the United States as the world’s largest crude oil importer in 2015. As China’s economic growth is predicted to decrease from the high rates of the early part of the 21st Century that level might grow more slowly, but still China is so far behind the USA in consumption of gasoline per capita the trend toward more equal consumption clearly will increase china figures dramatically. Much depends how quickly china will grow middle class, which owns individual cars.

India consumption

India is burning over 4 mbpd now. India's oil imports are expected to more than triple from 2005 levels by 2020, rising to 5 million barrels per day.  Look at Energy Export Databrowser to see the consumption line for each country. 45 degree slope for India, just a few degrees less than China’s slope. KSA’s slope looks early exponential. No reason why it shouldn’t be. It’s their oil.

Russian consumption

Russian internal consumption grows rapidly and that means that in the future Russia will export less oils. Russian leadership have found itself unprepared to the dramatic drop of oil prices and now will take moves to refine more oil at home, and selling less raw oil. The fact that Russia sells mostly unprocessed oil was a blunder that costs Russia billions and Putin had shown ability to learn from mistakes. 

Russia's Key Energy Statistics world rank
Total Primary Energy Production
2012
55.296
Quadrillion Btu
3
Total Primary Energy Consumption
2012
31.522
Quadrillion Btu
3
Dry Natural Gas Production
2011
22,213
Billion Cubic Feet
2
Total Petroleum and Other Liquids Production
2014
10,853
Thousand Barrels Per Day
3
Total Primary Coal Production
2013
388,013
Thousand Short Tons
6

Compare that with the USA

United States' Key Energy Statistics world rank
Total Primary Energy Production
2012
79.212
Quadrillion Btu
2
Total Primary Energy Consumption
2012
95.058
Quadrillion Btu
2
Dry Natural Gas Production
2011
22,902
Billion Cubic Feet
1
Total Petroleum and Other Liquids Production
2014
13,973
Thousand Barrels Per Day
1
Total Primary Coal Production
2013
984,842
Thousand Short Tons
2

India

India's existing domestic production of about 0.86 Mb/d is only about 25% of its current consumption of 3,47 Mb/d.  According to the EIA, its production peaked at 996,000 barrels per day in 2011. Energy consumption in India is likely double by 2031.   The CAGR (compound annual growth rate) for the ten years ending in March 2014 is above 3.5%.

Domestic production of  oil is relatively stable. The EIA (US Energy Information Administration) estimates that India had close to 5.7 billion barrels of proven oil reserves at the beginning of 2014. About 44% of the reserves are onshore resource.

 Imports is likely to rise  from current 75 percent to 80 percent by the end of the 12th five year plan (2016-17). According to the Directorate General of Commercial Intelligence and Statistics, crude oil and refined products made up over 28 percent and 30 percent of India's import of principal commodities in 2010-11 and first half of 2011-12 respectively.

India is a major crude oil refiner. India petroleum refining capacity has outstripped demand consistently. Since 2002, the country's export of petroleum products has risen from 10 million tones to around 60 million tones in 2011-12, an average annual growth of over 20%.

Analyzing India’s oil consumption

According to IES (International Energy Statistics) presented by the EIA (US Energy Information Administration), the CAGR for total petroleum consumption for the world was 0.8% from 2005 to 2013. This consumption has been measured in thousand barrels per day. In the same period, China saw its consumption increase by 5.1%. In CAGR terms, India’s consumption increased by 4.1%. In contrast, the US saw its consumption decrease by 1.2%.

Per sector consumption

Oil consumption is distributed amongst four broad sectors: transportation, residential, commercial, and industrial. In terms of oil consumption, transportation is the largest sector and the one that has seen the largest growth in demand in recent decades. This growth has largely come from new demand for personal cars. In the USA it accounts for approximately 68.9% of all the oil used. Globally it is close to 55%

There are also "shadow" consumers of oil. For example military is important but often underreported or unreported consumer. So in no way published figured of consumption can be taken at face value. 
 

Consumption by transportation sector

Approximately two-thirds of U.S. oil consumption is due to the transportation sector. Slightly less for the world. 

In the USA consumption is depicted on the following picture

Private transportation is gradually became more efficient in miles per gallon metric (so energy consumption is shifted to the production of battery and electrical motors).  Most of the efficiently is already obtained on cars such as Toyota Prius which averages probably 40 miles per gallon and can run on electrical engine at low speeds/city traffic which is killing regular car efficiency.  Further substantial improvement is unlikely as traffic jams are the most important feature of morning commute in the USA. Traffic congestion, especially at rush hour, is a problem in most of the USA large cities. A 2009 study found that traffic congestion costs the United States almost $87.2 billion. The economic costs of traffic congestion have increased 63% over the past decade, and despite the declining traffic volumes caused by the economic downturn, Americans still waste more than 2.8 billion US gallons (11,000,000 m3) of fuel each year as a result of traffic congestion. Motorists also waste 4.2 billion hours annually, or one full workweek per traveler.

Private transportation sector oil consultation with gradually rise with the growth of population.

It's not only car and trucks burn fuel on the roads. Maintaining road surface is pretty fuel-intensive activity as well. With the development of the  Eisenhower Interstate Highway System in the 1950s, the road system in the USA, as of 2010, has a total length of 47,182 miles (75,932 km), making it the world's second longest after China's, and the largest public works project in US history. A large number of multilane roads while improving peak hours traffic is considerably more expensive to maintain. A Federal Highway Administration report saying the number of roads in good condition each year is going up.  As the same time roads and surface transportation will only get about half their projected $1.7 trillion need for capital projects.  The high cost of America's bad roads and bridges - Feb. 12, 2013

Industrial transportation use efficient diesel engines and improving efficiently on such engines is a very difficult task. So it will approximately consume the same amount of fuel per ton per mile of transported goods as now. Some improvement are possible by increasing of usage of railways. for maritime transportation saving are possible by lowing the speed of vessels, which was already done when price of oil was high.

In air transportation larger planes, more efficient engines can improve fuel efficiency. Between 1960 and 2000 there was a 55% overall fuel efficiency gain. Optimal amount of passengers/cargo  and fuel are also important factors. As over 80% of the fully laden take-off weight of a modern aircraft such as the Airbus A380 is craft and fuel (Fuel economy in aircraft - Wikipedia )

Pilots of turbine airplanes actually have less control over the fuel efficiency of their flights because there are so many variables, first among them being air traffic control. Turbine engines are at their least efficient down low where the air is dense. As the airplane climbs up and the air thins, the turbine produces less power and thus consumes less fuel, but the drag of the thinning air on the airplane decreases faster than the power from the engine drops, so the airplane speeds up and the fuel flow goes down. Takeoff delays really cut into fuel efficiency in a jet compared to a piston engine.

Military aviation also consumes large amount of fuel and is known for very low fuel efficiency.

Chemical industry consumption

Chemical industry consumes approximately 30% of oil.

Residual Fuel Oil Consumption By Chemical Industry - By Country - Data from Quandl

Military consumption

Also we should not forget that one of the largest consumer of oil is military which will get oil at any price. And we have the recent trend in re-armament. So the consumption of oil by military grows again. Here are some 2007 data (US military energy consumption- facts and figures)

As the saying goes, facts are many but the truth is one. The truth is that the U.S. military is the single largest consumer of energy in the world. But as a wise man once said, don't confuse facts with reality. The reality is that even U.S. Department of Defense (DoD) does not know precisely where and how much energy it consumes. This is my Fact Zero.

Below I give some facts and figures on U.S. military oil consumption based mostly on official statistics.[1] If you want to reproduce them make sure you read every footnote even if you need to put on your glasses. Also read the footnotes in this article.

According to the DoD's Federal Energy Management Report for FY2006, the DoD spent approximately $3.5 billion on facility energy and $16.5 billion on energy for tactical vehicles. To this we should add 238 million spent on non-tactical vehicles.[6] Overall, total actual cost[7] for DoD energy consumption is over $20 billion. By the way, remember that a billion has nine zeros.

According to Pentagon spokesman Chris Isleib a $10 increase per barrel of oil increases Defense Department costs by $1.3 billion per year.

Hurting Russian economy

Oil is a strategic resource using which countries pursue geostrategic interest. So manipulation on oil price is a war by other means. As Patrick J. Buchanan  noted in his article America Regains the Oil Weapon The American Conservative in American Conservative (Nov 14, 2014)  "...price, Adam Smith notwithstanding, is something we can control and manipulate"  although strangely enough he consider Saudis to be an independent player, as if they are not a vassal state dependent on Washington:

In July of 1941, after Japan occupied French Indochina, the Roosevelt administration froze Japan’s assets in the United States. Denied hard cash, Japan could not buy the U.S. oil upon which the empire depended for survival. Seeing the Dutch East Indies as her only other source, Japan prepared to invade.

But first she had to eliminate the sole strategic threat to her occupation of the East Indies—the U.S. battle fleet at Pearl Harbor. FDR’s cutoff of oil to Japan was thus a primary cause of WWII in the Pacific, which led to hundreds of thousands of U.S. war dead, the destruction of Japan, Mao’s triumph in China and a U.S. war in Korea.

A second stunning use of the oil weapon came in 1973. Arab members of OPEC imposed an embargo in retaliation for Nixon’s rescue of Israel with an airlift in the Yom Kippur war. Long gas lines helped to bring Nixon down.

Now the oil weapon appears to be back in America’s hand.

Due to the substitution of natural gas for oil in heating homes and buildings, horizontal drilling, and hydraulic fracking, which enables us to bring oil and gas out of shale rock in places like North Dakota, U.S. production has exploded. We now produce more oil than Saudi Arabia and the benefits are not only economic, but geostrategic.

... ... ...

What is Riyadh’s game?

Is the Saudi strategy to let prices fall to where it is no longer profitable for Americans to begin new fracking? Are the Saudis thinking of doing to the new oil-producing champion, USA, what we are doing to Venezuela, Russia, and Iran? Riyadh may want to let the price of oil sink below where it makes sense for energy companies to prospect for new sources of oil or invest more billions in expanding production.

Are the Saudis out to cripple us with an oil glut?

Today, not only are Iran and Iraq producing below potential, so, too, is Libya. And we have been bombing ISIS’ oil facilities in Syria.

A contrarian’s question: Would we not be better off if these countries not only restored oil production, but also expanded production and put more oil on the market than they do today? Demand creates supply, and a world oil market where there is more supply than demand would seem to be to America’s benefit. For we remain the world’s largest consumer of petroleum products. And surely it is to our benefit to enlarge both the reserves and production of oil and gas in North America.

Price pays a huge role in creating, and shrinking, supply. And price, Adam Smith notwithstanding, is something we can control and manipulate, even as China manipulates its currency.

In “America’s New Oil Weapon” in National Review, Arthur Herman of the Hudson Institute urges the United States to take bold steps to increase our supplies of oil and gas.

We should relax the rules on drilling in Alaska’s Arctic National Wildlife Refuge, which has 10 billion barrels of oil locked up. We should use as an economic weapon against OPEC the 700 million barrels in the Strategic Petroleum Reserve. We should allow the export of oil from the United States to enable us to cope with OPEC cutbacks. We should build the Keystone XL pipeline, and the other oil and gas pipelines between us and Canada now sitting in limbo.

What Herman is urging upon us is a new nationalism, a new way of thinking about international economics that puts the U.S. and its allies first, and uses our economic leverage to advance national rather than global interests.

High oil prices pressured the US economy and its perennially-undercapitalized banking system. US economy health depends on low oil prices.   But there is geopolitical dimension of the current drop of oil prices. In is not unconceivable to think that Washington reused Reagan plan of hurting Russian economy (which catalyzed dissolution of the USSR) by pushing down oil prices.

Among the many threats facing Russia’s economy, cheap oil could be the biggest of all. Low crude are depressing the ruble (at some point in early 2015 ruble  dropped to 69 per dollar from 30-35 or so; in August 24, 2015 it reached 69.96) and knocking export on which Russia depends due to its integration in the global economy: the direction Russian neoliberal pushed for since 1991. And Russian elite was taking high oil prices for granted. For example,  Russia’s draft budget for 2015 was based on $100-a-barrel oil (Oil Prices Are Hurting Russia's Economy - Businessweek, October 13, 2014)

Because of Russia’s outsize dependence on oil and gas, which account for more than two-thirds of its exports, lower energy prices can easily tip its $2 trillion economy into recession. “Growth is likely to remain positive only with oil prices above $92 to $93 a barrel,” says economist Charles Robertson of Renaissance Capital. At $90 a barrel, the economy would contract 0.4 percent next year, and at $80 a barrel it would shrink 1.7 percent, he predicts.

Do the US tried to subdue Russia the second time via decimating oil prices and thus cutting dramatically the stream of revenue from oil exports?  It is difficult to say.   But now this strategy is better understood by Russians, which created certain difficulties in its implementation despite the huge power of the US financial sector. The sector which can allow itself to play with oil futures the way it wants due to unlimited supply of the US dollars -- the world reserve currency.  The Fed remains a monetary superpower controlling the world's main reserve currency and xUSSR  and emerging countries currencies are formally or informally pegged to dollar. Therefore, its monetary policy is exported across the globe. The Fed was exporting its easy monetary policy to the rest of the world in the early-to-mid 2000s. Now  the attempt of normalization of monetary policy creating huge tightening of monetary conditions for the rest of the world.  It also dramatically devalue large export oriented Russian companies:

How Russian energy giant Gazprom lost $300bn  Justin Burke for  the New East network

Aug 07, 2015  |  The Guardian

annamarinja airman23 8 Aug 2015 09:09

Poor airman23. Have you ever heard about Dick Cheney? Have you ever looked at the Wolfowitz Doctrine? If not, then you are very much behind the nowadays understanding of fascism and fascists. On the other hand, you are such a concrete success of Mrs. Nuland-Kagan' (and likes) travails.

yemrajesh  -> psygone 8 Aug 2015 07:36

Difficult to say. If the costs are true'ly low it would have reflected at the Pump. But it hasn't. Another flaw is how can oil pumped from deeper well ( Fracked Oil) is cheaper than conventional oil. It looks more like US flexing its muscles to subdue Russia. Besides its not Just Gazprom , shell, BP, Exxon , Gulf, Mobil etc also many of US vassal states are affected. It would be interesting to see how long this artificial price drop continue with zero benefit to the customers.

Kaiama 8 Aug 2015 06:07

Since the Russians haven't rolled over the first time, the US is trying again. These days, the price of oil is determined by activity in the futures market impacting the spot price. Likewise, I expect for shares and wouldn't be surprised if someone is shorting the stock. Any oil and gas not pumped today is available to be pumped tomorrow - possibly at higher prices. Gazprom isn't going bankrupt. Neither are any of the other major oil companies.

AlbertEU  -> alpamysh 7 Aug 2015 17:09

The crisis of one industry necessarily will hurt other sectors. Hard-hit banking sector, which is credited US shale industry. The effect can be like an avalanche. Especially if it is strengthened by additional steps. I think for anybody is not a secret the existence of a huge number of empty weight of the dollar, which is produced by running the printing press. Oil trade is in the dollar, which in turn keeps the volume of the empty weight of the dollar. Now imagine a situation where part of the oil market has not traded more in dollars. It is equally affected, the USA and Russia.

But there is one important detail. Russia has never in its history, was a rich country (if you count all the inhabitants of Russia, not individuals). In the country there is no cult of consumption. The traditional religions of Russia, that is, those that have always existed in Russia (Orthodox Christianity, Islam and Buddhism) did not contribute to the emergence of such a cult.

Orthodoxy says plainly that material wealth is not important for a man. Wealth is only supplied in addition to achieve the main goal in the life of an Orthodox Christian. Therefore, to be poor in Russia is not a problem. This is a normal way of life. Hence the stoic resistance to any hardship, challenges, wars and so on. Expectations of great social upheaval in Russia, caused by the lowering of the standard of living is a little naive. Russia used to run in the marathon. Who would have more strength, intelligence and endurance is a big question. Geopolitics is a very strange science...

If this is a deliberate maneuver, an economic war on Russia, it can became very costly and might have made sense only on a short or medium-term basis (three-five years), to shock Russian elite into submission and depose Putin and his faction of "resource nationalists" which are like a bone in the throat of US multinationals.  This time Washington managed to catch  Putin's government completely  unprepared to such development of event, which increased the chances of success.

And they really took Russian elite by surprise. That's why the USA oil Blitzkrieg initially enjoyed such a huge success and immediately crashed the ruble (100% devaluation happened) as well as put Russian economy in recession. But Russians quickly realized what's going on and the game in the second part of  2015 became more complicated as those futures and shale industry junk bonds now also weight on the USA financial sector.  It this was a deliberate maneuver, it does has unanticipated side effects.

Those who sell futures for 2017 for $58 can be hit with $30 loss per barrel, if the game turn bad.  So the current low oil price movements should be viewed as  yet another neoliberal financial casino gambling session, in which stakes are really high.  It is completely counter productive from the point of view of future of mankind, but the last thing the USA elite care about is the future of mankind. They are preoccupied with the desire to preserve and enhance their global neoliberal empire and that requires crashing all potential competitors, including Russia and China. The paradox is that while they weaken Russia they really strengthen China (although they try to compensate this with playing Chinese stock market to their advantage). But Putin severely underestimated the damage West can inflict to Russian economy:

Opportunities for the West to hurt the Russian economy are limited, President Vladimir Putin said Thursday. Europe cannot stop buying Russian gas without inflicting pain on itself, and if the US tries to lower oil prices, the dollar will suffer.

If the West tries to damage Russia’s influence in the world energy market, efforts will likely backfire, the Russian President said during his twelfth annual televised question and answer session.

To really influence the world oil market a country would need to increase production and cut prices, which currently only Saudi Arabia could afford, Putin said.

The president added he didn’t expect Saudi Arabia, which has “very kind relations” with Russia, will choose to cut prices, that could also damage its own economy.

If world oil production increases, the price could go down to about $85 per barrel. “For us the price fall from $90 to $85 per barrel isn’t critical,” Putin said, adding that for Saudi Arabia it would be more sensitive.

Also the President said that being an OPEC member, Saudi Arabia would need to coordinate its action with the organization, which “is very complicated.”

Meanwhile, Russia supplies about a third of Europe's energy needs, said Putin. Finland, for example, is close to Russia economically, as it receives 70 percent of its gas from Russia.

“Can Europe stop buying Russian gas? I think it's impossible…Will they make themselves bleed? That's hard to imagine,” the Russian president said.

Since oil is sold internationally on global markets cutting the price would mean lower dollar circulation, diminishing its value in the global currency market.

"If prices decrease in the global market, the emerging shale industry will die,” Putin said.

The US shale industry has boosted domestic production, but President said that the so-called "shale revolution" was expensive and not quick to come.

Russia’s economy largely relies on energy. In 2013 more than 50 percent of the national budget was funded by gas and oil revenues. The main revenue comes from oil, as last year, oil revenues reached $191 billion, and gas $28 billion.

“Oil and gas revenues are a big contribution to the Russian budget, a big part for us when we decide on our government programs, and of course, meeting our social obligations,” the president said.

As Reuters reported:

“The Obama administration has opened a new front in the global battle for oil market share, effectively clearing the way for the shipment of as much as a million barrels per day of ultra-light U.S. crude to the rest of the world…

The Department of Commerce on Tuesday ended a year-long silence on a contentious, four-decade ban on oil exports, saying it had begun approving a backlog of requests to sell processed light oil abroad.

The action comes at a critical juncture for the global oil market. World prices have halved to less than $60 a barrel since the summer as top exporter Saudi Arabia, once a staunch defender of $100 oil, refused to cut production in the face of surging U.S. shale output and tempered global demand…

With global oil markets in flux, it is far from clear how much U.S. condensate will find a market overseas.”
(Analysis – U.S. opening of oil export tap widens battle for global market, Reuters)

Why would the oil producers, who have over the years raised the price of oil  suddenly agree to drop the price from roughly $120 a barrel to lower then $60  a barrel (Want To Hurt Russia Lower The Price Of Oil OilPrice.com?).

Let us look first at who the major oil producers are today: Saudi Arabia, Qatar, the United Arab Emirates and the United States, as well as Russia, Iran and the Islamic State.

Of those, we can make a clear distinction between the first four countries who have solid economies and ample amounts of cash reserves and who can sustain a sharp drop in revenue when oil is sold at a lower price...

The big losers in this case will clearly be the last three countries on that list: Russia, Iran and the Islamic State.

Coincidentally, these countries are currently engaged in highly controversial conflicts and are facing opposition from the United States and the West.

Russia is involved in Ukraine’s civil war, supporting the separatists in a highly criticized move condemned by the United States and its Western allies. In response, the allies began to impose sanctions as punishment and, given the ruble’s recent downturn, Russia’s credit rating being slashed and desperate gas deals in the Asian markets, it seems that the sanctions have, thus far, been highly successful.

CNN reported that Russian is Russia losing $140 billions from sanctions and low oil price according to estimates from Russia's finance minister Anton Siluanov. For every $10 drop in the per-barrel price of oil, Russia loses up to $14.6 billion a year in revenues, according to Alfa Bank. This is a real economic war (Russia has just lost the economic war with the west Business The Guardian)

The phrase “perfect storm” is over-used, but the combination of a collapsing currency, a collapsing economy and punitive interest rates make it apposite. The question now is how Putin responds. If he softens his line over Ukraine, the west’s gamble will have paid off and it will be mission accomplished. But there are hardliners in Moscow who will argue that the response to the crisis should be a siege economy and the ratcheting up of military pressure on Ukraine. If economic agony makes a wounded Russian bear more belligerent, it will prove a hollow victory.

Here’s a clip from an NPR interview with the president just last week. About halfway through the interview, NPR’s Steve Inskeep asks Obama: “Are you just lucky that the price of oil went down and therefore their currency collapsed or …is it something that you did?

“Are you just lucky that the price of oil went down and therefore their currency collapsed or …is it something that you did?

Barack Obama:

If you’ll recall, their (Russia) economy was already contracting and capital was fleeing even before oil collapsed. And part of our rationale in this process was that the only thing keeping that economy afloat was the price of oil. And if, in fact, we were steady in applying sanction pressure, which we have been, that over time it would make the economy of Russia sufficiently vulnerable that if and when there were disruptions with respect to the price of oil — which, inevitably, there are going to be sometime, if not this year then next year or the year after — that they’d have enormous difficulty managing it.” (Transcript: President Obama’s Full NPR Interview)

Obama just admit that he wanted “disruptions” in the “price of oil” because he figured Putin would have “enormous difficulty managing it”?

Isn’t that the same as saying that it was all part of Washington’s plan; that plunging prices were just the icing on the cake for their asymmetrical attack on the Russian economy? It sure sounds like it. And that would also explain why Obama decided to allow domestic producers to dump more oil on the market even though it’s going to send prices lower. Apparently, none of that matters as long as the policy hurts Russia.

So maybe the US-Saudi oil collusion theory isn’t so far fetched after all. Maybe Salon’s Patrick L. Smith was right when he said:

“Less than a week after the Minsk Protocol was signed, Kerry made a little-noted trip to Jeddah to see King Abdullah at his summer residence. When it was reported at all, this was put across as part of Kerry’s campaign to secure Arab support in the fight against the Islamic State.

Stop right there. That is not all there was to the visit, my trustworthy sources tell me. The other half of the visit had to do with Washington’s unabated desire to ruin the Russian economy. To do this, Kerry told the Saudis 1) to raise production and 2) to cut its crude price. Keep in mind these pertinent numbers: The Saudis produce a barrel of oil for less than $30 as break-even in the national budget; the Russians need $105.

Shortly after Kerry’s visit, the Saudis began increasing production, sure enough — by more than 100,000 barrels daily during the rest of September, more apparently to come…

Think about this. Winter is coming, there are serious production outages now in Iraq, Nigeria, Venezuela and Libya, other OPEC members are screaming for relief, and the Saudis make back-to-back moves certain to push falling prices still lower?

You do the math, with Kerry’s unreported itinerary in mind, and to help you along I offer this from an extremely well-positioned source in the commodities markets: “There are very big hands pushing oil into global supply now,” this source wrote in an e-mail note the other day.” (“What Really Happened in Beijing: Putin, Obama, Xi And The Back Story The Media Won’t Tell You”, Patrick L. Smith, Salon)

As New York Post tabloid, a mousepiece of Rupert Murdock,   gleefully reported

The price collapse could not have come at a worse time for Bad Vlad Putin. The Russian president needs an oil price around $100 a barrel to prop up what’s become a wartime economy. Oil and gas provide up to a third of budget revenue and compose two-thirds of exports.

Sanctions imposed over Putin’s aggression have gnawed at Russia’s economy, but this price drop bites deep: The ruble has crashed, Russian bonds are pathetic, and foreign reserves are bleeding.

While Russians will put up with harder times than Westerners will, Putin’s made extravagant commitments (bet he’d like to have back the $50 billion he squandered on corrupt Olympic construction). The world’s fave bare-chested bully had embarked on a massive arms buildup, with a hi-tech $5 billion command center just unveiled. But Putin’s visions of military resurgence are becoming unaffordable. He also made election promises to improve Russia’s wretched health-care system. Instead, he’s firing health-care workers and shuttering hospitals.

He promised higher living standards, but now the average Ivan’s feeling squeezed. And Putin faces enormous costs in Crimea and eastern Ukraine, two booby-prize welfare states, with the latter shot to ruins. Putin’s popularity remains high. For now. The gravest worry is that, with his back to the wall, he’ll play the Mother Russia card and attack again.
 

Iraq war was a war for oil

Oil, the U.S.-Middle East Free Trade Area and the Bush Agenda By Antonia Juhasz,

 Antonia Juhasz, a visiting scholar at the Institute for Policy Studies, is the author of The Bush Agenda: Invading the World, One Economy at a Time, on which part of this article is based. She is working on a new book that will make the case for the break-up of the largest American oil companies. Learn more at www.TheBushAgenda.net

Remember oil? That thing we didn’t go to war in Iraq for? Now with his war under attack, even President George W. Bush has gone public, telling reporters last August, “[a] failed Iraq … would give the terrorists and extremists an additional tool besides safe haven, and that is revenues from oil sales.” Of course, Bush not only wants to keep oil out of his enemies’ hands, he also wants to put it into the hands of his friends. 

The President’s concern over Iraq’s oil is shared by the Iraq Study Group, which on December 6 released its much-anticipated report. While the mainstream press focused on the report’s criticism of Bush’s handling of the war and the report’s call for (potential) removal of (most) U.S. troops (maybe) by 2008, ignored was the report’s focus on Iraq’s oil. Page 1, chapter 1 laid out in no uncertain terms Iraq’s importance to the Middle East, the United States and the world with this reminder: “It has the world’s second-largest known oil reserves.” The group then proceeds to give very specific and radical recommendations as to what should be done to secure those reserves. 

Guaranteeing access to Iraq’s oil, however isn’t the whole story. Despite the lives lost and the utter ruin that the war has brought, the overarching economic agenda that the administration is successfully pursuing in the Middle East might be the most enduring legacy of the war—and the most ignored.  Just two months after declaring “mission accomplished” in Iraq, Bush announced his plans for a U.S.-Middle East Free Trade Area to spread the economic invasion well-underway in Iraq to the rest of the region by 2013. Negotiations have progressed rapidly as countries seek to prove that they are with the United States, not against it.

The Bush Agenda

Within days of the 9/11 terrorist attacks, then-U.S. Trade Representative Robert Zoellick announced that the Bush administration would be “countering terror with trade.” Bush reiterated that pledge four years later when he told the United Nations, “By expanding trade, we spread hope and opportunity to the corners of the world, and we strike a blow against the terrorists. Our agenda for freer trade is part of our agenda for a freer world.” In the case of the March 2003 invasion and ongoing occupation of Iraq, these “free trade”—or corporate globalization—policies have been applied in tandem with America’s military forces.

The Bush administration used the military invasion of Iraq to oust its leader, replace its government, implement new economic and political laws, and write a new constitution. The new economic laws have transformed Iraq’s economy, applying some of the most radical—and sought-after—corporate globalization policies in the world and locking in sweeping advantages to U.S. corporations. Through the ongoing occupation, the Bush administration seeks to ensure that both Iraq’s new government and this new economic structure stay firmly in place. The ultimate goal—opening Iraq to U.S. oil companies—is reaching fruition.

In 2004, Michael Scheuer—the CIA’s senior expert on al-Qaeda until he quit in disgust with the Bush administration—wrote, “The U.S. invasion of Iraq was not preemption; it was … an avaricious, premeditated, unprovoked war against a foe who posed no immediate threat but whose defeat did offer economic advantages.”  How right he was. For it is an absolute fallacy that the Bush administration had no post-invasion plan for Iraq. The administration had a very clear economic plan that has contributed significantly to the disastrous results of the war. The plan was prepared at least two months prior to the war by the U.S. consultancy firm, Bearing Point, Inc., which then received a $250 million contract to remake Iraq’s economic infrastructure.

L. Paul Bremer III—the head of the U.S. occupation government of Iraq, the Coalition Provisional Authority (CPA)—followed Bearing Point’s plan to the letter. From May 6, 2003 until June 28, 2004, Bremer implemented his “100 Orders” with the force of law, all but a handful of which remain in place today. As the preamble to many of the orders state, they are intended to “transition [Iraq] from a … centrally planned economy to a market economy” virtually overnight and by U.S. fiat.  Bremer’s orders included firing the entire Iraqi military—some half a million men—in the first weeks of the occupation. Suddenly jobless, many of these men took their guns with them and joined the violent insurgency. Bremer also fired 120,000 of Iraq’s senior bureaucrats from every government ministry, hospital and school. {By removing the Sumi bureaucracy, they removed opposition to globalization.  The U.S. could now shop for support from what would soon be a newly elected factionalized parliament—jk.}  His laws allowed for the privatization of Iraq’s state-owned enterprises (excluding oil) and for American companies to receive preferential treatment over Iraqis in the awarding of reconstruction contracts. The laws reduced taxes on all corporations by 25 percent and opened every sector of the Iraqi economy to private foreign investment. The laws allowed foreign firms to own 100 percent of Iraqi businesses (as opposed to partnering with Iraqi firms) and to send their profits home without having to invest a cent in the struggling Iraqi economy. Iraqi laws governing banking, foreign investment, patents, copyrights, business ownership, taxes, the media, agriculture and trade were all changed to conform to U.S. goals. 

After the U.S. corporate invasion of Iraq

More than 150 U.S. companies were awarded contracts for post-war work totaling more than $50 billion.  The American companies were hired, even though Iraqi companies had successfully rebuilt the country after the previous U.S. invasion. And, because the American companies did not have to hire Iraqis, many imported foreign workers instead. The Iraqis were, of course, well aware that American firms had received billions of dollars for reconstruction, that Iraqi companies and workers had been rejected and that the country was still without basic services. The result: increasing hostility, acts of sabotage targeted directly at foreign contractors and their work, and a rising insurgency.

Halliburton received the largest contract, worth more than $12 billion, while 13 other U.S. companies received contracts worth more than $1.5 billion each. The seven largest reconstruction contracts went to the Parsons Corporation of Pasadena, Calif. ($5.3 billion); Fluor Corporation of Aliso Viejo, Calif. ($3.75 billion); Washington Group International of Boise, Idaho ($3.1 billion); Shaw Group of Baton Rouge, La. ($3 billion); Bechtel Corporation of San Francisco ($2.8 billion); Perini Corporation of Framingham, Mass. ($2.5 billion); and Contrack International, Inc. of Arlington, Va. ($2.3 billion). These companies are responsible for virtually all reconstruction in Iraq, including water, bridges, roads, hospitals, and sewers and, most significantly, electricity.

U.S. Air Force Colonel Sam Gardiner, author of a 2002 U.S. government study on the likely effect that U.S. bombardment would have on Iraq’s power system, said, “frankly, if we had just given the Iraqis some baling wire and a little bit of space to keep things running, it would have been better. But instead we’ve let big U.S. companies go in with plans for major overhauls.”

Many companies had their sights set on years-long privatization in Iraq, which helps explain their interest in “major overhauls” rather than getting the systems up and running. Cliff Mumm, head of Bechtel’s Iraq operation, put it this way: “[Iraq] has two rivers, it’s fertile, it’s sitting on an ocean of oil. Iraq ought to be a major player in the world. And we want to be working for them long term.”

And, since many U.S. contracts guaranteed that all of the companies’ costs would be covered, plus a set rate of profit (known as cost-plus contracts), they took their time, building expensive new facilities that showcased their skills and would serve their own needs should they be runing the systems one day.

Mismanagement, waste, abuse and criminality have also characterized U.S. corporations in Iraq—leading to a series of U.S. contract cancellations. For example, a $243 million contract held by the Parsons Corporation for the construction of 150 health care centers was cancelled after more than two years of work and $186 million yielded just six centers, only two of which are serving patients. Parsons was also dropped from two different contracts to build prisons, one in Mosul and the other in Nasiriyah. The Bechtel Corporation was dropped from a $50 million contract for the construction of a children’s hospital in Basra after it went $90 million over budget and a year-and-a-half behind schedule. These contracts have since been turned over to Iraqi companies.

Halliburton’s subsidiary KBR is currently being investigated by government agencies and facing dozens of charges for waste, fraud and abuse. Most significantly, in 2006, the U.S. Army cancelled Halliburton’s largest government contract, the Logistics Civil Augmentation Program (LOGCAP), which was for worldwide logistical support to U.S. troops. Halliburton will continue its current Iraq contract, but this year the LOGCAP will be broken into smaller parts and competitively bid out to other companies.

The Special Inspector General for Iraq Reconstruction (SIGIR), a congressionally-mandated independent auditing and oversight body, has opened 256 investigations into criminal fraud, four of which have resulted in convictions. SIGIR has provided critical oversight of the U.S. reconstruction, but this fall it nearly fell prey to a GOP attempt to shut down its activities well ahead of schedule. Fortunately, it survived.

SIGIR’s October 2006 report to Congress reveals the failure of U.S. corporations in Iraq. In the electricity sector, less than half of all planned projects in Iraq have been completed, while 21 percent have yet to even begin. Even the term “complete” can be misleading as, for example, SIGIR has found that contractors have failed to build transmission and distribution lines to connect new generators to homes and businesses. Thus, nationally, Iraqis have on average just 11 hours of electricity a day, and in Baghdad, the heart of instability in Iraq, there are between four and eight hours on average per day. Before the war, Baghdad averaged 24 hours per day of electricity.

While there has been greater success in finishing water and sewage projects, the fact that 80 percent of potable water projects are reported complete does little good if there is no electricity to pump the water into homes, hospitals or businesses. Meanwhile, the health care sector is truly a tragedy. Just 36 percent of planned projects are reported as complete. Of 20 planned hospitals, 12 are finished and only six of 150 planned public health centers are serving patients today.

Overall, the economy is languishing, with high inflation, low growth, and unemployment rates estimated at 30 to 50 percent {being part of a militia is providing employment} for the nation and as high as 70 percent in some areas. The International Monetary Fund has enforced a structural adjustment program on Iraq that mirrors much of Bush’s corporate globalization agenda, and the administration continues to push for Iraq’s admission into the World Trade Organization.

Iraq has not, therefore, emerged as the wealthy free market haven that Bush & Co. had hoped for. Several U.S. companies are now preparing to pack up, head home and take their billions of dollars with them, their work in Iraq left undone.  The Bush administration is likely to follow a dual strategy: continuing to pursue a corporate free-trade haven in Iraq, while helping U.S. corporations extricate themselves without consequence. The administration will also focus on the big prize: Iraq’s oil.

Winning Iraq’s oil prize: 

The Bush Agenda does have supporters, especially those corporate allies that have both shaped and benefited from the administration’s economic and military policies.  In the 2000 election cycle, the oil and gas industry donated 13 times more money to Bush’s campaign than to Al Gore’s. The Bush administration is the first in history in which the president, vice president and secretary of state are all former energy company officials. In fact, the only other U.S. president to come from the oil and gas industry was Bush’s father. Moreover, both George W. Bush and Condoleezza Rice have more experience running oil companies than they do working for the government.

Planning to secure Iraq’s oil for U.S. companies began on the tenth day of the Bush presidency, when Vice President Dick Cheney established the National Energy Policy Development Group—widely referred to as “Cheney’s Energy Task Force.” It produced two lists, titled “Foreign Suitors for Iraqi Oilfield Contracts as of 5 March 2001,” which named more than 60 companies from some 30 countries with contracts for oil and gas projects across Iraq—none of which were with American firms. However, because sanctions were imposed on Iraq at this time, none of the contracts could come into force. If the sanctions were removed—which was becoming increasingly likely as public opinion turned against the sanctions and Hussein remained in power—the contracts would go to all of those foreign oil companies and the U.S. oil industry would be shut out.

As the Bush administration stepped up its war planning, the State Department began preparations for post-invasion Iraq. Meeting four times between December 2002 and April 2003, members of the State Department’s Oil and Energy Working Group mapped out Iraq’s oil future. They agreed that Iraq “should be opened to international oil companies as quickly as possible after the war” and that the best method for doing so was through Production Sharing Agreements (PSAs).

PSAs are considered “privatization lite” in the oil business and, as such, are the favorite of international oil companies and the worst-case scenario for oil-rich states. With PSAs, oil ownership ultimately rests with the government, but the most profitable aspects of the industry—exploration and production—are contracted to the private companies under highly favorable terms. None of the top oil producers in the Middle East use PSAs, because they favor private companies at the expense of the exporting governments. In fact, PSAs are only used in respect to about 12 percent of world oil reserves {such as Nigeria}. 

 

Weakness of the propagated by MSM hypothesis about Saudi Arabia fighting for its market share

In 2013 before oil prices slump started Saudies shipped 7.54 million barrels a day on average up from 7.41 million barrels a day in 2012 (JODI website ). Saudi Arabia exported 5.49 million barrels a day in 2002, when the group began collecting oil data. Saudi monthly exports in 2013 peaked at 7.84 million barrels a day in August, the most since April and May of 2003. North Sea Brent, the benchmark for more than half of the world’s oil, averaged $110.82 a barrel during the 2010-2013.

Saudi Arabia produced 10.28 million barrels a day in October, 2015,  up from 9.69Mb/done year ago.   Chances that production will reach 11 Mb/d are slim. There are strong signs that they have huge difficulties in increasing oil extraction volume.  All their efforts to increase production led to increase of less then 1Mb/d  increase in 2015. Which is partially offset by  increase in internal consumption (In 2015 Saudi Arabia oil demand rose by a notable 0.21 mb/d, a nearly 8% annual rise)  Here is relevant quote (OilPrice.com, Dec 21, 2015). All they can achieve is 7% increase of exports.

Crude exports from Saudi Arabia rose from an average of 7.111 million barrels per day in September to 7.364 million per day in October, according to the latest data from the Joint Organizations Data Initiative (JODI), which monitors the oil industry. The report said this quantity was the most oil exported from Saudi Arabia since June and 7 percent higher than in October 2014.

The key question about propagated by MSM hypothesis about Saudi Arabia fighting for its market share is "Why piss yourself without any need?". 

That means that if Saudis withdraw one Mb/s from the market in 2015 and exported the same 7 Mb/d (instead of 7.5 Mb/d, saving around 0.5 Mb/d of their oil reserves, not counting rise in internal consumption)  their revenue would be  125 billions.  While after increasing oil production to maximum (no spare capacities) they got oil revenue $118 billions.  Less money for more effort.  Their proven oil reserves are only 268 billion barrels (EIA)  which at current rate of production (which is around 3.6 billion barrels per year) get them less then a hundred years.

Moreover they need approximately $100 oil to balance budget, so low oil prices mean depletion of their currency reserves, which if prices say on the current level will last less then 10 years.  Saudi Arabia’s record deficit of  $98 billion in 2015 At the end of October, its reserves fell to $644 billion from $732 billion at the end of last year.  The finance ministry has issued bonds worth $20 billion for the domestic market. projected means that dumping oil on the market was a self-destructive action.

The only reasonable explanation for such suicidal actions is that they launched "all-out" economic war against their arch-enemy Iran depriving it of oil revenue after lifting sanctions, hitting simultaneously Russia, Venezuela and couple of other countries they do not like.  In any case such an action should be approved by Washington as Saudis are a vassal state completely dependent on Washington for survival of their monarchic regime.

And it is easy to see huge benefits for Washington from such Saudis-Iran oil war.  Moreover may be lifting sanction itself was a gentle push for Saudis to unleash this war.

Not everybody buy MSM propagated version of Saudis behaviour. For example here is a comment from Yahoo (Saudi to diversify economy away from oil King Salman)

brian  Dec 30, 2015

This oil collapse is engineered by Saudi with the Western media. As the analysts are saying the daily over production is 1.5 million barrels. 1.5 out of 100 million daily production is ONLY 1.5% percent. Why did Saudi keep on over producing and with the media bombarding over production, the future's market is easily manipulated as oil collapsed to $36 per barrel.

This just does not make sense and not fair to the commodity producing nations. If you look at the U.S., Euro, Japan, China all they are doing is QE, printing money to supercharge their economy. On the other hand, the commodity nations are contracting.

Si

Saudi Arabia is in a conundrum, it has propped up its Clergy and kept majority of its population illiterate. This was done to keep the Kingdom under full control of its population, their women folk are even further worst off. The country is run by expatriates from around the world, mostly from Egypt, Pakistan, India, Bangladesh and Malaysia. According to Saudi rules these expatriates can not ever become citizens, even after many generations. Unlike Iran whose population is highly educated (Men and Women), Saudi administrators are afraid if Saudi gets educated there will be a revolution and that will affect how Saudi Arabia is ruled. My bet is Saudi Arabia can not progress beyond oil based economy.

 

And in another Yahoo thread Oil down 3 percent; Brent near 11-year low as oversupply worries return
Old Midwest Geezer
Saudi Arabia is fighting a financial war against Iran, its mortal enemy. Iran's main source of income is oil and SA is putting the screws to them and their Russian buddies. They picked up a perk by squeezing the US shale oil producers.

Hedging and junk debt: shale oil as subprime oil


"There are too many ugly balance sheets," warns one energy industry analyst, adding simply that "the group is not positioned for this downturn." While the mainstream media continues to chant the happy-clappy side of lower oil prices, spewing various 'statistics' about how the down-side of low oil prices is 'contained' and the huge colossal massive tax cut means 'everything is awesome' for America, the data - and now actions - do not bear this out.

Zero Hedge

Shale oil companies were not making as bandits when prices were $100. They operated in a very risky and rather unstable environment and mot of them took substantial amoount of debt.  Many used hedges regularly to make the environment more stable which is double edge sword -- it helps if price drop but deprive you of profits if price surge. Those who did were in better shape in 2015 when oil prices dropped to $35 per barrel (WTI).  Here is a good explanation of hedging from a post in peakoilbarrel.com blog:

shallow sand, 12/20/2015 at 8:56 am
Donn. Companies hedge with counter parties. Those are usually large banks. The there are 3 basic types of hedges.
  1. SWAP. The producer and counter party agree to a fixed price, say $70 per barrel. If the price goes above $70, the producer pays the counterparty the difference. If it goes below $70, the counterparty pays the producer.
  2. Cost less collars. These are like SWAPS, but in a range. Say the parties agree to a collar of $60-80. No money changes hands unless the price goes outside the range.
  3. The third is a floor, or put. The producer pays a premium to the counterparty. Say the producer buys $60 puts. If the price falls below $60, the counterparty pays the producer.

There are various hybrids and modifications of the above.

The price levels and cost of puts are based on the futures market. It is now impossible to hedge anything remotely profitable for the shale industry and a good portion of US conventional.

Furthermore, it is difficult to hedge production past 24 months. This is especially true for shale, with the high declines.

One concern with SWAPS or collars is in the event of a price spike, the producer produces less barrels than that hedged. That can wind of costing the producer a lot of $$. Also, theses types of hedges can result in very large margin requirements of the producers, but they commonly avoid those by allowing a first lien on production.

Another problem with hedges is giving up upside. If it were possible, someone who hedged in 2003 for the next ten years at $30 a barrel would be BK, as the price rocketed up, which caused OPEX to also skyrocket.

Most companies do not hedge past 24 months. Also, they do it in layers so that not as many barrels are hedged n the later years.

Many companies had significant hedge gains in 2015. There will be much less in 2016 and almost none in 2017.

Shale companies debt was typically rated as junk which means that chances for repayment of the load are low.  Just due to this fact the current talk about profitability of certain parts of shale at below then $50 prices looks a little bit suspicious even with some technology advances which were sped up by the price slum as well as lower service companies costs.   To many observers $60-$75 per barrel looks like a more reasonable minimal price for shale oil sustainable extraction, if the amount of junk bond debt is counted.

The current talk about profitability of certain parts of shale at below then $50 prices looks a little bit suspicious.   To many observers $60-$75 per barrel looks like more a reasonable minimal price for shale oil sustainable extraction, if the amount of junk bond debt is counted. 

Some technological improvements can cut costs. Neglecting ecological concerns can cut costs. The strong dollar and crash of other commodities can cut some costs (as steel and some equipment, can be bought at much lower prices). But whether all three factors mentioned can cut 50% of costs is a big multibillion question.   Gail Tverberg, a well known commentator on "end of cheap oil" problem,  thinks that the current drop of prices looks more like a harbinger of the collapse of financial system then oversupply problem on world markets (Deflationary Collapse Ahead?  Aug 28, 2015  Our Finite World )

The entire shale oil industry in America is complex mix of new technological methods and new schemes of creation of  junk bonds by Wall Street (200 billion of this debt might also be securitized like subprime mortgages). There also might be some complex derivative bets  (including but not limited to related to hedging of oil prices by shale producers, airlines, etc).

Shale oil is impossible to understand without  proper context which is the existence of  sophisticated financial system and complex financial products under neoliberalism. Wall Street can be trusted as for its ability to produce exotic financial instrument tailored for particular purpose, which can blow in your face in case of any Black Swan event.  In this case this might be securitization of debt of shale oil companies that could play a role somewhat similar to subprime mortgages but on much smaller scale as the amount of dent is miniscular in comparison with subprime mortgages.  Still, in this sense, we can call shale oil subprime oil (Broken Energy Markets and the Downside of Hubbert’s Peak Energy Matters): 

The second example of a broken energy market I want to explore is the US shale industry.  This shares certain characteristics with the wind industry in that it is a high cost but potentially very large resource. But the mechanism for integration of this resource into the market is rather different. The problem with shale gas is that over-supply has resulted in the US gas price being dumped below the level where many shale operators can make a profit. Consumers in this case benefit through getting both secure and low priced gas. But the shale operators have reportedly racked up large losses that have been covered by expanding debt. These losses may yet come home to roost with the consumer if debt defaults result in a new credit crunch where the debts are socialised via government bailouts of the banking sector.

If it were possible to produce shale gas at $1 / million btus then everyone would be happy. Consumers would be getting secure and cheap energy and producers would be making handsome profits to distribute to shareholders. That is how capitalism is supposed to work. The system as it has operated seems broken.

US Light tight oil (LTO) production appears now to have created the same problem for the liquids plays where the entrance of expensive liquids in the market have contributed to the crash in the oil price. This has created risks for the LTO operators. It remains to be seen if the LTO sector sees mass insolvencies and default on loans that may socialise these losses. The introduction of high cost LTO has also undermined the whole of the higher cost component of the conventional oil sector. If LTO could be produced in large quantities for $20 / bbl then there would be no problem since this source would  go on to substitute for the higher cost conventional sources of supply. But with costs closer to $60-$80 this is not going to happen. The conundrum for capitalism is the introduction of large quantities of higher cost energy to the system.

At this point I have to admit that nuclear power may be subject to similar limitations. It is difficult to view the Hinkley Point new nuclear build in the UK as a triumph for the consumer or the country. A better way to manage such enormous capital expenditure on vital infrastructure is via the state. The costs may eventually be socialised to the tax payer, but at least the energy is reliable and amongst the safest forms of power generation ever developed and the taxation system distributes costs in an equitable way.

A form of society could undoubtedly exist powered by nuclear, wind and shale gas. But it would be a society supported by the state with far larger numbers working in the energy industries than now, producing lower surpluses, the energy production part perhaps running at a perennial loss. Those losses have to be covered by either higher price or via the taxation system. Either way, the brave new world that awaits us will be characterized as the time of less that will be in stark contrast to the time of plenty many of us enjoyed during the 20th Century.

The so-called “shale revolution” in the U.S. was partially powered by innovation in horizontal drilling but  its cornerstone is the junk bond market. Which questions boom’s the long-term sustainability.  As The Wall Street Journal  reported total debt is   almost $200 billion. At 7% that's 14 billion of interest a year. Or at $40 per barrel 350 million barrels per year are needed just to service the debt. That's almost million barrels per day or almost total production of Bakken field (dmr.nd.gov )

And now,  the bankruptcies have begun as financing costs are not just prohibitive, there is no liquidity available at any price for many...

American oil and gas companies have gone heavily into debt during the energy boom, increasing their borrowings by 55% since 2010, to almost $200 billion.

Their need to service that debt helps explain why U.S. producers plan to continue pumping oil even as crude trades for less than $50 a barrel, down 55% since last June.

But signs of strain are building in the oil patch, where revenue growth hasn’t kept pace with borrowing. On Sunday, a private company that drills in Texas, WBH Energy LP, and its partners, filed for bankruptcy protection, saying a lender refused to advance more money and citing debt of between $10 million and $50 million. Neither the Austin-based company nor its lawyers responded to requests for comment.

Energy analysts warn defaults could be coming. “The group is not positioned for this downturn,” said Daniel Katzenberg, an analyst at Robert W. Baird & Co. “There are too many ugly balance sheets.”

...

In 2010, U.S. companies focused on producing oil and gas had $128 billion in combined total debt, according to financial data collected by S&P Capital IQ.

As of their latest quarter, such companies had $199 billion of combined total debt.

Even is "good times", before the start of current oil price slump,  the whole shale industry was financed only via junk bond market:  75 of the 97 energy E&P companies were rated by S&P below investment grade (Shale Boom Built on ‘Junk’ - GE Reports Ideas, May 19, 2014)

Although share prices for most U.S. exploration and production (E&P) companies are at all-time highs, the elephant in the room is an industry financed by the high-yield debt market, better known as “junk bonds.” The S&P says that 75 of the 97 energy E&P companies it rates are below investment grade.

The report cites a recent analysis by Energy Aspects, a commodity research consultancy, of 35 independent companies that shows a steadily worsening financial picture across the last six years. The analysis showed the companies spent as much as they brought in and “net cash flow is becoming negative while debt keeps rising.”
 

Many of the oil-drilling newcomers set up shop in order to take advantage of the low rates and easy money available in the bond market. Now that oil prices have crashed, investors are avoiding energy-related junk bonds. Moreover the whole US bond market started to turn south (in correlation with stocks) in anticipation of rate hikes. Which is making it impossible for the smaller companies to roll over their debt or attract fresh capital. The most indebted companies from Here Are America's Most Levered Energy Companies Zero Hedge are:

Source: CapIQ

When these companies need to refinance their bond they are forced to default or, if they have valuable properties, be acquired by larger companies. The whole situation with junk bonds from shale companies has some analogy with subprime loads and while lesser in scale still can serve as a catalyst for another financial meltdown (WSJ.com)

Energy companies, the fastest-growing segment of the high-yield bond market in recent years, account for nearly 18% of all outstanding high-yield bonds, up from 9% in 2009, according to J.P. Morgan.

Mr. Hamid says that the 40% possible default rate is the upper limit over the next few years, and that energy companies will take steps to avoid falling into bankruptcy, including cutting spending and selling assets.

Still even if companies make smart moves to cut costs, with oil at $65 per barrel or below for the next three years, he estimates that default rates high-yield bonds from the energy sector could still hover around 20% to 25%. “It would become a very dire scenario,” Mr. Hamid said.

After a steep plunge in oil prices last week, WTI crude, the U.S. benchmark, was recently up 3% to $68.14 a barrel in Monday morning trading.

He predicts that not that many companies will default in 2015 because many companies have hedged their exposure. But he expects that energy companies will run into trouble in 2016 as even the most conservative energy companies will see most of their hedges run off.

Energy companies are the largest sector in the high-yield universe by a wide margin. The next largest sector, J.P. Morgan estimates, is the healthcare sector, which accounts for 7.1%.
 

The total size of shale companies junk bond debt is estimated at 200 billions out of which at least 20 billions are not recoverable.

The additional huge problem is that the banks again have bundled a lot of shale companies debt into financially-engineered products like Collateralized Loan Obligations (CLOs) and Collateralized Debt Obligations (CDOs), which much like subprime CLO and CDO are overrated and might fail when borrowers are no longer able to service the loans. The rot can be concealed for a while (may be two-three years -- as long as existing well produce oil in quantity to pay the debt), but eventually, if oil prices don’t recover, a significant number of these companies are going to go under

Vultures start circling shale companies

If low prices persist for all 2016 many shale oil companies are doomed. And vultures already started circling them:

Clueless, 12/19/2015 at 10:40 pm
I would guess that by now, most can see what is happening and therefore, what is going to happen in the future since the model has been established. The banks are not going to take serious hits. Re: Magnum Hunter and New Gulf Resources.

I remember seeing some vulture investor discussions back in 2009. They were stating that they would never buy equity in failing companies: they would take control thru the debt. Much more upside possible. So, a company with $1 billion in debt has its bonds trading at say 70 cents on the $ and it is rated junk. The bond funds that hold the debt [their covenants prohibit them from holding “bankrupt” rated debt] sells to novice speculators. Then the debt plunges to 10- 30 cents on the dollar. The investment/hedge funds step in. They can buy $1 billion of debt for $300 million or less, and the are praying that the company does go belly up. If it does, they get 100% of the equity, and agree to put in another $200 million to ride out the storm. A totally non-contested, prearranged bankruptcy. If things come back [even partially], they might own a company worth $2 billion for their $500 million investment. 

shallow sand, 12/19/2015 at 11:20 pm
Clueless. You are correct. I might add that the vultures do not appear to be just purchasing the debt. They are trading unsecured debt for second lien debt. I am not sure how this works, but from what I have read, the unsecured bonds have very weak covenants. The vultures give the unsecured bond holders the option of taking pennies on the dollar or becoming subordinate the vultures on all the debt the vultures are able to trade out.

The vultures better be pretty sharp, however. 1st, they better have a good handle on the assets they are trying to acquire. Second, they better have a good team put together to operate the assets. Third, they better have a better handle on future oil and gas prices than schmucks like me.

I saw something similar to this up close in the aftermath if the 1998-99 crash. An investor group bought the bad debt from a bank for pennies on the dollar, took assignment of the liens and foreclosed.

The investor group found out in a hurry that they didn’t quite know what they had bought, and that it wasn’t easy to manage from 1000+ miles away. They had a hell of a field superintendent, but of course they thought they were smarter than him, despite him having grown up in the middle of the field.

In any event, after burning several million dollars, the sold the assets and I am sure took a big loss. They also screwed up on timing the sale. Had they held on for about 3 more years they could have at least quintupled the sale proceeds. But they knew about as much as I, or really any of us, know about where oil prices are headed.

I am sure these distressed buyers are real sharks. But sharks can die too.

What is the sustainable minimal oil price with the current oil reserves depletion

As oil is important geopolitical resource there can be no definite answer to it. Still there is a probability that the peak "cheap oil" has already occurred, but we won’t know that until several years after the fact.  There is a large discrepancy in estimates ;-).  Much depends of the type of oil in question with shale, oil sands, as deep water oil as the most expensive.

Shale oil has a break even price around $70-75 / barrel for most shale producers and at below $50, every single well is losing money. There are also pretty expensive oil extracted from  deepwater (around 7 Mb/d). Which at current oil prices will shrink approximately 10% per year.  And there are around 20 MB/d in shallow water with higher staying power but also declining 10% due to lack of investments in current price situation.  Half of oil production from future developments is uneconomic at US$60/bbl (post of AlexS 01/29/2016 at 7:06 pm )

EIA projects that in 2030 the average real price of crude oil is projected to be $72 per barrel in 2006 dollars or about $113 per barrel in nominal dollars. Projected U.S. crude oil production averages 9.3 Mb/d in 2015 and 8.8 Mb/d in 2016.  Decline is 0.5 Mb/d.  EIA is always on optimists side (they were major cheerleaders of shale bubble, which makes them more of propaganda agency then statistical outlet)  so you can probably assume that 2020 prices of oil will be above, especially if low prices will last the whole 2016.  

Pricewise EIA projections are dropping all 2015 (Short-Term Energy Outlook)

EIA short term predictions as of December 3, 2015 suggest that low oil prices might continue to dominate the first quarter of 2016:

Previously common wisdom was around that price will return to $100 per barrel on average in 2016, which the following post from Zerohedge illustrates:

6344498 Magooo

HOW HIGH OIL PRICES WILL PERMANENTLY CAP ECONOMIC GROWTH For most of the last century, cheap oil powered global economic growth. But in the last decade, the price of oil production has quadrupled, and that shift will permanently shackle the growth potential of the world’s economies.  http://www.bloomberg.com/news/articles/2012-09-23/how-high-oil-prices-will-permanently-cap-economic-growth

HIGH PRICED OIL DESTROYS GROWTH According to the OECD Economics Department and the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices.  http://www.EIA.org/textbase/npsum/high_oil04sum.pdf

BUT WE NEED HIGH OIL PRICES:  Marginal oil production costs are heading towards $100/barrel http://ftalphaville.ft.com/2012/05/02/983171/marginal-oil-production-costs-are-heading-towards-100barrel/

The marginal cost of the 50 largest oil and gas producers globally increased to US$92/bbl in 2011, an increase of 11% y-o-y and in-line with historical average CAGR growth.  http://ftalphaville.ft.com/2012/05/02/983171/marginal-oil-production-costs-are-heading-towards-100barrel/

Steven Kopits from Douglas-Westwood said the productivity of new capital spending has fallen by a factor of five since 2000. “The vast majority of public oil and gas companies require oil prices of over $100 to achieve positive free cash flow under current capex and dividend programmes. Nearly half of the industry needs more than $120,” he said http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11024845/Oil-and-gas-company-debt-soars-to-danger-levels-to-cover-shortfall-in-cash.html

Sanford C. Bernstein, the Wall Street research company, calls the rapid increase in production costs “the dark side of the golden age of shale”. In a recent analysis, it estimates that non-Opec marginal cost of production rose last year to $104.5 a barrel, up more than 13 per cent from $92.3 a barrel in 2011.   http://www.ft.com/intl/cms/s/0/ec3bb622-c794-11e2-9c52-00144feab7de.html#axzz3T4sTXDB5

Now all those consideration looks far less plausible in a short term (one year) period. Here are some "post oil price slump" considerations (in 2013 dollars):

Wikipedia article gives a more wide range of prices at wellhead (without cost of servicing the debt and transportation costs) from $35 to $95 for shale oil (Oil shale economics - Wikipedia)

The United States Department of Energy estimates that the ex-situ processing would be economic at sustained average world oil prices above US $54 per barrel and in-situ processing would be economic at prices above $35 per barrel. These estimates assume a return rate of 15%.[6] The International Energy Agency estimates, based on the various pilot projects, that investment and operating costs would be similar to those of Canadian oil sands, that means would be economic at prices above $60 per barrel at current costs. This figure does not account carbon pricing, which will add additional cost.[4] According to the New Policies Scenario introduced in its World Energy Outlook 2010, a price of $50 per tonne of emitted CO2, expected by 2035, will add additional $7.50 per barrel cost of shale oil.[4]

According to a survey conducted by the RAND Corporation, the cost of producing a barrel of oil at a surface retorting complex in the United States (comprising a mine, retorting plant, upgrading plant, supporting utilities, and spent shale reclamation), would range between $70–95 ($440–600/m3, adjusted to 2005 values). This estimate considers varying levels of kerogen quality and extraction efficiency. In order for the operation to be profitable, the price of crude oil would need to remain above these levels. The analysis also discusses the expectation that processing costs would drop after the complex was established. The hypothetical unit would see a cost reduction of 35–70% after its first 500 million barrels (79×10^6 m3) were produced. Assuming an increase in output of 25 thousand barrels per day (4.0×10^3 m3/d) during each year after the start of commercial production, the costs would then be expected to decline to $35–48 per barrel ($220–300/m3) within 12 years. After achieving the milestone of 1 billion barrels (160×10^6 m3), its costs would decline further to $30–40 per barrel ($190–250/m3).[7]

 

Floor for oil prices for 2016

The only function of economic forecasting is to make astrology look respectable.
 ~John Kenneth Galbraith

The most common view is that most US shale producers are highly vulnerable if price falls below $60 and are losing money on each barrel of oil they produce  at prices below $50. With difficulties of junk bond re-financing this figure should be higher. Some Russian sources cite $75 per bbl as a breakeven price for US shale oil.  This estimate is supported by the following detailed report BAKKEN - Single Well Economics  (Jan 4, 2016).

Here is a pretty telling graph from  Scotiabank (they have way too optimistic price for Bakken I think: adding $10 to $47 we get $57 for Bakken, which is probably 10 to 20 dollars low):

 

Source Why oil prices keep falling — and throwing the world into turmoil - Vox

As you can see plausible minimum for shale oil wellhead costs is around $55( $45+$10) per barrel ( and that  does not include the cost of servicing of junk bond debt).  If prices in 2016 remain under $50/bbl (as many forecaster expect), shale oil production in the United States will likely see a substantial decline in output and many shale companies will face merger or pushed into bankruptcy. But as for total US output, this decline will be partially offset by Gulf oil coming into production so for the first six months of 2015 total decline probably will be around 0.5Mb/d or lower. 

In any case, as 2015 has shown low prices became sticky and self reinforcing via Wall Street financial mechanisms. So chances for quick reversal in 2016 are close to zero. That spells real trouble for the US shale oil industry as well as Canada oil sands production  (QE At Work Pouring Cheap Debt Into The Shale Ponzi David Stockman's Contra Corner) as well as speculators in oil futures who will be wiped out via EFN  (outside major banks and those who shorted oil):

There are two pieces of the economic puzzle when it comes to shale. First is that most shale oil deposits are not profitable to extract except at current high prices. This drilling/extraction method is not cheap. Breakeven prices vary by region but it is safe to say that no shale oil deposits are profitable below $50/barrel and most areas require much higher prices. An average might be in the range of $65 and there are plenty of areas where the price needs to be above $80 before anyone makes a nickel.

I would just note that oil traded, albeit briefly, at $34 in the last recession. Second is the production profile of shale wells; production drops off rather precipitously after the first year (in contrast with traditional wells which deplete over much longer time frames). Combine high extraction costs with rapid depletion and the economics of shale become not only dubious but frankly insane.

Usually forecasts of oil prices are not work the paper or electrons. but there are some exceptions to this rule. For example  Bill Connoly in his Oil Price Forecast 2015-2016 - Forbes was one of the few forecasters who proved to be right as for 2015; remains to be seen for 2016.

My price forecast is that today’s $60 price is likely to be the high end for the coming two years. There may be temporary market volatility higher, but don’t expect a higher price to be sustained. At the low end, $50 seems like a floor absent a global recession.

OilPrice.com analysts think that the bankruptcy of shale companies and drastic reduction of the number of new projects and capital expenditures will eventually move the oil price up to $70+ range. And that the production of shell oil in the USA will drop 1 Mb/d in 2016 or even more, while consumption rises as record number of cars was sold in 2015.  But this process in not immediate and can take more then one year as in 2015 oil production defied gloomy forecasts and remains relatively stable (Oil Price Scenarios For 2015 And 2016 OilPrice.com_

The spare capacity data suggests that demand/supply imbalance may last three years, requiring 18 months to work through to the mid-cycle point where over-supply turns to under-supply. It is by no means certain that the market will respond to the same time dynamic when we are now dependent upon natural production capacity wastage to occur as opposed to OPEC simply closing the spigot. But this is all I have to go on.

The downturn in the current price cycle began last July and we are therefore just 6 months in. Another year of pain to go for the producers, that is unless OPEC decides to intervene.

In we count start of mid cycle from December of 2014 then we can see some upward pressure in July of 2016 or so.

Low prices also might mean that only selected shale projects ("sweet spots") with continue to be explored, diminishing of flow of oil from this source to the market ( Oil under US$60 beyond 2016 suggests market rethinking shale - Channel NewsAsia). Those places will be exhausted in two-three years making extraction more expensive on average.

If U.S. shale drillers - the world's new 'swing' producers - can still turn a profit at below US$60 a barrel, then the fall in long-dated oil prices may be rational. If not, as some bullish market analysts worry, then lower prices could be choking off new supplies the world may need as soon as next year.

"If you take the curve at face value, it appears to be saying that U.S. shale can grow ... if WTI stays below US$60 for three years. That doesn’t seem very likely," Paul Horsnell, global head of commodities research at Standard Chartered, said, referring to West Texas Intermediate crude.

"One would guess that all those companies that had been holding back from cutting projects and jobs over the past few months are not going to hold on much longer, and another shakeout will start. And it probably won’t be long before U.S. rig counts start to dive again."

Link to chart: http://link.reuters.com/tef25w 

... ... ...

U.S. oil futures for December 2017 delivery have dropped by as much as US$5 a barrel, or 8 percent, in the past two days, an even deeper retreat than last November when OPEC's surprise decision to maintain oil output despite a global glut sent markets into a deepening tailspin.

CLZ17 Commodity Futures Price Chart for Crude Oil WTI December 2017

[Note that they are close to $58 as of July 24, 2015 -- NNB]

EIA forecasts change with market prices

Short-Term Energy Outlook - U.S. Energy Information Administration (EIA)

In December 2015 EIA predicted average price of oil in 2016 much lower, around $51 a barrel, so EIA forecasts change really fast with future prices and as such are just educated guesses.

  2013 2014 2015 2016
WTI Crude Oila
(dollars per barrel)
97.98 93.17 49.08 50.89
Brent Crude Oil
(dollars per barrel)
108.56 98.89 52.93 55.78

Sustained low oil price will cut capital investment in oil dramatically

An extended period of lower oil prices would benefit consumers but would trigger energy-security concerns by heightening reliance on a small number of low-cost producers, or risk a sharp rebound in price if investment falls short, says the International Energy Agency (EIA) in the 2015 edition of its  World Energy Outlook publication (WEO-2015).We need to distinguish between oil as a chemical substance, a source used by chemical companies to produce all kind of useful things and oil as a source of motor fuel.  Oil is irreplaceable resource and burning it now deprive of oil future generations. As simple as that.

The US government policy of allowing (or, most probably, facilitating/engineering) very low oil prices is extremely unwise (I would use a stronger word) because at least for one segment of transportation (which is around 70% of total oil consumption in the USA) alternative does already exist. Small hybrid and electrical cars with prices of oil over $100 (and gasoline above $4 per gallon) are absolutely viable.

Instead now we have a huge jump in SUVs sales which became No.1 personal car category. To say nothing about light trucks. Which is the last thing we need.

Switch to natural gas in large vehicles such as buses (and small delivery trucks) also experiences a dramatic slow down (transit buses in Europe already are using this fuel on mass scale).

Again I think that it is the US government which is the culprit of destruction of the US shale industry which was build with such great effort and expense and is now on the verge of extinction. By really great people working in very difficult, challenging conditions.

The US government could buy excessive oil into strategic reserve or do something similar to keep prices at least above $70 dollars level. They could also prohibit short oil ETNs and other Wall Street machinations and for good effort jail couple of too aggressive traders for violation of some New Deal era laws(after all this is gambling, plain and simple) which are still on books after all this deregulation efforts by Clinton and Bush II administrations.

My point is that wind and solar might well be not the best choices. Other alternatives of renewable fuels exists. Meanwhile we need to save oil and the best way to do it is to ramp up oil price to above $100 level, which ensure the survival of frackers, which unfortunately became a collateral damage in some larger, possibly geopolitical play.

Actually EIA recognizes the danger of oil price spikes caused by sustained low oil prices and low capex investments Sustained low oil prices could reduce exploration and production investment - Today in Energy - U.S. Energy Information Adminis

Low oil prices, if sustained, could mark the beginning of a long-term drop in upstream oil and natural gas investment. Oil prices reflect supply and demand balances, with increasing prices often suggesting a need for greater supply. Greater supply, in turn, typically requires increased investment in exploration and production (E&P) activities. Lower prices reduce investment activity.

Overlaying annual averages of the domestic first purchase price (adjusted for inflation) on oil and natural gas investment reveals that upstream investment is highly sensitive to changes in oil prices. Given the fall in oil prices that began in mid-2014 and the relationship between oil prices and upstream investment, it is possible that investment levels over the next several years will be significantly lower than the previous 10-year annual average.

Oil production is a capital-intensive industry that requires management of existing production assets and evaluation of prospective projects often requiring years of upfront investment spending on exploration, appraisal, and development before reserves are developed and produced.

Previous investment cycles provide insights into how investment responds to crude oil price changes. In 1981 and 1982, after crude oil prices significantly increased, investment topped out at more than $100 billion (in 2014 dollars) and then averaged $30 billion to $40 billion per year into the early 2000s as crude oil prices fell and remained in the $20-$30 per barrel (b) range. From 2003 to 2014, investment spending increased from $56 billion to a high of $158 billion as crude oil prices increased from $34.53/b to $87.39/b, including several months of prices reaching more than $100/b. EIA's 2015 Annual Energy Outlook Reference case projects real domestic first purchase prices to average about $70/b in 2020. This price level could result in substantially lower annual oil and natural gas investment over the 2015-20 period than the annual average of $122 billion spent during the 2005-14 investment cycle crest period

 

Additional "end of cheap energy" readings

See also my introduction to the topic of "End of cheap energy":


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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 12, 2021] Energy Density of Natural Gas - The Physics Factbook by Jessica Yan

Jun 07, 2004 | hypertextbook.com

Energy Density of Natural Gas

An educational, fair use website

Bibliographic Entry Result
(w/surrounding text)
Standardized
Result
"Fuel." Encyclopedia Encarta . CD-ROM. Microsoft, 2003. "Gaseous fuels (Btu per cu ft): acetylene 1480; blast-furnace gas 93; carbon monoxide 317; coke-oven gas or coal gas about 600; hydrogen 319; natural gas 1050 to 2220; oil gas 516; producer gas 136." 39.1""82.7 MJ/m 3
Brennard, Timothy P. Natural Gas, A Fuel of Choice for China . Norwich: University of East Anglia, 2001: 81. "In calorific value it competes extremely well with other traditional commercial gasses: 37-41 MJ/m 3 i.e., twice coal gas, and eight times producer gas [Tiratsoo, 1976]." 37.0""41.0 MJ/m 3
E.N., Tiratsoo. Oilfields of the World . Scientific Press, 1973: 15. Reference in Understanding Natural Gas . "Calorific values: 900""1100 Btu/ft. 3 (33.4""40.9 MJ/m 3 )" 33.4""40.9 MJ/m 3
Bioenergy Conversion Factors . Bioenergy Information Network. "Natural gas: HHV = 1027 Btu/ft3 = 38.3 MJ/m 3 ; LHV = 930 Btu/ft3 = 34.6 MJ/m 3 [HHV""Higher Heating Level; LHV""Lower Heating Level]" 38.3 MJ/m 3
34.6 MJ/m 3

Natural gas, a combustible mixture of hydrocarbons, is a very important source of energy since it is clean, cheap and efficient. The major component is methane, but it may also contain small amounts of other hydrocarbon compounds such as ethane or butane. A natural gas is described as sweet (with low sulfur contents) or sour (with high sulfur contents). It may also be wet or dry, depending on the presence of natural gas liquids and other energy gases. When more than 90% of a natural gas is composed of methane, it is referred to as dry.

Source: Background of Natural Gas
Typical Composition of Natural Gas
Methane CH 4 70-90%
Ethane C 2 H 6 0-20%
Propane C 3 H 8
Butane C 4 H 10
Carbon Dioxide CO 2 0-8%
Oxygen O 2 0-0.2%
Nitrogen N 2 0-5%
Hydrogen sulphide H 2 S 0-5%
Rare gases A, He, Ne, Xe trace

There are three theories that explain the formation of natural gas. The first is that natural gas is formed when organic matter, such as the remains of a plant or animal, is compressed beneath the earth at high pressures for a long period of time. This is referred to as thermogenic methane.

Another theory suggests that natural gas is formed by the decomposition of organic matters by a microorganism. These microorganisms chemically break down the organic matters into pure methane, which is referred to as biogenic methane.

The third states that methane is formed by the reaction of hydrogen rich gases and carbon molecules deep inside the earth. In the absence of oxygen, they may combine to form hydrocarbon gases. Under high pressure, these gases may rise to the surface of the earth and form methane deposits.

Energy density is measured by the amount of energy stored in a given unit of matter or system. For natural gases, the energy density is the either the amount of energy stored per unit volume or per unit mass of the gas. The energy stored per unit volume is usually measured in British Thermal Units per cubic feet, or, the amount of natural gas that will produce enough energy to heat one pound of water one degree at normal pressure. The standard unit is megajoules per cubic meter. The energy density of a natural gas lies in the range of 900-2200 Btu/ft 3 or 33.4""82.7 MJ/m 3 .

Jessica Yan -- 2004

[Jun 12, 2021] Forget Activism- Chronic Underperformance Is Big Oil's Biggest Problem

Jun 06, 2021 | finance.yahoo.com

Whereas climate change issues are the presumptive reasons behind the latest wave of investor revolts at the oil and gas giants, lurking beneath the surface is a growing sense of apprehension about Big Oil's strategy and failure to generate adequate returns for shareholders in recent decades.

The naked truth is that Exxon and its cohorts have severely underperformed the broader market over the last two decades in terms of total returns to shareholders, implying the sector's woes are long-term and strategic rather than short-term and cyclical.

Chronic underperformance

XOM

Source: CNN Money

Big Oil's underperformance relative to the market is clearly evident whether you are looking at 2-year, 5-year, 10-year, or even 20-year timespans.

For instance, since 2015, Exxon shares have returned a -2.5% compound annual loss based on share prices and dividends, a far cry from the average annual gain of +14.4% by the S&P 500 over the timeframe.

Over the past two decades, Exxon's compound annual return has clocked in at +4.2%, still considerably lower than the broad market benchmark's return of +7.1%.

... ... ...

Exxon is hardly alone, with none of its peers, including Chevron, Royal Dutch Shell (NYSE:RDS.A), BP Inc. (NYSE:BP), and Total (NYSE:TOT) coming close to matching the returns by the broader share market over the past decade.

In fact, on an inflation-adjusted U.S. dollar basis, returns by Exxon, Shell, and BP have been negative over the past five years, a period which coincided with the biggest bull market in the history of the stock market.

The renewable energy conundrum

You cannot blame the oil majors for continuing to engage in a lot of hand-wringing at a time when investors are demanding they pump less oil and transition to cleaner energy.

For the oil majors, successfully transitioning to green energy companies is not going to be a walk in the park because these companies have to ride two horses.

That's the case because the majority are already battling dwindling cash flows which means they cannot afford to gamble with whatever little is left. Oil prices have been on a downtrend since 2014, a situation that has only worsened during the pandemic.

Oil and gas firms are still grappling with the best way to presently use dwindling cash flows; in effect, they are still weighing whether it's worthwhile to at least partially reinvent themselves as renewables businesses while also determining which low-carbon energy markets offer the most attractive future returns.

Most renewable ventures, like solar and wind projects, tend to churn out cash flows akin to annuities for several decades after initial up-front capital expenditure with generally low price risk as opposed to their current models with faster payback but high oil price risk. With the need to generate quick shareholder returns, some fossil fuel companies have actually been scaling back their clean energy investments.

Energy companies are also faced with another conundrum: Diminishing returns from their clean energy investments.

Related: ''We'll See $200 Oil": Russia & OPEC Ministers Blast IEA's Net Zero Plan

A paper published in Science Direct last August says that dramatic reductions in the cost of wind and solar have been leading to an even bigger reduction in revenue inflows leading to falling profits. This is particularly true for wind energy as later deployments of wind usually have lower market value than earlier ones due to wind energy revenue declining more rapidly than cost reductions. Solar is more resilient, with technological progress approximately balancing out the revenue degradation, which perhaps explains why solar stocks have gone ballistic.

Adding wind and solar to our grid tends to reduce electricity prices during peak generation times: Indeed, electricity prices in California can come down to zero during long sunny durations. This was not a problem for early deployments but is becoming a major concern as renewables increasingly play a bigger part in our electricity generation mix.

But, ultimately, Big Oil will have to take the plunge and engage in drastic internal restructuring and product cycle transitions even as activists like Engine No.1 promise to continue turning the screw. As Charlie Penner of Engine No.1 has told FT , the energy transition is happening faster than expected and has undermined Big Oil's assumptions about long-term demand for its oil.

By Alex Kimani for Oilprice.com

->


[Jun 07, 2021] Energy Density of Natural Gas - The Physics Factbook

Jun 07, 2021 | hypertextbook.com

Energy Density of Natural Gas

An educational, fair use website

Bibliographic Entry Result
(w/surrounding text)
Standardized
Result
"Fuel." Encyclopedia Encarta . CD-ROM. Microsoft, 2003. "Gaseous fuels (Btu per cu ft): acetylene 1480; blast-furnace gas 93; carbon monoxide 317; coke-oven gas or coal gas about 600; hydrogen 319; natural gas 1050 to 2220; oil gas 516; producer gas 136." 39.1""82.7 MJ/m 3
Brennard, Timothy P. Natural Gas, A Fuel of Choice for China . Norwich: University of East Anglia, 2001: 81. "In calorific value it competes extremely well with other traditional commercial gasses: 37-41 MJ/m 3 i.e., twice coal gas, and eight times producer gas [Tiratsoo, 1976]." 37.0""41.0 MJ/m 3
E.N., Tiratsoo. Oilfields of the World . Scientific Press, 1973: 15. Reference in Understanding Natural Gas . "Calorific values: 900""1100 Btu/ft. 3 (33.4""40.9 MJ/m 3 )" 33.4""40.9 MJ/m 3
Bioenergy Conversion Factors . Bioenergy Information Network. "Natural gas: HHV = 1027 Btu/ft3 = 38.3 MJ/m 3 ; LHV = 930 Btu/ft3 = 34.6 MJ/m 3 [HHV""Higher Heating Level; LHV""Lower Heating Level]" 38.3 MJ/m 3
34.6 MJ/m 3

Natural gas, a combustible mixture of hydrocarbons, is a very important source of energy since it is clean, cheap and efficient. The major component is methane, but it may also contain small amounts of other hydrocarbon compounds such as ethane or butane. A natural gas is described as sweet (with low sulfur contents) or sour (with high sulfur contents). It may also be wet or dry, depending on the presence of natural gas liquids and other energy gases. When more than 90% of a natural gas is composed of methane, it is referred to as dry.

Source: Background of Natural Gas
Typical Composition of Natural Gas
Methane CH 4 70-90%
Ethane C 2 H 6 0-20%
Propane C 3 H 8
Butane C 4 H 10
Carbon Dioxide CO 2 0-8%
Oxygen O 2 0-0.2%
Nitrogen N 2 0-5%
Hydrogen sulphide H 2 S 0-5%
Rare gases A, He, Ne, Xe trace

There are three theories that explain the formation of natural gas. The first is that natural gas is formed when organic matter, such as the remains of a plant or animal, is compressed beneath the earth at high pressures for a long period of time. This is referred to as thermogenic methane.

Another theory suggests that natural gas is formed by the decomposition of organic matters by a microorganism. These microorganisms chemically break down the organic matters into pure methane, which is referred to as biogenic methane.

The third states that methane is formed by the reaction of hydrogen rich gases and carbon molecules deep inside the earth. In the absence of oxygen, they may combine to form hydrocarbon gases. Under high pressure, these gases may rise to the surface of the earth and form methane deposits.

Energy density is measured by the amount of energy stored in a given unit of matter or system. For natural gases, the energy density is the either the amount of energy stored per unit volume or per unit mass of the gas. The energy stored per unit volume is usually measured in British Thermal Units per cubic feet, or, the amount of natural gas that will produce enough energy to heat one pound of water one degree at normal pressure. The standard unit is megajoules per cubic meter. The energy density of a natural gas lies in the range of 900-2200 Btu/ft 3 or 33.4""82.7 MJ/m 3 .

Jessica Yan -- 2004

[Jun 07, 2021] Forget Activism- Chronic Underperformance Is Big Oil's Biggest Problem

Jun 06, 2021 | finance.yahoo.com

Whereas climate change issues are the presumptive reasons behind the latest wave of investor revolts at the oil and gas giants, lurking beneath the surface is a growing sense of apprehension about Big Oil's strategy and failure to generate adequate returns for shareholders in recent decades.

The naked truth is that Exxon and its cohorts have severely underperformed the broader market over the last two decades in terms of total returns to shareholders, implying the sector's woes are long-term and strategic rather than short-term and cyclical.

Chronic underperformance

XOM

Source: CNN Money

Big Oil's underperformance relative to the market is clearly evident whether you are looking at 2-year, 5-year, 10-year, or even 20-year timespans.

For instance, since 2015, Exxon shares have returned a -2.5% compound annual loss based on share prices and dividends, a far cry from the average annual gain of +14.4% by the S&P 500 over the timeframe.

Over the past two decades, Exxon's compound annual return has clocked in at +4.2%, still considerably lower than the broad market benchmark's return of +7.1%.

... ... ...

Exxon is hardly alone, with none of its peers, including Chevron, Royal Dutch Shell (NYSE:RDS.A), BP Inc. (NYSE:BP), and Total (NYSE:TOT) coming close to matching the returns by the broader share market over the past decade.

In fact, on an inflation-adjusted U.S. dollar basis, returns by Exxon, Shell, and BP have been negative over the past five years, a period which coincided with the biggest bull market in the history of the stock market.

The renewable energy conundrum

You cannot blame the oil majors for continuing to engage in a lot of hand-wringing at a time when investors are demanding they pump less oil and transition to cleaner energy.

For the oil majors, successfully transitioning to green energy companies is not going to be a walk in the park because these companies have to ride two horses.

That's the case because the majority are already battling dwindling cash flows which means they cannot afford to gamble with whatever little is left. Oil prices have been on a downtrend since 2014, a situation that has only worsened during the pandemic.

Oil and gas firms are still grappling with the best way to presently use dwindling cash flows; in effect, they are still weighing whether it's worthwhile to at least partially reinvent themselves as renewables businesses while also determining which low-carbon energy markets offer the most attractive future returns.

Most renewable ventures, like solar and wind projects, tend to churn out cash flows akin to annuities for several decades after initial up-front capital expenditure with generally low price risk as opposed to their current models with faster payback but high oil price risk. With the need to generate quick shareholder returns, some fossil fuel companies have actually been scaling back their clean energy investments.

Energy companies are also faced with another conundrum: Diminishing returns from their clean energy investments.

Related: ''We'll See $200 Oil": Russia & OPEC Ministers Blast IEA's Net Zero Plan

A paper published in Science Direct last August says that dramatic reductions in the cost of wind and solar have been leading to an even bigger reduction in revenue inflows leading to falling profits. This is particularly true for wind energy as later deployments of wind usually have lower market value than earlier ones due to wind energy revenue declining more rapidly than cost reductions. Solar is more resilient, with technological progress approximately balancing out the revenue degradation, which perhaps explains why solar stocks have gone ballistic.

Adding wind and solar to our grid tends to reduce electricity prices during peak generation times: Indeed, electricity prices in California can come down to zero during long sunny durations. This was not a problem for early deployments but is becoming a major concern as renewables increasingly play a bigger part in our electricity generation mix.

But, ultimately, Big Oil will have to take the plunge and engage in drastic internal restructuring and product cycle transitions even as activists like Engine No.1 promise to continue turning the screw. As Charlie Penner of Engine No.1 has told FT , the energy transition is happening faster than expected and has undermined Big Oil's assumptions about long-term demand for its oil.

By Alex Kimani for Oilprice.com

->


[Jun 06, 2021] GOM is the major factor in the USA oil prodcution comeback , not "shale plays " that are supposedly should be the last hurrah of oil production in the USA

Notable quotes:
"... LTO drilling locations are diminishing faster and faster. Look for massive consolidation as E&P companies can only grow through M&A. ..."
"... The energy transition will be painful and longer than anticipated. Criminalization of an industry that embodies national security and that gives the "haves" a competitive advantage in favor of hopes and prayers is folly and irresponsible. ..."
"... A few years ago I heard Chinese venture capitalist speak at the Aspen Institute. He claimed that democracy is not a form of government but instead a religion. He gave the example that in Nigeria, the US is concerned about human rights while the Chinese could care less who dies in Nigeria as long as they can get the oil. He also stated that the Chinese only care about how they can feed, shelter, move, and run their economy and human rights are not remotely introduced into their paradigm. Something to think about. ..."
Jun 01, 2021 | peakoilbarrel.com

HOLE IN HEAD IGNORED 05/30/2021 at 1:40 pm

Ovi, great work as usual .My POV is that it is GOM that is the major factor in the comeback , not "shale plays " that are supposedly going to be the saviors of Industrial civilisation . Confirms my argument ( and of many others )that shale is all juiced out . Better to lower expectations from LTO for the future . REPLY OVI IGNORED HOLE IN HEAD IGNORED 05/30/2021 at 1:40 pm

Ovi, great work as usual .My POV is that it is GOM that is the major factor in the comeback , not "shale plays " that are supposedly going to be the saviors of Industrial civilisation . Confirms my argument ( and of many others )that shale is all juiced out . Better to lower expectations from LTO for the future . REPLY OVI IGNORED 05/30/2021 at 5:00 pm

Thanks HH

I know the general opinion seems to be that the shale plays are finished. Looking at the data that is in the post doesn't confirm, at this time, that shale is overblown. Let's look at the two states at the top of the post, Texas and NM and the onshore L48 first chart.

Looking at the Texas increase from January to March one gets 4,745 – 4,661 = 84 kb/d or 42 kb/d/mth.
Looking at NM from November to March, one gets 1,155 – 1,112 = 43 or 11 kb/d/mth.
The total being 53 kb/d/mth.

Looking at the total onshore L48 increase from January to March, one gets 8,861 – 8,814 = 47 or a net of 23.5 kb/d/mth. So within the onshore lower 48 there is 30 kb/d/mth of decline.

I would not bet much on my two month or four month analysis, but I think we will need to monitor what is happening in Texas and NM for another six months to get a better idea of what is happening in the Permian. The price of oil will be the determining/critical factor.

05/30/2021 at 5:00 pm

Thanks HH

I know the general opinion seems to be that the shale plays are finished. Looking at the data that is in the post doesn't confirm, at this time, that shale is overblown. Let's look at the two states at the top of the post, Texas and NM and the onshore L48 first chart.

The total being 53 kb/d/mth.

Looking at the total onshore L48 increase from January to March, one gets 8,861 – 8,814 = 47 or a net of 23.5 kb/d/mth. So within the onshore lower 48 there is 30 kb/d/mth of decline.

I would not bet much on my two month or four month analysis, but I think we will need to monitor what is happening in Texas and NM for another six months to get a better idea of what is happening in the Permian. The price of oil will be the determining/critical factor.

LTO SURVIVOR IGNORED 05/31/2021 at 12:39 am

LTO drilling locations are diminishing faster and faster. Look for massive consolidation as E&P companies can only grow through M&A. Many companies have drilling inventories of less than four years. The LTO revolution is over as we knew it and the number of E&P companies will shrink dramatically. There will be minimal growth and much less than 75kbd per month.

The energy transition will be painful and longer than anticipated. Criminalization of an industry that embodies national security and that gives the "haves" a competitive advantage in favor of hopes and prayers is folly and irresponsible.

China will bury us as they try to capture as much of the hydrocarbon as they can knowing that energy equals power.

A few years ago I heard Chinese venture capitalist speak at the Aspen Institute. He claimed that democracy is not a form of government but instead a religion. He gave the example that in Nigeria, the US is concerned about human rights while the Chinese could care less who dies in Nigeria as long as they can get the oil. He also stated that the Chinese only care about how they can feed, shelter, move, and run their economy and human rights are not remotely introduced into their paradigm. Something to think about.

[May 30, 2021] A Critical Shift In The War For Oil by Tom Luongo

May 30, 2021 | www.zerohedge.com

Authored by Tom Luongo via Gold, Goats. 'n Guns blog,

Biden backed down on Nordstream 2 and, at The Davos Crowd's insistence, he will back down on the JCPOA.

Davos needs cheap energy into Europe. That's ultimately what the JCPOA was all about. The basic framework for the deal is still there. While the U.S. will kick and scream a bit about sanctions relief, Iran will be back into the oil market and make it possible for Europe to once again invest in oil/gas projects in Iran.

Now that Benjamin Netanyahu is no longer going to be leading Israel, the probability of breakthrough is much much higher than last week. The Likudniks in Congress and the Senate just lost their raison d'etre. The loss of face for Israel in Bibi's latest attempt to bludgeon Gaza to retain power backfired completely.

U.S. policy towards Israel is shifting rapidly as the younger generations, Gen-X and Millennials, simply don't have the same allegiance to Israel that the Baby Boomers and Silent generations did. It is part of a geopolitical ethos which is outdated.

So, with some deal over Iran's nuclear capability in the near future, Europe will then get gas pipelines from Iran through Turkey as well as gain better access to the North South Transport Corridor which is now unofficially part of China's Belt and Road Initiative.

Russia, now that Nordstream 2 is nearly done, will not balk at this. In fact, they'll welcome it. It forms the basis for a broader, sustainable peace arrangement in the Middle East. What's lost is the Zionist program for Greater Israel and continued sowing dissent between exhausted participants.

But the big geopolitical win for Davos, they think, is that by returning Iran to the oil markets it will cut down on Russia's dominance there. That the only reason Russia is the price setter in oil today, as the producer of the marginal barrel, is because of Trump taking Iranian and Venezuelan oil off the market.

With these negotiations ongoing and likely to conclude soon I'm sure the thinking is that this will help save Iranian moderates in the upcoming elections. But with Iran's Guardian Council paving the way for Ebrahim Raeisi to win the election that is also very unlikely( H/T to Pepe Escobar's latest on this ) :

So Raeisi now seems to be nearly a done deal: a relatively faceless bureaucrat without the profile of an IRGC hardliner, well known for his anti-corruption fight and care about the poor and downtrodden. On foreign policy, the crucial fact is that he will arguably follow crucial IRGC dictates.

Raeisi is already spinning that he "negotiated quietly" to secure the qualification of more candidates, "to make the election scene more competitive and participatory". The problem is no candidate has the power to sway the opaque decisions of the 12-member Guardian Council, composed exclusively by clerics: only Ayatollah Khamenei.

I have no doubt that Iran is, as Escobar suggests, in post-JCPOA mode now and will walk away from Geneva without a deal if need be, but Davos will cut the deal it needs to bring the oil and gas into Europe while still blaming the U.S. for Iran's nuclear ambitions because they've gotten what they actually wanted, Netanyahu out of power.

Trump's assault on Iran did what Neocon belligerence always does, increase domestic sympathies for hardliners within the existing government. I told you his assassinating Gen. Qassem Soleimani was not only a mistake but a turning point in history , it sealed the alliance between Russia/China/Iran into a cohesive one which no amount of Euro-schmoozing will undo.

Seeing the tenor of these negotiations and the return of Obama to the White House, the Saudis saw the writing on the wall immediately and began peace talks with Iran in Baghdad put off for a year because of Trump's killing Soleimani.

The Saudis are fighting for their lives now as the Shia Crescent forms and China holds the House of Saud's future in its hands.

Syria will be restored to the Arab League and all that 'peace' work by Trump will be undone quickly. Because none of it was actually peaceful in its implementation. Netanyahu is gone, Israel just got defeated by Hamas and now the rest of the story can unfold, put on hold by four years of Jared Kushner's idiocy and U.S. neoconservatives feeding Trump bad information about the situation.

The Saker put together two lists in his latest article (linked above) which puts the entire situation into perspective:

The Goals:
  1. Bring down a strong secular Arab state along with its political structure, armed forces, and security services.

  2. Create total chaos and horror in Syria justifying the creation of a "security zone" by Israel not only in the Golan but further north.

  3. Trigger a civil war in Lebanon by unleashing the Takfiri crazies against Hezbollah.

  4. Let the Takfiris and Hezbollah bleed each other to death, then create a "security zone," but this time in Lebanon.

  5. Prevent the creation of a Shia axis Iran-Iraq-Syria-Lebanon.

  6. Break up Syria along ethnic and religious lines.

  7. Create a Kurdistan which could then be used against Turkey, Syria, Iraq, and Iran.

  8. Make it possible for Israel to become the uncontested power broker in the Middle-East and force the KSA, Qatar, Oman, Kuwait, and all others to have to go to Israel for any gas or oil pipeline project.

  9. Gradually isolate, threaten, subvert, and eventually attack Iran with a broad regional coalition of forces.

  10. Eliminate all centers of Shia power in the Middle-East.

The Outcomes:
  1. The Syrian state has survived, and its armed and security forces are now far more capable than they were before the war started (remember how they almost lost the war initially? The Syrians bounced back while learning some very hard lessons. By all reports, they improved tremendously, while at critical moments Iran and Hezbollah were literally "plugging holes" in the Syrian frontlines and "extinguishing fires" on local flashpoints. Now the Syrians are doing a very good job of liberating large chunks of their country, including every single city in Syria).

  2. Not only is Syria stronger, but the Iranians and Hezbollah are all over the country now, which is driving the Israelis into a state of panic and rage.

  3. Lebanon is rock solid; even the latest Saudi attempt to kidnap Hariri is backfiring. (2021 update: in spite of the explosion in Beirut, Hezbollah is still in charge)

  4. Syria will remain unitary, and Kurdistan is not happening. Millions of displaced refugees are returning home.

  5. Israel and the US look like total idiots and, even worse, as losers with no credibility left.

The net result is everyone in the region who were aggressors are now suing for peace. This is why I expect some kind of deal that returns Iran to the global economy. There's no way for Germany's shiny new trade deal with China to work without this.

Trump's hard line against Iran was always a mistake, even if Iran's nuclear ambitions are real. But with the Open Skies treaty now a dead letter the U.S. has real logistical problems in the region and they only multiply if Erdogan in Turkey finally chooses a side and gives up his Neo-Ottoman ambitions, now very likely.

But when it comes to economics, as always, Davos has this all backwards vis a vis oil. They still think they can use the JCPOA to drive a wedge between Iran and Russia over oil. They still think Putin only cares about oil and gas sales abroad. It's clear they don't listen to him because the policy never seems to change.

So, to Davos, if they bring 2.5 to 3 million barrels per day from Iran back online and oil prices drop, this forces Russia to back down militarily and diplomatically in Eastern Europe. With a free-floated ruble the Russians don't care now that they are mostly self-sufficient in food and raw material production.

None of that will come to pass. Putin is shifting the Russian economy away from oil and gas with an announced ambitious domestic spending plan ahead of this fall's State Duma elections. Lower or even stable prices will accelerate those plans as capital no longer finds its best return in that sector.

This carrot to Iran and stick to Russia approach of Brussels/Davos is childish and it will only get worse when the Greens come to power in Germany at the end of the year. Unless the German elections end in a stalemate which is unforeseen, the CDU will grand coalition as the junior partner to the Greens, just as Davos wants it.

Don't miss the significance of the policy bifurcation either when it comes to oil. The Biden administration is trying to make energy as expensive as possible in the U.S. -- no Keystone Pipeline, Whitmer trying to close down Enbridges's Line 5 from Canada into Michigan, etc. -- while Europe gets Nordstream 2 from Russia and new, cheap supplies from Iran.

This is what had Trump so hopping mad when he was President. This is part of why he hated the JCPOA. Israel and the EastMed pipeline was what should have been the U.S. policy in his mind.

Now, those dreams are dead and the sell out of the U.S. to Davos is in full swing. Seriously, Biden/Obama are going to continue on this path of undermining U.S. energy production until they are thrown out of office, either by the overwhelming shame of the election fraud lawsuits which recall Senators from Arizona, Georgia and Michigan, the mid-term elections which brings a more pro-Trump GOP to power or by military force. That last bit I put a very low probability on.

Bottom line, for now global oil prices have likely peaked no matter what drivel comes out of John Kerry's mouth.

The Brent/WTI spread will likely collapse and go negative for the first time in years as Iran's full oil production comes online over the next two years while U.S. production falls. We'll see rising oil prices in the U.S. while global supply rises, some of which China is getting at a steep discount from who? Iran.

Meanwhile Russia continues to hold the EU to account on everything while unmasking the not just the latest Bellingcat/MI6/State Dept. nonsense in Belarus surrounding the arrest of Roman Petrosovich, but also filling the void diplomatically left by a confused and incompetent U.S. policy in the Middle East.

If I'm the Bennett in Israel, the first phone call I make after taking office is to no one other than Putin, who now holds the reins over Iran, Hezbollah and a very battle-hardened and angry Syria who just re-elected Assad because he navigated the assault on the country with no lack of geopolitical skill.

Because it is clear that Biden/Obama, on behalf of Davos , have left Israel out to twist in the wind surrounded by those who wish it gone. We'll see if they get their wish. I think the win here is clear and the days of U.S. adventurism in the Middle East are numbered.

The oil wars aren't over, by any stretch of the imagination, but the outcome of the main battles have decisively shifted who determines what battles are fought next.

* * *

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wellwaddyaknow 2 hours ago (Edited)

About time that fcking Project for the New American Century(aka Greater Israel from the Nile to the Euphates) got derailed .

Fcking useless neocon sh its gutted and bankrupted the U.S. for their fcked up ziosh it garbage.

Sheldon Adelson belongs in the Aus witz Mengele suite in hell. He was the biggest cheerleader for the last 20 years of this hell on earth that was created in the middle east.

Woodenman 2 hours ago remove link

Trump got it *** backwards , he should have defunded Israel and fast tracked Iran to be a nuclear power, Iran is an oil producer, what does Israel do for us?

Would I care that Israel cannot sleep at night knowing Iran has the bomb, not at all.

AGuy 37 minutes ago

" what does Israel do for us? "

Keeps the ME unstable so the US has the excuse to keep a lot of military resources in the ME, in the name of being the worlds policemen. Plus the US needs to protect the Petro dollar, but at this point I don't think that will matter soon considering the amount of money printing & spending the US is doing at the momement.

wellwaddyaknow 2 hours ago (Edited)

Soleimani was very good at destroying ISIS trash.

And which countries backed ISIS?

JR Wirth 2 hours ago

NeoCon tears as the world attempts to move on from deranged foreign policy. Will the US throw a fit and drag the world into war? Let's call Tel Aviv and find out.

Der Steppenwolf 2 hours ago remove link

Iran already sells huge amounts of oil to China and likely many others, there just isn't going to be a significant increase in Iranian oil hitting the market as a result of any deal. Moreover, this relatively small increase will occur over time. Even if Iran eventually increases production the 2.5-3 million bpd the author cites, world consumption in 2021 is forecast to increase about 6 million bpd over 2020. Considering these facts any changes in Iranian oil production should do little to affect the overall price.

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AGuy 42 minutes ago

" Iran has huge potential to increase production "

I doubt that very much. Iran has very old oil fields which have been producing since the 1920s. Global Oil production peaked in 2018 & is now in permanent decline. Iran could increase NatGas production, but Oil production is in permanent decline.

Apollo 32 minutes ago

God, I hope half of the above comes true. Bibi needs to be court martialed and Israel needs to go back into smaller and more peaceful version of itself (if that is even possible) . USA can just bugger off home, and try to deal with transgendered army, president's dementia and critical race theory nonsense first.

What the world needs is less wars, less central bankers screwing the game and less stealing of other people's natural resources. Instead it just more plain old hard work, honest trading and no bs diplomacy.

dead hobo 1 hour ago (Edited) remove link

Amazingly perfect analysis.

Israel will survive. I wish them well.

So many US wars are oil based. Lies abound to cover this up. Neocon Economics turns every war opportunity into a profit center. No Profit = No War potential. Whenever you see a Neocon pumping a war somewhere, you need to look for who will make scads of money from it.

Trump isn't an angel. He's the guy who destroyed Establishment Republicanism. That begat populism. I detested him working his book when he pumped QE and ZIRP. I considered it a temporary price to pay to remove Establishment Republicans from the world. Yes, the US also needed a good Front Door with a lock. He also did good there. Trump playing the Imperialism Game clumsily worked in the favor of Peaceful Coexistence. Probably by mistake. Ok by me if everyone else declares peace anyway.

The US economy can still outpower anyone even if it is forced to play fair.

This brings us to the Deep State. Who exactly are they?

Are they Neocons who want war profits by making it look like others are the war mongers? Are they anti-peace as long as it doesn't start a full blown war - providing a profit can be made from it by their oligarch bosses?

Or is the Deep State the Davos oriented oligarchs who wants the 99% to whistle while they work to support uncountable billions of dollars flowing into the asset piles of the 1%?

Why did the Deep State allow the BLM / Antifa / Democrat cabal take over? Are they stupid? Or did they think Covid-19 along with these freaks would work in their favor somehow?

Is the Deep State only common ordinary Imperialism? Is it only oil, and natural gas and who gets to control the markets? Ukraine has a lot of natural resources. Is that a coincidence?

https://www.worldatlas.com/articles/what-are-the-major-natural-resources-of-ukraine.html

What is it about Peaceful Coexistence that makes them go crazy?

What does The Deep State really want?

AGuy 49 minutes ago

" The only difference will be the wars will be fought for lithium and other rare metals. "

Unlikely Oil will remain the King for causing wars. electricification of transportation is doomed to fail. First average Americans cannot afford EV. heck they are struggling with cheaper ICE vehicles. Auto loan duration have ballooned & most Americans are rolling over debt from their older vehicle when they buy a new one. Second the grid is struggling. Most of the older power plants are getting replaced by NatGas fired plants & at some point we are going to see NatGas prices shoot up. Much of the US grid was built in the 1930s & 1940s and will need trillions just to maintain it and replace equipment & power lines operating beyond their expected operating lifetime.

The US economy is slowly collapsing: Mountains of debt, demographics, dumbed down education, and worthless degrees for Millennials, failing infrastructure (ie I-40 bridge). We are on borrowed time.

AJAX-2 1 hour ago remove link

The fly in the ointment is that the banksters desperately need higher oil prices to prop up their derivative portfolios. As a result, they are at odds with the Davos Crowd and their desire for cheap/plentiful oil for Europe. We shall see who prevails.

AGuy 1 hour ago

" The fly in the ointment is that the banksters desperately need higher oil prices to prop up their derivative portfolios. "

Nope:

Higher oil prices leads to higher defaults, which is likely to trigger derivative losses. Banker shady deals come under congressional\agency scrutiny usually ending with billion dollar fines, and bad press. A lot of banks probably will get nationalized when the next banking crisis happens & all those bankers will lose out on the financial scams they play.

European Monarchist 46 minutes ago remove link

Currently:

  1. The Syrian state has survived, and its armed and security forces are now far more capable than they were before the war started (remember how they almost lost the war initially? The Syrians bounced back while learning some very hard lessons. By all reports, they improved tremendously, while at critical moments Iran and Hezbollah were literally "plugging holes" in the Syrian frontlines and "extinguishing fires" on local flashpoints. Now the Syrians are doing a very good job of liberating large chunks of their country, including every single city in Syria).

  2. Not only is Syria stronger, but the Iranians and Hezbollah are all over the country now, which is driving the Israelis into a state of panic and rage.

  3. Lebanon is rock solid; even the latest Saudi attempt to kidnap Hariri is backfiring. (2021 update: in spite of the explosion in Beirut, Hezbollah is still in charge)

  4. Syria will remain unitary, and Kurdistan is not happening. Millions of displaced refugees are returning home.

  5. Israel and the US look like total idiots and, even worse, as losers with no credibility left.

The net result is everyone in the region who were aggressors are now suing for peace. This is why I expect some kind of deal that returns Iran to the global economy. There's no way for Germany's shiny new trade deal with China to work without this.

ut218 2 hours ago remove link

Solarcycle 25 had a bad start. By 2028 people will realize we are in a period of global cooling. oil prices will soar

Itinerant 18 minutes ago

There won't be major investments of European majors in Iran's oil industry.

  • For Iran, Western partners have proved too fickle
  • For Western corporations, the risk is too great for long term investment.

China will be reaping most of the investement opportunities.


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Marrubio 1 hour ago

.... the NWO & Davos idiotards ,they have been trying since March for oil not to exceed the $ 70 barrier and they are not succeeding. Week after week they try to lower the price, frightening with the covid, the production of Iran or whatever, and the following week the oil rises again. The only thing left for them is mass slaughter ... but now people know that what is going to kill them is in the "vaccine". Of course they will be stupid enough to do it; if they have shown anything it is that they are profoundly idiots. They will not be successful in getting cheap oil, simply because PeakOil is running since 2018 and since then oil production decreases at 5% per year: -5% per year, I am telling to the NWO deep idiotards.

European Monarchist 55 minutes ago (Edited)

Interesting, but it remains to be seen where this is going, short term and long.

Now that Benjamin Netanyahu is no longer going to be leading Israel, the probability of breakthrough is much much higher than last week. The Likudniks in Congress and the Senate just lost their raison d'etre. The loss of face for Israel in Bibi's latest attempt to bludgeon Gaza to retain power backfired completely.

U.S. policy towards Israel is shifting rapidly as the younger generations, Gen-X and Millennials, simply don't have the same allegiance to Israel that the Baby Boomers and Silent generations did. It is part of a geopolitical ethos which is outdated.

So, with some deal over Iran's nuclear capability in the near future, Europe will then get gas pipelines from Iran through Turkey as well as gain better access to the North South Transport Corridor which is now unofficially part of China's Belt and Road Initiative.

Russia, now that Nordstream 2 is nearly done, will not balk at this. In fact, they'll welcome it. It forms the basis for a broader, sustainable peace arrangement in the Middle East. What's lost is the Zionist program for Greater Israel and continued sowing dissent between exhausted participants.

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Einstein101 55 minutes ago remove link

Now the Syrians are doing a very good job of liberating large chunks of their country, including every single city in Syria).

Really? Hell no! The Syrians and the mighty Russians and the Hezbollah for many months now are not able to overcome lowly terrorists militia in northern Syria's Idlib. Plus, the Israelis has been launching hundreds of airstrikes over Syria while the Russian made Syrian anti air defense can do nothing about it.

[May 28, 2021] The US Is Not Ready For An All-Electric Future - ZeroHedge

May 20, 2021 | www.zerohedge.com

The U.S. is woefully unprepared to handle "the electrification of everything," as Amy Myers Jaffe, a research professor at Tufts University's Fletcher School, describes the drive to electrify transportation and buildings and parts of industry in The Wall Street Journal .

Increased electrification in all sectors will need huge investments in the electric grid, in battery storage to back up renewable power generation, in charging points for EVs, and in technologies such as green hydrogen to help those technologies to reach maturity and cost efficiency enough to start replacing fossil fuels.

[May 28, 2021] Biden aministsration is building a coalition to challenge China. It wants to neutralize Russia. Nord Stream 2 is an element of contention

May 20, 2021 | www.moonofalabama.org

Max , May 19 2021 21:16 utc | 26

@ Old man of the sea | May 19 2021 20:46 utc | 22

One can't blame everything on Israel. Yes, it is part of five eyes, more like SIX eyes.

Biden (JB) is building a coalition to challenge China. JB's administration wants to neutralize Russia. Nord Stream 2 is an element of contention and by making a concession JB is making Germany and Russia happy. Agree, that its completion will be a "huge geopolitical win for Putin". Let's see when Nord Stream 2 becomes fully operational. Time will tell.

Russia's main focus is De-Dollarization, stability in Russia and in its neighborhood.

China's announcement about Bitcoin led to it dropping by 30%. What will China, Russia, Turkey and Iran announcement about the U$A dollar do to its value and the market? When will China become the #1 ECONOMY?

THE MOST DANGEROUS DECADE: 2018-2028

Stonebird , May 19 2021 21:42 utc | 29

Old man of the sea | May 19 2021 20:46 utc | 22

The US is now the largest provider of LNG, so there is relatively little more financial advantage to be gained from a direct confrontation with Germany or Russia. Political maybe, but the dedollarisation is starting to take hold. (Aside; even Israel depends on the strength of the dollar to continue, like musical chairs, when the music stops there will be precious few chairs left ). The Gas/Oil lobbies in the US who are behind the sanctions may have some other trick up their sleeve, but the deflation of Zelensky in Ukraine, and the opening up of a steal-fest of Ukrainian assets might compensate.

***
Note that the West has closed Syrian Embassies so as to stop Syrians voting for Assad. They steal it's oil, and Syria is still next to Israel and doing relatively well in spite of tanker bombings, and missiles. It is also possible that, as you say, there is a price for non-interference in Israel itself.

[May 28, 2021] Ukraine has become a financial black hole for the West, and the USA is trying to get rid of it by throwing it to the EU's arms

May 23, 2021 | www.moonofalabama.org

vk , May 23 2021 15:36 utc | 4

The The Hill piece linked in the week in review here confirms our suspicions Ukraine has become a financial black hole for the West, and the USA is trying to get rid of it by throwing it to the EU's arms:

Instead of expending diplomatic capital on a campaign to stop Nord Stream 2, the Biden administration should work with its European partners to prepare Ukraine to withstand the pipeline's completion. The deadline for action is 2024, when Kyiv's current gas contract and President Biden's term effectively end. By that time, Washington and Brussels should formulate and implement an economic package that, first and foremost, covers Ukraine's inevitable budget shortfall from the loss of transit fees to keep the Ukrainian state running. This package should, however, also invest in the country's sustainable growth. That would entail material and technical support for Kyiv's ongoing anti-corruption campaign, whose success is a prerequisite for attracting long-term investment. One idea worth considering is a loan to cover revenue shortfalls, whose repayment would be incrementally forgiven in exchange for concrete progress on reforms by Kyiv.

That won't happen. The easiest way you can infer that is that the USA and Germany don't even have the resources to invest in green energy in their own territories, let alone on third-parties' territories. Hell, the USA doesn't even have the resources to rebuild Puerto Rico.

This is not the 1950s. The American Empire's bottomless pocket is no more.

[May 28, 2021] Note To Greenwald - The 'Russian' Pipeline Is A Germany Need

May 23, 2021 | www.moonofalabama.org

Caliman , May 20 2021 16:44 utc | 5

Glenn Greenwald writes that President Trump acted more hostile to Russia than President Biden does, even while the media claimed that Trump was 'a Russian agent'. It is probably a fair point to make but in his piece Greenwald himself falls for anti-Russian propaganda nonsense.

The problem starts with the headline:

Biden, Reversing Trump, Permits a Key Putin Goal: a New Russian Natural Gas Pipeline to Germany
That Trump was controlled by Putin and served his agenda was the opposite of reality. First Obama, and now Biden, have accommodated Moscow far more.

Greenwald seems to presume that it is the right or the job of a U.S. president to 'permit' pipelines between two foreign country? That is of course completely false. The U.S. has no right, duty or whatever to interfere in regular businesses between foreign partners. Such interference is in fact illegal under international law. Biden, as well as Trump, should be criticized for even thinking about 'permitting' it.

On to Greenwald's main point:

When it came to actual vital Russian interests" as opposed to the symbolic gestures hyped by the liberal cable and op-ed page circus" Trump and his administration were confronting and undermining the Kremlin in ways Trump's predecessor, Barack Obama, had, to his credit, steadfastly refused to do.

Indeed, the foreign policy trait relentlessly attributed to Trump in support of the media's Cold War conspiracy theory" namely, an aversion to confronting Putin" was, in reality, an overarching and explicit belief of President Obama's foreign policy, not President Trump's.

Obama waged a massive undercover war to overthrow the Syrian government, an old Russian ally. He arranged a fascist coup in the Ukraine and he sent the anti-Russian academic Michael McFaul as ambassador to Russia where McFaul immediately started to prepare a color revolution against President Putin. It was the Obama administration which launched the 'Russiagate' campaign against Trump which further infested U.S. policies with anti-Russian sentiment.

Seen from the Russian side Obama certainly showed absolutely no 'aversion to confronting Putin'.

While Trump ripped up arms treaties with Russia and gave a few useless weapons to the Ukraine, making sure they would not reach the front lines, he otherwise took, thankfully, few other damaging steps.


bigger

Now on to the Nord Stream 2 pipeline of which Greenwald writes:

Cont. reading: Note To Greenwald - The 'Russian' Pipeline Is A Germany Need

Well, the fact that the pipeline has not been finished for years, despite being near completion, tells us that it's not actually true that the "pipeline would have been finished with or without US sanctions." Certainly, it seems that Trump's pressure did work to severely slow down if not completely stop the completion of the project and presumably Biden could have continued that pressure. Btw, didn't the front-running Green party head come out against the pipeline, showing that there's not unanimous support in Germany for its completion?

But more importantly, Greenwald's main point is that Trump's actions had nothing to do with the Russian Puppet narrative against him. That both Biden and previously Obama were less "anti-Russian" in practice and yet were thought to be "tough" on Russia, while Trump (providing lethal arms to Ukraine and stopping NS2) was a "puppet" ... narrative building by the Deep State. Greenwald's larger point is in fact accurate.


jared , May 20 2021 17:10 utc | 8

I think Greenwald was thrown off by what seems a sudden reversal and positive step by Biden administration.

Personally I think Biden Administration was stunned at almost having instigated WW3 within 100 days of taking office. They looked fairly like amateur idiots even to the unwashed such as myself. Then they realized that it would be difficult and given their evident ineptness they chose the well proven political tactic of taking the loss and making it a win. Voila they are genious - why didnt Trump think of that?

We in the US must accept that our government is craven incompetents and have to hope that they might accidentally do something good by virtue of being so incompetent.

Harry , May 20 2021 17:15 utc | 9

Greenwald makes an error but it is understandable. NS2 pipeline wont deliver enough gas to truly make a significant difference to Germany. Where it makes a difference is to Ukraine, which will struggle to steal as much gas from Russia as it has in the past. Gas transit rates will fall, and if Ukraine doesnt like it RF will still be able to supply Germany without Ukraine stealing gas which was meant for Germany.

But who will make good any shortfall in Ukraine's budget?

Roger , May 20 2021 17:51 utc | 13

The early closure of the Netherlands Groningen natural gas field, due to land subsidence, was a big hit to European energy security - especially with the move from coal/nuclear to natural gas. B is very right in stating that Europe desperately needs Russian gas to fill a yawning future hole between supply and demand. Russia is also developing their Arctic gas reserves, which can be provided as LNG to Europe (as well as Asia). Very bad for the Ukrainians, but they (or the US and the Nazis) picked their bed and can deal with the consequences.

The Russians opened the Power of Siberia gas pipeline to China, and have agreements to start development on additional pipelines. China is rapidly expanding natural gas usage so no demand problem there.

Seems like the Biden administration took their "hardass" shot in the past months and it blew up in their face. Now they have to take a step back and play a bit better with their so-called allies. Probably won't last long, the US elite have extreme learning difficulties when it comes to the reality of their decline from the Unipolar moment.

karlof1 , May 20 2021 17:56 utc | 15

This is somewhat OT to the subject, but it's clear to me a greater understanding of the Russian POV is needed. Although the transcript is currently incomplete, this meeting of the Russian Pobeda (Victory) Organising Committee provides an excellent insight into the Russian mind, and IMO this excerpt says a great deal:

"Regrettably, the ranks of the great generation of victors are thinning out. But this is only increasing our responsibility for preserving their legacy, especially now that we are witnessing increasingly frequent attempts to slander and distort history and to revise the role played by the Red Army in the routing of Nazism and the liberation of European nations from the Nazi plague.

"We understand the reasons for this, and attempts to hamper the development of this country, regardless of its name, be it the Russian Empire, the Soviet Union or Russia, were made in different times and historical epochs and under different political systems. These approaches and principles remain the same. There is one principle or rather, one reason for containing Russia: the stronger and more independent Russia becomes, the more consistently it defends its national interests, the greater the striving of foreign forces to weaken it, to discredit the values uniting our society and sometimes to slander and distort what people hold dear, the things that are instilled in the younger generations of Russians and which help them acquire a strong character and their own opinions .

"This is why all kinds of Russophobic individuals and unscrupulous politicians are trying to attack Russian history, to promote the ideas of revising the results of World War II and to exonerate Nazi criminals." [My Emphasis]

And the geopolitical dynamic has drastically shifted from Greater Europe to Greater Eurasia. Here are Putin's comments from yesterday :

"Very soon, we will be celebrating 20 years of our core bilateral document, the Treaty of Good-Neighbourliness, Friendship and Cooperation. Since the signing of this treaty, Russia and China have achieved great success in strengthening our multidimensional cooperation and mutual trust across all areas without exception: politics, international affairs, trade and the economy, cultural and humanitarian exchanges. It can be said that Russia-China relations have reached their highest level in history."

And those relations will certainly reach much greater heights regardless the nature of Russian-EU relations.

S , May 20 2021 18:36 utc | 20
@SoMuchToLearn #18:
I'm puzzled by b's arithmetic on the gas flow rates

Apart from Nord Stream 1 and Nord Stream 2, there are also old Soviet pipelines that go through Belarus and Ukraine, as well as the recently completed Turk Stream, part of which is used to export gas to Bulgaria, Romania and Serbia (and soon Hungary, Bosnia and Austria).

ZigZag , May 20 2021 18:38 utc | 21
@11
My two cents on that is that the old surface Power-structure of Germany has been crumbling rapidly for around the last decade. Merkel has left the christian conservative party in shambles and there's no one with enough gravitas around to fill the giant sized shoes she's left vacant, same thing with the social democrats who've been in a freefall from 35% to now barely 15% for the last 15 years. Environmentalism coated Neoliberalism seems to be the maxim of the hour in the leftists and centrists spheres, and almost everyone, but foremost the Green Party, is trying to ride that wave to the finish line. Don't expect peoples first policies, climate change will dominate the election, and we'll likely be wrapped up in more deindustrialization coupled with an ever more chaotic energy policy. If anything the average persons cost of living in terms of rent, energy, food and transportation will continue to rise, while jobs in traditional industry sectors will continue to fall off. I haven't heard a coherent plan on how the German economy is supposed to work like 10 years from now, and there likely is none, all I expect is more taxes and the possibility of plundering social security trust funds to address whatever critical infrastructure issue will face us next.

@14
Green-Party was about to oust the Conservatives in a major federal state election. People got really riled up by nuclear, especially since there already was an ongoing controversy around long term waste storage. It was one of Merkels signature opportunistic moves that aimed to size the moment in absence of long term planing. It didn't work btw, Greens still ousted them, but once you make a big move like that there's not going back without losing face, but it does seem like exiting nuclear proved to be a popular strategy with the electorate in the long run. I'm sure that are more complex/intricate theories around, but I can't speak on that

FMG , May 20 2021 18:56 utc | 26

Here in Brasil Greenwald is known as a CIA asset. Just ask Pepe Escobar.

Michael Crockett , May 20 2021 19:11 utc | 31

Thanks b. The Empire of the Deranged is in a steady downward slide. By its own hand, through financial engineering (stock buy back schemes fueled by bailout's of bankrupt corporations plus derivatives etc. etc.) Add to this, restrictions on the use of swift. The US devalues its own currency. Other countries are not so interested in purchasing US debt to offset rising US deficit. Include all of that with our foreign policymaking which angers even our allies like Germany, as you point out with NS2. The Leaders think they can snap their fingers and bring the world to heel. That ship sailed a long time ago. The multi-polar world is a reality that the paper tiger struggles with. To Glen Greenwald's Brazil, US influence evaporates should Lula get elected as the next President. The tiger is toothless Glen, no need to give it more authority than it has.

DougDiggler , May 20 2021 19:32 utc | 35

With the US pressuring Germany to end NS-2 in favor of importing much more expensive fracked US gas, we see that the US thinks there is nothing wrong with asking it's vassal states to cut their own throats (forego steps to retain their economic competitiveness) to please their patron. The idiocy of Cold War 2 is costing US allies a lot and seems inimical to the very idea of US allies even regarding their own national interests. One would hope this is leading to either a re-evaluation of these alliances or a revolt of the satraps.

Max , May 20 2021 19:40 utc | 37
thanks b... Agree that "the U.S. has no right, duty or whatever to interfere in regular businesses between foreign partners." Every journalists needs to be making this key point.

Any geopolitical article that doesn't address the MONETARY arena is missing an important element and thereby incomplete. Greenwald's article is missing many key points and mistaken (&/or misleading) by taking U$A's political trickery angle. It is all about the POWER game that involves deceptions, like sending the director of the Federal Reserve Bank of New York on a Red Cross mission to Russia or committing to not moving NATO forces towards Russia in 1991.

HISTORICAL CONTEXT
Vladimir Putin in his Munich (2007) speech announced Russia's pivot away from the Dollar Empire and unwillingness to be a vassal. The Dollar Empire challenged Russia through Georgia in 2008. Obama & Clinton fooled Russia through their reset announcement and got a go ahead to attack Libya. The relationship was calm in 2012. Obama fooled Medvedev by saying, "he will have "more flexibility" to deal with contentious issues," after reelection, in early 2012. However, Vladimir Putin was back in 2013 and the Dollar Empire realized it has been outplayed. It moved aggressively after the two outside Russian military bases in Syria and Ukraine. Russia captured Crimea in 2014, and Putin declared Russia's willingness to go to war in Syria (2015). The Imperial Council of the United States was surprised by Russia's move into Syria and wasn't ready for a war. In the meantime, China was developing strong. Here comes Trump in 2017. It seems like the Imperial Council and its Intelligence Community came with a new ploy to associate Trump with Russia, so they can bully China and bend it over on trade. China stood up to Empire's challenge and developed its independence plan! In the meantime Trump increased sanctions on Russia using the Congress as a pretext while strengthening Ukraine. The sanctions on the Nord Stream 2 brought halt to work in December 2019. Did Trump FOOL Putin/Russia by stating, "he will have "more flexibility" to deal with contentious issues," after reelection? The reasoning behind this question is that Russia didn't start work on the pipeline until the election was over in December 2020. One year wait to start work on the pipeline.

MISSING DIMENSIONS
Why isn't Greenwald speaking against the dollar monetary imperialism and enslavement? Very rarely one come across a journalist that shines light on reality and exposes truth. It seems like Empire's MSM and journalists are making a big deal of this minuscule Nord Stream 2 sanction waiving. Why? It is just propaganda and perception management to create distrust in the China-Russia relationship? No one is mentioning Russia's redlines or its ability to retaliate to additional sanctions. Andrei Martyanow gets it right!

Please analyze every geopolitical development from the MONETARY lens too. Russia as part of its De-Dollarization plan is offering energy deals in national currencies to win nations in Eurasia, including Japan. In which currency is the U$A offering its LNG ? US$? Also, it seems like Russia's transit payments to Ukraine are in the US$. In addition to providing an alternate route, the Nord Stream 2 increases Russia's leverage with Ukraine. Imagine if those transit payments were in Rubles to Ukraine, Russia's leverage will be immense.

China, Russia, Germany, Japan... (Non-$ Bloc) are standing up to dollar's monetary imperialism, and seeking more trade in their respective national currencies. The EU and Germany will pay for its energy in Euros and reduce threats to their economies. Why don't journalists address the monetary or currency dimensions?

RUSSIAN SUCCESSES?
Successfully completing the Nord Stream 2 and supplying gas to Europe in Euros will be a huge victory for Russia and Germany. It has yet to implement its agreements (Minsk, Astana, JCPOA...). All its conflicts are frozen and unresolved. Please share agreements that Russia has successfully delivered on in the 21st Century, particularly when the Dollar Empire is involved. Will the Empire surprise Russia by attacking on multiple fronts?

The Logic of U$A Foreign Policy

bjd , May 20 2021 19:44 utc | 38
Very worthwhile opinion, the debate between you and Greenwald sharpens the mind on this issue.
Alpi , May 20 2021 19:47 utc | 39
To say that there is a shift in US geopolitical policies, is an understatement. In short, IMO, Biden is going back to Obama's plan and his pivot to Asia. Therefore, it is China, China, China. Nothing else matters that much right now.

1. Nordstream 2 settled"¦..check
2. Germany and Europeans happy"¦..check
3. Settling ME problems with going back to JCPOA, promoting KSA and Iran peace, pulling out of Afghanistan (not ME)"¦..check
4. Putting Israel in its place (via a shift in media coverage and taking away support slowly and congress expressions of outrage) "¦..check
5. Abstention form UN resolution punishing Israel"¦"¦.coming up
6. Taking Europeans to the South East China confrontation"¦..coming up
7. Prying away Iran and Russia away from China"¦"¦wishful thinking, hopefully.
8. Ousting Netanyahoo"¦"¦coming up

Although, Biden is a zionist, Netanyahu and his antics are not convenient at this time and Israel takes a back seat to grand chessboard strategy.

Greenwald's and b's commentaries are a bit of a sideshow, in my opinion. Best concentrate on the outcome and the bigger picture instead of this he said she said.

Passer by , May 20 2021 19:53 utc | 42
What happened this year is that the winter was cold, gas storage in Europe was nearly depleted, and Europe needed huge amounts of russian gas.

The other problem is that LNG is more expensive in Asia, causing LNG producers and shippers to prefer the asian market.

There are many more issues as well - such as the hit on US producers by the Covid crisis, Germany moving the carbon goal posts from 2050 to 2045, green energy problems this winter in Germany, explosions on pipelines in Ukraine, and so on.

It is also true that Russia is readying Power of Siberia 2 and 3 pipelines to China, as well as actively developing its own LNG exports.

Skiffer , May 20 2021 20:06 utc | 43
In response to SoMuchToLearn@18,

The disputed claim by Greenwald is that, "Nord Stream 2... is designed to double Russian sales capacity to an EU addicted to cheap Russian natural gas, producing massive revenue for the Russian economy and giving Moscow greater leverage when dealing with its European neighbors." This is very different from the statement that NS2 together with NS1 is twice the capacity of NS1 on its own.

There are several, to my mind, wrongful assumptions in Greenwald's claim.

The first, that the EU wants to increase its purchases of Russian gas, but is prevented from doing so solely due to the lack of infrastructure which, presumably, is operating at full capacity. From this assumption, it then follows that Russia is expecting massive revenues from an increase in transit capacity, since customers are already standing by. Finally, as a result of supplying significantly more gas to Europe and earning substantially more money from it, Moscow can be expected to take advantage of its position as an energy supplier to pressure Europe over political matters.

While it's true that European gas-needs are growing, it's more of a long-term projected development and not some energy crisis straining the current configuration. A more topical and urgent crisis is the situation in Ukraine and the state of disrepair of the gas transit infrastructure in that country, which not long ago accounted for 80% of Russian gas supplied to Europe. IIRC, official estimates gave these pipelines a few short years before becoming unusable without major repair efforts -- something like 5 years -- and coupled with the state of the country itself, it's not impossible that the pipelines outlive the state.

If we, for the sake of argument, assume that Ukraine and/or the gas infrastructure on that territory ceases to function tomorrow, halting all gas transits to Europe in the blink of an eye, which isn't as far-fetched as you might think, the result would be an energy crisis. Already, this crisis would not be of catastrophic proportions as it would have been a mere decade ago, due to alternative transit routes established to lessen reliance on Ukrainian pipelines. NS2 is designed to eliminate reliance on Ukrainian pipelines completely, if one disregards various political commitments made by Russia on Europe's behalf to retain part of its gas export through Ukraine, which I'm sure would fall to the wayside the moment European capitals started going dark. Of course, cutting off transit states also has the added benefit of making the gas cheaper and thus the contract becomes more lucrative, but that's more of a bonus.

If we, for the sake of argument, assume that all the pipelines to Europe are working at full capacity, and Europe desperately needs more gas -- say, 25 years from now when no new green alternatives have presented themselves and no new pipelines have been built because the war of sanctions continues -- there's always LNG, which Russia can supply at a competitive price, and the port infrastructure for that is already available, provided the EU is willing to resolve its energy problems collectively.

From this it follows that, no, Russia isn't expecting massive revenues to come flooding in at the completion of NS2. They're presumably expecting massive revenues from new energy projects in Asia, but they're at worst expecting to retain the current revenue in the European market, and at best see it grow in connection with European economy. Certainly, they wouldn't like to lose the European market, especially due to unpredictable incidents abroad that are outside of their control, but Europe is arguably much more vulnerable and has more to lose from such an eventuality.

Lastly, since we are no longer expecting an immediate increase in European reliance on Russian energy following NS2, how does it translate to Russian leverage over European politics? Russia is already Europe's main supplier of, not only gas, but crude oil which accounts for 2/3 of Europe's energy supply (gas is 24%). If Russia wants to leverage its position as the main energy supplier to Europe, it does not need NS2 to do so, and shutting down NS2 will not prevent it from doing so.

Passer by , May 20 2021 20:10 utc | 44
Posted by: Roger | May 20 2021 17:51 utc | 13

>>The early closure of the Netherlands Groningen natural gas field, due to land subsidence, was a big hit to European energy security

Yes, this too.

Posted by: Dutch | May 20 2021 19:51 utc | 41

>>The impressive year-on-year surge, to nearly 53 billion cubic meters, is reportedly due to the cold (in European terms) winter season.

Exactly.

[May 28, 2021] Electricity usage in the USA will take " until 2022 to get back to 2019 levels': Duke Energy CEO

Highly recommended!
That means there there was no industrial recovery at all: stagnation continues unabated. Claims that the the U.S. economy surges in this sense are fraudulent.
But the fact is that stock market casino is now is completely detached from real economy and lives with its own life and dynamics. Of cource, this will not end well, but nobody knows when the bubble will burst or will be deflated by FED.
Apr 30, 2021 | finance.yahoo.com

Duke Energy CEO Lynn Good joins 'Influencers with Andy Serwer' to disccuss the pandemic's long-term impact on the energy industry.

Duke observed 10-15% deline in some months of 2020 and 3% for 2020 as a whole.

[May 28, 2021] The danger of blocking North Stream Ii is that Russia can start delivering LNG to Western and Northern Europe at much more competitive prices than the American LNG, through the Arctic route

May 19, 2021 | www.moonofalabama.org

vk , May 20 2021 0:15 utc | 49

@ Posted by: ptb | May 19 2021 23:58 utc | 45

It's Izvestia and it was in Russian, that's why I'm not able to recover it. It was also machine translated, so I may well have gotten the wrong message.

But yeah, from what I understood, the spirit of the article was that it was just a matter of time before Russia start to deliver LNG to Western and Northern Europe at much more competitive prices than the American LNG, through the Arctic route (investment in icebreakers, gas pipelines, oil pipelines, nuclear reactors etc. etc.).

[May 28, 2021] US jobs numbers " so bad' media thought it was an " error'

May 14, 2021 | www.youtube.com

David James , 3 days ago

The MSM always covers for Sleepy Joe! This is the bull sh-t we have to put up with here in the USA now. It is very sad our News outlets are unable and unwilling to tell the truth and be journalists like you are here! Thank you Sky News Australia for telling it real!


Noodle Hat
, 2 days ago

We're going to have Jimmy Carter 1970's stagflation.


dewwed1965
, 5 days ago

I'm a trucker in Nebraska. I went to Wendy's they were closed, no staff. Went to Taco Bell they were closed to restock because only 2 people showed up to work


Tenderfoot Prepper
, 4 days ago

"Google's algorithms might be covering for Sleepy Joe." GEE, YA THINK???

[May 28, 2021] EU Parliament report says regime change needed in Russia, recommends Brussels launch propaganda TV channel to help it happen

Notable quotes:
"... A draft report published online by the assembly's Committee on Foreign Affairs caused consternation in Russian media on Monday, after statements came to light that argued the bloc "should establish with the US a transatlantic alliance to defend democracy globally" and "deter Russia" from supposed aggression in Eastern Europe. ..."
May 20, 2021 | www.moonofalabama.org

vk , May 19 2021 22:31 utc | 35

Very aggressive stuff from the EU:

EU Parliament report says regime change needed in Russia, recommends Brussels launch propaganda TV channel to help it happen

A draft report published online by the assembly's Committee on Foreign Affairs caused consternation in Russian media on Monday, after statements came to light that argued the bloc "should establish with the US a transatlantic alliance to defend democracy globally" and "deter Russia" from supposed aggression in Eastern Europe.

As part of its "vision" for future ties with Moscow, the paper concludes that the EU should put forward a number of incentives designed to persuade Russians that a turn to the West would be beneficial, including visa liberalization and "free trade investment."

[...]

At the same time, the committee puts forward a number of extreme steps that it says the bloc should take. It insists that Brussels "must be prepared not to recognize the parliament of Russia and to ask for Russia's suspension from international organizations with parliamentary assemblies if the 2021 parliamentary elections in Russia are recognized as fraudulent."

The success or failure of this operation will depend entirely on the Russian people. Will it fall for the Western European honey trap once again?

After Putin is gone, bets are off. Also, the EU continues to suffer from refugee waves from Syria and Libya, and its economy continues to deteriorate (recession confirmed for Q1 2021). The whole system is so exhausted that they don't talk about even of the absorption of Moldova anymore (the Moldovan president had to bring that up to the Kremlin; good they remembered them).

--//--

US waives sanctions against Nord Stream company and CEO as Blinken & Lavrov meet in Iceland

This looks like Biden had some surge of sanity, but it's not: I read an article on Izvestia some days ago and it seems Russia won the war for the Arctic and has expelled the USA from that sea. That, combined with the fact that Russia has been ramping up investment on the sector, results in the fact that, soon enough, Russia will also have the infrastructure to deliver cheaper LNG by ship to Europe, too.

That means the USA has given up on the NordStream II in order to hurt the Russian LNG investments. Yes, people, that's the insanity of the situation: the USG is completely lost. It still has its ace in the hole, though: the Green Party is set to win the next German general elections, and they're rabid Atlanticists. Like, this would cost Germany dearly and they wouldn't last two years in government, but at least Russian gas to Europe through a non-Ukrainian route would be stopped.

Speaking of the Ukraine, this whole situation makes us reflect: it is patent at this point in time that the EU is a subsidiary of NATO - it expands eastwards after those countries become NATO members. They're the "socioeconomic" version of NATO. This has created a huge problem for the EU, though, because the Ukraine is a massive financial black hole to the American economy (through the IMF) and the USA is pressuring the EU to make it a member quick, so that this black hole goes to European (i.e. German) hands. The thing is Germany obviously doesn't want that, because it needs the Euro to keep at where it is or stronger (you can only enter the EU by entering the EZ nowadays). The Ukraine is salivating to become an EZ member - that's the whole point of the Maidan coup in the first place - so Ukraine entering the EU without entering the EZ is out of the table. The EU must've told the USA that no, the Ukraine must first become a NATO member, then they'll make it an EZ-EU member. The Ukraine is the proverbial hot potato.

All of that coupled with the hard economic fact that, without the Russian gas transit exclusivity, you can't leverage Ukraine's debt, because, after Maidan, all of the public goods and infrastructure were privatized to American capitalists. That means we have the absurd situation where Germany has to give up cheaper gas for itself (which would be essential for its economic recovery) in order to make the Ukraine happy so that it enters the EU, so that it becomes a financial black hole... to the German economy! Germany has to pay the Ukraine for the privilege of having to pay it even more, for eternity.

The price of nation-building has become more and more expensive to the capitalist world. Turns out those Third World shitholes have learned something after all those decades.

--//--

Well, well, well... how the tables have turned:

Iron Curtain reversed? EU agrees to open up to foreign tourists fully vaccinated against Covid-19, but NOT to those who've had Russia's Sputnik V jab

Taiwan is also suffering from a significant brain drain to the Mainland. They're trying to solve the problem by demonizing those people by calling them "traitors".

Interesting times.

--//--

Colonial Pipeline CEO confirms paying $4.4 million ransom to hackers, says he did it for America

This is USSR-of-the-1980s level of propaganda.

Either way, give that man a statue in D.C.!

P.S.: this is the quotation of what the CEO really said, so you don't accusing me of just reading the headline:

"[it was very hard, difficult to me etc. etc.] But it was the right thing to do for the country," Blount, who leads the company since 2017, added.

--//--

No shit, Sherlock:

Russian Sputnik V Covid-19 vaccine hasn't been approved by EU due to political pressure from top officials – Moscow's spy chief

[May 28, 2021] Was the Colonial Pipeline Co. ransomware attack a false flag operation ?

Probably it was not a false flag. First of all the state of IT security at Colonial Pipeline was so dismal that it was strange that this did not happened before. And there might be some truth that they try to exploit this hack to thier advantage as maintenance of the pipeline is also is dismal shape.
Notable quotes:
"... "As for the money-nobody really knows where it really went." If you are right about the perpetrators, my guess would be that it went into the black-ops fund, two birds one stone. ..."
"... I have become so used to false flags, I am going to be shocked when a real intrusion happens! ..."
"... an in depth article researching solarwinds hack - looks like it was Israel, not a great leap to see that colonial was a false flag https://unlimitedhangout.com/2021/01/investigative-reports/another-mega-group-spy-scandal-samanage-sabotage-and-the-solarwinds-hack/ ..."
"... Regarding the ownership of Colonial Pipeline: 'IFM Investors, which is owned by 27 Australian union- and employer-backed industry superannuation funds, owns a 16 per cent stake in Colonial Pipeline, which the infrastructure manager bought in 2007 for $US651 million.' ..."
"... 'The privately held Colonial Pipeline is valued at about $US8 billion, based upon the most recent sale of a 10 per cent stake to a unit of Royal Dutch Shell in 2019.' ..."
May 19, 2021 | www.moonofalabama.org

Blackhat , May 19 2021 18:51 utc | 6

The Colonial Pipeline Co.,ransomware attack was a false flag. They wanted to blame Russian hackers so they could derail Nordstream II

It is common knowledge that the only real hackers that are able of such sabotage is CIA and Israeli. It's the same attack types they do to Iranian infrastructure on a regular basis.

The Russians are not that stupid to do something they know will be blamed on them and is of no political use to them. And could derail Nordstream2.

As for the money-nobody really knows where it really went. CEO is ultra corrupt. They never ever invested in their infrastructure so when it went down they came up with a profitable excuse. Just look at their financials/balance sheet over the years. No real investment in updating and maintaining infrastructure. Great false flag. Corruption and profiteering.


MarkU , May 19 2021 19:04 utc | 7

@ Blackhat | May 19 2021 18:51 utc | 6

"As for the money-nobody really knows where it really went." If you are right about the perpetrators, my guess would be that it went into the black-ops fund, two birds one stone.

james , May 19 2021 19:08 utc | 9

@ 6 blackhat..

I have become so used to false flags, I am going to be shocked when a real intrusion happens!

abee , May 19 2021 19:21 utc | 10

@ blackhat 6

an in depth article researching solarwinds hack - looks like it was Israel, not a great leap to see that colonial was a false flag https://unlimitedhangout.com/2021/01/investigative-reports/another-mega-group-spy-scandal-samanage-sabotage-and-the-solarwinds-hack/

vinnieoh , May 19 2021 20:05 utc | 15

Blackhat | May 19 2021 18:51 utc | 6

I'm not familiar with your handle - hello. IMO, it would be counterproductive for Russia to initiate such a hack. What really affects and debilitates US oil and gas interests is low prices, both at the pump and on the stock exchange. The hack helped jack up prices (which were already being jacked-up despite demand still lagging behind supply) which only HELPS those energy interests. It has long been known, the math isn't complicated, what level crude must trade at for US domestic oil & gas operations to be profitable. Remember that just as the pandemic was emerging Russia and Saudi Arabia once again sent the global crude market into the depths of despair.

I do agree the hack can be interpreted in light of the desperation of US energy interests to try to kill NS2. I have not yet read the recent articles discussing Biden's recent moves in that regard. If these moves are a recognition that US LNG to Europe (and elsewhere) are diametrically opposed to climate responsibility, I'd welcome those moves. As is usually the case though, environmental responsibility is probably the least likely reason.

vk , May 19 2021 22:31 utc | 35

Colonial Pipeline CEO confirms paying $4.4 million ransom to hackers, says he did it for America

This is USSR-of-the-1980s level of propaganda. Either way, give that man a statue in D.C.!

P.S.: this is the quotation of what the CEO really said, so you don't accusing me of just reading the headline:

"[it was very hard, difficult to me etc. etc.] But it was the right thing to do for the country," Blount, who leads the company since 2017, added.

--//--

No shit, Sherlock:

Russian Sputnik V Covid-19 vaccine hasn't been approved by EU due to political pressure from top officials – Moscow's spy chief

Paul , May 19 2021 23:42 utc | 42

Posted By Oldhippy @28

Thanks for your comment.

Regarding the ownership of Colonial Pipeline: 'IFM Investors, which is owned by 27 Australian union- and employer-backed industry superannuation funds, owns a 16 per cent stake in Colonial Pipeline, which the infrastructure manager bought in 2007 for $US651 million.'

also

'The privately held Colonial Pipeline is valued at about $US8 billion, based upon the most recent sale of a 10 per cent stake to a unit of Royal Dutch Shell in 2019.'

see Australian Financial Review 6 days ago.

Koch may well own another multi million $ stake.

[May 20, 2021] These energy stocks are expected by Wall Street to rise up to 37% over the next year

May 20, 2021 | finance.yahoo.com

A growing economy has helped lift oil prices 31% this year.

Jesse Felder was cited in MarketWatch's Call of the Day for his opinion that energy is the neglected sector of the stock market even though it has been outperforming other sectors since last fall. (You can read Felder's entire posting here .)

He pointed out that energy stocks make up a smaller percentage of the S&P 500 SPX, 1.31% than they did 20 years ago. Looking at numbers provided by FactSet, it appears Felder expressed this phenomenon mildly. As of the close on May 19, the S&P 500 energy sector made up 2.85% of the index's market capitalization, down from 6.95% 20 years earlier.

The collapse in crude oil prices from the summer of 2014 through February 2016 was enough to push some energy companies out of the S&P 500 -- their market values had declined too much to remain in the benchmark large-cap index. And the worst point of the COVID-19 crisis for financial markets even led to forward-month oil futures contracts falling below zero in April 2020. (The price of West Texas crude oil per continuous forward contract CL00, -1.93% was up 31% for 2021 to $63.35 on May 19, according to FactSet.)

The S&P 500 now includes only 23 energy stocks. Our look at the sector will be broadened to the 63 energy companies in the S&P Composite 1500 Index SP1500, 1.19% , which is made up of the S&P 500, the S&P 400 Mid Cap Index MID, 0.52% and the S&P Small Cap 600 Index SML, 0.25% .

Here's how the 11 sectors of the S&P 1500 have performed this year through May 19 and also since the end of 2019 and since the end of 2015:

S&P COMPOSITE 1500 SECTOR PRICE CHANGE - 2021 PRICE CHANGE FROM END OF 2019 PRICE CHANGE FROM END OF 2015
Energy 37.3% -13.9% -15.5%
Financials 25.6% 20.1% 89.6%
Materials 20.1% 40.5% 101.4%
Industrials 15.7% 26.9% 92.4%
Real Estate 14.0% 5.5% 31.8%
Communication Services 11.6% 36.0% 64.5%
Health Care 8.1% 21.7% 76.5%
Consumer Discretionary 5.6% 39.1% 116.6%
Consumer Staples 4.4% 12.7% 40.6%
Utilities 4.2% -0.2% 50.5%
Information Technology 2.9% 45.8% 222.8%
S&P Composite 1500 10.2% 27.6% 100.7%

[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 08, 2021] There is no alternative to the thrust-lifting energy jet fuel provides

May 08, 2021 | www.wsj.com

There is no alternative to the thrust-lifting energy jet fuel provides Carlos Lumpuy

⏤But Yellen said yesterday:
"I don't think there is going to be an inflationary problem.
Biden has proposed further substantial spending packages we would love to be enacted into law."

There is no alternative to the thrust-lifting energy jet fuel provides.
Daily demand is about 6 million barrels a day, a third in the USA.
Price rise is nearing a third in just the last three months.
There is no stopping an airline's largest revenue, the cargo jet planes carry; passengers above are incidental.

[May 08, 2021] Does IEA really believe the shit they predict?

May 08, 2021 | peakoilbarrel.com

JEAN-FRANÇOIS FLEURY IGNORED RON PATTERSON IGNORED 05/01/2021 at 8:38 pm

Jean, I cannot get into the heads of the EIA analysis and figure out why they make the predictions they do. That is, do they really believe the shit they predict? Or do they do it as some kind of propaganda campaign to keep the shale Ponzi scheme afloat as long as possible because they think it is their civic duty to do so? I just don't know but I would imagine it is a little of both.

But we must look at the history of all the peak oil predictions. It all started around 2005 when almost everyone thought peak oil had arrived. But it did not happen. Then many thought it had arrived every couple of years since then. But the peak oil prognosticators became fewer and fewer. Now because all the predictions have been wrong in the past, it is just naturally assumed that peak oil will never happen.

So, even though almost every major producer has peak, including the three largest, the US, Russia, and Saudi Arabia, people cannot bring themselves to believe that peak oil has finally arrived, or did arrive a couple of years ago. So all we can do is shake our heads as they continue to predict that oil production will keep going up and almost forever.

But I find it rather fun to watch as finally someone else's predictions are going up in flames. 😉

05/01/2021 at 6:48 pm

There is something I don't understand. How EIA can project that the world oil production will be almost at the level of April 2020 in December 2022? If I am not wrong. KSA has apparently so much difficulties to maintain its production that they decreased their production of 1Mb/d in February to announce after a plan to decrease the domestic oil consumption of 1Mb/d to increase the amount of oil for export. And currently, they are at 8 Mb/d : in March 2020, their production was at 10 Mb/d. Russia is in oil production decline and the goal of increasing the production to the level of March 2020 (11 Mb/d) is and will be a goal for a long time as most the oil produced to compensate the loss of production (1Mb/d) will come from EOR (costly) and fracking (even more costly). For the US, I don't know how the DUC which are currently changed into completed wells and fracked will produce but as the growth of the number of operated rigs is slowing in Permian fields, I don't know how the decline of the current operated rigs will be compensated in the near future (in 6 or 12 months). I am not speaking of Baker, Eagle Ford and Niobara which are in decline. As the lower 48 states conventional oil production is in decline, as the Alaska oil production is in decline and as the GOM oil production is fairly stable, I don't know what will be the increase of US oil production in future. But I have a hunch that it won't be as glorious as the EIA can imagine (predict). Between now and December 2022, there are 6 Mb/d to compensate. If it is not coming the three main oil producers of the world, from where this will come? Iraq : no. They are sparing their oil ressources. Brazil? With pre-salt formations, they will be able to add only a maximum of 500 kb /d. Canada? They are at 5 Mb/d. I am not sure of their possibilities of production growth and even at their production growth rate, they will only add 290 kb/d or so in December 2022. Guyana will produce at most 750 kb/d in 2026. Assuming a constant rate of increase, this will give an additional 120 kb/d in December 2022. The rest of non-opec producer are, at best, only able to maintain their production. Among the rest of OPEC producers ,all are in production decline. There is only Iran which could increase its production but only 1,5 Mb/d at most. With all of this, we are a long way from increasing global oil production by 6 Mb/d until December 2022. HOLE IN HEAD IGNORED 05/02/2021 at 1:35 am

Ron , simple answer . "It is difficult to get a man to understand something, when his salary depends on his not understanding it." . –Upton Sinclair

[May 03, 2021] Deepest Backwardation Since 2007 Shows World Short on Commodities

Notable quotes:
"... That is, the premium for commodities that can be delivered now versus later into the future is the highest it has been since at least 2007, signaling just how strong the world's demand is for raw materials and how tight supplies are. ..."
May 03, 2021 | www.bloomberg.com

For an idea of exactly how strong the fundamentals are for commodities such as metals, agriculture and oil today, consider this: These markets are now showing the steepest backwardation in more than 14 years.

That is, the premium for commodities that can be delivered now versus later into the future is the highest it has been since at least 2007, signaling just how strong the world's demand is for raw materials and how tight supplies are.

In commodities markets, futures are frequently pricier at longer maturities because they reflect the cost of carrying inventories over time as well as future demand expectations. But urgent demand has flipped about half of major commodity markets tracked by the Bloomberg Commodity Index including oil, natural gas, copper, soybeans into backwardation.

[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] Switch to EV -- will it append and if yes, when

Apr 30, 2021 | peakoilbarrel.com

DENNIS COYNE IGNORED 04/26/2021 at 7:47 pm

Nick,

I don't really. I estimate total fuel consumption for light and heavy vehicles (road only) worldwide in 2018, then I simply assume the non-land transport demand for C+C (for farm equipment, water transport, air transport, and everything else that isn't for road vehicles (heavy trucks, buses, motorcycles, and light vehicles). I simply assume that quantity remains fixed (greater need for miles travelled by air and water matched by less fuel use due to efficiency improvements so the two factors exactly offset).

Essentially it is just a simplifying assumption. NICK G IGNORED 04/26/2021 at 7:55 pm

Dennis,

So you're assuming that global land transport oil consumption (excluding farm, rail, buses, heavy off-road trucks, motorcycles, chainsaws, etc) is 55 Mb/d, or 64% of all C&C? That seems a little high. How did you estimate that? DENNIS COYNE IGNORED 04/27/2021 at 6:52 am

Nick,

I used US data for average fuel economy for heavy trucks and light vehicles, then I used a 1300 million global fleet size, assumed average miles driven was about 10k per year, did something similar for commercial (heavy truck) fleet globally. It is a rough estimate, BP has gasoline and diesel consumption for World at 52 Mb/d in 2019, I assume most of that is for light vehicles and heavy trucks, not sure how much is used in ships (I assumed they mostly use fuel oil/bunker/residual fuel).

Also see figure 2 on page 6 of EIA document below, 55 Mboe/d in 2020 looks about right, and they estimate about 57 Mboe/d in 2025, my estimate is about 56 Mboe/d, with decreases starting in 2028.

The model is no doubt imperfect and does not account for the drop in demand in 2020 due to pandemic (the model was done in 2019 before the pandemic).

https://www.eia.gov/analysis/studies/transportation/scenarios/pdf/globaltransportation.pdf NICK G IGNORED 04/27/2021 at 1:56 pm

Thanks.

It's interesting how quickly this 2017 study has become out of date:

" The combined share of electric and plug-in hybrid electric vehicles in OECD countries increases from less than 1% in 2015 to 10% in 2040. In non-OECD countries, diesel, natural gas, and electric and plug-in hybrid electric vehicles experience a three-to-five percentage point increase in the total share of LDVs sold in non-OECD countries. In 2040, diesel and natural gas vehicles each represent approximately 11.5% of the total LDV new sales market in non-OECD countries, and electric and plug-in hybrid electric vehicles combined represent 4.5%."

They thought EVs would be about 10% in 2040, while diesel and NG vehicles would each be about 11.5%. Based on how quickly car makers are abandoning diesel and NG and adopting EVs, I'd say EVs will take pretty much all of the 23% projected for diesel and NG and, of course, much more. LIKBEZ 04/30/2021 at 1:12 pm

Dennis,

I know that you are EV enthusiast, and even own Tesla, but still we need to be realistic.

For heavy trucks transporting goods over long distances the switch to EV is very problematic and might never happen. The switch to natural gas is a possibility but this is an expensive solution. For local trucks the problem is the cost of the battery and it might happen but very slowly, as gradual displacement due to high gas prices. Even in this case natural gas will eat lithium.

Three large users of fuel that you did not account are military, airplanes and agricultural machinery. In the USA we also need to add trains as the level of electrification of railroads leaves much to be desired.

Those three categories of consumers of fuel are not switching to EV in foreseeable future. If you account for the growth of population the demand actually might increase until the price of fuel will come into play.

Globally Africa, China, India (and Asia in general), xUSSR space very rapidly add personal cars so those areas will experience growth of fuel demand. And cars in those regions often run for 15-20 years not 12 like in the USA. .

And that will affect African producers and, especially Russia. So when talking about Russia it is important to understand that the internal consumption will grow (Russia adds around 1.5 million cars a year) and that will cut exports https://knoema.com/atlas/Russian-Federation/Primary-energy-consumption although many Russian cars are running of natural gas as it is cheaper.

https://carsalesbase.com/russia-car-sales-data/

The number of cars per capita in Russia still is twice less than in the USA and this gap will gradually diminish. https://en.wikipedia.org/wiki/List_of_countries_by_vehicles_per_capita

The initial fascination with EV as passenger cars will soon pass as outside places like California with no winter they are very problematic during winter periods. I would say they are dangerous.

Currently they are kind of status symbol in certain circles and IMHO represent "conspicuous consumption." Conspicuous consumption is a term coined by American economist and sociologist Thorstein Veblen.

I wonder whether Tesla stock will be able to sustain the current crazy valuation in three-five years period. (139 minutes and 25 seconds)
DENNIS COYNE IGNORED 04/27/2021 at 5:17 pm

Hickory,

Here is a transition scenario that assumes the 37% growth rate in plug in sales continues, personally I think this is too optimistic, sales for light vehicles is 100% plugin by 2031 and the ICE light vehicle fleet is replaced 100% by 2044 with plugin vehicles. Interesting that you believe this is pessimistic. Also interesting that Ovi believes my original EV scenario is too optimistic, I seem to be somewhere between your optimism and the pessimism of Ovi. It will be interesting to watch (and I hope you are right).

REPLY HICKORY IGNORED 04/27/2021 at 9:51 pm

We shall see. It seems to me that at a certain point, there is going to be a very rapid realization that we are in new territory. Most of the manufacturers now get it, and are scrambling to react.
It will be very interesting to see if there is a component supply crunch ( I think likely) in the late decade.
A big piece of the unknown on this this is the general state of the world economy.
If there is stability and resumed growth after pandemic, the transition to plugin vehicles will be quicker.
If there is economic stagnation/contraction- it will be much slower as people hold on to what they've got.
And of course, the price oil will play a leading role in the incentive/disincentive equation.

I also think it is important to acknowledge that we are talking about percent of new sales, but not the absolute magnitude of sales. That may be more important. Vehicles last so much longer now, and if petrol is available at reasonable price, the best bet for most people financially will be to milk their current vehicle for as long as possible. But after that, the next one will probably have a plug. STEPHEN HREN IGNORED 04/28/2021 at 3:32 pm

At some point people will stop buying ICE vehicles even if no EV option is available. Operating a gas station, especially in an urban environment, is a low margin, high regulation enterprise. As gas stations in urban areas either go out of business or give up on selling gas, gas cars will lose most of their appeal for urban and suburban residents because of "range anxiety" – i.e. not enough places to fill up. I would guess that at about 20-30% EV saturation, selling gas will no longer become profitable in any given area. This will add to the spiral of concerns about resale value for ICE cars as the inevitability of the EV transition becomes ever more apparent. HICKORY IGNORED 04/28/2021 at 10:31 pm

This kind of action is hard to predict from past performance, but get used to these kind of news items-

Germany March 2021
"The number of new passenger plug-in car registrations increased to 65,681 (up 232% year-over-year), which is 22.5% of the total [new car]market. That's more than one in five new cars!" OVI IGNORED 04/26/2021 at 5:17 pm

Dennis

To me the EV market is bifurcated. From what I can see there are four concentrated EV markets in the world.
– California due to its history with car pollution.
– Norway using its massive oil revenues to heavily subsidize EVs along wth other perks.
– China with their heavy EV sales mandate and getting away from its achilles heal, oil.
– Japan also wants to reduce dependence on oil.

Looking at what is happening in two US states provides some insight on how fast the EV take up will occur in the US. California with a population of 39.5 M sold 133,000 EVs in 2020 or put another way 3,360 EVs per million population. New York with a population of 19.45 M sold 21,000 EVs in 2020 or 1,080 EVs per million population. That is a ratio of three to one. it would be a lot higher in other states.

Total US 2020 sales were 296,000. California accounts for 45% of US sales.

My point is that these 4 concentrated regions are not representative of the rest of the world. The only region that will continue to grow at a significant pace will be China with its sales mandate and I think with an eye to becoming a world leader in EV design. EVs are coming, no doubt, but at a pace that is slower than most prognosticators are forecasting, primarily because of cost.

[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 29, 2021] The car makes a COVID comeback, and that means burning more oil

Apr 29, 2021 | www.bnnbloomberg.ca

After being stuck in their homes for so long, people are itching to get out again. It's a boon to newly reopening economies, with consumers ready to start spending more at gas stations, convenience stores, restaurants, hotels and attractions. Daimler AG, BMW AG and Toyota Motor Corp. all started the year with sales at records, and things are so hot that used car prices in the U.S. are soaring to all-time highs.

The jump in vehicle sales is a strong sign that this is more than just a passing fad.

Gasoline is the big winner.

Profits from making the fuel are near seasonal five-year highs and are expected to stay strong as the Northern Hemisphere heads into summer driving season. U.S. refiner Valero Energy Corp. says gasoline sales are nearly at pre-pandemic levels, and the biggest bulls are predicting demand could hit a record. The U.S. Energy Information Administration expects summer fuel prices to be the highest since 2018 this year.

[Apr 27, 2021] The Greens, if they "win" will not win with a majority. That means they will need coalition partners. Neither the CDU or the SPD is going to go along with their plan to stop NS2. The Greens, in order to form a govt. will cave in on NS2 and probably other things.

Apr 27, 2021 | www.moonofalabama.org

robert , Apr 22 2021 20:00 utc | 16

Just a couple of notes:

-The Greens, if they "win" will not win with a majority. That means they will need coalition partners. Neither the CDU or the SPD is going to go along with their plan to stop NS2. The Greens, in order to form a govt. will cave in on NS2 and probably other things.

-The Ukies are still fleeing the country to avoid going to the front. The Ukie brass says as much. These are not soldiers. They are farm kids. At the 1st sign of serious war, they will all head for the russians with hands in the air.

-V. Putin handled the western MSM narrative quite well, imo, when he said "Those behind provocations that threaten the core interests of our security will regret what they have done in a way they have not regretted anything for a long time." It can't be clearer than that. And that tells me that the ussa is in the crosshairs. This may be the 1st time in history that the oceans will offer no protection for the warmongers that have been at war for 222 years of 237 years of their existence

The comedian is still flaying about and now trying to play the SWIFT card (last week it was nuclear weapons, before that it was...). Which, of course, the west will not honor because it would cripple the west as much or more than RU. I would imagine he needs to change his undershorts on an hourly basis these days. He is literally caught between a rock and a hard spot. No more support from DE, FR, US, NATO, TR except good wishes. And demands from his brain-dead Banderites are only growing more shrill. What's a poor comic to do?

The west is basically done with him and with the show of force by the russians they are more done with him than before. For his sake, i hope his khazarian passport app has been approved.

Another failed state compliments of the khazarians in DC. And the beat goes on.


passerby , Apr 22 2021 21:17 utc | 18

Eighthman @10 North Stream 2 will be the last mayor cooperation between Russia and Europe for the next 10, 20 years. If you had to choose where to put your money, would you put it in a gas pipeline to China (Power of Siberia) or a gas pipeline to Europe (North Stream2)?

Putin will be the last Russian president who looked west, to Europe; the next president will look east, to Asia. It's where the money is.

Nick , Apr 22 2021 23:52 utc | 28

I know how the German system works. Yet I am not seeing the Greens win or compose the next government if they threaten to cancel NS2. The NS2 is not about the CDU/CSU but about the German elite interest. No way they are going to give green light to the Greens. Speaking of someone which city is on the border.

Bernard F. , Apr 23 2021 1:15 utc | 35

Dans l'œil du cyclone

The only antiwar party in Germany is AfD. They don't buy at all the "narrative" Die Linke is only " pacifistes bêlants ".

The meeting of German parliament was interesting. Unfortunately, only found german SNA report

https://snanews.de/20210422/bundestagsdebatte-ostukraine-parteienvertreter-gespalten-1826965.html

About green leadership in west Germany, it was a fake election, no meeting, no campaign...just ridiculous posters in the streets. Massive abstention.

A post Covid-19 election, with young people back, could be surprised. East Germany is to be analyse.

Germany often surprises the world for the better , SS-20 and Pershing II missiles crisis 1978-87 and Mauerfall 1989.


[Apr 27, 2021] On the subject of LNG, is it even possible to transport enough LNG from the United States to Germany in quantity equal to the flow of Nordstream II?

Apr 27, 2021 | www.unz.com

Jim Christian , says: April 19, 2021 at 4:56 am GMT • 3.9 days ago

There is ONE little thing Mike Whitney missed, or maybe it developed as/after he wrote this, the State Department told Germany last week there would be no further sanctions on Germany or her companies as regards Nordstream II. I believe also that a four-Euro-country coalition told the U.S. a couple of weeks ago that this was for Germany's energy security, Nordstream that is and they sounded like they're serious about any further American interference in the matter.

On the subject of LNG, is it even possible to transport enough LNG from the United States to Germany in quantity equal to the flow of Nordstream II? That pipe they're laying looks of sufficient diameter to walk through standing up, it's going to pass a LOT of gas. I don't know what the flow rates and pressures are, but I know one thing; Boston has a large LNG terminal and it's a dangerous setup. Pipelines seem to me a safer enterprise.

Anyone familiar with this stuff?

shylockcracy , says: April 19, 2021 at 5:14 am GMT • 3.9 days ago

-The Ziocorporate globalist NATO/EU terrorists: We supported Chechen terrorist separatists and KLA organ-harvesting Jihadis, dismembered Yugoslavia and bombed Serbia, used your Russian airspace that you opened for us to invade Afghanistan after the 9/11 Zioterrorist self-attacks, instigated Georgia into war with Russia, used your UNSC vote to destroy Libya with ISIS, turned EUkraine into a NATO satellite complete with an bloody massacre in Odessa and yet another massmurderous war on Russia's border and blamed and sanctioned you for it, shot down your planes in Syria; and we're gonna be taking Belarus the moment Lukashenko blinks. But we're really good business partners, and need some gas, you know...

Miro23 , says: April 19, 2021 at 5:42 am GMT • 3.9 days ago

To my American readers I'd say that the US is very strong and the people of the US can have a wonderful life even without world hegemony, in fact, hegemony is not in their interests at all. What they should seek is a strong nationalist policy that cares for the American people and avoids wasteful foreign wars.

The problem here, is that the American people are crushed and powerless, and in the grip of something morphing into a Neo-Bolshevik style dictatorship. Similarly to the mid 1930's this dictatorship wants world power – and from this perspective Ukraine looks more like Spain 1936 (the first act of a much bigger show).

Biden's recent phone call to Putin suggests that the administration has decided not to launch a war after all. The unconfirmed report of two US ships turning away from the Black Sea fits this assessment. However, we cannot be sure about this since the Kremlin refused to agree to Biden's offer for a meeting. The Kremlin's response was a frosty "We shall study the proposal". Russians feel that the summit proposal might be a trick aimed at buying time to strengthen their position.

Except that the US ordered two British warships to go there instead.

TASS, April 18. Two British warships will sail for the Black Sea in May. According to The Sunday Times, a source in the Royal Navy indicated that this gesture is intended to show solidarity with Ukraine and NATO in the region against the background of the situation at the Russian-Ukrainian border.

According to the newspaper, one Type 45 destroyer armed with anti-aircraft missiles and an anti-submarine Type 23 frigate will peel off from the Royal Navy's carrier task group in the Mediterranean and sail through the Bosphorus into the Black Sea.

It is reported that the decision was made in order to support Ukraine after the US cancelled its plans of sending two destroyers to the Black Sea in order to avoid further escalation in the region and tensions with Russia. It is noted that in case of a threat on the part of Russia, the UK is ready to send other military equipment to the region.

https://tass.com/world/1279483

I would guess that the US Trotskyites plan to push the Ukrainians into a war and then launch a massive international media barrage, "heroic Ukrainian patriots", "Russian atrocities", "killer Putin" etc. sufficient to finish with Nord Stream 2 and scare France and Germany back into the US fold.

If this is right, then they're not expecting Russia to retake the whole of the Ukraine, and they're not planning to start WW3.

However, Russia's lowest risk strategy would probably still be to only defend their existing positions making it difficult to claim a "Russian invasion". They've probably already lost Nord Stream (which is really a German loss – and the Germans know what the ZioGlob are doing here). This buys time, and given that the US is already on a fast downward slope, lets them keep sliding.

The Alarmist , says: April 19, 2021 at 12:16 pm GMT • 3.6 days ago
@Jim Christian

Let's just say that Germany relying on LNG from the US and ME is somebody's pipe dream.

MarkU , says: April 19, 2021 at 12:19 pm GMT • 3.6 days ago
@Anonymous point the finger and shriek about 'Russian aggression' in order to pressure the Germans into cancelling Nordstream 2 and any other Russian supplied energy.

Of course if the Europeans weren't run by (((banker))) stooges and if they had any balls between them they would force the US to call the whole thing off and pressure the Ukrainian fascists to honour the Minsk 2 agreement. Sadly we are just going to have to prepare for the worst and hope it doesn't go nuclear.

I see my own government (I am from the UK) has decided to send some sacrificial ships to the Black sea (the US apparently doesn't want to risk theirs) What else can we expect when 2/3 of our parliament are in 'Friends of Israel' groups?

BorisMay , says: April 19, 2021 at 12:47 pm GMT • 3.6 days ago

As Andrew Anglin writes, watch out for an upcoming false flag

Zarathustra , says: April 19, 2021 at 12:50 pm GMT • 3.6 days ago
@Schuetze

Like Mike did say in Godfather:" You are not lucky." Neither is US

Brooklyn Dave , says: April 19, 2021 at 1:07 pm GMT • 3.5 days ago
@Marshall Lentini

The Ukrainians who would the hardest to pacify are in the Ukie Diaspora in US, Canada and Western Europe. These folks still maintain a WW II mentality, act as if the Holodomor (which was terrible) only happened the other day and have a fair number of Banderists among their number. They do not wish to acknowledge that the Holodomor was orchestrated by the same Jews who launched the Bolshevik Revolution and killed millions of Orthodox Russians more than a decade beforehand. The ideal would be for Ukraine to maintain it territorial integrity minus perhaps the Donbas and go forward with a positive relationship with Russia.

Fiendly Neighbourhood Terrorist , says: Website April 19, 2021 at 3:26 pm GMT • 3.4 days ago
@Anonymous refugees, including tens of thousands of Russian passport holders, trek into Russia, creating a nightmare for Putin. Ukranazistan is enormously emboldened, joins NATO de facto if not yet de jure, Russia is tremendously weakened, loses all allies and prospective allies. Win for Amerikastan.

Scenario 2: Putin intervenes.

Result: Amerikastan leaves the Ukranazis high and dry, but shrieks about Evil Russian Invasion; NordStream II and all other economic connections with Europe are severed. Amerikastan immensely reasserts its control over Europe, sells its LNG to Germany at much inflated prices, and its useless weapons to everyone to "defend against Russia". Hands Russia the unenviable burden of the ruin of Ukranazistan, which Amerikastan has looted for 7 years till there is nothing left. Win for Amerikastan.

Art thou answer'd yet? What, art thou answer'd?

PokeTheTruth , says: April 19, 2021 at 3:27 pm GMT • 3.4 days ago
@Fiendly Neighbourhood Terrorist ttlement of Disputes". Hopefully it will direct the attention of the Security Council or the General Assembly to realize the Russian Federation and permanent member of the UNSC, see no other path to peace if the representatives of the UN fail to make a just and fair decision on this particular matter that has gone on for far too long.

This in itself does not necessarily mean the armies of Russia will pour over Ukraine's western border and over their northern border from Belarus. But the declaration of defensive war puts US-NATO in a Hobson's choice predicament and that is to choose peace. If they choose to cross the Rubicon then the necessity of defense war as theoretically stated will happen to preserve the sovereignty of Mother Russia.

RadicalCenter , says: April 19, 2021 at 3:31 pm GMT • 3.4 days ago
@kszat

Less than 11% of ukrainians are Catholic -- less than 1% "Latin Rite" and 10% Uniate Catholic -- and they are concentrated overwhelmingly in the oblasty bordering Poland and Slovakia etc. in the west. Catholicism does not exist in the Donbass region and has almost zero presence or influence in the rest of the Ukraine excluding the far west.

Russian and Ukrainian are even more similar than you make out, albeit not nearly-identical like Russian and Belarussian.

In any event, many Ukrainians consider BOTH Russian and ukrainian to be their native languages.

Moreover, a large minority of people, especially around Kiev, use the Russian-Ukrainian mix called Surzhyk.

annamaria , says: April 19, 2021 at 3:33 pm GMT • 3.4 days ago
@Carlton Meyer

If the MIC/Banksters like the brinkmanship games so much, it would be interesting to see Russian nuclear submarines emerging near Patagonia (Jewish "retreat") and Cuba. A piece of leaked information about the City of London being on a crosshair of Kinzhal will be a bonus. Add to that the publication of a detailed map of underground luxury bunkers for the "deciders;" that would be super nice.
The cannibals – the "globally-oriented elites" – need to feel the flaming spear directed towards each of them (and their progeny) personally. The confrontation has indeed become personal: the ZUSA's "elites" against humankind.

steinbergfeldwitzcohen , says: April 19, 2021 at 3:52 pm GMT • 3.4 days ago
@Miro23 re it fit best how would that be a bad thing?
Some to Russia, some to Poland, some to a rump State.
I would love to see Putin, Lavrov and Shoigu cook up a feast for Bidet Joe and Camel Toe tbat would see them humiliated. Bidet is a fraud and anything that makes him and his little goblin Blinkenfeld look like idiots is great.
We can only hope!
P.S. It must really suck to be a Ukrainian. Here we are in the 21st century and these guys can't get out from being stuck in the mud. The young have to leave for Poland to get jobs. And for what reason, so American Jews can get their Hate On for the Czar?! All the Greenblatts need war crime charges. Convict and execute the next morning. All legal. Force is all these vermin understand.
Oscar Peterson , says: April 19, 2021 at 4:01 pm GMT • 3.4 days ago
@Anonymous oke Putin into overreacting, thus, proving that Russia poses a threat to all of Europe. The only way Washington can persuade its EU allies that they should not engage in critical business transactions (like Nordstream) with Moscow, is if they can prove that Russia is an "external threat" to their collective security.

Shamir unfortunately became fixated on Whitney's use of the word "overreact" (though I agree it's not the right word) and mostly failed to address the substance of the question and its underlying premise.

And, as a postscript, I agree with animalogic. Your kindergarten language is embarrassing. I mean, if you're going to insult Escobar et al., at least use adult insults.

Oscar Peterson , says: April 19, 2021 at 4:07 pm GMT • 3.4 days ago

In the unlikely event that Ukraine does try to take back the Donbas by force, Shakespeare has already devised the appropriate stage direction for the Zelensky government:

Exit, pursued by a bear.

annamaria , says: April 19, 2021 at 4:08 pm GMT • 3.4 days ago
@Ray Caruso ref="https://www.wsws.org/en/articles/2009/05/zime-m11.html">https://www.wsws.org/en/articles/2009/05/zime-m11.html
Krystian Zimerman, a man of dignity, loathed the treacherous snake obama.
https://blazingindiscretions.blogspot.com/2009/04/krystian-zimermans-pro-peace-speech.html

"Get your hands off my country," Zimerman told the stunned crowd in a denunciation of US plans to install a missile defence shield on Polish soil. Some people cheered, others yelled at him to shut up and keep playing. A few dozen walked out, some of them shouting obscenities.

SafeNow , says: April 19, 2021 at 4:46 pm GMT • 3.4 days ago

I've played hundreds of Russians at chess, and they prefer what chess players call "quiet moves." (Unlike US players, who are more impetuous). Same for Putin; quiet moves. But if provoked, he will finish the job. (Adm Spruance, after Pearl Harbor: By not attacking the tank farms, sub base, and machine shops, they had not "finished the job.

Majority of One , says: April 19, 2021 at 6:01 pm GMT • 3.3 days ago
@Prester John

The "western" Ukraine you cite may have been culturally Ukrainian/Russian/eastern Slavic, several hundred years ago. But as they were under Polish and later Austro-Hungarian overlordship for many generations, they became westernized–culturally deracinated. They are Galicians, NOT Ukrainians.

If Ukraine retains some level of political independence, they need to divorce these culturally undigestible Uniates and their fascistic leadership. Currently that group poses a toxicity to the body-politick of Ukraine, however else you may wish to define Kievan Rus.

RadicalCenter , says: April 19, 2021 at 6:02 pm GMT • 3.3 days ago
@Prester John

Wrong to say that "West Ukraine" is Catholic. Only TEN percent of Ukrainians are Uniate Catholic, less than 1% Roman Catholic.

Majority of One , says: April 19, 2021 at 6:11 pm GMT • 3.3 days ago
@Bombercommand > In some ways your take is apropos, particularly regarding potential Russian overextending.

You do place a lot of reliance on "International Law". With little incidents like Trump's overturning of the uranium-processing accords with Iran, plus numerous other violations by the U$/British consortium working as the intel and military enforcement arms for the Bank$ter Cabal; international law has been constantly and consistently violated.

Geopolitically speaking, in terms of realistic "real politick", as per Bismark, no national regime regards such nice-sounding accords as valid and inviolable. At some unknown future time, genuine International Law may become a reality. At present, it is primarily a smiley-faced mask.

Russian_Deplorable , says: April 19, 2021 at 6:23 pm GMT • 3.3 days ago

A bear has never been a "Russian totem animal". Eagles, falcons, wolves – but never bears. "Russian bear" is a product of the British russophobic propaganda of the Crimean war of the 19 century.

The ukies are not Russians. Russian society looks forward demolition of the ukronazi statehood, but without any form of integration of the Northern Somalia into our country. A few million insurgent anarchists on top of all our problems would finish us.

Alfred , says: April 19, 2021 at 6:35 pm GMT • 3.3 days ago
@Brooklyn Dave for Ukraine.

The fanatics who actually live in Ukraine can be easily traced and kept under control. Their funding would be cut off. They are a tiny portion of the population.

In the last elections that were won by Zelensky, the parties that wanted peace with Russia represented over 95% of the population. Zelensky deceived everyone by continuing exactly the same policies of Poroshenko. In fact, he was worse as he recently shut down all opposition TV stations.

1n 2019, the only area in favour of continuing the war was brick-red on this map. Today, due to the collapsing economy and the lockdowns, there are even fewer people in favour of war. The Russians would be welcomed almost everywhere.

Lucy Lipinska , says: April 19, 2021 at 6:42 pm GMT • 3.3 days ago
@steinbergfeldwitzcohen

Fraud Bidet and little goblin Blinkenfeld; amusing but true nevertheless.

And I couldn't agree more when it comes to what you say about Ukraine, i.e. the borderland. According to my sister who lives in Poland, Ukraincy (in Polish "those from bordeland) are everyplace.

Sally'sDad , says: April 19, 2021 at 6:49 pm GMT • 3.3 days ago
@Majority of One

I would add that the western part of Ukarine "released" to join Poland would just allow the evil empire to occupy that much land even closer to Russia. I don't see that as desirable. Perhaps that western
extremity is something that needs to be made "independent" and demilitarized, perhaps with UN peacekeepers present. At any rate, it needs to be rendered as no danger to Russia.
I have thought that by making Ukraine unavailable to the native neo-nazies there, they are forced to relocate, and then become a major headache for their damaging and dangerous influence in Europe.
Call it "blowback" . just another reason for the Europeans to defuse any American smart ideas in their neighbourhood.

Aaron Hilel , says: April 19, 2021 at 7:13 pm GMT • 3.3 days ago
@Fiendly Neighbourhood Terrorist t.
Russia wins.

Fourth variant.

Canadian, British and hand-picked nazi battalions attempt to enter the no mans land, come under mortar fire, go to ground and ask their artillery to save them.
Ukrainian/nato artillery battalions get counter-batteried into oblivion by ru artillery regiments stationed in range.
Commanders at battalion level ask for a cease-fire, evacuate their troops back to the starting line.
V.V. Putin, being merciful and kind, agrees.
Russia wins.

Fifth variant

Nothing happens except for a lot of hot air, troop movements and wails from Lugenpresse.
Status quo is maintained, zato keeps paying for the Ukrainian Project.
Russia wins.

Marshall Lentini , says: April 19, 2021 at 7:25 pm GMT • 3.3 days ago
@Bombercommand

Absolutely solid take. Only thing I would add –

Russia would instantly become an outlaw state.

They are already being treated as an outlaw state, and although Russians are inhumanly patient, as I've seen for too long firsthand, this may figure into any looming brinkmanship – as Lavrov's recent exasperated remark about the US being incapable of negotiation may indicate.

Jake , says: April 19, 2021 at 8:49 pm GMT • 3.2 days ago
@SteveK9

True, There is zero need for the US to play Imperial Global Overlord because of the natural resources on North America. It is only the greed and hubris of the Elites, who cannot ever be satisfied.

The Anglo-Zionist Empire is very much an Evil Empire.

[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 19, 2021] The danger here is that the US and the EU vassals push Russia into having nothing to lose. I don't see how NS2 can be finished if Navalny dies.

Apr 19, 2021 | www.moonofalabama.org

Eighthman , Apr 18 2021 1:26 utc | 65

The danger here is that the US and the EU vassals push Russia into having nothing to lose. I don't see how NS2 can be finished if Navalny dies. I hope Russia/Putin are working to prevent this, if they can.

[Apr 14, 2021] After The Bear Showed Its Teeth The Ukraine Filed For Peace

Now it looks more and more like a deliberate provocation. With Ukraine striving to get attention and the USA striving to stop NS2.
Notable quotes:
"... The new 2020/2024 Russia/Ukraine transit gas contract is 'pump or pay' in that Russia pays $7B over 5 years regardless of whether gas is shipped or not. So it doesn't matter if the volume drops. I am actually surprised that it has given the still harsh weather in Europe. ..."
"... Meanwhile more figures are out on NS2 and it looks, given good weather, that both Fortuna and AC could finish pipe laying in both Danish and German waters by the end of May. So operational by the end as of year as stated by Gazprom looks on the cards, if not earlier. ..."
"... I suspect that the US and its NATO lapdogs are playing a distraction game. And I think that the Russian government knows this; but also realizes that the Western nations are cirrently in the grips of madcap rulers. Thus Russia is not taking any chance. One can bet that, as the whole empire crashes, it would like to bring down as much of humanity down with it as it can. The future of the earth is not bright. ..."
"... The Oil Shock only added to the 1973-75 recession. The Oil Shock was political in nature, and somewhat coordinated with the USG itself. The deeper causes of the early 70s economic crisis, and of the end of Bretton Woods, was declining profitability across all advanced capitalist states. See Robert Brenner's book, The Economics of Global Turbulence. ..."
"... Nuland et al may be trying to show themselves loyal agents of Israel, testing whether Russia can be distracted from Syria, or pretending to raise the cost of NS2. Russia and China could make balanced moves in the Caribbean to tame the bullies, but may see no advantage in counterthreats. ..."
"... This will be followed by an attack on the two Republics, dead bodies everywhere, un indisputable reason to convince the Germans with to scrap Nord-2. ..."
"... I am wondering if this might be an advantage for Russia and other countries in the mid to long term, that their companies are forced to master all the complex technologies involved as fast as possible? Maybe they will even become competitors to their western equivalents? ..."
Apr 14, 2021 | www.moonofalabama.org
Jamesp , Apr 10 2021 14:58 utc | 1

First the Ukraine said it would use force to recover the renegade Donbass region as well as Crimea. It then moved heavy troops towards the contact lines. The ceasefire at the contact line was broken multiple times per day. Several Ukrainian soldiers died while attempting to remove a minefield in preparation of an attack.

It became clear that a war in Ukraine's east was likely to soon braek out. A successful war would help Ukraine's president Zelensky with the ever increasing domestic crises. A war would also give the U.S. more influence in Europe . The U.S. and NATO promised "unwavering support for Ukraine's sovereignty".

Russia gave several verbal warnings that any Ukrainian attack on the renegade provinces of Luhansk and Donetsk or Crimea would cause a serious Russian intervention. There was never a chance that the U.S. or NATO would intervene in such a war. But it was only after Russia started to move some of its troops around that sanity set in. It dawned on the Ukrainian leadership that the idea of waging war against a nuclear armed superpower was not a good one.

Late yesterday it suddenly decided to file for peace (machine translation):

The Armed Forces ruled out the use of force to "liberate" Donbass

KIEV, April 9 - RIA Novosti. "Liberation" of Donbass by force will lead to mass deaths of civilians and servicemen, and this is unacceptable for Kiev, said Commander-in-Chief of the Armed Forces of Ukraine Ruslan Khomchak.

"Being devoted to universal human values ​​and norms of international humanitarian law, our state puts the lives of its citizens in the first place," the General Staff's press center quoted him as saying.

According to Khomchak, the Ukrainian authorities consider the political and diplomatic way to resolve the situation in Donbass a priority. At the same time, he added that the Armed Forces of Ukraine are ready for an adequate response both to the escalation of the conflict and to "the complication of the military-political and military-strategic situation around the country."

Zelensky himself chipped in (machine translated):

Zelensky spoke for a truce in Donbass

MOSCOW, April 9 - RIA Novosti. President of Ukraine Volodymyr Zelenskyy announced the need for a new truce in Donbass after visiting the contact line.

The head of state wrote on Facebook that shooting at the front lines had become "a dangerous routine." "After several months of observing a complete and general ceasefire, we returned to the need to establish a truce," Zelensky said.

As the commander-in-chief of the Armed Forces of Ukraine Ruslan Khomchak emphasized earlier, the use of force to "liberate" Donbass is unacceptable for Kiev, as it is fraught with casualties among the civilian population and military personnel. At the same time, last week he said that the Armed Forces of Ukraine will strengthen the grouping of troops in the Donbass and in the Crimean direction - in response to the "build-up" of Russian forces on the border with Ukraine.

It seems that order has come from Washington to stand down - at least for now. U.S. reconnaissance flights near Russia's border continue . One should therefore consider that the sudden call for a renewed ceasefire might be a ruse.

But if it is not why was all of this allowed to happen in the first place?

Posted by b on April 10, 2021 at 14:44 UTC | Permalink

It would be so beneficial to Russia in so many ways to fix the Ukraine problem once and for all, that America is now backpedalling fast and hoping the Russians do not get their fix. They want this to continue to be a set of problems for Russia. Avoiding a war would be great for all, but if the West thinks they can resume this contentious scenario, they will find they are wrong. I am willing to bet that most common citizens of ukraine are sick of all this vitriol and tension, crashing economy, and other hardships. Maybe the majority will finally speak up and get their say.

JohninMK , Apr 12 2021 22:42 utc | 160

Stonebird @ 155

The new 2020/2024 Russia/Ukraine transit gas contract is 'pump or pay' in that Russia pays $7B over 5 years regardless of whether gas is shipped or not. So it doesn't matter if the volume drops. I am actually surprised that it has given the still harsh weather in Europe.

Meanwhile more figures are out on NS2 and it looks, given good weather, that both Fortuna and AC could finish pipe laying in both Danish and German waters by the end of May. So operational by the end as of year as stated by Gazprom looks on the cards, if not earlier.

andreweed , Apr 10 2021 15:04 utc | 2

"why was all of this allowed to happen in the first place?"

because this is what bullies do. and when they sense they are about to lose in a fight, they ask for peace.

Mao Cheng Ji , Apr 10 2021 15:25 utc | 5

Once again, the World is saved. Pure West-emitted Goodness stopped The Dark Lord Putin in his tracks.

Jackrabbit , Apr 10 2021 15:38 utc | 7

At the same time, last week he said that the Armed Forces of Ukraine will strengthen the grouping of troops in the Donbass and in the Crimean direction - in response to the "build-up" of Russian forces on the border with Ukraine.

If war is really unacceptable to Ukraine why aren't they pulling back their forces?

1) Because the "Russian aggression' propaganda must continue until Nord Stream 2 is terminated.

2) Because the threat of a war with NATO-supported Ukraine must be sustained to deter Russia in Idlib and elsewhere.

!!

Don , Apr 10 2021 15:42 utc | 8

@MapleLeaf

The only deterrent US ships provide is the type that Russia wants to avoid engaging the US directly for fear of an eventual nuclear exchange. Otherwise, those ships provide no challenge to their military capabilities.

I submit the ships are there to encourage Zelensky to take a risk thinking the US has his back. But it appears even he isn't this dumb and this whole thing is going to blow over as I predicted a week or two ago.

imo , Apr 10 2021 15:44 utc | 9

So, was it always about bluff, theater and optics? ... Or did they simply lose their will to die young? I guess Zelensky is a bad-joke comedian after all. He gets the local nazis off his neck (for a while) by being a bold bad-ass boy and passing ideological laws (far from reality); and then goes listen to the frontline generals as they explain the suicidal meaning of his comic bluster. Being an actor, it's all just a stage for a gig, it seems. So, now he tells his pet nazi thugs that Ruslan Khomchak has their phone numbers. Perhaps now that Phil-the-(UK)Greek has died the Nato biolabs will be working on the next 'Plan B' reincarnation-virus pandemic mix. Sputnik-V 2.0 better be ready soon.

bevin , Apr 10 2021 16:25 utc | 13

Maybe I missed it but there were elections in Ukraine last Sunday and
"The new Verkhovna Rada (parliament) of the Ukraine, elected on Sunday, will have an overwhelming national mandate to negotiate peace terms to end the five-year civil war.

"Sluha Narodu ("Servant of the People"), the party of President Volodymyr Zelensky, having won more than 43% of the votes countrywide, will now command majorities of both the party-list and the single-constituency seats in the new parliament; 253 seats altogether out of 422, or a "mono-coalition" as the party is calling the result, or as the hostile Ukrainian media term it, "a landslide [which] has never occurred in the contemporary history of Ukraine and it is more typical for post-Soviet Asian dictatorships..."

"...This beats earlier pollster predictions that Zelensky would be forced into a coalition with Holos ("The Voice"), a US-invented spoiler organization of Lvov region (Galicia) led by pop singer, Svyatoslav Vakarchuk. He ended up with less than 6% of the national votes, fewer than forecast. Holos has proved to be neither the voice of youth, nor an organization without oligarch support (it was backed by Victor Pinchuk), nor a political party at all.

"Polling better than predicted was the Donbass (Donetsk, Lugansk regions) party, Opposition Platform led by Victor Medvedchuk, which ended up with 13% nationally; 48% in Lugansk; 42% in Donetsk; 24% in Odessa; and 19% in Nikolaev. If the additional votes of the eastern Opposition Bloc of Boris Kolesnikov and Vadim Novinsky are counted with Medvedchuk's aggregate, together they have drawn majorities of 53% to 54%, putting Zelensky's party in the east in a minority.

"This is the first time democracy has defeated a US Government-installed putsch and junta in Europe since the election of Andreas Papandreou's Pan-Hellenic Socialist Movement (PASOK) in 1982."

According to John Helmer "President Volodomyr Zelensky (right) is suffering from memory failure, mood swings, and other neurological disorders after his hospitalisation for Covid-19 five months ago..." The obvious theory is that Zelensky was playing for time while giving the ultra fascists and their Canadian sponsors free rein until the elections gave the Ukrainian people- powerless political flotsam and jetsam, tossed around by Ottawa Nazis, Anglo imperialism and a corrupt oligarchy which has been robbing everyone in sight, blind since time immemorial a chance to indicate that it would be an extremely dumb move to attack Russia. Amongst other reasons, because the average Ukrainian would very likely side with the Russians against their ancient persecutors the Poles and Balts.

For Helmer:
http://johnhelmer.net/reminder-of-july-21-2019-for-democrats-suffering-acute-memory-failure/#more-46171

psychohistorian , Apr 10 2021 16:25 utc | 14

b wrote
"
It seems that order has come from Washington to stand down - at least for now. U.S. reconnaissance flights near Russia's border continue. One should therefore consider that the sudden call for a renewed ceasefire might be a ruse.

But if it is not why was all of this allowed to happen in the first place?
"

Good question. It fits with the characterization of late empire flailing at trying to exert/maintain control over global narratives. Empire keeps hoping that Russia and China back down because they have no other options than bullying. This is just the latest example of the bully being faced up to.....thank you Mr. Putin!....we just hope the bully goes down without taking all the rest of us with it.

Steve , Apr 10 2021 16:44 utc | 16

I suspect that the US and its NATO lapdogs are playing a distraction game. And I think that the Russian government knows this; but also realizes that the Western nations are cirrently in the grips of madcap rulers. Thus Russia is not taking any chance. One can bet that, as the whole empire crashes, it would like to bring down as much of humanity down with it as it can. The future of the earth is not bright.

AriusArmenian , Apr 10 2021 16:58 utc | 19
If Ukraine doesn't start their self-destruction by launching war before end of June then I will believe the danger has passed this year and only because the crazies in the US are hesitating to push the final button.
JohnH , Apr 10 2021 16:59 utc | 20
Meanwhile the New York Times, which always claims to know everything about Russian intentions, is left clueless!
https://www.nytimes.com/2021/04/09/world/europe/russia-ukraine-war-troops-intervention.html
vk , Apr 10 2021 17:05 utc | 22
But if it is not why was all of this allowed to happen in the first place?

The only plausible explanation is that time isn't in favor of the Ukraine (and maybe the USA). Time is running up.

We should stop seeing capitalism as this unmovable, eternal and indestructible system, and the USA as this eternal and indestructible empire with endless resources. Both presuppositions are entirely false: capitalism and the USA are historically specific phenomena, and they will - 100% certainty - collapse and disappear eventually.

In politics, time is always relative. You know you won't last forever, but you know you don't need to: you just need to last longer than your political enemy. The fact that USA outlived the USSR gave it almost 17 years of incontestable supremacy, even though, analyzing the numbers, we know that the economic apex of the American Empire (its "golden age") was between Eisenhower and Lyndon B. Johnson. The absence of its geopolitical rival resulted in the fact that the American Empire reached its pinnacle during Bill Clinton and George W. Bush, not at the time its people was the most happy, during 1945-1969.

But geopolitical apex doesn't always translate automatically to economic apex. The USA also suffered a lot with the Oil Crisis of 1974, after which it quickly started to financialize and deindustrialize, in a process that was best symbolized by the Nixon Reforms (the creation of the Petrodollar in 1971 with the secret talks with the Saudi royal family and the deal with China in 1972). This crisis was masked solely by the fact that the USSR suffered even more with the Oil Crisis than the USA, resulting into a relative ascension. This relative ascension can be verified by the fact that Ronald Reagan was the most popular POTUS of the post-war USA: his reign was, by all economic metrics, a monumental failure, but it was during his watch that the USSR started to collapse.

Signs of cracks in the USA were already evident when George H. W. Bush wasn't re-elected because of a tax revolt by the electorate. During Bill Clinton, the American Empire gained a lot of breathing space thanks to the absorption of the vital space left by the ex-USSR countries, which were ransacked by the American and, to a lesser extent, German, capitalists (Victoria Nuland's husband, for example, got extremely rich with the privatization of the communications services in ex-Yugoslavia, hence her particular interest in Eastern Europe affairs). But even during Bill Clinton we could already see some dark clouds, e.g. the infamous "twin deficits" increase. Bill Clinton also governed long enough to see the crisis of the Asian Tigers (1997) and the Dotcom Crisis (2000). The dark clouds that would result in the storm of September 2008 were already there, gathering.

Analyzing the economic data, we can clearly see that the USSR wasn't the only one in an age of stagnation: since 1990, only China and SE Asia genuinely grew. If the 21st Century is to be consolidated as the "Asian Century", then a historian of the 22nd Century will have to go back to that year (or even earlier, to the mid-1980s) to try to understand the Asian rise. Growth elsewhere (when it happened) was either vegetative or fruit of a relocation (i.e. rise in inequality, bankruptcy of some sectors in favor of others) of wealth. During the 2000s, almost all the economic growth can be exclusively traced back to China (Russia's and Brazil's commodity booms, SE Asia's continued dynamism due to China's outsourcing or financing of American debt).

The 2008 crisis ended Neoliberalism as a hegemonic ideology. Today's world is still very much neoliberal, but only because the global elites don't know what to do and, either way, it's being implemented in a very distorted way, very far from its ideological purity of the 1990s. No one takes neoliberalism seriously anymore, even among the high echelons of the economics priesthood. Some remnants of neoliberal thought are still alive in the form of some living fossils in Latin America, but its end if fait accompli.

It is in this world that the Ukraine chose to align with the American Empire. To put it simply, it chose the wrong side at the wrong time: it chose the West in an era that's shifting to the East. The euphoria of the fall of socialism masked the degeneration of capitalism that was started at the same time and it particularly impacted the Warsaw Pact (Comecon) and the Western ex-USSR nations.

The Ukraine debacle has two aspects. First of all: the Maidan color revolutionaries clearly envisioned a neonazi, pro-Western Ukraine in its territorial integrity, i.e. with Crimea, Luhansk and Donbas. They didn't see the pro-Russians being well-organized enough to be able to quickly fall back to Russia (Crimea being the most spectacular case, rapidly organizing a referendum and fully integrating with Russia). Those losses are big: without Crimea, Ukraine essentially lost any significant Black Sea influence, and without Donbas + Luhansk, it practically lost all its industry and economy. Donbas specifically was a huge blow to the Ukrainians: since the Tsarist era, it was the most industrialized and advanced region of the Russian Empire (even more than Moscow and St. Petersburg) and it continued to be so during the Soviet Era - three of the main Soviet General-Secretaries of the post-war era came from the region (Krushchev, Brezhnev and Gorbachev).

Secondly, Ukraine, by choosing capitalism, has put itself withing the capitalist metabolic clock. The era of the Marshall Plan is gone. The USA needs wealth and it needs now. It will have to pay tributes to its new metropolis, and the price is high. The USA will settle for nothing less than the entire Ukraine - including the rich regions of the Donbas basin, plus the Crimea (over which its powerful Navy will be able to project into Russian territory). It also won't settle for anything less than a fully NATO-integrated, IMF-controlled Ukraine. That's the price for a full accession to the capitalist club post-2008.

In this sense, Ukraine's time is very short, as it is sucking the IMF dry (financial black hole) and it will collapse soon. The patience of the Empire is short and is getting shorter. As is common with capitalist societies, the Ukraine is also starting to devour itself as it collapses with the lack of vital space: the liberal elites governing it are having to ask themselves how can they get out of this mess without being murdered by the neonazi base that sustains it; at this point, they're more worried about avoiding another Night of the Long Knives than in reconquering the Donbas and Crimea.

The only good aspect I see in the dissolution and extinction of the Ukraine is that it can finally put to rest the myth that Nazism is a brutal, but highly efficient, "system": there's not such a thing - and never was - as a "Nazi system". Germany already was the second industrial superpower by the time Hitler rose to power; he never elaborated any kind of economic theory or even policy, instead delegating it to the already existing (Weimarian) industrial elite. Hitler was just a very powerful cheerleader who dreamed in being an epic movie. There was never such a thing called "national socialism" - it was just the name of the Bavarian party that already existed when Hitler crossed the border; it was by mere chance of destiny that he came from Austria (Southern border) and not Denmark (Northern border), France/Alsace-Lorraine (Western border) or Poland-Sudentenland (Eastern border). Nazism is not a system, it is just crazy liberalism, and I hope the white supremacists and traditionalists in the West take note of that - if they don't want to be crushed.

MarkU , Apr 10 2021 17:28 utc | 27 Prof , Apr 10 2021 17:33 utc | 28
VK
The Oil Shock only added to the 1973-75 recession. The Oil Shock was political in nature, and somewhat coordinated with the USG itself. The deeper causes of the early 70s economic crisis, and of the end of Bretton Woods, was declining profitability across all advanced capitalist states. See Robert Brenner's book, The Economics of Global Turbulence.
oldhippie , Apr 10 2021 17:35 utc | 29

It is more than 24 hours since the initial announcement of a stand down and it would be nice to see some confirmation. Troops withdrawing would be confirmation. If it is happening in is not reported. What we get tends to be like the NYT item cited by John H @ 20. Nothing in that article but fantasy and delusion. The ongoing narrative crowds out facts until nothing is left. No one is as bad as NYT, still it is hard to trust anything we read.

Keeping an army in the field indefinitely is difficult. At minimum the troops must be fed and must be kept busy. Does Ukraine have the wherewithal to do that? I tend to doubt that, and yes, I am speculating. We will find out much later how bad desertion has been. We will find out much later how the hodgepodge of conscripts, mercs, Special Forces, and NATO got along. Reporting from 2014 had it that 600 NATO of every flavor were captured in the Debaltsevo cauldron. If you believe that. I can't see how Ukraine musters and fields another army after this if it is in fact over. More likely future armies will resemble what US manipulates in Syria -- Turks, Uighurs, jihadis from whole planet, mercs.

Domestic politics in Uke have to be crazy. No one can possibly know what is happening except the US Embassy. And they have their brains fogged by a lifetime of NYT fiction. No good locals for them to work with. If there was anyone good we would have seen them by now.

El Cid , Apr 10 2021 17:49 utc | 32

One must be awestruck with the talent the neo cons have for nation destruction. What they created in Ukraine is a virtual post nuclear war. Neither the EU or Russia want this basket-case-failed-Nazi state. Like the Israeli invasion of Lebanon, it has fortified its enemy whom it intended to weaken. Now, Putin has a Hezbollah type ally in the Donetsk and Lugansk region, and it has Russian Crimean back to the Motherland.

jayc , Apr 10 2021 18:02 utc | 34

Rick Rozoff, writing for the Antiwar website, has taken note of other activity - not least next week's scheduled appearances at NATO hdq of both the US Sec State and US Defence sec with Ukraine discussions on agenda.
https://www.bloomberg.com/news/articles/2021-04-09/blinken-is-set-to-return-to-brussels-for-more-nato-meetings

Rozoff also notes that the CC of Ukraine armed forces continues with bluster about Ukraine's "territorial integrity" and invoking NATo Article 5.
https://news.antiwar.com/2021/04/09/ukraines-top-commander-invokes-natos-article-5-military-assistance-clause-as-west-continues-to-oversee-ukraines-war-in-the-donbass/

Sam F , Apr 10 2021 18:10 utc | 35

Nuland et al may be trying to show themselves loyal agents of Israel, testing whether Russia can be distracted from Syria, or pretending to raise the cost of NS2. Russia and China could make balanced moves in the Caribbean to tame the bullies, but may see no advantage in counterthreats.

Such an utter humiliation of the US to pursue such foolish and racist FP, admitting its complete control by money power in all federal branches and mass media.

dadooronron , Apr 10 2021 18:21 utc | 36

As others here suggest, it's possible to read this as a success for the neocons. Ukrainian gov't troop movements set off Russian troop movements, which are then portrayed as aggressive, justifying whatever. It is very hard to believe that they seriously contemplated an attack on Russia's doorstep, or in its antechamber. But the question remains as to how far Zelensky's can has been kicked down the road.

Baron , Apr 11 2021 9:00 utc | 108

It's a trap, the calls for peace, new negotiations and stuff, it's to create the impression that the West and Ukraine are the good boys.

The next stage will be a heap of accusations that Russia is breaking the peace, makes threatening moves, is poised to take over rUkraine.

This will be followed by an attack on the two Republics, dead bodies everywhere, un indisputable reason to convince the Germans with to scrap Nord-2.

Martin , Apr 11 2021 11:07 utc | 114

After foreign pressure, several western companies abandoned building the Nord Stream 2 pipeline. For example, the pipes are now laid by the Russian ship Fortuna instead of a Swiss one ( https://www.unz.com/pescobar/ukraine-redux-war-russophobia-and-pipelineistan/).

I am wondering if this might be an advantage for Russia and other countries in the mid to long term, that their companies are forced to master all the complex technologies involved as fast as possible? Maybe they will even become competitors to their western equivalents?

Usually, when governments decide about big industry projects, they demand that their national companies get some orders to profit from the project. Now, it seems reversed. The German government is still not openly against Nord Stream 2, but it has to be finished without some of the companies originally involved.

[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 11, 2021] Reject Nord Stream 2 Once and for All

Apr 11, 2021 | www.wsj.com

William Wahl SUBSCRIBER 2 days ago

Just put Hunter on it. He'll fix this right up.
RODNEY SMITH SUBSCRIBER 2 days ago
Where does Burisma stand on the issue? Will be Biden's brief.

[Apr 11, 2021] Reject Nord Stream 2 Once and for All - WSJ by Oleksii Reznikov April 8, 2021 6:37 pm ET
A pipe bearing the Nord Stream 2 logo at a plant in Chelyabinsk, Russia, Feb. 26, 2020. PHOTO: MAXIM SHEMETOV/REUTERS
Listen to this article 5 minutes 00:00 / 05:07 1x Ukrainian President Leonid Kuchma found himself in the company of a political titan, France's President François Mitterrand, on a gloomy day in December 1994. "Young man, you will be tricked, one way or another," Mitterrand told Mr. Kuchma, who was then the leader of a newly independent nation. Unsettled as he felt, Mr. Kuchma accepted the security assurances of the U.S., U.K. and Russia and signed the Budapest Memorandum. In exchange, Ukraine gave up its nuclear arsenal, then the third-largest in the world. Little did we know that two decades later one of the signatories -- Russia -- would attack Ukraine and occupy its sovereign territory. Now, after many years of wooing and cajoling, Russia's attitude toward Ukraine is again growing belligerent. The Minsk process to resolve the conflict is stalled, and foreign troops have yet to leave the Donbas, the Ukrainian region where fighting rages on. Despite the supposed cessation of hostilities agreed to in September 2014, when the Minsk protocol was signed, little progress has been made. Ukrainians therefore are bewildered by the continuing construction of the Baltic Sea pipeline, known as Nord Stream 2. Unlike the attack on Crimea, which came as a surprise, the pipeline's completion will have entirely predictable consequences for our national security. Ukraine will be irreparably weakened as soon as Russia has a new direct gas link to Germany. Ukrainian President Leonid Kuchma found himself in the company of a political titan, France's President François Mitterrand, on a gloomy day in December 1994. "Young man, you will be tricked, one way or another," Mitterrand told Mr. Kuchma, who was then the leader of a newly independent nation. Unsettled as he felt, Mr. Kuchma accepted the security assurances of the U.S., U.K. and Russia and signed the Budapest Memorandum. In exchange, Ukraine gave up its nuclear arsenal, then the third-largest in the world. Little did we know that two decades later one of the signatories -- Russia -- would attack Ukraine and occupy its sovereign territory. Now, after many years of wooing and cajoling, Russia's attitude toward Ukraine is again growing belligerent. The Minsk process to resolve the conflict is stalled, and foreign troops have yet to leave the Donbas, the Ukrainian region where fighting rages on. Despite the supposed cessation of hostilities agreed to in September 2014, when the Minsk protocol was signed, little progress has been made. Ukrainians therefore are bewildered by the continuing construction of the Baltic Sea pipeline, known as Nord Stream 2. Unlike the attack on Crimea, which came as a surprise, the pipeline's completion will have entirely predictable consequences for our national security. Ukraine will be irreparably weakened as soon as Russia has a new direct gas link to Germany. Now, after many years of wooing and cajoling, Russia's attitude toward Ukraine is again growing belligerent. The Minsk process to resolve the conflict is stalled, and foreign troops have yet to leave the Donbas, the Ukrainian region where fighting rages on. Despite the supposed cessation of hostilities agreed to in September 2014, when the Minsk protocol was signed, little progress has been made. Ukrainians therefore are bewildered by the continuing construction of the Baltic Sea pipeline, known as Nord Stream 2. Unlike the attack on Crimea, which came as a surprise, the pipeline's completion will have entirely predictable consequences for our national security. Ukraine will be irreparably weakened as soon as Russia has a new direct gas link to Germany. Now, after many years of wooing and cajoling, Russia's attitude toward Ukraine is again growing belligerent. The Minsk process to resolve the conflict is stalled, and foreign troops have yet to leave the Donbas, the Ukrainian region where fighting rages on. Despite the supposed cessation of hostilities agreed to in September 2014, when the Minsk protocol was signed, little progress has been made. Ukrainians therefore are bewildered by the continuing construction of the Baltic Sea pipeline, known as Nord Stream 2. Unlike the attack on Crimea, which came as a surprise, the pipeline's completion will have entirely predictable consequences for our national security. Ukraine will be irreparably weakened as soon as Russia has a new direct gas link to Germany. Ukrainians therefore are bewildered by the continuing construction of the Baltic Sea pipeline, known as Nord Stream 2. Unlike the attack on Crimea, which came as a surprise, the pipeline's completion will have entirely predictable consequences for our national security. Ukraine will be irreparably weakened as soon as Russia has a new direct gas link to Germany. Ukrainians therefore are bewildered by the continuing construction of the Baltic Sea pipeline, known as Nord Stream 2. Unlike the attack on Crimea, which came as a surprise, the pipeline's completion will have entirely predictable consequences for our national security. Ukraine will be irreparably weakened as soon as Russia has a new direct gas link to Germany. With the Nord Stream 1 and Turk Stream pipelines already operational, Nord Stream 2 will complete the encirclement of Ukraine, Poland and the Baltic states, decoupling our energy security from Western Europe. Russia has tried to bully Ukraine by threatening gas cutoffs, most recently in June 2014. But Moscow has always had to be careful -- a large percentage of Russia's gas reaches Europe through Ukraine. If Nord Stream 2 is built, this consideration will be null and void. With the Nord Stream 1 and Turk Stream pipelines already operational, Nord Stream 2 will complete the encirclement of Ukraine, Poland and the Baltic states, decoupling our energy security from Western Europe. Russia has tried to bully Ukraine by threatening gas cutoffs, most recently in June 2014. But Moscow has always had to be careful -- a large percentage of Russia's gas reaches Europe through Ukraine. If Nord Stream 2 is built, this consideration will be null and void. me title=
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Opinion: Morning Editorial Report
Apr 11, 2021 | www.wsj.com

All the day's Opinion headlines. PREVIEW SUBSCRIBE


The Kremlin has demonstrated time and again its willingness to use energy trade to advance its geopolitical ambitions. It would be unwise, if not reckless, for Europe to increase its dependence on Gazprom , Russia's state-owned energy company, and give Moscow direct control over which countries are supplied with gas and which can be cut off.

The current contract between Gazprom and Ukraine's gas-transit operator guarantees the flow of westward exports via Ukraine until the end of 2024. But make no mistake: The day Nord Stream 2 is completed, that promise will be worthless. Even if some transit through Ukraine persists, Ukraine will be subject to the Kremlin's whims.

The fighting in the Donbas, where Russia operates through its proxies, mercenaries and even regular troops, has continued unabated for more than seven years. The gas pipeline has been spared from shelling -- Russia needs uninterrupted gas flows through Ukraine as much as we do. This mutual dependence is a deterrent that Nord Stream 2 will remove.

Ukraine is grateful to the U.S. Congress, which recognized the true nature of this pipeline project, and the European Parliament, which voted 10-to-1 on Jan. 21 to demand a halt to construction with a resolution on the arrest of Russian dissident Alexei Navalny in Moscow.

Germany and Europe already have access to a massive gas-transit network spanning the Black and Baltic seas, Belarus and Ukraine. The existing capacity is more than 50% higher than current consumption of Russian gas in the European Union. Even if the demand increases as Germany is working to phase out nuclear and coal power generation, there is no commercial need for another pipeline.

While Germany has little to gain, Ukraine stands to lose billions of dollars in transit revenue if the second Baltic Sea gas link is built -- a fact that Nord Stream 2 apologists often present as the only basis for Ukrainian opposition. The economic effect will be significant, but the claim is deliberately misleading. Ukrainian soldiers will be putting their lives on the line if Russia decides to escalate the conflict in the Donbas after it no longer needs to consider the effect on gas exports.

Ukraine understands the need to strengthen the trans-Atlantic alliance and the desire to find a solution that works for both Washington and Berlin. It is, however, incumbent on the Kremlin first to demonstrate respect for international law. The ball is in Moscow's court. It can and should end hostilities in the Donbas region, withdraw its troops from the Crimean Peninsula and restore Ukrainian sovereignty.

me title=

President Biden was right to call the pipeline "a bad deal for Europe." As the project inches closer to completion, Ukrainians can't help but recall Mitterrand's words from nearly 30 years ago. Ukraine was tricked, just as the French president predicted. Let us not repeat history but learn from it. We must come together and reject Nord Stream 2 once and for all.

Mr. Reznikov is Ukraine's deputy prime minister for reintegration of the temporarily occupied territories. V


V Lee SUBSCRIBER 1 day ago

The Ukrainian kleptocracy will see their cut shrink or disappear when gas will start flowing via Nord Stream 2. Not "a bad deal for Europe" just for Ukraine.
A Koster SUBSCRIBER 17 hours ago
Did i mention Turkey's role in Syria ?

It's interesting that everyone conveniently fails "to mention the role that gas line geopolitics played in the "fallout" between Erdogan and Assad; as soon as Assad vetoed the Qatar-Turkey pipeline that would have brought massive wealth to his family's energy transshipment business (BMZ Ltd), Assad instead signing on to the Iran-Iraq-Syria "Friendship Pipeline", the friendship was ended and the war on Assad commenced"

A Koster SUBSCRIBER 1 day ago
This article is about one thing.. absolutely nothing to do with a risk to Ukraine's national security

'Ukraine stands to lose billions of dollars in transit revenue if the second Baltic Sea gas link is built"

And Turkey is in there like a dirty shirt.. see "Russia Warns of Full-Scale War in Eastern Ukraine, Blames Kyiv".. like it was with Azerbaijan as they slaughtered thousands of Christians in Armenia.. and all for the first find in the Caspian Sea by Azerbaijan since Russia's breakup.. HINT: they wanted.. not needed.. a direct route west for a pipeline from Azerbaijan to Turkey.. which they got in a Russia brokered peace deal

So i guess congratulations are in order to Biden's NATO as they loyally keep working on enlarging the EU and keeping the oil baron families of Erdogan and Alyiev filthy rich

James Schumaker SUBSCRIBER 1 hour ago
I suggest you look up the Budapest Memorandum. The U.S. gave no guarantees. Like Russia, it gave assurances. I also suggest you stop falling for pro-Trump talking points and look at what Trump actually did with regard to Ukraine. He tried to extort its President into digging up dirt on his main political opponent by threatening to withdraw military aid. That's what he was impeached for -- the first time.
RODNEY SMITH SUBSCRIBER 2 days ago
Where does Burisma stand on the issue? Will be Biden's brief.
Jens Praestgaard SUBSCRIBER 2 days ago
Otto von Bismarck's maxim for the newly formed German state was to always keep cordial relations with Russia. NordStream 2 is a step towards normalization of the German/Russian relationship after 120 years of failure.
Jim Mcdonnell SUBSCRIBER 2 days ago
Bismarck's policy made sense in 19th Century Europe, and had Kaiser Wilhelm II not scuttled it we would be living in a very different world. But he did scuttle it, and the world has changed - largely in ways Bismarck sought to prevent - a great deal, as has Europe.
Heiko Muhr SUBSCRIBER 2 days ago
Bismarck's thoughts about Germany's geopolitical situation are still relevant today. He argued that the map that matters for German politicians is the map of Europe [and since 1945 that frame has been enlarged, has included the US and Canada]. That Germany needed to pay particular attention to relationships with its neighbors. That the country was to small to dominate Europe, and should rely on a system of stable alliances to ensure stability, Ukraine and Russia are neighbors, Bismarck would have seen relationships with both countries as relevant. Communication channels need to be kept open, those relationships need to be managed. One neighbor, Russia, is an authoritarian state and since 2014 more openly aggressive. It needs to be contained and challenged. The US has not been a reliable partner in doing that in the last 4 years under Trump. That might change under a Biden, but will he be able to make and lock in the appropriate policy decisions? We'll see.
John Bute SUBSCRIBER 2 days ago
Germany has made a terrible strategic mistake by abandoning nuclear power to become more and more dependent on Russian natural gas. France gets 70% of its electricity from nuclear power and about 10% from fossil fuel. Only moderate increases in hydro power and renewable energy will make it fossil fuel independent.
Heiko Muhr SUBSCRIBER 2 days ago
German voters make their own decisions about climate change and definitely don't look for US advice. Power plants burning coal and producing nuclear energy are coming off the grid. Natural gas will continue to be important in that mix for quite some time. The Green Party's power is growing. It successfully expanded its electoral base in 2 state elections this spring with broad support from middle class voters. After all, environmentalism is a full belly movement. The Greens will challenge the German Conservatives, Merkel's Christian Democrats, in September at the ballot box in national elections and other state elections. And Merkel will not be on the ballot. Her CDU, which has been consistently the most pro-American party in Europe, finds that pro-American stance is now a big liability. 4 years of the Trump regime. which treated Germans as clients, changed the political landscape. Fewer Germans see the US is as a reliable partner, and that is now true even in Merkel's party.
SCOTT CORE SUBSCRIBER 1 day ago
Germany may view the US as an unreliable partner but they still rely on the US for economic and military protection. Perhaps Germans have replaced the US with NATO in their minds and ignored the fact that the US is the majority of NATO. Where Russia to threaten Germany where do you think Germany would turn? France? UK? China?
So Germans are free to trash Trump for asking them to provide a modicum of their own protection but in the end they will look to the US should they be threatened either economically by a cutoff of gas from Russia or a military threat from Russia.
Heiko Muhr SUBSCRIBER 20 hours ago
Look at Gallup polling data or the Pew Research Center's data in its Global attitudes program. In many countries Trump ranked even below Xi or Putin. He was perceived as the bigger threat--unstable, angry, without a strategic vision, just a ventilator of his emotions, a middle schooler craving attention, a clown. Yet he made these huge claims, all lies, that the US was respected and listened to. The polling data tells us otherwise. Trump's lying and the hubris that fell from these lies, that is unprecedented.
And now; THE LOSER. The Mouse-of-Mar-a-Lago. But, the Republican Party still follows him.. The man will be remembered as the worst president the US ever had, ranking even below the corrupt Harding and the imbecile Buchanan. The lowest of the low. And as THE LIAR [-->Trump should register that as a trademark]. History books won't be kind to him and the suckers that still gobble up his lies even now after the putsch or whatever you want to call the Capitol "riot." Barnum was right!
michael ring SUBSCRIBER 2 days ago
England and France have their own nuclear deterrents. Europeans just want cheap steady supply of energy. Russia is in the Middle East because Hillary and Obama destroyed Syria and Libya. Bush put us in Iraq and Afghanistan for 20 years! Trump started the withdrawal. Let's hope sleepy preacher Biden continues it.
Heiko Muhr SUBSCRIBER 2 days ago
A little reality check: At the very moment when Washington supposedly champions energy independence and warns European allies against becoming too dependent on Moscow, American refineries are buying more Russian oil than ever before.
Check out the article by Javier Blas on the Bloomberg News site, published Mar. 24, 2021: "U.S. Thirst for Russian Oil Hits Record High Despite Tough Talk."
David Thomson SUBSCRIBER 2 days ago
Puerto Rico buys Russian LNG because there are no American-built LNG tankers. Thanks to the Jones Act, we can't ship LNG from Texas to PR.
Eugene Boutz SUBSCRIBER 2 days ago (Edited)
Ukraine is composed of three *identities* which have nothing in common and want nothing in common.

There are the Russian speakers in the East and along the Black Sea, the people surrounding Lviv in the West which want to be European and the denizens of Kiev who tend to favor the values and views of the Chancellor of Germany in the '30s.

Ukraine already has a tripartite schism and is most likely headed for a tripartite split once the Russian Federation, having had its absolute fill of Kiev's games, obtains Beijing approbation to bring the matter to a conclusion with weaponry of which Kiev can only dream.

The United States is not going to fight a nuclear war with Russia over the interests of the Kiev faction nor does Germany want it to.

Nor do I.

Nor do you.

Heiko Muhr SUBSCRIBER 2 days ago (Edited)
The Germans are not going to cave. They will finish the pipeline. It is now 96 % built. The West Europeans started importing Russian gas more than 40 years ago. Ronald Reagan failed when he tried to stick it to the Germans with sanctions. And so will Cancun Ted. The old pipeline system that runs through Ukraine has been reverse-engineered with EU funds about a decade ago. Ukraine has already been reliably supplied from the West when the Russians cut supplies. The talking points in this piece are based on Cancun Ted's hallucinations, and not the facts on the ground. For a factual analysis see Eugene Rumer's long piece published today in Defense News "Punishing Germany for Nord Stream 2 does nothing to stop Putin." Rumer is the director of the Russia and Eurasia Program at the Carnegie Endowment for International Peace. He previously worked as a national intelligence officer on Russia and Eurasia for the U.S. National Intelligence Council. He actually knows what he is talking about.
William Wahl SUBSCRIBER 2 days ago
Just put Hunter on it. He'll fix this right up.
michael ring SUBSCRIBER 2 days ago
Biden has been on the wrong side of every foreign policy decision in his entire career in Washington. Mitterrrand was a bureaucrat who started his rise in vischy France. Ukraine is in a tough spot. So is Russia. They have been fighting for 7 years. Body counts go up,citizens do not like it. Russia will not sacrifice one pipeline for another. Ukraine and Russia can agree to no NATO troops on their border and tensions will go down.
bruce miller SUBSCRIBER 2 days ago
And who talked Ukraine into giving up their nukes? Well we did. Or rather, Slick and his pals did. Bet the Ukrainians wish they'd kept a bunch. Just for old time's sake.
michael ring SUBSCRIBER 2 days ago
What bargaining power would they be?No person or government in their right mind would use them. This is about land grabbing.

[Apr 09, 2021] Is Ukraine just a tool in the US hands to shut down Nordstream?

Apr 09, 2021 | www.zerohedge.com

vic and blood

GreatCaesar'sGhost called it: Ukraine is a tool to shut down Nordstream. Ukraine will push until Russia does something, then Germany shuts down Nordstream, shooting themselves in the foot.

Puppyteethofdeath 1 hour ago

There's always the chance that election fraud will bring the Green Party to rise in Germany also.

They'll gladly get rid of Nordstream 2 and destroy the German economy.

[Apr 09, 2021] Behind the fog of war, though, a clear scenario emerges: the deep state/NATO combo using Kiev to start a war as a Hail Mary pass to ultimately bury NS2, and thus German-Russian relations.

Apr 09, 2021 | www.unz.com

Originally from: Ukraine redux, by Pepe Escobar - The Unz Review

Ukraine and Russia may be on the brink of war – with dire consequences for the whole of Eurasia. Let's cut to the chase, and plunge head-on into the fog of war.

On March 24, Ukrainian President Zelensky, for all practical purposes, signed a declaration of war against Russia, via decree No. 117/2021.

Ukrainian President Volodymyr Zelensky speaks during a joint press conference with European Council President in Kiev on March 3, 2021. Photo: AFP / Sergey Dolzhenko

The decree establishes that retaking Crimea from Russia is now Kiev's official policy. That's exactly what prompted an array of Ukrainian battle tanks to be shipped east on flatbed rail cars, following the saturation of the Ukrainian army by the US with military equipment including unmanned aerial vehicles, electronic warfare systems, anti-tank systems and man-portable air defense systems (MANPADS).

More crucially, the Zelensky decree is the proof any subsequent war will have been prompted by Kiev, debunking the proverbial claims of "Russian aggression." Crimea, since the referendum of March 2014, is part of the Russian Federation.

It was this (italics mine) de facto declaration of war, which Moscow took very seriously, that prompted the deployment of extra Russian forces to Crimea and closer to the Russian border with Donbass. Significantly, these include the crack 76 th Guards Air Assault Brigade, known as the Pskov paratroopers and, according to an intel report quoted to me, capable of taking Ukraine in only six hours.

It certainly does not help that in early April US Secretary of Defense Lloyd Austin, fresh from his former position as a board member of missile manufacturer Raytheon, called Zelensky to promise "unwavering US support for Ukraine's sovereignty." That ties in with Moscow's interpretation that Zelensky would never have signed his decree without a green light from Washington.

On March 8, 2021, US Defense Secretary Lloyd Austin speaks during observance of International Women's Day in the East Room of the White House in Washington, DC. Photo: AFP / Mandel Ngan

Controlling the narrative

Sevastopol, already when I visited in December 2018 , is one of the most heavily defended places on the planet, impervious even to a NATO attack. In his decree, Zelensky specifically identifies Sevastopol as a prime target.

Once again, we're back to 2014 post-Maidan unfinished business.

To contain Russia, the US deep state/NATO combo needs to control the Black Sea – which, for all practical purposes, is now a Russian lake. And to control the Black Sea, they need to "neutralize" Crimea.

If any extra proof was necessary, it was provided by Zelensky himself on Tuesday this week in a phone call with NATO secretary-general and docile puppet Jens Stoltenberg.

NATO Secretary-General Jens Stoltenberg gives a press conference at the end of a NATO Foreign Ministers' meeting at the Alliance's headquarters in Brussels on March 24, 2021. Photo: AFP / Olivier Hoslet

Zelensky uttered the key phrase: "NATO is the only way to end the war in Donbass" – which means, in practice, NATO expanding its "presence" in the Black Sea. "Such a permanent presence should be a powerful deterrent to Russia, which continues the large-scale militarization of the region and hinders merchant shipping."

All of these crucial developments are and will continue to be invisible to global public opinion when it comes to the predominant, hegemon-controlled narrative.

The deep state/NATO combo is imprinting 24/7 that whatever happens next is due to "Russian aggression." Even if the Ukrainian Armed Forces (UAF) launch a blitzkrieg against the Lugansk and Donetsk People's Republics. (To do so against Sevastopol in Crimea would be certified mass suicide).

In the United States, Ron Paul has been one of the very few voices to state the obvious: "According to the media branch of the US military-industrial-congressional-media complex, Russian troop movements are not a response to clear threats from a neighbor, but instead are just more 'Russian aggression.'"

What's implied is that Washington/Brussels don't have a clear tactical, much less strategic game plan: only total narrative control.

And that is fueled by rabid Russophobia – masterfully deconstructed by the indispensable Andrei Martyanov, one of the world's top military analysts.

A possibly hopeful sign is that on March 31, the chief of the General Staff of the Russian Armed Forces, General Valery Gerasimov, and the chairman of the Joint Chiefs of Staff, General Mark Milley, talked on the phone about the proverbial "issues of mutual interest."

Days later, a Franco-German statement came out, calling on "all parties" to de-escalate. Merkel and Macron seem to have gotten the message in their videoconference with Putin – who must have subtly alluded to the effect generated by Kalibrs, Kinzhals and assorted hypersonic weapons if the going gets tough and the Europeans sanction a Kiev blitzkrieg.

French President Emmanuel Macron speaks as German Chancellor Angela Merkel looks on after a German-French Security Council video conference at the Elysee Palace in Paris, on February 5, 2021. Photo: AFP / Thibault Camus

The problem is Merkel and Macron don't control NATO. Yet Merkel and Macron at least are fully aware that if the US/NATO combo attacks Russian forces or Russian passport holders who live in Donbass, the devastating response will target the command centers that coordinated the attacks.

What does the hegemon want?

As part of his current Energizer bunny act, Zelensky made an extra eyebrow-raising move. This past Monday, he visited Qatar with a lofty delegation and clinched a raft of deals , not circumscribed to LNG but also including direct Kiev-Doha flights; Doha leasing or buying a Black Sea port; and strong "defense/military ties" – which could be a lovely euphemism for a possible transfer of jihadis from Libya and Syria to fight Russian infidels in Donbass.

Right on cue, Zelensly meets Turkey's Erdogan next Monday. Erdogan's intel services run the jihadi proxies in Idlib, and dodgy Qatari funds are still part of the picture. Arguably, the Turks are already transferring those "moderate rebels" to Ukraine. Russian intel is meticulously monitoring all this activity.

A series of informed discussions – see, for instance, here and here – is converging on what may be the top three targets for the hegemon amid all this mess, short of war: to provoke an irreparable fissure between Russia and the EU, under NATO auspices; to crash the Nord Steam 2 pipeline; and to boost profits in the weapons business for the military-industral complex.

So the key question then is whether Moscow would be able to apply a Sun Tzu move short of being lured into a hot war in the Donbass.

On the ground, the outlook is grim. Denis Pushilin, one of the top leaders of the Lugansk and Donetsk people's republics, has stated that the chances of avoiding war are "extremely small." Serbian sniper Dejan Beric – whom I met in Donetsk in 2015 and who is a certified expert on the ground – expects a Kiev attack in early May .

The extremely controversial Igor Strelkov, who may be termed an exponent of "orthodox socialism," a sharp critic of the Kremlin's policies who is one of the very few warlords who survived after 2014, has unequivocally stated that the only chance for peace is for the Russian army to control Ukrainian territory at least up to the Dnieper river. He stresses that a war in April is "very likely"; for Russia war "now" is better than war later; and there's a 99% possibility that Washington will not fight for Ukraine.

On this last item at least Strelkov has a point; Washington and NATO want a war fought to the last Ukrainian.

Rostislav Ischenko, the top Russian analyst of Ukraine whom I had the pleasure of meeting in Moscow in late 2018, persuasively argues that, "the overall diplomatic, military, political, financial and economic situation powerfully requires the Kiev authorities to intensify combat operations in Donbass.

"By the way," Ischenko added, "the Americans do not give a damn whether Ukraine will hold out for any time or whether it will be blown to pieces in an instant. They believe they stand to gain from either outcome."

Gotta defend Europe

Let's assume the worst in Donbass. Kiev launches its blitzkrieg. Russian intel documents everything. Moscow instantly announces it is using the full authority conferred by the UNSC to enforce the Minsk 2 ceasefire.

In what would be a matter of 8 hours or a maximum 48 hours, Russian forces smash the whole blitzkrieg apparatus to smithereens and send the Ukrainians back to their sandbox, which is approximately 75km north of the established contact zone.

In the Black Sea, incidentally, there's no contact zone. This means Russia may send out all its advanced subs plus the surface fleet anywhere around the "Russian lake": They are already deployed anyway.

Russian President Vladimir Putin looks on as Novator Design Bureau director-general Farid Abdrakhmanov and Deputy Defense Minister Alexei Krivoruchko shake hands during a signing ceremony for government contracts in Alabino, Moscow region, Russia. on June 27, 2019. Photo: AFP / Alexei Druzhinin / Sputnik

Once again Martyanov lays down the law when he predicts, referring to a group of Russian missiles developed by the Novator Design Bureau: "Crushing Ukies' command and control system is a matter of few hours, be that near border or in the operational and strategic Uki depth. Basically speaking, the whole of the Ukrainian 'navy' is worth less than the salvo of 3M54 or 3M14 which will be required to sink it. I think couple of Tarantuls will be enough to finish it off in or near Odessa and then give Kiev, especially its government district, a taste of modern stand-off weapons."

The absolutely key issue, which cannot be emphasized enough, is that Russia will not (italics mine) "invade" Ukraine. It doesn't need to, and it doesn't want to. What Moscow will do for sure is to support the Novorossiya people's republics with equipment, intel, electronic warfare, control of airspace and special forces. Even a no-fly zone will not be necessary; the "message" will be clear that were a NATO fighter jet to show up near the frontline, it would be summarily shot down.

And that brings us to the open "secret" whispered only in informal dinners in Brussels, and chancelleries across Eurasia: NATO puppets do not have the balls to get into an open conflict with Russia.

One thing is to have yapping dogs like Poland, Romania, the Baltic gang and Ukraine amplified by corporate media on their "Russian aggression" script. Factually, NATO had its collective behind unceremoniously kicked in Afghanistan. It shivered when it had to fight the Serbs in the late 1990s. And in the 2010s, it did not dare fight the Damascus and Axis of Resistance forces.

When all fails, myth prevails. Enter the US Army occupying parts of Europe to "defend" it against – who else? – those pesky Russians.

That's the rationale behind the annual US Army DEFENDER-Europe 21 , now on till the end of June, mobilizing 28,000 soldiers from the US and 25 NATO allies and "partners."

This month, men and heavy equipment pre-positioned in three US Army depots in Italy, Germany and the Netherlands will be transferred to multiple "training areas" in 12 countries. Oh, the joys of travel, no lockdown in an open air exercise since everyone has been fully vaccinated against Covid-19.

Pipelineistan uber alles

Nord Stream 2 is not a big deal for Moscow; it's a Pipelineistan inconvenience at best. After all the Russian economy did not make a single ruble out of the not yet existent pipeline during the 2010s – and still it did fine. If NS2 is canceled, there are plans on the table to redirect the bulk of Russian gas shipments towards Eurasia, especially China.

Connecting German infrastructure for Nord Stream 2 is in place. In this handout photo released February 4, 2020, by the press service of Eugal, a view shows the Eugal pipeline, in Germany. The Eugal pipeline, which will receive gas from Nord Stream 2 in the future, has reached full pumping capacity, and the second line of the pipeline has been introduced. Photo: AFP / Press-service of Eugal / Sputnik

In parallel, Berlin knows very well that canceling NS2 will be an extremely serious breach of contract – involving hundreds of billions of euros; it was Germany that requested the pipeline to be built in the first place.

Germany's energiewende ("energy transition" policy) has been a disaster. German industrialists know very well that natural gas is the only alternative to nuclear energy. They are not exactly fond of Berlin becoming a mere hostage, condemned to buy ridiculously expensive shale gas from the hegemon – even assuming the egemon will be able to deliver, as its fracking industry is in shambles. Merkel explaining to German public opinion why they must revert to using coal or buy shale from the US will be a sight to see.

As it stands, NATO provocations against NS2 proceed unabated – via warships and helicopters. NS2 needed a permit to work in Danish waters, and it was granted only a month ago. Even as Russian ships are not as fast in laying pipes as the previous ships from Swiss-based Allseas , which backed down, intimidated by US sanctions, the Russian Fortuna is making steady progress, as noted by analyst Petri Krohn: one kilometer a day on its best days, at least 800 meters a day. With 35 km left, that should not take more than 50 days.

Conversations with German analysts reveal a fascinating shadowplay on the energy front between Berlin and Moscow – not to mention Beijing. Compare it with Washington: EU diplomats complain there's absolutely no one to negotiate with regarding NS2. And even assuming there would be some sort of deal, Berlin is inclined to admit Putin's judgment is correct: the Americans are "not agreement-capable." One just needs to look at the record.

Behind the fog of war, though, a clear scenario emerges: the deep state/NATO combo using Kiev to start a war as a Hail Mary pass to ultimately bury NS2, and thus German-Russian relations.

At the same time, the situation is evolving towards a possible new alignment in the heart of the "West": US/UK pitted against Germany/France. Some Anglosphere exceptionals are certainly more Russophobic than others.

The toxic encounter between Russophobia and Pipelineistan will not be over even if NS2 is completed. There will be more sanctions. There will be an attempt to exclude Russia from SWIFT. The proxy war in Syria will intensify. The hegemon will go no holds barred to keep creating all sorts of geopolitical harassment against Russia.

What a nice wag-the-dog op to distract domestic public opinion from massive money printing masking a looming economic collapse. As the empire crumbles, the narrative is set in stone: it's all the fault of "Russian aggression."


Alfa158 , says: April 8, 2021 at 12:05 am GMT • 1.9 days ago

Well, I'm hoping the Ukrainians will finally remember Bernard Lewis's warning about the U.S. and realize they are being used like a Kleenex: "America is harmless as an enemy but treacherous as a friend."
Americans have had it and will never tolerate sending combat troops into a Russia/Ukraine conflict no matter how much rah-rah let's you and him fight we'll hold your coat for you, faux patriotism the lugenpresse throw at them. Those of us who volunteered for the US military in the past have learned our lesson.

Agent76 , says: April 8, 2021 at 8:09 pm GMT • 1.1 days ago

Aug 10, 2020 Nord Stream 2 final stretch & Russia-Cyprus try to mend fences

https://www.youtube.com/embed/s4S_wOvCQAU?feature=oembed

Apr 4, 2019 NATO EXIT: Prof. Michel Chossudovsky

NATO is a criminal entity, an instrument of the Pentagon. There is no "Alliance". There is military Occupation.

https://www.youtube.com/embed/649_HXyJPAg?feature=oembed

Petermx , says: April 8, 2021 at 12:46 am GMT • 1.9 days ago

"The problem is Merkel and Macron don't control NATO." I don't know how a decision is made whether NATO will go to war or not but if Germany and France have no say in whether their soldiers will be sent to war or not, that must by a very scary thought for them.

I found the following analysis interesting and I think it makes sense. It suggests France and Germany have a say in matters and that they oppose any offensive Ukraine has in mind. The commentator analyzes the diplomatic language and Germany and France appear to be fed up. Without coming out and saying so directly, they see things more as Russia does than Ukraine. It's very unfortunate things have developed this way for Ukraine. In addition, if Merkel wants to be perceived as a complete failure as chancellor in Germany, only then will she let NS2 be stopped from being completed. This analysis suggests there may be some strain between France and Germany versus the USA.

https://www.youtube.com/embed/30Lzq-K-cO4?feature=oembed

Zarathustra , says: April 8, 2021 at 4:59 am GMT • 1.7 days ago

I do have to disagree. If Ukraine start a war Russia must take back all eastern part of Ukraine that has prevalent Russian population. Odessa and Zaporozhie is particularly important. Russia must also tale all Kiev area back.

Carlton Meyer , says: Website April 8, 2021 at 5:04 am GMT • 1.7 days ago

Several things to note:

1. Senior Ukrainian officers were once Soviet officers. They, and most of their troops, don't want to fight Russians and know it's foolish. The Ukrainian army will crumble if they come in contact with regular Russian troops. It's not that they are cowards, but sane. It would be like Canadian troops ordered to attack across the American border.

2. The American empire is furious and concerned that its long-time puppet disobeyed orders. Germany wants Russian gas and the empire wants that pipeline stopped. Not only to hurt Russia, but to teach the Germans a lesson. If fighting occurs in the Ukraine, would the Germans dare to buy natgas from evil Russians?

3. Most importantly, Israel controls the American government. A major goal is the destruction of Syria to allow the expansion of Greater Israel, as explained in the video below. This nearly succeeded until the Russians intervened. Fighting in Ukraine would divert Russian military resources from Syria so that nation can be destroyed, or Russia may give up Syrian support as part of a grand peace deal.

https://www.youtube.com/embed/P512QBpjoq4?feature=oembed

The Biden administration is fully supportive of finishing off Syria and Lebanon, then moving on to destroy Iran. The new talks about Iran's nuclear program will go nowhere. It's just a show so Biden can say he tried.

https://www.youtube.com/embed/pEigig2qWkc?feature=oembed

Silicon Silence , says: April 8, 2021 at 5:11 am GMT • 1.7 days ago
@anon

It makes all the difference when the revolving-door regulator-capture reframing is not "USA/Nato vs Russia" -- but rather the more accurate "Raytheon (et al) vs Russia."

The modern truth is: Russia and China have governments in control of policy and industry. The USA (and therefore also its yapping poodle collection) have Industry setting policy and running government for their 1%-er shareholder benefits.

Majority of One , says: April 8, 2021 at 6:06 am GMT • 1.7 days ago

Part of me wants to think that the Ukies will want to fold at the last moment. Yet all this apparent evidence points to their going for it and promptly getting their collective noses smashed in. Those who speculate in meta-political geo-strategic analysis cannot make sense of the moves by the largely incompetent shot-callers and their even more incompetent minions who cut the orders to their chessmen.

Heavy pressure by the equally incompetent regime in the Di$trict of Corruption, where carrot and stick are equally in play, is as Escobar points out, the force behind this nearly automatic death-sentence for the Kiev regime and the poor slobs who make up the draftee elements in the Ukrainian military.

Again, geopolitically, one wonders at the deeper string-pullers within the Pentagram, the CIA and the mass media of mind-control and message-massaging. Is this essentially a move to keep the American people–most particularly the edjumacated managerial and technical classes who make up the core of the alleged "middle-class"–"on message and in line"?

Yes, the WarDefense industry (aka Eisenhower's "Military-Industrial Complex") insist on ongoing wars and threats of war to maintain their profit margins for the prime owners of that false economic basis,prime actors such as the Rottenchild Crime Clan and the rest of the parasites clustered in City of London and Wall $treet.

How will the canny and ever wary Russians proceed? Will they operate in the manner that Escobar proposes, by not directly employing the considerable ground-forces which now stand on alert just to the eastwards of their mutually agreed upon Swiss-cheese border with the Novorussians in Donetsk and Luhansk? Or will Russian strategy be somewhat more comprehensive by liberating the rest of the primarily Russian-speaking parts of eastern and southern Ukraine which had largely backed the overthrown legitimate government of that bedizened composite nation and are still smarting under the heels of the Galician fascists and the smaller grouping of Russophobic Ukrainian nationalists who still harbor nightmares about the Bolshevik/Stalinoid Holodomar? There are, after all human considerations which may influence Kremlin policy.

Should Russia decide to make a move, it is my projection that they would never be likely to even attempt to occupy central Ukraine and would set a stop-line well to the east of Kiev. Something that bemusingly intrigues me is the Belarus factor. It would appear that the Minsk regime, smarting from the attempted coup by the Poles, Baltic states and Ukraine backing of "pro-Westerners, may be mobilizing to get into the action and perhaps readjust their boundaries somewhat southwards. This could indicate a countering move by the Uniates in Galicia to make common cause with their Roman Catholic brethren in the afore-mentioned Poland along with Lithuania and remove their lands of control from a shattered Ukraine and form a confederation with their neighbors to the west.

There is little doubt in my mind that Russia has numerous human assets in central and southwestern Ukraine, who along with elements of a disintegrating Ukie military, would unite to overthrow the rotten regime in Kiev and establish a markedly neutral smaller but more cohesive Ukraine–a natural though smaller nation which could serve as an essential buffer between a strengthening Russia and a collection of NATO nations which would then comprise a hodgepodge of hawks and doves, a discombobulated collection of politico-economic entities attempting to swim their ways to calmer shores or to maintain some semblance of "Great Reset" programming in the face of popular resistance to lockdowns and mandated AstraGenica jabbings.

Worst possible scenario is that someone in the Pentagon-dominated NATO command complex loses their cool and initiates a conflict that could result in planet-wide chaos and destruction. One would hope that cooler heads will take a few hits to their expansionist fantasies and decide to make the best of a failed bit of adventurism and bide their time -- if they feel they have any time remaining before globalist economies hit the skids, leading to a potential collapse to the myth of progress.

Vojkan , says: April 8, 2021 at 6:16 am GMT • 1.7 days ago

Everyone gets American logic. It's the Ukrainian logic that is truly baffling. Just how stupid do the Ukrainians have to be to attack when anyone with a brain knows what will be the outcome?

Silicon Silence , says: April 8, 2021 at 5:11 am GMT • 1.7 days ago
@anon

It makes all the difference when the revolving-door regulator-capture reframing is not "USA/Nato vs Russia" -- but rather the more accurate "Raytheon (et al) vs Russia."

The modern truth is: Russia and China have governments in control of policy and industry. The USA (and therefore also its yapping poodle collection) have Industry setting policy and running government for their 1%-er shareholder benefits.

GMC , says: April 8, 2021 at 6:37 am GMT • 1.7 days ago

You can't do any Normal business with a Crime Syndicate like the USA/ EU and or Israel. Turkey, Saudi Arabia and others. Russia is so close to being self sufficient , they could turn their back on the West and it's cut throat allies , and just look to the East until the West implodes. They will have to destroy all armies within close proximity to their borders, including the Ukrainian/Mercenary one. Moscow must still have Jew Oligarchy baggage, that is making money on Wall Street and those ties need to break apart or come to a Pro Russian agreement or else. Rename Kyiv to Berlin 1944, and Lviv to Dresden and take it from there – and don't look back anymore. And PS : on way to Lviv, Agent Orange every F..n Monsanto/Bayer, Dupont and Cargil farm – like they did to Vietnam.

Levtraro , says: April 8, 2021 at 6:50 am GMT • 1.7 days ago

Behind the fog of war, though, a clear scenario emerges: the deep state/NATO combo using Kiev to start a war as a Hail Mary pass to ultimately bury NS2, and thus German-Russian relations.

Yes but also the Ukraine needs to save those gas transit fees that will go kaput if NS2 is completed and operational, so it is the Ukraine the one with the most immediate incentive to start a war. Though they need just a small war, a little war to force the hands of the Germans to cancel NS2. Problem is the Russians have promised to give the Ukrainians more than what they bargained for. To save those gas transit fees the Ukrainians may end losing the country to a puppet installed by the Kremlin.

Schuetze , says: April 8, 2021 at 7:19 am GMT • 1.6 days ago

Escobar, besides not naming the Jew, does not mention which side Israel is likely to support. We can be pretty certain that whichever side Israel supports is going to be the victor in this conflict. Turkey is also important because of the Bosphorus, and Turkey and Israel are working together to exploit the Leviathan gas field to the detriment of Cyprus and Syria, so Israel can jerk Turkey around like a pitbull on a chain.

The US has been moving drones into Ukraine and they now are right on the border with Crimea. The US Marines also have a large presence in Romania, also likely including all kinds of drones. The Israelis are among the planet's leaders in drone technology, and surely own even more patents. Israel provides much of its drone technology to Turkey, and the Azerbeijanis used Turkish and Israeli drones in their short war with Armenia. During this short war the Azerbeijanis shot up all kinds of Russian equipment with their drones including Pantsir's and ZSU-23's.

The US also has all kinds of stealth drones and missiles, likely that is one area where they lead the entire planet.

Miro23 , says: April 8, 2021 at 10:13 am GMT • 1.5 days ago

https://vk.com/wall-57424472_304332

If this assessment is correct (in Russian but comes out OK in Google translate), then the US / NATO have to get involved to compensate for the lack of a Ukrainian air force – and in fact the rest of their obsolete equipment.

Personally, I can't imagine US or NATO troops on the ground in the Ukraine – and I don't see any planning for it, so what's the idea?

One possibility seems to be 1) to start the fighting 2) then start the real game, which is a massive anti-Russian media barrage "heroic Ukrainian patriots", "Russian atrocities", "killer Putin" etc. sufficient to finish with Nord Stream 2, divide Russia from France/Germany, plus reanimate NATO and sanction Russia. Basically to force Europe back into US hegemony, and away from independent decision making.

They won't have any problem with the UK (their most slavish follower) but at some point the French and Germans are surely going to become tired of all this CIA/Neo-con BS.

The Alarmist , says: April 8, 2021 at 10:18 am GMT • 1.5 days ago

[German Industrialists] are not exactly fond of Berlin becoming a mere hostage, condemned to buy ridiculously expensive shale gas from the hegemon .

German Industrialists and financiers have been repeatedly shaken down by the hegemon for fines related to a number of "infractions." The scuttlebutt I've heard from a number of them is that it got old a long time ago; what point is it to participate in the US market when your profits are repeatedly clawed back as "fines," and those in the US with whom you compete are given a leg up not just in the US, but on the world stage. Left to most industrialists, Germany might have gone its own way years ago. Oddly enough, it is the Ossivergeltungswaffe who dithers over breaking ranks with the "ally" that openly spied on her.

And even assuming there would be some sort of deal, Berlin is inclined to admit Putin's judgment is correct: the Americans are "not agreement-capable." One just needs to look at the record.

The most recent example would be the Doha agreement on the US withdrawal of forces and personnel from Afghanistan. Apparently the Pentagon recently awarded a number of contracts for contractor services in that country for some time well past the "agreed" withdrawal date, strongly suggesting the agreement to leave was a ruse.

Garliv , says: April 8, 2021 at 10:34 am GMT • 1.5 days ago
@J. Alfred Powell

Unfortunately we live in a world where history is/was erased, facts don't matter or they can be twisted to fit anything no matter how ridiculous, the present is what I say it is. Thus US and its vassals are just interested in their today's narrative.
Ukrainian leadership is hopelessly incompetent and corrupt so will do anything Biden's gang tells them. It's simply a depressing scenario.

street worm , says: April 8, 2021 at 12:59 pm GMT • 1.4 days ago

Blinken poking the Ukies to attack is a Hail Mary to stop NS2. Maybe it will work, maybe not. But a few hundred or a few thousand dead Ukies is worth the Russian boogeyman psy-op for the empire.

Marckus , says: April 8, 2021 at 1:23 pm GMT • 1.4 days ago

""Ukraine and Russia may be on the brink of War blah blah""

Contrary to what Pepe asserts the rest of the world will not give a shit. Memories of Chechnya? The sooner Putin over runs the place the better. You can bet the Ukrainian ruling elite, for all their gumption, have their jets all fuelled and ready with flight plans for the US via Switzerland...

Reaper , says: April 8, 2021 at 1:56 pm GMT • 1.4 days ago

"NATO puppets do not have the balls to get into an open conflict with Russia."

Sadly not so sure.
Some has it`s own agenda, like POland, Lithuania. Not even NATO/ US are in full control over that, and needs no more than a misstep. Like activate some system which is potentionally dangerous for Russia.
Or in different NATO/ US bases elsewhere in continental Europe.

"to provoke an irreparable fissure between Russia and the EU, under NATO auspices"
"When all fails, myth prevails. Enter the US Army occupying parts of Europe to "defend" it against – who else? – those pesky Russians."

This sounds to be the real goal.
For long since the US is jealous to Europe as it became more and more equal in economic and political power, and prevail better even with this "global pandemic".
EU wants more independence, US wants it`s colony to more obidient and follow commands.

If not just occupy, but "let" Europe partly destroyed even better: the treat of dominance reduced, and again can be the "nice savior" who helps and "brings democracy".

So seems far too real in the Ukrainian conflict Ukraine is just a side character.

Anonymous [902] Disclaimer , says: April 8, 2021 at 2:54 pm GMT • 1.3 days ago
@Vojkan

Good point. They simply can't "win" anything by attacking.

The (((US))) will provide plenty of encouragement and support as long as they get mountains of Ukrainian corpses in return. Those corpses can then be photographed and the photos broadcast all over the world as "proof" that Putin is Hitler. Basically, Ukrainians are being funnelled into the meat grinder for a globohmo psyop opportunity. What a way to die...

Realist , says: April 8, 2021 at 2:59 pm GMT • 1.3 days ago
@Fred777

The crumbling US economy will provide more than enough meat for the neocon's grinder.

Perhaps they will turn their attention to problems at home. The question is are they smart enough to recognize where the problem lies.

MLK , says: April 8, 2021 at 3:01 pm GMT • 1.3 days ago
@Robert Bruce

Are you referring to the Ukraine fiasco? Would that it were so that it was just a distraction. Just apply some reverse engineering to how Germany and Russia have a pretext to link up energy-wise when Ukraine was a perfectly serviceable transit point until NeoCon filth started working their magic.

[Apr 09, 2021] German Chancellor Merkel spoke to President Putin yesterday and apparently told him she wanted to see immediate de-escalation

Apr 09, 2021 | www.zerohedge.com

Indeed, let's not worry: German Chancellor Merkel spoke to President Putin yesterday and apparently told him she wanted to see immediate de-escalation or else she might not sell Russia any German cars; or buy Russian vaccine; or complete Nord-Stream 2 and tie the German economy into Russian gas supplies. Isn't realpolitik a German word originally?

"Destiny guides our fortunes more favourably than we could have expected. Look there, Sancho Panza, my friend, and see those thirty or so wild giants, with whom I intend to do battle and kill each and all of them, so with their stolen booty we can begin to enrich ourselves. This is noble, righteous warfare, for it is wonderfully useful to God to have such an evil race wiped from the face of the earth."

"What giants?" asked Sancho Panza.

"The ones you can see over there," answered his master, "with the huge arms, some of which are very nearly two leagues long."

"Now look, your grace," said Sancho, "what you see over there aren't giants, but windmills, and what seems to be arms are just their sails, that go around in the wind and turn the millstone."

"Obviously," replied Don Quixote, "you don't know much about adventures."

Or labour vs. capital; or realpolitik. But Happy Friday!


GreatCaesar'sGhost 1 hour ago

No nato troops will ever set foot in Ukraine. They're trying to pressure Russia into doing something so they can force the Germans to stop nordstream. The Ukrainians can't win here and they're being used. Not good.

USAllDay 56 minutes ago

Germans need the gas and Russia needs the revenue. These are facts that can not change.

GreatCaesar'sGhost 53 minutes ago

US has gas to sell. Greater Israel and their Saudi partners believe that after they overthrow Assad they will have gas to sell. I'm not sure the constantly virtue signaling German government will buy Russian gas if there's a war.

BeePee 43 minutes ago

Russia already sells gas. This will continue. Mistake to destablize Russia's economy.

GreatCaesar'sGhost 53 minutes ago

US has gas to sell. Greater Israel and their Saudi partners believe that after they overthrow Assad they will have gas to sell.

I'm not sure the constantly virtue signaling German government will buy Russian gas if there's a war.

land_of_the_few 51 minutes ago (Edited) remove link

They should just mock them mercilessly.

Formation flypasts with rainbow colored smoke, Village People blasting from frigates buzxing them, that kind of thing.

land_of_the_few 40 minutes ago

"In the Navy", anyone?

[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 03, 2021] Nord Stream 2 Warns Of Security Risks From Warships Low-Flying Planes - ZeroHedge

Apr 03, 2021 | www.zerohedge.com

Nord Stream 2 Warns Of Security Risks From Warships & Low-Flying Planes BY TYLER DURDEN SATURDAY, APR 03, 2021 - 09:20 AM

Authored by Dave DeCamp via AntiWar.com,

A senior official from Nord Stream 2 AG, the project company leading the Nord Stream 2 Russia to Germany natural gas pipeline project, has reported an uptick in "provocative" activity from warships and planes in the area where the pipeline is being built .

"Higher activity of naval vessels, airplanes and helicopters and civilian vessels of foreign states is observed in the work area after restarted construction of the offshore segment of the Nord Stream 2 gas pipeline, whose actions are often clearly provocative ," said Nord Stream AG official Andrei Minin, according to the Russian news agency TASS .

Above: the pipe-laying vessel Fortuna, which is operated by the Russian company KVT-RUS and recently targeted by US sanctions. Image via Reuters

Minin said a 1.5-mile safety zone is established around the construction area where vessels are not supposed to enter. "Nevertheless, naval vessels of foreign countries are constantly registered near service ships performing work," he said.

He added that a Polish antisubmarine warfare airplane is "regularly flying around the work area at a small height and closely to the pipelay vessel."

Minin said in one provocation, an unidentified submarine was above surface within one mile of the pipeclay vessel Fortuna , a ship that was hit with US sanctions on January 19th. Minin said the activity indicates "obviously planned and prepared provocations." Besides warships and planes, he said fishing vessels have also come dangerously close to the construction area.

https://platform.twitter.com/embed/Tweet.html?dnt=false&embedId=twitter-widget-0&frame=false&hideCard=false&hideThread=false&id=1377891924300939264&lang=en&origin=https%3A%2F%2Fwww.zerohedge.com%2Fgeopolitical%2Fnord-stream-2-warns-security-risks-warships-low-flying-planes&siteScreenName=zerohedge&theme=light&widgetsVersion=e1ffbdb%3A1614796141937&width=550px

The Nord Stream 2 pipeline has been in the crosshairs of the US for years, but despite sanctions and threats, Nord Stream AG reported on Thursday that the project is now 95 percent complete . Construction restarted in December 2020 after being suspended due to threats of US sanctions.

Although it's not clear if the US is involved in these provocations, it is likely. Washington seems willing to take extreme measures to stop the project and is threatening to sanction its ally Germany . Besides the US, another country keen to stop the project is Ukraine, which stands to lose up to $3 billion a year in gas transportation fees if the pipeline is complete.

The original Nord Stream consists of two lines that run from Vyborg, Russia, to Lubmin, Germany, near Greifswald. The new project would add two more lines, doubling the amount of natural gas Russia could export to Germany.
play_arrow


Be of Good Cheer 1 hour ago

$3 billion loss to the Biden Crime Family. No wonder he wants to stop NS2.

NoPension 1 hour ago

^^^^^!!!

Pair Of Dimes Shift 45 minutes ago

10% to the big guy would be $300M.

Damn right the big guy's handlers are pissed.

Rid'n Dirty 1 hour ago

The US spends over $1 trillion on "defense" with over 800 bases worldwide, yet we have no control over who illegally takes up residence here. America has become an ugly hegemon run by Wall Street and other corporate whores. Almost 2/3rds of the world is under some type of US sanction designed to wreck economies and starve innocent people (Houthis, Syrians and Iranians).

Let's see if Germany can do what's best for its economy for the first time since 1945.

Based Fren 1 hour ago

It's so tiresome. We just have to stick our finger in everyone else's business.

naro 1 hour ago

Have you heard of the MILITARY INDUSTRIAL COMPLEX. Wars is their oxygen.....they are looking for wars wherever they can find it.

ManOnFirst 59 minutes ago

a Polish fishing vessel rammed a construction ship and blamed a faulty engine for the incident. I really hate the Poles. They are the whiniest, most cowardly country in the world. They lament the fall of their empire 1000 years ago and think they could still be a superpower if only the big, bad Russians weren't so mean. Oh, and the big, bad Germans too.

SoDamnMad 27 minutes ago

I'm surprised the Russians didn't throw a 3 liter gasoline jug with a burning rag taped to it down on that fishing vessel. Your telling me no steerage and no engine control. Two can play this game. Poles best not try to lay any communication cables in the next 20 years.

Games Without Frontiers 1 hour ago (Edited)

Globalists from the US doing everything they can to prevent a more independent EU. The further away you can get from a dying and dangerous empire the better.

2banana 1 hour ago

Established by whom?

Oh, you just made that sh!t up in international waters in one of the most heavily used trade routes in the world.

Minin said a 1.5-mile safety zone is established around the construction area where vessels are not supposed to enter. "Nevertheless, naval vessels of foreign countries are constantly registered near service ships performing work," he said.

Games Without Frontiers 1 hour ago

It's international waters but safety zones are always established on this type of industrial project, it's hard to enforce in open waters but the West looks like a bunch of tools as usual.

not-me---it-was-the-dog 43 minutes ago (Edited) remove link

google is your friend, my friend.

https://www.nord-stream.com/press-info/images/exclusion-zone-around-pipelay-vessel-2665/

https://ens.dk/sites/ens.dk/files/OlieGas/15_-_nord_stream_2_-_transboundary_impacts_-_environmental_impact_assessment_denmark_north-western_route._august_2018.pdf

.... Shipping and shipping lanes In Danish waters, the proposed NSP2 route will run inside and along the TSS Bornholmsgat for approximately 42 km close to the Swedish EEZ. The TSS Bornholmsgat carries most of the ship traffic to/from the Baltic Sea and experiences over 50,000 ship passages per year. The proposed NSP2 route additionally crosses the TSS Adlergrund in the Danish and German EEZs, which has approximately 7,000 ship movements per year. Safety exclusion zones will be implemented around slow-moving construction vessels. Only vessels involved in the construction of NSP2 will be allowed inside the safety zone; therefore, all other vessels not involved in construction activities will be requested to plan their journeys around the safety zone. The shipping lanes crossed by the proposed NSP2 route in Danish waters provide sufficient space and water depth for ships to plan their journey and safely navigate around possible temporary obstructions. The impact on ship traffic associated with the imposition of a safety zone is assessed to be minor and associated with local and temporary changes to the traffic scheme. Therefore, it is assessed that there will be no significant transboundary impacts on Baltic Sea ship traffic caused by the NSP2 project in Danish waters.

so....umm....since the work is being done in danish waters, well, gosh, i would guess the exclusion zones are set up with......wait for it......danish authorities. and the last bits in german waters will require german authorities to set up the exclusion zone.

https://www.argusmedia.com/en/news/2193430-construction-on-remaining-nord-stream-2-string-to-start

Jerzeel 17 minutes ago remove link

Ukraine gets 3B a year in transit fees for Russian gas...

rejectnumbskull 15 minutes ago

Besides the US, another country keen to stop the project is Ukraine, which stands to lose up to $3 billion a year in gas transportation fees if the pipeline is complete.

Did you not read this sentence in the article correctly?

[Apr 02, 2021] The construction site of Nord Stream 2 has been suffering harassment by various vessels and aircraft in recent months, which nearly led to damage to the pipeline itself, according to Nord Stream AG representative Andrey Minin.

Apr 02, 2021 | www.moonofalabama.org

karlof1 , Apr 1 2021 22:22 utc | 49

Nice work on pulling all the puzzle pieces together, b!

The really big problem will be weaning the Outlaw US Empire from its addiction to Unilateralism, which is its primary mode of operation aside from a very brief interlude when FDR was POTUS, devised the UN and its Charter, and got the Senate to ratify it so it would become an integral part of the USA's fundamental law of the land.

All one need do to see the gravity of the bolded text is to examine the Outlaw US Empire's behavior since FDR died--The USA immediately transformed into the Outlaw US Empire on 22 October 1945 when the UN Charter came into full force and the Empire was already in grave violation of its fundamentals.

That those millions of violations have never seen the inside of a courtroom doesn't mean they never occurred or aren't now happening globally.

I was going to post this on the other thread but will use it here as an example that's grave:

"Nord Stream AG Says Warships, Submarines and Helicopters Tried to Disrupt Pipeline's Construction":

"However, it seems that in March threats to the pipeline multiplied and became more 'real'.

"The construction site of Nord Stream 2 has been suffering harassment by various vessels and aircraft in recent months, which nearly led to damage to the pipeline itself, according to Nord Stream AG representative Andrey Minin. He stressed that the disturbances were 'clearly planned and thoroughly prepared provocations,' devised to stop the joint Russian-European project in its tracks ." [My Emphasis]

Unilateral Act of War anyone?!! Yes, its the Poles once again.

IMO, it's sad b omitted mentioning the newly formed Friends of the UN Charter Group in his article since it aims at drowning the "Unilateral, rules based international order" once and for all time. My promotion of it isn't going to be enough. If all but the Neoliberal nations become members, then they can jointly aver that there's only one system of international Law and its based on the UN Charter and all relevant treaties thus shutting up the Outlaw US Empire regardless its protests. Of course, a movement within the Empire that says the same as the Friends would go a long ways to getting us where we as humans want to go to--a peaceful planet that's concerned about the wellbeing of humans and all they need for support instead of making the rich ever richer through the terror of unremitting Class War.

And if you don't think that War isn't based on Terror, then you haven't seen migrant families busted up with the little kids being kidnapped and all put into concentration camps. ( China is beginning to bark up that very inhuman tree watered so well by the Outlaw US Empire.)

Nick , Apr 2 2021 0:16 utc | 71

Dumb Polacks are getting desparate
https://sputniknews.com/europe/202104011082512013-nord-stream-ag-says-warships-submarines-and-helicopters-tried-to-disrupt-pipelines-construction/

[Apr 02, 2021] Tentions in Ukraine are about stopping North Stream: The USA treats business as war, while treating war as business

Apr 02, 2021 | www.moonofalabama.org

karlof1 , Apr 2 2021 18:16 utc | 70

So Alfie, What's it all about?

Geoeconomics and Market Weight and it's not behind a paywall. Escobar intones:

"As it stands, Russia is very much focused on limitless possibilities in Southwest Asia, as Foreign Minister Sergey Lavrov made it clear in the 10th Middle East conference at the Valdai club [Link at Original]. The Hegemon's treats on multiple fronts – Ukraine, Belarus, Syria, Nord Stream 2 – pale in comparison."

Awhile ago, I posted the following acutely correct adage: The USA treats business as war, while treating war as business. I added what Coolidge was misquoted as saying in 1925--The business of America is business (He actually said, "the chief business of the American people is business.") So when the POTUS says its just business, you should prepare for war.

Back to the linked article. While reading it ought to be easy to see why the BRI interconnectivity is seen as a huge threat to the two Outlaw Maritime Empires--UK/US--who initially set forth the parameters of the Great Game. (BTW, Lavrov's Great Game program interview English transcript is now complete.) They have no seat at the table whatsoever. You'll also see why the Outlaw US Empire will try to remain in Afghanistan forever as well as the reason why it can't admit the real reason for being there--to interdict the BRI and the development boom it promises to bring to a great many impoverished people throughout Eurasia. Talk about Human Rights!

But it looks like all the Empire's efforts will amount to little more than a mosquito attacking an elephant for there's no way it can stop BRI or Eurasian integration; at best, it can merely delay it and earn the enmity of the planet, including its own people. Clearly, India will cease its role in the Quad as staying locks it out from what it needs most--development that uplifts its impoverished tens of millions. And the loss of India means the certain loss of the Great Game for the Outlaw Empire.

In the grand scheme of things, Ukraine is merely a tsetse fly as is NATO ultimately. The real prize lies with the geoeconomic riches BRI and Eurasian Integration will generate and being a partner with it, not an adversary.

[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 30, 2021] Russian gas meets only a fraction of Germany's needs - Germany's Scholz

Mar 30, 2021 | finance.yahoo.com


More content below More content below More content below More content below More content below More content below More content below More content below

BERLIN, Sept 21 (Reuters) - Gas contributes only a fraction of Germany's energy consumption, and Russian gas only a fraction of that, so it is wrong to say that the Nord Stream 2 pipeline will make Germany dependent on Russian energy, Finance Minister Olaf Scholz said.

Asked about the flagship Kremlin project, which has been heavily criticised by the United States and some European countries, Scholz on Monday restated the German government's position that the pipeline was a private investment and should not be the target of U.S. sanctions.

The poisoning of Kremlin critic Alexei Navalny, blamed by most Western governments on Russian state actors, has led to renewed calls for the nearly complete pipeline, built by state-owned Gazprom, to be cancelled.

Critics of the pipeline say it increases Germany's reliance on Russian energy and deprives transit countries Poland and Ukraine of crucial leverage over the giant country to their east. (Reporting by Thomas Escritt; Editing by Maria Sheahan)

[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