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It’s Getting Harder for Oil Companies to Make Money

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One morning in May, Danielle Fugere tried to convince America’s second-largest oil company to get out of the oil exploration business. Standing before a room full of Chevron shareholders in San Ramon, California, she warned that climate change and rapidly shifting oil markets were threatening to erode the corporation’s profits.

Fugere, president of the shareholder activist group As You Sow, pointed out that Chevron—the world’s largest corporate source of carbon dioxide emissions—has spent billions of dollars searching for new, often remote sources of oil that will take years to tap. How, she wondered, can the company remain profitable when it faces plummeting crude oil prices and looming restrictions on fossil fuel use? Rather than funding long-term projects that might never pay off, she argued, Chevron could return the money as dividends or steer it into less risky ventures like renewable energy. “Oil that stays in the ground is valueless,” she said.

Shell recently halted its controversial Arctic drilling project because of high costs, poor results, and “unpredictable” regulations.

The proposal garnered less than 4 percent of Chevron’s shareholder votes. But warnings about oil’s uncertain future are no longer just coming from climate activists. From Wall Street analysts to Middle Eastern bankers, some of Big Oil’s former cheerleaders are starting to sound the alarm, questioning whether the industry can stay on its current course and remain in the black. “They’re in a vise,” says Mark Lewis, chief energy economist at the international financial consulting firm Kepler Cheuvreux. “You have economics and technology on one side of the vise. And you have politics, the push for climate action, on the other side.”

Start with the tumbling price of oil. Finding new sources of petroleum, especially when they’re deep beneath the sea or buried in layers of shale, is extremely expensive, so energy companies need prices to stay reliably high. In 2014, Goldman Sachs cautioned investors that the largest new drilling projects needed to earn at least $90 per barrel to break even. The World Bank says one-third of current oil production and two-thirds of future reserves could be uneconomical even at $60 per barrel. In August, the price dipped below $40, the lowest in more than six years.

Over the past year, ExxonMobil and Chevron‘s earnings have slumped by more than 50 percent; their stock prices (as well as those of Shell, ConocoPhillips, and BP) dropped by as much as one-third in the first eight months of 2015. In July, Standard & Poor’s downgraded Shell’s credit rating, partly in response to the company’s controversial efforts to drill in the Arctic and other pricey endeavors. On Monday, Shell announced that it would halt its Arctic exploration “for the foreseeable future.” The company cited the project’s enormous costs and “disappointing” outcome, as well as the “challenging and unpredictable federal regulatory environment in offshore Alaska.”

Kepler Cheuvreux reports that the industry’s expenditures on developing new oil sources have increased 120 percent since 2000, while supplies of crude have increased just 11 percent. Investing $100 billion in solar or wind power, the firm’s analysts conclude, would produce far more energy in the long term than an equivalent investment in oil. “The rules of the game for upstream oil and gas companies have changed,” says Lewis. “Every year they have to replace cheaper legacy barrels with more expensive barrels.”

One explanation for falling prices is the glut of cheap domestic oil from the fracking boom. But the industry is also confronting what Bloomberg energy analysts have characterized as a “demand shock.” California’s new regulations on fuels’ carbon intensity and the Obama administration’s aggressive fuel efficiency standards, scheduled to take effect in 2025, are steering carmakers toward designs that use less gasoline. “We’re on the opposite side of the oil companies in the battle over the low-carbon fuel standard,” says General Motors spokesman Shad Balch. “The first company with a no-gas car wins.” Citi’s commodity research team predicts these factors, combined with the rising use of natural gas, will cause the rate of US oil consumption to peak by 2030. In August, the Interior Department reported an almost unprecedented lack of interest in purchasing leases for new wells in the Gulf of Mexico. And the National Bank of Abu Dhabi recently concluded that developing wind or solar capacity in the Middle East would be cheaper than building a new oil-fired power plant, even if the price of oil drops to $30 per barrel.

Oil companies will also be in a quandary if prices at the pump go back up. Higher prices could make hybrids, electric vehicles, and mass transit more attractive than conventional cars. According to a Bloomberg analysis, even if the cost of gasoline averaged just $2.09 per gallon, electric vehicles’ penetration of the US car market would rise from 1 percent to 6 percent by 2020; at $3.34 per gallon, it would jump to 9 percent. (In the first eight months of 2015, the average price of a gallon of regular gas nationwide was $2.53.)

Oil companies are “in a vise,” says Mark Lewis of Kepler Cheuvreux. “You have economics and technology on one side of the vise. And you have politics, the push for climate action, on the other side.”

And it’s becoming more expensive to burn fossil fuels. The European Union, California, and several other states have all imposed some sort of direct price on carbon emissions. Last week, China pledged to create a nationwide cap-and-trade system. Rising pressure from the public as well as climate negotiators preparing to gather in Paris in December suggest these policies will continue to spread. If the cost of greenhouse gas emissions rises high enough, fossil fuel reserves could turn into so-called “stranded assets,” meaning it would no longer make financial sense to exploit them. ExxonMobil and other American oil companies have already started integrating hypothetical carbon costs into their internal accounting, preparing for the inevitable drop in demand that will kick in if policymakers can agree on a universal price tag.

The new realities facing the energy sector are reflected in Bloomberg’s 2013 decision to display companies’ fossil-fuel-­related risks on the omnipresent terminals that deliver financial data to investors. Such liabilities, however, do not have to be reported in public financial statements. In 2010, the Securities and Exchange Commission asked publicly traded companies to voluntarily report their financial risks from climate change. So far, not even 15 percent of S&P 500 companies have bothered to do so.

Meanwhile, overseas investors have had more success in prodding the industry to make changes that it has thus far been able to dodge in the United States. In January, Royal Dutch Shell shareholders enlisted management support for unprecedented emissions disclosures and a suggestion that executive compensation be linked with planning for a carbon-constrained energy market. In April, just before Chevron stockholders ignored Fugere, BP’s shareholders agreed to similar policies.

So while the oil industry isn’t going away anytime soon, the barrel it is over is increasingly hard to ignore.

Mother Jones  


53 Comments on "It’s Getting Harder for Oil Companies to Make Money"

  1. BC on Tue, 29th Sep 2015 9:30 am 

    Peak Oil and LTG.

  2. penury on Tue, 29th Sep 2015 9:42 am 

    Look around. All extraction companies are in the same mess. Falling demand, the need to continue producing, borrowed money, and a customer base with no money. Look no further than Cat, mining cos, and the economies of the producing countries. Start with China,Russia, Australia,Canada, Mexico, It getting harder for all Companies to make money. (except Apple)

  3. Kenz300 on Tue, 29th Sep 2015 9:46 am 

    Fossil fuels are so last year……..

    Alternative energy sources are the future….

    Wind, solar, biofuels, and electric vehicles are growing in use around the world.Top 10 Clean Energy Trends Driving the Global Clean Energy Revolution – Renewable Energy World

    http://www.renewableenergyworld.com/articles/slideshow/2015/08/top-10-clean-energy-trends-driving-the-global-clean-energy-revolution.html

  4. shortonoil on Tue, 29th Sep 2015 9:58 am 

    We have two things to say to this article:

    The cost to produce oil is ever going up:

    http://www.thehillsgroup.org/depletion2_007.htm

    The price that the economy can afford to pay for it, from here on out, is ever going down:

    http://www.thehillsgroup.org/depletion2_022.htm

    No climate change argument needed, you are simply going to go broke! It is called depletion – you numb skulls!

    http://www.thehillsgroup.org/

  5. JuanP on Tue, 29th Sep 2015 10:15 am 

    I am very happy that all these people who have been profiting from the Earth’s destruction are now losing their shirts. I look forward to seeing all oil companies go bankrupt. It gives me great satisfaction. And I don’t care that some of them are poor old pensioners. Let them starve to death, I say, they deserve it!

  6. jeff share on Tue, 29th Sep 2015 10:24 am 

    It always amazes me how so many people say they hate the oil and gas industry until they learn they need those products. Instead of whining, they should be thankful we have a strong industry that provides ample fuel products at a cheap price and which has also made us energy independent of others.

  7. Amvet on Tue, 29th Sep 2015 10:25 am 

    Global Oil demand is rising not falling.#
    US oil storage surges were caused by surges in imports, not production. Etc.

  8. makati1 on Tue, 29th Sep 2015 10:30 am 

    JuanP, it sure is an exciting show. In fact, the whole collapse extravaganza is just getting into the final act, I think. Governments can print money but the more they print, the less it is worth. Fiat is fast approaching zero.

  9. Plantagenet on Tue, 29th Sep 2015 10:31 am 

    The fall in profits for oil companies is due to the oil glut. When the oil glut ends and oil prices go back up, oil company profits will go up as well.

  10. BobInget on Tue, 29th Sep 2015 10:42 am 

    Demand, shortonoil, Penury, has simply changed destinations. Well, not entirely.
    Americans reverted to old ways faster then a junky in a shooting gallery. If you think Das Auto owners are pissed getting 39 MPG instead of 40, I can’t wait to hear new Explorer owners explode!

    http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=5&pid=54&aid=2

    China’s petroleum demands have never been higher. There are EXPECTATIONS of lower oil demand. Not actual diminished consumption.
    (don’t believe anyone on this, even me)

    India’s demand is up 27% year over year.
    http://www.indexmundi.com/energy.aspx?country=in&product=oil&graph=imports

    Traders in New York and London look a person directly in the nose and tell you;
    demand for ALL commodities fell off the back porch. This is what is known as a ‘self fulfilling prophecy’

    Oil workers were the first to go.

    So what if China is trying to make a change to a consumer based economy.. at least that is what they are saying. “If the world insists on selling oil, copper, fertilizer, etc below cost, who are we to complain?”

  11. ghung on Tue, 29th Sep 2015 10:57 am 

    Jeff said; “It always amazes me how so many people say they hate the oil and gas industry until they learn they need those products.

    Yes, Jeff, pretty much everyone here knows they’re addicted to oil. Doesn’t mean we have to like it. I know that I (and most of you) wouldn’t be here if it wasn’t for oil and the industrial age, sort of like most Americans wouldn’t be Americans had it not been for genocide, slavery, and environmental rape. So lay back and enjoy it.

  12. marmico on Tue, 29th Sep 2015 11:03 am 

    The cost to produce oil is ever going up

    In 1964 gasoline was $0.31 per gallon, autos averaged 14 miles per gallon and the average production wage was $2.53 per hour.

    It took 0.88 hours of work to travel 100 miles.

    Fast forward 50 years to 2014 when gasoline was $3.37, autos averaged 24 and the average wage was $20.60.

    It took 0.68 hours of work to travel 100 miles.

    Rising incomes and increased tech have completely and then some offset the rising cost of oil production.

  13. BC on Tue, 29th Sep 2015 11:04 am 

    As for increasing oil demand:

    http://www.bloomberg.com/news/articles/2015-09-17/even-a-slowing-china-is-oil-s-best-defense-against-deeper-slump

    “China’s demand growth is set to slow to an annual rate of 2.3 percent by the fourth quarter compared with 5.6 percent in the second quarter, a reflection of ‘weak car sales data, declines in industrial activity, plummeting property prices and fragile electricity output,’ the IEA said in a report on Sept. 11.”

    https://finance.yahoo.com/news/oil-prices-fall-slowing-global-044005251.html

    http://marketrealist.com/2015/09/opec-crude-oil-demand-slow/

    Global trade is not growing and real GDP per capita is decelerating. A bear market for stocks is beginning. Thus, demand for oil is likely to decline, sustaining the “glut” 😀 and lower oil prices.

    More QE is on the way but this time with much more debt, debt service, an energy sector recession, money velocity lower, and trend nominal GDP below 3%. The Fed can print trillions more but it will cause velocity to fall further and price deflation likely.

  14. rockman on Tue, 29th Sep 2015 11:39 am 

    ghung – The problem with Big Oil changing gears is that if they try to do it quickly their stock value will crash even further than it already has. Just because one company is skilled at producing one type of energy it doesn’t mean they can easily shift into another form of energy production. IOW would you have liked to see your local utility company get into the EFS back when it was booming? Some did, actually. And some were losing their ass before prices collapsed. LOL. That’s why so few chevron shareholders back the plan: they didn’t want to see their stocks value drop any further. If folks think Chevron stock is selling cheap now imagine if the company said they were going to significantly cut back on drilling the next few years.

    But how slow is slow in making such a transition? and transition to what: building solar panels…wind turbines? Virtually no one at Chevron has those skills. So they start laying off tens of thousands. And then what: start alt energy companies from scratch using their remaining oil/NG revenue? And how successful would they be against established companies? Established companies that have been dropping their prices and now have to complete with even cheaper fossil fuels?

    IOW is this the time to move into alt development just when the prime competitor, fossil fuels, is selling so much cheaper than just 12 months ago? It’s still that same silly attitude that just by tagging a company as an alt producers there’s automatic riches. It isn’t difficult to imagine we’ll start seeing many of those companies being crippled by the same low energy prices that are crippling the oil patch. Forget Chevron: how about the shareholders of Starbucks pushing them to get into alt manufacturing? That company has a nice cash flow. And they have as many employees trained to build alts as Chevron.

    Makes sense, doesn’t it? LOL.

  15. shortonoil on Tue, 29th Sep 2015 12:47 pm 

    “The Fed can print trillions more but it will cause velocity to fall further and price deflation likely.”

    It appears that Central Bank printing has reached its point of diminishing returns. Adding currency to the system is no longer producing an increase in GDP. The deflation that is now occurring is outpacing the CBs ability to compensate. Falling commodity prices across the world is negating anything that they print. I suspect that they have now entered a negative feedback loop where the more they print, the faster prices fall. That would explain what we have not yet been able to isolate; why the price of oil has fallen faster than our energy analysis projected:

    http://www.thehillsgroup.org/depletion2_022.htm

    The price is now $38 below the curve, and the curve has had a 4.5% margin of error for the previous 49 years. But, I still don’t have a mechanism for exactly what is happening, if that is what is happening? If you come up with any ideas please drop me note:

    Thanks
    http://www.thehillsgroup.org/

  16. IanC on Tue, 29th Sep 2015 1:15 pm 

    JuanP, I used to share your sentiment, nursing my hatred for oil companies who destroy the planet. On reflection, I am the one destroying the planet by living a lifestyle that exists because of what the oil companies are selling.

    Now I am trying to live a lifestyle with less oil, prep for the future, and lead by example.

    I hope we can use what oil is left to design a way of living that is more egalitarian and fair to citizens of the planet (non-humans included) and does not include burning so much oil.

  17. trane on Tue, 29th Sep 2015 1:59 pm 

    Shortonoil, have you seen Gail’s latest post where she outlines some reasons for commodity price deflation I had not thought of.

    http://ourfiniteworld.com/2015/09/29/low-oil-prices-why-worry/

  18. JuanP on Tue, 29th Sep 2015 2:14 pm 

    Ian, Your path seems wise, but I fear that most people won’t follow it voluntarily. The changes coming will have to force most to change. Very few will change before they have to like you did. Carpe diem!

  19. GregT on Tue, 29th Sep 2015 2:20 pm 

    “Now I am trying to live a lifestyle with less oil, prep for the future, and lead by example.”

    Good for you Ian. That is all any of us can do. Unfortunately, in my experience at least, leading by example is falling mostly on deaf ears. Greed is a very strong motivating factor for the Human Ape. People always want more, not less.

  20. Davy on Tue, 29th Sep 2015 2:54 pm 

    Ian, I am there with you. Begin your descent now. Don’t worry about the others crisis will catch up to them. You will be on your way to adjustment.

    Dooming and prepping is significantly mental. It is very hard to go against the grain of conventional behavior and thinking. You either live dual lives or become an outcast. It is a worthy path for those with mental strength.

    We here on this board are with you and behind you. Any advice or help you need just ask. I am here everyday.

  21. BC on Tue, 29th Sep 2015 3:56 pm 

    short, that’s an interesting question. Whether or not this illuminates the issue, take a look at the following for the price of oil (POO) adjusted for M2 and the US$ (spliced data series for spot and WTI):

    Adjusted POO (APOO) 😀 and its change rate vs. CPI change rate:

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1YL5

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1YL1

    APOO vs. M2 velocity to private GDP (having fallen to 1.0 recently) and its acceleration:

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1YLn

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1YLx

    One primary inference is that the velocity of the price of oil is at a 50-year low, which is following the M2 velocity to private economic activity, which in turn implies decelerating growth of overall demand.

    https://app.box.com/s/xt8fhcxp62igds328g7q6mzorpytq9pw

    Moreover, the deceleration of M2 and the APOO velocity is accelerating, which is perfectly consistent with the decelerating rate of growth of world trade to ~0% recently, which historically coincides with recessionary conditions.

    So, to your point about CB printing’s diminishing returns, it is clearly the case as evidenced by the M2 velocity to private GDP of 1.0. (The velocity of M2 plus institutional money funds and large time deposits to private GDP is even lower at 0.78.)

    https://app.box.com/s/545ufkd4x268h9uj8cuht24acksm30q0

    Finally, at the chart above is a demographic dimension implying the cyclical and secular rates of CPI will continue to decelerate for the foreseeable future, which further suggests that nominal GDP will likely decelerate from the post-2007 rate of ~2.6% and ~1.9% per capita, which in turn will reduce velocity still further, and more so if the Fed resumes QEternity.

    The vast majority (~85%) of the Fed’s reserve printing since 2008 remains in reserves deposited at Fed reserve banks. That is, most of the addition to the money base circulated between the Fed, TBTE banks, and the US Treasury, with ~$500B being used to write off bad loans and/or repay the US gov’t for bailouts, etc. However, the decline in interest rates and increase in the value of Treasury paper has collateral on banks’ balance sheets, and in the financial sector in general, encouraged unprecedented MASSIVE levering up and bubbles absolutely everywhere.

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1YDi

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1Hmk

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1YMB

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1YDk

    Now it appears that a stock bear market has begun and the unreal estate market reached another bubble peak in 2013 and is rolling over as in 2006-07, 2001, and 1989-90, setting up another bust with CPI deflation. Stock market capitalization and household net wealth have also turned negative.

    IOW, these are recessionary indications, therefore, there is a 0% probability that the Fed is going to raise rates.

    Anyway, I’ll send you my advisory consulting bill in the mail. 😀

  22. augjohnson on Tue, 29th Sep 2015 4:31 pm 

    Ian, there are quite a few of us out here doing the same. We’re on here, just not the ones doing all the loud screaming that “everything’s OK, we can ‘fix’ this.”

    It’s a very good idea to learn how to do with less and be happy and comfortable with yourself doing it.

  23. makati1 on Tue, 29th Sep 2015 8:05 pm 

    For those of you who are prepping and downsizing, don’t forget to build a how-to library and the hand tools to do it. And, least you forget, maybe a set of real books that can be used to teach English* or the language you read and speak. Primary levels at least with real paper dictionaries. Sad if those books are unreadable by your grand kids because they don’t know how and they use them to light their wood fires.

    *Basic math and science would also be helpful.

  24. BC on Tue, 29th Sep 2015 8:11 pm 

    mak, excellent advice.

  25. Bloomer on Tue, 29th Sep 2015 10:50 pm 

    The cost to bring a barrel of oil to market is still high, whereas what they are generating for revenue is poor. So ya they are going broke and soon a lot of oil companies will go broke or be gobbled up by the large corporations.

  26. rockman on Wed, 30th Sep 2015 6:15 am 

    Bloomer – The gobbling up phase actually began long ago but most didn’t notice because we still had relatively high oil prices. The latest gobble is rather striking. One major pipeline company, Energy Transfer, just acquired another, Williams Companies, for $37 billion in cash, stock and debt transfer. The amazing angle: just 3 months ago Williams turned down an offer of $53 billion from the same company. Why? Just my guess but I’ve seen it before: the Williams management and/or a major shareholder didn’t want to lose control. Now I wouldn’t be surprised to see other shareholders file a lawsuit against whoever turned down the original offer. Three months is not a sufficient amount of time for the value of Williams to change that much.

    But why was the original offer so much higher? I doubt we’ll ever see the details but I sure there a very interesting soap opera going on behind the situation.

  27. Davy on Wed, 30th Sep 2015 7:05 am 

    Rock, maybe they see the writing on the wall is clear about the future. It looks like a panic sell. Are we going to see more panic selling and consolidations? Probably and soon.

  28. shortonoil on Wed, 30th Sep 2015 7:53 am 

    “Shortonoil, have you seen Gail’s latest post where she outlines some reasons for commodity price deflation I had not thought of.”

    I try to find time to scan through Gail’s posts. She generally uses good common sense in her evaluations of the situation, but her assessments are qualifying as opposed to the Etp Model , which is quantifiable. The model allows us to input real numbers, and generate numerical outputs. The Model tells us things like 84% of the world’s theoretical extractable liquid hydrocarbons have already been removed, which is a quantifiable value. A qualifying easement would merely state that most of the world’s useable liquid hydrocarbons have already been extracted. The latter statement gives no means to determine when they will be totally removed, or how much they can be expected to cost. That is, one is an opinion, and one is a calculation.

    The Etp Model calculates the progress of the petroleum production process in energy terms. It then translate those values, if required, into dollars term through the use of this function:

    http://www.thehillsgroup.org/depletion2_008.htm

    We believe that somehow, through the CBs ZIRP policies, and liquidity creation processes that the form of the above function has been changed in recent years. The CBs in an attempt to rescue equity markets have changed how energy is defined in dollars terms. That has resulted in the deflationary environment that Gail is so fond of referring to, and what we have been indicating would likely happen for the last two years. Our interest is to produce a function that would allows us to calculate what the specific impact of further CB activities will have on petroleum; if that is what is actually happening.

    This is of the utmost importance to the world’s economies. If the CBs actions result in the premature demise of the petroleum industry in order to save the bonuses of a $20 million per year hedge fund manager they need to be drastically reevaluated. That is not likely to occur unless an explicit model of the effect can be demonstrated.

    http://www.thehillsgroup.org/

  29. Davy on Wed, 30th Sep 2015 8:24 am 

    Short while there is no arguing quantifiable analysis of oil we should not discount the qualifying aspect. I say this because economics and human nature are not fully rational. Economics is a pseudo science.

    In that regards we must account for those actions and events that are vital but contrary to normal scientific analysis. The very act of discounting and dismissing your groups ETP model fits this description. This is a favorite tactic for the cornucopians against hard science that does not fit the cornucopian narrative of growth through technology, development, and substitution.

    It is like trying to dismiss religion from social arguments. It does not matter if the issue is a religious fallacy if people believe it. The believing itself has meaning.

  30. rockman on Wed, 30th Sep 2015 9:33 am 

    Davy – I wouldn’t call them panic sales. These are very calculated business transactions. They may be forced sales with the shareholders or debt holders calling the shots and management having few options. That pipeline deal is particularly shocking and don’t have a good guess why other then someone (like a shareholder or debt holder) threatening a lawsuit if management didn’t cut a deal…any deal.

  31. BobInget on Wed, 30th Sep 2015 9:54 am 

    Summary of Weekly Petroleum Data for the Week Ending September 25, 2015
    U.S. crude oil refinery inputs averaged 16.0 million barrels per day during the week
    ending September 25, 2015, 241,000 barrels per day less than the previous week’s
    average. Refineries operated at 89.8% of their operable capacity last week. Gasoline
    production increased last week, averaging about 9.7 million barrels per day. Distillate
    fuel production decreased slightly last week, averaging 5.0 million barrels per day.

    U.S. crude oil imports averaged about 7.6 million barrels per day last week, up by
    378,000 barrels per day from the previous week. Over the last four weeks, crude oil
    imports averaged over 7.3 million barrels per day, 1.7% below the same four-week period
    last year. Total motor gasoline imports (including both finished gasoline and gasoline
    blending components) last week averaged 990,000 barrels per day. Distillate fuel imports
    averaged 56,000 barrels per day last week.
    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum
    Reserve) increased by 4.0 million barrels from the previous week. At 457.9 million
    barrels,
    U.S. crude oil inventories remain near levels not seen for this time of year in at
    least the last 80 years. Total motor gasoline inventories increased by 3.3 million barrels
    last week, and are near the upper limit of the average range. Both finished gasoline
    inventories and blending components inventories increased last week. Distillate fuel
    inventories decreased by 0.3 million barrels last week but are in the middle of the average
    range for this time of year. Propane/propylene inventories rose 1.7 million barrels last
    week and are well above the upper limit of the average range. Total commercial
    petroleum inventories increased by 3.7 million barrels last week.

    Total products supplied over the last four-week period averaged over 19.5 million barrels
    per day, up by 1.5% from the same period last year. Over the last four weeks, motor
    gasoline product supplied averaged about 9.1 million barrels per day, up by 4.2% from
    the same period last year. Distillate fuel product supplied averaged 3.8 million barrels per
    day over the last four weeks, up by 0.2% from the same period last year. Jet fuel product
    supplied is up 11.8% compared to the same four-week period last year.

  32. BobInget on Wed, 30th Sep 2015 9:56 am 

    Re: Weekly EIA repore
    As always, I believe the last paragraph tells the actual ‘tale of the tape’.

    So what four million barrels remain homeless?

    Arbitraged imports more then account for 4 MB.
    (refineries are operating under 90% due to changes to winter blends and maintenance)

    My belief, jet fuel consumption is a great economic indicator. (up double digits)

    Rockman?

    Doomers are calling for collapse and Deflation. Why? Because oil prices are (too) low.

  33. zoidberg on Wed, 30th Sep 2015 10:26 am 

    People who think its a show they can sit back and enjoy are delusional. You should talk to some Syrians who watched it up close about how enjoyable it is.

    Collapse of modern infrastructure is really horrific when the local population is well above carrying capacity.

    WE DONT WANT IT TO HAPPEN. YOU DONT UNDERSTAND THE HELL YOUR WELCOMING. YOU THINK YOU DO, BUT YOU DONT.

    Oil shrinking without respite and substitution is scary. And yet every indication is that this article is correct and the peak is playing out now.

    The fantasy you can just downsize and mentally prep and carry on more or less normally is just as denial-ish as people thinking solar panels can sub in for oil. I wish you the best of luck in prepping, but I will say you can prep for temporary emergencies but if a permanent collapse and chaos happens your probably going to have to go with the flow and abandon your nest and move where you can survive. Think refugees and migrants swamping Europe.

  34. Davy on Wed, 30th Sep 2015 10:37 am 

    Void, if you would read what the majority of doomers and preppers talk about then you would understand. Instead you say what you say to feel better because you have not done anything nor will you. Too much work and too much money for the Void to bother. Better for the Void just to criticize.

    Preppers are under no illusions of the challenges and the probability of failure. In fact being a doomer and prepper brings home just how difficult prepping is when the rest of society has no interest in it. We are trying to live in the status quo and prep for the end of status quo. That is double duty. What’s in your toolbox Void?

  35. Kenz300 on Wed, 30th Sep 2015 10:44 am 

    Electric vehicles and bicycles are the future……..

    It is time to reduce oil use for transportation purposes.

  36. ghung on Wed, 30th Sep 2015 10:56 am 

    Ziod said: “People who think its a show they can sit back and enjoy are delusional.”

    But it is a show, Zoido; the proverbial comic tragedy on a scale never dreamed of by the likes of Shakespeare, Voltaire, or even Job. I wouldn’t miss it for anything. You say:

    “WE DONT WANT IT TO HAPPEN. YOU DONT UNDERSTAND THE HELL YOUR WELCOMING. YOU THINK YOU DO, BUT YOU DONT.”

    But it is happening, Zoido, and nothing can stop it. Better learn to lay back and enjoy it. Beats the shit out of staying angry and afraid.

  37. marmico on Wed, 30th Sep 2015 11:23 am 

    But, I still don’t have a mechanism for exactly what is happening, if that is what is happening? If you come up with any ideas please drop me note:

    The ETP curve fitting is bull shit.

  38. JuanP on Wed, 30th Sep 2015 11:31 am 

    Frackers face mass extinction – Fortune: http://fortune.com/2015/09/26/frackers-could-soon-face-mass-extinction/

  39. zoidberg on Wed, 30th Sep 2015 11:35 am 

    Well my toolbox consists of a secure and connected place large enough to defend itself important enough to warrant extennal protection resource rich enough to supply itself separated from global markets.

    Back up plan consists of short term prepping, a cache, and knowledge of remote arable places up north America. Lots of abandoned small farms and absent landlords. Not my preferred option,I do like my modern conveniences but I can hide, until things change. Surviving pioneer communities and natives make good neighbors if your a good neighbors.

    Ghung lay back and enjoy it sounds rapey. Ill leave you to your own devices, and away from me.

    Also anger and fear are good antidotes to despair. I like feeling alive.

  40. GregT on Wed, 30th Sep 2015 12:18 pm 

    Zoid:

    “I wish you the best of luck in prepping, but I will say you can prep for temporary emergencies but if a permanent collapse and chaos happens your probably going to have to go with the flow and abandon your nest and move where you can survive.”

    “Back up plan consists of short term prepping, a cache, and knowledge of remote arable places up north America. Lots of abandoned small farms and absent landlords.”

    Sounds like you have a plan Zoid. Not a smart one, but a plan none the less. The first consideration for the wife and myself in our plans, was location. We’ve already moved to where we can survive, far away from the masses of unprepared people like yourself. We won’t be abandoning our farm, or our community, and we’re more than prepared to deal with you if you manage to show up. Which is extremely unlikely. The further we are away from people like you, the better. We don’t want angry and afraid people here. We plan on staying alive.

  41. rockman on Wed, 30th Sep 2015 12:28 pm 

    “Frackers face mass extinction” A die off to some degree but not extinction. I was frac’ng wells 37 years ago. I was frac’ng wells when oil was under $30/bbl inflation adjusted. In 2 weeks I’ll be doing a small frac on a well in Mississippi.

  42. Davy on Wed, 30th Sep 2015 12:47 pm 

    Void, I take it you are a prepper but believe all other preppers are misguided but you? WTF are you trying to say? Why bash preppers then say you are one? Or are you? Maybe you are just a talker. If you were a real prepper you would be acting differently.

  43. zoidberg on Wed, 30th Sep 2015 1:08 pm 

    I don’t like the delight in the suffering of others, nor do I like the holier than thou attitude. It makes preppers easy targets and prepping unseemly. Neither of which is helpful.

  44. GregT on Wed, 30th Sep 2015 1:16 pm 

    “I don’t like the delight in the suffering of others”

    Precisely why many of us here are trying to get the message out. We don’t want to see other people suffering. What you do with that message is your choice.

  45. zoidberg on Wed, 30th Sep 2015 1:22 pm 

    I’m also probably not as prepped as others. I’ve got a fire escape planned and a general plan. It’s not like a military operation or anything.

  46. BC on Wed, 30th Sep 2015 1:23 pm 

    short, that’s an interesting question. Whether or not this illuminates the issue, take a look at the following for the price of oil (POO) adjusted for M2 and the US$ (spliced data series for spot and WTI):

    Adjusted POO (APOO) 😀 and its change rate vs. CPI change rate:

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1YL5

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1YL1

    APOO vs. M2 velocity to private GDP (having fallen to 1.0 recently) and its acceleration:

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1YLn

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1YLx

    One primary inference is that the velocity of the price of oil is at a 50-year low, which is following the M2 velocity to private economic activity, which in turn implies decelerating growth of overall demand.

    https://app.box.com/s/xt8fhcxp62igds328g7q6mzorpytq9pw

    Moreover, the deceleration of M2 and the APOO velocity is accelerating, which is perfectly consistent with the decelerating rate of growth of world trade to ~0% recently, which historically coincides with recessionary conditions.

    So, to your point about CB printing’s diminishing returns, it is clearly the case as evidenced by the M2 velocity to private GDP of 1.0. (The velocity of M2 plus institutional money funds and large time deposits to private GDP is even lower at 0.78.)

    https://app.box.com/s/545ufkd4x268h9uj8cuht24acksm30q0

    Finally, at the chart above is a demographic dimension implying the cyclical and secular rates of CPI will continue to decelerate for the foreseeable future, which further suggests that nominal GDP will likely decelerate from the post-2007 rate of ~2.6% and ~1.9% per capita, which in turn will reduce velocity still further, and more so if the Fed resumes QEternity.

    The vast majority (~85%) of the Fed’s reserve printing since 2008 remains in reserves deposited at Fed reserve banks. That is, most of the addition to the money base circulated between the Fed, TBTE banks, and the US Treasury, with ~$500B being used to write off bad loans and/or repay the US gov’t for bailouts, etc.

    However, the decline in interest rates and increase in the value of Treasury paper has collateral on banks’ balance sheets, and in the financial sector in general, encouraged unprecedented MASSIVE levering up and bubbles absolutely everywhere.

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1YDi

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1Hmk

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1YMB

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1YDk

    Now it appears that a stock bear market has begun and the unreal estate market reached another bubble peak in 2013 and is rolling over as in 2006-07, 2001, and 1989-90, setting up another bust with CPI deflation. Stock market capitalization and household net wealth have also turned negative.

    IOW, these are recessionary indications, therefore, there is a 0% probability that the Fed is going to raise rates.
    Anyway, I’ll send you my advisory consulting bill in the mail.:-D

  47. GregT on Wed, 30th Sep 2015 1:30 pm 

    If you’re angry and scared Zoid, you obviously aren’t feeling comfortable with your preparations.

  48. ghung on Wed, 30th Sep 2015 1:35 pm 

    Zoid said: “I don’t like the delight in the suffering of others, nor do I like the holier than thou attitude.”

    How many people can you feed if our BAU food system (along with everything else BAU) begins to fail, Zoid? If there’s a major disease outbreak, could you supply your neighbors with antibiotics? Other supplies? If communication systems go down, do you have alternative/standalone means of communications and getting information to help keep your friends/family/neighbors informed? Could you supply them with plenty of safe drinking water if that comes unavailable? How long do you think that stash of bottled water will last. Shit, I could offer my neighbors a hot shower under almost any circumstances. Could you offer the elderly or infirm a warm, safe bed during the next big blizzard or flood?

    Preppers may be scorned these days, but the little islands of resilience they build may be invaluable, even in short-term emergencies. In a widespread collapse scenario, we can offer longer-term solutions via knowledge and experience most folks don’t have, and maybe a steady supply of okra whiskey at that 😉

  49. Davy on Wed, 30th Sep 2015 2:06 pm 

    Zoid, I give you a hard time but it is just for conversation. I am glad you have a fire escape. I am not sure why the hard feeling for other doomers and preppers. There are so few of us we need to be sticking together. Chill out and help out. We can use friends with helpful ideas.

  50. apneaman on Wed, 30th Sep 2015 4:17 pm 

    Fortune: “Frackers Face Mass Extinction”

    “Awareness is gradually seeping into the financial press that the Great American Oil Revolution has been over for months — witness the current Fortune headline, “Frackers Could Soon Face Mass Extinction.” If the general media had any grasp of what was happening in America, or what it meant, CNN would be doing wall-to-wall coverage of the deserted man-camps in North Dakota, the unemployment lines in Texas, the equipment yards stacked with idle derricks, the spreading panic in the junk-bond, bond and stock markets. Instead we get Donald’s beautiful tax plan, Hillary’s elusive emails and Carly’s mythical video tapes.

    Today is the last day of the rest of the frackers’ lives. That’s because it is the last day of the third quarter of the year, the day after which banks audit their loans, assessing anew the value of the assets held as collateral.

    Frackers pledge their oil reserves, and those reserves are worth today about half of what they were worth a year ago. A year ago, they borrowed everything they could. In about two weeks when the audits are done they’re going to have to give half of it back. Many of the companies don’t have it.

    Analysts quoted by Fortune expect a third of the fracking companies to go under.

    I expected this to happen at the end of the first quarter, when the banks did the first of their two annual reassessments. But I forgot the old rule of thumb: borrow ten thousand dollars, and the bank owns you, borrow ten million and you own the bank. Back in April, lenders bent over backwards to avoid reclassifying loans, and predatory investors poured money into junk-bond rollovers of expiring junk bonds, because they simply could not believe that the ride was over. Prices would go back up, was the mantra they chanted, and all would be well again.

    As I’ve reported here over and over, this disaster would have overtaken the fracking patch even if oil prices had not tanked, because its root problem was the hideous decline rate of fracking wells, most of which are exhausted within four years.

    Imagine if they built houses of water-soluble materials. You buy a house for $200,000 or so, and at the end of four years it’s uninhabitable and worthless, and you have to buy another one. You might have been making good money those four years, but enough to set aside $50,000 a year? That’s been the fracking problem from the beginning, and virtually every company in the business has had to borrow heavily – actually, recklessly — to stay in the game.

    Which is over. For most. There will always be some operators diligently wringing out the last few drops of combustibles, but the Brave New World of American oil supremacy in a cowed world, the age of American energy security, the renewed American oil economy — all creations of marketing departments in search of the proverbial greater-fool investors and lenders — are toast.

    Still can’t believe it? Check out David Stockman, “Going Broke in the Shale Patch;” Oil Price.com, “Is This the End of the Shale Gas Revolution?;” CNBC, “US Drillers About to Start Hemorrhaging;” Bloomberg, “Wall Street Lenders Growing Impatient with U.S. Shale Revolution” and “Junk-Debt Investors Fight for Scraps as U.S. Shale Rout Deepens;” and even the Wall Street Journal, “Fracking Firms that Drove Oil Boom Struggle to Survive.”

    Yes, it’s morning in the American fracking patch, but instead of Ronald Reagan’s rhapsodic dawn it’s more like something out of Revelations. Even the staid Fortune Magazine says, “Doomsday may finally be coming to the fracking industry.””

    http://www.dailyimpact.net/2015/09/30/fortune-frackers-face-mass-extinction/

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