Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on January 5, 2015
The Real Cause Of Low Oil Prices: Interview With Arthur Berman
With all the conspiracy theories surrounding OPEC’s November decision not cut production, is it really not just a case of simple economics? The U.S. shale boom has seen huge hype but the numbers speak for themselves and such overflowing optimism may have been unwarranted. When discussing harsh truths in energy, no sector is in greater need of a reality check than renewable energy.
In a third exclusive interview with James Stafford of Oilprice.com, energy expert Arthur Berman explores:
• How the oil price situation came about and what was really behind OPEC’s decision
• What the future really holds in store for U.S. shale
• Why the U.S. oil exports debate is nonsensical for many reasons
• What lessons can be learnt from the U.S. shale boom
• Why technology doesn’t have as much of an influence on oil prices as you might think
• How the global energy mix is likely to change but not in the way many might have hoped
OP: The Current Oil Situation – What is your assessment?
Arthur Berman: The current situation with oil price is really very simple. Demand is down because of a high price for too long. Supply is up because of U.S. shale oil and the return of Libya’s production. Decreased demand and increased supply equals low price.
As far as Saudi Arabia and its motives, that is very simple also. The Saudis are good at money and arithmetic. Faced with the painful choice of losing money maintaining current production at $60/barrel or taking 2 million barrels per day off the market and losing much more money—it’s an easy choice: take the path that is less painful. If there are secondary reasons like hurting U.S. tight oil producers or hurting Iran and Russia, that’s great, but it’s really just about the money.
Saudi Arabia met with Russia before the November OPEC meeting and proposed that if Russia cut production, Saudi Arabia would also cut and get Kuwait and the Emirates at least to cut with it. Russia said, “No,” so Saudi Arabia said, “Fine, maybe you will change your mind in six months.” I think that Russia and maybe Iran, Venezuela, Nigeria and Angola will change their minds by the next OPEC meeting in June.
We’ve seen several announcements by U.S. companies that they will spend less money drilling tight oil in the Bakken and Eagle Ford Shale Plays and in the Permian Basin in 2015. That’s great but it will take a while before we see decreased production. In fact, it is more likely that production will increase before it decreases. That’s because it takes time to finish the drilling that’s started, do less drilling in 2015 and finally see a drop in production. Eventually though, U.S. tight oil production will decrease. About that time—perhaps near the end of 2015—world oil prices will recover somewhat due to OPEC and Russian cuts after June and increased demand because of lower oil price. Then, U.S. companies will drill more in 2016.
OP: How do you see the shale landscape changing in the U.S. given the current oil price slump?
Arthur Berman: We’ve read a lot of silly articles since oil prices started falling about how U.S. shale plays can break-even at whatever the latest, lowest price of oil happens to be. Doesn’t anyone realize that the investment banks that do the research behind these articles have a vested interest in making people believe that the companies they’ve put billions of dollars into won’t go broke because prices have fallen? This is total propaganda.
We’ve done real work to determine the EUR (estimated ultimate recovery) of all the wells in the core of the Bakken Shale play, for example. It’s about 450,000 barrels of oil equivalent per well counting gas. When we take the costs and realized oil and gas prices that the companies involved provide to the Securities and Exchange Commission in their 10-Qs, we get a break-even WTI price of $80-85/barrel. Bakken economics are at least as good or better than the Eagle Ford and Permian so this is a fairly representative price range for break-even oil prices.
Related: Low Prices Lead To Layoffs In The Oil Patch
But smart people don’t invest in things that break-even. I mean, why should I take a risk to make no money on an energy company when I can invest in a variable annuity or a REIT that has almost no risk that will pay me a reasonable margin?
Oil prices need to be around $90 to attract investment capital. So, are companies OK at current oil prices? Hell no! They are dying at these prices. That’s the truth based on real data. The crap that we read that companies are fine at $60/barrel is just that. They get to those prices by excluding important costs like everything except drilling and completion. Why does anyone believe this stuff?
If you somehow don’t believe or understand EURs and 10-Qs, just get on Google Finance and look at third quarter financial data for the companies that say they are doing fine at low oil prices.
Continental Resources is the biggest player in the Bakken. Their free cash flow—cash from operating activities minus capital expenditures—was -$1.1 billion in the third- quarter of 2014. That means that they spent more than $1 billion more than they made. Their debt was 120% of equity. That means that if they sold everything they own, they couldn’t pay off all their debt. That was at $93 oil prices.
And they say that they will be fine at $60 oil prices? Are you kidding? People need to wake up and click on Google Finance to see that I am right. Capital costs, by the way, don’t begin to reflect all of their costs like overhead, debt service, taxes, or operating costs so the true situation is really a lot worse.
So, how do I see the shale landscape changing in the U.S. given the current oil price slump? It was pretty awful before the price slump so it can only get worse. The real question is “when will people stop giving these companies money?” When the drilling slows down and production drops—which won’t happen until at least mid-2016—we will see the truth about the U.S. shale plays. They only work at high oil prices. Period.
OP: What, if any, effect will low oil prices have on the US oil exports debate?
Arthur Berman: The debate about U.S. oil exports is silly. We produce about 8.5 million barrels of crude oil per day. We import about 6.5 million barrels of crude oil per day although we have been importing less every year. That starts to change in 2015 and after 2018 our imports will start to rise again according to EIA. The same thing is true about domestic production. In 2014, we will see the greatest annual rate of increase in production. In 2015, the rate of increase starts to slow down and production will decline after 2019 again according to EIA.
Why would we want to export oil when we will probably never import less than 37 or 38 percent (5.8 million barrels per day) of our consumption? For money, of course!
Remember, all of the calls for export began when oil prices were high. WTI was around $100/barrel from February through mid-August of this year. Brent was $6 or $7 higher. WTI was lower than Brent because the shale players had over-produced oil, like they did earlier with gas, and lowered the domestic price.
U.S. refineries can’t handle the light oil and condensate from the shale plays so it has to be blended with heavier imported crudes and exported as refined products. Domestic producers could make more money faster if they could just export the light oil without going to all of the trouble to blend and refine it.
This, by the way, is the heart of the Keystone XL pipeline debate. We’re not planning to use the oil domestically but will blend that heavy oil with condensate from shale plays, refine it and export petroleum products. Keystone is about feedstock.
Would exporting unrefined light oil and condensate be good for the country? There may be some net economic benefit but it doesn’t seem smart for us to run through our domestic supply as fast as possible just so that some oil companies can make more money.
OP: In global terms, what do you think developing producer nations can learn from the US shale boom?
Arthur Berman: The biggest take-away about the U.S. shale boom for other countries is that prices have to be high and stay high for the plays to work. Another important message is that drilling can never stop once it begins because decline rates are high. Finally, no matter how big the play is, only about 10-15% of it—the core or sweet spot—has any chance of being commercial. If you don’t know how to identify the core early on, the play will probably fail.
Not all shale plays work. Only marine shales that are known oil source rocks seem to work based on empirical evidence from U.S. plays. Source rock quality and source maturity are the next big filter. Total organic carbon (TOC) has to be at least 2% by weight in a fairly thick sequence of shale. Vitrinite reflectance (Ro) needs to be 1.1 or higher.
If your shale doesn’t meet these threshold criteria, it probably won’t be commercial. Even if it does meet them, it may not work. There is a lot more uncertainty about shale plays than most people think.
OP: Given technological advances in both the onshore and offshore sectors which greatly increase production, how likely is it that oil will stay below $80 for years to come?
Arthur Berman: First of all, I’m not sure that the premise of the question is correct. Who said that technology is responsible for increasing production? Higher price has led to drilling more wells. That has increased production. It’s true that many of these wells were drilled using advances in technology like horizontal drilling and hydraulic fracturing but these weren’t free. Has the unit cost of a barrel of oil gas gone down in recent years? No, it has gone up. That’s why the price of oil is such a big deal right now.
Domestic oil prices were below about $30/barrel until 2004 and companies made enough money to stay in business. WTI averaged about $97/barrel from 2011 until August of 2014. That’s when we saw the tight oil boom. I would say that technology followed price and that price was the driver. Now that prices are low, all the technology in the world won’t stop falling production.
Many people think that the resurgence of U.S. oil production shows that Peak Oil was wrong. Peak oil doesn’t mean that we are running out of oil. It simply means that once conventional oil production begins to decline, future supply will have to come from more difficult sources that will be more expensive or of lower quality or both. This means production from deep water, shale and heavy oil. It seems to me that Peak Oil predictions are right on track.
Technology will not reduce the break-even price of oil. The cost of technology requires high oil prices. The companies involved in these plays never stop singing the praises of their increasing efficiency through technology—this has been a constant litany since about 2007—but we never see those improvements reflected in their financial statements. I don’t doubt that the companies learn and get better at things like drilling time but other costs must be increasing to explain the continued negative cash flow and high debt of most of these companies.
The price of oil will recover. Opinions that it will remain low for a long time do not take into account that all producers need about $100/barrel. The big exporting nations need this price to balance their fiscal budgets. The deep-water, shale and heavy oil producers need $100 oil to make a small profit on their expensive projects. If oil price stays at $80 or lower, only conventional producers will be able to stay in business by ignoring the cost of social overhead to support their regimes. If this happens, global supply will fall and the price will increase above $80/barrel. Only a global economic collapse would permit low oil prices to persist for very long.
OP: How do you see the global energy mix changing in the coming decades? Have renewables made enough advances to properly compete with fossil fuels or is that still a long way off?
Arthur Berman: The global energy mix will move increasingly to natural gas and more slowly to renewable energy. Global conventional oil production peaked in 2005-2008. U.S. shale gas production will peak in the next 5 to 7 years but Russia, Iran, Qatar and Turkmenistan have sufficient conventional gas reserves to supply Europe and Asia for several decades. Huge discoveries have been made in the greater Indian Ocean region—Madagascar, offshore India, the Northwest Shelf of Australia and Papua New Guinea. These will provide the world with natural gas for several more decades. Other large finds have been made in the eastern Mediterranean.
There will be challenges as we move from an era of oil- to an era of gas-dominated energy supply. The most serious will be in the transport sector where we are thoroughly reliant on liquid fuels today —mostly gasoline and diesel. Part of the transformation will be electric transport using natural gas to generate the power. Increasingly, LNG will be a factor especially in regions that lack indigenous gas supply or where that supply will be depleted in the medium term and no alternative pipeline supply is available like in North America.
Of course, natural gas and renewable energy go hand-in-hand. Since renewable energy—primarily solar and wind—are intermittent, natural gas backup or base-load is necessary. I think that extreme views on either side of the renewable energy issue will have to moderate. On the one hand, renewable advocates are unrealistic about how quickly and easily the world can get off of fossil fuels. On the other hand, fossil fuel advocates ignore the fact that government is already on board with renewables and that, despite the economic issues that they raise, renewables are going to move forward albeit at considerable cost.
Time is rarely considered adequately. Renewable energy accounts for a little more than 2% of U.S. total energy consumption. No matter how much people want to replace fossil fuel with renewable energy, we cannot go from 2% to 20% or 30% in less than a decade no matter how aggressively we support or even mandate its use. In order to get to 50% or more of primary energy supply from renewable sources it will take decades.
I appreciate the urgency felt by those concerned with climate change. I think, however, that those who advocate a more-or-less immediate abandonment of fossil fuels fail to understand how a rapid transition might affect the quality of life and the global economy. Much of the climate change debate has centered on who is to blame for the problem. Little attention has been given to what comes next namely, how will we make that change without extreme economic and social dislocation?
I am not a climate scientist and, therefore, do not get involved in the technical debate. I suggest, however, that those who advocate decisive action in the near term think seriously about how natural gas and nuclear power can make the change they seek more palatable.
The great opportunity for renewable energy lies in electricity storage technology. At present, we are stuck with intermittent power and little effort has gone into figuring out ways to store the energy that wind and solar sources produce when conditions are right. If we put enough capital into storage capability, that can change everything.
By James Stafford of Oilprice.com
30 Comments on "The Real Cause Of Low Oil Prices: Interview With Arthur Berman"
bobinget on Mon, 5th Jan 2015 9:24 am
May I offer a few Stafford quotes?
#1) “The current situation with oil price is really very simple”. (oh yeah?)
#2) “Demand is down because of a high price for too long”.. (rarity is one reason tens of millions are spent)
to FIND, LIFT, DELIVER from remote locations)
#3)” the return of Libya’s production”
http://fuelfix.com/blog/2015/01/05/oil-tanker-bombed-at-libyan-port-amid-militant-fighting/
Greek oil tanker bombed/ This news two hours old.
another source:
http://www.bloomberg.com/news/2015-01-05/jets-bomb-oil-tanker-near-libyan-port-in-fresh-threat-to-trade.html
http://www.thenational.ae/business/energy/opec-december-crude-production-drops-as-global-oil-prices-slide
http://www.thenational.ae/world/middle-east/suicide-car-bomb-targets-libyan-parliament
OK, OK so much for Libya.
#4 During the Macondo GOM blowout, technology wasn’t to blame. Economizing on safety was.
Is anyone breaking out costs for environmental disasters like ‘Lost Horizon’? The next Arctic spill?
Oil gathering costs increase the deeper we drill
under seriously adverse conditions.
Saying super-computers, metallurgy, 3/D Look Down, satellite geo sighting, general technology
had nothing much to do with America’s shale boom is denying fact.
Everyone, including J. Stafford is entitled to his own
(or Saudi) opinions but not his (orSaudi) set of facts.
bobinget on Mon, 5th Jan 2015 9:58 am
I’ve posted MY opinions all too often on these pages.( This entire “Oil Glut” is bullshit)
Week after week EIA tells us we are still importing
7.5 million BBp/d on average.
http://www.eia.gov/petroleum/supply/weekly/
CHINA (alone) will be consuming OVER 20 million barrels per day in fewer then four years.
(Barrons)
China, India, Japan combined will need every drop of exportable oil in five years.
Iran and Saudi Arabia (OPEC members) are in a serious state of war. (145,000 dead in Syria)
President of Russia, V. Putin is backing Iran.
President of US, B. Obama, is backing KSA.
Is that not sufficient reason for this Oil WW/3
we find ourselves locked into?
If 145,000 dead Syrian are not enough. Add OVER 10,000 dead Nigerians in 2014.
3,000,000 displaced persons doubling Lebanon’s population.
When was the last time you read about S. Sudan?
Another ‘greatest humanitarian disasters’ in progress.
Make no mistake, propaganda, markets are being manipulated for short term gain..
Where else do you read this?
bobinget on Mon, 5th Jan 2015 10:02 am
Hers’s the “Tell” line;
“I am not a climate scientist and, therefore, do not get involved in the technical”
http://www.msnbc.com/rachel-maddow-show/the-gops-not-scientist-meme-keeps-spreading
ghung on Mon, 5th Jan 2015 10:32 am
Meanwhile, WTI drops again; another 4%+, at $50.30 as I type.I may have set my 2015 prediction for a low a little high.
Davy on Mon, 5th Jan 2015 10:40 am
G-man, I wonder how long it will take before the short-squeeze starts. I think this oil market is way oversold per the fundamentals.
GregT on Mon, 5th Jan 2015 10:45 am
“This entire “Oil Glut” is bullshit”
Couldn’t agree more. Tons of speculation, but I have yet to hear anything even remotely resembling the truth. I am still expecting great news about increased employment and consumption figures over the latest winter carnival season though, the Fed has no choice now but to raise interest rates. We shall see……..
GregT on Mon, 5th Jan 2015 10:54 am
“I think this oil market is way oversold per the fundamentals.”
A great reason to rack up even more credit card debt though.
westexas on Mon, 5th Jan 2015 11:40 am
Bob,
I think that you are mostly quoting Art Berman.
J-Gav on Mon, 5th Jan 2015 12:26 pm
Berman strikes me as a straight-shooter kinda guy if you see what I mean. As opposed to, say, a Michael Lynch, recently featured in an article on this site.
I also believe he’s right when he says the storage capability is key for renewables and that this is a place where tech can make a difference. However, I don’t agree with him in his conclusion on the subject: “If we put enough capital into storage capability, that can change everything.”
That seems a tad hyperbolic to me. It COULD change SOMETHING, but not everything – and even that supposes that the capital in question will actually exist when needed, hardly a given.
Davy on Mon, 5th Jan 2015 12:42 pm
I was wondering if anyone wanted to predict when Noony (The NOo) will break his new year resolution. I thought about him when I saw Art Berman article. The NOo gets animated anytime the Art Berman subject comes up. Kinda miss the NOo every doom site needs a corny mascot. The guy is a walking Econ 101 advert but still fun to toy with.
GregT on Mon, 5th Jan 2015 12:50 pm
I’m sure that one of Nony’s ‘personalities’ will show up soon enough.
shortonoil on Mon, 5th Jan 2015 1:08 pm
When the drilling slows down and production drops—which won’t happen until at least mid-2016—we will see the truth about the U.S. shale plays.
Well — thank you Mr. Berman.
We project peak total liquids in 2016 (even if you include Palm oil, and Moonshine). His assertion that the comments of the shale producers about producing at $40 -$50 /barrel are crap, is exactly what they are. When drilling costs per barrel are higher than that, you know they are crap. The Bakken has had a long term average drilling cost of $53/barrel. We went through 4,598 wells to get that number.
His assertion that technology will not save the day is also correct. Technology in shale did not reduce the cost of production, it only allowed for additional production. Production costs in shale have been going up from day one, and they will continue to advance. Depletion of these fields absolutely guarantees it, and technology can not reduce their rate of depletion. Those rates are determined by the geology, and physics that apply to them, and not some PR campaign from Continental.
His statement that Saudi Arabia is only doing what is financially prudent for them is exactly what we have been saying. The Saudis are not out to punish Russia, Iran, or some operator in a North Dakota cow pasture. The Saudis only intent (being business men first, and Arabs second) is to maximize revenue. From what we have gleaned from our analysis, that is exactly what they are doing. No world wide super power conspiracy theory needed. Just good business practices.
As far as the oil price increasing to $100/barrel, we respectively disagree with him. Prices will probably advance some this coming year, but $100 oil will never again be sustainable. Depletion is reducing the the per unit value of oil. The price of oil is now in a long term downward trend, and that will continue until at least 2020. The tail of the curve will consist of only the highest quality remaining fields.
http://www.thehillsgroup.org/depletion2_022.htm
Whether, or not the world’s economy can survive this decline is yet to be seen?
http://www.thehillsgroup.org/
Perk Earl on Mon, 5th Jan 2015 1:50 pm
“As far as the oil price increasing to $100/barrel, we respectively disagree with him. Prices will probably advance some this coming year, but $100 oil will never again be sustainable. Depletion is reducing the the per unit value of oil. The price of oil is now in a long term downward trend, and that will continue until at least 2020. The tail of the curve will consist of only the highest quality remaining fields.”
Bravo Short! The interesting thing about most of the MSM spin on the oil price debacle is the idea that this is simply another part of a regular oil price cycle, and soon enough prices will rise to keep all the expensive producers happy. Oh, wrong!
Your last line there, Short, is what I’ve been warning about recently – i.e. we will end up using conventional. I think 2014’s oil price decline marks the point in time when non-conventional begins it’s descent. How far behind conventional is in making the same move we’ll just have to wait and see. But things are unraveling fast in emerging markets like Venezuela. Now the EU is strongly considering QE to keep Greece in the EU – oh my things are squeezing awfully fast!
SugarSeam on Mon, 5th Jan 2015 2:25 pm
“Prices will probably advance some this coming year, but $100 oil will never again be sustainable. Depletion is reducing the the per unit value of oil.”
I don’t disagree with you. But could you help me understand this better so I can explain it to those in my obnoxious circle? Doesn’t this fly in the face of “Econ 101,” which so many people religiously cling to?
If U.S. production begins to flatline and decline within 18 months, and existing production continues decline, won’t there be an imminent shortage?
Perk Earl on Mon, 5th Jan 2015 3:50 pm
SugerSeam, usually econ 101 does apply, but in the case of oil, the net energy available from a barrel of oil is declining – therefore the value of it to use that energy to produce products/services is also dropping.
When prices were above 100 a barrel it made economic sense to go after oil with less energy. But eventually that lower energy content had a feedback effect on the affordability to consumers. Now many non-conventional oil sources will no longer make economic sense and we will become more reliant on conventional oil.
So it’s not just dollars it’s energy content and energy is something most people do not have an understanding about. As we continue to move forward with ever more depletion of energy content in oil, the price must also drop. So going back to 100 plus oil price would require lots of QE stimulus, which seems to have been shelved.
Best of luck explaining it to other people.
Davy on Mon, 5th Jan 2015 3:52 pm
Sugar, it is not that Econ 101 is wrong it is the parameters of Econ 101 are different in descent then they are in the growth paradigm. This is especially true with oil.
Econ 101 was already misinterpreting oil in the growth paradigm now that we are in a bumpy descent Econ 101 is little more than wishful thinking. We now are at limits of growth facing diminishing returns in a position of relatively rapid depletion of the economic value of one of the primary drivers to the economy namely oil.
This situation leaves me to believe a new adapted Econ 101 is needed that includes shorts thesis based upon real science not pseudoscience and selective history. At least a macro version that includes oil in a systematic relationship with the other means of production acknowledging broad depletion of energy delivered to that relationship.
Speculawyer on Mon, 5th Jan 2015 4:37 pm
Wow. If Berman is right, it seems that some bankruptcies and defaults on debt are inevitable.
It could get ugly. And one wonders how much it will spread to other places. How many 401(k) accounts have funds that invested in the junk bonds from the oil drillers. A lot of people that only thought the cheap gas was good for them may be in for a rude awakening if their mutual funds, IRA, or 401(k) fund was heavily invested in this sector either through equities or debt.
SugarSeam on Mon, 5th Jan 2015 4:49 pm
^ thanks guys…
I understand that. I’m just not sure cultists of finance seem to hear that kind of rationale when we mention net energy. To them, EROEI doesn’t seem to matter. They’re like that Ed Stein cartoon with the Custer-like character telling the nearby Indian, “Buffalo shortage? WHAT buffalo shortage? … Just give me enough money for guns and scouts, and I’ll get you all the buffalo you need.”
In other words, I don’t think econ cultists think there is a limit to purchasing power, and it’s near impossible to explain demand destruction to them.
shortonoil on Mon, 5th Jan 2015 6:13 pm
Best of luck explaining it to other people.
lol
I once tried to explain Quantum Mechanics to my dog.
He never forgave me!
GregT on Mon, 5th Jan 2015 6:59 pm
Wow. If Berman is right, it seems that some bankruptcies and defaults on debt are inevitable.
It could get ugly.
It already is ugly, it just isn’t apparent yet. The central bankers have done a good job of hiding reality from the vast majority of people. We are witnessing the largest redistribution of wealth in human history right now. All hiding behind mountains of paper. This isn’t going to affect a lot of people, it is going to affect almost everybody except for the 1 tenth of one percent. Our entire financial ponzi system is inextricably intertwined. When it goes down, it will go down quickly, just like the house of cards that it really is.
Davy on Mon, 5th Jan 2015 7:00 pm
Sugar, the “Cultists of Finance” have a reality and it is a powerful reality much like world leaders. These folks are movers and shakers. They can touch a button or send a communication and shit happens big shit sometimes. That is a powerful reality. Is it the reality? NO. The reality can only be approached and gotten near to. It cannot be known fully it can only be appreciated at a distance. If one gets too close one can lose their mind. That reality is true power and for no human hands to control.
These folks that have power are clever but they are deceived by their cleverness. They are lost in the lust of power or the mechanization of an organization that has swallowed them up and sucked their spirituality dry. It is no wonder our global movers and shakers have developed into psychopaths and automatons. The system has progressed to a point where humanity has been sidelines. We no longer have our tribe, our myths, our essence found in traditional social culture. We are lost in space and time in a reality manufactured and dehumanized, defunct of the natural, and mechanized.
If this sounds like preaching or world salad OK but you must admit life is barreling out of control and we are the victims. Are the riches really worth the truth? Would you turn your back on comfort for the truth? I mention these ideas because it is only going to get worse before it may get better. The degree and duration of the descent coming will determine the magnitude of social fabric decay. I just can’t get a handle on the time frame, degree and duration at this point. I can see what we have now at “Peak Everything” and it is nasty so I can only imagine what may be coming.
A word of hope for survivors, you may be starting a journey back to what is truly human. This may be an awakening of sorts. Humanity is not found in those places we are dwelling in currently. Humanity is where it once was. It is in our hearts and the traditions and culture of our tribe, clan, and small communities. It is with nature and our reverence of our higher power. So in conclusion those cultist of finance are worshipping a god that will destroy them eventually. It is a false god of greed and exploitation.
Northwest Resident on Mon, 5th Jan 2015 9:21 pm
“life is barreling out of control and we are the victims”
No kidding. That sums it nicely, Davy.
For any who might doubt that fact, here’s a detailed description of just exactly what is happening, and where it is taking us:
Sayonara Global Economy
“The global economy is imploding. Stock markets do not reflect the economic circumstances of the average person in Asia, Europe or the U.S. Governments across the globe have been captured by banking, corporate and military interests. They have used their power to subsidize rich elite oligarchs at the expense of the common people. Their weapons have been debt, control of interest rates, ability to rig stock, bond and currency markets, and media propaganda to convince the masses these criminal actions have actually benefited them. The people are beginning to realize government is not their friend. Trusting the government to solve the problems they created which led to the 2008 worldwide financial collapse, is insane. They have saved their .1% benefactors, while impoverishing billions. Now that their “solutions” are failing again, they will use real weapons wielded by soldiers, police and prison guards to enforce their decrees and self-serving laws. The year of consequences may have finally arrived. The people versus their governments is crystallizing as the impending chaotic clash which will turn violent, bloody and vicious. Your freedom will depend upon the outcome.”
http://www.theburningplatform.com/2015/01/04/sayonara-global-economy/
Davy on Tue, 6th Jan 2015 6:41 am
Yea, NR, good post. We can sum it up as “same as it always been”. One civilization after another has run the ecological cycles that govern “ALL” species. We are now at the end of just such a cycle. In the typical human fashion the priest and nobles are covering their ass in this period by cannibalizing the productive base to maintain their power and comfort. It is really not rocket science just plain old survival of the fittest.
Our BAU world benefits and supports the 1%er survival of the fittest actions. When the bumpy descent becomes a fall many of these folks will be exposed and unprepared to a new reality. BAU will not be there to support them. This doesn’t have to be a French revolution scenario. It will probably just be a mass dispersal from a global bottleneck where the strong and the hearty survive.
The fat, lazy, and unprepared will perish or have a greatly diminished lifestyles. The weak if in a good tribe, clan, and family will have a chance. I see big problems for a retirement community of the Sunbelt. It will take a diverse community to survive a descent. This means the entire strata chipping in not a mono culture retirement community.
GregT on Tue, 6th Jan 2015 9:36 am
The early 70s was our wake up call. When all of the OPEC oil came online, those that DID wake up, kind of rolled over and went back to sleep.
Those of us that were alive in those days can remember the results of the US peak, those that weren’t alive mostly believe that what is now coming down the pipes will never happen.
Those of us that do remember will see the end of the age of oil in the later years of our lives. Those that were not around back then will live a larger portion of their lives post oil, if they survive. The children of today that make it through the bottleneck, will not live lives even remotely close to what we have become accustomed to.
So sad that human greed is such a strong motivator, things could have been so much different.
Davy on Tue, 6th Jan 2015 10:41 am
Greg, my eccentric geology teach in 85 was fascinated with PO. It was part of the studies and was a big wake up call for me along with AGW in my ecology class. I took it serious and it had a big impact on me back then.
So much happened to discount both that I was influenced to believe the effects would not be a near term issue. It was not until around 2000 I had renewed interest. There has not been anything since that time that has changed my opinion.
I once was optimistic for AltE but no longer. Now I am resigned for a scary story to unfold. What makes it scarier is all the possibilities. We are truly in uncharted waters with no clear path. We are walking in the dark near a cliff with a cavalier attitude.
I would feel better if there were a coherent strategy for something. Currently we can’t even acknowledge a problem in a united global way.
I am leaning towards a near term crisis from PO changing that. Oil shortages are the only answer. It is what is needed to change attitudes and lifestyles. It will also end BAU which may be very bad. I am hoping for something softer than very bad.
bobinget on Tue, 6th Jan 2015 11:03 am
Obviously; shale, ultra deep water, oil-sands,production will be curtailed if trends toward $40. oil continue.
This begs a vital question.. WTF will the US find
21,000,000 BB a day to keep America’s wheels spinning?
Just a few obstacles:
Fact: US loses at minimum seven million NET BB per month from Venezuela stock going to China for debt service. Beginning, mid 2015
Fact: US loses six million Net barrels PM from Ecuador:
http://www.bloomberg.com/news/2015-01-06/ecuador-gains-5-3-billion-credit-line-from-china-as-oil-tumbles.html
Alaska’s diminishing production is not the big problem. Melting permafrost endangers ‘The Pipeline’.
Canada, by 2016 will be shipping oil sands crude
East and West and South to Latin America.
Now that Keystone is about to be approved
its importance has been muted by alternative pipelines and Rail.
GregT on Tue, 6th Jan 2015 11:19 am
I am afraid that we are at the cusp guys. What remains to be seen now is how quickly things will fall apart. Originally I believed that we had until the mid 20s, I do not believe that we have a decade left anymore. I can only hope that we have another few years left, I still have a lot of work left to do.
Northwest Resident on Tue, 6th Jan 2015 11:41 am
“WTF will the US find 21,000,000 BB a day to keep America’s wheels spinning?”
Answer: They won’t. Energy shortages are coming. The noticeable kind. The kind that result in gas lines, rationing, all that fun stuff. Not just in America but everywhere else too, to a lesser or greater degree. Riding in the same clown car will be our friends chaos, panic and utter mayhem.
GregT — My brother is in sort of the same situation. My advice to him was to make sure he has his food/water situation taken care of, and to order and get delivered all the materials he is going to need to complete his projects NOW. As long as you have the materials and enough food/water to last, you can get those projects completed as you’re able to do so, regardless of whether or not you still have a job any longer, or JIT delivery is still operational, or stores/businesses are still open for business. Just a possible solution. I personally can’t image that BAU sticks together for three more years, but that’s just me.
GregT on Tue, 6th Jan 2015 12:47 pm
NWR,
Our government and emergency services personnel have been warning people here for decades. We live close to a major subduction fault line, and are historically overdue for an Earthquake in the 9.0 magnitude range. Every time we have a little event here, people freak out for a couple of weeks and then all is forgotten. My wife and I have heeded their advice. We probably have enough food and water to survive for several weeks. It is not our preparedness that concerns me, it is the tens of thousands of people within close proximity that haven’t made any preparations, that I worry about.
We all saw the results of Katrina, the worst of which was not shown on MSM television. While some people definitely rose up to the occasion so to speak, there is a percentage that went off of the deep end. Katrina should have been a wake up call for us all, but it was not. People always seem to believe that ‘it will never happen to me’ until it does.
Katrina and Sandy, as two examples, were temporary events. The decline following the peak in oil production will not be temporary, it will be permanent, and will continue to become increasingly more problematic as time goes on. Of course you already understand where I am going with this.
My wife and I are out of the city in the beginning of June. We still have a lot of work to get things in order. We have security covered, food production mostly covered, but still need to work on alternate energy infrastructure. We really need to establish ties within the local community, as I feel this may be one of the most important aspects going forward. I guess at this point in time, it is the waiting that is the hardest part.
bobinget on Tue, 6th Jan 2015 1:50 pm
We are seeing market panic selling.
The masses believe or believe OTHER people are convinced this so called ‘glut’ is a genuine indication of a slowing world economy.
Few understand we are in deadly War Situation Over Oil.
(there are currently 7 related, full scale oil conflicts in ‘progress’; Iraq, Syria, Yemen, S.Sudan, Nigeria,
Venezuela, Libya.
Yes, the most important economic lubricant known to man is selling below cost of production.
When a group of Saudi Citizens pulled off the World Trade Center disaster, many feared that sort of terrorist attack could or would be duplicated.
WTC used our own technology, a few hundred thousand dollars to attack the host.
Today, Saudi Arabia once again using America’s
might and a few thousand million dollars has inadvertently caused serious market ‘corrections’
worldwide. Trillions have been lost in ‘market value’
in this not 10% ‘correction ‘ but disastrous for many,. Fifty-five percent and counting.
While most knowledgable sellers understand normal market dynamics few understand we are being attacked using our own market dynamics.
I do believe world markets can recover once
the public gets a bit or truthiness. . However, there has been too much damage done for America to bounce back as we did in 2002.
First and foremost, we may be the world’s largest
oil producer, the USD, @ 91.60 near record highs,
inflation low, is deflation around the corner?
The US still imports on average 7.5 million barrels each and every day. Take Venezuela and now Ecuador and Nigeria and S.Sudan and Libya and
Yemen out of the equation, we would be lucky to
scratch together four million Barrels p/d.
Where did all that ‘Glut’ of oil go? To Asia, jerk-off.
I predicted here over a year ago Russia will ‘win’
control of oil markets. I sand by this prediction.
Russia and China have everything to gain and are doing so.
Saudi Arabia:. Any state attempting 11th century punishments on 21st FaceBooker’s, Twitterers, Instagramers, etc is doomed. It’s that simple.
F/16’s, German tanks won’t stop a ‘Saudi Spring’.
V. Putin knows, the Saudis know, you know, the damage done to Libya’s oil economy by a single $110 rocket drive-by launch.
Putin determines timing. Throw more arms, money at dissident groups now fighting in Syria to shift
any blame for future drive-by attacks onto ‘Islamic
Rebels’ itching to get hold of even a slice of Saudi Oil Wealth. Note that both oil giants, Saudi Arabia and Russia export more oil then consumed domestically, This is Not the case for “The largest oil producer in the world”