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Operating in a World of $50 Oil

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While hopes for a reversal in oil prices may have faded just after mid-August when U.S. crude oil futures slipped to a six-and-a half year low, the battered petroleum industry continues to plod along in its search for ways to steer through these difficult times.

Last month, some industry players met in Singapore for the 14th Annual Marine Money Singapore Ship Finance Forum, where there was a discussion on dealing with the impact of oil at $50 a barrel. Rigzone takes a look at the key issues under scrutiny at the forum, including the future direction of oil prices, the impact on the offshore support vessels market and oil consumption in China – the primary driver for global demand growth in recent years.

To recap, global oil prices have lost around half of its value from a year ago due mainly to a supply glut, a development exacerbated by the decision of the Organization of Petroleum Exporting Countries (OPEC) in November 2014 not to reduce production so as to protect their market share. The prolonged supply glut weighed on global oil prices, culminating in U.S. crude futures falling to $40.46 a barrel Aug. 19 – the lowest since March 2009.

Mixed Views on Oil Prices

Panelists at the Singapore forum held different opinions on the future direction of global oil prices. They singled out various factors for the current malaise in the oil markets, including weak demand caused by low global economic growth and the surge in U.S. shale production. But the panelists agreed that the industry downtrend stemmed mainly from OPEC’s stance on keeping unchanged the cartel’s oil production level.

“If you look at what’s happening today, it’s a plan, it’s a strategy, it’s a plot and you can call it what you want. OPEC has a strategy here. It’s just not the force of market pressure. This is a strategy to drive the price of oil down, drive out the producers/competitors that have more expensive recovery, like the Russians, North Sea and U.S. shale production. So that’s what I think the difference is and it’s working,” Kenny Rogers, head of Chemical Transport Logistics at Aurora Tankers/IMC Industrial Group, said.

Panelists were uncertain when global oil prices would recover given the unpredictable nature of the markets.

“At the very peak in 2008, Goldman Sachs [Group, Inc.] said oil would go to $200 [a barrel] and of course it crashed to $37. Only last week they say it will go to $20. I don’t really know. It’s anybody’s guess I believe,” Geir Sjurseth, Managing Director and Head of Offshore Finance at Germany’s DVB Bank SE, said.

He was referring to the last major financial crisis, when global benchmark Brent oil futures peaked at around $145 a barrel in July 2008. At the moment, industry players are unsure whether the oil prices have bottomed.

“No one has ever suggested an alphabet to describe this crisis. The last time [the 2007-2008 crisis] it was all about a V-shaped recovery, a W-shaped recovery or a U-shaped recovery. But there’s no alphabet to describe what we are going through right now,” Fazel A. Fazelbhoy, CEO of Dubai-based Synergy Offshore FZ LLE, a consulting firm focused on the offshore energy and marine sector.

Lower Non-OPEC Supply Key to Market Recovery

With OPEC sticking to its current production quotas, prospects for a recovery in global oil prices will hinge on a reduction in supplies from major non-OPEC producers like those in Russia and the North Sea as well as U.S. shale producers.

“In the short term, it’s going be a cut in supply which is required to help stabilize the oil price. Recent reports … have been proclaiming that OPEC won the oil price war as the non-OPEC producers have started to cut supplies, notably U.S. shale production, most of which makes a sizeable loss while the oil price is languishing in the $40-50 a barrel price range,” Simon Spells, a Singapore-based senior associate at international law firm Berwin Leighton Paisner LLP, told forum participants.

“OPEC itself was likely to respond by cutting back its own production, having achieved the objective of protecting its market share. And this in turn will allow supplies to fall further … which in the short to medium term will assist in leading to an increase and stability in the oil price,” Spells added.

These sentiments were reflected in the “Short-Term Energy and Winter Fuels Outlook” released by the U.S. Energy Information Administration (EIA) Oct. 6. In it, the EIA forecast non-OPEC production, which expanded 2.3 million barrels of oil per day (MMbopd) in 2014, would grow by 1.3 MMbopd in 2015 – with the increase attributed to investments made when oil prices were higher. It estimated output would remain flat in 2016.

“Non-OPEC growth dries up to almost nothing; the Saudi strategy is working … It is has never been about a couple of months or a couple of quarters, but a couple of years, and that is how it is playing out,” according to Michael Wittner, a New York-based analyst at Societe Generale, as quoted by Reuters Oct. 6.

In fact, a panelist commented that the current low oil prices could be a precursor to another rally in the market in the not too distant future.

“I don’t understand how no one has talked in the last three to six months what the decline rate of existing oil production [which could be] anywhere between 8 and 20 percent,” Fazelbhoy said, noting that capital spending has been cut by petroleum companies worldwide amid the industry downturn.

“If no new oil is being discovered and we have an absolute limit of new oil coming from 2014 through 2017, someone is going to wake up one day and say hey we need more oil. The reaction is going to be: you have lost over $100,000, capability has been decimated in the oil industry, in the oil services sector, including oil companies,” he explained.

“You have no infrastructure in place, no major oil fields discovered during this period … You have a declined rate of up to 20 percent and more in some cases, oil inventory goes down, then what? You are going to have this haywire Goldman Sachs prediction probably come true … The point is no one knows. I think $200 is perfectly logical [under such circumstances].”

Offshore Sector Faces Headwinds

The offshore sector, including the offshore support vessel (OSV) segment, serving the oil and gas industry is facing continued headwinds as its revenues are still under pressure from sharp cutbacks in capital spending by petroleum firms, causing delays and cancellations of several exploration and production (E&P) projects.

“$50 oil has decimated the offshore industry altogether. E&P has been growing at a rate of 12 to 14 percent per annum from 2008 onwards and it crashed down to 2 percent growth in 2014. Growth will fall 15 to 20 percent … in 2015 and by up to 25 percent in 2016,” Fazelbhoy said.

Meantime, he revealed that OSV utilization rates fell from 90 to 60 percent while day rates have fallen by around 30 to 60 percent. More downside pressure is expected for OSVs as 400 new vessels are poised to join the global fleet, a number that excludes the estimated 200 newbuilds in China.

While OSV utilization in the Middle East stays high at over 90 percent, largely a result of the OPEC-led strategy to keep oil production up, it has not shielded regional vessel operators from feeling the effects of a worldwide decline in day rates. Vessel day rates for OSV players dipped by more than 30 percent, according to the Synergy Offshore CEO.

Agreeing with the observation, Berwin Leighton Paisner’s Simon Spells noted that the offshore sector is now “coming to a stage where there is going to be some distress in that market and some restructuring required.”

He explained that banks are concerned about the financing arrangements with vessel owners, especially if the existing charter contracts are not being renewed, or renewed as expected, as these are often built into the requirements for existing financing facilities.

Chinese Concerns Eases, Slightly

Economists who spoke at the forum said they expected the economy in China to avoid a “hard landing”, easing concerns of a sharp curtailment in oil consumption in Asia’s largest, and the world’s number two economy after the United States, data from the International Monetary Fund indicated.

Operating in a World of $50 Oil

China’s currency devaluation in August and a sharp decline in its equity markets dented confidence in its economy, which – the EIA noted in its May report – accounted for about 43 percent of global oil demand growth in 2014 and an estimated 25 percent for 2015.

“The Chinese authorities have the tools necessary to keep the slowdown in economic growth gradual,” ABN AMBRO’s Head of Macro and Financial Markets Research Nick Kounis told the forum, adding that China’s economy is expected to grow by 7 percent in 2015 and 6.5 percent  in 2016, compared to 7.3 percent in 2014.

Another economist held similar views on the Chinese economy, highlighting the country’s importance despite the slowdown.

“China’s economy is slowing but not crashing,” according to Edward Lee Wee Kok, head of ASEAN Economic Research at Standard Chartered Bank. He added that “despite the concerns … about China in the near term … it’s hard to look away from this economy.”

RIGZONE



37 Comments on "Operating in a World of $50 Oil"

  1. BC on Tue, 20th Oct 2015 8:11 pm 

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2cri

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2cqs

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2cr8

    https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/50878-MBR.pdf

    Private final sales (FS) per capita have stalled and the deficit/FS is set to increase.

    Prepare for a “stimulating” 2016-17 (to 2018-20?), a deficit/FS of ~15-16% (SAAR) at some point, and the Fed’s balance sheet at, or near, 40% of FS and approaching ~100% of bank loans less inter-bank loans, charge-offs, and delinquencies, i.e., effectively no fractional reserve lending at that point.

    Ready, gents?

  2. makati1 on Tue, 20th Oct 2015 8:30 pm 

    More RIGPORN…

  3. MrNoItAll on Wed, 21st Oct 2015 1:37 am 

    Nothing a few trillion freshly printed digi-bucks/Yuan can’t handle.

    Meanwhile, in the real world, EM oil exporters are crashing, commodities are crashing, shipping is crashing, international trade is crashing, retail is crashing, massive layoffs across the spectrum of asset classes are ongoing including perhaps especially in the domestic shale/fracking sector, etc…

    But have no fear. We CAN operate in a world of $50 oil, yes we CAN, as long as the printing presses are rolling and the propaganda machine is turned up max volume.

    Now, if we could just get the price of oil UP to $50 per barrel and keep it there for a while. Hey! Where did all the happy shoppers go!?

  4. GregT on Wed, 21st Oct 2015 2:01 am 

    What are you going on about NWR? Who needs shoppers? Everyone knows that Joe Six Pack spends less of his wages on gas, in better comfort and safety, than he did back in 1965.

    We’ll just drive ourselves into economic prosperity. Jeez, what’s wrong with you guys anyways. 🙂

  5. rockman on Wed, 21st Oct 2015 5:24 am 

    “We CAN operate in a world of $50 oil…”. Probably so since the world kept on plugging along for 20 years (1986-2006) with the inflation adjusted price of oil less than $50/bbl. And at times just 1/3 of that amount during that period.

  6. shortonoil on Wed, 21st Oct 2015 6:32 am 

    “The point is no one knows. I think $200 is perfectly logical [under such circumstances].”

    The price of oil can be no higher than the amount of economic activity it can power. No one can afford to use $2 worth of oil to produce a $1 worth of goods and services. This simple concept seems to evade most commentators. The price of oil is range bound; it is determined by consumer affordability, and that is going down – It is gong down as the energy to produce petroleum, and its products is going up:

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

    Petroleum’s falling capacity to power the economy has resulted in an economy that has stagnated, or is declining. In an attempt to compensate Central Banks have flooded their economies with fiat currency. Interest rates have fallen, and trillions of dollars have been made available to the credit markets. Much of that excess money was used in activities that would have otherwise never taken place because they are non productive, like shale.

    This has resulted in an excess of supply for which there is no market. In the case of petroleum it has resulted in historically high inventories, and prices falling below where they should have fallen. Central bank policies appear to have driven the price of oil down an additional $20/ barrel from their otherwise market equilibrium point. The more fiat the Central Banks print, the more oil prices will fall. In their futile attempt to save the banking system, the Central Banks have managed to decimate the commodities sector.

    The coming end of the oil age will be froth with such unintended consequences.

    http://www.thehillsgroup.org/

  7. Davy on Wed, 21st Oct 2015 7:07 am 

    It is amazing isn’t it the bad news is good news and the cultural narrative of disregard for all those economic basics that are stagnating. I presume we as a global people are not accustomed to deflation and decay. It is our frog boiling analogy. We have been habituated to development, growth, and to a basically inflationary long term outlook. Even peakers were fooled when many preached very high prices to eventually take over and stay.

    It appears limits of growth and economic decay has a significant deflationary basis. I still believe we will have the inflation like feeling when there is demand for products that are not available because of supply destruction. I still see hyperinflation from the combination of inflation and deflation destroying confidence. There is far too much digital wealth in relation to the real “now” physical and the “future” physical. This “notional” wealth has nowhere to go. When that “notional” wealth runs for the hills “Katty bar the door”.

    In the case of oil it appears we have a new scenario of demand and supply destruction. It is not easy to see through the haze of a glut but we have ample evidence of exploration and new production that is not happening. We see an economy not prospering on lowish oil prices. That is evidence for me of demand and supply destruction. The longer these oil investments are delay or worse shelved the more likely we are going to have a supply shock without economic strength to handle that shock and bring new supply to market. That means dangerous contagions of volatility and risk across the board of economic activity.

    I wish there were more research on what may happen with an economy like our now that is clearly not healthy having an oil price shock because of lack of supply. Oil bulls are crowing about this day coming. Shale believers see American oil turning on like a faucet. We know here some supply can turn on like a facet but most take many months to restart. Our global economy no longer works well on the volatility that accompanies fluctuations in supply and demand.

    Central banks are struggling to normalize now. Global economic activity is under extreme pressure from the Chinese slow down. Emerging markets especially the resource driven ones are a mess with economic struggles. Add to our current unhealthy economy at some possible point high oil prices and lack of supply. I can’t see anything good coming out of that.

    I agree with Shorts ETP analysis in the long term but my feelings are human nature dictates the short term. The markets and the economy will suffer increasing dysfunctional when oil supply is constrained and high prices hit. Can you imagine more dysfunction added to what we have now? Already a sneeze makes everyone duck for cover. Will a supply shock lead eventually to low prices from plummeting demand further adding dysfunction and volatility? How long can our global economy hold together in gyrating descending dysfunction?

  8. shortonoil on Wed, 21st Oct 2015 11:44 am 

    http://www.zerohedge.com/news/2015-10-21/caterpillars-endless-pain-screams-global-depression

    Prices don’t go UP in a depression, they go down!

    We believe that oil is the most crucial indicator that there is of the world’s economic state. It is so intertwined into every single aspect of it that the world moves when it does. Human nature is certainly complicit, but it is also constrained by the laws of physics like every other activity that has, or will ever take place. We have our limits, and we are not going passed them as long as we occupy a place in this particular universe.

  9. Davy on Wed, 21st Oct 2015 12:03 pm 

    Short, I am not the only one seeing a supply shock induced price rise. I believe you have mentioned this before also. I feel it is possible short term and it will surely be accompanied by economic disruption that will drive prices lower later. This is possible and should not be taken off the table IMHO.

  10. GregT on Wed, 21st Oct 2015 12:54 pm 

    OPEC Hosts Meeting With Oil Officials From Non-Member States

    ‘Meeting is unlikely to yield an agreement to pull back on production.”

    “Countries like Venezuela have called for Russia to slash output. Russia, the world’s largest oil producer, and the Persian Gulf countries that rule OPEC have said they aren’t interested in cutting output.”

    “They are not going to change position now. Russia is the elephant in the room, not the U.S. or Iran,” one Gulf delegate said.”

    “Any cut, the group’s leaders reasoned, would be rendered meaningless by a flood of new oil production from the U.S.”

    http://www.wsj.com/articles/opec-hosts-meeting-with-oil-officials-from-non-member-states-1445419301

    The plot thickens………

  11. rockman on Wed, 21st Oct 2015 1:20 pm 

    “…by a flood of new oil production from the U.S.” The last “flood” of US oil production increased global output from 5 mmbopd to the peak of 9.601 mmbopd in April 2015. That’s an increase of 4.601 mmbopd according to the EIA. Which also pegs 2Q 2015 global “liquid petroleum” at 95.56 mm bbls/day. Thus that recent “flood” now represents a whopping 4.8% of total global production. Better than a sharp stick in the eye but I don’t think I would characterize it as a flood. Especially now that the flood has begun to recede. Granted it has had some effect on pricing but it seems reasonable that the entire oil price collapse might be explained by a small “flood” of new production teaming up with a growing “drought” of purchasing ability by the consumers. Small floods aren’t dangerous…unless you happen to be going down into the “basement” at the same time.

  12. GregT on Wed, 21st Oct 2015 1:36 pm 

    All stories have plots rockman. This story happens to be written by the Wall Street Journal. The story that I’m reading here? The Russians are responsible for the decline in output of US oil production.

  13. BC on Wed, 21st Oct 2015 2:06 pm 

    https://app.box.com/s/ys8ijadj4b57nb95ka0b3ilph38ga7fm

    In support of short’s argument and indirectly/tangentially responding to rock and Davy, the price of WTI is still too high in terms of oil consumption to final sales and the differential change rates.

    https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2cTQ

    The Fed has had to print $3.4 trillion in bank reserves and the federal gov’t borrow an additional $8 trillion (nearly 50% equivalent of final sales and 67% of private final sales!!!) since 2008 to prevent a 1930s-like contraction in nominal output, which in turn encouraged a ZIRP-induced MASSIVE increase in non-financial corporate debt (energy sector and for the Fortune 25-100 firms to buy back stock) to private final sales at the highest since 1928-30 and in Japan in 1988-94.

    But the unprecedented reserve printing and corporate debt to final sales has succeeded in merely getting back to the level of 2007-08 for real final sales per capita, and US oil production per capita is still down 45% since 1970 and back to the level of the late 1940s.

    But if I am correct about the current situation with the monetary base to the deficit and the net savings deficit to private investment, the Fed will be compelled (direct by the TBTE banks) to print an additional $3 trillion in the years ahead to accommodate a fiscal deficit of 15-16% (SAAR) of private GDP/final sales in order to fund deficit spending to prevent nominal GDP from contracting.

    The money multiplier and velocity will decline further, and the acceleration of money velocity will contract more, reinforcing the liquidity trap and deflationary conditions emerging for secular stagnation of the Long Wave debt-deflationary regime.

    But $3 trillion more in bank reserves and $8 trillion more in deficit spending will not result in any more affordable oil at a price that will permit growth of profitable extraction of shale and tar, nor will it allow the economy to achieve “escape velocity”.

    This is serious stuff, dudes.

  14. shortonoil on Wed, 21st Oct 2015 3:56 pm 

    “This is serious stuff, dudes.”

    By our calculations it will require $39 trillion in additional debt formation over the next decade to keep the world’s petroleum production flowing. That calculation was done with the same method that projected the price decline six months before it began in June of 2014.

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

    The industry has been banking on a rebound in prices to save their demolished balance sheets. That rebound, if it occurs at all, will be insufficient to return the industry to profitability.

    Here are a couple of articles that describe the predicament that the industry is finding itself getting into:

    http://wolfstreet.com/2015/10/20/who-on-wall-street-is-eating-losses-on-oil-gas-debt/

    “But then, there are dreams of “a potential spike in oil prices.” Read… The Dismal Thing Schlumberger Just Said about US Oil”

    http://wolfstreet.com/2015/10/18/the-dismal-view-schlumberger-ceo-just-shared-on-us-oil/

    Articles on the Etp Model will soon be available in German, and will be published in the German press.

  15. antaris on Wed, 21st Oct 2015 4:13 pm 

    Yah gotta laugh. Right in the middle of the above top article was an add for “Oil Boom Investing, get started now” complete with a nice smiling cowgirl.I went back to have a look again and it had rotated to another add.

  16. apneaman on Wed, 21st Oct 2015 5:05 pm 

    Global Recession Accelerating toward Depression

    http://www.dailyimpact.net/2015/10/21/global-recession-accelerating-toward-depression/

  17. BC on Wed, 21st Oct 2015 8:46 pm 

    Gents, seriously, if you have the capacity to secure in cash or equivalents outside the US, Canadian, UK, Aussie, and EU banks at least 3-6 months’ worth of living expenses, I would STRONGLY URGE you to do so NOW.

    Perhaps I’m being redundant for the “preppers” among us, but I would be professionally, morally, and ethically remiss for not taking the opportunity to urge with care and earnestness to DO IT NOW.

  18. Davy on Wed, 21st Oct 2015 9:00 pm 

    BC, 100 #10 cans of long shelf life food would not hurt either.

  19. BC on Wed, 21st Oct 2015 9:01 pm 

    @short: By our calculations it will require $39 trillion in additional debt formation over the next decade to keep the world’s petroleum production flowing.

    Not coincidentally, that’s equivalent to ~50% of today’s world GDP, which implies that the energy and debt cost of extraction of global oil supply at the current price as a share of GDP (1) PRECLUDES growth per capita of marginal kerogen and tar supply as a share of GDP; and (2) without the growth of oil supply per capita at an affordable price to sustain global GDP, neither will production be maintained hereafter.

    At the risk of sounding like a fanboy, I’m not sure how many readers appreciate short’s contribution here for its merit; but his work is exemplary in that it frames Peak Oil and its implications in a scientifically falsifiable context, as I have attempted to demonstrate, which for the most part affirms short’s work, which I hope adds to the larger understanding of Peak Oil, LTG, and the profound implications for our economy, civilization, and ultimately the human apes’ prospects hereafter on our finite spherical planet.

  20. BC on Wed, 21st Oct 2015 9:03 pm 

    @Davy: BC, 100 #10 cans of long shelf life food would not hurt either.

    Perhaps even better, or the best, advice.

  21. ghung on Wed, 21st Oct 2015 10:04 pm 

    BC said; “I would be professionally, morally, and ethically remiss for not taking the opportunity to urge with care and earnestness to DO IT NOW.”

    Do it always. Integrate it into your lifestyle. As for 100 #10 cans of long shelf life food…, my take is that the added expense of commercially available “long shelf-life foods” is misspent money. Many items found in your local grocer have a long enough shelf-life for much less, and if you aren’t producing most/all of your own food in 3-5 years, or those things aren’t available in that time frame, you’re screwed anyway. We recently opened two cans of Campbell’s Chunky Sirloin Burger soup, one new and one 5 years past it’s ‘best by’ date. Not much difference, and the older stuff was perfectly edible. These doomsday preppers who store 20 years worth of food may be guilty of overkill, although it may be good for trade/barter.

    Buying dry goods such as rice, beans, pasta, sugar, SALT, and flour on sale is a good way to put up calories for the future, especially if you vacuum pack things and store in a cool, dry place. Our ‘root cellar’ is set up so we can rotate food stocks in order of purchase.

    Buy in bulk and repackage (again, get a cheap vacuum packer). I made bread last week from flour we bought at Costco and packed over five years ago; an easy crusty french bread that came out great. I always keep fresh yeast in the fridge, but could keep an ongoing culture going indefinitely if needed, or culture my own from the air.

    Meanwhile, this weekend we canned gallons of beets and filet beans I grew in our greenhouse; still producing a week after our first frost. Still getting fresh tomatoes, and have loads of cabbage, carrots, more beets, onions, herbs, broccoli, Brussels sprouts, more, coming on late fall and winter. More greens going in soon. We didn’t do regular pickles this year, but have plenty to get us through from last year.

    Another skill is to learn to can meat. Cheaper, tougher cuts of beef get tender and tasty after being canned for a while. I can soups, stews, and chilli often. Always have several months worth stored for a quick lunch or snack. If I’m making these things, I make extra for canning. My canner is almost always out on the counter, ready to go. Another thing I stockpile is canning lids.

    Of course, most of you won’t take things this far, but as I said, it’s not prepping; it’s a lifestyle. For most, buying cases of canned products and shoving them in a closet is better than nothing. Tuna, salmon, canned chicken, soups, canned vegetables and tomato/pasta sauces, along with dry goods; all keep well for years if stored properly, as do things like canned coffee and tea. Canned citrus fruits keep well and may help stave off scurvy. I also keep several gallons of white vinegar in the rotation for pickling. Learn what’s edible in your yard as well, like dandelions.

  22. GregT on Wed, 21st Oct 2015 10:48 pm 

    BC,

    ” I would STRONGLY URGE you to do so NOW.” We have already done so, no problems there. My questions to you? Why not 5 years from now, or 3 years, or 10 months? What do you see as the catalyst that finally puts an end to this facade sooner rather than later?

  23. GregT on Wed, 21st Oct 2015 11:25 pm 

    “Of course, most of you won’t take things this far, but as I said, it’s not prepping; it’s a lifestyle.”

    I grew up like that ghung, my Mom was always canning preserves. One of the reasons why I married my wife was because she was also brought up the same way. We spent the last two weekends canning pickles, vegetables, fish, and antipasto. We also made up and froze turkey soup, pea soup, turkey pot pies, and vacuum packed salmon and halibut. Our canner is just about rusted through now, so we’re looking for a good stainless steel one.

    We have one of those cheap Food Saver vacuum sealers. One of the best investments I ever made. I’ve pulled steaks out of the freezer that were frozen for three years and they’re every bit as good as the day they were packed. Smoked salmon for four years. It works great, but the ‘bags’ aren’t as thick as the commercial ones and sometimes lose their seals. A commercial vacuum packer is on our list of things to get. For anybody that doesn’t already have a vacuum sealer, I would highly recommend them, even the cheaper ones.

    We stock olive oil, rice, balsamic and white vinegars, dried beans, peas, sugar, salt, flour, and herbs and spices. We also buy our coffee in bulk in two pound tins. We are always a year ahead of our consumption. Cheaper this way too. We pay around five dollars a pound for ground espresso beans. We have canned soups, fruit, tuna, chicken, salmon, corned beef and spam. As well as tomatoes whole, diced, sauced, and pasted.

    Once you get into the habit, it is really easy to keep rotating a stock of food. I really don’t understand why so few people do, especially in this day and age. We don’t go usually go shopping when we need to make a meal, we go shopping to stock up.

  24. MrNoItAll on Thu, 22nd Oct 2015 1:30 am 

    Canning is good practice and we do a fair amount of it. But is it sustainable over the long haul and can it be depended on as a method of food preservation when jars, canning lids and NG/electric heat is generally needed, although I’m pretty sure that I could do my canning on my rocket stove assuming I can keep the heat at a fairly stable temperature.

    My approach is to not depend on canning as a long term solution to food storage. Instead, I am depending on high-protein maze/corn which can be dried and lasts for many years if kept cool and dry — grind it into corn flour like the Indians (and Lewis and Clark) used to do, and there are several tasty ways to prepare it. Also, potatoes! I have 30 gallons in my “garbage can in the ground” root cellar, and another 15 gallons in the garage that we have been eating regularly. Russet and Kinebec potatoes are very nutritious and keep well, and are easy to propagate as seed for next year’s crop. We have also discovered that onions preserve very well underground in a garbage can root cellar, and the ones we have in the garage on shelves and have been eating since July are still as fresh as the day we pulled them out of the ground. Carrots are extremely nutritious, and you can leave carrots in the ground — no need to harvest — just go pull them out of the ground when ready to eat, although if you want them crisp you do need to keep the soil damp. I have grown wheat and the wheat seed keeps literally for years and years — plant it for a new crop or grind it to make fresh flour — but you need a lot of surface area to grow any significant amount of wheat. Egg laying chickens — must have! Honey bees — self-propagating with minimal care, and depending on your location and available forage and managing them correctly, and you can get a LOAD of high nutrition and very tasty honey. My honey this year made primarily from blackberry forage is extremely good and gets rave reviews from everybody — I eat it like candy. Pole beans a huge producers in a limited amount of space, and if dried, the peas can be kept/preserved for seed or for soups/stews at least a year. Garlic is awesome — we grow it, harvest it, dry it and grind it into garlic powder where it stays fresh and tasty in air-tight jars for a long, long time.

    Buying long shelf life food is excellent prep, and we have all that — salt, sugar, pinto beans, rice, wheat and assorted canned meats.

    But if you’re thinking real long term, and want to be self-sustaining in food production, then you have to learn what to grow in your area, how to grow it, and how to preserve it not just for food, but for continued seed propagation too.

  25. MrNoItAll on Thu, 22nd Oct 2015 1:48 am 

    BC — I for one definitely appreciate short’s contribution here. I’m not a rocket scientist or math whiz, but the concept of declining energy available to drive the economy due to depletion — which I believe is shortonoil’s main theme — is just plain logical. Also, it doesn’t take a genius to understand that shale/fracking and other unconventional oil is an approximate zero net-energy gain operation, but shortonoil makes that understanding perfectly clear. And the concept of the economy being a function of energy production rather than the other way around — I thank shortonoil for hammering that idea regularly, and decisively.

  26. Davy on Thu, 22nd Oct 2015 2:05 am 

    G-Man – “my take is that the added expense of commercially available “long shelf-life foods” is misspent money.” “Yea, but” G-man, not everyone can do the econo-prepper as you do. You are an expert at doing the prepping in a thrifty and efficient way. That takes a lifestyle, education, and time. It seems so simple to you as your alternative energy systems expertise but it ain’t. There are so many new to the prep world that just don’t have the time or the ability to be at your level.

    I would say yes practice some of your food resource ideas as sound food prep investments and lifestyle especially for the money. I would say for many just buying #10 cans is an effective way to build up a store of food to get one over a hump. And yes they are good barter items. In the meantime people should be following what you preach and more. There are thousands of locals which means diversity but that diversity can have the common theme of food procurement. The real key to doom and prep is being able to produce food longer term without all the fossil fuel support.

    This is all a dramatic and drastic life change. It does not come over night. The spectrum of doom and pre is so broad as to be overwhelming. I have been at this now seriously for 10 years. It has been my mentality since 85 when in college I learned about climate change and peak oil.

    I will say this food is the number one aspect of doom and prep then it is location IMHO. You have to have some food options to fall back on in a time of crisis. The crisis may stabilize but it may not stabilize within a time frame of your three meal for three days. When this happens poor decisions can be made and one can lose years of investment. We know people are told in adverse climates where hurricanes or snow storms can strand people to have emergency rations. I am saying take that further with doom and prep efforts to have at least a minimum of 1 month of food ideally 6 months. Have basics that might not be tasty but they will keep you alive. G-man makes a good point that if we get far enough along and the local cannot supply food we are S.O.L anyway.

    Chapter 2 of this story is food production by farming, gardening, and animal husbandry. Just a comment on the chapter 1 and 2 they can coexist. I am doing a grazing system for goats and cattle. There are reasons for goat and cattle related to weed and brush management from the goats and grass management from the cattle. On the doom and prep side the cattle are assets to sell into the market. They are too valuable to butcher for food except on certain occasions in conjunction with other families. Goats on the other hand can be utilized by one family at any time. Goats are tough as a pine knot. With climate change coming drought is a real issues. Everything can be eaten in my pasture by the combination of goats and cattle.

    My point here is not to pitch my grazing system it is to push you to be creative and all-inclusive in your particular local. Your lifestyle should be one dedicated to both long and short term to producing food. Plus ideally your efforts are still in the status quo but with one foot out. Bills must be paid so do something that offers some kind of return.

    If you are not in the position to produce food then have as a minimum of basic food rations. This is where location becomes a critical issue and also your skill set. Will your local provide enough food to survive in a fossil fuel crisis situation? Do you have a skill set to offer services that can be traded for food in a fossil fuel crisis situation? If not then you should be considering as a hobby learning some kind of skill to fall back on. Learn to make beer and wine for example. Learn to can food.

    We are not just going to be taken care of at some point. There are too many people. Security is chapter 3. You can claim mad max force majeure to argue against doom and prep efforts but my response is what kind of crisis, how long, and how bad. Is mad max your Hollywood fantasy? Arguing against any effort means you are planning to fail and hoping for luck. In other words you are playing the casino of life. I was never lucky at gambling if you are have at it. Speaking of gambling money and equivalents are another items to consider for chapter 4. The chapters of doom and prep go on and on because life is deep. All the chapters are connected by chapter one the food chapter. Have food!

  27. MrNoItAll on Thu, 22nd Oct 2015 2:16 am 

    GregT — I don’t want to steal BC’s thunder or presume to have a better answer than him. But you ask, “Why not 5 years from now, or 3 years, or 10 months?”

    My take on that, for what it’s worth, is this.

    The ONLY thing keeping BAU and global/national economies viable is active and organized intervention by TPTB. I assume that you recognize that fact as self-evident.

    When your job, your food, your utilities, your transportation, your medical treatment/pills (if needed), and so much more absolutely is dependent on continued BAU, and when you recognize that BAU is a dead man walking propped up by supports that could be withdrawn at ANY time, or just blown away by a sudden black swan event, then I believe a logical and aware individual will correctly conclude that right fucking NOW is the time to be as totally prepared as possible.

    I just happen to be one of those that believe the US Government and no doubt many if not most other governments are keenly (yet secretly) aware of just how close we are to a shit storm, and I’m sure that the US Gov at least has a plan in place to deal with economic breakdown. The preparations that the US Gov is making are obvious and public record.

    So, I tend to think that in the good ol’ USA and probably Canada too, a global economic meltdown will be managed. Stop or severely limit private transportation, shut down useless widget factories, cut off pornography from the internet, turn the lights out in all those office high rises — and America/Canada has more than enough oil/energy to keep food production, utilities and security forces viable.

    But that doesn’t mean there won’t be disruptions, food shortages, chaos and sheer panic in many locations.

    We all know that, and so we prepare. If the US Gov doesn’t have a plan, or runs into complications implementing their plans, than our preparations will be needed more than ever.

    From my point of view, that could happen at any time — tomorrow, next week, etc… I tend to believe that they’ll be able to give us one more “good” Christmas, but really, who knows? Anything could happen.

    Now is a good time to be ready.

  28. MrNoItAll on Thu, 22nd Oct 2015 2:19 am 

    Davy — Right on!

  29. Davy on Thu, 22nd Oct 2015 2:20 am 

    MR & Greg, great points on the food side. I just started with G-man because he address my earlier point. All of us could write chapters on the subject. MR, I am not going to harvest my honey this year since the colony is new. My hive is full of honey. The bee club guru is really impressed. My farm has so many wild flowers that it offers plenty of food. So far so good. Good luck guys and let’s keep bouncing our food prep ideas around.

  30. Davy on Thu, 22nd Oct 2015 2:39 am 

    MR, the fascinating aspect of doom and prep is the speculation on what is underneath this status quo and what is coming. The cornucopians are constantly struggling to justify their world of the status quo and increasingly using fantasy and delusion in that effort. We are using science and common sense. I am not sure about what you say but I find it interesting.

    Sometimes I just want to go offline and forget about these things. I can drift off into nature like a dream here on the farm. Spiritually melting into my pasture and animals. Yet, we must be constantly vigilant for what is ahead. We need that edge to know which way to move and when. We know enough to be dangerous maybe but at least we are aware.

    Doom and prep is 90% attitude. The rest falls into place once you understand this truth. This truth is an innate human characteristic that has been bred out of us by modern life. It is the basis of our human nature that modern life has destroyed. The powers that be like sheeples. I know I like animals that I can control. It is natural because animals that are easier to control allow the system to function more efficiently.

    The unfortunate outcome of this efficiency is power and control, and the corruption of these. We are at the end days of the corruption of power and control. Don’t be a sheeple. If you have no choice for 1000 legitimate reasons at least develop some attitude that may guide you to make some better decisions in a crisis. We are entering the second and more deadly period of this decade of crisis. I see 2016 as a turning point maybe the tipping point.

  31. GregT on Thu, 22nd Oct 2015 2:46 am 

    Remember what I said back last year about how cool bees are Davy. Not that I’m trying to be annoying, but your bees don’t adhere to any human political ideologies, and if anything it will be those same human ideologies that kill your bees off. IMHO they are an amazing ‘animal’, to this day I still pet them and feed them sugar water whenever they have lost their way. They don’t wave flags, they know no human lines drawn in the sand, and they exist in nature, just as we all should.

    Good for you for taking care of them, they will reward you for your effort. This is exactly what all of us should all be doing. Taking care of nature. Two thumbs up, buddy!

  32. GregT on Thu, 22nd Oct 2015 3:12 am 

    NWR,

    We have been discussing this stuff for what? Three or four years now? I think that it’s a pretty safe bet to say that we are mostly on the same page. MIS is not sustainable. I frequent these forums mostly for two reasons. 1) These are not topics of conversation that I can openly discuss in person with most of the people that I know. 2) While I know where we are headed, I’d like to be able to establish some kind of a timeline.

    BC above has expressed his opinion that NOW is the time to address personal finances. (which my wife and myself have already done, as much as possible) I am well aware of where we are headed, and have made some rather large changes in this regard. I respect BC’s opinion, because he makes complete sense to me, and comes across as a very knowledgable individual in the matters of economics and finance. BC tonight has made a rather bold statement. He apparently maintains that things could fall apart much sooner than later. ( something that I do not argue) I would simply like to hear why he thinks this way.

  33. GregT on Thu, 22nd Oct 2015 3:14 am 

    Oops, sorry Davy. I forgot, I’m not your buddy. Ignore that part. The rest I stand firmly behind.

  34. Davy on Thu, 22nd Oct 2015 7:38 am 

    Greg, heres at you:

    https://www.youtube.com/watch?v=_lsZE8MpQZI

  35. Davy on Thu, 22nd Oct 2015 8:04 am 

    “Caterpillar Shares Tumble After Company Misses Across The Board, Revenues Plunge 19%, Guidance Cut”

    http://www.zerohedge.com/news/2015-10-22/caterpillar-shares-tumble-after-company-misses-across-board-revenues-plunge-19-guida

    Wow, we thought Cat was hurting yesterday but this is an oowweee! Check out these numbers Cat is painting.

  36. Davy on Thu, 22nd Oct 2015 8:12 am 

    I might add Caterpillar sales drop does not fully show the carnage in the industry. Caterpillar has taken market share from other manufacturers and this has blunted its decline.

  37. GregT on Thu, 22nd Oct 2015 2:38 pm 

    Back at you Davy. Respectfully.

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