[Plantagenet]

oil companies are abandoning new exploration and development projects, thereby lowering their CAPEX, so the "cost floor" sinks lower. Is that supposed to be good news?

1. Not all oilcos are pulling back. For instance, Russia just made a huge discovery in the Arctic and they are pushing ahead with development.

2. There is no point in trying to decide if every little bit of news is "good news" or "bad news" Some things are more nuanced.

I don't see falling oil prices as all good or all bad---there are plusses and minuses---its kind of a mixed bag.

[Tanada]

Have no fear, Brent is back up to $95.65 as I type this.

http://www.bloomberg.com/energy/

[Pops]

You could have full-employment economy where most productive output of the economy is geared towards finding, pumping and processing oil. High oil price has nothing to do with economic contraction, assuming the change in price is slow enough to be able to gear the industrial output towards oil production.

Don't be silly dsula, what would be the point of producing energy if it and all other effort were simply going to go back into producing energy?

Of course high priced oil impacts the economy, just like the strength of the economy affects the price of oil.

[AndyA]

Is this caused by a reduction in consumption or an increase in production? I'm not exactly sure what is going on, but there seem to be a few commodities that have been sliding in price this year. I'm thinking it has more then a little to do with the deflationary pressures of high debt, low growth in new debt and a genuine lack of money good collateral. Companies have stopped investing via capex and are investing in share buybacks, which is one way of saving energy. If Ebola continues to spread then the price of everything non medical can be expected to fall.

[copious.abundance]

Is this caused by a reduction in consumption or an increase in production?

US through July. The past 3 weeks it has reached 8.8 million barrels/day.


World through July.

I'm not exactly sure what is going on, but there seem to be a few commodities that have been sliding in price this year.

There have been record corn and soybean crops this year, at least in the US. Beef and pork went way up earlier this year but have since come down.

I'm thinking it has more then a little to do with the deflationary pressures of high debt, low growth in new debt and a genuine lack of money good collateral.

No, it has nothing to do with that. It has everything to do with increased supply coming online, coupled with a rising dollar.

Companies have stopped investing via capex and are investing in share buybacks, which is one way of saving energy.

Capital spending in the US, at least, has recently reached record levels.

If Ebola continues to spread then the price of everything non medical can be expected to fall.

Only if fatalities from Ebola reach, like, 50 million or more. It's concentrated in *the* part of the world that pretty much consumes the least per capita.

[KaiserJeep]

Yay for cheap oil! Lets go fill our tanks and go cruising, because we can.

[Pops]

Is this caused by a reduction in consumption or an increase in production? I'm not exactly sure what is going on, but there seem to be a few commodities that have been sliding in price this year. I'm thinking it has more then a little to do with the deflationary pressures of high debt, low growth in new debt and a genuine lack of money good collateral.

Just as tight/tar oil "manufacturing" signals the end of cheap oil, interest rates effectively negative for 5 years now and the US government (and elsewhere) absorbing "troubled assets" seems to me the sure sign that the underlying economy is deflating. The first round of QE probably kept the boogieman away but the rest has merely lined Wall Street's pockets.

The EU is obviously stalled - no surprise, they didn't pass out free money like we did, the Chinese are already switching to a burger flipper economy - but probably not fast enough since 2/3 of their economy has been busy at work building "Ghost Cities" with rents too high for a Foxcon employee to pay and so have no occupants, no cash flow so in the parlance are "nonperforming assets" - bad debt to you and me.

Again, the dollar is at a 4-6 year high, and the reason of course is that the Fed is about to allow short term rates to rise. When people "buy" the dollar to get the interest, the value of the dollar rises, when a dollar is more valuable it buys more oil: more barrels per dollar = fewer dollars per barrel, simple as that.

COs charts show that the 3mbopd increase in US LTO of over the last couple of years has barely offset declines elsewhere, obviously it isn't an abundance of cheap oil that is causing the fall in price.


http://www.bloombergview.com/articles/2 ... -says.html
http://www.bbc.com/news/business-29227597
http://www.eia.gov/totalenergy/data/mon ... sec9_6.pdf

[KaiserJeep]

Pops, the only correction I would make is that the Chinese don't even care for beef that much. They are switching to a rice ball economy, not a burger-flipper economy. But unfortunately their trade imbalance is gonna put a few million private automobiles on their roads before the oil conniption ends, and create a huge demand for oil the world does not have.

Then after the light hydrocarbons are all burned as fuel, they will use the petroleum feedstocks that remain to manufacture plastic crap that they will export to us, in return for even more rice. Freight containers loaded with plastic crap go to the US, and come back loaded with sacks of rice. At the end of the cycle, we have beaucoups plastics in our landfills, and they have beaucoups honey in their honey buckets. At which point they have low-energy organic recycling to do to produce more food, and we will probably be burying plastic wastes as rising energy costs make recycling more expensive.

Seems like they have all the angles figured, sometimes.

[kublikhan]

Pops, the only correction I would make is that the Chinese don't even care for beef that much. They are switching to a rice ball economy, not a burger-flipper economy.

What gave you that idea?

CHINA - China’s meat consumption is expected to rise by 35 per cent by 2020 while rice and flour consumption will fall by five per cent each.

The reason for the sharp change in eating habits is the change in the Chinese population to a wealthier more urban people. Domestic demand for protein feed climb higher with an annual growth of 8.5 to 8.9 per cent over the last five years and the demand for meat, poultry, eggs and aquatic products has grown by three per cent over the same time.

The country needs to connect with the global market to be able to import more raw materials – soybean, wheat and corn meal as well as being able to import more meat especially beef and lamb.

How Can China Meet Growing Demand for Meat?

With its burgeoning middle class, annual meat consumption in China has gone from being a third of that of the U.S. in 1978, to now more than double it.

China’s higher demand for meat not only carries implications on global prices and trade, but also the environment. A net-exporter of grains until 2007, China is now the second largest grain importer, with a third of grains going to livestock feed in 2011.

China’s Meat, Processed Food Consumption is Rising. What Does That Mean for China?

China's meat imports are predicted to skyrocket over 3,500 per cent to US$150 billion by 2050 as consumption of chicken, pork and beef surges on the back of the rising affluence of its growing middle class. "The shift from a rice to meat diet has already happened in China. Even small changes in the way China consumes can have a large impact overseas"

A report by the US Department of Agriculture's Economic Research Service tracked the explosive growth in China's demand for meat. China produces nearly all of its own meat. Its output of pork, poultry, and beef rose from about 20 million tonnes in 1986 to more than 70 million tonnes in 2012.

China accounted for 3 per cent of Australia's beef exports in 2012, which soared to 20 per cent by the end of last year. "We're seeing a huge amount of interest from strategic investors from China and other countries in the Australian beef industry, looking to leverage this trend"

"China's announcement to relinquish its historic grain self-sufficiency policy signals a major boost to the country's meat, dairy and feed sectors as Chinese companies go global. China's transition to an industrial, resource-intensive model of livestock production could have major implications around the world. China has become a critical actor in the global industrial meat complex that carries significant weight for global grain and meat production."

[furrybill]

Pops, the only correction I would make is that the Chinese don't even care for beef that much. They are switching to a rice ball economy, not a burger-flipper economy.

What gave you that idea?

CHINA - China’s meat consumption is expected to rise by 35 per cent by 2020 while rice and flour consumption will fall by five per cent each.

The reason for the sharp change in eating habits is the change in the Chinese population to a wealthier more urban people. Domestic demand for protein feed climb higher with an annual growth of 8.5 to 8.9 per cent over the last five years and the demand for meat, poultry, eggs and aquatic products has grown by three per cent over the same time.

The country needs to connect with the global market to be able to import more raw materials – soybean, wheat and corn meal as well as being able to import more meat especially beef and lamb.

How Can China Meet Growing Demand for Meat?

With its burgeoning middle class, annual meat consumption in China has gone from being a third of that of the U.S. in 1978, to now more than double it.

China’s higher demand for meat not only carries implications on global prices and trade, but also the environment. A net-exporter of grains until 2007, China is now the second largest grain importer, with a third of grains going to livestock feed in 2011.

China’s Meat, Processed Food Consumption is Rising. What Does That Mean for China?

China's meat imports are predicted to skyrocket over 3,500 per cent to US$150 billion by 2050 as consumption of chicken, pork and beef surges on the back of the rising affluence of its growing middle class. "The shift from a rice to meat diet has already happened in China. Even small changes in the way China consumes can have a large impact overseas"

A report by the US Department of Agriculture's Economic Research Service tracked the explosive growth in China's demand for meat. China produces nearly all of its own meat. Its output of pork, poultry, and beef rose from about 20 million tonnes in 1986 to more than 70 million tonnes in 2012.

China accounted for 3 per cent of Australia's beef exports in 2012, which soared to 20 per cent by the end of last year. "We're seeing a huge amount of interest from strategic investors from China and other countries in the Australian beef industry, looking to leverage this trend"

"China's announcement to relinquish its historic grain self-sufficiency policy signals a major boost to the country's meat, dairy and feed sectors as Chinese companies go global. China's transition to an industrial, resource-intensive model of livestock production could have major implications around the world. China has become a critical actor in the global industrial meat complex that carries significant weight for global grain and meat production."

Yup. As someone who has spent some time in China and recently married someone from there, I can assure you that the Chinese love meat. Yes, rice is important, and they'll insist on eating it every single day. However, meat consumption is considered important for health and growth, and as they become more wealthy they'll be eating a lot more of it. Say goodbye to the Amazon rainforests...

[I would tell people there that I'm a vegetarian and every time they'd stare at me aghast: "You're too big/muscular to be a vegetarian!" One more: my wife ascribes every single physical problem I might have to the fact that I don't eat meat. This is a woman who is now in law school, extremely logical, 99% Americanized after being here 10 years, and still she has that bias...]

Also related to hydrocarbon usage having a car is seen as quite the status symbol. Remember that in Chinese culture flaunting your wealth is very important. Its a bit more closely tied into one's self image than in the West IMHO. Recently my wife's friend sent pictures of her 2nd child. She also sent pictures of their new car.

You want to soften the downward slope of the peak? Pray for a Japanese-style economic malaise to take hold in China.

[GregT]

Well.. so what's this mean for the peak oil picture?

Well, seeing as oil is a FINITE resource, the faster it is exploited, the sooner it will run out.

[Herr Meier]

You could have full-employment economy where most productive output of the economy is geared towards finding, pumping and processing oil. High oil price has nothing to do with economic contraction, assuming the change in price is slow enough to be able to gear the industrial output towards oil production.

Don't be silly dsula, what would be the point of producing energy if it and all other effort were simply going to go back into producing energy?

Of course high priced oil impacts the economy, just like the strength of the economy affects the price of oil.

If the change is slow enough it probably don't affect it by much. Even if oil was completely free for the last 100 years I have my doubt that the global economy were much larger than it is now.

Or in the words of EROEI. For the standard of living it doesn't matter if the world pumps 1 billion barrels per day at an EROEI of 1.1, or if it gets 100 Mbpd of oil for free at an EROEI of infinity. In both cases you will get 100MBps of oil to use at your discretion.
I could even argue that in case of EROEI 1.1 the economy is much larger, providing jobs etc, although at no net benefit to the standard of living.

[Herr Meier]

I could even argue that in case of EROEI 1.1 the economy is much larger, providing jobs etc, although at no net benefit to the standard of living.

I have to agree, especially if you define 'standard of living' as eating and respirating.

Thanks god we are about to invent the driverless car/truck. Because in your scenario Monsieur Meier, there wouldn't be fuel left over to grow food, much less drive to the shopping mall for xmas presents. Practically all energy would go for digging oil.

YES. I AGREE. I SAID THAT FROM THE START.
What I also said is that you can have a very large economy with full employment with very high oil price. High oil price does not mean unemployment or shrinking economy. High oil price means lower standard of living.


Come on guys, will you agree with me, won't you? It's too beautiful of a Sunday to waste time on PO. The leaves are in full fall color, he sky is blue. IT IS BEAUTIFUL ! I'm going outside, I will also have some raclette today (the melted cheese on potato) with some glass of white wine. Oh my God, ain't life great?

[Herr Meier]

P, not to penny-pinch, but EROEI approaches 1, not 0.

Assume you need 1 cord of wood for your own use every year. Fortunately your wood lot is basically infinitely large. Unfortunately it is also in extreme terrain, requiring you to buy, use and maintain very expensive and technologically advanced machinery to be able to access the wood. In order to pay for this you will need to cut and sell 9 cords of your wood, only to get your single cord for your own use. As you can see, even with a EROEI of 1.1, you still get your wood and don't need to freeze in winter. Same with oil. Expensive oil does not reduce economic activity (as long as the increase is cost is slow enough).

[Pops]

As you can see, even with a EROEI of 1.1, you still get your wood and don't need to freeze in winter.

explain where your unlimited time to cut the extra 9 cords comes from...

obviously you don't have to work very hard to survive,

I wonder why that is?

[ROCKMAN]

Just a touch of reality regarding EROEI: wells get drilled based on anticipated profit margin. I've explained many times that IMHO somewhere in the 5 to 6 EROEI range drilling for oil/NG becomes uneconomic. EROEI has never been the determining factor of what gets drilled... and never will. It's the ROR. Very simple: Follow the money... not the BTU's. LOL.