[ennui2]

But EIA data since Dec 2015 shows the US "shale revolution" is a "flash-in-the-pan" phenomenon. Alaska, N. Dakota, and Texas are in decline again

Here we go again...

They stopped drilling...because of the glut. Not because of geologic depletion.

I mean, it's like saying we've hit peak-pie because people at a pie-eating-contest can't fit anymore pies into their bloated stomachs. We have more than enough oil right now. The drilling figures mean very little other than there's a glut.

[AdamB]

But EIA data since Dec 2015 shows the US "shale revolution" is a "flash-in-the-pan" phenomenon. Alaska, N. Dakota, and Texas are in decline again, and for that matter, the US, and even the recent IEA charts now shows a decrease in world oil production. I'm going to update and post charts for each of the above states after the EIA releases the April data on June 30th.

You appear to misunderstand EIA "data". Supply response to price is what has happened so far, but the EIA by no means is saying that there isn't more oil in the tight and shale formations.

See for yourself:



The supply side based economic models understand supply and demand and their response to price. And these are the folks that underestimated the shale revolution, so it should be interesting to see what happens.

The EIA's "forecast' production in your post above needs revising soon! lol The 1970-1971 US peak was not equalled or surpassed by the shale revolution in the US. Close, but no cigar.

I suspect the "glut" will be gone by the end of 2017.

And then the next supply/demand response to price will happen. The EIA certainly thinks the price will come back. And the 2015 peak came close enough!! Certainly close enough to dispatch the bell shaped curve of oil supply model.

I am advocating the sine curve model next, based on the US prototyping of how additional resources work.

[ROCKMAN]

ennue - "They stopped drilling...because of the glut. Not because of geologic depletion." Well, yes and no. Back to how one defines a glut. No rules per se. But to me a glut implies inventory for which there are no buyers. So if oil prices and not fallen wouldn't we still be adding to the production rate?

OTOH if buyers eventually can't sustain the high cost of a commodity sales and INCOME decline. So the seller has a choice: hold the price, maintain profit margin BUT income declines. Or reduces his price and maximizes income. Which might be less, the same or greater then prior to the price decrease. IOW it was too much unsellable oil because producers are selling every bbl they can produce. But only because they reduced the price and actually EXPANDED the oil market. Thus would one call an INCREASE in market demand and sales be called a glut?

[ennui2]

would one call an INCREASE in market demand and sales be called a glut?

The runup to the glut and the glut itself has been discussed at length here. Argue semantics all you like, but the colloquial term for glut is cheap oil (one not driven by demand destruction) and that's what we've got, hence the news stories about road trips for the 4th of July.

[Jibdul]

Glut is the sound that your throat makes when you swallow something substantial and somewhat dry...

Semantics aside, when you have a so-called 'economic' engine tuned to ~80:1 oil running on ~15:1 oil, it's going to be maybe creating its own ongoing glut (like a drier and drier swallow) as it begins sputtering as, at the same time, it has to drill yet more baby, drill yet more, and harder. Baby. On less energy. That seems like a glut with no end and no Viagra.

Now, I don't know about you, but that seems to have all the hallmarks of a reinforcing feedback loop toward increased 'parchment'.

If price were a voice into a microphone that got too amplified out of some speakers nearby, one might need less and less volume (price) for their voice to have an effect on the system feedback-- that loud *wooowooo...* sound you hear out of the speakers when you speak into the mic.

That's maybe where we are globally WRT oil and sort of how, in laypersons' terms, this plugs into BW Hill's ETP model, not that I've read it or anything. 'u^

...And then there's Jeffrey Brown's ELM model, maybe for the terminal phase of global oil... Mr. ELM, meet Ms. ETP; Ms. ETP, Mr. ELM. Drinks on the house... but you have to walk across the city now to get them and bring them back. Can you afford the calories? The more expensive food has less calories in it too. And for each drink, the trip gets longer (next city over), the food gets more expensive and less caloric. Enjoy the party. It's practically over. If you feel sad, maybe there's lithium, if with potentially-limited dosage unless you avoid the rush and stock up.

@ennui2; Perhaps demand is its own destruction or cheap price oil is expensive cost oil. In a feedback-looped context. Working harder to get less to work harder to get less...

In context with the rest of the album, Apotheosis (see link below) represents to me a tragedy about to happen. Don't cry for us, unknown aliens... You may have already experienced your own denoument...

Futilitist: Keep drumming.

Apotheosis

a·poth·e·o·sis
əˌpäTHēˈōsəs/...
noun: apotheosis...

the highest point in the development of something; culmination or climax.
"his appearance as Hamlet was the apotheosis of his career"
the elevation of someone to divine status; deification.

[AdamB]

would one call an INCREASE in market demand and sales be called a glut?

The runup to the glut and the glut itself has been discussed at length here. Argue semantics all you like, but the colloquial term for glut is cheap oil (one not driven by demand destruction) and that's what we've got, hence the news stories about road trips for the 4th of July.

BET YOUR BACKSIDE!!!!!

I'm thinking....the week of July 4th....6000 road miles? National Parks? Coast of Maine? Mount Washington? WHO IS WITH ME!!!

[ROCKMAN]

Not semantics...it's dynamics. When oil pushed past $100/bbl eventually there weren't enough buyers for the production available. So the produces had a choice: don't lower prices and thus perpetuate the GLUT of oil they had to deal with. Or they could lower prices (as they did) and thus use up that GLUT by increasing DEMAND. Which they did.

As said: It's about the dynamics at play and not semantics. When the world has greatly increased oil consumption there isn't a glut of oil that has no market. But if one wants to define a glut based upon lower prices that's OK: oil is currently selling well above its inflation adjusted price so by that definition the "glut" ended when the price adavanced above $35-40 per bbl, didn't it? Not the Rockman's definition but that of the gluterites. LOL

[Jibdul]

It's selling well above its inflation-adjusted price of what? What's the price of that?
What about that graph that shows production breakeven prices per country? What are those and then what are they adjusted for inflation?

Also, over at Peak Oil Barrel, Watcher has mentioned something to the effect of price-by-decree, if I have that correct. What might you make of that? I guess it would be something more national than global in scope?

If we have governpimp-owned oil anyway, what does price even mean, such as when things start contracting and separating. As long as EROEI is still feasible, oil simply flows to who can get it, yes? So maybe it becomes 'free' as in a kind of 'communism/dictatorship'.

Fundamentally, oil is free. It only has a price in the face of trade. When trade ceases, it becomes free again to those who have it and can hold onto it, yes? Something like that? As long as the EROEI is still feasible?

I wonder how well militaries can run on ethanol and other substitutes... Russia's a big country. Lots of energy resources of wood, coal, ethanol, gas, oil and so forth. I guess energy levels and who gets what dictate power structure levels...

Well, geographic lines can be redrawn, new alliances formed and/or social unrest fomented...

New Cold War

[EdwinSm]

Oil tankers at anchor.

Compared to the recent past the figures in the article indicate a glut, but this (according to IEA) is still 18 million barrels less than stored at sea in 2009 - so not so much of a glut.

....The International Energy Agency (IEA) has been monitoring the situation. It has tracked just under 94 million barrels of unrefined crude oil in what’s known as “floating storage” at the end of May. And Clarksons, a shipping analyst firm in London, says it has tracked an increase from 85 to 120 oil tankers at anchor around the world.
...
An interesting situation has also developed off the coast of Iran, where some large oil tankers are also anchored. Until January, there were sanctions prohibiting the export of Iranian oil. While those sanctions were in place, some of the country’s oil was stored offshore. It’s not clear why those stocks haven’t moved since sanctions have lifted but Wilson again thinks it’s a logistical issue. Some of those ships are storing a type of oil called condensate and not all refineries can process it thanks to a high number of impurities.
...
Bockmann says all of this should be viewed in context, though. In 2009, the IEA tracked 112 million barrels of crude oil at sea – compared to the 94 million we are seeing today. Plus, there was a further 58 million barrels of oil products – 170 million barrels in total. At the time that was unprecedented and led to a true contango in which oil was traded offshore for economic gain.

http://www.bbc.com/future/story/20160628-why-are-more-and-more-oil-ships-anchoring-off-singapore

[Zarquon]

According to the above chart, the EIA sees the supply of US lower 48 onshore (conventional) increasing by the early 2020's? The 2016 report isn't out yet; can anyone explain the idea behind that?

[ROCKMAN]

Edwin - Do you understand that virtually all the oil at sea (in transit or not) IS NOT SURPLUS OIL? It's oil that has been purchased by refiners or by speculators who bought it on the hopes they'll RESELL IT at a higher price. Additional the vast majority of STORED OIL that is report is the working volume moving from the wellhead to the cracking tower.

So again: on what basis do you define surplus oil...by price or consumption dynamics?

[ROCKMAN]

Z - "... sees the supply of US lower 48 onshore (conventional) increasing by the early 2020's? The 2016 report isn't out yet; can anyone explain the idea behind that?" Easily: it's a projection based upon a variety of assumptions that one may choose to accept even though they cannot be proven at this time.

[PeakOiler]

According to the above chart, the EIA sees the supply of US lower 48 onshore (conventional) increasing by the early 2020's? The 2016 report isn't out yet; can anyone explain the idea behind that?

See http://www.eia.gov/analysis/reports.cfm and scroll down the list a bit and you will see the pdf of the 2016 AEO early release on May 17th.

Also note what the EIA says about the projection:

The U.S. Energy Information Administration provides a long-term outlook for energy supply, demand, and prices in its Annual Energy Outlook (AEO). This outlook is centered on the Reference case, which is not a prediction of what will happen, but rather a modeled projection of what might happen given certain assumptions and methodologies.

(Bold emphasis mine).

[EdwinSm]

So again: on what basis do you define surplus oil...by price or consumption dynamics?

I would use consumption dynamics

Being a consumer, and not in the oil industry, my take on surplus seems to be a little different from yours Rockman

I understand that as an oil man, your definition of surplus is not being able to sell the oil that the well head is producing [= no Rockman glut]. From a consumer point of view a surplus is where the end consumer does not buy all the oil that the producers are selling [= a small Edwin glut].As the number of tanker-day of storing oil is greater than the the time needed to transport from country to country, that from my view point is a surplus.

Thus in the case of the article more oil seems to be being stored by middle-men between the time it leaves you (and other producers) and the time it arrives at me (and other end consumers). In the total scheme of things the difference is probably not so large, but any small deviation for 'balance' can create largish price movements.

[ennui2]

Not semantics...it's dynamics.

There's been 'dynamics' to oil since the 1800s. How is that significant?

oil is currently selling well above its inflation adjusted price

[/quote]

Compared to which baseline? It's purely a matter of pain at the pump. Right now nobody's whining about gas prices, hence there's no doom and another round of happy-motoring.

[JV153]

Oil is 50 USD a barrel and fuel taxes in Chindia have been on the up - it's the pump price that determines how eagerly the road trip crowd trips, etc. Economic expansion based on fossil fuels has already come to a halt in Europe. Growth in vehicle sales in China have already slowed dramatically.

[AdamB]

According to the above chart, the EIA sees the supply of US lower 48 onshore (conventional) increasing by the early 2020's? The 2016 report isn't out yet; can anyone explain the idea behind that?

Have you, or really ANYONE in the blogosphere for that matter, ever thought of asking them?

Turns out, here is your opportunity. Wonder if the ASPO will be there?

https://www.eia.gov/conference/2016/index2.cfm

[PeakOiler]

Here's an example of EIA's 2015 AEO projection from just last year:



I printed the image and drew the 10 mbpd line and then scanned it.

US oil production as of last week's report was 8.677 mbpd.

Oops.

I tend not to believe EIA's AEO projections...

[AdamB]

oil is currently selling well above its inflation adjusted price

Compared to which baseline? It's purely a matter of pain at the pump. Right now nobody's whining about gas prices, hence there's no doom and another round of happy-motoring.[/quote]

Which inflation adjusted price?

Looks like current real oil prices are quite a bit cheaper than back in the "high EROEI" days. Funny fact that EROEI fanatics can't talk about, it ruining a good (ridiculous) story.

Oil was more expensive for the first 20 years than it is today. Oil is only more expensive now than back in the truly cheap days, pre-1970 or so. And then Colin, after oil had been expensive for like 25 years, declared cheap oil over. Funny...he had to wait a quarter century after it happened to notice.

[AdamB]

Here's an example of EIA's 2015 AEO projection from just last year:



I printed the image and drew the 10 mbpd line and then scanned it.

US oil production as of last week's report was 8.677 mbpd.

Oops.

I tend not to believe EIA's AEO projections...

Read their methodology. It runs off their price assumption, as it should. They expected a quicker price rebound, being very doomerish. That didn't happen, and the glut stuck around longer than expected. Compare their long term price expectations and it stands out like a sore thumb. So the production is following the real price path, which stayed low, and their newest work reflects the production dip. The most recent AEO release came out yesterday. Folks haven't read it cover to cover yet?

http://www.eia.gov/forecasts/aeo/


We also need to discuss what to believe or not to believe, for example, Hubbert said the US should be producing 2 million a day right now. And we are doing 8+? Well, looks like we know who we should be paying attention INSTEAD of those who just fit random declines to stuff. Closer to correct by a factor of 4.....mmmmm......so much for bell shaped curves!

Come on folks! Besides getting ready for summer road trips, we need to form a petition demanding that ASPO give up on bell shaped nonsense and get with the modern oil production profile!