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Is fast crash likely? Pt. 7

General discussions of the systemic, societal and civilisational effects of depletion.

Re: Is fast crash likely? Pt. 7

Unread postby Yoshua » Wed 06 Dec 2017, 15:18:01

Oman is using thermal EOR by burning nat gas to heat up water and then injecting it as steam into its reservoirs.

Image

Rockhead has started to think Total energy costs of petroleum production.

Meanwhile he is sharing compliments like: You thick dipshit idiot!

Will he join the Etp ghetto one day? No, I don't think so. It would crack his skull.
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Re: Is fast crash likely? Pt. 7

Unread postby shortonoil » Wed 06 Dec 2017, 15:38:56

It would seem like Oman could do better with higher oil prices to make EOR economic. But higher oil prices will lead to higher production costs on everything...


Higher oil prices mean higher production costs, and lower oil prices mean less cash flow to service existing debt, and expenses. Damned if you do, damned if you don't. The economy has to pay for the energy that the oil industry uses (the industry is part of the economy). The industry is now using more than half of what it produces. It can't win by increasing production, or by increasing price. The lower ERoEI fields will be phased out as they approach the 6.9:1 "dead state", and the economy can no longer afford to subsidize them.
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Re: Is fast crash likely? Pt. 7

Unread postby onlooker » Wed 06 Dec 2017, 16:07:16

So tell us naysayers how, the law of supply/demand economics is going to fix this situation Short just described? We are all ears. And try keeping the answer mildly credible
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Re: Is fast crash likely? Pt. 7

Unread postby Cog » Wed 06 Dec 2017, 16:12:37

onlooker wrote:So tell us naysayers how, the law of supply/demand economics is going to fix this situation Short just described? We are all ears. And try keeping the answer mildly credible


Its hard to know where to start with shorty's nonsense. Higher oil prices make oil companies more profitable and thus more money for exploration and exploitation. To think otherwise is exposing your lack of knowledge in how the oil business works. Not surprising really since shorty has never understood the oil business.
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Re: Is fast crash likely? Pt. 7

Unread postby Yoshua » Wed 06 Dec 2017, 16:31:36

Oman faces another problem when its conventional nat gas reserves start to deplete and they are forced to turn to tight gas production to keep the EOR project running.

"Converting a land mass covered by an enormous semi-sandy desert plain, dunes and flat terrain to a massive gas field, the size of Greater London, is nothing short of a miracle. The Khazzan tight gas field in Oman which started production recently is the latest of BP’s seven major projects to come online this year and certainly one of the most challenging."

It is not exactly cheap gas they are using to produce not cheap oil to produce.

It seems as if the same story is repeated all over the world. Capital and energy intensive projects are built to scrape up whatever hydrocarbons that can be found to keep the oil age going till the bitter end...since we don't know what else to do. There probably never was a Plan B.

Innovation and new technology will unlock new resources into reserves and oil will last forever...
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Re: Is fast crash likely? Pt. 7

Unread postby onlooker » Wed 06 Dec 2017, 16:46:58

https://www.wsj.com/articles/wall-stree ... 1512577420

Wall Street’s Fracking Frenzy Runs Dry as Profits Fail to Materialize
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Re: Is fast crash likely? Pt. 7

Unread postby rockdoc123 » Wed 06 Dec 2017, 16:52:05

Higher oil prices mean higher production costs, and lower oil prices mean less cash flow to service existing debt, and expenses. Damned if you do, damned if you don't. The economy has to pay for the energy that the oil industry uses (the industry is part of the economy). The industry is now using more than half of what it produces. It can't win by increasing production, or by increasing price.


Higher oil prices do not necessarily translate into higher costs. The last time we went through a downturn companies got more efficient to deal with lower prices and when price rose again their OPEX/boe and CAPEX/boe did not follow in lockstep. The costs that tend to rise and fall with prices are service costs and they do not make up the majority of costs. The cost controls that were imposed in this latest downturn which have a lot to do with efficiency gains in how wells are drilled and completed and those will not disappear with rising prices. As well the digital oil field which has of late come into it's own has the potential to lower costs and improve EUR irrespective of oil price.

It seems intuitive that lower price means less cashflow but the breakeven cost /boe in all of the shales dropped substantially from 2014 until this year. What that means is that cashflow did not follow lockstep with price as it fell, cost cutting avoided that. The industry is a lot more adaptable than many here seem to think.

And the industry using more than half it produces? What a complete load of malarky. The largest production comes out of Saudi Arabia and unless you are a complete moron there is no way you can argue they are expending anywhere near that amount of energy to produce oil. You can calculate it from first principles just knowing what fuel costs what spread rate is on a rig, what pipe and transportation cost etc. I just looked at a deal for a friend which was a series of wells to be drilled in Latin America. The Capex investment required would be $20 MM and even at a 40% chance of success the wells drilled would deliver $200 MM NPV10. What that means is taking into account all the services and goods that go into drilling the wells the project returns 10 times what was invested. There is no way in the world that equates to half the energy being put in that is being recovered.
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Re: Is fast crash likely? Pt. 7

Unread postby kublikhan » Wed 06 Dec 2017, 18:34:55

ralfy wrote:You can scroll up and look at the global consumption chart you shared. Notice that consumption rose steadily even though prices soared and then plummeted. Given "basic economics," demand should have adjusted to prices.
This has been explained to you before Ralfy.

First let's look at a basic concept in economics: Marginal Utility
What is 'Marginal Utility'
Marginal utility is the additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important economic concept because economists use it to determine how much of an item a consumer will buy. Positive marginal utility is when the consumption of an additional item increases the total utility. Negative marginal utility is when the consumption of an additional item decreases the total utility.

BREAKING DOWN 'Marginal Utility'
Economists use the concept of marginal utility to measure happiness and pleasure, and how that affects consumer decision making. They have also identified the law of diminishing marginal utility, which means that the first unit of consumption of a good or service has more utility than the next units of consumption.
Marginal Utility

Basically, marginal utility says we get alot of gain from those first few units of product we consume. In this case oil. And thus we are willing to pay a large price for those first few barrels. And each additional barrel of oil we consume gives us slightly less utility than the barrel before it. And thus we are willing to pay a slightly lower price for those additional barrels. Now not all countries consume oil at the same rate. In fact it varies considerably:

Image
This is how much more oil the US uses per person than China and India

For example, out of all the countries in that graph, the US consumes the largest amount of oil per person. And still this amount kept on rising. By 2005 it was around 26 bbl/person/yr. However something changed around that time. Our per capita oil consumption began falling. The reason for that is simple. It was around that time that oil prices started rising. When oil was cheap US consumers were willing to continue to increase their consumption of it. Despite the falling utility each additional barrel represented. However when oil prices started rising, US consumers stared losing their appetite for buying increasing amounts of oil. By 2005 this trend actually reversed and US customers started buying less oil per person. The small additional utility they would get from purchasing that oil did not justify the price premium oil now commanded. This same trend was seen to a lesser extent throughout the OECD.

Contrast that with China. China started out with very low oil consumption per capita. Meaning they were still getting a very large amount of utility out of each additional barrel of oil they consumed. And this remained true even in 2005 when rising oil prices convinced US customers to curtail their oil consumption. To a chinese consumer who has much lower overall oil costs and much faster rising wages, the increase in the price of oil was not enough to dissuade them to slow their growing oil appetite. The same trend was seen to a lesser extent throughout the non OECD.

And we haven't even talked about the increase in population yet. A billion more people have been added to the planet since 2005. Even if the global per capita oil consumption remained unchanged that alone would represent over a 15% increase in oil consumption over 2005 levels.

In the graph I posted of oil demand per capita, world values are relatively flat. However this metric hides big changes happening in individual countries. OECD countries are seeing their per capita(and gross) oil consumption fall. Non-OECD countries are seeing the per capita(and gross) oil consumption rise.

That graph stops in 2014 but something interesting started happening after that. Non-OECD oil consumption kept right on rising of course. However the fall in OECD oil consumption reversed and started rising again in 2015. Why is that? It's simple: oil prices fell. Oil prices had fallen to the point where OECD consumers felt the utility they get from an additional barrel of oil was high enough to purchase more oil. In other words: Oil prices in 2014 were high enough to cause oil demand to fall for OECD customers. However it was not high enough to cause oil demand to fall for Non-OECD customers, or the world. Even 2008 oil prices were not high enough to cause Non-OECD demand to fall.

Just a general observation from looking at this data: Oil over $70 causes oil demand for OECD countries to fall. However even $100+ oil is not enough to cause oil demand to fall in Non-OECD countries, or the world. IE: The "high" oil prices we had 2005-2014 were not high enough to cause oil demand to fall for the Non-OECD nor the world.
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Re: Is fast crash likely? Pt. 7

Unread postby kublikhan » Wed 06 Dec 2017, 18:37:32

onlooker wrote:So tell us naysayers how, the law of supply/demand economics is going to fix this situation Short just described? We are all ears. And try keeping the answer mildly credible
Rockdoc already gave an excellent answer to this but for another dose of reality:

When oil prices rise, oil profits rise:
07/29/2011 - The Big Five oil companies this week announced they had made a whopping $36 billion in profits in the second quarter of 2011. Shell nearly doubled its profits year over year, taking in $8.7 billion in the second quarter. The companies are only halfway through what could be a record year for oil profits. At this rate ExxonMobil, for example, will clear almost $43 billion in profits in 2011, just shy of its 2008 record of $45 billion -- the last time there was a huge spike in oil prices.
Big Oil Companies Post Huge Profits On High Gas Prices

When oil prices fall, oil companies cut costs:
The majors, often dubbed Big Oil, have already been through tough spending cuts since a collapse in crude prices since mid-2014 from above $100. They have shed thousands of jobs, scrapped projects, sold assets and squeezed service costs.

The painstaking effort has paid off. Net income for Exxon, Chevron (CVX.N), Shell, BP (BP.L), Total, Eni (ENI.MI) and Statoil (STL.OL) is set to double on average in the quarter ending June 30 from a year earlier, even though oil prices are back as similar levels.

“Given where oil prices are, 2017 is still a year of transition for these companies, and that is not necessarily supportive for investment. The sector needs to continue doing more of the same,” he said, referring to the ongoing need to reduce costs.

“The fundamental environment is looking quite good because this is an environment where (companies) can cut costs and reduce headcount and they don’t have to develop anything. They are off life support at $55 a barrel.”
After false dawn, Big Oil to double down on cost cuts
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Re: Is fast crash likely? Pt. 7

Unread postby AdamB » Wed 06 Dec 2017, 19:41:21

Yoshua wrote:The oil consumers went broke in 2008 when the oil price spiked and crashed the economy.


The Americans using their homes as lines of credit when the values decreased went broke in 2008 and only peak-centric history ignorant McDoomsters make the mistake of ignoring..you know...reality and stuff.

Yoshua wrote:
Since the energy cost to produce petroleum is increasing, the rising oil price might not even benefit the oil producers when they are the ones who consume increasing amounts of energy.


Yes, and I'm sure you've had this reference pointed out to you before showing that costs began going down after the 2012 supply bottleneck cleared up.

May I recommend some facts and stuff, rather than just making things up because you wish they were true?
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Re: Is fast crash likely? Pt. 7

Unread postby AdamB » Wed 06 Dec 2017, 19:45:18

onlooker wrote:So tell us naysayers how, the law of supply/demand economics is going to fix this situation Short just described? We are all ears. And try keeping the answer mildly credible


You've already been told before. More than a year ago now, when everyone here was told the economic rules that, unlike shorts random number generator, have worked across the entire history of the oil field, including now, and will continue to hold in the future.

The cure to low prices is low oil prices. The cure to high oil prices is high oil prices.

Stencil it across your forehead, because it will hold true far longer than anything Short has ever cooked up in his life. A low bar to exceed, I know, but still...more than a century and a half old, and still going strong!
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Re: Is fast crash likely? Pt. 7

Unread postby shortonoil » Wed 06 Dec 2017, 20:01:20

Its hard to know where to start with shorty's nonsense.


Try starting the same way you would start on your nonsense. That's the scientific method of doing things. Of course, if you are still using a Ouija board, and a can of dried chicken bones it probably will not work as well.

Oman faces another problem when its conventional nat gas reserves start to deplete and they are forced to turn to tight gas production to keep the EOR project running.


The economy must now find 15.7 quad BTU per year (other than the energy that comes from petroleum) to keep oil production at its present rate. In monetary terms that is $2.7 trillion. That number is growing at about $500 billion per year (1823 BTU per gallon) as the energy to produce petroleum increases. That energy must be coming from somewhere, and NG seems like the most likely candidate. Neither coal, nuclear or hydro have the potential for a scale up of that magnitude. Once it is no longer possible to deliver the extra energy needed to power petroleum production, its production rate will begin to decline. If we assume $3 per MM cubic feet production cost, the world must now deliver 15.7 trillion additional cubic feet of NG each year to keep its petroleum production constant, or $470 billion. Which is close to th $500 billion estimate above.
In 2016, global natural gas production increased by only 0.3%, or 21 billion cubic metres (bcm) to 3552 bcm , the weakest growth in gas output for [20 years], other than in the immediate aftermath of the financial crisis


https://www.bp.com/en/global/corporate/ ... ction.html

21 billion cubic metres equals 742 billion cf; which is 4.7% of what is needed
As a consequence, Peak Oil Production is most likely to occur within 1 to 3 years as no other energy source is likely to appear.
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Re: Is fast crash likely? Pt. 7

Unread postby EdwinSm » Thu 07 Dec 2017, 01:51:58

Mazamascience needs a few lessons in graph making 8O As the graph is reported to be the total world figures then there should be red bars for "oil imports" equal to the green bars for "oil exports". As the graph stands it shows that the world is exporting about half of all its oil production (about 50 million barrels a day) into space. :roll:

Yoshua wrote:
Image
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Re: Is fast crash likely? Pt. 7

Unread postby ralfy » Thu 07 Dec 2017, 02:35:34

kublikhan wrote:
ralfy wrote:You can scroll up and look at the global consumption chart you shared. Notice that consumption rose steadily even though prices soared and then plummeted. Given "basic economics," demand should have adjusted to prices.
This has been explained to you before Ralfy.

First let's look at a basic concept in economics: Marginal Utility
What is 'Marginal Utility'
Marginal utility is the additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important economic concept because economists use it to determine how much of an item a consumer will buy. Positive marginal utility is when the consumption of an additional item increases the total utility. Negative marginal utility is when the consumption of an additional item decreases the total utility.

BREAKING DOWN 'Marginal Utility'
Economists use the concept of marginal utility to measure happiness and pleasure, and how that affects consumer decision making. They have also identified the law of diminishing marginal utility, which means that the first unit of consumption of a good or service has more utility than the next units of consumption.
Marginal Utility

Basically, marginal utility says we get alot of gain from those first few units of product we consume. In this case oil. And thus we are willing to pay a large price for those first few barrels. And each additional barrel of oil we consume gives us slightly less utility than the barrel before it. And thus we are willing to pay a slightly lower price for those additional barrels. Now not all countries consume oil at the same rate. In fact it varies considerably:

Image
This is how much more oil the US uses per person than China and India

For example, out of all the countries in that graph, the US consumes the largest amount of oil per person. And still this amount kept on rising. By 2005 it was around 26 bbl/person/yr. However something changed around that time. Our per capita oil consumption began falling. The reason for that is simple. It was around that time that oil prices started rising. When oil was cheap US consumers were willing to continue to increase their consumption of it. Despite the falling utility each additional barrel represented. However when oil prices started rising, US consumers stared losing their appetite for buying increasing amounts of oil. By 2005 this trend actually reversed and US customers started buying less oil per person. The small additional utility they would get from purchasing that oil did not justify the price premium oil now commanded. This same trend was seen to a lesser extent throughout the OECD.

Contrast that with China. China started out with very low oil consumption per capita. Meaning they were still getting a very large amount of utility out of each additional barrel of oil they consumed. And this remained true even in 2005 when rising oil prices convinced US customers to curtail their oil consumption. To a chinese consumer who has much lower overall oil costs and much faster rising wages, the increase in the price of oil was not enough to dissuade them to slow their growing oil appetite. The same trend was seen to a lesser extent throughout the non OECD.

And we haven't even talked about the increase in population yet. A billion more people have been added to the planet since 2005. Even if the global per capita oil consumption remained unchanged that alone would represent over a 15% increase in oil consumption over 2005 levels.

In the graph I posted of oil demand per capita, world values are relatively flat. However this metric hides big changes happening in individual countries. OECD countries are seeing their per capita(and gross) oil consumption fall. Non-OECD countries are seeing the per capita(and gross) oil consumption rise.

That graph stops in 2014 but something interesting started happening after that. Non-OECD oil consumption kept right on rising of course. However the fall in OECD oil consumption reversed and started rising again in 2015. Why is that? It's simple: oil prices fell. Oil prices had fallen to the point where OECD consumers felt the utility they get from an additional barrel of oil was high enough to purchase more oil. In other words: Oil prices in 2014 were high enough to cause oil demand to fall for OECD customers. However it was not high enough to cause oil demand to fall for Non-OECD customers, or the world. Even 2008 oil prices were not high enough to cause Non-OECD demand to fall.

Just a general observation from looking at this data: Oil over $70 causes oil demand for OECD countries to fall. However even $100+ oil is not enough to cause oil demand to fall in Non-OECD countries, or the world. IE: The "high" oil prices we had 2005-2014 were not high enough to cause oil demand to fall for the Non-OECD nor the world.


That's obvious, and I I explained that in another message as well. Recall the graph that showed oil consumption rising for the rest of the world even as that for the U.S., EU, and Japan went down. That's because oil is used more for manufacturing and transport of goods for most of the world.

What's the problem with that view? The global capitalist system in which those countries operate requires increasing energy returns to support a growing global middle class that wants what the U.S., EU, and Japan has. That's the service-dominated, house-flipping, funny money world that you were referring to previously!

Sorry, can't have what we got? Then expect more fast crashes. After that....
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Re: Is fast crash likely? Pt. 7

Unread postby kublikhan » Thu 07 Dec 2017, 15:45:10

ralfy wrote:That's obvious, and I I explained that in another message as well. Recall the graph that showed oil consumption rising for the rest of the world even as that for the U.S., EU, and Japan went down. That's because oil is used more for manufacturing and transport of goods for most of the world.
So you do actually think oil responds to supply, demand, and price signals. Your actual reason for stopping by in this discussion was not to debate that point at all as we are in agreement.

ralfy wrote:What's the problem with that view? The global capitalist system in which those countries operate requires increasing energy returns to support a growing global middle class that wants what the U.S., EU, and Japan has. That's the service-dominated, house-flipping, funny money world that you were referring to previously!

Sorry, can't have what we got? Then expect more fast crashes. After that....
So this is what you really wanted to talk about. To borrow a phrase from Pstarr: I think we've whipped that dead horse enough.
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Re: Is fast crash likely? Pt. 7

Unread postby onlooker » Thu 07 Dec 2017, 20:20:08

Kub, Ralfy does an expert job of showing why the growth based Capitalistic system is incompatible with the demands of our world population and and a planet that is becoming less bountiful
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Re: Is fast crash likely? Pt. 7

Unread postby kublikhan » Thu 07 Dec 2017, 20:31:27

Onlooker, Ralfy and I have debated that topic to death on numerous occasions. Sometimes for months. I am tired of the subject.
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Re: Is fast crash likely? Pt. 7

Unread postby ralfy » Fri 08 Dec 2017, 01:38:45

kublikhan wrote:So you do actually think oil responds to supply, demand, and price signals. Your actual reason for stopping by in this discussion was not to debate that point at all as we are in agreement.


I was arguing the opposite.

ralfy wrote:So this is what you really wanted to talk about. To borrow a phrase from Pstarr: I think we've whipped that dead horse enough.


Only if you think a fast crash has nothing to do with what I raised!
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Re: Is fast crash likely? Pt. 7

Unread postby AdamB » Fri 08 Dec 2017, 10:53:06

shortonoil wrote:
Its hard to know where to start with shorty's nonsense.


Try starting the same way you would start on your nonsense. That's the scientific method of doing things.


Just as the scientific method knows during peer review to kick nonsense to the curb. How is that review coming elsewhere, now that your random number generator has been kicked to the curb by, you know, actual scientist types?
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Re: Is fast crash likely? Pt. 7

Unread postby AdamB » Fri 08 Dec 2017, 11:02:37

onlooker wrote:So tell us naysayers how, the law of supply/demand economics is going to fix this situation Short just described? We are all ears. And try keeping the answer mildly credible


Then try and do the same with the question. Supply and demand has been "fixing" not only every claim short has made recently, but the opposite ones he has made in the past. So which situation are you referring to, the ones short claimed before, or the contradictory ones he claims now?
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