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Declining Production in Venezuela

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

Re: Declining Production in Venezuela

Unread postby tita » Mon 22 Aug 2016, 12:17:20

Adam - I was referring to "availability" as "physical existence" of anything that can be turned into "supply". Economics act on the supply... The efforts made to search and extract oil from what is available. Efforts being workforce, technology, money.

Economics have no power on this availabilty. And when we take a portion (like US conventional oil) of this availability, it appears that the supply follow a bell-shape curve. If oil supply in the US is not making a bell-shape curve is because shale oil required too much efforts to extract vs other available oil. It is only when the other availabilty required more efforts to sustain the supply required by the demand that shale oil could be turned into supply.

If I give you $0 for your oil, there is no availability. If I give you $2/bbl, there might be a little. So sure, economics matters. No worries, classic doomer mistake.


And I'm sorry, you may have a PhD in economics, but your definition of 0$ oil is nonsense. It is not because there is a price that there is supply and demand. It's the other way around. It's the imbalance that create a price, which of course stimulate (or destroy) the supply.

The 0$ price is a special case. Price extend to 0$ when the supply extend to infinite or when the demand extend to 0. You give your battered couch for free on the street because there is no demand for it. You don't pay for the air you breathe because there is huge supply of it. For a long time, oil was a 0$ ressource... Because there was no demand for it.
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Re: Declining Production in Venezuela

Unread postby AdamB » Tue 23 Aug 2016, 15:35:21

tita wrote:Adam - I was referring to "availability" as "physical existence" of anything that can be turned into "supply". Economics act on the supply... The efforts made to search and extract oil from what is available. Efforts being workforce, technology, money.


Seems reasonable. Using your definition, economic theory does not create things from whole cloth that didn't exist before. It does, however, dictate how much of a thing that does EXIST, will be used in a particular economic context.

So, trying to not use the word "available", it certainly can make oil "appear" in previously unsuspected quantities, for example the recent US increases in oil production at faster rates than at any time in its history. Economics did not create the "new" oil, it simply made it worth enough that some fellows thought "crap! With these high prices, maybe if I rubblized some of that source rock that was always leaving oil stains on the sample bags when I was drilling for Red River in North Dakota, I can make some oil!". The rest, as they say, is history.

tita wrote:And I'm sorry, you may have a PhD in economics, but your definition of 0$ oil is nonsense. It is not because there is a price that there is supply and demand. It's the other way around. It's the imbalance that create a price, which of course stimulate (or destroy) the supply.


I am simply trying to use a very simple example, between you and I, or any two people trying to figure out an equitable trade.

I want something, and you have it. If I offer you $0 for it, odds are you would not consider that a good trade, and won't give me what I want. So then I attempt to give you more. There is some price at which you will say..."sure! I'll give you a barrel of my oil for $40...here you go!", and this defines the market clearing price in our trade.

Expand this to millions of transactions acting in a stochastic fashion, but ending in a very deterministic way on each one, and you have...economics in action!

Now, if you wish to discuss macro-economics, which is really the deterministic whole of all these individual market clearing prices, we can do that as well.

tita wrote:The 0$ price is a special case. Price extend to 0$ when the supply extend to infinite or when the demand extend to 0. You give your battered couch for free on the street because there is no demand for it. You don't pay for the air you breathe because there is huge supply of it. For a long time, oil was a 0$ ressource... Because there was no demand for it.


Economics, much like physics, tends to operate quite well in the middle range of what we can see, and then, like economics, has all kinds of weird issues when things get very big, or very small. So sure, $0 anything is one of those singularity points for economics, just as are resource cost curves as they move beyond the perspective of our macro-economic world. $1000 oil for example. I can think of a use for it, and even how it is paid for, under those conditions, but I am betting that most others cannot.
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Re: Declining Production in Venezuela

Unread postby tita » Wed 24 Aug 2016, 05:08:18

AdamB wrote:Expand this to millions of transactions acting in a stochastic fashion, but ending in a very deterministic way on each one, and you have...economics in action!

Now, if you wish to discuss macro-economics, which is really the deterministic whole of all these individual market clearing prices, we can do that as well.

Yeah, our little examples were only reflections in the microeconomics field. But the real shit is macroeconomics as you say. Oil market (and energy in general) can't just be analyzed from a microeconomics view. The ties between oil and the flows that represent the macroeconomics functionality of our world is very strong. They affect each other. Some think that the development of shale oil was so huge only because of some leverage was done on a macroeconomics level (QE). But I don't have time now, and we already digressed too much from the original topic. Maybe I'll start some discussion in the economic section. Thanks for the answers.
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Re: Declining Production in Venezuela

Unread postby AdamB » Wed 24 Aug 2016, 10:10:37

tita wrote: Some think that the development of shale oil was so huge only because of some leverage was done on a macroeconomics level (QE).


Sure. But none of them know much about the industry, let alone were working in shale development in the low price environment of the 70's, 80's and 90's. To them this is all new, and highly disruptive of the ignorance they cling to. Ignorance is easy. Figuring out how bootstrapping new production works is hard, they might have to unlearn some peak oil dogma, and heaven forbid anyone exert that kind of effort!

tita wrote:But I don't have time now, and we already digressed too much from the original topic. Maybe I'll start some discussion in the economic section. Thanks for the answers.


No problem.
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Venezuela oil production is plummeting

Unread postby AdamB » Wed 14 Feb 2018, 11:23:38


Venezuela's main source of cash is dwindling at a breathtaking pace. The country's oil output in January fell to its lowest level in nearly 30 years, not including a brief oil strike in 2003, according to S&P Global Platts. A monthly OPEC report published Monday revealed Venezuela pumped 1.6 million barrels of oil per day last month. Production in January was down 20% from a year ago. The staggering decline is another sign of Venezuela's economic and political crisis. The country is heading toward a presidential election in April that international critics are already labeling fraudulent. Venezuela has more crude oil than any other country in the world and it heavily depends on the commodity to power its economy. Crude oil makes up about 95% of Venezuela's exports. The country has no other source of foreign income. Yet the government-owned oil company, PDVSA, has pumped


Venezuela oil production is plummeting
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Re: Declining Production in Venezuela

Unread postby ROCKMAN » Sat 12 May 2018, 12:57:44

As they say if you can’t do the time don’t do the crime.

Reuters - Venezuela on Thursday rejected ConocoPhillips's moves to seize the country's Caribbean assets to collect on a $2 billion arbitration award, but in a sign the U.S. oil company's pressure might be working, Caracas also suggested it was ready to pay. In its first official comments since Reuters revealed Conoco's actions over the weekend, Venezuela's cash-squeezed leftist government said PDVSA wanted to solve the dispute through legal means. The dispute stems from Venezuela's nationalization of Conoco's assets a decade ago under late leader Hugo Chavez.

Nicolas Maduro's leftist administration is also battling more than a dozen other arbitration cases triggered by a wave of nationalizations under Chavez, who died of cancer in 2013. In the most aggressive move to date, ConocoPhillips last week moved to temporarily seize PDVSA's assets on Aruba, Bonaire, Curacao and St. Eustatius. That threw Venezuela's oil export chain into a tailspin. PDVSA was forced to suspend oil storage and shipping from its Caribbean facilities and has concentrated most shipping in its main crude terminal of Jose, which is suffering from a backlog.
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