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The ETP model was wrong - But is there a top for oil prices?

Discuss research and forecasts regarding hydrocarbon depletion.

Re: The ETP model was wrong - But is there a top for oil pri

Unread postby ROCKMAN » Tue 26 Jun 2018, 11:12:39

"The energy sector consumes 30% of the worlds energy and the economy receives 70% of the energy." The energy sector IS a portion of the world economy. In fact, a very large portion. "They say that this rings true with that 70% of the world GDP goes to consumption." I'm confused: what portion of the world's GPD isn't bought by and consumed by someone? And if no one is acquiring that portion why is it being produced?
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby ralfy » Tue 26 Jun 2018, 22:00:31

The problem is that GDP is composed primarily of credit. What we need to look at are things like energy and physical resources per capita, and how much per capita will be needed to maintain a particular lifestyle.
http://sites.google.com/site/peakoilreports/
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Yoshua » Wed 27 Jun 2018, 02:46:48

The machines consume 30% of GDP and humans consume 70% of GDP.

Man v. Machine

And entropy is the freaking terminator. It never rests. It never stops. It will hunt you down.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Outcast_Searcher » Thu 28 Jun 2018, 13:13:40

Yoshua wrote:The machines consume 30% of GDP and humans consume 70% of GDP.

Man v. Machine

And entropy is the freaking terminator. It never rests. It never stops. It will hunt you down.

Yes, in many trillion years, the universe will "die" due to entropy, becoming a cold, dark, silent place. (White dwarves can live on a timescale of trillions of years, so the process will take a VERY long time).

No doubt. But that does NOT mean that entropy is about to eat mankind alive in the very short term (like within a few decades or even centuries). Local conditions, like this big yellow nearby star that pumps a LOT of energy into the earth every second can stave off entropy for a very long time. Or large deposits of energy stored in the form of hydrocarbons.

So let's stop pretending that entropy is a valid excuse for Cassandras to wave their arms and claim financial armageddon is right around the corner, shall we?
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby asg70 » Thu 28 Jun 2018, 19:50:27

Outcast_Searcher wrote:Yes, in many trillion years, the universe will "die" due to entropy, becoming a cold, dark, silent place. (White dwarves can live on a timescale of trillions of years, so the process will take a VERY long time).


A dyson sphere around a white dwarf would make a great doomstead.

https://www.centauri-dreams.org/2015/03 ... n-spheres/

I suppose it's still not sustainable enough for the doomer diehards, though.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Yoshua » Fri 29 Jun 2018, 15:10:25

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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby onlooker » Fri 29 Jun 2018, 17:18:30

Oil Spikes To Highest Level Since 2014 As Global Markets On The Edge Of Panic!


https://kingworldnews.com/alert-oil-spi ... -of-panic/
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby asg70 » Mon 02 Jul 2018, 07:25:49

onlooker wrote:
Oil Spikes To Highest Level Since 2014 As Global Markets On The Edge Of Panic!


https://kingworldnews.com/alert-oil-spi ... -of-panic/


Back to citing hyperbolic fringe sources I see. Some people will never learn.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Outcast_Searcher » Mon 02 Jul 2018, 13:23:30

asg70 wrote:
onlooker wrote:
Oil Spikes To Highest Level Since 2014 As Global Markets On The Edge Of Panic!


https://kingworldnews.com/alert-oil-spi ... -of-panic/


Back to citing hyperbolic fringe sources I see. Some people will never learn.

yes, now from folks like Onlooker, we can expect to constantly hear how depletion and high prices are doooooooooooooom.

And that might not seem so odd, if just the opposite message was just recently the same doooooooooooom.

And the world is in SUCH a panic, that oil is down about 0.2% and has been quiet today! Should I hide under my bed?

You'd think some folks had a certain agenda to flog, regardless of the news, trends, data, etc. :roll:

I wonder what that agenda could possibly be? :idea: :P
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby asg70 » Mon 02 Jul 2018, 13:43:31

Outcast_Searcher wrote:I wonder what that agenda could possibly be? :idea: :P


I think I know.

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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby ROCKMAN » Mon 02 Jul 2018, 13:56:19

“Global Markets On The Edge Of Panic!” Which oil markets? I’ve known a few folks if refinery management and that segment is the most calm group I’ve ever run across. Maybe because it’s the refiners that set the price of oil. OTOH if you’re referring to the folks in the futures market never met a more high strung and jumpy. By far the most alcohol/drug abusers I’ve seen in the industry. Probably comes from the potential to make/lose tens of $millions in a matter of hours.

On the operations/production side where the Rockman has worked for the last 10 years: the only time I start to feel a tad panic is when I didn't have vendors lined up to buy me lunch a couple of times during the week. LOL. There was no panic per se even as oil prices began to fall. It was a relatively slow process and not unexpected. Just didn’t know the exact timing. But the Rockman began preparing 10 years when he started the new job. Used the bonuses to pay off mortgage. And did not add debt…paid cash for replacement vehicles. All credit cards paid automatically from checking account every month. IOW zero living on credit. So the Rockman is very lucky today: can live comfortably from just his and wife’s Social Security checks without dipping into savings. Pretty damn good considering I didn't really expect to live to 65. Too much time on rigs with close calls. That and Houston traffic/drunk drivers. LOL.

Not like the Rockman hasn’t lived thru such sh*t storms more than once in the last 43 years. LOL
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby pstarr » Mon 02 Jul 2018, 14:51:18

The problem arises because the reigning economic paradigm makes an implicit claim that its econometric claims are the equal of the "hard sciences" of physics and chemistry, that it is a truly a "natural" science. It is not. It is voodoo.

The reality is that Keynesianism arose in an era of abundant cheap energy, and it is an artifact of that brief one-off period in which industrialization, consumption and the human population were able to expand by leaps and bounds due to cheap energy and new technologies that leveraged greater value ("work," output) from the cheap energy.

Once energy is no longer cheap or abundant, the Keynesian model of paying people to dig holes and fill them as a means of boosting "aggregate demand" falls apart. In the Keynesian model, "growth" as measured by consumption (gross domestic product) is assumed to be permanent and the highest goal of any economy.

Image
"The Keynesian model makes another implicit assumption: that technology + cheap abundant energy will always generate increasing productivity: in other words, the same quantity of inputs (energy, labor, capital) will yield greater outputs due to rising productivity.

But as this chart of productivity illustrates, productivity is in a long-term secular decline."

Charles Hugh Smith; Of Two Minds
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Pops » Wed 04 Jul 2018, 13:50:44

Short finally admitted his theory was bogus?

LOL, sorry I missed it. Derailing the whole site based on misreading of a nominal price chart then years of double-down pretty well caused me to lose interest.

But on topic: we've seen that consumption is sticky in the short term, say a year or two. Oil consumption is tied to lifestyle, but even more it is based on major fixed assets: where you live, where you work, what you drive, how you recreate, etc. Moving closer to work is not a casual thing and since most people live check to check with little slack, a rapid increase in oil price obviously necessitates cutbacks elsewhere. One can argue that oil price spikes don't cause recessions but that requires arguing higher spending on oil offsets lower spending on everything else. This chart isn't definitive of course but illustrates my point:

Image


Longer term, consumption is more flexible— something early Peakers like me denied by the way. That obviously means the price ceiling is likewise flexible. We saw consumption fall when price was above $100/$2-3gal. Thing is, moving or buying a smaller car only happens if the price signal is clear and sustained. Just about the time overall and per capita consumption were beginning to fall due to increases in efficiency and changes in habit, the supply crimp abated, the oil price crashed, sales of SUVs/pickups spiked and miles traveled returned to growth.

Image


Circling back to why the "oil becomes more expensive to produce so price falls" model was so obviously wrong. As more oil is used to produce oil, less oil is available to meet consumer demand effectively constricting supply— OK so far. But the supply side is where EROEI ends. Constricted supply at whatever demand means higher price— not lower for crying out loud. Eventually lower available energy without replacement would lead to a lessened economy but higher prices would happen first and periodically in the typical wave of the so called "business cycle".

Lots of oil is simply wasted, most in fact. That isn't to say it doesn't add to the churn of the domestic product, it does. But some uses are critical to even a less "modern" life and I believe could justify a much higher price than we've ever seen. My old analogy is the oil fired 4x4 trip to the QuikSak for a six-pack will go before the oil-fired fire truck or ambulance trip because one has great utility and the other not so much. Really, the central point of PO in my mind is that without substitution those critical uses will repeatedly drive a cycle of price spikes and recessions that raise the ceiling (and floor) price of oil so high that the "waste" we are soaking in will become unaffordable.

My idea of ratcheting price waves in a nutshell:
scarcity / lower EROEI causes higher price
higher price reduces wasteful consumption
higher aggregate utility raises price ceiling
repeat


So price ceiling short term— yes, but long term, nope
YMMV — the devil is in your details

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If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen we must live through all time or die by suicide.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby kublikhan » Wed 04 Jul 2018, 15:20:23

Nice to see you again Pops. And no, short still hasn't admitted his model was wrong. But most of his adherents have abandoned him. Short however is still doubling down on his BS and insulting anyone who doesn't drink the Kool-Aid:

shortonoil wrote:The Etp Model isn't wrong; the monetary system is collapsing: you damn fool. Almost every correlation ever used has been broken, and the Emerging Economies FX markets are dying. The monetary system can no longer price the cost of goods and services accurately enough to maintain a functioning economy. Go ask Venezuela, South Africa, Turkey, Indonesia, Mexico, or Argentina how they are doing? This will spread from the poorer peripheral economies to the developed economies. If David Stockman is right, and historically he has been right on the money, it should get to the West within a year! Then we will witness the crash of all times.

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The ETP model was wrong - But is there a top for oil prices?
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Pops » Wed 04 Jul 2018, 22:31:04

hey, Kub
oh, yeah I see, obviously didn't read far enough, lol
If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen we must live through all time or die by suicide.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Yoshua » Thu 05 Jul 2018, 03:01:34

The Etp Model's MAC is telling how much net energy is left in a barrel of crude after reducing the energy cost to produce the crude barrel and how much economic activity it can generate in USD.

If the price of WTI crude oil raises above the MAC, then this should should show in a economic downturn and in economic destruction. I think that we are at least seeing this taking place in EM and in the slowing down of the Eurozone.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Yoshua » Thu 05 Jul 2018, 03:19:17

I think that the shortcoming of the Etp Model is that it equals one Btu with one Btu, while the economy prices Btu's differently depending on what fuel type they come from.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby asg70 » Thu 05 Jul 2018, 09:25:21

Yoshua, I think you're basically the last guy out the door as far as carrying the torch for ETP. BahamasEd is sort of obsessed with it like a science experiment but isn't what I'd consider an evangelist. So you just might want to reconsider your support.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby Outcast_Searcher » Thu 05 Jul 2018, 16:16:03

Yoshua wrote:The Etp Model's MAC is telling how much net energy is left in a barrel of crude after reducing the energy cost to produce the crude barrel and how much economic activity it can generate in USD.

If the price of WTI crude oil raises above the MAC, then this should should show in a economic downturn and in economic destruction. I think that we are at least seeing this taking place in EM and in the slowing down of the Eurozone.

By context, I presume you mean the MAP (Maximum Affordable Price) discussed in the ETP paper? If not, what is the MAC, re the ETP please?
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: The ETP model was wrong - But is there a top for oil pri

Unread postby vtsnowedin » Thu 05 Jul 2018, 16:49:17

Perhaps we are about to explore what the maximum price really is.
https://www.spglobal.com/platts/en/mark ... -opec-deal
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