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When a big & lasting oil shortage will happen .

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

Re: When a big & lasting oil shortage will happen .

Unread postby baha » Sun 06 Aug 2017, 06:03:45

Good point ralfy,
What happens when the system doesn't respond the way they expect? Peak oil may prevent production from ramping back up and there is also a threat from EVs, peak demand.

The money is loaned on the assumption that, after the glut, the oil industry will start making money again. Just like it always has...but what if?

This is why transitions need to be managed. This kind of 'what if' can be the card that slides out and crashes the house.
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Re: When a big & lasting oil shortage will happen .

Unread postby baha » Sun 06 Aug 2017, 07:03:43

I am really impressed with what Europe is doing with EV mandates. Complex societies need to be able to plan 30 years out. It may not go the way you think but at least everyone is headed in the same direction.

I will credit Trump for this. Europe has always looked to the US for support and guidance. Don't ask me why, it just is. When they realized we had taken a hard right and were headed in the wrong direction, they decided to go their own way.

'We are tired of waiting for you to help us, so we are helping ourselves.'

Good move. The majority of Americans are looking around stupid and wondering what happened...We are flailing around fighting over what direction to go in. Americans are idealist. We need to believe in what we are doing. And obviously the majority is not in control.

Don't get me wrong. The comfy motherly Hillary would just have delayed things even longer while also promising magical solutions.

We will see the writing on the wall and start playing catchup, but the world is changed.
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Re: When a big & lasting oil shortage will happen .

Unread postby ROCKMAN » Sun 06 Aug 2017, 07:04:39

ralfy - "Also, additional credit was provided based on the assumption that the industry will recover and thrive in the long term..." Not these days: the banks and other money lenders just got bushwhacked a couple of years ago for doing just that during the boom. The credit used to be issued on such foolish optimism. If you look at the post C11 settlement details the bankers have their asses we'll covered now. Take Halcon as a good example. The new big credit line is ASSET BASED. IOW it's based on the current value of its PROVEN RESERVES based on the CURRENT PRICE of oil/NG. Remember: the bankruptcy court gave those creditors 96% of Halcon's assets. And I suspect the bank's engineers were very conservative in their evaluation. An evaluation that Halcon had no choice but accept. Additionally the bankruptcy court GUARANTEED those new loans: if anything goes wrong in the future those loans get paid off before any other debt or obligation. And if I recall correctly the creditors also get a $266 million payment...again GUARANTEED by the federal bankruptcy court.

This is typically how the dynamic has always worked. During the boom times there's a lot of competition amongst the money lenders, investors and service companies. As a result they have very little to no leverage and thus truly sh*tty trades are made. But the situation completely reverses during a bust: the E&P companies ended up with the sh*tty terms because they've lost all leverage. On top of that the federal bankruptcy court will guarantee compliance with the new trade terms. Remember the court gave the Ocean Rig creditors 99%+ of its assets: a fleet of state of the art Deep Water drill ships. Without many drilling contracts they aren't generating much revenue today. But they still have a replacement cost into the $BILLIONS. And given the creditor's ownership is in the form of stock they can easily liquidate anytime they chose. And by controlling the board of directors they can set policies that would enhance the value of the stock even if it isn't in the best long term interest of the company.

But have no doubt: the money lenders took a hard hit by making foolish loans during the boom. But the shoe is on the other foot now and they have the federal bankruptcy court forcing the companies into bad deals to the benefit of the money lenders. IOW now is when the banks can be very aggressive lending money to the oil patch. But when oil was $100/bbl? Not such a good idea. LOL.
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Re: When a big & lasting oil shortage will happen .

Unread postby ROCKMAN » Sun 06 Aug 2017, 07:34:22

baha - "...what Europe is doing with EV mandates. Complex societies need to be able to plan 30 years out. It may not go the way you think but at least everyone is headed in the same direction." But as I pointed out before: a good plan that isn't enacted is no plan at all. Most if not all of the politicians drafting those mandates won't be around to put them in place. Likewise many of the citizens who say the support those proposals won't be around to be impacted by them. The Rockman could easily support a US 99% corporate tax rate in 30 years: he won't be around to deal with such a nightmare. LOL.

So why wait decades? Why don't politicians today (or 8 years ago) begin enacting significant changes to the dynamic? Easy answer: they don't want to get voted out of office. How many years have we've been saying serious changes need to take place? And the result: in the last couple of years the world has burned more fossil fuels then ever before. So that's the net result of all the rhetoric from the public and politicians? Politicians of a Democrat flavor that had ruled the US federal govt for the last 8 years? A very pro-environment POTUS that exported more coal (mostly from govt leases) in a single year then any other POTUS in history? A POTUS that offered more offshore leases for auction during his watch then any other POTUS in history. Including leases after one of the worst offshore oil spills the world has ever experienced. A D POTUS that supported exporting as much US oil, refinery products and NG as the global market could absorb?

And now the situation will improve with the R's controlling DC? And the situation in Europe will improve as nationalistic parties are growing in support?

Yep: nothing easier then designing a plan. A plan someone else will have to carry out.
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Re: When a big & lasting oil shortage will happen .

Unread postby baha » Sun 06 Aug 2017, 08:24:35

The shortcomings of our society are not my fault :)

I've always said it doesn't matter what party he/she is in. Once they are elected they are the President. As president you don't get to play parties. You just do what you can around the edges. There is no real control there, just a figurehead, maybe some influence on opinions...good or bad :)

All presidents fail to honor their ideals. They are not willing to shut it all down to make a stand. No wonder, it is one against the country. No politician wants to be the destroyer.

I do, baha for president :) Don't kid yourself, I'm not that stupid. There is the problem, anyone with vision and determination cannot get elected. You have to be a stooge.

I made my plan and I am working it...I will be raking in money while TPTB look stupid. That's why I am impressed with Europe. Take charge and do it yourself.
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The energy density of a tank of FF's doesn't matter if it's empty.

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Re: When a big & lasting oil shortage will happen .

Unread postby ralfy » Mon 07 Aug 2017, 06:46:33

ROCKMAN wrote:ralfy - "Also, additional credit was provided based on the assumption that the industry will recover and thrive in the long term..." Not these days: the banks and other money lenders just got bushwhacked a couple of years ago for doing just that during the boom. The credit used to be issued on such foolish optimism. If you look at the post C11 settlement details the bankers have their asses we'll covered now. Take Halcon as a good example. The new big credit line is ASSET BASED. IOW it's based on the current value of its PROVEN RESERVES based on the CURRENT PRICE of oil/NG. Remember: the bankruptcy court gave those creditors 96% of Halcon's assets. And I suspect the bank's engineers were very conservative in their evaluation. An evaluation that Halcon had no choice but accept. Additionally the bankruptcy court GUARANTEED those new loans: if anything goes wrong in the future those loans get paid off before any other debt or obligation. And if I recall correctly the creditors also get a $266 million payment...again GUARANTEED by the federal bankruptcy court.

This is typically how the dynamic has always worked. During the boom times there's a lot of competition amongst the money lenders, investors and service companies. As a result they have very little to no leverage and thus truly sh*tty trades are made. But the situation completely reverses during a bust: the E&P companies ended up with the sh*tty terms because they've lost all leverage. On top of that the federal bankruptcy court will guarantee compliance with the new trade terms. Remember the court gave the Ocean Rig creditors 99%+ of its assets: a fleet of state of the art Deep Water drill ships. Without many drilling contracts they aren't generating much revenue today. But they still have a replacement cost into the $BILLIONS. And given the creditor's ownership is in the form of stock they can easily liquidate anytime they chose. And by controlling the board of directors they can set policies that would enhance the value of the stock even if it isn't in the best long term interest of the company.

But have no doubt: the money lenders took a hard hit by making foolish loans during the boom. But the shoe is on the other foot now and they have the federal bankruptcy court forcing the companies into bad deals to the benefit of the money lenders. IOW now is when the banks can be very aggressive lending money to the oil patch. But when oil was $100/bbl? Not such a good idea. LOL.


Take risks, fail, and then receive guaranteed gubmint protection. That certainly offsets the POD, right?
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Re: When a big & lasting oil shortage will happen .

Unread postby ROCKMAN » Mon 07 Aug 2017, 10:39:23

ralfy - "That certainly offsets the POD, right?." Perhaps. But I think better stated it's part of the POD. Just as some lending huge amounts of capex to the industry because of high oil prices was a significant part of the POD.

Why some folks didn't like the POD concept: too inclusive. But how do you separate high oil prices - drilling boom - big production increase - economy damage - price crash - increased consumption - drilling slump - production decline - etc? Folks can try to analyze each factor separately as if they all are unrelated.

But they really aren't, are they?
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Re: When a big & lasting oil shortage will happen .

Unread postby AdamB » Mon 07 Aug 2017, 13:55:42

ROCKMAN wrote:ralfy - "That certainly offsets the POD, right?." Perhaps. But I think better stated it's part of the POD. Just as some lending huge amounts of capex to the industry because of high oil prices was a significant part of the POD.

Why some folks didn't like the POD concept: too inclusive. But how do you separate high oil prices - drilling boom - big production increase - economy damage - price crash - increased consumption - drilling slump - production decline - etc? Folks can try to analyze each factor separately as if they all are unrelated.

But they really aren't, are they?


Folks who never knew that oil production has to do with both SUPPLY and DEMAND easily assume hair brained ideas of independence where there is none. Of course, these are the same folks who don't know any more about statistics than they do oil production. Around here we just call them peakers, doomers, etc etc.
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Re: When a big & lasting oil shortage will happen .

Unread postby ROCKMAN » Mon 07 Aug 2017, 14:15:14

Adam - But they don't need all that info to understand what's going on: they have 3 minute broadcasts by the MSM and plenty of bumper stickers to educate themselves. LOL.
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Re: When a big & lasting oil shortage will happen .

Unread postby pstarr » Mon 07 Aug 2017, 16:53:58

That's a bit confusing there Adam, mixing up the 'cornies' and the 'doomers'. These are craxy times all right :shock: 8)
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Re: When a big & lasting oil shortage will happen .

Unread postby ralfy » Mon 07 Aug 2017, 18:44:02

ROCKMAN wrote:ralfy - "That certainly offsets the POD, right?." Perhaps. But I think better stated it's part of the POD. Just as some lending huge amounts of capex to the industry because of high oil prices was a significant part of the POD.

Why some folks didn't like the POD concept: too inclusive. But how do you separate high oil prices - drilling boom - big production increase - economy damage - price crash - increased consumption - drilling slump - production decline - etc? Folks can try to analyze each factor separately as if they all are unrelated.

But they really aren't, are they?


Well, I've been talking about the rest of the POD, which involves not just large amounts of capex but diminishing returns affecting it.
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Re: When a big & lasting oil shortage will happen .

Unread postby AdamB » Mon 07 Aug 2017, 21:25:43

ROCKMAN wrote:Adam - But they don't need all that info to understand what's going on: they have 3 minute broadcasts by the MSM and plenty of bumper stickers to educate themselves. LOL.


And there are always peak oil websites to help educate them.

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Re: When a big & lasting oil shortage will happen .

Unread postby ROCKMAN » Tue 08 Aug 2017, 09:15:01

ralfy - I'm pleased that many here understand the complexity of the POD. There may be some debates on the details but in general our little band of brothers (and a few sisters) are well beyond the simplistic rhetoric. Of course there are still a few that debate individual components of the POD as if they are independent of the dynamic.

But they do offer some numerous relief from the seriousness of the subject. LOL.
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