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Low Oil Prices Could Break The “Fragile Five” Producing Nations

Production

Persistently low oil prices have already inflicted economic pain on oil-producing countries. But with crude sticking near six-year lows, the risk of political turmoil is starting to rise.

There are several countries in which the risks are the greatest – Algeria, Iraq, Libya, Nigeria, and Venezuela – and RBC Capital Markets has labeled them the “Fragile Five.”

Iraq, facing instability from the ongoing fight with ISIS, has seen its problems compounded by the fall in oil prices, causing its budget to shrink significantly. The government is moving to tap the bond markets for the first time in years, looking to issue $6 billion in new debt.

Revenues have been bolstered somewhat by continued gains in production. Iraq’s oil output hit a record high in July at 4.18 million barrels per day, up sharply from an average of 3.42 million barrels per day in the first quarter of this year. But with Brent crude now dropping well below $50 per barrel, Iraq’s finances are worsening. According to Fitch Ratings, Iraq may post a fiscal deficit in excess of 10 percent this year, and all the savings accrued during the years of high oil prices have been depleted.

Related: EPA Cracking Down On U.S. Methane Waste

Other political problems loom for Iraq. The central government and the semiautonomous region of Kurdistan have been unable to resolve a dispute over oil sales. With revenues running low for the central government, it has failed to transfer adequate funds to the Kurdish Regional Government (KRG). That led to the breakdown of a tenuous deal between the two sides that saw Kurdish oil sold under the purview of the Iraqi government. The KRG is selling oil on its own now in an effort to obtain much needed revenue in order to pay private oil companies operating in its territory.

Meanwhile, in southern Iraq, which produces the bulk of the country’s oil and has been far from the violence associated with ISIS, protests have threatened oil operations there. Protests at the West Qurna-2 oilfield operated by Russian firm Lukoil have raised concerns within both the company and the Iraqi central government about disruptions. The Prime Minister even traveled to the site to reassure Lukoil about the stability of its operations.

“Recent pressure from villagers and nearby residents making demands could force us to consider halting operations if they keep extorting us,” a Lukoil official reportedly said. Disruptions don’t appear to be imminent, but any cutback in production would be a huge blow to Baghdad and would plunge Iraq deeper into financial despair.

Low oil prices could also push Venezuela into a deeper crisis. The cost of insuring Venezuelan government bonds has hit its highest level in 12 years, indicating the growing probability of default. Critical parliamentary elections loom in December, but the government has already cracked down on opposition candidates and will likely prevent a fair election from taking place, even while President Maduro’s popularity sinks. The economy is already in crisis, but it is teetering on the brink of something more acute. Bloomberg’s editors openly wonder whether Venezuela’s neighbors are prepared for its collapse.

For Libya, already torn apart by civil war and the growing presence of ISIS militants, low oil prices are the last thing the country needs. ISIS violently crushed a civilian rebellion last week in the coastal city of Sirte, according to Al-Jazeera. Libya’s internationally-recognized government has called upon Arab states for help in fighting ISIS, something that the Arab League has endorsed. Meanwhile, the country’s oil sector – the backbone of the economy – is producing less than 400,000 barrels per day, well below the 1.6 million barrels per day Libya produced during the Gaddafi era. In other words, Libya is selling far less oil than it used to, and at prices far below what they were as recently as last year. Citing IMF data, Bloomberg says that oil is selling for almost $160 per barrel less than what Libya would need it to be for its budget to breakeven.

Saudi Arabia does not belong in the same category of troubled countries, but it is also not immune to oil prices at multiyear lows, despite its vast reserves of foreign exchange. Saudi Arabia could run a fiscal deficit that is equivalent to about 20 percent of GDP. To finance public spending, Saudi Arabia has returned to the bond markets for the first time in eight years, issuing 15 billion riyals ($4 billion) in July, only to be followed up by an additional bond offering of 20 billion riyals ($5.33 billion) in August. The government plans on taking on more debt in the coming months as well.

Still, Saudi Arabia has a market share strategy that it is pursuing, and there are no signs that it will reconsider. That could spell trouble for much more fragile oil-producing countries around the world.

By Nick Cunningham of Oilprice.com



49 Comments on "Low Oil Prices Could Break The “Fragile Five” Producing Nations"

  1. Makati1 on Wed, 19th Aug 2015 7:57 pm 

    Hohum…. More guessing about the future. This is only the beginning of the breakdown all over the world.

  2. Apneaman on Wed, 19th Aug 2015 8:01 pm 

    The “Fragile Five”? I had all their albums back in the 60’s

  3. Truth Has A Liberal Bias on Wed, 19th Aug 2015 10:38 pm 

    Five countries soon to be added to the growing list of failed states. And whose citizens will soon join in the waves of unregulated mass migration. This is collapse ladies and gentlemen. The countries will fall in order of most fragile to least fragile. Before too long they will have all fallen. Even the most resilient. Government by ox cart in a world order best described as a ‘Hobbesian Scramble’.

  4. Bloomer on Wed, 19th Aug 2015 11:51 pm 

    Low oil prices will also hurt the Peoples Republic of Alberta.

  5. Apneaman on Thu, 20th Aug 2015 12:09 am 

    Energy companies face pressure to sell assets as oil slump hits profits

    “The benchmark price for oil in North America, known as West Texas intermediate, closed at $40.80 (U.S.) a barrel Wednesday. This week, Western Canadian Select oil sands crude fetched about $18.70 less than WTI. As a result, the S&P/TSX energy subindex fell more than 4 per cent.”

    http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/energy-companies-face-pressure-to-sell-assets-as-oil-slump-hits-profits/article26026572/

  6. joke on Thu, 20th Aug 2015 3:44 am 

    There is no logic in the reason why the US and the EU have behaved towards the middle east unless you include the so called neo-con Project for a New American Century, where the West was supposed to ensure its enduring supremacy by militarising then breaking up all the Russian allied states by destroying them. The real problem is that they have not taken into account that they have uncorked the mass of population in the third world which could overwhelm the western world.

  7. Davy on Thu, 20th Aug 2015 7:34 am 

    Good morning

    Dazed And Confused: Futures Tumble Below 200 DMA, Oil Near $40, Soaring Treasurys Signal Deflationary Deluge
    http://www.zerohedge.com/news/2015-08-20/dazed-and-confused-futures-tumble-below-200-dma-oil-near-40-soaring-treasurys-signal

    “oil is about to trade under $40”

  8. Boat on Fri, 21st Aug 2015 3:28 pm 

    Did you know Greece spends more on their military than Iran does? Yep, let’s all live in fear.

  9. Makati1 on Fri, 21st Aug 2015 9:41 pm 

    Anyone notice the smear of red all over the market numbers lately? Will we make it to the end of 2015? I have no investments there, but it sure is interesting to follow. Red is a good color for the blood to come.

  10. peakyeast on Sat, 22nd Aug 2015 5:26 am 

    Could be a blessing – if the collapsed 5 nations still export oil.

    Then the ELM will only be eaten into from depletion and not the countrys own usage.

    Thats real demand destruction !

  11. BobInget on Sun, 23rd Aug 2015 10:03 am 

    There’s a misconception abroad to the effect that Mideast, in particular Saudi oil, is the lowest cost in the world. I challenge that.

    This, from Wikipedia:

    Saudi Aramco (Arabic: أرامكو السعودية‎ ʾArāmkō s-Saʿūdiyyah), officially the Saudi Arabian Oil Company, most popularly known just as Aramco (formerly Arabian-American Oil Company) is a Saudi Arabian national petroleum and natural gas company based in Dhahran, Saudi Arabia.[5][6] Saudi Aramco’s value has been estimated at anywhere between US$1.25 trillion[7] and US$7 trillion,[8] making it the world’s most valuable company.

    BuT, You know all that.

    Here’s my point. Aramco and the Government of KSA are one in the same.
    If government, for political reasons sells Egypt crude at great discounts, it’s oil company profits that are challenged.

    http://www.ibtimes.com/amid-threats-turmoil-egypt-saudi-arabia-sign-3-month-oil-deal-worth-14b-2061893

    When government decides to invade neighboring Yemen, Aramco’s profits, government revenue tumbles.

    It matters to share holders how much it cost to raise a barrel of oil in North Dakota. If the US Government decides to buy more drones or F/32s it doesn’t directly effect that US oil company’s bottom line.

    When the Only source of revenue is Crude Oil,
    all expenditures related to withdrawing, marketing, protection of that oil must be a business expense.

    If Saudi Arabia requires $125. oil to satisfy government, we need to dismiss oil data
    of five or ten dollars a barrel for Saudi OIl.

    http://money.cnn.com/2015/04/13/news/economy/military-spending-saudi-arabia/

  12. Davy on Sun, 23rd Aug 2015 10:31 am 

    Bob over on Zero Hedge:

    Saudi Arabia Faces Another “Very Scary Moment” As Economy, FX Regime Face Crude Reality

    Gulf Markets Melting Down: Saudi Arabia Plunges 7%, Dubai Sold

  13. Boat on Sun, 23rd Aug 2015 10:32 am 

    Bob,

    It matters to share holders how much it cost to raise a barrel of oil in North Dakota. If the US Government decides to buy more drones or F/32s it doesn’t directly effect that US oil company’s bottom line.

    Profits are taxed. Taxes go up. Infrastructure has to be upgraded and built for oil. Tax revenue has to be created by the state or county. Pollution happens. People get sick and medical costs go up. Another form of tax. All the flaring causes global warming which causes disasters which drive up costs in many other ways. US oil companies,coal companies etc are subsidised in a way by not having to shared in these costs which have to be paid one way or another. etc.
    The huge burden of medical costs of war are in the trillions, just debt only counted doctor visit by doctor visit.

  14. BobInget on Sun, 23rd Aug 2015 10:38 am 

    Getting back to topic.

    Times are tough in the troubled five.

    The youngest and brightest Algerians are leaving for Europe. ISIS and al Qaeda are making serious inroads among discontented.

    How much longer can Russian oil companies
    continue to operate in Southern Iraq ?
    Local people are loath to see their only resource
    wasted and they get nothing in return.

    Libyan exports are down to a trickle as duel governments and dozens of ‘War Lords’ fight over the goodies.

    Boko Haram atrocities get nastier and more brutal by the day. Even hired armies out of South Africa can’t control vast areas of Northern Nigeria. Oil rich Southern Nigeria could be next. It’s ISIS goal to control Southern Nigeria’s oil.

    The “Big Kauna” Venezuela, surrendered to China and Russia without either firing a shot.
    As KSA burns out Venezuela becomes the leading edge of OPEC. Venezuela’s oil sands, bigger then Canada’s have yet to be tapped.
    In twenty years, or fewer, Venezuela and Canada will be among the world’s main oil suppliers.

    Venezuela almost went broke as a result of Saudi craziness. China and Russia stepped in
    with cash and expertise. Result, China gets the oil, Russia does a little profit-sharing. North America gets back exactly what we did to help Venezuela, nada.

    Unemployment in the US oil patch is rising to the point of real hardship.
    http://www.wsj.com/articles/oil-layoffs-hit-100-000-and-counting-1429055740

    Peakeasy, Here’s hoping you live a long life.
    LT consequences of this so called ‘glut’
    are so far reaching and world changing, giving material for sites like this for decades.

  15. Davy on Sun, 23rd Aug 2015 10:39 am 

    Boat, where are your corny friends the NOo and Marmi? How come when the tuff gets going the pussys hide. I admire you for that Boat. You are up this morning chipper as ever as if notin happened last week. Kick ass and take names Boat.

  16. Davy on Sun, 23rd Aug 2015 10:58 am 

    Bob, damn you are reaching with this prediction “in 20 years time Venezuela and Canada will be among the worlds main oil suppliers”.

    Bob, do you realize the folly of a 20 year out prediction? Bob, do you realize we likely don’t have 5 years of the status quo. How the hell are the technically challenging unconventionals going to be exploited at your predicted level. Bob, do you believe in unicorns?

  17. Boat on Sun, 23rd Aug 2015 10:59 am 

    Davy?
    As a person who believes the peak of oil hasn’t happened yet and thinks there is years of cheap oil ahead. I am doing great, thanks. When it comes to nat gas have you ever seen so few wells pumping such a plethora? Fantastic optimism for economic for many decades to come.
    If you are talking about the DJIA just look at a 50 year chart. Any problems are just a minor blip on the radar. When we look back as consumers these days are some of the best days the US has ever seen. Cheap gas, cheap interest rates, reasonable food prices etc. I do think you should move though. I hate the idea of you so close to a nuke plant.

  18. Davy on Sun, 23rd Aug 2015 12:02 pm 

    Ye ha, ridem cowboy. Boat you know how corny your last comment was? Boat, do you believe in unicorns. I have a feeling you are going to get bitch slapped in the next few weeks and months as out untenable economic situation progressively gets worse.

    I agree with you on gas and thank God we have that resource. I disagree with you on oil and the economy.

    Boat you have been habituated and condition all your life for progress and growth. That is coming to an end and you have not a clue how to deal with that. I don’t have much of a clue either but I am not in denial.

  19. apneaman on Sun, 23rd Aug 2015 12:31 pm 

    Davy, I think that boat is sailing on an ocean of Kool-aid and we saw that same fake swagger last fall by corns when prices tanked. They do that to compensate. Predictable ape behaviour as consequence time draws near.

  20. Boat on Sun, 23rd Aug 2015 1:10 pm 

    So when does consequence time come? How many years have to go by before you say I might have been wrong about oil?

    Conventional oil is taking back over. Deep sea oil, fracking and tar sands have taken a hit but the world consumption is still growing. Cheap prices will encourage more growth. When the 2.5 mill glut is absorbed the market back up and those oil industries will resume. What is so confusing about that.
    There is no fake swagger just BAU.

    Davy we have discussed before. I actually prefer a higher price of oil to slow pollution and population growth. Managed degrowth is a much preferred scenario. But my wishes and wants are like yours. We have no individual control. We just read and discuss. I just don’t hate and blame like many of you doomers do. It is what it is.

  21. MrNoItAll on Sun, 23rd Aug 2015 1:27 pm 

    So when does consequence time come?

    NOW!!

    Boat, if you can’t open your eyes and see how the global economy is swirling down the commode in a vortex of deflation brought on by energy shortages, then you must be blind.

    Speaking of boats:

    Global Trade In Freefall: Container Freight Rates From Asia To Europe Crash 60% In Three Weeks

    http://www.zerohedge.com/news/2015-08-23/global-trade-freefall-container-freight-rates-asia-europe-crash-60-three-weeks

    But don’t worry Boat. I personally feel confident that you’re not as dense an detached from reality as you make out to be. I suspect you’re just a straw man in cahoots with Peak Oil dot com, here to generate controversy, discussion, rebuttals and hits/revenue for the site.

  22. apneaman on Sun, 23rd Aug 2015 1:53 pm 

    boater, ask all the formerly employed (08-09) people who are now in their parents basements or have 3 roommates and are living off Ramen when they think the consequences are coming. Ask the California farmer and his former employees. Ask the people who have lost their homes this year due to unprecedented wildfires. Ask the millions and millions of young people with useless degrees who can only get minimum wage jobs but are stuck with massive loan debt that most will never be able to repay. Ask the commercial fishermen who are having their livelihood wipeout from ocean acidification, agriculture runoff, plastic and a too hot ocean. Ask the folks who can not afford any healthcare and the ones that are spending more on it every year. Ask the unemployed 100,000 plus and growing oil patch workers. Ask yourself why you refuse to see the obvious.

  23. Boat on Sun, 23rd Aug 2015 1:57 pm 

    NO,
    Look at oil consumption around the world. Nat gas, solar, wind etc. Show me the declines. I see slower growth but growth nonetheless. Cheap oil prices will spur more growth or pay down debt. The money has to go somewhere. The money we paid for oil over the last 5-6 years is coming back to the consumer. A massive transfer to be sure but not the apocalypse.

  24. Boat on Sun, 23rd Aug 2015 2:19 pm 

    Look at government revenues. The US deficit is about equal to the interest on the debt. Unemployment went from over 10 to less than 5. Most countries would like to have these problems. All this since the crash. These are the best of times historical, not the worst in spite of what you doomers say.
    Kids living with their parents are just a trend that is needed for sustainable living. This is a good thing. The US is overloaded with housing square feet. Single women working with kids is the result of welfare reform. They still need assistance but they are not freeloading like in the past. Some of BAU will change some as energy gets more expensive as we do live in a finite world. More people living in the same house is a perfect way to save on money. This is not doom but a good sign.
    If you have 3-4 wage earners living together you can live in a very nice house or split up and all live in small apartments. Maybe you doomers just need to learn to get along, Just takes some give and take.

    You can grow a massive amount of food in a small space and not pay as much for shipping and handling. This is part of a changing future. Local produce in stores is normal now. Was it 20 years ago? Humans are adapting. Maybe it is just you that can’t see it. Corn at Walmart was at $.17 an ear for months this summer. I can’t grow it that cheap if you factor in time.

  25. apneaman on Sun, 23rd Aug 2015 2:43 pm 

    boat, you keep changing your argument. One time you say it’s doomer conspiracy thinking – next it’s silly – then it’s the way things have always been – it’s “not” that bad and this time it’s we’ll all adjust. You contradict yourself boat. How can we adjust to something that is not happening?

    does this look like a decline?

    Global Trade In Freefall: Container Freight Rates From Asia To Europe Crash 60% In Three Weeks

    http://www.zerohedge.com/news/2015-08-23/global-trade-freefall-container-freight-rates-asia-europe-crash-60-three-weeks

  26. apneaman on Sun, 23rd Aug 2015 2:47 pm 

    Gulf Stocks Deepen Slide Amid Global Selloff

    http://www.wsj.com/articles/gulf-stocks-slide-deepens-amid-global-selloff-1440331818

  27. Boat on Sun, 23rd Aug 2015 3:03 pm 

    apeman,
    Technology has and will continue to take jobs. Downside for humans, upside for efficiency and the natural order of business. In 1900 95% of US was involved in agriculture. Because of machinery now it takes less than 5% of our population and beside that we are a major exporter to the world. I have argued many times which you fail to mention the US biggest problem is immigration for sustainability sake.

    boat, you keep changing your argument. One time you say it’s doomer conspiracy thinking – next it’s silly – then it’s the way things have always been – it’s “not” that bad and this time it’s we’ll all adjust

    It’s not that bad. In fact it’s great for us working drones as Guhng calls us. Constant change is normal and we have continually adjusted. No brainer there. Some countries better than others. China was just one example, instead of 38 million people dying in a famin compared to a drop in their market. I would take the drop in the market.
    Your concern about the drop in shipping is a legit stat, there is slowing, let’s just wait a few months to see if it sorts itself out. Low energy prices should spur growth and a recovery except for countries that depend on oil for income.

    Free fall problems was wwII where 2,700 people died per day for 6 years. Everybody had less food, less fuel more debt per capita and huge devastation. I would say in comparison the world is doing awesome.

  28. Davy on Sun, 23rd Aug 2015 3:15 pm 

    Boat, you fail to see the dangers of declining growth. The system has a threshold level that if not achieved decay begins. We are at that point or close. You are far to optimistic considering everything that is going on since 08. I see that as pure denial.

  29. Boat on Sun, 23rd Aug 2015 3:17 pm 

    12 August 2015

    Global oil demand in 2015 is expected to grow by 1.6 mb/d, up 0.2 mb/d from our previous Report and the fastest pace in five years, as economic growth solidifies and consumers respond to lower oil prices. Persistent macro-economic strength supports above-trend growth of 1.4 mb/d in 2016.

    Global refinery runs reached a record 80.6 mb/d in July, 3.2 mb/d up on a year earlier

    http://www.iea.org/newsroomandevents/news/2015/august/iea-releases-oil-market-report-for-august.html

    Does this look like a crash?

  30. apneaman on Sun, 23rd Aug 2015 3:19 pm 

    So because some drones are still working – no problem? Everyone one who gets thrown under the bus will just quietly fade away and the happy consumer paradise will carry on – just for you and yours. Good luck with that.

    You are comparing today to WWII. Are you fucking kidding? Talk about moving the goal post – you’ve dragged them out to the parking lot. You keep jumping to new levels of psychological protection.

    Motivated Reasoning

    “Motivated reasoning is confirmation bias taken to the next level. Motivated reasoning leads people to confirm what they already believe, while ignoring contrary data. But it also drives people to develop elaborate rationalizations to justify holding beliefs that logic and evidence have shown to be wrong. Motivated reasoning responds defensively to contrary evidence, actively discrediting such evidence or its source without logical or evidentiary justification. Clearly, motivated reasoning is emotion driven. It seems to be assumed by social scientists that motivated reasoning is driven by a desire to avoid cognitive dissonance. Self-delusion, in other words, feels good, and that’s what motivates people to vehemently defend obvious falsehoods.”

    http://skepdic.com/motivatedreasoning.html

  31. apneaman on Sun, 23rd Aug 2015 3:22 pm 

    boat I think you may have all the right stuff to run for mayor.

    Jackson, Miss., looks for heaven to fill its potholes: Jarvis DeBerry

    “New Orleanians who have had enough with the teeth-chattering potholes will probably be surprised to hear what the mayor of Jackson, Miss., is proposing for his city’s similar problem. Prayer. Yes, Tony Yarber, the pastor and founder of Relevant Empowerment Church and who elected to the mayor’s office in 2014, has suggested that the city pray its way to smooth streets.”

    http://www.nola.com/opinions/index.ssf/2015/08/pray_potholes_away.html

  32. Boat on Sun, 23rd Aug 2015 3:28 pm 

    U.S. regular gasoline monthly average retail prices averaged $2.79/gallon (gal) in July, a decrease of 1 cent/gal from June and 82 cents/gal lower than in July 2014. EIA expects monthly average gasoline prices to decline from their July level to an average of $2.11/gal during the fourth quarter of 2015. EIA forecasts U.S. regular gasoline retail prices to average $2.41/gal for all of 2015.
    EIA estimates total U.S. crude oil production declined by 100,000 barrels per day (b/d) in July compared with June. Production is expected to continue decreasing through mid-2016 before growth resumes late in 2016. Projected U.S. crude oil production averages 9.4 million b/d in 2015 and 9.0 million b/d in 2016, 0.1 million b/d and 0.4 million b/d lower, respectively, than in July’s STEO.
    Natural gas working inventories were 2,912 billion cubic feet (Bcf) on July 31, which was 23% higher than a year earlier and 2% higher than the previous five-year average (2010-14). EIA projects inventories will close the injection season at the end of October at 3,867 Bcf, which would be the second-highest end-of-October level on record.

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

    Does this look like a crash?

    I usually don’t like to put links in because information is so easy to find. But you have to read every month and take into account adjustments later. But news is good for the short term in the US as far as energy goes.

  33. Boat on Sun, 23rd Aug 2015 3:39 pm 

    Last year’s deficit was $483 billion, 2.1 percent of gross domestic product, the lowest level since 2008.
    The CBO said Friday that in the first 10 months of this year, the government collected $196 billion more in taxes than during the same period last year. The amount collected in personal income taxes rose by 8 percent, along with 9 percent for corporate taxes.

    Spending was also $198 billion higher for that same period this year compared to last year. It increased for entitlement programs Medicaid, Medicare and Social Security.

    Defense Department spending on the military fell by 2 percent.

    http://thehill.com/policy/finance/250589-cbo-lowers-deficit-projection-for-2015

    The deficit has dropped for 7 years. Does this like a country going south?

  34. MrNoItAll on Sun, 23rd Aug 2015 4:03 pm 

    Boat is a Nony sockpuppet. Like Nony, Boat just wants to engage in endless debate. Facts don’t phase him. He pushes his discredited arguments, false assertions and hopium because this is his idea of a good time. “That’s silly”, said Boat. A standard, frequently used Nony phrase. Come on Nony, put your sock puppet down. Come out and fight like a man!

  35. JuanP on Sun, 23rd Aug 2015 4:03 pm 

    Boat, I normally ignore people like you who are living in denial, but I will still give you this one time friendly warning: WWI, WWII, the Spanish Flu, the Black Death, and all the great wars, diseases, and famines in human history were a walk in the park compared to what is coming. This coming global civilization crash will be much worse than all those things happening at the same time. You are running out of time to prepare. Buy some long shelf life food, store some water, make plans to defend them and yourself and learn how to grow food organically and eat weeds now, before it is too late. You will not be able to say you were not warned, you are luckier than most because we are all warning you. Don’t be a fool!

  36. JuanP on Sun, 23rd Aug 2015 4:16 pm 

    Boat, All your comments about how well the US economy is doing are like a flashback to 2007 to me. I warned people for a year and a half that the RE market was going to crash like a mother. I knew what I was talking about, I was a RE broker working in Miami Beach. All the fools’ answers to my arguments back then sounded exactly like your comments on this board’ “things are better than ever and prices will keep going up forever” was their favorite reply. You are always ar a peak before a crash. This has happened since the beginning of human civilization, it is even written in the old testament. This time the crash will be global and last longer than your life, though, because we pushed past the planet’s limits. We are not just some goat herding tribe overpopulating and destroying our local environment, it is all of humanity overpopulating and destroying the only planet we have to live on. Wake up and smell the roses, man!

  37. peakyeast on Sun, 23rd Aug 2015 4:34 pm 

    Humanity has a LOONG history of not solving real problems, but trying to kill their way out of them…

    For example how we “solved” food production: We killed and burned large portions of the ecosystems to make more food and added fossil fuels on top of it.

    However, trying to “destroy” your way out of ecological disasters and species extinction as well as climate change – is just not possible.

    This probably means this is the end of the line – since we do not know other ways of solving problems.

  38. GregT on Sun, 23rd Aug 2015 4:44 pm 

    Boat said:

    “The deficit has dropped for 7 years. Does this like a country going south?”

    US federal debt in 2008 was 10 Trillion dollars. 7 years later, today, US federal debt has risen to 18 Trillion dollars.

    That works out to 151,000 dollars of debt per taxpayer.

    Does this sound like a country that isn’t going south?

    http://www.forbes.com/sites/mikepatton/2015/04/24/national-debt-tops-18-trillion-guess-how-much-you-owe/

  39. shortonoil on Sun, 23rd Aug 2015 4:50 pm 

    The total cost of producing oil has increased in nominal dollars by 5,700% since 1970. WTI is now selling for $40.80/ barrel, in 1970 it sold for $3.18. The world is now literally going bankrupt attempting to produce oil. Over the next decade it will cost the world $39 trillion to keep oil production flowing. The next few years are going to produce an avalanche of M&As and shut-ins in the industry. As credit lines dry up producers will have no other option but to shut their doors.

    What is transpiring right now is a wake up call for the world. The age of oil is ending, and only a very few are preparing for that day!

    http://www.thehillsgroup.org/

  40. Davy on Sun, 23rd Aug 2015 5:52 pm 

    Ape Man, Motivated reasoning covers the cornies so well and to be fair many doomers. Yet, it is the cornies that are under the gun with storm clouds everywhere. All the cornies have is cherry picking the statistics. We know how one can bend statistics to one side or another.

    I always go back to the point of fed normalization and the resulting global economic reaction. One could argue it is precisely the talk of beginning a very small step in that direction that was the straw that broke the camels back.

    China is undeniably in a slow down. We know how connected all markets and currencies are. The combination of a slowing China and a fed talking normalization has begun the bubble deflation of multiple markets, currencies, and commodities.

    This type of momentum will likely not be arrested because the tools of easing and ZIRP have already been used to the point of declining marginal utility. IOW, if used again dangerous irregularities will magnify.

    We are now naked in the storm. It will be interesting to see how the markets fare tomorrow. Will the central banks try something or will they throw in the towel? Sometimes no action is better than action.

  41. Boat on Sun, 23rd Aug 2015 6:10 pm 

    For those who say the crash is now and the end of civilization was imminent in 2007 made all of us pause and think. I stuck with my dollar cost averaging plan and did well. I will not apologize for being right.

    While short and others think the age of oil is almost over I think the last 6 years proved that wrong as fracking, tar sands, and deep water drilling will take a back seat to a return of conventional oil. Disruptions of price will most likely be geopolitical rather than lack of drilling spots or money to fund it. The last 6 years also proved that $100 oil could be sustained without massive starvation or economy collapse.

  42. Boat on Sun, 23rd Aug 2015 6:17 pm 

    JuanP,
    The sun will burn out. Human existence is limited. The discussion was about more current and short term expectations.

  43. Apneaman on Sun, 23rd Aug 2015 7:39 pm 

    boat all the little economic games are but a small part of ape overshoot. You have been coming here for awhile and have been provided with more that enough information(comments and links)than any reasonable person needs. You do not want to believe the worst can happen so you have decided not to regardless of evidence. Peak oil and crashed economies are nothing compared to the biosphere destruction we have wrought. Peak oil is the death of billions and a rollback to a simpler and tougher life. What we have done to the biosphere may very well result in the extinction of the species. I get that you can’t deal with it. Most people can’t due to the way they are wired, but you must be a masochist or sumthing showing up here for your regular cognitive dissonance torture session.

    Your brain won’t allow you to believe the apocalypse could actually happen

    http://io9.com/5848857/your-brain-wont-allow-you-to-believe-the-apocalypse-could-actually-happen

  44. Apneaman on Sun, 23rd Aug 2015 7:49 pm 

    boat when you read a headline like this:

    Humans could be among the victims of sixth ‘mass extinction’, scientists warn

    how do you fit your “dollar cost averaging plan” into it?

    When the lead scientist who did the study says

    “If it is allowed to continue, life would take many millions of years to recover and our species itself would likely disappear early on,” lead author Gerardo Ceballos of the Universidad Autonoma de Mexico said.”

    do you think he means we just need more-better technology and efficiency and the inertia of mass extinction will magically stop and everything will be awesome again?

    http://www.abc.net.au/news/2015-06-20/sixth-mass-extinction-impact-humans-study-says/6560700

  45. apneaman on Mon, 24th Aug 2015 1:59 am 

    Before I hit the sack there’s already this from the other side of the world, so I know when I wake up tomorrow there will be more carnage. ==========================================================================

    China’s ‘Black Monday’ as panic grips global financial markets – live
    Shares, commodities and currencies under pressure:

    ‘Black Monday’ as Chinese market plunges 8.45%

    European stock markets expected to tumble

    Beijing poised to flood the market with cash, says WSJ

    Japan’s Nikkei tumbles 4.61%

    Australia share market has worst day in six years

    http://www.theguardian.com/business/live/2015/aug/24/global-stocks-sell-off-deepens-as-panic-grips-markets-live#block-55daa6f3e4b084894f2229ce

  46. marmico on Mon, 24th Aug 2015 4:50 am 

    Over the next decade it will cost the world $39 trillion to keep oil production flowing.

    Sheesh. It’s only a big number for innumerates. Over the next decade world income [GDP] will total $750 trillion (official exchange rate basis) or $900 trillion (purchasing power parity basis), assuming no income growth.

    Take it to the bank that world income will grow and be $1.0 quadrillion+ in total over the next 10 years.

    World oil production costs 4% of world income. No big deal for numerates.

  47. Davy on Mon, 24th Aug 2015 6:27 am 

    Pussy lips a flapping:
    Marmi speaks:
    “Take it to the bank that world income will grow and be $1.0 quadrillion+ in total over the next 10 years.”
    Folks, how far off in unicorn land can one be? Marm, surely you don’t think supply and demand will make all the carnage in the news mute. Do you think the central banks can fix this with numerations? Maybe you would be wise to innumerate because your numeration has you in the la la land.

    http://www.zerohedge.com/

    Summarizing The “Black Monday” Carnage So Far
    Carnage Continues Across European Stocks; EURUSD Surges Above 1.1500 As WTI Crude Tumbles To $38 Handle
    “Black Monday” – Shanghai Composite Goes Red For The Year, Wiping Out 60% In Gains, 2000 Stocks Limit Down
    US Equity Futures Are Crashing

  48. JuanP on Mon, 24th Aug 2015 7:05 am 

    Boat, You are right; the Sun will burn out. Thanks for letting me know, I had no idea. I am not worried about that, though, or humanity’s future. I am selfish prick who is only concerned with the things that will affect me and my loved ones this century. I had a Vasectomy and no children, so the long term future of humans and the planet is no concern of mine. You are more of a moron than I thought. I will simply skip all your comments from now on. Life is short and I have no time to waste, and reading your comments is a complete waste of time.

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