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Page added on November 29, 2015
One Year Later and OPEC Still Hasn’t Killed Shale
“No change.” It was roughly one year ago that Kuwait’s oil minister succinctly delivered the message that would turn the oil market on its head. The group of oil producing nations had decided to keep the organization’s output at a ceiling of 30 million barrels per day, despite the fact that supplies were surging thanks to U.S. shale producers while demand, especially in China, was weaker than expected. Those two little words sent the price of crude into a tailspin from which it has yet to recover.
Brent Crude Oil Spot Price data by YCharts.
Halting the ascent
Those two words really inflicted significant damage to the worldwide oil market. Investment in new oil projects plunged with $200 billion of investments in new oil projects being deferred this year, and upward of $1.5 trillion in future projects at risk of not being developed due to challenged economics at current oil prices. Meanwhile, closer to home, shale drillers slashed capex spending, with many spending cutting spending by 50%. This cutback led U.S. oil production to peak earlier this year, before turning over into what’s expected to be a steady decline for at least the next year.
U.S. Crude Oil Field Production data by YCharts.
Yet, despite the deep impact on production and the profitability of U.S. oil companies, OPEC’s decision to protect its market share instead of the market price of oil has yet to kill the shale industry. Instead of killing it, lower the oil price is making the industry stronger.
Building a better well
Nowhere is this clearer than the drilling returns for shale wells. A crude crash was expected to be the death knell of the juicy returns that drillers could earn through the drill bit, with it not uncommon to see a driller earn a rate of return above 50% at $90 oil. However, through focused cost reductions, new technologies, and some good old American ingenuity, many shale drillers can earn a drilling return as good, if not better, at today’s oil price than when oil was much higher.
Permian Basin focused Laredo Petroleum (NYSE:LPI) is a prime example of this stunning improvement. Thanks to a combination of drilling a longer horizontal lateral to go along with better well targeting due to its Earth Model, Laredo Petroleum’s returns today are almost as strong as its pre-crash returns.
Source: Laredo Petroleum Investor Presentation.
Another important development over the past year has been the dramatic uptick in well performances thanks to increased sand volumes being pumped into wells. Bakken shale driller Whiting Petroleum (NYSE:WLL), for example, has experienced a 44% improvement in its average 30-day production rate over wells completed in the prior quarter. This was after Whiting Petroleum shifted to an enhanced completion technique whereby it increased its average sand volume per well from 3 million pounds to 5.2 million pounds.
Even more stunning were two monster wells Whiting Petroleum completed with a hybrid-style using seven million pounds of sand. Those wells achieved an average initial production rate of more than 5,000 barrels of oil equivalent per day, or BOE/d, against last quarter’s average initial rate of more than 1,100 BOE/d. In drilling better wells, not only can Whiting still earn a fairly lucrative 31% return, but it now estimates that it can reduce its spending by $1 billion next year, or by more than 50%, and keep its production flat while balancing capex with cash flow. That alone represents a remarkable turnaround for a company that had a history of outspending cash flow.
Investor takeaway
OPEC’s intention has been to keep a lid on oil prices in an effort to severely weaken its growing U.S. rival. While it has certainly succeeded in weakening shale producers, it hasn’t choked out the industry. Instead, the shale industry is drilling better wells than it was when prices were higher, suggesting that what was intended to kill it, has only made it stronger.
45 Comments on "One Year Later and OPEC Still Hasn’t Killed Shale"
paulo1 on Sun, 29th Nov 2015 9:42 am
Come on Rockman and Short, get ’em.
coffeeguyzz on Sun, 29th Nov 2015 10:05 am
While the above information will undoubtedly prompt fiercely negative responses from commentators on this site, the operational and technological advances in the unconventional fields are continuing apace.
By utilizing so called diverting agents in with the proppant mix (degradable fibers/pellets), fissures formed during frac’ing are temporarily blocked. This enables pressure build up so more new fissures are created.
EOG used this in the Bakken recently with its Riverview 102 32H well and it has produced over 200,000 barrels of oil in its first 91 days online … a Bakken record.
The lateral is 4,300′ long.
In the Deep Utica, EQT has a well, the Scotts Run, that – in its first 86 days online – has produced 2.6 Bcf of gas … the energy equivalent of more than 400,000 boe.
This well is on restricted choke and is producing 30 MMcfd and is expected to continue at that rate until springtime, with 7 1/2 Bcf expected by that time.
Synergy Resources just brought online an 11 well pad in the Niobrara with the average well cost of drilling and completing at $2.5 million per.
You all may not want to accept this stuff, and, yes, the economics at $45/$55 WTI WILL by unsustainable to this industry, but the amount of hydrocarbons that will be available in the future will be significantly higher than thought just a few years ago.
Davy on Sun, 29th Nov 2015 10:29 am
Coffee, as a conditional doomer, I welcome the news but I am still skeptical of scale in regards to the economy and timing. I think we missed the boat and now need lifeboats. In this regards any energy sources offering promise are appreciated but not our savior. Hunger lurks around the corner.
Mark Bucol on Sun, 29th Nov 2015 10:34 am
Coffeeguyzz: The decline rate is still very important to the total production of the well. Takes six months to year and applying this in many wells to determine how this new technique affects overall reservoir production. When historical data points to greater recovery, then we can say Bakken reserves have increased due to this technique. Until then, you can say this boosted initial production on one well pad only, not yet a game changer for entire formation.
apneaman on Sun, 29th Nov 2015 10:38 am
We know OPEC was going all out to kill shale because the American media said so.
coffeeguyzz is proof positive that marketing works. Look at him jumping up and down like a little kid who just woke up on Christmas morning.
Again, we know it’s true because the company looking for investors said so.
We’re experts – trust us!
rockman on Sun, 29th Nov 2015 10:39 am
Obviously individual(and cherry-picked) company anecdotal reports indicate nothing about the general state of the shale plays. But if the writer wants us to use Whiting as a benchmark of this exciting new era of the trend so be it. Let’s look at the stats that a professional market analyst pulled up THIS WEEK. Note: these are documented FACTS…not OPINIONS:
Company Overview
•Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
•Whiting Petroleum Corporation’s current Price/Book of 0.69 is about median in its peer group.
•Whiting has relatively low profit margins and median asset efficiency.
•Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
•Over the last five years, Whiting’s return on assets has declined from about median to less than the median among its peers suggesting that the company’s historical competitiveness in operations is slipping away.
•The company’s relatively low gross and pre-tax margins suggest a non-differentiated product portfolio and not much control on operating costs relative to peers.
•Whiting is too levered to raise additional debt.
coffeeguyzz on Sun, 29th Nov 2015 11:10 am
Mr. Bucol
You raised several points of significance and relevance in your comment.
The frequent conflating of hydrocarbon extraction from conventional reservoirs with this ‘shale’ stuff has led to many misperceptions.
As a point of fact, EOG DID, in fact, greatly increase their estimated recoverables in the Bakken specifically due to this innovation. They now feel they can control the frac’d radius and thus emplace laterals much closer together.
To be clear, the oil is NOT being cannibalized from one well to another due, in large measure, the low permeability of the formation. What IS significantly a factor is the overall pressure drawdown which inhibits fluid mobility.
There are efforts, primarily in the Bakken fields in Canada, by Crescent Point and Granite, to re-pressurize fields via gas injection or water flood.
The water flooding is especially intriguing as there is a demonstrated history in the Bakken of the ‘halo’ effect wherein existing wells show increased production (sometimes dramatically so) when nearby wells are frac’d. It is strongly postulated that the increased pressure from the frac process boosts output from the older, nearby wells.
EOG has recently applied for permitting to attempt water flooding in the Bakken.
shortonoil on Sun, 29th Nov 2015 12:09 pm
Over two years ago we said that a company that is in the energy business, and that doesn’t produce any energy is going to go broke. We applied a very simple equation to the best of the best in shale, the Bakken (s2-s1 = cp*ln{T2/T1}). A simple data run told us that the average Bakken well is no longer a net energy provider after about 70,000 barrels, or 10 months. We then told everyone, who would listen, that investing in these things was wishing upon a star. There was no doubt about it, that all they were doing was borrowing money to pay for drilling another well that they then used to borrow more money with for drilling another well. Eventually they would run out of sucker to borrow money from, and the whole thing would collapse around their ears. Well, they are running out of suckers, and the whole thing is now collapsing around their ears!
http://www.zerohedge.com/news/2015-11-27/cusp-staggering-default-wave-energy-intelligence-issues-apocalyptic-warning-energy-s
As with all Ponzi schemes there is a little twist to it. To make money at any of them you have to be the one starting the scheme. A few people will make money on shale as they were the ones who started it. The rest of them are going to be providing the money; they are the ones who believed that they were so very special that the Laws of Physics didn’t apply to them. Maybe that’s what comes from Mothers telling their kids that they are very special – they grow up believing it?
http://www.thehillsgroup.org/
BobInget on Sun, 29th Nov 2015 12:28 pm
Shortonoil and others, I thought this read
would be of great interest to board members’
https://www.islainvest.com/wp-content/uploads/2015/11/LTI_Nov_15_Consolidated_Final.pdf
If you open this ‘letter to investors’ it will be one of the most rewarding hour’s reading you’ve spent on the PO subject.
rockman on Sun, 29th Nov 2015 12:52 pm
Great link Bob…mucho thanks. A great read especially coming from someone who makes a portion of his living talking investors into buying oil stocks. Some excepts for folks without time to open the link:
“Oil production in the U.S. is on pace to decline by the end of this year by approximately 600,000 bopd, down from approximately 9.6 million barrels bopd at the peak this past April. This pace is significant, though it has recently been obscured by temporary oil storage increases due to seasonal refinery maintenance, which now appear to have peaked.
Last week was the first back-to-back decline in crude oil storage in the U.S. since May. More than 1.4 million bopd is still offline during routine maintenance as refineries tune things up after a very busy summer driving season. Refinery processing runs should rise by up to 900,000 barrels per day during November and December, if past history is any guide.
All of which means the actual decline in U.S. oil production numbers should begin to become that much more obvious to even the most daft of headline writers. And we should soon start to
hear more and more about large consecutive draws on crude oil stocks in the U.S. as we head into the end of 2015.”
And: “On weakening demand for oil from China. This has gotta be one of the most tired myths of 2015…in Q3 of 2015, demand for oil in China was up 6.9% year over year. This is strong demand and good growth. Demand for oil in China has been and should continue to be quite strong, due to (a) growing
consumer demand, (b) efforts to fill the country’s SPR or Strategic Petroleum Reserve, and (c) the country’s transition to a mass automobile culture.”
Davy on Sun, 29th Nov 2015 1:54 pm
“Demand for oil in China has been and should continue to be quite strong”
“Should” is a pretty lame adjective in this case. It indicates to me uncertainty. It like something our mom’s would say “we should be OK”.
We just have little idea how hard a landing China will have. The best of the best don’t know this either. China is a wild card. Should China have a hard landing we should be worried may be another way to look at it.
shortonoil on Sun, 29th Nov 2015 2:04 pm
https://www.islainvest.com/wp-content/uploads/2015/11/LTI_Nov_15_Consolidated_Final.pdf
“In the end it is just another oil price cycle, and we are in the trough.”
This is what most investors wish to believe. It is not! What we are witnessing is the final effects of a 150 year old depletion cycle. It is resulting from the entropic decay of the Petroleum Production System. Just as a cup of hot coffee will always cool, and not heat up; just as an iron bolt will always continue to rust if left unattended, the world’s petroleum system is approaching its point of equilibrium with its environment. Many fortunes will be lost as this inevitable, and unstoppable process continues forward.
http://www.thehillsgroup.org/
BC on Sun, 29th Nov 2015 2:32 pm
https://app.box.com/s/u3icgvx6wbcddnijynhx257dshzm1dyr
https://app.box.com/s/owod89wcezed28ij7ykxlksarhqbak52
https://app.box.com/s/s0wyvm4xh7kvd4fxcwyxx3mfevtf8yub
https://app.box.com/s/8rqnbk0mqgctg7vlt04su71711vumjs9
To short’s point about long-term depletion . . .
https://app.box.com/s/zsa8qobvkd141ghmq7o8mj90p7d2x5rx
https://app.box.com/s/0ulvltzk9w154gcs2zyoga3cshvg15ny
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2KyB
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2KyF
And this is occurring with the US economy again at cyclical “stall speed” coincident with equity and real estate bubbles now deflating.
With the exceptions of 1931 to support the US$ in response to the collapse of Creditanstalt and the 25% devaluation of sterling (and 1936-37 when reserve requirements were raised and gold inflows were “sterilized”), the Fed has NEVER raised rates under the foregoing conditions. In fact, the Fed was cutting rates.
BobInget on Sun, 29th Nov 2015 2:36 pm
Smith or anyone else that I’m aware of dares mention jet fuel consumption used by
Fighter jets from Egypt, Morocco, Jordan, Sudan, the United Arab Emirates, Kuwait, Qatar, Bahrain, the US and Saudi Arabia itself bombing Yemen night and day.
Or, how about four aircraft carriers posted
off Syria’s coast ?
Each one with 80 to 90 fighter bombers that burn through a ton of fuel an hour.
(three to four thousand crew on each carrier)
George HW Bush
US Aircraft Carrier CVN-77
(Carrier ‘groups’ to protect these ships number in the hundreds. Only the carriers are nuke powered.
Russian aircraft carrier Admiral Kutznetsov in Syrian port
Charles de Gaulle arrives off Syrian coast for strikes
Sources: Chinese naval vessel located off Syrian coast
Hundreds of Iranian troops have arrived in Syria over the last ten days, … are backed up by a Chinese Aircraft Carrier fleet also off the coast of Syria.
http://www.breitbart.com/london/2015/11/22/cameron-wants-airstrikes-syria-within-two-weeks/
I invite anyone to Google any above to verify.
apneaman on Sun, 29th Nov 2015 2:43 pm
“In the end it is just another oil price cycle, and we are in the trough.”
How unrealistic optimism is maintained in the face of reality
“Unrealistic optimism is a pervasive human trait that influences domains ranging from personal relationships to politics and finance. How people maintain unrealistic optimism, despite frequently encountering information that challenges those biased beliefs, is unknown. We examined this question and found a marked asymmetry in belief updating. Participants updated their beliefs more in response to information that was better than expected than to information that was worse. This selectivity was mediated by a relative failure to code for errors that should reduce optimism. Distinct regions of the prefrontal cortex tracked estimation errors when those called for positive update, both in individuals who scored high and low on trait optimism. However, highly optimistic individuals exhibited reduced tracking of estimation errors that called for negative update in right inferior prefrontal gyrus. These findings indicate that optimism is tied to a selective update failure and diminished neural coding of undesirable information regarding the future.”
http://www.nature.com/neuro/journal/v14/n11/full/nn.2949.html
It’s a biological/evolutionary thang. It’s the main reason why crashes and collapses are a regular feature of civilization.
Civilizations die from suicide, not by murder.
Arnold J. Toynbee
twocats on Sun, 29th Nov 2015 2:52 pm
It would be nice to think that the massive losses that have and will continue to accrue in the oil patch will actually have a long-lasting effect on oil production. In a normal capitalist world that might even have been true. But that is not the world we find ourselves in today. When these small E&P companies finally go belly-up in mass their assets (land, equipment, surveys, whatever) will be sold to the big fish for pennies on the dollar. Any investment banks caught up in the fray will be cannibalized.
And when the price of oil goes back up these assets will be reinvigorated and there will be another mini-cycle upwards. Sure the overall trend will “eventually” turn downward, it’s called something, I forget, but to think the globe doesn’t have one last gasp at a new all-time high is to not learn the lesson of 2005 to now. Sure the oil will be more expensive to produce, will be of a lower quality, blah blah blah, but we are now pushing 2018 before this new high will be reached, and another downturn towards 2020, and then another attempt at an upturn 2022, so it won’t be until 2024 or so before THE WORLD will have any hope of declaring, once and for all, for any type of liquid fuel that could conceivably be produced, that peak oil took place. I’m afraid we may be in for another 10 years of this bullshit.
idontknowmyself on Sun, 29th Nov 2015 4:13 pm
What apneaman is not obvious in Swenden.
How unrealistic optimism is maintained in the face of reality
https://www.youtube.com/watch?v=3KSJY0c8QWw
idontknowmyself on Sun, 29th Nov 2015 4:14 pm
What apneaman said is now obvious in Swenden.
How unrealistic optimism is maintained in the face of reality
https://www.youtube.com/watch?v=3KSJY0c8QWw
shortonoil on Sun, 29th Nov 2015 5:09 pm
“How people maintain unrealistic optimism, despite frequently encountering information that challenges those biased beliefs, is unknown.”
Petroleum has experienced a 60% decline in price with almost no increase in demand. This is obviously an indication that something has changed substantially in the historical supply/ demand relationship. The market is not forecasting that there will be any major benefit from lower oil prices.
“And when the price of oil goes back up these assets will be reinvigorated and there will be another mini-cycle upwards”
“This selectivity was mediated by a relative failure to code for errors that should reduce optimism. Distinct regions of the prefrontal cortex tracked estimation errors when those called for positive update,”
Humans are apparently not wired to make the best decisions under deteriorating conditions. Perhaps that is what Lord Kelvin meant when he said, “knowledge without numbers is of a mean, and unsatisfactory kind”
onlooker on Sun, 29th Nov 2015 5:30 pm
I would ask the economic experts on this board, is this lack of demand mostly due to over leverage/debt along with lack of discretionary or leftover income on the part of consumers.?
BC on Sun, 29th Nov 2015 5:55 pm
onlooker: I would ask the economic experts on this board, is this lack of demand mostly due to over leverage/debt along with lack of discretionary or leftover income on the part of consumers.?
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2HPY
Real GDP per capita has averaged less than 1% since 2008-09 (same as the US in the 1830s-40s, 1930s to before WW II, and Japan since the late 1990s).
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2KxB
Real final sales per capita less household health (for-profit dis-ease) care spending and the fiscal deficit is decelerating to, or below, stall speed.
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2CDg
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2CDh
Dis-ease care spending to private GDP is accelerating at a rate twice that of GDP/final sales, which historically has been recessionary.
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2I0u
https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=2KFa
GDP less gov’t, dis-ease care, and rentier flows is decelerating to below 1%.
The cumulative cost of gov’t, debt service, and prohibitive dis-ease care is constraining growth of real private economic activity per capita, which is a function of Peak Oil; population overshoot; peak Boomer demographic drag effects; resource depletion per capita; climate change; and a record low for labor share to GDP and excessive debt/asset prices to wages and GDP, which the principal cause of extreme inequality.
Given that the top 1-10% of households possess over $40 trillion in financial wealth, receive more than $6 trillion in income, pay 70-75% of income taxes, and effectively own the gov’t, they do not need the economy to grow, or for tax receipts to grow to provide for social goods, including subsistence income support for the bottom 60-90%.
So, “secular stagnation” or a “slow-motion depression” is not a problem because it does not affect the top 0.001-1% to 10%.
Therefore, from the perspective of those who matter, it’s all good and has never been better.
John Keller on Sun, 29th Nov 2015 7:28 pm
About the Scott’s run well which cost $30mm and will probably lose $15-20mm:
EQT, which has said it would suspend its Upper Devonian drilling program and defer some Marcellus next year to build a 10-15 Utica well program in Pennsylvania, said last week that its Scotts Run well was dropping pressure at a rate of 40 psi per day (see Shale Daily, Oct. 22). Based on current line pressures, the company issued an EUR of 13.9-18.8 Bcf, or 4.3-5.9 Bcf per 1,000 feet of lateral. Consol said this week that it’s too early for an EUR at its Gaut 4IH well in Westmoreland County, PA (see Shale Daily, Oct. 27).
Pete Bauer on Sun, 29th Nov 2015 7:56 pm
With 60% of the rigs being shut and 200,000 jobs being laid off, the US shale oil production will go down later, but until then OPEC has to tighten their belt.
All that Saudis are saying is that, there is enough oil from just the conventional vertically drilled fields that can keep up with the World’s demand and there is no need for sources like Shale and Tar Sands.
Lets see.
Anonymous on Sun, 29th Nov 2015 8:02 pm
The idea that some mythical unicorn called ‘OPEC’ has it out for the ‘merikan shale industry’ is so much blue smoke its not even funny. ‘OPEC’ is just another overhyped US media bogeyman, with far less power, influence and ability to work together than commenters like this would ever care to admit. If ‘OPEC’ most of whose members are US puppet states(with few exceptions these days-thanks US invasions!), were actually trying to screw over america. They would be promptly invaded or, if unlucky, would get the Syria\Libya program sent their way.
That nothing remotely like this is in the works, makes it clear, that the whole OPEC vs US shale trope is just so much BS.
rockman on Sun, 29th Nov 2015 9:36 pm
Looker – “…would ask the economic experts on this board, is this lack of demand…” With all due respect: with the world today consuming more oil then ever before how can there be a lack of demand? IOW if there is a lack of demand today wouldn’t the lack of demand have been even greater a year ago when the world was consuming less oil…when oil was selling for twice what it is today?
Boat on Sun, 29th Nov 2015 10:09 pm
I have read dozens of comments about lack of demand the precursor to all kinds of economic problems while overall world growth is stable and growing. This is the same group who claims MSM is no place to get accurate information. LOL Ideology to think crash and doom is certainly prevalent here with few results to show on a global scale.
You would think that as fracked oil is being driven out of the market by cheaper to develop oil in the Middle East would be proof that there is plenty of oil. But hey. I just look around and read.
Will Iran get investors? How much cheaper to develop oil will they be able market and drive even more fracked oil out of the market? The quality of oil and depletion of oil in general is not a short or midterm problem as some of the “experts” think IMO. We will see over the next 2-5 years and into the future.
Boat on Sun, 29th Nov 2015 10:23 pm
Pete Bauer,
You are not thinking nat gas when it comes to fracking. There used to be over 1,660 drilling rigs in the US not that long ago. Last I checked there are now like 185. And guess what. Because fracking unleashed better wells production has grown huge amounts every year while prices are low because of oversupply.
All over the net you can read about energy intensive industry moving or starting in the US due to the amount and price of nat gas.
Whether you like or dislike fracking, it is not going away anytime soon.
GregT on Sun, 29th Nov 2015 11:41 pm
“Shortonoil and others, I thought this read
would be of great interest to board members’
https://www.islainvest.com/wp-content/uploads/2015/11/LTI_Nov_15_Consolidated_Final.pdf
If you open this ‘letter to investors’ it will be one of the most rewarding hour’s reading you’ve spent on the PO subject.”
Thanks for the link Bob! Should be mandatory reading for everyone here. Although I know that there is at least one ‘person’ here that won’t read it.
Stupid isn’t fixable.
onlooker on Mon, 30th Nov 2015 12:04 am
Thanks BC, it think that pretty much answer my inquiry in showing how strapped consumers are by debt and health expenditures and how debt also plays a role.
keith on Mon, 30th Nov 2015 12:11 am
Why would it kill the shale industrial? Shale is held up by massive debt. The industrial will collapse when the money printing stops.
toms2 on Mon, 30th Nov 2015 3:46 am
apneaman:
“coffeeguyzz is proof positive that marketing works. Look at him jumping up and down like a little kid who just woke up on Christmas morning.”
He knows more about this than you know about any topic. You could learn something from him, but I doubt you will.
-Tom S
toms2 on Mon, 30th Nov 2015 3:55 am
onlooker:
“I would ask the economic experts on this board, is this lack of demand mostly due to over leverage/debt along with lack of discretionary or leftover income on the part of consumers.?”
No. It’s just a matter of balancing supply with demand. This is a slow process, because of very long lead times involved.
Large oil projects have long lead times of many years. Thus, large oil companies must decide years in advance how many projects to go forward with. They attempt to anticipate what demand will be years down the road, and then they decide how many projects to fund based upon that.
If large oil producers get this wrong and there is a glut, they do not throw away what they’ve already drilled. Instead, they cancel FUTURE projects, but doing that can take a long time to rebalance supply with demand.
In the mean time, the demand for oil is extremely inelastic which means that consumers do not adjust their driving behavior much when the price of oil changes. They buy almost the same amount unless prices are extremely high or extremely low. As a result there is not much of a short term adjustment, which can lead to temporary gluts.
This is just a matter of matching supply with demand. It takes awhile because of long lead times, imperfect information, and few short-run adjustments available.
-Tom S
toms2 on Mon, 30th Nov 2015 4:00 am
onlooker:
By the way, it has nothing to do with incipient peak oil, the inability of consumers to afford gasoline, the declining ERoEI of oil, the inability of oil to provide enough economic activity to pay for itself, or anything similar, IMO. The price of oil will rebound over time, at least modestly. I don’t think that peak oil and terminal declines are coming within the next 5 years.
-Tom S
rockman on Mon, 30th Nov 2015 6:21 am
“Why would it kill the shale industrial? Shale is held up by massive debt.” I’m not sure what “held up” implies. The shale boom was significantly funded by companies taking on huge debt loads. And those debt loads are now driving many of the same shale players into insolvency. The Rockman’s company was neither a shale player or a borrower which is why it’s still going forward. Not as fast forward as when oil prices were higher but still going forward,
Davy on Mon, 30th Nov 2015 6:39 am
Boat “MSM is no place to get accurate information.” Boat that is why you are so deluded sometimes. MSM is good at delivering for the most partial facts. The critical point is what and how facts are delivered. It is how these facts are delivered that point to subtle brainwashing and agenda. It is the tone not the facts that are deceptive. It is the lack of balance, fairness, and objectivity that seeks influence. The key word here is influence. Influence points to personal or group agendas. This is precisely what I argue about here on this board against MSM and the ugly anti-Americanism.
Agendas that have a tone of extremism of purpose and focus are distortions. Agendas seek personal motive and not the cause of the truth. In the end what else is there but the truth? When minds like our here get to the point we are at what else is there but the truth?
Boat your American mainstream media is the most at fault in this regard. This is a political industrial message of American exceptionalism. It points to a corrupted culture in America that has morphed into a society in distress. Black Friday is case in point. How could a society allow such excesses with a world in distress as it is? It is an example of a system out of control driven by greed and a psychopathic reward system.
We are drifting in a moral and ethical soup of conflicting meaning and choices. This has been scientifically and meticulously created both overtly and from within. It is a manifestation of greed and exploitation and is frankly evil. I am saying evil in the sense of mechanization and corruption. Yes Boat you can get accurate information in our mainstream media but you have to really dig and you have to have a very good portfolio of competing sources.
JuanP on Mon, 30th Nov 2015 6:59 am
There goes Davy once more! This time engaging in some completely uncalled for China bashing! What would you have written instead of should, Davy, definitely will?
The board’s neurotic delusional American exceptionalist 1%er strikes his imagined enemies once again as his paranoia keeps him from accepting the truth. China’s oil consumption grew 7% year on year. Why do you resent other people’s consumption, Davy? Do you want it all for yourself and your terrorist sponsoring compatriots?
JuanP on Mon, 30th Nov 2015 7:04 am
Everything Davy has ever written about China on this forum is nothing more than the delusions of a sick American! He hates the fact that other countries are doing better than the USA right now. The USA has been in decline since before I was born in 1969 because it is a corrupt country filled mostly with stupid, ignorant fools, bar 1,000.
Davy on Mon, 30th Nov 2015 7:09 am
fock off Juan and climb back in bed put the sheets over your head you are sick.
shortonoil on Mon, 30th Nov 2015 7:59 am
“So, “secular stagnation” or a “slow-motion depression” is not a problem because it does not affect the top 0.001-1% to 10%.
Therefore, from the perspective of those who matter, it’s all good and has never been better.”
Outstanding graphs, thanks BC.
The top 0.1% may very well have accumulated 70% of the world’s wealth, but that wealth was ultimately derived from oil. The maintenance of that wealth also depends on oil. When oil can no longer supply enough energy to maintain that wealth it deteriorates into a pile of rubble. By focusing on the dollar value of their holdings, the 0.1% have inadvertently ignored the real value of the commodity that created the wealth. They will ultimately be left with a book of assets of high dollar value that are unmaintainable, and ultimately worthless.
“the inability of oil to provide enough economic activity to pay for itself,”
The magic of oil meme; if oil can’t pay for itself – how then does it get paid for? What you are proposing is “if pigs had wings they could fly”! The world will not just keep producing oil because we “think” it should, and because we “need” it. That is like jumping off a building, and pretending that you are not going to hit the ground. Pretending that we can ignore the Laws of Physics is like believing in Santa Claus. It’s a Fairy Tale that you appear to have bought into hook, line and sinker.
shortonoil on Mon, 30th Nov 2015 8:26 am
“I don’t think that peak oil and terminal declines are coming within the next 5 years.
-Tom S”
The nation with the largest oil resource in the world can’t afford toilet paper; the richest oil producing nation on earth now has to borrow money to pay its bills; the debt held by the world’s oil producers has doubled in the last six years! At $40/ barrel the industry can’t afford to replace the reserves that they are now extracting; so they are losing money on every barrel that they pump. Instead we get 5 year platitudes; “don’t pay any attention to the facts folks, I’ll keep you posted of the results from my Ouija board”!
JN2 on Mon, 30th Nov 2015 8:29 am
Thanks for the link Bob. For Planter:
“It’s not a glut it’s a price war”
7 months global supply today versus 11 years in 1986 – that was a glut.
buddavis on Mon, 30th Nov 2015 8:31 am
Rock
One of my favorite parts
“Geology is destiny. And the top priority here, really, should be to have both-great managers and great rocks.”
Nothing beats great rock. And great rock is economical at $2 gas and $40 oil. Just takes a little more ability than money whipping lessors in the middle of a shale play, and then figuring out how to increase lateral lengths and cram more sand into the rock.
Boat on Mon, 30th Nov 2015 10:35 am
Davy,
Boat “MSM is no place to get accurate information.” Boat that is why you are so deluded sometimes. MSM is good at delivering for the most partial facts. The critical point is what and how facts are delivered. It is how these facts are delivered that point to subtle brainwashing and agenda.
We are bombarded from birth with spin and partial facts. But on the other hand who better to sift through the information than those who know that. A person simply cannot believe most of everything he/she reads because the opposing view is readily available.
This is just yet another one of your views I disagree with. Were smart enough to sort around knowing we don’t always get all the facts and they are delivered by spin. But compared to (before internet) there is a lot more information easily accessible.
Do you really think that only those that think like you are the only ones able to decipher opinion and news?
I would say if 20 of us were given a subject matter that we would come up with 20 different conclusions as to the pertinence, accuracy and effect. Welcome to the real world.
GregT on Mon, 30th Nov 2015 12:22 pm
“Were smart enough to sort around knowing we don’t always get all the facts and they are delivered by spin.”
Some of us are smart enough Boat.
It’s ‘we’re’, not ‘were’.
Kenz300 on Mon, 30th Nov 2015 12:36 pm
Banks have stopped lending………
Boom…….Bust…………