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Saudi Arabia: the great oil game

Saudi Arabia: the great oil game thumbnail
Saudi Arabia just increased oil production to a record level, never reached in previous history. They are doing that in a moment of record low oil prices. What do they have in mind? (Image from Arthur Berman)

When the collapse of the oil prices started, in the summer of 2014, everyone noticed that Saudi Arabia was not playing their traditional role of “swing producers”, that is varying their production in such a way to maintain reasonably constant prices. Facing a slump in demand, they should have reduced production; but they didn’t, at least not enough.

Initially, I thought the Saudis were simply taken by surprise and they were slow to react. But now, with the recent increase in Saudi production, it is clear that they have something in mind. Maybe they haven’t engineered the market collapse, but in some way they are riding it.

Though this be madness, yet there is method in ‘t. But what method could there be in raising production just when prices are lowest? Every single textbook in economics will tell you that the market should adapt to changes in demand and offer in exactly the opposite way: facing a reduced demand, production should go down, too. 

Of course, as we all know, what you read in textbooks of economics has little to do with the real world. And, in the real world, there is a well known market strategy that consists in bankrupting your competitors by selling below cost. The idea is to create a monopoly and recoup later what the winner of the struggle has lost at the beginning. It is, of course, illegal, but the very fact that there are laws against it, means that it is done.

However, there is a little problem in applying this strategy to the oil market. It has to do with the fact that oil is a finite resource. So, if producers manage to obtain a monopoly, that means they will run out of the resource before the others. Imagine you are an art dealer: would you sell your Picassos at low cost in order to undercut the other art merchants and gain a monopoly? Of course not, what you would obtain is simply to run out fast of your precious Picasso paintings and then leave the market fully open to the others. 

So, what are the Saudis doing, exactly? Art Berman suggests that they are fighting against the banks that created the tight oil bubble possible. After the elimination of the bubble, the market might return to relatively high oil prices and maximize the revenues for Saudi Aramco. 

Berman’s interpretation is surely possible, but, as in all these cases, we are looking at governments as if they were “black boxes”, trying to understand the inner mechanisms that make them move. This is very risky: just as we see in clouds faces that aren’t there, we may see in a government’s action an intelligence that is not there. Are the Saudis really planning for a long term profit? Or are they simply misjudging the extent of their resources? 

After all, we have several examples of non-renewable resources having been managed as if they were infinite. Just consider how the North Sea oil resources were extracted at the highest possible rate when the oil market was experiencing historically low prices. That left producers with declining oil field when market prices started increasing. It was not a very smart strategy, to say the least.

In the case of the North sea, there was no long term planning; it was just that the long term depletion problem was not understood. So, are the Saudis blind to the very concept of “depletion”?(*) That’s impossible to say at present. The only certain fact is that age of cheap oil is gone; even though some wild oscillations may make us believe that the good times have returned – but just for a while. 

(*) About being unable to perceive that a mineral resource is running out, an especially tragic case is that of Yemen. For a few years, I have been following the “Yemen Times” and. in all this time, I never could read any statement that indicated that the problem of oil depletion in Yemen was understood. Whenever the decline in production was mentioned, it was attributed to terrorism, civil unrest, and other temporary problems. From what I could read, it seems to me that the Yemen society was (and still is) completely and totally blind to the fact that they have been gradually running out of oil and that oil depletion is the root cause of all the troubles that they have experienced, and that they are experiencing right now. (graph from “our finite world“)

Cassandra’s legacy by Ugo Bardi

56 Comments on "Saudi Arabia: the great oil game"

  1. HARM on Mon, 27th Apr 2015 9:25 pm 

    “…it seems to me that the Yemen society was (and still is) completely and totally blind to the fact that they have been gradually running out of oil and that oil depletion is the root cause of all the troubles that they have experienced, and that they are experiencing right now.”

    Substitute “humanity” for “Yemen society” and it’s still true.

  2. Plantagenet on Mon, 27th Apr 2015 9:45 pm 

    Bardi doesn’t understand economics. OPEC countries are actually likely to produce oil full out even though we are in an oil glut and oil prices have collapses—its the only they can maximize their income at these low oil prices.

  3. GregT on Mon, 27th Apr 2015 10:19 pm 

    eCONomists don’t understand Bardi, because they are incapable of understanding physics, biology, mathematics, and the limits to growth. Bardi is not the problem, it is the eCONomists that are leading us down the path to our own destruction. All in the name of greed.

  4. rockman on Tue, 28th Apr 2015 2:50 am 

    “…its the only they can maximize their income at these low oil prices.” And that simple marketing dynamic seems so difficult for many to understand. Just flash back to the 80’s when the Saudis continually cut production trying to increase oil prices. It did work: US, Russia and the other OPEC countries benefited because they didn’t reduce production. The Saudis OTOH lost many $billions in revenue. Eventually they opened the valves and started selling more oil.

    It still amazes how so many stick the KSA with not reducing production. Russian hasn’t curtailed production nor has the other OPEC countries. Even the US govt allows (despite the supposed ban on oil export) the export of the equivalent of over 1 BILLION BBLS OF OIL PER YEAR.

    It really ain’t rocket science. But some folks who lack the intellectual capability to discuss reality resort to conspiracy theories IMHO. I can understand some of the MSM going that route…they have advertising to sell.

  5. Nony on Tue, 28th Apr 2015 5:09 am 

    “US, Russia and the other OPEC countries benefited because they didn’t reduce production.”

    US OIL PRODUCERS benefited, but “the US” did not, because it is mostly a net import country. High prices hurt it.

    “Even the US govt allows (despite the supposed ban on oil export) the export of the equivalent of over 1 BILLION BBLS OF OIL PER YEAR.”

    1. This is so moronic and continued so. If there is no ban, the why are Brent and WTI prices so far apart?

    2. Crude exports were 126 MM bbls in 2014, not 1 billion. Perhaps you are confusing refined products with crude? There is no ban on exporting refined products. There sure as heck is an import restriction on sales of crude (NAFTA countries only).

    P.s. You STILL haven’t admitted that you read off a monthly change for an annual one when looking at Marcellus growth. I don’t care that you made a simple mistake. But to not admit it, shows dishonesty.

  6. Nony on Tue, 28th Apr 2015 5:12 am 

    3. And 204 crude exports were 0.346 MM bpd, for a country that produced 9MM bpd. So we are talking about less than 5%. Not some huge number. You should think in percent, not throwing out numbers like billion (said in a Carl Sagan on Cosmos tone).

  7. Nony on Tue, 28th Apr 2015 5:13 am 

    2014 exports

  8. marmico on Tue, 28th Apr 2015 5:22 am 

    Bardi says: Art Berman suggests that they are fighting against the banks that created the tight oil bubble possible.

    What a bunch of effing morons. The Fed’s large scale asset purchases (QE) drove down long term interest rates for all sectors in the economy. Households alone are saving $200 billion per year on lower mortgage payments which has nada to do with understanding physics, biology, mathematics, and the limits to growth.

  9. Davy on Tue, 28th Apr 2015 6:26 am 

    Marmi, QE, is about wealth transfer and bubble creation. It is a last ditch effort to avoid dangerous global deflation. You cornucopian idiots are blinded to this reality by your moronic graphs that are part of the corruption, manipulation, and distortions present at the top. None of the numbers from the top can be relied upon as balance and fair. It is a hat trick and the old switcheroo of thieves and psychopaths. Your mainstream economics are outdated and only used to justify these dangerous and unfair actions. Our kids are going to hate us after all this is said and done. You and the NOo are part of this totally bought into the BAUtopian meme of growth and progress at any cost.

  10. marmico on Tue, 28th Apr 2015 7:10 am 

    You are the moron, Doomer Davy. You post the same innumerate word salad “goat shit on your boots” crap day after day after day.

  11. Davy on Tue, 28th Apr 2015 7:13 am 

    Thanks for responding Marmi, I know I got my message across by being called names by a delusional cornucopian preaching a false progress crap day after day after day after day on and on.

  12. Nony on Tue, 28th Apr 2015 7:38 am 


    You don’t put forward facts or analyses. When you are presented with some that don’t go your way, you respond with irrational comments about numbers not mattering.

  13. Davy on Tue, 28th Apr 2015 7:50 am 

    Fair enough NOo but I admit this you on the other hand are in denial with zero humility. You bounce around as the cornucopian boy wonder who knows it all. You pick at a respected commentator Rock unjustly. This criticism of Rock is legitimate at one level but childish at another. I do the same with the idiot Makster but I again admit my weaknesses. There are others on this forum with far more maturity who avoid ad hominem practices.

    As for the word salad how else do you describe something that is occurring under our feet that is like a painting visually being surreal and impressionistic. On the level of mathematics it is linear trying to describe nonlinear.

    You and Marmi on the other hand use the same old econ 101 that got us into this mess to push a delusional story of unending progress from human exceptionalism of technology and markets. It is a false god you worship and with false message that will doom us to a hard collapse as opposed to a more human collapse. But NOo, I like you because you are smart and fun. Stay around I enjoy being slapped it makes me stronger.

  14. marmico on Tue, 28th Apr 2015 8:56 am 

    You and Marmi on the other hand use the same old econ 101

    C’mon, we passed econ 201. 🙂

    Now I second Nony’s work to continue the crusade against Rockman. Initially, Nony chided me for being too harsh with the mudlogger because he was a “good guy”. Bullshit. The war is on when it comes to argument from pretentious authority.

  15. Davy on Tue, 28th Apr 2015 9:25 am 

    Good job Marmi! I have a finance degree. I was Cum Laude. I imagine you and the NOo were Suma Cum Laude. I have 25 year under my belt in corporate management from the bottom to the top. At the end of my stint I was one of 4 owners of a median sized corporation.

    I left all that Marmi because I refuse to bow to a false god. I am not saying econ is a bad thing rather it is a pseudo science that has risen to a societal religion. It is killing us and the world.

    At superficial level I enjoy following global finance. You and the NOo with your hard hitting cornucopian arguments are very informative. These cornucopian arguments are valid because they are part of societies myth of exceptionalism through a manifest destiny of progress and growth IOW belief in immortality of the Anthropocene. Since this is life a doomer must follow it as a matter of survival. I wish all the corn porn were true but I gave up on the tooth fairy at about 10 give or take a year.

  16. marmico on Tue, 28th Apr 2015 9:37 am 

    I have a finance degree. I was Cum Laude

    Well you have certainly fooled everyone with your innumerate word salad “goat shit on your boots” routine.

    You have 10 standard talking points. You just re-configure them day after day after day. What a boring life you live lying on the beach in the Bahamas at mommy and daddy’s place and roaring around the doomstead with your Duck Commander vehicles. You are the epitome of corn pone.

  17. GregT on Tue, 28th Apr 2015 9:48 am 

    “What a bunch of effing morons. The Fed’s large scale asset purchases (QE) drove down long term interest rates for all sectors in the economy.”

    Speaking of an “effing moron”. Historically low long term interest rates are not limited to the US, which happens to make up less than 5% of the world’s population. Low interest rates have been offered around the globe in an attempt to jump start failing economies. It hasn’t worked, and when CBs finally raise rates, to curb inflation, the system will crumble like a house of cards.

    The global economy is in a bubble blown up by easy credit and massive mountains of unrepayable debt.

  18. shortonoil on Tue, 28th Apr 2015 10:07 am 

    The Saudis do not report their production, and never have. These estimates of production come from an observer who sits on a dock, and watches the water line of the freighters going by, or from other second, and third party sources. Not exactly what one would call an exact science. The difference between the August 2013, and the March 2015 data is 0.1 million barrels, or less than 1%. The Saudis could have just been selling oil that was in storage; an increase in production has certainly not been confirmed.

    To speculate on why the Saudis are doing something when the doing something was merely speculation to begin with, is certainly macabre! Whether or not speculation of speculation will improve out knowledge of the petroleum situation is at best a little speculative!

  19. marmico on Tue, 28th Apr 2015 10:24 am 

    The global economy is in a bubble blown up by easy credit and massive mountains of unrepayable debt.

    Whatever you say, Fraser Valley “effing moron” ginseng farmer. Talk to the 6 million American households who have lost their financed homes, voluntarily or through foreclosure, because of easy credit in the last eight years. It is a real corn pone picnic, eh! Back of the envelope, there are likely 10 million millennials who are not attracted to homeownership because they experienced easy credit through their parents. What an effing moron. I can hardly wait for Doomer Davy, Finance Cum Laude, to pipe in with his irrelevancies.

    GregT is another, in a Baltimore line of looters, inflationista. What an “effing moron”!

  20. GregT on Tue, 28th Apr 2015 10:31 am 

    The global financial crisis has not ended Marmico. CBs continue to talk about raising interest rates, but they can’t. They continue to lower them. Why do you think that to be the case?

  21. BobInget on Tue, 28th Apr 2015 10:40 am 

    Saudis were lucky.. full stop.
    Saudis believe in killing witches, adulteress.
    Saudi males believe women inferior.
    Saudis cut off atheist’s heads, publicly.

    The Saudis are locked a power struggle with Iran, another Islamic state. Unlike Iran however, KSA has no five thousand year diplomatic legacy*.

    Saudis, Iranians, will fight to the last (Syrian, Yemeni, American) to ‘win’ theological arguments.
    Religious States belong in centuries before print.

    Why in 2015 is Absolute Monarchy still a

    *Half a millennium before the birth of Christ, the great conquerors Cyrus, Darius and Xerxes built the Persian Empire into a far-reaching power. When Europe was descending into the Dark Age, Persian poets were creating works of timeless beauty, and Persian scientists were studying mathematics, medicine and astronomy. Over the centuries, the nation that would become Iran thrived as it assimilated influences from Egypt, Greece and India.

    Read more:
    Give the gift of Smithsonian magazine for only $12!
    Follow us: @SmithsonianMag on Twitter

  22. GregT on Tue, 28th Apr 2015 10:40 am 

    If it weren’t for easy credit Marmico, far more than 6 million American households would have lost their homes by now.

  23. Davy on Tue, 28th Apr 2015 10:41 am 

    Owee, Marmi, why are you so mean? You remind me of the scrooge. I wonder when the collapse comes and you are broke if you have the Ebenezer conversion too.

  24. shortonoil on Tue, 28th Apr 2015 10:51 am 

    “The global economy is in a bubble blown up by easy credit and massive mountains of unrepayable debt.”

    The global economy has probably been in decline since 2000. Central Bank monetary policy has allowed the camouflaging of the real situation by allowing for the building of dozens of ghost cities in China, or the development of a $trillion industry in low grade, and mostly unusable hydrocarbons in the US. This has resulted in a 40% increase in global debt since 2008. A debt for which there is no corresponding profit potential with which to repay it.

    The consequences of these actions will most likely result in continued social disintegration, and unrest. Those that are being continually disenfranchised from the system will eventually palace a burden on it that will be great enough to bring it to an end. Unfortunately, this burden is not growing linearly; it appears to be following an exponential curve!

  25. marmico on Tue, 28th Apr 2015 11:08 am 

    If it weren’t for easy credit Marmico, far more than 6 million American households would have lost their homes by now.

    I can hardly wait for your Birkenstock Permaculture best seller book. “How I lost a Fortune moving from a Vancouver condo to Summerland Sage Brush”. Yippee!

  26. joe on Tue, 28th Apr 2015 11:13 am 

    It’s simple math for Saudi. They are selling their oil now, rather than compete with big oil/gas. They can squash tight oil now, they can make more money. If they reduce output at higher price they also reduce income long term as higher prices will cause lower/sluggish demand growth.

  27. marmico on Tue, 28th Apr 2015 11:41 am 

    KSA has had 12% of the global share of the crude oil market since 1985. They ain’t giving it up without inflicting pain on U.S. wildcatters.

    You peakoilers should be cheering that the gasoline price is one third off the prior 3.5 years. Nice, eh! I think it’s great. My wishful thinking is to keep it going for another decade but econ 201 says that long run equilibrium marginal costs will prevent it from happening.

    OK, U.S. GDP prints tomorrow. Personal Outlays prints Thursday. I’ll be back with my “mean” affordability chart which will show the greatest affordability in a three month period since the heart of the Great Recession. Enjoy low priced gasoline while it is available! Take your kids to Disney, go visit granny. Cheers.

  28. Apneaman on Tue, 28th Apr 2015 11:44 am 

    Davy, the creature nony-marm got all worked up like this before. Remember it was last fall when prices tanked and his/it’s world started tumbling. He even disappeared for awhile to the cornucopia sanatorium for the cure. They wiped his hard drive of all the inconvenient facts and reloaded it with a handful of select FRED charts and tortured numbers. Denial has no upper limit, Davy, so don’t expect anyone to come around – doubling down on denial is the norm. These are the type that jump out the window or eat their gun when can kicking can no longer hide the rot from the sheep and panic ensues. Ever notice how much nony-marm talks about other people “admitting they were wrong”? He needs that like a junkie needs a hit. He needs people here to say it ain’t so, to sooth his ever growing anxiety if only for a few more days. If he can find a mistake here or an anomalies there it will some how disprove mountains of evidence that we are going down. People have a variety of fucked up ways of dealing. nony-marm is a closet Doomer. To come out would be to expose himself and he has way to much invested in his BAU/Econ 101 identity and worldview – an entire life time.

  29. Dredd on Tue, 28th Apr 2015 11:48 am 

    The suicide game.

    Nothing great about it.

  30. BobInget on Tue, 28th Apr 2015 12:02 pm 

    Production, is one thing. Exports, quite another, different as watermellons and mangoes.

    For instance, because of climate, every modern building in KSA is air conditioned.
    Water, from oil flooding to tea drinking is pumped or desalinated. The current air bombing of Yemen, oil passed on to Egypt, Pakistan, USA, Syrian ‘rebels’ for ‘services’ at zero charge, not counted as export, but is.

    US imports are also suspect. Oil we purchase
    for overseas operations is not in fact imported.. so, it doesn’t count?
    The US military, in war time, like NOW, uses
    close to one million barrels per day*.

    ‘Security’ reasons don’t ya know.

    From Wikipedia, the free encyclopedia *

    A view of solar panels installed in 2011 on the roof of Space and Naval Warfare Systems Command Headquarters, San Diego. The rooftop photovoltaic installation supports the Department of Defense’s goal of increasing renewable energy sources to 25 percent of all energy consumed by the year 2025.
    The United States Department of Defense is one of the largest single consumers of energy in the world, responsible for 93% of all US government fuel consumption in 2007 (Air Force: 52%; Navy: 33%; Army: 7%. Other DoD: 1%).[1] In FY 2006, the DoD used almost 30,000 gigawatt hours (GWH) of electricity, at a cost of almost $2.2 billion. The DoD’s electricity use would supply enough electricity to power more than 2.6 million average American homes. In electricity consumption, if it were a country, the DoD would rank 58th in the world, using slightly less than Denmark and slightly more than Syria (CIA World Factbook, 2006).[1] The Department of Defense uses 4,600,000,000 US gallons (1.7×1010 L) of fuel annually, an average of 12,600,000 US gallons (48,000,000 L) of fuel per day. A large Army division may use about 6,000 US gallons (23,000 L) per day. According to the 2005 CIA World Factbook, if it were a country, the DoD would rank 34th in the world in average daily oil use, coming in just behind Iraq and just ahead of Sweden.[1] The military recognizes that renewable energy can provide improvements in force safety and budget stability as well as mitigate climate change so it has several programs working on deploying alternative energy at major facilities and in forward operating bases. Admiral Samuel J. Locklear has called climate change the biggest concern for the United States military.[2][3]

  31. Nony on Tue, 28th Apr 2015 12:04 pm 

    This is insane that you think price going DOWN is a sign of peak oil. Don’t you remember Rock’s vaunted “POD” (high prices)? Don’t you know supply and demand? Hotelling’s rule?

    Somehow, you lot think both higher prices AND lower prices are signs of more depletion. Guess what, higher prices are consistent with short supply, lower prices with high supply. [assuming equal demand]*

    *However, it’s pretty hard to whine about demand causing a price drop in 2015, when the volume went UP.

  32. justeunperdant on Tue, 28th Apr 2015 12:21 pm 

    You have to be really naive in this day and age to believe any figure release by any governmental agencies publish. Some people still believe
    that tar sand is producing something similar to light sweet crude when they are not. The oil coming out of the tar sand is such of low quality that they have
    to upgrade it to make it more usable. According to Wikipedia he is what upgrading oil means

    An upgrader is a facility that upgrades bitumen (extra heavy oil) into synthetic crude oil. Upgrader plants are typically located close to oil sands production, for example, the Athabasca oil sands in Alberta, Canada or the Orinoco tar sands in Venezuela.

    Upgrading means using fractional distillation and/or chemical treatment to convert bitumen so it can be handled by oil refineries. This means at least reducing its viscosity so that it can be pumped through pipelines (bitumen is 1000x more viscous than light crude oil), and often separating out heavy fractions and reducing sulfur, nitrogen and metals like nickel and vanadium.

    Upgrading may involve multiple processes:

    Vacuum distillation to separate lighter fractions, leaving behind a residue with molecular weights over 400.

    De-asphalting the vacuum distillation residue to remove the highest molecular weight alicyclic compounds, which precipitate as black/brown asphaltenes when the mixture is dissolved in C3–C7 alkanes, leaving “de-asphalted oil” (DAO) in solution. A mixture of propane and butane will remove metallic compounds that would interfere with hydrotreating.[1]

    Cracking to break long chain molecules in the DAO into shorter ones.

    Hydrotreating may also be employed to remove sulfur and reduce the level of nitrogen.

    I would not be surprise if the light sweet oil of good quality is traded outside of the CME market and sell directly to refiners . This would explain why gasoline is still expensive and does not match the decrease in oil price . The increase of oil in storage could be caused by low quality oil that nobody wants to process. I know in Quebec right now we are paying 1.25 $ /liter . When the oil was at 150$/barrel we were paying gazonline 1.50$/liter. No much of a drop.

  33. Davy on Tue, 28th Apr 2015 12:38 pm 

    Ape Man, good personality analysis. I have similar thoughts on Marmi and the NOo. I have mentioned the window diving sports of the mentally crushed corns to Marmi and the NOo. I am honestly trying to save their life. I imagine Marmi and The NOo are too pretty to eat a gun. I see the closet doomer syndrome as you do with Marmi and the NOo. Why else would they be here on PO except for a sick collapse cognitive dissonance with death denial contributing to reoccurring anxiety attacks. They are scared but want to appear tough. That’s how the business world has breed the Wall Street psychopaths types.

    The Marmi personal attacks are hilarious. Ape Man, I am waiting for Marm to give you a home and a Modus like Greg and I. He is very good writer as far as bashing and trashing. He should start a political advertising company with the elections coming. NOo is a fun guy though. Marm used to be nice on occasion now he is a scrooge most of the time. He must be under allot of stress because lately he can’t lighten up at all.

    For those of you who think this is not relevant to the PO subject well it most certainly is. We are talking about the clash of ideologies of man’s future. One ideology claims all is well the other sees no hope for life as we know it IOW BAU.

    The cornucopians are in charge the doomers a fringe group but growing. If you accept peak oil dynamics then you accept BAU is dated. Cornucopians believe we have a long future of technological progress and growth ahead. Energy like all other depleting resources will be substituted through technological development and market forces. We have years left with fossil fuel resources. Just when those fossil fuels start to deplete other energy sources will be there to take their place. Population growth is a good thing because of the aging boomer population. This is how they debunk the peakers and Malthusians.

    Folks, you can choose your side or straddle the fence to wait and see. I am 100% doom praying for some good news to lessen the pain suffering and death I see coming to everyone within 10 years probably less than 5. If the corn’s message is not discredited soon we face problems and predicaments with no preparation and no tools. IOW we will be naked, cold, and hungry. The upside of that is a quick population and consumption rebalance. If you are lucky enough to survive that rebalance then it may be a wonderful time of rebirth.

  34. Davy on Tue, 28th Apr 2015 12:44 pm 

    NOo, energy is not widgets it is a foundational commodity that is basic to operations of BAU. Prices that go out of the stability range are extremely dangerous especially now with the financial system being repressed with excessive debt. That can’t be that hard to understand even for a flaming corn.

  35. GregT on Tue, 28th Apr 2015 12:56 pm 

    ““How I lost a Fortune moving from a Vancouver condo to Summerland Sage Brush”.”

    I just sold my Vancouver Burbs home for 1.255 million. I have no mortgage Marmico. My second home is also paid off, and it isn’t in Summerland. It would be ~ 8 1/2 hours away by car.


  36. Davy on Tue, 28th Apr 2015 1:13 pm 

    Good work, Greg. I imagine you unwinding into the wonderful countryside motivated by your prep instincts. I see you happy that the turbulence of the city is behind you. Keep us posted on the progress.

    Got my first bee hive going Friday. The bees seem to be doing well so far. Down in the garden today and burning native grass tomorrow. Life is good despite the dark clouds on the horizon.

  37. GregT on Tue, 28th Apr 2015 1:42 pm 

    I bought my Vancouver home for 378K 16 years ago. We just had 3 buyers in a bidding war two hours after the listing showed up on MLS.

    Real estate is out of control here in the GVA. The bubble could be blown higher by speculation and low interest rates, but it isn’t going to last forever. I’m glad we got out while the going is still good. A lot of people are going to be devastated when this bubble bursts.

    “Financial adviser and author Hilliard MacBeth believes Canadian home prices sit on the precipice of their biggest crash ever. Puffed up by years of ultra-low borrowing rates, home values have bloated to levels so far out of sync with the underlying incomes needed to support them, it’s only a matter of time before one headwind or another blows over the house of cards.”

    “The availability of financing. Canada is unique in the world in the availability of government insurance through CMHC [Canada Mortgage and House Corp.], that’s allowed the lenders to lend a phenomenal amount of money. [Household] debt levels have gone from one trillion dollars to $1.8 trillion, just in 15 years.”

  38. Nony on Tue, 28th Apr 2015 2:01 pm 

    Dave: When foundational commodities get cheaper that is good for the economy. When they are expensive, it’s bad.

    Rock was RIGHT when he said 100+ oil was a bad thing and showed depletion impact (even if volume was plateaued or slightly up). Now that price is down to 50, that’s better. Maybe not as great as if it were 30, but still WAY BETTER than 100.

  39. GregT on Tue, 28th Apr 2015 2:15 pm 

    $50/ bbl oil is still in recessionary territory Nony. While better than 100 for sure, 50 is not good enough to allow for the continuation of growth that is needed to drive BAU. 50 is also not good enough for the continuation of growth needed in fossil fuels production.

    The party is over Nony. We are living on borrowed time, and capital.

  40. Davy on Tue, 28th Apr 2015 2:29 pm 

    NOo, sorry, it does not work that way as the commodity depletes. You know that NOo. That is just common sense that if a commodities production costs are on the increase its net benefit to society goes down. That is just basic science and basic sense.

    The price may benefit some consumers but not all. Somewhere someone is suffering. There is no free lunch this is a zero sum gain with entropy winning. NOo are you trying to tell me entropy can be defeated?

    I hate to be redundant with the peak oil dynamics but if production costs go up the macro consumer in aggregate have less to work with. Eventually supply destruction and demand destruction mingle in negative feedbacks.

    NOo, I acknowledge a place for the basic Econ supply and demand you preach all the time but I am saying their is more to it then that. You seem smarter then to discount this condition or you are an agendist preaching corn porn without concern for the truth.

    You and Marmi have zero balance on issues of economic contraction. I have never heard you all acknowledge problems. All I hear is how good things are. This type of aurguement does not mesh with reality where we see cycles and frequency.

  41. Nony on Tue, 28th Apr 2015 2:50 pm 

    Stop typing and start reading. Try this:'s_rule

  42. GregT on Tue, 28th Apr 2015 3:48 pm 

    Oil is THE non-renewable resource that fuels economic growth. When oil becomes too expensive to continue to fuel growth, our economies contract. Our monetary and financial systems require growth or they will collapse. That is the very nature of a ponzi schemed system.

    The other somewhat important aspect of oil as a non-renewable resource is, by burning it we are causing irreparable damage to our planet’s natural ecological systems.

    All of the paper money in the world will not generate oxygen for us, and will not do anything at all to maintain biological systems that we require to survive as a species on this planet.

    You are trading greed for life Nony. Your thought process is irrational, immoral, and self centered. It is people like you that are driving our species and all others into extinction. You are among those that are causing the biggest problems facing mankind.

  43. Davy on Tue, 28th Apr 2015 3:51 pm 

    NOo, you know oil is different. We are not talking some non essential resource we are talking THE resource that makes everything in BAU possible directly or indirectly. So fantasize on about your Hotelling applying to oil in a system dynamic sense as it would with many other resources. Oil is different and the difference magnifies as depletion takes its toll.

  44. Nony on Tue, 28th Apr 2015 4:00 pm 

    Davy: Hotelling applies specifically to nonrenewable resources. [Don’t reply…read.]

    Greg: chill. just because people don’t agree with you doesn’t make them baby killers. This is America.

  45. GregT on Tue, 28th Apr 2015 4:15 pm 


    This is not America. This is the planet Earth. The planet that we all share a responsibility to take care of. Unfortunately for those of us that actually give a damn, we are surrounded by people like you who don’t.

    You have again promised to adhere to your NYR, yet 11 of the last 18 posts on this forum have been written by you. You continually insult others on these forums, and refuse to listen to, or acknowledge other people’s points of view.

    You ( and your sock puppets) are nothing more than a troll/trolls Nony.

  46. Apneaman on Tue, 28th Apr 2015 4:29 pm 

    Nony-damus predicts BAU and growth, growth, growth for a 1000 years.

  47. Davy on Tue, 28th Apr 2015 4:57 pm 

    Geeze, Greg, please call Batman. Boy Wonder is being dense. The only one he will listen to is Batman. The Boy Wonder just cannot get it through his density that oil is different in the conditions of a system completely reliant upon affordability and adequate supply along with adequate capital and roi for the oil producers.

    There are no substitutes for oil and no time even if we find alternatives. The fate of BAU is lock into oils fate. Oil has a criticality that supersedes Hotelling when it leaves a zone of stability for consumer, producer, and the system both operate in.

  48. shortonoil on Wed, 29th Apr 2015 7:33 am 

    04/29/15 WTI $56. $56/barrel is not a sufficient enough price to keep the world’s high cost producers in business, nor is it a sufficient enough price to replace reserves that are being extracted. The petroleum industry is losing the capacity to provide a product that the consumer can afford to buy. The price is going down, and the cost of production is going up:

    38% of the world’s economy is powered directly by petroleum; 38% of the world’s assets become valueless without it. The industry is now building a huge debt pyramid in a futile attempt to maintain those assets. It is a pyramid by an industry that will never again have the profitability to maintain it!

  49. Davy on Wed, 29th Apr 2015 8:13 am 

    Short, 38% is powered directly from oil but 100% is systematically dependent on oil. The entire global system revolves around oil and the management of oil and other resources through our command and control systems within the economy.

    This is where the disconnect is with the cornucopian message. The corns number one believe technology will keep bringing oil to market at growing volumes. Number two message is a decouple is occurring with oil and the economy because of efficiency and a switch to services. The corns then thirdly preach that technology is delivering new alternatives to substitute our dependence on all fossil fuels. The corns claim technology will eventually mitigate AGW climate change or they just deny AGW.

    This cornucopian message is supported by the post 08 crisis economic policies of financial repression and debt monitarization. This has resulted in bubbles that are benefiting the wealthy and in effect causing wealth transfer to a few from the many and the public commons pillage. This global policy is leading to serious malinvestment in the name of growth at any cost. We are clearly seeing this with the unstable commodity markets, industry excess capacity, and redundant development (ghost cities and strip malls).

    How does oil relate to the above policies creating the moral hazard of wealth transfer and economic disequilibrium? It is oil growth that is fundamental to these policies. It is these policies that has continued the growth. Peak oil dynamics and especially the Hills group ETP message point to a fundamental danger to this necessary growth.

    If we cannot grow energy supplies these policies will crash the economy. The producers and consumers must have adequate oil to power this economy. We must have adequate oil to create the activity needed to service all the debt. IMA debt of which much is bad debt being extended and pretended away. Once oil production declines this debt will come due.

    The national producers are in danger of economic collapse, social collapse, and conflict. We are seeing the policies that are maintaining oil production also destroying the real economy and with it growth. This is a process that can be explained away for a while but the disequilibrium is increasing daily. We are to the point of no return for BAU. Once the process goes into descent the policies in use will have no effect. Oil production will drop and by extension economic activity. All the malinvestment, digital debt, and social fabric distortions will explode in chaos and dysfunction.

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