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Peak Oil Pulled a Fast One on Me

Peak Oil Pulled a Fast One on Me thumbnail

I’ll admit that I was completely caught off guard by the recent (and ongoing?) crash in oil prices. It’d be a stretch to say I’m embarrassed by my lack of foresight, although perhaps “dumb-ass” would be a bit deserving.

I would say I’m well enough versed with the reality of peak oil: I’ve read perhaps a couple dozen books on the topic, poured through several of the peak oil blogs (upon deciding to end my 5-year Internet hiatus a year ago), have seen several talks given by authors and writers on the topic, and I’ve attended two Age of Limits conferences.

Nevertheless, even though there were bloggers out there discussing the possible ramifications of low oil prices, its possibility still didn’t register with me. I’ll explain what I mean by that shortly, but to do that it’d be best if I first give a recap of what the mainstream media have been saying about collapsing oil prices the past couple of months.

If you’ve been following the recent oil-related news stories then you’ll be familiar with two things: first, that the price of a barrel of oil has been crashing (to nearly 50% of its value half a year ago), and second, that OPEC (Organization of the Petroleum Exporting Countries) has refused to cut back its production, the hope being that a cut in supplies would have resulted in a rise in prices.

The first sign of trouble came after OPEC’s November 27th meeting in Vienna whereupon it was announced that OPEC was going to maintain its production levels. Seeing how no explanation or elaboration was given, it was no surprise when the expected theories on the topic began appearing, and, of course, the conspiracy theories.

Some of the more mundane theories (not to say that there isn’t any truth in them) include (1) that a rising US dollar has resulted in a downward pressure on the price of oil (since oil is priced and predominantly purchased in US dollars); (2) that Libyan production has increased and so contributed to a glut in supply; (3) that demand in Europe has been declining, also leading to a glut in supply; and (4) that increased production in the United States has meant increased consumption of domestic supplies and so a decrease in need for imports, once again resulting in a glut on world oil-supply markets. To name just a few.

Jumping over into the conspiracy theory realm (again, not to say that there isn’t any truth in them), first is the notion that Saudi Arabia has colluded with the United States (something to do with the United States’ Secretary of State having made a trip to Saudi Arabia a few months back), the intent being to bring down oil prices so as to crush the Russian economy (oil and natural gas make up about three-quarters of Russia’s exports and more than half of its budget revenues).

United States oil production levels, in thousands of barrels per day
(image: Peak Oil Barrel)

Another of the popular conspiracy theories is that rather than colluding with the United States, Saudi Arabia is actually attempting to crush the tight oil (otherwise known as shale oil or fracking) boom in the U.S., the idea here being to restore its and OPEC’s dominance in the oil markets. For what’s been going on is that since 2008 the United States has increased its production levels of oil – thanks to fracking – by some 4 million barrels a day, nearly doubling its previous extraction rate.

Secondly, since the peak in conventional oil supplies (that found under the ground and deserts and such) occurred in 2005, the only thing that’s been keeping overall extraction levels increasing (in order to maintain worldwide economic growth) are the newly tapped unconventional oils – tight oil, tar sands, and deepwater offshore oil. And since tapping these forms of oil is similar to the extra effort required when scraping the bottom of a barrel, these unconventional sources require more energy and so cost more money to extract.

The idea then is that since tight oil in the United States is rather expensive to produce, if Saudi Arabia lets the oil price drop, this could very well bankrupt shale oil producers in the U.S. With a drop in production levels, prices would level off if not rise again, and not only would OPEC reap the restored higher prices, but they wouldn’t have lost any market share.

That all being said, deciding to finally end the silence and partially put to rest lingering conspiracy theories, Saudi Arabia’s oil minister was quoted on December 18th as stating that “The share of OPEC, as well as Saudi Arabia, in the global market has not changed for several years… while the production of other non-OPEC [countries] is rising constantly.”

Similarly, the oil minister for the United Arab Emirates stated that “No one likes the price drop, but it is not right that one party should interfere to fix the matter. [The party] responsible for the price fall [by causing the current oil glut] should contribute to fix the imbalance in the market.”

In other words, while OPEC members have maintained their overall production levels of roughly 30 million barrels a day for about a couple of years now, it is the United States’ fracking industry that since 2008 has significantly increased worldwide production levels, earning itself, no less, the rather idiotic moniker of “Saudi America.”

A few days after the aforementioned statements were made, Saudi Arabia’s oil minister again pleaded for non-OPEC members to cut back on production, then adding that those countries “will realize that it is in their interests to cooperate to ensure high prices for everyone.” Furthermore, he also added that OPEC doesn’t intend to cut supply “whatever the price is.” “Whether it goes down to $20, $40, $50, $60, it is irrelevant.”

And finally, in his response to conspiracy theories bandied about regarding Saudi Arabia pulling out the oil weapon on so-and-so countries, Saudi Arabia’s oil minister stated that “Talking about such alleged conspiracies… is absolutely incorrect and indicates a misunderstanding in some minds… Our economy is based on strictly economic strategies, no more, no less.”

So. I suppose that what one could do is wonder whether these statements are simply a smoke-screen for some nefarious, underhanded deals going on. But not only do I not have the faintest clue whether that’s the case or not, and see no good reason for throwing uneducated guesses around, author Ugo Bardi put it even better when he said that “we tend to interpret the present downward cycle as the result of strategic choices or conspiracies, but this is mostly an illusion (the illusion of control).” That being said, what I do see as being important (and useful) is looking at why prices started to get so low in the first place.

Estimated oil price levels needed for OPEC members to balance their government budgets in 2014 (data via The Wall Street Journal)

First off, certain OPEC members – namely Saudi Arabia, the United Arab Emirates, and Qatar – have either built up such substantial financial reserves and/or can extract oil so cheaply that they are able to bear the brunt of low oil prices for some time. Not so much others.

While Iran needs oil in the $100+ range in order to balance its books, Venezuela is in the worst position of all. While the Latin American country is already a very polarized nation, oil accounts for 95% of its export revenue. Low oil prices could therefore easily make a grim situation worse, some people having a propensity to become hostile when their standards of living continually depreciate. Likewise, a default on Venezuela’s debt wouldn’t be out of the blue.

But perhaps more pertinent and interesting to readers of this blog is what of the non-OPEC producing countries? This, I think, would be a much better area to look at, seeing how it would shed much light on how we got into this situation in the first place.

First off, it’s worth noting that for the past three years or so, before oil’s recent crash, the price of crude has been bouncing around the $100 mark. This was a relatively expensive range, particularly in comparison to its long-standing rate of $20-$40 per barrel for more than a decade, before its gradual then meteoric rise to $147 in 2008.

Since oil is entwined with the price of pretty much everything nowadays, its changes in price can have a significant effect on economies (as we currently [mis]understand the term). With higher and higher oil prices sapping a greater percentage from expenditures – be it of “consumers” or businesses – a price point is eventually reached where goods become so expensive that those who can’t afford them anymore simply stop buying them. This is what is called “demand destruction.”

When demand dries up and fewer goods thus end up being bought and sold, a glut in oil supply results, which ends up crashing prices. This is simple supply and demand. Along with other factors, this is what happened after the $147 oil price spike in July of 2008, and resulted in oil tumbling down to $32 by December of that same year.

While the ensuing low oil prices get seen by some as a boon (via the expectation that consumers will have more money to spend), the opposite problem actually kicks in – namely, “offer destruction.” Since many businesses get forced to close down due to crashing oil demand and so in effect fewer sales, and since a number of people get their hours cut or even lose their jobs, there often-times isn’t enough money to pay for oil and other goods, regardless of how low the prices go. This is what happened in 2009, gets referred to as being the Great Recession, and can be fairly described as “the beauty of the market.”

To return to the first paragraph of this post, this is where I got thrown off. To digress:

As mentioned earlier, 2005 is seen by some as the year that conventional supplies of oil peaked. It is because of this (and a few other factors, like speculation) that oil climbed to $147. Although prices subsequently crashed due to demand destruction, they eventually made their way back up, to the point that several unconventional forms of oil (shale oil/fracking, tar sands, and deepwater offshore oil) became somewhat profitable.

The problem with peak oil is that when (if?) growth kicks in again, and since more and more energy is getting used, soon enough the increasing levels of energy-use may very well butt up against maximum extraction levels, resulting in a shortage in supply and causing the whole demand and offer destruction cycle to kick back in again.

Furthermore, and as far as one theory goes, higher highs and higher lows will occur. That is, instead of maxing out at $147 per barrel, oil will reach, say, $200 per barrel, before crashing down to $80 or so instead of $32. And so forth.

And it is because of this notion that peak oil pulled a fast one on me. Expecting the higher high having to happen, what I didn’t clue into was that oil prices at a high enough level for a prolonged period of time would be enough to have a similar effect as a quick rise to $147.

Case in point, one can look at countries that have recently slipped into recession or simply haven’t gotten out since 2009 – Greece, Spain, Italy, Brazil, and so forth. Furthermore, some of the more robust and rich countries are seeing their growth wane – Japan, China, Germany, to name just a few. For what is a slowdown in Europe leads to fewer consumer purchases from China leads to less iron ore and coal bought from Australia.

(image: Resource Crisis)

For a closer look, take a look at Italy. Oil and gas consumption peaked in 2004 and has been on a decline ever since. According to Ugo Bardi over at Resource Crisis, “Italy is in full collapse.” One not only sees that industries are closing down, but also that restaurants are popping up in the attempt to attract the wallets of globe-trotting, placeless tourists, along with all the chic restaurant-hoppers. What is being witnessed, says Bardi, is “unreal.”

Unfortunately, and much like the aforementioned countries, if one is looking for solid explanations about these economic collapses from mainstream news sources, then one is pretty much SOL. As Bardi then explains,

When the crisis is mentioned, different culprits periodically appear in the first pages of the newspapers: the Euro, the European Union, politicians, immigrants, government employees, bureaucracy, lazy workers, terrorism, femicide, Angela Merkel, Vladimir Putin, Silvio Berlusconi, and more. It is a cycle that never stops, it keeps turning, every time pointing at something – new or old – that the government will target to solve the crisis once and for all.

In turn, not only could low-priced oil ($20!?) usher in another Great Recession via a meltdown of the oil market, but the newly enshrined oil ventures are at serious risk of collapse, and whose bubble bursting could be akin to the recent housing bubble. (To be fair, I can’t imagine oil reaching that low if not staying there for very long, for the very simple reason that any number of unfortunate conflicts around the world could cause its price to increase overnight.)

Cost of oil production for various projects and countries
(image: The Oil Drum)

In short, many of the unconventional sources of oil require $100 prices in order to remain financially viable (or at least give that impression). Since many of the fracking plays in the United States are owned by independents who don’t have the financial reserves to weather a prolonged period of prices below costs of production, things could get hairy.

Furthermore, since fracking is capital-intensive, drillers have borrowed ridiculous amounts of money in order to acquire leases, drill wells, as well as purchase and install processing equipment and infrastructure. And since fracked wells have both steep production increase levels and decrease levels, drillers have been forced to continually drill more and more wells to keep up the semblance of growth – and to keep the debt piling up. What’s resulted is a junk bond market possibly akin to what was witnessed a few years back with the housing fracas.

And not to let all the boosters off the hook, for it was once again an all-too-giddy media that kept itself busy cheering on the latest (fraudulent?) money-making scheme, pumping up all the debt with nary a peep about any possible consequences.

And so what’s going on now that prices have crashed? That would be sellers panicking to unload their energy-related junk bonds and other investments in unconventional oil and related industries, and it’s anybody’s guess as to how much of a collapse will occur in these fields – and if it’s significant enough, if they’ll even have a chance to recover.

And as mentioned earlier, a round of offer destruction is expected to kick in after a round of demand destruction. For instance, nearly 40% of the jobs created since 2009 in the United States have been in energy related fields, those being some of the higher paying jobs in the nation, a catastrophe to the U.S. economy if lost.

As John Michael Greer recently put it over at The Archdruid Report, “If I’m right, the spike in domestic US oil production due to fracking was never more than an artifact of fiscal irresponsibility in the first place, and could not have been sustained no matter what.”

What we might be about to find out is how vulnerable the United States’ shale boom is to low prices, and how profitable fracking actually is.

Regardless, what happens next is anybody’s guess, and it would be a fool’s game to try and give any predictions. Nonetheless, it’s worth quoting Terry Lynn Karl from a recent conversation with Andrew Nikiforuk. “We are in a situation where oil supply limits can cause recessions and oil supply gluts can cause stock market failures.”

The reasons to get off oil seem to be piling up.

29 Comments on "Peak Oil Pulled a Fast One on Me"

  1. Davy on Tue, 27th Jan 2015 7:36 am 

    Many of you here ignore my long rambles of word salad and doomerism. That is understandable and I don’t blame you. I do want to make a point of a point I made in the past. I have always said it is not clear what is going to occur first in the vicious cycle down either demand destruction or supply destruction. They both represent economic dysfunction and the likely end of growth meaning the end of the bumpy plateau and the beginnings of the bumpy descent. This includes the financial system post QE.

    It is clear by most that QE globally is a failure and has hit limits complete with diminishing returns to its effectiveness as an economic tool. We are stuck with loaded central bank balance sheets and zero or negative suppressed interest rates. Tell me that is healthy so I can have a morning chuckle. The oil situation is in POD and ETP stress and fully codependent to a sick financial situation. This is why I say demand destruction and supply destruction are in play. The current distorted economic figures and all the low value crude per eroi, economic ETP of oil, and POD above ground issues are in an aggregate destruction mode.

    This economic state is in the fog of deception from all the noise of BAU. Time frame is an issue also. We must admit post 08 until now is a very short time but for our obsessed psychological time frame dimensions it is an eternity. These macro-economic forces do not play out per our short term filters. We must also accept that BAU is so complex, interconnected, unsustainable, and efficiency oriented that we have put ourselves globally into a situation of potential cascading failures. There is just no way to forecast or predict them because they are part of a self-organizing system that is entering what appears to be a descent.

    Descent is driven by economic abandonment, network dysfunctions, and irrational policies. If growth policies are perused in a descent environment wouldn’t we call that irrational? Isn’t that what the top is likely doing? Are we not seeing network dysfunctions with our financial system with repression and excessive debt? Economic abandonment is about to occur on a widespread scale because of the uncontrollable deflationary tendencies with huge amounts of debt and counterparty risk. Folks this is a perfect storm of which PO is only a part. I will say this PO is the brick wall if this situation is able to limp along by other means. If there is an oil supply shock with a price spike it will surely be a spike in the heart of a sick economy.

    It is possible demand will never return to overtake supply. Few will acknowledge that in this BAU oriented world. BAU has never been in a long term descent paradigm. Tell me please is there any reason BAU can’t enter a descent paradigm? Ecosystems cycle and BAU’s growth cycle has been ongoing for two centuries with quantifiable average growth. The realities of a finite world and ecosystem cycles point to the possibility we are now in the descent to the end of modern man. Nothing can discount this profound statement.

  2. Rodster on Tue, 27th Jan 2015 7:53 am 

    When you start going after the shit oil in the ground and have to spend more money and energy to get it, that’s PEAK OIL. That’s what most of the world is NOW doing.

  3. Plantagenet on Tue, 27th Jan 2015 8:01 am 

    Peak oil is NOT “going after shit oil in the ground”.

    Peak oil is when global oil production reaches its maximum level.

    AND That hasn’t happened yet.

  4. westexas on Tue, 27th Jan 2015 8:31 am 

    Of course, it depends on how you define “oil.”

    As I have periodically noted, condensate and natural gas liquids are byproducts of natural gas production, and if we subtract out some plausible estimates for global condensate production, it’s quite likely that we have not seen a material increase in actual global crude oil production (45 and lower API gravity crude oil) since 2005, even as annual Brent crude oil prices averaged $110 per barrel for 2011 to 2013 (and about $100 for 2014).

    And of course the key question is, if four years of approximately $100 or greater annual oil prices only kept us on an “Undulating plateau” in actual crude oil production, after trillions of dollars were spent on upstream capex, what happens to global crude oil production given the current price collapse and resulting (ongoing) decline in upstream capex?

    Or let me put it this way, if global crude oil production virtually stopped increasing in 2005, or started falling, but if global natural gas production and associated liquids–condensate and NGL–continued to increase, what would global natural gas and petroleum liquids data look like, something like the following chart showing normalized global gas, global NGL and global C+C for 2002 to 2012?

    Also, we have this fundamental disconnect between price and supply numbers.

    As I have noted before, when you ask for the price of oil, you get the price of 45 or lower API gravity crude oil, but when you ask for volumes, you get some combination of crude + condensate + NGL + biofuels + refinery gains.

  5. Rodster on Tue, 27th Jan 2015 9:24 am 

    “Peak oil is NOT “going after shit oil in the ground”.”

    It sure as hell IS !

    As Short has said, there will always be oil in the ground. At some point it gets too expensive for either the consumer or producers to get it out of the ground.

  6. rockman on Tue, 27th Jan 2015 9:46 am 

    “Peak oil is NOT “going after shit oil in the ground”. Peak oil is when global oil production reaches its maximum level. AND That hasn’t happened yet.”

    True…if you mean global PO. And, of course as westexas explains, subject to how one defines “oil”. But in either case we spend little time here discussing dates of global peak oil or global peak “kinda oil”. The subject tends to be more inclusive and revolves around the POD…Peak Oil Dynamic. The dynamic that drives oil prices up and down; that boosts and crashes economies; that leads to expending $trillions and a lot of blood to “export democracy” to oil exporting nations; that leads to major environmental clashes; etc. IOW the aspects of declining oil reserve that is so much more important than some date and how much oil is being produced on that day.

  7. Aspera on Tue, 27th Jan 2015 10:40 am 

    I know the focus is now on global peak oil (or peak “kinda oil”). But the following suggest a pattern that, on a finite world, speaks volumes (sorry the pun).

    Are these dates close to correct (knowing that we recently came close to the US 1971 peak)?

    Conventional crude (45 or lower API gravity) peaks:
    1971 US
    1974 Canada
    1984 Global on-shore
    1989 Alaska
    1999 North Sea

  8. Northwest Resident on Tue, 27th Jan 2015 11:20 am 

    Peak Oil is not about a specific date and time. Not in my opinion. Who cares when that specific moment in time is that we achieve maximum historical oil (including all liquids) in a single day or other time period. It doesn’t matter.

    Just like it doesn’t matter if you’re at ground zero or a few hundred yards from ground zero when that nuclear bomb goes off. You’re vaporized in either case.

    We’re “close enough” to peak oil for all of the dire consequences of peak oil to kick in.

    The global economy, deprived of the sufficiently low priced oil that it needs to run on, has become excessively dysfunctional and is screeching to a halt.

    The oil producers are desperately scraping the bottom of the barrel, calling just about any liquid that burns “oil”, doing whatever they can do to keep that production level up. To continue in this mode, they must take on excessive levels of debt, debt that cannot and will not ever be repaid. But now even that losing game is coming to an end as banks and investors are seeing their get-rich energy investment schemes evaporate with the plunging price of oil.

    Everywhere, all around the world, governments and companies and people are mired in debt. The excess energy that is needed to pay the bills, keep the current infrastructure going PLUS enable economic growth is just not there any more. It doesn’t matter how many barrels of oily stuff they frack out of the rock — there will never be enough energy in that stuff to provide excess energy to the economy.

    Social cohesion is under stress like never before. Oil exporting countries are in dire straits. Conflicts over oil and in and around oil producing regions are heating up. The pressure is building. The “good times” of plentiful oil have faded into history, and now we are AT or EXTREMELY CLOSE to peak oil and all its consequences.

    Let the corny deniers nitpick and deny. Let the obnoxious trolls with agendas to deny peak oil be their grotesque selves. Look at them and understand that the mass of humanity will turn ugly and violent and desperate in the very near future. Because, the party is over. We burned it up, and we burned it fast. Future reality will be one without much if any fossil fuels to burn, and that future is creeping up on us faster than most of us care to admit.

  9. Perk Earl on Tue, 27th Jan 2015 12:02 pm 

    Really good thread here and I’m not trying to change its course, just tossing in something found today that I wanted to intersperse.

    Here’s an interesting article on what happens to those pesky QE bonds:

    “But we also had that QE, that quantitative easing. Where the Fed makes money and goes out and buys bonds. They don’t have to pay interest on the money they made, they do receive interest on those bonds and thus they’ve been making a tidy profit (which goes to Treasury). They’ve got $4+ trillion of those bonds stacked up now. The printing of the money and the purchase of the bonds lowered long term interest rates. And, in reverse, the selling of the bonds and the cancelling of the money would raise interest rates again.”

    Did you catch that last part; “And, in reverse, the selling of the bonds and the cancelling of the money would raise interest rates again.”

    Rising interest rates would make it harder to repay loans which would lead to a certain % of defaults, so it seems like a situation frought with potential repercussions.

  10. Davy on Tue, 27th Jan 2015 1:07 pm 

    Perk, a trap comes to mind. Not only are the central banks in traps so are sovereign governments. Then step up a notch and there is the energy trap society is in with depletion and waning window of time to adjust and mitigate. The party is shutting down but the drunks are ignoring last call.

  11. Perk Earl on Tue, 27th Jan 2015 2:40 pm 

    “Perk, a trap comes to mind.”

    Definitely, Davy, as all attempts currently going on by banks and govt’s to ignore/avoid the energy predicament simply ‘extends and pretends’ (as Stoneleigh put it), an inevitable continuous contraction proportional to depletion.

    Just think of it; an insistence on continuous growth simultaneous to incremental depletion. That’s a conflict that has to have consequences as pressure builds towards what will be a forced adjustment down. The harshness of that whiplash will be equal to the efforts to insist on doing the opposite.

    Like NR put it, it’s a spring that is loading tension and at some point it will release it and when it does, oh my, look out!

  12. Davy on Tue, 27th Jan 2015 3:07 pm 

    Yea, perk, definitely seismic tensions building. It will be fascinating to see when, where, and how much when the fault gives. We talk about this daily and sooner or latter something is going to give. It is ashame the game is so serious it could be fun betting on an outcome instead it is life threatening.

  13. Perk Earl on Tue, 27th Jan 2015 3:57 pm 

    Yeah, agree it won’t be fun and the big question is when and in what form? I figure as pressures continue to build to a crescendo, at some point it will be fairly obvious it’s ready to break, so no need to try and predict it. For now there is still time to get our ducks in a row, to prep. I still have a long way to go to prepare. If it happened today, I’d be up a creek without a paddle. Give me 2 more years, please, lol.

  14. Arthur75 on Tue, 27th Jan 2015 3:58 pm 

    I find last Kunstler post quite to the point :

  15. Perk Earl on Tue, 27th Jan 2015 4:14 pm 

    Kunstler writes: “The future is telling us very clearly: get smaller, get finer, get more local, get less complex, get less grandiose, do it now.”

    Yet, instead what we hear continuously on MSM financial information, like CNBC is the growth mantra. Grow, baby grow! Forget the energy predicament, expand!

  16. Northwest Resident on Tue, 27th Jan 2015 5:18 pm 

    Archdruid has a few relevant words to say on the subject in his last post:

    “The decline and fall of modern industrial civilization, it bears repeating, is not poised somewhere off in the indefinite future, waiting patiently for us to get ready for it before it puts in an appearance; it’s already happening at the usual pace, and the points I’ve raised in posts here over the last few weeks suggest that the downward slope is probably going to get a lot steeper in the near future. As the collapse of the fracking bubble ripples out through the financial sphere, most of us are going to be scrambling to adapt, and the chances of getting everything lined up in time to move to rural property, get the necessary equipment and supplies to start farming, and get past the worst of the learning curve before crunch time arrives are not good.

    If you’re already on a rural farm, in other words, by all means pursue the strategy that put you there. If your plans to get the necessary property, equipment, and skills are well advanced at this point, you may still be able to make it, but you’d probably better get a move on. On the other hand, dear reader, if your rural retreat is still off there in the realm of daydreams and good intentions, it’s almost certainly too late to do much about it, and where you are right now is probably where you’ll be when the onrushing waves of crisis come surging up and break over your head.

    That being the case, are there any options left other than hiding under the bed and hoping that the end will be relatively painless? As it happens, there are.”

  17. GregT on Tue, 27th Jan 2015 5:51 pm 

    “Kunstler writes: “The future is telling us very clearly: get smaller, get finer, get more local, get less complex, get less grandiose, do it now.”

    “If your plans to get the necessary property, equipment, and skills are well advanced at this point, you may still be able to make it, but you’d probably better get a move on.”

    Geez, I feel important now. Both of these guys must have read my ramblings here on If I remember correctly, something like this:

    “Move away from largely populated areas, learn how to grow your own food, and get involved in a small local community.”

    Holy crap! I’m famous!

  18. Perk Earl on Tue, 27th Jan 2015 7:40 pm 

    This is kind of interesting, i.e. since the Draghi sponsored Euro QE got the heads up, the price difference between WTI & Brent has begun to widen again. As you can see below they went in opposite directions today.

    Crude Oil (WTI) USD/bbl. 45.56 -0.67 -1.45% Mar 15 19:54:43
    Crude Oil (Brent) USD/bbl. 49.60 +1.44 +2.99% Mar 15 18:00:00

    This is worth keeping an eye on because there of course was a lot of people asserting (incl. myself) that US QE helped with cheap money loans to spur LTO, and then when that went bye bye, the price suddenly began dropping. So does Brent keep rising from here while WTI flounders? Time will tell.

  19. Perk Earl on Tue, 27th Jan 2015 7:51 pm 

    “On the other hand, dear reader, if your rural retreat is still off there in the realm of daydreams and good intentions, it’s almost certainly too late to do much about it, and where you are right now is probably where you’ll be when the onrushing waves of crisis come surging up and break over your head.”

    Even if it’s not, I’ll presume that’s for me – lol! Actually one idea I have that differs from the idea of farming (because you’re probably right I won’t transition into that before all hell breaks loose), is just load up on lots of food, water and other supplies enough for 3 years. That’s a whole lot, but the water part is a lot easier because there is a fresh running spring nearby good year round. We have the space to store lots of stuff, so that may turn into my go to strategy. So far we have a bunch of food stored away, but we need a whole lot more and I don’t want to be living on freeze dried stuff, although may stick some of that away just as a back up.

    This would be done with the idea that once the dust settled, those that make it through the bottleneck would combine forces to farm or whatever. So we may not need to know everything.

    Beyond that we need to pay off the mortgage and get solar, but we have a really big job in the offing, so this could all happen quite quickly.

  20. green_achers on Tue, 27th Jan 2015 8:19 pm 

    Link is ka-ka. Just routes me back here.

  21. steve on Tue, 27th Jan 2015 9:21 pm 

    I always cringe when people say oil will never get to this price again!! Do you want to bet?!!The governments of today will do everything they can like rich parents helping their spoiled children after they have already spent their trust funds….Governments like the U.S will eventually start the printing presses after QE keeps failing and we fall farther into deflation…they will be dumping cash out the door…My point is we are in the last throes of BAU but that does not mean we will not see some weird things in the future and this is what Nicole Foss predicted 10 years ago…we may wake up one day to see gold go to 10,000 and then the following week fall to 30…the only prediction we should be making is that BAU is about to crash…predictions of peak oil price has added to the confusion making people think the price of oil is due only to a glut in oil

  22. thingy on Wed, 28th Jan 2015 1:47 am 

    Plantagenet, The term peak oil was coined to mean when conventional crude reaches its max production which it appear to have in 2005~6. the 4mbpd of US shale is an “extra” few years while allowing us to do nothing.

  23. thingy on Wed, 28th Jan 2015 1:54 am 

    “instead of maxing out at $147 per barrel, oil will reach, say, $200 per barrel, before crashing down to $80 or so instead of $32. And so forth.”

    Actually I think you need to look at it slightly differently. $147 was about the equivalent of 6% US GDP then it collapsed to $35. This time around with a weaker economy we couldnt stand $110 before a collapse to $45. So what I am suggesting is rather than the max price getting higher and higher its gpoing to get lower. Because the economy is going to get increasingly weaker and weaker, unable to pay as much. So After this dip is over we may well find the World’s economy cant stand $100 and we’ll see a recession.and a collapse. However when the marginal cost of new oil is say $90+ and we cant pay it then I think the oil curve is going to collapse away fast. So rather asymetrical.

  24. Davy on Wed, 28th Jan 2015 4:14 am 

    Perk, I want to remind you there is no templet for this oncoming collapse so a prep templet is difficult. All locals and people have different comparative advantages that should be leveraged. I personally think agriculture has to be part of the mix. This can be from a garden to a farm but it must be in most people’s mix. I think salvage skills will need to be important. Tools are important. Have a security plan of some kind. This does not necessarily mean guns. Do you know your neighbors? Water is very important. Have resilience with heating if heating is an issue. I use wood and electric. I could go on for many pages.

    The fact is we just don’t know how this is going to shake out and what the time frame will be. I have been doing this prepping and dooming in earnest since 2005. Even before that I was opining on a future of doom and prep someday. The biggest prep action is attitude. Make prep a priority or at least a portion of your priority. You all have insurance don’t you so include prep actions with your insurance actions.

    This descent may play out less severe for you in your local. Prepping too much can ruin what you have now. I am lucky it fits in completely with what I am doing now as a way of life and hobby. Yet, for so many others it is just not in the cards for many reasons. I do recommend to these people to reevaluate their situation to at least be aware of what your risks are. Some of you reading this are in locals that may make you a refugee. If you live in Las Vegas you need to think about why you are there.

    I could give you a handbook of prep with many chapters. I have a library of books. My prep handbook has the short term and long term covered. It has the physical and the mental. But I cannot tell you what is coming and when. This is about you, your life and your local. It is about each and every one of our destinies which is not for us to know. We cannot know destiny but we can see the storm clouds and realize trouble is ahead. We do not have control over much more than that. The nation and the global are out of control. You can make a difference at home and with your neighbors.

    My recommendations is stock up on the basics of food, water, security, cash/gold, tools, and books. If that works for you move up the ladder. If you are like me and some others here it becomes a passion. Longer term choose a postmodern occupation and get good at it even while you have your BAU job. For most of us that will be a garden or a farm effort. If some of you are gifted with a trade that may be your niche.

    With all this said keep in mind this could turn into a Kunstler “Long Emergency”. The Long Emergency may not start for several years. If there is one thing you must do right here right now is appreciate life to its fullest. Take care of yourself and your family like there is no tomorrow. Try to be heroic in the face of what could be and likely will be a painful period ahead. Time appears to be short in my eyes and time is something you can never recover.

  25. bobinget on Wed, 28th Jan 2015 9:35 am 

    Just now EIA reported inventory.
    More to the point, read the LAST paragraph that put lie to any fictional slow-down.

    Summary of Weekly Petroleum Data for the Week Ending January 23, 2015

    U.S. crude oil refinery inputs averaged about 15.3 million barrels per day during the week ending January 23, 2015, 347,000 barrels per day more than the previous week’s average. Refineries operated at 88.0% of their operable capacity last week. Gasoline production decreased last week, averaging 9.2 million barrels per day. Distillate fuel production decreased last week, averaging over 4.7 million barrels per day.

    U.S. crude oil imports averaged over 7.4 million barrels per day last week, up by 204,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.2 million barrels per day, 4.8% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 597,000 barrels per day. Distillate fuel imports averaged 439,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 8.9 million barrels from the previous week. At 406.7 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 2.6 million barrels last week, but are well above the upper limit of the average range. Both Finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 3.9 million barrels last week and are in the lower half of the average range for this time of year. Propane/propylene inventories fell 1.9 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories increased by 2.0 million barrels last week.

    Total products supplied over the last four-week period averaged over 19.8 million barrels per day, up by 4.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 8.9 million barrels per day, up by 8.0% from the same period last year. Distillate fuel product supplied averaged 4.0 million barrels per day over the last four weeks, up by 5.6% from the same period last year. Jet fuel product supplied is up 7.8% compared to the same four-week period last year.

  26. bobinget on Wed, 28th Jan 2015 9:47 am 

    Poster’s note:
    Observe how swollen are imports, storage, now,
    remember the melting glacier metaphor.

    WE are being swamped with imported oil to give the impression that,
    (A) no one else in the entire world
    wants it, so, send it here.
    (B) despite an 8% consumption increase year over year, US consumption is headed lower.
    (the previous week showed double digits)

    Storage is this high because oil is cheap, nothing

    Were it not for Mideast nasties, consumption in the US might well have exceeded 21,000,000 B p/d.
    As it stands,expect gasoline shortages this summer.

  27. Perk Earl on Wed, 28th Jan 2015 11:31 am 

    Davy, thanks for the bits of wisdom. I shall make a note of those points.

  28. Amvet on Wed, 28th Jan 2015 2:07 pm 

    Changing the definition is popular in the US. Using the old definitions, we have (1) An unemployment rate of around 25%, (2) An inflation rate of around 15%, and peak oil occured about a decade ago. My opinion about the current oil price crash: It is a futures controlled part of our economic war on Russia, Iran, and Venezuela aided by the ever helpful Saudis. Collateral damage: the US shale and deepwater oil industry, Canada, Mexico, Norway, Nigeria, etc.

  29. viewcrafters on Fri, 30th Jan 2015 7:55 am 

    The dumb-ass part is why don’t the frackers shut off their pumps for a month and let the price come back?

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