[SeaGypsy]

Nice story shaved, thanks for the link.

http://www.inspirationpeak.com/shortsto ... erman.html

[ROCKMAN]

Keith - Just the opposite. The oil patch, as far as employment goes, is a dying animal. One of the last career paths I would advisor someone starting college would be in a related field. Just last week I advised a young salesman he should consider the long term prospect of moving towards another industry. His company’s future will be directly proportional to the number of wells drilled and not the price of oil/NG. Even with the current push into the shale plays and the Bakken the rig count is flat to sliding a bit. IMHO it will be much lower in 10 years or so. Thanks to high prices we are tapping the last significant accumulation of oil in the US. IMHO there is no “next commercially viable” oil play regardless of price after the shales and Deep Water are exhausted.

[Ibon]

. IMHO there is no “next commercially viable” oil play regardless of price after the shales and Deep Water are exhausted.

What's your projection on how long until exhaustion?

So there isn't any other lower grade fossil fuel, expensive to harvest and process that is waiting on the sidelines? Nothing else even with an EROEI of 1:2 or 1:3 ?

[Duende]

Oh, and I forgot to mention also -

Strict economic arguments about what happens on the backslope are rendered irrelevant by the potency of political intervention and subsidization of special interests.

[ROCKMAN]

Ibon – I can only toss out a qualitative guess. But as long as oil prices stay up the Eagle Ford and Bakken will be drilled. But only for a while. The hottest play on the planet back in the 90’s was the Austin Chalk in Texas being horizontally drilled and frac’d. You don’t hear much about it today because it’s been fairly well drilled up with few viable locations left even though oil prices are higher now than when it boomed. And you notice I didn’t mention plays other than the EFS and Bakken. Last time I saw the stat more than 80% of the oil producing from the unconventionals was from these two formations. For quite a while now companies have been testing many dozens of other fractured shale formations and they haven’t hit the next big play yet. Lots of chatter about the Monterey Shale but no one has made a splash yet out on the west coast.

Operators are drilling longer laterals and doing a lot more frac stages in both the EFS and Bakken which, IMHO, is being driven by the poorer productivity of the remaining leases. I’ve heard that some of the frac jobs in the EFS are now costing more than what it takes to drill the well. As far as “exhaustion” one could say we’ve already fairly well exhausted the number of available leases in both plays. Much of the acreage is already tied up and is just waiting for someone to drill a well. I’ll just lean on the expectations of some of the most optimistic proponents of these plays and guess we’ll be well on the down slope of rig count in both plays in 5 or 7 years. That’s one of the problems those projecting much high rates from both plays: it requires a rapid drilling of the remaining wells which reduces the number of future wells very quickly. And when you add that to the proven high decline rate of fractured reservoirs those high production rates will quickly vanish compared to conventional reservoirs.

There may be some reservoir comparable in quality to the EFS and Bakken left to be found. But many hundreds of wells have already been poked in those dozens of other shale plays. I could toss out a list of 15 fractured shale formations and I doubt many hear would recognize many of them. That’s the point I was making about a low expectation of finding new booming oil plays in the US: we’ve been beating on every potential one for a number of years now and no additional “booms”…yet.

EROEI of 1:2 or 1:3? Won’t ever happen due to economics. The energy consumed in drilling and frac’ng a shale well is a relatively small component of the total expense. Typically around 10%. If a well produces just 3X the energy needed to drill it would definitely be a money loser. Just my WAG but once the EROEI gets below 5 or 6 the poor economics will kill the project. Remember the oil patch does give a hoot about EROEI. It’s all about rate of return. A well producing less than a 5 EROEI or so will likely have a negative ROR. And no one is going to intentionally drill such a well.

Think about the numbers: if I spend $1 million on the energy used to drill a well that costs $8 million to drill/complete and that well produces $6 million in energy I’ve got an EROEI of 6 but lost $2 million on my investment. From the beginning folks have been way over estimating how low EROEI can get when it comes to drilling. EROEI has never been nor ever will be a direct determining factor of what does or doesn’t get drilled. Just follow the money, baby! LOL

[Pops]

In all likelihood what's already occurring will continue to occur: those with the means will still enjoy cruises and commuting to work while numerous others will get priced out of the game

But that's not what's happening now at all, which is exactly my point.

In China the average manufacturing wage is $1.50/hr, in the US the average income is $25/hr.

Which country's consumption is rising and which falling?

That's right, China's use is rising and the US is falling, they are outbidding us at $1.50/hr because they can make better use of one gallon than we can of another gallon even though we average 16x their income!

Strict economic arguments about what happens on the backslope are rendered irrelevant by the potency of political intervention and subsidization of special interests.

But you are doing exactly that, your economic argument is
"economics doesn't matter because the economically advantaged will win"

See above


--

Pops, I think you are, at some point, trying to plot those curves.

I'm not forecasting a particular outcome, newf. Just because I don't say this, then this, then collapse! doesn't mean I'm dreaming of unicorns. But it does boil down to either we pay more for harder oil or we don't.

If we don't pay more, production stops.
We can't pay more if we don't use less
ergo we must increase utility and use less in order to pay more.


I'm just trying to noodle out why prior predictions failed and the mechanics of how society can afford to pay more for harder oil. How many outcomes can there be?
There is the Simmons Scenario (no supply) - $1,000 overnight
The Tipping Point Scenario (no demand) - $0 overnight
The Increasing Utility Scenario (lower supply/higher demand) - $1,000 eventually

Really the first two are not endpoints because the price of oil can not go permanently to either $1k or $0 overnight, so they aren't end points - they could happen I suppose, in the futures market especially but they would no more last than $147 did.

That's a broad enough forecast to fit a whole chariot full of zombies!

.

[Plantagenet]

trying to noodle out why prior predictions failed and the mechanics of how society can afford to pay more for harder oil.

It was always a fallacy to believe that the entire US or the entire world economy would "collapse" simultaneously as gasoline prices went up and reached some magic number due to peak oil.

The "doomers" didn't realize that oil producing states and countries actually benefit as oil prices go up. Other parts of the economy also benefit as oil prices go higher, for instance, just consider the Bakken----fracking in the Bakken resulted in a whole new oil province that required increased production of US steel for oil well casing etc., and increased trucking of oil field equipment and supplies, with concomitant increases in oil shipments on trains. Even the auto industry benefitted from higher oil prices, as there was demand for new pick-up trucks for all the folks making good money working in the Bakken.


Higher oil prices are GOOD for the economy of oil-producing states and regions

[Ibon]

ergo we must increase utility and use less in order to pay more.
.

Simmons always used to say that oil was way underpriced as it is the most precious of commodities that should be cherished....... it's a variation of saying it should never have been squandered.....which is a variation of saying it should have always been reserved for its greatest utility. It is ironic that as we come to the end of the oil age the dynamics of price and the market and supply will finally make this come true!

[Ibon]

Oh, and I forgot to mention also -

Strict economic arguments about what happens on the backslope are rendered irrelevant by the potency of political intervention and subsidization of special interests.

First of all thanks Rockmann for that thorough answer.

Duende, I think you have a point. One of the special interests will be the socially dislocated and disenfranchised economically as a result of higher prices. Fuel stamps anyone?

In all seriousness, we did ration gas during world war II where farmers (my dad was in highschool at the time and was a rural hick farmer but very popular in high school because he could get gas) were given priority on rationing. That interesting because we see during this stressful time how political intervention did prioritize utility.

If the elite still want to drive around on the open road in public places there will be government regulation, rationing and subsidies handed out. Expect it.

Fuel stamps..... I can see it. How many liters per week? you want to see some serious car pooling.....recent mexican and filipino immigrants in the US will show us how to get the greatest utility for a liter of fuel......and we will learn from them....... and we will still to some degree prosper........

There is such a long peacocks tail of waste and inefficiency to run through before oil constrains to the point of collapse.....

[Keith_McClary]

Keith - Just the opposite. The oil patch, as far as employment goes, is a dying animal.

The post-peak half of oil is several times more expensive to produce, so I was thinking there must be proportionately more employment. Maybe not the same type of good "oil patch" jobs.

[Loki]

Fuel stamps anyone?

Good one

I could certainly see government rationing in the decades to come here in the US. All manner of things were rationed in WWII (my signature is from a WWII propaganda poster), it won't be difficult to dust off that old playbook. And of course there will be a black market---that's maybe where we could see the fabled $1000 gallon. But it will happen in a time of war, and likely be relatively short lived, I think.

Price rationing will be the primary distribution mechanism in the decades to come. The price of oil will zigzag every which way depending on the vicissitudes of the economy. There's obviously a ceiling, but what that is is anybody's guess. There are all sorts of complex feedback mechanisms going on, peak oil interacting with climate change, Ponzi finance, demographic change, regional political instability, and fundamental structural changes in the global economy (automation being perhaps the most important but least discussed). But all these things need time to play out, they operate on time scales of decades and centuries.

Whatever the slope, the trendline is clear, though. Getting poor slowly isn't as compelling as that angry Max fellow, but it seems the most likely scenario. The price of oil will just be one of many insults to our previous expectations.

[Keith_McClary]

Why would you need to be rich ?
Im going to be like the Mexican fisherman

http://www.inspirationpeak.com/shortsto ... erman.html

Rudesindo Cantarell ?

[ROCKMAN]

Keith - That's the deceptive part of energy pricing. One factor for an increase in pricing is the lack of new production coming on line. A lack of production increase due to a lack of drilling opportunities. A lack of drilling opportunities equates to a lower manpower requirement for both the prospect generation and drilling aspects. There used to be 5 of us with my company. Now there are three. The two no longer here were experts in deep NG exploration. But we couldn't find enough of those prospects at today's prices to justify keeping them on. They were good guys. It wasn't personal...just business. We don't treat our won any better than the public. If the remaining 3 of us don't find enough viable oil prospects to drill we'll be gone also.

We've been thru a number of busts during my career. Interestingly the salaries don't really get slashed very hard. If you have a job you still make a good living. The problem is that you can't find a job. And the sad truth is that geologists aren't good for much else. LOL.

[Shaved Monkey]

Why would you need to be rich ?
Im going to be like the Mexican fisherman

http://www.inspirationpeak.com/shortsto ... erman.html

Rudesindo Cantarell ?

Hope not, Im dreaming of a simple fossil free future in paradise,I dont want to be responsible for a few more decades of people riding jet-skis and factories making plastic corn holders.
I wanted to witness the collapse of that .

[Dybbuk]

Getting poor slowly isn't as compelling as that angry Max fellow, but it seems the most likely scenario. The price of oil will just be one of many insults to our previous expectations.

That's how it will look from a first world perspective. But what about the third world? How much will food prices rise, and how much of a rise can happen before there is mass starvation?

And to bring it back to the first world...there seems to be an official, no-exceptions humanitarian policy of "let no one starve"...unless the local government prevents it (like in Darfur), we will always send food aid anywhere there is a famine in the world. But what happens when that policy leads to a significant hit to our own standard of living? What happens when the grain silos are empty and we're shipping out a major portion of our current food production (for free) and the specter of hunger at home becomes realistic?

[basil_hayden]

we must .... use less in order to pay more.

Or have none.


What a beautifully succinct written description of the economic model for a finite resource in desperate need globally for which there's no true substitution.

Pops, I gotta hand it to ya, You're da Man.

Forget sticking this in my posting signature, this got written on a sticky note and posted in my office a few minutes ago.

[Cloud9]

Ladies and gentlemen look around and trust your lying eyes. Every strip mall and shopping center in the country is dotted with empty store fronts. Every neighborhood is blighted with distressed homes and vacant houses. Just like in the 1920’s, our sky lines are graced with grand structures that were built on dashed dreams and failed expectations that will never be utilized to capacity. Every year we drive less.

The bubble of borrowing has now moved to student loans enslaving a whole generation to a debt that must be paid down with part time jobs.

Half the population is either directly or indirectly subsidized by some kind of federal program.

Congress is more despised than cockroaches and lawyers.

Listen to what you are hearing. Eighty four billion a month is being conjured out of thin air just to keep the government’s doors open. There has been a corresponding flight into precious metals and hard assets. American citizens now buy enough guns and ammunition to outfit a World War II army every nine days. Home Land Security has grown to a standing army of almost four hundred thousand if you list the private contractors in the overall count. HLS has ordered enough ammunition to fight a twenty year war and has taken delivery of 2700 armored vehicles designed to fight urban wars.

A third of the population expects a revolution. The collapse is taking place all around us.

[Pops]

Ladies and gentlemen look around and trust your lying eyes.

Per capita miles driven peaked in 2005 when real unleaded price exceed $2.50 a gallon, it's been there since, longer than during the artificial shortages of the 80's.

Maybe the price of collapse of the US Empire is $2.50

[Ibon]

Ladies and gentlemen look around and trust your lying eyes. Every strip mall and shopping center in the country is dotted with empty store fronts. Every neighborhood is blighted with distressed homes and vacant houses.

I have a friend Sudhir with whom years ago I was walking in a poor inner city neighborhood and he was telling me how when he lived in Mumbai he would filter out from his field of vision all the poverty and despair and focus on what beauty he could see about him.

This is perhaps more human than cultural as it seems like Americans are learning this trick as well........ funny though, Sudhir never mentioned anything about himself and his fellow citizens buying guns and ammunition..... I guess there are some cultural differences..... or perhaps, Americans are just in the early adolescence in managing living in a less secure world.

Back in the 70's I recall how Americans tuned out the poverty of the inner city, appalachia and indian reservations. That living amongst us where these disenfranchised people. They were off the radar........ and now they have become many of us. Former middle class mainstream Americans threatened with a standard of living like these groups we used to tune out.

But that individualism thrives on unblemished when holding that semi automatic firmly in your hands.

[Cloud9]

I don't know if its rugged individualism or a frantic attempt to retain some control and some options here at the end of empire.