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Collapsing or not?

Discussions about the economic and financial ramifications of PEAK OIL

Are we now in an accelerated phase of collapse or is this just temporary disruption ?

1. Yes we are in a process of collapse
11
44%
2. No, we will continue business as usual a while longer
14
56%
 
Total votes : 25

Re: Collapsing or not?

Unread postby onlooker » Wed 25 Mar 2020, 12:39:43

I am not sure how the Western Economies will recover from this.  They will not.  Already the middle class has virtually disappeared.  The financial system is a rogue and parasitic element on the general Economy sucking wealth from the general economy and totally unresponsive to the working class as it serves totally the ownership/wealthy class. 

Already Americans overwhelmingly had little extra income and virtually no savings. They are  as the phrase says
 living paycheck to    paycheck.  Their economic condition after all this will be significantly worse. And yes we are still better off than many others around the world. The point is the trajectory is downward
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Re: Collapsing or not?

Unread postby Cog » Wed 25 Mar 2020, 12:45:44

onlooker wrote:I am not sure how the Western Economies will recover from this.  They will not.  Already the middle class has virtually disappeared.  The financial system is a rogue and parasitic element on the general Economy sucking wealth from the general economy and totally unresponsive to the working class as it serves totally the ownership/wealthy class. 

Already Americans overwhelmingly had little extra income and virtually no savings. They are  as the phrase says
 living paycheck to    paycheck.  Their economic condition after all this will be significantly worse. And yes we are still better off than many others around the world. The point is the trajectory is downward


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Re: Collapsing or not?

Unread postby ROCKMAN » Wed 25 Mar 2020, 13:27:18

Big problem with the poll IMHO: collapse is a meaningless term. IOW without a defined definition it means many different things subject to the views of each reader. With multiple definitions it essentially has no definition. Folks will argue endlessly because each debater will be arguing their own definition.

Also there is the question of who is "collapsing". Fortunately the Rockman has suffered zero collapse regardless of whose definition. The Rockman has lost no money in the stock market since all his retirement funds are in CD's. Not much interest but no loss either. Since retired no wage loss and Social Security check keeps being deposited every month. No mortgage or debt since Rockman knew how to plan on retirement and didn't piss money away on expensive cars or a McMansion he didn't need. Just talked to my engineer this morning. He's on SS too but also loss about 30% in the stock market...on paper. But isn't selling since he only owns securities that pay nice dividends. He did build his McMansion in the Texas Hill Country but also paid off his mortgage years ago. Bought expensive cars but still drives them because he learned how to do repairs on YouTube. That's engineers for you. LOL.

In fact most I know aren't "collapsing" but since they are all old farts and in the high risk group they might croak from coronavirus but are not going to "collapse". LOL. I suspect that since all us old oil patch farts have survived the boom/bust cycles we just all plan for another bust before we die.

And true story I just got from my engineer this morning. An oil patch salesman we know may have been "Patent Zero" for his community. On 28 Dec he played golf with 2 Chinese that had just flown in. A few days later started getting sick. Docs had no idea what was wrong with him. Various meds didn't work. Had such a high fever for 5 days he couldn't speak. Doc didn't know what to do so gave him a med with high sulfur. Started feeling better right away. The drug: anti-malaria drug. My engineer didn't know which one. Interesting. eh?
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Re: Collapsing or not?

Unread postby careinke » Wed 25 Mar 2020, 15:15:36

I voted YES. I hope it is just as reliable as my more recent predictions, meaning it will fail miserably.
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Re: Collapsing or not?

Unread postby onlooker » Wed 25 Mar 2020, 15:42:15

All tied up. That makes for healthy debating
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Re: Collapsing or not?

Unread postby Outcast_Searcher » Wed 25 Mar 2020, 15:48:58

onlooker wrote:I am not sure how the Western Economies will recover from this.  They will not.  Already the middle class has virtually disappeared.  The financial system is a rogue and parasitic element on the general Economy sucking wealth from the general economy and totally unresponsive to the working class as it serves totally the ownership/wealthy class. 

Already Americans overwhelmingly had little extra income and virtually no savings. They are  as the phrase says
 living paycheck to    paycheck.  Their economic condition after all this will be significantly worse. And yes we are still better off than many others around the world. The point is the trajectory is downward

Given the almost complete lack of knowledge re even the most basic economic concepts you repeatedly show on this site -- why in the WORLD should we accept your judgement over that of real world professional economists?

To state the obvious, in the short term, economic aid exists and huge packages are being passed in much of the world. Unemployment still exists in the US on top of that, and is so heavily being accessed that it's crashing web sites re an article I saw today.

How many lessons of a bad economy followed by a much improved economy, and BAU continuing do you need to see that waving your arms and crying doom at every event, zerohedge style, just isn't credible after scores, hundreds, even thousands of bad doom calls?
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Collapsing or not?

Unread postby Outcast_Searcher » Wed 25 Mar 2020, 15:57:17

asg70 wrote:
onlooker wrote:boy are we far along in that process.


Sorry, um, no. Shutting in with netflix is nothing.

I swear to god, my house cat is more clear on economic principles than he is.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Collapsing or not?

Unread postby onlooker » Wed 25 Mar 2020, 16:03:15

Outcast_Searcher wrote:
asg70 wrote:
onlooker wrote:boy are we far along in that process.


Sorry, um, no. Shutting in with netflix is nothing.

I swear to god, my house cat is more clear on economic principles than he is.

You mean like the economic principle of a teetering Oil Industry ie oil price too low to sustain the Shale/fracking and a teetering general economy ie, massive unemployment now, will drag each other down to the nadir. Think a drowning person pulling down a rescuer. Sorry if I am soliciting so much thinking from you guys, I know you are not used to it :razz:
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Re: Collapsing or not?

Unread postby asg70 » Wed 25 Mar 2020, 20:08:58

onlooker wrote:a teetering Oil Industry ie oil price too low to sustain the Shale/fracking


Unless you work in the shale patch, low oil prices are only a benefit.

onlooker wrote:and a teetering general economy ie, massive unemployment now


Prior to coronavirus we started from the vantage point of some of the lowest unemployment ever. Coronavirus isn't peak oil or global warming. It's only weakly connected to limits to growth. It's not "collapse". It's a passing crisis. Peakers are just trying to carpet-bag their way onto this and muddy the waters just like they did with the credit-crisis back in 2008.

BOLD PREDICTIONS
-I'm glad Trump is in there now. I think we'll have a vaccine in a couple of months. (mmasters, 3/17/20)

HALL OF SHAME:
-Short welched on a bet and should be shunned.
-Frequent-flyers should not cry crocodile-tears over climate-change.
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Re: Collapsing or not?

Unread postby rockdoc123 » Wed 25 Mar 2020, 22:15:10

Unless you work in the shale patch, low oil prices are only a benefit.


not the case if there are massive layoffs at oil and gas companies, service companies, companies who truck fluids, companies who sell materials including food to field operations and then the fallout in local restaurants, shops etc. Landholders will no longer see royalties, States will no longer see their share of production royalites and the federal government loses out on corporate and personal income tax. It isn't trivial. And once the Saudis are comfortable they can shut down NA oil they will close in their own production to drive the price up. So you will ultimately see higher gasoline and byproduct prices as well as the economic fallout from companies going under.
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Re: Collapsing or not?

Unread postby Outcast_Searcher » Thu 26 Mar 2020, 03:29:46

rockdoc123 wrote:
Unless you work in the shale patch, low oil prices are only a benefit.


not the case if there are massive layoffs at oil and gas companies, service companies, companies who truck fluids, companies who sell materials including food to field operations and then the fallout in local restaurants, shops etc. Landholders will no longer see royalties, States will no longer see their share of production royalites and the federal government loses out on corporate and personal income tax. It isn't trivial. And once the Saudis are comfortable they can shut down NA oil they will close in their own production to drive the price up. So you will ultimately see higher gasoline and byproduct prices as well as the economic fallout from companies going under.


But in reality, plenty of economic risk is ALWAYS a "thing" in an industry where the core commodity it produces is WILDLY volatile over time. Although quiet now and then, we've seen MAJOR crude oil volatility since I was paying attention, in about 1973, about the time "gas lines" became a thing, when I was 13 or 14.

At SOME point, when the adults in the room aren't doing at least a reasonable amount of planning to handle wild volatility in and industry (including supporting that industry) that is more or less DEFINED by such volatility, at SOME point, economics should be allowed to take its course, when businesses can't handle a month, much less three of a downturn (or upturn, if it's a big consumer of oil, like airlines and trucking).

If this goes 12 months or 18 months and there is no recovery, not having enough cash reserves at least becomes a lot more understandable/excusable.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: Collapsing or not?

Unread postby JuanP » Thu 26 Mar 2020, 08:31:41

rockdoc123 wrote:
Unless you work in the shale patch, low oil prices are only a benefit.


not the case if there are massive layoffs at oil and gas companies, service companies, companies who truck fluids, companies who sell materials including food to field operations and then the fallout in local restaurants, shops etc. Landholders will no longer see royalties, States will no longer see their share of production royalites and the federal government loses out on corporate and personal income tax. It isn't trivial. And once the Saudis are comfortable they can shut down NA oil they will close in their own production to drive the price up. So you will ultimately see higher gasoline and byproduct prices as well as the economic fallout from companies going under.


I have always been quite certain that the oil companies would be bailed out or nationalized if necessary, particularly on the shale side of the business which has always seemed to me to be financially unsustainable in the medium term. Letting some companies go bankrupt while having others buying the assets for pennies on the dollar also seems another way to keep things going for a few more years, too. I don't know anything about the business. What do you think of these ideas? I would appreciate your input. I don't see the government letting the whole shale industry go bust because that oil is essential to the US economy and position in the world, IMO.
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Re: Collapsing or not?

Unread postby rockdoc123 » Thu 26 Mar 2020, 08:51:49

have always been quite certain that the oil companies would be bailed out or nationalized if necessary, particularly on the shale side of the business which has always seemed to me to be financially unsustainable in the medium term. Letting some companies go bankrupt while having others buying the assets for pennies on the dollar also seems another way to keep things going for a few more years, too. I don't know anything about the business. What do you think of these ideas?


Nothing new there. I was active in the industry for 35+ years and saw at least 3 major phases of consolidation. I worked for two different mid-size international companies that eventually became somebody else. The most recent consolidation came after the 2014 price crash and there should have been one in late 2018 but the price drop was too short-lived. I've been on record here over the past decade (as has Rockman) stating that consolidation in the oil and gas business is a good thing. It cleans up overall balance sheets. Companies who have just not figured out how to make it work efficiently in any price scenario get bought out, other companies restructure under legal umbrellas and either come out as healthier entities able to survive or are bought out. And then once Saudi Arabia figures out they once again shot themselves in the foot (third time not so lucky) they will shut-in production in order to raise the price and new start-up oil and gas companies will rise up once again.
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Re: Collapsing or not?

Unread postby JuanP » Thu 26 Mar 2020, 08:58:41

rockdoc123 wrote:
have always been quite certain that the oil companies would be bailed out or nationalized if necessary, particularly on the shale side of the business which has always seemed to me to be financially unsustainable in the medium term. Letting some companies go bankrupt while having others buying the assets for pennies on the dollar also seems another way to keep things going for a few more years, too. I don't know anything about the business. What do you think of these ideas?


Nothing new there. I was active in the industry for 35+ years and saw at least 3 major phases of consolidation. I worked for two different mid-size international companies that eventually became somebody else. The most recent consolidation came after the 2014 price crash and there should have been one in late 2018 but the price drop was too short-lived. I've been on record here over the past decade (as has Rockman) stating that consolidation in the oil and gas business is a good thing. It cleans up overall balance sheets. Companies who have just not figured out how to make it work efficiently in any price scenario get bought out, other companies restructure under legal umbrellas and either come out as healthier entities able to survive or are bought out. And then once Saudi Arabia figures out they once again shot themselves in the foot (third time not so lucky) they will shut-in production in order to raise the price and new start-up oil and gas companies will rise up once again.


Consolidation sounds quite reasonable. How long do you think it would take for US shale oil production to peak from a geological point of view, if we disregarded all economic considerations?
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Re: Collapsing or not?

Unread postby rockdoc123 » Thu 26 Mar 2020, 09:07:56

Consolidation sounds quite reasonable. How long do you think it would take for US shale oil production to peak from a geological point of view, if we disregarded all economic considerations.


you can't do a calculation without taking into consideration economic considerations given it is the economics that drive whether a new well gets driven or not. The details require digging in the data and I'm sure some like WoodMac and Rystad have been busy doing that. We know that new drilling isn't going to happen and the decline rate over the first 24 - 36 months in horizontal unconventional wells drilled into tight formations and fracked is somewhere between 65 - 80%. After that those wells go into a gradually slowing low rate decline phase. But the wells are all staggered in time of course so some will already be through that hyperbolic decline and others are just starting into it. Adding to that calculation is the need to look at conventional production both offshore and Canadian heavy oil. Unlike the unconventionals operating costs (the cost to keep lifting oil) are much higher so if you get the oil price into the teens then those wells will be shut-in. So how long does it take for all that production to fall off? In 2014 it took about 6 months before it became noticeable but total production from unconventionals was much smaller back then. An added uncertainty is that many producers have hedged a portion if not all of their 2020 production at higher prices so that draws the curve out further. I'm not going to dig through the data to come up with an estimate as it would almost certainly be wrong but I've seen estimates that US production could easily drop by 30% this year.
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Re: Collapsing or not?

Unread postby JuanP » Thu 26 Mar 2020, 09:13:07

rockdoc123 wrote:you can't do a calculation without taking into consideration economic considerations given it is the economics that drive whether a new well gets driven or not. The details require digging in the data and I'm sure some like WoodMac and Rystad have been busy doing that. We know that new drilling isn't going to happen and the decline rate over the first 24 - 36 months in horizontal unconventional wells drilled into tight formations and fracked is somewhere between 65 - 80%. After that those wells go into a gradually slowing low rate decline phase. But the wells are all staggered in time of course so some will already be through that hyperbolic decline and others are just starting into it. Adding to that calculation is the need to look at conventional production both offshore and Canadian heavy oil. Unlike the unconventionals operating costs (the cost to keep lifting oil) are much higher so if you get the oil price into the teens then those wells will be shut-in. So how long does it take for all that production to fall off? In 2014 it took about 6 months before it became noticeable but total production from unconventionals was much smaller back then. An added uncertainty is that many producers have hedged a portion if not all of their 2020 production at higher prices so that draws the curve out further. I'm not going to dig through the data to come up with an estimate as it would almost certainly be wrong but I've seen estimates that US production could easily drop by 30% this year.


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Re: Collapsing or not?

Unread postby sparky » Fri 27 Mar 2020, 01:18:46

.
voted business as usual ... for a while , the Titanic remained a ship fora while after striking the iceberg
great systems have an inertia about them ,
we are not watching a house collapse , we are watching a whole mountainside sliding down
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Re: Collapsing or not?

Unread postby EnergyUnlimited » Fri 27 Mar 2020, 02:40:27

Voted collapse because it is likely that historians will mark it as an important turning point.
But for a while due to system inertia once initial turmoil is over it will superficially look like BAU.
Lame duck type of BAU but still.
Economic trajectory in coming decade or two will resemble final two decades of Soviets.
Superficially working but with deeper and deeper rot destroying fabric of economy, society, government etc.
It will no longer be possible to massage numbers and pretend that everything is fine.
Progress of crisis is going to be selfevident.

But there might be a bright outcome of all of that.
Working of society may be reshaped (after a due period of chaos) into some nicer, more placid setups.
Debt may go out of fashion, big corporations may end up disassembled and even smartphones may well end up abandoned by most. Not because they are no longer produced but because there is no interest in possessing them and no funds to maintain mobile networks outside of large cities.
Passenger air travel is going to be at most few times in life experience and satellite network will gradually dissipate due to lack of funds.
Only very few satellites will be worth to maintain and replace.
Life expectancy will shorten because of lack of funds to keep half dead people still alive for next 30 years and because of general dissipation of healthcare.
Knowledge will remain as long as it can be practised but affordability of high tech for masses will be gone.
As long as Guy McPherson's scenario with global dimming does not play out we should be fine.
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Re: Collapsing or not?

Unread postby asg70 » Fri 27 Mar 2020, 08:47:30

rockdoc123 wrote:not the case if there are massive layoffs...


Shale was already hit hard once before during when the Saudis kept the taps open to kill it. The greater economy of the US barely felt it. It's a minor factor.

BOLD PREDICTIONS
-I'm glad Trump is in there now. I think we'll have a vaccine in a couple of months. (mmasters, 3/17/20)

HALL OF SHAME:
-Short welched on a bet and should be shunned.
-Frequent-flyers should not cry crocodile-tears over climate-change.
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Re: Collapsing or not?

Unread postby rockdoc123 » Fri 27 Mar 2020, 13:51:27

Shale was already hit hard once before during when the Saudis kept the taps open to kill it. The greater economy of the US barely felt it. It's a minor factor
.

In 2014 the price went just below $30 for a couple of days, this time it has been in the low $20 range for a couple of weeks and is predicted to go into the teens in the next couple of weeks. The size of the "shale" industry is also more than double what it was back then as you can see from production rates. In 2015 PWC calculated that there were 10 MM people employed directly or indirectly in the petroleum industry. I suggest you try and explain to someone from South Texas who lived through the last downturn that oil is a minor factor. Also note that in 2014 the rest of the economy was in full expansion, that is not the case at this moment in time so there is no savior.
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