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Is EROEI Important Pt. 5

General discussions of the systemic, societal and civilisational effects of depletion.

Re: Is EROEI Important Pt. 5

Unread postby shortonoil » Sat 23 Mar 2019, 11:24:42

Basically leaving the Economy and society with a tremendous debt load even as net energy dwindles.


As the net energy (available\ exergy) supplied to the economy declines the economy slows, and its ability to service its existing debt declines. When it reached the point (around 2012) where it could no longer cover those debt service costs with its organic growth the central banks stepped in, and created the additional currency. If they hadn't there would have been massive defaults. Depending upon whom you read that was at least $16 trillion, or 28% of all currency in circulation. Since the 28% of additional currency created wasn't in conjunction with the production of goods and services it deformed the system's true pricing mechanism.

Since consumption was inadequate to absorb the 28% of additional currency (the goods and services were never created to be consumed) the additional currency created poured into assets. Land, the stock/ bond market, and commodities absorbed the inflation created, and did it outside the CPI. It is hardly surprising to find that the points on the oil/ GDP curve are floating away from their historical correlation.

Because the net energy supplied to the economy from petroleum is not going to be improving (it will only continue to decline) the central banks will have to keep creating money from nothing for there to be enough currency in circulation for the existing debt to be serviced. True price discovery will be further eroded until the system no longer functions. The present currency expansion method selectively transfers the newly created funds which leaves the majority of the economy out of the process. The poor get poorer faster than the rich get richer, which subsequently results in a contracting economy. With no other options available to the central banks, QE4 and additional rate reductions are now baked into the process.

We are watching the failure of the monetary system as it attempts to compensate for fossil fuels decline. Because the monetary system operates on references relative to each other, an energy approach is the only way to project the outcome.
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Re: Is EROEI Important Pt. 5

Unread postby onlooker » Sat 23 Mar 2019, 11:39:21

Thank you once again Short for this superbly logical explanation and all your work. We are at a point whereby debating with the naysayers is comical as they do not concede or cannot understand at its most basic how all this has been transpiring as logical cause and effect.

The MAP obviously cannot project out oil price in this now chaotic monetary system without any point of reference. But the energy accounting that your group has devised is giving us an idea of the approaching inflection points.
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Re: Is EROEI Important Pt. 5

Unread postby dissident » Sat 23 Mar 2019, 14:49:17

I think that diminishing returns regime is not just for cheap fossil fuels. There is a general degradation associated with overpopulation and the accumulating toxic chemical pollution in the environment. Development is a zero sum game in the long run since the planet has finite resources and finite accommodation capacity for humans their precious economy, which mostly translates into rapid garbage production (and entropy maximization).
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Re: Is EROEI Important Pt. 5

Unread postby Yoshua » Sun 24 Mar 2019, 04:23:07

The next step down in oil prices is coming? The MAP predicts $25 oil for 2019. We might just get $25 oil this year. That would be the end for the oil industry?

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Re: Is EROEI Important Pt. 5

Unread postby Cog » Sun 24 Mar 2019, 08:13:19

Why should the MAP prediction be any more right for 2019 than it was for 2018?

Its a dead horse of a model. Quit beating it.
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Re: Is EROEI Important Pt. 5

Unread postby shortonoil » Sun 24 Mar 2019, 10:11:48

The next step down in oil prices is coming? The MAP predicts $25 oil for 2019. We might just get $25 oil this year. That would be the end for the oil industry?


In the event of $25 crude for any extended period the only functioning producers remaining would be those receiving government subsidies. Those subsidies would have be huge, and in the present situation of massively over indebted central governments most likely fatal! We are presently at Peak (description below) and a significant decline in price at this juncture would result in a Post Peak production curve resembling a Seneca Cliff,

Peak is occurring because declines in existing formations have become greater than what new oil can be brought on line as replacement. Shale has been the only source to demonstrate production increases in more than a decade. To prevent Peak it has been necessary for Shale to replace both its own legacy decline, and that of conventional. Shale is no longer able to do that. In 2019 Shale will only have the capacity to replace 1.29 mb/d of conventional decline. 2018 witnessed conventional declines of at least 3% (the IEA states 4.5% per year which was not used here because it may have included Shale) or 2.12 mb/d. To prevent Peak Shale will fall short by at least 0.83 mb/d in 2019; by over 1.50 mb/d in 2020, and over 3.0 mb/d in 2021.

A simple calculation demonstrates the situation:

2018 Shale production - 8.03 mb/d
2017 " " - 6.44

2017 - 2018 increase (8.03 - 6.44) 1.59 mb/d

2017 - 2018 production decline that had to be made up during 2018 for production to begin increasing - 6.44 mb/d * 0.178 = 1.15 mb/d. (Shale declines 89% in its first five years 0.89/5 = 0.178 per year)

Total production added in 2018 = 1.15 mb/d + 1.59 mb/d = 2.74 mb/d per year.

Rig productivity equaled 2.74 mb/d /860 rigs / 365 days per year = 8.73 barrels produced per rig per day. (860 rigs - Baker Hughes 2018 yearly average)

A significant price decline would be devastating!


http://www.eia.gov/dnav/pet/pet_sum_sndw_dcus_nus_w.htm
https://www.eia.gov/petroleum/drilling/
http://www.thehillsgroup.org/
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Re: Is EROEI Important Pt. 5

Unread postby BahamasEd » Sun 24 Mar 2019, 11:03:11

17 months with the price of WTI over the MAP and 17 months without much growth.
The world is getting poorer.
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The total energy cost of producing and delivering a gallon of gasoline to the end consumer must be less than the energy in a gallon of gasoline for it to be commercially viable.
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Re: Is EROEI Important Pt. 5

Unread postby shortonoil » Sun 24 Mar 2019, 11:17:17

17 months with the price of WTI over the MAP and 17 months without much growth.
The world is getting poorer.


The only growth we will see from here on out will be when the central banks throw another bale of their confetti to the market. Then everyone will dance in the streets until MikiDee runs out of soy bean meal, and marble dust.
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Re: Is EROEI Important Pt. 5

Unread postby EdwinSm » Mon 25 Mar 2019, 05:27:44

BahamasEd wrote:17 months with the price of WTI over the MAP


While there might be lots with the underlying principles that we can agree on about new energy needing more energy to produce it etc, it seems to me that for the MAP calculations to be wrong for 17 months means that there is some fundamental flaw in the assumptions going into that model. For me the Hill Group (or individual) would have a lot more credibility if they were honest enough to update the parameters of the model they are using as new data becomes available.
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Re: Is EROEI Important Pt. 5

Unread postby onlooker » Mon 25 Mar 2019, 07:05:17

Short has made clear that from 2012 with more energy needed to extract energy from oil than was derived from it, the link between oil production and economic activity broke. Hence, the capacity to the project the oil price onward becomes untenable because of this and the commensurate huge money infusions distorting prices and valuations
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Re: Is EROEI Important Pt. 5

Unread postby Cog » Mon 25 Mar 2019, 07:51:16

So when your model fails to predict anything useful, you go back to blaming some other nebulous force as to why you are wrong. How convenient for you all.
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Re: Is EROEI Important Pt. 5

Unread postby onlooker » Mon 25 Mar 2019, 09:30:13

https://oilprice.com/Energy/Energy-Gene ... ction.html

Was 2018 The Peak For Crude Oil Production?
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Re: Is EROEI Important Pt. 5

Unread postby shortonoil » Mon 25 Mar 2019, 11:24:38

Was 2018 The Peak For Crude Oil Production?


Looking at Shale's production increase over the last 6 months, it is happening at present. Shale can no longer make up for its 1.43 mb/d 2018 legacy decline and conventional's decline. Total US production has only increased by 1 mb/d over the last half year, and Shale is running short on rigs and money. Peak will really stand out on the $/barrel vs consumption per capita graph. That 60 year trend line is breaking. Either the price of oil takes a serious fall, or a lot of people will be going without oil.
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Re: Is EROEI Important Pt. 5

Unread postby Yoshua » Wed 27 Mar 2019, 04:34:20

Another blackout in Venezuela as a power station blows up at the Guri dam as the infrastructure decays.

The good news is that Venezuela doesn't have old decaying nuclear power plants.
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Re: Is EROEI Important Pt. 5

Unread postby shortonoil » Wed 27 Mar 2019, 08:08:12

The good news is that Venezuela doesn't have old decaying nuclear power plants.


They don't have nuclear, they don't have hydro, and they don't have oil. They do have Russian S300 which they are going to pay for with cocoa leaves, and monkey crap. Getting straight back to the stone age requires a special talent that the Venezuelans seems to have in abundance.
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Re: Is EROEI Important Pt. 5

Unread postby peakoilwhen » Wed 27 Mar 2019, 08:45:01

>We are presently at Peak

Hi Shorty,
Can you be specific?
Like peak second? Minute? Day? Month? Year? Decade? Century? Millenium? Geologic era?
at the moment you haven't defined a time frame, so the time resolution may be infinite, like your saying peak oil is somewhere between the start and end of the universe.
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Re: Is EROEI Important Pt. 5

Unread postby rockdoc123 » Wed 27 Mar 2019, 09:59:05

They don't have nuclear, they don't have hydro, and they don't have oil.


how about getting your facts straight?

Venezuela has 302 billion barrels of proved oil reserves. Production is still around 1.4 million bbls/d (down from 2.2 MMbbl/d in mid-2016) despite all of the economic issues and sanctions, that puts it as 12th largest oil producer in the world.

Venezuela also has the second highest hydropower capacity in South America at 15,000 MW. There are 6 dams that are set up to supply power. The current power outages are a symptom of lack of maintenance in their power facilities, not much different than the fact that lack of maintenance and reinvestment in the oil fields has been responsible for the considerable decrease in production.
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Re: Is EROEI Important Pt. 5

Unread postby Yoshua » Wed 27 Mar 2019, 11:05:21

At this moment Venezuela doesn't have electricity, oil or water.

The government had two options: Invest in infrastructure and the oil industry...or...Buy food, medicine and education for the masses.

They should have allowed the poor masses starve to death. Now the whole society is collapsing.

https://www.reuters.com/article/us-vene ... SKCN1R723R
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Re: Is EROEI Important Pt. 5

Unread postby shortonoil » Wed 27 Mar 2019, 11:18:48

how about getting your facts straight?


Venezuela doesn't have nuclear, doesn't have oil and doesn't have hydro, and we know that because the lights are out! Anymore minor facts you are having trouble getting your head wrapped around? A lot of oil in the ground, and a lot of water flowing into the ocean doesn't help a bit when you are sitting in the dark. In other words their EROI is now zero, but according to your argument that since oil companies never consider EROI, that is completely irrelevant. We now know to expect brain death to occur in conjunction with falling ERoEI, and the zoombie population is going to thrive. If there is a Zoombie ETF the future looks bright, and it can be hedged with road kill.
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