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Kunstler: Party On, Dudes

Kunstler: Party On, Dudes thumbnail

As of this week, the shale oil miracle launched US oil production above the 1970 previous-all-time record at just over ten million barrels a day. Techno-rapturists are celebrating what seems to be a blindingly bright new golden age of energy greatness. Independent oil analyst Art Berman, who made the podcast rounds the last two weeks, put it in more reality-accessible terms: “Shale is a retirement party for the oil industry.”

It was an impressive stunt and it had everything to do with the reality-optional world of bizarro finance that emerged from the wreckage of the 2008 Great Financial Crisis. In fact, a look the chart below shows how exactly the rise of shale oil production took off after that milestone year of the long emergency. Around that time, US oil production had sunk below five million barrels a day, and since we were burning through around twenty million barrels a day, the rest had to be imported.

Chart by Steve St. Angelo at

In June of 2008, US crude hit $144-a-barrel, a figure so harsh that it crippled economic activity — since just about everything we do depends on oil for making, enabling, and transporting stuff. The price and supply of oil became so problematic after the year 2000 that the US had to desperately engineer a work-around to keep this hyper-complex society operating. The “solution” was debt. If you can’t afford to run your society, then try borrowing from the future to keep your mojo working.

The shale oil industry was a prime beneficiary of this new hyper-debt regime. The orgy of borrowing was primed by Federal Reserve “creation” of trillions of dollars of “capital” out of thin air (QE: Quantitative Easing), along with supernaturally low interest rates on the borrowed money (ZIRP: Zero Interest Rate Policy). The oil companies were desperate in 2008. They were, after all, in the business of producing… oil! (Duh….) — even if a giant company like BP pretended for a while that its initials stood for “Beyond Petroleum.”

The discovery of new oil had been heading down remorselessly for decades, to the point that the world was fatally short of replacing the oil it used every year with new supply. The last significant big fields — Alaska, the North Sea, and Siberia — had been discovered in the 1960s and we knew for sure that the first two were well past their peaks in the early 2000s. By 2005, most of the theoretically producible new oil was in places that were difficult and ultra-expensive to drill in: deep water, for instance, where you need a giant platform costing hundreds of millions of dollars, not to mention armies of highly skilled (highly paid) technicians, plus helicopters to service the rigs. The financial risk (for instance, of drilling a “dry hole”) was matched by the environmental risk of a blowout, which is exactly what happened to BP’s 2010 Deepwater Horizon platform in the Gulf of Mexico, with clean-up costs estimated at $61 billion.

Technology — that El Dorado of the Mind — rode to the rescue with horizontal drilling and fracturing of ”tight” oil-bearing shale rock. It was tight because of low permeability, meaning the oil didn’t flow through it the way it flowed through normal oil-bearing rocks like sandstone. You had to sink a pipe down, angle it horizontally into a strata of shale only a few meters thick, and then blast it apart with water under pressure and particles of sand or ceramic called propants, the job of which was to hold open those fractures so the oil could be sucked out. Well, it worked. The only problem was you couldn’t make any money doing it.

The shale oil companies could get plenty of cash-flow going, but it all went to servicing their bonds or other “innovative” financing schemes, and for many of the companies the cash flow wasn’t even covering those costs. It cost at least six million dollars for each shale well, and it was in the nature of shale oil that the wells depleted so quickly that after Year Three they were pretty much done. But it was something to do, at least, if you were an oil company — an alternative to 1) doing no business at all, or 2) getting into some other line-of-work, like making yoga pants or gluten-free cupcakes.

The two original big shale plays, the Bakken in North Dakota and the Eagle Ford in south Texas, have now apparently peaked and the baton has passed to the Permian Basin in west Texas. If the first two bonanzas were characteristic of shale, we can look forward not very far into the future when the Permian also craps out. There are only so many “sweet spots” in these plays.

The unfortunate part of the story is that the shale oil miracle only made this country more delusional at a moment in history when we really can’t afford to believe in fairy tales. The financial world is just now entering a long overdue crack-up due to the accumulating unreality induced by Federal Reserve interventions and machinations in markets. As it continues to get unglued — with rising interest rates especially —  we will begin to see the collapse of the bonding and financing arrangements that the fundamentally unprofitable shale “miracle” has been based on. And then you will see the end of the shale “miracle.” It is likely to happen very quickly. It was fun while it lasted. Now comes the hard part: getting through this without the nation completely losing its marbles and doing something stupid and desperate — like starting another merry little war.



42 Comments on "Kunstler: Party On, Dudes"

  1. MASTERMIND on Fri, 9th Feb 2018 2:54 pm 

    Unconventional oil is a scam and those who promote it are liars or fools!

    The US Shale Business is “not profitable” and can’t fund itself whether oil is at 100 or 50 dollars a barrel

    MIT Technology Review: Shale Oil Will Boost U.S. Production, But It Won’t Bring Energy Independence

    The world’s largest oil trader Vitol says US oil production will peak in 2018

    Chevron CEO warns US shale oil alone cannot meet the world’s growing demand for crude

  2. MASTERMIND on Fri, 9th Feb 2018 2:56 pm 

    I will party on its Friday and i just got some bubble gum kush!

  3. Boat on Fri, 9th Feb 2018 3:09 pm 


    With unconventual oil being over 50% of all production in the US. How does miles driven continue to go up and consumption remain relitivity flat over several years?

  4. MASTERMIND on Fri, 9th Feb 2018 3:10 pm 

    Drugs, alcohol and suicides contribute to alarming drop in U.S. life expectancy

  5. coffeeguyzz on Fri, 9th Feb 2018 3:27 pm 

    If anyone reading the above post is interested in accuracy, make note that Kuntsler claimed the Bakken has peaked. In a few months’ time, production figures will definitely show a new high for the Bakken.

    I have – for years now – been wondering why so many people write about these matters bringing a stunning degree of ignorance, all the while projecting an air of knowledgeable authority.
    Simply googling the past half dozen years quickly, irrefutably shows the consistent errors from so many of these guys.

    An accurate glimpse of the future regarding unconventional development?

    How about the 100,000 bbld new pipeline proposed for the Powder River Basin?
    The strong results coming out of the Uinita?
    Mark this down … 11 months out – end of 2018 – 10 Bcfd new pipeline is expected to be in service in the Appalachian Basin.
    That’s a one and a zero … 10 billion ADDITIONAL!
    How bout the 16,000 foot deep Austin Chalk well EOG just brought online in Ayovelles parish, LA?
    That is just above the potentially large Tuscaloosa Marine Shale.

    Cabot targeting, possibly, the Trenton Black River in Ashland county, OH?
    Does Mr. K have anything to say about that?
    Is he even aware?
    Probably not.

    That’s ok.
    Just like the Post Carbon Institute folks, these guys will continue to floridly spew wildly incorrect scenarios to an ever-shrinking audience of willing disbelievers as the rest of the world carries on.

  6. peakyeast on Fri, 9th Feb 2018 4:10 pm 

    Before the boom of bakken shale I believe I saw a prediction from IEA that predicted the tight oil to peak around 2020.

    Something like this graph:

  7. peakyeast on Fri, 9th Feb 2018 4:11 pm 

    Btw. That graph actually seems like a fair estimate to me.

  8. MASTERMIND on Fri, 9th Feb 2018 4:27 pm 

    2020s To Be A Decade of Disorder For Oil

    Less than 2 years till Anarchy!

  9. MASTERMIND on Fri, 9th Feb 2018 4:28 pm 

    Even wood mac believes the Permian will peak by 2020. And that will be peak shale!

  10. MASTERMIND on Fri, 9th Feb 2018 4:32 pm 

    Until the philosophy which hold one race superior
    And another
    Is finally
    And permanently
    And abandoned –
    Everywhere is war –
    Me say war.

    That until there no longer
    First class and second class citizens of any nation
    Until the colour of a man’s skin
    Is of no more significance than the colour of his eyes –
    Me say war.

    That until the basic human rights
    Are equally guaranteed to all,
    Without regard to race –
    Dis a war.

  11. Cloggie on Fri, 9th Feb 2018 4:49 pm 

    Quote from: Haile Selassie I

    Shall we just say that peoples are different and have different identies and that it is better to keep them separate, unless you fancy civil and genocide?

  12. coffeeguyzz on Fri, 9th Feb 2018 5:39 pm 


    That graph might be in the ballpark.
    If it was produced before the Permian took off, that is pretty remarkable.

    Permian will continue to accelerate for at least the next half dozen years as infrastructure gets built out.
    It truly does compare with Ghawar potential.

    At this moment, over 90% of the existing oil (Origional Oil In Place) is not being recovered.
    The stunning advances with diversion products hold great promise for effective EOR, all the more so as pressure manipulation via hydraulic injections (gas starting to be used) may enhance recovery with the extensive underground grid of iron in these plays.

    Every 1 per cent increase in recovery equates to billions of barrels of additional oil.

  13. MASTERMIND on Fri, 9th Feb 2018 6:39 pm 

    Whether or not shale reserves are exploited. Peak oil and peak gas are passed. And this means tremendous pressure on the entire system.

    -Dennis Meadows

  14. MASTERMIND on Fri, 9th Feb 2018 7:07 pm 

    The three richest people in the US own as much wealth as the bottom half of the nation’s population

  15. onlooker on Fri, 9th Feb 2018 7:11 pm 

    Now Just Five Men Own Almost as Much Wealth as Half the World’s Population

  16. Mad Kat on Fri, 9th Feb 2018 7:31 pm 

    “The unfortunate part of the story is that the shale oil miracle only made this country more delusional at a moment in history when we really can’t afford to believe in fairy tales.”

    BINGO!Keep trying to climb that ladder as it disintegrates under you, Americans!

  17. MASTERMIND on Fri, 9th Feb 2018 7:43 pm 

    Jim Rogers Says Next Bear Market Will Be Worst in His Life

    Veteran investor says that’s because of more debt in system

  18. N. Gjergji on Fri, 9th Feb 2018 8:55 pm 

    The peak oil and all the other forecasts are based on different assumptions, mainly are based on the existing technologies. Many forecasts on future oil supply have failed and the reason is mainly on two breakthrough technologies, the SAGD and development of bitumen resources, and horizontal drilling and multi-fracture on unconventional oil and gas reservoirs. If these technologies were not developed, then the world oil production will be 7-8 mm bbld or more lower than what we produce and consume.
    Has the peak oil or peak demand reached, or will be reached soon? This is baseless, we see production increase and the demand increase. We hear and see about renewable energies and efforts to invest and produce these energy, but we see that these energies do not compete with fossil fuels. Personally I do believe the unstoppable innovation, and mainly on brainstorm invention. Until today the innovation has supported the economy with energy, but we do not see a breakthrough technology on renewable energy to compete the fossil fuels, which can curve the oil and gas demand downward. If this will not happen soon, for sure this will happen on the future. During these transition time, oil and gas demand will increase proportionally with population growth, economic growth and improvement on lifestyle. The world has abundant oil resources, and from all resources discovered we have produced less than 10% of OOIP. Has the world possibility to produce more oil and discover new reservoirs? The actual recognized technologies used on oil industry can produce trillions of barrel oil from existing reservoirs, but the actual technologies have restriction on production and the supply depend strongly from new investment. Actual oil reservoirs to keep the supply-demand for oil on the near future will need significant amount of capital. The capital invested on the past time after time has showed that the efficiency has declined. The SAGD and horizontal drilling associated with multi-frack, as well as the use of EOR/IOR have showed that oil produced has high cost of production and can contribute on supply increase only if prices are high. On low oil prices the above technologies are not encouraging investment. These technologies have and CO2 and other emission as a serious problem, and other environmental problem, and these technologies need very high initial capital, not mentioning and the high operating cost these technologies have.
    The industry is in real need for inventive technologies which need less initial capital, have low operation cost, have low emission and low land disturbance. All these are possible and can be achieved by modifying many existing technologies. The modified EOR/IOR can reduce the initial capital, reduce emission and land disturbance, use less fresh water, less energy and use injectant that are available and with low cost.
    Another option is investing on inventive renewable energies which have limited land disturbance, limited initial capital and limited energy consumption. This renewable energy technology is related with low energy input which can produce more energy if we combine energy input with gravitational energy. Gravitational energy can be transformed on mechanic energy/power. This technology, if developed will accelerate the process of phasing out oil. In fact, even the gravitational energy will be successfully harvested, it need time to phase out fossil fuels, initially to phase out the coal, later the oil and at the end and the gas production. The future of all these goods is clear, these goods will be used as feedstock to produce other good, so the coal, oil and gas will be forever in our life.

  19. Anonymouse1 on Fri, 9th Feb 2018 11:53 pm 

    The uS is not, contrary to the giddy proclamations of its various propaganda ministries, producing anything like 10 mbpd of ‘oil’. It is extracting a certain % of oil, and a certain % of various liquid, or liquid(ish) substances that happen to be flammable.

    A valid point of contention then, is just where the dividing line breakdown between ‘oil’ and ‘oil-like’ truly lies.

  20. Cloggie on Sat, 10th Feb 2018 3:15 am 

    News wrap up saturday:

    Assad shoots down Israeli F16 over Syria.

    Extremely bad start 4th Merkel government (if it happens at all) by embarrassing faux-pas/retreat SPD-leader Schulz in clash over posts:

    Glorious combined North and South Korean entry Olympic stadium, while waving a flag showing a united Korea. Outside the stadium angry South-Korean protesters, suspiciously waving American flags (who gave them to them?).

    Europeans win first gold medals (Sweden, Norway) at Olympics. No surprises here.

    Real surprise of the day: “rocketman” Kim Jong Un invits SK prez Moon to PjongJang. Are we going to witness the downfall of another Wall after 1989?

    The German president of the IOC Thomas Bach has been heavily criticized for allowing the Russians to participate in Korea after all, albeit not under the Russian flag. Bach has been accuse of pro-Russian sentiments, entirely correct accusations. There are a lot of those in Germany.

  21. TheNationalist on Sat, 10th Feb 2018 6:04 am 

    What the bloody hell are the yids doing in Syria anyway?, Like the yanks they appear to support the islamofascists. I am convinced the world has lost it’s mind.

  22. Mad Kat on Sat, 10th Feb 2018 8:05 am 

    American delusion writ large:

    “The recent history of what amounts to world dominance, militarily, scientifically, academically, and culturally, gives a sense to Americans that it is their country which is the guardian of all that is good. …

    That greatness has shown many signs of slipping into decadence, such as happened in the waning days of the Roman Empire, where people lost their vision of becoming great, and have been self-indulgent in their perceived independence, not only of other nations and cultures, but of any power, including the Highest Power. We have seen it become legal to call homosexual unions “marriage” and depravity, drug use, and tremendous unproductive navel-gazing have become more and more prevalent in a nation that, a mere 45 years ago, really stood as a defender of Christian freedom. …

    It is not possible that a nation living in delusion about itself can have a clear view of those nations outside itself. …

    (That is what I have been saying for years. Americans have no idea what the real world is like. None.)

    “This Nuclear Posture Review shows us the face of a country who is deluded, hysterical, as the Russian media calls it, and they are right.”

    War … or?

  23. MASTERMIND on Sat, 10th Feb 2018 8:42 am 

    Impacts of oil price shocks on the United States economy: A meta-analysis of the oil price elasticity of GDP for net oil-importing economies (Oladosu 2018)

  24. joe on Sat, 10th Feb 2018 10:06 am 

    The link between tight oil drilling and cheap money for capital is the basis for the arguement that tight oil is temporary. Nobody doubts the volume of oil recoverable, what’s up for debate is whether or not it is affordable and worthwhile. I my own experience governments will pay any price for oil except the one needed to end the madness. If they would heavily tax the rich, suppliment the poor during a wind down phase of de – industrialisation (switching to green) and de – population (mass contraception and care for the aged) then humans would have a small chance of surviving. But it has to happen now. I disagree with Kunstler that markets will collapse. In my opinion debt can be as high a 200% or more of gdp before the brain eating begins. Greece is sitting at around 180% and Italy 132% both of them should have been thrown out of the Euro long ago, but it helps keep German produce cheap (eh hmm currency manipulating huns!). IMHO US can be 30-40 trillion before the Saudis will give up the greenback. The Trump tax break garuntees that US will reach that figure unless every school and pension is closed today and America does not build any more roads again. My point is that the choice is very clear now either the party continues or it does not. So it will be for tight oil. If rates go up then debt has to go up faster begining a spiral of a bubble market to end all bubbles, if they don’t go up, gdp can’t go up much cause there is little or no productivity growth. A.I won’t improve productivity cause you need humans to be paid for working. If a.i is doing all the business and legal leg work and driving the cars then all that’s left for the services sector (75% or more of the developed economy) is serving more coffee staying in ‘educaton’ longer. Don’t get wrong. When a.i is doing the heavy lifting in the services industries (63% of global gdp) people will not be in a position to worry about oil. But thats another debate.
    We have to survive Climate change before we should worry about oil.

  25. joe on Sat, 10th Feb 2018 10:16 am 

    My guess is the shooting down of an Israeli plane was Russias answer to forces shooting down a Russian Jet over idlib. Sombody is handing out manpads and it probobly isn’t Assad.
    That war is getting seriously fucked up. The pot will boil on and on and won’t end well for anyone. I hope Israel bought itself a policy against something going wrong with destabilising every government on its border.

  26. Cloggie on Sat, 10th Feb 2018 10:34 am 

    I hope Israel bought itself a policy against something going wrong with destabilising every government on its border.

    The insurance policy is called Upstate New York.

  27. GregT on Sat, 10th Feb 2018 12:06 pm 

    “Impacts of oil price shocks on the United States economy: A meta-analysis of the oil price elasticity of GDP for net oil-importing economies (Oladosu 2018)”

    “Most of the oil price increases since 1991, particularly during the 2000 to 2007 period, are thought to be driven by demand shocks (including the rapid growth in some Asian economies), which tend to lead to simultaneous increases in the oil price and economic growth. In addition, changes in the structure and management of the economy, oil market structure, and policy responses, among others have made the economy less vulnerable to the impacts of supply-driven oil price shocks than in the 1970s.

  28. GregT on Sat, 10th Feb 2018 12:15 pm 

    “I hope Israel bought itself a policy against something going wrong with destabilising every government on its border.”

    Israel will be victorious in the final war, the Jews are God’s chosen people and will rule over mankind for a thousand years.

    For it is written…….

  29. MASTERMIND on Sat, 10th Feb 2018 12:16 pm 


    If you really want to learn how oil prices influence the economy read Hamilton’s work. I love how you cherry pick every study or paper..You are no different than a climate denier! What a foolish old man you are. I can tell you never went to college!

  30. GregT on Sat, 10th Feb 2018 12:17 pm 


    Why do you continue to post links that do not support your views of doom and gloom?

    Here, let me help you out.

  31. MASTERMIND on Sat, 10th Feb 2018 12:19 pm 


    Judaism is a religion not an ethnicity…

  32. MASTERMIND on Sat, 10th Feb 2018 12:21 pm 


    I never said it was doom and gloom? I just shared the study because it was about oil and economics and it was emailed to me last night via google scholar. Great job on assuming and getting everything wrong.

  33. Cloggie on Sat, 10th Feb 2018 12:22 pm 

    Israel will be victorious in the final war, the Jews are God’s chosen people and will rule over mankind for a thousand years.

    Sure. Here is something else written, backed by historic fact:

    #110 – USA, coming decade.

    Judaism is a religion not an ethnicity…

    After a few centuries the difference evaporates.

  34. GregT on Sat, 10th Feb 2018 12:22 pm 

    “Judaism is a religion not an ethnicity…”

    What part of “God’s chosen people” do you think is not a religious belief?

  35. GregT on Sat, 10th Feb 2018 12:26 pm 

    “Great job on assuming and getting everything wrong.”

    Sorry, my bad. Good to see that you’re finally coming to your senses.

  36. MASTERMIND on Sat, 10th Feb 2018 12:27 pm 


    Jebus loves me yes I know, group psychosis tells me so!

  37. GregT on Sat, 10th Feb 2018 12:43 pm 

    “Jebus loves me yes I know, group psychosis tells me so!”

    Glad that’s working out so well for you.

  38. Boat on Sat, 10th Feb 2018 12:43 pm 

    Books are just opinions that captian obvious never gets righ. Books are based on old data then presented as todays fact when indeed the inputs change. Citing authors and books as evidenance is like picking the NYT and Sputnik as sources of accurate informatio.

  39. Anonymouse1 on Sat, 10th Feb 2018 2:07 pm 

    The only books you are familiar with, and can read (sort of), are coloring books, boatretard. And perhaps, snippets from your bible.

    evidenance? Holy fook are you dumb boatrItard

  40. Cloggie on Sun, 11th Feb 2018 2:00 am 

    The economy may be booming in Germany, politically the country threatens to become unstable, as even the lackeys of the US deep state der Spiegel have to admit:

    Merkel has great trouble forming her 4th and last government, reason: nobody really wants to sit with her in the same government as she is damaged goods after she let in 1.5 million rapefugees in the country (probably on orders of George Soros) and still refuses to admit her mistake. The SPD (20%) knows it is heading for the exits of history if they stay in the Merkel government (French and Dutch social-democrats are virtually eliminated and replaced by populists). Germany is balking and the media receive death threats 24/7, because government and media talk about the original German population as “those who already live here a little longer”, clearly showing the neo-bolshevik intent to abolish the German nation.

    Not going to happen. Germany and Western Europe aren’t very far away from declaring independence from the entity that organized the multicultural mess in the first place: the US imperial overlord. Europe is rapidly approaching a 1989 of its own and even the EU-Marxists are flirting with taking over from the US:

    And together with nuclear power Russia, that just humiliated the US in Syria, we can dwarf the power of the US, so much so that we can position ourselves as the protector of European-America.

    There was a reason why populist-lite Macron invited Putin as the first head of state with all egards:

    ..because Putin is the future.

    And there is a reason why Macron also got along surprisingly well with populist-Trump, although he could not resist the temptation to humiliate both Putin and Trump a little bit…

    …because Macron can afford it. All of a sudden, France is a major country again… because it positions itself at the heart of Europe of 500 million, where the German c*nt is blundering and is about to be floored because of her insane “refugee” policies, where Macron talks humanitarian but acts right-wing in refusing to take in large numbers of invaders and is busy setting up “refugee centers” in Africa rather than in Europe. This is how you win elections: being pro-Europe and anti-third world (invaders).

    All is marching towards a major geopolitical reconfiguration.

  41. Boat on Sun, 11th Feb 2018 2:39 am 


    Feel free to declare independence from the US. Not that you cheap bastards paid any taxes anyways. Lol
    Putin will stay in power as long as Jew led world wants him to. Everybody knows that.

  42. Cloggie on Sun, 11th Feb 2018 3:26 am 

    Feel free to declare independence from the US. Not that you cheap bastards paid any taxes anyways. Lol

    We appreciate that. In return we are not going to tax the Heartland either as we are not totally going to reverse 1776. We are after all not babysitters.

    Putin will stay in power as long as Jew led world wants him to. Everybody knows that.

    Sure boat: this is one of Chamberlain’s “World Jews” who likely committed suicide out of embarrassment of appointing Putin under the false assumption that Putin would do the bidding of said “World Jews”:

    As we all know, Vladimir the Great didn’t.

    Europe-ZOG 1-0

    Even your owners meanwhile admitted defeat:

    The only interesting question is: “who gets what” from the dying US empire?

    My prediction:

    – Heartland [*] junior partner Paris-Berlin-Moscow
    – US-SW back to Mexico
    – Upstate New York home of “World Jews”
    – US-SE independent black homeland
    – Down Under + Vancouver goes to China

    [*] – territory between Rockies, Canadian border, Appalachians, Mississippi, Red River. Lafayette opening to the Gulf.

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