The Oil Crisis And How It Could Overshoot

The day we hit “peak oil” will be a definitive moment in the history of resources and energy consumption. Throughout our lifetime we have been warned of the implications of oil production hitting an absolute maximum; the consequence of which will be the terminal decline of global supply. M. King Hubbert, the author of the Peak Oil Theory, suggested the world might max out in terms of oil in around 1970, a prediction that held true for a long time, saved only by vast improvements in hydraulic fracking technology. Optimists of recent decades have placed new estimates ranging from 2020 all the way to 2050 depending on the industry’s extraction rate, and yet, I’m looking at an oil industry where company and country alike are engaged in a unanimous effort to pull it out of the ground quicker than ever. There is little evidence to suggest crude oil can ‘go off’, although we’ve never let it sit long enough anywhere to find out, but you can’t help but wonder why some of the most developed nations and organisations in the world are entrenched in a price war where oil supply is their greatest weapon.

History has a lot to do it. We’ve had two significant oil supply crises in the last few decades, 1985 and 1998, both of which were caused by nations and conglomerates hellbent on maximum production irrespective of demand. In the preliminary years to these crises, the industry indulged in a vicious cycle  where high production from one forced an equal response from others in a show-of-strength effort to retain market share. Anyone familiar with basic economics will tell you how this ends; extensive oversupply and ultimately a crash in price. The severity of the crash depends on the extent of oversupply in the market and the time it will take for the market to return to its stable equilibrium, so how bad is the one we’re in?

(Source: Google finance)

In the past three years U.S. oil production has risen by 3 million barrels a day. The response from the rest of the world, led by OPEC’s Saudi Arabia, was to increase its own production to the tune of 2.25 million barrels a day and they don’t show any sign of slowing down. In November 2015 last year OPEC crossed its informal quota of 30 million, pushing production up to 31.6 million barrels a day. It’s a level of production we’ve never seen before. It has the single purpose of running its U.S. shale counterparts into a price they can’t compete with; ultimately forcing them out of business. You have to admire the world’s blissful naivety as we watch from afar, ignorant to a crisis that has been building up for so long, only to  wake up to ask ‘why is the price falling?’. As Robert Mabro wryly puts it in his paper on the 1998 oil crisis:

“If you have been drinking or eating all night do not seek the cause of headaches or stomach pains the next morning.”

Robert Mabro, Oxford Institute for Energy Studies

As I write this article, the sanctions of Iran have been lifted and its own production has come back online. Expected to add 500,000 barrels to global inventories in the first few days, the news has been reflected in a Brent Crude price comfortably settling below $30, a price even lower than oil’s bottom during 2008. So when we talk about the severity of overproduction, we have to consider we may not even be at the peak. Saudi Arabia still has unused capacity and Iran is fighting to regain its title as one of the world’s largest oil producers. The fundamental problem with Iran’s return to the market is the country’s vast ‘el dorado’ oil reserves that can be extracted at a cost per barrel of just $2-3. In comparison, Gary Shilling of Gary Shilling & Co estimates there is a $20 per barrel marginal cost for American shale frackers in the best circumstances across the Permian base.

We talk about the time it might take to return to equilibrium, but OPEC is in disarray and its meeting in December 2015 was a catastrophe. Saudi Arabia, by far the largest producer in the group, is completely disinterested in an arrangement and has not been shy in encouraging the organisation’s members to keep pumping. No-one wants to call the bottom of oil and this crisis looks set to continue far into 2016 and possibly the start of 2017. One thing we can talk about is how the trend will revert, and perhaps we’re in for a sharp change. Firstly, this crisis doesn’t look like it’s going to end softly. If it ends with the default of oil titans the landscape of the industry will be fundamentally changed. It will leave even greater market share in the hands of fewer, and in the wake of the crisis the survivors will be hungry for their margins back. Secondly, resource extraction is a game of two halves; exploiting your current projects, reserves commonly called ‘brownfields’,  and exploring new opportunities known as ‘greenfields’. A price war of this magnitude is threatening the balance sheets of even the biggest industry operatives, you only have to look at Saudi Aramco’s possible IPO and BHP Billiton’s forced writing of assets to know that much is true. These companies are using the capital reserves they have to weather the storm of this crisis, not to invest in new sites or opportunities.

(Source: Google finance)

If everyone buttons down the hatches instead of investing for the future during the crisis it won’t matter if we come out of it to find our overflowing inventories are back to a normal 60 day level – we won’t have enough new projects to fuel future demand.  As oil demand goes it’s not particularly high now, meaning a turnaround in sentiment and growth in China and the emerging markets will only add to the supply we require. This set of events could lead to a massive overshooting in the oil market, as current and future supply crash below equilibrium. We’d see the opposite symptoms in the markets, namely an unsustainable high oil price. It’s not clear when this oil crisis will end, but we should be careful that when it does, we do not shoot into another.

Market Mogul

53 Comments on "The Oil Crisis And How It Could Overshoot"

Plantagenet on Thu, 28th Jan 2016 12:06 pm 



An oil glut is not a crisis (except for the oil companies and service companies).

Oil gluts produce very low energy prices which are, on balance, GOOD for the economy as a whole.

Cheers!

twocats on Thu, 28th Jan 2016 12:25 pm 



suggested the world might max out in terms of oil in around 1970, [article]

I don’t think they were suggestions, but predictions based on analysis of data. And it wasn’t the world, it was the US (I think for the world, he predicted around 1995). But I’ve also read direct quotes from him where he talks about improving technologies. Nothing but the best from “Google Finance”.

shortonoil on Thu, 28th Jan 2016 12:59 pm 



“The severity of the crash depends on the extent of oversupply in the market and the time it will take for the market to return to its stable equilibrium, so how bad is the one we’re in?”

Considering that prices have declined by 70%, and demand responded by increasing 3% the answer would be never. One can only wonder if these authors ever think about what they are writing. Can any of them do simple math, plot a straight line, count? The simple fact is that nobody wants any more oil at any price. The world’s 150 year period of insatiable demand has ended, and so also has the age of oil.

Plantagenet on Thu, 28th Jan 2016 1:12 pm 



The claim that “nobody wants any more oil at any price” is silly.

The world consumed over 90 billion bbls of oil in 2015, and will like consume even more in 2016.

JN2 on Thu, 28th Jan 2016 1:36 pm 



Plant, it seems like nobody wants more than 95mbpd, even at current low prices. At even lower prices there might be a few more buyers. But demand seems to be ‘inelastic’. In the short term.

Plantagenet on Thu, 28th Jan 2016 2:06 pm 



@JN2

Your claim that “nobody wants more then 95 mbpd” is true now, but it won’t be true next year.

Word GDP growth is slow and oil demand growth is slow. Nonetheless, the current EIA forecast is for global oil consumption to reach 96 mbpd in the third quarter of 2016.

https://www.eia.gov/forecasts/steo/report/global_oil.cfm

Cheers!

shortonoil on Thu, 28th Jan 2016 2:34 pm 



“The claim that “nobody wants any more oil at any price” is silly.”

Do you know what any more means? It means more than what there was. That is 1 is more than 2. 2 is more than 3, and etc. Got it Plant! No one wants to buy any more oil than what they are already buying regardless of the price. Every week when the EIA publishes inventory numbers they go up. Last week it was 11 mb, and it has gone up every week for the last 19; and it has gone up to historical highs over the last 19 months. That 3% increase in consumption is mostly oil that is now sitting along the Gulf Coast in a big tank.

The world’s 150 year period of insatiable demand has ended, and so also has the age of oil. Sorry to bust your fairy tale bubble, but it’s here. You’ll have to find another job pretty soon. You had better get started before they start passing out the pink slips.

Apneaman on Thu, 28th Jan 2016 2:35 pm 



Planty, does not appear to be doing any GOOD.

The Shipping News Says the World Economy Is Toast

http://www.bloombergview.com/articles/2016-01-28/shipping-news-says-world-economy-is-toast

Apneaman on Thu, 28th Jan 2016 2:42 pm 



Prop em up – the new capitalism.

World Bank discussing possible aid to oil exporter Azerbaijan

http://uk.reuters.com/article/imf-azerbaijan-idUKL2N15B2NG

GregT on Thu, 28th Jan 2016 2:45 pm 



“An oil glut is not a crisis (except for the oil companies and service companies).”

And of course, all of those oil companies have no bearing at all, when it comes down to oil consumption. GOOD for the economy as a whole planter.

Probably much better if you just focus on teaching grade school. Not that you’re much better at that.

GregT on Thu, 28th Jan 2016 2:51 pm 



“That 3% increase in consumption is mostly oil that is now sitting along the Gulf Coast in a big tank.”

Geez Short, you’re batting zero today. Planter already told us that the oil glut is being stored in tanker ships in the Port of Gibraltar.

antaris on Thu, 28th Jan 2016 3:50 pm 



I think the gluster got it wrong, If I’m reading Vessel tracker properly a lot of the tankers are sitting in the Netherlands, and the United Emirates. Gibralter is down the list a ways. Those under way are higher in the UK and Asia.

Plantagenet on Thu, 28th Jan 2016 4:25 pm 



@antaris

Don’t be a dope. I never said the entire oil glut is being stored at Gibralter—thats another lie from the gregster.

Cheers!

Plantagenet on Thu, 28th Jan 2016 4:27 pm 



@shortonoil

You are very confused. Oil demand is still going up, albeit slowly.

The numbers don’t lie, dudette!

Cheers!

shortonoil on Thu, 28th Jan 2016 5:07 pm 



“You are very confused. Oil demand is still going up, albeit slowly.”
Oil that is purchased and, stored is considered consumed by the EIA and IEA. It is part of the demand. They are not being dishonest, it is just that there is no other practical way of doing it. Inventories historically didn’t change that much, and not in one direction like what is occurring at the present. That is, only going up! There is good evidence to support the hypothesis that consumer (end user) demand is going down. One look at the world’s economy confirms that must be happening.

Apneaman & GregT can now roll out their 10,000 stored URLs describing how the the economy is falling apart. Start with the BDI, it is one of my favorites.

Boat on Thu, 28th Jan 2016 5:12 pm 



Plant, short,

Do ya’ll even read world consumption charts by year? The projected 1.4 million bpd is not slow growth. Iran says they are not concerned about price only regaining their market share. Frackers will take it on the chin. Expect more and a growing DUCTs inventory.

ennui2 on Thu, 28th Jan 2016 5:15 pm 



“You’ll have to find another job pretty soon. You had better get started before they start passing out the pink slips.”

And there shortonoil lays his chips on the table. The joy of saying “If you weren’t smart enough to plan ahead then DOOM ON YOU, doom…on…you….doom…on….you.”

https://www.youtube.com/watch?v=dBRjIWRc45s

Apneaman on Thu, 28th Jan 2016 6:00 pm 



short, not stored – it just keeps coming.

https://youtu.be/RTxlh65Pe14?t=173

shortonoil on Thu, 28th Jan 2016 6:05 pm 



“Do ya’ll even read world consumption charts by year?

Between 2012 and 2013 consumption increased by 685,000 b/d, not 1.4 mb/d. Anyway, it took 1.33 mb/d of additional production just to produce the oil. The energy to produce oil, and its products is going up by 1.32% per year. That means the the remainder of the economy is consuming less. Once production begins to decline (this year) consumption will plunge.

http://www.indexmundi.com/energy.aspx

http://www.thehillsgroup.org/

Davy on Thu, 28th Jan 2016 6:21 pm 



“That means the the remainder of the economy is consuming less. Once production begins to decline (this year) consumption will plunge.” We know what the velocity of money means. It works both ways and this is what has the central bankers up at night. When consumption is plunging confidence will not be far behind. Confidence is basically an economic liquidity. I do not see a way out this time. In 08 we had the Fed easing and China credit and development boom. This is over and never to return. We now have no floor and nothing to lift us. We are approaching a minimum operating level. This is a Ponzi environment of unreality. We are in an economy of abstractions saying all is well with a real economy stalling. That can’t end well and something will surely break. It is likely the break will occur in the global currency arena. No government or central bank has the balance sheet to tame that beast.

In the middle on Thu, 28th Jan 2016 10:24 pm 



The world has already reached peak oil. Some people get this confused with oil depletion which is really on the extreme second end of the chart. Depletion is evidenced by nobody using oil anymore whereas peak oil is evidenced by the situation where if oil were priced low enough that the economy could continue to grow, there won’t be enough supply to meet demand, which would in turn would cause prices to rise, which again would stop the economy from growing. The oil age is coming to an end, but we still have the second half of the chart to go. The irony: it’s all down hill.

LazyThree

Northwest Resident on Thu, 28th Jan 2016 11:22 pm 



Production decline, leading to a consumption decline, leading to a confidence decline — vicious cycle — and like Davy says, nothing to power us out of the downward spiral. No new vast and economically spectacular oil finds. No new technological gadgetry. No new financial tricks. NOTHING! At some point during the self-reinforcing cycle of decline we’ll hit a critical point beyond which that decline will take us straight over the cliff, Mary and Louise style. Who knows, we may have already flown off the cliff and we’re in free fall right now, we just don’t know it. Impact is coming, one way or another.

In the middle on Fri, 29th Jan 2016 12:23 am 



It took several hundred years to reach peek. It’ll take less than that to reach depletion, but it’s still decades away. As it gets more scarce it will get more expensive. Those economies that use it most efficiently will be the most competitive and therefore able to pay more for it as the ultimate goods produced by it (food) will cause the currency of that economy to be strongest. That will probably be America but could be any country that is market oriented.

JV153 on Fri, 29th Jan 2016 1:36 am 



I wonder if any of you actually drive .. thing is while the price of oil has gone down the taxes at the pump have gone up and fuel subsidies are being cut, especially in Europe.

makati1 on Fri, 29th Jan 2016 5:19 am 



In the middle. I think you are missing the elephant in the room. The decline in wages/buying power in most of the world today, and the spread of that disease to ALL of the world soon, means that there will be NO money to buy oily products at any price by most consumers. If the demand for oil dropped to one million barrels a day, it would cost thousands of dollars a gallon in today’s dollars. Why? Something call “economy of scale.”

Your apparent Amerocentric outlook is telling me that you are in denial of the facts, either deliberately or by ignorance. Or you are an “economist”. Capitalism is dying. there are no “decades” of decline to consider. Less than one and maybe only a few years until it is over.

The oil majors are already pulling in their investments and buying each other out to maintain some equity. Most will be history in a few years. This time, demand will not set the price, the ability to purchase will. Wait and see.

BTW: If you actually believe that the US is going to avoid the cliff, move to the front of the line and be the first to see if you are correct.

“BlackRock’s Fink Says 400 Energy Firms May Not Survive Cheap Oil”
“Energy Industry “Dead-Man Drilling” Into Bankruptcy”
“This Oil Driller’s Budget Would Barely Cover a Hamptons Home”
” U.S. shale firms, struggling to profit with $30 oil, slash spending more”
“The U.S. Coal Industry Is In A Hopeless Situation”
“America’s lead poisoning problem isn’t just in Flint. It’s everywhere.”
” Emergency Rooms Short on Lifesaving Drugs” (US)
“AG calls on Gilead to lower price of hepatitis C medicines” (US)
“Experts: USA must prepare now for Zika virus”
“Super Bowl 50 Terrorism Threat? F-16 Fighter Jets, FBI, K-9 Units, Helicopters Ready For Football Game”
“How Do You Know When Your Society Is In The Midst Of Collapse?”
“The Global Skills Gap Widens as U.S. Students Struggle”
“Wave Of Corporate Defaults Could Be Coming, Financial Watchdog Warns”
“Ka-boom Goes the Bottom of the US Bond Market — And it’s not just oil & gas!”
” Danger signs at the mall? More empty storefronts”
“Few US neighborhoods affordable, walkable with good schools”
” Kalashnikov USA to produce AK-47 in Florida”
“Shocking Crash: Durable Goods Orders Plunge 5.1%, Shipments Drop 2.2%, Huge Negative Revisions; Recession Here?”
“American Democracy Down for the Count?”

Bring on the clowns…

“Donald Trump in 2000: “I Support the Ban on Assault Weapons””
“Trump pulls out of Republican debate in Iowa”
“Donald Trump Brands Brussels a ‘Hellhole,’ Alienating More of Europe”
“Hillary Clinton’s historical problem with honesty”
“Hillary Clinton lies about health care”
“Ted Cruz Endorsed By Preacher Who Said Jews Will Be Exterminated If They Don’t Embrace Jesus”
“The Clinton Foundation: Hillary Beholden To Banks, Corporations, And Foreign Governments”
“Hillary Clinton Laughs When Asked if She Will Release Transcripts of Her Goldman Sachs Speeches”

http://ricefarmer.blogspot.fr/

And finally: “It is our particular (mis)fortune to be living through the beginning of the end, the disintegration of capitalism as a world system.”

http://www.doomsteaddiner.net/blog/2016/01/28/the-waning-of-the-modern-ages-2/

I would prefer to be at the end of the line and able to turn aside before the cliff, not be pushed over it by the like-minded lemmings behind me.

Dredd on Fri, 29th Jan 2016 6:31 am 



We have a poison glut in the U.S.eh? (A History of Oil Addiction – 2)

Davy on Fri, 29th Jan 2016 6:40 am 



“Production decline, leading to a consumption decline, leading to a confidence decline — vicious cycle”. We know this concept is difficult for the many colors and shades of cornucopianism to understand. We see this even with the hardcore greens who think economy and technology can be decarbonized, recycling will cover resources, population growth can be made smart, and habitat can be improved by policy. The browns believe in endless development with substitution, innovation, and technological advancement. For these folks limits to growth will be bypassed by our exceptional abilities.

We then have those who are moderate cornucopians or even peaker/doomer-lites. This crowd fails to see the systematic implications of the vicious cycle of decay from production/consumption/confidence decline. Our global system has a minimum operating level it must maintain for it to function properly. Without this level of growing growth global trade becomes dysfunctional. We are seeing this now. These doomer-lites fail to see a systematic bifurcation point where the present operating level can’t hold.

These folks cannot fathom that this operating level in respect to food, oil, and industrial production could drop abruptly to a 60 level within a decade or less. Some would say that would be fine having a slower and simpler life. Again it is not that simple. A drop to that level means a rebalance of population along with the consumption. We had half the population we have now in 1960. We had a global GDP that was a tenth of what we have today.

It is also difficult to fathom the resulting infrastructure loss from this kind of drop. The level of technology, the size of our developments is completely out of scale to that kind of drop. How are we going to properly support these mega-urban areas? How are we going to maintain the complexity with the dangerous technologies we have created like huge chemical plants and NUK power? I see global breakdown of complex systems as a dangerous symptom of decline. These will have catastrophic consequences on the health of populations and the food chain.

The key question for me is not “If” or even “When”. I see the process in action now. We are burning through fat quickly now and soon will start consuming the vital muscle of our global system. I then have the question of how quickly this unravel will take. That is impossible to tell because we cannot really know where the break point will start. These events are random per our abilities of forecasting. There are multiple areas that could see failures and multiple scenarios for that process.

We can point to scenarios and define variables. We can definitely say that any kind of forced degrowth will hit hard those areas exposed to high population densities and or reliance on high consumption levels for support. This would put all the worlds’ large urban areas in the cross hairs. Areas with climate, food, and water support exposure are likewise at risk. We can define these places as at risk but we can’t point to any directly with a time frame and with degree and duration. This is a dangerous process with embedded catastrophic events that will play out maybe over a decade or less.

Davy on Fri, 29th Jan 2016 6:48 am 



“BTW: If you actually believe that the US is going to avoid the cliff, move to the front of the line and be the first to see if you are correct.” What I find particularly hilarious is the fact that the Brics are the ones who are falling the hardest and first. This will put Asia with its huge populations and high consumption needs most at risk. Yes the US is fully in the cross hairs of descent. The US is way too reliant on high consumption to support a population twice as big as it should be. Our urban areas are too dense and many exposed to climate change. Yet, Asia is there now. China is heading for a nasty economic hard landing. Asia has 4.5BIL of the global population is in an area the size of Russia. Asia is already in crisis and falling. Why some fail to acknowledge this and still point fingers at the US reminds me of Baghdad Bob.

shortonoil on Fri, 29th Jan 2016 6:59 am 



“It took several hundred years to reach peek. It’ll take less than that to reach depletion, but it’s still decades away.”

When the average barrel produced becomes an energy sink, as opposed to an energy source, the resource is no longer extractable and has become fully depleted out. Our calculations indicate that will occur no later than between 2030 and 2035.

It will be possible for some regional production to continue after the above dates, but the integrated global petroleum production system that we now take for granted will be gone.

http://www.thehillsgroup.org/

Davy on Fri, 29th Jan 2016 7:15 am 



“Global Stocks, Bonds Jump On BOJ NIRP Stunner; Rally Fizzles After Crude Fades Gains”

http://www.zerohedge.com/news/2016-01-29/global-stocks-bonds-jump-boj-nirp-stunner-rally-fizzles-after-crude-fades-gains

“negative rates are now a reality in Japan.”

“it is virtually certain that the BOJ action will exacerbate global currency wars as it forces China to retaliate once more, in turn accelerating capital outflows from China, depressing asset prices and not only adding to global volatility but also depress both the Japanese and global recovery”

“central banks really have no choice at this point: they have to keep pushing or face systemic collapse. As SocGen’s Kit Jukes points out, whether or not it works matters less than fact that “disinflationary forces in the global economy are so entrenched”

Davy on Fri, 29th Jan 2016 7:38 am 



“It will be possible for some regional production to continue after the above dates, but the integrated global petroleum production system that we now take for granted will be gone.” This is the key point to acknowledge. The approach to the oil dead state found in the ETP model is the end of globalism. Oil at the global level allows globalism.

We will likely see something shake out of this transition from global markets to regional markets. I imagine some type of global trade will continue like we saw around the turn of the 20th century but nothing like today. This is being optimistic because the scenario of catastrophic collapse is not out of the question if luck is not on our side and or bad policy is followed.

“Our calculations indicate that will occur no later than between 2030 and 2035.” This is a theoretical brick wall. Those of us who study the systematic implications of oil and the global economic system realize that the vital economic energy of “growing growth” will soon be rocked by the inertia of oils declining value to “growing growth”. In other words we are going to see oil become an inertia against the momentum of growth instead of driving the momentum of growth as we have seen for the last 150 years.

This could happen abruptly and every indication is we are destroying vital oil capacity as we speak. We should also realize we are economically destroying oil’s ability to power globalism as oil depletion also drives declines. That is a double whammy of decay. The situation then becomes the vicious cycle of economic decline with deflationary pressures along with oil depletions causing decaying support of “growing growth” momentum.

diemos on Fri, 29th Jan 2016 8:05 am 



Neither supply nor demand responds instantaneously to price signals.

It takes time to build new wells, it takes time to let the current wells play out.

You have to build machines to consume the oil in order to increase demand. Unless you’re going to buy it in order to set it on fire out in the yard.

That’s why this industry is always in a boom bust cycle.

marmico on Fri, 29th Jan 2016 8:21 am 



Our calculations indicate that will occur no later than between 2030 and 2035

What a crock of shit. The EROI of the petroleum production system (well head to gasoline tank) will not be less than 1.0 in the 2030-2035 time period.

Well head EROI will decline but refinery, transportation and distribution EROI will not decline.

Davy on Fri, 29th Jan 2016 8:32 am 



“What a crock of shit” said Nero as Rome burned. Marmi, are you aware that your economic and financial world is burning? IMA like we have told you it would over the last year. Where is the Freddy fluff charts these days? They don’t look so good do they? I am talking the ones that matter not your dubious esoteric ones that do not reflect the reality of a the physical of the real world.

makati1 on Fri, 29th Jan 2016 9:04 am 



Marmico… and are not refinery, transport and distribution ALL tied to EROEI at the well head? If those three add up to, say 8 and the EROEI at the well is only 8… If I understand previous readings, we are fast approaching the break even energy ratio from well head to user.

After all, much of today’s oil is heavy junk, or light junk, or tar sand or fraked liquids that require a lot of refining to make them usable or deep ocean wells that go down for miles or some oil and water mixture. Not like the old days when it practically flowed from the well to the gas pump on it’s own. About like comparing 12 year Scotch with cheap beer.

When it is not profitable, no matter the ratio, the wells will shut down and the Age of Petroleum will be over for the private sector. My bet is that it will end for the masses first and then, eventually for the government. After all, the government will use your tax dollars to pump it at a loss for their use as long as they can. They will nationalize the petroleum industry first, of course.

Interesting future ahead, no?

Larry on Fri, 29th Jan 2016 10:41 am 



What I have Learned in my 75 years is that 99% of what I think is going to happen NEVER does. This is particularly true when other mere human intellectualism is part of the equation. Particularly negative human prognostications such as all of the below comments are.

Apneaman on Fri, 29th Jan 2016 10:43 am 



Marmi, your TOD buddy, Nate Hagens splaining it for ya. Watch it, learn it, know it.

https://www.youtube.com/watch?v=EOq7pdFF4iI

Apneaman on Fri, 29th Jan 2016 10:50 am 



Larry in 75 years you had a 99% failure record? Why should anyone listen to anything you say then? Chances are that’s wrong too eh?

marmico on Fri, 29th Jan 2016 10:57 am 



How’s Nate doing in the WSOP? 🙂

shortonoil on Fri, 29th Jan 2016 12:03 pm 



“Marmico… and are not refinery, transport and distribution ALL tied to EROEI at the well head?”

Over the last half century there was a very close correlation between ERoEI, and crude price:

http://www.thehillsgroup.org/depletion2_009.htm

That changed after the 2012 energy half way point was reached. We are essentially now in a no mans’ land. The function hit a discontinuity in 2012 which will most likely bring about the end of the integrated global petroleum production system, and the end of the oil age. To continue production over the next decade will require additional debt formation of $39 trillion. Whether or not nation states, and the world’s monetary system can sustain such a burden is yet to be known. To generate the required $39 trillion will require the cannibalization of a large portion of the the world’s present capital stock. How long it will be before some essential component of that stock is removed through miss management can not be determined. Considering that political entities now in charge appear to have no idea as to the scope of the present situation it may not be that long?

http://www.thehillsgroup.org/

marmico on Fri, 29th Jan 2016 12:21 pm 



That changed after the 2012 energy half way point was reached

You are a fuctard. We have gone over this alleged half way point 100 fucking times.

We are not at the fucking half way point if you had a fucking clue that refineries are 90% energy efficient.

PracticalMaina on Fri, 29th Jan 2016 12:43 pm 



Marmico, so are we just risking train explosions by moving bitumen and other crap fuels because….?

marmico on Fri, 29th Jan 2016 1:23 pm 



Wow, 2 units of Athabasca bitumen, 1 unit of Bakken versus 30 units of Persian Gulf crude has little materiality for EROI transportation from the well head to the refinery.

BTW, the Bakken blows up not the bitumen. The bitumen is worse in spills, however.

antaris on Fri, 29th Jan 2016 1:29 pm 



Bullshit “refineries are 90% energy efficient.” Let see you back that statement up! (and I don’t mean “Bullshit”)

Nony on Fri, 29th Jan 2016 2:44 pm 



Antaris:

See page 6 (table 4) of “Updates to Petroleum Refining and Upstream Emissions” by Ignasi Palou-Rivera, Jeongwoo Han, and Michael Wang (Center for Transportation Research Argonne National Laboratory), October 2011.

Link: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=0ahUKEwi68d2q8c_KAhUKGD4KHXKiBPYQFggrMAI&url=https%3A%2F%2Fgreet.es.anl.gov%2Ffiles%2Fpetroleum&usg=AFQjCNHoz7xTUnK3qPhR0t_Nk61aToRqbA&sig2=vdThs0lDEiaJ4T7z2LbmxA&bvm=bv.113034660,d.cWw

(Google it if link does not work.)

antaris on Fri, 29th Jan 2016 3:38 pm 



Nony, I think ” energy efficiency of a refinery” needs to be defined before we can talk more about it. I’m at work and can’t spend the time right now to look at the subject.

In the middle on Fri, 29th Jan 2016 4:07 pm 



Mak. To be consistent with Darwins survival of the fittest observation, the most adaptable and strongest economies with the right resources will be the survivors. The winners. Sorry if you don’t see it Mak, but it’s the cold hard bitter truth. Russia has the resources but they are weak in human rights, liberty and protection of intellectual property. That’s how the mafia maintains their control. The smart ones immigrate to America to protect their wealth or to gain it. Unless something changes I’ll keep my bet on America and other free societies.

makati1 on Fri, 29th Jan 2016 8:53 pm 



In the Middle, that makes Russia number one on the survivor list and the US way down that same list. Maybe you should google the long list of American imports necessary for the country to survive?

Here are a few of the web sites:

http://www.ers.usda.gov/data-products/us-food-imports.aspx

http://www.worldsrichestcountries.com/top_us_imports.html

http://www.made-in-china.com/

http://www.indexmundi.com/trade/imports/?country=us

http://www.census.gov/econ/overview/mt0100.html

The US gets it computer chips from Asia. How do you replace a part if it is imported? Ditto car parts. Truck parts. Parts for most of your home appliances. Solar panels. Etc..

As for your two last sentences: much of the money ‘flowing’ into the Us is stolen, not earned. Few come to the US to “gain it”. That would be a stupid idea as those who do not live behind the US MSM Iron Curtain see the 3rd world America for what it really is. They are going to be disappointed when their ‘investments’ turn to shit and the multi-million dollar homes are worthless as there will be no buyers just as many Americans are going to see their pipe dreams go up in smoke.

America a “Free” society! That one makes me laugh until it hurts. I am more free here in the Philippines than you ever will be this side of death. There are many countries more “free” than America. Even Russians are more free than you are. Why do you think the Empire is trying to take down the only independent countries left on earth? Because, they do not bed the knee to the American Emperor. I could give you a list of examples for my assertion, but it would fill many pages and you would not read them or believe them anyway. Ignorance or denial does not change the message. Ignore it at your peril. You don’t seem to have a grasp on reality. You need to think about what is really happening, not what the government tells you to think.

Nony on Fri, 29th Jan 2016 9:36 pm 



Antaris:

I have lots of sympathy with the view that definitions affect the numbers you get. Still, this is I think a reasonable estimate (well done, by good impartial academics) with reasonable definitions (how much energy consumed in transforming the mixed barrel of goop that this the natural product we call crude oil, the remnant of million year old bacteria, into the commercial products and what their energy content is. The bottom line you get is ~10% loss. Note, that reducing energy use at refineries is a big lever in improving their economic competitiveness and that unlike the fancy boys in upstream these guys are NOT wildcatter geologists with secret well knowledge…they are transforming products sold on the world stage to products sold on the world stage.

Feel free to read up the specifics on the definition. I doubt you would have had a different definition from the beginning of the problem statement, but if you do, so be it. Anyhow, you wanted some citation and what I gave you was a very accessible reasonable study done by good people. At least you can chew on it…

Joe D on Fri, 29th Jan 2016 9:44 pm 



Regarding the Rivera, Han, Wang analysis. All tables of the analysis are in volumes. Yet it is an ENERGY efficiency analysis. Wouldn’t an Energy efficiency analysis require tables of BTU’s, Joules, Calories, or some form of ENERGY metric?