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Page added on October 11, 2014
Why Oil Is Plunging: The Other Part Of The “Secret Deal” Between The US And Saudi Arabia
Two weeks ago, we revealed one part of the “Secret Deal” between the US and Saudi Arabia: namely what the US ‘brought to the table’ as part of its grand alliance strategy in the middle east, which proudly revealed Saudi Arabia to be “aligned” with the US against ISIS, when in reality John Kerry was merely doing Saudi Arabia’s will when the WSJ reported that “the process gave the Saudis leverage to extract a fresh U.S. commitment to beef up training for rebels fighting Mr. Assad, whose demise the Saudis still see as a top priority.”
What was not clear is what was the other part: what did the Saudis bring to the table, or said otherwise, how exactly it was that Saudi Arabia would compensate the US for bombing the Assad infrastructure until the hated Syrian leader was toppled, creating a power vacuum in his wake that would allow Syria, Qatar, Jordan and/or Turkey to divide the spoils of war as they saw fit.
A glimpse of the answer was provided earlier in the article “The Oil Weapon: A New Way To Wage War“, because at the end of the day it is always about oil, and leverage.
The full answer comes courtesy of Anadolu Agency, which explains not only the big picture involving Saudi Arabia and its biggest asset, oil, but also the latest fracturing of OPEC at the behest of Saudi Arabia…
… which however is merely using “the oil weapon” to target the old slash new Cold War foe #1: Vladimir Putin.
To wit:
Saudi Arabia to pressure Russia, Iran with price of oil
Saudi Arabia will force the price of oil down, in an effort to put political pressure on Iran and Russia, according to the President of Saudi Arabia Oil Policies and Strategic Expectations Center.
Saudi Arabia plans to sell oil cheap for political reasons, one analyst says.
To pressure Iran to limit its nuclear program, and to change Russia’s position on Syria, Riyadh will sell oil below the average spot price at $50 to $60 per barrel in the Asian markets and North America, says Rashid Abanmy, President of the Riyadh-based Saudi Arabia Oil Policies and Strategic Expectations Center. The marked decrease in the price of oil in the last three months, to $92 from $115 per barrel, was caused by Saudi Arabia, according to Abanmy.
With oil demand declining, the ostensible reason for the price drop is to attract new clients, Abanmy said, but the real reason is political. Saudi Arabia wants to get Iran to limit its nuclear energy expansion, and to make Russia change its position of support for the Assad Regime in Syria. Both countries depend heavily on petroleum exports for revenue, and a lower oil price means less money coming in, Abanmy pointed out. The Gulf states will be less affected by the price drop, he added.
The Organization of the Petroleum Exporting Countries, which is the technical arbiter of the price of oil for Saudi Arabia and the 11 other countries that make up the group, won’t be able to affect Saudi Arabia’s decision, Abanmy maintained.
The organization’s decisions are only recommendations and are not binding for the member oil producing countries, he explained.
Today’s Brent closing price: $90. Russia’s oil price budget for the period 2015-2017? $100. Which means much more “forced Brent liquidation” is in the cards in the coming weeks as America’s suddenly once again very strategic ally, Saudi Arabia, does everything in its power to break Putin.
56 Comments on "Why Oil Is Plunging: The Other Part Of The “Secret Deal” Between The US And Saudi Arabia"
shortonoil on Sat, 11th Oct 2014 8:41 am
As we approach the end of the oil age expect more ridiculous articles like this one. The Saudis are in no position to “break” the the Russians. The Russians have a guaranteed market in Europe that no one else can fill, including the Saudis. The Saudis have 27 million oil welfare recipients that will hang them from the nearest palm tree when the handouts stop. The Saudis have massive production cost increases, and rapidly depleting fields. Ghawar, their crown jewel, is well over 90% depleted.
Last week Aramco cut the cost of crude to North American by 50 cents a barrel. They cut the cost because demand is down, not because they want to break the Russians. Demand is down because petroleum’s ability to drive the economy is declining. As the economy declines , demand follows. It now takes 53% of the energy available from a barrel of oil to produce the oil, and its products. This leaves the end consumer with a product of continually declining value.
As depletion continues its relentless march forward expect shut-ins of high cost production, increasing stress in oil producing countries, and declining prices. Geopolitical events will be effects, not causes.
http://www.thehillsgroup.org/
rockman on Sat, 11th Oct 2014 8:43 am
“Plunging oil prices”. LOL. Yep… plunging to a level that’s 300% higher then it was decade or so ago.
Poor KSA: having to scrape by with 100’s of $BILLIONS more at these “plunged prices” compared to their income not that many years ago.
Just more rookie spin efforts. LOL.
Perk Earl on Sat, 11th Oct 2014 9:27 am
“As we approach the end of the oil age expect more ridiculous articles like this one.”
I read this article on zerohedge yesterday and didn’t believe it then either, shortonoil. ZH rolls out a different article every few hours so a lot of it is sensationalized to the point of being pure speculation of the wildest kind to agitate their many young posters, while attempting to substantiate the many ads attached to that site.
steve on Sat, 11th Oct 2014 9:48 am
how long can we be at this oil price before they start shutting down shale production in Texas and North Dakota or is it already happening…..one thing I will miss in the post BAU world is spell check…I can’t spell for sh*t
Davy on Sat, 11th Oct 2014 9:48 am
Perk, I like ZH because they are slapping around the psycho finance types in DC & NY. I am tiring of the unbalanced anti-American side of that message. They like to bash America and talk up the bright horses. These bright horses are also a mess so this is clearly propaganda ideologue talk. But, hey, look at who they are up against! The DC/NY mafia den is the best funded and most effective propagandist ideologues on the planet so I guess I have to accept that part of the game.
paulo1 on Sat, 11th Oct 2014 9:50 am
When I am bored I hit Zero H, but for the most part it is a waste of time…..especially their comment section on any and all articles.
How many times can you read and chuckle at:
Bitchez
BTFD
Ohbomba
etc etc etc. It is tweet site full of dummies.
Paulo
Davy on Sat, 11th Oct 2014 9:57 am
Paulo, agreed but it is hard to find alternative finance news.
scott on Sat, 11th Oct 2014 10:50 am
Pay attention to zero hedge articles. I have followed for the past few years and they seem to identify truths before they come to light in mainstream media. True you have to filter out some of the craziness. but there are a lot of valid stories and theories that come to light many months later.
ghung on Sat, 11th Oct 2014 10:54 am
Steve: “one thing I will miss in the post BAU world is spell check…”
Yeah Steve, I found a new book they call a “dictionary”;-)
I wonder how many homes even have one these days. Our fat Webster’s still has a prominent place in our library. I like to go there and read about the origin of certain words.
Rivaz Ahmed on Sat, 11th Oct 2014 11:02 am
For Saudi Arabia – Oil is the only export commodity.
For Iran – Oil & Natgas are 2 main export commodities.
For Russia – Oil, Natgas, Coal, Steel, Aluminium, Uranium, Gold, Platinum and so many other commodities are exported.
But here in USA, many people just look at Oil alone as though its the only commodity.
Oil prices plunging down will affect Saudi Arabia only.
If prices for Oil go above $100, then the move to alternative fuel vehicles will accelerate.
Already the electric vehicle sales are increasing world wide.
Hope Saudis take notice of it.
Nony on Sat, 11th Oct 2014 11:14 am
If we are running out, Hotelling price theory says price should rise yearly at the price of capital. What is happening is at least a trend in the opposite direction. Seems to show that OPEC is a cartel (duh) versus pumping all out. And that U.S. crude is at least a wedge to drive price wars.
RHO on Sat, 11th Oct 2014 11:21 am
The “end of the oil age” is still a long way off. No matter how much you libs may despise that evil oil (and capitalism), it is the only viable fuel for the world for the next fifty years. There is still a lot of oil left in the ground, and it just may be that we don’t really understand the creation of it as well as the haters think we do.
jack on Sat, 11th Oct 2014 11:29 am
i think the Saudi’s reduced their prices in order to compete with shale oil. Kerry or Russia or Iran are just incidental.
jack on Sat, 11th Oct 2014 11:31 am
shale oil and alternative energy sources too
steve on Sat, 11th Oct 2014 11:31 am
Ah…dictionary im a gonna git me one of dem….But seriously I have been stocking up on print books but strangely enough I did not think of a good dictionary….I hope I will have time and energy to read in a post BAU world…
Gary Anderson on Sat, 11th Oct 2014 11:45 am
If I were running Russia I would consider this Saudi deal an act of war.
Gary Anderson on Sat, 11th Oct 2014 11:46 am
Jack, you are incorrect, Saudi Arabia gets US support against ISIS in exchange for the US seeking to destroy Russia, and that will backfire.
GregT on Sat, 11th Oct 2014 11:50 am
I have suspected manipulation to be a large contributing factor to the recent price drop in a barrel of crude. An almost 20% decline in only three short months does not make any sense when only supply and demand are taken into consideration. If demand has really declined that much in the last 90 days, why not cut back on production (supply)? If the KSA alone turned off the taps, the price would skyrocket overnight.
Nony on Sat, 11th Oct 2014 12:08 pm
Given oil demand is relatively inelastic, small increases in supply (e.g. the Libyan barrels) can drive large price drops in a free market. [This is mathematical…not opinion.] OPEC can act to constrain the market (to be not free) if they successfully coordinate volume production (their quotas). The problem is when they break down in cooperation. (problem for them, benefit for consumers).
Of course the whole point of this is that a LOT of the high prices for the last few years has been not because of gradual Hotelling exhaustion of a fixed resource, but cartel efficacy.
GregT on Sat, 11th Oct 2014 12:19 pm
High prices are also limited by what the consumer is willing/ able to pay. The consumer has been both willing, and able to pay high prices. Given that demand is relatively inelastic, small decreases in supply can drive large price increases in a free market. There is no good reason for prices to be dropping, other than an agreement as proposed above. DC is trying to maintain global hegemony, the Saudis are trying to destabilize the ME and Russia. The game continues. The same game that has been played in earnest, since 2001.
Later on Sat, 11th Oct 2014 12:36 pm
The Saudi’s know that in order for shale oil to be “harvested” the price of oil has to be very high.
They also realize that the more experience we have with shale oil the cheaper we will pull it out of the earth.
Money trail as usual.
shortonoil on Sat, 11th Oct 2014 1:13 pm
“High prices are also limited by what the consumer is willing/ able to pay. The consumer has been both willing, and able to pay high prices.”
Total world debt has increased 40% in the last six years. That is not indicative of a consumer who has money to spare. It is a sign of a consumer that must borrow to fund their pricy oil habit.
In 1970 the consumer got 3.6 million BTU out of a barrel of oil, in 2014 they are getting about 1.0 million. The value of oil when measured by its true metric, energy, is declining rapidly. It is hardly surprising that the consumer is unwilling, and unable to pay higher prices for petroleum, and its products. This decline in petroleum’s ability to supply the consumer with what they want, which is energy, is not surprising. It is the direct result of depletion, a concept that many find hard to understand, or accept. It is occurring with every commodity that we extract from the earth; water, soil nutrients, metals, minerals, and petroleum.
The end of the oil age is not very far away. It will come when the consumer gets zero energy from a barrel of oil. After that point it becomes just black goo. It has already become more expensive than the consumer, or the producer can afford to pay. Expect this situation to worsen significantly over the next few years. Debt accumulation will break the back of oil, just like it will break the world’s economy.
http://www.thehillsgroup.org/
Davy on Sat, 11th Oct 2014 1:15 pm
Has anyone noticed a 20% correction to the S&P 500. What about the bond market? Has anyone notice the tapper? What about China’s slow down? I have never seen a decouple of oil from the economy. I am sure the DC/NY mafia is up to no good with the usual manipulation. I am sure the ME cartel is playing their games. The primary factor in all this is bad news, declining confidence, and a slowing Asian growth. The rest is cake icing.
dn32844 on Sat, 11th Oct 2014 2:34 pm
Its all game of the great Satan to break back bone of Russia. I did see it 2 month ago as the U.S. plot against Russia was brewing. But like its other wars, this too will hit the fan soon.
GregT on Sat, 11th Oct 2014 2:51 pm
“Total world debt has increased 40% in the last six years. That is not indicative of a consumer who has money to spare. It is a sign of a consumer that must borrow to fund their pricy oil habit.”
Absolutely agree. Debt is at an all time high. Disposable income is in decline. 54 percent of Canadians are now living paycheck to paycheck, but I see no reduction of vehicles on the road here in Vancouver. Traffic congestion is growing exponentially. The difference in the last 4 years alone, is astronomical. The amount of full sized pickups on the road is increasing, and ‘rush hour’ now lasts almost all day long. The consumer may not be able to afford the extra expense of increased fuel costs, but he is still buying fuel, at the ‘expense’ of everything else.
Robert Loveless on Sat, 11th Oct 2014 3:02 pm
how is this possible?
Obama promised us that his would be the most transparent administration in history.. There couldn’t be any ‘secret’ deals, because that would mean that he wasn’t telling the truth, right??
kill'em.all on Sat, 11th Oct 2014 3:09 pm
the americans will abandon the deal made with saud after ww2…
“keep the oil flowing and we’ll make you rich beyond your wildest dreams”
the u.s. thugs have no honor, only greed.
they’ll make the same deal with iran or whoever will keep everyone riled up.
they don’t hate us for our freedom; they hate the u.s. government for killing their babies and stealing everything they can.
the same as some americans would do if a foreign power did the same to us.
oh, we did…. it was called the American revolution.
welcome to version 2.0
America is so over unless patriots stand and violently overthrow the thugs who claim to be the u.s. government.
face shots and burned thug houses.
baptised on Sat, 11th Oct 2014 3:27 pm
The slope is too steep, without a MSM scare tactic. Their is some politics involved.
Brett Jameson on Sat, 11th Oct 2014 3:38 pm
The sooner Americans go after all these oil/war profiteering terrorists the better. Trace the evil behind the violence in the Middle East back to Texas, Israel, and Saudi Arabia.
marmico on Sat, 11th Oct 2014 3:45 pm
Disposable income is in decline
Only according to mythologists.
he is still buying fuel, at the ‘expense’ of everything else.
More mythology. 10 years ago the U.S. consumer was spending 2.9 cents per dollar of total spending on gasoline. Today it is less than 3.5 cents. An increase of a half of a penny per dollar is not meaningful in an aggregate sense.
Davy on Sat, 11th Oct 2014 4:08 pm
Marm, what friggen heartless planet were you born on? I guess you forget that when you average the dismal situation with the middle class with the money sucking 1%ers yea you only get a mild increase. Marm-w/o-a-heart in almost every important expense catagory the bulk of the Main Street type people are loosing ground. Cheap junk from China is even going up in price. You sound like the fed when one of their wonks said iPads were cheaper lowering inflation. Marm, did you say the above just to be a troll and anger the caring people here on PO?
Rocky M on Sat, 11th Oct 2014 4:35 pm
Everybody, this secret deal is with the Saudi’s and it’s not targeting Iran or Russia. It’s actually targetting the American voter. They want to keep everyone happy for the oft overlooked but important mid term elections, in order to further the leftist agenda. I don’t know what they have offered the Saudis for their participation, but I have a sneaky suspicion that it has something to do with America’s honor and integrity concerning Israel.
Please, don’t be fooled. Get out and vote.
GregT on Sat, 11th Oct 2014 5:00 pm
REAL disposable income per capita:
http://www.oftwominds.com/photos2014/income-per-capita1-14a.png
Department store sales, 1990 to present:
ht tp://www.oftwominds.com/photos2014/CRE8-1-14a.png
There’s a big problem with per capita (and mean or average) measures of income: a significant gain in the the top 10%’s income will mask the decline in the bottom 90%’s income. If households earning $150,000 annually get a boost to $200,000, that $50,000 increase not only offsets the decline of nine households who saw their income decline from $35,000 to $31,500 annually, but pushes both the per capita income metrics higher even as 9 of 10 households experienced a 10% decline in income.
ht tp://www.oftwominds.com/photos2014/CRE4-1-14a.png
Robert Testa on Sat, 11th Oct 2014 6:42 pm
Toyota=fuel cell electric=who the hell needs oil.
alex s on Sat, 11th Oct 2014 6:45 pm
To the shortnooil guy…. wow just wow… read ur site and u live in a short sellers fantasy world. Yes, oil is a finite resource. But if u think ur going to be around and solvent by the time the last drop comes out you are sorely mistaken. The fact is, the article, although somewhat absent of detail, is telling the truth…
GregT on Sat, 11th Oct 2014 7:21 pm
Toyota=fuel cell electric=who the hell needs oil?
Is this a trick question? In this case, obviously Toyota would need oil. How the hell else do you expect them to build a billion plus EVs?
synapsid on Sat, 11th Oct 2014 7:44 pm
Who was it who said that the internet is the perfect vehicle for the instant transmission of heated opinion?
fida on Sat, 11th Oct 2014 7:57 pm
Saudi’s are naughty boys without brain power, in their excitement to punish Russia and Iran, they might end up eating the dust when their lazy boys stop getting the free money.
Speculawyer on Sat, 11th Oct 2014 9:52 pm
Yeah, I’m not buying this ‘secret deal’ bit. I wouldn’t be surprised if the Saudis are allowing the oil price to drop because they have plenty of money in the bank and they know low oil prices hurt their rival Iran and hurt Russia who supports Assad. But the price can’t drop much lower or else the fracking & tar sands investments will slow down.
bobinget on Sat, 11th Oct 2014 10:05 pm
“When elephants fight its the grass that suffers”.
Kenyan proverb
As I’ve been repeating for the last six months (ad nausea) When oil giants like Iran, Iraq and Saudi Arabia are engaged in a proxy war (over Syria), What could go wrong?
Enter the US and soon Israel. Did you happen to notice nations as diverse as Canada, the UK, Australia, France,
offered to help bomb IS. All of the above are tens of thousands of miles distant. Israel, with one of the most sophisticated air-forces in the world has been silent.
12 minutes ago:
Iranian Deputy Foreign Minister Hossein Amir Abdollahian on Saturday warned the US that if America and its coalition tries to topple Syrian President Bashar Assad, Israel will be attacked, reports Associated Press.
In fact, this is not the first time Abdollahian has made such a warning against deposing Iran’s ally Assad; last September he likewise said a US strike on Syria would lead to attacks on Israel by “some groups and movements that have formed over the past two or three years.”
The statements are viewed by many as a thinly veiled threat by the Islamic regime, which has repeatedly threatened to annihilate Israel – just over a week ago for the Hajj pilgrimage Iranian Supreme Leader Ayatollah Ali Khamenei called for Muslim unity for Israel’s annihilation.
Iran has been actively pursuing those statements by continuing its nuclear program. A mass explosion occurred at Iran’s secret Parchin nuclear facility last Sunday – a site Iran has admitted has been used to test exploding bridge wires used as a nuclear bomb detonator. Iran has also supplied rockets to its terror proxies Hamas and Hezbollah to use against Israel.
On another front, Abdollahian confirmed that Iran and the US have been in contact over the fight against Islamic State (ISIS) terrorists in Iraq and Syria, reports Associated Press.
The comments are the first time a senior Iranian official has confirmed Iranian and American discussion regarding how to fight the ISIS threat.
http://www.israelnationalnews.com/News/News.aspx/186032#.VDnvcUu5JBU
bigd3086 on Sat, 11th Oct 2014 10:23 pm
the president got himself in a mess when he put the line in sand in syria and when it was crossed he needed someone to bale him out. That someone was putin in exchange we told him he could have crimea. when he took this as a sign of weakness and tried to take half of the ukraine the oil war was born. Saudi Arabia needed our help with something that scares the s… out of them. ISIS. In exchange for that they would help us drive Russia to the verge of collapse. It wouldn’t have to go that far except Putin is the classic Russian macho man and he’s to stupid to give in for fear of seeming weak
William on Sat, 11th Oct 2014 10:44 pm
SOMEONE SAID “GET OUT AND VOTE IN USA”
That is a waste of effort, because it
just being a choice between evils.
EXCEPT THE – PROPOSITIONS – TO VOTE ON
A – proposition – to be voted on
can be very dangerous if they pass.
To many think elections are just about
voting people into office
A proposed PROPOSITION, if the proposition passes, it becomes law.
*Most propositions are poorly written,
and do not consider all the issues involved, being to focused on a few things, to then create problems in many other areas where no problem had existed before.
*Many propositions just favor one or a few groups, hurting others in BIG ways.
*Many propositions result in higher taxes, to = less personal $$ to spend.
*Many propositions take your freedoms away NOT being constitutional.
*Most propositions have several of the above issues involved to make it BAD.
THUS while not liking anyone
running for any office
VOTE to address the propositions.
UNLESS the USA citizens do away with
* political parties,
* career politician (2 terms or more)
* paid lobbyist,
* attorneys in Congress
* attorneys in legislatures
* corrupt judges
* liberal judges in Fed and state gov.
AND JUST vote for AVERAGE CITIZENS
WHO WILL BRING THE USA BACK TO THE
CONSTITUTION
only then will things change for BETTER in USA and the world.
PLUS keeping 2nd amendment having guns.
Gun control is just anti-good citizen.
The criminals ALWAYS get the guns.
Gun control is for
the thugs and criminals to
control the people.
The majority do not go shooting people.
It is the good people, the majority
who make the up a good
police and military.
Those seeking gun control are DANGEROUS.
The ordinary citizens must
come to realize
that they need each other
as to common issues, such as
political economy and all public issues,
while at the same time can also have
their own ethic customs and ways
and select
their own private circle of friends.
Much of what I said above,
would require a
Constitutional amendment
Also NEED a way to finance ordinary citizen to run for political office, ONE TIME, using public tax money
Otherwise typical citizen
HAS NO SAY IN GOVERNMENT
while having to pay the bills,
and be in the military
NOW as someone said on the postings,
the USA is EXTREMELY broken
from its initial intentions,
and would require the people to UNITE.
Unfortunately,
I do not see that happening.
To many do not know what the USA was.
To many do not know the Constitution, the foundation of USA, and do not care.
The Supreme Court and judges all across
the USA are violating the Constitution.
Congress has the ultimate power and
could change everything, but will not happen until the citizens UNITE and take their country back from the thugs.
Realistically, USA is to divided
therefore, it will not happen unfortunately.
Ray on Sat, 11th Oct 2014 11:19 pm
Some real well thought out posts. Let’s hope it does not affect U.S. oil production. Keep on fracking baby!
Sudhir Jatar on Sun, 12th Oct 2014 2:27 am
What ever the reliability of the ZeroHedge, the fact is that shale oil will become uneconomical if the price of oil falls below $85 a barrel.
Lex on Sun, 12th Oct 2014 5:27 am
Secret deal? Peak Oil? The US just surpassed both Saudi Arabia and Russia as the number one energy producer on earth including , gas, oil coal and miscellaneous, It is also the largest consumer considering that china manufactures for us and our webs of international companies. all depends on how you look at it. There is no peak oil and probably won’t be for thousands of years if ever. Why the price is down ? Some might say over supply to retain the high prices. Would not take a deal with saudia Arabia to do that. Also the kerds and now ISIS in Iraq have been selling cut rate oil. That did not help to maintain global prices. If you think tar sands exploitation are an over cost way to obtain oil this is what we need to prove it. Lower prices. Lower prices may not last long. India and China and south east asia and Africa and hot economic spots around the world are growing. Cars are being sold worldwide and so many that that the world will soon look like the interstate highway system in California. India is being cut down the center with a highway north to south . Consumption will rise even as exploration in the US and elsewhere finds new major sources. A balance point will be reached.
shortonoil on Sun, 12th Oct 2014 8:43 am
“What ever the reliability of the ZeroHedge, the fact is that shale oil will become uneconomical if the price of oil falls below $85 a barrel.”
Over the full life cycle of a shale well it is probably already uneconomical. Our best estimate of shale puts its ERoEI at a little better than 7:1. 6.9 :1 is the minimum theoretical ERoEI that a liquid hydrocarbon can have and still be a self sustaining system. That is, it can supply enough energy to allow for its own production. (see our site: Commentaries, The Energy Factor II).
The Achilles heel of shale is in its cash flow. The 70% first year production decline rate of these wells means that a continually increasing number of wells must be drilled to service the debt of the wells that have already been drilled (this is being done at present with increasing lateral lengths, and frac stages; higher cost wells). Once producers can no longer borrow the money (increase their debt load) their cash flow will go negative in months. Backers that have been depending on increasing cash flows to justify their investments will go else where with their money. The bonds issued by these companies will begin to rapidly decline in value. The Ponzi scheme that has been played by the producers, and financiers that have back them will unravel.
The Etp model predicts that the high cost producers (those with low energy delivery capabilities) will be phased out before conventional. Ultra deep water, arctic, bitumen, high sulfur extra heavy, and shale make up the list of candidates. Shale, that has been backed by a set of naive investors that may soon “see the light”, is likely to be the first. The TBTF banks, like Goldman, will head for the exits — in a hurry. The “Secret Agreement Story” is just as likely to have come from one of them as from an insider. It takes time to liquidate positions.
http://www.thehillsgroup.org/
ghung on Sun, 12th Oct 2014 9:06 am
Short: “…a continually increasing number of wells must be drilled to service the debt of the wells that have already been drilled…”
This could be expanded to apply to our entire financialised economy. An increasing number of claims on real (or imaginary projected)assets must be made to service the debt on previous claims. The math is pretty simple; it doesn’t work for long.
Boat on Sun, 12th Oct 2014 9:27 am
If fracking needs higher oil prices to keep going, higher prices will happen. There will always be money for oil in the ground.
As the price for oil climbs populations in the developed countries will simply have less children. This is happening and will just happen faster. As for the starving child producing nations, at some point we food will not be delivered because of cost and they will just starve faster.
Northwest Resident on Sun, 12th Oct 2014 10:56 am
“Our best estimate of shale puts its ERoEI at a little better than 7:1.”
shortonoil — I see in this PDF that:
“The most reliable studies suggest that the EROI for oil shale falls between 1:1 and 2:1 when self-energy is counted as a cost.”
An Assessment of the Energy Return on Investment (EROI) of Oil Shale
ht tp://www.circleofblue.org/waternews/wp-content/uploads/2010/08/oilshale-assessment-2010-for-water.pdf
Question: How does your estimate differ from the one in the PDF (done by a couple of guys at the Department of Geography and Environment, Boston University)?
shortonoil on Sun, 12th Oct 2014 3:35 pm
NR asked:
Question: How does your estimate differ from the one in the PDF (done by a couple of guys at the Department of Geography and Environment, Boston University)?
“The most reliable studies suggest that the EROI for oil shale falls between 1:1 and 2:1 when self-energy is counted as a cost.”
The reason for the difference is that we are calculating ERoEI, not EROI. EROI refers to energy returned on energy invested to the end user. ERoEI refers to energy returned on energy invested at the “well head”.
Clevand says:
“One technique for evaluating energy systems is net energy analysis, which seeks to compare the
amount of energy delivered to society by a technology to the total energy required to find,
extract, process, deliver, and otherwise upgrade that energy to a socially useful form.”
The energy returned ratio varies according to where it is calculated, it is different at the well head, than at the refinery door, at the refinery gate, and etc. To avoid such confusion (the subject already has plenty of that) we define ERoEI at the well head, specifically. ERoEI is the only metric we use throughout the entire report to maintain consistency, and clarity.
When estimating the EROI to the end consumer from shale 1:1 is probably an optimistic estimate. That would mean that it is a break even. It is probably not an energy source at all but an energy sink! 0.7:1 would be a better estimate. That is, its takes energy from other sources to produce a finished fuel from shale production. Since we are talking about liquid hydrocarbons we deduct that from the amount of energy delivered by conventional.
http://www.thehillsgroup.org/