[John_A]

The $64 Trillion question is what happens from 2012 to 2022, especially if we see declining Global Net Exports of oil.

That is extremely dependent on how fast the developing world can achieve a US level of increasing efficiency driving down consumption, and how much of the rest of the world accesses their shale oil deposits. Tracking only exports ignores exactly the sort of effect the US is currently creating in world oil markets, and that alone is causing these kinds of statements from the Saudi's, AND voluntary cutbacks in oil exports. Which means the world is using less oil FASTER than countries lose export ability.

This type of scenario leads to exporter competition and that scenario has already played out in 1986. And those in industry back then undoubtedly remember how that went for careers, jobs, and their mortgage payments.

[Pops]

LOL, facts just never enter into your spiel do they John?

[John_A]

LOL, facts just never enter into your spiel do they John?

Which facts? America increasing oil production faster than at any time in its history, and the side effect of this being the Saudi's having to put out statements acting as though they are worried about it? All seems kind of straight forward, factual wise, to me. If the worlds oldest and 3rd largest producer of oil, half a century past its prime can pull off this kind of stunt, what happens when an even larger oil producing region, which isn't past its prime, suddenly decides to put the effort into both their normal resources as well as the kind of stuff the US is doing? Can Russia make 15 million a day from conventional resources plus 50% greater amounts of shale oil they have than we do? Here are the amounts claimed by the most recent study on the topic.

http://www.eia.gov/analysis/studies/worldshalegas/

Facts, facts everywhere. The Saudi's are talking for a reason, they haven't forgotten what happened in 1986 (the facts on that price crash aren't in dispute either) and how it happened. Guaranteed. Want another fact? Interested Saudi princes, perhaps even the one referred to in the most recent press release, they dropped in on the EIA to get the story from the horses mouth back in February of this year. Things that make you go mmmmmmmm........

You can call the Saudi's many things, but stupid ain't one of them. And that's a fact.

[TheDude]

America increasing oil production faster than at any time in its history

Largest YOY gains in US production history:

Code: Select all

2012      840
1951      751
1940      643
1967      515
1937      499
1966      491
1923      480
1955      465
1978      462
1944      459
1948      432

Almost every year in this set was in the era of ca. $2/bbl. Some of these years just reflect shut-in production coming back online, but a good few are from further on down the line too; here are the largest YOY contractions:

Code: Select all

1941      -260
1986      -291
1930      -300
1993      -324
1987      -331
1999      -371
1975      -399
1974      -434
1958      -460
1949      -474
1989      -527

The whole tight oil phenomenon I'm still viewing as a proof of concept. Still haven't seen solid proof that the American experience can be replicated elsewhere easily, if at all - the French put the kibosh on it with the stroke of a pen, after all. FSU nations seem to be content with tertiary recovery on old conventional fields.

"Drowning in oil," well, that'd be great if we had somewhere to put it. There was a massive stock buildout in the 80s to have somewhere to store all that North Sea/Slope crude. These days the OECD stocks just seem to be warbling about, just like demand for the stuff is doing. BRIC nations/exporters, good luck finding solid numbers. EIA tells us for instance that "In addition to the strategic reserves of crude oil, China had between 170 and 310 million barrels of commercial crude oil storage capacity in 2010 according to various Chinese government and private sector sources." Nice fudge factor you got there, EIA. And they're paid to get to the bottom of these matters.

[Pops]

John the USs falling consumption doesn't have anything to do with "efficiency" it has to do with not driving because it costs too much, lol. I could quote chapter and verse but to what end? You'll just repeat the same tripe tomorrow, it's what you do.

And don't you think the Fracking Miracle would have shown some legs somewhere other than 14 counties in the US by now, at this price? Even Leo M., Grand Phobah of Fracking Fluffing now says it's doubtful fracking will spread outside of the US any time soon, at least in the way it popped here. How can it, half the rigs in the world are here, lol.

And where is all this new shale oil you keep harping about going? It's going to offset the decline in the rest of the world's oil production. Study the chart, the US & Canada, Russia and Iraq are the only countries growing at all.



ROCK is exactly right, the reason prices are still at record levels - higher that at any time in the past as a yearly average for 2 1/2 years now - is because supply is not meeting demand, just that simple. If there were a glut of oil or a dearth of demand the price would fall, that's the rule, just as it did with the nat gas drilling bubble.

Our new member DC put up a couple of believable charts showing that using the EIAs URR fracking in the baken will peak within a few of years at less than 2Mbopd, barely enough to offset the ROW decline to this point. 2Mbopd for a while is better than none but it ain't great.

The reason KSA isn't playing the swinger is because they can't, they are drilling for gas because a)they want to export it b) they want to burn gas to run the A/C and c) I think they really want to manage what they have for the long term. It could be they've been reading westexas because there are rumblings of actually reducing subsidies and building mass transit instead.

Riyadh plans a bit of social engineering to go with the Saudi capital’s new $22 billion-plus metro project, hoping to coax car-loving Saudis off clogged roads and into the subway, the head of Riyadh’s development authority says...

Once the project’s done, the authorities will be looking for “incentives that encourage the people to use public transport,” Mr. Sultan said. That could include increases “in terms of fuel costs,” he added.

http://blogs.wsj.com/middleeast/2013/07 ... ng-saudis/

That ought to open some eyes on the US right, lol
.

[TheDude]

I mean to take a closer look at what's happened with US demand - it's intriguing that VMT is up a titch but gasoline consumption is flat. We have weekly numbers that can reveal what's up with each sector.

I see how Puti Put has loosened the reigns a titch: RusPetro Says Tight Oil Tax Relief to Provide Big Boost | Business | The Moscow Times

29 July 2013 | Issue 5178
Reuters
RusPetro, the only Russian company focused on hard-to-extract "tight oil," said it would get significant tax relief for almost all of its current crude production under a law signed earlier this week.

Development of tight oil could help Russia, the world's largest crude producer, meet its aim to maintain production capacity at its current level of more than 10 million barrels per day over the next decade.

RusPetro, with proved and probable reserves of more than 1.8 billion barrels of oil equivalent in the heart of West Siberia, said it would get 80 percent relief on mineral extraction tax for about 97 percent of its current oil production.

But of course there's a catch:

But Putin also left in an amendment that requires separate metering for tight oil at each well, a costly new infrastructure that may prevent companies from using the tax relief.

RusPetro has obtained an interest in exploring the Bazhenov formation, which covers 2.3 million square kilometers in West Siberia. Russian producers have already reported 500 million tons, or 3.5 billion barrels, of recoverable tight oil reserves in the formation.

Alexander Nazarov, an analyst with Gazprombank, welcomed the tax relief but said it was worth waiting a couple of months to see how companies would deal with the new tax regime.

First I've heard about the Baz in the news for some time now. It's pretty ridiculously huge. Дрель Дрель младенца!

[John_A]

EIA tells us for instance that "In addition to the strategic reserves of crude oil, China had between 170 and 310 million barrels of commercial crude oil storage capacity in 2010 according to various Chinese government and private sector sources." Nice fudge factor you got there, EIA. And they're paid to get to the bottom of these matters.

About a year or two back the EIA had its budget whacked by a decent 10%, and that was before sequestration. So, they are paid, but apparently not much. An amazing thing, considering the value of energy information for this country, be it domestic or international.

[Ferretlover]

A year or two ago, someone posted an item about SA going to solar power, and not starting any new fields so there would be something left for the citizens of SA.
Fracking, IMHO, is actually another sign depicting how desperate TPTB are for oil.

[John_A]

A year or two ago, someone posted an item about SA going to solar power, and not starting any new fields so there would be something left for the citizens of SA.
Fracking, IMHO, is actually another sign depicting how desperate TPTB are for oil.

TPTB aren't the ones desperate for oil. Joe Sixpack is. Although TPTB would certainly like to encourage this particular dependency, just like they do home ownership (buy into BAU that big and they have you by the short hairs every time), access to credit, and semi-legal use of weed. Semi-legal being the key, then they can choose to ignore or arrest you purely at their discretion, TPTB just loves those kind of laws.

[AirlinePilot]

John the USs falling consumption doesn't have anything to do with "efficiency" it has to do with not driving because it costs too much, lol. I could quote chapter and verse but to what end? You'll just repeat the same tripe tomorrow, it's what you do.

I will Echo pops sentiment here. My own research over the last 2-3 years indicates this is exactly what is going on. If you believe that it is efficiency causing US (or OECD) demand drop then your deluding yourself. Some tiny fraction to be sure, but the bulk of it is by price. Its the only way you deal with GNE falling YOY.

Someone did a post a while back talking about the disposable nature of use when you are using so much. We can still get by with less and since costs are so high, the part of our income we use for gas/oil is a much larger amount than per capita in most of the developing world. They use a tiny fraction per capita so they have a long way to go yet....via demand growth....before the higher costs cut into their budget in a significant way. Not so much in the OECD.

Saying its efficiency is simply a form of denial, and we all know that there is still plenty of that around.

[dorlomin]

According to Baker Hughes about 60% of the world rigs can find no where more profitable to drill than US tight oil.About 75 million barrels of oil comes from about 40% of the rigs, the US rigs are producing about 2.3 million barrels.

[ROCKMAN]

d - I don't understand your numbers...can you expand? Drill rigs don't produce oil. Are you saying certain rigs drilled wells in certain regions that produce X bopd?

There's a good reason the US dominates the global rig count: small US independent companies. Very few can function in the international theater. It also explains why the average US rig develops small reserves and lower production rates: international projects, as a combination of higher costs and mandates from NOC's, require bigger targets. The small US independent develop reserves that are typically much to small for an NOC or Big Oil to pursue.

In a sense the US and international rigs counts represent two different universes.

[SamInNebraska]

John the USs falling consumption doesn't have anything to do with "efficiency" it has to do with not driving because it costs too much, lol. I could quote chapter and verse but to what end? You'll just repeat the same tripe tomorrow, it's what you do.

I will Echo pops sentiment here. My own research over the last 2-3 years indicates this is exactly what is going on.

And what might your experience in "doing research" be? John did not define wht he meant by "efficiency, he appears to be noting, correctly, that less is used now, than it once was. For anyone who has done their "research", it is quite obvious that there are now more people, and they are using less, the amount per capita used is less, and it is reasonable to call this an increase in efficiency.

Saying its efficiency is simply a form of denial, and we all know that there is still plenty of that around.

There is plenty around, and efficiency has nothing to do with denial, and everything to do with using less while doing either a proportionate amount less work(which would be zero change in efficiency on a per capita basis) or slightly more than proportionately less, in which case there is an increase in efficiency.

Increased prices drive increases in efficiency, it is just that easy of an assumption for an economist to make because it is the fundamental function of price.

The key is not what is the price of gasoline or liquid fuels, the key is what does any one individual pay for their fuel use over the course of a year.

I buy $1000 in fuel at $2/gal for my V10 powered Excursion. This allows me to buy 500 gallons, and go approximately 5000 miles.

The price doubles, and I change my behavior, and switch to a mid sized sedan. Now when I drive 5000 miles I need only 200 gallons of fuel, which with a doubling of prices costs me $800.

Economics in action, certainly I now use 60% less fuel for the same amount of transport, and pay 20% less to boot. Focus on the amount spent now ($800) versus then ($1000) and I saved $200, and the price of gasoline is now doubled. If we had another doubling or two in America, get us to at least European prices, and the efficiency would just keep piling on.

[AirlinePilot]

Its been pretty evident to me....and Im not the only one who thinks so...that the drop in vehicle miles traveled in the US has been due to PRICE for gasoline. If it was efficiency I'd expect something very different to have happened.

Anecdotal evidence of personal efficiency gains doesn't count. I do not deny that there is some gain to be had (from efficiency) and we have seen some because of the price, but its extremely difficult to quantify.

[John_A]

Its been pretty evident to me....and Im not the only one who thinks so...that the drop in vehicle miles traveled in the US has been due to PRICE for gasoline. If it was efficiency I'd expect something very different to have happened.

An economist would expect exactly what happened. Price goes up, people substitute, conserve, CHANGE. Replace your monster truck with a mid sized sedan, call it a day, and let everyone else worry about their personal solution to high prices.

Economics covers this one really well. Efficiency woo hoo. How much GDP has disappeared as people used less fuel? Any?

Anecdotal evidence of personal efficiency gains doesn't count. I do not deny that there is some gain to be had (from efficiency) and we have seen some because of the price, but its extremely difficult to quantify.

Personal efficiency X 1,000,000 people = yes, they do count. And fortunately, we have economics to tell us how, and why, and what it means. This board really needs a full time economist or two to explain how all this stuff works, rather than just letting us amateurs bumble around in the dark.

[John_A]

Its been pretty evident to me....and Im not the only one who thinks so...that the drop in vehicle miles traveled in the US has been due to PRICE for gasoline. If it was efficiency I'd expect something very different to have happened.

Not to put too fine a point on it, but this is the something "very different" to have happened....for Americans anyway. Economics in action!

Drivers put off buying new cars during the recession, nursing their jalopies through to better times. But in the last year, they have returned to showrooms in droves not only to buy cars likely to last them longer, but to trade in for models that will get better gas mileage.

http://www.usatoday.com/story/driveon/2 ... k/2621713/

[AirlinePilot]

In the US vehicle miles traveled are down measurably over the last 3-4 years. It is not insignificant. If you consider that efficiency I would submit you are a bit confused. The drop is solely due to high fuel prices and a lowering of disposable income. You would expect that if it really was efficiency, as all you cornies claim, vehicle miles traveled would not be down so much here.

[ROCKMAN]

AP - Don't want to interfere in the pissing battle you two are having but it does seem to be a valid point: if someone has responded seriously by going very efficient, such as switching from 20 mpg to 40 mpg, I don't see a great incentive for them to drive less. Might even drive a little more. OTOH if the efficiency gain in general is going from 20 mpg to 24 mpg it's difficult to see that having much effect on consumption especially given how slow the public is to change out vehicles.

Also maybe it's just how one defines he terms. I don't think of folks driving fewer miles as a measure of efficiency. To me that's really just conservation. And conservation motivated by fuel costs and not by any desire to see the US become "energy independent". Consuming less fuel and seeing more miles driven would be a great gain in efficiency in my book. At any one point in times folks are consuming X gallons of gasoline per year and driving Y miles per year. Wouldn't the answer regarding efficiency vs. demand destruction be just a matter of calculating the change in mpg over time? If we're consuming less but the average mpg of US drivers hasn't increased significantly then it would seem that demand destruction is the answer.

[Pops]

Just imagine how efficient those long-term unemployed folks are who've been more or less permanently removed from the labor market!

Heck, if we can reduce the labor participation rate down to 40% or 50% I'll bet our efficiency doubles.

Ah, good times.

[John_A]

In the US vehicle miles traveled are down measurably over the last 3-4 years. It is not insignificant. If you consider that efficiency I would submit you are a bit confused.

We need a board economist. Rising prices cause conservation (driving less), substitution (econobox instead of monster truck) and just general behavior changes to minimize cost. Darn right that is efficiency, the same number of people use less. Period. Now, those whining about having to change their behavior because of price might not be happy, but the wonders of economic theory should cover this kind of efficiency wonderfully well.

The drop is solely due to high fuel prices and a lowering of disposable income. You would expect that if it really was efficiency, as all you cornies claim, vehicle miles traveled would not be down so much here.

yes, price, it means people drive less. Who would have thunk it that price could directly lead to people being better people, driving less, doing other things instead of emitting CO2 in their monster trucks, it sure all sounds good.