From: John Clark <[email protected]>
On Mon, Dec 22, 2014 'Chris de Morsella' via Everything List
<[email protected]> wrote:
>> In the USA oil production rose by more than half a million barrels per day
>> between 2007 and 2011 to the highest level in 15 years, and in that same
>> year the USA exported more gasoline and diesel than it imported for the
>> first time since 1949. And in 2012 USA oil production increased by another
>> 760,000 barrels a day, the largest yearly increase since records about oil
>> production started in 1859. But incredibly 2013 beat even that record, oil
>> production in the United States rose by another 992,000 barrels a day! And
>> in 2014 the USA overtook Saudi Arabia to become the largest producer of oil
>> on planet Earth, it was already the largest natural gas producer in the
>> world and has been since 2010.
> Yes, so what?
>>So the "false projections" about the USA becoming the next Saudi Arabia
>>turned out to be true.
That is misleading and is myopically focused in on the incomplete picture given
by just looking at current production numbers. The meme of "The USA becoming
the Saudi Arabia of shale" is that this resource base was as large in scale as
the Saudi mega fields and that the USA would achieve long term fossil oil & gas
independence based on these -- massively overstated reserves being produced.It
does not matter much ion the long run if for a few years and at the cost of
trillions of dollars of sunk capital that could have been better allocated in
other sectors, the US has managed to -- very temporarily -- increase it's
current production. The fact is we cannot sustain the level of drilling that
would be required just to hold production levels current levels; fracked wells
deplete a lot more rapidly than traditional oil & gas wells do. This assertion
is borne out by the actual (public domain) data that exists for the older more
mature tight oil play of the Eagle Ford formations (which ere developed before
the Marcellus and the Bakken)If you want to grab on to that much repeated sound
bite -- go ahead run with it, but it is little more than a fig leaf and does
not give an accurate picture of the energy production capacity of the US tight
oil sector over the next decades.
> I was under the mistaken impression that you understood what reserves mean,
>>And I was under the mistaken impression that you understood that historically
>>the proven oil reserves of a country have remained about as constant as the
>>New York Stock Exchange, it changes every time a new oil discovery is made,
>>and even more important, it changes every time a new technology is developed
>>that allows for the economic extraction of oil in places where it had
>>previously been uneconomic.
If that is the case can you kindly point these new super giant fields that must
have been discovered and are in the ever growing reserve numbers you seem to
believe in. Where are the new Ghawar super giants? They are not being
discovered John. Traditional oil has already peaked some years ago and the
tight oil sector will not be able to sustain the current production rates,
especially now that the global capital market for this sector is in full blown
retreat. The EIA has had to very significantly downgrade a lot of its reserve
projections in the US -- so I really don't have a clue what numbers you are
referring to and who is producing the numbers you seem to believe in.
> Reserves measure what is in the ground that can be recovered.
Reserves measure what is known to be in the ground that can be recovered
economically with existing technology.
Yes. That is what reserves are supposed to be measuring, but as the recent
fiasco with the EIA reserve projections for the California Monterey shale
formation (from May of last year) the stated reserve numbers of even the
official agency of the US government responsible for producing these numbers
needs to be taken with a lot of skepticism. Three years ago -- at the
beginning of this boom -- and also very much by the way adding a a lot of fuel
to the shale play bubble -- the EIA estimated that California's Monterey
formation contained some 15.4 billion barrels of technically recoverable oil -
about 64 percent of total U.S. shale oil reserves. Last May the EIA announced
it had reduced the Monterey's reserve potential to just 600 million barrels - a
measly 4% of its 2011 estimate.
Thus the largest -- and largest by far -- alleged shale oil reserve in the USA
e.g. the Monterey shale deposit -- has had its reserve potential reduced down
to just 600 million barrels - about four percent of its 2011 estimate. In other
words a full 96% of the 2011 reserve numbers have just vanished into thin air
-- e.g. they never existed! What is left unreported is how the original totally
overblown EIA figures were very much used by the shale boosters to build the
bubble mania that was being frothed up in the media and amongst investors
during that period.
When the EIA is forced to downgrade the most important reserve number for shale
by a whopping 96% (the Monterey shale deposit reserve numbers would have made
this by far the largest shale deposit in the US) you have to wonder what the
hell is going on over at the EIA.
Frankly, based on your belief that fossil energy reserves keep on growing, I
don't think you spend a lot of time actually investigating what lies behind the
highly optimistic reserve number headlines you read.
>> Explain to me how the Saudi's will make more cash when oil is selling at $60
>> a barrel then it did when it was selling at $130 a barrel. Is this some new
>> form of mathematics?
> Are you trying to be ironic or cute? Clearly the Saudi's feel they can endure
> the loss now in order to drive a large portion of the higher cost producers
> out of business.
>>So your theory is that the price of oil collapsed from $130 to $60 because of
>>some sort of byzantine conspiracy of the Saudi's, but your theory just does
>>not fit the facts.
You have not been following the news coming from recent OPEC meetings have you.
Saudis block OPEC output cut, sending oil price plunging
| |
| | | | | | | |
| Saudis block OPEC output cut, sending oil price plungingVIENNA (Reuters) -
Saudi Arabia blocked calls on Thursday from poorer members of the OPEC oil
exporter group for production cuts to arrest a slide in global prices,... |
| |
| View on www.reuters.com | Preview by Yahoo |
| |
| |
During the time of the oil collapse Saudi Arabia did NOT increase their oil
production, they kept on using the same old technology and their production
remained constant. However during that time the USA started using a new
technology, and they increased their oil production, and did so DRAMATICALLY.
And the USA increased its gas production even more. There is no need to invoke
sinister plots by James Bond style villains, it's a simple rule of economics
that when the supply of commodity X increases the price of commodity X falls.
And the free market ensures that the sort of silly conspiracy you're so
concerned about could never work. I manufacture 99% of the worlds widgets, you
make 1%. I want to drive you out of business, so I figure I'll lower my price
until you go broke and then I can jack them up to anything I want. So now you
lose money on each
widget you sell, the trouble is I do too. I have 99 times as much money as you
do, but I'm losing it 99 times faster. Even worse, because the price is very
low the demand for widgets is huge, and if prices are to remain low I must
build more factories (or oil wells) and increase production. I'm losing money
faster and faster,
meanwhile you just temporally halt production in your small factory and wait
for me to go broke. It won't be a long wait.
How can I possibly benefit from an economics 101 lesson from a man who swallows
cornucopean reserve statements hook line and sinker. -Chris
John K Clark
John K Clark widget
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