Oil and Gas Issues

[wehappyfew]

I have a question for anybody knowledgeable about the energy markets...

Is it possible the Saudi's are making even more money now with lower prices?

1. They lead a monopoly - they get to set production, and can sometimes know far in advance what production levels they will set, especially if it is a high level (they have trouble enforcing cuts, but all OPEC members will go along with max output to avoid losing revenue).

2. The Saudis control huge amounts of liquid capital - what is prevent them from selling their production far in advance at high prices last year through the futures market (essentially shorting the futures contracts with the ability to deliver)?

3. They could also short the the futures through options.

4. They could short all the oil companies, the Russian Ruble, the Venezuelan currency, etc.

Then after they have made a huge profit going short, they reverse their position, and only then announce a production cut - making another great gob of profits going the other way.

So the question is...

Is there enough liquidity in all those markets to essentially hedge the price decline for the entire Saudi output, and maybe make a profit above and beyond the recent normal $100 price?

[Sigmetnow]

The U.S., still a net oil importer, would accelerate economic growth to 3.8 percent in the next two years with oil at $40 a barrel, compared with 3 percent at $84, the Oxford Economics study found.

Article:  http://www.bloomberg.com/news/2015-01-07/oil-at-40-means-boon-for-some-no-ice-cream-for-others.html

[Sigmetnow]

Saudi king in hospital battling pneumonia, but, "The question over succession is not going to make a lot of difference to the oil policy of Saudi Arabia."
http://www.bloomberg.com/news/2015-01-07/saudi-king-s-health-puts-prince-who-hunted-al-qaeda-in-spotlight.html

[Sigmetnow]

New journal "Nature" study is first to detail what resources from what regions cannot be burned under 2°C warming limit scenario.

The study, published Wednesday in the journal Nature, is the first to quantify the implications for each type of fossil fuel as well as different regions, from the Middle East to the United States, if we are to meet the globally agreed upon temperature target of keeping global warming to less than 2 degrees Celsius, or 3.6 degrees Fahrenheit, above preindustrial temperatures through the year 2100.

The big losers, according to this research, include Russia, which could only burn 59% of its existing natural gas reserves and 25% of its oil reserves, as well as Canada, which would have the lowest utilization of its oil reserves of any country analyzed.
...
According to the study's authors, Christophe McGlade and Paul Etkins of the University College London, oil companies spent a total of $670 million on exploring for new energy resources in the year 2013 alone.

"One might ask why they’re doing this when there’s more in the ground than we can afford to burn, and that money might be better spent," Etkins said at a press conference. Etkins suggested that companies return such funds to shareholders in the form of dividends, or use the money to invest in renewable energy research.
...
The study used a computer model to determine the most economically efficient ways of burning fossil fuel reserves while staying under the budget limit. These economic calculations help explain why the study shows such low utilization rates for Canadian tar sands oil resources in Alberta, since they are comparatively much more expensive to access and more carbon-intensive than U.S. oil and gas from states like North Dakota and Pennsylvania, for example.

http://mashable.com/2015/01/07/carbon-budget-limits-fossil-fuel-burning/

[silkman]

In spite of blanket coverage of the Charlie Hebdo attack in Paris, this story received headline coverage in the BBC Radio 4 Today programme this morning and included an interview with Paul Ekins.

Here's the Guardian's take:

http://www.theguardian.com/environment/2015/jan/07/much-worlds-fossil-fuel-reserve-must-stay-buried-prevent-climate-change-study-says

[silkman]

This presentation is embedded in the Guardian story. It needs to be seen by as many people as possible:

http://carbontracker.live.kiln.it/index.html#

[Sigmetnow]

Florida!   

State lawmaker Introduces Bill To Ban Fracking In Florida, Citing Health And Environmental Concerns
http://thinkprogress.org/climate/2015/01/07/3608769/florida-bill-to-ban-fracking/

[Sigmetnow]

World Bank says end fuel subsidies and add price on carbon now.

With Russia and the Saudi Arabia-dominated OPEC cartel refusing to cut production, the signs are prices will remain low.

World Bank chief economist Kaushik Basu said governments should use this drop in prices to offset the medium-term incentives for increased oil consumption by changing tax policies on energy use.

“With oil likely to remain cheap for some time, oil-importing countries should lower or even eliminate fuel subsidies and rebuild the fiscal space needed to carry out future stimulus efforts,” he said.

http://www.rtcc.org/2015/01/07/world-bank-urges-leaders-to-use-oil-crash-to-slash-subsidies/

[Laurent]

Nebraska Supreme Court Says Yes To Keystone Rout
http://www.huffingtonpost.com/2015/01/09/nebraska-keystone-pipeline-route_n_6439466.html?utm_hp_ref=green&ir=Green

[wili]

Yikes! Will the veto hold?

[Laurent]

Obama faces growing pressure as construction of Keystone pipeline moves a step closer
http://www.theguardian.com/environment/2015/jan/09/obama-keystone-pipeline-legal-hurdle

John Boehner: Obama's 'Out Of Excuses' For Blocking Keystone Pipeline
http://www.huffingtonpost.com/2015/01/09/john-boehner-obama-keystone_n_6443510.html?utm_hp_ref=green&ir=Green

[Sigmetnow]

Fracking country:  Irving, Texas is suddenly hit with small earthquakes.
http://www.nbcnews.com/nightly-news/are-earthquakes-texas-becoming-new-trend-n282621

[Sigmetnow]

CNBC financial channel discussions: finally getting real?

Oil Industry in Dire Straits;  "probably by the end of 2016 we'll see prices go back up.”
"We have to figure out why are prices crashing … so far so fast."
Exploration budgets to be cut by 30-35 percent, which will result in about 9,000 fewer wells being drilled.
http://www.cnbc.com/id/102326270

[silkman]

Two stories in today's Sunday Times business section illustrate well the challenges that will be faced by any government attempting to put the longer term necessity of addressing the carbon issue ahead of short term expediency.

George Osbourne is apparently working on tax cuts to support the declining North Sea oil industry in the face of the current oil price collapse:

http://www.thesundaytimes.co.uk/sto/business/Industry/article1505481.ece

At the same time the rump of the UK coal industry is pleading for an extension of life support:

http://www.thesundaytimes.co.uk/sto/business/Industry/article1505456.ece

It's easy to understand the political pressures on the Chancellor with a difficult election looming and, I suspect, impossible for him to even consider the longer term need to let these two industries fade away as part of a UK transition to a low carbon economy. It's a story that will be echoed around the world as governments, in pursuit of short term expedients, protect their own assets.

I'm starting to feel as pessimistic as Jim D!

[Sigmetnow]

Meanwhile, The New York Times adds their voice to sensible calls for raising the gasoline tax during this period of low gas prices in the U.S., and using the money to fix our crumbling roads and bridges.
http://www.nytimes.com/2015/01/11/opinion/sunday/raise-the-gas-tax-to-fix-americas-roads.html

[Sigmetnow]

Hate to think what this is doing to, say, the highway overpasses....

@SPIAindex: Latest #earthquake near Guthrie, OK, @ 4:29am today was a mag 3.6, approx. 4.5 mi. deep. 4 of last 8 were > 3.5 mag. http://t.co/YkOS3k8ekS

@SPIAindex: Most #earthquakes occurring near Guthrie OK are within "East Guthrie Lake Gas & Oil Field" & Guthrie Gas & Oil Field. http://t.co/5z1iQ9fZWL

[Laurent]

How the world burns: fuel consumption compared
http://www.theguardian.com/environment/2015/jan/12/sp-fuel-consumption-worldwide-graphic

[Sigmetnow]

Methane leaks from U.S. oil and gas industry, particularly the New Mexico site, under more discussion.

“Every company is strongly incentivized to capture methane and bring it to the market,” Milito said. “We don’t need regulation to tell us to do that.”

But environmentalists point to problems with old pipelines and outdated equipment that are the source of more than 90 percent of the wasted methane, according to a report earlier this month by a consortium of five environmental organizations. The study said relatively modest curbs would result in a reduction of greenhouse-gas emissions over two decades comparable to closing down 90 coal-fired power plants.

http://www.dispatch.com/content/stories/insight/2015/01/11/01-methane-cloud-grows.html

[JimD]

Methane leaks from U.S. oil and gas industry, particularly the New Mexico site, under more discussion.

“Every company is strongly incentivized to capture methane and bring it to the market,” Milito said. “We don’t need regulation to tell us to do that.”

But environmentalists point to problems with old pipelines and outdated equipment that are the source of more than 90 percent of the wasted methane, according to a report earlier this month by a consortium of five environmental organizations. The study said relatively modest curbs would result in a reduction of greenhouse-gas emissions over two decades comparable to closing down 90 coal-fired power plants.

http://www.dispatch.com/content/stories/insight/2015/01/11/01-methane-cloud-grows.html

One of my brother-in-laws helps run an oil field service company his family started.  They primarily service gas wells and the pipelines and equipment which pumps and stores the gas.  The various sources of your methane leaks.  I can assure you that low and dropping wholesale gas prices will not be conducive to fixing the problems described. It is very expensive to operate these businesses and expenditures on maintenance will suffer as prices stay low.

You might find this factoid interesting in relation to your interest in vehicle sales.  By bro buys 20-30 3/4 ton 4x4 heavy duty diesel pickups a year to support the business needs.  Under the conditions of use they put them to they last about 2 years is all.  Think of the embedded energy involved.

[jai mitchell]

By bro buys 20-30 3/4 ton 4x4 heavy duty diesel pickups a year to support the business needs.  Under the conditions of use they put them to they last about 2 years is all.  Think of the embedded energy involved.

Are you sure he isn't just taking advantage of an oil-industry giveaway in the form of an outrageously accelerated depreciation schedule?

[Sigmetnow]

...
One of my brother-in-laws helps run an oil field service company his family started.  They primarily service gas wells and the pipelines and equipment which pumps and stores the gas.  The various sources of your methane leaks.  I can assure you that low and dropping wholesale gas prices will not be conducive to fixing the problems described. It is very expensive to operate these businesses and expenditures on maintenance will suffer as prices stay low.

Here's a money-saving tip:
New, lower-cost IR scans for methane can identify leaks that repairs would more than pay for in product saved. 
And pressure for action could well increase: "The camera is putting power into local residents’ hands, enabling them to see the leaks near their own homes and around their communities, and share the information with others."

The emergence of the camera technology has reduced cost and time associated with leak detection and repair programs and is leading to significant reductions in emissions and wasted natural gas with very little cost. In a recent study, the Clean Air Task Force estimated that finding and fixing leaks could reduce methane emissions by around 1.7 million metric tons per year, cutting leaks by at least 60 to 80 percent.

The costs of such surveys is very reasonable for two reasons: the cost of inspecting facilities is low with these cameras and, once leaks are found, the cost of repairing the leaks is largely (often entirely) paid for by the value of the gas conserved by fixing the leaks. Multiple sources report that survey costs are low. A recent study by the energy consultancy firm Carbon Limits found that it cost $400 to $1,200 to have an external firm detect and repair leaks at a well facility, depending on the facility’s size. Likewise, several studies have shown that repair costs are almost – or even entirely – paid for by the value of the gas conserved by the repairs. The Carbon Limits study, which analyzed records from over 4,000 surveys of oil and gas facilities, reported that 97 percent of the volume of leaks comes from leaks which are economic to repair — i.e., the revenues from the additional gas are greater than the cost of the repair.

http://dotearth.blogs.nytimes.com/2015/01/05/two-ways-infrared-cameras-have-boosted-the-case-for-e-p-a-rules-cutting-methane-leaks/

[JimD]

By bro buys 20-30 3/4 ton 4x4 heavy duty diesel pickups a year to support the business needs.  Under the conditions of use they put them to they last about 2 years is all.  Think of the embedded energy involved.

Are you sure he isn't just taking advantage of an oil-industry giveaway in the form of an outrageously accelerated depreciation schedule?

A fair question, but no that is not it.

The trucks are sold off when the downtime for repair costs exceed a certain threshold.  This type of work is rugged.  About 75% of the miles are on dirt and gravel roads in Wyoming.  The trucks are pulling heavy trailers which often have many tons of equipment and materials on them.  And at some times of the years the roads are very rough with snow and mud, not to mention bumpy.  Four wheel drive is commonly necessary to get where they are going.  So extreme use.  I won't go into all the types of breakdowns he describes, but many of them are not at all common - like cracked frames, and splits in the sheetmetal of the cabs, broken manifolds.

[JimD]

Here's a money-saving tip:
New, lower-cost IR scans for methane can identify leaks that repairs would more than pay for in product saved.

Since he has been in this business for near 30 years I expect he knows about what is available.

One thing that many do not focus on in issues like these is the profit factor.  His company is hired by the people who own these facilities.  If the price for their gas falls by 50% and the cost of my bro's maintenance work stays basically the same (other than fuel costs not much will change) then the types of repairs that the owners can afford goes down.

Worrying about small leaks of something that is now worth half what it was might just mean that a lot less maintenance gets done and the leakage rate goes up. 

Low oil prices will make it much harder to deal with problems like leaks.

[JimD]

http://www.nakedcapitalism.com/2015/01/oil-bust-last.html

The oil story is the same just with more detail.  However one should pay attention to the overall bust in commodity prices globally.  This also has huge impacts.  Especially on the developing countries of which many are highly dependent on those incomes and have no substitutes.  Many are going to fall into recession. 

All of this has a big impact on oil demand and thus will further push down on prices.

[JimD]

Something new.

The first instance I have seen in the business press that the US govt should consider starting to support (bailout anyone?) the US oil companies in their battle with international oil producers.  Too big to fail again?

http://www.bloombergview.com/articles/2015-01-12/americas-going-to-lose-the-oil-price-war

America's Going to Lose the Oil Price War

The financial debacle that has befallen Russia as the price of Brent crude dropped 50 percent in the last four months has overshadowed the one that potentially awaits the U.S. shale industry in 2015. It's time to heed it, because Saudi Arabia and other major Middle Eastern oil producers are unlikely to blink and cut output, and the price is now approaching a level where U.S. production will begin shutting down....

This could be a bloody, prolonged battle with an uncertain outcome. The oil price is rather inelastic to short-term changes in demand and supply. Its course this year will, therefore, be largely dictated by the news and the market's reaction to it. A wave of bankruptcies in the U.S. shale industry will probably drive it up because it will be perceived as a negative factor for supply. How high it will go, however, is unpredictable. It may actually rise enough to enable consolidation in the U.S. shale industry, giving it second wind and driving OPEC countries, Russia, Mexico and Norway into greater difficulties -- or it might just even out at a level that would make the U.S. forget about its shale boom. That would have dire consequences for the U.S. economic recovery.

It may be time for the U.S. government to consider whether it wants to up the stakes in this price war by entering it as a sovereign country. That might mean bailing out or temporarily subsidizing the shale producers. After all, they are competing with states now, not with businesses like themselves.

So now that it is pretty obvious that the US producers (the high cost ones) cannot out compete non-US companies (the low costs producers) we start changing the free market dialogue to one that says the others are not playing fair and we have to tap into the tax payers pocket book to bail out our failing companies.  The irony!

[jai mitchell]

By bro buys 20-30 3/4 ton 4x4 heavy duty diesel pickups a year to support the business needs.  Under the conditions of use they put them to they last about 2 years is all.  Think of the embedded energy involved.

Are you sure he isn't just taking advantage of an oil-industry giveaway in the form of an outrageously accelerated depreciation schedule?

A fair question, but no that is not it.

The trucks are sold off when the downtime for repair costs exceed a certain threshold.  This type of work is rugged.  About 75% of the miles are on dirt and gravel roads in Wyoming.  The trucks are pulling heavy trailers which often have many tons of equipment and materials on them.  And at some times of the years the roads are very rough with snow and mud, not to mention bumpy.  Four wheel drive is commonly necessary to get where they are going.  So extreme use.  I won't go into all the types of breakdowns he describes, but many of them are not at all common - like cracked frames, and splits in the sheetmetal of the cabs, broken manifolds.

I know a little bit about vehicle fleet usage and operations.  Usually repair costs are juxtaposed with the depreciation schedule and as soon as 'potential' repairs match that depreciated rate then the fleet is sold off at a profit.  Since this is a business expense it is written off and a new cycle of depreciation begins.  I would be very surprised if your bro's depreciated value is more than 10% of the original purchase cost after the second year of operations.  Why don't you ask him?

[Sigmetnow]

Something new.

The first instance I have seen in the business press that the US govt should consider starting to support (bailout anyone?) the US oil companies in their battle with international oil producers.  Too big to fail again?
...

The U.S. oil industry may suffer (my sympathies to your brother) -- but the U.S. and global economies are forecast to improve under an oil price rout.  (All the more reason for energy companies to move away from fossil fuels and switch to renewables!)

This article includes a graph of GDP increase by country:

For the US, the energy dependency and sensitivity story has been evolving rapidly as more and more oil has been fracked out of America's shale basins.

"Prior to the shale revolution model simulations would have suggested a boost of 0.2 to 0.3 percentage points to US growth for every USD 10/bbl decrease in the price of oil," they write. "That estimate is now only 0.1%."

 http://www.businessinsider.com/ubs-gdp-impact-of-10-decline-in-oil-2014-12   

   The slump in oil prices is set to boost the global economy, with crude-importing countries expected to substantially benefit, says the World Bank.
A 10 per cent drop in oil prices would increase gross domestic product in oil-importing countries by 0.1 percentage points to 0.5 percentage points, World Bank research said.

http://www.smh.com.au/business/the-economy/cheap-oil-will-fuel-global-economy-world-bank-20150108-12k6eb.html

[Sigmetnow]

At least one major oil company will turn its back on fossil fuels, says scientist

The oil price crash coupled with growing concerns about global warming will encourage at least one of the major oil companies to turn its back on fossil fuels in the near future, predicts an award-winning scientist and former industry adviser.

Dr Jeremy Leggett, who has had consultations on climate change with senior oil company executives over 25 years, says it will not be a rerun of the BP story when the company launched its “beyond petroleum” strategy and then did a U-turn.

“One of the oil companies will break ranks and this time it is going to stick,” he said. “The industry is facing plunging commodity prices and soaring costs at risky projects in the Arctic, deepwater Brazil and elsewhere.

“Oil companies are also realising it is no long morally defensible to ignore the consequences of climate change.”
...
Leggett, who plans to stands down as chairman of the highly successful Solarcentury renewable business he founded to focus on climate change campaigning, holds what he calls “friendly critic” sessions with the fossil fuel sector these days. The tone of the meetings has changed significantly over the past two years, he said.

“Before it was know your enemy. Now it’s: ‘Crikey. A lot of this may be coming true on our watch. What shall we do about it?’ There are top-to-bottom strategic reviews going on in E.ON but in other companies as well, utility and oil and gas. So it will be really interesting to see which is the first of the oil and gas companies to break from the pack, although I fear BP and Shell are going backwards not forwards on carbon.”

http://www.theguardian.com/business/2015/jan/11/oil-company-fossil-fuels-jeremy-leggett-soaring-costs-risky-energy-projects

[Sigmetnow]

Quick, need to find someone to blame.

Oil Drops Below $45; U.S. Stockpiles May Speed Collapse
http://www.bloomberg.com/news/2015-01-13/oil-drops-from-5-1-2-year-low-as-u-s-supply-seen-adding-to-glut.html

[Laurent]

Obama Is Said to Be Planning New Rules on Oil and Gas Industry’s Methane Emissions
http://www.nytimes.com/2015/01/14/us/politics/obama-administration-to-unveil-plans-to-cut-methane-emissions.html?partner=rss&emc=rss

[JimD]

The U.S. oil industry may suffer (my sympathies to your brother) -- but the U.S. and global economies are forecast to improve under an oil price rout.  (All the more reason for energy companies to move away from fossil fuels and switch to renewables!)

Well we will see how beneficial the plummet in oil prices will be to the various economies.

I would be very careful accepting such projections from many sources.  Do not forget that most main stream media and many industry specific outlets are trying very hard to manipulate you and everyone else into continuing to support consumption patterns that will make them more money.  They will tell you anything to get you to follow them.

The oil price fall is going to obliterate the finances of many countries.  This will ripple and effect many others who have weak finances.  And so on.  The banking and finance industry is in another bubble and debt is once again at very high levels.  This begs for a correction.  There are large housing bubbles in many locations and consumers are in deep debt not to mention there are large numbers of companies (especially in the oil industry) which are in serious trouble regarding debt payments and rolling over that debt.  The Euro countries are sinking in economic terms, as is Eastern Europe and Russia, China is slowing, Brazil, Argentina and many other developing countries are slowing and have debt troubles.  Commodity dependent countries are all looking at declining finances and then there is the deep issues with oil/gas.

Yes the low oil prices will result in a temporary boost to US consumer sales and profits for some countries.  But much of that consumer bump is exactly the wrong kind.  To wit the huge jump in sales of large gas guzzeling vehicles with their horrible environmental tail. The overall impact on the US economy, however, is most likely not going to be pretty over the next year. 

Additionally you have a rise in the US and many other countries of power in conservative political parties and they will be a strong force for BAU and an impediment to a host of the things you value like alternative energy programs.

It is very hard to come up with a scenario where we are not in a worse position 2 years from now than we are now.  Anything less than dramatic progress is the same as none to me.  We are way past the point of no return and we still are taking satisfaction in little tiny things and ignoring the elephant in the room.

But we will see.  Call me on it in a year or two.

[Sigmetnow]

Blame the Saudis, Chapter 2: If they hadn't slowed their production in the 1980s and allowed prices to rise, we wouldn't have invested in all the expensive extraction methods causing the oversupply today.  Spoiler:  There is no quick or easy fix.

In the 1980s, Saudi Arabia “was tired of the other members cheating and just opened the spigots,” Walter Zimmerman, the chief technical strategist for United-ICAP who predicted last year’s drop, said by phone from Jersey City, New Jersey yesterday. After the plunge in prices “the Saudis lost their nerve and they resumed the role of swing producer. If they hadn’t lost their nerve, we wouldn’t be seeing the shale oil boom today and North Sea production would be substantially lower because investment would have been less,” he said.

Investment in new production surged as futures averaged $95.77 a barrel in 2011 through 2013. The combination of horizontal drilling and hydraulic fracturing has unlocked supplies from shale formations, sending U.S. oil output to the highest level in three decades. Russian oil production rose to a post-Soviet record last month and Iraq exported the most oil since the 1980s in December.

“If they had allowed prices to stay lower they would have saved themselves many problems in the long run,” Zimmerman said. “Many reserves we take for granted would have never been developed.”

http://www.bloomberg.com/news/2015-01-13/oil-s-1986-collapse-signals-rebound-years-away-chart-of-the-day.html

[Sigmetnow]

JimD said:

  ...Yes the low oil prices will result in a temporary boost to US consumer sales and profits for some countries.  But much of that consumer bump is exactly the wrong kind.  To wit the huge jump in sales of large gas guzzeling vehicles with their horrible environmental tail. The overall impact on the US economy, however, is most likely not going to be pretty over the next year.  ... 

Look closely at those truck and SUV sales and you will find most are in oil boom states.  As the oil and gas industry shrinks, they won't last.  The auto-credit boom "has clearly seen its best days" already:

http://www.bloombergview.com/articles/2014-12-03/cheap-oil-wont-help-detroit-sell-gas-guzzlers

[JimD]

http://ftalphaville.ft.com/2015/01/12/2084942/a-capital-contango-and-why-oil-storage-economics-may-be-dead/

The story that is developing is that oil prices are going to stay low for some time.  At least a year or maybe two.  There are many stories which will play out due to this but here is one for you to think about.

Think about the push for renewable technologies.  Over the last couple of years we have seen a host of charts depicting the slowly changing figures detailing the rising costs of fossil fuels and the lowering costs of renewables.  Depending on who is drawing the graphs and how they select the data (not all of this is pure fact of course as  both side engage in promoting their cause) some of those lines are nearing each other or crossing.  In other words the argument that renewables could be less expensive is being made.

Go look at any of those charts and insert the current price of oil and, for the sake of argument, extrapolate it out for a year or two.  Even better assume the fall in price continues for a time and settles not in the mid 40's but in the mid 30's.

Under that scenario there is not any renewable technology which is cost competitive with fossil fuels.  Do not think that the fossil energy industry and its bought and paid for politicians will forget to take advantage of this situation.

[JimD]

Look closely at those truck and SUV sales and you will find most are in oil boom states.  As the oil and gas industry shrinks, they won't last.  The auto-credit boom "has clearly seen its best days" already:

http://www.bloombergview.com/articles/2014-12-03/cheap-oil-wont-help-detroit-sell-gas-guzzlers

The statement is just not accurate.

Your article is about Ohio.  Ohio is not an oil boom state.  The oil boom states are North Dakota, Texas, Oklahoma.  Beyond that there are no major booms just medium to small ones. 

National level vehicles sales are not materially impacted by county level sales due to a local increase in drilling.  Drilling is dying right now and sales are SOARING.

I live in the mountains of AZ.  There is no oil and gas industry here at all.  Sales of big pickups and large suv's are soaring.  They are soaring everywhere where the consumer and local cultures make them desirable.  Not just in oil producing areas.  Hundreds of thousands are going out the door.

Look at the graph in this link found from your Bloomberg articles.

http://www.businessweek.com/articles/2013-10-03/texas-key-to-pickup-truck-makers-success

You will notice it is for just pickup sales.  The only places where pickup sales in the US are NOT out of proportion to needs is?  Calif, Illinois,New York and the megalopolis from DC to Boston.  Everywhere else in the US is going hot and many areas are on fire so to speak.

Add in large SUV's (the chart is only for pickups) and it would be even more dramatic.

Vehicle purchases are not short term items.  They have environmental tails that are years long.  This is very impactful.

Look at this link and it will show you what is really happening.

http://online.wsj.com/mdc/public/page/2_3022-autosales.html

Light truck sales are higher than car sales.  The best selling vehicle in the US (once again) is the Ford F-150 pickup.  The 3 best selling vehicles in the US are ALL pickups - by a big margin.  Look at the sales growth numbers.  11 of the top 20 vehicles in sales are pickups or suv's. 

Look across the sales numbers in the last chart and just roughly add up the total sales of pickups, suv's and large luxury cars.  Their total is about 2/3 of all sales.

Look at those numbers and charts.  There is no good story to be found here.

http://autos.jdpower.com/content/blog-post/88x80jB/december-2014-auto-sales-most-automakers-enjoy-a-great-year-see-2015-as-path-paved-in-gold.htm

[Sigmetnow]

Today, the Obama Administration announced plans to cut methane emissions from the oil and gas sector by 40 to 45 percent from 2012 levels by 2025.

http://thinkprogress.org/climate/2015/01/14/3611372/plan-to-cut-fossil-fuel-methane-emissions/

[Sigmetnow]

New pollutants found to be in fracking waste.  No one has been monitoring for them.

Duke University geochemistry professor Avner Vengosh and his team of scientists found that wastewater produced by both conventional and unconventional oil drillers contains high volumes of ammonium and iodide — chemicals that, when dissolved in water or mixed with other pollutants, can encourage the formation of toxins like carcinogenic disinfection byproducts and have negative impacts on aquatic life.
That’s a problem, the study said, because oil and gas industry wastewater is often discharged or spilled into streams and rivers that eventually flow into drinking water systems.
“We were not aware that they existed in oil and gas waste products,” Vengosh told ThinkProgress on Wednesday. “Until now, no one was aware — no one was monitoring for those contaminants.”

http://thinkprogress.org/climate/2015/01/14/3611503/two-new-fracking-pollutants/

[Sigmetnow]

Oil prices closed up today!   "Dead cat bounce" is apparently the technical term for it.   

@iarnsdorf: Why the last-minute oil spike? Explanations here http://t.co/uCj5iSjU2m or if you prefer snarky video http://t.co/XKozYB3YZj

[Laurent]

Engaging with oil companies on climate change is futile, admits leading UK environmentalist
http://www.theguardian.com/environment/2015/jan/15/engaging-with-oil-companies-climate-change-futile-admits-leading-environmentalist

[Laurent]

Judge’s Ruling on Gulf Oil Spill Lowers Ceiling on the Fine BP Is Facing
http://www.nytimes.com/2015/01/16/business/energy-environment/judge-sets-top-penalty-for-bp-in-deepwater-horizon-spill-at-nearly-14-billion.html?partner=rss&emc=rss

[Laurent]

Report: Fracking Imperils Southern California Residents, Wildlife
http://www.kcet.org/news/redefine/rewire/natural-gas/report-fracking-imperils-southern-california-residents-wildlife.html

[JimD]

The big boys are heading for the exits

Oilfield Services Company Schlumberger Is Cutting 9,000 Jobs

Here come the oil-related job cuts.

In its fourth quarter earnings announcement on Thursday, oilfield services company Schlumberger announced that it will cut 9,000 jobs, or about 8% of its workforce....

And THIS is not a good thing.

The company also raised its dividend 25% and repurchased $1.1 billion worth of its own stock during the quarter, both efforts to reward shareholders that have stuck with the company amid the decline in oil prices and selling pressure faced by all companies in the energy sector. ...

the rapid decline in energy prices, and said that while the market is still making sense of the massive decline, the knock-on effects, like a reduction in capital investment and job cuts, will take a few quarters to really kick in.

In other words.  It is just getting started.

[Laurent]

Repsol Abandons Oil and Gas Exploration Off Canary Islands
http://www.nytimes.com/2015/01/17/business/international/repsol-oil-gas-exploration-canary-islands.html?partner=rss&emc=rss

[Sigmetnow]

Wow!

Canadian propane price nearing zero
http://www.argusmedia.com/News/Article?id=977692

[JimD]

Bleeding out

A good article on some of the companies which are dying first.

http://www.nakedcapitalism.com/2015/01/money-dries-up-for-oil-money-dries-up-for-oil-and-gas-layoffs-spread-write-offs-start-gas-layoffs-spread-write-offs-start.html

...........

Larger drillers outspent their cash flows from production by 112% and smaller to midsize drillers by a breathtaking 157%, Barclays estimated. But no problem. Wall Street was eager to supply the remaining juice, and the piles of debt on these companies’ balance sheets ballooned. Oil-field services companies, suppliers, steel companies, accommodation providers… they all benefited.

Now the music has stopped. Suddenly, many of these companies are essentially locked out of the capital markets. They have to live within their means or go under.

California Resources, for example. This oil-and-gas production company operating exclusively in oil-state California, was spun off from Occidental Petroleum November 2014 to inflate Oxy’s share price. As part of the financial engineering that went into the spinoff, California Resources was loaded up with debt to pay Oxy $6 billion. Shares started trading on December 1. Bank of America explained at the time that the company was undervalued and rated it a buy with a $14-a-share outlook. Those hapless souls who believed the Wall Street hype and bought these misbegotten shares have watched them drop to $4.33 by today, losing 57% of their investment in seven weeks.

Its junk bonds – 6% notes due 2024 – were trading at 79 cents on the dollar today, down another 3 points from last week, according to S&P Capital IQ LCD.

Others weren’t so lucky.........

...It boils down to this: these companies are locked out of the capital markets for all practical purposes: at these share prices, they can’t raise equity capital without wiping out existing stockholders; and they can’t issue new debt at affordable rates. For them, the junk-bond music has stopped. And their banks are getting nervous too.

Their hope rests on cutting operating costs and capital expenditures, and coddling every dollar they get, while pushing production to maximize cash flow, which ironically will contribute to the oil glut and pressure prices further. They’re hoping to hang on until the next miracle arrives.

“We are not panicking,” is how a bank CEO responded to the fact that loans to energy companies made up 20% of the bank’s loan portfolio.

Well one thing you can be sure of is when a banker opens his mouth you are about ready to hear a lie.

[JimD]

BP sees $50 oil for three years

The oil price has dropped around 60% since June, to $48 a barrel, and I understand that BP expects that it will stay in the range of $50 to $60 for two to three years....

The reason BP expects the oil price to stay in the range of $50 to $60 for some years is for reasons you have read about here - it is persuaded that the Saudis, Emiratis and Kuwaitis are determined to recapture market share from US shale gas.

This means keeping the volume of oil production high enough such that the oil price remains low enough to wipe out the so-called froth from the shale industry - to bankrupt those high-cost frackers who have borrowed colossal sums to finance their investment....

And, as I have also been banging on about, Saudi is not thought to be weeping that a lower oil price hurts its supposed nemesis, Iran, reduces the resources of an an oil-financed Islamic state and mullers the economy of a Russia that it sees as having been too supportive of Syria.

Meanwhile although the US shale industry is in pain, the lower price will probably reinforce the US economic recovery - and the White House doesn't massively worry that Russia and Venezuela are in dire economic straits.......

http://www.bbc.com/news/business-30827910

[Lennart van der Linde]

reduces the resources of an an oil-financed Islamic state

How about Saudi Arabia's own oil-financed islamic state resources? Do they need a minimum price to keep their country running, or will they just use their financial reserves to fill the gap, or will they sell extra oil because of the lower price, so there won't be much of a gap?

[JimD]

reduces the resources of an an oil-financed Islamic state

How about Saudi Arabia's own oil-financed islamic state resources? Do they need a minimum price to keep their country running, or will they just use their financial reserves to fill the gap, or will they sell extra oil because of the lower price, so there won't be much of a gap?

If we are just talking about financial resources, and not the influence of extreme political pressure from places like the US, the Saudis are quite capable of maintaining the current situation for a long time.  The biggest issue is that their revenues with these low prices are below their government expenditures.  But they have a sovereign wealth fund sufficient in size to make up the difference for several years.  They still make large profits per barrel as their production costs are certainly no more than $20 per barrel.  But this situation will not last several years.

They cannot really sell more oil than they are as they are not ramping up production but refusing to cut production.  Their free market argument is perfectly sound.  They are the low cost producers so the high cost producers (i.e. the US fracking industry, the Canadian tar sands producers, North Sea oil, deep water oil, Arctic oil) should be the ones to cut production.  And so the Saudis are running them out of business.

That is until the pain in the US exceeds the military and strategic benefit to our empire and we exert enough pressure on them to change their production levels.  Can we do that still?  Probably, but there will be consequences.

Saudi sees big benefits in their policy as it also works to gain them strategic advantage over their biggest enemy the Shiites - Iran being the only big country dominated by Shiites.   They do not really care about Russia other than their military support for the Syrians (Shiites again).  The Russians are certainly a large competitor in the oil markets and a fairly low cost producer but they are not a problem like the fracking and tar sands people are.

A big problem going forward for the Saudi's is Sunni fundamentalism.  ISIS is, in a round about way, a child of Saudi/Wahabbi Sunni extremism as it is an outgrowth of Al Queada.  Al Queada is, of course, the more famous child of the same.  There is a strong movement in Saudi to support and fund Sunni extremism.  Al Queada would not exist without it anywhere near the levels it does today.  ISIS will seek to expand into Saudi as they think of themselves as the proper and rightful caretakers of the holy cities as they consider the Royal family totally corrupt.  One sees the parallels to this situation in the US where extreme conservatives look on conservative/moderate Republicans   as no different than liberals.  Holding this situation in check will require some pretty serious repression in the Kingdom - as always there will be consequences and an unknown resolution.  In the meantime the Shiites will not sit idly by letting this situation worsen for them.  There is great potential for spreading troubles throughout the Sunni controlled countries due to Shia influenced resistance.

All the non-market stuff will also be a big determinant in how the levels of production are set and when. 

I expect that the Saudi's will hold out long enough to gut their US and Canadian competitors (and a few other bystanders) as this will not take all that long (no more than 6 months).  Beyond that it will be interesting to see how the various possibilities work themselves out.  I note that some of the prognosticators (BP for instance) have totally switched their tune and have gone from the prediction that oil will jump back up in price later this year to saying that oil prices will stay down for several years now.  But I think the real answer to that will be determined by whether we have our likely global financial meltdown we seem to be hanging on the verge of.  Or not.

None of this will be helpful in dealing with climate change in any case.  It is just more BAU stuff.  Interesting and entertaining, but fluff in any real sense.

All of the machinations of the market players and the various empire builders will just make it much harder to accomplish any solutions to our big problem.  Ever day our options dwindle.

[Shared Humanity]

While I have not commented for quite a while, I visit here often. I have always dug deeply into world economic news and would like to let everyone posting comments here know that these threads have become a "must visit" site for anyone who wants to track trends in the world economy. The links have been exceptional.

If there is a single take away for me and I have always felt this to be the case, we should simply not believe that the markets hold any solution to our fossil fuel crisis. Rising prices for fossil fuels will always trigger exploration and dramatic growth in supply, including exotic sources like deep water drilling, fracked fuels and tar sands. This trend will also cause renewables to grow as they become more competitive. As fossil fuel supply increases, drops in prices will cause investment in renewables to collapse and people  will go out and buy trucks and SUV's. Prices for fossil fuels will eventually rebound causing the cycle to begin anew. We are like drunks stumbling along the curb of a busy thoroughfare, narrowly avoiding falling into the street and getting pulverized by a speeding bus.

If we are to get off fossil fuels, it will absolutely require outside interventions into the functioning of the marketplace.

[Sigmetnow]

Oklahoma faces the painful truth as layoffs begin.
"The oil patch giveth, and the oil patch taketh away,” said Costello.
http://m.koco.com/news/labor-commissioner-oil-field-layoffs-eminent-economy-will-suffer/30768130