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The Trend is Not Your Friend

The Trend is Not Your Friend


The be-Muellered, bothered, and bewildered American public may find US-China trade talks about as interesting as a rain delay in an Orioles-Chisox game, but the Friday collapse of negotiations may be marked by historians as the day that the global economy died. The Big Box blue-light-special orgy of bargain shopping ran about thirty years, with China exuberantly pumping out cheap consumer goods to feed the US beast-of-Mammon. Americans happily payed for it all with IOUs based on long daisy chains of previous IOUs. Tom Friedman of The New York Times said it would last forever. Alas….

The paradigm kicked off for one simple reason: energy flows dictated capital flows. By the mid-1980s, the non-OPEC world was once again swimming in oil from the last great bonanzas of the oil age: The Alaska North Slope and the North Sea. Twenty years later, they were running down. Meanwhile, the USA had fecklessly “offshored” its factories in the mistaken belief that we had entered a shimmering new digital economy of virtual business were nobody had to make real stuff. China became the world’s workshop and the USA became the world’s financial bucket-shop, churning out endless swindles and frauds. The predictable result was the financial crisis of 2008, which coincided with oil prices rising to over $140-a-barrel (and six months later they crashed, with the economy, to under $30-a-barrel).

The “recovery” from that was based on Wall Street’s premier swindle: the shale oil “miracle,” based on high-risk lending to companies that couldn’t make a red cent even while accomplishing the majestic stunt of exceeding America’s old 1970 oil production peak of around 10 million barrels-a-day (now at around 12 million). Notice, too, that the final push to 12-million barrels occurred during the last two years: thus, Mr. Trump’s miracle economy. All that, to paraphrase the immortal words of Mr. Dylan, balances like a mattress on a bottle of wine.

 …click on the above link to read the rest of the article…

Oil Jumps After Saudis Admit Two Tankers Attacked As Iran Tensions Soar

Oil Jumps After Saudis Admit Two Tankers Attacked As Iran Tensions Soar

The bizarre and mysterious explosions that rocked the UAE port of Fujairah on Sunday just got even more strange after Saudi Arabia admitted overnight that two of its oil tankers were attacked while sailing toward the Persian Gulf possibly as part of the incident.

Crude prices quickly jumped as much as 2% on the news. Throughout Sunday as what was being reported in international press as multiple oil tankers exploding at port, local UAE officials had vehemently denied any explosion, much less that any sabotage incident, took place. 

But even more interesting is that it was primarily Iran-linked media, beginning with Lebanon’s Al Mayadeen, which first reported and pushed the story into mainstream coverage. But later in the day, we reported that the UAE finally acknowledged an incident, saying four commercial cargo ships were targeted by “sabotage operations” off its eastern coast, near the Gulf of Oman. And now, a full 24 hours later, this bombshell admission which is fast sending oil prices higher: 

Saudi Arabia said on Monday that two of its oil tankers had been sabotaged off the coast of the United Arab Emirates, in attacks it described as posing a threat to the security of global oil supplies.

Via AFP/Haaretz: Saudi cargo ship Bahri Yanbu next to British crude oil tanker Nordic Space (L) waiting in the port of Le Havre, May 9, 2019

The state-run Saudi Press Agency (SPA) said Monday that one of the vessels was due to be loaded with Saudi crude oil from the port of Ras Tanura, after which it would eventually supply customers in the United States. International shipping monitors identified the Saudi vessels as Bahri-owned crude carrier Amjad and crude tanker Al Marzoqah

No casualties or oil spills were reported as part of the “sabotage” incident, but the statement acknowledged “significant damage to the structures of the two vessels.”

 …click on the above link to read the rest of the article…

Renewables Are Dead

Renewables Are Dead

Gustave Courbet The man made mad by fear 1844

If I’ve said once that those among us who tout renewable energy should pay more attention to the 2nd law of Thermodynamics, I must have said it a hundred times. But I hardly ever get the impression that people understand why. And it seems so obvious. A quote I often use from Herman Daly and Ken Townsend, when I talk about energy, really says it all:

“Erwin Schrodinger (1945) has described life as a system in steady-state thermodynamic disequilibrium that maintains its constant distance from equilibrium (death) by feeding on low entropy from its environment – that is, by exchanging high-entropy outputs for low-entropy inputs. The same statement would hold verbatium as a physical description of our economic process. A corollary of this statement is that an organism cannot live in a medium of its own waste products.”

Using energy produces waste. Using more energy produces more waste. It doesn’t matter -much- what kind of energy is used, or what kind of waste is produced. The energy WE use produces waste, in a medium of which WE cannot survive. The only way to escape this is to use less energy. And because we have used such an enormous amount of energy the past 100 years, we must use a whole lot less in the next 100.

We use about 100 times more energy per person, and a whole lot more in the west, than our own labor can produce. We use the equivalent of what 500 billion people can produce without the aid of fossil fuel-powered machines. We won’t solve this problem with wind turbines or solar panels. There really is one way only: cut down on energy use.

 …click on the above link to read the rest of the article…

Why Your Gasoline Won’t Take You As Far As it Used To

Why Your Gasoline Won’t Take You As Far As it Used To

Barrels

Over the weekend, I saw a passing reference on Twitter to the declining energy content of gasoline. Intuitively I know this to be correct for reasons I discuss below. But the poster linked to data from the Energy Information Administration (EIA) that I hadn’t previously seen.

The EIA doesn’t directly tabulate the energy content of gasoline. But they do provide two pieces of data that let us calculate it ourselves from two relevant tables in the April 2019 Monthly Energy Review.

Table 3.5 provides Petroleum Products Supplied by Type in thousands of barrels per day, while Table 3.6 provides Heat Content of Petroleum Products Supplied by Type in trillion Btus per year.

From the annual numbers, doing the appropriate conversions (which includes accounting for leap years) provides the energy content of gasoline, in BTUs per gallon, since 1949. What we find is that the EIA reported a constant energy content of gasoline from 1949 to 1992 of 125,071 Btu/gallon. I have always typically used 125,000 Btu/gal as the standard value for gasoline.

(Click to enlarge)

The energy content of gasoline

Starting in 1993, the EIA shows the energy content start to decline. The decline accelerates in 2006. What happened then? I have seen two explanations floated.

I have heard some suggest that the shale oil boom in the U.S., which created an abundance of light oil, ultimately lowered the BTU value of gasoline. This is unlikely for a couple of reasons.

First, to change the energy content of gasoline you must change the composition. As I explained in a previous article, adding butane is a recipe change that takes place seasonally. It impacts the vapor pressure of the gasoline, but it also impacts the energy content. Butane has an energy content of 103,000 BTU/gal, so the more butane, the lower the energy content of the gasoline blend. This means that winter gasoline, which contains more butane, has a lower energy content. 

 …click on the above link to read the rest of the article…

Oil Tumbles After Trump Says “He Called OPEC, Gas Prices Are Coming Down”

Oil Tumbles After Trump Says “He Called OPEC, Gas Prices Are Coming Down”

WTI crude futures have tumbled back to a $63 handle, breaking a key technical support, following President Trump comments that he has called OPEC and “gasoline prices are coming down.”

The last 107 days have seen an almost unprecedented surge in gas prices in America…

And Trump’s comments seems to have taken some shine off the mega crude bull…

This has taken oil prices back below the key retracement level…

Additionally, ABN Amro Senior Energy Economist Hans van Cleef writes in a report today that crude oil looks “toppish around current levels” as there is enough supply growth from other nations to offset any drop in Iranian crude output.

Trump Kicks the Sanctions Can on Iran Oil

Trump Kicks the Sanctions Can on Iran Oil

Sanctions on Iran have failed. The weakness of the U.S. position in the oil markets is now complete. Donald Trump’s Energy Dominance strategy has failed.

The announcement by Secretary of State Mike Pompeo (R – The Eschaton) that no more sanctions waivers will be granted to importers of Iranian oil. Those that do so will face sanctions.

But let’s look at what is actually on the table.  Waivers will be extended to a year from now during a ‘wind-down’ period. But, I thought these past six months were the ‘wind down’ period Don?

I told you these would get extended the minute they were granted. Because three of these countries — India, Turkey and China — are in open revolt over the policy. 

And they have built plenty of infrastructure to get around these sanctions when or if they are ever implemented.

Three of the eight countries granted waivers — Italy, Greece and Taiwan — do not need waiver extensions as they’ve already cut their imports to zero.

No Disruptions

But the main issue here is the extension. It’s clear that Trump and his merry band of neocon handlers are afraid of further disruption of the oil supply and demand, otherwise the extensions wouldn’t have been granted at all.

They talk tough about UAE and Saudi Arabia adding supply but the reality is it isn’t that easy to spin up new supply. And the year-long waiver extension is proof of this. They’ll certainly sell all they can but there are those pesky OPEC quotas to deal with.

No one was willing to go along with the Saudis OPEC+ plan where they and Russia would be pigs more equal than the others this winter, so it’s unlikely that will happen now that Trump has helped them push prices back towards $75 per barrel.

 …click on the above link to read the rest of the article…

Mapping The Countries With The Most Oil Reserves

Mapping The Countries With The Most Oil Reserves

There’s little doubt that renewable energy sources will play a strategic role in powering the global economy of the future.

But, as Visual Capitalist’s Jeff Desjardins notes, for now, crude oil is still the undisputed heavyweight champion of the energy world.

In 2018, we consumed more oil than any prior year in history – about 99.3 million barrels per day on a global basis. This number is projected to rise again in 2019 to 100.8 million barrels per day.

The Most Oil Reserves by Country

Given that oil will continue to be dominant in the energy mix for the short and medium term, which countries hold the most oil reserves?

Today’s map comes from HowMuch.net and it uses data from the CIA World Factbook to resize countries based on the amount of oil reserves they hold.

Here’s the data for the top 15 countries below:

Venezuela tops the list with 300.9 billion barrels of oil in reserve – but even this vast wealth in natural resources has not been enough to save the country from its recent economic and humanitarian crisis.

Saudi Arabia, a country known for its oil dominance, takes the #2 spot with 266.5 billion barrels of oil. Meanwhile, Canada and the U.S. are found at the #3 (169.7 billion bbls) and the #11 (36.5 billion bbls) spots respectively.

The Cost of Production

While having an endowment of billions of barrels of oil within your borders can be a strategic gift from mother nature, it’s worth mentioning that reserves are just one factor in assessing the potential value of this crucial resource.

In Saudi Arabia, for example, the production cost of oil is roughly $3.00 per barrel, which makes black gold strategic to produce at almost any possible price.

Other countries are not so lucky:

*Total cost (bbl) includes production cost (also shown), capital spending, gross taxes, and admin/transport costs.

 …click on the above link to read the rest of the article…

Life imitates art: Norway rejects oil prospecting in sensitive Arctic islands

Life imitates art: Norway rejects oil prospecting in sensitive Arctic islands

In what seemed like an episode of the Norwegian television drama Occupied, Norway’s largest political party joined smaller ones in the nation’s parliament to prevent oil exploration in the scenic Lofoten archipelago. The Labor Party’s environmental wing made climate change and scenic beauty big issues.

Unlike another contentious oil resource, Alaska’s Arctic National Wildlife Refuge, these islands get around 1 million visitors each year. That implies that many Norwegians have actually seen the islands.

In the history of oil-rich nations, Norwegians have followed an unorthodox path. While most such nations have chosen to subsidize domestic prices of petroleum products or at least keep them cheap by policy, Norway has taxed consumption of oil and oil products as if the country were an importer trying to economize on petroleum use.

A recent Bloomberg survey showed that the average price of a gallon of gas worldwide was $3.48. The range was 1 cent in Venezuela to $7.61 in Hong Kong. Norway ranked second highest at $6.89.

Even more strange is that Norway has become a leading market for all-electric cars. About one-third of all new cars sold in the country last year were all-electric. Of course, Norway has very large hydroelectric resources, resources which produced 93.6 percent of the country’s electricity in February 2019, the most recent month for which data is available. But these copious hydropower resources have long been available and didn’t prevent the country from becoming dependent on petroleum-fueled transportation just like the rest of the world.

Norway also made a fateful and propitious decision shortly after the discovery of its oil and natural gas riches in the North Sea. The country decided to invest much of the tax revenue derived from oil and gas in a sovereign wealth fund to be managed on behalf of the Norwegian people for use by future generations.

 …click on the above link to read the rest of the article…

Smart Money Is Piling Into Oil

Smart Money Is Piling Into Oil

oil field dusk

Oil prices jumped to five-month highs this week, pushed higher by a bullish cocktail of supply outages, geopolitical unrest and a sputtering shale sector.

The most recent factor is the sudden eruption of the long simmering feud in Libya between rival factions. The attack on Tripoli by the Libyan National Army (LNA), a militia led by Khalifa Haftar, led to a spike in oil prices on Monday as the market priced in the possibility of supply outages.

One oil export terminal near Tripoli is the most obvious asset at risk. “If this port were to be shut down due to the fighting, this could see a delivery outage of up to 300,000 barrels per day,” Commerzbank said in a note on Tuesday. “The oil market is already undersupplied, so if supply from Libya also falls away the supply deficit will become even bigger.” Brent jumped to $71 and WTI to $64 on the news, the highest level in five months.

Intriguingly, speculators have only recently turned bullish on crude oil in terms of their positions in the futures market. “Indeed, our money-manager positioning index implies that speculative funds only moved from neutral to positive on oil in the latest week,” Standard Chartered wrote in a report on April 9. The investment bank argued that major investors only began to properly factor in geopolitical risk in the last few days, having overlooked risk for much of this year. Standard Chartered analysts said that the “supply security” of Libyan oil is “low,” and that output could decline in both the short and medium term. 

 …click on the above link to read the rest of the article…

The geopolitics of oil in the Trump era

The geopolitics of oil in the Trump era

The United States have become the leading world producer of hydrocarbons. As from now, they are using their dominant position exclusively to maximise their profits, and do not hesitate to eliminate their major rivals in oil production, plunging their citizens into misery. Although in the past, access to Middle East oil was a vital necessity for their economy (Carter, Reagan, Bush Sr.), then a market over which they presided (Clinton), and then again a failing ressouce whose supply they wanted to control (Bush Jr., Obama), hydrocarbons have now become black gold (Trump).

JPEG - 64.3 kb

Economy depends primarily on the source of energy to which it has access. This need has always been one of the main causes of war. At one time, it was necessary to put slaves to work in the fields then, in the 19th century, to seize coal with which to feed machinery, and today we rely on hydrocarbons (oil and gas).

To avoid looking at this logic too closely, men have always invented good reasons to justify what they are doing.

  1. that Iran is being sanctioned because of its military nuclear programme (which it closed down in 1988);
  2. that the installations and assets of the PDVSA (Venezuelan Oil) have been seized in order to transfer them from the dictator Maduro to Juan Guaido’s team (although it is the former and not the latter who was constitutionally elected President of Venezuela);
  3. or again that the United States maintains its military presence in Syria in order to support their Kurdish allies against the dictator el-Assad (while in fact the Kurds are mercenaries who do not represent their people, and el-Assad was democratically elected).

 …click on the above link to read the rest of the article…

The Russians are coming (and they’re bringing oil)

The Russians are coming (and they’re bringing oil)

As America’s Russia hysteria is stirred once again by the arrival of the long-awaited report of the U.S. Department of Justice on Russian meddling in the 2016 presidential election, a surge in Russian oil imports has arrived on America’s shores.

The surge was little noticed by what passes for the U.S. foreign policy apparatus these days which has now become obsessed with toppling the current regime in Venezuela—a regime unloved by American oil interests who saw their property expropriated by the Venezuelan government.

By effectively preventing the national Venezuelan oil company from getting paid for its cargoes to the United States, the U.S. government has forced Venezuela, previously a major source of imported oil, to seek other customers for its mostly heavy crude.

But the loss of Venezuela as a major U.S. oil supplier has opened up room for other exporters, most notably Russia. Russian oil has never been subject to the economic sanctions arranged by the United States against the country. The arrival of increasing amounts of Russian crude at America’s ports belies the notion so frequently trumpeted by a chorus of fawning admirers of America’s get-tough foreign policy that the U.S. can now use its rising oil dominance to advance its geopolitical goals.

Here’s what’s wrong with that story. First, the United States remains a substantial importer of petroleum products, both on a gross and a net basis. Yes, the country does export a large amount of the light oil produced from the shale deposits in Texas and elsewhere because American refineries cannot use all of it. Those refineries are generally designed to mix light and heavy crudes for optimal output. But, this means the United States must import a significant amount of heavy crude. America remains wildly dependent on world oil to keep its voracious refining industry in operation.

 …click on the above link to read the rest of the article…

U.S. ‘’Oil Weapon’’ Could Change Geopolitics Forever

U.S. ‘’Oil Weapon’’ Could Change Geopolitics Forever

Trump Senate

In a dynamic that shows just how far U.S. oil production has come in recent years, the U.S. Energy Information Administration (EIA) said on Monday that in the last two months of 2018, the U.S. Gulf Coast exported more crude oil than it imported.

Monthly net trade of crude oil in the Gulf Coast region (the difference between gross exports and gross imports) fell from a high in early 2007 of 6.6 million b/d of net imports to 0.4 million b/d of net exports in December 2018. As gross exports of crude oil from the Gulf Coast hit a record 2.3 million b/d, gross imports of crude oil to the Gulf Coast in December—at slightly less than 2.0 million b/d—were the lowest level since March 1986.

U.S. oil production hit a staggering 12.1 million b/d in February, while that amount has been projected to stay around that production mark in the mid-term then increase in the coming years. The U.S. is the new global oil production leader, followed by Russia and Saudi Arabia, while Saudi Arabia is still the world’s largest oil exporter – a factor that still gives Riyadh considerable leverage, particularly as it works with Russia, and other partners as part of the so-called OPEC+ group of producers. However, Saudi Arabia’s decades-long role of market swing producers has now been replaced by this coalition of producers, reducing Riyadh’s power both geopolitically and in global oil markets. In short, what Saudi Arabia could once do on its own, it has to do with several partners.

Meanwhile, U.S. crude oil production, particularly in the Gulf Coast region, is still increasing. In November 2018, U.S. Gulf Coast crude oil production set a new record of 7.7 million b/d, the IEA report added.

 …click on the above link to read the rest of the article…

Oil Rises As Saudi Extends Production Cuts Through April

Oil Rises As Saudi Extends Production Cuts Through April 

President Trump isn’t going to like this.

Offering the first indication that the OPEC+ cartel of major oil exporters intends to extend cuts, Saudi Arabia has reportedly told its clients that they will receive significantly less oil than they had requested in April, extending deeper-than-agreed oil production cuts into a second month, Bloomberg reported.

Saudi

The report, which provoked a spike in oil prices, suggests that “Riyadh is determined to regain control of the oil market as prices remain well below the level that many OPEC members need to cover their government spending.” Oil rose as much as 1% on the news, before fading some gains.

However, the extension isn’t all that surprising: Responding to Trump, who demanded in a tweet that OPEC do something to curb rising oil prices, Saudi Energy Minister Khalid Al-Falih said last month that “we are taking it easy, 25 countries are taking a very slow and measured approach.”

Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!

Aramco, Saudi’s state-owned oil producer, has given customers their allocations for the next month, and they’re some 635,000 barrels short of what refiners had asked for.

With Venezuela output falling further due to U.S. sanctions and power blackouts, oil refiners put in requests – or nominations in industry jargon – for Saudi crude of more than 7.6 million barrels a day for April, the person said. However, the kingdom will supply overseas customers with less than 7 million barrels a day, 635,000 barrels less than refiners asked for however, they said.

The second consecutive month of deep production cuts shows the world’s largest oil exporter is determined to re-balance the market more quickly even though events in Venezuela have left some refiners short of crude. The crisis has worsened a deficit of so-called heavy-sour crude that many refiners use to make diesel.

 …click on the above link to read the rest of the article…

The Real New Deal

The Real New Deal

Wassily Kandinsky Succession 1935

While we’re on the issue of the Green New Deal, here’s an article by Dr. D. with an intro by Dr. D., one he sent me in the mail that contained the actual article, and that I think shouldn’t go to waste. I hope he agrees.

Waste being the key term here, because he arrives at the same conclusion I’ve often remarked upon: that our societies and economies exist to maximize waste production. Make them more efficient and they collapse. 

Ergo: no Green New Deal is any use if you don’t radically change the economic models. Let’s see AOC et al address that, and then we can talk. It’s not as if a shift towards wind and solar will decrease the economic need for waste production (though it may change the waste composition), and thus efficiency is merely a double-edged sword at the very best. 

Here’s Dr. D. First intro, then article:

Dr. D: [..] of course there are a thousand things I can say, but I wanted to make just this one point:  that the economy as we know it is prohibited from contracting by its own system structure.  One thing I couldn’t expand on is that I believe it is almost entirely unconscious.  People like AOC, the Aspen Ecological Center, these people have in the back of their minds “What is possible” and “how things are done” and “can I sell this or will people turn away.” 
 
As I say, the idea of saying, “Everything will be perfect, just live like a Zen Monk” is a non-starter.  Why, I don’t know, as it’s very pleasant and quite provable. 

 …click on the above link to read the rest of the article…

Flirting With Disaster: the Return of Offshore Drilling

Flirting With Disaster: the Return of Offshore Drilling

Photograph by TheConduqtor

It’s been decades since a fisherman out of Montauk on Long Island told me about seeing a ship in the Atlantic Ocean east of Long Island similar to those he had seen searching for oil in the Gulf of Mexico when he was a shrimper there. I telephoned oil company after company and each gave a firm denial about having any interest in looking for petroleum off Long Island.

That was until a PR man from Gulf called back and said, yes, his company was looking for oil and gas off Long Island—and was involved in a consortium of 32 oil companies (many of which earlier issued denials).

It was my first experience in oil industry honesty—an oxymoron.

Then, after breaking the story as an investigative reporter for the daily Long Island Press about the oil industry seeking to drill in the offshore Atlantic, there were years of staying on the story. I traveled the Atlantic Coast including in 1971 getting onto the first off-shore drilling rig set up in the Atlantic, off Nova Scotia. The riskiness of offshore drilling was obvious on that rig. There were spherical capsules to eject workers in emergencies. And a rescue boat went round-and-round 24-hours-a-day. The man from Shell Canada said: “We treat every foot of hole like a potential disaster.”

You might recall seeing movies from years ago about oil drilling in the west and the drill hitting a “gusher” and it raining oil on happy workers. But on an offshore rig that “gusher” would be raining oil on the sea and life in it and then the oil would move to shore.

The Shell Canada executive gestured to the Nova Scotia shore and said peat moss was being stockpiled to try to absorb spilled oil. On Long Island, he said, “you’d use straw.”

 …click on the above link to read the rest of the article…

Olduvai IV: Courage
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