TOPIC: Unconventional Oil is NOT a Game Changer
Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4088
Washington, D.C. "Penn Oil and truck."
This is no surprise to us here at The Automatic Earth, as our position is that the 2008 price peak will stand for a very long time, and that the rise from the 2009 low has been a counter-trend rally. Prices of many assets have been moving with the ebb and flow of confidence, and therefore of liquidity, in this era of extreme financialization, and commodities are no exception.
As we have pointed out many times, prices do not reflect the fundamentals of supply and demand in any particular industry. If they did so, equities and different commodities would not move in relative sychrony, yet they have often done so.
Instead, prices reflect a combination of general confidence (or lack thereof) and the perception of future scarcity or glut, whether or not that perception is, in fact, accurate. Commodities top on fear of shortages. When there is a perception of scarcity, speculators bid up the price in advance of what the fundamentals would justify at that time, as they did in the run up to the 2008 price peak.
When the speculative bubble bursts, the sector is dumped and the price collapses as speculation goes into reverse. In 2008, commodities in general fell 58%, and oil prices plunged 78% in five months as the financial crisis sucked liquidity out of the system and the perception of imminent scarcity disappeared.
With the temporary resurgence of confidence from the 2009 bottom, liquidity returned, and, increasingly, so did the perception of scarcity for commodities in general and for oil specifically. Prices were bid up again, although not to the previous high, even though analysts extrapolating the trend forward were calling for a much larger commodity price spike than 2008.
Commodity prices in general peaked in May 2011 and continue their retreat.
Confidence is ebbing as the scope of the financial crisis centred in Europe becomes increasingly evident, and vulnerabilities in other regions and sectors of the economy emerge. Even the Chinese juggernaut (the primary driver of commodity demand) is visibly faltering.
Retreating liquidity and persistent economic weakness act to undermine comodity prices further. This process is far closer to its beginning than its end. As the global credit bubble of the last thirty years implodes, we will be heading right in to the teeth of liquidity crunch, economic seizure and another deflationary Great Depression. Under such circumstances, we can expect demand to be weak for many years, and with falling demand will come falling price support.
At the same time, in the case of oil, we are seeing a sharp reversal of perception - from one of scarcity to one of glut - as pundits discuss how technological innovations, including horizontal drilling and hydraulic fracturing, will increase global supply dramatically. De-conventionalization of oil supply is touted as the solution to peak oil for the foreseeable future.
Euphoria particularly surrounds the projections for US production, with talk of the country becoming both energy independent and an exporting powerhouse - a New Middle East.
Thanks to the technological revolution brought about by the combined use of horizontal drilling and hydraulic fracturing, the U.S. is now exploiting its huge and virtually untouched shale and tight oil fields, whose production although still in its infancy is already skyrocketing in North Dakota and Texas.
The U.S. shale/tight oil could be a paradigm-shifter for the oil world, because it could alter its features by allowing not only for the development of the worlds still virgin shale/tight oil formations, but also for recovering more oil from conventional, established oilfields whose average recovery rate is currently no higher than 35 percent.
The natural endowment of the initial American shale play, Bakken/Three Forks (a tight oil formation) in North Dakota and Montana, could become a big Persian Gulf producing country within the United States. But the country has more than twenty big shale oil formations, especially the Eagle Ford Shale, where the recent boom is revealing a hydrocarbon endowment comparable to that of the Bakken Shale. Most of U.S. shale and tight oil are profitable at a price of oil (WTI) ranging from $50 to $65 per barrel, thus making them sufficiently resilient to a significant downturn of oil prices.
From: Maugeri, Leonardo. “Oil: The Next Revolution” Discussion Paper 2012-10, Belfer Center for Science and International Affairs, Harvard Kennedy School, June 2012.
The difficulty is that an analogous scenario has unfolded before, in the natural gas industry. Out of sync with other commodities, the boom and bust in natural gas is giving us a glimpse of the future for unconventional oil. The extraction techniques are the same ones that have generated tremendous hype, while simultaneously setting up a ponzi scheme in flipping land leases, creating the perception of supply glut, crashing the price of natural gas in North America to far below break-even, amplifying financial risk for increasingly indebted producers, and threatening to put those same producers out of business.
This is the dynamic that is set to lead North America into a natural gas supply crunch over the next few years, as we discussed recently in Shale Gas Reality Begins to Dawn.Those involved in unconventional oil would do well to take note.
The drilling costs are high, as are the decline rates ("While some have been able to yield as much as 1,000 barrels a day, the rate then falls off to 65 percent the first year, 35 percent the second, and 15 percent the third"), and the EROEI is very low in comparison with conventional oil. As with unconventional gas, which suffers from the same obstacles, the industry is set on an accelerating drilling treadmill in an attempt to grow equity by expanding the reserve base with the cash flow generated.
Continued expansion is necessary to maintain the perception of company value. In other words, the industry is based on ponzi dynamics. So long as prices hold up, we can expect it to continue, but if we look at the broader economic context in conjunction with the lessons derived from unconventional gas, there is every reason to expect that the production boom is temporary, precisely because these circumstances will generate a price collapse.
Estimates of the price required for the new supplies to be economic vary. The consensus appears to be that there is a sufficient price cushion to withstand a fall, but producers are not anticipating a major one. Unfortunately for them, we can expect the perception of glut, combined with deepening economic depression, to force prices down to the cost of the lowest price producer, and quite possibly lower, at least temporarily. Companies on the unforgiving drilling treadmill will be facing increasing financial risk, and over the next few years, as over-extended and over-indebted companies go out of business, we can expect a supply crunch to develop.
The timescale is difficult to predict, as there are many factors with different timeframes to consider. Large scale deleveraging, which is set to unfold over the next few years, will have a tremendous impact on project capital availability, on demand, and on the affordability of operating and maintaining existing infrastructure. It will also be very difficult to build out new oil transport infrastructure to cope with changing energy supply patterns. The infrastructure mismatch will put continued downward price pressure on North American oil in comparison with international supplies, reducing the fungibility of oil.
North America has a long history of oil production and processing. Decades of producing oil and consuming lots of petroleum products have left the continent with a pretty good system of pipelines and refineries but pipelines are annoyingly stagnant things that tend to stay where you build them. And it turns out that the pipelines of yesterday are in the wrong places to serve the oil fields and refineries of today.
America's oil infrastructure was built around two inputs some domestic production and large volumes of imports. You see, while the Middle East may be the biggest producer of crude oil in the world, most of the refining occurs in the United States, Europe, and Asia. There are two reasons for this. The first is that it's easier to ship massive volumes of one product (crude oil) than smaller volumes of multiple products (gasoline, diesel, jet fuel, and so on). The second reason is that refineries are generally built within the regions they serve, so that each facility can be tailored to produce the right kinds and amounts of petroleum products for its customers...
...Remember how the US's oil pipelines were designed primarily to move refined products from the Gulf region and the coastal refineries to inland customers? Well, those pipelines of yesterday now run the wrong way.
The production boom in shale oil has momentum, and that is likely to carry on for some time, even in the face of sharply falling prices, as has been the case for natural gas. The rig count in shale oil production is skyrocketing, even as the rig count for natural gas falls, and production lags rig count.
The quantity of recoverable oil has been considerably hyped, and this resource is not going to represent a game-changer. In fact it would not even if we were not facing economic circumstances set to crash production.
The estimated amount of oil in place (the resource) varies widely, with some suggesting that there could be 400 billion barrels of oil in the Bakken. Because of advances in fracking technology, some of the resource has now been classified as reserves (the amount that can be technically and economically produced). However, the reserve is a very low fraction of the resource at 2 to 4 billion barrels (although some industry estimates put the recoverable amount as high as 20 billion barrels or so). For reference, the U.S. consumes a billion barrels of oil in about 52 days, and the world consumes a billion barrels in about 11 days.
In addition, the enormous number of expensive wells required would takes decades to drill with the rigs available, even if considerable efforts were made to increase their number, meaning that the oil that is there would be produced very slowly.
Beyond the shale oil of the Bakken in North Dakota or the Eagle Ford in Texas, there are other forms of unconventional oil that form part of the North American production boom hype.
Robert Rapier again:
When some people speak of hundreds of billions or trillions of barrels of U.S. oil, they are most likely talking about the oil shale in the Green River Formation in Colorado, Utah, and Wyoming. Since the shale in North Dakota and Texas is producing oil, some have assumed that the Green River Formation and its roughly 2 trillion barrels of oil resources will be developed next because they think it is a similar type of resource. But it is not.
The prospects for some of these are significantly worse than for shale oil, especially where the EROEI is even lower. Colorados oil shale in particular is unlikely ever to amount to much. While shale oil is a liquid hydrocarbon trapped in low permeability source rock, which can be liberated through fracking, oil shale is not a liquid at all, but solid kerogen that requires tremendous energy inputs to be separated from the source rock. Those required energy inputs mean a rock-bottom EROEI. Costs in monetary terms are sky-high as well.
To generate liquid oil synthetically from oil shale, the kerogen-rich rock is heated to as high as 950 degrees Fahrenheit (500 degrees Celsius) in the absence of oxygen, a process known as retorting.
There are several competing technologies for producing oil shale. Exxon Mobil has developed a process for creating underground fractures in oil shale, filling these cracks with a material that conducts electricity, and then passing currents through the shale to gradually convert the kerogen into producible oil. Royal Dutch Shell Plc buries electric heaters underground to heat the oil shale.
Although estimates of the cost to produce oil shale vary widely, the process is more expensive and energy-intensive than extracting crude from Canada's oil sands. Producers would require oil prices of roughly $100 a barrel before this capital-intensive process would be feasible on a commercial scale.
Shale oil may have an EROEI of approximately 4, while tar sands would come in at 3 and oil shale would be 2 or less.
Humans are prone to grasp at straws and believe in fantasies rather than face unpleasant realities. Believing that unconventional fossil fuels can maintain business as usual is a fantasy. We cannot run our current complex society on low EROEI energy sources.
We are still facing peak oil, and, on the downslope of Hubberts Curve, we will be running faster and faster on our accelerating treadmill just to slow the decline in supply. Unconventional supplies with lower and lower EROEI are not going to change that picture, and the crash of prices that will happen thanks to economic depression will aggravate the situation considerably in the short term. We can expect prices to fall faster than the cost of production, and many corporate casualties to emerge as boom turns to bust, as it always does.
The next few years will be remembered for financial crisis, where it will be money in short supply rather than energy. As economic contraction proceeds, and purchasing power falls substantially due to the collapse of the money supply, demand for energy will - temporarily - fall a long way. Beyond that, as the deleverging comes to an end and the economy begins to stabilize somewhat (probably between five and ten years down the line), we are likely to see a supply crunch develop.
With that we are likely to see a major price spike, and the potential for resource wars will grow dramatically. Oil is liquid hegemonic power, and conflict can be expected to develop when it is perceived to be scarce. Thats not where we find ourselves today, but it is where the future is taking us.
The following user(s) said Thank You: Barak
Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4089
It's great to have you contributing more often Nicole. When researching information about these important topics, it's rare and refreshing to have find the writings of such a brilliant mind without the hyperbole.
The following user(s) said Thank You: sensato
Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4091
Westexas (Jeffrey Brown) over at TOD has a good data set on oil prices in the Great Depression:
"The Thirties Analogue:
Annual nominal US crude oil prices* 1929 to 1939
*Data Source: Global Financial Data
It appears that global crude oil consumption declined in 1930, 1931 and 1932, and then started increasing in 1933:
I obtained the Global Financial Data from Mark Perry, who had the following blog post, which shows 1930's (inflation/deflation adjusted) monthly oil prices in constant 2008 dollars:
Note that both adjusted prices and nominal oil prices rose after 1933, with the 1938 decline still being above the 1933 price level."
This is my response:
I am expecting oil to bottom relatively early in this depression, as it did in the last one. My guess would be a bottom within the next 5 years at the most, and quite possibly sooner. Economic contraction and collapsing purchasing power should push prices down a long way (a temporary $20/barrel would not surprise me), but military demand will probably start to pick up as countries chase after their share of the liquid hegemonic power. I am expecting resource wars and internal conflict within resource rich countries to take supply off the market. I am also expecting production and distribution infrastructure decay and deliberate damage. In addition, trade collapses in depressions, meaning that we would see oil cease to be fungible. Price could vary substantially both in time and between places. The overall picture is likely to be a very complex blend of technology, finance, geopolitics and many other factors.
Even if prices are low in nominal terms, that does not equate to greater affordablity. Purchasing power for most people will have fallen much further than the oil price, making oil considerably more expensive in real terms, even as prices are bottoming. As the next price cycle begins, and prices rise substantially, affordability will get drastically worse. We could see a new high in nominal terms, but real terms matter more anyway.
Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4092
Link to Jeff Brown's post:
Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4093
I agree that in the short term markets today seem to be just a measure of where liquidity is running - there's a lot of it out there, and it appears to slosh from bonds to stocks, from one country to another, with big distorting effects as it does so.
To understand what our effective constant oil supply might be from all the shale wells we've drilled, if we just were to eliminate the first few (deceptively rich) years of production, it would seem to be a simple matter of multiplying some lower average rate (50 bbl/day?) times the number of wells drilled to get a sense as to the steady state production without the distorting effect of the first few years.
20k wells x 50 bbl/day = 1 mbpd. So can we say, for each 20k wells, we get 1 mbpd steady state (more or less) for perhaps 10 years? At a cost of perhaps $6M per well, that's $120B per 1 mbpd or about $30/bbl.
A 10B barrel resource produced @ 1 mbpd will last about 27 years, and require about 50k total wells drilled. So, we need about 180B barrels of resource to provide for US oil needs for the next 27 years. To produce such a resource, we'd need to drill 900k wells, costing $5.4 Trillion dollars, or $200B per year. Say 100k wells per year drilled at maximum - 20 days per well, so that would require 5k rigs I think we have 2k rigs right now, and some of them are working on gas.
My questions are - are the average numbers I used even close to being correct, and does that resource even exist?
If you have different numbers, I'd like to hear what they are.
I do realize you anticipate a crash that will likely prevent any of this investment from happening, but I'm curious just from an engineering standpoint to see what it might cost if we could actually execute on it, and where it might have problems in execution.
Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4095
Absent from this article is the increasing amount of energy coming online from renewables all over the world. This surely is putting some burrs under fossil fuel pig saddles.
I know for a fact that wind power in Texas is now at 3 cents per kwh. I will post the stats in the US after I dig them up at the US Energy Department web site but I know that renewables are forcing fossil fuel prices down and the world recession and more natural gas from fracking are not the only factors.
I also question any math that excludes the cost of dealing with poisoned aquifers from fracking or ignores the massive subsidies these crooks get.
I don't DO excluding "externalites" to make the numbers look good!
Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4096
Renewables represent a drop in the bucket of global supply. They are having no effect whatsoever on fossil fuel prices. They are more expensive than fossil fuels because of their very low EROEI and very large fossil fuel dependency. In fact renewables is a minomer. The sun will continue to shine and the wind to blow, but steel is not renewable and neither are many other essential components.
The demand and price collapse will kill much of renewable development, especially at a large scale. You cannot run an industrial society on intermittent energy sources with low EROEI. Feed in tariffs are already being cut worldwide, and without them renewable power is not competitive. Since we cannot run this society on renewables, our society will have to change. We will have to learn to live within our means.
This article was not about poisoned aquifers. I have written about that before though. I cannot cover everything in every article or there would be no focus. Of course fracking is obscene, the environmental risks are huge and a few well connected individuals are making a killing from the ponzi scheme. The price collapse will eventually prevent it, just not right now when there is still money to be made. The numbers are bad even with externalities excluded, and are of course much worse with them. Some of these things are very difficult to quantify, and over-quantification doesn't really help anyway.
This is real politik - the way the world really works. It's about money and power. The expansion phase of the bubble concealed that for a while by floating many boats temporarily. I wish that wasn't the way it worked, but it does, whether we like it or not. All we can do is to understand our situation and make the best of it.
Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4097
The discussion of unconventional gas/oil seems to get more absurd to me. If the claims are right (just for argument's sake), the carbon dioxide emissions will be the final nails in the coffin for civilization. To be a proponent of developing the unconventional resources fully, you have to believe unlimited CO2 emissions have no consequences. I'd like to hear someone state that view--I can always use a good laugh.
Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4098
"Although industry growth in 2010 was slower than the record growth set in 2009, 5,600 MW worth of projects were under construction at the end of the year, laying the foundation for further growth in 2011. In 2010, the U.S. wind industry grew 15%, installing 5,115 MW of generating capacity—enough to power more than 1.2 million homes.
Wind power represented 25% of all new U.S. electric generation capacity in 2010.
According to the American Wind Energy Association, 38
states now have utility scale wind projects. Current wind
power installations in the United States provide enough
electricity to avert nearly 62 million tons of greenhouse gas
emissions, which is equivalent to taking 14 million cars off the road. Fourteen states have installed more than 1,000 MW of wind power."
"Enhanced Geothermal Systems
Naturally occurring geothermal systems,
known as hydrothermal systems,
are defined by three key elements:
heat, fluid, and permeability at depth.
Enhanced Geothermal Systems (EGS)
are manmade reservoirs, created where
there is hot rock but little to no natural
permeability or fluid saturation."
"EGS offers the opportunity to access
an enormous, domestic, clean energy
resource estimated to be in the range
of 100-500 GWe. A Massachusetts
Institute of Technology (MIT) study
released in 2007 predicted that in
the United States alone, 100 GWe of
cost-competitive capacity could be
provided by EGS in the next 50 years.1"
"Oil provided a growing share of energy for electric generation through the 1960s, but its share declined to less than 1% in 2011 since peaking at 18% in 1973."
DO YOU SEE THE TREND?
Now look at world electricity production.
I believe that although supply and demand have a definite bearing on the reduced price of oil and gas caused partially by more renewable energy coming online and a world recession going on, there is something else going on here that I witnessed in the 1980s as well. The price of fossil fuels was flattened to knock the stuffing out of solar power, wind power and any other renewable that threatened price monopoly by the fossil fuel pigs. After all, how can you have sudden increases in prices from wars, the rumors of wars or some other convenient reason for jacking up the prices to the moon when a wind generator in Texas or a geothermal plant or a 100MW solar panel farm in the California desert is pumping out that power day in and day out in a boring, predictable fashion? Wall Street and fossil fuel pigs HATE "boring and predictable". It's hard to scam people when things are "boring and predictable".
President Carter managed to convince a lot of people that renewables were a good deal. Since big oil could not attack that head on, they conspired to lower prices to bargain basement levels in order to make renewables "non-competitive". Then they came up with the LIE that nuclear power was clean and green to blur the obvious advantage for the environment of real renewables like wind, solar and geothermal, etc. It was also during that period that big oil came out with the big lie that fossil fuels, rather than increases in proper hygene and antiseptic procedures, had enabled the population explosion.
It worked. Don't fall for it again. We need to push for renewables with all our might if we ever hope to control how much we pay for our energy and make sure we generate it in an environmentally sound manner.
For those who like wading through data, here's the whole enchillada about energy source breakdown from 1973-2010 and lots of other spreadsheet data as well.
Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4100
THOSE RENEWABLE ENERGY "DROPS IN THE BUCKET" KEEP GETTING BIGGER and BIGGER:
Wind Power Projects
EDF Energies Nouvelles and Mitsui of Japan have
announced a 150-MW wind power project in northern
Morocco. Morocco intends to have 2 GW of wind power and 2 GW of solar power up by 2020.
Iberdrola has commissioned the 178-MW Messina-Agrigento wind power complex on the island of Sicily in Italy. “This project, developed jointly (50/50) with Italy’s API Nova Energía, part of the API business group, encompasses four wind farms: Nebrodi (64.6 MW), Alcántara (47.6 MW), Lago Arancio (44 MW) and Rocca Ficuzza (22.1 MW).”
Polish utility Enea has bought a 50-MW wind farm in northwestern Poland from leading wind power company Vestas. The capacity of the wind farm is supposed to expand to 60 MW.
First Wind “has obtained $76 million in construction financing for its 34 megawatt (MW) Bull Hill Wind project in Hancock County, Maine.”
Chinese subsidiary Jade Werke is “outsourcing wind production to Germany” — it will begin production of steel fundaments for offshore wind farms at a €50-million production plant in Germany as early as 2013. Construction of the new plant is expected to begin this summer. ”Germany’s decision to abandon nuclear power is having profound effects on the wind energy industry. Growth rates in the onshore segment were strong last year, the policy framework has been improved, and the offshore market ready to take off,” said Anne Braeutigam, wind energy expert at Berlin-based Germany Trade & Invest.
The largest wind farm in the US, the Alta Wind Energy Center (“AWEC”) located in Tehachapi, CA, is projected to reach a capacity of 1,320 MW (wow, that’s big) with $650 million of financing now secured for the 168-MW Alta Wind VII and 132-MW Alta Wind IX projects. Other news related to the project is that “Terra-Gen recently sold the Alta Wind VIII (150 MW) phase to Brookfield and has entered into an agreement to sell the Alta Wind VI phase (150 MW) to Everpower.”
Wind Power Market Trends
Asia is expected to drive the global wind market forward in coming years, yet another report finds. “Danish consulting firms BTM and Make have published analyses on global wind power market trends. In 2011, nearly 42 gigawatts – some 23,640 turbines in 50 countries – was installed, bringing the global total up to around 241 gigawatts. Vestas managed to defend its market leadership…. Asia now makes up 52.1 percent of the global wind power pie, growing by 34.1 percent from 63.6 gigawatts in 2010 to 85.3 gigawatts last year.”
Scottish people love or like wind power, well 7 out of 10 of them do. A recent YouGov survey commissioned by the trade group Scottish Renewables “found that 39 per cent of respondents ‘strongly agreed’ with the statement ‘I support the continuing development of wind power as part of a mix of renewables and conventional forms of electricity generation’, while a further 33 per cent ‘tended to agree’.”
In the UK as a whole, approximately 66% of people support wind energy and only 8% are against it when asked ”to what extent are you in favour of or opposed to the use of wind power in the UK?” according to a recent Ipsos Mori poll, commissioned by wind trade body RenewableUK.
The UK’s Guardian has a new, short video on Denmark’s wonderful wind leadership. “[Over] 28% of the country’s energy is now provided by wind, with an aim of 50% by 2020 – and 100% renewable energy provision by 2050.”
In Ontario, a couple claiming that their home’s value has been devalued from nearby wind turbines has had the claim rejected by MPAC, the Municipal Property Assessment Corp.
Re: Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4101
Do you live off grid? What systems do you use?
Re: Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4102
Without going into an analysis about the growing use of wind and solar...it might be handy to recall the Hirsch report....."we don't have an energy crisis, we have a liquid fuels crisis."
At last look, 95% of all transport worldwide was still via fossil fuels....
going on 1 billion vehicles......
glad I can walk to the beach and don't have to heat my home....
Re: Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4104
Wind power becomes a lot more useful if we can develop cheap hydrogen electrolyzers. Hasn't happened yet.
Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4108
Here in the UK, where Nicole is at the moment, I notice that George Monbiot has been completely taken in by Maugeri's report. See www.monbiot.com/2012/07/02/false-summit/. It's a pity that GM has waived his usual demand that claims of the sort that Maugeri makes should be based on peer-reviewed work. In particular he happily accepts, as "compelling evidence" of the game-changing nature of shale oil, the following passage from Maugeri :
“In 2011, Continental has estimated the Bakken OOP alone at 500 billion barrels. In terms of oil in place (not all of which is recoverable), both the Price and the Continental estimates would put the Bakken formation ahead of the largest oil basins in the world".
Of course the parenthesis is absolutely crucial here, and authoritative estimates of what is "recoverable" are available to Monbiot with a few mouse clicks' effort: for instance the USGS estimate of 3 - 4.3 billion barrels. Too bad he didn't expend that effort. At least Monbiot is prepared to admit past mistakes.
Last Edit: 10 months, 3 weeks ago by billhartree. Reason: I decided the edit made the text less clear
Re: Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4110
"boom and bust"...Chinese glut in cement mixers (& other):
From "The Looting of China by the Kleptokapitalist Bourgeoisie Roaders"
Elsewhere , Zoomlion the concrete and industrial machine giant is seeking Rmb140bn ($22bn) in fresh credit, fuelling fears the company is at the centre of a growing debt bubble. Zoomlion only has a market capitalization of $12.5B and is one of the most shorted stocks on the Hong Kong market with over 30% on loan at any one time to short-sellers. This company certainly lives up to its name, we know we have a bubble when a company with a business model like this one can raise just less than twice as much as the Facebook who raised $12.B by selling 12.3% of the company.
Zoomlion has an interesting business model, it is similar in many of ways to Caterpillar, except whereas Caterpillar report falling sales, Zoomlion reports astounding sales growth with a fivefold increase in revenue since 2007. Zoomlion customers sometimes buy ten concrete mixers when they planned to initially by one or two. They have a perverse incentive to buy more than they need because these concrete trucks are purchased via finance packages supplied by Zoomlion.
Then the machines can be garaged and used as collateral to borrow further funds from other lenders. Zoomlion continues to grow while cement sales have plunged. In May, cement output increased 4.3 per cent YoY, down from 19.2 per cent recorded last year. Zoomlion’s new debt of $22.5B buys roughly 900,000 trucks which could produce enough concrete (at six loads a day) to build over thirty Great Pyramids of Giza a day .
Every sector is infected with these kinds of perverse business practices, steel traders used loans meant for steel projects to speculate in property and stocks , it has been common (apparently) for steel traders to secure loans to buy steel then use this same steel as collateral to borrow funds to invest in property development and the stock market. In many ways this is the steel version of the Zoomlion model. A fundamental foundation of any lending market is the ability of the lender to ensure title and guarantee ownership of collateral.
complete article here
Re: Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4112
Don't bother reading the whole article, it's really awful, but the Zoomlion bit is illustrative; it's part of my next China piece. Today and tomorrow is travel time, so it may take a few days.
Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4115
Nope. I live on grid in Vermont on rented land (can't control what I put on the house for solar power) but I support Green Mountain Power's (local utility) move to renewables from wind farms to replace the Vermont Yankee nuclear power plant contracts they are doing away with. My house is small (less than 1,00 sq. ft.) and we keep our carbon footprint tiny with a push mower and less than 2,000 miles driving per year.
Unconventional Oil is NOT a Game Changer 10 months, 3 weeks ago #4116
Correction: My house is less than 1,000 square feet. Sorry for the typo.
Re: Unconventional Oil is NOT a Game Changer 10 months, 2 weeks ago #4139
One good thing,and the only "good"thing I see about "unconventional" oil,is that it is kicking the can a few more months/years down the road...yes,I know there will be a terrible price to pay with the destroyed aquifers,and other "prices"that are not yet known...but I understand the logic they used....when it breaks bad,all hell breaks loose,and even TPTB will be hurt...
Unconventional Oil is NOT a Game Changer 10 months, 2 weeks ago #4151
Renewable energy, higher efficiency and LENR energy generation will likely save us in the long run (10 to 20 years) as these things ramp up. The question is if they can do so fast enough to prevent global warming disaster.
Unconventional Oil is NOT a Game Changer 10 months, 1 week ago #4321
I agree with you that the pursuit of renewable energy systems should be of paramount importance.
However, I am not convinced that renewables will ever amount to anything more than a drop in the bucket.
As much capacity as is being added, it is nothing compared to demand and there are many large technical hurdles to overcome - grid scale storage not the least.
Check out this article from "The Economist":
Apparently Texas should have had plenty of electricity over the summer of 2011 based on a 2010 estimate of 84400 MW of total capacity (9500 MW from wind alone) but they only barely avoided rolling blackouts... Part of the problem was that the 9500 MW from wind wasn't really 9500 MW. Wind is intermittent and doesn't always produce when you need it. The article goes on to hype future-tech grid scale storage systems...
If you've never seen it, you should check out Tom Murphy's "Do The Math". There are, I think, some very practical estimates there on what can be expected of all manner of renewable energy technologies (among other things).
All the technical difficulties aside, I think the biggest problem with a transition to renewables is not even with the technology but in people's expectations for how much energy they "need" to consume.
I think it was Nate Hagens who said something like:
"We're not facing a shortage of energy, but a longage of expectations."
I'm not sure I entirely agree with the statement... but the "longage of expectations" is definately a component of the equation worthy of serious consideration.
- ► 2013 (13)
- ► May (2)
- ► April (3)
- ► March (3)
- ► February (2)
- ► January (3)
- ► 2012 (90)
- ► December (3)
- ► November (2)
- ► October (5)
- • 29 - Nicole Foss And Max Keiser Talk Greed, Fear, Downward Spirals And Risk Divisions
- • 23 - Japan Is Not A Good Example Of How Deflation Typically Plays Out
- • 16 - Household Net Worthless: Poverty Here We Come
- • 11 - What Happens When The Core Starts To Rot
- • 05 - The IMF -Inadvertently- Condemns The Eurozone
- ► September (5)
- ► August (8)
- • 30 - A Big Bad Brick Wall
- • 25 - Dear Angela, It's Time To Do The Right Thing
- • 19 - India Power Outage: The Shape of Things to Come?
- • 14 - The People Are Guaranteed to Lose
- • 10 - The Seductive Promises of Counterfeit CULTures
- • 07 - Here's The Science That Can Solve The Crisis
- • 04 - Lessons From the Full Tilt Ponzi
- • 01 - Culturally Programmed Myths of Omnipotence
- ► July (10)
- • 29 - How Will We Handle Our Losses?
- • 26 - Our Debts Must be Redeemed
- • 24 - Einstein's Definition of Gluttony
- • 22 - Super Rich Stash At Least $21 Trillion In Secret Tax Havens
- • 18 - Jeff Rubin and Oil Prices Revisited
- • 16 - Report: The Golden Dilemma
- • 12 - Europe Is Sliding Back Into Its Own Past
- • 10 - Libor was a criminal conspiracy from the start
- • 08 - Hubris Before The Storm
- • 03 - Unconventional Oil is NOT a Game Changer
- ► June (11)
- • 29 - Angela Merkel is Playing You For Fools
- • 23 - This Is Not America
- • 21 - Spanish Cook Books
- • 18 - Capital Flight, Capital Controls, Capital Fear
- • 18 - The Orkin Man: Which Side Are You On?
- • 15 - Goodness! Gracious! Great Wall's on Fire!
- • 13 - Autoimmune Finance: The System Attacks Itself
- • 09 - Europe: A Thousand Miles Behind
- • 06 - Welcome to the No-Growth Paradigm
- • 03 - If you love your kids, stop the bond bonanza
- • 01 - The truth about Europe - There is no solution Part 2: Growth doesn't rhyme with crunch
- ► May (9)
- • 29 - Espana en Fuego
- • 27 - Mammon is Hungry: Husband's Suicide One Day, Wells Fargo to Evict Wife The Next
- • 23 - All Hail the Greek Exit
- • 20 - Homo sapiens v. FWS
- • 18 - Deterrence is Dead
- • 17 - A world terrified by impotent ghosts from the past
- • 13 - Discovering the "End" in "Extend & Pretend"
- • 11 - There Is Not Enough Money On Planet Earth
- • 05 - China, or How To Live in Interesting Times
- ► April (8)
- • 29 - Beyond Zero Emissions: What's Wrong with Big Green Tech
- • 27 - The Limits to Mankind
- • 25 - Revisiting the Physical Risks of Debt
- • 22 - General Thoughts about Luck
- • 18 - Spain, Land of Magical Financial Realism
- • 09 - Money in Politics
- • 06 - Learning to Think in Multiple Scales
- • 02 - Disaster Capital Hits Europe
- ► March (14)
- • 29 - The Nature of Tipping Points
- • 28 - The Death of the Entertainment Industry
- • 27 - The Shock Doctrine has come to New Zealand
- • 24 - Becoming the Bank
- • 22 - To Where Our Oppositional Culture Takes Us
- • 20 - You wouldn't know it to look at it
- • 16 - An Introduction to Agent-Based Modeling
- • 13 - Juking the Stats: Our Culture of Manipulation
- • 11 - Get Ready to be Disappointed With "Sterilized" QE3
- • 09 - Revisiting the Financial Fingerprint of Instability
- • 06 - Why Liquidity is No Longer Enough
- • 05 - Their Assumptions are Getting Very Ugly
- • 03 - The Original Street Artist
- • 01 - Modern Myths that Destroy Humanity
- ► February (9)
- • 28 - When the Deflation Tsunami Hits, Losing the Least is a Winner
- • 26 - Our Depraved Future of Debt Slavery (Part III)
- • 24 - Our Depraved Future of Debt Slavery (Part II)
- • 22 - Our Depraved Future of Debt Slavery (Part I)
- • 20 - The Torture of the European Periphery
- • 18 - We're Still Sinking With the Titanic
- • 15 - Political Theater Will Kill the Status Quo
- • 13 - Die Wahrheit Macht Frei
- • 04 - Who Killed the Money Printer?
- ► January (6)
- ► 2011 (4)
Nicole Foss Lecture Tour:
AUSTRALIA/NEW ZEALAND March-June 2013
New Zealand May/June Dates still available
May 24 Waiheke Island
Palm Beach Hall 6.30pm
May 27 Auckland
The Hillsborough Room, The Fickling Centre (Mount Eden) 7.30pm
May 29 Tauranga
May 30 Wellington
Sustainability Trust, 2 Forresters Lane 5.30pm
June 1 Otaki
Clean Technology Centre 47 Miro St. 1.30pm
US Fall 2013 - Dates Available
Request Lectures: StoneleighTravels •at• gmail •dot• com.
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