Powers Vow in 2007 as in 1932

[Guest]

Re: Powers Vow in 2007 as in 1932

Jim -

Fred wrote : << I'm only human! I think. >>

Maybe FRED is a BOT??!!

I just knew there were more of 'em around here ( :cool: !!?? )

I bet he's a BOT Jim. That explains everything - never sleeps, pops up 24/7 where iTulip discussions are getting fractious, squashes spammers to mush with all the sentimentality of a mallet at 3.00 AM, sounds 'different' every few months when they upgrade it's firmware, etc.

It's got to be a BOT! :eek:

[GRG55]

Re: Powers Vow in 2007 as in 1932

You have a lot of company. This report came out today...

Steep decline in oil production brings risk of war and unrest, says new study

• Output peaked in 2006 and will fall 7% a year
• Decline in gas, coal and uranium also predicted

World oil production has already peaked and will fall by half as soon as 2030, according to a report which also warns that extreme shortages of fossil fuels will lead to wars and social breakdown.

The German-based Energy Watch Group will release its study in London today saying that global oil production peaked in 2006 - much earlier than most experts had expected. The report, which predicts that production will now fall by 7% a year, comes after oil prices set new records almost every day last week, on Friday hitting more than $90 (£44) a barrel.

EWG's web site states, "The Energy Watch Group is financed by funds, which flow into the Ludwig-Bölkow Foundation." We sent them a note today asking where the group's funds come from.

Well, a group dedicated to...

From jk's post: "The main focus of the LBST work is on sustainable energy and transportation systems and related technologies.
Important fields of activity are: Renewable energies, energy efficiency, reduction of greenhouse gas emissions, introduction of hydrogen as an energy carrier produced by renewable energy sources, fuel cells, and future availability of fossil energies."

...would say that sort of thing.

The 7% per annum initial decline rate smacks of sensationalism, and their forecast must assume Ghawar falls off a cliff. What may have peaked already is light, sweet crude oil production. Total global oil productive capability appears to still be capable of growing at least a bit more when lower grade sour crudes, and unconventional production are added. (However, productive capability, actual production, and available exports to consuming nations are three different things)

Khurais in Saudi Arabia (1.2 mm bbls/d) is the last major green field light oil development on the books, and it will require 168 producing wells and 184 injection wells at full development. Manifa (900 k bbls/d) is heavier than Khurais, but the average well productivity is expected to be twice the average of Khurais - a good indication of the reservoir quality differentials that Aramco is dealing with (the best of the light, sweet reservoirs were developed long ago). In sequence with the massive Khurais waterflood sourcing (sea water from the Gulf), Aramco plans to increase the injection capacity at Ghawar, which should arrest the decline somewhat for some years (how much and how long is largely conjecture as the information is simply not publicly available - something Matt Simmons keeps pointing out).

The decline rate in mature petroleum basins accelerates with time after peak production. This is due, in part, to typically more aggressive technology application, now including horizontal wells. These "enchanted recovery" techniques tend to flatten out the decline when first applied but often result in a much steeper decline later in the life of the reservoir. A good recent example of this sort of production behaviour is Mexico's Cantarell field (3rd largest oil field in the world based on peak production - declined more than 20% between Jan and Dec 2006). A focus on NPV economic parameters, instead of maximum reserves recovery, supports this type of investment behaviour, and at times of rising petroleum prices quite a few rate acceleration projects get funded. There is no reason to believe that didn't happen this time.

[Jim Nickerson]

Re: Powers Vow in 2007 as in 1932

Well, a group dedicated to...

From jk's post: "The main focus of the LBST work is on sustainable energy and transportation systems and related technologies.
Important fields of activity are: Renewable energies, energy efficiency, reduction of greenhouse gas emissions, introduction of hydrogen as an energy carrier produced by renewable energy sources, fuel cells, and future availability of fossil energies."

...would say that sort of thing.

The 7% per annum initial decline rate smacks of sensationalism, and their forecast must assume Ghawar falls off a cliff. What may have peaked already is light, sweet crude oil production. Total global oil productive capability appears to still be capable of growing at least a bit more when lower grade sour crudes, and unconventional production are added. (However, productive capability, actual production, and available exports to consuming nations are three different things)

Khurais in Saudi Arabia (1.2 mm bbls/d) is the last major green field light oil development on the books, and it will require 168 producing wells and 184 injection wells at full development. Manifa (900 k bbls/d) is heavier than Khurais, but the average well productivity is expected to be twice the average of Khurais - a good indication of the reservoir quality differentials that Aramco is dealing with (the best of the light, sweet reservoirs were developed long ago). In sequence with the massive Khurais waterflood sourcing (sea water from the Gulf), Aramco plans to increase the injection capacity at Ghawar, which should arrest the decline somewhat for some years (how much and how long is largely conjecture as the information is simply not publicly available - something Matt Simmons keeps pointing out).

The decline rate in mature petroleum basins accelerates with time after peak production. This is due, in part, to typically more aggressive technology application, now including horizontal wells. These "enchanted recovery" techniques tend to flatten out the decline when first applied but often result in a much steeper decline later in the life of the reservoir. A good recent example of this sort of production behaviour is Mexico's Cantarell field (3rd largest oil field in the world based on peak production - declined more than 20% between Jan and Dec 2006). A focus on NPV economic parameters, instead of maximum reserves recovery, supports this type of investment behaviour, and at times of rising petroleum prices quite a few rate acceleration projects get funded. There is no reason to believe that didn't happen this time.

Ramadan's over, isn't it, and yet you keep on showing up here, how is your marriage going? It's nice to have someone here with some, I take it, intimate knowledge about oil. You're not spoofing us are you?

[Rajiv]

Re: Powers Vow in 2007 as in 1932

Some interesting graphs at theoildrum.com

[GRG55]

Re: Powers Vow in 2007 as in 1932

Ramadan's over, isn't it, and yet you keep on showing up here, how is your marriage going? It's nice to have someone here with some, I take it, intimate knowledge about oil. You're not spoofing us are you?

iTulip may not be a religious experience (like Ramadan) but it is a bit addictive. 30th year in this goofy business Jim. Over that time have covered the spectrum from drilling & development and upstream production all the way to international product trading & transport. When I post something that is my opinion I try to make that clear.

Time availability is a function of location (where I currently live isn't exactly the center of the universe :eek and certain things transpiring on biz front that I may be able to share with the community later this year. Marriage fine, but wife still wishes she'd married a banker, 'cause that's where all the money is...;)

[RebbePete]

Re: Powers Vow in 2007 as in 1932

Alternate energy and infrastructure require large amounts of raw materials, unlike the FIRE economy or the tech bubble that preceeded it. This implies that commodities might be a good bet no matter how you look at it, yes?

This also would be a way to play into some government boondoggle in infrastructure construction like the CCC of the '30s instead of a private industry bubble.

- Pete

[Guest]

Disagree with the "currency inflation as primary driver of everything" iTulip theme

Regarding the bid presumed to be underpinning commodities: I understand the iTulip position is price action in commodities is primarily an inflationary manifestation. I frankly don't however believe you can conjure demand for things like cement, grains or fuel solely by fanning monetary inflation..

According to iTulip's reasons, because monetary inflation is running strongly, a regional government in Indonesia builds large public utilities to accomodate a growing urban population, or a rancher in Argentina takes out a big loan and doubles his productive acreage to sell more cattle.

If all this demand for commodities were occurring instead because end-user countries are actually building out infrastructure as they turn into modern economies, the theory that currency inflation is "causing it all" would then be a partial explanation at best.

Seems iTulip concludes price action in raw materials is driven only minimally by what's happening in those many booming economies where these raw materials are actually being turned into industrial build-out. The perspective is turned upside down - the real booming involved in the industrialisation of these many countries, who are only following the well established industrialisation path the G7 follwed previously, is ascribed as primarily due to currency events.

So I'm told the "price action" in commodities is due to currency inflation. I'm told the price action in oil is due to currency inflation as well. What's not evident to me at all is that the inflation of currencies is the most relevant mover in terms of what's really occurring in the industrialisation of half the world. If these countries are industrialising at a rapid pace for reasons that have nothing to do with inflation, then demand for the materials they consume has little or nothing to do with inflation either.

It's been explained to me when you strip away decreased purchasing power due to inflation, only a minor real price action has occurred in commodities. So I am told if real price action was low or nothing adjusted for US dollar inflation, there's no larger story right there on the ground in 50 or 70 countries to derive ulterior conclusions from. Meanwhile I am looking around and it seems there is a very large story on the ground in these many countries, and it's all about growth, and much less about inflation.

All these same components hold as well in the price action in petroleum, and that is a touchy subject here insofar as 'depletion' causing any 'shortages' is the object of a marked amount of unecessary disparagement. Emerging evidence of flat production growth in petroleum, of potentially quite large significance, is discounted as a potential cause of future or past inflation.

What exactly is it, that prevents acknowledging it would be quite normal to find a principal cause for commodity prices right at the local infrastructure level, rather than high up the chain at the central banks? The reductive logic employed here is that fast growing demand for commodities at the local level cannot be a primary driver of price action, because primary status has already been assigned to fiat money instead. This exclusion of any other prime causes risks being merely dogmatic.

If you make a concentrated bet in the commodities area, according to this standard iTulip view, the safety of your bet is contingent on whether central banks keep expanding liquidity. Viewed from this angle, a bet on commodities is in fact speculative.

If you subscribe to Jim Roger's view, the biggest driver underpinning commodity prices has been, and will continue to be a a very large upturn in global industrialisation.

This is not supposed to be a larger inflationary force than central bank money printing? The depletion factor which is now accompanying this 'once in a century growth event', due to the G7 having already sucked up a lot of these raw materials in the previous century is instead dismissed as sensationalism for the consumption of the more naive among us.

Oil depletion? Declining petroleum production growth Vs. rapid industrialisation? Why should such questions meet with condescending smiles when they are in fact quite rational potential causes of inflation also? Is there not a large body of documentation out there now causing governments the world over to discuss the potential reality of depletion?

Unlike currency flows and central bank liquidity games, which require all kinds of sleuthing to uncover, industrialisation leaves a large footprint worldwide. Complex economic forensics are not even required to ascertain a runaway industrialisation, are they? It's obvious - it's large, growing daily - and it's all over the news. The world is building out at the same pace it did 125 - 150 years ago, but at multiples of that earlier scale. And that earlier industrialisation made the history books.

If you buy Jim Roger's thesis about a global infrastructure build out and large cycle of industrialisation, it's improbable that commodity prices would not keep rising merely due to the absence of high currency inflation.

Apparently we are in a post Soviet Bloc world. The thing that kept half the world from exploding into free market economies for 50 years is ended. All of Eastern Europe, all the central Asian nations, the Balkans, China, India, their commercial satellites are now industrialising to catch up to the West.

Nowhere have I read that Jim Rogers concludes commodities price growth must weaken notably due to austere monetary policies. He does not finesse this call, because you don't need to finesse a 150 year global scale event.

What Jim Roger's thesis apparently does not require, is the construction of a model that relies primarily on what the gnomes at the world's central banks are doing with the currency to govern the course of commodity inflation heading out another ten years..

Disagreeing with Mr. Janszen on this should be just fine. In fact a re-examination of all the one-way assumptions underlying the relationship between inflating commodity prices and all possible causes is a good thing to air here, as there seems too much conformity of opinion here anyway on the topic.

[jk]

Re: Powers Vow in 2007 as in 1932

i, for one, think there are many drivers of commodity prices and that the factors you mention, lukester, are relevant. i just don't care to engage in extended debates on the matter, as they seem fruitless in that no one ever seems to be persuaded to change an opinion. i'd rather focus discussion here on those matters of our economic and financial futures that we can all admit we are at least somewhat confused about.

[Guest]

Re: Powers Vow in 2007 as in 1932

On the subject of US centric economic analysis - Found on an Agora website news feed today, an argument against the (appears to me) overused "US dollar inflation drives global commodity consumption" thesis :

____________


“After reading a number of your gloomy predictions,” writes another reader, “I have two major observations to make:

“1. While most of the world stock markets are indeed ‘U.S.-centric’ -- the major exception is Shanghai) -- the world economy has not been ‘U.S.-centric’ for some time.

“The prime example is Canada, which is tied economically to U.S. more than any other country: The Toronto Stock Exchange follows the U.S. markets with a five-minute delay (you must like this), but it does not have the housing crisis, the credit crunch or the current account deficit. Construction and houses prices are booming. [Heh-heh, for now.]

“2. Unfortunately, most opinions from the U.S. are very ‘U.S.-centric’ and suffer from reality ignorance and/or denial of monumental proportions. The underlying reasoning is something like this: ‘We are in really big trouble, but we are the best. Therefore, everybody else must be on the verge of collapse.’

“As another example, I can offer my other ‘home’ country, the Czech Republic: The economic growth, real income growth and optimism are unprecedented. In the last five years, the exchange rate has dropped from about 40 CK/US$ to 19 CK/US$, while the average income (in CK) has more than doubled… was this growth driven by the American consumer?

[c1ue]

Re: Powers Vow in 2007 as in 1932

People in Eastern European countries should behave as people living in glass houses...

The euro strengthening has helped them in the short term, but the same forces eating away at the American middle class are equally at work in Czech, Lithuania, Latvia, Hungary, etc.