The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

[Chris Coles]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

also From 1998: The Harvard Boys Do Russia


http://www.thenation.com/article/harvard-boys-do-russia

The Harvard Boys did classic medieval feudalism; creating a better example of a feudal mercantile economy than that already well established in the West before they started.

[mkeplinger]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Why does the production curve factor matter more since 2009 than before?

I don't think that it matters more, it is just that it has a significant influence on the relationship between number of rigs in production and output. The chart doesn't show a reversal in trend for the number of rigs in production until 2001 -2002, which coincides with the beginning of a rapid increase in the price of oil above $30ish. And from there (when the economics of it drove more rigs into production), there was a slow and steady increase in rigs in production from 2001 to 2008, but there seams to be a lag in the trend reversal for total output. The rapid drop-off in number of rigs in production in 2009 when oil crashed and the most unproductive rigs shut down, shows just how productive some of the rigs can be (and consequently, how unproductive others are). I think that the production curve is visible if you look at the Daily TBPD of Crude instead of monthly in your chart.


SOURCE: EIA

The Production curve seems to indicate about 3 years delay in getting to a reasonable production level per rig. So what conclusions can we draw from this?

The U.S. hasn’t produced this much oil since 1996, but it’s taking more than three times as many rigs now as it took back then to do it.

If you factor in the delay and look at the more recent data, the new drilling is actually a bit more productive than "three times as many rigs". I completely agree with you EJ about moving production forward, and the drop off in production could end up being a bit more steep than previous trends. But they are increasing production, and that is a lot of rigs that have 3 years until they become productive.

So with regard to your thesis of the relationship between PCO, GAGFO, Gold Price and the timing of the next PCO spiked recession, I think that it is worth exploring the impact of the production curve. The trend points at Oil Production going back somewhere near
1987 Oil production levels as we steadily increase from now through 2016. There is an obvious requirement that the price of oil remain high to make the economics work, which was clear in the drop in rigs and production when oil crashed in 2008, and could put the brakes on production quickly.

For me, the timing is the most important aspect of the understanding. So I look forward to hearing EJ's response to my juvenile, and likely partially uninformed ramblings, with respect to the PCO spike recessions, GAGFO, Gold Price, etc thesis.

[c1ue]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

If you factor in the delay and look at the more recent data, the new drilling is actually a bit more productive than "three times as many rigs".

It is an interesting thesis, but there are also a few assumptions underlying your tentative conclusion.

For one - that the productivity of the more than 2x additional rigs starting 2009 is similar to that of the rigs deployed in the 2008 ramp.

Another assumption is that the lag time is constant - i.e. that the spike in oil production starting late 2011 is due exclusively to 2008 ramp rigs.

GRG55 might be able to shed some light into whether these 2 assumptions are tenable.

From my view, I would tend to believe that the first rigs to deploy shale fracking technology would tend to be far more productive than the last rigs - how the production profile changes from first to last is also a question. After all, the first rigs are the most speculative - and these rigs must show great success in order to breed copycat behavior.

I'd also note that 2009 was right after the GFC. I wonder how this impacted oil production as oil prices also dipped. Might this have delayed production either from income and/or capital investment effects? With the subsequent 'recovery' bringing previously available but delayed production into the market?

The last note is that at least part of the above graph is purely speculative. The EIA has been noted by GRG55 as being more politically driven than reality driven in its forecasts - having been notably wrong on many occasions. The 'spike' which purports to come in 2015 clearly is speculative, and there is also usually some form of time lag associated with gathering data for reports.

So where exactly is the point where actual data is switched to 'model' in the above?

This link shows the EIA's actual data:

http://www.eia.gov/dnav/pet/pet_crd_...c_mbblpd_m.htm

It only extends to June 2013 - but note the last y-axis data point in the graph above is Jan 2013.

If I graph out the last several years of January 20xx year points, this is what it looks like:

US oil production 2000 2013.png

This makes it seem like the spike from 7000 to 9000 is pure model, and furthermore the shape of this curve looks a lot different than the shape of the above curve. (Note I inserted a 0/Zero x/y data point to replicate the y-axis scale of the EIA graph)

Makes me wonder if there isn't some chart-massaging magic going on here.

The last data point: the graph of the actual monthly US oil production from January 2005 to June 2013:

US oil production monthly 2000 2013.png

Paints a somewhat different picture, no?

[Polish_Silver]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

This may help:


Elliptical Research Contribution 2008.5 - supplemental:

Accounting for the Time Delay Between Oil Drilling and Production Supplement to Why “Drill, Baby, Drill!” is Not a National Energy Policy Timothy D. Kailing Elliptical Research September 2008

As stated in the main article, empirically, for United States oil production there is a 4-6 year lag in the
relationship between oil drilling and oil production. We can account for this by using the methods in the main
article but adding a lag to the production.


More here: http://www.ellipticalresearch.com/ti...roduction.html

I am thinking the time lag must be different for the "new oil" than conventional wells.
I thought the lag would be shorter, but I don't know that. At any rate, the new oil depletes a lot faster, so that should also be factored in.

[Slimprofits]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Chris Reich , senior analyst at Informa Global Markets said September is so far the biggest month ever for investment grade corporate debt—at $142.6 billion—thanks to Verizon's $49 billion offering. This week alone, there was $29.2 billion, with $17.3 billion of that going to market Wednesday. http://www.cnbc.com/id/101063313

[ProdigyofZen]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Chris Reich , senior analyst at Informa Global Markets said September is so far the biggest month ever for investment grade corporate debt—at $142.6 billion—thanks to Verizon's $49 billion offering. This week alone, there was $29.2 billion, with $17.3 billion of that going to market Wednesday. http://www.cnbc.com/id/101063313

It seems the more corporations issue debt the less and less the Fed has the ability to taper/and or raise rates.

[Bundi]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

I am thinking the time lag must be different for the "new oil" than conventional wells.
I thought the lag would be shorter, but I don't know that. At any rate, the new oil depletes a lot faster, so that should also be factored in.

One factor possibly worth consideration is that rig count and well drilling may be a separate capex category from associated infrastructure, yet both may be required for optimal production. In the case of natural gas, rig count has fallen precipitously yet production is hanging in there, at least for now or most recent EIA data anyway. Part of this discrepancy between natural gas well drilling declines and continued natural gas production is the “catch up” (technical term) needed for completions of already drilled but not producing natural gas wells. Could a similar phenomenon influence oil production versus oil well drilling in the shale formations?

Nat gas infrastructure discussed here (post#22).

http://www.itulip.com/forums/showthr...466#post251466

Oil and Gas Journal article on capex for exploration vs. infrastructure.
http://online.qmags.com/OGJ030413#pg30&mode2

To my limited knowledge, natural gas wells need completion infrastructure for connection to distribution whereas oil distribution is via different methods. However there could be other production delaying/limiting infrastructure requirements in the shale oil area.

This report is kind of interesting. Discussion of fiscal policy impacts in local oil & gas municipalities. This may speak to the reverse scale dynamic of unconventional plays.

I am not at all sure how impactful, if at all, this type of dynamic is on the question of production time lag from drilling in shale oil fields. Just throwing out thoughts here.
http://headwaterseconomics.org/wphw/..._Practices.pdf

An example of unintended consequences of a drilling tax exemption? To the degree that limiting infrastructure build out is dependent on local tax revenues, tax policy may impact timing of those flows.

Example: Montana has an 18-month “holiday” tax rate of 0.5 percent on newly completed horizontal wells. After the incentive ends, the state collects the production tax quarterly, and makes distributions to
local governments in the following quarter. The incentive combined with the basic tax collection and distribution policy delays significant tax revenue to local governments by about two years after each well
begins producing.

[verdo]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

So I'm really not sure what to do. I've been holding on to US dollars for a while now but I want to know if I should buy gold not at what seems to be low levels or wait until 2014 when the market corrects and I get a potentially better opportunity

[cobben]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

The Harvard Boys

may have been in way over their heads and were "done" by the KGB? But Armstrong doesn't seem to "see" the KGB . . . in any case, what a mess . . . kasha . . .

Russian Capitalism and the Death of Boris Berezovsky

. . . the fall of the Soviet Union was not a straightforward event; and the new Russian economy, the new business climate, and the new men of business, were not like their Western counterparts. This is because they were not chosen by the market. They were, in fact, chosen by the KGB. According to Preobrazhenskiy, “In the early 1990s Berezovsky became one of the first Russain oligarchs. How? Nobody knows. As far as I know, the oligarchs were mostly reliable KGB agents to whom the KGB gave Communist Party money in order to turn them into KGB milk cows.”



So Who Really Tried to Blackmail Yeltsin & Takeover Russia – NSA-CIA-or Investment Bankers?

. . . just who really was behind the plot to blackmail the former head of Russia Boris Yeltsin to stop him from running for reelection in 2000 and hand-pick Boris Abramovich Berezovsky?

[c1ue]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

may have been in way over their heads and were "done" by the KGB? But Armstrong doesn't seem to "see" the KGB . . . in any case, what a mess . . . kasha . . .

The general gist of what Armstrong writes is correct: Putin was called in to be a stand-in for Yeltsin.

The commentary that 'no one knows' how the oligarchs got their money is a load of junk though. Berezofsky was one of a clique of managers of stolen Russian state owned enterprises (to be fair, this is identically true for every single other Russian oligarch), but his 'rise' was primarily due to his financing Yeltsin.

His 'fall' was thinking that he could buy his way into power.

Banksters, however, don't rule in Russia. The fall from grace for Berezofsky, Khodorkovsky, etc is a counterexample to what we see in the US and UK: sovereign power overtopping financial power.

[Woodsman]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Banksters, however, don't rule in Russia. The fall from grace for Berezofsky, Khodorkovsky, etc is a counterexample to what we see in the US and UK: sovereign power overtopping financial power.

There's nothing in the street
Looks any different to me
And the slogans are replaced, by-the-bye
And the parting on the left
Is now the parting on the right
And the beards have all grown longer overnight

I'll tip my hat to the new constitution
Take a bow for the new revolution
Smile and grin at the change all around
Pick up my guitar and play
Just like yesterday
Then I'll get on my knees and pray
We don't get fooled again
Don't get fooled again
No, no!

Meet the new boss
Same as the old boss

[verdo]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

gold got bludgeoned below 1300 today, ouch. I guess its due to the shutdown.

[Chomsky]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Six months. That’s how long we’ve wrestled this greased pig, this drunken monkey, this long, stinky cat running for its life barely inches ahead of a pack of rabid coyotes.

Hi EJ --

It's been about five months since this fantastic article of six months' hard work appeared. Respectfully I ask, when might we see another feature article?

[EJ]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

Hi EJ --

It's been about five months since this fantastic article of six months' hard work appeared. Respectfully I ask, when might we see another feature article?

The next article has of course been in progress for some time and I greatly appreciate everyone's patience. Admittedly the Chairman role on the TruTouch board has proved a major distraction but I expect that this will shortly be rectified. It is hard work but also a great joy to write and develop new ideas of value for the iTulip community. These next weeks will be especially productive, I think.

[Chomsky]

Re: The Post-Market Economy - Part I: Chaos on Planet ZIRP - Eric Janszen

The next article has of course been in progress for some time and I greatly appreciate everyone's patience. Admittedly the Chairman role on the TruTouch board has proved a major distraction but I expect that this will shortly be rectified. It is hard work but also a great joy to write and develop new ideas of value for the iTulip community. These next weeks will be especially productive, I think.

Great! I only ask as a fan and junkie, hungry for the next installment. Please keep up the good work.