- October 1, 2016
- Posted by: Art Berman
- Categories: Audio/Video & Articles, Presentations & Publications
A presentation to the Houston Geological Society September 26, 2016. Click the link below to view the video:
Low Oil Prices In A Failing Economy: No Place to Go For Tight Oil
I watched your video. People are pissed because politicians, after the great depression, promised them full employment and a life of prosperity, plus the entire economy has shifted to the rich. Income distribution is skewed rich and has for a while now. We shifted production to low-wage China, but I didn’t see prices go down. People’s salaries have gone down but prices haven’t; capital is making tons of money and people see that on TV. I did a little calculation; I earned minimum wage in 1970 of $1.80/hour; it would have to be around $11.00/hour to keep up with inflation. It’s not much more than 1/2 of that now. That’s been a bi-partisan type thing, as is the promotion of higher debt for all.
The second thing I noted was China. I hate to break this to you, but global manufacturing runs on coal (not oil). Coal is about $50/ton right now. China uses about 4 billion tons/year; if you look at the EIA website in 2012 they had 68 billion tons of the stuff (bituminous) that they use. That is 17 years, so they’ll be out by 2029, right?
It will never happen; China’s got trillions of tons underground. The problem is that the 68 billion tons was shallow coal; the trillions are deep coal in the Chinese West and Northwest. UK has lots of deep coal; Thatcher shut off the subsidies and now they don’t mine the stuff. Germany is set to do they same; all of their bituminous is deep coal. The Germans were mining coal with production costs of $180.00/ton.
Maybe Chinese miners are much more efficient than the Germans. If not, China would need subsidies of $130/ton ($500 billion/year) to keep costs down. China can’t afford $500 billion/year in subsidies. They mine half the world’s coal and seem to have half of its heavy industry. No one around China has a lot of coal; not 4 billions tons a year worth. Vietnam, Indonesia, and even Australia would have trouble supplying that much coal, and would run out very quickly if they tried.
It will bear watching. There’s only one country in the world with reserves that could replace 4 billion tons of production, and we live in it.
Cassandra always told the truth but no one liked hearing it.
I am curious what conclusions you draw from your examination of gravity. 1) who is buying the high gravity oil that is going into storage (as opposed to export) and why buy it? 2) If that much high gravity “oil” is accumulating in storage every day then why do you continue to argue that the surplus of ~125 million barrels must be consumed before oil prices begin to rise appreciably? 3) I’m not exactly clear on what you were saying about rising imports–is the rise due to both declining domestic production AND the unsuitability of the gravity of domestic production? It seems that if the high gravity oil is going into storage, that if increased imports is symptomatic of that high gravity unsuitability, that demand for imports will continue to rise hastening the balance of world crude supply and demand regardless of the status of United States oil in storage. I usually follow your sound thinking easily, but this time it’s not all clicking for me.
Art, I and others want to know what you have to say about things. Granted, my hearing is not what it used to be, but, my goodness, the audio on that video was terrible! If you are going to move away from the podium/microphone, you need to put a mic on you. You could easily solve this and end up with excellent and important videos. Don’t make us struggle to hear. I found it impossible to hear some of it. Thanks again for your excellent research.
I didn’t go back to watch video of you to see if you had a lavalier mic, I admit, and I jumped to a conclusion. And that was due to the audio being fine one minute and then changing. It seemed like there must have been a mic at the podium because it seemed to degrade when you moved away from the podium. So, it could be simply that the lavalier mic was not working. I do realize that audio is often problematic, I have experienced frustration before on that! Thanks again for your honesty in presenting the unhappy truth about oil!
Informative talk, thanks for posting it. A couple questions:
Regarding the “unaccounted for crude oil” from the EIA, have you/Matt looked at including refined products inventory and consumption into the equation to eliminate the uncertainty of refinery demand to see if there is a better correlation? You mentioned/alluded to in the video that refinery inputs may be the one factor with the least certainty in the balance equation. Since any oil produced in the US would have to be exported, stored or refined, are there better numbers on refined products demand and inventory (compared to refinery demand) that would help to reconcile the unaccounted for crude oil? The 400MMBO number is huge (80%) of the the current EIA estimate of 525MBO.
With the shortage of refining capacity world wide for high gravity oil (35 to 40 plus), why doesn’t a downstream company either retool an existing refinery or build a new one to process the higher gravity oil to eliminate the bottleneck? Is it a problem of economics, regulations or other factors? Seems someone would have a money making refinery given the supply of light oil.
Look forward to that. Seems refineries are also likely battling the EPA with all the regulations that have been imposed on the oil industry or anything related to fossil fuels over the last 8 years.
Thanks for the slides. On your slide 14, should it be – the most likely explanations are the “overestimating” of refinery intakes rather than “underestimating”…
That would tie up with your API theory.
I would like to see the video.