Does Oil Have A Future?
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DPC Gotham Grows Up 1913 Of course I’ve been following oil prices too, on top of all the other topics. The economics of oil has become amusing, in tha
[See the full post at: Does Oil Have A Future?]Apparently it is time to abandon the portion of economics that deals with profit and loss. Cash flow profits don’t mean a thing anymore for select major corporations. Take Amazon, or ARAMCO. The latter a proxy for the slight discrepancy in the cost of Saudi production, $2 or $80 a bbl, who cares? The accounting such as it is, is make believe in any case, only a matter of interest to old fashioned students of corporate balance sheets, or skeptics of the status quo,meaning nobodies or in some cases nobody. Shale oil? Same thing.
Freed of simple balance sheet accounting, economics is free to do whatever its masters want it to do. Make 65% of Greeks poor? No sweat. Make Amazons market cap $150bn, fine. Set the return on sovereign bonds of bankrupt nations in negative return territory, great.
Point being maybe this fixation on the financial markets and thus economics is a mistake. It is certainly a mistake in most short terms. Long term is something else again.
Again and again I come back to the Karl Rove quote.
The aide said that guys like me were “in what we call the reality-based community,” which he defined as people who “believe that solutions emerge from your judicious study of discernible reality.” … “That’s not the way the world really works anymore,” he continued. “We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality—judiciously, as you will—we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors…and you, all of you, will be left to just study what we do.”
Sure, in some future the empires aristocrats may face the guillotine, but when? The official poverty rate in the US is around 15% and it had never been below 20% prior to 1960 so there is a long long way to go before the heavy blade or nooses come into play here.
rapier – that’s a good quote and most likely exactly how things work: if you build it, they will come. They make the game up out of thin air, create the new realities, use the media as their mouthpiece, and we just follow, forced along by fear of being left behind.
I think they are “history’s screenwriters” or playwrights and we’re the “actors”, stumbling along in an unconscious haze, and never really knowing why. They know what they’re doing, they’re manufacturing and engineering a new reality, but we are (most of us) clueless that we are being steered, herded and manipulated. It’s what I was trying to get at the other day when I said we are “acting”.
So although Ilargi says he doesn’t really know why they’re doing what they’re doing, it is apparent they are doing something and a new game is afoot.
If the oil majors don’t think tight oil is profitable, why do the banks keep lending to the oil minors to keep drilling? They must surely demand a business plan, and they must know what will work and what won’t. Or perhaps USG and the Fed have told them to make sub-prime loans to keep the oil flowing – they have rigged all the other markets, so why not oil too? Of course it will all end up in default, unless …
Mostly I wonder about what TPTB think they are going to do when TSHTF. Plan A is not going to keep working for much longer, and yet we haven’t seen any sign of Plan B, or have we? The only thing I can think of is that they will declare an emergency that triggers a whole new set of governmental powers, and new economic rules. That would explain the totally unreasonable raising of tensions against Russia, and the ridiculous push against ISIS with no boots on the ground and without natural allies Syria and Iran. They want the tension levels high, so that a mere cyber-attack (we can’t give you the details) will be enough to trigger what seems likely to lead to WW3.
A war economy gives them the right to reorganise who manufactures what, with directed labour, and the conscription of angry young men in the streets into the army. Gasoline and electricity rationing. Currency controls. War bonds to soak up peoples’ savings. Severe crackdown on dissent, using NSA surveillance tools and militarised police. And of course a full spectrum propaganda exercise through the media. Plan B has been in full view all along.
If I was them, I might well be thinking we could pull that off OK. The trick then would be to keep the war bubbling along without it going nuclear, but sounding incredibly serious on TV News. “Are you a patriot, or not?”
Ilargi, you questioned the difference between the graph showing a Saudi Arabia break-even price of about $90 and the production cost of $2 stated in the article. As I understand it, the graph is not about production costs but about the price the country needs to sustain its spending programme. So SA needs $90 pb to keep its populace subdued but only needs $2 to break even on actual production costs.
Someone asked the other day if they could donate to TAE in bitcoin. This is our address:
1HYLLUR2JFs24X1zTS4XbNJidGo2XNHiTT
Bakken adds about 1800 new wells per year at $6M apiece. From that activity, less than $1B additional revenue year over year (assuming $100/barrel). If the State of North Dakota table is close to right, it costs not UP TO $80 but much more than $80/barrel.
palloy,
Might add to the “patriot” scheme of things, Western Europe is consistently, and conveniently, turning more “Muslim” by the day, with even more refugees expected as a result of Nobel Peace Bombs raining down around the Middle East.
Another excuse for destruction of European infrastructure?
Of course this ends in war. What else are nukes and other military hardware for?
What do you think of Gail’s take on low oil prices llargi? https://ourfiniteworld.com/2014/10/06/wsj-gets-it-wrong-on-why-peak-oil-predictions-havent-come-true/
Yep, as the quote further up the post indicates
“Iran has the highest fiscal break-even price for its budget at over $130 per barrel of Brent, compared with the UAE at around $70 per barrel and Saudi Arabia at about $90…”
–It’s [fiscal] break-even price there talking about…
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On the other hand, yes ; 2$ a barrel is absolute BS in a country that has reached a such level of affluence that this sort of occurrence is thinkable…https://www.businessinsider.com/two-wheel-change-drive-2014-4
“Does Energy create Money” or does “Money create Energy”
If you answered the former – excellent.
Energy will have a future and more specifically Oil. Although it appears certain components of the “Energy Complex” are presently not welcome: namely Coal.
Were the powers that be to make yet another attempt at increasing money velocity, and I do believe they will, it probably begin with Oil prices rising substantially.
This will in turn have an instantaneous impact upon all derivatives of Crude Oil, namely – everything.
Thinking like a good overlord criminal, the most profitable “productive ” input on our earth has a future, albeit perhaps as the carrot and stick.
War appears imminent and with it any hiccup along the its path will have a profound impact on the price of Oil. Supply presently, we are told, is plentiful.
I suspect this will change within the mere blink of an eye, of course this thesis may well be entirely off the mark, as it does appear we are being left for dead by the Anglo-Sphere Cartel…
We shall see.
In my early readings about peak oil, Twilight in the Desert and all that, I did often come across the “fact” that Saudi Arabia had very low costs of production (less than a dollar a barrel), though that was in the days when the big fields were still producing easily, without extra encouragement. Whether it’s $2 a barrel or $5 a barrel, I suspect the actual production costs are still low there because most is still regular conventional oil (as I understand it). But it’s largely irrelevant if the country depends for almost all its finances from oil and needs $90 to sustain its spending. So $2 may be creative accounting but it doesn’t really matter.
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