Another year, and getting closer to D Day (D for doom of course..!)

1 01 2018

entering 2018New years may be human constructs, but they sort of force us to think about what happens next. I personally don’t do new year’s resolutions, because frankly, it’s just asking for trouble, stressing out about underachieving and so forth… and a lot of people could be underachieving this year, and the next, and the next….

I’ll be happy if our house is up out of the ground in any shape or form… because the weather down here is not exactly co-operating, swinging from heatwaves to cold rainy and windy.  Summer is just not meant to be like this, but I of all people should not be surprised when it comes to climate chaos.

Having said that, I just had to share this latest bit of info that landed in my newsfeed on New Year’s Day.  You know it’s all happening when even the IEA finally acknowledges Peak Oil.

Oil Shortage Feared by 2020 as Discoveries Fall to Record Low

Yes, you read that right. In the Wall Street Journal no less….  maybe that will finally shut all those deniers down once and for all.

In 2016, oil discoveries amounted to just 2.4 billion barrels of potential oil, the lowest since the IEA’s records began in 1950. That is down from 6.4 billion barrels of discoveries in 2013, when oil prices were consistently above $100 a barrel and 16.3 billion barrels in 2010, the IEA said.

The global oil industry greenlighted projects amounting to over 4.8 billion barrels of oil in 2016, down from 21.2 billion barrels in 2014.

Offshore drilling, which accounts for a third of global production, is still seeing activity decline. Last year, only 13% of conventional project approvals were offshore, compared with an average of 40% between 2000 and 2015, according to the IEA. In the U.K., spending on offshore drilling is now only slightly higher than spending on offshore wind projects, it said.

Oil Shortage Feared by 2020 as Discoveries Fall to Record Low

The Organization of the Petroleum Exporting Countries has also sounded the alarm over the potential for a looming supply gap in the long term. Saudi energy minister Khalid al-Falih told a London energy conference last year that “there will be a period of shortage of supply.”

So there you have it, I wasn’t making all this up. After banging on about Peak Oil for at emptyEVleast 17 years, and predicting crunch time to be around 2020, give or take, that crunch time seems all too close these days, especially as absolutely NOBODY has done a thing about getting ready for it. The results will be interesting. Virtually no one has any idea of what the future holds, and boy are they in for a shock.  Even we, let’s face it, who follow all this crazy stuff may well be shocked by what happens next.

And not least the EV buyers…… who may not get access to all that electricity. No one escapes the collapse.

That WSJ articles further states…..

According to estimates from The Rapidan Group, a Washington-based energy policy advisory firm, oil prices could hit $100 a barrel in 2022, squeezed by supply constraints and stronger-than-expected demand growth.

Now if that doesn’t bring on a recession/depression, combined with the debt bubble, I don’t know what will.

Mind you, as I’ve said all along, it’s just what we need to ‘save us’ from climate change, so I personally won’t mind. Check out this chart showing emissions growth on an annual basis..:


The only time emissions actually fell was because of the GFC…..  don’t know about you, but there’s a story in there somewhere……..  that chart came from a National Observer article that you might all find interesting.

The same BP data illustrates fossil fuels’ share of all global energy. Turning point? What turning point…..?

What this chart says to me is that fossil fuels continue to absolutely dominate global energy consumption. Even a quarter century of global efforts to transition to safer energy sources was unable to make any meaningful dent in the dominance of fossil fuels.

Then we have this from SRSRocco…..

While the U.S. Shale Energy Industry continues to borrow money to produce uneconomical oil and gas, there is another important phenomenon that is not understood by the analyst community.  The critical factor overlooked by the media is the fact that the U.S. shale industry is swindling and stealing energy from other areas to stay alive.  Let me explain.

First, let’s take a look at some interesting graphs done by the Bloomberg Gadfly.  The first chart below shows how the U.S. shale industry continues to burn through investor cash regardless of $100 or $50 oil prices:


The chart above shows the negative free cash flow for 33 shale-weighted E&P companies.  Even at $100 oil prices in 2012 and 2013, these companies spent more money producing shale energy in the top four U.S. shale fields than they made from operations.  While costs to produce shale oil and gas came down in 2015 and 2016 (due to lower energy input prices), these companies still spent more money than they made.  As we can see, the Permian basin (in black) gets the first place award for losing the most money in the group.

Now, burning through investor money to produce low-quality, subpar oil is only part of the story.  The shale energy companies utilized another tactic to bring in additional funds from the POOR SLOBS in the retail investment community… it’s called equity issuance.  This next chart reveals the annual equity issuance by the U.S. E&P companies:


According to the information in the chart, the U.S. E&P companies will have raised over $100 billion between 2012 and 2017 by issuing new stock to investors.  If we add up the funds borrowed by the U.S. E&P companies (negative free cash flow), plus the stock issuance, we have the following chart:


Thus, the U.S. E&P companies tapped into an additional $212 billion worth of funding over the last six years to produce uneconomical shale oil and gas.  Now, this chart is an approximation based on the negative free cash flow (RED color) from the four top U.S. shale fields and the shale equity issuance (OLIVE color).  So, how much money would these U.S. E&P companies need to make to pay back these funds?

Good question.  If we assume that the U.S. shale oil companies will be able to produce another 10 billion barrels of oil, they would need to make $21 a barrel profit to pay back that $212 billion.  However, they haven’t made any profits in at least the past six years, so why would they make any profits in the next six years?

2018 is going to be interesting, without a doubt.

Happy New Year (!) to all my readers……