First, let me remind you that a pessimist is an optimist who shed his delusions and denial, and educated himself. Please keep this in mind, if you continue reading. If you don't, that's fine too. You will remain in your blissful bubble of denial and ignorance, which are the dominant genetic traits of most denizens of the fossil superorganism. Please understand that many democratically elected governments know very well about your truth aversion and are making best use of it.
Imagine now that your favorite airline offers a vacation package to a world-class city like the one shown below. That city is Beijing. China is the rising economic superpower that will collapse rather immediately, because there is not enough of the environment left to protect her 1.4 billion people from disease and death. But before China collapses, she will suck dry most of the world that remains. The brutal global competition for resources may precipitate a war between China and US.
By the way, a famous photographer, who captured China's multitudinous industrial achievements just went missing. And rightly so, why need we talk about the small side-effects of an economic miracle that lifted most from poverty? But what is poverty when a rich environment allows families to subsist with little cash? Conversely, what is affluence, when air, water and soil are toxic, and bees are dead?
And how about getting a suite in a beach hotel with a view like this?
I hope that you get my point. The vacation package above probably would not be your idea of having the best time of your life, but this environment just might be:
Instead of telling you the dirty truth, your fossil amoeba airline will try to woo you like this. In the ad you just saw, this airline has relied on your life-long self deception and improbable lies you weave to remain "hopeful," that is inoculated from the cold facts staring into your eyes wide shut. They already know that you are a brainwashed fossil superorganism monkey. Snap out of it, will you? Recapture you atrophied power of human thinking.
All right, I might have woken you up from that hopeful stupor, punctuated by resentments from the perceived lack of privilege the fossil amoeba should have bestowed upon you, but didn't because she lied. But if you remain in denial, you are in good company. The gangster from New York and a suspected Russian agent, our President, has just rejected the science in the latest UN report published in Katowice, 25 km from Gliwice, where I was born. He also claimed that the current "yellow vest" upheaval in France was linked directly to the Paris climate agreement.
Not! The French riots are directly related to the depletion of many resources, but specifically to the intermediate distillates (abbreviated here as the naphtha fraction) that are disappearing from the refinery feedstock crudes worldwide. The ultralight condensates produced from the US shale plays have none. Naphtha is the petroleum fraction from which diesel fuel is produced. Since almost all trucks run on diesel fuel, which one would you rather have: food and other goods in stores or an unrestricted supply of fuel to private diesel cars?
The fossil amoeba will never admit that she is limited by anything. She cannot violate her own principle of indiscriminate, eternal growth that will pay for the ginormous debt the rich took everywhere to bail themselves out. This debt is now sloshing around the world killing what remains of the healthy environment and speeding up the collapse of our civilization.
The detached Macron was manipulated into an environmentally friendly explanation: less emissions. Of course, this explanation is nonsensical, and it came on the heels of many real and perceived social injustices in France that span two decades or more. To make things worse, air quality has become so bad in most places that ships will have to use low-sulfur fuel, which will further increase demand on the heavy naphtha fraction.
A mid-size cruise ship burns through as much as 150 tonnes of fuel a day, emitting as much particulate matter as one million cars. Recent onboard measurements of pollution on cruise ships illustrated the potential dangers passengers are facing. TV crews in France and Germany recorded levels of particulate pollution up to 200 times higher than normal clean air.
Aviation too is growing everywhere to move people and goods across the global economy (soon to be discontinued). Jet fuel, which is essentially diesel fuel, competes with your poor little diesel car. Finally, please do not forget that heating oil you use to avoid freezing in winter, is diesel fuel that is a little heavier.
Not to be outdone, President of Poland, Andrzej Duda (Windpipe in Polish), seconded Trump's ravings, and proclaimed that he supports actions against climate change as long as Poland continues using coal to satisfy 80% of her energetic needs for the next two centuries. Two centuries?! People, if we have 10 more years without a major war that will wipe out most of us, I will feel really lucky. In fact, when there is a major war, the habitually clueless, self-absorbed Poles will evaporate first. Obviously, Duda was blowing hot air, which is his job description by any other name.
Here is what my friend, Rex Weyler, an American-Canadian author, historian, journalist and ecologist, wrote yesterday in an email exchange on the very subject of this blog:
"Like you, your colleague, and our colleagues on this list, I’ve been monitoring the ecological trends all of my adult life, for some fifty years. As far as I can see, all the trend lines converge on collapse, including “technology.” Nate is correct that economic growth is running on fumes, mostly on plunder and debt.
When people talk about ingenuity, “new technology,” and “advancing technology,” I am reminded that human technology has been advancing for two million years. Advancing technology is not new. It is our story. At every step of that long, advancing technology story - stone scrapers, axes, fire ignition, bows & arrows, steam engines, computers, super-sonic stealth bombers, and XBox games - humans gained some measure of power, ease, comfort, or entertainment.
Meanwhile, at every step, humanity has become more destructive to Earth’s ecosystems. I see no trend that we are solving more problems than we are creating. When the techno-optimists hail future “solutions,” I’m reminded that all the problems we face today are the results of earlier “solutions,” and all the solutions of today are creating new problems.
I know you know all this, but it’s worth saying: There are no significant ecological trend lines that are getting better for the ecosystems:
And what, pray-tell, is offsetting this Earth balance sheet asset collapse? Windmills? Solar panels? Carbon capture? Artificial intelligence? A few rich humans getting richer? Computer chip processing speeds increasing? Video conferences? “Smart” bombs?
No, whenever I doubt we are right about collapse, I take stock of this large-scale Earth balance sheet and must conclude again that human enterprise itself is a giant Ponzi scheme, plundering the mother that gave birth to us, high-grading every resource, squandering the riches for idle pleasures, and leaving behind a smoldering, toxic trail. " [With minor edits and additions by TWP.]
So you get the point? If you don't, please go and treat yourself to Faux (meaning fake in French) News or read "Mein Kampf." Or, better yet, read Trump's tweets.
I end with a sample of the images sent to me by the Greenpeace friends, when I was getting ready to battle the liberal EU ministers of environment. In 2007, I participated in an OECD ministerial meeting on the potentially destructive environmental effects of the clean biofuels. This also was the year when the Renewable Biofuel Standards were pushed through in the US by an unusual coalition of the darkest forces of humanity, Monsanto, Cargill, Archer-Daniels Midland, Syngenta, Bayer, etc., and - in different combinations - the greedy, vain, arrogant and uneducated "liberals," like Nancy Pelosi and several Berkeley professors, Dan Kammen and Steven Chu (Energy Biosciences Institute (EBI) founders), Chris Somerville (hired from Stanford as EBI director), Jay Keasling, and so many others. One assistant professor, Alex Farrell in Kammen's group, was pushed to commit suicide. Oh, what a year it was!
By the way, Rex Weyler was one of the original founders of Greenpeace International in 1979. In 2007, I got nowhere in Paris with the well meaning, do-nothing ministers. They could not fathom using satellite images to verify the environmental carnage committed in the name of our clean biofuels. Today, we have COP 2018 in Katowice with identical results. The global fossil amoeba will never let anyone challenge her. Until she shrivels, that is, and most of us die.
In closing, here is my son, Lucas, interviewing a Scottish priest (please click on this beautiful conversation), Father Tiago, who risked his life helping poor people working the giant sugarcane plantations in Brazil. We, in turn, helped to save his life, threatened by thugs hired by the sugarcane barons to terrorize or kill these poor people. Please listen, weep for all of us, and understand my decades-old rage. Father Tiago also speaks about us, a small band of Berkeley faculty, who in 2007 tried to challenge the clean biofuels, that creeping Gaia-cide committed against our beautiful Earth.
P.S. (12/16/2018) Now it is official. If you photograph the environmental devastation in Inner Mongolia, the home of rare earth metal mining and processing, you get "reeducated." These rare earth metals are used in batteries, motors, etc. in electric cars. The sustainable, clean electric cars will solve all humanity's problems with transportation. Have we heard this before? In 2007, perhaps?
P.S.P.S. (01/21/2019) Here is another example of devastation of the human environment. My former country, Poland, has severely deteriorated. The hateful monkeys, led by a micro-Trump, rule there and terrorize the civil society. My heart is filled with sadness and pain. So much for imagining Poland's spectacular recovery from the dark, hateful times of communism. I guess, most people cannot rip themselves apart from the darkness that filled their lives for so long. And then there is clergy...
A similar universal human darkness was captured so well in 1899 by the Polish-English novelist Joseph Conrad in his "Heart of Darkness" about a voyage up the Congo River into the Congo Free State and out of the paper thin veneer of civility and humanity. Józef Teodor Konrad Korzeniowski was a Polish writer who fled the Russian oppression. Having learned to speak English in his early twenties, he captured the soul of the English language perhaps better than anyone since Shakespeare. I can really relate to this quote from JTKK: “It was written I should be loyal to the nightmare of my choice.” ... I have my choice nightmares every day.
Imagine now that your favorite airline offers a vacation package to a world-class city like the one shown below. That city is Beijing. China is the rising economic superpower that will collapse rather immediately, because there is not enough of the environment left to protect her 1.4 billion people from disease and death. But before China collapses, she will suck dry most of the world that remains. The brutal global competition for resources may precipitate a war between China and US.
By the way, a famous photographer, who captured China's multitudinous industrial achievements just went missing. And rightly so, why need we talk about the small side-effects of an economic miracle that lifted most from poverty? But what is poverty when a rich environment allows families to subsist with little cash? Conversely, what is affluence, when air, water and soil are toxic, and bees are dead?
 |
| Welcome to your vacation travel destination. As you can see, this is a giant beautiful city, but can you see at all? |
And how about getting a suite in a beach hotel with a view like this?
 |
| Here is your hotel suite on the beach. We hope you don't mind some messiness. Rest assured that you will enjoy your stay in our resort and our hospitality. The local fish are to die for; literally, because we stuffed them with lethal sewage. |
I hope that you get my point. The vacation package above probably would not be your idea of having the best time of your life, but this environment just might be:
 |
| You'd rather vacation in this place, where nature still can protect you from human invasion and environmental destruction. But there is a catch, all these places are about to succumb to global climate change, overpopulation and pollution. Even this peaceful scene is deceiving. Every morning, workers must remove sea-borne plastic trash so that you are not disgusted when you wake up. |
Instead of telling you the dirty truth, your fossil amoeba airline will try to woo you like this. In the ad you just saw, this airline has relied on your life-long self deception and improbable lies you weave to remain "hopeful," that is inoculated from the cold facts staring into your eyes wide shut. They already know that you are a brainwashed fossil superorganism monkey. Snap out of it, will you? Recapture you atrophied power of human thinking.
 |
| This is how your "pristine" beach might look in the morning. |
All right, I might have woken you up from that hopeful stupor, punctuated by resentments from the perceived lack of privilege the fossil amoeba should have bestowed upon you, but didn't because she lied. But if you remain in denial, you are in good company. The gangster from New York and a suspected Russian agent, our President, has just rejected the science in the latest UN report published in Katowice, 25 km from Gliwice, where I was born. He also claimed that the current "yellow vest" upheaval in France was linked directly to the Paris climate agreement.
Not! The French riots are directly related to the depletion of many resources, but specifically to the intermediate distillates (abbreviated here as the naphtha fraction) that are disappearing from the refinery feedstock crudes worldwide. The ultralight condensates produced from the US shale plays have none. Naphtha is the petroleum fraction from which diesel fuel is produced. Since almost all trucks run on diesel fuel, which one would you rather have: food and other goods in stores or an unrestricted supply of fuel to private diesel cars?
The fossil amoeba will never admit that she is limited by anything. She cannot violate her own principle of indiscriminate, eternal growth that will pay for the ginormous debt the rich took everywhere to bail themselves out. This debt is now sloshing around the world killing what remains of the healthy environment and speeding up the collapse of our civilization.
The detached Macron was manipulated into an environmentally friendly explanation: less emissions. Of course, this explanation is nonsensical, and it came on the heels of many real and perceived social injustices in France that span two decades or more. To make things worse, air quality has become so bad in most places that ships will have to use low-sulfur fuel, which will further increase demand on the heavy naphtha fraction.
A mid-size cruise ship burns through as much as 150 tonnes of fuel a day, emitting as much particulate matter as one million cars. Recent onboard measurements of pollution on cruise ships illustrated the potential dangers passengers are facing. TV crews in France and Germany recorded levels of particulate pollution up to 200 times higher than normal clean air.
Aviation too is growing everywhere to move people and goods across the global economy (soon to be discontinued). Jet fuel, which is essentially diesel fuel, competes with your poor little diesel car. Finally, please do not forget that heating oil you use to avoid freezing in winter, is diesel fuel that is a little heavier.
Not to be outdone, President of Poland, Andrzej Duda (Windpipe in Polish), seconded Trump's ravings, and proclaimed that he supports actions against climate change as long as Poland continues using coal to satisfy 80% of her energetic needs for the next two centuries. Two centuries?! People, if we have 10 more years without a major war that will wipe out most of us, I will feel really lucky. In fact, when there is a major war, the habitually clueless, self-absorbed Poles will evaporate first. Obviously, Duda was blowing hot air, which is his job description by any other name.
Here is what my friend, Rex Weyler, an American-Canadian author, historian, journalist and ecologist, wrote yesterday in an email exchange on the very subject of this blog:
"Like you, your colleague, and our colleagues on this list, I’ve been monitoring the ecological trends all of my adult life, for some fifty years. As far as I can see, all the trend lines converge on collapse, including “technology.” Nate is correct that economic growth is running on fumes, mostly on plunder and debt.
When people talk about ingenuity, “new technology,” and “advancing technology,” I am reminded that human technology has been advancing for two million years. Advancing technology is not new. It is our story. At every step of that long, advancing technology story - stone scrapers, axes, fire ignition, bows & arrows, steam engines, computers, super-sonic stealth bombers, and XBox games - humans gained some measure of power, ease, comfort, or entertainment.
Meanwhile, at every step, humanity has become more destructive to Earth’s ecosystems. I see no trend that we are solving more problems than we are creating. When the techno-optimists hail future “solutions,” I’m reminded that all the problems we face today are the results of earlier “solutions,” and all the solutions of today are creating new problems.
I know you know all this, but it’s worth saying: There are no significant ecological trend lines that are getting better for the ecosystems:
- Human population is growing, getting worse
- Human livestock population is growing, getting worse
- Human consumption is increasing, getting worse for all but the consumers
- Human ecological and war-victim refugees are increasing, getting worse
- Toxin load in biological systems is growing, getting worse
- Wild flora / fauna diversity is shrinking, getting worse
- Aquifers, and all freshwater resources are shrinking, getting worse
- CO2 content in atmosphere is increasing, getting worse for existing biodiversity
- Acid content of oceans is increasing, getting worse
- Human economic unpayable debt load (fake energy, fake “growth”) is increasing, getting worse
- Quality and availability of every critical resource are shrinking, making these resources more expensive and more destructive to recover
- Net energy from energy resources is shrinking
- Habitats and food for wild fauna are shrinking
- Carbon and nutrient content of arable soils are shrinking
- Nitrogen and Phosphorus cycles are disrupted and concentrated, creating dead lakes and dead ocean zones
- Coral bed sea-life nurseries are shrinking
- Tropical forest terrestrial nurseries are shrinking
- Estuaries are shrinking
- Ponzi schemes, stock swindles, and scams are increasing in frequency and monetary value
- Forest fires and violent storms are increasing with CO2 and heating
- War budgets are increasing, etc.
And what, pray-tell, is offsetting this Earth balance sheet asset collapse? Windmills? Solar panels? Carbon capture? Artificial intelligence? A few rich humans getting richer? Computer chip processing speeds increasing? Video conferences? “Smart” bombs?
No, whenever I doubt we are right about collapse, I take stock of this large-scale Earth balance sheet and must conclude again that human enterprise itself is a giant Ponzi scheme, plundering the mother that gave birth to us, high-grading every resource, squandering the riches for idle pleasures, and leaving behind a smoldering, toxic trail. " [With minor edits and additions by TWP.]
So you get the point? If you don't, please go and treat yourself to Faux (meaning fake in French) News or read "Mein Kampf." Or, better yet, read Trump's tweets.
I end with a sample of the images sent to me by the Greenpeace friends, when I was getting ready to battle the liberal EU ministers of environment. In 2007, I participated in an OECD ministerial meeting on the potentially destructive environmental effects of the clean biofuels. This also was the year when the Renewable Biofuel Standards were pushed through in the US by an unusual coalition of the darkest forces of humanity, Monsanto, Cargill, Archer-Daniels Midland, Syngenta, Bayer, etc., and - in different combinations - the greedy, vain, arrogant and uneducated "liberals," like Nancy Pelosi and several Berkeley professors, Dan Kammen and Steven Chu (Energy Biosciences Institute (EBI) founders), Chris Somerville (hired from Stanford as EBI director), Jay Keasling, and so many others. One assistant professor, Alex Farrell in Kammen's group, was pushed to commit suicide. Oh, what a year it was!
By the way, Rex Weyler was one of the original founders of Greenpeace International in 1979. In 2007, I got nowhere in Paris with the well meaning, do-nothing ministers. They could not fathom using satellite images to verify the environmental carnage committed in the name of our clean biofuels. Today, we have COP 2018 in Katowice with identical results. The global fossil amoeba will never let anyone challenge her. Until she shrivels, that is, and most of us die.
In closing, here is my son, Lucas, interviewing a Scottish priest (please click on this beautiful conversation), Father Tiago, who risked his life helping poor people working the giant sugarcane plantations in Brazil. We, in turn, helped to save his life, threatened by thugs hired by the sugarcane barons to terrorize or kill these poor people. Please listen, weep for all of us, and understand my decades-old rage. Father Tiago also speaks about us, a small band of Berkeley faculty, who in 2007 tried to challenge the clean biofuels, that creeping Gaia-cide committed against our beautiful Earth.
 |
| The Brazilian tropical rainforest is being cut for soybean plantations dedicated to clean biofuels. This single Brazilian nut tree was protected by law and left behind. This was in 2006 and 2007. Today no one bothers about protecting any trees. A neo Nazi government is in charge in Brazil. We, the US, helped in installing it. Image source: the Greenpeace volunteers risking their lives to overfly in a small plane this illegal forest cutting operation full of armed men. At that time, parts of Amazonia were outside of control of Brazilian government and Cargill operated an illegal port on the Amazon river. |
 |
| Another Brazilian nut tree to show you the scale of destruction. This tractor sprayer is applying a herbicide. The iron-rich oxidized paleosol is no good and will fail in a few years. The rainforest cutters will then move on and cut more forest until nothing but a hot dry desert is left. When enough of the rainforest is gone, its captive rain system will stop. The hot dry desert in Amazonia will then migrate north, all the way to Texas, New Mexico, Colorado, etc., where new sand deserts will emerge. Do you get this?! Image source Greenpeace, 2007, personal communication. |
 |
| Hundreds of square kilometers of the tropical rainforest in Brazil are being cut for soybean plantations. There go the associated cloud system and rain. Image source: Greenpeace, 2007, personal communication. |
P.S. (12/16/2018) Now it is official. If you photograph the environmental devastation in Inner Mongolia, the home of rare earth metal mining and processing, you get "reeducated." These rare earth metals are used in batteries, motors, etc. in electric cars. The sustainable, clean electric cars will solve all humanity's problems with transportation. Have we heard this before? In 2007, perhaps?
P.S.P.S. (01/21/2019) Here is another example of devastation of the human environment. My former country, Poland, has severely deteriorated. The hateful monkeys, led by a micro-Trump, rule there and terrorize the civil society. My heart is filled with sadness and pain. So much for imagining Poland's spectacular recovery from the dark, hateful times of communism. I guess, most people cannot rip themselves apart from the darkness that filled their lives for so long. And then there is clergy...
A similar universal human darkness was captured so well in 1899 by the Polish-English novelist Joseph Conrad in his "Heart of Darkness" about a voyage up the Congo River into the Congo Free State and out of the paper thin veneer of civility and humanity. Józef Teodor Konrad Korzeniowski was a Polish writer who fled the Russian oppression. Having learned to speak English in his early twenties, he captured the soul of the English language perhaps better than anyone since Shakespeare. I can really relate to this quote from JTKK: “It was written I should be loyal to the nightmare of my choice.” ... I have my choice nightmares every day.
US LTO being worthless or not making diesel is much more of a meme than a reality:
ReplyDelete1. Sweet oil at 40-45 continues to get premium pricing over heavier sourer grades. If it were useless or in excess, it would not. You can look at LLS-Mars price comparison (CME posts these prices publicly) for proof that even in the US (center of the infection), this is not the case. You can also look at oil price bulletins from Plains, Flint Hill, and several other buyers (also available on the net for free). Can look at multiple states and daily bulletins going back several years. In addition, you can look at Saudi quality grade price differentials by region (public in Reuters reports for now and monthly back several years). All of the data shows clearly that light sweet crude sells for more than medium sour.
2. US (lower 48) C&C by API data is publicly available from EIA. Go to the EIA 914 page and download the excel sheet called historical API (eight sheet down on right, NOT Table 5). Some basic analysis:
Month Total %LT40 %40-45 %GT45 unkn
Jan15 8,885 47% 27% 25% 1%
Jan16 8,681 46% 29% 24% 1%
Jan17 8,324 49% 30% 21% 0%
Jan18 9,487 44% 32% 24% 0%
Sep18 11,003 45% 33% 22% 0%
You can see that the percentage of oil higher API than 45 has been relatively constant or even dropped. The big story is the growth in premium 40-45 oil. Yup, the exact stuff the peak oilers told us 10 years ago we couldn't find. They said we only had yucky heavy stuff from Vz and Canada. Now they want that and hate WTI.
FWIW, 45-50 oil is still somewhat oily. If you look at more hard core condensate, it is less than 5% from 50-55 and less than 5% greater than 55.
3. Finally it is incorrect to say there is no (or even not much) diesel from LTO. See the second figure down in the attached link:
https://www.engineeringtoolbox.com/crude-oil-petroleum-specific-gravity-density-yield-structure-gasoil-VGO-diesel-naphtha-residue-d_1970.html
For reference, .8 sg ~ 45 API. You can see that there is about 20% straight run diesel from 45 API oil and that the function is actually relatively constant. (What you lose is resids.) Further refineries have some flexibility (realize they change product amounts by season). In addition, the low sulfur nature of LTO is extremely desirable for simpler refineries with low S treating, especially given modern sulfur limits in diesel.
Hello Old Friend,
ReplyDeleteI admire your laser focus on crude oil and natural gas, with complete exclusion of all else. This blog actually was about that all else.
I will have a lot more to say on the subjects dear to your heart when we publish our next two definitive papers: the first one on the Barnett and the second on the Bakken. You will see that the truth in very high granularity is not what the EIA and many other "predict."
But do me a favor, please find the recent data on global production of diesel fuel from all sources. The data I have are somewhat fuzzy, but point out that this global production is either constant or has peaked.
So forget the details of where diesel fuel comes from, and ask this question: if demand on the intermediate distillates is growing, how will diesel fuel fare? Was Macron correct to make it more difficult to purchase diesel fuel in France, while giving a false reason?
Sorry, I don't know of a good source. Below link is from Googling. Not very satisfactory, but sharing.
ReplyDeletehttps://www.mckinseyenergyinsights.com/insights/diesel-demand-still-growing-globally-despite-dieselgate/
I suggest emailing IEA and EIA. I have gotten info before from EIA analysts with a respectful email.
Good job on getting two pieces of work done. I will look forward to each. Both plays have a little more history so I expect you can get some more insights about late in life issues that are harder to understand in young plays: individual decline curve in late years, downspaced downcurve [i.e. boundary limitations], evolution in approach over time [sweet spot exhaustion, sweet spot finding, improvements in hole and completion design and cost effectiveness], shut-in rates, refracks, etc. Of course, not expecting you to address everything with some 1000 page monstrosity. But interested in whatever you did.
I do admit that aside from just the "old well" insights, the Bakken is probably a much more significant play in terms of economic importance. Baker Hughes shows 56 rigs in the Williston and 1 in the Barnett. (It is probably a little more than that, since they don't count rigs moving from pad to pad.) So, in that sense the Bakken paper will be more interesting.
FYI: I saw a couple papers come out from the Browning/Tinker/Ikannikove/etc. clique. I get the impression they have had to change their approach a little as some of their results were too conservative and ended up being overconservative (e.g. using old data and assuming no improvements over time). They don't exactly say it, but they sort of allude to it in some of the writing. And...they did miss the Haynesville resurgence.
(Just responding to your last questions...don't know exact answers but don't want you to think I'm ducking you.)
ReplyDelete1. Um...leaving aside supply problems, if relative diesel demand is increasing, we need to expect relative prices to go up.
Europe is seeing some shift to gasoline passenger cars (VW scandal). But globally demand for diesel remains strong because it is correlated to industry and industrial growth in Asia remains strong.
Note also that sulfur regulations have been getting tighter for years and low sulfur diesel is harder to make (and thus pricier), but I think aside from IMO, this is mostly something that has already happened. But I speculate.
Also, of course the change in bunker fuel regulations (IMO 2020) will likely significantly increase demand for diesel (versus heavier or lighter fluids). Essentially the speculation is that diesel crack spread (price versus crude) will increase strongly. This is because it stresses the system to do something different. Gasoline cracks are expected to go up but not as strongly. (The reason for gasoline going up weakly is that refineries have some ability to switch from gasoline to diesel preference...they do it seasonally now in the US.)
What is expected to drop in crack spread is residual fuel oil (heavy fuel oil, full of sulfur). This can only be burned in land plants with scrubbers or ships with scrubbers. It will be in excess now (and may even be shipped from simple refineries that lack hydrocracking capacity or cokers to more complext refineries that can handle it.)
I don't have a good handle on how much damage was being done to the atmosphere by far out at sea sulfur dioxide production. So I really can't opine on if the cost of the regulation was worth it. Probably in total the cost will be "high" for the world but on a per person basis, we won't really notice that our rubber duckies from China cost a penny more for shipping cost.
2. I don't know what Macron did wrong, what he should have done instead or even what the whole kerfuffle is over in France. I am not stupid and followed some of it and understand that there is dislike of a fuel tax but I don't know to what extent that is the issue or intrinsic economics or even if there are side issues (outside of petroleum prices). I just haven't done the work to understand it well.
Thank you for your thorough answers. What we need to get is the global production (=demand) of diesel fuel, Jet A and B aviation fuels, low-sulfur ship fuel, and heating oil. Then we will see how their proportions have been changing. Yet another project to do,...
DeleteSee page 7 and page 14 of the attached IEA report.
Deletehttps://www.iea.org/media/omrreports/fullissues/2018-11-14.pdf
You can probably go back and pull up old reports and get past data.
I am just "Googling" to find this stuff (not an expert or paid analyst...a "civilian" really). I would encourage to reach out to Neil Atkinson. His email is listed in the report.
You can add the OECD and non OECD numbers and get amounts of jet/kerosene versus gasoil/diesel. Those two cuts. I think that is as granular as you can/should get. Those represent different common cut points for distillation. (Yes, of course the refinery has some loops and treatment and the like, so it is not as simple as just distillation determining output but the cut points basically equate to product categories also.)
Trying to track every micro grade of product like different grades of jet fuel or different sulfur grades of diesel will drive you crazy since different countries (in the US, even different states...liberal California) can have different exact specifications.
Home heating oil (called "fuel oil" in the US) is part of the gasoil/diesel cut, very similar to motor diesel (same chemically except for lack of red dye [tax issue] and perhaps slightly different sulfur restrictions.
Residual fuel oil is a whole different beast than home heating oil. Not same thing. Very heavy, full of sulfur, "bottom of the barrel". Can be burned in large industrial boilers built to handle it (power plants, steam ships, etc.) , but not really appropriate for home heating use.
Note that "demand" means consumption so ignores inventory changes. If you look at longer trends, it is probably irrelevant to consider inventory. While news loves to talk about inventory, it is really an in the weeds trader consideration. Over longer trends, inventory will sort itself out as it is just working capital. System needs a certain amount of it, but has incentives not to keep too much. The tanks can't run dry; the tanks can't overfill. But if you look at a very short term change and try to extrapolate from it (be careful of that regardless!), inventory may be significant.
I would also watch out for seasonality in any of your analyses.
This is what the Financial Times had to say on Dec 13, 2018:
Delete...Crude extracted from shale rock is generally far lighter than conventional oil and is not the type wanted by the world’s oil refiners as demand for heavier products such as diesel increases and demand for petrol decreases. At the same time, we are approaching the limits of achieving full vehicle fuel efficiency while European consumption has grown faster than previously anticipated...
https://www.ft.com/content/d4a8c0ea-f8ad-11e8-8b7c-6fa24bd5409c
More about the shortage of mid-distillates, https://uk.reuters.com/article/us-shipping-fuel-sulphur/new-rules-on-ship-emissions-herald-sea-change-for-oil-market-idUKKCN1II0PP
Delete"LONDON (Reuters) - New rules coming into force from 2020 to curb pollution produced by the world’s ships are worrying everyone from OPEC oil producers to bunker fuel sellers and shipping companies."
The global shipping fleet now consumes about 4 million barrels per day (bpd) of high sulfur fuel oil, but about 3 million bpd of that demand will “disappear overnight”, according to the average market forecast calculated by Norway’s SEB Bank.
Most demand is expected to shift to marine gasoil, a lower sulfur distillate fuel.
Morgan Stanley predicts this will generate at least 1.5 million bpd in extra demand for distillate in the next three years, pushing up total distillate demand growth for the period to 3.2 million bpd.
The global refining industry needs to process an extra 2.5 million bpd of crude to make distillates for cleaner fuel, says Robert Herman, refining executive at Phillips 66.
Some refiners have invested in cutting sulfur in their output, but fitting hydrocracker or coker unit so that a refinery produces more distillates with lower sulfur content while reducing fuel oil output can cost about $1 billion, analysts say.
Small refineries, unable to afford the upgrade, may find they are churning out fuel oil without finding buyers.
A KBC consultancy survey showed 40 percent of Middle Eastern and European refineries are not prepared. European plants, which tend to be less complex than those in other regions, produce more fuel oil and may face the biggest challenge.
Hey there fellow diffyQ lover. Reuters is, for a newspaper, one of the best reporting on oil and gas. If you want to go more in depth, there has been a huge amount of ink on the IMO rule change. Definitely not news.
DeleteWhile the Reuters article is directionally correct, some detailed studies and presentations have been done.
Note also that both the article you link (and better, longer studies) emphasize that this will HELP shale, not hurt it. This is because the biggest issue is low sulfur, not distillate. In addition, the increased use of middle distillate is at the expense of even HEAVIER fractions. So both factors will help light sweet.
Whole thing is actually going in the opposite direction as the "too much light sweet" argument.
That said, it will drive the diesel price up. Probably versus gasoline but especially versus heavier refined products. (Gasoline may actually rise as well, but less than diesel.) Really the main factor is going to be the low prices for heavy residual fuel oil (used traditionally in ships and onshore power plants. Note this fraction, RFO, is much heavier than home heating oil (sometimes called "fuel oil"), which is essential diesel fuel.
Sound bite. Not scientific and analytical. No numbers, no graphs, no analysis. It's just a statement of the concept. I GET the concept. What I want is analysis to describe its impact.
ReplyDelete1. For all the "hitting a wall", it has not been sufficient to reverse the price relationship of light sweet to medium sour (e.g. Mars to LLS), even in the US, center of the infection. Or in any other region.
https://www.cmegroup.com/trading/energy/crude-oil/mars-crude-oil-argus-vs-wti-calendar-spread-swap-futures.html
and
https://www.cmegroup.com/trading/energy/crude-oil/lls-crude-oil-argus-vs-wti-calendar-spread-swap-futures.html
2. The global system (refineries around the world) currently process a vast variety of crudes: from superheavy to ultralight and with varying amounts of sulfur or other bad actors like metals and with varying aromaticity. Think how different Maya is from California from WTI from Algerian condensate. They all get used now.
The system has the ability to move crudes around to the refineries that process them better. (Recall a decade ago, the worry was not enough WTI, not too much!) In addition, it is completely normal and common for individual refineries to have a blend tank that supplies the tower. Even with zero disruption/change in the long term average crude quality, refineries routinely do this since they like to buy cheap cargoes running around (but then may not be optimal for their kit...so they blend).
A simple though experiment shows that adding a million bopd of oil that is 10 API points higher than the average only raises world API average by ~0.1 points. (This is just math. But it shows a scientific attitude to want to estimate extent of a phenomenon. To quantify.) I have done the simple spreadsheet on this (including correcting API gravity to specific gravity to do proper mixing calcs).
3. I just don't see any evidence that the FT author has done any numerical analysis. Does he even know where the EIA spreadsheet for crude quality for US oil is and has he crunched it to see how much growth in US oil is by API gravity? This is available to the general public. Published monthly.
4. I do agree that export is needed for continued development of US light oil. However this is happening readily. Many of the "hit the wall" critics told me that the world could not absorb any more US oil when we were exporting a bit over 1.5 MM bopd, a year ago. Last couple weeks, we have exported ~3 MM. The imminent "wall" didn't kick in and stop us from exporting an extra 1.5+ MM bopd from one year ago. But I definitely heard the "about to hit a wall" criticism loud and clear last year. Must be a flimsy wall...we crushed right through it.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCREXUS2&f=W
Would be great to have your point of view on LTO future, remember a post of yours on the oil drum, clearly it has risen much higher, part of it due to all the financial shenanigan around it, but can it go much further ?
ReplyDelete(even if in any case the "stop" will be brutal)
Hi yvesT, Anything is possible, given the rampant speculation by "investors," and short-term unprofitable field development and posturing, but right now I do not see LTO going much higher. The Permian Basin development is pure madness, with most of the natural gas flared and wells communicating vertically among the different strata. The production will go up momentarily and then it will come down. We are talking a few years, not decades here. Americans tend to think that if the oil production rate is high today, it shall remain so for decades, but it will not. It's just like buying big SUVs and trucks, because gasoline has been cheaper for two months. I call it the selective delusionary amnesia.
Delete"most of the natural gas flared". Not mathematically correct.
DeleteAs of late 2018, ~3% of TX casinghead (oil associated) gas was flared. About 1.25% of all TX gas.
As the Permian supplies more than half of all casinghead gas, it's impossible for Permian flaring to be "mostly flared" (i.e. flaring over 50%). Can't be much over 5%, even if Permian is source of all state flaring and rest of state has 0%.
Source: https://www.rrc.state.tx.us/about-us/resource-center/faqs/oil-gas-faqs/faq-flaring-regulation/ (click on the link for flaring percentage, halfway down page)
Less than three years later and your Hubbert peak oil predictions for US shale plays (made in MAR16) are not aging well:
ReplyDeletehttp://patzek-lifeitself.blogspot.com/2016/03/is-us-shale-oil-gas-production-peaking_16.html
1. Eagle Ford: Your Hubbert curve would have us somewhere between 1/3 and 1/6 of peak production at end of 2018. Instead, we are at just under peak (more than 90% of it). While we have not broken old record, we're actually up since last data posted in your graph (during the worst part of the price crash). Gone from peak of 1.6 M bopd and 6 BCF/d to 1.4 MM bopd and 6 BCF/d. (Or about 6 EJ/yr to 5.8 EJ/yr.) Very far cry from the radical drop predicted by Hubbert curve.
2. Bakken: Your Hubbert curve would have us at about 1/3 of peak EJ at end of 2018. Instead we are setting new records--are about 25% up from old peak.
qty peak now
oil(MMBOpd) 1.2 1.4
gas(BCFpd) 1.6 2.5
oil EJ 2.7 3.1
gas EJ 0.7 1.1
Total EJ 3.4 4.3
Well, Besselfunctionlvr, the Hubbert curves are no magic. They cannot predict the future mad drilling programs, like in the Permian Basin. The Bakken too had an intensive new drilling program in 2016 and later. The newest, better wells produced a secondary peak that is now in decline. Since we have analyzed well-by-well over 13,000 wells in the Bakken, I can assure you that production there must decline from the current peak, unless there is a lot of unnecessary and unprofitable infill drilling that will decrease the field EUR, but will result in a flash cash flow to pay up the older debt and speculators.
ReplyDeleteThe Eagle Ford is unlikely to go up again, unless there is new rampant speculation. The same observation applies to the Barnett and Fayetteville that are in terminal decline.
So the "shale miracle" will last for another few years, mostly because of the Permian, but the very poor quality reservoirs are no substitute for conventional oil and gas fields, no matter how many trains with one hundred cars, hundred tons each, of water and sand will be pumped per each new well. Currently, it can be 2.5 train loads.
Please be patient. We are writing two definitive papers, one on the Barnett and the other on the Bakken. Eagle Ford will be handled next.
I think mathematically what happened is that you trained a regression (fitted the Hubbert curve) onto graphs that had a short quick drop from price. However, this was not some physical effect (running out), but price driven decline. With a small recovery in prices, production turned around. It's same problem that Bruno Verwimp had with his model.
DeleteThe other issue is that there is no reason to expect two different sides of the peak to be symmetric. But the Hubbert model assumes that.
Actually if you look in the 1956 Hubbert paper, it's more thoughtful as he makes the point that you can have several peaks (gives an example from IL, showing this caused by seismic). He also says there is nothing special about the symmetric curve shape and that realit can differ significantly from symmetry.
All very good points, Besselfunctionlvr. That's precisely what we have done in our upcoming paper. The Gaussians arise by the Central Limit theorem no matter what, so they are the natural way of decomposing production for a play, say, the Barnett with the longest production history. We have inverted our approach and let the Gaussians emerge as they would, but did not fit them. Here is the procedure:
DeleteSort wells by county and by year of completion.
Calculate the probabilities of survival of wells of a given vintage.
For each county and for 12,24,36,... months on production fit the distribution of cums with a Generalized Extreme Value (GEV) pdf.
Calculate the expected (P_{50}), high (P_{10}) and low (P_{90}) cum values.
Map the dimensionless recovery factor curve from physics-based scaling (PNAS, 2013) amended for the late time external inflow (JNGSE, 2018) onto each dimensional P_{50} curve, obtaining average well prototype for each county with, say, 30 years on production.
These prototypes embed well attrition, progress of technology, gas prices, etc. They are robust.
Since we know how many wells per year were completed in each county, multiply the prototypes by the number of wells completed and time-shift them. Add the results, and voila, an equivalent of two Gaussians emerge and deliver a perfect match of the past production.
Now we have to speculate. For each county, we can distribute the future drilling programs in a reasonable way and assume that the future wells will be on average as productive as the old ones. This gives us an estimate of the future production and the future Gaussians as they may emerge.
We have duplicated this algorithm for the Bakken, splitting the play into the Bakken formation and Upper Three Forks, and into the geological regions from USGS. This approach gave us 55 well prototypes and a stunning match of the past production. Two Gaussians emerged. The future drilling programs in the Bakken are a speculation, because the best well locations are gone and the reservoir pressure is significantly depleted. Most certainly one cannot drill 55,000 new wells, as the US EIA requires, and USGS and Rystad copy.
We are now ready to do Eagle Ford and move on to the ultimate challenge: the Permian.
I think a bottoms up approach is better than just simple curve fitting. Even if it is wrong also, at least you learn something about the resource in the process.
DeleteI am wary even of the bottoms up approach though. Remember what Pratt told Hubbert in 1956: said he really enjoyed the paper and Hubbert's math explanation. But that he cautioned M King on total resource estimates. Always ended up being too low (Pratt had been a 1920s peak oiler). In the end, Pratt's advice was sound...Hubbert's predictions were eclipsed as well. [Source: The Oracle of Oil, pages 149-150.]
1. I question how you are going to do a better job than the Texas project (or are you working with them again in round 2)? Obviously they did not do everything perfect, but still they had a lot of resources on the problem, good people, data, funding, etc. It's not like it is a new idea to do a bottoms up assessment. So what will you do differently/better.
Delete2. If you look at the 2014 Nature paper by Inman, it shows that EIA was not too optimistic, but not optimistic enough! This even after a history of not being optimistic enough (paper mentions that).
https://www.nature.com/news/natural-gas-the-fracking-fallacy-1.16430
The second chart is revealing. Shows the EIA 2014 AEO with US gas production hitting 1000 bcm/yr at ~2032. I did the work to convert bcf/month to bcm/yr and as of OCT2018, we are actually doing ~980 bcm/yr (dry marketed gas) or ~1080 bcm/yr (total withdrawals). Nature is not clear on the exact gas units, but in any case by 2018, we were doing what EIA predicted in 2030 (dry) or 2040 (total withdrawals).
Of note, the article contrasts the EIA views with UT, which came out with more conservative takes than EIA. (And you are quoted as being even more conservative than UT!) But what really happened was
Shale reality >>> EIA >> UT > Patzek.
[And the price deck for the last 4 years has actually been LOWER than the EIA assumptions.]
Another funny thing is the article made me download and look at the 2014 AEO itself. One funny part is where the AEO talks about natural gas supplying as much electricity as coal by 2035. Guess what? It happened in 2015 instead! Not, 21 years later. One year later.
So....I would be careful of doing a study to show EIA is too optimistic. My Bayesian betting money is still on it being not optimistic enough.
Of course in any case, you need to run a process that is truth seeking and open to discoveries that go in a different way than your prejudices. (I would say the same to cornies. Is an issue I see in companies, military, etc. Just human nature to prove your beliefs versus disprove them.)
But when you put your bottoms up process together, look at the UT study and how it was wrong. And which direction it was wrong. Despite all the hard work.
P.s. Maybe you need to hire some Aggies. Starting to wonder about UT. ;-)
Latest dry gas statistics on the Haynesville show it about to bust its previous peak. The all time high was 7.321 BCF/d in NOV2011. The NOV2018 statistics are at 7.269 BCF/d. Should break old record next month.
Deletehttps://www.eia.gov/naturalgas/weekly/ (click on the request data button next to the bottom chart, gives a spreadsheet)
The Haynesville is back.
This comment has been removed by the author.
ReplyDeleteAn interesting choice of comments, dear Robert. I am not quite sure how to reply to your mixture of innuendo, facts, and resentments. Let me then start from the olden times. I am 67, and both of my grandmothers completed college education before WWII (in the 1920's). All women in my Polish family have had either master or Ph.D. degrees. This means that I was in for a deep shock when I came to the US in 1981, and discovered that most white women here were decades behind my old country. I will not even mention the women of color.
ReplyDeleteSo my first question to you is this: Have your grandmothers, mother, wife and sisters had advanced college degrees and have they had thriving professional careers? Have they done as well or better as men in your family? Please think about it, when you are shouting about the injustice done to the white males.
Now on to socialism. Yes, outside of Norway, Sweden, Finland and Denmark with the tiny, homogenous and very educated societies, socialism is almost impossible. In 1917-1939, my grandfather, a physicist, was a real socialist. He refused to accept the Virtuti Militari cross (the highest Polish decoration for heroism in battle) from the nationalistic, right-wing Polish government in ca 1930, because he thought that this government betrayed all of his ideals for which he spilled blood in WWI, fought for the Polish independence, and during the cruel all-out Soviet-Polish war of 1919-1920. The government fired my grandfather from his physics-teaching job, and he could not find work. My grandmother, an elementary school teacher, became the breadwinner for at least three years.
In September 1939, my grandfather was too old to be in active duty. He volunteered, fought Germans for over a month, and then spent 6 years in the German concentration camps. The rub was that my grandfather's father was an ethnic German, and my grandfather could have walked out of the lagers in one day. But my grandfather was an officer in the Polish army and he would never do that, being the socialist he was. So before you condemn all socialists across the board, please admit that our president is a traitor, who has helped the descendants of the same Soviets to manipulate election results in our US. Regardless of whether HRC is bisexual and/or a socialist, that purely capitalistic swine has conspired to undercut our democracy. Believe me I know how to smell the (post)Soviet rats, when I see them in action. How do you then feel about our white nationalist president?
In our atomized, multicultural and multiethnic society, socialism is completely impossible. People here are simply too deeply indoctrinated, too uneducated, and too greedy. Remember, greed is a virtue in our political system. Therefore, the brutal, Darwinian capitalism we espouse will devour most of us. Just look at the Iowa farmers. How do they feel about being held for scrooge by their hero-in-chief? And how about the TSA and ICE employees, who showed up for work today without pay so that we could travel? Instead, they should have been changing the poop-full diapers on that need, 72-year old crybaby.
I could continue with my counter-arguments, but I will not. It would be best if we met over beer, looked each other in the eye, saw our snow-white faces, and continued this discussion in real time.
Thank you for that brilliant response to Robert C.
ReplyDelete@Anonymous,
ReplyDeleteAnd says who that Netanyahu is not a neo-Nazi by any other name? All right wing nuts support each other, don't they? The state of Israel is dangerously close to applying to the Palestinians the same approach that was used against the European Jews in 1933-1945. What happened to the middle-of-the-road, thoughtful and humane Jews?
1. I hope this does not come across as piling on (similar point already made), but I think the graphic in the article (whole new peak of the Haynesville) is extremely telling. Please look at it.
ReplyDelete2. If you can arbitrarily add new Gaussians what is the point of the theory? At some point it becomes more like Ptolemaists adding epicycles to preserve a theory. I am making this allusion not to offend you but since as a classical European, you like this sorts of broader ideas. (I hope.)
3. Sorry for discussing facts and science and analysis versus politics. ;-) OK...not really.)
https://www.rystadenergy.com/newsevents/news/press-releases/Haynesville-Shale-set-to-surpass-historical-gas-output-record-from-2011/
Any comment on this article: "Can China recover from its disastrous one-child policy?"
ReplyDeletehttps://www.theguardian.com/world/2019/mar/02/china-population-control-two-child-policy
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ReplyDelete