Is This Worth Posting? -- September 16, 2015

Probably not, but for the archives. Business Insider is reporting:

The US shale boom is grinding to a halt.

In its latest monthly oil-market report, published Monday, the 12-member oil cartel OPEC said US oil producers were finally beginning to feel the squeeze of lower oil prices.

OPEC writes: "In North America, there are signs that US production has started to respond to reduced investment and activity. Indeed, all eyes are on how quickly US production falls."

OPEC slashed its forecast for US production in 2015 by 100,000 barrels a day to 13.75 million.

Before the oil crash that started mid-2014, OPEC essentially controlled oil prices through its output, increasing or decreasing supply as conditions warranted.

More global players have entered the scene in recent years, however, notably US shale producers, whose drilling methods allowed them to drill more cheaply and to ramp up production faster. This brought new supply to the market and is largely seen as the trigger for what sent oil prices tumbling about 60% from last year.

But through the collapse in prices, OPEC has continued to pump oil in a fight to maintain the market share it enjoyed for years. And with this new forecast, OPEC is more or less claiming victory over shale producers in this stage of the oil-price war.

OPEC's new forecast echoes a report Friday from the International Energy Agency that said low oil prices could bring US oil production to a grinding halt.

Slashed? 100,000 / 13.75 million = 0.7% decrease.

The 13.75 million bopd is a record production of US crude oil production no one saw coming ten years ago.

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Who Does The Math, Anyway?

Along that same line, BloombergBusiness had this IEA forecast:

Oil supplies outside OPEC will decline next year by the most in more than two decades as the price rout curbs U.S. shale output, according to the International Energy Agency.

Production outside the Organization of Petroleum Exporting Countries will fall by 500,000 barrels a day to 57.7 million in 2016, the Paris-based adviser said Friday in its monthly report. While fuel demand this year will be the strongest since 2010, record-high oil inventories in developed nations won’t start to diminish until the second half of next year, and the revival of Iranian exports with the removal of sanctions may swell supplies further.

Shrinking supplies outside OPEC show that Saudi Arabia’s strategy to defend the group’s market share by pressuring rivals with lower prices “appears to be having the intended effect,” the IEA said. Brent crude futures, a benchmark used around the world, slumped to a six-year low near $42 a barrel on Aug. 24. Production may not be falling fast enough to clear the global surplus and prices could drop as low as $20, according to Goldman Sachs Group Inc. 

This is a most interesting article. Look at what was said:

• a decrease of 500,000 bopd in 2016
• that decrease is ALL of non-OPEC

Comments:

• even if the full 500,000 bopd had fallen on the US, it would have been inconsequential. But this is ALL of non-OPEC, which when I last looked, included Russia, Mexico, Canada, and Latvia
• Texas and North Dakota alone could handle a combined 500,000 bopd decrease, and this doesn't even begin to include the implosion that we are starting to see in Alberta (that would be western Canada) -- which can't even get a pipeline to the west coast and they don't even need President Obama's approval to do that 
• this is what Saudi accomplished: got the Americans (and the rest of the world) hooked on oil AGAIN; and, pretty much destroyed any interest in intermittent energy (wind, solar) unless entirely financed by gullible taxpayers and/or mandated by the government

Then the math:

• 500,000 / 58.2 million bopd = 0.9%.

0.9% is less than a full one (1) percent (%).

Saudi Arabia took a bath -- giving their oil away for $50/bbl and all they achieved was a measly 1% drop in non-OPEC oil production.

Note: I often make simple arithmetic errors, and there may be huge errors here. For all I know, my decimal point is off by a decimal or two and perhaps Saudi sees a 100% drop in non-OPEC oil production. I honestly don't know. But when I see headlines and stories like this and the math works out to less than 1% -- and that's a year from now -- I wonder about the news source.

Mid-Week Rants And Raves -- September 16, 2015

Tweeting now: Gulf Coast gasoline production jumps 9.2% on week.

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Really?

This story is getting a lot of attention. Everywhere it's being reported that five years of recovery haven't boosted median household income.  A lot of data points in that article.

I think the biggest problem is that mainstream media tell(s) us we've in a recovery for the past five years. Except for the oil and gas industry -- up until about a year ago -- no sector seemed to be in recovery mode. There seems to be a disconnect among a) people like you and me; b) people in the White House; c) Reuters and Bloomberg -- the mouthpieces for the people in the White House; d) Wall Street; and, e) CNBC.

When H-P announced another 30,000 jobs to be cut, it sort of put everything into perspective. And H-P isn't even in the oil and gas sector. The 30,000 jobs cut is on top of tens of thousands of cuts have already been made. I track job losses here -- the original post was dated October 26, 2012. President Obama had been president for about three years, I suppose.

When you go to that link, and scroll down just a bit -- there it is:

HP's layoffs at 55,000 and rising, October 7, 2014. And that was just the start. Wow.

Back to that "five years of recovery haven't boosted median household income." Look at this data point (my favorite data point by the way): Those 65 and older, meanwhile, saw their incomes rise 3.7 percent. No other age group saw statistically significant income gains.

It reminds of the joke about two hikers in the woods when they stumbled upon a grizzly (bear). One hiker put on his tennis shoes, telling the other hiker he didn't have to run faster than the grizzly (bear), he only had to faster than the other hiker.

I'm not quite in that "those 65 and older" group but for all practical purposes I am and I will be next year.

I could make a lot of comments on that article, but I'll let Huffington Post, The Wall Street Journal, and The Rolling Stone Magazine do that for me. 

But look at that tweet up above: gasoline production along the coast jumped 9.2% this past week. My hunch is that gasoline costs less today than it did five years ago.

Later, BloombergBusiness also had a story on this miserable recovery:

Looking at eight groups of household income selected by Census, only those whose incomes are already high to begin with have seen improvement since 2006, the last full year of expansion before the recession. Households at the 95th and 90th percentiles had larger earnings through 2014, the latest year for which data are available.

Income for all others was below 2006 levels, indicating they're still clawing their way out of the hole caused by the deepest recession in the post-World War II era. 

Despite a gazillion dollars in stimulus. How's that ObamaCare working out? How's that expensive intermittent energy (solar/wind) working out? How's that killing of the Keystone XL working out? How's that war on coal working out? That alone probably accounts for a lot of "job loss" misery?And it is not going to get better any time soon. Everyone agrees -- everyone -- that a government-mandated minimum wage will result in a net loss of human jobs. Robot jobs will increase. That two-income family -- where both members are working minimum wage jobs -- will probably not see their family income increase. One or both of the jobs will evaporate with a government-mandated minimum wage.

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Givens

In the past five years:

• utility costs have gone up due to intermittent (solar, wind) energy mandates;
• the government has done whatever it can to kill the US oil and gas industry;
• the US government has done whatever it can to kill the least expensive form of energy (coal);
• health care costs have risen exponentially (ObamaCare);
• college costs continue to rise.  

Those "65 and older":

• are less affected by higher utility bills, as they downsize to smaller homes;
• generally have college tuition bills behind them;
• drive less; and,
• can get a senior pass to all national parks that never expire for ... $10.  

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Connecting The Dots

If one wonders whether folks are doing well or not, consider this: the UAW tentatively signed off on a new four-year contract with Fiat Chrysler without a strike or other job action. The workers know that it's unlikely they will ever make up their lost income by going on strike.

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Why I Love To Blog

From Jo Nova:

This “ambitious” goal is purely symbolic. Here’s why. Electrical power plants make 37% of US emissions, which are about one-fifth of global human emissions, which are 4% of total CO2 emissions globally.

So a 32% cut in US electrical emissions will result in a 0.1% cut in total global CO2 emissions (at best).

If the Obama/EPA plan is “successful” and if the IPCC are right, Paul Knappenberger and Pat Michaels estimate that Obama’s new plan will cool the world by an unmeasurable 0.02°C by 2100.

NERA Economic consulting estimates US electricity prices will rise 12 -17%. The Heritage Foundation estimates that rising energy costs will have an economy wide effect and the US will lose $2.5 trillion in GDP. Choosing expensive electricity as a form of global climate control will cost more than one million jobs.

Eight (8) New Permits, North Dakota -- September 16, 2015

Active rigs:

	9/16/2015	09/16/2014	09/16/2013	09/16/2012	09/16/2011
Active Rigs	69	198	178	193	199

Eight (8) new permits --

• Operators: Oasis (6), Petro-Hunt, Slawson
• Fields: Siverston (McKenzie), Willow Creek (Williams), Clear Creek (McKenzie), Little Knife (Dunn), Big Bend (Mountrail)
• Comments:

One well coming off the confidential list Thursday:

• 29418, 1,353, Whiting, State 31-3-4H, Nelson Bridge, 30 stages, 3.2 million lbs sand; on a pump almost immediately, t3/15; cum 42K 7/15;

Hess cancels one permit, AN-Lone Tree, in McKenzie County.

Producing wells completed:

• 28972, 441, Petro-Hunt, K. Thorson 159-94-7A-18-1HS, North Tioga, t8/15; cum --
• 28973, 335, Petro-Hunt, K. Thorson 159-94-7A-17-2HS, North Tioga, t8/15; cum --
• 29087, 1,040, EOG, Van Hook 134-1319H, Parshall, ICO, t8/15; cum --
• 29959, 1,590, Slawson, Skybolt Federal 1SLH, Big Bend, 4 sections, t9/15; cum --
• 30453, 841, Hess, EN-D Cvancara S-154-93-0904H-9, Robinson Lake, t8/15; cum --

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29418, see above, Whiting, State 31-3-4H, Nelson Bridge:

Date	Oil Runs	MCF Sold
7-2015	7995	0
6-2015	8482	0
5-2015	6629	0
4-2015	12694	0
3-2015	5936	0

Reminder: Ports-To-Plains Website And Registration Information -- Conference October 6 - 8, 2015

Ports-To-Plains website.

Register for Ports-To-Plains conference, October 6 - 8, 2015, here.

Original post here.

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Why The Rich Are So Much Richer

That is the title of an article in the most recent issue of The New York Review of Books. Other than the definition of "rent-seeking," I doubt I agree with anything in the books reviewed or the review itself. I was quite amazed at all the blind spots of the both author reviewed and the reviewer. I could have missed it but when I see an article on rent-seeking and I don't see Bill or Hillary mentioned, Elon Musk mentioned, or Tom Steyer mentioned, it suggests to me the writer has a huge blind spot when it comes to rent seeking.

From the article:

He sees the boom in the incomes of the one percent as largely the result of what economists call “rent-seeking.” Most of us think of rent as the payment a landlord gets in exchange for the use of his property.

But economists use the word in a broader sense: it’s any excess payment a company or an individual receives because something is keeping competitive forces from driving returns down. So the extra profit a monopolist earns because he faces no competition is a rent. The extra profits that big banks earn because they have the implicit backing of the government, which will bail them out if things go wrong, are a rent. And the extra profits that pharmaceutical companies make because their products are protected by patents are rents as well.

And immediately, the first problem: confusion between the CEO and the company they run. The definition of rent-seeking applies to a corporation in most cases.  

Other rent-seekers, based on that definition, not mentioned in the article are: pro athletes, movie stars, faux environmentalists, and Hilly Clinton (in a class of her own). Some of these (pro athletes and movie stars, for example), may not be "rent-seekers" by the strict definition, but any book or review discussing why the rich are getting richer needs to include pro athletes, movie stars, and other entertainers, such as singers.

Wednesday, September 15, 2015

Headlines from sites you all visit that caught my eye:

• US poverty rate edged up in 2014 as median income fell
• oil rises 4% on US crude stockpile drop ahead of Fed
• low oil prices throw North Sea oil into a state of crisis (I do not particularly care for this source) 
• Apple has interesting new revenue stream; leasing iPhones directly at a very affordable monthly rate; remember when "we" all leased our ATT phones in our homes on a monthly basis? Analysts see this monthly lease with yearly upgrades as an incredibly clever move by Apple; Apple on pace to set new record with iPhone launch (but this launch includes China, which I have read, did not occur previously)
• UAW signs tentative four-year contract with Fiat Chrysler; will end two-tier wage system (over time); addresses health care costs; industry "ready to shift into high gear";

Active rigs:

	9/16/2015	09/16/2014	09/16/2013	09/16/2012	09/16/2011
Active Rigs	70	198	178	193	199

RBN Energy: will takeaway capacity in the Eaglebine boost production?

Blueknight Energy Partners’ 100 Mb/d Knight Warrior pipeline is currently under construction and due online in Q2 2016 to deliver crude from the developing Eaglebine play to the Houston Ship Channel. It complements the 60 Mb/d Sunoco Logistics Eaglebine Express pipeline to Nederland, TX that opened last December.

Today we discuss how the promising but relatively complex nature of Eaglebine drilling could scare off producers until prices move substantially higher than today’s levels.
It’s been a year since we took an in-depth look at the Eaglebine play (also known as Eagle Ford East and East Eagle Ford), and a lot’s happened.

For one thing, the price of West Texas Intermediate crude oil has fallen sharply (from about $90/Bbl then to less than $50/Bbl now); for another, the first oil pipeline out of the Eaglebine (Sunoco Logistics’ Eaglebine Express) has been completed and can now move up to 60 Mb/d to its Nederland crude terminal in Port Arthur, TX. As we said in our last update on the Eaglebine, the play is located on the northeastern trend of the Eagle Ford where the Eagle Ford Shale meets the Woodbine Sandstone.

Most of the drilling in the Eaglebine has taken place in these counties (in order of June 2015 oil production volumes, highest to lowest): Brazos, Madison, Leon, Grimes, Polk and Walker. The play got off to a slower start than the Eagle Ford, in part because the Eaglebine formation (up to 1,000 feet thick, and found at depths of between 6,500 and 15,000 feet) has been more complex for drillers to exploit.

The Eaglebine and Eagle Ford share similar geology--both are situated above the Buda Formation and below the Austin Chalk—but the Eagle Ford is a carbonate rich organic, while the Eaglebine contains a large percentage of silica-rich sands interlaced in the organic rich shale, and that makes Eaglebine completion and production complicated. Still, the Eaglebine has high hydrocarbon potential, including a mixture of oil and condensate liquids. In other words, it’s too promising a play to ignore, particularly given its proximity to Gulf Coast refineries.