OPEC Sneezes, US Industry Gets the Flu and Canada Gets Pneumonia

[Falcon + 222]

16 hours ago, wrs said:

Not sure what you view as surplus but the OECD inventories are right around the 5 year average according to this.

https://www.erce.energy/graph/oecd-us-oil-inventories

If you read the quote it states that it is from Mario della Ossa of Orbital Insight, as were the previous two months numbers.

The whole world trades on US weekly reports that can vary greatly on a weekly basis due to weather, outages orchange in exports. US oil is just 12% of world production. While this is FOOLISH it's the only transparent and reliable data.  Europe is stagnant and hardly matters anymore. OPEC lies more than Trump, and China (and most of Asia) are very secretive.

The oil "experts" and investment analyst all parrot the same Saudi talking points. Some because they want Saudi investment banking deals and others because they're clueless. 

OPEC has some difficult decisions to make.  There are no good answers, only some less damaging then others. Maybe there is no answer and they're f'_d.

By the way, Aramco production costs are $2.80 a barrel. Should US be concerned about stability in Mideast, MAYBE.  Many say no.  

Saudi Royals have $ Billions in overseas banks and investments.  

In 2017 Crown Prince Mohammad bin Salman survived an attempted palace coup by some of his cousins. He was shot twice and retreated with family and King to a palace on Red Sea in Jeddah ready to flee if necessary.

He will survive. The question is what do oil dependent countries do when oil trades at $50 a barrel or God forbid $40 a barrel as the new normal.

Many opinions differ on the timing. That's understandable. Personally I think it is inevidable.

Edited May 3, 2019 by Falcon

[Jan van Eck + 7,558]

4 hours ago, wrs said:

Yeah, but just like royalties are a cost of production, I think political stability for the royals staying in control is part of the cost of production there.  So the taxes on the oil and the royalties paid to the royal family in order to maintain social order are a requirement for consistent production in a stable society.  To me, the social costs are a cost of production which if not paid will ultimately result in falling production.  Plenty of good examples, Nigeria, Libya, Venezuela and Mexico all come to mind.

Then the solution to all those surplus princes sponging off the treasury is to eliminate the princes.  Shot or beheaded?  Does not really matter, either way, they go off the payroll.   Yup, I expect a major bloodbath inside KSA.

Edited May 3, 2019 by Jan van Eck

[Falcon + 222]

When the collective oil producing countries realizes the electrification of world energy is comming they will all be selling their reserves as quickly possible.

It will be a race to the lower priced oil. How much longer do OPEC MEMBERS put up with Saudi's exporting 8 mmbls/day while they sell 1, 2, or 3.  I guess they already are fed up.  Qatar left and most other members ignore quotas.

Their large reserves are worth nothing in the ground. (or a lot lower price)

Edited May 3, 2019 by Falcon

[Jan van Eck + 7,558]

4 minutes ago, Falcon said:

When the collective oil producing realizes the electrification of world energy is comming they will all be selling their reserves as quickly possible.

Their large reserves are worth nothing in the ground.

Your prediction is unlikely.  Oil (and gas) has large value as a feedstock for plastics.  Some plastic-type products are likely to really explode in volume and take materials share away from metals.  Specifically, fibrous materials such as carbon-fiber composite.  Entire aircraft will be built out of the stuff, as well as trolleys, railcars, even buses.  Stick around; oil is here to stay.  

[ronwagn + 6,290]

12 minutes ago, Falcon said:

When the collective oil producing realizes the electrification of world energy is comming they will all be selling their reserves as quickly possible.

Their large reserves are worth nothing in the ground.

What do you mean by electrification? From what energy sources?

 

5 minutes ago, Jan van Eck said:

Your prediction is unlikely.  Oil (and gas) has large value as a feedstock for plastics.  Some plastic-type products are likely to really explode in volume and take materials share away from metals.  Specifically, fibrous materials such as carbon-fiber composite.  Entire aircraft will be built out of the stuff, as well as trolleys, railcars, even buses.  Stick around; oil is here to stay.  

Many guns today are largely made out of plastic or carbon fiber. Cars are also. I am hoping that affordable housing will learn to use new technology. Conventional housing is unaffordable for many. Jan, have you ever thought about ways to make housing more affordable? 

Edited May 3, 2019 by ronwagn
addition

[Falcon + 222]

1 hour ago, Jan van Eck said:

Your prediction is unlikely.  Oil (and gas) has large value as a feedstock for plastics.  Some plastic-type products are likely to really explode in volume and take materials share away from metals.  Specifically, fibrous materials such as carbon-fiber composite.  Entire aircraft will be built out of the stuff, as well as trolleys, railcars, even buses.  Stick around; oil is here to stay.  

Agreed. In addition to plastics and other composites, air travel will continue to grow from current 7 to 8 million barrels a day.

I guess the point I was trying to make is it will probably be worth a lot less. There will be an impetus to sell more while the going is good at todays higher prices. 

If you look at the cycles of oil over the recent years you will see price is achieving lower highs.  I heard a fund manager today state his belief that oil prices going to triple digits by end of year.  I can't imagine unless there are major outages. Like Libya to zero and Iran to zero. Both of which I believe are low probability occurrences

 

Other topic: Do you really believe chaos and major bloodbath in KSA. If yes what's your best guess as to timing.

Edited May 3, 2019 by Falcon

[Falcon + 222]

4 minutes ago, ronwagn said:

Electrification source ?

Mostly natural gas power plants. Some renewables. China is jumping into nuclear with both feet.

[ronwagn + 6,290]

2 minutes ago, Falcon said:

Mostly natural gas power plants. Some renewables. China is jumping into nuclear with both feet.

I agree, but also think that natural gas will take over as a cleaner and less expensive replacement than gasoline and diesel. I think that is a slow evolution, however. China and Iran lead the field in natural gas vehicles right now. Natural gas will help keep a lid on oil demand however. 

[Falcon + 222]

11 hours ago, Jan van Eck said:

Then the solution to all those surplus princes sponging off the treasury is to eliminate the princes.  Shot or beheaded?  Dos not really matter, either way, they go off the payroll.   Yup, I expect a major bloodbath inside KSA.

Bloodbath ? If you believe so what is your best guesstimate as to timing ?

Imagine killing off 18,000 of your cousin's.

Edited May 3, 2019 by Falcon

[Jan van Eck + 7,558]

9 minutes ago, ronwagn said:

Conventional housing is unaffordable for many. Jan, have you ever thought about ways to make housing more affordable? 

My approach to that is two-fold.  First, is the financing approach.  It is a bit complex but involves the State borrowing from the Federal Reserve at the discount window.  The govt here took that proposal and ran with it, now building some 1,200 new houses but did not go to the fed discount, instead bonded it out.  I have a video on it somewhere but cannot readily find it, sorry.

The second approach I am working on is called Cross Laminated Timber construction  {"CLT"}.  I am attaching some links to show you how that works.  To set up that CLT plant I would have to cobble together about 40 million of patient capital.  It will come together eventually. 

https://www.youtube.com/watch?v=pNr635IIUWg

https://www.youtube.com/watch?v=pPiXiHPRgn8

This technique was developed in Austria, and it is ready technology, easily used in the USA.  Needs the right people to do it, of course.  You would design perhaps 20 variations of a house plan, and because it is all CNC, you load the flash drive into the machine, supply the panel lumber, and let the machine build you the panels.  Ship to the jobsite, bolt it together, voila, a great house that is net-zero energy. 

[ceo_energemsier + 1,818]

30 minutes ago, Jan van Eck said:

My approach to that is two-fold.  First, is the financing approach.  It is a bit complex but involves the State borrowing from the Federal Reserve at the discount window.  The govt here took that proposal and ran with it, now building some 1,200 new houses but did not go to the fed discount, instead bonded it out.  I have a video on it somewhere but cannot readily find it, sorry.

The second approach I am working on is called Cross Laminated Timber construction  {"CLT"}.  I am attaching some links to show you how that works.  To set up that CLT plant I would have to cobble together about 40 million of patient capital.  It will come together eventually. 

https://www.youtube.com/watch?v=pNr635IIUWg

https://www.youtube.com/watch?v=pPiXiHPRgn8

This technique was developed in Austria, and it is ready technology, easily used in the USA.  Needs the right people to do it, of course.  You would design perhaps 20 variations of a house plan, and because it is all CNC, you load the flash drive into the machine, supply the panel lumber, and let the machine build you the panels.  Ship to the jobsite, bolt it together, voila, a great house that is net-zero energy. 

https://www.bluhomes.com/why-blu

 

 

 

Imagine using oil to make construction material, already being done, more durable than timber, can be recycled and re-used. Save the trees.

Cross Laminated petchem construction timber

[ronwagn + 6,290]

1 hour ago, Jan van Eck said:

My approach to that is two-fold.  First, is the financing approach.  It is a bit complex but involves the State borrowing from the Federal Reserve at the discount window.  The govt here took that proposal and ran with it, now building some 1,200 new houses but did not go to the fed discount, instead bonded it out.  I have a video on it somewhere but cannot readily find it, sorry.

The second approach I am working on is called Cross Laminated Timber construction  {"CLT"}.  I am attaching some links to show you how that works.  To set up that CLT plant I would have to cobble together about 40 million of patient capital.  It will come together eventually. 

https://www.youtube.com/watch?v=pNr635IIUWg

https://www.youtube.com/watch?v=pPiXiHPRgn8

This technique was developed in Austria, and it is ready technology, easily used in the USA.  Needs the right people to do it, of course.  You would design perhaps 20 variations of a house plan, and because it is all CNC, you load the flash drive into the machine, supply the panel lumber, and let the machine build you the panels.  Ship to the jobsite, bolt it together, voila, a great house that is net-zero energy. 

Sounds great. I will get back to you when I watch the videos. 

[ronwagn + 6,290]

2 hours ago, Jan van Eck said:

My approach to that is two-fold.  First, is the financing approach.  It is a bit complex but involves the State borrowing from the Federal Reserve at the discount window.  The govt here took that proposal and ran with it, now building some 1,200 new houses but did not go to the fed discount, instead bonded it out.  I have a video on it somewhere but cannot readily find it, sorry.

The second approach I am working on is called Cross Laminated Timber construction  {"CLT"}.  I am attaching some links to show you how that works.  To set up that CLT plant I would have to cobble together about 40 million of patient capital.  It will come together eventually. 

https://www.youtube.com/watch?v=pNr635IIUWg

https://www.youtube.com/watch?v=pPiXiHPRgn8

This technique was developed in Austria, and it is ready technology, easily used in the USA.  Needs the right people to do it, of course.  You would design perhaps 20 variations of a house plan, and because it is all CNC, you load the flash drive into the machine, supply the panel lumber, and let the machine build you the panels.  Ship to the jobsite, bolt it together, voila, a great house that is net-zero energy. 

It is all very impressive and high quality. Unfortunately, anything I have seen like that is quite expensive and built for the wealthy. I favor single family homes and think the sandwich walls are a great idea. The cut out window holes are great etc. Great precision is used as well. The lumber is beautiful. I am thinking that plywood and chipboard could incorporate the sandwich insulation and be done for a lot less. I just had a beautiflul two and a half car garage built for $17,000. It is big enough for a couple if it would have been made into a house for maybe twice the price. It was built with a concrete foundation. The walls and roof are modular but match my stick built house. 

I have also seen machines that pour layers for walls and many other designs. It is a subject that fascinates me. I would love to see people have a deal on a house like I bought new on a half acre. I was able to purchase another half acre adjacent to it. 

Americans have built homes of many kinds. Logs, sod, adobe, cordwood, hay bales with adobe walls, stucco over chicken wire, rammed earth, cement, etc. 

[ronwagn + 6,290]

5 hours ago, Falcon said:

I agree 100% with everything you say.  But like I said, it's not like they aren't trying. The money being spread around Washington DC Lobbying firms and Think Tanks by Saudi Arabia and Emirates this year is off the charts.

Other topic: Libya's GNA just hired Lobbying firm Mercury.  They may be a little late.

They are desperate. Just wait until alternative fuel choices catch on. It will be interesting to watch. One benefit will be less money to finance Islamic terrorists and the schools that teach extreme forms of Islam. I hope that the countries overly dependent on petroleum income can make realistic plans for the future. 

[Jan van Eck + 7,558]

1 hour ago, ronwagn said:

It is all very impressive and high quality. Unfortunately, anything I have seen like that is quite expensive and built for the wealthy.

But that is classically American.  It is new technology so the first entities in will charge a premium.  The homes I had in mind would be sold all-in for about $80,000. Because you finance it with triple-net money, the Buyer ends up with a home for a payment of about $600 a month all-in.  The real winner is the heating bill: that goes way down, as the existing old, worn-out homes in rural VT will have a heat demand of a $1,000 a month  (Which is why those guys go out into the woods and saw firewood, which costs them only their labor).  I would build them with the floors, ceilings, and the roof panels all out of CLT, so you have this great thermal barrier everywhere. Then for winter night-time you install these plug-in sections shaped like corks that would block heat transfer.  Nice and snug houses!

You take the bond money (or as raised from the Fed discount window) to do the construction.  Then the buyer takes a no closing costs, no-money down loan from that pool, the house is the collateral in the conventional sense.  The mortgage notes are sold to a Trust, which sells shares, or Certificates, to investors at 3%.  But those Certificates attract no Federal, State or Local income taxes, as they are issued by the State of VT, and thus triple-net tax free.  You sell the Certificates to guys like dentists in NJ, anybody seeking to shelter income from taxes.  Those tax benefits then flow up the chain to the homeowner in the form of a discounted mortgage payment. 

For servicing, you create a Servicer company inside VT as a "crown corporation," the way they do that in Canada. The servicer takes a -.5% charge, and for that you develop a new pool of jobs for the rural people.  See how this works?  The sales of the Certificates provides the cash to discharge the bonds or the borrowing at the discount window. When the dust settles, the State of VT is $5 million richer, you have this new servicing company, you have 6,000 men at work on building the houses, you have these 1,200 lucky homeowners with nice spanking new homes for about their heat payment in the old ones, and you have this new industry manufacturing the CLT panels, which becomes a new export industry employing another 25,000 men. 

And when you are all done, it costs you nothing.  And that five million gain?  That is seed capital for your next industrial venture.And that is how you generate prosperity from rural poverty.

[Jan van Eck + 7,558]

4 hours ago, Falcon said:

Bloodbath ? If you believe so what is your best guesstimate as to timing ?

I have no clue.  look, the Saudi oil revenues are going to take a hit. If they fall off a cliff, the spoiled princes are too stupid to figure out that that will be the new order.  So they predictably will attempt to assassinate MBS.  He is not the sort to go down without fighting.  He and his private army will start killing off the princes, not because they are his rivals for the throne, but because they are simply too expensive to keep around - and because they will be attempting to kill him.  So you already know where this is heading. Somebody has to die.  It is not going to be MBS. 

In China, if you are a trouble-maker  (that includes drug dealers), a political rabble-rouser, or a tax thief, you are taken before a Court, that has over a 99% conviction rate, there is no appeal, you are loaded into a truck together with the rest of the day's convicted guys who are found disagreeable to the regime, driven out to the outskirts of town, unloaded, and shot in the back of the head.  For the prime examples, your corpse is immediately dissected and your organs removed, for re-sale to the transplant industry.  If your relatives pay extra, they will shoot you in the head without you seeing it coming.  If your relatives do not pay extra, you get shot watching the executioner doing the pistol load and walking up to you to shoot you.  It is all quite unpleasant.  The Communists do not much care.  Execution is quite common, well over 6,000 a year.  You are getting up to the auto-crash numbers in the USA.  Why would you think the KSA would be much different?  Their idea of execution is to bring you out into the public square and have this guy with a long sword take a swing at your neck, slicing it through with a hefty blow.  OK, so for the princes in mortal combat in some palace  they will be using sub-machine guns, but the idea is the same.  Somebody dies.  

[Tom Kirkman + 8,860]

2 minutes ago, Jan van Eck said:

look, the Saudi oil revenues are going to take a hit. If they fall off a cliff, the spoiled princes are too stupid to figure out that that will be the new order.  So they predictably will attempt to assassinate MBS.  He is not the sort to go down without fighting.  He and his private army will start killing off the princes, not because they are his rivals for the throne, but because they are simply too expensive to keep around - and because they will be attempting to kill him.  So you already know where this is heading. Somebody has to die.  It is not going to be MBS. 

Sounds about right to me.

3 minutes ago, Jan van Eck said:

In China, if you are a trouble-maker  (that includes drug dealers), a political rabble-rouser, or a tax thief, you are taken before a Court, that has over a 99% conviction rate, there is no appeal, you are loaded into a truck together with the rest of the day's convicted guys who are found disagreeable to the regime, driven out to the outskirts of town, unloaded, and shot in the back of the head.  For the prime examples, your corpse is immediately dissected and your organs removed, for re-sale to the transplant industry.  If your relatives pay extra, they will shoot you in the head without you seeing it coming.  If your relatives do not pay extra, you get shot watching the executioner doing the pistol load and walking up to you to shoot you.  It is all quite unpleasant.  The Communists do not much care.  Execution is quite common, well over 6,000 a year.  You are getting up to the auto-crash numbers in the USA.  Why would you think the KSA would be much different?  Their idea of execution is to bring you out into the public square and have this guy with a long sword take a swing at your neck, slicing it through with a hefty blow.  OK, so for the princes in mortal combat in some palace  they will be using sub-machine guns, but the idea is the same.  Somebody dies

Again, sounds about right to me. 

We seem to agree on some fairly off-kilter subjects, Jan.

[Jan van Eck + 7,558]

2 minutes ago, Tom Kirkman said:

Again, sounds about right to me. 

We seem to agree on some fairly off-kilter subjects, Jan.

Yup, well, it is late at night here, so my mind tends to wander into dark corners.  Comes from staying up late.  Oh, well.

[William Edwards + 708]

5 hours ago, Jan van Eck said:

I say it sinks to twenty seven bucks. How's that for sticking my neck out?

That was last time, Jan. Remember, in speculative trading the swings get wider, both higher and lower. So it should break below $27.

[Jan van Eck + 7,558]

Just now, William Edwards said:

That was last time, Jan. Remember, in speculative trading the swings get wider, both higher and lower. So it should break below $27.

I shudder to say that you are right.

[William Edwards + 708]

5 hours ago, Jan van Eck said:

Your prediction is unlikely.  Oil (and gas) has large value as a feedstock for plastics.  Some plastic-type products are likely to really explode in volume and take materials share away from metals.  Specifically, fibrous materials such as carbon-fiber composite.  Entire aircraft will be built out of the stuff, as well as trolleys, railcars, even buses.  Stick around; oil is here to stay.  

You might wish to apply a quantitative element to your conceptual reasoning. Quantities burned currently exceed plastics production by a large factor.

[Jan van Eck + 7,558]

Just now, William Edwards said:

You might wish to apply a quantitative element to your conceptual reasoning. Quantities burned currently exceed plastics production by a large factor.

But of course.  The point I make is what KSA has been attempting - to develop an actual parallel industry that converts that oil into a higher-value end product.  If the oil can be converted into styrenes, olefins, Polyethylene terephthalates, nylons, then you have high-value-added materials.  And then you can keep going downstream into fabrications.  Can the KSA develop a chemicals industry?  I don't think they have any realistic choice, it is either that, or their cash receipts will die. 

[William Edwards + 708]

6 minutes ago, Jan van Eck said:

But of course.  The point I make is what KSA has been attempting - to develop an actual parallel industry that converts that oil into a higher-value end product.  If the oil can be converted into styrenes, olefins, Polyethylene terephthalates, nylons, then you have high-value-added materials.  And then you can keep going downstream into fabrications.  Can the KSA develop a chemicals industry?  I don't think they have any realistic choice, it is either that, or their cash receipts will die. 

I suppose that I might mention now that , ultimately, I expect that their cash receipts will actually die -- as I expect of the Canadian Oil Sands industry.

[Jan van Eck + 7,558]

1 minute ago, William Edwards said:

I suppose that I might mention now that , ultimately, I expect that their cash receipts will actually die -- as I expect of the Canadian Oil Sands industry.

But not if the KSA gets it together and is able to dispose of the parasites and cash drains, and develops a really serious military to avoid being overrun by the Iranian military  (which I view as a serious threat, if the KSA starts to fall apart internally).  The KSA still has that ultra-low-cost oil, so it can pump and sell well below anybody else.  It cannot do that today because it has this huge overhang of internal costs - none of which have anything to do with actual production. If the vast servant class is deported, the young Saudis obliged to recognize the reality that the govt is not going to guarantee them a hefty stipend for life just for sitting around and drag-racing expensive cars, and the rivals that want to kill MBS are liquidated in a gigantic purge, Stalin style, then the Kingdom has a shot.  Otherwise, it goes back to desert sands.  That place has real problems, that it just barely keeps under wraps. 

[William Edwards + 708]

2 minutes ago, Jan van Eck said:

But not if the KSA gets it together and is able to dispose of the parasites and cash drains, and develops a really serious military to avoid being overrun by the Iranian military  (which I view as a serious threat, if the KSA starts to fall apart internally).  The KSA still has that ultra-low-cost oil, so it can pump and sell well below anybody else.  It cannot do that today because it has this huge overhang of internal costs - none of which have anything to do with actual production. If the vast servant class is deported, the young Saudis obliged to recognize the reality that the govt is not going to guarantee them a hefty stipend for life just for sitting around and drag-racing expensive cars, and the rivals that want to kill MBS are liquidated in a gigantic purge, Stalin style, then the Kingdom has a shot.  Otherwise, it goes back to desert sands.  That place has real problems, that it just barely keeps under wraps. 

You seem to have the situation adequately surrounded in concept. The bottom line is that an effective strategy will have to be implemented for KSA to avoid having the value of the oil under the ground become worth no more than the sand covering that oil. What odds do you assign for that possibility?