The G-7 Blues, and the related Chinese formula of 'Oil In, Exports Out'

[Tom Kirkman + 8,860]

Refreshingly candid and clear-headed anaysis, in my opinion.  Many here will likely disagree, apparently for the sole reason that I liked this article. 

No, I don't agree with everything in the article, but it has far more hits than misses, and the hits are doozies.

Excerpt below, full article in the link:

 

The G-7 Blues

What’s at stake in all these international confabs like the G-7 are the tenuous supply lines that keep the global game going. The critical ones deliver oil around the world. China imports about 10 million barrels a day to keep its operations going. It produces less than 4 million barrels a day. Only about 15 percent of its imports come from next door in Russia. The rest comes from the Middle East, Africa, and South America. Think: long lines of tanker ships traveling vast distances across the seas, navigating through narrow straits. The Chinese formula is simple: oil in, exports out. It has worked nicely for them in recent decades. Things go on until they don’t.

That game is lubricated by a fabulous stream of debt generated by Chinese banks that ultimately answer to the Communist Party. The party is the Chinese buffer between banking and reality. If the party doesn’t like the distress signals that the banks give off, it just pretends the signals are not coming through, while it does the hokey-pokey with its digital accounting, and things appear sound a while longer.

The US produces just over 12 million barrels of oil a day. About 6.5 million of our production is shale oil. We use nearly 20 million a day. (We’re not “energy independent.”) The shale oil industry is wobbling under the onerous debt load that it has racked up since 2005. About 90 percent of the companies involved in shale oil lose money. The capital costs for drilling, hauling a gazillion truckloads of water and fracking sand to the rig pads, and sucking the oil out, exceed the profit from doing all that. It’s simply all we can do to keep the game going in our corner of the planet, but it’s not a good business model. After you’ve proved conclusively that you can’t make a buck at this using borrowed money, the lenders will quit lending you more money. That’s about where we are now.

Europe is near the end of its North Sea oil bonanza and there’s nothing in the on-deck circle for them. Germany tried to prove that they could run the country on “renewables” and that experiment has flopped. They have no idea what they’re going to do to keep the game going in their patch of nations. They must be freaking out in their charming capital cities.

The next economic bust is going to amount to the crack-up of the oil age, and the “global economy” that emerged in its late stage. It was all about moving fantastic quantities of things around the planet. The movements were exquisitely tuned, along with the money flows that circulated freely, like blood carrying oxygen to each organ. All of that is coming to an end. The nations of the world must be feeling desperate, despite the appearance of good manners at meetings like the G-7. What’s at stake for everybody in the dark background is the ability to maintain high standards of living only recently attained. And the fear behind that is not knowing just how far backward these high standards of living may have to slide.

...

 

[JR EWING + 123]

4 minutes ago, Tom Kirkman said:

Refreshingly candid and clear-headed anaysis, in my opinion.  Many here will likely disagree, apparently for the sole reason that I liked this article. 

No, I don't agree with everything in the article, but it has far more hits than misses, and the hits are doozies.

Excerpt below, full article in the link:

 

The G-7 Blues

What’s at stake in all these international confabs like the G-7 are the tenuous supply lines that keep the global game going. The critical ones deliver oil around the world. China imports about 10 million barrels a day to keep its operations going. It produces less than 4 million barrels a day. Only about 15 percent of its imports come from next door in Russia. The rest comes from the Middle East, Africa, and South America. Think: long lines of tanker ships traveling vast distances across the seas, navigating through narrow straits. The Chinese formula is simple: oil in, exports out. It has worked nicely for them in recent decades. Things go on until they don’t.

That game is lubricated by a fabulous stream of debt generated by Chinese banks that ultimately answer to the Communist Party. The party is the Chinese buffer between banking and reality. If the party doesn’t like the distress signals that the banks give off, it just pretends the signals are not coming through, while it does the hokey-pokey with its digital accounting, and things appear sound a while longer.

The US produces just over 12 million barrels of oil a day. About 6.5 million of our production is shale oil. We use nearly 20 million a day. (We’re not “energy independent.”) The shale oil industry is wobbling under the onerous debt load that it has racked up since 2005. About 90 percent of the companies involved in shale oil lose money. The capital costs for drilling, hauling a gazillion truckloads of water and fracking sand to the rig pads, and sucking the oil out, exceed the profit from doing all that. It’s simply all we can do to keep the game going in our corner of the planet, but it’s not a good business model. After you’ve proved conclusively that you can’t make a buck at this using borrowed money, the lenders will quit lending you more money. That’s about where we are now.

Europe is near the end of its North Sea oil bonanza and there’s nothing in the on-deck circle for them. Germany tried to prove that they could run the country on “renewables” and that experiment has flopped. They have no idea what they’re going to do to keep the game going in their patch of nations. They must be freaking out in their charming capital cities.

The next economic bust is going to amount to the crack-up of the oil age, and the “global economy” that emerged in its late stage. It was all about moving fantastic quantities of things around the planet. The movements were exquisitely tuned, along with the money flows that circulated freely, like blood carrying oxygen to each organ. All of that is coming to an end. The nations of the world must be feeling desperate, despite the appearance of good manners at meetings like the G-7. What’s at stake for everybody in the dark background is the ability to maintain high standards of living only recently attained. And the fear behind that is not knowing just how far backward these high standards of living may have to slide.

...

 

Not a bad assessment of the energy markets and i have a theory that some countries are being prevented from developing their energy deposits for obvious reason that it may not flow in the direction the g7 want it to. 

But this debt you speak of will be repaid quickly when its decided that oil needs to be $100 to pay it all down. So you can liken shale to a deposit locked in for 20years with a very high end recovery / return.

 

 

[Douglas Buckland + 6,308]

14 hours ago, JR EWING said:

Not a bad assessment of the energy markets and i have a theory that some countries are being prevented from developing their energy deposits for obvious reason that it may not flow in the direction the g7 want it to. 

But this debt you speak of will be repaid quickly when its decided that oil needs to be $100 to pay it all down. So you can liken shale to a deposit locked in for 20years with a very high end recovery / return.

 

 

JR,

Your premise depends alot on how many shale oil 'sweetspots' remain to be drilled and if the lithology agrees to keep delivering at it's present rate for 20 years. Neither are dependent on the price of oil.

[Boat + 1,323]

The G-7 blues

Renewables having flopped is like land lines having flopped when the smart phone arrived. Did tv’s flop because a 60” is now $500 when 15 years ago they were $2,000? Lots of oil out there and there will be new tech. The question is how long before electricity captures a lead in market share over oil. 

[John Foote + 1,135]

On 8/27/2019 at 6:58 AM, Boat said:

The question is how long before electricity captures a lead in market share over oil. 

Remember while electricity is becoming the overwhelming dominant way to consume energy, what matters is how you generate the electricity.

It's why an all-electric car in an area using coal for electrical production is messier than a modern gasoline powered car. Gas is still growing market share, and will for a while.

[kshithij Sharma + 78]

On 8/27/2019 at 5:28 PM, Boat said:

The G-7 blues

Renewables having flopped is like land lines having flopped when the smart phone arrived. Did tv’s flop because a 60” is now $500 when 15 years ago they were $2,000? Lots of oil out there and there will be new tech. The question is how long before electricity captures a lead in market share over oil. 

60-70% of oil is used in making petrochemicals, shipping, air-travel and commercial transportation in trucks, trains or other commercial means. How exactly will you substitute oil with electricity for these?

Even in electric vehicles, it is really difficult to substitute all passenger vehicles due to problems due to logistical problems of electricity lines, problems of charging cars when travelling/touring (like how will you charge in your aunt's house and pay the cost of electricity?) and so on.

In the best case, you may only substitute about 1 third of the oil and that is not much.

[Boat + 1,323]

People are not being displaced, being killed in weather events and have yet to spend trillions in the climate change disasters yet to come. There will be stiff carbon taxes and much tougher regulations as these tragedies unfold. Where the size of oil and FF markets end up is not that important but recognizing trends tells me your minimizing not only the danger to the earth but also the response by humans.

[Boat + 1,323]

On 8/26/2019 at 2:59 PM, Tom Kirkman said:

Refreshingly candid and clear-headed anaysis, in my opinion.  Many here will likely disagree, apparently for the sole reason that I liked this article. 

No, I don't agree with everything in the article, but it has far more hits than misses, and the hits are doozies.

Excerpt below, full article in the link:

 

The G-7 Blues

What’s at stake in all these international confabs like the G-7 are the tenuous supply lines that keep the global game going. The critical ones deliver oil around the world. China imports about 10 million barrels a day to keep its operations going. It produces less than 4 million barrels a day. Only about 15 percent of its imports come from next door in Russia. The rest comes from the Middle East, Africa, and South America. Think: long lines of tanker ships traveling vast distances across the seas, navigating through narrow straits. The Chinese formula is simple: oil in, exports out. It has worked nicely for them in recent decades. Things go on until they don’t.

That game is lubricated by a fabulous stream of debt generated by Chinese banks that ultimately answer to the Communist Party. The party is the Chinese buffer between banking and reality. If the party doesn’t like the distress signals that the banks give off, it just pretends the signals are not coming through, while it does the hokey-pokey with its digital accounting, and things appear sound a while longer.

The US produces just over 12 million barrels of oil a day. About 6.5 million of our production is shale oil. We use nearly 20 million a day. (We’re not “energy independent.”) The shale oil industry is wobbling under the onerous debt load that it has racked up since 2005. About 90 percent of the companies involved in shale oil lose money. The capital costs for drilling, hauling a gazillion truckloads of water and fracking sand to the rig pads, and sucking the oil out, exceed the profit from doing all that. It’s simply all we can do to keep the game going in our corner of the planet, but it’s not a good business model. After you’ve proved conclusively that you can’t make a buck at this using borrowed money, the lenders will quit lending you more money. That’s about where we are now.

Europe is near the end of its North Sea oil bonanza and there’s nothing in the on-deck circle for them. Germany tried to prove that they could run the country on “renewables” and that experiment has flopped. They have no idea what they’re going to do to keep the game going in their patch of nations. They must be freaking out in their charming capital cities.

The next economic bust is going to amount to the crack-up of the oil age, and the “global economy” that emerged in its late stage. It was all about moving fantastic quantities of things around the planet. The movements were exquisitely tuned, along with the money flows that circulated freely, like blood carrying oxygen to each organ. All of that is coming to an end. The nations of the world must be feeling desperate, despite the appearance of good manners at meetings like the G-7. What’s at stake for everybody in the dark background is the ability to maintain high standards of living only recently attained. And the fear behind that is not knowing just how far backward these high standards of living may have to slide.

...

 

We keep reading the same kind of grey truth. The US produces over 12 mbpd and consumes 13/14 mbpd. The rest of that use is foreign oil in and out. Why we talk about that oil as US oil is a tradition but in my view a misleading label.

[Ward Smith + 6,615]

On 9/6/2019 at 8:18 AM, Boat said:

We keep reading the same kind of grey truth. The US produces over 12 mbpd and consumes 13/14 mbpd. The rest of that use is foreign oil in and out. Why we talk about that oil as US oil is a tradition but in my view a misleading label.

You bring up an interesting point. I've tried (and largely failed) to make sense of the IEA numbers on exports from the US. I know we've got excess refinery capacity in the gulf and are supplying multiple nations with refined fuels and feedstocks. Therefore I agree we're not really "consuming" 20 million bbls per day. But getting exact numbers is hard. Part of the problem is you have to add up all the little stuff like "specialty naptha", whatever that is but still thousands of bbls per day exported. "Regular" naptha is in the hundreds of thousands of bbls per day. Gasoline millions per day etc. 

[Boat + 1,323]

37 minutes ago, Ward Smith said:

You bring up an interesting point. I've tried (and largely failed) to make sense of the IEA numbers on exports from the US. I know we've got excess refinery capacity in the gulf and are supplying multiple nations with refined fuels and feedstocks. Therefore I agree we're not really "consuming" 20 million bbls per day. But getting exact numbers is hard. Part of the problem is you have to add up all the little stuff like "specialty naptha", whatever that is but still thousands of bbls per day exported. "Regular" naptha is in the hundreds of thousands of bbls per day. Gasoline millions per day etc. 

If you search the EIA for imports and exports for petroleum products our net imports is somewhere around 1 mbpd. For interest search net imports by country and look at the history by country. 

But to your point it isn’t clear how much of the imported oil is refined, swapped, mixed and sold or just stored etc. Again it isn’t clear how much US home produced product is swapped, mixed, sold as crude etc then exported. 

Generally this chart is like a ballpark number.

https://www.eia.gov/dnav/pet/pet_move_wkly_dc_NUS-Z00_mbblpd_4.htm

Like 8 million in and 1 million out per week using the average of 4 weeks button.

[Enthalpic + 1,496]

On 9/6/2019 at 2:35 AM, kshithij Sharma said:

60-70% of oil is used in making petrochemicals, shipping, air-travel and commercial transportation in trucks, trains or other commercial means. How exactly will you substitute oil with electricity for these?

Even in electric vehicles, it is really difficult to substitute all passenger vehicles due to problems due to logistical problems of electricity lines, problems of charging cars when travelling/touring (like how will you charge in your aunt's house and pay the cost of electricity?) and so on.

In the best case, you may only substitute about 1 third of the oil and that is not much.

About 40% of oil goes to making plain old gasoline. Another about 25% is diesel type fuels.

Trains can (and do) run on electricity, boats can run on LNG; very easy to get more than 1/3 reduction.

[kshithij Sharma + 78]

7 hours ago, Enthalpic said:

About 40% of oil goes to making plain old gasoline. Another about 25% is diesel type fuels.

Trains can (and do) run on electricity, boats can run on LNG; very easy to get more than 1/3 reduction.

40% of oil for to gasoline only in US. In India, it is 15% only for gasoline while 50% goes for diesel, fuel oil & kerosene and 10% goes to LPG, 20% for petrochemicals and feedstock. Rest to miscellaneous and rounding off error.

Trains mostly run on electricity in India except in places where it is too difficult to use electric cables as in extreme snowy region, dense forest, rough Himalayan areas etc where Trains run on diesel.

USA may be an exception where 45% oil is used for gasoline. Other countries don't spend so much oil on civilian transportation.

PT_Consumption.xls

[Douglas Buckland + 6,308]

On 9/6/2019 at 11:07 PM, Boat said:

People are not being displaced, being killed in weather events and have yet to spend trillions in the climate change disasters yet to come. There will be stiff carbon taxes and much tougher regulations as these tragedies unfold. Where the size of oil and FF markets end up is not that important but recognizing trends tells me your minimizing not only the danger to the earth but also the response by humans.

Yet, early ‘trends’ show that the Earth was much cooler. In the ‘70’s the experts were warning that we were approaching another period of glaciation...what happened with that?

You need to be careful when ‘cherry picking’ your ‘trends’.

[kshithij Sharma + 78]

9 minutes ago, Douglas Buckland said:

Yet, early ‘trends’ show that the Earth was much cooler. In the ‘70’s the experts were warning that we were approaching another period of glaciation...what happened with that?

You need to be careful when ‘cherry picking’ your ‘trends’.

The climate change is a hoax to cover up the reality of Petroleum depletion. It is not climate changing but petroleum reserves are depleting. That is why there is not much focus of coal and gas production and consumption while focus is only on Petroleum. Earth is nit getting any warmer by carbon dioxide. The level if carbon dioxide in atmosphere earlier was 0.03% and is now 0.04%. Think for yourself- If temperature of earth rises by 1 degree Celsius for rise in CO2 by 0.01%, will earth's temperature go to 100 degree Celsius for a carbon dioxide level of 1% in atmosphere? What kind of evidence from greenhouses show that mere 0.p1% increase in carbon dioxide will warm the air by 1 Celsius?

Your observations of 1970s trend of cooling iw also a good example why climate change & global warming is a hoax.