"CERA is a political notion supported by IHS to keep us on oil" - Bob Fiske

"Joel, NEVER, EVER mess with a man's livelihood.."
Guido, the killer pimp (Joe Pantoliano) - Risky Business, 1983

I think that CERA has been looking for a way to stage a strategic withdrawal from their previous unrealistic production estimates--down to lower, but still unrealistic, production estimates--and the decline in drilling provided a perfect opportunity for them.

Yergin's assertion, in late 2004, was that rising production would drive oil prices down to a long term index price of $38. In fact, relative to either the 5/05 (C+C, EIA) production rate or the average annual rate in 2005, we have seen a significant cumulative shortfall between what we would have produced (using either 2005 metric) and what we actually produced through the end of 2008. This, aided by net export factors, drove prices up to an average rate of $100 in 2008, until of course, demand fell.

So, we know that today's oil price influences money spent on new production projects.
And, we know that new projects are a major factor in future production (plus depletion of existing wells).

Do we know the average lag time between oil price signals and new production coming on stream?

If so, can we create a sort of running average of the last 10 weeks oil price, and use it to predict how much new production will come on stream in about two years?
Or, is it because price signals are not linear, we don't get accurate predictions? I was thinking that if everybody says they need exactly $70 to green light new production, we would probably have a sort of gold rush again next year. It seams that even the onset of peak oil can't get the oil patch out of the boom-bust cycle.

LOL yes this is exactly what you get.

There is also a second shock where current resources are being drained down for cash flow.

This is different from dispersive discovery because I don't think dispersive discovery does a good job of covering in field drilling rates or work over of fields.

We can look at North American UNG plays for example most of the rigs being dropped where drilling wells in existing UNG plays they are already discovered in production and simply need wells drilled to produce. Assuming a similar dropping of rigs happens in the oil fields one
should see "discovery" drop faster as production of known oil sources slows.

Next I've proposed a second shock if you will that advances in technology allow us to extract at a faster rate pushing the peak production rate later down the depletion curve. This flattens the peak to a plateau and leads to a steep drop off once technological improvements can no longer cover decline.

I argue that unlike the medical industry we have a shark fin shaped extraction model in the oil industry.

http://www.utahinternalmedicine.com/pageview.aspx?id=14413
http://www.newyorker.com/archive/2004/12/06/041206fa_fact

In it he says, "It used to be assumed that differences among hospitals or doctors in a particular specialty are generally insignificant. If you charted a graph showing the results of all the centers treating cystic fibrosis-or any other disease, for that matter-people expected that the curve would look something like a shark fin, with most places clustered around the very best outcomes. But the evidence has begun to indicate otherwise. What you tend to find is a bell curve: a handful of teams with disturbingly poor outcomes for their patients, a handful with remarkably good results, and a great undistinguished middle."

Both are very high tech areas but oil fields are not patients you have time to consult with experts and apply the best treatment. I.e in general oil fields are produced with the best technical solution possible. They get the best treatment unlike the human patients. Also although you have to be aware of the difference Medicine like oil technology has progressed rapidly over the last several decades. In medicine overall life expectancy has not changed dramatically despite the advances. I'd argue that this is not because of the treatment bell curve since but because the precentage of patients with diseases that benefit from medical advances is itself small. To some extent its the same with oil horizontal drilling was the big advance similar to say penicillin for medicine but once it was in place further advances in both extraction and discovery only found or extracted the marginal barrel. This is simplistic but the point is you have two types of advances one thats generally applicable and can boost production in almost every field these tend to fall into the group that increases extraction rate. And others that apply only to marginal cases and by definition are not going to change the overall curve all that much they only act to sharpen the final shark fin.

So in a sense you have two shocks one is dispersive discovery and I'd argue that the long decades of low oil prices and slow increase in demand have acted as a long term shock slowing discovery coupled with a recent short term shock so its a two part shock.

Next you have technology improvements almost overwhelmingly applied to existing fields and basins these are new extraction technologies and new discovery technologies that allow more efficient extraction of a known field. This is the extraction shock fin.

It would be interesting to apply these shock if you could get suitable parameters on oil extraction after the 1980's. Back then you had a sharp drop in demand that should shock discovery I think you will find that a second shock is needed to match the real production curve since as new discovery fell off existing fields where exploited even harder.

Given the price shock was fast like your modeling and we actually have some reasonable numbers for demand changes for the time you should be able to get the price shock exactly.
Then I'm arguing you must introduce a second shock to match actual production. This is the technology shock. What it really is is a increasing extraction rate for discovered fields.

Overall I'm suggesting that we have not correctly modeled oil production since the 1980's a number of factors where at play for decades that have distorted the production curve.

WHT,

Nice charts!

In the short term, I'm also getting a "shark-fin" but only a small one due mainly to OPEC's response to demand destruction. The top of the "shark-fin" was July 2008 and the bottom about now.

Search suppression has been occurring as oil companies cut back on oil exploration but another important factor is investment suppression which is delaying the development of past discoveries. Consequently, the expected annual decline rate of 2.9 % from Dec 2009 to Dec 2012 could be steeper over the short term possibly creating a bigger "shark-fin" pattern from 2008 to 2012, followed by a slower decline rate from 2013.

The forecast below assumes that OPEC complies with about 80 % of the announced 4.2 mbd cuts from Mar 2009 to Jun 2009.
http://cn.reuters.com/article/editorsPicksNews/idCNTRE5304BU20090401

click to enlarge

Here is Colin Campbell's recent discovery curve. The world is currently discovering such small amounts of new oil that any delayed discoveries shouldn't make a big difference to the production curve.

click to enlarge
source http://www.aspo-ireland.org/index.cfm/page/newsletter

For more info about declining world oil production, please refer to

World Oil Production Peaked in 2008
http://www.theoildrum.com/node/5177

Why is it that some of the "greenest" states politically tend to fare so poorly in terms of carbon output per capita?

Imagine there’s no oil left
This might make you cry
Nowhere to drive or fly to
Empty streets and sky
Imagine all the vehicles
Scrapped forever more

Imagine there's no oil multis
All bankrupt at last
Nothing to pump or search for
And no global warming too
Imagine all the vehicles
Scrapped forever more

You may say I'm a doomer
But I'm not the only one
I hope someday you'll join us
And the world will power down

Imagine localization
I wonder if you can
No need for multinationals exploiting
The community of man

Imagine all the vehicles
recycled to make windmills

You may say I'm a doomer
But I'm not the only one
I hope someday you'll join us
And the world will power down

My apologies to the estate of John Lennon

Watching TV And Doing Nothing Might Just Save Us

...It is apparent to me that just sitting down, watching TV and doing absolutely nothing all day could save the planet.

Consider the following: Driving causes over 20% of the Greenhouse Gas in our environment. Staying home and not having a job helps the environment... Also, by having a lower cash flow, one reduces their own consumption. I mean, how many unemployed people have a Hummer? Without money, you can't overconsume, deplete resources and generate waste. And if you don't pay your bills, the utility company will shut off power to your home, which is the best way to conserve energy imagineable.

Oh, and stay at your parents while you are at it. Save the world and... well, just watch their TV.

Ever been Rick Rolled again?

Happy 4/1.

In the short term I believe they are headged at a much higher price. Long term they claim to have a lot of great prospects for the shale gas play. I dont know much other than that. I think Nate listened to their latest conference call a month or so ago. Also I think you can google a transcript if you are interested.

My new article (just posted) discusses E&P for natural gas: Natty Dread (with shoutout to Jon Friese's recent TOD piece on supply/demand balance)

Supply cuts continue to puzzle me where are they? Supposedly everyone is cutting supply yet with a relatively puny decrease in demand we build inventory virtually every week. The money talks bullshat walks is totally true in this market. Everyone seems to be waiting to the other guy to shut in his production. Obviously the O&G guys can't stand prosperity and have extremely sore feet from continually shooting themselves there. I guess counting on OPEC and the industry to have a brain is beyond stupid. Exxon (whom I believe are the biggest liars in the industry) is going to have the chance buy assests for pennies on the dollar if they want. Maybe that's the method to the madness destroy the independents and steal their assets thru cheap oil prices make big profits in the long term.

Total commercial petroleum inventories increased by 6.4 million barrels last week and are above the upper limit of average range for this time of year.

Up 6.4 million barrels now add the 1.7 million barrels added to the SPR That's 1.15 million barrels a day in inventory build. Looks to me like supply is freaking STATIC.

The rising imports are most easily explained by assuming that floating storage is now being off loaded. This will continue for some time. Then we should see imports start declining again and then finally we should see on shore inventories start to fall.

Only when we see some steady drawdowns of onshore storage can we assume that floating storage has been depleted until then we have a fairly murky understanding of how much oil is still sitting offshore.

Tanker rates could probably help but I think it would be hard to figure out to many other variables.

for the money they spent on the bail out they could of bought every man woman and child 2 smart cars and still have a good portion left over.

God drops the stars from the sky.

I've actually seen a diagram of this on Twitter...

The best part of that RFC is that it has actually been implemented!

Nothing could be further from the truth, as while the Internet may morph and change, the IP protocol suite was designed to be, and has proven to be, remarkably robust.

Paleo, that is an assertion with irrelevant justification. Whether or not IP is robust has nothing to do with whether or not the internet stays up. Every one of my clients - all we do is e-commerce - has been seeing plummeting sales. They pay me and I pay to keep my bit of the net up. They go - and lots of them have been closing up - and the infrastructure they pay to keep alive goes.

The net - as currently used - is very much based on 5 9's service. Imagine trying to process credit cards at your favorite shopping site if that were not so. Streaming podcasts? Google? Sure, IP can handle them but consider how podcasts or internet radio and streaming will work over UUCP. The relation between client and server will change; gmail will be a problem. If pornography and advertising no longer pay as much of the freight, if online commerce no longer pays the freight, the network withers. Once it loses 5 9s quality of service, it will contract faster. Just the time for Obama to focus on digital health records.

POTS has its own power system. That's not so for the internet. Not so for VOIP or any IP services. [I'm not sure about cellular.] The net is subject to financal disruption - MCI, ENRON, Fairpoint/Verizon. The threats to the net have nothing to do with robustness of IP protocol.

cfm in Gray, ME

Avian carriers! LOL!

And yet, I sense other posters have failed to spot the bulge in your cheek, courtesy of your tongue...

He tells us that he has psycho-somatic illnesses – backaches and pains – that tip him off to changes in the market. “It’s as if you’re a jungle animal, and you see another animal facing you. You have to make a decision: fight or flight? Your hair stands up and you growl and you decide, ‘Am I going to attack because I’m stronger or am I going to run away because otherwise he’s going to eat me?’ You are very tense. And that’s the tension that gives you the backache."

My grandma had arthritis and would get bad joint pain before a storm. It was a better predictor than the weatherman.

The George Soros Depression: because his body says so.

The apocalyptic rich have hoarded cash and assets - and they continue to accumulate as much as possible - and they've built retreats to allay a deep fear that, when the world starts to fall apart, they will be at the top of a mountain, in a secure compound with its own source of energy and potable water (and a decade's supply of cabernet), isolated from the screaming, rioting masses.

As the world's population grows, as the recession expands and unemployment worsens, as the globe continues to warm and the oceans rise, as questions about the future of energy and natural resources become graver, as civil unrest becomes a greater concern, the masters of the universe grab all they can. It's an Idaho panhandle mentality on Wall Street - hoard money and assets, and enough golf balls to ride out the coming cataclysm. There's social Darwinism at play in this, to be sure - survival of the richest - but it's the most cynical and self-centered kind, based not on enterprise or capitalism, but on a dark view of the future. Their concept of the greater good is gone, and they certainly display nothing you might call civic-mindedness or patriotism.

"Qu'ils mangent de la brioche."- Marie Antoinette (Translated: 'Let Them Eat Cake.')

And, BTW, revolutions generally are not so kind upon the rich or upper class... Ask the Russians, French and Cambodians.

There is no reason to maintain existing mechanisms other than as a form of trickle-down welfare.

If people are not buying GM cars, GM will not be buying parts and services to match. The lack of revenue will impact all suppliers regardless of the state of GM itself.

Unless Obama can get people to buy too many cars for too much money, Humpty GM can not be reassembled to anything resembling its former self.

Even a pre-packaged bankruptcy may still leave a GM that is too large and that does not understand its market, and that will be destined to fail and fail again in the coming years.

The more that gets liquidated now, the better. It's time for some cuts that go too deep, as too many up til now have not gone far enough, and the rot continues to spread.

JMHO

Hard to charge the US taxpayer $500 for a hammer when there are no Boogeymen out there to slay-sometimes these Boogeymen can't build themselves up-they need a little help.

First there is New Orleans, then San Francisco, then New York City. The rest of America is just McDonald's Alan

Surely this must refer to cuisine?

Nope. Alan had said on TOD that those are the only cities that matter and the entire nation should do whatever it takes to save them.

He claimed is was about their 'culture' - Yea, that New York Wall Steet culture is what needs a-saving!

You confuse what was (America once had a diverse and rich musical heritage) with what is.

New Orleans still has music as an integral part of life and much of it is live. A brass band practicing in a parking lot, Mardi Gras Indians getting together in a bar to practice their chants, playing and singing on the stoop, the Farmer's Market has a band most weeks, free concerts downtown every Wednesday, Jazz Fest, WWOZ#, this is New Orleans.

I was in Austin during the Armadillo World Headquarters days, and the first SXSW and saw what people were trying to do, and what was created. But the focus shifted to success, "making it big" and by the time I left Austin (the day GWB was sworn is as governor), what little organic music "spirit" there was in Austin had shrank. It certainly was not a part of everyday life.

The bizarrely high creativity of New Orleans, is, I believe, directly related to our lack of social pressure to conform. "Be who you want to be", as the old standard says.

Best Hopes,

Alan

# Having older professional musicians as DJs adds greatly to the station.

I'd suggest that these birds would be suitable for use with the protocol I posted early, but I suspect it would then only be compatible with Linux servers.

What is a "diebetic?"

I think I found one, On-topic, but better for April 2nd.

Since a Western diet conducive to diabetes has led us not to improved eating habits but to a growing diabetes industry, complete with its own magazine (Diabetic Living), Mr. Pollan finds little wisdom from the medical establishment about food and its ramifications. “We’ll know this has changed when doctors have kicked the fast-food franchises out of the hospitals,” he says.

http://www.nytimes.com/2008/01/03/books/03masl.html