Peak Oil (Demand) Front Update 2

Hat tip to Raul Ilargi Meijer of The Automatic Earth.

Source: Bloomberg via The Automatic Earth.

The Permian shale oil basin contains as much as the Ghawar oil field did originally? That'll put supply-side Peak Oil off until the storms of our grandchildren REALLY ramp up.

US Shale Producers Weather Oil Price Storm (Ambrose Evans Pritchard - The Telegraph)

[OPEC’s] worst fears are coming true. Twenty months after Saudi Arabia took the fateful decision to flood world markets with oil, it has failed to break the back of the US shale industry. The Saudi-led Gulf states have certainly succeeded in killing off a string of global mega-projects in deep waters. Investment in upstream exploration from 2014 to 2020 will be $1.8 trillion less than previously assumed, according to consultants IHS. But this is an illusive victory. North America’s hydraulic frackers are cutting costs so fast that most can now produce at prices far below levels needed to fund the Saudi welfare state and its military machine, or to cover Opec budget deficits. 

Scott Sheffield, the outgoing chief of Pioneer Natural Resources, threw down the gauntlet last week – with some poetic licence – claiming that his pre-tax production costs in the Permian Basin of West Texas have fallen to $2.25 a barrel. “Definitely we can compete with anything that Saudi Arabia has. We have the best rock,” he said. Revolutionary improvements in drilling technology and data analytics that have changed the cost calculus faster than most thought possible. The “decline rate” of production over the first four months of each well was 90pc a decade ago for US frackers. This dropped to 31pc in 2012. It is now 18pc. Drillers have learned how to extract more. Mr Sheffield said the Permian is as bountiful as the giant Ghawar field in Saudi Arabia and can expand from 2m to 5m barrels a day even if the price of oil never rises above $55.

But oil demand is still either running behind oil supply, or is actually on the decline. Remember, consumption of fossil fuels have remained stagnant for the past three years, 2013 through 2015.

Growing Oil Glut Shows Investors There’s Nowhere to Go But Down (Bloomberg)

Money managers have never been more certain that oil prices will drop. They increased bets on falling crude by the most ever as stockpiles climbed to the highest seasonal levels in at least two decades, nudging prices toward a bear market. The excess supply hammered the second-quarter earnings of Exxon Mobil and Chevron. Inventories are near the 97-year high reached in April as oil drillers boosted rigs for a fifth consecutive week. “The rise in supplies will add more downward pressure,” said Michael Corcelli, chief investment officer at Alexander Alternative Capital, a Miami-based hedge fund. “It will be a long time before we can drain the excess.” 

Hedge funds pushed up their short position in West Texas Intermediate crude by 38,897 futures and options combined during the week ended July 26, according to the Commodity Futures Trading Commission. It was the biggest increase in data going back to 2006. WTI dropped 3.9% to $42.92 a barrel in the report week, and traded at $41.75 at 12:20 p.m. Singapore time. WTI fell by 14% in July, the biggest monthly decline in a year. It’s down by 19% since early June, bringing it close to the 20% drop that would characterize a bear market. 

U.S. crude supplies rose by 1.67 million barrels to 521.1 million in the week ended July 22, according to U.S. Energy Information Administration data. Stockpiles reached 543.4 million barrels in the week ended April 29, the highest since 1929. Gasoline inventories expanded for a third week to 241.5 million barrels, the most since April. “The flow is solidly bearish,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “It reflects a recognition that the market is, at least for the time being, oversupplied.”

"According to David Fransen, Geneva-based head of Vitol SA, the biggest independent oil trader. 'Demand growth has faltered a bit.'” That is, demand is still growing slower than expected in response to the lowered oil prices compared to their June 2014 heights or even dropping. Now where are the latest statistics on fossil fuel demand in 2016?

Oil Glut Proves Harder To Kill Than Saudis To Goldman Predicted (Bloomberg)

The bullish spirit that gripped oil traders as industry giants from Saudi Arabia to Goldman Sachs declared the supply glut over is rapidly ebbing away. Oil is poised for a drop of 20% since early June, meeting the definition of a bear market. While excess crude production is abating, inventories around the world are brimming, especially for gasoline, and a revival in U.S. drilling threatens to swell supplies further. As the output disruptions that cleared some of the surplus earlier this year begin to be resolved, crude could again slump toward $30 a barrel, Morgan Stanley predicts. “The tables are turning on the bulls, who were prematurely constructive on oil prices on the basis the re-balancing of the oil market was a done deal,” said Harry Tchilinguirian at BNP Paribas in London. 

“It’s probably going to take a little longer than they expected.” Oil almost doubled in New York between February and June as big names from Goldman and the International Energy Agency to new Saudi Energy Minister Khalid Al-Falih said declining U.S. oil production and disruptions from Nigeria to Canada were finally ending years of oversupply. Prices retreated to a three-month low near $41 a barrel this week amid a growing recognition the surplus will take time to clear. “There’s lots of crude and refined products around,” said David Fransen, Geneva-based head of Vitol SA, the biggest independent oil trader. “Demand growth has faltered a bit.”

In closing allow me to show you the glut in oil inventories since 

Source: Bloomberg via The Automatic Earth.

And demand is certainly going to drop again once the USA summer recreational driving season is over when school starts again.

What makes things worse, is that "the rich go to enormous lengths to avoid paying taxes"!



Photo Credit: Dan Kinwood, Getty Images (copyright Getty Images)

"I tell you, it's not right! It's not right, I tell you!" (from Aldous Huxley, 1984, via bad memory)

From The Guardian UK (The Automatic Earth where I first found this, has its own blurb with other article snippets you wouldd want to look at):

"Despite their soaring share of the nation’s wealth, the rich go to enormous lengths to avoid paying taxes."

"Romney defended his sons by declaring that they served their country by 'helping me get elected'." (tip o' th' hat to Raul Ilargi Meijer)

How America's rich betrayed their fellow citizens
by Anthony J. Gaughan, The Guardian, Monday 25 April 2016

In the past, wealth came with responsibility. Today’s rich avoid taxes, military service, and charitable giving. No wonder we’re seeing a populist backlash.

The author F Scott Fitzgerald once wrote that the “rich are different than you and me”.
Fitzgerald’s observation rings especially true today. The growing divide between the wealthy and everyone else is one of the pre-eminent issues of the 2016 presidential election. A tidal wave of public anger over income inequality and the decline of the middle class has made the rich a popular target on the campaign trail. The best example is the remarkable success of Bernie Sanders, who has tapped into the populist spirit of the electorate by calling for a “political revolution” against the “billionaire class”.

Republicans routinely condemn such rhetoric as the reckless promotion of “class warfare” by irresponsible populists, but the reality is class conflict is a two-way street.

Sanders and other populists did not create the class tensions in American society. Instead, wealthy Americans themselves played a central role in creating the conditions that gave rise to the angry and populist mood of the 2016 election.

Although America has the largest economy in the world, real wages have not gone up since 1972 because most workers have experienced stagnating incomes for decades. Across the country middle-income Americans face a precarious economic future. Median income has fallen in over 80% of America’s counties since 2000, a trend that is accelerating. Even mortality rates reflect growing income inequality. Poor and rural Americans now die at rates well above that of wealthy and urban Americans.

Meanwhile the rich just keep getting richer....  Since the 1980s, rich Americans have maximized their share of the nation’s prosperity at the expense of the rest of the country. Adding insult to injury, a growing body of evidence suggests that many rich people today simply do not care about their fellow Americans. The old concept of noblesse oblige has declined among the wealthy to a disturbing degree.

To understand how the rich have changed, one needs to understand how the upper classes used to behave.

No single location encapsulates the worldview of “old money” families better than Harvard’s Memorial church, which stands in the center of Harvard Yard. The church’s walls list the Harvard students, alumni and faculty members who have perished in America’s wars since 1917.
The numbers are breathtaking. During the world wars, thousands of Harvard students and alumni served in the US military.

Harvard’s student body was drawn primarily from America’s richest and most well-connected families. Those families could have pulled strings to ensure their sons stayed out of combat. But they did not, as powerfully demonstrated by the list of names at Memorial church and similar memorials across the Ivy League. During the world wars, the upper classes did their part to defend the nation.

 

Things could not be more different today.

And it all started with Thatcher and Reagan, and the "Greed is good" mentality they spawned. And of course, nobody can be better at being greedy than narcissistic, self-centred rich people.

More here.

Globalisation costs the developed world's middle classes big time

Forget the positive video up at the top of the CNN article, courtesy of Getty Media. The fact of the matter is, globilisation and mechanization/automation/computerization have been the sources of that giant sucking sound of jobs going south.

Yet in the developing world, which we used to call the third or even turd world, middle classes are enlarging and their median income have been growing by leaps and bounds. That's why you have days-long traffic jams on Chinese expressways these days.

Take a look at this:

Source: Economist Branko Milanovic via CNN.

Of course, the Chinese middle class grew from hardly anything to 500 million in 2013 and more although the article does not mention that.

From the CNN article:

America's middle class is deeply concerned about jobs, pay and their future, and many of them are blaming China.

In the U.S., 43% of voters believe trade with other countries is a bad thing, according to the Pew Research Center. It's not that hard to understand why.

China's middle class is booming while America's middle class is stagnating. A typical family in China has experienced the "Asian miracle," an astonishing 70% bump in their income from 1988 to 2008.

But the middle class in the U.S. and across the developed world has stagnated: incomes rose a mere 4% over that 20-year same period, according to economist Branko Milanovic. He studies pay and wealth around the world and just published a new book, "Global Inequality."

To be clear, a Chinese middle class family still earns around $8,000 a year, a lot less than the typical U.S. household income of about $54,000, according to the World Bank. But the Chinese are getting richer at a much faster rate.

Consulting firm McKinsey predicts that by 2022, the majority of China's urban middle class will earn $9,000 to $34,000 a year. They are embracing all the trappings of a better life: eating out more, vacationing around the world and buying new cars.

Compare that to the U.S. where even people who have jobs worry they are one step away from financial ruin. Expenses are going up, but a typical family earns about the same amount of money now as they did in the mid-1990s.

Assuming, of course, the global economy doesn't completely sputter and break down. China is actually having problems right now, which can be followed at The Automatic Earth.

More at the CNN Article, here.

Greece Needs Your Help

'O Allos Anthropos banner. Source: The Automatic Earth.

Greece is spiraling into a deeper and deeper economic recession and refugee crisis due in no small part to EU/ECB/IMF mandates. So even though I am not part of the "Finance Blogosphere" I am reposting here a call for aid that was posted today on The Automatic Earth.

An Urgent Christmas Call To The Finance Blogosphere

By Raúl Ilargi Meijer, 23 December 2015

This is a call-out to the entire -financial- blogosphere to help the Automatic Earth help the poorest Greeks, and the refugees in Greece.
 
Please repost, rewrite, retweet, donate. Let’s grab our humanity by the horns and not allow this situation to deteriorate even further than it already has. It doesn’t have to.

This -late- spring I went to Athens. Because it seemed a place where things were happening, with Syriza, with Varoufakis in place. It turned out that during my stay, things did happen politically and economically, but not for the good. The EU and IMF crushed the Greek spirit. It was exciting, but then it was not.

Before I left for Greece, I asked our Automatic Earth readers if they would like to add something to the -financial- help I wanted to bring with me; at that time it was already clear that austerity was hitting the Greeks very hard (it’s gotten much worse since). I thought I’d get perhaps a few hundred dollars for the ‘AE for Athens’ fund. As of today, the counter stands at almost $12,000, a humbling number. Now it has become a responsibility.

Because I want to be careful with other people’s money, I’ve donated ‘only’ €5000 so far. And that includes a recent -second- trip I just got back from on Sunday (and no, I don’t pay for the trips from the money donated for Athens). €2000 of this money, I donated to a man I was fortunate to meet and become friends with, Kostas, full name Konstantinos Polychronopoulos. I first wrote about him here: The Man Who Cooks In The Street.

Kostas started -literally- cooking in the street some 4 years ago, something that soon became Social Kitchen ‘O Allos Anthropos’ (the other person, human, human being, the fellow man). As he describes quite eloquently in this little video, Kostas has very lucid ideas about what he aims for. He wants to not just give food to the hungry and homeless of Greece, whose numbers have started to swell rapidly since his effort took off, but also sympathy, and dignity, and simply conversation. ‘We eat together’ is not an empty slogan.

Because of his ideas of how he wants things to be, Kostas refuses to be beholden to governments, NGOs or corporations. Kostas insists he wants his project to be by people, for people, coming from one human being’s empathy for the other. Food for the soul is essential too.

We had an meeting on Saturday night with a group of people he’s gathered around him (there are dozens of volunteers by now, many -formerly- homeless). I donated another €1000 from our fund, but I was primarily interested in how he had been doing since we last met in July. Turns out, ‘The Other Human’ has grown at least 5-fold.

Because of media attention (I was not the only one who contacted him), Kostas gained some fame this year. And ‘offers’. The European Union awarded him a prize, which he -naturally- refused to accept. Coca Cola offered him a six-figure number to put their advertizing all over his operation, but that for him is his soul vs the devil. He also doesn’t want to become an NGO and spend half his time doing paperwork. It must be about people.

Existing NGOs are a story all by themselves in the Greek situation. I have no personal experience with what they do in the country, but I keep on hearing bad stories. Kostas’ people showed me a photo of bowls of food that they say refugees refuse to eat (and dogs too…), but that NGOs want to force on refugees because they get €7 per bowl handed out, from whoever it is that pays them. To compare: Kostas and his crew feed people for €1, max.

A good example of how the ‘locals’ look at the UNHCR, the Red Cross and other NGOs is this video by a native Brit who lives on Lesbos, Eric Kempson: Major Aid Agencies Are Deceiving The General Public on Refugees. Warning: there’s a few select F-words sprinkled in. Eric does angry well.

I was saying before how ‘The Other Human’ had grown at least 5-fold. That is a bit of an understatement. There are 5 now different ‘kitchen teams’ running (vs 1-2 before), and they hand out over 3000 meals a day today instead of the 300 earlier in the year. There simply is that much need. The Greeks themselves are getting poorer, fast, and refugees have become a major ‘target’ group as well.

Kostas began running operations on Lesbos over the summer, and has a team in place there now as well as on Salimani island and 3 different locations in the Athens area. And there’s no doubt he would like to do more.

Before, costs would be covered by food donations and sympathizers giving €5 or €10 a month from what little they have. Between pensions cuts, pay cuts and capital controls, the number of Greeks who have next to nothing rises fast. It’s no exception for former supporters to now come to rely on Kostas for their own food.

Nor is it exceptional for grandmothers to still insist on giving $5 from the €400 that’s all that’s left of their pension. Greeks do solidarity well.

But the numbers are getting out of hand, so many people need help, and it promises to get much worse in 2016, looking at the new austerity measures the troika is forcing upon the country, and the expected numbers of refugees arriving. The donations that used to run ‘The Other Human’ are simply not enough to cover operations any longer, let alone expand them where most needed.

And while the €1000 I donated earlier this year went a -relatively- long way, the second €1000, though at least as much appreciated, won’t go nearly as far. When I was told ‘The Other Human’ have been forced to cancel some cooking events now -for the cold and hungry homeless, for crying out loud, who are increasingly people that used to have jobs and homes and all until recently-, simply because they can’t afford to feed the poor, that actually hurt, and stung. That felt personal.

What we have here is a man who’s devoted his entire life to helping other people, no holds barred. And he’s by no means alone in that. The ‘social kitchens’ run 7 days a week. And if there’s anything I can do to make it possible for Kostas, and his crews, to keep on doing this, the way he sees fit, and they do, I will. I may fail, but it won’t be for lack of trying.

There is the food that needs to be provided, there are transport costs, they need to pay the rent for the building where donated food and blankets etc. come in, and that doubles as a school for homeless kids, as well as a laundry and shower facility for the -longtime and newly- homeless (the troika just forced through a new provision to make it easier for banks to throw people out of their homes in 2016).

Since this has grown beyond the scope of the Automatic Earth alone, I want to appeal to all of you, my friends and ‘competitors’ in the -finance and broader- blogosphere, for your help in what I think is about the worthiest cause there is. People are dying out there, and hurting, not just the babies that drown before they reach Greek shores, but also the ones that make it.

Medical care is crucial, so is schooling, and of course food, and shelter. With Kostas and his large team of volunteers, we have the people in place to provide all of this. What’s missing is the money. Not for them, they ask for nothing for themselves, but for the people they try to help.

There are hundreds of thousands of you who read the Automatic Earth, and our friends at Zero Hedge, Naked Capitalism, Aaron Krowne, Steve Keen, John Rubino, Mish, Jim Kunstler, Max Keiser, BI, Wolf Richter, Jesse’s Café, Davis Stockman, Bruno at Stealthflation, the Transition people, my dear friend Dave Holmgren, and those are just the ones that come to mind in the first few seconds, and that I’ve had personal contact with, and even then I’m still forgetting many (sorry!).

Between us, we should be able to help Kostas do what he thinks must be done. If only simply by drawing our readers’ and friends’ and families’ attention to this. If everyone donates just $5, we can feed and clothe all kids and their moms and donate some humanity for Christmas to those who need it badly. And perhaps for next Christmas too. It’s about the power of numbers, which y’all know about.

What Kostas and I discussed on Saturday is to run this -if there are any donations to begin with, that is- through the Automatic Earth for now, so he doesn’t get bothered up the wazoo by his government.
We may have to change that at some point, but we’ll tackle that one when we get there. For now, this is about saving people’s lives and dignity, today.

The Automatic Earth has a Paypal widget on our front page, top left hand corner. On our Sales and Donations page, there is an address to send money orders and checks if you don’t like Paypal. Our

Bitcoin address is 1HYLLUR2JFs24X1zTS4XbNJidGo2XNHiTT.

To tell donations for Kostas apart from those for the Automatic Earth (which badly needs them too!), any amounts that come in ending in either $0.99 or $0.37 (don’t ask), will go to ‘The Other Human’. And no, I don’t cheat either on my friends or the poor -nor anyone else-, you’re going to have to trust me on that one.

If someone would like to start a crowdfunding campaign for the cause, please contact me at: contact •at• TheAutomaticEarth •dot• com.

Jesus was a refugee. Who got help. Tiny Tim got it too. I think I’ll rest my case.