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U.S. job market and automotive sales trends support growth in gasoline use

graph of monthly U.S. product supplied of finished motor gasoline, as explained in the article text U.S. motor gasoline product supplied , a proxy for gasoline use in the United States, has been rising after reaching an 11-year low in 2012. Although lower gasoline prices have been an important factor in the increase in gasoline use so far in 2015, changes in the labor market and in the vehicle sales mix over the past few years also have contributed to the rise in gasoline use. Because more than 90% of U.S. motor gasoline is used in light-duty vehicles (LDVs), factors that affect vehicle miles traveled (VMT) and the average fuel economy of the LDV fleet can also lead to changes in gasoline consumption. In addition to lower gasoline prices, a stronger U.S. job market and higher wage growth may have contributed to record-high VMT , and sales trends in […]

Posted On : Published By : Tom Whipple
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Bakken Flat but the EIA Predicts Decline

The North Dakota Industrial Commission has published the July production data for The Bakken and for all North Dakota . Bakken production was down 5,430 barrels per day while all North Dakota was down 9,410 bpd. Bakken Amplified Here is a more amplified view of what has happened during the last 12 months. Bakken BPD Per Well Bakken barrels per day per well has been falling faster than for all North Dakota. This is because a lot of very low producing conventional wells are being shut down. North Dakota BPD This is chart reflects the monthly change in North Dakota barrels per day of production. It is quite noisy but the 12 month trailing average reflects a steady decline since December of 2014. From the Director’s Cut , bold mine. June Sweet Crude Price1 = $47.73/barrel July Sweet Crude Price = $39.41/barrel Aug Sweet Crude Price = $29.52/barrel Today’s […]

Posted On : Published By : Tom Whipple
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Offshore drilling woes to last through 2017, Moody’s says

The offshore drilling industry will remain under severe distress through 2017, predicts Moody’s Investors Service . Most troubling for the industry is overcapacity, as the number of idle rigs climbs despite delivery deferrals and retirements and as newbuild deliveries loom over the market. “Drillers will increasingly contend with diminished backlogs, rig values, fleet sizes, and margins if oil prices do not bounce back to the $70-80/bbl range, which we believe could support an increase in shallow-water as well as deepwater and ultradeepwater drilling,” writes Moody’s in an industry report. The firm expects crude oil prices to remain volatile and to “rise minimally” through 2017. “Even if rig demand stabilizes, persistent excess capacity will likely keep day rates low for several more years.” Average day rates have fallen by more than 35% for new-generation floating rigs from a cyclical peak early in 2014 and by more than 25% for jack […]

Posted On : Published By : Tom Whipple
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Texas Railroad Commission: Drilling Permits in Texas Down 65% in August

Along with oil prices and the rig count, the issuance of new drilling permits has dropped off dramatically in the last 12 months, according to numbers from the Texas Railroad Commission report of 864 permits issued in August. The commission, which regulates oil and gas activity in the state, said in a release that the issuance of drilling permits declined 65 percent year-over-year in August 2015. Among the 864 permits, the breakdown for August this year included 222 oil wells; 59 for gas; 518 for oil or gas; 54 injection wells and 11 other permits. Total well completions for 2015 year to date are 14,665, down from 20,657 recorded during the same period in 2014. At less than $45 per barrel Sept. 15, oil prices are less than half their price from 12 months ago, which was near the beginning of their descent. The rig counts in the United […]

Posted On : Published By : Tom Whipple
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Senate Democrats again block Iran nuclear deal disapproval

Speaker of the House John Boehner (R-OH) pauses during a news conference on Capitol Hill in Washington, in this September 10, 2015 photograph. U.S. Senate Democrats on Tuesday, for the second time in a week, blocked legislation meant to kill an Iran nuclear deal negotiated by the Obama administration and other world powers with Tehran. With the voting continuing, there were 41 Democrats voting to block the measure to disapprove the Iran deal from advancing in the Senate, enough to deny Republicans the 60 votes they need in the 100-member Senate. Senate Majority Leader Mitch McConnell staged the second vote in an attempt to lure at least a couple Democrats into voting for the resolution of disapproval. McConnell also moved to arrange a third procedural Iran vote, possibly this week, on an amendment preventing Obama from lifting economic sanctions against Iran until that country’s government formally recognizes Israel’s right […]

Posted On : Published By : Tom Whipple
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Expect U.S. oil output to slump? Better not overlook vertical wells

Easy money, super-sized frack jobs, and desperate drillers offering deep discounts to oil producers – all three have been credited for sustaining U.S. crude output during the worst price slump in six years. Now there appears to be a new factor in the mix: old vertical wells that can quickly be drilled, injected with water or fracked for a second time to increase production at low cost. Overshadowed by the fracking boom that delivered record oil and gas volumes, vertical wells are making a comeback as investors and producers shift focus away from production growth to capital discipline in the downturn. "It makes more sense to develop vertical wells in a lower price environment because they are not growth plays but they are a very strong cash flow asset," said Benjamin Shattuck, principal analyst at Wood Mackenzie. "They are going to give you that cash flow that you need […]

Posted On : Published By : Tom Whipple
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Low oil price reducing US offshore drilling interest: Secretary Jewell

Low oil and gas prices have lessened pressure from producers for the Obama administration to expand the plays it plans to offer in its five-year plan for offshore leasing, US Interior Secretary Sally Jewell said Tuesday. Prices have had a "significant impact" on efforts from the offshore industry to expand offshore leasing and likely diminished interest in last month’s Gulf of Mexico lease sale, Jewell said during a Christian Science Monitor event. That US Western Gulf sale yielded total high bids of $22.7 million, the smallest Western sale in over 30 years and just 20% of the $110 million yielded in last year’s comparable sale. Jewell said it was a "reasonable conclusion" that low prices caused that relatively low interest from producers and indicated interest in future lease sales likely would not grow if prices remained low. Oil and gas companies, she said, have become "pickier" about where they […]

Posted On : Published By : Tom Whipple
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Russia’s Turkish Stream pipeline on hold

Russian energy company Gazprom facing delays in build on its Turkish Stream natural gas pipeline. File photo by Igor Golovniov/UPI MOSCOW, Sept. 15 (UPI) — Development of the Turkish Stream natural gas pipeline from Russia is on hold because of installation delays, an official with Russia’s Gazprom said. Alexander Medvedev , the deputy chairman of Russian natural gas company Gazprom, said the late 2016 launch of the pipeline through Turkey was no longer achievable . "Due to the fact that the installation [of the pipeline] did not begin as planned, we are no longer speaking of December 2016," he said. The Kremlin sent two offers to the Turkish government for consideration on a pipeline project in mid-2015. In August, the government said there was still no word on the project from Ankara. Gazprom surveyed the Turkish land route for the 110-mile section of pipeline from the Black Sea last […]

Posted On : Published By : Tom Whipple
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Decline Rates Will Ensure Oil Output Falls in 2016

“It takes all the running you can do to keep in the same place. If you want to get somewhere else, you must run at least twice as fast,” the Red Queen told Alice in Lewis Carroll’s novel “Through the Looking-Glass”. Oil companies have to invest heavily simply to offset the impact of natural decline rates on their existing fields, and even more if they want actually to increase production. The need for continued investment and drilling to maintain output as a result of the rapid decline rates on shale wells has been widely discussed. But decline rates on conventional oil fields are even more important because they account for more than 90 percent of global production. Decline rates on conventional fields will play a critical part rebalancing the oil market and determining where oil prices settle in the longer term. Decline rates will cut output by several million […]

Posted On : Published By : Tom Whipple
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The receding tide of oil price foreshadows the incoming DEFLATION TSUNAMI.

The receding tide of oil price foreshadows the incoming DEFLATION TSUNAMI. Nothing grows indefinitely in a finite system, not even debt! Almost all (90%) of ‘money’ in existence today is debt (credit) . This debt is created from thin air with every form of loan, from credit cards, through corporate debt to Treasury Notes. All this debt comes with an interest component that demands never ending growth in order to repay it. Again, the current monetary system REQUIRES that we have never ending economic growth. It is one massive pyramid scheme because, if we ever stop growing, who is paying the interest? Total U.S. debt has soared over the last 35 years: Debts are claims on future goods and services with interest and are essentially a bet that the future economy will be bigger than the present. However: The economy is the summation of all goods and services and […]

Posted On : Published By : Tom Whipple