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Withering Reserve Buffer Forces Russia to Waive Key Budget Rule

Russia is overhauling its approach to crafting the budget next year to safeguard reserves, highlighting the challenges it faces in steering the recession-hit economy through a downturn in oil prices. Russia used 900 billion rubles ($13 billion) in the first eight months from the Reserve Fund, one of its two sovereign wealth funds, to cover the deficit, Finance Minister Anton Siluanov said Wednesday at a government meeting in Moscow. The non-oil shortfall, the gap excluding revenue from the energy industry, was 11 percent of economic output in the first half, the widest in 10 years, according to Siluanov. To temper the effects of the unfolding crisis on public finances, the government is suspending the so-called budget rule in 2016, a week after announcing plans to drop three-year fiscal plans in favor of a one-year program. The rule, which went into effect in 2013 and sought to cap public spending […]

Posted On : Published By : Tom Whipple
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Europe Oil Consumption Peaked in 2005

Fig 1: Western Europe oil consumption, oil prices in $2014 Total oil consumption peaked 3 times at around 14 mb/d: (1) In 1973, the 1 st oil crisis which was triggered by the Yom Kippur war. The following OPEC embargo was successful because US oil production had peaked 3 years earlier so the US could not increase production to offset OPEC’s reduction (2) In 1979, the 2 nd oil crisis which was caused by Iranian oil production peaking in the mid seventies and the following Iranian revolution, resulting in a global recession in 1982 (3) In 2005, at the beginning of the 3 rd oil crisis when global crude oil production had a peak and declined until 2007 3 main oil consumers Germany, UK and France The oil crises in the 70s brought down consumption by 2 mb/d (oil prices increased 10-fold) through both energy conservation and a recession. […]

Posted On : Published By : Tom Whipple
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June oil production ties record peak

Oil production in June matched its record peak from last year. Oil production in June rose to its highest levels since its record peak late last year, North Dakota regulators said Friday, adding that the current level of production could be maintained for about two years. Preliminary June numbers from the North Dakota Department of Mineral Resources had production at 1,211,178 barrels per day. This was an increase of more than 8,500 daily barrels from the final May tally of 1,202,615 barrels per day. The active rig count in the state was at 74 on Friday. Lynn Helms, director of the Department of Mineral Resources, said production has maintained due to operators primarily drilling in the most productive parts of the oil patch and increasing efficiencies with staff and equipment. Well completions by hydraulic fracturing increased from a final May count of 116 to a preliminary total of 149 […]

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What is the price of oil telling us?

Market fundamentalists tell us that prices convey information. Yet, while our barbers and hairdressers might be able to give us an extended account of why their prices have changed in the last few years, commodities such as oil– which reached a six-year low last week –stand mute. To fill that silence, many people are only too eager to speak for oil. And, they have been speaking volumes. So much information in that one price! First, as prices fell last year when OPEC refused to cut its oil production in the face of slowing world demand, the industry kept saying that it could continue to produce from American tight oil fields at around $80 a barrel and be profitable . Then, as prices fell further, the industry and its consultants assured everyone that while growth in tight oil production would slow, it would still be profitable for the vast majority […]

Posted On : Published By : Tom Whipple
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Population and climate instability will lead to severe food shortages by 2050

The food industry has become much more efficient in the last few decades as a result of globalization, but also a lot more vulnerable to shocks. Climate change will lead not only to increased temperatures, but the extreme weather it causes in North, South America and Asia are likely to also lead to global food shortages. Severe production shocks, with the food shortages, price spikes and market volatility that come with are likely to become three times as usual than today, according to a joint report by a US-British task force. These are likely to occur every 30 years by 2040. The Task force on Extreme Weather and Global Food System Resilience estimated that due to a rise in the world population from 7.3 billion to 9 billion in 2050, food production will need to increase by more than 60 percent and climate-linked market disruptions could lead to civil […]

Posted On : Published By : Tom Whipple
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Why an Oil Glut May Lead to a New World of Energy

The plunge of global oil prices began in June 2014, when benchmark Brent crude was selling at $114 per barrel. It hit bottom at $46 this January, a near-collapse widely viewed as a major but temporary calamity for the energy industry. Such low prices were expected to force many high-cost operators, especially American shale oil producers, out of the market, while stoking fresh demand and so pushing those numbers back up again. When Brent rose to $66 per barrel this May, many oil industry executives breathed a sigh of relief. The worst was over. The price had “reached a bottom” and it “doesn’t look like it is going back,” a senior Saudi official observed at the time. Skip ahead three months and that springtime of optimism has evaporated. Major producers continue to pump out record levels of crude and world demand remains essentially flat. The result: a global oil […]

Posted On : Published By : Tom Whipple
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World Population Will Nearly Double by 2100

The world population is 7.3 billion presently. It will surpass 11 billion by the end of the century, according to UN Population Division projections The world population is growing at an unprecedented rate. It will nearly double as much as we have today by 2100. Currently, the world population is 7.3 billion. It will be 9.7 million in 2050 and will cross 11 billion by the end of the century, according to United Nations Population Division . The global population growth will be largely driven by Africa. The continent’s current population is 1.2 billion. It is expected to triple or quadruple over the next 85 years. This is all due to consistent rapid growth in population in the region. Nigeria will likely be the biggest contributor if it continues to follow the current trend. United States will also have a significant increase in population. The country is projected to […]

Posted On : Published By : Tom Whipple
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Peak Oilers Shut Up Forever Please

Princeton University geologist Ken Deffeyes predicted that global oil production would peak on Thanksgiving Day, 2005 . In 2005, daily global oil production averaged 85 million barrels per day. Daily petroleum liquids production in July was 96 million barrels per day. For the past six months global oil prices have been falling steeply. Today West Texas Intermediate was selling for $43.20 per barrel. That means the price per barrel is just over $31 in inflation adjusted 2000 dollars. CNBC cite analysts who project that the price will fall further into the $30s per barrel range soon. Should the price fall to $30 dollars, that would be about $22 per barrel in 2000 dollars. That would be nearly back to what the price was 15 years ago . Read it and weep peak oilers NYMEX

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The Earth’s Battery Is Running Low

In the quiet of summer, a couple of U.S. scientists argued in the pages of the Proceedings of the National Academy of Sciences that modern civilization has drained the Earth — an ancient battery of stored chemical energy — to a dangerous low. Although the battery metaphor made headlines in leading newspapers in China, India and Russia, the paper didn’t garner “much immediate attention in North America,” admits lead author John Schramski, a mechanical engineer and an ecologist. And that’s a shame, because the paper gives ordinary people an elegant metaphor to understand the globe’s stagnating economic and political systems and their close relatives: collapsing ecosystems. It also offers a blunt course of action: “drastic” energy conservation. It, too, comes with a provocative title: “Human domination of the biosphere: Rapid discharge of the Earth-space battery foretells the future of humankind.” The battery metaphor speaks volumes and then some. In […]

Posted On : Published By : Tom Whipple
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Global Oil Supply More Fragile Than You Think

Oil pumps image via shutterstock. Reproduced at Resilience.org with permission. Many oil companies had trimmed their budgets heading into 2015 to deal with lower oil prices. But the rebound in April and May to $60 per barrel from the mid-$40s suggested that the severe drop was merely temporary. But the collapse of prices in July – owing to the Iran nuclear deal, an ongoing production surplus, and economic and financial concerns in Greece and China – have darkened the mood. Now a prevailing sense that oil prices may stay lower for longer has hit the markets. Oil futures for delivery in December 2020 are currently trading $8 lower than they were at the beginning of this year even while immediate spot prices are $4 higher today. In other words, oil traders are now feeling much gloomier about oil prices several years out than they were at the beginning of […]

Posted On : Published By : Tom Whipple