How to become an accurate forecaster of oil flows

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How to become an accurate forecaster of oil flow rates.

I wrote this today on a laptop, so it?s not my normal style. It?s long, so if you get bored, skip to the alternative energy portion, that?s the best part.
(Except the quote at the very end from the world?s most accurate flow rate forecaster.)
Sorry about posting here, but I?m tired of folks on here trashing the guys who?ve gotten flow rates right.
Nobody will like this, especially the part about ethanol. I am sure to regret posting this, in fact I already do.

--------------------------------------------------------------------------------------------------------------------------------------
Forecasting oil flow rates must be a tricky business. So many folks consistently fail at it. Take the entire oil supply studying world at the start of this decade for example. You?ve got the IEA, the EIA, CERA, then there?s all the investment banks like Citi and Goldman with their own guys, not to mention all the private supply analysts. What was conventional wisdom 5 years ago? The optimists predicted in 2004 that oil supply would reach 100 mbpd by 2010, while the pessimists believed we?d only see 95 mbpd. (Reality was 86 mbpd)
Meanwhile a tiny group of geologists in 2004 claimed oil supply would NOT rise above 86 mbpd, much to everyone?s laughter. Then folks doubled over as this group claimed that by the end of the decade, oil production would begin irreversible decline on a global scale, and nothing could be done to stop it. At this point, respectable folks stopped listening to these wackos.
With the final year of the decade fast approaching we have the benefit of time to determine who was wrong. A thoughtful person may ask themselves, ?What did that small group know that nobody else did?
Well, here?s the things a person needs to know if you are going to accurately predict oil supply;
Have a lot LESS fun. You need to spend at minimum 1 hour per day studying the production tables from individual oil fields all over the world. You must be on a first-name basis with individual oil fields from Azerbaijan to Zaire. Then you must spend at least one hour per day looking for news of some game-changer, as unlikely as such a creature may be. Then you?ve got to read through all the day?s energy news. Sound like fun? Its very hard work, and its a lazy man who just assumes all will be fine. Being accurate means getting WAY tedious.
One of the special things about those accurate forecasters is that they know the true ?Natural Decline Rate? in existing production. This is the difference between production CAPACITY today, versus production CAPACITY one year later in the TOTAL ABSENCE of drilling. The rotten forecasters grossly under-estimate the decline rate, for example they think its maybe 5% when in fact it?s closer to 12%.
The other thing a person needs to understand is above-ground factors. (Politics) Once a person establishes that the start of irreversible decline is underway, you can bet folks will change their voting habits.
A person can learn all you need to know about ?Above-Ground Factors? by watching mice in a cage. Crowd them, and then start taking their food away. They bicker and become distressed. Human?s act the same way, so when the economy melts down as a result of a tight oil market, people will vote for the left-wing politician. This is a negative feedback loop.
The other thing a person has to recognize is that during an oil boom, cost of drilling rises 5 times faster than does oil prices. This isn?t a problem for low-hanging fruit, but it kills the hard-to-get oil. This is where normal forecasters get lost. Upon studying projects with an EROEI of less than 10:1, a person quickly realizes that these projects are slow to take off during a boom, and quick to shut down during a depression.
While the above is time-proven, the area below is only my opinion.)
A new and exciting twist to the oil supply forecasters world is the concept of ?The Drunken Lodger?, which means that as oil supplies decrease, there will be INTERSPERSED PERIODS OF RECORD LOW PRICES. Because any market?s function is to ration, the market must impose low prices to ration reserves in the ground. The only way the market can ration oil from drillers is to bankrupt them from time to time. This insures oil will get rationed for future generations.
These periods of low prices will prevent drillers from tackling the large and growing ?Natural Decline Rate?. The economy in the absence of government intervention will naturally adjust to less energy by contracting. So the global economy will shrink pretty much each year.
-------------------------------------------------------------------------------------------------------------------------------------
Alternative energy is a truly fascinating subject.
Early in the decade there were some folks that claimed that a multi-year bull-market in oil would bring alternatives to market. Lots and lots of folks made silly claims, such as; ?higher prices mean that alternatives become economically viable?.
At the same time there was this other tiny, tiny, group of people who knew better. A select few individuals made what at the time was the outrageous claim that rising oil prices do very little if anything to assist alternative energies.
There are about 162 countries which find themselves in the helpless position of net-importing energy. The number of countries which offset serious amounts of oil with an alternative between the years 2000 and 2009 are zero. No country on the planet found a way to replace oil to any extant worth measuring. Billions were spent trying, but the results are pathetic when you calculate the back-drop of $147 oil occurred in this era.
The thoughtful person may ask themselves, ?What is it that these oddball guys knew?? The answer is that those individuals actually cared enough about energy to study Newton?s Laws. The reason that the promises of algae-diesel, biofuels etc failed to scale up to a respectable level is called Entropy. These folks knew that the friction created by poor net-energy yielding schemes would doom them.
The people who continued to believe in alternatives replacing vast amounts of oil never really thought about how entropy cursed that enterprise from the get-go.
------------------------------------------------------------------------------------------------------------------------------
I benefit greatly from the USA ethanol policy, and I would probably benefit more than anybody when the mandate goes to 15%, which is likely. It will move more acres of corn into marginal areas, and that creates a boom for little ol? me. I decided that I want the mandate to rise to 15%. I?m a bigger fan of burning corn in a stove., but I will take a quasi-embargo in the form of a boost to the mandate.
-----------------------------------------------------------
Here?s something neat to think about on the subject of alternatives like biofuels. Gasoline in Turkey in June of 2008 was $13 USD per gallon. Gasoline in Germany was over $8. There are about 190 countries on the planet. Maybe 20 countries subsidize biofuels. So let?s think about what was NOT happening in the other 170 countries last June?. There was not a soul in one of those places thinking to themselves, ?You know, it seems like a pretty good idea to build an ethanol plant.? The thought never even flipped on the radar screen of an entrepreneur living in a country that doesn?t subsidize it.
Why?
Here?s food for thought? What makes petro so special ? Why will folks pay so much for it at times? Why won?t people without a subsidy gladly produce ethanol or some other alternative instead?
Let?s look to Newton?s Second Law of Thermodynamics for an answer. Entropy = friction, and the subsidy removes that friction. Granted somebody somewhere has to PAY that subsidy, but to heck with their financial needs.
So why can?t we just subsidize the construction of nuke plants until they become profitable? Just literally have the gov?t pay for them?
The problem with trumping entropy by introducing subsidies into the system is that the entropy REAPPEARS on April 15th tax day. Either that or the entropy reappears in the form of inflation (if the gov?t chooses to simply print the $$ to cover the subsidy).
Here?s something I do know for sure, the folks with the STELLER TRACK-RECORD for predicting future flow rates spend a TON of time thinking about energy in its most basic form.
Folks who are bad at predicting flow rates tend to first look for a conclusion, then run around searching for data to support their pre-disposed conclusion. It doesn?t work, and the folks who employ this method will continue to fail.
Below is sage advice from the world's most accurate oil flow rate forecaster;
"Data always beats theories. 'Look at data three times and then come to a conclusion,' versus 'coming to a conclusion and searching for some data.'" [The former will win every time.] ? Matt Simmons

[/b]

Those countries might have considered that they had no corn field or feed lot close by.
It only makes sense to take the fuel out of the corn before feeding it to cattle if you consider EROEI.
IMAGE(http://imgcash6.imageshack.us/img526/3431/worthyic6.gif) "Oh great and almighty editor is this better?"
verbatime
[/b]

quote:
Originally posted by OBG
[br]How to become an accurate forecaster of oil flow rates.

I wrote this today on a laptop, so it?s not my normal style. It?s long, so if you get bored, skip to the alternative energy portion, that?s the best part.
(Except the quote at the very end from the world?s most accurate flow rate forecaster.)
Sorry about posting here, but I?m tired of folks on here trashing the guys who?ve gotten flow rates right.
NOBODY IS TRASHING THE GUYS THAT GET THE FLOW RATES RIGHT.
BUT, HOW ARE THEY GETTING THE FLOWRATES RIGHT WHEN IT IS
IMPOSSIBLE TO GET CREDIBLE INFORMATION OUT OF SAUDI ARABIA?
Nobody will like this, especially the part about ethanol. I am sure to regret posting this, in fact I already do.

--------------------------------------------------------------------------------------------------------------------------------------
Forecasting oil flow rates must be a tricky business. So many folks consistently fail at it. Take the entire oil supply studying world at the start of this decade for example. You?ve got the IEA, the EIA, CERA, then there?s all the investment banks like Citi and Goldman with their own guys, not to mention all the private supply analysts. What was conventional wisdom 5 years ago? The optimists predicted in 2004 that oil supply would reach 100 mbpd by 2010, while the pessimists believed we?d only see 95 mbpd. (Reality was 86 mbpd)
Meanwhile a tiny group of geologists in 2004 claimed oil supply would NOT rise above 86 mbpd, much to everyone?s laughter. Then folks doubled over as this group claimed that by the end of the decade, oil production would begin irreversible decline on a global scale, and nothing could be done to stop it.
THIS IS ABSOLUTE BS. WHEN YOU PUT ALL OF ALASKA, LEFT
COAST, AND FLORIDA OFF LIMITS TO DRILLING...AND NOTHING
CAN BE DONE???
At this point, respectable folks stopped listening to these wackos.
With the final year of the decade fast approaching we have the benefit of time to determine who was wrong. A thoughtful person may ask themselves, ?What did that small group know that nobody else did?
Well, here?s the things a person needs to know if you are going to accurately predict oil supply;
Have a lot LESS fun. You need to spend at minimum 1 hour per day studying the production tables from individual oil fields all over the world. You must be on a first-name basis with individual oil fields from Azerbaijan to Zaire. Then you must spend at least one hour per day looking for news of some game-changer, as unlikely as such a creature may be. Then you?ve got to read through all the day?s energy news. Sound like fun? Its very hard work, and its a lazy man who just assumes all will be fine. Being accurate means getting WAY tedious.
One of the special things about those accurate forecasters is that they know the true ?Natural Decline Rate? in existing production.
OH REALLY? AND HOW DO THEY KNOW THIS FOR SAUDI ARABIA???
This is the difference between production CAPACITY today, versus production CAPACITY one year later in the TOTAL ABSENCE of drilling. The rotten forecasters grossly under-estimate the decline rate, for example they think its maybe 5% when in fact it?s closer to 12%.
The other thing a person needs to understand is above-ground factors. (Politics) Once a person establishes that the start of irreversible decline is underway, you can bet folks will change their voting habits.
A person can learn all you need to know about ?Above-Ground Factors? by watching mice in a cage. Crowd them, and then start taking their food away. They bicker and become distressed. Human?s act the same way, so when the economy melts down as a result of a tight oil market, people will vote for the left-wing politician. This is a negative feedback loop.
TIGHT OIL SUPPLIES DID NOT CAUSE THE ECONOMY TO MELT DOWN.
147 CRUDE HAD THE WORLD SWIMMING IN OIL THANX TO THE BIG
SPECS. BIG OIL WAS STORING IT ON SUPERTANKERS OUT IN THE
OCEAN TO PLAY THE CONTANGO. THE ECONOMY MELTED DOWN CUZ
SUBPRIME CAME HOME TO ROOST ON THE BIG BANKS. THEY WOULD
HAVE GONE BANKRUPT, IF THEY HAD NOT BEEN BAILED OUT WITH
TAXPAYER MONEY. CREDIT AND LIQUIDITY DRIED UP CUZ BANKS
QUIT LOANING MONEY.
The other thing a person has to recognize is that during an oil boom, cost of drilling rises 5 times faster than does oil prices. This isn?t a problem for low-hanging fruit, but it kills the hard-to-get oil. This is where normal forecasters get lost. Upon studying projects with an EROEI of less than 10:1, a person quickly realizes that these projects are slow to take off during a boom, and quick to shut down during a depression.
DRILLING WAS CURTAILED ALRIGHT, BUT NEVERTHELESS TRANSOCEAN
AND NOBLE CONTINUED DRILLING RIGHT THRU THE ECONOMIC MELT
DOWN. SO DID NATURAL GAS DRILLERS. THAT'S WHY WE HAVE $3 NG.
While the above is time-proven, the area below is only my opinion.)
A new and exciting twist to the oil supply forecasters world is the concept of ?The Drunken Lodger?, which means that as oil supplies decrease, there will be INTERSPERSED PERIODS OF RECORD LOW PRICES. Because any market?s function is to ration, the market must impose low prices to ration reserves in the ground. The only way the market can ration oil from drillers is to bankrupt them from time to time. This insures oil will get rationed for future generations.
THIS IS ABSOLUTE BS. YOU ARE SAYING THE MARKET HAS A
MORAL CONSCIENCE AND IS SAVING OIL FOR FUTURE GENERATIONS.
WE HAD A FINANCIAL CRISIS, AND BIG BANKS ALMOST WENT OUT
OF BUSINESS. CREDIT AND LIQUIDITY DRIED UP. BUSINESSES
FOLDED. PEOPLE LOST JOBS. HOUSING CRASHED. HOUSING CONSTRUCTION
HAD BEEN A MAIN DRIVER OF THE ECONOMY FOR THE PREVIOUS
10 YEARS AT LEAST. THERE WAS DEMAND DESTRUCTION. THE
DEPRESSION WAS GLOBAL. NOW THERE WAS TOO MUCH OIL, AND
SIMPLE SUPPLY AND DEMAND DROPPED THE PRICE OF OIL FROM
THE ARTIFICIALLY HIGH LEVELS THAT THE BIG SPECS HAD RUN
IT UP TO...RIGHT ALONG WITH CORN, COPPER, STEEL, ETC.
These periods of low prices will prevent drillers from tackling the large and growing ?Natural Decline Rate?. The economy in the absence of government intervention will naturally adjust to less energy by contracting. So the global economy will shrink pretty much each year.
THIS IS ABSOLUTE BS. THE ECONOMY DID NOT CONTRACT BECAUSE
OF LESS OIL. THE ECONOMY CONTRACTED BECAUSE WE HAD A
FINANCIAL MELT DOWN THANX TO SUBPRIME.
-------------------------------------------------------------------------------------------------------------------------------------
Alternative energy is a truly fascinating subject.
Early in the decade there were some folks that claimed that a multi-year bull-market in oil would bring alternatives to market. Lots and lots of folks made silly claims, such as; ?higher prices mean that alternatives become economically viable?.
THIS IS ABSOLUTELY TRUE. TAR SANDS BREAK EVEN AT 50/BBL.
RIGHT NOW ETHANOL IS 40-50 CENTS CHEAPER THAN GASOLINE
AT 70/BBL CRUDE.
At the same time there was this other tiny, tiny, group of people who knew better. A select few individuals made what at the time was the outrageous claim that rising oil prices do very little if anything to assist alternative energies.
BULLSHXT!!!
There are about 162 countries which find themselves in the helpless position of net-importing energy. The number of countries which offset serious amounts of oil with an alternative between the years 2000 and 2009 are zero.
BULLSHXT! WHY IS THERE A PETITION BEFORE THE EPA TO ALLOW
E15??? 15% OF THE MOTOR FUEL SUPPLY IS NOT SIGNIFICANT?
MOST OF THOSE COUNTRIES ARE NOT BLESSED WITH THE ABILITY
TO PRODUCE CORN.
No country on the planet found a way to replace oil to any extant worth measuring. Billions were spent trying, but the results are pathetic when you calculate the back-drop of $147 oil occurred in this era.
The thoughtful person may ask themselves, ?What is it that these oddball guys knew?? The answer is that those individuals actually cared enough about energy to study Newton?s Laws. The reason that the promises of algae-diesel, biofuels etc failed to scale up to a respectable level is called Entropy. These folks knew that the friction created by poor net-energy yielding schemes would doom them.
THIS IS ABSOLUTE BS. IT TAKES LESS ENERGY TO PRODUCE ETHANOL
THAN GASOLINE. ALGAE-DIESEL SIMPLY NEEDS SOME ONE TO DEVELOP
IT. EXXONMOBIL IS WORKING ON IT NOW. HOPEFULLY, TO BRING IT
TO MARKET...NOT TO KILL IT. VALERO IS THE BIGGEST OIL REFINER
IN THE US. THEY BOUGHT VERASUN'S PLANTS. NOW, THEY SAY ALL
THEIR GASOLINE WILL HAVE ETHANOL IN IT.
The people who continued to believe in alternatives replacing vast amounts of oil never really thought about how entropy cursed that enterprise from the get-go.
THIS IS ABSOLUTE BS. THE ENTROPY FOR GASOLINE IS WORSE THAN
THE ENTROPY FOR ETHANOL.
------------------------------------------------------------------------------------------------------------------------------
I benefit greatly from the USA ethanol policy, and I would probably benefit more than anybody when the mandate goes to 15%, which is likely. It will move more acres of corn into marginal areas, and that creates a boom for little ol? me. I decided that I want the mandate to rise to 15%. I?m a bigger fan of burning corn in a stove., but I will take a quasi-embargo in the form of a boost to the mandate.
-----------------------------------------------------------
Here?s something neat to think about on the subject of alternatives like biofuels. Gasoline in Turkey in June of 2008 was $13 USD per gallon. Gasoline in Germany was over $8. There are about 190 countries on the planet. Maybe 20 countries subsidize biofuels. So let?s think about what was NOT happening in the other 170 countries last June?. There was not a soul in one of those places thinking to themselves, ?You know, it seems like a pretty good idea to build an ethanol plant.? The thought never even flipped on the radar screen of an entrepreneur living in a country that doesn?t subsidize it.
I GUESS BRAZIL DOES NOT COUNT! LOL.
Why?
BECAUSE THOSE COUNTRIES DON'T HAVE VAST RESOURCES OF
SUGARCANE OR CORN.
Here?s food for thought? What makes petro so special ? Why will folks pay so much for it at times? Why won?t people without a subsidy gladly produce ethanol or some other alternative instead?
Let?s look to Newton?s Laws for an answer. Entropy = friction, and the subsidy removes that friction. Granted somebody somewhere has to PAY that subsidy, but to heck with their financial needs.
MORE BS. BIG OIL GETS FAR BIGGER SUBSIDIES THAN ETHANOL.
AND, THE BLENDERS TAX CREDIT GOES TO BIG OIL. CAN YOU SAY
VALERO??? THE 54CENT IMPORT TARIFF ON CHEAP BRAZILIAN
SUGARCANE ETHANOL PROTECTS BIG OIL'S GASOLINE FAR MORE
THAN US CORN BASED ETHANOL. WHAT IS THE COST OF MAINTAINING
TWO US NAVY CARRIER GROUPS IN THE PERSIAN GULF TO KEEP
THE STRAITS OF HORMUZ OPEN FOR BIG OIL'S SUPERTANKERS???
THAT'S NOT A SUBSIDY??? IT DWARFS THE PIDDLY LITTLE
BLENDERS TAX CREDIT...THAT BIG OIL GETS!!!
So why can?t we just subsidize the construction of nuke plants until they become profitable? Just literally have the gov?t pay for them?
The problem with trumping entropy by introducing subsidies into the system is that the entropy REAPPEARS on April 15th tax day. Either that or the entropy reappears in the form of inflation (if the gov?t chooses to simply print the $$ to cover the subsidy).
THAT'S NOT WHAT ENTROPY IS. YOU ARE JUST BLOWING SMOKE UP
THE READERS' A$$ES.
Here?s something I do know for sure, the folks with the STELLER TRACK-RECORD for predicting future flow rates spend a TON of time thinking about energy in its most basic form.
Folks who are bad at predicting flow rates tend to first look for a conclusion, then run around searching for data to support their pre-disposed conclusion. It doesn?t work, and the folks who employ this method will continue to fail.
Below is sage advice from the world's most accurate oil flow rate forecaster;
"Data always beats theories. 'Look at data three times and then come to a conclusion,' versus 'coming to a conclusion and searching for some data.'" [The former will win every time.] ? Matt Simmons
I HAVE THE UTMOST RESPECT FOR MATT SIMMONS, BUT HE CAN NOT
GET ACCURATE INFO OUT OF SAUDI ARABIA EITHER. LOL.


[/b]

48,
OK, the reason I have a bur under my saddle is that I do not enjoy arguing. I don't mind a litle give and take, but with you, its all the time. I don't agree with your take on certain things, and when I tell you so, you just never let it go. I've got this thing called a "life", and prefer to live it rather than debate with a know-it-all who doesn?t like research.
I'm not even going to waste a keystroke discussing entropy with you. You think an oil play where it takes a unit of energy to receive a unit of energy out of the ground is a good trade, and I don't. Fine. The market will determine who is right.
I'm only going to spend 30 seconds on the stuff anybody who wants to do research can verify.
-----------------------------------------------------------------
OK, kids, so you want to become an accurate forecaster for oil do ya?? Well I hope you like research, cuz that's the only way to satisfy your curiosity. Let's research some of 48's claims shall we??
48 claim #1;
"DRILLING WAS CURTAILED ALRIGHT, BUT NEVERTHELESS TRANSOCEAN
AND NOBLE CONTINUED DRILLING RIGHT THRU THE ECONOMIC MELT
DOWN. SO DID NATURAL GAS DRILLERS. THAT'S WHY WE HAVE $3 NG."

---------------------------
FACT: Baker Hughes is a private oil service company who has taken accurate painstaking records of all drilling activity each week, and have done so for decades. It looks like somebody didn't bother to check the rig count, they just posted on through. Who needs hard data? The Baker Hughes rig count is the gold-standard in the industry. Last Sept, the number of rigs actively drilling for Nat Gas in the USA was 1,625. The number of rigs drilling for NG fell to 665 recently, the sharpest drop in NG drilling activity on a % basis in history within a 12 month period.
I've come to the conclusion a few weeks ago that 48 is not a curious person. He doesn't dig into research, cuz he doesn't wonder about how stuff works, or doesn't think he has stuff to learn.
48 claim #2;
"TIGHT OIL SUPPLIES DID NOT CAUSE THE ECONOMY TO MELT DOWN.
147 CRUDE HAD THE WORLD SWIMMING IN OIL THANX TO THE BIG
SPECS. BIG OIL WAS STORING IT ON SUPERTANKERS OUT IN THE
OCEAN TO PLAY THE CONTANGO."

-------------------------------
My Response:
So there was contango in the oil market when oil was 147 huh???
So my class of oil supply forecasters, we need to understand the shape of the price curve so we can determine the viability of future oil projects. Let's satisfy our curious minds and pull up price charts from various months from May of 2008 through July of 2008 and compare them. WHOA!! The market was in BACKWARDATION!! NOT CONTANGO during the height of the oil boom!
So tell me 48, when oil was $147, how does "Big Oil" capture storage fees when future month oil prices are less than spot bids?? Hmm??
The irrefutable fact is that contango storage began much later in the year when there ACTUALLY WAS FRIGGIN' CONTANGO.
So let's look at where oil stocks where in June 2008 shall we? Because we have curious minds, we actually have the gumption to go to the EIA tables on oil inventories. 18.6 days of cover. Historically very tight. Did the EIA or API inventory data have product inventory at the "swimming level"?? No. They had products below the five year range for the first half of 2008. In fact, gasoline inventory in July 2008 was at a 22-year low according to the EIA.
No fun to look at actual data is it?
Let's look to the global net export figures to see if the world was getting the oil it wanted. To do this, you need loads of curiosity, because it involves using the EIA tables on monthly oil production from each country, then you need to manually subtract off consumption from each country. The good news is that if you have patience, you can merely wait six months, and the EIA does this for you.
Global net exports peaked at a high of 49 mbpd in 2005 then fell as the exporters kept more and more of their own oil as their economies grew. By last May, tanker rates fell with imports into the OECD. Voila' less oil than we were used to.
A lazy man's way to verify this is to look at EIA data on USA oil imports. We import in out of every 5 barrels on the export market, so there you go. But then that would take a lot of effort.
----------------------------------------------------------------
48 claim #3;
"NOBODY IS TRASHING THE GUYS THAT GET THE FLOW RATES RIGHT.
BUT, HOW ARE THEY GETTING THE FLOWRATES RIGHT WHEN IT IS
IMPOSSIBLE TO GET CREDIBLE INFORMATION OUT OF SAUDI ARABIA?"

--------------------
My Response:
Matt Simmons did a neat thing. In 2005 he predicted on national television that 2005 was the year that Saudi Arabia would peak production. IT HAPPENED!!
How did he know?? Well, there is this place called a "library". On shelves in a "Library are books. They contain valuable info that satisfies curious minds.
MATT SIMMONS WROTE A BOOK ABOUT THE PEAK IN SAUDI PRODUCTION CALLED, "Twilight in the Desert"!! If you were to read the book, you would then understand HOW MATT KNEW!!
Matt is the world's foremost expert on the forecasting oil flows.
YOUR ABSURD ASSUMPTION THAT THE USA CAN SUBSTANTIALLY INCREASE OIL PRODUCTION BY DRILLING IS MADNESS ACCORDING TO SIMMONS. His research shows that a MASSIVE drilling campaign everywhere (Which he is pushing for day and night) will MERELY OFFSET DECLINES IN EXISTING PRODUCTION. That's all it will do!!
How does he know?? He doesn't golf, he doesn't blog with people, he doesn't fish. He studies oil data. ALL. DAY. LONG.
If you read his research papers, you would understand how high-hanging the remaining reserves in the USA are, and more importantly, how steep the decline rate in existing production is.
The USA peaked in oil production in 1970, and has been in decline since. The odds of that trend changing are zero.
Matt's recommendation is to BUILD TRAINS and CONSERVE WHAT IS LEFT.
Our very lives depend on wringing more GDP from a barrel. Stop fixing roads, and start building trains.
[/b]

I think everyone is in agreement on your last two statements.
Thanks for the info you two.
IMAGE(http://imgcash6.imageshack.us/img526/3431/worthyic6.gif) "Oh great and almighty editor is this better?"
verbatime
[/b]

A person has to view this thread using the
"Printer Friendly" version at the top of the page.
If a person doesn't want to read the green type
simply copy and paste it to a "Word" doc.
Sorry to all about the right-hand margin.
The graph "just" fit the original post.
However;
The "reply with quote" feature moved it over to the
right.
[/b]

quote:
Originally posted by OBG
[br]
48,
OK, the reason I have a bur under my saddle is that I do not enjoy arguing.
WELL, IF YOU CAN'T TAKE THE HEAT, GET OUT OF THE KITCHEN.
I don't mind a litle give and take, but with you, its all the time. I don't agree with your take on certain things, and when I tell you so, you just never let it go.
THAT'S RIGHT. I LIKE THE SUBURBS AND I DON'T WANT TO LIVE
IN A SHACK CLOSE TO THE COTTON SO THAT I AM CLOSE TO MY
SLAVE LABOR.
I've got this thing called a "life", and prefer to live it rather than debate with a know-it-all who doesn?t like research.
I LIKE RESEARCH JUST FINE. BUT, I HAVE A LIFE TOO. I SHOULD
BE WORKING ON MY CORRAL RIGHT NOW. YOU SAY WE'RE OUT OF OIL
AND WE'RE GOING BACK TO THE DARK AGES. AND, IF I DON'T ACCEPT
YOUR FAULTY PREMISE, THEN I'M A KNOW IT ALL. I KNOW THAT WE
ARE NOT EVEN TRYING TO SOLVE OUR ENERGY CRISIS. I AM NOT
GOING TO DRINK YOUR KOOL AID JUST TO BE YOUR PAL. MAKE YOUR
CASE WITH SOUND SCIENCE AND FACTS. WHEN YOU NAME CALL, YOU
ARE JUST LIKE DEC AND JAM, YOU CAN'T MAKE YOUR CASE. AND,
YOUR CASE IS THAT WE LAY DOWN AND DIE AND GO BACK TO HORSES
AND TRAINS. I REALLY DON'T THINK MOST READERS ARE GOING TO
DRINK YOUR KOOL AID FRIEND.
I'm not even going to waste a keystroke discussing entropy with you.
IT'S A GOOD THING CUZ YOU DON'T HAVE A CLUE WHAT ENTROPY IS.
IF YOU GO DOWN THAT ROAD, I WILL MAKE YOU LOOK VERY FOOLISH.
You think an oil play where it takes a unit of energy to receive a unit of energy out of the ground is a good trade, and I don't. Fine. The market will determine who is right.
THAT'S EXACTLY RIGHT. IF IT IS PROFITABLE, IT IS A VIABLE
ECONOMIC ENTERPRISE.
I'm only going to spend 30 seconds on the stuff anybody who wants to do research can verify.
-----------------------------------------------------------------
OK, kids, so you want to become an accurate forecaster for oil do ya?? Well I hope you like research, cuz that's the only way to satisfy your curiosity. Let's research some of 48's claims shall we??
48 claim #1;
"DRILLING WAS CURTAILED ALRIGHT, BUT NEVERTHELESS TRANSOCEAN
AND NOBLE CONTINUED DRILLING RIGHT THRU THE ECONOMIC MELT
DOWN. SO DID NATURAL GAS DRILLERS. THAT'S WHY WE HAVE $3 NG."

Baker Hughes is a private oil service company who has taken accurate painstaking records of all drilling activity each week, and have done so for decades. It looks like somebody didn't bother to check the rig count, they just posted on through. Who needs hard data? The Baker Hughes rig count is the gold-standard in the industry. Last Sept, the number of rigs actively drilling for Nat Gas in the USA was 1,625. The number of rigs drilling for NG fell to 665 recently, the sharpest drop in NG drilling activity on a % basis in history within a 12 month period.
THERE ARE STILL 665 RIGS DRILLING IN THE WORST ECONOMIC DOWN
TURN SINCE THE DEPRESSION.
I've come to the conclusion a few weeks ago that 48 is not a curious person.
IF I'M NOT A CURIOUS PERSON, HOW DID I BECOME A KNOW IT ALL???
He doesn't dig into research, cuz he doesn't wonder about how stuff works,
OH REALLY? IN ENGINEERING THAT'S WHERE SCIENCE GETS DOWN TO
BUSINESS. AND, THE FIRST THING YOU ASK IS: WILL IT WORK? THE
SECOND THING YOU ASK IS: IS IT PROFITABLE?
or doesn't think he has stuff to learn.
I AM NOT AGAINST RESEARCH. I ONLY HAVE SO MANY HOURS IN
THE DAY.
48 claim #2;
"TIGHT OIL SUPPLIES DID NOT CAUSE THE ECONOMY TO MELT DOWN.
147 CRUDE HAD THE WORLD SWIMMING IN OIL THANX TO THE BIG
SPECS. BIG OIL WAS STORING IT ON SUPERTANKERS OUT IN THE
OCEAN TO PLAY THE CONTANGO."

So there was contango in the oil market when oil was 147 huh???
So my class of oil supply forecasters, we need to understand the shape of the price curve so we can determine the viability of future oil projects. Let's satisfy our curious minds and pull up price charts from various months from May of 2008 through July of 2008 and compare them. WHOA!! The market was in BACKWARDATION!! NOT CONTANGO during the height of the oil boom!
AS OIL CAME DOWN THERE WAS CARRY IN THE MARKET, AND BIG OIL
WAS PLAYING THE CARRY JUST LIKE I SAID.
So tell me 48, when oil was $147, how does "Big Oil" capture storage fees when future month oil prices are less than spot bids?? Hmm??
The irrefutable fact is that contango storage began much later in the year when there ACTUALLY WAS FRIGGIN' CONTANGO.
THAT'S EXACTLY RIGHT. WHAT HAS THAT GOT TO DO WITH
ENTROPY, EROEI, AND RECEDING HORIZONS???
So let's look at where oil stocks where in June 2008 shall we? Because we have curious minds, we actually have the gumption to go to the EIA tables on oil inventories. 18.6 days of cover. Historically very tight. Did the EIA or API inventory data have product inventory at the "swimming level"?? No. They had products below the five year range for the first half of 2008. In fact, gasoline inventory in July 2008 was at a 22-year low according to the EIA.
YOU ARE JUST PICKING CERTAIN DATES TO MAKE YOUR ARGUMENT.
I CAN DO THE SAME THING. LATER IN THE YEAR THE TANKS AT
CUSHING WERE FULL AND BIG OIL WAS PAYING DEMURRAGE ON
SUPERTANKERS TO STORE THE FRICKING OIL OUT ON THE OCEAN.
No fun to look at actual data is it?
Let's look to the global net export figures to see if the world was getting the oil it wanted. To do this, you need loads of curiosity, because it involves using the EIA tables on monthly oil production from each country, then you need to manually subtract off consumption from each country. The good news is that if you have patience, you can merely wait six months, and the EIA does this for you.
Global net exports peaked at a high of 49 mbpd in 2005 then fell as the exporters kept more and more of their own oil as their economies grew. By last May, tanker rates fell with imports into the OECD. Voila' less oil than we were used to.
A lazy man's way to verify this is to look at EIA data on USA oil imports. We import in out of every 5 barrels on the export market, so there you go. But then that would take a lot of effort.
IF YOU CAN'T MAKE YOUR CASE, BAFFLE THEM WITH ENDLESS DATA
THAT MAY OR MAY NOT BE RELEVANT. AND, CHERRY PICK THE TIME
FRAME WHEN CRUDE WAS IN BACKWARDATION AND NOT CONTANGO LIKE
IT WAS LATER AS CRUDE CRASHED.
----------------------------------------------------------------
48 claim #3;
"NOBODY IS TRASHING THE GUYS THAT GET THE FLOW RATES RIGHT.
BUT, HOW ARE THEY GETTING THE FLOWRATES RIGHT WHEN IT IS
IMPOSSIBLE TO GET CREDIBLE INFORMATION OUT OF SAUDI ARABIA?"

Matt Simmons did a neat thing. In 2005 he predicted on national television that 2005 was the year that Saudi Arabia would peak production. IT HAPPENED!!
How did he know?? Well, there is this place called a "library". On shelves in a "Library are books. They contain valuable info that satisfies curious minds.
MATT SIMMONS WROTE A BOOK ABOUT THE PEAK IN SAUDI PRODUCTION CALLED, "Twilight in the Desert"!! If you were to read the book, you would then understand HOW MATT KNEW!!
Matt is the world's foremost expert on the forecasting oil flows.
I HAVE NO ARGUMENT WITH MATT SIMMONS. BUT, MATT SIMMONS
DID NOT DRINK THE KOOL AID OF THE OIL DRUM CROWD.
YOUR ABSURD ASSUMPTION THAT THE USA CAN SUBSTANTIALLY INCREASE OIL PRODUCTION BY DRILLING IS MADNESS ACCORDING TO SIMMONS. His research shows that a MASSIVE drilling campaign everywhere (Which he is pushing for day and night) will MERELY OFFSET DECLINES IN EXISTING PRODUCTION. That's all it will do!!
SO WHAT??? IT WILL DAMN SURE REDUCE THE TRILLIONS OF DOLLARS
WE SEND TO THE RADICAL MUSLIMS TO KILL US WITH OUR OWN
MONEY!!! AND, IT WILL MAKE US THAT MUCH MORE ENERGY SECURE.
How does he know?? He doesn't golf, he doesn't blog with people, he doesn't fish. He studies oil data. ALL. DAY. LONG.
CRY ME A RIVER. I RECEIVE INVESTMENT ADVISORY NEWSLETTERS
WHO USE CIA CONTACTS TO ESTIMATE SAUDI RESERVES. THEY'RE
NOT ALL THAT ACCURATE EITHER. BUT, THEY'RE PROBABLY CLOSER
TO THE TRUTH THAN WHAT MATT IS GETTING OUT OF...WHAT DID
YOU SAY???...OH YEAH...THE LIBRARY. SORRY MATT. I KNOW
HOW YOU GET YOUR DATA. I AM JUST RESPONDING TO OBG. LOL.
If you read his research papers, you would understand how high-hanging the remaining reserves in the USA are, and more importantly, how steep the decline rate in existing production is.
The USA peaked in oil production in 1970, and has been in decline since. The odds of that trend changing are zero.
NO ARGUMENT, BUT THAT DOESN'T MEAN THE END OF THE US.
Matt's recommendation is to BUILD TRAINS and CONSERVE WHAT IS LEFT.
MATT SHOULD STICK TO FORECASTING AND LEAVE THE TRAINS TO
AMTRAK. WHO RUNS AMTRAK??? OH YEAH, THE SAME PEOPLE WHO
RUN THE POST OFFICE. THE FEDERAL GOVERNMENT. I SUPPOSE HE
WOULD BE IN FAVOR OF THE FEDS RUNNING HEALTHCARE TOO????
Our very lives depend on wringing more GDP from a barrel. Stop fixing roads, and start building trains.
WHY NOT DRILL EVERYTHING WE HAVE. GENERATE ALL ELECTRICITY
WITH NUKES. USE NATURAL GAS TO RUN SEMIS. CONVERT COAL TO
DIESEL. USE DIESEL WHICH HAS 30% MORE ENERGY THAN GASOLINE.
USE CARS THAT GET 50MPG. USE E15 GASOLINE. AND STICK THE
AMTRAK TRAINS UP MATT'S A$$???
THAT IS MY ARGUMENT WITH YOU. YOU SAY WE'RE OUT OF OIL,
AND WE'RE GOING BACK TO THE DARK AGES. THAT'S EXACTLY
WHAT THE TREE HUGGERS AND RADICAL ENVIRONMENTALIST WANT...
TO RUIN THIS COUNTRY.
WHY DON'T YOU PRACTICE WHAT YOU PREACH??? WHY DON'T YOU
USE THE TRAIN TO SELL YOUR SEED CORN??? WHAT DO YOU DO???
YOU BUILD YOUR OWN ETHANOL STILL AND BURN YOUR OWN ETHANOL.
AND, THEN YOU SLAM ETHANOL. YOU ARE A FRAUD. PRACTICE WHAT
YOU PREACH, BUT I STILL WON'T AGREE WITH YOU CUZ THE US
DOES NOT HAVE TO COME TO AN END.
THIS IS LIKE CALLING 300YD HEAD SHOTS IN A PRAIRIE DOG
TOWN. KEEP STICKING YOUR HEAD UP, AND I'LL KEEP PUNCHING
THE TRIGGER. LOL.
OBG, I REALLY DO LIKE YOU. WHY DON'T YOU TAKE YOUR VAST
KNOWLEDGE OF OIL AND USE IT TO HELP SAVE THE US INSTEAD
OF DESTROYING IT BY ADVOCATING A RETURN TO THE DARK AGES.
BEST.


[/b]

OBG,
Thank you for the information. Now everyone can see exactly how 48 acts. If you don?t agree totally with him he targets you and bully's and then claims that you are the one that is stupid and calls you names while claiming that you are doing that to him.
I appreciate your knowledge in this area and for sharing it with us. But as you can see 48 and his know-nothingdog pack will go after anyone that disagrees with their point of view. 48, while not having graduated college now claims to have taken graduate classes, apparently in every subject that exists, as he seems to tell everyone everything there is to know in every subject. And now he is making threats against you. All one has to do is disagree with Mr. Blowhard. Aren't we lucky to have someone that will post here ad nauseum that makes Einstein look like a grade schooler? But yet he can't remeber how to log onto AgWeb.
Keep posting OBG. Your knowledge in this area is unmatched on this Board.
[/b]

quote:
WHY NOT DRILL EVERYTHING WE HAVE. GENERATE ALL ELECTRICITY
WITH NUKES. USE NATURAL GAS TO RUN SEMIS. CONVERT COAL TO
DIESEL. USE DIESEL WHICH HAS 30% MORE ENERGY THAN GASOLINE.
USE CARS THAT GET 50MPG. USE E15 GASOLINE. AND STICK THE
AMTRAK TRAINS UP MATT'S A$$???


What do you need to mine uranium, coal and drill for gas??? Petroleum. Mining uranium is already a low grade game, anthracite and bituminous production has already fallen drastically from peak, some countries are already burning lignite (black rocks) and how far is continental north america from peak natural gas? Alberta hit it in 2001. Sounds to me like all your solutions kicks the can another couple years down the road for an even bigger collapse later.
[/b]

quote:
Originally posted by JAM
[br]OBG,
Thank you for the information. Now everyone can see exactly how 48 acts. If you don?t agree totally with him he targets you and bully's and then claims that you are the one that is stupid and calls you names while claiming that you are doing that to him.
I appreciate your knowledge in this area and for sharing it with us. But as you can see 48 and his know-nothingdog pack will go after anyone that disagrees with their point of view. 48, while not having graduated college now claims to have taken graduate classes, apparently in every subject that exists, as he seems to tell everyone everything there is to know in every subject. And now he is making threats against you. All one has to do is disagree with Mr. Blowhard. Aren't we lucky to have someone that will post here ad nauseum that makes Einstein look like a grade schooler? But yet he can't remeber how to log onto AgWeb.
Keep posting OBG. Your knowledge in this area is unmatched on this Board.


JAM: You are a pathetic little weasel. You don't have a single
friend on this site besides dec. You see a discussion between
two friends on this site and try to worm your way in and kiss
up to the guy that I am having a discussion with. You are just
pathetic. Get a life.
[/b]

48,
I just finished watching Gran Torino again. Its a touching show. My Grandpa was a mystery, because the guy was such a hard-nosed fella, espec to his sons. The barber-shop scene just kills me, because the of the way that men talk to each other. Its starts in the locker room and never quits.
Anyway, I feel bad about the things I've said to you lately. I hope you are a happy person I really do!
I honestly get so irritated I want to put my hand through the computer screen. You are one stubborn SOB!
No offense.
I used to say bad things about Dec and Jam, then I always felt crappy about it in time.
I think both Dec and Jam are pretty smart guys, and I happen to think some of their arguments are completely valid. I think the test of the value of an energy source is whether or not it would exist at all at any price without the subsidy.
I went to a cool plot tour the other day. There was corn from hundreds of years ago through present. Very very impressed with advances in corn yields.
I think that corn ethanol will have an EROEI of over 5:1 soon. It'll still need the subsidy, or it won't scale, and even then it'll let the decline rate in oil win the energy loss battle. The advances in microbes and the improvements from tile drainage are a tailwind for the EROEI of ethanol.
There is zero doubt the blend mandate will rise to 15%, for the following reasons;
1) Falling global net oil exports will work their way up the economic foodchain and destroy job after job. The demand for meat is gonna get crushed. Its very sad, but the world will find meat less and less affordable from now on. Point blank, the world needs a lot less feedlots, hog barns, and chicken coops. This is the sad truth whether we produce ethanol or not. The country is headsed into a permanent death-spiral, and denial gets us nowhere.
No oil = no job, and no job = no steak.
2) Trendline production of corn is up.
3) Here's a mind expirement; I think that ethanol is a psuedo-embargo. The purpose of a grain embargo in most countries that do them is to keep grain inside the country cheap, at the expense of the potential importer, and at the expense of the producer.
Ethanol is an embargo not against grain, but against CHEAP grain. Its says to the world, "Look, if we have to import expensive oil, then by darn we aren't gonna give away our grain."
OK that's pretty messed up, but its kinda true.
4) THE BLENDING WALL!! The blending wall is gonna become a huge threat to ethanol pretty soon, as we run out of gasoline to blend it with. USA oil production took a bad hit the last 10 years, and its gonna get a lot worse. Imports are trending lower at an alarming pace. If both domestic production and imports trend lower, the blend mandate has to rise indefinately over time. Eventually we are talking 50% of a much smaller market.
5) The USA is a fascist country, and it has been increasingly become more and more so since the creation of the Federal Reserve. In the spirit of our economic system, we need to bailout everyone all the time. Except livestock producers. The country is broke, and we have no use anymore for meat. It is reccomended you take up gardening.
[/b]

quote:
Originally posted by OBG
[br]
48,
I just finished watching Gran Torino again. Its a touching show. My Grandpa was a mystery, because the guy was such a hard-nosed fella, espec to his sons. The barber-shop scene just kills me, because the of the way that men talk to each other. Its starts in the locker room and never quits.
Anyway, I feel bad about the things I've said to you lately. I hope you are a happy person I really do!
I honestly get so irritated I want to put my hand through the computer screen. You are one stubborn SOB!
No offense.
FRIEND, AND I MEAN THAT, YOU DON'T NEED TO APOLOGIZE TO
ME. I LOVE SPIRITED DISCUSSIONS WITH INTELLIGENT PEOPLE.
YOU ARE VERY INTELLIGENT, AND I APPRECIATE ALL THE RESEARCH
THAT YOU HAVE PUT INTO IRREVERSIBLE DECLINE. WHO YOU NEED
TO APOLOGIZE TO IS ALL THE AGWEB READERS WHO YOU CALLED
LOSERS. THE LEAST INTELLIGENT READER OF THIS SITE IS MORE
INTELLIGENT THAN 90% OF THE GENERAL POPULATION JUST BY
VIRTUE OF THE FACT THAT HE IS INTERESTED ENOUGH TO BE ON
THIS SITE.
I used to say bad things about Dec and Jam, then I always felt crappy about it in time.
I think both Dec and Jam are pretty smart guys,
THERE IS NO ARGUMENT THAT DEC AND JAM ARE SMART GUYS.
BUT, THEY ARE PUSHING AN AGENDA AND HAVE A BIG CONFLICT
OF INTEREST. DEC APPEARS TO TALK HIS BOOK. JAM IS THE
CHIEF LEGAL COUNSEL FOR ONE OF THE BIGGEST EGG PRODUCERS
IN THE US. CORN IS 84% OF THEIR RATION. HE HAS A VESTED
INTEREST IN CHEAP CORN PRICES. HIS COMPANY ALSO HAS THEIR
OWN SB CRUSHING PLANTS TO MAKE THEIR OWN SB MEAL FOR THE
OTHER 16% OF THEIR RATION. SB MEAL CAN NOT COMPETE WITH
DISTILLERS AS A PROTEIN SOURCE. SO, HE HAS A BIG CONFLICT
OF INTEREST AGAINST ETHANOL. HE DOES NOT CARE ABOUT THE
ENERGY SECURITY OF THE US. HE CARES ABOUT THE FACT THAT
HIS SB MEAL CAN NOT COMPETE WITH DISTILLERS FROM ETHANOL.
and I happen to think some of their arguments are completely valid. I think the test of the value of an energy source is whether or not it would exist at all at any price without the subsidy.
I went to a cool plot tour the other day. There was corn from hundreds of years ago through present. Very very impressed with advances in corn yields.
I HAVE BEEN RESEARCHING OPEN POLLINATED CORN FOR SOME
TIME. OP CAN NEVER COMPETE WITH HYBRIDS ON YIELD. BUT,
WHERE YOU AND I RAISE DRYLAND CORN ON THE FRINGE OF THE
CORN BELT, WE HAVE YEAR AFTER YEAR, WHERE OUR DRYLAND
CORN ONLY MAKES 60-80 BU/A. I'M NOT SURE BUT WHAT OP
CORN COULD NOT MATCH THIS. PLUS, THE FARMER COULD SAVE
HIS OWN SEED...FURTHER REDUCING INPUT COSTS. I AM ALWAYS
ON THE CUTTING EDGE OF NEW TECHNOLOGY LIKE PIONEER'S
REFUGE IN A BAG. BUT, I AM ALSO CURIOUS (CATCH THAT, LOL)
ENOUGH TO SEE IF THERE IS ALSO A PLACE FOR OP. BTW,
YOU CAN GET SAMPLES OF EVERY CORN EVER RAISED, AND RAISE
YOUR OWN HYBRID CORN. IT'S EASY. IT'S JUST A LOT OF WORK.
I think that corn ethanol will have an EROEI of over 5:1 soon. It'll still need the subsidy, or it won't scale, and even then it'll let the decline rate in oil win the energy loss battle. The advances in microbes and the improvements from tile drainage are a tailwind for the EROEI of ethanol.
THE ADVANCES IN ETHANOL PRODUCTION ARE ACCELERATING. THE
NEW HIGH AMYLASE CORNS WILL REDUCE INPUT COSTS FURTHER.
LARGE FEEDLOTS ARE LOOKING INTO HAVING ETHANOL PLANTS ON
SITE FOR THE EXPRESS PURPOSE OF SECURING THEIR OWN DISTILLER'S
AND ELIMINATING TRANSPORTATION COSTS. DISTILLERS IS THE
CHEAPEST SOURCE OF PROTEIN AND IT REDUCES THE AMOUNT OF
CORN REQUIRED. CO-GENERATION GIVES THEM THEIR OWN ELECTRICITY
AND STEAM. THEY SELL THE EXCESS ELECTRICITY. ETHANOL BECOMES
A BY-PRODUCT...NOT THE MAIN PRODUCT.
There is zero doubt the blend mandate will rise to 15%, for the following reasons;
I WISH I COULD AGREE WITH YOU HERE. I'M NOT SO SURE.
BIG OIL IS NATURALLY TRYING TO KILL THIS. THE TREE
HUGGERS HAVE THE CALIFORNIA AIR RESOURCES BOARD
SLAMMING US ETHANOL FOR INDIRECT LAND USES IN BRAZIL!!!
1) Falling global net oil exports will work their way up the economic foodchain and destroy job after job. The demand for meat is gonna get crushed. Its very sad, but the world will find meat less and less affordable from now on. Point blank, the world needs a lot less feedlots, hog barns, and chicken coops. This is the sad truth whether we produce ethanol or not.
"The country is headsed into a permanent death-spiral, and denial gets us nowhere."
FRIEND, THIS IS WHERE YOU AND I DISAGREE. I HAVE OUTLINED
PLAN AFTER PLAN THAT WILL SCALE. YOU HAVE A PHILOSOPHY OF
ZERO HOPE.
No oil = no job, and no job = no steak.
2) Trendline production of corn is up.
3) Here's a mind expirement; I think that ethanol is a psuedo-embargo. The purpose of a grain embargo in most countries that do them is to keep grain inside the country cheap, at the expense of the potential importer, and at the expense of the producer.
Ethanol is an embargo not against grain, but against CHEAP grain. Its says to the world, "Look, if we have to import expensive oil, then by darn we aren't gonna give away our grain."
SO...WHAT'S WRONG WITH THAT???
OK that's pretty messed up, but its kinda true.
4) THE BLENDING WALL!! The blending wall is gonna become a huge threat to ethanol pretty soon, as we run out of gasoline to blend it with. USA oil production took a bad hit the last 10 years, and its gonna get a lot worse. Imports are trending lower at an alarming pace. If both domestic production and imports trend lower, the blend mandate has to rise indefinately over time. Eventually we are talking 50% of a much smaller market.
THAT'S WHY WE NEED THE CHEVY VOLT POWERED BY ELECTRICITY
FROM NUCLEAR POWER PLANTS. THAT'S WHY WE NEED 50MPG DIESELS
CUZ DIESEL HAS 30% MORE ENERGY. IF WE GO TO 50MPG WE CUT
PETROLEUM REQUIREMENTS IN HALF. IF WE GO TO DIESEL, WE CUT
IT ANOTHER 30%.
5) The USA is a fascist country, and it has been increasingly become more and more so since the creation of the Federal Reserve.
WELL...WITH THE CURRENT ADMINISTRATION IT HAS BECOME SOCIALIST,
IF NOT COMMUNIST. THE TELEPROMPTER HAS MORE CZARS THAN
IMPERIAL RUSSIA. I AGREE WITH YOU 100% ON THE FEDERAL
RESERVE.
In the spirit of our economic system, we need to bailout everyone all the time. Except livestock producers. The country is broke, and we have no use anymore for meat.
WITH THE COW AND CALF HERDS AT 50 YR LOWS, I THINK CATTLE
OUR SETTING UP FOR A BULLISH FUTURE.
It is reccomended you take up gardening.
I DID THIS YEARS AGO...ORGANIC GARDENING. I AM AN EXPERT
ON COMPOST AND COMPANION PLANTING. I ENCOURAGE ALL
READERS TO ORGANICALLY RAISE THEIR OWN FOOD. BUT, IF
YOU TRY TO CONVERT PRODUCTION AG TO ORGANIC, WE TRULY
WILL BE STARING STARVATION IN THE FACE.


[/b]

quote:
Originally posted by thirsty
[br]48:
You can only crack 10 gallons of diesel, and another 20 gallons of gasoline from a barrel of oil. Those ratios cannot be changed. Europe uses a lot of diesel because it used to send a lot of gasoline to North America, a least a million barrels a day at one time. That may have since changed.
OBG:
I looked at the whale bone chart again, interesting time period. I also dug up the chart for whale oil production. Considering the panics in 1858-59, 1873 and the long term deflation inherent in the last half of the 19th century I'm thinking your 'drunken lodger' theory is a lock, with monetary policy being the driver into the troughs and very much a part of the peaks. The only thing that 'beats' peak oil is de-industrialization through bankruptcy, the Fed purposefully busting the economy in order to match economic activity to available supply, consumption = production. Something to think about during your hermitage. []


You had better go back and brush up on your Keynesian Economic
Theories and Demand/Pull inflation, and the affect it has on Economic
Growth in regard to the current money policy, taking into account
M1,M2,and M3.
[/b]

quote:
Originally posted by 48
[br]I have no idea what BAU means.


I'm pretty sure OBG's reference to BAU = Business As Usual.
[/b]

thirsty: You said:
"You can only crack 10 gallons of diesel, and another 20 gallons of gasoline from a barrel of oil. Those ratios cannot be changed. Europe uses a lot of diesel because it used to send a lot of gasoline to North America, a least a million barrels a day at one time. That may have since changed."
My friend, you are FOS. I worked as a chemical engineer in
an oil refinery. Do you know what a reformer is? You can
turn out any crack ratio you want. US refineries process
a lot of heavy crude. They can make diesel easier than
gasoline and...use a lot less energy to do it.
You are just as misinformed as OBG is on NGL's.
Both of you come across as highly informed elitists when
in reality, you are clueless.
I said in my example that I was making oversimplifications.
I just wanted to demonstrate that re-establishing US
energy independence is achievable.
You and OBG have drank The Oil Drum kool aid: We're out
of oil, and the world is going to end. The suburbs are
history. You have to move back to the ghetto. Cars are
out, you have to ride the train and horses. You guys are
FOS, and I am going to keep shining a spot light on your
BS. Best.
[/b]

OBG: Hope you enjoy your 30 days vacation. All of my
friends who have Blackberries can stay in touch regardless
of where they are. lol. But, have a good time. See ya
on the flip side. Best.
[/b]

NE sandhiller: Thanx for the heads up. It took me a long
time to figure out what lol meant. lol.
[/b]

Readers: NGL means natural gas liquids, and it is NOT
used primarily for plastics. I grew up in Phillips, TX
as in...Phillips Petroleum Company. As a matter of fact,
I was born in the company hospital. We had a refinery
with a NGL section, a butadiene plant, which I also
worked in, a copoly rubber plant to turn butadiene into
SBR rubber, and a carbon black plant. Carbon black adds
the wear resistance to tires in addition to inks, etc.
I also rough necked in the oil fields when I was a kid.
I know a little bit about the oil business. Best.
[/b]

48:
I'm trying to understand your argument.
Are you saying that it is possible to increase the diesel production from crude oil and that increased production results in 30% more BTUs being delivered in the finished products?
I can't find much research that agrees.
_____________________________________________--
This is from a European refiner:
Is it possible to decide to increase the production of certain products such as diesel oil?
The answer is that whilst you can increase production of certain grades it is only by a few per cent. It can be done by converting heavy fuels into lighter products by ?cracking? them. But these conversion processes are very high in energy use and hydrogen consumption. There is also an increased cost in production which is passed on to the consumer.
http://www.total.com/en/press/energy-dossiers/diesel-or-petrol/refining-crude-oil_16843.htm
________________________________________________
This is from environmental website:
Making a gallon of diesel fuel requires 25% more oil and emits 17% more heat-trapping greenhouse gases than gasoline reformulated with MTBE. Similarly, diesel requires 17% more oil and emits 18% more heat-trapping gases than gasoline reformulated with ethanol. This means that diesel fuel's advantages from its higher per-gallon energy content and better performance on greenhouse gases are partially offset by the impact of diesel's fuel-production process.
http://www.grinningplanet.com/2005/04-12/diesel-vs-gasoline-article.htm
____________________________________________
I'm not sure I understand your assertions. I cannot find anything which supports your contention that increasing diesel production would increase the available BTU output from any given unit of crude oil. I only did some rudimentary research. Maybe you can help me out?
[/b]

Where do plastics come from?
Where does oil-based paint come from?
Where do some herbicides come from?
-------------------------------------------------------------
What is USA liquids demand for petro-based plastics etc???????
5.2 mbpd. Read that figure over and over until it sinks in.
That amount for plastics alone divided by USA pop. is much more per capita consumption than the average person on earth consumes.
The first liquids go to plastics, herbicides, paint etc.
After that the transportation sector gets its liquids.
The notion of USA energy independance is beyond silly.
----------------------------------------------------------------
I'm driving to TXto watch the UFC in Dallas this weekend.
Over and out for 30 days.
[/b]

BTW,
Anybody catch this week's oil import figures released this AM??
Is there a hurricane in the Gulf preventing imports???
[/b]

OBG: 5.2 Million barrels of oil used per day just for plastics Manufacture? Is that in the USA alone? Please do***ent that, please.
[/b]

OBG, you throw in the towel too easily. The founding fathers risk all, and in many cases lost it, to start this country. It is worth fighting for. Going off on your own might be fun for a little while but is not a long term solution. The truth is. The truth about politics. The truth about politicians. The truth about markets. The truth about hedge funds. The truth about goldman sacks. The truth about position limits. The truth about deliveries. The truth about flow rates. The truth about greed. The truth about where our money goes. The truth about recoverable oil. The truth about coal. The truth about nuclear. The truth about wind, and solar.
This country was built on Christian values of truth and honesty. It is without those values that we turn into a turd world country. Reading a flow chart is easy. Standing for something you believe in is hard. If the world runs out of oil, so be it. Doesn't mean we have to turn into animals. Means we have to find another way to do things. Another way to help those who need help. Not throw in the towel and hide in the trees.
BTW, don't think I am accusing you of anything less than the truth. Not your style and not my style. It is what we do with the truth that defines us.
"The urge to save humanity is always a false front for the urge to rule it."--H.L. Mencken
[/b]

quote:
Originally posted by 48
[br]Also, how many bbls does a supertanker hold???
When Big Oil was playing the carry trade, they
had quite a few VLCC's storing it at sea.


The USA "commercial" inventory is tiny. The commercial inventory from minimum level to max level = week's consumption. It's "just-in-time" at its extreme.
Commercial inventory excludes the SPR. Its this commercial inventory I was referring to Good Sir.
One VLCC Oil Tanker = 2 million barrels. THAT's ONLY 135 minutes of USA consumption!!!!
The largest reduction in liquid demand in history occurred in 2008 when demand crashed by 5 mbpd in about 4 months. Consumption went from 88 mbpd to 83 mppd lickity split. The demand reset was violent. Beyond my comprehension actually.
$32 oil in Jan of 2009 was arguably probably too high by many at the time. Storage was nearly at max capacity. Had OPEC not acted in record fashion to pull production from the market, the tiny commercial (non-SPR) inventory would have overflowed. There is no way to build tank-farms fast enough to keep up with even a 1 mbpd over-supply.
So $32 was the bottom. A price that only 5 years prior seemed high was now an industry-wide calamity.
Another factor that stopped prices from falling below $30 was available oil tankers with nothing much to do. That was a weird scenario.
In 2005 literally NOBODY believed that oil tanker demand would enter permanent decline. That's exactly what happened however. The world shipped a LOT of oil in 2005. But then something strange started to happen. The exporters began shipping less and less.
Exporting countries claimed the reason was increasing domestic consumption. That sounds plausible, given their roaring economies. Maybe its true, and maybe its partially true.
The figure that doesn't lie is global net exports. I post about this ad nauseum. I certainly must bore people to death about declining net exports. Its because there is no news out there about it. I STRONGLY believe its the biggest news in the commodity biz, yet its DOA in the newsrooms.
So all these oil tankers with no job and no oil to haul had nothing better to do than to hoard oil. The world's cheapest oil storage is literally a floating tanker. Meanwhile oil tankers have not only been getting torn down for metal price, but not getting built fast enough to replace them. Why bother with net exports falling 20% in five years? Stunning.
-------------------------------------------------------------------
I went to bed early, but got up to read about oil. Here is some interesting info about oil import/export;
According to the EIA; in 2007 the USA imported oil/products from 90 differant countries.
http://tonto.eia.doe.gov/dnav/pet/pet_move
_impcus_a2_nus_ep00_im0_mbblpd_a.htm
------------------------------------------------------------
Now this is the fascinating part! In that same year, the USA EXPORTED (that's right, I said EXPORTED) oil and/or oil products to 73 differant countries. WOW!
http://tonto.eia.doe.gov/dnav/pet/pet_move
_expc_a_EP00_EEX_mbblpd_a.htm
-----------------------------------------------------------------
There's only about 190 total countries, so we jockey around oil like a hot potato.
Oil is a funny thing. Hmm... "Funny" isn't the right word... let's go with a better word... how about... "fungible"
Because oil is fungible, it moves from the place of the lowest bid to the place of the highest bid. If the bids were far enough apart, gasoline in Kansas would get burnt in Timbuktu, as strange as that sounds.
---------------------------------------------------------------
Should oil have been $147?? I don't know. Should refineries in some parts of the world have paid nearly $160 cash for partial shipments? Dunno. I do know it happened.
All I know is that the market had a bull move from 1999 through 2008 that few people enjoyed. What I think I know tells me that the market can not be grossly wrong for more than a few hours without some really strange things going on. Commercial inventories change that FAST.
Three weeks is an ETERNITY in the oil market. Fundamentals change on a dime.
Did specs create the bull market in oil??
I guess it doesn't really matter. []
[/b]

OBG: Thanx for the VLCC info. Now...how many are
out there total? How many are just floating storage???
How many are transporting crude today?
I appreciate your vast knowledge. I am not being
argumentative. But, you said US max storage is
380 mil bbl. You said pipelines have 275 mil bbl
in them. You said you included SPR.
380-275=105mil bbl for SPR, Cushing, and refineries.
But SPR max capacity is 727 mil bbls. See what I
mean??? Something doesn't compute here. lol.
Thanx for your help.
[/b]

Here is a link to Strategic Petroleum Reserve on Wiki:
http://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve
[/b]

From above:
"The US SPR is the largest emergency supply in the world
with the current capacity to hold up to 727 million barrels
(1.156E+8 m3)."
[/b]

Here's a link to the crude oil storage capacity at
Cushing, OK:
http://uk.reuters.com/article/idUKN0643997120090209
[/b]

OBG: From above link the total and planned expansion at
Cushing, OK is:
"TOTAL* 46.3 mln bls 6.1 million barrels by
end-2009"
SPR=727mil bbl
Cushing=46mil bbl
Total=773 mil bbl
This does not include the storage in the oil fields
and the tank batteries at refineries or the super
tankers storing it at sea.
If we add YOUR number of 275mil bbls in the pipelines,
773+275=1048mil bbls.
You said:
"FACT: USA max storage of oil is maybe 380 million
barrels if that....I can easily doc-u-ment every
word above. Its all in the EIA public info."
Something does not compute. Thanx for your help.
[/b]

quote:
Originally posted by 48
[br]But, you said US max storage is
380 mil bbl. You said pipelines have 275 mil bbl
in them. You said you included SPR.

quote:
Originally posted by OBG
Commercial inventory excludes the SPR. Its this commercial inventory I was referring to Good Sir.


Just going to let you look at that again. If you're still confused you can look at the TWIP reports. TWIP denotes crude supplies and specifically excludes the SPR.
You may also care to do some research on the MOL. MOL = minimum operating level. This is the pipeline figure which OBG mentions. The pipelines have to be full in order to push anything out at their destinations. I have yet to see anything but estimates as to the MOL. Perhaps you can find a more concrete figure.
Good luck.
[/b]

quote:
Originally posted by 48
[br]OBG: From above link the total and planned expansion at
Cushing, OK is:
"TOTAL* 46.3 mln bls 6.1 million barrels by
end-2009"
SPR=727mil bbl
Cushing=46mil bbl
Total=773 mil bbl
This does not include the storage in the oil fields
and the tank batteries at refineries or the super
tankers storing it at sea.
If we add YOUR number of 275mil bbls in the pipelines,
773+275=1048mil bbls.
You said:
"FACT: USA max storage of oil is maybe 380 million
barrels if that....I can easily doc-u-ment every
word above. Its all in the EIA public info."
Something does not compute. Thanx for your help.


Its exactly as NESandhiller says.
Commercial inventory is NOT NOT NOT SPR.
The SPR has NOTHING to do with any commercial inventory.
SPR is part of the dept of defense. Its a military thing.
SPR is completely seperate from the weekly commercial inventory figures.
Every wednesday when the EIA releases inventory figures, the figures they show are EXCLUDING the SPR.
The SPR inventory does not float much with supply and demand. If the military wants to add or subtract, they just do it. COMPLETELY differant from the way a refinery conducts biz. Price is sensitive to a refinery.
Commercial storage is ultra-price sensitive. SPR... not so much.
As I said several times in previous posts on this thread. The roughly 375 mb or so of MAX Capacity is COMMERCIAL STORAGE only.
------------------------------------------------------------
Please check the TWIP reports if you are still confused....
[/b]

This site will take you to the USA weekly inventory data. As the EIA CLEARLY states, the commercial inventory EXCLUDES the SPR.
It the COMMERCIAL inventory that jumps higher or collapses lower week-to-week. This is the market mover. The levels in the COMMERCIAL inventory signal to traders what prices need to do.
Its obviously a small part of the puzzle. Inventory is not the ONLY factor. The real factor is IMOPORTS. Specifically, the price required to attract imports.
http://tonto.eia.doe.gov/dnav/pet/pet
_stoc_wstk_a_EPC0_SAX_mbbl_w.htm
(I had to chop the link in half, so you'll have to copy n paste it)
SPR has nothing to do with signalling prices.
Only the commercial inventory is any sort of a price signal.
Commercial inventory and SPR have ZERO to do with each other.
Please read this last thing over a few times...
The SPR barrels are not perpetually and costantly "in-play" the way that commercial barrels are. They are not part of the day-to-day global oil trade.
[/b]

You can do the same thing as DXO by simply buying
2X DBO.
The one article said that DXO was wildly popular.
Well...you are leveraged 2/1, and when crude crashed
from $147/bbl, your losses were magnified 2X also.
It wasn't "wildly popular" then. lol.
[/b]

So tell me, is it common for you to post completely useless info that's in no way related to any aspect of the discussion? Or is this something new?
[/b]

quote:
Originally posted by Rogue Trader
[br]
So tell me, is it common for you to post completely useless info that's in no way related to any aspect of the discussion? Or is this something new?


Rogue: You said:
"Well gee... Maybe he would recommend DXO if some naïve populist fool that thinks big specs ran up oil prices to $150 hadn't gone and outlawed it."
If you don't think those posts are not germane to what you
posted, we have a little failure to communicate here.
I was showing you that a whole lot of their ETF's got
euthanized that had absolutely no connection to the
CFTC hearings on Position Limits. I was also showing
you that Deutsche Bank is not cancelling DXO cuz of
CFTC hearings, but rather cuz they have a lot of
disgruntled investors who got their clocks cleaned
at 2/1 leverage when crude crashed from 147. I also
showed you how to replace DXO by simply buying DBO
at 2/1 ratio. If you don't think any of that is
germane to what you said, I can see where you got
your alias...indeed. Very apropro. lol.
[/b]

quote:
Originally posted by 48
[br]
I was showing you that a whole lot of their ETF's got
euthanized that had absolutely no connection to the
CFTC hearings on Position Limits. I was also showing
you that Deutsche Bank is not cancelling DXO cuz of
CFTC hearings, but rather cuz they have a lot of
disgruntled investors who got their clocks cleaned
at 2/1 leverage when crude crashed from 147.


Mr. Fantasyland says, "I was also showing
you that Deutsche Bank is not cancelling DXO cuz of
CFTC hearings, but rather cuz they have a lot of
disgruntled investors..."
That is of course competely false.
It takes $$ to run an ETF/ETN. The killed-off ETFs you posted had no volume, because investors wouldn't touch them. DXO had massive volume. It was a daytrader's dream. People with a FINITE BALANCE in their account could jump from DTO to DXO and get twice the exposure as they could with DBO or DNO.
The volume of interest in DXO speaked for itself. DXO made Deutsche Bank a ton of dough, right up until the gov't stepped in.
Were did you "prove" it was disgruntled investors that killed DXO? Prolly the same place you "proved" big specs accomplished the impossible.
Read the last sentence in the story below. Clearly 48 is, as always, FOS.
---------------------------------------------------------------
NEW YORK (TheStreet) -- In the past, ETF issuers killed off their weakest funds, stragglers that could not garner enough investor interest to be viable.
Wednesday, however, was a landmark moment for the ETF industry, as Deutsche Bank(DB Quote) euthanized the wildly popular PowerShares DB Crude Oil Double Long ETN(DXO Quote).
This leveraged, futures-based commodity ETN has not had trouble attracting trading volume. As of Sept. 3, the three-month average daily trading volume for the fund was 12,775,600 shares. Currently, DXO has $407 million in outstanding notes that will have to be redeemed to investors on Sept 9.
As both a leveraged fund and a futures-based commodity fund, DXO has been caught in a double regulatory crossfire this summer as the Commodity Futures Trading Commission targets "speculators" in the commodities markets and Financial Industry Regulatory Authority scrutinizes leveraged ETF products.
Regulation on both fronts seems imminent , and funds like United States Natural Gas(UNG Quote) and DXO have tried to protect their funds from restrictions.
DXO's biggest crime, however, is its popularity.
http://www.thestreet.com/_yahoo/story
/10594401/1/huge-etn-euthanized.html?
cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
[/b]

Hey Beaner! You are a smart guy, I was wondering if you could take a look at the articl at the bottom of this post. Do you think that the CFTC regulators can change the market presented in this article?
----------------------------------------------------------------
48,
For some bizzarre reason only you understand, you want to turn my recco to buy physical (not paper) oil into a paper trade trade. You are going so far as using NYMEX quotes for goodness sake.
There is nothing special about buying and hoarding oil on any given day, anymore than its a good idea to not knock up your girlfriend on a given day. Its a good idea to shower on a given day, so what?
As the whale bone chart shows, a resource in decline becomes volitile, so odds are, you will lose lots and lots of value for a few years. As long as there are no alternatives, and the resource continues to dwindle, you can protect your cache from 48's regulators, then all is well.
A person could pay attention to prices on the NYMEX if they wanted. Personally, I prefer to see what is happening in the market that 48's regulator buddies can't touch. Below is an example of how the real world operates.
--------------------------------------------------------------
Saudi Aramco sells fourth fuel oil lot in firm market
Web posted at: 9/17/2009 2:11:28
Source ::: Reuters
SINGAPORE: Saudi Aramco has sold a fourth straight cargo of fuel oil within the past two weeks at strong price levels, taking advantage of the tight Middle East and east Asian markets, traders said yesterday.
The 80,0000-90,000 tonne 380-centistoke (cst) parcel, for October 16-18 loading from Jubail, was sold to a bunker player in the Fujairah marine fuels market at a discount of $2.50 a tonne to Singapore spot quotes on a free-on-board (FOB) basis.
?The transaction levels are still relatively high as the Middle East is still tight, though it is not as bad as it was earlier in the month when a similar cargo was done at premium levels,? a Singapore-based Middle East trader said.
Including the current parcel, Aramco has sold four 380-cst parcels in the past two weeks, with the previous three parcels coming from its Rabigh refinery that had suffered an outage during that period.
The three A962 lots, all September-loaders that became available due to a glitch at the fluid catalytic cracking unit at the facility, were transacted at premiums of $2.00-$5.00 a tonne to spot quotes, with at least two of the three parcels expected to stay in the Middle East. Aramco last sold two similar parcels, both for September lifting, from the joint-venture Sasref plant in Jubail at higher levels in premium.
Traders said both the Middle East and East Asia markets have been tight since earlier this month, due to a shortage of Iranian supplies into Fujairah and diminishing flows from the West into Singapore.
Less than 3.0 million tonnes of Western arbitrage volumes are expected to land east Asia next month, down from 3.7-3.8 million tonnes this month and below average levels of 3.0-3.5 million tonnes as refiners globally have cut runs.
http://www.thepeninsulaqatar.com/Display_news.asp?
section=Business_News&subsection=market+news&month =
September2009&file=Business_News2009091721128.xml
[/b]

OBG: You can hurl all the insults you want. YOU
personally know that I am not a socialist, regulator
loving populist. You know you are posting BS. If
that turns your crank, go for it, but every reader
on this board knows differently.
As a matter of fact the CFTC hearings are going
just as I predicted: Strengthen the commercials
against the farmer and the Long Only Index Funds
who are the farmers best friend.
Do you personally trade the cash markets in the
Mideast and Singapore??? I'm pretty sure you don't.
Crude oil has traded most of it's history without
a futures market, and it sure doesn't need one
now.
BTW, the post you posted on DXO, I had already
posted!!!! lol.
Hope you're having fun. Hope you took the train!!!
[/b]

Gulke: Pre-Harvest Comments
Fri Sep 25, 2009 04:35 PM CDT
Gulke: Pre-Harvest Comments 09/25 16:31 The views expressed here are those of the individual author and are not necessarily those of DTN, its management or employees. By Jerry Gulke DTN Contributing Analyst We have put off the impending freeze long enough that one would think the market would have gotten tired of it and prices would have gone much lower this week. However, that was not the case. Corn closed 16 higher for the week, after again testing the important $3.15 level. Soybeans closed only 2 1/2 higher on ideas this crop will be mostly out of significant frost danger by Oct. 3 or so. Wheat was 20 cents higher for the week, until the collapse Friday. It is still in the downtrend it has been in for months and still below a long-term downtrend line traders watch. Some said a large commission house (perhaps Goldman) was spreading wheat with a vengeance Friday with December on the selling side. WHEAT CONVERGENCE ISSUE In an effort to improve the convergence of futures and cash prices in soft red wheat, the CFTC had some propaganda out this week. The CFTC subcommittee on convergence has endorsed NGFA's proposal to move the Chicago wheat contract to variable storage rates to try to force convergence. The basic premise is that storage rates revert to 5 cents a month. The exchange will look at the carries in the month prior to each delivery period. If the carries are 80 percent or more of calculated full carry, the storage rate would increase to 8 cents a month for the months following. If the carries in the month prior to the next delivery period are again at 80 percent or more of calculated full carry, the storage rates would go to 11 cents for the following months If the spreads are at 50 percent of full carry or less, the storage rates would revert to 5 cents a month from 8. The calculation would be repeated for the next delivery contract. At no time would the storage rate drop below 5 cents a month. The CME staff does not endorse this change. The major problem, from their point of view, is that the CFTC proposal is aimed at the December 2009 contract. This is a very major change for a contract with existing open interest. The change as proposed would make it almost impossible for the hedger to decide where best to place short hedges, as the basic structure of the contract becomes a moving target. Could raising storage rates actually backfire with other classes of wheat flowing into delivery in Chicago? It happens! The problem with the changes tried so far to correct a broken contract is that they have not addressed the primary cause -- speculative participation has grown larger than commercial involvement, creating a situation where futures activity moves cash rather than the reverse. The contract will not be fixed until cash participation is again larger than or at least equal to speculative participation. If this change takes place, we will have to assume that U.S. wheat has some value to world markets so that the front end will not be discounted too far. This would leave the thinly-traded deferred contracts to absorb most of the change. There is the potential of adding as much at $1.25 to $1.65 in storage carries to 12 months forward. This would tend to maintain future acres in a wheat contract that is apparently not very desirable to the world trade. It would create all sorts of cash carries encouraging commercials to hold inventories, perpetuating large stocks. Would it drive up the value of deferred Chicago soft wheat to well above the levels of Minneapolis or Kansas City markets? It seems like a complicated issue, but the bottom line is that the CFTC wants the CME to change their current carrying charge structure. These changes would add 3 cents per bushel per month to current carrying charges in each delivery cycle, and the changes are cumulative. For example, if the changes are made for the December contract, then Dec/March full carry is approx 27 cents per bushel versus the current 18 cents per bushel; March/May would be 24 cents per bushel versus the current 12 cents per bushels, etc. Storing SRW could be a very profitable venture -- Dec 2010/Dec 2011 carrying charges could exceed $2.50 per bushel, less than the cost to build a new bin. One can only imagine the manipulation in the wheat market by commercials to earn the carry! This seems like another effort by a regulatory agency to end up with a solution that is bigger than the problem it sets out to solve. Likely those who use and abuse our products after harvest will once again make more profit than the farmer who produced it. Jerry Gulke can be reached at http://www.jerrygulke.com/, [email]jerrygulke@gmail.com[/email] or 707-365-0601. (CZ/AG) Copyright 2009 DTN. All rights reserved.
[/b]

Jerry Gulke is sure not a socialist, regulator lover.
Look at what NGFA is proposing, and the CFTC agrees.
Putting these onerous storage charges on makes it
impossible to hedge. It shakes grain loose which
is what the Big Commercials want. Who do you think
owns the Terminal Delivery Elevators specified in
the futures contracts.
The way to solve the convergence problem is to
enforce Position Limits and let the Long Only
Index Funds take Delivery. But...who is going
to take Delivery at those storage rates.
The futures markets are crooked. The CFTC is not
fixing the manipulation. The way this is going,
it would be better to outlaw the futures markets.
And...I make a lot of money out of them.
[/b]

BTW, the CME does not agree with this either. Does
that make the CME socialist, regulator, populists
too??? Hummmm.....????
[/b]

quote:
Originally posted by Rogue Trader
[br]

quote:
Originally posted by OBG
[br]
I'M NOT A KOOK!!!!!!!!!!!!!!!!!!!!!!!!


OOKKKAAAAYYYY....


Isn't that what Richard Nixon said too?
[/b]

I agree energy master O Biwan Guynobi- you are not a kook.
I will continue to deny the potential outcomes that you see and continue to learn.
"Oh Lord, it's hard to be humble, but I'm doin' the best that I can-------"
Mac Davis
[/b]

Rogue trader is right, OBG is a kook. So was Copernicus, Erasmus, Martin Luther and even Jesus Christ in his time. Conventional wisdom is a dumb, fat, slow cow being led out to slaughter. Enjoy the hubris whilst you can, the last step's a *****.
http://www.onthewavefront.com/
[/b]

Thirsty, you also forgot Galileo. The Church had their problems then with Martin Luther and Galileo.
[/b]

I actually had Galileo in the line up and took him out because I thought he had church approval for most of his scientific career. I could be wrong, after a couple crowns and cigarettes I often just post from the hip with an odd peak at wiki to make sure I'm not too far off track. There's a pile of men I could add to that list that were considered absolute nutbar in their time, from the founding fathers to the whole Vienna Collegiate scene in the later half of the 19th century. Nutbars make history, slow, fat, dumb cattle get lead to slaughter. That is the history lesson for today.
[/b]

OBG: I thought you were taking a 30 day vacation???
lol. Hope you're having fun.
On 9-11-09...what a date!!!...lol...you recommended
buying Tapis Dec 2010 crude oil and holding it forever.
Well...it turns out that the ordinary investor can not
do this. So...I based it off of CLZ0 which closed at
75.35 on 9-11-09.
This all started cuz I asked you to stick your neck
out and give us some tradable advice. Well...it turns
out that Tapis is not tradable for the ordinary investor!
I freely acknowledge that you have a vast amount of
knowledge about flowrates and reservoir levels. The
question is...is this just a leisure pursuit on your
part...or can you make money on it???
The day that you made this recommendation RSI was
declining and K had crossed D down. Not exactly an
auspicious time to be executing this trade. Sure
enough, CLZ0 declined for a couple of days. Then, it
took off and topped out at 78.40 on 9-16-09. On
9-21-09 K crossed D down and yesterday=9-24-09 it
closed at 72.36...for a loss of 2.99 from your
entry point.
In the past you have advocated buying these contracts
outright and not using futures. Indeed, that's the only
way that you can do Tapis...if you can do it at all.
So, your initial investment was $75,350. As of the
close yesterday your loss was $2,990 plus storage...
for a net position of $72,360 less storage.
Have fun in Dallas. Hope Travis does good. See ya.
[/b]

Well gee... Maybe he would recommend DXO if some naïve populist fool that thinks big specs ran up oil prices to $150 hadn't gone and outlawed it.
[/b]

Rogue: I deal with PowerShares and ProShares. Get
your facts straight before you try histrionics. Or,
maybe you're trying to be a comedian. Don't quit
your day job. lol.
[/b]

From "Seeking Alpha":
PowerShares Shutters 19 ETFs 1 comment
by: Don Dion May 08, 2009 | about: IVZ / PDQ / PEH / PFP / PGZ / PHJ / PHW / PRFE / PRFF / PRFG / PRFH / PRFM / PRFN / PRFQ / PRFS / PRFU / PRY / PUA / PVM / PWD
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On May 1, 2009, Invesco (IVZ) PowerShares Capital Management LLC announced that it would be closing 19 ETFs on May 18. Shareholders of record on May 18 will receive cash equal to the amount of the net asset value of their shares as of May 22. That cash value should include any capital gains and dividends left in the cash portion of investors? brokerage accounts, according to PowerShares. While the shuttering of these 19 ETFs may not come as a surprise to some investors, especially in light of earlier ETF closings in 2008, they nonetheless change the landscape of the ETF world. Liquidity is an excellent indicator of viability in the ETF industry, but there is not a particular formula that dictates if, or how long, a fund will last if investor interest is lacking or waning. The closing of the 19 PowerShares funds this month provides an opportunity to sort through some of the ETF clutter and examine what can go wrong and why.
The incredible popularity of ETFs from 2007 to mid-2008 brought with it an onslaught of new, and often similarly themed, products to market. The unique way in which ETFs are launched has provided sponsors such as PowerShares and Claymore with the opportunity to launch multiple products at a time. This flood, however, has proved to be unsustainable, leading to multiple ETF closings across the industry. Despite the recent hit, PowerShares still remains a significant player in the ETF business, with a product line of 135 ETFs with assets of $25.8 billion as of March 31.
PowerShares President Bruce Bond addressed issues of liquidity and viability in his press statement May 1. ?After carefully evaluating numerous factors including shareholder considerations, length of time on the market, asset levels and the potential for future growth, we proposed closing certain portfolios that have not gained sufficient acceptance with investors,? Bond noted. ?We remain fully committed to the ETF industry and expect to offer new, exciting products in the months ahead.?
Of the 19 PowerShares products closing, a dozen are based on fundamental indexes created by Rob Arnott?s Research Affiliates. The PowerShares FTSE RAFI indices use fundamental values to rank securities in the FTSE Group indexes. Of the 12 FTSE RAFI funds closing, nine are U.S. sector based and three are niche international portfolios. Arguably, the nine domestic RAFI closings are not purely based on lack of average daily trading volume or performance. Four of the domestic funds, PRFS, PRFE, PRFN and PRFQ, have three-month average daily trading volumes over 20,000. Many of the funds have markedly outperformed the competition when viewed on a multiyear basis. The problem for these funds has been the competition, as more and more fund sponsors enter the domestic sector ETF fray. Vanguard, in particular, has been particularly aggressive in the launch of lower-cost ETFs. The competition has also prompted the Select Sector SPDRs, the sector ETF leader, to reduce their expense ratios, making them the lowest-priced sector ETFs in the marketplace.
In addition to the FTSE RAFI ETF closures, PowerShares is also set to close five of its Dynamic ETFs?a family that includes more than 40 funds. The Dynamic ETFs are quantitative-based indexing funds based off of the Intellidex benchmarks. The Indellidex approach takes into account fundamental, momentum and risk measures to weight products. Again, these closings are not necessarily directly related to trading volume or group affiliation. PowerShares Dynamic Asia Pacific (PUA) is being closed, while PowerShares FTSE RAFI Japan (PJO) will remain open for the time being. PUA and PJO both have average daily trading volumes in the 11,000 range.
The other two ETFs that PowerShares will be closing, PowerShares International Listed Private Equity Portfolio (PFP) and PowerShares High Growth Rate Dividend Achievers Portfolio (PHJ), are both perhaps too narrowly focused to gain traction. PFP and PHJ attracted $25.6 million in combined assets, with three-month average trading volumes of approximately 17,000 and 10,000, respectively. PFP launched during rather inauspicious times?late 2007, just as an economic meltdown was getting under way. PHJ launched in 2005.
While average daily trading volume is a good indicator of investor interest in the fund, another important factor is assets under management. Not all investors, however, are created equal. In order to determine the true public interest in an ETF, you have to view public investment interest separately from seed money when evaluating total assets. This is why assets under management alone can sometimes be deceiving. ETFs are created in large units of shares, typically 50,000 or 100,000. When an ETF is initially launched, the designated market maker will create a number of these units. The market maker then generally tries to sell off these units piecemeal, and when its inventory gets low, it creates additional units. Primary market makers generally do not redeem these initial units, and with low-volume products, they have to wait a considerable amount of time to move their seed investment. Low volume can lead to wider bid/ask spreads or lack of depth in the marketplace, forcing individual investors to often buy at marked premiums and sell at discounts.
Current investors in the 19 PowerShares products set to close face a decision in the next couple of weeks. The first option is to hold on to shares after May 18 and receive their May 22 value. The upside of this strategy is not having to sell shares into an illiquid market?or have to cash out at a large discount because so many others are doing so. The downside to holding shares until liquidation is that your investment will be tied up for a couple days as the fund closes. The last day you can sell the fund is May 18, and the value of your investment may change between the 18th and the 22nd while you are powerless to sell your shares. PowerShares also warned in its recent announcement that the closure process ?will cause each fund?s holdings to deviate from the securities included in its underlying index and each fund to increase its cash holdings, which may lead to increased tracking error.? The funds closing, three of which are tracked by ETF Report, include:
* PowerShares Dyn Aggressive Growth (PGZ)
* PowerShares Dyn Asia Pacific Portfolio (PUA)
* PowerShares Dyn Deep Value Portfolio (PVM)
* PowerShares Dyn Europe Portfolio (PEH)
* PwrShrs Dyn Hardw & Cons Electr (PHW)
* PwrShrs FTSE RAFI Asia Pac ex-Jpn Sm-Mid (PDQ)
* PowerShares FTSE RAFI Basic Mat (PRFM)
* PowerShares FTSE RAFI Cons Goods (PRFG)
* PowerShares FTSE RAFI Cons Serv (PRFS)
* PowerShares FTSE RAFI Energy (PRFE)
* PowerShares FTSE RAFI Eur Sm-Mid (PWD)
* PowerShares FTSE RAFI Financials (PRFF)
* PowerShares FTSE RAFI Health Care (PRFH)
* PowerShares FTSE RAFI Industrials (PRFN)
* PowerShares FTSE RAFI Intl Real Estate (PRY)
* PowerShares FTSE RAFI Telecom & Tech (PRFQ)
* PowerShares FTSE RAFI Utilities (PRFU)
* PowerShares High Gr Rate Div Achievers (PHJ)
* PowerShares Intl Listed Private Equity (PFP)
[/b]

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