The Etp Model Has Been Empirically Confirmed

[Futilitist]

Hey billvon.

Here is a logic problem for you to solve:

The oil price is currently well below the full cost of oil production. If consumers cannot currently support the full cost of oil production, how will they be able to afford to do so in the future?* And if oil producers cannot currently make a profit, how can oil production continue while we are waiting for consumers to be fully able to afford it?

*Saying that consumers used to be able to afford expensive oil, so they automatically will again, is not logical. Consumers can't afford to pay the full cost of oil production now because they are too poor to do so. To fix this, they will have to become more wealthy. How?

And while we are at it, when do you think the price of oil will be sufficient to pay the full cost of it's production?

What is your forecast for oil prices by the end of this year? How about the end of next year?



---Futilitist

 

[billvon]

The oil price is currently well below the full cost of oil production.

No, it is below the cost of most TIGHT oil production. It is well within the full cost of CONVENTIONAL oil production.

If consumers cannot currently support the full cost of oil production

They can currently support the cost of conventional oil production and have been doing so for decades. They can also support the higher price of tight oil production, as was proven between 2011 and 2014.

how will they be able to afford to do so in the future?

Same way they did between 2011 and 2014.

Here's what's likely going to happen over the next few years:

Oil prices will drop due to oversupply. This will cause increased consumption. (Both these things are happening now.) As oil consumption increases and matches production, then prices will rise. They will continue to rise until the cost of oil exceeds about $50 at which point several tight oil plays become profitable. It will then continue to rise more slowly as supply increases, bringing more and more fracking plays on-line, until supply once again matches demand. It will "cap" at about $80 which is where most tight oil wells become economical. It will likely hover around this point with the usual oscillations caused by a variable market. If the price increases, then more challenging wells become profitable and more supply comes on line. If it decreases, then assets are stranded and demand increases until demand pushes prices above the threshold again.

Over a longer period, it will slowly climb as the easier to extract tight oil is removed. This climb will be tempered by better/cheaper/more efficient extraction processes. We have about 12 years of tight oil reserves, and thus this will represent an upper limit on oil extraction. Before we drill that much oil, oil prices will rise to a point where they are no longer economical, and the EROEI for tight oil will approach 1. At that point, alternatives will become cheaper and we will switch to them due to economic reasons.

See below for a pictorial display of fracking costs from 2014. (Prices have been dropping steadily since then.)

 

[Futilitist]

Before we drill that much oil, oil prices will rise to a point where they are no longer economical, and the EROEI for tight oil will approach 1.

So you think there will be a point where oil production becomes uneconomical, i.e. a maximum oil price. That is good and logical.

1) What makes you think we haven't already hit that price during the last two periods of high oil prices? After all, in both cases the price did not continue to rise as should be expected in your model. Instead, oil prices crashed badly both times. That sounds like a thermodynamic price limit to me.

2) What is the maximum possible oil price in your model?

And here is something kind of cool. The Etp model forecasts that the price of oil cannot currently exceed about 70 dollars a barrel. That limit is falling fast. Your model requires 80 dollars a barrel to unlock the much needed tight oil. So we should see very soon which one of us is right.

Would you be surprised if oil fell again soon, or is that accounted for in your model?

What happens if we have a recession soon?



---Futilitist

 

[Dr_Toad]

Who cares, nutcase?

 

[billvon]

So you think there will be a point where oil production becomes uneconomical, i.e. a maximum oil price. That is good and logical.

No, it will not be a specific price. It will be a specific EROEI, something that has only a loose relationship to price. And that is not even a hard limit - above that price there will still be uses for oil (for example, as aviation and spacecraft fuel) that will drive its extraction, albeit at ever-diminishing rates.

1) What makes you think we haven't already hit that price during the last two periods of high oil prices?

Because people were, and are, still buying it. That is the acid test of whether something is affordable.

2) What is the maximum possible oil price in your model?

There is no maximum price. There is an EROEI limit.

And here is something kind of cool. The Etp model forecasts that the price of oil cannot currently exceed about 70 dollars a barrel. That limit is falling fast. Your model requires 80 dollars a barrel to unlock the much needed tight oil. So we should see very soon which one of us is right.

Yes, we will.

Would you be surprised if oil fell again soon, or is that accounted for in your model?

As I have stated, it will continue to fall as long as supply outpaces demand growth. Once that stops, then the price will rise.

 

[Futilitist]

Who cares, nutcase?

Apparently you do, Toad. Otherwise why troll this thread?



---Futilitist

 

[arfa brane]

I can follow the argument about oil companies not investing in new production if the price of oil is low, but not that future demand won't change the price.
I can imagine the US government subsidising exploration and production if that's seen as a solution, hell it bailed out Wall St to keep the economy afloat, why not the oil companies?

 

[origin]

And here is something kind of cool. The Etp model forecasts that the price of oil cannot currently exceed about 70 dollars a barrel. That limit is falling fast. Your model requires 80 dollars a barrel to unlock the much needed tight oil. So we should see very soon which one of us is right.

But when you are shown to be wrong that won't slow you down at all if your history is any guide.

 

[exchemist]

I can follow the argument about oil companies not investing in new production if the price of oil is low, but not that future demand won't change the price.
I can imagine the US government subsidising exploration and production if that's seen as a solution, hell it bailed out Wall St to keep the economy afloat, why not the oil companies?

Actually I don't believe they would, or that it would be desirable. By the time, far into the future, that oil and gas cease to be economic to recover except for special uses, all our efforts will be in nuclear (possibly including fusion by then, who knows) and renewables.

Oil and gas are eminently replaceable now - at a price - for applications other than transport fuel. And, as we can all see around us, even in the transport niche, the competition is starting to get serious.

The notion that there is a looming catastrophe, due to thermodynamics, which has somehow been missed by everyone in both government planning and in the relevant industries, is stark staring mad.

 

[exchemist]

Format error: the following words are my comment:

Actually I don't believe they would, or that it would be desirable. By the time, far into the future, that oil and gas cease to be economic to recover except for special uses, all our efforts will be in nuclear (possibly including fusion by then, who knows) and renewables.

Oil and gas are eminently replaceable now - at a price - for applications other than transport fuel. And, as we can all see around us, even in the transport niche, the competition is starting to get serious.

The notion that there is a looming catastrophe, due to thermodynamics, which has somehow been missed by everyone in both government planning and in the relevant industries, is stark staring mad.

 

[Futilitist]

In my original post on this thread, I reprinted my empirical confirmation of the Etp model from peakoil.com. Here is how it was received there:

Re: The Etp Model, Q & A
by shortonoil » Thu 06 Aug 2015, 18:39:26
Hi <i>Futilitist</i>

Beautifully done.

With your permission I would like to put up a page at the site displaying your graphs. Drop me an email.

BW Hill
http://www.thehillsgroup.org/


Re: The Etp Model, Q & A
by Observerbrb » Thu 06 Aug 2015, 19:28:56
Hello Futilitist (I'm Kondratieff, I am sure you remember me).

I just would like to say that you did an amazing job.

Best Regards,


Re: The Etp Model, Q & A
by shortonoil » Thu 06 Aug 2015, 19:47:13
...Futilitist in his post above also has a very possible explanation for the huge drop in price we are witnessing. When the system went through the energy half way point it became unstable. In such a case we could expect massive price swings around the Max Affordability curve. That explanation also has the benefit of establishing the actions of the financial system as an effect; not a cause, and physics would win again. Let's hope the rebound is soon enough to save the financial integrity of the petroleum system for a few more years?


Re: The Etp Model, Q & A
by Whatever » Fri 07 Aug 2015, 12:29:59
Hi Observerbrb.

Thanks. Good to see you again.

Hi BW.

Thanks. After 10 years of trying to understand and explain the energy situation, this is the most positive response I have ever received. The Etp model is a major breakthrough in science. It is the key to understanding our world. I am honored that you want to use my graphs. I will be in touch via email.

Futilitist in his post above also has a very possible explanation for the huge drop in price we are witnessing. When the system went through the energy half way point it became unstable. In such a case we could expect massive price swings around the Max Affordability curve.

Unfortunately, I don't think we can expect too many massive price swings around the Max Affordability curve. The basic logic is that the Etp curve is a strange attractor and the Max Affordability curve is a strange repeller. As we get further from the original Etp curve, it tends to have less and less effect on the overall system, while the effect of the Max Affordability curve tends to increase as we approach it.

The oil price might rise rapidly in the case of a massive, sudden supply shortfall (frackers go bust, Saudi pipeline explosion, WWIII, etc.). This could theoretically push the price up over the Max Affordability curve, but not for very long, and the reversion to the mean will be vicious.

Basically, the whole system has less and less vigor over time, making large price increases less and less likely as time goes on.

We are essentially already in collapse.

Here is a graph showing where I think the oil price is headed:

The red zone shows the area of the most likely near term price moves.

I think the economy is at a critical phase right now. I believe we are about to have a stock market crash. I would guess that the price of oil will soon (before 2016) drop to somewhere in the low 30s or possibly even lower.

Here is a comparison between the oil price and the Dow Jones Industrial average:

The dotted line shows the highest price the Dow reached during the last oil spike and crash. The current level was only made possible through extraordinary central bank measures. Things are not looking good.


---Futilitist

----------------------------

My post above forecasts the onset of the stock market correction about 2 weeks in advance. This correction is not yet complete. World stock markets will continue falling. And the oil price is well on track to match this forecast. Treat the above as the official Futilitist forecast going forward, until I do my next official update.



---Futilitist

 

[krash661]

In my original post on this thread, I reprinted my empirical confirmation of the Etp model from peakoil.com. Here is how it was received there:

Re: The Etp Model, Q & A
by shortonoil » Thu 06 Aug 2015, 18:39:26
Hi <i>Futilitist</i>

Beautifully done.

With your permission I would like to put up a page at the site displaying your graphs. Drop me an email.

BW Hill
http://www.thehillsgroup.org/


Re: The Etp Model, Q & A
by Observerbrb » Thu 06 Aug 2015, 19:28:56
Hello Futilitist (I'm Kondratieff, I am sure you remember me).

I just would like to say that you did an amazing job.

Best Regards,


Re: The Etp Model, Q & A
by shortonoil » Thu 06 Aug 2015, 19:47:13
...Futilitist in his post above also has a very possible explanation for the huge drop in price we are witnessing. When the system went through the energy half way point it became unstable. In such a case we could expect massive price swings around the Max Affordability curve. That explanation also has the benefit of establishing the actions of the financial system as an effect; not a cause, and physics would win again. Let's hope the rebound is soon enough to save the financial integrity of the petroleum system for a few more years?


Re: The Etp Model, Q & A
by Whatever » Fri 07 Aug 2015, 12:29:59
Hi Observerbrb.

Thanks. Good to see you again.

Hi BW.

Thanks. After 10 years of trying to understand and explain the energy situation, this is the most positive response I have ever received. The Etp model is a major breakthrough in science. It is the key to understanding our world. I am honored that you want to use my graphs. I will be in touch via email.

Futilitist in his post above also has a very possible explanation for the huge drop in price we are witnessing. When the system went through the energy half way point it became unstable. In such a case we could expect massive price swings around the Max Affordability curve.

Unfortunately, I don't think we can expect too many massive price swings around the Max Affordability curve. The basic logic is that the Etp curve is a strange attractor and the Max Affordability curve is a strange repeller. As we get further from the original Etp curve, it tends to have less and less effect on the overall system, while the effect of the Max Affordability curve tends to increase as we approach it.

The oil price might rise rapidly in the case of a massive, sudden supply shortfall (frackers go bust, Saudi pipeline explosion, WWIII, etc.). This could theoretically push the price up over the Max Affordability curve, but not for very long, and the reversion to the mean will be vicious.

Basically, the whole system has less and less vigor over time, making large price increases less and less likely as time goes on.

We are essentially already in collapse.

Here is a graph showing where I think the oil price is headed:

The red zone shows the area of the most likely near term price moves.

I think the economy is at a critical phase right now. I believe we are about to have a stock market crash. I would guess that the price of oil will soon (before 2016) drop to somewhere in the low 30s or possibly even lower.

Here is a comparison between the oil price and the Dow Jones Industrial average:

The dotted line shows the highest price the Dow reached during the last oil spike and crash. The current level was only made possible through extraordinary central bank measures. Things are not looking good.


---Futilitist

----------------------------

My post above forecasts the onset of the stock market correction about 2 weeks in advance. This correction is not yet complete. World stock markets will continue falling. And the oil price is well on track to match this forecast. Treat the above as the official Futilitist forecast going forward, until I do my next official update.



---Futilitist

peak oil is ONLY one company with their own business model.
you're forgetting the whole industry.
agian, you're completely clueless to any of this as you continue to spew your pathetic nonsense.
this is sort of outdated, but the scenario is the same. study this,

and,

another thing to think about,

if you want, you can look at my link here and see some actuall screen shots i took at that time.
http://s1228.photobucket.com/user/krash661/library/?sort=6&page=1

 

[Futilitist]

peak oil is ONLY one company with their own business model.

Hey krash. Peakoil.com is a discussion forum. Get a clue.

you're forgetting the whole industry.

No.

agian, you're completely clueless to any of this as you continue to spew your pathetic nonsense.

Your entire post is meaningless gibberish.



---Futilitist

 

[Futilitist]

The notion that there is a looming catastrophe, due to thermodynamics, which has somehow been missed by everyone in both government planning and in the relevant industries, is stark staring mad.

It is quite apparent from your reaction, and the general reactions from almost everyone on this forum, that people aren't necessarily very open to hearing about this looming catastrophe. People don't like bad news. And this is really, really bad news. Hell, it's pretty much the worst news ever.

If you were the President of the United States or the CEO of a major corporation, how would you break the news of the upcoming apocalypse to the world?



---Futilitist

 

[krash661]

Hey krash. Peakoil.com is a discussion forum. Get a clue.

here's your clue: http://www.peakoil-gas.com/
also, so now you're just reiterating what ever you come across on that .com ?
because it's obvious you do not comprehend its entirety.

No.

yes.. all you have done is read a cesspool, then agree with its face value. shrugs. nothing more.

Your entire post is meaningless gibberish.

i'm sure it is too an individual whom has no clue what actually pertains to the subject that this one is talking.
yes, yes... experience is everything.
but please continue to spew your nonsense that you're just reiterating from another cesspool. it's not like you can do anything else, correct ?

 

[krash661]

this looming catastrophe. People don't like bad news. And this is really, really bad news. Hell, it's pretty much the worst news ever.

because there is none. you're only reading something to create fear in order to be able to increase prices from greed. nothing more.
i have mentioned before about exploration, drillers, and refiners or companies being one. but it appears it went right over your head.
the government already subsidises oil companies, not mention all the guaranteed tax deductions and such.
exxon is one of the entities that controls humanity. if all the subsidies and tax deductions were taken away, the two biggest oil companies will still be profitable of billions of dollars.
all in all, it's massive obvious that you have no clue of what you think you do.

upcoming apocalypse to the world?

ahh i now see.. be honest, this is your real intent huh.
all this is just used to lead up to your apocalypse nonsense huh ?

 

[krash661]

not only that, but if this apocalypse does happen, what would an oil industry matter then ?

 

[Futilitist]

Thanks for the brilliant insights there, krash.

Meanwhile, back to reality:

I can follow the argument about oil companies not investing in new production if the price of oil is low, but not that future demand won't change the price.

When oil companies don't invest in new production, that means that they don't spend money. That means job losses. Lot's of job losses. Think about all the soon to be bankrupt frackers. 9 out of 10 jobs created since the last recession have been oil related. And don't forget the banks, and all the jobs in the financial sector related to loans to frackers.

People without jobs don't buy much oil.

Demand is dropping rapidly. The entire commodities complex is basically cratering. Stock markets are crashing around the world. Many indicators point to a near term recession. I believe we are falling into a world wide deflationary spiral, like the Great Depression. The Great Depression lasted more than a decade. We never really recovered from it. We had WWII instead.

So where will future demand come from? When millions of people are out of work, it won't matter how low the oil price goes, it won't generate demand. See?

The price of oil cannot rise until the oil glut stops. But the oil glut cannot stop until much of the oil industry collapses, tanking the economy. And if the economy tanks, people will not be able to afford expensive oil. It is a giant catch-22.



---Futilitist

 

[billvon]

It is quite apparent from your reaction, and the general reactions from almost everyone on this forum, that people aren't necessarily very open to hearing about this looming catastrophe.

Like the riots that were coming in the summer of 2013, followed by the collapse of the world economy, most likely within 2 years? Or the $12-$24 gas prices that were coming in 2015?

Yes, we heard all about those looming catastrophes. And now you have a new catastrophe. I am confident that in another two years you will have a fresh catastrophe prediction, while claiming that you meant all along it wouldn't happen until 2018.

People don't like bad news. And this is really, really bad news. Hell, it's pretty much the worst news ever.

So was the 2013 riot prediction. So was the $12-$24 gas price prediction. Cry "wolf" enough and pretty soon people start ignoring you.

If you were the President of the United States or the CEO of a major corporation, how would you break the news of the upcoming apocalypse to the world?

Same way Harold Camping did (and with the same results.)

 

[exchemist]

Thanks for the brilliant insights there, krash.

Meanwhile, back to reality:

Demand is falling rapidly. The entire commodities complex is basically cratering. Stock markets are crashing around the world. Many indicators point to a near term recession. I believe we are caught in a world wide deflationary spiral, like the Great Depression. The Great Depression lasted more than a decade. We never really recovered from it. We had WWII instead.

So where will future demand come from? When millions of people are out of work, it won't matter how low the oil price goes, it won't generate demand. See?



---Futilitist

Hysterical crap. The long overdue correction in China has been forecast for some time. There is no reason to suppose this is going to usher in a catastrophic recession. Stock markets are not crashing around the world. This is just one of the periodic readjustments we get from time to time. Anyone older than 25, whose eyeballs are not permanently swivelling in their sockets, will have seen plenty of them.

There is no such thing as a "commodities complex", except possibly as a rare psychiatric condition, suffered by certain people. Anyway, whatever else may be debatable, what is absolutely for sure is the slowdown in China has fuck-all to do with the thermodynamics of oil extraction. It is to do with the natural evolution of the Chinese economy and the (mis)management of it. As any halfway decent newspaper article can tell you.