The Etp Model Has Been Empirically Confirmed

[Futilitist]

Which refer to the price of oil?

The second law of thermodynamics controls the price of oil because the price of oil is based on it's lifting cost (the cost of pumping it out of the ground). That lifting cost rises because of rising entropy in the oil production process over time.



---Futilitist

 

[Billy T]

The second law of thermodynamics controls the price of oil because the price of oil is based on it's lifting cost (the cost of pumping it out of the ground). That lifting cost rises because of rising entropy in the oil production process over time. ---Futilitist

Thermodynamics has nothing to do with "lifting cost" - that is related to the cost of energy, which in the case of wind energy and some others is the capital cost of the generation machine - That in term is largely politically set by the governments control of interest rate.

 

[Futilitist]

You need to re read this thread, Billy T. This has all been very well covered before (and you know that).

http://www.thehillsgroup.org/depletion2_022.htm

The Energy Factor, Part IV
The Price of Oil

The price of petroleum is controlled by two factors:

1) The cost of production.
2) The $ amount that the end consumer (the NEGs) can afford to pay for it.

What the end consumer pays must be sufficient to cover the cost of production. All production cost must be borne by the end consumer, who includes the end buyer, and the societal cost required to produce petroleum, and its products.

The Petroleum Price Curve, shown below, reflects the two factors that have, and will continue to control petroleum prices. The ETP derived Cost Curve is constructed from the ETP model, and has mapped the price of petroleum since 1960 with a correlation coefficient of 0.965. It is the most accurate pricing model that has ever been developed.

The Maximum Consumer Price curve was also developed from the ETP model. It represents the maximum price that the end consumer can pay for petroleum. It is based on the observation that the price of a unit of petroleum can not exceed the value of the economic activity that the energy it supplies to the end consumer can generate.

The energy content of a unit of petroleum is fixed by its molecular structure. The energy to produce a unit of petroleum, and its products increases with time as a result of the entropy production of the PPS (Petroleum Production System). The energy remaining for use by the general economy declines, and the economic activity that the petroleum can power also declines. Chart# 161 below shows the historical, and projected economic activity in 2014 dollars that a barrel of petroleum (37.5° API crude) has, and will be able to power.



A more complete explanation of how the Maximum Consumer Price curve was formulated is show in chart# 160 below:



The two Maximum affordable price curves labeled 71% (black), and 62% (light blue) are skewed logistic curves. There is no explicit mathematical equation to describe them. They are derived numerically, and the dots represent values for specific years. The 71% curve is the maximum theoretical energy that can be extracted from a unit of 37.5° API crude. Its value is derived from the combustion equations of hydrocarbons. The 62% curve is the average energy extracted from the same hydrocarbon by the end user. It passes through the ETP derived price curve at the inflection point of the ETP curve in year 2012. 2012 was the energy half way point for petroleum production. It was the year when it required one half of the energy content of petroleum to produce the petroleum, and its products.
The individual points are generated from the equation:

$/barrel = (Energy delivered - ETP value/ BTU/$) * 42.

Energy delivered = 140,000 BTU/gal *0.62 (140,000 BTU/gal - the energy content of 37.5° API crude)
ETP value is derived from the ETP function
BTU/dollars is taken from the BTU/dollars graph - Graph# 12

The Maximum Consumer Price curve is curtailed at 2020 at $11.76/ barrel. At this point petroleum will no longer be acting as a significant energy source for the economy. Its only function will be as an energy carrier for other sources. Production will continue as long as producers can realize the lifting costs at existing fields. E&D expenditures, and field maintenance costs will have been curtailed. All production from that point forward will be from legacy fields only. The economic impact that will result from the energy lost to the general economy is beyond the scope of this report.

The energy content of a unit of petroleum is fixed by its molecular structure. The energy to produce a unit of petroleum, and its products increases with time as a result of the entropy production of the PPS (Petroleum Production System). The energy remaining for use by the general economy declines, and the economic activity that the petroleum can power also declines. Chart# 161 below shows the historical, and projected economic activity in 2014 dollars that a barrel of petroleum (37.5° API crude) has, and will be able to power.



Historically, petroleum has been a primary beneficiary to the economy. The economic activity that it powered was greater than the cost of the petroleum. Its historical effect can be seen in Graph# 25 (World GDP vs Cumulative Production). That benefit is now declining, and by the early 2020's an increased use of petroleum will no longer add to GDP. It will become more cost effective for society to begin limiting its use of petroleum as the use of petroleum transitions from a GDP enhancer to a GDP reducer.

~The Hills Group



---Futilitist

 

[Futilitist]

You study up on your thermodynamics, Billy T.

Meanwhile, the financial consequences of our thermodynamic excess continue to mount:

http://www.zerohedge.com/news/2016-...apse-short-sales-banned-loan-loss-fears-mount

Italian Banks Collapse, Short Sales Banned As Loan Loss Fears Mount

Submitted by Tyler Durden on 01/18/2016 12:40 -0500

• CDS
• default
• Italy
• Markit
• Monte Paschi
• Naked Short Selling
• recovery
• Reuters
• Short Interest

Italian bank stocks are crashing (with BMPS down 40% year-to-date) as Reuters reports that investors are growing increasingly nervous about how the sector will cope with lower interest rates and a 200 billion euro ($218 billion) pile of loans that are unlikely to be repaid. The broad banking sector is down 4% with stocks suspended, and in light of this bloodbath, Italian regulators have decided in their wisdom, to ban short-selling of some bank stocks (which has driven hedgers into the CDS market, spking BMPS credit risk).

Italy's banking index was down over 4 percent with shares in several lenders, including the country's biggest retail bank Intesa Sanpaolo and the third biggest lender Banca Monte dei Paschi di Siena, suspended from trading after heavy losses.

Bloodbath for Italian financials in 2016...



But don't worry:

• *MONTE PASCHI CEO CONFIRMS FINANCIAL STABILITY OF BANK
• *MONTE PASCHI CEO: STOCK DECLINE NOT JUSTIFIED BY FUNDAMENTALS

As Reuters reports,

Investors are growing increasingly nervous about how the sector will cope with lower interest rates and a 200 billion euro ($218 billion) pile of loans that are unlikely to be repaid.

Those concerns are trumping expectations about a wave of consolidation set to sweep the sector, with cooperative banks under pressure to merge following a government reform to reduce the number of lenders.

JP Morgan said this month Italian banks should be avoided because low rates are expected to put pressure on revenues more than in other countries and credit problems limit a recovery in provisions.

Traders have suggested exiting investments that have been particularly favoured, such as Popolare di Milano and Intesa, as the stocks have reached key supports.

"I think upside on cooperative banks this year is much more limited," said a London-based equity sales person.

Short interest in Popolare di Milano soared 50 percent to 1.1 percent in the last month, and it rose 10 percent to 3.9 percent for UBI, according to Markit data.

And now, Italian regulators have re-enforced a short-selling ban (because that has always worked so well in the past)...

Consob adopts a temporary ban on short selling on Banca MPS shares.The ban shall apply immediately and shall last until Tuesday 19 January 2016 end of day.

Consob decided to temporary prohibit short sales of the share Banca MPS (ISIN code IT0005092165).

The ban will apply immediately and will be enforce for the entire trading session of tomorrow, Tuesday 19 January 2016, on the MTA market of Borsa Italiana.

The prohibition was adopted pursuant to Article 23 of the EU Regulation on short selling, considering the price change recorded by the share on 18 January 2016 (in excess of 10%).

The prohibition applies to short sales backed by stock lending. This extended the scope of the prohibition of naked short selling, already in force for all shares from 1st November 2012 by virtue of the EU Regulation on short selling.

And so hedgers have shifted to other markets - spiking default risk across the entire group, soaring back towards pre-"whatever it takes" levels...




---Futilitist​

 

[exchemist]

I never said the Saudi's don't have some cheap oil. I said that we don't. US oil is currently being sold for less than the cost of it's production. But it's funny you should mention water. I think the Saudi water cut is around 90%. For every 10 barrels they pump, 9 are water and only 1 is oil.

Globally, oil wells produce about 220 million BWPD (barrels of water per day)—roughly three barrels of water for every barrel of oil. In older fields, the water "cut," or ratio-of-water-to-oil, can be 95% or higher. Managing this produced water is a great challenge for operators.

The Etp model deals with the lifting costs of the liquid that comes out of the ground. That cost is the same whether you pump oil or water. That is why the model treats the thermodynamics the same. Get it?



---Futilitist

Aha, so now at last, after you have posted this rubbish 5 or 6 times, we finally get an acknowledgement that the formulae you have been posting all this time deal only with the "lifting costs". Well, exactly.

But then, in the case of oil, you can easily "pay" for these thermodynamic costs, by utilising a small proportion of the energy value of the oil itself. Which you can't do with water. So , therefore , any thermodynamic model that looks only at the "lifting costs" is stupid, because it is ignoring the enormous energy available from the material being lifted. (Incidentally, I see Saudi Arabia was claiming as recently as 2009 that their water cut was only 29%.)

I won't ask "get it?", as I am quite sure you won't - or won't admit to it, rather.

 

[Futilitist]

Aha, so now at last, after you have posted this rubbish 5 or 6 times, we finally get an acknowledgement that the formulae you have been posting all this time deal only with the "lifting costs".

No. After I patiently tried over and over again to explain the Etp model to you, now you finally begin to understand the basic concept. I guess that means that all of your prior objections to the model are rubbish because you have finally acknowledged your complete lack of comprehension.

...any thermodynamic model that looks only at the "lifting costs" is stupid, because it is ignoring the enormous energy available from the material being lifted.

The Etp model doesn't ignore the energy available in the oil. In fact, it uses three nested control volumes to allow for all potential forms of energetic input to oil production (natural gas, solar, etc.).

The cost of oil production is rising because of rapidly rising entropy production in the oil production process.

Lifting costs are all you need know to forecast the yearly average oil price. We know that because the Etp model is very accurate (at least until quite recently, when multiphasic collapse began to gain more momentum and even the Etp model's dire forecast has been exceeded. We are 4 years ahead of schedule!).



---Futilitist

 

[Billy T]

Yes I remember this "Etp derived cost curve" and the thermodynamic bases for it from your post of three + years ago.

Interesting how back then Thermodynamics was "proving" oil would soar in price, and soon* be unaffordable to the consumer so before 2015 the global and US economies would collapse; Yet now your version of thermodynamics is predicting the collapse of both the price of oil and the economy.

As thermodynamics does not say anything about the price of anything, You had the flexibility to claim it supported these very different price predictions.

Again: Thermodynamics does not concern price of oil, which is mainly supply and demand set. Saudis have decided to flood the market with supply (desiring to bankrupt US frackers and regain market share lost to them.) So I guess you think thermodynamics controls the thinking of the Saudis.

*I. e. there would be an annual short fall of 4 to 8% of demand and that would make gasoline cost 12 to 24 dollars a gallon in 2015, and double that in 2016.

 

[Futilitist]

Yes I remember this "Etp derived cost curve" and the thermodynamic bases for it from your post of three years + ago.

No Billy T. I didn't know about the Etp model until about March of 2015. That is less than a year ago. Quit lying.

Saudis have decided to flood he market with supply...

Bullshit. The Saudi's did not flood the market with supply. The US did.

*I. e. there would be an annual short fall of 4 to 8% of demand and that would make gasoline cost 12 to 24 dollars a gallon in 2015, and double that in 2016.

Back in 2013, I was talking about what would happen after the all liquids peak. But thanks to the FED's easy credit policies, which directly supported the rise of US fracking, we haven't reached the all liquids peak yet. We have a glut instead.

Prolonged low oil prices will destroy the oil industry, but the only way for oil prices to rise again is for production to drop. Catch-22. So we are almost at the peak right now. When the frackers all go bust, world oil production will fall fast. If we don't have an immediate total collapse, the world will experience continuously falling oil production, leading to continuously falling GDP until total collapse finally overtakes the system.



---Futilitist

 

[Billy T]

... The cost of oil production is rising because of rapidly rising entropy production in the oil production process. ... ---Futilitist

Nonsense. Saudis control the price of oil and their production process (like all non-reversible processes) does produce entropy but no more than it did 25 years ago - It is basically unchanged from back then. Their prodution cost is still about $9/ brl. I suspect they have become a little more efficient, produce less heat per barrel produced, so if anything now make smaller entropy increase per barrel than they did 25 years ago. In inflation adjusted terms, energy (for lifting the oil) has never been cheaper.

 

[Billy T]

No Billy T. I didn't know about the Etp model until about March of 2015.
---Futilitist

If that is true how did you get your extremely WRONG predictions - why do you think you predict more accuratelly now?

 

[Futilitist]

Nonsense. Saudis control the price of oil...

No they don't, Billy T. Nobody with half a brain could possibly believe that bullshit propaganda.

If that is true how did you get your extremely WRONG predictions - why do you think you predict more accuratelly now?

My predictions have been amazingly accurate all along, ever since I started the "Apocalypse Soon?" thread 3 years ago.

http://sciforums.com/threads/apocalypse-soon.133084/

And it has always been about thermodynamics.

All matter and energy in the universe are subject to the laws of thermodynamics. The First Law (the conservation law) says there can be no creation of matter, only the transformations of existing matter from one form into another. The Second Law (the entropy law) says that spontaneous processes will increase the disorder (or entropy) of a system; concentrations of matter tend to disperse, structure tends to disappear, and order becomes disorder. Moreover, all physical processes reduce the total available energy.

Billions of years of solar energy inputs created low-entropy matter here on Earth. Low-entropy matter is the prerequisite for human life. The human evolutionary line has existed for about 5,000,000 years, biologically modern humans appeared sometime in the last 120,000 years, and behaviorally modern humans probably appeared sometime between 120,000 and 40,000 years ago. Over millions of years, humans evolved to "fit" their billions-of-years-old environment. Major changes in our natural environment make it unsuitable for us -- we no longer "fit".

Humans use energy to feed on low-entropy matter (and excrete high-entropy matter as waste). When humans run out of energy, they die.
~Jay Hanson, From the very first post of "Apocalypse Soon?", Jan. 1, 2013

And from here on, my predictions should be even more spot on, since the positive feed backs of economic collapse are already setting in quite rapidly.

You are deep in denial. It is time to face the truth, whether you like it or not.



---Futilitist

 

[Russ_Watters]

My predictions have been amazingly accurate all along, ever since I started the "Apocalypse Soon?" thread 3 years ago. And from here on, my predictions should be even more spot on, since the positive feed backs of economic collapse are already setting in quite rapidly.

Uh huh -- so this "collapse" that supposedly started and resulted in widespread civil unrest two years ago (due to unsupportably high oil prices) should finally soon start to be noticeable?

 

[Futilitist]

Uh huh -- so this "collapse" that supposedly started and resulted in widespread civil unrest two years ago (due to unsupportably high oil prices) should finally soon start to be noticeable?

You mean noticeable to you? Yes, Russ, the collapse will finally start to become noticeable.

Aren't you excited?



---Futilitist

 

[Billy T]

... My predictions have been amazingly accurate all along, ever since I started the "Apocalypse Soon?" thread 3 years ago. ... Futilitist

Your definition of "accurate" must be: I was only wrong by a factor of 10!

To quote from a Futilitis post predicting that there will be an oil supply problem and gasoline prices after 2015 :

"After 2015, we will cross over into permanent {oil} depletion. That means about a 4-8 percent shortfall every year from then on. ... Hypothetically, gasoline will be 12 - 24 a gallon the first year, and 24 - 48 {dollars/ gallon} the next, except that the economy will completely collapse before that can happen. Alternatives are not capable of replacing oil, and even if they were, we have run out of time to react."

It was a "hypothetical" prediction that would not come true as the US economy would have collapsed before 2015, Futilitis predicted 3+ years ago.

The above quote is part of his post 128 here: http://www.sciforums.com/threads/apocalypse-soon.133084/page-7

You will be hard pressed to find a better example of "hoist-by-your-own-petard."

 

[Futilitist]

Your definition of "accurate" must be: I was only wrong by a factor of 10!

To quote from a Futilitis post predicting that there will be an oil supply problem and gasoline prices after 2015 :

"After 2015, we will cross over into permanent {oil} depletion. That means about a 4-8 percent shortfall every year from then on. ... Hypothetically, gasoline will be 12 - 24 a gallon the first year, and 24 - 48 {dollars/ gallon} the next, except that the economy will completely collapse before that can happen. Alternatives are not capable of replacing oil, and even if they were, we have run out of time to react."

It was a "hypothetical" prediction that would not come true as the US economy would have collapsed before 2015, Futilitis predicted 3+ years ago.

The above quote is part of his post 128 here: http://www.sciforums.com/threads/apocalypse-soon.133084/page-7

You will be hard pressed to find a better example of "hoist-by-your-own-petard."

That quote says that after crossing over into permanent oil depletion, oil prices would have to rise to levels that would destroy the economy. I said the prices would have to hypothetically rise to super high levels "except that the economy will completely collapse before that can happen". Thus those prices would be impossible and could not ever happen. I did not ever predict that those prices would ever happen. Learn to read!

As far as timing the depletion crossover event, it is just after 2015 and we are about to cross over into permanent depletion. So, I might be a little off on the timing, but not by much.

It didn't happen yet because the FED jumped in and enabled the fracking boom, thus somewhat delaying the crossover event. You would be correct to notice that I did not predict the current glut way back in 2013. But so what? I am not Nostradamus! If the FED had not intervened, my prediction would have been absolutely accurate. And since the only way to resolve the current low oil price is the destruction of the oil industry itself, and with it the whole economy, my prediction was amazingly accurate.

Thanks for helping me to point out how uncanny my predictions really have been over the years. I surprise even myself sometimes.

Here is how I answered this same stupid argument from you just a couple of pages ago:

Hey BillyT, you are totally boring and weirdly obsessed with a single statement I made 3 years ago. I answered you about a dozen times already. Nobody is interested in your stupid diversionary tactic. It is painfully obvious that you are just trying to draw attention away from my more recent definitive prediction:

"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."
~Futilitist, Aug 7, 2015

Here is a graph of how my prediction has turned out so far:

What do you think of my prediction and it's uncanny accuracy?

Where do you see oil prices and the stock markets heading?

These are exciting times, don't you think?
...

Forcing me to readdress this on every page is a form of trolling. Please knock it off, Billy T. Let's try to focus on the current ongoing collapse situation.



---Futilitist

 

[Futilitist]

Here is part of an interview with venerable trader Art Cashin:

Art Cashin: This Is "What You Get Before You Slip Into A Crisis"

http://www.zerohedge.com/news/2016-01-18/cashins-ominous-warning-what-you-get-you-slip-crisis

You’re working on the floor of the stock exchange for almost six decades. During that time you have seen many difficult moments. How severe is the situation right now?

"It is very similar to what you get before you slip into a crisis. Also, it’s earnings season and because of that many corporate buybacks have to be paused during this period. That removes an important potential support for the market. Over the last year, companies buying back their own stock have put more money into the market than all of the public has. The cessation of those buybacks is probably a reason why we’re seeing the rather sharp selling that has occurred."

A main source of concern is the sharp drop in oil prices. Both, WTI and Brent, closed below $30 on Friday. Why is this causing so much havoc on Wall Street?

"Investors are concerned that many of the small and domestic producers here in the United States have money owned in the high yield market. So if oil prices continue to go lower they’re afraid that up to two thirds of those fracking companies may go into bankruptcy. They fear that through financial contagion those bankruptcies would then begin to spread into other areas of the financial markets."

Are there already signs of contagion?

"Several market participants have been asked to put up more collateral to prepare for bad loans. Also, on Wednesday there were both rumors and indications that there was a good deal of forced selling going on. There were rumors that it could have been either a hedge fund or a sovereign wealth fund, maybe investors who are exposed to the oil prices. It could have been Saudi Arabia or Norway. Forced selling and margin calls are very hard to deal with because such an investor basically has no latitude. Positions must be sold at any price and that’s very difficult for the market."

Also, there is alarming news coming out of China. What’s the problem here?

"On Friday, before trading started in New York, Chinese equity markets were down another 3,5% already overnight – and that is despite the best efforts of the Chinese government and the central bank to keep prices from destabilizing."



---Futilitist

 

[Russ_Watters]

Prolonged low oil prices will destroy the oil industry, but the only way for oil prices to rise again is for production to drop. Catch-22. So we are almost at the peak right now. When the frackers all go bust, world oil production will fall fast. If we don't have an immediate total collapse, the world will experience continuously falling oil production, leading to continuously falling GDP until total collapse finally overtakes the system.

Hehe - right, as soon as all the frackers are gone, everyone will magically forget how to frack, never to be able to figure it out again.

You mean noticeable to you? Yes, Russ, the collapse will finally start to become noticeable.

Aren't you excited?

Can't wait. Now when we say "noticeable", you do mean GDP, right? I mean, you said it above, but I just want to be clear that now, finally, 2 years after you promised it, we'll be seeing the GDP collapsing soon, right? Shall we do another 'by summer we should be seeing civil unrest due to the collapse in gdp' (paraphrase) or do you want to try to keep it vague so it is easier for you to slowly back away than it was last time? I'm sure the laughter stung a bit last time.

But hey, at least you stopped with the whole "peak oil" nonsense you used to peddle. Remember when you used to try to argue that Peak Oil really, honestly guys, did happen because "tight oil" didn't count? I guess that's progress in a way.

Also, regarding your previous wrong oil price claims that you are trying to weasel out of, do you remember on June 8, 2013, in the middle of a 3-year stable oil market at $100-120 a barrel saying:

And we can expect oil prices to rise very rapidly in the near future since we are on the edge of irreversible oil depletion, prevented only by ever rising tight oil production."

Oops.

Hey, look, you used to understand basic economics!:

Demand is falling because the price is too high. If producers would produce more, the price per barrel would drop, but people would use more so the producers would still make a profit.

Guess you forgot.

And:

Our production rate is ultimately limited by geology.

Wow, that was actually true too! Too bad you forgot that, too.

 

[Russ_Watters]

Also, regarding your previous wrong oil price claims that you are trying to weasel out of, do you remember on June 8, 2013, in the middle of a 3-year stable oil market at $100-120 a barrel saying:

A little more on that. You're trying to weasel out of your claim of a spectacular rise in oil prices crushing the economy by now claiming that you always meant the economic collapse would prevent the rise in oil prices. This isn't true: you very clearly meant that oil prices would spiral up, out of control and that would precede/cause the economic collapse:

Since then, I have been anticipating that the production ceiling will again be exceeded by demand, leading to another oil price spike and economic crash.

Now that there is no problematic high oil price, there is nothing to cause the crash that you were previously predicting.

Then again, you were already hedging your bets:

It could collapse at any time, even without another oil spike.

 

[Futilitist]

Hehe - right, as soon as all the frackers are gone, everyone will magically forget how to frack, never to be able to figure it out again.

Fracking costs more than we can afford. Once the frackers are gone, that will be more true than ever.

But hey, at least you stopped with the whole "peak oil" nonsense you used to peddle.

This has always been about peak oil. It still is.

We have been on the edge of irreversible depletion ever since the fracking boom began. If it weren't for US fracking, we would already have crossed into irreversible depletion. Now that the fracking boom is coming to an end, we can expect depletion to begin.



---Futilitist

 

[Russ_Watters]

Here's what you said on March 13, 2013:

I think the stock markets are due for a very large correction (still known as a crash) as the US falls into recession again (happening now). We might not see major social unrest (hard to quantify) until the summer. But there will be no recovery from the next recession. The recession/depression will morph into full scale social collapse, eventually, as the monetary system fails, probably from a major sovereign default in Europe. Total collapse might not begin for a few years (unlikely), depending on the reactions of governments to all of this, although an immediate collapse would not surprise me (I think sooner is more likely than later).

So do you want to just give a thumbs-up and we can move the date ahead 3 years and give it another try? Or is the "happening now" part still too aggressive?

Fracking costs more than we can afford.

I afforded it just fine when prices were higher. And will again when prices go up again. $110 oil didn't cause a recession when we had 3 years of it.

We have been on the edge of irreversible depletion ever since the fracking boom began. If it weren't for US fracking, we would already have crossed into depletion. Now that the fracking boom is coming to an end, we can expect depletion to begin.

I think you've forgotten what "depletion" means. "Depletion" means we've already pumped all of it out of the ground. The fracking boom has stopped for a breather, but it was just getting started.