There’s a lot of discussion in the ‘blogosphere’ of whether we’re starting to see the effects of peak oil in our economic woes – here are some highlights (and don’t forget my blog post).

 

2015 Could Be The Year Of Peak Oil

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I am now more convinced than ever that 2015 will see the peak in world crude oil production. I have very closely studied the charts of every producing nation and my prognosis is based on that study. I see many nations in steep decline and most every other nation peaking now, or in the last couple of years, or very near their peak today. These include the world’s three largest producers, Russia, Saudi Arabia and the USA.

Read more: Oil Price

China Peak Oil: 2015 Is the Year

Domestic production looks set to peak, with some profound implications for the world market.

Intense focus on the North American shale boom, Saudi Arabia, and ISIS obscures an important emerging energy trend: China’s oil production is peaking. This has profound implications for the world oil market, because China is not just a massive importer of crude; it is also among the world’s five largest oil producers, trailing only the U.S., Russia, and Saudi Arabia, and virtually neck-in-neck with Canada.

China’s oil industry has delivered impressive oil and gas production growth over the past decade. Yet a range of data and historical analogies increasingly suggest that, at global oil prices between $50-to-$100 per barrel, China’s oil supply capability is plateauing and may peak as soon as this year. Lower or higher prices would accelerate or extend this timing.

Read more: The Diplomat

 

US Oil Production Nears Previous Peak

The EIA’s Monthly Energy Review came out a couple of days ago. The data is in thousand barrels per day and the last data point is July 2015.

US consumption of total liquids, or as the EIA calls it, petroleum products supplied, reached 20,000,000 barrels per day for the first time since February of 2008.

Something I never noticed before, consumption started to drop in January 2008, seven months before the price, along with world production, started to drop in August 2008. This had to be a price driven decline. Could the current June and July increase in consumption be price driven also?

Read more: Peak Oil Barrel

 

Crashing Oil Prices Aren’t Due to an Oil Glut But to Demand Destruction

As I began to mention at the end of the first part of this three-parter, I’ve only just recently come to the conclusion that oil prices aren’t going to have a tendency to rise due to the tightening of supply imposed by peak oil, but to depreciate. This of course flies in the face of the common logic of supply and demand, but when factoring in the method by which the majority of our money is created, a deflationary effect can be seen to come into play. This has taken me an absurdly long time to clue into, for although I’d steadfastly amassed a bunch of pieces (various information), I hadn’t realized they were actually all part of the same puzzle.

With peak oil and fractional-reserve banking being the first two pieces of this puzzle, the third piece that I needed to factor in (which oddly enough I’d already written about) is the fact that money is a proxy for energy.

Read more: From Filmers to Farmers

 

Will declines in U.S. and Canadian oil production lead to a global decline?

At the beginning of this year I noted that all of the growth in world oil production* since 2005 has come from two countries: the United States and Canada. And, I suggested that since the growth in production in those two countries came from high-cost deposits–tight oil in the United States and tar sands in Canada–that the precipitous drop in oil prices would lead to declines in production in both countries.

I concluded that unless another area of the world suddenly started growing its oil production significantly that those declines would probably result in a worldwide decline in oil production.

Well, declines in the both the United States and Canada have arrived. It will be several months before we can know with any certainty whether those declines will translate into a persistent global decline.

Read more: Resilience

 

Support For OPEC Production Cut Is Increasing

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Now the shale producers won’t willingly reduce output, as shale production is made up of many different companies, and not a national company like most global oil producers; but due to the economics of the current oil price environment, many shale oil producers will face bankruptcy next year, and as a result, will go out of business.

The reason being is that in 2016, most oil hedges will expire. These hedges have allowed shale oil companies to stay afloat and achieve cash flow neutrality, despite the decline in oil prices. These hedges have also helped shale oil companies gain access to credit, so they can raise the capital needed to put their wells into production. When these hedges expire, companies will not generate the cash flow needed to meet their covenants, which will in turn bankrupt them, and production from U.S. shale oil wells, will start declining rapidly. This will also dry up the credit markets and prevent any type of quick rebound in shale oil production.

This is why the IEA even estimates that U.S. oil output will start collapsing next year.

Read more: Oil Price

 

US Shale Oil too Expensive, Peaks 1H 2015

According to EIA data, monthly US crude oil production peaked in April 2015 at 9.6 mb/d.

Read more: Resilience

 

This is When Bonds Go Kaboom!

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In the energy sector, the bond devastation is even worse.

California Resources – Occidental Petroleum’s spinoff of its oil-and-gas assets in California, a masterpiece of Wall Street engineering – has done nothing but burn investors in its 10 months as an independent company. When I last wrote about it ten days ago, its $2.25 billion of 6% notes due 2024, issued at par to QE-drunk investors in September last year, had plunged to 66 cents on the dollar. Now they’re at 59.5 cents on the dollar.

Chesapeake Energy, the second largest natural gas driller in the US, is also facing the music. Two of its brethren, Quicksilver Resources and Samson Resources, have already filed for bankruptcy. When I last wrote about Chesapeake a month ago, its $1.1 billion of 5.75% notes due 2023 – that in June 2014 had been at 112 cents on the dollar – had plummeted to 70. Now they’re at 67.

Read more: Wolf Street

 

And from last year:

Collapse is Inevitable

There has been considerable discussion lately as to whether or not total collapse of the world’t economies will happen in the relatively near future. I think that is the wrong question. Let me explain.

Ecological collapse of the world’s ecosystem is a lead pipe cinch. It is already well underway and instead of slowing down, it is gaining momentum fast.

Read more: Peak Oil Barrel