Coping: Sunset in the Oil Patch

It’s an article of faith among most folks that we have more oil/energy than we know what to do with.  But, after spending some time with Oilman2 this week, talking through what’s ahead, I’m more convinced than ever that we need to be redirecting our prepping plans slightly to include the prospect of extremely tight energy supplies within the next 5-10 years.

As I’ve reported to you previously, the data suggests we have been in a slow-motion, rolling top, of Peak Energy and we’re slowly heading lower, rounding down toward the abyss.

The only thing that is keeping us stable – for the moment – is a kind of floor under oil at $90. 

Here’s the economics of it in a nutshell:

If the price of oil drops significantly, then a lot of the “new oil” suddenly doesn’t make sense: In addition to unannounced helicopter visits to oil rigs by the retooled version of the former Minerals Management Service (at a “regulatory fee” $25,000 a pop, a price which gets rolled into oil prices), there’s the increasing cost of rig rentals, seismic studies, liability insurance, and all that. 

Bottom line?  Forget about really cheap oil.  I doubt that we’ll see $75 oil for a long time, although that really depends on how bad demand collapse is when the stock and bond bubble ends badly in a year or three.

On the other hand, if the price of oil goes significantly higher, then it pushes inflation through the pipeline.  When that happens, the rental on money begins to rise (interest rates if you’re not awake), labor rates go up and all the bad stuff turns into a horrific vicious cycle.

Interest rates rise, business collapses, oil demand collapses, and we come back to $100 oil…except it will be $110 oil.  Then another pop up and a collapse back to $120 oil…and what used to be the ‘Merican middle class totters off into the sunset to becomes footnote in history.  We join the illegal immigrants and except for the language, we turn into Mexico. 

Think of it as the Great Crookification already underway.  We already have the corruption working its way up, the buying of politicians, though shielded as “campaign contributions” is still graft, just better marketed. But, a purchase, nevertheless.  I digress.

The other problem Oilman2 gripes about is the large number of “worms” in the oil industry.  A worm, in case you  skipped our class “Coon-ass Rig Talk 101,” is roughly the equivalent of a “newbie” in computers. A lot of the young-uns coming up almost need to be burped every time a new joint is turned-up.

Oil timers who know the rig business are quickly cashing in heading for the exits.  In the rig business an OF is age 45…and many see what’s coming – much  more starkly than makes it into the transfictional media buzz.

With this as stage-setting, OM2 sent me a follow-up overnight with some details about the latest “hot” area in oil:  The Eagle Ford Shale Play which runs in a band from the lower Rio Grande Valley area of southwest Texas, up to the northeast, passing south of San Antonio and Austin, but stopping a hundred miles, or so, short of our oil country (Palestine Dome).

From that article OM2 tells me this part is key:

“We’re drilling shale not because it’s a good idea but because we’ve exhausted all other good opportunities,” he says. “It’s all we got left. When this is done, we’re done.”

On this shale drilling stuff, I have been right from the get-go. This is the “rolling price plateau” now, and this type of extraction removes recharging mechanism for shallower fields above the Eagle Ford. The 4000′ depth described in this article is the shallowest workable portion of the play – most of it is below 10,000′.

If you could get onto some of these private ranches and see the mess, smell it everywhere, hit the potholes in all the roads…you would be amazed and not in a happy way.

This means (for us in the USA) that when we hit the wall on these shale plays, we hit it hard and at a good clip. Think “decline shock”…

There’s a bunch of up in the futuring/oil collapse who have been sounding the alarm on what’s coming for years.  Folks like my friend Jim Kunstler are still writing about it, and his book The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the Twenty-First Century (hard cover link, Kindle version here) will likely be correct in my lifetime, and your almost certainly.

For now, there’s lots of work in the oil patch, but if you know the right folks, you can tell that success rates are dropping.

And Oilman2 is taking a break from being a drilling engineer to work on his farm, about 35-minutes south of us.  In his view of the future, we’re going to need our sustainable places in the outback sooner than later.

Especially since the rig he was running about 200-miles out came in as a hole filled with high pressure salt water and nothing else.  On land, it would have been called a “dry hole.”

From an investment standpoint, it might make sense to pile money into majors with massive “proven reserves” as a “get rich slowly” strategy.  But, be sure to remember that even “proven” reserves are going to be very costly. 

Abiotic oil may have some basis in fact, but not enough to solve the problem or even significant change the decline slope once we finish off this topping process.

You see, abiotic processes take place over 10’s if not 100’s of thousands of years.  I’m presuming you’re going to need a tank of gas every seven days, or so.

We’ll be paying close attention to how the “top” evolves:  We may see a momentary drop of oil to lower levels, or spikes higher, but for this morning the key thought is “If your prepping plans don’t include energy planning – everything from batteries to home heating in winter – you’re not even going to be in the game longer-term.”

You have time to fix that now:  Insulation is cheap, solar is cheap, even wind systems make sense some places.  But the window is going to close and when it does, things will may become chaotic quickly.  At least that’s what Mr. Dry Hole is thinking, while he preps for a big green house and aquaponics down the road at his place.

We know from helping friends develop a new kind of pulse-type seismic unit that we have gas at 8,200 feet and layers of oil down at 10,200 to 11,500 feet under our property.  But, it might as well be on the moon when the Peak tapers off.  When that kind of world shows up, it’ll be time to have a mule and a plow…and a storm room underground where you can cool off in summer with LED lighting and some solar to power it.

I keep waiting for some wildcatter to offer us a fat surface lease on the lower 14 which would be like winning the Lotto…such are the fantasies at mid-week.

As much as we’d like to move up to the Pacific Northwest to be closer to the kids, Elaine grew up as a “down-winder” in northern Arizona.  Doesn’t make sense trying to dodge the bullet a second time, depending on how Fukushima develops.

As a result, Mike Oehler’s book (The Fifty Dollar and Up Underground House Book) has come down off the bookshelf, again. And I just picked up Alex Bealer’s Old Ways of Working Wood: The Techniques and Tools of a Time Honored Craft.

Using timber off our own property, soaked maybe in some crude from one of the wells down the street, the mind begins to wonder:  How tough would it be to build a zero outside inputs home and how much would it cost?

Iceland taught us a lot about how to deal with banksters, but maybe they have another thing to teach us:  Go read up on Iceland turf houses over here.  They may not be “pretty” on the inside, but that can be addressed.

There are a lot of strategies to deal with the return of Peak Oil and we have time.  Not a lot of time, but time to think things through and make intelligent decisions as we are all preppers looking at an uncertain future.

For now, the way ahead short term for markets seems to be a continuation of the the QE-B (quantitative easing bubble).  Confirmed by “Rob of the Road” who sends this:

Good morning George,

I’m back in Rockport Texas & I like the weather better than the I-5 corridor in Washington <g>, it was a good visit. The last drive down of the trip back to TX was from I-40 in New Mexico with a stop in Roswell to see the UFO museum (not bad & balanced).

Starting about Artesia NM there was a LOT of drilling going on & there were help wanted signs (“Hiring CDL” & “Domino’s $15-$20 hr”), oil & support company trucks everywhere. Saw the same when I got past San Antonio down towards Victoria. Lot’s of drilling going on.

A year & a half or 2 years ago I wrote about all the railroad flat cars (for containers) sitting on the tracks for over a year down by Centralia, WA… When we drove by this time (we left WA early Nov

’12) most of the flat cars were gone. Once we picked up I-40 in Arizona we found the flat cars, they had containers on them and were rolling down the road. All through Arizona & New Mexico we saw more trains than I’d ever seen before. This was the first time on I-40 since the 70’s. Took I-40 because it is out of the “Constitution Free Zone” & just felt better. (Looking at the last sentence is making me ill… ‘out of the Constitution free zone’ is true… when did we loose America?)

Imagine a world…

Imagine the robot workers, imagine all the out of work people, imagine oil prices rising, take your reference to “Soylent Green” and roll that into the this image.

Now imagine a winter that is really cold, the snow heads farther south than usual, imagine a summer that is really mild and the northern snow doesn’t go away then repeat the winter. For the last several million years that’s what happened at the end of every interglacial period…

Why is “global warming” a bad thing? The earth’s climate always changed, I think being warm is better than being cold. Hell crops grow better in warm weather than they do in cold! Why the “global warming” worry & fight? The wealthy live on the coast for one. The other thought is if the climate changed to a colder world a lot of people (in a world with 7 billion) are in trouble, money can hire/buy what is needs to give it’s owners (& their line) the best chance of surviving a return to 100,000 years of ice.

I’ll be doing [Redacted] & that’s what I do in exchange for the space rent (but don’t tell anybody what..) this winter.

Take Care George.

Yes, the nomads are out there and some rural pioneers

Me as Monsanto?

Not exactly, but check out this from reader Marc:

Have you considered doing some tomato splicing?

http://www.organicgardening.com/learn-and-grow/grafting-tomatoes

May work with other plants.

And to set yourself up WRT “clean” taters (along with a ‘tater reserve) one can place potato tops on tomato bottoms I hear.   The taters then develop good seed pods.

Hadn’t considered it…but it goes on the list…

Hasta La Vista Baristas Dept.

The other day we were talking about how a new burger-builder machine has been developed (a fine counter point to the Bilderbergers, don’tcha think?) and reader Chris says even more personnel cuts can be figured into our outlook:

Unloading stacking and cleaning can all be done by machines.  So can the driving. You forgot the really hot robot servers that can look like famous people that they pay to use the image of.  Only job left is eating.

And, in the interest of their ultimate improvements in “productivity” I bet the powersthatbe already have plans to deal with that one to hit their Club of Rome numbers.

But enough uplifting, inspirational, highly motivating and optimistic talk for now.  Get out there and hoodwink someone…and write when you break even.

George     george@ure.net

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