It's been a good debate this weekend.. Tara has brought out some legit criticisims.. (golly I sure missed that wheat call.. but I'm still bullish ;-) and here's why..  

I'm coming back to crude.  Everyone is comparing this supercommodity cycle break to the 1980's...  Which yes.. and no... there are alot of similarities.. but also some differences..  One of the satellite channels is running the movie Back to the Future 2 of what life was going to be like in the Future.. Oct 21, 2015.. as we thunk back in the 1980's.. ( https://en.wikipedia.org/wiki/Back_to_the_Future_Part_II )  I don't believe we have developed the hovering skate boards.. like we were supposed to.. but the cell phone technology.. that has been a game changer..  So Technology.. is probably going to help (per Tara's point..) but how much?

Let's review what made the 1980's.. the 1980's..

First off the Fed took interest rates to the moon..  Frankly.. they really screwed up on that one..  Fighting Inflation from the 1970's.. and the First Crude super bubble..  Our response today.. has been (I believe) "Mue Bueno"..  The Liberal dope smoking idiot President Obama.. did.. nothing... He didn't invade an Oil Producing country...  He didn't turn loose drilling in the National Parks.. Heck.. he didn't even approve the Keystone pipeline.. importing high costs Tar sand oil from our neighbor to the north..

He relied upon.. (Gasp..) the Free Market.. to solve the situation...  omg...  Which looked really stupid.. until it worked.  (chuckle some times it just takes a liberal who doesn't care.. to test out a therom..)  "golly he really doesn't care about high oil prices.."  Other administrations probably would have invaded Canada by now...???  To wit.. probably would have converted half the country into speaking French by now...??  

"Il faut parler français et mange des escargots."  Always those unintended consequences... 

And it worked...  Some people thought Crude was going to the moon.. (moi myself there for awhile..) and so we got this HUGE investment in ALL things Energy..  Roof Top Solar panels.. Wind Farms.. Transmission Lines.. Biofuels.. Horizontal Drilling.. Fracking.. are the ones that mostly worked.. Artic Crude exploration.. Ramp up of Tar Sand production, Cellulosic ethanol.. an electric powered car.. etc.. were also tried.. with varying results.. mostly not as expected though..

Anywho.. We did make tremendous progress in US Tight Shale Crude Oil production.. which gets repeated about every 45 seconds on the cable wall street news stations...  "The Jobs report added.. x number of jobs NO DOUBT to the US Renessiance in Crude oil production.. "



( http://www.eia.gov/todayinenergy/detail.cfm?id=20392 )

Even the one last week.. "Today's smaller then expected jobs gains was NO DOUBT helped by the US Renessiance in Crude oil production.." even though 100,000+ jobs were lost in the Oil patch since the first of the year.. or whatever the real number is up to by now..??

Okay now look at what happened in the 1980's... 

DW11 provided a link ( http://labs.timogrossenbacher.ch/worldoil/ ) which if you flip to Crude Production.. and hover over KSA.. you'll get their historical crude production back to...1965.. by 1981'ish.. KSA went from 10.? myn bbls per day to.. 3.?? by 1985.. in order to stabilize prices..  Which probably hit them in the wallet..  "NO New Helicopters THIS year.. son."

One of my main premises is that Low Crude Prices promote an unstable middle east.. golly I don't know where I get that?


( http://www.wtrg.com/oil_graphs/oilprice1970.gif )

hmm.. not counting the Yom Kipper conflict.. which kicked off the first spike back in the 1970's.. (the BIG one if you will) which lead to the Arab Crude Oil Embargo to begin with.. there's only like 7 wars in that chart above which moved prices...  

Golly and they say those guys don't get along... go figure? 

Tara is correct that NOT EVERY Conflict leads to $100 crude...  Although in today's dollars (edit add: or close to it).. the Yom Kipper did.. and the Iranian/Iraq conflict did.. twice.. and the 9/11 attack which ultimately lead to the US invasion of Iraq did... and the Libyan uprising put it back up there and.. and.. and.. so forth.

So.. I'm gonna continue to say.. "that whole Middle Eastern scenerio remains kind of volatile.."

.. and in defense of a previous administration.. over half of those wars were started by a leader that is no longer with us...  "What would Saddam Huessien do?"   Thankfully the world today does not have to relive that guy... which I believe even KSA appreciates... "yes.. he was too much a hot head.."

Okay.. let's get back to the future here.. 2015... what next?

Well we can look to the future in the Haynesville Shale production response to laying down the rigs.. something that I have been TRYING to say that Will happen.. already has in this field..

IF we continue on the Free Market path.. the impact of laying down.. ( http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-report... )

well.. we've gone from 1,925 drilling rigs this time last year.. to.. 864... laying down over half.. or 1,061 of them...

"that will leave a mark.."

 So WHAT will the impact of THAT be on US Unconventional tight Shale production..?? of which we get about 5.5 out of 9.3.. 60% of our domestic Crude production from..

For those that will not open the pic of the Haynesville field..

Ignoring the 08/09 recession induced drop.. the real decline in drilling rigs occured due to the break in Nat Gas prices..that unlike Crude.. did not come back post the recession ( http://futures.tradingcharts.com/chart/NG/M ) thus by spring of 2010.. the Haynesville field went from about 225 drilling rigs.. to 50 by the fall of 2012...

Production.. however, continued to climb.. after the initial start of laying down the rigs.. but eventually peaked.. at around 10.5 byn cubic ft per day.. and has now fallen to about 6.5 byn cubic ft per day.. a 38% drop..

IF the US Crude Shale mimic's that.. (and yes Tara.. you can employ all the technology.. and all the efficiencies that we know how to do drilling TODAY in the Haynesville Shale.. so.. "it's in there..") would take 5.5 myn bbls per day down to..3.4 myn bbls.. and thus Total US production ( http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPUS2&f=M )

at the peak of 9.612 down to around... 7.5 myn bbls per day.. or thereabouts...???  ( I could be wrong..??  but don't think I am..at least not yet..)

So THIS TIME.. KSA isn't going to have to do all the heavy lifting by themselves..

and one other thing to note.. back in the 1980's.. the US was the Big Kahuna of consumption.. go back to DW's link ( http://labs.timogrossenbacher.ch/worldoil/ ) and look at consumption.. specifically China.. "even IF" they are only going to grow at 5% or whatever terrible number it is... they are still growing.. and filling their strategic reserves.. and Crude production Declines CAN BE EXPECTED there due to low prices also.. which will result in an even GREATER need for imports from a volatile Middle East..

golly wonder why they sent warships to greet Obama as he toured the Artic drilling regions..???

The problem now is that the US has to stick the landing.. we got to fire up the drilling rigs to RAISE that 7.5 myn bbl number to a sustainable level.. and given the time lags between drilling and production.. we got to start soon... and/or NOW!!!  The time lags between drilling and production can be 12..18.. or even 24 months..

so that's my case... and I'm sticking to it.
We will not see a fall to 7.5 myn bbls because the market will not allow that.. and in order to get MORE than that.. it's gonna have to start offering more than what it is now to incentive a drilling program.. "Drill baby drill" may have been sidetracked for awhile.. but the 2016 driving season is coming.. will we be ready?

Increase Crude..or biofuels.. or solar panels.. or all of the above...  (not eating snails though..;-)

Cheers.

Golly I guess we actually do have hoverboards.. not approved as safe though..??

However, the film did accurately predict a number of technological and sociological changes, such as the rise of ubiquitous cameras, the influence of Asian nations over the United States (though this was certainly already on the rise at the time of its release), flat panel television sets mounted on walls, the ability to watch six channels at once, Internetvideo chat systems such as Skype, increased use of plastic surgery,^[16] head-mounted displays, and automated fueling systems.^[17] The film also correctly predicted a future where video games do not need hands (Microsoft Kinect) or, at the very least, do not need traditional controllers (Wii Remote).^[16] 

( https://en.wikipedia.org/wiki/Back_to_the_Future_Part_II ) 

sure could use that little Mr Fusion to power the Flux Capacitor though... hmmm...??

later.

Fire away Tara..