Delusional Mainstream Media Distorts The Disaster & Reality As We Head Over The Cliff

The news that flows from the Mainstream media continues to delude Americans from understanding the reality and disaster that is heading our way.  A perfect example of this took place last week when a small oil company announced a new huge oil discovery in Alaska.

The headlines stated that Caelus Energy LLC found between 6-10 billion barrels of oil on the North Slope of Alaska.  I imagine this new oil discovery did wonders in reviving the “hope” that the U.S. will still become energy independent.

However, rapidly falling oil production, due to high shale oil well decline rates, is putting a real kibosh on U.S. energy independence.  U.S. oil production is already down one million barrels per day since its peak last year.  Nevertheless, individuals who still believe that peak oil is rubbish are clinging to this new Alaska oil discovery as proof that technology will solve all our problems.

Unfortunately, common sense and logic will destroy this delusion once again.  According to Forbes article, Alaska’s 10 Billion Oil Discovery: What You Need To Know, provides a few noteworthy points:

This oil will be significantly more challenging to access than the oil in recently discovered fields in Texas but less challenging to access than the oil in Shell’s recently abandoned project in Alaska’s Chukchi Sea in the Arctic.

….. The project would also include a new 150 mile pipeline to connect Smith Bay with the Trans-Alaskan Pipeline System in Prudhoe Bay. Even though Alaska’s pipeline regulations are considerably more friendly to energy companies than elsewhere in the U.S., it could still take between five and ten years before any oil is produced.  And when it comes to opposition to pipelines and Arctic drilling, all possible delays are on the table.

The two important “Factors” to focus on here is the fact that this new oil discovery in Alaska will be “more challenging” to produce than new oil in Texas and that a new 150 mile oil pipeline would likely keep production from starting for 5-10 years.

The article stated that the production challenges and costs would be less than Shell’s now abandoned project in the Arctic Ocean.  From what I have read, Shell would need something close to $120 or higher to make producing oil in the Arctic feasible.  Well, with the current oil price less than half of that figure, producing oil in the Arctic is more a fantasy than reality.

Furthermore, the article also implied that Caelus Energy LLC  production cost would likely be higher than producing this new oil in Texas.  According to analysis by Art Berman, producing oil in the Permian field in Texas still loses money at $55-$60.  Which means, to be profitable drilling oil in this “supposed’ new oil field in Alaska will need a price closer to $80-$100 a barrel.

This is the problem the Mainstream media and energy companies fail to consider.  It doesn’t matter how much liquid oil is in the ground, if the cost is too high to extract it.  Moreover, the rapidly falling EROI – Energy Returned On Investment is gutting the entire U.S. energy industry.

Regardless, the amount of oil the company claims they can ultimately recover in their new Alaskan discovery is about three billion barrels.  While this may sound like a lot of oil, it’s peanuts when we compare it to total U.S. and world oil consumption:

new-alaska-oil-discovery-in-perspective

If Caelus Energy LLC is actually able to extract the three billion barrels of oil in their  Alaskan North Slope Smith Bay Field, it turns out to be less than half a year of U.S. oil consumption and about a month and half worth of annual global oil consumption. 

So, even if this oil is extracted, it’s very little in the whole scheme of things.

Considering the higher challenges and cost to produce this Smith Bay Field oil, I doubt much if any of this oil will make it to market.  Furthermore, the disintegration of the financial banking system continues in earnest as Deutsche Bank hemorrhages under the weight of massive derivative leverage.

I discussed this during my interview with James Howard Kunstler.  You can listen to my interview here at, KunslterCast 281- Chatting With Steve St. Angelo About Energy & Finance.

It was a pleasure chatting with James as I have been following his work for years.  I first heard him in an interview with Art Bell on Coast-to-Coast-Am back in 2005.  James has an excellent way in describing American’s “Delusions” and “Wishful thinking” in response to facing the negative ramifications of collapsing U.S. oil production.

While this new supposed Alaskan oil field discovery offers Americans hope that we will be able to continue business as usual, at most, it will only do so for six months.  It seems as if hope is running a bit short on time nowadays.

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44 Comments on "Delusional Mainstream Media Distorts The Disaster & Reality As We Head Over The Cliff"

  1. … of course, the production rate to market is constrained by the maximum flow rate of the pipeline. It’s likely that the proposed pipe size is a function of longevity, distribution per month (pipe size and cost of installation). ie. the lower the construction cost, the more profitable in the long run. The profits would be the highest if the flow rate was minimized so that the future oil value is much higher and life of production profits are increased. If so, the installation cost would need to consider the profit effects of future EROI.

    • Nick,

      Interesting comment. Up until recently, the idea of SUPPLY & DEMAND made some sense when it came to the oil price. This will no longer be the same going forward. Supply & demand will become increasingly meaningless as the EROI rapidly falls.

      To tell you the truth, I highly doubt much of this new Alaskan Oil production will make its way to the market. Within five years, a good percentage of the U.S. energy industry will likely be KAPUT.

      steve

  2. We had a birthday party for my sister yesterday that was attended by about 30 people, half older adults, half young adults and one 4 year old. Over the course of the evenings festivities I asked everyone who attended if they thought there was an energy emergency in the US or the world. All but three (one of which is my wife) thought that everything was great, the US was on it’s way to energy independence and that new more efficient inventions are right around the corner.

    While this was clearly not very scientific, if it even remotely resembles the understanding of the American electorate of what is really going on (10%) then the American electorate is in for a horrific surprise. I think you can attribute this to the Lame Stream Media and young adults that are getting their news as headlines on their smartphones. Headlines like the Caelus oil discovery is all that they remember.

    Great Interview with Kuntsler. You should post it under Clusterfuck nation sideline.

    SteveW

    • SteveW,

      Interesting observation. Yes, I would imagine if I did the same thing with my family, the results would be quite similar to your outcome. One of my family members visited last year and we briefly spoke about politics and etc. She went on to say that Russian President Putin was another Hitler. Gosh, the MSM really has done a wonderful job brainwashing Americans.

      That being said, Americans are totally disconnected from reality. It is no coincidence that the Financial system and Economy is disconnected from reality along with the Presidential Race.

      When the collapse finally occurs, Americans will not have the ability to deal with it. This will come as a real shock.

      steve

      • I made the mistake of walking into the room where the debate was on last night. Hitlery was rasping on about The Russians were behind the hacking, and they were trying to get Trump elected blah blah blah. What a load of horse manure. I’m sure Putin lies awake at night in fear of Hillary getting elected. Whatever Putin is or is not, I’m sure few Americans have a way of knowing, as “blame Russia” is such a popular meme for politicians and MSM

        • Putin just made a mega-trade-deal with Turkey / Erdogan, including major pipelines top be built. Talk about flicking the West the middle finger… Has the ‘murican MSM even mentioned this ?

          • DisappearingCulture | October 11, 2016 at 7:46 am |

            I don’t know if they have mentioned it, but other economic/strategic accomplishments like The New Silk Road [which point to U.S. hedgemony limits] is largely ignored.

      • “Interesting observation.”

        the more interesting observation was 15 young adults to 1 child. should tell you everything you need to know.

  3. DisappearingCulture | October 10, 2016 at 3:00 pm |

    “…..if it even remotely resembles the understanding of the American electorate of what is really going on (10%) then the American electorate is in for a horrific surprise…..”

    Yeah just like a lot of people really do think their presidential candidate will fix the problems.

    And just like the % of the elctorate that has any idea of what the Fed does…and that they are not a federal agency.

    And on and on.

    You must be the life of the party if you are asking about energy issues lol

    • Wasn’t as weird as it sounds because every one was talking politics and that nights debate.

      What a joke.

  4. Steve,

    In your conversation with James Kuntsler it sounded as if you both agree that added debt is, in fact, subsidising the ERO(E)I of our current energy production system. That is, if we are producing energy at 5/1. 10/1, or even 20/1 and our system requires 30/1 EROI, then the difference is being made up by adding vast sums of additional debt and, in effect, robbing the future.

    As a staunch believer of both the Law of Supply and Demand and the Laws of Thermodynamics, I am finding it very difficult to resolve the conflict.

    There is a base fundamental demand for gas and diesel the is totally inelastic. Military, government and the filthy rich – all of whom don’t care what it costs. Except for the inevitable black market at huge prices, the rest of us will be riding horses or bicycles, while the rich, the government poobahs and the military will be motoring down the roads.

    So when the ERO(E)I reaches 0 or even negative will oil production simply stop or will the nature of the product change? Instead of a simple supply and demand price paradigm, does oil become a “Giffen” or a “Veblen” good? A “Giffen” good is like health care in a socialised medicine country where affluent individuals pay an even higher price for private health services because socially provided health care is expensive but not readily available or as a “Veblen” good like the Diamond Studded Rolex when an inexpensive Timex does the same job but doesn’t confer the status?

    Or when the credit crash comes does it irreparably disrupt all of the complex delivery systems we have come to rely so heavily upon? So much so that no one has any petroleum products?

    Thanks,

    SteveW

    • SteveW,

      You bring up the most important OBJECTION or question to the Thermodynamic Oil Collapse. And that is SUPPLY & DEMAND. You are not the only one. I had trouble with it as well. Furthermore, many engineers and scientists have trouble with it as well.

      It is hard to explain in a few paragraphs which is why I am waiting to cover it during our interview. I will be including some charts and graphs.

      steve

      • @SRSRocco / Host
        I think you need to come up with the core-argument that fits in 1 paragraph, or else you will never convince but a few of your readers / regulars of this site. As for me, I see the collapse in oil production as inevitable, but not necessarily the collapse of oil price (for reasons I have stated here before)… I’d rather expect higher prices as EROEI kicks in more and more and S.O.S.-money printing continues to “save the world” once again…

        • DisappearingCulture | October 11, 2016 at 3:05 pm |

          “…….but not necessarily the collapse of oil price (for reasons I have stated here before)… I’d rather expect higher price…….”

          I’m in your camp on the price of oil, or at least gasoline and diesel. Mike Maloney did a recent video talking about deflation [relating to reduced velocity of money] before inflation or hyperinflation. As necessary as gasoline is, if there is far less of it far more people’s dollars will be chasing it. People with cash, or something to barter/sell to get currency, will buy available gasoline.

  5. They will find a way to use coal, eventually, safer, cleaner..MUCH cleaner…I mean, why not..there’s over 500 billion CUYDS available in high grades, and, it’s right in our own backyard.
    I truly believe OIL will take a backseat to coal, and, the circle will be complete. The BIG oil money will invest heavily, and, there will be no reason to use electric vehicles. The ONLY viable pollution-Free car will be the Hydrogen Fuel Cell system, which, when stations for filling put in place, will FAR exceed electric cars..why? SPEED…..NOT the speed of the car, silly…SPEED of fillup….were talking a few minutes, like GASOLINE, Vs. OVERNIGHT for charging a battery…NO Hyper-Active Millenial, or, GEN X, or GEN Z will tolerate waiting…..NOT their style…..so, if you are young, put your long term money into coal, and fuel cell stocks….forget TESLA, and LITHIUM….150% Loss within 5 years.

    • Farah Bazzrea | October 10, 2016 at 7:28 pm |

      totally agree.

    • cal,

      You bring up the same “ENERGY SOLUTIONS” as many who do not realize the low EROI- ENERGY RETURNED ON INVESTMENT will not allow these technologies to scale. It is hard to understand why, but all those technologies are not commercially viable on a massive scale.

      While many believe Hydrogen Fuel Cells are the energy savior of the future, I would kindly like to remind you that hydrogen in not a fuel source, it is a fuel carrier. You need some energy source to make the hydrogen fuel.

      steve

      • “You need some energy source to make the hydrogen fuel.”

        coal.

        • gman,

          The United States has eaten through its high-quality black coal decades ago. We are now mining what is known as brown coal. A lot of this lower quality coal comes from the west.

          Furthermore, to switch to coal is not possible for liquid fuel production. We have just enough remaining coal for electric generation. The idea that the United States has 100’s of years of coal reserves remaining is the same insanity as the supposed 1 trillion barrels of oil shale deposits in Utah and Wyoming.

          So, no… coal won’t help us with hydrogen fuel.

          steve

    • “I truly believe OIL will take a backseat to coal, and, the circle will be complete.”

      nah. you guys seem to think this is about supply and demand and free markets. it’s not. observe how the “global elite” “international financiers” “deep state” are deprecating both oil use and coal production. go ahead, invest wherever you want, but their goal is 1) they own it and 2) they use it and 3) you pay for it.

      can you say “feudalism”? sure you can.

  6. The world is awash in crude and natural gas. Saudi Arabia and Russia recently signed an oil-cooperation agreement that was, according to the WSJ, “.. a powerful symbol of the pressure bearing down on the world’s two largest oil producers as they grapple with fallen petroleum prices and face calls at home and abroad for direct action to prop up the market.”

    And let’s not forget the Oil Drum, which was dedicated to peak oil theory, had to shut down in 2013 due to “…scarcity of new content caused by a dwindling number of contributors.”

    Innovation in software and the applied Big Data renaissance has had a beautiful marriage with the oil industry and the subsequent applied technological revolution in well drilling will continue to keep a lid on oil prices in America. Sure there will be spikes (and dips) in the price of crude, but a serious EROI event that causes a permanent, sharp trajectory deviation in oil prices is far into the future.

    • Dear JTM,

      If “The world is awash in crude and natural gas”, why has production of conventional oil remained virtually the same for the past 10 years?

      Why has the EROI of oil production everywhere fallen?

      Why has oil production in 80% of oil producing countries already peaked?

      Why can’t Saudi Arabia sustainably increase production past 1970s levels?

      Coal won’t do it ! The caloric value of American coal production peaked 17 years ago. All the easy to mine stuff is gone and the rest takes billions of gallons of diesel to bring up to the surface.

      Like the article says, Americans live in a fantasy world !

      • Why weren’t people predicting sub $40 per barrel 10 years ago, 5 years ago, 3 years go? There’s lots of data out there but very few accurate predictions going forward. That means there is some noise that isn’t being accounted for. The “easy” stuff may have already been cherry picked, but new discoveries and new technology could “easily” reverse that.

    • JTM,

      I wish you were correct in your assumption that a “serious EROI event is far off in the future.” However, the amount of debt in the system has offset the ramifications of the falling EROI. Basically, debt has hidden the real mess that has not been covered by the Mainstream media.

      For Chevron, ConocoPhillips and ExxonMobil to lose $18 billion after paying CAPEX and Dividends in the first half of 2016 suggests the situation in the Major Oil Companies is far worse than we realize. Furthermore, the U.S. oil sector paid 86% of its operating income just to service the interest on its debt.

      How sustainable is this????

      steve

  7. In a nutshell, you’ve shown us that the “huge, new discovery” is enough to keep the world going for only 45 days. For oil to continue it’s dominant position, a new discovery of this size would not only have to be made every 45 days, but each of those discoveries would have to be viable, meaning 100% of each one of them would have to be brought to market. In attempting to achieve that goal, cost of production would skyrocket.

    Eventually this discovery and others such as the one aforementioned, abandoned by Shell, will be tapped, but that will be at a very much higher price of oil. Let’s say the company finds the confidence and the backing, because of a higher sustained oil price and begins work five years from now. Well, five or ten years later, the oil would begin flowing. At that time, because of the high cost of energy to produce, the breakeven price of oil might have to be $150.00.

    I really wonder what the exploration company was thinking, in spending their resources looking for oil where they surely must have known the difficulties. If the best case scenario is FINDING oil, which they did, what was the plan? (This reminds me of the story of burglars who broke into Ft Knox, and whether or not they found gold, they can’t find a way of getting out. There was no such story until just a minute ago, so don’t bother looking it up.)

    I’ll tell you what the plan would have been if I had been mixed up in this specific situation. As soon as we found the oil we would have shut down operations, and been quiet about the discovery. We would have announced to the workers that we concluded the find to be non-economic. Then we would have just sat on the deal, and quietly solidified the rights and perhaps added to the claimed area, in whatever form that would take. (Not my area of expertise.) Then 5 or 10 or 15 years from now when there are very obvious shortages developing, sell the project to a major.

    Charley Z

  8. call, which coal stocks do you recommend.

  9. IMF hasn’t got a clue …

    http://www.zerohedge.com/news/2016-10-10/rethinking-oil-market-imf-warns-conventional-wisdom-no-longer-applies

    Conventional oil no longer applies …

    Conventional wisdom no longer applies ..

  10. A few peakoil trolls seem to have followed you all the way home, Steve.

  11. Good grief Steve. Must every article preach doom and gloom. 99% of the USA doesn’t own any
    silver or gold. If we have an economic or currency collapse where do I dare spend my silver? What
    store will have any groceries. The USA is resilient. Your scenario will take years to unfold yet you
    preach it like tomorrow it will come. In 10 years energy will be from another source or a multiple of
    sources besides oil line natural gas, solar etc.

    • Joe Lindell,

      You are more than welcome to continue the “deluding” thinking that there will be another magical ENERGY SOURCE that we will pull out of the hat in ten years to continue running WalMart, Walt Disney World and the Interstate Highway System.

      The reason I continue to write about what you label as “doom and gloom” is based on fundamentals. This is similar to a doctor continually telling his patient that eating McFATS food, smoking CANCER STICKS and drinking lots of BOOZE will result in death sooner than later. To tell the patient ‘good news” would be disingenuous.

      So, as I said before, you are more than welcome to continue with your “Wishful thinking”, as that is what is typical of most Americans.

      steve

      • “The USA is resilient.”

        it was. the remaining citizens still are – that is why the dnc/gop are so intent on corralling them with more laws and restrictions and importing more ghetto/mestizo/jihadi sand to clog the gears.

        “magical ENERGY SOURCE”

        well, the idea that gold/silver store “economic energy” is magical thinking too.

        • gman,

          All empires collapse due to the Falling EROI. The United States is no different. This has nothing to do with the people, but rather the dynamics of the empire itself. The United States was doomed the day it started its massive suburban sprawl.

          As for your remark that Gold-Silver as stores of economic energy is magical thinking too, is incorrect. Gold and silver have been and will continue to be stores of economic energy due to “Thermodynamics” and not magical thinking.

          Modern Economics is “magical thinking”, not physical economics based on stores of value such as gold and silver.

          steve

          • “Gold and silver have been and will continue to be stores of economic energy due to ‘Thermodynamics’”

            that’s … even worse than what you said before. I’m impressed.

          • gman,

            You are more than welcome to continue making incongruent comments. However, you are not making much sense. Basically, it’s a lousy EROI to make augments that are quite meaningless.

            steve

  12. Ray say’s:
    I agree with SRSrocco. That is why I buy all the precious metals I can afford. I know the USA and the world for that matter will implode in the near future. I intend to buy food producing land and other income producing items. I expect my retirement income such as social security and retirement from my work to dry up. I have been planing for this for a while. People that stick their heads in the sand and ignore whats coming will pay dearly. After the crash there will be opportunities to pick up land, certain stocks and other things at bargain prices. My major concern is the government. This coming collapse could bring us a dictator just as it did in Germany during the 1929 crash. That’s my main concern because I have not devised a safe place to go if travel restrictions are imposed. Don’t believe this can’t happen just because this is the good ole US of A. The reason I have not allowed for this is because I am to dang old. I would advise younger folks to have already setup a country such as Argentina or wherever you think would be safe to flee. I believe when the SHTF here there will be riots and unrest like has never been experienced in this country. I don’t know if Steve agrees with this, but this is my opinion.
    Good luck to all.

    • Try to be a dictator without access to cheap oil. How would you mobilize your resources? When people are starving and you can’t move food supplies or an army to intimidate the locals who’s going to listen? I’d be more concerned about my local war lord then a countrywide dictator.

      • Pete, the government makes sure that the army is well taken care of. It won’t be a question of “no oil.” Price will be the limiter. The gendarmes will always have enough oil. gas, diesel, warm clothing and food. The average person , not necessarily. Witness, who suffers and who has plenty in North Korea. Or Venezuela. Or some areas of California.

        Ray is correct. It’s unfortunate he didn’t become aware at an earlier age. Many Americans who wouldn’t think about leaving the country are moving to the open, sparsely populated areas of the northwestern states. Often, the advice I give is to surround yourself with like-minded people. That could mean gun advocates or religious folks with whom you identify. Folks who support one another during troubling times.

        Education is the only thing they cannot take away from you. There is always big need for welders, plumbers, electricians, mechanics and similar tradespeople. I am amazed that there continues to be a shortage of these folks, so that it costs $90.00 to $125.00 per hour in some places to hire these people. That needn’t be except for the fact that many people are either lazy or not motivated to learn. If you are in position to benefit your community by providing these skills, you will be welcomed anywhere.

        Charley Z (workaholic and also life-long student. I just learned how to powder-coat metal this week. Very cool.)

    • Agreed Ray, except the .gov part. As soon as thermodynamics grabs your country by the pussy, there will be mayor disruptions in supply chains. Maybe you should worry about military units going on a rampage.

  13. None of this will matter if Hillary and her army of global warming alarmists get elected. Coal…Oil…natural gas – all tools of the devil. Think EROI is on the ropes now, just wait. Prepare for leg-powered cars like in the Flintstones.

  14. Ray says: houtskool, I understand the thermodynamics problem. I have over 32 acres and a great plow horse and I know how to use him. I live in a community of 1,100 and know must of them. I am active in my church. We all hunt and cling to our guns. we will survive and praise the LORD for his blessings. The LORD has provided me with over 13,000 oz. of silver and counting. There is always a possibility of some kind of takeover when a country fails. I might not be alive when or if it happens but if I am we are ready. We have seed to plant and beef to eat and and are willing to protect. We pray for this country and it”s people to survive this next depression. We don’t know what GOD has in store. People think they are in charge but I think that’s foolishness. People have pulled away from the LORD big time. Look at our history and you will find in our founding documents GOD is spoken of frequently. In our schools, communities, everywhere. GOD is being pushed away. Look at the wiki leaks stuff about Clinton and her staff. No, I am not worried just prepared. There will be people that will laugh about my relationship with GOD. He has blessed me and I praise HIM. I try to follow HIS direction.

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