Now that Thanksgiving is over, I think that we are facing a true winter of discontent. The global economy has to absorb and adjust for several uncomfortable changes over the next year. I am personally a perennial optimist but also a realist.
We have to overcome a shrinkage in US purchasing power known also as credit, brought on by the unraveling of the sub prime lending business, while the global economy is now eating an energy tax in the form of much higher fuel costs. This is not funny.
What is more, there is little reason to think that the credit decline will not be felt globally. Institutions are taking hits everywhere and they simply will not have as much liquidity. Remember that it was excess liquidity looking for a home that created this mess in the first place. And real estate price inflation took place just about everywhere.
We can thus expect a rolling squeeze on borrowers lasting about three years or more as inventories are unwound. I personally think that there is enough global liquidity slopping around to sponge up the excess housing inventory in the US within three years or very quickly.
Higher energy costs will impact everywhere, but in the US in particular. There is plenty of room for a recession style contraction in the economy that cannot be bailed out this time with cheap money. It is already dirt cheap.
The best scenario is for the oil price regime to stay generally neutral over the next three years while the credit markets work through their problems. In spite of the heated press. the credit situation will work itself out because the global economy will continue to expand for at least another generation or two simply because of the transition to a global middle class modern economy.
A shift in the price of oil to $200 per barrel will surely precipitate a serious recession. The problem is that looks as likely as a decline back to $60 per barrel. In the meantime, the industry and the users are all in denial. New discoveries now are still far too few, although they are been made, and they all need decade long lead times to become productive. The necessary wells that should have been discovered over the past fifteen years were not made.
The only technical fix that is even on the horizon and looks like it may be implemented is the THAI production protocol. It actually looks like the second coming of the oil business. although few have heard of it.
Right now it is been successfully tested on the deep tar sands in Alberta. Three well pairs are now sustaining 2,000 barrels of fluid per day with a water cut of around 50%. They have all started in the past eighteen months. They are currently shaking out the sand handling problems and perfecting the process. Two more years of production should see theses wells paid for. I do not know how long the wells will operate until the available resource is properly depleted and I am sure that the operators do not know either.
The real payoff, however, is that this protocol can be rolled out on thousands of wells just on the tar sands. And there are negligible inputs required unlike the mining protocol. And it can really be done very quickly in Alberta.
This exact same technology can be applied in theory in every other oil resource in the world and can lead to the recovery of huge amounts of left behind oil.
The creation of a pyrolysis front in the oil bearing formation upgrades and mobilizes the bulk of the remaining oil all0wing it to flow readily to the production well. If the oil cannot escape, it is likely to be burnt providing process energy.
Unheard of seventy percent recoveries are been touted by the project promoters.
If THAI fails, then the oil option will continue to evaporate and quickly. Right now, we are trying to get through the next several years while facing pending production declines.
We have to overcome a shrinkage in US purchasing power known also as credit, brought on by the unraveling of the sub prime lending business, while the global economy is now eating an energy tax in the form of much higher fuel costs. This is not funny.
What is more, there is little reason to think that the credit decline will not be felt globally. Institutions are taking hits everywhere and they simply will not have as much liquidity. Remember that it was excess liquidity looking for a home that created this mess in the first place. And real estate price inflation took place just about everywhere.
We can thus expect a rolling squeeze on borrowers lasting about three years or more as inventories are unwound. I personally think that there is enough global liquidity slopping around to sponge up the excess housing inventory in the US within three years or very quickly.
Higher energy costs will impact everywhere, but in the US in particular. There is plenty of room for a recession style contraction in the economy that cannot be bailed out this time with cheap money. It is already dirt cheap.
The best scenario is for the oil price regime to stay generally neutral over the next three years while the credit markets work through their problems. In spite of the heated press. the credit situation will work itself out because the global economy will continue to expand for at least another generation or two simply because of the transition to a global middle class modern economy.
A shift in the price of oil to $200 per barrel will surely precipitate a serious recession. The problem is that looks as likely as a decline back to $60 per barrel. In the meantime, the industry and the users are all in denial. New discoveries now are still far too few, although they are been made, and they all need decade long lead times to become productive. The necessary wells that should have been discovered over the past fifteen years were not made.
The only technical fix that is even on the horizon and looks like it may be implemented is the THAI production protocol. It actually looks like the second coming of the oil business. although few have heard of it.
Right now it is been successfully tested on the deep tar sands in Alberta. Three well pairs are now sustaining 2,000 barrels of fluid per day with a water cut of around 50%. They have all started in the past eighteen months. They are currently shaking out the sand handling problems and perfecting the process. Two more years of production should see theses wells paid for. I do not know how long the wells will operate until the available resource is properly depleted and I am sure that the operators do not know either.
The real payoff, however, is that this protocol can be rolled out on thousands of wells just on the tar sands. And there are negligible inputs required unlike the mining protocol. And it can really be done very quickly in Alberta.
This exact same technology can be applied in theory in every other oil resource in the world and can lead to the recovery of huge amounts of left behind oil.
The creation of a pyrolysis front in the oil bearing formation upgrades and mobilizes the bulk of the remaining oil all0wing it to flow readily to the production well. If the oil cannot escape, it is likely to be burnt providing process energy.
Unheard of seventy percent recoveries are been touted by the project promoters.
If THAI fails, then the oil option will continue to evaporate and quickly. Right now, we are trying to get through the next several years while facing pending production declines.
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