Billions of Barrels of US Oil Set to Disappear. Poof.

oil-fire-1024x681gc2smOff the keyboard of Thomas Lewis

Follow us on Twitter @doomstead666

Friend us on Facebook

 

oil-fire-1024x681

An oil refinery in Puerto Rico burns in 2009. That’s one way to make a bunch of oil disappear, but accountants can do it faster. And they’re going to. 

Published on The Daily Impact on December 10, 2015


In a few weeks, several billion barrels of American oil will vanish in an instant. (I am not making this stuff up: the headline is right there on Bloomberg Business, hardly a chicken-little medium.) This is — shortly to be was — the oil that just a few months ago (Remember? When we were young, and happy?) was to return us to energy independence, to make us the number one oil producer in the world, to bring the happy days here again for good.

Okay, there were weasel words salted into those assurances all along, words that we didn’t realize were there until too late. The new American oil revolution was going to put us on the road back in the general direction of North American energy independence (as long as you counted Mexican and Canadian oil, too); and we would be the number one oil producer if you included in your definition of “oil” such things as biofuels, refinery gains from heat expansion, spillage and, if necessary, drippings from leaky transmissions in shopping mall parking lots.

Well, we bought it. Even the president said we had a hundred years of petroleum lying under our feet. Thus it would be our great-grandchildren, not our grandchildren, whose lives we would ruin by burning it all up. Whew, that was a relief.

But much of that oil is about to disappear, not with the boom of an oil-train explosion or deep-well blowout or terrorist bomb, but with the quiet click of a computer mouse. And this time it’s not (as it often has been before) the Energy Information Administration revising downward a previous guess about oil reserves.   

As the American shale-oil boom, a.k.a. American Oil Revolution, was accelerating back in 2009, the Masters of the Oil Universe demanded and got an accommodation from the Securities and Exchange Commission: it was made easier for the oil companies to claim as hard assets, for purposes of valuing their companies and borrowing money, the value of all the oil they estimated to be “in reserve,” which is to say lying somewhere under the ground they had under their control.

The oil companies’ estimates of their own “proven reserves” were astronomical, of course. In the careful words of one expert observer, David Hughes, “There was too much optimism built into their forecasts.” Translation: They lied.

It is as if you and I, on applying to the bank for a loan, were able to claim as assets all the money we intended to make in our lifetime. “$20 million over 20 years, you say? Why then a $10 million loan should be no problem.” And so it was for the fracking industry, which never could have got started without oceans of cheap borrowed money.

Remarkably, at the time the SEC snuck two tiny limitations into the newly permissive rule, so niggling that no one thought them worthy of mention. To be, um, legitimate, these claimed assets had to be 1) profitable to extract under current market prices, and 2) actually extracted within five years. Profitability went away a year ago when oil prices collapsed from over a hundred dollars a barrel to under 50. Despite the fact that quarterly assessments of assets, including oil reserves, are required, bankers and hedge funds and operators used smoke and mirrors to avoid the Draconian restructuring that the new prices required. But now the five years have run out.

Hence the vanishing oil (which of course is not really vanishing, because it never existed). Chesapeake Energy Corporation, one of the noisiest participants in the erstwhile “Revolution” (Successful? That’s a whole ‘nother story.) is among the hardest to be hit: at year’s end it will lose over a billion barrels of reserves, or 45% of its assets.

Chesapeake is hardly alone. Moody’s Investment Service has just issued a report on the “deteriorating credit quality” in the oil and gas sector, a set of “exceptionally adverse conditions” that are “staggering in their breadth and severity.”

So this is how the oil revolution ends, not with a bang but a poof.


Thomas Lewis is a nationally recognized and reviewed author of six books, a broadcaster, public speaker and advocate of sustainable living. He also is Editor of The Daily Impact website, and former artist-in-residence at Frostburg State University. He has written several books about collapse issues, including Brace for Impact and Tribulation. Learn more about them here.

Knarf plays the Doomer Blues

https://image.freepik.com/free-icon/musical-notes-symbols_318-29778.jpg

Support the Diner
Search the Diner
Surveys & Podcasts

NEW SURVEY

Renewable Energy

VISIT AND FOLLOW US ON DINER SOUNDCLOUD

" As a daily reader of all of the doomsday blogs, e.g. the Diner, Nature Bats Last, Zerohedge, Scribbler, etc… I must say that I most look forward to your “off the microphone” rants. Your analysis, insights, and conclusions are always logical, well supported, and clearly articulated – a trifecta not frequently achieved."- Joe D
Archives
Global Diners

View Full Diner Stats

Global Population Stats

Enter a Country Name for full Population & Demographic Statistics

Lake Mead Watch

http://si.wsj.net/public/resources/images/NA-BX686_LakeMe_G_20130816175615.jpg

loading

Inside the Diner

Sea level isnt the problem. Super storms are.I predicted we would get hit by a hurricane this year in NS. Damn obvious in my opinion.Here is where I step up. I predict another one for next year.Just putting it here for posterity.In the mean time, t...

Quote from: RE on September 19, 2019, 03:39:25 PMQuote from: azozeo on September 19, 2019, 03:23:23 PMThose might be "YOUR" relative's, but there sure not mine    [...

Quote from: RE on September 19, 2019, 03:39:25 PMQuote from: azozeo on September 19, 2019, 03:23:23 PMThose might be "YOUR" relative's, but there sure not mine    [...

Quote from: azozeo on September 19, 2019, 03:23:23 PMThose might be "YOUR" relative's, but there sure not mine    AZ's Relatives[img width=900]https://www.geek....

Those might be "YOUR" relative's, but there sure not mine   

Knarf’s Knewz

Quote from: knarf on September 18, 2019, 06:25:30 [...]

Quote from: knarf on September 18, 2019, 06:25:30 [...]

I have a resolute will that is telling me NOT to l [...]

Diner Newz Feeds
  • Surly
  • Agelbert
  • Knarf
  • Golden Oxen
  • Frostbite Falls

Quote from: cernunnos5 on September 19, 2019, 07:4 [...]

Sea level isnt the problem. Super storms are.I pre [...]

We'll all be dead long before you get 80m of [...]

Quote from: K-Dog on September 19, 2019, 07:56:27 [...]

Quote from: UnhingedBecauseLucid on March 18, 2019 [...]

CleanTechnicaSupport CleanTechnica’s work via dona [...]

QuoteThe FACT that the current incredibly STUPID e [...]

Quote from: knarf on September 18, 2019, 06:25:30 [...]

Quote from: knarf on September 18, 2019, 06:25:30 [...]

I have a resolute will that is telling me NOT to l [...]

Scientists have unlocked the power of gold atoms b [...]

Quote from: azozeo on August 14, 2019, 10:41:33 AM [...]

Wisconsin Bill Would Remove Barrier to Using Gold, [...]

Under extreme conditions, gold rearranges its atom [...]

The cost of gold futures on the Comex exchange inc [...]

Quote from: K-Dog on September 15, 2019, 08:08:32 [...]

Good interview.  You sounded smart. [...]

A little Political Bickering is a small price to p [...]

Alternate Perspectives
  • Two Ice Floes
  • Jumping Jack Flash
  • From Filmers to Farmers

Shaking the August Stick By Cognitive Dissonance     Sometime towards the end of the third or fourth [...]

Empire in Decline - Propaganda and the American Myth By Cognitive Dissonance     “Oh, what a tangled [...]

Meanderings By Cognitive Dissonance     Tis the Season Silly season is upon us. And I, for one, welc [...]

The Brainwashing of a Nation by Daniel Greenfield via Sultan Knish blog Image by ElisaRiva from Pixa [...]

A Window Into Our World By Cognitive Dissonance   Every year during the early spring awakening I qui [...]

Event Update For 2019-09-18http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2019-09-17http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2019-09-16http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.html Th [...]

Event Update For 2019-09-15http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

Event Update For 2019-09-14http://jumpingjackflashhypothesis.blogspot.com/2012/02/jumping-jack-flash-hypothesis-its-gas.htmlThe [...]

With fusion energy perpetually 20 years away we now also perpetually have [fill in the blank] years [...]

My mea culpa for having inadvertently neglected FF2F for so long, and an update on the upcoming post [...]

NYC plans to undertake the swindle of the civilisation by suing the companies that have enabled it t [...]

MbS, the personification of the age-old pre-revolutionary scenario in which an expiring regime attem [...]

Daily Doom Photo

man-watching-tv

Sustainability
  • Peak Surfer
  • SUN
  • Transition Voice

The Trickster's Tale"Everyone has some wisdom, but no one has all of it." Come gather 'round my children [...]

Nothing Again - Naomi Klein Renews Her Climate Prescription"By now we should all be well aware by now of the havoc being caused by climate change." I [...]

Leaves of Seagrass"Seawater is the circulatory system of Gaia"In 1855, Walt Whitman penned the free verse, “ [...]

Treeplanting Olympics"Withdrawing 700 gigatons of carbon from the atmosphere could be accomplished by as early as mi [...]

The Dark Cloud"Skynet needs to send a terminator back to 1984 and take out Mark Zuckerberg’s mom before he ca [...]

The folks at Windward have been doing great work at living sustainably for many years now.  Part of [...]

 The Daily SUN☼ Building a Better Tomorrow by Sustaining Universal Needs April 3, 2017 Powering Down [...]

Off the keyboard of Bob Montgomery Follow us on Twitter @doomstead666 Friend us on Facebook Publishe [...]

Visit SUN on Facebook Here [...]

What extinction crisis? Believe it or not, there are still climate science deniers out there. And th [...]

My new book, Abolish Oil Now, will talk about why the climate movement has failed and what we can do [...]

A new climate protest movement out of the UK has taken Europe by storm and made governments sit down [...]

The success of Apollo 11 flipped the American public from skeptics to fans. The climate movement nee [...]

Today's movement to abolish fossil fuels can learn from two different paths that the British an [...]

Top Commentariats
  • Our Finite World
  • Economic Undertow

The thing about intermittent electricity is that it really doesn't substitute for much of anyth [...]

Hi Gail. I saw this in action myself at the Carnegie Mellon School of Architecture (I was their tame [...]

I am sure that the ferry needs a subsidy and this is why it is being cut. According to the article: [...]

"A coastal Alaska fishing town will soon be cut off from vehicles with the closure of its ferry [...]

It does look awfully suspicious. The article seems to make the assertion that these are natural gas [...]

Hi Steve. I recently found what I believe is a little gem, and I'm quite confident you'd a [...]

The Federal Reserve is thinking about capping yields? I don't know how long TPTB can keep this [...]

As some one who has spent years trying to figure out what the limits to growth are. let me say that [...]

Peak oil definitely happened for gods sake. Just because it isn't mad max right now is no indic [...]

@Volvo - KMO says he made some life choices he regrets. Not sure what they were. And I don't th [...]

RE Economics

Going Cashless

Off the keyboard of RE Follow us on Twitter @doomstead666...

Simplifying the Final Countdown

Off the keyboard of RE Follow us on Twitter @doomstead666...

Bond Market Collapse and the Banning of Cash

Off the microphone of RE Follow us on Twitter @doomstead666...

Do Central Bankers Recognize there is NO GROWTH?

Discuss this article @ the ECONOMICS TABLE inside the...

Singularity of the Dollar

Off the Keyboard of RE Follow us on Twitter @doomstead666...

Kurrency Kollapse: To Print or Not To Print?

Off the microphone of RE Follow us on Twitter @doomstead666...

SWISSIE CAPITULATION!

Off the microphone of RE Follow us on Twitter @doomstead666...

Of Heat Sinks & Debt Sinks: A Thermodynamic View of Money

Off the keyboard of RE Follow us on Twitter @doomstead666...

Merry Doomy Christmas

Off the keyboard of RE Follow us on Twitter @doomstead666...

Peak Customers: The Final Liquidation Sale

Off the keyboard of RE Follow us on Twitter @doomstead666...

Collapse Fiction
Useful Links
Technical Journals

Barocaloric is a solid-state not-in-kind technology, for cooling and heat pumping, rising as an alte [...]

Terrestrial ecosystems and their vegetation are linked to climate. With the potential of accelerated [...]

The Antarctic Centennial Oscillation (ACO) is a paleoclimate temperature cycle that originates in th [...]

Follow on our http://www.doomsteaddiner.net/forum/