The Coming Energy Shortage Will Exacerbate PEAK GOLD & SILVER

By SD Contributor SRSrocco:

THE US ENERGY POLICY IS COMPLETELY F.O.S.! – We are SERIOUSLY SCREWED!

The reason why I have been writing a great deal about energy is due to the fact that energy is money.  Gold and Silver are only a physical accounting of energy.  Without ample energy supplies, gold and silver cannot be mined commercially.

The U.S. energy policy promoting LNG because they believe we have 100 years of natural gas reserves is plain insanity.  Oil is even worse.
Break-even for the average well in the Bakken is probably $100 a barrel
.

PEAK GOLD & SILVER will come sooner than later…

I have been spending a great deal of time sifting through updated SHALE GAS & OIL DATA.

The CURRENT DELUSION is to push LNG- Liquid natural gas (-260 degrees) as a source to power the U.S. commercial trucking fleet.  The reasons stated are due to the current extremely low price of natural gas as well as the supposed huge domestic reserves.

I am starting to find out that the SHALE GAS reserves have been grossly overstated.  Furthermore, I believe the recent downgrades of shale gas reserves by the USGS are only the beginning.  I think we are going to see additional downgrades as the data from the shale gas industry makes its way into the public domain.

As I mentioned before, over $8 billion dollars were written down (1H 2012) from large companies such as BP and BHP Billiton due to shale gas reserve downgrades.  Funny, the companies are stating the huge impairments are due to the low price of NatGas.  This is a nice cover story for those who don’t have good functioning brain stems, but the truth of the matter is…. its due to a loss of reserves… PERIOD.

The shale gas Players such as Chesapeake were suffering negative cash flow due to a low price of natural gas plus the high cost of continued drilling.  In order for these companies to continue their SHALE GAS FACADE, they drilled a few wells and proved up supposed huge reserves, in which they unloaded these supposed reserves to companies for a great deal of money.

Then these shale gas companies took this money and used it to continue drilling which made a larger glut of gas on the market, that pushed natural gas prices even lower.  Thus, their cash flows are even worse than before…LOL.

We are going to see SERIOUS ADDITIONAL IMPAIRMENT CHARGES on supposed shale gas reserves year end 2012.

The reason why I have been writing a great deal about energy is due to the fact that energy is money.  Gold and Silver are only a physical accounting of energy.  Without ample energy supplies, gold and silver cannot be mined commercially.

The U.S. energy policy promoting LNG because they believe we have 100 years of natural gas reserves is plain insanity.  I have a great deal more to share when I finally get the research finished and an article to post.

PEAK GOLD & SILVER will come sooner than later…

THE GREAT BAKKEN OIL FIELD MAY PEAK SOONER THAN EXPECTED

I will end my posts on this positive note.  For those who still don’t believe in peak oil (i.e… Porter Stansberry), I would like to present the following graphic:

This map comes from the wonderful folks at the EIA.  Here we can see the entire Bakken field is outlined in red.  The green areas denote the sweet spots where drilling has already been saturated.  There are those who think the entire area is full of oil… it is not.

According to the work by Rune Likvern:

The post shows estimates of break even prices for the “average” (pro forma) well at around $80-$90/bbl. That estimate does not include full life cycle costs, acreage costs etc.. I hold it more likely that the break even cost for the “average” well in the Bakken formation presently is around $100/bbl when all costs are included.

Well, isn’t that quite interesting.  Break-even for the average well in the Bakken is probably $100 a barrel.  Those who are counting on DEFLATION, better realize this is much different than the 1930′s when the cost of a barrel of oil was only $1.27 (1929 before the depression).  Thus, the cost of producing the barrel of oil based on an EROI of 100/1 (in the 1930′s) was a lousy $0.02 cents a barrel (rounded higher.

When the price of oil fell to $0.65 a barrel in 1932, the oil tycoons were still making $0.63 profit for each barrel!  Sure it wasn’t as much as they were making in 1929, but who cared if the oil was flowing like water.

Today, we have a much different picture… especially in the cost of producing shale oil in the Bakken.  If it is true that break-even is nearly $90-100 a barrel… there ain’t a whole lot of bacon fat left in that balance sheet!

ONE DAY… THE OIL ANALYSTS MAY BE SLEEPING WITH THE FISHES…

Comments

  1. This large scale issue will force prices higher and on a substantial scale and not just in this country. The wildcat strikes in SA just add to the problems of silver and gold availability
    One side note to this. In California, shortages are cropping up at major stations such as Costco. Smaller mom and pop stations in both close in and rural area are forced to close when the price of delivered gas is too high for them to sell. $5,00 a gallon in not uncommon.  This same thing happened in 2008 when barrel prices spiked.  The Richmond plant is not back up to speed and shortages, whether as a result of barrel price or refinery shortages and shutdowns, could easily become more commmonplace.  The Iran situation has not been fully factored into this problem  Keep your gas tanks no lower than half full just in case. Topping off would be wise.

  2.    Price paid for oil $85.3479  and gas was $ 4.4721 for a few wells in the Bakken in a Sept report I read

  3. Visited with a friend last week with a few mineral acres. He stated ; One well with 2 legs netted the state of ND about $575,000.00 in extraction  taxes for 30 days.

  4. Releasing areas of large oil reserves from dictators is not just an idea, it’s a necessity. Expect Iran to be taken out soon or the veil will have to be pulled back from this charade call “energy independence”.

    Bakken is $80-$100/bbl, deep water is $60-$100/bbl, the largest reserve in the world (Ghawar) is suffering from significant water cut, fracking for nat gas is producing small earthquakes in various parts of the country and the wells run dry very quickly, the world wants off the dollar reserve currency……………how long can the mope keep the game of deception going.

    We are heading for energy wars like the world has never seen. Either that or we will be fighting over the neighborhood dumpsters by next year. 

  5. Here’s a pleasant thought. FREE ENERGY is presently available. This means you pay ONCE for the machine that harnesses energy from the earths atmosphere and then one can mine all the gold and silver they want. The problem is. YOUR GOVERNMENT (AKA The Criminal Banking Cabal) does not want you to know this technology is presently available and being made available for public use. There is also an Obama executive order that prohibits possession of these devices in the U.S. I wonder if it has something to do with bankrupting the energy cartels?
    To research free energy and healing technologies and other amazing data go to http://www.keshefoundation.org
    Like I say, this free energy technology is available NOW and Dr. Keshe is trying to promote his non-profit inventions to better humanity.
    Please share this information with others, as our time is running short.
     

  6. Oil consumption is down if the BDI is any indication of commerce. Yes I agree there seems to be a depletion of oil reserves but for a different reason. For a long time the EPA has not been releasing drilling permits on public land, or very few, and forcing the more limited and much more costlier production of off shore drilling. Most discovery now seems to be on private land here in this country and a vast amount of land west of the mississippi is govertnment controlled. Just the other day saw on the internet how 57 million acres of public land was frinally court ruled ‘off the mining/energy harvest grid!’ Most, if not all the Bakken recoverables are on private land and your post of the potential volume of oil in that reserve are not near the figures I have been reading. I will not argue with facts you present here, but your basis is on the ‘peak oil’ hypothesis. Yes, of course there is a peak oil controversy if production is squeezed down. You may boil this down to a ‘you think vs. I think’ thing, but the obviouse does remain. Purposely choke down the production of a commodity or anything and you have a managed supply problem. Thanks for the work and info you put into your posts…..

    • It’s not about running out of oil, it’s about the cost of retrieving what is left in the ground after the easy stuff is gone. And as much as I may get slammed for this, I don’t want oil wells covering every 6×6 ft. peice of land in the US. Yes, it can be done but you won’t want to live in a country like that. Look what has happened to southern Russia.

    • Not Sure – The ‘Peak Oil’ controversy is about running out of oil….but you are right in that directly it is about the cost of retrieving what is left in the ground that effects us dynamically as consumers. I’ll restate….’Purposely choke down the production of a commodity or anything and you have a managed supply problem.’ Which has been done and which in fact leads to a comsumer cost problem….and I believe you can have supply without every 6×6 piece of land covered in oil wells….BTW, have you seen the eye sores and bird killing wind turbins consuming vast tracts of landscapes here in the west? I have seen them out here and they bother me, however it may be just be a problem with perspective….

    • BIG TOM… yes, there is this notion that the GREAT PUBLIC LANDS have been left alone since the native americans roamed the land.  I would like to remind those who think there are all of these untapped reserves in these Public Lands… THE UNITED STATES HAS BEEN EXPLORED LIKE SWISS CHEESE.  All the cheap good stuff is gone.  The only reason why the Bakken is now being exploited is due to the  higher price of oil.  The oil industry had the technology of horizontal drilling a few decades ago.  However, it was not ECONOMICALLY VIABLE to drill and extract the oil at below $40-$50 a barrel.

      And.. if that doesn’t convince the worst skeptic, here is the truth right from the horse’s mouth,

      the CEO of Chesapeake Aubrey McClendon:

      Aubrey McClendon, CEO of Chesapeake Energy, admitted to Bloomberg that “There was a time you all were told that any of the 17 counties in the Barnett Shale play would be just as good as any other county. We found out there are about two or two and a half counties where you really want to be.” It is now known that every shale play in the U.S. has been reduced to such a core or tier area.

      ————————-

      I am working on a very detailed article showing just how much the SHALE GAS & OIL INDUSTRY IS A SCAM.
          

        
         

         
        

    • It’s not the depletion of oil reserves that we should be worried right now, it’s actually the cost of extracting them that we should be worried because it is going up. We should not be worried about the depletion of oil reserves right now because we still have a lot of liquid energy reserves left in the North.

  7. Here’s the thing.  When the global economy takes the second big leg down, the demand for liquid fuels will dramatically decrease.  Therefore, existing supplies will stretch out. This demand decrease will kill the price.  Soft prices will kill exploration.  Effect is to push peak oil down the road.  A liquid fuels crisis is brewing, it’s just going to be a bit farther down the horizon then what most peak oil experts think.

  8. The U.S. energy policy promoting LNG because they believe we have 100 years of natural gas reserves is plain insanity.  Oil is even worse.”

    Actually, I do not find that idea nearly as insane as the idea that we have to develop every single oil and gas reservoir in the USA immediately and export a lot of it.  This oil and gas has been in the ground for a VERY long time and is not going anywhere.  We can well afford to stretch it out, develop it slowly, and USE IT HERE. Until commercial nuclear fusion becomes a reality, which it won’t if we don’t get busy on it, oil and gas plus nuclear are the only viable high energy density methods of producing the tera-watts of power we need.  Nuclear would be a good option if we would use the very best technology available instead of continuing to use 30-40 year old nuclear-electric plants with antiquated safety systems, and get serious about long term nuclear waste storage.

  9. Clean coal is an option but it will drive the cost of electricity way up. Once prices rise above a certain point it will start to limit travel for the working poor in this country. They will only have enough to get to work, buy a little food, and go home. Hard to have an uprising when people can’t travel.

    • That’s why electricity must be produced with water which is called the hydroelectricity. With this method of producing electricity, you don’t have to worry about resources getting rare. My local electricity bills are the cheapest in the world. If the price of electricity skyrockets, then a lot of people will be burning stuffs to cook and heat themselves.

  10. COMMON SENSE ENERGY FOR DUMMIES:

    Folks, the problem is NOT WHEN WE HIT PEAK OIL, the problem is when the high cost destroys our LEECH & SPEND ECONOMY.  We are already there.  Very few realize what will happen when all those PAPER DIGITS IMPLODE.  Investment capitial to keep exploring and drilling will dry up and blow away.

    I am more concerned about the falling EROI – ENERGY RETURNED ON INVESTED of oil and gas, than I am of the exact damn date of the peak.  Here is a chart of the EROI of U.S. oil & gas:

    1
       
    In 1930, it took the energy cost of one barrel of oil to produce 100 for the market.  This fell to 30 to 1 by 1970, and at last calculation it was 11 to 1 in 2000.  I would imagine as shale oil has become a larger percentage of the overall oil supply in the states, the EROI has probably fallen to 7-9 to 1.  Hell, it could be even lower.

    Our economy needs a high EROI of oil and natural gas to sustain itself.  It doesn’t matter if there are a so-called 2 trillion barrels of oil in OIL SHALE in Utah and Wyoming.  This sort of oil is actually locked in shale that has an EROI of 1.2 to 1….LOL.  Christ, it is really hilarious just how brain dead we have become to believe there are 2 trillion barrels of oil shale.

    Anyhow, the whole debate about PEAK OIL is really pointless.  We are already feeling the pain, but the world wants to keep taking its MEDS and to continue to believe that the earth has a creamy nugget center of oil forever.   

    Porter Stansberry…. eat your heart out.   
             

    • SRS….your point about a declining EROI is well made.  The solution is to move to fuel with greater BTU density.  Nuclear is at 24.5 million kWh/kg .  Gasoline is 13 kWh/kg?   Obviously, nuclear is the solution.  Imagine if nuclear power was abundant and ultra-cheap.  Now fuel cells make sense

    • SRS – Please, let us all stop for a moment and take a breath here. We all seem to be shouting at eachother and defending our respective positions to the death. I am not attempting to destroy anything you say here at all. I am trying to add, as in contribute, to the discussion here on the energy issues problem. I do not pretend to have all the answers nor do I doubt your chart figures on EROI. In fact I agree you make some good points. I am just adding(as posted above) some comments as to why I believe we are having problems at the pump. Obviously more energy is spent defending our respective points here than conserving that energy which lies outside our fenced in conceptions….

  11. The only thing I disagree with SRS about is this peak oil… I think this is a bunch of BS. All misinformation given by the oil companies themselves to say there is a shortage so prices must rise. I remember as a kid in the 70′s hearing this bullshit and that we were running out of oil etc etc etc… I side with Lidsey Williams on this. Just like our Government who creates a crisis then comes in with the answers to fix the problem they created to get more control and power. this is all this folks. Saying this with all do respect for SRS..

  12. POPPA T… again, the whole Peak Oil debate is completely useless.  Its the EROI that counts.  Anyhow, Peak oil will come and go.  Just like the world thought the EARTH WAS FLAT and the EARTH WAS THE CENTER OF THE SOLAR SYSTEM…. all IGNORANCE goes away when the truth and facts become known.  We just have to be patient.

    And by the way… oil companies are not drilling for oil in the DEEP SEA & in the ARCTIC OCEAN because there’s all this oil just laying around inland.    

  13. I happened to have mineral rights in several gas wells in Texas. For some reason the returns have dried up…, and the wells are less than 5 years old. And it isn’t because there is no gas. For some reason the wells have been governed down for no other purpose than to show they are still active. But not according to my check each month. Something very strange is going on in Texas.

    • SNOWRIDER… you’re not alone.  Revenues have dried up all over Texas from shale gas wells.  Here is some revenue information from Deborah Rogers work you may find quite interesting:

      An excellent example of the drilling treadmill can be seen by examining the audited accounts of the City of Fort Worth in the Barnett shale play. (7)

In 2008, the city received approximately $50M in gas revenues. This dropped precipitously in 2009 to about $19M. In 2010, it trended back up and closed the year at approximately $38M. On the surface, it would seem that things were simply recovering from the economic downturn and returning to normal — until the number of producing wells is considered.
       
      Between 2008 and 2010, the number of producing wells within the city proper grew more than fourfold. So even though there were now four times more wells, these new wells could only keep revenues at 2/3 the levels seen in 2008. Although gas prices did decline during this period, severe depletion rates of the older wells was clearly the primary contributor.
       
      By the way, this pattern has occurred repeatedly in North Texas. For instance, Denton County saw a 58% increase in number of wells for a 23% decrease in revenues. The wells at DFW airport have come in with dismal returns. (8) They never performed up to original projections. Chesapeake Energy needed 2.0/Bcf to break even. The wells have produced .9/Bcf . The University of Texas at Arlington saw revenues peak at approximately $7M with a mere 6 wells on campus to plummet drastically in a matter of months. Revenues in 2010 were down to $800K even though there were now 22 wells on campus.
      ———————

      there you go. I don’t believe the problem is that they have turned down the gas… the gas has gone into an exponential decline rate. We must remember, shale gas fields can deplete upwards of 80% by second year. The shale gas industry has hyped their great production, but in reality, they have to keep drilling just to keep production from collapsing.

        

  14. BIG TOM..  by the way, I am not yelling.  That is just my typing style.  I like to use CAPS to highlight things that are important.  I would also like to add this chart for kicks and giggles.  PEAK OIL, is the least of our concern.  As I stated before the falling EROI is even a much worse problem.  Then, to add insult to injury, we have the DECLINING NET OIL EXPORTS which peaked in 2005.

    Available Net Oil Exports are those shown in the graph below as ANE.  ANE is all the net exports minus China & India:

    As you can see, even though OVERALL OIL PRODUCTION (in dark RED) is basically flat, Available Net Exports (ANE) peaked in 2005 at 40 million barrels a day (mbd), then dropped to only 35 mbd by 2011.   If past trends continue, Available Net Exports will drop in half to only 16-18 mbd by 2020.  This is where the SHEET HITS THE FAN.
      

  15. If there is an energy crisis that will cause the peaks on gold and silver, then the cartel are going to get wiped out with their paper gold and silver. Even if they successfully crush their prices, the premiums on the physicals ones are going to skyrocket.

  16. Steve  I am in agreement on EROI  It is self evident.  EROI/Peak silver and gold, as you have noted, also has its cross over especially as it related to the enery cost to produce the precious metals   With strikes forcing wages up over 20% that could be call peak wages.  Some mine operators in SA may be finding that to be part of their equation

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