Oil & Gas Arbitrage: The Market Finds a Way
Our fifth paper of 2025…
OUR PRELIMINARY SPECIFICATION MAKES SHALE COMMERCIAL. THROUGH AN INNOVATIVE BUSINESS MODEL SUPPORTING THE JOINT OPERATING COMMITTEE, WE PROVIDE OIL AND GAS ASSETS WITH THE MOST PROFITABLE MEANS OF OIL AND GAS OPERATIONS, EVERYWHERE AND ALWAYS. ENABLING THEM TO ACHIEVE ACCOUNTABLE AND PROFITABLE NORTH AMERICAN ENERGY INDEPENDENCE. OIL AND GAS’ VALUE PROPOSITION IS AT A MINIMUM, LEVERAGED TO THE POINT OF 10,000 MAN HOURS PER BOE. WE KNOW WE CAN, AND WE KNOW HOW TO MAKE MONEY IN THIS BUSINESS.
Our fifth paper of 2025…
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Labels: Research, White-Paper
As promised our paper looks at the dynamic interactions that are a result of People, Ideas & Objects use of Hyper Specialization, Artificial Intelligence, and Intellectual Property for our user community and their service providers. The paper entitled…
This is our third paper of 2025 that deals exclusively with our user community and their service providers. Download your copy here before all the shooting starts again.
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Our third white paper of 2025 is now published—this also our second white paper this year focused on our user community. Today’s paper is titled:
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I’m pleased to confirm that our February 10, 2025, paper—
will be published on schedule.
I can also announce a fourth deliverable for 2025, slated for release on March 17, 2025, under the current working title:
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Labels: Research, Service-Provider, User, White-Paper
And as promised, two white papers are being released from People, Ideas & Objects. Building off of the "animal spirits" being released in the North American marketplace. These papers address how the material and consequential issues that have manifested in oil & gas are dealt with through the reconstruction of the oil & gas industry under new leadership. The titles of these papers are.
And
These papers can be accessed here and here. Get yours before they're all gone.
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People, Ideas & Objects is pleased to announce that we will publish our third research paper on Monday, February 10, 2025. This paper represents the third deliverable from our recently established research capability. As a reminder, Intellectual Property, our user community, and research comprise the three distinct competitive advantages we pursue at People, Ideas & Objects.
Currently, a significant portion of our effort is devoted to research in preparation for the development of Phase I of the Preliminary Specification. Similar to one of the papers scheduled for release on January 20, 2025, this third paper will focus on our user community. The previously mentioned January 20 paper addressing our user community is titled:
This publication delves into many details of the Preliminary Specification development, as well as the structure of our user community. It covers the individual phases of development and, most importantly, the compensation framework for our user community throughout the development process.
On January 20, 2025, we are releasing two papers. Both are relevant to everyone, but one targets our user community specifically, while the other is directed toward engineers and geologists. Together, they address the four critical elements needed to provide dynamic, innovative, accountable, and profitable oil and gas operations.
Our February 10, 2025 paper is entitled:
At People, Ideas & Objects, we view our user community as the source of our solution’s quality. By making our user community a competitive advantage and our primary focus, we ensure the delivery of a high-quality ERP solution for the oil and gas industry. Over the next 25 years, the consequences of implementing a robust and well-designed ERP environment will be critical to the industry’s success. Starting with a thoughtful organizational design ensures that its benefits reach all corners of the sector. Approaching this task haphazardly would only jeopardize the outcome.
Periods of significant economic change—like the one we are entering—are exceedingly rare. We are transitioning into new economic models that promise exponentially greater performance trajectories, far beyond the scope of technology or bioengineering. This transformation will permeate every aspect of the economy, and its impact will be felt most intensely in North America.
Many believe that Artificial Intelligence represents the future of our economy, driving growth through its capacity to leverage intellectual efforts. While People, Ideas & Objects acknowledges that there may be some truth in this, we also recognize the daunting competitive challenge posed by oil and gas. Each barrel of oil equivalent delivers between 10,000 and 25,000 man-hours of mechanical leverage—an extraordinary value proposition that consumers rely on every day. Far from fading into the background, oil and gas still holds its greatest opportunities ahead.
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People, Ideas & Objects has scheduled Monday, January 20, 2025, for the publication of two of our papers. Originally conceived as a single document, we have separated them to provide clarity for two distinct audiences. We have titled these papers as follows:
and
These two papers comprehensively address the full spectrum of exploration, production, administrative, and accounting needs for oil and gas producers. They provide insights into how individuals within the industry can actively participate in the surge of entrepreneurial spirit invigorating the United States following the inauguration of President Trump. There is no reason for the oil and gas sector to remain in the hands of those who have contributed to its decline. On the contrary, North America needs dynamic, innovative, accountable, and profitable oil and gas producers to step forward, take the lead from existing officers and directors, and actively fuel this entrepreneurial resurgence with reliable, secure, affordable, and independent energy.
Profitability is not achieved simply because a CEO declares that everyone needs to be profitable from now on. The same holds true for innovation and dynamism. There are fundamental differences between organizations that can generate profitability and those that cannot. Transforming a persistent failed culture cannot be accomplished from within that culture; a new culture must be defined and built from the ground up, brick by brick and stick by stick.
The purpose of these two papers is to initiate action across the industry toward building the culture envisioned in the Preliminary Specification. People, Ideas & Objects aims to empower leadership from the engineering and geological disciplines to drive the industry forward and participate in this new economy.
Media outlets requesting embargoed copies for Thursday, January 16, 2025, can submit their email addresses here.
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Such a ban is not easy to imagine. Optimists forecast that the number of EVs in the world will rise from today’s nearly 4 million to 400 million in two decades.67 A world with 400 million EVs by 2040 would decrease global oil demand by barely 6%. This sounds counterintuitive, but the numbers are straightforward. There are about 1 billion automobiles today, and they use about 30% of the world’s oil.68 (Heavy trucks,aviation, petrochemicals, heat, etc. use the rest.) By 2040, there would be an estimated 2 billion cars in the world. Four hundred million EVs would amount to 20% of all the cars on the road—which would thus replace about 6% of petroleum demand.
An ant-size engine—which has been built—produces roughly 100,000 times less power than a Prius. An ant-size solar PV array (also feasible) produces a thousand- fold less energy than an ant’s biological muscles. The energy equivalent of the aviation fuel actually used by an aircraft flying to Asia would take $60 million worth of Tesla-type batteries weighing five times more than that aircraft.73
The inexorable march of technological progress for things that use energy creates the seductive idea that something radically new is also inevitable in ways to produce energy. But sometimes, the old or established technology is the optimal solution and nearly immune to disruption. We still use stone, bricks, and concrete, all of which date to antiquity. We do so because they're optimal, not “old.” So are the wheel, water pipes, electric wires ... the list is long.
Hydrocarbons are, so far, optimal ways to power most of what society needs and wants. More than a decade ago, Google focused its vaunted engineering talent on a project called “RE<C,” seeking to develop renewable energy cheaper than coal. After the project was canceled in 2014, Google’s lead engineers wrote: “Incremental improvements to existing [energy] technologies aren’t enough; we need some-thing truly disruptive. ... We don’t have the answers.”97Those engineers rediscovered the kinds of physics and scale realities highlighted in this paper.
Hydrocarbons—oil, natural gas, and coal—are the world’s principal energy resource today and will continue to be so in the foreseeable future. Wind turbines, solar arrays, and batteries, meanwhile, constitute a small source of energy, and physics dictates that they will remain so. Meanwhile, there is simply no possibility that the world is undergoing—or can undergo—a near-term transition to a “new energy economy.”
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Indeed, the job of the entrepreneur is precisely to introduce new knowledge. The “Circular Flow of Economic Life” is a state in which knowledge is not changing. Economic growth occurs at the hands of entrepreneurs, who bring into the system knowledge that is qualitatively new – knowledge not contained in the existing economic configuration. p. 27
Unwritten, unspoken, and hidden vast storehouse of knowledge held by practically every normal human being, based on his or her emotions, experiences, insights, intuition, observations and internalized information. Tacit knowledge is integral to the entirety of a person's consciousness, is acquired largely through association with other people, and requires joint or shared activities to be imparted from one to another. Like the submerged part of an iceberg it constitutes the bulk of what one knows, and forms the underlying framework that makes explicit knowledge possible. Concept of tacit knowledge was introduced by the Hungarian philosopher-chemist Michael Polanyi (1891-1976) in his 1966 book 'The Tacit Dimension.' Also called informal knowledge.
Much knowledge - including, importantly, much knowledge about production - is tacit and can be acquired only through a time-consuming process of learning by doing. Moreover, knowledge about production is often essentially distributed knowledge: that is to say, knowledge that is only mobilized in the context of carrying out a multi-person productive task, that is not possessed by any single agent, and that normally requires some sort of qualitative coordination - for example, through direction and command - for its efficient use. p. 359
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Availability is the single most critical feature of any energy infrastructure, followed by price, followed by the eternal search for decreasing costs without affecting availability.
It costs less than $1 a barrel to store oil or natural gas (in oil-energy equivalent terms) for a couple of months.20 Storing coal is even cheaper. Thus, unsurprisingly, the U.S., on average, has about one to two months’ worth of national demand in storage for each kind of hydrocarbon at any given time. 21
Meanwhile, with batteries, it costs roughly $200 to store the energy equivalent to one barrel of oil. 22 Thus, instead of months, barely two hours of national electricity demand can be stored in the combined total of all the utility-scale batteries on the grid plus all the batteries in the 1 million electric cars that exist today in America. 23
For wind/solar, the features that dominate cost of availability are inverted, compared with hydrocarbons.While solar arrays and wind turbines do wear out and require maintenance as well, the physics and thus additional costs of that wear-and-tear are less challenging than with combustion turbines. But the complex and comparatively unstable electrochemistry of batteries makes for an inherently more expensive and less efficient way to store energy and ensure its availability.
Since hydrocarbons are so easily stored, idle conventional power plants can be dispatched—ramped up and down—to follow cyclical demand for electricity. Wind turbines and solar arrays cannot be dispatched when there’s no wind or sun. As a matter of geophysics, both wind-powered and sunlight-energized machines produce energy, averaged over a year, about 25%–30% of the time, often less.24 Conventional power plants, however, have very high “availability,” in the 80%–95% range, and often higher. 25
A wind/solar grid would need to be sized to meet both peak demand and to have enough extra capacity beyond peak needs in order to produce and store additional electricity when sun and wind are available. This means, on average, that a pure wind/solar system would necessarily have to be about threefold the capacity of a hydrocarbon grid: i.e., one needs to build 3 kW of wind/solar equipment for every 1 kW of combustion equipment eliminated. That directly translates into a threefold cost disadvantage, even if the per-kWH costs were all the same. 26
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Scientists have yet to discover, and entrepreneurs have yet to invent anything as remarkable as hydrocarbons in terms of the combination of low-cost, high-energy density, stability, safety, and portability. In practical terms, this means that spending $1 million on utility-scale wind turbines, or solar panels will each, over 30 years of operation, produce about 50 million kilowatt-hours (kWh)—while an equivalent $1 million spent on a shale rig produces enough natural gas over 30 years to generate over 300 million kWh.
Solar technologies have improved greatly and will continue to become cheaper and more efficient. But the era of 10-fold gains is over. The physics boundary for silicon photovoltaic (PV) cells, the Shockley-Queisser Limit, is a maximum conversion of 34% of photons into electrons; the best commercial PV technology today exceeds 26%.
Wind power technology has also improved greatly, but here, too, no 10-fold gains are left. The physics boundary for a wind turbine, the Betz Limit, is a maximum capture of 60% of kinetic energy in moving air; commercial turbines today exceed 40%.
The annual output of Tesla’s Gigafactory, the world’s largest battery factory, could store three minutes’ worth of annual U.S. electricity demand. It would require 1,000 years of production to make enough batteries for two days’ worth of U.S. electricity demand. Meanwhile, 50–100 pounds of materials are mined, moved, and processed for every pound of battery produced.
Today’s reality: hydrocarbons—oil, natural gas, and coal—supply 84% of global energy, a share that has decreased only modestly from 87% two decades ago (Figure 1). Over those two decades, total world energy use rose by 50%, an amount equal to adding two entire United States’ worth of demand.
The small percentage-point decline in the hydrocarbon share of world energy use required over $2 trillion in cumulative global spending on alternatives over that period. Popular visuals of fields festooned with wind-mills and rooftops laden with solar cells don’t change the fact that these two energy sources today provide less than 2% of the global energy supply and 3% of the U.S. energy supply.
To completely replace hydrocarbons over the next 20 years, global renewable energy production would have to increase by at least 90-fold. For context: it took a half-century for global oil and gas production to expand by 10-fold. It is a fantasy to think, costs aside, that any new form of energy infrastructure could now expand nine times more than that in under half the time.
If the initial goals were more modest—say, to replace hydrocarbons only in the U.S. and only those used in electricity generation—the project would require an industrial effort greater than a World War II–level of mobilization. A transition to 100% non-hydrocarbon electricity by 2050 would require a U.S. grid construction program 14-fold bigger than the grid build-out rate that has taken place over the past half-century. Then, to finish the transformation, this Promethean effort would need to be more than doubled to tackle nonelectric sectors, where 70% of U.S. hydrocarbons are consumed. And all that would affect a mere 16% of world energy use, America’s share.
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This “new energy economy” rests on the belief—a centerpiece of the Green New Deal and other similar proposals both here and in Europe—that the technologies of wind and solar power and battery storage are undergoing the kind of disruption experienced in computing and communications, dramatically lowering costs and increasing efficiency. But this core analogy glosses over profound differences, grounded in physics, between systems that produce energy and those that produce information.
In the world of people, cars, planes, and factories, increases in consumption, speed, or carrying capacity cause hardware to expand, not shrink. The energy needed to move a ton of people, heat a ton of steel or silicon, or grow a ton of food is determined by properties of nature whose boundaries are set by-laws of gravity, inertia, friction, mass, and thermodynamics—not clever software.
This paper highlights the physics of energy to illustrate why there is no possibility that the world is undergoing— or can undergo—a near-term transition to a “new energy economy.”
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