July 2005 Archives
7 entries filed this month:
The report, Peaking of World Oil Production: Impacts, Mitigation, & Risk Management, as I’ve noted before, is well worth the time reading.
In an article today EnergyBulletin.net suggests that perhaps the report is being purposely ignored or shifted aside by the powers that be. Conspiracy? Or politics? Or a little of both? Perhaps the blogosphere can help by opening more eyeballs up to the content.
Following up the CERA report with Hirsch’s work gives one a good counterbalancing opinion through which we might view the potential problem more objectively.
No matter which spin on the topic one chooses to side with, we must remember that all such analysis is based largely an accumulation of assumptions.
Assumptions are a real problem in the energy business. National and international demand forecasters can’t get their forecasts right, based on more quantifyable assumptions, so it clearly doesn’t make any sense to have more faith in producers, especially since the largest producers hide behind dictatorial governments where transparency is a concept quite foreign.
One of the major problems with the world wide petro market is the near total opacity of OPEC production and reserve information. Russia is also a murky pond. Very little is really known about the state of the large Saudi oil fields which this world depends upon now totally. If these fields, as some industry observers have suggested with increasing frequency lately, are anywhere near their “peak” output capacity, no amount of world wide exploration in conventional and unconventional sources is likely to keep up with the current rate of demand growth.
In such a case the only alternative for the world will be to reduce demand, and the only way this happens is through deep recession, but depending on the shape of the oil production “peak” or “plateau”, it may require world wide economic depression before demand is brought inline with future supply capacity.
We are a ways off from this… but how long is the question – 1, 2, 5 or 10 years? Will alternatives be in place before such a challenge is faced by the world?
I’m not convinced we’ll be ready. In order to deal with a problem effectively one must generally first accept that a problem exists. There’s absolutely zero evidence of problem recognition in current policy and political activity in the United States and Canada.
Cambridge Energy Research Associates put out a report in June Oil & Liquids Capacity to Outstrip Demand Until At Least 2010: New CERA Report which to me at the time had the air of “hopeful assumptions”.
Ronald R. Cooke of FinancialSense.com has put together a not-bad set of challenges and questions to the CERA report in his article Oil Depletion? Its All In The Assumptions. (hat tip: The Oil Drum)
I suspect Mr. Cooke would be happy to admit that his somewhat dim view on the optimistic CERA report is based on assumptions, many of which can’t be verified at this time. He does pose some good questions though.
As an investor in energy companies (just because I don’t like the stuff doesn’t mean I am squeamish about profiting off of it or other people’s addiction to the stuff—sorry) I follow the projections and quarterly results of a number of companies quite closely. Production growth remains an issue with a number of the larger companies in the sector, yet demand growth continues inexorably higher. I’ll be writing an article on this for TrendVue in the near future.
My primary concern over peak oil is not to question IF but ascertain WHEN not just the peak but concern over the peak starts to gain widespread currency. There will come along with that realization much turmoil in financial markets, perhaps more than we’ve ever witnessed in history.
Its difficult not to sound like a whacko or alarmist when discussing this topic; all the generations alive today, at least in the modern/western world, have grown up taking for granted that relatively cheap energy would always be at our beck and call. We don’t even come close to realizing just how much petro-energy and petro-chemicals impact our daily lives.
The mere fact that the most optimistic of large energy industry research companies sees fit to entitle their report ”... Capacity to Outstrip Demand Until At Least 2010” should be a red flag, not a comfort. 2010 is less than 5 years demand growth away and already the current system is running at near peak capacity and markets are pricing oil as such. Peak capacity and peak availability (at a price anyone is willing to pay) are not the same things… it won’t take “peak” oil itself to create significant panic.
Lets just say its prudent to be tuned into the subject before everyone is tuned into the subject – by then it will be too late to do much about it.
I could have filed this under Politics, World or Environment but somehow Peak Oil seemed most appropriate.
On development, demography and climate change:The end of the world as we know it?, by Tim Dyson of the London School of Economics, is an interesting if not unsettling read.
(Hat tip: EnergyBulletin.net)
Pictures speak:
SANAA, 21 July 2005
On Tuesday, the government raised the prices of oil derivatives by up to 260 percent as part of a restructuring program agreed with the International Monetary Fund and the World Bank in 1995.
The Cabinet decided to raise the price of petrol by 90 percent to 1,300 rials ($6.75) per gallon and diesel by 260 percent to 900 rials ($4.68) a gallon. Kerosene prices shot up by 250 percent to 900 rials per gallon and cooking gas by 100 percent to 400 rials ($2) per cylinder. The price hikes came into effect at midnight Tuesday.
Government officials said Tuesdayâs subsidy cut has been delayed from 2002. âWhat kind of reforms are these that make us more poor?â asked one protester in the Attahrir Square in downtown Sanaa.
âIs this how they reward us for giving them our votes in the elections?â he asked.
A fair question… similar questions being asked in many developing countries as demand continues to grow, keeping prices high.
Radio Baghdad: Insurgents explode oil pipeline in southern Iraq
July 21, IRNA – Iraqi state Radio Baghdad announced minutes ago that insurgents on Wednesday night exploded an oil pipeline in southern Iraq’s Mahmoudiyeh region. The radio added, “Due to the explosion of a heavy bomb along the route of Mahmoudiyeh-Latifiyeh oil pipeline on early hours of Wednesday evening a part of it was set ablaze and the high flames due to the burning of the leaking oil covered a vast area for six hours.
No reference in western media to this as yet
BP plans resumed production at Badami oil field
Oil production at the Badami field on Alaska’s North Slope could resume as early as this summer, and BP expects output of 1,000 barrels a day, said Daren Beaudo, the company’s Alaska spokesman. High oil prices make the venture worthwhile, not so much for the expected daily trickle of oil but for the chance to try new technologies that might significantly improve Badami’s performance, Beaudo said.
Experimentation or desperation?
Russia increases oil export to China by 28 percent in 6 months
IRKUTSK, July 20. KAZINFORM. – A total of 3.7 million tonnes of oil has been shipped from Russia to China in the first six months of the current year, which is by 28.4 percent more than during the same period last year, the East-Siberian Railway Company, a branch of the Russian Railways Company, told Itar-Tass on Wednesday. Additional yards for receiving and dispatch of railway tank cars are being built there and railways are extended for making trains for carrying of up to 6,000 tonnes of oil.
OPEC President Says Oil Market Is Well Supplied
July 20 (Bloomberg)—The president of the Organization of Petroleum Exporting Countries, the source of almost 40 percent of the world’s oil, said the oil market is well supplied as prices fall below $60 a barrel.
China 2nd-Qtr Growth Unexpectedly Accelerates to 9.5%
Crude oil rises as China fuel sales jump
ââWhen we look at Chinese sales, we still see a strong and robust trend in consumption,ââ said Frederic Lasserre, head of commodities research at Societe Generale SA in Paris. ââWe might see a huge rebound in Chinese oil imports in the second half of this year.ââ
ââChina has confounded expectations of a slowdown,ââ said Dariusz Kowalczyk, a senior investment strategist in Hong Kong at CFC Securities Ltd. ââCommodity prices should increase for the very simple reason that the recent declines have been caused by fears of a Chinese slowdown. This data disproves such fears.ââ
so much for the so-called slow-down in China
Oman: 17 years proven reserves at current extraction rates.
“China emerged the main importer of Oman crude during 2004, accounting for 40.3 per cent of export volumes as against a 27.7 per cent share in 2003. Thailand stood second, lifting 16.4 per cent of Omani crude compared to 18.6 per cent in 2003. South Korea was third with a share of 15.9 per cent while Japan was in fourth place with a 15.5 per cent share.”
What’s even more interesting is that Oman pumped less in 2004 than in 2003.
Crude oil exports reached 263.6 million barrels in 2004 compared to 278.5 million barrels in 2003.
Seems a little odd at times of high prices, no?
Nigeria & China: As part of its quest for more oil supplies, China has inked a major oil supply pact with Nigeria under which the latter will supply 30,000 barrels of crude a day to the former.
Politics continue over CNOOC bid for Unocal: Committee to weigh CNOOC bid’s national threat
Yet, ExxonMobil is working in China on a $3.5 billion refinery expansion and Russian energy giant Lukoil wants Lukoil branded gas stations in the US
Interconnected we are.
Big media starting to muse about Peak Oil more and more: Washington Post
The Exxon report, issued last year, forecasts a peak in oil production outside of the Middle East and other countries not belonging to the Organization of Petroleum Exporting Countries by 2010. By 2030, a decline in global oil production will be aggravated by a world demanding 50 percent more of the stuff than it uses today, the report said.
The way I figure it, if the oil companies run dry without a plan, that’s really bad for them. But in no way can that be good for us.