<DrumBeat: December 21, 2006 The Oil Drum A Conversation on Energy Issues>

94 comments on Angola Joins OPEC

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Leanan on December 20, 2006 - 3:46pm Permalink | Subthread | Parent | Comments top
Dante thinks inventories are being drawn down.
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memmel on December 20, 2006 - 4:49pm Permalink | Subthread | Parent | Comments top

I think the weakest link in the oil economy is shortages. They can cause massive disruption and social problems. Thus the situation of OPEC trying to control price via cuts could very well backfire big time if it leads to shortages even if they are temporary. Erratic supply could easily and quickly become a factor even if overall supply is still okay.

The current mucking with supply by OPEC can easily end in unintended shortages instead of slow rises in price.

Regardless of the cause the biggest problem we will face with tight of expensive oil is supply disruption. Its the achilles heel of the oil industry.

Note that even situations such as Mexico production dropping can cause a lot of problems is refineries are optimized for oil of a certain quality thus its not trivial to change sources. Maybe Robert could comment on issues caused by changes in the oil quality type at refineries.

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jkissing on December 21, 2006 - 3:42am Permalink | Subthread | Parent | Comments top
Actually, inventories rose (to a record?) late summer, dropping sharply since, but still above any time last year. SO, inventories are dropping,but it is a misleading statement, just as is the claim that falling inventories are proof of losing a bidding war or anything else.
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westexas on December 21, 2006 - 12:08pm Permalink | Subthread | Parent | Comments top
You are of course correct.  We can continue to import 5% more crude + product every year for the indefinite future, while the top exporters are all--as I predicted--now showing lower exports.

 I've got to go now.  I'm doing my Christmas shopping in my car powered by an perpetual motion device, using my magic debit card that never falls below $1,000, no matter how much I spend.

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jkissing on December 22, 2006 - 2:43am Permalink | Subthread | Parent | Comments top
I've said before that your export model is of course correct. However, all liquids have surged this summer, imo the real reason prices fell.  Whether the summer surge and the recent decline is on account of seasonal ethanol production, I don't know. Regardless, using the recent decline to make your point, given that stocks are still higher than last year or the year previous, is misleading. Advancing weak arguments damages your positions, not strengthens them.

Exporters are likely to reduce exports over time because of internal demand, geological factors, and a shortage of rigs. The us is already reducing consumption, evidenced that for years the us wanted 2% more/year (400kb/d) every year, and now is somehow making do with <1%.  No doubt everybody save europe, where prices have been steadier, are making do with less than they would have if prices were still around 25/b.

China wastes an enormous amount of energy, teh US somewhat less/unit gop.  We will see prices move everybody towards greater efficiency, just as happened in the seventies.

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94 comments on Angola Joins OPEC

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