Since Mexico is our number 1 or 2 biggest supplier is it more significant that they are having supply problems while internal demand grows?
Should we worry more about the world peaking or a major supplier?
thank god for those Canadian oil sands ;) They'll save us.
Should we worry more about the world peaking or a major supplier?
Important point. Localized supply problems may become the most urgent issues. Smart strategy example? Look at China--they are lining up sources of supply everywhere.
>Remarks like that astound me. The one thing everyone agrees on here is THERE ARE NO NEW SOURCES OF SUPPLY!
They are arranging long term contracts with existing exporters. Some of these exporters had offered oil on the open market which was available to any buyer. China has essential locked up this production for thier own consumption leaving other importers to get oil from someone else. If this continues, some importers may have difficulty obtaining oil and will be forced to power down because they won't be able to import enough oil to meet demand.
The bottles stand as empty
as they were filled before.
Time there was, and plenty,
but from that cup no more.
Though I could not caution all,
I still might warn a few:
Don't lend your hand to raise no flag
atop no ship of fools.
CBS EVENING RUNS STORY SUPPOSEDLY ESPOSING OPEC/NON OPEC SECRET MEETINGS TO FIX OIL PRICE AND REDUCE PRODUCTION IN ALL COOPERATING COUNTRIES, INCLUDING NORWAY, RUSSIA, ANGOLA AND MAJOR OTHERS POSSIBLY MEXICO (??)
INTERNAL OPEC MEMO SAYS "SOMEDAY FUTURE SCHOLARS MAY LOOK BACK AND CALL THIS THE GOLDEN AGE OF PETROLEUM, WE MAY HOPE SO.
Claim is that secret OPEC AND NON OPEC PRICE AND PRODUCTION FIXING IS ADDING $1.00 A GALLON TO U.S. GASOLINE PRICE, THAT THERE IS STILL GREAT AMOUNTS OF OIL, BUT THAT OPEC AND NON OPEC PLAYERS NOT NORMALLY VIEWED AS COOPERATIVE ARE BREAKING INTO NEWER LEVEL OF COOPERATION AND MONOPOLY.
Whether true or not, this will have to be confronted, as it undercuts the "immenent peak" theory to the core.
As I have previously noted, the Houston consultant (recommended by Saudi Arabia) at the PBS Peak Oil debate stated several times that exporters may be cutting back on their production--look at what the Saudis have already said, in justifying their approximately 5% reduction in production since December.
It may be that OPEC would rather be hated--by claiming that production declines are voluntary--than risk military takeovers, by admitting that world oil production has peaked. This is the basis for incorporating major oil exporters into the major oil company/major oil exporter/energy analyst leg of the "Iron Triangle," i.e. their fear of their oil fields being seized.
ExxonMobil can say that they need all of their cash flow to bring on new oil fields outside the Middle East, and the housing/auto/finance group can say that high oil prices are temporary. So, go ahead an buy the large SUV, to drive the long commute, to the large mortgage--all advertised by the media group.
Your analysis, I fear, is sadly absolutely correct.
The fact that major oil producing nations and their dependents are stuck in a web of fakery and illusion is only indication of the house of cards falling all the harder.
This also, as mention a bazillion times here on TOD, has the added benefit of driving up prices further. And if there is no swing producer, then all the better--none of these countries can be punished through artificial price adjustments, simply because Washington no longer has the stroke to do so.
Just look at the desperation of Dick Cheney flying over to Kazakhstan in order to secure energy. We are indeed at the stage of using every possible option at our disposal to keep our imports plentiful and "cheap" (hah!).
Whether there is peak oil imposed by nature and economics or there is peak oil imposed by a cartel would lead to the same result, an imbalance between supply and demand leading to ever higher prices. Unless, of course, one believes that these producers can be jawboned or forced to produce more or if people get the impression that shortates are just temporary because they are dictated by politics.
In any event, however, our "leaders" (do we actually have any) could announce that either way, we must decrease our consumption for the indefinite future, because we will have less oil and because climate change mandates a decrease in the consumption of all forms of energy.
Also, in any event, this news just reiterates the fact that the world's producers have us by the gonads and we need more than some silly ass Bush vision of hydrogen and ethanol savings said nads in twenty years.
We could start by cutting our defense budget in half -- the half that clearly isn't making a dime's worth of difference in our ability to influence world events.
"Also tonight, there are many reasons for the high cost of gas. You've probably heard about increased demand in China, lack of refineries, and trouble in the Middle East. But what's the OPEC factor? Sharyl Attkisson investigates. "
Doesn't seem like it's a major story since it's not on their front page.
Saudi Arabia seemed to not be at all caught off by the story and it's release, and
The dates given. If the dates given are accurate, it would put the start time right about the period of the "Plauteau" as described by many who closely follow world oil production. (Stuart, Simmons and others)
We have to consider the possibility that the OPEC plauteau is very planned, and they knew they had the leverage on production again with North Sea in apparent genuine geological peak.
The main point being this, that no "production stats" can be considered reliable in indicating near term peak or no near term peak, all are equally suspect, because the production volume is being played with. Thus, many months of dropping production would indicate absolutely nothing about the ability of the field or the nation to produce, and nothing about the geology, and instead be a part of the monopoly control being reexerted by certain big players. This is how we were caught out so badly in the 1970's-80's, and those who said fuel was short worldwide and gas and oil would NEVER get cheaper were made fools of.
The FACT that still stands out: WE THINK WE ARE RUNNING IN THE BLIND. WE ARE RUNNING SO MUCH MORE IN THE BLIND THAN WE CAN EVEN KNOW, INDIVIDUAL PLANNING FOR THE WORST IS BECOMING THE ONLY SAFE WAY.
This is possibly the most transparent nonsense ever published, even in the US media.
You must have an impressive collection of bridges in Brooklyn, old chap.
There are actually many people (including me) who agree with Roger. The website www.interventionalanalysis.com will show you straigthline moving averages in oil (brent) and gold prices that are impossible in a natural market. It is not that the markets are controlled, it is that the extent to which they are controlled is far worse than you can possibly imagine.
How on earth could a straight line moving average be impossible in a natural market (whatever that is)? Proof, evidence or even argument from authority (if yours really is such) would be nice.
And that still wouldn't say anything in favour of this posited diabolical Norwegian plot to reduce production.
"The extent to which they (the markets) are controlled is far worse than you can possibly imagine."
What always puzzled me about the great oil price conspiracy is how long it took the conspirators to get their act together. Oddly enough, the conspirators were finally successful in controlling the oil market--and in forcing oil prices higher--just as the world hit the conventional 50% depletion mark.
I read an article from John Mauldin, but I can't locate it. That article was specific about the dollar weakness, but he was pointing out something. You want to know what helps the dollar? Higher oil prices. As the prices of oil go higher, demand for dollars increases to settle these transactions throughout the central banks of the world. So the increases in oil prices just this year created a demand of Trillions of new dollars just to meet this need. This is bad for inflation though, as you may have figured.
My only point to this is that he also touched on how hard cornering this market would be. If you total the daily oil bill, this needs to trade hands in some form every day. The staggering amount of money that trades hands is so large that even a few select players couldn't manipulate it. If barrels of oil are $75 right now and there are 85M barrels (yeh i know there are lower priced long term contracts, but we're getting a worst case) so this total is $6.375Trillion dollars. Then again, if you control the fields, all this crap is nonsense.
This is a transparent attempt to create "bad guys" who can later be vilified and thus attacked. Gee... Saudi Arabia is holding out on us! Let's "nuke their ass and take the gas" (as one popular T-shirt says).
It seems to me that the "Iron Triangle" is developing a two-fold strategy to combat Peak Oil: (1) Oil traders are bidding oil prices to irrational levels and (2) Oil production is down because of voluntary cutbacks by exporters, in an attempt to drive oil prices higher and/or in an attempt to prolong the life of the fields (take your pick).
As I said above, from the exporter's point of view it is better to be hated than to be militarily occupied.
If people truly believed that Peak Oil is at hand, they would implement ELP (Economize/Localize/Produce), and stop buying and financing large SUV's to travel long distances to large mortgages. The auto/housing/finance industries would stop advertising, and many members of the MSM would be out of work.
By the way, I was interviewed at length by a reporter for a major paper (not one here in Texas) for a long article on where our oil comes from and on the pros and cons of Peak Oil. From what he has told me, it looks like his editors are sitting on the story.
Once again, the mainstream media is selling a wild wholly unsupported conspiracy theory so ridiculous that it would embarass even the hard core tinfoil hat brigade. (Maybe space aliens are using mind control rays to make Norway, Russia, Angola, Saudi, and Mexico cooperate?) But mainstream media conspiracy theories are always treated with great respect. LOL!
Right. This is unmitigated crap. I can just see the Russians, the Saudis, the Norwegians, the Mexicans and the rest sitting down together to fix prices.
To what lengths will the denial go? Probably we haven't seen anything yet.
The whole problem with a conspiracy theory is that the length of time any secret can be kept is in inverse proportion to the number of people knowing the secret. There are just too damn many co-conspirators in this story.
I think WestTexas is right, its just the latest story by the iron triangle. And it won't hold up very long. But some people will believe it because it reenforces their opinions.
This is community website focusing on "discussions about energy and our future". We talk about Peak Oil. Those of us who contribute make our case using the best methods at our disposal, through knowledge, data, theory and analysis.
There is no conceivable way that such controversial subjects are not going to attract some real whackos, wing nuts, crazies, call them what you want. I don't apologize for these people and I don't approve either. That's just the way it is. As far as the MSM goes, there will be great resistance until the tipping point has occurred. That said, I can only quote Alfred, Lord Tennyson.
"Forward, the Light Brigade!"
Was there a man dismay'd?
Not tho' the soldier knew
Someone had blunder'd:
Their's not to make reply,
Their's not to reason why,
Their's but to do and die:
Into the valley of Death
Rode the six hundred.
Cannon to right of them,
Cannon to left of them,
Cannon in front of them
Volley'd and thunder'd;
Storm'd at with shot and shell,
Boldly they rode and well,
Into the jaws of Death,
Into the mouth of Hell
Rode the six hundred.
HK: Agreed. However, if you took the most absurd theories written on TOD and had the MSM endorse them through Mike Wallace or Dan Rather, etc. you would be surprised how well they would fly. If any of us had floated this absurd theory last week we would have been shouted down as moronic, but even on TOD the MSM has a seductive power than is often subtle but always present.A bonus is they can always bring on "experts" with lots of "credentials" a la Yerginize the story.
Being still quite new to this I have been trying to politey point out the flaws in the whackos scaremongering stories. But it seems they have made up their mind about what the outcome is and peakoil is an excuse to rationalise it. I guess you are right that it is just how it is. I think from now on I will just pass over any of that BS. Some of you are really doing a great job.
I have a feeling that PO is starting to get more and more traction with the public.
Yes, and I believe it was the former great Senator from Colorado, Gary Hart, who had the foresight to warn us. He also warned us about 9/11. Man, the guy must be tired of being so right with so few people listening.
About 18 months ago I had a chance to listen to Gary in the context of a graduate class on national security. His big concern about the next major terrorist strike was a dozen or two people injected with smallpox and then walking across the Mexican border. Each would then be taken to a major city and spend as much time as possible strolling around and coughing at crowded public venues -- museums, sporting events, etc. He had visited Russia and was not impressed by the accounting for the viral stocks maintained there. It is my understanding that smallpox is not very contagious while the disease is incubating, so actually spreading it might be difficult.
It's available on their website now. It didn't seem very persuasive though. OF COURSE OPEC tried to restrain production, including appeals to non-OPEC producers for help back in the late '90's and into 2001. Prices were getting HAMMERED again, and their recent cutbacks had had only modest impact.
So someone in Florida is suing because of this major stunner that OPEC would like to constrain competition? DUH! I can't imagine this will go very far, but who knows.
Anyway, I think the real news from 2001 until now has been the surprisingly rapid growth in demand from the US and Asia. Oil production has increased (until lately) and so the idea that collusion has driven up the prices isn't as persuasive as the argument that it has been demand-driven. From 2006 and beyond, the story may be changing, but the demand has grown despite rising prices until now. Canterell is the real news.
I have to be careful not to pat myself on the back (because that is a good way to fall on my posterior), but the increase in U.S. consumption of gasoline came as no surprise to me--nor to any other economist I know of.
Aggregate nominal incomes are up, way up.
Unemployment is down.
Car (and especially SUV) sales have been going gangbusters for the past ten years, despite cars lasting longer and longer.
Commutes are getting longer and longer as people willingly drive for more than an hour each way to get decent schools for their kids and to get away from life in central cities and close-in suburbs. Much of this is "white flight" which has abated not one whit.
All economists know that gasoline demand is extremely price inelastic in the short run.
So why should we be surprised that Americans keep buying more and more gasoline? I do not know of a single economist who predicted a decline in U.S. gasoline sales during the past twelve months, a decline based on a price increase to levels only half what people pay in Europe.
At some price, quantity demanded will go down significantly and fairly quickly. My WAG is that level is $4.50 per gallon of gasoline in the U.S. When we reach that level depends upon the weather, among other unpredictable variables.
IMO we are right now at the beginning of a recession, though the National Bureau of Economic Statistics probably won't call one until after January. If indeed a serious recession materializes, that decline in GDP will shift the whole demand curve for gasoline downward and to left--and could cause an abrupt fall in gasoline prices for a short period of time.
All right, I have stuck my neck out now--a most uncomfortable posture.
You might be right about the recent expectations for gasoline demand growth, but the many commentators whose work I read (not here) have often mischaracterized the rise in oil prices to date as a supply shock, or a shift up of the supply curve. They come to the erroneous conclusion that quantity demanded (over time) will drop in response. Because the demand has led (upward shifting demand curve) to higher prices, it is illogical to assume that higher prices will cause demand to fall. The other idea is that more supply will be coming on the market at the current high prices, causing prices to fall. Thanks to TOD, we know that supply is now also becoming inelastic, and maybe for the long run too.
It's a low probability bet to get an actual recession out of the next two quarters, but growth is definitely slowing so your neck isn't so far out there. After a Q1 real gdp of +5.6%, the consensus forecase Q2 of +3.1 % allows for a significant slowing, and Q3 numbers are already coming in lower, excepting jobless claims. Negative numbers still seem a ways off though.....
Granted a recession would slow gasoline demand, but simply higher gas prices are unlikely to have much impact well beyond $4.50 a gallon. To see this, just do the arithmetic. An exurban commuter at the extreme end drives 2 hours or roughly 100 miles each way, 200 per day, five days a week. His car gets a measly 20 mpg, using 50 gallons a week. The current cost: $150. At $4.50: $225 or $75 a week difference. This is about the cost of a meal for two at Appleby's (one reason restaurant sales figures are getting a bit weak). It won't stop anyone from commuting or staying in the exurbs, though it will increase the marginal shift to higher mileage cars which will have a small impact after several years of the trend growing.
Now at $10 a gallon, our friend will be shelling out $500 a week for his commute. At a cost diffference of $350 a week for commuting (although his salary will have gone up with inflation, assuming he still has a job), that could make a difference. But that would put the price of oil at about $250 a barrel. So my own WAG is that an oil price of $250 a barrel is where things will start to get very hairy, but not at $4.50 a gallon (still less than the Europeans pay currently), which assumes an oil price of about $112.
Why do the European prices keep cropping up as relevant? They do pay much more than we do; they also have per capita energy use of half of what we have yet have the same quality of life. But they aren't built on a suburbia model either which may be because of their gas prices but is also why they lifestyle is good despite lower gas usage. So the fact that they pay more and use half is irrelevant. Because we are built on a suburbia model, we cannot go to using half as easily.
And $300 a month lost discretionary income will have an impact on families, especially as higher gas prices become higher prices for goods and services and as adjustable mortgages go up to take away even more discretionary income. Eventually, the people run out of income or max out the credit cards they have been using to cover the shortfall up to now. At that point, any increases in gas prices will bite them big-time.
European prices are relevant. They have led Europe to develop a car fleet that looks completely different than the US fleet: much smaller cars, much smaller engines, and far more diesels that get much better economy. European new cars (ex-UK) are about 45% diesels, with France at about 60%. The US is about 3%.
Yes, Europeans drive less--partly shorter distances, and probably partly the cost of fuel. But a lot of their economy comes from more efficient vehicles. If the US had comparable gasoline prices to Europe, car manufacturers and buyers would have been acting far differently. Europe never saw anything like the sadly-missed 9 passenger, 19 foot long, 9200 pound, 44 gallon tank Ford Excursion.
And if gas prices were high, different real estate development patterns would have occurred--more density, fewer exurbs. How America developed, and how it uses energy, were the result of naive choices. Bad choices in the past means bigger problems to fix in the future.
Now it will take a LONG time to fix [per Hirsch 2005]: 9-14 years to replace half of the car fleet, and 10-15 years to replace half of the light truck fleet. And at the end of that period, the US fleet will still be far less efficient than the European fleet already is today.
The logical thread after "gas prices will bite them big-time" is recession/depression, loss of real estate values, abandonment of parts of exurbia/suburbia. It is going to happen regardless.
If we wait for free market prices to do it, that will be the worst of all worlds and we maximize the chances of TSHTF.
However, if we move up the price signals a few years (my favorite is increasing gas taxes 2 cents/gallon every month, with quarterly inflation adjustments, for 20 to 25 years).
Free market forces will likely exceed this; BUT it gives a clear price signal to make structural adjustments NOW or ASAP. And we can use the additional taxes in a wide variety of ways.
You seem to assume that suburbia is built and will stay there. I disagree and point to US gov't policies that trashed our pre-WW II housing stock in favor of suburbia. Now is the time to to the reverse. Use gov't policies to "induce" the boarding up and trashing of suburbia & shopping malls (as we did to all of our downtowns and most of our old neighborhoods).
I do not know where you live, but I suspect that you have a downtown dead or dying (with some small gov't. activity to bring it back) surrounded by "bad" neighborhoods.
Think back 55 years. And think forward 20 years, when downtown is the palce to shop and the best homes are within walking distance of downtown and the farmers market. Meanwhile, shopping malls become storage places and homeless shelters.
I think that $4.50 gas might pinch a bit more than that. Generally only about 30 percent of trips are trips to work; life in suburbia generally means that doing anything -- getting kids to school, buying groceries, running errands, visiting family or friends -- involves a car trip.
Also, the cost of gasoline will mean higher prices for all of the stuff moved around in automobiles and trucks.
I saw this story on CBS and saw it for what it was, pure bullshit. I did not catch all the non-OPEC countries because the flashed them all at once, for about one second, but I did catch Russia, Angola and Mexico. And they said this grand conspiracy, to cut oil production, started in 2002, soon after 9/11. Well, Russia, Angola and Mexico all increased production in 2002, 2003 and 2004. Angola and Russia are still increasing their production. Mexico peaked in 2004.
I just don't see how one can conspire to cut production while all the time increasing production. That is the dumbest damb thing I have ever heard of.
Oh yeah, I forgot to mention, Norway was among the grand conspirators. Norway had peaked the previous year. They have been showing a slow decline ever since. A sure sign of a conspiracy to cut production.
Prices of crude oil are high these days not because oil reserves are waning -- in fact, they are plentiful -- but because inadequate refining capacity has limited the quantity of crude available on the world market.
In an interview after a meeting here of the Organization of Petroleum Exporting Countries, Ali Naimi said other cartel members are having trouble finding buyers for all the crude they are producing, at a time when global stores are near full and many refiners have closed facilities for routine maintenance. One Saudi official said an estimated three million barrels a day of refining capacity is out of action and unable to process crude, at a time when the world is using some 84 million barrels a day of oil products like gasoline and jet fuel.
"It's not just heavy oil. Even light oil is having problems" finding buyers, Mr. Naimi said, referring to premium grades of crude known as light crude that are highly prized by refiners because they have high gasoline yields.
Asked if the kingdom was easing up on supply because of concern about the buildup of inventories in the U.S. and other importing countries, Mr. Naimi rejected such a motive, replying: "At $70 a barrel?" Mr. Naimi suggested that producers will sell all the oil they can at such high prices.
The shift in excuses from "we're pumping flat out but there's not enough refinery capacity" to "price fixing" happened within a very short space of time. fishier and fishierer
Is the stuff pulled out of the ground (we'll call it raw crude) always refined in some way before it is sold on the commodities market?
In other words, it seems to me that if raw crude were sold & shipped to be refined at destination, then a reduction in refining capacity would mean a glut of the raw stuff (assuming production rates aren't changed). Shouldn't this lead to a lower price for the raw crude (due to the glut)?
How does a refining capacity shortage = higher prices for crude oil (such as WTI)?
yes, I think your logic is exactly right. i've never understood the concept of oil being expensive because refinery capacity is limited. it should be exactly the opposite.
There is apparently a capacity shortage for refining heavy, sour crude. This has resulted in lower prices for the heavy sour crude that most refineries can't use (as you'd expect), and higher prices for the light sweet grades that they need (also as you'd expect). There is now more or less a record price spread between the grades(in $, though perhaps not in %).
While i consider this story just another example of the unlimited levels of inanity that pervade the MSM, what difference does it make what causes the peak? The supply will still not be there, the price will still go up, and we are still screwed.
IMO, the main difference is, unlike a geological limitation being explained to the US public, a list of evildoers is being read to the US public (mostly A-rab, you can throw in left-wing Mexicans if you want). The broadcast was designed to enrage the viewer and focus the blame, along with implying that things will get fixed once we straighten out those bastards/cheaters.
So I'm curious. I'm still unable to find any coverage at all of this CBS story on the web. What evidence did CBS cite for their conclusions? (I know it's terribly old-fashioned, but I really like to understand the facts before making up my mind about some new idea that comes along). Certainly with the exception of Saudi Arabia, you can make an argument from rig counts that the OPEC countries are not making much of an effort to increase/maintain production.
I hope this does end up in court. Having to explain to Joe Sixpack in simple diagrams and words why oil production eventually falls in oil fields could be one of the best ways of bringing Peak Oil to the public. I wonder how scared the brighter members of the general public will get, when the realise how useful to society, oil and oil products are and how much is remaining that can be extracted.
Makes you wonder if Norway et al are going to have to mention the words Peak Oil in court to defend themselves. Also, having to admit that many big oil fields having falling production levels because they are passed their prime should help move the markets.
That someone would believe that they could successful sue [in a U.S. court and presumably recover from] what has always been a cartel [comprised of sovereign countries] operating outside the U.S. alleging price fixing and collusion [which is what cartels do] is beyond insane.
The video refers for sources mainly to "Internal OPEC bulletins obtained by CBS news", suggesting that it is some secret thing CBS cleverly gained access to. However, a graphic shows a periodical titled "OPEC bulletin". The OPEC bulletin is a periodical available on the web here. So I think we can assume that CBS is actually just coming up with a sensational characterization of OPEC's normal operation (which historically aimed to maintain prices in the $22-$28 range, but which has broken down of late because they were all producing more or less flat-out).
Here's some text from the December 2001 issue which seems to be at the heart of CBS's "news" report:
in the OPEC website archives from 2002. Contains the following:
OPEC and Russia in talks on second-quarter market-stabilization measures
No 1/2002
Vienna, Austria, 1st March 2002
A top-level OPEC delegation is to begin two days of talks on Monday (4 March) with their Russian counterparts on measures to ensure stable and reasonable oil prices during the second quarter of this year.
OPEC President Dr. Rilwanu Lukman, Secretary General Dr. Alí Rodríguez Araque and Director of Research Dr. Adnan Shihab-Eldin, will urge senior Government and energy officials, from the world's second-largest oil-producing nation, to extend its policy of restricting crude oil exports into the second quarter. This will be to maintain market stability, in view of the expected seasonal weakness in the next three months.
Late last year, Russia, along with some other leading non-OPEC producers, offered strong support for OPEC's market-stabilizing initiatives, by agreeing to cut its crude oil exports by 150,000 barrels a day, with effect from 1 January. However, Russia indicated that its decision covered only the first quarter of 2002, but that it would review prevailing market conditions before deciding whether to extend export restrictions to the middle of t
I love the roller coaster anology.
Since Mexico is our number 1 or 2 biggest supplier is it more significant that they are having supply problems while internal demand grows?
Should we worry more about the world peaking or a major supplier?
thank god for those Canadian oil sands ;) They'll save us.
Remarks like that astound me. The one thing everyone agrees on here is THERE ARE NO NEW SOURCES OF SUPPLY!
So where are the Chinese whipping up all this new supply?
:-)
Roger Conner known to you as ThatsItImout
They are arranging long term contracts with existing exporters. Some of these exporters had offered oil on the open market which was available to any buyer. China has essential locked up this production for thier own consumption leaving other importers to get oil from someone else. If this continues, some importers may have difficulty obtaining oil and will be forced to power down because they won't be able to import enough oil to meet demand.
New small fields will continue to show up. Even in the GoM.
MAJOR BREAKING NEWS MONDAY JULY 24 2006 6:50PM
CBS EVENING RUNS STORY SUPPOSEDLY ESPOSING OPEC/NON OPEC SECRET MEETINGS TO FIX OIL PRICE AND REDUCE PRODUCTION IN ALL COOPERATING COUNTRIES, INCLUDING NORWAY, RUSSIA, ANGOLA AND MAJOR OTHERS POSSIBLY MEXICO (??)
INTERNAL OPEC MEMO SAYS "SOMEDAY FUTURE SCHOLARS MAY LOOK BACK AND CALL THIS THE GOLDEN AGE OF PETROLEUM, WE MAY HOPE SO.
Claim is that secret OPEC AND NON OPEC PRICE AND PRODUCTION FIXING IS ADDING $1.00 A GALLON TO U.S. GASOLINE PRICE, THAT THERE IS STILL GREAT AMOUNTS OF OIL, BUT THAT OPEC AND NON OPEC PLAYERS NOT NORMALLY VIEWED AS COOPERATIVE ARE BREAKING INTO NEWER LEVEL OF COOPERATION AND MONOPOLY.
Whether true or not, this will have to be confronted, as it undercuts the "immenent peak" theory to the core.
Roger Conner known to you as ThatsItImout
It may be that OPEC would rather be hated--by claiming that production declines are voluntary--than risk military takeovers, by admitting that world oil production has peaked. This is the basis for incorporating major oil exporters into the major oil company/major oil exporter/energy analyst leg of the "Iron Triangle," i.e. their fear of their oil fields being seized.
ExxonMobil can say that they need all of their cash flow to bring on new oil fields outside the Middle East, and the housing/auto/finance group can say that high oil prices are temporary. So, go ahead an buy the large SUV, to drive the long commute, to the large mortgage--all advertised by the media group.
The fact that major oil producing nations and their dependents are stuck in a web of fakery and illusion is only indication of the house of cards falling all the harder.
This also, as mention a bazillion times here on TOD, has the added benefit of driving up prices further. And if there is no swing producer, then all the better--none of these countries can be punished through artificial price adjustments, simply because Washington no longer has the stroke to do so.
Just look at the desperation of Dick Cheney flying over to Kazakhstan in order to secure energy. We are indeed at the stage of using every possible option at our disposal to keep our imports plentiful and "cheap" (hah!).
In any event, however, our "leaders" (do we actually have any) could announce that either way, we must decrease our consumption for the indefinite future, because we will have less oil and because climate change mandates a decrease in the consumption of all forms of energy.
Also, in any event, this news just reiterates the fact that the world's producers have us by the gonads and we need more than some silly ass Bush vision of hydrogen and ethanol savings said nads in twenty years.
We could start by cutting our defense budget in half -- the half that clearly isn't making a dime's worth of difference in our ability to influence world events.
http://www.cbsnews.com/stories/1999/10/04/broadcasts/main64925.shtml?CMP=ILC-SearchStories
"Also tonight, there are many reasons for the high cost of gas. You've probably heard about increased demand in China, lack of refineries, and trouble in the Middle East. But what's the OPEC factor? Sharyl Attkisson investigates. "
Doesn't seem like it's a major story since it's not on their front page.
It was as Roger described it.
No Peak Oil - all a group fixing of prices.
Rick
The interesting points to me that stood out were,
Saudi Arabia seemed to not be at all caught off by the story and it's release, and
The dates given. If the dates given are accurate, it would put the start time right about the period of the "Plauteau" as described by many who closely follow world oil production. (Stuart, Simmons and others)
We have to consider the possibility that the OPEC plauteau is very planned, and they knew they had the leverage on production again with North Sea in apparent genuine geological peak.
The main point being this, that no "production stats" can be considered reliable in indicating near term peak or no near term peak, all are equally suspect, because the production volume is being played with. Thus, many months of dropping production would indicate absolutely nothing about the ability of the field or the nation to produce, and nothing about the geology, and instead be a part of the monopoly control being reexerted by certain big players. This is how we were caught out so badly in the 1970's-80's, and those who said fuel was short worldwide and gas and oil would NEVER get cheaper were made fools of.
The FACT that still stands out: WE THINK WE ARE RUNNING IN THE BLIND. WE ARE RUNNING SO MUCH MORE IN THE BLIND THAN WE CAN EVEN KNOW, INDIVIDUAL PLANNING FOR THE WORST IS BECOMING THE ONLY SAFE WAY.
Roger Conner known to you as ThatsItImout
You must have an impressive collection of bridges in Brooklyn, old chap.
And that still wouldn't say anything in favour of this posited diabolical Norwegian plot to reduce production.
What always puzzled me about the great oil price conspiracy is how long it took the conspirators to get their act together. Oddly enough, the conspirators were finally successful in controlling the oil market--and in forcing oil prices higher--just as the world hit the conventional 50% depletion mark.
My only point to this is that he also touched on how hard cornering this market would be. If you total the daily oil bill, this needs to trade hands in some form every day. The staggering amount of money that trades hands is so large that even a few select players couldn't manipulate it. If barrels of oil are $75 right now and there are 85M barrels (yeh i know there are lower priced long term contracts, but we're getting a worst case) so this total is $6.375Trillion dollars. Then again, if you control the fields, all this crap is nonsense.
You're being manipulated, Roger.
As I said above, from the exporter's point of view it is better to be hated than to be militarily occupied.
If people truly believed that Peak Oil is at hand, they would implement ELP (Economize/Localize/Produce), and stop buying and financing large SUV's to travel long distances to large mortgages. The auto/housing/finance industries would stop advertising, and many members of the MSM would be out of work.
By the way, I was interviewed at length by a reporter for a major paper (not one here in Texas) for a long article on where our oil comes from and on the pros and cons of Peak Oil. From what he has told me, it looks like his editors are sitting on the story.
To what lengths will the denial go? Probably we haven't seen anything yet.
Canterell has peaked! It's declining! Rapidly! Therefore, let's talk conspiracy. ******* idiots.
As always, a proud member of Homo Sapiens.
I think WestTexas is right, its just the latest story by the iron triangle. And it won't hold up very long. But some people will believe it because it reenforces their opinions.
Actually I think this is not even the start of it...
Some of the dieoff/conspiracy stories floating around here are much more ridiculous and embarrassing than this MSM story.
Regards.
This is community website focusing on "discussions about energy and our future". We talk about Peak Oil. Those of us who contribute make our case using the best methods at our disposal, through knowledge, data, theory and analysis.
There is no conceivable way that such controversial subjects are not going to attract some real whackos, wing nuts, crazies, call them what you want. I don't apologize for these people and I don't approve either. That's just the way it is. As far as the MSM goes, there will be great resistance until the tipping point has occurred. That said, I can only quote Alfred, Lord Tennyson.
Kind of inspiring, isn't it?Being still quite new to this I have been trying to politey point out the flaws in the whackos scaremongering stories. But it seems they have made up their mind about what the outcome is and peakoil is an excuse to rationalise it. I guess you are right that it is just how it is. I think from now on I will just pass over any of that BS. Some of you are really doing a great job.
I have a feeling that PO is starting to get more and more traction with the public.
Regards.
It DID sound pretty outrageous at the time ...
a) goiny to war in the middle east is not whacko.
b) dieoff is whacko.
c) pointing to (a) as if it justifies (b) is whacko.
In the end, they were still right.
So someone in Florida is suing because of this major stunner that OPEC would like to constrain competition? DUH! I can't imagine this will go very far, but who knows.
Anyway, I think the real news from 2001 until now has been the surprisingly rapid growth in demand from the US and Asia. Oil production has increased (until lately) and so the idea that collusion has driven up the prices isn't as persuasive as the argument that it has been demand-driven. From 2006 and beyond, the story may be changing, but the demand has grown despite rising prices until now. Canterell is the real news.
Aggregate nominal incomes are up, way up.
Unemployment is down.
Car (and especially SUV) sales have been going gangbusters for the past ten years, despite cars lasting longer and longer.
Commutes are getting longer and longer as people willingly drive for more than an hour each way to get decent schools for their kids and to get away from life in central cities and close-in suburbs. Much of this is "white flight" which has abated not one whit.
All economists know that gasoline demand is extremely price inelastic in the short run.
So why should we be surprised that Americans keep buying more and more gasoline? I do not know of a single economist who predicted a decline in U.S. gasoline sales during the past twelve months, a decline based on a price increase to levels only half what people pay in Europe.
At some price, quantity demanded will go down significantly and fairly quickly. My WAG is that level is $4.50 per gallon of gasoline in the U.S. When we reach that level depends upon the weather, among other unpredictable variables.
IMO we are right now at the beginning of a recession, though the National Bureau of Economic Statistics probably won't call one until after January. If indeed a serious recession materializes, that decline in GDP will shift the whole demand curve for gasoline downward and to left--and could cause an abrupt fall in gasoline prices for a short period of time.
All right, I have stuck my neck out now--a most uncomfortable posture.
It's a low probability bet to get an actual recession out of the next two quarters, but growth is definitely slowing so your neck isn't so far out there. After a Q1 real gdp of +5.6%, the consensus forecase Q2 of +3.1 % allows for a significant slowing, and Q3 numbers are already coming in lower, excepting jobless claims. Negative numbers still seem a ways off though.....
Now at $10 a gallon, our friend will be shelling out $500 a week for his commute. At a cost diffference of $350 a week for commuting (although his salary will have gone up with inflation, assuming he still has a job), that could make a difference. But that would put the price of oil at about $250 a barrel. So my own WAG is that an oil price of $250 a barrel is where things will start to get very hairy, but not at $4.50 a gallon (still less than the Europeans pay currently), which assumes an oil price of about $112.
And $300 a month lost discretionary income will have an impact on families, especially as higher gas prices become higher prices for goods and services and as adjustable mortgages go up to take away even more discretionary income. Eventually, the people run out of income or max out the credit cards they have been using to cover the shortfall up to now. At that point, any increases in gas prices will bite them big-time.
Yes, Europeans drive less--partly shorter distances, and probably partly the cost of fuel. But a lot of their economy comes from more efficient vehicles. If the US had comparable gasoline prices to Europe, car manufacturers and buyers would have been acting far differently. Europe never saw anything like the sadly-missed 9 passenger, 19 foot long, 9200 pound, 44 gallon tank Ford Excursion.
And if gas prices were high, different real estate development patterns would have occurred--more density, fewer exurbs. How America developed, and how it uses energy, were the result of naive choices. Bad choices in the past means bigger problems to fix in the future.
Now it will take a LONG time to fix [per Hirsch 2005]: 9-14 years to replace half of the car fleet, and 10-15 years to replace half of the light truck fleet. And at the end of that period, the US fleet will still be far less efficient than the European fleet already is today.
If we wait for free market prices to do it, that will be the worst of all worlds and we maximize the chances of TSHTF.
However, if we move up the price signals a few years (my favorite is increasing gas taxes 2 cents/gallon every month, with quarterly inflation adjustments, for 20 to 25 years).
Free market forces will likely exceed this; BUT it gives a clear price signal to make structural adjustments NOW or ASAP. And we can use the additional taxes in a wide variety of ways.
You seem to assume that suburbia is built and will stay there. I disagree and point to US gov't policies that trashed our pre-WW II housing stock in favor of suburbia. Now is the time to to the reverse. Use gov't policies to "induce" the boarding up and trashing of suburbia & shopping malls (as we did to all of our downtowns and most of our old neighborhoods).
I do not know where you live, but I suspect that you have a downtown dead or dying (with some small gov't. activity to bring it back) surrounded by "bad" neighborhoods.
Think back 55 years. And think forward 20 years, when downtown is the palce to shop and the best homes are within walking distance of downtown and the farmers market. Meanwhile, shopping malls become storage places and homeless shelters.
Also, the cost of gasoline will mean higher prices for all of the stuff moved around in automobiles and trucks.
I just don't see how one can conspire to cut production while all the time increasing production. That is the dumbest damb thing I have ever heard of.
Yeah Right!
http://www.foreignaffairs.org/20060301faessay85212/leonardo-maugeri/two-cheers-for-expensive-oil.htm l
http://www.econbrowser.com/archives/2006/06/saudi_oil_produ.html
The shift in excuses from "we're pumping flat out but there's not enough refinery capacity" to "price fixing" happened within a very short space of time. fishier and fishierer
Is the stuff pulled out of the ground (we'll call it raw crude) always refined in some way before it is sold on the commodities market?
In other words, it seems to me that if raw crude were sold & shipped to be refined at destination, then a reduction in refining capacity would mean a glut of the raw stuff (assuming production rates aren't changed). Shouldn't this lead to a lower price for the raw crude (due to the glut)?
How does a refining capacity shortage = higher prices for crude oil (such as WTI)?
Thanks!
CBS news: The OPEC factor
This is pretty funny stuff. It's not reported as 'possible' or speculative at all. Apparently the non-OPEC conspirators are getting sued! Funny stuff.
Makes you wonder if Norway et al are going to have to mention the words Peak Oil in court to defend themselves. Also, having to admit that many big oil fields having falling production levels because they are passed their prime should help move the markets.
That someone would believe that they could successful sue [in a U.S. court and presumably recover from] what has always been a cartel [comprised of sovereign countries] operating outside the U.S. alleging price fixing and collusion [which is what cartels do] is beyond insane.
Here's some text from the December 2001 issue which seems to be at the heart of CBS's "news" report:
http://www.opec.org/opecna/press%20releases/2002/pr012002.htm
in the OPEC website archives from 2002. Contains the following:
OPEC and Russia in talks on second-quarter market-stabilization measures
No 1/2002
Vienna, Austria, 1st March 2002
A top-level OPEC delegation is to begin two days of talks on Monday (4 March) with their Russian counterparts on measures to ensure stable and reasonable oil prices during the second quarter of this year.
OPEC President Dr. Rilwanu Lukman, Secretary General Dr. Alí Rodríguez Araque and Director of Research Dr. Adnan Shihab-Eldin, will urge senior Government and energy officials, from the world's second-largest oil-producing nation, to extend its policy of restricting crude oil exports into the second quarter. This will be to maintain market stability, in view of the expected seasonal weakness in the next three months.
Late last year, Russia, along with some other leading non-OPEC producers, offered strong support for OPEC's market-stabilizing initiatives, by agreeing to cut its crude oil exports by 150,000 barrels a day, with effect from 1 January. However, Russia indicated that its decision covered only the first quarter of 2002, but that it would review prevailing market conditions before deciding whether to extend export restrictions to the middle of t