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285 comments on DrumBeat: January 12, 2007

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Robert Rapier on January 12, 2007 - 12:29pm Permalink | Subthread | Parent | Comments top

And so far the data tells us that we are at peak right now.

Of course used in that way, the data would have told us several times in the past we were at peak.

Data is subject to interpretation. Oil production goes flat or declines for other reasons than a production peak, as has been witnessed multiple times in the past.

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Darwinian on January 12, 2007 - 12:57pm Permalink | Subthread | Parent | Comments top

Robert, with all due respect, I did say so far!

Now having said that, I think it is extremely foolish to declare, as Value did, that we are definitely not at peak because of the price of oil. The world has, without a doubt, produced less oil in 2006 than in 2005. Looking at that fact alone I think it is extremly foolish to say that we cannot be at peak because of the price of oil.

And just one more very important point! Before the OPEC cuts went into effect on October 1st, we were already below 2005 levels of production. A plateau of two years along with a slight drop in production, has never before in the history of the world happened except in the case of OPEC deliberately cutting production, Iran-Iraq war and the following tanker wars, or the collapse of the Soviet Union causing a cut in production.

I get so damn tired of people pointing to past drops in world oil production without giving us the cause of these drops! This time, before November 1st of 2006, that a plateau of two years and a drop happened while all the world was producing flat out. This has never happened before and that fact should simply should not be overlooked.

Ron Patterson

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Robert Rapier on January 12, 2007 - 1:37pm Permalink | Subthread | Parent | Comments top

This time, before November 1st of 2006, that a plateau of two years and a drop happened while all the world was producing flat out.

That last portion, though, is not a fact. It is your opinion. In fact, "all the world" certainly wasn't producing flat out, as I have argued before. Canada was not producing flat out. But even in the Middle East, Saudi had already made the statement that they were having trouble finding buyers. They had already made cuts. You simply choose to believe that they were lying about the statement they made.

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Papirus on January 12, 2007 - 8:04pm Permalink | Subthread | Parent | Comments top

Ad the Saudis not having buyers for their oil in June 2006, when NYMEX light sweet was 70 $/b plus.

In 2006 if Aramco - like CERA and others - believed that the price of oil soon (within a year or two) would fall, then how come they didn't lower the price a little?

It has been argued (Robert) that an eventual bluff easily could be nuked by someone simply buying oil from the Saudis. IMO, this is not an evidence for spare production capacity. We all believe the Saudis have tank farms, don't we?

An explanation to my question could be ECONish, that maximizing the profit means producing less than 100%. Personally i don't think the Saudis are free to produce less. Such behaviour would not be tolerated by Uncle Sam, which i think has lot of tools to utilize when exercising power. But this of course, is just an opinion. I'm sure there are knowledgeable generalists, like Sailorman and others, that has a more qualified say on this than I.

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Don Sailorman on January 12, 2007 - 10:09pm Permalink | Subthread | Parent | Comments top

I just watched "Lawrence of Arabia" again. Anybody who thinks Arabs are likely to act in their long-term best interests should watch that movie.

Can the Saudis restrict output to boost prices and hence revenues? Heck yes they can; Uncle Sam does not get to peek at their books (which assumes, BTW, that the Saudis know how much they are producing--highly questionable IMO).

So what are the Saudis doing?
1. Nobody knows.
2. That probably includes the Saudis. Why assume that they know what their production capacity is--not to mention their reserves?

It is always a great mistake in human affairs to assume that the other guy knows what he is doing.

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Papirus on January 13, 2007 - 1:24am Permalink | Subthread | Parent | Comments top

Am I missing something here? You are being ironic?

I assume that Aramco has a functional hierarchy, reporting oil output to the top dogs, wouldn't you?

US knowledge of KSA internal affairs?
There is quite a few Saudis with cultural links to US; education, business et cetera. I can easily imagine Uncle Sam having many informants in KSA. But of course, it's just unqualified speculations. I know very little about KSA.

Here in Norway, US knowledge of internal affairs caused big headlines recently. Prior to the invasion of Iraq, the inner circle of the cabinet had secret discussions. The former prime minister, Kjell Magne Bondevik, revealed in his biography that the ambassador in Washington, Mr. Vollebæk, got those discussions referred in a meeting with the state department. It was the state department who initiated the meeting.

The secret discussion was limited to a group of five ministers (prime, finance, foreign, defence and justice) and their apparatus.

So, either the US is exercising technical surveillance on Norway's "white house", or they had a mold inside the apparatus of the inner cabinet. At least, that is my interpretation of that event.

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Don Sailorman on January 13, 2007 - 9:48am Permalink | Subthread | Parent | Comments top

I was not being ironic. Norway is not KSA. Norwegians have been counting accurately every single herring they have caught for the past thousand years.

The people I have reason to believe who know the most about KSA oil production claim to know the least. (Those with claims of knowledge about Saudi production and reserves have no consensus nor any strong claim to such knowledge.)

My position on KSA is based almost entirely on Matt Simmons, "Twighlight in the Desert."

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James Bond on January 14, 2007 - 1:59am Permalink | Subthread | Parent | Comments top

The people I have reason to believe who know the most about KSA oil production claim to know the least.

Well said. You seem to have a talent for summing it all up in one sentence. You should write books. We should all spend less time reading Westexas and more time letting you shake the fuzzy dice.

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285 comments on DrumBeat: January 12, 2007

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