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One or two week anomalies in imports do not represent a trend.
It's not one or two week anomalies. Look for yourself:
http://tonto.eia.doe.gov/dnav/pet/hist/wceimus2w.htm
We have been running ahead of last year's crude imports for 5 weeks (and will almost certainly set new records this summer, just as we did last summer), and yet crude prices are lower than last year:
http://tonto.eia.doe.gov/dnav/pet/hist/wtotworldw.htm
You have probably also seen the statements from China and India that they are importing record amounts of crude.
So, I will repeat the question I have asked here many times. What does it take to convince you that the import situation does not support an oil production peak? I have never received a satisfactory answer to this question. The response I usually get is either another question, or a red herring.
Well, some countries are seeing reduced imports.
http://news.bbc.co.uk/2/hi/south_asia/6642907.stm
Re: We have been running ahead of last year's crude imports for 5 weeks
maybe compared to last year but historically imports are back where they should be for the first time since last March:
We need a few more weeks to confirm this increase. Crude oil import number are extremely noisy and it is hard to see a short term trend. However, after running a 4-weeks moving average, we get a better view:
In addition, refinery utilization (89%) is still below average (should be around 92-93% at this time of the year) so what's the point to import more crude if we can't refine it? Crude oil stock coverage (excluding SPR) is around the historical average (22 days). I agree with you that the import numbers (and inventory levels) do not support a peak production hypothesis but rather a refinery bottleneck. Also, prices seems to have an effect on imports:
I agree with you that the import numbers (and inventory levels) do not support a peak production hypothesis but rather a refinery bottleneck. Also, prices seems to have an effect on imports:
Your charts and comments always great. So what of the world crude inventory numbers? Any data to support that it will be difficult to import more gasoline b/c of crude stocks below 'normal' in places where the US usually looks for finished products?
This morn
Crude oil Rises on signs Gasoline Supply is Insufficient
Re: So what of the world crude inventory numbers?
I have only data for the OCDE countries:
Stocks have been going down a little bit since the summer 2006 but are still at record high levels, clearly not consistent with a falling supply. Note that these numbers include both commercial and government controlled stockpiles (i.e. SPR) so this picture is maybe a little bit rosy.
Nice chart. Then maybe the refinery bottleneck exists elsewhere too. Gasoline up sharply today.
Is the chart updated through the first quarter of 2007?
http://ca.today.reuters.com/news/newsArticle.aspx?type=businessNews&stor...
IEA warns on oil inventories after big Q1 drop
Thu Apr 12, 2007 5:37 AM EDT
By Alex Lawler
No, the last available date is December 2006. The data is here:
http://tonto.eia.doe.gov/merquery/mer_data.asp?table=T11.03
From the IEA Oil Market Report (April 2007):
RE: clearly not consistent with a falling supply
When I build my food stockpile, I size it not on a given amount of liters or kilograms but on my family consumption: 10 years ago we were 2 adults, now there are 3 children, two cats and some chickens, so the stock is more important.
I find strange in this nice diagram that nearly all stocks did not grow very much in 20 years when the consumption did.
It looks like that neither governments nor businesses made stocks adjustments in line with the consumption growth, so either they could not (falling supply) or did not think about it or thougth they were big enough, in that case stock analysis is irrelevant.
A way to measure the adequacy of stocks relative to current demand levels is the stock coverage:
stock coverage has been increasing from 51 days in 2004 to 54-55 in 2006. If peak oil supply is occurring about now, I should expect a big drop in stock coverage.
Why a "big" drop. I think a consistent, even though gradual drop would be perfectly reasonable. For example, US production fall was very gradual initially. Mexican production had its highest month in 2003, highest year in 2004, but has only shown a significant decline over the last year. Typically, the initial signs of a peak have been subtle prior to becoming obvious. We just don't have a long enough period to determin yet. If the trend above were to continue only another 5 mos (I'm not stating it will - I'm waiting to see), it would actually be dramatic, and that is really not a very long period.
It depends also on how demand for oil will evolve (mainly reacting to prices), the stock coverage can remain constant if both demand an supply are falling at the same rate. However, a 54 days coverage can melt quite rapidly if demand is growing and supply is dropping or even staying constant.
Why, Khebab? This picture is the OECD only, the wealthiest part of the planet. In a market where supplies are constricting, it is common to see people build spare inventories at lower prices for consumption later when the price is higher.
Your statement would be true of the world as a whole but not of just the OECD. In fact, if the OECD is outbidding the rest of the world, a crude build in the OECD is one possible artifact of that. We cannot tell from these numbers without global data since the OECD is the wealthiest subset of nations on the planet.
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
I think wealth is only half the picture. Energy as a portion of GDP is probably equally important.
If you were looking at Louis Vittion (sp?) handbags, then wealth would be the crucial factor. However, energy is only partially a luxury item.
Countries such as Thailand, Korea and China import oil in large part to fuel industry and exports. Oil is a leveraged resource in the production process. For every dollar less they spend on this oil they lose $1x dollars in industrial production and export revenue.
High oil prices are far more likely to lead to reduced consumption in poor Americans than mega-rich third world elites or those who are using it for industrial production and exports.
As Peakearl noted, the initial Lower 48 decline was quite gradual, an average of less than 1% per year, over the first two years, and this was without the benefit of nonconventional crude oil production.
Also, the OECD inventories don't reflect the world situation.
IMO, the key point is the world crude oil production response we have seen to the oil price increase. Oil prices are up by two-thirds, on average, relative to the average price in the 20 months prior to 5/05, and crude oil production is down by about 1%, relative to 5/05. The pattern of lower crude oil production versus higher crude oil prices is what we saw in the Lower 48 in the Seventies.
BTW, gasoline prices are jumping today. Traders noticed that outside the west coast, US gasoline inventories fell by about 700,000 barrels.
I think looking at stocks as just as snap shot in time doesnt tell the whole story... 10 years ago every major oil company would have held stocks for its own refining system..with all the mergers that have taken place Exxon/Mobil, BP/Amoco, Chevron/Texaco etc etc has meant that combined systems have meant synergies, such that costly working capital tied up in stocks can be reduced as the need of the 2 combined is not as great as the sum of the 2 companies as individuals...so comparing stocks even 5 years ago to current can be somewhat misleading as you are not comapring apples and apples. More importantly however is how the market looked at differnt points in time. A look at the forward curve of the market will give you a idea of the propensity of the market to store oil. In a contango it pays you to store and sell at a later date since the deferred price of oil is greater than the cost of storrage, time value of money and potential shrinkage...At the moment it pays you to store current crude production and sell out around late summer next year. Hence we have comfortable stocks of crude comapred to 5 yr averages (but then I'm falling into the trap above)..On the other hand gasoline is steeply backwardated and prompt production should be sold rather than stored and so it is no surprise stocks are low..
So when looking at storrage and comparing points in time it is important to know the market dynamics governing the periods being compared.
Thank you and goodnight.
Welcome to TOD, Fletch.
Good comment.
Question?
What is the world total of crude exports? Where can I find that? Focusing on one country, expecially the mac daddy of countries as of this moment, is a bit misleading. There was a nearly $5 spread between WTI and Brent and this is due to refineries I can see. However, when the Brent price is rising and now stands at $65 give or take, this prices have to arbitrage there way together. I surmise WTI rises more than Brent falls.
The Price within the oil sector is ambigous and does not convey value. I mean a cup of gas is far cheaper than even a cup of coffee! And I think we can both agree, cafeeine might be valuable, it's not more so than energy sources like oil. Instead of talking about the price of something lets talk raw numbers like volume. Thus this is why I am asking where total export numbers lie. Let's just compare some raw export numbers to see how much oil is being sent abroad and how much is staying home. When we've got a huge drop in spite of increased rig counts, something's not right. Just a thought.
I have always agreed that the US situation, while obviously a major factor, doesn't tell us the overall supply or export situation. This is why the concerned words coming recently from the IEA about supplies for the Pacific and Europe have been so notable. I am really wondering what tomorrow's OMR will have to say about this. Can't conclude much without this information going forward.
Robert asked:
The import situation only indicates that the US, Indian and Chinese domestic economies support importing crude at $61.81 (nymex) at this time. There's plenty of oil available at $61.81 today.
If these markets could only support importing crude at $50/barrel, they would experience severe shortages of crude imports. The ability of one or three countries to maintain domestic crude inventories has little to do with total world supply availability and everything to do with price.
I am not sure you can push those price comparisons too far - from the table you reference, average price in March and April in 2006 was $56.33 and $64.28 versus $57.92 and $63.67 for this year. I would put those as practically unchanged. Price thus far for May does, granted, appear lower.
I thought you usually got accused of being an oil company stooge, but maybe I'm not pay enough attention.
No, that's what happens when I bother to correct some misconception about oil companies - like "They take refineries offline in the spring just to drive prices up." There are numerous myths out there, and I can't correct them without someone saying "You would say that."