<DrumBeat: May 19, 2007The Oil DrumDepletion Levels in Ghawar (Updated)>

198 comments on This Week in Petroleum

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Robert Rapier on May 18, 2007 - 10:54am Permalink | Subthread | Parent | Comments top

The only thing you didn't mention is that we have a minimum requirement for 185 million barrels in the system just to keep the pipelines running and process equipment primed, so our real inventories are much smaller than 200,000,000 barrels-really a two or three day supply.

The reason is that this is essentially brand new information to me. Obviously there is a minimum level that has to be in the pipelines, tanks, etc., but I did not know it was so high. A couple of comments that Paul Sankey made in his Senate testimony now sound fairly likely:

It is fair to say that as we enter driving season in 2007, we are one major incident away from a 1970s-style gasoline crisis.

For this summer, be prepared to take emergency measures (lifting environmental restrictions, emergency IEA gasoline inventory drawdown) should an emergency develop. We are not there yet, but we are close.

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oilmanbob on May 18, 2007 - 12:01pm Permalink | Subthread | Parent | Comments top

One of the things I love best about TOD is how quickly various information is diseminated to everyone here, and how we can all react and change our views. This data really seems to be showing Jeffrey's Export Land hypothesis is kicking in. It shows the true frailty of our system, and, IMO proves peak oil has happened. It may just be for geopolitical reasons, but the declines in Saudi production and Nigerian shut-ins make it unlikely that we will see the 88 mmbopd level that you predict in the next couple of years.
I really hope I'm wrong about this-the world needs the room so that the message can be spread. I sure hope this is just a temporary glitch, but when everybody is already running flat-out and barely keeping up any minor incident is magnified. Its terrifying !

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InJapan on May 18, 2007 - 1:58pm Permalink | Subthread | Parent | Comments top

Robert - I looked for that quote, about a 1970's style crisis, in the Senate pdf you linked to earlier in the article, but couldn't find it. Is it from another document (or am I just blind?)

Reason I ask is that I'd like to use it as a reference for telling others of the hairiness of the edge on which we are walking. - thanks

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Robert Rapier on May 18, 2007 - 2:07pm Permalink | Subthread | Parent | Comments top

See the 2nd paragraph under executive summary in the PDF link.

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InJapan on May 18, 2007 - 2:48pm Permalink | Subthread | Parent | Comments top

Thanks Robert... turns out I am blind!

That statement to me sounds more ominous than what is being reported in the MSM... it just seems to have been totally overlooked by the newswires, blogs, and everything I read.

How did the Senate committee react to that testimony? It certainly poured cold water on the rants of some politicians.

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Robert Rapier on May 18, 2007 - 2:56pm Permalink | Subthread | Parent | Comments top

I am watching the webcast right now:

Senate Energy Hearing Webcast

The hearing doesn't start until about the 22 minute mark. For the first 21 minutes there's nothing. I am interested to see how they reacted, but I just started watching it.

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Robert Rapier on May 18, 2007 - 3:31pm Permalink | Subthread | Parent | Comments top

Sankey knows his stuff. If you want all the issues clearly laid out, he knows and understands the industry and the history. I am at the 53 minute mark right now, and he has been the most impressive speaker so far. Even if he is a Brit. :-) But they tend to be quite direct in their speech, and he told them that they need to keep in mind that Europe pays double the cost of the U.S. for gasoline.

I am really looking forward to the Q&A.

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Robert Rapier on May 18, 2007 - 4:04pm Permalink | Subthread | Parent | Comments top

I just watched Senator Wyden from Oregon, and he left me with a very unfavorable impression. He kept asking why the oil companies weren't reinvesting their profits, and Sankey kept saying that they were. Wyden must have repeated this 3 or 4 times, and then he closed with it. He wasn't interested in Sankey's view, he just wanted to assert that profits aren't being reinvested.

That's my first and only impression of him, but I think he is probably pretty typical. They don't actually want to listen to what you have to say.

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OilcoEx on May 18, 2007 - 9:18pm Permalink | Subthread | Parent | Comments top

wyden's mind is already made up. His famous report which postulated that oilcos were shutting down refineries in some planned way to drive up prices was riddled with mistakes. He strikes me as the sort that decides what the answer should be and then searches for whatever data bolsters the pre conceived notion.

Anyone who looks at the data hard understands that refining capacity has grown by about a third from 1990. The bad news is that demand grew faster and imports are much less available due to spec changes and overall world demand growing. Those European, South American and AG export refineries now have other markets looking for product. Of course refiners didn't invest in excess capacity in the 90's. their margins were already poor due to excess investment worldwide in the 80's. Time to pay the piper until the herd all rushes to add capacity in the next 5 years.

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Robert Rapier on May 19, 2007 - 4:08pm Permalink | Subthread | Parent | Comments top

I finished watching the web cast and wrote up my impressions:

http://i-r-squared.blogspot.com/2007/05/comments-on-senate-hearing-on-ga...

Wyatt wasn't the only one who put his meager knowledge on display. Check this out:

Senator Menendez: Over the past few years, it seems that bracing for the onslaught of record high prices at the gas pump has become as common as planning for the summer vacation. And we see prices rise and fall, we understand the concept of a changing supply and demand chain, that's not foreign to us, but when we see no singular event, no visible cause for the increase in prices, consumers scratch their heads and try to figure out what's happening. This is the 3rd year in a row in which consumers are facing gasoline prices above the $3/gallon mark. Yet there's no devastating hurricane this year; there's no single event at a refinery or in an OPEC country that explains why, in the first half of May, consumers are already experiencing sticker shock. Mr. Sankey, when you say there is no price manipulation through the whole supply chain, then why do prices seem to spike during times of greatest motorist activities such as the summer, and Memorial Day weekend? Now, I am sure that demand is part of the answer, but it seems that we find that it is in these time periods that the prices spike. Is that just convenience, that it just conveniently happens that way? Is it just a pure coincidence?

Now remember, this is a guy who says he understands all about supply and demand, and now is asking if it's a coincidence that prices rise at the times of highest demand. If I had been a witness, it would have been hard for me to hide my disbelief at this question from another esteemed member of the Senate who happens to be formulating energy policy.

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memmel on May 19, 2007 - 5:09pm Permalink | Subthread | Parent | Comments top

I think he is trying to insinuate that their is enough refining capacity and its being held back. The wording seems poor since I suspect he did not want to give the chance for a rebuttal of the underlying assumption he is trying to sneak in. If you heard this statement it does a good just of sneaking in this concept. So it probably sounds like pretty decent doublespeak to the average American.

Given that this stupidity is coming from a fairly powerful person in the US anyone that does not expect a witch hunt or big oil hunt in the near future is probably mistaken. And technically we really are not suffering direct peak oil effects yet just some temporary refining issues can you imagine the ton when real shortages become possible. We still have two more years before demand and supply diverge enough to make peak a significant factor.

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