The Oil Drum

Re: The "Bidding War" for declining crude oil exports

While OECD oil inventories have fallen from their highs last year, they are still at adequate levels, although the EIA is warning that we will drop to the bottom of the five year range this year, especially in terms of Days of Supply: http://www.eia.doe.gov/emeu/steo/pub/gifs/Slide25.gif

However, focusing on OECD inventories, as an indication of what is going on in the entire world, is like asserting that no one went hungry in the US in the Thirties, based on surveys of the top half of incomes earners.

Consider a map of OECD versus non-OECD countries:

http://en.wikipedia.org/wiki/Image:OECD-memberstates.png

We don’t have to look hard for reports of forced energy conservation in poorer regions. Leanan has posted countless stories. I think that one of the best is the following WSJ article in 2006. IMO, inventory levels in OECD countries are okay, because of forced energy conservation in areas like Africa, but the pattern that I expect to see is forced energy conservation moving up the food chain.

Published on 18 Nov 2006 by Wall St Journal. Archived on 23 Nov 2006.
As Fuel Prices Soar, A Country Unravels
by Chip Cummins
Conakry, Guinea

The impact of today's energy crunch on the poor is plain in rich nations such as America: Expensive gasoline and soaring heating bills make a hard life harder. In impoverished countries such as Guinea, where per capita income is just $370 a year and surging gasoline prices have helped spark bloody riots, the energy shock has become a matter of life and death.

A story of problems with forced energy conservation at the margins, in a OECD country:

http://online.wsj.com
Running on Empty
On a Road to Nowhere
An Alaskan village asks a scary question:
What happens when oil is too expensive to use?
By RUSSELL GOLD
June 9, 2007; Page A1

Excerpt:

"We have a very fragile economy in most of these villages already and then you add the jolt of high fuel-oil prices. It's my guess that many of these communities will not find themselves viable if fuel prices stay here," says Mike Black, director of community advocacy at Alaska's Department of Commerce, Community and Economic Development. The villages, he says, "are begging, borrowing and stealing to get enough fuel."

The extreme costs of fuel in rural Alaska have led to numerous energy experiments. But various efforts to reduce rural Alaska's dependence on petroleum-based energy have struggled. Petroleum is easy to store, handle and transport, says Brent Sheets, head of the federal government's Arctic Energy Office in Fairbanks. "It is hard to beat diesel fuel," he says.

A proposal to build a small nuclear power plant for one small town was shelved when a study concluded that the federal security requirements made the project uneconomic. Solar isn't a good fit for Alaska, because fuel demand goes up in the winter when the state gets little sunlight. The Energy Department office even looked at turbines designed to harness river energy, dodging logs and car-sized icebergs, but plans never made it past the theoretical stage.

One alternative-energy success stories is in Kotzebue, the hub community to the west of Shungnak on the Chukchi Sea. On the tundra outside of Kotzebue, where the only sign of life is paw prints from an Arctic fox, are 17 windmills capable of generating one megawatt of electricity. The windmills "are a hedge against rising fuel costs," says Brad Reeve, a Minnesotan who came to the town 30 years ago to run the public-radio station and now heads up the electric cooperative.

As the cost of bringing in diesel has grown, electricity from the windmills has looked better and better. But the windmills have a high upfront cost -- they sit on special pilings with chemicals that ensure the tundra remains frozen to hold the windmills steady. And on a recent morning, as a computer in the coop's offices showed 2.8 megawatts of demand, the wind wasn't blowing. All of the electricity came from distillate-burning generators, a reminder that Kotzebue needs to keep a steady supply of oil.

In Shungnak, Mr. Woods, the tribal-government official, says he expects the oil will keep on flowing. Eskimos are accustomed to adapting to extreme conditions, he says. But there is little effort being made to teach children how to hunt the old way. "Their lifestyle now is so convenient," he says.