DrumBeat: February 15, 2008
Posted by Leanan on February 15, 2008 - 9:56am
Topic: Miscellaneous
Analysis: Does storing oil raise prices?
To date, the SPR holds 698 million barrels of oil, but the DOE has been actively working to increase the reserve's size in order to meet the Bush administration goal, announced by the president last year, of doubling its contents to 1.5 billion barrels by 2027.But with oil prices reaching records highs of $100 per barrel this year, some congressmen say the administration's actions are worsening the load on consumers and adding to market instability. Last week Sen. Byron Dorgan, D-N.D., introduced a bill calling on the Department of Energy to cease adding oil to the SPR for the rest of 2008, or until prices fall below $50 a barrel.
"We need to use a little common sense here," Dorgan said in a statement. "I believe maintaining the current reserve is important for our economy and national security but the time to stock up is not when prices are highest."
CERA sees a dozen reactors under way by 2015 in US
HOUSTON, Feb 15 (Reuters) - Challenges facing a nuclear revival in the United States seem only to increase, but industry experts at the CERA conference expect to see a dozen new reactors under construction in the next decade, they said Friday.
Ark. congressman introduces energy bill
A plan introduced by U.S. Rep. Mike Ross to encourage alternative and renewable energy relies on oil drilling in Arctic wildlife lands and the Gulf of Mexico to meet its goals.Ross' bill, the "American-Made Energy Act of 2008," also would create tax credits to build new nuclear power plants throughout the United States, with an aim of having 40 percent of the nation's power come from nuclear sources.
New Zealand: Low lakes pose risk of power cuts
The security of the electricity supply is on a knife-edge and power cuts are possible this winter.Energy Minister David Parker yesterday admitted the supply situation was becoming dire, although he still believed the country would get through winter without blackouts.
Earlier yesterday, however, Meridian Energy chief executive Keith Turner told a select committee at Parliament that New Zealand would avoid cold showers and brown-outs only if nothing else went wrong.
"It is a very fine margin, finer than I have seen it in my career," Turner said.
Senator Feinstein asks Energy Secretary Bodman about Oil Transparency
On February 11, 2008, California Senator Dianne Feinstein sent a letter (see below) to Energy Secretary Samuel Bodman inquiring about the Department of Energy’s activities concerning peak oil.
Experts debate whether oil crisis looms
HOUSTON–Are the lackluster production and reserve replacement rates reported by the largest oil companies precursors to a looming oil crisis?The largest oil companies have had increased difficulty meeting a range of challenges to increase their production, including mature oil fields with declining production rates and restrictive regimes that have tightened their hold on their resources as commodity prices have.
The issue was much debated by oil executives and industry watchers at the CERA energy conference this week.
OPEC Finance Chiefs to Discuss Dollar Oil Pricing, Khelil Says
(Bloomberg) -- OPEC finance ministers will meet to study a proposal from Venezuela to price oil in a currency other than the U.S. dollar, the group's President Chakib Khelil said.
Eni ups estimate on Russian reserves by 20 pct to about 1.5 bln boe
MILAN (Thomson Financial) - Eni SpA chief operating officer Stefano Cao said reserves of its Russian assets are estimated at about 1.5 bln barrels of oil equivalent (boe), a 20 pct increase compared to the company's previous assumptions.
Once again, Gazprom has threatened to cut off Ukraine because of overdue bills, and once again the issue has been fudged.The Kremlin is clearly, and deplorably, trying to intimidate Ukraine into dropping its newly revived ambitions to join NATO, and into quashing any thoughts that it might host American missile-defence installations. Vladimir Putin’s loose talk about nuclear targeting is particularly alarming. But the real point of the story is bad government and corruption.
Chile's Gener 2007 net falls to $81 million
SANTIAGO (Reuters) - Aes Gener CHG.SN, a unit of U.S. power company AES Corp, said profit fell 47 percent last year on big cost increases resulting from higher fuel prices and cuts in natural gas supplies.
Nepal strike hits petrol supplies
Nepalese petrol stations have been hit by severe fuel shortages, largely triggered by protesters blockading key roads in the south of the country.Most petrol stations have shut down and those still serving fuel have attracted queues of thousands of motorists.
Sierra Leone: “Enough Petrol Now, More On the Way”
“If only people stop hoarding petrol and if only consumers stop panic buying of the commodity, we will all realise that there is enough petrol to last until the next consignment which is just round the corner,” the deputy minister assured.
Put Up Your Dukes: Venezuela Wants $110M in Taxes from Exxon
The battle ensues in international courtrooms, as Venezuela and Exxon Mobil duke it out over lost compensations concerning the Orinoco Belt and the country's nationalization of oil and gas projects.Now, the Venezuelan municipality Independencia claims that Exxon Mobil owes $110 million in taxes for production in the area between 2000 and 2006, reports Dow Jones.
OPEC to mull backing Venezuela in Exxon dispute
QUITO (Reuters) - OPEC will consider taking action at its next meeting to support Venezuela in its legal dispute against U.S. oil giant Exxon Mobil Corp, Ecuador Oil Minister Galo Chiriboga told Reuters on Friday."Any actions that the OPEC could take will come from a legal analysis from member countries' lawyers," Chiriboga said in a telephone interview, without specifying possible actions. He said OPEC member lawyers will meet on March 4.
Expert Says Chavez Is in Over His Head
Venezuelan President Hugo Chavez doesn't have the tactical advantage he thinks he does when it comes to controlling his oil-rich country's resources, an energy security consultant told oil and gas executives Wednesday.
Chevron's Pascagoula refinery back in operation after fire
PASCAGOULA, Miss. - The Chevron Pascagoula Refinery has resumed production in a crude oil unit damaged by fire last summer.
Lester R. Brown: U.S. Moving Toward Ban on New Coal-Fired Power Plants
In a report compiled in early 2007, the U.S. Department of Energy listed 151 coal-fired power plants in the planning stages and talked about a resurgence in coal-fired electricity. But during 2007, 59 proposed U.S. coal-fired power plants were either refused licenses by state governments or quietly abandoned. In addition to the 59 plants that were dropped, close to 50 more coal plants are being contested in the courts, and the remaining plants will likely be challenged as they reach the permitting stage.
Insight: The next crisis will be over food
I used to think that the fastest way to become worried about markets was to stare into the bowels of a monoline. No longer. A few days ago, I happened to hear Goldman Sachs discuss the state of the global financial system with European clients.And what struck me most forcefully from this analysis – aside from the usual, horrific litany of bank woes – was just how much trouble is quietly brewing in corners of the commodities world.
Spiking global prices of coal should make energy experts rethink the wisdom of depending on it for long-term fueling of electricity plants.
Away from these areas of direct combat, however, another strategic dilemma faced by the architects of the war on terror is becoming increasingly visible. This involves developments in asymmetric warfare - the ability of the weak to take up arms against the strong - which are already changing the global pattern of armed operations and counterinsurgency in ways still largely unrecognized. The United States army, and other powerful armies, find this form of warfare particularly difficult to cope with, as it can utilise in highly effective ways the advantages of an imbalance of forces and a surplus of targets..
Ensuring energy security is a costly affair - KSA
(MENAFN - Arab News) Oil is a costly affair. When US Energy Secretary Samuel Bodman was last here in Riyadh, he stressed on the need to invest "billions of dollars" in the industry annually, so as to achieve "global energy security."The International Energy Agency estimates that $22 trillion of investments would be needed between now and 2030 if the world is to meet expected energy demand.
Scramble for South Africa coal underway
SOARING international energy prices and Eskom’s desperate need for more coal to feed its overworked power stations have stoked southern Africa’s coal sector as investors scramble to bring new coal mines on line.
Partners in pilelines, but not in energy exports
Though connected by two pipelines that convey Caspian Basin energy to Western markets, Georgia and Azerbaijan are having trouble working out a long-term gas-supply deal. Price appears to be a major sticking point.
The crippling hours of load-shedding in Nepal start affecting the industrial production
The energy-crisis is starting to have all-round effects. From common consumers to business enterprises, the lack of energy has triggered a cascading impact everywhere.Among the worst sufferers include the industries and businesses. From manufacturing to service industries, all have been subject to swelling hours of power cuts.
Bolivia tries to avert looming energy crisis in Argentina, Brazil
LA PAZ, Bolivia: Bolivian President Evo Morales said Thursday he will meet with the leaders of Brazil and Argentina to try to resolve a possible energy crisis because the Andean nation may be unable to supply enough natural gas to meet the needs of its power-hungry neighbors.While Bolivian officials have said they can meet the needs of Argentina and Brazil this year, increased demand by the two nations could mean shortages in 2009. Natural gas is a key energy source for Brazil and Argentina, which have South America's largest economies.
Kosovo PM Rebukes Energy Utility
Kosovo’s Prime Minister Hashim Thaci has lashed out against the management of the local energy utility, blaming it for shortages of power and demanding greater accountability.Talking of a “national energy crisis,” Thaci accused executives of the Kosovo Energy Corporation, KEK, of “steering the energy sector as if it was their private property and letting millions of euros leak without any sense of responsibility”.
Shrinking timeframe to prevent dangerous climate change?
A growing number of scientists are echoing the concern raised in the latest Intergovernmental Panel on Climate Change (IPCC)’s Fourth Assessment Synthesis Report that climate change is happening faster than at rates predicted by earlier IPCC reports.A recent paper published in the US Proceedings of the National Academy of Science (PNAS) suggests that the Earth’s land and oceans are losing their capacity to absorb the excess carbon dioxide from anthropogenic emissions, accelerating the build-up of greenhouse gases in the atmosphere.
Reports of the oil industry's imminent death are greatly exaggerated
I am utterly perplexed by Jeremy Leggett's attempt to foretell the impending demise of the oil industry (The great fuel folly, February 5). Unless, of course, he contemplates such a development as being highly favourable to his Solarcentury company. I am one of the economists who, he claims, "tend not to see the problem". But Leggett seriously understates the ability of the many oil-producing countries to sustain provision of oil and natural gas.
Spreading car culture will push gasoline demand ever higher, but experts say it will need some help to meet the world's growing energy needs.
Peak oil - when global oil production will reach a peak and then begin to fall - is a real possibility sooner or later. It has happened in the US; it is happening in Britain, the North Sea and Indonesia; it is expected to happen in Mexico and some other major oil producing countries during the coming five-year period.In this scenario, the criticality of Iraqi oil production cannot but be overstated. Furthermore, Iraq is particularly blessed in certain other ways. Apart from its massive reserves of oil and gas, the cost of oil production in Iraq at US$1 to $2 per barrel is very low. Second, the oil fields are dispersed evenly across the country. Third, Iraq's location itself is a boon. Unlike, say, the Caspian, Siberia or the Arctic, it is easy to develop oil export routes out of Iraq heading in several directions simultaneously - the Persian Gulf, Saudi Arabia, Kuwait, Jordan, Syria and Turkey. All this means that rapid expansion of Iraq's oil production and the arrival of substantial amounts of Iraqi oil - exceeding 10 mn b/d - in the international market is an attainable objective.
Venezuela's oil minister says Exxon demands excessive
CARACAS, Venezuela — Exxon Mobil Corp. is demanding more than 10 times the compensation the company could rightly deserve from Venezuela for the nationalization of an oil venture, the country's top oil official said Thursday.Oil Minister Rafael Ramirez said Exxon Mobil's losses and past investments stemming from Venezuela's nationalization decision last year "wouldn't even reach 10 percent" of the $12 billion in assets the company has sought to freeze in court.
"They ask for too high an amount for their compensation," Ramirez said.
Who benefits when airlines merge? Who gets hit the hardest?
Call it collusion, monopolizing or whatever you want, but banding together provides them a competitive edge that will help stabilize a battered and teetering industry, dampening what has for decades been a wildly cyclical pattern of highs and lows.It's also a hedge against future catastrophes such as a terrorist attack, a severe recession or continued spikes in petroleum prices. If, as many are predicting, the so-called peak oil crisis hits in the next five or 10 years, massive consolidation will be the only means of survival. Best to start now. The eagerness to merge is in many ways a survival tactic.
DoD energy strategy: "More fight - less fuel"
When Undersecretary of Defense Kenneth Krieg asked Defense Science Board to form a Task Force on DoD energy strategy he specifically used two words very often – identify and assess.The DSB released its report called DoD Energy Strategy: "More Fight - Less Fuel" on February 12, 2008. The title of Section 2.2.2 is Peak Oil. Not surprising, because James Schlesinger was the co-chairman of the DoD Task Force.
Barack Obama: Old package in a new wrapping
One of his foreign policy advisers is Zbigniew Brzezinski, who goes back to the Carter Administration. Zbig is as imperialist as they come...The last thing Zbig wants is what Peak Oil and climate change is now demanding: more political localism and local control of resources by the people of whose land they are a part. When this book was published in 1997, Big Oil thought it had discovered in the Caspian Sea basin oilfields that would be greater even than those of Saudi Arabia. However, soon thereafter, the oil companies found out that there was not nearly the amount of oil there that they thought and they canceled projects.
A Better Way to Capture Carbon
Researchers have developed porous materials that can soak up 80 times their volume of carbon dioxide, offering the tantalizing possibility that the greenhouse gas could be cheaply scrubbed from power-plant smokestacks. After the carbon dioxide has been absorbed by the new materials, it could be released through pressure changes, compressed, and, finally, pumped underground for long-term storage.
OPEC Hints At Output Cut If Supply Rise Continues
LONDON -(Dow Jones)- The Organization of Petroleum Exporting Countries said Friday weakening world economic growth and demand prospects and ongoing increases in U.S. and European crude and gasoline inventories could soon force the producer group to pare back its own production to avert a drop in crude prices."These unfolding developments in the world economy and the oil market warrant close monitoring in the months ahead to ensure a timely response to changing conditions," OPEC said.
Oil prices approach 100 dollars per barrel
LONDON (AFP) - World oil prices advanced on Friday towards 100 dollars per barrel, briefly topping 96 dollars, as geopolitical jitters stemming from Nigeria and Venezuela stoked global supply concerns, traders said.Those market fears overshadowed a gloomy warning from Federal Reserve chairman Ben Bernanke, who predicted "a period of sluggish growth" ahead for the energy-hungry US economy.
I suppose this post should be titled, "Why you want to own long term oil futures." The following graph of "all liquids" supply and demand going forward five years gives us an basis to compare recent observations on peak oil by Matt Simmons, Charlie Maxwell and Chris Skrebowski, three very astute oil observers, and draw some conclusions.
Improving Our Green Job Prospects
On the one hand we have a deepening economic recession, a mortgage and debt crisis, and rising unemployment. On the other hand is the growing energy and climate crisis, shadowed by the specters of peak oil and planetary meltdown. Rising prices for energy, food and health care are hitting the poor and middle class hard. We have ourselves in quite a mess.No one has all the answers to these problems, but there is one answer that everyone with any sense embraces as a necessary first step toward a permanent solution: we must create green jobs in the renewable energy and energy efficiency industries. But despite that clear path forward, somehow the political will is not there yet and our prospects for a green jobs program in 2008 do not look very good.
Beijing petrol stations to close
China is closing 10% of Beijing's petrol stations to improve air quality ahead of the Olympics in August.By the end of May, 144 will shut because they are not expected to meet higher environmental standards, according to state media.
Siberian field to produce cheaper oil than Saudi crude - Rosneft
KRASNOYARSK (RIA Novosti) - An oil deposit, which Russian state-controlled crude producer Rosneft is developing in East Siberia, will produce cheaper oil than Saudi crude, the company's president said on Friday.
OPEC lowers its oil demand projections for 2008
VIENNA - The OPEC oil cartel on Friday lowered its projections for growth of oil demand this year in response to a slowdown in world economic momentum.The Organisation of Petroleum Exporting Countries in its February report said demand would likely grow by 1.43 percent this year rather than its previously estimated 1.52 percent.
Chavez Uses Exxon Legal Battle to Stoke Anti-American Sentiment
(Bloomberg) -- Venezuelan President Hugo Chavez has seized on a legal battle between the state oil company and Exxon Mobil Corp. to drum up backing for his campaign against the U.S. and President George W. Bush.Oil and Energy Minister Rafael Ramirez called the dispute an ``economic war'' with the U.S. and urged Venezuelans to march in the streets to protest court orders that freeze more than $12 billion of Petroleos de Venezuela SA's assets. Oil workers planned to hold a vigil at the company's headquarters near downtown Caracas from last night to this morning.
Coal Doesn't Have to Be a Dirty Word, CEOs Say
Coal is no longer an ugly, dirty stepchild in the shadow of oil and natural gas now that the world faces unrelenting electricity demand growth in emerging nations including China and India, which are gobbling up the abundant fuel.But coal's environmental issues often overshadow perceptions of its value at home, where it is the one fossil fuel America has more of than anyone else.
Next US president will take action on climate change: Stiglitz
PARIS (AFP) - Joseph Stiglitz, the Nobel laureate economist, declared himself "almost certain" Thursday that the next US president, whoever it turns out to be, will get tough on climate change."I don't want to be over confident, but I'm almost certain that the new president will come (through) on this issue," Stiglitz told a conference in Paris.
Business chiefs vow to lead fight against global warming
TOKYO (AFP) - Some of the world's top companies vowed Friday to step up their efforts to cut greenhouse gas emissions, saying governments were failing to show sufficient leadership in the fight against global warming.The declaration reflects a growing trend by global corporations waging war on climate change by taking steps to reduce or offset the amount of carbon dioxide belched out by their offices and factories.
Gore warns on 'subprime carbon' industry
UNITED NATIONS - Al Gore advised Wall Street leaders and institutional investors Thursday to ditch businesses too reliant on carbon-intensive energy — or prepare for huge losses down the road.
Venture to Use Sea to Fight Warming Runs Out of Cash
Planktos, a California company that is trying to turn a profit by fertilizing the ocean with iron dust, canceled planned field tests on Wednesday, citing a lack of funds. At the company’s Web site, planktos.com, a notice blamed a “highly effective disinformation campaign” for the cancellation.
http://online.wsj.com/article/SB120304250961670669.html?mod=todays_us_pa...
Crunch Time for Mexican Oil
Political Will Lacking For Production Overhaul
As Output Tumbles
By PETER MILLARD and DAVID LUHNOW
February 15, 2008; Page A9
Mexico, like the UK and Indonesia, had relatively high consumption as a percentage of production, at recent peak production, in the vicinity of 50%. The UK went to zero net exports in seven years, Indonesia in eight years. I estimate that Mexico will be approaching zero net exports by 2014.
BTW, Brent Blend Spot is well over $97. Tapis and Bonny Light are at or over $100. I wonder if the decline in Nigerian oil exports combined with a falloff in Russian oil exports is causing refiners to bid up the price of crude.
"No one has all the answers to these problems,"
"Mexico will likely stop exporting oil within seven years (2015)."
It will stop long before then.
Positive feedback loops (oil, grain, power grids interacting) insure that oil exports will encounter "Fat Tails"
and a Six Sigma Event.
Thus when data naturally arise from a fat tail distribution, shoehorning the normal distribution model of risk - and an estimate of the corresponding sigma based necessarily on a finite sample size - would severely understate the true risk. Many - notably Benoît Mandelbrot - have noted this shortcoming of the normal distribution model and have proposed that fat tail distributions such as the stable distribution govern asset returns frequently found in finance.
The Black-Scholes model of option pricing is based on a normal distribution and under-prices options that are far out of the money since a 5 or 7 sigma event is more likely than the normal distribution predicts.
(Too bad Citigroup didn't read this, eh?)
A Six Sigma Event was coined from observation of the normal distribution to describe extreme movements in market prices that contradict normal distribution assumptions.
"I estimate that Mexico will be approaching zero net exports by 2014."
"Approaching zero" is a good stand in for the Fat Tail Distribution and...
The Maximum Power Principle (MPP) states that all open systems (Bernard cells, ecosystems, people, societies, etc.) evolve to degrade as much energy as possible while allowing for the continued existence of the larger systems they are part of. "
The structures and storages that operate our world of humanity and environment are sustained against the depreciation of the second law (of Thermodynamics) by productive inputs for replacement and maintenance. Maximizing the products and services for growth and support appears to be a design principle of self organization as given by Alfred Lotka as the MPP."
As we approach zero grain stocks, the price of grain will accelerate, perhaps as much as six fold.
And Mexico's Electricity Grid could go at anytime:
Electric power systems are frequently nonlinear and, when faced with increasing power demands, may behave in unpredictable and rather irregular ways. We investigated the nonlinear dynamics of a single machine infinite bus power system model in order to study the appearance of coexistent periodic and chaotic attractors, characterizing multi-stable behavior. The corresponding basins of attraction present fractal boundaries, for which we have determined the uncertain fraction scaling in phase space. The bifurcation diagrams are studied with respect to variations of the mechanical power input and may lead to voltage collapse under certain circumstances, which we relate to a boundary crisis suffered by a chaotic attractor.
http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6TJ4-461XHJS-2...
It's not often that I am accused of being too optimistic. . .
But I am beginning to wonder if the debt markets are basically on their way to virtually disappearing. IMO, there is simply not enough exported energy out there to enable most borrowers to pay off their loans (in the absence of hyperinflaiton of course).
Other than things like food & energy investments, why would anyone want to borrow and who in their right mind would lend?
And the same thing is true of equity investments. IMO, markets are mispricing most equities because there is not enough exported energy out there to generate the projected earnings.
BTW, I think that Nigeria is a prime example of what happens when a regime tries to maximize net oil exports, while to some degree ignoring what their citizens want to consume.
Good time then to get a home with land out of the city. My son just bought his first home with 2 acres, small bungalow house (heated with a new GSHP, a WaterFurnace) in the middle of a farm field, no one around for a kilometer. It has a few other buildings one can use as barns, plus a fair sized pond and a huge garden area all for $200K. We're chipping in some of the money. He wants to get chickens and a couple goats.
The GSHP was running and it hardly makes any sound at all. Nice unit. Definte must for us this year (see the price of NG lately? Rising.)
That sounds so great. Very happy for your son.
As a lifeboat, there are some interesting implied assumptions.
Food will become a problem, Canada will not be able to import wheat from Western Canada, grind it and bake it in Eastern Canada BUT Canada will be able to keep all parts of the rural electrical grid operating.
Since one cannot make a living off of farming two acres, so I assume that he commutes some distance to a city or town (some few can telecommute). And he needs this income to pay off the loan and taxes and insurance, he expects enough fuel to afford exurban commuting for long enough to pay off his debts. And he expects that the electricity will stay on and roads cleared in the years that he is commuting. An implied assumption is that shortly after he cannot drive to work & shop, there will be a sudden collapse where even urban residents will not be working or getting to work.
If there is a multi-year time gap between exurban commuting stopping and urban collapse, hard times will come to him many years sooner. He will be a survivalist, depending on the next crop and the weather and good health (unless that tax or loan man comes) whilst Urban Dwellers are still drinking their coffee.
A social collapse, where no neighbor can be trusted is the primary and largest risk, and the risk of needing medical care (see cleared or snowed in roads), the fire department or other social services are MUCH less of a risk.
IMHO, the exurban commuting choice is bad for society and the HIGHEST personal risk. Separating oneself from society, with it's benefits, support and the efficiencies of urban living (live without using ANY oil directly) and even separating from fellow exurbanites is a risk. Break a leg in the field and ???
The rural areas will be the first without snowplows, the last to get linemen to repair the lines, long distance commuters will be squeezed first financially (many will find their lifeboats foreclosed on and a later mover will get them).
IMO, there is no risk of Canada not being able to distribute minimal food (see bread) in urban areas. There is a risk of support for rural areas, particularly in winter, being cutoff.
Alan
The two acres sounds very nice - and realistic. However I recommend he consider sheep rather than goats. Sheep will unfailingly eat grass, and keep his "lawns" tidy, whereas goats may not, and can be rather picky.
mcgowanmc, you told us that Mexico would end exports by the past new year. Is that still your position? I thought we would be standing in breadlines right now in the midst of the great depression? Just saying careful with your predictions, you lose a bit of credibility with each incorrect one that passes. WT may be right, only time will tell, but he could be wrong, like I have said many times, predicting the future is a most dangerous game just ask JHK, the King of Bad Predictions.
The caveat:
That Mexico's Ruling Class has adopted DC's Disaster Capitalism.
That the Status Quo will exist until it doesn't. Note that
I haven't mentioned City police commanders being killed.
Entire city police dept's being replaced by Federales.
And who will replace them?
The facts bare me out.
Mexico's production HAS fallen as fast as WT, Khebab, Ace,
others have predicted.
Mexico even now is talking about using Indian Refineries instead of US.
Does no one here on TOD think this is Bat Shit Crazy?
West Coast Mexico oil shipment to SoCal have stopped.
We are in the Great Depression. Citi just announce an $18 BILLION
writedown. Brand new.
Right after USB did the world's largest only yesterday at $13 B.
The CDO's have frozen. There is zero counter party risk!
Gasoline at $2.50 NYMEX.
Wheat over $10, even with margins doubling.
Soy just hit $14.
Platinum over $2000.
Question. How high does Platinum have to go before it's more
profitable to mine than coal?
And BTW-2008 has just started.
And Venezuela's solution to this?
Venezuela, Argentina to trade food, oil
Venezuela and Argentina have reached an agreement to exchange food for oil, it was reported Wednesday.
Under the agreement, Argentina will supply 1,000 tons of beef monthly and in exchange Venezuela will provide all the crude needed to ensure Argentina's "human and industrial development," Mercopress reported.
Venezuelan President Hugo Chavez said Argentine needs "no longer to worry about the energy issue." Similarly, he said, "the Venezuelan families are grateful to Argentina for its efforts in making everyday life easier."
I thought this was coming. It's not a good time to be both a big net food & energy importer.
Oh good - that makes me feel much better!
WT, this is not a new ploy for Chevez. He has said for several years that he wants 'fair trade' not 'free trade'...This statement is directed at the IMF and World Bank. His aim is to replace these organizations in SA and the islands. Everyone in SA is aware of the history of the US on their continent and Chevez is making an attempt to end US envolvement there. If one is to believe 1/2 of what is written in 'I Was An Economic Hit Man' it is easy to see why...but, that book aside, there is ample evidence of very bad conduct on the part of the US in SA for a very long time.
WT, this is not a new ploy for Chevez. He has said for several years that he wants 'fair trade' not 'free trade'...This statement is directed at the IMF and World Bank. His aim is to replace these organizations in SA and the islands. Everyone in SA is aware of the history of the US on their continent and Chevez is making an attempt to end US envolvement there.
If you stood up at the UN with all the cameras on you live and you told the whole spanish speaking world(and every other language) to go out and buy this book, Noam Chomsky’s “Hegemony or Survival,” a critique of American foreign policy
I'd say the secret is out, and the curtain has been raised for many.
It sounds like Senor Chavez is setting up his own little bartering system. Yet another way to circumvent using the U$D during oil transactions.
I agree with you and Westexas--the bartering will turn out to be the start of a trend.
From the start I had a gut feel that this pissing contest between Exxon Mobil and Venezuela would develop into something far beyond a mere dispute over money.
For Venezuela it appears to have become a matter on national honor. And what worries me even more, is that Venezuela appears to have a great deal of sympathy among those who like to see Uncle Sam's beard get tweaked.
So it would appear from OPEC's comment that it might support Venezuela.
I can't imagine that NOC's would take kindly to the idea of behavior like Exxon's.
On the contrary, I think they would be far more pissed at Venezuela than Exxon. Virtually all NOCs use foreign contractors. When Venezuela kicked Exxon out, they offered them pennies on the dollar for all they had invested in Venezuela. Imagine the president this sets. NOCs need foreign contractors and the behavior of Venezuela will make it more expensive to hire foreign contractors if they think there is a chance of being kicked out and leaving their investment behind.
Foreign investors will now demand a higher return because of Venezuela's behavior. They must now face the prospect that it could happen again in other countries. Other NOCs cannot possibly be pleased at this prospect.
I am absolutely astonished that so many people on this list think Exxon is the villain in this case. No, Exxon invested billions in Venezuela and when most projects were up and running they unceremoniously kicked them out and offered them a pittance for their investment. And that kind of behavior simply cannot be accepted by other NOC or those who are contemplating further investment in those nations.
Ron Patterson
Ron: Reality check- the country of Iraq was invaded, destroyed and not one penny of the oil revenue derived has been spent to rebuild the destroyed country. If it wasn't done to specifically benefit XOM they are certainly on the "home team" (unlike virtually all Americans not to mention the godforsaken Iraqis). Nothing against XOM, but when you have people killed for money sometimes people will consider you to be a "villain".
Bryan, we are talking apples and oranges here. I know Iraq invaded Kuwait, then Kuwait pleaded for help from the US and got it. Then Bush 1 left and things were back to normal. Then Baby Bush tried to be a hero. I do not defent Bush 2 in any shape or form. I am backing the Democratic cantidate because McCain is just another Bush and wishes to continue the Bush policy.
But that has not one frigging thing to do with the Venezuela-Exxon debate. Please stick to the subject and if it is apples don't try to make it oranges.
Ron Patterson
Ron: I disagree. You say (in the Venezeula situation) that there should be a world of rules and they are breaking the rules, which is a bad thing. The same company (XOM) that is supposedly getting the short end of the stick here (unfairly according to you) stands to benefit from the use of the schmuck taxpayer's money not to mention the loss of life in the Iraq situation. According to you, this is the proper working of the "free market". Whatever.
uh huh,
Ron, the argument BrianT makes IS about apples and oranges.. but they are all Oily, Nationalised Apples and Oranges. Have a seance, ask Mossadegh about his Oily, Nationalized Oranges.
Bob
Jokuhl, it would be helpful if you would just make a point instead of just expressing silly hyperbole. I am not a psychic and do not hold séances therefore I cannot ask Mossadegh anything. You obviously know that therefore you put your post out of reach of normal refutation. That is a cheap rhetorical trick. I am unimpressed with such silly tricks however others may have a different opinion of your verbiage. However is does give me a chuckle. Being a student of silly rhetorical tricks and always enjoy a new one. Thanks for that anyway.
Ron Patterson
3 Vulnerable Regimes, Nationalizing or Threatening to Nationalize their Oil Supplies.
2 Down,
1 To go (OK, a lot more than 1 to go, but they're working on them too, I'm sure!)
I can't believe that my point was all that obscure, though I realize my writing can be far from Literal. You seem to have a way of not even trying to get the point being made..
I don't think 'Hyperbole' fits, but 'Rhetorical Device' would be fair enough.
Bob Fiske
ps, I held a Seance, and 'Mossadeq' referred me to this Wikipedia page.. let me know if it's way off in it's conclusions..
"The Dulles brothers had worked for Sullivan and Cromwell, a prominent law firm that represented Standard Oil of New Jersey. Standard Oil had wanted to gain oil interests in Iran for many years; but the AIOC had a monopoly on the region. The Dulles brothers saw a chance to give Standard Oil the ability to set up operations in the region, when the British asked about a coup. The British, no longer the dominant power, knew they could not remove Mosaddeq without the US, which meant that the US would be entitled to a portion of the Iranian Oil, which they were okay with, because 60% is better than nothing. After the Coup, 40% of Iranian oil was owned by US oil companies."
http://en.wikipedia.org/wiki/Operation_Ajax
related NYT article:
http://www.nytimes.com/library/world/mideast/041600iran-cia-index.html
The NOCs have zero need for foreign investors or contractors. Zero. Nada. They have boodles of money, and can now call the shots. Smart IOC's like Total are adapting. Stupid IOC's, like Exxon, are pulling plays like this. They are dooming themselves.
Wrong, wrong, you could not possibly be more wrong! I was a contractor in Saudi for two years and an Aramco employee for three more years. Aramco is totally dependent on foreign employees and contractors. Many of my friends were former contractors in Iran or Kuwait. Every oil company in the Middle East is totally dependent on foreign contractors.
Schlumberger, Halliburton, Brown and Root and dozens of other contractors are in the Middle East because they are needed there to drill and service oil wells. I was with Dravo Utilities, then a contractor to ARAMCO, for two years in Saudi. We built the first Gazlan power plant there. A second has been built by another contractor since I left.
To say that NCOs have no need for foreign investors or contractors shows an unbelievable amount of naiveté as well as a total lack of knowledge as to how NCOs actually operate. Do you actually believe that ARAMCO could build gosps, power plants, refineries, petrochemical plants, install water seperation equipment and drill and then pour horizontal MRC wells without foreign help? Goodness man, try to study up on what is really going on over there.
If they did not truly need those contractors they would not be there. That is just plain common sense.
And it must be noted that when the four oil companies that built ARAMCO, (The Arabian American Oil Company) left Saudi in the late 70s and early 80s, they were adiquately compensated for their investment. Saudi did the honorable thing and paid those that had built the company a just sum for their labors and investment. Venezuela did not. That is the point of contention.
Ron Patterson
Agreed, But this battle is also causing the price of Oil to rise. Exxon profits from higher oil prices. If VZ does shut off the taps to the US, oil prices will head much higher. Why I understand Exxons desire to get back its investment, this battle will result in further geopolitical deteriation with Oil exporters.
As a taxpayer and energy consumer it probably would had made better sense for the Us gov't to re-imburse Exxon for its losses. Now all americans will suffer as the price of oil rises again. Exxon may win the battle, but everyone else stands to lose.
TechGuy, sorry but you are a bit off on this one. Chavez is not really as dumb as he lets on to be. He clearly realizes that oil is a fungible commodity. And his oil is heavy and sour, meaning that almost any oil is better than his. His oil can be replaced with any oil from anywhere in the world. If he shuts off oil sales to the US then those that he does sell his oil to will just buy less oil from someone else. That oil will go to the US.
Chavez can only hurt the US by not selling oil at all. That would drive prices higher and wreck his budget in the process. But that in turn may help the entire world by pushing oil prices to a more reasonable level, pushing out the date when the oil supply will sharply decline.
Ron Patterson
If Chavez still owns the CITGO refinery, he could sell his gasoline from that refinery to Mexico, which, as noted above, is considering sending it's oil to India for refining. Chavez is not saying he would not MOVE his oil to the U.S. only that he saying he won't SELL his oil to EXXON or the U.S...
E. Swanson
Third option, PVDSA "creates" new demand. Long term (several years) deal with China (and India ?) to fill their SPRs at much faster rates than they are currently being filled.
India has two new (last couple of years) heavy oil refineries. Eash was built in just one year. India, China co-operation to build a Venezuelan oil "upgrader"for long term storage ? Remove metals and sulfur, take the asphalt and bunker fractions and crack them while adding some hydrogen and end up with a few different syncrudes that can fit