Mexican oil output has declined steadily from its peak of 3.4 million barrels a day in 2004 and is expected to fall to 2.8 million barrels a day by the end of this year. If that continues, Mexico will likely stop exporting oil within seven years (2015). The country relies on oil exports for about a third of government revenue. And Mexico is the third-largest supplier of oil to the U.S., behind Canada and Saudi Arabia.
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.
"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.
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.)
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.
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.
"Mexico will likely stop exporting oil within seven years (2015)."
It will stop long before then.
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.
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."
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.
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.
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: 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: 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.
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.
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.
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
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.
The NOCs have zero need for foreign investors or contractors. Zero. Nada.
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.
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
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.
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...
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 various refineries. Perhaps sell some of the asphalt locally instead of storing it.
Three or four years of 250,000 b/day (first deliveries 1/1/2009 ?) specifically for the SPRs (much faster fill than currently) would have an impact.
And after the SPR contract was over, the tankers could still keep coming.
Seriously, though. There are many changes taking place. Market volatility is a sign that the anarchic and corrupt so-called "globalized free market is in fact lawless. Those with wealth and power use this as leverage to get more, largely at the expense of the planet and other people (other nations) and now even at the expense of the entire economic system.
I think that there are those who do not care if the system has to bear the costs of their corrupt and unethical ways, and may not even care if the contribute to bringing the system down around them.
In fact, according to "The Shock Doctrine," the NeoCons want to do exactly this: bring the system crashing down and impose a new, blatantly authoritarian fascist system to replace the softer corporatism that is still a bit stifled by old pieces of paper -- the Constitution, debt notes, things of that sort.
Mac, you are right but you left out a couple of items on your list:
1) Occasionally Mexican pipelines and pumping stations are blown up by some organization with skill, timing, and the ability to recognize what disruption will cause the most damage to foreign investors and the Mexican economy.
2) Posted on Drum Beat recently was a list of how many illegal taps were found on Mexican pipelines in 2005 vs 2006. There was a large increase indicating lots of oil and gas is being stolen and I see no reason that the amount stolen will decrease.
As FF prices rise for Mexican citizens and businesses the amount of gas and oil stolen will increase. See Iraq (Basra) for an example. At some point in the oil export decline the Mexican Government will face a total collapse of their economy, followed quickly be a collapse of the government. Imo, it will not take another seven years for these events to occur.
From my own review, economics seems to be based on ordinary Variational calculus. A not particularly powerful thing. I have been wondering if the assumption that resources (energy) are essentially infinite is essentially the same as saying that the curvature of resources is flat. If one allows curvature (Curl) in resources, could one then not redevelop economics using Riemann geometry instead of Euclidean geometry wherein the unstated assumptions of infinite availability and substitutability become explicit as curvature in the universe of economics?
I thought Shell had declared force majeure regarding a production problem in the Bonny field - some 400kbbl/day worth of production. Is that not all of the field, or was the problem resolved?
I see among Leanan's list that some insightful and hardworking journalist is predicting that Mexican oil production is going to hit peak during the "coming five year period". Moreover peak oil is happening [even as we breathe today's air] in Britain and Indonesia. To give our intrepid reporter the benefit of the doubt, I suppose the first draft of this article might have been written several years ago. Still he does risk the opinion that "peak oil...is a real possibility sooner or later."
From the article:
The door to Iraq's oil opens
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.
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 various refineries. Perhaps sell some of the asphalt locally instead of storing it.
Three or four years of 250,000 b/day (first deliveries 1/1/2009 ?) specifically for the SPRs (much faster fill than currently) would have an impact.
And after the SPR contract was over, the tankers could still keep coming.
Alan
Good thoughts, mcgowanmc.
Just one quibble:
"The facts bare me out."
I sure hope not! How about:
"The facts bear me out."
:)
Seriously, though. There are many changes taking place. Market volatility is a sign that the anarchic and corrupt so-called "globalized free market is in fact lawless. Those with wealth and power use this as leverage to get more, largely at the expense of the planet and other people (other nations) and now even at the expense of the entire economic system.
I think that there are those who do not care if the system has to bear the costs of their corrupt and unethical ways, and may not even care if the contribute to bringing the system down around them.
In fact, according to "The Shock Doctrine," the NeoCons want to do exactly this: bring the system crashing down and impose a new, blatantly authoritarian fascist system to replace the softer corporatism that is still a bit stifled by old pieces of paper -- the Constitution, debt notes, things of that sort.
Just one quibble:
"The facts bare me out."
I sure hope not! How about:
"The facts bear me out."
That's why we call it Doomer Porn, beggar ! :)
Mac, you are right but you left out a couple of items on your list:
1) Occasionally Mexican pipelines and pumping stations are blown up by some organization with skill, timing, and the ability to recognize what disruption will cause the most damage to foreign investors and the Mexican economy.
2) Posted on Drum Beat recently was a list of how many illegal taps were found on Mexican pipelines in 2005 vs 2006. There was a large increase indicating lots of oil and gas is being stolen and I see no reason that the amount stolen will decrease.
As FF prices rise for Mexican citizens and businesses the amount of gas and oil stolen will increase. See Iraq (Basra) for an example. At some point in the oil export decline the Mexican Government will face a total collapse of their economy, followed quickly be a collapse of the government. Imo, it will not take another seven years for these events to occur.
Hey, antidoomer, where were you on the little Mitsubishi car? George Asebius had to put up the link. You're falling down on the job, man!
Fancy language for reminding us that Murphy is alive and well -- and was probably an optimist!
From my own review, economics seems to be based on ordinary Variational calculus. A not particularly powerful thing. I have been wondering if the assumption that resources (energy) are essentially infinite is essentially the same as saying that the curvature of resources is flat. If one allows curvature (Curl) in resources, could one then not redevelop economics using Riemann geometry instead of Euclidean geometry wherein the unstated assumptions of infinite availability and substitutability become explicit as curvature in the universe of economics?
SolarHouse
I thought Shell had declared force majeure regarding a production problem in the Bonny field - some 400kbbl/day worth of production. Is that not all of the field, or was the problem resolved?
I see among Leanan's list that some insightful and hardworking journalist is predicting that Mexican oil production is going to hit peak during the "coming five year period". Moreover peak oil is happening [even as we breathe today's air] in Britain and Indonesia. To give our intrepid reporter the benefit of the doubt, I suppose the first draft of this article might have been written several years ago. Still he does risk the opinion that "peak oil...is a real possibility sooner or later."
From the article:
The door to Iraq's oil opens
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.