<Khosla and I Finally See Eye to EyeThe Oil DrumDrumBeat: February 21, 2008>

131 comments on Oil Price Closes Above $100 a Barrel - New Peak Oil Press Release

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memmel on February 20, 2008 - 12:04pm Permalink | Subthread | Comments top

I think that one of the big problems we face is fairly simple. The media likes to attribute high oil prices to some simple factor which changes daily.

For example its been noted that if a large refinery goes down it makes sense for crude prices to decrease and finished products to increase. Instead crude goes up. That's like the price of timber going up when a large sawmill burns down.

Certainly geopolitical factors and other issues play a role in high prices. But constantly high and increasing prices for years deserves a serious investigation. Attributing these prices to the event of the week does the world a disservice.

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Euan Mearns on February 20, 2008 - 1:51pm Permalink | Subthread | Parent | Comments top

Distillery burns down - price of barley soars.

But we just busted $100 again.

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gernos on February 20, 2008 - 3:23pm Permalink | Subthread | Parent | Comments top

NYMEX now at 100.61.
Is there a lot of speculative money pouring into the market just now ?
Bloomberg seems to have given up providing explanations.
Perhaps they are getting bored with all these new records.

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gernos on February 20, 2008 - 3:26pm Permalink | Subthread | Parent | Comments top

NYMEX now 100.92
Am I the only person on TOD following this ?

I will leave it to someone else to post the next record.

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gernos on February 20, 2008 - 3:28pm Permalink | Subthread | Parent | Comments top

Sorry, but I can't resist informing you all that NYMEX has now reached 101.20.
Will someone please shut me up !

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garyp on February 20, 2008 - 3:44pm Permalink | Subthread | Parent | Comments top

The question isn't so much particular indices rising above $100 a barrel. Its more "what is the future path of prices and when will be the last point the price is below $100?"

Now personally I originally calculated the end of Feb for the rise above $100, so the previous high caught me by surprise and this price is in keeping with the maths.

However, what with the likelihood of a number of large fields coming onstream this year, together with the probability of recession, I'd have to say I'd expect a fall back to the $60-$80 region in time for the US elections. That's excepting someone doing something stupid.

However I still see no reason to believe the start of the decline won't be in the 2011-12 timeline - 3-4 years away. What are we doing to prepare and adapt? Where is the movement? We are getting inside the planning horizon of business and politicians, but still the action isn't there at a large scale level.

Next to the large scale picture, day to day movements on Nymex are unimportant.

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Prof. Goose on February 20, 2008 - 3:48pm Permalink | Subthread | Parent | Comments top

I think it goes slowly to $110, then the economy slows down and it settles back in to the mid-70s or 80s for a while, save any other geopolitical events. But still...that's gotta be enough to make it hurt. Especially with crack spreads finally catching up and gasoline demand about to increase.

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memmel on February 20, 2008 - 4:03pm Permalink | Subthread | Parent | Comments top

I agree I did not expect it to go this high. However my worst case scenario indicates that GOM and other high technology old producing regions should be declining fairly rapidly now. Small field infield drilling etc. If this is true then I think the price is heading for 150 or so by mid summer.

However short term I'm waiting to see when the US can no longer import all the gasoline it wants. Once gasoline and blending components for export are maxed out thats when the fun begins.

So far it seems we can always buy all the gasoline we want but I suspect that sometime this year maybe the fall this will end.

The reason I think this is important is its root cause will be simply not enough oil for refinery capacity thus building more refineries in the US and competing for crude does no good.

Before this import prices for gasoline should increase substantially and like I said it seems we can get whatever we want now. But thats the number to watch it will go down before crude imports.

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Samsara on February 20, 2008 - 11:49pm Permalink | Subthread | Parent | Comments top

However my worst case scenario indicates that GOM and other high technology old producing regions should be declining fairly rapidly now.

Memmel, Prof. G.

That would be a good subject for a write up.

GOM - 3 Years Later

With all the post Kat-Rita damage at the time, and how much was impared, it would be a great study to take a clinical look now.

How much was lost?

How much capacity was/will never be reclaimed?

Dollar amount of loss?

etc.

Just Sayin...

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memmel on February 21, 2008 - 12:04am Permalink | Subthread | Parent | Comments top

I found a wealth of data on the DOE website. I'd have to dig up the links but I posted them here a few times. Simmons has given several talks on the issue.

Bringing it all together is a bear since their is a treasure trove of data and a number of good summary papers exist.

Short summary is if the rest of the world that has invested in advanced extraction methods follows the decline patterns seen in the GOM we are fucked.
And sorry to use such language but...

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Kiashu on February 21, 2008 - 7:49am Permalink | Subthread | Parent | Comments top

Nup.

$180 by the end of the year, I say. Just in time to give the knockout punch to the US economy - then it drops back down a bit to $130, and all that unfulfilled demand from China, India, etc drags it back up slowly.

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tommy on February 20, 2008 - 3:54pm Permalink | Subthread | Parent | Comments top

Sorry, but I don't see the importance in your reporting every new record. It is not as if the world is going to end with someone paying $101 for a barrel of oil. Go and do something useful.

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Gail the Actuary on February 20, 2008 - 4:42pm Permalink | Subthread | Parent | Comments top

It is basically a reason for a news-like story to tell to the press. Sometimes there are teachable moments. We are hoping this is one of them.

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Euan Mearns on February 20, 2008 - 7:08pm Permalink | Subthread | Parent | Comments top

Gernos - at The Oil Drum we don't really give a damn about the oil price but we do care about energy shortages and the impact upon society;-)

However, by chance I just happened to click by accident on this chart busting spike over at 321.


http://www.321energy.com/index.php

I think we'll see the oil price move sharply up to $110 from here.

Closing prices today:

Tapis $101.79
Bonny $101.07
Louisiana $103.50
WTI $100.83

http://www.upstreamonline.com/market_data/?id=markets_crude

We may see Brent break through $100 tomorrow.

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Euan Mearns on February 20, 2008 - 7:21pm Permalink | Subthread | Parent | Comments top

And by way of partial explanation of what is going on in terms of supply and demand imbalance I think this chart is part of the story:


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westexas on February 21, 2008 - 6:58am Permalink | Subthread | Parent | Comments top

Our outlook for Russia from the Khebab/Brown Top Five Net Exporters Paper:

Russia’s initial 10 year projected production decline rate is -5.1%/year ±2%. The projected rate of increase in consumption, which is heavily weighted toward recent consumption and therefore on the low side, is +0.3% ±0.8%. The initial 10 year projected net export decline rate is -8.2%/year, ±4%. Our middle case shows Russia approaching zero net exports in 2024, within a range from 2018 to 2029.

We believe that Russia’s recent rebound in production was primarily a result of Russia making up for what was not produced following the collapse of the Soviet Union, and based on our mathematical model, Russia has now “caught up” to where its post-1984 cumulative production should have been.

This summer Alfa Bank warned of problems with mature Russian oil fields because of rapidly rising water cuts. Just recently, Renaissance Capital brokerage said that excluding the Sakhalin-1 Field, daily crude output in Russia has been down year-on-year since May. There have been recent warnings that new fields in Eastern Siberia are too small and being developed too slowly to offset the production declines in Western Siberia, and the most recent Russian oil export data show a 6.7% decline in total Russian oil exports in December, 2007 versus December, 2006.

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HereinHalifax on February 20, 2008 - 4:05pm Permalink | Subthread | Parent | Comments top

Bloomberg seems to have given up providing explanations.

I noticed that as well. Wasn't too long ago you'd see a story entitled "Oil trading higher on Middle East concerns" replaced ten minutes later by another that read "Oil trading lower on latest job report", followed shortly thereafter by a third telling us "Oil little changed at market close". Personally, I never found their analysis all that helpful; then again, I never understood the inner workings of these things and I suspect I never will. I've resigned myself to the fact that my only real connection to the markets is at the pumps and that little fill slip the oil man drops through the mail slot.

Cheers,
Paul

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