DrumBeat: March 8, 2008
Posted by Leanan on March 8, 2008 - 10:03am
Topic: Miscellaneous
For much of its 47-year existence, the Organization of the Petroleum Exporting Countries (OPEC) has been a cartel in name only. It could not, in practice, control oil prices because many of its members regularly breached the production quotas that were intended to regulate the market. So OPEC generally followed oil prices up and down, as supply and demand conditions shifted. But now OPEC may be the real deal: a cartel that works. If so, that's bad news for us.
Senate Committee Seeks Audit of Iraq Oil Money
Two senior members of the Senate Armed Services Committee have requested a full accounting of how Iraq is spending its soaring oil revenues, amid starkly conflicting estimates of how much the country has invested in rebuilding its broken infrastructure and providing basic services to its citizens.
Belarus cuts Washington off over U.S. sanctions against against oil company
MINSK, Belarus - The Belarusian Foreign Ministry told the U.S. ambassador on Friday to leave the country and recalled its own ambassador from the U.S. over economic sanctions Washington imposed on the former Soviet nation last year.
State Offers Help After Waterbury Oil Company Abruptly Closes
WATERBURY, Conn. -- The state is offering to help 12,000 customers of a Waterbury oil company that abruptly went out of business and left many people with pre-paid contracts in limbo.
Official: China to put into use two more oil reserve bases
BEIJING, March 8 (Xinhua) -- Another two strategic oil reserve bases will soon be put into use, a Chinese official said Saturday on the sidelines of the annual session of the country's top political advisory body."Two oil reserve bases in Huangdao (of Shandong Province) and Dalian (of Liaoning Province) is near completion," said Zhang Guobao, vice minister in charge of the National Development and Reform Commission (NDRC), without elaborating how soon.
The two oil reserve bases located in Zhenhai and Zhoushan of Zhejiang Province have been put in operation.
Oil-filling at the two bases is worthwhile in terms of oil prices, and the timings have been well chosen to prevent major impact on international oil price, the official said.
Colin J. Campbell - The first ever oil database: the history of Petroconsultants
Naturally an oil company has every reason to track the activities of its competitors which can have much commercial significance. In earlier days in the United States, they used to employ people known as "scouts" who would keep rigs under observation, sometimes with binoculars.
Bangladesh oil company sees nearly one billion dollars loss
Bangladesh's state-owned oil company will post a record net loss of nearly one billion dollars in the current fiscal year due to sky-rocketing global crude oil prices, its chairman said on Saturday.The Bangladesh Petroleum Corp (BPC), the nation's monopoly oil importer and distributor, sells fuel at prices set by the government that do not reflect the purchase cost.
Cameroon ups state wages, cuts prices after riots
YAOUNDE (Reuters) - Cameroon's President, Paul Biya, has raised state salaries by 15 percent and suspended customs duties on basic foodstuffs like fish, rice and cooking oil to ease discontent over high prices which provoked riots last week.In two presidential decrees broadcast on state radio late on Friday, Biya increased the wages of civilian and military personnel from April 1 and raised their family allowances by 20 percent of the monthly basic salary.
The cash price for coal that utilities burn to generate electricity exceeded $101 per ton this week at a West Virginia mine served by Norfolk Southern Railway....High-heat, low-sulfur coal from Central Appalachian mines is popular with utilities because it burns cleaner and helps them comply with federal clean-air rules. Five years ago, the same coal was selling for around $30 per ton.
With half the state's and half the nation's electricity produced from coal, the price trend could mean higher electricity prices for Virginians. Utilities generally are allowed to pass along the increased cost of fuel for their power plants.
EDMONTON -- A mysterious problem at Imperial Oil's Strathcona County refinery continued yesterday, choking off gas supply to Esso stations across Western Canada for the second day in a row.In addition to several local service stations, fuel shortages have also been reported at Esso stations in B.C., Saskatchewan and Manitoba.
Mexican Interior Minister Defends Earlier Energy Contracts
Mexico's embattled Interior Minister, Juan Camilo Mourino, has vowed to remain in his post despite criticism over two energy contracts he signed years ago during a stint as an adviser to the Energy Ministry.
Seventy years since oil expropriation
This coming March 18 marks 70 years since General Lázaro Cárdenas nationalized Mexican oil, a conquest of the ancient country of the Aztecs that, given current efforts to reverse it, in 2008 has become a call to struggle for the political opposition and the 80-plus% of the population that opposes the so-called structural reform of the state oil company, PEMEX.
South Africa: The consumer is dead ...
Diesel generators are a great deal more expensive than electricity and once the electricity rate hike of 14% combined with the 2c KWh comes into affect, it will be inflationary along with the 10% increase in the cost of petrol.
Did the Government deliberately prevent Eskom from building new power stations and fail to curb multinational coal exports to China and India etc, in order to perpetuate the impression that SA lacked energy and to convince us that newer more radical vectors of energy, such as nuclear and biofuels were required?
The perils of the 'Great Game'
The 'Great Game' planned towards the end of nineteenth century was aimed at challenging the nineteenth century belief that 'European Civilization had its beginning in Middle East' and to establish global supremacy of Europeans. “The European powers at that time believed that they could change the Muslim majority Asia in the very fundamentals of its political existence, and in their attempt to do so introduced an artificial state system into the Middle East that has made its way into a region of countries, many of which have not become nations by definition even today.”
Better mileage than a Prius? Not so fast
VW's new diesel-powered hybrid gets great mileage - better than Toyota's top-selling hybrid. Its price-tag is another story.
Some think going green means going lavish. Paquette says that’s not the case. A house built, by design, with state-of-the-art energy-saving features costs nominally more than one without such features. However, he says, reduced fuel use of 20 percent to 40 percent on the energy-efficient house quickly recoups its cost.“I think going green will become standard fare. I think people will turn their focus toward it and ask their builders to include these elements in the house they want to live in.”
Solar-power paint lets you generate as you decorate
A lick of solar-power paint could see the roofs and walls of warehouses and other buildings generate electricity from the sun, if research by UK researchers pays off. The scientists are developing a way to paint solar cells onto the steel sheets commonly used to clad large buildings.
Surprise Friday: Matthew Simmons (with video)
Following is a summary of the main points made by Simmons during his interview with the Fast Money traders.You’re predicting $378 a barrel!?
“We never understood the value of oil (domestically), replies Simmons. In England they’re paying the equivalent of $9 a gallon. That translates to $378 a barrel and it’s having no impact on England, right now. The cost of oil is going up, he adds, it’s getting scarcer." We’re not going to run out but we are peaking.”
Life after oil (review of World Made By Hand)
Oil has now climbed past $100 a barrel for the first time in US history. Some folks believe this is merely the result of market speculators driving up the price so that they can cash in on some serious profits. But for James Howard Kunstler, the astronomical prices are just one more sign that oil, the liquid foundation of techno-industrial civilization, is entering into a long state of emergency.
Daylight saving time uses more energy, not less
WASHINGTON — For Benjamin Franklin, daylight saving time was about saving candles and for modern lawmakers, it's about electricity — but a recent university study found it might actually cost more energy when the nation resets its clocks Sunday.
Venezuela's coal moves may cut exports - analysts
HOUSTON (Reuters) - Coal exports from Venezuela this year could fall because of government moves to take greater control of the industry, U.S. analysts and traders said Friday.The cut in Venezuela's premium grade coal exports would come as the world runs short of coal, prices skyrocket and buyers scramble for supply.
Iran gas: China waits as India wavers
NEW DELHI - China is emerging as a potential partner in the proposed multi-billion dollar, 2,700-kilometer gas pipeline originally intended to link Iran, Pakistan and India.
Iraq desires to improve co-op with Turkey in energy sector
ANKARA, March 8 (Xinhua) -- Visiting Iraqi Minister of Oil Husayn al-Shahristani said on Saturday that Iraq desired to improve its cooperation with Turkey in the energy sector....He said that Iraq wants to provide gas to Turkey and considers Turkey as a transit country as well.
Ukraine president again blasts PM on gas row
Ukrainian President Viktor Yushchenko issued a new denunciation of his prime minister on Friday over her stand on gas trade with Russia ahead of new talks to resolve long-running price and supply disputes.
Analysis: Uzbeks, S. Korea eye natural gas
While Russia's Gazprom dominates Central Asian natural gas exports through its pipeline monopoly, the leaders of the "stans" are unhappy about the arrangement, as Gazprom buys cheap and sells dear to European consumers. Seeking to break the deadlock, Uzbekistan has been investigating alternatives, and on Feb. 25 state-owned Uzbekneftegaz signed an agreement with a South Korean energy consortium led by state-run Korea Gas Corp. to develop a gas field in western Uzbekistan and construct a gas-chemical industrial complex.
Biodiesel producers could shutter without state subsidies
Pennsylvania biodiesel producers said without help from the state they could go belly-up by the end of this month.The companies are urging the Legislature to pass a bill to increase the amount of subsidies per biodiesel gallon produced. Without that boost, many of the state's producers could go out of business in less than 30 days, said Ben Wootton, president of Keystone Biofuels Inc. based in Silver Spring Township, Cumberland County.
"We've all been running on fumes and bank loans," he said.
US dumping of biofuels will ruin us, says UK firm
The US is flooding Europe with subsidised biofuels that threaten to destroy Europe's domestic refining market, the head of the biofuel company D1 Oils warned yesterday as its shares lost a third of their value.
David Keith and Thomas Homer-Dixon: A win-win-win solution
What should we do with the carbon we produce when we burn fossil fuels? Some experts say we should fight climate change by putting the carbon back underground, whence it came.
Oil rally may be economy's undoing
NEW YORK - Preoccupied the last few months with shrinking credit and a slumping economy, Wall Street has all but ignored the relentless rise in oil prices that has taken a barrel of crude to a once-unthinkable $106.But the market may not be able to look the other way much longer — especially when consumers, already hurting from the soaring cost of gasoline, find themselves paying even more to fill their tanks come spring.
Peak Oil Passnotes: Knock-Through
We have long talked about the various impacts of higher oil and energy costs. The way that inflated energy prices knock-through into other commodities, for example by hiking transportation and extraction costs, is one of them. From commodities they then knock through into your pocket, maybe making you feel poorer, or if you bet on their rise, possibly richer.Other impacts aside from your personal well-being or otherwise have included the run-up in food prices, also linked to transportation and manufacturing, but also to the way biofuels have been so badly mismanaged. All along we have pointed out that there is a correlation between general all round inflation due to rising energy costs, but with a significant time lag.
Whether world "peak oil" comes within a decade or several, traditional petroleum production will eventually not meet demand, especially with economies such as China and India in the early stages of an auto boom. It is becoming increasingly difficult and costly to retrieve marginal oil, and many deposits, such as the oil sands in Canada, pose formidable environmental challenges.
'When Will Peak Oil Strike' – The Renewable Energy Centre UK Comments on the Debate
Peak Oil has been the subject of debate for many years and has largely been ignored by industry optimists but has continually worried many industry experts.The big question has it seems, finally been answered with new projections placing the point of peak oil occurring within the next 10 years.
CT Lawmakers push for clean energy department
HARTFORD - A group of lawmakers, including state Rep. Terry Backer, D-Stratford, yesterday called for the creation of a new Department of Clean Energy to help the state reduce its dependence on oil."The days of plentiful, cheap oil are drawing to an end," Backer told reporters during an afternoon news conference. "It isn't a question of whether we will switch to a clean-energy economy, but when."
Norway's oil capital seeks new image for post-petroleum era
STAVANGER, Norway (AFP) — Long considered the oil capital of Norway, the small southwestern town of Stavanger has begun hunting for a new image that will keep the money flowing in even after the oil wells dry up."We really have to take advantage of the wealth we have in this town now to give us more legs to stand on going forward. We know the oil isn't going to last forever," said Helge Solum Larsen, the deputy head of the Stavanger council for city development.
Dependence on Russian gas worries some – but not all – European countries
Two years later, rumors of a common European energy policy are again circling Brussels. Russia rattled the European Union this week when it cut Ukrainian shipments by half, prompting Ukraine to threaten –briefly – to siphon Russian gas sent to Europe via Ukraine. Gazprom announced Wednesday that it was resuming full shipments.But individual nations continue to make deals that make them reliant on Russia for the long term. This tension between the recognized need for a common market and nations acting in their own long-term energy security interests is at the core of a growing European rift over how to deal with Russia.
Iran sees pre-election US bid to reduce oil price
TEHRAN (Reuters) - A senior Iranian oil official said on Saturday he expected the oil price to fall ahead of November's U.S. presidential election, suggesting Washington would seek to push it down for political reasons.Hojjatollah Ghanimifard told the Fars News Agency that "those in political power in the (United States) will try to (influence) the market through various factors to create interest in voters to elect individuals of their preference."
Iraq vows to block oil contracts signed by Kurds
ANKARA (AFP) - Baghdad will block any contracts signed by foreign oil companies with Iraqi Kurdish regional authorities, Iraq's Oil Minister Hussein Chahristani said on Saturday."All contracts will be handled by the central government," he told a joint press conference in Ankara with his Turkish counterpart Hilmi Guler.
"No contracts signed by any regions in Iraq will be recognised by the government of Iraq. Companies will not be allowed to work on Iraqi territory unless their contract is approved by the central government in Baghdad."
Iraq's parliament faces big challenges revisiting delayed laws, speaker says
BAGHDAD: Big challenges are ahead of Iraq's parliament when it resumes work March 18 and revisits controversial measures including an oil and gas law and a bill to set up provincial elections, Iraq's parliament speaker said Saturday.A measure aimed at regulating foreign investment in Iraq's underdeveloped oil sector, and distributing its revenues among the nation's Sunni and Shiite Arab communities and the large Kurdish minority, has been bogged down in parliament since February 2007.
Kuwait-China $5bn oil refinery stalled
TOKYO (KUNA): Pollution concerns in the Pearl River Delta region in southern China continue to stall the approval of an evaluation on a planned Sino-Kuwait $5-billion oil refinery and chemical plant, the state-run China Daily reported Friday.
Climate change a new factor in global tensions: EU
BRUSSELS (AFP) - The risks of climate change have turned from a threat to reality impacting the conflict in Darfur, migration from flood-prone Bangladesh and hopes for stability in the Middle East, according to a new EU report.From Africa to Asia, and from pole to pole, climate change has become "a threat multiplier which exacerbates existing trends, tensions and instability," warns the seven-page report on "Climate change and international security", to be presented to a European summit in Brussels on March 13-14.
Climate Watchers Place Own Big Bet On Alaska's Thaw
The Ice Classic has given them a rare, reliable climate history that has documented to the minute the onset of the annual thaw as it shifted across 91 years. By this measure, spring comes to central Alaska 10 days earlier than in 1960, said geophysicist Martin Jeffries at the University of Alaska, Fairbanks -- and that trend is accelerating. "The Nenana Ice Classic is a pretty good proxy for climate change in the 20th century," Dr. Jeffries said.
The EIA’s latest International Petroleum Monthly came out last evening. I think it came out well after hours so someone must have worked overtime to get it out.
May 05 is still the record but by only 96 kb/d. December 07 total C+C production rose 451,000 bp/d to 74,202,000 bp/d. OPEC production was up by 678,000 bp/d while Non-OPEC production was down 227,000 bp/d. OPEC production was driven by the UAE as they recovered from their maintenance program to be up 417,000 bp/d. Saudi Arabia was up 100,000 bp/d to 9.1 mb/d. Other OPEC producers showed lesser changes with Iraq up 50 and Angola up 46 kb/d. As far as yearly production goes, 2005 is still the high year by half a million barrels per day.
Of Non-OPEC nations Azerbaijan and China had the greatest losses, down 248,000 bp/d and 120,000 bp/d respectively. Canada was down 79,000 bp/d as the third biggest loser. Russia was down another 25,000 bp/d to 9,425,000 bp/d and down 95,000 bp/d since they peaked in October. Reports have them down another 100,000 barrels per day or so in January.
Non-OPEC big gainers were Brazil up 95 kb/d, US up 66 kb/d, Australia up 56 kb/d and Mexico up 53 kb/d. Norway was down a bit and the UK up but the North Sea as a whole was down 29 kb/d.
Looking to January and the rest of 2008, reports have OPEC showing little change in January but down in February. OPEC, in my opinion anyway, is pretty well maxed out. Among Non-OPEC nations the big gainers in the last two years were Russia and Azerbaijan were the big gainers with China not too far behind them. Russia and China seemed to have peaked and I am not sure what is going on with Azerbaijan. Brazil will continue to gain but not any more increases like this past month.
According to the EIA’s weekly reports, the US is down in production in January and February. Though Atlantis is now on line depletion in other areas are offsetting any gain there. It looks like the US will be stuck at around 5 million barrels per day until Thunder Horse comes on line late this year or early next year.
In conclusion I don’t see any huge gains in either OPEC or Non-OPEC in the near future. Non-OPEC production now stands at 800 kb/d below its peak last February. And with the previous big gainers now in decline, we appear to be very near the high water mark. We are still on the plateau but it looks like we may be walking off it soon. I also believe this is reflected in the current price of crude.
Ron Patterson
May 05 is still the record but by only 96 kb/d. December 07 total C+C production rose 451,000 bp/d to 74,202,000 bp/d.
I told you it would be close. They could always revise downward, but it looked to me like May 2005 C+C was in some danger of being broken in December.
In conclusion I don’t see any huge gains in either OPEC or Non-OPEC in the near future.
I agree with that, although Khursaniyah will add a little to Saudi's capacity. I don't see them boosting production when it comes online though.
Other than OPEC, I think most everyone is pumping all out at these prices.
They waited pretty late in the day to release it. It is close.
Agreed. Crude is about at max. All liquids can only rise from other liquids. Peak crude has a good shot of standing as May 2005. Peak all liquids is either here or getting pretty close depending how biofuels plays out.
May 2005 is still not safe but it's very clear now that crude is going to have a rough time breaking that number and even if it does, it won't last. Everyone is maxed out in the petroleum business.
Peak all liquids in 2009, Robert? Or later? What's your gut feel (and NOT a prediction)?
Last check, Ace was predicting Peak All Liquids somewhere around 2009...I think May by his last graph.
2009 - 2010...and All liquids, it's sadly amusing to see how we watch these numbers (me too) all the while, the mess is already unfolding.
I wonder if anyone in the future will care what the final numbers were?
Peak all liquids in 2009, Robert? Or later? What's your gut feel (and NOT a prediction)?
Gut feel? 2009/2010. But we have been solidly in the Peak Lite era since 2005/2006, and for all practical purposes you are seeing what true peak is going to look like. My own belief is that these high prices are a blessing, because they will force us to start changing behaviors pretty quickly. Soon enough? No. But any preparation is better than none at all.
I don't agree with Matt Simmons on his comparison between high gas prices in the UK and the US. Their per capita oil usage is half of ourse. High prices won't impact them as much. We are seeing impacts now, and I believe would see even more significant impacts if people understood that these higher prices are here to stay.
Could we possibly see another peak when KSA brings Manifa online? I haven't followed that closely, I just recall articles about a new refinery due to a seriously sour crude supply (vanadium?) Or will they manage expectations by bringing it online and giving Ghawar a break?
This close, we could see a new peak for any of several reasons. But we are extremely unlikely to come off the present plateau on the upside.
Saudi is fighting depletion from her giant fields while trying to offset that decline with new projects. We may see a bump in Saudi production but the general trend will continue downward. Remember Saudi is still half a million barrels per day below her peak in the summer of 2005.
But with OPEC pumping everything it can possibly pump and non-OPEC clearly post peak, (in my opinion anyway), the best we can hope for is to keep the plateau going for another year or so. We have been on this plateau for almost three years and the non-OPEC plateau has lasted for almost four and one half years. Non-OPEC peaked in February 2007 and we are now 800,000 barrels per day below that peak.
Ron Patterson
But with OPEC pumping everything it can possibly pump...
But of course we now know for certain that this has not been the case. If it was, Saudi production should be falling month after month as fields deplete. The fact that it isn't proves that they have reserve capacity. The only unanswered question is "How much?"
I would alter your last question to "How much of their spare capacity can be processed?" (At a decent rate / EROEI etc..)
Marco.
Think about your question. Each month, fields are obviously depleting. Each month, they are obviously able to replace that depletion. So all of the spare capacity they have been bringing online can be processed, since their capacity has been steady (after recently increasing) and it is being sold to their customers. If it couldn't be processed, they couldn't sell it.
But "Spare capacity" is the oil they are NOT bringing to market. Spare capacity is what they are claiming they have 2+ mbd of. If it was "spare" then sure as hell the world needs it now at $106 a barrell and sure as hell we have not got the refinery capacity to process this sour heavy stuff they claim as spare.
Marco.
But "Spare capacity" is the oil they are NOT bringing to market.
They have to bring some of that spare capacity online each month - as fields are depleting - if they are maintaining their production at a steady level. Between February and October of last year, when production was steady over the entire time, they had to bring on enough spare capacity to cover for the fields that depleted over that time period.
But my argument is that there is only so much of that spare capacity that the world can accept due to processing problems so really they are supply constrained which effectively is the same thing as demand constrained, which ever way you look at it. If it was more light sweet they could bring into play oil would not now be at $106 a barrel and Saudis would be pumping more as this is above even their 'desired' price.
If you think about it. If heavy sour is indeed all they can bring into play and the world currently cannot process any more of this stuff then the statement from the Sauids "pumping more would not bring the price down" is in a round about sort of way a true statement. pumping more of what they are offering would help diddly squat.
The only thing I am trying to puzzle out is why so many plans for heavy / sour processing seem to be getting delayed or cancelled.
Marco.
If you think about it. If heavy sour is indeed all they can bring into play...
I understand that this is your argument, but it isn't accurate. Let's think about what would have happened last year if Saudi had no spare capacity. Saudi production - 8.6 million bpd in February 2007 - would have fallen to maybe 7.9 million bpd by year end (and this was predicted by some here). Instead, production at year end was 9.1 million bpd:
http://www.eia.doe.gov/emeu/ipsr/t11c.xls
What does this mean? That in February of 2007 they were setting on at least 1.2 million bpd of spare capacity (which if you recall was the argument I was making at that time); capacity they brought on line during the year. What was the quality? Quality that their customers could process, obviously, as they bought it.
And if you look at the quality of crude inputs to U.S. refineries, you see that at least in that case the gravity change over the past 12 months is very small:
http://tonto.eia.doe.gov/dnav/pet/hist/mcrapus2m.htm
In fact, crude in 2007 was lighter than it was 2 or 3 years earlier. So I don't see any evidence of the argument that they only have spare capacity that is heavy and sour. Some of their spare capacity is certainly in that category. But clearly they have been setting on spare capacity that is light and sweet.
Well Robert, at the risk of you crying Troll once again, I would point out that you again are making an argument that is not sustainable by any information that I can locate and certainly not by the data to which you link.
KSA provides about 15% of US imported crude imports and an even lower percentage of the oil inputted to US refineries, given domestic production. Where is there any information on the quality of the KSA oil imported? Where is there data on the quality of the crude supplied by those accounting for 85% of US imports?
If there was a change in the quality of Saudi exports to the US, it could be easily hidden by a compensating change in the quality of the other imported crude (85%) or of domestically produced oil. Even if Saudi exports to the US have not changed in quality, the quality of the rest of their oil production (~80% of total) could have changed. Do you have data that precludes this possibility?
You simply can't conclude, as you do, that "clearly they have been setting on spare capacity that is light and sweet."
As for our previous disagreement regarding the validity of inventory data as a useful indicator, I note with interest that the non-OECD countries are since 2004 accounting for all the increased consumption of oil (complete data only available through 2006, though OECD consumption through to November 2007 is available and it indicates flat to declining consumption). There are some bumps and shifts within the OECD during this period, but nothing that supports the use of inventory data to explain Saudi behaviour, which as I recall is what you try to do from time to time.
There is no inventory data for the non-OECD countries that I've ever been able to locate.
Otherwise, I greatly appreciate most of your posts, especially your ongoing contribution to the ethanol debate.
In support of Roberts I'd say what I call the micro data which is incomplete information is still open to interpretation. If it was clear cut then Saudi Arabia would be under a lot more pressure than they are now.
If we had real inventory problems and say oil was 200 dollars a barrel then KSA claim that the world was well supplied would be met with serious resistance.
Looking outside the monthly data we are clearly in far worse shape now than we where in 2005.
And KSA has not really responded.
Well Robert, at the risk of you crying Troll once again...
If you recall, you were called Troll when you opened up with a gratuitous insult. Challenging my arguments is not what I consider trolling - except when you toss in insults.
KSA provides about 15% of US imported crude imports and an even lower percentage of the oil inputted to US refineries, given domestic production. Where is there any information on the quality of the KSA oil imported? Where is there data on the quality of the crude supplied by those accounting for 85% of US imports?
I almost put this caveat in there. The point is, there is no evidence to support Marco's argument. It is conjecture. Furthermore, 1). We know they brought spare capacity online - spare capacity that I argued at the time (an unpopular argument) that they had; 2). It was obviously good enough for their customers to process, as they bought it. If you can't process it (Marco's question "How much of their spare capacity can be processed?") then you don't buy it.
So my argument is simply that their spare capacity - whether it was of a slightly different quality or not - could all be processed.
There are some bumps and shifts within the OECD during this period, but nothing that supports the use of inventory data to explain Saudi behaviour, which as I recall is what you try to do from time to time.
No you are presuming not only that the hidden inventory information supports you, but that Saudi sells to these customers. As always, the transparent data has favored my argument. Yours relies on the data we can't see. You know which one I think is a stronger argument (and once again, I point out that my predictions on their behavior were in fact correct - which I presume you must think was a lucky guess).
"No you are presuming not only that the hidden inventory information supports you, but that Saudi sells to these customers. As always, the transparent data has favored my argument. Yours relies on the data we can't see. You know which one I think is a stronger argument (and once again, I point out that my predictions on their behavior were in fact correct - which I presume you must think was a lucky guess)."
First of all, Robert, please point to the gratuitous insult you are attributing to me. It isn't my normal practice to give anything away freely, even insults. My memory tells me that I interjected that you were again presuming to use inventory data where it was not warranted.
My argument is not about Saudi behaviour, but about YOUR claim that the data to which you pointed supported YOUR contention regarding KSA behaviour.
Your statement that the transparent [inventory] data has favoured your argument is patently ridiculous in the face of the quality of evidence you have marshalled --vague references to anecdotes regarding non-OECD stocks-- and the quality of your logic, in which you claim that US and OECD inventory levels (as I recall you began with only US data) can explain supplier behaviour in a market in which massive new demand and virtually all new demand is coming from elsewhere.
The problem with your use of limited quality of oil data and limited inventory data in YOUR argument regarding Saudi production history is the potential effect it has on your more reasoned and well-supported arguments, such as on the ethanol matter. It reflects very poorly on you that you make this quality of argument in what seems to be a juvenile pissing contest to establish who is the most accurate prognosticator on TOD. Are readers going to be forced to verify every reference you make, because they have detected elsewhere in your writing a habit of using poor and/or irrelevant data and making spurious arguments with it for seemingly egotistical reasons.
My view on Saudi Arabia is that the regime has every political and financial incentive to mislead the world with respect to their petroleum production capacity, including their domestic population. That doesn't make it so, only likely. Also based on what I read on TOD from people who know a great deal more than myself about oil production, including yourself, I doubt that they will ever be able to arrest the historical transformation situated at the end of the 2 millenium of the common era and rooted in the 'end' of the fossil fuel era. I have concluded that even their capacity to increase their own crude oil production to 2005 levels is very doubtful.
If I was part of Saudi Arabia's inner circle, I would argue that in any case it doesn't matter whether the Kingdom raises production, the tide is not for the turning; the Kingdom should look after the Kingdom's long-term interests. Hoard as much as is sustainable politically and economically: a value that is being actively tested almost daily.
Such behaviour, is in my view, another one many characteristics of the peak oil period, and like the others ultimately attributable to knowledge of physical factors, such as declining resource quality, declining reservoir pressure, etc..
It isn't my normal practice to give anything away freely, even insults.
I am not going to spend time going back and pulling that up. You know there was an insult. Whether you think it was warranted is beside the point. If you open with an insult, I consider that trolling. It isn't necessary, and adds nothing.
My argument is not about Saudi behaviour, but about YOUR claim that the data to which you pointed supported YOUR contention regarding KSA behaviour.
This argument has gotten beyond silly. Of course the data supported me. I showed the OECD graphs. The inventories were at record highs and rising. The OECD makes up most of the oil consumption in the world. The Saudis sell a lot of oil to the OECD. Those facts are indisputable. It makes sense that high and rising OECD inventories mean that their purchases are going to have to slow down (or their sales increase). All you are doing is saying that maybe elsewhere, someone, who may or may not be a Saudi customer - may have had falling inventories to offset the OECDs increasing inventories – and therefore Saudi could have sold to them. That's what I consider a very weak argument. (The anecdotes on non-OECD stocks were not vague, but that's beside the point.) Furthermore, the Saudis certainly benefited greatly from making these moves.
And I note that you can't help yourself, and go right back into the insults:
"juvenile pissing contest" "using poor and/or irrelevant data" "making spurious arguments"
This wastes my time. When you accuse me of making poor arguments, it isn't a pissing contest to point out that 1). I made predictions based on those arguments; 2). Those predictions came true; 3). Those who made arguments such as yourself - pointing out that I was using a partial data set - turned out to be wrong in that Saudi production didn’t continue to fall. Perhaps it is time for YOU to step back and say "Maybe there was more to that than I really understood. Maybe you can gain a lot of information from looking at OECD inventories. Or maybe I am the one who was using a half-baked logic, and I should re-examine where my own argument may have fallen short." Or are you one of those who thinks it is only significant when OECD inventories are falling?
The irony is that you fail to realize that it is you who is engaged in a pissing contest - one in which you have already lost.
You never demonstrated a statistical relationship between OECD inventories and Saudi production. When you provide data which accounts for time lags in information availability, I will believe that you are least trying to do so.
If, a statistical relationship can be established, you have to demonstrate that it is not accidental. You have not done so. Among other things, you have to provide some evidence that any growth in OECD inventory is not a result of a new attitude towards reliability of supply (cost of supply disruptions, etc) and that the Saudis were unaware of this shift in attitude, if it indeed occurred. I recall referencing at least one industry analyst who claimed that such a shift in attitude was the case.
You have to demonstrate, that the Saudis considered growth in demand from the non-OECD countries (1 million b/d in 2005 over 2004, 1.3 mbpd the following year) to be temporary or irrelevant, or at least try to explain why their production behaviour appears to be completely disconnected from the reality that demand growth in world markets is overwhelmingly accounted for by non-OECD countries.
And I could go on.
You appear to believe that to challenge the validity of your assertions, amounts to an insult. You might want to think about that.
You also appear to deny a personal predilection for pissing contests, and then go on to declare victory.
You never demonstrated a statistical relationship between OECD inventories and Saudi production.
You really crack me up. Sit in the popcorn stands, never show even a tiny sliver of data yourself, and heckle me when I showed 1). A graph of OECD inventories that supported Saudi's claims; and 2). I accurately predicted Saudi's moves on the basis of those trends. What was your prediction? Oh, I am sure you were one of the masses who expected Saudi production to fall all year. Right?
Tell you what, Champ. You win. You know all about inventories. You are the best at interpreting invisible evidence.
Here are two 25 minute interviews with Matt Simmons. They are about 6 MB each.
http://www.evworld.com/evworld_audio/mSimmons1_feb08.mp3
http://www.evworld.com/evworld_audio/mSimmons2_feb08.mp3
They shocked the hell out of me. It is startling to come to find what many of us have been expecting is indeed here, now... and the really scary thing is the "new and improved" oil well extraction methods he speaks about, prolong the output volume but at the cost of severe depletion rates once the end nears. So, this means we will go along business as usual and all of a sudden, depletion hits hard and fast... add to that our nation's essential bankrupt financial status and climate destabilization and... even after being at this place for 14 years now and all that I have done (solar PV, solar hot water, super insulating the now zero energy house, heat pump, greenhouse, large garden, increasingly larger orchard, 50 MPG Prius) I still feel very uneasy about what is coming.
Todd
Damned ! Twilight in the desert part 2: Nightfall....
Meanwhile, the ELM marches on.
Saudi net exports fell at about -5%/year in 2006, with the 2007 net export decline rate probably doubling to about -10%/year.
The Saudis produced 11.1 mbpd total liquids in 2005. I estimate that if they wanted--and were able--to match their 2005 net export level, they would have to boost 2008 production to about 11.7 mbpd.
In any case, the key question regarding the apparent 2005 Saudi crude peak is whether they will ever again match or exceed 9.6 mbpd (C+C) on an annual basis.
Just ran some Top Five Net Exporter numbers. Assuming that total liquids looks like C+C, and assuming a +5%/year rate of increase in consumption, the top five net export numbers would look like this (EIA, Total Liquids, estimated for 2007):
2005: 23.5 mbpd
2006: 22.7 mbpd (-3.5%/year)
2007: 21.7 mbpd (-4.5%/year)
One of the oddities of Net Export Math is that the net export declines tend to approximate a linear decline, i.e., an approximately fixed volume per year (which is an accelerating decline rate). If we average the 2006 and estimated 2007 declines, we get -0.9 mbpd. If we divide the 2005 peak by 0.9 mbpd, we get 26 years of remaining net exports by the top five. 2005 + 26 = 2031.
Our middle case projection for the top five collectively approaching zero net exports is 2031:
http://graphoilogy.blogspot.com/2008/01/quantitative-assessment-of-futur...
Am I correct in describing ELM as 1.) declining stock leading to 2.) swiftly rising prices causing 3.) more domestic use because they have need for it and means due to rising prices?
I need to do an ELM page for our FAQ ... http://strandedwind.org/FAQ
The ELM is a simple mathematical model with the following conditions at peak production:
Production = 2 mbpd
Consumption = 1 mbpd
Net Exports = 1 mbpd
Production declines at -5%/year, and consumption increases at +2.5%/year. This sounds relatively benign, but it results in a vicious--and accelerating--net export decline rate, with net exports hitting zero in 9 years, and with only about 10% of post-peak production being exported.
The three key factors are: Consumption as a percentage of production at peak; the rate of change in production and the rate of change in consumption.
I have suggested Phase One and Phase Two net export declines.
Phase One: The cash flow from export sales increases, even as export volumes go down, because of rising oil prices.
Phase Two: The cash flow from export sales goes down, because rising oil prices can't offset the decline in production.
We would expect to see a positive feedback loop in Phase One declines in exporting countries, which would cause the rate of increase in domestic consumption to accelerate.
I hope I'm not lying too much here ... feel free to correct me:
http://strandedwind.org/node/112
I have reworked it as follows:
We have seen discrete regions, such as the US Lower 48, peak and then show a gradual decline in production. However, once oil exporting regions peak and decline, the resulting net export declines have tended to be very sharp.
The Export Land Model (or ELM) is a simple mathematical model, proposed by petroleum geologist Jeffrey J. Brown, which assumes that a region--producing two million barrels per day (mbpd), consuming one mbpd and exporting one mbpd--peaks and then shows a -5%/year production decline rate, with a +2.5%/year rate of increase in consumption. This results in an overall net export decline of close to -30%/year, hitting zero net exports in nine years. The UK and Indonesia showed similar declines, hitting zero net exports in seven years and eight years respectively.
Current data suggest that world crude oil production may have peaked in 2005, and we have seen two years of slow declines in crude production, based on EIA data. However, the available data indicate that the top five net oil exporters--Saudi Arabia, Russia, Norway, Iran and the UAE, accounting for about half of current world net oil exports--are on track to approach zero net oil exports around 2031.
The expectation of a bidding war between importing countries for rapidly declining net oil exports is why we must build wind driven ammonia for fertilizer and fuel as soon as possible; we're energy hogs and we're going to be priced out of that market.
The full details of the Export Land Model were first aired on The Oil Drum in this post by Brown himself.
An Introduction to the Export Land Model
Does this meet with your approval?
http://strandedwind.org/node/112