 | The Bullroarer - Monday 14 April 2008 | TOD: Australia/New Zealand | The Bullroarer - Tuesday 15th April 2008 |  |
User login
Contact
- anz at theoildrum dot com
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
Archives
GAIA Host Collective
RalphW:
A lot of the decline in production for Saudi Arabia had to do with with OPEC cutting quotas something like 2 MBPD since early 2007, when crude dropped below $60 per barrel and looked like it was going into the $40 range.
Also, a lot of countries have declined has been because of politics, not economics. While some people say this is an excuse for actual depletion rates, that's just not the case. Regardless, the result is the same. Violence and crippiling corruption has kept Iraq production below a potential of probably around 6 MBPD of production easy, same situation in Angola and Nigeria. Iranian and Venesualan production has if anything declined because a lack of investment, besides the fact that Hugo Chaves turned PDVSA from one of the best run oil companies in the world to a POS company that he packs full of cronies who couldn't care less about production levels. Mexico has also suffered from a lack of investment, although that is addressed to some extent.
The other huge problem around the world is rising demand due to fuel subsidies. In Iran, Venesuala, China, etc, gasoline is subsidized to the point where it's pennies per gallon. While people here scream from the tops of mountains how we subsidize oil, in reality, the government here makes more money off of oil than the oil companies (Exxon has 10% profit margins--the highest in the industry--while in places like california, taxes are $.60 per gallon). Because of that, you have for example Venesualens who almost all have gasoline generators for electricity because many don't have access to the grid and gasoline is $.12 per gallon. China has a similar problem when it comes to cars.
You give a very simplistic view a widely complex array of production problems.
First off, even without the violence in Iraq the oil may flow at rates up to 6 mbpd, but that would assume that major oil companies could work easily with the Iraq government to get a fair share of the profits. Even under best circumstances this level of 6 mbpd would not be reached for six to ten years. Don't count on anything good happening to the Iraq political situation for many years, especially when a melt down of the US economy forces the US to leave prematurely.
As far as Iran goes, they could produce more, but why should they? The investment in nuclear power is to provide electricity from a source other than oil, which they know to be their sole livelyhood. So they will continue to produce at slow rates. They are also increasing the price of gasoline, which by the way is not subsidized, but sold at a much smaller profit margin since their oil production costs are more like $8 per barrel versus NYMEX price of $110 per barrel. And for China, they too are bringing the price of gas and diesel closer to world market price.
Your comment about gas being taxed at $0.60 per gallon in California has nothing to do with production, as the oil companies make a profit from oil sold at NYMEX price, not gas station refined product price. Even if gas were taxed at $0 (which would provide no money for roads which create the demand for gas) The oil companies would not be inclined to produce any more.
Bottom line is if you want more production of oil it will cost a lot in E & P costs and take many years. I suggest you look at the work going on in the Bakken formation of the north central US, typical of many of the world's new oil production areas. Same could be said of Orinoco basin in Venezuela. The easy oil is largely gone!