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DrumBeat: May 23, 2008
Posted by Gail the Actuary on May 23, 2008 - 9:17am
Topic: Miscellaneous
Wall Street Journal: If $4 Gas Is Bad, Just Wait
Judging from the futures markets, shock at the gas pump is bound to get worse. Maybe much worse. [...]
If oil hits $200 a barrel, which is the upper end of Goldman Sach's prediction for prices over the next six months to two years, the gasoline picture changes quite dramatically. At $200 a barrel, crude alone would cost $4.76 a gallon. Add on the costs of refining and distributing as well as taxes, and pump prices could rise to a range of $6 to $7 a gallon.
Oil Industry, Lawmakers Aim To Lift Bans on Drilling
Mounting concerns about global energy supply are fueling a drive by the oil industry and some U.S. lawmakers to end longstanding bans on domestic drilling put in place to protect environmentally sensitive areas.
Colorado water law could prove too tough for in-situ uranium mining
The Colorado Uranium Mining & Water Protection Act may have serious implications for future Colorado in-situ leach uranium projects, as it implements what may be the toughest U.S. water quality regulatory regime for uranium mining.
A newly signed uranium water monitoring law may ultimately prove too punitive for Colorado uranium in-situ leach miners, depending on the subsequent state regulations used to implement the law.
Stuart Sanderson, Colorado Mining Association President, said, "If we place unrealistic requirements on the uranium industry that is re-emerging in Colorado and the United States, we will find ourselves as dangerously reliant on foreign sources of uranium as we are dependent on foreign oil."
US renewable energy consumption slips on lower hydro output: EIA
US consumption of renewable energy fell 1% in 2007 to 6,830 trillion Btu from 2006, largely because of a sharp drop in hydro-electric generation last year, the US Energy Information Administration said.
In releasing preliminary numbers on Wednesday, the agency said the decline in renewable consumption came as both total and non-renewable energy consumption increased by 2%.
Jet fuel costs rise faster than crude
Jet fuel prices are rising much faster than crude oil prices, threatening the profitability of the airline industry, as demand for middle distillates, a category that includes jet fuel but also diesel and heating oil, surges, writes Javier Blas in London .
NGSA: No natural gas shortage in the US
Fordham said that while gas production from the Gulf of Mexico has been dropping in recent years, producers have met consumer demand by developing new gas finds in unconventional shale fields in Texas and in Marcellus shale field, which stretches from New York to West Virginia. NGSA also expects US LNG imports to strengthen in future years, although competition from world demand will continue to limit imports in the near term.
Chris Skrebowski on BBC News: 'We're in the foothills of peak oil' (audio)
The next peak will be when the producer countries' exports start falling. Because their growth rates are differentially much higher than those in the West.
So in effect they are pre-empting more and more of their own oil for their own use, so then we will get another upward kick to the price when that starts to come in.
Finally then we will get the peak oil where we simply cannot produce any more of any grade, any quality, anywhere. And that will give the final kick-up.
Producers say $200 oil is possible as prices hit record three days running
Libya's leading oil official, Shokri Ghanem, told Bloomberg TV: "It is out of our hands. $200 a barrel is not logical but even $135 is not logical, so yes oil could reach $200 a barrel. Why not?"
Oil supplies: Running on empty?
"The high-priced energy environment is being driven by the fact that demand has outstripped supply," President George Bush's Energy Secretary, Samuel Bodman, told the US Congress yesterday. "We have sopped up all the available spare oil production capacity in the system ... and there is no silver bullet that will immediately solve our energy challenges or drastically reduce costs at the gas pump."
High prices won't stop the world going on growing
So will the surge in the oil price have similar consequences this time? It is a tough judgement because we don't know how high oil will go, but it looks likely that this oil shock will have a less damaging impact than in the 1970s. However, since the price is unlikely to fall back as far, it will have a more lasting impact on our way of life.
Second horizontal development well commences in Khurbet East Field
Gulfsands Petroleum announced that the Company has commenced the drilling of the second horizontal development well within the Khurbet East Field ("KHE-6H"). The KHE-6H well will be completed and suspended as an oil producer for connection through the Early Production Facility ("EPF"), scheduled to commence operation by the fourth quarter of 2008.The KHE-6H well is designed to be drilled and completed as a horizontal producer within the Cretaceous Massive Reservoir ("Massive Reservoir") in the Khurbet East Field. The Company estimates that approximately 50 days are required for the drilling, evaluation and completion of the KHE-6H well.
US, Japan agree to joint methane hydrate study
Japan has decided to pursue joint research and development on methane hydrate with the US, aiming to commercialize it as an energy source by 2018.
By sharing their findings, Japan and the US aim to accelerate research and development efforts and establish a global standard for production technology. The two governments already have begun working-level talks, and are expected to reach a final agreement by this summer.
Timchenko Says Putin Link Hyped
The owner of Swiss-based oil trader Gunvor has denied that Prime Minister Vladimir Putin's help was key to turning his firm into a global player in an open letter called "Gunvor, Putin and me: the truth about a Russian oil trader."
BP faces cold war in Russian venture
Relations between BP and its billionaire partners in the Russian joint venture TNK-BP appear to be worsening, amid a warning from the operation's chief executive Robert Dudley that recent legal action will be damaging to all shareholders.It emerged yesterday that an obscure Moscow-based investment firm, whose legal action in a Siberian court is preventing 147 senior BP staff from working for the venture, is demanding about $400m (£200m) from BP.
Maersk drills longest well at Al Shaheen
DOHA: Maersk Oil has finished drilling the longest hole in the world with a length of 40,320 feet (12.3km) at Al Shaheen Field, offshore Qatar, beating the 20-year old record of the Russian Kola Peninsula exploratory well.
With a horizontal section of 35,770ft (10.9km) Maersk Oil’s BD-04A well also extended the company’s previously held world record for the longest horizontal well by 9,000ft (3km). The entire horizontal reservoir section was placed within a reservoir target which is only 20ft thick.
Govt in a bind over oil prices
With crude oil spiking to $135/barrel on Thursday, and showing no sign of cooling anytime soon, indications are that the government is considering the hard option of raising the petrol price by up to Rs 2 a litre but leaveing diesel unchanged. This, along with a reduction in excise and customs levies, form the key elements of a rescue package being worked out for the state-run oil marketing firms.
Power generation to rise by 2,200MW in one year
LAHORE: In order to bridge the gap between electricity generation and consumption, the federal government has approved several power projects to be executed on fast track basis while additional 2,200 megawatts will be added to the national grid within one year. . . . . . WAPDA General Manager (Technical Services) Dr Izhar-ul-Haq briefed the delegation about the hydropower and water sectors, saying Pakistan had the potential to generate more than 54,000MW low-cost hydropower.The delegation was told that per capita water availability in the country dropped to an alarming level of 1,070 cubic metres in 2007. It was further told that the country had already lost storage capacity equivalent to 5.13 million acre feet due to silting in the reservoirs of Tarbela, Mangla and Chashma.
Decision on Asia Energy's offer after coal policy finalisation
Dhaka: The UK-based Asia Energy had made an investment offer of $2 billion to develop open-cast coal mine and set up a power plant at Phulbari coal field. The country has a known reserve of 2.7 billion metric tons of coal.
Washington - The hardy sweet sorghum plant could be the miracle crop that provides cheap animal feed and fuel without straining the world's food supply or harming the environment, said scientists working on a pilot farming project in India.
Johannesburg - Chairman of Eskom Valli Moosa has strongly denied the suggestion that Eskom management has been pre-occupied with the profitability of the utility at the expense of providing adequate supply of electricity to the country. . . . . Moosa also said Eskom's board disagrees with the Nersa's conclusion that "there appears to be a conflict between Eskom's business objectives and its reason for existence: to supply electricity"
NOAA's Climate Center Predicts This Season's Hurricane Activity
The National Oceanic and Atmospheric Administration's Climate Prediction Center announced that projected climate conditions point to a near normal or above normal hurricane season in the Atlantic Basin this year. The prediction was issued at a news conference called to urge residents in vulnerable areas to be fully prepared for the onset of hurricane season, which begins June 1, 2008.
Palin, lawmakers to revisit energy relief
Gov. Sarah Palin will call the Legislature into a special session this summer meant to provide Alaskans some relief from the soaring cost of energy.
Palin backs TransCanada pipeline plan
Gov. Sarah Palin is calling for TransCanada to get the state license and $500 million subsidy to pursue building a natural gas pipeline from the North Slope. . . . . TransCanada is proposing to build a line from the North Slope to Alberta, where it would connect to the North American pipeline network.
Russia's monthly oil output shrinks
Russia's oil and gas condensate production inched down 0.7 percent to 39.7m tonnes in April 2008 compared to the same month a year earlier, the Federal State Statistics Service (Rosstat) reported today. Oil output shrank 3.6 percent in April compared to March.
From my oil trader friend:
I posted a note previously about the "Two Year Rule," i.e., the Lower 48 decline was quite low for the first two years, primarily because of the final Texas peak. Texas itself showed a similar pattern. If we round off to the nearest 0.1 mbpd, Texas peaked at 3.5 mbpd, followed by two years at 3.4 mbpd, versus a long term decline of about -4%/year.
In any case, 2008 could be to the world, and to world net oil exports, as 1973 was to the Lower 48 and as 1975 was to Texas, i.e., the onset of the sharper decline period.
Rembrandt showed the start of a renewed downward slope in total net oil exports. With the recent news from Russia, Mexico, etc., it's plausible that the net export decline is continuing, and our model and recent case histories show that the net export decline rate should accelerate with time.
Russian production is down. OPEC shipments are down. But the only reason oil prices are going up is speculation. Yeah, right.
And the drop in the dollar. And because we are not drilling everywhere, and because the Petrosarus' are not doing their jobs.
2 arguments against the speculation position I heard on CNBC: the fact that trading volume is high and the fact that we're in a contango situation.
Can anyone please explain how high trading volume and contango both undermine the speculation argument?
WT,
I found one of the articles and something else too about increasing OPEC production but together it is interesting enough.
http://www.guardian.co.uk/business/feedarticle/7530772
http://www.bloomberg.com/apps/news?pid=20601072&sid=a8Ly_081LZpQ&refer=e...
That makes 1.24 million less barrels exported in April over March. It seems that they pumped in 4 weeks of April 31.7 million and exported 23.786 million barrels so they used themselves 7.914 million barrels. In May they will have pumped probably 700,000 barrels more but exports not mentioned for May in first article.
April opec
Production 31.7
Export 23.786
Internal use 7.914
May opec
Production 32.4
Export ???
Internal use ???
So what do other countries get from these 700,000 barrels? Why were exports so down in April? Will they keep the 700,000 barrels for themselves? It seems a bit of a yoyo in production. Priduction up and down but nobody really tracks the long term over last year or the import/export side consistently in the press. This is like reading house prices up 5% this month over last month but down 30% yoy but the press doesn't mention it.
Saudi Arabia's total liquids production in 2005 was 11.1 mbpd (EIA). I estimate that if we they wanted--and more importantly, were able--in 2008 to match their 2005 net export level, they would have to produce an average of about 11.7 mbpd in 2008.
Or, you can put it this way. If they maintained about 11 mbpd forever, with no decline, and if they maintained their 2006 rate of increase in consumption, they would cease exporting oil around 2036.
Because of a rapid increase in consumption, the US hit zero net oil exports more than 20 years before our production peaked.
the US hit zero net oil exports more than 20 years before our production peaked
See Interstate Highways, the creation of modern Suburbia, the universal destruction of our downtowns and inner cities, etc.
Best Hopes for A Reversal,
Alan
By the way, while russian output felt 0.7 percent, the inner consumption grew 5.7 per sent, following strong economy growth and car''s increase. It means that export felt at least 6.4 persent.
No it doesn't.
The 0.7% is a percent of a different quantity than the 5.7%.
You can't just add 'em up.
If we say the US imports 13 million barrels/day at $130/barrel then there is roughly $1.7 billion leaving the country every day or 12 billion/week going to the oil exporters from the US alone or maybe twice that worldwide. It seems clear they do not want to recycle all this into bonds and looking at the huge amounts of building works going on in the ME energy use there will only continue to increase so reducing exports so increasing prices...
Mexico Pemex Jan-Apr Crude Output 2.88M B/D, Down 9% On Year (probably paywalled)
April Pemex production release is here (PDF)
Mexico production and export numbers.
C+C production down 80,000 barrels per day, March to April.
All Liquids down 78,000 barrels per day, March to April.
Exports down 189,000 barrels per day, March to April.
Exports down 240,000 barrels per day, April 2007 verses April 2008.
Ron Patterson
More from Dow Jones Newswires (may be paywalled)
Analysis of Mexico's Battle Over Oil
Mexico's Joe Sixpacks and their wives are preparing to fight to retain their resources from looting by neoliberal interests led by the US Empire.
Even if there isn't a neocon conspiracy against Mexico and its oil, the people of Mexico should act as though there is one based on their past history with the US and the current disaster perpetrated by the US on Iraq. The burden of proof is on us to show that we have something to offer most Mexicans besides sweatshops.
Yet nowhere in any major American media is there any discussion of the idea that the United States must justify its demands to the rest of the world based on rational self-interest. There are occasional reports of the negative effects of the World Bank/IMF cabal on various countries (the list is endless), and less often reports on the negative effects of NAFTA on Mexico. What we are not allowed to do is put these stories together the way that people overseas increasingly do:
What's good for America is bad for everyone else.
What's good for everyone else is bad for America.
These ideas are so alien to our eyes that we make no demand to our leaders that they articulate an alternative. Even the most liberal Presidential candidate who is electable must phrase the problem in terms of misunderstanding on the part of the foreigners.
The most absurd and dangerous form this has taken is when democratic governments like Turkey have given into the popular will and refused to aid the US invasion of Iraq, while other democratic governments like Denmark defied the popular will by joining Bush's crusade. Bush's propaganda ministry (state & corporate wings) invariably talked of the defiant actions as coming from the "government", while the compliant actions were by the "nation" or "people". In other words, only evil big government says no to America. The people everywhere are always on our side, only muzzled by socialist tyranny. We've been living under this formula for generations, and we've used it to ruin Vietnam and Iraq to the tune of millions dead.
So now if Mexicans line up against US oil companies, will we pretend again that the majority are just brainless (and thus cartoon-killable) clones of renascent Communism, and the corrupt business minority are somehow "the people of Mexico"? Because we are known to go war to save the people from Communism.
Even if there isn't a neocon conspiracy against Mexico and its oil, the people of Mexico should act as though there is one based on their past history with the US and the current disaster perpetrated by the US on Iraq.
If the 'mexicans suk - stop 'em from coming in' crowd is right, there is evidence that citizens are being told exactly that by some elements.
To the article on Pemex should be added the discussion of Bush's plans for Iraq's oil as shown by Schwartz, which displays a continuum in the Empire's overall strategy.
What an incredibly biased article by the author Laura Carlsen. As far as PO though, she doesn't seem to appreciate the need to lessen the slope on the downside of oil production.
Like the ELM, the UK and Indonesia, Mexico was consuming about half of their production at peak, so they are in the "red zone," unlikely to be a net exporter beyond 2014, and their year over year change in net oil exports should look something like the ELM, UK and Indonesia net export year over year changes:
As I have noted on the other threads, it appears that all three of our closest sources of exported oil--Canada (slight decline), Venezuela and Mexico--showed net export declines in 2007.
Hey WT, oil is fungible, right? Proximity doesn't matter, right? I am joking of course. I do not see oil as fungible, especially when national protection of natural resources kicks into high gear in the not too distant future.
Once the sides are drawn up over the last of the Petro Battles, proximity to the resource will be key to survival.
Exactly. That's why I moved to Calgary.
Actually, lack of proximity to the resource is key to survival when it comes to a shootout at the Last Gas Pump. I certainly would prefer to be somewhere else, living a low profile life without much need for the resource in question, when they start applying violence to the problem of who gets the last drop.
Good point--real damn difficult to determine that geo-located 'sweetspot' where you can still get access to vital resources by foot, riding animal, or bicycle, but still far enough away where you hope your Eco-Tech Bunkers isn't decimated.
*clap* *clap*
Add to that the ability to 'reach out' and 'touch someone' from a long way away via deer hunting rifles/.50 cal FMJ - kinda hard for the isolated to make it if things get shooting bad.
Hi early,
I agree, probly best to "make other arangements" as JHK says. Get used to doing without ff, or very little. New ways of living are on the horizon, hell, they're just around the corner. Got to get it out of our brains, this "life via oil". It's over. That doesn't mean life is over, just our modus operendi. Good call.
Jeff
Yes, don't wait until you absolutely HAVE to do without to start doing without. Get ahead of the curve and start learning how to do without now, so you have time to practice and make non-fatal, correctable mistakes.
When I said "proximity to the resource will be key to survival" I was referring to a particular country not an individual.
And the actual numbers for Cantarell in April are here:
http://www.bloomberg.com/apps/news?pid=20601086&sid=auA2G9v81BqM&refer=n...
Last month was 1.17 million, so this is the first month where it is below half the peak production rate. And it looks like it won't be long at all before the world loses one of its 1mbpd fields.
http://www.bloomberg.com/apps/news?pid=20601103&sid=a9btF8JdrlxI&refer=u...
I posted a note yesterday about my chat with a car buyer at Carmax. She was stunned at the rapid decline in sales prices at auctions for trucks and SUV's.
Not much of a surprise is it. I'm hoping the price of small 2nd hand compacts will increase later this year. I'll sell mine and hold out for an ev. I have a solar setup but need a battery bank.
In 3 years time, sky-high gas prices will have revoked the driving privileges of many millions of our fellow Americans. They will not be happy campers. To cruise past them in a shiny new EV would be like eating a bowl of ice cream in front of a group of semi-starving people.
Also, road work costs may rise exponentially due to skyrocketing oil and natural gas prices. Who is going to pay for the upkeep of our country's thousands of miles of roads? There's reason to believe that the U.S. Government is heading towards a financial tipping point in around 2010. It won't be funding much of anything. Local governments are not faring much better.
Without regular maintenance, how long before roads deteriorate to the point of becoming undrivable? Do the new EVs come with four-wheel drive? ;)
yes I'm aware of these valid points. While I think it wont be as bad here in Australia as the USA my form of EV/battery bank may be a fleet of push bikes or a 4wd ute (pickup only much lighter) home EV conversion. I'll keep it in the shed till the population dies down :P
Didn't realize you were in Australia. I think you'll be better off in this respect than will many parts of the U.S. The brutal northern winters here really take a toll on roads. Water finds a way into the cracks, freezes & expands. The following spring: potholes galore! :)
Inflationary trends in fear and scaremongering, Deflationary trends in reasoning and solutions. I really don't expect that to change.
Got that right Scotty, you doomer you. Instead of the 'free' market bringing up new and exciting technologies, we're treated to lots of innovative obfuscation.
The Secretary of Transition