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231 comments on DrumBeat: December 30, 2008

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ROCKMAN on December 30, 2008 - 10:37am Permalink | Subthread | Parent | Comments top

kevin,

There was a lot of debate back when prices peaked as to the effect of speculators in the futures market. In particular was the supposed effect of the credit crunch forcing many of those players to liquidate their positions in a rather rushed manner and thus crushed the price support. The price swings we've seen seem to support that theory IMO. Following that the thought, the futures market should swing back to a more reality based flow. Add the potential OPEC production cuts and we could see a significant rise in prices in 2 or 3 months. I've seen it speculated eslewhere that such an expectatioin is being seen in longer term future contracts.

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westexas on December 30, 2008 - 11:22am Permalink | Subthread | Parent | Comments top

Depletion Marches On

Speaking of OPEC, Indonesia (a founding member of OPEC) is a good example of net export rate versus cumulative remaining net oil exports. I put the final production peak for Indonesia in 1996. The following percentages are net oil exports as a percentage of the 1996 net oil export rate (left) and cumulative remaining post-1996 net oil exports as a percentage of the 1996 number (right), for Indonesia (EIA).

1996: 100% & 100%
1997: 85% & 78%
1998: 91% & 56%
1999: 78% & 37%
2000: 63% & 21%
2001: 46% & 10%
2002: 27% & 3%
2003: 13% & 0%
2004: Net Oil Importer

In 1998, note that the net export rate was only down by about 10% from the 1996 rate, but the cumulative remaining net oil exports were down by close to half.

By the time that net exports were down by about half, in 2001, cumulative remaining net oil exports were down by 90%.

Mexico is following the same trajectory as Indonesia (both consumed about half of production at final production peaks). The top five will follow the same pattern; it will just take a little longer for them to approach zero.

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Paleocon on December 30, 2008 - 11:26am Permalink | Subthread | Parent | Comments top

There have been comments that the ELM model doesn't properly capture internal demand changes relative to cost shifts as oil depletes.

I wonder if cost and price for oil are in reality moot (no graphs, whether ELM or Hubbert, include price in the model)? If prices are high, exporting countries have money to spend and use more internally, but they also have money to spend on production technology and drilling. If prices are low, then exporting countries have less money to spend and may use less internally, but they also have less to invest in production, and presumably production will drop.

If the effect is roughly linear, then I think the end of exports will happen at the same date regardless of price, only the amount of oil left for subsequent internal use would increase. The curve would be lower and flatter, in essence, but cross the ELM zero point at about the same date.

I know this is a bit more pessimistic than the original discussions, but I guess we can watch Mexico this year and see how production and exports fare with low prices and a slow internal economy.

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westexas on December 30, 2008 - 12:48pm Permalink | Subthread | Parent | Comments top

Regarding oil prices, US annual oil prices didn't cross the $40 mark until 2004, when Indonesia became a net importer. The 1997 to 2003 decline corresponded to annual oil prices in the $14 to $31 range.

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231 comments on DrumBeat: December 30, 2008

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