The Oil Drum

Observation :> )  The more you know the less
you care ... if you care more than less...
there is more to know.

think small, think fast, peace

Quite remarkably, in the first half of 2005 the top five, the top ten and the top 22 publicly quoted oil companies all produced less crude and NGLs than they did in 2004 and only slightly more than they did in 2003 and 2002.

Given the global increase in production and demand over the last three years it is clear that, in aggregate, the largest private oil companies are losing market share. For ten of the top 22 companies, and for four out of the five largest private companies, the first half of 2005 saw lower crude and NGLs production than in 2004.

Ten companies also produced less in first half 2005 than they did in 2003, while nine companies produced less than in 2002. Clearly, it is no exaggeration to say that the world's largest publicly quoted oil companies are now really struggling to hold production levels, with only a few managing to maintain their market share of global production.

Extraction Rates Fall At Major Oil Companies

For farmers, a Katrina-like disaster is building. It will soon swamp many family farming operations. Astronomical fuel prices, fertilizer and chemical costs have reached the point that even a modest profit is impossible.

Farmers are receiving the lowest price for commodities that myself or most farmers can remember. Farmers are a proud group, usually not willing to protest. This time, I hope someone is listening. We are literally at the end of the turn row. That's a metaphor for desperation. Agriculture is in serious trouble.

And the Falls Church News-Press has this nugget:

Spiraling costs of materials combined with a frenzy of activity is driving up costs of construction projects throughout Northern Virginia, ...

But, everyone I work with is living as if there are no problems.  Our main office had an open house last week, so we all drove there together.  One lady talks of her son applying to Ivy League schools.  The other guy's wife is expecting a second child.  My immediate boss wants to upgrade to digital cable.  Meanwhile, I'm consolidating and cutting back on everything.

I walk down the street and through the stores and feel oddly removed, as if I have to remember all this because it will be gone soon.

of the Atlantic. The US overall energy situation is much brighter than that of the European Union. The US energy self-sufficiency is about 70%, which is relatively high among the OECD countries. In the Western part of the EU (without the newly joined East and Middle European countries - this is for better time series) that percentage is only 46%, and if we take into account the fact that all uranium for nuclear fuel is imported, only 30%. (All number from BP)

Worse yet, the EU self-sufficiency is rapidly diminishing. Coal has still leading position in the domestic energy supply, but the production has rapidly decreased - it is down 65% from 1981 and decreasing. New EU members produce some coal - especially Poland - but also their production is decreasing rapidly so not much help from there.

Oil production in the North Sea helped a lot from the middle of the '70s to the '90s - the EU North Sea gas and oil made at best (1984) 20% of the total EU energy consumption. But the production has started to decline rapidly. As the North Sea (+ Netherlands gas) make still a almost half of the Western EU domestic energy production this is really bad news. Overall EU oil production peaked in 1999, gas in 2001.

Total Western EU domestic energy production peaked in 1996,  fossil fuel production already 1985. Russia is a very important gas and oil supplier with gas pipelines to EU, but its oil production is obviusly having a second peaking right now and it will not have easy job trying to offset the decreasing North Sea Gas. The first real OECD energy crunch since the '70s seems to be this winter in the UK, where natural gas shortage threatens (or is a reality - GDP growth has stalled already).

EU has no realistic prospects in increasing its domestic energy production. Its coal has mostly depleted, oil and gas are rapidly depleting. Very little else - some oil shales in Germany and Estonia, some lignite left in Germany - nothing much. Very little uranium.

No wonder EU is talking much about the Climate Change and the Kyoto agreement. These are obviously just code words for the energy crisis. (The Climate Change problem is real but the EU agenda has nothing much to do with it.) Under this pretext it has created some kind of a rationing system aimed at energy efficiency. Not a bad idea as such, but not very successful. Energy consumption and imports are still growing. Now it has a better idea: If Turkey becomes an EU memeber then the EU will have an almost direct access to the Middle East oil.

The EU experience tells that conservation is not easy. European energy efficiency is better than in US and primary energy consumption per capita clearly lower - only 49% of that of the US. This doesn't help much now. The EU oil consumption is about 15 mbpd and none of the new members is an oil producer. Gasoline taxes are high but consumption is up. The EU has no clear plan - almost all of the easy measures are already taken.  Only the difficult ones remain - cutting consumption and getting a severe recession.

Why do the Americans complain?

http://www.arabnews.com/?page=7&section=0&article=72041&d=21&m=10&y=2005

You know - a few hundred billion for Iraq, two hundred billion for reconstruction, a few hundred billion for highways..... and so on

At first you would think future generations will pay (since we are running a deficit and have to borrow any new spending). But you would be wrong.

In the past we relied on foreign central banks and hedge funds for all of this lending but our debt is already so large that can NEVER be repaid - so you think our children will be safe  - we are going to stiff the lenders and they will pay... or so it seems. But you would be wrong.

When you look at the inflow of foreign capital buying treasury notes (TIC data) you realize that actually the Fed is substantially printing and lending the government money itself through the "Carribean Funds" operation. (This is called monetizing the debt). So foreign central banks are lending us a lot less money than before and we are just printing money to make up the difference. This should normally lead to inflation and a drop in the value of the dollar - so you conclude that we are all paying for this excess spending over the short/medium term through higher inflation and lower purchasing power.

But then you look at the daily currency fluctuations, and you realize that the value of the dollar is being managed through other central banks printing their currency and buying dollars - thus importing our inflation into their countries in turn.

So - the answer is.... every citizen of every country belonging to the IMF is paying for the excesses of the current administration to the extent that their central banks are inflating their money supplies in order to manage their currency against the dollar.

Who gave the Bush administration the power to tax the world?

this is from today financial times uk

Lawyers aim to pin blame for Katrina on big business
By Ben Bain and Patti Waldmeir in Washington
Published: October 22 2005 03:00 | Last updated: October 22 2005 03:00

Plenty of people have been blamed for the devastation of the US Gulf coast after Hurricane Katrina - but most of them cannot be sued.

Suing the federal government, or the much-maligned Federal Emergency Management Agency, is very difficult. So now enterprising lawyers - many of whom hail from the south - are trying to hold insurance companies, oil companies and mortgage lenders responsible.

Post-disaster lawsuits are a fixture of modern American life: many were also filed in the aftermath of September 11, and many get nowhere. But the US Chamber of Commerce says post-Katrina suits are hampering the relief effort. It is pushing for legislation to protect companies involved in relief and reconstruction efforts from liability.

Big oil companies such as Shell, ChevronTexaco and Exxon Mobil are being sued on the grounds that their refining and production activities in the Gulf cause global warming, which in turn caused Katrina. Lawyers are trying to turn that lawsuit into a Mississippi-wide class action.

It claims that oil companies are the "greatest single source" of global warming and that their activities "produced the conditions whereby a storm of the strength and size of Hurricane Katrina would inevitably form and strike the Mississippi Gulf coast".

Oil companies are also being sued for causing ecological damage to coastal marshes that had protected New Orleans.

The global warming suit, which was filed in federal court in Mississippi by the New Orleans law firm Maples & Kirwan, also targets insurance companies and mortgage lenders. Several other suits have also been brought against insurers, including one by the Mississippi attorney-general.

Most homeowners' policies exclude flood losses, and the federal government provides flood insurance to compensate; but many homeowners did not buy it. The Mississippi attorney-general is trying to get the exclusions voided on grounds that they violate state public policy.

Such actions impede recovery, says Tom Donohue, the Chamber of Commerce president: "It becomes more difficult to attract resources and risk-takers if insurance companies aren't able to participate without the fear of having their policies changed after the fact." He says a small group of class-action and mass-action lawyers are exploiting the disaster.

"If these lawsuits were successful they would essentially be rewriting contracts after the fact and that's something that has serious implications not just for insurance contracts but for any contract under the US legal system," adds Julie Pulliam of the American Insurance Association.

The Association of Trial Lawyers of America rejects this. "If the insurance industry and big energy companies acted responsibly there would be no reason for lawsuits, but many times the last resort for victims is the civil justice system, and they are given no other choice when negligent corporations do bad things," says its spokesman Chris Mather.

F. Gerald Maples, who filed the global warming lawsuit, says part of its point is to raise public awareness. He hopes the suit "will bring dialogue and resources to solving the problem".

Does it really cost 10 cents a gallon more for the "additives" to make 89 and 91 octane?

"Money-eating" tigers dampen dreams of drivers
www.chinaview.cn 2005-10-21 09:33:36

    BEIJING, Oct. 21 -- For Xu Wenhua, a trusty bicycle is looking more and more attractive than the petrol-guzzling Citroen he now owns.

    "I should have bought an electrical bicycle, not a car," lamented Xu, who lives in Changping, a suburban district some 40 kilometres north of downtown Beijing.

    Currently, there is a saying in Beijing: "You may afford buying a car, but you may not afford the cost of using it."

    Xu couldn't agree more. To his dismay, fuel prices had kept soaring in China since he bought a car early this year. The steep costs had come in response to skyrocketing oil prices in the world market, once exceeding an all-time US$70 per barrel in late August.

    Now, No 93 petrol, the most popular fuel grade in Beijing, was sold at 4.26 yuan (approximately 8.11 yuan against the dollar) per litre in early August.

    "My heart falls the most when I hear of news that the fuel prices have risen again," said Xu, 35, who works at a company in Qianmen, a business district in the heart of the Chinese capital.

    The soaring fuel prices have dampened potential car buyers' enthusiasm. Some have postponed and even abandoned their purchase plans. Those who planned to buy a mid-end car changed their minds and instead, have bought economy models.

    Since March, Chinese authorities have raised the fuel prices five times, starting at 3.92 yuan (US$0.48) per litre, to the current 4.26 yuan (US$0.53) per litre. The price of refined oil shot up to an average of 0.5 yuan per litre within 28 days, from June 25 to July 23, "something without precedence in history," according to the Beijing-based China Economic Times.

    Experts and other people interviewed noted that in Beijing, a person has to spend about 1,000 yuan (US$123) a month on his or her car, including the cost of fuel as well as the maintenance and parking and insurance fees.

    For average wage earners, this is no small sum. According to local press reports, a white-collar worker at a foreign-funded company in the Chinese capital makes 3,000-4,000 yuan (US$370-US$493) a month. Their cars used to be their pride, but now many of them complain that cars have become "money-eating tigers."

    In fact, Chen Gang, an editor with local media, has passed on driving his car now opting to cycle to work and back every day.

    Chen, 28, said that he has to pay up to 200 yuan (US$24.7) more a month for fuel than in the past. Earning about 5,000 yuan (US$617) a month, he has a family of three to support.

    A government employee, who identified himself only as Mr Yang, used to drive to Inner Mongolia in the summer to escape from Beijing's choking heat and humidity. But he, too, had a change of heart.

    "I went there by train this summer to save money," he said.

Read the whole thing:
http://news.xinhuanet.com/english/2005-10/21/content_3660012.htm

 Vehicles fueled with hydrogen/natural gas blends (HCNG) are an initial step toward the hydrogen-based transportation of the future. HCNG vehicles offer the potential for immediate emissions benefits, such as a reduction in nitrogen oxides (NOx) emissions. At the same time, they can pave the way for a transition to fuel cell vehicles by building early demand for hydrogen infrastructure.

http://www.eere.energy.gov/cleancities/blends/hcng.html

Also this is interesting too:
 http://world.honda.com/FuelCell/FCX/station/

Honda seems to have the answer, don't they. But it operates with natural gas, and the cost of NG is going nowhere but up!

it may be more enviromentally safe, but what about the costs?

I'm not sure if this was posted here.  I read most everything at TOD but I may have missed someone else posting.  My apology in advance if this has been posted.

1.    When will the significant impacts be felt?  I'll call this T
2.    How rapidly will change come?  I believe that the rate will be one of the most important issues.  If changes happen rapidly, the impacts will be very much greater.  So we have d/dt
3.    How big will the change be?  I'll use D for "depth"
4.    How long will it last, which is of course related to D.  Call this L?

The more I look at it, the more I think that the aggregation of all the world's oil supplies peaking at separate times, with different slopes, and combined with various external issues will product something that is less a classical Hubbert peak and more a rocky plateau.  But this could change I suppose, if several of the biggest fields peak at once.  And it obviously depends on where we really are along the timeline.  Regardless, the real impact on our lives will be due mostly the difference between supply and demand, and the rate at which those two diverge.  

There are just too damned many variables in reality, and I expect in the end that I shall just have to use my best "engineering judgment", but this site is an invaluable tool in gathering data along the way.  Thanks to all for the efforts you're putting into it!

My two sons, both high tech guys on the west coast, just got out of their rat races with Moore's law and went into things that cannot be exported to China- or at least not very easily or right away. One went into videos of weddings, and the other into solar and biomass stirling engines.  This last one is in my view, really going to rocket ahead, given recent big technical advances coupled with the sudden realization on the part of venture capitalists that renewables are here to stay.

Meanwhile, back at the old farmhouse, I and my wife relish the possibility that peak oil might at last rid us of the inundations of crap that we never asked for and do not want- catalogs, credit cards, pleas to buy, buy, buy things that never should have been made in the first place.

I laugh at the weepings of so many folks contemplating depravations from peak oil, when  I remember the life of my parents in the depression, and the situations in Madras, Mexico, Africa and you know how many other places.  The waste of energy, food- everything -here is absolutely criminal in comparison.  

There was not one single fat guy in my high school graduation picture. We were all stick thin from running around throwing 50 lb. hay bales and scraping up cow poop.  And the ones who didn't get shot down by the Luftwaffe are still alive and happy today.  Then look at the kids now!  Labor saving has gone way too far.

 http://ca.today.reuters.com/news/newsArticle.aspx?type=domesticNews&storyID=2005-10-19T191553Z_0 1_MAR969247_RTRIDST_0_CANADA-ENERGY-CANADA-OILSANDS-COL.XML&archived=False

"The whole process (tar sands) uses far more energy than it ends up producing, Simmons said"

(This is a bit of a stunner.  Even I didn't think that the tar sands process is an energy loser.  I did think that one should look at the effects of depletion from conventional Canadian sources of oil and at the energy input necessary to get the bitumen out and processed into oil.)  

Jeffrey Brown

OTTAWA (Reuters) - Canada is squandering valuable natural gas in trying to develop its much-vaunted oil sands reserves, a Houston-based oil expert said on Wednesday.

"We shouldn't be laying a foundation of saying we can replace Saudi Arabia's reserves with Canada's tar sands," analyst and investment banker Matthew Simmons told a business and media audience in Ottawa.

"They are extremely energy-intensive, to turn it into usable energy, and natural gas is in decline."

He says the oil sands, centered in northern Alberta, would be more appropriately called coal. Natural gas is used to heat steam which is injected into the tar sands to help convert it into oil.

The energy industry is investing tens of billions of dollars on projects to develop the massive resource, which now accounts for more than one third of Canada's overall oil production.

The resources rival Saudi Arabia's conventional oil reserves in size, but are far more expensive to develop and operate, partly due to the need for natural gas as a fuel.

Referring to Arctic gas which is set for development in Canada's Mackenzie Delta, he said: "It would be a tragedy to use all of that for converting tar sands into low quality oil. Natural gas is just too valuable."

The whole process uses far more energy than it ends up producing, Simmons said.

There is increasing resentment in Canada over the fact that U.S. demand is raising the price of domestic energy in Canada--and rapidly depleting their conventional reserves.  Once the reality of Peak Oil sets it, how long is it going to take for energy producers to begin to think that it is not in the own self interest to ramp up production of a depleting resource to meet an insatiable demand?

Also, the U.S. is supposed to become a net food importer this year, a trend that will probably be worsened by the fuel/ferilizer crises in the farm belt.

We are borrowing hundreds of billions of dollars each year to pay for imported food & energy--which is driving up the world prices of food & energy.  How long will it be before our creditors realize that  lending us money--that will probably never be repaid and that has the effect of driving up food & energy prices--is not a good idea?

http://news.bbc.co.uk/1/hi/business/4356014.stm

I am figuring on having at least until 2010 to get ready, and possibly 2015. But that readiness entails having a home for my as-yet-unbelieving children to run to, and so it will not be a shack in the backwoods.

It is very interesting to me that there are only a couple of places to actually purchase a full-size, workable steam engine. Otherwise, it is lost technology.

It is interesting to me that nobody is even contemplating ethanol as a fuel, when it can be made from basically anything with sugar or starch, and will run in a standard IC engine with less pollution and more performance. You can build a still to make ethanol for a few hundred dollars - a decent sized one too. Mine sits behind my garage. And potato peelings, apple peels, anything with sugar or starch value will produce ethanol. With gas fluctuating between $2-$4 a gallon, buying bulk molasses will let you turn out ethanol at around $2 a gallon. You can cut your gasoline with it to drop costs or switch to it completely with minor engine modification. I'm not worrying about global production here, but MY OWN production - MY FUEL. I am worried about this beacuse I watched what happened when Katrina and Rita hit - gas was gone in a day. And those were very localized effects. What happens when there really is a gas shortage?

I don't know what is going to be the straw that breaks our economical camel. But my spine is itching and my stomach feels flutery reading about so many things that are at "their highest levels" - credit, debt, storms, oil usage, cement, steel, inflation and on and on. People have a 6th sense - they need to listen to what it is saying. The US a net food importer? People - read that again. We were the breadbasket of the world...

Infrastructure the world over is in need of repair. Every country is stretched to the limit in terms of delivering water, electricity, food and other staples of life. Where does this leave the average city? What happens when something really clobbers electrical generating capacity?

When earthquakes are coming, animals freak out. When big storms come, animals disappear. Christians in many places are getting ready for tribulations. Muslims are as well. Both are for different reasons, but their goal is one and the same, and at the same point in time. Never has the "free press" in America been as controlled and censored as today. Why is that? What is it about our world today that requires such manipulation of information? That should be a warning as well.

I don't know from what quarter it will originate, but we have had a very cheap and easy ride for the last century, and it appears to me that our own excesses are driving us into a cul de sac. I want to turn down another road, one with a better future.

The signs are everywhere around us - listen and watch. But get ready - something is slouching towards us. Everybody feels this, but few have the constitution and certitude to act on it. Most cannot put a face or name to what it is they are sensing. But everywhere people are feeling these same dire feelings of dread and uncertainty. You can read it in financial papers, technical journals, any newspaper or magazine. Go read these same publications 10 years ago - unbridled optimism. People are sensing an unknown something ahead, and it has a inimic and malignant quality to it.

You are left with two choices - listen and get ready for some dark times ahead, or deny what you are feeling and go forward. I think that those who deny their inner sense are the same ones who debunk everything having to do with change. Their strength comes from their fear of change, and their inability to contemplate the same change.

Just some thoughts...