You have to repay a loan
Posted by Heading Out on December 28, 2005 - 11:49am
The members "agreed that the impact of hurricanes Katrina and Rita has been successfully addressed by a combination of the IEA collective action, lower than expected demand, worldwide refinery flexibility and additional efforts by producer countries.One of the activities that has, in the past, mopped up a certain amount of surplus supply was the steady purchase of oil for the Strategic Petroleum Reserve. About a year ago we were looking to the Chinese to put a significant effort this year into building their own reserve. Several posts have discussed, either in the lead or comments, the investment that has been made in the required infrastructure. And there is a concern that this will act as another drain on a tight supply.__"The IEA member countries will exercise flexibility in re-establishing their emergency stock levels through 2006, noting the need to take into account seasonal demand and the possibility of higher than expected refinery maintenance," (IEA Chief Claude) Mandil said on Monday.
The experience of the US in the last year has surely suggested the benefits of having some reserve, and the Chinese had a similar bad experience with bad weather, though on a much reduced scale, that caused some shortage early this fall. On the other hand they may wait until they get the oil flowing from the Caspian, though that would delay the insurance policy.
And in a small note on keeping oil flowing Rigzone is noting the move by Kuwait to get major oil companies to assist in upping production. The catch
Kuwait pumped about 3 percent of all the oil produced worldwide last year, or about 2.5 million barrels a day. The country hopes to increase daily production by 2020 to four million barrels. By then, Project Kuwait is expected to account for a third of the country's production.But at these volumes, Kuwait will also be pumping out 10 million barrels a day of water associated with the oil-production process, something that officials say the country's state-owned oil company cannot do without foreign expertise.
Contact
- Content: editors at theoildrum dot com
- Tech support: support at theoildrum dot com
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
Emergency reserves are now filling the role of swing producer. The problem of course will be refilling the reserves.
They can be used to soften prices to prevent runaway panic, but they eventually have to be replenished, and when that it done, it creates increased demand with resulting upward pressure on prices.
The danger is that if high prices stay around, there will be a strong economic disincentive for countries to replenish their SPRs. Then when the next crisis hits, the SPRs will be drawn down either further. It these SPRs get run down too low, chances are they will never be completely refilled. In which case the insurance gets thinner and thinner. To use the food analogy, if you have several famines in a row, you are very likely never going to get your emergency food supply back up to where it should be.
You can read it here. They still maintain the preception of 35$ oil and 6$ /MBtu nat gas. they were wrong on wind power by a factor 20 in 1998, the real growth of wind exceeded the IEA forecast 20times...
you can find my speech on IEA here
http://www.rechsteiner-basel.ch/allepub/41
Rudolf Rechsteiner, Switzerland
Great graphs as well.
It's amazing how hard it is to convince people that wind is cheap!
America is entering a dangerous situation the next couple years; relying on LNG to heat our homes and make electricity.
Close to 20 billion will be invested in the LNG terminals/tankers/pipelines.
Imagine what 20 billion could do for wind power.
20,000 megawattts! At 5 cents a KWH! For 25+ years and minimal operation costs.
OTOH, at $5/mmBTU and 40% efficiency, gas costs 4.3¢/kWh for fuel alone. "Pay for the next 20 years, or pay once and be done" sounds like a good slogan.
For governments to make correct decisions energy supply must be viewed as a risk analysis. It can be a wise insurance to diversify energy supply even if oil and gas prices drop (they won't). One can easily trash IEA oil price predictions by the fact: oil prices have increased by more than 30% in each of the last 3 years, they have probably predicted a static or fall in oil price every year.
Did you know China are building straw fired power stations?
http://www.shanghaidaily.com/login.php?red=art/2005/12/22/230197/Straw_power.htm
(it seems to be subscribers only now, and chargeable, it wasn't when I first accessed it)
Unfortunately, investor return in the wind sector was poor in 2005. Vestas and Gamesa have half of the global wind turbine market. Vestas is on track to lose money this year, Gamesa isn't doing much better. Likely both of these stocks will finish the year with single digit share price gains. Compared to any fossil fuel company, these stocks were losers in 2005.
The way that money works now, wind just isn't getting the job done. Suppose you knew that a wind company would return 5% per annum (less than the real rate of inflation) but an oil company would return 15% per annum. Where would you put your family's life savings? I am considering divesting from wind in 2006. It might be good for the planet, but it hasn't been good to me.
From my seat, those wind-gen companies look like a bargain. But I'm not betting the farm on it either.