The IEA's Oil Market Report has OPEC's April crude production at 30 mb/d. They had December's OPEC production at 29.3 mb/d. (Though the February report said OPEC production fell in January by .65 mb/d to 29.2 mb/d.) At any rate from December to April the IEA has OPEC increasing production by .7 mb/d.
The EIA's Short Term Energy Report has a different story. They had OPEC production, crude only, at 30.16 mb/d in December and 29.78 mb/d in April, a draw-down of .38 mb/d. Ignoring the differences in amount and looking only at the total change reported by each agency, December to April, that is a discrepancy of a whopping 1.08 mb/d between the two. With such a discrepancy between these two agencies, and the IEA's habit of dramatically revising their figures month to month, can we have any confidence in any figures they put out.
On another note, the EIA's Short Term Energy Outlook, has OPEC production, crude only, up 90,000 barrels per day March to April. They have Iran's output flat for that period. http://www.eia.doe.gov/emeu/steo/pub/3atab.html
However MEES, (Middle East Energy Specialists) has OPEC production down 140,000 mb/d for the same period. They have Iranian production falling 420,000 barrels per day from March to April. http://www.mees.com/Energy_Tables/crude-oil.htm
It appears there is not much certainty in what is really going on in the OPEC Oil Patch, especially in the short term.
Experts Say Despite Problems, Russia Plays Constructive Role in Global Energy Market
By Barry Wood
Washington
19 May 2006
A leading Washington research organization, the American Enterprise Institute, Friday held a forum on Russia and the world energy market. VOA's Barry Wood reports that analysts believe Russia must make considerable new investments just to maintain current levels of oil and gas production.
Excerpt:
Cliff Gaddy, the Russian economy expert at Washington's Brookings Institution, worries that Russia's oil production will decline in coming years. Massive new investment, he said, is required to meet Russia's goal of maintaining and then boosting production. After Saudi Arabia, Russia is the world's biggest oil exporter. Gaddy said the world needs Russian oil.
"Just ask yourself, where would world oil prices be without these three million extra barrels a day of oil that Russia has contributed since 1999? I mean, that is a real counter-factual and a lot of other things might have happened. Maybe China wouldn't have grown as much without that oil, maybe the whole world would be in a depression, but maybe oil prices would be not $70 to $80 a barrel, but $120 a barrel, or $150 a barrel, or $200 a barrel," he said.
It seems like the national attitude is this (and I understand this wasn't westexas' point in this post): we have to find more sources of oil so we can continue to use it up as fast as possible. While I don't wish for $120 to $200 a barrel oil (I'm retired, on a fixed income, and drive a paid-for Voyager), it seems that higher prices for oil (to a level that would result in say $6.00 US for a gallon of gas) is the only way people will get off the stick and start driving smaller cars, driving less, conserving energy, and (in the macro) developing different energy sources. Around my area (the Pacific Northwest), people are still buying huge tricked out pickups and SUVs, V-8 thisis and thatis, and Hummers. In short they've already adjusted to $3+ gas prices! We need innovation and political leadership, and it would be nice if that would start now and not under the extreme pressure of an economic collapse brought about by disastrously high energy prices.
"we have to find more sources of oil so we can continue to use it up as fast as possible."
That's my point about "moving to the endpoints of the fossil fuel continuum," i.e., gas to liquids (GTL) and coal to liquids (CTL). We are simply talking about accelerating our rate of consumption of finite energy sources.
My continuing recommendation: abolish the Payroll (Social Secuirty + Medicare) Tax and replace it with an Energy Consumption Tax.
Confession: I was a volunteer in the 1996 and (to a lesser extent) 2000 Steve Forbes for President campaigns (I liked his tax policies). Ironically, I now disagree vehemently with Steve regarding Peak Oil, but it was an interesting experience. I got to meet lots of people way above my pay scale.
In any case, I had dinner last night with a senior member of the Forbes campaign (who had been a member of the Reagan Administration). She was largely Peak Oil unaware, but I pitched the Energy Tax/Abolish the Payroll Tax idea, and I think I sold her on the idea.
She said that lots of Republicans are now lamenting their choice for president and telling her that she was correct when she tried to warn them about Bush. I asked her if she could imagine George W. Bush giving Reagan's "Tear Down This Wall" Speech." She said that "George Bush probably can't spell Berlin Wall."
Thomas Friedman and Sen Richard Lugar were on C-span this afternoon discussing energy and foreign policy. After much hedging they both endorsed an increased gas tax and a lowering of the payroll tax:
Funny or not so funny we bought a ford explorer afew years ago- before I became fully aware of peak oil- yes we one of those hated SUV owners. Our family is all tall-6'+ and small cars don't fit our family worth a crap. We looked at fuel miliage compared to other vechiles and found that none of them were very impressive. Mini vans including toyota didn't deliver alot more. The old MG had leg room like no other car has today. We were driving today with three poeple in our car surrounded by several cars that only carried 1 person. Better gas milage per person? Does this count? How much of our true traffic is still one person per car? I bet if you filmed a highway for any lenght of time and counted people per car it would be interesting.
Vans, minivans, and SUVs are not horrible vehicles if you drive them with a full or nearly full passenger load all the time. But that's the problem - most people drive these monsters solo, with no one else in the entire vehicle.
Miles per gallon is not the only measure we should observe. We need to observe passenger miles per gallon. Yes, vehicles can and should get better mileage overall, but one SUV carrying 6 people and getting 12 miles per gallon is more energy efficient than 6 Camrys getting 40 miles per gallon being driven solo. Take a sample trip of 20 miles. The SUV will expend 1.67 gallons while the 6 Camries will expend 6 * 0.5 = 3.0 gallons for covering the same distance. This is precisely why mass transit is more energy efficient than solo drivers in cars. Even though something like a train gets far lower raw MPG, it carries far more passengers and/or cargo so the total energy expended is less per passenger or cargo pound moved.
If you drive your SUV with a full or nearly full load most of the time, then you are actually helping conserve energy. It's all those solo drivers, even in their hybrid Priuses that are wasting energy.
So carpool. It's a good way to start conserving energy. It's not the ultimate solution but it's a good place to start.
I've been thinking about this lately, I've concluded that the only real measure is fuel used per unit time. It does not matter HOW you achieve it, the goal should be to reduce the number of gallons you use, say, in a month. If that be from a higher mpg car, or combining trips, or car pooling, or walking, or taking the train, whatever.
This is the point I keep making to people in person--don't get caught up in the minutiae of the situation, just look for ways to minimize your monthly energy expenses. Use less (turn off lights in unused rooms, batch errands together, car pool), and use energy more efficiently (use CFL's, drive with a lighter foot), and you can save a healthy percentage of your energy bill, beginning right now, without making a major investment or change in your lifestyle.
Ah, but here's the tricky part of people miles per gallon:
Take an average four passenger Civic getting 32 miles per gallon. 4people X 32mpg = 128pmpg
And a large 7 passenger SUV getting 15 mpg. 7people X 15 mpg = 105pmpg
(For giggles you might also want to consider 5 people riding
in an Echo: 5people X 38mpg = 190pmpg)
First of all, with the (theoretical) vehicles at full
capacity the civic still beats out the SUV in people miles
per gallon. That could obviously flip if the SUV got better
mpg in this case, but it'd still be a close call.
Now the real problem...what's the likelyhood that you can
find 7 people all going in the same direction at the same
time? Pretty slim. How about four people going in the same
direction? Less slim, but still pretty slim I'd say. I'd
say that two people going in the same direction at the same
time is a lot more likely. So back to the math:
Civic: 2 people X 32mpg = 64pmpg
SUV: 2 people X 15mpg = 30pmpg
You somehow need to find twice as many people going in the
same direction to make the SUV match or exceed the efficiency of the smaller, better mileage car, and once you reach two people in the car (meaning four in the SUV) your likelyhood that all people are heading in the same direction at the same time decreases greatly.
Russia doesn't need to maintain or increase its oil production since it exports two thirds and the oil revenue just drives up inflation. But others need Russia's oil. So do those arrogant others who lecture Russia incessantly on the flimsiests of pretexts expect Russia to just do this out of the goodness of its heart? Get real.
As the article says, the price of oil could have been much higher without the extra Russian output since 1999. So Russia is actually hurting its own interests pumping the volumes it does. Let the Saudis try an play the game they did in the 80s and 90s.
For newcomers, Khebab and I have done some Hubbert Linearization (HL) work that suggests that net export capacity is going to fall much, much faster than world oil production declines.
IMO, Russia is on the verge of a catastrophic decline in oil production.
I found it interesting that Marathon is selling their Western Siberian production.
The Russian Energy Minister has warnd that, without a crash driling program in frontier areas, Russia faces the possibility of a "real collapase in oil production."
Following the pattern of the US this decline will not be all that catastrophic, in contrast to under-sea provinces such as the North Sea. If Russia's output falls by 2.5 million barrels per day by 2010 that is not bad for Russia. But pumping hundreds of billions of dollars into oil exploration and development on some forced program to please the west is bad for Russia.
Russia's current oil consumption is about 2.5 million barrels per day. A decline in production is actually good for the country since it will prevent it from copying the US car culture deathtrap.
"But pumping hundreds of billions of dollars into oil exploration and development on some forced program to please the west is bad for Russia."
No argument from me. I think that it is ultimately bad for the West too.
However, we have seen three major regions peak and decline:
Texas/Lower 48/Total US in the Seventies;
Russia in the Eighties;
North Sea in the Nineties.
Based on the HL method, all peaked between about 49% and 58% of Qt. None have shown production higher than what they showed in the vicinity of 50% of Qt. Based on the HL method, Russia's rebound in production is just making up for what was not produced after the collapse of the Soviet Union.
The kicker? Based on currently producing basins (I admit that frontier basins in Russia are huge unknowns, for better or worse), the HL model indicates the US has more recoverable reserves than Russia. This implies an extremely sharp decline. How sharp can declines be? Look at what the internal reports are suggesting for Cantarell (up to 40% per year).
I continue to find it very interesting that Marathon sold their Russian production.
I agree with the HL method but I doubt that Russia's oil production will collapse by 15%-20% per year from now on. There is also a big difference between the history of oil exploitation in Russia compared to the US. The US has had many entrepreneurs getting at ever scrap of oil while in Russia it has been a few big enterprises before and after the fall of communism.
Marathon Oil could have been harassed out of Russia. Treatment of foreign investors in the natural resource sector in that country has been attrocious.
Marathon Oil could have been harassed out of Russia. Treatment of foreign investors in the natural resource sector in that country has been attrocious.
I am assuming you are in Russia, please correct me if I am wrong. I sincerely hope that Russia does have the wisdom to avoid the car culture deathtrap, but please inform us if this is, in fact, official Russian policy. As I understand it now: motor vehicle sales are booming:
Can you give us an assessment of the average Russian's response to Putin's proposed new birth benefits: are the people excited to pump out the newborns, or would they rather have fewer children? Thxs.
People are certainly talking about it on the street.
I think there will be some short-term increase in the fertility rate, but - if the experience of all the other countries that have tried similar measures is any guide - not nearly enough.
And the other part of the demographic problem - the appallingly low male life expectancy - goes unaddressed.
A week ago there was an informal discussion about Peak Oil concept in the Russian Ministry of Energy. The consensus was that the World Peak will be somewhere in the middle of the next decade.
I'm no expert on Russia, but I've read everything I could get my hands on concering their new oil plans.
It seems that the concept of PO and depletion has indeed come up in Russia. It was not clear at what level of production they were talking about - but the Russian energy minstry specifically stated they believe Mideast oil will last about 13 more years at roughly the same rate before it depletes, but Russia's supplies will last roughly 28 years.
What was supposed to happen after 13 or 28 years was not made clear. Russia was just preparing for the day when its financial windfall would run out by shifting its surpluses into Euros, gold, and even specific worldwide investments.
Unfortunately Russian policy is still dominated by monetarist dogma imposed by Yeltsin. So the car culture is growing out of control and streets in Moscow and elsewhere are becoming clogged with traffic. For a country were public transit was very, very good (e.g. you could hop on a train to go camping in the backwoods) this is idiotic. So a swift kick upside the head for this trend would be very beneficial.
A significant fall in oil production has numerous benefits. It will force the economic development away from dependence on fossil fuel extraction and sale abroad, which is seriously distorting the economy. It will force the development to make use of existing rail and public transit infrastructure and prevent all of these assets from being scrapped in the name of "progress".
As other posters have said already, awareness of peak oil is lacking since the same BS was spewed during Soviet times about vast oil resources. East and west people have been brainwashed by endless repitition of the technology will overcome nature mantra.
I believe there are discrepancies in OPEC figures because of the uncertainty surrounding Nigeria's output and how much is really "shut in" in any given month. As MEND, the rebel group in the Niger Delta said, "there is no shortage of things to blow up". Most estimates put it at 25% of production. This is approximately 625/kbpd, which would be (assuming 2.5/mbpd of capacity) a production level of 1.875/mbpd while EIA (your link) puts the level at 2.150/mbpd in March. This is a pretty big discrepancy of 275/kbpd. The real truth is nobody knows what Nigeria is producing and that changes day to day.
This situation will continue and likely get worse. So, I do not trust OPEC estimates of production at this time, even while ignoring uncertainties in the other OPEC countries.
SO, it looks like inflation is starting to unfold as the comsumer price index rose. IMHO, inflation is the way the powers that be will deal with the Federal Debt, Consumer Debt, Trade Deficit and Housing Bubble all at once. Even just a 8-10% yearly inflation rate for 10 years would reduce these problems dramatically.
Unions are barely a factor now like they were in the 1970s so workers will only notice in retrospect that their spending power has been greatly reduced over time. At the same time they will be comforted by the nominal rise in the value of their houses and salaries even if most of it is stripped away by rising prices. Fixed income folks will get screwed big time, along with all of us savers. The debtors go free...
And ideas for personal finances? I've got GLD and a bunch of commodity companies in my portfolio. What about going into debt for real estate? Anyone else thinking of going into a little debt to buy some straight-up land (no house) that's either agricultural or loaded with timber? I feel like that might be a good investment right now.
I think debt for real estate makes sense if you are ABSOLUTELY SURE that you will have the cashflow to make payments AND handle taxes that will be increasing with inflation. You can not be sure that property values will not be depressed due to high mortgage interest rates in an inflationary environment, and you may not be able to sell for a profit. This happened in countries that had high inflation for a while (South Africa e.g.) and property loans were underwater for 10 years or so.
As far as GLD - I dont like the fact that you have to pay 28% tax on the profit. A better investment in my opinion is CEF - (half gold / half silver) where you pay 15% long term capital gains tax on any profit.
CEF is considered a passive foreign investment company by the IRS. If you own CEF in a taxable account, you need to file form 8621 every year so you can elect to have it treated as a QEF.
You can google CEF, PFIC, and 8621 to get more info.
That said, I much prefer to own CEF than GLD. As opposed to the ETFs (which I believe are tools for manipulation), CEF insures and audits its gold and silver holdings.
At this point just about everyone expects high inflation and a massive dollar devaluation. The retail investor, the proverbial "little" guy, has finally arrived on the scene - late as usual and itching to plunk down his money, dreaming of riches untold.
Where was he in 1999, when crude was going for $15 ($70 now)? Piling into dotcoms and telecoms, that's where.
Where was he in 2002 when the USD/EUR FX rate was 0.85 dollars to the euro (1.26 now)?
Where was he when gold was scraping the bottom at $275/oz in 2001 ($700 now)?
Where was he in 2003 when copper was going for 75c/lb ($3.75 now)?
But you get my drift...The name of the game is "buy low-sell high" and not "buy very high and hope desperately that it goes to the Moon".
But hey, there is something different this time, some will say. I'll let you in on a little secret: there ALWAYS is. Like "The New Economy", or "The Nifty Fifty", or "The Economy Has Now Reached A Permanent High Plateau"...
Actually, for all the bubble talk the commodity bull market is extremely different than the tech bull market. The tech bull market was aggressively promoted by the MSM and Wall Street and valuations reached absurd heights. Many highly valued companies had astronomical P/Es or were actually losing money. In contrast, during this supposed "commodity mania or bubble" oil companies are trading at a discount to the overall market. As an example, Valero has a P/E of 9. These companies are being valued by the market with the belief that oil prices will slide back to $40 within a couple years. Certainly a mania of a different colour.
Since you bring up Valero...it is one of the biggest (if not the biggest) sour-capable refiners in the US. Since the sweet-sour oil price spread has widened very considerably in the past couple of years they have made a bundle.
On the "bubble" valuations: cyclical businesses like commodities-related ones trade at low P/E's at the top of their earnings cycles and high ones at the bottom. In fact, low P/E's are a pretty good sign of a top.
All bubbles are more or less the same because they are human psychology phenomena. Humans don't change..greed, fear, mania, hubris...they have been the same for thousands of years.
You are right to point out that consensus is a lagging indicator, and that the broader the consensus, the closer the trend is to exhaustion. By the time Joe Sixpack stakes his future on it, the writing is on the wall. The little guy is always left holding the (empty) bag at the end of the day.
Personally, I do not own stocks because I expect the market to crash, taking the good down with the bad just as the stock mania took the bad up with the good. I do own real estate, but as a consumption item, not an investment. I would not own it if I could not do so debt free - in that case I would be renting and letting someone else take the price risk. The reason I bought my small farm, despite expecting its nominal value to fall dramatically and property taxes on it to rise, is that I do not plan to sell it in my lifetime. Self-sufficiency, while being no guarantee of security, is still a reasonable strategy to pursue (communally if necessary) during times of great disruption.
Hellasious, you are exactly right, but frankly, I am afraid you are spitting into the wind on this...
It seems that the little investor gets the "information" to make investments and plans just at the moment the earliest investors need to fill out the top level of the pyramid...
Allow me to tell one on myself here...in 1999-2000, I was taking a continuing education class that involved a writing assignment...routine stuff, just an essay assignment-argumentative in nature, and I asked the instructor if I could take on an economic theme....source it well, about 10 pages...he had seen my writing before so he gave me pretty much free rein....
I wrote an essay in 2000 that basically said the energy consumption situation in the world could not possibly be sustainable. There were no quotes from Matt Simmons, no quotes about "Peak Oil". These were "off the radar" to me at that time. But, just based on the math I could find, the constantly rising fuel consumption were bound to create a massive problem, despite the appearance at that time that was SIMPLY NO PROBLEM on the energy front, that we could just keep motoring along.
Question: Did I invest on my own advice? Sadly, no, at least not in a big, bold way. In my research I could find ALL the business publications I could stand that said, there simply is NO PROBLEM. I went cautious, made a nice little bit on "teaspoon" size investments in Nabors Industries (oil service looked good to me, just based on the size of the industry and it's prospective growth) and on a little Louisiana offshore driller, took my 25% or 35% gain and was happy...I had not been greedy, I had made my fair share, and didn't try to be a "hog" (the old Wall Street rule you know, Bears can make money, Bulls can make money, but "hogs" never do) As oil crossed past $40 to $45 dollars, ALL market advisors agreed....back off, we have to be at the top of this bull run....I actually heard a market analysis on MSNBC say flatly, "$45 has to be near the top....as for the economy, if it goes past $50, all bets are off." Needless to say, someone, (?? Who??) was still buying the oils, oil service and commoditii
The EIA's Short Term Energy Report has a different story. They had OPEC production, crude only, at 30.16 mb/d in December and 29.78 mb/d in April, a draw-down of .38 mb/d. Ignoring the differences in amount and looking only at the total change reported by each agency, December to April, that is a discrepancy of a whopping 1.08 mb/d between the two. With such a discrepancy between these two agencies, and the IEA's habit of dramatically revising their figures month to month, can we have any confidence in any figures they put out.
On another note, the EIA's Short Term Energy Outlook, has OPEC production, crude only, up 90,000 barrels per day March to April. They have Iran's output flat for that period.
http://www.eia.doe.gov/emeu/steo/pub/3atab.html
However MEES, (Middle East Energy Specialists) has OPEC production down 140,000 mb/d for the same period. They have Iranian production falling 420,000 barrels per day from March to April.
http://www.mees.com/Energy_Tables/crude-oil.htm
It appears there is not much certainty in what is really going on in the OPEC Oil Patch, especially in the short term.
Ron Patterson
http://www.voanews.com/english/2006-05-19-voa62.cfm
Experts Say Despite Problems, Russia Plays Constructive Role in Global Energy Market
By Barry Wood
Washington
19 May 2006
A leading Washington research organization, the American Enterprise Institute, Friday held a forum on Russia and the world energy market. VOA's Barry Wood reports that analysts believe Russia must make considerable new investments just to maintain current levels of oil and gas production.
Excerpt:
Cliff Gaddy, the Russian economy expert at Washington's Brookings Institution, worries that Russia's oil production will decline in coming years. Massive new investment, he said, is required to meet Russia's goal of maintaining and then boosting production. After Saudi Arabia, Russia is the world's biggest oil exporter. Gaddy said the world needs Russian oil.
"Just ask yourself, where would world oil prices be without these three million extra barrels a day of oil that Russia has contributed since 1999? I mean, that is a real counter-factual and a lot of other things might have happened. Maybe China wouldn't have grown as much without that oil, maybe the whole world would be in a depression, but maybe oil prices would be not $70 to $80 a barrel, but $120 a barrel, or $150 a barrel, or $200 a barrel," he said.
That's my point about "moving to the endpoints of the fossil fuel continuum," i.e., gas to liquids (GTL) and coal to liquids (CTL). We are simply talking about accelerating our rate of consumption of finite energy sources.
My continuing recommendation: abolish the Payroll (Social Secuirty + Medicare) Tax and replace it with an Energy Consumption Tax.
In any case, I had dinner last night with a senior member of the Forbes campaign (who had been a member of the Reagan Administration). She was largely Peak Oil unaware, but I pitched the Energy Tax/Abolish the Payroll Tax idea, and I think I sold her on the idea.
She said that lots of Republicans are now lamenting their choice for president and telling her that she was correct when she tried to warn them about Bush. I asked her if she could imagine George W. Bush giving Reagan's "Tear Down This Wall" Speech." She said that "George Bush probably can't spell Berlin Wall."
http://inside.c-spanarchives.org:8080/cspan/cspan.csp?command=dprogram&record=161283941
Miles per gallon is not the only measure we should observe. We need to observe passenger miles per gallon. Yes, vehicles can and should get better mileage overall, but one SUV carrying 6 people and getting 12 miles per gallon is more energy efficient than 6 Camrys getting 40 miles per gallon being driven solo. Take a sample trip of 20 miles. The SUV will expend 1.67 gallons while the 6 Camries will expend 6 * 0.5 = 3.0 gallons for covering the same distance. This is precisely why mass transit is more energy efficient than solo drivers in cars. Even though something like a train gets far lower raw MPG, it carries far more passengers and/or cargo so the total energy expended is less per passenger or cargo pound moved.
If you drive your SUV with a full or nearly full load most of the time, then you are actually helping conserve energy. It's all those solo drivers, even in their hybrid Priuses that are wasting energy.
So carpool. It's a good way to start conserving energy. It's not the ultimate solution but it's a good place to start.
This is the point I keep making to people in person--don't get caught up in the minutiae of the situation, just look for ways to minimize your monthly energy expenses. Use less (turn off lights in unused rooms, batch errands together, car pool), and use energy more efficiently (use CFL's, drive with a lighter foot), and you can save a healthy percentage of your energy bill, beginning right now, without making a major investment or change in your lifestyle.
Take an average four passenger Civic getting 32 miles per gallon. 4people X 32mpg = 128pmpg
And a large 7 passenger SUV getting 15 mpg. 7people X 15 mpg = 105pmpg
(For giggles you might also want to consider 5 people riding
in an Echo: 5people X 38mpg = 190pmpg)
First of all, with the (theoretical) vehicles at full
capacity the civic still beats out the SUV in people miles
per gallon. That could obviously flip if the SUV got better
mpg in this case, but it'd still be a close call.
Now the real problem...what's the likelyhood that you can
find 7 people all going in the same direction at the same
time? Pretty slim. How about four people going in the same
direction? Less slim, but still pretty slim I'd say. I'd
say that two people going in the same direction at the same
time is a lot more likely. So back to the math:
Civic: 2 people X 32mpg = 64pmpg
SUV: 2 people X 15mpg = 30pmpg
You somehow need to find twice as many people going in the
same direction to make the SUV match or exceed the efficiency of the smaller, better mileage car, and once you reach two people in the car (meaning four in the SUV) your likelyhood that all people are heading in the same direction at the same time decreases greatly.
As the article says, the price of oil could have been much higher without the extra Russian output since 1999. So Russia is actually hurting its own interests pumping the volumes it does. Let the Saudis try an play the game they did in the 80s and 90s.
IMO, Russia is on the verge of a catastrophic decline in oil production.
I found it interesting that Marathon is selling their Western Siberian production.
The Russian Energy Minister has warnd that, without a crash driling program in frontier areas, Russia faces the possibility of a "real collapase in oil production."
Russia's current oil consumption is about 2.5 million barrels per day. A decline in production is actually good for the country since it will prevent it from copying the US car culture deathtrap.
No argument from me. I think that it is ultimately bad for the West too.
However, we have seen three major regions peak and decline:
Texas/Lower 48/Total US in the Seventies;
Russia in the Eighties;
North Sea in the Nineties.
Based on the HL method, all peaked between about 49% and 58% of Qt. None have shown production higher than what they showed in the vicinity of 50% of Qt. Based on the HL method, Russia's rebound in production is just making up for what was not produced after the collapse of the Soviet Union.
The kicker? Based on currently producing basins (I admit that frontier basins in Russia are huge unknowns, for better or worse), the HL model indicates the US has more recoverable reserves than Russia. This implies an extremely sharp decline. How sharp can declines be? Look at what the internal reports are suggesting for Cantarell (up to 40% per year).
I continue to find it very interesting that Marathon sold their Russian production.
http://www.mosnews.com/news/2006/05/18/heliummoon.shtml
No need to worry.
(sarcasm)
Marathon Oil could have been harassed out of Russia. Treatment of foreign investors in the natural resource sector in that country has been attrocious.
But deliberate and planned?
I am assuming you are in Russia, please correct me if I am wrong. I sincerely hope that Russia does have the wisdom to avoid the car culture deathtrap, but please inform us if this is, in fact, official Russian policy. As I understand it now: motor vehicle sales are booming:
http://english.pravda.ru/main/18/89/357/16308_cars.html
Do the Russian media and the general public discuss Peakoil ramifications, or are most in ignorance and denial like here in the US?
Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?
Because up to now, it's been party time.
Can you give us an assessment of the average Russian's response to Putin's proposed new birth benefits: are the people excited to pump out the newborns, or would they rather have fewer children? Thxs.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
I think there will be some short-term increase in the fertility rate, but - if the experience of all the other countries that have tried similar measures is any guide - not nearly enough.
And the other part of the demographic problem - the appallingly low male life expectancy - goes unaddressed.
It seems that the concept of PO and depletion has indeed come up in Russia. It was not clear at what level of production they were talking about - but the Russian energy minstry specifically stated they believe Mideast oil will last about 13 more years at roughly the same rate before it depletes, but Russia's supplies will last roughly 28 years.
What was supposed to happen after 13 or 28 years was not made clear. Russia was just preparing for the day when its financial windfall would run out by shifting its surpluses into Euros, gold, and even specific worldwide investments.
Unfortunately Russian policy is still dominated by monetarist dogma imposed by Yeltsin. So the car culture is growing out of control and streets in Moscow and elsewhere are becoming clogged with traffic. For a country were public transit was very, very good (e.g. you could hop on a train to go camping in the backwoods) this is idiotic. So a swift kick upside the head for this trend would be very beneficial.
A significant fall in oil production has numerous benefits. It will force the economic development away from dependence on fossil fuel extraction and sale abroad, which is seriously distorting the economy. It will force the development to make use of existing rail and public transit infrastructure and prevent all of these assets from being scrapped in the name of "progress".
As other posters have said already, awareness of peak oil is lacking since the same BS was spewed during Soviet times about vast oil resources. East and west people have been brainwashed by endless repitition of the technology will overcome nature mantra.
This situation will continue and likely get worse. So, I do not trust OPEC estimates of production at this time, even while ignoring uncertainties in the other OPEC countries.
Unions are barely a factor now like they were in the 1970s so workers will only notice in retrospect that their spending power has been greatly reduced over time. At the same time they will be comforted by the nominal rise in the value of their houses and salaries even if most of it is stripped away by rising prices. Fixed income folks will get screwed big time, along with all of us savers. The debtors go free...
And ideas for personal finances? I've got GLD and a bunch of commodity companies in my portfolio. What about going into debt for real estate? Anyone else thinking of going into a little debt to buy some straight-up land (no house) that's either agricultural or loaded with timber? I feel like that might be a good investment right now.
As far as GLD - I dont like the fact that you have to pay 28% tax on the profit. A better investment in my opinion is CEF - (half gold / half silver) where you pay 15% long term capital gains tax on any profit.
You can google CEF, PFIC, and 8621 to get more info.
That said, I much prefer to own CEF than GLD. As opposed to the ETFs (which I believe are tools for manipulation), CEF insures and audits its gold and silver holdings.
Where was he in 1999, when crude was going for $15 ($70 now)? Piling into dotcoms and telecoms, that's where.
Where was he in 2002 when the USD/EUR FX rate was 0.85 dollars to the euro (1.26 now)?
Where was he when gold was scraping the bottom at $275/oz in 2001 ($700 now)?
Where was he in 2003 when copper was going for 75c/lb ($3.75 now)?
But you get my drift...The name of the game is "buy low-sell high" and not "buy very high and hope desperately that it goes to the Moon".
But hey, there is something different this time, some will say. I'll let you in on a little secret: there ALWAYS is. Like "The New Economy", or "The Nifty Fifty", or "The Economy Has Now Reached A Permanent High Plateau"...
I sincerely wish you good luck.
On the "bubble" valuations: cyclical businesses like commodities-related ones trade at low P/E's at the top of their earnings cycles and high ones at the bottom. In fact, low P/E's are a pretty good sign of a top.
All bubbles are more or less the same because they are human psychology phenomena. Humans don't change..greed, fear, mania, hubris...they have been the same for thousands of years.
1999 lost money (neg. p/e). Price avg.$7.
2000 avg p/e 40x Price avg $8
2001 avg p/e 5x Price avg $11
2002 avg p/e 40x Price avg. $8
2003 avg p/e 20x Price avg. $9
2004 avg p/e 9x Price avg $17
2005 avg p/e 11x Price avg $45
2006 so far p/e 9 Price between $48-71
You were saying?
Personally, I do not own stocks because I expect the market to crash, taking the good down with the bad just as the stock mania took the bad up with the good. I do own real estate, but as a consumption item, not an investment. I would not own it if I could not do so debt free - in that case I would be renting and letting someone else take the price risk. The reason I bought my small farm, despite expecting its nominal value to fall dramatically and property taxes on it to rise, is that I do not plan to sell it in my lifetime. Self-sufficiency, while being no guarantee of security, is still a reasonable strategy to pursue (communally if necessary) during times of great disruption.
Hellasious, you are exactly right, but frankly, I am afraid you are spitting into the wind on this...
It seems that the little investor gets the "information" to make investments and plans just at the moment the earliest investors need to fill out the top level of the pyramid...
Allow me to tell one on myself here...in 1999-2000, I was taking a continuing education class that involved a writing assignment...routine stuff, just an essay assignment-argumentative in nature, and I asked the instructor if I could take on an economic theme....source it well, about 10 pages...he had seen my writing before so he gave me pretty much free rein....
I wrote an essay in 2000 that basically said the energy consumption situation in the world could not possibly be sustainable. There were no quotes from Matt Simmons, no quotes about "Peak Oil". These were "off the radar" to me at that time. But, just based on the math I could find, the constantly rising fuel consumption were bound to create a massive problem, despite the appearance at that time that was SIMPLY NO PROBLEM on the energy front, that we could just keep motoring along.
Question: Did I invest on my own advice? Sadly, no, at least not in a big, bold way. In my research I could find ALL the business publications I could stand that said, there simply is NO PROBLEM. I went cautious, made a nice little bit on "teaspoon" size investments in Nabors Industries (oil service looked good to me, just based on the size of the industry and it's prospective growth) and on a little Louisiana offshore driller, took my 25% or 35% gain and was happy...I had not been greedy, I had made my fair share, and didn't try to be a "hog" (the old Wall Street rule you know, Bears can make money, Bulls can make money, but "hogs" never do) As oil crossed past $40 to $45 dollars, ALL market advisors agreed....back off, we have to be at the top of this bull run....I actually heard a market analysis on MSNBC say flatly, "$45 has to be near the top....as for the economy, if it goes past $50, all bets are off." Needless to say, someone, (?? Who??) was still buying the oils, oil service and commoditii