Analysts skeptical of Iran oil plan

Iran took a step on Friday toward establishing an oil market denominated in euros, a plan analysts described as highly unlikely to materialize but which in theory could have serious consequences for the U.S. economy.

If the market were to succeed -- or if Iran simply demanded payment for its oil in euros -- commodities experts said it could lead central bankers around the world to convert some dollar reserves into euros, possibly causing a decline in the dollar's value.

Oil is currently denominated in dollars around the globe, whether through direct sales between producers and consumers or in trades made on markets in New York and London.

But if one day the world's largest oil producers allowed, or worse demanded, euros for their barrels, "it would be the financial equivalent of a nuclear strike," said A.G. Edwards commodities analyst Bill O'Grady.

But he doesn't think it's likely:

O'Grady said there are practical reasons why the Iranian threat is an empty one.

For starters, Iran is not a very attractive site for a market, given the volatile nature of its politics, the U.S. sanctions against it and the lack of a fair legal system. Moreover, there is no indication that the European Union is interested in vying to become the world's central bank, which requires a willingness to run large currency deficits, he said. For the U.S., that has meant allowing cheap imports to undermine the strength of some major industries, including textiles, autos and electronics manufacturing.

And so the war came, with its lies, murder, ruin, and corruption. Yet how many of those now opposed to this horrific military action are prepared to pay the actual cost of ending it: i.e., relinquishing the guarantee of cheap oil and the lifestyle it sustains? The number is doubtless very small. The large remainder should perhaps be seen as the true "Bush base." For while they may oppose his tactical incompetence in this instance, they share, wittingly or unwittingly, his strategic goal. With this basic common cause between the elite and the majority, the wars for oil will go on - no matter who sits in the White House.

"All buyers, not just investors, pull back"

"Speculators supposedly have fled metropolitan Phoenix's housing market, so it's no surprise that home sales have dropped as that demand has dried up.

What is surprising is that home sales and building are down more than the rate at which investors were buying last year. New-home building permits were down 16 percent for the first three months compared with a year ago, reports real estate analyst RL Brown. Resales plummeted 34 percent during the first quarter, according to the Arizona Real Estate Center at Arizona State University."
http://www.azcentral.com/arizonarepublic/business/articles/0430biz-catherine0430.html

Daily Kos
Energy Bulletin (with JoP's permission)
European Tribune

Original POP post (5/4/06):

greetings all-
i went to a sustainable energy and development panel discussion last night and an issue was raised about which some clarification, confirmation or debunking, would be appreciated. i assume the oil industry types may be able to respond.
the nut of it is that the USA forbade exploration and drilling in the outer continental shelf (ocs) in the 1970s and that therefore no such (or very limited) activity has taken place, and that there is believed to be a great deal of oil 'n' gas in the ocs, and particularly off the coast of georgia/sc, and the west coast. further, that the US MMS is surreptitiously loosening restrictions.
is any of this so? makes intuitive sense, in the sense that one would expect more off-shore drilling everywhere absent such a restriction. and if it is true, should this suggest a re-thinking of the timing of the peak, whether geological or logistical? and what about collapse and the natural strategic reserve (unpumped fields)? global climate change implications are obviously negative.
anyone?
-pop

HO's response:
There are various reasons why drilling off-shore has been banned in the coastal regions around the country. There is some explanation of the situation off-California from October 1999 where you might note that both the Governor Bush, and Vice President Gore favored the moratorium on drilling off the California Coast.

"Vice President Al Gore pledged yesterday to permanently ban offshore oil drilling in California and Florida, states critical to his bid for the presidency. . . . . . . . .Margita Thompson, Bush's California campaign spokeswoman, said, ``Gov. Bush has consistently supported and will continue to support the current moratorium. As a governor, he understands the importance of listening to local concerns. As president, he will take a hard look at current leases on a case-by-case basis, with a strong deference to local concerns.''
The issue of offshore oil drilling has been the focus of decades of environmental debate in California, where there are 43 active drilling sites. Owners of another 36 still have drilling rights.

New drilling is on hold until the Interior Department's Minerals Management Service finishes a $1.5 million feasibility study."  (Quote from 10/99 SF Gate article, which is the linked article)

thanks,
-pop

Shell says reserves may slip more

Royal Dutch Shell, struggling to replace its aging oil and gas fields, said Thursday that new developments may fail to keep pace with production for the next three years, signaling its reserves may fall further.

Projects may be delayed because of short supplies of materials and rising prices for contractors and services, Chief Executive Officer Jeroen van der Veer told reporters in London. Meeting a goal of replacing 100 percent of the oil and gas pumped from its fields from 2004 to 2008 is "less likely" as a result, he said.

(Ok I borowed it from Totoneila but I think it's best to greet all the people around!)

I read the essay made by Jerôme à Paris regarding the fictional stopping of oil exportation from Norway.  Just Imagine what a less friendly country will a huge demand could do to the market if it were to happen.

On a bright side, I met my hometown mayor this morning with the general manager.  I had produced a report in french just to state the PO problem with criticts and analisys of alternatives.  We only could go trough the conclusions of the report wich are :

1. PO is happening shortly or has already happened
   
2. Growth and oil are closely related and diminution of oil production will lead to economical collapse.
   
3. Alternatives are at most questionable at worst ineficient.

From the start they say they will take a torough look at the issue and think of what can be done from our perspective. I guess they need some time to chew it and sink it for themselves.  

The general manager is somewhat of a friend (as someone 20 years older can be a friend!) and told me her girl and their friends are making 2 big gardens for 4 families and expect to be self sufficient this winter.  He's grandson has not ever eated industrial farming products, cow milk or ice cream.

Since I'm deeply involved in my hometown, the message was really taken seriously.  Also I didnt took the environmental way nor did I had to go deeply in the consequences. Merely stating that if a spike would occur between september and april, there could be food shortage and life threathning hunger.

What they offered already is some arable land owned by the city could be made available to grow food.  Tractors, fuel and seeds could be given by the city.  People would have to fill in for benevolent work.  Also we agreed that before getting the normal citizen to learn about it, we would have to put up a plan so we could prevent hysteria and panic.
They also saw that taking first step toward readying our city would entice green people to establish around here and geting an influx of youth people (we had an youth exodus dating from 12 years ago)

The Quebec goverment has just realeased their new energy  strategy yesterday and they asked me what I did think of that strategy.  I said that they talk about ethanol from wood waste and oil exploration under the Saint-Lawrent River.  I told them that ethanol was an energy looser and that wood harvesting industry has an 30% input in fuel. Wood harvesting industry, already hurted by scores of bad news (tariff barrier with US, raising of dollar from 0,60$US to 0,90$US in 3 years, a cut in the available wood alotment, you know real stinky bad news) would be about the first to fold in the advent of rise in oil price. Also we have good hydro electric dams but they are located way up north.  I told them that it TSHTF, there is not much hope from keeping them running easylly. I told them to read the part regarding alternatives.

Since I'm the general manager of the Chamber of commerce, I also told all administrator about the PO problem and talked the president into thinking there was an opportunity when there is a crisis (he's a buisness man, so to win a buisness man, you have to talk buisness).  And I told him about the post carbon institute and that they advocate relocalization.   Since, like me, he has our city engraved in his heart, that soothed him a lot.  I also told him that in 3 to 5 years at most there is no hope for most (if not all) buisnesses around here.  I also told him that while buisiness would be dead, people would still needing food, toothpaste, tools, woods, etc and that new buisiness would incur, no matter what we will have to go trough.

Because I can go and talk to almost anybody important around town and they let me in without a warning call, I had met the general manager of the Union Bank (caisse populaire Sieur de Roberval, I know it's a weird name, but we like it a lot) last friday.  Apart from asking him money for one of my involment I talked to him about the pending PO problems.  I didnt had the time to go trough it toroughly but he was receptive.  I advanded the idea of putting forward a new local currency, like the one in Salt Spring, BC.  I had not completed the report and wanted to meet with the mayor before showing it to him.  He think that I have a very inovative Idea and not current way of thinking but he is open to that idea.

I have already given copies of my report (I will put up a website shortly to make it available to all, creating websites is my sideline job) to all the administrator of the Chamber of commerce and I have put up a presentation next tuesday (may 9th).  I will use power point slides and photos of main PO actors and players (Roscoe Bartlett, Simmons, Campbell, Deffeyes, Kunstler, Hubbert, Rainwater, Hirsch, etc) graphics and such.  I think some already take my findings seriously and I what to steer them to do stuff regarding this.

I know it will not be easy to steer them toward a new paradigm (a new way of thinking abour their like) but since I make the emphasis in the way I care for them, they will get it.

Also I tell them that there is no real way of telling when TSHTF but that preparing for at least food security might not be too hard to do while they keep on doing what they do best already to earn their life. I have put forward just a few important things to do to cope with PO problems :

1. Ensure food security from local producers
   
2. Bring forward a local currency network
   
3. Entice people to learn stuff that could be usefull in the next economy.

This is a matter of contention and what answer you get depends on who you talk to.

>From what I remember from the speech -- and I didn't write down every single number -- Al-Saif claimed many fields were not depleting at 8%. I think he said the average was more like 4%. He also said that new fields that came online in 2004 and 2005 are more than making up for depleting reserves. So his contention is that Saudi will be actually producing 12.5 million barrels of oil a day in 2009. Obviously, some people look at the numbers and disagree that this will actually happen.

Lynn J. Cook
Energy Reporter
Houston Chronicle
801 Texas Ave. - 9th floor
Houston, Texas 77002
713/220-6873
ljcook@chron.com

-----Original Message-----
From: Robert
Sent: Tuesday, May 02, 2006 8:44 AM
To: ljcook@chron.com
Subject: Al-Saif

Lynn, Great story on the new Saudi oil production. From your article I understand that they are adding 2.7mb/day from Khurais, Abu Jifan and Mazalif fields by 2009. According to Platts the existing fields are depleting at 8% annually so if you take that as 750,000mb/day, then by 2009, the total output will be 9.8 + 2.7 - 3*0.75 = 10.1mb/day. Do I have that right? I didn't take into consideration filling of tank farms, could that be the source of error?

-Robert, oil futures trader

Global warming blamed for Glacier Instability
Long a tradition in the French Alps, summer skiing at France's Alpe d'Huez provided glacier skiing for skiers and snowboarders from all over the world. There was also a circuit that provided rare summer cross country skiing. And now resort officials have announced that summer riding will be halted for the foreseeable future, perhaps forever, until the melting glacier is stabilized. Apparently, global warming (or similar) is wreaking havoc on the resort.

Most websites specialising in discussion of peak oil had crashed early on, as millions of people were directed to them by Google searches.

Better have a high-availability plan in place!

http://www.petroleumnews.com/pntruncate/769687358.shtml

i'd say it is consistent with tertzakian's supply chain and break point argument.  a moderate expectation of a couple decades of rising prices, no silver bullets, but (grudging?) adjustment.

We must reduce our oil consumption. 70% of a barrel of oil goes to transportation fuels in this country. The U.S. Department of Transportation stands to provide the biggest impact on reducing our levels of consumption.

Here are some proposals to help you out:

1. We can substantially reduce oil consumption (and improve safety records) by immediately reinstating the 55mph speed limit nationwide, or at least on all interstate highways.

2. Radically enlarging the nation's rail system is an even bigger and very crucial method of reducing future oil consumption, especially for the hauling of freight. In the U.S., freight rail carried 27.8% of the ton-miles at 220,000 barrels/day while trucks carry 32.1% of the freight miles with 2.07 million barrels/day [all 2002 data.] We should start to run as many rail services on electricity as possible. We should include the addition of significant separate lines for long-distance, high-speed passenger rail. We are about the only western country without a good rail system and we are going to suffer severely in the near future if we don't do something about it.

3. Some complain that acquisition of real estate for rail tracks is one of the most significant hurdles -- they're wrong; we have a massive interstate highway system that could be modified to accommodate track. It would take train service to virtually every city of significant size in the country and could be built in a relatively short period of time compared to acquiring new real estate and rights of way. Provide incentives to the States to begin building feeder rail lines to other cities off the interstate system. Fund it with a gas tax increase of twenty cents per gallon, or more. That should get you at least $100 million of additional funding a year at current fuel consumption rates. Such a tax (billed as a new "fuel saving" rail initiative) would be better received by Americans than a so-called "carbon tax".

4. Reduce Interstate Highway vehicle lanes in exchange for rail lanes and mandate HOV lanes for every interstate highway to emphasize conservation. As another incentive, HOV lanes could be entitled to a higher speed limit privilege as well. This would encourage HOV and rail use as solo drivers looked out the windows of their cars, stuck in slow traffic, and watching high occupancy vehicles and trains whizzing past.

Americans aren't going to change their habits until the alternatives are less painful than existing habits. You, sir, can go a long way towards "motivating" motorists and freight forwarders to modify their transportation habits, especially in better-gas-mileage vehicles. Conservation, given the world oil situation, is not a dirty word. I encourage you to move swiftly; the clock is ticking.

Alter thinks we came very close to TEOTWAWKI during the Great Depression.  He said in some areas, unemployment was as high as 85%.  Families had their whole life savings wiped out in the banking crisis, and the threat of mass violence loomed.  Many felt capitalism had failed, and that democracy was failing, too.  He claims FDR even considered imposing martial law.

Haven't read the book, but he seemed to be crediting FDR, not so much for his actual policies, but for his leadership.  For giving America hope.

http://www.dailystar.com.lb/article.asp?edition_id=10&categ_id=2&article_id=24166

U.S. Natural Gas Production in billion cubic feet
2003    24, 118     Peak
2004    24, 055     -0.2%
2005    23, 500     -2.3%
2006 Jan/Feb        -3.0%

The U.S. apparently peaked in natural gas production in 2003. Production has not been able to re-attain the 2003 level despite an increasing price and an increased number of wells. In 2005, the U.S. was producing at a level of about 0.4% below 2004, until the hurricane season hit and made the situation worse. Natural gas production from the Gulf of Mexico is not, however, as large a factor as oil production in the Gulf. The current 3% decline may be due to residual effects from the hurricane season, but these are likely to linger through at least the first half of the year, after which the comparison with 2005 may improve - but only if we are spared more Gulf hurricanes.

Canadian natural gas production has been on a ragged plateau since 2000, at roughly one quarter of U.S. production. Some significant discoveries early this decade may have prevented an earlier peak. Slightly more than half of the natural gas produced in Canada is exported to the U.S. This contributes to the U.S. supply as shown below:

Natural Gas Imports from Canada in billion cubic feet
2004     4258
2005     4285     0.2%
2006 Jan/Feb    -17.3%

Canada supplies about 15% of the natural gas used by the U.S. The sharp reduction in 2006 Jan/Feb imports is immediately suspicious, and is probably due in large part to the unusually warm Jan/Feb months in the U.S. However, December imports were also down 6%, and December was not a warm month. Whether or not this is a trend of reduced natural gas imports from Canada is probably too soon to tell. Imports of liquid natural gas make up about 2.6% of the U.S. supply, and will remain too small in 2006 to significantly affect the total.

The combination of reduced U.S. production and reduced Canadian imports will likely create a situation where total U.S. supply is down about 4% from last year.

Current U.S. natural gas storage as of the end of Feb 2006 is 6090 billion cubic feet, or about 3 months supply. Measured in terms of months of supply, this is quite a bit more supply than oil inventories, which only run around 3 weeks. It is also quite large compared to what happened with natural gas in England this winter, where they got down below two weeks supply, I believe. The shortfall in 2005 production was completely mitigated by the warm weather in the winter, with stocks now 5.5% above last year's levels. They had been below the previous year's levels in December.

Gas usage in the U.S. breaks down as follows:
Residential    22.1%
Commercial     13.9%
Industrial     30.2%
Electricity    26.4%  
Other          the rest

Looking at the electricity component, natural gas now supplies 18.6% of the electricity generated in the U.S. This is an annual figure, but the seasonal variation is large. In the summer, natural gas supplies about 25% of the electricity, primarily due to air conditioning. In the winter, the figure drops substantially as natural gas is applied to heating rather than electricity.

The electricity component is the most sensitive area in the short and medium term, because any shortfall in natural gas supply will be taken from electricity. Utility companies are very sensitive to the issue of cutting residential or commercial supply - interruptions in gas supply will cut off supply to burning units and pilot lights, and resumptions will fill buildings with gas, creating health and fire hazards. Industrial users of natural gas are not usually very flexible with alternatives to natural gas. As a result, any shortfall will be taken almost entirely from the electricity supply, since there are alternate sources of electricity, and the consequences are less severe - at least at first.

The problem is likely to develop in the medium and long term. Two thirds of the new electricity generation supply since 2000 has come from natural gas, and now it appears that this source of supply will decline. Furthermore, most of the new power generation capability scheduled to come on line this year is based on natural gas. Electricity generation capacity has been an issue already this year, with rolling blackouts in Texas a few weeks ago. California had a worse experience several years back. Supply is somewhat tight. The natural gas situation will not help.

Most of the figures on this post come from the EIA site:
http://www.eia.doe.gov/natural_gas/data_publications/natural_gas_monthly/ngm.html

Craig

Why are we still debating climate change? How soon will we hit peak oil supply? When politics mix with science, what is being brewed? Join speakers from the left & the right, from the lab & the field, from industry & advocacy, as we air the ongoing debate about whether human activity is actually changing the climate of the planet.

The quote is right from the website of an environmental conference taking place June 2 - 4, 2006 at CalTech. It's hosted by the Skeptics Society and includes some big names on the speaker's list (John Stossel, Michael Crichton, Nobel lauriate Dr. David Baltimore, with Michael Shermer acting as host).

The site for the conference: http://www.environmentalwars.org/