The Oil Drum

To your question memmel,
"Is there anyway to find out what really happening in SA ?",

Of all the things my contact with the "peak aware" and "peak concerned" community has taught me, this is one of the most fundamental, and one of the least known by the general public:  There really is NO WAY to know what is going on in Saudi Arabia, or most of the other OPEC nations.  The Mexican oil industry is almost as secretive.  Matthew Simmons once made the comparison of running 70 miles per hour in your car without a fuel gauge.  Everything looks great and your having a big ole' time till all of a sudden.....what happened?   You sputter to a stop with no warning.  Here's the real rub:  You don't even know if you ran out!  It could be a fuel filter stopped up or an ignition or computer problem, or...you may be out of gas!  You cannot even know how to diagnose the problem with no visibility!

Most of the folks here know from my prior posts that I am an optimistic type by the standards of the "peak" aware/"peak" concerned type.  But I find the absolute lack of useful information from the biggest oil producers, who are some of the U.S. markets biggest suppliers, to be discomforting and foreboding beyond easy words.  

The lack of information even if there is no lack of oil should be seen as a potentially nation threatening emergency in and of itself and treated as such by our government, business, and civil defense authorities in cities, states, and towns, and viewed that way by our individual citizens.

This is something we CAN DO now, and with no immediate breakthrough in technology.  We must:
*Lobby the world every day in every way for energy supply and productioon transparency.  Outside auditing is considered a hallmark of modern respectable business and finance around the world.  We should make sure the OPEC organization KNOWS that without outside auditing and transparency, we consider them niether modern nor respectable.  Likewise, Venezuala (an OPEC  member) and Mexico.  The Europeans, Japanese, Koreans and Chinese should be lobbied to join this cause.  They have as much or more at stake as we do.

*Strategic planning.  We should work to increase the strategic storage AT ALL LEVELS of crude oil, gasoline and Diesel, LPG, and Natural gas.  Even using tax relief and incentives should be considered to get business, states, counties, and local communities to stretch their storage capacitiy out to the maiximum sensible amount.  Storing out of season fuel (nat gas and LPG in the summer) should be studied, and put into place if it can be done in a way that does not threaten market stability.  This should be done in phased and planned intervals, and NOT as a panic hoarding strategy.  But having enough storage to assure the ability to ride through unique weather abnormalities, or to assist in the event of a sudden short duration political/terrorist/transportation event is not hoarding, but just good planning.  Remember, we have NO VISIBILITY forward.  That is not the fault of the buyer, but of the suppiers.
*Fuel diversity.  There is now no excuse not to diversify fossil fuel supply to critical services and agencies.  At least part of the fleets of ambulance, police cars, utility service trucks, telephone service trucks, postal delivery and private delivery vehicles, should be on a "secondary" or even third fuel, different from the "mainstream" or primary gasoline or Diesel fuel of the fleet at large.  CNG and LPG are idea candidates, along with a mix of gasolne, hybrid, and Diesel vehicles.  As PHEV (Plug Hybrid Electric Vehicles) become usable, they should not be dismissed, as it even brings the electric grid into the mix, but that may still be a few years down the road.  This way, in the event of emergency, at least some of the fleet may be able to remain functional, since the odds of losing access to all of the above types of fuel is not nearly as likely as the risk of losing just one "mono" fuel.

Again, on site storage where possible should be considered.  LPG can be stored in very large tanks, and a "Fuel CO-OP" of, for example, telephone service and electric utility firms could jointly arrange with the LPG distributer in the area to provide a tank on lease, and share out the cost. Similiar arrangements could be made by emergency services of cities and counties, hospitals, etc.  Other such arrangements would be made with nat gas companies, and possibly even Diesel or gasoline distributers, to stretch out forward planning and visibility.  

This is no joke.  I say again, that we should all be deeply concerned and troubled, immediate peak or not, about the absolute blindness we are operating in.
The public should know that this is a serious threat to public and national health and safety. (Who will do a public information campaign?  Tag line:  "Do you know how much of our oil Saudi Arabia is producing?  Niether do we."

 I speak for myself here, but it is this absolute forward blindness that scares me more in the very short term than the potential of immediate peak.  Peak may happen soon, it may have already happened, it may be a couple of decades off. We really just don't know.  The absolute blindness we live with on energy supply information WE KNOW has already happened years ago, and stays with us daily.

Roger Conner  known to you as ThatsItImout

Let's look at how Saudi Arabia responded to supply disruptions in 1973 versus 2005

As I have previously noted, based on Khebab's HL work, Saudi Arabia (the current swing producer) in 2005 was at about the same stage of depletion at which Texas (the prior swing producer), in 1972, started its so far terminal decline in production.

During the 1973 Arab Oil Embargo, Texas had started declining.  Note that the "Embargo" lasted for 60 days or so.  In fact, if you look at Saudi oil production during this time period, they showed rising oil production.  The reason that oil prices went up by about 1,000% from 1973 to 1980 was because of temporary supply/demand imbalances--the embargo was just a trigger.  

It's instructive to compare the Saudi production response in the Seventies to their hurricane response last year.  From 1970 to 1973, Saudi oil production went up by about 100%:  http://www.eia.doe.gov/emeu/ipsr/supply.html

Last year, after the hurricanes hit, the Saudis were unable to increase their production, and Saudi oil production started showing a decline, which required (as far as I know) the largest ever coordinated release of emergency petroleum reserves.  

It appears that releases of emergency reserves represent the new source of "swing production."   Also, note that the rig count explosion on Stuart's excellent graph really kicked off in early 2005.

To summarize:  (1) Saudi Arabia, based on the HL method, is at about the same point at which Texas started its decline; (2)  Saudi Arabia in 2005, like Texas in 1973, was unable to respond to a supply disruption and (3)  Saudi Arabia, just like Texas in the Seventies, has embarked on a very aggressive drilling program.

(After increasing the number of producing wells in Texas by 14%, from 1972 to 1982, the Texas oil industry succeeded in slowing the decline in production to only about 30% from 1972 to 1982.)  

BTW, note that the EIA data continue to show that world crude + condensate production is down about 1% since December, while (light/sweet) oil prices are up close to 25%.

Our govt department (ABARE) uses IEA and EIA figures and you can see the phallic-shape of the 'predicter's droop' over the past 6 years compared to the actual rise in the oil price. :)