So who do we believe?
Posted by Heading Out on August 21, 2006 - 11:10pm
Topic: Supply/Production
Tags: bp, george w. bush, syncrude, texas city refinery [list all tags]
Q Thanks. Mr. President, what do you say to people who are losing patience with gas prices at $3 a gallon? And how much of a political price do you think you're paying for that right now?The response seems to feed to the Saudi position that they have plenty of oil, if only we users would provide the refineries that could use it.THE PRESIDENT: I've been talking about gas prices ever since they got high, starting with this -- look, I understand gas prices are like a hidden tax. Not a hidden tax, it's a tax -- it's taking money out of people's pockets. I know that. All the more reason for us to diversify away from crude oil. That's not going to happen overnight. We passed law that encouraged consumption through different purchasing habits, like hybrid vehicles
-- you buy a hybrid, you get a tax credit. We've encouraged the spread of ethanol as an alternative to crude oil. We have asked for Congress to pass regulatory relief so we can build more refineries to increase the supply of gasoline, hopefully taking the pressure off of price.
And so the strategy is to recognize that dependency upon crude oil is -- in a global market affects us economically here at home, and therefore, we need to diversify away as quickly as possible.
At the same time Darwinian and Totoneila draw attention to the strange case of the Shrinking Refinery. Apparently the BP Refinery at Texas City, which pre-hurricanes had a capacity of 460,000 bd, will no longer produce at more than 300,000 bd.
The article suggests that this might be a permanent downsizing. Given that one of the ways that the refineries have coped with increasing demand in the past has been to increase production at permitted refineries (as, for example we are seeing up in Canada, where the Syncrude Coker will come on line later this month, after being shut down, almost immediately after initial start because of a smell that it produced. With that re-start the production will increase, if my memory serves, by 100,000 bd. However, while similar expansion plans are in the offing for other companies in Alberta, here we see a refinery in Texas that is reducing the size of its operations.
There are obviously two different messages being given here, a public affirmation, and a less loudly stated lack of faith in the sustainability of oil supplies.
Unfortunately there is also a third, which confirms much of what has been said before about the difference between plans and reality. Both refinery stories show that the anticipated production dates slip, or can't be met, and that, as with the Thunder Horse platform, the production that could be anticipated, gets further delayed.
Bush said today that he would bring down gasoline prices by creating enough political good will with oil-producing nations that they would increase their supply of crude. "I would work with our friends in OPEC to convince them to open up the spigot, to increase the supply. Use the capital that my administration will earn, with the Kuwaitis or the Saudis, and convince them to open up the spigot." Implicit in his comments was a criticism of the Clinton administration as failing to take advantage of the good will that the US built with Kuwait and Saudi Arabia during the Persian Gulf war in 1991. Also implicit was that as the son of the president who built the coalition that drove the Iraqis out of Kuwait, Mr. Bush would be able to establish ties on a personal level that would persuade oil-producing nations that they owed the US something in return.
http://www.ontheissues.org/Celeb/More_George_W__Bush_Budget_&_Economy.htm
The Saudi and Kuwaiti elite (Sunni) have large Shiite minorities---the Shia of Saudi Arabia all happen to be in oil producing areas---and really don't want Iran pressuring them and causing rebellious ideas among their disadvantaged minorities.
That's why they supported Saddam against Iran in the 1980s---that little invasion of Kuwait wasn't in the plan---and especially why they were against invading Iraq this time. Because they knew the Arab Shia would take over in Iraq and that would give other people "bad ideas".
:)
If it turns out, retrospectively, that Saudi Arabia still currently has excess capacity, and could open the spigot if they wanted (and who can say that they coudn't?)...
then this current "oil crisis" will be seen, by future historians, as due exclusively to the ineptitude and adventurism of the Bush administration.
For better or for worse!
Yet the President and many others believe the lie that they are deliberately cutting back on production because of lack of buyers. Hell, let them lob off about five bucks off the price and see how many buyers they have.
The Flip side of the coin says that the President is indeed well aware of PO and knows very well that KSA is "maxed out". After All Matt Simmons was apart of the President's energy counsel. Cheney was also in the loop. The President believes that any direct acknowledgement will trigger a panic. For one, such a speech would destablize the ME further, possiblity resulting in the overthrow of House of Saud that suddenly ends all KSA oil exports (eg 1979 Iranian revolution). That certainly would not be an improvement. The US now imports 60% of its oil from oversea. What do you think would happen if 10% to 25% of Oil imports disappear with in the next 30 days? Absolute chaos.
And so the strategy is to recognize that dependency upon crude oil is ....we need to diversify away [from crude oil] as quickly as possible.
All the more reason for us to diversify away from crude oil.
If refinery capacity is the real culprit, strong talk about diversification doesn't seem appropriate. In fact, he is a little tentative about the refineries.
we can build more refineries to increase the supply of gasoline, hopefully taking the pressure off of price.
Can we read this as simply saying: whatever the cause, there is no trusting oil-derived energy going forward?
http://www.theonion.com/content/node/51567
http://www.engineerlive.com/international-oil-and-gas-engineer/15986/saudi-arabia-signs-for-refinery .thtml
On the oil majors - here in the UK they are all closing down most of their gas stations. This means you have to drive miles to find an open gas station where now, owing to shortage (of gas stations), their are always queues. Supermarkets are now the main outlet for gas and the majors claim that it makes more commercial sense to sell gas station sites for real estate redevelopment. But you are left wondering if they don't know exactly what is going on - no gas to sell and drivers fighting at the pumps for supply?
Will Las Vegas' gas prices spiral out of control soon?
Nevada, which receives by pipeline all its FFs from California, will be capacity maxed in a year.
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The BP pipeline shutdown is "going to make a big difference in gas prices in Las Vegas over the next six months," Ortega said.
Southern Nevada's existing fuel pipelines from Colton are on pace to reach capacity within the next 12 months. Without new delivery methods, fuel shortages will soon follow as local jet and motor vehicle traffic grows an estimated 3 percent to 5 percent each year.
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This article does a pretty good job outlining CA infrastructure problems.
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The report said four reasons caused California consumers to pay an extra $1.3 billion at the pumps from May through July:
- Refinery problems and unplanned outages lowered state gasoline production to the lowest levels in five years.
- California marine port congestion increased in late April, delaying the arrival of gasoline and diesel imports.
- Gasoline and diesel shipments to Nevada and Arizona were the highest in five years.
- Prices of materials used in gasoline refining increased.
It also said the number of unplanned refinery problems tripled to 175 for the first half of this year compared to 58 during the same time period last year. It said the refinery problems averaged 9.2 days this year compared to 5.3 in 2005. Also, it said dock congestion caused some tankers to take three to five days to unload compared to the usual one day.------------------------
from this CA Govt website
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Crude oil production in California averaged 731,150 barrels per day in 2004, a decline of 4.7 percent from 2003. Statewide oil production has declined to levels not seen since 1943. In 2005, the total receipts to refineries of roughly 674 million barrels came from in-state oil production (39.4%), combined with oil from Alaska (20.1%), and foreign sources (40.4%).
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Many pipelines in CA are fifty years old, much older than Prudhoe Bay. This article details the eroding public trust from corrosion.
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The state, home to prolific oil fields that date as far back as 1899, has long been fertile ground for wells, refineries and gasoline-guzzling automobiles. That led to the construction of huge webs of pipelines to connect oil fields, refineries, storage tanks, ports, airports, military bases, offshore drilling rigs and more.
Today there are about 6,000 miles of active "hazardous liquids" pipelines in California, with most carrying crude oil or petroleum-based fuels like gasoline, diesel and jet fuel, according to the state fire marshal's pipeline safety division, California's primary watchdog for that infrastructure.
Pipelines that carry natural gas are ubiquitous because they deliver the fuel to individual houses as well as power plants and other facilities.
California has more than 12,000 miles of the larger, long-haul transmission lines and 98,000 miles of distribution lines -- the smaller pipes that carry natural gas into neighborhoods -- according to the federal Pipeline and Hazardous Materials Safety Administration, an arm of the Transportation Department.
But many of California's pipelines are at least 50 years old, prone to corrosion and under threat from Mother Nature as well as backhoes and other kinds of human interference.
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Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Well the president's right. What would have happened if WE had started and stayed with it 3 decades ago? Would George W. Bush ever gotten even near the White House?
Soon, my precious, soon ....
So :
- There is a global shortage of refining capacity (or would be, in the hypothesis that world oil consumption is expanding / will continue to expand).
- The oil majors aren't building refineries. Yet they subscribe to the cornucopian thesis that there are at least thirty years of expanding oil production ahead of us.
- The Saudis are building refineries.
So, the oil majors, who are conservative investors, don't actually believe that there is 30 years' worth of oil production at rates exceeding the current production. They don't want to get stuck with plant that will run at capacity for 5 or 10 years, then get mothballed for lack of supply. The Saudis, on the other hand, need to sell their heavy, sour reserves, and are obliged to build their own refineries because nobody else is able to guarantee supply for long enough to recoup the investment.Is that about it?
Odd that the Saudis, who have such vast capacity, are looking at the Manifa crude and at bitumen deposits.
Iran 'fires on Romanian oil rig'
http://www.cnn.com/2006/WORLD/meast/08/22/iran.romania.ap/index.html
What the h*ll is this all about?
19 August, AME Info - Romanian drilling company Grup Servicii Petroliere is threatening to take the Petro Iran Development Company to the International Court of Justice at The Hague in order to retrieve an oil rig which it claims has been seized in an act of piracy, reported Gulf News.
The Orizont rig has been in Iranian waters since the end of a contract in April. GSP says it has lost $70m due to the dispute.
Allow me to post a comment from a well used Ag board that was handed to me yesterday in a printout. This type of comment shows just about where most 'Merikans' are at here in the flyover and ,well most elsewhere in 'Merika' perhaps.
Thread was titled: "Does the average American understand this?"
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Dear Sir,
I think both you and MSB have good points. If I read correctly, you both are advocating conservation. MSB suggests governmental involvement to help push the idea. I do think the average American grasps the concept that placing lots of oil dollars in the hands of unstable foreigners isn't a smart thing. The thing with conservation is, who'll go first? As it stands now, the individual who continues to drive the machine that does a good job for him and provides safety on the road is behaving ratinally, even with today's fuel price. After all, if the SUV or 4WD dually is what you perceive as necessary, and you're paying the bills, then that's the end of the argument, isn't it? The alternative is to provide a bureacracy to determine your needs and you can't buy anything else. Ugh.
I would remind readers that our government's policies have already precluded the solution to much of what e81 has pointed out as the problem. We buy oil from others because we've prohibited production within our own nation. Is this smart?
We have the resources to supply nearly all our electricity with nuclear. We now get under 20% that way. Why? We've run about a hundred plants for over 30 years without mishap. (Oh yeah, Three Mile Island disaster--no one killed, no one injured, one very small release of steam that affected no one, and one big lesson: If the guys at the control panel, upon hearing the first alarm, had simply picked up their lunch boxes and departed the building, the damage would have been far less. (They actually turned off the main cooling pump, allowing the overheat.))
Having nearly destroyed the nuclear industry, we are now in the goofy position of building every new electrical generating plant using natural gas--essentially a bank of turboshaft jet engines driving generators. Why use our cleanest fuel to make something that can be made by either nuclear or our almost inexhaustible supply of coal? (Best estimates run around a two thousand year supply or so, right here in our own backyard.) If you prefer to worry about greenhouse gasses, then nuclear is your obvious solution. Either fits well for fixed-site electrical generation.
For travel and transportation, oil is ideal since it packs the most punch into a gallon and our infrastructure is already in place. But we're running out of oil, of course. Not so. World proven reserves in late 1990's was around 1.1 trillion bbls. Last year, world proven reserves was around....1.1 trillion bbls. Uh? Yep. Seems technology can recover stuff that used to be considered unrecoverable, plus there are new discoveries.
But that's world. How about within the US? Even better on the factual side. Not so good from the political side. We have oil right here in the US. We have even more offshore. However, our politicians have placed pretty much all new fields off limits. Why? Go ask them. Natural gas is even more plentiful. Enough for all the clean, efficient home heating you'd ever want for hundreds of years. But we don't drill for it and it's tough to build a pipeline anywhere to deliver it anymore. Why? I guess we'd rather give the money to someone else.
In addition, if you like oil, then consider the coal-to-oil conversion. The process has been around for over half a century, with Germany doing quite a lot of it as their natural oil reserves dried up. The leader today is...South Africa. They have plenty of coal and had an oil embargo for years, so they developed the largest industry for it. Looks pretty smart right now. Even easier is shale to oil. That's how Canada makes most of the oil they ship to the US for sale. Meanwhile, we let our coal and oil shale sit in the ground, off limits to development and give the money to somebody else.
I would suggest there is some merit to the tax subsidies for windmills. Having distributive power generating capability is of some strategic value and there is the feel good factor. I'd be nice if Ted Kennedy didn't throw a hissy fit when it's proposed in his favorite sailing area....
My point is, there is so much goofiness in our current policy that I just don't know where to begin. I've pointed out how we already have so much energy sources in so many forms that E81's problem can be solved quite easily. Politics seem to have interfered, so I'm not hopeful our government will undo the damage soon.
As to conservation, that already happens. Each individual makes decisions to conserve every time he adjusts the thermostat, turns a light switch on or off, buys a lightbulb, chooses a water heater, or chooses a vehicle. If you believe each person is acting rationally, then that person is choosing the level of conservation that fits that person's unique situation. One guy may have had some property stolen, and will choose to leave a 50,000 watt yard light on all night no matter what the cost. His neighbor, having experienced no theft, prefers darkness and rural solitude. If that's not the right answer for both, then who will be the bureacrat to say otherwise?
We already ration gasoline, and do it by the most efficient process ever devised--the market. The guy who thinks ahead, figures out how to combine two trips to town into one has just decided to allow supply to rise slightly. The next guy will stop at the pump and decide to pay the price for those gallons our thrifty dude didn't buy. Both are satisfied, having made a free choice. If we ask our government to "help" with the price, supply drops and we can once again enjoy those long afternoons getting acquainted with strangers while awaiting our turn in gas lines. Gas will be cheaper, it just won't be available.
Yep, I certainly agree with E81 that it's idiocy to import so much oil. It's doubly bad since we've done it to ourselves. I'm not sure how much more help we can stand from our government. I'll also admit I had hoped George would understand this threat and actually do something more about it. I understand there is some movement on the nuclear front, and Yucca Mt is continuing to be a viable long-term storage. Good grief, how long has that been going on? Not much else that I can see, but there's even more resistance from the Dems. Wish I had a better answer.
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Please note that this is NOT my views.
It doesn't matter whether or not these are your views -- nobody is going to bite you.
Like many bore-of-the-year tracts of this kind ("I've got a pat solution to all your energy problems anf if people listened to me and had a bit of common sense then electricity would be too cheap to meter and the Murcan way of life could continue indefinitely honestly it's not as though you have to be a rocket scientist to understand all this it's blindingly obvious and a child of five could do it etc etc"), it combines a dollop of sense with a kilo of non-sense.
Actually the bit on nuclear power wasn't a no-brainer.
It's ironic that the Greens, thanks to their dogged and sometimes hysterical opposition to nuclear power, are at least partly responsible for skyrocketing fossil fuel consumption. Or to put it from a different angle: cheap fossil fuels allowed the general public to play the prissy princess in refusing to consider the only viable alternative, short-term, finite fuel with a slow depletion rate -- since AFAIK 'peak uranium' isn't scheduled for a couple of centuries in terms of both its economic and technical recovery potential.
But I'm going off-topic ... so finito for now
See The economics of oofle dust and more generally Why Nuclear Power Cannot be a Major Energy Source.
re Risk:
risk is relative -- the question is which energy source is safer. How many years of life lost per Gigawatt of energy generated? Something like that.
re quantity:
As in the case of oil, it's a question of the gap between the technically and the economically recoverable quantity that matters when it comes to estimating URR. Opinions differ. Here's an excerpt from a pro-nuclear fuel article (You'll find it here):
Though by the time of 'peak uranium', overshoot will probably have done away with most of us anyhow ...
Two plants are being built to carry out this process at existing enrichment sites at Paducah, Kentucky and Portsmouth Ohio. According to a recent report the Portsmouth plant is due for completion this year (Dec. 2006) and to start conversion in Nov. 2007
Obviously this idiot believes in abiotic coal to go along with abiotic oil.
With the gadzillions of BTU's that the sungod sends us every day this should be no problem for our solar powered mining equipment.
As one example, they have to add additional desulphurization capacity for over-the-road diesel (June 1, 2006, US market requires 0.015% sulpher for 80% of "road" diesel vs. 0.5% the day before). Even without changes in feedstock, additional space is required.
One solution, reduce capacity and take out oan lder distillation column that was near end-of-life anyway.
We are past Peak Light Sweet crude. If an oil company has a light sweet crude refinery with very limited space for expansion, the "obvious" choice is to reduce capacity rather than, say, build a parking garage and epxand onto part of the employee parking lot.
IMHO, the issue is more Peak Light Sweet crude (and OPEC expansion of heavy sour refineries) than a Global Peak Oil expectation.
Also, US refineries may be "de-emphasized" due to rising natural gas prices (today and expected future). Again, OPEC may expand heavy sour capacity as US shrinks light sweet capacity.
Watch that oil price.
Iran's formal position, that they merely want to control the entire nuclear cycle for electricity production, is both coherent and plausible on its face. They are conscious of the time limit on their oil reserves, and wish to be dependent on no-one in securing their energy future. Decades of pariah status do not incite them to confidence.
The nuclear-bomb subtext is also plausible and coherent. But nobody is claiming it's imminent (except perhaps Condoleeza "Mushroom cloud" Rice?). It strikes me that it's urgent to calm down and temporize some more.
It's unfortunate that both sides are presided by shiny-eyed brinksmen.
A PWR with high enrichment fuel were a quick to develop and good submarine reactor and then could the civilian industry use the basic design and research.
The power industry were comfortable with boiling water and handling high purity water. Handling salt melts is something completely new.
Its easy to service water based technolog. You can even etch and clean the internal surfaces of a BWR reactor vessel, use a simple radiation screen and then have people in anti-dust coveralls working with servicing the pipes in the bottom.
USA probably built an enrichmnet overcapacity during the early cold war.