The Forest and the Trees -- the Oil News Imbalance
Posted by Dave Cohen on September 20, 2006 - 7:26am
A chronic pitfall for economists is that the daily deluge of data often obscures more meaningful long-term trends...Let's look briefly at the forest, not the trees. There's plenty of bad news.It's that old adage of not seeing the forest for the trees...
With oil now in the low $60 range, many economists are rethinking their assumptions of last year...
The problem in all this is that the peak oil theory isn't about $78-a-barrel oil. And the price of abundance isn't necessarily $63.
BP had originally scheduled startup for the end of 2005 and this latest slippage will make it harder for BP to hit production growth targets in the coming years.Project slippage is nothing new. However, "Thunder Horse has been repeatedly delayed but as of late July, BP still expected production to begin in the middle of 2007." In 2007, will we be told Thunderhorse will begin production in 2009?The delay will also call BP's skills at overseeing complex projects into question at a time when its management of Alaskan oil fields and pipelines is the subject of intense scrutiny.
BP said in a statement that tests carried out over the past four months revealed metallurgical failure in components of the subsea system and it now "plans to retrieve and rebuild all the sea-bed production equipment" from Thunder Horse.
In the year 2000, the Kashagan discovery in Kazahkstan was announced. Heralded as the largest reserves addition from a new field in 30 years, the operator consortium Agip KCO has pressed forward to get it onstream. Fast forward to the fall of 2006. Eni's Kashagan oil field start may be delayed to 2010.
The commercial production of the Kashagan oilfield, of which Eni SpA is the operator, could be delayed to 2010, the daily Il Sole 24 ore reported citing Kazak energy minister Baktyjoka Izmukhambetov.In Confident Despite Delays from Petroleum Economist (page 3), we are told that "Agip KCO has not yet revealed exactly what has gone wrong at Kashagan." What is at stake? Skrebowski's 2006 Megaprojects Update lists Kashagan Phase 1 as providing 0.450/mbpd in 2008 and an additional 0.450+/mbpd coming onstream in 2009 from the phase 2 addition. It is likely that no oil from Kashagan will flow until 2010. This prediction may be optimistic.Production could be delayed from 2008 to 'end of 2009, beginning of 2010,' the minister was quoted as saying.
The Kashagan field is one of the world's largest oil fields, with estimated reserves of 45 bln barrels, of which between 8-13 bln barrels are currently considered recoverable.
Could the delays at Kashagan be predicted? Absolutely. These are deep, high-pressure reservoirs in the shallow North Caspian Sea. "Temperatures can fall below -20°C in winter and a coating of ice, several metres thick, forms in this part of the Caspian Sea for many months of the year" (from the Kashagan link above). Finally, Kazahkstan's leader Nursultan Nazarbayev, the Sultan of the Steppes, is playing each potential operator (AGIG KCO, CNPC, KNOC, Petronas, ONGC) off against the others, asking for exorbitant terms for E&P in Caspian Sea development blocks.
Everyone knows that new oil production is subject to long lead times, as Daniel Yergin is fond of telling us. The meaning of the word "long" is a bit slippery in the Brave New World of oil E&P. Between them, Kashagan and Thunderhorse, designed to produce 0.250/mbpd, account for well over a million barrels per day of global supply that was supposed to be onstream by 2010.
There's more unsettling news. Russia is trying to take over Sakhalin II.
Shell said it was continuing to work on Sakhalin, but admitted the removal of its environment permit might lead to more delays and further cost overruns.The production challenges facing phase 2 of Sakhalin II (0.120+/mbpd due onstream in 2007) are at least as daunting as those at Kashagan—even without the Russian political interference.
In Nigeria, Shell May Delay 480,000 BPD Output due to continuing political violence. To be sure, there are some success stories like Azerbaijan. A closer look at others, like Angola, reveals a geopolitical accident waiting to happen. Also look at the optimistically framed Angola won't go back to war. Perhaps they won't. Meanwhile, declines like those at Cantarell will continue no matter how many horizontal wells they drill.
As you read about all of the shorter term "good news", remember that the perilous longer term supply-side trend reported here at The Oil Drum remains the same. The current enthusiasm for dismissing peak oil concerns misses much of the big picture.
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That's one of the best posts I've seen here yet. There's actually been far more bad news than good news over the last month, but since oil prices are falling nobody wants to talk about it. They'll talk about it in a few months, though.
As we speak, oil is down over a dollar on news of Oil CEO's obsession with Paris Hilton.
I also agree that this is a very good post.
We have credible reports that the four largest producing fields are declining/crashing.
Saudi production is down.
World production is down.
World net oil exports, from the top 10 exporters, are going down.
As outlined above, new fields are delayed (as Matt Simmons predicted).
Chinese oil imports are up 15% year over year. There are reports that the rate of increase in world demand is slowing, but not reversing, i.e., demand is going up, albeit at a slower rate, at least for now.
However, I think we are feeling some strong deflationary winds. So, it is entirely possible that we will see an actual falloff in consumption, but I predict that there will not be an increase in production.
"With world production down, world demand still going up" and US inventories high are we drawing down inventories from other parts of the world?
http://www.rigzone.com/news/article.asp?a_id=36156
Is this desperation exploration? This reads as a lot riskier and even more expensive than the Jack oilfield.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Did the conversions: 2,400 meters of seawater = 7,874 feet, 7200 meters of drill depth = 23,622 ft or 4.47 miles. The hopeful potential of 6-8 billion barrels is approx 1/2 of the optimistic potential of the 15 billion barrels of Jack. Ideal working conditions in the GoM vs the cold, wet weather off Newfoundland. My guess is that if icebergs come down this far: tugboats will have to lasso them, then drag them away to prevent a berg from hitting any platforms.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Check out this link on towing icebergs. My guess is that this is extremely energy intensive because 90% of the berg is underwater. Tugboats are basically dragging a huge underwater mass through billions of gallons of seawater--they won't move easily. In rough seas, the berg may want to rock & tumble making it nearly impossible to keep the towline on. The tugboat & berg have to move faster than the current they are both floating in to have any measureable effect if the current is headed towards an oil platform. The tug operator also has to compensate for wind drift too.
How would you like to have the winter job of floating in a boat in frigid, tossing seas sledgehammering or hot-water spraying off the ice forming on the underside of an oil-rig?
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Tell you what, Bob. You come up here and help me guard the gardens in the summer and I'll come down there and watch the fire tornados rage through Chandler in the winter with you.
We might as well have some fun with this!
Oil export slowdown endangers Russia GDP aim, official tells MPs
Excerpt:
Who the heck ever said that prices were controlled by only supply and demand? The news has mentioned repeatedly in recent weeks how much a fear of war or terrorism, or concern about a possible hurricane in the GoM was helping to push up crude prices.
An earlier poster already brought up the topic of Quantum Marketronics.
But let's recap.
There are 5 fundamental particles (aka the digits of the Invisible and Brainless Hand):
- The Price Nucleus: This particle is the largest and most visible. It moves in an ether of currency, shifting to lower levels, even negative ones, but never to positive infinity. Often governments will print more ether in an effort to keep the Price Nucleus colloidally suspended at artificial levels.
- The Infotron: This particle carries information energy in two flavors, positive and negative.. It orbits the Price Nucleus, causing the nucleus to move up or down based on the net polarity of infotrons spinning around the nucleus. If there is net negative news, the nucleus is propelled downwardly by bombardment of negative infotrons. If there is an overexuberance of net positive news, the Price nucleus is lifted to dizzying heights before leveling off due to counter drag by reality.
- The Dis-Infotron: This particle carries dis-information forces of two flavors, cornucopian and doomer/gloomer. It orbits in a higher valence band than the Infotrons and therefore often obscures them. It is very difficult to tell the difference between Infotrons and Dis-infotrons. It is said that Infotrons triumph in the end, but that is true only in a civilization that manages to survive. It is believed that collapsed civilizations exhibit an excess of Dis-Infotrons just prior to their collapse. Recently, on Easter Island, scientists found a monolith. It said "Dump wood, buy rock." There were no engravings after that.
- The Growth-o-tron: This particle spins about the outskirts of the orbitals of the infotrons and dis-infotrons. As its radius of orbit increases, it induces volumetric expansion in quantity attributes of the Price Nucleus. There are two main attributes: supply and demand. With all else equal, supply and demand can remain proportional to one another as long as growth does not exceed available resources.
- The Collapse-o-tron: This particle spins about the outskirts of the orbitals of the Growth-o-trons. It is very high energy and dangerous. If Growth-o-trons exceed their orbital boundaries and crash into the Collapse-o-trons, all hell breaks loose. The event is otherwise known as WTSHTF.
With all this in mind, you can now understand why the price nucleus of crude oil appears to oscillate in resonance with background noise. It's mostly Brownian movement of the Katrina type. Try to pay attention to real things, like geology and geography. Note that the continental shelf has an edge. When herd animals go over the edge, they usually fall and drown. Pocket change quickens the process,Probably the most fundamental particles of marketonic theory.
DIYer,
Well yes, but now we are getting into Advanced Quantum Marketronics.
The Producions and Consumions are charmed versions of the basic Sapien-Decepticon particles that tunnel through the Forbidden Zone.
As you probably recall from your intemediary QM classes, the Forbidden Zone separates the Belief Core (the center that is populated by the Infotrons and Dis-Infotrons) from the Outer Reality Shell (populated by Growth-o-trons and Collapse-o-trons).
Decepticons tunnel through the Forbidden Zone to occassionally actualize image patterns held in the Belief Core. So sometimes, but rarely, the When-You-Wish-Upon-a-Star phenomenon is observed to transend through the Forbidden Zone and into the Reality Zone due to quantum entanglement.
Entanglement is maximized when the Producions bombard the Consumions with Advertisement-cons, causing population inversions among the Consumions and causing many of the Consumions to tunnel through the Forbidden zone so as to collide with the Growth-o-cons and push the latter particles towards the outer Collapse-o-con orbitals.
But as indicated above, these more advanced aspects of Quantum Marketronics are not suitable for general public discussion.
These are absolutely the smartest and funniest posts I've read at this site yet.
I've fretted most of my life away trying to visualize the subtle influence of the invisible, brainless hand, but it's all clear now. Everything will be alright, and then some.
Most people are deeply troubled to learn of the existence of the Forbidden or Exclusion Zone.
I'm glad that you are able to accept it as a necessary part of our current Standard Model of the Universe.
Albert Einstein was wrong when he said that God does not play dice ... at the same casino table as we do. God loves us to death and that is why he (she, or it) is with us to the bitter end. That is why God quantum meritly exists --and not-- right there deep in the heart of our Belief Core. God is part of our Price-Value-Spirit triune.
Despite all that being said, the Forbidden Zone (or Magic-is-Forbidden Zone as it is more formally known) prevents all mere mortal thoughts from instantly becoming reality. That would be a bad idea as you may know from having watched "Forbidden Planet".
"Price" and "Value" are tightly bound together with "Spirit" in our Belief Nucleus or Core by this incredibly strong force known as the Wisdom-of-the-Crowds. If Price is split apart from Value, or if Value is separated from our Spiritual inner-being, then the Belief Core can become destabilized and this can lead to chain reaction disruptions extending out into the reaches of the Collapse-o-tron outer orbitals.
So yes, Reed. Everything will be all right. Human "Ingenuity" will power us out of this mess as it has done in the past. Together we will merge our ingenuities, cross that Forbidden Zone, climb every mountain, Ford and GM every stream, till we reach our dreams!
May the krell be with you.
Great post.LOL!!!
That is the problem with starting a new world model.
It takes on a life of its own.
And the advancements in the field are so rapid that it is hard to keep up.
Recently, Prof. Barlett has noted an exponential increase in peer-reviewed papers dedicated to exploring the Forbidden Zone and its implications to real world existence and sustainability. Fascinating stuff.
I had a little problem with my Amaranth investment yesterday. Paris and I are out shopping for matching electric bicycles right now.
The money was in CT ..
The trader was in Alberta ..
Triff ..
That piece of news right there might be good for your $57. Isn't that what they call "geopolitics." Warwonger, my ass. George is givin' peace a chance.
I've always maintained that the tension with Iran was all about the unacceptability of the status quo. One way or the other, the business community is going to demand access to the Iranian market.
Also, I think the Bush years will be remembered as Part I and Part II, with Part II being four years of face-saving, backtracking, and, above all, paralysis in the face growing global opposition to U.S. imperialism.
It takes two to tango, and the US(not just Bush, but going back to Carter and beyond) has definitely made some dumb moves. Or let's just say it could have done some things differently.
On the other hand, Iran, since the "revolution" hasn't exactly been very friendly. Hostages, Lebanon, their end of Iran-contra, you name it.
I totally agree on your last point about Parts I and II.
Was the Shah a US dictator imposed on us by Iran? Was Mossadegh a US president overthrown by Iran because he had nationalized US oil?
No -- this is the same sh@t as Iraq.
That's what happens when you are a trader and you give up your charts.
But to avoid substituting one ridiculous stereotype with another, next time have your friend take some pictures of the factories, laboratories, universities, ports, service sector activity, construction (not the gaudy stuff, just the typical, middle-class Dubai), elementary schools, hospitals, normal people working and going about their lives. Seriously, i'd hate to see the western world jump straight from, "camel jockies," to, "Islamo-ski-bums," or whatever the case may be.
Overheard on the Dubai ski run:
"I will make it through these moguls, insha'Allah."
Seems like everybody is scared of too high oil prices - but of too low prices as well ..
from Financial Times
September 18 2006
I admit that I have no numbers to back this line of thinking up, but I just wanted to throw it out there for those more knowledgeable than I about these things to comment on.
It seems like we have more oil now than last year, despite all these delays. How much oil would have been produced if there were no delay? It seems we are seriously underestimating oil production from somewhere. Once we know why over 1.5mbpd of production can be halted due to political or other reasons do not seriously hinder oil supplies, then it will be easier to see when PO will hit.
Maybe the answer is simply demand is dropping a lot outside of US?
Down here in the third world of Panama, you can see it every day. When 91 octane gas started climbing from below $2.00 (mid-2004) to hit it's high of around $3.50 a few months ago, things started happening. Remarkably fewer cars on the highways, less traffic congestion in the larger towns and cities, even maybe a little less pollution in Panama City. Buses started filling up, car pooling became more popular than ever and the taxi cab drivers were ecstatic (once the central govt allowed them to raise their fares to compensate for their higher fuel prices).
The wheels of commerce roll on diesel down here, as they do throughout most of the world, and by keeping diesel (apparently) subsidized at around $2.75, the higher oil prices haven't had much of an impact on the economy (Panama has the strongest economy in Central America). It's the little guy, as always, that is taking the brunt of the disruption. A respectable working person's wage down here is $300 month. That would be about what a beginning college graduate school teacher could expect. So even if you could afford a car (not likely), you soon wouldn't be able to afford the gas. Cars are being sold or parked.
91 octane has recently dropped back down to below $3.00 a gallon, with no change in diesel prices as yet. (Too bad, I drive a Toyota diesel pickup!) My neighbor told me yesterday that he is buying a Suzuki motorbike to make the little trips into town for necessities, leaving the Hyundai parked under the tin roof.
Welcome to the new world! It's making its debut in the third world first (of course).
Thanks to all of you gentlemen for the enlightening discussions,
Your dedicated lurker, Bud in Panama
ps...the government also subsidizes propane, and a 25 liter tank can be exchanged for $5.00, as it has for years. This is a sop to the working class that relies on these tanks for cooking fuel...there are no other alternatives except wood (cook with electricity at $.16 per kwh?...and that's hydro-electricity!) But thank god we've got that!
My guess would be the top 10% of US gasoline demand is fairly responsive to price; once that demand is wrung out, I'd think demand is fairly inelastic. But this would seem to moderate the increase in prices and doesn't seem to at all explain the recent plummet. Then again the drop of prices post-Katrina never made much sense either.
"there has never been a negative 12 month MA going back to the start of the tables in 1981."
It's interesting you should mention that particular year, the start of a 20% plus collapse in crude oil production/consumption.
Interestingly, most of the stats we use now were created after that great collapse to try to figure out what the helll the oil markets were doing. They have been very marginally successful, at best, as the complexities of technology, market abstraction, and whole new areas of fuel switching have made the picture by factors of 10 more obscure and impossible to read.
This is also the first long duration energy crisis we have had since the internet. Fascinating, the way information, news, conjecture and rumor swirl together in a storm clould, becoming mixed to the point of uselessness.
The whole thing has now become a complete farce, equal to a discussion of how many angels can dance on the head of a pin. The 1980's proved that consumption can change by HUGE amounts and very quickly, and that a rather short term crisis can cause buying decisions that will have effects long after the crisis is past.
On the production side, I will go waaaay out on a limb and say this: No one has any idea what the production capacity of the world oil industry is. How's that for pinning things down?! :-)
And things unrelated to oil price can have large effects. I was talking to a baby boomer friend the other day. He has an Explorer, but is getting ready to trade down to a nice luxury sedan, a Buick or little Lincoln have his eye....it would move him from about 16 to 18 mile per gallon up to around 26 to 28. Is he doing it due to the fuel price? No, he can afford the fuel, (even at $3.50 it would be a marginal expense compared to his lifestyle), but his two kids are off to state college, it's now just him and and his wife most of the time....and his wife is a short woman getting older and tired of climbing up in that damm truck! So it goes....like the custom van of the '70's and the retractable hardtop convertible of the '50's, the immortal SUV was not so immortal after all....it was on it's way out even before the fuel price issue.
So, see ya' at $1.20 a gallon, or $3.50 a gallon, whichever comes first, and will it really matter which in the larger scheme of things, inflation is marching on anyway, and gasoline at $3.50 will soon enough just be in the normal band that time would have allowed....(gasoline today, in central KY, $2.16 and $2.18 at a pair of stations on my way to work...Diesel still at $2.60. the widest spread from gasoline I have EVER seen, and....I drive a Diesel, to save money and fuel ya' know :-(
Roger Conner known to you as ThatsItImout
Bruce from Chicago (now with a farm in Cumberland County Il.)
Big project delays? That's good news! That mean the oil is still in the ground, right?
As I looked just a minute ago, crude was still heading down, pushing into the $62 range, (and have you seen the price of propane, heading into winter! :-O
Absolutely idiotic, but I love it!
Just think if it wasn't for these "big project" delays, crude would be pushing bact to a, well, Yergin number!
Those "big project delays" are in a way kind of convenient as a price support, hmmm.....;-)
Roger Conner known to you as ThatsItImout
News tends to go in cycles. It's how the news business works. Once a story is published with a certain "hook", other stories automatically become newsworthy if they have the same hook. This produces the illusion of trends when in fact nothing significant has changed.
Today, it's happening with "good news" on energy, all tied to the hook that peak oil proponents were wrong (or at least premature). Any news which fits into that story has a much higher chance of being published because it's what all the other news agencies are doing.
But we've seen this same thing many times in the past. Remember all the shark attack stories a few summers ago? There were no more shark attacks that year than any other. But because there were a couple of widely-publicised incidents, more shark-attack stories got published, and pretty soon every day you were reading about shark attacks. Stories that would have been ignored were suddenly newsworthy.
We saw the same thing a couple of weeks ago. After the British plane bombers were arrested, we saw story after story about the effects of jumpy air security. Planes were diverted, passengers arrested, often with little cause. This fit the news "hook" of overreaction to the recent incident. But the truth is that these kinds of incidents have been going on continually at least since 9/11. There may have been a few more than usual that week, but the main effect is that the news was suddenly covering stories that it had previously ignored. This gave the illusion that there were drastically more security related incidents that week than any other.
The point is then that you can't rely on the news to get a sense of trends or to recognize when some new phenomenon has actually become more common. As long as news agencies continue to suffer from this "pack news" effect, we will see spurious spikes in news stories when there is no actual change in the underlying situation.
i LOVE news about shark attacks !
it takes my mind off Peak Oil.
when i was surfing & diving a lot, i tried to be as educated as possible about Carcharadon something (that's slacker-Latin for Great White).
one year i got 2 (count 'em, TWO !) books, both about the illustrated history of shark attacks. full of good stories.
one of my favorite anecdotal statistics - one year during the last few decades there were about 4 attacks in Hawaii, and 4 in California. each of the Hawaii attacks was fatal - the Calif. guys lived. why ? i think it has something to do with the practice of wearing a wet-suit, that one way elevator ride back to the surface.
there's another story about a British war-ship that ran aground about a mile from shore off the coast of Africa, in about 1850. there were about 400 women and children and several hundred men.
Skin diving & reading about shark attacks, 2 ways to forget about Peak Oil.
It sure sounds like you are arguing that the "crowd" is being "unwise" here. Elsewhere you have argued several times about the "wisdom of crowds," your example usually being the prediction of future oil prices. Sounds like these two positions are contradictory. Would you care to clarify your thinking?
Chart http://www.corporations.org/media/
However the real explanation is that crowds are not always wise, and it matters how you go about aggregating the opinions of crowd members. If you do it wrong you get a bad answer.
The best way is to poll people privately and then combine the data. This way each person uses his own knowledge, wisdom and imagination to answer the question, and you get the maximum range of individual perspectives and information.
A bad way is to poll people sequentially and let each person hear what other people have said. Many studies have shown that this method works much worse. People tend to be influenced by what other people are saying. If the first few people polled tend to have a certain view, others are more likely to agree with it, and soon it looks like an overwhelming consensus. It is a snowball effect and gets bad answers.
The news business is very conservative in certain ways. They tend to play it safe, and one way to do so is to wait for flagship institutions like the New York Times to cover a story a certain way, then to copy them. Another way is to wait until everyone else is covering a story, then to do it. Either way you are immune from criticism if you get it wrong (which you usually do!), because "everyone else made the same mistake".
The setting of prices in a free market is not done by private poll, is it? I always thought the bid and ask prices are always there for all to see. True, you don't know who the bidders and askers are, but you do know the prices. Is this not a situation in which you could get a bad answer? For example, buying a stock because the price is going up, and selling it because it's going down? This sounds more like Extraordinary Popular Delusions and the Madness of Crowds than The Wisdom of Crowds.
I suppose sealed bid auctions do approximate private polls. It would be interesting to analyze the price patterns in these auctions versus those for publicly set prices. Perhaps some of the studies you refer to get into this.
However this effect should be self-limiting in a market because people are gambling their own money on prices. Let's consider a commodities market. And suppose you believe in the efficient market hypothesis, which says that the market price is guaranteed to be optimal based on all available information. But suppose you want to make a bet anyway. Then you still have to guess whether the market will go up or down. If the market price is perfect, there is a 50-50 chance which way it will go, so it doesn't matter which direction you bet, but you have to pick a direction.
Now, if you have your own private opinion about what would be the correct price, and it differs from the market, then even if you accept that the market price is more likely than your own to be right, you can still incorporate your private data by choosing which direction you will bet. If you think the market seems too high, you bet it will go down, and vice versa.
The result is that people can believe in, and be influenced by, market prices, and still bring their own private information to bear. This would move markets in the same direction that they would go in anyway if people were not influenced by their knowledge of the market price. Markets are self-correcting and tend to return to rational prices, although they can have temporary excursions when people pay too much attention to what other people think.
There's an amusing result in the economics literature related to this. If everyone were rational, and everyone believed that everyone else were rational, then trading in futures markets would never happen. People would be about to make a trade, but then at the last minute they would back down, because the mere fact that the other guy was willing to bet in the opposite direction (which is what happens when you enter a futures market) is evidence that your guess is wrong. You could still have "market prices" which would be midway between booked buy and sell orders, but no orders would ever actually execute. It's a pretty funny scenario, actually. Futures markets actually rely on people believing that other people are irrational, otherwise they don't really work.
If everyone believed markets were efficient, they would buy index funds (or take similar actions that don't count on being able to achieve abnormal returns). As a result, the market would not be completely scoured for data and it would not all be incorporated into the price and markets would not be efficient.
That's the theory at least.
However crack spreads have now collapsed so we can expect European gasoline exports to drop sharply, and fall heating demand will pick up shortly. I would not be surprised by crude prices in the high 50s for a few weeks, moving back into the 60s before Christmas. 2007 prices will be driven a lot by new capacity coming on stream, which until recently was expected to outstrip demand growth plus decline of existing supply. Now things look much more ominous. Murray
I foresee a rather bumpy economic ride for the next few years and we'll definitely be losing altitude along the way.
Don't sell humans short when it comes to economizing. I think we'll all be surpised at how much gasoline demand will be diminished through voluntary reduction in discretionary driving. We won't like it but we can survive quite nicely in a 65 degree house during the winter and an 85 degree house during the summer. Many opportunities exist to reduce energy demand significantly without dramatically changing our life styles.
The drop in oil, gold, copper and other commodities may well be just a reflection of a rising investor consensus that the recession of a lifetime is nigh. And I believe, along with you, that they are taking the cue from what's happening in the housing market.
Everyone says that the fed is powerless. I think they underestimate the fed a lot. This is Bernanke reloaded. Armed with 5.25%. This is the first time the fed has reloaded without causing a financial accident.
Bernanke to the rescue? He will also have to deal with a dollar dependent on 2+ billion a month foreign investments. With a lack of US growth, foreigners will look for higher interest rates.
That being said I am open to the system finding some way from keeping people from choking on their debt. But not indefinitely,
Some people would say what's developing in the US real estate market looks suspiciously like a financial accident.
We could have a problem but the long bond is coming to the rescue. Many people are going to be able to refinance at much better rates than the rates related to 5.25% fed funds.
Also the homebuilders have started rallying on bad news. I wouldnt buy the stocks but they may be singalling a bottom within 6 months.
Defending the dollar is Paulson's job. The dollar decline is only a problem if it is quick and nasty. There are too many countries who dont want that to happen. I think the dollar has a % or 2 on the upside and then the decline begins but it will be orderly.
And of course if the dollar declines oil in dollars will still be higher over the longer term. You cant have a dollar collapse and an oil collapse in dollars at the same time.
FYI...
This month's Ethanol Producer magazine has a cover story titled "OIL. Has the Peak Already Hit?". Big nod to Campbell, ASPO and Deffeyes. It looks as though Campbell got to use his Guinness presentation again.
Also, from Bloomberg, no slam dunk here: "Basketball star Shaquille O'Neal started a real estate company to invest in projects including a $1 billion residential, hotel and retail complex in Miami, where he plays for the Heat."
These guys are clever, albeit destructive. Still, some people cast doubt on the ability of any group to manipulate a market as big as the oil market.
In a similar vein, I have neighbours who are surprised that I can single handedly move 1000 lb rocks. They are amazed by my rock wall, rock garden and waterfall, for which I use many stones in the 2 to 4 hundred pound range. He's Hercules, one neighbour says to visitors, who look surprisingly at my lean and lanky frame, topped with grey hair.
I tell them, No, not Hercules, but I never work alone, only with my invisible friends. Invisible friends, they laugh, wondering what kind of screwball they're meeting and looking around for my Bobcat. Who are they, where are they? I'm asked. They're from Sumeria, Egypt and Greece, I respond, And they're in here, say I, pointing to my noggin.
Moving the oil market and the gasoline price is also about rolling, leverage and concentration of force. And it's also about friends, but these friends are both visible and invisible.
It can't be done over the long term, just as I can only move so many rocks, so much distance, during any given period of time, in spite of the assistance of the gods of long ago.
But moving the market temporarily can and is being done. Who is surprised that a gang, which, perhaps correctly, accused Clinton of doing the same thing in 2000, wouldn't undertake an effort of known political advantage.
It begins with a favourable and known co-incidence in the timing of the end of the 'driving season', the change over to winter gasoline, and the part of the pre-election period when swing voters are making up their minds. Information about a slowing economy is also abundant and the consequences of same are known.
It is carried forward by an extraordinary ability to leverage small events of minor significance into huge media happenings.
And so, the results of a springtime production test of a small 2004 find of oil in the Wilcox tertiary, called Jack, are announced after Labor Day, by one of the biggest contributors to Republican coffers, and becomes a 15 billion barrell increase in US oil reserves and proof that, afterall the market will save us.
The touts on the payroll of big oil and the Saudi dictatorship come out in full force and are welcomed into the studios of Fox, MSNBC and the rest. Even the Times of London lowers itself and publishes the disinformation of a Hudson Institute economist, a 'thinktank' happy to take the money of big tobacco as well as big oil, who advises all that that markets don't work for oil because of nefarious foreign forces.
Nonetheless, he can happily report that $60 to $70 oil has predictably led industry to discover 15 billion barrels. Completely ignoring the actual 2004 discovery date at Jack and its small size, completely ignoring the ten year old exploration process that led to Jack 2, completely ignoring the physical reality constraining the development of the play, completely ignoring that industry, necessarily and legally concerned with credibility, only spoke of a "potential 3-15 billion barrel recovery".
Screw the evidence, we make our own reality.
Meanwhile, in Iraq, Anbar province is abandoned, and all efforts are made to protect and increase Iraqi oil production and exports. Some effort is made to reinforce the garrison protecting the US 'embassy', the 'Iraqi government' and the media confined in the Green(back) Zone. Iraqis may wait days to fuel their vehicles, risking robbery and death, but then, that's their problem; internal consumption only competes with exportation, in any case.
And then Iran. Suddenly, the urgency to wipe out their alleged drive to obtain nuclear weapons, evaporates, just like the trail leading to the supposed masterminds of 9/11. Osama? Who dat?
It's a ways to go yet to voting day. Expect more 'announcements' aimed at the price of gasoline. Expect the corporate propaganda machine to continue to treat Peak Oil as junk science.
After all, all the people who convinced millions that the risk of smoking and the risk of second hand smoke and the risk of climate are "junk science" are on the payroll.
Why is my company going through the largest "business transformation" process in years that will lead to the large cuts in staffing and increases in early retirement offers?
Why are business analysts so sure that oil prices will fall to their lowest levels in several years this 4 QTR?
Something is askew.
Mindful that plans to attack Iran were fully in place, after two years of US and British drones crusing though Iranian skies, Iran did not want a pre-election October surprise. Wisely they agreed not to proceed with their nuclear enrichment program until November.
Thus it would be impossible for the US to attack Iran for good cause in the next two months, and GWB is only trying to look good here before the UN by admitting the obvious.
It seems that 2007 is a more likely year for something militarily to go down, and it would be from the air I would think, unless something is done by Israel in Lebanon and/or Syria.
Syria may not be taken down, which would be very relatively easy, because of the fear of further Muslim fundamentalism spreading further. Ever get the sense that the USA is sitting on a drum that wants to explode its top off?
This makes sense along with Murray just above you in this thread. So, but at $57 a barrel . . .
I just do not think natural gas will recover until next year and only than if it is a cold winter here.
I think that gas is the "iron triangle's" real bail-out strategy for oil production decline. It can be easily run in today's internal combustion engines. That's why Exxon is developing Qatar, or at any rate my best guess, and the conversion is cheap for both vehicles and filling stations..
You have to replace the gasoline storage tank with a pressure rated tank. Nominal operating presures in current vehicles is either 3200 or 3600 psig (we operate both). Once converted, it does not have the ability to run gasoline. So, when you are out of fuel, you're out. At about 200 miles (whether we are driving the Hondas or the Crown Vics) you need to think about refueling.
While refueling is relatively simple with the quick connect fittings, each station needs a fast-fill system (unless you wish to take 8 hours to refill). This has much to do with the compression storage and cooling. Fast fill system have large intercoolers associated with them. "Fast" could mean as long as 20 minutes (our experience is more like 10, but then we don't test our luck on how close to empty we can get our NG vehicles).
BP Stat review 2006:
India 2004 oil consumption 2,573,000 bpd
India 2005 oil consumption 2,485,000 bpd
$78 /bbl is hot for some consumers. I guess we'll find out what is going on now next June when bp - the world's acest oil company reports again.
Also, the popular press are jerks. So I'd tend to ignore them.
CW
PS to OIL ceo - if I come to Boston, and given that the Hilton sisters are out of town - will you be paying for lunch?
Russia turns the screw on Shell
By Christopher Hope, Industry Editor
(Filed: 19/09/2006)
Shell moved last night to reassure its investors after Russia tried to stop the development of its biggest gas project, the $20bn (£10.6bn) Sakhalin II scheme in eastern Siberia. The move by the Putin administration was seen by some as an attempt to tighten the Kremlin's grip on the country's energy resources after the part re-nationalisation of oil company Yukos.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/09/19/cnshell19.xml
Speaking of 'the forest and trees': this article proclaims Jack will save 100 million acres of forest. Hate to tell him that he better keep a sharp edge on those axe-blades and work on getting in the best physical shape possible.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Repeat the big lie again and again, in every available forum, and eventually only 'junk scientists' are left talking about peak oil.
Well, at least until election day, whereafter a price high enough to sustain marginal E & P will again be appreciated.
Are the Saudi's withholding the potential declining status of their mature oil fields to slow up costly new exploration and development that my depress the price of oil?
Kuwait, Mexico and the North Sea hand is on the table.
Looks like a bumpy peak to me, for the next 5-7 years.
Could output peak before 50% reserve depletion? This is a tough question due to coal being both a complement and a substitute. There are reasons it could go
Down: not enough oil to run economy or get goods to market, carbon tax
Up: transport electrification, CTL, hydro dams drying thru GW
The evidence looks like coal is going to boom and will peak early. If Iraq is a rerun of Vietnam then Peak Coal will be a rerun of Peak Oil.
We burn anthracite here instead of oil for heat. We cook with it and heat all our hot water, too, all with one stove.
Last year we paid $239/ton.
This year, it's $375/ton.
What you have, mostly, is reaching the boundaries of a seam. I haven't looked recently, but the other trend that was present was a decrease in coal quality (meaning lower BTU/lb and a few other rather interesting qualities.)
But much of that change has come about in a switch from higher sulfur (and higher BTU) bituminous coals to lower sulfur subbituminous coals. Not all operations handle that switch from coal types well.
this is the price of oil for the recent 3 year period. if you draw a line under the bottoms , going back to oct'03, you would notice a serious breach of that line, starting on august 17,2006. a violation of a line that has been sucessively hit and turned back from as many times as has happened in the last 3 years to this chart, should make you sit up and try to find a reason to explain it's significance..... at least , that's what i do.,
the line was breeched , and price never looked back.
..so now what?..it will be interesting to see the first rally off the next low..if it rallys strongly , and bypasses the lo's trendline we drew, it's as if nothing ever happened. i don't see this as a large possibility....if it rallys and doesn't even make it back to the trendline , it confirms a new regimen...this is much more probable in my opinion. so ....this implies and end to the first stage of the oil bull market. remember, a classical bull market is exponential. this first stage has been a straight line. this implies that later stages will be more "volatile"....but back to why...dave has demonstrated above that the supply issue hasn't changed , and is in fact, in trouble. so, supply has disassociated itself from price. one chinese observer had this to say
..did they say that? anyway , for whatever reason, the bull market is entering a digestive phase.maybe a political phase, where price is determined by the guardians of the gate.anybody can and will do the SPR math. i would be on the lookout for stage 3.
http://www.theoildrum.com/story/2006/9/11/91323/8663#64
He noted that oil prices had just breached the lower support line and seemed to think that this meant they would start climbing. I replied that you can come up with almost any story you want after the fact, but that in my understanding, once you breach a support line, that is considered a "breakout" and it predicts a further price move in the same direction. Then there are various magical rules of thumb to try to judge how far it will go.
I'm not a believer in technical analysis but in this case it seems like it did a pretty good job. You may wonder why we broke through the support this time when we didn't all the other times, and TA doesn't provide much of an answer to that. But it does say that once you break through the support, you expect a further strong move in the same direction, i.e. down. And that's what we're seeing.
http://quotes.ino.com/exchanges/?r=NYMEX_CL
we saw 60 today. Today's low was 59.80. It doesn't look like your prediction about 80 before 60 has held up.
Even if you only count closing prices and not intraday lows, with today's close of 60.46 it is surely an extreme long shot to predict 80 before 60!
Not attending ASPO-USA
Where do I get a refund?
More unreported bad news, I'm sorry to say.
IF I was an heir to the Hilton Hotel chain--I would be going to the conference--this business model will go tits up very quickly when people will be unwilling to pedal their bicycles very far. ASPO-USA should try to email her somehow with the idea of saving her fortune, or pay for her to attend for the mere press coverage alone.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
I'm just trying to lend some semblance of support to Learsy's notion (The Huffington Post) that we're peak oil pranksters
They get more traffic than we do.
I could teach her about Hubbert in about an hour. Maybe two. The hard part is getting her to lose the cell-phone. Once that happens - it's aaaaalll charts!
Imagine what that could do for the movement. Naimi would have nothing on us.
Copy below of my just sent email to invite the Hilton family to ASPO-USA. Maybe if all TODers sent a request to this link we might get her to make an appearance, or even attend. They love publicity, and ASPO could use some. Feel free to cut & paste whatever portions of my email you want if you are pressed for time. Git 'er done!
--------------------------
Hello Kathy Shepard,
ASPO-USA is having a conference on PeakOil in Boston soon. Paris Hilton, as a very visible media person, and heir to the Hilton fortune, should be vitally concerned about Peakoil. When gasoline and jetfuels prices skyrocket--most vacationers and businesspeople will not be able to stay in Hilton Hotels. I implore you to read the following websites and forward this info to the Hilton family. Her attendance, or even her appearance, would greatly aid our cause of informing fellow Americans of what is looming ahead as oil depletion never stops a 1,000 barrels/second. Please read and study:
Energybulletin.net, LifeAfterTheOilCrash.net, Dieoff.com, and the internet forum called TheOilDrum.com.
Thank you for passing this info on to the Hilton family and employees worldwide. If the Hilton family decides to attend-- http://www.aspo-usa.com/ for date and contact persons.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
--------------------------------------------------
Oil CEO, and Dave Cohen: whoever can clean up their appearance the best gets the nod as her official ASPO squire and chaperon. May the best man win!
...miss francis of "ding dong school"
what a babe!
On the issue of price manipulation I am a bit of a believer. I took a peek at TOD and Schlumberger at work this afternoon and snorted my coffee. The price line on here looked like a cross section of the GOM (oil is harder to produce at both depths). But then I remembered Dub-ya was speaking to the UN and sure enough he fluttered like a dove. He won't shake Iran's hand but he will wave at 'em across the room, at least until middle of November. This "peace" initiative is half of what could be a subtle two handed indirect way to try and bring the price down until after the election. The other is hyping the "cooling of the American economy" giving the speculators and other traders cold feet and selling oil. Now the US economy is cooling a bit so this is not hard to do. This second might be a dangerous move though, as the negative talk might actually accelerate a collapse of confidence. And I think traders thrive on understanding the wave and not the water. The Amaranth fiasco is an example of misreading the wave. If they understood the water they might sell the gas to themselves and hold it. In any event this issue is like peak oil itself. We won't know it happened until after the event. If the administration turns hawkish in November and prices rise then, it will be telling.
Jumping back to the recession posts. Am I right or crazy in thinking that a recession, or even a deep price drop will actually "cause" the peak to have already occured. Either will create a situation where expensive developments like Jack2, repairing Thunderhorse, expanding the tar sands, using some enhanced recovery methods and even a lot of drilling will be shelved. We will fill our demands on cheaper already developed conventional oil until the price shoots up again but by then we won't be able to develop the hard stuff quickly or even at all. In this case the world oil production curve will show the peak in the past. We will never get back there again.
You okay, buddy? What's up? You still have internet access? Any good photos?
You know it's a messed up world when you hear some news from around the globe and the first thing you think about is someone on TOD.
The coup was about corruption - the ousted leader did not pay a ¢ on a $1.5 billion selling of a company he owned to a Singapore firm (read foreign and not Thai), though I wonder if the disturbed southern three Muslim dominated provinces don't have something to do with it (lots of killings on both sides going on there).
If you wanted to simplify and say the coup was "about" one thing, it was the tranfer of a massive amount of power from one faction (old elite) to another faction (TRT) who used it largely for personal gain.
This issue existed long before the Shin sale, which was to some degree a reaction rather than a root cause. The problems of corruption in the Taksin regime were also far greater than the sale of a single company. Even within the Shin case, abuse of power to favor the PM's own business interests, convoluted ownersghip structure, and allowing a telecom concession to be transferred to a foreign entity may be as big or bigger than the headline tax issue, which was strictly speaking legal.
By Dominic G. Diongson
Sept. 20 (Bloomberg) -- The Stock Exchange of Thailand plans to operate normally today in the wake of a coup, said Ladawan Kantawong, a spokeswoman.
``We will open the market,'' she said in a telephone interview from Bangkok.
Stocks trade on the Thai exchange from 10 a.m. to 12:30 p.m. and from 2:30 p.m. to 4:30 p.m. local time each weekday. The benchmark SET has fallen 1.6 percent this year, trailing a 4.3 percent gain in Morgan Stanley Capital International's Asia Pacific Index.
Military leaders sent tanks to block Bangkok's Government House and broadcast a message on state television that they had seized control of the capital ``without resistance.''
The coup took place as Prime Minister Thaksin Shinawatra prepared to address the United Nations General Assembly in New York. Thaksin declared a state of emergency and said he fired the army's chief, Sondhi Boonyarataklin, in a message broadcast before the military announcement.
Last Updated: September 19, 2006 14:33 EDT
* * * * *
Thailand to shut down after coup
By Grant Peck, Bangkok
THAILAND'S stock market, banks and schools will close today following a military coup that ousted Prime Minister Thaksin Shinawatra last night, the army announced.
Civil servants in the Bangkok metropolitan area, including permanent secretaries of ministries, heads of state agencies and heads of universities, were ordered to report to the new Council of Administrative Reform tomorrow.
Earlier, the army commander wrested power from Thaksin, sending tanks and troops on to the streets of the Thai capital and declaring martial law.
Earlier yesterday, an announcement on national television, signed by Army Commander-in-Chief General Sondhi Boonyaratkalin,, said martial law had been declared across Thailand and the constitution revoked.
Sondhi, who is known to be close to Thailand's revered constitutional monarch, will serve as acting prime minister. He is a a Muslim in the Buddhist-dominated nation.
Sondhi's troops struck while Thaksin was abroad at a United Nations meeting in New York, circling his offices with tanks, seizing control of television stations and declaring a provisional authority loyal to King Bhumibol Adulyadej.
The council said it would soon return power to a democratic government but did not specify what reforms they would carry out.
IrishExaminer.com
Remember the movie "Syriana"?
For those interested in trying to get actor George Clooney to attend ASPO-USA's conference on a last second 'Midnight Ride like Paul Revere": this is the address for his agency:
-------------------
George Clooney
c/o Stan Rosenfield & Associates
2029 Century Park East - Suite 1190
Los Angeles, CA 90067
-----------------------
Yeah, I know it's snail-mail, better write soon! I wished I knew what actors/actresses lived around Boston--that would be ASPO's best bet for MSM publicity. But maybe, at the very minimum: we can get Clooney to send in a brief video of himself expressing his views on Peakoil and Global Warming that could be premiered at ASPO, then released to the MSM and YouTube.com.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Affleck and Damon probably aren't in town. The Sox are...well, you know.
Feel free to cut and paste as required for your own snail-mail:
----------------------------
George Clooney
c/o Stan Rosenfield & Associates
2029 Century Park East - Suite 1190
Los Angeles, CA 90067
Hello,
ASPO-USA, in cooperation with Boston University, is having a Global Conference on Peakoil and Global Warming in Boston soon. The Conference theme is entitled, "Time for Action: A Midnight Ride for Peak Oil". I believe this is an ideal public appearance opportunity for George Clooney to help further leverage his career.
I would like to invite George Clooney to attend, or at a very minimum, send in a brief video of himself expressing his views on these topics. It would be very good publicity for him with follow-on publicity effects for ASPO-USA. The members of TheOilDrum.com are very aware of his recent speech at the United Nations. For good information on Peakoil and Global Warming please read the following websites: EnergyBulletin.net, LifeAfterTheOilCrash.net, Dieoff.com, and the aforementioned WWWeb forum, of which I am a member.
Thank you for any efforts in this manner. Conference dates and contact persons can be found at http://www.aspo-usa.com/fall2006/
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
---------------------------------------------
Git 'er done!
Was idly wondering, if as many as 2000 mostly internal flights were cancelled in UKs recent security scare (though estimates vary dramatically), then how much did this relieve crude prices?
That's one of the nicest compliments I've received in some time. Thanks. Meanwhile, Paul Krugman at the NY Times has discovered the internet.