Energy Literacy Advocates Newsroom

As oil rises for the third week in a row, and gasoline prices jump against historical trends, have we established a new floor for oil prices?

Industry and economic analysts predict that $70 a barrel is the new "bargain price" on oil. Lower than that, and oil producers can't fund exploration and development. Oil companies slash dividends. Taxes from governments and exploration constrictions raise new project costs. Oil wells are capped. Economically, the $20 a barrel price of oil, which reigned in the 1990s, is a thing of the past.

Adding to the new floor is the need to replace declining production in established oil fields. 3.5 million barrels a day of new production is needed annually to offset the loss in production from old fields.

For more on this story in The New York Times, click here.

Labels: oil companies, oil price, oil supply, oil supply/demand, peak oil

Labels: economy, oil companies, oil price, oil supply, oil supply/demand

Labels: economy, oil companies, oil price, oil supply, oil supply/demand

The storms racing into United States territory have not raised oil prices, despite affecting Gulf of Mexico oil operations. Gulf productions account for a quarter of all domestic oil production.

Supplies of oil remain high, while demand is low, which has kept prices down. US inventory is 20 percent above levels last year.

For more data, click here.

Labels: oil companies, oil price, oil supply, oil supply/demand

The price of oil registered its largest drop in three months, based upon unexpected stockpile numbers from the US.

Supplies were up by 5.15 million barrels in the US, with a declining demand. Estimators predict that oil may touch $60 or lower in the next week. Supply has continued to outstrip demand, particularly in the US.

To read more, click here.

Labels: economy, oil companies, oil prices, oil supply/demand

Labels: biofuels, energy sources, oil companies, renewables

Labels: energy, energy sources, oil companies, renewables

Labels: oil companies, oil price, oil supply/demand

The New York Times - Debate over a proposed oil and gas title aimed at expanding domestic energy production opens the Senate Energy and Natural Resources Committee session today.

Notably, the proposal would allow for expanding leasing for oil and gas exploration in the US, and streamline permitting procedures for offshore drilling.

The debates are part of the Committee's continued mark-ups on a broad energy bill.

Today marks the first day lawmakers will be able to view the full proposed list of amendments to the bill.

To access the article, click here.

Labels: energy, oil companies, u.s. energy policy

Bloomberg - An April survey of 382 U.S. financial executives in the oil and gas business reveals only 16 percent believe that by 2030 the U.S. will be able to depend solely on its own energy supplies.

The survey, run by KPMG LLP’s Global Energy Institute, also revealed that a majority believed the U.S. will not be able to mass-produce viable alternative energy until 2015.

“The executives’ perceptions of energy independence mirror their views on the viability of alternatives in the near-term,” Bill Kemble, executive director of the institute, said in a statement.

While these statements may reflect industry bias, they also appear to reflect reality. Net imports of petroleum into the U.S. were about 57 percent of the total consumed last year. If the U.S. remains on projected oil consumption levels, that percentage will only fall to about 40 percent by 2030, according to the U.S. Energy Information Administration.

To read the full article, click here.

Labels: oil companies, oil supply, renewables

Bloomberg - The price of oil climbed to above $51 on reports that consumer confidence is improving. The price represents a five week high for the commodity.

Additional promising numbers, including a brighter outlook for manufacturing and growth in China's economy, further bolstered the price of oil. The rise in oil is positive news for OPEC, which meets to review output numbers on May 28 in Vienna.

Keeping a lid on oil price, however, is the news that U.S. supplies rose to the highest level since 1990, while consumer fuel demand dropped.

To access the full article, click here.

Labels: oil companies, oil price, oil supply/demand

According to Bloomberg, members from the Organization of Petroleum Exporting Countries (OPEC) will meet with delegates from Japan, China, and India this week to discuss reviving energy spending.

This meeting comes on the heels of the latest IEA report, issued April 10, citing that global oil supplies will be "severely constrained by today’s lower prices and lower investment."

While OPEC wants Asia, which the IEA estimates will account for more than half the increase in world energy demand between 2006 and 2030, to commit to using oil in the years ahead, Asian delegates warn that their countries may move to cheaper alternatives, especially nuclear power, if OPEC won’t contain future prices.

To read the full article in Bloomberg, click here.

Labels: oil companies, oil price, oil supply/demand

In an energy climate dominated with talk of peaking supply, industry analysts are newly predicting something many economists have not focused on - a peak in demand.

According to the Wall Street Journal, among those forecasting that U.S. consumption of gasoline has peaked are executives at the world's biggest publicly traded oil company, Exxon Mobil Corporation, as well as many private analysts and government energy forecasters.

This forecast, if correct, signals a profound transformation from America's gas-guzzling history. Results could be dramatic; not only for the companies that refine gasoline from crude oil but also for state and federal budgets and for consumers. Much of contemporary America, from the design of its cities to its tax code and its foreign policy, is predicated on a growing thirst for gasoline.

Reasons fueling the drop in consumption include the economic downturn, changes in the way Americans live and the transportation they choose, and a growing emphasis on alternative fuels.

To read the full article in the Wall Street Journal, click here.

Labels: economy, oil companies, oil price, oil supply/demand, peak oil

Valero Energy, the nation's largest independent oil refiner, announced the purchase of seven ethanol plants from VeraSun, the nation's second largest ethanol producer.

The purchase comes as a boost for the ethanol market. VeraSun filed for Chaper 11 bankruptcy in the fall of 2008, amidst economic woes. Valero plans for the plants include using the ethanol produced there to blend with traditional gasoline, satisfying the 10 percent blend requirement.

The Valero purchase of an ethanol plant is the first in the U.S. by a traditional refiner, pumping cash into the industry at a time of tight credit. It also signals a new alignment of traditional and renewable energy industries.

Given the economic travails facing renewable energy industries, the ethanol industry is additionally pressing the Obama administration to raise the 10 percent blend limit in most gasoline blends to as high as 15 percent to bolster demand for biofuels.

To read the full article, click here.

Labels: biofuels, economy, oil companies, renewables

The Obama administration has broken from the offshore drilling plan proposed by the Bush administration, which would have opened additional offshore U.S. leases to oil and gas companies.

Secretary of the Interior Ken Salazar ordered an extended six-month hearing for the plan, which would have immediately opened 5-year leases.

Instead, Salazar wants"to build a framework for offshore renewable energy development so that we can incorporate the great potential for wind, wave and ocean current energy into our offshore energy strategy," Salazar said.

To read the full press release, click here.

Labels: oil companies, oil supply, u.s. energy policy

The Associated Press - The weight of promised supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) on price is debatable, based upon market reactions. Many experts predict that oil will sink to $30 per barrel, given dire economic predictions.

Trading today hovers at $40 per barrel. According to the Associated Press, a report Tuesday by the American Petroleum Institute, the industry's trade association, is expected to show that oil stocks rose to 2.9 million barrels last week, according to the average of estimates in a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos. The U.S. Energy Department's Energy Information Administration reports its inventory data on Wednesday. The data is expected to show that US crude inventories rose by 2.5 million barrels in the week ending January 30, according to a Thomson Reuters poll of analysts.

Oil stocks have grown more than 20 million barrels in the last four weeks, evidence the nation's worst recession in more than 25 years may be deepening. Refiners are buying much less crude with demand for their products like gasoline falling. That has led to rising gas prices even with the price of oil near five-year lows.

To read the full Associated Press article, click here.

Labels: economy, oil companies, oil price, oil supply/demand

Despite oil falling to $35 a barrel on continued forecasts of a depressed world wide economy, oil rich states in the Middle East are investing in more green energy.

According to the Associate Press, the United Arab Emirates are making strong pledges toward renewable energy use. The head of a green-energy project in Abu Dhabi says the oil-rich emirate plans to generate 7 percent of its energy needs from renewable sources by 2020.

Sultan al-Jaber says the initiative will create a renewable energy market worth $6 billion to $8 billion in Abu Dhabi.

Most, if not all, of the energy will come from solar power, another official involved with the project says.

To read the Associated Press release, click here.

Labels: oil companies, oil price, oil supply/demand, renewables

On June 27, Neil King Jr. of the Wall Street Journal posted an article opening a window into Saudi oil supply discussions. We've published the text of that article here for you.

"Global Oil-Supply WorriesFuel Debate in Saudi ArabiaFormer Officials at OddsOver 'Peak' Theory;Crude Hits High" By NEIL KING JR. June 27, 2008; Page A1

Sadad al-Husseini and Nansen Saleri raced up the ranks at Saudi Aramco, the world's most powerful oil company, working together for years to squeezemore crude from Saudi Arabia's massive fields. Today, the two men havestaked out opposite sides of a momentous industry debate.[Sadad al-Husseini]

Mr. Husseini, Aramco's second-in-command until 2004, says the world faces a brute reality of depleting resources and ever rising prices. Mr. Saleri, until recently the company's oil-reservoir manager, insists that with enough ingenuity and investment, plenty more oil can be found. With oil prices having doubled over the past year, political leaders, Wall Street investors, commuters, airlines and car makers are all scrambling todivine where prices will head next. The disparity of opinion between two ofthe most knowledgeable men in the industry shows how much fog hangs over the most basic question of all -- whether oil can be unearthed any faster than it currently is.

At the moment, Mr. Husseini's pessimistic view is clearly ascendant. Even before this year's surge in oil prices, there were gloomy industry predictions that world oil output would soon hit a ceiling. U.S. benchmark crude hit a record high on Thursday, propelled by Libyan threats of possible supply cuts, closing at $139.64 a barrel, up more than threefold since 2004.

But Mr. Saleri isn't alone in dismissing the gloom as misplaced. Optimists, from Exxon Mobil Corp. to the U.S. Energy Department, argue that high prices propel companies to innovate and invest more. As supplies rebound, prices will fall from today's levels. Saudi Arabia itself, producer of 12% of the world's oil, has vacillated for years over whether to try to extract oil faster than it already is. Last weekend, urged on by Saudi King Abdullah, it appeared to move into Mr. Saleri's camp. Fearful that supply jitters were damaging the world economy,the kingdom said it was ready to invest tens of billions of dollars to boostits capacity to unprecedented levels -- to 15 million barrels a day over the next decade, from just over 11 million now. Opinions within the region on the health of the Persian Gulf's remaining petroleum riches vary more widely than many realize. Messrs. Husseini and Saleri disagree over whether the new Saudi production target iseither feasible or wise -- echoing a debate that has swirled behind thescenes at Aramco for years. That the two men worked side by side at the company that controls one-quarter of the world's proven oil reserves makes their divergent outlooks all the more striking.

Mr. Husseini, now an independent consultant, has jetted around the worldspreading his views, including recently over dinner with George Soros and a clutch of other top financiers. Mr. Saleri has lectured, written opinionpieces and buttonholed top oil officials from Latin America to Kuwait. Mr. Husseini, 61 years old, lives across the street from the Saudi oil minister, Ali Naimi, in a leafy neighborhood of Dhahran, the Aramco company town on Saudi Arabia's east coast. The suave but sharply opinionated petroleum geologist says most of the big oil repositories have been found, and no amount of gadgetry will restore bubbly youth to aging fields fromI ndonesia to the Gulf of Mexico. War, politics and soaring costs, he adds, are slowing development in many of the most promising regions."The fact is, we have to work harder and harder to get the oil we need," he says. Those who contend otherwise, he insists, "claim to have some magic potion, like voodoo, that doesn't exist."

Mr. Saleri, who is a year younger, shrugs off his former boss's pessimism. A self-described "technology nut" who resigned as Aramco's top reservoir manager last fall to set up his own consulting shop in Houston, Mr. Saleri has become a vociferous opponent of the "peak oil"view, which holds that global oil production is about to enter a permanent slump due to shrinking resources and limited investment."We have consumed only one trillion of the 14 or 15 trillion barrels of oilthat are out there," says Mr. Saleri, citing a personal estimate for all types of oil that is far higher than most. "For the next 40, 50 or 60 years, I see no problem at all."

Both men started their careers at Aramco as outsiders. Mr. Husseini's family moved to Saudi Arabia from Syria in 1961, when he was 14. The royal family had invited his father to help establish the Saudi National Guard under the command of Prince Abdullah, who is now the Saudi king. Prince Abdullah became a guardian of sorts to the six Husseini children after their father died in a car wreck in 1968. After graduating from Brown University, Mr. Husseini took a job with Aramco,which was then in American hands. By 1980, when the Saudi government took over the company, the young geologist was rising fast."Sadad was one of the best engineers I worked with anywhere in the world,"says Edward Price, Aramco's president at the time.

THE CAPACITY QUESTION. The Debate: Industry experts are divided over whether global oil production has peaked. The Background: Pessimists say big new discoveries are unlikely; optimists say innovation and investment will yield more. The Saudi Factor: Last weekend, Saudi Arabia said it would move to boos tproduction capacity. Mr. Saleri's route to Aramco was more circuitous. Born to a prominent Armenian family in Istanbul, he studied in the U.S., then joined Standard Oil of California, now Chevron Corp. His job was to take all the known data on an oil field -- well-flow rates, geological core samples, seismic charts-- and predict how the reservoir would behave under different production scenarios. "I basically sat in a dark room and crunched data," he says. In 1978, Chevron sent him to Saudi Arabia for a seven-year stint as a consultant to Aramco, where he met Mr. Husseini. The oil world was about to experience a price spike that began with the Iranian revolution. For three years, starting in 1979, Aramco pushed its oil production to nearly 10 million barrels a day -- still its all-time record.What happened next bears directly on Mr. Husseini's current view. The effort to draw out so much more oil, he says, nearly crippled the kingdom's mightiest fields. The pressure in many of them plummeted. Water seeped into oil zones."They were going hellbent for leather to take care of world demand,"he says. "And then we spent the next seven or eight years cleaning up the mess."

After Aramco began cutting back on output in 1981, Mr. Husseini worked to mend its huge reservoirs -- and to understand them better. In 1992, he persuaded Mr. Saleri to join Aramco full-time to help create computer-simulation models of all Saudi oil fields. The two men worked side by side on some of Aramco's most ambitious projects, including the development of a vast oil field called Shaybah, deep in the country's remote and forbidding Empty Quarter. It was at Shaybah that Mr. Saleri had what he calls his "big eureka moment."Aramco had developed the field using hundreds of wells that went down, then snaked horizontally. But when Shaybah came on stream in 1998, its production fell short of the planned 500,000 barrels a day. Mr. Saleri led an aggressive campaign to drill a new batch of extraordinarily long wells, many with multiple branches shooting off in all directions. Shaybah's production shot up. "That was a true engineering breakthrough," says Rick Chimblo, Aramco's chief geophysicist at the time.That success helps explain why Mr. Saleri is now such an optimist."Shaybah brought me fame," says Mr. Saleri. "And it made me realize how the old rules no longer applied."

Mr. Husseini applauded Mr. Saleri's accomplishment. But soon, the two executives were disagreeing on key forecasts. In 2001, Aramco was looking to open the kingdom's vast Empty Quarter to foreign natural-gas exploration. Mr. Husseini estimated that the area contained at most about 30 trillioncubic feet of gas -- not large by Saudi standards. Mr. Saleri predicted the area would yield 10 times that much. So far, drilling in the area has found no commercial quantities of gas. At around that time, rising oil demand revived discussion within Aramco overwhen and how to boost the kingdom's production capacity, then just over 10 million barrels a day. Then, as now, Messrs. Husseini and Saleri had sharply different views on the issue. Recalling his experience in Shaybah, Mr. Saleri argued that the kingdom could hit 15 million barrels a day and hold that level for decades. Mr.Husseini, remembering the missteps of the late 1970s, pushed for what he calls "a realistic, gradual approach." Fifteen million barrels a day would be sustainable only briefly, he said, and then only with huge effort and expense."My view is that you produce a field for the longest period of time at the least capital cost," says Mr. Husseini. "Nansen comes from the international-company school of thought, which is to get the maximum amountof oil you can in the shortest time."

In recent months, Saudi leaders appeared to have adopted Mr.Husseini's view. Local reports quoted King Abdullah saying that some new discoveries should stay in the ground. "With grace from God, our children need it," he said. Mr. Naimi, the oil minister, announced that Aramco saw no need to go beyond 12.5 million barrels a day next year. But on Sunday, under heavy international pressure, the kingdom revived its earlier promise to push for the far higher target of 15 million barrels a day. Mr. Husseini, once viewed as a shoo-in to be Aramco's top executive, left Aramco in March 2004 after clashing with other senior managers overproduction targets and other matters, others at the company say. Mr. Husseini declines to explain why he left, saying only: "I'd done all I could to support all our collective objectives without having to do anything I would feel embarrassed about." Months later, he issued his first gloomy take on the world's oil. Forces ranging from resource nationalism to depletion rates in the biggest fields, he wrote in Oil and Gas Journal, meant that oil prices will continue to escalate through the end of the decade. By fall he was warning that consumers shouldn't expect any big Saudi production increases over the next decade. His statements earned him several sharp rebukes from the Saudi Oil Ministry, though Mr. Husseini insists that his relations with the country's top oil officials remain warm. Mr. Husseini says he often bumps into Mr. Naimi, the Saudi oil minister, in their Dhahran neighborhood or at parties. "We are great friends. I see him all the time," he says. Mr. Naimi declined to comment.

By last fall, anxiety was growing within the industry and on Wall Street over whether long-term supplies could keep pace with the rising world demand. Mr. Husseini stoked those fears at a London conference in October. The major oil-producing nations were inflating their oil reserves by as much as 300 billion barrels, about one-quarter of the world's proven reserves, he said, while the giant fields of the Persian Gulf region are 41% depleted. Mr. Saleri, who left Aramco in September, doesn't share those worries. He has hired a half dozen former Aramco and Chevron officials and opened a business in Houston. His company, Quantum Reservoir Impact, says it has the reservoir-modeling and management know-how to revive declining oil fields. Mr. Saleri is now shopping his services to big national oil companies in Latin America and the Middle East, though he has yet to sign any contracts.

In a Wall Street Journal opinion piece in March, he dismissed the peak-oil theory. "The world has plenty of oil," he wrote. Three weeks later, Mr. Husseini flew to New York at the invitation of a clutch of high-powered financiers, including Mr. Soros, Leucadia NationalCorp. Chairman Ian M. Cumming and Aubrey McClendon, the chief executive of natural-gas company Chesapeake Energy Corp. The group of about 20 met for dinner in the 21 Club's wine cellar. Mr. Husseini declines to comment on the session. One guest says he spoke mainly about the geopolitical thunderclouds hovering over the oil market, especially the U.S. and Israeli standoff with Iran. In a longer presentation the following morning, he argued that the world will have to work hard just to keep its oil production where it is. Conservation, not new oil discoveries, will be "the primary source of overall energy availability" going forward, he said. He delivered the same message to oil magnate T. Boone Pickens over lunch in Chicago. "It was just two oil guys talking," says Mr.Pickens, adding that Mr. Husseini's views dovetail with his own.

Messrs. Husseini and Saleri remain collegial, though they haven't spoken for months. Both see the other's views as largely a matter of personal disposition."Sadad by nature sees the dark clouds overhead," says Mr. Saleri. "He's a pessimist."His former boss laughs at the description. "The problem with Nansen,"he says, "is that he loves his theories, even when they run up against reality."

Labels: oil companies, oil supply, oil supply/demand, peak oil

Wednesday, May 28 - There are two sides to every coin. While consumers struggle to assimilate $4 per gallon for gasoline, the oil industry itself faces a maelstrom of hurdles in supply-side economics. Not only have costs more than doubled for developing a new oil or gas field, the backbone of the oil industry is within 10 years of retirement. Competition over equipment and personnel have effectively delayed new projects while driving up operating costs.

Daniel Yergin highlights the woes facing the oil industry - points typically neglected in media coverage - while uncovering supply-side factors forcing oil to its breaking point. For the full text of this article, click here.

Labels: economy, oil companies, oil supply, oil supply/demand

Time magazine recently ran an article on the "peak oil" concept - another case of the mainstream media slowly becoming more aware of the energy issues we are now and will continue to face. An excerpt:

"This isn't quite the same as saying that oil production has peaked and is about to start declining sharply--the view of the true peakists. In "peak lite," as some call it, the big issues are not so much geological as political, technical, financial and even human-resource-related (the world apparently suffers from a dearth of qualified petroleum engineers). These factors all delay the arrival of oil on the market, meaning that production would not so much peak as plateau. But with demand rising sharply, especially from China and India, even a plateau could be precarious."

Very true, and great to see in a major publication. View the whole article here.

Labels: energy, energy policy, oil companies, peak oil, u.s. energy policy

How long will it be before gas reaches $5 - $6 a gallon? And contrary to what many are saying, the issue is a little more complicated and troubling than the notion that U.S. oil companies are simply being greedy. We have an emerging energy supply problem that the whole world, including our own federal government, must work with energy suppliers to address.

Denver Post News Brief, 5/21/07:
Camarillo, California

Gas reaches record U.S. average of $3.18

The average price of self-serve regular gas hit a record of $3.18 a gallon, rising more than 11 cents in two weeks, accroding to a national survey released Sunday.

That topped the record of $3.07 set two weeks ago and the previous inflation-adjusted record of $3.15 in March 1981, said the Lundberg Survey of 7,000 gas stations.

The lowest average for regular fuel was $2.87 in Charleston, S.C.; the highest was $3.59 in Chicago.

Labels: gas prices, oil companies, oil supply